<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Washington Mutual, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[WASHINGTON MUTUAL LOGO]
1201 THIRD AVENUE, SUITE 1500
SEATTLE, WASHINGTON 98101
MARCH 23, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Washington Mutual, Inc. ("Washington Mutual"), which will be held in the S. Mark
Taper Foundation Auditorium at Benaroya Hall, 200 University Street, Seattle,
Washington, at 2:00 p.m., Tuesday, April 20, 1999. I look forward to greeting as
many of our shareholders as possible.
At the Annual Meeting, holders of Washington Mutual Common Stock will be
asked to vote on the following matters: (1) to elect seven directors; (2) to
amend Washington Mutual's current Articles of Incorporation ("Articles") to
provide mandatory indemnification of directors; (3) to amend the Articles to
reduce the vote required to amend the Articles, to eliminate the requirement to
publish notice of certain shareholder meetings, to clarify the Board of
Directors' authority to amend the Articles, to eliminate the provision on
transactions with certain interested persons and to expand the provision
relating to shareholder approval of merger transactions; and (4) to ratify the
appointment of Deloitte & Touche LLP as the independent auditors for Washington
Mutual for 1999. All of these proposals are more fully described in the
accompanying Notice of Annual Meeting of Shareholders and the Proxy Statement.
Your Board of Directors believes that each proposal is in the best interests of
Washington Mutual and its shareholders and, accordingly, recommends that you
vote "FOR" each of them.
In addition to the specific matters to be acted upon, there will be a
report on the progress of Washington Mutual and an opportunity to ask questions
of general interest to shareholders.
Whether or not you attend the Annual Meeting, it is important that your
shares be represented and voted at the Annual Meeting. Therefore, I urge you to
sign, date and promptly return the enclosed proxy in the enclosed postage-paid
envelope. If you decide to attend the Annual Meeting and vote in person, you
will, of course, have that opportunity.
Sincerely,
/s/ KERRY K. KILLINGER
Kerry K. Killinger
Chairman, President and Chief
Executive Officer
<PAGE> 3
WASHINGTON MUTUAL, INC.
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 1999
------------------------------
The Annual Meeting of Shareholders of Washington Mutual, Inc. ("Washington
Mutual") will be held in the S. Mark Taper Foundation Auditorium at Benaroya
Hall, 200 University Street, Seattle, Washington, on Tuesday, April 20, 1999 at
2:00 p.m. for the following purposes:
1. To elect one director to hold office until the 2000 Annual Meeting of
Shareholders, one director to hold office until the 2001 Annual Meeting
of Shareholders and five directors to hold office until the 2002 Annual
Meeting of Shareholders and, in each case, until his or her successor is
elected and qualified;
2. To amend Washington Mutual's current Articles of Incorporation
("Articles") to provide mandatory indemnification of directors;
3. To amend the Articles to reduce the vote required to amend the Articles,
to eliminate the requirement to publish notice of certain shareholder
meetings, to clarify the Board of Directors' authority to amend the
Articles, to eliminate the provision on transactions with certain
interested persons and to expand the provision relating to shareholder
approval of merger transactions;
4. To ratify the appointment of Deloitte & Touche LLP as the independent
auditors for Washington Mutual for 1999; and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
All of these proposals are more fully described in the Proxy Statement,
which follows. Only holders of shares of Washington Mutual Common Stock at the
close of business on March 5, 1999 are entitled to notice of, and to vote at,
this Annual Meeting, and any and all adjournments thereof.
By Order of the Board of Directors,
/s/ William L. Lynch
William L. Lynch
Secretary
Seattle, Washington
March 23, 1999
IMPORTANT
Whether or not you expect to attend in person, we urge you to sign, date
and return the enclosed proxy at your earliest convenience. This will ensure the
presence of a quorum at the Annual Meeting. Promptly signing, dating and
returning the proxy will save Washington Mutual the expense and extra work of
additional solicitation. An addressed envelope for which no postage is required
if mailed in the United States is enclosed for that purpose. Sending in your
proxy will not prevent you from voting your stock at the Annual Meeting if you
desire to do so, as your proxy is revocable at your option in the manner
described in the Proxy Statement.
<PAGE> 4
WASHINGTON MUTUAL, INC.
1201 THIRD AVENUE, SUITE 1500
SEATTLE, WASHINGTON 98101
------------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
APRIL 20, 1999
------------------------------
SOLICITATION AND REVOCATION OF PROXY
The enclosed proxy is solicited by the Board of Directors of Washington
Mutual, Inc. (the "Company" or "Washington Mutual") to be voted at the Annual
Meeting of Shareholders to be held at 2 p.m. on April 20, 1999, or any
adjournments thereof (the "Annual Meeting"). The persons named as proxies are
William L. Lynch and Marc R. Kittner. The accompanying Notice of Annual Meeting,
this Proxy Statement and the accompanying proxy are being first sent to
shareholders on or about March 23, 1999.
At the Annual Meeting, holders of Washington Mutual common stock, no par
value per share (the "Common Stock"), will be asked to elect seven directors,
one of whom is to hold office until the Annual Meeting of Shareholders in 2000,
another to hold office until the Annual Meeting of Shareholders in 2001, and the
other five to hold office until the Annual Meeting of Shareholders in 2002 and,
in each case, until his or her successor is elected and qualified. Holders of
Common Stock will also be asked to approve amendments to the Company's current
Articles of Incorporation (the "Articles") and to ratify the appointment of
Deloitte & Touche LLP as the Company's independent auditors for 1999.
All shares represented by proxies that are properly executed and returned
will be voted in accordance with the instructions noted thereon. In the absence
of voting instructions, the shares of Common Stock will be voted for the
nominees for director listed herein and on the proxy, for each of the proposals
to amend the Articles and for the ratification of the Company's independent
auditors. A shareholder giving a proxy has the power to revoke it at any time
prior to the commencement of the Annual Meeting. The proxy may be revoked by
written notice to the Secretary received at Washington Mutual's offices at 1201
Third Avenue, Suite 1700, Seattle, Washington 98101, before April 20, 1999, or
by written notice delivered in person at the Annual Meeting to the Secretary.
Attendance at the Annual Meeting will not, in itself, constitute revocation of a
previously granted proxy.
At the close of business on March 5, 1999, there were 593,991,375 shares of
Common Stock outstanding (including 12,000,000 shares of Common Stock held in
escrow). Each share of Common Stock is entitled to one vote in each of the
matters properly presented at the Annual Meeting. Only shareholders of record at
the close of business on March 5, 1999 (the "Record Date") will be entitled to
vote at the Annual Meeting. All share amounts and per share amounts are as
adjusted for a June 1, 1998 stock dividend of one share of Common Stock for
every two shares held of record on May 18, 1998.
The holders of a majority of the Common Stock issued and outstanding and
entitled to vote at the Annual Meeting, present in person or represented by
proxy, constitute a quorum for purposes of acting on the election of directors,
for the proposals on the amendment of the Articles and for the ratification of
the Company's independent auditors. Abstentions and broker "non-votes" are
counted as present for purposes of determining a quorum. A broker "non-vote"
occurs when a nominee holding shares of Common Stock for a beneficial owner does
not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that item and has not received timely
instructions from the beneficial owner.
1
<PAGE> 5
Under applicable law and the Company's Articles and Bylaws, and assuming
that a quorum is present, in the election of directors, the persons elected will
be those receiving the largest number of votes cast for the relevant class of
directors at the Annual Meeting by shares present in person or by proxy.
Assuming a quorum is present, approval of each of the proposals to amend the
Company's Articles requires the affirmative vote of two-thirds of the votes
entitled to be cast at the Annual Meeting, while ratification of the appointment
of Deloitte & Touche LLP as the Company's independent auditors for 1999 requires
that more votes favor the action than oppose it. Abstentions and broker
non-votes will have no effect on the election of directors or the ratification
of the appointment of Deloitte & Touche LLP as the Company's auditors for 1999,
but will count as "no" votes on each proposal to amend the Articles. Proxies and
ballots will be received and tabulated by ChaseMellon Shareholder Services,
L.L.C., the Company's transfer agent and the inspector of elections for the
Annual Meeting.
If you are a participant in the Washington Mutual Restricted Stock Plan,
the Washington Mutual, Inc. Retirement Savings and Investment Plan, the
Washington Mutual Employees' Stock Purchase Plan, the Pioneer Savings Bank
Employee Stock Ownership Plan and Trust or the Ahmanson Advantage Account, the
enclosed proxy includes any Common Stock allocated to your account. The trustees
or plan administrators of such plans will vote the number of shares allocated to
your account pursuant to the instructions you provide, so please sign and return
your proxy promptly. If proxies representing allocated shares in these plans are
not returned, those shares will be voted by the trustees or plan administrators
in accordance with the terms of such plans.
In addition to mailing this material to shareholders, the Company has asked
banks and brokers to forward copies to persons for whom they hold shares of the
Common Stock and request authority to execute the proxies. The Company will
reimburse the banks and brokers for their reasonable out-of-pocket expenses in
doing so. Officers and regular employees of the Company may, without being
additionally compensated, solicit proxies by mail, telephone, telegram,
facsimile or personal contact. Washington Mutual also intends to employ and pay
the fees (estimated to be $10,000) plus reimbursement of reasonable
out-of-pocket expenses of Georgeson & Company, Inc., a firm engaged in the
business of soliciting the return of proxies. All proxy soliciting expenses will
be paid by the Company in connection with the solicitation of votes for the
Annual Meeting.
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth information regarding beneficial ownership
of Common Stock by each person known to the Company to have owned more than 5%
of the outstanding shares of the Common Stock on March 5, 1999. The following is
based solely on statements filed with the Securities and Exchange Commission
(the "SEC") or other information that the Company believes to be reliable. The
named shareholder has sole voting and investment power with respect to the
shares shown, except as noted below.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------- ---------------------- ----------
<S> <C> <C>
FMR Corp.(1)................................. 35,770,235 6.0%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- ------------------------------
(1) Washington Mutual has obtained information concerning the Common Stock
beneficially owned by FMR Corp. as of December 31, 1998 from a Schedule 13G
dated February 1, 1999. Members of the Edward C. Johnson 3d family and
trusts for their benefit, through ownership of voting common stock of FMR
Corp. and the execution of shareholders' voting agreements, may be deemed,
under the Investment Company Act of 1940, to form a controlling group with
respect to FMR Corp. The Schedule 13G indicates that the 35,770,235 shares
of Common Stock beneficially owned by FMR Corp. include: 28,100,743 shares
beneficially owned by Fidelity Management & Research Company ("Fidelity"), a
registered investment advisor and a wholly-owned subsidiary of FMR Corp., as
a result of acting as investment adviser to various registered investment
companies ("Fidelity Funds"); 5,653,584 shares beneficially owned by
Fidelity Management Trust Company, a bank and a wholly-owned subsidiary of
FMR Corp. ("Fidelity Trust") as
2
<PAGE> 6
a result of its serving as investment manager of institutional accounts (the
"Institutional Accounts"); and 2,015,908 shares owned by Fidelity
International Limited ("Fidelity International"), a corporation operated
independently of FMR Corp. According to the Schedule 13G, Mr. Johnson, FMR
Corp., through its control of Fidelity, and the Fidelity Funds each has sole
dispositive power over the Fidelity Funds' shares, but the sole power to
vote these shares resides with the Fidelity Funds' Boards of Trustees. Mr.
