<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.
For the Quarterly Period Ended June 30, 1999.
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: 1-14667
Washington Mutual, Inc.
-----------------------
(Exact name of registrant as specified in its charter)
Washington 91-1653725
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1201 Third Avenue, Seattle, Washington 98101
(Address of principal executive offices) (Zip Code)
(206) 461-2000
(Registrant's telephone number, including area code)
(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 [ ]
The number of shares outstanding of the issuer's classes of common stock
as of July 31, 1999:
Common Stock - 579,107,856
<PAGE> 2
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I
Item 1. Financial Statements:
Consolidated Statements of Income--
Three and Six Months Ended June 30, 1999 and 1998.................... 2
Consolidated Statements of Comprehensive Income-
Three and Six Months Ended June 30, 1999 and 1998.................... 3
Consolidated Statements of Financial Condition--
June 30, 1999 and December 31, 1998.................................. 4
Consolidated Statements of Stockholders' Equity--
Six Months Ended June 30, 1999 and 1998.............................. 5
Consolidated Statements of Cash Flows--
Six Months Ended June 30, 1999 and 1998.............................. 6
Notes to Consolidated Financial Statements............................. 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
General............................................................ 14
Results of Operations.............................................. 15
Review of Financial Condition...................................... 22
Asset Quality...................................................... 23
Asset and Liability Management Strategy............................ 27
Liquidity.......................................................... 27
Capital Adequacy................................................... 28
Year 2000 Project.................................................. 28
PART II
Item 4. Submission of Matters to a Vote of Security Holders.................... 31
Item 6. Exhibits and Reports on Form 8-K....................................... 31
</TABLE>
i
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
In the opinion of management, the accompanying consolidated statements of
financial condition and related interim consolidated statements of income,
comprehensive income, stockholders' equity and cash flows reflect all
adjustments (which include reclassifications and normal recurring adjustments)
that are necessary for a fair presentation in conformity with generally accepted
accounting principles ("GAAP"). The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect amounts reported in the financial statements. Changes in these estimates
and assumptions are considered reasonably possible and may have a material
impact on the financial statements.
Certain reclassifications have been made to the 1998 financial statements to
conform to the 1999 presentation. All significant intercompany transactions and
balances have been eliminated. When Washington Mutual, Inc. ("Washington Mutual"
or the "Company") acquires a company through a material pooling of interests,
prior period financial statements are restated to include the accounts of merged
companies. Previously reported balances of the merged companies have been
reclassified to conform to the Company's presentation and restated to give
effect to the mergers. The financial information of Washington Mutual contained
herein has been restated for the merger with H.F. Ahmanson & Company
("Ahmanson"), which was effective on October 1, 1998.
The information included in this Form 10-Q should be read in conjunction with
Washington Mutual's 1998 Annual Report to the Securities and Exchange Commission
on Form 10-K. Interim results are not necessarily indicative of results for a
full year.
1
<PAGE> 4
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 2,013,372 $ 2,059,908 $ 4,041,874 $ 4,050,105
Available-for-sale securities 646,322 430,389 1,185,334 810,982
Held-to-maturity securities 258,416 305,922 505,793 621,965
Other interest income 41,512 46,364 80,739 86,767
------------ ------------ ------------ ------------
Total interest income 2,959,622 2,842,583 5,813,740 5,569,819
INTEREST EXPENSE
Deposits 792,694 927,429 1,606,321 1,831,225
Borrowings 1,018,220 825,457 1,931,516 1,588,595
------------ ------------ ------------ ------------
Total interest expense 1,810,914 1,752,886 3,537,837 3,419,820
------------ ------------ ------------ ------------
Net interest income 1,148,708 1,089,697 2,275,903 2,149,999
Provision for loan losses 42,857 44,394 84,557 94,369
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 1,105,851 1,045,303 2,191,346 2,055,630
OTHER INCOME
Depositor and other retail banking fees 182,114 135,216 345,531 254,696
Loan servicing income 23,881 30,926 49,912 63,273
Loan related income 26,859 30,161 53,406 55,252
Securities fees and commissions 69,364 51,701 128,886 98,486
Insurance fees and commissions 10,269 13,586 20,939 26,377
Mortgage banking income 28,021 40,614 66,383 67,662
Gain on sale of other assets 4,392 13,640 16,325 14,787
Provision for recourse liability -- (10,314) (5,142) (25,519)
Other operating income 19,218 23,873 40,022 38,751
------------ ------------ ------------ ------------
Total other income 364,118 329,403 716,262 593,765
OTHER EXPENSE
Salaries and employee benefits 302,120 305,407 603,729 596,638
Occupancy and equipment 137,160 126,366 272,064 246,583
Telecommunications and outsourced information services 67,180 66,729 137,244 126,290
Regulatory assessments 14,840 16,635 30,203 32,891
Transaction-related expense 36,569 24,473 60,371 56,282
Amortization of intangible assets 23,262 26,241 48,635 49,825
Foreclosed asset (income) expense (869) 10,345 729 19,228
Other operating expense 168,362 151,552 325,516 274,756
------------ ------------ ------------ ------------
Total other expense 748,624 727,748 1,478,491 1,402,493
------------ ------------ ------------ ------------
Income before income taxes 721,345 646,958 1,429,117 1,246,902
Income taxes 268,671 248,357 532,325 477,527
------------ ------------ ------------ ------------
NET INCOME $ 452,674 $ 398,601 $ 896,792 $ 769,375
============ ============ ============ ============
Net income attributable to common stock $ 452,674 $ 393,761 $ 896,792 $ 755,811
============ ============ ============ ============
Net income per common share:
Basic $ 0.78 $ 0.70 $ 1.54 $ 1.37
Diluted 0.78 0.68 1.54 1.33
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 5
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net income $ 452,674 $ 398,601 $ 896,792 $ 769,375
Other comprehensive income, net of income taxes:
Gross unrealized gain (loss) on securities:
Unrealized holding gain (loss) during the period, net of
deferred income tax (benefit) of $(270,105), $55,002,
$(310,087), and $70,145 (413,361) 86,028 (474,546) 109,713
Less: adjustment for gains included in net income,
net of income taxes of $96, $5,320, $932 and $5,767 (146) (8,320) (1,427) (9,020)
Less: amortization of market adjustment for mortgage-backed
securities ("MBS") transferred in 1997 from
available for sale to held to maturity, net of deferred
income taxes of $1,904, $2,903, $4,384, and $4,977 (2,913) (4,541) (6,709) (7,784)
---------- ---------- ---------- ----------
(416,420) 73,167 (482,682) 92,909
Minimum pension liability adjustment -- -- (1,760) --
---------- ---------- ---------- ----------
Other comprehensive income (loss) (416,420) 73,167 (484,442) 92,909
---------- ---------- ---------- ----------
Comprehensive income $ 36,254 $ 471,768 $ 412,350 $ 862,284
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 6
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------- --------------
(dollars in thousands)
<S> <C> <C>
ASSETS
Cash $ 1,642,285 $ 2,695,454
Cash equivalents 64,669 61,520
Trading securities 29,899 39,068
Available-for-sale securities, amortized cost of $40,801,138 and $32,861,818:
MBS 39,663,120 32,399,591
Investment securities 405,992 517,462
Held-to-maturity securities, fair value of $14,232,483 and $14,112,620:
MBS 14,145,918 13,992,235
Investment securities 138,135 137,247
Loans:
Loans held in portfolio 111,142,106 107,612,197
Loans held for sale 824,494 1,826,549
Reserve for loan losses (1,053,589) (1,067,840)
-------------- --------------
Total loans 110,913,011 108,370,906
Investment in Federal Home Loan Banks ("FHLBs") 2,419,151 2,030,027
Foreclosed assets 244,188 274,767
Premises and equipment 1,530,636 1,421,162
Intangible assets 960,091 1,009,666
Mortgage servicing rights 492,619 461,295
Other assets 2,391,700 2,082,881
-------------- --------------
Total assets $ 175,041,414 $ 165,493,281
============== ==============
LIABILITIES
Deposits:
Interest-bearing checking accounts $ 6,017,288 $ 6,686,682
Noninterest-bearing checking accounts 7,528,790 6,774,049
Savings accounts and money market deposit accounts ("MMDAs") 31,499,804 28,285,868
Time deposit accounts 38,079,432 43,745,542
-------------- --------------
Total deposits 83,125,314 85,492,141
Federal funds purchased and commercial paper 3,448,525 2,482,830
Securities sold under agreements to repurchase ("reverse repurchase agreements") 26,286,536 17,519,538
Advances from FHLBs 46,223,504 39,748,613
Other borrowings 4,894,603 5,449,508
Other liabilities 2,001,370 5,456,251
-------------- --------------
Total liabilities 165,979,852 156,148,881
STOCKHOLDERS' EQUITY
Common stock, no par value: 1,600,000,000 shares authorized - 582,765,123 and
593,408,525 shares issued -- --
Capital surplus - common stock 2,574,473 2,994,653
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities (395,077) 87,605
Minimum pension liability adjustment (15,084) (13,324)
Retained earnings 6,897,250 6,275,466
-------------- --------------
Total stockholders' equity 9,061,562 9,344,400
-------------- --------------
Total liabilities and stockholders' equity $ 175,041,414 $ 165,493,281
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 7
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Capital Accumulated Common
Surplus- Other Stock
Preferred Common Comprehensive Retained in
Total Stock Stock Income (Loss) Earnings Treasury
----------- --------- ----------- ------------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1998 $ 9,344,400 $ -- $ 2,994,653 $ 74,281 $ 6,275,466 $ --
Net income 896,792 -- -- -- 896,792 --
Cash dividends on common stock (275,008) -- -- -- (275,008) --
Repurchase of common stock, net (457,993) -- (457,993) -- -- --
Common stock issued through
employee stock plans,
including tax benefit 37,583 -- 37,583 -- -- --
Common stock issued under
dividend reinvestment plan 230 -- 230 -- -- --
Other comprehensive loss,
net of related
income tax benefit (484,442) -- -- (484,442) -- --
----------- --------- ----------- --------- ----------- ---------
BALANCE, June 30, 1999 $ 9,061,562 $ -- $ 2,574,473 $(410,161) $ 6,897,250 $ --
=========== ========= =========== ========= =========== =========
BALANCE, December 31, 1997 $ 7,601,085 $ 597,262 $ 2,629,377 $ 62,297 $ 5,244,509 $(932,360)
Net income 769,375 -- -- -- 769,375 --
Cash dividends on preferred
stock (15,279) -- -- -- (15,279) --
Cash dividends on common stock (196,835) -- -- -- (196,835) --
Repurchase of common stock, net (24,082) -- -- -- -- (24,082)
Redemption or conversion of
preferred stock (263,790) (314,684) (19,881) -- -- 70,775
Common stock issued to acquire
Coast Savings Financial,
Inc. ("Coast") 925,143 -- 373,078 -- -- 552,065
Common stock issued through
employee stock plans,
including tax benefit 87,575 -- 84,788 -- -- 2,787
Common stock issued under
dividend reinvestment plan 149 -- 149 -- -- --
Other comprehensive income,
net of related income taxes 92,909 -- -- 92,909 -- --
----------- --------- ----------- --------- ----------- ---------
BALANCE, June 30, 1998 $ 8,976,250 $ 282,578 $ 3,067,511 $ 155,206 $ 5,801,770 $(330,815)
=========== ========= =========== ========= =========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 8
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------
1999 1998
------------ ------------
(dollars in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 896,792 $ 769,375
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 84,557 94,369
Mortgage banking income (66,383) (67,662)
Gain on sale of other assets (16,325) (14,791)
Depreciation and amortization 160,031 153,006
Stock dividends from FHLBs (61,300) (51,500)
Provision for recourse liability 5,142 25,519
Decrease in trading securities 9,658 97,201
Origination of loans held for sale (2,768,851) (6,733,602)
Sales of loans held for sale 5,976,890 8,802,703
Increase in other assets (318,835) (55,716)
Decrease in other liabilities (1,274,439) (168,645)
Other, net 9,333 (7,888)
------------ ------------
Net cash provided by operating activities 2,636,270 2,842,369
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale securities (16,572,405) (6,841,361)
Purchases of held-to-maturity securities (86,510) (12,036)
Sales of available-for-sale securities 1,930,570 1,150,512
Maturities of available-for-sale securities 128,269 254,448
Maturities of held-to-maturity securities 2,408 2,712
Principal payments on securities 7,009,769 3,847,800
Purchases of FHLB stock (335,502) (142,146)
Purchases of loans (2,905,987) (668,739)
Sales of loans 25,215 18,790
Origination of loans, net of principal payments (5,473,844) (4,072,982)
Proceeds from sales of foreclosed assets 189,896 341,825
Cash from Coast acquisition -- 399,591
Purchases of premises and equipment (206,789) (158,674)
Other, net -- (12,602)
------------ ------------
Net cash used in investing activities (16,294,910) (5,892,862)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in deposits (2,366,827) (1,784,719)
Increase in short-term borrowings 3,220,314 3,284,697
Proceeds from long-term borrowings 60,072,591 36,417,472
Repayments of long-term borrowings (47,621,381) (35,060,623)
Cash dividends paid on preferred and common stock (275,008) (212,114)
Redemption of preferred stock -- (263,813)
Repurchase of common stock, net (457,993) (24,082)
Other capital transactions 36,924 57,253
------------ ------------
Net cash provided by financing activities 12,608,620 2,414,071
------------ ------------
Decrease in cash and cash equivalents (1,050,020) (636,422)
Cash and cash equivalents, beginning of period 2,756,974 2,719,997
------------ ------------
Cash and cash equivalents, end of period $ 1,706,954 $ 2,083,575
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 9
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1999 1998
---------- ----------
(dollars in thousands)
<S> <C> <C>
NONCASH INVESTING ACTIVITIES
Loans exchanged for MBS $2,335,484 $ 647,020
Loans exchanged for trading securities -- 107,544
Real estate acquired through foreclosure 197,818 277,338
Loans originated to facilitate the sale of
foreclosed assets 28,973 35,939
Loans held for sale originated to refinance
existing loans 2,216,823 2,273,107
Loans held in portfolio originated to refinance
existing loans 2,210,116 1,044,551
Trade date purchases not yet settled 673,793 --
Trade date sales not yet settled -- 100,230
CASH PAID DURING THE PERIOD FOR
Interest on deposits 1,551,258 1,769,645
Interest on borrowings 2,007,509 1,516,457
Income taxes 473,518 501,298
</TABLE>
See Notes to Consolidated Financial Statements.
7
<PAGE> 10
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: EARNINGS PER SHARE ("EPS")
Basic EPS excludes dilution and is computed by dividing income attributable to
common stock by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.
Information used to calculate EPS was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ -------------- ------------ --------------
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net income:
Net income $ 452,674 $ 398,601 $ 896,792 $ 769,375
Less: accumulated dividends on preferred stock -- (4,840) -- (13,564)
------------ -------------- ------------ --------------
Basic net income attributable to common stock 452,674 393,761 896,792 755,811
Add: accumulated dividends paid on convertible
preferred stock -- 3,904 -- 8,160
------------ -------------- ------------ --------------
Diluted net income attributable to common stock $ 452,674 $ 397,665 $ 896,792 $ 763,971
============ ============== ============ ==============
Weighted average shares:
Basic weighted average number of common shares
outstanding 580,214,730 560,688,632 581,072,470 553,053,350
Dilutive effect of outstanding common stock
equivalents 2,179,938 22,787,039 2,387,996 23,416,731
------------ -------------- ------------ --------------
Diluted weighted average number of common
shares outstanding 582,394,668 583,475,671 583,460,466 576,470,081
============ ============== ============ ==============
Net income per common share:
Basic $ 0.78 $ 0.70 $ 1.54 $ 1.37
Diluted 0.78 0.68 1.54 1.33
</TABLE>
The decline in the dilutive effect of outstanding common stock equivalents
from the prior year's periods was primarily attributable to the conversion to
common stock of the Company's 6.00% Cumulative Convertible Preferred Stock,
Series D in the third quarter of 1998, which caused a corresponding increase in
the average number of common shares outstanding.
As part of the business combination with Keystone Holdings, Inc., 12 million
shares of common stock, with an assigned value of $27.7417 per share, were
issued to an escrow for the benefit of the general and limited partners of
Keystone Holdings, Inc. and the FSLIC Resolution Fund and their transferees. The
conditions upon which these shares are contingently issuable are not based on
earnings or market price. The contingencies had not occurred at June 30, 1999,
and, therefore, the contingently issuable shares have not been included in the
above computations.
8
<PAGE> 11
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2: BORROWINGS
Other borrowings included Company-obligated mandatorily redeemable capital
securities of the Company's subsidiary trusts holding solely $950.0 million
aggregate liquidation amount of subordinated deferrable interest debentures of
the Company as of both June 30, 1999 and December 31, 1998.
In August 1999, the Company issued senior debt securities totaling $750.0
million and bearing a fixed rate of 7.50%. The notes are due on August 15, 2006.
9
<PAGE> 12
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3: LINES OF BUSINESS
Washington Mutual is managed along five major lines of business: mortgage
banking, consumer banking, commercial banking, financial services, and consumer
finance. The treasury group, although not considered a line of business, is
responsible for the management of investments and interest rate risk. The
financial performance of these business lines is measured by the Company's
profitability reporting processes, which utilize various management accounting
techniques to ensure that each business line's financial results reflect the
underlying performance of that business. Assets not originated through the
Company's business operations are allocated to the treasury group. Prior to the
Ahmanson merger and during the fourth quarter of 1998, Ahmanson was managed as a
distinct business segment of Washington Mutual, and was therefore previously
presented as a separate segment. Subsequent to year-end, management began
integrating the operations of Ahmanson into the Company's five major lines of
business. The corresponding information for periods in 1998 has been restated to
conform with the Company's current basis of segmentation.
Financial highlights by lines of business:
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
------------------------------------------------------------------------------------------------
Mortgage Consumer Commercial Financial Consumer Treasury/
Banking Banking Banking Services Finance Other Total
---------- ---------- -------- -------- ---------- ---------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Condensed income statement:
Net interest income after
provision for loan losses $ 214,983 $ 601,962 $ 98,069 $ 501 $ 54,454 $ 135,882 $ 1,105,851
Other income 68,586 193,515 10,854 83,661 6,868 634 364,118
Transaction-related expense 9,352 24,992 283 722 -- 1,220 36,569
Direct expense 61,565 245,490 20,645 50,410 32,774 5,508 416,392
---------- ---------- -------- -------- ---------- ---------- ------------
Income before income taxes 212,652 524,995 87,995 33,030 28,548 129,788 1,017,008
Income taxes 78,944 194,897 32,771 12,518 11,132 48,182 378,444
---------- ---------- -------- -------- ---------- ---------- ------------
Net income (before centrally
managed expense) 133,708 330,098 55,224 20,512 17,416 81,606 638,564
Centrally managed expense 72,729 210,262 5,490 86 262 6,834 295,663
Income taxes (27,000) (78,057) (2,045) (33) (102) (2,536) (109,773)
---------- ---------- -------- -------- ---------- ---------- ------------
Net income $ 87,979 $ 197,893 $ 51,779 $ 20,459 $ 17,256 $ 77,308 $ 452,674
========== ========== ======== ======== ========== ========== ============
</TABLE>
10
<PAGE> 13
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
--------------------------------------------------------------------------------------------------
Mortgage Consumer Commercial Financial Consumer Treasury/
Banking Banking Banking Services Finance Other Total
--------- ----------- --------- --------- --------- --------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Condensed income statement:
Net interest income after
provision for loan losses $ 422,935 $ 1,199,360 $ 199,256 $ 1,095 $ 107,242 $ 261,458 $ 2,191,346
Other income 142,746 373,580 18,878 154,491 13,523 13,044 716,262
Transaction-related expense 13,730 42,543 421 2,196 -- 1,481 60,371
Direct expense 126,305 487,980 40,718 96,322 67,048 9,485 827,858
--------- ----------- --------- --------- --------- --------- -----------
Income before income taxes 425,646 1,042,417 176,995 57,068 53,717 263,536 2,019,379
Income taxes 158,052 387,073 65,894 21,634 20,948 97,930 751,531
--------- ----------- --------- --------- --------- --------- -----------
Net income (before centrally
managed expense) 267,594 655,344 111,101 35,434 32,769 165,606 1,267,848
Centrally managed expense 149,202 415,067 11,250 218 635 13,890 590,262
Income taxes (55,402) (154,124) (4,188) (83) (248) (5,161) (219,206)
--------- ----------- --------- --------- --------- --------- -----------
Net income $ 173,794 $ 394,401 $ 104,039 $ 35,299 $ 32,382 $ 156,877 $ 896,792
========= =========== ========= ========= ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $32,686,457 $85,861,092 $19,123,506 $117,758 $2,909,371 $34,343,230 $175,041,414
=========== =========== =========== ======== ========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
-----------------------------------------------------------------------------------------------
Mortgage Consumer Commercial Financial Consumer Treasury/
Banking Banking Banking Services Finance Other Total
---------- ---------- -------- -------- -------- -------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Condensed income statement:
Net interest income after
provision for loan losses $ 164,730 $ 641,257 $ 95,618 $ 660 $ 49,657 $ 93,381 $ 1,045,303
Other income 128,437 150,281 4,575 62,234 5,777 (21,901) 329,403
Transaction-related expense 5,547 14,277 216 2,624 -- 1,809 24,473
Direct expense 59,023 238,458 18,007 42,222 32,637 17,500 407,847
---------- ---------- -------- -------- -------- -------- ------------
Income before income taxes 228,597 538,803 81,970 18,048 22,797 52,171 942,386
Income taxes 89,284 205,350 31,249 6,885 9,001 19,998 361,767
---------- ---------- -------- -------- -------- -------- ------------
Net income (before centrally
managed expense) 139,313 333,453 50,721 11,163 13,796 32,173 580,619
Centrally managed expense 78,445 201,992 4,435 358 255 9,943 295,428
Income taxes (30,638) (76,984) (1,691) (137) (101) (3,859) (113,410)
---------- ---------- -------- -------- -------- -------- ------------
Net income $ 91,506 $ 208,445 $ 47,977 $ 10,942 $ 13,642 $ 26,089 $ 398,601
========== ========== ======== ======== ======== ======== ============
</TABLE>
11
<PAGE> 14
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
---------------------------------------------------------------------------------------------------
Mortgage Consumer Commercial Financial Consumer Treasury/
Banking Banking Banking Services Finance Other Total
------------ ------------ ------------ --------- ----------- ------------ -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Condensed income statement:
Net interest income after
provision for loan losses $ 366,887 $ 1,260,060 $ 187,704 $ 1,165 $ 98,564 $ 141,250 $ 2,055,630
Other income 184,894 283,030 11,242 115,541 12,266 (13,208) 593,765
Transaction-related expense 12,263 37,365 634 2,756 -- 3,264 56,282
Direct expense 121,915 459,218 37,728 83,298 66,417 33,089 801,665
------------ ------------ ------------ --------- ----------- ------------ -------------
Income before income taxes 417,603 1,046,507 160,584 30,652 44,413 91,689 1,791,448
Income taxes 161,310 398,888 61,219 11,751 17,573 35,110 685,851
------------ ------------ ------------ --------- ----------- ------------ -------------
Net income (before centrally
managed expense) 256,293 647,619 99,365 18,901 26,840 56,579 1,105,597
Centrally managed expense 140,375 372,908 9,935 1,937 435 18,956 544,546
Income taxes (54,224) (142,138) (3,787) (743) (173) (7,259) (208,324)
------------ ------------ ------------ --------- ----------- ------------ -------------
Net income $ 170,142 $ 416,849 $ 93,217 $ 17,707 $ 26,578 $ 44,882 $ 769,375
============ ============ ============ ========= =========== ============ =============
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $ 29,592,109 $ 91,295,004 $ 20,169,581 $ 104,322 $ 2,492,109 $ 12,400,147 $ 156,053,272
============ ============ ============ ========= =========== ============ =============
</TABLE>
12
<PAGE> 15
WASHINGTON MUTUAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4: IMPACT OF APPLICABLE RECENTLY ISSUED OR ADOPTED ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued in June 1998 and
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. The Financial Accounting Standards Board has issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No. 133," which delays the implementation date of
SFAS No. 133 for one year, to fiscal years beginning after June 15, 2000. The
effect of the adoption of this statement on the results of operations or the
financial condition of the Company has not yet been determined.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise," was issued in October 1998. Prior to issuance of SFAS No. 134, when
a mortgage banking company securitized mortgage loans held for sale but did not
sell the security in the secondary market, the security was classified as
trading. SFAS No. 134 requires that the security be classified as either
trading, available for sale or held to maturity according to the Company's
intent unless the Company has already committed to sell the security before or
during the securitization process. The adoption of this statement by the Company
on January 1, 1999 did not affect the results of operations or financial
condition of the Company.
NOTE 5: LONG BEACH FINANCIAL CORPORATION MERGER
On May 19, 1999, Washington Mutual announced that the Company had signed a
definitive agreement to purchase California-based Long Beach Financial
Corporation ("Long Beach"). Each share of Long Beach common stock will be
converted into the right to receive cash in the amount of $15.50 or a number of
shares of Washington Mutual common stock determined by dividing $15.50 by the
current market value of Washington Mutual common stock. On a pro forma combined
basis, the purchase is expected to create goodwill of approximately $280
million. The transaction requires the approvals of certain state regulators and
Long Beach shareholders and is expected to close by the beginning of the fourth
quarter of 1999.
13
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes presented elsewhere in this report.
This report contains forward-looking statements, which are not historical
facts and pertain to future operating results of Washington Mutual, Inc. These
forward-looking statements are within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are inherently
subject to significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the Company's control. In addition,
these forward-looking statements are subject to assumptions with respect to
future business strategies and decisions that are subject to change. Actual
results may differ materially from the results discussed in these
forward-looking statements for the reasons, among others, discussed under the
heading "Business-Risk Factors" in the Company's 1998 Annual Report on Form
10-K.
GENERAL
Washington Mutual, Inc. ("Washington Mutual" or the "Company") is a financial
services company committed to serving consumers and small to mid-sized
businesses. The Company's banking subsidiaries, Washington Mutual Bank, FA
("WMBFA"), Washington Mutual Bank ("WMB") and Washington Mutual Bank fsb
("WMBfsb"), accept deposits from the general public, make residential loans,
consumer loans, and limited types of commercial real estate loans (primarily
loans secured by multi-family properties), and engage in certain commercial
banking activities. The Company's consumer finance operations provide direct
installment loans and related credit insurance services and purchase retail
installment contracts. Washington Mutual also markets annuities and other
insurance products, offers full service securities brokerage, and acts as the
investment advisor to and the distributor of mutual funds.
As interest rates decreased during 1998, the Company experienced a substantial
increase in the percentage of fixed-rate single-family residential ("SFR")
mortgage originations. Since the Company's policy is to sell a substantial
portion of its fixed-rate originations, during 1998 and the first half of 1999,
the Company purchased investment grade mortgage-backed securities ("MBS") and
whole loans in the secondary market in order to utilize its excess capital.
These purchases, however, created assets with generally lower rates of return
than loans originated by the Company and retained in its portfolio.
Commencing in late 1998 and continuing through early 1999, mortgage interest
rates generally decreased. During the second quarter of 1999, a rise in
long-term interest rates prompted renewed interest in adjustable-rate mortgage
("ARM") loans with a corresponding decrease in fixed-rate loan originations.
ARMs comprised 60% of the Company's SFR originations in the first six months of
1999 compared to 44% in the first six months of 1998. Despite this increase in
ARM originations, principal repayments in the Company's MBS and loan portfolios
have remained above 20%. Although the Company has continued to purchase whole
loans and MBS in the secondary market, it has not been able to achieve its asset
growth goals at anticipated spreads.
In April 1999, the Company's Board of Directors approved a share repurchase
program to acquire up to 20 million shares of common stock. During the second
quarter of 1999, the Company repurchased 12.3 million common shares at an
average price of $37.21. In May 1999, the Company's Board of Directors
authorized the repurchase of common shares which the Company intends to reissue
to shareholders of Long Beach Financial Corporation as consideration in the
pending merger with Long Beach Financial. In July 1999, the Board of Directors
authorized the Company to repurchase up to 30 million additional shares.
14
<PAGE> 17
RESULTS OF OPERATIONS
NET INTEREST INCOME. Net interest income for the second quarter of 1999 was
$1.15 billion, a 5% increase from $1.09 billion in the second quarter of 1998.
The increase was due to an 11% rise in average interest-earning assets to
$167.43 billion from $150.28 billion in the second quarter of 1998, which more
than offset the decline in the net interest spread to 2.58% in the second
quarter of 1999 from 2.72% in the second quarter of 1998. The 6% increase in net
interest income for the first half of 1999 to $2.28 billion was also due to an
11% rise in average interest-earning assets from the first half of 1998. The net
interest spread declined to 2.60% in the first six months of 1999 from 2.73% for
the same period in 1998. The Company's net interest margin declined to 2.74% in
the second quarter of 1999 from 2.89% for the same period in 1998. Similarly,
the net interest margin declined to 2.76% in the first half of 1999 from 2.90%
for the same period in 1998.
The yield on loans declined 43 basis points to 7.36% for the second quarter of
1999 from 7.79% for the same period in 1998. The yield on loans declined 40
basis points to 7.40% for the first half of 1999 from 7.80% for the same period
in 1998. This resulted from a gradual decline in market interest rates during
1998 and early 1999, which reduced the yield on the Company's ARM portfolio and
encouraged the prepayment of loans with higher rates. In addition, rates on new
ARMs originated by the Company were generally lower than the rates on loans in
the Company's portfolio.
The yield on MBS declined 51 basis points to 6.61% for the second quarter of
1999 from 7.12% for the same period in 1998. This decline was attributable to
paydowns on higher yielding MBS, purchases of $13.15 billion of MBS at a
weighted average rate of 6.33% during the latter half of 1998 and $14.75 billion
at a weighted average rate of 6.25% during the first half of 1999, and the
downward effect of market interest rates on repricing of adjustable-rate MBS.
The yield on MBS declined 51 basis points to 6.68% for the first half of 1999
from 7.19% for the same period a year ago.
