Mr Michael Finn
August 17 2007
Page 4
CONFIDENTIAL TREATMENT REQUESTED
further requests that
if notwithstanding the foregoing the OTS should determine
preliminarily to make available to the public any of the information contained in this
Submission
it
will Inform the Association prior to any such release
If you have any questions regarding this letter please call Robert Monheit at
212 3266104 or me at 206 5004149
hn F Robinson
Executive Vice President
Corporate Risk Management
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00010
Office of Thrift Supervision
SEP d 2007
Department of the Treasury West Region
101 Stewart Street Suite 1010 Seattle WA 981012419 Seattle Area Once
Telephone 206 8292600 Fax 206 8292620
September 20 2007
Mr John F Robinson Executive Vice President
Corporate Risk Management
Washington Mutual
1301 Second Avenue WMC 3201
Seattle WA 98101
Dew Mr Robinson
This responds to your August 17 2007 letter advising that Washington Mutual Bank WMB plans to issue
an additional class of preferred securities LLC Preferred Securities IV through Washington Mutual
Preferred Funding LLC WMPF and requesting OTS confirmation that such securities are eligible for
inclusion in core capital of WMB The LLC Preferred Securities IV will be issued to WMB in exchange for
not more than
$1 billion in cash
On February 24 2006 December 4 2006 and February 24 2007 this office confirmed that the three prior
classes of LLC Preferred Securities issued by WMPF could be included in WMBs capital subject to certain
representations and undertakings Similarly please be advised that OTS will not exercise its supervisory
authority and discretion to exclude the LLC Preferred Securities IV fromcore capital under 12 CFR
5675a1 footnote 4 or the reservation of authority provision 12 CFR 56711 of the OTS capital rule
and we hereby confirm that the preferred securities will qualify for inclusion in WMB core capital This
decision is based on the representations made in your August 17 letter
Notwithstanding the above the OTS reserves the right in its sole discretion to exclude the Preferred
Securities or prospective issuances of Preferred Securities if the terms are revised or it otherwise ceases to
provide meaningful capital support and a realistic ability to absorb losses or otherwise raises supervisory
concerns This may include OTS concerns about the capital mix or asset structure of the WMPF orWMB
If you have any questions regarding this letter please contact me at 206 8292603
cc FDIC
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00011
CONFIDEI ALTREATMENTREQ ESTER
I
February 23 2006
Darrel Dodliow
Deputy Regional DirectorWest Region
Office of Thrift Supervision
101 Stewart Street Suite 1010
Seattle WA 981011048
Washington Mutual
John F Robinson
Executive Vice President
Corporbte Risk Manegeinenl
Re Washington Mutual BattkDocket Number 08551Requestforconfitmatid ofcapital treatment of two classes ofpreferred stock
DeaaMr Dochow
On behalf of Washingtari Mutual • WMIn I a•mwriting with reference to the riotice
filed January 30 2006 by Washington Mutual tank WMB toesstablish°a new
subsidiary Washington Mutual Preferred Fpding LC`°WMPF for the purposeof
issuing two classes of preferredsecurities to be eligibleforinclesiein in corecapital of
WMB the `Notice You provided notice of thenonobjectionof the Office of Thrift
Supervision STS to the establishtnejat of WMPPby your letierdated February 9 2005
Asyou are aware inthe NotieeWMB requestedthe OTSoonfirstrthat the We of the
Cayman Co Preferred Securities and the Delaware Issuer Securities as defined in the
Noticeto outside investors constitutes thesale oftheLLC Preferred Securities as defined
in th6Notice to outside investors and that the LLC Preferred Securities qualify for
inclusion iii core capital ofWMB
In connection with thatrequesttWM herebytndertakes
that if asa result of aSupervisory Event as defined in the Notice WMI exchanges its
Holding Company Shares as defilned
run the Notice for Cayman Co Preferred Securities
andthe Delaware Issuer tecurities or if WMI subsequent to such exchange acquires the
LLC Preferred Securities W7vnwillcontribute1toWMB the Cayman Co Preferred
Securities and the Delaware Issuer Securities or as appropriate the LLC Pitferred
Securities
If you have anyquestions regarding this letterplease call Robert Monheit at
2123266104 or meat 206 4906100
Zl•35hn` F Robinson
ExecWve Vice President
Corporate Risk Management
1201 Thi�d Avenue
wMr166
Seattle WA98101
phone 7064905100
Fax 2053775316
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00001
N
Office of Thrift Supervision
Departmentofthe Trc4sw7 • wane Regina
lot S wzt 5tecd W
is l01Q SeMk WA 981012419 Sedde Arw Qfjlr
Telaphce 216 3292600 Fac 205 $29200
February 24 2006
Mr John FRobinson
Execultivc Vice President
Corporate Risk Manageunaat
Washington Mutual W1201 ThirdAvenun WMT 1601
Seattle WA 981 or
FEB 2 8 2006
LEGAL DEPARTMENT
Dear Mr Robinson
This letter further responds to the notice filed January 3020 advising that Washington Mutual
Bark rWMB plans to establish
it now subsidiary Washington Mutual Preferred Funding YYC
CVb9n for the purpose of issuing two classes of Preferred Secxnities to be eligible for
inclusion in cm capital ofWMB By letter dated February 92006 we took no objection to thr
establishment of the new operating subsidiary and the issuance of secsvities by WMPF
Please be advised that OTS will not exercise its supervisory authority and discretion to exclude
the Prefrsod Securities from core capital under 12 CFR 5675al footnote 4 or the
resaYation of authority provision 12 CFR 56711 of the OTS capital rule and we hereby
confirm thalthc Proffered Securities will qualify for inclusion in WMB core capital This
decision is based on the representations in theNotice attachment thereto and commitment
detailed in your confidential letter dated February 23 2006
Notwithstanding the above the OTS reserves the right in its sole dis tion to exchrdc the
Preferred Securities or prospective issuances ofPrefesred Securities if the teems are revised or
it otherwise ceases to provide meaningful capital support and a realistic ability to absorb losses
orotherwise raises supevisorp ccncems This may include OTS cancers about the capital mix
or asset structure of the Subsidiary or WMB
If you have any questions regarding this letter please contact me at 206 8292601
Sincerely
Darrel W Dochow
Regional Deputy Director
cc William L Lynch Secretary Washington Mutual
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00002
Washington Mutual
CONFIDENTIAL TREATMENT REQUESTED
November 14 2006
Darrel Dochow
Deputy Regional Director West Region
Office of Thrift Supervision
101 Stewart Street Suite 1010
Seattle WA 981011048
Re Washington Mutual Bank Docket Number 08551 Request for
confirmation of capital treatment of additional class of preferred stock
am
Dear Mr Dochow
On behalf of Washington Mutual Inc WMI and Washington Mutual Bank the
Association I am writing with reference to the notice filed January 30 2006 bythe Association to establish a new subsidiary Washington Mutual Preferred
Funding LLC WMPF for the purpose of issuing two classes of preferred
securities collectively the LLC Preferred Securities to be eligible for inclusion in
core capital of WMB the Notice You provided notice of the nonobjection of the
Office of Thrift Supervision OTS to the establishment of WMPF by your letter
dated February 9 2006
As you are aware in the Notice the Association requested the OTS confirm that the
sale of the Cayman Co Preferred Securities and the Delaware Issuer securities
as defined in the Notice to outside investors constitutes the sale of the LLC
Preferred Securities as defined
in
the Notice to outside investors and that the LLC
Preferred Securities qualify for inclusion in core capital of the Association You
advised by letter dated February 24 2006 that the OTS will not exercise its
supervisory authority and discretion to exclude the LLC Preferred Securities from
core capital under 12 CFR 5675a1footnote 4 or the reservation of authority
provision 12 CFR 56711 of the OTS capital rule and confirmed that the LLC
Preferred Securities will qualify for inclusion
in
the Associations core capital
WMPF is planning to issue an additional class of LLC Preferred Securities the
FixedtoFloating Rate Perpetual Noncumulative Preferred Securities Series
2006C LLC Preferred Securities II The LLC Preferred Securities II will
include terms substantially the same as the LLC Variable Rate Preferred
Securities as defined in the Notice including the requirement for the prior
approval of the OTS for any proposed redemption Like the LLC Variable Rate
Preferred Securities the LLC Preferred Securities II will have a stated amount to
be determined based upon market conditions and will pay distributions on anoncumulativebasis at a fixed rate for a period to be determined and thereafter will
pay distributions based on a variable rate of interest plus an applicable spread
However the dividend rates dividend payment dates and redemption dates and
prices will be different than the LLC Variable Rate Preferred Securities
Corporate Execatlve Offices
1301 Second Avenue
Seattla WA 98101
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00003
Mr Darrel Dochow
November 14 2006
Page 2
CONFIDENTIAL TREATMENT REQUESTED
The LLC Preferred Securities II will be issued to the Association in exchange for
not more than approximately $10 billion in assets consisting of a pool of option
ARMs originated by the Association Simultaneously the Association will then sell
the LLC Preferred Securities 11 to a new entity Washington Mutual Preferred
Funding Trust
II Delaware Issuer III for not more than approximately $10 billion
in cash Delaware Issuer 11
will be a trust formed under the laws of the State of
Delaware and will not be a subsidiary of the Association for purposes of the
notice requirement set forth in 12 CFR § 55911 Delaware Issuer
II will own all of
the LLC Preferred Securities1
1 which will be the sole asset of the Delaware Issuer
II
Delaware Issuer II will issue a single class of securities Delaware Issuer Il
Securities which will represent undivided beneficial ownership interests in the LLC
Preferred Securities 11 held by Delaware Issuer II Delaware Issuer 11 willpassthroughany distributions or payments upon redemption or upon liquidation with
respect to the LLC Preferred Securities II to be holders of the Delaware Issuer II
Securities Delaware Issuer
11 Securities will be sold solely to US persons who are
qualified institutional buyers within the meaning of Rule 144A under the
Securities Act of 1933 as amended Securities Act who are also qualified
purchasers within the meaning of the Investment Company act of 1940
Investment Company Act in a transaction exempt from the registration
requirements of the Securities Act pursuant to Rule 144A thereunder
In the Notice the Association agreed that the amount of the Associations core
capital that may be comprised of the LLC Preferred Securities plus any other
future issuances of subsidiary preferred stock will not exceed 25 percent of the
Associations core capital including the LLC Preferred Securities and any future
subsidiary preferred securities issuances The issuance of LLC Preferred
Securities 11 will not cause the Association to exceed this limit On a pro forma
basis based upon an October 10 2006 forecast the amount of LLC Preferred
Securities and LLC Preferred Securities II will constitute no more than
approximately 1402 percent of the Associations core capital as of December 312006
In connection with the request In
the Notice regarding the capital treatment of the
LLC Preferred Securities WMI by letter to you dated February 23 2006 stated
i
In addition to the creation of Delaware Issuer
II a new asset trust Washington Mutual Option ARM
Trust I Asset Trust l1 will be formed Asset Trust It will be a trust formed under the laws of the
State of Delaware pursuant to a trust agreement between WMPF as depositor and a trustee
unaffiliated with the Association as Delaware Trustee Asset Trust II will own approximately $30billion of first lien closedend optionARM home loans the Asset Trust I
f Assets acquired from
the Association WMPF and from university Street Inc REIT any property that secured a loan
that Asset Trust Il acquires by foreclosure or deed in lieu of foreclosure as well as other assets
authorized for federal savings associations under federal law
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00004
Mr Darrel Dochow
November 14 2006
Page 3
CONFIDENTIAL TREATMENT REQUESTED
that it will undertake that if as a result of a Supervisory Event as defined in the
Notice WMI exchanges its Holding Company Shares as defined in the Notice for
Cayman Co Preferred Securities and the Delaware Issuer Securities or if WMI
subsequent to such exchange acquires the LLC Preferred Securities WMI will
contribute to WMB the Cayman Co Preferred Securities and the Delaware Issuer
Securities or as appropriate the LLC Preferred Securities On behalf of WMI I
hereby extend that undertaking to the issuance of LLC Preferred Securities li and
the Delaware Issuer II Securities
Based on the foregoing the Association respectfully requests the OTS to confirm
that the OTS will not exercise its supervisory authority and discretion to exclude the
LLC Preferred Securities II from corecapital under 12 CFR 5675a1footnote 4
or the reservation of authority provision 12 CFR 56711 of the OTS capital rule
and confirm that the LLC Preferred Securities 11 will qualify for inclusion in the
Associations core capital
Request for Confidential Treatment Consistent with the standards of the Freedom
of
Information Act 5 USC § 552b the Association hereby requests confidential
treatment of the information contained in this letter the Submission The
Submission contains information that is commercial or financial information
obtained from a person and privileged and confidential thatis exempt from
disclosure under paragraph b4 of the Freedom of Information Act 5 USC
§552b4 and the applicable regulations of the Department of the Treasury 31
CFR §§ 12c1 and 16a The information is proprietary compiled for internal
use only and is made available to regulatory authorities only upon request The
Association requests that the information contained in this document be treated as
confidential indefinitely because the basis for confidential treatment will continue to
exist after the issues presented by this Submission are resolved The Association
further requests that
if notwithstanding the foregoing the OTS should determine
preliminarily to make available to the public any of the information contained in this
Submission it will inform the Association prior to any such release
If you have any questions regarding this letter please call Robert Monheit at
212 3266104 or me at 206 5004149
ohn F Robinson
Executive Vice President
Corporate Risk Management
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00005
U
M
Office of Thrift Supervision
Department of the Treasury
1551 Nottb T ssda Avenue Suits 1050 Santa Ana CA 927058635
TeScpltone 714 7964700 FAX 714 7964710
December 4 2006
Mr John F Robinson
Executive Vice President
Corporate Risk Management
Washington mutual
1301 Second Avenue
Seattle WA 98101
bear Mr Robinson
W4VVL
West lzs toh
Santa Ana Area Offim
Prist1t brand tax transmittal memo 7671 Ff popes r
•
To ro
Dept phone
TaTi
This responds to your November 142006 letter advising that Washington Mutual Bank hWNB plate to
issue an additional class ofpicferred securities C LLC PreierrrdSecurities 11 Rough Washington
Mutual Professed Funding LLC WMPF and requcatin OTS confirmation that such securities are
eligible for inclusion in core capital of WMB The LLC Pre1 red securities 11 wil bo issued to WMB in
exchange for not more than $1 billion is assets consisting of a pool of option ABMs origiuate+l by WMIB
By letter dated February 24 2006 this office con niad that the initial two classes of LLC Preferred
Securities issued by WMPF could be included inWW Is capital subject to certain representations and
=krWdngs Similarly please be advised that OTS will not exercise its atpe rvisory authority and
discretion to exclude the LLC Preferred Securities 11 timmcore capital under 12 CFR $675a1 footnote 4
or the reservation of authority provision 12 CFR 56711 of the OTS capital zuie and we hereby confirm
that the preferred securities will qualify for inclusion in WMB core capital This decision is based on the
r esentations made in your November 141etter
Notwiibatanding the above the OTS reserves the right in its cote discretion to exclude she Pr+efeured
Securities or prospective issuances of Preferred Securities if the terms are revised or it otherwise ceases
to provide meaningibl capital support and a realistic ability to absorb losses or otherwise raises
supervisory concerns This may include OTS concerns about the capital mix or asset struttwc ofthe
Subsidiary or WMB
If you have any questions regarding this letter please contact we at 206 8292603
Sincercly
Darrel W Doehow
Regional Deputy Director
cc FDIC
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00006
CONFIDENTIAL TREATMENT REQUESTED
August 17 2007
Michael Finn
Regional Director West Region
Office of Thrift Supervision
101 Stewart Street Suite 1010
Seattle WA 981011048
John P Rabhnaan
Executive V ce President
Corporate Risk Management
1301 Second Avenue
WMC3Z01
Seattle WA 98101
206 500 4149 phone
206 377 3018 fax
Re Washington Mutual Bank Docket Number 08551 Request for
confirmation of capital treatment of additional class of preferred stock
Dear Mr Finn
On behalf of Washington Mutual Inc WMI and Washington Mutual Bank the
Association I am writing with reference to the notice filed January 30 2006 by
the Association to establish a new subsidiary Washington Mutual Preferred
Funding LLC WMPF for the purpose of issuing two classes of preferred
securities collectively the LLC Preferred Securities to be eligible for inclusion in
core capital of WMB the Notice The Office of Thrift Supervision COTSprovided notice of Its nonobjection to the establishment of WMPF by letter dated
February 9 2006 All capitalized terms used but not otherwise defined herein shall
have the same meaning ascribed to them in the Notice
As you are aware in the Notice the Association requested that the OTS confirm
that the sale of the Cayman Co Preferred Securities and the Delaware Issuer
Securities to outside investors constitutes the sale of the LLC Preferred Securities
to outside investors and that the LLC Preferred Securities qualify for inclusion incore capital of the Association The OTS advised by letter dated February 242006 that it will not exercise its supervisory authority and discretion to exclude the
LLC Preferred Securities from core capital under 12 CFR 5675a1footnote 4 or
the reservation of authority provision 12 CFR 56711 of the OTS capital rule and
confirmed that the LLC Preferred Securities qualify for inclusion in the Associations
core capital
Subsequently the Association by letter dated November 14 2006 requested the
OTS confirm the capital treatment of an issuance of an additional class of LLC
Preferred Securities the Fixed toFloating Rate Perpetual Noncumulative
Preferred Securities Series 2006C LLC Preferred Securities 11 The OTS
advised by letter dated December 4 2006 that it will not exercise its supervisory
authority and discretion to exclude the LLC Preferred Securities II from core capital
under 12 CFR 5675a1footnote 4 or the reservation of authority provision 12CFR 56711 of the OTS capital rule and confirmed that the LLC Preferred
Securities It qualify for inclusion
in
the Associations core capital
QEqual Honing Lander
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00007
Mr Michael Finn
August 17 2007
Page 2
CONFIDENTIAL TREATMENT REQUESTED
Following that issuance the Association by letter dated February 7 2007
requested the OTS confirm the capital treatment of an issuance of another
additional class of LLC Preferred Securities the Fixedto Floating Rate Perpetual
Noncumulative Preferred Securities Series 2007A LLC Preferred Securities
Ill The OTS indicated it consent by return of the letter stamped No Objection
as of February 24 2007
WMPF
is now planning to issue an additional class of LLC Preferred Securities theLLC Preferred Securities IV The LLC Preferred Securities IV will be fixed rate
and will include terms substantially the same as the LLC Fixed Rate Preferred
Securities as defined in the Notice including the requirement for theprior approval
of the OTS for any proposed redemption Like the LLC Fixed Rate Preferred
Securities the LLC Preferred Securities IV will have a stated amount to be
determined based upon market conditions and will pay distributions on anoncumulativebasis However the dividend rates and redemption dates and prices will
be different than the LLC Fixed Rate Preferred Securities Also the LLC Preferred
Securities IV will not be callable during the first five years following issuance and
then may be called at any time thereafter in the discretion of WMPF subject to
prior approval of the OTS
The LLC Preferred Securities IV will be issued to the Association in exchange for
not more than approximately $10 billion in cash Simultaneously the Association
will then sell the LLC Preferred Securities IV to a new entity Washington Mutual
Preferred Funding Trust IV Delaware Issuer IV for not more than approximately
$10 billion in cash2 Delaware Issuer IV will be a trust formed under the laws of
the State of Delaware and will not be a subsidiary of the Association for purposesof the notice requirement set forth in 12 CFR § 55911 Delaware Issuer IV will
own all of the LLC Preferred Securities IV which will be the sole asset of the
Delaware Issuer IV
Delaware Issuer IV will issue a single class of securities Delaware Issuer IV
Securities which will represent undivided beneficial ownership interests
in
the LLC
Preferred Securities IV held by Delaware Issuer IV Delaware Issuer IV will pass
through any distributions or payments upon redemption or upon liquidation with
respect to the LLC Preferred Securities 1V to the holders of the Delaware Issuer IV
Securities Delaware Issuer IV Securities will be sold solely to US persons whoare qualified institutional buyers within the meaning of Rule 144A under the
Securities Act of 1933 as amended Securities Act who are also qualified
1 At the time the letter was submitted WMPF had not determined whether the LLC Preferred
Securities
III would be fixedtofloating rate or fixed rate
2Alternatively WMPF may sell the LLC Preferred Securities
III
directly to Delaware Issuer IV for
$10 billion in cash The Association undertakes to advise the OTS If this alternative is selected
prior to the launch date of the issuance
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00008
Mr Michael Finn
August 17 2007
Page 3
CONFIDENTIAL TREATMENT REQUESTED
purchasers within the meaning of the Investment Company act of 1940
Investment Company Act in a transaction exempt from the registration
requirements of the Securities Act pursuant to Rule 144A thereunder
In
the Notice the Association agreed that the amount of the Associations core
capital that may be comprised of the LLC Preferred Securities plus any other
future issuances of subsidiary preferred stock will not exceed 25 percent of the
Associations core capital including the LLC Preferred Securities and any future
subsidiary preferred securities issuances The issuance of LLC Preferred
Securities IV will not cause the Association to exceed this limit On a pro forma
basis based upon a forecast dated August 9 2007 the amount of LLC Preferred
Securities LLC Preferred Securities
II LLC Preferred Securities
III and LLC
Preferred Securities IV will constitute no more than approximately 1821 percent of
the Associations core capital at September 30 2007
In connection with the request in the Notice regarding the capital treatment of the
LLC Preferred Securities WMI by letter to the OTS dated February 23 2006stated that
it
will undertake that
if as a result of a Supervisory Event WMI
exchanges its Holding Company Shares for Cayman Co Preferred Securities and
the Delaware Issuer Securities or if WMI subsequent to such exchange acquires
the LLC Preferred Securities WMI will contribute to WMB the Cayman CoPreferred Securities and the Delaware Issuer Securities or as appropriate the LLC
Preferred Securities On behalf of WMI I hereby extend that undertaking to the
issuance of LLC Preferred Securities IV and the Delaware Issuer IV Securities
Based on the foregoing the Association respectfully requests the OTS to confirm
that the OTS will not exercise its supervisory authority and discretion to exclude the
LLC Preferred Securities IV from core capital under 12 CFR 5675a1footnote 4or the reservation of authority provision 12 CFR 56711 of the OTS capital rule
and confirm that the LLC Preferred Securities IV will qualify for inclusion in the
Associations core capital
Request for Confidential Treatment Consistent with the standards of the Freedomof Information Act 5 USC § 552b the Association hereby requests confidential
treatment of the information contained in this letter the Submission TheSubmission contains information that is commercial or financial information
obtained from a person and privileged and confidential that is exempt from
disclosure under paragraph b4 of the Freedom of Information Act 5 USC§552b4 and the applicable regulations of the Department of the Treasury 31
CFR §§ 12c1 and 16a The information
is proprietary compiled for internal
use only and is made available to regulatory authorities only upon request TheAssociation requests that the information contained
in
this document be treated as
confidential indefinitely because the basis for confidential treatment will continue to
exist after the issues presented by this Submission are resolved The Association
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00009
Mr Michael Finn
August 17 2007
Page 4
CONFIDENTIAL TREATMENT REQUESTED
further requests that
if notwithstanding the foregoing the OTS should determine
preliminarily to make available to the public any of the information contained in this
Submission
it
will Inform the Association prior to any such release
If you have any questions regarding this letter please call Robert Monheit at
212 3266104 or me at 206 5004149
hn F Robinson
Executive Vice President
Corporate Risk Management
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00010
Office of Thrift Supervision
SEP d 2007
Department of the Treasury West Region
101 Stewart Street Suite 1010 Seattle WA 981012419 Seattle Area Once
Telephone 206 8292600 Fax 206 8292620
September 20 2007
Mr John F Robinson Executive Vice President
Corporate Risk Management
Washington Mutual
1301 Second Avenue WMC 3201
Seattle WA 98101
Dew Mr Robinson
This responds to your August 17 2007 letter advising that Washington Mutual Bank WMB plans to issue
an additional class of preferred securities LLC Preferred Securities IV through Washington Mutual
Preferred Funding LLC WMPF and requesting OTS confirmation that such securities are eligible for
inclusion in core capital of WMB The LLC Preferred Securities IV will be issued to WMB in exchange for
not more than
$1 billion in cash
On February 24 2006 December 4 2006 and February 24 2007 this office confirmed that the three prior
classes of LLC Preferred Securities issued by WMPF could be included in WMBs capital subject to certain
representations and undertakings Similarly please be advised that OTS will not exercise its supervisory
authority and discretion to exclude the LLC Preferred Securities IV fromcore capital under 12 CFR
5675a1 footnote 4 or the reservation of authority provision 12 CFR 56711 of the OTS capital rule
and we hereby confirm that the preferred securities will qualify for inclusion in WMB core capital This
decision is based on the representations made in your August 17 letter
Notwithstanding the above the OTS reserves the right in its sole discretion to exclude the Preferred
Securities or prospective issuances of Preferred Securities if the terms are revised or it otherwise ceases to
provide meaningful capital support and a realistic ability to absorb losses or otherwise raises supervisory
concerns This may include OTS concerns about the capital mix or asset structure of the WMPF orWMB
If you have any questions regarding this letter please contact me at 206 8292603
cc FDIC
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00011
CONFIDEI ALTREATMENTREQ ESTER
I
February 23 2006
Darrel Dodliow
Deputy Regional DirectorWest Region
Office of Thrift Supervision
101 Stewart Street Suite 1010
Seattle WA 981011048
Washington Mutual
John F Robinson
Executive Vice President
Corporbte Risk Manegeinenl
Re Washington Mutual BattkDocket Number 08551Requestforconfitmatid ofcapital treatment of two classes ofpreferred stock
DeaaMr Dochow
On behalf of Washingtari Mutual • WMIn I a•mwriting with reference to the riotice
filed January 30 2006 by Washington Mutual tank WMB toesstablish°a new
subsidiary Washington Mutual Preferred Fpding LC`°WMPF for the purposeof
issuing two classes of preferredsecurities to be eligibleforinclesiein in corecapital of
WMB the `Notice You provided notice of thenonobjectionof the Office of Thrift
Supervision STS to the establishtnejat of WMPPby your letierdated February 9 2005
Asyou are aware inthe NotieeWMB requestedthe OTSoonfirstrthat the We of the
Cayman Co Preferred Securities and the Delaware Issuer Securities as defined in the
Noticeto outside investors constitutes thesale oftheLLC Preferred Securities as defined
in th6Notice to outside investors and that the LLC Preferred Securities qualify for
inclusion iii core capital ofWMB
In connection with thatrequesttWM herebytndertakes
that if asa result of aSupervisory Event as defined in the Notice WMI exchanges its
Holding Company Shares as defilned
run the Notice for Cayman Co Preferred Securities
andthe Delaware Issuer tecurities or if WMI subsequent to such exchange acquires the
LLC Preferred Securities W7vnwillcontribute1toWMB the Cayman Co Preferred
Securities and the Delaware Issuer Securities or as appropriate the LLC Pitferred
Securities
If you have anyquestions regarding this letterplease call Robert Monheit at
2123266104 or meat 206 4906100
Zl•35hn` F Robinson
ExecWve Vice President
Corporate Risk Management
1201 Thi�d Avenue
wMr166
Seattle WA98101
phone 7064905100
Fax 2053775316
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00001
N
Office of Thrift Supervision
Departmentofthe Trc4sw7 • wane Regina
lot S wzt 5tecd W
is l01Q SeMk WA 981012419 Sedde Arw Qfjlr
Telaphce 216 3292600 Fac 205 $29200
February 24 2006
Mr John FRobinson
Execultivc Vice President
Corporate Risk Manageunaat
Washington Mutual W1201 ThirdAvenun WMT 1601
Seattle WA 981 or
FEB 2 8 2006
LEGAL DEPARTMENT
Dear Mr Robinson
This letter further responds to the notice filed January 3020 advising that Washington Mutual
Bark rWMB plans to establish
it now subsidiary Washington Mutual Preferred Funding YYC
CVb9n for the purpose of issuing two classes of Preferred Secxnities to be eligible for
inclusion in cm capital ofWMB By letter dated February 92006 we took no objection to thr
establishment of the new operating subsidiary and the issuance of secsvities by WMPF
Please be advised that OTS will not exercise its supervisory authority and discretion to exclude
the Prefrsod Securities from core capital under 12 CFR 5675al footnote 4 or the
resaYation of authority provision 12 CFR 56711 of the OTS capital rule and we hereby
confirm thalthc Proffered Securities will qualify for inclusion in WMB core capital This
decision is based on the representations in theNotice attachment thereto and commitment
detailed in your confidential letter dated February 23 2006
Notwithstanding the above the OTS reserves the right in its sole dis tion to exchrdc the
Preferred Securities or prospective issuances ofPrefesred Securities if the teems are revised or
it otherwise ceases to provide meaningful capital support and a realistic ability to absorb losses
orotherwise raises supevisorp ccncems This may include OTS cancers about the capital mix
or asset structure of the Subsidiary or WMB
If you have any questions regarding this letter please contact me at 206 8292601
Sincerely
Darrel W Dochow
Regional Deputy Director
cc William L Lynch Secretary Washington Mutual
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00002
Washington Mutual
CONFIDENTIAL TREATMENT REQUESTED
November 14 2006
Darrel Dochow
Deputy Regional Director West Region
Office of Thrift Supervision
101 Stewart Street Suite 1010
Seattle WA 981011048
