<PAGE> 1
Filed pursuant to Section 424(b)(2)
of the Securities Act of 1933.
Form S-4 Registration Statement
No. 33-57413
March 24, 1995
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders
of Olympus Capital Corporation ("Olympus") to be held on April 26,
1995 at 9:00 a.m., local time, at the corporate headquarters of Olympus
located at 115 South Main Street, Salt Lake City, Utah.
At this meeting you will be asked to consider and vote upon the
following proposals:
1. To approve the Amended and Restated Agreement for Merger
(including the alternative Plans of Merger) dated as of January 20, 1995 among
Washington Mutual, Inc. ("Washington Mutual"), Washington Mutual Bank,
Washington Mutual Federal Savings Bank, Olympus and Olympus Bank, a Federal
Savings Bank (the "Merger Agreement"), which provides for the merger of
Olympus with and into Washington Mutual (the "Merger").
2. To approve an amendment to the Olympus Capital Corporation
Nonqualified Stock Option Plan and Incentive Stock Option Plan (the "Option
Plan Amendment").
As a result of the Merger, Olympus shareholders will receive $15.50 per
share in newly issued shares of Washington Mutual common stock ("Merger
Consideration"), which amount is subject to increase if the effective time of
the Merger is after April 30, 1995. If the average price of Washington Mutual
common stock for the ten trading days immediately prior to the third trading
day before the effective time of the Merger is less than $18.00, then
Washington Mutual may elect to pay up to 49% of the aggregate Merger
Consideration with cash. In such case, each shareholder of Olympus, subject to
certain allocation procedures, will be eligible to receive such shareholder's
preference as to the form of the Merger Consideration to be paid. Unless
Washington Mutual waives its right to pay a portion of the Merger Consideration
with cash, preference forms will be sent to shareholders of Olympus prior to
the effective time of the Merger through which each holder can indicate such
holder's preference to receive either Washington Mutual common stock or cash in
the Merger. Preference forms will only be utilized, however, if Washington
Mutual elects to pay a portion of the aggregate Merger Consideration in cash.
As a result of the Option Plan Amendment, if Washington Mutual elects
to pay a portion of the aggregate Merger Consideration in cash, the holders of
outstanding stock options of Olympus will have their options converted into
options to acquire shares of Washington Mutual common stock, adjusted as to the
number of shares of Washington Mutual common stock to be acquired and the
exercise price by the exchange ratio in the Merger.
THE OLYMPUS BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND "FOR" THE OPTION PLAN AMENDMENT.
Details of the proposed Merger and the Option Plan Amendment and other
important information concerning Olympus and Washington Mutual appear in the
accompanying Proxy Statement/Prospectus. Please give this material your
careful attention.
Whether or not you plan to attend this special meeting, please
complete, sign and date the accompanying proxy card and return it in the
enclosed prepaid envelope. You may revoke your proxy in the manner described
in the accompanying Proxy Statement/Prospectus at any time before it has been
<PAGE> 2
voted at the special meeting. If you attend the special meeting, you may vote
in person even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
Sincerely,
A. Blaine Huntsman
Chairman of the Board and
Chief Executive Officer
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<PAGE> 3
[OLYMPUS]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
APRIL 26, 1995
TO THE SHAREHOLDERS OF OLYMPUS CAPITAL CORPORATION:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of
Olympus Capital Corporation, a Utah corporation ("Olympus"), will be held on
April 26, 1995 at 9:00 a.m., local time, at the corporate headquarters of
Olympus located at 115 South Main Street, Salt Lake City, Utah, for the
following purposes:
1. To approve the Amended and Restated Agreement for Merger
(including the alternative Plans of Merger) dated as of January 20, 1995 among
Washington Mutual, Inc. ("Washington Mutual"), Washington Mutual Bank,
Washington Mutual Federal Savings Bank, Olympus and Olympus Bank, a Federal
Savings Bank (the "Merger Agreement"), which provides for the merger of
Olympus with and into Washington Mutual, which Merger Agreement is attached to
and described in the enclosed Proxy Statement/Prospectus.
2. To approve an amendment to the Olympus Capital Corporation
Nonqualified Stock Option Plan and Incentive Stock Option Plan, which amendment
is attached to and described in the enclosed Proxy Statement/Prospectus.
Only shareholders of record at the close of business on
March 13, 1995 are entitled to notice of and to vote at the special meeting.
If there are not sufficient votes to approve any of the foregoing proposals at
the time of the special meeting, the special meeting may be adjourned or
postponed in order to permit further solicitation of proxies by Olympus.
All shareholders are cordially invited to attend the meeting in
person. However, to ensure your representation at the meeting, you are urged
to complete, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. You may
revoke your proxy in the manner described in the accompanying Proxy
Statement/Prospectus at any time before it has been voted at the special
meeting. Any shareholder attending the special meeting may vote in person even
if he or she has returned a proxy card.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES
WITH THEIR PROXY CARDS.
BY ORDER OF THE BOARD OF DIRECTORS
__________________________
A. Blaine Huntsman,
Chairman of the Board and
Chief Executive Officer
Salt Lake City, Utah
March 24, 1995
<PAGE> 4
Filed pursuant to Section 424(b)(2)
of the Securities Act of 1933.
Form S-4 Registration No. 33-57413
PROXY STATEMENT PROSPECTUS
OF OF
OLYMPUS CAPITAL CORPORATION WASHINGTON MUTUAL, INC.
SPECIAL MEETING OF SHAREHOLDERS COMMON STOCK
TO BE HELD ON APRIL 26, 1995 (NO PAR VALUE)
This Proxy Statement/Prospectus is being furnished to the holders of
shares of common stock, par value $1.00 per share ("Olympus Common Stock"), of
Olympus Capital Corporation, a Utah corporation ("Olympus"), in connection with
the solicitation of proxies by the Board of Directors of Olympus for use at a
special meeting of shareholders to be held on April 26, 1995, at 9:00 a.m.,
local time, at the corporate headquarters of Olympus located at 115 South Main
Street, Second Floor, Salt Lake City, Utah 84111, and at any adjournments or
postponements thereof (the "Special Meeting").
At the Special Meeting, the holders of Olympus Common Stock will
consider and vote upon proposals (i) to approve an Amended and Restated
Agreement for Merger (including the alternatiave Plans of Merger) dated as of
January 20, 1995, by and among Washington Mutual, Inc., a Washington
corporation ("Washington Mutual"), Washington Mutual Bank, a Washington
state-chartered stock savings bank ("WMB"), Washington Mutual Federal Savings
Bank, a federal savings association ("WMFSB"), Olympus, and Olympus Bank, a
Federal Savings Bank ("Olympus Bank") (the "Merger Agreement"), a copy of which
is attached to this Proxy Statement/Prospectus as Appendix A, and (ii) to
approve an amendment (the "Option Plan Amendment") to the Olympus Capital
Corporation Nonqualified Stock Option Plan and Incentive Stock Option Plan (the
"Option Plan"), a copy of which amendment is attached to this Proxy
Statement/Prospectus as Appendix G. WMB and WMFSB are wholly-owned
subsidiaries of Washington Mutual and Olympus Bank is a wholly-owned subsidiary
of Olympus. As more fully described herein, pursuant to the Merger Agreement,
Olympus will merge with and into Washington Mutual (the "Merger") and all of
the outstanding shares of Olympus Common Stock held by each holder thereof
immediately before the effective time of the Merger will be converted into the
right to receive $15.50 per share, subject to adjustment, as described herein,
to be paid in shares of common stock, no par value per share, of Washington
Mutual ("Washington Mutual Common Stock"). If the average price of Washington
Mutual Common Stock for the ten trading days immediately prior to the third
trading day before the effective time of the Merger is less than $18.00 per
share, subject to certain adjustments, Washington Mutual may elect to pay up to
49% of the aggregate consideration to be paid in the Merger with cash. Unless
the average price of Washington Mutual Common Stock falls significantly below
$18.00 per share, Washington Mutual does not intend to elect to pay any of the
consideration for the Merger with cash. See "THE MERGER -- General."
Washington Mutual intends, after the effective time, to merge Olympus Bank with
and into WMFSB (the "Bank Merger").
This Proxy Statement/Prospectus also constitutes a Prospectus of
Washington Mutual with respect to the shares of Washington Mutual Common Stock
to be issued in the Merger. The outstanding shares of Washington Mutual Common
Stock are quoted on the National Association of Securities Dealers Automated
Quotations -- National Market System ("The Nasdaq Stock Market"). The last
reported sale price of Washington Mutual Common Stock on The Nasdaq Stock
Market on March 22, 1995, was $20.25 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to shareholders of Olympus on or about March 29, 1995.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS MARCH 24, 1995.
<PAGE> 5
AVAILABLE INFORMATION
Olympus and Washington Mutual 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"). The
reports, proxy statements and other information filed by Olympus and Washington
Mutual with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 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 Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, at
prescribed rates. In November 1994, Washington Mutual became a holding company
for WMB, WMFSB and other subsidiaries. Prior to creating a holding company
structure, Washington Mutual Savings Bank ("WMSB"), the publicly reporting
predecessor to Washington Mutual's most significant subsidiary, WMB, filed
reports, proxy statements and other information with the Federal Deposit
Insurance Corporation (the "FDIC"). The reports, proxy statements and other
information filed by WMSB with the FDIC can be inspected and copied at the
public reference facilities maintained by the FDIC at 550 17th Street, N.W.,
Washington, D.C. 20429, at prescribed rates. In addition, material filed by
Washington Mutual and Olympus can be inspected at the offices of the National
Association of Securities Dealers, Inc., Report Section, 1735 K Street, N.W.,
Washington, D.C. 20006.
Washington Mutual has filed a Registration Statement on Form S-4
(together with any exhibits, amendments or supplements thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") covering the Washington Mutual Common Stock to be issued
pursuant to the Merger Agreement. This Proxy Statement/Prospectus does not
contain all the information set forth in the Registration Statement. Such
additional information may be obtained from the Commission's principal office
in Washington, D.C. Statements contained in this Proxy Statement/Prospectus as
to the contents of any contract or other document referred to herein are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
This Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. These documents (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference) are available upon request to any person, including
any beneficial owner to whom this Proxy Statement/Prospectus is delivered,
without charge, in the case of documents relating to Olympus, directed to
Olympus, 115 South Main Street, Salt Lake City, Utah 84111 (telephone number
(801) 325-1000), Attention: Corporate Secretary, or, in the case of documents
relating to Washington Mutual, directed to Washington Mutual, Washington Mutual
Tower, 1201 Third Avenue, 12th Floor, Seattle, Washington 98101 (telephone
number (206) 461-3187), Attention: Ms. JoAnn DeGrande, Vice President of
Investor Relations. In order to ensure timely delivery of the documents, any
requests should be made by April 17, 1995.
No person has been authorized to give any information or to make any
representation other than those contained in this Proxy Statement/Prospectus in
connection with the solicitation of proxies or the offering of securities made
hereby and, if given or made, such information or representation must not be
relied upon as having been authorized by Olympus, Washington Mutual or any
other person. This Proxy Statement/Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any securities, or the solicitation
of a proxy, in any jurisdiction to or from any person to or from whom it is not
lawful to make any such offer or solicitation in such jurisdiction.
Neither the delivery of this Proxy Statement/Prospectus nor any
distribution of securities made hereunder shall, under any circumstances,
create an implication that there has been no change in the affairs of Olympus
or Washington Mutual since the date hereof or that the information herein is
correct as of any time subsequent to the date hereof.
All information contained in this Proxy Statement/Prospectus relating to
Washington Mutual has been supplied by Washington Mutual and all information
herein relating to Olympus has been supplied by Olympus.
-2-
<PAGE> 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Washington Mutual
pursuant to the Exchange Act, under cover of a Current Report on Form 8-K dated
November 29, 1994, are incorporated by reference in this Proxy
Statement/Prospectus:
1. WMSB's Annual Report on Form F-2 ("Form F-2") for the year ended
December 31, 1993;
2. The independent auditors' report and the audited financial
statements of WMSB contained in WMSB's Annual Report to
Shareholders for the year ended December 31, 1993, attached as an
exhibit to the Form F-2;
3. WMSB's Quarterly Report on Form F-4 for the quarters ended March
31, 1994, June 30, 1994 and September 30, 1994;
4. WMSB's Proxy Statement for the Annual Meeting of Shareholders
held on April 9, 1994; and
5. Item 5 of Washington Mutual's Form 8-K dated November 29, 1994.
In addition, the Washington Mutual Annual Report on Form 10-K ("Form
10-K") for the year ended December 31, 1994, filed with the Commission on March
13, 1995 pursuant to the Exchange Act, is incorporated herein by reference.
The following documents filed by Olympus with the Commission pursuant to
the Exchange Act are incorporated in this Proxy Statement/Prospectus by
reference:
1. Olympus' Annual Report on Form 10-K for the year ended
December 31, 1993;
2. Olympus' Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994, June 30, 1994, and September 30, 1994; and
3. Olympus' Current Report on Form 8-K dated July 22, 1994.
All documents and reports subsequently filed by Olympus and Washington
Mutual pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Proxy Statement/Prospectus and before the date of the Special
Meeting shall be deemed to be incorporated by reference in this Proxy
Statement/Prospectus and to be part hereof from the date of filing of such
documents or reports. Any statement contained 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 any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement/Prospectus.
The information relating to Washington Mutual and Olympus contained in
this Proxy Statement/Prospectus does not purport to be complete and should be
read together with the information in the documents that accompany this Proxy
Statement/Prospectus and the additional documents that are incorporated by
reference herein.
-3-
<PAGE> 7
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
COMPARATIVE PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Summary Consolidated Financial Data of Washington Mutual . . . . . . . . . . . . . . . . . . . . . . . 15
Condensed Consolidated Financial Data of Olympus . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Pro Forma Combined Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Matters To Be Considered at the Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Record Date and Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Quorum; Votes Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Background of and Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Recommendation of the Olympus Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Affiliate Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Resales of Washington Mutual Common Stock by Olympus Shareholders . . . . . . . . . . . . . . . . . . 37
THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Effective Date and Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Business of Olympus Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Break-Up Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Preference and Allocation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Exchange of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Effect on Employee Benefit Plans and Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Post-Merger Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Authorized Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Comparison of Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Dividend Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Amendments of Articles and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C>
Anti-Takeover Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Limitation of Directors' Liability; Indemnification . . . . . . . . . . . . . . . . . . . . . . 52
Washington Mutual Shareholder Rights Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
CERTAIN DIFFERENCES BETWEEN WASHINGTON AND UTAH CORPORATE LAWS . . . . . . . . . . . . . . . . . . . . 54
Right to Call Special Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 54
Provisions Affecting Control Share Acquisitions and Business Combinations . . . . . . . . . . . 54
Transactions With Officers or Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
INFORMATION CONCERNING OLYMPUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Recent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Beneficial Ownership of Olympus Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 62
INFORMATION CONCERNING WASHINGTON MUTUAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Washington Mutual, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
The Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Washington Mutual's Operating Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
WMFSB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Recent Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Recent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
DESCRIPTION OF WASHINGTON MUTUAL CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
THE OPTION PLAN AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Description of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Value of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
APPENDIX A: Amended and Restated Agreement for Merger (including Plans of Merger) . . . . . . . A-1
APPENDIX B: Opinion of Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C: Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
APPENDIX D: Utah Revised Business Corporation Act, Part 13 . . . . . . . . . . . . . . . . . . D-1
APPENDIX E: Olympus' Annual Report on Form 10-K for
the year ended December 31, 1993 and
Amendment to such report on Form 10-K/A
filed June 22, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
APPENDIX F: Olympus' Quarterly Report on Form 10-Q for
the three months ended September 30, 1994 . . . . . . . . . . . . . . . . . . . F-1
APPENDIX G: Option Plan Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
</TABLE>
-5-
<PAGE> 9
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus or in documents incorporated herein by
reference. This summary is not intended to be complete and is qualified in its
entirety by the more detailed information contained elsewhere in this Proxy
Statement/Prospectus, the Appendices hereto and the other documents
incorporated herein by reference. Shareholders are urged to read this Proxy
Statement/Prospectus, the Appendices hereto and the documents incorporated
herein by reference in their entirety.
THE PARTICIPANTS
WASHINGTON MUTUAL. Washington Mutual is a Washington corporation which
provides a broad range of financial services in Washington, Oregon and Idaho
through WMB, WMFSB and other subsidiary operations. These services include the
traditional savings bank activities of accepting deposits from the general
public and making residential loans, consumer loans and limited types of
commercial real estate loans, primarily multi-family. As part of its consumer
banking focus, Washington Mutual also underwrites and markets insurance
annuities and offers mutual funds through various subsidiaries. At September
30, 1994, Washington Mutual's predecessor had total assets of $17.8 billion,
total deposits of $9.4 billion and stockholders' equity of $1.3 billion and was
the largest independent depository institution headquartered in the state of
Washington. The principal executive offices of Washington Mutual are located
in the Washington Mutual Tower, 1201 Third Avenue, Suite 1500, Seattle,
Washington 98101, and its telephone number is (206) 461-2000.
In November 1994, Washington Mutual's predecessor, Washington Mutual
Savings Bank, a Washington state-chartered stock savings bank ("WMSB") was
reorganized into a holding company structure (the "Reorganization"), with
Washington Mutual as the resulting holding company. Washington Mutual, which
was formed in August 1994, serves as the holding company for WMSB's successor,
WMB, WMFSB and other subsidiaries. Washington Mutual qualifies as a savings
and loan holding company. Except as noted otherwise, references in this Proxy
Statement/Prospectus to "Washington Mutual" refer to both (i) Washington
Mutual, Inc. and its consolidated subsidiaries after the consummation of the
Reorganization; and (ii) WMSB and its consolidated subsidiaries prior to
consummation of the Reorganization. See "INFORMATION CONCERNING WASHINGTON
MUTUAL -- The Reorganization."
WMFSB. WMFSB, a wholly-owned subsidiary of Washington Mutual, is a
federal savings bank, formed in 1994 to participate in a supervisory
acquisition of three branches of a savings association in receivership, two of
which were subsequently transferred to another subsidiary of Washington Mutual.
WMFSB's principal business includes the traditional savings association
activity of accepting deposits from the public, as well the brokering of loans
to other Washington Mutual subsidiaries.
For additional information concerning Washington Mutual and WMFSB, see
"INFORMATION CONCERNING WASHINGTON MUTUAL," "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
OLYMPUS. Olympus Capital Corporation, a Utah corporation ("Olympus"),
provides banking services in Utah and Montana through its wholly owned
subsidiary, Olympus Bank, a Federal Savings Bank ("Olympus Bank"). At
September 30, 1994, Olympus had total assets of $392.3 million, total deposits
of $311.2 million and stockholders' equity of $33.8 million. The principal
executive offices of Olympus are located at 115 South Main Street, Salt Lake
City, Utah 84111, and its telephone number is (801) 325-1000.
OLYMPUS BANK. Olympus Bank is a federal savings bank that provides a
broad range of financial services in Utah and Montana. These services include
obtaining funds from savings and transaction account deposits and borrowings,
investing in real estate loans, mortgage-backed securities and debt securities,
and providing related financial services.
For additional information concerning Olympus and Olympus Bank, see
"INFORMATION CONCERNING OLYMPUS," "AVAILABLE INFORMATION" and "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
-6-
<PAGE> 10
THE SPECIAL MEETING
TIME, DATE AND PLACE. The Special Meeting will be held at 11:00 a.m.,
local time, on April 24, 1995, at the corporate headquarters of Olympus
located at 115 South Main Street, Salt Lake City, Utah 84111.
MATTERS TO BE CONSIDERED. At the Special Meeting, shareholders of
Olympus ("Olympus Shareholders") will be asked to consider and vote upon
proposals (i) to approve the Merger Agreement, and (ii) to approve the Option
Plan Amendment, and to transact such other business as shall properly come
before the Special Meeting. See "THE SPECIAL MEETING -- Matters To Be
Considered at the Special Meeting."
RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM. The Board of Directors
of Olympus has fixed the close of business on March 13, 1995, as the record
date (the "Record Date") for the determination of Olympus Shareholders entitled
to receive notice of and vote at the Special Meeting. As of the Record Date,
3,134,539 shares of Olympus Common Stock were outstanding and eligible to be
voted at the Special Meeting. Each share of Olympus Common Stock will be
entitled to one vote on each matter to be acted upon or that may properly come
before the Special Meeting. The presence, in person or by proxy, of the
holders of a majority of the outstanding shares of Olympus Common Stock is
required for a quorum. See "THE SPECIAL MEETING -- Record Date and Voting" and
"-- Quorum; Votes Required."
VOTES REQUIRED. The affirmative vote of the holders of a majority of
the shares of Olympus Common Stock outstanding on the Record Date is required
to approve the Merger Agreement. Because the required vote of the holders of
Olympus Common Stock on the Merger Agreement is based upon the number of issued
and outstanding shares of stock, the failure to submit a proxy card (or to vote
in person at the Special Meeting), broker non-votes, which is an indication by
a broker that it does not have discretionary authority to vote on a particular
matter, and abstentions from voting by Olympus Shareholders will have the same
effect as a "NO" vote with respect to the Merger Agreement. To approve the
Option Plan Amendment, once a quorum is present, the votes cast in favor of the
proposal must exceed the votes cast against the proposal. Abstentions and
broker non-votes will not have the effect of being considered as votes cast
against the proposal. See "THE SPECIAL MEETING -- Record Date and Voting" and
"-- Quorum; Votes Required."
THE MERGER
GENERAL. The Merger Agreement provides for the merger of Olympus with
and into Washington Mutual, with Washington Mutual as the surviving
corporation. It is further intended that thereafter Olympus Bank will be
merged with and into WMFSB, with WMFSB as the surviving federal savings bank.
The separate existence of Olympus and Olympus Bank will cease upon completion
of the respective mergers. The Articles of Incorporation and Bylaws of
Washington Mutual will continue to be the Articles of Incorporation and Bylaws
of Washington Mutual after the completion of the Merger. Upon consummation of
the Merger, all shares of Olympus Common Stock will no longer be outstanding
and will automatically be canceled and retired and will cease to exist, and
each holder of a certificate representing any shares of Olympus Common Stock
will cease to have any rights with respect thereto, except the right to receive
shares of Washington Mutual Common Stock or, under certain circumstances,
shares of Washington Mutual Common Stock and/or cash, to be issued or paid upon
the surrender of such certificate, without interest, as described below, or the
right of dissenting Olympus Shareholders to receive fair value for their shares
of Olympus Common Stock, under certain circumstances. See "THE MERGER --
Dissenters' Rights."
At the effective date of the Merger (the "Effective Date"), each
outstanding share of Olympus Common Stock will be converted into the right to
receive $15.50 per share (the "Merger Consideration") in newly issued shares of
Washington Mutual Common Stock, which amount is subject to increase if the
Effective Date is after April 30, 1995, as described in "THE MERGER --
General." The per share value of Washington Mutual Common Stock for purposes
of determining the number of shares of Washington Mutual Common Stock to be
received in the Merger will be based upon the arithmetic average of the closing
prices of Washington Mutual Common Stock on The Nasdaq Stock Market for the
ten trading days immediately preceding the third trading day before the
Effective Date (the "Average Price"). The exchange ratio for determining the
number of shares of Washington Mutual Common Stock to be issued for each share
of Olympus Common Stock (the "Exchange Ratio") will be the Merger Consideration
divided by the Average Price. No certificates for fractional shares of
Washington Mutual Common Stock will be issued as a result of the Merger.
Instead, each stockholder otherwise entitled to a fractional share will receive
cash in lieu of such fractional share.
-7-
<PAGE> 11
If the Effective Date occurs after April 30, 1995, the Merger
Consideration will be increased by an amount equal to (i) $0.775 (five percent
of $15.50) multiplied by (ii) a fraction, the numerator of which is the number
of days elapsed between April 30, 1995 and the Effective Date and the
denominator of which is 365.
If the Average Price is less than $18.00, then Washington Mutual may
elect to pay up to 49% of the aggregate Merger Consideration in the form of
cash (the "Partial Cash Consideration Option"). Unless the Average Price is
substantially below $18.00, Washington Mutual does not intend to elect the
Parial Cash Consideration Option. If Washington Mutual were to elect the
Partial Cash Consideration Option, each shareholder of Olympus, subject to
certain allocation procedures, will be eligible to receive such shareholder's
preference as to the form of the Merger Consideration to be paid. Unless
Washington Mutual waives its right to elect the Partial Cash Consideration
Option, preference forms ("Preference Forms") will be sent to Olympus
Shareholders prior to the Effective Date. On such Preference Form, each holder
will be able to indicate such holder's preference to receive either Washington
Mutual Common Stock or cash in the Merger. Preference Forms will only be
utilized, however, if Washington Mutual elects the Partial Cash Consideration
Option. During the period after an Olympus Shareholder delivers a Preference
Form and such shareholder's stock certificates and before such shareholder
receives Washington Mutual Common Stock and/or cash in the Merger, such Olympus
Shareholder will not be able to sell his shares or liquidate his investment in
Olympus Common Stock. However, an Olympus Shareholder may revoke a Preference
Form prior to the Preference Deadline (as hereinafter defined) and promptly
receive a return of such shareholder's stock certificate. See "THE MERGER --
General," "-- Dissenters' Rights" and "-- Federal Income Tax Consequences," and
"THE MERGER AGREEMENT -- Preference and Allocation Procedures."
RECOMMENDATION OF THE OLYMPUS BOARD; REASONS FOR THE MERGER. The Board
of Directors of Olympus ("Olympus Board") has carefully considered the terms of
the Merger Agreement, has approved it as being in the best interests of Olympus
and its shareholders, and recommends that shareholders of Olympus vote FOR the
proposal to approve the Merger Agreement.
The recommendation of the Olympus Board is based upon a number of
factors, including the terms of the Merger, the Merger Agreement and the Stock
Option Agreement between Olympus and Washington Mutual (the "Stock Option
Agreement"), benefits expected to result from the combination of Olympus and
Washington Mutual, information concerning the financial condition, results of
operations and prospects of Washington Mutual and Olympus on a stand-alone and
combined basis, the Board's view of the relative merits of other opportunities
presented to the Board or that the Board believed would be available, including
the possibility of remaining independent, the market price of Olympus Common
Stock and the fairness opinion of Goldman, Sachs & Co. ("Goldman Sachs") as
financial advisor to Olympus. See "THE MERGER -- Background of and Reasons for
the Merger" and "-- Opinion of Financial Advisor."
The Olympus Board believes that the Merger would provide Olympus
Shareholders with the opportunity to receive a premium over the prices per
share of Olympus Common Stock at which individual trades have occurred in the
recent past and, to the extent that shareholders receive solely Washington
Mutual Common Stock in the Merger, enable them to participate as Washington
Mutual shareholders, on a tax-deferred basis, in the expanded opportunities for
growth and profitability made possible by the Merger. The Olympus Board also
believes that the Merger would result in a combined entity that is (i) capable
of competing more effectively with larger financial institutions that have
exerted increasing competitive pressure on Olympus, and (ii) capable of
enjoying significant market penetration in the banking and financial services
markets served by the combined entity.
OPINION OF FINANCIAL ADVISOR. Goldman Sachs has served as financial
advisor to the Olympus Board, and has delivered its written opinion, dated
March 24, 1995 to the Olympus Board that the consideration to be received by
Olympus Shareholders pursuant to the Merger Agreement is fair to
such holders. Olympus has agreed to pay Goldman Sachs a fee for its services
which is, in part, contingent on the consummation of the Merger. The full text
of Goldman Sachs' written opinion, dated March 24, 1995, which sets forth
the assumptions made, matters considered and limits on their review, is
attached hereto as Appendix B. Shareholders of Olympus are urged to read such
opinion in its entirety. See "THE MERGER -- Opinion of Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER. Certain members of
Olympus' management and the Olympus Board may be deemed to have interests in
the Merger in addition to their interests, if any, as shareholders of Olympus
generally. These include, among other things, payments under Olympus' Cash
Incentive Plan, payments of deferred compensation, the acceleration of vesting
of options to purchase shares of Olympus Common Stock, and provisions in the
Merger Agreement relating to indemnification, severance payments, employee
benefit plans, continued employment or consulting relationships with Washington
Mutual, and under certain circumstances, the conversion of outstanding options
into options to purchase Washington Mutual Common Stock or the ability to
receive the net value of options which remain unexercised immediately prior to
the effective time of the Merger and certain other benefits. See
-8-
<PAGE> 12
"THE MERGER -- Interests of Certain Persons in the Merger" and "THE MERGER
AGREEMENT -- Effect on Employee Benefit Plans and Stock Plans."
AFFILIATE LETTERS. As of the Record Date, Olympus directors and
officers and their affiliates beneficially owned an aggregate of 456,399
shares of Olympus Common Stock (excluding 205,600 shares issuable upon the
exercise of outstanding options) or approximately 14.6% of the shares of
Olympus Common Stock outstanding on such date. In addition, as of the Record
Date, certain shareholders and their affiliates who owned more than 5% of the
shares of Olympus Common Stock owned an aggregate of 539,891 shares or
approximately 17.2% of the shares of Olympus Common Stock. These Olympus
directors, officers and shareholders have each delivered a letter to
Washington Mutual and WMB (the "Affiliate Letters") agreeing, among other
things, to vote all shares of Olympus Common Stock held by them in favor of
the Merger Agreement. Accordingly, holders of approximately 31.8% of the
shares of Olympus Common Stock outstanding on the Record Date have committed
to voting in favor of the proposal to approve the Merger Agreement. These
Affiliate Letters are intended to increase the likelihood that the Merger will
be consummated according to the terms set forth in the Merger Agreement and
may tend to discourage competing offers by other parties to acquire Olympus.
See "THE MERGER -- Affiliate Letters."
REGULATORY APPROVALS. The Merger and the Bank Merger are subject to
the prior approval of the Office of Thrift Supervision ("OTS"). Receipt of
regulatory approvals of the Merger and the Bank Merger are conditions to
consummation of the Merger. Generally, bank mergers may not be consummated
until the 30th day following the date of the OTS's approval. Washington Mutual
has filed applications for all required regulatory approvals, but there can be
no assurance that such applications will be approved or, if approved, that such
approvals will not contain conditions or requirements which cause such
approvals to fail to satisfy the conditions set forth in the Merger Agreement.
A protest to the OTS merger application may significantly delay OTS approval of
the Merger. See "THE MERGER -- Regulatory Approvals."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The Merger is intended to
qualify as a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, for federal income
tax purposes, no gain or loss will be recognized by Olympus Shareholders who
receive solely Washington Mutual Common Stock in exchange for their Olympus
Common Stock. Cash received by Olympus Shareholders in the Merger will be
wholly or partially taxed. Consummation of the Merger is conditioned upon
receipt by Washington Mutual and Olympus of an opinion of counsel to Washington
Mutual to the effect that the Merger will constitute a reorganization within
the meaning of Section 368 of the Code. For a further discussion of the
federal income tax consequences of the Merger, see "THE MERGER -- Federal
Income Tax Consequences."
Because certain tax consequences of the Merger may vary depending upon
the particular circumstances of each shareholder and other factors, each holder
of Olympus Common Stock is urged to consult such holder's own tax advisor to
determine the particular tax consequences to such holder of the Merger
(including the effect of state and local income and other tax laws).
ACCOUNTING TREATMENT. It is intended that the Merger will be accounted
for as a pooling-of-interests of Washington Mutual and Olympus under generally
accepted accounting principles. It is Washington Mutual's intention not to
restate financial statements and other financial information for periods prior
to the Merger to include the accounts and results of operations of Olympus
because the transaction is not expected to be material to Washington Mutual.
If the Average Price of Washington Mutual Common Stock is below $18.00 and
Washington Mutual elects the Partial Cash Consideration Option, the Merger will
be accounted for as a purchase under generally accepted accounting principles.
See "THE MERGER -- Accounting Treatment."
DISSENTERS' RIGHTS. Under Sections 1301-1331 of Part 13 ("Part 13") of
the Utah Revised Business Corporation Act ("URBCA"), Olympus Shareholders will
not be entitled to dissent from the Merger and obtain payment of the fair value
of shares held by them, unless Washington Mutual elects the Partial Cash
Consideration Option. If Washington Mutual elects the Partial Cash
Consideration Option, Olympus Shareholders will be entitled to dissent from the
Merger and obtain payment for such shares in cash, assuming the Merger is
consummated, by following certain procedures set forth in Part 13 of the URBCA,
the text of which is attached hereto as Appendix D. An Olympus Shareholder's
failure to follow exactly the procedures specified will result in a loss of
such shareholder's dissenters' rights. Under the Merger Agreement, Washington
Mutual may elect the Partial Cash Consideration Option if the Average Price is
less than $18.00. The Average Price is determined three trading days prior to
the Effective Date. At the time of the Special Meeting, it is not likely to be
known if the Partial Cash Consideration Option will be available to Washington
Mutual, or, if available, whether it would be elected by Washington Mutual.
Therefore, Olympus Shareholders should assume, for purposes of exercising
dissenters' rights, that Washington Mutual will elect the Partial Cash
Consideration Option. Dissenting Olympus Shareholders should follow the
procedures for perfecting such rights described in "THE MERGER -- Dissenters'
Rights" and in Part 13
-9-
<PAGE> 13
of the URBCA. If Washington Mutual does not elect the Partial Cash
Consideration Option, however, Olympus Shareholders will not be entitled to
dissenters' rights. See "THE MERGER -- Dissenters' Rights."
THE MERGER AGREEMENT
EFFECTIVE DATE AND TIME OF THE MERGER. The Merger will become effective
at the time (the "Effective Time") of the occurrence of both (a) the filing of
the articles of merger with the Secretary of State of the State of Washington
and (b) the delivery to the Division of Corporations and Commercial Code of the
State of Utah of the articles of merger, or at such later time after such
filing and delivery as is provided in the articles of merger. See "THE MERGER
AGREEMENT -- Effective Date and Time of the Merger."
CONDITIONS TO THE MERGER. The respective obligations of Olympus and
Washington Mutual to consummate the Merger are subject to certain conditions,
including the receipt of regulatory approvals, approval of the Merger Agreement
by the shareholders of Olympus, the receipt of certain tax and accounting
opinions, and certain other conditions customary in a transaction of this
nature. See "THE MERGER AGREEMENT -- Conditions to the Merger" and "THE MERGER
-- Regulatory Approvals."
BREAK-UP FEES. To compensate Olympus for certain costs incurred in
anticipation of the Merger and to induce Olympus to forego initiating
discussions with other potential acquirors, Washington Mutual has agreed to pay
to Olympus $250,000 if the Merger Agreement terminates under certain
circumstances. To compensate Washington Mutual for certain costs incurred in
anticipation of the Merger and to induce it to forego initiating discussions
regarding other potential acquisitions, Olympus has agreed to pay to Washington
Mutual $250,000 if the Merger Agreement terminates under certain circumstances.
See "THE MERGER AGREEMENT -- Break-Up Fees."
TERMINATION. The Merger Agreement may be terminated, and the Merger
abandoned, at any time before the Effective Time, either before or after its
approval by the Olympus Shareholders, by either party if, among other reasons,
the Merger shall not have become effective by June 30, 1995, unless the failure
of such occurrence shall be due to the failure of the party seeking termination
to perform its respective covenants and agreements under the Merger Agreement.
See "THE MERGER AGREEMENT -- Termination."
STOCK OPTION AGREEMENT. As a condition to Washington Mutual entering
into the Merger Agreement, Olympus and Washington Mutual also entered into the
Stock Option Agreement, pursuant to which Olympus granted Washington Mutual an
option (the "Option") to purchase up to 306,864 authorized and unissued shares
of Olympus Common Stock (representing approximately 9.9% of the outstanding
shares of Olympus Common Stock on July 22, 1994) at a price of $13.6126 per
share. The Option is exercisable only upon the occurrence of certain events
(none of which has occurred as of the date hereof), including without
limitation Olympus pursuing an acquisition with an entity other than Washington
Mutual. The Stock Option Agreement is intended to increase the likelihood that
the Merger will be consummated in accordance with the terms of the Merger
Agreement and may discourage offers by other parties to acquire Olympus. A
copy of the Stock Option Agreement is attached to this Proxy
Statement/Prospectus as Appendix C. See "THE MERGER AGREEMENT -- Stock Option
Agreement."
EXCHANGE OF STOCK CERTIFICATES. Promptly after consummation of the
Merger, an agreed upon escrow agent (the "Exchange Agent") will mail
instructions to each Olympus Shareholder who did not deliver stock certificates
with a Preference Form concerning the proper method of surrendering
certificates formerly representing Olympus Common Stock in exchange for the
Merger Consideration. OLYMPUS SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES
AT THIS TIME. See "THE MERGER AGREEMENT -- Exchange of Stock Certificates."
COMPARATIVE RIGHTS OF SHAREHOLDERS
Washington Mutual is a Washington corporation organized under the
Washington Business Corporations Act ("WBCA"). Olympus is a Utah corporation
operating under the URBCA. The rights of Olympus Shareholders are governed by
the URBCA and the Articles of Incorporation and Bylaws of Olympus. Upon
consummation of the Merger, except with respect to those Olympus Shareholders
who receive only cash in the event Washington Mutual elects the Partial Cash
Consideration Option, Olympus Shareholders will become shareholders of
Washington Mutual and their rights as shareholders of Washington Mutual will be
governed by the WBCA and the Articles of Incorporation and Bylaws of Washington
Mutual. Certain differences arise from this change of governing law, as well
as from the distinctions between the Articles of Incorporation and Bylaws of
Olympus and the Articles of Incorporation and Bylaws of Washington Mutual.
Among other things, Washington Mutual's Articles of
-10-
<PAGE> 14
Incorporation include provisions that generally prohibit certain business
combinations with shareholders owning 5% or more of the voting stock of
Washington Mutual except under specified circumstances. In addition,
Washington Mutual has adopted a shareholders' rights plan that under certain
circumstances allows holders of such rights to purchase an additional share of
Washington Mutual Common Stock for each right held. For a summary of certain
differences between the rights of holders of Washington Mutual Common Stock and
holders of Olympus Common Stock and an explanation of certain possible
anti-takeover effects of certain provisions in Washington Mutual's Articles of
Incorporation and Bylaws, see "COMPARATIVE RIGHTS OF SHAREHOLDERS" and "CERTAIN
DIFFERENCES BETWEEN WASHINGTON AND UTAH CORPORATE LAWS."
MANAGEMENT AND OPERATIONS OF WASHINGTON MUTUAL AFTER THE MERGER
Following the Merger, it is expected that the Washington Mutual Board of
Directors (the "Washington Mutual Board") will not change and will continue as
constituted immediately prior to the Merger. From time to time prior to
consummation of the Merger, decisions may be made with respect to the
management and operations of Washington Mutual after the Merger. See
"INFORMATION CONCERNING WASHINGTON MUTUAL" and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
RESALES OF WASHINGTON MUTUAL COMMON STOCK
The shares of Washington Mutual Common Stock to be issued to
shareholders of Olympus in connection with the Merger have been registered
under the Securities Act. All Washington Mutual Common Stock received by
holders of Olympus Common Stock upon consummation of the Merger will be freely
transferable by those shareholders of Olympus not deemed to be "affiliates" of
Olympus. "Affiliates" are generally defined as persons who control, are
controlled by, or are under common control with, Olympus at the time of the
Special Meeting (generally, executive officers, directors and certain and
beneficial owners). See "THE MERGER -- Resales of Washington Mutual Common
Stock by Olympus Shareholders" for a discussion of the limitations on transfer
of Washington Mutual Common Stock held by affiliates of Olympus.
THE OPTION PLAN AMENDMENT
Under the terms of the Option Plan, upon execution of the Merger
Agreement, all outstanding options under the Option Plan became immediately
exercisable, and, upon consummation of the Merger, any unexercised options will
terminate and cease to be effective. The Merger Agreement contemplates that
Olympus will submit for shareholder approval an amendment to the Option Plan
which provides that, if Washington Mutual elects the Partial Cash Consideration
Option, the outstanding options under the Option Plan will not terminate upon
consummation of the Merger but will instead be converted into options to
acquire shares of Washington Mutual Common Stock, adjusted as to the number of
shares of Washington Mutual Common Stock to be acquired and the exercise price
by the Exchange Ratio.
The Olympus Board has adopted the Option Plan Amendment to effectuate
the changes contemplated by the Merger Agreement. The Olympus Board has
carefully considered the Option Plan Amendment, has approved it as being in the
best interests of Olympus and its Shareholders, and recommends that Olympus
Shareholders vote FOR the proposal to approve the Option Plan Amendment. The
text of the Option Plan Amendment is set forth on Appendix G to this Proxy
Statement/Prospectus. The effectiveness of the Option Plan Amendment is
conditioned on (i) Olympus Shareholder approval and (ii) the election by
Washington Mutual of the Partial Cash Consideration Option. IF WASHINGTON
MUTUAL DOES NOT ELECT THE PARTIAL CASH CONSIDERATION OPTION, THE OPTION PLAN
AMENDMENT WILL NOT BECOME EFFECTIVE, NOTWITHSTANDING ADOPTION BY THE OLYMPUS
BOARD AND APPROVAL BY OLYMPUS SHAREHOLDERS. See "THE OPTION PLAN AMENDMENT."
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<PAGE> 15
MARKET PRICES AND DIVIDENDS
Washington Mutual Common Stock and Olympus Common Stock are traded on
The Nasdaq Stock Market under the symbols "WAMU" and "OLCC," respectively.
The table below sets forth, for the calendar quarters indicated, the reported
high and low sales prices of Washington Mutual Common Stock (adjusted for the
50% stock dividends declared in the first quarter of 1992 and the third quarter
of 1993) and Olympus Common Stock as reported on The Nasdaq Stock Market, in
each case based on published financial sources, and the dividends declared on
such stock.
<TABLE>
<CAPTION>
WASHINGTON MUTUAL OLYMPUS
COMMON STOCK COMMON STOCK
----------------------------------- ----------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 First Quarter . . . . . $24.08 $17.92 $0.10 $ 9.50 $ 6.50 $ --
Second Quarter . . . . 23.00 18.08 0.11 11.25 8.75 --
Third Quarter . . . . . 27.38 22.25 0.14 15.00 10.50 --
Fourth Quarter . . . . 28.38 22.63 0.15 14.50 12.50 --
1994 First Quarter . . . . . 25.00 19.13 0.16 15.75 11.25 --
Second Quarter . . . . 21.50 18.25 0.17 13.75 10.25 --
Third Quarter . . . . . 21.63 19.63 0.18 14.75 13.25 --
Fourth Quarter . . . . 20.63 15.75 0.19 15.00 14.25 --
1995 First Quarter . . . . . 20.75 16.63 0.19 15.63 14.63 --
(through March 6, 1995)
</TABLE>
The following table sets forth (i) the last reported sale price per
share of Washington Mutual Common Stock and Olympus Common Stock on July 22,
1994, the last full trading day before the execution and delivery of the Merger
Agreement and the public announcement thereof, and on March 22, 1995, the most
recent date for which it was practicable to obtain market price data prior to
the mailing of this Proxy Statement/Prospectus, (ii) the hypothetical Average
Price of Washington Mutual Common Stock computed as if the Effective Date were
each of such dates and (iii) the Merger Consideration.
<TABLE>
<CAPTION>
HYPOTHETICAL
AVERAGE PRICE
OF WASHINGTON
WASHINGTON MUTUAL OLYMPUS MUTUAL MERGER
COMMON STOCK COMMON STOCK COMMON STOCK CONSIDERATION
----------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Market Value Per Share at:
July 22, 1994 $20.13 $13.50 $20.30 $15.50
March 22, 1995 $20.25 $14.75 $19.44 $15.15
</TABLE>
Under the Merger Agreement, the number of shares of Washington Mutual
Common Stock to be issued to Olympus Shareholders in the Merger will vary
depending on the Average Price of Washington Mutual Common Stock. As the
Average Price increases, the number of shares of Washington Mutual Common Stock
to be issued in the Merger will decrease. Conversely, as the Average Price
decreases, the number of shares of Washington Mutual Common Stock to be issued
in the Merger will increase. No assurance can be given as to what the Average
Price will be or as to what the market price of Washington Mutual Common Stock
will be at the time the Merger is consummated. Olympus Shareholders
are encouraged to obtain current market quotations for shares of Washington
Mutual Common Stock and Olympus Common Stock. The value of the Merger
Consideration is fixed and bears no relation to the market price of the Olympus
Common Stock or the Washington Mutual Common Stock.
On December 31, 1994, there were approximately 11,620 shareholders
of record of Washington Mutual Common Stock and an aggregate of 1,043 holders of
the three series of outstanding Washington Mutual preferred stock
("Washington Mutual Preferred Stock"). As of the Record Date, there were
approximately 11,414 shareholders of record of Olympus Common Stock.
-12-
<PAGE> 16
COMPARATIVE PER SHARE DATA
The following table sets forth for Washington Mutual Common Stock and
Olympus Common Stock certain historical, unaudited pro forma and unaudited pro
forma equivalent per share financial information for the years ended December
31, 1991, 1992, and 1993 and for the nine months ended September 30, 1994. The
information presented herein should be read in conjunction with the Pro Forma
Condensed Combined Financial Data of Washington Mutual and Olympus appearing
elsewhere in this Proxy Statement/Prospectus and the other financial
information incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
-- Pro Forma Combined Consolidated Financial Data." The pro forma and pro
forma equivalent per share data in the following table are presented for
comparative purposes only and are not necessarily indicative of the combined
financial position or results of operations in the future or what the combined
financial position or results of operations would have been had the Merger been
consummated during the period or as of the date for which this pro forma table
is presented.
The pro forma and pro forma equivalent per share data reflect the
combined results of Washington Mutual and Olympus, after giving effect to the
Merger under the pooling-of-interests accounting method. If the Average Price
is less than $18.00, and Washington Mutual elects the Partial Cash
Consideration Option, the Merger will be treated as a purchase for accounting
purposes. The pro forma and pro forma equivalent per share data for the 1993
fiscal year and the nine-month period ended September 30, 1994 would not be
materially different if the Merger were treated as a purchase for accounting
purposes. See "THE MERGER."
-13-
<PAGE> 17
<TABLE>
<CAPTION>
For the Nine Months
For the Year Ended December 31, Ended September 30,
------------------------------- -------------------
1991 1992 1993 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
WASHINGTON MUTUAL COMMON STOCK (A)
Net income per fully diluted share:
Historical . . . . . . . . . . . . $ 1.58 $ 1.91 $ 2.67 $ 1.83
Pro forma . . . . . . . . . . . . 1.51 1.88 2.66 1.81
Dividends per share:
Historical . . . . . . . . . . . . 0.24 0.33 0.50 0.51
Pro forma (b) . . . . . . . . . . 0.24 0.33 0.50 0.51
Book value per share at period-end:
Historical . . . . . . . . . . . . 12.00 14.37 16.42 17.47
Pro forma . . . . . . . . . . . . 11.84 14.22 16.17 17.18
OLYMPUS COMMON STOCK
Net income per fully diluted share:
Historical . . . . . . . . . . . . 0.14 1.04 1.95 1.02
Pro forma equivalent (c) . . . . . 1.15 1.43 2.03 1.39
Dividends per share:
Historical . . . . . . . . . . . . - - - -
Pro forma equivalent (c) . . . . . 0.18 0.25 0.39 0.39
Book value per share at period-end:
Historical . . . . . . . . . . . . 8.57 8.82 10.76 10.85
Pro forma equivalent (c) . . . . . 9.12 10.95 12.55 13.32
</TABLE>
________________
(a) Washington Mutual's acquisition of Summit Bancorp, Inc. on
November 14, 1994 was accounted for as a pooling-of-interests.
Washington Mutual has not restated any financial statements or
other financial information for periods prior to the date of
such acquisition because such transaction was not material to
Washington Mutual.
(b) The Washington Mutual pro forma combined dividends per share
amounts represent historical dividends per share.
(c) The Olympus pro forma equivalent per share amounts are
calculated by multiplying the Washington Mutual pro forma per
share amounts by an exchange ratio of 0.770186. This exchange
ratio is based upon a Washington Mutual Common Stock price of
$20.125, the closing price on March 6, 1995.
-14-
<PAGE> 18
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
SUMMARY CONSOLIDATED FINANCIAL DATA OF WASHINGTON MUTUAL
The following table presents certain historical consolidated financial
data for Washington Mutual. This table is based upon and should be read in
conjunction with the Consolidated Financial Statements of Washington Mutual and
the notes thereto, which are incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Additionally, all per
common share information has been adjusted for 50% stock dividends paid on
February 14, 1992, and August 13, 1993, each of which had the effect of a
three-for-two stock split. Because of the significant increase in Washington
Mutual's size as a result of the acquisition of Pacific First Bank and Pioneer
Savings Bank early in 1993, the financial results for the year ended December
31, 1993, the nine months ended September 30, 1993, and 1994, and as of
September 30, 1994, are not generally comparable to prior periods or dates.
The information as of September 30, 1994 and for the nine-month periods ended
September 30, 1993 and 1994 is unaudited and reflects all adjustments which
are, in the opinion of Washington Mutual management, necessary for a fair
statement of the results for the periods presented and is not necessarily
indicative of the operating results for the entire year.
-15-
<PAGE> 19
<TABLE>
<CAPTION>
For the Nine Months
For the Year Ended December 31, Ended September 30,
----------------------------------------------------- ------------------
1989 1990 1991 1992 1993 1993 1994
-------- ------- ------- -------- -------- ------ ---------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARIZED STATEMENTS
OF INCOME:
Net interest income . . . . $152,836 $193,057 $234,061 $329,558 $529,431 $382,941 $428,820
Provision for loan 21,382 61,549 21,627 14,000 35,000 27,500 15,000
losses(1) . . . . . . . .
Other income . . . . . . . 55,280 66,924 94,475 90,692 143,862 107,147 81,877
Other expense . . . . . . . 158,030 166,295 183,792 230,896 369,264 268,631 291,195
Income taxes . . . . . . . 8,287 20,508 42,526 60,247 93,765 67,226 76,655
Extraordinary items, net
of federal income tax
effect . . . . . . . . . . (1,999) -- -- (4,638) (8,953) (8,953) --
Cumulative effect of
change in tax
accounting method . . . . -- -- -- -- 13,365 13,365 --
-------- ------- ------- -------- -------- ------ ---------
Net income (1) . . . . . . $ 18,418 $ 11,629 $ 80,591 $110,469 $179,676 $131,143 $127,847
======== ======== ======== ======== ======== ======== ========
Net income attributable
to common stock . . . . . $ 17,226 $ 6,754 $ 75,716 $105,594 $166,118 $121,819 $113,909
======== ======== ======== ======== ======== ======== ========
Net income per share:
Primary . . . . . . . . . $0.41 $0.15 $1.65 $2.01 $2.82 $2.08 $1.89
Fully diluted . . . . . . 0.41 0.15 1.58 1.91 2.67 1.96 1.83
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of September 30,
----------------------------------------------------------- ------------------------
1989 1990 1991 1992 1993 1993 1994
---------- ---------- ---------- ---------- ----------- ----------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARIZED STATEMENTS
OF FINANCIAL
POSITION:
Total assets . . . . . $7,243,845 $7,659,973 $7,970,427 $9,911,602 $15,827,228 $15,075,483 $17,840,418
Loans . . . . . . . . . 4,526,419 4,997,762 5,251,558 6,719,680 10,891,102 10,339,936 11,872,057
Trading, investment
and mortgage-backed
securities . . . . . . 2,284,118 2,155,914 2,140,490 2,587,476 4,013,098 3,823,726 5,110,382
Deposits . . . . . . . 4,417,833 5,009,947 5,410,236 6,058,112 9,351,402 9,332,643 9,392,236
Borrowings (includes
annuities) . . . . . . 2,191,512 2,065,472 1,789,308 2,735,652 5,050,645 4,263,163 6,863,275
Stockholders' equity . 506,861 505,506 658,326 995,036 1,195,704 1,151,154 1,269,754
</TABLE>
____________________
(1) In 1990, Washington Mutual modified its reserving methodology from a
"loan-by-loan" analysis of providing for losses to one of "general
reserving" and accordingly increased its provision for loan losses by
$48.0 million.
-16-
<PAGE> 20
OTHER FINANCIAL DATA (1):
<TABLE>
<CAPTION>
For The Nine Months
For The Year Ended December 31, Ended September 30,
---------------------------------------------- -----------------
1989 1990 1991 1992 1993 1993 1994
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Yield on earning assets 9.97% 10.22% 10.11% 9.26% 8.03% 8.11% 7.49%
Cost of deposits and
borrowings . . . . . 7.85 7.74 7.05 5.49 4.04 4.12 3.95
Net interest spread . . 2.12 2.48 3.06 3.77 3.99 3.99 3.54
Net interest margin . . 2.33 2.71 3.25 3.99 4.12 4.12 3.67
Operating efficiency
ratio (2) . . . . . . 75.93 63.96 55.94 54.94 54.84 54.81 57.02
Return on average
assets. . . . . . . . 0.26 0.15 1.04 1.24 1.31 1.33 1.04
Return on average
stockholders' equity 4.15 2.27 14.08 15.16 16.92 17.02 13.52
Ratios of combined
earnings to fixed
charges (3):
Excluding interest on
deposits . . . . . . 1.15x 1.16x 1.81x 2.33x 2.62x 2.61x 2.09x
Including interest on
deposits . . . . . 1.06x 1.06x 1.25x 1.40x 1.53x 1.52x 1.46x
</TABLE>
<TABLE>
<CAPTION>
December 31, September 30,
-------------------------------------------------------- --------------
1989 1990 1991 1992 1993 1993 1994
----- ----- ----- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Nonperforming assets as
a percentage of total
assets . . . . . . . 2.05% 1.92% 1.66% 1.34% 0.70% 0.91% 0.48%
Loan loss reserves/total
loans . . . . . . . . 0.56 1.06 1.00 0.80 1.06 1.17 1.04
Loan loss reserves/
nonperforming assets 16.93 35.92 39.54 40.75 103.70 88.42 144.92
Leverage capital ratio
(4)(5) . . . . . . . 6.27 5.77 7.57 9.35 6.00 6.22 5.91
Core risk-based capital
ratio (5)(6) . . . . 10.69 9.57 12.04 15.41 9.84 9.89 10.71
Total risk-based capital
ratio (5)(7) . . . . 13.25 12.87 15.13 16.99 10.59 10.98 11.58
--------------------
</TABLE>
(1) Where appropriate, calculations for the nine-month periods are
annualized.
(2) Other expense divided by operating income (net interest income plus
other income).
(3) The ratios of combined earnings to fixed charges have been computed by
dividing earnings before income tax expense and fixed charges by fixed
charges.
(4) The FDIC requires that a bank have a minimum leverage ratio of at
least 5.00% to be considered "well capitalized."
(5) The capital ratios at December 31, 1992, were significantly higher
than Washington Mutual's historical levels primarily because of the
completion of the offerings of the 9.12% Noncumulative Perpetual
Preferred Stock, Series C and $6.00 Noncumulative Convertible
Perpetual Preferred Stock, Series D, on December 28, 1992. These
offerings were intended, in part, to provide capital to support
Washington Mutual's acquisition of Pacific First Bank, which was
consummated on April 9, 1993.
(6) The FDIC requires that a bank have a core risk-based capital ratio of
at least 6.00% to be considered "well capitalized."
(7) The FDIC requires that a bank have a total risk-based capital ratio of
at least 10.00% to be considered "well capitalized."
-17-
<PAGE> 21
CONDENSED CONSOLIDATED FINANCIAL DATA OF OLYMPUS
The following table sets forth certain condensed historical financial
data of Olympus and is based upon and should be read in conjunction with the
Consolidated Financial Statements of Olympus, including the respective notes
thereto, which are incorporated herein by reference. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." The information as of September 30, 1994 and
for the nine month periods ended September 30, 1993 and 1994 is unaudited and
reflects all adjustments which are, in the opinion of Olympus management,
necessary for a fair statement of results for the periods presented and is not
necessarily indicative of the operating results for the entire year.
<TABLE>
<CAPTION>
For the Nine Months
For the Year Ended December 31, Ended September 30,
------------------------------------------------------- -------------------
1989 1990 1991 1992 1993 1993 1994
-------- ------- ------- ------- ------- ------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS:
Interest income . . . . . . . . $ 65,147 $48,833 $39,544 $33,109 $27,430 $20,558 $20,493
Interest expense . . . . . . . 59,376 40,513 29,665 19,769 14,485 11,132 10,127
Net interest income . . . . . . 5,771 8,320 9,879 13,340 12,945 9,426 10,366
Provision (recovery) for losses
on loans . . . . . . . . . . 8,874 2,113 1,922 2,038 (996) (844) 1,027
Net interest income after
provision for loan losses . . (3,103) 6,207 7,957 11,302 13,941 10,270 9,339
Other income . . . . . . . . . 2,841 3,547 3,546 3,083 4,492 3,422 2,216
Other expenses . . . . . . . . 14,157 8,896 10,774 11,707 12,105 8,849 8,233
Income (loss) before federal -------- ------- ------- ------- ------- ------- -------
income taxes and
extraordinary items . . . . . (14,419) 858 729 2,678 6,328 4,843 3,322
Federal income taxes . . . . . - 1,090 553 (157) - - -
Extraordinary items, net of
federal income tax effect . . . - 1,090 169 - (323) (323) -
Cumulative effect of change in
tax accounting method . . . . - - - - 338 338 -
-------- ------ ------- ------- ------- ------- -------
Net income (loss) . . . . . . . $(14,419) $ 858 $ 345 $ 2,835 $ 6,343 $ 4,858 $ 3,322
======== ====== ======= ======= ======= ======= =======
Cash dividends declared . . . . - - - - - - -
PER SHARE DATA:
Net income per common share:
Primary . . . . . . . . . . . . $(5.65) $0.34 $0.14 $1.06 $1.97 $1.51 $1.02
Fully diluted . . . . . . . . . (5.65) 0.34 0.14 1.04 1.95 1.50 1.02
Cash dividends declared per
common share . . . . . . . . . . - - - - - - -
Book value per common share . . . . 8.10 8.43 8.57 8.82 10.76 10.36 10.85
Average common shares and common
stock equivalents outstanding . . 2,550,139 2,550,139 2,550,139 2,716,003 3,255,226 3,245,804 3,269,792
</TABLE>
-18-
<PAGE> 22
STATEMENT OF FINANCIAL
CONDITION DATA:
<TABLE>
<CAPTION>
December 31, September 30,
------------------------------------------------- -------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets . . . . . . . . . . . . $589,933 $450,466 $403,693 $380,480 $414,169 $388,603 $392,320
Loans receivable, net . . . . . 306,686 268,771 264,630 238,906 242,470 237,368 233,935
Mortgage-backed securities . . 178,106 122,758 90,661 99,736 134,347 113,709 118,070
Cash and investments . . . . . 71,145 34,153 23,683 23,233 18,966 20,031 20,482
Total deposits . . . . . . . . 332,560 291,580 292,713 291,651 294,561 294,699 311,242
Borrowings . . . . . . . . . . 228,972 131,548 83,168 57,562 81,646 56,301 41,963
Shareholders' equity . . . . . 20,646 21,504 21,849 26,987 33,364 31,930 33,765
</TABLE>
OTHER FINANCIAL DATA:
<TABLE>
<CAPTION>
For the Nine
Months Ended
For the Year Ended December 31, September 30,
----------------------------------------- ----------------
1989 1990 1991 1992 1993 1993 1994
------ ---- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Yield on earning assets . . . . . . . . . . 9.66% 9.84% 9.49% 8.37% 7.12% 7.42% 7.09%
Cost of deposits and borrowings . . . . . . 8.79 8.21 7.27 5.28 4.12 4.27 3.77
Net interest spread . . . . . . . . . . . . 0.87 1.63 2.22 3.09 3.00 3.15 3.32
Net interest margin . . . . . . . . . . . . 0.83 1.63 2.32 3.23 3.25 3.42 3.58
Return on average assets . . . . . . . . . (2.01) 0.16 0.08 0.70 1.64 1.70 1.12
Return on average stockholders' equity . . (50.47) 3.73 1.57 12.08 20.83 22.00 13.01
</TABLE>
<TABLE>
<CAPTION>
December 31, September 30,
----------------------------------------- -----------------
1989 1990 1991 1992 1993 1993 1994
----- ----- ----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Nonperforming assets as a percentage
of total assets . . . . . . . . . . . . 5.25% 5.48% 3.48% 2.45% 1.28% 0.25% 0.23%
Loan loss reserve to total loans . . . . . 3.99 2.43 2.41 2.72 2.26 2.38 2.77
Loan loss reserve to nonperforming assets . 41.08 27.17 46.55 71.73 105.91 594.11 730.37
Tangible capital ratio . . . . . . . . . . 3.30 4.70 5.20 7.03 7.91 8.05 8.58
Core capital ratio . . . . . . . . . . . . 3.30 4.70 5.20 7.03 7.91 8.05 8.58
Total risk-based capital ratio . . . . . . 6.45 8.30 8.90 12.30 14.27 13.99 15.92
</TABLE>
-19-
<PAGE> 23
PRO FORMA COMBINED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain pro forma combined consolidated
financial data for Washington Mutual giving effect to the Merger under the
pooling-of-interests accounting method. The pro forma combined consolidated
statements of income and per share data are presented as if the Merger had been
consummated at the beginning of each period presented. The pro forma combined
consolidated statement of financial position combines the historical
consolidated statement of financial position of Washington Mutual and Olympus
as if the Merger had occurred on September 30, 1994. For a description of the
treatment of the Merger for accounting purposes, see "THE MERGER -- Accounting
Treatment." This information should be read in conjunction with and is
qualified in its entirety by the historical consolidated financial statements
of Washington Mutual and Olympus, including the respective notes thereto,
which are incorporated by reference in this Proxy Statement/ Prospectus. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." The pro forma condensed
combined financial data have not been audited by the independent auditors of
Washington Mutual or Olympus, are intended for informational purposes only and
are not necessarily indicative of the future financial position or future
results of operations of the combined company or of the financial position or
the results of operations of the combined company that would have been realized
had the Merger been consummated as of the dates or for the periods presented.
Washington Mutual's acquisition of Summit Bancorp, Inc. on November 14, 1994
was accounted for as a pooling-of- interests. Washington Mutual has not
restated any financial statements or other financial information for periods
prior to the date of such acquisition because such transaction was not
material to Washington Mutual.
The presentation of the following pro forma information should not be
construed as indicative of the form or the probability of consummation of the
Merger. If Washington Mutual elects the Partial Cash Consideration Option, the
Merger will be treated as a purchase for accounting purposes. The pro forma
financial information for the 1993 fiscal year and the nine-month period ended
September 30, 1994 would not be materially different if the Merger were treated
as a purchase for accounting purposes. See "THE MERGER."
-20-
<PAGE> 24
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
September 30, 1994
-------------------------------------------------------------
Washington Pro Forma Pro Forma
Mutual Olympus Adjustment Combined
------------ --------- ---------- ----------
(in thousands)
Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents . . . . . . $ 225,678 $ 9,569 $ - $ 235,247
Trading account securities . . . . . . 1,721 - - 1,721
Available-for-sale securities . . . . 2,559,765 76,380 - 2,636,145
Held-to-maturity securities . . . . . 2,548,896 52,603 - 2,601,499
Loans . . . . . . . . . . . . . . . . 11,872,057 233,935 - 12,105,992
REO . . . . . . . . . . . . . . . . . 19,421 32 - 19,453
Bank premises and equipment . . . . . 168,802 6,982 - 175,784
Goodwill and other
intangible assets . . . . . . . . . . 198,071 - - 198,071
Other assets . . . . . . . . . . . . . 246,007 12,819 258,826
------------ --------- ----- ------------
Total assets . . . . . . . . . . . $17,840,418 $392,320 $ - $18,232,738
============ ========= ===== ============
Liabilities:
Deposits . . . . . . . . . . . . . . . $ 9,392,236 $311,242 $ - $ 9,703,478
Annuities . . . . . . . . . . . . . . 782,015 - - 782,015
Securities sold under
agreements to repurchase . . . . . . 2,635,253 16,636 - 2,651,889
Advances from the FHLB . . . . . . . . 3,365,682 25,327 - 3,391,009
Other borrowings . . . . . . . . . . . 80,325 - - 80,325
Other liabilities . . . . . . . . . . 315,153 5,350 - 320,503
------------ --------- ----- ------------
Total liabilities . . . . . . . . . 16,570,664 358,555 - 16,929,219
Stockholders' Equity:
Preferred stock . . . . . . . . . . . 6,200 - - 6,200
Common stock. . . . . . . . . . . . . . 60,391 3,112 (523) 63,546
Capital surplus . . . . . . . . . . . . 561,485 1,942 523 563,384
Valuation reserve for available-
for-sale securities . . . . . . . . . (14,427) (3,088) - (17,515)
Retained earnings . . . . . . . . . . 656,105 31,799 - 687,904
------------ --------- ----- ------------
Total stockholders' equity . . . . . . 1,269,754 33,765 - 1,303,519
Total liabilities and
stockholders' equity . . . . . . . $17,840,418 $392,320 $ - $18,232,738
============ ========= ===== ============
</TABLE>
________________
Key assumptions:
(1) The Merger is accounted for as a pooling-of-interests.
(2) Adjustment of common stock and capital surplus is retirement of Olympus
Stock (3,112,239 shares) and issuance of Washington Mutual Common Stock
(2,589,620 shares). (Includes approximately 250,000 shares of Olympus
Stock issued under Olympus Stock Plan.) Resulting total shares
outstanding of Washington Mutual Common Stock after the Merger is
62,980,616. Conversation based upon March 6, 1995 closing price of
Washington Mutual Common Stock.
-21-
<PAGE> 25
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, 1991 Year Ended December 31, 1992
--------------------------------------- ---------------------------------------
Washington Pro Forma Washington Pro Forma
Mutual Olympus Combined Mutual Olympus Combined
----------- ------- --------- ---------- ------- ---------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans . . . . . . . . . . . . . . . $542,176 $26,821 $568,997 $581,095 $25,279 $606,374
Securities . . . . . . . . . . . . 189,381 12,723 202,104 188,261 7,830 196,091
-------- ------- -------- -------- ------- --------
Total interest income . . . . . . 731,557 39,544 771,101 769,356 33,109 802,465
Interest expense:
Deposits . . . . . . . . . . . . . 344,819 19,944 364,763 308,065 14,169 322,234
Borrowings . . . . . . . . . . . . 152,677 9,721 162,398 131,733 5,600 137,333
-------- ------- -------- -------- ------- --------
Total interest expense . . . . . 497,496 29,665 527,161 439,798 19,769 459,567
-------- ------- -------- -------- ------- --------
Net interest income . . . . . . 234,061 9,879 243,940 329,558 13,340 342,898
Provision for loan losses . . . . . . . 21,627 1,922 23,549 14,000 2,038 16,038
-------- ------- -------- -------- ------- --------
Net interest income after
provision for loan losses . . 212,434 7,957 220,391 315,558 11,302 326,860
Other income:
Service fees . . . . . . . . . . . 40,856 217 41,073 51,363 555 51,918
Loan servicing fees . . . . . . . . 10,858 866 11,724 10,380 836 11,216
Other operating income . . . . . . 11,621 1,983 13,604 10,897 483 11,380
Interest on federal income tax refund 9,085 - 9,085 - - -
Gain on sale of assets . . . . . . 22,055 480 22,535 18,052 1,209 19,261
-------- ------- -------- -------- ------- --------
Total other income . . . . . . . 94,475 3,546 98,021 90,692 3,083 93,775
Other expense:
Salaries and employee benefits . . 82,912 4,242 87,154 106,997 5,079 112,076
Occupancy and equipment . . . . . . 29,095 1,697 30,792 33,163 1,966 35,129
Deposit insurance . . . . . . . . . 11,125 553 11,678 13,579 577 14,156
Other operating expense . . . . . . 45,519 2,649 48,168 61,927 2,083 64,010
Amortization of goodwill and
other intangible assets . . . . . 7,707 - 7,707 10,407 - 10,407
REO operations . . . . . . . . . . 5,051 103 5,154 2,111 583 2,694
Write down of other assets . . . . 2,383 1,530 3,913 2,712 1,419 4,131
-------- ------- -------- -------- ------- --------
Total other expense . . . . . . 183,792 10,774 194,566 230,896 11,707 242,603
-------- ------- -------- -------- ------- --------
Income before income tax expense . . . 123,117 729 123,846 175,354 2,678 178,032
Income tax expense . . . . . . . . . . 42,526 553 43,079 60,247 (157) 60,090
-------- ------- -------- -------- ------- --------
Net income from continuing operations . 80,591 176 80,767 115,107 2,835 117,942
======== ======= ======== ======== ======= ========
Net income applicable to common stock . $ 75,716 $176 $ 75,892 $110,232 $ 2,835 $113,067
======== ======= ======== ======== ======= ========
PER SHARE DATA:
Net income from continuing
operations per common share:
Primary . . . . . . . . . . . . . $1.65 $0.07 $1.56 $2.10 $1.06 $2.03
Fully diluted . . . . . . . . . . 1.58 0.07 1.50 1.99 1.04 1.95
Average number of common shares:
Primary . . . . . . . . . . . . .45,924,301 2,550,139 48,513,921 52,529,967 2,674,297 55,119,587
Diluted . . . . . . . . . . . . .51,101,258 2,550,139 53,690,878 57,763,252 2,716,003 60,352,872
</TABLE>
___________________
NOTE: For a discussion of the effect of the 1993 business combinations with
Pioneer Savings Bank and Pacific First Bank, see Washington Mutual's
1994 Form 10-K, Item 8, "Financial Statements and Supplementary
Data--Note 25: Acquisitions," which is incorporated by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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<PAGE> 26
<TABLE>
<CAPTION>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31, 1993 Nine Months Ended September 30, 1994
--------------------------------------- ---------------------------------------
Washington Pro Forma Washington Pro Forma
Mutual Olympus Combined Mutual Olympus Combined
---------- -------- ---------- ------------ ---------- ----------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans . . . . . . . . . . . . . . $ 789,669 $21,010 $ 810,679 $666,833 $15,128 $681,961
Securities . . . . . . . . . . . 246,270 6,420 252,690 205,544 5,365 210,909
--------- ------- ---------- -------- ------- --------
Total interest income . . . . . 1,035,939 27,430 1,063,369 872,377 20,493 892,870
Interest expense:
Deposits . . . . . . . . . . . . 340,595 11,023 351,618 255,355 8,207 263,562
Borrowings . . . . . . . . . . . 165,913 3,462 169,375 188,202 1,920 190,122
--------- ------- ---------- -------- ------- --------
Total interest expense . . . . 506,508 14,485 520,993 443,557 10,127 453,684
--------- ------- ---------- -------- ------- --------
Net interest income . . . . . 529,431 12,945 542,376 428,820 10,366 439,186
Provision (or recovery) for loan losses 35,000 (996) 34,004 15,000 1,027 16,027
--------- ------- ---------- -------- ------- --------
Net interest income after
provision for loan losses . 494,431 13,941 508,372 413,820 9,339 423,159
Other income:
Service fees . . . . . . . . . . 68,862 794 69,656 52,858 1,145 54,003
Loan servicing fees . . . . . . . 13,381 619 14,000 6,935 619 7,554
Other operating income . . . . . 19,963 560 20,523 17,638 173 17,811
Interest on federal income tax refund - - - 428 - 428
Gain on sale of assets . . . . . 41,656 2,519 44,175 4,018 279 4,297
--------- ------- ---------- -------- ------- --------
Total other income . . . . . . 143,862 4,492 148,354 81,877 2,216 84,093
Other expense:
Salaries and employee benefits . 162,516 5,439 167,955 131,404 4,493 135,897
Occupancy and equipment . . . . . 55,936 2,185 58,121 46,658 1,655 48,313
Deposit insurance . . . . . . . . 20,425 455 20,880 16,780 551 17,331
Other operating expense . . . . . 96,914 3,451 100,365 74,838 2,264 77,102
Amortization of goodwill and
other intangible assets . . . . 24,690 - 24,690 21,784 - 21,784
REO operations . . . . . . . . . 6,295 (62) 6,233 (269) (788) (1,057)
Write down of other assets . . . 2,488 637 3,125 - 58 58
--------- ------- ---------- -------- ------- --------
Total other expense . . . . . . 369,264 12,105 381,369 291,195 8,233 299,428
--------- ------- ---------- -------- ------- --------
Income before income tax expense . . 269,029 6,328 275,357 204,502 3,322 207,824
Income tax expense . . . . . . . . . 93,765 - 93,765 76,655 - 76,655
--------- ------- ---------- -------- ------- --------
Net income from continuing operations 175,264 6,328 181,592 127,847 3,322 131,169
========= ======= ========== ======== ======= ========
Net income applicable to common stock $ 161,706 $ 6,328 $ 168,034 $113,909 $ 3,322 $117,231
========= ======= ========== ======== ======= ========
PER SHARE DATA:
Net income from continuing
operations per common share:
Primary . . . . . . . . . . . . $2.74 $1.96 $2.73 $1.89 $1.02 $1.87
Fully diluted . . . . . . . . . 2.60 1.94 2.59 1.83 1.02 1.81
Average number of common shares
Primary . . . . . . . . . . . . 58,954,059 3,223,742 61,543,679 60,265,903 3,254,341 62,855,523
Diluted . . . . . . . . . . . . 65,016,545 3,255,226 67,606,165 65,685,150 3,269,792 68,274,770
</TABLE>
__________________________
NOTE: For a discussion of the effect of the 1993 business combinations with
Pioneer Savings Bank and Pacific First Bank, see Washington Mutual's
Form 10-K, Item 8, "Financial Statements and Supplementary Data --
Note 25: Acquisitions," which is incorporated by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
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<PAGE> 27
THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to Olympus
Shareholders in connection with the solicitation of proxies by the Olympus
Board for use at the Special Meeting to be held at 9:00 a.m. local time on
April 26, 1995, at the corporate headquarters of Olympus located at
115 South Main Street, Salt Lake City, Utah 84111, and at any
adjournments or postponements thereof for the purposes set forth herein.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
As more fully described in this Proxy Statement/Prospectus, the purpose
of the Special Meeting is to consider and vote upon proposals (i) to approve
the Merger Agreement pursuant to which Olympus will be merged with and into
Washington Mutual with Washington Mutual as the surviving corporation (see "THE
MERGER") and (ii) to amend the Option Plan to provide that, if and only if
Washington Mutual elects the Partial Cash Consideration Option, all outstanding
options of Olympus shall not terminate as of the Effective Time but shall
instead be converted into fully-exercisable options to acquire Washington
Mutual Common Stock, adjusted as to the number of options and the exercise
price by the Exchange Ratio. See "THE OPTION PLAN AMENDMENT."
RECORD DATE AND VOTING
The Olympus Board has fixed the close of business on March 13, 1995 as
the Record Date for the determination of holders of Olympus Common Stock
entitled to receive notice of and to vote at the Special Meeting. On the
Record Date, 3,134,539 shares of Olympus Common Stock were outstanding and
entitled to vote, which were held by 11,414 holders of record. Holders of
shares of Olympus Common Stock will be entitled to one vote exercisable in
person or by properly executed proxy, for each share held of record at the
close of business on the Record Date on each proposal described herein and on
any other matter that may be presented for consideration and action by the
shareholders at the Special Meeting.
QUORUM; VOTES REQUIRED
The presence, in person or by proxy, of at least a majority of the total
number of shares of Olympus Common Stock outstanding on the Record Date is
necessary to constitute a quorum at the Special Meeting. Abstentions will be
considered as shares present for purposes of determining the presence of a
quorum. The approval of the Merger Agreement will require the affirmative vote
of the holders of a majority of the outstanding shares of Olympus Common Stock
entitled to vote thereon. With respect to the vote on the proposal to approve
the Merger, abstentions and failures to vote (including broker non-votes) will
have the same effect as negative votes. The approval of the Option Plan
Amendment will require, once a quorum is present, that votes cast in favor of
the proposal exceed the votes cast against the proposal. Abstentions and
broker non-votes will not have the effect of being considered as votes cast
against the proposal.
As of the Record Date, Olympus directors and officers and their
affiliates beneficially owned an aggregate of 456,399 shares of Olympus Common
Stock (excluding 205,600 shares issuable upon the exercise of outstanding
options) or approximately 14.6% of the shares of Olympus Common Stock
outstanding on such date. In connection with the Merger Agreement, each of the
directors and officers of Olympus, and certain shareholders of Olympus owning
in the aggregate 996,290 shares of Olympus Common Stock or approximately 31.8%
of the shares outstanding as of the Record Date, entered into letter agreements
with Washington Mutual pursuant to which, among other things, each such person
agreed to vote all shares of Olympus Common Stock held by such person in favor
of the Merger Agreement. See "THE MERGER -- Affiliate Letters."
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<PAGE> 28
VOTING AND REVOCATION OF PROXIES
Shares of Olympus Common Stock represented by a proxy properly signed
and received at, or prior to, the Special Meeting, unless such proxy is revoked
prior to the vote at the Special Meeting, will be voted at the Special Meeting
in accordance with the instructions thereon. If a proxy is properly signed and
returned without indicating any voting instructions, the shares represented by
the proxy will be voted (1) FOR approval of the Merger Agreement; and (2) FOR
the approval of the Option Plan Amendment. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before the
proxy is voted by filing with the Secretary of Olympus a written instrument
revoking the proxy, by submitting to the Secretary of Olympus a new proxy
bearing a later date prior to or at the Special Meeting, or by voting in person
at the Special Meeting. Attendance at the Special Meeting will not in and of
itself constitute a revocation of a proxy. All written instruments of
revocation and other communications with respect to revocation of proxies
should be addressed as follows: Olympus Capital Corporation, 115 South Main
Street, Salt Lake City, Utah 84111, Attention: K. John Jones, Secretary.
As of the date of this Proxy Statement/Prospectus, the Olympus Board is
not aware of any business to be acted on at the Special Meeting other than as
described herein. If, however, any other matters properly come before the
Special Meeting, including, among other things, consideration of a motion to
adjourn or postpone the Special Meeting to another time and/or place (including
without limitation, for the purpose of soliciting additional proxies), the
persons named as proxies will, unless the shareholder otherwise specifies in
the proxy, vote upon such matters as determined by a majority of the Olympus
Board.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers, and employees
of Olympus, who will not be specifically compensated for such services, may
solicit proxies, personally or by telephone or telegram or other forms of
communication. Brokerage houses, nominees, fiduciaries and other custodians
will be requested to forward soliciting materials to beneficial owners and will
be reimbursed for their reasonable expenses incurred in sending proxy material
to beneficial owners. Olympus will bear its own expenses in connection with
the solicitation of proxies for the Special Meeting. See "THE MERGER
AGREEMENT -- Expenses."
OLYMPUS SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO OLYMPUS IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
SHAREHOLDERS SHOULD NOT SEND ANY
STOCK CERTIFICATES WITH THEIR PROXY CARDS
THE MERGER
The following information, insofar as it relates to matters contained in
the Merger Agreement or the Stock Option Agreement, is qualified in its
entirety by reference to the Merger Agreement and the Stock Option Agreement,
which are incorporated herein by reference and attached hereto as Appendix A
and Appendix C, respectively. OLYMPUS SHAREHOLDERS ARE URGED TO READ THE MERGER
AGREEMENT, THE STOCK OPTION AGREEMENT AND THE OTHER APPENDICES IN THEIR
ENTIRETY.
GENERAL
The Merger Agreement provides for the merger of Olympus with and into
Washington Mutual, with Washington Mutual as the surviving corporation. It is
further intended that thereafter Olympus Bank will be merged
-25-
<PAGE> 29
with and into WMFSB, with WMFSB as the surviving federal savings bank. The
separate existence of Olympus and Olympus Bank will cease upon completion of
the respective mergers. The Articles of Incorporation and Bylaws of Washington
Mutual will continue to be the Articles of Incorporation and Bylaws of
Washington Mutual after the completion of the Merger. Upon consummation of the
Merger, all shares of Olympus Common Stock will no longer be outstanding and
will automatically be canceled and retired and will cease to exist, and each
holder of a certificate representing any shares of Olympus Common Stock will
cease to have any rights with respect thereto, except the right to receive
shares of Washington Mutual Common Stock or, under certain circumstances,
shares of Washington Mutual Common Stock and/or cash, to be issued and/or paid
upon the surrender of such certificate, without interest, as described below,
or the right of dissenting Olympus Shareholders to receive fair value for their
shares of Olympus Common Stock, under certain circumstances. See "THE MERGER
-- Dissenters' Rights."
At the Effective Time, each outstanding share of Olympus Common Stock
will be converted into the right to receive $15.50 per share, in newly issued
shares of Washington Mutual Common Stock or, under certain circumstances, cash
and/or Washington Mutual Common Stock, which amount is subject to increase if
the Effective Date is after April 30, 1995. The per share value of Washington
Mutual Common Stock for purposes of determining the number of shares of
Washington Mutual Common Stock to be received in the Merger is based upon the
arithmetic average of the closing prices of Washington Mutual Common Stock on
The Nasdaq Stock Market for the ten trading days immediately preceding the
third trading day before the Effective Date. The exchange ratio for determining
the number of shares of Washington Mutual Common Stock to be issued for each
share of Olympus Common Stock will be the Merger Consideration divided by the
Average Price. No certificates for fractional shares of Washington Mutual
Common Stock will be issued as a result of the Merger. Instead, each
stockholder otherwise entitled to a fractional share will receive cash in lieu
of such fractional share.
If the Effective Date is after April 30, 1995, the Merger Consideration
will be increased by an amount equal to (i) $0.775 (five percent of $15.50)
multiplied by (ii) a fraction, the numerator of which equals the number of days
elapsed between April 30, 1995 and the Effective Date and the denominator of
which equals 365.
If the Average Price is less than $18.00, then Washington Mutual may
elect to pay up to 49% of the aggregate Merger Consideration in the form of
cash. Unless the Average Price is substantially below $18.00, Washington
Mutual does not intend to elect the Partial Cash Consideration Option. If
Washington Mutual elects the Partial Cash Consideration Option and
subject to certain allocation procedures, each Olympus Shareholder will be
eligible to receive such shareholder's preference as to the form of the Merger
Consideration to be paid. Unless Washington Mutual waives its right to elect
the Partial Cash Consideration Option, a Preference Form and other appropriate
transmittal materials will be sent to each such holder of record of Olympus
Common Stock through which each holder can indicate such holder's preference to
receive either Washington Mutual Common Stock or cash with respect to such
holder's Olympus Common Stock, or indicate no such preference. Although Olympus
Shareholders may be asked to complete Preference Forms prior to the Effective
Date, such forms will only be utilized under circumstances where Washington
Mutual elects the Partial Cash Consideration Option. See "THE MERGER AGREEMENT
-- Preference and Allocation Procedures."
BACKGROUND OF AND REASONS FOR THE MERGER
The Olympus Board has been cognizant of increasing levels of competition
in the financial services business and the significant consolidation that has
been occurring among the providers of banking services in Olympus' banking
market and throughout the United States, in general. Olympus is and has been
aware that larger entities that emerge from consolidations may acquire
substantial competitive advantages, including greater diversity in their loan
portfolios, cost savings through the integration of overlapping operations and
support functions, improved access to capital and funding and the ability to
spread costs of new products, services and research and development over a
wider customer base.
During the first half of 1993, Olympus received unsolicited inquiries
regarding the possibility of merging Olympus with two larger financial
institutions. Neither of these inquiries resulted in any negotiations
concerning a possible business combination involving Olympus.
On September 23, 1993, the Olympus Board engaged Goldman Sachs to
prepare an objective evaluation of various alternatives for maximizing
shareholder value, including, without limitation, (i) continuing to serve its
-26-
<PAGE> 30
customers and communities as an independent savings bank, (ii) expanding
Olympus through acquisitions, (iii) selling parts of Olympus to other financial
institutions, or (iv) entering into a business combination transaction with
another financial institution. At an Olympus Board meeting on October 27,
1993, Goldman Sachs presented its analysis of various strategic alternatives
available to the Olympus Board. Olympus' special counsel also reviewed with
the Board their fiduciary duties and legal considerations that would attend the
choice of the alternatives reviewed by the Board. At the October 27 meeting,
Olympus authorized Goldman Sachs to seek, on an exploratory basis, indications
of interest on Olympus' behalf regarding a possible merger or sale transaction
involving Olympus. The Board made no determination at that time that Olympus
would do anything other than remain independent.
In January 1994, Olympus was contacted by a financial institution that
expressed an interest in a business combination with Olympus. As a result,
Olympus entered into preliminary merger discussions with this financial
institution. On February 11, 1994, Olympus announced publicly that it had
received a preliminary indication of interest from a financial institution
interested in acquiring Olympus in a stock merger, and that the valuation
implicit in the terms of the proposed exchange of stock under discussion was
below the Company's recent trading prices. On February 24, 1994, Olympus
announced the termination of discussions with this financial institution.
On or about May 12, 1994, Washington Mutual contacted Goldman Sachs and
expressed an interest in meeting with Olympus' Chairman and Chief Executive
Officer, Mr. A. Blaine Huntsman, to discuss a possible business combination.
On May 19, 1994, Mr. Huntsman met with representatives of Washington
Mutual and discussed a variety of strategic options. Subsequent to that
meeting, representatives of Washington Mutual expressed an interest in
gathering additional information concerning Olympus.
On June 7, 1994, Washington Mutual's senior management met with
Mr. Huntsman and other members of Olympus' management in Salt Lake City. During
the next three weeks, Mr. Huntsman and other members of Olympus' senior
management responded to a number of inquiries from Washington Mutual's
management regarding Olympus' business.