The 39 basis points decrease in the cost of deposits to 3.79% for second
quarter 1999 from 4.18% for the same period in 1998 was primarily a result of a
change in the composition of deposits. Higher-costing time deposits decreased
from 57% of total deposits at June 30, 1998 to 46% at June 30, 1999, which
reflected the Company's focus on growing retail transaction accounts rather than
time deposits. Transaction accounts, consisting of savings accounts, money
market deposit accounts ("MMDAs") and checking accounts, have the benefit of
lower interest costs, compared with time deposits.
15
<PAGE> 18
The Company's cost of borrowings declined 63 basis points to 5.26% for second
quarter 1999 from 5.89% for second quarter 1998, reflecting a decline in
short-term rates. For example, the three-month London Interbank Offering Rate
("LIBOR") dropped from an average rate of 5.69% during second quarter 1998 to an
average rate of 5.07% for second quarter 1999. At June 30, 1999, 46% of the
Company's borrowings were indexed to LIBOR. Although there was a modest rise in
interest rates late in the second quarter of 1999, the Company's overall cost of
borrowings was lower during the first half of 1999, compared with the same
period in 1998. The cost of borrowings decreased 59 basis points to 5.34% for
the first half of 1999, as compared with 5.93% for the same period a year ago.
Selected average financial balances and the net interest spread and margin
were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Average Balances:
Loans $109,523,390 $105,844,558 $109,400,323 $103,889,404
MBS 54,227,044 40,323,676 50,019,420 38,787,855
Investment securities 3,681,555 4,116,370 3,646,188 4,079,243
------------ ------------ ------------ ------------
Total interest-earning assets 167,431,989 150,284,604 163,065,931 146,756,502
Deposits 83,920,105 88,979,283 84,103,172 87,643,595
Borrowings 77,666,546 56,170,181 72,861,536 54,047,066
------------ ------------ ------------ ------------
Total interest-bearing liabilities 161,586,651 145,149,464 156,964,708 141,690,661
Total assets 173,205,859 156,435,935 168,748,350 152,806,969
Stockholders' equity 9,509,791 8,847,867 9,483,253 8,496,603
Weighted Average Yield On:
Loans 7.36% 7.79% 7.40% 7.80%
MBS 6.61 7.12 6.68 7.19
Investment securities 5.54 6.28 5.55 6.21
Interest-earning assets 7.07 7.57 7.14 7.60
Weighted Average Cost of:
Deposits 3.79 4.18 3.85 4.21
Borrowings 5.26 5.89 5.34 5.93
Interest-bearing liabilities 4.49 4.85 4.54 4.87
Net interest spread 2.58 2.72 2.60 2.73
Net interest margin 2.74 2.89 2.76 2.90
</TABLE>
The net interest spread is the difference between the Company's weighted
average yield on its interest-earning assets and the weighted average cost of
its interest-bearing liabilities. The net interest margin measures the Company's
annualized net interest income as a percentage of average interest-earning
assets.
16
<PAGE> 19
The dollar amounts of interest income and interest expense fluctuate depending
upon changes in interest rates and upon changes in amounts (volume) of the
Company's interest-earning assets and interest-bearing liabilities. Changes
attributable to (i) changes in volume (changes in average outstanding balances
multiplied by the prior period's rate), (ii) changes in rate (changes in average
interest rate multiplied by the prior period's volume), and (iii) changes in
rate/volume (changes in rate times the change in volume that were allocated
proportionately to the changes in volume and the changes in rate) were as
follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 vs. 1998 1999 vs. 1998
------------------------------------- -------------------------------------
Increase/(Decrease) Due to Increase/(Decrease) Due to
------------------------------------- -------------------------------------
Volume Rate Total Volume Rate Total
--------- --------- --------- --------- --------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans $ 69,850 $(116,386) $ (46,536) $ 209,058 $(217,289) $ (8,231)
MBS 232,553 (55,334) 177,219 380,594 (103,109) 277,485
Investment securities (6,450) (7,194) (13,644) (12,686) (12,647) (25,333)
--------- --------- --------- --------- --------- ---------
Total interest income 295,953 (178,914) 117,039 576,966 (333,045) 243,921
Interest Expense:
Deposits (50,835) (83,900) (134,735) (71,991) (152,913) (224,904)
Borrowings 289,674 (96,911) 192,763 512,478 (169,557) 342,921
--------- --------- --------- --------- --------- ---------
Total interest expense 238,839 (180,811) 58,028 440,487 (322,470) 118,017
--------- --------- --------- --------- --------- ---------
Net interest income $ 57,114 $ 1,897 $ 59,011 $ 136,479 $ (10,575) $ 125,904
========= ========= ========= ========= ========= =========
</TABLE>
OTHER INCOME. Other income was $364.1 million and $716.3 million for the
second quarter and first six months of 1999, compared with $329.4 million and
$593.8 million for the same periods in 1998.
Other income consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ------------------------
1999 1998 1999 1998
-------- ---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Depositor and other retail banking fees $182,114 $ 135,216 $ 345,531 $ 254,696
Loan servicing income 23,881 30,926 49,912 63,273
Loan related income 26,859 30,161 53,406 55,252
Securities fees and commissions 69,364 51,701 128,886 98,486
Insurance fees and commissions 10,269 13,586 20,939 26,377
Mortgage banking income 28,021 40,614 66,383 67,662
Gain on sale of other assets 4,392 13,640 16,325 14,787
Provision for recourse liability -- (10,314) (5,142) (25,519)
Other operating income 19,218 23,873 40,022 38,751
-------- ---------- ---------- ----------
Total other income $364,118 $ 329,403 $ 716,262 $ 593,765
======== ========== ========== ==========
</TABLE>
17
<PAGE> 20
Depositor and other retail banking fees of $182.1 million for the second
quarter of 1999 increased from $135.2 million for the same period a year ago.
Depositor and other retail banking fees of $345.5 million for the first six
months of 1999 increased from $254.7 million for the same period a year ago. The
increases primarily reflected the implementation of the Company's consumer
banking strategy in the former Great Western and American Savings Bank financial
centers. The strategy emphasizes the sale of value-added, fee-based services and
an increased emphasis on the collection of fees. Additionally, an 8% increase in
the number of checking accounts contributed to the increase in fees.
The growth in depositor and other retail banking fees has been offset somewhat
by an increase in the amount of deposit account-related losses (included in
other operating expense) incurred by the Company resulting from the increased
number of checking accounts. The number of net new retail checking accounts
increased by 78,622 accounts during the second quarter of 1999 and 172,284
accounts during the first half of 1999.
Securities fees and commissions increased to $69.4 million in the second
quarter of 1999 from $51.7 million for the same period in 1998. These fees
increased to $128.9 million in the first six months of 1999 from $98.5 million
for the comparable period in 1998. The increases were primarily attributable to
higher sales of mutual funds and annuities. In addition, the former Ahmanson
securities brokerage business began to offer Washington Mutual's products and
services in early 1999, which generate higher fees.
Loan servicing income declined to $23.9 million for the second quarter of 1999
from $30.9 million for the comparable period in 1998. Loan servicing income
declined to $49.9 million for the six months ended June 30, 1999 from $63.3
million for the same period in 1998 due primarily to a four basis point drop in
the average servicing fee. The decrease for the first six months of 1999 was
primarily due to a 5.5 basis point drop in the average servicing fee.
The Company had mortgage banking income during the second quarter of 1999 of
$28.0 million, compared with $40.6 million for the same period a year ago. It is
the Company's strategy to sell the majority of its conforming fixed-rate loan
production in the secondary market. However, due to the anticipated rise in
interest rates and resulting customer shift to ARMs, the Company originated and
therefore sold fewer fixed-rate mortgage loans during second quarter 1999.
Fixed-rate SFR loan originations declined to $3.77 billion during second quarter
1999 from $4.50 billion in first quarter 1999 and $5.59 billion in second
quarter 1998. The Company had mortgage banking income during the first half of
1999 of $66.4 million, compared with $67.7 million for the same period a year
ago. Fixed-rate SFR loan originations decreased to $8.27 billion during the
first half of 1999, compared with $10.88 billion for the same period a year ago.
The sale of other assets resulted in net gains of $4.4 million for the second
quarter of 1999, compared with $13.6 million for the same period in 1998. The
net gains in the second quarter of 1999 included a $2.1 million gain on the sale
of receivables related to financial services activities and a $1.2 million gain
on the sale of certain commercial banking trust assets. The net gains during the
second quarter of 1998 primarily resulted from sales and calls of
mortgage-backed and investment securities as well as an increase in the
valuation of securities held for trading.
The sale of other assets resulted in net gains of $16.3 million during the six
months ended June 30, 1999, compared with $14.8 million for the same period in
1998. In addition to the gains recognized during the second quarter of 1999, the
net gains during the first half of 1999 included a $7.1 million gain recognized
on the sale of the former Coast headquarters property and a $1.8 million gain on
the sale of assets associated with the expiration of a leveraged lease.
There was no provision for recourse liability in the second quarter of 1999,
compared with $10.3 million for the same period in 1998. This provision declined
to $5.1 million in the first half of 1999 from $25.5 million for the same period
one year ago. The June 1999 quarterly analysis of the recourse liability on
loans securitized and retained with recourse and loans sold with recourse
confirmed the adequacy of the recourse liability when compared to the recourse
obligation at June 30, 1999.
18
<PAGE> 21
OTHER EXPENSE. Other expense totaled $748.6 million and $1.48 billion for the
second quarter and first six months of 1999, compared with $727.7 million and
$1.40 billion for the same periods in 1998.
Other expense consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ------------------------
1999 1998 1999 1998
---------- -------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
Salaries and employee benefits $ 302,120 $305,407 $ 603,729 $ 596,638
Occupancy and equipment:
Premises and equipment 86,676 98,974 171,000 195,096
Data processing 50,484 27,392 101,064 51,487
---------- -------- ---------- ----------
Total occupancy and equipment 137,160 126,366 272,064 246,583
Telecommunications and outsourced information services 67,180 66,729 137,244 126,290
Regulatory assessments 14,840 16,635 30,203 32,891
Transaction-related expense 36,569 24,473 60,371 56,282
Amortization of intangible assets 23,262 26,241 48,635 49,825
Foreclosed asset (income) expense (869) 10,345 729 19,228
Other operating expense:
Advertising and promotion 28,883 30,609 55,733 57,663
Operating losses and settlements 31,874 14,002 58,691 26,697
Postage 21,333 18,655 43,384 36,585
Professional fees 16,995 19,685 33,212 31,038
Office supplies 9,285 12,120 17,133 23,043
Other 59,992 56,481 117,363 99,730
---------- -------- ---------- ----------
Total other operating expense 168,362 151,552 325,516 274,756
---------- -------- ---------- ----------
Total other expense $ 748,624 $727,748 $1,478,491 $1,402,493
========== ======== ========== ==========
</TABLE>
Salaries and employee benefits decreased to $302.1 million for the second
quarter of 1999 from $305.4 million for the same period in 1998. Salaries and
employee benefits increased to $603.7 million for the first six months of 1999
from $596.6 million for the same period in 1998. Despite decreases in full-time
equivalent employees ("FTE") in administrative support areas, FTE increased
during the first half of 1999 because of additions to staff in loan production
and deposit operation areas. FTE were 28,108 at June 30, 1999, compared with
27,768 at June 30, 1998 and 27,931 at March 31, 1999. Also affecting the
decrease in salaries and employee benefits was the alignment of Ahmanson loan
agent compensation with the Washington Mutual model. The decline was partially
offset by a lower deferral of salary and benefits expense resulting from
improved efficiencies in originating loans, which resulted in lower origination
costs.
Occupancy and equipment expense was $137.2 million for the second quarter of
1999, up from $126.4 million for the same period a year ago. Occupancy and
equipment expense was $272.1 million for the first six months of 1999 compared
with $246.6 million for the same period in 1998. The primary contributors to
these increases were computer system upgrades and the conversion of systems at
the former Ahmanson financial centers to Washington Mutual's platforms. Also
contributing to the increase were higher rental expenses, a higher volume of
maintenance expenses and an increase in property taxes.
Telecommunications and outsourced information services expense increased
slightly to $67.2 million for the second quarter of 1999 from $66.7 million for
the same period in 1998. For the first six months of 1999, this expense was
$137.2 million, up from $126.3 million for the same period a year ago. These
changes reflected increased volume and usage, resulting from the Company's
growth, the need for higher levels of customer support services, and the
continued use of outsourced data processing services.
As a result of merger activity, the Company recorded transaction-related
expense of $36.6 million for the second quarter of 1999 and $24.5 million for
the same period in 1998. For the first six months of 1999 and 1998, this expense
was $60.4 million and $56.3 million. The majority of the charges were for
contract and temporary employment services, severance and related payments,
facilities and equipment impairment, and other costs, which are being expensed
as incurred. Transaction-related expense in the
19
<PAGE> 22
first quarter of 1998 included $23.2 million related to the Coast acquisition.
The Company continued to incur transaction-related expenses in connection with
the Ahmanson merger in second quarter 1999, during which time several key
computer systems were converted.
During the second quarter of 1999, these transaction-related expenses were
partially offset by reductions in the estimates of facilities holding costs of
$7.9 million and other accruals of $1.1 million. The reduction in estimates of
facilities holding costs and lease payments is attributable in part to the fact
that certain office space was subleased more quickly and at higher rates than
expected.
The Company expected staff reductions related to the Ahmanson merger of
approximately 3,400. As of June 30, 1999, 2,978 employee separations had
occurred. The majority of the remaining employee separations are planned to be
completed by the end of September 1999. The actual number of staff reductions is
not anticipated to be materially different from the original estimate.
At June 30, 1999, the carrying amount of all assets acquired through mergers
and held for future disposal was $52.0 million.
20
<PAGE> 23
Reconciliation of the transaction-related expense and accrual activity was as
follows:
<TABLE>
<CAPTION>
Three Months
March 31, Ended June 30, Three Months
1999 June 30, 1999 1999 Ended
Accrued Activity Charged Accrued June 30, 1999
Balance Against Accrual(1) Balance Period Costs(2)
--------- ------------------ --------- ---------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Severance $ 56,217 $ (36,357) $ 19,860 $ 4,544
Premises and equipment 156,110 (35,082) 121,028 (3,143)
Legal, underwriting and other
direct transaction costs -- -- -- 2,072
Contract cancellation costs 6,817 (890) 5,927 123
Other -- -- -- 32,973
--------- --------- -------- --------
$ 219,144 $ (72,329) $146,815 $ 36,569
========= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Six Months
December 31, Ended June 30, Six Months
1998 June 30, 1999 1999 Ended
Accrued Activity Charged Accrued June 30, 1999
Balance Against Accrual(1) Balance Period Costs(2)
------------ ------------------ -------- ---------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Severance $ 86,014 $ (66,154) $ 19,860 $ 9,889
Premises and equipment 158,932 (37,904) 121,028 2,771
Legal, underwriting and other
direct transaction costs -- -- -- 4,041
Contract cancellation costs 15,678 (9,751) 5,927 (6,578)
Other 1,406 (1,406) -- 50,248
--------- --------- -------- --------
$ 262,030 $(115,215) $146,815 $ 60,371
========= ========= ======== ========
- -----------
(1) Amounts include activity charged against the accrual, additional accruals
and reversals of excess accruals.
(2) Amounts include additional accruals and reversals of excess accruals.
</TABLE>
Amortization of intangible assets was $48.6 million for the first six months
of 1999, down slightly from $49.8 million for the same period in 1998. In
February 1998, Ahmanson acquired Coast under the purchase accounting method,
which created intangible assets of $516.5 million and amortization expense of
$14.2 million in the first six months of 1999, compared with $10.1 million in
the same period of 1998. This increase was offset by the $3.3 million decrease
from goodwill and other intangible assets that were fully amortized during the
second quarter of 1999.
Foreclosed assets generated net income of $0.9 million during second quarter
1999, compared with net expense of $10.3 million during the same period in 1998.
Similarly, foreclosed asset expense declined to $0.7 million for the first half
of 1999 from $19.2 million for the comparable period in 1998. The decrease for
the comparable second quarters primarily reflected a $5.1 million decline in
write downs and increased net gains on the sales of real estate owned of $3.8
million. For the first six months of 1999, compared with the same period a year
ago, the decrease in foreclosed asset expense was primarily comprised of an $8.4
million increase in net gains on the sales of real estate owned and a $7.4
million decline in write downs. The overall decrease in foreclosed asset expense
during the 1999 periods, compared with the same periods in 1998, reflected the
improvement in real estate values, as shown by the higher gains and lower write
downs.
Other operating expense increased to $168.4 million in the second quarter of
1999 from $151.6 million for the same period in 1998 primarily as a result of an
increase in operating losses and settlements to $31.9 million for second quarter
1999 from $14.0 million for the same period a year ago. Other operating expense
increased to $325.5 million during the first six months of 1999 from $274.8
million for the same period in 1998. The higher operating losses and settlements
reflected the continued growth in deposit accounts and losses related to deposit
system conversions in connection with
21
<PAGE> 24
the Ahmanson merger. Postage costs also increased by $2.7 million and $6.8
million for the second quarter and first six months of 1999 as a result of the
Ahmanson merger, which required several special customer notifications as well
as increased mailings related to various marketing campaigns.
For the six months ended June 30, 1999, the other category of other operating
expense increased to $117.4 million from $99.7 million for the same period a
year ago. Included in the other category are items such as travel and training,
loan expenses, other proprietary mutual fund expense, other real estate expense,
outside printing and forms, security services, contributions, insurance and
other miscellaneous expense. Overall, the higher level of other operating
expense reflects the growth and geographic expansion of the Company.
TAXATION. Income taxes include federal and applicable state income taxes and
payments in lieu of taxes. Income taxes of $268.7 million and $532.3 million for
the second quarter and first six months of 1999 represented an effective tax
rate of 37.25%. Income taxes were $248.4 million and $477.5 million for the
second quarter and first six months of 1998, which represented effective tax
rates of 38.39% and 38.30%. The decline in the effective tax rate was due, in
part, to benefits realized from certain tax strategies of the Company.
REVIEW OF FINANCIAL CONDITION
ASSETS. At June 30, 1999, the Company's total assets were $175.04 billion, an
increase of 6% from $165.49 billion at December 31, 1998. The asset growth was
the result of loan originations and asset purchases, partially offset by
payments on loans and MBS.
SECURITIES. The Company's securities portfolio increased by $7.30 billion to
$54.38 billion during the first half of 1999 due to the purchase of $14.75
billion in investment grade MBS in the secondary market. At June 30, 1999, 55%
of MBS in the Company's securities portfolio were adjustable rate, compared with
71% at December 31, 1998. At June 30, 1999, of the $29.61 billion in MBS with an
adjustable rate, 82% were indexed to COFI, 13% were indexed to U.S. Treasury
securities, and 5% were indexed to LIBOR.
LOANS. Total loans (net of reserve for loan losses) at June 30, 1999 were
$110.91 billion, a 2% increase from $108.37 billion at December 31, 1998. Loans
held in portfolio increased by $3.53 billion during the first half of 1999 as a
result of originations of $20.53 billion offset by a high level of prepayment
activity during the first six months of 1999, compared with the same period a
year ago. The $1.00 billion decrease in loans held for sale was primarily due to
lower fixed-rate loan production. During the first six months of 1999, the
Company purchased $1.75 billion of whole loans, of which $1.04 billion were
subprime loans at a weighted average yield of 8.27%.
ARM production accounted for 66% and 60% of total SFR originations in the
second quarter and first six months of 1999, up from 48% and 44% for the same
periods a year ago. In particular, medium-term ARM originations rose to 39% of
total SFR originations in the second quarter of 1999 from 20% in the second
quarter of 1998. Similarly, for the first half of 1999, these originations rose
to 36% from 20% for the same period in 1998. The shift by borrowers from
fixed-rate mortgages to medium-term ARMs was in response to a recent increase in
rates for fixed-rate loans and a steepening of the yield curve. The difference
between the yield on a three-month U.S Treasury bill and a ten-year U.S.
government note averaged 90 basis points and 73 basis points in the second
quarter of 1999 and first six months of 1999, compared with 50 basis points and
45 basis points for the same periods in 1998.
LIABILITIES. Due to increased market competition for customer deposits, the
Company has increasingly relied upon wholesale borrowings to fund its asset
growth. The decrease in deposits from $85.49 billion at December 31, 1998 to
$83.13 billion at June 30, 1999 reflected the competitive environment of banking
institutions and the wide array of investment opportunities available to
consumers. The Company's strategy has been to increase its ratio of transaction
accounts to total deposits. As a result of this strategy, transaction accounts
have increased as a percentage of total deposits to 54% at June 30, 1999, from
49% at year-end 1998. Transaction accounts generally carry
22
<PAGE> 25
lower interest costs to the Company, compared with time deposit accounts. Even
though transaction accounts are more liquid, they are considered by the Company
to be the core relationship with its customers. In the aggregate, the Company
views these core accounts to be a more stable source of long-term funding than
time deposits.
The Company's asset growth during the first half of 1999 was funded by
borrowings in the form of securities sold under agreements to repurchase
("reverse repurchase agreements") and advances from the FHLBs of Seattle and San
Francisco. The exact mix of borrowings at any given time is dependent upon a
variety of factors, primarily the market pricing of the individual borrowing
sources.
ASSET QUALITY
PROVISION AND RESERVE FOR LOAN LOSSES. The Company analyzes several important
elements in determining the level of the provision for loan losses in any given
period, such as current and anticipated economic conditions, nonperforming asset
trends, historical loan loss experience, and plans for problem loan
administration and resolution. These elements are also captured in a migration
analysis performed on the loan portfolio on a quarterly basis and used in
determining the loan loss provision.
During the second quarter of 1999, net charge offs increased to $59.0 million
from $42.0 million for the same period in 1998. Net charge offs increased to
$104.0 million for the first half of 1999 from $93.7 million for the same period
a year ago. Included in the 1999 periods were charge offs of $17.8 million in
previously established specific reserves on four commercial real estate
properties that were obtained through acquisitions. Excluding the charge off of
these specific reserves, charge offs have continued to decline from 1998 levels,
which reflects the improvements in credit quality and real estate values. The
Company's analysis of these trends, growth in the loan portfolio and other
factors considered in the quarterly determination of the adequacy of the loan
loss reserve resulted in a lower provision for loan losses from the prior year's
periods.
The provision for loan losses declined to $42.9 million for second quarter
1999 from $44.4 million for the same period a year ago. Similarly, the provision
for the first six months of 1999 was $84.6 million, down from $94.4 million for
the comparable period in 1998. Because of favorable credit trends, the provision
for loan losses was $16.1 million and $19.5 million less than net charge offs
for the second quarter and first half of 1999. The Company's consistent
application of its loan loss reserve methodology has resulted in reduced
provision levels. However, no assurance can be given that the Company will not,
in any particular period, sustain loan losses that are sizable in relation to
the amount reserved, or that subsequent evaluation of the loan portfolio, in
light of the factors then prevailing, including economic conditions and the
Company's ongoing examination process and that of its regulators, will not
require significant increases in the reserve for loan losses.
23
<PAGE> 26
Changes in the reserve for loan losses were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Balance, beginning of period $ 1,069,719 $ 1,153,921 $ 1,067,840 $ 1,047,845
Provision for loan losses 42,857 44,394 84,557 94,369
Reserves added through business combinations -- -- -- 107,830
Reserves transferred to recourse liability -- -- (7,500) --
Reserves transferred from other liabilities -- -- 12,714 --
Loans charged off:
SFR and SFR construction (8,524) (17,046) (19,604) (39,042)
Manufactured housing, second mortgage and
other consumer (10,435) (9,097) (23,845) (18,295)
Commercial business (1,261) (1,408) (3,716) (2,767)
Commercial real estate (22,878) (9,225) (26,803) (18,970)
Consumer finance (22,808) (21,588) (46,632) (43,693)
------------ ------------ ------------ ------------
(65,906) (58,364) (120,600) (122,767)
Recoveries of loans previously charged off:
SFR and SFR construction 152 5,597 2,247 8,699
Manufactured housing, second mortgage and
other consumer 737 524 1,274 982
Commercial business 223 88 451 184
Commercial real estate 1,692 5,518 4,366 10,263
Consumer finance 4,115 4,669 8,240 8,942
------------ ------------ ------------ ------------
6,919 16,396 16,578 29,070
------------ ------------ ------------ ------------
Net charge offs (58,987) (41,968) (104,022) (93,697)
------------ ------------ ------------ ------------
Balance, end of period $ 1,053,589 $ 1,156,347 $ 1,053,589 $ 1,156,347
============ ============ ============ ============
Net charge offs as a percentage of average loans 0.22% 0.16% 0.19% 0.18%
</TABLE>
An analysis of the reserve for loan losses was as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
(dollars in thousands)
<S> <C> <C>
Specific and allocated reserves:
Commercial real estate $ 84,983 $ 133,167
Commercial business 18,158 9,690
Builder construction 3,622 852
---------- ----------
106,763 143,709
Unallocated reserves 946,826 924,131
---------- ----------
$1,053,589 $1,067,840
========== ==========
Total reserve for loan losses as a percentage of:
Nonaccrual loans 128% 114%
Nonperforming assets 99 88
Total loans (exclusive of the reserve for loan losses) 0.94 0.98
</TABLE>
24
<PAGE> 27
Based on the Company's quarterly analysis of the adequacy of the reserve for
loan losses, the reserve decreased slightly from year-end 1998 to June 30, 1999.
As a result of this decline and the $2.53 billion increase in the loan
portfolio, the reserve as a percentage of the overall loan portfolio declined
during the first half of 1999. However, the reserve as a percentage of
nonaccrual loans and nonperforming assets has increased due to the decline in
these assets. See "Nonperforming Assets." This decline reflects the overall
improvement in credit quality, as described above.
The Company follows the practice of securitizing (with and without recourse)
certain loans and retaining them in its investment portfolio. The Company's
intent is to hold the majority of these securities to maturity. In addition to
retaining securitized loans with recourse, the Company has, from time to time,
sold these securities in the secondary market.
At June 30, 1999, the Company had $21.85 billion of loans securitized and
retained with recourse, and $5.18 billion of loans and MBS sold with recourse.
At June 30, 1999, the total liability for this recourse was $122.0 million.
Changes in the recourse liability were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- -------- ---------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Balance, beginning of period $ 127,966 $ 77,661 $ 144,257 $ 80,157
Transfer of reserve on held-to-maturity REMIC securities -- -- (22,500) --
Transfer from reserve for loan losses -- -- 7,500 --
Charge offs, net of provision for losses (5,963) (3,614) (7,254) (6,110)
---------- -------- ---------- --------
Balance, end of period $ 122,003 $ 74,047 $ 122,003 $ 74,047
========== ======== ========== ========
</TABLE>
25
<PAGE> 28
NONPERFORMING ASSETS. Assets considered to be nonperforming include nonaccrual
loans and foreclosed assets. When loans securitized or sold on a recourse basis
are nonperforming, they are repurchased upon foreclosure by the Company and
included in foreclosed assets. Management's classification of a loan as
nonaccrual does not necessarily indicate that the principal of the loan is
uncollectible in whole or in part. Loans are generally placed on nonaccrual
status when they are four payments or more past due.
Nonperforming assets were $1.06 billion or 0.61% of total assets at June 30,
1999, compared with $1.21 billion or 0.73% of total assets at December 31, 1998.
Nonperforming assets consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------- ------------
(dollars in thousands)
<S> <C> <C>
Nonaccrual loans:
SFR $ 649,379 $ 752,261
SFR construction 12,210 9,188
Manufactured housing 16,391 14,669
Second mortgage and other consumer 30,289 24,284
Commercial business 6,994 7,416
Apartment buildings 37,167 43,653
Other commercial real estate 14,244 33,077
Consumer finance 53,744 53,412
---------- ----------
820,418 937,960
Foreclosed assets 244,188 274,767
---------- ----------
$1,064,606 $1,212,727
========== ==========
Nonperforming assets as a percentage of total assets 0.61% 0.73%
</TABLE>
SFR nonaccrual loans declined $102.9 million from December 31, 1998 to June
30, 1999. In addition, commercial real estate nonaccrual loans dropped $25.3
million during the same period. The decrease in these nonaccrual loans is
primarily due to the improvement in the California economy.
26
<PAGE> 29
ASSET AND LIABILITY MANAGEMENT STRATEGY
The long-run profitability of the Company depends not only on the success of
the services it offers to its customers and the credit quality of its loans and
securities, but also the extent to which its earnings are not negatively
affected by changes in interest rates. The Company engages in a comprehensive
asset and liability management program that attempts to reduce the risk of
significant decreases in net interest income caused by interest rate changes
without unduly penalizing current earnings. As part of this strategy, the
Company actively manages the amounts and maturities of its assets and
liabilities.
One key component of the Company's program is the origination and retention of
short-term and adjustable-rate assets whose repricing characteristics more
closely match the repricing characteristics of the Company's liabilities. At
June 30, 1999, 73% of the Company's total SFR loan and MBS portfolio had
adjustable rates, compared with 80% at December 31, 1999 due to purchases of
fixed-rate MBS primarily in the first quarter of 1999.
In addition to originating and holding in portfolio adjustable-rate and
short-term loans in order to better control the interest sensitivity of its
assets, the Company also attempts to manage its liability durations by utilizing
a variety of borrowing types and sources. In addition, it utilizes derivative
instruments to adjust the interest-sensitivity characteristics of certain of its
borrowings and deposits to better match those of the assets which the
liabilities fund.
LIQUIDITY
Liquidity management focuses on the need to meet both short-term funding
requirements and long-term growth objectives. The long-term growth objectives of
the Company are to attract and retain stable consumer deposit relationships and
to maintain stable sources of wholesale funds. Because the low interest rate
environment of recent years inhibited growth of consumer deposits, Washington
Mutual has supported its growth through business combinations with other
financial institutions and by increasing its use of wholesale borrowings. Should
the Company not be able to increase deposits either internally or through
acquisitions, its ability to grow would be dependent upon, and to a certain
extent limited by, its borrowing capacity.