Johnson and FMR Corp., through its control of Fidelity Trust, each has sole
dispositive power over the 5,653,584 shares beneficially owned by Fidelity
Trust and sole power to vote 4,365,326 of those shares, but no power to vote
1,288,258 shares owned by the Institutional Accounts. Mr. Johnson is the
Chairman of FMR Corp. and Fidelity International and, through a partnership
controlled by Mr. Johnson and members of his family, owns shares of the
voting stock of Fidelity International with the right to cast 39.9% of the
total votes that may be cast. According to the Schedule 13G, FMR Corp. and
Fidelity International may be deemed to constitute a "group" within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, but each disclaims that any such "group" exists.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table and accompanying footnotes provide a summary of the
beneficial ownership of the Common Stock as of March 5, 1999 by (i) directors,
(ii) the Company's Chief Executive Officer, (iii) the other executive officers
named in the executive compensation table set forth herein and (iv) the
directors and executive officers as a group. The following summary is based on
information furnished by the respective directors and officers. Each of the
named directors and officers has sole voting and investment power with respect
to the shares shown, except as noted below.
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------
NAME NUMBER OF SHARES(1) PERCENT OF CLASS
---- ------------------- ----------------
<S> <C> <C>
Douglas P. Beighle......................... 26,528(2) *
David Bonderman............................ 3,014,080(3) *
J. Taylor Crandall......................... 9,218,477(4) 1.6%
Craig S. Davis............................. 85,766(5) *
Roger H. Eigsti............................ 22,249(6) *
John W. Ellis.............................. 50,135(7) *
Anne V. Farrell............................ 10,749(8) *
Stephen E. Frank........................... 22,824(9) *
William P. Gerberding...................... 15,000(10) *
Enrique Hernandez, Jr...................... 20,799(11) *
Kerry K. Killinger......................... 1,970,034(12) *
Phillip D. Matthews........................ 11,006(13) *
Samuel B. McKinney......................... 12,624(14) *
Michael K. Murphy.......................... 19,299(15) *
Deanna W. Oppenheimer...................... 206,469(16) *
William G. Reed, Jr........................ 45,811(17) *
Elizabeth A. Sanders....................... 16,863(18) *
William D. Schulte......................... 31,143(19) *
James H. Stever............................ 20,949(20) *
Craig E. Tall.............................. 467,851(21) *
S. Liane Wilson............................ 375,997(22) *
Willis B. Wood, Jr......................... 30,924(23) *
All directors and executive officers as a
group (28 persons)....................... 16,659,406(24) 2.8%
</TABLE>
- ------------------------------
* Less than 1%.
(1) All fractional shares have been rounded up to the next highest share. All
options included are exercisable within 60 days after March 5, 1999, and
all restricted stock included is held in the Washington Mutual Restricted
Stock Plan, as amended and restated ("Restricted Stock Plan"), and is
subject to divestiture.
3
<PAGE> 7
(2) Includes 9,000 shares issuable pursuant to stock options and 249 shares
held pursuant to the Restricted Stock Plan.
(3) Includes 4,500 shares issuable pursuant to stock options and 249 shares
held pursuant to the Restricted Stock Plan. Also includes 383,275 shares
held in escrow for the benefit of Keystone Holdings Partners, L.P. ("KH
Partners") and its transferees pursuant to the merger agreement dated July
21, 1996, as amended November 1, 1996, by and among Washington Mutual, KH
Partners, Keystone Holdings, Inc. ("Keystone Holdings") and certain of its
subsidiaries (the "Merger Agreement"). Pursuant to the Merger Agreement,
7,788,000 shares of Common Stock (the "Litigation Escrow Shares") were
placed in escrow and held for the benefit of KH Partners and its
transferees pending the outcome of certain litigation between Keystone
Holdings and the United States of America. Pursuant to the escrow, KH
Partners and its transferees have the sole right to vote the Litigation
Escrow Shares while they are in escrow. KH Partners has distributed such
voting rights to its partners in accordance with their sharing percentages,
and Mr. Bonderman, as a limited partner of KH Partners, may therefore be
deemed to be the beneficial owner of the Litigation Escrow Shares as to
which voting rights have been distributed to him. Also includes 167,089
shares beneficially owned by Bondo FTW, Inc., of which Mr. Bonderman is the
President and sole stockholder. Also includes 547,215 shares beneficially
owned by KH Group Management, Inc. ("KH Group"). Of these shares, 91,428
shares are Litigation Escrow Shares held for the benefit of KH Partners and
its transferees, as to which voting rights have been distributed to KH
Group in accordance with its sharing percentage as a limited partner of KH
Partners. Mr. Bonderman is the president and sole stockholder of KH Group.
(4) Includes 4,500 shares issuable pursuant to stock options and 249 shares
held pursuant to the Restricted Stock Plan. Also includes 21,183 shares
held by Acadia MGP, Inc ("Acadia MGP") and 1,558,336 Litigation Escrow
Shares held for the benefit of KH Partners and its transferees, as to which
voting rights have been distributed to Acadia Partners, L.P. ("Acadia") in
accordance with its sharing percentage as a limited partner of KH Partners.
Mr. Crandall is the president and sole stockholder of Acadia MGP, which is
the managing general partner of Acadia FW Partners, L.P., which in turn is
the sole general partner of Acadia. Mr. Crandall disclaims beneficial
ownership of any shares owned by Acadia in excess of the greater of Mr.
Crandall's direct and indirect interest in the profits or capital account
of Acadia. Also includes 7,448,209 shares beneficially owned by WAMU
Partners, of which Mr. Crandall is the general partner. Also includes
186,000 shares, of which 83,142 shares are Litigation Escrow Shares held
for the benefit of KH Partners and its transferees, as to which voting
rights have been distributed to Mr. Crandall in accordance with his sharing
percentage as a limited partner of KH Partners.
(5) Includes 42,500 shares issuable pursuant to stock options, 28,935 shares
held pursuant to the Restricted Stock Plan, 10,000 shares held in the Davis
Family Trust and 2,919 shares held in the Washington Mutual Retirement
Savings & Investment Plan ("RSIP").
(6) Includes 9,000 shares issuable pursuant to stock options and 249 shares
held pursuant to the Restricted Stock Plan.
(7) Includes 9,000 shares issuable pursuant to stock options, 249 shares held
pursuant to the Restricted Stock Plan and 2,250 shares held in trust for
the benefit of Mr. Ellis' grandchildren.
(8) Includes 7,500 shares issuable pursuant to stock options and 249 shares
held pursuant to the Restricted Stock Plan.
(9) Includes 19,875 shares issuable pursuant to stock options and 249 shares
held pursuant to the Restricted Stock Plan.
(10) Includes 9,000 shares issuable pursuant to stock options, 249 shares held
pursuant to the Restricted Stock Plan and 2,632 shares held jointly with
Mr. Gerberding's spouse.
(11) Includes 19,875 shares issuable pursuant to stock options and 249 shares
held pursuant to the Restricted Stock Plan.
(12) Includes 944,372 shares issuable pursuant to stock options, 125,301 shares
held pursuant to the Restricted Stock Plan and 1,615 shares held in the
RSIP.
4
<PAGE> 8
(13) Includes 7,943 shares issuable pursuant to stock options and 63 shares held
pursuant to the Restricted Stock Plan.
(14) Includes 4,500 shares issuable pursuant to stock options and 249 shares
held pursuant to the Restricted Stock Plan.
(15) Includes 9,000 shares issuable pursuant to stock options, 249 shares held
pursuant to the Restricted Stock Plan and 2,250 shares held jointly with
Mr. Murphy's spouse.
(16) Includes 109,497 shares issuable pursuant to stock options, 32,753 shares
held pursuant to the Restricted Stock Plan and 4,686 shares held in the
RSIP.
(17) All shares are held jointly with Mr. Reed's spouse. Includes 9,000 shares
issuable pursuant to stock options and 249 shares held pursuant to the
Restricted Stock Plan.
(18) Includes 5,040 shares issuable pursuant to stock options, 63 shares held
pursuant to the Restricted Stock Plan and 1,680 shares held jointly with
Ms. Sanders' spouse.
(19) Includes 26,880 shares issuable pursuant to stock options and 63 shares
held pursuant to the Restricted Stock Plan.
(20) Includes 9,000 shares issuable pursuant to stock options, 249 shares held
pursuant to the Restricted Stock Plan, 1,200 shares held in the Stever
Family Foundation, for which Mr. Stever is the President, and 7,500 shares
that are held jointly with Mr. Stever's spouse.
(21) Includes 179,874 shares issuable pursuant to stock options, 34,943 shares
held pursuant to the Restricted Stock Plan, 7,000 shares held in a family
partnership and 48,342 shares held in the RSIP.
(22) Includes 169,374 shares issuable pursuant to stock options, 34,545 shares
held pursuant to the Restricted Stock Plan and 559 shares held in the RSIP.
(23) Includes 30,000 shares issuable pursuant to stock options and 249 shares
held pursuant to the Restricted Stock Plan.
(24) Includes 1,921,601 shares issuable pursuant to stock options, 367,954
shares held pursuant to the Restricted Stock Plan and 85,911 shares held in
the RSIP.
5
<PAGE> 9
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of Washington Mutual previously consisted of 15
directors, divided into three classes. Effective October 1, 1998, the Board of
Directors was increased to 18 and Phillip D. Matthews, Elizabeth A. Sanders and
William D. Schulte were appointed to fill the three vacancies. Under Washington
law, each of these three appointees serves as a director only until the Annual
Meeting. Each director has been nominated to election to a different class to
cause the three classes of directors to be approximately equal in number
following the Annual Meeting. Otherwise, the members of each class ordinarily
serve three-year terms, with one class elected annually. The Board of Directors
has nominated each of the following persons for election as a director to serve
a one-, two-or three-year term expiring at the Company's Annual Meeting of
Shareholders in the year indicated above such person's name:
TERM ENDING 2000
Elizabeth A. Sanders
TERM ENDING 2001
William D. Schulte
TERM ENDING 2002
David Bonderman
Roger H. Eigsti
Phillip D. Matthews
William G. Reed, Jr.