On June 30, 1994, and again on July 5, 1994, representatives of
Washington Mutual contacted Mr. Huntsman and indicated that Washington Mutual
was interested in pursuing a possible business combination with Olympus.
On July 6, 1994, a special telephonic meeting of the Olympus Board was
convened at which Mr. Huntsman briefed the other directors on the preliminary
discussions that had taken place to date, and the Olympus Board unanimously
authorized Mr. Huntsman to continue negotiations with Washington Mutual.
Thereafter, senior management of Washington Mutual and Olympus conducted
due diligence reviews of each other (subject to confidentiality agreements
executed by each party), reviewed the proposed transaction with their
respective financial advisors, legal counsel and members of their respective
Boards of Directors, negotiated the terms of the Merger Agreement and related
documents and gave consideration to the possible financial basis and other
terms upon which a transaction might be consummated.
At a meeting of the Washington Mutual Board held on July 19, 1994,
members of Washington Mutual's management reviewed the results of their due
diligence and the proposed terms of the Merger, and the Washington Mutual Board
approved the Merger Agreement and the related agreements.
On July 22, 1994, the Olympus Board met with its senior management,
financial advisors and legal counsel and considered in detail the proposed
transaction. During the meeting, directors were provided with drafts of the
Merger Agreement, the Stock Option Agreement and related documents. The
Olympus directors were informed that Washington Mutual had conditioned its
offer to acquire Olympus on (i) receipt of an irrevocable option to acquire
from Olympus shares representing approximately 9.9% of the then outstanding
Olympus Common Stock exercisable under certain circumstances, (ii) receipt of a
$250,000 break-up fee payable upon termination of the transaction under certain
circumstances and (iii) the agreement by directors, executive officers and
certain
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<PAGE> 31
shareholders of Olympus to vote in favor of the transaction and take certain
actions intended to preserve the desired accounting treatment of the Merger.
Representatives of Goldman Sachs made a presentation to the Olympus Board
regarding the financial terms of the Merger. Olympus' special legal counsel
conducted a detailed review with the Board of the transaction documents and
related issues. At the conclusion of the meeting, the Olympus Board
unanimously approved the Merger Agreement and the transactions contemplated
thereby as being in the best interests of Olympus and its shareholders and
directed that the Merger Agreement be submitted to the shareholders of Olympus
for their approval.
The Merger Agreement is the result of arm's length negotiations between
Olympus and Washington Mutual. There is no affiliation between any of the
directors and officers of the respective companies.
The original merger agreement was entered into on July 22, 1994 and
contemplated that Olympus would be merged with and into WMSB and that shares of
Olympus Common Stock would be converted into shares of common stock of WMSB.
The original agreement also contemplated that, at the option of WMSB, the
transaction might be restructured provided that the amount and form of the
Merger Consideration or tax consequences of the transaction to Olympus
shareholders were not modified. On November 29, 1994, WMSB reorganized into a
holding company structure, with Washington Mutual as the holding company for
WMB (the successor to WMSB in the Reorganization), WMFSB and other
subsidiaries. In order to provide for changes necessitated by the change in
Washington Mutual's structure and certain other modifications, the Merger
Agreement was amended and restated in the form attached hereto as Appendix A.
RECOMMENDATION OF THE OLYMPUS BOARD
The Olympus Board has carefully considered the terms of the Merger
Agreement, has approved it as being in the best interests of Olympus and its
shareholders, and recommends that Olympus Shareholders vote FOR the proposal
to approve the Merger Agreement.
The recommendation of the Olympus Board is based upon a number of
factors, including the terms of the Merger, the Merger Agreement and the Stock
Option Agreement, the substantial benefits expected to result from the
combination of Olympus and Washington Mutual, information concerning the
financial condition, results of operations and prospects of Washington Mutual
and Olympus on a stand-alone and combined basis, the Board's view of the
relative merits of other opportunities presented to the Board or that the Board
believed would be available, including the possibility of remaining
independent, the market price of Olympus Common Stock and the fairness opinion
of Goldman Sachs as financial advisor to Olympus. See "THE MERGER --
Background of and Reasons for the Merger" and "-- Opinion of Financial
Advisor."
The Olympus Board believes that the Merger would provide holders of
Olympus Common Stock with the opportunity to receive a premium over the prices
per share of Olympus Common Stock at which individual trades have occurred in
the recent past and, generally to the extent that shareholders receive solely
Washington Mutual Common Stock in the Merger, enable them to participate as
Washington Mutual shareholders, on a tax-deferred basis, in the expanded
opportunities for growth and profitability made possible by the Merger. The
Olympus Board also believes that the Merger would result in a combined entity
that is capable of competing more effectively with larger financial
institutions that have exerted increasing competitive pressure on Olympus.
In considering the recommendations of the Olympus Board, shareholders
should be aware that certain directors and executive officers of Olympus may be
deemed to have interests in the Merger in addition to their interests, if any,
as Olympus Shareholders. As of the Record Date, directors and executive
officers of Olympus own, in the aggregate, 456,399 shares of Olympus Common
Stock (approximately 14.6% of the outstanding shares of Olympus Common Stock)
and hold, in the aggregate, exercisable options to purchase 205,600 shares of
Olympus Common Stock at an average exercise price of $5.32. Assuming that all
such options are converted into Washington Mutual Common STock and the Average
Price is the hypothetical Average Price set forth in "MARKET PRICES AND
DIVIDENDS," the directors and executive officers of Olympus would own, in the
aggregate, less than one percent of the outstanding shares of Washington Mutual
Common Stock after the Merger. Certain directors and executive officers of
Olympus will receive an aggregate of $1,042,573 upon consummation of the Merger
under the Olympus Cash Incentive Plan. Pursuant to the Merger Agreement, Mr.
Huntsman, Chairman of the Board and Chief Executive Officer of Olympus, will be
paid $225,000 to provide consulting services to Washington Mutual for 18 months
after the Merger and will receive payments of approximately $154,000 pursuant
to a deferred compensation arrangement between Olympus and Mr. Huntsman.
Additionally, Washington Mutual has agreed to indemnify the current and former
directors and officers of Olympus for acts or omissions occurring prior to the
Effective Date. The Merger Agreement provides that Washington Mutual will make
severance payments (in an amount equal to two weeks' salary for each full
year of service with Olympus up to a maximum of six months' total pay) to any
officer of Olympus whose employment is terminated without cause within one
year after the Effective Date. See "THE MERGER - Interest of Certain Persons
in the Merger" and "THE MERGER AGREEMENT--Effect on Employee Benefit Plans and
Stock Plans."
OPINION OF FINANCIAL ADVISOR
Goldman Sachs has delivered a written opinion to the Olympus Board to
the effect that, as of the date of this Proxy Statement/Prospectus, the
consideration to be received by Olympus Shareholders pursuant to the
terms of the Merger Agreement is fair to such holders. Goldman Sachs' opinion
is directed only to the fairness of the Merger Consideration from a financial
point of view and does not constitute a recommendation to any Olympus
Shareholder as to how such shareholder should vote at the Special Meeting. The
full text of Goldman Sachs' written opinion, which sets forth the
assumptions made, matters considered and limits on its review, is attached
hereto as Appendix B. The summary of the Goldman Sachs' opinion in this Proxy
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<PAGE> 32
Statement/Prospectus is qualified in its entirety by reference to the full text
of such opinion. HOLDERS OF SHARES OF OLYMPUS COMMON STOCK ARE URGED TO READ
SUCH OPINION IN ITS ENTIRETY.
In connection with its written opinion dated March 24, 1995, Goldman
Sachs reviewed, among other things, the Merger Agreement; the Registration
Statement, including this Proxy Statement/Prospectus; Annual Reports to
Stockholders and Form 10-K Annual Reports of Olympus for the five years ended
December 31, 1993; Annual Reports to stockholders and Annual Reports to the
FDIC on Form F-2, of Washington Mutual for the five years ended December 31,
1993 and the Annual Report on Form 10-K for the year ended December 31, 1994;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of
Olympus; certain interim reports to stockholders and Quarterly Reports to the
FDIC, Form F-4, of Washington Mutual; certain other communications from
Olympus and Washington Mutual to their respective stockholders; and certain
internal financial analyses and forecasts for Olympus prepared by its
management. Goldman Sachs held discussions with members of the senior
managements of Olympus and Washington Mutual regarding the past and current
business operations, financial condition and future prospects of their
respective companies. In addition, Goldman Sachs reviewed the reported price
and trading activity for the Olympus Common Stock and the Washington Mutual
Common Stock, compared certain financial and stock market information 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 Goldman Sachs
considered appropriate.
In conducting its review and in arriving at its opinion, Goldman Sachs
relied, without independent verification, upon the accuracy and completeness of
all of the financial and other information reviewed by them for purposes of
its opinion. In that regard, Goldman Sachs assumed, with the consent of the
Olympus Board, that the financial forecasts, including, without limitation,
projections regarding underperforming and nonperforming assets and net
chargeoffs were reasonably prepared on a basis reflecting the best currently
available judgments and estimates of Olympus and that such forecasts would be
realized in the amounts and at the times contemplated thereby. Goldman Sachs
also assumed, with the consent of the Olympus Board, that the allowances for
losses with respect to the loan and lease portfolios for each of Olympus and
Washington Mutual are in the aggregate adequate to cover all such losses.
Goldman Sachs did not review individual credit files nor did they make an
independent evaluation or appraisal of the assets and liabilities of Olympus or
Washington Mutual or any of their respective subsidiaries.
The following is a summary of the material financial analyses utilized
by Goldman Sachs in connection with their presentation to the Olympus Board on
July 22, 1994.
Pro Forma Analysis. Goldman Sachs analyzed certain pro forma
effects for 1995 resulting from the Merger based on (a) financial
forecasts for Olympus in 1994 prepared by management and grown at a
rate of 12.0% from 1994 to 1995 and assuming an effective tax rate of
40%, (b) projected earnings for Washington Mutual based on the median
of institutional brokers' estimates compiled by SNL Securities, L.P.
as of July 15, 1994 (SNL Securities, L.P. is a data firm that monitors
and publishes a compilation of earnings estimates produced by selected
research analysts), and (c) cost savings, equal to 15% of Olympus
estimated 1994 noninterest expenses, estimated by management of
Olympus to be attainable in the Merger. Such analysis indicated that
1995 earnings per share for Washington Mutual following the Merger
would be slightly lower than were forecasted for Washington Mutual as
a stand-alone entity.
Selected Transaction Analysis. Goldman Sachs analyzed certain
information relating to 24 banks and thrift acquisitions, including
six acquisitions by Washington Mutual announced since January 1, 1987
(the "Washington Mutual Acquisitions"), eight bank acquisitions in the
states of Arizona, Colorado, Idaho, New Mexico, Nevada, Oregon, Utah,
Washington and Wyoming (collectively, the "Rocky Mountain States")
announced since 1989 in which the aggregate consideration was greater
than $25 million and less than $100 million (the "Rocky Mountain Bank
Acquisitions") and eight acquisitions of savings and loans in the
Rocky Mountain States since 1989 in which the aggregate consideration
was greater than $25 million and less than $100 million (the "Rocky
Mountain Thrift Acquisitions"). Such analysis indicated that, for the
Washington Mutual Acquisitions, the Rocky Mountain Bank Acquisitions
and the Rocky Mountain Thrift Acquisitions,
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the median values of the consideration paid as a multiple of tangible
book value were 1.5x, 1.7x and 1.9x, respectively, as compared to a
corresponding value for the consideration payable pursuant to the
Merger as a multiple of Olympus' tangible book value of 1.5x. In
addition, such analysis indicated that for the Washington Mutual
Acquisitions, the Rocky Mountain Bank Acquisitions and the Rocky
Mountain Thrift Acquisitions, the median value of the consideration
paid as a multiple of the acquired banking organizations' latest
twelve months' ("LTM") after-tax earnings were 14.1x, 10.1x and 14.9x,
respectively, as compared to the corresponding value for the
consideration paid pursuant to the Merger as a multiple of Olympus'
after tax LTM earnings of 8.9x. Goldman Sachs also compared such
multiples of LTM after-tax earnings to multiples of Olympus' LTM
earnings, assuming full taxation, of 14.8x.
Selected Company Analysis. Goldman Sachs reviewed and compared
actual and estimated selected financial, operating and stock market
information for Olympus and Washington Mutual with corresponding
information for selected regional banking organizations, including
Glacier Bancorp, Security Bancorp, United Savings Bank and WesterFed
Financial (collectively, the "Selected Group One Banks"), and for
selected savings and loans organizations with significant consumer
banking businesses, including H.F. Ahmanson & Co, Golden West
Financial, Great Western Financial and Washington Federal Savings and
Loan (collectively, the "Selected Group Two Banks"), based on publicly
available information, consensus analysts' estimates for Washington
Mutual, the Selected Group One Banks and the Selected Group Two Banks
and financial forecasts for Olympus prepared by Olympus management.
Such analysis indicated that, for the Selected Group One Banks and the
Selected Group Two Banks, (i) the median estimated 1994 price-earnings
multiples were 11.0x and 10.0x, respectively, as compared to
corresponding values of 9.1x for Olympus and 7.7x for Washington
Mutual, (ii) the median values of price as a multiple of book value
per share were 1.08x and 1.45x, respectively, as compared to
corresponding values of 1.32x for Olympus and 1.58x for Washington
Mutual, (iii) the median ratios of nonperforming assets as a
percentage of total assets were 0.25% and 1.78%, respectively, as
compared to corresponding values of 0.29% for Olympus and 0.71% for
Washington Mutual, (iv) the median ratios of reserves as a percentage
of nonperforming assets were 286% and 49%, respectively, as compared
to corresponding values of 568% for Olympus and 103% for Washington
Mutual, (v) the median after-tax returns on equity were 10.07% and
12.39%, respectively, as compared to corresponding values of 12.46%
for Olympus and 14.34% for Washington Mutual and (vi) the median
ratios of tangible common equity as a percentage of tangible assets
were 13.75% and 7.43%, respectively, as compared to corresponding
values of 8.34% for Olympus and 4.86% for Washington Mutual.
Present Value Analysis. Goldman Sachs reviewed and analyzed
certain internal financial analyses and projections as prepared by
Olympus management and assumed, at the request of management of
Olympus, growth rates of 6.6%, 11.6% and 16.6% of pre-tax, pre-gain
income for Olympus. Based on the projected earnings developed
thereby, Goldman Sachs analyzed the discounted present value of a
share of Olympus Common Stock assuming a range of discount values of
10.0%, 12.5% and 15.0% and terminal multiples of 1999 estimated
earnings of 10.0x, 12.0x, 14.0x, 16.0x, 18.0x and 20.0x. Such
analysis suggested the present value per share of Olympus to be in a
range between $5.81 per share and $22.08 per share.
Selected Washington Mutual Information Analysis. Goldman Sachs
reviewed and analyzed certain financial and other information for
Washington Mutual, including (1) historical and current loan portfolio
by type of loan and origination volumes by type of loan, (2)
sensitivity of Washington Mutual to changes in the interest rate
environment, (3) selected research reports on, and earnings estimates
for Washington Mutual, (4) historical trading prices per share of
Washington Mutual Common Stock, on a daily basis from July 15, 1993
through July 15, 1994 and on a weekly basis from July 1991 through
July 1994, (5) the daily stock price performance of Olympus Common
Stock and Washington Mutual Common Stock, indexed from July 15, 1993
to July 15, 1994, as compared to the Standard & Poor's 56 financial
Stock Index and a Washington Mutual peer composite including the
Selected Group Two Banks.
Other Analyses. Goldman Sachs also reviewed selected investment
research reports on, and earnings estimates for, Olympus and
Washington Mutual and analyzed available information regarding the
ownership and ownership profiles of shares of Olympus Common Stock and
Washington Mutual Common Stock.
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The foregoing is a summary of the material financial analyses performed
by Goldman Sachs, but does not purport to be a complete description of the
analyses performed by Goldman Sachs. The preparation of a fairness opinion is
a complex process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analyses or of the summary set
forth above, without considering the analysis as a whole, could create an
incomplete view of the processes underlying Goldman Sachs' opinion. In
arriving at its fairness determination, Goldman Sachs considered the results
of all such analyses. No Selected Group One Bank or Selected Group Two Bank is
identical to Olympus or to Washington Mutual and none of the Washington Mutual
Acquisitions, the Rocky Mountain Bank Acquisitions and the Rocky Mountain
Thrift Acquisitions is identical to the Merger. Accordingly, Goldman Sachs
indicated to the Olympus Board that analyses of the results described above
under Selected Company Analysis and Selected Transaction Analysis are not
mathematical, but rather involve complex considerations and judgments
concerning differences in operating and financial characteristics, including,
among other things, differences in revenue composition and earnings performance
among Olympus, Washington Mutual and the selected companies and transactions
reviewed. The analyses were prepared solely for purposes of Goldman Sachs
providing its opinion to the Olympus Board as to the fairness of the
consideration to be received by Olympus Common Stockholders, and do not purport
to be appraisals or necessarily reflect the prices at which Olympus or its
securities actually may be sold. Analyses based upon forecast of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses.
Olympus retained Goldman Sachs as its exclusive financial advisor
pursuant to an engagement letter dated October 11, 1993 (the "Engagement
Letter") in connection with reviewing Olympus' strategic alternatives including
a possible sale of Olympus. Goldman Sachs is an internationally recognized
investment banking firm and 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. Goldman Sachs is familiar with Olympus, having
acted as financial advisor in connection with, and having participated in
certain of the negotiations leading to, the Merger Agreement. Goldman Sachs
has also provided certain investment banking services to Washington Mutual from
time to time and may provide investment banking services to Washington Mutual
in the future. The Olympus Board selected Goldman Sachs to act as Olympus'
exclusive financial advisor based on Goldman Sachs' substantial experience in
mergers and acquisitions and in securities valuation generally.
In connection with its opinion dated March 24, 1995, Goldman
Sachs confirmed the appropriateness of their reliance on the analyses described
above by performing procedures to update certain of such analyses and reviewing
the assumptions on which such analyses were based and the factors considered in
connection therewith.
Pursuant to the terms of the Engagement Letter, Olympus has paid Goldman
Sachs a fee of $75,000 and has agreed to pay Goldman Sachs a transaction fee
equal to the sum of (a) 1.5% of the aggregate consideration paid in such
transaction for the first $51,200,000 in aggregate consideration, plus 3.0% of
the aggregate consideration paid in such transaction in excess of $51,200,000,
minus (b) any other fees already paid pursuant to the Engagement Letter.
Twenty-five percent of the transaction fee became payable upon the mailing of
this Proxy Statement/Prospectus and the remaining 75% of the
transaction fee will be payable upon the consummation of the Merger. In
addition, Olympus has agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including the reasonable fees and disbursement of its
counsel, plus any sales, use or similar taxes arising in connection with its
engagement, and to indemnify Goldman Sachs against certain liabilities relating
to or arising out of its engagement, including liabilities under the federal
securities law.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Olympus Board, shareholders
should be aware that certain directors and executive officers of Olympus may be
deemed to have interests in the Merger in addition to their interests, if any,
as Olympus Shareholders.
Ownership of Olympus Common Stock. As of the Record Date, directors and
executive officers of Olympus, together with their affiliates, beneficially
owned an aggregate of 456,399 shares of Olympus Common Stock (or
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approximately 14.6% of the then outstanding shares of Olympus Common Stock)
excluding shares that may be acquired upon the exercise of outstanding stock
options.
Stock Options. As of the Record Date, directors and executive officers
of Olympus held options to purchase 205,600 shares of Olympus Common Stock at an
average exercise price of $5.32 per share. Under the terms of the Option Plan,
all of these options became immediately exercisable upon the execution of the
Merger Agreement and, upon consummation of the Merger, any unexercised options
will terminate. Under the terms of the Merger Agreement, if Washington Mutual
does not elect the Partial Cash Consideration Option, then any options which
remain unexercised immediately prior to the Effective Time will be deemed to
have been exercised at the Effective Time through the conversion of such
options into that number of shares of Washington Mutual Common Stock equal to
the "net option value" divided by the Average Price. "Net option value" means
the aggregate Merger Consideration related to the number of shares issuable
upon exercise of such options, less the aggregate exercise price of such
options less the aggregate amount of tax and other withholdings required with
respect to such exercise.
If the Option Plan Amendment is approved by Olympus Shareholders and
Washington Mutual elects the Partial Cash Consideration Option, then any
options outstanding at the Effective Time will be converted into options to
purchase shares of Washington Mutual Common Stock, adjusted as to the number of
options and the exercise price by the Exchange Ratio. See "THE OPTION PLAN
AMENDMENT" and "INFORMATION CONCERNING OLYMPUS -- Beneficial Ownership of
Olympus Common Stock."
Indemnification and Insurance. Washington Mutual has agreed, from and
after the Effective Time, to indemnify the current and former directors and
officers of Olympus as though they had been directors and/or officers of
Washington Mutual, for acts and omissions occurring prior to and including the
Effective Time. Washington Mutual and WMFSB have also agreed to use all
reasonable efforts, in cooperation with Olympus and Olympus Bank, to arrange
for insurance coverage for officers and directors of Olympus and Olympus Bank
following the Effective Time with at least as much dollar coverage as such
officers and directors have under their current policy.
Cash Incentive Plan. Under Olympus' Cash Incentive Plan, upon
consummation of the Merger, R. Gibb Marsh, K. John Jones, Gary L. Matern and
Kathy K. Hale will be entitled to receive 31%, 23%, 23% and 23%, respectively,
of an amount equal to two percent of the greater of (i) the fair market value
of the issued and outstanding Olympus Common Stock or (ii) the tangible net
worth of Olympus, in either case on the date immediately prior to the Merger.
Assuming that, at the Effective Time, 3,363,139 shares of Olympus Common Stock
are outstanding (i.e., that all outstanding options are exercised before the
Effective Time) and that the fair market value of Olympus Common Stock is
$15.50 per share, an aggregate of approximately $1,042,573 will be payable to
the four participating executive officers as follows: $323,198 to R. Gibb
Marsh; and $239,792 to each of K. John Jones, Gary L. Matern and Kathy K. Hale.
Consulting and Non-Competition Agreement. The Merger Agreement provides
that Washington Mutual and A. Blaine Huntsman will enter into a Consulting and
Non-Competition Agreement, pursuant to which Mr. Huntsman will serve as a
consultant to Washington Mutual for a period of 18 months after the Effective
Time. During the term of the Consulting and Non-Competition Agreement,
Mr. Huntsman will advise Washington Mutual generally in regard to its Utah
operations and perform such other functions as reasonably requested by the
President and CEO of Washington Mutual. In addition, Mr. Huntsman will agree
not to work for or serve any other financial institution as an employee,
officer, director, consultant or advisor during the term of the Consulting and
Non-Competition Agreement. As compensation for his consulting services and
agreement not to compete, Mr. Huntsman will be entitled to receive $225,000
over the 18 month term of the agreement.
Deferred Compensation Arrangement. Pursuant to a deferred compensation
arrangement between Olympus and Mr. Huntsman, Olympus credits $1,250 per month
to a deferred compensation account for Mr. Huntsman to be invested in
investments approved by him. Upon consummation of the Merger, Mr. Huntsman's
employment will be terminated and Washington Mutual (as successor to Olympus)
will be required to pay to Mr. Huntsman the fair market value of his deferred
compensation account in five annual installments. As of February 28, 1995, the
balance of Mr. Huntsman's deferred compensation account was $153,593.38.
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Severance Payments. The Merger Agreement provides that Washington
Mutual will make severance payments (in an amount equal to two weeks' salary
for each full year of service with Olympus up to a maximum of six months' total
pay) to any officer of Olympus whose employment is terminated without cause
within one year after the Effective Date.
AFFILIATE LETTERS
As a condition to the execution of the Merger Agreement, each director
and executive officer of Olympus and certain shareholders of Olympus
(collectively, the "Affiliates") beneficially owning in the aggregate 996,290
shares of Olympus Common Stock (31.8% of the shares of Olympus Common Stock
outstanding as of the Record Date) and holding in the aggregate options to
acquire 205,600 shares of Olympus Common Stock (6.2% of the shares of Olympus
Common Stock outstanding as of the Record Date) delivered to Washington Mutual a
letter (the "Affiliate Letter"), pursuant to which, among other things, the
Affiliates agreed to vote the shares of Olympus Common Stock held by them in
favor of approval of the Merger Agreement. In addition, pursuant to the
Affiliate Letters, each Affiliate agreed not to (i) sell or otherwise dispose of
(x) any shares of Olympus Common Stock during the 30 days preceding the
Effective Date or (y) any shares of Washington Mutual Common Stock until such
time as consolidated financial results covering at least 30 days of post-Merger
combined operations of Washington Mutual and Olympus have been published, or
(ii) sell or transfer any shares of Olympus Common Stock except in open market
transactions or in privately negotiated transactions in which the ultimate
beneficial owner will acquire fewer than 30,000 shares. The Affiliate Letters
do not restrict any director or officer of Olympus from voting on any matter, or
otherwise from acting in his or her capacity as a director or officer with
respect to any matters, including but not limited to, the general management of
Olympus or any other exercise of fiduciary responsibilities.
The Affiliate Letters are intended to increase the likelihood that the
Merger will be consummated according to the terms set forth in the Merger
Agreement and may tend to discourage competing offers by other parties to
acquire Olympus.
REGULATORY APPROVALS
OTS Approval. The Merger and the Bank Merger are subject to the
approval of the OTS under Section 10 of the Home Owners' Loan Act of 1933, as
amended ("HOLA") and under Section 18(c) of the Federal Deposit Insurance Act
(the "Bank Merger Act"). Olympus and Washington Mutual qualify as savings and
loan holding companies under HOLA and are subject to OTS regulation,
supervision and reporting requirements. Section 10 of the HOLA requires that
the OTS take into consideration, among other factors, the financial and
managerial resources and future prospects of the institutions, the effect of
the acquisition on the savings associations, the insurance risk to the Savings
Association Insurance Fund or the Bank Insurance Fund and the convenience and
needs of the communities to be served. The HOLA prohibits the OTS from
approving the Merger (i) if it would result in a monopoly or be in furtherance
of any combination or conspiracy to monopolize or to attempt to monopolize the
savings and loan business in any part of the United States or (ii) if its
effect in any section of the country may be substantially to lessen competition
or to tend to create a monopoly, or if it would in any other manner be a
restraint of trade, unless the OTS finds that the anti- competitive effects of
the Merger are clearly outweighed by the public interest and the probable
effect of the transaction in meeting the convenience and needs of the
communities to be served. Generally, under the Bank Merger Act, a bank
merger may not be consummated until the 30th day following the date of OTS
approval, during which time the United States Department of Justice may
challenge the Bank Merger on antitrust grounds. The Community Reinvestment Act
of 1978 ("CRA") also requires that the OTS, in deciding whether to approve the
Merger, assess the record of performance of the bank subsidiaries of
Washington Mutual and Olympus in meeting the credit needs of their
communities, including low and moderate income neighborhoods, served by such
bank subsidiaries.
On November 21, 1994, Washington Mutual submitted an application
seeking OTS approval of the Merger. There can be no assurance that the OTS
will approve the Merger, and if the Merger is approved, there can be no
assurance as to the date of such approvals or as to what conditions, if any,
may be imposed in such approvals. Washington Mutual's obligation to consummate
the Merger is conditioned upon receipt of all required regulatory approvals and
consents, without any term or condition that (i) has not normally been imposed
in transactions of this type and would have a material adverse effect
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on Olympus or Washington Mutual or (ii) would require Washington Mutual to
contribute additional capital to WMFSB (other than to increase its leverage
capital to a level no higher than 5%). There can be no assurance that the
Department of Justice or a state attorney general will not challenge the Bank
Merger or, if challenged, what the result of such a challenge would be.
On January 19, 1995, the OTS notified Washington Mutual that a protest
to the merger application by the Washington Association of Community
Organizations for Reform Now ("ACORN") was deemed "substantial" by the OTS. The
OTS finding is not a comment on the merits of the protest. The ACORN protest
raises questions regarding Washington Mutual's record of performance under the
CRA. Because Washington Mutual and ACORN had not resolved the issues privately
or made significant progress toward that end by February 9, 1995, the OTS held
a hearing to review Washington Mutual's CRA record on February 13, 1995. If the
OTS finds that Washington Mutual has not performed adequately under the CRA,
the OTS may refuse to approve the Merger. Washington Mutual believes that it is
in full compliance with the CRA and, in their most recent CRA performance
evaluations, one Washington Mutual bank subsidiary received a "satisfactory"
CRA performance rating from the FDIC and another received an "outstanding" CRA
performance rating from the OTS. Nonetheless, the ACORN protest may
significantly delay OTS approval of the Merger.
Washington Mutual and Olympus are not aware of any other governmental
approvals that are required for consummation of the Merger or the Bank Merger
except as described above. Should any other approval or action be required, it
is presently contemplated that such approval would be sought. There can be no
assurance whether or when any such approval, if required, could be obtained.
FEDERAL INCOME TAX CONSEQUENCES
The Merger is expected to constitute a "reorganization" under the Code.
The following discussion summarizes the material federal income tax
consequences relating to the Merger, assuming the Merger is so treated. No
ruling from the Internal Revenue Service (the "IRS") will be applied for with
respect to the federal income tax consequences of the Merger. Thus, THERE CAN
BE NO ASSURANCE THAT THE IRS WILL AGREE WITH THE CONCLUSIONS SET FORTH IN THIS
PROXY STATEMENT/PROSPECTUS.
Consummation of the Merger is conditioned upon, among other things,
receipt by Olympus and Washington Mutual of an opinion from Foster Pepper &
Shefelman, counsel to Washington Mutual, dated as of the Effective Date,
substantially to the effect that the Merger will qualify as a "reorganization"
for federal income tax purposes and that the attendant tax consequences will be
as discussed below. Such opinion is conditioned upon the continued accuracy of
certain factual representations made by Washington Mutual and Olympus. The
opinion will not, however, be binding upon the IRS or the courts.
Gain or loss will not be recognized by an Olympus Shareholder on the
exchange of all of such shareholder's shares of Olympus Common Stock solely for
Washington Mutual Common Stock in the Merger.
Each of an Olympus Shareholder who, if Washington Mutual elects the
Partial Cash Consideration Option, receives solely cash in the Merger for all
of such shareholder's shares of Olympus Common Stock, an Olympus Shareholder
who receives cash in lieu of a fractional share of Washington Mutual Common
Stock and an Olympus Shareholder who receives cash in connection with the
perfection of dissenters' rights will be treated as receiving a distribution in
redemption of such share interest. In general, such distribution in redemption
will be treated as a payment in exchange for such share interest, subject to
the provisions and limitations of Code Section 302 (which in certain
circumstances could result in the receipt of cash being treated as a dividend).
If treated as a payment in exchange for such share interest, gain or loss will
be measured by the difference between the tax basis of Olympus Common Stock
surrendered in the Merger, allocable to the fractional share, or of the
dissenters' shares tendered, as the case may be, and the amount of cash
received therefor. Such gain or loss will be a capital gain or loss if the
Olympus Common Stock was held as a capital asset as of the Effective Date.
With respect to an Olympus Shareholder who, if Washington Mutual elects
the Partial Cash Consideration Option, exchanges shares of Olympus Common Stock
partially for Washington Mutual Common Stock and partially for a cash payment
(a) any gain realized on the Olympus shares surrendered in the Merger will be
recognized but not in excess of the amount of cash received; (b) subject to the
provisions of Code Section 302 (which in certain circumstances could result in
the receipt of cash being treated as a dividend), such gain will be capital
gain for a shareholder who holds such shares as capital assets; and (c)
pursuant to Code Section 356(c), no loss will be allowed.
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The gain or loss will be treated as a long-term capital gain or loss if
the Olympus Common Stock which resulted in the receipt of such cash was held by
the shareholder for more than one year, and otherwise will be short-term
capital gain or loss.
The aggregate tax basis of the Washington Mutual Common Stock received
by each Olympus Shareholder in the Merger will equal the aggregate tax basis of
such shareholder's Olympus Common Stock exchanged therefore, reduced by (a) the
basis of the Olympus Common Stock allocable to any fractional share of
Washington Mutual Common Stock in lieu of which cash is received and (b) the
amount of any cash payment received (other than cash received in lieu of a
fractional share), if Washington Mutual elects the Partial Cash Consideration
Option, and increased by the amount of gain recognized due to the receipt of
any such cash payment. The holding period for the Washington Mutual Common
Stock received by each shareholder in the Merger will include the period the
shareholder held the Olympus Common Stock exchanged therefore, provided such
shares of Olympus Common Stock were held as capital assets at the Effective
Time.
The cash payments, if any, due holders of Olympus Common Stock (other
than certain exempt entities and persons) pursuant to the Merger will be
subject to a 31% backup withholding tax by the Exchange Agent under federal
income tax law unless certain requirements are met. Generally, the Exchange
Agent will be required to deduct and withhold the tax if (i) the shareholder
fails to furnish a taxpayer identification number ("TIN") to the Exchange Agent
or fails to certify under penalty of perjury that such TIN is correct, (ii) the
IRS notifies the Exchange Agent that the shareholder has failed to report
interest, dividends or original issue discount in the past, or (iii) there has
been a failure by the shareholder to certify under penalty of perjury that such
shareholder is not subject to the 31% backup withholding tax. Any amounts
withheld by the Exchange Agent in collection of the 31% backup withholding tax
will generally reduce the federal income tax liability of the shareholder from
whom such tax was withheld. The TIN of an individual shareholder is the
shareholder's Social Security Number.
THE FOREGOING CONSTITUTES ONLY A GENERAL DESCRIPTION OF THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO OLYMPUS SHAREHOLDERS UNDER CURRENTLY
EXISTING FEDERAL INCOME TAX LAWS, WITHOUT CONSIDERATION OF THE PARTICULAR FACTS
AND CIRCUMSTANCES OF EACH SHAREHOLDER'S SITUATION. EACH OLYMPUS SHAREHOLDER IS
URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR AS TO SUCH
SHAREHOLDER'S OWN SITUATION, INCLUDING ANY ESTATE, GIFT, STATE, LOCAL OR
FOREIGN TAX CONSEQUENCES ARISING OUT OF THE MERGER AND/OR ANY SALE THEREAFTER
OF WASHINGTON MUTUAL COMMON STOCK RECEIVED IN THE MERGER.
ACCOUNTING TREATMENT
The Merger, if completed as proposed, will be treated as a
pooling-of-interests for accounting purposes, unless Washington Mutual elects
the Partial Cash Consideration Option. Accordingly, under generally accepted
accounting principles, the assets and liabilities of Olympus will be recorded
on the books of Washington Mutual at their values on the books of Olympus at
the time of consummation of the Merger. No goodwill will be created in the
Merger if it is accounted for as a pooling-of-interests.
If Washington Mutual elects the Partial Cash Consideration Option, the
Merger will be treated as a purchase for accounting purposes. In that event,
the assets and liabilities of Olympus will be recorded on the books of
Washington Mutual at their respective fair market values at the time of
acquisition. Goodwill, the excess of purchase price over the net fair value of
the assets and liabilities, will be recorded and amortized on a straight-line
basis.
Olympus has agreed to make certain accounting adjustments upon the
request of Washington Mutual. If the Merger closing conditions have been met,
Washington Mutual waives certain other conditions to the Merger and Olympus'
1994 year end financial statements have not been published, Olympus will make
income statement adjustments regarding the treatment of (i) certain real estate
property values; (ii) costs incurred in connection with the Merger; and (iii)
charges for severance and other payments to employees resulting from the
Merger. Adjustments will be made only to the extent permissible under
generally accepted accounting principles and applicable federal regulations.
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DISSENTERS' RIGHTS
Under Part 13 of the URBCA, Olympus Shareholders will not be entitled to
dissent from the Merger and obtain payment of the fair value of shares held by
them, unless Washington Mutual elects the Partial Cash Consideration Option.
Under the Merger Agreement, Washington Mutual may elect the Partial Cash
Consideration Option only if the Average Price is less than $18 per share. The
Average Price is determined three trading days prior to the Effective Date. At
the time of the Special Meeting, it is not likely to be known if the Partial
Cash Consideration Option will be available to Washington Mutual, or, if
available, whether it would be elected by Washington Mutual. Therefore,
Olympus Shareholders should assume, for purposes of exercising dissenters'
rights, that Washington Mutual will elect the Partial Cash Consideration
Option. Dissenting Olympus Shareholders should follow the procedures for
perfecting such rights described in "THE MERGER -- Dissenters' Rights" and in
Part 13 of the URBCA. If Washington Mutual does not elect the Partial Cash
Consideration Option, however, Olympus Shareholders will not be entitled to
dissenters' rights.
If Olympus Shareholders perfect dissenters' rights with respect to more
than 5% of the outstanding shares of Olympus Common Stock, Washington Mutual
may elect not to consummate the Merger. See "THE MERGER AGREEMENT --
Conditions to the Merger."
If Olympus Shareholders become entitled to dissenters' rights and have
exercised dissenters' rights in connection with the Merger in accordance with
the provisions of Part 13, any Dissenting Shares (as defined below) will not be
converted into Washington Mutual Common Stock but will entitle the holder
thereof to receive payment therefor in cash pursuant to Part 13. The following
summary of the provisions of Part 13 is not intended to be a complete statement
of such provisions and is qualified in its entirety by reference to the full
text of Part 13, a copy of which is attached to this Proxy Statement/Prospectus
as Appendix D and is incorporated herein by reference. Olympus and Washington
Mutual will require strict compliance with the statutory procedures.
If the Merger is approved by the required vote of shareholders and is
not abandoned or terminated, each Olympus Shareholder who does not vote in
favor of the Merger and who follows the procedures set forth in Part 13 will be
entitled to have his shares of Olympus Common Stock purchased by Olympus for
cash at their Fair Value (as defined below). The "Fair Value" of shares of
Olympus Common Stock is to be determined immediately before effectuation of the
Merger, excluding any appreciation or depreciation in anticipation of the
proposed Merger. The shares of Olympus Common Stock with respect to which
holders have perfected their purchase demand in accordance with Part 13 and
have not effectively withdrawn or lost such rights are referred to in this
Proxy Statement/Prospectus as the "Dissenting Shares." It is the current
intention of Washington Mutual to estimate the Fair Value of Olympus Common
Stock to be $13.6125 per share, the average closing sales price for the ten
trading days up to and including the day prior to the date the Merger Agreement
was signed and announced to the public.
Prior to the vote taken to approve the proposed Merger at the Special
Meeting, a stockholder who wishes to assert dissenters' rights must (a) deliver
written notice to Olympus of his intent to demand payment for shares if the
proposed Merger is approved and (b) not vote any of his shares in favor of the
proposed Merger. The failure of an Olympus Shareholder to vote against the
Merger will not constitute a waiver of dissenters' rights. A vote against the
Merger will not satisfy the notice requirements. Within ten days after approval
of the Merger by Olympus' shareholders, Olympus must mail a notice of such
approval (the "Approval Notice") to all the shareholders who are entitled to
demand payment for their shares under Part 13, together with a statement of the
price determined by Olympus to represent the Fair Value of the applicable
Dissenting Shares (determined in accordance with the immediately preceding
paragraph), a brief description of the rights, a copy of Part 13, and a form
for demanding payment. The statement of price by Olympus constitutes an offer
by Olympus to purchase all Dissenting Shares at the stated amount. Only a
holder of record of shares of Olympus Common Stock as of the date of the
Special Meeting (or his duly appointed representative) is entitled to
assert a purchase demand for the shares registered in that holder's name.
An Olympus Shareholder electing to exercise dissenters' rights must,
within 30 days after the date on which the Approval Notice is mailed to such
shareholder, demand in writing from Olympus the purchase of his Dissenting
Shares and payment to the shareholder of their Fair Value and must submit a
certificate representing the Dissenting Shares to Olympus, or Washington Mutual
as the survivor, if the Merger has been consummated (the "Surviving Company"),
in accordance with the terms of the Approval Notice. A shareholder who does
not demand payment
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and deposit share certificates as required by the date set forth in the
Approval Notice, is not entitled to payment for shares under Part 13. A holder
who elects to exercise dissenter's rights should mail or deliver his written
demand for payment to the Surviving Company at 115 South Main Street, Salt Lake
City, Utah 84111, directed to the attention of the Dissenters' Rights
Administrator. The demand should specify the holder's name and mailing
address, the number of shares of Olympus Common Stock owned by such shareholder
and state that such holder is demanding purchase of his shares in payment of
their Fair Value. Upon the later of the Effective Time and receipt by the
Surviving Company of each payment demand made pursuant to Part 13, the
Surviving Company shall pay the amount it estimates to be the Fair Value of the
Dissenting Shares, plus interest at the legal rate of interest, to each
dissenter who acquired Dissenting Shares before the date of the first public
announcement of the terms of the Merger and who has complied with the
requirements of Part 13 and has not yet received payment. As to those
dissenters who acquired Dissenting Shares on or after the date of such
announcement and who comply with the requirements of Part 13, the Surviving
Company need not make such payment, but may offer to make payment if the
dissenter agrees to accept it in full satisfaction of the dissenter's demand.
Any holder of Dissenting Shares who has not accepted an offer made by
the Surviving Company may, within 30 days after the Surviving Company first
offered payment for his shares, notify the Surviving Company in writing of his
own estimate of the Fair Value of his shares and demand payment of the
estimated amount, plus interest, less any payment made under Part 13, if (i)
the holder of Dissenting Shares believes that the amount offered or paid by the
Surviving Company under Part 13 is less than the Fair Value of the shares, (ii)
the Surviving Company fails to make payment within 60 days after demand, or
(iii) the Surviving Company, having failed to consummate the proposed Merger,
does not return share certificates deposited by a holder as required by Part
13. If the Surviving Company denies that the shares are Dissenting Shares, or
if the Surviving Company and the shareholder fail to agree upon the fair value
of the Dissenting Shares, then within 60 days after receiving the payment
demand the Surviving Company must petition the District Court of Salt Lake
County (the "Court") to determine whether the shares are Dissenting Shares or
to determine the Fair Value of such Dissenting Shares or both. If the
Surviving Company does not commence the proceeding within the 60-day period, it
shall pay each holder of Dissenting Shares whose demand remains unresolved the
amount demanded. The Surviving Company shall make all holders of Dissenting
Shares whose demands remain unresolved parties to the proceeding as an action
against their shares. The Court may appoint one or more persons as appraisers
to receive evidence and recommend a decision on the question of Fair Value.
Each holder of Dissenting Shares made a party to the proceeding is entitled to
judgment for the amount, if any, by which the Court finds that the Fair Value
of his shares, plus interest, exceeds the amount paid by the Surviving Company.
If any holder of shares of Olympus Common Stock who demands the purchase
of his shares under Part 13 fails to perfect, or effectively withdraws or loses
his right to, such purchase, the shares of such holder will be converted into
the right to receive the Merger Consideration in accordance with the Merger
Agreement. Dissenting Shares lose their status as Dissenting Shares if (a) the
Merger is abandoned; (b) the shares are transferred after the Special Meeting;
(c) the shareholder fails to make a written demand for purchase; (d) the
shareholder votes to approve and adopt the Merger Agreement; (e) the
shareholder and the Surviving Company do not agree on the status of the shares
as Dissenting Shares or do not agree on the purchase price, but neither the
Surviving Company nor the shareholder files a complaint within 60 days after
the mailing of the Approval Notice; or (f) with the Surviving Company's
consent, the shareholder delivers to the Surviving Company a written withdrawal
of such shareholder's demand for purchase of his shares.
RESALES OF WASHINGTON MUTUAL COMMON STOCK BY OLYMPUS SHAREHOLDERS
The shares of Washington Mutual Common Stock issuable to shareholders of
Olympus upon consummation of the Merger have been registered under the
Securities Act. Such shares may be traded freely and without restriction by
those shareholders not deemed to be "affiliates" of Olympus or Washington
Mutual as that term is defined in the rules and regulations under the
Securities Act. "Affiliates" are generally defined as persons who control, are
controlled by, or are under common control with, Olympus at the time of the
Special Meeting (generally, executive officers, directors and certain
beneficial owners). Affiliates may not sell their Washington Mutual Common
Stock acquired in connection with the Merger, except pursuant to an effective
registration statement under the Securities Act covering such shares or in
compliance with Rule 145 (or Rule 144 under the Securities Act in the case of
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persons who become affiliates of Washington Mutual) or another applicable
exemption from the registration requirements of the Securities Act. In
general, under Rule 145, for two years following the Effective Time, an
affiliate (together with certain related persons) would be entitled to sell
Washington Mutual Common Stock acquired in connection with the Merger only
through unsolicited "broker transactions" or in transactions directly with a
"market maker," as such terms are defined in Rule 144. Additionally, the
number of shares to be sold by an affiliate (together with certain related
persons and certain persons acting in concert) within any three-month period
for purposes of Rule 145 may not exceed the greater of 1% of the outstanding
shares of Washington Mutual Common Stock or the average weekly trading volume
of such stock during the four calendar weeks preceding such sale. Rule 145
would only remain available, however, to affiliates if Washington Mutual
remained current with its informational filings with the Securities and
Exchange Commission (the "Commission") under the Exchange Act. Two years after
the Effective Time, an affiliate would be able to sell such Washington Mutual
Common Stock without such manner of sale or volume limitations provided that
Washington Mutual was current with its Exchange Act informational filings and
such affiliate was not then an affiliate of Washington Mutual. Three years
after the Effective Time, an affiliate would be able to sell such Washington
Mutual Common Stock without any restrictions so long as such affiliate had not
been an affiliate of Washington Mutual for at least three months prior thereto.
THE MERGER AGREEMENT
EFFECTIVE DATE AND TIME OF THE MERGER
The Merger will become effective at the time of the occurrence of both
(a) the filing of the articles of merger with the Secretary of State of
Washington (the "Secretary") and (b) delivery to the Division of Corporations
and Commercial Code of the State of Utah (the "Division") of the articles of
merger, or at such later time after such filing and delivery as is provided in
the articles of merger. As used herein, the term "Effective Date" means the
day on which the Effective Time occurs. It is intended that the Effective Time
will occur after the close of business on or about April 28, 1995, assuming
the satisfaction of the conditions discussed below. The parties are unable
to predict when or if the Effective Time will occur.
CONDITIONS TO THE MERGER
The obligations of Olympus and Washington Mutual to consummate the
Merger are subject to, among other things, the satisfaction of the following
conditions: (i) the approval of the Merger Agreement by the requisite vote of
Olympus Shareholders; (ii) the receipt of all applicable regulatory or
governmental approvals or consents and the expiration of all statutory or
regulatory waiting periods; (iii) the absence of any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger; (iv) receipt of an opinion of counsel
to Washington Mutual to the effect that the Merger will qualify as a
"reorganization" as defined by the Code and neither Washington Mutual nor
Olympus nor any stockholder of Olympus will recognize any gain or loss for
federal income tax purposes (with the exception of cash paid for fractional
shares, cash paid as a result of Washington Mutual electing the Partial Cash
Consideration Option or cash paid as a result of any Olympus Shareholder
perfecting dissenters' rights) as a result of the Merger; (v) compliance with
applicable pre-merger notification provisions of Section 7A of the Clayton Act
and the absence of pending or threatened proceedings under any applicable
antitrust law of the State of Washington; and (vi) the effectiveness of the
Registration Statement and the absence of any stop order suspending the
effectiveness thereof or any proceedings for that purpose initiated by the
Commission.
The obligation of Washington Mutual to consummate the Merger is subject
to the satisfaction or waiver of certain additional conditions, including,
without limitation, the following: (i) the continued accuracy of
representations and warranties of Olympus and the performance by Olympus of its
covenants and agreements made in the Merger Agreement, except where the failure
of such representations and warranties to be accurate or the failure to perform
such covenants or agreements shall not, in the aggregate, have a negative
economic effect of $500,000 or more on Olympus and its subsidiaries or, when
adjusted to present value, have such an effect on Washington Mutual; (ii) the
receipt of all regulatory or governmental approvals or consents required in
connection with the transactions contemplated by the Merger Agreement without
the imposition of any condition which (a) has
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not normally been imposed in such transactions and would have a material
adverse effect on Olympus or Washington Mutual or (b) would require Washington
Mutual to raise additional capital other than to raise its leverage capital to
a level no higher than 5% (as adjusted to account for the Merger); (iii) the
receipt of an opinion, dated the date of the closing, from Kimball, Parr,
Waddoups, Brown & Gee, counsel to Olympus; (iv) the absence of any material
adverse change in the overall financial condition, businesses or results of
operations of Olympus and its subsidiaries taken as a whole; (v) the receipt of
consents necessary for the assignment of certain real property leases to the
successor by merger to Olympus Bank; (vi) the receipt of resignations of the
directors of Olympus and each Olympus subsidiary; (vii) unless Washington
Mutual elects the Partial Cash Consideration Option, the receipt of an opinion
of Deloitte & Touche LLP that the Merger will qualify for pooling of interests
accounting treatment or, in the event it does not so qualify, that neither
Olympus nor its shareholders, directors, or officers shall have taken any
action that would disqualify the Merger from being treated as a pooling of
interests for accounting purposes; (viii) the receipt of a certificate of
officers of Olympus and such other documents necessary to evidence fulfillment
of the conditions precedent to the closing of the Merger; (ix) evidence that
dissenters' rights have not been preserved with respect to more than 5% of the
outstanding shares of Olympus Common Stock and that each party which executed
an Affiliate Letter has voted in favor of the Merger; and (x) the amendment of
certain indemnification agreements between Olympus and current directors.
The obligation of Olympus to consummate the Merger is subject to the
satisfaction or waiver of certain additional conditions, including, without
limitation, the following: (i) the continued accuracy of the representations
and warranties of Washington Mutual, except where the failure to be accurate
would not have a material adverse effect on Washington Mutual, and the
performance by Washington Mutual of its covenants and agreements made in the
Merger Agreement; (ii) the receipt of an opinion from Foster Pepper &
Shefelman, counsel to Washington Mutual; (iii) the absence of any material
adverse change in the overall financial condition, businesses or results of
operations of Washington Mutual and its subsidiaries taken as a whole; (iv) the
receipt of a certificate of officers of Washington Mutual and such other
documents necessary to evidence fulfillment of the conditions precedent to the
closing of the Merger; (v) the receipt of a fairness opinion from Goldman
Sachs, dated the date of this Proxy Statement/Prospectus; and (vi) Washington
Mutual shall have instructed its transfer agent with respect to the issuance of
Washington Mutual Common Stock to the Olympus Shareholders at least two days
prior to closing.
BUSINESS OF OLYMPUS PENDING THE MERGER
Under the Merger Agreement, until the Effective Time, Olympus is
generally obligated to conduct its business in the ordinary course and
consistent with past practice and prudent banking practice. In addition,
Olympus and Olympus Bank have agreed to use their best efforts to preserve
their business organizations, keep available the present services of their
employees and preserve the goodwill of their customers and other business
relationships. The Merger Agreement also provides that, prior to the Effective
Time, except as otherwise consented to by Washington Mutual, permitted by the
Merger Agreement or required by law, Olympus will not, and will not permit any
of its subsidiaries to: (i) change any provisions of its articles of
incorporation or by-laws, (ii) issue any shares of capital stock except upon
the exercise of certain existing options, (iii) issue, grant or amend any
options, warrants or other rights to purchase capital stock, (iv) split,
combine or reclassify any shares of its capital stock, (v) declare or pay any
dividends on its capital stock, (vi) redeem or otherwise acquire any shares of
its capital stock, (viii) grant any severance or termination pay or enter into
or amend any employment agreement or increase the amount of payments or fees to
its employees, officers or directors, (ix) make capital expenditures in excess
of $40,000 per project or $200,000 in the aggregate, (x) open, close or
relocate any branches, (xi) change in any material manner its lending,
investment or asset/liability policies or any other material banking policies,
(xii) make loans or issue loan commitments other than in the ordinary course of
business consistent with past practice at rates not less than prevailing market
rates, (xiii) acquire, sell, transfer, assign, encumber or otherwise dispose of
assets other than in the ordinary course of business, (xiv) enter into or amend
certain contracts having a term of one year or more or calling for the payment
of $25,000 or more, (xv) make any contributions to Olympus' Employee Stock
Bonus Plan or other benefit plans except in amounts consistent with past
practice, (xvi) increase the number of full-time employees, (xvii) foreclose
upon or otherwise acquire any real property (other than 1-to-4 family
residential properties in the ordinary course of business) or (xviii) agree to
do any of the foregoing.
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WAIVER AND AMENDMENT
At any time prior to the consummation of the Merger, the parties to the
Merger Agreement may (i) amend the Merger Agreement, (ii) extend the time for
the performance of any of the obligations or other acts of any other party
thereto, (iii) waive any inaccuracies in the representations and warranties of
any other party contained therein or in any document delivered pursuant
thereto, or (iv) waive compliance with any of the agreements or conditions
contained therein; provided, however, that after any approval of the Merger by
the Olympus Shareholders, there may not be, without further approval of such
shareholders, any amendment or waiver of the Merger Agreement that changes the
amount or the form of consideration to be delivered to the Olympus
Shareholders.
TERMINATION
The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger by the Olympus
Shareholders:
(a) by mutual written consent of all the parties to the Merger
Agreement;
(b) by any party to the Merger Agreement (i) if the Effective Time
shall not have occurred on or prior to June 30, 1995 unless the failure of such
occurrence is due to the failure of the party seeking to terminate the Merger
Agreement to perform or observe its agreements and conditions set forth in the
Merger Agreement; or (ii) 31 days after the date on which any application for
regulatory approval prerequisite to the consummation of the Merger shall have
been denied or withdrawn at the request of the applicable regulatory authority;
provided, that, if prior to the expiration of such 31-day period Washington
Mutual is engaged in litigation or an appeal procedure relating to an attempt
to obtain such approval, Olympus may not terminate the Merger Agreement until
the earlier of (A) June 30, 1995 and (B) 31 days after the completion of such
litigation and appeal procedures, and of any further regulatory or judicial
action pursuant thereto, including any further action by a government agency as
a result of any judicial remand, order or directive or otherwise; or (iii) ten
days after written certification of the vote of the Olympus Shareholders is
delivered to Washington Mutual indicating that the Olympus Shareholders failed
to approve the Merger Agreement and the Merger at the Special Meeting (or any
adjournment thereof);
(c) by Washington Mutual if (i) at the time of such termination
there shall have been a material adverse change in the consolidated financial
condition of Olympus from that set forth in Olympus' Quarterly Report on Form
10-Q for the three month period ended March 31, 1994 (except for changes
resulting from market and economic conditions which generally affect the
savings industry as a whole, including changes in regulation) or (ii) there
shall have been any material breach of any obligation of Olympus under the
Merger Agreement and such breach shall have not been remedied within 45 days
after receipt by Olympus of notice in writing from Washington Mutual specifying
the nature of such breach and requesting that it be remedied or (iii) Olympus
or Olympus Bank or either of their boards of directors enters into an agreement
or recommends to Olympus' shareholders an agreement (other than the Merger
Agreement) pursuant to which any person or group would (a) merge or consolidate
with, acquire 51% or more of the assets or liabilities of, or enter into any
similar transaction with Olympus or Olympus Bank or (b) acquire ten percent or
more of the voting shares of Olympus or Olympus Bank; or (iv) the Olympus Board
withdraws its recommendation that shareholders vote for approval of the Merger
or the Olympus Shareholders fail to approve the Merger after any person or
group announces publicly, or communicates in writing, to Olympus a proposal to
(a) acquire Olympus or Olympus Bank (by merger, consolidation or purchase of
51% of assets), (b) purchase or otherwise acquire securities representing 25%
of the voting shares of Olympus or (c) change the composition of the Olympus
Board; or
(d) by Olympus if (i) at the time of such termination there shall
have been a material adverse change in the consolidated financial condition of
Washington Mutual from that set forth in Washington Mutual's Quarterly Report
on Form F-4 for the quarter ended March 31, 1994 (except for changes resulting
from market and economic conditions which generally affect the savings industry
as a whole), or (ii) there shall have been any material breach of any
obligation of Washington Mutual under the Merger Agreement and such breach
shall have not been remedied within 45 days after receipt by Washington Mutual
of notice in writing from Olympus specifying the nature of such breach and
requesting that it be remedied, or (iii) the directors of Olympus, after
receiving advice of counsel,
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determine in their good faith judgment to withdraw or modify or resolve to
withdraw or modify their recommendation that shareholders vote in favor of the
Merger in order to discharge their fiduciary duties.
BREAK-UP FEES
As part of the Merger Agreement, Washington Mutual and Olympus agreed to
pay liquidated damages to each other under certain circumstances. To
compensate Olympus for certain costs incurred in connection with the Merger and
to induce Olympus to forego initiating discussions with other potential
acquirors (i) if Washington Mutual terminates the Merger Agreement for any
reason other than the mutual consent of the parties, expiration of the term of
the Merger Agreement, or any material change in the financial condition of
Olympus, or (ii) if the Merger Agreement terminates because Washington Mutual
did not use all reasonable efforts to consummate the Merger, or (iii) if
Olympus terminates the Merger Agreement because of a material breach of any
covenant of Washington Mutual and such breach is not remedied within 45 days
after receipt by Washington Mutual of notice in writing from Olympus specifying
the nature of such breach and requesting that it be remedied, then Washington
Mutual will pay to Olympus on demand $250,000.
To compensate Washington Mutual for certain costs incurred in connection
with the Merger and to induce it to forego initiating discussions regarding
other potential acquisitions (i) if Olympus terminates the Merger Agreement for
any reason other than the mutual consent of the parties, expiration of the term
of the Merger Agreement, or any material change in the financial condition of
Washington Mutual, or (ii) if the Merger Agreement terminates because Olympus
did not use all reasonable efforts to consummate the Merger, or (iii) if
Olympus, Olympus Bank or either of their respective boards enter into a merger,
consolidation or similar transaction with another person, entity or group, or
(iv) if the Olympus Board fails to recommend, or it withdraws its prior
recommendation of the Merger to Olympus' Shareholders, or (v) if Olympus'
Shareholders fail to approve the Merger after any person publicly announces or
communicates in writing to Olympus a proposal to (a) acquire by merger,
consolidation or purchase 51% or more of Olympus' assets or liabilities (or any
similar transaction), (b) purchase or otherwise acquire 25% or more of the
voting shares of Olympus, or (c) change the composition of the Olympus Board,
then Olympus shall pay to Washington Mutual on demand $250,000, and in addition
Washington Mutual shall be entitled to receive any benefits under the Stock
Option Agreement. See "THE MERGER AGREEMENT -- Stock Option Agreement." The
liquidated damages described above could increase the likelihood that the
Merger will be consummated on the terms set forth in the Merger Agreement.
STOCK OPTION AGREEMENT
As a condition to Washington Mutual entering into the Merger Agreement,
Olympus and Washington Mutual have entered into a Stock Option Agreement,
pursuant to which Olympus has granted to Washington Mutual the Option to
purchase an aggregate of 306,864 authorized but unissued shares of Olympus
Common Stock at a per share price of $13.6125, which was the average closing
price of Olympus Common Stock on The Nasdaq Stock Market for the ten trading
days prior to and including July 21, 1994. The Option will become exercisable
under any of the following circumstances: (a) Olympus or Olympus Bank or either
of their boards of directors enters into an agreement or recommends to Olympus
Shareholders an agreement (other than the Merger Agreement) pursuant to which
any person or group would (i) merge or consolidate with, acquire 51% or more of
the assets or liabilities of, or enter into any similar transaction with
Olympus or Olympus Bank or (ii) acquire ten percent or more of the voting
shares of Olympus or Olympus Bank; (b) any person or group (other than
Washington Mutual, WMFSB or any other person owning ten percent of Olympus as
of July 22, 1994) acquires the beneficial ownership of ten percent or more of
the voting shares of Olympus (unless the person or group acquires less than 25%
of the voting shares of Olympus, and files a complete rebuttal of control
submission with the OTS prior to acquiring beneficial ownership of 10% and such
submission is accepted by the OTS); (c) the Olympus Board withdraws its
recommendation that shareholders vote for approval of the Merger or the Olympus
Shareholders fail to approve the Merger after any person or group announces
publicly, or communicates in writing, to Olympus a proposal to (i) acquire
Olympus or Olympus Bank (by merger, consolidation or purchase of 51% of the
assets), (ii) purchase or otherwise acquire securities representing 25% of the
voting shares of Olympus or (iii) change the composition of the Olympus Board.
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The Stock Option Agreement and the Option will terminate upon the
earliest of (i) June 30, 1995; (ii) the mutual agreement of the parties hereto;
(iii) thirty-one (31) days after the date on which any application for
regulatory approval for the Merger shall have been denied; provided, however,
that if prior to the expiration of such 31-day period, Olympus, Washington
Mutual or WMFSB is engaged in litigation or an appeal procedure relating to an
attempt to obtain approval of the Merger or the Bank Merger, the Stock Option
Agreement will not terminate until the earlier of (a) June 30, 1995, or (b)
thirty-one (31) days after the completion of such litigation and appeal
procedure; (iv) the thirtieth (30th) day following the termination of the
Merger Agreement for any reason other than a material noncompliance or default
by Washington Mutual with respect to its obligations thereunder; or (v) the
date of termination of the Merger Agreement if such termination is due to a
material noncompliance or default by Washington Mutual with respect to its
obligations thereunder.
The foregoing summary of the terms of the Stock Option Agreement is not
intended to be complete and is subject to, and qualified in its entirety by
reference to, the copy of the Stock Option Agreement which is attached as
Appendix C to this Proxy Statement/Prospectus and is incorporated herein by
reference.
The Stock Option Agreement is intended to increase the likelihood that
the Merger will be consummated in accordance with the terms of the Merger
Agreement, and may discourage persons from proposing a competing offer to
acquire Olympus. The existence of the Stock Option Agreement could
significantly increase the cost to a potential acquiror of acquiring Olympus,
compared to its cost had Olympus not entered into the Stock Option Agreement.
PREFERENCE AND ALLOCATION PROCEDURES
If the Average Price is less than $18.00, then Washington Mutual may
elect the Partial Cash Consideration Option. In such case and subject to
certain allocation procedures, each Olympus Shareholder will be eligible to
receive such shareholders' preference as to the form of the Merger
Consideration to be paid. On March 22, 1995, the closing sales price of
Washington Mutual Common Stock on The Nasdaq Stock Market was $20.25.
However, it is impossible to predict whether the Average Price will or will not
be less than $18.00 or whether, even if it were less than $18.00, Washington
Mutual would elect the Partial Cash Consideration Option. It is anticipated
that a Preference Form and other appropriate transmittal materials will be sent
to each holder of record of Olympus Common Stock 27 days prior to the expected
Effective Time, as described below, through which each Olympus Shareholder can
indicate their preference to receive either Washington Mutual Common Stock or
cash with respect to such holder's Olympus Common Stock, or indicate no such
preference. If Washington Mutual waives its right to elect the Partial Cash
Consideration Option, no Preference Form will be sent to Olympus Shareholders.
Although Olympus Shareholders will be asked to complete Preference
Forms prior to the Effective Time, such Preference Forms will only be utilized
under circumstances where Washington Mutual elects the Partial Cash
Consideration Option. If necessary, the allocation of Washington Mutual Common
Stock or cash in the Merger will be conducted by an exchange agent in
accordance with the preferences indicated by shareholders on the preference
forms and pursuant to certain allocation procedures described below. During
the period after an Olympus Shareholder delivers a Preference Form and such
Shareholder's stock certificates and before such shareholder receives
Washington Mutual Common Stock and/or cash in the Merger, such Olympus
Shareholder will not be able to sell his shares or liquidate his investment in
Olympus Common Stock. However, an Olympus Shareholder may revoke a Preference
Form prior to the Preference Deadline (as defined below) and promptly receive a
return of such shareholders' stock certificate.
Indications of Preference. Unless Washington Mutual waives the Partial
Cash Consideration Option, each Olympus Shareholder of record will have
the right to submit a Preference Form specifying the kind of consideration
sought to be received. The Preference Form and other appropriate transmittal
materials will be mailed by the Exchange Agent on the Mailing Date (27 days
before the expected Effective Date, or on such other date as is mutually
agreed) to each Olympus Shareholder of record as of five business days before
the Mailing Date. Holders of record of such shares of Olympus Common Stock who
hold such shares as nominees, trustees, or in other representative capacities
may submit multiple Preference Forms that cover all the shares of Olympus
Common Stock held by such record holder for each beneficial owner thereof. See
"THE MERGER -- Federal Income Tax Consequences." The Preference Form will
permit Olympus Shareholders (1) to indicate that they prefer to receive in
exchange for their Olympus shares (a) only Washington Mutual Common Stock
(Stock Preference Shares) or (b) only cash (Cash Preference Shares) or (2) to
indicate they have no preference as to the receipt of Washington Mutual Common
Stock or cash (No Preference Shares). The Preference Form,
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together with stock certificates representing all shares of Olympus Common
Stock covered thereby, must be completed, signed and returned to the Exchange
Agent no later than the Preference Deadline (5:00 p.m., Mountain Time, on the
date that is 20 days after the Mailing Date). If a certificate for Olympus
Common Stock has been lost, stolen or destroyed, a Preference Form will be
properly completed only if accompanied by appropriate evidence as to such loss,
theft or destruction, appropriate evidence as to the ownership of such
certificate by such Olympus Shareholder and appropriate and customary
indemnification. Olympus shares for which a Preference Form has not been
properly completed and received, together with the certificates representing
such shares, by the Exchange Agent by the Preference Deadline will be deemed No
Preference Shares. The Preference Forms will be accompanied by instructions
specifying other details of the exchange. OLYMPUS SHAREHOLDERS SHOULD NOT SEND
THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A PREFERENCE FORM.
If Washington Mutual elects the Partial Cash Consideration Option, the
aggregate number of shares of Washington Mutual Common Stock to be issued (the
"Stock Limit") and the total amount of cash payable in the Merger will be
fixed. Accordingly, there can be no assurance that each Olympus Shareholder
will receive the form of consideration that such holder prefers. In the event
that the Preference Forms result in an aggregate preference of either
Washington Mutual Common Stock or cash, the procedures for allocating
Washington Mutual Common Stock and cash, described below under "Allocation
Procedures," will be followed by the Exchange Agent.
Any Preference Form may be revoked or changed by written notice from the
person submitting such Preference Form to the Exchange Agent, but to be
effective such notice must actually be received by the Exchange Agent at or
before the Preference Deadline. The Exchange Agent will have reasonable
discretion to determine when any preference, modification or revocation is
received and whether any such election, modification or revocation has been
properly made, and such determination shall be final.
Persons who become shareholders of Olympus after the date five days
before the Mailing Date and before the close of business on the day before the
Preference Deadline, or any other shareholders who need a Preference Form, may
obtain copies of the Preference Form upon request from Washington Mutual either
in writing at Washington Mutual, Washington Mutual Tower, 1201 Third Avenue,
12th Floor, Seattle, Washington, Attention: Ms. JoAnn DeGrande, Vice President
of Investor Relations, or by telephone at (206) 461-3187.
Allocation Procedures. If Washington Mutual elects the Partial Cash
Consideration Option, then within five business days after the Preference
Deadline, the Exchange Agent will allocate among Olympus Shareholders rights to
receive Washington Mutual Common Stock or cash as follows (provided that in no
event will the Exchange Agent be required to effectuate the allocation before
the Effective Date):
(a) If the number of Washington Mutual Common Stock shares to
be issued for Stock Preference Shares is less than the Stock Limit, then
(i) all Stock Preference Shares will be converted into Washington Mutual
Common Stock, (ii) a sufficient number of No Preference Shares and then,
if necessary, Cash Preference Shares will be selected randomly by the
Exchange Agent to receive Washington Mutual Common Stock, so that the
total of Washington Mutual Common Stock shares to be issued will equal
as closely as practicable the Stock Limit and (iii) the Cash Preference
Shares and No Preference Shares not so selected will be converted into
cash.
(b) If the number of Washington Mutual Common Stock shares to
be issued for Stock Preference Shares exceeds the Stock Limit, then (i)
all Cash Preference Shares and No Preference Shares will be converted
into cash, (ii) a sufficient number of Stock Preference Shares will be
selected randomly by the Exchange Agent to receive cash so that the
total of Washington Mutual Common Stock shares to be issued will equal
as closely as practicable the Stock Limit and (iii) the Stock Preference
Shares not so selected will be converted into Washington Mutual Common
Stock.
(c) If the number of Washington Mutual Common Stock shares to
be issued on conversion of Stock Preference Shares equals or is nearly
equal to (as determined by the Exchange Agent) the Stock Limit, Stock
Preference Shares will receive Washington Mutual Common Stock, and all
Cash Preference Shares and No Preference Shares will receive cash.
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(d) If the number of Washington Mutual Common Stock shares to
be issued on conversion of Stock Preference Shares and No Preference
Shares equals or is nearly equal to (as determined by the Exchange
Agent) the Stock Limit, all Cash Preference Shares will receive cash and
all Stock Preference Shares and No Preference Shares will receive
Washington Mutual Common Stock.
No assurance can be given that a preference by any Olympus Shareholder
will be honored. Because the number of shares of Washington Mutual Common
Stock to be issued and the total amount of cash to be paid in the Merger will
be fixed after Washington Mutual elects the percentage of aggregate Merger
Consideration to be paid in cash pursuant to the Merger Agreement, the extent
to which elections will be accommodated will depend upon the numbers of shares
which elect cash and stock and as to which no preference is indicated.
Accordingly, an Olympus Shareholder who prefers to receive cash may instead
receive shares of Washington Mutual Common Stock (plus cash in lieu of a
fractional share) and an Olympus Shareholder who prefers to receive shares of
Washington Mutual Common Stock (plus cash in lieu of a fractional share) may
instead receive all cash. In addition, it is possible, in such cases, that a
beneficial owner of Olympus Common Stock who holds his shares in more than one
record ownership could receive both cash (in addition to cash received in lieu
of fractional shares) and Washington Mutual Common Stock in the Merger.
Because the tax consequences of receiving cash, Washington Mutual Common Stock
or a combination of cash and Washington Mutual Common Stock will differ,
shareholders of Olympus are urged to read carefully the information under "THE
MERGER -- Federal Income Tax Consequences" in this Proxy Statement/Prospectus,
and to consult with their own tax advisors before returning the Preference
Form.
If Washington Mutual does not elect the Partial Cash Consideration
Option, all Preference Forms will be disregarded and all of the outstanding
shares of Olympus Common Stock will be converted into the right to receive
$15.50 per share, subject to adjustment, to be paid in shares of Washington
Mutual Common Stock, as described herein.
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Date, the Exchange Agent will mail written
transmittal materials concerning the exchange of stock certificates to each
record holder of shares of Olympus Common Stock outstanding at the Effective
Date who did not deliver their stock certificates with a Preference Form. The
transmittal materials will contain instructions with respect to the proper
method of surrender of certificates formerly representing shares of Olympus
Common Stock in exchange for the Merger Consideration. OLYMPUS SHAREHOLDERS
SHOULD NOT SEND STOCK CERTIFICATES AT THIS TIME.
Upon surrender to the Exchange Agent of certificates formerly
representing shares of Olympus Common Stock for cancellation, together with
properly completed transmittal material, an Olympus Shareholder will be
entitled to receive the Merger Consideration. Olympus Shareholders will not be
entitled to receive interest on any cash payment received in the Merger.
Until surrendered, each certificate which, prior to the Effective Date
of the Merger, represented Olympus Common Stock (other than shares exchanged or
canceled at the Effective Date pursuant to the exercise of dissenters' rights)
will be deemed for all corporate purposes to evidence ownership of the number
of whole shares of Washington Mutual Common Stock into which the shares of
Olympus Common Stock formerly represented thereby were converted and/or the
right to receive cash for such shares. However, until such outstanding Olympus
certificates are so surrendered, no dividend payable to holders of record of
Washington Mutual Common Stock will be paid to any holders of such outstanding
certificates. Upon surrender of such outstanding certificates, there shall be
paid to the holder thereof the amount of any dividends, without interest,
theretofore paid with respect to such whole shares of Washington Mutual Common
Stock, but not paid to such holder, and which dividends had a record date
occurring on or subsequent to the Effective Date of the Merger and the amount
of any cash, without interest, payable to such holder. After the Effective
Date, there will be no further registration or transfers of outstanding
certificates formerly representing shares of Olympus Common Stock, and, if a
certificate formerly representing such shares is presented to Washington
Mutual, it shall be canceled and exchanged for certificates representing whole
shares of Washington Mutual Common Stock and/or cash.
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If any new certificate for Washington Mutual Common Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefore is registered, it shall be a condition of the issuance
thereof that the certificate surrendered in exchange shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
transfer pay any transfer or other taxes required by reason of the issuance of
a new certificate for shares of Washington Mutual Common Stock in any name
other than that of the registered holder of the certificate surrendered, or
establish to the satisfaction of Washington Mutual that such tax has been paid
or is not payable.
Fractional shares of Washington Mutual Common Stock will not be issued
in the Merger. Instead, each Olympus Shareholder who would otherwise be
entitled to a fractional share will receive cash in lieu thereof.
EFFECT ON EMPLOYEE BENEFIT PLANS AND STOCK PLANS
Following the Merger, all employees of Olympus and its subsidiaries will
become, at least temporarily, employees of WMFSB. Pursuant to the Merger
Agreement, Washington Mutual or WMFSB will make severance payments to any
employee whose employment is subsequently terminated by Washington Mutual or
WMFSB without "cause" within one year after the Effective Date, as follows:
(i) non-officer employees will receive one- half month's salary for each full
year of service with Olympus and Olympus Bank, up to a maximum of three months
total pay; (ii) officers will receive two weeks salary for each full year of
service with Olympus and/or Olympus Bank, up to a maximum of six months' total
pay; and (iii) regular part-time employees will receive the same severance
payments, but their per month compensation shall be based on one-twelfth of the
actual number of hours worked in 1994. Severance payments will be made on the
first regular pay date following the date that any termination is effective.
All employees of Olympus who continue as employees of Washington Mutual
or WMFSB for twelve months and one day after the Effective Time shall receive
service credit for employment at Olympus for purposes of meeting all
eligibility and vesting requirements for all Washington Mutual retirement
plans. Employees who receive such service credit shall be considered for
eligibility under the Washington Mutual retirement plans effective as of the
Effective Time. Prior to enrollment in a Washington Mutual retirement plan,
all employees of Olympus or its subsidiaries shall either (i) be covered by the
existing Olympus retirement plans or (ii) in the event of termination of
employment with Washington Mutual or WMFSB prior to enrollment in the
Washington Mutual retirement plans, receive an additional after tax payment
substantially equivalent to the benefits that would have been accrued under the
Olympus retirement plans (as reasonably determined by Washington Mutual),
without regard to service requirements for active participation, and based on
compensation earned from the Effective Time until termination of employment.
Under the Merger Agreement, Olympus will be required to make certain
amendments to its Employee Benefit and Stock Plans. Olympus shall amend the
Olympus stock bonus plan to eliminate offering new or extending existing
participant loans and also to eliminate salary deferral elections after the
Effective Time. Olympus may not amend or authorize any action not permitted
under the terms of the stock bonus plan as of July 15, 1994. To the extent
permissible under federal law, Olympus shall amend the Olympus money purchase
pension plan, effective by the Effective Time, so that participants do not
accrue benefits. If any portion of the money purchase pension plan is invested
in Olympus Common Stock, the plan shall not be terminated. Olympus will have
to amend or terminate any benefit plan so that no individual can receive an
"excess parachute payment" as defined by the Code. In addition, Olympus shall
amend or terminate any benefit plan that is an "employee welfare benefit plan"
under ERISA so that no participant is entitled to receive benefits after
termination of employment except for those specifically enumerated in the
Merger Agreement.
Washington Mutual will have the discretion to decide if Olympus
employees will continue to participate in Olympus benefit plans in effect
before the Effective Time or will become participants in similar Washington
Mutual plans. All vacation accrued and not used by Olympus employees before
the Effective Time shall be maintained by Washington Mutual.
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EXPENSES
All legal and other costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby will be borne by the
party incurring such costs and expenses unless otherwise specified in the
Merger Agreement.
POST-MERGER DIVIDEND POLICY
Dividends may be paid on the Washington Mutual Common Stock as and when
declared by the Washington Mutual Board out of funds legally available for the
payment of dividends. Each quarter, the Washington Mutual Board considers the
payment of dividends. The factors affecting this determination include
Washington Mutual's long-term interests, current and projected earnings,
adequacy of capitalization, expected asset and deposit growth as well as other
financial conditions, legal, regulatory and contractual restrictions, and tax
considerations.
According to Washington law, Washington Mutual dividends may be paid
only if, after giving effect to the dividend, Washington Mutual will be able to
pay its debts as they become due in the ordinary course of business and
Washington Mutual's total assets will not be less than the sum of its total
liabilities plus the amount that would be needed, if Washington Mutual were to
be dissolved at the time of the dividend, to satisfy the preferential rights of
persons whose right to payment is superior to those receiving the dividend.
Washington Mutual's ability to pay dividends is also dependent on the ability
of WMFSB and other subsidiary operations to pay Washington Mutual dividends.
See "COMPARATIVE RIGHTS OF SHAREHOLDERS -- Dividend Rights."
The Washington Mutual Preferred Stock ranks prior to the Washington
Mutual Common Stock and to all other classes and series of equity securities of
Washington Mutual, other than any classes or series of equity securities of
Washington Mutual ranking on a parity with the Washington Mutual Preferred
Stock.
The right of holders of Washington Mutual Preferred Stock to receive
dividends is noncumulative. Accordingly, if the Washington Mutual Board fails
to declare a dividend payment date, the holders of Washington Mutual Preferred
Stock will have no right to receive a dividend in respect of the dividend
period ending on such dividend payment date and Washington Mutual will have no
obligation to pay the dividend accrued for such period, whether or not
dividends are declared payable on any future dividend payment dates.
Full dividends on Washington Mutual Preferred Stock must be declared and
paid or set apart for payment for the most recent dividend period ended before
(i) any dividend (other than in Washington Mutual Common Stock or stock junior
to the Washington Mutual Preferred Stock ("Junior Stock") may be declared or
paid or set aside for payment or other distribution made upon the Washington
Mutual Common Stock or on any other Junior Stock or (ii) Junior Stock is
redeemed (or any moneys are paid to or made available for a sinking fund for
the redemption of any share of any such stock) or any Junior Stock or stock on
a parity with Washington Mutual Preferred Stock ("Parity Stock") is purchased
or otherwise acquired by Washington Mutual for any consideration except by
conversion into or exchange for Junior Stock as to dividends and upon
liquidation.
The Washington Mutual Board may issue Washington Mutual Preferred Stock
which is entitled to such dividend rights as the Washington Mutual Board may
determine, including priority over Washington Mutual Common Stock in the
payment of dividends.
COMPARATIVE RIGHTS OF SHAREHOLDERS
If the Merger is consummated, Olympus Shareholders receiving Washington
Mutual Common Stock in the Merger will become shareholders of Washington
Mutual. The rights of holders of Olympus Common Stock are governed by the
URBCA and the Articles of Incorporation and Bylaws of Olympus. The rights of
holders of Washington Mutual Common Stock are governed by the WBCA (RCW Chapter
23B) and the Articles of Incorporation and Bylaws of Washington Mutual.
Certain provisions of the Washington Mutual Articles could render more
difficult or discourage a merger, tender offer, proxy contest or other attempt
to obtain control of
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Washington Mutual. The following is a summary of the material differences
between the rights of holders of Olympus Common Stock and the rights of holders
of Washington Mutual Common Stock. This summary does not purport to be a
complete discussion of and is qualified in its entirety by reference to the
URBCA, the WBCA, Washington Mutual's Articles of Incorporation and Bylaws and
Olympus' Articles of Incorporation and Bylaws.
AUTHORIZED CAPITAL
WASHINGTON MUTUAL. Washington Mutual is authorized to issue 100,000,000
shares of Washington Mutual Common Stock and 10,000,000 shares of Preferred
Stock. As of March 8, 1995, Washington Mutual had 62,098,684 shares of
Washington Mutual Common Stock issued and outstanding and 2,800,000 shares of
9.12% Noncumulative Perpetual Preferred Stock, Series C ("Series C Preferred
Stock"), 1,400,000 shares of $6.00 Noncumulative Convertible Perpetual
Preferred Stock, Series D ("Series D Preferred Stock") and 2,000,000 shares of
7.60% Noncumulative Perpetual Preferred Stock, Series E ("Series E Preferred
Stock") issued and outstanding. At March 16, 1995, options to purchase
963,135 shares of Washington Mutual Common Stock under Washington Mutual's
stock option plans had been granted, but not exercised or terminated and
3,559,000 shares were available for future grants under such plans.
OLYMPUS. Olympus is authorized to issue 10,000,000 shares of Olympus
Common Stock of which 3,134,539 shares were outstanding as of the Record Date,
held by 11,414 holders of record. As of the Record Date, options to purchase
303,000 shares of Olympus Common Stock under the Option Plan had been granted
or exercised, leaving 197,000 shares available for future grants under the
Option Plan.
COMPARISON OF VOTING RIGHTS
WASHINGTON MUTUAL. Each holder of Washington Mutual Common Stock is
entitled to one vote for each share held on all matters voted upon by
shareholders. Washington Mutual Shareholders ("Washington Mutual
Shareholders") are not permitted to cumulate their votes in the election of
directors. The Washington Mutual Board is authorized to determine the voting
rights of any Washington Mutual Preferred Stock. None of the Series C, D or E
Preferred Stock has general voting rights. The holders of Series C, D and E
Preferred Stock have the right to elect two directors for newly created
directorships if dividends are not paid for six quarterly dividend periods,
whether or not consecutive.
OLYMPUS. Each holder of Olympus Common Stock is entitled to one vote
for each share held on all matters voted upon by shareholders, except that
shareholders are permitted to cumulate their votes in the election of
directors.
LIQUIDATION RIGHTS
WASHINGTON MUTUAL. In the event of the liquidation of Washington
Mutual, holders of Washington Mutual Common Stock will be entitled to receive
any remaining assets of Washington Mutual, in cash or in kind, after payment of
all liabilities. In the event of liquidation, the Washington Mutual Series C,
D and E Preferred Stock ranks prior to the Washington Mutual Common Stock, and
to all other classes and series of equities securities of Washington Mutual
other than any classes or series of equities securities Washington Mutual
ranking on a parity with the Washington Mutual Preferred Stock. The Washington
Mutual Preferred Stock is also subject to creation of Parity Stock and Junior
Stock to the extent not expressly prohibited by the Washington Mutual Articles
of Incorporation. All Washington Mutual Preferred Stock as described above is
"Parity Stock." The rights of the holders of Washington Mutual Preferred Stock
are subordinate to the rights of Washington Mutual's general creditors, and
there is no sinking fund with respect to Washington Mutual Preferred Stock.
The Washington Mutual Board is authorized to determine the liquidation rights
of any Washington Mutual Preferred Stock which may be issued in the future,
including priority over the liquidation rights of holders of Washington Mutual
Common Stock.
OLYMPUS. In the event of the liquidation of Olympus, holders of Olympus
Common Stock shall be entitled to receive, in cash or in kind, the assets of
Olympus available for distribution remaining after discharging or making
provisions for discharging its liabilities.
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DIVIDEND RIGHTS
WASHINGTON MUTUAL. Washington Mutual's ability to pay dividends on its
Common Stock is restricted by Washington law. Additionally, Washington
Mutual's ability to pay dividends to shareholders is dependent on the ability
of its subsidiaries to pay Washington Mutual dividends. Washington Mutual's
most significant subsidiary, WMB, is precluded from paying Washington Mutual
dividends if to do so would cause (i) the regulatory capital levels of WMB to
be reduced below the regulatory capital requirements or (ii) its net worth to
be reduced below the amount required for its liquidation accounts or any limits
imposed by the Director of Financial Institutions for the State of Washington
(the "Director"). In addition, WMB is precluded from paying dividends in an
amount greater than its retained earnings without the approval of the Director.
Washington Mutual is restricted by Washington law with respect to the payment
of dividends. Washington law provides that dividends may be paid only if,
after giving effect to the dividend, Washington Mutual will be able to pay its
debts as they become due in the ordinary course of business and Washington
Mutual's total assets will not be less than the sum of its total liabilities
plus the amount that would be needed, if Washington Mutual were to be dissolved
at the time of dividend, to satisfy the preferential rights of persons whose
right to payment is superior to those receiving the dividend.
OLYMPUS. No dividends have been paid to shareholders of Olympus since
1981 and no determination has been made as to when, if at all, dividends may be
paid to shareholders of Olympus in the future. As a unitary savings and loan
holding company, Olympus' ability to pay dividends depends, in large part, on
the dividends it receives from Olympus Bank and on income from other activities
in which Olympus may engage either directly or through other subsidiaries. As
a condition of the February 1983 approval of the reorganization in which
Olympus Bank became a subsidiary of Olympus, dividends paid by Olympus Bank are
limited to Olympus Bank's net income for each year, but such dividends may be
deferred to a subsequent year. However, no dividend may be paid from net
income for a year prior to 1983 or if the payment of such dividends would
reduce Olympus Banks' regulatory capital below the regulatory minimum set by
the OTS. To the extent dividends have been paid by Olympus Bank to Olympus,
such funds have been used in the conduct of the business of Olympus.
Under Utah law, distributions (other than share dividends) may be paid
only if, after giving effect to the distribution, Olympus will be able to pay
its debts as they become due in the ordinary course of business and Olympus'
total assets will not be less than the sum of its total liabilities plus the
amount that would be needed, if Olympus were to be dissolved at the time of
distribution, to satisfy the preferential rights of persons, if any, whose
right to payment is superior to those receiving the distribution.