Washington Mutual monitors its ability to meet short-term cash requirements
using guidelines established by its Board of Directors. These guidelines ensure
that short-term secured borrowing capacity is sufficient to satisfy
unanticipated cash needs. As part of this process, the Company is developing
plans for potential liquidity requirements for the year 2000.
Refer to separate discussion of "Year 2000 Project" below.
Regulations promulgated by the Office of Thrift Supervision ("OTS") require
that the Company's federal savings banks maintain for each calendar quarter an
average daily balance of liquid assets at least equal to 4.00% of the prior
quarter end's balance of withdrawable deposits plus borrowings due within one
year. At June 30, 1999, both of the Company's federal savings banks had
liquidity ratios in excess of 4.00%.
As presented in the Consolidated Statements of Cash Flows, the sources of
liquidity vary between the comparable periods. The statement of cash flows
includes operating, investing and financing categories. Cash flows from
operating activities included net income for the first six months of 1999 of
$896.8 million, $122.1 million for noncash items and $1.62 billion of other net
cash inflows from operating activities. Cash flows from investing activities
consisted mainly of both proceeds from and purchases of securities, and loan
principal repayments and loan originations. For the first six months of 1999,
cash flows from investing activities included sales, maturities and principal
payments on securities totaling $9.07 billion. Loans originated and purchased
for investment were in excess of repayments and sales by $8.35 billion, and
$16.99 billion was used for the purchase of securities. Cash flows from
financing activities consisted of the net change in the Company's deposit
accounts and short-term borrowings, the proceeds and repayments from both
long-term reverse repurchase agreements and FHLB advances, and the issuance of
long-term debt. For the first half of 1999, the above mentioned financing
activities decreased cash and cash equivalents by
27
<PAGE> 30
$1.05 billion on a net basis. Cash and cash equivalents were $1.71 billion at
June 30, 1999. See "Consolidated Financial Statements - Consolidated Statements
of Cash Flows."
At June 30, 1999, the Company was in a position to obtain approximately $36.67
billion in additional borrowings primarily through the use of collateralized
borrowings and deposits of public funds using unpledged MBS and other wholesale
borrowing sources.
CAPITAL ADEQUACY
The Company's capital (stockholders' equity) was $9.06 billion at June 30,
1999, down from $9.34 billion at December 31, 1998. During the second quarter of
1999, the Company repurchased 12.3 million shares of common stock at an average
price of $37.21. These stock repurchases and the growth in assets contributed to
a decline in the ratio of capital to total assets of 5.18% at the end of second
quarter 1999, compared with 5.65% at December 31, 1998.
The regulatory capital ratios of WMBFA, WMB and WMBfsb and the minimum
regulatory requirements to be categorized as well-capitalized were as follows:
<TABLE>
<CAPTION>
June 30, 1999
---------------------------------- Well-Capitalized
WMBFA WMB WMBfsb Minimum
------ ------ ------ ----------------
<S> <C> <C> <C> <C>
Capital ratios:
Leverage 5.69% 5.50% 7.26% 5.00%
Tier 1 risk-based 10.15 10.28 11.38 6.00
Total risk-based 11.54 11.06 12.64 10.00
</TABLE>
In addition, Aristar, Inc.'s industrial bank, First Community Industrial Bank,
met all Federal Deposit Insurance Corporation requirements to be categorized as
well-capitalized at June 30, 1999.
The Company's federal savings banking subsidiaries are also required by OTS
regulations to maintain core capital of at least 3.00% of assets and tangible
capital of at least 1.50% of assets. WMBFA and WMBfsb both satisfied these
requirements at June 30, 1999.
The Company's broker-dealer subsidiary is also subject to capital
requirements. At June 30, 1999, it was in compliance with its applicable capital
requirements.
YEAR 2000 PROJECT
This section contains forward-looking statements that have been prepared on
the basis of management's best judgments and currently available information and
constitutes a Year 2000 Readiness Disclosure within the meaning of the Year 2000
Readiness Disclosure Act of 1998. These forward-looking statements are
inherently subject to significant business, third-party and regulatory
uncertainties and contingencies, many of which are beyond the Company's control.
In addition, these forward-looking statements are based on current assessments
and remediation plans, which are based on certain representations of third-party
service providers and are subject to change. Accordingly, there can be no
assurance that the Company's results of operations will not be adversely
affected by difficulties or delays in the Company's or third parties' Year 2000
readiness efforts. See "Risks" below for a discussion of factors that may cause
such forward-looking statements to differ from actual results.
The Company has implemented a company-wide program to renovate, test and
document the readiness ("Year 2000 readiness") of its electronic systems,
programs and processes ("Computer Systems") and facilities to properly recognize
dates to and through the year 2000 (the "Year 2000 Project"). While the Company
is in various stages of modification and testing of individual Year 2000 Project
components, the Year 2000 Project is proceeding generally on schedule.
The Company has assigned its Executive Vice President of Operations to oversee
the Year 2000 Project, has set up a Year 2000 Project Office, and has charged a
senior management team representing all of its significant operational areas to
act as a Steering Committee. The Company has dedicated a substantial amount of
management and staff time on the Year 2000 Project. In addition, it has engaged
IBM to provide
28
<PAGE> 31
supplemental technical and management resources to assess and test the Year 2000
readiness of its Computer Systems, Deloitte Consulting Group LLC to assist in
documenting certain aspects of the Year 2000 Project, and CB Richard Ellis to
provide technical and management resources in executing the Year 2000 Project
with respect to facilities. Monthly progress reports are made to the Board of
Directors, and the Board's Audit Committee reviews Year 2000 Project progress on
a quarterly basis. The Project
The Company has divided its Year 2000 Project into the following general
phases, consistent with guidance issued by the Federal Financial Institutions
Examinations Council (the "FFIEC"): (i) inventory and assessment; (ii)
renovation, which includes repair or replacement; (iii) validation, which
includes testing of Computer Systems and its connections with other computer
systems; (iv) due diligence on third-party service providers; and (v)
development of contingency plans. The Year 2000 Project is divided into four
categories: mainframe systems, non-mainframe systems, third-party service
providers, and facilities.
The inventory and assessment phase is substantially complete, and each
component that has been identified has been assigned a priority rating
corresponding to its significance. The rating has allowed the Company to direct
its attention to those Computer Systems, third-party service providers, and
facilities that it deems more critical to its ongoing business and the
maintenance of good customer relationships.
The Company has also completed the process of repairing or replacing and
testing the components of its Computer Systems it deems most critical and has
tested these Computer Systems in an integrated environment. It has also
completed the process of repairing or replacing and testing the components of
its facilities it deems most critical. It has also adopted business contingency
plans for the Computer Systems and facilities that it has determined to be most
critical. These plans conform to guidance from the FFIEC on business contingency
planning for Year 2000 readiness. Contingency plans include, among other
actions, manual workarounds and identification of resource requirements and
alternative solutions for resuming critical business processes in the event of a
year 2000-related failure.
The Company continues to assess the readiness of its third-party service
providers, though it is currently unable to predict their final readiness. Prior
to 1998, the Company undertook strategic business initiatives that shifted a
significant portion of the cost for Year 2000 readiness to third-party service
providers. Following the merger with Ahmanson and after the data processing
conversions associated with that merger, the Company will rely on third-party
service providers for significant business processes such as item processing,
loan servicing, and desktop and communications management. It has been
communicating with its third-party service providers to assess and monitor their
Year 2000 readiness. The Company has completed its due diligence on third-party
service providers for its most critical business processes, including the
testing of connections with these service providers, where possible, although
the monitoring of these service providers will continue. The Company has
established contingency plans for the service providers it deems most critical
and will continue monitoring to determine whether to implement specific
contingency plans.
The Company has completed testing the connections between its Computer Systems
and third-party computer systems that it deems most critical. Additional testing
of these Computer Systems and third-party computer systems will continue through
1999.
On October 1, 1998, the parent company of Washington Mutual acquired Ahmanson
and began to manage its Year 2000 planning process. As of December 31, 1998,
Ahmanson's planning process was consolidated into the Company's Year 2000
Project, because all of Ahmanson's critical computer systems will be converted
to the Company's systems as a part of the integration process.
The Company continues to assess its risk from other environmental factors over
which it has little control, such as electrical power supply, and voice and data
transmission. Because of the nature of the factors, however, the Company is not
actively engaged in any repair, replacement or testing efforts for these
services.
29
<PAGE> 32
Costs
While the Company does not believe that the process of making its Computer
Systems Year 2000 ready will result in material cost, it is expected that a
substantial amount of management and staff time will be required on the Year
2000 Project. The Company spent approximately $16.5 million during 1998 and the
first half of 1999 on its Year 2000 Project, and it currently expects to spend
approximately $12.5 million more before it concludes its Year 2000 readiness
efforts. In 1996 and 1997, the Company spent approximately $30.3 million on
technology-related initiatives, which had the effect of reducing its current
cost of Year 2000 readiness.
Risks
Based on its current assessments and remediation plans, which are based in
part on certain representations of third-party service providers, the Company
does not expect that it will experience a significant disruption of its
operations as a result of the change to the new millennium. Although the Company
has no reason to conclude that a failure will occur, the most reasonably likely
worst-case Year 2000 scenario would entail a disruption or failure of its power
supply or voice and data transmission suppliers, a Computer System, a
third-party service provider, or a facility. If such a failure were to occur,
the Company would implement its contingency plan. While it is impossible to
quantify the impact of such a scenario, the most reasonably likely worst-case
scenario would entail a diminishment of service levels, some customer
inconvenience, and additional costs from the contingency plan implementation,
which are not currently estimable. While the Company has contingency plans to
address a temporary disruption in these services, there can be no assurance that
any disruption or failure will be only temporary, that the contingency plans
will function as anticipated, or that the Company's results of operations will
not be adversely affected in the event of a prolonged disruption or failure.
There can be no assurance that the FFIEC or other federal regulators will not
issue new regulatory requirements that require additional work by the Company
and, if issued, that new regulatory requirements will not increase the cost or
delay the completion of the Year 2000 Project.
30
<PAGE> 33
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Washington Mutual, Inc. held its annual meeting of shareholders on April 20,
1999. A brief description of each matter voted on and the results of the
shareholder voting are set forth below:
<TABLE>
<CAPTION>
VOTES VOTES ABSTENTIONS AND
FOR AGAINST NON-VOTES
----------- ---------- ---------------
<S> <C> <C> <C>
1. The election of seven directors set
forth below:
Elizabeth A. Sanders (term ending 2000) 500,935,386 3,593,731
William D. Schulte (term ending 2001) 500,949,380 3,579,737
David Bonderman (term ending 2002) 500,925,359 3,603,758
Roger H. Eigsti (term ending 2002) 500,981,263 3,547,854
Phillip D. Matthews (term ending 2002) 500,949,431 3,579,686
William G. Reed, Jr. (term ending 2002) 500,908,460 3,620,657
James H. Stever (term ending 2002) 500,958,063 3,571,054
2. Amendment to Washington Mutual's Articles of
Incorporation ("Articles") to provide for
Mandatory Indemnification of Directors. 487,202,025 14,552,830 92,236,520
3. Amendment to the Articles to reduce the vote
required to amend the Articles. 444,958,068 8,762,891 140,270,416
4. Amendment to the Articles to eliminate the
requirement to publish notice of certain
shareholder meetings, and clarify the Board's
authority to amend the Articles. 470,356,112 31,974,096 91,661,166
5. Amendment to the Articles to eliminate the
provision relating to dealings with interested
persons. 437,724,974 15,035,466 141,230,935
6. Modification to the Articles relating to
shareholder approval of merger transactions. 445,027,662 8,461,987 140,501,726
7. Ratification of the appointment of Deloitte &
Touche LLP as the Company's Independent Auditors. 500,864,228 2,042,224 91,084,923
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index of Exhibits on page 33.
(b) Reports on Form 8-K
During the second quarter of 1999, the Company filed a report on Form 8-K
dated April 23, 1999. The report included under Item 7 of Form 8-K a press
release announcing Washington Mutual's first quarter 1999 financial results and
audited consolidated financial statements for the quarter ended March 31, 1999.
During the second quarter of 1999, the Company also filed a report on Form 8-K
dated May 18, 1999. The report included under Item 7 of Form 8-K the following
exhibits: (i) Agreement and Plan of Merger dated May 18, 1999 between Washington
Mutual and Long Beach Financial Corporation, (ii) Stock Option Agreement dated
May 18, 1999 between Washington Mutual and Long Beach Financial Corporation, and
(iii) Press Release dated May 18, 1999 regarding the execution of a definitive
merger agreement with Long Beach Financial Corporation.
31
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 13, 1999.
WASHINGTON MUTUAL, INC.
By: /s/ FAY L. CHAPMAN
-----------------------------------------
Fay L. Chapman
Senior Executive Vice President
and General Counsel
By: /s/ RICHARD M. LEVY
-----------------------------------------
Richard M. Levy
Senior Vice President and Controller
(Principal Accounting Officer)
32
<PAGE> 35
WASHINGTON MUTUAL, INC.
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
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<S> <C>
3.1 Restated Articles of Incorporation of the Registrant, as amended
(filed herewith).
3.2 Restated By-laws of the Registrant, as amended (filed herewith).
4.1 Rights Agreement dated October 16, 1990 (filed as an exhibit to the
Company's Current Report on Form 8-K dated November 29, 1994 and
incorporated herein by reference. File No. 0-25188).
4.2 Amendment No. 1 to Rights Agreement, dated October 31, 1994 (filed
as an exhibit to the Company's Current Report on Form 8-K dated
November 29, 1994 and incorporated herein by reference. File No.
0-25188).
4.3 The registrant agrees to furnish the Securities and Exchange
Commission, upon request, with copies of all instruments defining
the rights of holders of long-term debt of registrant and its
consolidated subsidiaries.
27 Financial Data Schedule.*
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* Filed electronically with the Securities and Exchange Commission.
</TABLE>
33
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
WASHINGTON MUTUAL, INC.
Pursuant to the provisions of Chapter 23B.10 of the Washington Business
Corporation Act, WASHINGTON MUTUAL, INC., a Washington corporation, hereby
adopts the following articles of amendment to its restated articles of
incorporation, as previously amended (the "Restated Articles"):
FIRST: The name of the corporation is:
WASHINGTON MUTUAL, INC.
SECOND: Article VIII of the Restated Articles governing Dealings with
Interested Persons is hereby eliminated in its entirety.
THIRD: Article IX of the Restated Articles governing Shareholder Vote
Required to Approve Plan of Merger is hereby deleted in its entirety and
replaced with the following provision:
If pursuant to the Washington Business Corporation Act the
Company's shareholders are required to approve a plan of merger, share
exchange or sale, lease, exchange, or other disposition of all, or
substantially all of the Company's property, otherwise than in the usual
and regular course of business (each of the foregoing, a "Substantial
Business Transaction"), then (a) if two-thirds of the directors vote to
recommend the Substantial Business Transaction to the shareholders, the
Substantial Business Transaction shall be approved by each voting group
entitled to vote thereon by a simple majority of all votes entitled to
be cast by that group; (b) in all other cases where a shareholder vote
is required by the Washington Business Corporation Act, such Act, as it
may be amended, will control.
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<PAGE> 2
FOURTH: Article X of the Restated Articles governing Indemnification is
hereby deleted in its entirety and replaced with the following provision:
The Company shall indemnify any individual made a party to a
proceeding because that individual is or was a director of the Company
and shall advance or reimburse the reasonable expenses incurred by such
individual in advance of final disposition of the proceeding, without
regard to the limitations in RCW 23B.08.510 through 23B.08.550 of the
Washington Business Corporation Act, or any other limitation that may
hereafter be enacted to the extent such limitation may be disregarded if
authorized by the articles of incorporation, to the full extent and
under all circumstances permitted by applicable law.
FIFTH: Article XII of the Restated Articles governing Amendment of the
Restated Articles is hereby deleted in its entirety and replaced with the
following provision:
The Company may amend these Articles of Incorporation if
approved by each voting group entitled to vote thereon by a simple
majority of all the votes entitled to be cast by that voting group at
any regular meeting or special meeting duly called for that purpose in
the manner prescribed by its Bylaws, provided, however, that Article XI
may not be repealed or amended in any respect unless such action is
approved by at least a ninety-five percent (95%) vote of the outstanding
Voting Stock beneficially owned by shareholders other than any Major
Stockholder, and provided further, that the Board of Directors may,
without shareholder approval, amend these Articles (i) to the extent
permitted under the Washington Business Corporation Act or (ii) as
necessary to designate the preferences, limitations, and relative rights
of a class or series of shares of the Company prior to issuance of any
shares in that class or series.
SIXTH: The foregoing amendments to the Restated Articles do not provide
for an exchange, reclassification or cancellation of any issued shares.
SEVENTH: The foregoing amendments to the Restated Articles were adopted
by the board of directors of the corporation in accordance with the provisions
of RCW 23B.10.030 at a duly called meeting of the directors held on February 16,
1999.
EIGHTH: The foregoing amendments to the Restated Articles were approved
by the shareholders at a duly called annual meeting of the shareholders held on
April 20, 1999, in accordance with the provisions of RCW 23B.10.030 and RCW
23B.10.040.
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<PAGE> 3
EXECUTED this 16th day of June, 1999.
WASHINGTON MUTUAL, INC.
By: /s/ Fay L. Chapman
-------------------------------
Fay L. Chapman
Executive Vice President and
General Counsel
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<PAGE> 4
FILED
State of Washington
Sep 17 1998
Ralph Munro
Secretary of State
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
WASHINGTON MUTUAL, INC.
Pursuant to the provisions of chapter 23B.10 of the Washington Business
Corporation Act, Washington Mutual, Inc., a Washington corporation, hereby
adopts the following articles of amendment to its restated articles of
incorporation, as previously amended (the "Restated Articles of Incorporation"):
FIRST: The name of the corporation is:
WASHINGTON MUTUAL, INC.
SECOND: The first sentence of Article IIA. of the Restated Articles of
Incorporation, "Capital Stock - Issuance of and Payment for Stock", is amended
to read in its entirety as follows:
"The total number of shares of capital stock which the Company has
authority to issue is 1,610,000,000 shares of which 1,600,000,000 shares
shall be shares of common stock with no par value per share and 10,000,000
shares shall be shares of preferred stock with no par value per share."
THIRD: The amendment does not provide for an exchange, reclassification or
cancellation of any issued shares.
FOURTH: The foregoing amendment to the Restated Articles of Incorporation
was adopted by unanimous written consent of the board of directors dated June
30, 1998 of the corporation in accordance with the provisions of RCW 23B.10.030.
FIFTH: The foregoing amendment to the Restated Articles of Incorporation
was duly approved by the shareholders on August 28, 1998, in accordance with
the provisions of RCW 23B.10.030 and RCW 23B.10.040.
EXECUTED this 16th day of September, 1998.
WASHINGTON MUTUAL, INC.
By: /s/ Kerry K. Killinger
-----------------------------
Kerry K. Killinger
President and Chief Executive Officer
<PAGE> 5
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
WASHINGTON MUTUAL, INC.
Pursuant to the provisions of Chapter 23B.10 of the Washington
Business Corporation Act, WASHINGTON MUTUAL, INC., a Washington corporation,
hereby adopts the following articles of amendment to its restated articles of
incorporation:
FIRST: The name of the corporation is:
WASHINGTON MUTUAL, INC.
SECOND: Article II.D is amended by adding to the end of Article
II.D the following section:
(3) The terms of the 8.30% Cumulative Preferred
Stock, Series F shall be as follows:
1. Designation. The designation of the series of Preferred Stock shall
be 8.30% Cumulative Preferred Stock, Series F, no par value, of Company
(hereinafter referred to as "Cumulative Preferred Stock"), and the number of
shares constituting such series shall be 660,000, which number may be increased
(but not above the total number of authorized but unissued shares of Preferred
Stock of the Company) or decreased (but not below the number of shares then
outstanding) from time to time by the Board of Directors or any authorized
committee thereof.
2. Dividend Rights.
(a) The holders of shares of Cumulative Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, cash dividends, accruing from May 2, 1997 at
the annual rate of 8.30% per annum, and no more, payable, when, as and if
declared by the Board of Directors, quarterly on February 1, May 1, August 1,
and November 1 of each year (each quarterly period ending on any such date being
hereinafter referred to as a "dividend period"), commencing August 1, 1997, at
such annual
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<PAGE> 6
rate. Each dividend will be payable to holders of record as they appear on the
stock books of the Company on such record dates, not exceeding 45 days preceding
the payment dates thereof, as shall be fixed by the Board of Directors of the
Company. The date of initial issuance of shares of Cumulative Preferred Stock is
hereinafter referred to as the "Issue Date". Dividends payable on the Cumulative
Preferred Stock (i) for any period other than a full dividend period, shall be
computed on the basis of a 360-day year consisting of twelve 30-day months and
(ii) for each full dividend period, shall be computed by dividing the annual
dividend rate by four.
(b) Dividends on shares of Cumulative Preferred Stock shall be
cumulative from the Issue Date whether or not there shall be funds legally
available for the payment thereof. If there shall be outstanding shares of any
other series of Preferred Stock ranking on a parity with the Cumulative
Preferred Stock as to dividends, no full dividends shall be declared or paid or
set apart for payment on any such other series for any period unless full
cumulative dividends have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on the Cumulative Preferred Stock for all dividend periods terminating on or
prior to the data of payment of such dividends. If dividends on the Cumulative
Preferred Stock and on any other series of Preferred Stock ranking on a parity
as to dividends with the Cumulative Preferred Stock are in arrears, in making
any dividend payment on account of such arrears, the Company shall make payments
ratably upon all outstanding shares of the Cumulative Preferred Stock and shares
of such other series of Preferred Stock in proportion to the respective amounts
of dividends in arrears on the Cumulative Preferred Stock and on such other
series of Preferred Stock to the data of such dividend payment. Holders of
shares of the Cumulative Preferred Stock shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends on such shares. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments which may be in
arrears.
(c) Unless full cumulative dividends on all outstanding shares of
the Cumulative Preferred Stock shall have been paid or declared and set aside
for payment for all past dividend periods and the Company is not in default or
in arrears in respect to the optional redemption of any shares of Cumulative
Preferred Stock, no dividend shall be declared upon the Common Stock or upon any
other stock ranking junior to the Cumulative Preferred Stock as to dividends or
the distribution of assets upon liquidation, dissolution or winding up of the
affairs of the Company (the Common Stock and any other such stock being herein
referred to as "Junior Stock"), nor shall the Company make any payment on
account of, or set apart money for, the purchase, redemption or other retirement
of, or for a sinking or other analogous fund for any shares of Junior Stock or
make any distribution in respect thereof, whether in cash or property or in
obligations or stock of the Company, other than Junior Stock which is neither
convertible into, nor exchangeable or exercisable for, any securities of the
Company other than Junior Stock and other than the rights (the "Rights")
distributed pursuant to the Rights Agreement previously entered into by and
between Washington Mutual Savings Bank ("WMSB") and First Interstate Bank of
Washington, N.A. ("First Interstate") dated as of October 16, 1990, as amended
by the Amendment No. 1 to Rights Agreement dated as of October 31, 1994 by and
between WMSB and First Interstate and as supplemented by the Supplement to
Rights Agreement dated as of
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<PAGE> 7
November 29, 1994 by and between WMHC and First Interstate (as so amended and
supplemented, the "Rights Agreement").
3. Liquidation Preferences.
(a) In the event of any liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, the holders of
Cumulative Preferred Stock shall be entitled to receive out of the assets of the
Company available for distribution to stockholders an amount equal to $250 per
share of Cumulative Preferred Stock plus an amount equal to any accrued and
unpaid dividends thereon to and including the data of such distribution, and no
more, before any distribution shall be made to the holders of Common Stock or
any other class of stock of the Company ranking junior to the Cumulative
Preferred Stock as to the distribution of assets upon any such liquidation,
dissolution or winding up. After payment of such liquidating distributions, the
holders of shares of Cumulative Preferred Stock will not be entitled to any
further participation in any distribution of assets by the Company.
(b) In the event the assets of the Company available for
distribution to stockholders upon any liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, shall be
insufficient to pay in full the amounts payable with respect to the Cumulative
Preferred Stock and any other shares of Preferred Stock ranking on a parity with
the Cumulative Preferred Stock as to the distribution of assets upon any such
liquidation, dissolution or winding up, the holders of Cumulative Preferred
Stock and the holders of such other Preferred Stock shall share ratably in any
distribution of assets of the Company in proportion to the full respective
preferential amounts to which they are entitled.
(c) The merger or consolidation of the Company into or with any
other corporation, the merger or consolidation of any other corporation into or
with the Company or the sale of the assets of the Company substantially as an
entirety shall not be deemed a liquidation, dissolution or winding up of the
affairs of the Company within the meaning of this Section 3.
4. Redemption.
(a) The Company, at its option, may redeem any or all shares of
Cumulative Preferred Stock, at any time or from time to time, on or after
November 1, 1997, at a redemption price of $250.00 per share, plus an amount
equal to accrued and unpaid dividends thereon to and including the date of
redemption (the "Redemption Price").
(b) If less than all the outstanding shares of Cumulative
Preferred Stock are to be redeemed, the shares to be redeemed shall be selected
pro rata (subject to rounding to avoid fractional shares) as nearly as
practicable or by lot, or by such other method as the Board of Directors may
determine to be equitable.
(c) Notice of any redemption shall be given by first class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the date
fixed for redemption to
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<PAGE> 8
the holders of record of the shares of Cumulative Preferred Stock to be
redeemed, at their respective addresses appearing on the stock books of the
Company. Notice so mailed shall be conclusively presumed to have been duly given
whether or not actually received. Such notice shall state: (i) the date fixed
for redemption; (ii) the Redemption Price; (iii) the number of shares of
Cumulative Preferred Stock to be redeemed and if less than all the shares held
by such holder are to be redeemed, the number of such shares to be so redeemed
from such holder; (iv) the place where certificates for such shares are to be
surrendered for payment of the Redemption Price; and (v) that after the close of
business on such data fixed for redemption the shares to be redeemed shall not
accrue dividends. If such notice is mailed as aforesaid, and if on or before the
date fixed for redemption funds sufficient to redeem the shares called for
redemption are set aside by the Company in trust for the account of the holders
of the shares to be redeemed, notwithstanding the fact that any certificate for
shares called for redemption shall not have been surrendered for cancellation,
from and after the related redemption date the shares represented thereby so
called for redemption shall be deemed to be no longer outstanding, dividends
thereon shall cease to accrue, and all rights of the holder of such shares of
the Company shall cease, except the right to receive the Redemption Price,
without interest, upon surrender of the certificate representing such shares.
Upon surrender in accordance with the aforesaid notice of the certificate for
any shares so redeemed (duly endorsed or accompanied by appropriate instruments
of transfer, if so required by the Company in such notice), the holders of
record of such shares shall be entitled to receive the Redemption Price, without
interest. In case fewer than all the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the unredeemed
shares without cost to the holder thereof.
(d) At the option of the Company, if notice of redemption is
mailed as aforesaid, and if prior to the date fixed for redemption funds
sufficient to pay in full the Redemption Price are deposited in trust, for the
account of the holders of the shares to be redeemed, with a bank or trust
company named in such notice doing business in the Borough of Manhattan, The
City of New York, State of New York or The City of Los Angeles, State of
California and having capital surplus and undivided profits of at least $50
million (which bank or trust company also may be the transfer agent and/or
paying agent for the Cumulative Preferred Stock), notwithstanding the fact that
any certificate(s) for shares called for redemption shall not have been
surrendered for cancellation, on and after such date of deposit the shares
represented thereby so called for redemption shall be deemed to be no longer
outstanding, and all rights of the holders of such shares as stockholders of the
Company shall cease, except the right of the holders thereof to receive out of
the funds so deposited in trust the Redemption Price, without interest, upon
surrender of the certificate(s) representing such shares. Any funds so deposited
with such bank or trust company which shall remain unclaimed by the holders of
shares called for redemption at the end of two years after the related
redemption date shall be repaid to the Company, on demand, and thereafter the
holder of any such shares shall look only to the Company for the payment,
without interest thereon, of the Redemption Price.
(e) Any provision of this Section 4 to the contrary
notwithstanding, in the event that any quarterly dividend payable on the
Cumulative Preferred Stock or any dividend on any other series of Preferred
Stock of the Company ranking on a parity with the Cumulative
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<PAGE> 9
Preferred Stock as to dividends and distribution of assets upon liquidation,
dissolution or winding up of the affairs of the Company (the "Parity Preferred
Stock") shall be in arrears and until all such dividends shall have been paid or
declared and set apart for payment, the Company shall not redeem any shares of
Cumulative Preferred Stock or Parity Preferred Stock unless all outstanding
shares of Cumulative Preferred Stock and Parity Preferred Stock are
simultaneously redeemed and shall not purchase or otherwise acquire any shares
of Cumulative Preferred Stock or the Parity Preferred Stock except in accordance
with a purchase or exchange offer made on the same terms to all holders of
record of Cumulative Preferred Stock and Parity Preferred Stock for the purchase
of all outstanding shares thereof.
5. Voting Rights. Other than as required by applicable law, the
Cumulative Preferred stock shall not have any voting powers either general or
special, except that:
(a) Unless the vote or consent of the holders of a greater number
of shares shall then be required by law, the affirmative vote or consent of the
holders of at least 66-2/3% of all of the shares of the Cumulative Preferred
Stock, and any ones or more other series of Parity Preferred Stock which by its
terms provides for similar voting rights (the "Other Preferred Stock") and is
similarly affected, at the time outstanding, given in person or by proxy, either
in writing or by a vote at a meeting called for the purpose at which the holders
of shares of the Cumulative Preferred Stock and any such other series of Other
Preferred Stock shall vote together as a separate and single class, shall be
necessary for authorizing, effecting or validating the amendment, alteration or
repeal of, or any other change in, any of the provisions of the Restated
Certificate of Incorporation or of any amendment or supplement thereto
(including any Certificate of Designations or any similar document relating to
any series of Preferred Stock) of the Company, which would adversely affect the
preferences, rights, powers or privileges, qualifications, limitations and
restrictions of the Cumulative Preferred Stock and any such other series of
Other Preferred Stock.