Re Washington Mutual Bank Docket Number 08551 Request for
confirmation of capital treatment of additional class of preferred stock
am
Dear Mr Dochow
On behalf of Washington Mutual Inc WMI and Washington Mutual Bank the
Association I am writing with reference to the notice filed January 30 2006 bythe Association to establish a new subsidiary Washington Mutual Preferred
Funding LLC WMPF for the purpose of issuing two classes of preferred
securities collectively the LLC Preferred Securities to be eligible for inclusion in
core capital of WMB the Notice You provided notice of the nonobjection of the
Office of Thrift Supervision OTS to the establishment of WMPF by your letter
dated February 9 2006
As you are aware in the Notice the Association requested the OTS confirm that the
sale of the Cayman Co Preferred Securities and the Delaware Issuer securities
as defined in the Notice to outside investors constitutes the sale of the LLC
Preferred Securities as defined
in
the Notice to outside investors and that the LLC
Preferred Securities qualify for inclusion in core capital of the Association You
advised by letter dated February 24 2006 that the OTS will not exercise its
supervisory authority and discretion to exclude the LLC Preferred Securities from
core capital under 12 CFR 5675a1footnote 4 or the reservation of authority
provision 12 CFR 56711 of the OTS capital rule and confirmed that the LLC
Preferred Securities will qualify for inclusion
in
the Associations core capital
WMPF is planning to issue an additional class of LLC Preferred Securities the
FixedtoFloating Rate Perpetual Noncumulative Preferred Securities Series
2006C LLC Preferred Securities II The LLC Preferred Securities II will
include terms substantially the same as the LLC Variable Rate Preferred
Securities as defined in the Notice including the requirement for the prior
approval of the OTS for any proposed redemption Like the LLC Variable Rate
Preferred Securities the LLC Preferred Securities II will have a stated amount to
be determined based upon market conditions and will pay distributions on anoncumulativebasis at a fixed rate for a period to be determined and thereafter will
pay distributions based on a variable rate of interest plus an applicable spread
However the dividend rates dividend payment dates and redemption dates and
prices will be different than the LLC Variable Rate Preferred Securities
Corporate Execatlve Offices
1301 Second Avenue
Seattla WA 98101
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00003
Mr Darrel Dochow
November 14 2006
Page 2
CONFIDENTIAL TREATMENT REQUESTED
The LLC Preferred Securities II will be issued to the Association in exchange for
not more than approximately $10 billion in assets consisting of a pool of option
ARMs originated by the Association Simultaneously the Association will then sell
the LLC Preferred Securities 11 to a new entity Washington Mutual Preferred
Funding Trust
II Delaware Issuer III for not more than approximately $10 billion
in cash Delaware Issuer 11
will be a trust formed under the laws of the State of
Delaware and will not be a subsidiary of the Association for purposes of the
notice requirement set forth in 12 CFR § 55911 Delaware Issuer
II will own all of
the LLC Preferred Securities1
1 which will be the sole asset of the Delaware Issuer
II
Delaware Issuer II will issue a single class of securities Delaware Issuer Il
Securities which will represent undivided beneficial ownership interests in the LLC
Preferred Securities 11 held by Delaware Issuer II Delaware Issuer 11 willpassthroughany distributions or payments upon redemption or upon liquidation with
respect to the LLC Preferred Securities II to be holders of the Delaware Issuer II
Securities Delaware Issuer
11 Securities will be sold solely to US persons who are
qualified institutional buyers within the meaning of Rule 144A under the
Securities Act of 1933 as amended Securities Act who are also qualified
purchasers within the meaning of the Investment Company act of 1940
Investment Company Act in a transaction exempt from the registration
requirements of the Securities Act pursuant to Rule 144A thereunder
In the Notice the Association agreed that the amount of the Associations core
capital that may be comprised of the LLC Preferred Securities plus any other
future issuances of subsidiary preferred stock will not exceed 25 percent of the
Associations core capital including the LLC Preferred Securities and any future
subsidiary preferred securities issuances The issuance of LLC Preferred
Securities 11 will not cause the Association to exceed this limit On a pro forma
basis based upon an October 10 2006 forecast the amount of LLC Preferred
Securities and LLC Preferred Securities II will constitute no more than
approximately 1402 percent of the Associations core capital as of December 312006
In connection with the request In
the Notice regarding the capital treatment of the
LLC Preferred Securities WMI by letter to you dated February 23 2006 stated
i
In addition to the creation of Delaware Issuer
II a new asset trust Washington Mutual Option ARM
Trust I Asset Trust l1 will be formed Asset Trust It will be a trust formed under the laws of the
State of Delaware pursuant to a trust agreement between WMPF as depositor and a trustee
unaffiliated with the Association as Delaware Trustee Asset Trust II will own approximately $30billion of first lien closedend optionARM home loans the Asset Trust I
f Assets acquired from
the Association WMPF and from university Street Inc REIT any property that secured a loan
that Asset Trust Il acquires by foreclosure or deed in lieu of foreclosure as well as other assets
authorized for federal savings associations under federal law
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00004
Mr Darrel Dochow
November 14 2006
Page 3
CONFIDENTIAL TREATMENT REQUESTED
that it will undertake that if as a result of a Supervisory Event as defined in the
Notice WMI exchanges its Holding Company Shares as defined in the Notice for
Cayman Co Preferred Securities and the Delaware Issuer Securities or if WMI
subsequent to such exchange acquires the LLC Preferred Securities WMI will
contribute to WMB the Cayman Co Preferred Securities and the Delaware Issuer
Securities or as appropriate the LLC Preferred Securities On behalf of WMI I
hereby extend that undertaking to the issuance of LLC Preferred Securities li and
the Delaware Issuer II Securities
Based on the foregoing the Association respectfully requests the OTS to confirm
that the OTS will not exercise its supervisory authority and discretion to exclude the
LLC Preferred Securities II from corecapital under 12 CFR 5675a1footnote 4
or the reservation of authority provision 12 CFR 56711 of the OTS capital rule
and confirm that the LLC Preferred Securities 11 will qualify for inclusion in the
Associations core capital
Request for Confidential Treatment Consistent with the standards of the Freedom
of
Information Act 5 USC § 552b the Association hereby requests confidential
treatment of the information contained in this letter the Submission The
Submission contains information that is commercial or financial information
obtained from a person and privileged and confidential thatis exempt from
disclosure under paragraph b4 of the Freedom of Information Act 5 USC
§552b4 and the applicable regulations of the Department of the Treasury 31
CFR §§ 12c1 and 16a The information is proprietary compiled for internal
use only and is made available to regulatory authorities only upon request The
Association requests that the information contained in this document be treated as
confidential indefinitely because the basis for confidential treatment will continue to
exist after the issues presented by this Submission are resolved The Association
further requests that
if notwithstanding the foregoing the OTS should determine
preliminarily to make available to the public any of the information contained in this
Submission it will inform the Association prior to any such release
If you have any questions regarding this letter please call Robert Monheit at
212 3266104 or me at 206 5004149
ohn F Robinson
Executive Vice President
Corporate Risk Management
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00005
U
M
Office of Thrift Supervision
Department of the Treasury
1551 Nottb T ssda Avenue Suits 1050 Santa Ana CA 927058635
TeScpltone 714 7964700 FAX 714 7964710
December 4 2006
Mr John F Robinson
Executive Vice President
Corporate Risk Management
Washington mutual
1301 Second Avenue
Seattle WA 98101
bear Mr Robinson
W4VVL
West lzs toh
Santa Ana Area Offim
Prist1t brand tax transmittal memo 7671 Ff popes r
•
To ro
Dept phone
TaTi
This responds to your November 142006 letter advising that Washington Mutual Bank hWNB plate to
issue an additional class ofpicferred securities C LLC PreierrrdSecurities 11 Rough Washington
Mutual Professed Funding LLC WMPF and requcatin OTS confirmation that such securities are
eligible for inclusion in core capital of WMB The LLC Pre1 red securities 11 wil bo issued to WMB in
exchange for not more than $1 billion is assets consisting of a pool of option ABMs origiuate+l by WMIB
By letter dated February 24 2006 this office con niad that the initial two classes of LLC Preferred
Securities issued by WMPF could be included inWW Is capital subject to certain representations and
=krWdngs Similarly please be advised that OTS will not exercise its atpe rvisory authority and
discretion to exclude the LLC Preferred Securities 11 timmcore capital under 12 CFR $675a1 footnote 4
or the reservation of authority provision 12 CFR 56711 of the OTS capital zuie and we hereby confirm
that the preferred securities will qualify for inclusion in WMB core capital This decision is based on the
r esentations made in your November 141etter
Notwiibatanding the above the OTS reserves the right in its cote discretion to exclude she Pr+efeured
Securities or prospective issuances of Preferred Securities if the terms are revised or it otherwise ceases
to provide meaningibl capital support and a realistic ability to absorb losses or otherwise raises
supervisory concerns This may include OTS concerns about the capital mix or asset struttwc ofthe
Subsidiary or WMB
If you have any questions regarding this letter please contact we at 206 8292603
Sincercly
Darrel W Doehow
Regional Deputy Director
cc FDIC
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00006
CONFIDENTIAL TREATMENT REQUESTED
August 17 2007
Michael Finn
Regional Director West Region
Office of Thrift Supervision
101 Stewart Street Suite 1010
Seattle WA 981011048
John P Rabhnaan
Executive V ce President
Corporate Risk Management
1301 Second Avenue
WMC3Z01
Seattle WA 98101
206 500 4149 phone
206 377 3018 fax
Re Washington Mutual Bank Docket Number 08551 Request for
confirmation of capital treatment of additional class of preferred stock
Dear Mr Finn
On behalf of Washington Mutual Inc WMI and Washington Mutual Bank the
Association I am writing with reference to the notice filed January 30 2006 by
the Association to establish a new subsidiary Washington Mutual Preferred
Funding LLC WMPF for the purpose of issuing two classes of preferred
securities collectively the LLC Preferred Securities to be eligible for inclusion in
core capital of WMB the Notice The Office of Thrift Supervision COTSprovided notice of Its nonobjection to the establishment of WMPF by letter dated
February 9 2006 All capitalized terms used but not otherwise defined herein shall
have the same meaning ascribed to them in the Notice
As you are aware in the Notice the Association requested that the OTS confirm
that the sale of the Cayman Co Preferred Securities and the Delaware Issuer
Securities to outside investors constitutes the sale of the LLC Preferred Securities
to outside investors and that the LLC Preferred Securities qualify for inclusion incore capital of the Association The OTS advised by letter dated February 242006 that it will not exercise its supervisory authority and discretion to exclude the
LLC Preferred Securities from core capital under 12 CFR 5675a1footnote 4 or
the reservation of authority provision 12 CFR 56711 of the OTS capital rule and
confirmed that the LLC Preferred Securities qualify for inclusion in the Associations
core capital
Subsequently the Association by letter dated November 14 2006 requested the
OTS confirm the capital treatment of an issuance of an additional class of LLC
Preferred Securities the Fixed toFloating Rate Perpetual Noncumulative
Preferred Securities Series 2006C LLC Preferred Securities 11 The OTS
advised by letter dated December 4 2006 that it will not exercise its supervisory
authority and discretion to exclude the LLC Preferred Securities II from core capital
under 12 CFR 5675a1footnote 4 or the reservation of authority provision 12CFR 56711 of the OTS capital rule and confirmed that the LLC Preferred
Securities It qualify for inclusion
in
the Associations core capital
QEqual Honing Lander
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00007
Mr Michael Finn
August 17 2007
Page 2
CONFIDENTIAL TREATMENT REQUESTED
Following that issuance the Association by letter dated February 7 2007
requested the OTS confirm the capital treatment of an issuance of another
additional class of LLC Preferred Securities the Fixedto Floating Rate Perpetual
Noncumulative Preferred Securities Series 2007A LLC Preferred Securities
Ill The OTS indicated it consent by return of the letter stamped No Objection
as of February 24 2007
WMPF
is now planning to issue an additional class of LLC Preferred Securities theLLC Preferred Securities IV The LLC Preferred Securities IV will be fixed rate
and will include terms substantially the same as the LLC Fixed Rate Preferred
Securities as defined in the Notice including the requirement for theprior approval
of the OTS for any proposed redemption Like the LLC Fixed Rate Preferred
Securities the LLC Preferred Securities IV will have a stated amount to be
determined based upon market conditions and will pay distributions on anoncumulativebasis However the dividend rates and redemption dates and prices will
be different than the LLC Fixed Rate Preferred Securities Also the LLC Preferred
Securities IV will not be callable during the first five years following issuance and
then may be called at any time thereafter in the discretion of WMPF subject to
prior approval of the OTS
The LLC Preferred Securities IV will be issued to the Association in exchange for
not more than approximately $10 billion in cash Simultaneously the Association
will then sell the LLC Preferred Securities IV to a new entity Washington Mutual
Preferred Funding Trust IV Delaware Issuer IV for not more than approximately
$10 billion in cash2 Delaware Issuer IV will be a trust formed under the laws of
the State of Delaware and will not be a subsidiary of the Association for purposesof the notice requirement set forth in 12 CFR § 55911 Delaware Issuer IV will
own all of the LLC Preferred Securities IV which will be the sole asset of the
Delaware Issuer IV
Delaware Issuer IV will issue a single class of securities Delaware Issuer IV
Securities which will represent undivided beneficial ownership interests
in
the LLC
Preferred Securities IV held by Delaware Issuer IV Delaware Issuer IV will pass
through any distributions or payments upon redemption or upon liquidation with
respect to the LLC Preferred Securities 1V to the holders of the Delaware Issuer IV
Securities Delaware Issuer IV Securities will be sold solely to US persons whoare qualified institutional buyers within the meaning of Rule 144A under the
Securities Act of 1933 as amended Securities Act who are also qualified
1 At the time the letter was submitted WMPF had not determined whether the LLC Preferred
Securities
III would be fixedtofloating rate or fixed rate
2Alternatively WMPF may sell the LLC Preferred Securities
III
directly to Delaware Issuer IV for
$10 billion in cash The Association undertakes to advise the OTS If this alternative is selected
prior to the launch date of the issuance
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00008
Mr Michael Finn
August 17 2007
Page 3
CONFIDENTIAL TREATMENT REQUESTED
purchasers within the meaning of the Investment Company act of 1940
Investment Company Act in a transaction exempt from the registration
requirements of the Securities Act pursuant to Rule 144A thereunder
In
the Notice the Association agreed that the amount of the Associations core
capital that may be comprised of the LLC Preferred Securities plus any other
future issuances of subsidiary preferred stock will not exceed 25 percent of the
Associations core capital including the LLC Preferred Securities and any future
subsidiary preferred securities issuances The issuance of LLC Preferred
Securities IV will not cause the Association to exceed this limit On a pro forma
basis based upon a forecast dated August 9 2007 the amount of LLC Preferred
Securities LLC Preferred Securities
II LLC Preferred Securities
III and LLC
Preferred Securities IV will constitute no more than approximately 1821 percent of
the Associations core capital at September 30 2007
In connection with the request in the Notice regarding the capital treatment of the
LLC Preferred Securities WMI by letter to the OTS dated February 23 2006stated that
it
will undertake that
if as a result of a Supervisory Event WMI
exchanges its Holding Company Shares for Cayman Co Preferred Securities and
the Delaware Issuer Securities or if WMI subsequent to such exchange acquires
the LLC Preferred Securities WMI will contribute to WMB the Cayman CoPreferred Securities and the Delaware Issuer Securities or as appropriate the LLC
Preferred Securities On behalf of WMI I hereby extend that undertaking to the
issuance of LLC Preferred Securities IV and the Delaware Issuer IV Securities
Based on the foregoing the Association respectfully requests the OTS to confirm
that the OTS will not exercise its supervisory authority and discretion to exclude the
LLC Preferred Securities IV from core capital under 12 CFR 5675a1footnote 4or the reservation of authority provision 12 CFR 56711 of the OTS capital rule
and confirm that the LLC Preferred Securities IV will qualify for inclusion in the
Associations core capital
Request for Confidential Treatment Consistent with the standards of the Freedomof Information Act 5 USC § 552b the Association hereby requests confidential
treatment of the information contained in this letter the Submission TheSubmission contains information that is commercial or financial information
obtained from a person and privileged and confidential that is exempt from
disclosure under paragraph b4 of the Freedom of Information Act 5 USC§552b4 and the applicable regulations of the Department of the Treasury 31
CFR §§ 12c1 and 16a The information
is proprietary compiled for internal
use only and is made available to regulatory authorities only upon request TheAssociation requests that the information contained
in
this document be treated as
confidential indefinitely because the basis for confidential treatment will continue to
exist after the issues presented by this Submission are resolved The Association
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00009
Mr Michael Finn
August 17 2007
Page 4
CONFIDENTIAL TREATMENT REQUESTED
further requests that
if notwithstanding the foregoing the OTS should determine
preliminarily to make available to the public any of the information contained in this
Submission
it
will Inform the Association prior to any such release
If you have any questions regarding this letter please call Robert Monheit at
212 3266104 or me at 206 5004149
hn F Robinson
Executive Vice President
Corporate Risk Management
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00010
Office of Thrift Supervision
SEP d 2007
Department of the Treasury West Region
101 Stewart Street Suite 1010 Seattle WA 981012419 Seattle Area Once
Telephone 206 8292600 Fax 206 8292620
September 20 2007
Mr John F Robinson Executive Vice President
Corporate Risk Management
Washington Mutual
1301 Second Avenue WMC 3201
Seattle WA 98101
Dew Mr Robinson
This responds to your August 17 2007 letter advising that Washington Mutual Bank WMB plans to issue
an additional class of preferred securities LLC Preferred Securities IV through Washington Mutual
Preferred Funding LLC WMPF and requesting OTS confirmation that such securities are eligible for
inclusion in core capital of WMB The LLC Preferred Securities IV will be issued to WMB in exchange for
not more than
$1 billion in cash
On February 24 2006 December 4 2006 and February 24 2007 this office confirmed that the three prior
classes of LLC Preferred Securities issued by WMPF could be included in WMBs capital subject to certain
representations and undertakings Similarly please be advised that OTS will not exercise its supervisory
authority and discretion to exclude the LLC Preferred Securities IV fromcore capital under 12 CFR
5675a1 footnote 4 or the reservation of authority provision 12 CFR 56711 of the OTS capital rule
and we hereby confirm that the preferred securities will qualify for inclusion in WMB core capital This
decision is based on the representations made in your August 17 letter
Notwithstanding the above the OTS reserves the right in its sole discretion to exclude the Preferred
Securities or prospective issuances of Preferred Securities if the terms are revised or it otherwise ceases to
provide meaningful capital support and a realistic ability to absorb losses or otherwise raises supervisory
concerns This may include OTS concerns about the capital mix or asset structure of the WMPF orWMB
If you have any questions regarding this letter please contact me at 206 8292603
cc FDIC
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002022.00011
Office of Thrift Supervision
Department of the Treasury
101 Stewart Street Suite 1010 Seattle WA 981011048
Telephone 206 8292600 + Fax 206 8292620
February 9 2006
Mr John F Robinson
Executive Vice President
Corporate Risk Management
Washington Mutual Bank
1201 Third Avenue WMT 1601
Seattle Washington 98101
Dear Mr Robinson
West Region
Seattle Area Office
This responds to the notice filed January 30 2006 advising that Washington Mutual Bank WMBplans to establish a new subsidiary Washington Mutual Preferred Funding LLC WMPF for the
purpose of issuing two classes of preferred securities to be eligible for inclusion in core capital of WMBBased upon the representations made in the notice we do not object to establishment of the new operating
subsidiary or to the issuance of securities by WMPF Notwithstanding please be advised that this letter
should not be construed as authorizing the proposed capital treatment of the SI5 billion in LLC Preferred
Securities to be issued by WMPF That issue remains under review and we will provide an answer when
our review is
completedInthe future we will expect that WMB will plan appropriately so as to allow for the full thirtyday review
by OTS of notices of this type
Please contact me at 206 8292601 if you have any questions
Sincerely
DarrelW Dochow
Regional Deputy Director
cc William L Lynch Secretary Washington Mutual
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002025.00001
Washington Mutual
CONFIDENTIAL TREATMENT QUESTEDSohn F Robinson
Executive Vice President
Corporate RiiskManagement
February 23 2006
Darrel Dochow
Deputy Regional Director West Region
Office ofThrift Supervision
101 Stewart Street Suite 10 10
Seattle WA 981041048
Re Washington Mutual Bank Docket Number 08551 Request for
confirmation of capital treatment of two classes ofpreferred stock
Dear Mr Dochow
fin behalf of Washington Mutual Inc I I I am writing with reference to the notice
filed January 30 2006 by Washington Mutual Bank WMB to establish a new
subsidiary Washington Mutual Preferred Funding LLC VilMPF for the purpose of
issuingtwo classes of preferred securities to be eligible far inclusion in core capital of
WMB the Notice You provided notice of the nonobjection of the Office of Thrift
Supervision OTS to the establishment of WMPP by your letter dated February 9 2006
As you are aware in the Notice WMB requested the OTS confirm that the sale of the
Cayman Co Preferred Securities and the Delaware Issuer Securities as defined in the
Notice to outside investors constitutes the sale of the LLCPreferred Securities as defined
in the Notice to outside investors and that the LLC Preferred Securities qualify for
inclusion in core capital ofWMB In connection wit=h thatrequest WM1 hereby undertakes
that if as a result of Supervisory Event as defined inthe Notice WMI exchanges its
Holding Company Shares as defined in the Notice for Cayman Co Preferred Securities
and the l ielaware Issuer Securities or if WTI subsequent to such exchange a quires the
LLC Preferred Securities W IIWill contribute to VMB the Cayman Co Preferred
Securities and the Delaware IssuerSecurities or as appropriate the LLC Preferred
Securities
If you have any questions regarding this letter please call RobertMonheit at
212 3266104 or me at 206 4906100
SiereI
oho F Robinson
Executive Vice President
Corporate Risk Management
12111 Third Avenue
Seattle WA 981
2064906€3Ephone
fax 206 3 5I8
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002025.00002
Office of Thrift Supervision
Department ofthe Treasury
101 Stewart Street Suite 3010 Seattle WA 981012419
Telephone 206 8292600 Fax 206 8292620
February 24 2006
West Region
Seattle Area oft e
Mr John F Robinson
Executive Vice President FEB 2 8 2006c
Corporate Risk Management
Washington Mutual Inc LEGAL DEPARTMENT
1201 Third Avenue WMT 1601
Seattle WA 98101
Dear Mr Robinson
This letter further responds to the notice filed January 30 2006 advising that Washington Mutual
Bank WMB plans to establish a new subsidiary Washington Mutual Preferred Funding LLC
WMPF for the purpose of issuing two classes of Preferred Securities to be eligible for
inclusion in core capital of WMB By letter dated February 9 2006 we took no objection to the
establishment of the new operating subsidiary and the issuance of securities by WMPF
Please be advised that OTS will not exercise its supervisory authority and discretion to exclude
the Preferred Securities from core capital under 12 CFR 5675a1 footnote 4 or the
reservation of authority provision 12 CFR 56711 ofthe OTS capital rule and we hereby
confirm that the Preferred Securities will qualify for inclusion in WMB core capital This
decision is based on the representations in the Notice attachment thereto and commitment
detailed in yourconfidential letter dated February 23 2006
Notwithstanding the above the 0TS reserves The right in its sole discretion to exclude the
Preferred Securities or prospective issuances of Preferred Securities if the terms are revised or
it otherwise ceases to provide meaningful capital support and a realistic ability to absorb losses
or otherwise raises supervisory concerns This mayinclude OTS concerns about the capital mix
or asset structure of the Subsidiary or WMB
If you have any questions regarding this letter please contact me at 206 8292601
Sincerely
•WA W•LDarrel W Dochow
Regional Deputy Director
cc William L Lynch Secretary Washington Mutual
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002025.00003
Mailstop WMC 3301
1301 Second Avenue
Seattle WA 98101
Via Electronic Mail
September 25 2008
Office of Thrift Supervision
Examinations
Attn John Bisset
Attn Benjamin Franklin
2065008302 direct phone
steverotellawamunet
WMI will issue a press release on September 26 2008 announcing that each Conditional Exchange will
occur at 800 am New York time on September 26 2008 Pursuant to Section 2 of each Exchange
Agreement the Conditional Exchange will then occur automatically at that time and WMI will become
the owner of all the Delaware issuer trust securities and all the Preferred Securities issued by
Washington Preferred Funding Cayman I Ltd the Cayco Preferred Securities The occurrence of the
Conditional Exchange has the effect of dissolving each of the Delaware issuer trusts so that the WMPF
Preferred Securities held by the trusts will be owned by WMl as a result of such dissolution In any event
lawardth Dt t eo eeffective September25 2008 WMI has assigned to WMB all of its right title and interes
i tpthe Cayco Preferred Securities and the WMPF Preferred Securities and upon rece
trust securities
the Delaware trust securities the Cayco Preferred Securities and the WMPF Preferred Securities WM
will immediately contribute and transfer same to WMB and such contribution and transfer will occur
regardless of any events which may occur prior to such contribution and transfer
Sincerely
WASHINGTON MUTUAL INC
ByName Steve Rotella
Title President and Chief Operating Officer
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002025.00004
ASSIGNMENT AGREEMENT
between
WASHINGTON MUTUAL BANKas Assignee
and
WASHINGTON MUTUAL INCas Assignor
Effective as of September 25 2008
17535196 05129267
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002025.00005
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT as amended modified or supplemented
from time to time after the date hereof the Agreement is effective as of September 25
2008 and is made by and between WASHINGTON MUTUAL BANK afederallychartered
savings association as Assignee the Assignee and WASHINGTON
MUTUAL INC a Washington corporation as Assignor the Assignor
RECITALS
A Assignor wishes to assign to Assignee certain securities and Assignee
wishes to accept such assignment which Securities shall be assigned upon the
execution of this Agreement
AGREEMENT
In consideration of the premises and the mutual agreements hereinafter set forth
and for other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged the Assignee and Assignor agree as follows
ARTICLE I
DEFINITIONS GENERAL INTERPRETIVE PRINCIPLES
Section 101 Definitions
Whenever used in this Agreement the following words and phrases unless the
context otherwise requires shall have the following meanings
Agreement This Assignment Agreement including all exhibits hereto and all
amendments hereof and supplements hereto
Certificate Any instrument constituting evidence of ownership of a Security
Effective Date September 25 2008
Code The Internal Revenue Code of 1986 as amended and the regulations
promulgated thereunder and rulings issued thereunder Section references to the Code
are to the Code as in
effect as the date of this Agreement and any subsequent
provisions of the Code amendatory thereof supplemental thereto or substituted
therefore
Assignment The assignment to Assignee by Assignor of Securities pursuant to
this Agreement
Delive Is deemed to occur as of September 25 2008
WMBNWI Master Securities
Assignment Agreement
17535196 05129267
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002025.00006
Person Any individual corporation limited liability company partnership joint
venture association jointstock company trust unincorporated organization or
government or any agency or political subdivision thereof
Assignee Washington Mutual Bank a federallychartered savings association
and its successors and assigns
Securities The securities listed in
Exhibit A that are the subject of this
Agreement The term Securities includes without limitation such securities any
Certificates corresponding to such securities and all other rights benefits proceeds and
obligations of the owner of such securities arising from or in connection with such
securities whether now owned or hereafter acquired
Assignor Washington Mutual Inc a Washington corporation and its successors
and assigns
Section 102 General Interpretive Principles
For purposes of this Agreement except as otherwise expressly provided or
unless the context otherwise requires
a the terms defined in this Agreement have the meanings assigned to them
in this Agreement and include the plural as well as the singular and the
use of any gender herein shall be deemed to include the other gender
b accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting
principles
references herein to Articles Sections Subsections Paragraphs
and other subdivisions without reference to a document are to designated
Articles Sections Subsections Paragraphs and other subdivisions of this
Agreement
d a reference to a Subsection without further reference to a Section is a
reference to such Subsection as contained in the same Section in which
the reference appears and this rule shall also apply to Paragraphs and
other subdivisions
e the words herein hereof hereunder and other words of similar
import refer to this Agreement as a whole and not to any particular
provision and
f the term include or including shall mean without limitation by reason of
enumeration
2
17535196 05129267