James H. Stever
Each of the nominees has indicated that he or she is willing and able to
serve as a director. If any nominee becomes unable or unwilling to serve, the
accompanying proxy may be voted for the election of such other person as shall
be designated by the Planning and Nominating Committee of the Board of
Directors. Unless instructions to the contrary are specified in a properly
signed and returned proxy, the proxies will be voted in favor of the seven
nominees listed above.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE NOMINEES.
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<PAGE> 10
DIRECTORS
The following table sets forth information regarding each nominee for
election as a director and each director whose term of office will continue
after the Annual Meeting. Dr. McKinney who is Pastor Emeritus of Mount Zion
Baptist Church in Seattle, Washington will retire at the Annual Meeting. Except
as otherwise indicated, each director has been engaged in the principal
occupation described below for at least five years.
<TABLE>
<CAPTION>
COMPANY EXPIRATION OF
NAME AGE DIRECTOR SINCE TERM AS DIRECTOR
---- --- -------------- ----------------
<S> <C> <C> <C>
Douglas P. Beighle..................... 66 1989 2000
David Bonderman........................ 56 1997 1999
J. Taylor Crandall..................... 45 1997 2000
Roger H. Eigsti........................ 56 1992 1999
John W. Ellis.......................... 70 1970 2001
Anne V. Farrell........................ 63 1994 2001
Stephen E. Frank....................... 57 1997 2001
William P. Gerberding.................. 69 1979 2001
Enrique Hernandez, Jr.................. 43 1997 2001
Kerry K. Killinger..................... 49 1988 2000
Phillip D. Matthews.................... 60 1998 1999
Michael K. Murphy...................... 62 1985 2000
William G. Reed, Jr.................... 60 1970 1999
Elizabeth A. Sanders................... 53 1998 1999
William D. Schulte..................... 66 1998 1999
James H. Stever........................ 55 1991 1999
Willis B. Wood, Jr..................... 64 1997 2000
</TABLE>
Mr. Beighle has been a consultant to The Boeing Company since 1997. From
1981 through 1997, he held various positions at Boeing, including Senior Vice
President of The Boeing Company from 1986 to 1997. Mr. Beighle serves as a
director of Puget Sound Energy, Inc., Active Voice Corporation and Simpson
Investment Company.
Mr. Bonderman is the Managing Director of Texas Pacific Group, an
investment entity. From 1983 until 1992, Mr. Bonderman was Chief Operating
Officer of Keystone, Inc. (formerly Robert M. Bass Group, Inc.), a company owned
by Robert M. Bass and principally engaged in investment activities. KH Group
Management, Inc., a corporation of which Mr. Bonderman is the sole director and
President, is the managing general partner of Keystone Holdings Partners, L.P.
He is a director of Bell & Howell Company, Inc.; Beringer Wine Estates Holdings,
Inc.; Continental Airlines, Inc.; Denbury Resources, Inc.; Oxford Health Plans,
Inc.; Ryanair Ltd.; and Realty Information Group, Inc.
Mr. Crandall has been Chief Operating Officer and Vice President of
Keystone, Inc. since August 1998, and President of Acadia MGP, Inc., which is
the managing general partner of Acadia FW Partners, L.P., which is the sole
general partner of Acadia Partners, L.P., an investment partnership, since 1992.
In addition, Mr. Crandall was a Vice President and director of National Re
Holdings Corp. from 1989 until 1997 and served as Treasurer of that company
until 1990. Mr. Crandall is a director of Bell & Howell Company, Inc.; Physician
Reliance Network, Inc.; Specialty Foods, Inc. and Sunterra Corporation.
Mr. Eigsti has served as the Chairman of SAFECO Corporation since May 1993
and Chief Executive Officer since January 1992. He served as its President from
May 1989 until August 1996, Chief Operating Officer from May 1989 until January
1992, and Executive Vice President and Chief Financial Officer from February
1985 until May 1989. Mr. Eigsti has been a director of SAFECO Corporation since
May 1988.
Mr. Ellis has been the Chairman and Chief Executive Officer of The Baseball
Club of Seattle, Inc. since 1992. Previously, Mr. Ellis served at Puget Sound
Energy, Inc. as Chairman from 1988 until 1993 and as Chief Executive Officer
from 1970 until 1993. Mr. Ellis is a director of Associated Electric & Gas
Insurance Service Ltd., Puget Sound Energy, SAFECO Corporation and UTILX
Corporation.
7
<PAGE> 11
Mrs. Farrell has served as the President and Chief Executive Officer of The
Seattle Foundation, a charitable and educational corporate foundation, since
1984. Mrs. Farrell is a director of Blue Cross of Washington and Alaska and
PREMERA. Mrs. Farrell also serves as a trustee of the registered investment
companies that comprise the WM Group of Funds. The investment adviser to the
funds is an indirect wholly-owned subsidiary of Washington Mutual.
Mr. Frank has served as President and Chief Operating Officer of Southern
California Edison, the largest subsidiary of Edison International, since June
1995. He also serves as a director for both Southern California Edison and
Edison International. Mr. Frank was the President, Chief Operating Officer and a
director of Florida Power and Light Company from August 1990 until June 1995.
From 1988 until 1990 he was Executive Vice President and Chief Financial Officer
of TRW, Inc. Mr. Frank is also a director of the Electric Power Research
Institute and UNOVA, Inc. and served as a director of Great Western Financial
Corporation ("GWFC") until its merger with a subsidiary of the Company in July
1997 (the "Great Western Merger").
Mr. Gerberding serves as a director of SAFECO Corporation and is a member
of the Board of Directors of the Seattle Opera. Mr. Gerberding served as
President of the University of Washington from 1979 through 1995.
Mr. Hernandez has been the Chairman, Chief Executive Officer and President
of Inter-Con Security Systems since 1984. He is also a co-founder and has been
principal partner since 1988 of Interspan Communications, a television broadcast
company serving Spanish-speaking audiences. Prior to becoming the President of
Inter-Con, he served as Vice President and Assistant General Counsel from 1984
to 1985 and as Executive Vice President from 1985 to 1986 of Inter-Con. Mr.
Hernandez serves as a director of McDonald's Corporation and Nordstrom, Inc. and
served as a director of GWFC until the Great Western Merger in July 1997.
Mr. Killinger has been Chairman, President and Chief Executive Officer of
Washington Mutual, Inc. since its organization in August 1994 for the purpose of
serving as the holding company of Washington Mutual Savings Bank ("WMSB"). Mr.
Killinger became President and a director of WMSB in 1988, its Chief Executive
Officer in 1990 and Chairman of its Board of Directors in 1991. Mr. Killinger
has served as a director of the Federal Home Loan Bank of Seattle since 1995 and
a director of Simpson Investment Company since 1997.
Mr. Matthews is the Chairman of the Executive Committee of Wolverine World
Wide, Inc. ("Wolverine") and served as its Chairman from 1993 through 1996. He
was Chairman and Chief Executive Officer of The Reliable Company from 1992 to
1997. Mr. Matthews serves as a director of Sizzler International, Inc. and
Wolverine, and served as a director of H.F. Ahmanson & Company ("Ahmanson")
until its merger with the Company in October 1998 (the "Ahmanson Merger").
Mr. Murphy has been President and Chief Executive Officer of CPM
Development Corporation, the parent company of Central Pre-Mix Concrete Company
and Inland Asphalt Company, since 1978 and previously served as its Chairman.
Mr. Murphy also serves as a trustee of the registered investment companies that
comprise the WM Group of Funds. The investment adviser to the funds is an
indirect wholly-owned subsidiary of Washington Mutual.
Mr. Reed is a director of Simpson Investment Company, the holding company
for Simpson Paper Company and Simpson Timber Company, and was Chairman from 1971
to 1996. Mr. Reed also serves as a director of Microsoft Corporation; PACCAR,
Inc.; SAFECO Corporation and The Seattle Times.
Ms. Sanders is the founder and Principal since 1990 of The Sanders
Partnership, an executive management and leadership consulting firm. She served
as a Vice President and General Manager of Nordstrom, Inc. from 1978 to 1990.
She is also a director of Advantica Restaurant Group; Inc.; Wal-Mart Stores,
Inc.; Wellpoint Health Networks Inc. and Wolverine. Ms. Sanders served as a
director of Ahmanson until the Ahmanson Merger in October 1998.
8
<PAGE> 12
Mr. Schulte served in various positions at KPMG from 1961-1990, including
Vice Chairman and director until 1990. Mr. Schulte is a director of Parsons
Corporation and Vastar Resources, Inc. and served as a director of Ahmanson
until the Ahmanson Merger in October 1998.
Mr. Stever retired as the Executive Vice President--Public Policy of US
West, Inc. on December 31, 1996, which position he had held since January 1996.
He was the Executive Vice President--Public Policy and Human Resources of US
West, Inc. from November 1994 to January 1996 and was the Executive Vice
President--Public Policy of U.S. West Inc. and US West Communications, Inc. from
1993 until 1994. He was President--Public Policy of US WEST Communications, Inc.
from 1990 until 1993 and President--Business Division from 1988 until 1990.
Mr. Wood retired as the Chairman, Chief Executive Officer and a director of
Pacific Enterprises, the holding company of Southern California Gas Company in
1998. Mr. Wood served in various positions, including as an executive officer of
Pacific Enterprises' subsidiaries since 1960. Mr. Wood is a director of the
Automobile Club of Southern California and served as a director of GWFC until
the Great Western Merger in July 1997.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of Washington Mutual has an Audit Committee, a
Compensation and Stock Option Committee (the "Compensation Committee"), a Loan
and Investment Committee, a Corporate Development Committee, a Corporate
Relations Committee and a Planning and Nominating Committee.
The Audit Committee's function is to meet with management, the internal
auditors and the independent auditors to review and evaluate the Company's
audited financial statements, internal accounting controls and regulatory
examinations and to monitor the Company's compliance with laws, regulations and
corporate policy. The Committee currently consists of Messrs. Beighle
(Chairman), Eigsti, Frank, Hernandez, Reed and Schulte.
The Compensation Committee reviews and approves compensation policies for
all employees; develops, approves and administers the salaries, bonuses and
equity compensation of all executive and senior officers of Washington Mutual
and its subsidiaries; reviews compensation programs and practices for the Chief
Executive Officer; and has supervisory control over the administration of
Washington Mutual's compensation, stock option and other equity incentive plans,
its pension and retirement plans and its other benefit plans and programs. The
Committee currently consists of Messrs. Ellis (Chairman), Beighle, Murphy,
Stever and Wood.
The Loan and Investment Committee has supervisory control over all
investments in, and dispositions of, securities and loans, all purchases of real
estate and dispositions of property of Washington Mutual. The Committee
currently consists of Messrs. Murphy (Chairman), Beighle, Bonderman, Crandall,
Eigsti, Frank, Reed, Stever and Wood and Dr. McKinney.