(b) Unless the vote or consent of the holders of a greater number
of shares shall then be required by law, the affirmative vote or consent of the
holders of at least 66-2/3% of all of the shares of the Cumulative Preferred
Stock and any series of other Preferred Stock of the Company at the time
outstanding, given in person or by proxy, either in writing or by a vote at a
meeting called for the purpose at which the holders of shares of the Cumulative
Preferred Stock and any such series of Other Preferred Stock of the Company
shall vote together as a single class without regard to series, shall be
necessary to create, authorize or issue, or reclassify any authorized stock of
the Company into, or create, authorize or issue any obligation or security
convertible into or evidencing a right to purchase, or increase the authorized
amount of, any shares of any class of stock of the Company ranking prior to the
Cumulative Preferred Stock and any series of Other Preferred Stock. Subject to
the foregoing, the Company's Restated Articles of Incorporation may be amended
to increase the number of authorized shares of Preferred Stock without the vote
of the holders of Preferred Stock, including the Cumulative Preferred Stock.
(c) Whenever, at any time or times, dividends payable on the
shares of Cumulative Preferred Stock shall be in arrears in an amount equal to
at least six full quarterly
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<PAGE> 10
dividends on shares of the Cumulative Preferred Stock at the time outstanding,
the holders of the outstanding shares of Cumulative Preferred Stock shall have
the exclusive right, voting separately as a class together with holders of
shares of any one or more series of Other Preferred Stock to elect two directors
of the Company at the Company's next annual meeting of stockholders and at each
subsequent annual meeting of stockholders at which such directors or their
successors are to be elected. At elections for such directors, each holder of
Cumulative Preferred Stock shall be entitled to one vote for each share held
(the holders of shares of any series of Other Preferred Stock being entitled to
such number of votes, if any, for each such share of Other Preferred Stock held
as may be granted to them). Upon the vesting of such right of the holders of
Cumulative Preferred Stock, the maximum authorized number of members of the
Board of Directors shall automatically be increased by two and the two vacancies
so created shall be filled by vote of the holders of the outstanding shares of
Cumulative Preferred Stock (either alone or together with the holders of shares
of any series of Other Preferred Stock) as hereinafter set forth. The right of
the holders of Cumulative Preferred Stock, voting separately as a class to elect
(either alone or together with the holders of shares of any series of Other
Preferred Stock) members of the Board of Directors of the Company as aforesaid
shall continue until such time as all dividends accumulated on the Cumulative
Preferred Stock shall have been paid in full or declared and set apart for
payment, at which time such right shall terminate, except as herein or by law
expressly provided, subject to revesting in the event of each and every
subsequent default of the character above mentioned.
(d) Each director elected by the holders of shares of Cumulative
Preferred Stock (either alone or together with the holders of shares of any
series of Other Preferred Stock) shall continue to serve as such director for
the full term for which he or she shall have been elected, notwithstanding that
prior to the end of such term all dividends on the Cumulative Preferred Stock
shall have been paid in full. If the office of any director elected by the
holders of Cumulative Preferred Stock voting as a class becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office, or
otherwise, such vacancy shall be filled as provided in the Restated Articles of
Incorporation of the Company and the applicable provisions of the Washington
Business Corporation Act. Whenever the term of office of the directors selected
by the holders of the Cumulative Preferred Stock and the special voting powers
vested in the holders of Cumulative Preferred Stock as provided in this
subsection (d) shall have expired, the number of directors shall be such number
as may be provided for in the Restated Articles of Incorporation or the By-Law,
as amended, irrespective of any increase made pursuant to the provisions of this
subsection (d).
6. Reacquired Shares. Shares of Cumulative Preferred Stock redeemed or
otherwise purchased or acquired by the Company shall be restored to the status
of authorized but unissued shares of Preferred Stock without designation as to
series.
7. No Sinking Fund. Shares of Cumulative Preferred Stock are not subject
to the operation of a sinking fund or other obligation of the Company to redeem
or retire the Cumulative Preferred Stock.
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<PAGE> 11
8. Rank. The Cumulative Preferred Stock shall rank on a parity, both as
to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Company, with the Company's
7.60% Noncumulative Perpetual Preferred Stock, Series E and with the Company's
9.12% Noncumulative Perpetual Preferred Stock, Series C. The Cumulative
Preferred Stock shall rank prior, both as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Company, to the Common Stock of the Company."
THIRD: These amendments do not provide for an exchange, reclassification
or cancellation of any issued shares.
FOURTH: The foregoing amendments of the Restated Articles of
Incorporation were adopted by the Board of Directors of the Company on March 5,
1997. SHAREHOLDER ACTION WAS NOT REQUIRED.
EXECUTED this 30th day of June, 1997.
WASHINGTON MUTUAL, INC.
By: /s/ Kerry K. Killinger
-------------------------------
Kerry K. Killinger
Its: President and Chief Executive
Officer
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<PAGE> 12
Filed
State of Washington
Jul 09 1997
Ralph Munro
Secretary of State
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
WASHINGTON MUTUAL, INC.
Pursuant to the provisions of Chapter 23B.10 of the Washington Business
Corporation Act, WASHINGTON MUTUAL, INC., a Washington corporation, hereby
adopts the following articles of amendment to its restated articles of
incorporation, as previously amended (the "Restated Articles of Incorporation"):
FIRST: The name of the corporation is:
WASHINGTON MUTUAL, INC.
SECOND: The first sentence of Article IIA. of the Restated Articles of
Incorporation, "Capital Stock -- Issuance of and Payments for Stock", is
amended to read in its entirety as follows:
"The total number of shares of capital stock which the Company
has authority to issue is 810,000,000 shares of which 800,000,000
shares shall be shares of common stock with no par value per share
and 10,000,000 shares shall be shares of preferred stock with no
par value per share."
THIRD: The amendment does not provide for an exchange,
reclassification or cancellation of any issued shares.
FOURTH: The following amendment to the Restated Articles of
Incorporation was adopted on March 5, 1997, by the board of directors of the
corporation in accordance with the provisions of RCW 23B.10.030.
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<PAGE> 13
FIFTH: The foregoing amendment to the Restated Articles of Incorporation
was duly approved by the shareholders on July 8, 1997, in accordance with the
provisions of RCW 23B.10.030 and RCW 23B.10.040.
EXECUTED this 8th day of July, 1997.
WASHINGTON MUTUAL, INC.
By: /s/ KERRY K. KILLINGER
--------------------------------------
Kerry K. Killinger
President and Chief Executive Officer
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<PAGE> 14
FILED
State of Washington
Dec 18 1996
Ralph Munro
Secretary of State
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
WASHINGTON MUTUAL, INC.
Pursuant to the provisions of Chapter 23B.10 of the Washington Business
Corporation Act, Washington Mutual, Inc., a Washington corporation, hereby
adopts the following articles of amendment to its restated articles of
incorporation:
FIRST: The name of the corporation is:
WASHINGTON MUTUAL, INC.
SECOND: The first sentence of Article IIA. of the Restated Articles of
Incorporation, "Capital Stock--Issuance of and Payment for Stock", is amended
to read in its entirety as follows:
"The total number of shares of capital stock which the Company has
authority to issue is 360,000,000 shares of which 350,000,000 shares shall
be shares of common stock with no par value per share and 10,000,000 shares
shall be shares of preferred stock with no par value per share."
THIRD: The amendment does not provide for an exchange, reclassification or
cancellation of any issued shares.
FOURTH: The foregoing amendment of the Articles of Incorporation was
adopted October 16, 1996 by the board of directors of the corporation in
accordance with the provisions of RCW 23B.10.030, and duly approved by the
shareholders on December 18, 1996, in accordance with the provisions of RCW
23B.10.030 and RCW 23B.10.040.
EXECUTED this 18th day of December, 1996.
WASHINGTON MUTUAL, INC.
By: /s/ KERRY KILLINGER
-------------------------------------
ITS: President and Chief Executive Officer
<PAGE> 15
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
WASHINGTON MUTUAL, INC.
Pursuant to the provisions of RCW 23B.10.070 of the Washington
Business Corporation Act, WASHINGTON MUTUAL, INC., hereby certifies that these
Restated Articles of Incorporation correctly set forth without change the
provisions of the Articles of Incorporation of the corporation, as amended.
These Restated Articles of Incorporation supersede the original Articles of
Incorporation and all amendments thereto.
ARTICLE I
Name
The name of this corporation is WASHINGTON MUTUAL, INC. (the
"Company").
ARTICLE II
Capital Stock
A. Issuance of and Payment for Stock. The total number
of shares of capital stock which the Company has authority to issue is
110,000,000 shares of which 100,000,000 shares shall be shares of common stock
with no par value per share and 10,000,000 shares shall be shares of preferred
stock with no par value per share. The shares may be issued by the Company
from time to time as approved by its Board of Directors without the approval of
the shareholders. The consideration for issuance of the shares shall be paid
in full before their issuance. Neither promissory notes nor the promise of
future services shall constitute payment or part payment for the issuance of
shares of the Company. The consideration for the shares shall be cash,
tangible or intangible property, labor or services actually performed for the
Company or any combination of the foregoing. In the absence of actual fraud
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<PAGE> 16
in the transaction, the value of such property, labor or services, as
determined by the Board of Directors of the Company, shall be conclusive. Upon
payment of such consideration, such shares shall be deemed to be fully paid and
non-assessable.
B. Voting by Class or Series. Except as expressly
provided in these Articles or in any resolutions of the Board of Directors
designating and establishing the terms of any series of preferred stock, no
holders of any class or series of capital stock shall have any right to vote as
a separate class or series or to vote more than one vote per share.
Notwithstanding the foregoing, the restriction on voting separately by class or
series shall not apply to the extent that applicable law requires such voting,
nor shall this restriction apply to any amendment to these Articles which would
adversely change the specific terms of any class or series of capital stock as
set forth in this Article II or in any resolution of the Board of Directors
designating and establishing the terms of any series of preferred stock. For
purposes of the preceding sentence, an amendment which increases the number of
authorized shares of any class or series of capital stock, or substitutes the
surviving institution in a merger or consolidation for the Company, shall not
be such an adverse change.
C. Common Stock. On matters on which holders of common
stock are entitled to vote, each holder of shares of common stock shall be
entitled to one vote for each share held by such holder.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full
amount of dividends and of sinking fund or retirement fund or other retirement
payments, if any, to which such holders are respectively entitled in preference
to the common stock, then dividends may be paid on the common stock and on any
class or series of stock entitled to participate therewith as to dividends, out
of any assets legally available for the payment of dividends; but only when and
as declared by the Board of Directors.
In the event of any liquidation, dissolution or winding up of the
Company, after there shall have been paid to or set aside for the holders of
any class having preferences over the common stock in the event of liquidation,
dissolution or winding up of the full preferential amounts to which they are
respectively entitled, the holders of the common stock, and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets, shall be entitled, after payment or provision for
payment of all debts and liabilities of the Company, to receive pro rata the
remaining assets of the Company available for distribution, in cash or in kind.
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Each share of common stock shall have the same relative rights as and
be identical in all respects with all the other shares of common stock.
D. Preferred Stock.
(1) The authorized Preferred Stock shall be
comprised of 10,000,000 shares no par value per share, which authorized
Preferred Stock shall initially consist of 2,800,000 shares of 9.12%
Noncumulative Perpetual Preferred Stock, Series C, 1,400,000 shares of $6.00
Noncumulative Convertible Perpetual Preferred Stock, Series D, and 2,000,000
shares of 7.60% Noncumulative Perpetual Preferred Stock, Series E. The Board
of Directors of the Company is authorized by resolution or resolutions from
time to time adopted, to provide for the issuance of preferred stock in one or
more additional series by designating and establishing the terms of such a
series. With respect to any such series, the Board of Directors is authorized
to fix and state the voting powers, designations, preferences and relative,
participating, optional or other special right of the shares of each such
series and the qualifications, limitations and restrictions thereon, including,
but not limited to, determination of any of the following:
(a) The distinctive serial designation
and the number of shares constituting such series;
(b) The dividend rates or the amount of
dividends to be paid on the shares of such series, whether dividends shall be
cumulative and, if so, from which date or dates, the payment date or dates for
dividends, and the participating or other special rights, if any, with respect
to dividends;
(c) The voting powers, full, special or
limited, if any, of shares of such series;
(d) Whether the shares of such series
shall be redeemable and, if so, the price or prices at which, and the terms and
conditions on which, such shares may be redeemed;
(e) The amount or amounts payable upon
the shares of such series in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Company;
(f) Whether the shares of such series
shall be entitled to the benefit of a sinking or retirement fund to be applied
to the purchase or redemption of such shares, and if so entitled, the amount of
such fund and the manner of its application, including the price or prices at
which such shares may be redeemed or purchased through the application of such
fund;
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(g) Whether the shares of such series
shall be convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes of
stock of the Company and, if so convertible or exchangeable, the conversion
price or prices, or the rate of exchange, and the adjustments thereof, if any,
at which such conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange; and
(h) Whether the shares of such series
which are redeemed or converted shall have the status of authorized but
unissued shares of serial preferred stock and whether such shares may be
reissued as shares of the same or any other series of serial preferred stock.
Each share of each series of preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares
of the same series.
While the foregoing authorizes the Board of Directors, in establishing
the terms of a series of preferred stock, to permit holders of that series of
preferred stock to elect separately one or more directors, in no event shall
the total number of directors separately elected by holders of one or more
series of preferred stock equal or exceed fifty percent (50%) of the total
number of authorized directors.
(2) The terms and designations of the initially
authorized series of Preferred Stock shall be as follows:
(A) 9.12% Noncumulative Perpetual Preferred
Stock, Series C.
1. Designation. There shall initially
be a series of preferred stock whose designation shall be "9.12% Noncumulative
Perpetual Preferred Stock, Series C" ("Series C"). The number of shares of
Series C shall be 2,800,000. The liquidation preference of Series C shall be
$25.00 per share (plus accrued and unpaid dividends for the then-current
dividend period up to the date fixed for liquidation, dissolution or winding
up).
2. Rank. The shares of Series C shall,
with respect to dividend rights and rights on liquidation, winding up and
dissolution of the Company, rank prior to the Company's common stock (the
"Common Stock") and to all other classes and series of equity securities of the
Company now or hereafter authorized, issued or outstanding, other than any
classes or series of equity securities of the Company either (a) ranking on a
parity with shares of Series C as to dividend rights and rights upon
liquidation, winding up or dissolution of the Company (the "Series C Parity
Stock"), or (b) ranking senior to shares of
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Series C as to dividend rights and rights upon liquidation, winding up or
dissolution of the Company (the Common Stock and such other classes and series
of equity securities other than those described in (a) or (b) collectively may
be referred to herein as the "Series C Junior Stock"). The shares of Series C
shall be subject to the creation of such Series C Parity Stock and such Series
C Junior Stock to the extent not expressly prohibited by these Articles.
Any class or classes of stock of the Company shall be deemed to rank
prior to Series C as to dividends and as to distribution of assets upon
liquidation, dissolution or winding up if the holders of such class shall be
entitled to the receipt of dividends and of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the holders
of shares of Series C.
3. Noncumulative Dividends and Dividend
Rate. Holders of shares of Series C shall be entitled to receive, when, as and
if declared by the Board of Directors, or a duly authorized committee thereof,
out of funds legally available therefor, cash dividends from the date of issue
thereof at the annual rate of $2.28 per share, payable quarterly in arrears, on
February 15, May 15, August 15 and November 15 (each a "Series C Dividend
Payment Date") of each year, commencing on the first Series C Dividend Payment
Date after issuance of the shares of Series C; provided, however, that if any
such day is a non-business day, the Series C Dividend Payment Date will be the
next business day. Each declared dividend shall be payable to holders of
record as they appear at the close of business on the stock books of the
Company on such record dates, not more than 30 calendar days and not less than
10 calendar days preceding the payment dates therefor, as are determined by the
Board of Directors of the Company or a duly authorized committee thereof (each
of such dates a "Series C Record Date"). Quarterly dividend periods (each a
"Series C Dividend Period") shall commence on and include the fifteenth day of
February, May, August and November of each year (except as set forth above with
respect to the initial Series C Dividend Period) and shall end on and include
the day next preceding the next following Series C Dividend Payment Date.
Dividends on the shares of Series C shall be noncumulative so that if
a dividend on the shares of Series C with respect to any Series C Dividend
Period is not declared by the Board of Directors of the Company, or any duly
authorized committee thereof, then the Company shall have no obligation at any
time to pay a dividend on the shares of Series C in respect of such Series C
Dividend Period. Holders of the shares of Series C shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of the
noncumulative dividends declared by the Board of Directors, or a duly
authorized committee thereof, as set forth herein.
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Any Series C Parity Stock issued by the Company shall only have
dividend periods which end on the same date as a Series C Dividend Period. No
full dividends shall be declared or paid or set apart for payment on any Series
C Parity Stock in respect of any such dividend period unless full dividends on
Series C for the Series C Dividend Period ending on the same date as such
dividend period shall have been paid or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for such
payment.
If at any time with respect to any Series C Dividend Period dividends
are not declared and paid in full (or declared and a sum sufficient for such
full payment so set apart) upon the shares of Series C, dividends upon shares
of Series C and dividends on any shares of Series C Parity Stock outstanding
shall only be declared by the Board of Directors or a duly authorized committee
thereof pro rata with respect thereto, so that the amount of dividends declared
per share on Series C and such Series C Parity Stock shall bear to each other
the same ratio that accrued dividends per share on the shares of Series C for
such Series C Dividend Period (which shall not include any accumulation in
respect of unpaid dividends for prior Series C Dividend Periods) and full
dividends, including accumulations, if any, on shares of Series C Parity Stock,
bear to each other.
Unless full dividends have been declared and paid (or declared and a
sum sufficient for such full payment set apart for payment) on all outstanding
shares of Series C for the immediately preceding Series C Dividend Period, the
Company shall not declare or pay any dividends (other than in Common Stock or
other Series C Junior Stock) or set any amount aside for payment thereof or
make any other distribution on the Common Stock or on any other Series C Junior
Stock, nor shall any Common Stock nor any Series C Junior Stock be redeemed (or
any moneys be paid to or made available for a sinking fund for the redemption
of any shares of any such stock), or any Series C Junior Stock or Series C
Parity Stock be purchased or otherwise acquired by the Company for any
consideration except by conversion into or exchange for Series C Junior Stock.
Regardless of the length of the initial Series C Dividend Period and
whether or not the time period from the date of issue of the shares of Series C
to the Series C Dividend Payment Date constitutes a full quarter, a full
quarterly dividend of $.57 per share shall be paid on the initial Series C
Dividend Payment Date. Dividends payable for any other period shorter than a
full Series C Dividend Period shall be computed on the basis of twelve 30-day
months and a 360-day year. Dividends payable for each full quarterly dividend
period shall be computed by dividing the annual dividend rate by four.
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4. Voting Rights. Except as indicated
below and except as otherwise required by applicable law, the holders of shares
of Series C will not be entitled to vote for any purpose.
As long as any shares of Series C remain outstanding, the consent of
the holders of at least two-thirds of the shares of Series C at the time
outstanding (unless the vote or consent of the holders of a greater number of
shares shall then be required by law), given in person by proxy, by a vote at a
meeting of the holders of Series C called for such purpose at which the holders
of shares of Series C shall vote together as a separate class, shall be
necessary (i) to issue or authorize any additional class of equity stock (it
being understood that subordinated debt instruments, including mandatory
convertible debt, are not for these purposes equity stock) ranking prior to
Series C as to dividends or upon liquidation, winding up or dissolution or
which possess rights to vote separately as one class with Series C on a basis
of more than one vote for each $25.00 of stated liquidation preference thereof
(excluding any liquidation preference for accrued but unpaid dividends) or to
issue or authorize any obligation or security convertible into or evidencing a
right to purchase, or to reclassify any authorized stock of the Company into,
any such additional class of equity stock or (ii) to repeal, amend or otherwise
change any of the provisions of these Articles in any manner which adversely
affects the powers, preferences, voting power or other rights or privileges of
Series C; provided, however, that amending these Articles to increase the
number of authorized shares of common or preferred stock shall not be deemed to
be included within the scope of (ii) above.
In connection with any matter on which holders of Series C are
entitled to vote including, without limitation, the election of directors as
set forth below or any matter on which the holders of Series C are entitled to
vote as one class or otherwise pursuant to law or the provisions of these
Articles, each holder of Series C shall be entitled to one vote for each share
of Series C held by such holder.
To the extent permitted by law, if the equivalent of six full
quarterly dividends on Series C, whether or not consecutive, are not declared
and paid, the holders of shares of Series C, together with the holders of any
Series C Parity Stock as to which the payment of dividends is in arrears and
unpaid in an aggregate amount equal to or exceeding the amount of dividends
payable for six quarterly dividend periods (or if dividends are payable other
than on a quarterly basis the number of dividend periods, whether or not
consecutive, containing in the aggregate not less than 540 calendar days) and
which by its terms provides for voting rights similar to those of the shares of
Series C (the "Series C Voting Parity Stock"), shall have the exclusive right
at the next annual meeting of shareholders for the election of directors or at
a
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<PAGE> 22
special meeting called as described below, voting separately as one class, to
elect two directors for newly created directorships of the Company, each
director to be in addition to the number of directors constituting the Board of
Directors of the Company immediately prior to the accrual of such right (the
remaining directors to be elected by the other class or classes of stock
entitled to vote therefor). At any time when the right to elect such directors
shall have so vested, the Company may, and upon written request of the holders
of record of not less than 20% of the total number of shares of Series C and
such Series C Voting Parity Stock then outstanding shall, call a special
meeting of the holders of such shares to fill such newly created directorships.
In the case of such a written request, such special meeting shall be held
within 90 days after delivery of such request and in either case, at the place
and upon the notice provided by law and the Bylaws of the Company, provided
that the Company shall not be required to call such a special meeting if such
request is received less than 120 days before the date fixed for the next
annual meeting of shareholders. The right of holders of shares of Series C to
elect directors shall continue until dividends on the shares of Series C, have
been declared and paid in full for four consecutive Series C Dividend Periods,
at which time such voting right of the holders of the shares of Series C and
the Series C Voting Parity Stock shall, without further action, terminate,
subject to revesting in the event of each and every subsequent failure of the
Company to pay such dividends for the requisite number of periods as described
above.
The term of office of all directors elected by the holders of the
shares of Series C and the Series C Voting Parity Stock in office at any time
when the aforesaid voting right is vested in such holders shall terminate upon
the election of their successors at any meeting of shareholders for the purpose
of electing directors; provided however, that without further action and unless
otherwise required by law, any director who shall have been elected by holders
of the shares of Series C and the Series C Voting Parity Stock as provided
herein may be removed at any time, either with or without cause, by the
affirmative vote of the holders of record of a majority of the outstanding
shares of Series C and the Series C Voting Parity Stock, voting separately as
one class, at a duly held shareholders' meeting. Upon termination of the
aforesaid voting right in accordance with the foregoing provisions, the term of
office of all directors elected by the holders of the shares of Series C and
the Series C Voting Parity Stock pursuant thereto then in office shall, without
further action, thereupon terminate unless otherwise required by law. Upon
such termination the number of directors constituting the Board of Directors of
the Company shall, without further action, be reduced by two, subject always to
the increase of the number of directors pursuant to the foregoing provisions in
the case of the future right of holders of the shares
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<PAGE> 23
of Series C and the Series C Voting Parity Stock to elect directors as provided
above.
Unless otherwise required by law, in case of any vacancy occurring
among the directors so elected, the remaining director who shall have been so
elected may appoint a successor to hold office for the unexpired term of the
director whose place shall be vacant, and if all directors so elected by the
holders of the shares of Series C and the Series C Voting Parity Stock shall
cease to serve as directors before their term shall expire, the holders of the
shares of Series C and the Series C Voting Parity Stock then outstanding may,
at a meeting of such holders duly held, elect successors to hold office of the
unexpired terms of the directors whose places shall be vacant.
The directors to be elected by the shares of Series C and the Series C
Voting Parity Stock, voting together as a class, shall not become members of
any of the three classes of directors otherwise required by these Articles. If
these Articles and applicable law were construed to require classification of
such directors and as a result, or if for any other reason, the holders of the
shares of Series C and the Series C Voting Parity Stock are not able to elect
the specified number of directors at the next annual meeting of shareholders in
the manner described above, the Company shall use its best efforts to take all
actions necessary to permit the full exercise of such voting rights (including,
if necessary, taking action to increase the authorized number of directors
standing for election at such next annual meeting of shareholders or seeking to
amend, alter or change these Articles and bylaws of the Company).
5. Optional Redemption. The shares of
Series C will not be redeemable before December 31, 1997. On or after December
31, 1997, the shares of Series C are redeemable at the option of the Company
for cash, in whole or in part, at any time and from time to time, at $25.00 per
share, to the extent that the Company has funds legally available therefor,
plus unpaid dividends (whether or not declared) for the then-current Series C
Dividend Period up to the date fixed for redemption (without accumulation of
accrued and unpaid dividends for prior Series C Dividend Periods) (the "Series
C Redemption Price") without interest.
The Company shall not redeem or set aside funds for the redemption of
any Series C Parity Stock unless prior to or contemporaneously therewith it
redeems, or sets aside funds for the redemption of, a number of shares of
Series C whose liquidation preference bears the same relationship to the
aggregate liquidation preference of all shares of Series C then outstanding as
the liquidation preference of such Series C Parity Stock to be redeemed bears
to the aggregate liquidation preference of all Series C Parity Stock then
outstanding. In addition, notwithstanding the
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<PAGE> 24
foregoing, the Company may redeem Series C Parity Stock without redeeming a
proportional amount of Series C in the event (i) such Series C Parity Stock is
convertible into Common Stock and (ii) the average of the daily closing prices
of Common Stock for the 30-day period ending 15 days prior to the date of the
notice of redemption is in excess of the conversion price of such Series C
Parity Stock.
In the event that fewer than all the outstanding shares of Series C
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board of Directors or by any other
method as may be determined by the Board of Directors in its sole discretion to
be equitable.
In the event the Company shall redeem shares of Series C, notice of
such redemption (a "Series C Notice of Redemption") shall be given by first
class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the stock register of
the Company. Each Notice of Redemption shall include the following
information: (1) the redemption date; (2) the number of shares of Series C to
be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (3) the
Series C Redemption Price (specifying the amount of unpaid dividends to be
included therein); (4) the place or places where certificates for such shares
are to be surrendered for payment of the Series C Redemption Price; (5) that
dividends on the shares to be redeemed will cease to accrue as of such
redemption date; and (6) the provision hereunder pursuant to which such
redemption is being made.
On or after a redemption date, each holder of shares of Series C that
were called for redemption shall surrender the certificate or certificates
evidencing such shares to the Company at any place designated for such
surrender in the Notice of Redemption and shall then be entitled to receive
payment of the Series C Redemption Price for each share. If less than all the
shares represented by one share certificate are to be redeemed, the Company
shall issue a new share certificate for the shares not redeemed.
By noon of the business day immediately preceding the redemption date,
the Company shall irrevocably deposit with First Interstate Company of
Washington, N.A., in its capacity as paying agent with respect to the shares of
Series C or any successor paying agent (the "Paying Agent"), an aggregate
amount of immediately available funds or short-term money market instruments or
U.S. Treasury Securities sufficient to pay the Series C Redemption Price
specified herein for the shares of Series C to be
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<PAGE> 25
redeemed on such date and shall give the Paying Agent irrevocable instructions
to pay such Series C Redemption Price to the holders of record of the shares of
Series C called for redemption.
If a Notice of Redemption shall have been given and the deposit
referred to in the preceding paragraph made, then dividends shall cease, as of
the redemption date, to accumulate on the shares of Series C called for
redemption and all other rights of holders of the shares so called for
redemption shall cease on and after the redemption date, except the right of
holders of such shares to receive the Series C Redemption Price against
delivery of such shares, but without interest, and such shares shall cease to
be outstanding. The Company shall be entitled to receive, from time to time,
from the Paying Agent the interest, if any, earned on such monies deposited
with the Paying Agent, and the holders of any shares to be redeemed with such
monies shall have no claim to any such interest. With regard to any other
funds so deposited that are unclaimed by holders of shares at the end of two
years from such redemption date, the Paying Agent shall, upon demand, pay over
to the Company such amount remaining on deposit, the Paying Agent shall
thereupon be relieved of all responsibility to the holders of such shares and
the holders of shares of Series C so called for redemption shall thereafter be
entitled to look only to the Company for payment thereof.
Any shares of Series C which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of preferred stock of the Company, without designation as to series until such
shares are once more designated as part of a particular series by the Board of
Directors.
6. No Conversion Rights. Holders of
shares of Series C will have no right to convert shares of Series C into Common
Stock or any other security of the Company.
7. Liquidation Preference. In the
event of any liquidation, dissolution or winding up of the Company, voluntary
or involuntary, the holders of the outstanding shares of Series C shall be
entitled to receive out of the assets of the Company, or the proceeds thereof,
available for distribution to shareholders, before any distribution of assets
is made to the holders of Common Stock or other Series C Junior Stock,
liquidating distributions in the amount of $25.00 per share plus dividends
accrued and unpaid for the then-current Series C Dividend Period (without
accumulation of accrued and unpaid dividends for prior Series C Dividend
Periods) to the date fixed for such liquidation, dissolution or winding up.
After payment of the full amount of the liquidating distribution to which they
are entitled, the holders of shares of Series C will not be entitled to any
further participation in any distribution of assets of the Company. All
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<PAGE> 26
distributions made with respect to the shares of Series C in connection with
such liquidation, dissolution or winding up of the Company shall be made pro
rata to the holders entitled thereto.
If, upon any liquidation, dissolution or winding up of the Company,
the assets of the Company, and proceeds thereof, available for distribution
among the holders of the shares of Series C and of any Series C Parity Stock,
shall be insufficient to pay in full the preferential amount set forth in the
preceding paragraph above to the holders of the shares of Series C and
liquidating payments on all such Series C Parity Stock, then such assets and
proceeds shall be distributed among the holders of Series C and all such Series
C Parity Stock ratably in accordance with the respective amounts which would be
payable on such shares of Series C and any such Series C Parity Stock if all
amounts payable thereon were paid in full.