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002025.00007
ARTICLE II
ASSIGNMENT OF SECURITIES
Section 201 Assignment of Securities
With respect to the Securities listed on Exhibit A attached hereto Assignor
hereby contributes transfers assigns sets over and conveys to Assignee without
recourse but subject to the terms of this Agreement all of Assignors right title and
interest whether now owned or hereafter acquired in
and to the Securities
Upon execution and delivery of this Agreement by Assignor and Assignee all
rights and benefits arising out of the Securities which come into the possession of
Assignor including but not limited to funds which may be received by Assignor on or in
connection with the Securities and the ownership of all records and documents with
respect to the Securities which are prepared by or which come into the possession of
Assignor shall immediately vest in Assignee
Assignee acknowledges that the assignment by Assignor to Assignee under this
Agreement are intended to qualify as taxfree transactions under Section 351 of the
Code
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 301 Mutual Representations and Warranties Each party hereby
represents and warrants to the other that it has all requisite power and authority to enter
into and perform its obligations under this Agreement
It is understood and agreed that the representationsand warranties set forth in
this Article V shall survive delivery of the respective Securities to the Assignee and shall
continue throughout the term of this Agreement
ARTICLE IV
COSTS
Section 401 Costs
Each partyshall bear its own costs and expenses All other costs and expenses
incurred in
connection with the transfer and delivery of the Securities including without
limitation recording and filing fees shall be paid by Assignee
Each remittance or distribution made pursuant to this Agreement shall be made
in the manner agreed to by the parties To the extent that the amount of a remittance or
distribution made pursuant to this Agreement is greater than the amount that was
supposed to be made each party agrees to give prompt written notice thereof to the
other party after discovery thereof including the amount of such remittance or
distribution that was paid in error and to refund such overpayment immediately
3
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ARTICLE V
MISCELLANEOUS PROVISIONS
Section 501 Amendment
This Agreement may be amended from time to time only by written agreement
signed by Assignor and Assignee
Section 502 Governing Law
This Agreement shall be construed in accordance with the internal laws of the
State of Washington except to the extent preempted by federal law and without
reference to the choice of law doctrine of such state and the obligations rights and
remedies of the parties hereunder shall be determined in
accordance with such laws
Section 503 Notices
All demands notices and communications hereunder shall be in writing and shall
be deemed to have been duly given if personallydelivered at or mailed by registered or
certified mail postage prepaid to a in the case of Assignor
Washington Mutual Inc
1301 Second Avenue WMC 1411
Seattle Washington 98101
Attention Corporate Secretary
or such other address as may hereafter be furnished by Assignor to Assignee in writing
and
b in the case of Assignee
Washington Mutual Bank
1301 Second Avenue WMC 1411
Seattle Washington 98101
Attention Corporate Secretary
or such other address as may hereafter be furnished by Assignee to Assignor in writing
Section 504 Merger Severability of Provisions
This Agreement and the documents and instruments referred to herein
constitute the entire agreement of and is the final and complete expression of the parties
relating to the subject matter of this Agreement and supersedes all prior or
contemporaneous negotiations and agreements whether oral or written relating to the
subject matter hereof
If any one or more of the covenants agreements provisions or terms of this
Agreement shall be held invalid for any reason whatsoever then such covenants
4
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agreements provisionsor terms shall be deemed severable from the remaining
covenants agreements provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisionsof this Agreement If the invalidity of
any part provision representation or warranty of this Agreement shall deprive any party
of the economic benefit intended to be conferred by this Agreement the parties shall
negotiate in good faith to develop a structure the economic effect of which is nearly as
possible the same as the economic effect of this Agreement without regard to such
inability
Section 505 Execution Successors and Assicros
This Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts each of which when so executed
shall be deemed to be an original such counterparts together shall constitute one and
the same agreement This Agreement shall inure to the benefit of and be binding upon
Assignor and Assignee and their respective successors and assigns
Signatures on Following Page
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IN WITNESS WHEREOF the parties have caused this Agreement to be
executed by their respective duly authorized officers on the dates shown below to be
effective as of the effective date first set forth above
WASHINGTON MUTUAL BANK
By$
Name zht irTitlet jA
r1WASHINGTONMUTUAL INC
ByName1tTitle VVj f vol
s
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EXHIBITA
SECURITIES
I Washington Mutual Preferred Cayman I Ltd 725 Perpetual Noncumulative
Preferred Securities Series A1
ii Washington Mutual Preferred Cayman I Ltd 725 Perpetual Noncumulative
Preferred Securities Series A2iii Washington Mutual Preferred Funding Trust FixedtoFloating Rate Perpetual
Noncumulative Trust Securities
iv Washington Mutual Preferred Funding Trust II FixedtoFloating Rate Perpetual
Noncumulative Trust Securities
v Washington Mutual Preferred Funding Trust Ill FixedtoFloating Rate Perpetual
Noncumulative Trust Securities
vi Washington Mutual Preferred Funding Trust IV FixedtoFloating Rate Perpetual
Noncumulative Trust Securities
vii Washington Mutual Preferred Funding LLC FixedtoFloating Rate Perpetual
Noncumulative Preferred Securities Series 2006A
viii Washington Mutual Preferred Funding LLC 725 Perpetual Noncumulative
Preferred Securities Series 2006B
ix Washington Mutual Preferred Funding LLC FixedtoFloating Rate Perpetual
Noncumulative Preferred Securities Series 2006C
x Washington Mutual Preferred Funding LLC FixedtoFloating Rate Perpetual
Noncumulative Preferred Securities Series 2007A
xi Washington Mutual Preferred Funding LLC FixedtoFloating Rate Perpetual
Noncumulative Preferred Securities Series 2007B
ii Any and all right title and interest of the Washington Mutual Inc in and to
Washington Mutual Preferred Cayman I Ltd WaMu Cayman Washington
Mutual Preferred Funding Trust WaMu Delaware I Washington Mutual
Preferred Funding Trust II WaMu Delaware Iln Washington Mutual Preferred
Funding Trust
III WaMu Delaware Ill and Washington Mutual Preferred
Funding Trust IV WaMu Delaware IV and together with WaMu Cayman
VJaMu Delaware I WaMu Delaware 11 and WaMu Delaware III the Trusts
including any interests of the Trusts in any of the Securities
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Washington Mutual
CONFIDENTIAL TREATMENT QUESTEDSohn F Robinson
Executive Vice President
Corporate RiiskManagement
February 23 2006
Darrel Dochow
Deputy Regional Director West Region
Office ofThrift Supervision
101 Stewart Street Suite 10 10
Seattle WA 981041048
Re Washington Mutual Bank Docket Number 08551 Request for
confirmation of capital treatment of two classes ofpreferred stock
Dear Mr Dochow
fin behalf of Washington Mutual Inc I I I am writing with reference to the notice
filed January 30 2006 by Washington Mutual Bank WMB to establish a new
subsidiary Washington Mutual Preferred Funding LLC VilMPF for the purpose of
issuingtwo classes of preferred securities to be eligible far inclusion in core capital of
WMB the Notice You provided notice of the nonobjection of the Office of Thrift
Supervision OTS to the establishment of WMPP by your letter dated February 9 2006
As you are aware in the Notice WMB requested the OTS confirm that the sale of the
Cayman Co Preferred Securities and the Delaware Issuer Securities as defined in the
Notice to outside investors constitutes the sale of the LLCPreferred Securities as defined
in the Notice to outside investors and that the LLC Preferred Securities qualify for
inclusion in core capital ofWMB In connection wit=h thatrequest WM1 hereby undertakes
that if as a result of Supervisory Event as defined inthe Notice WMI exchanges its
Holding Company Shares as defined in the Notice for Cayman Co Preferred Securities
and the l ielaware Issuer Securities or if WTI subsequent to such exchange a quires the
LLC Preferred Securities W IIWill contribute to VMB the Cayman Co Preferred
Securities and the Delaware IssuerSecurities or as appropriate the LLC Preferred
Securities
If you have any questions regarding this letter please call RobertMonheit at
212 3266104 or me at 206 4906100
SiereI
oho F Robinson
Executive Vice President
Corporate Risk Management
12111 Third Avenue
Seattle WA 981
2064906€3Ephone
fax 206 3 5I8
CONFIDENTIAL
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By:Name: Steve RotellaTitle: President and Chief Operating Officer
CONFIDENTIAL
WaMue
Mailstop: WMC 33011301 Second AvenueSeattle, WA 98101
206-500-8302 direct [email protected]
Via Electronic Mall
September 25, 2008
Office of Thrift SupervisionExaininationsAttn: John BissetAttn: Benjamin Franklin
WMI will Issue a press release on September 26, 2008 announcing that each Conditional Exchange willoccur at 8:00 am. New York time on September 26, 2008. Pursuant to Section 2 of each ExchangeAgreement, the Conditional Exchange will then occur automatically at that time, and WMI will becomethe owner of all the Delaware issuer trust securities, and all the Preferred Securities issued byWashington Preferred Funding (Cayman) I Ltd. (the "Cayco Preferred Seciiritles") The occurrence of theConditional Exchange has the effect of dissolving each of the Delaware issuer trusts, so that the WMPFPreferred Securities held by the trusts will be owned by WMI as a result of such dissolution. In any event,effective September 25, 2008, WMI has assigned to WMB all of its right, title and interest to the Delawatrust securities, the Cayco Preferred Securities and the WMPF Preferred Securities, and upon receiptthe Delaware trust securities, the Cayco Preferred Securities and the WMPF Preferred Securities,will immediately contribute and transfer same to WMB, and such contribution and transfer will occurregardless of any events which may occur prior to such contribution and transfer.
Sincerely,
WASHINGTON MUTUAL, INC.
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Ilia Electronic Mall
Se,,!en,h.r 25, 2008
Office of Thrift Supervision Examinations Attn: John Bisset Attn: Benjamin Franklin
CONFIDENTIAL
Mailstop: WMC 3301 1301 Second Avenue Seatile, WA 98101
206-500-8302 direct phone [email protected]
WMf wm Issue a press release on 2008 announcing that each Conditional will
occur at 8:00 am. New York time on 2008 .. Pul'Su.ntto Section 2 of each Exc;hal1Qe
Agr.emen~ lhe Conditional then occur at that time, and WMI will become
the owner of all the Delaware and all the Securities Issued by
Washington Preferred Funding (Cayman) I Ltd; (lhe Preferred Securities"). The occurrence afth.
Condmonal has the effecl of dissolving each Delaware Issuer trusts, so that the WMPF
Preferred Securities by the trusts WIll be owned by WMI .s a re5uft of such dl .. ". lulion. In .ny~ven~
effeclive September 25, 2008, WMI has to WMB all of its right, titie and interest to the Delawa 1I.JlJ.\ trust securitie., the Cayco Preferred and the WMPF Preferred Securities, end recelp!
the Delaware trust securlH.s, the Cayco Preferred Securities and the WMPF Preferred Se"uritle.,
will contribute and transfer .ame to WMB, and such contribution and !ransfer WIll occur
regardless of any events which may occur plior to such contrtbull"n and transfer. '
Sincerely,
WASHINGTON MUTUAL, INC.
Title: President and Chief 'Op,''''!ing Officer I I I I I I I I I
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CONFIDENTIAL
ASSIGNMENT AGREEMENT
between
WASHINGTON MUTUAL BANK,as Assignee
and
WASHINGTON MUTUAL, INC.,as Assignor
Effective as of September 25, 2008
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ASSIGNMENT AGREEMENT
175351% 05129267
between
WASHINGTON MUTUAL as A$.,ign,~e
and
WASHINGTON as As"lallor
Effective as
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2008
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ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (as amended, modified or supplementedfrom time to time after the date hereof, the "Agreement') is effective as of September 25,2008, and is made by and between WASHINGTON MUTUAL BANK, a federally-chartered savings association, as Assignee (the "Assignee), and WASHINGTONMUTUAL, INC., a Washington corporation, as Assignor (the 4Assignor').
RECITALS
(A) Assignor wishes to assign to Assignee certain securities, and Assigneewishes to accept such assignment, which Securities shalt be assigned upon theexecution of this Agreement.
AGREEMENT
In consideration of the premises and the mutual agreements hereinafter set forth,and for other good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the Assignee and Assignor agree as follows:
ARTICLE I
DEFINITIONS: GENERAL INTERPRETIVE PRINCIPLES
Section 1.01 Definitions.
Whenever used in this Agreement, the following words and phrases, unless thecontext otherwise requires, shall have the following meanings:
Agreement: This Assignment Agreement, including all exhibits hereto, and all,amendments hereof and supplements hereto.
Certificate: Any instrument constituting evidence of ownership of a Security.
Effective Date: September 25, 2008.
Code: The Internal Revenue Code of 1986, as amended, and the reguiationspromulgated thereunder and rulings issued thereunder. Section references to the Codeare to the Code, as in effect as the date of this Agreement and any subsequentprovisions of the Code, amendatory thereof, supplemental thereto or substitutedtherefore.
Assignment The assignment to Assignee by Assignor of Securities pursuant tothis Agreement
Delivery: Is deemed to occur as of September 25, 2008.
WMIIIINMI Mester SecuritiesAssignment Agreement
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CONFIDENTIAL
. THIS ASSIGNMENT AGREEMENT (as modified or supplemented
from time 10 time Ihe dale hereof, the "Agreemenf') is as of September
2008, and is made and between WASHINGTON MUTUAL BANK, a federally-
chartered savings as Assignee and WASHINGTON
MUTUAL, INC., a corporation, as Assignor
RECITALS
(Al wishes 10 execution
10 assign to Assignee certain s:,~~:;~~,s~ and A.,,10;1ee
such assignment, which Securities shall be a upon the
Agreement.
AGREEMENT
In consideralion of the premises and the mutual hereinafter sel forth,
and for other good and valuable the and suffiCiency of which are
aclmc1wlildgled, the and Assignor agree as follows:
ARTICLE I
Section 1,01.
Whenever Ilsed in this Acree,mlmt.the follOWing words and ohlrases. unless the
context otherwise the foll"wi"9 m,,,arlinos:
ame'nd;~~~~~ This Assignment Agreement including all exhibits supplements hereto.
"ndall
!&!!i!i!;;l!!J,,: Any instrument constituting evidence of ownership of a Security.
2008.
The Internal Revenue Code of 1986, as amoencled, and the regulations
prctmLllgalted !.hereLlndler and rulings issued thereunder. Section references to the Cod"
are to as in effect as the date of this and any subsequent
amendatory thereof, thereto or substituted
Agr~::~Jl: The "J>."innm"nt to A.,.i"""" by Assignor of SecurHies pun~ua'n!to
this
Is deemed to occur as of $e'JIs,nb<" 25, 2008.
WMSMMI Master Sooulitl .. Asslgnment Agreement
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Person: Any individual, corporation, limited liability company, partnership, jointVenture, association, joint-stock company, trust, unincorporated organization orgovernment or any agency or political subdivision thereof.
Assignee: Washington Mutual Bank, a federally-chartered savings association,and its successors and assigns.
Securities: The securities listed in Exhibit A that are the subject of thisAgreement. The term 'Securities" includes, without limitation, such securities, anyCertificates corresponding to such securities, and all other rights, benefits,-proceeds andobligations of the owner of such securities arising from or in connection with suchsecurities, whether now owned or hereafter acquired.
Assignor. Washington Mutual, Inc, a Washington corporation, and its successorsand assigns.
Section 1.02. General Interpretive Principles.
For purposes of this Agreement, except as otherwise expressly provided orunless the context otherwise requires:
a) the terms defined in this Agreement have the meanings assigned to themin this Agreement and include the plural as well as the singular, and theuse of any gender herein shall be deemed to include the other gender;
b) accounting terms not otherwise defined herein have the meaningsassigned to them In accordance with generally accepted accountingprinciples;
c) references herein to "Articles," "Sections," 'Subsections,' "Paragraphs,"and other subdivisions without reference to a document are to designatedArticles, Sections, Subsections, Paragraphs and other subdivisions of thisAgreement;
d) a reference to a Subsection without further reference to a Section Is areference to such Subsection as contained in the same Section in whichthe reference appears, and this rule shall also apply to Paragraphs andother subdivisions;
e) the words "herein," hereof," °hereunder,' and other words of similarimport refer to this Agreement as a whole and not to any particularprovision; and
f) the term 'include or "including" shall mean without limitation by reason ofenumeration.
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217535196 05129267
e:,:~~~A~'n~:Y~,iindiVidual, corporation, limifed li~biJity cnrnDa,nv partnership, joint Venture, joint-stock company, trust: organization or
. govemment or any agency or political subdivision "'"""".
&;;illl!!~: Washington Mutual and Hs successors and assigns.
a federally"chartered saviinos aSll'ociation,
The securities listed in Exhibit A that are the of this 'Securiti",,' includes. without limitation, such sacurfties. any
to such and all other rights. benefits. proceeds and of the owner such securities from or in connection with such
whelher now owned or hereafter ar .. ,ui!-ed .
• ;~~!Q.[: Washington Mutual. Inc:. a Washington corporation, and its successors and a,
Section 1.02.
For "l!!'nn, .. ,~ of this Agreement, as othelWise expressly prc,vidied or unless the otherwise requires:
al
b)
0)
d)
e)
the lenns defined in this have Ihe meanings assigned to them In this Agreement and the plural as well as Ihe singular, and the use of any gender herein shall be deemed to include the other gender;
"~;~~~:;:;:~ terms not otherwise defined herein have the meanings a them in accordance WITh generally accounting
references herein 10 'Articles," • 'SllbseotJon,s, 'f:~~a3~::~~;;ed and other subdivisions without reference to II document are to Articles, and other subdivisions of Ihls Agreement;
a reference to a Subsection without further reference to a Section Is a reference to such Subsection as oontained in the same Section in which the reference appears, and Ihis rule shall also apply to and other subdivisions;
words " 'hereof," 'hereunder," and other words ofsimilar refer to this Agreement as a whole and not to any particular
prc.vlsllon; and
l) the tSI111 "include" or "including' shall mean vAthoutlimilaiion by reason of enumeration,
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ARTICLE II
ASSIGNMENT OF SECURITIES
Section 2.01. Assignment of Securities.
With respect to the Securities listed on Exhibit A attached hereto, Assignor• hereby contributes, transfers, assigns, sets over and conveys to Assignee, withoutrecourse, but subject to the terms of this Agreement, all of Assignor's right, title andinterest, whether now owned or hereafter acquired, In and to the Securities.
Upon execution and delivery of this.Agreement by Assignor and Assignee, allrights and benefits arising out of the Securities which come into the possession ofAssignor, including but not limited to funds which may be received by Assignor on or inconnection with the Securities, and the ownership of all records and documents withrespect to the Securities which are prepared by or which come into the possession ofAssignor, shall immediately vest in Assignee,
Assignee acknowledges that the assignment by Assignor to Assignee under thisAgreement are intended to qualify as tax-free transactions under Section 351 of theCode.
ARTICLE III
REPRESENTAT!QNS AND WARRANTIES
Section 3.01. Mutual Representations and Warranties,. Each party herebyrepresents and warrants to the other that it has all requisite power and authority to enterinto and perform its obligations under this Agreement.
It is understood and agreed that the representations and warranties set forth Inthis Article V shall survive delivery of the respective Securities to the Assignee, and shallcontinue throughout the term of this Agreement.
ARTICLE IV
COSTS
Section 4.01. Costs.
Each party shall bear its own costs and expenses. All other costs and expensesincurred in connection with the transfer and delivery of the Securities, Including withoutlimitation recording and filing fees, shall be paid by Assignee.
Each remittance or distribution made pursuant to this Agreement shall be madein the manner agreed to by the parties. To the extent that the amount of a remittance ordistribution made pursuant to this Agreement is greater than the amount that wassupposed to be made, each party agrees to give prompt written notice thereof to theother party after discovery thereof, including the amount of such remittance ordistribution that was paid in error, and to refund such overpayment immediately.
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ARTICLE II
With respect to the Securilies listed on Exhibft A a!!ached hereto, Assignor
contributes, assigns, over and conveys to Assignee, without .
recourse, but to the terms of this all of Assigl1o~s right,ltlle and
interest, whether now owned or hereafter acquired, and to the Securities,
execution and delivery of this Agreement by As,siol'Of
rights out of the Securities which rome ;nt" t"A
Assignor, including but limited to funds which may be
connection with the Securities, and the ownership of all records
re!lpect to the Secumies which are or which come inlo the
Assigrlor, shall immediately vest in As,sigrlee.
all of on orin with
of
Aor,,~rr~:i~::~ acknowledges that the a::~~~~~~~~~~ are intended to qualify as tax-free
Asl;;grlee underthis oflhe
ARTICLE III
enter
It is understood and that the representations and warranties set forth In
this Article V shall survive del'iverv of the respective Securi!ies to the and shall
continue throughout the term
ARTICLE IV
Section 4.01.
Each shall bear fts own costs and expens .. s. All other costs and exp,emsoo
Incurred In with the transfer and delivery of the Including
limitation recording and filing shall be by Assignee.
Eaoh remillance or distribution made pursuant to this shall be made
in the To the extent that Ihe amount of a remittance or
distrtbution Agreement the amount that was
SUI)P~sed to be nro,mo" wriit"n noliee thereof to
after discoII'ery Ihe",,,,f, 1I10,a{""" the of such remittance or
distribution that was such overpayment imlllediately.
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ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. Amendment.
This Agreement may be amended from time to time only by written agreementsigned by Assignor and Assignee.
Section 5.02. Governing Law. ..
This Agreement shall be construed In accordance with the internal laws of theState of Washington, except to the extent preempted by federal law and withoutreference to the choice of law doctrine of such state, and the obligations, rights andremedies of the parties hereunder shall be determined in accordance with such laws.
Section 5.03. Notices.
All demands, notices and communications hereunder shall be in writing and shallbe deemed to have been duly given if personally delivered at or mailed by registered orcertified mail, postage prepaid, to (a) in the case of Assignor,
Washington Mutual, Inc.1301 Second Avenue, WMC 1411Seattle, Washington 98101Attention: Corporate Secretary
or such other address as may hereafter be furnished by Assignor to Assignee in writing;and
b) in the case of Assignee,
Washington Mutual Bank1301 Second Avenue, WMC 1411Seattle, Washington 98101Attention: Corporate Secretary
or such other address as may hereafter be furnished by Assignee to Assignor in writing.
Section 5.04. Merger: Severability of Provisions.
This Agreement, and the documents and instruments referred to herein,constitute the entire agreement of and is the final and complete expression of the partiesrelating to the subject matter of this Agreement, and supersedes all prior orcontemporaneous negotiations and agreements, whether oral or written, relating to thesubject matter hereof.
If any one or more of the covenants, agreements, provisions or terms of thisAgreement shall be held invalid for any reason whatsoever, then such covenants,
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ARTICLE V
SectionS.01. llmruJf!l!:!lE!l1
This Aoreement be amended from time to time only written agreement
signed As"lgn,orand
Section 5.02 . .\2Q'l§LolDJaklM,·.
This Agreemenl shall be In the intemallaws of the
Slate of Washington, 10 the eldent by federal law and without
reference to the choice of doctrine of such and the and
remedies of the hereunder shall be determined In accordance such laws.
Section 5.03. Nolices.
All notices and communications hereunder shall be in writing and shall
be deemed to have been if personally delivered at or mailed by registered or
certified (a) in the case of Assignor.
W"shing'lon Mutual. Inc. 1301 Second Avenue. WMC 1411 "",,:me. Washington 98101 Attention: Corporate Se,orelary
or such oth"r address as may hereafter be furnished by Assignor to ASJ<im1M in writing;
and
b) in the Case
Washington MlJlual Bank 1301 Second WMC 1411 ",",ame. Washington Atten!ion: COlJXlI·ate Se,eret:ary
or such other address asmay hereafter be furnished by As"ig"ss!" Assignor in writing.
Section 5.04.
This and the documents and instruments referred 10 herein,
constitu1e entire agreement of and is the and expression of the
rel,alir,,, to the subject malter and all plior or
contemporaneous agreements. oral or written, rab,tinlg to the
subject malle,
one or more of the provisions or terms of this
be held invalid for any reason whatsoever, then such co,'en,.nbs.
4 17535196 ()Sl29261
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agreements, provisions or terms shall be deemed severable from the remainingcovenants; agreements, provisions or terms of this Agreement and shall in no way affectthe validity or enforceability of the other provisions of this Agreement. If the invalidity ofany part, provision, representation or warranty of this Agreement shall deprive any partyof the economic benefit intended to be conferred by this Agreement, the parties shallnegotiate in good faith to develop a structure the economic effect of which is nearly aspossible the same as the economic effect of this Agreement without regard to suchinability.
Section 5,05. Execution; Successors and Assigns.
This Agreement may be executed in one or more counterparts and by thedifferent parties hereto on separate counterparts, each of which, when so executed,shall be deemed to be an original; such counterparts, together, shall constitute one andthe same agreement. This Agreement shall inure to the benefit of and be binding uponAssignor and Assignee and their respective successors and assigns.
[Signatures on Following Page]
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17535196 05/232675
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provisions·orterms shall be deemed severable from the ren1ai"ino
covenants, or ielTllS cif this Agreement and shall in no way affect
the validity Or of the other provisions of this If the Invalidity of .
any part, provision, or warranty althis Agreementshail deprive any party
of the economic Intended to be conferred Ihls Agreement, Ihe parties shall
negoliale in good faith to develop a structure Ihe economic effect of which is Meany as
fn~~~i~~ the same as Ihe economic effect of this Agreement without regard 19 such
Aareement may be executed In one Of more counterparts and by the
different hereto on counterparts, each afwhlch, when so "x"cU""U,
shall bede"m.,d to be an such together, shall constitute one and
the same This shall inure 10 the benefit of and be binding upon
Assignee respective successors and a .. ,ians.
[Signatures on Following
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IN WITNESS WHEREOF, the parties have caused this Agreement to beexecuted by their respective duly authorized officers on the dates shown below, to beeffective as of the effective date first set forth above.
By.Name: ,•.,414,4—A
5e6CONre Fre*trfril--
WASHINGTON MUTUAL, INC.
esti/Alp Name.Title: Ice.cA.Arkii.c vict- F(rWeti1-
WASHINGTON MUTUAL BANK
.4:gokilit,.
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-.",.:
IN WITNESS WHEREOF, the parties have caused Ihis Agreement to be executed by their respective duly authorized officers on the dates shollln below, to be effective as of the effective date first set forth above.
WASHINGTON MUTUAL, INC.
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EXHIBIT A
SECURITIES
(i) Washington Mutual Preferred (Cayman)] Ltd. 7.25% Perpetual Non-cumulativePreferred Securities, Series A-1
(ii) Washington Mutual Preferred (Cayman) I Ltd. 7.25% Perpetual Non-cumulativePreferred Secirrities, Series A-2
(iii) Washington Mutual Preferred Funding Trust Fixed-to-Floating Rate PerpetualNon-cumulative Trust Securities
(iv) Washington Mutual Preferred Funding Trust II Fixed-to-Floating Rate PerpetualNon-cumulative Trust Securities
(v) Washington Mutual Preferred Funding Trust III Fixed-to-Floating Rate PerpetualNon-cumulative Trust Securities
(vi) Washington Mutual Preferred Funding Trust IV Fixed-to-Floating Rate PerpetualNon-cumulative Trust Securities
(vii) Washington Mutual Preferred Funding LLC Fixed-to-Floating Rate PerpetualNon-cumulative Preferred Securities, Series 2006-A
(viii) Washington Mutual Preferred Funding LLC 7.25% Perpetual Non-cumulativePreferred Securities, Series 2005-B
(ix) Washington Mutual Preferred Funding LLC Fixed-to-Floating Rate PerpetualNon-cumulative Preferred Securities, Series 2006-C
(x) Washington Mutual Preferred Funding LLC Fixed-to-Floating Rate PerpetualNon-cumulative Preferred Securities, Series 2007-A
(xi) Washington Mutual Preferred Funding LLC Fixed-to-Floating Rate PerpetualNon-cumulative Preferred Securities, Series 2007-B
(xii) Any and all right, title and interest of the Washington Mutual, Inc. in and toWashington Mutual Preferred (Cayman) I Ltd. ("WaMu Cayman"), WashingtonMutual Preferred Funding Trust ("WaMu Delaware Washington MutualPreferred Funding Trust II ("WaMu Delaware 111, Washington Mutual PreferredFunding Trust ill ("WaMu Delaware III") and Washington Mutual PreferredFunding Trust IV ("WaMu Delaware IV' and, together with WaMu Cayman,WaMu Delaware I, WaMu Delaware II and WaMu Delaware Ill, the 'Trusts"),including any interests of the Trusts In any of the Securities
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002025.00012
17535196 05129267
Restricted For
CONFIDENTIAL
EXHIBIT A
SECURITIES
(i) Washington Mutual Preferred (Cayman) I Ltd. 7.25% Perpetual Non-cumulative Preferred Securities, Series A-l
Iii) Washington Mulual Preferred (Cayman) I Ltd. 7.25% Perpetual Non-cumulative Preferred Series A-2
(Iii) Mutual Funding Trust Fixed-to-FloatingRate Perpetual Non-cumulalive Trust Securities
(iv) MlIlual Preferred FUlndi"n Truslll Rate Perpetual Non-cumula!iveTrust Securities
(v) Washington Mutual Preferred F'lf1dir,n Trust III Rate Perpetual Non-cumulative Trust Securities
(vi) Washington Mutual Preferred Trust IV Rale Perpetual Non-cumulalive Trust Securities
(vii) Washington Mutual Preferred F'ul,di"n Rate peillel:ual Non-cumulalive Preferred 2006-A
(viii) Washington Mutual Preferred Funding LLC 7.25% PA,mel:ual Non-cumulative Preferred Series 2006-8
Ox) Washington Mutual Non-cumulative Preferred !,:,,,,,, "III".