BOARD OF DIRECTORS
WASHINGTON MUTUAL. Washington Mutual's Articles of Incorporation
provide that its Board of Directors shall consist of not less than five
members, with the exact number to be set by Washington Mutual's Bylaws.
Washington Mutual's Board currently consists of 15 members which are divided
into three classes. Members of each class serve for three-year "staggered
terms" pursuant to which approximately one-third of Washington Mutual's Board
is elected annually. Vacancies on the Washington Mutual Board may be filled by
the affirmative vote of four-fifths of the remaining directors and any director
so appointed is to serve until the next annual meeting of shareholders.
Washington Mutual's Articles provide that a director may be removed by the
shareholders only with good cause.
OLYMPUS. Olympus' Articles of Incorporation and Bylaws provide that
Olympus' Board shall consist of not less than three or more than fifteen
members and shall be divided into three classes as nearly equal in number as is
possible. Members of each class serve for three-year "staggered terms,"
pursuant to which approximately one-third of Olympus' Board is elected
annually. Presently, Olympus' Board is comprised of seven members.
AMENDMENTS OF ARTICLES AND BYLAWS
WASHINGTON MUTUAL. Washington Mutual's Articles of Incorporation may be
amended by a vote of its shareholders representing two-thirds of its issued
capital stock; provided, however, that Article XI, relating to business
combinations, may not be repealed or amended unless such action is approved by
holders of at least 95%
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of the outstanding stock or other securities entitled to vote upon any action
to be taken in connection with any business combination or entitled to vote
generally in the election of directors, including stock convertible into such
stock ("voting stock") beneficially owned by shareholders other than a Major
Stockholder. The term "Major Stockholder" means generally any individual,
corporation, partnership or other person, group or entity, together with its
affiliates and associates and persons acting in concert with it, that is the
beneficial owner of 5% or more of the votes held by the holders of the
outstanding shares of the Voting Stock of Washington Mutual. The Washington
Mutual Board also may amend the Articles of Incorporation for the purpose of
determining, with respect to each new series of authorized Washington Mutual
Preferred Stock that may be issued, the rights, preferences, voting powers,
privileges and other rights of such Washington Mutual Preferred Stock. The
Washington Mutual Board has the power to amend or repeal Washington Mutual's
Bylaws, subject to the concurrent power of the Washington Mutual Shareholders,
by at least two-thirds affirmative vote of the shares of Washington Mutual
entitled to vote thereon.
OLYMPUS. Under the URBCA, the Articles of Incorporation of Olympus may
be amended in any manner prescribed or permitted by law. The URBCA provides
that a corporation may amend its articles of incorporation at any time to add,
change or delete provisions which are permitted, required or not required in
the articles of incorporation. A board of directors may adopt specified
ministerial amendments without shareholder approval. Other amendments may be
proposed to the shareholders and must be approved by a majority of votes
entitled to be cast on the amendment by any voting group with respect to which
the amendment would create dissenters' rights. Approval is also conditional on
receiving the majority of votes entitled to be cast on the amendment by each
voting group whose rights would be adversely affected by the amendment. Any
amendment which would impact personal liability of shareholders must be
approved by all of the shares affected.
Olympus' Bylaws, pursuant to Article IX therein, may be amended at any
time by a two-thirds vote of the full Board of Directors or a majority of the
votes eligible to be cast by the shareholders at any legal meeting.
ANTI-TAKEOVER PROVISIONS
WASHINGTON MUTUAL.
Classified Board of Directors. Article IV of Washington Mutual's
Articles provides that the Washington Mutual Board is to be divided into three
classes which shall be as nearly equal in number as possible. A classified
Board of Directors could make it more difficult for Washington Mutual
Shareholders, including those holding a majority of the outstanding Common
Stock, to force an immediate change in the composition of the majority of the
Washington Mutual Board. Since the terms of only one-third of the incumbent
directors expire each year, at least two annual elections are required for the
Washington Mutual Shareholders to change a majority, whereas a majority of a
non-classified board may be changed in one year. In the absence of such
provision, all directors would be elected each year. Thus, a staggered board
of directors makes it more difficult for Washington Mutual Shareholders to
change the majority of directors even when the only reason for the change is
their performance.
Restriction of Maximum Number of Directors in Filling Vacancies of the
Board of Directors. Article VI of Washington Mutual's Articles provides that
the number of directors of Washington Mutual shall not be less than five, as
provided from time to time in accordance with Washington Mutual's Bylaws.
Additionally, the power to determine the number of directors within the
numerical limitations and the power to fill vacancies, whether occurring by
reason of an increase in the number of directors or by resignation, is vested
in Washington Mutual's Board. The overall effect of such provisions may be to
prevent a person or entity from immediately acquiring control of Washington
Mutual through an increase in the number of Washington Mutual's directors and
election of his, her or its nominees to fill the newly created vacancies, thus
allowing existing management to continue in office.
Advance Notice Requirements for Nomination of Directors and Presentation
of New Business at Meetings of Shareholders. Article 3.13 of Washington
Mutual's Bylaws generally provides that any Shareholder desiring to make a
nomination for the election of directors or a proposal for new business which
is a proper matter for action at a meeting of Washington Mutual Shareholders
must submit written notice not less than 90 days in advance of the anniversary
date of the mailing of the proxy statement in connection with the previous
year's annual meeting. This
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advance notice requirement gives management time to solicit its own proxies in
an attempt to defeat any dissident slate of nominations, should management
determine that doing so is in the best interests of Washington Mutual
Shareholders generally. Similarly, adequate advance notice to shareholder
proposals will give management time to study such proposals and to determine
whether to recommend to the Washington Mutual Shareholders that such proposals
be adopted. In certain instances, such provision could make it more difficult
to oppose management's nominees or proposals, even if Washington Mutual
Shareholders believe such nominees or proposals are in the company's best
interests.
Approval of Mergers, Consolidations, Sale of Substantially All Assets
and Dissolution. Article IX of Washington Mutual's Articles provides that if
pursuant to the WBCA, Washington Mutual's Shareholders are required to approve
a merger, and if two-thirds of the Washington Mutual Board vote to recommend
the merger to the Washington Mutual Shareholders, then the merger may be
approved by a vote of the Washington Mutual Shareholders holding a majority of
the outstanding voting shares. See "CERTAIN DIFFERENCES BETWEEN WASHINGTON AND
UTAH CORPORATE LAWS -- Provisions Affecting Control Share Acquisitions and
Business Combinations."
The Articles of Incorporation of Washington Mutual contain provisions
which, except under specified circumstances discussed below, generally prohibit
Washington Mutual (or any subsidiary of Washington Mutual) from becoming a
party to (i) any merger or consolidation with a Major Stockholder, (ii) any
sale, lease, exchange, transfer, distribution to stockholders or other
disposition to or with a Major Stockholder of all or substantially all of the
assets or business of Washington Mutual or a subsidiary or a portion of such
assets or business having a value of more than 5% of the assets of Washington
Mutual and its subsidiaries; (iii) the purchase, exchange, lease or other
acquisition by Washington Mutual or any subsidiary of all or substantially all
the assets or business of a Major Stockholder or a portion of such assets or
business having a value of more than 5% of the value of the assets of
Washington Mutual and its subsidiaries; (iv) the issuance of any securities, or
of any rights, warrants or options to acquire any securities, of Washington
Mutual, or a subsidiary to a Major Stockholder or the acquisition by
Washington Mutual, or a subsidiary, of any securities, or of any rights,
warrants, or options to acquire any securities of a Major Stockholder, or (v)
any reclassification of voting stock, recapitalization or other transaction
that has the effect of increasing the proportionate amount of voting stock of
Washington Mutual or any subsidiary beneficially owned by a Major
Stockholder, or any partial or complete liquidation, spin off, split off or
split up of Washington Mutual or any subsidiary (except that any transaction
specified in this subparagraph (v) shall not be prohibited if approved by a
majority of Washington Mutual's "continuing directors"). The term "continuing
director" means (x) a member of Washington Mutual's Board of Directors
immediately prior to the time that any then-existing Major Stockholder became
a Major Stockholder or (y) a member of such board designated, before becoming a
director, as a continuing director by a majority of the then-continuing
directors.
The above prohibition does not apply if the specific transaction is
approved by: (A) a majority of the Board of Directors prior to the major
stockholder involved in the transaction becoming such; (B) a majority of the
continuing directors if the Major Stockholder involved obtained prior unanimous
approval of the board to become such; (C) 80% of the continuing directors; or
(D) 95% of Washington Mutual's outstanding voting stock and a majority of such
shares beneficially owned by stockholders other than any Major Stockholder.
The above prohibitions also do not apply if the specific transaction is
approved by a majority of the outstanding voting stock and of such shares
beneficially owned other than by any Major Stockholder provided that holders of
Common Stock receive at least the higher of (a) the highest price paid by the
involved Major Stockholder in acquiring any of Washington Mutual's Common Stock
and (b) an amount which bears the same percentage relationship to the market
price of Washington Mutual's Common Stock immediately prior to the announcement
of the transaction as the highest per share price paid by the involved major
stockholder in acquiring any of Washington Mutual's Common Stock bears to the
market price of Washington Mutual's Common Stock immediately prior to the
commencement of acquisition of Washington Mutual's Common Stock by such major
stockholder (but in no event in excess of two times the highest per share price
determined in (a) above), and provided certain other conditions are met. The
Articles of Incorporation also provide that during the time a Major Stockholder
exists, Washington Mutual may
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voluntarily dissolve only upon the unanimous consent of its stockholders or an
affirmative vote of at least two-thirds of its directors and the holders of at
least two-thirds of both the shares entitled to vote on such a dissolution and
of each class of shares entitled to vote on such a dissolution as a class, if
any. Amendments to these provisions of the Articles of Incorporation require
the affirmative vote of 95% of Washington Mutual Shareholders holding voting
stock beneficially owned by stockholders other than any Major Stockholder. This
provision is designed to inhibit hostile takeovers and encourage potential
acquirors to negotiate with the Board. Without the approval of the Washington
Mutual Board, a potential acquiror would find it extremely difficult to
assemble the votes required to effect a transaction pursuant to the terms of
this provision.
OLYMPUS.
Classified Board of Directors. Article V of Olympus' Articles provides
that the Olympus Board is to be divided into three classes which shall be as
nearly equal in number as possible. A classified board of directors could make
it more difficult for Olympus Shareholders, or holders of proxies to vote
Olympus Common Stock, to force an immediate change in the composition of a
majority of Olympus' Board. Since the terms of only one-third of the incumbent
directors expire each year, at least two annual elections are required, in the
ordinary course of events, for the Olympus Shareholders to change a majority,
whereas a majority of a nonclassified board may be changed in one year. In the
absence of the provision of Olympus' Articles classifying Olympus' Board, all
the directors would be elected each year. The provision for a staggered board
of directors affects every election of directors and is not triggered by the
occurrence of a particular event such as a hostile merger. Thus, a staggered
board of directors makes it more difficult for the Olympus Shareholders to
change the majority of directors even when the only reason for the change is
their performance.
Restriction of Maximum Number of Directors and Filling Vacancies of the
Board of Directors. Article V of Olympus' Articles and Article II of Olympus'
Bylaws provide that the number of directors of Olympus shall not be less than
three nor more than fifteen, as shall be provided from time to time in
accordance with Olympus' Bylaws. Additionally, the power to determine the
number of directors within the numerical limitations and the power to fill
vacancies, whether occurring by reason of an increase in the number of
directors or by resignation, is vested in Olympus' Board. The overall effect
of such provisions may be to prevent a person or entity from immediately
acquiring control of Olympus through an increase in the number of Olympus'
directors and election of his, her or its nominees to fill the newly created
vacancies, thus allowing existing management to continue in office.
Advance Notice Requirements for Nomination of Directors and Presentation
of New Business at Meetings of Shareholders. Article I of Olympus' Bylaws
generally provides that any Olympus Shareholder desiring to make a nomination
for the election of directors or a proposal for new business which is a proper
matter for action at a meeting of Olympus Shareholders must submit written
notice not less than 60 nor more than 90 days in advance of the anniversary
date of the preceding year's annual meeting. This advance notice requirement
gives management time to solicit its own proxies in an attempt to defeat any
dissident slate of nominations, should management determine that doing so is in
the best interests of Olympus Shareholders generally. Similarly, adequate
advance notice of shareholder proposals will give management time to study such
proposals and to determine whether to recommend to the Olympus Shareholders
that such proposals be adopted. In certain instances, such provisions could
make it more difficult to oppose management's nominees or proposals, even if
Olympus Shareholders believe such nominees or proposals are in their best
interests.
Cumulative Voting. Olympus Shareholders are permitted to cumulate
their votes in the election of directors. Cumulative voting allows a
stockholder to cast a number of votes for the election of directors by
multiplying the number of shares held times the number of directors to be
elected. A stockholder may cast all of his or her votes for one nominee or
distribute his or her votes among two or more nominees, as desired.
Cumulative voting may allow a group of shareholders, who do not possess the
power to vote a majority of the shares to be voted, to elect one or more
directors. Utah law provides that if cumulative voting is in effect, a
director may not be removed if the number of votes sufficient to elect the
director under cumulative voting is voted against removal. Cumulative voting
may make it more difficult for Olympus Shareholders holding a majority of
shares to elect their entire slate of directors or to remove certain directors.
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<PAGE> 55
LIMITATION OF DIRECTORS' LIABILITY; INDEMNIFICATION
Washington Mutual. Under Article XIII of Washington Mutual's Articles,
a Washington Mutual director shall not be personally liable to Washington
Mutual or its shareholders for monetary damages for conduct as a director
("Protected Conduct"). Protected Conduct, however, excludes (i) acts or
omissions which involve intentional misconduct by the director or knowing
violation of laws by the director; (ii) any conduct violating RCW 23B.08.310;
and (iii) any transaction from which the director will personally receive a
benefit in money, property or services to which the director is not legally
entitled. If Washington law is amended to authorize corporate action which
further eliminates or limits the liability of Washington Mutual directors, then
the liability of Washington Mutual directors shall be eliminated or limited to
the fullest extent permitted by Washington law, as so amended. Pursuant to
Article X of Washington Mutual's Articles and Article VIII of Washington
Mutual's Bylaws, Washington Mutual must, subject to certain exceptions,
indemnify and defend its directors against any liability arising from or in
connection with service for or at the request of Washington Mutual, including
without limitation, liability under the Securities Act. Washington Mutual is
not obligated to indemnify a director from acts of such director which are
finally adjudged to be intentional misconduct, conduct in violation of RCW
23B.08.310, or a knowing violation of the law or if such director received an
economic benefit from a transaction to which he or she was not entitled.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling Washington Mutual
pursuant to the provisions described above, Washington Mutual has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
Olympus. Article IX of Olympus' Articles provides that to the fullest
extent permitted by Utah law, a director of Olympus shall not be personally
liable to Olympus or the Olympus Shareholders for monetary damages for any
action taken or failure to take any action as a director. Under current Utah
law, a corporation may eliminate the liability of a director to the corporation
and its stockholders for monetary damages for any action taken or any failure
to take any action, as a director, except for: (i) the amount of a financial
benefit received by a director to which he is not entitled; (ii) an intentional
infliction of harm on the corporation or the stockholders; (iii) a violation of
the section of the URBCA which prohibits unlawful distributions by a
corporation to its stockholders; or (iv) an intentional violation of criminal
law. Olympus' Bylaws contain provisions relating to indemnification of
officers and directors of Olympus. Olympus has also entered into individual
indemnification agreements with most of the directors. Olympus' Bylaws and the
individual indemnification agreements provide generally that directors are
entitled to reimbursement from Olympus for their damages, amounts paid in
settlement and legal costs incurred in any claim or lawsuit in which they are
involved as a result of serving as a director and in certain other capacities
at the request of Olympus. Indemnification is not permitted unless a director
is determined to have acted in good faith and in a manner he reasonably
believed to be in the best interests of Olympus. In addition, a director may
not be indemnified if he has been adjudged liable to Olympus and only to the
extent that the court in which such action was brought determines that the
director, based on all the evidence, is fairly and reasonably entitled to be
indemnified. The ability of directors, however, to assert successfully
indemnity claims under Olympus' Bylaws or the indemnification agreements may be
limited by public policy considerations, the insolvency of Olympus, or the risk
of revocation or denial of indemnification by a successor Board of Directors.
WASHINGTON MUTUAL SHAREHOLDER RIGHTS PLAN
In October 1990, WMB's predecessor's Board of Directors adopted a
shareholders rights plan and declared a dividend of one right for each
outstanding share of WMB's Common Stock to shareholders of record on October
31, 1990. Washington Mutual has assumed the shareholders rights plan. The
rights have certain anti-takeover effects and are intended to discourage
coercive or unfair takeover tactics and to encourage any potential acquiror to
negotiate a price fair to all stockholders. The rights may cause substantial
dilution to an acquiring party that attempts to acquire Washington Mutual on
terms not approved by the Washington Board, but they will not interfere with
any friendly merger or other business combination. The plan was not adopted in
response to any specific effort to acquire control of Washington Mutual.
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<PAGE> 56
The rights are not exercisable until the tenth day after a party
acquires beneficial ownership of 20% or more of the outstanding Washington
Mutual Common Stock or announces a tender offer to do so. Each right entitles
the holder to purchase one share of Common Stock for $26.67. In the event that
an acquiring party thereafter gains control of 30% or more of the Washington
Mutual Common Stock, any rights held by that party will be void and for the
next 60 days, all other holders of rights can receive that number of shares of
Washington Mutual Common Stock having a market value of two times the exercise
price of the right. The rights which expire on November 15, 2000, may be
redeemed by Washington Mutual for $.0044 per right prior to being exercisable.
Until a right is exercised, the holder of that right will have no rights as a
Washington Mutual Shareholder, including, without limitation, the right to
vote or to receive dividends.
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<PAGE> 57
CERTAIN DIFFERENCES BETWEEN WASHINGTON AND UTAH CORPORATE LAWS
The WBCA governs the rights of Washington Mutual Shareholders and will
govern the rights of Olympus Shareholders who become shareholders of Washington
Mutual pursuant to the Merger. The WBCA and the URBCA differ in many respects.
Certain of the significant differences between the provisions of the WBCA and
the URBCA that could materially affect the rights of Washington Mutual
Shareholders are discussed below.
RIGHT TO CALL SPECIAL MEETINGS OF SHAREHOLDERS
The WBCA provides that a special meeting of shareholders of the
corporation may be called by its board of directors, by holders of at least 10%
of all votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting, or by other persons authorized to do so by the
articles of incorporation or bylaws of the company. However, the WBCA allows
the right of shareholders to call a special meeting to be limited or denied to
the extent provided in the articles of incorporation. The Washington Mutual
Articles provide that the written request of holders of at least 25% of the
outstanding Washington Mutual Common Stock entitled to vote at the meeting is
required to call a special meeting.
The provisions of the URBCA relating to the rights to call special
meetings of shareholders are similar to the provisions of the WBCA described
above. Olympus has not enacted any provision limiting the rights of
shareholders to call special meetings of shareholders.
PROVISIONS AFFECTING CONTROL SHARE ACQUISITIONS AND BUSINESS COMBINATIONS
The WBCA imposes restrictions on certain transactions between a
corporation and certain significant shareholders. First, subject to certain
exceptions, pursuant to the fair price provision, a merger, share exchange,
sale of assets other than in the regular course of business or dissolution of a
corporation involving a shareholder holding more than 20% of the corporation's
outstanding voting stock ("Interested Shareholder") must be approved by the
holders of two-thirds of the corporation's outstanding securities, other than
those of the Interested Shareholder. This restriction does not apply if a
majority of disinterested directors determines that the fair market value of
the consideration to be received by shareholders other than the Interested
Shareholder as a result of the transaction is not less than the highest fair
market value of the consideration paid by any Interested Shareholder for the
shares of the same class of the corporation's stock during the preceding 24
months or if the transaction is approved by a majority of disinterested
directors. A Washington corporation may, in its articles of incorporation,
exempt itself from coverage of this provision; Washington Mutual has not done
so.
Second, Chapter 23B.19 of the WBCA prohibits a "target corporation,"
with certain exceptions, from engaging in certain "significant business
transactions" with a person or group of persons who beneficially own 10% or
more of the voting securities of a target corporation (an "acquiring person")
for a period of five years after the acquisition of such securities, unless the
transaction or acquisition of shares is approved by a majority of the members
of the target corporation's board of directors prior to the date of the
acquisition. The significant business transactions include, among others,
merger or consolidation with, disposition of assets to or with or issuance or
redemption of stock to or from, the acquiring person, termination of 5% or more
of the employees of the target corporation employed in Washington State as a
result of the acquiring person's acquisition of 10% or more of the shares or
allowing the acquiring person to receive any disproportionate benefit as a
shareholder. The target corporations include domestic corporations with their
principal executive offices in Washington and either a majority or over 1,000
of their employees resident in Washington. Washington Mutual believes that it
currently meets these standards and is subject to this statute. Washington
Mutual's Articles contain provisions similar to this statute. See "COMPARATIVE
RIGHTS OF SHAREHOLDERS -- Anti-Takeover Provisions."
Utah's Control Shares Acquisition Act (the "Act") provides that any
person or entity which acquires 20% or more of the outstanding voting shares of
a Utah corporation meeting certain criteria is denied voting rights with
respect to the acquired shares, unless a majority of the disinterested
shareholders of the corporation elects to restore such voting rights. The Act
provides that a person or entity acquires such "control shares" whenever it
acquires shares that, but for the operation of the Act, would bring its voting
power within any of the following three ranges:
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<PAGE> 58
(i) 20 to 33 1/3%, (ii) 33 1/3 to 50%, or (iii) 50% or more. A "control share
acquisition" is generally defined as the direct or indirect acquisition of
either ownership or voting power associated with issued and outstanding control
shares. If such disinterested shareholders do not vote to restore voting
rights to the control shares, the corporation may, if its articles of
incorporation so provide, redeem the control shares at any time within 60 days
of the acquiror's last acquisition of control shares, regardless of the
decision of the shareholders to restore voting rights. Olympus' Articles of
Incorporation and Bylaws do not provide for such redemption. Unless otherwise
provided in the articles of incorporation or bylaws of a corporation,
shareholders are entitled to dissenters' rights if the control shares are
accorded full voting rights and the acquiror has obtained a majority or more
control shares. Olympus' Articles of Incorporation and Bylaws do not deny such
dissenters' rights to the Company's shareholders. The shareholders of a
corporation may elect to exempt the stock of the corporation from the
provisions of the Act through adoption of a provision to that effect in the
articles of incorporation or bylaws of the corporation. Olympus' Articles of
Incorporation and Bylaws do not exempt Olympus from the Act.
The provisions of the Act may discourage companies interested in
acquiring a significant interest in or control of Olympus.
TRANSACTIONS WITH OFFICERS OR DIRECTORS
The WBCA sets forth a safe harbor for transactions between a corporation
and one or more of its directors. A conflicting interest transaction may not
be enjoined, set aside or give rise to damages if: (i) it is approved by a
majority of qualified directors (but no fewer than two); (ii) it is approved by
the affirmative vote of the majority of all qualified shares after notice and
disclosure to the shareholders; or (iii) at the time of the commitment, the
transaction is established to have been fair to the corporation. For purposes
of this provision, a qualified director is one who does not have either: (a) a
conflicting interest respecting the transaction or (b) a familial, financial,
professional or employment relationship with a second director who does not
have a conflicting interest respecting the transaction, which relationship
would, in the circumstances, reasonably be expected to exert an influence on
the first director's judgment when voting on the transaction. "Qualified
Shares" are defined generally as shares other than those beneficially owned, or
the voting of which is controlled, by a director (or an affiliate of the
director) who has a conflicting interest respecting the transaction.
The URBCA sets forth a safe harbor for transactions between a Utah
corporation and one or more of its directors or persons or entities closely
related to the director. A conflicting interest transaction may not be
enjoined, set aside or give rise to damages or other sanctions in a proceeding
by a shareholder of the corporation or by or in right of the corporation if:
(i) it is approved by a majority of qualified directors after appropriate
disclosure; (ii) it is approved by the affirmative vote of the majority of all
qualified shares after notice and disclosure to the shareholders; or (iii) at
the time of the commitment, the transaction is established to have been fair to
the corporation. For purposes of this provision, a qualified director is one
who does not have either: (a) a conflicting interest respecting the
transaction or (b) a familial, financial, professional or employment
relationship with a second director who does have a conflicting interest
respecting the transaction, which relationship would, in the circumstances,
reasonably be expected to exert an influence on the first director's judgment
when voting on the transaction. "Qualified shares" are defined generally as
shares other than those beneficially owned, or the voting of which is
controlled, by a director (or an affiliate of the director) who has a
conflicting interest respecting the transaction.
DISSENTERS' RIGHTS
Under the WBCA, a shareholder is entitled to dissent from, and, upon
perfection of the shareholder's appraisal right, to obtain the fair value of
his or her shares in the event of certain corporate actions, including certain
mergers, share exchanges, sales of substantially all assets of the corporation,
and certain amendments to the corporation's articles of incorporation that
materially and adversely affect shareholder rights.
Under the URBCA, a shareholder is entitled to dissent from, and, upon
perfection of the shareholder's appraisal right, to obtain the fair value of
his or her shares in the event of certain corporate actions, including certain
mergers, share exchanges, sales of substantially all assets of the corporation,
and certain amendments to the
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<PAGE> 59
corporation's articles of incorporation that materially and adversely affect
shareholder rights. Dissenters' rights with respect to shares of certain Utah
corporations whose shares are listed on certain securities exchanges or
quotation systems may not be available in certain types of corporate actions.
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<PAGE> 60
INFORMATION CONCERNING OLYMPUS
Olympus is a publicly held savings and loan holding company organized
under the laws of Utah. At September 30, 1994, Olympus had total assets of
approximately $392.3 million and stockholders' equity of approximately $33.8
million. Olympus' principal business activities are conducted through Olympus
Bank.
Olympus Bank provides a broad range of financial services in Utah and
Montana. The principal business activities of Olympus Bank include obtaining
funds from savings and transaction account deposits and borrowings, investing
in real estate loans, mortgage-backed securities and debt securities, and
providing related financial services. Olympus Bank also makes commercial and
consumer loans.
Since 1989, Olympus Bank has changed its business emphasis from that of
a wholesale banking institution to that of a community-based retail banking
institution. Olympus Bank has significantly decreased its reliance upon
brokered and "jumbo" certificates of deposit, Federal Home Loan Bank borrowings
and repurchases agreements. Olympus Bank has significantly expanded its
services to individual and small business customers, including checking
accounts, credit cards, consumer loans and an expanded emphasis upon
residential mortgages and small business lending. To support and enhance its
retail banking operations, since 1989 Olympus Bank has invested in new
facilities and systems, including eight new branch facilities (five additions
and three relocations), a state-of-the-art mortgage servicing system and a data
processing system which will accommodate the more diverse commercial banking
operations of Olympus Bank.
In recent years Olympus Bank has also focused on resolving
unsatisfactory commercial real estate loans originated by Olympus Bank in
several western states, including California, prior to 1990. Actions taken
have included reviewing and updating credit files, implementing more thorough
loan monitoring and more responsive loan collection procedures and actively
pursuing borrower negotiations and foreclosure proceedings where necessary.
On the Record Date, 3,134,539 shares of Olympus Common Stock were
outstanding and entitled to vote, which were held by 11,414 holders of
record. Holders of shares of Olympus Common Stock will be entitled to
one vote exercisable in person or by properly executed proxy, for each share
held of record at the close of business on the Record Date on each proposal
described herein and on any other matter that may be presented for
consideration and action by the shareholders at the Special Meeting.
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<PAGE> 61
RECENT EVENTS
The following table highlights results of operations and earnings per share of
Olympus for the three-month period and year ended December 31, 1994 compared to
the same period and year-end in 1993.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
1994 1993 1994 1993
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(Unaudited)
Net interest income $3,396,307 $3,518,365 $13,762,114 $12,994,773
Provisions for loan losses 22,129 (152,870) 1,048,461 (966,412)
Other income 726,872 778,622 3,731,010 4,553,470
Other expense 2,711,955 3,296,086 11,733,391 12,166,950
Net income 1,389,095 1,484,851 4,711,272 6,342,776
Primary earnings per share $ 0.42 $ 0.46 $ 1.45 $ 1.97
Fully diluted earnings per share $ 0.42 $ 0.46 $ 1.44 $ 1.95
</TABLE>
Other expenses for the year ended December 31, 1994 includes $336,000
of professional fees for legal and accounting matters related to the
proposed Merger.
The following table highlights net interest income for the three-month
period and the year ended December 31, 1994 compared to the same period and year
end in 1993.
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
1994 1993 1994 1993
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(Unaudited)
Interest income $7,099,135 $6,871,322 $27,592,148 $27,429,545
Interest expense 3,702,828 3,352,957 13,830,034 14,484,772
Net interest income 3,396,307 3,518,365 13,762,114 12,944,773
Total interest income/average 7.43% 7.04% 7.18% 7.32%
interest earning assetes
Total interest expense/average 4.15% 3.65% 3.87% 4.12%
costing liability
Net interest spread 3.28% 3.39% 3.31% 3.20%
Net interest margin includes loan 3.58% 3.60% 3.58% 3.45%
origination fees
</TABLE>
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<PAGE> 62
The modest increase in interest income for the three months ended
December 31, 1994 as compared to the same period in 1993 is primarily from
higher interest earned on investments, the result of adjustable interest rates
resetting higher in 1994. Increase in interest expense is attributed to a
rise in the cost of borrowing for the Bank from both deposits and other
borrowed money.
The following table is a condensed balance sheet for December 31, 1994 and
1993.
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
(Unaudited)
ASSETS
Cash and investments $134,505,886 $153,313,064
Loan receivables, net 236,233,684 242,469,876
Real estate acquired in settlement
loans, net - 3,054,916
Other assets 21,513,401 15,331,557
------------ ------------
TOTAL ASSETS $392,252,971 $414,169,413
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits $286,598,971 $294,560,648
Advances from the Federal Home Loan
Bank 46,820,820 36,649,913
Securities sold under agreement to
repurchase 20,470,047 44,996,245
Other liabilities and accrued expenses 3,331,123 4,599,067
Stockholders' equity 35,032,010 33,363,540
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS'EQUITY $392,252,971 $414,169,413
============ ============
</TABLE>
The decline in assets from December 31, 1993 to December 31, 1994 is
largely attributed to the collection of principal on investment securities
available for sale of approximately $16 million. Additionally, loan receivables
declined approximately $6 million as a result of scheduled and unscheduled
principal payments exceeding loan originations. Other assets increased from
December 31, 1993 to December 31, 1994 primarily as the result of additional
purchases of mortgage servicing rights.
The decline in liabilities results from an $8 million decrease in deposits
and a $14 million decrease in other borrowed money which includes advances and
securities sold under agreement to repurchase.
Further information with respect to the loan portfolio is shown in the
following table.
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<PAGE> 63
Type of Loan and Balances
<TABLE>
<CAPTION>
December 31,
----------------------------
1994 1993
------------ ------------
<S> <C> <C>
Real estate - mortgage $222,561,730 $232,740,378
Real estate - construction 10,952,370 7,045,708
Commercial 7,857,681 7,091,863
Installment loans to individuals 1,032,922 768,173
Other loans 1,531,622 1,470,588
------------ ------------
Total loans 243,936,325 249,116,710
Less unamortized loan fees (1,020,773) (1,036,834)
Less allowance for possible loss (6,681,868) (5,610,010)
------------ ------------
Net loans $236,233,684 $242,469,876
============ ============
</TABLE>
Of the loans described, the following table sets forth the aggregate principal
amount of loans that are non-accrual as of December 31, 1994 and December 31,
1993.
Risk Elements
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1993
-------- ----------
<S> <C> <C>
Non-accrual loans $949,704 $2,241,647
</TABLE>
A summary of the loan loss experience for 1994 as compared to 1993 is presented
in the following table.
Summary of Loan Loss Experience
Changes in the allowance for losses are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1994 1993
---------- ----------
<S> <C> <C>
Balance, beginning of year $5,610,010 $6,677,783
Loans charged off:
Real estate - mortgage - 391,418
Real estate - construction - -
Commercial 20,568 45,358
Installment loans to individuals 7,532 1,527
Other loans 16,873 8,263
---------- ----------
Total loans charged off 44,973 446,566
</TABLE>
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<PAGE> 64
<TABLE>
<CAPTION>
<S> <C> <C>
Recoveries
Real estate-mortgage $ 15,290 $ 308,354
Real estate-construction - -
Commercial 48,483 66,518
Installment loans to individuals - -
Other loans 4,597 333
---------- ----------
Total recoveries 68,370 375,205
Provision charged (credited) to expense 1,048,461 (996,412)
---------- ----------
Balance, end of year $6,681,868 $5,610,010
========== ==========
Net charge offs to average loans 0.02% 0.18%
</TABLE>
For additional information concerning Olympus, including information
regarding its directors and executive officers, see "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "APPENDIX E" and "APPENDIX
F."
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<PAGE> 65
BENEFICIAL OWNERSHIP OF OLYMPUS COMMON STOCK
The following table sets forth information as of December 31, 1994, with
respect to shares of Olympus Common Stock beneficially owned (i) by each
director of Olympus, (ii) by all directors and executive officers of Olympus as
a group and (iii) by all persons believed by management to own beneficially
more than 5% of the Olympus Common Stock(1):
<TABLE>
<CAPTION>
PERCENT OF
TOTAL SHARES
NAME SHARES OPTIONS TOTAL OUTSTANDING
---- ------ ------- ----- ------------
<S> <C> <C> <C> <C>
A. Blaine Huntsman . . . . . . . . . . 120,936(2) 125,000 245,936 7.5%
Richard N. Hokin . . . . . . . . . . . 304,000(3) -- 304,000 9.7
James K. Loebbecke . . . . . . . . . . 2,000 -- 2,000 *
R. Gibb Marsh . . . . . . . . . . . . . 10,200 28,500 38,700 1.2
Richard G. Price . . . . . . . . . . . 100 -- 100 *
Ramon E. Johnson . . . . . . . . . . . 713 -- 713 *
K. John Jones . . . . . . . . . . . . . 7,202 18,500 25,702 *
All directors and executive officers
as a group (9 persons) . . . . . . . . 456,399 205,600 661,999 19.8
Century Partners
800 Post Road
Darien, CT 06820 . . . . . . . . . . . 304,000(3) -- 304,000 9.7
Charter National Life Insurance Company
8301 Maryland Ave.
St. Louis, MO 63105 . . . . . . . . . . 85,900(4) -- 85,900 2.7
LNC Investments, Inc.
529 East South Temple
Salt Lake City, UT 84102 . . . . . . . 453,991(4) -- 453,991 14.5
Evergreen Investments, Ltd.
1910 East 3060 South
Salt Lake City, UT 84106 . . . . . . . 120,936(2)(4) -- 120,936 3.9
</TABLE>
________________________
* Less than one percent.
(1) The above table does not include shares held for the account of
the indicated persons and group by the Employee Stock Bonus Plan
which on November 30, 1994 held 130,656 shares.
(2) Includes 46,536 shares owned by Mr. Huntsman and 74,400 shares
owned by Evergreen Investments, Ltd., a limited partnership, in
which Mr. Huntsman is a limited partner with a 37% ownership
interest. Mr. Huntsman and Evergreen Investments, Ltd. could be
deemed to be members of a "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act, which owns 5%
or more of the common stock of Olympus. This information was
obtained from a Form 4 filed with the Securities and Exchange
Commission on or about March 7, 1994.
(3) The general managing partner of Century Partners, a New York
limited partnership, is Mr. Hokin, who is currently a director.
(4) These persons could be deemed to be members of a "group" as that
term is used in Section 13(d) of the Securities Exchange Act
which owns 5% or more of the common stock of Olympus. This
information was obtained from a Schedule 13 D filed with the
Securities and Exchange Commission on or about July 21, 1994.
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<PAGE> 66
INFORMATION CONCERNING WASHINGTON MUTUAL
WASHINGTON MUTUAL, INC.
Washington Mutual is a corporation, organized under the laws of the
state of Washington. Washington Mutual provides a broad range of financial
services in Washington, Oregon and Idaho through WMFSB and other subsidiary
operations. These services include the traditional savings bank activities of
accepting deposits from the general public and making residential loans,
consumer loans and limited types of commercial real estate loans, primarily
multi-family. As part of its consumer banking focus, Washington Mutual also
underwrites and markets insurance annuities and offers mutual funds through
various subsidiaries. At September 30, 1994, Washington Mutual had total
assets of $17.8 billion, total deposits of $9.4 billion and stockholders'
equity of $1.3 billion and owns the largest independent depository institution
headquartered in the state of Washington. The principal asset of Washington
Mutual is the capital stock of its subsidiaries.
The principal executive offices of Washington Mutual are located in the
Washington Mutual Tower, 1201 Third Avenue, Suite 1500, Seattle, Washington
98101, and its telephone number is (206) 461-2000.
Certain information relating to the business, management, executive
compensation, voting securities and the principal holders thereof, certain
relationships and related transactions and other related matters as to
Washington Mutual is set forth in: (1) Washington Mutual's Annual Reports on
Form F-2 for the year ended December 31, 1993 and on Form 10-K for the year
ended December 31, 1994; (2) Washington Mutual's Annual Reports to Stockholders
for the year ended December 31, 1993; and (3) Washington Mutual's Quarterly
Reports on Form F-4 for the quarters ended March 31, 1994, June 30, 1994 and
September 30, 1994; and (4) Washington Mutual's Proxy Statement for the Annual
Meeting of Stockholders held on April 19, 1994. Each of these documents is
incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE" and "AVAILABLE INFORMATION."
THE REORGANIZATION
On August 17, 1994, WMSB formed Washington Mutual for the purpose of
serving as a holding company for WMSB and the other subsidiary operations of
WMSB. Thereafter, WMSB caused Washington Mutual to form WMB. On November 29,
1994, WMSB merged with and into WMB (the "Reorganization Merger"). WMB is the
survivor of the Reorganization Merger and, as of the date of the Reorganization
Merger, WMSB no longer exists. After the Reorganization Merger, Washington
Mutual is the sole shareholder of WMB.
The effect of the Reorganization Merger is that Washington Mutual was
reorganized into a holding company structure with Washington Mutual as the
holding company. Washington Mutual serves as the holding company for WMB,
WMFSB and other banking and nonbanking subsidiaries. Washington Mutual
qualifies as a savings and loan holding company for purposes of federal laws
and regulations governing holding companies of depository institutions.
Washington Mutual effected the Reorganization to provide certain business
advantages, including improving access to the capital markets, improving
operating flexibility and enhancing its ability to retire and repurchase
corporate securities.
Pursuant to the Reorganization Merger, WMSB's Common Stock and its three
classes of Preferred Stock (9.12% Noncumulative Perpetual Preferred Stock,
Series C; $6.00 Noncumulative Convertible Perpetual Preferred Stock, Series D;
and 7.60% Noncumulative Perpetual Preferred Stock, Series E) have been
converted on a share-for-share basis into Washington Mutual Common Stock and
series of Washington Mutual Preferred Stock that have rights, privileges and
preferences substantially identical to those of WMSB.
WASHINGTON MUTUAL'S OPERATING SUBSIDIARIES
Organized as a building loan association in 1889, WMB (WMB and its
predecessor, WMSB, are hereafter referred to as "WMB") operated as a Washington
state-chartered mutual savings bank from 1917 until its conversion to a stock
savings bank in 1983. At September 30, 1994, WMB was the largest independently
owned depository institution headquartered in the State of Washington.
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WMB's principal business is providing a broad range of financial
services, primarily to consumers. These services include the traditional
savings bank activities of accepting deposits from the general public and
making residential loans, consumer loans and limited types of commercial real
estate loans, primarily multi-family. In 1988, WMB acquired a federal savings
bank, which it renamed Washington Mutual, a Federal Savings Bank (the "FSB").
On April 15, 1994, the FSB established an operating subsidiary, WMFSB, to
participate in a supervisory acquisition. The principal business of FSB and
WMFSB includes the traditional savings association activity of accepting
deposits from the general public, as well as the brokering of residential real
estate loans to WMB. FSB also makes consumer loans, and WMFSB brokers consumer
loans to FSB. During the 1980's, WMB expanded its range of financial services
by acquiring a group of nonbanking subsidiaries. These include Murphey Favre,
Inc., a registered securities broker-dealer; Composite Research & Management
Co., a registered investment advisor that manages mutual funds and offers
investment advisory services; Washington Mutual Insurance Services, Inc.,
Columbia Services, Inc. and WM Life Insurance Company, which offer an array of
insurance services and products; and Mutual Travel, Inc., a full-service travel
agency. Washington Mutual recently announced its agreement to sell Mutual
Travel, Inc.
WMB operates under Title 32 (Mutual Savings Banks) of the Revised Code
of Washington. Its deposits are insured by the FDIC, principally through the
Bank Insurance Fund. The FSB and WMFSB operate as federal stock savings banks
chartered under the HOLA. The FDIC insures the deposits of FSB and WMFSB
through the Savings Association Insurance Fund. Because WMB owns the FSB, WMB
is a non-diversified savings and loan holding company under federal law and, as
such, is also subject to regulation by the OTS.
Washington Mutual, through its subsidiaries, operates, as of December
31, 1994, a total of 232 full-service financial centers and 22 home loan
centers. WMB itself currently operates 73 full-service financial centers, 40
in the greater Seattle metropolitan area and 33 elsewhere in Washington and ten
home loan centers in Washington. The FSB operates 158 full-service financial
centers, 38 in the greater Seattle metropolitan area, 41 elsewhere in
Washington, 76 in Oregon, and three in Idaho. The FSB also operates 12 home
loan centers in Washington, Oregon and Idaho. Most of the FSB's branches have
been acquired as a result of acquisitions completed in the past several years.
WMFSB
WMFSB, a wholly-owned subsidiary of Washington Mutual, is a federal
savings bank, formed in 1994 to participate in a supervisory acquisition of a
federal savings bank branch. WMFSB's principal business includes traditional
savings association activity of accepting deposits from the public, as well the
brokering of loans to other Washington Mutual subsidiaries. WMFSB also makes
consumer loans. WMFSB operates one full-service financial center in Lake
Oswego, Oregon.
RECENT ACQUISITIONS
On March 1, 1993, WMB merged with Pioneer Savings Bank ("Pioneer"). As
of the date of such merger ("Pioneer Merger"), Pioneer operated 17 branches and
one mortgage lending center and had assets of $926.5 million, deposits of
$659.5 million, and stockholders' equity of $114.4 million. The Pioneer Merger
was treated as a pooling-of-interests for accounting purposes. Accordingly,
under generally accepted accounting principles, the assets and liabilities of
Pioneer were recorded on the books of the resulting institution at their values
as reported on the books of Pioneer immediately prior to the time of the
consummation of the Pioneer Merger. No goodwill was created in the Pioneer
Merger.
On April 9, 1993, WMB completed the acquisition of Pacific First Bank
("Pacific First") from RT Holdings, Inc., a subsidiary of Royal Trustco Limited
of Toronto, Canada ("Pacific First Acquisition"). At the time of the Pacific
First Acquisition, Pacific First operated 129 branches and 14 home loan centers
in Washington and Oregon. At March 31, 1993, Pacific First had assets of
$5,847.5 million and deposits of $3,825.7 million.
The Pacific First Acquisition was treated as a purchase for accounting
purposes. Accordingly, under generally accepted accounting principles, the
assets and liabilities of Pacific First have been recorded on the books of WMB
at their respective fair market values at the time of the consummation of the
Pacific First Acquisition, April 1, 1993. Goodwill, the excess of the purchase
price over the net fair value of the assets and liabilities,
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including identified intangible assets, was recorded for $178.2 million.
Amortization of goodwill over a ten-year period will result in a charge to
earnings of approximately $17.8 million per year.
As a result of the Pacific First Acquisition and Pioneer Merger, WMB
became substantially larger, with significant operations in Oregon as well as
Washington. From December 31, 1992 (prior to the effect of the Pioneer
Merger), to December 31, 1993, as a result of the acquisitions, total assets
increased by 76% ($9.0 billion to $15.8 billion), loans increased by 79% ($6.1
billion to $10.9 billion) and deposits increased by 74% ($5.4 billion to $9.4
billion).
On April 15, 1994, WMFSB acquired three branches and approximately $42
million in deposits from the Resolution Trust Corporation as the receiver for
Far West Federal Savings Bank of Portland, Oregon. On the same day, WMFSB sold
two of these branches and approximately $34.7 million in deposits to FSB.
On November 14, 1994, WMB merged (the "Summit Merger") with Summit
Bancorp, Inc. ("Summit"). As of June 30, 1994, Summit, through its banking
subsidiary, operated four branches and had assets of $197.9 million, deposits
of $172.5 million, and stockholders' equity of $16.6 million. After the Summit
Merger, Summit's banking subsidiary was merged with and into WMB. The Summit
Merger was treated as a pooling-of-interests for accounting purposes.
Accordingly, under generally accepted accounting principles, the assets and
liabilities of Summit were recorded on the books of the resulting institution
at their values as reported on the books of Summit immediately prior to the
time of the consummation of the Summit Merger. No goodwill was created in the
Summit Merger.
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RECENT EVENTS
The following table, discussion and analysis is qualified in its entirety
by and should be read in conjunction with the consolidated financial statements
and notes thereto, and other documents incorporated herein by reference. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------
1992 1993 1994
---------- ----------- -----------
<S> <C> <C> <C>
SUMMARIZED STATEMENTS OF INCOME:
Net interest income $ 329,558 $ 529,431 $ 571,225
Provision for loan losses(1) 14,000 35,000 20,000
Other income 90,692 143,862 107,838
Other expense 230,896 369,264 384,312
Income taxes 60,247 93,765 102,447
Extraordinary items, net of federal income tax effect (4,638) (8,953) -
Cumulative effect of change in tax accounting method - 13,365 -
---------- ----------- ----------
Net income(1) $ 110,469 $ 179,676 $ 172,304
========== =========== ==========
Net income attributable to common stock $ 105,594 $ 166,118 $ 153,720
========== =========== ==========
Net income per share:
Primary $2.01 $2.82 $2.54
Fully diluted 1.91 2.67 2.46
SUMMARIZED STATEMENTS OF FINANCIAL POSITION:
Total assets $9,911,602 $15,827,228 $18,457,682
Loans 6,719,680 10,891,102 12,406,589
Trading, available-for-sale and held-to maturity securities 2,587,476 4,013,098 5,143,603
Deposits 6,058,112 9,351,402 9,777,912
Borrowings (includes annuities) 2,735,652 5,050,645 7,211,479
Stockholders' equity 995,036 1,195,704 1,304,568
</TABLE>
____________________________________
(1) In 1990, Washington Mutual modified its reserving methodology from a
"loan-by-loan" analysis of providing for losses to one of "general
reserving" and accordingly increased its provision for loan losses by
$48.0 million.
During 1994, the increase in interest rates had an adverse effect not only
on the results of operations but also on the market value of the Company's net
financial assets. Other than available-for-sale securities, financial assets
and liabilities were reported at historical cost and accordingly the financial
statements do not reflect changes in market value.
RESULTS OF OPERATIONS. Washington Mututal's net income of $172.3 million
for 1994 was down from $179.7 million in 1993, but above 1992's earnings of
$110.5 million. Fully diluted earnings per share were $2.46 in 1994, compared
with $2.67 in 1993 and $1.91 in 1992. Washington Mutual's return on average
assets ("ROA") for 1994
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equaled 1.02% down from 1.31% in 1993 and 1.24% in 1992. Its return on average
common stockholders' equity ("ROE") of 14.24% for 1994 was also down from the
previous two years -- 17.73% in 1993 and 15.17% in 1992. During 1992 and 1993,
Washington Mutual operated in a highly favorable interest rate environment.
However, an increase of approximately 250 basis points in short-term interest
rates in 1994 led to a compression of the net interest margin and a
corresponding pressure on net interest income. Although Washington Mutual
takes steps to protect itself from significant increases in short-term interest
rates, any further increases in 1995 will continue to adversely affect net
interest income.
Net Interest Income. Net interest income of $571.2 million for 1994
was up 8% from $529.4 million in 1993, which in turn was 61% higher than the
$329.6 million earned during 1992. Most of the growth in net interest income
was due to the increase in average interest-earning assets resulting from
planned growth in 1994 and the acquisition of Pacific First. Although average
interest-earning assets were up 23% during 1994, a decline in the net
interest margin (net interest income divided by average interest-earning
assets) limited the potential increase in net interest income.
Other Income. Other income of $107.8 million in 1994 was down from $143.9
million in 1993, but above the $90.7 million reported in 1992. Other income in
1993 included $41.7 million in gains on the sale of loans and other assets.
The significant level of asset gains during 1993 resulted from asset
restructurings to accommodate the acquisition of Pacific First. In addition,
loans were sold during 1993 to take advantage of record loan origination volume
fueled by home loan refinancing and a declining interest rate environment which
enabled the Company to sell these loans at a gain.
Other Expense. Total other expense of $384.3 million in 1994 was up from
$369.3 million in 1993 and $230.9 million in 1992. This increase reflected the
growth in total assets and particularly the growing number of financial
centers. One commonly accepted measure of a bank's operating efficiency is the
ratio of its operating expenses to revenues (net interest income and other
income). The Company has established a long-term operating efficiency goal of
50%. Washington Mutual's operating efficiency ratios were 56.6% in 1994 versus
54.8% for 1993 and 54.9% for 1992.
Nonbanking Subsidiary Operations. Nonbanking subsidiary operations
generally comprise approximately 5% of the Company's total profitability.
Pretax operating income (net income before amortization of goodwill and
intangible assets and elimination of intercompany transactions) was $14.4
million in 1994, compared with $18.6 million in 1993 and $13.4 million in 1992.
The securities and insurance operations typically account for more than 90% of
nonbanking pretax operating income.
REVIEW OF FINANCIAL CONDITION. Assets grew substantially in 1994 as
they did in 1993. During 1994, total assets grew $2,630.5 million to end the
year at $18,457.7 million. At December 31, 1993, total assets were $15,827.2
million, an increase of $5,915.6 million from December 31, 1992. Approximately
three-quarters of the growth in 1993 resulted from the acquisition of Pacific
First. In addition to the acquisition of Pacific First, growth these past two
years has come from retaining originated loans and acquiring investment-grade
securities.
Investment Activities. In 1994, Washington Mutual leveraged its
capital and increased its investment securities by 28 percent to $5,143.6
million at December 31, 1994, from $4,012.0 million at December 31, 1993. The
increase was funded mostly through borrowings. By leveraging the balance sheet
through the use of these wholesale activities, Washington Mutual generated
additional net interest income.
Loans. Loans grew 14% during 1994 to $12,406.6 million at December
31, 1994, up from $10,891.1 million at December 31, 1993.
Deposits. Total deposits increased to $9,777.9 million at December 31,
1994, from $9,351.4 million at December 31, 1993. Retail deposits were up
$200.4 million to $9,049.1 million. Wholesale activities -- predominately
deposits greater than $100,000 -- were up $226.1 million. Wholesale deposits
are an alternative to other borrowings and their levels are determined by
management's decisions as to the most economic funding sources. The deposit
market continued to be difficult but showed improvement as short-term interest
rates rose throughout the year.
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BORROWINGS. Washington Mutual's borrowings primarily take the form of
securities sold under agreements to repurchase and advances from the FHLB.
These two borrowing sources grew to $2,595.7 million and $3,737.6 million,
respectively, by year-end 1994 from a combined level of $4,253.6 million at
December 31, 1993. The increase was used to fund the Company's asset growth.
ASSET QUALITY. Classified assets, which consist of nonaccrual loans,
loans under foreclosure, REO and performing loans (including troubled debt
restructurings) and securities that exhibit credit quality weaknesses,
decreased to $253.8 million at the end of 1994 from $306.0 million at December
31, 1993.
Nonperforming assets decreased to $79.9 million at the end of 1994 from
$111.1 million at December 31, 1993. Nonperforming assets as a percentage of
total assets also declined substantially to 0.43% at December 31, 1994, from
0.70% at December 31, 1993. All asset categories reflected lower nonperforming
asset levels.
PROVISION FOR LOAN LOSSES AND RESERVE LOAN LOSSES. The
provision for loan losses during 1994 was $20.0 million compared with $35.0
million in 1993 and $14.0 million in 1992. The 1994 provision reflected the
Company's strong level of reserves and continued improvement in asset quality.
The growth in the provision during 1993 was determined necessary by management
because of uncertainty about the economic conditions in some lending markets as
well as caution about the asset quality of the loans acquired from Pacific
First.
The reserve for loan losses increased to $128.0 million at December 31,
1994, from $115.2 million at December 31, 1993. Loan charge-offs, net of
recoveries for 1994 totaled $8.1 million. This was less than half the level of
net charge-offs in 1993 and 1992 of $19.8 million and $17.7 million,
respectively. During 1993 and 1992, net charge-offs of commercial real estate
loans accounted for $13.3 million and $14.4 million, respectively, of total net
charge-offs. However, with the improved performance of the commercial real
estate portfolio, net charge-offs on commercial real estate loans dropped to
$318,000 during 1994. Of the $8.1 million of net charge-offs taken in 1994,
$4.3 million was the result of consumer loan activity in large part due to
loans acquired from Pacific First. Net charge-offs on consumer loans have
grown to the current level from $2.1 million in 1993 and $883,000 in 1992.
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DESCRIPTION OF WASHINGTON MUTUAL CAPITAL STOCK
Washington Mutual is authorized by its Articles of Incorporation to
issue up to 100,000,000 shares of Washington Mutual Common Stock and up to
10,000,000 shares of Preferred Stock, par value $1.00 per share. As of
March 8, 1995, there were issued and outstanding 62,098,684 shares of
Washington Mutual Common Stock, 2,800,000 shares of Series C Preferred Stock,
1,400,000 shares of Series D Preferred Stock and 2,000,000 shares of Series E
Preferred Stock.
COMMON STOCK. Each holder of Washington Mutual Common Stock is entitled
to one vote for each share held on all matters voted upon by shareholders.
Shareholders are not permitted to cumulate their votes for the election of
directors.
In the unlikely event of liquidation of Washington Mutual, holders of
Washington Mutual Common Stock will be entitled to receive any remaining assets
of Washington Mutual, in cash or in kind, after payment of all liabilities.
Holders of Washington Mutual Common Stock are not entitled to preemptive
rights with respect to any additional shares that may be issued.
The authorized but unissued and unreserved shares of Washington Mutual
Common Stock will be available for general corporate purposes, including but
not limited to possible issuance in exchange for capital notes, as stock
dividends or stock splits, in future mergers or acquisitions, under a cash
dividend reinvestment plan, for employee benefit plans, or in a future
underwritten or other public offering. Except as described above or as
otherwise required to approve the transactions in which the additional
authorized shares of Washington Mutual Common Stock would be issued, no
shareholder approval will be required for the issuance of these shares.
At March 16, 1995, options to purchase 963,135 shares of Washington
Mutual Common Stock under Washington Mutual's stock option plans had been
granted, but not exercised, leaving 3,559,000 shares available for further
grants under such plans.
PREFERRED STOCK. The Preferred Stock is prior to Common Stock as to
dividends and liquidation, but does not confer general voting rights.
The Series C Preferred Stock has a liquidation preference of $25.00 per
share plus dividends accrued and unpaid for the then-current dividend period,
and is not convertible into any other Washington Mutual securities. Dividends
on the Series C Preferred Stock, if and when declared by the Washington Mutual
Board, are noncumulative and are payable quarterly. Washington Mutual may at
its option redeem the Series C Preferred Stock. The Series C Preferred Stock
is prior to the Washington Mutual Common Stock as to dividends and liquidation,
but does not confer general voting rights.
The Series D Preferred Stock has a liquidation preference of $100.00 per
share plus dividends accrued and unpaid for the then-current dividend period,
and is convertible into shares of Washington Mutual Common Stock. Dividends on
the Series D Preferred Stock, if and when declared by the Washington Mutual
Board, are noncumulative and are payable quarterly. Washington Mutual may at
its option redeem the Series D Preferred Stock. The Series D Preferred Stock
is prior to the Washington Mutual Common Stock as to dividends and liquidation,
but does not confer general voting rights.
The Series E Preferred Stock has a liquidation preference of $25.00 per
share plus dividends accrued and unpaid for the then-current dividend period,
and is not convertible into any other Washington Mutual securities. Dividends
on the Series E Preferred Stock, if and when declared by the Washington Mutual
Board, are noncumulative and are payable quarterly. Washington Mutual may at
its option redeem the Series E Preferred Stock. The Series E Preferred Stock
is prior to the Washington Mutual Common Stock as dividends and liquidation,
but does not confer general voting rights.
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THE OPTION PLAN AMENDMENT
GENERAL
The Option Plan currently provides that all outstanding options of
Olympus shall become immediately exercisable upon execution of the Merger
Agreement and that any options not exercised at the Effective Time of the
Merger shall terminate. The Merger Agreement contemplates that, in the event
Washington Mutual elects the Partial Cash Consideration Option, the Option Plan
shall be amended to provide that outstanding options of Olympus shall not
terminate as of the Effective Time but shall instead be converted into
fully-exercisable options to acquire Washington Mutual Common Stock, adjusted
as to number of shares of Washington Mutual Common Stock to be acquired and the
exercise price by the Exchange Ratio. (By way of example only, if the Exchange
Ratio were .50 and if a person had an option to acquire 1,000 shares of Olympus
Common Stock at $7.00 per share, then at the Effective Time, the option would
be converted into an option to acquire 500 shares of Washington Mutual at
$14.00.)
The Olympus Board has adopted the Option Plan Amendment to the Option
Plan to effectuate the change contemplated by the Merger Agreement, the text of
which is set forth on Appendix G to this Proxy Statement/Prospectus. The
effectiveness of the Option Plan Amendment is conditioned on (i) shareholder
approval and (ii) the election by Washington Mutual of the Partial Cash
Consideration Option. If Olympus Shareholders approve the Option Plan
Amendment and if Washington Mutual elects the Partial Cash Consideration
Option, then, at the Effective Time, the Option Plan shall become a separate
plan of Washington Mutual and the options to acquire Olympus Common Stock shall
convert solely into options to acquire Washington Mutual Common Stock, adjusted
as described above. IF WASHINGTON MUTUAL DOES NOT ELECT THE PARTIAL CASH
CONSIDERATION OPTION, THE OPTION PLAN AMENDMENT WILL NOT BECOME EFFECTIVE,
NOTWITHSTANDING ADOPTION BY OLYMPUS' BOARD AND APPROVAL BY THE OLYMPUS
STOCKHOLDERS. The following description of the Option Plan does not purport to
be complete and is qualified in its entirety by reference to the full text
thereof.
DESCRIPTION OF THE PLAN
Purpose. The purpose of the Option Plan is to promote and advance the
interests of Olympus and its stockholders by strengthening the ability of
Olympus to attract, motivate and retain directors, managerial and other
employees and to strengthen the mutuality of interests between such persons and
Olympus' Shareholders.
Administration. The Option Plan is administered by a committee of a
sufficient number of disinterested members of the Olympus Board (the
"Committee") so as to qualify the Committee to administer the Option Plan as
contemplated by Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The Executive Compensation Committee of
the Olympus Board currently serves as the Committee; however, the Olympus Board
may, in its discretion, replace the members of the Committee at any time. The
Committee administers the Option Plan and has the authority, in its sole
discretion, to adopt such rules and regulations and impose such conditions upon
the exercise of stock options as it deems appropriate. Among other things, the
Committee shall determine, subject to the requirements set forth in the Option
Plan, who shall receive stock options, the number of such stock options, and
the time when such awards shall be granted.
Duration of the Plan. The Option Plan became effective as of July 7,
1988, was amended effective as of November 18, 1992 and will remain in effect
until terminated by the Olympus Board, except that no Incentive Stock Options
(as defined below) may be granted after November 18, 2002.
Shares Subject to Plan. The Option Plan provides for the issuance of
incentive stock options ("Incentive Stock Options"), as that term is defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options which are not governed by Section 422 of the Code
("Nonqualified Stock Options"). Incentive Stock Options and Nonqualified Stock
Options are collectively referred to herein as "Stock Options." The stock
subject to the Stock Options consists of shares of Olympus's authorized but
unissued common stock or shares of common stock that have been reacquired by
Olympus. On November 30, 1994, the closing price
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per share of Olympus Common Stock was $15.00. In addition to the 303,000
shares of common stock that have been issued under the Option Plan or are
reserved for issuance upon exercise of Stock Options presently outstanding, the
maximum number of shares of common stock for which Stock Options may be granted
is 197,000.
In the event the number of outstanding shares of common stock should be
increased or decreased, or if common stock underlying Stock Options issued
under the Option Plan should be changed into or exchanged for a different
number or kind of shares or securities of Olympus through reorganization,
merger, recapitalization, reclassification, stock dividend, stock split or
reverse stock split, upon authorization by the Committee, an appropriate
adjustment shall be made in the terms and conditions of all Stock Options
issued pursuant to the Option Plan, including the exercise price of each Stock
Option issued thereunder. Should the Committee determine, however, upon the
advice of counsel, that any such adjustment could result in the recognition of
federal taxable income by holders of Stock Options granted under the Option
Plan, or by holders of common stock or other securities of Olympus, no such
adjustment need be made.
Eligibility. Directors, managerial, professional and other employees
who are, in the discretion of the Committee, key employees are eligible to
receive Stock Options under the Option Plan. The Committee may also, in its
discretion, select other individuals who have made or are expected to make
significant contributions to Olympus to receive Nonqualified Stock Options.
Only employees of Olympus are eligible to receive Incentive Stock Options. As
of November 30, 1994, approximately 9 employees of Olympus and its subsidiaries
were considered eligible to receive Incentive Stock Options under the Option
Plan.
Stock Options. The Committee may grant both Nonqualified Stock Options
and Incentive Stock Options from time to time. The Committee has complete
authority, subject to the terms of the Option Plan, to determine the persons to
whom and the time or times at which grants of Stock Options will be made. The
terms of each Stock Option are set forth in a Stock Option Agreement,
including, without limitation, the exercise price of the Stock Options,
restrictions upon the exercise of Stock Options and restrictions on the
transferability of shares issued upon the exercise of Stock Options, as the
Committee, in its sole discretion, shall determine. In no event, however,
shall the exercise price of an Incentive Stock Option be less than the fair
market value of a share of common stock on the date of the grant. The exercise
price of a Nonqualified Stock Option shall be the greater of (i) the mean daily
average of the bid and ask prices of a share of common stock for the thirty
(30) days preceding the date of grant, (ii) the closing price of a share of
common stock as reported on any national securities exchange on the date of
grant and (iii) the average of the bid and ask prices on the date of grant if
the common stock is not reported on a national exchange. The Committee, in its
sole discretion, shall determine the time or times when each Stock Option vests
and becomes exercisable. In no event, however, shall any Stock Option be
exercisable before six months have elapsed from the date of the grant (except
in the case of death or disability), and no Incentive Stock Option shall be
exercisable after the expiration of ten years from the date of grant. During
the lifetime of the employee receiving the Stock Option (the "Optionee"), the
Stock Option shall be exercisable only by the Optionee and shall not be
assignable or transferable. Each Stock Option Agreement shall set forth the
extent to which the Optionee shall have the right to exercise the Option
subsequent to the termination of the Optionee's employment with Olympus. Such
termination provisions, to the extent allowed by the Option Plan, shall be
determined in the sole discretion of the Committee and need not be uniform
among all Optionees. There have been 303,000 Stock Options granted under the
Option Plan. Stock Options for 228,600 shares which have been granted under
the Option Plan are presently outstanding.
Payment. Stock Options may be exercised by giving written notice to
Olympus accompanied by payment in full of the exercise price in cash or in any
other manner satisfactory to the Committee, consistent with applicable law,
regulations and rules.
Application of Securities Laws. The federal securities laws subject a
corporation's executive officers, directors and certain beneficial owners of
more than 10% of a class of registered equity securities (collectively referred
to as "Insiders") to the reporting and liability provisions of Section 16 of
the Exchange Act.
Section 16(b) of the Exchange Act generally requires that any profit
realized by an Insider from any purchase and sale, or any sale and purchase, of
any equity security of a corporation within six months is recoverable by
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Olympus. Rules adopted by the Commission expand the short-swing trading
restrictions to derivative securities, such as stock options, stock
appreciation rights and other convertible securities. Therefore, transactions
by Insiders of Olympus in any equity or derivative securities, including Stock
Options, are subject to the short-swing liability provisions under Section
16(b), unless an exemption is available thereunder. Under the Section 16
rules, a derivative security is deemed to be the same class of equity security
as the underlying security for short-swing trading purposes.
Under the Section 16 rules, the grant of a stock option or other
derivative security is treated as a purchase of the underlying security, unless
the stock option or other derivative security was granted pursuant to an
employee benefit plan meeting the requirements of Rule 16b-3 under the Exchange
Act. Such requirements include, among other things, stockholder approval and
disinterested administration of the employee benefit plan, restrictions on
transferability and a six-month holding period from the date of grant of a
stock option or other derivative security to the date of sale of the underlying
security.
Under the Section 16 rules, the acquisition of underlying securities
upon the exercise or conversion of a stock option or other derivative security
is exempt from short-swing liability, independent of Rule 16b-3. The rules do,
however, require that the exercise or conversion be "in-the-money" (i.e., at an
exercise or conversion price that is equal to or less than the market price of
the underlying security).
Amendment to the Option Plan. The Olympus Board may, insofar as
permitted by law, suspend or discontinue the Option Plan or revise or amend it
in any respect whatsoever, except that no amendment may be effected without the
approval of Olympus's Stockholders if giving effect to such amendment would
cause the Option Plan to fail to satisfy the requirements of Rule 16b-3 under
the Exchange Act or other applicable law or if it would cause Stock Options
granted as Incentive Options to fail to meet the requirements of incentive
stock options as defined in Section 422 of the Code. In no event, however,
shall any amendment, suspension or termination of the Option Plan that would
adversely affect the rights of any Optionee be effective without the written
consent of the affected Optionee.
General Provisions. Neither the Option Plan nor any grant of Stock
Options thereunder shall be deemed to give any individual the right to remain
employed by Olympus. Participants in the Option Plan shall have no rights with
respect to dividends, voting or any other privileges accorded to Olympus'
Stockholders prior to the issuance of stock certificates for shares of Common
Stock. Recipients of Stock Options under the Option Plan have no obligation to
exercise such Stock Options. All costs and expenses of administering the
Option Plan shall be borne by Olympus.
FEDERAL INCOME TAX CONSEQUENCES
Nonqualified Stock Options. A recipient of Nonqualified Stock Options
under the Option Plan incurs no income tax liability, and Olympus obtains no
tax deduction, from the grant of such Stock Options. Under current accounting
practice, however, the grant of a Nonqualified Stock Option with an exercise
price less than the fair market value of the common stock on the date of grant
will result in a charge to Olympus's income in an amount equal to the
difference between the exercise price and such fair market value.
Upon the exercise of a Nonqualified Stock Option, the amount by which
the fair market value of the shares on the date of exercise exceeds the
exercise price will be taxed to the Optionee as ordinary compensation income.
Olympus generally will be entitled to a tax deduction in the same amount,
provided it makes all required wage withholdings. In general, the Optionee's
tax basis in the shares acquired by exercising a Nonqualified Stock Option will
be equal to the fair market value of such shares on the date of exercise. Upon
a subsequent sale of any such shares in a taxable transaction, the Optionee
will generally realize capital gain or loss (long-term or short-term, depending
on the applicable holding period) in an amount equal to the difference between
his or her basis in the shares and the sale price.
Special rules apply if an Optionee pays the exercise price of
Nonqualified Stock Options with previously acquired shares of common stock.
Such a transaction is generally treated as a tax-free exchange of the old
shares
-72-
<PAGE> 76
for the same number of new shares. To the extent of the number of shares
exchanged, the Optionee's basis in the new shares is the same as his or her
basis in the old shares, and the capital gain holding period runs without
interruption from the date when the old shares were acquired. With respect to
the number of shares received on exercise of a Nonqualified Stock Option that
exceeds the number of shares exchanged, the Optionee will recognize ordinary
compensation income on the fair market value of the shares received. The
Optionee's basis in the additional shares is equal to the fair market value of
such shares on the date the shares were transferred, and the capital gain
holding period commences on the same date. The general effect of these rules
is to defer the date when any gain on the old shares that are used to buy new
shares must be recognized for tax purposes.
Incentive Stock Options. The holder of an Incentive Stock Option will
not be subject to income tax upon the grant or the exercise of the Incentive
Stock Option, and Olympus will not be entitled to a tax deduction by reason of
such grant or exercise, provided that the holder is still employed by Olympus
(or terminated employment no longer than three months before the exercise
date). Additional exceptions to this exercise timing requirement apply upon
the death or disability of the Optionee. A sale of the shares received upon
the exercise of an Incentive Stock Option which occurs both more than one year
after the exercise of the Incentive Stock Option and more than two years after
the grant of the Incentive Stock Option will result in the realization of
long-term capital gain or loss in the amount of the difference between the
amount realized on the sale and the option price for such shares. Generally,
upon an earlier disposition of the shares, the Optionee will recognize ordinary
compensation income, and Olympus will receive a corresponding deduction, equal
to the lesser of (i) the excess of the fair market value of the shares on the
date of transfer to the Optionee over the Stock Option price or (ii) the excess
of the amount realized on the disposition over the Stock Option price for such
shares.
The excess of the fair market value of the shares of common stock at the
time of the exercise of an Incentive Stock Option over the Stock Option price
will increase the Optionee's alternative minimum taxable income subject to the
alternative minimum tax, unless a subsequent disqualifying disposition occurs
in the same taxable year of the Optionee in which the common stock was
purchased.
If an Optionee pays the exercise price of Incentive Stock Options with
previously acquired shares of common stock, the transaction will generally be
treated as a tax-free exchange of the old shares for the same number of new
shares in a similar manner as for Nonqualified Stock Options, as discussed
above. However, if the Optionee exchanges stock that was acquired through the
exercise of an Incentive Stock Option that has not been held for the statutory
holding period, the exchange will be treated as a disqualifying disposition of
the exchanged shares and will result in ordinary compensation income, and the
Company will be entitled to a corresponding deduction, as described above.
Withholding Tax Obligations. To the extent required by applicable law,
the recipient of any payment or distribution under the Option Plan must make
arrangements satisfactory to Olympus for the satisfaction of any withholding
tax obligations arising as a result of such a payment or distribution. Olympus
shall not be required to make such payment or distribution until such
obligations are satisfied. The exercise of a Stock Option by an Optionee
shall constitute the Optionee's agreement that Olympus may withhold any taxes
attributable to taxable income realized under the Option Plan from any other
compensation or other payment payable to such Optionee by Olympus. Generally,
Olympus is required to withhold taxes upon the exercise of a Nonqualified Stock
Option.
The preceding discussion is based upon federal tax laws and regulations
presently in effect, which are subject to change, and does not purport to be
complete description of the federal income tax aspects of the Option Plan.
Optionees may also be subject to state and local taxes in connection with the
grant of Stock Options and the sale or other disposition of shares acquired
upon the exercise of Stock Options.
VALUE OF BENEFITS
The following table summarizes, as of March 6, 1995, the value of
outstanding options that have been granted under the Option Plan to the
individuals and groups of individuals set forth below:
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<PAGE> 77
PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION DOLLAR VALUE (1) STOCK OPTIONS (2)
----------------- ---------------- -----------------
<S> <C> <C>
A. Blaine Huntsman, Chief Executive Officer $1,365,625 125,000(3)
R. Gibb Marsh, President 204,608 28,500(4)
K. John Jones, Sr. VP, Chief Financial Officer 135,488 18,500(5)
Kathy K. Hale, Sr. VP, Chief Lending Officer 39,563 11,700(6)
Gary L. Matern, Sr. VP, Retail Banking 168,213 21,900(7)
Executive Officers as a group 1,913,495 205,600
Non-Executive Directors as a group -- --
Non-Executive Officer Employees as a group 71,960 8,000(8)
</TABLE>
_________________________
(1) Dollar value is determined by the spread between the exercise
price of the options and the price of the underlying security as of
March 6, 1995. The market price of a share of common stock as
reported on The Nasdaq Stock Market on March 6, 1995 was
$14.625.
(2) All options granted under the Option Plan have been Nonqualified
Stock Options. Stock Options granted prior to November 18, 1992 are generally
exercisable one year from the date of grant and all options granted on or after
November 18, 1992 vest 20% after two years, 40% after 3 years, 60% after 4
years and 100% after 5 years. Stock Options are generally exercisable for a
period of 10 years from the date of grant unless terminated earlier in
accordance with the provisions of the Option Plan.
(3) Consists of 100,000 Stock Options granted on February 4, 1991 at
an exercise price of $3.25 per share and 25,000 Stock Options granted on
January 30, 1990 at an exercise price of $5.50 per share.
(4) Consists of 3,500 Stock Options granted on March 12, 1992 at an
exercise price of $5.63 per share, 15,000 Stock Options granted on November 18,
1992 at an exercise price of $5.50 per share and 10,000 Stock Options granted
on May 25, 1994 at an exercise price of $11.00 per share.
(5) Consists of 2,500 Stock Options granted on March 12, 1992 at an
exercise price of $5.63; 10,000 Stock Options granted on November 18, 1992 at
an exercise price of $5.50; and 6,000 Stock Options granted on May 25, 1994 at
an exercise price of $11.00.
(6) Consists of 5,700 Stock Options granted on July 29, 1993 at an
exercise price of $11.50 and 6,000 Stock Options granted on May 25, 1994 at an
exercise price of $11.00.
(7) Consists of 900 Stock Options granted on February 4, 1991 at an
exercise price of $3.25; 5,000 Stock Options granted on March 12, 1992 at an
exercise price of $5.63; 10,000 Stock Options granted on November 18, 1992
at an exercise price of $5.50; and 6,000 Stock Options granted on May 25, 1994
at an exercise price of $11.00.
(8) Stock Options to purchase 8,000 shares were granted on March 12,
1992 at an exercise price of $5.63 per share.
LEGAL MATTERS
The validity of the shares of Washington Mutual Common Stock to be
issued in connection with the Merger will be passed upon by Foster Pepper &
Shefelman, counsel to Washington Mutual. As of March 15, 1995, individual
members of Foster Pepper & Shefelman owned an aggregate of 50,764; 160; and 100
shares of Washington Mutual Common Stock, Series C Preferred Stock, and Series
D Preferred Stock, respectively.
INDEPENDENT AUDITORS
The consolidated statements of financial position of Washington Mutual
and its subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1993, incorporated in this
Proxy Statement/Prospectus by reference to Washington Mutual's Annual Report to
Shareholders for the year ended December 31, 1993 attached as an exhibit to the
Form F-2 have been audited by Deloitte & Touche LLP, independent auditors, as
set forth in their report with respect thereto.
The consolidated statements of financial position of Washington Mutual
and its subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1994, incorporated in this
Proxy Statement/Prospectus by reference to Washington Mutual's Annual Report to
Shareholders for the year ended December 31, 1994 attached as an exhibit to the
Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as
set forth in their report with respect thereto.
-74-
<PAGE> 78
The consolidated statements of financial condition of Olympus and its
subsidiaries as of December 31, 1992 and 1993, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1993, incorporated in this Proxy
Statement/Prospectus by reference to Olympus' Annual Report on Form 10-K have
been audited by Deloitte & Touche LLP, independent auditors, as set forth in
their report with respect thereto.
It is expected that representatives of Deloitte & Touche LLP will be
present at the Special Meeting to respond to appropriate questions of
shareholders and to make a statement if they desire.
SHAREHOLDER PROPOSALS
Any proposal intended to be presented by any shareholder for action at
the 1995 Annual Meeting of Shareholders of Olympus must be received by the
Corporate Secretary of Olympus at 115 South Main Street, Salt Lake City, Utah
84111, not later than March 29, 1995, in order for the proposal to be
considered for inclusion in the proxy statement and proxy relating to the 1995
Annual Meeting. Nothing in this paragraph shall be deemed to require Olympus to
include in its proxy statement and proxy relating to the 1995 Annual Meeting
any shareholder proposal that does not meet all of the requirements for
inclusion established by the Commission in effect at the time.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, the Olympus Board
knows of no matters to be brought before the Special Meeting other than those
specifically listed in the Notice of Special Meeting of Shareholders. However,
if any other matters should properly come before the Special Meeting, the proxy
holders will vote the proxies on such matters in accordance with the
determination of the Olympus Board. The Olympus Board urges each shareholder,
whether or not he or she intends to be present at the Special Meeting, to
complete, sign and return the enclosed proxy as promptly as possible.
BY ORDER OF THE BOARD OF DIRECTORS
OF OLYMPUS CAPITAL CORPORATION
/s/A. Blaine Huntsman
Chairman of the Board and Chief Executive Officer
Salt Lake City, Utah
March 24, 1995
-75-
<PAGE> 79
PROXY
OLYMPUS CAPITAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints RAMON E. JOHNSON, JAMES K. LOEBBECKE
and RICHARD G. PRICE, and each of them, as proxies, with full power of
substitution, with authority to represent and vote, as designated below, all
shares of common stock of Olympus Capital Corporation held of record by the
undersigned on March 13, 1995 at the Special Meeting of Shareholders to
be held at 115 South Main Street, Salt Lake City, Utah, on
April 26, 1995, at 9:00 a.m., local time, or at any adjournment or
postponement thereof, upon the matters set forth below, all in accordance with
and as more fully described in the Notice of Special Meeting and Joint Proxy
Statement and Prospectus dated March 24, 1995.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
The Board of Directors recommends a vote "FOR" the following proposals:
(Continued, and to be dated and signed, on reverse side)
-76-
<PAGE> 80
Please mark boxes [ ] or [x] in blue or black ink.
1. Proposal to approve the Amended and Restated Agreement for Merger
(including the alternative Plans of Merger) dated as of January 20,
1995 among Washington Mutual, Inc., Washington Mutual Bank,
Washington Mutual Federal Savings Bank, Olympus Capital Corporation
and Olympus Bank, a Federal Savings Bank, pursuant to which, among
other things, (i) Olympus Capital Corporation will merge with and
into Washington Mutual, Inc., and (ii) all of the outstanding shares of
Olympus common stock held by each holder thereof immediately before the
effective time of the merger will be converted into the right to receive
$15.50 per share, subject to adjustment, to be paid in shares of common
stock, no par value per share, of Washington Mutual, Inc.; provided if
the average price of Washington Mutual common stock for the ten trading
days immediately prior to the third trading day before the effective
time of the merger is less than $18.00, subject to certain adjustments,
Washington Mutual, Inc. may elect to pay up to 49% of the aggregate
consideration to be paid in the merger with cash.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to approve the amendment to the Olympus Capital Corporation
Nonqualified Stock Option Plan And Incentive Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Please sign exactly as your name appears on the
proxy card. When shares are held jointly, each
party 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.)
Date: ___________________________________, 1995
Signed: _________________________________________
_________________________________________
Please Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope.
-77-
<PAGE> 81
APPENDIX A
(CONFORMED COPY)
AMENDED AND RESTATED
AGREEMENT FOR MERGER
AMONG
WASHINGTON MUTUAL INC.,
WASHINGTON MUTUAL BANK,
WASHINGTON MUTUAL FEDERAL SAVINGS BANK
AND
OLYMPUS CAPITAL CORPORATION
OLYMPUS BANK, A
FEDERAL SAVINGS BANK
DATED AS OF
JANUARY 20, 1995
<PAGE> 82
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
------
2. Effective Time; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
-----------------------
3. Option to Purchase Certain Shares . . . . . . . . . . . . . . . . . . . . . . . . . -7-
---------------------------------
4. Representations and Warranties of Olympus and Olympus Bank . . . . . . . . . . . . -7-
----------------------------------------------------------
4.1 Organization, Power, Good Standing, Etc. . . . . . . . . . . . . . . . . . . . -8-
----------------------------------------
4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
--------------
4.3 Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
--------------
4.4 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
-------
4.5 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
---------
4.6 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
------------
4.7 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
----------------------
4.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
--------------------
4.9 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
---------
4.10 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . -14-
------------------------------------
4.11 Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
----------------
4.12 Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
---------------------
4.13 Employees; Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . -15-
---------------------------------
4.14 Olympus and Olympus Bank Information . . . . . . . . . . . . . . . . . . . . . -19-
------------------------------------
4.15 Compliance With Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . -19-
------------------------------
4.16 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
------------------------
4.17 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
----------------------
4.18 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
----------
4.19 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
-----------------
4.20 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
---------
4.21 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
------------------
4.22 Employee Stock Bonus Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
-------------------------
4.23 Community Reinvestment Act Compliance . . . . . . . . . . . . . . . . . . . . . -23-
-------------------------------------
4.24 Agreements with Bank Regulators . . . . . . . . . . . . . . . . . . . . . . . . -23-
-------------------------------
5. Representations and Warranties of WMI, WM Bank and NFSB . . . . . . . . . . . . . . -24-
-------------------------------------------------------
5.1 Corporate Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
----------------------
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
---------
5.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
------------
5.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
----------------------
5.5 WMI Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
---------------
5.6 Sufficient Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
--------------------
5.7 Capitalization, Investments . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
---------------------------
5.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
--------------------
5.9 Absence of Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . -29-
----------------------------------
5.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
----------
5.11 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
---------
5.12 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
-------
5.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
----------
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.14 CRA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
--------------
5.15 Agreements With Bank Regulators . . . . . . . . . . . . . . . . . . . . . . . . -30-
-------------------------------
5.16 Compliance With Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . -30-
------------------------------
6. Covenants of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
------------------------
6.1 Conduct of the Business of Olympus . . . . . . . . . . . . . . . . . . . . . . -31-
----------------------------------
6.2 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
---------------
6.3 Current Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
-------------------
6.4 Access to Properties and Records; Confidentiality . . . . . . . . . . . . . . . -35-
-------------------------------------------------
6.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
-------
6.6 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
------------------
6.7 Approval of Olympus Stockholders . . . . . . . . . . . . . . . . . . . . . . . -37-
--------------------------------
6.8 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
------------------
6.9 Disclosure Supplements . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
----------------------
6.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
--------------------
6.11 Failure to Fulfill Conditions . . . . . . . . . . . . . . . . . . . . . . . . . -38-
-----------------------------
6.12 Assignment of Contract Rights . . . . . . . . . . . . . . . . . . . . . . . . . -39-
-----------------------------
6.13 Employees; Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . -39-
---------------------------------
6.14 Indemnification of Olympus Directors and Officers . . . . . . . . . . . . . . . -41-
-------------------------------------------------
6.15 Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
------------------
6.16 Post-Closing Financial Statements . . . . . . . . . . . . . . . . . . . . . . . -43-
---------------------------------
6.17 Consulting and Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . -43-
---------------------------------------
6.18 Post-Merger Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
-------------------
6.19 Current Public Information . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
--------------------------
7. Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
------------------
7.1 Conditions to Each Party's Obligations Under This Agreement . . . . . . . . . . -43-
-----------------------------------------------------------
7.2 Conditions to the Obligations of WMI under this Agreement . . . . . . . . . . . -45-
---------------------------------------------------------
7.3 Conditions to the Obligations of Olympus Under This Agreement . . . . . . . . . -47-
-------------------------------------------------------------
8. Termination, Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . -48-
---------------------------------
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
-----------
8.2 Break-Up Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
------------
8.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -51-
---------------------
8.4 Amendment, Extension and Waiver . . . . . . . . . . . . . . . . . . . . . . . . -51-
-------------------------------
9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
-------------
9.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
--------
9.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
--------
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
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9.4 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
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9.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
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9.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
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9.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
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9.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
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</TABLE>
<PAGE> 84
EXHIBITS
<TABLE>
<S> <C>
Exhibit A-1 Plan of Merger
Exhibit A-2 Plan of Merger
(Stock and Cash Transaction)
Exhibit B-1 "Affiliates" List
Exhibit B-2 Form of "Affiliate" Letter
Exhibit C-1 Stock Option Agreement
Exhibit C-2 Assignment of Stock Option Agreement
Exhibit D Consulting and Noncompetition Agreement
Exhibit E Kimball, Parr, Waddoups, Brown &
Gee Opinion
Exhibit F Foster Pepper & Shefelman Opinion
</TABLE>
<PAGE> 85
SCHEDULES
<TABLE>
<S> <C>
Disclosure Schedule 4.1(b) (Subsidiaries & Investment Entities)
Disclosure Schedule 4.1(d) (Equity Securities Owned)
Disclosure Schedule 4.2 (Outstanding Stock Options)
Disclosure Schedule 4.3(a) (Defenses to Loans)
Disclosure Schedule 4.3(b) (Loans in Excess of $250,000)
Disclosure Schedule 4.3(c) (Delinquent Loans)
Disclosure Schedule 4.3(f) (Loan Participation Information)
Disclosure Schedule 4.6 (Agreements Requiring Third Party Consent to Transfer)
Disclosure Schedule 4.10 (Changes From the March 1994 Financial Statements)
Disclosure Schedule 4.11 (Litigation Report)
Disclosure Schedule 4.13(a)(i) (Employment Contracts)
Disclosure Schedule 4.13(a)(ii) (Benefit Plans Containing Change of Control Provisions)
Disclosure Schedule 4.13(b) (Employees Receiving Compensation in Excess of $50,000)
Disclosure Schedule 4.13(c) (Claims Regarding Employment Practices)
Disclosure Schedule 4.13(e)(i) (Benefit Plans)
Disclosure Schedule 4.13(e)(ii) (Audits and Investigations of Benefit Plans)
Disclosure Schedule 4.13(e)(iii) (Plan Qualification)
Disclosure Schedule 4.13(e)(viii) (Post-Retirement Benefit Plans)
Disclosure Schedule 4.13(e)(ix)(A) (Severance Pay Plans)
Disclosure Schedule 4.13(e)(ix)(B) (Termination Payments)
Disclosure Schedule 4.15(b) (Olympus Compliance With Applicable Laws)
Disclosure Schedule 4.16(b) (Material Contracts)
Disclosure Schedule 4.17 (Affiliated Party Transactions)
Disclosure Schedule 4.19(a) (Title to and Leases of Real Property)
Disclosure Schedule 4.19(b) (Environmental Disclosure)
Disclosure Schedule 4.19(c) (Personal Property)
</TABLE>
<PAGE> 86
<TABLE>
<S> <C>
Disclosure Schedule 4.20 (Insurance Policies)
Disclosure Schedule 5.9 (WMSB Changes Since March 31, 1994)
Disclosure Schedule 5.10 (WMSB Litigation Report)
Disclosure Schedule 5.16(b) (WMSB Compliance With Applicable Laws)
Disclosure Schedule 6.13(b) (List of Officers)
</TABLE>
<PAGE> 87
AMENDED AND RESTATED
AGREEMENT FOR MERGER
This Amended and Restated Agreement for Merger (the "Agreement") is made and
entered into as of the 20th day of January, 1995 by and among Washington Mutual,
Inc., a Washington corporation ("WMI"), Washington Mutual Bank, a Washington
stock savings bank ("WM Bank"), Washington Mutual Federal Savings Bank, a
federal savings association ("NFSB"), Olympus Capital Corporation, a Utah
corporation ("Olympus") and Olympus Bank, a Federal Savings Bank, a federal
savings bank ("Olympus Bank").