8. Payments on Stock Ranking Junior.
In the event of any such liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, unless and until payment in full is made to
the holders of all outstanding shares of Series C of the liquidation
distribution to which they are entitled, no dividend or other distribution
shall be made to the holders of the Common Stock or any other Series C Junior
Stock, and no purchase, redemption or other acquisition for any consideration
by the Company shall be made in respect of the shares of the Common Stock or
such other class of junior Stock.
Neither a consolidation or merger of the Company into or with another
entity or entities nor the sale, transfer or exchange (for cash, shares of
equity stock, securities or other consideration) of all or substantially all of
the property and assets of the Company, shall be deemed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Section
D.(2)(A).
9. Sinking Fund. No sinking fund shall
be provided for the purchase of redemption of shares of Series C.
10. Preemptive Rights. No holder of
shares of Series C shall have any preemptive right to subscribe to stock,
obligations, warrants, rights to subscribe to stock, or other securities of
this corporation of any class, whether now or hereafter authorized.
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<PAGE> 27
(B) $6.00 Noncumulative Convertible Perpetual
Preferred Stock, Series D
1. Designation. There shall initially
be a series of preferred stock whose designation shall be "$6.00 Noncumulative
Convertible Perpetual Preferred Stock, Series D" ("Series D"). The number of
shares of Series D shall be 1,400,000. The liquidation preference of Series D
shall be $100.00 per share (plus accrued and unpaid dividends for the
then-current dividend period up to the date fixed for liquidation, dissolution
or winding up).
2. Rank. The shares of Series D shall,
with respect to dividend rights and rights on liquidation, winding up and
dissolution of the Company, rank prior to the Common Stock and to all other
classes and series of equity securities of the Company now or hereafter
authorized, issued or outstanding, other than any classes or series of equity
securities of the Company either (a) ranking on a parity with shares of Series
D as to dividend rights and rights upon liquidation, winding up or dissolution
of the Company (the "Series D Parity Stock"), or (b) ranking senior to shares
of Series D as to dividend rights and rights upon liquidation, winding up or
dissolution of the Company (the Common Stock and such other classes and series
of equity securities other than those described in (a) or (b) collectively may
be referred to herein as the "Series D Junior Stock"). The shares of Series D
shall be subject to the creation of such Series D Parity Stock and such Series
D Junior Stock to the extent not expressly prohibited by these Articles.
Any class or classes of stock of the Company shall be deemed to rank
prior to Series D as to dividends and as to distribution of assets upon
liquidation, dissolution or winding up if the holders of such class shall be
entitled to the receipt of dividends and of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the holders
of shares of Series D.
3. Noncumulative Dividends and Dividend
Rate. Holders of shares of Series D shall be entitled to receive, when, as and
if declared by the Board of Directors, or a duly authorized committee thereof,
out of funds legally available therefor, cash dividends from the date of issue
thereof at the annual rate of $6.00 per share, payable quarterly in arrears, on
February 15, May 15, August 15 and November 15 (each a "Series D Dividend
Payment Date") of each year, commencing on the first Series D Dividend Payment
Date after issuance of the shares of Series D; provided, however, that if any
such day is a non-business day, the Series D Dividend Payment Date will be the
next business day. Each declared dividend shall be payable to holders of
record as they appear at the close of business on the stock books of the
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Company on such record dates, not more than 30 calendar days and not less than
10 calendar days preceding the payment dates therefor, as are determined by the
Board of Directors of the Company or a duly authorized committee thereof (each
of such dates a "Series D Record Date"). Quarterly dividend periods (each a
"Series D Dividend Period") shall commence on and include the fifteenth day of
February, May, August and November of each year (except as set forth above with
respect to the initial Series D Dividend Period) and shall end on and include
the day next preceding the next following Series D Dividend Payment Date.
Dividends on the shares of Series D shall be noncumulative so that if
a dividend on the shares of Series D with respect to any Series D Dividend
Period is not declared by the Board of Directors of the Company, or any duly
authorized committee thereof, then the Company shall have no obligation at any
time to pay a dividend on the shares of Series D in respect of such Series D
Dividend Period. Holders of the shares of Series D shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of the
noncumulative dividends declared by the Board of Directors, or a duly
authorized committee thereof, as set forth herein.
Any Series D Parity Stock issued by the Company shall only have
dividend periods which end on the same date as a Series D Dividend Period. No
full dividends shall be declared or paid or set apart for payment on any Series
D Parity Stock in respect of any such dividend period unless full dividends on
Series D for the Series D Dividend Period ending on the same date as such
dividend period shall have been paid or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for such
payment.
If at any time with respect to any Series D Dividend Period dividends
are not declared and paid in full (or declared and a sum sufficient for such
full payment so set apart) upon the shares of Series D, dividends upon shares
of Series D and dividends on any shares of Series D Parity Stock outstanding
shall only be declared by the Board of Directors or a duly authorized committee
thereof pro rata with respect thereto, so that the amount of dividends declared
per share on Series D and such Series D Parity Stock shall bear to each other
the same ratio that accrued dividends per share on the shares of Series D for
such Series D Dividend Period (which shall not include any accumulation in
respect of unpaid dividends for prior Series D Dividend Periods) and full
dividends, including accumulations, if any, on shares of Series D Parity Stock,
bear to each other.
Unless full dividends have been declared and paid (or declared and a
sum sufficient for such full payment set apart for payment) on all outstanding
shares of Series D for the immediately preceding Series D Dividend Period, the
Company shall not declare or pay any
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<PAGE> 29
dividends (other than in Common Stock or other Series D Junior Stock) or set
any amount aside for payment thereof or make any other distribution on the
Common Stock or on any other Series D Junior Stock, nor shall any Common Stock
nor any Series D Junior Stock be redeemed (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such
stock), or any Series D Junior Stock or Series D Parity Stock be purchased or
otherwise acquired by the Company for any consideration except by conversion
into or exchange for Series D Junior Stock.
Regardless of the length of the initial Series D Dividend Period and
whether or not the time period from the date of issue of the shares of Series D
to the Series D Dividend Payment Date constitutes a full quarter, a full
quarterly dividend of $1.50 per share shall be paid on the initial Series D
Dividend Payment Date. Dividends payable for any other period shorter than a
full Series D Dividend Period shall be computed on the basis of twelve 30-day
months and a 360-day year. Dividends payable for each full quarterly dividend
period shall be computed by dividing the annual dividend rate by four.
4. Voting Rights. Except as indicated
below and except as otherwise required by applicable law, the holders of shares
of Series D will not be entitled to vote for any purpose.
As long as any shares of Series D remain outstanding, the consent of
the holders of at least two-thirds of the shares of Series D at the time
outstanding (unless the vote or consent of the holders of a greater number of
shares shall then be required by law), given in person by proxy, by a vote at a
meeting of the holders of Series D called for such purpose at which the holders
of shares of Series D shall vote together as a separate class, shall be
necessary (i) to issue or authorize any additional class of equity stock (it
being understood that subordinated debt instruments, including mandatory
convertible debt, are not for these purposes equity stock) ranking prior to
Series D as to dividends or upon liquidation, winding up or dissolution or
which possess rights to vote separately as one class with Series D on a basis
of more than one vote for each $25.00 of stated liquidation preference thereof
(excluding any liquidation preference for accrued but unpaid dividends) or to
issue or authorize any obligation or security convertible into or evidencing a
right to purchase, or to reclassify any authorized stock of the Company into,
any such additional class of equity stock or (ii) to repeal, amend or otherwise
change any of the provisions of these Articles in any manner which adversely
affects the powers, preferences, voting power or other rights or privileges of
Series D; provided, however, that amending these Articles to increase the
number of authorized shares of common or preferred stock shall not be deemed to
be included within the scope of (ii) above.
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<PAGE> 30
In connection with any matter on which holders of Series D are
entitled to vote including, without limitation, the election of directors as
set forth below or any matter on which the holders of Series D are entitled to
vote as one class or otherwise pursuant to law or the provisions of these
Articles, each holder of Series D shall be entitled to one vote for each share
of Series D held by such holder.
To the extent permitted by law, if the equivalent of six full
quarterly dividends on Series D, whether or not consecutive, are not declared
and paid, the holders of shares of Series D, together with the holders of any
Series D Parity Stock as to which the payment of dividends is in arrears and
unpaid in an aggregate amount equal to or exceeding the amount of dividends
payable for six quarterly dividend periods (or if dividends are payable other
than on a quarterly basis the number of dividend periods, whether or not
consecutive, containing in the aggregate not less than 540 calendar days) and
which by its terms provides for voting rights similar to those of the shares of
Series D (the "Series D Voting Parity Stock"), shall have the exclusive right
at the next annual meeting of shareholders for the election of directors or at
a special meeting called as described below, voting separately as one class, to
elect two directors for newly created directorships of the Company, each
director to be in addition to the number of directors constituting the Board of
Directors of the Company immediately prior to the accrual of such right (the
remaining directors to be elected by the other class or classes of stock
entitled to vote therefor). At any time when the right to elect such directors
shall have so vested, the Company may, and upon written request of the holders
of record of not less than 20% of the total number of shares of Series D and
such Series D Voting Parity Stock then outstanding shall, call a special
meeting of the holders of such shares to fill such newly created directorships.
In the case of such a written request, such special meeting shall be held
within 90 days after delivery of such request and in either case, at the place
and upon the notice provided by law and in the Bylaws of the Company, provided
that the Company shall not be required to call such a special meeting if such
request is received less than 120 days before the date fixed for the next
annual meeting of shareholders. The right of holders of shares of Series D to
elect directors shall continue until dividends on the shares of Series D, have
been declared and paid in full for four consecutive Series D Dividend Periods,
at which time such voting right of the holders of the shares of Series D and
the Series D Voting Parity Stock shall, without further action, terminate,
subject to revesting in the event of each and every subsequent failure of the
Company to pay such dividends for the requisite number of periods as described
above.
The term of office of all directors elected by the holders of the
shares of Series D and the Series D Voting Parity Stock in
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<PAGE> 31
office at any time when the aforesaid voting right is vested in such holders
shall terminate upon the election of their successors at any meeting of
shareholders for the purpose of electing directors; provided however, that
without further action and unless otherwise required by law, any director who
shall have been elected by holders of the shares of Series D and the Series D
Voting Parity Stock as provided herein may be removed at any time, either with
or without cause, by the affirmative vote of the holders of record of a
majority of the outstanding shares of Series D and the Series D Voting Parity
Stock, voting separately as one class, at a duly held shareholders' meeting.
Upon termination of the aforesaid voting right in accordance with the foregoing
provisions, the term of office of all directors elected by the holders of the
shares of Series D and the Series D Voting Parity Stock pursuant thereto then
in office shall, without further action, thereupon terminate unless otherwise
required by law. Upon such termination the number of directors constituting
the Board of Directors of the Company shall, without further action, be reduced
by two, subject always to the increase of the number of directors pursuant to
the foregoing provisions in the case of the future right of holders of the
shares of Series D and the Series D Voting Parity Stock to elect directors as
provided above.
Unless otherwise required by law, in case of any vacancy occurring
among the directors so elected, the remaining director who shall have been so
elected may appoint a successor to hold office for the unexpired term of the
director whose place shall be vacant, and if all directors so elected by the
holders of the shares of Series D and the Series D Voting Parity Stock shall
cease to serve as directors before their term shall expire, the holders of the
shares of Series D and the Series D Voting Parity Stock then outstanding may,
at a meeting of such holders duly held, elect successors to hold office of the
unexpired terms of the directors whose places shall be vacant.
The directors to be elected by the shares of Series D and the Series D
Voting Parity Stock, voting together as a class, shall not become members of
any of the three classes of directors otherwise required by these Articles. If
these Articles and applicable law were construed to require classification of
such directors and as a result, or if for any other reason, the holders of the
shares of Series D and the Series D Voting Parity Stock are not able to elect
the specified number of directors at the next annual meeting of shareholders in
the manner described above, the Company shall use its best efforts to take all
actions necessary to permit the full exercise of such voting rights (including,
if necessary, taking action to increase the authorized number of directors
standing for election at such next annual meeting of shareholders or seeking to
amend, alter or change these Articles and Bylaws of the Company).
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<PAGE> 32
5. Optional Redemption. The shares of
Series D will not be redeemable before December 31, 1996. On or after December
31, 1996, the shares of Series D are redeemable at the option of the Company
for cash, in whole or in part, at any time and from time to time, at the
following redemption prices per share if redeemed during the 12-month period
ending December 31 in each of the following years to the extent that the
Company has funds legally available therefor:
<TABLE>
<CAPTION>
redemption price redemption price
per share of per share of
Year Series D Year Series D
---- -------- ---- --------
<S> <C> <C> <C>
1997 $103.60 2001 $101.20
1998 $103.00 2002 $100.60
1999 $102.40 2003 and
2000 $101.80 thereafter $100.00
</TABLE>
plus in each case accrued and unpaid dividends (whether or not declared) for
the last complete Series D Dividend Period immediately preceding the date fixed
for redemption (without accumulation of accrued and unpaid dividends for prior
Series D Dividend Periods) (the "Series D Redemption Price") without interest.
The Company shall not redeem or set aside funds for the redemption of
any Series D Parity Stock unless prior to or contemporaneously therewith it
redeems, or sets aside funds for the redemption of, a number of shares of
Series D whose liquidation preference bears the same relationship to the
aggregate liquidation preference of all shares of Series D then outstanding as
the liquidation preference of such Series D Parity Stock to be redeemed bears
to the aggregate liquidation preference of all Series D Parity Stock then
outstanding. In addition, notwithstanding the foregoing, the Company may
redeem Series D Parity Stock without redeeming a proportional amount of Series
D in the event (i) such Series D Parity Stock is convertible into Common Stock
and (ii) the average of the daily Closing Prices (as defined in 6(a) below) of
Common Stock for the 30-day period ending 15 days prior to the date of the
notice of redemption is in excess of the conversion price of such Series D
Parity Stock.
In the event that fewer than all the outstanding shares of Series D
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board of Directors or by any other
method as may be determined by the Board of Directors in its sole discretion to
be equitable.
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<PAGE> 33
In the event the Company shall redeem shares of Series D, notice of
such redemption (a "Series D Notice of Redemption") shall be given by first
class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the stock register of
the Company. Each Series D Notice of Redemption shall include the following
information: (1) the redemption date; (2) the number of shares of Series D to
be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (3) the
Series D Redemption Price (specifying the amount of accrued and unpaid
dividends to be included therein); (4) the place or places where certificates
for such shares are to be surrendered for payment of the Series D Redemption
Price; (5) that dividends on the shares to be redeemed will cease or ceased to
accrue as of the end of the Series D Dividend Period immediately preceding such
redemption date; and (6) the provision hereunder pursuant to which such
redemption is being made.
On or after a redemption date, each holder of shares of Series D that
were called for redemption shall surrender the certificate or certificates
evidencing such shares to the Company at any place designated for such
surrender in the Series D Notice of Redemption and shall then be entitled to
receive payment of the Series D Redemption Price for each share. If less than
all the shares represented by one share certificate are to be redeemed, the
Company shall issue a new share certificate for the shares not redeemed.
By noon of the business day immediately preceding the redemption date,
the Company shall irrevocably deposit with First Interstate Company of
Washington, N.A., in its capacity as paying agent with respect to the shares of
Series D or any successor paying agent (the "Series D Paying Agent"), an
aggregate amount of immediately available funds or short-term money market
instruments or U.S. Treasury Securities sufficient to pay the Series D
Redemption Price specified herein for the shares of Series D to be redeemed on
such date and shall give the Series D Paying Agent irrevocable instructions to
pay such Series D Redemption Price to the holders of record of the shares of
Series D called for redemption.
If a Series D Notice of Redemption shall have been given and the
deposit referred to in the preceding paragraph made, then dividends shall cease
after the end of the complete Series D Dividend Period immediately preceding
the redemption date, to accumulate on the shares of Series D called for
redemption and all other rights of holders of the shares so called for
redemption shall cease on and after the redemption date, except the right of
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<PAGE> 34
holders of such shares to receive the Series D Redemption Price against
delivery of such shares, but without interest, and such shares shall cease to
be outstanding. The Company shall be entitled to receive, from time to time,
from the Series D Paying Agent the interest, if any, earned on such monies
deposited with the Series D Paying Agent, and the holders of any shares to be
redeemed with such monies shall have no claim to any such interest. The
Company shall be entitled to receive upon demand any amounts so deposited which
exceed the total obtained by multiplying the Series D Redemption Price times
the difference between the number of shares called for redemption and the
number of such shares converted on or before the redemption date. With regard
to any other funds so deposited that are unclaimed by holders of shares at the
end of two years from such redemption date, the Series D Paying Agent shall,
upon demand, pay over to the Company such amount remaining on deposit, the
Series D Paying Agent shall thereupon be relieved of all responsibility to the
holders of such shares and the holders of shares of Series D so called for
redemption shall thereafter be entitled to look only to the Company for payment
thereof.
Any shares of Series D which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of preferred stock of the Company, without designation as to series until such
shares are once more designated as part of a particular series by the Board of
Directors.
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<PAGE> 35
6. Conversion Rights.
(a) Holders of shares of Series D
will have the right, at their option at any time and from time to time, to
convert any or all of such shares into the number of shares of Common Stock of
the Company determined by dividing $100.00 for each share of Series D to be
converted by the then effective conversion price, except that if any shares of
Series D are called for redemption, the conversion rights pertaining thereto
will terminate at the close of business on the date fixed for redemption,
unless the Company defaults in the payment of the Series D Redemption Price.
The market value of a share of Common Stock (the "Series D Market Price") on
any date shall be deemed to be the average of the daily Closing Prices for the
30-day period ending 15 days prior to the date in question. The term "Series D
Closing Price," with respect to any day, shall mean (i) the last sales price in
the over-the-counter market, as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or a similar accepted
reporting service for the date of any such determination, or (ii) if the Common
Stock is listed or admitted for trading on the New York Stock Exchange, the
last reported sales price per share of Common Stock on such date on the New
York Stock Exchange, or (iii) if the Common Stock is not listed or admitted for
trading on the New York Stock Exchange, the last reported sales price on the
principal national securities exchange on which the Common Stock is admitted
for trading, or (iv) if no such quotations are available and the Common Stock
is not so listed or admitted, the fair market value on the date in question of
a share of Common Stock as determined in good faith by the Board of Directors.
If more than one share of Series D is surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock which shall be
issuable on conversion thereof shall be computed on the basis of all such
shares so surrendered.
(b) The holders of shares of Series
D at the close of business on a dividend payment Series D Record Date shall be
entitled to receive the dividend payable on such shares (except that holders of
shares of Series D subject to redemption on a redemption date between such
Series D Record Date and the Series D Dividend Payment Date shall not be
entitled to receive such dividend on such Series D Dividend Payment Date) on
the corresponding Series D Dividend Payment Date notwithstanding the conversion
thereof or the Company's default on payment of the dividend due on such Series
D Dividend Payment Date. However, shares of Series D surrendered for
conversion during the period after any dividend payment Series D Record Date
and before such Series D Dividend Payment Date (except shares subject to
redemption on a redemption date during such period) must be accompanied by
payment of an amount equal to the dividend payable on such shares on such
Series D Dividend Payment Date. Holders of shares of Series D on a dividend
payment Series D Record Date who (or whose
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<PAGE> 36
transferees) convert shares of Series D on a Series D Dividend Payment Date
will receive the dividend payable on such Series D by the Company on such date,
and the converting holder need not include payment in the amount of such
dividend upon surrender of shares of Series D for conversion.
(c) The initial conversion price
for each share of Series D is $25.8338. The initial conversion price or other
conversion price then in effect shall be subject to adjustment from time to
time as follows:
(i) In case the Company shall declare
a dividend or other distribution on any class of capital stock of the Company
payable in shares of Common Stock, the conversion price in effect at the
opening of business on the day following the date fixed for the determination
of stockholders entitled to receive such dividend or other distribution shall
be reduced by multiplying such conversion price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination and the denominator
shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following the
date fixed for such determination.
(ii) In case the Company shall
subdivide the outstanding shares of the Common Stock into a greater number of
shares, the conversion price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately reduced, and, conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares, the conversion
price in effect at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately increased.
(iii) In case the Common Stock
issuable upon the conversion of Series D shall be changed into the same or a
different number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a stock dividend or
a subdivision or combination of shares provided for in subclause (i) or (ii),
or a reorganization, merger, consolidation or sale of assets provided for in
(d)), then and in each such event the holders of shares of Series D shall have
the right thereafter to convert such shares into the kind and amount of shares
of stock and other securities and property receivable upon such reorganization,
reclassification or other change, by holders of the number of shares of Common
Stock into which such shares of Series D might have been converted
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<PAGE> 37
immediately prior to such reorganization, reclassification or change.
(iv) In case the Company shall issue
to all holders of the Common Stock rights or warrants entitling them (within a
45 calendar-day period after the date fixed for the determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at less than the Series D Market Price on the
date fixed for such determination, the conversion price in effect at the
opening of business on the day following the date fixed for such determination
shall be reduced by multiplying such conversion price by a fraction of which
the numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination plus the number of
shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase would
purchase at such current Series D Market Price and the denominator shall be the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock so
offered for subscription or purchase, such reduction to become effective
immediately after the opening of business on the day following the date fixed
for such determination.
(v) In case the Company shall, by
dividend or otherwise, distribute to all holders of shares of Common Stock
evidences of indebtedness or assets (including rights or warrants to purchase
capital stock, or any other securities, but excluding any dividend or
distribution referred to in (i), any rights or warrants referred to in (iv) and
any dividend or distribution paid in cash out of the retained earnings or
consolidated net income of the Company), the conversion price shall be adjusted
by multiplying the conversion price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders entitled to
receive such distribution by a fraction of which the numerator shall be the
current Series D Market Price of the Common Stock on the date fixed for such
determination less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive) of the portion of the
assets or evidences of indebtedness so distributed allocable to one share of
Common Stock and the denominator shall be such current Series D Market Price of
the Common Stock, such adjustment to become effective immediately prior to the
opening of business on the day following the date fixed for the determination
of stockholders entitled to receive such distribution. In the event that the
Company shall distribute or shall have distributed to all holders of shares of
Common Stock rights or warrants to purchase capital stock that are not
initially detachable from the Common Stock (whether or not such distribution
shall have occurred prior to the date of issuance of Series D),
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<PAGE> 38
then the distribution of separate certificates representing such rights or
warrants subsequent to their initial distribution shall be deemed to be the
distribution of such rights or warrants for purposes of this subclause (v).
Notwithstanding the foregoing, in the event that the Company shall
distribute rights or warrants to purchase capital stock (other than those
referred in (iv) above) ("Series D Rights") to holders of Common Stock, the
Company may, in lieu of making the foregoing adjustment pursuant to this
subclause (v), make proper provision so that each holder of shares of Series D
who converts such shares of Series D before the record date for such
distribution shall be entitled to receive upon such conversion shares of Common
Stock issued with Series D Rights and after the record date for such
distribution and prior to the expiration or redemption of the Series D Rights
shall be entitled to receive upon such conversion, in addition to the shares of
Common Stock issuable upon such conversion, the same number of Series D Rights
to which a holder of the number of shares of Common Stock into which the shares
of Series D so converted were convertible immediately prior to the record date
for such distribution would have been entitled on the record date for such
distribution in accordance with the terms and provisions of and applicable to
the Series D Rights.
(vi) No adjustment in the conversion
price shall be required unless such adjustment would require an increase or
decrease of at least 1% of the conversion price then in effect; provided,
however, that any adjustments which by reason of this subsection (vi) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
(d) In case of any (i)
consolidation or merger of the Company with or into another entity (other than
a consolidation or merger in which the Company is the surviving entity), (ii)
sale, transfer, lease or conveyance of all or substantially all the assets of
the Company, (iii) reclassification, capital reorganization or change in the
Company's Common Stock (other than solely a change in par value, or from par
value to no par value), or (iv) consolidation or merger of another entity into
the Company and in which there is a reclassification or change of the Company's
Common Stock (other than solely a change in par value or from par value to no
par value), then each holder of shares of Series D then outstanding shall have
the right thereafter to convert each share of Series D held by such holder into
the same kind and amount of shares of stock, other securities, cash or other
property (or any combination thereof) which the holder would have received had
the holder converted such holder's shares of Series D to Common Stock
immediately prior to the occurrence of such event. If the consideration into
which Series D is convertible following any such event consists of common stock
of the Company or the surviving
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<PAGE> 39
entity (as the case may be), then from and after the occurrence of such event
the conversion price for each share of Series D into such common stock shall be
subject to the same anti-dilution and other adjustments described herein,
applied as if such common stock were Common Stock of the Company.
No fractional shares of Common Stock shall be issued upon any
conversion, but, in lieu thereof, there shall be paid to each holder of shares
of Series D surrendered for conversion who, but for the provisions of this
paragraph would be entitled to receive a fraction of a share of Common Stock on
such conversion, as soon as practicable after the date shares of Series D are
surrendered for conversion an amount in cash equal to the same fraction of the
Market Value on the date of surrender of a full share of Common Stock, unless
the Board of Directors or a duly authorized committee thereof shall determine
to adjust fractional shares by the issue of fractional scrip certificates or in
some other manner. If more than one share of Series D is surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock which shall be issuable on conversion thereof shall be computed on the
basis of all such shares so surrendered.
(e) In addition to the foregoing
adjustments, the Company may, but shall not be required to, make such
reductions in the conversion price as it considers to be advisable in order
that any event treated for federal income tax purposes as a dividend of stock
or stock rights will be taxable to the recipients to the minimum extent
determined to be reasonable under the circumstances as determined by the Board
of Directors.
(f) Whenever any adjustment is
required in the conversion price of Series D, the Company shall forthwith (A)
keep available at each of its offices and agencies at which shares of Series D
are convertible a statement describing in reasonable detail the adjustment and
the method of calculation used; and (B) cause a copy of such statement to be
mailed to the holders of record of the shares of Series D.
(g) If in any case a state of facts
occurs wherein in the opinion of the Board of Directors the other provisions of
this Section D.(2)(B) with respect to conversion rights are not strictly
applicable or if strictly applied would not fairly protect the conversion
rights of the shares of Series D in accordance with essential intent and
principles of such provisions, then the Board shall make an adjustment in the
application of such provisions, in accordance with the essential intent and
principles so as to protect such conversion rights aforesaid, all as the Board
in its discretion shall determine.
(h) The Company shall at all times
reserve and keep available out of the authorized but unissued
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<PAGE> 40
shares of Common Stock the maximum number of shares of Common Stock into which
all shares of Series D from time to time outstanding are convertible, but
shares of Common Stock held in the treasury of the Company may in its
discretion be delivered upon any conversion of shares of Series D.
(i) Shares of Series D converted
into Common Stock shall have the status of authorized but unissued shares of
Series D provided that the Board has the authority to declare at any time that
such converted shares shall, after conversion, have the status of authorized
but unissued shares of preferred stock of the Company without designation as to
series (until once more designated as a part of a particular series by the
Board of Directors) and provided that in the event a Series D Notice of
Redemption for all outstanding shares of Series D is made, then all shares
converted prior to the redemption date shall as of the redemption date
automatically have the status of such authorized but unissued shares of
preferred stock of the Company without designation as to series.
_ 7. Liquidation Preference. In the
event of any liquidation, dissolution or winding up of the Company, voluntary
or involuntary, the holders of the outstanding shares of Series D shall be
entitled to receive out of the assets of the Company, or the proceeds thereof,
available for distribution to shareholders, before any distribution of assets
is made to the holders of Common Stock or other Series D Junior Stock,
liquidating distributions in the amount of $100.00 per share plus dividends
accrued and unpaid for the then-current Series D Dividend Period (without
accumulation of accrued and unpaid dividends for prior Series D Dividend
Periods) to the date fixed for such liquidation, dissolution or winding up.
After payment of the full amount of the liquidating distribution to which they
are entitled, the holders of shares of Series D will not be entitled to any
further participation in any distribution of assets of the Company. All
distributions made with respect to the shares of Series D in connection with
such liquidation, dissolution or winding up of the Company shall be made pro
rata to the holders entitled thereto.
If, upon any liquidation, dissolution or winding up of the Company,
the assets of the Company, and proceeds thereof, available for distribution
among the holders of the shares of Series D and of any Series D Parity Stock,
shall be insufficient to pay in full the preferential amount set forth in the
preceding paragraph above to the holders of the shares of Series D and
liquidating payments on all such Series D Parity Stock, then such assets and
proceeds shall be distributed among the holders of Series D and all such Series
D Parity Stock ratably in accordance with the respective amounts which would be
payable on such shares of Series D and any such Series D Parity Stock if all
amounts payable thereon were paid in full.
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<PAGE> 41
8. Payments on Stock Ranking Junior.
In the event of any such liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, unless and until payment in full is made to
the holders of all outstanding shares of Series D of the liquidation
distribution to which they are entitled, no dividend or other distribution
shall be made to the holders of the Common Stock or any other Series D Junior
Stock, and no purchase, redemption or other acquisition for any consideration
by the Company shall be made in respect of the shares of the Common Stock or
such other class of junior Stock.
Neither a consolidation or merger of the Company into or with another
entity or entities nor the sale, transfer or exchange (for cash, shares of
equity stock, securities or other consideration) of all or substantially all of
the property and assets of the Company, shall be deemed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Section
D.(2)(B).
9. Sinking Fund. No sinking fund shall
be provided for the purchase of redemption of shares of Series D.
10. Preemptive Rights. No holder of
shares of Series D shall have any preemptive right to subscribe to stock,
obligations, warrants, rights to subscribe to stock, or other securities of
this corporation of any class, whether now or hereafter authorized.
(C) 7.60% Noncumulative Perpetual Preferred
Stock, Series E.
1. Designation. There shall initially
be a series of preferred stock whose designation shall be "7.60% Noncumulative
Perpetual Preferred Stock, Series E" ("Series E"). The number of shares of
Series E shall be 2,000,000. The liquidation preference of Series E shall be
$25.00 per share (plus accrued and unpaid dividends for the then-current
dividend period up to the date fixed for liquidation, dissolution or winding
up).