(x) Washington Millu,,1 Preferred Funding lLC Rate Perpe:lual . Non-cumulative Preferred Securities, Series 2007-A Washington Mutual Preferred Funding LLC Fixed-to-Floating Rale Perpetual Non-cumulative Preferred Securities, Series 2007-8
(xli) and all right, tille and Inlerest oflhe Washington Mutual, Inc. in and to Washington Mutual Preferred (Cayman) I ltd. ("WaMu Cayman"), Washington Mutual Preferred Funding Trust (WaMu Delaware Washington Mutual Preferred Funding Trust II rwaMu Delaware 11"), Mutual Preferred
Trusllll (WaMu Delaware III') and Washington Preferred ",,,,,.H,,~ Trust IV (WaMu Delaware IV' and, togetharwith WaMu Cayman, WaMu I, WaMu Delaware II and WaMu Delaware III, the "Trusts"), including any interests of the Trusts In any of the Securtties
17535196051:29261
I I I I ' I I I I
[ I I
r I I
I ~
in with Plan Confirmation Only WM I PC _ 500002025 00012
CONFIDENTIAL
Office of Thrift SupervisionDepartment of the Treasury West Region
Seattle Office • (206) 829-2600 • Fax: (206) 829-2620101 Stewart Street, Suite 1010Seattle, WA 98101
September 25, 2008
Board of DirectorsMr. Steve Frank, ChairmanMr. Alan Fishman, Chief Executive OfficerWashington Mutual, Inc.1301 Second AvenueSeattle, WA 98101
Members of the Board or their Representative:
The deposit outflows from Washington Mutual Bank over the past two weeks and reduction in availability ofalternative funding sources have created significant liquidity pressures for the institution. The September 7,2008 OTS Memoranda of Understanding ("MOU") the bank entered into with OTS requires WaMu to provideOTS with an analysis of the earnings, profitability and stability of all existing and projected business lines. Inaddition, the MOU places limitations on the ability of the bank to pay dividends.
Pursuant to the conditional exchange provision in the prospectus of the REIT preferred offerings of the bank,OTS concludes an "Exchange Event" has occurred and therefore directs an exchange of WaMu REITPreferred Securities to a like amount of preferred stock in Washington Mutual Incorporated.
Please let me know if you have any questions,
Sincerely,
\ Cus.#4Darrel W. DochowRegional Director
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002026.00001Restricted
Seplemb,er 25, 2008
Board of Directors
CONFIDENTIAL
Thrift SUlpervision the
Senttle Ofnce l1li (206) 829·2600 I!II Fax: (206) 829-2620 ! 0 I Stew.lIt Street, Suite 1 D! 0 SeaUle. WA 98LOI
Me. Steve Frank, Chairman Me. Alan Fishman, Chief Executive Officer Washington ~1utt.lal~ Inc. 1301 Second Avenue SeaUle, W A 98 I 0 I
Members of the Board or their Representative:
WeSf
The deposit outflows from Washington Mutual Bank over thep.st two weeks and reduction ill availability of altemative funding sources have created significant liquidity pressures for the institution, The 7, 2008 OTS Memoranda of Understanding ("MOU") the bank entered into with OTS requires WaM" to pre.Y,,!" OTS with an analysis of the e!IInings, profitability and stability of all existing and projected business lincs. In addition, ,he MOU places limitations on the ability of the bank 10 pay dividends.
Pursuant to the conditional exchange provision ill the prospectus of ,he REIT of the bank, OTS concludes all "Exchange Event" has occurred and therefore directs an of WaMu REIT Preferred Securities to a like amount of stock in Washington Mutual Incorporated.
Please let me know if you have any qUl"tioll".
Sincerely,
Darrel W, Dochow Regional Director
Use in Connection with Plan Confirmation Only WM I PC _ 500002026.00001
CONFIDENTIAL
Washington
Mutual$750,000,000
Washington Mutual Preferred Funding Cayman) I Ltd.
7.25% Perpetual Non-cumulative Preferred Securities
Automatically Exchangeable in Specified Circumstances into
Depositary Shares representing Preferred Stock of
Washington Mutual, Inc.
Washington Mutual Preferred Funding Cayman) I Ltd., a Cayman Islands exempted company limited by shares WaMu
Cayman"), will invest the proceeds of
its 7.25% Perpetual Non-cumulative Preferred Securities, Series A-1, liquidation
preference $100,000 per security the Series A-1 WaMu Cayman Preferred Securities"), and
its 7.25% Perpetual Non-
cumulative Preferred Securities, Series A-2, liquidation preference $10,000 per security the Series A-2 WaMu Cayman
Preferred Securities" and, together with the Series A-1 WaMu Cayman Preferred Securities, the WaMu Cayman Preferred
Securities") offered hereby
in
a like amount
of 7.25% Perpetual Non-cumulative Preferred Securities, liquidation preference
$1,000 per security the Fixed Rate Company Preferred Securities"), of Washington Mutual Preferred Funding LLC, a Delaware
limited liability company the Company"). The terms of
the Series A-1 WaMu Cayman Preferred Securities and the Series A-2
WaMu Cayman Preferred Securities are identical except for their per security liquidation preference. WaMu Cayman will have
no material assets other than the Fixed Rate Company Preferred Securities. The financial entitlements of
each WaMu Cayman
Preferred Security will be substantially the same as
the financial entitlements of
a like amount of
Fixed Rate Company Preferred
Securities, with the consequence that dividends and the redemption price
on the WaMu Cayman Preferred Securities will
be
payable on the same dates and in the same amounts as
the corresponding dividends and redemption price, as
applicable, on a
like amount
of
Fixed Rate Company Preferred Securities. The Company's initial material assets will consist
of
indirect interests
in mortgages and mortgage-related assets originated by Washington Mutual Bank as
described herein.
Dividends on the Fixed Rate Company Preferred Securities will be payable
if, when and as
declared by
the Company's
Board of
Managers out of
legally available funds, on a non-cumulative basis at
an annual rate of
7.25% on the liquidation
preference per security, quarterly
in
arrears
on March 15, June 15, September
15 and December
15
of each year,
commencing
on June 15, 2006 each, a Dividend Payment Date"),
or
the next Business Day
if
any such day
is
not a
Business Day.
If the Office
of
Thrift Supervision together with any successor regulator, the OTS") so directs following the
occurrence of
an Exchange Event as
described herein, each WaMu Cayman Preferred Security will be automatically
exchanged for depositary shares representing a like amount
of Washington Mutual, Inc.'s Series J Perpetual Non-
cumulative Fixed Rate Preferred Stock.
See Risk Factors" beginning on page for a description of
the risk factors you should consider before you invest in the
securities offered hereby.Continued o
n next page)
Offering price: $100,000.00 per Series A-1 WaMu Cayman Preferred Security
$ 10,000.00 per Series A-2 WaMu Cayman Preferred Security
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED THE SECURITIES ACT"). THE SERIES A-1 WAMU CAYMAN PREFERRED SECURITIES AREBEING OFFERED AND SOLD ONLY
IN
THE UNITED STATES AND ONLY TO U.S. PERSONS THAT ARE BOTH QUALIFIED
INSTITUTIONAL BUYERS" WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND QUALIFIED
PURCHASERS" WITHIN THE MEANING OF SECTION 2(a)(51) OF THE U.S. INVESTMENT COMPANY ACT OF 1940, AS
AMENDED THE INVESTMENTCOMPANY ACT"» IN RELIANCE ON AN EXEMPTION FROM REGISTRATION PURSUANT TORULE 144A. THE SERIES A-2 WAMU CAYMAN PREFERRED SECURITIES ARE BEING OFFERED AND SOLD ONLY TONON-U.S. PERSONS
IN
TRANSACTIONS OUTSIDE THE UNITED STATES
IN
RELIANCE ON AN EXEMPTION FROMREGISTRATION PURSUANT TO REGULATION S UNDER THE SECURITIES ACT. PROSPECTIVE PURCHASERS OF SERIES A-1
WAMU CAYMAN PREFERRED SECURITIES ARE HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.
THE SECURITIES ARE NOT TRANSFERABLE EXCEPT
IN
ACCORDANCE WITH THE RESTRICTIONS DESCRIBED UNDER
NOTICE TO INVESTORS."
The Initial Purchasers expect to deliver the Series A-1 WaMu Cayman Preferred Securities through the facilities of
The
Depository Trust Company and the Series A-2 WaMu Cayman Preferred Securities through the facilities
of
Clearstream
Banking, societe anonyme, and Euroclear Bank S.A./N.V.,
as operator
of
the Euroclear System,
as participants
in
The
Depository Trust Company, in each case, against payment in New York, New York on
or
about March 7,
2006.
Goldman, Sachs Co.
Senior Co-Manager
Offering Circular dated February 24, 2006.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00001
Continued from previous page)
The Fixed Rate Company Preferred Securities will not
be redeemable
at
the option
of
the Company prior
to
the
Dividend Payment Date in March 2011, except upon the occurrence of
a Tax Event, an Investment Company Act Event
or a Regulatory Capital Event each
as described herein). Upon the occurrence
of a Tax Event,
an Investment
Company Act Event or
a Regulatory Capital Event, the Company may redeem the Fixed Rate Company Preferred
Securities in whole but not in part. On or
after the Dividend Payment Date in March 2011, the Company may redeem
the Fixed Rate Company Preferred Securities
in
whole
or
in
part. Any redemption will
be subject
to
the prior approval
of
the OTS and will
be
at a redemption price equal
to
the liquidation preference per Fixed Rate Company Preferred
Security, plus declared but unpaid dividends, if any, plus a U.S. Treasury-based make whole" amount if the
redemption occurs prior
to
the Dividend Payment Date
in
March 2011.
The WaMu Cayman Preferred Securities will be issued only in book-entry form. Each individual purchaser or
group of
affiliated purchasers that acquires Series A-1 WaMu Cayman Preferred Securities in the initial offering must
acquire at
least three Series A-1 WaMu Cayman Preferred Securities having an aggregate liquidation preference of
$300,000.
The Initial Purchasers are offering the Series A-2 WaMu Preferred Securities, which are being offered outside the
United States to non-U.S. persons in reliance upon Regulation S under the Securities Act, through their respective
selling agents.
Application will
be made
to
list the Series A-2 WaMu Cayman Preferred Securities
on the Euro MTF market
of
the
Luxembourg Stock Exchange. The Series A-1 WaMu Cayman Preferred Securities will not
be listed
on any securities
exchange or
automated dealer quotation system.
The securities offered hereby are not insured
or
guaranteed
by the U.S. Federal Deposit Insurance
Corporation.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00002
This offering circular is confidential. You are authorized to use this offering circular solely for
the purpose of
considering the purchase of
the securities described in the offering circular. WMI,
Washington Mutual Bank WMB"), University Street, Inc. University Street"), the Company,
WaMu Cayman, Washington Mutual Home Equity Trust I the Asset Trust"), Washington Mutual
Preferred Funding Trust I WaMu Delaware") and other sources identified herein have provided
the information contained in this offering circular. The Initial Purchasers named herein make no
representation or
warranty, express or
implied, as
to the accuracy or completeness of such
information, and nothing contained in this offering circular is,
or
shall be
relied upon as, a promise
or
representation by the Initial Purchasers. You may not reproduce or
distribute this offering
circular, in whole or
in part, and you may not disclose any of
the contents of
this offering circular
or use any information herein for any purpose other than considering the purchase of
the notes.
You agree to the foregoing by accepting delivery of
this offering circular.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY UNITED
STATES FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY ORDETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The distribution of
this offering circular and the offering and sale of
the securities offered
hereby in certain jurisdictions may be restricted by law. WMI, WMB, University Street, the
Company, WaMu Cayman, the Asset Trust, WaMu Delaware and the Initial Purchasers require
persons in whose possession this offering circular comes to inform themselves about and to
observe any such restrictions. This offering circular does not constitute an
offer of,
or
an
invitation to purchase, any of
the securities offered hereby in any jurisdiction in which such offer
or
invitation would be unlawful.
Notwithstanding anything herein to the contrary, each investor and each employee,
representative, or
agent of
any investor) may disclose to any and all persons, without limitation
of any kind, the tax treatment and tax structure of
the transactions contemplated herein and
all
materials of any kind including opinions or
other tax analyses) that are provided to the
investors relating to such tax treatment and tax structure. However, any information relating tothe United States Federal income tax treatment o
r
tax structure will remain confidential and the
foregoing sentence will not apply) to the extent reasonably necessary to enable any person to
comply with applicable securities laws. For this purpose, tax treatment" means United States
Federal or
state income tax treatment, and tax structure" means any facts relevant to the
United States Federal or
state income tax treatment of
the transactions contemplated herein but
does not include information relating to the identity of
the issuer of
the securities, the issuer of
any assets underlying the securities, or
any of
their respective affiliates that are offering the
securities.
No person has been authorized to give any information or
to make any representations
other than those contained in this offering circular, and, if given or
made, such information or
representations must not be relied upon as having been authorized by any of WMI, WMB,
University Street, the Company, WaMu Cayman or
the Asset Trust. Neither the delivery of
this
offering circular nor any sale hereunder will create, under any circumstances, any implication that
there has been no change in the affairs of WMI, WMB, the Company, WaMu Cayman, University
Street or
the Asset Trust since the date hereof or
that the information contained herein is correct
as
of any time subsequent to its date.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00003
NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY
DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN
ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR
CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
NO INVITATION TO SUBSCRIBE FOR WAMU CAYMAN PREFERRED SECURITIES IS
BEING MADE TO THE PUBLIC IN THE CAYMAN ISLANDS.
IN CONNECTION WITH THIS OFFERING, GOLDMAN, SACHS CO. AND ITS AFFILIATES,
ON BEHALF OF THE INITIAL PURCHASERS, MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY
AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL FOR A LIMITED
PERIOD OF TIME AFTER THE ISSUE DATE. HOWEVER, THERE MAY BE NO OBLIGATION ONGOLDMAN, SACHS CO. TO DO THIS. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME, AND MUST BE BROUGHT TO AN END AFTER A LIMITEDPERIOD.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00004
NOTICE TO INVESTORS
the following restrictions, purchasers are advised to consult legal counsel prior to
making any offer, purchase, resale, pledge or
other transfer the securities offered hereby.
Series A-1 WaMu Cayman Preferred Securities
qualified institutional buyer"
qualified purchaser"
employee benefit plan"
ERISA"),
plan"
Code"),
plan
Benefit Plan
Investor"),
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00005
F) the certificates evidencing the Series A-1 WaMu Cayman Preferred Securities will
bear a legend to the following effect:
THIS SECURITY IS ONE OF THE 7.25% PERPETUAL NON-CUMULATIVE PREFERRED
SECURITIES, SERIES A-1 SERIES A-1 WAMU CAYMAN PREFERRED SECURITIES")
ISSUED BY WASHINGTON MUTUAL PREFERRED FUNDING CAYMAN) I LTD. WAMUCAYMAN"). THE ISSUER OF THIS SECURITY HAS NOT BEEN REGISTERED AS ANINVESTMENT COMPANY UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940, AS
AMENDED THE INVESTMENT COMPANY ACT"), AND THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED THESECURITIES ACT"), AND NEITHER THIS SECURITY NOR ANY BENEFICIAL INTERESTS
HEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
TO A PERSON WHO IS BOTH A QUALIFIED INSTITUTIONAL BUYER" WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT QUALIFIED INSTITUTIONAL
BUYER") AND A QUALIFIED PURCHASER" WITHIN THE MEANING OF SECTION 2(a)(51)
OF THE INVESTMENT COMPANY ACT AND THE RULES AND REGULATIONS THEREUN-
DER QUALIFIED PURCHASER") ACQUIRING FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF A PERSON WHO IS BOTH A QUALIFIED INSTITUTIONAL BUYER AND A
QUALIFIED PURCHASER AN ELIGIBLE PURCHASER") AND EACH SUCH PERSON AND
ACCOUNT FOR WHICH SUCH PERSON IS PURCHASING A) IS NOT A BROKER-DEALER
THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN US$25 MILLION IN
SECURITIES OF ISSUERS THAT ARE NOT ITS AFFILIATED PERSONS, B) IS NOT A PLAN
REFERRED TO IN PARAGRAPH a) 1) i) D) OR a) 1) i) E) OF RULE 144A, OR A
TRUST FUND REFERRED TO IN PARAGRAPH a) 1) F) OF RULE 144A THAT HOLDSTHE ASSETS OF SUCH A PLAN, IF INVESTMENT DECISIONS WITH RESPECT TO THE
PLAN ARE MADE BY THE BENEFICIARIES OF SUCH PLAN, C) WAS NOT FORMED FOR
THE PURPOSE OF INVESTING IN WAMU CAYMAN, D) WILL HOLD AND TRANSFER AT
LEAST $100,000 LIQUIDATION PREFERENCE OF SERIES A-1 WAMU CAYMAN PRE-
FERRED SECURITIES AT LEAST ONE SERIES A-1 WAMU CAYMAN PREFERRED
SECURITY), AND E) UNDERSTANDS THAT WAMU CAYMAN MAY RECEIVE A LIST OFPARTICIPANTS HOLDING POSITIONS IN THIS SECURITY FROM ONE OR MORE BOOK-
ENTRY DEPOSITARIES. EACH PURCHASER OF THIS SECURITY OR ANY BENEFICIAL
INTERESTS HEREIN WILL BE DEEMED TO REPRESENT THAT IT AGREES TO COMPLY
WITH THE TRANSFER RESTRICTIONS SET FORTH HEREIN AND IN THE MEMORANDUM
AND ARTICLES OF ASSOCIATION OF WAMU CAYMAN AS AMENDED, THE ARTICLES
OF ASSOCIATION"), AND WILL NOT TRANSFER THIS SECURITY OR ANY BENEFICIAL
INTERESTS HEREIN EXCEPT TO AN ELIGIBLE PURCHASER WHO CAN MAKE THE SAME
REPRESENTATIONS AND AGREEMENTS ON BEHALF OF ITSELF AND EACH ACCOUNT
FOR WHICH IT IS PURCHASING. ANY PURPORTED TRANSFER OF THIS SECURITY ORANY BENEFICIAL INTERESTS HEREIN THAT IS IN BREACH, AT THE TIME MADE, OF ANY
TRANSFER RESTRICTIONS SET FORTH HEREIN OR IN THE ARTICLES OF ASSOCIATION
WILL BE VOID AB INITIO. IF AT ANY TIME WAMU CAYMAN DETERMINES IN GOOD FAITH
THAT A HOLDER OR BENEFICIAL OWNER OF THIS SECURITY OR BENEFICIAL
INTERESTS HEREIN IS IN BREACH, AT THE TIME GIVEN, OF ANY OF THE TRANSFER
RESTRICTIONS SET FORTH HEREIN, WAMU CAYMAN SHALL CONSIDER THE ACQUISI-
TION OF THIS SECURITY OR SUCH BENEFICIAL INTERESTS VOID, OF NO FORCE AND
EFFECT AND WILL NOT, AT THE DISCRETION OF WAMU CAYMAN, OPERATE TO
TRANSFER ANY RIGHTS TO THE TRANSFEREE NOTWITHSTANDING ANY INSTRUCTIONS
TO THE CONTRARY TO WAMU CAYMAN, ITS AGENT FOR REGISTRATION OF TRANS-
FER, EXCHANGE OR PAYMENT THE TRANSFER AGENT"), OR ANY OTHER INTERME-
DIARY. IN ADDITION, WAMU CAYMAN OR ITS TRANSFER AGENT MAY REQUIRE SUCH
ACQUIRER OR BENEFICIAL OWNER TO SELL THIS SECURITY OR SUCH BENEFICIAL
INTERESTS TO AN ELIGIBLE PURCHASER.
iv
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00006
NO SECURITY MAY BE PURCHASED OR TRANSFERRED TO: I) AN EMPLOYEE
BENEFIT PLAN" AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED WHETHER OR NOT
SUBJECT TO ERISA AND INCLUDING, WITHOUT LIMITATION, FOREIGN OR GOVERN-
MENTAL PLANS, II) A PLAN" WITHIN THE MEANING OF SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED THE OR III) ANY
ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS" OF ANY OF THE
FOREGOING BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR
OTHER PLAN IN SUCH ENTITY EACH OF THE FOREGOING, A BENEFIT PLAN
INVESTOR"), EXCEPT FOR AN INSURANCE COMPANY GENERAL ACCOUNT THAT
REPRESENTS, WARRANTS AND COVENANTS THAT, AT THE TIME OF ACQUISITION
AND THROUGHOUT THE PERIOD IT HOLDS THE SECURITIES, I)
IT IS ELIGIBLE FOR
AND MEETS THE REQUIREMENTS OF THE DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60, II) LESS THAN 25% OF THE ASSETS OF
SUCH GENERAL ACCOUNT ARE OR REPRESENT) ASSETS OF A BENEFIT PLAN
INVESTOR AND III) IT IS NOT A PERSON WHO HAS DISCRETIONARY AUTHORITY OR
CONTROL WITH RESPECT TO THE ASSETS OF WAMU CAYMAN OR ANY PERSON WHOPROVIDES INVESTMENT ADVICE FOR A FEE DIRECT OR INDIRECT) WITH RESPECT
TO SUCH ASSETS, OR ANY AFFILIATE OF SUCH A PERSON AND WOULD NOTOTHERWISE BE EXCLUDED UNDER 29 C.F.R. 2510.3-101 F) 1).
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OFTHE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION DTC"), TO
WAMU CAYMAN OR THE TRANSFER AGENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS
MADE TO CEDE CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USEHEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFULINASMUCH AS THE REGISTERED OWNER HEREOF, CEDE CO., HAS AN INTEREST
HEREIN.
G) the purchaser and each account for which it is purchasing:
i) is not a broker-dealer that owns and invests on a discretionary basis less
than $25 million in securities of
unaffiliated issuers;
is not a participant-directed employee plan, such as a 401(k) plan, as
referred to in paragraph a) 1) i) D) or
a) 1) i) E) of
Rule 144A, or
a trust fund
referred to in paragraph a) 1) i) F) of
Rule 144A that holds the assets of such a
plan;
was not formed for the purpose of
investing in WaMu Cayman;
iv) will hold at
least $300,000 liquidation preference of
Series A-1 WaMu
Cayman Preferred Securities i.e., at
least three Series A-1 WaMu Cayman Preferred
Securities) in the case of each initial investor, and will hold and transfer $100,000
liquidation preference of
Series A-1 WaMu Cayman Preferred Securities i.e., at
least
one Series A-1 WaMu Cayman Preferred Security) in the case of
each subsequent
investor;
v)
will provide notice of
the transfer restrictions described in this Notice to
Investors" to any subsequent transferees;
vi) acknowledges that WaMu Cayman may receive a list of
participants holding
positions in the Series A-1 WaMu Cayman Preferred Securities from one or more
book-entry depositaries; and
v
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00007
vii) may not transfer the Series A-1 WaMu Cayman Preferred Securities or
beneficial interests therein except to a transferee who can make the same representa-
tions and agreements as set forth in this Notice to Investors" and vyaMu Cayman's
Memorandum and Articles of
Association as
in effect on the issue date of
the WaMuCayman Preferred Securities together, a
s amended,
on behalf of
itself and each account for which it is purchasing.
The purchaser acknowledges that the Series A-1 WaMu Cayman Preferred Securities are
being offered only in a transaction not involving any public offering within the meaning of
the
Securities Act. The Series A-1 WaMu Cayman Preferred Securities have not been and will not be
registered under the Securities Act and WaMu Cayman has not been and will not be registered
under the Investment Company Act, and, if in the future the purchaser decides to offer, resell,
pledge or
otherwise transfer the Series A-1 WaMu Cayman Preferred Securities, such Series A-1
WaMu Cayman Preferred Securities may be offered, resold, pledged or
otherwise transferred
only in accordance with the legend on such Series A-1 WaMu Cayman Preferred Securities
described above. The purchaser acknowledges that no representation is made by WaMu
Cayman, the Company or
the Initial Purchasers as
to the availability of
any exemption under the
Securities Act or any state securities laws for resale of
the Series A-1 WaMu Cayman Preferred
Securities.
Reminder Notices
Whenever WaMu Cayman sends an annual report or
other periodic report to holders of
the
Series A-1 WaMu Cayman Preferred Securities, it will also send a reminder notice each, a
to the holders of
the Series A-1 WaMu Cayman Preferred Securities. Each
Reminder Notice will state that i) each holder of a Series A-1 WaMu Cayman Preferred Security
or an interest in a Series A-1 WaMu Cayman Preferred Security) that is a U.S. person must be
able to make the representations set forth above in paragraphs B) and G) iv) under
Series A-1 WaMu Cayman Preferred Securities Representations of
Purchasers" the
7) ii) the Series A-1 WaMu Cayman Preferred Securities or
interests in the Series A-1 WaMu Cayman Preferred Securities) are transferable only to
purchasers deemed to have made the 3(c) 7) Representations and to have satisfied the other
transfer restrictions applicable to the securities, iii) if any prospective transferee of
the
Series A-1 WaMu Cayman Preferred Securities or an interest in the Series A-1 WaMu Cayman
Preferred Securities) that is a U.S. person is determined not to be a qualified purchaser, then
WaMu Cayman will have the right exercisable in its sole discretion) to refuse to honor such
transaction, and iv) if any security holder or any holder of
an
interest in a security) that is a
U.S. person is determined not to be a qualified purchaser, then WaMu Cayman will have the right
exercisable in its sole discretion) to treat the transfer to such purchaser as null and void and
require such purchaser to sell all
of
its securities and all
interests therein) to a transferee
designated by WaMu Cayman at
the then current market price therefor. WaMu Cayman will send
a copy of each annual or
other periodic reports and each Reminder Notice) to DTC with a
request that participating organizations in DTC forward them to the security
holders or
holders of
an interest in Series A-1 WaMu Cayman Preferred Securities.
CUSIP
WaMu Cayman will cause each CUSIP" obtained for a 144A Global Security to have an
attached fixed field" that contains GRLS" and 144A" indicators.