The Corporate Development Committee was formed in December 1997 to review
on a case-by-case basis with Washington Mutual's management all potential
acquisitions presented to it. The Committee currently consists of Messrs.
Killinger (Chairman), Beighle, Bonderman, Ellis and Wood.
The Corporate Relations Committee was formed in December 1997 to monitor
the Company's charitable giving and community service activities, including
implementation of its ten-year $120 billion commitment to community
reinvestment. The Committee currently consists of Mrs. Farrell (Chairman) and
Messrs. Eigsti, Frank and Gerberding and Ms. Sanders and Dr. McKinney. Chairman
of the Corporate Relations Committee, Mrs. Farrell retains responsibility for
the duties she performed as Director Liaison to the Washington Mutual
Foundation.
The Planning and Nominating Committee monitors Washington Mutual's
operating and financial condition, reviews and approves Washington Mutual's
strategic and operational plans and programs and assists the Board of Directors
in policymaking functions. The Committee also recommends persons to fill
vacancies on the Board of Directors and reviews the structure and operation of
the Board of Directors. Pursuant to the
9
<PAGE> 13
Company's Bylaws, the Committee considers shareholder-recommended nominees for
the Board of Directors, provided that such shareholder nominations must be
submitted to the Company's Secretary not less than 90 days in advance of the
mailing of the Proxy Statement as based on the prior year's mailing date. The
Committee currently consists of Messrs. Reed (Chairman), Crandall, Ellis,
Gerberding, Hernandez and Matthews and Mrs. Farrell.
During 1998, the Company's Board of Directors met nine times. Each director
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and the total number of all meetings held by committees on
which he or she served.
COMPENSATION OF DIRECTORS
Non-employee directors are compensated for their services on the Board of
Directors and any committees on which they serve. Effective January 1, 1998,
each non-employee director is paid an annual retainer fee of $31,000, $10,000 of
which is distributed in restricted stock on a quarterly basis. Such restricted
stock vests on the March 31st of the year in which a director reaches age 72 and
the restricted stock earns quarterly dividends which are reinvested. Each
director also receives $600 for attendance at purely telephonic board meetings
and $1,200 for attendance in person or by telephone at other board meetings. In
addition, directors who serve on committees receive $500 for attendance at
purely telephonic committee meetings and $1,000 for attendance in person or by
telephone at other committee meetings, plus travel and accommodation expenses,
except that Corporate Development Committee members receive an annual fee of
$5,000 in lieu of any fees for committee meeting attendance. The Chairman of the
Audit Committee receives an additional annual fee of $6,000; the Chairman of the
Compensation Committee receives an additional annual fee of $4,000; the Chairman
of the Loan and Investment Committee receives an additional annual fee of
$3,000; the Chairman of the Corporate Relations Committee receives an additional
annual fee of $3,000; and the Chairman of the Planning and Nominating Committee
receives an additional annual fee of $2,000. Mr. Killinger receives no
compensation as a director.
In 1998 each non-employee director was given an automatic grant of options
to purchase 3,000 shares of Common Stock at an exercise price of $44.9167, the
fair market value of the underlying Common Stock on the date of grant. All such
options vest on the first anniversary of the grant.
In connection with the Ahmanson Merger, all outstanding options to acquire
Ahmanson common stock became immediately exercisable and converted into options
to acquire Common Stock of the Company in amounts and at exercise prices based
upon the same rate at which Ahmanson common stock was exchanged for Common Stock
of the Company in the Ahmanson Merger. As a result, Messrs. Matthews and Schulte
and Ms. Sanders received vested options to acquire 7,943 shares, 26,880 shares,
and 5,040 shares, respectively, of Company Common Stock at prices ranging from
$10.8259 to $39.2485 per share.
Messrs. Frank, Hernandez and Wood have residential loans outstanding with
Washington Mutual or one of its subsidiaries. All such loans were made prior to
the Great Western Merger by Great Western Bank ("GWB") pursuant to the Great
Western Home Loan Program (the "GW Home Loan Program") described in this Proxy
Statement under "Indebtedness of Management." Interest on those loans is
generally at monthly adjustable rates equal to the cost of funds of Washington
Mutual Bank, FA ("WMBFA"), a wholly owned subsidiary of Washington Mutual, plus
.25%. This rate was approximately 2.2% below that on similar loans made to the
public in 1998. The economic benefit of preferential loans under the GW Home
Loan Program to Messrs. Frank, Hernandez and Wood in 1998 was, respectively,
$19,868, $43,243 and $20,464.
Messrs. Frank, Hernandez and Wood are entitled to certain retirement
benefits under an unfunded directors' retirement plan for which Washington
Mutual has assumed responsibility as successor to GWFC. Upon termination of
service on GWFC's Board of Directors, each eligible director became entitled
under the plan to an annual retirement benefit equal to the sum of the annual
retainer paid to members of the Board plus twelve times the monthly meeting fee,
both as in effect at the time of the director's termination. Benefits are
payable for a period equal to the number of years that the eligible director
served as a director and will be provided to the surviving spouse or other
designated beneficiary following an eligible director's death. Washington Mutual
has purchased company owned cost-recovery life insurance on the lives of the
participants
10
<PAGE> 14
in the plan. Messrs. Frank and Hernandez are entitled to receive quarterly
payments of $11,650 under the plan until October 2008 and Mr. Wood is entitled
to receive such payments until October 2011. Accordingly, in 1998 each of the
three directors received payments aggregating $46,600 under the plan.
Messrs. Matthews and Schulte and Ms. Sanders are entitled to certain
retirement benefits under an unfunded directors' retirement plan for which
Washington Mutual has assumed responsibility as successor to Ahmanson. Upon
termination of service on Ahmanson's Board of Directors, each eligible director
became entitled under the plan to an annual retirement benefit equal to the
director's pay during the twelve month period immediately preceding retirement
from the Board. Benefits are payable for a period equal to the number of years
that the eligible director served as an Ahmanson director and will be provided
to the surviving spouse or other designated beneficiary following an eligible
director's death. Washington Mutual has purchased company owned cost-recovery
life insurance on the lives of the participants in the plan. Messrs. Matthews
and Schulte and Ms. Sanders are entitled to receive monthly payments of $2,000
under the plan beginning April 1, 1999. Messrs. Matthews and Schulte and Ms.
Sanders are entitled to receive this benefit through May 2002, November 2007 and
September 2006, respectively.
Messrs. Frank, Hernandez and Wood have vested balances in an unfunded
deferred compensation plan for certain former directors of GWFC for which
Washington Mutual has assumed responsibility as successor to GWFC. No additional
compensation may be deferred under this plan. Washington Mutual has purchased
company owned cost-recovery life insurance on the lives of the participants.
Interest accrues on fund balances under the plan at enhanced rates. Those
interest amounts exceeded 120% of the applicable federal long-term rate
compounded annually by $3,172, $3,190 and $3,595, respectively, for Messrs.
Frank, Hernandez and Wood.
11
<PAGE> 15
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table and related notes set forth all compensation received
from the Company for the three fiscal years ended December 31, 1998 by the
Company's Chief Executive Officer and the four most highly paid executive
officers (other than the Chief Executive Officer) who were serving as executive
officers at the end of 1998 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- --------------------------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
COMPEN- STOCK OPTIONS COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION AWARD(1) GRANTED(#)(2) SATION(3)
- --------------------------- ---- -------- -------- --------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Kerry K. Killinger......... 1998 $900,000 $738,000 $ 0 $ 0 220,500 $214,247
Chairman, President and 1997 833,336 575,684 0 0 202,500 145,560
Chief Executive Officer 1996 560,575 372,900 0 120,000 150,000 123,066
Craig E. Tall.............. 1998 400,000 246,000 0 0 67,500 62,923
Executive Vice President 1997 333,874 197,473 0 0 60,000 48,452
1996 260,004 130,000 0 35,000 42,000 49,625
Craig S. Davis............. 1998 390,000 246,000 0 0 67,500 34,895(4)
Executive Vice President 1997 330,000 160,656 19,222(5) 0 30,000 14,131(4)
Deanna W. Oppenheimer...... 1998 390,000 246,000 0 0 67,500 52,357
Executive Vice President 1997 314,624 174,713 0 0 45,000 37,123
1996 215,004 96,100 0 30,000 33,000 27,879
S. Liane Wilson............ 1998 390,000 246,000 0 0 67,500 70,695
Executive Vice President 1997 316,672 197,473 0 0 60,000 46,154
1996 240,004 130,000 0 35,000 42,000 46,625
</TABLE>
- ------------------------------
(1) The stock awards reflected in this column were granted pursuant to the
Restricted Stock Plan. Pursuant to applicable securities regulations, the
dollar value of each restricted stock award set forth in the table is based
on the fair market value of the Common Stock on the date of grant. The
restricted stock awards set forth in this column were granted to Messrs.
Killinger and Tall and Ms. Oppenheimer and Ms. Wilson on January 16, 1996 in
the amounts of 6,486 shares, 1,891 shares, 1,621 shares and 1,891 shares,
respectively. The restrictions on all such shares of restricted stock lapse
at a rate of 20% per year from the date of grant. Dividends will be paid on
the restricted stock during the restricted period. The value of restricted
stock set forth in this column includes only stock on which the lapsing of
restrictions is based upon other than performance-based criteria. This
column does not include performance-based restricted stock awards that were
made to the Named Executive Officers in 1996 and 1997 and reflected in the
long-term incentive plan awards tables in the 1997 and 1998 proxy
statements.
The number and value of the aggregate restricted stock holdings of each of
the Named Executive Officers, including restricted stock awards reported as
long-term incentive plan awards and shares acquired through the reinvestment
of dividends paid on the restricted stock initially awarded and excluding
shares with respect to which restrictions have lapsed, based on the value of
the Common Stock as of the close of trading on December 31, 1998, is set
forth in the table below:
<TABLE>
<CAPTION>
NUMBER VALUE AT
NAME OF SHARES DECEMBER 31, 1998
---- --------- -----------------
<S> <C> <C>
Kerry K. Killinger................................ 125,300 $4,808,387
Craig E. Tall..................................... 34,942 1,340,899
Craig S. Davis.................................... 28,934 1,110,342
Deanna W. Oppenheimer............................. 32,752 1,256,858
S. Liane Wilson................................... 34,544 1,325,626
</TABLE>
(2) The options shown in this column as 1998 compensation were granted on
December 16, 1997.
12
<PAGE> 16
(3) The amounts shown in this column include the following:
(a) Profit sharing and Company matching contributions under the Company's
RSIP during fiscal 1998 of $9,600 for each of Messrs. Killinger, Tall and
Davis and Ms. Oppenheimer and Ms. Wilson.
(b) Allocations under the Company's Supplemental Employee Retirement Plan
(the "SERP") during fiscal 1998 of $93,674, $31,148, $21,779, $28,815 and
$30,435 to the accounts of Messrs. Killinger, Tall and Davis and Ms.