Washington Mutual Savings Bank, formerly a Washington stock savings bank
("WMSB"), NFSB, Olympus and Olympus Bank entered into an Agreement for Merger
dated July 22, 1994 (the "Original Agreement"), which provided for Olympus to
be acquired by WMSB on the basis of a merger of Olympus with and into WMSB,
which would be the surviving institution. Section 1(f) of the Original
Agreement provided, in part, that the transaction could be restructured at
WMSB's request, provided that no such restructuring would modify the amount or
the form of the Merger Consideration (as defined in the Original Agreement) or
the tax consequences to shareholders of Olympus from those contemplated by, and
described in Section 7.1(d) of, the Original Agreement.
The corporate structure of WMSB and its affiliates has been reorganized (the
"Restructuring") into a holding company structure, with WMI as the holding
company. The Restructuring was effected by merging WMSB with and into WM Bank,
with WM Bank as the surviving bank. The merger was effective at 6:01 p.m.,
Pacific time, on November 29, 1994 (the "Restructure Time"). Prior to such
merger, WMI owned, and continues to own after the merger, all of the issued and
outstanding shares of WM Bank. At the Restructure Time, shares of WMSB stock
outstanding immediately prior to the Restructure Time were automatically
converted into an equal number of shares of WMI stock. WMI now owns, directly
or indirectly, all of the corporations which, prior to the Restructuring, were
owned, directly or indirectly, by WMSB. As a result of the merger of WMSB with
and into WM Bank, all of WMSB's rights and interests under the Original
Agreement, together with any and all of its obligations thereunder, are now the
property and obligations of WM Bank as successor by merger to WMSB.
As a result of the Restructuring, WM Bank owns all of the issued and
outstanding shares of stock of Washington Mutual, a Federal Savings Bank
("WMFSB"). Following the Restructuring, WMFSB continued to own all of the
issued and outstanding shares of stock of NFSB. WMI and WMFSB entered into
that certain Stock Purchase Agreement dated October 6, 1994 pursuant to which
WMFSB agreed to sell all the issued and outstanding shares of stock of NFSB to
WMI. The sale was consummated on January 4, 1995.
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The parties now wish to amend and restate the Original Agreement in order to
restructure the transaction contemplated thereby so that Olympus will be merged
with and into WMI, which will be the surviving company (the "Merger") and to
make certain other modifications. WM Bank is a party to this Agreement in its
capacity as the successor of WMSB.
As used hereinafter in this Agreement, the term "WM Bank" shall mean WMSB
with respect to any period prior to the Restructure Time and shall mean
Washington Mutual Bank with respect to any period on or after the Restructure
Time. As used herein, the term "Original Agreement Date" shall mean July 22,
1994.
Therefore, the parties to this Agreement hereby amend and restate the
Original Agreement and agree as follows:
1. Merger. Subject to the terms and conditions of this Agreement, the Merger
is to be accomplished in the manner described herein.
(a) Merger of Olympus and WMI. Olympus shall be merged with and into WMI
in accordance with the Plan of Merger by and between WMI and Olympus,
substantially in the form attached hereto as Exhibit A-1 (the "Plan of
Merger"), at the Effective Time (as defined in Section 2). The Plan of Merger
provides for the terms of the Merger and the manner of carrying it into effect.
The terms and conditions of the Plan of Merger are incorporated herein and made
a part hereof.
(b) Subsequent Merger of Olympus Bank and NFSB. The parties understand
that WMI and NFSB intend, after the Effective Time, to merge Olympus Bank with
and into NFSB, with NFSB as the resulting institution (the "Bank Merger"). The
Bank Merger shall be pursuant to the terms of a plan of merger to be agreed
upon and entered into by Olympus Bank and NFSB and their respective
post-closing directors and shareholders. Olympus and Olympus Bank agree to
take such actions prior to the Effective Time as may be reasonably requested by
WMI and NFSB in order to be able to effect the Bank Merger following the
Effective Time.
(c) Conversion of Olympus Common Stock. Subject to the provisions below
and in the Plan of Merger, at the Effective Time, all of the outstanding shares
of common stock, par value $1.00 per share, of Olympus ("Olympus Common Stock")
shall be converted into the right to receive shares of common stock, no par
value per share, of WMI ("WMI Common Stock"), as described below and in the
Plan of Merger.
(i) Subject to the other provisions of this Section 1(c) and Section
1(h), holders of all outstanding shares of Olympus Common Stock will receive
per share consideration equal to $15.50 per share of Olympus Common Stock
subject to adjustment as provided in Section 1(c)(v) below (the "Merger
Consideration"), such consideration to be paid in newly issued shares of WMI
Common
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<PAGE> 89
Stock, subject to the conditions set forth in this Agreement and in the Plan of
Merger. The per share value of WMI Common Stock for the purpose of paying the
Merger Consideration shall be the arithmetic average of the National Market
System Closing Price of WMI Common Stock for the ten trading days immediately
preceding the third trading day before the Effective Date (the "Average
Price"). The term "National Market System Closing Price" means the price per
share of the last sale of WMI Common Stock reported on the National Market
System at the close of the trading day by the National Association of
Securities Dealers, Inc. The exchange ratio for determining the number of
shares of WMI Common Stock to be issued for each share of Olympus Common Stock
(the "Exchange Ratio") shall be the Merger Consideration divided by the Average
Price. Computations of the Average Price and of the Exchange Ratio shall be
carried to five decimals and then rounded to three decimals, rounding down if
the fourth decimal is four or less or up if it is five or more. Cash will be
paid in lieu of fractional shares as set forth in the Plan of Merger.
(ii) If between the date of this Agreement and the Effective Time,
the shares of WMI Common Stock shall be changed into a different number or
class of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or if a stock dividend thereon shall be
declared with a record date within such period, the Average Price specified in
Section 1(c)(i) shall be adjusted accordingly.
(iii) In the event that the Average Price is less than $18.00 (such
amount to be adjusted accordingly if any of the events described in (ii) above
occur), then at WMI's sole option, WMI may elect to pay up to 49% of the
aggregate Merger Consideration in the form of cash. If WMI makes such an
election, then the Plan of Merger shall be substantially in the form of Exhibit
A-2 attached hereto. In the event that WMI makes such an election, each
shareholder of Olympus shall have the opportunity to indicate such
shareholder's preference as to the form of the Merger Consideration to be paid
to such shareholder, such preference to be indicated in the manner and subject
to the limitations set forth in Section 5(a)(i) of Exhibit A-2.
(iv) If Foster Pepper & Shefelman is unwilling to provide the tax opinion
referred to in Section 7.1(d) due solely to the fact that the appropriate
officers of Olympus are unable to make the representation set forth in
paragraph 2 of Section 7.01 of Rev. Proc. 86-42, 86-2 C.B. 722, then WMI
shall, to the extent necessary to enable such representation to be rendered,
reduce the percentage of the Merger Consideration to be paid in cash below 49%
provided that in no event shall WMI be required to reduce such percentage below
35%.
(v) In the event that the Merger is not consummated on or before April
30, 1995 (the "Yield Date"), then the Merger Consideration shall be equal to
$15.50 plus the product determined by multiplying (i) $15.50 by (ii) the Extra
Consideration Rate (as
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<PAGE> 90
hereinafter defined) by (iii) a fraction the numerator of which equals the
number of days elapsed between the Yield Date and the Effective Date and the
denominator of which equals 365. For purposes hereof, the Extra Consideration
Rate shall be 5% per annum.
(vi) If no distribution date under WMI's shareholder rights plan shall
have occurred prior to the Effective Time, then each share of WMI Common Stock
issued in the Merger shall also evidence one right under such plan.
(d) Stock Options.
(i) Except to the extent that options have been exercised since the
Original Agreement Date, Disclosure Schedule 4.2 attached hereto sets forth the
holders of valid, outstanding options to purchase Olympus Common Stock under
the Olympus Nonqualified Stock Option Plan and the Olympus Incentive Stock
Option Plan (the "Stock Option Plans") and the exercise price of each such
option. It is understood that if any holder exercises his or her options, that
exercise and any subsequent sale, transfer, pledge or other disposition of the
shares shall be in compliance with any applicable requirements of the
Securities and Exchange Commission's ASR 135 and Section 1(h).
(ii) The Stock Option Plans currently provide that, upon the execution of
this Agreement, all outstanding options shall become immediately exercisable
and that as of the Effective Time any such options then unexercised shall
terminate. Olympus intends to present for shareholder approval an amendment to
the Stock Option Plans which, if approved, will be effective if and only if WMI
elects, pursuant to Section 1(c)(iii) of this Agreement, to pay a portion of
the Merger Consideration in cash. The amendment to the Stock Option Plans will
amend Section 7.02 thereof to delete the provision that unexercised options
will terminate at the Effective Time and to permit unexercised options to
convert into fully vested options to acquire WMI Common Stock. If such an
amendment is adopted and WMI elects to pay a portion of the Merger
Consideration in cash pursuant to Section 1(c)(iii), then the Stock Option
Plans shall become separate plans of WMI, and the outstanding options shall not
terminate as of the Effective Time but shall instead be converted into fully
vested options to acquire WMI Common Stock. Each option to acquire Olympus
Common Stock shall become an option to acquire the number of shares of WMI
Common Stock determined by multiplying (i) the number of shares of Olympus
Common Stock covered by such option by (ii) the Exchange Ratio. The price at
which each option to acquire a share of WMI Common Stock shall be exercisable
shall be determined by dividing (x) the exercise price of the option to acquire
Olympus Common Stock by (y) the Exchange Ratio. Calculation of the number of
shares and the exercise price shall each be carried out to four decimals and
then rounded to two decimals, rounding down if the third decimal is four or
less or up if it is five or more. (So that, by way of example, if the Exchange
Ratio is .50 and a person
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has an option to acquire 1,000 shares of Olympus Common Stock at $7.00 per
share, then at the Effective Time, the option will be converted into an option
to acquire 500 shares of WMI Common Stock at $14.00.)
(iii) If WMI does not elect, pursuant to Section 1(c)(iii) of
this Agreement, to pay a portion of the Merger Consideration in cash, then each
outstanding option to purchase shares of Olympus Common Stock which remains
unexercised immediately prior to the Effective Time, shall be deemed to have
been exercised at the Effective Time through the conversion into that number of
shares of WMI Common Stock equal to the quotient obtained by dividing (i) the
Net Option Value by (ii) the Average Price. For purposes of this Section
1(d)(iii), with respect to any option to purchase shares of Olympus Common
Stock, "Net Option Value" means (x) the aggregate Merger Consideration in
respect of the number of shares of Olympus Common Stock issuable upon exercise
of such option, less (y) the aggregate exercise price payable upon exercise of
such option, less (z) the aggregate amount of federal, state and local income
taxes and other amounts required to be withheld with respect to such exercise.
(e) Olympus Stockholders' Meeting. Subject to Section 6.7, Olympus shall,
as soon as practicable, hold a meeting of its stockholders (the "Olympus
Stockholders' Meeting") to submit for stockholder approval (the "Olympus
Stockholder Approval") this Agreement and the Plan of Merger.
(f) [Intentionally Omitted]
(g) Prospectus/Proxy Statement.
(i) The parties hereto will cooperate in the preparation of an
appropriate prospectus/proxy statement satisfying all applicable requirements
of the Securities Exchange Commission ("SEC") promulgated under the Securities
Exchange Act of 1934, as amended (the "Securities Exchange Act"), and the rules
and regulations thereunder and applicable state law (such prospectus/proxy
statement in the form mailed by Olympus to Olympus stockholders, together with
any and all amendments or supplements thereto, being herein referred to as the
"Prospectus/Proxy Statement").
(ii) WMI will furnish such information concerning WMI and its
subsidiaries as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to such corporations, to comply with Section 1(g)(i).
WMI agrees promptly to advise Olympus if at any time prior to the Olympus
Stockholders'
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<PAGE> 92
Meeting any information provided by WMI for inclusion in the Prospectus/Proxy
Statement becomes incorrect or incomplete in any material respect and to
provide the information needed to correct such inaccuracy or omission. WMI
will continue to furnish Olympus with such supplemental information as may be
necessary in order to cause such Prospectus/Proxy Statement, insofar as it
relates to WMI and its subsidiaries, to comply with Section 1(g)(i) after the
mailing thereof to Olympus stockholders.
(iii) WMI will prepare and file with the SEC a registration statement on
Form S-4 (together with amendments thereto, the "Registration Statement")
containing the Prospectus/Proxy Statement in connection with the registration
under the Securities Act of the WMI Common Stock to be issued in connection
with the Merger, use all reasonable efforts to have or cause the Registration
Statement to become effective as promptly as practicable, and take any other
action required to be taken under any applicable federal or state securities
laws in connection with the issuance of WMI Common Stock in the Merger. WMI
will advise Olympus promptly when the Prospectus/Proxy Statement has been
approved for use in all necessary states.
(h) Accounting Treatment.
(i) The parties hereto intend for the Merger to be treated as a pooling
of interests for accounting purposes. From and after the Original Agreement
Date and until the Effective Time, neither WMI, WM Bank nor Olympus nor any of
their respective subsidiaries or other affiliates (i) knowingly has taken or
shall take any action, or knowingly has failed or shall fail to take any
action, that would jeopardize the treatment of the Merger as a "pooling of
interests" for accounting purposes; or (ii) has entered into or shall enter
into any contract, agreement, commitment or arrangement with respect to the
foregoing; provided, however, that no action or omission by any party shall
constitute a breach of this sentence if such action or omission is permitted by
the terms of this Agreement or is made with the written consent of the other
parties hereto. The persons specified on Exhibit B-1 hereto may be deemed to
be "affiliates" of Olympus for purposes of the Securities and Exchange
Commission's ASR 135. WMI has received from each person so identified, a
written agreement in the form of Exhibit B-2 hereof. Prior to the Effective
Time, Olympus shall use all reasonable efforts to cause any additional person
who becomes or is identified as an "affiliate" to execute such an agreement.
(ii) WMI shall have the right to place a restrictive legend on all
shares of WMI Common Stock to be received by an "affiliate" so as to preclude
their transfer or disposition in violation of such letters, to instruct its
transfer agent not to permit the transfer of any such shares and/or to take any
other steps reasonably necessary to ensure compliance with ASR 135. Prior to
30 days before the Effective Time, stock certificates evidencing ownership of
all Olympus Common Stock by Olympus "affiliates" shall be delivered to Olympus
and Olympus (prior to
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<PAGE> 93
the Effective Time) and WMI (after the Effective Time) shall retain such
certificates or certificates of WMI Common Stock into which they are exchanged
until such time as financial results covering at least 30 days of combined
operations of the merged party shall have been published, at which time such
certificates shall be released.
(iii) Notwithstanding the above, WMI, in its sole discretion, may elect
at any time not to proceed with qualifying the Merger to be treated as a
pooling of interests for accounting purposes in which case the restrictions in
this Section 1(h) shall no longer be applicable.
2. Effective Time; Closing. The Merger shall become effective at the time
(not earlier than January 1, 1995) of the occurrence of both (a) the filing of
the articles of merger with the Secretary of State of the State of Washington
(the "Secretary") and (b) delivery to the Division of Corporations and
Commercial Code of the State of Utah (the "Division") of the articles of
merger, or at such later time after such filing and delivery as is provided in
the articles of merger. As used herein, the term "Effective Time" shall mean
the date and time when the Merger becomes effective. As used herein, the term
"Effective Date" shall mean the day on which the Effective Time occurs. The
parties intend that the Effective Time shall occur after the close of business
on the first Friday which is at least ten business days following the
satisfaction of the conditions set out in Section 7.1(a) and (b) below. A
closing (the "Closing") shall take place prior to the Effective Time at the
offices of Foster Pepper & Shefelman, 1111 Third Avenue, Suite 3400, Seattle,
Washington, or at such other place as the parties hereto may mutually agree
upon for the Closing to take place.
3. Option to Purchase Certain Shares. As a condition of the execution of the
Original Agreement, WMSB required the delivery by Olympus of an option (the
"Option Agreement"), dated the Original Agreement Date, a copy of which is
attached hereto as Exhibit C-1, entitling WMSB to purchase shares of Olympus
Common Stock at a price per share stated therein. Concurrent with the
execution of this Agreement, WM Bank shall assign its rights under the Option
Agreement to WMI pursuant to an assignment (the "Option Assignment")
substantially in the form attached hereto as Exhibit C-2.
4. Representations and Warranties of Olympus and Olympus Bank. The "Olympus
Disclosure Schedules" shall mean all of the disclosure schedules required by
this Agreement, dated as of the Original Agreement Date, which were delivered
to WMSB and NFSB. Olympus and Olympus Bank hereby jointly and severally
represent and warrant to WMI and WM Bank as follows (it being understood that,
except as otherwise provided below, the following representations and
warranties are being made by Olympus and Olympus Bank as of the Original
Agreement Date; provided, however, that the reference in this parenthetical to
the "Original Agreement Date" shall be deemed not to be an earlier date to
which the representations and
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<PAGE> 94
warranties below related for purposes of the parenthetical in Section 7.2(a)):
4.1 Organization, Power, Good Standing, Etc.
(a) Olympus is a corporation duly organized, validly existing and in good
standing under the laws of the State of Utah. Olympus Bank is a federally
chartered savings bank duly organized and validly existing under the laws of
the United States, the charter of which is in full force and effect and for
which no conservator or receiver has been appointed. Each of Olympus and
Olympus Bank has all the requisite corporate power and authority to own, lease
and operate all of its properties and assets and to carry on its business as
currently conducted. Each of Olympus and Olympus Bank is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the nature of the business conducted by it makes such licensing or
qualification necessary and where the failure to be so qualified would,
individually or in the aggregate, have a Material Adverse Effect (as defined
below) on Olympus. Olympus Bank accounts are insured by the Savings
Association Insurance Fund (the "SAIF") administered by the Federal Deposit
Insurance Corporation (the "FDIC") in accordance with the Federal Insurance
Deposit Act. Olympus Bank is a member in good standing of the Federal Home
Loan Bank of Seattle. Olympus is a savings and loan holding company duly
registered with the Office of Thrift Supervision (the "OTS"). Olympus Bank is
a qualified thrift lender pursuant to Section 10(m) of the Home Owners' Loan
Act ("HOLA"). Each of Olympus and Olympus Bank has heretofore delivered or
made available to WMI or WM Bank true and correct copies of its Articles of
Incorporation or Charter, as the case may be, (together, the "Articles") and
its bylaws as in effect on the Original Agreement Date. As used in this
Agreement, the term "Material Adverse Effect" with respect to a party shall
mean any change or effect that is reasonably likely to be materially adverse to
the business, operations, properties, condition (financial or otherwise),
assets or liabilities of such party and such party's subsidiaries taken as a
whole.
(b) Disclosure Schedule 4.1(b) correctly sets forth a list of each firm,
corporation, partnership, joint venture or similar organization which is
consolidated with Olympus for financial reporting purposes and each corporation
a majority of the outstanding capital stock of which is owned by Olympus,
including Olympus Bank and any subsidiary thereof, (each, including Olympus
Bank and any subsidiaries thereof, a "Olympus Subsidiary"). Disclosure
Schedule 4.1(b) also sets forth as to each Subsidiary, the jurisdiction of its
incorporation and the percentage of capital stock owned by Olympus or Olympus
Bank, as the case may be. Except as set forth on Disclosure Schedule 4.1(b),
each Olympus Subsidiary has the corporate power and authority to own, lease and
operate all of its properties and assets and to carry on its business as
currently conducted, if any, and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which the nature of the
business conducted by it or the character or
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<PAGE> 95
location of the properties and assets owned, leased or operated by it make such
qualification necessary and where the failure to be so licensed or qualified
would individually or in the aggregate, have a Material Adverse Effect on
Olympus. Disclosure Schedule 4.1(b) also correctly sets forth a list of each
firm, corporation, partnership, joint venture or similar organization (other
than any entity which is a Olympus Subsidiary) in which Olympus or any Olympus
Subsidiary has a direct or indirect controlling, or 10 percent or greater,
equity interest (an "Investment Entity").
(c) The minute books of Olympus and Olympus Bank contain materially
complete and accurate records of all meetings held and other corporate action
taken, since December 31, 1990, by each company's stockholders and Board of
Directors.
(d) Except as set forth on Disclosure Schedule 4.1(d), Olympus does not
own (beneficially or otherwise) any capital stock or other equity interest in
any corporation or other entity which is not a Subsidiary or Investment Entity.
(e) Each of Olympus and Olympus Bank has each previously delivered to, or
made available for inspection by, WMI or WM Bank true and complete copies of
all agreements to which it is a party or by which it or any of its assets may
be bound, other than loans, credit facility agreements or accounts in the
ordinary course, (i) which relate to any ownership interest by Olympus or
Olympus Bank of an equity interest in any partnership, joint venture, or
similar enterprise, (ii) pursuant to which either Olympus or Olympus Bank may
be required to transfer funds in respect of an equity interest to, make an
investment in, or guarantee or assume any debt, dividend or other obligation
of, any person or entity, partnership, joint venture or similar enterprise, or
(iii) pursuant to which they are or may become an equity investor in a real
estate project.
(f) Olympus owns all of the issued and outstanding shares of stock of
Olympus Bank.
4.2 Capitalization. The authorized capital stock of Olympus consists of
10,000,000 shares of common stock, par value $1.00 per share ("Olympus Common
Stock"). As of the Original Agreement Date, 3,099,639 shares of Olympus Common
Stock were issued and outstanding. No shares of stock are held in Olympus's
treasury. All of the issued and outstanding shares of Olympus Common Stock
have been duly authorized, validly issued, and are fully paid and
non-assessable, with no personal liability attaching to the ownership thereof.
Except to the extent reduced as the result of the exercise of options since the
Original Agreement Date, there are 455,500 shares of Olympus Common Stock
reserved for issuance upon the exercise of outstanding employee and director
stock options but not for any other reason. Except to the extent that options
have been exercised since the Original Agreement Date, Disclosure Schedule 4.2
sets forth a list of all individuals who hold stock options, the number of
shares for which options have been granted to such individuals and the exercise
price for each
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option. Except as set forth in Disclosure Schedule 4.2, neither Olympus nor
any Olympus Subsidiary is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
transfer, purchase, or issuance of any shares of its capital stock or any
securities representing the right to purchase or otherwise receive any shares
of its capital stock or any securities convertible into or representing the
right to purchase or subscribe for any such shares, and there are no agreements
or understandings to which Olympus or any Olympus Subsidiary is a party with
respect to voting any such shares. Except as otherwise set forth on Disclosure
Schedule 4.1(b), all of Olympus's Subsidiaries' capital stock, which is issued
and outstanding, is owned by Olympus.
4.3 Loan Portfolio.
(a) All evidences of indebtedness in current principal amount in excess of
$150,000 reflected as assets in Olympus's March 1994 Financial Statements (as
hereinafter defined) were, as of March 31, 1994, in all respects binding
obligations of the respective obligors named therein and no such indebtedness
is subject to any defenses which have been asserted on or prior to the Original
Agreement Date, or, to the best knowledge of Olympus, may be asserted, except
as set forth on Disclosure Schedule 4.3(a), and except for defenses arising
from applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity. To the
knowledge of Olympus, except for a loan to LifeCare Centers of America with a
principal balance of $556,454, a loan to Jolene Company, Inc. with a principal
balance of $660,219 and a loan to Eugene Barrango in the principal balance of
$649,738, in each case as of June 30, 1994, all such indebtedness in a current
principal amount in excess of $25,000 that is primarily secured by an interest
in real property is secured by a valid and perfected first lien (other than
consumer loans, which include home equity and second mortgage loans).
(b) All loans with a balance in excess of $250,000 as of June 30, 1994
which are secured by property other than 1-4 family residences are listed on
Disclosure Schedule 4.3(b), which indicates, for each such loan, the loan
number, the borrower's name and the unpaid balance as of June 30, 1994.
(c) Except as disclosed on Disclosure Schedule 4.3(c), no loan, all or any
part of which is an asset of Olympus Bank was, as of June 30, 1994, more than
30 days delinquent.
(d) To the knowledge of Olympus, the documentation for each loan (the
"Loan File") is correct and complete to the extent that all Loan Files contain
those documents necessary for Olympus Bank to enforce the loans and realize
upon the security, if any, therefor, including but not limited to properly
executed notes or credit agreements and security documents. In addition, the
Loan Files for all loans secured primarily by real property also contain
evidence of property casualty insurance (or are covered by a
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mortgage protection policy) and, where required by the OTS or other
governmental regulators, appraisals, policies of title insurance (or, in the
case of loans closed within the past three months, commitments therefor) and
policies of flood insurance.
(e) With isolated minor exceptions, each outstanding loan or commitment
to extend credit was solicited and originated and is administered in accordance
with the relevant loan documents and in material compliance with all
requirements of federal, state and local laws and regulations applicable at the
time the loan was originated or modified.
(f) Disclosure Schedule 4.3(f) sets forth as of July 15, 1994, as to each
loan in which Olympus Bank has sold participation interests, the total loan
balance, the percentage of interest sold, the identity of the purchaser and an
indication of whether or not there are any buy-back or guarantee obligations
and whether the percentage of interest retained by Olympus Bank is subordinated
to the percentage of interest sold; provided, however, as to 1-4 family
residential loans such information is provided by loan package sold instead of
individual loans. The same sets forth, as of June 30, 1994, as to each
participation purchased, the total loan balance, the percentage of interest
purchased, the identity of the seller and an indication of whether or not there
are any put-back rights or indemnifications and whether the percentage of
interest purchased by Olympus Bank is superior to the percentage of interest
retained by the seller.
(g) There are no employee, officer, director or other affiliate loans on
which the borrower is paying a rate other than that reflected on the note or
the relevant credit agreement.
4.4 Reports.
(a) Olympus and Olympus Bank have duly filed with the SEC, the FDIC and the
OTS, in correct form in all material respects, the monthly, quarterly,
semiannual and annual reports required to be filed by them under applicable
regulations for all periods subsequent to December 31, 1990. Olympus and
Olympus Bank have previously delivered or made available to WMI or WM Bank
accurate and complete copies of such reports.
(b) Olympus and Olympus Bank have previously delivered or made available to
WMI or WM Bank an accurate and complete copy of each (a) final registration
statement, prospectus, report and definitive proxy statement filed by Olympus
since January 1, 1991 with the SEC, and (b) communication (other than general
advertising materials) mailed by Olympus or Olympus Bank to its stockholders
since January 1, 1991 and no such registration statement, prospectus, report,
proxy statement or communication, as of its date, contained any untrue
statement of a material fact or omitted to state any 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.
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4.5 Authority.
(a) Olympus has requisite corporate power and authority to execute and
deliver the Original Agreement, the Plan of Merger and the Option Agreement
and, subject to the Olympus Stockholder Approval and applicable regulatory
approvals, to consummate the transactions contemplated hereby and thereby. The
execution and delivery of the Original Agreement, this Agreement, the Plan of
Merger, and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved by the
Board of Directors of Olympus. The Original Agreement, this Agreement and the
Option Agreement have been duly and validly executed and delivered by Olympus.
Assuming the due authorization, execution and delivery hereof and thereof by
the other parties hereto and thereto, this Agreement and the Option Agreement
(as assigned by the Option Assignment) constitute valid and binding obligations
of Olympus, enforceable against it in accordance with their respective terms.
(b) Olympus Bank has requisite corporate power and authority to execute and
deliver the Original Agreement and this Agreement and, subject to applicable
regulatory approvals, to consummate the transactions contemplated hereby and
thereby. The execution and delivery of the Original Agreement and this
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly and validly approved by the Board of Directors of
Olympus Bank. The Original Agreement and this Agreement have been duly and
validly executed and delivered by Olympus Bank and, assuming the due
authorization, execution and delivery hereof and thereof by the other parties
hereto, constitutes a valid and binding obligation of Olympus Bank, enforceable
against it in accordance with its terms.
4.6 No Violation. Neither the execution and delivery of this Agreement,
the Plan of Merger or the Option Agreement nor the consummation by Olympus or
Olympus Bank of the transactions contemplated hereby and thereby, nor
compliance by Olympus or Olympus Bank with any of the terms or provisions
hereof or thereof, will (i) assuming Olympus Stockholder Approval, violate any
provision of the Articles or bylaws of Olympus, or the Charter or bylaws of
Olympus Bank, (ii) assuming the consents and approvals referred to in Section
7.1 hereof are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Olympus
or any Olympus Subsidiary, or any of its respective properties or assets, or
(iii) except as set forth on Disclosure Schedule 4.6, violate, conflict with,
result in a breach of any provisions of, constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of, accelerate the performance required by, or
result in the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of Olympus or any Olympus
Subsidiary, under any of the terms, conditions or provisions of any note, bond,
mortgage indenture, deed of trust, license, lease,
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agreement or other instrument or obligation to which Olympus or any Olympus
Subsidiary is a party, or by which it or any of its properties or assets may be
bound or affected, except with respect to (iii) above, for such violations,
conflicts, breaches, defaults, terminations, accelerations and encumbrances
which would not in the aggregate have a Material Adverse Effect on Olympus.
4.7 Consents and Approvals. Except for (i) consents and approvals of or
filings, deliveries or registrations with the SEC, the OTS, the FDIC, the
Director, the Secretary, the Division, the United States Department of Justice
(the "Justice Department"), the Federal Reserve Board or other applicable
governmental authorities, (ii) the approval of the stockholders of Olympus and
(iii) the consents, approvals, filings or registrations set forth on Disclosure
Schedule 4.6, no consents or approvals of or filings or registrations with any
third party or public body or authority, except for consents, approvals,
filings or registrations where the failure to obtain such consents or approvals
or to make such filings or registrations would not prevent or delay the Merger
and would not in the aggregate have a Material Adverse Effect on Olympus, are
necessary in connection with the execution and delivery by Olympus or Olympus
Bank of this Agreement and the consummation of the transactions contemplated
hereby.
4.8 Financial Statements.
(a) Olympus has previously delivered or made available to WMI or WM Bank
copies of (i) the consolidated statements of financial condition of Olympus and
the Olympus Subsidiaries as of December 31, in each of the three fiscal years
1991, 1992 and 1993, and the related consolidated statements of income,
statements of stockholders' equity and statements of cash flows for each of the
three year periods ending, respectively, on December 31, 1991, 1992 and 1993,
as reported in Olympus's Annual Reports filed with the SEC under the Securities
Exchange Act, in each case accompanied by the Olympus audit reports of Deloitte
& Touche, independent public accountants, with respect to Olympus (the "Olympus
1991, 1992 and 1993 Financial Statements," respectively), and (ii) the
unaudited consolidated balance sheet of Olympus as of March 31, 1994 and the
related unaudited consolidated statements of income and statements of cash
flows for the three-month period then ended as reported in Olympus's Quarterly
Reports on Form 10-Q filed with the SEC under the Securities Exchange Act (the
"Olympus March 1994 Financial Statements"). The consolidated statements of
condition of Olympus referred to herein (including the related notes) fairly
present the consolidated financial position of Olympus as of the respective
dates set forth therein, and the other financial statements referred to herein
(including the related notes) fairly present the results of the consolidated
operations and changes in stockholders' equity and cash flows of Olympus for
the respective fiscal periods or as of the respective dates set forth therein,
except that interim unaudited financial statements are subject to normal
year-end adjustments.
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(b) Each of the financial statements referred to in Section 4.8(a)
(including the related notes) has been prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved
(except as indicated in the notes thereto). The books and records of Olympus
have been, and are being, maintained in accordance with applicable legal and
accounting requirements and reflect only actual transactions.
4.9 Brokerage. Except for amounts owed to Goldman, Sachs & Co., there
are no claims for investment banking fees, brokerage commissions, finder's fees
or similar compensation arising out of or due to any act of Olympus or of any
Olympus Subsidiary in connection with the transactions contemplated by this
Agreement or the Original Agreement.
4.10 Absence of Certain Changes or Events. As of the Original Agreement
Date, except as disclosed in Disclosure Schedule 4.10, there had not been any
material adverse change in the business, operations, properties, assets or
financial condition of Olympus and the Olympus Subsidiaries, taken as a whole,
from that described in the 1993 Annual Report or the Olympus March 1994
Financial Statements (except for changes resulting from market and economic
conditions which generally affect the savings industry as a whole, including,
without limitation changes in law or regulation, and changes in generally
accepted accounting principles or interpretations thereof) and, to the best of
Olympus's knowledge, no fact or condition existed as of the Original Agreement
Date that Olympus had reason to believe would cause such a material adverse
change after the Original Agreement Date.
4.11 Litigation, Etc. As of the Original Agreement Date, except as
disclosed on Disclosure Schedule 4.11, there were no actions, suits, claims,
inquiries, proceedings or, to the knowledge of Olympus, investigations before
any court, commission, bureau, regulatory, administrative or governmental
agency, arbitrator, body or authority pending or, to the knowledge of Olympus,
threatened against Olympus or any Olympus Subsidiary which would reasonably be
expected to result in any liabilities, including defense costs, in excess of
$250,000 in the aggregate. Except as disclosed on Disclosure Schedule 4.11,
neither Olympus nor any Olympus Subsidiary is subject to any order, judgment or
decree and neither Olympus nor any Olympus Subsidiary is in default with
respect to any such order, judgment or decree.
4.12 Taxes and Tax Returns.
(a) The amounts set up as provisions for taxes on the Olympus March 1994
Financial Statements are sufficient for all material accrued and unpaid
federal, state, county and local taxes, interest and penalties of Olympus and
all Olympus Subsidiaries, whether or not disputed, for the period ended March
31, 1994 and for all fiscal periods prior thereto. Only the federal income tax
returns of Olympus and Olympus Bank for the fiscal years ending in
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1990, 1991, 1992 and 1993 are subject to audit or adjustment by the Internal
Revenue Service or the applicable taxing authorities. Complete and correct
copies of the income tax returns of Olympus and each Olympus Subsidiary for the
five fiscal years ending December 31, 1993, as filed with the Internal Revenue
Service and all state and local taxing authorities, together with all related
correspondence and notices, have previously been delivered or made available to
WMI or WM Bank.
(b) Each of Olympus and each Olympus Subsidiary has timely and correctly
filed all federal, state, county and local tax and other returns and reports
(collectively, "Returns") required by applicable law to be filed (including,
without limitation, estimated tax returns, income tax returns, excise tax
returns, sales tax returns, use tax returns, property tax returns, franchise
tax returns, information returns and withholding, employment and payroll tax
returns), except to the extent that the failure to timely or correctly file
such returns does not result in aggregate penalties or assessments of more than
$25,000 or a reduction in federal income tax net operating loss carryforward
deductions of more than $75,000, and have paid all taxes, levies, license and
registration fees, charges or withholdings of any nature whatsoever shown by
such Returns to be owed, or which are otherwise due and payable (hereinafter
called "Taxes"), and to the extent any material liabilities for Taxes have not
been fully discharged, full and complete reserves have been established on the
Olympus 1993 Financial Statements. Neither Olympus nor any Olympus Subsidiary
is in default in the payment of any Taxes due or payable or any assessments
received in respect thereof except for Taxes which are being contested in good
faith. No additional assessments of Taxes are known to Olympus or any Olympus
Subsidiary to be proposed, pending or threatened, other than Taxes for periods
for which returns are not yet filed.
(c) Olympus has not filed a consent to the application of Section 341(f)
of the Internal Revenue Code of 1986, as amended.
4.13 Employees; Employee Benefit Plans.
(a) As of the Original Agreement Date, except as set forth in Disclosure
Schedule 4.13(a)(i) neither Olympus nor any Olympus Subsidiary was a party to
or bound by any contract, arrangement or understanding (whether written or
oral) with respect to the employment or compensation of any officers, employees
or consultants and except as provided herein, and under those Benefit Plans (as
defined below) set forth in Disclosure Schedule 4.13(a)(ii), consummation of
the transactions contemplated by this Agreement will not (either alone or upon
the occurrence of any additional acts or events) result in any payment (whether
of severance pay or otherwise) becoming due from Olympus or any Olympus
Subsidiary to any officer or employee thereof. Olympus has previously
delivered or made available to WMI or WM Bank true and complete copies of all
employment, consulting and deferred
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compensation agreements that are in writing, to which Olympus or any Olympus
Subsidiary is a party.
(b) Except as set forth on Disclosure Schedule 4.13(b), as of the Original
Agreement Date, no officer or employee of Olympus or any Olympus Subsidiary was
receiving aggregate remuneration (bonus, salary and commissions) at a rate
which, if annualized, would exceed $50,000 in 1994.
(c) Except as disclosed on Disclosure Schedule 4.13(c), as of the Original
Agreement Date, there were not, and had not been at any time in the past three
years, any actions, suits, claims or proceedings before any court (which have
been served on Olympus or Olympus Bank), commission, bureau, regulatory,
administrative or governmental agency, arbitrator, body or authority pending
or, to the best of Olympus's knowledge, threatened by any employees, former
employees or other persons relating to the employment practices or activities
of Olympus or any Olympus Subsidiary (except for threatened actions which had
subsequently been resolved as of the Original Agreement Date). Neither Olympus
nor any Olympus Subsidiary is a party to any collective bargaining agreement,
and no union organization efforts are pending or, to the best of Olympus's
knowledge, threatened nor have any occurred during the last three years.
(d) Olympus and Olympus Bank have made available to WMI or WM Bank true
and complete copies of all personnel codes, practices, procedures, policies,
manuals, affirmative action programs and similar materials.
(e) With respect to all employee benefit plans, Olympus and Olympus Bank
represent and warrant as follows:
(i) All employee benefit plans, as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any
other pension, bonus, deferred compensation, stock bonus, stock purchase,
post-retirement medical, hospitalization, health and other employee benefit
plan, program or arrangement, whether formal or informal, under which Olympus
or any Olympus Subsidiary has any obligation or liability, or under which any
employee or former employee has any rights to benefits (the "Benefit Plans")
are set forth on Disclosure Schedule 4.13(e)(i). All Benefit Plans that are
subject to the funding requirements in Title I, Subtitle B, Part 3 of ERISA or
Section 412 of the Internal Revenue Code of 1986, as amended (the "Code"), are
in compliance with such funding standards, and no waiver or variance from such
funding requirements has been obtained or applied for under Section 412(d) of
the Code. None of the Benefit Plans is subject to Title IV of ERISA or is a
"multiemployer plan," as such term is defined in Section 3(37) and 4001(a)(3)
of ERISA and Section 414(f) of the Code.
(ii) In all material respects, the terms of the Benefit Plans are, and the
Benefit Plans have been administered, in
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accordance with the requirements of ERISA, the Code, applicable law and the
respective plan documents. Except as disclosed on Disclosure Schedule
4.13(e)(ii), none of the Benefit Plans is under audit or is the subject of an
investigation by the Internal Revenue Service, the U.S. Department of Labor or
any other federal or state governmental agency. Except as disclosed on
Disclosure Schedule 4.13(e)(ii), all material reports and information required
to be filed with, or provided to, the United States Department of Labor,
Internal Revenue Service, the Pension Benefit Guaranty Corporation (the "PBGC")
and plan participants and beneficiaries with respect to each Benefit Plan have
been timely filed or provided. With respect to each Benefit Plan for which an
annual report has been filed, no material change has occurred with respect to
the matters covered by the most recent annual report since the date thereof.
(iii) Except as disclosed on Disclosure Schedule 4.13(e)(iii) neither
Olympus nor Olympus Bank is aware of any facts regarding any Benefit Plan which
is an "employee pension benefit plan" as defined in Section 3(2) of ERISA
(collectively, the "Employee Pension Benefit Plans") that would present a
significant risk that any Employee Pension Benefit Plan would not be determined
by the appropriate District Director of the Internal Revenue Service to be
"qualified" within the meaning of Section 401(a) of the Code, or with respect
to which any trust maintained pursuant thereto is not exempt from federal
income taxation pursuant to Section 501 of the Code, or with respect to which a
favorable determination letter could not be issued by the Internal Revenue
Service with respect to each such Employee Pension Benefit Plan.
(iv) Prior to the Closing, Olympus and Olympus Bank shall deliver or make
available to WMI or WM Bank complete and correct copies (if any) of (w) the
most recent Internal Revenue Service determination letter relating to each
Employee Pension Benefit Plan intended to be tax qualified under Section 401(a)
and 501(a) of the Code, (x) the most recent annual report (Form 5500 Series)
and accompanying schedules of each Benefit Plan, filed with the Internal
Revenue Service or an explanation of why such annual report is not required,
(y) the most current summary plan description for each Benefit Plan, and (z)
the most recent audited financial statements of each Benefit Plan.
(v) With respect to each Benefit Plan, all contributions, premiums or
other payments due or required to be made to such plans as of the Effective
Time have been or will be made or accrued prior to the Effective Time.
(vi) To the best of Olympus's and Olympus Bank's knowledge, there are not
now, nor have there been, any "prohibited transactions", as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, involving Olympus,
Olympus Bank, or any officer, director or employee of Olympus or Olympus Bank,
with respect to the Benefit Plans that could subject Olympus or Olympus Bank or
any other party-in-interest to the penalty or tax imposed under Section 502(i)
of ERISA and Section 4975 of the Code.
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(vii) As of the Original Agreement Date, no claim, lawsuit, arbitration or
other action has been instituted, asserted (and no such lawsuit has been served
on Olympus or Olympus Bank) or, to the best of Olympus and Olympus Bank's
knowledge, threatened by or on behalf of such Benefit Plan or by any employee
alleging a breach or breaches of fiduciary duty or violations of other
applicable state or federal law with respect to such Benefit Plans, which could
result in liability on the part of Olympus or any Olympus Subsidiary or a
Benefit Plan under ERISA or any other law, nor is there any known basis for
successful prosecution of such a claim, and WMI or WM Bank will be notified
promptly in writing of any such threatened or pending claim arising between the
date hereof and the Closing.
(viii) Except (A) as set forth on Disclosure Schedule 4.13(e)(viii) (such
disclosure being made in accordance with the principles of Financial Accounting
Standard No. 106 of the Financial Accounting Standards Board), (B) as may be
required by the Consolidated Omnibus Budget and Reconciliation Act of 1985, as
amended ("COBRA") or (C) as to medical coverage in place as of the Original
Agreement Date for John Adams, Brent Shaw and Joan Wagner, no Benefit Plan
which is an employee welfare benefit plan (within the meaning of Section 3(1)
of ERISA) provides for continuing benefits or coverage for any participant or
beneficiary of a participant after such participant's termination of employment
nor does Olympus or any Olympus Subsidiary have any current or projected
liability under any such plans.
(ix) Except as set forth on Disclosure Schedule 4.13(e)(ix)(A), Olympus
and the Olympus Subsidiaries have not maintained or contributed to, and do not
currently maintain or contribute to, any severance pay plan. All payments
(other than regular wages and vacation pay) made to employees of Olympus or the
Olympus Subsidiaries coincident with or in connection with termination of
employment since January 1, 1993 are disclosed on Disclosure Schedule
4.13(e)(ix)(B).
(x) Except as provided in Sections 6.13 and 6.14, and under Disclosure
Schedule 4.13(a)(ii) no individual will accrue or receive any additional
benefits, service, or accelerated rights to payment or vesting of benefits
under any Benefit Plan as a result of the transactions contemplated by this
Agreement.
(xi) Olympus and each Olympus Subsidiary has complied in all material
respects with all of the requirements of COBRA.
(xii) All amendments required to bring all Benefit Plans into conformity
with any of the applicable provisions of ERISA and the Code have been duly
adopted or will be duly adopted as of the Effective Date, subject to further
revisions that may be required by the Internal Revenue Service.
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(xiii) Except as set forth on Disclosure Schedule 4.13(a)(ii), there are
no Benefit Plans or other arrangements of Olympus or the Olympus Subsidiaries
under which any individual can or will receive an "excess parachute payment" as
defined in Section 280G(b)(1) of the Code.
4.14 Olympus and Olympus Bank Information. The information relating to
Olympus to be contained in the Prospectus/Proxy Statement contemplated by
Section 1(g) hereof will not, at the time it is filed with the applicable
governmental authorities, as of the date thereof, or at the date actions of
Olympus shareholders are taken with respect to the transactions contemplated
therein, contain any untrue statement of a material fact or omit to state a
material fact necessary to make such statements, in light of the circumstances
under which such statements were made, not misleading.
4.15 Compliance With Applicable Law.
(a) Olympus and each Olympus Subsidiary hold all licenses, certificates,
franchises, permits and other governmental authorizations ("Permits") necessary
for the lawful conduct of their respective businesses and such Permits are in
full force and effect, and Olympus and each Olympus Subsidiary are in all
respects complying therewith, except where the failure to possess or comply
with such Permits would not have a Material Adverse Effect on Olympus.
(b) Except as set forth on Disclosure Schedule 4.15(b), each of Olympus
and each Olympus Subsidiary is and for the past three years has been in
compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules, regulations and orders applicable to the operation, conduct
or ownership of its business or properties except for any noncompliance which
is not reasonably likely to have in the aggregate a Material Adverse Effect on
Olympus.
4.16 Contracts and Agreements.
(a) Olympus and Olympus Bank have previously delivered to, or made
available for inspection by, WMI and WM Bank each insurance policy to which
Olympus or any Olympus Subsidiary is a party (other than insurance policies
under which Olympus or Olympus Bank is named as a loss payee or additional
insured as a result of its position as a secured lender).
(b) As of the Original Agreement Date, except as disclosed in Disclosure
Schedule 4.16(b), (i) except with respect to deposits or other borrowings in
the ordinary course, neither Olympus nor any Olympus Subsidiary was a party to
or bound by any commitment, contract, agreement or other instrument which
involves or could involve aggregate future payments by Olympus or any Olympus
Subsidiary of more than $25,000, (ii) neither Olympus nor any Olympus
Subsidiary was a party to nor was it bound by any
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commitment, contract, agreement or other instrument which is material to the
business, operations, properties, assets or financial condition of Olympus and
the Olympus Subsidiaries taken as a whole and (iii) no commitment, contract,
agreement or other instrument other than Olympus or Olympus Bank's charter
documents, to which Olympus or any Olympus Subsidiary was a party or by which
it was bound, limited the freedom of Olympus or any Olympus Subsidiary to
compete in any line of business or with any person.
4.17 Affiliate Transactions.
(a) Except as disclosed in Disclosure Schedule 4.17 or in Olympus's proxy
statements relating to its annual meetings of shareholders, and except as
specifically contemplated by this Agreement, since January 1, 1990, neither
Olympus nor Olympus Bank has engaged in, or is currently obligated to engage in
(whether in writing or orally), any transaction with any Affiliated Person (as
defined below) involving aggregate payments by or to Olympus or Olympus Bank of
$60,000 or more during any consecutive 12 month period other than transactions
between or among Olympus or any Olympus Subsidiary which are not in violation
of Sections 23A and 23B of the Federal Reserve Act.
(b) For purposes of this Section 4.17, Affiliated Person means:
(i) a director, executive officer or Controlling Person (as defined
below) of either Olympus or Olympus Bank;
(ii) a spouse of a director, executive officer or Controlling Person of
either Olympus or Olympus Bank;
(iii) a member of the immediate family of a director, executive
officer, or Controlling Person of either Olympus or Olympus Bank who has the
same home as such person;
(iv) any corporation or organization (other than Olympus or a Olympus
Subsidiary) of which a director, executive officer or Controlling Person of
Olympus or Olympus Bank (w) is a chief executive officer, chief financial
officer, or a person performing similar functions; (x) is a general partner;
(y) is a limited partner who, directly or indirectly, either alone or with his
spouse and the members of his immediate family who are also Affiliated Persons,
owns an interest of five percent or more in the partnership (based on the value
of his contribution) or who, directly or indirectly through other directors,
executive officers and Controlling Persons of Olympus or Olympus Bank and their
spouses and their immediate family members who are also Affiliated Persons,
owns an interest in 25 percent or more of the partnership; or (z) directly or
indirectly either alone or with his spouse and the members of his immediate
family who are also Affiliated Persons, owns or controls ten percent or more of
any class of equity securities, or owns or controls, with other directors,
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executive officers, and Controlling Persons of Olympus or Olympus Bank and
their spouses and their immediate family members who are also Affiliated
Persons, 25 percent or more of any class of equity securities;
(v) any trust or estate in which a director, executive officer, or
Controlling Person of Olympus or Olympus Bank or the spouse of such person has
a substantial beneficial interest or as to which such person or his spouse
serves as trustee or in a similar fiduciary capacity.
(c) For purposes of this Section 4.17 a Controlling Person is any person
or entity which, either directly or indirectly, or acting in concert with one
or more other persons or entities owns, controls or holds with power to vote,
or holds proxies representing ten percent or more of the outstanding Olympus
Common Stock.
(d) For purposes of this Section 4.17, the term "director" means any
director, trustee, or other person performing similar functions with respect to
any organization whether incorporated or unincorporated.
(e) For purposes of this Section 4.17, the term "executive officer" means
the president, any executive vice president, any senior vice president, the
secretary, the treasurer, the comptroller, and any other person performing
similar functions with respect to any organization whether incorporated or
unincorporated.
4.18 Disclosure. To the knowledge of Olympus, no representation or warranty
of Olympus or Olympus Bank contained in this Agreement, and no statement
contained in the Disclosure Schedules delivered by Olympus or Olympus Bank
hereunder, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make a statement herein or therein, in
light of the circumstances under which it was made, not misleading.
4.19 Title to Property.
(a) Real Property. Disclosure Schedule 4.19(a) contains a description
of all interests in real property (other than real property security interests
received in the ordinary course of business), whether owned, leased or
otherwise claimed, including a list of all leases of real property, in which
Olympus and any Olympus Subsidiary had or claimed an interest as of the
Original Agreement Date and any guarantees of any such leases by any of such
parties. True and complete copies of such leases have previously been
delivered or made available to WMI or WM Bank, together with all amendments,
modifications, agreements or other writings related thereto. Except as
disclosed on Disclosure Schedule 4.19(a), each such lease is legal, valid and
binding as between Olympus, or a Olympus Subsidiary and the other party or
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parties thereto, and the occupant is a tenant or possessor in good standing
thereunder, free of any default or breach whatsoever and quietly enjoys the
premises provided for therein. Except as disclosed on Disclosure Schedule
4.19(a), Olympus and each Olympus Subsidiary had good, valid and marketable
title to all real property owned by them on the Original Agreement Date, free
and clear of all mortgages, liens, pledges, charges or encumbrances of any
nature whatsoever, except liens for current taxes not yet due and payable, and
such encumbrances and imperfections of title, if any, as do not materially
detract from the value of the properties and do not materially interfere with
the present or proposed use of such properties or otherwise materially impair
such operations. All real property and fixtures material to the business,
operations or financial condition of Olympus and each Olympus Subsidiary are in
substantially good condition and repair.
(b) Environmental Matters. Except as set forth on Disclosure Schedule
4.19(b), to the knowledge of Olympus, the real property owned or leased by any
of Olympus or any Olympus Subsidiary on the Original Agreement Date did not
contain any underground storage tanks, asbestos, ureaformaldehyde, uncontained
polychlorinated biphenyls, or, except for materials which are ordinarily used
in office buildings and office equipment such as janitorial supplies and do not
give rise to financial liability therefor under the hereafter defined
Environmental Laws, releases of hazardous substances as such terms may be
defined by all applicable federal, state or local environmental protection laws
and regulations ("Environmental Laws"). As of the Original Agreement Date (i)
no part of any such real property had been listed, or to the knowledge of
Olympus, proposed for listing on the National Priorities List pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or on a registry or inventory of inactive hazardous waste sites maintained by
any state, and, (ii) except as set forth on Disclosure Schedule 4.19(b), no
notices had been received alleging that Olympus or any Olympus Subsidiary was a
potentially responsible person under CERCLA or any similar statute, rule or
regulation. Neither Olympus nor any Olympus Subsidiary knows of any violation
of law, regulation, ordinance (including, without limitation, laws, regulations
and ordinances with respect to hazardous waste, zoning, environmental, city
planning or other similar matters) relating to its respective properties, which
violations could have in the aggregate a Materially Adverse Effect on Olympus.
(c) Tangible Personal Property. Disclosure Schedule 4.19(c) contains (i)
a list of each item of machinery, equipment, or furniture, including without
limitation computers and vehicles, of Olympus or any Olympus Subsidiary,
included on the consolidated financial statements on March 31, 1994 at a
carrying value of, or, if acquired after March 31, 1994, for a purchase price
of, more than $25,000, (ii) a list of each lease or other agreement under which
any such item of personal property is leased, rented, held or operated and
(iii) a list of all trademarks, trade
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names or service marks currently used, owned, or registered for use by Olympus
or any Olympus Subsidiary.
4.20 Insurance. Disclosure Schedule 4.20 contains a true and complete list
and a brief description (including name of insurer, agent, coverage and
expiration date) of all insurance policies in force on the Original Agreement
Date with respect to the business and assets of Olympus and each Olympus
Subsidiary (other than insurance policies under which Olympus or Olympus Bank
is named as a loss payee or additional insured as a result of its position as a
secured lender). Olympus and each Olympus Subsidiary are in compliance with
all of the material provisions of its insurance policies and are not in default
under any of the terms thereof. Each such policy is outstanding and in full
force and effect and, except as set forth on Disclosure Schedule 4.20, Olympus
is the sole beneficiary of such policies. All premiums and other payments due
under any such policy have been paid.
4.21 Powers of Attorney. Neither Olympus nor any Olympus Subsidiary has any
powers of attorney outstanding other than those issued pursuant to the
requirements of regulatory authority or in the ordinary course of business with
respect to routine matters.
4.22 Employee Stock Bonus Plan. Olympus does not issue or contribute new
shares of Olympus Common Stock to the Employee Stock Bonus Plan, all shares of
Olympus Common Stock owned by the Employee Stock Bonus Plan are purchased in
the open market or through private transactions with third parties, and the
Plan has an independent trustee.
4.23 Community Reinvestment Act Compliance. Olympus Bank is in substantial
compliance with the applicable provisions of the Community Reinvestment Act of
1977 and the regulations promulgated thereunder (collectively, "CRA"). Neither
Olympus nor Olympus Bank has been advised of the existence of any fact or
circumstance or set of facts or circumstances which, if true, would cause
Olympus Bank to fail to be in substantial compliance with such provisions or to
have its current rating lowered. Any change in the current rating which would
prohibit the Merger from being consummated shall be a material adverse change
in the business of Olympus and Olympus Bank.
4.24 Agreements with Bank Regulators. Neither Olympus nor Olympus Bank is a
party to or is subject to any written order, decree, agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is a recipient of any currently applicable extraordinary supervisory
letter from, any federal or state governmental agency or authority charged with
the supervision or regulation of depository institutions or the insurance of
deposits therein which is outside the ordinary course of business or not
generally applicable to entities engaged in the same business. Neither Olympus
nor Olympus Bank has been advised within the last 18 months by any such
regulatory authority that such authority is contemplating issuing,
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requiring or requesting (or is considering the appropriateness of issuing,
requiring or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter or submission.
5. Representations and Warranties of WMI, WM Bank and NFSB. WMI, WM Bank and
NFSB hereby jointly and severally represent and warrant to Olympus and Olympus
Bank as follows:
5.1 Corporate Organization.
(a) WMI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington. WMI has all the requisite
power and authority to own, lease and operate all of its properties and assets
and to carry on its business as it is currently conducted, and is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of business conducted by it makes such licensing or
qualification necessary and where failure to be so qualified would,
individually or in the aggregate, have a Material Adverse Effect on WMI. WMI
owns, directly or indirectly, all of the outstanding capital stock of WM Bank,
NFSB and WMFSB. WMI is a savings and loan holding company duly registered and
in good standing with the OTS.
(b) WM Bank is a state-chartered stock savings bank duly organized, validly
existing and in good standing under the laws of the state of Washington. WM
Bank has all the requisite power and authority to own, lease and operate all of
its properties and assets and to carry on its business as it is currently
conducted, and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it makes such licensing or qualification necessary and where failure to be so
qualified would, individually or in the aggregate, have a Material Adverse
Effect on WM Bank. WM Bank accounts are insured by the Bank Insurance Fund and
the SAIF, both administered by the FDIC, to the fullest extent permitted by
law. WM Bank is a savings and loan holding company duly registered and in good
standing with the OTS. WM Bank is a qualified thrift lender pursuant to
Section 10(m) of HOLA.
(c) The Restructuring was consummated in accordance with all applicable
law. All consents or approvals of or filings or registrations with any third
parties, shareholders, or any public body or authority necessary to be obtained
or made by WMI, WM Bank or WMSB in order to effect the Restructuring were
obtained or made.
(d) NFSB is, and at the Original Agreement Date was, a federally chartered
savings association. NFSB has the corporate power and authority to own, lease
and operate all of its properties and assets and to carry on its business as it
is currently conducted, and is, and at the Original Agreement Date was, duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by
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it makes such licensing or qualification necessary and where failure to be so
qualified would, individually or in the aggregate, materially adversely affect
the financial ability of WMI to consummate the Merger. NFSB accounts are, and
at the Original Agreement Date were, insured by the SAIF administered by the
FDIC. NFSB is, and at the Original Agreement Date was, a member in good
standing of the Federal Home Loan Bank of Seattle. NFSB is, and at the
Original Agreement Date was, a qualified thrift lender pursuant to Section
10(m) of HOLA.
(e) Each of WMI, WMSB and NFSB has heretofore delivered to Olympus true and
correct copies of its Charter and its bylaws as in effect on the date hereof.
5.2 Authority.
(a) WMI has full corporate power and authority to execute and deliver
this Agreement, the Plan of Merger and the Option Assignment, and, subject to
applicable regulatory approvals, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, the Plan of Merger and
the Option Assignment and consummation of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of WMI. This
Agreement and the Option Assignment have been duly and validly executed and
delivered by WMI and, assuming the due authorization, execution and delivery
thereof by the other parties thereto, constitute valid and binding obligations
of WMI, enforceable against it in accordance with their respective terms.
(b) WMSB had full corporate power and authority to execute and deliver
the Original Agreement and the Option Agreement, and, subject to applicable
regulatory approvals, to consummate the transactions contemplated by the
Original Agreement. The execution and delivery of the Original Agreement and
the Option Agreement and the consummation of the transactions contemplated
thereby were duly and validly approved by the Board of Directors of WMSB. The
Original Agreement and the Option Agreement were duly and validly executed and
delivered by WMSB and, assuming the due authorization, execution and delivery
thereof by the other parties thereto, constituted valid and binding obligations
of WMSB, enforceable against it in accordance with their respective terms.
(c) WM Bank has full corporate power and authority to execute and deliver
this Agreement and the Option Assignment, and, subject to applicable regulatory
approvals, to consummate the transactions relating to WM Bank contemplated
hereby. The execution and delivery of this Agreement and the Option Assignment
and consummation of the transactions relating to WM Bank contemplated hereby
have been duly and validly approved by the Board of Directors of WM Bank. This
Agreement and the Option Assignment have been duly and validly executed and
delivered by WM Bank and, assuming the due authorization, execution and
delivery thereof by the other parties thereto, constitute valid and binding
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obligations of WM Bank, enforceable against it in accordance with their
respective terms.
(d) (i) NFSB has full corporate power and authority to execute and
deliver this Agreement and, subject to applicable regulatory approvals, at the
Effective Time to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of NFSB (excepting only the Bank Merger). This Agreement
has been duly and validly executed and delivered by NFSB and, assuming the due
authorization, execution and delivery thereof by Olympus and Olympus Bank,
constitutes a valid and binding obligation of NFSB, enforceable against it in
accordance with its terms.
(ii) NFSB had full corporate power and authority to execute and deliver
the Original Agreement, and, subject to applicable regulatory approvals, to
consummate the transactions contemplated thereby. The execution and delivery
of the Original Agreement and consummation of the transactions contemplated
thereby were duly and validly approved by the Board of Directors of NFSB
(excepting only the Bank Merger). The Original Agreement was duly and validly
executed and delivered by NFSB and, assuming the due authorization, execution
and delivery thereof by the other parties thereto, constituted a valid and
binding obligation of NFSB, enforceable against it in accordance with its
terms.
5.3 No Violation. Neither the execution and delivery of this Agreement,
the Option Assignment and the Plan of Merger by WMI and NFSB nor the
consummation by WMI, WM Bank and NFSB of the transactions contemplated hereby
and thereby, nor compliance by WMI, WM Bank and NFSB with any of the terms
hereof or thereof, will (i) violate any provision of the Articles of
Incorporation or charter or bylaws of WMI, WM Bank or NFSB, or (ii) assuming
that the consents and approvals referred to in Section 7.1 are duly obtained,
violate any statute, code, ordinance, rule, regulation, judgment, order, writ,
decree or injunction applicable to WMI, WM Bank or NFSB or any of their
respective properties or assets, or (iii) violate, conflict with, result in the
breach of any provisions of, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other encumbrance upon any
of the respective properties or assets of WMI, WM Bank or NFSB under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which WMI, WM Bank or NFSB is a party, or by which they or any of their
respective properties or assets may be bound or affected, except with respect
to (iii) above, for such violations, conflicts, breaches, defaults,
terminations, accelerations or encumbrances which in the aggregate will not
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prevent or delay the consummation of the transactions contemplated hereby.
5.4 Consents and Approvals. Except for consents and approvals of or
filings or registrations with the OTS, the FDIC, the Director, the Secretary,
the Division, the Justice Department and other applicable governmental
authorities, no consents or approvals of or filings or registrations with any
third party or any public body or authority are necessary in connection with
the execution and delivery by WMI of this Agreement and the Plans of Merger.
5.5 WMI Information. The information relating to WMI and its subsidiaries
supplied by WMI for inclusion in the Prospectus/Proxy Statement contemplated by
Section 1(g) hereof will not, at the time the Prospectus/Proxy Statement is
filed with the applicable governmental authorities, as of the date of such
Prospectus/Proxy Statement or at the date stockholder action is taken with
respect to the transactions contemplated therein, contain any untrue statement
of a material fact or omit to state a material fact necessary to make such
statements, in light of the circumstances under which they were made, not
misleading.
5.6 Sufficient Resources. WMI has and will have available at the
Effective Time authorized but unissued shares of WMI Common Stock, and
sufficient funds if WMI elects to pay cash pursuant to Section 1(c)(iii), to
enable it lawfully to satisfy its payment obligations pursuant to this
Agreement. WMI has and will have sufficient management and financial resources
to obtain the required regulatory approvals for the Merger and the Bank Merger.
On the date of this Agreement, there is no pending or, to the knowledge of WMI
or WM Bank, threatened legal or governmental proceeding against WMI or any
subsidiary or affiliate thereof which would affect WMI's or NFSB's ability to
obtain any of the required regulatory approvals or satisfy any of the other
conditions required to be satisfied in order to consummate the transactions
contemplated by this Agreement. WMI will promptly notify Olympus if any of the
representations contained in this Section 5.6 ceases to be true and correct.
5.7 Capitalization, Investments. The authorized capital stock of WMI
consists of 100,000,000 shares of common stock, no par value per share, of
which 61,970,704 shares were, as of December 31, 1994, duly issued and
outstanding, fully paid and non-assessable, and 10,000,000 shares of preferred
stock, of which 6,200,000 shares were, as of November 30, 1994, issued and
outstanding. As used herein, "WMI Subsidiaries" shall mean WM Bank, Washington
Mutual, a Federal Savings Bank, Washington Mutual Federal Savings Bank, WM
Financial, Inc., Murphey Favre, Inc., Composite Research & Management Co., WM
Life Insurance Co., Washington Mutual Insurance Services, Inc. and Mutual
Travel, Inc. Substantially all of the business of WMI and its subsidiaries is
done through WMI and the WMI Subsidiaries. All of the WMI Subsidiaries'
Capital Stock, which is issued and outstanding, is
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owned by WMI directly or indirectly through wholly-owned subsidiaries. There
are outstanding no options, convertible securities, warrants or other rights to
purchase or acquire Capital Stock from any of the WMI Subsidiaries, there is no
commitment of any of the WMI Subsidiaries to issue any of the same and, other
than by operation of law, there are no outstanding agreements, restrictions,
contracts, commitments or demands of any character of which either WMI or any
of the WMI Subsidiaries is aware which relate to the transfer or restrict the
transfer of any shares of the WMI Subsidiaries' Capital Stock owned by WMI or
by any of the WMI Subsidiaries. The common stock of WMI to be issued in the
Merger will have been duly authorized and, when issued in accordance with the
Plan of Merger, (i) will be validly authorized and issued and fully paid and
nonassessable and no shareholder of WMI will have any preemptive rights thereto
and (ii) will be registered under the Securities Act of 1933 and listed for
trading on a national securities exchange or the NASDAQ National Market System.
5.8 Financial Statements. WM Bank made available to Olympus audited
consolidated statements of financial condition for WM Bank and its subsidiaries
as of the end of WM Bank's last three fiscal years, and audited consolidated
statements of (i) operations, (ii) stockholders' equity, and (iii) cash flows
for each of the last three fiscal years, including the notes to such audited
consolidated financial statements, together with the reports of WM Bank's
independent certified public accountants, pertaining to such audited
consolidated financial statements. WM Bank has also furnished Olympus with WM
Bank's unaudited consolidated statements of financial condition for WM Bank and
its subsidiaries as of March 31, 1994, and unaudited consolidated statements of
(i) operations and (ii) cash flows for the interim periods ended March 31, 1993
and 1994, including the notes to such unaudited condensed consolidated
financial statements. For purposes of this Agreement, the "WM Bank Statement"
shall mean the unaudited condensed consolidated statement of financial
condition for WM Bank and its subsidiaries as of March 31, 1994 (including the
notes thereto). The aforesaid audited consolidated statements of financial
condition and the WM Bank Statement present fairly the financial condition of
the companies indicated on a consolidated basis at the dates thereof, using
generally accepted accounting principles consistently applied. Such audited
and unaudited consolidated statements of (i) operations, (ii) stockholders'
equity, (iii) cash flows, and (iv) financial position present fairly the
results of the operations of the companies indicated on a consolidated basis
for the periods or at the dates indicated, using generally accepted accounting
principles consistently applied. Except as and to the extent reflected or
reserved against in the WM Bank Statement, or as otherwise disclosed pursuant
to this Agreement, neither WM Bank nor any of its subsidiaries had, at the date
thereof, any material liabilities or obligations, or any other liabilities or
obligations which in the aggregate would be material, secured or unsecured
(whether accrued, absolute, contingent or otherwise), including, without
limitation, any tax
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liabilities, which should be reflected in the WM Bank Statement in accordance
with generally accepted accounting principles consistently applied. The books
and records of WM Bank and its subsidiaries are maintained in accordance with
generally accepted accounting principles consistently applied.
5.9 Absence of Material Adverse Change. Since March 31, 1994, except as
set forth on Disclosure Schedule 5.9 hereto, there has been (i) no material
adverse change in the financial condition, business or results of operations of
WMI or WM Bank and their affiliates taken as a whole (except for changes
resulting from market and economic conditions which generally affect the
savings industry as a whole), (ii) no loss, destruction or damage to the
properties of WMI or WM Bank or any of their affiliates, which loss,
destruction, or damage is material to WMI or WM Bank and their affiliates taken
as a whole and is not adequately covered by insurance; and (iii) no change in
any of the accounting methods or practices or revaluation of any of the assets
of WMI or WM Bank or their affiliates which is material to WMI or WM Bank and
their affiliates taken as a whole. Since such date, WMI and WM Bank and their
affiliates taken as a whole, have conducted their businesses, in all material
respects, in compliance with applicable federal, state and local laws,
statutes, ordinances and regulations.
5.10 Litigation. Except as set forth on Disclosure Schedule 5.10 hereto,
no action, suit, counterclaim or other litigation, investigation or proceeding
to which WMI or any of its subsidiaries is a party is pending, or is known by
the executive officers of WMI or any of its subsidiaries to be threatened,
against WMI or any of its subsidiaries before any court or governmental or
administrative agency, domestic or foreign which would be reasonably expected
to result in any liabilities which would, in the aggregate, have a Material
Adverse Effect on WMI. Neither WMI nor any of its subsidiaries is subject to
any order, judgment or decree nor is it a party to any supervisory agreement or
arrangement, consensual or otherwise, with any regulatory authority. Neither
WMI nor any of its subsidiaries is in default with respect to any such order,
judgment, decree, agreement or arrangement.
5.11 Brokerage. There are no claims for investment banking fees, brokerage
commissions, finder's fees or similar compensation arising out of or due to any
act of WMI or any of its subsidiaries in connection with the transactions
contemplated by this Agreement or the Original Agreement.
5.12 Reports. WMI, WM Bank and NFSB have duly filed with the Director (or
his predecessor), the FDIC and the OTS, in correct form, the monthly,
quarterly, semi-annual and annual reports required to be filed by them under
applicable regulations for all periods subsequent to December 31, 1991. WMI,
WM Bank and NFSB have previously delivered or made available to Olympus
accurate and complete copies of such reports. WMI and WM Bank have each timely
filed all reports required to be filed by each of them pursuant to
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the Securities Exchange Act and the rules and regulations promulgated
thereunder. WMI, WM Bank and NFSB have previously delivered or made available
to Olympus an accurate and complete copy of each (i) offering circular,
definitive proxy statement filed by each of them since January 1, 1991 with the
FDIC or the SEC, and (ii) communication (other than general advertising
materials) mailed by each of them to its stockholders since January 1, 1991 and
no such offering circular, proxy statement or communication, as of its date,
contained any untrue statement of a material fact or omitted to state any
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.
5.13 Disclosure. To the knowledge of WMI and WM Bank, no representation or
warranty of WMI, WM Bank or NFSB contained in this Agreement, and no statement
contained in the Disclosure Schedules delivered by WMI, WM Bank or NFSB,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make a statement herein or therein, in light of the
circumstances under which it was made, not misleading.
5.14 CRA Compliance. Each of WM Bank and NFSB is in substantial compliance
with the applicable provisions of CRA. Neither WM Bank nor NFSB has been
advised of the existence of any fact or circumstance or set of circumstances
which, if true, would cause WM Bank or NFSB to fail to be in substantial
compliance with such provisions or to have its current rating (if any) lowered.
5.15 Agreements With Bank Regulators. Neither WMI, WM Bank nor NFSB has
been a party to or has been subject to any written order, decree, agreement or
memorandum of understanding with, or any commitment letter or similar
undertaking to, or has been a recipient of any extraordinary supervisory letter
from, any federal or state governmental agency or authority charged with the
supervision or regulation of depository institutions or the insurance of
deposits therein which is outside the ordinary course of business or not
generally applicable to entities engaged in the same business. Neither WMI, WM
Bank nor NFSB has been advised by any such regulatory authority that such
authority is contemplating issuing, requiring or requesting (or is considering
the appropriateness of issuing, requiring or requesting) any such order,
decree, agreement, memorandum of understanding, commitment letter or
submission.
5.16 Compliance With Applicable Law.
(a) WMI and each WMI Subsidiary holds all Permits necessary for the lawful
conduct of their respective businesses and such Permits are in full force and
effect, and WMI and each WMI Subsidiary are in all material respects complying
therewith, except where the failure to possess or comply with such Permits
would not have a Material Adverse Effect on WMI.
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(b) Except as set forth on Disclosure Schedule 5.16(b), each of WMSB
(prior to the Restructure Time), WMI and each WMI Subsidiary is and since June
30, 1991 has been in compliance with all foreign, federal, state and local
laws, statutes, ordinances, rules, regulations and orders applicable to the
operation, conduct or ownership of its business or properties except for any
noncompliance which has not and will not have in the aggregate a Material
Adverse Effect on WMSB (prior to the Restructure Time) or on WMI (after the
Restructure Time).
6. Covenants of the Parties.
6.1 Conduct of the Business of Olympus. During the period from the
Original Agreement Date to the Effective Time, Olympus has conducted and will
conduct the business of Olympus and any Olympus Subsidiary and has engaged and
will engage in transactions only in the ordinary course and consistent with
past practice and with prudent banking practice, except with the written
consent of WMI (which will not be unreasonably withheld, delayed or
conditioned). During such period, Olympus and Olympus Bank have used or will
use their best efforts to (x) preserve the business organizations of Olympus
and each Olympus Subsidiary intact, (y) keep available to them and to WMI the
present services of the employees of Olympus and each Olympus Subsidiary, and
(z) preserve for themselves and for WMI the goodwill of the customers of
Olympus and Olympus Bank and others with whom business relationships exist. In
addition, without limiting the generality of the foregoing, Olympus agrees that
from the date hereof to the Effective Time, except as otherwise consented to or
approved by WMI in writing (which consent or approval shall not be unreasonably
withheld, delayed or conditioned) or as permitted or required by this Agreement
or as required by law (in which case Olympus or Olympus Bank shall notify WMSB
in writing), Olympus will not, and will not cause or permit any Olympus
Subsidiary to:
(a) change any provisions of its Articles or bylaws or any similar
governing documents of Olympus or any Olympus Subsidiary;
(b) change the number of shares of its authorized or issued capital stock
(other than issuance of stock as a result of the exercise of options issued as
of the Original Agreement Date and described on Disclosure Schedule 4.2 or as a
result of the exercise of options pursuant to the Option) or issue, grant or
amend any option, warrant, call, commitment, subscription, right to purchase or
agreement of any character relating to the authorized or issued capital stock
of Olympus or any Olympus Subsidiary, or any securities convertible into shares
of such stock, or split, combine or reclassify any shares of its capital stock,
or declare, set aside or pay any dividend, or other distributions (whether in
cash, stock or property or any combination thereof) in respect of the capital
stock of Olympus or any Olympus Subsidiary, or redeem or otherwise acquire any
shares of such capital stock, it being understood that the restrictions in this
Section 6.1(b) shall not
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apply to the amendment to Olympus's stock option plan contemplated by Section
1(d)(ii) and to any transaction solely between Olympus and a Olympus
Subsidiary;
(c) except pursuant to agreements disclosed on Disclosure Schedule
4.13(a)(i), grant any severance or termination pay to or enter into or amend
any employment agreement with, or increase the amount of payments or fees to,
any of its employees, officers or directors;
(d) make any capital expenditures in excess of (i) $40,000 per project or
related series of projects or (ii) $200,000 in the aggregate, other than
pursuant to binding commitments existing on the date hereof, expenditures
necessary to maintain existing assets in good repair and the expenditures
necessary to furnish and equip the two in-store branches referred to in
subsection (e) below herein;
(e) make application for the opening of any, or open any, new branches
except for the two in-store branches Olympus Bank currently intends to open in
Dan's grocery stores located in Park City and in the general vicinity of 39th
So. and Wasatch Boulevard in Salt Lake City (the "Proposed Branches");
(f) make application for the relocation or closing of any, or relocate or
close any, branches;
(g) change in any material manner its lending or pricing policies or
approval policies for making loans, its investment policies, its
asset/liability management policies or any other material banking policies;
(h) make any loan or issue a commitment for any loan except for loans and
commitments that are made in the ordinary course of business consistent with
past practice at rates not less than prevailing market rates or issue or agree
to issue any letters of credit or otherwise guarantee the obligations of any
other persons;
(i) acquire assets other than those necessary in the conduct of its
business in the ordinary course (except in connection with the Proposed
Branches);
(j) sell, transfer, assign, encumber or otherwise dispose of assets other
than has been customary in its ordinary course of business;
(k) enter into or amend or terminate any long-term (one-year or more)
contracts (including real property leases) (except in connection with the
Proposed Branches, except for contracts of deposit at Olympus Bank not
otherwise restricted under this Agreement which are in the ordinary course of
business consistent with past practice and not in excess of prevailing market
rates and except for agreements for Olympus Bank to lend money not otherwise
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restricted under this Agreement which are in the ordinary course of business
consistent with past practice and provide for not less than prevailing market
rates of interest);
(l) enter into or amend any contract (other than contracts for deposits at
Olympus Bank or agreements for Olympus Bank to lend money not otherwise
restricted under this Agreement) that calls for the payment by Olympus of
$25,000 or more after the date of this Agreement (a "Material Contract") that
cannot be terminated on not more than 30 days' notice without cause and without
payment or loss of any material amount as a penalty, bonus, premium or other
compensation for termination except in connection with the Proposed Branches;
(m) engage or participate in any material transaction or incur or sustain
any material obligation except for transactions otherwise permitted under this
Section 6.1 which are in the ordinary course of business consistent with past
practices and which are of similar kinds and involve similar amounts;
(n) make any contributions to the Employee Stock Bonus Plan or any other
Benefit Plans except in such amounts and at such times as consistent with past
practice;
(o) increase the number of full time equivalent employees of Olympus from
June 30, 1994, except for reasonable staffing for the Proposed Branches;
(p) except after having followed reasonable procedures with respect to the
investigation of potential environmental problems, which procedures have been
approved in writing by WMSB (which approval shall not be unreasonably withheld,
delayed or conditioned), foreclose upon or otherwise acquire (whether by deed
in lieu of foreclosure or otherwise) any real property (other than 1-to-4
family residential properties in the ordinary course of business); or
(q) agree to do any of the foregoing.
During the period from the Original Agreement Date to the date of this
Agreement, Olympus did not do, and did not cause or permit any Olympus
Subsidiary to do, any of the foregoing.
6.2 No Solicitation. Neither Olympus, Olympus Bank nor any of their
directors, officers, representatives, agents or other persons controlled by any
of them, shall, directly or indirectly encourage or solicit, or (except to the
extent that the directors of Olympus in their good faith judgment after receipt
of advice of counsel determine that such response is reasonably required in
order to discharge their fiduciary duties) hold discussions or negotiations
with, or provide any information to, any person, entity or group other than WM
Bank or WMI concerning any merger, sale of substantial assets not in the
ordinary course of business, sale of shares of capital stock or similar
transactions involving
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Olympus, any division or any Olympus Subsidiary, and none of the foregoing has
taken any such action since the Original Agreement Date. Olympus and Olympus
Bank will promptly communicate to WMI the terms of any proposal that it may
receive in respect of any such transaction. Notwithstanding the foregoing two
sentences, if the board of directors of Olympus receives an unsolicited offer
or inquiry with respect to such a transaction, the board may respond to such
offer if the board determines in its good faith judgment (after receiving
advice of counsel) that such response is reasonably required in order to
discharge its fiduciary duties.
6.3 Current Information.
(a) Subsequent to the Original Agreement Date, Olympus and WM Bank
each designated an individual acceptable to the other party (a "Designated
Representative" and, together, the "Designated Representatives") to be the
primary point of contact between the parties. From the date hereof, the
Designated Representative of WM Bank shall be the Designated Representative of
WMI (the "WMI Designated Representative"). During the period from the date of
their designation to the Effective Time, the Designated Representatives or
their representatives have conferred and shall confer on a regular basis so
that WM Bank and WMI are kept advised as to the general status of the ongoing
operations of Olympus and Olympus Bank. Without limiting the foregoing,
Olympus and Olympus Bank have conferred and agree to confer with the WMI
Designated Representative regarding any proposed significant changes to Olympus
Bank's asset/liability management policies and objectives. Olympus and Olympus
Bank will promptly notify the WMI Designated Representative or his or her
representatives of any material change in the normal course of business or in
the operation of the properties of Olympus or Olympus Bank or of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or the institution or the threat
of any litigation involving Olympus or Olympus Bank, and have kept and will
keep the WMI Designated Representative or his or her representatives fully
informed of such events and the progress of any already existing litigation.
Olympus and Olympus Bank agree not to settle the class action lawsuit captioned
Richard Madsen vs. Prudential Federal Savings and Loan Association, Third
Judicial District Court of Salt Lake County, State of Utah, Civil No. 226073,
filed February 1975 without the approval of WMI (which approval will not be
unreasonably withheld, delayed or conditioned).
(b) WMI shall immediately notify the Olympus Designated Representative if
it appears that there has occurred any change in its financial or other
condition or any other event that will or may affect WMI's ability to complete
the Merger or have a Material Adverse Effect on WMI.
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6.4 Access to Properties and Records; Confidentiality.
(a) Each of Olympus and Olympus Bank has permitted WM Bank and shall
permit WMI reasonable access to its properties, and has disclosed and made
available to WM Bank and shall disclose and make available to WMI all books,
papers and records relating to the assets, stock, ownership, properties,
obligations, operations and liabilities of Olympus and any Olympus Subsidiary,
including but not limited to, all books of account (including the general
ledger), tax records, minute books of directors and stockholders meetings,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants work papers, litigation files, plans
affecting employees, and any other business activities or prospects in which WM
Bank or WMI may have a reasonable interest, including without limitation, all
commercial and commercial real estate loan files in each case during normal
business hours and upon reasonable notice. Olympus and Olympus Bank shall not
be required to provide access to or disclose information where such access or
disclosure would jeopardize the attorney-client privilege of Olympus or any
Olympus Subsidiary or would contravene any law, rule, regulation, order,
judgment, decree or binding agreement entered into prior to the date hereof.
The parties will use all reasonable efforts to make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.
(b) All information furnished by Olympus or any Olympus Subsidiary to WM
Bank or WMI or the representatives or affiliates of either pursuant to, or in
any negotiation in connection with, this Agreement or the Original Agreement
shall be treated as the sole property of Olympus or any Olympus Subsidiary
until consummation of the Merger and, if the Merger shall not occur, WM Bank,
WMI and their affiliates, agents and advisers shall return to Olympus or any
Olympus Subsidiary, as appropriate, all documents or other materials
containing, reflecting, referring to such information, and shall keep
confidential all such information and shall not disclose or use such
information for competitive purposes. The obligation to keep such information
confidential shall not apply to (i) any information which (w) WM Bank or WMI
can establish by convincing evidence was already in its possession (subject to
no obligations of confidentiality) prior to the disclosure thereof by Olympus
or such Olympus Subsidiary; (x) was then generally known to the public; (y)
becomes known to the public other than as a result of actions by WMI or WM Bank
or by the directors, officers or employees or agents of either; or (z) was
disclosed to WMI or WM Bank, or to the directors, officers or employees of
either, solely by a third party not bound by any obligation of confidentiality;
or (ii) disclosure in accordance with the federal securities laws, federal
banking laws, or pursuant to an order of a court of competent jurisdiction.
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6.5 Reports.
(a) As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter ending after the Original Agreement Date
(other than the last quarter of any fiscal year), Olympus has delivered or will
deliver to WM Bank or WMI its quarterly report on Form 10-Q, as filed under the
Securities Exchange Act. As soon as reasonably available but in no event more
than 120 days after the end of each fiscal year ending after the Original
Agreement Date, Olympus will deliver to WMI its annual report on Form 10-K, as
filed under the Securities Exchange Act.
(b) As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter ending after the Original Agreement Date
and prior to the date of this Agreement (other than the last quarter of any
fiscal year), WM Bank delivered to Olympus its quarterly report on Form F-4 as
filed with the FDIC. As soon as reasonably available, but in no event more
than 45 days after the end of each fiscal quarter ending after the Original
Agreement Date (other than the last quarter of any fiscal year), WMI will
deliver to Olympus its quarterly report on Form 10-Q, as filed under the
Securities Exchange Act. As soon as reasonably available, but in no event more
than 120 days after the end of each fiscal year ending after the date of this
Agreement, WMI will deliver to Olympus its annual report on Form 10-K as filed
under the Securities Exchange Act.
6.6 Regulatory Matters.
(a) The parties hereto will cooperate with each other and use all
reasonable efforts to prepare all necessary documentation, to effect all
necessary filings and to obtain all necessary permits, consents, approvals and
authorizations of all third parties and governmental bodies necessary to
consummate the transactions contemplated by this Agreement including, without
limitation, those that may be required from the SEC, the FDIC, the OTS, the
Justice Department, other regulatory authorities, or the holders of capital
stock. WMI and Olympus shall each have the right to review reasonably in
advance all information relating to WMI or Olympus, as the case may be, and any
of their respective subsidiaries, together with any other information
reasonably requested, which appears in any filing made with or written material
submitted to any governmental body in connection with the transactions
contemplated by this Agreement.