Series A-2 WaMu Cayman Preferred Securities
Each purchaser of
Series A-2 WaMu Cayman Preferred Securities including the registered
holders and beneficial owners of
the Series A-2 WaMu Cayman Preferred Securities, as
they
vi
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00008
exist from time to time, including as a result of
transfers, in each case as
of
the time of
purchase) will be deemed to have represented and agreed as follows:
A) the purchaser is i) a non-U.S. person within the meaning of
Rule 902 of
the
Securities Act purchasing the Series A-2 WaMu Cayman Preferred Securities in an offshore
transaction in accordance with Regulation S under the Securities Act and
ii) aware that the
sale of
the Series A-2 WaMu Cayman Preferred Securities to it is being made in reliance on
Regulation S or
another exemption from the registration requirements of
the Securities Act;
B) either i) the purchaser is not a Benefit Plan Investor or
ii) the purchaser is an
insurance company general account that represents, warrants and covenants that, at
the
time of
acquisition and throughout the period it holds the securities, x)
it is eligible for and
meets the requirements of
the Department of
Labor Prohibited Transaction Class
Exemption 95-60, less than 25% of
the assets of such general account are or
represent) assets of
a Benefit Plan Investor and z) it is not a person who has
discretionary authority or
control with respect to the assets of WaMu Cayman or any person
who provides investment advice for a fee direct or
indirect) with respect to such assets, or
any affiliate of such a person and would not otherwise be excluded under
29 C.F.R. 2510.3-101 f)(1).
C) the purchaser is not purchasing the Series A-2 WaMu Cayman Preferred
Securities with a view to the resale, distribution or
other disposition thereof in violation of
the Securities Act;
D) neither the purchaser nor any account for which the purchaser is acquiring the
Series A-2 WaMu Cayman Preferred Securities will hold such Series A-2 WaMu Cayman
Preferred Securities for the benefit of any other person and the purchaser and each such
account will be the sole beneficial owners thereof for all purposes and will not sell
participation interests in the Series A-2 WaMu Cayman Preferred Securities or
enter into
any other arrangement pursuant to which any other person will be entitled to an interest in
the distributions on the Series A-2 WaMu Cayman Preferred Securities;
E) the certificates evidencing the Series A-2 WaMu Cayman Preferred Securities will
bear a legend to the following effect:
THIS SECURITY IS ONE OF THE 7.25% PERPETUAL NON-CUMULATIVE PREFERREDSECURITIES, SERIES A-2 SERIES A-2 WAMU CAYMAN PREFERRED SECURITIES")
ISSUED BY WASHINGTON MUTUAL PREFERRED FUNDING CAYMAN) I LTD. WAMUCAYMAN"). THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED THE SECURITIES ACT"), AND NEITHER
THIS SECURITY NOR ANY BENEFICIAL INTERESTS HEREIN MAY BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT 1) IN AN OFFSHORE TRANSAC-
TION MEETINGTHE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT
TO A PERSON OTHER THAN A U.S. PERSON, OR 2) IN RELIANCE UPON RULE 144A
UNDER THE SECURITIES ACT IN A TRANSACTION INVOLVING AN EXCHANGE OF THIS
SECURITY FOR A LIKE AMOUNT OF 7.25% PERPETUAL NON-CUMULATIVE PREFERRED
SECURITIES, SERIES A-1, OF WAMU CAYMAN, WHICH IS ALSO THE ISSUER OF THIS
SECURITY, BUT ONLY UPON RECEIPT BY WAMU CAYMAN'S TRANSFER AGENT OF A
WRITTEN CERTIFICATE ON BEHALF OF THE TRANSFEROR TO THE EFFECT THAT
SUCH TRANSFER IS BEING MADE TO A PERSON WHO THE TRANSFEROR REASONA-
BLY BELIEVES IS BOTH A QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT QUALIFIED INSTITUTIONAL BUYER")
AND A QUALIFIED PURCHASER" WITHIN THE MEANING OF SECTION 2(a) 51) OF
THE U.S. INVESTMENT COMPANY ACT OF 1940, AS AMENDED QUALIFIED PUR-
CHASER"), ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER WHO IS ALSO A QUALIFIED PURCHASER AN ELIGIBLE
vii
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00009
PURCHASER") IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH ALL APPLICABLE LAWS OF
THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. EACH PURCHASEROF THIS SECURITY OR ANY BENEFICIAL INTERESTS HEREIN WILL BE DEEMED TO
REPRESENT THAT IT AGREES TO COMPLY WITH THE TRANSFER RESTRICTIONS SET
FORTH HEREIN AND IN THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF
WAMU CAYMAN AS AMENDED, THE ARTICLES OF ASSOCIATION"), AND WILL NOTTRANSFER THIS SECURITY OR ANY BENEFICIAL INTERESTS HEREIN EXCEPT TO A
PURCHASER WHO CAN MAKE THE SAME REPRESENTATIONS AND AGREEMENTS ON
BEHALF OF ITSELF AND EACH ACCOUNT FOR WHICH IT IS PURCHASING. ANY
PURPORTED TRANSFER OF THIS SECURITY OR ANY BENEFICIAL INTERESTS HEREIN
THAT IS IN BREACH, AT THE TIME MADE, OF ANY TRANSFER RESTRICTIONS SET
FORTH HEREIN OR IN THE ARTICLES OF ASSOCIATION WILL BE VOID AB INITIO. IF AT
ANY TIME WAMU CAYMAN DETERMINES IN GOOD FAITH THAT A HOLDER ORBENEFICIAL OWNER OF THIS SECURITY OR BENEFICIAL INTERESTS HEREIN IS IN
BREACH, AT THE TIME GIVEN, OF ANY OF THE TRANSFER RESTRICTIONS SET FORTH
HEREIN, WAMU CAYMAN SHALL CONSIDER THE ACQUISITION OF THIS SECURITY ORSUCH BENEFICIAL INTERESTS VOID, OF NO FORCE AND EFFECT AND WILL NOT, AT
THE DISCRETION OF WAMU CAYMAN, OPERATE TO TRANSFER ANY RIGHTS TO THE
TRANSFEREE NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO WAMUCAYMAN, ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT
THE TRANSFER AGENT"), OR ANY OTHER INTERMEDIARY. IN ADDITION, WAMUCAYMAN OR ITS TRANSFER AGENT MAY REQUIRE SUCH ACQUIRER OR BENEFICIAL
OWNER TO SELL THIS SECURITY OR SUCH BENEFICIAL INTERESTS TO AN ELIGIBLE
PURCHASER.
NO SECURITY MAY BE PURCHASED OR TRANSFERRED TO: I) AN EMPLOYEE
BENEFIT PLAN" AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ERISA"), WHETHER OR NOTSUBJECT TO ERISA AND INCLUDING, WITHOUT LIMITATION, FOREIGN OR GOVERN-
MENTAL PLANS, II) A PLAN" WITHIN THE MEANING OF SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED THE CODE"), OR III) ANY
ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS" OF ANY OF THE
FOREGOING BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR
OTHER PLAN IN SUCH ENTITY EACH OF THE FOREGOING, A BENEFIT PLAN
INVESTOR"), EXCEPT FOR AN INSURANCE COMPANY GENERAL ACCOUNT THAT
REPRESENTS, WARRANTS AND COVENANTS THAT, AT THE TIME OF ACQUISITION
AND THROUGHOUT THE PERIOD IT HOLDS THE SECURITIES, I)
IT IS ELIGIBLE FOR
AND MEETS THE REQUIREMENTS OF THE DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION 95-60, II) LESS THAN 25% OF THE ASSETS OFSUCH GENERAL ACCOUNT ARE OR REPRESENT) ASSETS OF A BENEFIT PLAN
INVESTOR AND III) IT IS NOT A PERSON WHO HAS DISCRETIONARY AUTHORITY ORCONTROL WITH RESPECT TO THE ASSETS OF WAMU CAYMAN OR ANY PERSON WHOPROVIDES INVESTMENT ADVICE FOR A FEE DIRECT OR INDIRECT) WITH RESPECT
TO SUCH ASSETS, OR ANY AFFILIATE OF SUCH PERSON AND WOULD NOT
OTHERWISE BE EXCLUDED UNDER 29 C.F.R. 2510.3-101 F) 1).
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION DTC"), TOWAMU CAYMAN OR THE TRANSFER AGENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS
MADE TO CEDE CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
viii
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00010
Forced Sale of
Securities
Investment Company Act
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00011
e.g.,
DTC Actions with respect to the WaMu Cayman Preferred Securities
Bloomberg Screens, etc.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00012
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00013
Purchasers will request that Bloomberg, L.P. include the following on each Bloomberg screen containing information about the securities as applicable:
• the bottom of the "Security Display" page describing the Series A-1 WaMu Cayman Preferred Securities should state: "Iss'd under 144A/3c7" and "GRLS";
• the "Security Display" page should have a flashing red indicator stating "Additional Note Pg";
• such indicator for the WaMu Cayman Preferred Securities should link to an "Additional Security Information" page, which should state that the Series A-1 WaMu Cayman Preferred Securities are being offered in reliance on the exception from registration under Rule 144A of the Securities Act of 1933, as amended (the "Securities Act") to persons that are (i) "qualified institutional buyers" as defined in Rule 144A under the Securities Act, and (ii) with respect to U.S. Persons, "qualified purchasers" as defined under Section 2(a) (51) of the Investment Company Act of 1940, as amended; and
• the "Disclaimer" pages for the WaMu Cayman Preferred Securities should state that the securities have not been and will not be registered under the Securities Act of 1933, as amended, and Washington Mutual Preferred Funding (Cayman) I Ltd. has not been registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the WaMu Cayman Preferred Securities may not be offered or sold in the United States absent an applicable exemption from registration requirements and any such offer and sale of these securities must be in accordance with Section 3 (c) (7) of the Investment Company Act.
Legends
WaMu Cayman will not remove the legend set forth in "- Series A-1 WaMu Cayman Preferred Securities" or "- Series A-2 WaMu Cayman Preferred Securities" at any time.
Exchanges Between Rule 144A Global Security Evidencing Series A-1 WaMu Cayman Preferred Securities and Regulation S Global Security Evidencing Series A-2 WaMu Cayman Preferred Securities
The Series A-1 WaMu Cayman Preferred Securities will be evidenced by the Rule 144A Global Security and the Series A-2 WaMu Cayman Preferred Securities will be evidenced by the Regulation S Global Security, in each case, as described under "Book-Entry Issuance." An investor (including a beneficial owner) in Series A-1 WaMu Cayman Preferred Securities may sell such securities to a non-U.S. person who takes delivery in the form of an interest in the Regulation S Global Security only if the certifications described under "Book-Entry Issuance" are made and, in connection with such sale, the transferor's interest in the Series A-1 WaMu Cayman Preferred Securities evidenced by the Rule 144A Global Security is exchanged by the transferee for Series A-2 WaMu Cayman Preferred Securities evidenced by the Regulation S Global Security. Similarly, an investor (including a beneficial owner) in Series A-2 WaMu Cayman Preferred Securities may sell such securities in the United States or to a U.S. person who takes delivery in the form of an interest in the Rule 144A Global Security only if the certifications described under "Book-Entry Issuance" are made and, in connection with such sale, the transferor's interest in the Series A-2 WaMu Cayman Preferred Securities evidenced by the Regulation S Global Security is exchanged by the transferee for Series A-1 WaMu Cayman Preferred Securities evidenced by the Rule 144A Global Security.
xi
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00014
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This offering circular and the documents incorporated herein by reference contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to financial condition, results of operations, and other matters. Statements in this offering circular, including those incorporated herein by reference, that are not historical facts are "forward-looking statements" for the purpose of the safe harbor provided by Section 21 E of the Exchange Act and Section 27 A of the Securities Act. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words, such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates" or words of similar meaning, or future or conditional verbs, such as "will", "should", "could" or "may".
Forward-looking statements provide WMl's or WMB's (as applicable) expectations or predictions of future conditions, events or results. They are not guarantees of future performance. By their nature forward-looking statements are subject to risks and uncertainties. These statements speak only as of the date they are made. WMI and WMB do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made. There are a number of factors, many of which are beyond WMl's or WMB's (as applicable) control, that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. The factors are generally described in WMl's or WMB's (as applicable) most recent Form 10-K and Form 10-0 under the caption "Risk Factors."
xii
WHERE YOU CAN FIND MORE INFORMATION
http://www.wamu.com
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00015
document that was filed later. WMB incorporates herein by reference the documents listed below
and any documents it files with the OTS in the future under Sections 13(a), 13(c), 14 or
15(d)
of
the Exchange Act or
regulations of
the OTS to substantially similar effect untjl the Offering is
completed:
Annual Report on Form 10-K for the year ended December 31, 2004; and
Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2005,
June 30,2005 and September 30, 2005.
This offering circular also incorporates herein by reference certain other information that
WMB submits to the OTS. WMB submits to the OTS quarterly reports regarding WMB's financial
condition and operations on OTS Form 1313 entitled Thrift Financial Report" each, a Thrift
Financial Report" and collectively, the Thrift Financial Reports"). Each Thrift Financial Report
consists of a Consolidated Statement of
Condition, Consolidated Statement of
Operations,
Consolidated Cash Flow Information, Consolidated Capital Requirements and other supporting
schedules as
of
the end of
the period to which the report relates. The Thrift Financial Reports
are prepared in accordance with regulatory instructions issued by
the OTS. These regulatory
instructions in most, but not all, cases follow generally accepted accounting principles in the
United States GAAP") or
the opinions and statements of
the Accounting Principles Board or
the Financial Accounting Standards Board. While the Thrift Financial Reports are supervisory and
regulatory documents, not previously accounting documents, and do not provide a complete
range of
financial disclosure about WMB, the reports nevertheless provide important information
concerning WMB's financial condition and operating results. In addition, WMB's Thrift Financial
Reports are not audited. The non-confidential portions of
Thrift Financial Reports filed by WMB
are on file with, and are publicly available upon written request to the Office of
Thrift Supervision,
FOIA, 1700 G Street, N.W., Washington, D.C. 20552, Attention: Dissemination Branch and are
also available at
the U.S. Federal Deposit Insurance Corporation's the web site at
http://www.fdic.gov.
You may request a copy of
these filings, other than an exhibit to a filing unless that exhibit
is specifically incorporated by reference into that filing, at no cost, by writing to or
telephoning
WMI
at:
1201 Third Avenue
Seattle, Washington 98101
206) 461-3187
ENFORCEMENT OF CIVIL LIABILITIES
WaMu Cayman has been advised by Maples and Calder,
its Cayman Island counsel, that the
courts of
the Cayman Islands should not be expected to i) enforce judgments of
U.S. courts
obtained in actions against WaMu Cayman's directors who are non-residents of
the United
States predicated upon the civil liability provisions of
the U.S. federal securities laws or
ii) entertain original actions brought in the Cayman Islands against such persons or WaMu
Cayman predicated solely upon U.S. federal securities laws. There is no treaty in effect between
the United States and the Cayman Islands providing for such enforcement, and there are grounds
upon which the Cayman Islands courts may not enforce judgments of
U.S. courts.
INDEX OF TERMS
An index of
terms used in this offering circular with specific meanings appears on the inside
back cover of
this offering circular.
xiv
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00016
OFFERING CIRCULAR SUMMARY
The fol/owing summary is qualified in its entirety by the detailed information appearing
elsewhere in this offering circular, in particular, the information under the headings. Description of
the WaMu Cayman Preferred Securities" and Description of
the Fixed Rate Company Preferred
Securities," which describe the terms and conditions of
the securities offered hereby.
Introduction
The 7.25% Perpetual Non-cumulative Preferred Securities, Series A-1, liquidation preference
$100,000 per security the Series A-1 WaMu Cayman Preferred Securities"), and the
7.25% Perpetual Non-cumulative Preferred Securities, Series A-2, liquidation preference $10,000
per security the Series A-2 WaMu Cayman Preferred Securities" and, together with the
Series A-1 WaMu Cayman Preferred Securities, the WaMu Cayman Preferred Securities"), are
being issued by Washington Mutual Preferred Funding Cayman) I Ltd. WaMu Cayman") in a
financing transaction that raises capital for Washington Mutual Bank WMB"). WMB is a
subsidiary of Washington Mutual, Inc. WMI"). WMI and
its affiliates are referred to herein as
the WMI Group".
WaMu Cayman will invest the proceeds of
the WaMu Cayman Preferred Securities in a like
amount of
7.25% Perpetual Non-cumulative Preferred Securities, liquidation preference
$1,000 per security the Fixed Rate Company Preferred Securities"), of Washington Mutual
Preferred Funding LLC, a Delaware limited liability company the Company"). WaMu Cayman
will have no material assets other than the Fixed Rate Company Preferred Securities. The
financial entitlements of
each WaMu Cayman Preferred Security will be
substantially the same as
the financial entitlements of a like amount of
Fixed Rate Company Preferred Securities, with the
consequence that dividends and the redemption price on each WaMu Cayman Preferred Security
will be payable on the same dates and in the same amounts as the corresponding dividends and
redemption price, as applicable, on a like amount of
Fixed Rate Company Preferred Securities.
The Company's initial material assets will consist of
direct or
indirect interests in mortgages or
mortgage-related assets originated by WMB as
described under The Company Business of
the Company Assets of
the Company" and The Asset Trust."
The terms of
the Series A-1 WaMu Cayman Preferred Securities and the Series A-2 WaMu
Cayman Preferred Securities are identical except for their per security liquidation preference. The
Series A-1 WaMu Cayman Preferred Securities are being offered in reliance upon Rule 144A
under the U.S. Securities Act of
1933, as amended the Securities Act") only in the United
States and to persons who are qualified institutional buyers" within the meaning of 144A and
qualified purchasers" within the meaning of
Section 2(a) 51) of
the U.S. Investment Company
Act of
1940, as amended the Investment Company Act"). The Series A-2 WaMu Cayman
Preferred Securities are being offered and sold in reliance upon Regulation S under the
Securities Act only to non-U.S. persons in transactions outside the United States. Resales of
Series A-l WaMu Cayman Preferred Securities to non-U.S. persons and of
Series A-2 WaMuCayman Preferred Securities in the United States o
r
to U.S. persons are subject to restrictions as
described under Notice to Investors Exchanges Between Rule 144A Global Security
Evidencing Series A-1 WaMu Cayman Preferred Securities and Regulation S Global Security
Evidencing Series A-2 WaMu Cayman Preferred Securities," in each case subject to the
certification requirements described under Book-Entry Issuance."
By a separate offering circular dated the same date as
this offering circular, Washington
Mutual Preferred Funding Trust I, a Delaware statutory trust established by the Company as
grantor WaMu Delaware"), is offering $1,250,000,000 of
its Perpetual Exchangeable Non-
cumulative Trust Securities the Trust Securities"). WaMu Delaware will invest the proceeds of
the Trust Securities in a like amount of
the Company's Perpetual Non-cumulative Fixed-to-
Floating Rate Preferred Securities the Fixed-to-Floating Rate Company Preferred Securities"
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00017
and, together with the Fixed Rate Company Preferred Securities, the Company Preferred
Securities"). The terms of
the Fixed-to-Floating Rate Company Preferred Securities are
substantially identical to the Fixed Rate Company Preferred Securities except for the dividend
rate. The Trust Securities are being offered and sold only in the United States and only to
U.S. persons that are both qualified institutional buyers and qualified purchasers in reliance on
the exemption from registration under the Securities Act pursuant to Rule 144A. They are not
being offered by this offering circular. The WaMu Cayman Preferred Securities are not
exchangeable for Trust Securities, or
vice versa.
WMB has asked for confirmation from the Office of
Thrift Supervision together with any
successor regulator, the that the Company Preferred Securities constitute core capital of
WMB under the OTS' applicable regulatory capital regulations and, upon receipt of such
confirmation, intends to treat the Company Preferred Securities accordingly.
If the OTS so directs following the occurrence of
an Exchange Event, each WaMu Cayman
Preferred Security will be automatically exchanged for a like amount of
Fixed Rate Depositary
Shares each representing 111000th of a share of WMl's Series Perpetual Non-cumulative Fixed
Rate Preferred Stock, no par value and liquidation preference $1,000,000 per share Fixed Rate
WMI Preferred Stock"), as described below in this Summary under" The Offering
Conditional Exchange." Upon a Conditional Exchange, the Trust Securities will also be
automatically exchanged, but for depositary shares representing a different series of WMl's
preferred stock, having substantially equivalent terms with certain exceptions) as
to dividends,
liquidation preference and redemption preference as the Fixed-to-Floating Rate Company
Preferred Securities.
This offering circular uses the term like amount" in describing the financial entitlements and
voting rights, as applicable, of
the WaMu Cayman Preferred Securities as compared to the Fixed
Rate Company Preferred Securities and in describing the amount of
Fixed Rate Depositary
Shares, each representing a 1 OOOthinterest in one share of
Fixed Rate WMI Preferred Stock
for which the WaMu Cayman Preferred Securities will be exchanged upon the occurrence of
a
Conditional Exchange. The term like amount" means:
when describing the financial entitlements or
voting rights, as applicable, of WaMu
Cayman Preferred Securities as compared to Fixed Rate Company Preferred Securities, a
number of
Fixed Rate Company Preferred Securities that have the same aggregate
liquidation preference as the WaMu Cayman Preferred Securities to which the reference
is being made e.g., 1,000 Fixed Rate Company Preferred Securities with an aggregate
liquidation preference of
$1,000,000 are a like amount" for ten Series A-1 WaMu
Cayman Preferred Securities or
100 Series A-2 WaMu Cayman Preferred Securities, each
having an aggregate liquidation preference of
$1,000,000); and
when describing the number of
depositary shares for Fixed Rate WMI Preferred Stock
with which WaMu Cayman Preferred Securities will be exchanged upon a Conditional
Exchange, a number of
Fixed Rate Depositary Shares, each representing a 1 OOOthin-
terest in one share of
Fixed Rate WMI Preferred Stock, having a liquidation preference
equal to the liquidation preference of
the WaMu Cayman Preferred Securities that are
being exchanged e.g., 10,000 Fixed Rate Depositary Shares representing Fixed Rate
WMI Preferred Stock with an aggregate liquidation preference of
$10,000,000 are a like
amount" for 100 Series A-1 WaMu Cayman Preferred Securities or
1,000 Series A-2
WaMu Cayman Preferred Securities, each having an aggregate liquidation preference of
$10,000,000)
The offering of
the WaMu Cayman Preferred Securities and the related issuance of
the
Fixed Rate Company Preferred Securities are referred to herein as
the Offering".
2
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00018
The following diagram outlines the relationship among WMI, WMB, University Street, the
Company, the Asset Trust, WaMu Cayman, WaMu Delaware, purchasers of
the WaMu Cayman
Preferred Securities and purchasers of
the Trust Securities:
University Street<")
Assets
Proceeds
Assets
ConditionalConditional
ExchangeExchange
Rxed-to-FloatingFixed Rate Company
Rate CompanyPreferred Securities(3)
Preferred Securities(4)
WaMu
Delaware
TrustProceeds:
Securities
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00019
WaMu Cayman
Washington Mutual Preferred Funding Cayman) I Ltd. is a Cayman Islands exempted
company limited by
shares, incorporated on February 23, 2006 for the purposes set forth below
in WaMu Cayman."
All
of WaMu Cayman's ordinary shares the WaMu Cayman Ordinary
Shares") will be held in trust for the benefit of
a Cayman Islands charity. WaMu Cayman will not
issue any securities other than the WaMu Cayman Ordinary Shares, and the WaMu Cayman
Preferred Securities offered hereby. WaMu Cayman will be prohibited from issuing other equity
securities or any debt securities. The Fixed Rate Company Preferred Securities will be the only
material assets of WaMu Cayman. WaMu Cayman will be managed by a Board of
Directors
consisting of
five directors, three of
whom will be appointed by such Cayman Islands charitable
trust and two of
whom will be persons who are also members of
the Company's Board of
Managers. Of
the two WaMu Cayman directors who are also members of
the Company's Board
of
Managers, one will be the same individual who is the Company's Independent Manager.
Subject to the limitations and assumptions described under Certain Tax Considerations
United States Federal Income Tax Consequences," for United States Federal income tax
purposes, WaMu Cayman intends to be treated as a corporation, and for the holders of
the
WaMu Cayman Preferred Securities to be treated as holders of
stock in such corporation.
The Company
Washington Mutual Preferred Funding LLC is a Delaware limited liability company formed on
February 3,
2006 for the purpose of
i) issuing the Fixed Rate Company Preferred Securities to
WaMu Cayman, the Fixed-to-Floating Rate Company Preferred Securities to WaMu Delaware, the
common securities of
the Company the Company Common Securities") to University Street,
Inc., an indirect subsidiary of WMB University Street"), and additional Parity Equity Securities
or
Junior Equity Securities subject to certain limitations described in this offering circular
ii) acquiring and holding Eligible Investments and iii) performing functions necessary or
incidental thereto.
The Fixed-to-Floating Rate Company Preferred Securities rank pari passu with the Fixed
Rate Company Preferred Securities as
to dividends and upon liquidation of
the Company. The
terms of
the Fixed-to-Floating Rate Company Preferred Securities are substantially identical to
the terms of
the Fixed Rate Company Preferred Securities other than with respect to the rate
applicable to dividends thereon. The Fixed-to-Floating Rate Company Preferred Securities will,
if,
when and as
declared by
the Company's Board of
Managers, pay dividends at
an annual rate of
6.534% until the Dividend Payment Date on March 15, 2011 and an annual rate equal to three-
month UBOR plus 1.4825% for the Dividend Period starting on such Dividend Payment Date and
each Dividend Period thereafter.
University Street will own all
of
the Company Common Securities. The Eligible Investments
owned by the Company from time to time will generate net income for payment by the Company
to WaMu Cayman as dividends on the Fixed Rate Company Preferred Securities and
consequently for payment as
dividends by WaMu Cayman to holders of
the WaMu Cayman
Preferred Securities), to WaMu Delaware as dividends on the Fixed-to-Floating Rate Company
Preferred Securities and consequently for pass through by WaMu Delaware to the holders of
the Trust Securities) and to University Street as
dividends on the Company Common Securities.
Subject to the limitations and assumptions described under Certain Tax Considerations
United States Federal Income Tax Consequences," the Company intends to be treated as a
partnership other than a publicly traded partnership taxable as a corporation) for United States
Federal income tax purposes and will receive the opinion of
Mayer, Brown, Rowe Maw LLP to
the effect that, for United States Federal income tax purposes, the Company will not be treated
as
an association taxable as a corporation or
as a publicly traded partnership taxable as a
corporation.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00020
The Company will be managed by a Board of
Managers. The Company's Board of
Managers will have three members, one of whom is not, and has not been during the preceding
five years, an officer or employee of WMI or any affiliate of WMI, other than a financing
subsidiary the
Initial Conveyances
In connection with the Offering, WMB will convey a portfolio of
first lien, closed-end, fixed
rate home equity loans to the Company in exchange for 100% of
the Company
Preferred Securities. Concurrently with such transfer by WMB, University Street will convey a
portfolio of HELs to the Company in exchange for 100% of
the Company Common Securities.
The portfolios conveyed by WMB and University Street to the Company will consist of
approximately $5,389,459,150 of HELs in the aggregate. The Company will convey 100% of
the
HELs that it owns to the Asset Trust in exchange for the Class A Trust Certificate of
the Asset
Trust. WMB will then sell the Fixed Rate Company Preferred Securities and the Fixed-to-Floating
Rate Company Preferred Securities for cash to WaMu Cayman and WaMu Delaware,
respectively.
University Street
University Street, Inc. is a Washington corporation. It has elected to be treated as a real
estate investment trust for United States Federal income tax purposes. University Street will hold
100% of
the Company Common Securities which represent 100% of
the voting rights in the
Company subject to the limited rights of
holders of
the Company Preferred Securities described
herein)
The Asset Trust
Washington Mutual Home Equity Trust I is a Delaware statutory trust formed pursuant to a
trust agreement, to be entered into on or
before the closing date, between the Company, as
depositor, and Deutsche Bank Trust Company Delaware, as Delaware trustee the
The Pooling and Servicing Agreement among the Company, as depositor, WMB, as
Servicer, Deutsche Bank Trust Company Delaware, as Delaware Trustee, and Deutsche Bank
National Trust Company, as Trustee the will restate the
trust agreement and will be the governing instrument of
the Asset Trust. The Asset Trust will
make an
election to be treated as a real estate mortgage investment conduit for
United States Federal income tax purposes.
The initial assets of
the Asset Trust will consist of
the portfolio of
HELs to be conveyed by
the Company to the Asset Trust in connection with the Offering. The HELs were originated by
WMB primarily through its
retail branches between September 2001 and September 2005. As of
January 31, 2006, the HELs to be transferred into the Asset Trust had an aggregate unpaid
principal balance of
approximately $5,389,459,150.
WMI
With a history dating back to 1889, Washington Mutual, Inc., a Washington corporation, is a
retailer of
financial services to consumers and small businesses. Based on its consolidated
assets at
September 30, 2005, WMI was the largest thrift holding company in the United States
and the seventh largest among all U.S.-based bank and thrift holding companies. As of
September 30, 2005, WMI, together with
its subsidiaries, had total assets of
approximately
$333.6 billion, total liabilities of
approximately $311.0 billion and total stockholders' equity of
approximately $22.6 billion. As of September 30, 2005, WMI and
its subsidiaries also had total
deposits of
approximately $190.4 billion. WMI's common stock is listed on the New York Stock
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00021
Exchange under the symbol WM". The principal business offices of WMI are located at
1201 Third Avenue, Seattle, Washington 98101 and
its telephone number is 206-461-2000.