Oppenheimer and Ms. Wilson, respectively. The SERP is a nonqualified,
non-contributory plan of deferred compensation to provide benefits that
exceed certain limits imposed by federal tax laws on benefit accruals
under the Company's Cash Balance Pension Plan (the "Pension Plan") and
the RSIP.
(c) Allocations under the Supplemental Executive Retirement Accumulation Plan
(the "SERAP") during fiscal 1998 of $110,973, $22,175, $13,942 and
$30,660 to the accounts of Messrs. Killinger and Tall and Ms. Oppenheimer
and Ms. Wilson, respectively. The purpose of this plan is to provide
retirement benefits for certain executive employees of the Company and
its affiliates. The level of benefits under the SERAP is determined by
the Company's Compensation Committee.
(4) Includes, in addition to amounts set forth in note 2 to this Summary
Compensation Table, $3,516 and $1,516, in 1997 and 1998, respectively, of
interest paid in excess of 120% of the applicable federal long-term rate
compounded annually on the balance of funds in an unfunded deferred
compensation plan for certain former employees of American Savings Bank,
F.A. ("ASB"). ASB became a subsidiary of the Company upon the merger of
Keystone Holdings with and into Washington Mutual on December 20, 1996
pursuant to the Keystone Merger Agreement and is now WMBFA. No additional
compensation may be deferred under this plan.
(5) Includes reimbursement of relocation expenses of $14,147 paid pursuant to
Washington Mutual's relocation plan for which key managerial personnel
generally are eligible and full tax gross-up of $5,075 on such expenses.
GRANTS OF STOCK OPTIONS IN 1998
The following table sets forth information on stock option grants during
fiscal 1998 to the Named Executive Officers. The options set forth in the table
below were granted on December 15, 1998 as a part of recipient's 1999
compensation.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
NUMBER OF PERCENT OF TEN YEAR
SECURITIES TOTAL OPTIONS OPTION TERM(2)
UNDERLYING GRANTED TO EXERCISE ------------------------------
OPTIONS EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE ($) ($)
---- ---------- ------------- --------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kerry K. Killinger.......... 390,000(3) 14.4% $32.875 12/15/08 $8,063,211 $20,433,777
Craig E. Tall............... 110,000 4.1 32.875 12/15/08 2,274,239 5,763,373
Craig S. Davis.............. 110,000 4.1 32.875 12/15/08 2,274,239 5,763,373
Deanna W. Oppenheimer....... 110,000 4.1 32.875 12/15/08 2,274,239 5,763,373
S. Liane Wilson............. 110,000 4.1 32.875 12/15/08 2,274,239 5,763,373
</TABLE>
- ------------------------------
(1) Each of the options reflected in this table was granted to the respective
Named Executive Officer pursuant to the Washington Mutual 1994 Stock Option
Plan ("1994 Stock Option Plan"). The exercise price of each option is equal
to the fair market value of Common Stock on the date of grant. The options
have a 10-year term and vest over three years.
(2) These assumed rates of appreciation are provided in order to comply with the
requirements of the SEC and do not represent the Company's expectation as to
the actual rate of appreciation of the Common Stock. These gains are based
on assumed rates of annual compound stock price appreciation of 5% and 10%
from the date the options were granted over the full option term. The actual
value of the options will depend on the performance of the Common Stock and
may be greater or less than the amounts shown.
13
<PAGE> 17
(3) Fifteen thousand of the options granted to Mr. Killinger in 1998 are
contingent upon future shareholder approval of an increase in the number of
options that may be granted under the 1994 Stock Option Plan to any
participant in any calendar year.
AGGREGATE OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table sets forth information on the exercise of stock options
during fiscal 1998 by each of the Named Executive Officers and the value of
unexercised options at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE FISCAL YEAR END(#) AT FISCAL YEAR END($)(2)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kerry K. Killinger....... 100,000 $3,046,590 944,372 604,500 $21,089,383 $2,817,185
Craig E. Tall............ 62,623 1,449,473 179,874 175,000 3,190,446 804,166
Craig S. Davis........... 0 0 42,500 165,000 804,166 694,888
Deanna W. Oppenheimer.... 13,500 245,673 109,497 175,000 1,537,175 754,375
S. Liane Wilson.......... 51,373 1,561,409 169,374 170,000 2,933,949 804,166
</TABLE>
- ------------------------------
(1) The value realized is the difference between the fair market value of the
underlying stock at the time of exercise and the exercise price.
(2) Amounts are based on the fair market value of Washington Mutual Common Stock
on the last trading day of the year, December 31, 1998, which was $38.375.
PENSION PLANS AND AGREEMENTS
CASH BALANCE PENSION PLAN
Pursuant to the terms of the Cash Balance Pension Plan (the "Pension
Plan"), participants annually receive benefit accruals based upon eligible
compensation and interest credits on current and prior benefit accruals. Through
December 31, 1994, the Pension Plan annually credited each participant with 3%
of total eligible cash compensation. Beginning January 1, 1995, the crediting
rate is based on years of service with Washington Mutual. For service up to four
years, the benefit credit is 2.5%; for service from five to nine years, the
benefit credit is 3%; for 10 or more years, the benefit credit is 4%. Eligible
cash compensation includes base salary, incentive payments, bonuses and
overtime. Effective October 1, 1995, the Pension Plan annually credits interest
on all benefit accruals at the rate quoted for the yield on U.S. government
securities adjusted to a constant maturity of 30 years at the beginning of each
Pension Plan year. Effective October 1, 1998, the Pension Plan credits benefit
accruals (based on years of service) each pay period. Interest credits are
allocated daily to participant accounts. The interest credit rate for 1998 was
5.99%. Participants may elect to receive, at the time of termination, a lump sum
distribution of their vested balances or an annuitized payment from the Pension
Plan's Trust Fund. The Pension Plan complies with the Employee Retirement Income
Security Act of 1974 (ERISA). In general, all employees become eligible to
participate in the Pension Plan beginning with the quarter following completion
of one year of service with Washington Mutual during which they work a minimum
of 1,000 hours. An employee's balance in the Pension Plan becomes vested at a
graduated rate after two years of service, with full vesting after five years of
active service. There are no employee contributions to the Pension Plan.
The following is an estimate of annual benefits payable upon retirement at
normal retirement age to each of the Named Executive Officers under the Pension
Plan. These projections are based on an interest crediting rate of 5.25% and are
not subject to any deduction for Social Security or other offset amounts.
14
<PAGE> 18
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
NAME BENEFITS AT 65 YEARS OF AGE
---- ---------------------------
<S> <C>
Kerry K. Killinger..................................... $48,214
Craig E. Tall.......................................... 33,385
Craig S. Davis......................................... 18,263
Deanna W. Oppenheimer.................................. 65,963
S. Liane Wilson........................................ 24,259
</TABLE>
EMPLOYMENT, TERMINATION AND CHANGE IN CONTROL AGREEMENTS
Washington Mutual has entered into a separate employment agreement with
each of the Named Executive Officers for a term that continues until either the
Board of Directors in its sole discretion or the Named Executive Officer in his
or her sole discretion terminates the respective agreement in accordance with
its terms.
Under the employment agreements, the annual salary of the Named Executive
Officer is determined by the Compensation Committee of the Board of Directors,
which has set 1999 salaries at $1,000,000, $440,000, $430,000, $430,000 and
$410,000, respectively, for Messrs. Killinger, Tall and Davis, Ms. Oppenheimer
and Ms. Wilson. Upon termination for any reason upon or within three years after
a Change in Control, or upon resignation for Good Cause upon or within three
years after a Change in Control (as Change in Control and Good Cause are defined
in the individual employment agreements), the Named Executive Officer will be
paid three times his or her total annual compensation including the greater of
salary and target bonus for the calendar year in which the termination occurs
(if established before the termination) or salary and actual bonus for the prior
calendar year (annualized if the Named Executive Officer was not employed by the
Company for the entire calendar year), but excluding the value of grants of
stock options or restricted stock. In addition, all of the Named Executive
Officer's outstanding, unvested options will immediately vest and become
exercisable, and, subject to prior approval of the Compensation Committee,
restrictions on all or certain grants of the Named Executive Officer's
restricted stock will immediately lapse. Pursuant to this provision of the
employment agreements, the Compensation Committee has determined that, upon a
Change in Control, the restrictions on the Named Executive Officers' 1996 and
1997 performance-based restricted stock grants will lapse, in whole or in part,
based on Washington Mutual's achievement of certain targeted levels of
cumulative ROCE through a specified date on or before the effective date of the
Change in Control. Mr. Killinger's agreement provides that he also shall be
entitled to such cash payments and equity acceleration (the "Severance Payment")
if he is terminated other than for Cause (as defined in Mr. Killinger's
agreement), whether or not a Change in Control has occurred.
Under the terms of the agreements, if the Severance Payment constitutes a
"parachute payment" under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), the agreement provides for payment of an additional amount
(the "Gross-Up Payment") to the Named Executive Officer within a specified
period of time. The Gross-Up Payment would be equal to the amount necessary to
cause the net amount retained by the Named Executive Officer, after subtracting
the parachute excise tax imposed by Section 4999 of the Code (the "Excise Tax")
and any federal, state and local income taxes, FICA tax and Excise Tax on the
Gross-Up Payment, to be equal to the net amount the Named Executive Officer
would have retained had no Excise Tax been imposed and no Gross-Up Payments been
paid.
Pursuant to his 1982 employment agreement, Mr. Killinger entered into a
deferred bonus arrangement with Washington Mutual pursuant to which certain
deferred bonus amounts and accrued interest thereon are payable to Mr. Killinger
upon death, resignation or retirement. As of December 31, 1998, the accrued
benefits under such arrangement totaled $151,172.
15
<PAGE> 19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
In 1998 the Company paid $143,800 to Columbia Resource Group ("CRG") an
event management and planning group, and Bell Harbor International Conference
Center, which is managed by CRG Hospitality, a property management company. Mr.
John Oppenheimer, the husband of Ms. Deanna Oppenheimer, Executive Vice
President, is the owner of both CRG and CRG Hospitality.
INDEBTEDNESS OF MANAGEMENT
Except as set forth in the table below, no executive officer or director of
the Company was indebted to the Company or its subsidiaries at any time since
the beginning of 1998 in an amount in excess of $60,000. In each case Washington
Mutual or one of its subsidiaries is the lender for a residential loan secured
by a deed of trust or mortgage on the respective residence of the executive
officer or director.