(b) WMI and Olympus shall furnish each other with all reasonable
information concerning themselves, their subsidiaries, directors, officers and
stockholders and such other matters as may be necessary or advisable in
connection with the Prospectus/Proxy Statement, or any other statement or
application made by or on behalf of WMI or Olympus, or any of their respective
subsidiaries to any governmental body in connection with the Merger and the
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other transactions, applications or filings contemplated by this Agreement.
(c) WMI and Olympus will promptly furnish each other with copies of
written communications received by WMI or Olympus or any of their respective
subsidiaries from, or delivered by any of the foregoing to, any governmental
body in respect of the transactions contemplated hereby.
6.7 Approval of Olympus Stockholders. Olympus will (a) take all steps
necessary duly to call, give notice of, convene and hold a meeting of its
stockholders as soon as practicable for the purpose of voting on this Agreement
and the transactions contemplated hereby and with the consent of WMI (which
consent shall not be unreasonably withheld, delayed or conditioned), for such
other purposes as may be necessary or desirable, (b) include in the Proxy
Statement the recommendation of Olympus's Board of Directors that the
stockholders approve this Agreement and the other transactions contemplated
hereby and such other matters as may be submitted to its stockholders in
connection with this Agreement, (c) cooperate and consult with WMI with respect
to each of the foregoing matters, and (d) use all reasonable efforts to obtain,
as promptly as practicable, the necessary approvals by Olympus stockholders of
this Agreement and the transactions contemplated hereby, except, in each case,
where the directors of Olympus determine in their good faith judgment (after
receiving advice of counsel) that they are required to do otherwise in order to
discharge their fiduciary duties.
6.8 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case of any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all necessary action,
subject to the terms and conditions of this Agreement.
6.9 Disclosure Supplements.
(a) As soon as practicable after the end of each calendar quarter ending
after the Original Agreement Date and prior to the date hereof, Olympus and
Olympus Bank have promptly supplemented or amended the Disclosure Schedules
delivered in connection with the Original Agreement with respect to any matter
thereafter arising which, if existing, occurring or known at the Original
Agreement Date would have been required to be set forth or described in such
Schedules or which was necessary to correct any information in such Schedules
rendered inaccurate thereby. As soon as practicable after the end of each
calendar quarter ending after the date hereof, at such other times as WMI may
reasonably request
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and at least five business days prior to Closing, Olympus and Olympus Bank will
promptly supplement or amend the Disclosure Schedules delivered in connection
herewith with respect to any matter hereafter arising which, if existing,
occurring or known at the date of this Agreement would have been required to be
set forth or described in such Schedules or which is necessary to correct any
information in such Schedules which has been rendered inaccurate thereby.
Notwithstanding this provision, no supplement or amendment to such Schedules
shall have any effect for the purpose of determining satisfaction of the
conditions hereinafter set forth in Section 7.2 or the compliance by Olympus or
Olympus Bank with the covenants set forth in Section 6 hereof, nor shall the
delivery of any such supplement or amendment in and of itself be deemed to
constitute an admission by Olympus of any omission from, or any incorrectness
or inaccuracy of, any information previously delivered pursuant hereto.
(b) As soon as practicable after the end of each calendar quarter ending
after the Original Agreement Date and prior to the date hereof, WM Bank and
NFSB have promptly supplemented or amended the Disclosure Schedules delivered
in connection with the Original Agreement with respect to any matter thereafter
arising which, if existing, occurring or known at the Original Agreement Date
would have been required to be set forth or described in such Schedules or
which was necessary to correct any information in such Schedules rendered
inaccurate thereby. As soon as practicable after the end of each calendar
quarter ending after the date hereof, at such other times as Olympus may
reasonably request and at least five business days prior to Closing, WMI and
NFSB will promptly supplement or amend the Disclosure Schedules delivered in
connection herewith with respect to any matter hereafter arising which, if
existing, occurring or known at the date of this Agreement would have been
required to be set forth or described in such Schedules or which is necessary
to correct any information in such Schedules which has been rendered inaccurate
thereby. Notwithstanding this provision, no supplement or amendment to such
Schedules shall have any effect for the purpose of determining satisfaction of
the conditions hereinafter set forth in Section 7.3 or the compliance by WMI,
WM Bank or NFSB with the covenants set forth in Section 6 hereof.
6.10 Public Announcements. The parties will cooperate and consult with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby, except as may be otherwise required by law.
6.11 Failure to Fulfill Conditions. In the event that WMI or Olympus
determines that a condition to its obligation to consummate the transactions
contemplated hereby cannot be, or is not likely to be, fulfilled on or prior to
June 30, 1995 and that it will not waive that condition, it will promptly
notify the other party.
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6.12 Assignment of Contract Rights. Olympus and Olympus Bank shall obtain
any consents, waivers or revisions necessary to allow WMI or NFSB to accede to
all of the rights of Olympus, or Olympus Bank as the case may be, under all
existing real property and personal property leases, licenses and other
contracts, including without limitation loan servicing contracts, which WMI
wishes to have continue in effect after the Effective Time without incurring
substantial costs in connection therewith. WMI will offer its reasonable
cooperation with Olympus and Olympus Bank in obtaining such consents, waivers
and revisions, it being understood that the obligation to obtain such consents,
waivers and revisions shall nevertheless be the obligation of Olympus and
Olympus Bank.
6.13 Employees; Employee Benefit Plans.
(a) Except as otherwise provided herein, all employees of Olympus and any
Olympus Subsidiary as of the Effective Time will at least temporarily continue
as employees of NFSB after the Effective Time.
(b) WMI or NFSB will provide severance payments to employees of Olympus
and any Olympus Subsidiary whose employment is terminated without cause by WMI
or NFSB within one year after the Effective Date in the amount set forth below.
Such payments shall be paid on the first regular pay date following the date
that any termination is effective. Such severance payments shall be computed
as follows:
Non-officer: 1/2 month per year of service; maximum 3 months total pay.
Officer (as set out on Disclosure Schedule 6.13(b)): two weeks per year of
service; maximum 6 months total pay.
As used above in this Section 6.13(b), the term "year of service" shall mean
a full year of service, except that any person having at least six months of
service shall be deemed to have one full year of service (it being understood,
for example, that a person with eighteen months shall be treated as only having
one year). In computing such severance payments for regular part-time
employees, their per month compensation shall be based on one-twelfth of the
actual number of hours worked by any such employee in 1994. Olympus or Olympus
Subsidiary employees who are terminated "for cause" shall receive no severance
payments.
As used in this Section 6.13(b) "termination" shall occur when WMI or NFSB
gives an employee a notice of termination.
As used in this Section 6.13(b), termination "for cause" shall mean
termination because (i) the employee engages in abusive use of alcohol or other
drugs on a continuing or recurring basis, (ii) the employee is convicted of a
crime (other than a traffic violation), or (iii) WMI or NFSB determines in good
faith that the employee has engaged in dishonesty, fraud, destruction or theft
of WMI or NFSB
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property, physical attack resulting in injury to a fellow employee, willful
malfeasance or gross negligence in the performance of his or her duties, or
misconduct materially injurious to WMI or NFSB. WMI shall interpret and
administer the term "for cause" consistently with its application for similarly
situated WM Bank employees under the WM Bank severance plan.
(c) All employees of Olympus or the Olympus Subsidiaries who continue as
employees of WMI, NFSB or any other subsidiary of WMI shall receive service
credit for employment at Olympus and any Olympus Subsidiary for purpose of
meeting all eligibility and vesting requirements for vesting in all WMI
retirement plans; provided that such persons are continually employed by WMI,
NFSB or any other subsidiary of WMI on a date that is no later than 12 months
and one day after the Effective Time. Employees who receive such service
credit shall be considered for eligibility under the WMI retirement plans
effective as of the Effective Time. Prior to enrollment in the WMI retirement
plans, employees of Olympus shall either (i) be covered by the existing Olympus
retirement plans or (ii) in the event of termination of employment with WMI or
WMI Subsidiaries prior to enrollment in the WMI retirement plans, then such
employees shall receive an additional after tax payment substantially
equivalent to the benefits that would have been accrued under the Olympus
retirement plans (as reasonably determined by WMI), without regard to the
service requirements for active participation, and based on compensation earned
from the Effective Time until termination of employment.
(d) With the consultation and approval of WMI, Olympus shall take all
necessary and appropriate action to amend the Olympus Stock Bonus Plan to (i)
eliminate new participant loans, or any extension or renewal of existing loans,
and (ii) eliminate salary deferral elections after the Effective Time. Olympus
shall not amend the Olympus Stock Bonus Plan or otherwise authorize any action
to terminate such plan or to provide distributions therefrom that are not
permitted or required under the terms thereof on July 15, 1994.
(e) To the extent permissible under the Code and ERISA, and with the
consultation and approval of WMI, Olympus shall take all necessary and
appropriate action to amend the Olympus money purchase pension plan, effective
as of the Effective Time, and provide the notices required under Section 204(h)
of ERISA, so that participants do not accrue benefits thereunder after the
Effective Time. Notwithstanding the foregoing, if any portion of the money
purchase pension plan is invested in the common stock of Olympus, Olympus shall
not terminate the plan.
(f) Prior to the Effective Time, Olympus and the Olympus Subsidiaries
shall take all necessary and appropriate action to amend or terminate any
Benefit Plan or other arrangement of Olympus or the Olympus Subsidiaries so
that no individual can or will receive an "excess parachute payment," as
defined in Section
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280G(b)(1) of the Code, as a result of the Closing or any change described in
Section 280G(b)(2)(A)(i) of the Code.
(g) Prior to the Effective Time, Olympus and the Olympus Subsidiaries
shall amend or terminate, as appropriate, any Benefit Plan which is an employee
welfare benefit plan (within the meaning of Section 3(1) of ERISA) so that no
participant, beneficiary or dependent is entitled to benefits or continuing
coverage thereunder after such participant's termination of employment, except
for (i) continuing coverage required under COBRA; (ii) the retired life reserve
arrangement disclosed on Disclosure Schedule 4.13(e)(viii); and (iii) medical
coverage currently in place for John Adams, Brent Shaw and Joan Wagner.
(h) Effective as of the Effective Time, all employees of Olympus or the
Olympus Subsidiaries shall, at the option of WMI, either continue to
participate in the Benefit Plans that are employee welfare benefit plans
(within the meaning of Section 3(1) of ERISA) or "cafeteria plans" (within the
meaning of Section 125 of the Code) and are in effect immediately prior to the
Effective Time or become participants in similar WMI employee benefit plans,
practices and policies (the "WMI Welfare Benefit Plans") on the same terms and
conditions as similarly situated employees of WMI or its subsidiaries. If any
of the employees of Olympus or the Olympus Subsidiaries shall become eligible
to participate in any WMI Welfare Benefit Plans that provide medical,
hospitalization or dental benefits, WMI and NFSB shall waive any pre-existing
condition exclusions and actively at work requirements (but shall not waive
general requirements of formal employment with WMI or NFSB).
(i) All vacation accrued and not used by employees of Olympus and the
Olympus Subsidiaries prior to the Effective Time shall be maintained by WMI or
NFSB after the Effective Time; provided, however, that such vacation shall
accrue at the same rate as for similarly situated WM Bank employees (counting
service credit earned prior to the Effective Time.) Up to 5 days of sick leave
or short-term disability accrued by employees of Olympus and the Olympus
Subsidiaries prior to the Effective Time shall be maintained by WMI after the
Effective Time.
6.14 Indemnification of Olympus Directors and Officers.
(a) WMI and NFSB will use all reasonable efforts, in cooperation with
Olympus and Olympus Bank to arrange for insurance coverage (with at least as
much dollar coverage as Olympus' and Olympus Bank's directors and officers have
under their current policy) for prior acts for all current and former directors
and officers of Olympus and Olympus Bank, provided that such coverage must be
available from normal carriers at a reasonable cost in light of the cost of
similar policies under similar circumstances. Subject to the foregoing, it is
contemplated that Olympus and Olympus Bank will purchase "tail" coverage to
cover the first 6 months following the Effective Date, and WMI and NFSB will
purchase
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"prior acts" coverage for subsequent periods. WMI and NFSB shall not cancel
such prior acts coverage for 3 years after the Effective Date.
(b) From and after the Effective Time, WMI will, to the extent permitted
by then applicable law, indemnify current and former directors and officers of
Olympus (each an "Indemnified Party") as though they had been directors and/or
officers of WMI, for acts or omissions occurring prior to, and including, the
Effective Time.
Any Indemnified Party wishing to claim indemnification under this provision
shall, upon learning of any claim, action, suit, proceeding or investigation
(hereinafter a "Claim"), promptly notify WMI thereof. WMI shall have the right
to assume the defense of any such Claim and upon so doing shall not thereafter
be liable to such Indemnified Party for any expenses, of other counsel or
otherwise, subsequently incurred by such Indemnified Party in connection with
such Claim. If WMI elects not to assume such defense, or counsel for the
Indemnified Party advises that there are issues which raise conflicts of
interest between WMI and the Indemnified Party, the Indemnified Party may
retain counsel satisfactory to him and WMI will pay all reasonable fees and
expenses of such counsel incurred in defending the Claim; provided, however,
that (i) in the event that more than one Indemnified Party is involved in the
same Claim, WMI shall not be obligated to pay for more than one firm of counsel
for all Indemnified Parties in any one jurisdiction (unless counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnified Parties), (ii) the Indemnified Parties will
cooperate in the defense of the Claim, and (iii) WMI shall not be liable for
any settlement effected without its prior written consent. If, upon the
conclusion of the proceedings in any Claim, it is determined by WMI that the
Indemnified Party was not entitled to such indemnification, such party shall be
required to reimburse WMI for all cost expended in defending such Indemnified
Party.
(c) This Section 6.14 is intended to be for the benefit of, and shall be
enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on WMI and its successors and assigns.
6.15 Stock Option Plans. Except as contemplated by Section 1(d)(iii) of
this Agreement, Olympus shall cause the Stock Option Plan committee to not
allow any Optionee to receive cash, property or other consideration (other than
shares received upon exercise of an option) in exchange for the surrender of
any options. Nothing in this Section 6.15 shall prevent an Option holder from
exercising his options prior to Closing, provided that any exercise and any
subsequent sale, transfer, pledge or other disposition of the shares shall be
in compliance with applicable requirements of the Securities and Exchange
Commission's ASR 135 and Section 1(h) hereof.
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6.16 Post-Closing Financial Statements. WMI agrees to use all reasonable
efforts to file an 8-K with the SEC within 20 calendar days after the end of
the first full calendar month deemed by Deloitte & Touche to satisfy the
requirement of ASR 135 with respect to the time period required for post-Merger
financial results following the Effective Time (except if such month is the
last month of a calendar quarter), which 8-K shall include financial results
covering at least 30 days of post-merger combined operations of WMI and Olympus
in accordance with ASR 135.
6.17 Consulting and Noncompetition Agreement. At or prior to Closing, WMI
shall enter into a consulting agreement with Blaine Huntsman substantially in
the form of Exhibit D hereto which agreement shall provide that Mr. Huntsman
will be a consultant to WMI for a period of 18 months from and after the
Effective Time, that Mr. Huntsman will receive $225,000 over such period
(payments to be monthly), that he shall advise WMI generally in regard to its
Utah operations and shall perform such other functions as reasonably requested
by the President and CEO of WMI, that during the term of the consulting
agreement, he shall not work for or serve any other financial institution as an
employee, officer, director, consultant or advisor, that he shall have
reasonable access to office space and secretarial support and that he shall be
entitled to no employee benefits.
6.18 Post-Merger Actions. Following the Merger, neither WMI nor any of its
affiliates shall take any action which will adversely affect the tax treatment
of the transaction to the shareholders of Olympus including, without limitation
failing to continue at least one significant historic business line of Olympus
Bank or to use at least a significant portion of Olympus Bank's historic assets
in a business, in each case within the meaning of Treas. Reg. Section
1.368-1(d).
6.19 Current Public Information. WMI shall continue to satisfy the current
public information requirements of Rules 144 and 145 of the SEC with respect to
the WMI Common Stock, and to provide affiliates of Olympus with such
information as they may reasonably require and to otherwise cooperate with them
to facilitate sales of WMI Common Stock in compliance with Rules 144 and 145
of the SEC.
7. Closing Conditions.
7.1 Conditions to Each Party's Obligations Under This Agreement. The
respective obligations of each party under this Agreement to consummate the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by the requisite vote of the stockholders of Olympus.
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(b) All necessary regulatory or governmental approvals and consents
required to consummate the transactions contemplated hereby shall have been
obtained and shall remain in full force and effect and all statutory or
regulatory waiting periods in respect thereof shall have expired.
(c) No party hereto shall be subject to any order, decree or injunction of
a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of the Merger.
(d) Tax Ruling or Opinion. An opinion shall be obtained from Foster Pepper
& Shefelman in a form reasonably satisfactory to WMI and Olympus with respect
to federal income tax laws substantially to the effect that:
(i) The Merger will qualify as a "reorganization" under Section 368(a)
of the Code.
(ii) No gain or loss will be recognized by Olympus or WMI by reason of
the Merger.
(iii) No gain or loss will be recognized by a stockholder of Olympus
who, pursuant to the Agreement, exchanges shares of Olympus Common Stock solely
for shares of WMI Common Stock.
(iv) Subject to the provisions of Section 302 of the Code, gain or loss
will be recognized with respect to each shareholder of Olympus who holds shares
of Olympus Common Stock and who, pursuant to the exercise of dissenter rights,
exchanges such shares solely for cash.
(v) The payment of cash to a Olympus shareholder in lieu of a fractional
share of WMI Common Stock will be treated as a distribution in redemption of
the fractional share interest, such shareholder will be taxed on the cash
received in accordance with the provisions and limitations of Section 302 of
the Code and, in general, such distribution in redemption will be treated as a
payment in exchange for such fractional share interest.
(vi) The aggregate basis of the WMI Common Stock received by a Olympus
stockholder who exchanges Olympus Common Stock for WMI Common Stock will be the
same as the aggregate basis of the Olympus Common stock surrendered in exchange
therefor (reduced by the basis allocable to any fractional share for which cash
is received).
(vii) The holding period of the WMI Common Stock received by a Olympus
stockholder will include the period during which the Olympus Common Stock
surrendered in exchange therefore was held (if such Olympus Common Stock was
held by such Olympus stockholder as a capital asset at the Effective Time).
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(viii) Gain or loss recognized in exchange for a fractional share or by
Olympus Shareholders if Olympus Common Stock is converted into cash by exercise
of dissenter rights generally will be capital gain or loss if the shares of
Olympus Common Stock were held by the Olympus Shareholder as a capital asset.
For such shareholders, if the shares had been held for more than one year, the
gain or loss will be long-term capital gain or loss. Whether or not the
character of any taxable gain or loss is material to a Olympus Shareholder
depends upon the particular circumstances of the shareholder.
Appropriate modifications to the opinion shall be made in the event that WMI
elects to pay a portion of the Merger Consideration in cash pursuant to Section
1(c)(iii); provided that no such modification shall affect the opinion under
(i) or (ii) above or under (iii) above to the extent a stockholder receives WMI
Common Stock pursuant to the Merger.
(e) Antitrust Law. Any applicable pre-merger notification provisions of
Section 7A of the Clayton Act shall have been complied with by the parties
hereto, and no other statutory or regulatory requirements with respect to the
Clayton Act shall be applicable other than Section 18(c) of the Federal Deposit
Insurance Act and rules and regulations in connection therewith. There shall
be no pending or threatened proceedings under any applicable antitrust law of
the State of Washington.
(f) Securities Laws. The shares of WMI Common Stock to be issued to the
stockholders of Olympus in exchange for their shares shall be exempt or shall
have been qualified or registered for offering and sale under the federal
securities law and the state securities or Blue Sky laws of each jurisdiction
in which stockholders of Olympus reside, and no order suspending the sale of
such shares of WMI Common Stock in any such jurisdiction shall have been issued
prior to the Effective Time and no proceedings for that purpose shall have been
instituted or shall be contemplated; provided, that WMI shall not have been
obligated to execute or file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in which it is not
qualified. As soon as reasonably practicable, Olympus shall advise WMI of each
jurisdiction in which stockholders of Olympus reside.
7.2 Conditions to the Obligations of WMI under this Agreement. The
obligations of WMI under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any one or more of which may be waived by WMI.
(a) Each of the obligations or covenants of Olympus and the Olympus
Subsidiaries required to be performed by them at or prior to the Closing
pursuant to the terms of this Agreement shall have been duly performed and
complied with and each of the representations and warranties of Olympus and the
Olympus Subsidiaries contained in this Agreement shall be true and correct
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as of the Original Agreement Date and as of the Effective Time as though made
at and as of the Effective Time (except as to any representation or warranty
that specifically relates to an earlier date, which shall be true and correct
as of such earlier date), except where the failure of such representations to
be true and correct or the failure of Olympus or any Olympus Subsidiary to have
performed the obligations and covenants as required by Section 6 hereof, shall
not in the aggregate have had a negative economic effect of $500,000 or more on
Olympus and the Olympus Subsidiaries or will, when adjusted to their present
value, have such an effect on WMI; provided, however, that the representations
and covenants contained in Sections 6.1(a), 6.1(b) and 6.2 shall not be subject
to the foregoing materiality exception and must be fully complied with.
(b) Any consents, waivers, clearances, approvals and authorizations of
regulatory or governmental bodies that are necessary in connection with the
consummation of the transactions contemplated hereby shall have been obtained,
and none of such consents, waivers, clearances, approvals or authorizations
shall contain any term or condition that (i) is a term or condition that has
not heretofore been normally imposed in such transactions and which would have
a Material Adverse Effect on Olympus or WMI, or (ii) would require WMI to
contribute additional capital to NFSB other than to increase the leverage
capital ratio of NFSB (as defined in 12 C.F.R. Part 567 as proposed or adopted
by the OTS) to a level no higher than 5.0 percent (as adjusted to account for
the Merger). It is hereby agreed that any term or condition contained in any
previous approval granted to WMSB for a merger or acquisition transaction shall
be deemed a "normal" condition for purposes of this Section 7.2(b). For
purposes of Section 8 hereof, any "approval" which contains any of the
foregoing unacceptable terms or conditions shall be deemed to be a regulatory
"denial."
(c) WMI shall have received an opinion, dated the date of the Closing,
from Kimball, Parr, Waddoups, Brown & Gee, counsel to Olympus, substantially to
the effect set forth in Exhibit E hereto.
(d) Since the date of this Agreement there shall have been no material
adverse change in the overall financial condition, businesses or results of
operations of Olympus and the Olympus Subsidiaries taken as a whole (except for
changes resulting from market and economic conditions which generally affect
the savings industry as a whole including, without limitation, changes in law
or regulation or changes in generally accepted accounting principles or
interpretations thereof); provided, however, that the following expenses and
adjustments shall be excluded in determining whether a material adverse change
has occurred: (i) fees and expenses relating to the consummation of the
transactions contemplated hereby, (ii) charges for severance and other payments
to officers and employees made or expected to be made in connection with the
transactions contemplated hereby, and (iii) costs and expenses related to any
transactions of the type set forth in
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Section 6.1 undertaken by Olympus with the prior written consent of WMI or WM
Bank (including without limitation, the opening of the Proposed Branches).
(e) Olympus shall have obtained at or prior to the Effective Time consents
to the assignment of the real property leases for the One Utah Center and
Woodlands branches to the successor by merger to Olympus Bank.
(f) Except as otherwise requested, the directors of Olympus and each
Olympus Subsidiary shall have resigned effective on or prior to the Effective
Time.
(g) Unless WMI elects to pay a portion of the Merger Consideration in the
form of cash pursuant to Section 1(c)(iii) hereof, WMI shall have received an
opinion in form reasonably satisfactory to it from Deloitte & Touche that the
Merger shall qualify for pooling of interests accounting treatment or, in the
event it does not so qualify, that neither Olympus, nor its shareholders,
directors or officers shall have taken any action (other than actions or events
permitted by the Original Agreement or this Agreement) that would disqualify
the Merger from being treated as a pooling of interests for accounting
purposes.
(h) Olympus shall have furnished WMI with such certificates of its
officers and such other documents to evidence fulfillment of the conditions set
forth in this Section 7.2 as WMSB may reasonably request.
(i) Dissenters' rights shall not have been preserved by stockholders of
Olympus with respect to more than 5 percent of the outstanding shares of
Olympus Common Stock, each affiliate of Olympus has delivered to Olympus
certificates evidencing all shares of Olympus Common Stock owned by such
affiliate as provided in Section 1(h) hereof, and that such affiliate has not
voted against the Merger, together with any other assurances, requested by WMI
that such affiliates will not have dissenter's rights.
(j) Olympus shall have delivered to WMI amendments of all indemnification
agreements entered into by Olympus (other than the agreement with persons who
were directors at Olympus but are no longer directors as of the date of this
Agreement) which amendment shall provide that the agreement shall commit WMI to
indemnify only to the extent permitted under the laws of the State of
Washington.
7.3 Conditions to the Obligations of Olympus Under This Agreement. The
obligations of Olympus and Olympus Bank under this Agreement shall be further
subject to the satisfaction, at or prior to the Effective Time, of the
following conditions, any one or more of which may be waived by Olympus:
(a) Each of the obligations of WMI, WM Bank and NFSB required to be
performed by them at or prior to the Closing
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pursuant to the terms of this Agreement shall have been duly performed and
complied with in all material respects.
(b) Each of the representations and warranties of WMI, WM Bank and NFSB
contained in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as of the Effective Time as though made at
and as of the Effective Time except as to any representation or warranty which
specifically relates to an earlier date, which shall be true and correct as of
such earlier date, except in the case of such representations and warranties,
where the failure to be true would not have a Material Adverse Effect on WMI.
(c) Olympus shall have received an opinion, dated the date of the Closing,
from Foster Pepper & Shefelman, counsel to WMI, substantially to the effect set
forth in Exhibit F hereto.
(d) Since the date of this Agreement, there shall have been no material
adverse change in the overall financial condition, businesses or results of
operations of WMI and its Subsidiaries taken as a whole.
(e) WMI shall have furnished Olympus with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in this Section 7.3 as Olympus may reasonably request.
(f) Olympus shall have received an opinion reasonably satisfactory to it
from Goldman, Sachs & Co., a financial advisory firm, dated as of the date of
the Prospectus/Proxy Statement, as to the fairness, from a financial point of
view, of the consideration to be received by the stockholders of Olympus
pursuant to this Agreement.
(g) WMI shall have instructed its transfer agent with respect to the
issuance of WMI Common Stock to the Olympus stockholders at least two days
prior to Closing.
8. Termination, Amendment and Waiver.
8.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of the Merger by the
Olympus stockholders:
(a) by mutual written consent of all the parties hereto;
(b) by any party hereto (i) if the Effective Time shall not have occurred
on or prior to June 30, 1995 unless the failure of such occurrence shall be due
to the failure of the party seeking to terminate this Agreement to perform or
observe its agreements and conditions set forth herein to be performed or
observed by such
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party at or before the Effective Time; or (ii) 31 days after the date on which
any application for regulatory approval prerequisite to the consummation of the
transactions contemplated hereby shall have been denied or withdrawn at the
request of the applicable regulatory authority; provided, that, if prior to the
expiration of such 31-day period WMI is engaged in litigation or an appeal
procedure relating to an attempt to obtain such approval, Olympus may not
terminate this Agreement until the earlier of (A) June 30, 1995 and (B) 31 days
after the completion of such litigation and appeal procedures, and of any
further regulatory or judicial action pursuant thereto, including any further
action by a government agency as a result of any judicial remand, order or
directive or otherwise; or (iii) 10 days after written certification of the
vote of the Olympus's stockholders is delivered to WMI indicating that such
stockholders failed to adopt the resolution to approve this Agreement and the
transactions contemplated hereby at the stockholders' meeting (or any
adjournment thereof) contemplated by Section 1(e) hereof;
(c) by WMI (i) if at the time of such termination there shall have been a
material adverse change in the consolidated financial condition of Olympus from
that set forth in Olympus's Quarterly Report on Form 10-Q for the three-month
period ended March 31, 1994 (except for changes resulting from market and
economic conditions which generally affect the savings industry as a whole,
including changes in regulation), it being understood that any of the matters
set forth in Olympus's Disclosure Schedules as of the date of this Agreement or
any of the matters described in clauses (i), (ii) or (iii) of Section 7.2(d)
are not deemed to be a material adverse change for purposes of this paragraph
(c); (ii) if there shall have been any material breach of any covenant of
Olympus hereunder and such breach shall not have been remedied within 45 days
after receipt by Olympus of notice in writing from WMI specifying the nature of
such breach and requesting that it be remedied; or (iii) any of the events or
circumstances described in Section 2(a) or 2(c) of the Option occurs;
(d) by Olympus (i) if at the time of such termination there shall have
been a material adverse change in the consolidated financial condition of WMI
from that of WMSB set forth in WMSB's Quarterly Report on Form F-4 for the
three-month period ended March 31, 1994 (except for changes resulting from
market and economic conditions which generally affect the savings industry as a
whole), it being understood that any of the matters set forth in WMI's
Disclosure Schedules as of the date of this Agreement are not deemed to be a
material adverse change for purposes of this paragraph (d); or (ii) if there
shall have been any material breach of any covenant of WMI, WM Bank or NFSB
hereunder and such breach shall have not been remedied within 45 days after
receipt by WMSB of notice in writing from Olympus specifying the nature of such
breach and requesting that it be remedied or (iii) if the directors of Olympus,
after receiving advice of counsel, determines in their good faith judgment that
they are required to do so in order to discharge their fiduciary duties, shall
withdraw or modify or
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resolve to withdraw or modify its recommendation that shareholders vote in
favor of the transactions contemplated hereby.
8.2 Break-Up Fee.
(a) The parties hereby acknowledge that, in negotiating and executing the
Original Agreement, this Agreement and the Option and in taking the steps
necessary or appropriate to effect the transactions contemplated hereby,
Olympus has incurred and will incur direct and indirect monetary and other
costs (including without limitation attorneys' fees and costs, costs of Olympus
management and employee time and potential damage to Olympus's business and
franchises as a result of the announcement of the pending Merger), will forego
discussions with other potential acquirors and will forego various business
activities which it would have otherwise undertaken if it remained an
independent institution. To compensate Olympus for such costs and to induce it
to forego initiating discussions with other potential acquirors, (i) if this
Agreement terminates because WMI, WM Bank or NFSB does not use all reasonable
efforts to consummate the transactions contemplated by this Agreement in
accordance with the terms of this Agreement (unless a condition set forth in
Section 7.3 is not satisfied and such nonsatisfaction has not been the result
of the failure of WMI, WM Bank or NFSB to use all reasonable efforts to
consummate this Agreement in accordance with the terms of this Agreement), (ii)
if WMI terminates this Agreement for any reason other than the grounds for
termination set out in Sections 8.1(a), 8.1(b) or 8.1(c) or (iii) if Olympus
terminates this Agreement pursuant to Section 8.1(d)(ii), then WMI shall pay to
Olympus on demand (and in no event more than three days after such demand) in
immediately available funds, Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00).
(b) The parties hereby acknowledge that, in negotiating and executing the
Original Agreement, this Agreement and the Option and in taking the steps
necessary or appropriate to effect the transaction contemplated hereby, WMI and
WM Bank have incurred and will incur direct and indirect monetary and other
costs (including without limitation attorneys' fees and costs and costs of WMI
and WM Bank employee and management time) and will forego discussions with
respect to other potential acquisitions. To compensate WMI for such costs and
to induce it to forego initiating discussions regarding other acquisitions, if
(i) this Agreement terminates because Olympus does not use all reasonable
efforts to consummate the transactions contemplated by this Agreement in
accordance with the terms of this Agreement (unless a condition set forth in
Section 7.3 is not satisfied and such nonsatisfaction has not been the result
of the failure of Olympus or Olympus Bank to use all reasonable efforts to
consummate this Agreement in accordance with the terms of this Agreement) or
any of the events or circumstances described in Section 2(a) or 2(c) of the
Option occurs; (ii) Olympus terminates this Agreement for any reason other than
the grounds for termination set out in Sections 8.1(a), 8.1(b) or 8.1(d); or
(iii) WMI terminates this Agreement pursuant to Section
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8.1(c)(iii), then Olympus shall be obligated to pay WMI on demand (and in no
event more than three days after such demand) in immediately available funds
Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), and in addition
WMI shall be entitled to receive any benefits under the Option. It is
understood and agreed that this Section 8.2(b) does not limit or restrict in
any way the events or circumstances upon which WMI may exercise its options
under the Option Agreement.
If (a) each of the conditions set forth in Section 7.1 has been satisfied,
(b) WMI has delivered to Olympus a written waiver of the conditions set forth
in Section 7.2 hereof, and (c) Olympus has not yet published its financial
statements for the year ended December 31, 1994, then, upon the written request
of WMI, Olympus and/or Olympus Bank shall, to the extent (i) permissible under
generally accepted accounting principles (in the judgment of Olympus'
accountants) and (ii) permissible under applicable federal regulations and not
objectionable to Olympus' regulators, reflect the following changes or
adjustments on its income statement for the year ended December 31, 1994:
(i) adjustments to reflect a reduction of the market value of the real
property located at 115 South Main Street, Salt Lake City, Utah 84111 below
book value;
(ii) costs and expenses incurred or expected to be incurred in
connection with the transactions contemplated hereby; and
(iii) charges for severance and other payments to officers and
employees made or expected to be made in connection with the transactions
contemplated hereby.
8.3 Effect of Termination. In the event of termination of this Agreement
by any party, this Agreement shall forthwith become void (other than Section
6.4(b) hereof, which shall remain in full force and effect) and, except as and
to the extent provided in Section 8.2, there shall be no further liability on
the part of any party or its officers or directors except for the liability of
WMI, WM Bank and NFSB under Section 6.4(b), it being understood and agreed that
termination of this Agreement shall not affect the rights of WMI under the
Option Agreement except as and to the extent expressly provided in the Option
Agreement.
8.4 Amendment, Extension and Waiver. Subject to applicable law, at any
time prior to the consummation of the Merger, whether before or after approval
thereof by the stockholders of Olympus, the parties may (a) amend this
Agreement (including the Plans of Merger incorporated herein), (b) extend the
time for the performance of any of the obligations or other acts of any other
party hereto, (c) waive any inaccuracies in the representations and warranties
of any other party contained herein or in any document delivered pursuant
hereto, or (d) waive
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compliance with any of the agreements or conditions contained herein; provided,
however, that after any approval of the Merger by the Olympus stockholders,
there may not be, without further approval of such stockholders, any amendment
or waiver of this Agreement (or the Plans of Merger) that changes the amount or
changes the form of consideration to be delivered to the Olympus stockholders
(it being understood that any election by WMSB pursuant to Section 1(c)(iii)
does not constitute an amendment or waiver). This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto. Any agreement on the part of a party hereto to any extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf
of such party, but such waiver or failure to insist on strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
9. Miscellaneous.
9.1 Expenses. All legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall
be borne by the party incurring such costs and expenses unless otherwise
specified in this Agreement.
9.2 Survival. Except for the covenants of Sections 6.4(b), 6.13, 6.14,
6.16, 6.17, 6.18 and 6.19 the respective representations and warranties,
covenants and agreements set forth in this Agreement and all Disclosure
Schedules shall not survive the Effective Time.
9.3 Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery, by registered or
certified mail (return receipt requested) or by cable, telecopier, or telex to
the respective parties as follows:
(a) If to WMI, WM Bank or NFSB, to:
Washington Mutual, Inc.
1201 Third Avenue, Suite 1500
Seattle, Washington 98101
Attn: Craig E. Tall, Executive Vice President
With a copy to:
Foster Pepper & Shefelman
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
Attn: Fay L. Chapman
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(b) If to Olympus or Olympus Bank, to:
Olympus Capital Corporation
115 South Main Street
Salt Lake City, Utah 84111
Attn: A. Blaine Huntsman
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue N.W., Suite 800
Washington, D. C. 20004-2505
Attn: Thomas P. Vartanian
or such other address as shall be furnished in writing by any party to the
others in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
9.4 Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties. Nothing in this
Agreement is intended to confer, expressly or by implication, upon any other
person any rights or remedies under or by reason of this Agreement (except for
Sections 1, 6.13, 6.14, 6.16, 6.17, 6.18 and 6.19, which are intended to
benefit third party beneficiaries).
9.5 Entire Agreement. This Agreement, including the documents and other
writings referred to herein or delivered pursuant hereto, contains the entire
agreement and understanding of the parties with respect to its subject matter.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings between the parties other than those expressly set forth herein or
therein. Except for the Option Agreement, this Agreement supersedes all prior
agreements and understandings between the parties, both written and oral, with
respect to its subject matter.
9.6 Counterparts. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
9.7 Governing Law. This Agreement, in all respects, including all matters
of construction, validity and performance, is governed by the internal laws of
the state of Washington as applicable to contracts executed and delivered in
Washington by citizens of such state to be performed wholly within such state
without giving effect to the principles of conflicts of laws thereof. This
Agreement is being delivered in Seattle, Washington.
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9.8 Headings. The Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
WASHINGTON MUTUAL, INC.
By: /s/ Craig E. Tall
Its Executive Vice President
WASHINGTON MUTUAL BANK
By: /s/ Craig E. Tall
Its Executive Vice President
WASHINGTON MUTUAL FEDERAL SAVINGS BANK
By: /s/ Craig E. Tall
Its Executive Vice President
OLYMPUS CAPITAL CORPORATION
By: /s/ A. Blaine Huntsman
Its Chairman of the Board and
Chief Executive Officer
OLYMPUS BANK, A FEDERAL SAVINGS BANK
By: /s/ A. Blaine Huntsman
Its Chairman of the Board and
Chief Executive Officer
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Exhibit A-1
PLAN OF MERGER
(OLYMPUS WITH AND INTO WM, INC.)
This Plan of Merger is made by and between Olympus Capital Corporation, a
Utah corporation ("Olympus") and Washington Mutual, Inc., a Washington
corporation ("WM, Inc.") in connection with the transactions described in an
Amended and Restated Agreement for Merger dated January 20, 1995 (the "Merger
Agreement") among WM, Inc., Washington Mutual Bank, a Washington chartered
stock savings bank ("WM Bank"), Washington Mutual Federal Savings Bank, a
federal savings association ("NFSB"), Olympus and Olympus' wholly-owned
subsidiary, Olympus Bank, a Federal Savings Bank ("Olympus Bank"). WM Bank and
NFSB are wholly-owned subsidiaries of WM, Inc. Capitalized terms not otherwise
defined herein shall have the meaning given them in the Merger Agreement. This
Plan of Merger, including related documents, is intended to constitute a "Plan
of Reorganization" as that term is used in section 354 of the Code. Further,
this Merger is intended to constitute a "Reorganization" as defined in section
368(a)(1)(A) of the Code.
As of the date hereof, Olympus has authorized capital stock of [INSERT
THE NUMBER OF SHARES AS OF THE DATE OF THE MERGER] (_________) shares of common
stock, par value $1.00 per share (the "Olympus Common Stock"). As of the date
hereof, [INSERT THE NUMBER OF SHARES AS OF THE DATE OF THE MERGER]
(_____________) shares of Olympus Common Stock are issued and outstanding. As
of the date hereof, WM, Inc. has authorized capital stock of [INSERT THE NUMBER
OF SHARES AS OF THE DATE OF THE MERGER] (___________) shares of common stock,
no par value (the "WM, Inc. Common Stock"), and [INSERT THE NUMBER OF SHARES AS
OF THE DATE OF THE MERGER] (__________) shares of preferred stock, of which
[INSERT THE NUMBER OF SHARES AS OF THE DATE OF THE MERGER] (_____________)
shares of WM, Inc. Common Stock and [INSERT THE NUMBER OF SHARES AS OF THE DATE
OF THE MERGER] (___________) shares of WM, Inc. preferred stock are issued and
outstanding.
The boards of directors of Olympus and WM, Inc. have approved this Plan of
Merger (the "Plan of Merger") under which Olympus shall be merged with and into
WM, Inc. The Plan of Merger has been approved by the shareholders of Olympus.
Olympus and WM, Inc. hereby agree as follows:
1. Merger. At and on the Effective Time of the Merger, Olympus shall be
merged with and into WM, Inc. in accordance with the terms hereof. WM, Inc.
shall be the surviving corporation.
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2. Effective Time. The effective time ("Effective Time") of this
Merger shall be the time and date the articles of merger are both (a) filed
with the Secretary of State of the State of Washington and (b) delivered to the
Division of Corporations and Commercial Code of the State of Utah, or at such
later time or date after such filing and delivery as specified in such
articles.
3. Name. The name of the surviving corporation shall continue
to be "Washington Mutual, Inc."
4. Directors and Principal Officers. The directors and the
principal officers of WM, Inc. immediately prior to the Effective Time shall
continue to serve as directors and principal officers of the surviving
corporation after the Effective Time.
5. Terms and Conditions of Merger. At the Effective Time of the
Merger:
(a) Conversion of Olympus Common Stock. Subject to the
provisions below, at the Effective Time, all of the outstanding shares of
common stock, par value $1.00 per share, of Olympus ("Olympus Common Stock")
shall be converted into the right to receive shares of common stock, no par
value per share, of WM, Inc. ("WM, Inc. Common Stock"), as described below.
Subject to the provisions hereof, holders of all outstanding shares of Olympus
Common Stock will receive per share consideration equal to [INSERT $15.50, BUT
IF THE MERGER CONSIDERATION HAS BEEN ADJUSTED PURSUANT TO SECTION 1(C)(V) OF
THE AGREEMENT, THEN INSERT ADJUSTED MERGER CONSIDERATION] per share of Olympus
Common Stock (the "Merger Consideration"), such consideration to be paid in
newly issued shares of WM, Inc. Common Stock. The per share value of WM, Inc.
Common Stock for the purpose of paying the Merger Consideration shall be the
arithmetic average of the National Market System Closing Price of WM, Inc.
Common Stock for the ten (10) trading days immediately preceding the third
trading day before the Effective Time (the "Average Price"). The term
"National Market System Closing Price" means the price per share of the last
sale of WM, Inc. Common Stock reported on the National Market System at the
close of the trading day by the National Association of Securities Dealers,
Inc. The exchange ratio for determining the number of shares of WM, Inc.
Common Stock to be issued for each share of Olympus Common Stock (the "Exchange
Ratio") shall be $[INSERT DOLLAR AMOUNT OF MERGER CONSIDERATION] divided by the
Average Price. Computations of the Average Price and of the Exchange Ratio
shall be carried to five decimals and then rounded to three decimals, rounding
down if the fourth decimal is four or less or up if it is five or more. Cash
will be paid in lieu of fractional shares as provided in Section 5(c) below.
[If between the date of the Merger Agreement and the Effective Time,
the shares of WM, Inc. Common Stock shall be changed into a different number or
class of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or if a stock dividend thereon shall be
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declared with a record date within such period, the Average Price shall be
adjusted accordingly.]
(b) WM, Inc. Common Stock. Each share of WM, Inc. Common
Stock issued and outstanding immediately prior to the Effective Time shall
remain outstanding and unchanged and shall continue to be owned by the
stockholder thereof.
(c) No Fractional Shares. Notwithstanding any term or
provision hereof, no fractional shares of WM, Inc. Common Stock, and no
certificates or scrip therefor, or other evidence of ownership thereof, shall
be issued in exchange for any shares of Olympus Common Stock or unexercised
options for Olympus Common Stock; no dividend or distribution with respect to
WM, Inc. Common Stock shall be payable on or with respect to any fractional
share interests; and no such fractional share interest shall entitle the owner
thereof to vote or to any other rights of a stockholder of WM, Inc. In lieu of
such fractional share interests, any holder of Olympus Common Stock or
unexercised options for Olympus Common Stock who would otherwise be entitled to
a fractional share of WM, Inc. Common Stock will, upon surrender of his
certificate or certificates representing Olympus Common Stock outstanding
immediately prior to the Effective Time, in the case of holders of Olympus
Common Stock, and on the Effective Date, in the case of holders of unexercised
options for Olympus Common Stock, be paid the cash value of such fractional
share interest, which shall be equal to the product of the fraction multiplied
by the Average Price. For the purposes of determining any such fractional
share interests, all shares of Olympus Common Stock owned by an Olympus
stockholder and all such unexercised options shall be combined so as to
calculate the maximum number of whole shares of WM, Inc. Common Stock issuable
to such Olympus stockholder.
(d) Options to Acquire Olympus Common Stock. Each
option to purchase shares of Olympus Common Stock which is outstanding
and remains unexercised immeditately prior to the Effective Time shall be
deemed to have been exercised at the Effective Time through conversion into
that number of shares of WM, Inc. Common Stock equal to the quotient obtained
by dividing (i) the Net Option Value by (ii) the Average Price. For purposes
of this Section 5(d), with respect to any option to purchase shares of Olympus
Common Stock, "Net Option Value" means (x) the aggregate Merger Consideration
in respect of shares of Olympus Common Stock issuable upon exercise of such
option, less (y) the aggregate exercise price payable upon the exercise of such
option, less (z) the aggregate amount of federal, state and local income taxes
and other amounts required to be withheld with respect to such exercise.
6. Method of Effectuation; Exchange of Certificates. Prior to
the Effective Time, WM, Inc. shall designate a bank or trust company to act as
an exchange agent (the "Exchange Agent") in connection with the Merger. Prior
to or at the Effective Time, WM, Inc. shall deposit with the Exchange Agent
certificates representing the shares of WM, Inc. Common Stock to be received by
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shareholders and optionholders of Olympus, together with cash sufficient to pay
fractional shares as provided in Section 5(a).
As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each person who was, at the Effective Time, a holder of record of
Olympus Common Stock a letter of transmittal (which shall specify that delivery
of certificates which immediately prior to the Effective Time represented
outstanding shares of Olympus Common Stock (the "Certificates") shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
receipt of the Certificates by the Exchange Agent) and, for holders of Olympus
Common Stock who have not previously delivered Certificates, instructions for
effecting the surrender of the Certificates. Upon surrender to the Exchange
Agent of the Certificates, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, and
such other documents as may be reasonably requested, the Exchange Agent shall
promptly deliver to the person entitled thereto a certificate representing the
number of shares of WM, Inc. Common Stock (and cash in lieu of any fractional
shares of WM, Inc. Common Stock) such holder is entitled to receive pursuant to
this Plan of Merger. All Certificates so surrendered shall be cancelled.
Until so surrendered and exchanged, each Certificate shall, after the Effective
Time, be deemed to evidence only the right to receive the number of shares of
WM, Inc. Common Stock (and cash in lieu of any fractional shares of WM, Inc.
Common Stock) to which such holder is entitled pursuant to Section 5 hereof.
No dividends or other distributions declared after the Effective Time
with respect to shares of WM, Inc. Common Stock and payable to the holders of
record thereof after the Effective Time shall be paid to the holder of any
unsurrendered Certificate until the holder thereof surrenders such Certificate.
Subject to the effect of any applicable escheat laws and unclaimed property
laws, after the subsequent surrender and exchange of a Certificate, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to the WM, Inc. Common Stock for which such Certificate
was exchangeable.
If delivery of shares of WM, Inc. Common Stock (and any cash in lieu
of fractional shares) is to be made to a person other than the person in whose
name a surrendered Certificate is registered, it shall be a condition of such
delivery that the Certificate so surrendered be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise be in
proper form for transfer and that the person requesting such delivery shall
have paid any transfer and other taxes required by reason of such delivery to a
person other than the registered holder of the surrendered Certificate or shall
have established to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
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At the Effective Time, the stock transfer books of Olympus shall be
closed and there shall be no further registration of transfers of shares of
Olympus Common Stock thereafter on the records of Olympus. From and after the
Effective Time, the holders of Certificates shall cease to have any rights with
respect to the shares of Olympus Common Stock represented thereby immediately
prior to the Effective Time except as provided herein.
No interest shall be paid or accrue on or in respect of any portion of
the WM, Inc. Common Stock, or the cash in lieu of fractional shares, to be
delivered in exchange for the surrendered Certificates.
The Exchange Agent shall return to WM, Inc. all shares of WM, Inc.
Common Stock and cash not previously paid to Olympus shareholders 90 days
following the Effective Time, and thereafter all former shareholders of Olympus
shall only be entitled to receive shares of WM, Inc. Common Stock (and any
cash in lieu of fractional shares) from WM, Inc. upon proper surrender of their
Certificates. Notwithstanding anything to the contrary herein, neither the
Exchange Agent nor WM, Inc. shall be liable to a holder of Olympus Common Stock
for any amount properly paid to a public official pursuant to any applicable
property, escheat or similar laws.
Notwithstanding anything in this Plan of Merger to the contrary,
shares of Olympus Common Stock which are issued and outstanding immediately
prior to the Effective Time and which are held by holders who have voted their
shares against the Merger and shall have complied with the provisions of Part
13 of the Utah Revised Business Corporation Act relating to dissenting
shareholders shall not, if such Part 13 grants dissenter rights in the Merger
transaction, be converted into the right to receive the per share Merger
Consideration, unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost the right to payment under such Part
13, in which case each such share shall thereupon be deemed to have been
converted at the Effective Time into the right to receive the per share Merger
Consideration, without any interest thereon.
7. Articles and Bylaws. At and after the Effective Time, the
Articles of Incorporation and Bylaws of WM, Inc. as in effect immediately prior
to the Effective Time shall continue to be the Articles of Incorporation and
Bylaws of the surviving corporation until amended in accordance with law.
8. Rights and Duties of the Surviving Corporation.
At the Effective Time, Olympus shall be merged with and into
WM, Inc., which shall be the surviving corporation and which shall continue to
be a Washington corporation. All assets, rights, privileges, powers,
franchises and property (real, personal and mixed) of Olympus shall be
automatically transferred to and vested in WM, Inc. as the surviving
corporation by virtue of the Merger
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without any deed or other document of transfer. The surviving corporation,
without any order or action on the part of any court or otherwise and without
any documents of assumption or assignment, shall hold and enjoy all of the
properties, franchises and interests, including appointments, powers,
designations, nominations and all other rights and interests as agent or other
fiduciary in the same manner and to the same extent as such rights, franchises
and interests and powers were held or enjoyed by WM, Inc. and Olympus,
respectively. The surviving corporation shall be responsible for all the
liabilities of every kind and description of both WM, Inc. and Olympus
immediately prior to the Effective Time, including liabilities for all debts,
obligations and contracts of WM, Inc. and Olympus, respectively, matured or
unmatured, whether accrued, absolute, contingent or otherwise and whether or
not reflected or reserved against on balance sheets, books or accounts or
records of either WM, Inc. or Olympus. All rights of creditors and other
obligees and all liens on property of either WM, Inc. or Olympus shall be
preserved and shall not be released or impaired.
8. Execution. This Plan of Merger may be executed in any number
of counterparts each of which shall be deemed an original and all of such
counterparts shall constitute one and the same instrument.
Dated as of _______________, 1995.
Washington Mutual, Inc.
By ___________________________________
__________________, President
By ___________________________________
__________________, Secretary
Olympus Capital Corporation
By ___________________________________
__________________, President
By ___________________________________
__________________, Secretary
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Exhibit A-2
PLAN OF MERGER
(STOCK AND CASH TRANSACTION)
(OLYMPUS WITH AND INTO WM, INC.)
This Plan of Merger is made by and between Olympus Capital Corporation, a
Utah corporation ("Olympus") and Washington Mutual, Inc., a Washington
corporation ("WM, Inc.") in connection with the transactions described in an
Amended and Restated Agreement for Merger dated January 20, 1995 (the "Merger
Agreement") among WM, Inc., Washington Mutual Bank, a Washington chartered
stock savings bank ("WM Bank"), Washington Mutual Federal Savings Bank, a
federal savings association ("NFSB"), Olympus and Olympus' wholly-owned
subsidiary, Olympus Bank, a Federal Savings Bank ("Olympus Bank"). WM Bank and
NFSB are wholly-owned subsidiaries of WM, Inc. Capitalized terms not otherwise
defined herein shall have the meaning given them in the Merger Agreement. This
Plan of Merger, including related documents, is intended to constitute a "Plan
of Reorganization" as that term is used in section 354 of the Code. Further,
this Merger is intended to constitute a "Reorganization" as defined in section
368(a)(1)(A).
As of the date hereof, Olympus has authorized capital stock of [INSERT
THE NUMBER OF SHARES AS OF THE DATE OF THE MERGER] (_________) shares of common
stock, par value $1.00 per share (the "Olympus Common Stock"). As of the date
hereof, [INSERT THE NUMBER OF SHARES AS OF THE DATE OF THE MERGER]
(_____________) shares of Olympus Common Stock are issued and outstanding. As
of the date hereof, WM, Inc. has authorized capital stock of [INSERT THE NUMBER
OF SHARES AS OF THE DATE OF THE MERGER] (___________) shares of common stock,
no par value per share (the "WM, Inc. Common Stock"), and [INSERT THE NUMBER OF
SHARES AS OF THE DATE OF THE MERGER] (__________) shares of preferred stock, of
which [INSERT THE NUMBER OF SHARES AS OF THE DATE OF THE MERGER]
(_____________) shares of WM, Inc. Common Stock and [INSERT NUMBER AS OF DATE
OF MERGER] (___________) shares of WM, Inc. preferred stock are issued and
outstanding.
The boards of directors of Olympus and WM, Inc. have approved this Plan of
Merger (the "Plan of Merger") under which Olympus shall be merged with and into
WM, Inc. The Plan of Merger has been approved by the shareholders of Olympus.
Olympus and WM, Inc. hereby agree as follows:
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1. Merger. At and on the Effective Time of the Merger, Olympus shall
be merged with and into WM, Inc. in accordance with the terms hereof. WM, Inc.
shall be the surviving corporation.
2. Effective Time. The effective time ("Effective Time") of this
Merger shall be the date the articles of merger are both (a) filed with the
Secretary of State of the State of Washington and (b) delivered to the Division
of Corporations and Commercial Code of the State of Utah, or such later time or
date after such filing and delivery as specified in such articles.
3. Name. The name of the surviving corporation shall continue to
be "Washington Mutual, Inc."
4. Directors and Principal Officers. The directors and the
principal officers of WM, Inc. immediately prior to the Effective Time shall
continue to serve as directors and principal officers of the surviving
corporation after the Effective Time.
5. Terms and Conditions of Merger. At the Effective Time of the
Merger:
(a) Conversion of Olympus Common Stock. Subject to the
provisions below, at the Effective Time, each of the outstanding shares of
common stock, par value $1.00 per share, of Olympus ("Olympus Common Stock")
shall be converted into the right to receive shares of common stock, no par
value per share, of WM, Inc. ("WM, Inc. Common Stock") or cash, as described
below.
(i) Subject to the provisions hereof, holders of
all outstanding shares of Olympus Common Stock will receive per share
consideration equal to [INSERT $15.50, BUT IF THE MERGER CONSIDERATION HAS BEEN
ADJUSTED PURSUANT TO SECTION 1(C)(V) OF THE AGREEMENT, THEN INSERT THE MERGER
CONSIDERATION AS ADJUSTED] per share of Olympus Common Stock (the "Merger
Consideration"). ___________ percent (___%) (the "Stock Percentage") of the
aggregate Merger Consideration shall be paid in newly issued shares of WM, Inc.
Common Stock and __________ percent (___%) shall be paid in cash. The per
share value of WM, Inc. Common Stock for the purpose of paying the Merger
Consideration shall be the arithmetic average of the National Market System
Closing Price of WM, Inc. Common Stock for the ten (10) trading days
immediately preceding the third trading day before the Effective Date (the
"Average Price"). The term "National Market System Closing Price" means the
price per share of the last sale of WM, Inc. Common Stock reported on the
National Market System at the close of the trading day by the National
Association of Securities Dealers, Inc. The exchange ratio for determining the
number of shares of WM, Inc. Common Stock to be issued for each share of
Olympus Common Stock which is converted into the right to receive WM, Inc.
Common Stock (the "Exchange Ratio") shall be [INSERT DOLLAR AMOUNT OF MERGER
CONSIDERATION] divided by the Average Price. Computations of the Average Price
and of the Exchange Ratio shall be carried to five decimals and then rounded to
three decimals, rounding down if the
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fourth decimal is four or less or up if it is five or more. Cash will be paid
in lieu of fractional shares as provided in Section 5(c) below. The
determination of whether a share of Olympus Common Stock is to be converted
into the right to receive the Merger Consideration in the form of WM, Inc.
Common Stock or cash shall be made as provided in Section 5(a)(ii) below.
[If between the date of the Merger Agreement and the Effective Time,
the shares of WM, Inc. Common Stock shall be changed into a different number or
class of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or if a stock dividend thereon shall be
declared with a record date within such period, the Average Price shall be
adjusted accordingly.]
(ii) An election form and other appropriate transmittal
materials as WM, Inc. and Olympus shall mutually agree ("Election Form") will
be sent twenty-seven (27) days before the anticipated Effective Time or on such
other date as WM, Inc. and Olympus shall mutually agree (the "Mailing Date") to
each holder of record of Olympus Common Stock as of five (5) business days
prior to the Mailing Date permitting such holder (or in the case of nominee
record holders, the beneficial owner through proper instructions and
documentation) (i) to elect to receive only WM, Inc. Common Stock with respect
to such holder's Olympus Common Stock as hereinabove provided (the "Stock
Election Shares"), (ii) to elect to receive only cash with respect to such
holder's Olympus Common Stock as hereinabove provided (the "Cash Election
Shares"), or (iii) to indicate that such holder makes no such election (the
"No-Election Shares"). Any shares of Olympus Common Stock with respect to
which the holder thereof shall not, as of the Election Deadline (as defined
below), have submitted to the Exchange Agent (as defined below), an effective,
properly completed Election Form shall be deemed to be No-Election Shares.
The term "Election Deadline", shall mean 5:00 p.m., Pacific Time, on
the 20th day following but not including the Mailing Date or such other date as
Olympus and WM, Inc. shall mutually agree upon. WM, Inc. shall make an
election form available to all persons who become holders of Olympus Common
Stock between the date five (5) business days prior to the Mailing Date and the
close of business on the day five (5) business days prior to the Election
Deadline; provided that Olympus will provide to the Exchange Agent in a timely
manner all information necessary to comply with this provision.
Any election to receive WM, Inc. Common Stock or cash shall have been
properly made only if the Exchange Agent shall have actually received a
properly completed Election Form by the Election Deadline. An Election Form
will be properly completed only if accompanied by certificates (or customary
affidavits and indemnities regarding the loss thereof) representing all shares
of Olympus Common Stock covered thereby. Any Election Form may be revoked or
changed by the person submitting such Election Form to
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the Exchange Agent at or prior to the Election Deadline. The certificate or
certificates representing Olympus Common Stock relating to any revoked Election
Form shall be promptly returned without charge to the person submitting the
Election Form to the Exchange Agent. The Exchange Agent shall have reasonable
discretion to determine when any election, modification or revocation is
received and whether any such election, modification or revocation has been
properly made.
Within five business days after the Election Deadline, the Exchange
Agent shall effectuate the allocation among holders of Olympus Common Stock of
rights to receive WM, Inc. Common Stock or cash in the Merger in accordance
with the Election Forms as follows (provided, however, that in no event shall
the Exchange Agent be required to effectuate the allocation prior to the
Effective Date):
(A) "Stock Limit" shall mean ___________ shares of WM,
Inc. Common Stock [INSERT A NUMBER OF SHARES DETERMINED BY (I)
MULTIPLYING THE STOCK PERCENTAGE BY THE MERGER CONSIDERATION, (II)
MULTIPLYING THAT RESULT BY THE NUMBER OF OLYMPUS COMMON SHARES
OUTSTANDING AT THE EFFECTIVE TIME AND (III) DIVIDING THAT RESULT BY
THE AVERAGE PRICE.] If the number of shares of WM, Inc. Common Stock
that would be issued upon the conversion into WM, Inc. Common Stock of
the Stock Election Shares is less than the Stock Limit, then:
(I) all Stock Election Shares will be converted into
the right to receive WM, Inc. Common Stock;
(II) the Exchange Agent will select first from
among the holders of No-Election Shares and then (if
necessary) from among the holders of Cash Election Shares, by
random selection (as described below), a sufficient number of
such holders ("Stock Designees") such that the number of
shares of WM, Inc. Common Stock that will be issued upon the
conversion into WM, Inc. Common Stock of shares of Olympus
Common Stock held by the Stock Designees will, when added to
the number of shares of WM, Inc. Common Stock that will be
issued upon the conversion of the Stock Election Shares, equal
as closely as practicable the Stock Limit, and all shares held
by the Stock Designees will be converted into the right to
receive WM, Inc. Common Stock, and
(III) the Cash Election Shares and the No-Election
Shares not held by Stock Designees will be converted into the
right to receive cash; or
(B) If the number of shares of WM, Inc. Common Stock that
would be issued upon the conversion into WM, Inc. Common Stock of the
Stock Election Shares is greater than the Stock Limit, then:
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(I) all Cash Election Shares and No-Election
Shares will be converted into the right to receive cash,
(II) the Exchange Agent will select from among the
holders of Stock Election Shares, by random selection (as
described below), a sufficient number of such holders to
receive cash ("Cash Designees") such that the number of shares
of WM, Inc. Common Stock that will be issued upon the
conversion of the Stock Election Shares not held by Cash
Designees will equal as closely as practicable the Stock
Limit, and all shares held by the Cash Designees will be
converted into the right to receive cash, and
(III) all Stock Election Shares not held by the
Cash Designees will be converted into the right to receive WM,
Inc. Common Stock; or
(C) If the number of shares of WM, Inc. Common Stock that
would be issued upon the conversion into WM, Inc. Common Stock of the
Stock Election Shares is equal or nearly equal to the Stock Limit,
then subparagraphs (A) and (B) above and subparagraph (D) below shall
not apply and all Stock Election Shares will be converted into the
right to receive WM, Inc. Common Stock and all Cash Election Shares
and No-Election Shares will be converted into the right to receive
cash; or
(D) If the number of shares of WM, Inc. Common Stock that
would be issued upon the conversion into WM, Inc. Common Stock of the
Stock Election Shares and No-Election Shares would equal or nearly
equal the Stock Limit, then subparagraphs (A), (B) and (C) above shall
not apply and all Cash Election Shares will be converted into the
right to receive cash and all Stock Election Shares and No-Election
Shares will be converted into the right to receive WM, Inc. Common
Stock.
The selection process to be used by the Exchange Agent shall consist
of such processes as shall be mutually determined by Olympus and WM, Inc. as
shall be further described in the Election Form.
(b) WM, Inc. Common Stock. Each share of WM, Inc. Common
Stock issued and outstanding immediately prior to the Effective Time shall
remain outstanding and unchanged and shall continue to be owned by the
stockholder thereof.
(c) No Fractional Shares. Notwithstanding any term or
provision hereof, no fractional shares of WM, Inc. Common Stock, and no
certificates or scrip therefor, or other evidence of ownership thereof, shall
be issued in exchange for any shares of Olympus Common Stock; no dividend or
distribution with respect to WM, Inc. Common Stock shall be payable on or with
respect to any fractional share interests; and no such fractional share
interest shall entitle the owner thereof to vote or to any other rights of
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a stockholder of WM, Inc. In lieu of such fractional share interests, any
holder of Olympus Common Stock who would otherwise be entitled to a fractional
share of WM, Inc. Common Stock will, upon surrender of his certificate or
certificates representing Olympus Common Stock outstanding immediately prior to
the Effective Time, be paid the cash value of such fractional share interest,
which shall be equal to the product of the fraction multiplied by the Average
Price. For the purposes of determining any such fractional share interests,
all shares of Olympus Common Stock owned by a Olympus stockholder shall be
combined so as to calculate the maximum number of whole shares of WM, Inc.
Common Stock issuable to such Olympus stockholder.
(d) [FOLLOWING PROVISION TO BE ADDED IF THE AMENDMENT
DESCRIBED IN SECTION 1(D)(II) OF THE MERGER AGREEMENT IS ADOPTED.] Stock
Options. At the Effective Time, the Stock Option Plans shall become separate
plans of WM, Inc., and each option shall be automatically converted into a
fully vested option to acquire WM, Inc. Common Stock. Each option to acquire
Olympus Common Stock shall become an option to acquire the number of shares of
WM, Inc. Common Stock determined by multiplying (i) the number of shares of
Olympus Common Stock covered by such option by (ii) the Stock Option Exchange
Ratio. The Stock Option Exchange Ratio shall be [INSERT THE DOLLAR AMOUNT OF
MERGER CONSIDERATION] the Merger Consideration divided by the Average Price.
The price at which each option to acquire a share of WM, Inc. Common Stock
shall be exercisable shall be determined by dividing (i) the exercise price of
the option to acquire Olympus Common Stock by (ii) the Stock Option Exchange
Ratio. Calculation of the number of shares and the exercise price shall each be
carried out to four decimals and then rounded to two decimals, rounding down if
the third decimal is four or less or up if it is five or more. (So that, by
way of example, if the Stock Option Exchange Ratio is .50 and a person has an
option to acquire 1,000 shares of Olympus Common Stock at $7.00 per share, then
at the Effective Time, the option will be converted into an option to acquire
500 shares of WM, Inc. Common Stock at $14.00.)
6. Method of Effectuation; Exchange of Certificates. Prior to
the Effective Time, WM, Inc. shall designate a bank or trust company to act as
an exchange and payment agent (the "Exchange Agent") in connection with the
Merger. Prior to or at the Effective Time, WM, Inc. shall deposit with the
Exchange Agent certificates representing the shares of WM, Inc. Common Stock to
be received by shareholders of Olympus, together with cash sufficient to pay
the cash percentage of the aggregate Merger Consideration multiplied by the
number of outstanding shares of Olympus Common Stock in an interest-bearing
account controlled by the Exchange Agent. Upon completion of the allocation
procedures described in Section 5(a)(ii) above, WM, Inc. shall, if necessary,
deposit with the Exchange Agent any additional shares of WM, Inc. Common Stock
in exchange for cash or deposit with the Exchange Agent any additional cash in
exchange for WM, Inc. Common Stock, as may be required to effect the conversion
of Olympus Common Stock as contemplated hereby.
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As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each person who did not submit to the Exchange Agent an
effective, properly completed and unrevoked Election Form and who was, at the
Effective Time, a holder of record of Olympus Common Stock a letter of
transmittal (which shall specify that delivery of certificates which
immediately prior to the Effective Time represented outstanding shares of
Olympus Common Stock (the "Certificates") shall be effected, and risk of loss
and title to the Certificates shall pass, only upon receipt of the Certificates
by the Exchange Agent) and instructions for effecting the surrender of the
Certificates. Upon surrender to the Exchange Agent of the Certificates,
together with such letter of transmittal, duly completed and validly executed
in accordance with the instructions thereto, and such other documents as may be
reasonably requested, the Exchange Agent shall promptly deliver to the person
entitled thereto a certificate representing the number of shares of WM, Inc.
Common Stock such holder is entitled to receive pursuant to this Plan of
Merger, and the cash portion of the Merger Consideration that such holder is
entitled to receive pursuant to this Plan of Merger. All Certificates so
surrendered shall be cancelled. Until so surrendered and exchanged, each
Certificate shall, after the Effective Time, be deemed to evidence only the
right to receive the number of shares of WM, Inc. Common Stock and the amount
of cash to which such holder is entitled to pursuant to Section 5 hereof.
No dividends or other distributions declared after the Effective Time
with respect to shares of WM, Inc. Common Stock and payable to the holders of
record thereof after the Effective Time shall be paid to the holder of any
unsurrendered Certificate until the holder thereof surrenders such Certificate.
Subject to the effect of any applicable escheat laws and unclaimed property
laws, after the subsequent surrender and exchange of a Certificate, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to the WM, Inc. Common Stock for which such Certificate
was exchangeable.
If delivery of shares of WM, Inc. Common Stock or any cash is to be
made to a person other than the person in whose name a surrendered Certificate
is registered, it shall be a condition of such delivery that the Certificate so
surrendered be properly endorsed (or accompanied by an appropriate instrument
of transfer) and otherwise be in proper form for transfer and that the person
requesting such delivery shall have paid any transfer and other taxes required
by reason of such delivery to a person other than the registered holder of the
surrendered Certificate or shall have established to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
At the Effective Time, the stock transfer books of Olympus shall be
closed and there shall be no further registration of transfers of shares of
Olympus Common Stock thereafter on the records of Olympus. From and after the
Effective Time, the holders of Certificates shall cease to have any rights with
respect to the
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shares of Olympus Common Stock represented thereby immediately prior to the
Effective Time except as provided herein.
No interest shall be paid or accrue on or in respect of any portion of
the WM, Inc. Common Stock or any cash to be delivered in exchange for the
surrendered Certificates.
The Exchange Agent shall return to WM, Inc. all shares of WM, Inc.
Common Stock and cash not previously paid to Olympus shareholders 90 days
following the Effective Time, and thereafter all former shareholders of Olympus
shall only be entitled to receive shares of WM, Inc. Common Stock and cash
from WM, Inc. upon proper surrender of their Certificates. Notwithstanding
anything to the contrary herein, neither the Exchange Agent nor WM, Inc. shall
be liable to a holder of Olympus Common Stock for any amount properly paid to a
public official pursuant to any applicable property, escheat or similar laws.
Notwithstanding anything in this Plan of Merger to the contrary,
shares of Olympus Common Stock which are issued and outstanding immediately
prior to the Effective Time and which are held by holders who have voted their
shares against the Merger and shall have complied with the provisions of Part
13 of the Utah Revised Business Corporation Act relating to dissenting
shareholders shall not be converted into the right to receive the per share
Merger Consideration, unless and until such holder shall have failed to perfect
or shall have effectively withdrawn or lost the right to payment under such
Part 13, in which case each such share shall thereupon be deemed to have been
converted at the Effective Time into the right to receive the per share Merger
Consideration, without any interest thereon.
7. Articles and Bylaws. At and after the Effective Time, the
Articles of Incorporation and Bylaws of WM, Inc. as in effect immediately prior
to the Effective Time shall continue to be the Articles of Incorporation and
Bylaws of the surviving corporation until amended in accordance with law.
8. Rights and Duties of the Surviving Corporation.
At the Effective Time, Olympus shall be merged with and into
WM, Inc., which shall be the surviving corporation and which shall continue to
be a Washington corporation. All assets, rights, privileges, powers,
franchises and property (real, personal and mixed) of Olympus shall be
automatically transferred to and vested in the surviving corporation by virtue
of the Merger without any deed or other document of transfer. The surviving
corporation, without any order or action on the part of any court or otherwise
and without any documents of assumption or assignment, shall hold and enjoy all
of the properties, franchises and interests, including appointments, powers,
designations, nominations and all other rights and interests as agent or other
fiduciary in the same manner and to the same extent as such rights, franchises
and interests and powers were held or enjoyed by WM, Inc. and Olympus,
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<PAGE> 155
respectively. The surviving corporation shall be responsible for all the
liabilities of every kind and description of both WM, Inc. and Olympus
immediately prior to the Effective Time, including liabilities for all debts,
obligations and contracts of WM, Inc. and Olympus, respectively, matured or
unmatured, whether accrued, absolute, contingent or otherwise and whether or
not reflected or reserved against on balance sheets, books or accounts or
records of either WM, Inc. or Olympus. All rights of creditors and other
obligees and all liens on property of either WM, Inc. or Olympus shall be
preserved and shall not be released or impaired.
8. Execution. This Plan of Merger may be executed in any number
of counterparts each of which shall be deemed an original and all of such
counterparts shall constitute one and the same instrument.
Dated as of _______________, 1995.
Washington Mutual, Inc.
By ___________________________________
__________________, President
By ___________________________________
__________________, Secretary
Olympus Capital Corporation
By ___________________________________
__________________, President
By ___________________________________
__________________, Secretary
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APPENDIX B
PERSONAL AND CONFIDENTIAL
-------------------------
March __, 1995
DRAFT 3/2/95
============
Board of Directors
Olympus Capital Corporation
115 South Main Street
Salt Lake City, UT 84111
Gentlemen:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $1.00 per share (the "Shares"),
of Olympus Capital Corporation (the "Company") of the Consideration, as defined
below, to be received for each Share by such holders pursuant to the Amended
and Restated Agreement for Merger dated as of January 20, 1995 among Washington
Mutual, Inc. ("Washington Mutual"), Washington Mutual Bank and Washington
Mutual Federal Savings Bank, both wholly-owned subsidiaries of Washington
Mutual, the Company and Olympus Bank, a Federal Savings Bank, a wholly-owned
subsidiary of the Company (the "Agreement"). Pursuant to the Agreement, the
Company will be merged with and into Washington Mutual (the "Merger") and
holders of the Shares will receive $15.50 per share, subject to certain
adjustments (the "Consideration"), in shares of Common Stock, no par value, of
Washington Mutual (the "Washington Mutual Common Stock"). The Washington
Mutual Common Stock to be received by holders of the Shares will be determined
by dividing $15.50 by the average price per share of the last sale of
Washington Mutual Common Stock as reported by the National Association of
Securities Dealers, Inc. for the ten trading days immediately preceding the
third trading day before the Merger (the "Average Price"). The Consideration
is subject to increase if the Merger is not consummated by April 30, 1995 by an
amount equal to (i) $0.775 (five percent of $15.50) multiplied by (ii) a
fraction, the numerator of which is the number of days elapsed between April
30, 1995 and the date of the Merger and the denominator of which is 365.
Furthermore, if the Average Price is less than $18.00, then Washington Mutual
may elect to pay up to 49% of the aggregate Consideration with cash. In such
case, holders of the Shares may elect to receive the Consideration in either
cash or Washington Mutual Common Stock, subject to certain allocation
procedures as detailed in the Agreement. No certificates for fractional shares
of Washington Mutual Common Stock will be issued as a result of the Merger.
Instead, each stockholder otherwise entitled to a fractional share will receive
cash in lieu of a fractional share.
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 underwirtings, 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 acted as its financial advisor in connection
with the Merger and having participated in certain of the negotiations leading
to the Agreement. We have also provided certain
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Olympus Capital Corporation
March __, 1995
Page Two
investment banking services to Washington Mutual from time to time and may
provide investment banking services to Washington Mutual in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement on Form S-4 under the Securities Act of
1933, including the Proxy Statement/Prospectus; Annual Reports to Stockholders
and Form 10-K Annual Reports of the Company for the five years ended December
31, 1993; Annual Reports to Stockholders and Annual Reports to the FDIC, Form
F-2, of Washington Mutual for the five years ended December 31, 1993; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of the
Company; certain interim reports to stockholders and Quarterly Reports to the
FDIC, Form F-4, of Washington Mutual; certain other communications from the
Company and Washington Mutual to their respective stockholders; and certain
internal financial analyses and forecasts for the Company prepared by its
management. We also have held discussions with members of the senior
managements of the Company and Washington Mutual regarding the past and current
business operations, financial condition and future prospects of their
respective companies. In addition, we have reviewed the reported price and
trading activity for the Shares, compared certain financial and stock market
information for the Company 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 forecasts, including, without limitation, projections
regarding underperforming and nonperforming assets and net chargeoffs have been
reasonably prepared on a basis reflecting the best currently available
judgments and estimates of the Company and that such forecasts will be realized
in the amounts and at the times contemplated thereby. We are not experts in
the evaluation of loan and lease portfolios for the 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
Washington Mutual 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 Washington Mutual or any of their respective subsidiaries.
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
Consideration to be received by the holders of Shares pursuant to the Agreement
is fair to such holders.
Very truly yours,
/s/
------------------------
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APPENDIX C
(CONFORMED COPY)
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement"), dated as of July 22,
1994, is made by and between Olympus Capital Corporation, a savings and loan
holding company organized under the laws of Utah ("Olympus"), and Washington
Mutual Savings Bank, a Washington stock savings bank ("WMSB").
Concurrently with the execution hereof, Olympus, Olympus Savings Bank,
a Federal Savings Bank ("Olympus Bank"), WMSB and Washington Mutual Federal
Savings Bank, a federal savings association ("NFSB") have executed a certain
Agreement for Merger (the "Merger Agreement") which would result in the merger
of Olympus with and into WMSB (the "Merger") and the subsequent merger of
Olympus Bank with and into NFSB (the "Bank Merger").
It is understood and acknowledged that by negotiating and executing
the Merger Agreement and by taking actions necessary or appropriate to effect
the transactions contemplated by the Merger Agreement, WMSB and NFSB have
incurred and will incur substantial direct and indirect costs (including
without limitation the costs of management and employee time) and will forgo
the pursuit of certain alternative investments and transactions.
THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in the Merger Agreement, the parties hereto agree as follows:
1. Grant of Option. Subject to the terms and conditions set
forth herein, Olympus hereby irrevocably grants an option (the "Option") to
WMSB to purchase an aggregate of 306,864 authorized but unissued shares of
Olympus' Common Stock, $1.00 par value (the "Common Stock") (which represents
9.9% of total stock issued and outstanding), at a per share price of $13.6125
(the "Option Price"), which was the average closing sales price for the 10
trading days up to and including July 21, 1994 for the Common Stock on the
NASDAQ/National Market System.
2. Exercise of Option. Subject to the provisions of this Section
2 and of Section 14(a) of this Agreement, this Option may be exercised by WMSB
or any transferee as set forth in Section 5 of this Agreement, in whole or in
part, at any time, or from time to time in any of the following circumstances:
(a) Olympus, Olympus Bank or either of their respective
boards of directors enter into an agreement or recommends to their respective
shareholders an agreement (other than the Merger Agreement) pursuant to which
any entity, person or group, within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (any of the
foregoing hereinafter in this Section 2, a "Person") would: (i) merge or
consolidate with, acquire 51 percent (51%) or more of the assets or liabilities
of, or enter into any similar transaction with Olympus or Olympus Bank, or (ii)
purchase or otherwise acquire (including by merger, consolidation, share
exchange or any similar transaction) securities representing ten percent (10%)
or more of the voting shares of Olympus or Olympus Bank;
(b) any Person (other than NFSB or WMSB and other than
any Person owning as of the date hereof ten percent or more of the voting
shares of Olympus) acquires the beneficial ownership or the right to acquire
beneficial ownership of securities representing ten percent (10%) or more of
the voting shares of Olympus (the term "beneficial ownership" for purposes of
this Agreement shall have the meaning set forth in Section 13(d) of the
Exchange Act, and the regulations promulgated thereunder); provided, however,
notwithstanding the foregoing, the Option shall not be exercisable in the
circumstances described above in this subsection (b) if (x) a Person acquires
the beneficial ownership of securities representing ten percent (10%) or more
but less than 25 percent (25%) of the voting shares of Olympus, (y) such Person
files a complete submission in accordance with 12 C.F.R. Section 574.4(e)(1)
prior to acquiring beneficial ownership of securities representing ten percent
(10%) or more of the voting shares of Olympus, and (z) such submission is
accepted or deemed accepted by the Office of Thrift Supervision in accordance
with 12 C.F.R. Section 574.4(e)(3), before such Person acquires beneficial
ownership of securities representing ten percent (10%) or more of the voting
shares of Olympus, that such ownership will not result in control; or
(c) failure of the board of directors of Olympus to recommend,
or withdrawal by the board of directors of a prior recommendation of, the
Merger to the shareholders, or failure of the shareholders to approve the
Merger by the required affirmative vote at a meeting of the shareholders, after
any Person (other than WMSB or NFSB) announces publicly or communicates, in
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writing, to Olympus a proposal to (i) acquire Olympus or Olympus Bank (by
merger, consolidation, the purchase of 51 percent (51%) or more of its assets
or liabilities or any other similar transaction), (ii) purchase or otherwise
acquire securities representing 25 percent (25%) or more of the voting shares
of Olympus or (iii) change the composition of the board of directors of
Olympus.
It is understood and agreed that the Option shall become exercisable
upon the occurrence of any of the above-described circumstances even though the
circumstance occurred as a result, in part or in whole, of the boards of
Olympus or Olympus Bank complying with their fiduciary duties.
Notwithstanding the foregoing, the Option may not be exercised if
either (A) any applicable and required governmental approvals have not been
obtained with respect to such exercise or if such exercise would violate any
applicable regulatory restrictions, or (B) at the time of exercise WMSB or NFSB
is failing in any material respect to perform or observe its covenants or
conditions under the Merger Agreement unless the reason for such failure is
that Olympus is failing to perform or observe its covenants or conditions under
the Merger Agreement.
3. Notice, Time and Place of Exercise. Each time that WMSB or
any transferee wishes to exercise any portion of the Option, WMSB or such
transferee shall give written notice of its intention to exercise the Option
specifying the number of shares as to which the Option is being exercised
("Option Shares") and the place and date for the closing of the exercise (which
date shall be not later than ten (10) business days from the date such notice
is mailed). If any law, regulation or other restriction will not permit such
exercise to be consummated during such ten-day period, the date for the closing
of such exercise shall be within five (5) days following the cessation of such
restriction on consummation.
4. Payment and Delivery of Certificate(s). At any closing for an
exercise of the Option or any portion thereof, (a) WMSB and Olympus will each
deliver to the other certificates of their respective chief executive officers
as to the accuracy, as of the closing date, of their respective representations
and warranties hereunder, (b) WMSB or the transferees will pay the aggregate
purchase price for the shares of Common Stock to be purchased by delivery of a
certified or bank cashier's check in immediately available funds payable to the
order of Olympus, and (c) Olympus will deliver to WMSB or the transferees a
certificate or certificates representing the shares so purchased.
5. Transferability of the Option and Option Shares. Prior to the
time the Option, or a portion thereof, becomes exercisable pursuant to the
provisions of Section 2 of this Agreement, neither the Option nor any portion
thereof shall be transferable. Upon the occurrence of any of the events or
circumstances set forth in Sections 2(a) through (c) above, the Option or any
portion thereof or any of the Option Shares may be freely transferred by WMSB,
subject to applicable federal and state securities laws.
For purposes of this Agreement, a merger or consolidation of WMSB
(whether or not WMSB is the surviving entity) or an acquisition of WMSB shall
not be deemed a transfer.
6. Representations, Warranties and Covenants of Olympus. Olympus
hereby represents, warrants, and covenants to WMSB as follows:
(a) Due Authorization. This Agreement has been duly
authorized by all necessary corporate action on the part of Olympus,has been
duly executed by a duly authorized officer of Olympus and, subject to any
necessary amendments to Olympus' articles of incorporation, constitutes a valid
and binding obligation of Olympus. No shareholder approval by Olympus
shareholders is required by applicable law or otherwise prior to the exercise
of the Option in whole or in part.
(b) Option Shares. Except for any necessary amendments
to its articles of incorporation, Olympus has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and at all
times from the date hereof to such time as the obligation to deliver shares
hereunder terminates will have reserved for issuance, at the closing(s) upon
exercise of the Option, or any portion thereof, the Option Shares (subject to
adjustment, as provided in Section 9 below), all of which, upon issuance
pursuant hereto and after any necessary amendments to Olympus' articles of
incorporation, shall be duly and validly issued, fully paid and nonassessable,
and shall be delivered free and clear of all claims, liens, encumbrances and
security interests, including any preemptive right of any of the shareholders
of Olympus.
(c) No Conflicts. Subject to any necessary amendments to
Olympus' articles of incorporation, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate or result in any violation of or be in conflict with or constitute a
default under any term of the articles of incorporation or bylaws of Olympus or
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any agreement, instrument, judgment, decree, law, rule or order applicable to
Olympus or any subsidiary of Olympus or to which Olympus or any such subsidiary
is a party.
(d) Notification of Record Date. At any time from and
after the date of this Agreement until such time as the Option is no longer
exercisable, Olympus shall give WMSB or any transferee thirty (30) days prior
written notice before setting the record date for determining the holders of
record of the Common Stock entitled to vote on any matter, to receive any
dividend or distribution or to participate in any rights offering or other
matters, or to receive any other benefit or right, with respect to the Common
Stock.
7. Representations, Warranties and Covenants of WMSB. WMSB
hereby represents, warrants and covenants to Olympus as follows:
(a) Due Authorization. This Agreement has been duly
authorized by all necessary corporate action on the part of WMSB, has been duly
executed by a duly authorized officer of WMSB and constitutes a valid and
binding obligation of WMSB.
(b) Transfers of Common Stock. No shares of Common Stock
acquired upon exercise of the Option will be transferred except in a
transaction registered or exempt from registration under any applicable
securities laws.
(c) No Conflicts. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will violate or result in any violation of or be in conflict with or constitute
a default under any term of the charter documents or bylaws of WMSB or any
agreement, instrument, judgment, decree, law, rule or order applicable to WMSB
or any subsidiary of WMSB or to which WMSB or any such subsidiary is a party.
8. Adjustment Upon Changes in Capitalization. In the event of
any change in the Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, exchanges of shares or the like, the
number and kind of shares or securities subject to the Option and the purchase
price per share of Common Stock shall be appropriately adjusted. If prior to
the termination or exercise of the Option Olympus shall be acquired by another
party, consolidate with or merge into another corporation or liquidate, WMSB or
any transferee shall thereafter receive upon exercise of the Option the
securities or properties to which a holder of the number of shares of Common
Stock then deliverable upon the exercise thereof would have been entitled upon
such acquisition, consolidation, merger or liquidation, and Olympus shall take
such steps in connection with such acquisition, consolidation, merger or
liquidation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be practicable, in
relation to any securities or property thereafter deliverable upon exercise of
the Option.