WMB
Washington Mutual Bank formerly known as Washington Mutual Bank, FA) is a federally
chartered savings association, chartered and operating under the United States Home Owners'
Loan Act of
1933, as amended. WMB engages in mortgage banking, consumer banking and
small business banking. WMB, as a federally chartered association, has the authority to make
various types of
loans, including loans secured by homes and commercial real estate, secured
and unsecured consumer loans, and secured and unsecured commercial loans. As a federal
savings association, WMB is subject to regulation and examination by the OTS,
its primary
regulator. WMB is an indirect wholly-owned subsidiary of WMI.
Prior to 2004, WMB had two sister depository institutions which were both owned directly
by WMI. WMB has since acquired both of
these sister institutions. One of
these institutions,
Washington Mutual Bank fsb, a federal savings bank, became a wholly-owned subsidiary of
WMB on February 1,
2004. The other institution, Washington Mutual Bank, a savings bank
chartered under the laws of
the state of
Washington, converted into a federally chartered savings
bank and then was merged into WMB on January 1,
2005.
6
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00022
The Offering
Issuer As to the WaMu Cayman Preferred Securities, Washington
Mutual Preferred Funding Cayman) I Ltd., a Cayman
Islands exempted company limited by shares.
As to the Fixed Rate Company Preferred Securities,
Washington Mutual Preferred Funding LLC, a Delaware
limited liability company.
As to the Fixed Rate WMI Preferred Stock which will be
represented by the Fixed Rate Depositary Shares) for
which the WaMu Cayman Preferred Securities will be
exchanged upon the occurrence of
a Conditional Ex-
change, Washington Mutual, Inc., a Washington
corporation.
Offered Securities 7.25% Perpetual Non-cumulative Preferred Securities, Se-
ries A-1, liquidation preference $100,000 per security and
$302,300,000 in the aggregate, and 7.25% Perpetual Non-
cumulative Preferred Securities, Series A-2, liquidation
preference $10,000 per security and $447,700,000 in the
aggregate, both issued by WaMu Cayman. The terms of
the Series A-1 WaMu Cayman Preferred Securities and the
Series A-2 WaMu Cayman Preferred Securities are identi-
cal except for their per security liquidation preference. The
financial entitlements of each WaMu Cayman Preferred
Security will be substantially the same as the financial
entitlements of a like amount of
Fixed Rate Company
Preferred Securities, with the consequence that dividends
and the redemption price on the WaMu Cayman Preferred
Securities will be payable on the same dates and in the
same amounts as the corresponding dividends and re-
demption price, as
applicable, on a like amount of
Fixed
Rate Company Preferred Securities.
Dividends. Dividends on the WaMu Cayman Preferred Securities will
become payable on a non-cumulative basis except in the
limited circumstances set out under Description of
the
WaMu Cayman Preferred Securities Dividends"), on
each date on which the Company pays to WaMu Cayman
dividends on the Fixed Rate Company Preferred Securities,
in an amount per WaMu Cayman Preferred Security equal
to the amount of
dividends received by WaMu Cayman on
a like amount of
Fixed Rate Company Preferred Securities
including with respect to Additional Taxes, if any). WaMuCayman's Board o
f
Directors is not required to declare the
payment of
dividends in order for dividends to be paid.
However, payment of
dividends may be blocked by WaMu
Cayman's Board of
Directors, but only by their unanimous
action including consent of
the Independent Director).
For purposes of
this offering circular, we refer to distribu-
tions payable by the Company on
its securities as divi-
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00023
dends." Dividends on the Fixed Rate Company Preferred
Securities are payable as follows:
Dividend Rate. Dividends on the Fixed Rate Company
Preferred Securities will accrue at a fixed rate per annum
equal to 7.25% applied to the liquidation preference of
$1,000 per Fixed Rate Company Preferred Security.
Dividend Payment Dates. If declared by
the Company's
Board of
Managers, the Dividend Payment Dates for the
Fixed Rate Company Preferred Securities are the 15th day
of
March, June, September and December of each year,
commencing on June 15, 2006. If any Dividend Payment
Date is not a Business Day, then dividends will be payable
on the first Business Day following such Dividend Payment
Date with the same force and effect as
if payment were
made on the date such payment was originally payable.
Declaration of
Dividends, etc. Dividends on the Fixed
Rate Company Preferred Securities when, as and if
declared by the Company's Board of Managers out of
legally available funds, will be payable at
the applicable
dividend rate applied to the liquidation preference per
Fixed Rate Company Preferred Security accruing on a non-
cumulative basis on each such security as follows: i) from
March 7,
2006 in the case of
the Fixed Rate Company
Preferred Securities offered hereby and if additional
Fixed Rate Company Preferred Securities are issued at a
future date, from A) March 7, 2006 if such date is before
June 15, 2006, B) the date of
issue if such date is a
Dividend Payment Date and C) either the immediately
preceding Dividend Payment Date or
the date of
issue as
determined by the Company if the date of
issue is other
than a Dividend Payment Date and is after June 15, 2006.
Any such dividends will be distributed to holders of
Fixed
Rate Company Preferred Securities in the manner de-
scribed under Description of
the Fixed Rate Company
Preferred Securities Dividends."
Non-cumulative Dividends. Dividends on the Fixed Rate
Company Preferred Securities are not cumulative. Accord-
ingly, in the event dividends are not declared on the Fixed
Rate Company Preferred Securities for payment on any
Dividend Payment Date, then any accrued dividends will
cease to accrue and be payable. If the Company's Board
of Managers has not declared a dividend before the
Dividend Payment Date for any Dividend Period, the
Company will have no obligation to pay dividends accrued
for such Dividend Period after the Dividend Payment Date
for that Dividend Period, whether or
not dividends on the
Fixed Rate Company Preferred Securities are declared for
any future Dividend Period.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00024
Redemption IReplacement Capital
Covenant General. On each day on which the Compflny redeems
Fixed Rate Company Preferred Securities, WaMu Cayman
will redeem a like amount of WaMu Cayman Preferred
Securities. If the redemption of
the Fixed Rate Company
Preferred Securities is in part instead of
in whole, then
WaMu Cayman will allocate the partial redemption between
the Series A-1 WaMu Cayman Preferred Securities and the
Series A-2 WaMu Cayman Preferred Securities in propor-
tion to their aggregate liquidation preferences. The re-
demption provisions of
the Fixed Rate Company Preferred
Securities are described below.
Subject to a covenant in favor of
certain of
WMl's
debtholders limiting WMl's and
its subsidiaries' right to
repurchase or
redeem the Fixed Rate Company Preferred
Securities or
the WaMu Cayman Preferred Securities
among others) as
described in the next paragraph, and
subject to the Company having received the prior approval
of
the OTS for any proposed redemption of
Fixed Rate
Company Preferred Securities, the Company may, at
its
option, redeem the Fixed Rate Company Preferred
Securities:
in whole but not in part, prior to the Dividend Payment
Date in March, 2011, if a Tax Event, an Investment
Company Act Event or a Regulatory Capital Event
occurs. The cash redemption price will be the greater of
i) $1,000 per Fixed Rate Company Preferred Security
or
the sum of
present values of
$1,000 per Fixed
Rate Company Preferred Security and all undeclared
dividends for the Dividend Period from the redemption
date to and including the Dividend Payment Date in
March 2011, discounted to the redemption date on a
quarterly basis assuming a 360-day year consisting of
twelve 30-day months) at
the Treasury Rate, as calcu-
lated by
an Independent Investment Banker, plus 0.40%,
plus any declared and unpaid dividends to the redemp-
tion date, or
in.whole or
in part, on or
after the Dividend Payment
Date in March 2011, at
a cash redemption price of
$1,000 per Fixed Rate Company Preferred Security, plus
any declared and unpaid dividends to the redemption
date, without accumulation of any undeclared dividends.
See Description of
the Fixed Rate Company Preferred
Securities Redemption."
Restriction on Redemption or
Repurchases. At
or
prior to
initial issuance of
the WaMu Cayman Preferred Securities,
WMI will enter into a Replacement Capital Covenant" as
described under Description of
the WaMu Cayman Pre-
ferred Securities Restriction on Redemption or
Repur-
chases." In the Replacement Capital Covenant, WMI will
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00025
covenant in favor of
certain of
its debtholders that, if WMI
or a subsidiary repurchases or redeems any WaMu Cay-
man Preferred Securities, Trust Securities or
Company
Preferred Securities or, after a Conditional Exchange,
Fixed Rate Depositary Shares or related Fixed Rate WMIPreferred Stock), WMI o
r
its subsidiaries will do so only if
and to the extent that the total redemption or
purchase
price is equal to or
less than designated percentages of
the net cash proceeds that WMI or
its subsidiaries have
received during the 180 days prior to such redemption or
repurchase from the issuance of
securities having the
characteristics described under Description of
the WaMu
Cayman Preferred Securities Restriction on Redemption
or
Repurchases."
Ranking. WaMu Cayman Preferred Securities. The WaMu Cayman
Preferred Securities will rank senior to the WaMu Cayman
Ordinary Shares in terms of
dividends and liquidation
payments. The Series A-1 WaMu Cayman Preferred Secu-
rities and the Series A-2 WaMu Cayman Preferred Securi-
ties will rank pari passu with each other in terms of
dividends and liquidation payments and otherwise have
identical terms other than as
to their respective per
security liquidation preference.
WaMu Cayman's Memorandum and Articles of
Association
together, as amended, the WaMu Cayman's Articles of
Association") will provide that WaMu Cayman will not,
without the consent of
the holder of each outstanding
WaMu Cayman Preferred Security, issue equity securities
ranking pari passu or
senior to the WaMu Cayman
Preferred Securities in terms of
dividends or
redemption or
liquidation payments or
incur any indebtedness.
Fixed Rate Company Preferred Securities. The Fixed
Rate Company Preferred Securities will rank pari passu
with the Fixed-to-Floating Rate Company Preferred Securi-
ties and senior to the Company Common Securities in
terms of
dividends and liquidation payments.
During a Dividend Period, the Company may not declare or
pay any. dividends on any of
its Junior Equity Securities,
other than dividends payable in Junior Equity Securities, or
repurchase, redeem or
otherwise acquire for consideration,
directly or
indirectly, any Junior Equity Securities other
than as a result of
reclassification of
Junior Equity
Securities for or
into other Junior Equity Securities, or
the
exchange or
conversion of
Junior Equity Securities for or
into other Junior Equity Securities), unless dividends for
such Dividend Period on all outstanding Company Pre-
ferred Securities have been declared and paid in full, or
declared and set aside for payment, as the case may be.
The Company may from time to time issue additional Parity
Equity Securities without the consent of
the holders of
the
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00026
provided
pro forma
pro forma
Fixed Rate Depositary Shares").
Exchange Event"
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00027
pari passu
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00028
Voting Rights and Certain Covenants ...................... .
that limits the payment of dividends, as applicable, by WMB, and in connection therewith, directs such exchange.
The Fixed Rate WMI Preferred Stock will have substantially equivalent terms as to dividends, redemption and liquidation preference as the Fixed Rate Company Preferred Securities, except that the Fixed Rate WMI Preferred Stock: (i) will not have the benefit of the covenants described under "Description of the Fixed Rate Company Preferred Securities - Voting Rights and Covenants;" (ii) will not be listed on any securities exchange or automated dealer quotation system; (iii) will be redeemable prior to the Dividend Payment Date occurring on March 15, 2011 only upon the occurrence of a Regulatory Capital Event (as described herein); (iv) Additional Amounts will not be payable with respect to the Fixed Rate WMI Preferred Stock; and (v) if WMI fails to pay, or declare and set aside for payment, full dividends on the Fixed Rate WMI Preferred Stock for six Dividend Periods, the authorized number of WMl's directors will increase by two, and the holders of Fixed Rate WMI Preferred Stock, voting together with the holders of any other equity capital securities of WMI having similar voting rights, including the Fixed-to-Floating Rate WMI Preferred Stock, will have the right to elect two directors in addition to the directors then in office at the next annual meeting of shareholders. The Fixed Rate WMI Preferred Stock will be subject to the Replacement Capital Covenant described under "- Redemption I Replacement Capital Covenant" above.
WMI will covenant in the Exchange Agreement in favor of the holders of the WaMu Cayman Preferred Securities that it will not issue any preferred stock that would rank senior to the Fixed Rate WMI Preferred Stock upon its issuance. Each share of Fixed Rate WMI Preferred Stock will, upon issuance, rank at least pari passu with the most senior preferred stock of WMI, if any, then outstanding.
Except as otherwise set forth below, the holders of the Fixed Rate Company Preferred Securities will not have voting rights.
However, the LLC Agreement will provide that, except with the consent or affirmative vote of the holders of at least two-thirds of the Fixed Rate Company Preferred Securities and the Fixed-to-Floating Rate Company Preferred Securities, voting together as a single class, the Company will not:
• effect a consolidation, merger or share exchange with or into another entity other than an entity controlled by, or under common control with, WMI;
• issue any securities of the Company ranking senior to the Company Preferred Securities in respect of pay-
12
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00029
ments of dividends or on liquidation to the Company Preferred Securities ("Senior Equity Securities") ;
• incur any indebtedness for borrowed money;
• pay dividends on the Company's Junior Equity Securities unless the Company's FFO, for the four prior fiscal quarters equals or exceeds 150% of the amount that would be required to pay full annual dividends on all outstanding Company Preferred Securities, as well as any other Parity Equity Securities;
• amend or otherwise change the requirement that the Company make investments and distributions with the proceeds of the Company's assets such that the Company's FFO over any period of four fiscal quarters will equal or exceed 150% of the amount that would be required to pay full annual dividends on all outstanding Company Preferred Securities, as well as any other Parity Equity Securities;
• issue any additional Company Common Securities to any person, other than University Street or another affiliate ofWMI;
• amend or otherwise change the terms of any Asset Documentation in a manner which is materially adverse to WaMu Cayman or the holders of the WaMu Cayman Preferred Securities;
• remove or cause to be removed, as applicable, "Washington Mutual" from the Company's, WaMu Cayman's or WaMu Delaware's name unless the name of WMI changes and the Company makes a change to the Company's, WaMu Cayman's and WaMu Delaware's name to be consistent with the new group name;
• take any action or fail to take any action that would cause the Company to fail to be treated as a partnership (other than a publicly traded partnership taxable as a corporation) for United States Federal income tax purposes;
• amend or otherwise change the requirement that the Company not engage in a U.S. trade or business for United States Federal income tax purposes;
• amend or otherwise change the requirement that the Company hold only assets that qualify for the portfolio interest exemption under the Code and are exempt from gross basis United States withholding taxes;
• amend or otherwise change the requirement that the Company manage its affairs such that income with respect to the WaMu Cayman Preferred Securities does not constitute "unrelated business taxable income" for United States Federal income tax purposes; or
13
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00030
• amend its Certificate of Formation or LLC Agreement in a manner that materially and adversely affects the terms of the Company Preferred Securities; provided, however, that, if such amendment affects only one class of Company Preferred Securities, such amendment will require only the class vote of the holders of at least twothirds of the applicable Company Preferred Securities of such class (voting separately and not as a single class with the other class) and, if such amendment affects both classes but affects them differently, then such amendment will require a class vote of each class of Company Preferred Securities, each voting separately.
In addition, the LLC Agreement will provide that, without the consent of all of the Managers, including the Independent Manager, the Company will not:
• terminate, amend, or otherwise change any Asset Documentation; or
• effect a consolidation, merger or share exchange (excluding the Conditional Exchange) that is not tax-free to the holders of the Fixed Rate Company Preferred Securities, and the related WaMu Cayman Preferred Securities, unless such transaction was approved by the consent or affirmative vote of the holders of at least twothirds of the Fixed Rate Company Preferred Securities and the Fixed-to-Floating Rate Preferred Securities, voting together as a single class.
In addition, the LLC Agreement will provide that if (i) the Company fails to pay full dividends on the Company Preferred Securities on any Dividend Payment Date, (ii) WaMu Cayman fails to pay full dividends on the WaMu Cayman Preferred Securities on any Dividend Payment Date or (iii) a Bankruptcy Event occurs, the holders of the Fixed Rate Company Preferred Securities and the Fixed-toFloating Rate Company Preferred Securities, voting together as a single class, by majority vote, are entitled to remove the initial or any succeeding Independent Manager and to fill the vacancy created by such removal or any other vacancy existing in the office of the Independent Manager.
The voting rights described above with respect to the Fixed Rate Company Preferred Securities will be passed on to the holders of the related WaMu Cayman Preferred Securities and with respect to the Fixed-to-Floating Rate Company Preferred Securities will be passed through to the holders of the related Trust Securities of WaMu Delaware. See "Description of the WaMu Cayman Preferred Securities - Voting Rights."
Additional Amounts. . . . . . . . . . . . . . . If the Company or WaMu Cayman is required to pay any additional taxes, duties or other governmental charges as a result of an Additional Tax Event, the Company will pay as
14
additional amounts on the Fixed Rate Company Preferred
Securities such amounts as
will be required so that
dividends on the Fixed Rate Company Preferred Securities,
and accordingly on the WaMu Cayman Preferred Securi-
ties, will not be reduced as a result of
any such Additional
Taxes. See Description of
the Fixed Rate Company
Preferred Securities Additional Amounts." If investors
exchange their Fixed Rate Company Preferred Securities
for Fixed Rate WMI Preferred Stock upon a Conditional
Exchange, WMI will not be obligated to pay Additional
Amounts on the Fixed Rate WMI Preferred Stock.
Assets and the Asset Trust. The initial assets of
the Company will consist of
the
Class A Asset Trust Certificate representing its interest in
the Asset Trust. The Asset Trust is a Delaware statutory
trust formed pursuant to a trust agreement between the
Company, as depositor, and Deutsche Bank Trust Com-
pany Delaware, as Delaware Trustee. The Pooling and
Servicing Agreement among the Company, as depositor,
WMB, as
Servicer, Deutsche Bank Trust Company Dela-
ware, as Delaware Trustee, and Deutsche Bank National
Trust Company, as
Trustee, will restate the trust agree-
ment and will thereafter be the governing instrument of
the
Asset Trust. The Asset Trust will make a REMIC election
for federal tax purposes.
The initial assets of
the Asset Trust will consist of
a
portfolio including payments thereon received from and
after February 1,
2006) of
HELs and certain related assets
originated by WMB primarily through
its retail branches
between September 1,
2001 and September 30, 2005. As
of
January 31, 2006, the 56,090 HELs had an aggregate
unpaid principal balance of
approximately $5,389,459,150.
These loans typically are made for reasons such as home
purchases, home improvements, furniture and fixtures
purchases, purchases of
automobiles and debt consolida-
tion. These HELs are first lien, closed-end fixed rate home
equity loans and are generally repaid on a self-amortizing
basis.
From time to time, the Company may acquire Additional
Assets. All
Additional Assets acquired by
the Company will
be
Eligible Assets.
Listing Application will be made to list the Series A-2 WaMu
Cayman Preferred Securities on the Euro MTF market of
the Luxembourg Stock Exchange. The Series A-1 WaMuCayman Preferred Securities will not b
e listed on any
securities exchange or
automated dealer quotation system.
Use of
Proceeds. WaMu Cayman will use the proceeds of
the sale of
the
WaMu Cayman Preferred Securities to purchase a like
amount of
Fixed Rate Company Preferred Securities from
WMB, which the Company will issue to WMB in exchange
for the conveyance of a portfolio of HELs to the Company.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00031
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00032
The WMI Group will use the proceeds from the sale of the Fixed Rate Company Preferred Securities to WaMu Cayman and the Fixed-to-Floating Rate Preferred Securities to WaMu Delaware for general corporate purposes, which may include the repurchase of WMl's common stock.
Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . The WaMu Cayman Preferred Securities are expected to be assigned upon issuance ratings of "BBB" by Standard & Poor's Rating Services, a division of The McGraw Hill Companies, Inc., "Baa2" by Moody's Investors Services, Inc. and "A-" by Fitch, Inc. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organization.
Tax Consequences ............... It is anticipated that WaMu Cayman will be a passive foreign investment company ("PFIC") for United States Federal income tax purposes and that the WaMu Cayman Preferred Securities will be treated as equity interests therein.
The Company intends to qualify as a partnership (other than a publicly traded partnership taxable as a corporation) for United States Federal income tax purposes, and thus, the Company Preferred Securities held by WaMu Cayman are intended to constitute equity interests in such partnership.
WaMu Cayman and the Company intend to operate so as not to be engaged in a U.S. trade or business. Accordingly, WaMu Cayman intends that it will not be subject to United States Federal income taxes on its net income.
See "Certain Tax Considerations - United States Federal Income Tax Consequences."
ERISA Considerations. . . . . . . . . . . . . No WaMu Cayman Preferred Security may be purchased by or transferred to any Benefit Plan Investor, except for an insurance company general account that represents, warrants and covenants that, at the time of acquisition and throughout the period it holds the securities, (A) it is eligible for and meets the requirements of the Department of Labor Prohibited Transaction Class Exemption 95-60, ( B) less than 25% of the assets of such general account are (or represent) assets of a Benefit Plan Investor and ( C) it is not a person who has discretionary authority or control with respect to the assets of WaMu Cayman or any person who provides investment advice for a fee (direct or indirect) with respect to such assets, or any affiliate of such a person and would not otherwise be excluded under 29 C.F.R. 2510.3-101 (f) (1).
Governing Law... . . .. . . . . .. . .. ... WaMu Cayman's Articles of Association and the WaMu Cayman Preferred Securities will be governed by, and construed in accordance with, the laws of the Cayman Islands. The LLC Agreement and the Fixed Rate Company
16
Preferred Securities will be governed by, and construed in
accordance with, the laws of
the State of
Delaware. The
Fixed Rate WMI Preferred Stock will be governed by and
construed in accordance with the laws of
the State of
Washington. The Fixed Rate Depositary Shares will be
governed by, and construed in accordance with, the laws
of
the State of
New York.
CUSIP ISIN The CUSIP number for the Series A-1 WaMu Cayman
Preferred Securities is 93934V AA 5.
The ISIN number for the Series A-1 WaMu Cayman
Preferred Securities is US93934VAA52.
The CUSIP number for the Series A-2 WaMu Cayman
Preferred Securities is G9463G AA 6.
The ISIN number for the Series A-2 WaMu Cayman
Preferred Securities is USG9463GAA60.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00033
RISK FACTORS
Purchasers should carefully consider the following risk factors in conjunction with the other
information contained in this offering circular, as well as information that is incorporated by
reference in this offering circular, before purchasing any WaMu Cayman Preferred Securities, the
financial entitlements of
which will be
substantially similar to those of
a like amount of
Fixed Rate
Company Preferred Securities and which are conditionally exchangeable into Fixed Rate Depositary
Shares representing interests in Fixed Rate WMI Preferred Stock.
Risks Relating to the Terms of
the WaMu Cayman Preferred Securities and the Fixed Rate
Company Preferred Securities
WaMu Cayman's ability pay dividends the WaMu Preferred Securities depends
whether the Company will pay dividends on the Fixed Rate Company Preferred Securities.
The only material assets of WaMu Cayman will be the Fixed Rate Company Preferred
Securities. Consequently, WaMu Cayman's ability to pay dividends on the WaMu Cayman
Preferred Securities depends entirely on whether the Company pays dividends on the Fixed Rate
Company Preferred Securities held by WaMu Cayman. If the Company does not declare and pay
dividends on the Fixed Rate Company Preferred Securities, WaMu Cayman will not pay dividends
on the WaMu Cayman Preferred Securities.
Even if the Company pays dividends on the Fixed Rate Company Preferred Securities held
WaMu Cayman, it is possible that WaMu Cayman's Board of
Directors prevent
payment of
dividends on the WaMu Cayman Preferred Securities.
Even though WaMu Cayman's Articles of
Association provide that dividends on the WaMu
Cayman Preferred Securities will be automatically payable on each date on which the Company
pays to WaMu Cayman dividends on the Fixed Rate Company Preferred Securities owned by
WaMu Cayman, WaMu Cayman's Articles of
Association also provide that WaMu Cayman's
Board of
Directors, acting unanimously including the two directors who are also members of
the
Company's Board of
Managers one of
whom is the Independent Manager) may prevent the
payment of such dividends on the WaMu Cayman Preferred Securities. However, if full dividends
on the WaMu Cayman Preferred Securities for any Dividend Period have not been declared and
paid, then, as described under Description of
the Fixed Rate Company Preferred Securities-
Restrictions on Dividends by WMI," WMI will not declare or pay dividends with respect to any of
its equity capital securities during the next succeeding Dividend Period, except dividends in
connection with a shareholder's rights plan, if any, or
dividends in connection with benefits plans.
The level of
the Company's relative the aggregate liquidation preference of
the
Company Preferred Securities could shrink over time other things, dividends
paid the Company the Common Securities or
other Junior Equity Securities if
are issued future date.
The LLC Agreement includes provisions that limit the Company's ability to pay dividends on
the Company's Junior Equity Securities but, subject to satisfaction of
those limitations, does not
prohibit dividends that could cause the level of
the Company's assets relative to the aggregate
liquidation preference of
the Company Preferred Securities to shrink. These limitations are
described under Description of
the Fixed Rate Company Preferred Securities Ranking,"
Restrictions on Dividends" and Voting Rights and Covenants." They include the following:
during a Dividend Period, the Company may not pay dividends on Junior Equity
Securities, or
repurchase, redeem or
otherwise acquire for consideration directly or
indirectly with limited exceptions) Junior Equity Securities, unless dividends for such
Dividend Period on all outstanding Company Preferred Securities have been declared and
paid in full, or
set aside for payment, as the case may be; and
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without the consent or
affirmative vote the holders of
at
least two-thirds of
the Fixed Rate
Company Preferred Securities and the Fixed-to-Floating Rate Company Securities, voting
together as a single class, the Company may not:
pay dividends on Junior Equity Securities unless the Company's FFO for the four
prior fiscal quarters equals or exceeds 150% of
the amount that would be
required to pay full dividends on the outstanding Company Preferred Securities,
as well as any other Parity Equity Securities; or
amend or
otherwise change the requirement that the Company make investments
and distributions with the proceeds of
the Company's assets such that the
Company's FFO for any period of
four fiscal quarters will equal or
exceed 150%
of
the amount that would be required to pay full annual dividends on
all
outstanding Company Preferred Securities, as
well as any other Parity Equity
Securities.
As HELs in the Asset Trust prepay or
repay principal and distributions with respect to such
principal payments are made by the Asset Trust to the Company on the Class A Asset Trust
Certificate, subject to the limitations referenced above, the Company may choose to apply such
amounts to pay dividends on the Company Common Securities or
reinvest such amounts in
additional Eligible Assets. Additionally, subject to the limitations referenced above, the Company
could distribute a portion of
the Class A Asset Trust Certificate as a dividend on the Company
Common Securities. The Company has no current intention to pay an extraordinary dividend, and
WMI has no current intention to cause or
permit the Company to pay such an extraordinary
dividend. Nevertheless, dividends paid by
the Company on the Company Common Securities could
result in a reduction in the Company's assets that could have the consequence, notwithstanding
its
compliance with the limitations referred to above, of
the Company not having funds available to
pay full dividends on the Company Preferred Securities in future periods or
loss by investors of
some or
all
of
the amount of
their investment were the Company to be liquidated.