2. Rank. The shares of Series E shall,
with respect to dividend rights and rights on liquidation, winding up and
dissolution of the Company, rank prior to the Common Stock and to all other
classes and series of equity securities of the Company now or hereafter
authorized, issued or outstanding, other than any classes or series of equity
securities of the Company either (a) ranking on a parity with shares of Series
E as to dividend rights and rights upon liquidation, winding up or dissolution
of the Company (the "Series E Parity Stock"), or (b) ranking senior to shares
of Series E as to dividend rights and rights upon liquidation, winding up or
dissolution of the Company (the Common Stock and such other classes and series
of equity securities other
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than those described in (a) or (b) collectively may be referred to herein as
the "Series E Junior Stock"). The shares of Series E shall be subject to the
creation of such Series E Parity Stock and such Series E Junior Stock to the
extent not expressly prohibited by these Articles.
Any class or classes of stock of the Company shall be deemed to rank
prior to Series E as to dividends and as to distribution of assets upon
liquidation, dissolution or winding up if the holders of such class shall be
entitled to the receipt of dividends and of amounts distributable upon
liquidation, dissolution or winding up in preference or priority to the holders
of shares of Series E.
3. Noncumulative Dividends and Dividend
Rate. Holders of shares of Series E shall be entitled to receive, when, as and
if declared by the Board of Directors, or a duly authorized committee thereof,
out of funds legally available therefor, cash dividends from the date of issue
thereof at the annual rate of $1.90 per share, payable quarterly in arrears, on
February 15, May 15, August 15 and November 15 (each a "Series E Dividend
Payment Date") of each year, commencing on the first Series E Dividend Payment
Date after issuance of the shares of Series E; provided, however, that if any
such day is a non-business day, the Series E Dividend Payment Date will be the
next business day. Each declared dividend shall be payable to holders of
record as they appear at the close of business on the stock books of the
Company on such record dates, not more than 30 calendar days and not less than
10 calendar days preceding the payment dates therefor, as are determined by the
Board of Directors of the Company or a duly authorized committee thereof (each
of such dates a "Series E Record Date"). Quarterly dividend periods (each a
"Series E Dividend Period") shall commence on and include the fifteenth day of
February, May, August and November of each year (except as set forth above with
respect to the initial Series E Dividend Period) and shall end on and include
the day next preceding the next following Series E Dividend Payment Date.
Dividends on the shares of Series E shall be noncumulative so that if
a dividend on the shares of Series E with respect to any Series E Dividend
Period is not declared by the Board of Directors of the Company, or any duly
authorized committee thereof, then the Company shall have no obligation at any
time to pay a dividend on the shares of Series E in respect of such Series E
Dividend Period. Holders of the shares of Series E shall not be entitled to
any dividends, whether payable in cash, property or stock, in excess of the
noncumulative dividends declared by the Board of Directors, or a duly
authorized committee thereof, as set forth herein.
Any Series E Parity Stock issued by the Company shall only have
dividend periods which end on the same date as a Series E Dividend Period. No
full dividends shall be declared or paid or
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set apart for payment on any Series E Parity Stock in respect of any such
dividend period unless full dividends on Series E for the Series E Dividend
Period ending on the same date as such dividend period shall have been paid or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment.
If at any time with respect to any Series E Dividend Period dividends
are not declared and paid in full (or declared and a sum sufficient for such
full payment so set apart) upon the shares of Series E, dividends upon shares
of Series E and dividends on any shares of Series E Parity Stock outstanding
shall only be declared by the Board of Directors or a duly authorized committee
thereof pro rata with respect thereto, so that the amount of dividends declared
per share on Series E and such Series E Parity Stock shall bear to each other
the same ratio that accrued dividends per share on the shares of Series E for
such Series E Dividend Period (which shall not include any accumulation in
respect of unpaid dividends for prior Series E Dividend Periods) and full
dividends, including accumulations, if any, on shares of Series E Parity Stock,
bear to each other.
Unless full dividends have been declared and paid (or declared and a
sum sufficient for such full payment set apart for payment) on all outstanding
shares of Series E for the immediately preceding Series E Dividend Period, the
Company shall not declare or pay any dividends (other than in Common Stock or
other Series E Junior Stock) or set any amount aside for payment thereof or
make any other distribution on the Common Stock or on any other Series E Junior
Stock, nor shall any Common Stock nor any Series E Junior Stock be redeemed (or
any moneys be paid to or made available for a sinking fund for the redemption
of any shares of any such stock), or any Series E Junior Stock or Series E
Parity Stock be purchased or otherwise acquired by the Company for any
consideration except by conversion into or exchange for Series E Junior Stock.
Regardless of the length of the initial Series E Dividend Period and
whether or not the time period from the date of issue of the shares of Series E
to the Series E Dividend Payment Date constitutes a full quarter, a full
quarterly dividend of $.475 per share shall be paid on the initial Series E
Dividend Payment Date. Dividends payable for any other period shorter than a
full Series E Dividend Period shall be computed on the basis of twelve 30-day
months and a 360-day year. Dividends payable for each full quarterly dividend
period shall be computed by dividing the annual dividend rate by four.
4. Voting Rights. Except as indicated
below and except as otherwise required by applicable law, the holders of shares
of Series E will not be entitled to vote for any purpose.
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As long as any shares of Series E remain outstanding, the consent of
the holders of at least a majority of the shares of Series E at the time
outstanding (unless the vote or consent of the holders of a greater number of
shares shall then be required by law), given in person by proxy, by a vote at a
meeting of the holders of Series E called for such purpose at which the holders
of shares of Series E shall vote together as a separate class, shall be
necessary (i) to issue or authorize any additional class of equity stock (it
being understood that subordinated debt instruments, including mandatory
convertible debt, are not for these purposes equity stock) ranking prior to
Series E as to dividends or upon liquidation, winding up or dissolution or
which possess rights to vote separately as one class with Series E on a basis
of more than one vote for each $25.00 of stated liquidation preference thereof
(excluding any liquidation preference for accrued but unpaid dividends) or to
issue or authorize any obligation or security convertible into or evidencing a
right to purchase, or to reclassify any authorized stock of the Company into,
any such additional class of equity stock or (ii) to repeal, amend or otherwise
change any of the provisions of these Articles in any manner which adversely
affects the powers, preferences, voting power or other rights or privileges of
Series E; provided, however, that amending these Articles to increase the
number of authorized shares of common or preferred stock shall not be deemed to
be included within the scope of (ii) above.
In connection with any matter on which holders of Series E are
entitled to vote including, without limitation, the election of directors as
set forth below or any matter on which the holders of Series E are entitled to
vote as one class or otherwise pursuant to law or the provisions of these
Articles, each holder of Series E shall be entitled to one vote for each share
of Series E held by such holder.
To the extent permitted by law, if the equivalent of six full
quarterly dividends on Series E, whether or not consecutive, are not declared
and paid, the holders of shares of Series E, together with the holders of any
Series E Parity Stock as to which the payment of dividends is in arrears and
unpaid in an aggregate amount equal to or exceeding the amount of dividends
payable for six quarterly dividend periods (or if dividends are payable other
than on a quarterly basis the number of dividend periods, whether or not
consecutive, containing in the aggregate not less than 540 calendar days) and
which by its terms provides for voting rights similar to those of the shares of
Series E (the "Series E Voting Parity Stock"), shall have the exclusive right
at the next annual meeting of shareholders for the election of directors or at
a special meeting called as described below, voting separately as one class, to
elect two directors for newly created directorships of the Company, each
director to be in addition to the number of directors constituting the Board of
Directors of the Company
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immediately prior to the accrual of such right (the remaining directors to be
elected by the other class or classes of stock entitled to vote therefor). At
any time when the right to elect such directors shall have so vested, the
Company may, and upon written request of the holders of record of not less than
20% of the total number of shares of Series E and such Series E Voting Parity
Stock then outstanding shall, call a special meeting of the holders of such
shares to fill such newly created directorships. In the case of such a written
request, such special meeting shall be held within 90 days after delivery of
such request and in either case, at the place and upon the notice provided by
law and in the Bylaws of the Company, provided that the Company shall not be
required to call such a special meeting if such request is received less than
120 days before the date fixed for the next annual meeting of shareholders.
The right of holders of shares of Series E to elect directors shall continue
until dividends on the shares of Series E, have been declared and paid in full
for four consecutive Series E Dividend Periods, at which time such voting right
of the holders of the shares of Series E and the Series E Voting Parity Stock
shall, without further action, terminate, subject to revesting in the event of
each and every subsequent failure of the Company to pay such dividends for the
requisite number of periods as described above.
The term of office of all directors elected by the holders of the
shares of Series E and the Series E Voting Parity Stock in office at any time
when the aforesaid voting right is vested in such holders shall terminate upon
the election of their successors at any meeting of shareholders for the purpose
of electing directors; provided however, that without further action and unless
otherwise required by law, any director who shall have been elected by holders
of the shares of Series E and the Series E Voting Parity Stock as provided
herein may be removed at any time, either with or without cause, by the
affirmative vote of the holders of record of a majority of the outstanding
shares of Series E and the Series E Voting Parity Stock, voting separately as
one class, at a duly held shareholders' meeting. Upon termination of the
aforesaid voting right in accordance with the foregoing provisions, the term of
office of all directors elected by the holders of the shares of Series E and
the Series E Voting Parity Stock pursuant thereto then in office shall, without
further action, thereupon terminate unless otherwise required by law. Upon
such termination the number of directors constituting the Board of Directors of
the Company shall, without further action, be reduced by two, subject always to
the increase of the number of directors pursuant to the foregoing provisions in
the case of the future right of holders of the shares of Series E and the
Series E Voting Parity Stock to elect directors as provided above.
Unless otherwise required by law, in case of any vacancy occurring
among the directors so elected, the remaining director
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who shall have been so elected may appoint a successor to hold office for the
unexpired term of the director whose place shall be vacant, and if all
directors so elected by the holders of the shares of Series E and the Series E
Voting Parity Stock shall cease to serve as directors before their term shall
expire, the holders of the shares of Series E and the Series E Voting Parity
Stock then outstanding may, at a meeting of such holders duly held, elect
successors to hold office of the unexpired terms of the directors whose places
shall be vacant.
The directors to be elected by the shares of Series E and the Series E
Voting Parity Stock, voting together as a class, shall not become members of
any of the three classes of directors otherwise required by these Articles. If
these Articles and applicable law were construed to require classification of
such directors and as a result, or if for any other reason, the holders of the
shares of Series E and the Series E Voting Parity Stock are not able to elect
the specified number of directors at the next annual meeting of shareholders in
the manner described above, the Company shall use its best efforts to take all
actions necessary to permit the full exercise of such voting rights (including,
if necessary, taking action to increase the authorized number of directors
standing for election at such next annual meeting of shareholders or seeking to
amend, alter or change these Articles and bylaws of the Company).
5. Optional Redemption. The shares of
Series E will not be redeemable before September 15, 1998. On or after
September 15, 1998, the shares of Series E are redeemable at the option of the
Company for cash, in whole or in part, at any time and from time to time, at
$25.00 per share, to the extent that the Company has funds legally available
therefor, plus unpaid dividends (whether or not declared) for the then-current
Series E Dividend Period up to the date fixed for redemption (without
accumulation of accrued and unpaid dividends for prior Series E Dividend
Periods) (the "Series E Redemption Price") without interest.
The Company shall not redeem or set aside funds for the redemption of
any Series E Parity Stock unless prior to or contemporaneously therewith it
redeems, or sets aside funds for the redemption of, a number of shares of
Series E whose liquidation preference bears the same relationship to the
aggregate liquidation preference of all shares of Series E then outstanding as
the liquidation preference of such Series E Parity Stock to be redeemed bears
to the aggregate liquidation preference of all Series E Parity Stock then
outstanding. Notwithstanding the foregoing, the Company may redeem Series E
Parity Stock without redeeming a proportional amount of Series E in the event
(i) such Series E Parity Stock is convertible into Common Stock and (ii) the
average of the daily closing prices of Common Stock for the 30-day period
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ending 15 days prior to the date of the notice of redemption is in excess of
the conversion price of such Series E Parity Stock.
In the event that fewer than all the outstanding shares of Series E
are to be redeemed, the number of shares to be redeemed shall be determined by
the Board of Directors and the shares to be redeemed shall be determined by lot
or pro rata as may be determined by the Board of Directors or by any other
method as may be determined by the Board of Directors in its sole discretion to
be equitable.
In the event the Company shall redeem shares of Series E, notice of
such redemption (a "Series E Notice of Redemption") shall be given by first
class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the stock register of
the Company. Each Series E Notice of Redemption shall include the following
information: (1) the redemption date; (2) the number of shares of Series E to
be redeemed and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such holder; (3) the
Series E Redemption Price (specifying the amount of unpaid dividends to be
included therein); (4) the place or places where certificates for such shares
are to be surrendered for payment of the Series E Redemption Price; (5) that
dividends on the shares to be redeemed will cease to accrue as of such
redemption date; and (6) the provision hereunder pursuant to which such
redemption is being made.
On or after a redemption date, each holder of shares of Series E that
were called for redemption shall surrender the certificate or certificates
evidencing such shares to the Company at any place designated for such
surrender in the Series E Notice of Redemption and shall then be entitled to
receive payment of the Series E Redemption Price for each share. If less than
all the shares represented by one share certificate are to be redeemed, the
Company shall issue a new share certificate for the shares not redeemed.
By noon of the business day immediately preceding the redemption date,
the Company shall irrevocably deposit with First Interstate Company of
Washington, N.A., in its capacity as paying agent with respect to the shares of
Series E or any successor paying agent (the "Series E Paying Agent"), an
aggregate amount of immediately available funds or short-term money market
instruments or U.S. Treasury Securities sufficient to pay the Series E
Redemption Price specified herein for the shares of Series E to be redeemed on
such date and shall give the Series E Paying Agent irrevocable instructions to
pay such Series E Redemption Price to the holders of record of the shares of
Series E called for redemption.
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If a Series E Notice of Redemption shall have been given and the
deposit referred to in the preceding paragraph made, then dividends shall
cease, as of the redemption date, to accumulate on the shares of Series E
called for redemption and all other rights of holders of the shares so called
for redemption shall cease on and after the redemption date, except the right
of holders of such shares to receive the Series E Redemption Price against
delivery of such shares, but without interest, and such shares shall cease to
be outstanding. The Company shall be entitled to receive, from time to time,
from the Series E Paying Agent the interest, if any, earned on such monies
deposited with the Series E Paying Agent, and the holders of any shares to be
redeemed with such monies shall have no claim to any such interest. With
regard to any other funds so deposited that are unclaimed by holders of shares
at the end of two years from such redemption date, the Series E Paying Agent
shall, upon demand, pay over to the Company such amount remaining on deposit,
the Series E Paying Agent shall thereupon be relieved of all responsibility to
the holders of such shares and the holders of shares of Series E so called for
redemption shall thereafter be entitled to look only to the Company for payment
thereof.
Any shares of Series E which shall at any time have been redeemed
shall, after such redemption, have the status of authorized but unissued shares
of preferred stock of the Company, without designation as to series until such
shares are once more designated as part of a particular series by the Board of
Directors.
6. No Conversion Rights. Holders of
shares of Series E will have no right to convert shares of Series E into Common
Stock or any other security of the Company.
7. Liquidation Preference. In the event
of any liquidation, dissolution or winding up of the Company, voluntary or
involuntary, the holders of the outstanding shares of Series E shall be entitled
to receive out of the assets of the Company, or the proceeds thereof, available
for distribution to shareholders, before any distribution of assets is made to
the holders of Common Stock or other Series E Junior Stock, liquidating
distributions in the amount of $25.00 per share plus dividends accrued and
unpaid for the then-current Series E Dividend Period (without accumulation of
accrued and unpaid dividends for prior Series E Dividend Periods) to the date
fixed for such liquidation dissolution or winding up. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of shares of Series E will not be entitled to any further participation in any
distribution of assets of the Company. All distributions made with respect to
the shares of Series E in connection with such liquidation, dissolution or
winding up of the Company shall be made pro rata to the holders entitled
thereto.
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If, upon any liquidation, dissolution or winding up of the Company,
the assets of the Company, and proceeds thereof, available for distribution
among the holders of the shares of Series E and of any Series E Parity Stock,
shall be insufficient to pay in full the preferential amount set forth in the
preceding paragraph above to the holders of the shares of Series E and
liquidating payments on all such Series E Parity Stock, then such assets and
proceeds shall be distributed among the holders of Series E and all such Series
E Parity Stock ratably in accordance with the respective amounts which would be
payable on such shares of Series E and any such Series E Parity Stock if all
amounts payable thereon were paid in full.
8. Payments on Stock Ranking Junior.
In the event of any such liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, unless and until payment in full is made to
the holders of all outstanding shares of Series E of the liquidation
distribution to which they are entitled, no dividend or other distribution
shall be made to the holders of the Common Stock or any other Series E Junior
Stock, and no purchase, redemption or other acquisition for any consideration
by the Company shall be made in respect of the shares of the Common Stock or
such other class of junior Stock.
Neither a consolidation or merger of the Company into or with another
entity or entities nor the sale, transfer or exchange (for cash, shares of
equity stock, securities or other consideration) of all or substantially all of
the property and assets of the Company, shall be deemed to be a liquidation,
dissolution or winding up of the Company within the meaning of this Section
D.(A)(3).
9. Sinking Fund. No sinking fund shall
be provided for the purchase of redemption of shares of Series E.
10. Preemptive Rights. No holder of
shares of Series E shall have any preemptive right to subscribe to stock,
obligations, warrants, rights to subscribe to stock, or other securities of
this corporation of any class, whether now or hereafter authorized.
ARTICLE III
Preemptive Rights
The shareholders of the Company have no preemptive rights to acquire
additional shares of the Company.
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ARTICLE IV
Board of Directors
The Company shall be managed by a Board of Directors. The number of
directors shall be stated in the Company's Bylaws, provided, however, that such
number shall be not less than five (5). In the absence of such a provision in
the Bylaws, the board shall consist of the number of directors constituting the
initial Board of Directors. The initial directors shall be five (5) in number.
There shall be three classes of elected directors designated as Class 1, Class
2, and Class 3 directors. Each class shall contain one-third of the total
number of directors, as near as may be. The terms of the Class 1 directors
shall expire at the first annual shareholders' meeting after their election.
The terms of the Class 2 directors shall expire at the second annual
shareholders' meeting after their election. The terms of the Class 3 directors
shall expire at the third annual shareholders' meeting after their election.
At each annual shareholders' meeting held thereafter, directors shall be chosen
for a term of three years to succeed those whose terms expire. A vacancy on
the Board of Directors may be filled by the Board in accordance with the
applicable provisions of the Company's Bylaws. A director elected to fill a
vacancy shall be elected for a term of office continuing only until the next
election of directors by shareholders.
ARTICLE V
Removal of Directors
Any director may be removed by the shareholders only with good cause
and in accordance with the applicable provisions of the Company's Bylaws.
ARTICLE VI
Cumulative Voting
The right to cumulate votes in the election of directors shall not
exist with respect to shares of stock of the Company.
ARTICLE VII
Bylaws
The Board of Directors has the power to adopt, amend or repeal the
Bylaws of the Company, subject to the concurrent power of the shareholders, by
at least two-thirds affirmative vote of the shares of the Company entitled to
vote thereon, to adopt, amend or repeal the Bylaws.
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ARTICLE VIII
Dealings With Interested Persons
The Company may enter into contracts and otherwise transact business
as vendor, purchaser, or otherwise, with its directors, officers, and
shareholders and with corporations, associations, firms, and entities in which
they are or may become interested as directors, officers, shareholders,
members, or otherwise, as freely as though such interest did not exist;
provided, however, that no director or officer shall become an indorser, surety
or guarantor or in any manner an obligor for any loan made by the Company, and
provided further that no director or officer shall, for himself or as agent or
partner of another, directly or indirectly borrow any of the funds or deposits
held by the Company or become the owner of real property upon which the Company
holds a mortgage. A loan to or a purchase by a corporation in which a director
or officer of the Company is a stockholder of fifteen percent (15%) or more of
the total outstanding stock, or in which such director or officer and other
directors of the Company are collectively stockholders of twenty-five percent
(25%) or more of the total outstanding stock, shall be deemed a loan to or a
purchase by such director or officer within the meaning of this Article, except
when the loan to or purchase by such corporation occurred without his or her
knowledge or against his or her protest. Except as otherwise provided in this
Article and in the absence of fraud, the fact that any director, officer,
shareholder, or any corporation, association, firm or other entity of which any
director, officer, or shareholder is interested, is in any way interested in
any transaction or contract shall not make the transaction or contract void or
voidable, or require the director, officer, or shareholder to account to the
Company for any profits therefrom if the transaction or contract is or shall be
authorized, ratified, or approved by (i) vote of a majority of a quorum of the
Board of Directors excluding any interested director or directors, (ii) the
written consent of the holders of a majority of the shares entitled to vote, or
(iii) a general resolution approving the acts of the directors and officers
adopted at a shareholders meeting by vote of the holders of the majority of the
shares entitled to vote. Nothing herein contained shall create any liability
in the events described or prevent the authorization, ratification or approval
of such transactions or contracts in any other manner.
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ARTICLE IX
Shareholder Vote Required to Approve Plan of Merger
If pursuant to the Washington Business Corporation Act the Company's
shareholders are required to approve a plan of merger, then (a) if two-thirds
of the directors vote to recommend the plan of merger to the shareholders, the
plan of merger shall be approved by a vote of the holders of a majority of the
outstanding voting shares of the Company; (b) in all other cases where a
shareholder vote is required by the Washington Business Corporation Act, such
Act, as it may be amended, will control.
ARTICLE X
Indemnification
The Company has the power to indemnify, and to purchase and maintain
insurance for, its directors, officers, employees, and other persons and agents
against all liability, damage, and expenses arising from or in connection with
service for or at the request of, employment by, or other affiliation with the
Company or other firms or entities.
ARTICLE XI
Business Combinations
I
B. For the purposes of this Article XI:
(1) The terms "Affiliate" and "Associate" shall have the
meanings attached to them by Rule 12b-2 under the Securities Exchange Act of
1934, as amended, or any similar successor rule.
(2) The term "beneficial owner" and correlative terms
shall have the meaning as set forth in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended, or any similar successor rule. Without limitation and
in addition to the foregoing, any shares of Voting Stock of the Company which
any Major Stockholder has the right to vote or to acquire (i) pursuant to any
agreement, (ii) by reason of tenders of shares by shareholders of the Company
in connection with or pursuant to a tender offer made by such Major Stockholder
(whether or not any tenders have been accepted, but excluding tenders which
have been rejected), or (iii) upon the exercise of conversion rights, warrants,
options or otherwise, shall be deemed "beneficially owned" by such Major
Stockholder.
(3) The term "Business Combination" shall mean:
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(a) any merger or consolidation (whether in a
single transaction or a series of related transactions, including a series of
separate transactions with a Major Stockholder, any Affiliate or Associate
thereof or any Person acting in concert therewith) of the Company or any
Subsidiary with or into a Major Stockholder or of a Major Stockholder into the
Company or a Subsidiary;
(b) any sale, lease, exchange, transfer,
distribution to stockholders or other disposition, including without
limitation, a mortgage, pledge or any other security device, to or with a Major
Stockholder by the Company or any of its Subsidiaries (in a single transaction
or a series of related transactions) of all, substantially all or any
Substantial Part of the assets of the Company or a Subsidiary (including,
without limitation, any securities of a Subsidiary);
(c) the purchase, exchange, lease or other
acquisition by the Company or any of its Subsidiaries (in a single transaction
or a series of related transactions) of all, substantially all or any
Substantial Part of the assets or business of a Major Stockholder;
(d) the issuance of any securities, or of any
rights, warrants or options to acquire any securities, of the Company or a
Subsidiary to a Major Stockholder or the acquisition by the Company or a
Subsidiary of any securities, or of any rights, warrants or options to acquire
any securities, of a Major Stockholder;
(e) any reclassification of Voting Stock,
recapitalization or other transaction (other than a redemption in accordance
with the terms of the security redeemed) which has the effect, directly or
indirectly, of increasing the proportionate amount of Voting Stock of the
Company or any Subsidiary which is beneficially owned by a Major Stockholder,
or any partial or complete liquidation, spin off, split off or split up of the
Company or any Subsidiary; provided, however, that this Section A(2)(e) shall
not relate to any transaction of the types specified herein that has been
approved by a majority of the Continuing Directors; and
(f) any agreement, contract or other arrangement
providing for any of the transactions described herein.
(4) The term "Continuing Director" shall mean (i)
a person who was a member of the Board of Directors of the Company immediately
prior to the time that any then-existing Major Stockholder became a Major
Stockholder, or (ii) a person designated (before initially becoming a director)
as a Continuing Director by a majority of the then Continuing Directors. All
references to a
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<PAGE> 54
vote of the Continuing Directors shall mean a vote of the total number of
Continuing Directors.
(5) The term "Major Stockholder" shall mean any Person
which, together with its Affiliates and Associates and any Person acting in
concert therewith, is the beneficial owner of five percent (5%) or more of the
votes held by the holders of the outstanding shares of the Voting Stock of the
Company, and any Affiliate or Associate of a Major Stockholder, including a
Person acting in concert therewith. The term "Major Stockholder" shall not
include a Subsidiary.
(6) The term "other consideration to be received" shall
include, without limitation, Voting Stock retained by the Company's existing
shareholders in the event of a Business Combination which is a merger or
consolidation in which the Company is the surviving corporation.
(7) The term "Person" shall mean any individual,
corporation, partnership or other person, group or entity (other than the
Company, any Subsidiary or a trustee holding stock for the benefit of employees
of the Company or its Subsidiaries, or any one of them, pursuant to one or more
employee benefit plans or arrangements). When two or more persons act as a
partnership, limited partnership, syndicate, association or other group for the
purpose of acquiring, holding or disposing of shares of stock, such
partnerships, syndicate, association or group will be deemed a "Person."
(8) The term "Subsidiary" shall mean any business entity
fifty percent (50%) or more of which is beneficially owned by the Company.
(9) The term "Substantial Part," as used in reference to
the assets of the Company or any Subsidiary or of any Major Stockholder means
assets having a value of more than five percent (5%) of the total consolidated
assets of the Company and its Subsidiaries as of the end of the Company's most
recent fiscal year ending prior to the time the determination is made.
(10) The term "Voting Stock" shall mean the 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 or other securities convertible into Voting Stock.
B. Notwithstanding any other provisions of these Articles of
Incorporation and except as set forth in Section C of this Article XI, neither
the Company nor any Subsidiary shall be a party to a Business Combination
unless:
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<PAGE> 55
(1) The Business Combination was approved by the Board of
Directors of the Company prior to the Major Stockholder involved in the
Business Combination becoming such; or
(2) The Major Stockholder involved in the Business
Combination sought and obtained the unanimous prior approval of the Board of
Directors to become a Major Stockholder and the Business Combination was
approved by a majority of the Continuing Directors; or
(3) The Business Combination was approved by at least
eighty percent (80%) of the Continuing Directors of the Company; or
(4) The Business Combination was approved by at least
ninety-five percent (95%) of the outstanding Voting Stock beneficially owned by
shareholders other than any Major Stockholder.
C. The approval requirements of Section B shall not apply if:
(1) The Business Combination is approved by at least the
majority vote of the shares of the Voting Stock and the majority vote of the
shares of the Voting Stock beneficially owned by shareholders other than any
Major Stockholder; and
(2) All of the following conditions are satisfied:
(a) The aggregate of the cash and the fair market
value of other consideration to be received per share (as adjusted for stock
splits, stock dividends, reclassification of shares into a lesser number and
similar events) by holders of the common stock of the Company in the Business
Combination is not less than the higher of (i) the highest per share price
(including brokerage commissions, soliciting dealers' fees, dealer-management
compensation, and other expenses, including, but not limited to, costs of
newspaper advertisements, printing expenses and attorneys' fees) paid by the
Major Stockholder in acquiring any of the Company's common stock; or (ii) an
amount which bears the same or a greater percentage relationship to the market
price of the Company's common stock immediately prior to the announcement of
such Business Combination as the highest per share price determined in (i)
above bears to the market price of the Company's common stock immediately prior
to the commencement of acquisition of the Company's common stock by such Major
Stockholder, but in no event in excess of two times the highest per share price
determined in (i) above; and
(b) The consideration to be received in such
Business Combination by holders of the common stock of the Company
-41-
<PAGE> 56
shall be, except to the extent that a stockholder agrees otherwise as to all or
a part of his or her shares, in the same form and of the same kind as paid by
the Major Stockholder in acquiring his Voting Stock.
(c) After becoming a Major Stockholder and prior
to the consummation of such Business Combination, (i) such Major Stockholder
shall not have acquired any newly issued shares of capital stock, directly or
indirectly, from the Company or a Subsidiary (except upon conversion of
convertible securities acquired by it prior to becoming a Major Stockholder or
upon compliance with the provisions of this Article XI or as a result of a pro
rata stock dividend or stock split), and (ii) such Major Stockholder shall not
have received the benefit, directly or indirectly (except proportionately as a
shareholder), of any loans, advances, guarantees, pledges or other financial
assistance or tax credits provided by the Company or a Subsidiary, or made any
major changes in this Company's business or equity capital structure; and
(d) A proxy statement responsive to the
requirements of the Securities Exchange Act of 1934, whether or not the Company
is then subject to such requirements, shall be mailed to all shareholders of
the Company for the purpose of soliciting shareholder approval of such Business
Combination and shall contain on the front thereof, in a prominent place, (i)
any recommendations as to the advisability (or inadvisability) of the Business
Combination which the Continuing Directors may choose to state, and (ii) the
opinion of a reputable national investment banking firm as to the fairness (or
lack thereof) of the terms of such Business Combination, from the point of view
of the remaining shareholders of the Company. Such investment banking firm
shall be engaged solely on behalf of the remaining shareholders, be paid a
reasonable fee for their services by the Company upon receipt of such opinion,
and be one of the so-called major bracket investment banking firms which has
not previously been associated with such Major Stockholder and to be selected
by a majority of the Continuing Directors.