9. Registration Under Applicable Securities Laws. Upon the
written request of WMSB or any transferee, Olympus agrees (i) to use all
reasonable efforts to effect a registration for WMSB and any transferees under
the Securities Act of 1933 (the "Securities Act"), if applicable, any other
applicable federal law or regulation and any applicable state securities laws
covering any part or all of the Option Shares owned by WMSB or any transferee,
no later than one hundred twenty (120) days after WMSB or any transferee
requests such registration and (ii) to include any part or all of the Option
Shares in any registration filed by Olympus under the Securities Act and any
other applicable federal law or regulation and in any related applicable state
securities laws, registrations or applications in which such inclusion is
appropriate under applicable rules and regulations of the Securities and
Exchange Commission, unless, in the written opinion of securities law counsel
to Olympus, addressed to WMSB or any transferee, (a) WMSB would be able to
dispose of all of the Option Shares owned by it pursuant to Rule 144 or Rule
144A under the Securities Act within three (3) months of such opinion, or (b)
registration is not otherwise required for the sale and distribution of such
Option Shares. The registration effected under this Section 9 shall be
effected at Olympus' expense except for any underwriting commissions, fees and
disbursements of WMSB's counsel and other experts and filing fees attributable
to Option Shares provided that such fees and expenses to be paid by Olympus
shall not exceed $100,000. In connection with registration under this Section
9, the parties agree to indemnify each other in the customary manner, and, in
the case of an organized secondary or primary underwritten offering, Olympus
agrees to indemnify WMSB or any transferee and the underwriters, and WMSB or
any transferee agrees to indemnify Olympus and the underwriters, in the manner
and to such extent as is customary in such secondary or primary underwritten
offering. In the event of any demand for registration pursuant to clause (i)
above, Olympus may delay the filing of such registration statement for a period
of up to ninety (90) days if, in the good faith judgment of Olympus' Board of
Directors, such delay is necessary in order to avoid interference with a
planned material transaction involving Olympus. With respect to any
registration pursuant to clause (ii) above, if such registration relates to a
firm commitment underwriting of securities to be sold by Olympus, Olympus may
decline to include all or any portion of the Option Shares owned by WMSB or any
transferee if the inclusion of such shares would, in the judgment of the
managing underwriter in such underwriting, materially interfere therewith.
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Olympus may also decline to include any portion of the Option Shares owned by
WMSB or any transferee with respect to any registration pursuant to clauses (i)
and (ii) above to the extent necessary to comply with the requirements for
required or incidental registration pursuant to Registration Rights Agreements
among Olympus and certain investors dated November 10, 1992.
10. Nonassignability. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and the successors of each of the
undersigned. This Agreement and any right hereunder shall not be assignable by
either party except that WMSB may transfer the Option, the Option Shares or any
portion thereof in accordance with Section 5. A merger or consolidation of
WMSB (whether or not WMSB is the surviving entity) or an acquisition of WMSB
shall not be deemed an assignment or transfer.
11. Regulatory Restrictions. Olympus shall use its best efforts
to obtain or to cooperate with WMSB or any transferee in obtaining all
necessary regulatory consents, approvals, waivers or other action (whether
regulatory, corporate or other) to permit the acquisition of any or all Option
Shares by WMSB or any transferee.
12. Remedies. Olympus agrees that if for any reason WMSB or any
transferee shall have exercised its rights under this Agreement and Olympus
shall have failed to issue the Option Shares to be issued upon such exercise or
to perform its other obligations under this Agreement, unless such action would
violate any applicable law or regulation by which Olympus is bound, then WMSB
or any transferee shall be entitled to specific performance and injunctive and
other equitable relief. WMSB agrees that if it shall fail to perform any of
its obligations under this Agreement, then Olympus shall be entitled to
specific performance and injunctive and other equitable relief. This provision
is without prejudice to any other rights that Olympus or WMSB or any transferee
may have against the other party for any failure to perform its obligations
under this Agreement.
13. No Rights as Stockholder. This Option, prior to the exercise
thereof, shall not entitle the holder hereof to any rights as a stockholder of
Olympus at law or in equity; specifically this Option shall not entitle the
holder to vote on any matter presented to the stockholders of Olympus or to any
notice of any meetings of stockholders or any other proceedings of Olympus.
14. Miscellaneous.
(a) Termination. This Agreement and the Option, to the
extent not previously exercised, shall terminate upon the earliest of (i) June
30, 1995; (ii) the mutual agreement of the parties hereto; (iii) thirty-one
(31) days after the date on which any application for regulatory approval for
the Merger shall have been denied; provided, however, that if prior to the
expiration of such 31-day period, Olympus, WMSB or NFSB is engaged in
litigation or an appeal procedure relating to an attempt to obtain approval of
the Merger or the Bank Merger, this Agreement will not terminate until the
earlier of (a) June 30, 1995, or (b) thirty-one (31) days after the completion
of such litigation and appeal procedure; (iv) the thirtieth (30th) day
following the termination of the Merger Agreement for any reason other than a
material noncompliance or default by WMSB with respect to its obligations
thereunder; or (v) the date of termination of the Merger Agreement if such
termination is due to a material noncompliance or default by WMSB with respect
to its obligations thereunder; provided, however, that if the Option has been
exercised, in whole or in part, prior to the termination of this Agreement,
then such exercise shall close pursuant to Section 4 hereof even though such
closing date is after the termination of this Agreement; and provided, further,
that if the Option is sold prior to the termination of this Agreement, such
Option may be exercised by the transferee at any time within thirty-one (31)
days after the date of termination even though such exercise and/or the closing
of such exercise occurs after the termination of this Agreement.
(b) Amendments. This Agreement may not be modified, amended,
altered or supplemented, except upon the execution and delivery of a written
agreement executed by the parties hereto.
(c) Severability of Terms. Any provision of this
Agreement that is invalid, illegal, or unenforceable shall be ineffective only
to the extent of such invalidity, illegality, or unenforceability without
affecting in any way the remaining provisions hereof or rendering any other
provisions of this Agreement invalid, illegal or unenforceable. Without
limiting the generality of the foregoing, if the right of WMSB or any
transferee to exercise the Option in full for the total number of shares of
Common Stock or other securities or property issuable upon the exercise of the
Option is limited by applicable law, or otherwise, WMSB or any transferee may,
nevertheless, exercise the Option to the fullest extent permissible.
(d) Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by delivery, by cable,
telecopies, or telex, or by registered or certified mail, postage prepaid,
return receipt requested, to the respective parties as follows:
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If to Olympus:
Olympus Capital Corporation
115 South Main Street
Salt Lake City, Utah 84111
Attention: A. Blaine Huntsman
With copies to:
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue N.W., Suite 800
Washington, D. C. 20007-2505
Attention: Thomas P. Vartanian
If to WMSB:
Washington Mutual Savings Bank
1201 Third Avenue, Suite 1500
Seattle, Washington 98101
Attention: Craig E. Tall
With copies to:
Foster Pepper & Shefelman
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
Attention: Fay L. Chapman
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
(e) Governing Law. This Agreement and the Option, in all
respects, including all matters of construction, validity and performance, are
governed by the internal laws of the State of Washington by citizens of such
state to be performed wholly within such state without giving effect to the
principles of conflicts of law thereof. This Agreement is being delivered in
Seattle, Washington.
(f) Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
(g) Effects of Headings. The section headings herein are
for convenience only and shall not affect the construction hereof.
DATED as of the day first written above.
OLYMPUS CAPITAL CORPORATION
By: /s/ A. Blaine Huntsman
----------------------------------------
Its Chairman and CEO
-------------------------------------
WASHINGTON MUTUAL SAVINGS BANK
By: /s/ Craig E. Tall
----------------------------------------
Its Executive Vice President
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APPENDIX D
UTAH REVISED BUSINESS CORPORATION ACT, PART 13
DISSENTERS' RIGHTS
16-10A-1301. DEFINITIONS.
For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholders.
(2) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under Section 16-10a-1302 and who exercises that right
when and in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the statutory rate set forth in
Section 15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial owner
is recognized by the corporation as the shareholder as provided in Section
16-10a-723.
16-10A-1302. RIGHT TO DISSENT.
(1) A shareholder, whether or not entitled to vote, is entitled to
dissent from, any obtain payment of the fair value of shares held by him in the
event of, any of the following corporate actions:
(a) consummation of a plan of merger to which the
corporation is a party if:
(i) shareholder approval is required for the
merger by Section 16-10-a-1103 or the articles of
incorporation; or
(ii) the corporation is a subsidiary that is
merged with its parent under Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired;
(c) consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of the
corporation for which a shareholder vote is required under Subsection
16-10a-1202(1), but not including a sale for cash pursuant to a plan
by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within one year after the date of
sale; and
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(d) consummation of a sale, lease, exchange, or other
disposition of all, or substantially all, of the property of an entity
controlled by the corporation if the shareholders of the corporation
were entitled to vote upon the consent of the corporation to the
disposition pursuant to Subsection 16-10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the
fair value of his shares in the event of any other corporate action to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors so provides.
(3) Notwithstanding the other provisions of this part, except to
the extent otherwise provided in the articles of incorporation, bylaws, or a
resolution of the board of directors, and subject to the limitations set forth
in Subsection (4), a shareholder is not entitled to dissent and obtain payment
under Subsection (10) of the fair value of the shares of any class or series of
shares which either were listed on a national securities exchange registered
under the federal Securities Exchange Act of 1934, as amended, or on the
National Market System of the National Association of Securities Dealers
Automated Quotation System, or where held of record by more than 2,000
shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to
determine the shareholders entitled to receive notice of the
shareholders' meeting at which the corporation action is submitted to
a vote:
(b) the record date fixed under section 16-10a-704 to
determine shareholders entitled to sign writings consenting to the
proposed corporate action; or
(c) the effective date of the corporate action if the
corporate action is authorized other than by a vote of shareholders.
(4) The limitation set forth in Subsection (3) does not apply if
the shareholder will receive for his shares, pursuant to the corporate action,
anything except:
(a) shares of the corporation surviving the consummation
of the plan of merger or share exchange;
(b) shares of a corporation which at the effective date
of the plan of merger or share exchange either will be listed on a
national securities exchange registered under the federal Securities
Exchange Act of 1934, as amended, or on the National Market System, or
will be held of record by more than 2,000 shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection
(94), or cash in lieu of fractional shares.
(5) A shareholder entitled to dissent and obtain payment for his
shares under this party may not challenge the corporate action creating the
entitlement unless the action is unlawful or fraudulent with respect to him or
to the corporation.
16-10A-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(1) A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in his name only if the shareholder dissents
with respect to all shares beneficially owned by any one person and causes the
corporation to receive written notice which states the dissent and the name and
address of each person on whose behalf dissenters' rights are being asserted.
The rights of a partial dissenter under this subsection are determined as if
the shares as to which the shareholder dissents and the other shares held of
record by him were registered in the names of different shareholders.
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(2) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if:
(a) the beneficial shareholder causes the corporation to
receive the record shareholder's written consent to the dissent not
later than the time the beneficial shareholder assets dissenters'
rights; and
(b) the beneficial shareholder dissents with respect to
all shares of which he is the beneficial shareholder.
(3) The corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each beneficial shareholder must certify to the corporation that
both he and the record shareholder of all shares owned beneficially by him have
asserted, or will timely assert, dissenters' rights as to all the shares
unlimited on the ability to exercise dissenters' rights. The certification
requirement must be stated in the dissenters' notice given pursuant to section
16-10a-1322.
16-10A-1320. NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is submitted to a vote at a shareholders' meeting,
the meeting notice must be sent to all shareholders of the corporation as of
the applicable record date, whether or not they are entitled to vote at the
meeting. The notice shall state that shareholders are or may be entitled to
assert dissenters' rights under this part. The notice must be accompanied by a
copy of this part and the materials, if any, that under this chapter are
required to be given the shareholders entitled to vote on the proposed action
at the meeting. Failure to give notice as required by this subsection does not
affect any action taken at the shareholders' meeting for which the notice was
to have been given.
(2) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is authorized without a meeting of shareholders
pursuant to Section 16-10a-704, any written or oral solicitation of a
shareholder to execute a written consent to the action contemplated by Section
16-10a-704 must be accompanied or preceded by a written notice stating that
shareholders are or may be entitled to assert dissenters' rights under this
part, by a copy of this part, and by the materials, if any, that under this
chapter would have been required to be given to shareholders entitled to vote
on the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to given written notice as provided by this
subsection does not affect any action taken pursuant to Section 16-10a-704 for
which the notice was to have been given.
16-10A-1321. DEMAND FOR PAYMENT -- ELIGIBILITY AND NOTICE OF INTENT.
(1) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights:
(a) must cause the corporation to receive, before the
vote is taken, written notice of his intent to demand payment for
shares if the proposed action is effectuated; and
(b) may not vote any of his shares in favor of the
proposed action.
(2) If a proposed corporate action creating dissenters' rights
under Section 16-10a-1302 is authorized without a meeting of shareholders
pursuant to Section 16-10a-704, a shareholder who wishes to assert dissenters'
rights may not execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares this part,
unless otherwise provided in the articles of incorporation, bylaws, or a
resolution adopted by the board of directors, a shareholder must have been a
shareholder with respect to the shares for which payment is demanded as of the
date the proposed corporate action creating dissenters' rights under Section
16-10a-1302 is approved by the shareholders, if shareholder approval is
required, or as of the effective date of the corporate action if the corporate
action is authorized other than by a vote of shareholders.
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(4) A shareholder who does not satisfy the requirements of
Subsections (1) through (3) is not entitled to payment for shares under this
part.
16-10A-1322. DISSENTERS' NOTICE.
(1) If proposed corporate action creating dissenters' rights under
Section 16-10a-1302 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand payment for
their shares under this part.
(2) The dissenters' notice required by Subsection (1) must be sent
no later than ten days after the effective date of the corporate action
creating dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and
the effective date or proposed effective date of the corporate action;
(b) state an address at which the corporation will
receive payment demands and an address at which certificates for
certificated shares must be deposited;
(c) inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the payment
demand is received;
(d) supply a form for demanding payment, which form
requests a dissenter to state an address to which payment is to be
made;
(e) set a date by which the corporation must receive the
payment demand and by which certificates for certificated shares must
be deposited at the address indicated in the dissenters' notice, which
dates may not be fewer than 30 nor more than 70 days after the date
the dissenters' notice required by Subsection (1) is given;
(f) state the requirement contemplated by Subsection
16-10a-1303(3), if the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10A-1323. PROCEDURE TO DEMAND PAYMENT.
(1) A shareholder who is given a dissenters' notice described in
Section 16-10a-1322, who meets the requirements of Section 16-10a-1321, and
wishes to assert dissenters' rights must, in accordance with the terms of the
dissenters notice:
(a) cause the corporation to receive a payment demand,
which may be the payment demand form contemplated in Subsection 16-
10a-1322(2)(d), duly completed, or may be stated in another writing;
(b) deposit certificates for his certificated shares in
accordance with the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters'
notice described in Section 16-10a-1322, as contemplated by Section
16-10a-1327, certify in writing, in or with the payment demand,
whether or not he or the person on whose behalf he asserts dissenters'
rights acquired beneficial ownership of the shares before the date of
the first announcement to news media or to shareholders of the terms
of the proposed corporate action creating dissenters' rights under
Section 16-10a-1302.
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(2) A shareholder who demands payment in accordance with
Subsection (1) retains all rights of a shareholder except the right to transfer
the shares until the effective date of the proposed corporate action giving
rise to the exercise of dissenters' rights and has only the right to receive
payment for the shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share
certificates as required, by the date or dates set in the dissenters' notice,
is not entitled to payment for shares under this part.
16-10A-1324. UNCERTIFICATED SHARES.
(1) Upon receipt of a demand for payment under Section 16-10a-1323
from a shareholder holding uncertificated shares, and in lieu of the deposit of
certificates representing the shares, the corporation may restrict the transfer
of the shares until the proposed corporate action is taken or the restrictions
are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323
apply to shareholders who own uncertificated shares.
16-10A-1325. PAYMENT.
(1) Except as provided in Section 16-10a-1327, upon the later of
the effective date of the corporate action creating dissenters' rights under
Section 16-10a-1302, and receipt by the corporation of each payment demand
pursuant to Section 16-10a-1323, the corporation shall pay the amount the
corporation estimates to be the fair value of the dissenters' shares, plus
interest to each dissenter who has complied with Section 16-10a-1323, and who
meets the requirements of Section 16-10a-1321, and who has not yet received
payment.
(2) Each payment made pursuant to Subsection (1) must be
accompanied by:
(a) (i) (A) the corporation's balance sheet as
of the end of its most recent fiscal year, or if not available, a
fiscal year ending not more than 16 months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in
shareholders' equity for that year and a statement of
cash flow for that year, if the corporation
customarily provides such statements to shareholders;
and
(D) the latest available interim
financial statements, if any;
(ii) the balance sheet and statements referred to
in Subsection (i) must be audited if the corporation
customarily provides audited financial statements to
shareholders;
(b) a statement of the corporation's estimate of the fair
value of the shares and the amount of interest payable with respect to
the shares;
(c) a statement of the dissenter's right to demand
payment under Section 16-10a-1328; and
(d) a copy of this part.
16-10A-1326. FAILURE TO TAKE ACTION.
(1) If the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302 does not occur within 60 days
after the date set by the corporation as the date by which the corporation must
receive payment demands as provided in Section 16-10a- 1322, the corporation
shall return all deposited certificates and
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release the transfer restrictions imposed on uncertificated shares, and all
shareholders who submitted a demand for payment pursuant to Section 16-10a-1323
shall thereafter have all rights of a shareholder as if no demand for payment
had been made.
(2) If the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302 occurs more than 60 days after the
date set by the corporation as the date by which the corporation must receive
payment demands as provided in Section 16-10a-1322, then the corporation shall
send a new dissenters' notice, as provided in Section 16-10a-1322, and the
provisions of Section 16-10a-1323 through 16-10a-1328 shall again be
applicable.
16-10A-1327. SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.
(1) A corporation may, with the dissenters' notice given pursuant
to Section 16-10a-1322, state the date of the first announcement to news media
or to shareholders of the terms of the proposed corporate action creating
dissenters' rights under Section 16-10a-1302 and state that a shareholder who
asserts dissenters' rights must certify in writing, in or with the payment
demand, whether or not he or the person on whose behalf he asserts dissenters'
rights acquired beneficial ownership of the shares before that date. With
respect to any dissenter who does not certify in writing, in or with the
payment demand that he or the person on whose behalf the dissenters' rights are
being asserted, acquired beneficial ownership of the shares before that date,
the corporation may, in lieu of making the payment provided in Section 16-10a-
1325, offer to make payment if the dissenter agrees to accept it in full
satisfaction of his demand.
(2) An offer to make payment under Subsection (1) shall include or
be accompanied by the information required by Subsection 16-10a-1325(2).
16-10A-1328. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(1) A dissenter who has not accepted an offer made by a
corporation under Section 16-10a-1327 may notify the corporation in writing of
his own estimate of the fair value of his shares and demand payment of the
estimated amount, plus interest, less any payment made under Section
16-10a-1325, if:
(a) the dissenter believes that the amount paid under
Section 16-10a-1325 or offered under Section 16-10a-1327 is less than
the fair value of the shares;
(b) the corporation fails to make payment under Section
16-10a-1325 within 60 days after the date set by the corporation as
the date by which it must receive the payment demand; or
(c) the corporation, having failed to take the proposed
corporate action creating dissenters' rights, does not return the
deposited certificates or release the transfer restrictions imposed on
uncertificated shares as required by Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this
section unless he causes the corporation to receive the notice required by
Subsection (1) within 30 days after the corporation made or offered payment for
his shares.
16-10A-1330. JUDICIAL APPRAISAL OF SHARES -- COURT ACTION.
(1) If a demand for payment under Section 16-10a-1328 remains
unresolved, the corporation shall commence a proceeding within 60 days after
receiving the payment demand contemplated by Section 16-10a-1328, and petition
the court to determine the fair value of the shares and the amount of interest.
If the corporation does not commence the proceeding within the 60-day period,
it shall pay each dissenter whose demand remains unresolved the amount
demanded.
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(2) The corporation shall commence the proceeding described in
Subsection (1) in the district court of the county in this state where the
corporation's principal office, or if it has no principal office in this state,
the county where its registered office is located. If the corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered office
of the domestic corporation merged with, or whose shares were acquired by, the
foreign corporation was located.
(3) The corporation shall make all dissenters who have satisfied
the requirements of Section 16-10a-1321, 16-10a-1323, and 16-10a- 1328, whether
or note they are residents of this state whose demands remain unresolved,
parties to the proceeding commenced under Subsection (2) as an action against
their shares. All such dissenters who are named as parties must be served with
a copy of the petition. Service on each dissenter may be by registered or
certified mail to the address stated in his payment demand made pursuant to
Section 16-10a-1328. If no address is stated in the payment demand, service
may be made at the address stated in the payment demand given pursuant to
Section 16-10a-1323. If no address is stated in the payment demand, service
may be made at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's shares.
Service may also be made otherwise as provided by law.
(4) The jurisdiction of the court in which the proceeding is
commenced under Subsection (2) is plenary and exclusive. The court may appoint
one or more persons as appraisers to receive evidence and recommend decision on
the question of fair value. The appraiser have the powers described in the
order appointing them, or in any amendment to it. The dissenters are entitled
to the same discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that
the fair value of his shares, plus interest, exceeds the amount paid
by the corporation pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold
payment under Section 16-10a-1327.
16-10A-1331. COURT COSTS AND COUNSEL FEES.
(1) The court in an appraisal proceeding commenced under Section
16-10a-1330 shall determine all costs of the proceeding, including the
reasonable compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation, except that the court may
assess costs against all or some of the dissenters, in amounts the court finds
equitable, to the extent the court finds that the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section
16-10a-1328.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially
comply with the requirements of Sections 16-10a-1320 through
16-10a-1328; or
(b) against either the corporation or one or more
dissenters, in favor of any other party, if the court finds that the
party against whom the fees and expenses are assessed act arbitrarily,
vexatiously, or not in good faith with respect to the rights provided
by this part.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to those counsel reasonable fees to be paid
out of the amounts awarded the dissenters who were benefited.
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APPENDIX E
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________
Commission File Number 0-11130
OLYMPUS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
UTAH 87-0166750
------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
115 South Main St. Salt Lake City, Utah 84111
(Address of principal executive offices)
(Zip Code)
(801) 325-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
3,099,639 shares of $1.00 par value common stock of the registrant were
outstanding as of February 28, 1994.
The aggregate market value of the shares of common stock held by non-affiliates
of the registrant based on the closing price as of March 25, 1994 was
$38,311,828. An estimated 2,642,195 shares are held by non-affiliates.
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PART I
Item 1. BUSINESS
Olympus Capital Corporation (the "Corporation") is a publicly held savings and
loan holding company organized under the laws of Utah with approximately $414
million in assets and $33 million in stockholders' equity at December 31, 1993.
The Corporation's principal business activities are conducted through Olympus
Bank, a Federal Savings Bank (the "Bank"). The principal business activities
of the Bank consist of obtaining funds from savings and transaction account
deposits and borrowings, investing in real estate loans, mortgage-backed
securities and debt securities and providing related financial services. The
Bank also makes commercial and consumer loans.
Since 1989 the Bank has changed its business emphasis from that of a wholesale
banking institution to that of a community-based retail banking institution.
The Bank has significantly decreased its reliance upon brokered and "jumbo"
certificates of deposit, Federal Home Loan Bank borrowings and repurchase
agreements. The Bank has significantly expanded its services to individual and
small business customers, including checking accounts, credit cards, consumer
loans and an expanded emphasis upon residential mortgage and small business
lending. To support and enhance its retail banking operations, since 1989 the
Bank has invested in new facilities and systems, including eight new branch
facilities (five additions and three relocations), a state-of-the-art mortgage
servicing system and a data processing system which will accommodate the more
diverse commercial banking operations of the Bank.
In recent years the Bank has also focused on resolving unsatisfactory
commercial real estate loans originated by the Bank prior to 1990. Actions
taken have included reviewing and updating credit files, implementing more
thorough loan monitoring and more responsive loan collection procedures and
actively pursuing borrower negotiations and foreclosure proceedings where
necessary.
SOURCES OF FUNDS
DEPOSITS
Customer deposits are the Bank's primary source of funds. The Bank offers
checking and other demand deposit accounts, passbook accounts, money market
deposit accounts ("MMDA") and certificates of deposit. Deposit inflows and
outflows are significantly influenced by interest rates, money market
conditions and other factors, including conditions in the financial services
industry. The Bank's level of overall deposits has remained relatively stable
for the last four years, although there have been changes among the types of
deposits. Deposits may be affected by developments in future periods and the
conditions and factors referred to above. Reductions in deposits may require
the bank to engage in higher cost borrowings.
Consumer and commercial deposits are attracted principally from within the
Bank's primary market areas along the Wasatch Front in Utah (a 100-mile
corridor from Ogden to Provo, including Salt Lake City) and in Butte, Montana
and the surrounding area.
The composition of the Bank's deposits have a significant impact on the Bank's
cost of funds. Management's current strategy is to attract deposits in
checking and regular savings accounts.
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Checking accounts can provide significant fee income and are a source of low
cost funds for the Bank.
The following table describes the balances and contractual average interest
rates on deposits:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
-------------------------------- -----------------------------
Average Average
Rate Amount Rate Amount
------- ------------- -------- ------------
<S> <C> <C> <C> <C>
Checking and other demand .86% $ 36,656,000 1.06% $ 20,298,000
Statement savings 3.17 49,515,000 3.43 43,158,000
MMDA 2.83 21,864,000 3.00 25,349,000
Certificates of deposit 4.31 186,526,000 4.77 202,846,000
----- ------------ -------- ------------
Total 3.59% $294,561,000 4.16% $291,651,000
===== ============ ======== ============
</TABLE>
Management initiated a three phase program to modify physical facilities,
relocate certain of its branch offices, and selectively acquire new locations
which could provide opportunities for deposit and loan growth. The Bank hopes
to increase the number of new checking accounts at the Bank by providing
additional locations from which customers may transact checking account
business and avail themselves of other banking services. In furtherance of
this program, during 1991 the Bank opened a new branch in the Tamarack Shopping
Mall in Butte, Montana and a new branch on Harrison Boulevard in Ogden, Utah.
The Provo branch was relocated in 1991. In 1992 the Bank relocated its Main
Street, Salt Lake City branch to the main floor of a new commercial building on
Main Street in Salt Lake City and the Woodlands, Salt Lake City branch to a
larger facility located at the same complex as its former facility. In 1993,
the Bank opened two new branches in Salt Lake City, one is inside a supermarket
and the other is a free standing branch with a drive up teller window.
Management anticipates that at least one new branch will be opened in 1994.
Additional branch locations will continue to be reviewed as possible sites are
identified along the Wasatch Front in Utah which can better serve the Bank's
customers and increase the customers available to the Bank. Implementation of
the program has resulted in an increase in compensation, occupancy and
advertising expenses. There can be no assurance that the anticipated benefits
from such program will outweigh the attendant costs.
BORROWINGS
Borrowings in the form of advances from the Federal Home Loan Bank of Seattle
("FHLB") provide an additional source of funds for the Bank. The Bank is a
member and stockholder of the FHLB and as such may borrow from the FHLB,
subject to the credit policy of the FHLB. FHLB advances to the Bank totaled
$36,650,000 at December 1, 1993, compared to $40,000,000 at December 31, 1992.
The FHLB prescribes the acceptable uses of proceeds of FHLB advances under
various programs as well as limitations on the size of advances. Acceptable
uses have included expansion of residential mortgage lending and funding
short-term liquidity needs. The limit on advances is generally based on the
FHLB's assessment of the institutions' creditworthiness. Under Federal law, an
institution's record of lending to low- and moderate-income borrowers may also
be used as a basis on which to determine its ability to borrow from the FHLB.
The FHLB is required to review an institution's credit limitations and
standards at least once each year.
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The cost of FHLB advances may at times be higher than alternate sources of
funds and prepayments of advances entails payment of prepayment penalties.
While the Bank intends to de-emphasize the use of FHLB advances as a secondary
funding source to augment deposits, it will in all likelihood continue to use
these advances in the future.
As an additional source of funds, the Bank periodically sells securities
subject to an obligation to repurchase these securities under repurchase
agreements ("repurchase agreements") with major investment bankers, Butte
Silver Bow, Montana, Treasurer, the Federal National Mortgage Association
("FNMA") or with the Federal Home Loan Mortgage Corporation ("FHLMC"). While
the Bank's obligations on these borrowings is high periodically, the Bank's
reliance on this source of borrowings has declined. Repurchase agreements
totaled $44,996,000 at December 31, 1993, compared to $8,465,000 at December
31, 1992. There is no assurance that such reliance will not increase.
Generally, securities with a value in excess of the amount borrowed are pledged
by the Bank as collateral for its obligations under the repurchase agreements.
Because such excess may be at risk in a repurchase transaction, it has been the
Bank's policy since 1985 to enter into repurchase agreements only with
institutions with a satisfactory credit history. The use of repurchase
agreements may expose the Bank to certain risks not associated with other
sources of funds, including obligations to provide additional collateral under
certain circumstances and the risk that such agreements, which generally
involve short terms and larger amounts, may not be renewed. In the event the
Bank were unable to deliver additional required collateral, existing collateral
could be sold, possibly resulting in a significant loss. If the Bank were no
longer able to obtain repurchase agreement financing, the Bank would be
required to obtain alternative sources of short-term funds. Such alternative
sources of funds, if available, may be more expensive. In addition, since
repurchase agreements are generally short-term, they increase the Bank's
exposure to rising interest rates.
USES OF FUNDS
LENDING ACTIVITIES
The Bank's principal use of funds is lending, with loan and lease receivables
accounting for approximately 58% of the total assets of the bank as of December
31, 1993.
The Bank's aggregate non-residential real estate loans may not exceed 400% of
its capital as determined in accordance with applicable laws and regulations.
Such laws and regulations do not require divestiture of any loan that was
lawful when it was originated. At December 31, 1993, the Bank was in
compliance with the 400% limitation, but its ability to originate additional
non-residential real estate loans is restricted. Additionally, the Bank is
prohibited from originating loans to any one borrower after August 9, 1989 in
excess of 15% of capital, except for loans not to exceed $500,000 or to
facilitate the sale of real estate acquired in settlement of loans. The 15%
limitation results in a dollar limitation of approximately $5,366,000 at
December 31, 1993. The Bank does not believe it has originated a loan which
was in violation of this limitation since it became applicable. The bank has
aggregate loans that were originated prior to August 9, 1989 that exceed this
limit, but the prohibition did not require divestiture of any loan that was
lawful when it was originated.
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RESIDENTIAL REAL ESTATE FUNDING
Residential loan originations consist primarily of first mortgage loans for the
financing and refinancing of 1-to-4 family homes. Mortgage origination centers
are located in the primary geographic markets served by the Bank, the Wasatch
Front area in Utah and the Silver Bow-Butte region in Montana. The Bank makes
both adjustable rate and fixed rate mortgage loans, generally retaining some
conventional fixed rate loans with maturities of fifteen years or less and all
adjustable rate loans in its portfolio and selling longer term fixed rate
loans, Federal Housing Administration ("FHA") and Veterans' Administration
("VA") loans in the secondary market. The Bank's real estate loan portfolio
generally includes loans up to 95% of the value of the property as appraised at
the time the loan was made. FHA and VA guaranteed loans secured by first
mortgages are made at the maximum loan-to-value ratios allowed by the
particular agency and may, in some cases, exceed 100% of the property value.
The Bank generally adheres to FNMA, FHLMC, VA or FHA guidelines in originating
its residential real estate loans. The Bank generally requires that all
conventional loans with loan-to-value ratios in excess of 80% carry private
mortgage insurance in an amount sufficient to reduce the Bank's exposure to 75%
of the appraised value. A limited number of loans were purchased from loan
correspondents. The Bank sells residential real estate loans in the secondary
market primarily on a non-recourse basis which provide additional funds for
loan originations which the Bank may retain servicing rights for loans
originated and sold into the secondary market. The Bank may, from time to
time, purchase or sell servicing rights on residential real estate loan
portfolios. During 1993, the Bank purchased servicing rights for loans in
aggregate principal amount of $192,399,000 and sold servicing rights for loans
in aggregate principal amount of $38,376,000. Purchased servicing rights may
involve loans made in geographic areas outside of the traditional lending area
of the Bank. Servicing rights provide fee income to the Bank but the
possibility that loans in the portfolio will pay off or be refinanced faster
than anticipated, thus reducing the fee income collected and the value of the
servicing rights.
Adjustable rate residential real estate loans originated by the Bank have
various adjustment periods and generally limit periodic adjustments on each
adjustment date as well as aggregate adjustments. The Bank is exposed to the
risk that borrowers of these loans may not be able to make higher payments
resulting from rate adjustments. These adjustments depend upon the magnitude
and frequency of shifts in market interest rates.
The Bank intends to focus the Bank's residential real estate lending activities
geographically in the Wasatch Front in Utah and in the Butte-Silver Bow region
in Montana. During 1992 and 1993, residential real estate loan rates were at
or near historic low levels which resulted in a higher volume of new loan
originations and existing loan refinancings. The volume of residential real
estate loan origination experienced in 1992 and 1993 is unlikely to continue
into 1994 as interest rates rise and refinancings slow down.
Competition for residential real estate lending is primarily with other savings
associations, mortgage banking companies, mortgage brokers, commercial banks,
insurance companies and credit unions. Generally, the competition for mortgage
loans is dependent on interest rates, availability of funds, service and
convenience to customers.
The Bank purchases interests in various types of residential real estate loans
in the form of loan participations or mortgage-backed securities. These loan
participations and mortgage-backed
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securities are generally serviced by others with a portion of the interest paid
by the borrower being retained by the servicer to cover servicing fees and
costs.
CONSTRUCTION LOANS
Construction lending activity consists primarily of first mortgage loans to
construct single family dwellings along the Wasatch Front area of Utah. Loans
are made to either the owner of the home or a licensed general contractor.
Terms are typically an adjustable rate with a maximum 80% loan to value ratio
and a six to nine month term.
Individual home loans are made directly to intended owner/occupants after they
are approved for long term financing. Individual home loans and lines of
credit are also extended to general contractor to build homes for resale.
These homes may be under earnest money contract with a permanent buyer or they
may be unsold at the time the loan is committed. The major risks associated
with single family construction lending include the possibility of interest
rates rising to a level that may slow or curtail home sales, or a change in the
financial status of preapproved buyers, including the impact of rising interest
rates such that they no longer qualify for permanent financing.
Construction lending also includes multi-family, condominium, land acquisition
and development of single family building lots and other commercial real estate
projects. These loan types have constituted only a small portion of the total
construction loan portfolio. Interest rates are adjustable with terms ranging
from twelve to eighteen months. Loan to value ratios range from 75% or less
depending upon the perceived credit risk associated with a given transaction.
The Bank intends to increase its construction lending volume in the future,
which will require additional personnel and training of other personnel.
However, the Bank existing staff with significant construction lending
experience to manage and direct this activity.
MULTI-FAMILY REAL ESTATE LOANS
The Bank will continue to make permanent loans secured by existing multi-family
properties along the Wasatch Front in Utah. The maximum loan to value ratio is
80% of the appraised value or sales price, whichever is lower. The interest
rate is normally adjustable annually. Three-year and five-year adjustments
are also available.
The debt coverage ratio required is a minimum of 120%, typically based upon
historical cash flow from the property. Although our market is experiencing
the rapidly rising rental rates, pro forma cash flow statement has not been a
major factor when underwriting multi-family properties, in an effort to
minimize the risk associated with this type of lending.
COMMERCIAL REAL ESTATE LENDING
Recently, the Bank commenced originating new commercial real estate loans
because the Bank's portfolio of nonresidential real estate loans no longer
exceeded the maximum allowed under applicable federal law. As existing
commercial real estate loans mature, the Bank will consider renewing the loan
as circumstances warrant. Prior to renewal, the borrower's financial condition
will be reviewed and the existing and proposed loan terms will be analyzed.
The Bank may propose modifying the interest rate, the amortization term and
other loan terms as the
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circumstances justify. Loan maturities are generally between five and ten
years. Commercial real estate loans are generally considered to have a higher
level of risk than single family residential loans, due to the concentration of
principal in a limited number of loans and borrowers. In addition, the nature
of these loans is that they are generally less predictable and more difficult
to evaluate and monitor.
Beginning in 1986, the Bank activity offered commercial real estate loans
secured by income producing properties in amounts ranging from $200,000 to
4,000,000. In 1986, the Bank issued letters of credit relating to the payment
of $9,000,000 of industrial development revenue bonds issued to finance
development of a commercial building. The Bank later took title to the
building. As a result of these and other activities, the Bank has a
substantial amount of large commercial loans and REO. Regulatory criticism
resulted in losses to the bank. The majority of consumer loans originated so
far are composed of home equity lines of credit that the Bank calls
"SmartLine." As of December 31, 1993, total outstanding SmartLine loan
commitments were $9.8 million with approximately $6.0 million funded.
Commercial real estate loans outstanding at December 31, 1993, and December 31,
1992, totaled $119 million and $135 million, respectively. REO of the Bank at
December 31, 1993 and 1992, totaled $3.1 million and $5.3 million,
respectively, net of reserves. Improvement in many of the economic regions in
which the Bank holds loans has made it possible for much of the REO to be sold.
Management anticipates further reductions in REO in the early part of 1994.
There can be no assurance that additional losses will not be realized in
connection with the commercial real estate loans or the REO of the Bank or any
other of its assets.
The Bank has established allowances for possible losses for known and
anticipated problem loans, as well as a general loan loss allowance for the
portfolio as a whole. Total allowances for possible losses totaled $5.6
million or 1.35% of assets of the Bank at the end of December 31, 1993. REO
reported net of reserves on the financial statement had a reserve for loss of
$350,000 at December 31, 1993, or 0.1% of total assets of the Bank.
When REO is sold, the Bank usually provides financing for the sale. In some
cases the Bank may provide a "loan to facilitate," which is a loan at or below
market rates or involving terms not usually offered to other borrowers. If a
loan to facilitate is made below market rate, the Bank records a loan discount
in order to bring the yield on the loan to a market interest rate.
The Bank has made a concerted effort to reduce both the number and dollar
amount of delinquent loans and to reduce the level of REO. The Bank continues
to place a major emphasis on this area, although there is no assurance such
efforts will succeed. Delinquent loans and
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leases and REO and repossessed equipment as of December 31, 1993, and December
31, 1992 are shown below.
<TABLE>
<CAPTION>
Delinquent Loans and Leases December 31, 1993 December 31, 1992
----------------- -----------------
(net of specific reserves) (dollars in thousands)
<S> <C> <C>
30 to 60 days $1,852 $4,317
60 days or more 2,122 2,913
------ ------
Total $3,974 $7,230
====== ======
REO (net of all reserves) $3,055 $5,263
====== ======
</TABLE>
Pursuant to management's emphasis on resolving unsatisfactory credits through
foreclosure proceedings or other actions, the Bank has commenced, and may in
the future commence, enforcement proceedings against borrowers whose loans may
not be delinquent with respect to principal or interest payments but who may
not be in compliance with other provisions of the documents governing the
loans, such as those relating to payment of taxes. These proceedings may
precipitate delinquencies or may result in additional REO.
CONSUMER LENDING
During 1991, the Bank began offering consumer loans for personal, family, or
household purposes such as the financing of home improvements, automobiles,
boats, vacations and education. Such loans have been originated in the branch
offices of the Bank. Competition for consumer loans comes from other savings
associations, commercial banks, credit unions and other finance companies.
The Bank hopes to increase its consumer lending activities in the future as the
Bank endeavors to attract new customers through its retail checking and savings
programs. As new customers come to the Bank, the Bank intends to market
consumer loan programs to these new customers.
The Bank has not engaged in consumer lending for a substantial period of time.
The establishment of consumer lending programs requires additional personnel
and the development of forms, policies and procedures to be used in the
program. Consumer lending laws change rapidly and frequently and require that
someone in the program keep apprised of developments. There can be no
assurance that income from consumer loans will justify the costs of the program
or that losses will not be experienced. In addition, consumer lending programs
involve peculiar risks. As a general rule, consumer loans experience a higher
default rate than residential real estate loans. Collateral for consumer loans
(other than real estate), if any is obtained, normally declines rapidly in
value and may be difficult to locate. The cost and expense of enforcing loan
and security agreements against an individual consumer may outweigh the
likelihood of any benefit of recovery. The mortgage lien on real estate
securing consumer loans is often subordinate to priority mortgage liens
securing larger amounts of indebtedness. The consumer lender may be required
to advance monies in amounts greater than the consumer loan in order to protect
its security. For these and other reasons there can be no assurance that the
consumer loan program will not adversely affect the Bank.
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COMMERCIAL BUSINESS LENDING
The Bank has determined in recent years to offer commercial business loans
principally to small to mid-market businesses and individuals. These loans
include revolving lines of credit established for borrowers. During the years
ended December 31, 1993 and 1992, the Bank originated $3,820,000 and $7,815,000
in commercial business loans, respectively. Such loans are secured with
business assets or, in some cases, are unsecured.
The Bank perceives two principal advantages of making commercial business
loans. First, commercial business loans assist in increasing the Bank's
short-term, variable rate asset base. These loans also generally bear interest
rates that are higher than commercial real estate loans. Second, commercial
business lending can generate depository relationships and may lead to the sale
by the Bank of other income producing products.
While the Bank has made commercial business loans from time to time in past
years, it has not, until just recently, offered commercial business loans on a
regular basis. Commercial business lending involves a different type of
underwriting analysis, loan monitoring and exercise of remedies than does real
estate lending. A more in depth understanding of the business being financed
and the industry involved may be required. More frequent monitoring and
analysis of the loan may be necessary. The structure of the loan and the
documentation of the loan may be more complicated and customized. The
collateral involved, if any, may be more difficult to identify, locate, insure,
manage and resell than real estate. In order to bolster the business lending
program, the Bank will hire new personnel, and train other personnel. The bank
may also expand the variety and type of commercial business loans it will
offer. In past years certain aspects of the program, particularly sufficiency
of some loan files has been criticized by regulators of the Bank. Management
believes operation of the program should not raise regulatory concerns but
there can be no assurance that the program will not raise additional regulatory
concerns or that losses will not be sustained in the program. Further, there
can be no assurance that the benefits of such program will outweigh the risks
and costs involved.
INVESTMENT ACTIVITIES
The second principal use of the Bank's funds is to purchase certain securities,
primarily investment securities and mortgage-backed securities.
INVESTMENT SECURITIES
The Bank invests in various types of liquid assets (including United States
Treasury obligations, securities of various federal agencies and corporate
obligations). Such investments are generally purchased by the Bank to maintain
minimum levels of liquid assets for the conducting of business, as well as to
meet minimum regulatory requirements for liquidity. Liquidity may increase or
decrease depending on the availability of funds and comparative yields on
investments in relation to the return on loans and mortgage-backed securities.
During 1993, approximately $16,662,000 of investment securities were purchased
by the Bank to meet liquidity needs. Mortgage-backed securities may be
purchased or classified as investment securities when management determines
that such securities will be held to their final maturity. Management
anticipates that such securities will be those that are most similar to the
loans that the Bank originates for its portfolios.
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Investment in FHLB capital stock is required of FHLB members and represents the
greater of: (a) 1% of residential mortgage loans and mortgage- backed
securities, (b) 0.3% of total assets, or (c) 5% of advances from the FHLB. At
December 31, 1993, the Bank had invested in $3,858,000 of FHLB capital stock.
INVESTMENTS AVAILABLE FOR SALE
The Bank invests in certain mortgage-backed securities primarily as a means of
investing in residential real estate mortgage loans with adjustable rates.
Such investments are accounted for as assets available for sale and carried on
the books at fair value. At December 31, 1993, the amortized cost of these
investments was $132,302,000 and the estimated fair value was $132,196,000.
EMPLOYEES
As of December 31, 1993, the Corporation and its subsidiaries had 175
employees, including 46 part-time employees. Employees are provided a
comprehensive program of benefits, some of which are on a contributory basis.
The number of full-time equivalent employees of the Corporation increased by 17
since December 31, 1992. This increase is primarily associated with personnel
working in the expanded branch network, residential lending and the loan review
operations.
OTHER AFFILIATED COMPANY
The Corporation has one additional wholly owned subsidiary, Olympus Financial
Services, Inc., which is engaged in the sale of insurance products, including
tax deferred annuities and property and casualty insurance.
SUPERVISION AND REGULATION
OVERVIEW; LEGISLATIVE AND REGULATORY DEVELOPMENTS
The Corporation, a publicly held thrift holding company, as well as the Bank, a
federally chartered savings bank, with deposits insured by the Federal Deposit
Insurance Corporation (the "FDIC"), are subject to extensive laws, regulations
and supervision. These laws, regulations and supervision impose restrictions
on activities, minimum capital requirements, lending and deposit restrictions,
securities disclosure obligations and numerous other requirements.
Many of these laws and regulations were recently enacted and promulgated. The
Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA") was
enacted in 1989 and the Federal Deposit Insurance Corporation Improvement Act
("FDICIA") was enacted in 1991. A number of significant changes applicable to
the Corporation and the Bank resulted from this legislation and from new
regulations issued pursuant to FIRREA and FDICIA. Additional regulations are
to be promulgated pursuant to such legislation. The ultimate effects of the
foregoing developments cannot be predicted.
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REGULATORY CAPITAL REQUIREMENTS
FIRREA mandated significant new regulatory capital requirements for thrift
institutions. Under minimum regulatory capital regulations issued by the
Director of the Office of Thrift Supervision ("OTS"), thrift institutions are
required to have "core capital" equal to no less than 3% of adjusted total
assets and "tangible capital" equal to no less than 1.5% of adjusted total
assets. The minimum tangible capital requirement will effectively increase to
3% of adjusted total assets over a five-year "phase-in" period ending on
December 31, 1994. In addition, thrift institutions are required to maintain
"risk-based capital" equal to 8% of risk-weighted assets as of December 31,
1993.
Consistent with increased "leverage limits" imposed by regulators of national
banks, the core capital requirement for most savings institutions is expected
to range from 4% to 5% of adjusted total assets. In December 1991 OTS directed
the Bank to maintain core capital at 5% of adjusted consolidated assets, from
December 31, 1991, forward. This directive was terminated in 1993. In 1992
the Bank's regulators urged the Bank to maintain core capital at 7% of adjusted
consolidated assets. At December 31, 1993, the Bank had actual core capital,
consisting entirely of common stockholders' equity, in the amount of
approximately $32.7 million which is equal to 7.91% of adjusted consolidated
assets. There can be no assurance that the Bank will continue to meet its core
capital requirement nor can there be any assurance the Bank's regulators will
not take steps adverse to the Bank if the Bank's core capital drops below 7%.
Tangible capital is defined as core capital less intangible assets, except that
savings institutions may include certain amounts of purchased mortgage
servicing rights in core capital subject to a maximum amount determined by the
FDIC or, under FDICIA, by the OTS. The FDIC has restricted the percentage of
purchased mortgage servicing includible in capital to a maximum of 50% of core
capital and 100% of tangible capital.
Under the risk-based capital requirement, risk weighted assets are determined
by multiplying each of an institution's assets by specified risk weights.
Certain off-balance sheet items must be converted into on-balance sheet
equivalent amounts and then multiplied by specified risk weights. The
applicable risk weights range from 0% to 100%. As of December 31, 1993, the
Bank had risk weighted assets of approximately $250.8 million. The risk-based
capital requirement as of the same date was 8% of the risk weighted assets or
approximately $20 million. Eligible capital of the Bank is composed of core or
tier 1 capital of approximately $32.7 million and supplementary or tier 2
capital of approximately $3.2 million for a total risk weighted capital of
approximately $35.9 million, or 14.3% of risk weighted assets, exceeding the
requirement by approximately $15.8 million. The OTS revised the market rate
risk effect of its risk-based capital standards that became effective January
1, 1994. The bank is in compliance with recently revised regulations.
The OTS also has the authority to impose higher capital requirements for
individual institutions, such as the Bank, based on an assessment of the risk
an institution presents to the deposit insurance fund or other factors. The
OTS also has the authority to raise the capital requirements over the minimum
levels set forth in FIRREA.
Pursuant to FDICIA, the OTS promulgated regulations in September 1992
specifying the levels at which a savings institution is well capitalized,
adequately capitalized, under capitalized,
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significantly under capitalized, or critically under capitalized. The level of
capital below which an institution is deemed to be critically under capitalized
may not be less than 2% of total assets nor more than 65% of the required
minimum level of capital under the leverage limit. An institution is well
capitalized if it has a total risk-based capital ratio of 10% or greater, a
Tier I risk-based capital ratio of 6% or greater, and a leverage ratio of 5% or
greater, and the institution is not subject to an order, written agreement,
capital directive, or prompt corrective action directive to meet and maintain a
specific capital level for any capital measure. This categorizes the Bank as
"well capitalized."
Certain interpretive issues are presented by the new capital rules. In many
instances, these issues have not been resolved by the OTS or other regulatory
authorities. Although the Bank believes its resolution of such issues,
together with the assumptions it has used in its capital calculations, are
appropriate and reasonable, its calculations of capital may require adjustment
in the event the OTS or other regulatory authorities adopt differing
interpretations or use different assumptions.
In the event the Bank fails to comply with any of its existing or future
minimum regulatory capital requirements, it would be required to file and
implement a capital plan with the appropriate regulatory agencies, would be
subjected to restrictions on growth and the payment of dividends, could have
restrictions imposed on its ability to form new branches, invest in service
corporations and make equity risk investments, or be precluded from issuing
securities as a means of raising additional capital, among other negative
effects. Such failure could also permit the OTS to require that the Bank
subject itself to a restrictive business plan or supervisory agreement that
could impose limits on dividends or compensation of officers and employees or
impose other restrictions. Such failure could also permit the FDIC to initiate
action resulting in the termination of deposit insurance.
The Bank's ability to attain compliance with potential future increases in
the risk-based capital requirement or the core capital requirement may be
adversely affected by un-anticipated losses or lower levels of earnings, by new
or increased regulatory capital requirements, or by other factors. In
addition, there is virtually no limit on the authority of the OTS or FDIC to
take any appropriate action with respect to conditions or activities it
considers unsafe and unsound, including failure to comply with minimum
regulatory capital requirements.
QUALIFIED THRIFT LENDER
Savings institutions are subject to restrictions on permissible investments
that are generally known as Qualified Thrift Lender ("QTL") requirements.
Pursuant to FDICIA, an institution will satisfy the QTL requirements if the
institution's qualified thrift investments continue to equal or exceed 65% of
the institution's portfolio assets on a monthly average basis in nine out of
every twelve months. In general, qualified thrift investments include loans
for and securities backed by domestic residential housing. For purposes of the
QTL test, portfolio assets means total assets minus goodwill and other
intangible assets, the value of property used by the institution to conduct its
business and liquid assets held by the institution in an amount up to a
specified percentage of its total assets. Failure to meet the requirements of
the QTL Test may have several consequences for an institution and its holding
company including: the institution shall either become a bank or be subject to
certain restrictions, including (i) limitations on new investments and
activities to those permissible for national banks, (ii) branching restrictions
equivalent to those imposed on national banks, (iii) prohibition on obtaining
new FHLB
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advances, and (iv) dividend restrictions equivalent to those applicable to
national banks. Additionally, three years after the institution ceases to be a
QTL, the institution would be required to divest all investments and cease all
activities not permissible for national banks and repay all FHLB advances.
Within one year after an institution should have (but does not) become, or
ceases to be, a QTL, its holding company must register as and be deemed to be a
bank holding company. Such a development would impose a number of additional
activity, capital and other restrictions on the holding company. The Bank is in
compliance with all QTL requirements.
INTERNAL OPERATIONS REQUIREMENTS
FDICIA requires the federal regulators to promulgate regulations promoting the
safety and soundness of individual institutions by specifically addressing,
among other things: (1) internal controls, information systems and internal
audit systems; (2) loan documentation; (3) credit underwriting; (4) interest
rate exposure; (5) asset growth; (6) ratio of classified assets to capital; (7)
minimum earnings; and (8) compensation and benefit standards for management
officials. Proposed rules or notices of rule making addressing these areas
have been issued but not yet finalized. These regulations are expected to add
further to the cost of compliance and to impose new record keeping
requirements.
REGULATORY SUPERVISION
The Bank is subject to periodic examinations and to supervision by the OTS and
the FDIC. The Bank is also subject to regulations governing such matters as
mergers, establishment of branch offices and subsidiary investments and
activities, and to general investment authority under regulations applicable to
federally chartered savings banks. Any insured institution which does not
operate in accordance with or conform to OTS or FDIC regulations, policies and
directives may be sanctioned for noncompliance. Proceedings may be instituted
against any insured institution or any director, officer, employee or person
participating in the conduct of the affairs of such institution who engages in
unsafe and unsound practices, including the violation of applicable law,
regulations, orders, agreements or similar items. If the assets of an
institution are overvalued on its books, it may be ordered to establish and
maintain a specific reserve in an amount equal to the determined overvaluation,
which may result in a charge against operations to the extent of the
overvaluation. FDIC insurance may be terminated, after notice and hearing,
upon a finding that an insured institution is engaging in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operating, does not
meet minimum regulatory capital requirements, or has violated any applicable
law, rule, regulation or order of or condition imposed by the FDIC. FIRREA has
resulted in increased costs for the Bank including examination fees, and
deposit insurance premiums. In addition, the Bank expects reduced dividends
from FHLB stock due to substantial contributions which will be required from
the Federal Home Loan Banks to fund the Resolution Trust Corporation.
Increased financial pressure on the FHLB System may also result in higher rates
on borrowings by the Bank from the FHLB in the future. Finally, other adverse
effects may result from the application of more rigorous standards in
regulatory examinations of savings associations.
LIQUIDITY AND RESERVE REQUIREMENTS
The Director of the OTS must adopt regulations providing for a minimum
liquidity requirement for thrift institutions. The minimum liquidity
requirement must be in a range of 4% to 10% of
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an institution's withdrawable accounts and borrowings payable on demand or with
maturities of one year or less. Current OTS regulations, which may be modified
by the Director of the OTS, provide that each thrift institution must maintain
an average daily balance for each calendar month of liquid assets equal to at
least 5% of the sum of its average daily balance of net withdrawable deposit
accounts plus borrowings payable in one year or less. Each thrift institution
must maintain an average daily balance for each calendar month of short-term
liquid assets equal to at least 1% of its average daily balance of net
withdrawable deposit accounts plus short-term debt. Management believes the
Bank is in compliance with these requirements.
The Bank is also subject to Federal Reserve Board reserve requirements imposed
under Regulation D. These requirements, which are subject to change from time
to time, call for minimum levels of reserves based on amounts held in
transaction accounts. The Bank was in compliance with these reserve
requirements on December 31, 1993.
INSURANCE OF ACCOUNTS
The Bank's deposits are insured by the Savings Association Insurance Fund
administered by the FDIC up to $100,000 per insured depositor. Deposit
insurance premiums are assessed on a risk weighted basis, as defined by the
FDIC, with well-capitalized and well-managed institutions paying a lower
percentage on deposits than institutions with deficiencies.
Currently, those institutions that pose the lowest risk of loss to SAIF pay
$0.23 per $100.00 of insured deposits, and those institutions that pose the
greatest risk of loss to SAIF pay $0.31 per $100.00 of insured deposits.
The Bank was recently assigned a risk classification assessment of $0.26 per
$100.00 of insured deposits. The assignment was based on an examination of the
Bank conducted in July 1993. This assessment classification of the Bank will
be reviewed semi-annually by the FDIC.
FDICIA requires the FDIC to establish regulations setting up a risk-based
deposit insurance premium schedule. In addition, the FDIC can impose special
assessments.
ACCOUNTING AND INVESTMENTS
During the past several years, there has been an ongoing review of the
accounting principles and practices used by financial institutions for certain
types of transactions. As a result of this process, there have been new
accounting pronouncements. This review is expected to continue by thrift and
banking regulators, the SEC, the FASB, the AICPA and other organizations, and
further developments may be forthcoming.
The SEC has advocated market value accounting for financial institutions and
has urged the AICPA and the FASB to require that banks and other financial
institutions account for assets at their market value. The SEC's position has
been criticized by the Federal Reserve Board and is highly controversial. As
of December 31, 1993, the Corporation adopted SFAS No. 115, "Accounting for
Investments in Certain Debt and Equity Securities." The Bank classified most
mortgage-backed securities as assets available for sale, which resulted in an
unrealized loss of $107,000, which is recorded as a separate component of
stockholders' equity. Due to the requirements of SFAS 115, capital levels may
be more volatile.
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CERTAIN LENDING RESTRICTIONS
FIRREA generally subjects savings banks to the same loans-to-one borrower
limitations that are applicable to national banks. The new loans-to-one
borrower limitations are substantially more restrictive than the limitations
previously imposed on savings banks. Prior to the enactment of FIRREA, a
savings bank could generally lend an amount equal to its entire regulatory
capital to one borrower. With certain limited exceptions, the maximum amount
that a savings bank may now lend to one borrower (including certain related
entities of such borrower) is an amount equal to 15% of the savings bank's
unimpaired capital and unimpaired surplus, plus an additional 10% for loans
fully secured by readily marketable collateral. Real estate is not included
within the definition of "readily marketable collateral."
FIRREA generally limits the amount that a savings bank may invest in commercial
real estate loans to 400% of capital. FIRREA does not require a savings bank
to divest itself of commercial real estate loans in excess of such limitation
acquired prior to the enactment of FIRREA.
THE COMMUNITY REINVESTMENT ACT
The Community Reinvestment Act ("CRA") was enacted in 1977 by Congress to
eliminate the practice by some financial institutions of denying or restricting
credit for the purchase or improvement of homes in areas of a community where
the risk of loan losses is believed to be high. Changes to the regulations
have been proposed which would place the emphasis on performance instead of the
process and encourage consistency in assessments to permit more effective
enforcement of poor performance and to reduce regulatory burden. These
proposed changes are scheduled to become effective July 1, 1994. Management is
unable to determine what, if any, the proposed changes will have on the
Corporation. The Bank's CRA compliance is monitored by the OTS. Management
believes the Bank's compliance with CRA is satisfactory.
CLASSIFICATION OF ASSETS
The Bank classifies its problem assets on the same system as used by commercial
banks. An asset is classified substandard when it has a well-defined weakness
or weaknesses. A substandard asset is one that is inadequately protected by
the net worth or paying capacity of the obligor or by the collateral, if any.
An asset is classified doubtful where some loss seems very likely but there is
still sufficient uncertainty to permit the asset to remain on the books at its
full value. The possibility of a loss on an asset classified doubtful is high,
but because of important and reasonably specific pending factors which may work
to the strengthening of the asset, its classification as loss is deferred until
its more exact status may be determined. An asset, or a portion thereof, is
classified as loss when it is considered uncollectible and of such little value
that continuance as an asset without establishment of a specific reserve is not
warranted. Assets that do not warrant classification as substandard, doubtful
or loss, but posseses credit deficiencies or potential weaknesses deserving
management's close attention are classified as special mention.
Assets may be classified in whole or in part, and part of an asset may be
classified in one category, and part in a different category. Insured
institutions are required to self-classify their assets. These classifications
are reviewed as part of the regulatory examination process. An
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institution is required to have general valuation allowances that are adequate
in light of its level of classified assets. When an asset or portion of an
asset has been classified as loss, the institution must either charge-off 100%
of the portion classified as loss or establish a specific valuation allowance
in a like amount. Specific allowances may not be included in regulatory
capital, while general reserves are included in risk-based capital, subject to
certain limitations.
RESTRICTIONS ON DISTRIBUTIONS
Capital distributions by institutions such as the Bank, including dividends,
stock repurchases, redemption of securities and cash-out mergers are subject to
restrictions tied to the institution's capital levels after giving effect to
such a transaction.
OTHER LAWS AND REGULATIONS
The Bank is subject to a wide array of other laws and regulations, both federal
and state, including, but not limited to, usury laws, the Equal Credit
Opportunity Act and Regulation B, the Electronic Fund Transfer Act and
Regulation E, the Truth-in-Lending Act and Regulation Z and the Real Estate
Settlement Procedures Act and Regulation X. The Bank is also subject to laws
and regulations that may impose liability on lenders and owners for clean-up
costs and other costs stemming from hazardous waste located on property
securing real estate loans made by lenders or on real estate that is owned by
lenders following a foreclosure or otherwise. Although the Bank's lending
procedures include measures designed to limit lender liability for hazardous
waste clean-up or other related liability, the Bank has engaged in significant
commercial lending activity and there is some uncertainty as to the
circumstances under which lenders may be held liable for hazardous wastes.
REGULATION OF THE CORPORATION
The Corporation is subject to regulation as a savings and loan holding company.
It is required to register with the OTS and is subject to OTS regulations,
examinations and reporting requirements relating to savings and loan holding
companies. As a subsidiary of a savings and loan holding company, the Bank is
subject to certain restrictions in its dealings with the Corporation and with
other companies affiliated with the Corporation.
The Home Owners Loan Act ("HOLA") generally regulates acquisitions by a savings
and loan holding company, directly or indirectly, of certain interests in other
savings institutions (or a holding company thereof). Savings institutions may
also be subject to the Federal Change in Bank Control Act if the provisions of
HOLA do not apply.
HOLA provides generally that an insured savings institution subsidiary of a
holding company is subject to the restrictions on affiliate transactions set
forth in the Federal Reserve Act sections 23A and 23B. In addition, an insured
institution may not buy securities from an affiliate, except for shares of
stock of a subsidiary, and it may not make loans to an affiliate engaged in a
non-banking activity. The OTS can adopt additional restrictions upon affiliate
transactions. Thrift institutions are also subject to Section 22(h) of the
Federal Reserve Act, which restricts a financial institution's ability to make
loans to "insiders" (executive officers and directors) and permits the OTS to
impose additional restrictions on loans to insiders.
E-16
<PAGE> 186
HOLA authorizes the OTS or the FDIC to identify holding company activities that
present excessive risk to insured institutions, and to restrict, among other
things, dividends to the holding company and other affiliate transactions. If
the Bank were to lose its status as a QTL, the Corporation would thereafter be
treated as a bank holding company, resulting in additional restrictions on its
activities and other possible negative effects. Reference is made to the
additional information, financial statements and footnotes thereto presented in
Items 6, 7 and 8 of this Report for additional financial information.
The following statistical information is presented to facilitate an
understanding of the Corporation's operations.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES
AND INTEREST DIFFERENTIAL
ANALYSIS OF INTEREST CHANGES DUE TO VOLUME AND CHANGES IN RATES
(Amounts in Thousands)
<TABLE>
<CAPTION>
1993 over 1992 1992 over 1991
-------------- --------------
Changes Due to Changes Due to
-------------- --------------
Total Total
Interest-Earning Assets Volume Rate Changes Volume Rate Changes
----------------------- ------ ---- ------- ------ ---- -------
<S> <C> <C> <C> <C> <C> <C>
Investments Securities and
Other Short-term Investments $ 22 $ (362) $ (340) $ (470) $ (775) $ (1,245)
Mortgage-Backed Securities 650 (1,720) (1,070) (1,383) (2,266) (3,649)
Loan Receivables:
Real Estate Loans (1,676) (2,168) (3,844) (621) (1,803) (2,424)
Commercial Loans (96) (96) 343 (189) 154
Other Loans Receivables (161) 15 (146) 99 (31) 68
------- ------- ------- ----- ------- ------
Total Loan Receivables (1,938) (2,148) (4,086) (179) (2,023) (2,202)
------- ------- ------- ------ ------- -------
Total Interest-Earning Assets (685) (4,811) (5,496) (2,032) (5,064) (7,096)
----- ------- ------- ------- ------- -------
Interest-Bearing Liabilities
----------------------------
Savings Deposits (70) (3,076) (3,146) 32 (5,807) (5,775)
Advances from Federal Home
Loan Bank 607 (905) (298) (1,789) (509) (2,307)
Securities Sold Under
Agreements to Repurchase and
Other Borrowings (1,010) (830) (1,840) (685) (1,129) (1,814)
------- ------- ------- -------- -------- --------
Total Interest-Bearing
Liabilities (473) (4,811) (5,284) (2,442) (7,445) (9,896)
------- ------- ------- -------- -------- --------
</TABLE>
E-17
<PAGE> 187
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in
Interest Differential $ 152 $ (364) $ (212) $ 419 $ 2,381 $ 2,800
====== ======= ======= ====== ======= =======
</TABLE>
Note: Changes not due entirely to changes in volume or rate have been allocated
to volume.
INVESTMENT PORTFOLIO
(Amounts in Thousands)
Investment Securities:
<TABLE>
<CAPTION>
Book Value on December 31
-------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
U.S. Treasury and other U.S. Government agencies $ 199 $ 200
Other investment securities* 8,730 8,374 $15,730
------- ------- -------
Total debt securities 8,929 8,574 15,730
------- ------- -------
Federal Home Loan Bank stock 3,858 3,357 2,982
Other equity securities 7 7 7
------- ------- -------
Total equity securities 3,865 3,364 2,989
------- ------- -------
Total Investment Securities $12,794 $12,038 $18,719
--------------------------- ======= ======= =======
</TABLE>
* Other Securities include bonds, federal funds sold and securities
purchased under agreements to resell. Investments available for sale
are not included in the maturity and yield analysis.
Maturity and Yield Analysis of Debt Securities
December 31, 1993
<TABLE>
<CAPTION>
Carrying Average Estimated
Value Yield* Fair Value
-------- ------- ----------
<S> <C> <C> <C>
Due one year or less $ 280 3.24% $ 278
Due after one year through five years 8,489 3.96 8,489
Due after five years through ten years 160 9.57 160
------ -------- ------
Total investment debt securities $8,929 4.04 $8,927
====== ======== ======
</TABLE>
* Average yields have been calculated using coupon rates adjusted for
amortization of premiums and discounts, not adjusted to fully taxable
equivalent.
E-18
<PAGE> 188
The Corporation held no single issuer of securities, excluding the U.S.
Government and U.S. Government agencies, included above in excess of 10% of
stockholders' equity of the Corporation.
LOAN PORTFOLIO
(Amounts in Thousands)
Types of Loan and Balances
<TABLE>
<CAPTION>
December 31 1993 1992 1991 1990 1989
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Real estate - mortgage $239,786 $236,522 $261,765 $269,342 $303,485
Commercial 7,092 7,562 6,326 4,123 10,619
Other Loans 2,239 2,302 3,811 1,592 2,889
Lease Financing 217 1,127 3,220
------- ------- ------- ------- -------
Total loans and leases 249,117 246,386 272,119 276,184 320,213
Less unamortized loans fees 1,037 802 944 709 792
Less allowance for possible
losses 5,610 6,678 6,545 6,704 12,735
------- ------- ------- ------- -------
Net Loans $242,470 $238,906 $264,630 $268,771 $306,686
======== ======== ======== ======== ========
</TABLE>
Maturities and Sensitivity to Changes in Interest Rates
(Excluding Real Estate Mortgages, Other Loans and Leases)
<TABLE>
<CAPTION>
Remaining Maturity
----------------------------------------
1 Year 1 Year to Over
or Less 5 Years 5 Years Total
------- ------- ------- -----
<S> <C> <C> <C> <C>
Commercial $ 4,853 $ 1,644 $ 596 $ 7,092
======= ======= ====== =======
</TABLE>
Loans maturing in more than one year are all fixed rate loans.
Risk Elements
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Non-accrual loans $ 2,242 $ 4,047 $ 2,823 $12,310 $14,708
</TABLE>
According to the policies of the Corporation, no loans past due more than 90
days continue to accrue interest. Renegotiated loans have been insignificant.
If non-accrual loans had been current in accordance with their stated terms,
approximately $99,000 in interest would have been recorded in 1993. Interest
actually recognized on such loans was immaterial.
E-19
<PAGE> 189
The accrual of interest income is generally discontinued when loans become more
than 90 days past due. However, when a large commercial real estate loan
becomes 30 days or more delinquent, the prospects for curing the delinquency
are reviewed. If it does not appear that the delinquency will be easily cured,
the loan is placed on a non-accrual status prior to becoming 90 days or more
delinquent. Loans that have matured, but continue to make principal and
interest payments, are not reported as delinquent.
POTENTIAL PROBLEM LOANS AND LOAN CONCENTRATIONS
At December 31, 1993 and 1992, real estate loans included $807,000 and
$4,276,000, respectively, on which the Corporation had filed notice of default
with the borrower, which begins foreclosure proceedings, and/or where the
borrower has declared bankruptcy.
Concentrations of non-residential real estate loans classified by property type
at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Property Type Carrying Amount
------------- ---------------
<S> <C>
Office Buildings (includes medical and bank) $22,069,573
Industrial and warehouse (includes light industrial) 12,646,042
Retail and wholesale 29,873,011
Motel or hotel 21,250,380
Nursing home, convalescent center or hospital 11,096,471
Mobile home parks 3,801,403
Service (gas station, fast food, car wash, convenience stores, etc.) 2,883,363
Restaurant 2,106,450
Other commercial (recreation facilities, mini-storage, farm, hydro-
electric, auto-dealers, truck terminal and other single-use property)
13,461,075
</TABLE>
Commercial real estate loans listed by the state in which the property is
located at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
State Book Value
----- ------------
<S> <C>
Alaska $ 1,202,224
Arizona 3,067,538
California 37,691,363
Colorado 1,044,606
Idaho 16,335,436
Montana 6,561,469
</TABLE>
E-20
<PAGE> 190
<TABLE>
<S> <C>
New Mexico 5,829,617
Nevada 372,091
Oregon 2,357,314
Utah 42,920,533
Wyoming 1,805,577
</TABLE>
OTHER INTEREST-EARNING ASSETS
The Corporation did not have any other interest-earning assets that would have
been reportable above had they been classified as loans.
SUMMARY OF LOAN LOSS EXPERIENCE
(Amounts in Thousands)
Changes in the allowance for losses are as follows:
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
------ ------ ------ ---- -------
<S> <C> <C> <C> <C> <C>
Balance, beginning of year $6,678 $6,545 $6,704 $12,735 $ 6,783
Loans charged off:
Real estate mortgage 391 73 2,208 5,426 2,428
Commercial 45 26 789 406
Other loans 10 1,737 28
------ ------ ------- ------- -------
Total loans charged off 446 73 2,431 8,144
------ ------ ------- ------- -------
Recoveries 375 324 350
------ ------ ------ ------- -------
Provision charged (credited) to
expense (997) (118) 1,922 2,113 8,873
------- ------ ------ ------- -------
Balance, end of year $ 5,610 $ 6,678 $ 6,545 $ 6,704 $12,735
======= ======= ======= ======= =======
Net charge offs to average loans
.18% .03% .78% 2.87% .93%
</TABLE>
The Corporation determines the amount to be provided for loan and lease losses
on a quarterly basis, based on management's judgment as to the adequacy of the
allowance for possible losses. Various factors are considered in making this
judgment, such as the size, composition, collateral and quality of the loan and
lease portfolios; levels of delinquent or troubled loans and leases; historical
charge-off percentages; specifically identified allocations of the reserve; the
amount of the reserve that is unallocated; and prevailing local and national
economic conditions.
The purpose of an allowance for possible loss is to recognize losses which are
probable and estimable. Allowances are established using the OTS
Classifications of Assets Regulation to determine category risk. Assets
classified pass, special mention, substandard or doubtful generally trigger
allowances categorized as general, while loss classification triggers a
specific allowance or charge off. General and specific allowances are
estimated based on the loan collateral and the factors mentioned above.
E-21
<PAGE> 191
The allocation by loan category of the allowance for possible losses are as
follows at December 31, 1992:
<TABLE>
<CAPTION>
Percent
Applicable to: Amount to Total Loans
-------------- ------ --------------
<S> <C> <C>
Real Estate Mortgage $4,142 73.8%
Commercial 1,444 25.7
Other Loans 24 0.5
------ -----
$5,610 100.0%
====== =====
</TABLE>
DEPOSITS
(Amounts in Thousands)
Average Deposits and Rates
<TABLE>
<CAPTION>
1993 1992 1991
------------------- --------------- -------------------
Average Average Average Average Average
Average Balance Rate Balance Rate Balance Rate
-------- -------- ------- ---- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing demand $ 50,793 1.86% 42,144 2.96% $ 30,844 5.61%
Savings 46,510 3.31 35,220 4.23 21,156 5.54
Time 191,987 4.45 213,452 5.37 238,374 7.15
-------- ----- -------- ---- -------- ----
Total $289,290 3.81% $290,816 4.87% $290,374 6.87%
======== ===== ======== ==== ======== ====
</TABLE>
<TABLE>
<CAPTION>
Maturity Schedule of Time Certificates of Deposit Over $100,000
---------------------------------------------------------------
Remaining Maturity December 31, 1993
------------------ -----------------
<S> <C>
3 months or less $ 9,164
3 to 6 months 5,682
6 to 12 months 5,302
Over 12 months 4,077
-------
Total $24,225
=======
</TABLE>
RETURN ON EQUITY AND ON ASSETS
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------
1993 1992 1991
------ ------ -----
<S> <C> <C> <C>
Ratio of net income (loss) to average total assets 1.64% 0.70% 0.08%
Ratio of net income (loss) to average total equity 20.83% 12.08% 1.57%
Ratio of average total equity to average total assets 7.88% 5.78% 4.97%
</TABLE>
No dividends have been paid by the Corporation as of the end of the above
reported periods.
E-22
<PAGE> 192
SHORT-TERM BORROWINGS
(Amount in Thousands)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Balance outstanding at December 31
(including accrued interest payable):
Amount $44,996 $ 8,465 $52,700
======= ======= =======
Weighted average interest rate 3.60% 4.82% 5.01%
======= ======= =======
Average borrowing for the year:
Outstanding $13,412 $39,548 $55,969
======= ======= =======
Weighted average interest rate 5.11% 4.26% 6.31%
======= ======= =======
Largest amount outstanding at month-end $44,996 $57,685 $64,890
======= ======= =======
</TABLE>
The above short-term borrowings are securities sold under agreements to
repurchase and generally mature within three months.
INTEREST-SENSITIVITY
(Amounts in Thousands)
The following table is a GAP analysis of the Bank as of December 31, 1993
<TABLE>
<CAPTION>
6 Months 6 Months 1 to 3 3 to 5 Over 5
Category or Less to 1 Year Years Years Years
-------- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
ASSETS:
Real estate loans and
mortgage-backed securities
Adjustable rate: $109,768 $107,001 $11,656 $14,876
Fixed rate: 12,496 11,382 37,248 27,710 $40,226
Unearned fees: (34) (18) (70) (69) (185)
All other loans and
mortgage servicing 5,364 1,224 4,274 1,750 690
Investment securities
and Federal Funds sold: 20,972 18 66 59
------- -------- ------- ------- --------
TOTAL INTEREST RATE
SENSITIVE ASSETS: 148,566 119,607 53,174 44,326 40,731
------- ------- ------ ------ ------
LIABILITIES:
Deposits: 133,453 43,329 58,481 31,568 28,152
Advances from FHLB
Adjustable rate: 14,000 150
Fixed rate: 12,500 10,000
</TABLE>
E-23
<PAGE> 193
<TABLE>
<S> <C> <C> <C> <C> <C>
Repurchase agreements: 42,407
Hedges
Interest rate caps: (12,000) 12,000
Interest rate swaps: (5,000) 5,000
--------- -------- ------- --------
TOTAL INTEREST RATE
SENSITIVE LIABILITIES: 185,360 53,329 75,481 31,568 30,711
------- ------ ------ ------ ------
Hedged Gap (36,764) 66,278 (22,307) 12,758 10,020
======== ====== ======== ====== ======
CUMULATIVE HEDGED GAP $(36,794) $29,484 $ 7,177 $19,935 $29,955
========= ======= ======== ======= =======
CUMULATIVE HEDGED GAP TO TOTAL ASSETS (8.9%) 7.1% 1.7% 4.8% 7.2%
====== ==== ====== ====== ======
</TABLE>
The following prepayment assumptions were used in the preparation of
the GAP analysis:
<TABLE>
<CAPTION>
Category Prepayment Rate
-------- ---------------
<S> <C>
ASSETS
Investment Securities:
Fixed rate 7.0%
Mortgage-backed Securities:
Adjustable rate: 10.0%
Fixed rate: 10.1%
Real estate loans:
Adjustable rate residential 5.0%
Fixed rate residential
Less than 7.00% 12.9%
7.00% to 7.999% 12.9%
8.00% to 8.999% 20.1%
9.00% to 9.999% 25.5%
10.00% to 10.999% 31.8%
11.00% or more 30.9%
Adjustable rate commercial 7.3%
Fixed rate commercial 7.0%
LIABILITIES
Checking:
Year one 37.0%
Years two through three 32.0%
More than three years 17.0%
</TABLE>
E-24
<PAGE> 194
<TABLE>
<S> <C>
Money market deposit accounts:
Year one 79.0%
More than one year 31.0%
Statement savings accounts:
Years one through three 17.0%
Years four through five 16.0%
More than five years 14.0%
</TABLE>
Item 2. PROPERTIES
The following table sets forth certain information relating to the ownership of
the Bank's offices as of December 31, 1993:
<TABLE>
<CAPTION>
Leased
or
Location Owned Lease Expiration Date
------------------------------- ----- ---------------------
<S> <C> <C>
Executive Office
Salt Lake City, Utah
115 South Main Street Owned
Branch Offices
--------------
Salt Lake City, Utah
201 South Main Street Leased February 28, 2002; renewable for up to two
additional terms of five years each.
Salt Lake City, Utah
4041 South 700 East Leased May 15, 2002; renewable for up to two additional
terms of five years each.
Salt Lake City, Utah
1360 South Foothill Blvd. Leased July 1994; renewable for up to two additional terms
of five years each; second renewable term is subject
to operator's approval.
Salt Lake City, Utah
5510 South 900 East Leased March 31, 2003; renewable for up to two additional
terms of five years each.
Sandy, Utah
7850 South 1300 East Leased June 30, 1998; renewable for up to two additional
terms of five years each.
</TABLE>
E-25
<PAGE> 195
<TABLE>
<S> <C>
Ogden, Utah Owned
2661 Washington Boulevard
Ogden, Utah
4411 Harrison Boulevard Owned
Provo, Utah
310 North University Avenue Owned
Butte, Montana (Satellite)
49 North Main & Broadway Owned
Butte, Montana
3701 Harrison Avenue Owned
</TABLE>
The Bank occupies approximately 31,500 square feet of space in the executive
office at 115 South Main Street, Salt Lake City, Utah. The remainder of the
space (approximately 21,500 square feet) is available to lease to others for
general office purposes, 12,700 square feet of which is currently leased. The
Bank also leases space to others in its Ogden, Provo and Butte branch offices.
Each of the properties is adequate and suitable for the purposes for which it
is being used.
Item 3. LEGAL PROCEEDINGS
Richard Madsen vs. Prudential Federal Savings and Loan Association, Third
Judicial District Court of Salt Lake County, State of Utah, Civil No. 226073,
filed February 1975.
This is an alleged class action filed in February, 1975, in the District Court
of Salt Lake County, seeking compensation for the use of loan reserves for
taxes and insurance. The District Court granted the Bank's (formerly known as
Prudential Federal Savings and Loan Association) motion for summary judgment
dismissing the complaint. Plaintiff appealed to the Utah Supreme Court. The
Utah Supreme Court reversed the summary judgment on January 14, 1977, and
ordered the case remanded for further proceedings. In October, 1977, plaintiff
amended the complaint to allege a plaintiff class action on behalf of all
mortgagors in the State of Utah against a defendant class of all mortgage
lenders in Utah, of which the Bank would be the representative defendant. In
October, 1981, plaintiff filed an amended complaint in the matter. The amended
complaint, in addition to requesting an accounting, requests that the Bank and
other members of the alleged defendant class pay to plaintiffs and other
members of the alleged plaintiff's class profits earned from the past use of
escrow funds, annual payments in the future for the use of escrow fund,
punitive damages of $10,000,000 and the sum of 4% interest on the reserve
account of each member of the plaintiff's class or $100, whichever is more,
from June 30, 1979. The trial court also denied the Bank's Motion for Summary
Judgment and ruled that the Bank must account to plaintiff Madsen only for net
earnings, if any, made on his reserve account.
Trial on this case was held in September, 1985. At the conclusion the Court
directed judgment in favor of plaintiff Madsen in the amount of $134.70.
Before judgment was entered, the Bank
E-26
<PAGE> 196
moved for disqualification of the trial judge, which was granted on January 16,
1986, and was retroactive, so that all of the trial judge's orders were
vacated. Thereafter, plaintiff's petition to the Utah Supreme court for
interlocutory review of the disqualification order was granted. During 1988,
the Utah Supreme Court reversed the lower court's disqualification of the trial
judge. The case was remanded to the trial court entry of findings of fact and
conclusion of law.
The trial court has on March 22, 1990, entered its findings of fact and
conclusions of law. The trial court entered judgment on April 30, 1992. The
judgment awards $134.70 to plaintiff, plus costs of court, plus 10% interest
from the date of the trial to the date of judgment, plus post-judgment interest
from the date of judgment. The judgment also orders that a special master be
appointed to survey the Bank's records to determine a feasible method for
identifying class members and for identifying records from which a computation
of damages can be made for class members. A consequence of the judgment may be
that a class of plaintiffs, whose trust deeds in favor of the Bank contain
similar language as that contained in the plaintiff's trust deed, may recover a
larger judgment against the Bank. The trial court certified the judgment as
final and directed its entry so that an appeal may be taken. The trial court
stayed, pending appeal, that portion of the judgment ordering that a special
master be appointed to identify the defendant class and calculate damages.
Both the individual plaintiff in this case and the Bank filed a notice of
appeal to the Utah Supreme Court.
The Supreme Court has now found that the appeals were premature and returned
the case to the trial court. The parties and the trial court are now in the
process of appointing a special master who will identify class members and
compute damages. The amount of the damages that may be awarded against the
Bank cannot be determined at this time. Appeal must await the trial court's
determination of class issues.
Other Litigation
The Corporation and its subsidiaries are parties to other ordinary routine
legal proceedings incident to its business none of which, in the opinion of
management, will have a material adverse effect on the Corporation's business
or financial condition if decided adversely to the Corporation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
E-27
<PAGE> 197
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
TRADING
The common stock, $1.00 par value, of the Corporation is traded on the National
Association of Securities Dealers Automated Quotation Service ("NASDAQ")
National Market System. The following table sets forth, for the respective
periods indicated, the closing prices of the common stock on the NASDAQ
National Market System, based upon actual transactions, as reported and
summarized by NASDAQ.
<TABLE>
<CAPTION>
1993 High Low
---- ---- ---
<S> <C> <C>
First Quarter 9 1/2 6 1/2
Second Quarter 11 1/4 8 3/4
Third Quarter 15 10 1/2
Fourth Quarter 14 1/2 12 1/2
</TABLE>
<TABLE>
<CAPTION>
1992 High Low
---- ---- ---
<S> <C> <C>
First Quarter 6 4 1/4
Second Quarter 6 5 1/8
Third Quarter 5 7/8 5 1/4
Fourth Quarter 7 1/4 5 1/4
</TABLE>
As of March 25, 1994, there were 11,895 record holders of the common stock.
DIVIDENDS
No dividends have been paid to stockholders since 1981, and no determination
has been made as to when, if at all, dividends may be paid to stockholders of
the Corporation in the future.
As a unitary savings and loan holding company, the Corporation's ability to pay
dividends depends in part on the dividends it receives from the Bank and on
income from other activities in which the Corporation may engage either
directly or through other subsidiaries. As a condition of the February 1983
FHLBB approval of the reorganization in which the Bank became a subsidiary of
the Corporation, dividends paid by the Bank are limited to net income for each
year, but such dividends may be deferred to a subsequent year. However, no
dividend may be paid from net income for a year prior to 1983 or if the payment
of such dividends would reduce the Bank's regulatory capital below the
regulatory minimums set by the OTS. To the extent dividends have been paid by
the Bank to the Corporation, such funds have been used in the conduct of the
business of the Corporation.
E-28
<PAGE> 198
Item 6. SELECTED FINANCIAL DATA
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR 1993 1992 1991 1990 1989
------------ -------- -------- -------- -------- --------
(Dollar Amounts in Thousands except Earnings (Loss) and
Stockholders' Equity Per Share)
<S> <C> <C> <C> <C> <C>
Interest Income $ 27,430 $ 33,109 $ 39,545 $ 48,833 $ 65,147
Interest Expense 14,485 19,769 29,665 40,513 59,376
Net Interest Income 12,945 13,340 9,880 8,320 5,771
Provision for (Recovery of)
Loan Losses (996) 2,038 1,922 2,113 8,874
Gain on Sale of Loans and
Investments 2,519 1,209 480 457 393
Provision for Loss on Real Estate
Acquired in Settlement of Loans 576 1,130 1,457 1,528 5,012
Net Income (Loss) 6,343 2,835 345 858 (14,419)
Primary Earnings (Loss) Per Share 1.97 1.06 0.14 0.34 (5.65)
Return (Loss) on Average Equity 20.83% 12.08% 1.57% 3.73% (50.47%)
Return (Loss) on Beginning Equity 23.50% 12.98% 1.60% 4.16% (41.12%)
Return (Loss) on Average Assets 1.64% 0.70% 0.08% 0.16% (2.01%)
AT YEAR END
Total Assets $414,169 $380,480 $403,693 $450,466 $589,933
Loan Receivable-Net 242,470 238,906 264,630 268,771 306,686
Investment Securities 12,713 7,058 16,414 25,174 57,814
Investments Available for Sale 132,196 103,835
Mortgage-Backed Securities 90,661 122,758 178,106
Savings Deposits 294,561 291,651 292,713 291,580 332,560
FHLB Advances, Securities Sold
Under Agreements to Repurchase
and Other Borrowings 81,646 57,562 83,168 131,548 228,972
Stockholders' Equity 33,364 26,987 21,849 21,504 20,646
Stockholders' Equity Per Share $ 10.76 $ 8.82 $ 8.57 $ 8.43 $ 8.10
</TABLE>
E-29
<PAGE> 199
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
This discussion should be read in conjunction with the Consolidated Financial
Statements and notes thereto included in this Annual Report.