<TABLE>
<CAPTION>
LARGEST
AMOUNT INDEBTEDNESS CURRENT
OF INDEBTEDNESS NATURE OF OUTSTANDING AT INTEREST
NAME AND POSITION DURING 1998 INDEBTEDNESS MARCH 5, 1999 RATE(%)
----------------- --------------- ------------ -------------- --------
<S> <C> <C> <C> <C>
Stephen E. Frank $1,039,207 Residential(1) $1,021,658 5.0930
Director 1,150,535 Residential(2) 940,335 7.6900
Enrique Hernandez, Jr. 891,327 Residential(1) 847,654 4.8441
Director 1,343,679 Residential(1) 1,368,573 4.8441
Willis B. Wood, Jr. 688,507 Residential(1) 672,912 4.8441
Director 383,531 Residential(1) 376,862 4.8441
Fay L. Chapman 142,324 Residential(3) 130,917 7.2500
Executive Vice President and
General Counsel
Richard M. Levy 303,200 Residential(2) 300,648 7.0000
Senior Vice President and Controller
William A. Longbrake 494,089 Residential(3) 270,532 6.9550
Executive Vice President and
Chief Financial Officer
</TABLE>
- ------------------------------
(1) Interest on the loans is payable at monthly adjustable rates equal to
WMBFA's cost of funds plus .25%. The rates were approximately 2.2% below
similar loans to the public during 1998. The loans were made by GWB prior to
the Great Western Merger, to Messrs. Frank, Hernandez and Wood as directors
of GWFC pursuant to the GW Home Loan Program. Under the GW Home Loan
Program, employees, officers and directors of GWFC and its affiliates could
obtain loans in amounts up to 90% of the appraised value of their primary
and secondary residences. Executive officers and directors that had loans
outstanding under the GW Home Loan Program at the time of the Great Western
Merger were entitled to continue their participation, because all
participants were protected against adverse amendments to the terms of
existing loans or suspensions of the GW Home Loan Program following a change
in control. GWB stopped approving applications for the GW Home Loan Program
prior to the Great Western Merger by agreement with Washington Mutual.
(2) This loan was made in the ordinary course of business, on substantially the
same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons, and did not involve
more than the normal risk of collectability or present other unfavorable
features.
(3) Mr. Longbrake obtained this monthly adjustable rate loan from GWB before the
Great Western Merger. Ms. Chapman obtained this fixed rate loan from
Washington Mutual Bank before becoming employed by the Company. Each loan
was made in the ordinary course of business, on substantially the same
terms,
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including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons and did not involve more than the
normal risk of collectability or present other unfavorable features.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The following Report of the Compensation Committee and the Performance
Graphs included in this Proxy Statement shall not be deemed to be incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
OVERVIEW
As part of its duties, the Compensation Committee of the Board of Directors
develops and administers Washington Mutual's executive and senior officer
compensation programs and establishes and administers annual and long-term
incentive compensation plans for executive and senior management, including
awards of restricted stock and stock options. The Compensation Committee also
makes recommendations to the Board of Directors with respect to the compensation
philosophy, programs and practices for the Chief Executive Officer of Washington
Mutual, including annual and long-term incentive compensation plans.
The compensation program for Washington Mutual's executive and senior
officers for 1998 consisted of a combination of base salary; cash bonus awards
under the Company's Bonus and Incentive Plan for Executive Officers and Senior
Management (the "Bonus Plan"); restricted stock awards under the Restricted
Stock Plan; option grants under the Company's 1994 Stock Option Plan; awards
under the Company's Supplemental Executive Retirement Accumulation Plan;
participation in investment, retirement and other benefit programs generally
available to employees; and certain additional perquisites that vary with the
level of responsibility.
The Compensation Committee is comprised of independent directors, none of
whom is or has been an employee of Washington Mutual. The Compensation Committee
utilizes an independent compensation consultant to assist it in its
deliberations.
COMPENSATION POLICY
In determining the compensation for a particular executive or senior
officer, the Compensation Committee is guided by the following objectives:
- Attracting and retaining highly qualified officers by maintaining
competitive compensation packages for officers;
- Motivating those officers to achieve and maintain superior performance
levels;
- Maintaining compensation packages that are equitable relative to efforts,
skills and responsibility of the officer when compared to other positions
in Washington Mutual; and
- Making a significant portion of each officer's total compensation package
at risk and dependent on Company performance and creation of long-term
shareholder value.
The Compensation Committee believes that total compensation for executive
and senior officers should be sufficiently competitive with compensation paid by
financial institutions of a similar size, with lines of business, geographic
dispersion and market place position similar to Washington Mutual so that the
Company can attract and retain qualified officers who will contribute to
Washington Mutual's long-term success. The independent compensation consultant
provides a market survey of such information for use by the Compensation
Committee in its deliberations.
During July and August 1997, the independent compensation consultant
evaluated competitive market data to reflect the Company's merger with Great
Western in July 1997 which more than doubled the asset size of the Company.
Washington Mutual's expansion of its business due to the merger also broadened
the scope
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<PAGE> 21
and scale of the responsibilities of its executives. At its October 1997
meeting, the Compensation Committee approved executive and senior officer base
salaries and target bonuses effective September 1, 1997 for the remainder of
1997 and for 1998. The market survey the Compensation Committee used in making
its adjustments in October 1997 included forty-three of the companies in the
Standard & Poor's ("S&P") Financial Index.
Compensation payments in excess of $1 million to any of the executive or
senior officers are subject to a limitation on deductibility under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Certain
performance-based compensation is not subject to the limitation on
deductibility. Stock option grants under the 1994 Stock Option Plan, cash
bonuses granted under the Bonus Plan and restricted stock awards made under
Section 6.6 of the Restricted Stock Plan are intended to qualify for the
performance-based exception to the $1 million limitation on deductibility of
compensation payments. The Compensation Committee nevertheless retains the
discretion to provide non-deductible compensation to reward performance that
increases the long-term value of the Company.
SALARY
The Compensation Committee evaluates the individual performance of the
executive officers based on performance reviews by the Chief Executive Officer.
In evaluating an executive officer, the Compensation Committee qualitatively
reviews the significance of the position that the officer held and the officer's
experience and contribution, based on an assessment of the officer's management
skills, judgment and support of corporate values and priorities. The
Compensation Committee sets base salary levels for the executive officers and
recommends to the Board of Directors a base salary level for the Chief Executive
Officer, based primarily on the market data provided by the outside consultant
and the performance of each executive officer for the previous year. The
Compensation Committee determines the closest comparable position in the market
data and then adjusts the recommended target based on specific job
responsibilities within the Company and the individual performance review. The
base salary component is intended to be at market median salaries.
CASH BONUS AWARD
Each year, in its determination of bonuses for executive officers, the
Compensation Committee first identifies a target bonus based on the market
survey provided by its outside consultant. The target bonus is positioned at
market median levels for each position.
Executive officers are entitled to receive some percentage of the target
bonus based on the Company's achievement of established business goals that are
long-term determinants of shareholder value. For 1998, 60% of the target bonus
depended on Washington Mutual achieving its goal for return on common equity
("ROCE") and 40% depended on achieving its goal for operating efficiency. No
bonus would be paid if Washington Mutual did not achieve an established minimum
ROCE. Executive officers could receive up to 150% of their target bonus if
Washington Mutual exceeded its business targets, which is indicative of the
creation of long-term shareholder value.
For 1998, executive officers received 102.5% of their original target
bonuses. For 1999, the Compensation Committee has adopted business goals for the
Bonus Plan that base one-third of the target bonus on ROCE, one-third on
operating efficiency, and one-third on net operating expense targets.
RESTRICTED STOCK
The Compensation Committee made no grants of restricted stock to executive
officers in 1998; however, in 1996 and 1997 performance-based restricted stock
grants were made to executive and senior officers to provide a long-term
incentive for creation of shareholder value and to encourage the recipient to
remain at Washington Mutual. The 1996 and 1997 grants have vesting restrictions
that begin to lapse in 2000. Up to one-third of the shares' restrictions lapse
in 2000, up to two-thirds in 2001, and all restrictions lapse in 2002, only if
the Company achieves certain targeted levels of cumulative ROCE, which the
Compensation Committee believes is an important element in creating shareholder
value. In its October 1997 meeting the
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<PAGE> 22
Compensation Committee factored in the value of one-fifth of the 1996 and 1997
restricted stock grants in determining 1998 total compensation for executive and
senior officers.
STOCK OPTIONS
Awards of stock options under the 1994 Stock Option Plan are designed to
provide long-term incentives for executive and senior officers that are directly
linked to the enhancement of long-term shareholder value. The Compensation
Committee selects the executive officers who will receive stock options and
determines the number of shares subject to each option. The size of the
individual option grants is generally intended to reflect an officer's position
within Washington Mutual and his or her performance and contributions to the
Company. In determining the size of the option grant, the Compensation Committee
also analyzes the value of the options using an option valuation methodology.
CEO COMPENSATION
Compensation for Washington Mutual's Chief Executive Officer, Mr.
Killinger, was determined based on the same general policies and criteria as the
compensation for the other executive officers. Mr. Killinger's base salary and
target bonus for 1998 were approved by the Board at its October 1997 meeting
upon the recommendation of the Compensation Committee. In making its
recommendation, the Compensation Committee reviewed the outside consultant's
market survey and considered the financial and operating results of Washington
Mutual in fiscal 1997 and the Company's 1998 financial and business plans. Based
on the factors set out in "Cash Bonus Award," Mr. Killinger's bonus for 1998 was
calculated in the same manner as described above for the other executive
officers.
In evaluating Mr. Killinger's performance, the Compensation Committee uses
both quantitative and qualitative criteria such as Washington Mutual's financial
performance, which is indicative of the creation of shareholder value; capital
strength; asset quality; operating efficiency; expansion during the previous
year; the resulting size and quality of the organization; Mr. Killinger's
leadership of the Company; and his industry and community leadership. The
Compensation Committee's assessment of Mr. Killinger's performance was reviewed
with the Board of Directors.
In determining the size of Mr. Killinger's option grant, the Compensation
Committee reviews the market survey and other information provided by the
outside consultant. Based on these considerations, as compensation for 1998, Mr.
Killinger was awarded an option to purchase 220,500 shares. The Compensation
Committee concluded that Mr. Killinger's performance in 1998 fully supported the
total compensation awarded.
COMPENSATION AND STOCK OPTION
COMMITTEE
John W. Ellis, Chairman
Douglas P. Beighle
Michael K. Murphy
James H. Stever
Willis B. Wood, Jr.