D. During the time a Major Stockholder exists, a resolution to
voluntarily dissolve the Company shall be adopted only upon: (1) the consent
of all of the Company's shareholders; or (2) the affirmative vote of at least
two-thirds of the total number of directors, the affirmative vote of the
holders of at least two-thirds of the shares of the Company entitled to vote
thereon, and the affirmative vote of the holders of at least two-thirds of the
shares of each class of shares entitled to vote thereon as a class, if any.
E. As to any particular transaction, the Continuing Directors
shall have the power and duty to determine, on the basis of information known
to them:
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<PAGE> 57
(1) The amount of Voting Stock beneficially held by any
Person;
(2) Whether a Person is an Affiliate or an Associate of
another;
(3) Whether a Person is acting in concert with another;
(4) Whether the assets subject to any Business
Combination constitute a Substantial Part;
(5) Whether a proposed transaction is subject to the
provisions of this Article; and
(6) Such other matters with respect to which a
determination is required under this Article.
Any such determination shall be conclusive and binding for all
purposes of this Article.
F. The affirmative vote required by this Article is in addition
to the vote of the holders of any class or series of stock of the Company
otherwise required by law, these Articles of Incorporation, any resolution
which has been adopted by the Board of Directors providing for the issuance of
a class or series of stock or any agreement between the Company and any
national securities exchange.
-43-
<PAGE> 58
ARTICLE XII
Amendment
The Company may increase or decrease its capital stock or otherwise
amend these Articles of Incorporation by a vote of the stockholders
representing two-thirds of its issued capital stock at any regular meeting or
special meeting duly called for that purpose in the manner prescribed by its
Bylaws, provided, however, that Article XI may not be repealed or amended in
any respect unless such action is approved by at least a ninety-five percent
(95%) vote of the outstanding Voting Stock beneficially owned by shareholders
other than any Major Stockholder, and provided further, that the Board of
Directors may amend these Articles without stockholder action as necessary to
designate the preferences, limitations, and relative rights of a class or
series of shares of the Company prior to issuance of any shares in that class
or series. Notice of a meeting to increase or decrease authorized capital
stock shall first be published once a week for four weekly issues in a
newspaper published in Seattle, Washington, of if there is no newspaper
published in Seattle, then in some newspaper published in King County,
Washington. The notice shall state the purpose of the meeting, the amount of
the present authorized capital stock of the Company and the proposed new
authorized capital stock.
ARTICLE XIII
Limitation of Liability
A director of the Company shall not be personally liable to the
Company or its shareholders for monetary damages for conduct as a director
("Protected Conduct"). However, Protected Conduct shall exclude (i) acts or
omissions which involve intentional misconduct by the director or a knowing
violation of law by the director, (ii) any conduct violating Section 23B.08.310
of the Revised Code of Washington, 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 further eliminating or limiting the personal
liability of directors, then the liability of a director of the Company shall
be eliminated or limited to the fullest extent permitted by Washington law, as
so amended. Any repeal or modification of this Article XIII by the
shareholders of the Company shall not adversely affect any right or protection
of a director of the Company existing at the time of such repeal or
modification.
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<PAGE> 59
ARTICLE XIV
The street address of the initial registered office of the Company is:
1201 Third Avenue
15th Floor
Seattle, WA 98101
and the name of the initial registered agent at that address is:
Marc R. Kittner
ARTICLE XV
The name and address of the incorporator is:
William L. Lynch
Washington Mutual Savings Bank
1201 Third Ave. 15th Floor
Seattle, WA 98101
ARTICLE XVI
Special Meeting of the Shareholders
Special meetings of the shareholders for any purpose or purposes,
unless otherwise prescribed by statute, may be called by the board of directors
or by any other person or persons authorized to do so in the Company's Bylaws.
Notwithstanding RCW 23B.07.020(1)(b) or any other provision in these Articles
or the Company's Bylaws, a special meeting of the shareholders may be called by
the shareholders only if the holders of at least twenty-five percent of all the
votes to be cast on any issue proposed to be considered at the proposed special
meeting sign, date and deliver to the Company's secretary one or more written
demands for the meeting describing the purpose or purposes for which it is to
be held.
Executed this 28th day of November 1994.
/s/ William L. Lynch
--------------------------------------
William L. Lynch,
Corporate Secretary
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<PAGE> 1
EXHIBIT 3.2
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS
(Amendments since the September 28, 1994, adoption of Restated Bylaws; organized
according to the affected article and, within the section for each article,
organized chronologically)
<TABLE>
<CAPTION>
Date of
Article Effect of Amendment Amendment
------- ------------------- ---------
<S> <C> <C>
Article II The board of directors of this corporation shall 1/16/96
consist of thirteen (13) directors.
Article II The board of directors of this corporation shall 12/17/96
consist of fifteen (15) directors.
Article II The board of directors of this corporation shall 4/15/97
consist of thirteen (13) directors.
Article II The board of directors of this corporation shall 6/17/97
consist of seventeen (17) directors.
Article II The board of directors of this corporation shall 7/15/97
consist of sixteen (16) directors.
Article II The board of directors of this corporation shall 4/21/98
consist of fifteen (15) directors.
Article II The board of directors of this corporation shall 9/15/98
consist of up to eighteen (18) directors.
</TABLE>
<PAGE> 2
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 2
- ------------------------------
Article V of the Corporation's Bylaws was amended and restated, effective
6/15/99, to read as follows:
ARTICLE V - OFFICERS
SECTION 5.1. RANKS AND TERMS IN OFFICE. The officers of the corporation
shall be a Chief Executive Officer, a Chairman, a President of the Corporation,
a General Auditor, a Controller, and such Vice Chairmen, Group Presidents,
Senior Executive Vice Presidents, Executive Vice Presidents, Senior Vice
Presidents, First Vice Presidents or Vice Presidents as the board of directors
may designate and elect, or such other officers as the board of directors may
designate and elect.
Officers shall serve until the termination of their employment or their
earlier removal from service as officers. Any officer may be removed, with or
without cause, by the board of directors, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed.
SECTION 5.2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
corporation shall have direct supervision and management of its affairs and the
general powers and duties of supervision and management usually vested in the
Chief Executive officer of a corporation, subject to the Bylaws and policies of
the corporation. The Chief Executive Officer shall be ex-officio a member of all
committees except the Audit Committee and the Compensation and Stock Option
Committee. The Chief Executive Officer shall perform such other duties as may be
assigned by the board of directors. In the absence of the Chief Executive
Officer, his duties shall be assumed by the President of the Corporation, and in
their absence such duties shall be assumed by a person designated by the Chief
Executive Officer or the board of directors.
SECTION 5.3. CHAIRMAN. The Chairman shall preside over all meetings of the
board of directors. The Chairman shall preside over all meetings of the
shareholders, which duty shall include the authority to adjourn such meetings.
The Chairman shall perform such other duties as may be assigned by the board of
directors or the Chief Executive Officer, or as may be set forth in the policies
and procedural directives of the corporation. In the event of the Chairman's
incapacity, the Chairman's duties shall be assumed by the Chief Executive
Officer or, in the event of the Chief Executive Officer's incapacity, the duties
of the Chairman shall be assumed by the President of the Corporation, and in
their absence such duties shall be assumed by a person designated by the board
of directors.
SECTION 5.4. PRESIDENT OF THE CORPORATION. The President of the
Corporation shall perform such duties as may be assigned by the Chief Executive
Officer or the board of directors, or as may be set forth in the policies and
procedural directives of the corporation.
<PAGE> 3
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 3
- --------------------------------
SECTION 5.5. GENERAL AUDITOR. The General Auditor shall supervise and
maintain continuous audit control of the assets and liabilities of the
corporation. He shall be responsible only to the board of directors in
coordination with the Chief Executive officer. He shall perform such other
duties as may be assigned to him by the Chief Executive Officer or the President
of the Corporation from time to time, only to the extent that such other duties
do not compromise the independence of audit control.
SECTION 5.6. CONTROLLER. The Controller shall be the chief accounting
officer of the corporation and shall have supervisory control and direction of
the general accounting, accounting procedure, budgeting and general bookkeeping,
and shall be the custodian of the general accounting books, records, forms and
papers. He shall also perform such other duties as may be assigned from time to
time by the Chief Executive Officer, the President of the Corporation, a Vice
Chairman, a Group President, a Senior Executive Vice President or an Executive
Vice President, or as may be set forth in the policies and procedural directives
of the corporation, only to the extent that such other duties do not compromise
the independence of audit control.
SECTION 5.7. VICE CHAIRMEN, GROUP PRESIDENTS, SENIOR EXECUTIVE VICE
PRESIDENTS, EXECUTIVE VICE PRESIDENTS. Any Vice Chairmen, Group Presidents,
Senior Executive Vice Presidents, Executive Vice Presidents shall perform such
duties as may be assigned from time to time by the Chief Executive Officer or
the President of the Corporation, or as may be set forth in the policies and
procedural directives of the corporation.
SECTION 5.8. SENIOR VICE PRESIDENTS, FIRST VICE PRESIDENTS AND VICE
PRESIDENTS. Senior Vice Presidents, First Vice Presidents and Vice Presidents
shall perform such duties as may be assigned from time to time by the Chief
Executive Officer, the President of the Corporation, a Vice Chairmen, a Group
President, a Senior Executive Vice President or a Executive Vice President, or
as may be set forth in the policies and procedural directives of the
corporation.
SECTION 5.9. SECRETARY AND ASSISTANT SECRETARY. The Secretary shall keep
the minutes of all meetings of the board of directors and of the shareholders.
He shall give such notices to the directors as may be required by law or by
these Bylaws. He shall have the custody of the corporate seal, if any, and the
contracts, papers and documents belonging to the corporation. He shall also
perform such other duties as may be assigned from time to time by the Chief
Executive Officer, the President of the Corporation, a Vice Chairman, a Group
President, a Senior Executive Vice President or an Executive Vice President, or
as may be set forth in the policies and procedural directives of the
corporation. In the absence of the Secretary, the powers and duties of the
Secretary shall devolve upon an Assistant Secretary or such person as shall be
designated by the Chief Executive Officer.
<PAGE> 4
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 4
- ------------------------------
SECTION 5.10. COMBINING OFFICES. An officer who holds one office may, with
or without resigning from such existing office, be elected by the board of
directors to hold another office.
SECTION 5.11. OTHER OFFICERS. The other Officers shall perform such duties
as may be assigned by the Chief Executive Officer, the President of the
Corporation, a Vice Chairman, a Group President, a Senior Executive Vice
President or an Executive Vice President, or as may be set forth in the policies
and procedural directives of the corporation. The Chief Executive Officer may
designate such functional titles to an officer, as the Chief Executive Officer
deems appropriate from time to time.
SECTION 5.12. OFFICIAL BONDS. The corporation may be indemnified in the
event of the dishonest conduct or unfaithful performance of an officer,
employee, or agent by a corporate fidelity bond, the premiums for which may be
paid by the corporation.
SECTION 5.13. EXECUTION OF CONTRACTS AND OTHER DOCUMENTS. The Chief
Executive Officer, the President of the Corporation, or any Vice Chairman, Group
President, or Senior Executive Vice President may from time to time designate
the officers, employees or agents of the corporation who shall have authority to
sign deeds, contracts, satisfactions, releases, and assignments of mortgages,
and all other documents or instruments in writing to be made or executed by the
corporation.
SECTION 5.14. RESIGNATION. Any officer may resign at any time by
delivering written notice to the Chief Executive Officer, the President, the
Secretary or the board of directors, or by giving oral notice at any meeting of
the board. Any such resignation shall take effect at any subsequent time
specified therein, or if the time is not specified, upon delivery thereof and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 5.15. COMPENSATION OF OFFICERS AND EMPLOYEES. The board of
directors shall fix compensation of officers and may fix compensation of other
employees from time to time. No officer shall be prevented from receiving a
salary by reason of the fact that such officer is also a director of the
corporation.
SECTION 5.16. VOTING OF SHARES HELD BY CORPORATION. Shares of another
corporation held by this corporation may be voted in person or by proxy by the
Chief Executive Officer, by the President of the Corporation, by a Vice
Chairman, by a Group President, by a Senior Executive Vice President, by an
Executive Vice President, or by a Senior Vice President.
<PAGE> 5
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 5
- ------------------------------
Article IV, Section 4.3 of the Corporation's Bylaws was amended, effective
4/20/99, to read as follows:
SECTION 4.3 ANNUAL AND OTHER REGULAR MEETINGS. Regular meetings of the
Board shall be held at two-thirty o'clock, or an earlier hour in the discretion
of the Chairman or the President, on the third Tuesday of the months of January,
February, April, June, July, September, October, and December unless such day is
a legal holiday, in which case the meeting shall be held on the first business
day thereafter, or unless such meeting has been canceled by the Chairman or the
President upon giving notice to the members of the Board at least three calendar
days before the date on which such meeting is scheduled. The date of any regular
meeting may be changed to such other date within the month as shall be
determined by the Chairman or the President, or in the absence of the Chairman
or the President, by any three members of the Board, provided notice of the time
and place of such meeting is given as provided in Section 4.4. In each year, the
regular meeting on the day of the Annual Meeting of Shareholders shall be known
as the Annual Meeting of the Board.
<PAGE> 6
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 6
- ------------------------------
<TABLE>
<S> <C> <C>
Article IV Sec. 4.14. CORPORATE RELATIONS COMMITTEE The 2/17/98
Section 4.14 Chairman, with the approval of the board of
directors, may appoint from among the members of the board
of the Corporation, a Corporate Relations Committee which
shall consist of no fewer than two Directors and shall
monitor the performance of voluntary commitments that the
Corporation has made to support its communities, and the
contributions by the Corporation to the Washington Mutual
Foundation.
Article IV Section 4.14. CORPORATE RELATIONS COMMITTEE. The 12/16/97
Section 4.14 Chairman, with the approval of the board of
directors, may appoint from among the members of the board
of the Corporation, a Corporate Relations Committee which
shall consist of no fewer than two Directors and shall have
supervisory control and direction of the performance of
voluntary commitments that the Corporation has made to
support its communities, and of contributions by the
Corporation to the Washington Mutual Foundation.
Article IV Section 4.15 CORPORATE DEVELOPMENT COMMITTEE. The 12/16/97
Section 4.15 Chairman, with the approval of the board of
directors, shall appoint from among the members of the
board a Corporate Development Committee which shall consist
of the Chairman of the Board and not less than two other
directors. The Corporate Development Committee shall
exercise all the authority of the Board: (A) with regard to
the authorization of negotiations and approval of the terms
of offers and agreements and of investments relating to
mergers and acquisitions not involving a change of control
of the Corporation; provided, that further action of the
board of directors shall be required for submission to
shareholders of a plan of merger or consolidation; and (B)
with regard to approval of the final terms, rights,
designations and preferences of stock to be issued by the
Corporation, provided, that prior action of the board of
directors shall be required to specify the maximum number
or value of the shares to be issued.
</TABLE>
<PAGE> 7
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 7
- ------------------------------
<TABLE>
<S> <C> <C>
Prior Article IV, Section 4.16 OTHER BOARD COMMITTEES. The Board of 12/16/97
Section 4.14 Directors may by resolution designate from among
renumbered as its members such other committees as the Board in
Article IV, its discretion may determine, each of which must
Section 4.16 have two or more members. To the extent provided
in such resolutions, each such committee shall have and may
exercise the authority of the board of directors, except as
limited by applicable law. The designation of any such
committee and the delegation thereto of authority shall not
relieve the Board of Directors, or any members thereof, of
any responsibility imposed by law. In addition, the
Chairman of the Board, with the approval of the Board of
Directors, may appoint from among the members of the Board
such committees as he deems appropriate.
Article IV Section 4.17 COMMITTEE PROCEDURES. Except as 12/16/97
Section 4.17 provided in the bylaws or in specific resolutions
of the Board of Directors, the committees of the Board
shall be governed by the same rules regarding meetings,
action without meetings, notice, waiver of notice, and
quorum and voting requirements as applied to the Board of
Directors.
Prior Article IV, Renumbered as Article IV, Sections 4.18 through 12/16/97
Sections 4.15 4.22, respectively.
through 4.19
</TABLE>
<PAGE> 8
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 8
- ------------------------------
<TABLE>
<S> <C> <C>
Article IV Section 4.4. SPECIAL MEETINGS. Special meetings 9/16/97
Section 4.4 of the board of directors may be called by the
board of directors, the chairman of the board, or the
president. The notice of a special meeting of the board of
directors shall state the date and time and, if the meeting
is not exclusively telephonic, the place of the meeting.
Unless otherwise required by law, neither the business to
be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified
in the notice or waiver of notice of such meeting. Notice
shall be given by the person or persons authorized to call
such meeting, or by the secretary at the direction of the
person or persons authorized to call such meeting. The
notice may be oral or written. If the notice is orally
communicated in person or by telephone to the director or
to the director's personal secretary or is sent by
electronic mail, telephone or wireless equipment, which
transmits a facsimile of the notice to the director's
electronic mail designation or telephone number appearing
on the records of the corporation, the notice of a meeting
shall be timely if sent no later than twenty-four (24)
hours prior to the time set for such meeting. If the notice
is sent by courier to the director's address appearing on
the records of the corporation, the notice of a meeting
shall be timely if sent no later than three (3) full days
prior to the time set for such meeting. If the notice is
sent by mail to the director's address appearing on the
records of the corporation, the notice of a meeting shall
be timely if sent no later than five (5) full days prior to
the time set for such meeting.
Article V Sec. 5.1 RANKS AND TERMS IN OFFICE. The officers 9/16/97
Sec. 5.1 of the corporation shall be a Chief Executive
Officer, a President, a controller, a General Auditor, a
Secretary and such Executive Vice Presidents, Senior Vice
Presidents, First Vice Presidents, Vice Presidents, or
other officers as the Board may designate.
The officers shall be elected by the board of directors, to
serve, unless earlier removed, until the next annual
meeting of directors and until the appointment and
qualification of their successors. Officers may be
terminated or removed at will at any time.
Article V Sec. 5.8 SENIOR VICE PRESIDENTS, FIRST VICE 9/16/97
Sec. 5.8 PRESIDENTS, AND VICE PRESIDENTS. Any Senior Vice
Presidents, First Vice Presidents, and Vice Presidents
shall perform such duties as may be specified in duly
adopted policies of the corporation or as may from time to
time be assigned to them by the Chief Executive Officer,
the President, or an Executive Vice President.
</TABLE>
<PAGE> 9
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 9
- ------------------------------
<TABLE>
<S> <C> <C>
Article V Sec. 5.12 CONTRACTS AND SATISFACTIONS. The Chief 9/16/97
Sec. 5.12 Executive Officer, the President, or any Executive
Vice President may from time to time designate the
officers or employees of Washington Mutual, Inc.
who shall have authority to sign deeds, contracts,
satisfactions, releases, and assignments of
mortgages, and all other instruments in writing to
be made or executed by the corporation.
Article V Section 5.2 CHIEF EXECUTIVE OFFICER. The Chief 4/15/97
Section 5.2 Executive Officer of the corporation shall have
direct supervision and management of its affairs and the
general powers and duties of supervision and management
usually vested in the Chief Executive Officer of a
corporation, subject to the Bylaws of the corporation. He
shall be ex-officio a member of all committees except the
Audit Committee and the Compensation and Stock Option
Committee. The Chief Executive Officer shall perform such
other duties as may be assigned by the board of directors.
In the absence of the Chief Executive Officer, his duties
shall be assumed by the President, and in their absence
such duties shall be assume by a person designated by the
Chief Executive Officer or the board of directors.
</TABLE>
<PAGE> 10
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 10
- -------------------------------
<TABLE>
<S> <C> <C>
Article IV Section 4.11. AUDIT COMMITTEE. The board of 2/18/97
Section 4.11 directors, at any regular meeting of the Board,
shall elect from their number an Audit Committee of not
less than three members, none of whom shall be employed by
the corporation. At least annually the Board of Directors
shall determine that each Committee member is independent
of management of the corporation and not a "large customer"
as defined by the Code of Federal Regulations, and that at
least two Committee members have banking or related
financial expertise.
The Audit Committee (a) shall review the basis for
the audited financial statements of the corporation; (b)
shall oversee the corporation's internal control structure,
its accounting and financial reporting process, its
independent audit function, and its compliance with
applicable laws and regulations; (c) shall cause such
examination of the records and affairs of the corporation
to be made for the purpose of determining its financial
condition as is necessary under applicable State and
Federal laws and regulations; (d) shall review compliance
with all corporate policies that have been approved by the
Board; and (e) shall have such other responsibilities as
required by law or regulation or as determined to be
necessary or appropriate in the judgment of the Board or
the Chairperson of the Committee, including but not limited
to ensuring the independence of the corporation's internal
audit functions.
In performing all of its responsibilities, the
Audit Committee may take whatever steps it deems necessary.
Among other things, the Audit Committee shall have
authority to require the assistance of the corporation's
General Auditor, of the corporation's Internal Audit
Department, of management, of the corporation's independent
public accountant, and of outside counsel to perform these
responsibilities.
</TABLE>
<PAGE> 11
WASHINGTON MUTUAL, INC.
AMENDMENTS TO BYLAWS -- PAGE 11
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<TABLE>
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Article VIII This section is hereby amended so that the 2/20/96
Section 8.6 existing language is retained except that it is
identified as subparagraph (a), the final period in the
paragraph is replaced by a semicolon and the word "or", and
a new subparagraph (b) is added as follows:
(b) The corporation shall pay for or reimburse the
reasonable expenses incurred by any officer or employee of
the corporation, who is not a director, who is a party to a
proceeding in advance of final disposition of the
proceeding if: (1) such person furnishes the corporation
with an affidavit stating that (a) he or she was made a
party to a proceeding because he or she is or was an
officer or employee of the corporation, (b) he or she acted
in good faith, (c) the conduct in question was carried out
in his or her official capacity with the corporation, and
(d) his or her conduct was in the corporation's best
interests, (2) such person furnishes the corporation with a
written undertaking, executed personally, to repay the
advance if it is ultimately determined that such person did
not meet the standard of conduct set forth in the affidavit
and (3) such payment or reimbursement is approved in
writing by the President or the Chief Executive Officer of
the corporation, or by a designee of either of them.
</TABLE>
<PAGE> 12
RESTATED
BYLAWS
OF
WASHINGTON MUTUAL, INC.
<PAGE> 13
Originally adopted on SEPTEMBER 28, 1994
Restated on MARCH 16, 1995
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<PAGE> 14
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article I. OFFICES...........................................................................1
Article II. NUMBER OF DIRECTORS..............................................................1
Article III. SHAREHOLDERS....................................................................1
Section 3.1 Annual Meeting................................................................1
Section 3.2 Special Meetings..............................................................1
Section 3.3 Place of Meetings.............................................................1
Section 3.4 Fixing of Record Date.........................................................1
Section 3.5 Voting Lists..................................................................2
Section 3.6 Notice of Meetings............................................................2
Section 3.7 Waiver of Notice..............................................................3
Section 3.8 Manner of Acting; Proxies.....................................................3
Section 3.9 Quorum........................................................................3
Section 3.10 Voting of Shares.............................................................3
Section 3.11 Voting for Directors.........................................................4
Section 3.12 Voting of Shares by Certain Holders..........................................4
Section 3.13 Notice of Nomination.........................................................5
Section 3.14 Action Without a Meeting.....................................................5
Article IV. BOARD OF DIRECTORS...............................................................5
Section 4.1 General Powers................................................................5
Section 4.2 Number, Tenure and Qualification..............................................5
Section 4.3 Annual and Other Regular Meetings.............................................5
Section 4.4 Special Meetings..............................................................6
Section 4.5 Waiver of Notice..............................................................6
Section 4.6 Quorum........................................................................6
Section 4.7 Manner of Acting..............................................................6
Section 4.8 Participation by Conference Telephone.........................................7
Section 4.9 Presumption of Assent.........................................................7
Section 4.10 Action by Board Without a Meeting............................................7
Section 4.11 Audit Committee..............................................................7
Section 4.12 Compensation and Stock Option Committee......................................7
Section 4.13 Directors' Loan & Investment Committee.......................................8
Section 4.14 Other Board Committees.......................................................9
Section 4.15 Resignation..................................................................9
Section 4.16 Removal......................................................................9
Section 4.17 Vacancies....................................................................9
Section 4.18 Compensation.................................................................9
</TABLE>
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<TABLE>
<S> <C>
Section 4.19 Chairman of the Board........................................................9
Article V. OFFICERS.........................................................................10
Section 5.1 Ranks and Terms in Office....................................................10
Section 5.2 Chief Executive Officer......................................................10
Section 5.3 President....................................................................10
Section 5.4 Senior Executive Vice President..............................................10
Section 5.5 Controller...................................................................10
Section 5.6 General Auditor..............................................................10
Section 5.7 Secretary and Assistant Secretary............................................11
Section 5.8 Executive Vice Presidents....................................................11
Section 5.9 Senior Vice Presidents and Vice Presidents...................................11
Section 5.10 Combining Offices...........................................................11
Section 5.11 Other Officers..............................................................11
Section 5.12 Official Bonds..............................................................11
Section 5.13 Contracts and Satisfactions.................................................11
Section 5.14 Resignation.................................................................11
Section 5.15 Compensation of Officers and Employees......................................12
Article VI. SHARES..........................................................................12
Section 6.1 Certificates for Shares......................................................12
Section 6.2 Issuance of Shares...........................................................12
Section 6.3 Beneficial Ownership.........................................................12
Section 6.4 Transfer of Shares...........................................................12
Section 6.5 Lost or Destroyed Certificates...............................................12
Section 6.6 Stock Transfer Records.......................................................12
Article VII. SEAL...........................................................................13
Article VIII. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS..................13
Section 8.1 Director's Right To Indemnification..........................................13
Section 8.2 Director's Burden of Proof and Procedure For Payment.........................14
Section 8.3 Right of Claimant to Bring Suit..............................................14
Section 8.4 Nonexclusivity of Rights.....................................................14
Section 8.5 Insurance, Contracts and Funding.............................................14
Section 8.6 Indemnification of Officers, Employees and Agents of the Corporation.........15
Section 8.7 Contract Right...............................................................15
Section 8.8 Severability.................................................................15
</TABLE>
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<TABLE>
<S> <C>
Article IX. BOOKS AND RECORDS...............................................................15
Article X. FISCAL YEAR......................................................................15
Article XI. VOTING OF SHARES OF ANOTHER CORPORATION.........................................15
Article XII. AMENDMENTS TO BYLAWS...........................................................16
</TABLE>
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<PAGE> 17
BYLAWS
OF
WASHINGTON MUTUAL, INC.
ARTICLE I. OFFICES
The principal office and place of business of the corporation in the
state of Washington shall be located at 1201 Third Avenue, Seattle, Washington
98101.
The corporation may have such other offices within or without the state
of Washington as the board of directors may designate or the business of the
corporation may require from time to time.
ARTICLE II. NUMBER OF DIRECTORS
The board of directors of this corporation shall consist of fifteen (15)
directors.
ARTICLE III. SHAREHOLDERS
SECTION 3.1 ANNUAL MEETING. The annual meeting of the shareholders shall
be held on the third Tuesday in the month of April in each year, beginning with
the year 1995, at 10:00 a.m., or at such other date or time as may be determined
by the board of directors, for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday in the state of
Washington, the meeting shall be held on the next succeeding business day. If
the election of directors is not held on the day designated herein for any
annual meeting of the shareholders or at any adjournment thereof, the board of
directors shall cause the election to be held at a meeting of the shareholders
as soon thereafter as may be convenient.
SECTION 3.2 SPECIAL MEETINGS. Special meetings of the shareholders for
any purpose or purposes unless otherwise prescribed by statute may be called by
the Chairman, by the board of directors, or by the written request of any
director or holders of at least twenty-five percent (25%) of the votes entitled
to be cast on each issue to be considered at the special meeting.
SECTION 3.3 PLACE OF MEETINGS. Meetings of the shareholders shall be
held at either the principal office of the corporation or at such other place
within or without the state of Washington as the person or persons calling the
meeting may designate.
SECTION 3.4 FIXING OF RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or
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shareholders entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the board of
directors may fix in advance a date as the record date for any such
determination of shareholders, which date in any case shall not be more than
seventy (70) days and, in the case of a meeting of shareholders, not less than
20 days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend or
distribution, the day before the first notice of a meeting is dispatched to
shareholders or the date on which the resolution of the board of directors
authorizing such dividend or distribution is adopted, as the case may be, shall
be the record date for such determination of shareholders. When a determination
of shareholders entitled to notice of or to vote at any meeting of shareholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than one hundred twenty
(120) days after the date fixed for the original meeting.
The record date for determining shareholders entitled to take action
without a meeting is the date the first shareholder signs the consent in lieu of
meeting.
SECTION 3.5 VOTING LISTS. At least ten (10) days before each meeting of
the shareholders, the officer or agent having charge of the stock transfer books
for shares of the corporation shall prepare an alphabetical list of all its
shareholders on the record date who are entitled to vote at the meeting or any
adjournment thereof, arranged by voting group, and within each voting group by
class or series of shares, with the address of and the number of shares held by
each, which record for a period of ten (10) days prior to the meeting shall be
kept on file at the principal office of the corporation or at a place identified
in the meeting notice in the city where the meeting will be held. Such record
shall be produced and kept open at the time and place of the meeting and shall
be subject to the inspection of any shareholder, shareholder's agent or
shareholder's attorney at any time during the meeting or any adjournment
thereof. Failure to comply with the requirements of this bylaw shall not affect
the validity of any action taken at the meeting.
SECTION 3.6 NOTICE OF MEETINGS. Written or printed notice stating the
date, time and place of a meeting of shareholders and, in the case of a special
meeting of shareholders, the purpose or purposes for which the meeting is
called, shall be given by the person or persons calling the meeting or by the
Secretary at the direction of such person or persons to each shareholder of
record entitled to vote at such meeting (unless required by law to send notice
to all shareholders regardless of whether or not such shareholders are entitled
to vote), not less than ten (10) days and not more than sixty (60) days before
the meeting, except that notice of a meeting to act on an amendment to the
articles of incorporation, a plan of merger or share exchange, a proposed sale,
lease, exchange or other disposition of all or substantially all of the assets
of the corporation other than in the usual course of business, or the
dissolution of the corporation shall be given not less than twenty (20) days and
not more than sixty (60) days before the meeting. Written notice may be
transmitted by: Mail, private carrier or personal delivery; telegraph or
teletype; or telephone, wire or wireless equipment which transmits a
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facsimile of the notice. Such notice shall be effective upon dispatch if sent to
the shareholder's address, telephone number, or other number appearing on the
records of the corporation.