The following table includes average balance information and the calculated
average rate earned or paid on assets and liabilities and is presented to
facilitate discussion of the Corporation's financial condition and results of
operations.
AVERAGE BALANCE SHEET/YIELDS AND RATES
for the Twelve Months Ended December 31, 1993, 1992 and 1991
(Unaudited)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
Average Average Average Average Average Average
ASSETS Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ------- ------- -------- ------- ------- -------- -------
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning Assets:
Investment Securities
and Other Short-term
Investments $24,809 $1,147 4.62% $ 24,349 $ 1,487 6.11% $ 32,021 $ 2,732 8.53%
Mortgage-backed
Securities 106,048 5,273 4.97 93,051 6,343 6.82 113,290 9,992 8.82
Loan Receivables1
Real Estate Loans 234,431 19,478 8.31 254,653 23,322 9.16 261,321 25,746 9.85
Commercial Loans 7,225 578 8.00 8,433 674 8.00 4,133 520 12.58
Other Loans Receivable 2,241 202 9.01 4,018 348 8.66 2,829 290 10.25
-------- ------- ----- ------- ------- ------ ------ ----- -----
Total Loan
Receivables 243,897 20,258 8.31 267,104 24,344 9.11 268,283 26,546 9.89
------- ------ ------- -------- ------- ------
Total Interest
Earning Assets 374,754 $26,678 7.12% 384,504 $32,174 8.37% 413,594 $39,270 9.49%
======= ====== ======= ===== ======= =====
Other Assets, Net 11,629 21,419 26,303
-------- ------- -------
Total Assets $386,383 $405,923 $439.897
======== ======== ========
</TABLE>
E-30
<PAGE> 200
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------- -------------------------------- -------------------------------
LIABILITIES AND Average Average Average Average Average Average
STOCKHOLDERS EQUITY Balance Interest Rate Balance Interest Rate Balance Interest Rate
-------- -------- ------- -------- -------- -------- -------- -------- -------
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing
Liabilities:
Deposits $289,290 $11,023 3.81% $290,816 $14,169 4.87% $290,374 $19,944 6.87%
Advances from Federal
Home Loan Bank 45,134 2,741 6.07 35,116 3,039 8.65 55,912 5,346 9.56
Securities Sold Under
Agreement to Repurchase
and Other Borrowings 16,910 721 4.26 48,665 2,561 5.26 61,711 4,375 7.09
------- ------ ---- -------- ------- ---- -------- ------ ----
Total Interest-Bearing
Liabilities 351,334 $14,485 4.12% 374,597 $19,769 5.28% 407,997 $29,665 7.27%
======= ==== ======= ==== ======= ====
Other Liabilities 4,602 7,850 9,879
Stockholders' Equity 30,447 23,476 22,021
------- -------- --------
Total Liabilities and
Stockholders' Equity $386,383 $405,923 $439,897
======== ======== ========
Net Interest Spread 3.00% 3.09% 2.22%
Net Interest
Income/Earning Assets $12,193 3.25% $12,405 3.23% $9,605 2.32%
</TABLE>
1 Loans and leases include non-accrual loans and are shown net of
unearned discount and allowance for possible losses. Interest on
loans and leases excludes fees.
RESULTS OF OPERATIONS
The following table highlights results of operation and earnings per share for
the years ended December 31,
<TABLE>
<CAPTION>
1993 1992 1991
----------- ------------ ---------
<S> <C> <C> <C>
Net income $6,343,000 $2,835,000 $345,000
Primary earnings per share 1.97 1.06 0.14
Fully diluted earnings per share 1.95 1.04 0.14
</TABLE>
NET INTEREST INCOME
A significant component of the Corporation's income is net interest income.
Net interest income is the difference between interest earned on loans,
investments and other interest-earning assets ("interest income") and interest
paid on deposits and other interest-bearing liabilities ("interest expense").
Net interest margin, expressed as a percentage, is net interest income divided
by average interest-earning assets. Changes in interest rates, the volume and
the mix of interest-earning assets and interest-bearing liabilities, and the
levels of non-performing assets affect net interest income and net interest
margin. Net interest spread is the difference between the yield on
interest-earning assets and the percentage cost of interest-bearing
liabilities.
E-31
<PAGE> 201
The following table highlights net interest income for the years ended December
31,
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- ------------
<S> <C> <C> <C>
Net interest income
including loan origination fees $12,945,000 $13,340,000 $9,880,000
Change from previous year (395,000) 3,460,000 1,560,000
% change from previous year (2.96%) 35.02% 18.75%
Net interest spread 3.00% 3.09% 2.22%
Net interest margin 3.25% 3.23% 2.32%
Net interest margin including
loan origination fees 3.45% 3.47% 2.39%
</TABLE>
The Corporation's net interest margin increased from 1991 to 1993 as the result
of a generally lower interest rate environment, lower levels of non-performing
assets and a change in the mix of retail deposits from certificates of deposit
to checking and statement savings accounts.
The following table highlights interest income for the years ended December 31,
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
Total interest income $27,430,000 $33,109,000 $39,545,000
Change previous year (5,679,000) (6,436,000) (9,288,000)
% change from previous year (17.15%) (16.28%) (19.02%)
Total interest income/average interest
earning assets 7.32% 8.61% 9.56%
</TABLE>
The greatest decline in interest income from 1991 to 1993 occurred in the real
estate loan portfolio. Income from real estate loans declined $2,425,000 from
1991 to 1992 and $3,844,000 from 1992 to 1993 as a result of a decline in
average balances and rates. Real estate loan average portfolio balances have
also declined from 1991 to 1993 falling $6,668,000 from 1991 to 1992 and
$20,222,000 from 1992 to 1993. Over half the decline from 1992 to 1993
occurred in the commercial real estate portfolio. Until recently, federal
banking regulations prohibited the Corporation from originating non-residential
real estate loans, except to finance the sale of commercial real estate
acquired in settlement of loans (REO). Multi-family real estate loan average
balances increased $3,000,000 from 1992 to 1993, and average outstanding
balances on home equity loans increased $2,000,000 for the same period.
Average disbursed balances on construction loans increased $3,000,000 from 1992
to 1993. The balance of the decline from 1992 to 1993 was in single family
real estate loans. The average interest rate received for the real estate
portfolio fell 0.69% from 1991 to 1992 and 0.85% from 1992 to 1993. This trend
occurred in the mortgage-backed securities (MBS) portfolio as well. The
average interest rate earned for MBS fell 2.00% from 1991 to 1992 and 1.85%
from 1992 to
E-32
<PAGE> 202
1993. Decreases in the interest rate received for MBS and real estate loans
resulted from the downward adjustment of interest rates for adjustable rate
loans and the replacement of loans paid off with new loans at lower interest
rates. The average balance of investment securities increased $500,000 from
1992 to 1993 after declining $7,700,000 from 1991 to 1992. Due to lower yields
available for these securities, these balances are kept at minimum levels for
conducting business as well as to meet minimum regulatory requirements for
liquidity.
Loan origination fees earned during 1993 decreased by $183,000 over that earned
in 1992, which followed an increase of $660,000 from 1991 to 1992. The overall
increase from 1991 to 1993 of $478,000 was the result of the increased activity
in residential mortgage loans originated for sale and the increased volume of
loan refinancing. Deferred net loan fees collected at origination are
recognized as income when the loans are sold or pay-off. During 1993, Olympus
Bank, a Federal Savings Bank (the Bank) funded $66,228,000 for mortgage loans
originated for sale compared to $79,944,000 during 1992 and $13,343,000 for
1991. From the portfolio of loans originated for sale, $66,437,000 principal
balance was sold during 1993 compared to $77,898,000 which was sold during 1992
and $13,440,000 which was sold during 1991.
The following table highlights interest expense for the years ended December
31,
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Total interest expense $14,485,000 $19,769,000 $29,665,000
Change from previous year (5,284,000) (9,896,000) (10,848,000)
% change from previous year (27.73%) (33.36%) (26.78%)
Total interest expense/average costing
liabilities 4.12% 5.28% 7.27%
</TABLE>
Average costing liabilities declined $56,663,000 from 1991 to 1993 and the
average rate paid for such liabilities declined 3.15% for the same period. The
aggregate average balance of deposits declined $1,084,000 from 1991 to 1993 but
the average rate paid for such deposits fell 3.06% for the same period. The
Bank has experienced a significant change in the mix of the deposits during the
last three years. Outstanding balances of certificates of deposit at December
31, 1993, were $41,320,000 lower than the outstanding balances of certificates
of deposit at December 31, 1991. For the same period outstanding balances of
demand deposits, including money market demand accounts (MMDA), and statement
savings accounts increased $44,501,000 consistent with management's focus on
retail banking. The interest paid for all deposits fell $3,146,000 from 1992
to 1993 and $5,775,000 from 1991 to 1992. Advances from the Federal Home Loan
Bank (FHLB) constitute the most expensive source of funds for the Bank, though
the cost of this funding source has declined significantly in the past three
years. The average rate paid for FHLB advances fell 3.49% from 1991 to 1993
and the average balances of these advances declined $10,778,000. The interest
paid for FHLB advances fell $298,000 from 1992 to 1993 and $2,307,000 from 1991
to 1992. During the years ended December 31, 1993 and 1991 the Bank prepaid
$25,000,000 and $9,600,000, respectively, of
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<PAGE> 203
FHLB advances. The advances prepaid during 1993 had an average rate of 9.48%.
Such prepayments resulted in prepayment penalties, which are reported as
extraordinary items for 1993 and 1991. The average balances of other borrowing
sources declined $31,755,000 from 1992 to 1993 and $13,046,000 from 1991 to
1992. During 1993, $5,100,000 of $9,000,000 of other borrowings consisting of
an industrial revenue refunding bond liability was retired and the balance of
the liability was assumed by the purchaser of the industrial building
previously held in real estate acquired in settlement of loans. The average
balance of repurchase agreements declined $26,136,000 from 1992 to 1993.
Management may use this source of funding for the Corporation's liquidity needs
and to fund investment opportunities.
PROVISION FOR LOSSES
For the year ended December 31, 1993, the Corporation recorded a benefit for
$996,000 as compared to losses of $2,038,000 for the same period in 1992. The
provision for losses for 1992 was primarily the result of provision for losses
taken on the interest-only strips. These interest-only strips were sold during
1993 and had no impact on loan loss provisions during 1993.
The recoveries of previous loan loss reserves during 1993 were the result of
lower non-performing asset levels and the satisfactory settlement of several
troubled loans.
The provision for losses on REO was $576,000 for the year ended December 31,
1993, compared to $1,130,000 for the year ended December 31, 1992. The
provision for losses on REO was principally the result of adopting during 1992
the American Institute of Certified Public Accountants Statement of Position
92-3, "Accounting for Foreclosed Assets." The statement requires that assets
such as REO be carried on the books of the Corporation at the lower of cost or
fair value minus estimated costs to sell. Provision for losses on other
accounts receivable increased from 1991 to 1992 and decreased in 1993. These
provisions for 1993 include a charge of $257,000 to recognize the permanent
impairment of two purchased mortgage servicing portfolios caused by
prepayments, and a recovery of $196,000 on previously charged off assets. The
provision for 1992, totaling $289,000, was primarily taken against the residual
value of equipment owned by the Bank and leased to others. Such equipment is
being sold by the Bank and no further significant provisions for losses are
expected because the Bank no longer has an active equipment leasing program.
OTHER INCOME
Other income for the year ended 1993 was $4,200,000 as compared to $2,500,000
and $3,443,000 for the same periods in 1992 and 1991, respectively.
Fee income increased $22,000 from 1992 to 1993 after increasing $307,000 from
1991 to 1992. The two largest components of fee income are loan servicing fees
and fees and charges on deposits. Loan servicing fees declined $172,000 from
1992 to 1993, due in part to increased amortization of purchased mortgage
servicing rights resulting from early prepayments of mortgage loans. Late
charges collected on loans serviced for the Bank and others increased $28,000
from 1992 to 1993 and increased $74,000 from 1991 to 1992. Fees and charges
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<PAGE> 204
collected on deposits increased $132,000 from 1992 to 1993 and increased
$197,000 from 1991 to 1992.
The Corporation earned $62,000 from real estate operations in 1993 compared to
a loss of $583,000 in 1992 and a loss of $103,000 for 1991. The Corporation
continues to make a concerted effort to reduce the dollar amount and holding
costs associated with REO properties.
At December 31, 1992, the Bank classified all mortgage-backed securities and
mortgage-backed derivative securities as assets available for sale, and
consistent with applicable accounting practice, recorded an unrealized loss of
$562,000. In the first quarter of 1993 most of the portfolio was sold,
including interest-only strip securities, and the Bank realized this loss. The
Bank continues to classify mortgage-backed securities as available for sale,
but consistent with current accounting practices, unrealized gains or losses
are excluded from income and reported as a separate component of Stockholders
Equity. At December 31, 1993, the Bank had recorded an unrealized loss on
securities available for sale of $107,000.
The Bank realized $956,000 more gain on sale of investments in 1993 than 1992.
Gain from the sale of mortgage loans decreased $270,000 from $1,200,000 in 1992
to $930,000 in 1993. During 1993, the Bank sold mortgage servicing rights on
loans serviced for others at a gain of $350,000. Gains on sale of investments,
principally mortgage-backed securities, increased $880,000 from 1992 to 1993.
Miscellaneous income fell $453,000 from 1992 to 1993, after falling $807,000
from 1991 to 1992. Miscellaneous income in 1992 and 1991 included tax refunds
and interest on tax refund claims. Such refunds and interest totaled $363,000
in 1992 and $1,373,000 in 1991. Commissions and income from the sale of
insurance products amounted to $400,000 in both 1993 and 1992.
OTHER EXPENSES
Excluding provision for losses on REO and other accounts receivable discussed
above, other expenses increased $1,826,000 during 1993, following an increase
of $563,000 during 1992 over 1991.
From 1991 to 1993 compensation expense has increased $1,197,000. Full time
compensation contributed most to the increase, rising $819,000 from 1991 to
1993. The Bank has opened five new branches since 1991, as well as adding
commercial loan administration personnel and residential lending personnel due
to increased demand for these services. Additionally, the increased volume of
demand deposits has required additions to the operations staff. Besides
opening five new branches, the Bank has relocated three additional branches to
larger, more convenient locations. Occupancy expense increased $219,000 from
1992 to 1993 after increasing $270,000 from 1991 to 1992. As well as new
branches and relocations, major repair projects have led to increased occupancy
expense. Management anticipates that increases in compensation and occupancy
may continue in future periods with the opening of two additional branches in
grocery stores. Management believes that retail branches represent an
opportunity to build low cost core deposits and to offer the Bank's lending
products and services to a wider
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<PAGE> 205
range of customers. Loan and collection expense rose to 1991 levels after
declining $433,000 during 1992. The Bank experienced fewer and less
complicated foreclosure proceedings during 1992. The Bank was involved in
several costly foreclosure proceedings during 1993, most of which had been
concluded by December 1993. Insurance expense, which includes Federal Deposit
Insurance Corporation (FDIC) premiums for insured deposits, declined $129,000
from 1992 to 1991. During 1993 the Bank received the final installment of its
secondary reserve credit. This credit reduced the FDIC insurance premium
$415,000 for 1993. Legal expense continues to be a significant expense for the
Corporation reflecting management's policy of aggressively protecting the
Corporation's interests. In connection with this, a reserve of $500,000 has
been established for estimated costs associated with litigation. Data
processing and other outside services expense increased $240,000 from 1992 to
1993 after declining $211,000 from 1991 to 1992. In the fourth quarter of 1993
the Corporation spent $200,000 for review of strategic alternatives in
connection with an expression of interest to acquire the Corporation, which
expression of interest has since been terminated.
INCOME TAXES
The Corporation adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," effective January 1, 1993. The cumulative
effect of adopting SFAS No. 109 on the Corporation's financial statements was
to increase income $338,000 during 1993.
In 1992, the Corporation recorded an income tax benefit of $157,000 which
resulted from a $197,000 deferred tax benefit offset by an estimate for Federal
alternative minimum tax of $40,000. The Corporation has net operating loss
carry forwards for financial statement purposes of approximately $8,750,000
which expire in the year 2003.
ASSET/LIABILITY MANAGEMENT - INTEREST RATE RISK
A mismatch between maturities and interest rate sensitivities of assets and
liabilities results in interest rate risk. While a certain level of interest
rate risk may be unavoidable, and may at times be desirable, management closely
monitors and attempts to manage this risk. The Corporation's general objective
has been to reduce its vulnerability to interest rate fluctuations over time.
The principal strategies to achieve this objective include (1) emphasizing
originations of shorter term and adjustable rate loans, (2) increasing core
checking and other demand deposit accounts which are less sensitive to changes
in interest rates, and (3) the use of interest rate swaps and interest rate cap
agreements to minimize the consequences of rising interest rates on short-term
deposits and borrowings.
The Corporation uses primarily two techniques in managing and measuring
interest rate risk, net interest income simulations and theoretical
mark-to-market values for interest sensitive assets and liabilities. The net
interest income simulation is a simulation of interest income and interest
expense for a twelve month period under different scenarios. An initial
scenario or base case was calculated using rates as of December 31, 1993.
Additional scenarios were computed adjusting rates both up and down. The
Corporation is negatively impacted by rising interest
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<PAGE> 206
rates. Based on the simulation, net interest income would decline by
approximately 11% for an increase of 200 basis points over the base rates.
Theoretical market values were also computed using December 31, 1993 market
rate information for both assets and liabilities. This provides a base case
from which additional values for assets and liabilities are computed under
varying fluctuations of the current interest rates. The net market value of
portfolio equity, which is the theoretical market values of assets minus the
theoretical market values of liabilities, as of December 31, 1993, is
approximately $38.5 million. Given the same 200 basis point increase in the
base rates as discussed above, the net market value of portfolio equity would
decline by approximately 14%.
It is common for financial institutions to also measure interest rate risk
using a gap analysis. This analysis measures the difference between interest
earning assets and interest bearing liabilities repricing within a given time
period. Within one year the Bank has approximately $29,484,000 in assets
repricing in excess of liabilities or a cumulative hedged gap as a percent of
total assets of positive 7.1%. Within three years from December 31, 1993, the
Bank has approximately $7,177,000 of assets repricing in excess of liabilities
for a cumulative hedged gap to total assets of positive 1.7%. This information
is based on the Bank's internal gap analysis model as of December 31, 1993.
FINANCIAL CONDITION
ASSETS
Total consolidated assets at December 31, 1993, were $414,169,000, an increase
of $33,689,000 or 8.85% from the December 31, 1992 balance of $380,480,000.
This resulted primarily from an increase in net loan receivables of $3,564,000
and an increase in MBS of $28,361,000.
INVESTMENT SECURITIES AND LIQUIDITY MANAGEMENT
Investment securities, including federal funds sold, are used to provide
liquidity and generate income. The following table sets forth the carrying
values of each type of investment security held by the Corporation.
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
----------------- -----------------
<S> <C> <C>
Federal Funds Sold $ 81,000 $ 4,980,000
U.S. Government Securities 199,000 200,000
U.S. Government Agency Securities 6,498,000 2,997,000
Corporate Debt 497,000
Mortgage-backed Securities 2,151,000
Other Investment Securities 7,000 7,000
</TABLE>
E-37
<PAGE> 207
<TABLE>
<S> <C> <C>
Federal Home Loan Bank Stock 3,858,000 3,357,000
----------- -----------
Total $12,794,000 $12,038,000
=========== ===========
</TABLE>
Collateralized mortgage obligations (CMO) and mortgage-backed securities
interest-only strips (IO strips) accounted for as investments available for
sale as of December 31, 1992 are no longer included in the investment
securities. The securities included in the investment securities portfolio
have short term maturities and management has the intent and ability to hold
them to maturity.
The Corporation attempts to manage its liquidity position to meet the funding
needs of depositors and borrowers in a prompt and cost-effective manner.
Generally, the Corporation's liabilities have shorter maturities than the
Corporation's assets. Hence, the Corporation's ability to retain deposits and
renew advances and other borrowings can significantly affect liquidity. During
1993, although the assets had longer scheduled maturities, principal repayments
and maturities of the assets provided ample liquidity to fund deposit
withdrawals, other maturing liabilities, lending commitments, and capital
expenditures. The Corporation believes it has enough assets that can be
converted to cash through sale or used as collateral for borrowings to meet
liquidity needs. The Bank is required by regulation to meet mimimum liquidity
levels. Management believes it continues to be in compliance with such
requirements.
INVESTMENTS AVAILABLE FOR SALE
As of December 31, 1992, the Corporation categorized most mortgage-backed
securities and mortgage-backed securities derivatives as investments available
for sale and recorded an unrealized loss of $562,000. Such adjustment was
included as a reduction in income in 1992. In early 1993 the Bank sold most of
the adjustable rate mortgage-backed securities, the IO strips and CMOs. During
the third quarter of 1993, the Bank sold an additional $36,600,000 of
mortgage-backed securities. This sale resulted in a recognized gain of
$900,000. The proceeds of the sales were used to purchase adjustable and fixed
rate mortgage-backed securities, many with different interest rate indices
which more closely approximate the marginal cost of liability funding.
Additionally, a portion of the mortgage-backed securities are not issued by an
agency of the U.S. government but are privately issued securities with a
Standard and Poors rating of AAA. Management believes these securities will,
in the long term, provide a higher return than available from government
agency-backed securities at an acceptable level of risk. The mortgage-backed
securities are accounted for as assets available for sale recorded at fair
value and unrealized gains or losses are recorded as a separate component of
stockholders' equity.
LOAN AND LEASE RECEIVABLE
Loan and lease receivables totaled $242,470,000 at December 31, 1993, compared
to $238,906,000 at December 31, 1992. The increase in the ending balance is
primarily the result of loans originated for portfolio of $76,100,000 during
1993 offset by principal payments (both scheduled and unscheduled) of
$69,152,000 and the sale of the student loan portfolio.
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<PAGE> 208
Real estate loans totaled $233,316,000 at December 31, 1993, an increase of
$3,472,000 from December 31, 1992. This increase is due to the amount of loans
originated to be retained in the portfolio which exceeded the repayment of
principal mentioned above. Currently, the Bank retains residential real estate
loans which either have adjustable interest rates and certain fixed rate loans
with shorter maturity dates. The Bank is currently originating and retaining
multi-family real estate loans. During 1993 the Bank originated $10,202,000 of
multi-family loans, compared to $4,381,000 during 1992. The Bank also
originates commercial real estate loans for acceptable borrowers and to finance
the sale by the Bank of commercial REO. Real estate loans are reviewed by
members of the Bank's loan committee or a direct endorsement underwriter prior
to the time a loan commitment is made, and the loan must adhere to established
underwriting standards and procedures designed to minimize the risk of
originating a loan which may later result in default.
The following table sets forth information to the Corporation's real estate
loan originations and loan sales:
<TABLE>
<CAPTION>
December 31,
---------------------------------
Real estate loans originated: 1993 1992
------------ -----------
<S> <C> <C>
Residential $106,824,000 $88,183,000
Commercial 3,675,000 6,850,000
Land 12,000 14,000
Construction 17,799,000 4,433,000
------------ -----------
Total originations $128,310,000 $99,480,000
============ ===========
Real estate loans sold $ 66,437,000 $77,898,000
============ ===========
</TABLE>
At December 31, 1993 and 1992, the Bank had extended lines of credit totaling
$10,602,000 and $4,057,000, respectively, for mortgage loan originations. The
lines of credit are used by mortgage bankers to originate and warehouse
mortgage loans. During the years ended December 31, 1993 and 1992, the Bank
disbursed $98,938,000 and $20,817,000, respectively, on these lines of credit.
These originations are not included in the preceding table.
The Bank currently maintains $119,188,000 in outstanding commercial real estate
loans in its loan portfolio. The commercial real estate loan portfolio is
subject to significant concentrations in single industries, single borrowers
and geographical areas. A downturn in any one geographic area, industry, or a
deterioration in the financial condition of one of the largest borrowers, could
have a material adverse impact on the Corporation. A further decline in
commercial real estate values in markets where the Corporation's commercial
real estate loans are located or other unexpected events could cause losses
with the result that capital of the Bank could be reduced below required
levels. As a consequence of these risks, in 1992 the Bank employed three
additional employees to monitor and manage this portfolio.
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<PAGE> 209
Real estate loans held for sale totaled $6,470,000 at December 31, 1993. All
of these loans are fixed rate residential real estate loans which were
originated for sale in the secondary market. With the dramatic increase in
residential real estate loan production beginning in 1992, primarily from both
the financing and refinancing of residential real estate, and because many of
the loans bear interest at a fixed rate, it is presently management's intent to
continue to sell government and long term conventional fixed rate loans.
Commercial business loans totaled $7,092,000 at December 31, 1993, a decrease
of $470,000, or 6% from December 31, 1992. Management intends to allocate
additional resources for the origination of commercial business loans and
growth could be expected in this category of lending. Recognizing the
generally increased risks associated with commercial business lending, the Bank
originates commercial business loans in order to increase short-term or
adjustable rate assets.
Other loans receivable decreased $19,000 to a total of $2,223,000 at December
31, 1993. The balance of other loans receivable are consumer loans, such as
loans for automobiles and credit card loans. This area of lending will
continue, but slow growth is expected due to competitive pressure.
The allowance for losses on loans totaled $5,610,000 at December 31, 1993,
compared to $6,678,000 at December 31, 1992. The allowance for losses is
composed of specific allowances on particular loans and a general allowance for
the loan portfolio. As of December 31, 1993, the total of specific allowances
was $1,526,000, an increase of $449,000 from December 31,1992. The general
allowance totaled $4,084,000 at December 31, 1993 compared to $5,601,000 at
December 31, 1992. The general allowance is 1.66% of the loan and lease
portfolio at December 31, 1993, as compared to 2.71% at December 31, 1992. It
is difficult to predict which, if any, of the loans will become delinquent.
The general allowance is 182% of non-performing loans at December 31, 1993,
compared to 138% of non-performing loans at December 31, 1992. Management has
closely monitored the adequacy of the allowance for possible losses, but the
continuing evolution of the methodologies used to determine adequacy, the
changing economic environment, the changing financial condition of the Bank's
largest borrowers, and the evolving standards of the Federal Deposit Insurance
Corporation ("FDIC") and the OTS may result in further additions to the
allowance.
NON-PERFORMING ASSETS & REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS
Non-performing assets (principally non-accrual loans and REO) totaled
$5,297,000 at December 31, 1993, compared with $9,310,000 at December 31, 1992.
Commercial real estate loans represent the majority of the assets in this
category in 1993. In 1992, REO represented the majority of assets. As of
December 31, 1993, non-accrual loans totaled $2,242,000 compared to $4,047,000
at December 31, 1992. At December 31, 1993, non- accrual loans consisted of
commercial real estate loans and commercial installment loans. At December 31,
1993, real estate loans that were non-accrual totaled approximately $832,000 as
compared to $3,842,000 at December 31, 1992. At December 31, 1993, non-accrual
commercial installment loans totaled $1,408,000.
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<PAGE> 210
REO (including in-substance foreclosures) totaled $3,055,000 at December 31,
1993, compared to $5,263,000 at December 31, 1992. During 1992 and 1993 the
Corporation sold several large properties in REO, including the remaining
property at the Resort Center in Park City and an industrial building in Salt
Lake City. The Bank has provided loans on market terms to some of these
buyers. Properties in REO are being actively marketed. Pursuant to
management's emphasis on resolving unsatisfactory credits through foreclosure
proceedings or other actions, the Bank has commenced, and may in the future
commence, enforcement proceedings against borrowers whose loans may not be
delinquent with respect to principal or interest payments but who may not be in
compliance with other provisions of the documents governing the loans, such as
those relating to the payment of taxes. These proceedings may precipitate
delinquencies or may result in additions to REO.
At December 31, 1993, there were two Bank properties in REO. The largest was a
hotel located in Pocatello, Idaho. This hotel was sold in a Bank financed
transaction during the first quarter of 1994. The other property was a
hydroelectric plant. The Bank sold this property in the first quarter of 1994.
However, it will be accounted for as REO pursuant to Statement of Financial
Accounting Standards No. 66, "Accounting for sales of Real Estates". Major
loans that are on non-accrual consisted of a commercial real estate loan and
commercial business loans. The commercial real estate loan is an office
building located in southern California. The largest nonaccrual commercial
business loan was made in connection with a hotel in Idaho and has some
commonality of borrowers with the hotel in Pocatello, Idaho that is listed
above as REO property. Proceeds from the sale of the hotel were used to pay
this loan in full.
As of December 31, 1993, the Corporation has identified approximately $13.6
million of loans and real estate acquired in settlement of loans (net of
specific allowances) with various weaknesses or deficiencies, including present
and/or past delinquencies in payment, and unverified or unverifiable sources of
cash flow covering past and/or future payments. This compares with $22.8
million of such assets as December 31, 1992. The Corporation has $25,899,000
of commercial real estate loans located in southern California. Management is
unable to determine what, if any, the impact of recent natural disasters will
have on these loans.
LIABILITIES
SAVINGS DEPOSITS
Deposits are the Corporation's principal source of funds. Deposits totaled
$294,561,000 at December 31, 1993, an increase of $2,910,000 from December 31,
1992. Management's strategy, implemented in 1990, to improve and where
necessary relocate facilities and to emphasize checking accounts and other
transaction related accounts combined with a lower interest rate environment
appears to be successful so far in mitigating the loss of deposits attributable
to a decline in certificates of deposit offered by the Bank. During 1993,
certificates of deposit decreased $16,320,000 while checking and demand
accounts and statement savings accounts increased $19,230,000.
E-41
<PAGE> 211
BORROWINGS
Advances from the Federal Home Loan Bank decreased $3,350,000 from 1992 to 1993
and as discussed previously, during 1993 the Bank prepaid $25,000,000 of
advances from the Federal Home Loan Bank. These fixed rate advances were
replaced by adjustable rate advances. During 1993, $5,100,000 of the
$9,000,000 industrial revenue bond, supported by letters of credit issued by
the Bank, which made up the bulk of other borrowings at December 31, 1992, was
retired, and the principal obligation for repayment of the balance was assumed
by the purchaser of the industrial building previously held in REO. The
balance of funds borrowed through repurchase agreements rose $36,531,000 during
1993. The proceeds from this borrowing were used to purchase adjustable and
fixed rate mortgage-backed securities. Management intends to use borrowed
funds only as needed for liquidity and to borrow at longer maturities.
CAPITAL RESOURCES
The Corporation privately placed 510,000 shares of its common stock on November
19, 1992 at $5.00 per share. This raised approximately $2,300,000 in new
capital after all associated costs of issuance. The capital was contributed to
the Bank for general business purposes and to strengthen the capital position
of the Bank. During 1993, 39,500 stock options were exercised, which
contributed $140,000 in new capital to the Corporation.
In connection with the insurance of savings accounts by the Savings Association
Insurance Fund ("SAIF"), the Bank is required to meet certain minimum capital
standards consisting of three separate requirements. The capital standards
consist of a tangible capital requirement of 1.5% of tangible assets, a core or
leveraged capital requirement of 3% of tangible assets, and a risk-based
capital requirement. The risk-based requirement takes each asset and gives it
a weighting of 0% to 100% based upon credit risk as defined in the regulations
of the Office of Thrift Supervision ("OTS"). The risk-based capital
requirement as of December 31, 1993 and 1992 was 8% of the risk weighted
assets. Eligible capital to meet this test is composed of core or tier 1
capital and supplementary or tier 2 capital. Supplementary or tier 2 capital
is composed of general loan loss reserves up to a maximum of 1.25% of risk
weighted assets.
The following is a summary of the Bank's regulatory capital at December 31,
1993:
<TABLE>
<CAPTION>
Requirements Actual
------------------- --------------------- Amount Exceeding
Capital Ratio Capital Ratio Requirements
----------- ----- ------------ ------ ----------------
<S> <C> <C> <C> <C> <C>
Tangible $ 6,207,000 1.50% $32,731,000 7.91% $26,524,000
Core 12,415,000 3.00 32,731,000 7.91 20,316,000
Risk-based 20,060,000 8.00 35,877,000 14.27 15,817,000
</TABLE>
E-42
<PAGE> 212
EFFECT OF RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In December 1990, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Post-retirement Benefits Other Than Pensions". The Statement requires an
accrual of post-retirement benefits (such as health care benefits) during the
years an employee provides services. The cost of these benefits were
previously expensed on a pay-as-you-go basis. The Corporation adopted this
Statement in 1993. The impact of the Statement on the Corporation was not
material.
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Post-employment Benefits". The Statement requires an accrual of benefits to be
provided to former or inactive employees after employment but before
retirement, such as salary continuation, severance pay, or health care
benefits. The Statement is effective for fiscal years beginning after December
15, 1993. The impact of the Statement on the Corporation is not expected to be
material.
In May 1993, the Financial Accounting Standards Board issued SFAS No. 114,
"Accounting by Creditors for Impairment of a Loan". SFAS No. 114 requires that
impaired loans be valued based on the present value of expected future cash
flows or fair value of the collateral if the loan is collateral dependent.
SFAS No. 114 is effective for fiscal years beginning after December 15, 1994.
The impact of SFAS No. 114 on the Corporation is not expected to be material.
E-43
<PAGE> 213
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Olympus Capital Corporation and Subsidiaries:
We have audited the accompanying consolidated statements of financial condition
of Olympus Capital Corporation and subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1993. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Olympus Capital Corporation and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
Corporation changed its method of accounting for income taxes and certain debt
securities to conform with Statements of Financial Accounting Standards No. 109
and No. 115, respectively.
/s/
DELOITTE & TOUCHE
Salt Lake City, Utah
March 1, 1994
E-44
<PAGE> 214
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
ASSETS 1993 1992
------------ ------------
<S> <C> <C>
Cash on hand and in banks (Note 2) $ 8,323,332 $ 7,096,080
Federal funds sold 81,099 4,980,484
------------ ------------
Total cash and cash equivalents 8,404,431 12,076,564
------------ ------------
Investments available for sale (amortized cost of $132,302,225
in 1993 and $104,396,822 in 1992) (Notes 3, 11, and 17) 132,195,692 103,834,561
Investment securities (fair value $12,711,849 in 1993 and
$7,035,774 in 1992) (Note 4) 12,712,941 7,057,761
Loans receivables, net (Note 5):
Real estate loans 233,316,431 229,844,248
Real estate loans held for sale 6,469,655 6,678,429
Commercial loans 7,091,863 7,562,150
Other loans receivable 2,238,761 2,301,410
Less unamortized loan fees (1,036,824) (802,360)
Less allowance for losses (5,610,010) (6,677,783)
------------ ------------
Total loan receivables 242,469,876 238,906,094
------------ ------------
Accrued interest receivable (less allowance for uncollectible
interest of $99,499 in 1993 and $163,308 in 1992) 2,232,629 2,359,429
Real estate acquired in settlement of loans, net (Note 6) 3,054,916 5,262,614
Premises and equipment, net (Note 7) 7,333,637 7,528,378
Other assets and deferred charges (Note 8) 5,765,291 3,454,305
------------ ------------
TOTAL ASSETS $414,169,413 $380,479,706
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 9) $294,560,648 $291,650,580
Advances from Federal Home Loan Bank (Note 10) 36,649,913 40,000,000
Securities sold under agreements to repurchase
(including accrued interest payable) (Note 11) 44,996,245 8,464,822
Other borrowings (Note 12) 9,096,748
Other liabilities and accrued expenses 4,599,067 3,942,656
Deferred tax credits (Note 13) 337,878
Total liabilities 380,805,873 353,492,684
------------ ------------
Commitments and contingent liabilities (Note 17)
Stockholders' equity (Note 15):
Common stock - $1 par value, 10,000,000 shares authorized;
shares issued and outstanding 3,099,639 in 1993 and
3,060,139 in 1992 (Note 19) 3,099,639 3,060,139
Paid-in capital 1,894,005 1,793,230
Retained earnings - substantially restricted 28,476,429 22,133,653
Net unrealized losses on investments available
for sale (Note 3) (106,533)
------------ ------------
Total stockholders' equity 33,363,540 26,987,022
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $414,169,413 $380,479,706
============ ============
</TABLE>
See notes to consolidated financial statements.
E-45
<PAGE> 215
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST INCOME:
Real estate loans $19,478,265 $23,322,006 $25,746,517
Mortgage-backed securities 5,272,572 6,342,758 9,991,919
Investment securities and other short-term investments 643,174 1,107,940 2,345,729
Equity securities 504,137 378,958 386,258
Commercial loans 577,706 674,721 520,294
Other loans and contracts 201,490 347,441 279,880
Loan organization fees 752,201 935,025 274,091
----------- ----------- -----------
Total 27,429,545 33,108,849 39,544,688
----------- ----------- -----------
INTEREST EXPENSE
Deposits (Note 9) 11,022,544 14,168,612 19,944,339
Advances from Federal Home Loan Bank (Note 10) 2,740,926 3,039,131 5,345,760
Securities sold under agreements to repurchase
and other borrowings (Notes 11 and 12) 721,302 2,561,556 4,375,076
----------- ----------- -----------
Total 14,484,772 19,769,299 29,665,175
----------- ----------- -----------
NET INTEREST INCOME 12,944,773 13,339,550 9,879,513
Provision for (recovery of) loan losses (Note 5) (996,412) 2,037,707 1,922,271
----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 13,941,185 11,301,843 7,957,242
----------- ----------- -----------
OTHER INCOME:
Fees 1,413,207 1,391,491 1,083,500
Income (loss) from real estate operations 61,584 (582,802) (103,423)
Unrealized loss on investments available for sale (Note 3) (562,261)
Gain on sale of loans and investments (Notes 3, 4, and 5) 2,519,020 1,209,224 480,138
Rentals on operating leases, net 32,141 162,416
Miscellaneous (Note 13) 559,659 1,012,684 1,820,198
---------- ----------- -----------
Total 4,553,470 2,500,477 3,442,829
---------- ----------- -----------
OTHER EXPENSES:
Compensation and other employee expense (Note 20) 5,439,399 5,078,634 4,242,246
Occupancy 2,185,436 1,966,359 1,696,811
Advertising 375,326 295,078 457,497
Loan and collection expense 476,930 123,533 556,535
Insurance expense 693,069 821,943 785,588
Provision for losses:
Real estate acquired in settlement of loans (Note 6) 575,560 1,130,201 1,457,005
Other accounts receivable 61,058 289,475 72,836
Other operating expenses 2,360,172 1,419,058 1,402,760
----------- ----------- -----------
Total 12,166,950 11,124,281 10,671,278
----------- ----------- -----------
INCOME BEFORE INCOME TAXES, EXTRAORDINARY
ITEMS, AND CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE 6,327,705 2,678,039 728,793
----------- ----------- -----------
</TABLE>
(Continued)
E-46
<PAGE> 216
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
----------- ---------- -----------
<S> <C> <C> <C>
INCOME TAX EXPENSE (BENEFIT) (Note 13):
Provision in lieu of income taxes $ 553,000
Current $ 40,000
Deferred (196,761)
----------- ---------- -----------
Total NONE (156,761) 553,000
----------- ---------- -----------
INCOME BEFORE EXTRAORDINARY ITEMS AND
CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE $ 6,327,705 2,834,800 175,793
EXTRAORDINARY ITEMS
FHLB advance prepayment penalty, net of related
income taxes of $143,000 in 1991 (Note 10) (322,807) (240,894)
Realization of net operating loss carryforward 410,000
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE (Notes 1 and 13) 337,878
----------- ----------- -----------
NET INCOME $ 6,342,776 $ 2,834,800 $ 344,899
=========== =========== ===========
EARNINGS PER SHARE (Note 18):
PRIMARY
Income per share of common stock before
extraordinary items and cumulative effect
of a change in accounting principle $ 1.96 $ 1.06 $ .07
Extraordinary items (.10) .07
Cumulative effect of a change in accounting
principle (Note 1) .11
----------- ----------- -----------
Earnings per share of common stock $ 1.97 $ 1.06 $ .14
=========== =========== ===========
FULLY DILUTED:
Income per share of common stock before
extraordinary items and cumulative effect
of a change in accounting principle $ 1.94 $ 1.04 $ .07
Extraordinary items (.10) .07
Cumulative effect of a change in accounting
principle (Note 1) .11
----------- ----------- -----------
Earnings per share of common stock $ 1.95 $ 1.04 $ .14
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
(Concluded)
E-47
<PAGE> 217
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
UNREALIZED
COMMON PAID-IN RETAINED LOSS ON TOTAL
STOCK CAPITAL EARNINGS INVESTMENTS (NOTE 15)
---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1991 $2,550,139 $18,953,954 $21,504,093
Net income 344,899 344,899
---------- ---------- ----------- ---------- ----------
BALANCE, DECEMBER 31, 1991 2,550,139 19,298,853 21,848,992
Issuance of common stock
(Note 15) 510,000 $1,793,230 2,303,230
Net income 2,834,800 2,834,800
---------- ---------- ----------- ---------- ----------
BALANCE, DECEMBER 31, 1992 3,060,139 1,793,230 22,133,653 26,987,022
Issuance of common stock
(Note 19) 39,500 100,775 140,275
Net decrease in fair value of
investments available for
sale (Notes 1 and 3) $(106,533) (106,533)
Net income 6,342,776 6,342,776
---------- ---------- ----------- ---------- ----------
BALANCE, DECEMBER 31, 1993 $3,099,639 $1,894,005 $28,476,429 $(106,533) $33,363,540
========== ========== =========== ========= ===========
</TABLE>
See notes to consolidated financial statements.
E-48
<PAGE> 218
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
--------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $26,434,708 $ 34,075,609 $ 40,461,944
Fees and commissions received 2,828,343 2,185,135 1,592,096
Income (loss) from real estate operations 1,584 (582,802) (103,423)
Loans originated or purchased for resale (66,228,074) (79,943,643) (18,170,070)
Proceeds from sale of loans originated or
purchased for resale 66,436,848 77,897,537 13,440,454
Miscellaneous income received 1,030,959 2,024,324 2,264,391
Interest paid (15,248,131) (20,327,638) (29,700,682)
Cash paid for services to suppliers and employees (8,336,568) (6,657,617) (5,836,736)
Cash paid for other expenses (1,645,382) (2,228,429) (2,104,893)
Income taxes paid (7,213) (237,515)
--------------- -------------- --------------
Net cash provided by operating activities 5,274,287 6,435,263 1,605,566
--------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of investment securities 10,450,000 5,153,500 26,121,415
Proceeds from sale of investment securities 6,952,437 2,620,082 1,500,000
Purchase of investment securities (16,661,900) (10,385,706) (21,723,209)
Principal collected on investment securities 354,801 2,268,164 2,227,018
Proceeds from sale of mortgage-backed securities 137,781,224 10,842,347
Purchase of mortgage-backed securities (183,220,432) (28,788,003) (3,894,600)
Principal collected on mortgage-backed securities 11,461,598 21,484,572 25,180,681
Principal collected on loans 69,151,779 52,970,550 36,837,197
Proceeds from sale of loans 902,225 4,168,441 560,384
Loans originated or purchased (76,099,514) (33,716,496) (38,399,846)
Proceeds from sale of real estate 8,266,008 9,137,748 6,641,048
Capital expenditures for premises and equipment (2,215,264) (729,284) (2,026,679)
Purchases of other assets (3,467,329) (797,166) (98,033)
--------------- -------------- --------------
Net cash provided by (used in) investing
activities (36,344,367) 23,386,402 43,767,723
--------------- -------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 2,835,068 (1,062,709) 1,133,022
Proceeds from advances from Federal Home Loan Bank 152,258,200 30,696,000
Principal payments on advances from Federal Home
Loan Bank (155,608,287) (20,696,000) (34,600,000)
Net proceeds (repayment) of securities sold under
agreements to repurchase 36,626,668 (43,896,328) (4,706,178)
Proceeds from (repayment of) other borrowings (8,853,977) 7,641,989 (8,910,269)
Proceeds from issuance of common stock 140,275 2,303,230
--------------- -------------- --------------
Net cash provided by (used in)
financing activities 27,397,947 (25,013,818) (47,083,425)
--------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (3,672,133) 4,807,847 (1,710,136)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,076,564 7,268,717 8,978,853
--------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,404,431 $ 12,076,564 $ 7,268,717
=============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
E-49
<PAGE> 219
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (CONTINUED)
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 6,342,776 $ 2,834,800 $ 344,899
----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 716,298 682,455 559,818
Deferred income tax benefit (196,761)
Cumulative effect of a change in accounting principle (337,878)
Provision for (recovery of) credit losses (996,412) 2,037,707 1,922,271
Provision for loss on real estate acquired in
settlement of loans 575,560 1,130,201 1,457,005
Recoveries 196,689 345,323 965,798
Unrealized loss on investments available for sale 562,261
Gain on sale of loans and investments (2,519,020) (1,209,224) (480,138)
Net loans originated or purchased for resale 208,774 (841,307) (4,632,323)
(Gain) loss on sale of real estate (102,282) 970 (35,945)
Discount/premium amortization on investment and
mortgage-backed securities 134,913 1,459,464 1,104,848
Federal Home Loan Bank stock dividends (500,100) (375,900) (383,900)
Amortization on unearned discounts on loans (4,249) (8,706) (52,890)
Net rentals on operating leases (32,141) (162,416)
Provision for loss on and decline in value of other
assets 61,058 323,086
Decrease in other liabilities (25,184) (56,501) (236,014)
Decrease in accrued interest receivable 126,800 826,927 636,342
Increase (decrease) in interest payable (440,552) (558,339) 618,179
(Increase) decrease in prepaid expenses 895,892 (157,815) (138,200)
Increase (decrease) in deferred fees and commissions 448,425 (141,381) 234,505
Increase (decrease) in accrued expenses 492,779 (189,856) (116,273)
----------- ----------- -----------
Total adjustments (1,068,489) 3,600,463 1,260,667
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,274,287 $ 6,435,263 $ 1,605,566
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES - Loans transferred to
real estate acquired in settlement of loans $ 4,138,973 $ 4,223,816 $ 7,235,683
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
E-50
<PAGE> 220
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Olympus Capital Corporation (the "Corporation"), a savings and loan
holding company, provides a full range of financial services to individual
and corporate customers through its primary subsidiary, Olympus Bank, a
Federal Savings Bank (the "Bank"). The Corporation is subject to the
regulations of certain federal agencies and undergoes periodic
examinations by those agencies.
BASIS OF FINANCIAL STATEMENT PRESENTATION - The consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles including those applicable to the savings and loan
industry. In preparing such financial statements, management is required
to make estimates and judgments that effect the carrying amounts of assets
and liabilities as of the balance sheet date and revenues and expenses for
the period. Actual results could differ significantly from those
estimates. Material estimates that are particularly subject to change
relate to the determination of the allowance for possible loan losses and
the valuation of real estate acquired in settlement of loans. Management
obtains independent appraisals of properties to assist in the
determination of the allowance for losses on loans, leases, and real estate
owned.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include those of the Corporation and its wholly-owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation.
INVESTMENTS AVAILABLE FOR SALE - Effective December 31, 1993, the
Corporation adopted the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (Statement No. 115). Pursuant to Statement No. 115,
investments available for sale are recorded at fair value, with net
unrealized gains or losses excluded from income and reported as a separate
component of stockholders' equity. Gains or losses on investments
available for sale are determined on the specific identification method
and are included in income when realized. Investments available for sale
include securities for which the Corporation has entered into a commitment
to sell the securities as well as securities to be held for indefinite
periods of time that management intends to use as part of its
asset/liability management strategy and that may be sold in response to
changes in interest rates, prepayment risk, or other factors. Prior to
the adoption of Statement No. 115, investments available for sale were
carried at the lower of aggregate cost or market with unrealized losses
reported in the statement of operations.
INVESTMENT SECURITIES - Investments securities are carried at amortized
cost, based on management's intent and ability to hold such securities to
maturity. Discounts are accreted or premiums amortized using the interest
method over the life of the security. Gains or losses on sales of
securities are determined based on the specific identification method.
INTEREST RATE EXCHANGE, INTEREST RATE CAP AGREEMENTS, AND INTEREST-ONLY
STRIPS - The Corporation enters into interest rate exchange agreements as
a means of managing interest rate exposure. The floating rates associated
with these exchanges are reset on a quarterly basis. The effect on
interest costs is recognized currently over the term of such agreements.
E-51
<PAGE> 221
Interest rate cap agreements are purchased to reduce the Corporation's
exposure to rising interest rates which would increase the cost of
floating rate liabilities. Costs are amortized over the life of the
agreements and benefits are recognized when realized. The premium related
to interest-only strips is amortized using the interest method over the
estimated life of the future payment stream.
REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS (REO) - Properties acquired in
settlement of loans and loans considered in substance foreclosures are
carried at the lower of cost or fair value less estimated selling costs.
Costs relating to the development and improvement of property are
capitalized, whereas those relating to holding the property are expensed.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost.
Depreciation and amortization of office buildings and related equipment
are computed on a straight-line method over the estimated useful lives
ranging from 20 to 50 years for buildings, 5 to 35 years for leasehold
improvements, and 3 to 25 years for furniture and equipment. Maintenance
and repairs are expensed as incurred. Additions and major renewals and
betterments are capitalized. In addition, the Corporation leases certain
of its branch facilities under operating leases.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - Securities sold under
agreements to repurchase are accounted for as financing transactions and
are recorded at the amount at which the securities will be reacquired,
including accrued interest. Securities sold under agreements to
repurchase are entered into only with securities brokers which are
registered with the Securities and Exchange Commission, are members in
good standing of the National Association of Securities Dealers, Inc., and
are primary dealers in U.S. Government securities or are agencies of the
federal government. Collateralization limits, based on market values,
range from 101% to 110%, depending on maturity.
ALLOWANCE FOR LOSSES ON LOAN RECEIVABLES - Allowance for losses on loan
receivables are established to recognize losses which are, in the opinion
of management, probable and estimable. Allowance for losses are
established on the loan portfolio based on past experience and calculated
as a percentage of the portfolio. Delinquent and adversely classified
loans are analyzed and additional allowance for losses established based
on historical losses and estimates of the fair value of the collateral.
While management uses the best information available on which to base
estimates, future adjustments to the allowance may be necessary if
economic conditions differ substantially from the assumptions used for the
purposes of analysis. Restructuring of a loan results in the
establishment of a loss allowance based on the fair value of the
collateral. In addition, various regulatory agencies routinely examine
the Corporation's financial statements as part of their legally prescribed
oversight of the savings and loan industry. As an integral part of their
examination process, the regulatory agencies review the allowance for
losses. Such agencies may require additions to the allowance based on
their evaluation of information available at the time of their
examination.
NON-REFUNDABLE LOAN ORIGINATION FEES - Loan origination fees and certain
direct loan origination costs are being deferred. For loans held for
investment, such fees are amortized over the life of the loan using the
interest method as an adjustment of yield. Net deferred loan fees are
included in the calculation of the gain or loss on the sale of loans.
INCOME TAXES - In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes"
E-52
<PAGE> 222
(Statement No. 109). Effective January 1, 1993, the Corporation and its
subsidiaries adopted the provisions of Statement No. 109 and recognized a
cumulative effect of a change in accounting principle adjustment of
$337,878. The change in accounting for income taxes had no effect on
income before income taxes in 1993. The Corporation has recorded net
deferred tax assets which are offset by a valuation allowance for the
expected future tax consequences of events that have been recognized in
different periods for financial statement purposes than for income tax
purposes.
The Bank has qualified under provisions of the Internal Revenue Code which
permit it to deduct from taxable income an allowance for bad debts based
on a percentage of taxable income before such deduction. Retained
earnings at December 31, 1993 and 1992 include earnings of approximately
$25,200,000 and $27,300,000, respectively, representing such bad debt
deductions for which no provision for Federal income taxes has been made.
If the deducted amounts are used at a future time for any purpose other
than to absorb such losses, tax liabilities will be incurred by the Bank
at the Federal income tax rates in effect at that time. In the future, if
the Bank does not meet the Federal income tax requirements necessary to
permit it to deduct an allowance for bad debts, the Corporation's
effective Federal income tax rate could increase.
ACCRUED INTEREST RECEIVABLE - Interest earned but uncollected on loans and
investments is accrued. Generally, the recognition of income on a loan is
suspended and previously accrued interest is reversed when payments become
more than 90 days delinquent.
STATEMENTS OF CASH FLOWS - For purposes of the statements of cash flows,
the Corporation considers cash on hand, amounts due from banks, federal
funds sold, and United States Treasury Bills purchased as part of cash
management activities with an original maturity less than 90 days to be
cash equivalents. Also, for purposes of the statements of cash flows,
loan originations and principal collected on loans includes rollovers of
loans.
OTHER - Certain reclassifications have been made in the prior year's
financial statements to conform to classifications adopted in the current
year.
2. RESTRICTED CASH
In connection with loans serviced for others, the Corporation collects
loan payments and advances for taxes and insurance from borrowers and
remits such collections, less a servicing fee, to the lender. At December
31, 1993, there were no unremitted collections or restricted funds.
E-53
<PAGE> 223
3. INVESTMENTS AVAILABLE FOR SALE
The amortized cost and estimated fair values of investments available for
sale are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1993 COST GAINS LOSSES VALUE
----------------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Government Agency fixed rate
mortgage-backed securities $ 29,714,294 $ (323,745) $ 29,390,549
U.S. Government Agency variable
rate mortgage-backed securities 64,701,617 $ 34,932 64,736,549
Non-agency variable rate mortgage-
backed securities 37,886,314 182,280 38,068,594
------------ ---------- ------------ ------------
Total $132,302,225 $ 217,212 $ (323,745) $132,195,692
============ ========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1993 COST GAINS LOSSES VALUE
----------------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Government Agency fixed rate
mortgage-backed securities $ 1,668,040 $ 83,055 $ 1,751,095
U.S. Government Agency variable
rate mortgage-backed securities 94,004,584 1,823,258 95,827,842
Real estate mortgage investment
conduit 1,986,613 1,986,613
Utah Housing mortgage-backed
securities 170,000 170,000
Collateralized mortgage obligations 1,733,795 $ (70,924) 1,662,871
Interest-only mortgage-backed
securities 4,833,790 (2,397,650) 2,436,140
------------ ----------- ----------- ------------
Total $104,396,822 $1,906,313 $(2,468,574) $103,834,561
============ ========== =========== ============
</TABLE>
At December 31, 1993, the net unrealized loss on investments available for
sale of $106,533 was recorded to reduce the carrying value of the
investments on an aggregate basis to their estimated fair values.
Pursuant to the adoption of SFAS No. 115, such adjustment was excluded
from income and shown as a separate component of stockholders' equity. At
December 31, 1992, a lower of cost or market adjustment of $562,261 was
recorded to reduce the carrying value of the investments on an aggregate
basis to their estimated fair value. Such adjustment was included as a
reduction in income in 1992.
The amortized cost and estimated fair value of investment securities
available for sale at December 31, 1993 by contractual maturity are shown
below. Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties. The maturities of mortgage-backed
securities are estimated based on the contractual maturities of the
underlying loans.
E-54
<PAGE> 224
<TABLE>
<CAPTION>
ESTIMATED
FAIR
AMORTIZED COST VALUE
-------------- -------------
<S> <C> <C>
Due after one year through five years $ 5,224,009 $ 5,199,952
Due after five years through ten years 9,844,228 9,755,139
Due after ten years 117,233,988 117,240,601
------------ ------------
Total $132,302,225 $132,195,692
============ ============
</TABLE>
Proceeds, gross gains, and gross losses from sales of investments
available for sale were as follows for the year ended December 31, 1993:
<TABLE>
<S> <C>
Proceeds $137,781,224
============
Gross realized gains $ 2,807,672
Gross realized losses (2,482,636)
------------
Net realized gains $ 325,036
============
</TABLE>
There were no investments classified as available for sale during 1991.
At December 31, 1993, mortgage-backed securities totaling $6,747,391 are
pledged as collateral to letters of credit and $598,199 to interest rate
swap agreements. Additionally, mortgage-backed securities totaling
$46,912,958 as of December 31, 1993, have been sold under agreements to
repurchase (see Note 11). Investment in Federal Home Loan Bank capital
stock is required of Federal Home Loan Bank members and represents the
greater of: a) 1% of residential mortgage loans and mortgage-backed
securities, b) 0.3% of total assets, or c) 5% of advances from the Federal
Home Loan Bank.
4. INVESTMENT SECURITIES
The amortized cost and estimated fair values of investment securities are
as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1993 COST GAINS LOSSES VALUE
----------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Federal Home Loan Bank variable
rate notes $1,506,937 $ (7,387) $1,499,550
Federal National Mortgage
Association variable rate notes 3,491,220 (10,695) 3,480,525
Student Loan Marketing Association
variable rate notes 1,500,000 $ 3,000 1,503,000
Utah Housing mortgage-backed
securities 160,000 160,000
Real estate mortgage investment
conduit 1,990,955 15,246 2,006,201
U.S. Treasury securities 199,256 (1,256) 198,000
---------- ------- -------- ----------
Total debt securities 8,848,368 18,246 (19,338) 8,847,276
</TABLE>
E-55
<PAGE> 225
<TABLE>
<S> <C> <C> <C> <C>
Federal Home Loan Bank capital 3,857,500 3,857,500
stock
Other equity securities 7,073 7,073
----------- ------- -------- -----------
Total $12,712,941 $18,246 $(19,338) $12,711,849
=========== ======= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1992 COST GAINS LOSSES VALUE
----------------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Investment grade corporate debt $ 496,937 $3,063 $ 500,000
U.S. Treasury securities 199,890 110 200,000
Federal National Mortgage
Association debentures 2,996,460 $(25,160) 2,971,300
---------- ------ -------- ----------
Total debt securities 3,693,287 3,173 (25,160) 3,671,300
Federal Home Loan Bank capital
stock 3,357,400 3,357,400
Other equity securities 7,074 7,074
---------- ------ -------- ----------
Total $7,057,761 $3,173 $(25,160) $7,035,774
========== ====== ======== ==========
</TABLE>
The amortized cost and estimated fair value of investment debt securities
at December 31, 1993 by contractual maturity are shown below. Expected
maturities may differ from contractual maturities because borrowers have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
VALUE VALUE
---------- ----------
<S> <C> <C>
Due less than one year $ 199,256 $ 198,000
Due after one year through five years 8,489,112 8,489,276
Due after five years through ten years 160,000 160,000
---------- ----------
Total investment debt securities $8,848,368 $8,847,276
========== ==========
</TABLE>
Proceeds, gross gains, and gross losses from sales of investment securities
were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- -----------
<S> <C> <C> <C>
Proceeds $6,952,437 $2,620,082 $12,342,347
========== ========== ===========
Gross gains $ 384,295
Gross losses $ (11,910) $ (28,750)
---------- ---------- -----------
Net gains $ (11,910) $ (28,750) $ 384,295
========== ========== ===========
</TABLE>
E-56
<PAGE> 226
Investment securities totaling $3,857,500 and $3,357,400 were pledged on
advances from the Federal Home Loan Bank of Seattle at December 31, 1993
and 1992, respectively.
5. LOAN RECEIVABLES
Real estate loan receivables consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1992
------------ ------------
<S> <C> <C>
Real estate loans:
Residential $117,664,808 $ 84,076,030
Commercial 119,187,768 134,857,373
FHA and VA loans 9,966,800 12,738,600
Equity line-of-credit loans 6,506,411 4,011,628
Land acquisition loans 55,335 1,070,602
------------ ------------
Total 253,381,122 236,754,233
Less:
Undisbursed portion of loans-in-process 19,689,718 6,612,672
Unearned discount on loans and contracts purchased 374,973 297,313
------------ ------------
Net real estate loans $233,316,431 $229,844,248
============ ============
</TABLE>
These loans are collateralized by liens on real property. The balances of
participation loans serviced for others at December 31, 1993 and 1992 were
approximately $354,238,000 and $278,353,000, respectively. Generally,
fixed rate residential real estate loans currently originated by the
Corporation are sold in the secondary market.
A Federally-chartered savings bank's aggregate non-residential real estate
loans may not exceed 400% of its capital as determined under the capital
standards provisions of FIRREA. The Bank is federally-chartered and
subject to this limitation. FIRREA does not require divestiture of any
loan that was lawful when it was originated. At December 31, 1993, the
Bank was in compliance with the 400% limitation. Additionally, FIRREA
prohibits origination after August 9, 1989 of loans to one borrower in
excess of 15% of capital, except for loans not to exceed $500,000 or to
facilitate the sale of real estate acquired in settlement of loans. The
15% limitation results in a dollar limitation of approximately $4,910,000
at December 31, 1993. The Bank has not originated a loan since August 9,
1989 which was in violation of this limitation.
E-57
<PAGE> 227
The Corporation originates and purchases both adjustable and fixed
interest rate loans. At December 31, 1993, the composition of these loans
is as follows:
<TABLE>
<CAPTION>
FIXED RATE ADJUSTABLE RATE
--------------------------------------------------- ---------------------------------
AVERAGE
TERM TO TERM TO
INTEREST MATURITY RATE
RATE BOOK VALUE (YEARS) ADJUSTMENT BOOK VALUE
--------------- ----------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Less than 8.00% $24,150,736 9 1 mo. - 1 yr. $115,725,640
8.00 - 8.99% 17,830,500 10 1 yr. - 3 yr. 22,382,109
9.00 - 9.99% 23,976,550 10 3 yr. - 5 yr. 21,755,743
10.00 - 10.99% 22,134,264 9 Non-accrual 649,738
11.00% and above 4,592,842 10
Non-accrual 183,000
----------- ------------
Total $92,867,892 Total $160,513,230
=========== ============
</TABLE>
The adjustable rate loans have interest rate adjustment limitations and are
generally indexed to current market indices. Future market factors may affect
the correlation of the interest rate adjustment with the rates paid on the
deposits that have been primarily utilized to fund these loans.
Non-accrual real estate loans, principally loans past due more than 90 days,
totaled approximately $2,242,000 and $4,047,000 at December 31, 1993 and 1992,
respectively. If non-accrual loans had been current in accordance with their
stated terms, approximately $99,000, $163,000, and $157,000 in interest income
would have been recorded in 1993, 1992, and 1991, respectively.
Concentration of commercial real estate loans listed by property type at
December 31, 1993 are as follows:
<TABLE>
<CAPTION>
PROPERTY TYPE BOOK VALUE
------------- -----------
<S> <C>
Office buildings (includes medical and bank) $22,069,573
Industrial and warehouse (includes light industrial) 12,646,042
Retail and wholesale 29,873,011
Motel or hotel 21,250,380
Nursing home, convalescent center, or hospital 11,096,471
Mobile home parks 3,801,403
Service (gas station, fast food, car wash, convenience stores, etc.) 2,883,363
Restaurant 2,106,450
Other commercial (recreation facilities, mini-storage, farm, hydro-electric, 13,461,075
auto-dealers, truck terminal, and other single-use property)
</TABLE>
E-58
<PAGE> 228
Commercial real estate loans listed by the state in which the property is
located at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
STATE BOOK VALUE
----- ----------
<S> <C>
Alaska $ 1,202,224
Arizona 3,067,538
California 37,691,363
Colorado 1,044,606
Idaho 16,335,436
Montana 6,561,469
New Mexico 5,829,617
Nevada 372,091
Oregon 2,357,314
Utah 42,920,533
Wyoming 1,805,577
</TABLE>
Additionally, the Corporation has 93 commercial real estate and multi-family
loans with book values in excess of $500,000 at December 31,1993. Multiple
loans to 22 different borrowers range in total value, to each borrower, from
$301,819 to $12,935,584.
Changes in the allowance for losses on loan receivables are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ----------- -----------
<S> <C> <C> <C>
Balance, January 1 $6,677,783 $ 6,545,377 $ 6,703,698
Provision (recovery) charged
(credited) to expense (996,412) 2,037,707 1,922,271
Recoveries of amounts previously
charged to allowance 375,205 323,406 350,195
Charge-offs (446,566) (2,228,707) (2,430,787)
---------- ----------- -----------
Balance, December 31 $5,610,010 $ 6,677,783 $ 6,545,377
========== =========== ===========
</TABLE>
E-59
<PAGE> 229
6. REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS
Real estate acquired in settlement of loans is net of an allowance for
losses that may be incurred in disposing of the real estate. Changes in
the allowances are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ------------ -----------
<S> <C> <C> <C>
Balance, January 1 $ 1,851,129 $ 2,937,828 $ 3,106,335
Provision charged to expense 575,560 1,130,201 1,457,005
Recoveries 122,260 487,542
Charge-offs (2,076,689) (2,339,160) (2,113,054)
----------- ------------ -----------
Balance, December 31 $ 350,000 $ 1,851,129 $ 2,937,828
=========== ============ ===========
</TABLE>
7. PREMISES AND EQUIPMENT
The cost of premises and equipment and related accumulated depreciation
and amortization are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1992
----------- -----------
<S> <C> <C>
Land $ 1,076,318 $ 1,076,318
Buildings and leasehold improvements 9,178,689 9,129,815
Furniture and equipment 3,311,399 2,895,198
Branch offices and equipment under capital leases 316,169
----------- -----------
Total 13,566,406 13,417,500
Accumulated depreciation and amortization (6,232,769) (5,889,122)
----------- -----------
Net premises and equipment $ 7,333,637 $ 7,528,378
=========== ===========
</TABLE>
8. OTHER ASSETS AND DEFERRED CHARGES
Other assets and deferred charges consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1993 1992
----------- -----------
<S> <C> <C>
Purchased mortgage servicing rights $ 4,016,773 $ 2,040,382
Prepaid expenses 398,993 746,041
Other assets and deferred charges 1,349,525 667,882
----------- ------------
Total $ 5,765,291 $ 3,454,305
=========== ===========
</TABLE>
Amortization expense related to purchased mortgage servicing rights for
the years ended December 31, 1993 and 1992 was $825,295 and $219,496,
respectively, including a $257,414
E-60
<PAGE> 230
adjustment for permanent impairment recorded in 1993. The servicing
rights are amortized over the life of the loans, based on management's
estimate of prepayments of the underlying mortgage loans.
9. DEPOSITS
Deposits are classified by type and interest rate as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
----------------------- -----------------------
AVERAGE AVERAGE
RATE AMOUNT RATE AMOUNT
------- ------------ ------- ------------
<S> <C> <C>> <C> <C>
Money market deposit accounts 2.83% $ 21,863,517 3.00% $ 25,348,607
Checking accounts 0.89 35,450,467 1.20 17,970,289
Other demand 1,205,291 2,327,942
Statement savings 3.17 49,515,070 3.43 43,157,576
Certificates:
14 day/variable rate 3.47 2,702,802
3 month 2.93 1,745,826 3.33 2,495,413
6 month 3.26 54,804,732 3.76 65,771,552
8 month 3.44 2,785,973 4.43 7,995,869
10 month 4.05 27,509
1 year 3.75 43,247,614 4.45 58,588,595
18 month 4.30 1,172,139
2 year 4.75 14,150,806 5.77 15,359,731
3 year 5.52 22,674,999 6.79 13,221,789
4 year 6.56 3,588,874 7.49 3,337,921
5 year 6.43 27,035,779 8.18 12,831,557
Retirement trust 3.90 12,321,210 5.00 16,356,416
Jumbo (over $100,000) 3.53 2,998,351 3.86 4,157,012
----- ------------ ----- ------------
Total certificates 4.31 186,526,303 4.77 202,846,166
----- ------------ ----- ------------
Total deposits 3.59% $294,560,648 4.16% $291,650,580
===== ============ ===== ============
</TABLE>
As of December 31, 1993, certificates totaling $136,506,000 mature in
one year or less. The remaining certificates of $50,020,000 mature in two
to five years.
E-61
<PAGE> 231
Interest expenses on deposits consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Money market deposit and checking accounts $ 937,537 $ 1,245,751 $ 1,718,813
Statement savings 1,541,555 1,453,115 1,158,708
Certificates 8,543,452 11,469,746 17,066,818
----------- ----------- -----------
Total interest expense $11,022,544 $14,168,612 $19,944,339
=========== =========== ===========
</TABLE>
10. ADVANCES FROM FEDERAL HOME LOAN BANK (FHLB)
Advances from FHLB consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
MATURITY INTEREST ---------------------------------------
DATE RATE 1993 1992
-------- ---------- ----------- -----------
<S> <C> <C> <C>
1993 9.30-9.60% $20,000,000
1994 3.02-9.70% $26,500,000 20,000,000
1995 3.98% 10,000,000
2008 6.93% 149,913
----------- -----------
Total $36,649,913 $40,000,000
=========== ===========
</TABLE>
During the years ended December 31, 1993 and 1991, the Corporation prepaid
$25,000,000 and $9,600,000, respectively, of advances from the FHLB. Such
prepayments resulted in prepayment penalties of $322,807 for the year ended
December 31, 1993 and $383,894 for the year ended December 31, 1991. The
prepayment penalty is shown as an extraordinary item in the Consolidated
Statements of Operations for the years ended December 31, 1993 and 1991,
respectively.
E-62
<PAGE> 232
11. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Short-term borrowings of mortgage-backed securities sold under
agreements to repurchase substantially identical securities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1993 1992
----------- -----------
<S> <C> <C>
Balance outstanding (including accrued interest payable):
Amount $44,996,245 $ 8,464,822
=========== ===========
Weighted average interest rate 3.60% 4.82%
=========== ===========
Average borrowing for the year:
Outstanding $13,412,159 $39,547,895
=========== ===========
Weighted average interest rate 5.11% 4.26%
=========== ===========
Largest amount outstanding at any month-end $44,996,245 $57,685,160
=========== ===========
</TABLE>
Mortgage-backed securities sold under agreements to repurchase
substantially identical securities are as follows:
E-63
<PAGE> 233
DECEMBER 31, 1993
<TABLE>
<CAPTION>
SECURITIES SOLD
--------------------------------------------
ACCRUED
TERM TO INTEREST CARRYING FAIR INTEREST LIABILITY
MATURITY RATE VALUE (1) VALUE RECEIVABLE BALANCE
-------- ----------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Less than 30 days 3.16-3.41% $19,501,623 $19,698,089 $103,275 $19,086,206
30 days to 60 days 3.43% 24,795,308 24,518,596 133,842 23,459,389
Five years to ten years 5.72-8.875% 2,616,027 2,652,519 10,813 2,450,650
----------- ----------- -------- -----------
Total $46,912,958 $46,869,204 $247,930 $44,996,245
=========== =========== ======== ===========
</TABLE>
DECEMBER 31, 1992
<TABLE>
<CAPTION>
SECURITIES SOLD
-----------------------------------------------
ACCRUED
TERM TO INTEREST CARRYING FAIR INTEREST LIABILITY
MATURITY RATE VALUE (1) VALUE RECEIVABLE BALANCE
-------- ----------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
10 Months 3.910% $ 8,713,203 $ 8,862,609 $ 61,703 $ 6,927,964
129 Months 8.875% 1,541,541 1,615,286 9,273 1,536,858
----------- ----------- -------- -----------
Total $10,254,744 $10,477,895 $ 70,976 $ 8,464,822
=========== =========== ======== ===========
</TABLE>
(1) excludes accrued interest receivable
The mortgage-backed securities underlying the agreements were delivered
to the primary dealers who arranged the transactions. The dealers may
have sold, loaned, or otherwise disposed of such securities to other
parties in the normal course of their operations and have agreed to
resell to the Corporation substantially identical securities at the
maturities of the agreements.
The Corporation pays a fixed rate of 8% on an interest rate swap
agreement hedging securities sold under agreements to repurchase in the
notional principal amount of $5,000,000 at December 31, 1993 and 1992.
The agreement expires in July 1995. The effect of swaps for the years
ended December 31, 1993, 1992 and 1991 was to increase interest expense
by $169,486, $473,115, and $446,660, respectively. Securities totaling
$598,199 are pledged as collateral on these agreements as of December
31, 1993.
E-64
<PAGE> 234
12. OTHER BORROWINGS
Other borrowings consisted of the following as of December 31, 1992:
<TABLE>
<S> <C>
Notes payable with interest at 5% due in quarterly installments through 1997 $ 71,564
Obligations under capital leases, due in monthly installments through 1993 25,184
Industrial Revenue Refunding Bond with monthly interest payments at
variable interest rates based on market determined rates, with principal due
in 1996 (Note 17) 9,000,000
----------
Total $9,096,748
==========
</TABLE>
During the second quarter of 1993, $5,100,000 of the Industrial
Revenue Refunding Bond was retired, and the remaining principal obligation
was assumed by the purchaser of the related industrial building previously
held as real estate owned. The balance of the 5% note payable was prepaid
in December 1993 without penalty.
Premises, equipment and operating lease equipment with a depreciated
cost of $3,882,926 at December 31, 1992 were pledged as collateral for
these borrowings.
13. INCOME TAXES
As discussed in Note 1, the Corporation adopted SFAS No. 109,
"Accounting for Income Taxes" effective January 1, 1993.
The total deferred tax expense of $1,045,150 for the year ended
December 31, 1993 was offset by a corresponding reduction in the valuation
allowance.
Deferred tax assets and liabilities as of December 31, 1993 consisted
of the following items:
<TABLE>
<S> <C>
Assets:
Provision for loan losses $ 2,292,004
Net operating loss carryforward 3,265,135
AMT credit 168,598
Other 296,715
-----------
Total deferred tax assets 6,022,452
-----------
Liabilities:
Depreciation 344,813
Accrual to cash conversion 143,706
FHLB stock dividend 750,024
Other 75,683
-----------
Total deferred tax liabilities 1,314,226
-----------
Net deferred tax asse 4,708,226
Valuation allowance (4,708,226)
-----------
Net NONE
===========
</TABLE>
E-65
<PAGE> 235
Income tax expense (benefit) differed from the amount computed by
applying the Federal statutory rate to income taxes for the years ended
December 31, 1993, 1992 and 1991 as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1993 1992 1991
----------- ----------- ----------
<S> <C> <C> <C>
Federal income tax expense at statutory rate $ 2,041,665 $ 910,533 $ 117,266
Increases (decreases) in taxes resulting from:
Statutory bad debt deduction (885,318) (1,757,654) (632,810)
Tax exempt income (111,197) (91,419) (93,761)
State income taxes 36,136
Net loss on sale and provision for loss on
real estate owned 682,682 632,009
Provision for loss on qualifying real estate
loans and non-qualifying loans 58,246 700,757
Alternative minimum tax 40,000
Net operating loss carryforward used to
offset existing deferred tax credits (196,761)
Limitation in tax benefit due to net
operating loss 181,632
Reduction in valuation allowance (1,045,150)
Income tax refund (excluding interest (349,777)
portion)
Effect of FHLB advance prepayment 143,000
Other 15,980
----------- ----------- ----------
Total NONE $ (156,761) $ 553,000
=========== =========== ==========
</TABLE>
The deferred tax benefit of $196,761 recorded in 1992 results from a
change in the estimated timing difference related to FHLB stock which
management expects to reverse in the years prior to the expiration of
the Corporation's net operating loss carryforward.
At December 31, 1993, the Corporation has net operating loss
carryforwards for income tax purposes of approximately $8,750,000
which expire in the year 2003.
During the year ended December 31, 1991, the Corporation received a
refund of past income taxes paid of $1,373,086, including approximately
$344,000 in interest, which is included in other income. The refund is
due to a change in the method for computing the allowable bad debt
deduction for income tax purposes under the percentage method and
relates to tax years 1972 through 1977.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments" (SFAS 107) requires that the
Corporation disclose fair values for its financial instruments. Fair
value estimates, methods and assumptions are as follows for the
Corporation's financial instruments.
E-66
<PAGE> 236
CASH AND INVESTMENTS - The carrying amounts for cash and
short-term investments is considered a reasonable estimate of fair
value. The fair value of longer term investments is estimated based
on bid indications received from securities dealers.
The following table represents the carrying value and estimated fair
value of cash and investments at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
---------------------------------- ----------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash on hand and in
banks $ 8,323,332 $ 8,323,332 $ 7,096,080 $ 7,096,080
Federal funds sold 81,099 81,099 4,980,484 4,980,484
Investments
available for sale 132,302,225 132,195,692 104,396,822 103,834,561
Investment
securities 12,712,941 12,711,849 7,057,761 7,035,774
------------ ------------ ------------ ------------
Total $153,419,597 $153,311,972 $123,531,147 $122,946,899
============ ============ ============ ============
</TABLE>
LOANS - Fair values are estimated for portfolios of loans with similar
characteristics. Loans are segregated by type, such as residential
mortgage, commercial real estate, land loans, commercial, credit card
and other consumer. Each loan category is further segmented into fixed
and adjustable rate interest terms.
The fair value is calculated by discounting contractual cash flows
using estimated market discount rates which reflect the credit and
interest rate risk inherent in the loan.
The following table presents information for loans:
<TABLE>
<CAPTION>
AVERAGE
--------------------
ESTIMATED
CARRYING MATURITY DISCOUNT CALCULATED
DECEMBER 31, 1993 AMOUNT YIELD (YRS.) RATE FAIR VALUE
------------ ------ -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Real estate:
Residential:
Adjustable $ 22,758,355 6.70% 19 6.77% $ 22,603,756
Fixed 59,191,936 8.34 14 6.72 61,768,486
Commercial:
Adjustable 105,649,243 7.70 7 7.34 104,813,543
Fixed 39,715,303 9.76 6 7.96 42,684,711
Land:
Adjustable
Fixed 55,336 11.74 1 7.75 56,543
Other 12,415,913 8.00 1 8.06 12,415,913
Commercial 7,091,863 8.93 3 8.50 7,157,506
Credit card 543,989 10.32 3 15.00 537,589
Other 1,694,772 8.14 2 7.46 1,708,903
------------ ------------
Total $249,116,710 $253,746,950
============ ============
</TABLE>
E-67
<PAGE> 237
<TABLE>
<CAPTION>
AVERAGE
----------------------
ESTIMATED
DECEMBER 31, 1992 CARRYING MATURITY DISCOUNT CALCULATED
AMOUNT YIELD (YRS.) RATE FAIR VALUE
------------ ----- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
Real estate:
Residential:
Adjustable $ 18,049,225 7.45% 9 6.69% $ 18,098,176
Fixed 75,352,230 9.04 15 7.17 79,859,856
Commercial:
Adjustable 81,546,293 7.94 8 7.12 81,212,850
Fixed 49,789,118 10.15 12 9.75 50,739,941
Land:
Adjustable 1,000,422 9.00 14 8.00 1,020,200
Fixed 3,390,180 7.58 5 7.60 3,385,700
Other 7,395,209 8.11 3 7.65 7,415,183
Commercial 7,562,150 9.10 2 8.38 7,601,481
Credit card 439,056 12.19 3 15.00 435,955
Other 1,862,354 8.84 2 7.28 1,872,636
------------ ------------
Total $246,386,237 $251,641,978
============ ============
</TABLE>
Average maturity represents average cash flow period, which in some
instances is different than the stated maturity.
Management has made estimates of fair value discount rates that it
believes to be reasonable. However, because there is no market for
many of these financial instruments, management has no basis to
determine whether the fair value presented above would be indicative
of the value negotiated in an actual sale.
DEPOSITS - Under SFAS 107, the carrying amount of deposits with no
stated maturity, such as money market and checking accounts, and
statement savings accounts, is considered a reasonable estimate of
fair value. The fair value of certificates of deposit is based on the
discounted value of the contractual cash flows. The discount rate is
estimated using the rates currently offered for deposits of similar
remaining maturities.
The following table presents deposit information at December 31, 1993
and 1992.
<TABLE>
<CAPTION>
1993 1992
----------------------------------- ----------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Money market and checking $ 58,519,275 $ 58,519,275 $ 45,646,838 $ 45,646,838
Statement savings 49,515,070 49,515,070 43,157,576 43,157,576
Certificate of deposit 186,526,303 188,964,202 202,846,166 205,264,092
------------ ------------ ------------ ------------
Total $294,560,648 $296,998,547 $291,650,580 $294,068,506
============ ============ ============ ============
</TABLE>
ADVANCES FROM FHLB, SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE,
AND OTHER BORROWINGS - The fair value is calculated by discounting
contractual cash flows using estimated market discount rates.
E-68
<PAGE> 238
The following table presents information for advances from FHLB,
securities sold under agreements to repurchase, and other borrowings
as of December 31, 1993 and 1992.
<TABLE>
<CAPTION>
1993 1992
----------------------------------- --------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Variable rate advances from FHLB $ 14,149,913 $ 14,150,000 $ 10,000,000 $ 9,997,300
Fixed rate advances from FHLB:
Due in one year or less 12,500,000 12,501,692 20,000,000 20,777,698
Due after one year through five 10,000,000 9,936,371 10,000,000 10,491,154
Securities sold under agreements to
repurchase 44,996,245 45,789,529 8,464,822 8,979,600
Other borrowings 9,096,748 6,576,848
------------ ------------- ------------ ------------
Total $ 81,646,158 $ 82,377,592 $ 57,561,570 $ 56,822,600
============ ============ ============ ============
</TABLE>
INTEREST RATE SWAP AGREEMENTS AND INTEREST RATE CAPS - The fair values
of interest rate swap agreements and interest rate caps are obtained
by discounting anticipated cash flows. These values represent the
estimated amount the Corporation would receive or pay to terminate the
contracts or agreement, taking into account current interest rates.
The following table presents the notional amount, carrying amount and
estimated fair value for interest rate swaps and interest rate caps:
E-69
<PAGE> 239
<TABLE>
<CAPTION>
CARRYING ESTIMATED
DECEMBER 31, 1993 NOTIONAL AMOUNT AMOUNT FAIR VALUE
--------------- -------- ----------
<S> <C> <C> <C>
Interest rate swap agreement $ 5,000,000 $ 41,250 $ (243,000)
(net payable position)
Interest rate caps 12,000,000 85,146 None
</TABLE>
<TABLE>
<CAPTION>
CARRYING ESTIMATED
DECEMBER 31, 1992 NOTIONAL AMOUNT AMOUNT FAIR VALUE
--------------- -------- ----------
<S> <C> <C> <C>
Interest rate swap agreement
(net payable position) $ 5,000,000 $ 40,250 $(344,426)
Interest rate caps 22,000,000 132,896 None
</TABLE>
The amounts shown under "Carrying Amount" represent accruals or
deferred expense.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT - The fair
value of commitments to extend credit is estimated using the
fees currently charged to enter into similar agreements, taking into
account the remaining terms of the agreement and the present credit
worthiness of the counterparties. For fixed rate loan commitments, fair
value also considers the difference between current levels of interest
rates and the committed rates. The fair value of letters of credit is
based on fees currently charged for similar agreements or on the
estimated costs to terminate them or otherwise settle the obligations
with counterparties. The contract amount, carrying amount and the
estimated fair value for commitments to extend credit and standby
letters of credit are as follows:
<TABLE>
<CAPTION>
CONTRACT CARRYING ESTIMATED
DECEMBER 31, 1993 AMOUNT AMOUNT FAIR VALUE
----------- -------- ----------
<S> <C> <C> <C>
Commitments to extend credit $45,214,634 $194,741 $(403,891)
Standby letters of credit 5,821,227 None None
</TABLE>
<TABLE>
<CAPTION>
CONTRACT CARRYING ESTIMATED
DECEMBER 31, 1992 AMOUNT AMOUNT FAIR VALUE
----------- -------- ----------
<S> <C> <C> <C>
Commitments to extend credit $28,182,679 $30,775 $(279,000)
Standby letters of credit 474,446 None (8,000)
</TABLE>
The amounts shown under "Carrying Amount" represent deferred
income from these unrecognized financial instruments.
LIMITATIONS - The fair value estimates are made at a discrete point in
time based on relevant market information about the financial
instruments. Because no market exists for a significant portion of the
corporation's financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and
such other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgments and
therefore
E-70
<PAGE> 240
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
In addition, the fair value estimates are based on existing on and off
balance sheet financial instruments without attempting to estimate the
value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments.
Significant assets and liabilities that are not considered financial
assets or liabilities include the mortgage banking operation, deferred
tax credits, other assets, and premises and equipment. In addition,
the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates
and have not been considered in many of the estimates.
15. STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL REQUIREMENTS
In connection with the insurance of savings accounts by the Savings
Association Insurance Fund ("SAIF"), the Bank is required to meet
certain minimum capital standards consisting of three separate
requirements. The capital standards consist of a tangible capital
requirement of 1.5% of tangible assets, a core or leverage capital
requirement of 3% of tangible assets, and a risk-based capital
requirement. The risk-based requirement takes each asset and gives it
a weighting of from 0% to 100% based upon credit risk as defined in
the regulations of the Office of Thrift Supervision ("OTS"). The
risk-based capital requirement as of December 31, 1993 and 1992 was 8%
of the risk weighted assets. Eligible capital to meet this test is
composed of core or tier I capital and supplementary or tier 2
capital. Supplementary or tier 2 capital is composed of general loan
loss reserves up to a maximum of 1.25% of risk weighted assets.
The FDIC Improvement Act of 1991 ("FDICA") required each federal
banking agency to implement prompt corrective actions for institutions
that it regulates. In response to this requirement, the OTS adopted
final rules, effective December 19, 1992, based upon FDICIA's five
capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized.
The rules provide that a savings association is "well capitalized" if
its total risk-based capital ratio is 10% or greater, its tier 1
risk-based capital ratio is 6% or greater, its leverage ratio is 5% or
greater, and the institution is not subject to a capital directive.