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<PAGE> 23
PERFORMANCE GRAPH
The following two graphs compare the cumulative total shareholder return
(stock price appreciation plus reinvested dividends) on Washington Mutual Common
Stock against the cumulative total return of the S&P 500 Composite Index and the
S&P Financial Index since 1993 and since Washington Mutual first became a
publicly traded company on March 11, 1983, respectively. The graphs assume that
$100 was invested on, respectively, December 31, 1993 and March 11, 1983 in each
of the Company Common Stock, the S&P 500 Composite Index and the S&P Financial
Index, and that all dividends were reinvested. Management of Washington Mutual
cautions that the stock price performance shown in the graphs below should not
be considered indicative of potential future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMMON STOCK OF WASHINGTON MUTUAL,
THE S&P 500 COMPOSITE INDEX,
AND THE S&P FINANCIAL INDEX
<TABLE>
<CAPTION>
WASHINGTON MUTUAL
INC S&P FINANCIAL INDEX S&P 500 COMP-LTD
----------------- ------------------- ----------------
<S> <C> <C> <C>
Base Period Dec 93 100.00 100.00 100.00
'Dec 94' 72.41 96.47 101.32
'Dec 95' 128.39 148.92 139.40
'Dec 96' 197.81 201.29 171.40
'Dec 97' 296.67 298.12 228.59
'Dec 98' 272.97 332.18 293.91
</TABLE>
<TABLE>
<CAPTION>
WASHINGTON MUTUAL
INC. S&P FINANCIAL INDEX S&P 500 INDEX
----------------- ------------------- -------------
<S> <C> <C> <C>
Mar 83 100.00 100.00 100.00
Dec 83 106.00 99.18 111.35
Dec 84 92.99 108.49 118.28
Dec 85 137.02 154.64 155.70
Dec 86 281.20 167.02 184.69
Dec 87 263.99 139.02 194.26
Dec 88 268.61 164.23 226.31
Dec 89 365.43 217.79 297.80
Dec 90 245.10 171.14 288.51
Dec 91 698.89 257.65 376.04
Dec 92 1066.19 317.68 404.66
Dec 93 1172.34 352.94 445.45
Dec 94 848.84 340.45 451.33
Dec 95 1505.11 524.37 620.93
Dec 96 2318.95 708.78 763.50
Dec 97 3477.91 1049.76 1018.22
Dec 98 3200.05 1169.69 1308.21
</TABLE>
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<PAGE> 24
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, and the
regulations thereunder, Washington Mutual's directors, executive officers and
beneficial owners of more than 10% of any registered class of Washington Mutual
equity securities are required to file reports of their ownership, and any
changes in that ownership, with the SEC. Based solely on its review of copies of
these reports and on written representations from such reporting persons,
Washington Mutual believes that during fiscal year 1998, such persons filed all
ownership reports and reported all transactions on a timely basis, except as
follows: Dr. Samuel B. McKinney did not timely report one transaction,
subsequently reported on a Form 4; Mr. Norman H. Swick did not timely report two
transactions, subsequently reported on a Form 4; and Mr. Craig E. Tall did not
timely report three transactions, subsequently reported on a Form 5.
AMENDMENTS TO THE COMPANY'S ARTICLES OF INCORPORATION
The Board of Directors is proposing that certain amendments (collectively,
the "Amendments") to the Company's current Restated Articles of Incorporation
(the "Articles") be adopted (as amended, the "Amended Articles"). In the event
that each of the Amendments to the Articles are not approved by the Company's
shareholders, the Amended Articles will reflect only the Amendments that were
approved. The Board's reasons for recommending each of the Amendments are
discussed below.
If approved, each of the Amendments would be effective upon filing with the
Washington Secretary of State, which would occur promptly after the Annual
Meeting. Approval of any one of the Amendments is not a condition for approval
of either of the two other Amendments. Following adoption and filing of one or
both of these proposals, the Company intends to restate its Articles and to
renumber the provisions contained therein accordingly.
PROPOSAL 2. AMENDMENT TO ARTICLES OF INCORPORATION--
TO PROVIDE MANDATORY INDEMNIFICATION OF DIRECTORS
The Board has unanimously recommended that the shareholders approve a
proposal to amend the Articles to provide for the mandatory indemnification of
the Company's directors so as to enable the Company to continue to attract and
retain the best available and qualified persons to serve as directors for the
Company.
Article X of the Articles currently provides that the Company has the power
to indemnify, and to purchase insurance for, its directors, officers, employees,
and other persons and agents against all liability and expenses arising in
connection with their service with the Company. If the amendment is approved,
Article X would be eliminated in its entirety and replaced with an article that
provides for the Company to indemnify its directors to the fullest extent
permitted under the Washington Business Corporation Act (the "WBCA"), by which
the Company is governed as a Washington corporation. The new article would be
silent with respect to indemnification of officers, employees and other persons
and thus, under the WBCA, the Company would have the authority to indemnify
those persons as may be provided by its Bylaws, general or specific action of
its Board, or contract.
The Board recommends that the Articles be amended by deleting Article X in
its entirety and replacing it as follows:
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.
The amended indemnification provision would require the Company to pay all
liability and expenses incurred by any director in a suit or proceeding brought
against him or her arising out of his or her participation as a director of the
Company except in certain circumstances. Generally, under the WBCA, a
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<PAGE> 25
director may be indemnified if: (i) the director acted in good faith; (ii) the
director reasonably believed that (a) in cases involving conduct in the
director's official capacity as a director of the Company, that the director's
conduct was in the Company's best interests, and (b) in all other cases, that
the director's conduct was at least not opposed to the Company's best interests;
and (iii) in cases involving criminal proceedings, the director had no
reasonable cause to believe his or her conduct was unlawful. However, if
authorized by its articles of incorporation, a bylaw approved by its
shareholders or a resolution adopted by its shareholders, a corporation may
indemnify a director without regard to these limitations except in situations
involving: (i) acts or omissions of the director finally adjudged to be
intentional misconduct or a knowing violation of the law; (ii) distributions
finally adjudged to have been improper for which the director voted or to which
the director assented without performing the director's statutory duties; and
(iii) any transaction with respect to which it is finally adjudged that the
director personally received a benefit in money, property or services to which
the director was not entitled. The amendment therefore would require the Company
to indemnify its directors in all circumstances, subject only to the limitations
in the preceding sentence, and to advance or reimburse reasonable expenses
incurred in advance of the final outcome of any proceeding involving one of its
directors.
The Board recommends this proposal because of the increasing hazard of
litigation and its related expenses directed at corporate directors and the
effect this hazard could have on the Company's ability to continue to attract
and retain qualified directors in light of these circumstances. Although none of
the Company's current directors have indicated that they will no longer serve
absent changes to the Articles' provisions on indemnification, the Company is
concerned that it may encounter difficulty in attracting qualified individuals
to serve as directors in the future. In order to ensure that the Company will be
able to attract and retain experienced individuals to serve as directors, and as
a matter of fairness, the Board believes that the Company should provide the
maximum possible protection to its directors consistent with applicable law.
The Board acknowledges that current and future directors could benefit from
the approval of the foregoing amendment and, in this connection, the directors
may be considered to have a conflict of interest and have a personal interest in
approval of the amendment. Nevertheless, the Board believes that approval of the
amended indemnification provision is in the best interests of the Company and
its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE AMENDMENT.
PROPOSAL 3. AMENDMENTS TO ARTICLES OF INCORPORATION--
TO REDUCE THE VOTE REQUIRED TO AMEND ARTICLES, TO ELIMINATE THE REQUIREMENT TO
PUBLISH NOTICE OF CERTAIN SHAREHOLDER MEETINGS, TO CLARIFY THE BOARD'S AUTHORITY
TO AMEND ARTICLES, TO ELIMINATE AN ARTICLE RELATING TO INTERESTED PERSON
TRANSACTIONS AND TO MODIFY THE ARTICLE RELATING TO SHAREHOLDER APPROVAL OF
MERGER TRANSACTIONS
The Company's predecessor, Washington Mutual Savings Bank ("WMSB"), was a
state-chartered savings bank organized under the laws of the state of
Washington. As such, it was governed by Title 32 of the Revised Code of
Washington ("Title 32"), the state statute governing the activities of
state-chartered savings banks. The Company was formed in 1994 to serve as the
parent holding company in the reorganization of WMSB into a holding company
format. As a Washington corporation, the Company and its corporate activities
are governed by the WBCA.
At the time of the reorganization, all of the provisions in WMSB's charter
documents were retained in the Company's newly created articles of incorporation
for specific regulatory reasons that no longer apply. Some of the provisions
from WMSB's charter documents are either not applicable to a holding company or
were included in WMSB's original charter documents to comply with the provisions
of Title 32 in effect at the time the documents were adopted.
The Board is proposing a package of amendments to remove or modify certain
of these provisions.
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<PAGE> 26
Reduce Vote Required to Amend Articles, Eliminate Notice Requirement and
Clarify Board's Authority to Amend Articles. The Board has unanimously
recommended that the shareholders approve a proposal to amend the Articles to:
(i) reduce the vote required to make future amendments to the Articles from two-
thirds of the outstanding shares of the Company to a majority of the votes
entitled to be cast; (ii) eliminate a provision that requires the Company to
publish notice of any shareholder meeting at which a proposal is made to
increase or decrease the Company's authorized capital stock, and (iii) permit
the Board to make amendments to the Articles without obtaining shareholder
approval to the extent permitted by the WBCA. The proposed amendment would allow
the Company to more easily and efficiently carry out certain corporate actions
by reducing the required percentage for shareholder approval, thereby reducing
the time and cost of proxy solicitations, and by eliminating an unnecessary and
ineffective notice requirement. The amendment would also eliminate any
uncertainty regarding the Board's authority under state law to make certain
changes to the Articles without shareholder approval.
Article XII of the Articles governs the voting requirements and other
procedures necessary to amend the Company's Articles. The article presently
provides that amendments to the Articles must be approved by a vote of
two-thirds of the Company's issued capital stock. It also contains a requirement
that the Company publish in a Seattle newspaper notice of any meeting at which a
proposal will be made to increase or decrease the Company's authorized capital
stock. Article XII currently provides as follows:
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.
The proposed amendment to Article XII would reduce the required vote to
amend the Articles from two-thirds of the Company's outstanding shares to a
majority of the votes entitled to be cast, the default voting requirement under
the WBCA for public companies absent a higher voting requirement in the articles
of incorporation. Reduction of the required vote to a majority of votes entitled
to be cast would provide the Company with flexibility to adapt its business
structure to changing needs and business opportunities over time. For example,
it has proven difficult in the past under the current two-thirds vote
requirement to effect increases in the authorized shares of the Company in
Article II of the Articles, which have been necessary to enable the Company to
pursue corporate acquisition transactions. The provision has caused the cost of
proxy solicitation for these votes to be higher than otherwise in order to pass
these measures. The Board believes that few public companies require a
two-thirds vote for amendments to their articles of incorporation because such a
requirement allows a relatively small percentage of a company's stockholders,
either by opposition or by not voting, to prevent amendments that would be
beneficial to the Company and the majority of its stockholders. A reduction in
the required vote would prevent a minority of shareholders from thwarting the
will of a majority of shareholders and reduce the time and costs associated with
proxy solicitation necessary to obtain a two-thirds vote.