The WaMu Cayman Preferred Securities may not be redeemed at
the option of
the holder
thereof under any circumstances, are perpetual and have no maturity date. While the WaMu
Cayman Preferred Securities may be redeemed at
the option of
the Company under certain
circumstances described herein, any such redemption is subject to the approval of
the OTS and
may be constrained by
operation of
the Replacement Capital Covenant. Investors in the WaMuCayman Preferred Securities will have no right to reclaim their initial investment from WaMuCayman and there can b
e no guarantee that the WaMu Cayman Preferred Securities will ever be
redeemed. If investors in the WaMu Cayman Preferred Securities choose to sell their WaMu
Cayman Preferred Securities in order to reclaim all
or
part of
their initial investment in the
absence of any redemption, there can be no guarantee that such investors would be able to sell
their securities in the secondary market, or
that if such sale occurred the sale price would at
or
above the initial price.
on
on
Dividends on the Fixed Rate Company Preferred Securities are not cumulative. Conse-
quently, if the Company's Board of
Managers does not declare a dividend on the Fixed Rate
CONFIDENTIAL
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Company Preferred Securities for any quarter, WaMu Cayman will not be entitled to receive
dividends for such quarter, and consequently holders of
the WaMu Cayman Preferred Securities
will not receive dividends with respect to their securities for that quarter. In addition, the
Company's Board of Managers may determine that it would be
in the Company's best interests
to pay less than the full amount of
the stated dividends on the Fixed Rate Company Preferred
Securities or no dividends for any quarter even though funds are available. Factors that would
generally be considered by the Company's Board of Managers in making this determination are
the amount of
available funds, the Company's financial condition and capital needs, the impact of
current and pending legislation and regulations, economic conditions, and tax considerations.
to on
itEven if the Company pays dividends on Fixed Rate Company Preferred Securities held b
y
WaMu Cayman, it is possible that WaMu Cayman may not be able to pay dividends because
WaMu Cayman may only pay dividends on the WaMu Cayman Preferred Securities out of
funds
legally available therefor. Although WaMu Cayman's Articles of
Association restrict its activities
as described under WaMu Cayman" and WaMu Cayman is otherwise precluded from incurring
any indebtedness for borrowed money and does not anticipate having any material liabilities, it is
possible that WaMu Cayman may incur involuntary liabilities that may, in turn, preclude it from
paying dividends on the WaMu Cayman Preferred Securities even if the Company has paid
dividends on the Fixed Rate Company Preferred Securities owned by WaMu Cayman.
a a
The returns from an investment in the WaMu Cayman Preferred Securities will be dependent
to a significant extent on the performance and capital of WMB due to the potential for a
Conditional Exchange. A decline in the performance and capital levels of WMB or
the placement
by
the OTS of WMB into conservatorship or
receivership could result in a Conditional Exchange
of
the WaMu Cayman Preferred Securities for Fixed Rate Depositary Shares representing Fixed
Rate WMI Preferred Stock. The Fixed Rate WMI Preferred Stock would represent an investment
in WMI and not in the Company or WaMu Cayman. Under these circumstances:
the WaMu Cayman Preferred Securities would be exchanged for a preferred equity
interest in WMI at a time when WMB's and, ultimately, WMl's financial condition has
deteriorated or
when WMB may have been placed into conservatorship or
receivership
and, accordingly, it is unlikely that WMI would be
in a financial position to make any
dividend payment on the amount of
Fixed Rate WMI Preferred Stock;
in the event of a liquidation of WMI, the claims of
creditors of WMI would be entitled to
priority in payment over the claims of
holders of
equity interests such as the Fixed Rate
Depositary Shares, and, therefore, the former holders of
the WaMu Cayman Preferred
Securities who would then hold the Fixed Rate Depositary Shares representing Fixed
Rate WMI Preferred Stock because of
the occurrence of
the Conditional Exchange may
receive substantially less than such holders would receive had the.WaMu Cayman
Preferred Securities not been exchanged for the Fixed Rate Depositary Shares. See
Risk Factors Applicable to Fixed Rate Depositary Shares Issued in a Conditional
Exchange The Fixed Rate WMI Preferred Stock will rank subordinate to the direct
indebtedness of WMI;"
for United States Federal income tax purposes, a Conditional Exchange would most likely
be a taxable event to holders of
the WaMu Cayman Preferred Securities, and in that
20
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event such holders generally would incur a gain or
loss, as the case may be, measured
by
the difference between their adjusted tax basis in the WaMu Cayman Preferred
Securities and the fair market value of
the Fixed Rate Depositary Shares. In addition,
dividends, if any, paid to Foreign Holders of
Fixed Rate Depositary Shares received upon
a Conditional Exchange generally will be subject to a 30% United States withholding tax
unless the holder qualifies for a reduction from withholding tax under an applicable United
States income tax treaty; and
although the terms of
Fixed Rate Depositary Shares are substantially similar to the terms
of
the Fixed Rate Company Preferred Securities, there are differences that holders of
WaMu Cayman Preferred Securities might deem to be important, such as
the fact that
holders of
Fixed Rate Depositary Shares will not generally have voting rights, except as
required by
law or
in connection with the right to elect directors if dividends are missed
see Description of
the Fixed Rate WMI Preferred Stock Voting Rights"), or
benefit
from any protective covenants. In addition, neither the Fixed Rate WMI Preferred Stock
nor the Fixed Rate Depositary Shares will be listed on any securities exchange or
automated dealer quotation system, and the Initial Purchasers are under no obligation to
and do not intend to make a market in the Fixed Rate Depositary Shares.
Except as specified in WaMu Cayman's Articles of
Association or
in relation to the right to
direct the manner in which WaMu Cayman exercises its voting rights with respect to the Fixed
Rate Company Preferred Securities, holders of WaMu Cayman Preferred Securities are not
entitled to voting rights. Except as
specified in the LLC Agreement, WaMu Cayman, as
holder of
Fixed Rate Company Preferred Securities, is not entitled to voting rights. However, the Company
is prohibited by
the LLC Agreement from taking certain actions without the consent or
vote of
at
least two-thirds of
either the Fixed Rate Company Preferred Securities voting separately or
the
Fixed Rate Company Preferred Securities and the Fixed-to-Floating Rate Company Preferred
Securities, voting together as a single class, as applicable. For a description of
the matters on
which the holders of
Fixed Rate Company Preferred Securities have a right to vote, see
Description of
the Fixed Rate Company Preferred Securities Voting Rights and Covenants."
no
of
a an
Subject to the Replacement Capital Covenant and the prior approval of
the OTS, the
Company may redeem the Fixed Rate Company Preferred Securities i) in whole but not in part
upon the occurrence of a Tax Event, an Investment Company Act Event or a Regulatory Capital
Event prior to March 15, 2011 and in whole or
in part, at any time on or
after March 15, 2011.
The redemption by the Company of
the Fixed Rate Company Preferred Securities will automatically
cause a redemption of
the WaMu Cayman Preferred Securities for which the redemption price will
be paid from the proceeds WaMu Cayman receives from the Company as a consequence of
the
redemption of
the Fixed Rate Company Preferred Securities. The occurrence of
a Tax Event, an
Investment Company Act Event or a Regulatory Capital Event will not, however, give a holder of
the WaMu Cayman Preferred Securities any right to request that the Fixed Rate Company
Preferred Securities or
the WaMu Cayman Preferred Securities be redeemed.
If the Company redeems the Fixed Rate Company Preferred Securities, the WaMu Cayman
Preferred Securities will be automatically redeemed, and the former holders of
the WaMu
21
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00037
Cayman Preferred Securities may not be able to invest their redemption proceeds in securities
with a dividend yield and other terms comparable to that of
the WaMu Cayman Preferred
Securities. A Treasury based make whole" amount will be payable only in connection with a
redemption prior to March 15, 2011.
The WaMu Cayman Preferred Securities will rank subordinate to claims of WaMu Cayman's
creditors.
Although WaMu Cayman is a special purpose vehicle and its activities will be
limited by
WaMu Cayman's Articles of
Association, the WaMu Cayman Preferred Securities will rank
subordinate to claims of WaMu Cayman's creditors, if any. Accordingly, if
WaMu Cayman does not have funds legally available to pay full dividends on the WaMuCayman Preferred Securities; o
r
in the event of WaMu Cayman's liquidation, dissolution or
winding up, WaMu Cayman
does not have funds legally available to pay the full liquidation value of
the WaMuCayman Preferred Securities,
in each case, because of
claims of
any such creditors, any funds that are legally available to pay
such amounts will be paid pro rata to the WaMu Cayman Preferred Securities.
The Fixed Rate Company Preferred Securities will rank subordinate to claims of
the Company's
creditors and on a parity with other series of
preferred securities issued the Company.
The Fixed Rate Company Preferred Securities will rank subordinate to all claims of
the
Company's creditors. The Fixed Rate Company Preferred Securities will rank pari passu as
to
dividends and upon liquidation with the Fixed-to-Floating Rate Company Preferred Securities and
other Parity Equity Securities that the Company may issue. The Company will issue the Fixed-to-
Floating Rate Company Preferred Securities to WaMu Delaware at
a time substantially
contemporaneous with this Offering and may issue additional Parity Equity Securities at any time
in the future, subject to certain conditions at
the time of
issuance, without the consent or
approval of
the holders of
the WaMu Cayman Preferred Securities. Accordingly, if
the Company does not have funds legally available to pay full dividends on the Fixed Rate
Company Preferred Securities and any Parity Equity Securities; or
in the event of
the Company's liquidation, dissolution or
winding up, the Company does
not have funds legally available to pay the full liquidation value of
the Fixed R"ate
Company Preferred Securities and any Parity Equity Securities,
any funds that are legally available to pay such amounts will be paid pro rata to the Fixed Rate
Company Preferred Securities and any other Parity Equity Securities then outstanding. See
Description of
Other Company Securities Fixed-to-Floating Rate Company Preferred
Securities."
There has never been a market for the WaMu Cayman Preferred Securities.
Prior to this Offering, there was no market for the WaMu Cayman Preferred Securities.
Although the Initial Purchasers intend to make a market in the WaMu Cayman Preferred
Securities, they are under no obligation to do so and, to the extent that such market making is
commenced, it may be discontinued at
any time. The Series A-1 WaMu Cayman Preferred
Securities will not be listed on any securities exchange or automated dealer quotation system,
and although WaMu Cayman will apply to list the Series A-2 WaMu Cayman Preferred Securities
on the Euro MTF market of
the Luxembourg Stock Exchange, there can be no assurance that an
active and liquid trading market for the WaMu Cayman Preferred Securities will develop or
be
sustained. If such a market were to develop, the prices at
which the WaMu Cayman Preferred
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00038
Securities trade would depend on many factors, including prevailing interest rates, the operating
results of
the Company, WMB and WMI, and the market for similar securities. Hqlders of WaMu
Cayman Preferred Securities may not be able to resell their WaMu Cayman Preferred Securities
at
or above the initial price. Furthermore, the WaMu Cayman Preferred Securities are not and will
not be registered under the Securities Act, will be deemed to be
restricted securities within the
meaning of
Rule 144 under the Securities Act and are subject to significant transfer restrictions
as
described in Notice to Investors." These restrictions on transfer may inhibit the development
of
an
active and liquid trading market for the WaMu Cayman Preferred Securities and may
adversely impact the market price of
the WaMu Cayman Preferred Securities.
of,
The WaMu Cayman Preferred Securities do not constitute obligations or
equity securities of
WMI, WMB, the Company, Marion Holdings Inc., an intermediate holding company between WMB
and University Street University Street, the Asset Trust, WaMu Delaware or
any
other entity, nor are WaMu Cayman's obligations with respect to the WaMu Cayman Preferred
Securities guaranteed by any other entity. In particular, neither WMI, WMB, the Company,
University Street, Marion, the Asset Trust, WaMu Delaware nor any other entity guarantees that
WaMu Cayman will declare or
pay any dividends, nor are they obligated to provide additional
capital or
other support to WaMu Cayman to enable WaMu Cayman to pay dividends in the event
the Company fails to pay dividends on the Fixed Rate Company Preferred Securities and WaMuCayman is thus unable to pay dividends on the WaMu Cayman Preferred Securities. The WaMu
Cayman Preferred Securities are not exchangeable for Fixed Rate Depositary Shares or
Fixed
Rate WMI Preferred Stock except upon a Conditional Exchange. No holder of WaMu Cayman
Preferred Securities will have the right to require WaMu Cayman to exchange the WaMu Cayman
Preferred Securities for Fixed Rate Depositary Shares.
of,
The Fixed Rate Company Preferred Securities do not constitute obligations or
equity
securities of
any entity other than the Company, including WMI, WMB, Marion, University Street,
WaMu Cayman, the Asset Trust and WaMu Delaware, nor are the Company's obligations with
respect to the Fixed Rate Company Preferred Securities guaranteed by any other entity. In
particular, neither WMI, WMB, Marion, University Street, WaMu Cayman, the Asset Trust, WaMu
Delaware nor any other entity, guarantees that the Company will declare or
pay any dividends to
WaMu Cayman, nor are they obligated to provide additional capital or
other support to the
Company to enable the Company to pay dividends on the Fixed Rate Company Preferred
Securities to WaMu Cayman in the event the Company's assets and results from operations are
insufficient for such purpose.
All
of
the Company's officers and certain of
the Company's managers are also officers of
WMI or WMB or
their affiliates. After this Offering, WMI, WMB and University Street will continue
to control
all
of
the Company's outstanding voting securities. WMI, WMB, and University Street
will have the right to elect
all
of
the Company's managers, including the Independent Manager.
WMB and University Street may have interests that are not identical to the Company's
interests. WMI, through
its subsidiary, New American Capital, Inc., is the ultimate owner of
WMB's and University Street's common stock, and may have investment goals and strategies
CONFIDENTIAL
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The Company is dependent on the officers and employees of WMI and WMB for the selection,
structuring and monitoring of
the loans in the Asset Trust and the Company's relationship with
WMI and/or WMB may create potential conflicts of
interest.
The Company is dependent on the officers and employees of WMB for the servicing of
the loans
in the Asset Trust and the Company's relationship with WMB may create potential conflicts
interest.
per annum
per annum.
Regulators may limit the Company's ability to implement the Company's business plan and mayrestrict the Company's ability to pay dividends.
24
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a on
25
CONFIDENTIAL
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which it conducts
its operations to avoid being required to register as
an investment company, or
to register as
an investment company, either of
which could have a material adverse effect
on the Company or
the Asset Trust, as the case may be, the Company's ability to make
payments in respect of
the Fixed Rate Company Preferred Securities and, accordingly, the
trading price of
the WaMu Cayman Preferred Securities. Further, in order to ensure that the
Company and the Asset Trust at
all times continues to qualify for the above exemption from the
Investment Company Act, the Company and the Asset Trust may be required at
times to adopt
less efficient methods of
financing certain of
the Company's and the Asset Trust's assets than
would otherwise be the case and may be precluded from acquiring certain types of
assets whose
yield is higher than the yield on assets that could be purchased in a manner consistent with the
exemption. The net effect of
these factors may be
to lower at
times the Company's net interest
income. Finally, if the Company or
the Asset Trust were an unregistered investment company,
there would be a risk that the Company or
the Asset Trust, as
the case may be, would be
subject to monetary penalties and injunctive relief in an action brought by the SEC, that the
Company or
the Asset Trust, as the case may be, would be unable to enforce contracts with
third parties and that third parties could seek to obtain rescission of
transactions undertaken
during the period the Company or
the Asset Trust was determined to be
an unregistered
investment company.
In addition, an
issuer that is organized outside the United States, such as WaMu Cayman, is
not permitted to register under the Investment Company Act without first obtaining an order from
the SEC permitting it to register as
an investment company under the Investment Company Act.
WaMu Cayman does not intend to seek such an order and could not satisfy some of
the
requirements of
the Investment Company Act e.g., limitations on the ratio of
preferred equity to
common equity) that would have to be satisfied for WaMu Cayman to obtain such an order.
Accordingly, WaMu Cayman has not and does not intend to register under the Investment
Company Act in reliance on the exemption from registration set forth in Section 3(c) thereof.
Were such an exemption no longer available, potential ramifications of
a failure by WaMu Cayman
to obtain an order permitting it to register, if such registration were in fact required, include, but are
not limited to,
an
injunctive or
administrative proceeding by
the SEC for disgorgement and/or
monetary penalties and an order prohibiting WaMu Cayman from committing or
causing future
violations of
the federal securities laws. In the event the Company, the Asset Trust or WaMu
Cayman is ever considered an investment company under the Investment Company Act as a result
of
an Investment Company Act Event, the Company would likely redeem the Fixed Rate Company
Preferred Securities. See above under Risks Relating to the Terms of
the WaMu Cayman
Preferred Securities and the Fixed Rate Company Preferred Securities Holders of WaMu
Cayman Preferred Securities and Fixed Rate Company Preferred Securities have no redemption
rights; however, the Company may but is not required to) redeem the Fixed Rate Company
Preferred Securities upon the occurrence of a Tax Event, an Investment Company Act Event or a
Regulatory Capital Event prior to March 15, 2011, and at
any time thereafter and such redemption
will cause an automatic redemption of
the WaMu Cayman Preferred Securities."
Additionally, the Company may from time to time have Asset Subsidiaries other than the
Asset Trust. The Company may not establish an Asset Subsidiary unless the establishment and
operation of
such Asset Subsidiary will not cause the Company to be
an investment company
which is required to register under the Investment Company Act and such Asset Subsidiary is not
itself an investment company which is required to register under the Investment Company Act. If
any such Asset Subsidiary were to be required to register as
an investment company, the results
would be similar to those described above in respect to the Asset Trust being required to register
as
an investment company.
Adverse Effect of
Determination of Company's Partnership Status
Prior to the issuance of
the Company Preferred Securities, the Company will receive an
opinion from Mayer, Brown, Rowe Maw LLP to the effect that, for United States Federal
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income tax purposes, i) the Company will not be treated as
an association taxable as a
corporation and
ii) although no activities closely comparable to that contemplated by the
Company have been the subject of any U.S. Treasury regulation, revenue ruling or
judicial
decision, the Company will not be treated as a publicly traded partnership taxable as a
corporation. The opinions are based on certain assumptions and on certain representations and
agreements regarding restrictions on the future conduct of
the activities of
the Company.
Although the Company intends to conduct
its activities in accordance with such assumptions,
representations and agreements, if it were nonetheless determined that the Company was
taxable as a corporation for United States Federal income tax purposes, then the Company
would be subject under the Code to the regular corporate income tax. Such taxes would reduce
the amounts available to make payments on the Company Preferred Securities.
Adverse Effect of
Determination of
U.S. Trade or
Business Status
Prior to the issuance of
the WaMu Cayman Preferred Securities, WaMu Cayman will receive
an opinion from Mayer, Brown, Rowe Maw LLP to the effect that, for United States Federal
income tax purposes, although no activities closely comparable to that contemplated by WaMu
Cayman have been the subject of
any U.S. Treasury regulation, revenue ruling or
judicial
decision, WaMu Cayman will not be treated as engaged in the conduct of
a trade or
business
within the United States and, consequently, WaMu Cayman's profits will not be subject to United
States Federal income tax on a net income basis including the branch profits tax). The opinion
is based on certain assumptions and on certain representations and agreements regarding
restrictions on the future conduct of
the activities of WaMu Cayman and the Company. Although
WaMu Cayman intends to conduct its activities in accordance with such assumptions,
representations and agreements, if it were nonetheless determined that WaMu Cayman was
engaged in a United States trade or
business and had taxable income that is effectively
connected with such United States trade or
business, then WaMu Cayman would be subject
under the Code to the regular corporate income tax on such effectively connected taxable
income and possibly to the 30% branch profits tax as
well. Such taxes would reduce the amounts
available to make payments on the WaMu Cayman Preferred Securities.
The Company has control over changes in interest rates and such changes could negatively
impact the Company's financial condition, results of
operations, and ability to pay dividends.
Initially, the Company's income consists primarily of payments received on the HELs which
are the underlying assets supporting the Class A Asset Trust Certificate such underlying assets,
together with any collateral with respect to any Additional Assets, the Company's Portfolio"). At
January 31, 2006, 100% of
the HELs to be included in the Company's Portfolio bear interest at
fixed rates; however, in the future, the Company could acquire Additional Assets which include or
are secured by
adjustable rate loans. Adjustable-rate loans decrease the risks to a lender
associated with changes in interest rates but involve other risks. As interest rates rise, the
payment by
the borrower rises to the extent permitted by
the terms of
the loan, and the
increased payment increases the potential for default. At
the same time, the marketability of
the
underlying property may be adversely affected by higher interest rates. In a declining interest rate
environment, there may be
an increase in prepayments on the HELs or
other assets in the
Company's Portfolio as
the borrowers refinance their mortgages at
lower interest rates. Under
these circumstances, the Company may find it more difficult to acquire Additional Assets with
rates sufficient to support the payment of
the dividends on the Fixed Rate Company Preferred
Securities. A declining interest rate environment would adversely affect the Company's ability to
pay full, or even partial, dividends on the Fixed Rate Company Preferred Securities.
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The value of
the collateral underlying the Company's Portfolio and
lor
the results of
the
Company's operations could be affected by various conditions in the economy, such as:
local and other economic conditions affecting real estate and other collateral values;
sudden or
unexpected changes in economic conditions, including changes that might
result from terrorist attacks and the United States' response to such attaCks;
the continued financial stability of a borrower and the borrower's ability to make loan
principal and interest payments, which may be adversely affected by job loss, recession,
divorce, illness or
personal bankruptcy; and
interest rate levels and the availability of
credit to refinance loans at
or
prior to maturity.
At
January 31, 2006, more than 79% as a percentage of
loan principal balances) of
the
assets in the Company's Portfolio were located in Texas and California. Because of
the
concentration of
the Company's interest in those states, in the event of
adverse economic
conditions in those states, the Company would likely experience higher rates of
loss and
delinquency on the Company's Portfolio than if the underlying HELs were more geographically
diversified. Additionally, the HELs in the Company's Portfolio may be subject to a greater risk of
default than other comparable loans in the event of
adverse economic, political, or
business
developments or
natural hazards that may affect Texas and California, and the ability of
property
owners or
commercial borrowers in those states to make payments ofprincipal and interest on
the underlying loans. In the event of
any adverse development or
natural disaster in those states,
the Company's ability to pay dividends on the Fixed Rate Company Preferred Securities could be
adversely affected.
The Company has adopted policies with a view to ensuring that
all financial dealings
between WMB, University Street and the Company will be fair to each party and consistent with
market terms. However, there has been no third party valuation of
all
of
the Company's assets.
In addition, it is not anticipated that third party valuations will be obtained in connection with
future acquisitions or
dispositions of
assets even in circumstances where an affiliate of
the
Company.is selling the assets to the Company, or
purchasing the assets from the Company.
Accordingly, the Company cannot assure purchasers that the purchase price the Company paid
for all
of
the Company's assets was equal to the fair market value of
those assets. Nor can the
Company assure purchasers that the consideration to be paid by the Company
to,
or
received by
the Company from, WMB, University Street or any of
the Company's affiliates in connection with
future acquisitions or
dispositions of
assets will be equal to the fair market value of
such assets.
The Asset Trust or any other Asset Subsidiary may be forced to foreclose on an underlying
HEL or
other assets where the borrower has defaulted on
its obligation to repay the applicable
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00044
loan. It
is possible that the Asset Trust or
any other Asset Subsidiary, and therefore, the Company,
may be subject to environmental liabilities with respect to foreclosed property. The discovery of
these liabilities and any associated costs for removal of
hazardous substances, wastes,
contaminants or
pollutants, could have a material adverse effect on the fair value of such assets.
Substantial delays could be encountered in connection with the liquidation of
the collateral
securing defaulted loans in the Company's Portfolio, with corresponding delays in the Company's
receipt of
related proceeds. An action to foreclose on a mortgaged property or
repossess and
sell other collateral securing a loan is regulated by state statutes and rules. Any such action is
subject to many of
the delays and expenses of
lawsuits, which may impede the Company's ability
to foreclose on or
sell the collateral or
to obtain proceeds sufficient to repay
all amounts due on
the related loan in the Company's Portfolio.
Although the Company's Portfolio currently consists primarily of HELs held through the
Asset Trust, to the extent it acquires Additional Assets in the future, the Company is not required
to limit
its investments to assets of
the types currently in the Company's Portfolio. See TheCompany Business o
f
the Company Assets of
the Company." Assets such as second lien
closed end home equity loans, first or second lien home equity lines of
credit, mortgage loans on
single family or
multi-family residences, commercial mortgage loans or
other real estate assets
may involve different risks not described in this offering circular. Moreover, while the LLC
Agreement will call for maintaining specified levels of FFO coverage as
to expected dividends,
the Company is not required to maintain the levels of
asset coverage that currently exist.
The dependency of
the Company on WMI, University Street and WMB and the Company's
close relationship with WMI, University Street and WMB may create potential conflicts of
interest in
connection with the Company's acquisition of
Additional Assets. The Company will be dependent on
WMI, University Street and WMB to identify Additional Assets which it may acquire, but WMI,
University Street and WMB are not required to contribute or
sell Additional Assets to the Company. If
WMI, University Street and WMB are unable to identify, or
are unwilling to contribute or
sell, suitable
Additional Assets, then over time the Company's level of
FFO coverage as
to expected dividends will
decline. Moreover, conflicts of
interest may arise because the employees of WMI, University Street
and WMB Will, subject to.certain ~estrictions, make decisions on the amount, type and to the extent
the Company purchases Additional Assets) price of
future acquisitions by the Company of
Additional
Assets from University Street, WMB or
other members of
the WMI Group as well as future
dispositions of
assets to WMB, University Street or
third parties.
For United States Federal income tax purposes, a Conditional Exchange would most likely
be a taxable event to holders of WaMu Cayman Preferred Securities under the Code, and they
generally would incur a gain or
loss, as
the case may be, measured by
the difference between
their adjusted tax basis in the WaMu Cayman Preferred Securities and the fair market value of
the Fixed Rate Depositary Shares. In addition, dividends, if any, paid to Foreign Holders of
Fixed
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00045
to
30
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00046
Upon the occurrence of
a Conditional Exchange, the holders of
the Fixed Rate Depositary
Shares will not benefit from the same favorable covenants as
the Fixed Rate Company Preferred
Securities.
Dividends on the Fixed Rate WMI Preferred Stock are not cumulative. Consequently, if the
board of
directors of WMI of does not declare dividends on the Fixed
Rate WMI Preferred Stock for any quarterly period, the holders of
the Fixed Rate Depositary
Shares would not be
entitled to any such dividend whether or
not funds are or
subsequently
become available.
WMl's Board of
Directors may determine that it would be
in WMl's best interest to pay less
than the full amount of
the stated dividends on the Fixed Rate WMI Preferred Stock or no
dividends for any quarter even if funds are available. Factors that would be considered by WMl's
Board of
Directors in making this determination are WMl's financial condition and capital needs,
the impact of
current and pending legislation and regulations, economic conditions, tax
considerations, and such other factors as WMI's Board of
Directors may deem relevant.
The Fixed Rate WMI Preferred Stock and the Fixed Rate Depositary Shares will be new
issues of
securities. WMI does not intend to cause the listing or
quotation of
the Fixed Rate WMI
Preferred Stock or
the Fixed Rate Depositary Shares on any securities exchange or
automated
dealer quotation system, including any such securities exchange or automated dealer quotation
system on which the Series A-2 WaMu Cayman Preferred Securities are listed or
quoted. The
Initial Purchasers are under no obligation to and do not intend to make a market in the Fixed
Rate Depositary Shares. Consequently, it is unlikely that an
active and liquid trading public
market for the Fixed Rate Depositary Shares or
the underlying Fixed Rate WMI Preferred Stock
will develop or
be maintained. The lack of
liquidity and an active trading market could adversely
affect ability of
the holders of
Fixed Rate Depositary Shares to dispose of such shares.
In addition, neither the Fixed Rate Depositary Shares nor the Fixed Rate WMI Preferred
Stock represented by such shares have or
will be registered under the Securities Act and will be
deemed to be restricted securities within the meaning of
Rule 144 of
the Securities Act. Holders
of
Fixed Rate Depositary Shares will not be able to offer, sell, pledge or
otherwise transfer the
Fixed Rate Depositary Shares other than:
to a qualified institutional buyer within the meaning of
Rule 144A of
the Securities Act in a
transaction complying with Rule 144A;
to a non-U.S. person within the meaning of
Rule 902 of
Regulation S in a transaction
complying with Regulation S;
otherwise in accordance with an applicable exemption from the registration requirements
of
the Securities Act; or
to WMI or
one of
WMl's affiliates, and in any case, in accordance with exemptions from
any applicable state securities or
blue sky laws.
These restrictions on transfer may inhibit the development of
an
active and liquid trading market
for the Fixed Rate Depositary Shares and may adversely impact the market price of
such shares.
31
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00047
CERTAIN INFORMATION CONCERNING WMB
WMB") savings
various
savings
savings
savings
converted
Event:
corrective
conservatorship
dividends
quantitative
have
have leverage
savings
savings
exclusive servicing
servicing
32
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00048
lated gains losses) on certain available-for-sale securities and cash flow hedges. For purposes
of
determining risk-weighted assets for the risk-based capital ratios, the book value of each of
the savings association's on-balance sheet assets, and a portion of
certain off-bcl.lance sheet
items and exposures, are weighted from 0% to 100% based on broad categories. For instance,
U.S. government debt obligations are generally risk-weighted at
0%; certain qualifying residential
mortgage loans on one-to-four family dwellings are generally risk weighted at
50%; and
commercial loans and most other assets are generally risk-weighted at 100%. Off-balance sheet
items including letters of
credit, loan commitments, swaps and other derivatives) are converted
into on-balance sheet equivalent" amounts for risk-based capital purposes, then assigned a risk
weight like other assets. The capital risk weighting assigned to certain asset-backed securities
may vary from 20% to 200% depending on credit rating. Subordinated residual interests retained
in asset securitizations, credit enhancement and forms of
recourse" can result in higher capital
charges or
deductions from capital.