As used herein, total risk-based capital ratio means the ratio of
total capital to risk-weighted assets, tier 1 risk-based capital ratio
means the ratio of core capital to risk-weighted assets, and leverage
ratio means the ratio of core capital to adjusted total assets, in
each case as calculated in accordance with current OTS capital
regulations. Under these new regulations, the Bank is deemed to be
"well capitalized".
E-71
<PAGE> 241
The following is a summary of the Bank's regulatory capital at
December 31, 1993 and 1992:
<TABLE>
<CAPTION>
REQUIREMENT ACTUAL AMOUNT
------------------- -------------------- EXCEEDING
CAPITAL RATIO CAPITAL RATIO REQUIREMENT
----------- ----- ----------- ----- -----------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1993
Tangible $ 6,207,000 1.50% $32,731,000 7.91% $26,524,000
Core 12,415,000 3.00 32,731,000 7.91 20,316,000
Risk-based 20,060,000 8.00 35,877,000 14.27 15,817,000
DECEMBER 31, 1992
Tangible $ 5,700,000 1.50% $26,700,000 7.03% $21,000,000
Core 19,000,000 5.00 26,700,000 7.03 7,700,000
Risk-based 19,300,000 8.00 26,700,000 12.30 10,400,000
</TABLE>
At periodic intervals, both the Office of Thrift Supervision (OTS) and
Federal Deposit Insurance Corporation ("FDIC") routinely examine the
Bank's financial statements as part of their legally prescribed
oversight of the savings and loan industry. Based on these
examinations, the regulators can direct that the Bank's financial
statements be adjusted in accordance with their findings.
A future examination by the OTS or FDIC could include a review of
certain transactions or other amounts reported in the Bank's 1993
financial statements. In light of FIRREA and the uncertain regulatory
environment in which the Bank now operates, the extent, if any, to
which a forthcoming regulatory examination may ultimately result in
adjustments to the 1993 financial statements cannot presently be
determined.
In August 1993, the OTS issued a final regulation adding an interest
rate risk component to its risk-based capital standard. The regulation
will require a savings institution to maintain capital in an amount
equal to one-half the difference between the institution's measured
interest rate risk and 2% of the market value of the institution's
assets. Interest rate risk is to be measured on the market value of
its assets, based on a hypothetical 200 basis point change in interest
rates. The credit risk component of the risk-based capital standard
will remain unchanged at 8% of risk-weighted assets. Institutions with
measured interest rate risk less than or equal to 2% will not be
required to maintain additional capital. The Bank's management
believes that, based on the Bank's interest rate risk profile, no
additional risk-based capital would have been required at December 31,
1993.
On November 19, 1992, the Corporation sold 510,000 shares of its
common stock under a private placement memorandum. The net proceeds
received on the sale of stock were $2,303,230.
As a unitary savings and loan holding company, the Corporation's
ability to pay dividends depends in part on the dividends it receives
from the Bank and on income from other activities in which the
Corporation may engage either directly or through other subsidiaries.
As a condition of the February 1983 Federal Home Loan Bank Board
approval of the reorganization
E-72
<PAGE> 242
in which the Bank became a subsidiary of the Corporation,
dividends paid by the Bank are limited to net income for each year,
but such dividends may be deferred to a subsequent year. However, no
dividend may be paid from net income for a year prior to 1983 or if
the payment of such dividends would reduce the Bank's regulatory
capital below the regulatory minimums set by the OTS.
16. INTEREST RATE RISK
A mismatch between maturities and interest rate sensitivities of
assets and labilities results in interest rate risk. While a certain
level of interest rate risk may be unavoidable, and may at times be
desirable, it is important to monitor and manage this risk. The
Corporation's general objective has been to reduce its vulnerability
to interest rate fluctuations over time. The principal strategies to
achieve this objective include emphasizing originations of shorter
term and adjustable rate loans and growing core checking and other
demand deposit accounts which are less sensitive to changes in
interest rates. In addition, management constantly examines the value
of extending the effective maturities of liabilities or shortening the
effective maturity of assets through the use of interest rate swaps
and interest rate cap agreements.
The Corporation uses various techniques in managing and measuring
interest rate risks, including net interest income simulations,
theoretical mark-to-market values for interest sensitive assets and
liabilities, and gap analysis.
17. COMMITMENTS AND CONTINGENT LIABILITIES
The Corporation is a defendant in an action seeking punitive damages
of $10,000,000 and challenging the practice of not paying interest on
advances from borrowers for taxes and insurance, and in various other
actions in connection with its lending activities. Management does
not believe that the Corporation will sustain material future losses
from this contingency.
During 1986, the Corporation issued an irrevocable, collateralized
Letter of Credit supporting the payment of principal and interest on
$9,000,000 of Sandy City, Utah variable rate demand industrial
development revenue refunding bonds. During the second quarter of
1993, $5,100,000 of the bond was retired and the principal obligation
for repayment was assumed by the purchaser of the industrial building
previously held as real estate owned. Payment of any sums disbursed
under the letter of credit is secured by deeds of trust on the real
property and improvements with respect to which the bonds were issued.
At December 31, 1993, the Corporation has approximately $6,747,000 in
mortgage-backed securities held by the Bond Trustee to assure its
performance of obligations under the Letter of Credit which expires on
August 15, 2004.
At December 31, 1993, the Corporation had approximately $29,220,000 in
unused lines of credit which have been granted to customers in the
normal course of business, as well as $15,994,000 in single-family
mortgage loan applications. The Corporation uses the same credit
policies in making commitments to extend credit as they do for loans
to similar customers
E-73
<PAGE> 243
The Bank leases certain branch facilities under long-term operating
lease arrangements. Consolidated rent expense on the above operating
leases was approximately $233,402, $182,857, and $70,655 for the years
ended December 31, 1993, 1992, and 1991, respectively. The following
represents the Bank's future commitments under such leases:
<TABLE>
<S> <C>
1994 $ 202,155
1995 206,664
1996 207,773
1997 215,505
1998 210,350
Thereafter 605,285
==========
Total $1,647,732
</TABLE>
18. EARNINGS PER SHARE OF COMMON STOCK
Earnings per share of common stock are based on the following weighted
average number of shares outstanding:
<TABLE>
<CAPTION> 1993 1992 1991
<S> <C> <C> <C>
Primary 3,223,742 2,674,297 2,550,139
Fully diluted 3,255,226 2,716,003 2,550,139
</TABLE>
Primary per share amounts are computed after including the effect, if
dilutive, of stock options outstanding using the treasury stock
method.
Fully diluted per share amounts are computed using the greater of the
dilutive effects of average or quarter-end stock prices.
For the year ended December 31, 1991, common stock options were not
considered because their effect would be anti-dilutive.
19. STOCK OPTIONS
In July 1988, the Board of Directors of the Corporation adopted a
non-qualified stock option plan ("1988 Plan") which authorized the
Corporation to grant options to purchase up to 250,000 shares of
common stock pursuant to the 1988 Plan.
E-74
<PAGE> 244
Changes in stock options are as follows:
<TABLE>
<CAPTION>
PRICE RANGE
1993 SHARES PER SHARE
<S> <C> <C>
Granted 10,000 $11.50
Expired None
Exercised 39,500 3.25- 5.63
Outstanding and exercisable at December 31 233,000 3.25-11.50
1992
Granted 80,000 $ 5.50-5.63
Expired None
Exercised None
Outstanding and exercisable at December 31 262,500 3.25-5.63
1991
Granted 157,500 $ 3.25
Expired 30,000 5.50-10.50
Terminated 27,500 5.50-9.00
Exercised None
Outstanding and exercisable at December 31 182,500 3.25-5.50
</TABLE>
20. EMPLOYEE BENEFIT PLANS
The Employee Stock Bonus Plan (the "Bonus Plan"), qualified under
Section 401(a) of the Internal Revenue Code, provides that each full-
time salaried employee of the Corporation and/or its subsidiaries who
has attained the age of 21 and has completed 12 consecutive months of
employment during which he/she has received credit for at least 1,000
hours of service is entitled to participate in the Bonus Plan commencing
on the January 1 or July 1 immediately following when such
qualifications are met, provided he/she is employed on that date. Under
the terms of the plan, participating employees may contribute, and the
Board of Directors may authorize the Corporation to match a certain
portion of such contribution. Employees may elect to have their own
contributions invested in either (i) the Corporation's common stock, or
(ii) a certificate of deposit or savings account from the Bank.
Employer contributions are invested in the Corporation's common stock.
During 1993, 1992, and 1991, the Corporation and its subsidiaries
contributed $74,717, $111,502, and $80,865, respectively, to the Bonus
Plan.
The Corporation and its wholly-owned subsidiaries provide a
non-contributory retirement plan (the "Retirement Plan"), qualified
under Section 401(a) of the Internal Revenue Code, for the benefit of
qualified employees. Each full-time salaried employee who has attained
the age of 21 and has completed 12 consecutive months of employment
during which he/she has received credit for at least 1,000 hours of
service is entitled to participate in the Retirement Plan commencing on
January 1 or July 1 immediately following when such qualifications are
met. Under the Retirement Plan, the Corporation and its subsidiaries
make a monthly pension
E-75
<PAGE> 245
contribution equal to 6% of each eligible employee's monthly
base compensation. In addition, the Corporation and its subsidiaries
are allowed, but not required, to make a profit sharing contribution
based on base compensation to the Retirement Plan, provided that in no
event shall the profit sharing contribution and the aggregate
contributions under the Bonus Plan during any year exceed 15% of the
total payroll of eligible employees of the Retirement Plan. In any
year, aggregate contributions under the Retirement Plan and aggregate
contributions under the Bonus Plan may not exceed the lesser of 25% of
the eligible employee's base compensation or $30,000. During 1993,
1992, and 1991, the Corporation and its subsidiaries contributed
$133,387, $149,000, and $112,169, respectively, to the Retirement Plan.
In December 1990, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions". The
Statement requires an accrual of postretirement benefits (such as
health care benefits) during the years an employee provides services.
The cost of these benefits were previously expensed on a pay-as-you-go
basis. The Corporation adopted this Statement in 1993. The impact of
the Statement on the Corporation was not material.
E-76
<PAGE> 246
21. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of the quarterly results of
operations. This information should be read in conjunction with the
Discussion of Financial Condition and Results of Operations.
<TABLE>
<CAPTION>
DECEMBER 31, 1993 4th QUARTER 3rd QUARTER 2nd QUARTER 1st QUARTER
<S> <C> <C> <C> <C>
Interest income $6,781,322 $6,587,913 $6,967,922 $7,011,388
Interest expense 3,352,957 3,611,357 3,703,033 3,817,425
Provision for losses (152,870) (459,443) (421,940) 37,841
Gain on sale of loans and investments 349,822 1,190,644 745,016 233,538
Income before extraordinary items and
cumulative effect of a change in
accounting principle 1,484,786 1,804,042 1,703,466 1,335,411
Net income 1,484,851 1,481,235 1,703,466 1,673,224
Earnings per common share before
extraordinary items and cumulative
effect of a change in accounting
principle 0.46 0.56 0.53 0.42
Earnings per common share - primary 0.46 0.46 0.53 0.53
Earnings per common share - fully
diluted 0.46 0.46 0.53 0.52
DECEMBER 31, 1992
Interest income $7,868,413 $9,130,148 $7,829,826 $8,280,462
Interest expense 4,316,057 4,779,208 5,094,245 5,579,789
Provision for losses 482,454 1,245,714 45,791 263,748
Gain on sale of loans and investments 312,054 718,386 80,787 97,997
Income (loss) before extraordinary
items 2,298,000 (713,212) 562,963 687,049
Net income 1,028,000 556,788 562,963 687,049
Earnings (loss) per common share
before extraordinary items 0.79 (0.28) 0.22 0.27
Earnings per common share - primary 0.36 0.22 0.22 0.27
Earnings per common share - fully
diluted 0.36 0.22 0.21 0.26
</TABLE>
E-77
<PAGE> 247
22. EFFECT OF RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits". The Statement requires an
accrual of benefits to be provided to former or inactive employees
after employment but before retirement, such as salary continuation,
severance pay, or health care benefits. The Statement is effective
for fiscal years beginning after December 15, 1993. The impact of the
Statement on the Corporation is not expected to be material.
In May 1993, the Financial Accounting Standards Board issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan". SFAS No. 114
requires that impaired loans be valued based on the present value of
expected future cash flows or fair value of the collateral if the loan
is collateral dependent. SFAS No. 114 is effective for fiscal years
beginning after December 15, 1994. The impact of SFAS No. 114 on the
Corporation is not expected to be material.
23. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY
Condensed financial information of the parent company only is as
follows:
BALANCE SHEET INFORMATION AS OF DECEMBER 31, 1993 AND 1992
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________
1993 1992
<S> <C> <C>
ASSETS:
Cash and savings on deposit primarily with subsidiary
savings and loan $ 163,294 $ 10,330
Receivable from savings and loan and subsidiaries 16,597
Investment in subsidiaries:
Savings and loan and subsidiaries 33,116,325 26,938,873
Others 143,377 37,909
----------- -----------
Total $33,422,996 $27,003,709
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities, accounts payable, and accrued expenses $ 59,456 $ 16,687
----------- -----------
Stockholders' equity:
Common stock (3,099,639 shares issued in 1993 and
3,060,139 shares issued in 1992) 3,099,639 3,060,139
Paid-in capital 1,894,005 1,793,230
Retained earnings - substantially restricted 28,476,429 22,133,653
Net unrealized losses on investments available for
sale (106,533)
----------- -----------
Total stockholders' equity 33,363,540 26,987,022
----------- -----------
Total $33,422,996 $27,003,709
=========== ===========
</TABLE>
E-78
<PAGE> 248
STATEMENTS OF OPERATIONS INFORMATION FOR THE YEARS
ENDED DECEMBER 31, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
____________________________________________________________________________________________________
1993 1992 1991
<S> <C> <C> <C>
INCOME:
Income from subsidiaries
Interest $ 1,331 $ 11,348 $ 1,966
Other 113,625 99,500 95,000
Other 11,284 24,234
---------- ----------- --------
Total 114,956 122,132 121,200
---------- ----------- --------
EXPENSES:
Compensation and other employee expense 120,211 114,500 113,755
Occupancy 1,688
Provision for losses 70,010
Other 54,734 4,007 (460)
---------- ----------- --------
Total 176,633 188,517 113,295
---------- ----------- --------
INCOME (LOSS) BEFORE EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES (61,677) (66,385) 7,905
EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES 6,404,453 2,901,185 336,994
---------- ----------- --------
NET INCOME $6,342,776 $ 2,834,800 $344,899
========== =========== ========
</TABLE>
STATEMENTS OF CASH FLOWS INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
<TABLE>
<CAPTION>
____________________________________________________________________________________________________
1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,342,776 $ 2,834,800 $ 344,899
----------- ----------- ---------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Undistributed income of subsidiaries (6,404,453) (2,901,185) (336,994)
Provision for possible credit losses 70,010 9,150
Amortization of unearned discount on leases (5,795)
Decrease (increase) in receivables from
subsidiaries 16,597 (12,597) 19,475
Decrease in other assets 1,807
</TABLE>
E-79
<PAGE> 249
<TABLE>
<S> <C> <C> <C>
Increase (decrease) in accounts payable and
accrued expenses 42,769 (232) (50,884)
----------- ----------- ---------
Total adjustments (6,345,087) (2,842,197) (365,048)
----------- ----------- ---------
Net cash used in operating activities (2,311) (7,397) (20,149)
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dividends received from subsidiary 90,000 115,000 51,107
Capital contribution to subsidiary (75,000) (2,478,404)
----------- ----------- ---------
Net cash provided by (used in) investing
activities 15,000 (2,363,404) 51,107
----------- ----------- ---------
CASH FLOW FROM FINANCING ACTIVITIES:
Principal payments under capital lease
obligations (10,313)
Proceeds from issuance of common stock 140,275 2,303,230
----------- ----------- ---------
Net cash provided by (used in) financing
activities 140,275 2,303,230 (10,313)
----------- ----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 152,964 (67,571) 20,645
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 10,330 77,901 57,256
----------- ----------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 163,294 $ 10,330 $ 77,901
=========== ============ =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES -
Capital contributions of financing lease to
subsidiary NONE NONE $ 104,855
========== ========== =========
</TABLE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
E-80
<PAGE> 250
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Age Director Title of Class
Since
_______________________________________________________________________________________________________
<S> <C> <C> <C>
DIRECTORS SERVING UNTIL 1995 ANNUAL MEETING
CLASS I
A. Blaine Huntsman 57 1988 Common Stock
Gregory L. Smith 57 1989 Common Stock
_______________________________________________________________________________________________________
DIRECTORS SERVING UNTIL 1993 ANNUAL MEETING
CLASS II
Richard N. Hokin 53 1982 Common Stock
James K. Loebbecke 57 1992 Common Stock
R. Gibb Marsh 45 1992 Common Stock
_______________________________________________________________________________________________________
DIRECTORS SERVING UNTIL 1994 ANNUAL MEETING
CLASS III
Richard G. Price 66 1972 Common Stock
Ramon E. Johnson 58 1990 Common Stock
K. John Jones 40 1993 Common Stock
_______________________________________________________________________________________________________
</TABLE>
THE DIRECTORS
A. BLAINE HUNTSMAN was elected Vice Chairman of the Board of Directors
of the Corporation and Chief Executive Officer of the Corporation in July 1988,
Chairman of the Board of Directors in December 1988 and served as President of
the Corporation from August 1989 to 1993. He was elected a director of Olympus
Bank in July 1988 and Chairman of the Board of Directors in August 1989. He
also served as President of Olympus Bank from August 1989 to January 1991. Mr.
Huntsman was Professor of Finance at the University of Utah from 1972 to 1988
(but was on leave for significant periods of time during such years to pursue
various business activities), and served as Dean of the Graduate School of
Business and College of Business from 1975 to 1980. He was co-founder and
Chairman of the Board of Huntsman Container Corporation (a manufacturer of
polystyrene containers) and of Huntsman-Christensen Corporation (a real estate
construction and development firm). Mr. Huntsman received his Ph.D. in
Economics from the University of Pennsylvania (Wharton School) in 1968. He
served as a director of Dean Witter Reynolds Organization, Inc. from 1978 until
its acquisition by Sears in 1982 and was a director of Arcata Corporation from
1978 to 1982. He currently serves as a director of Geneva Steel, a Utah
corporation engaged in steel
E-81
<PAGE> 251
manufacturing and of Zions Co-operative Mercantile Institution (a retailing
company serving the intermountain area).
GREGORY L SMITH is an investor and consultant and has been a director
of the Corporation and Olympus Bank since April 1989. Mr. Smith has been
Chairman of Fountain Capital Management in Overland Park, Kansas, since March
1990. He has been President and Chief Executive Officer of Gregory L. Smith
and Sons, Inc., a privately owned consulting firm, since August 1978. In 1990,
he became a trustee of the Lutheran Church, Missouri Synod, Foundation. From
1982 to March 1988, Mr. Smith was President and Chief Executive officer of
Smith Breeden Associates, a privately owned firm specializing in financial
consulting services. He is a member of six corporate boards and numerous
charitable boards. Mr. Smith has been a director of the Corporation and
Olympus Bank since 1989.
RICHARD N. HOKIN has been Chairman of Intermountain Industries, Inc.,
Boise, Idaho, since 1984. Intermountain's principal subsidiary, Intermountain
Gas Company, distributes natural gas in southern Idaho. Mr. Hokin is managing
general partner of Century Partners, a private investment partnership,
organized in 1967, which holds approximately 9.4% of the outstanding common
stock of the Corporation. Mr. Hokin has been a director of the Corporation and
Olympus Bank since 1982.
RAMON E. JOHNSON has been a Professor of Finance at the University of
Utah since 1966. He received his Ph.D. in finance from the University of
Wisconsin in 1966. Mr. Johnson is a Chartered Financial Analyst and belongs to
several professional societies, including the Financial Management Association.
He was a member of the Consumer Advisory Council for the Federal Reserve Board
from 1987 to 1989, and is currently a member of the Utah State Board of
Financial Institutions. In 1983, he served as a member of the task force for
Current Value Accounting for the Federal Home Loan Bank Board. In addition to
his teaching and research activities, Mr. Johnson has been a consultant for
several financial institutions and public utility companies in Salt Lake City,
Utah, as well as the Utah State Legislative Auditor General. Mr. Johnson has
been a director of the Corporation and Olympus Bank since 1990.
JAMES K. LOEBBECKE has been a Professor of Accounting at the University
of Utah since 1980. Prior to 1980 he was a partner in the accounting firm of
Touche Ross & Co. in its New York office. Mr. Loebbecke has authored several
books and articles on the subjects of auditing and other accounting issues and
is a member of several professional societies, including the American Institute
of Certified Public Accountants. In addition to his teaching and research
duties, Mr. Loebbecke is a principal in Norman/Loebbecke Associates, financial
and litigation consultants, where he performs services as an expert witness in
business and accounting-related litigation. Mr. Loebbecke has been a director
of the Corporation and Olympus Bank since 1992.
R. GIBB MARSH has been employed by the Corporation, or one of its
subsidiaries, since June of 1972. Mr. Marsh was elected President and Chief
Operating Officer of Olympus Bank in May 1993. He was elected President of the
Corporation in August 1993. Prior to his election as President of Olympus
Bank, Mr. Marsh was the Chief Credit Officer for the Corporation and Olympus
Bank with principal responsibility for loan origination and underwriting, loan
servicing and special asset management. Mr. Marsh has held many positions
E-82
<PAGE> 252
during his 21 year tenure with Olympus Bank. He has been a director of the
Corporation and Olympus Bank since 1992.
K. JOHN JONES has been employed by the Corporation, or one of its
subsidiaries, since February 1979. Mr. Jones has been a Senior Vice President
of the Corporation since 1987. He was elected as Chief Financial Officer in
1989. Mr. Jones is also the Secretary and Treasurer of the Corporation and
Olympus Bank. His services to the Corporation and Olympus Bank have been in
the areas of interest rate risk management, investment securities, commercial
real estate underwriting and internal auditing. On July 29, 1993 he was
nominated to the Board of Directors of the Corporation and Olympus Bank.
EXECUTIVE OFFICERS
The executive officers of the Corporation are as follows:
<TABLE>
<CAPTION>
Name Age Officer Since* Positions
___________________________________________________________________________________________________________
<S> <C> <C> <C>
A. Blaine Huntsman 57 1988 Director, Chairman of the Board, Chief Executive
Officer and President of the Corporation and a
Director, Chairman of the Board and Chief Executive
Officer of Olympus Bank
R. Gibb Marsh 45 1977 President and Chief Operating Officer of the
Corporation and Olympus Bank
K. John Jones 40 1987 Senior Vice President, Chief Financial Officer,
Secretary and Treasurer of the Corporation and Olympus
Bank
Gary L. Matern 50 1990 Senior Vice President of the Corporation and Olympus
Bank
Kathy K. Hale 46 1987 Senior Vice President of the Corporation and Olympus
Bank
___________________________________________________________________________________________________________
</TABLE>
* Indicates the period of time during which such persons have served as
officers of the Corporation or Olympus Bank.
There is no family relationship between any of the directors or
executive officers. All officers are elected annually by the Board of
Directors to serve until they are removed by the Board of Directors or until
their successors have been duly elected and qualified.
For information concerning the positions and background of A. BLAINE
HUNTSMAN, see "The Directors" above.
For information concerning the positions and background of R. GIBB
MARSH, see "The Directors" above.
E-83
<PAGE> 253
For information concerning the positions and background of K. JOHN
JONES, see "The Directors" above.
GARY L. MATERN has been an employee and executive officer of the
Corporation and the Bank since July 1990. From 1988 to 1990 he was an Account
Manager for Systematics Inc. of Little Rock, Arkansas, and from 1964 to 1988 he
was Vice President and Cashier for First Interstate Bank of Utah, N.A.
KATHY K. HALE has been an employee of the Corporation and Olympus Bank
since 1976 and an executive officer of the Corporation since January 1987.
Item 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning the
compensation paid or accrued by the Corporation and its subsidiaries, to or on
behalf of the Corporation's Chief Executive Officer and each of the other four
most highly compensated executive officers of the Corporation whose
compensation exceeded $100,000 for the year (determined as of the end of the
last fiscal year) (hereafter referred to as the "Named Executive Officers") for
the fiscal years ending December 31, 1991, 1992, and 1993.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------------------
Other Securities All Other
Annual Restricted Underlying LTIP Compen-
Compen- Stock Options/ Payouts sation
Name & Principal Position Year Salary ($) Bonus ($) sation ($) Awards ($) SARs (#) ($) ($)(1)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A. Blaine Huntsman 1993 $182,200 - - - - - $14,897
Chairman & CEO 1992 $182,200 - - - - - $20,004
1991 $182,200 - - - 100,000 - $18,751
-
R. Gibb Marsh 1993 $ 88,000 $36,379 - - - - $ 7,141
Director, President, 1992 $ 88,000 $ 3,000 - - 20,000 - $10,560
COO 1991 $ 85,000 $10,000 - - 10,000 - $10,200
K. John Jones 1993 $ 75,000 $31,005 - - - - $ 4,958
Director, Sr. V.P., 1992 $ 67,500 $ 3,000 - - 15,000 - $ 6,066
CFO, Secretary & Treas. 1991 $ 65,000 $ 5,000 - - 5,000 - $ 5,844
Gary L. Matern 1993 $ 75,000 $31,005 - - - - $ 6,086
Sr. V.P.-Operations 1992 $ 75,000 $ 3,000 - - 15,000 - $ 9,000
1991 $ 72,000 $ 5,000 - - 5,000 - $ 4,320
</TABLE>
(1) The amounts shown in this column are the annual employer
contributions to the non-contributory retirement plan and the employee
stock bonus plan.
E-84
<PAGE> 254
STOCK OPTIONS
No individual grants of stock options or free standing stock
appreciation rights were granted during fiscal 1993 to the Named Executive
Officers.
OPTION EXERCISES
The following table provides information, with respect to the Named
Executive Officers, concerning the exercise of options and/or SARs during the
fiscal year and unexercised options and SARs held as of the end of the fiscal
year.
<TABLE>
<CAPTION>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END(1)
(#) ($)
SHARES ACQUIRED VALUE ---------------------------------------------
ON EXERCISE REALIZED EXERCISABLE (E)/ EXERCISABLE(E)/
NAME (#) ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A. Blaine Huntsman - - 125,000 (E) $1,350,000 (E)
R. Gibb Marsh 10,000 $97,500 5,000 (E) $44,350 (E)
15,000 (U) $135,000 (U)
K. John Jones 2,000 $19,500 8,000 (E) $78,100 (E)
10,000 (U) $90,000 (U)
Gary L. Matern - - 10,000 (E) $100,600 (E)
10,000 (U) $90,000 (U)
</TABLE>
(1) The price of a share of the Corporation's common stock as reported by
NASDAQ on December 31, 1993 was $14.50. The Value of unexercised options is
the difference between the exercise price and the price of a share as of
December 31, 1993.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AGREEMENTS
The Corporation has entered into a Deferred Compensation Agreement (the
"Agreement") with A. Blaine Huntsman in connection with Mr. Huntsman's
employment as Chief Executive Officer and President of the Corporation. The
Agreement provides that a general ledger account (the "Deferred Compensation
Account") shall be established with $1,250 being credited thereto on the first
day of each month commencing on August 1, 1988 and continuing until the
termination of Mr. Huntsman's employment with the Corporation. The Deferred
Compensation Account has been established solely for accounting and record
keeping purposes and there may be no actual assets or property in such account.
Any amount credited to the Deferred Compensation Account will (solely for
accounting purposes) be invested in investments that are approved by Mr.
Huntsman. Upon termination of Mr. Huntsman's employment, the Corporation shall
pay to him or his
E-85
<PAGE> 255
designated beneficiary (in the event of death) the fair market value of the
Deferred Compensation Account as of the date of termination in five equal
annual installments. Each installment shall include the earnings on the
remaining balance until the Deferred Compensation Account shall have been paid
out in full. At no time shall Mr. Huntsman have any property interest
whatsoever in any specific asset of the Corporation as a result of the
Agreement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of February 28, 1994 as
to those persons or entities known to the Corporation who own beneficially 5%
or more of the outstanding common stock of the Corporation.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP % OF CLASS
-------------- ------------------------------------ -------------------- ----------
<S> <C> <C> <C>
Common Stock Century Partners(1) 304,000 Shares 9.4%
800 Post Road
Darien, CT 06820
Common Stock Charter National Life
Insurance Company(2)
8301 Maryland Ave.
St. Louis, MO 63105
Common Stock LNC Investments, Inc.(2)
529 East South Temple
Salt Lake City, UT 84102
Common Stock Leucadia, Inc.(2)(3) 539,891 Shares 16.6%
315 Park Avenue South
New York, NY 10010
Common Stock Leucadia National Corporation(2)(3)
315 Park Avenue South
New York, NY 10010
Common Stock A. Blaine Huntsman(4) 246,026 Shares(5) 7.6%
115 South Main Street
Salt Lake City, UT 84111
Common Stock Evergreen Investments, Ltd.(5)
1910 East 3060 South
Salt Lake City, UT 84106
</TABLE>
---------------
(1) The general managing partner of Century Partners, a New York limited
partnership, is Richard N. Hokin, who is currently a director of the
Corporation.
(2) These persons (Leucadia Group) could be deemed to be members of a
"group" as that term is used in Section 13(d) of the Securities Exchange Act of
1934, which owns 5% or more of the common stock of the Corporation. This
information was obtained from a Form 4 filed with the Securities and Exchange
Commission on or about September 8, 1993.
(3) Each may be considered a beneficial owner of the common stock of the
Corporation held by Charter National Life Insurance Company and LNC
Investments, Inc.
E-86
<PAGE> 256
(4) These persons could be deemed to be members of a "group" as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, which
owns 5% or more of the common stock of the Corporation. This information was
obtained from a Form 4 filed with the Securities and Exchange Commission on or
about August 20, 1993.
(5) This figure includes 125,000 shares which Mr. Huntsman has the
right to acquire pursuant to stock options. See "Proposal 2."
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1993, certain directors and executive officers of the
Corporation were indebted to Olympus Bank. These loans were made by Olympus
Bank in the ordinary course of its business and were made on substantially the
same terms, including interest rate and collateral, at those prevailing at the
time for comparable transactions with other customers of Olympus Bank and do
not involve more than the normal risk of collectability or present unfavorable
features.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
Financial Statements. The following are included in Part II of this
Report:
Independent Auditors' Report
Consolidated Statements of Financial Condition at December 31,
1993 and 1992
Consolidated Statements of Operations for each of the Three
Years Ended in the Period December 31, 1993
Consolidated Statements of Cash Flow for each of the Three
Years Ended in the Period December 31, 1993
Consolidated Statements of Stockholders' Equity for each of
the Three Years Ended in the Period December 31, 1993
Notes to Consolidated Financial Statements
Financial Statements Schedules. All schedules are omitted because of
the absence of conditions under which they are required or because the
required information is given in the financial statements or notes
thereto.
Exhibits. For the information with respect to this Item, see the
Index to Exhibits attached to this Report.
Reports on Form 8-.
None
Separate Financial Statements of Registran. Separate financial
statements of the registrant are included in the Notes to Consolidated
Financial Statements.
E-87
<PAGE> 257
SIGNATURES
Pursuant to the requirements of Section 13 or 15(b) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
By /S/
------------------------------------------------
Blaine Huntsman, Chairman of the Board,
Chief Executive Officer
</TABLE>
Dated: March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of the
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
/S/ Chairman of the Board, Chief March 29, 1994
-----------------------------
A. Blaine Huntsman Executive Officer and Director
/S/ Director March 29, 1994
-----------------------------
Richard N. Hokin
/S/ Director March 29, 1994
-----------------------------
Ramon E. Johnson
/S/ Director March 29, 1994
-----------------------------
Richard G. Price
/S/ Director March 29, 1994
-----------------------------
Gregory L. Smith
/S/ Director March 29, 1994
-----------------------------
James K. Loebbecke
/S/ President of the March 29, 1994
-----------------------------
R. Gibb Marsh Corporation and Director
</TABLE>
E-88
<PAGE> 258
<TABLE>
<S> <C> <C>
/S/ Senior Vice President March 29, 1994
-----------------------------
K. John Jones Chief Financial Officer
Secretary/Treasurer and
Director
/S/ Vice President and Controller March 29, 1994
-----------------------------
Brad J. Foley
</TABLE>
E-89
<PAGE> 259
Olympus Capital Corporation
<TABLE>
<CAPTION>
Reg. S-K
Exhibits No. Index of Exhibits
------------ -----------------
<S> <C>
(2) Not Applicable
(3) (i) Articles of Incorporation (amended and restated)
(3) (ii) By laws
(4) Not Applicable
(9) Not Applicable
(10) (iii)(A) Management contracts regarding deferred compensation and stock options. All other management contracts
regarding deferred compensation and stock option agreements incorporated by reference to Form 10-K dated
December 31, 1992, File No. 0-11130.
(11) Statement of Per Share Earnings
Refer to registrant's Consolidated Financial Statements, Part II, Item 8 of this filing.
(12) Not Applicable
(13) Not Applicable
(16) Not Applicable
(18) Not Applicable
(19) Not Applicable
(21) The significant subsidiaries of Olympus Capital Corporation are as follows:
Jurisdiction of
Name Incorporation
---- -------------
Olympus Bank, A Federal Savings Bank United States
Olympus Financial Services, Inc. Utah
(22) Not Applicable
(23) Consent of Independent Public Accountants
(24) Not Applicable
(25) Not Applicable
</TABLE>
E-90
<PAGE> 260
<TABLE>
<S> <C>
(27) Not Applicable
(28) Not Applicable
(99) Not Applicable
</TABLE>
E-91
<PAGE> 261
FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1933
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT PF 1934
For the transition period from __________ to _________
Commission File Number 0-11130
OLYMPUS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
UTAH 87-0166750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
115 South Main St. Salt Lake City, Utah 84111
(Address of principal executive offices)
(Zip Code)
(801) 325-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE> 262
Part IV of the Registrant's Annual Report on Form 10-K and the related
Exhibit Index are hereby amended by filing the financial statements required by
Form 11-K for the Registrant's Amended and Restated Employee Stock Bonus Plan
as an Exhibit to the Registrant's Annual Report on Form 10-K as provided by
Rule 15d-21.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
Financial Statements. The following are included in Part II of this Report:
Independent Auditors' Report
Consolidated Statements of Financial Condition at December 31, 1993 and
1992
Consolidated Statements of Operations for each of the Three Years Ended
in the Period December 31, 1993
Consolidated Statements of Cash Flows for each of the Three Years Ended
in the Period December 31, 1993
Consolidated Statements of Stockholders' Equity for each of the Three
Years in the Period Ended December 31, 1993
Notes to Consolidated Financial Statements
Financial Statement Schedules. All schedules are omitted because of the absence
of conditions under which they are required or because the required information
is given in the financial statements or notes thereto.
Exhibits. For information with respect to this Item, see the Index to Exhibits
attached to this Report.
Reports on Form 8-K.
None
Separate Financial Statements of Registrant. Separate financial statements of
the registrant are included in the Notes to Consolidated Financial Statements.
<PAGE> 263
Olympus Capital Corporation
Reg S-K
Exhibits No. Index to Exhibits
(2) Not Applicable
(3) (i) Articles of Incorporation (amended and restated)
(3) (ii) By laws
(4) Not Applicable
(9) Not Applicable
(10)(iii)(A) Management contracts regarding deferred compensation
and stock options. All other management contracts
regarding deferred compensation and stock option
agreements incorporated by reference to Form 10-K dated
December 31, 1992, File No. 0-11130.
(11) Statement of Per Share Earnings.
Refer to registrant's Consolidated Financial
Statements, Part II, Item 8 of this filing.
(12) Not Applicable
(13) Not Applicable
(16) Not Applicable
(18) Not Applicable
(19) Not Applicable
(21) The significant subsidiaries of Olympus Capital
Corporation are as follows:
Jurisdiction of
Name Incorporation
Olympus Bank, a Federal Savings Bank United States
Olympus Financial Services, Inc. Utah
(22) Not Applicable
(23) Consent of Independent Public Accountant
(24) Not Applicable
(25) Not Applicable
(27) Not Applicable
(28) Financial Statements for the Amended and Restated
Olympus Capital Corporation Employee Stock Bonus Plan
for the year ended December 31, 1993.
(99) Not Applicable
<PAGE> 264
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
OLYMPUS CAPITAL CORPORATION
By: K. John Jones
K. John Jones, Senior Vice President,
Chief Financial Officer, Secretary and
Treasurer
Date: June 21, 1994
<PAGE> 265
OLYMPUS CAPITAL CORPORATION EMPLOYEE STOCK BONUS PLAN
Balance Sheet
For Fiscal Year Ending December 31, 1993
<TABLE>
<CAPTION>
Beginning End of
of year year
---------- ----------
<S> <C> <C>
Assets
Cash $ 356,624 $ 395,752
Receivables 0 0
Investments:
U.S. Government securities 0 0
Corporate debt and equity instruments 0 0
Real estate and mortgages (other than
to participants) 0 0
Loans to participants:
Mortgages 0 0
Other 0 0
Other (Common Stock of Olympus Capital) $ 726,622 $1,748,323
Total investments $1,083,246 $2,144,075
Buildings and other property used in
plan operations 0 0
Other assets 0 0
Total assets $1,083,246 $2,144,075
Liabilities
Payables $ 0 $ 0
Acquisition indebtedness 0 0
Other Liabilities 0 0
Total liabilities $ 0 $ 0
Net assets $1,083,246 $2,144,075
</TABLE>
<PAGE> 266
OLYMPUS CAPITAL CORPORATION EMPLOYEE STOCK BONUS PLAN
Income Statement
For Fiscal Year Ending December 31, 1993
<TABLE>
<S> <C>
Income
Contributions received or receivable in cash from:
Employer(s) (including contributions on behalf
of self-employed individuals) $ 69,715
Employees 144,611
Others 0
Total 214,326
Noncash contributions 0
Total contributions 214,326
Earnings from investments (interest, dividends, rents,
royalties) 13,753
Non realized gain (loss) on sale or exchange of assets 928,996
Other income (specify) 0
Total income $1,157,075
Expenses
Distribution of benefits and payments to provide benefits:
Directly to participants or their beneficiaries $ 96,246
Other 0
Total distribution of benefits and payments to
provide benefits 96,246
Administrative expenses (salaries, fees, commissions,
insurance premiums) 0
Other expenses (specify) 0
Total expenses $ 96,246
Net income (loss) $1,060,829
</TABLE>
<PAGE> 267
Appendix F
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-11130
OLYMPUS CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
UTAH 87-0166750
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
115 South Main St. Salt Lake City, Utah 84111
(Address of principal executive offices)
(Zip Code)
(801) 325-1000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
3,117,239 shares of $1.00 par value common stock of the registrant were
outstanding as of November 14, 1994.
<PAGE> 268
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Statements of Financial
Condition - September 30, 1994, and December 31, 1993
Consolidated Condensed Statements of Operations -
Three and Nine Month Periods ended September 30, 1994 and 1993
Consolidated Condensed Statements of Cash Flows -
Nine Month Periods ended September 30, 1994, 1993
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE> 269
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
ASSETS
Cash on hand and in banks $ 9,188,340 $ 8,323,332
Federal funds sold 380,415 81,099
Total cash and cash equivalents 9,568,755 8,404,431
Investments available for sale (amortized cost of $79,051,561
in 1994 and $132,302,225 in 1993) 76,380,344 132,195,692
Investment securities (fair value $49,645,739 in 1994 and
$12,711,849 in 1993) 52,602,832 12,712,941
Loan receivables, net
Real estate loans 230,170,564 233,316,431
Real estate loans held for sale 423,308 6,469,655
Commercial loans 8,556,359 7,091,863
Other loan receivables 2,528,449 2,238,761
Less unamortized loan fees (1,075,097) (1,036,824)
Less allowance for losses (6,668,306) (5,610,010)
Total loan receivables 233,935,277 242,469,876
Accrued interest receivable (less allowance for uncollectible
interest of $53,545 in 1994 and $99,499 in 1993) 2,217,043 2,232,629
Real estate acquired in settlement of loans, net 32,048 3,054,916
Premises and equipment, net 6,982,122 7,333,637
Other assets and deferred charges 10,602,015 5,765,291
TOTAL ASSETS $392,320,436 $414,169,413
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $311,242,265 $294,560,648
Advances from Federal Home Loan Bank 25,326,623 36,649,913
Securities sold under agreements to repurchase
(including accrued interest payable) 16,636,161 44,996,245
Other liabilities and accrued expense 5,350,280 4,599,067
Total liabilities 358,555,329 380,805,873
Stockholders' equity
Common stock - $1 par value, 10,000,000 shares authorized; shares
issued and outstanding 3,112,239 in 1994 and 3,099,639 in 1993 3,112,239 3,099,639
Paid-in capital 1,942,130 1,894,005
Retained earnings - substantially restricted 31,798,604 28,476,429
Net unrealized loss on investments available for sale (3,087,866) (106,533)
Total stockholders' equity 33,765,107 33,363,540
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $392,320,436 $414,169,413
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 270
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
1994 1993 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Real estate loans $4,706,696 $4,670,657 $13,727,527 $14,558,608
Investments available for sale 1,072,163 1,304,658 3,706,952 3,783,323
Investment securities 697,652 131,657 1,447,771 559,115
Equity securities 61,767 112,778 210,332 364,803
Commercial loans 195,852 145,559 538,263 463,343
Other loans and contracts 51,691 45,421 142,440 142,816
Loan origination fees 228,947 168,183 719,728 686,215
Total 7,014,768 6,578,913 20,493,013 20,558,223
INTEREST EXPENSE:
Deposits 2,839,283 2,786,855 8,207,362 8,361,774
Advances from Federal Home Loan Bank 301,253 686,911 776,145 2,386,915
Securities sold under agreements to
repurchase and other borrowings 359,357 137,591 1,143,699 383,126
Total 3,499,893 3,611,357 10,127,206 11,131,815
NET INTEREST INCOME 3,514,875 2,967,556 10,365,807 9,426,408
Provision for loan losses 136,517 (459,443) 1,026,332 (843,542)
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,378,358 3,426,999 9,339,475 10,269,950
OTHER INCOME:
Fees 615,283 366,885 1,764,263 1,090,501
Income (loss) from real estate operations 166,891 11,908 788,244 (182,471)
Gain on sale of loans and investments 38,066 1,190,644 278,908 2,169,198
Miscellaneous 46,774 165,546 172,723 344,249
Total 867,014 1,734,983 3,004,138 3,421,477
OTHER EXPENSES:
Compensation and other employee expense 1,344,164 1,481,721 4,493,449 4,009,385
Occupancy 549,530 568,406 1,654,530 1,616,969
Advertising 113,992 100,736 279,138 296,515
Loan and collection expense 9,846 46,079 21,417 274,930
Insurance expense 222,477 257,512 706,147 427,295
Provision for losses:
Real estate acquired in settlement
of loans 3,561 514,112 57,561 836,052
Other accounts receivable (75,447) (200) 61,059
Other operating expenses 721,237 464,821 1,809,394 1,326,303
Total 2,964,807 3,357,940 9,021,436 8,848,508
INCOME BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 1,280,565 1,804,042 3,322,177 4,842,919
EXTRAORDINARY ITEM - DEBT PREPAYMENT
PENALTY (322,807) (322,807)
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 337,813
NET INCOME $1,280,565 $1,481,235 $ 3,322,177 $ 4,857,925
</TABLE>
<PAGE> 271
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- --------------------------------
September 30, September 30, September 30, September 30,
1994 1993 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE
PRIMARY
Income per share of common stock
before extraordinary item and
cumulative effect of a change in
accounting principle $0.39 $ 0.56 $1.02 $ 1.51
Extraordinary item (0.10) (0.10)
Cumulative effect of a change in
accounting principle 0.10
Earnings per share of common stock $0.39 $ 0.46 $1.02 $ 1.51
FULLY DILUTED
Income per share of common stock
before extraordinary item and
cumulative effect of a change in
accounting principle $0.39 $ 0.56 $1.02 $ 1.49
Extraordinary item (0.10) (0.10)
Cumulative effect of a change in
accounting principle 0.11
Earnings per share of common stock $0.39 $ 0.46 $1.02 $ 1.50
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 272
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------
September 30, 1994 September 30, 1993
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 19,716,181 $ 19,863,347
Fees and commissions received 3,469,565 2,212,020
Income (loss) from real estate operations 788,244 (182,471)
Loans originated or purchased for resale (16,246,299) (43,663,135)
Proceeds from sale of loans originated or purchased for resale 22,436,698 45,520,515
Miscellaneous income received 143,199 374,412
Interest paid (10,319,030) (11,890,782)
Cash paid for services to suppliers and employees (6,572,780) 5,988,511)
Cash paid for other expenses (1,749,191) (740,937)
Net cash provided by operating activities 11,666,587 5,504,458
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturity of investment securities 550,000 10,450,000
Proceeds from sale of investment securities 6,952,437
Purchase of investment securities (686,161) (16,661,900)
Principal collected on investment securities 1,968,687 354,791
Proceeds from sale of investments available for sale 132,832,787
Purchase of investments available for sale (152,621,255)
Principal collected on investments available for sale 11,163,887 6,637,022
Principal collected on loans 68,075,010 114,386,679
Proceeds from sale of loans 880,825
Loans originated or purchased (63,672,374) (118,224,584)
Proceeds from sale of real estate 49,068 6,978,436
Capital expenditures for premises and equipment (153,949) (2,131,115)
Purchases of other assets (5,683,766) (1,183,355)
Net cash provided by (used in) investing activities 11,610,402 (11,349,232)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 16,681,617 3,048,785
Proceeds from advances from Federal Home Loan Bank 143,600,000 84,758,200
Principal repayment on advances from Federal Home Loan Bank (154,923,290) (79,105,650)
Net proceeds (repayment) of securities sold under
agreement to repurchase (28,179,007) 2,269,027
Proceeds from (repayment of) other borrowings 647,290 (7,678,028)
Proceeds from issuance of common stock 60,725 85,025
Net cash provided by (used in) financing activities (22,112,665) 3,377,359
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,164,324 (2,467,415)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,404,431 12,076,564
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,568,755 $ 9,609,149
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Loans transferred to real estate acquired in
settlement of loans $ 1,165,609 $ 4,176,881
Loan originations to facilitate the sale of real estate
acquired in settlement of loans $ 4,100,000 None
Securities transferred to investment securities from investments
available for sale (net of $462,185 unrealized loss included in
stockholder's equity in 1994) $ 42,401,856 None
</TABLE>
See notes to consolidated condensed financial statements
<PAGE> 273
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In management's opinion, the accompanying consolidated condensed
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial condition of
Olympus Capital Corporation (the "Corporation") and subsidiaries as of
September 30, 1994, and December 31, 1993, and the results of operations
for the three and nine month periods ended September 30, 1994, and 1993 and
the cash flows for the nine-month periods ended September 30, 1994 and
1993.
2. The results of operations for the nine-month period ended September 30,
1994, are not necessarily indicative of the results to be expected for the
full year.
3. Refer to Part II, Item 1 of this report for a discussion of
contingencies which may affect the Corporation.
4. For the quarters ended September 30, 1994, and 1993, no income tax
expense was recorded due to net operating loss carry forwards.
5. The Corporation adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," effective January 1, 1993.
The cumulative effect of adopting SFAS No. 109 on the Corporation's
financial statements was to increase income by $338,000 ($.10 per share)
for the nine month period ended September 30, 1993.
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial purposes and the amounts used for income tax purposes, and (b)
operating loss and tax credit carry forwards. Net deferred tax assets of
approximately $4,000,000 as of September 30, 1994, were offset by a
corresponding valuation allowance.
6. Investments Available for Sale - Effective December 31, 1993, the
Corporation adopted provisions of Statement of Financial Accounting
Standards No. 115. "Accounting for Certain Investments in Debt and Equity
Securities" (Statement No. 115). Pursuant to Statement No. 115,
investments available for sale are recorded at fair value, with net
unrealized gains or losses excluded from income and reported as separate
component of stockholders' equity. Gains or losses on investments
available for sale are determined on the specific identification method and
are included in income when realized. Investments available for sale
include securities for which the Corporation has entered into a commitment
to sell the securities as well as securities to be held for indefinite
periods of time that management intends to use as part of its
asset/liability management strategy and that may be sold in response to
changes in interest rates, prepayment risk, or other factors. Prior to the
adoption of Statement No. 115, investments available for sale were carried
at the lower of aggregate cost or market with unrealized losses reported in
the statement of operations. Gross unrealized gains and losses on
investments available for sale at September 30, 1994, were $1,000 and
$2,672,000, respectively.
<PAGE> 274
7. Investment Securities - Investment securities are carried at amortized
cost, based on management's intent and ability to hold such securities to
maturity. Discounts are accreted or premiums amortized using the interest
method over the life of the security. Gains or losses on sales of
securities are determined based on the specific identification method.
Gross unrealized gains and losses on investment securities at September 30,
1994, were $20,000 and $2,977,000, respectively.
8. On July 22, 1994, the Corporation and Olympus Bank, AFSB (the "Bank"),
signed an Agreement for Merger (the Agreement) with Washington Mutual
Savings Bank (WMSB) and its subsidiary Washington Mutual Federal Savings
Bank. Pursuant to the Agreement and upon satisfaction of certain
conditions, the Corporation will be merged in 1995 into WMSB and each share
of the Corporation's common stock will be exchanged for $15.50 worth of
WMSB common stock, based on the average closing price for the ten trading
days immediately preceding the third trading day before the effective date.
However, if the average price of WMSB common stock falls below $18.00, WMSB
may elect to purchase up to 49% of the Corporation's common stock with
cash. The total purchase price is anticipated to be approximately $52.1
million. There can be no assurance that such purchase or merger will
occur. Pending the merger or termination of the agreements the Corporation
has agreed to certain restrictions on its and the Bank's operations. The
Corporation has also entered into a Stock Option Agreement with WMSB
pursuant to which it has issued a stock option to WMSB for purchase of up
to approximately 9.9% of the Corporation's common stock under certain
conditions.
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis covers significant changes in the
results of operations of the Corporation and its subsidiaries for the three
and nine month periods ended September 30, 1994, as compared to the same
periods in 1993 and significant changes in the financial condition of the
Corporation and its subsidiaries since December 31, 1993 and should be read
in conjunction with the consolidated condensed financial statements and
related notes.
On July 22, 1994, the Corporation and Olympus Bank, AFSB (the "Bank"),
signed an Agreement for Merger (the Agreement) with Washington Mutual
Savings Bank (WMSB) and its subsidiary Washington Mutual Federal Savings
Bank. Pursuant to the Agreement and upon satisfaction of certain
conditions, the Corporation will be merged in 1995 into WMSB and each share
of the Corporation's common stock will be exchanged for $15.50 worth of
WMSB common stock, based on the average closing price for the ten trading
days immediately preceding the third trading day before the effective date.
However, if the average price of WMSB common stock falls below $18.00, WMSB
may elect to purchase up to 49% of the Corporation's common stock with
cash. The total purchase price is anticipated to be approximately $52.1
million. There can be no assurance that such purchase or merger will
occur. Pending the merger or termination of the agreements the Corporation
has agreed to certain restrictions on its and the Bank's operations. The
Corporation has also entered into a Stock Option Agreement with WMSB
pursuant to which it has issued a stock option to WMSB for purchase of up
to approximately 9.9% of the Corporation's common stock under certain
conditions.
<PAGE> 275
RESULTS OF OPERATIONS
The following table highlights results of operations and earnings per
share for the three and nine month periods ended September 30, 1994,
compared to the same periods in 1993.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net interest income $3,514,875 $2,967,556 $10,365,807 $9,426,408
Provisions for loan losses 136,517 (459,443) 1,026,332 (843,542)
Other income 867,014 1,734,983 3,004,138 3,421,477
Other expense 2,964,807 3,357,940 9,021,436 8,848,508
Net income 1,280,565 1,481,235 3,322,177 4,857,925
Primary earnings per share 0.39 0.46 1.02 1.51
Fully diluted earnings
per share 0.39 0.46 1.02 1.50
</TABLE>
A significant component of the Corporation's income is net interest income.
Net interest income is the difference between interest earned on loans,
investments and other interest-earning assets (interest income) and
interest paid on deposits and other interest-bearing liabilities (interest
expense). Net interest margin, expressed as a percentage, is net interest
income divided by average interest-earning assets. Changes in interest
rates, the volume and the mix of interest-earning assets and interest-
bearing liabilities and the levels of non-performing assets affect net
interest income and net interest margin. Net interest spread is the
difference between the yield on interest-earning assets and the percentage
cost of interest-bearing liabilities.
The following table highlights net interest income for the three and nine
month periods ended September 30, 1994, compared to the same periods in
1993.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income $7,014,768 $6,578,913 $20,493,013 $20,558,223
Interest expense 3,499,893 3,611,357 10,127,206 11,131,815
Net interest income 3,514,875 2,967,556 10,365,807 9,426,408
Total interest income/
average interest earning assets 7.26% 7.15% 7.09% 7.42%
Total interest expense/
average costing liabilities 3.89 4.18 3.77 4.29
Net interest spread 3.37 2.97 3.32 3.13
Net interest margin 3.66 3.25 3.58 3.39
</TABLE>
Results of Operations - Three Months Ended September 30, 1994 and 1993
Interest income increased $436,000 for the quarter ended September 30,
1994, compared to the same period in 1993. Interest income earned from
real estate loans for the third quarter of 1994 as compared to 1993
increased a nominal $36,000. During the third quarter of 1994 the average
balance of the loan portfolio increased $2,770,000 over the third quarter
of 1993. This increase was primarily the result of increased lending for
single family home construction and lending on established multi-family
dwelling properties combined with slower prepayments on mortgage loans due
to higher interest rates available for refinancing. Construction loans
increased in average balance for the third quarter of 1994 as compared to
1993 by $7,884,000, while multi-family loans increased for the same period
over period comparison by $5,772,000. Permanent loans on single family
properties increased $5,988,000 as more adjustable rate and short term
loans were made for portfolio. Real estate portfolio decreases in average
balance for the quarter to quarter comparison were principally in
commercial real estate loans which decreased $16,264,000, the result of
loans paid off by borrowers with more attractive financing alternatives.
The weighted average interest rate earned on the portfolio decreased 0.04%
from third quarter 1994 as compared to 1993.
Interest income from investments available for sale declined by $232,000
during the quarter ended September 30, 1994 compared to the same period in
1993. The average balance of investments available for sale during the
third quarter of 1994 as compared to the same period in 1993 declined by
$25,517,000. The decline in average balance of investments available for
sale is largely due to the reclassification of a portion of the mortgage
<PAGE> 276
backed securities to investment securities which are held to maturity. As
previously disclosed, certain mortgage backed securities were reclassified
as investment securities held to maturity because of characteristics
similar to loans being originated and held in the portfolio of the Bank.
The average interest rate earned on investments available for sale during
the third quarter of 1994 was 5.37% as compared to 4.95% for the same
quarter in 1993. This is a direct result of the adjustable rate nature of
many of the securities in the portfolio. As a result of the
reclassification of mortgage backed securities mentioned above, the average
balance for investment securities held to maturity increased by
approximately $40,000,000 which accounts for an increase in interest income
earned on this portfolio of $566,000 for the third quarter of 1994 as
compared to the same quarter in 1993. In addition to the increase in the
average balance, the interest rate earned on this portfolio increased to
4.75% in the 1994 quarter as compared to 4.10% in 1993. For the quarter
ended September 30, 1994, dividend income from the Federal Home Loan Bank
of Seattle ("FHLB") stock declined $51,000 compared to the same period of
1993. The dividend paid by the FHLB for the third quarter of 1994 was
6.00% as compared to 12.30% for the same period in 1993. Management of the
Bank believes the dividend paid by the FHLB will remain significantly lower
for the remainder of 1994 as compared to the dividends paid in 1993.
Interest income on commercial loans (principally loans made to small and
medium size business) increased $50,000 in the quarter ended September 30,
1994 as compared to the same period in 1993. This is a result of both an
increase in the average balance of the portfolio of $766,000, primarily in
lines of credit, and an increase in the average interest rate earned of
1.70% for the third quarter of 1994 as compared to the same period in 1993.
This increase in the interest rate earned can be attributed to the
adjustable interest rates of the portfolio combined with the general
increase in interest rates as well as a decrease in the level of non-
performing loans. Loan origination fees for the quarter ended September
30, 1994 increased $61,000 as compared to the same period in 1993 primarily
due to the increase in construction lending.
Interest expense declined $111,000 for the quarter ended September 30,
1994, compared to the same period in 1993. Overall, the average balance of
all deposits and other interest-bearing liabilities for the quarter ended
September 30, 1994, increased by $14,557,000 and the average interest rate
paid decreased by .30% as compared to the same period in 1993. Interest
expense on deposits for the quarter ended September 30, 1994, increased
$52,000 compared to the same period in 1993. During the quarter ended
September 30, 1994, the average balance of all deposits increased
$16,622,000 and the average rate paid for all deposits declined 0.07%
compared to the same period in 1993. The average balance increase in
deposits was concentrated in demand deposit accounts and long term
certificates of deposit. Interest expense from FHLB advances for the
quarter ended September 30, 1994, declined $386,000 compared to the same
period in 1993. During the third quarter in 1994, the average balance of
FHLB advances was $20,241,000 lower than the same period of 1993. The
lower average balance in 1994 was the result of the Bank prepaying high
interest FHLB advances in the last half of 1993. The average interest rate
paid on FHLB advances during the quarter ended September 30, 1994 was 1.32%
lower than the average interest rate for the same period of 1993. Interest
expense from repurchase agreements and other borrowing for the quarter
ended September 30, 1994, increased $222,000 compared to the same period in
1993. During this quarter in 1994, the average balance of repurchase
agreements was $18,240,000 higher and the average interest rate the Bank
paid for these funds was 0.30% lower than the average interest rate in the
same period of 1993. The increase in the repurchase agreement funds
occurred primarily during the fourth quarter of 1994 and the funds were
used to purchase mortgage backed securities.
The provision for loan losses during the three months ended September 30,
1994, was $137,000 as compared to a recovery of $459,000 for the same
period in 1993. The provision for loan losses in the third quarter of 1994
was to reserve against delinquent property taxes on a loan which although
current as to principal and interest, is classified according to Office of
Thrift Supervision regulations.
Other income for the quarter ended September 30, 1994 was $868,000 less
than the same period of 1993. The decline in other income for the third
quarter of 1994 as compared to the same quarter of 1993 is due to a
decrease in gain on sale of loans and investments of $1,153,000. During
the third quarter of 1993, the Bank sold mortgage backed securities and
recognized a gain of $901,000. The sale of the securities and the
resulting gain recognition was done in part to offset effects of penalties
in connection with prepaying high interest FHLB advances. During the
fourth quarter of 1993, mortgage backed securities were purchased to
replace those sold during the third quarter. No such security sales
occurred during the third quarter of 1994. The decline in gain on sale of
loans was partially offset by an increase in fee income. Fee income
increased $248,000 for the quarter ended September 30, 1994 as compared to
the same period in 1993. The increase was primarily a result of an
increase in loan servicing fees on a larger balances of the loans serviced
for others portfolio and an increase in fee income from deposits, primarily
demand deposit accounts. Income from real estate operations for the three
months ended September 30, 1994 was $155,000 higher as compared to the same
period in 1993. This increase was attributed primarily to the recovery of
property taxes accrued for real estate acquired in the settlement of loans
("REO"). Due to the significant decline in REO, the remaining property
taxes accrued for such REO is not needed. Miscellaneous income for the
three months ended September 30, 1994 was $119,000 lower than the same
period in 1993. During the quarter ended September 30, 1994, fee income
from the sale of annuity products by Olympus Financial Services,
Incorporated, a subsidiary of the Bank, was $134,000 less than the same
period in 1993.
Other expenses during the quarter ended September 30, 1994, were $393,000
lower compared to the same period in 1993. During the three months ended
September 30, 1994, compensation and other employee expense was $138,000
less than the same period in 1993, primarily as a result in a reduction of
five full time employees and lower commissions to loan officers. Loan and
collection expense encompasses the costs of reviewing loans, foreclosure
expense and the costs of collecting amounts which are owed to the Bank.
During the quarter ended September 30, 1994, loan and collection expense
was $36,000 lower compared to the same quarter of 1993. As of September
30, 1994, the Bank's non-performing assets, principally loans with payments
ninety days or more delinquent, totalled less than $1 million. Insurance
<PAGE> 277
expense included the premiums the Bank pays for Federal Deposit Insurance
Corporation ("FDIC") insurance on deposits. For the three months ended
September 30, 1994 this premium was $19,000 lower than the same period in
1993, primarily as a result of a lower premium assessment from the FDIC.
During the quarter ended September 30, 1994, the Bank recorded a small
provision for the losses from REO as compared to provision for losses of
$439,000 in the quarter ended September 30, 1993. The 1993 provision for
loss from REO was largely the result of writing down the carrying value of
an office complex in Idaho which has subsequently been sold. Other
operating expenses include legal and other professional services which the
Corporation and its subsidiaries use. During the quarter ended September
30, 1994, other operating expenses increased $256,000 as compared to the
same quarter in 1993 primarily due to costs associated with the pending
merger with WMSB.
Results of Operation - Nine Months Ended September 30, 1994 and 1993
Interest income declined by $65,000 and the average interest rate earned
declined by 0.33% for the nine months ended September 30, 1994, compared to
the same period in 1993. The decline is primarily in interest income
earned on commercial real estate loans. Interest income earned from real
estate loans for the nine months ended September 30, 1994, declined by
$831,000 compared to the same period in 1993. The average balance of real
estate loans outstanding during the nine months ended September 30, 1994,
declined by $3,969,000 compared to the same period during 1993, and the
weighted average interest rate earned declined by 0.34% compared to the
same period in 1993. The decline in the interest rate is due largely to
the repayment of loans with higher fixed interest rates in the commercial
real estate portfolio. The Bank experienced a decline of $20,876,000 in
the average balance of the commercial real estate loan portfolio during the
nine months ended September 30, 1994, compared to the same period during
1993. The bulk of this decline occurred in the third quarter of 1993 and
continued to the first quarter of 1994. During the nine months ended
September 30, 1994, the average balance of the multi-family real estate
loan portfolio grew $7,224,000, the construction loan portfolio grew
$7,508,000, and the consumer loan portfolio, composed of short term fixed
rate residential loans and home equity lines of credit, grew $5,596,000
compared to the same period in 1993.
During the nine months ended September 30, 1994, interest income from
investments available for sale decreased by $76,000 compared to the same
period in 1993. This decline was primarily the result of a decrease in the
average balance of investments available for sale of $2,358,000 for the
nine months ended September 30, 1994, compared to the same period in 1993.
During the first quarter of 1994, the Bank reclassified to investment
securities approximately $40,000,000 of mortgage backed securities
previously reported as available for sale. This reclassification was the
principal reason income from investment securities for the nine months
ended September 30, 1994, increased by $889,000. During the nine months
ended September 30, 1994, the average balances of investment securities for
the period, increased $22,721,000 compared to the same period in 1993. The
interest rate earned on these investments for the nine months ended
September 30, 1994, was 4.48% compared to 4.62% for the same period in
1993. During the nine months ended September 30, 1994, dividend income
from FHLB stock declined $155,000 compared to the same period of 1993. The
dividend paid by the FHLB for the nine months ended September 30, 1994, was
7.00% compared to 13.90% for the same period in 1993. Management of the
Bank believes the dividend paid by FHLB will remain significantly lower for
the remainder of 1994 compared to dividends paid in 1993.
Interest income on commercial loans increased $75,000 for the nine months
ended September 30, 1994 as compared to the same period in 1993. This is
primarily the result of an increase of 1.70% in the interest rate earned on
this portfolio for the nine month period of 1994 as compared to 1993. Most
interest rates on the loans in this portfolio are adjustable and have
adjusted higher as interest rates in general have increased. Loan
origination fees for the nine months ended September 30, 1994 increased
$34,000 over the same period in 1993 largely attributable to the increase
in construction lending experienced in 1994.
Interest expense declined $1,005,000, while the average balance of interest
costing liabilities increased $11,822,000 for the nine months ended
September 30, 1994, compared to the same period in 1993. Interest expense
for deposits for the nine months ended September 30, 1994, declined
$154,000 compared to the same period in 1993. During the nine months ended
September 30, 1994, the average balance of all deposits increased
$15,059,000 and the average interest rate paid for all deposits declined
0.21% compared to the same period in 1993. The increase in the average
balance of deposits was concentrated in demand deposit accounts and long
term certificates of deposit. Interest expense from FHLB advances for the
nine months ended September 30, 1994, declined $1,611,000 compared to the
same period in 1993. During the period in 1994, the average balance of
FHLB advances was $21,221,000 lower than the same period of 1993. The
lower balances in 1994 were the result of the Bank prepaying high interest
FHLB advances in the last half of 1993. The average rate paid for FHLB
advances during the nine months ended September 30, 1994 was 2.77% lower
than the average rate paid in the same period of 1993. Interest expense
from repurchase agreements and other borrowings for the nine months ended
September 30, 1994, increased $761,000 compared to the same period in 1993.
During the period in 1994, the average balance of repurchase agreements was
$30,333,000 compared to $7,690,000 during the first nine months of 1993 and
the average interest rate the Bank paid for this borrowing was 2.84% lower
compared to the same period of 1993. During the nine months ended
September 30, 1993, most of the funds borrowed by the Bank from repurchase
agreements were long-term with higher interest rates. These funds have
been retained by the Bank, but their impact on the weighted average
interest rate is smaller. During the nine months ended September 30, 1993,
the Bank recovered $87,000 of previously expensed interest payments on an
industrial revenue bond issued in connection with a property previously
owned by the Bank. The Bank sold the property during the second quarter of
1993. The recovery lowered interest expense from other borrowings by
$87,000 for the nine months ended September 30, 1993.
The provision for loan losses of $1,026,000 during the nine months ended
September 30, 1994, was $1,870,000 higher than the same period in 1993.
The Bank recorded net recoveries of $844,000 during the first nine months
of 1993, the result of lower non-performing asset levels and the resolution
<PAGE> 278
of several troubled loans during the first three quarters of 1993. Most of
the provisions for 1994 were established for loans secured by Southern
California properties in response to uncertainties caused by natural
disasters and the overall weakness of the rental market for commercial
space in the region.
Other income for the nine months ended September 30, 1994, was
$417,000 less compared to the same period of 1993. Fee income for
the nine months ended September 30, 1994, was $674,000 higher
compared to the same period in 1993. During the nine months ended
September 30, 1994, service fee income from deposits increased
$355,000 and loan servicing fee income increased $59,000 compared to
the same period in 1993. Due to prepayments of certain commercial
real estate loans, the Bank collected $275,000 in prepayment fees
during the first nine months of 1994. Income from real estate
operations for the nine months ended September 30, 1994, was
$971,000 higher compared to the same period in 1993. Rental income
from branch offices during the nine months ended September 30, 1994,
was $12,000 lower compared to the same period in 1993. During the
second quarter of 1994, the Bank lost a major tenant from the
corporate office building in Salt Lake City. The space remains
unleased. During the nine months ended September 30, 1994, the net
income from REO was $983,000 higher than the same period in 1993.
The lower costs of holding REO reflects the lower level of these
assets. During the nine months ended September 30, 1994,
settlements surrounding REO properties resulted in the Bank
collecting $627,000 for operating these properties. During the nine
months ended September 30, 1994, gains from sale of loans and
investments was $1,890,000 lower than the same period in 1993. In
addition to the sale of mortgage backed securities and the resulting
gain recognition previously discussed, lower prices when loans are
sold due to higher interest rates and lower production and sales
volume led to this decline. Additionally, during the second quarter
of 1993, the Bank sold mortgage servicing rights and recorded a gain
of $350,000. The Bank has not sold mortgage servicing rights during
1994. Miscellaneous income for the nine months ended September 30,
1994, was $171,000 lower than the same period in 1993. During the
nine months ended September 30, 1994, fee income from the sale of
annuity products by Olympus Financial Services, Incorporated, a
subsidiary of the Bank, was $189,000 lower than the same period in
1993.
Other expenses during the nine months ended September 30, 1994, were
$173,000 higher compared to the same period in 1993. During the nine
months ended September 30, 1994, compensation and other employee expense
was $484,000 higher than the same period in 1993. During the nine months
ended September 30, 1994, the Bank accrued or paid $228,000 in severance
pay for former employees and an officer of the Bank. Bonus payments during
the first nine months of 1994 were $90,000 higher than the same period in
1993. During the first nine months of 1994, the expense for employee
benefits, such as retirement fund contribution and health insurance was
$193,000 higher compared to the same period in 1993. During the nine
months ended September 30, 1994, loan and collection expense was $254,000
lower compared to the same period of 1993. As of September 30, 1994, the
Bank had non-performing assets totalling less than $1 million. For the
nine months ended September 30, 1994, the FDIC insurance premium was
$303,000 higher than the same period in 1993, chiefly because during the
first nine months of 1993, the Bank received a credit from the FDIC for
$516,000, the final installment of the Bank's Federal Savings and Loan
Insurance Corporation secondary reserve credit. During the nine months
ended September 30, 1994, the Bank recorded a $58,000 provision for the
losses from REO as compared to a $836,000 provision for losses from REO for
the same period in 1993. The reduction in the provision is a result of the
decline in the level of REO. For the nine months ended September 30, 1994,
other operating expenses increased $483,000 compared to the same quarter in
1993. During the nine months ended September 30, 1994, the Corporation
spent $303,000 for legal and professional services associated with the
proposed merger. Other legal fees increased $153,000 for the nine months
ended September 30, 1994, as compared to the same period in 1993. Much of
this increase was to review strategic alternatives in connection with an
expression of interest to acquire the Corporation earlier in 1994.
FINANCIAL CONDITION
Total consolidated assets at September 30, 1994, were $392,320,000 a
decrease of $21,849,000 from $414,169,000 at December 31, 1993. Principal
repayments both scheduled and unscheduled from mortgaged backed securities
as well as the real estate loan portfolio, are the primary reason for this
decrease. The proceeds from loan payoffs and increased deposits were used
to pay advances from the FHLB and other borrowing sources.
Investment securities increased $39,890,000 during the first nine months of
1994, while investments available for sale decreased $55,815,000 primarily
the result of a reclassification of securities from investments available
for sale to investments held to maturity. The Bank charged the carrying
value of the investment $462,000, with an offsetting entry to stockholders'
equity for the difference between the carrying value and the fair value at
the date of reclassification. The Bank amortized $45,000 of this
unrealized holding loss reported in equity during the nine months of 1994,
to offset the effect on interest income of the amortization of the discount
created by this reclassification. The reclassified securities included
fixed rate, fifteen year original maturity mortgage backed securities
("MBS"), MBS collaterized by loans with five and seven year balloon
payments and a MBS pledged as collateral for a long term letter of credit
issued by the Bank. In reassessing the classification of these assets
management concluded they bear many of the same characteristics as mortgage
loans currently being originated for the Corporation's portfolio. At
September 30, 1994, the market value of investments available for sale was
$2,671,000 lower than the carrying value of these securities. This
unrealized loss is reported as a separate component of stockholders equity.
Loan receivables declined by $8,535,000 from December 31, 1993 to September
30, 1994, with the largest decline of $16,127,000 occurring on commercial
real estate loans. During the first quarter of 1994, a large commercial
real estate loan borrower prepaid approximately $11,000,000 of commercial
real estate loans. During the nine months ended September 30, 1994, the
Bank originated real estate loans totalling $4,100,000 to facilitate the
sale of REO, all of which occurred in the first half of the year.
<PAGE> 279
Excluding the commercial real estate portfolio, the balances of the
remaining real estate loan portfolios increased $5,644,000, primarily in
shorter term fixed rate mortgages and construction loans. During the nine
months ended September 30, 1994, non-real estate commercial loans increased
by $1,464,000. Also during this period, the Bank received a pay off of a
commercial loan receivable of $1,130,000 previously reported as a non-
performing asset. During the first nine months of 1994, the Bank provided
financing for the sale of a hydro electric plant previously reported as
real estate acquired in settlement of loans. The increase in allowance for
loan loss of $1,058,000 is primarily in response to commercial real estate
conditions in California and most of the increase occurred early in the
year. Other assets and deferred charges increased $4,837,000 due mainly to
the acquisition of mortgage servicing portfolios for $4,429,000, net of
amortization. On December 31, 1993, the Bank was closed for New Years
holiday. Although the Bank was closed, the Federal Reserve System was
open. The Federal Reserve System posted credits to the Bank on December
31, 1993 which the Bank then posted to depositors' accounts January 3,
1994. These unposted credits which totalled $500,000 at December 31, 1993,
are reported as other assets and deferred charges.
Total deposits increased $16,682,000 from December 31, 1993 to September
30, 1994. Most of this increase was in the form of time deposits with
maturities of seven or more years. The proceeds from these deposits and
from collections from loans were used to pay off maturing advances from the
FHLB and obligations arising from securities sold under agreements to
repurchase. The Bank currently borrows only short term funds from the
FHLB. Other liabilities and accrued expense includes deposits for
borrower's taxes and insurance, interest accrued but unpaid on deposits,
and other expenses which are accrued but unpaid, and unposted mortgage
payments. Deposits for borrowers' taxes and insurance increased $1,669,000
during the first nine months of 1994 while unposted payments and accrued
interest decreased $1,063,000.
LIQUIDITY AND CAPITAL RESOURCES
Regulations of the Office of Thrift Supervision ("OTS"), require the Bank
to maintain specified levels of liquid assets, generally defined as cash
and marketable securities which are quickly convertible into cash. Such
assets must equal at least 5% of the daily average balance of total
withdrawable savings and short-term borrowings (liquidity base). As of
September 30, 1994, the Bank's average liquid assets were approximately
$24,096,000 or 6.8% of its liquidity base.
The Bank had loan commitments of approximately $47,961,000 as of September
30, 1994. The loan commitments outstanding includes $5,142,000 of
available but unused credit lines on home equity loans and $17,686,000 of
undisbursed construction loans. Additionally, commercial business lines of
credit that are unused and included in loan commitments is $6,136,000. The
Bank anticipates that the funding requirements of the outstanding loan
commitments will be met through cash from maturities and monthly payments
received on the existing portfolio together with loan sales. Liquidity
from deposits and other borrowing sources are expected to meet other
funding needs of the Bank.
In connection with the insurance of savings accounts by the Savings
Association Insurance Fund (SAIF), the Bank is required to meet certain
minimum capital standards consisting of a tangible capital requirement of
1.5% of tangible assets, a core or leveraged capital requirement of 3% of
tangible assets, and a risked-based capital requirement. The risk-based
requirement takes each asset and gives it a weighting of 0% to 100% based
upon credit risk as defined in the regulations of the OTS. The risk-based
requirement as of September 30, 1994, was 8% of the risk weighted assets.
Eligible capital to meet this test is composed of core or tier one capital
and supplementary or tier two capital. Supplementary or tier two capital
is composed of general loan loss reserves up to a maximum of 1.25% of risk
weighted assets.
<PAGE> 280
The following is a summary of the Bank's regulatory capital at September
30, 1994.
<TABLE>
<CAPTION>
Requirement Actual Amount
-------------------------- -------------------------- Exceeding
Capital Ratio Capital Ratio Requirements
------------ ----- ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
Tangible $ 5,885,000 1.50% $33,672,000 8.58% $27,787,000
Core 11,770,000 3.00% 33,672,000 8.58% 21,902,000
Risk-Based 18,338,000 8.00% 36,482,000 15.92% 18,144,000
</TABLE>
NON-PERFORMING ASSETS
Non-performing assets totaled $913,000 at September 30, 1994, compared with
$5,297,000 at December 31, 1993. The balance of REO, $3,055,000 at
December 31, 1993, had been sold by September 30, 1994 with the addition of
one single family loan which is now REO. The sales were financed in part
by loans provided by the Bank. The major non-performing loan at September
30, 1994, was a commercial real estate loan located in southern California.
OLYMPUS CAPITAL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Richard Madsen vs. Prudential Savings and Loan Association, Third Judicial
District Court of Salt Lake County, State of Utah, Civil No. 226073, filed
February 1975.
This is an alleged class action filed in February 1975, in the District
Court of Salt Lake County, seeking compensation for the use of loan
reserves for taxes and insurance. The District Court granted the Bank's
(formerly known as Prudential Federal Savings and Loan Association) motion
for summary judgment dismissing the complaint. Plaintiff appealed to the
Utah Supreme Court. The Utah Supreme Court reversed the summary judgment
on January 14, 1977, and ordered the case remanded for further proceedings.
<PAGE> 281
In October, 1977, the Plaintiff amended the complaint to allege a plaintiff
class action on behalf of all mortgagors in the State of Utah against a
defendant class of all mortgage lenders in Utah, of which the Bank would be
the representative defendant. In October, 1981, plaintiff filed an amended
complaint in the matter. The amended complaint, in addition to requesting
an accounting, requests that the Bank and other members of the alleged
defendant class pay to plaintiffs and other members of the alleged
plaintiff's class profits earned from the past use of the escrow funds,
annual payments in the future for the use of escrow funds, punitive damages
of $10,000,000 and the sum of 4% interest on the reserve account of each
member of the plaintiff's class or $100, whichever is more, from June 30,
1979. The trial court also denied the Bank's Motion for Summary Judgement
and ruled that the Bank must account to plaintiff Madsen only for net
earnings, if any, made on his reserve account.
Trial on this case was held in September, 1985. At the conclusion, the
Court directed judgement in favor of Plaintiff Madsen in the amount of
$134.70 Before judgment was entered, the Bank moved for disqualification of
the trial judge, which was granted on January 16, 1986, and was
retroactive, so that all of the trial judges's orders were vacated.
Thereafter, plaintiff's petition to the Utah Supreme Court for
interlocutory review of the disqualification order was granted. During
1988, the Utah Supreme Court reversed the lower court's disqualification of
trial judge. The case was remanded to the trial court for entry of
findings of fact and conclusions of law.
The trial court on March 22, 1990, entered its findings of fact and
conclusion of law. The trial court entered judgment on April 30, 1992.
The judgment awards $134.70 to plaintiff, plus costs of court, plus 10%
interest from the date of trial to the date of judgement, plus post
judgment interest from the date of judgment. The judgment also orders that
a special master be appointed to survey the Bank's records to determine a
feasible method for identifying class members and for identifying records
from which a computation of damages can be made for class members. A
consequence of the judgment may be that a class of plaintiffs, whose trust
deeds in favor of the Bank contain similar language as that contained in
the plaintiff's trust deed, may recover a larger judgment against the Bank.
The trial court certified the judgment as final and directed its entry so
that an appeal may be taken. The trial court certified the judgement as
final and directed its entry so that an appeal may be taken. The trial
court stayed, pending appeal, that portion of the judgment ordering that a
special master be appointed to identify the defendant class and calculate
damages. Both the individual plaintiff in this case and the Bank filed a
notice of appeal to the Utah Supreme Court.
The Supreme Court found that the appeals were premature and returned the
case to the trial court. On June 20, 1994, the trial court appointed a
special master who will identify class members and compute damages. Also
on June 20, 1994, the trial court ordered the Bank to pay the initial costs
of the master's determining what records the Bank has available and what is
the best, most economical method of locating individual class members and
computing their damages. The Bank's petition for interlocutory appeal to
the Supreme Court challenging that order was denied. The master is now
proceeding with his initial survey of the records.
The amount of the damages that may be awarded against the Bank cannot be
determined at this time. Appeal must await the trial court's determination
of all class issues.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
September 30, 1994.
<PAGE> 282
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
OLYMPUS CAPITAL CORPORATION
Date November 14, 1994 By: K. John Jones
K. John Jones, Vice President/
Chief Financial Officer
Date November 14, 1994 By: R. Gibb Marsh
R. Gibb Marsh, President
<PAGE> 283
[ARTICLE] 9
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1994
[PERIOD-END] SEP-30-1994
[CASH] 9,188,340
[INT-BEARING-DEPOSITS] 0
[FED-FUNDS-SOLD] 380,415
[TRADING-ASSETS] 0
[INVESTMENTS-HELD-FOR-SALE] 0
[INVESTMENTS-CARRYING] 131,654,393
[INVESTMENTS-MARKET] 126,026,083
[LOANS] 241,678,680
[ALLOWANCE] (6,668,306)
[TOTAL-ASSETS] 392,320,436
[DEPOSITS] 311,242,265
[SHORT-TERM] 41,962,784
[LIABILITIES-OTHER] 5,350,280
[LONG-TERM] 0
[COMMON] 3,112,239
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 30,652,868
[TOTAL-LIABILITIES-AND-EQUITY] 392,320,436
[INTEREST-LOAN] 15,127,958
[INTEREST-INVEST] 5,365,055
[INTEREST-OTHER] 0
[INTEREST-TOTAL] 20,493,013
[INTEREST-DEPOSIT] 8,207,362
[INTEREST-EXPENSE] 1,919,844
[INTEREST-INCOME-NET] 10,365,807
[LOAN-LOSSES] 1,026,332
[SECURITIES-GAINS] 0
[EXPENSE-OTHER] 9,021,436
[INCOME-PRETAX] 3,322,177
[INCOME-PRE-EXTRAORDINARY] 3,322,177
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 3,322,177
[EPS-PRIMARY] 1.02
[EPS-DILUTED] 1.02
[YIELD-ACTUAL] .071
[LOANS-NON] 0<F1>
[LOANS-PAST] 0<F1>
[LOANS-TROUBLED] 0<F1>
[LOANS-PROBLEM] 0<F1>
[ALLOWANCE-OPEN] 0<F1>
[CHARGE-OFFS] 0<F1>
[RECOVERIES] 0<F1>
[ALLOWANCE-CLOSE] 0<F1>
[ALLOWANCE-DOMESTIC] 0<F1>
[ALLOWANCE-FOREIGN] 0<F1>
[ALLOWANCE-UNALLOCATED] 0<F1>
<FN>
<F1> This item is reported only on Form 10K
</TABLE>
<PAGE> 284
APPENDIX G
AMENDMENT
TO
OLYMPUS CAPITAL CORPORATION
NONQUALIFIED STOCK OPTION PLAN
AND
INCENTIVE STOCK OPTION PLAN
(as amended)
THIS AMENDMENT (the "Amendment") is executed effective as of
_______________________ by Olympus Capital Corporation, a Utah corporation (the
"Company").
RECITALS
WHEREAS, the Company has previously adopted the Olympus Capital
Corporation Nonqualified Stock Option Plan and Incentive Stock Option Plan (the
Nonqualified Stock Option Plan and Incentive Stock Option Plan, as amended, are
hereinafter referred to as the "Plans"); and
WHEREAS, the Company has entered into an Amended and Restated
Agreement For Merger dated ______________, 1994 (the "Merger Agreement") with
Washington Mutual, Inc. ("WMI") and certain other parties which provides that
the Company will be merged into WMI;
WHEREAS, the Merger Agreement provides that the Plans shall be amended
to provide for conversion of the outstanding options issued under the Plans
into options to purchase common stock of WMI if WMI elects to pay a portion of
the merger consideration in cash; and
WHEREAS, the Board of Directors has determined it advisable and in the
best interests of the Company to execute this Amendment to amend the Plans as
set forth in the Merger Agreement subject to shareholder approval and subject
to WMI electing to pay a portion of the merger consideration in cash.
NOW, THEREFORE, upon these premises, the Plans are hereby modified,
altered and amended in the following respects only, subject to the conditions
set forth in Section 2 below:
1. Amendment. Section 7.02 of the Plans is hereby amended to read in its
entirety as follows:
7.02 Corporate Capital Transactions. In the event that the Company,
its shareholders, or both enter into a written agreement to dispose if all or
substantially all of the assets or stock of the Company by means of a sale,
merger, consolidation, reorganization, liquidation or similar transaction
(other than a reorganization, merger or consolidation effected solely to change
the Company's name or state of incorporation), all Options issued pursuant to
the Plans established hereby shall become immediately
-1-
<PAGE> 285
exercisable, whether or not such Options were exercisable prior to such event,
on the date on which the Company agrees to enter into such transaction. Each
outstanding Option shall also be subject to the agreement governing any sale,
merger, consolidation, reorganization or liquidation, which agreement may
provide, without limitation, for the conversion of the outstanding Options into
fully vested options to acquire common stock of the surviving corporation or
its parent. In the event that the Company's agreement to enter into any such
transaction is terminated, all unexercised Options shall revert to the status
they had before the Company agreed to enter into the transaction in question.
Any exercise of Options made before the agreement to enter into the transaction
was terminated shall remain effective after the termination of the agreement,
notwithstanding that the Option may have become exercisable solely by reason of
the Company entering into the agreement.
2. Shareholder Approval. This Amendment shall become effective only if
(i) it is approved by the shareholders of the Company and (ii) WMI elects to
pay a portion of the merger consideration in cash. If either of these two
conditions are not satisfied, this Amendment shall not become effective
notwithstanding the approval of this Amendment by the Board of Directors of the
Company.
3. Ratification. In all respects, other than as specifically set forth
in Section 1 above, the Plan shall remain unaffected by this Amendment, the
Plans shall continue in full force and effect, subject to the terms and
conditions thereof, and in the event of any conflict, inconsistency, or
incongruity between the provisions of this Amendment and any provisions of the
Plans, the provisions of this Amendment shall in all respects govern and
control.
IN WITNESS WHEREOF, the Company has duly executed this Amendment
effective as of ________________________.
OLYMPUS CAPITAL CORPORATION,
a Utah corporation
By ________________________________
Its___________________________
Attest:
___________________________________
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