The Board also proposes an amendment to eliminate the notice provision in
Article XII because it is unnecessary and ineffective. The Board believes that
the Company's compliance with the provisions of the WBCA relating to the timing
of shareholder notice and the SEC rules relating to the contents of proxy
statements provides shareholders sufficient notice of meetings and information
concerning the proposals to be presented at meetings to exercise their votes in
a timely and informed manner. Because compliance with state and federal law
requires the Company to timely notify shareholders of shareholder meetings and
sufficiently
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<PAGE> 27
describe any proposals to be submitted for shareholder approval, the requirement
in Article XII of published notice in a Seattle newspaper is simply unnecessary.
Moreover, because the Company's shareholders are not concentrated in the
Seattle, Washington area, but rather are located throughout the United States
and beyond national borders, publication of notice in a local newspaper
circulated for the most part in Washington state does not reach most
shareholders. Local newspaper notice is thus largely ineffective.
Finally, the Board recommends amending Article XII to make clear that the
Board has authority to make any amendments to the Articles permitted to be made
without shareholder approval under the WBCA. Such amendments are limited in
nature and under current law include: (i) in the case of a corporation with only
one class of shares outstanding, (A) changes in the number of authorized shares
necessary to effectuate a stock split of, or stock dividend in, the
corporation's own shares and (B) changes to, or elimination of, any provision
relating to the par value of any class of shares; (ii) deletion of the names and
addresses of the corporation's initial directors; (iii) deletion of the names
and addresses of the corporation's initial registered agent; (iv) changes in the
corporate name; and (v) designation of the terms, preferences, limitations, and
relative rights of each series of preferred stock. The Board deems it advisable
to make such authority expressly clear in the Articles.
If the amendment is approved, Article XII would be amended to read as
follows:
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.
Eliminate Provision Relating to Dealings with Interested Persons. The Board
has unanimously recommended that the shareholders approve a proposal to
eliminate a provision that prohibits directors and officers from in any way
becoming obligated for any loan made by the Company, either as indorser, surety,
or guarantor, and also prohibits directors and officers from directly or
indirectly borrowing any funds or deposits held by the Company, or becoming
owners of real property upon which the Company holds a mortgage. Other than
these specific prohibitions, no transaction in which a director or officer of
the Company has an interest is, under the terms of the article, void or voidable
if the transaction is authorized or ratified by either (i) a majority vote of a
quorum of the Board (excluding interested directors), (ii) the written consent
of a majority of the Company's shareholders entitled to vote or (iii) a general
resolution approving the transaction adopted at a shareholders meeting by a vote
of a majority of the Company's shareholders entitled to vote. This provision,
which was in WMSB's original charter documents and generally reflected
requirements in Title 32, provides as follows:
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
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<PAGE> 28
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.
The Board believes the article should be removed in its entirety. Like
Article VIII, the WBCA provides a system for approving or ratifying conflicting
interest transactions between a company and (i) any of its directors, (ii) any
related persons of its directors or (iii) any persons under the common control
of any of its directors. Regardless of the terms contained in a corporation's
articles of incorporation, under the WBCA such a transaction would be immune
from attack if approved by either a majority of disinterested directors or a
majority of disinterested shareholders. And while unlike Article VIII, the
WBCA's provisions relating to conflicting interest transactions apply only to
directors and not to officers, the Board believes it is the Board's role to
review corporate transactions involving the Company and its officers, and to
determine the appropriateness and fairness of any such transactions from the
standpoint of the Company.
The Article VIII prohibitions against officers and directors borrowing or
becoming obligated to repay funds loaned by the Company reflect its
predecessor's history as a state-chartered savings bank. Because the Company is
not a savings bank and is not itself in the business of making loans to third
parties, these provisions are no longer applicable to the Company and hence
unnecessary. And as with other conflicting interest transactions, the Board
believes it is the role of the Board to monitor whether any lending of funds by
the Company to a particular party is appropriate and fair to the Company, even
if that party is an officer or director of the Company. Moreover, each of the
Company's banking subsidiaries is subject to regulations that restrict their
ability to make loans to directors and executive officers.
Modify Article Relating to Shareholder Approval of Merger Transactions. The
Board recommends the shareholders approve an amendment to the Articles that
would modify Article IX of the Articles, which governs the voting requirements
for approval of merger transactions. The article currently provides as follows:
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.
If approved by the Company's shareholders, Article IX would be amended to
cover, in addition to plans of merger, plans of share exchange and the sale,
lease, exchange, or other dispositions of all, or substantially all of the
Company's property otherwise than in the usual and regular course of business.
Under the WBCA, a share exchange or sale of all or substantially all of a
corporation's property other than in the usual and regular course of business
must be approved by two-thirds of the votes entitled to be cast, unless the
articles provide for a lesser vote. Although it is very unlikely that the
Company would engage in a transaction involving a share exchange or sale of all
or substantially all of its property, the Board recommends amending Article IX
to conform the vote requirement for such transactions to that applicable to
mergers. The Board believes it is in the Company's best interest to have
flexibility in structuring any future business combination transactions by
providing in its articles all means available to the Company under state law.
If the amendment is approved, Article IX will state as follows:
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
25
<PAGE> 29
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.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE AMENDMENTS.
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors requests that the shareholders ratify its selection
of Deloitte & Touche LLP as the independent auditors for the Company for the
current fiscal year. In the event that ratification of this selection of
independent auditors is not obtained, the Board of Directors will review its
future selection of auditors.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting of Shareholders, with the opportunity to make a statement if so desired,
and will be available to respond to appropriate questions submitted to the
Secretary of Washington Mutual in advance of the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998, including financial statements and schedules, forms a part of the
Company's 1998 Annual Report that was mailed to shareholders with this Proxy
Statement. ADDITIONAL COPIES OF THE 1998 ANNUAL REPORT MAY BE OBTAINED WITHOUT
CHARGE BY WRITING TO INVESTOR RELATIONS, WASHINGTON MUTUAL, INC., 1201 THIRD
AVENUE, 7TH FLOOR, SEATTLE, WASHINGTON 98101. This proxy statement and the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
are also available from the Securities and Exchange Commission over the Internet
at its website, http://www.sec.gov.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The Company must receive a shareholder proposal by November 24, 1999 to
consider it for inclusion in the Company's proxy statement and form of proxy
relating to the Company's 2000 Annual Meeting of Shareholders. In addition, the
Company's Bylaws provide that written notice of a shareholder proposal must be
delivered or mailed by first class United States mail, postage prepaid, to the
Secretary of the Company by December 24,1999, for the proposal to be brought
before the Company's 2000 Annual Meeting of Shareholders. The Company's address
for these purposes is 1201 Third Avenue, Suite 1700, Seattle, Washington 98101,
Attention: Secretary.
26
<PAGE> 30
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters that
will be presented for consideration at the Annual Meeting other than the
proposals set forth in this Proxy Statement. If any other matters properly come
before the Annual Meeting, it is intended that the shares represented by proxies
will be voted in accordance with the judgment of the persons voting such
proxies.
By Order of the Board of Directors,
/s/ William L. Lynch
William L. Lynch
Secretary
March 23, 1999
27
<PAGE> 31
[WASHINGTON MUTUAL LOGO]
1201 THIRD AVENUE, SEATTLE, WA 98101
PROXY FOR THE APRIL 20, 1999 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF WASHINGTON MUTUAL, INC.
The undersigned shareholder(s) of Washington Mutual, Inc. (the "Company") hereby
appoints William L. Lynch and Marc R. Kittner, and each of them, as proxies,
each with the power of substitution to represent and to vote, as designated
below, all the shares of Common Stock of the Company held of record by the
undersigned on March 5, 1999, at the Annual Meeting of Shareholders to be held
at 2:00 p.m., Tuesday, April 20, 1999, and at any and all adjournments thereof.
FOLD AND DETACH HERE
[WASHINGTON MUTUAL LOGO]
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, April 20, 1999
2:00 p.m.
Benaroya Hall
S. Mark Taper Foundation Auditorium
200 University Street
Seattle, Washington
<PAGE> 32
Please mark
your votes as
indicated in /X/
this example.
1. ELECTION OF DIRECTORS: FOR all nominees WITHHOLD AUTHORITY
listed below to vote for all
(except as marked nominees listed below.
to the contrary
below)
/ / / /
(Instruction: To withhold
authority to vote for any
individual nominee, strike a
line through the nominee's
name in the list below.)
Nominees (Term will expire in 2000): Elizabeth A. Sanders
Nominees (Term will expire in 2001): William D. Schulte
Nominees (Term will expire in 2002):
David Bonderman
Roger H. Eigsti
Phillip D. Matthews
William G. Reed, Jr.
James H. Stever
2. APPROVAL OF AMENDMENT TO WASHINGTON FOR AGAINST ABSTAIN
MUTUAL'S ARTICLES OF INCORPORATION / / / / / /
("ARTICLES") TO PROVIDE MANDATORY
INDEMNIFICATION OF DIRECTORS.
3. APPROVAL OF AMENDMENT TO THE ARTICLES TO FOR AGAINST ABSTAIN
REDUCE THE VOTE REQUIRED TO AMEND THE / / / / / /
ARTICLES, TO ELIMINATE THE REQUIREMENT
TO PUBLISH NOTICE OF CERTAIN SHAREHOLDER
MEETINGS, TO CLARIFY THE BOARD OF DIRECTORS'
AUTHORITY TO AMEND THE ARTICLES, TO ELIMINATE
THE PROVISION ON TRANSACTIONS WITH CERTAIN
INTERESTED PERSONS AND TO EXPAND THE
PROVISION RELATING TO SHAREHOLDER
APPROVAL OF MERGER TRANSACTIONS.
4. RATIFICATION OF APPOINTMENT OF DELOITTE FOR AGAINST ABSTAIN
& TOUCHE LLP AS THE COMPANY'S / / / / / /
INDEPENDENT AUDITORS.
Shares represented by all properly
executed proxies will be voted in
accordance with instructions appearing
on the proxy and in the discretion of
the proxy holders as to any other matter
that may properly come before the Annual
Meeting of Shareholders. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS
1, 2, 3 AND 4, IN THE ABSENCE OF
SPECIFIC INSTRUCTIONS, PROXIES WILL BE
VOTED FOR ITEMS 1, 2, 3 AND 4 AND IN THE
DISCRETION OF THE PROXY HOLDERS AS TO
ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE ANNUAL MEETING OF
SHAREHOLDERS.
Signature(s)__________________________________________Date_____________, 1999
(Please sign as name(s) appear on this proxy and date this proxy. If a joint
account, each joint owner must sign. If signing for a corporation or partnership
or as agent, attorney or fiduciary, indicate the capacity in which you are
signing.)
FOLD AND DETACH HERE
[BENAROYA HALL MAP AND GRAPHIC]