If an annual or special shareholders' meeting is adjourned to a
different date, time or place, notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before
adjournment unless a new record date is or must be fixed. If a new record date
for the adjourned meeting is or must be fixed, however, notice of the adjourned
meeting must be given to persons who are shareholders as of the new record date.
SECTION 3.7 WAIVER OF NOTICE. A shareholder may waive any notice
required to be given under the provisions of these bylaws, the articles of
incorporation or by applicable law, whether before or after the date and time
stated therein. A valid waiver is created by any of the following three methods:
(a) in writing signed by the shareholder entitled to the notice and delivered to
the corporation for inclusion in its corporate records; (b) by attendance at the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting; or (c) by failure to
object at the time of presentation of a matter not within the purpose or
purposes described in the meeting notice.
SECTION 3.8 MANNER OF ACTING; PROXIES. A shareholder may vote either in
person or by proxy. A shareholder may vote by proxy by means of a proxy
appointment form which is executed in writing by the shareholder, his agent, or
by his duly authorized attorney-in-fact. All proxy appointment forms shall be
filed with the secretary of the corporation before or at the commencement of
meetings. No unrevoked proxy appointment form shall be valid after eleven (11)
months from the date of its execution unless otherwise expressly provided in the
appointment form. No proxy appointment may be effectively revoked until notice
in writing of such revocation has been given to the secretary of the corporation
by the shareholder appointing the proxy.
SECTION 3.9 QUORUM. At any meeting of the shareholders, a majority in
interest of all the shares entitled to vote on a matter by the voting group,
represented in person or by proxy by shareholders of record, shall constitute a
quorum of that voting group for action on that matter. If less than a majority
is represented, a majority of those represented may adjourn the meeting to such
time and place as they may determine, without further notice, except as set
forth in Section 3.6. Once a share is represented at a meeting, other than to
object to holding the meeting or transacting business, it is deemed to be
present for purposes of a quorum for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be fixed for the
adjourned meeting. At such reconvened meeting, any business may be transacted
which might have been transacted at the adjourned meeting. If a quorum exists,
action on a matter is approved by a voting group if the votes cast within the
voting group favoring the action exceed the votes cast within the voting group
opposing the action, unless the question is one upon which a different vote is
required by express provision of law or of the articles of incorporation or of
these bylaws.
SECTION 3.10 VOTING OF SHARES. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders, except as may be otherwise provided in the articles of
incorporation.
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SECTION 3.11 VOTING FOR DIRECTORS. In the election of directors every
shareholder of record entitled to vote at the election shall have the right to
vote in person the number of shares owned by him for as many persons as there
are directors to be elected and for whose election he has a right to vote.
Shareholders entitled to vote at any election of directors shall have no right
to cumulate votes. In any election of directors the candidates elected are those
receiving the largest numbers of votes cast by the shares entitled to vote in
the election, up to the number of directors to be elected by such shares.
SECTION 3.12 VOTING OF SHARES BY CERTAIN HOLDERS.
3.12.1 Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxy as the board
of directors of such corporation may determine. A certified copy of a resolution
adopted by such directors shall be conclusive as to their determination.
3.12.2 Shares held by a personal representative, administrator,
executor, guardian or conservator may be voted by such administrator, executor,
guardian or conservator, without a transfer of such shares into the name of such
personal representative, administrator, executor, guardian or conservator.
Shares standing in the name of a trustee may be voted by such trustee, but no
trustee shall be entitled to vote shares held in trust without a transfer of
such shares into the name of the trustee.
3.12.3 Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver may be
voted by the receiver without the transfer thereof into his name if authority so
to do is contained in an appropriate order of the court by which such receiver
was appointed.
3.12.4 If shares are held jointly by three or more fiduciaries,
the will of the majority of the fiduciaries shall control the manner of voting
or appointment of a proxy, unless the instrument or order appointing such
fiduciaries otherwise directs.
3.12.5 Unless the pledge agreement expressly provides otherwise,
a shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
3.12.6 Shares held by another corporation shall not be voted at
any meeting or counted in determining the total number of outstanding shares
entitled to vote at any given time if a majority of the shares entitled to vote
for the election of directors of such other corporation is held by this
corporation.
3.12.7 On and after the date on which written notice of
redemption of redeemable shares has been dispatched to the holders thereof and a
sum sufficient to redeem such shares has been deposited with a bank or trust
company with irrevocable instruction and authority to pay the
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redemption price to the holders thereof upon surrender of certificates therefor,
such shares shall not be entitled to vote on any matter and shall be deemed to
be not outstanding shares.
SECTION 3.13 NOTICE OF NOMINATION. Nominations for the election of
directors and proposals for any new business to be taken up at any annual or
special meeting of shareholders may be made by the board of directors of the
corporation or by any shareholder of the corporation entitled to vote generally
in the election of directors. In order for a shareholder of the corporation to
make any such nomination or proposal at any annual meeting, the shareholder must
first give notice thereof in writing, delivered or mailed by first class United
States mail, postage prepaid (the "Required Method of Mailing"), to the
Secretary of the corporation not less than 90 days in advance of the date
corresponding to the date that the corporation's proxy statement was released to
security holders in connection with the previous year's annual meeting of
security holders, except that if no annual meeting was held in the previous year
or the date of the annual meeting has been changed by more than 30 calendar days
from the date of the previous year's annual meeting, a proposal shall be
received by the corporation in accordance with the method set forth hereafter
for proposals or nominations in advance of a special meeting of shareholders.
Notice of shareholder nominations or proposals to be taken up at a special
meeting of shareholders must be delivered or mailed by the Required Method of
Mailing to the Secretary of the corporation not less than ten days nor more than
sixty days prior to any such meeting. Each such notice given by a shareholder
with respect to nominations for the election of directors shall set forth (i)
the name, age, business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment of each
such nominee, and (iii) the number of shares of stock of the corporation which
are beneficially owned by each such nominee.
SECTION 3.14 ACTION WITHOUT A MEETING. Any action permitted or required
to be taken at a meeting of the shareholders may be taken without a meeting if
one or more consents in writing setting forth the action so taken shall be
signed by all the shareholders.
ARTICLE IV. BOARD OF DIRECTORS
SECTION 4.1 GENERAL POWERS. The business and affairs of the corporation
shall be managed by its board of directors.
SECTION 4.2 NUMBER, TENURE AND QUALIFICATION. The number of directors
set forth in Article II of these bylaws may be increased or decreased from time
to time by amendment to or in the manner provided in these bylaws. No decrease,
however, shall have the effect of shortening the term of any incumbent director
unless such director resigns or is removed in accordance with the provisions of
these bylaws. The directors shall be classified and shall hold such terms as set
forth in the articles of incorporation. In all cases, directors shall serve
until their successors are duly elected and qualified or until their earlier
resignation, removal from office or death. Directors need not be residents of
the state of Washington or shareholders of the corporation.
SECTION 4.3 ANNUAL AND OTHER REGULAR MEETINGS. Regular meetings of the
board shall be held at two-thirty o'clock, or an earlier hour in the discretion
of the Chairman or the
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President, in the afternoon of the third Tuesday of the months of January,
February, March, April, May, June, July, September, October, and December unless
such day is a legal holiday, in which case the meeting shall be held on the
first business day thereafter, or unless such meeting has been canceled by the
Chairman or the President upon giving notice to the members of the board at
least three calendar days before the date on which such meeting is scheduled.
The date of any regular meeting may be changed to such other date within the
month as shall be determined by the Chairman or the President, or in their
absence by the Senior Executive Vice President, or in the absence of the
Chairman, the President, and the Senior Executive Vice President, by any three
members of the board, provided notice of the time and place of such meeting is
given as provided in Section 4.4. In each year, the regular meeting on the day
of the Annual Meeting of Shareholders shall be known as the Annual Meeting of
the Board.
SECTION 4.4 SPECIAL MEETINGS. Special meetings of the board of directors
may be called by the board of directors, the chairman of the board, or the
president. Notice of special meetings of the board of directors stating the
date, time and place thereof shall be given at least three (3) days prior to the
date set for such meeting by the person or persons authorized to call such
meeting, or by the secretary at the direction of the person or persons
authorized to call such meeting. The notice may be oral or written. Oral notice
may be communicated in person or by telephone, wire or wireless equipment, which
does not transmit a facsimile of the notice. Oral notice is effective when
communicated. Written notice may be transmitted by mail, private carrier, or
personal delivery; telegraph or teletype; or telephone, wire, or wireless
equipment which transmits a facsimile of the notice. Written notice is effective
upon dispatch if such notice is sent to the director's address, telephone
number, or other number appearing on the records of the corporation. If no place
for such meeting is designated in the notice thereof, the meeting shall be held
at the principal office of the corporation. Unless otherwise required by law,
neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in the notice or
waiver of notice of such meeting.
SECTION 4.5 WAIVER OF NOTICE. Any director may waive notice of any
meeting at any time. Whenever any notice is required to be given to any director
of the corporation pursuant to applicable law, a waiver thereof in writing
signed by the director, entitled to notice, shall be deemed equivalent to the
giving of notice. The attendance of a director at a meeting shall constitute a
waiver of notice of the meeting except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully convened. A director waives objection to consideration
of a particular matter at a meeting that is not within the purpose or purposes
described in the meeting notice, unless the director objects to considering the
matter when it is presented.
SECTION 4.6 QUORUM. A majority of the number of directors specified in
or fixed in accordance with these bylaws shall constitute a quorum for the
transaction of any business at any meeting of directors. If less than a majority
shall attend a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice, and a quorum present at such
adjourned meeting may transact business.
SECTION 4.7 MANNER OF ACTING. If a quorum is present when a vote is
taken, the affirmative vote of a majority of directors present is the act of the
board of directors.
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SECTION 4.8 PARTICIPATION BY CONFERENCE TELEPHONE. Directors may
participate in a regular or special meeting of the board by, or conduct the
meeting through the use of, any means of communication by which all directors
participating can hear each other during the meeting and participation by such
means shall constitute presence in person at the meeting.
SECTION 4.9 PRESUMPTION OF ASSENT. A director who is present at a
meeting of the board of directors at which action is taken shall be presumed to
have assented to the action taken unless such director's dissent shall be
entered in the minutes of the meeting or unless such director shall file his
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
SECTION 4.10 ACTION BY BOARD WITHOUT A MEETING. Any action permitted or
required to be taken at a meeting of the board of directors may be taken without
a meeting if one or more written consents setting forth the action so taken,
shall be signed, either before or after the action taken, by all the directors.
Action taken by written consent is effective when the last director signs the
consent, unless the consent specifies a later effective date.
SECTION 4.11 AUDIT COMMITTEE. The board of directors, at any regular
meeting of the Board, shall elect from their number an Audit Committee of not
less than three members, none of whom shall be employed by the corporation. At
least annually the board of directors shall determine that each Committee member
is independent of management of the corporation and not a "large customer" of
the corporation or any of its subsidiaries as defined by the Code of Federal
Regulations, and that at least two Committee members have banking or related
financial management expertise.
The Audit Committee (a) shall review the basis for the audited financial
statements of the corporation; (b) shall oversee the corporation's adherence to
the laws and regulations governing the corporation's operations; (c) shall
review compliance with all corporate policies that have been approved by the
Board; and (d) shall have such other responsibilities as required by law or
regulation or as determined necessary or appropriate in the judgment of the
Board or the Chairperson of the Committee, including but not limited to ensuring
the independence of the corporation's internal audit functions.
In performing all of its responsibilities, the Audit Committee may take
whatever steps it deems necessary. Among other things, the Audit Committee shall
have authority to require the assistance of the corporation's General Auditor,
of management, of the corporation's independent public accountant, and of
outside counsel to perform these responsibilities.
SECTION 4.12 COMPENSATION AND STOCK OPTION COMMITTEE.
The board of directors at any regular meeting of the board, shall elect
from their number a Compensation and Stock Option Committee which committee
shall have not less than three members, none of whom shall be employed by the
corporation.
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The Compensation and Stock Option Committee shall concern itself with
all forms of compensation and benefits for officers and employees of the
corporation. It shall serve as the Option Committee pursuant to the stock option
plans of the corporation, and shall have oversight of the corporation's pension
and retirement plans and such other plans as are subject to the Employees
Retirement Income Security Act of 1974. The Compensation and Stock Option
Committee shall determine the proper salaries which the Board is to establish
for all officers of the corporation who are in Salary Grade 19 or higher, and
shall have oversight of the determination of the compensation of other officers
and employees of the corporation.
The Compensation and Stock Option Committee shall have all the authority
of the Board of Directors to oversee the administration of and to amend policies
that govern the corporation's employee relations (the "Employee Policies")
following initial approval by the Board.
The compensation and Stock Option Committee shall report to the Board on
any material amendment of the Employee Policies.
SECTION 4.13 DIRECTORS' LOAN & INVESTMENT COMMITTEE. At any regular
meeting of the board, the Chairman of the Board, with the approval of the board
of directors shall appoint from the members of the board a Directors' Loan &
Investment Committee. The Committee shall consist of the Chairman and President
(if he is a member of the board) of the Corporation and certain other members of
the board, a majority of whom shall not be officers of the Corporation. The
Chairman of the Board shall appoint a committee chairman who is not an officer
of the Corporation.
The Committee Chairman shall coordinate with the Corporation's staff in
the preparation of reports for the Committee and the Board.
The Committee shall have oversight of the officers of the Corporation
who are responsible for the loans or investments of the Corporation and for
managing the sale, exchange and other disposition of loans or investments.
Its power shall include, but not be limited to oversight of all
securities and loan investments and dispositions, and all purchases of real
estate and the disposition of all property, real or personal, tangible or
intangible, acquired by the Corporation in satisfaction of debts owing to it or
otherwise (except the Corporation premises or other real property acquired for
use by the Corporation).
In connection with the monitoring of the Corporation's return on
investments in subsidiaries and other Corporations, the Committee shall also
have oversight of the officers of the Corporation who are responsible for such
investments.
The Committee shall have authority to oversee the administration of the
policies that govern the Corporation's loans or investments. The Committee shall
have all the authority of the board of directors to amend such policies
following initial approval by the Board.
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SECTION 4.14 OTHER BOARD COMMITTEES. The board of directors may by
resolution designate from among its members such other committees as the board
in its discretion may determine, each of which must have two (2) or more
members. All committees of the board shall be governed by the same rules
regarding meetings, action without meetings, notice, waiver of notice, and
quorum and voting requirements as applied to the board of directors, except that
unless otherwise specified in the bylaws or the resolution creating the
committee, notice of the date, time and place of the meeting may be given only
one (1) day prior to the date set for the meeting. To the extent provided in
such resolutions, each such committee shall have and may exercise the authority
of the board of directors, except as limited by applicable law. The designation
of any such committee and the delegation thereto of authority shall not relieve
the board of directors, or any members thereof, of any responsibility imposed by
law.
SECTION 4.15 RESIGNATION. Any director may resign at any time by
delivering written notice to the chairman of the board, the president, the
secretary, or the registered office of the corporation, or by giving oral notice
at any meeting of the directors or shareholders. Any such resignation shall take
effect at any subsequent time specified therein, or if the time is not
specified, upon delivery thereof and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.16 REMOVAL. At a meeting of the shareholders called expressly
for that purpose, any director or the entire board of directors may be removed
from office, with cause, by a vote of the holders of a majority of the shares
then entitled to vote at an election of the director or directors whose removal
is sought. If the board of directors or any one or more directors is so removed,
new directors may be elected at this same meeting.
SECTION 4.17 VACANCIES. A vacancy on the board of directors may occur by
the resignation, removal or death of an existing director, or by reason of
increasing the number of directors on the board of directors as provided in
these bylaws. Except as may be limited by the articles of incorporation, any
vacancy occurring in the board of directors may be filled by the affirmative
vote of four-fifths of the remaining directors though less than a quorum. A
director elected to fill a vacancy shall be elected for a team of office
continuing only until the next election of directors by shareholders.
If the vacant office was held by a director or elected by holders of one
or more authorized classes or series of shares, only the holders of those
classes or series of shares are entitled to vote to fill the vacancy.
SECTION 4.18 COMPENSATION. By resolution of the board of directors, the
directors may be paid a fixed sum plus their expenses, if any, for attendance at
meetings of the board of directors or committee thereof, or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
SECTION 4.19 CHAIRMAN OF THE BOARD. The Chairman shall preside at
meetings of the board of directors. In the absence of the Chairman and the Chief
Executive Officer, the directors
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<PAGE> 26
present may select someone from their number to preside. The Chairman shall be
ex-officio a member of all committees, except the Audit Committee and the
Compensation and Stock Option Committee. The Chairman shall perform such other
duties as may be assigned by the board of directors.
ARTICLE V. OFFICERS
SECTION 5.1 RANKS AND TERMS IN OFFICE. The officers of the corporation
shall be a Chief Executive Officer, a President, a Senior Executive Vice
President, a Controller, a General Auditor, a Secretary and such Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents, or other officers as the
Board may designate.
The officers shall be elected by the board of directors, to serve,
unless earlier removed, until the next annual meeting of directors and until the
appointment and qualification of their successors. Officers may be terminated or
removed at will at any time.
SECTION 5.2 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
corporation shall have direct supervision and management of its affairs and the
general powers and duties of supervision and management usually vested in the
Chief Executive officer of a corporation, subject to the Bylaws of the
corporation. He shall be ex-officio a member of all committees. The Chief
Executive Officer shall perform such other duties as may be assigned by the
board of directors. In the absence of the Chief Executive Officer, his duties
shall be assumed by the President, and in their absence such duties shall be
assumed by a person designated by the Chief Executive Officer or the board of
directors.
SECTION 5.3 PRESIDENT. The President shall perform such duties as may be
assigned by the Chief Executive Officer or the board of directors. The President
shall preside over all meetings of the shareholders, which duty shall include
the authority to adjourn such meetings.
SECTION 5.4 SENIOR EXECUTIVE VICE PRESIDENT. The Senior Executive Vice
President shall perform such duties as may be assigned to him or her by the
Chief Executive Officer or the President.
SECTION 5.5 CONTROLLER. The Controller shall be the chief accounting
officer of the corporation and shall have supervisory control and direction of
the general accounting, accounting procedure, budgeting and general bookkeeping,
and shall be the custodian of the general accounting books, records, forms and
papers. He shall also perform such other duties as may from time to time be
assigned to him by the Chief Executive Officer, the President, the Senior
Executive Vice President or an Executive Vice President.
SECTION 5.6 GENERAL AUDITOR. The General Auditor shall supervise and
maintain continuous audit control of the assets and liabilities of the
corporation. He shall be responsible only to the board of directors in
coordination with the Chief Executive officer. He shall perform such other
duties as may be assigned to him by the Chief Executive Officer, the President,
the
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<PAGE> 27
Senior Executive Vice President or an Executive Vice President, only to the
extent that such other duties do not compromise the independence of audit
control.
SECTION 5.7 SECRETARY AND ASSISTANT SECRETARY. The Secretary shall keep
the minutes of all meetings of the board of directors and of the shareholders.
He shall give such notices to the directors as may be required by law or by
these Bylaws. He shall have the custody of the corporate seal, if any, and the
contracts, papers and documents belonging to the corporation. He shall also
perform such other duties as may from time to time be assigned to him by the
Chief Executive Officer, the President, the Senior Executive Vice President or
an Executive Vice President. In the absence of the Secretary, the powers and
duties of the Secretary shall devolve upon an Assistant Secretary or such person
as shall be designated by the Secretary or the Chief Executive Officer.
SECTION 5.8 EXECUTIVE VICE PRESIDENTS. Any Executive Vice President
shall perform such duties as may be assigned to him by the Chief Executive
Officer of the President.
SECTION 5.9 SENIOR VICE PRESIDENTS AND VICE PRESIDENTS. Any Senior Vice
Presidents and Vice Presidents shall perform such duties as may be assigned to
them by the Chief Executive Officer, the President, the Senior Executive Vice
President or an Executive Vice President.
SECTION 5.10 COMBINING OFFICES. An officer whom the board of directors
elects or has previously elected to hold one office may be elected by the board
of directors to hold another office, with or without resigning from the previous
office, as the board of directors shall determine upon a recommendation of the
Chief Executive Officer.
SECTION 5.11 OTHER OFFICERS. The other Officers shall perform such
duties as may be assigned to them by the Chief Executive Officer or the
President. The Chief Executive Officer or the President may designate such
functional titles to an Officer as he deems appropriate from time to time.
SECTION 5.12 OFFICIAL BONDS. The corporation may be indemnified in the
event of the dishonest conduct or unfaithful performance of an officer,
employee, or agent by a corporate fidelity bond, the premiums for which may be
paid by the corporation.
SECTION 5.13 CONTRACTS AND SATISFACTIONS. The Chief Executive Officer,
the President, or in their absence the Senior Executive Vice President, shall
from time to time designate the officers or employees who shall have authority
to sign deeds, contracts, satisfactions, releases, and assignments of mortgages,
and all other instruments in writing to be made or executed by the corporation.
SECTION 5.14 RESIGNATION. Any officer may resign at any time by
delivering written notice to the chairman of the board, the President, a
Vice-president, the Secretary or the board of directors, or by giving oral
notice at any meeting of the board. Any such resignation shall take effect at
any subsequent time specified therein, or if the time is not specified, upon
delivery thereof and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
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<PAGE> 28
SECTION 5.15 COMPENSATION OF OFFICERS AND EMPLOYEES. The board of
directors shall fix compensation of officers and may fix compensation of other
employees from time to time. No officer shall be prevented from receiving a
salary by reason of the fact that such officer is also a director of the
corporation.
ARTICLE VI. SHARES
SECTION 6.1 CERTIFICATES FOR SHARES. The shares of the corporation may
be represented by certificates in such form as prescribed by the board of
directors. Signatures of the corporate officers on the certificate may be
facsimiles if the certificate is manually signed on behalf of a transfer agent,
or registered by a registrar, other than the corporation itself or an employee
of the corporation. All certificates shall be consecutively numbered or
otherwise identified. All certificates shall bear such legend or legends as
prescribed by the board of directors or these bylaws.
SECTION 6.2 ISSUANCE OF SHARES. Shares of the corporation shall be
issued only when authorized by the board of directors, which authorization shall
include the consideration to be received for each share.
SECTION 6.3 BENEFICIAL OWNERSHIP. Except as otherwise permitted by these
bylaws, the person in whose name shares stand on the books of the corporation
shall be deemed by the corporation to be the owner thereof for all purposes. The
board of directors may adopt by resolution a procedure whereby a shareholder of
the corporation may certify in writing to the corporation that all or a portion
of the shares registered in the name of such shareholder are held for the
account of a specified person or persons. Upon receipt by the corporation of a
certification complying with such procedure, the persons specified in the
certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the holders of record of the number of shares specified in
place of the shareholder making the certification.
SECTION 6.4 TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made only on the stock transfer books of the corporation by the holder
of record thereof or by his legal representative who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the secretary of the corporation,
on surrender for cancellation of the certificate for the shares. All
certificates surrendered to the corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled.
SECTION 6.5 LOST OR DESTROYED CERTIFICATES. In the case of a lost,
destroyed or mutilated certificate, a new certificate may be issued therefor
upon such terms and indemnity to the corporation as the board of directors may
prescribe.
SECTION 6.6 STOCK TRANSFER RECORDS. The stock transfer books shall be
kept at the principal office of the corporation or at the office of the
corporation's transfer agent or registrar. The name and address of the person to
whom the shares represented by any certificate, together
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<PAGE> 29
with the class, number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. Except as provided in these bylaws, the
person in whose name shares stand on the books of the corporation shall be
deemed by the corporation to be the owner thereof for all purposes.
ARTICLE VII. SEAL
This corporation need not have a corporate seal. If the directors adopt
a corporate seal, the seal of the corporation shall be circular in form and
consist of the name of the corporation, the state and year of incorporation, and
the words "Corporate Seal."
ARTICLE VIII. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
SECTION 8.1 DIRECTOR'S RIGHT TO INDEMNIFICATION. Each person who was or
is made a party or is threatened to be made a party to or is involved
(including, without limitation, as a witness) in any actual or threatened
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director of the
corporation or, being or having been such a director, he or she is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director or in any other capacity while serving as a director, shall be
indemnified and held harmless by the corporation against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts to be paid in settlement) actually and reasonably incurred
or suffered by such person in connection therewith; provided, however, that (a)
the corporation shall not indemnify any person from or on account of any acts or
omissions of such person finally adjudged to be intentional misconduct or
knowing violation of the law of such person, or from conduct of the person in
violation of RCW 23B.08.310, or from or on account of any transaction with
respect to which it is finally adjudged that such person personally received a
benefit in money, property, or services to which such person was not legally
entitled, and (b) except as provided in subsection 8.3 with respect to
proceedings seeking to enforce rights to indemnification, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the board of directors of the corporation.
Such indemnification shall continue as to a person who has ceased to be a
director and shall inure to the benefit of his or her heirs, executors and
administrators. If the Washington Business Corporation Act is amended to
authorize further indemnification of directors, then directors of the
corporation shall be indemnified to the fullest extent permitted by the
Washington Business Corporation Act, as so amended.
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<PAGE> 30
SECTION 8.2 DIRECTOR'S BURDEN OF PROOF AND PROCEDURE FOR PAYMENT.
(a) The claimant shall be presumed to be entitled to
indemnification under this Article upon submission of a written claim (and, in
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition, where the undertaking in (b)
below has been tendered to the corporation) and thereafter the corporation shall
have the burden of proof to overcome the presumption that the claimant is so
entitled.
(b) The right to indemnification shall include the right to be
paid by the corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that the payment of such
expenses in advance of the final disposition of a proceeding shall be made only
upon delivery to the corporation of an undertaking, by or on behalf of such
director, to repay all amounts so advanced if it shall ultimately be determined
that such director is not entitled to be indemnified under this Article or
otherwise.
SECTION 8.3 RIGHT OF CLAIMANT TO BRING SUIT. If a claim under this
Article is not paid in full by the corporation within sixty (60) days after a
written claim has been received by the corporation, except in the case of a
claim for expenses incurred in defending a proceeding in advance of its final
disposition, in which case the applicable period shall be twenty (20) days, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, to the extent successful in whole or
in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. Neither the failure of the corporation (including its
board of directors, its shareholders or independent legal counsel) to have made
a determination prior to the commencement of such action that indemnification of
or reimbursement or advancement of expenses to the claimant is proper in the
circumstances nor an actual determination by the corporation (including its
board of directors, its shareholders or independent legal counsel) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses shall be a defense to the action or create a presumption
that the claimant is not so entitled.
SECTION 8.4 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Articles of Incorporation, Bylaws, agreement, vote of
shareholders or disinterested directors or otherwise.
SECTION 8.5 INSURANCE, CONTRACTS AND FUNDING. The corporation may
maintain insurance, at its expense, to protect itself and any director, officer,
employee or agent of the corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss,
whether or not the corporation would have the power to indemnify such person
against such expense, liability or loss under the Washington Business
Corporation Act. The corporation may, without any shareholder action, enter into
contracts with such director or officer in furtherance of the provisions of this
Article and may create a trust fund, grant a security interest or use other
means (including, without limitation, a letter of credit) to
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<PAGE> 31
ensure the payment of such amounts as may be necessary to effect indemnification
as provided in this Article.
SECTION 8.6 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS OF THE
CORPORATION. The corporation may, by action of its board of directors from time
to time, provide indemnification and pay expenses in advance of the final
disposition of a proceeding to officers, employees and agents of the corporation
or another corporation, partnership, joint venture trust or other enterprise
with the same scope and effect as the provisions of this Article with respect to
the indemnification and advancement of expenses of directors of the corporation
or pursuant to rights granted pursuant to, or provided by, the Washington
Business Corporation Act or otherwise.
SECTION 8.7 CONTRACT RIGHT. The rights to indemnification conferred in
this Article shall be a contract right and any amendment to or repeal of this
Article shall not adversely affect any right or protection of a director of the
corporation for or with respect to any acts or omissions of such director or
officer occurring prior to such amendment or repeal.
SECTION 8.8 SEVERABILITY. If any provision of this Article or any
application thereof shall be invalid, unenforceable or contrary to applicable
law, the remainder of this Article, or the application of such provision to
persons or circumstances other than those as to which it is held invalid,
unenforceable or contrary to applicable law, shall not be affected thereby and
shall continue in full force and effect.
ARTICLE IX. BOOKS AND RECORDS
The corporation shall keep correct and complete books and records of
account, stock transfer books, minutes of the proceedings of its shareholders
and the board of directors and such other records as may be necessary or
advisable.
ARTICLE X. FISCAL YEAR
The fiscal year of the corporation shall be the calendar year.
ARTICLE XI. VOTING OF SHARES OF ANOTHER CORPORATION
Shares of another corporation held by this corporation may be voted by
the Chief Executive Officer, by the President, by the Senior Executive Vice
President, by an Executive Vice President, or by a Senior Vice President, or by
proxy appointment form executed by any of them, unless the directors by
resolution shall designate some other person to vote the shares.
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<PAGE> 32
ARTICLE XII. AMENDMENTS TO BYLAWS
These bylaws may be altered, amended or repealed, and new bylaws may be
adopted, by the board of directors, subject to the concurrent power of the
shareholders, by at least two-thirds affirmative vote of the shares of the
corporation entitled to vote thereon, to alter amend or repeal these bylaws or
to adopt new bylaws.
The undersigned, being the secretary of the corporation, hereby
certifies that these bylaws are the restated bylaws of WASHINGTON MUTUAL, INC.,
adopted by resolution of the directors on September 28, 1994 and amended on
October 19, 1994, November 28, 1994 and December 20, 1994.
DATED this 16th day of March, 1995.
/s/ WILLIAM L. LYNCH
----------------------------------------
William L. Lynch, Secretary
-16-
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-Q OF
WASHINGTON MUTUAL, INC. FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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