For purposes of
the OTS regulations, is defined as the sum of
core capital
and supplementary capital. generally includes: common shareholders' equity
which includes related surplus); non-cumulative perpetual preferred stock which includes
related surplus); and qualifying minority interests in the equity accounts of
consolidated
subsidiaries which may include such instruments as qualifying REIT preferred stock and the
Company Preferred Securities). generally includes subject to certain
limits and sub-limits): cumulative perpetual preferred stock; maturing capital instruments; Dutch
auction and money market preferred stock; hybrid capital instruments including certain
mandatory convertible notes); term subordinated debt; the savings association's allowance for
loan and lease losses up to a maximum of
1.25% of
total risk-weighted assets); and up to 45%
of
the pretax net unrealized gains of
available-for-sale equity securities investments. Supplemen-
tary capital is permitted to count towards only one-half of
total capital. Both core capital and
tangible capital are subject to various deductions. Some of
these deductions are more stringent
for tangible capital than core capital, including goodwill, certain other intangible assets, and
certain servicing assets in excess of
certain limits.
Federal law and regulations also establish five capital categories for savings associations:
well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and criti-
cally undercapitalized. A savings association is treated as well-capitalized if its ratio of
total
capital to risk-weighted assets is 10.00% or
more, its ratio of
core capital to risk-weighted assets
is 6.00% or
more,
its leverage ratio is 5.00% or
more, and it is not subject to any federal
supervisory agreement order or
directive to meet a specific capital level. In order to be
adequately capitalized, any savings association must have a ratio of
total capital to risk-weighted
assets of
not less than 8.00%, a ratio of
core capital to risk-weighted assets of
not less than
4.00%, and unless it is in the most highly-rated category) a leverage ratio of
not less than
4.00%. Any savings association that is neither well-capitalized nor adequately capitalized will be
considered undercapitalized. Any savings association with a tangible equity ratio of 2.00% or
less
will be considered critically undercapitalized.
Undercapitalized savings associations are subject to certain prompt corrective action
requirements, regulatory controls and restrictions, which become more extensive as
an
association becomes more severely undercapitalized. Failure by WMB to comply with applicable
capital requirements, if unremedied, would result in restrictions on its activities and lead to
regulatory enforcement actions against WMB including, but not limited
to,
the issuance of a
capital directive to ensure the maintenance of
required capital levels. The Federal Deposit
Insurance Corporation Improvement Act of 1991 requires the federal banking regulators to take
prompt corrective action with respect to depository institutions that do not meet minimum capital
requirements. Additionally, FDIC or OTS approval of any regulatory application filed for
its review
may be dependent on compliance with capital requirements.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00049
In addition, the OTS from time to time may impose higher specific capital requirements on
any savings association that is perceived to have risks, exposures, credit concentration, rapid
growth or
other circumstances warranting special attention. Failure to satisfy such a capital
directive could subject an association to civil money penalties, judicial enforcement and
administrative remedies available to the OTS, as well as a finding that a savings association is
undercapitalized"
Whether WMB would ever be determined by the OTS to be undercapitalized", or
at
risk of
becoming undercapitalized" in the near term thereby triggering the exchange of
the WaMu
Cayman Preferred Securities for Fixed Rate Depositary Shares could be influenced not only by
the OTS' capital adequacy regulations, but also by the regulator's interpretations and judgment
on other matters. For example, the OTS' views on asset credit quality potentially could affect a
thrift or
savings association's capital status. Among other things, the OTS typically evaluates
asset quality, loan loss reserves and procedures during periodic regulatory examinations of each
federal savings association. If,
following such an examination or
otherwise, the OTS in its
discretion were to require WMB to significantly increase
its reserves against credit losses
the allowance for loan and lease losses), this could potentially reduce WMB's retained earnings
and regulatory capital. As noted above, a savings association's allowance for loan and lease
losses is includable within supplementary capital only up to a limit, and is not includable at
all
in
core capital.
A savings association's regulatory capital status, and the risk of
being deemed undercapi-
talized" could also be affected by
other developments or
by
future changes in regulatory capital
and other standards. WMB and WMI continue to actively follow the progress of
the U.S. banking
agencies and the Basel Committee on Banking Supervision in developing a new set of
regulatory
risk-based capital requirements. The Basel Committee on Banking Supervision is a committee
established by
the central bank governors of
certain industrialized nations, including the United
States. The new requirements are commonly referred to as Basel II
or The New Basel Capital
Accord; however, final requirements have not been adopted. WMB and WMI are assessing the
potential impacts of
Basel
II.
The regulatory capital ratios calculated for WMB, along with the capital amounts and ratios
for the minimum regulatory requirement and the minimum amounts and ratios required to be
categorized as
well-capitalized under the regulatory framework for prompt corrective action were
as follows:
Total capital to total risk-weighted
assets $26,530 11.62% $18,260 8.00% $22,825 10.00%Core capital to total risk-weighted
assets 19,661 8.61 9,130 4.00 13,695 6.00
Core capital to adjusted total assets
leverage) 21,098 6.56 12,860 4.00(1) 16,075 5.00Tangible capital to tangible assets
tangible equity) 20,642 6.43 4,816 1.50
34
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00050
Total capital to total risk-weighted
assets $20,698 11.68% $14,174 8.00% $17,718 10.00%
Core capital to total risk-weighted
assets 14,392 8.12 7,087 4.00 10,631 6.00
Core capital to adjusted total assets
leverage) 14,530 5.46 10,635 4.00(1) 13,294 5.00
Tangible capital to tangible assets
tangible equity) 14,530 5.46 3,988 1.50 nfa nfa
Total capital to total risk-weighted
assets $15,444 10.80% $11,441 8.00% $14,302 10.00%
Core capital to total risk-weighted
assets 12,472 8.72 5,721 4.00 8,581 6.00
Core capital to adjusted total assets
leverage) 12,531 5.50 9,116 4.00(1) 11,395 5.00
Tangible capital to tangible assets
tangible equity) 12,531 5.50 3,419 1.50 nfa nfa
WMB has requested confirmation from the OTS that the Company Preferred Securities
constitute core capital of WMB under the OTS's applicable regulatory capital regulations and,
upon receipt of such confirmation, intends to treat the Company Preferred Securities accordingly.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00051
USE OF PROCEEDS
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00052
USE OF PROCEEDS
WaMu Cayman will use the proceeds of the sale of the WaMu Cayman Preferred Securities in this Offering, expected to be approximately $735,000,000, net of underwriting commissions, to purchase from WMB a like amount of Fixed Rate Company Preferred Securities, which the Company will issue to WMB in exchange for the conveyance from WMB of a portfolio of HELs. The WMI Group will use the proceeds from the sale of the Fixed Rate Company Preferred Securities to WaMu Cayman and the Fixed-to-Floating Rate Preferred Securities to WaMu Delaware for general corporate purposes, which may include the repurchase of WMl's common stock.
36
Washington Mutual Preferred Funding Cayman) I Ltd. WaMu Cayman") is a Cayman
Islands exempted company limited by
shares incorporated on February 23, 2006 under the
Companies Law 2004 Revision) of
the Cayman Islands the Companies Law") and
its
Memorandum and Articles of
Association together, as amended, WaMu Cayman's Articles of
Association")
WaMu Cayman's Articles of
Association limit
its activities to i) holding the 7.25% Perpetual
Non-Cumulative Preferred Securities, liquidation preference $1,000 per security the Fixed Rate
Company Preferred Securities"), ii) issuing the 7.25% Perpetual Non-cumulative Preferred
Securities, Series A-1, liquidation preference $100,000 per security and $302,300,000 in the
aggregate the Series A-1 WaMu Cayman Preferred Securities") and 7.25% Perpetual Non-
cumulative Preferred Securities, Series A-2, liquidation preference $10,000 per security and
$447,700,000 in the aggregate the Series A-2 WaMu Cayman Preferred Securities" and,
together with the Series A-1 WaMu Cayman Preferred Securities, the WaMu Cayman Preferred
Securities"), issuing the WaMu Cayman Ordinary Shares to the Cayman Trust and
iv) performing functions necessary or
incidental thereto. WaMu Cayman is prohibited from
issuing other equity or
any debt securities or
engaging in any other activities. Subject to the
limitations and assumptions described under Certain Tax Considerations," WaMu Cayman will
be treated as a corporation for United States Federal income tax purposes. The Fixed Rate
Company Preferred Securities will be the only assets of WaMu Cayman, other than the sum of
$1,000 representing the issued and paid-up share capital. The registered office of WaMu Cayman
is at PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman,
Cayman Islands. Copies of WaMu Cayman's Articles of
Association will be
available upon
request to WMI or
free of
charge at
the specified office of
the co-paying agent in Luxembourg
maintained by WaMu Cayman the Paying Agent in Luxembourg").
Capitalization
The authorized share capital of WaMu Cayman consists of
i) 3,023 Series A-1 WaMuCayman Preferred Securities par value $1.00 and liquidation preference $100,000 each,
all
of
which will be issued in connection with this Offering,
ii) 44,770 Series A-2 WaMu Cayman
Preferred Securities par value $1.00 and liquidation preference $10,000 each,
all
of
which will be
issued in connection with this Offering and iii) 1,000 ordinary shares, par value $1.00 each the
WaMu Cayman Ordinary Shares"),
all
of
which have been issued.
The WaMu Cayman Preferred Securities are described under Description of WaMu
Cayman Preferred Securities."
All
of
the issued WaMu Cayman Ordinary Shares are paid-up and
are held by Maples Finance Limited, as
share trustee in such capacity, the Share Trustee") of
a trust the Cayman Trust") established under the terms of a declaration of
trust the
Declaration of
Trust") dated February 23, 2006 under which the Share Trustee holds the WaMuCayman Ordinary Shares in trust until the termination o
f
the Cayman Trust. The Cayman Trust
will not terminate for so long as any WaMu Cayman Preferred Securities are outstanding. The
Cayman Trust may not dispose of
or
otherwise deal with the WaMu Cayman Ordinary Shares for
so long as
the WaMu Cayman Preferred Securities are outstanding. Prior to the termination of
the Cayman Trust, the Cayman Trust is an accumulation trust, and no distributions will be made
while any WaMu Cayman Preferred Security is outstanding. Following the termination of
the
Cayman Trust, the Share Trustee will wind up the Cayman Trust and make a final distribution to
charity. The Share Trustee has no beneficial interest in,
and derives no benefit other than its fee
for acting as Share Trustee) from, its holding of
the WaMu Cayman Ordinary Shares.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00053
The following table illustrates the expected capitalization of WaMu Cayman as
of
the closingof
this Offering, after giving effect to the issuance of
the WaMu Cayman Preferred Securities on
the closing date:
As of
the Closing Date
Unaudited)
Series A-1 WaMu Cayman Preferred Securities$302,300,000
Series A-2 WaMu Cayman Preferred Securities$447,700,000
WaMu Cayman Ordinary Shares$ 1,000
Total Capitalization$750,001,000
Business of WaMu Cayman
Assets of WaMu Cayman
WaMu Cayman's sole assets will be the Fixed Rate Company Preferred Securities and
$1,000 from the issuance of
the WaMu Cayman Ordinary Shares to the Cayman Trust.
Administration
Maples Finance Limited, a licensed trust company incorporated under the laws of
the
Cayman Islands, acts as
the administrator of WaMu Cayman the under the
Administration Agreement to be entered into on or
before the closing date the
between WaMu Cayman and Maples Finance Limited. The office of
the
Administrator serves as
the general business office of WaMu Cayman. Through this office and
pursuant to the terms of
the Administration Agreement, the Administrator performs various
management functions on behalf of WaMu Cayman, including the provision of
clerical,
administrative and other services.
The Administrator will serve until it resigns, is dissolved or
is removed by WaMu Cayman.
The Administrator may delegate
its duties under the Administration Agreement to other parties,
but doing so will not release the Administrator from any of
its obligations under the
Administration Agreement.
Under the Administration Agreement, WaMu Cayman may remove the Administrator at any
time, without paying any penalty, by giving at
least 30 days' written notice to the Administrator.
However, if the Administrator is dissolved or
commits an act of
bankruptcy, or
if it breaches the
Administration Agreement and the breach, if capable of
being cured, remains uncured for
30 days after receiving notice of
such breach from WaMu Cayman or
WMI), WaMu Cayman mayremove the Administrator on 14 days' notice to the Administrator.
The Administrator may resign at any time by giving at
least 30 days' written notice to WaMuCayman. Noresignation o
r
removal of
the Administrator will become effective while any WaMu
Cayman Preferred Securities are outstanding until a successor administrator has been appointed
and has accepted and assumed its duties. The Administration Agreement may be amended by
the Administrator and WaMu Cayman; that such amendment may not have a
material adverse affect on the rights and interests of
the holders of
the WaMu Cayman Preferred
Securities.
Under the Expenses Agreement, to be entered into on or
before the closing date the
among WaMu Cayman and WMB, all charges or
expenses of WaMu
Cayman other than payments required under the terms of
the WaMu Cayman Preferred
Securities, including the fees, charges and expenses of
the Administrator, the Registrar, the
Transfer Agent or any Paying Agent, will be paid or caused to be paid by WMB, that if
the Administrator incurs fees, charges or
expenses, for which they are not otherwise liable under
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00054
the Administration Agreement, at
the request of a holder of WaMu Cayman Preferred Securities
or
other person, such holder or
other person will be
liable for such fees, charges and expenses.
Management of
WaMu Cayman
Directors
WaMu Cayman will be managed by a Board of
Directors. WaMu Cayman's Articles of
Association will provide that WaMu Cayman's Board of
Directors will be composed of
five
members. Pursuant to WaMu Cayman's Articles of
Association, two of
the five directors will
automatically and at
all times consist of two of
the persons who are then currently serving as
members of
the Company's Board of
Managers the as
designated by the Company in a notice to WaMu Cayman. One of
the Company Designated
Directors will at
all times be the person who is the Company's Independent Manager, as
designated by the Company in a notice to WaMu Cayman. The person who is the Company's
Independent Manager will also be designated as WaMu Cayman's Independent Director the
The other three directors of WaMu Cayman will be appointed by the Share Trustee as
holder of
100% of
the WaMu Cayman Ordinary Shares. These persons will not be
or
have been
directors or employees of WMI or any affiliate of WMI. The directors of WaMu Cayman will serve
until their successors are duly appointed by
the Share Trustee as
holder of
100% of
the WaMuCayman Ordinary Shares, o
r
the Company in the case of
the Company Designated Directors
including the Independent Director), as applicable. Except in certain circumstances described
under Independent Director" below or
in connection with the prevention of
the dividend on
the WaMu Company Preferred Securities in circumstances where the Company has paid
dividends on the Fixed Rate Company Preferred Securities held by WaMu Cayman, action by the
WaMu Cayman's Board of
Directors will be
by majority vote.
The persons who will be the directors of
the Company upon completion of
this Offering are
as follows:
Wendy Ebanks Director
Carlos Fallajah Director
Guy Major Director
Robert Williams Director
Kenneth Uva Independent Director
Independent Director
As a consequence of
the WaMu Cayman's Independent Director being the same person as
the Company's Independent Manager, WaMu Cayman's Independent Director will be a person
who must not during the preceding five years have been a director or employee of WMI or any
affiliate of
WMI, other than a direct or
indirect financing subsidiary of
WMI. In addition, the
holders of
the WaMu Cayman Preferred Securities and the holders of
the Trust Securities, by
exercise of
their right to direct the manner in which WaMu Cayman and WaMu Delaware exercise
their voting rights with respect to the Fixed Rate Company Preferred Securities and Fixed-to-
Floating Rate Company Preferred Securities, respectively, voting together as a single class, will
be entitled to remove the initial or any succeeding Independent Manager of
the Company, and
consequently WaMu Cayman's Independent Director, and to fill the vacancies so created by such
removals or
any other vacancy existing in the office of WaMu Cayman's Independent Director
and Independent Manager of
the Company if i) the Company fails to pay full dividends on the
Fixed Rate Company Preferred Securities on any Dividend Payment Date, ii) WaMu Cayman
fails to pay full dividends on the WaMu Cayman Preferred Securities on any Dividend Payment
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00055
Compensation
of Directors
Additional Information
40
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00056
THE COMPANY
Washington Mutual Preferred Funding LLC the is a Delaware;limited liability
company formed on February 3, 2006 under the Delaware Limited Liability Company Act, as
amended the pursuant to an
initial limited liability company agreement and a
certificate of
formation filed with the Secretary of
State of
the State of
Delaware. The limited
liability company agreement will be amended and restated in its entirety on or
about March 7,
2006 as so amended and restated, the
The LLC Agreement generally limits the Company's activities to i) issuing the Fixed Rate
Company Preferred Securities, the Perpetual Non-cumulative Fixed-to-Floating Rate Preferred
Securities the and together with the
Fixed Rate Company Preferred Securities, the the common
securities of
the Company the and additional Parity Equity
Securities of
the Company acquiring and holding Eligible Investments, including the Class A
Asset Trust Certificate which will be the sole initial Eligible Investments of
the Company) in
accordance with the investment policy as described in Business of
the Company Assets of
the Company" and iii) performing functions necessary or
incidental thereto. Subject to the
limitations and assumptions described under Certain Tax Considerations United States
Federal Income Tax Consequences", the Company intends to be treated as a partnership for
United States Federal income tax purposes other than a publicly traded partnership taxable as a
corporation) and may not take any action, or
permit any action to be taken, that would cause the
Company to fail to be treated as a partnership for United States Federal income tax purposes for
so long as any Company Preferred Securities are outstanding, except with the consent or
affirmative vote of
the holders of
at
least two-thirds of
the Fixed Rate Company Preferred
Securities and the Fixed-to-Floating Rate Company Preferred Securities, voting together as a
single class. The principal executive office of
the Company is 1201 Third Avenue, Seattle,
Washington 98101. Copies of
the LLC Agreement will be
available upon request to WMI or
free
of
charge at
the specified office of
the Paying Agent in Luxembourg.
The Company will receive the opinion of
Mayer, Brown, Rowe Maw LLP to the effect that,
for United States Federal income tax purposes, the Company will not be treated as
an
association taxable as a corporation or
as a publicly traded partnership taxable as a corporation.
Capitalization
Upon completion of
this Offering, University Street, Inc., an indirect subsidiary of WMB
will hold
all
of
the Company Common Securities, representing 100% of
the
voting rights in the Company subject to the limited voting rights of
holders of
the Company
Preferred Securities described under Description of
Fixed Rate Company Preferred Securi-
ties"). Upon completion of
this Offering, WaMu Cayman will hold all
of
the Fixed Rate Company
Preferred Securities and WaMu Delaware will hold
all
of
the Fixed-to-Floating Rate Company
Preferred Securities.
41
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00057
As of
the Closing
Date
Unaudited)
Business of
the Company
Assets of
the Company
42
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00058
Additional Assets")
Eligible Assets"
provided, however,
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00059
Asset Documentation"
provided
Asset Subsidiary"
44
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00060
Asset Tax Opinion"
Asset Portfolio"
Eligible Investments"
Permitted Investments"
provided,
provided further,
provided,
provided,
provided.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00061
provided, however,
Rating Agencies"
Rating Agency Condition"
Administrative Services Agreement")
de minimis
Managers and Officers
Independent Manager").
46
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00062
Company's Board of Managers will be
by majority vote. The Company will have five officers upon
issuance of
the Fixed Rate Preferred Securities.
The persons who will be the managers and executive officers of
the Company upon
completion of
the Offering will include:
Name
Robert Williams. Manager and Senior Vice President
Peter Freilinger Manager and Senior Vice President
Kenneth Uva Independent Manager
Doreen Logan First Vice President and Assistant Secretary
Paul Phillips. Vice President
Chad Smith First Vice President and Secretary
Each of
the initial managers other than the Independent Manager) and officers of
the
Company are individuals who are officers or
employees of WMI or
one of
its
affiliates. The initial
Independent Manager is Kenneth Uva, who is an employee of
CT Corporation.
The Company will designate two of
the persons then currently serving as members of
the
Company's Board of
Managers to serve as members of WaMu Cayman's Board of
Directors in a
notice to WaMu Cayman. One of
the Company Designated Directors will at
all times be the
person who is the Company's Independent Manager, as
designated by
the Company in a notice
to WaMu Cayman. The person who is the Company's Independent Manager will also be
designated as WaMu Cayman's Independent Director. The Company Designated Directors will
serve as directors of WaMu Cayman until their successors are duly elected and qualified.
Independent Manager
Under the LLC Agreement, in order to be considered independent", a manager must not,
during the preceding five years, have been a director or employee of WMI or any affiliate of WMI,
other than a direct or
indirect financing subsidiary of
WMI.
The LLC Agreement will require that, in assessing the benefits to the Company of any
proposed action requiring his or
her consent, the Company's Independent Manager take into
account the interests of
holders of
both Company Common Securities and the Company
Preferred Securities. The LLC Agreement provides that in considering the interests of
the holders
of
the Company Preferred Securities, the Company's Independent Manager owes such holders
the same duties which the Independent Manager owes to the holders of Company Common
Securities.
The LLC Agreement will provide that, for so long as any Company Preferred Securities are
outstanding, certain actions by
the Company are subject to prior approval of
all Managers
including the Independent Manager. The Company will not be able, without the approval of
the
Independent Manager, to i) terminate, amend or
otherwise change any Asset Documentation or
ii) effect a consolidation, merger or
share exchange that is not tax-free to the holders of
the
Company Preferred Securities unless such consolidation, merger or
share exchange was
approved by the consent or
affirmative vote of
the holders of
at
least two-thirds of
the Fixed
Rate Company Preferred Securities and the Fixed-to-Floating Rate Company Preferred Securi-
ties, voting together as a single class. In addition, in the event that the Asset Trust fails to make
a payment to the Company or
any payments are not received with regard to any Additional Asset
in violation of
the terms of
the related Asset Documentation on any scheduled payment date, the
Independent Manager will have the authority to cause the Company, as the holder of
the
Series A Asset Trust Certificate or any Additional Asset, as applicable, to enforce
its rights in
such capacity until payments have been resumed and a year has passed since the date of
the
latest scheduled payment date with respect to which the Asset Trust or
the Additional Asset
failed to make a payment.
47
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00063
Bankruptcy Event"
de minimis.
provided, however,
48
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00064
Additional Information
49
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00065
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00066
THE ASSET TRUST
General
Washington Mutual Home Equity Trust I (the "Asset Trust") is a statutory trust formed under the laws of the State of Delaware pursuant to a trust agreement between the Company, as depositor, and Deutsche Bank Trust Company Delaware, as Delaware trustee. The Pooling and Servicing Agreement among the Company, as depositor, WMB, as servicer (the "Servicer") , Deutsche Bank Trust Company Delaware, as Delaware trustee (the "Delaware Trustee") and Deutsche Bank National Trust Company, as trustee (the "Trustee"), will restate the trust agreement and will be the governing instrument of the Asset Trust.
The Asset Trust will not own any assets other than the HELs and the other assets described below. The Asset Trust will not have any liabilities other than those incurred in connection with the Pooling and Servicing Agreement and any related agreement. The Asset Trust will not have any directors, officers or other employees. No equity contribution will be made to the Asset Trust by WMB, the depositor or any other party, except for a de minimis contribution made by the depositor pursuant to the initial trust agreement, and the Asset Trust will not have any other capital. The fiscal year end of the Asset Trust will be December 31. The Asset Trust will act through the Trustee and the Delaware Trustee, whose fees and reasonable expenses will be paid or reimbursed by the Servicer.
For purposes of this offering circular with respect to the underwriting, origination and servicing of the HELs in the Asset Trust, references to WMB include WMB, originators acquired by WMB and WMB's subsidiaries.
General Description of Assets
The assets of the Asset Trust will consist of HELs having, as of the Cut-Off Date, a value of approximately $5,389,459,150, payments received thereon and certain other investments. The HELs were originated by WMB primarily through its retail branches between September 1,2001 and September 30, 2005. As of January 31, 2006, the HELs transferred into the Asset Trust had an aggregate unpaid principal balance of approximately $5,389,459,150.
The assets of the Asset Trust will consist of 56,090 HELs that had an aggregate unpaid principal balance as of the Cut-Off Date, of approximately $5,389,459,150. The HELs have a weighted average gross interest rate of 6.076% and range from a gross interest rate of 4.00% to 11.315%. The weighted average current, unpaid principal balance of the HELs is $96,086 with a minimum current, unpaid principal balance of $25,002 and a maximum current, unpaid principal balance of $965,000. Assets in the Asset Trust have various original maturities ranging from 5 years to 40 years and were, on average, originated within the last 25.46 months. The current average loan-to-value ratio is 53.48% and the average loan-to-value ratio at origination was 57.51%. The HELs have a weighted average Credit Score (as defined below) of 757. Most of the properties underlying the HELs are owner occupied with 3.86% of the properties non-owner occupied. The HELs are geographically concentrated in Texas (49.01%), California (30.59%), Florida (7.17%), and New York (5.08%). HELs are typically made for reasons such as home purchases, home improvements, furniture and fixtures purchases, purchases of automobiles and debt consolidation. The HELs are generally repaid on a fully-amortizing basis.
Acquisition of the Portfolio and Related Transactions
In anticipation of the transactions described in this offering circular, WMB contributed a pool of HELs to the Company in exchange for a corresponding amount of the Company's Fixed Rate Company Preferred Securities and Fixed-to-Floating Rate Company Preferred Securities. In addition, University Street contributed a pool of HELs to the Company in exchange for all of the
50
A Trust Certificate")
R Trust Certificate").
Cut-Off Date").
Description of
the Portfolio
General
51
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00067
The following tables represent information as
of
January 31, 2006 with respect to the HELs
included in the portfolio of
the Asset Trust:
$0-$49,999 11,198 $ 432,387,414 8.02%
$50,000-$74,999 13,561 853,233,512 15.83
$75,000-$99,999 11,231 976,769,683 18.12
$100,000-$199,999 17,073 2,313,001,283 42.92
$200,000-$299,999 2,322 539,701,841 10.01
$300,000-$499,999 644 236,692,050 4.39
Greater than $500,000 61 37,673,368 0.70
56,090 $5,389,459,150 100.00%
4.00-4.99% $ 1,977,067 0.04%
5.00-5.99 26,026 2,624,484,236 48.70
6.00-6.99 27,509 2,571,843,320
7.00-7.99 2,277 173,421,367 3.22
8.00-8.99 209 14,243,687 0.26
9.00-9.99 1,654,510 0.03
10.00-10.99 1,658,731 0.03
11.00-11 99 176,232 0.00
56,090 $5,389,459,150 100.00%
Single Family 51,667 $4,958,055,897 92.00%
Townhouse 2,071 253,335,974 4.70
Condominium 2,269 171,618,855 3.18
Manufactured Housing 6,448,424 0.12
56,090 $5,389,459,150 100.00%
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00068
Texas 28,652 $2,641,385,492 49.01%
California 15,288 1,648,481,206 30.59
Florida 4,943 386,598,404 7.17
New York 2,486 273,920,738 5.08
Washington 1,181 110,746,674 2.05
New Jersey 694 76,275,944
Oregon 788 74,128,630 1.38
Georgia 446 38,773,740 0.72
Idaho334 27,517,454 0.51
Arizona 305 26,256,800 0.49
Other973 85,374,067 1.58
56,090 $5,389,459,150 100.00%
Less than 600 900 $ 80,943,626 1.50%
600-649 1,786 169,408,159 3.14
650-699 5,866 566,608,998 10.51
700-749 11,759 1,160,863,350 21.54
750-799 21,633 2,144,571,619 39.79
800-849 14,146 1,267,063,398 23.51
56,090 $5,389,459,150 100.00%
53
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00069
Distribution by Current Loan-to-Value Ratio
Percent of
Number of
Current Principal Overall Portfolio
Current Loan-to-Value Ratio(1) Balance Balance
Total
Distribution by Remaining Months to Maturity
Percent of
Number of
Current Principal Overall Portfolio
Remaining Months to Maturity Loans Balance Balance
Total
Distribution by Year of
Origination
Percent of
Number of
Current Principal Overall Portfolio
Year of
Origination Loans Balance Balance
Total
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00070
General
Evaluation the Borrower's Credit Standing
Evaluation the Borrower's Repayment Ability
Evaluation the Adequacy the Collateral
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00071
lor
lor
alternative services".
Documentation Programs
Exceptions Program Parameters
Automated Underwriting System
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00072
conditions, which may include the receipt of
additional documentation, ii) refers the loan
application to an underwriter for manual underwriting, or
declines the file based on
predetermined eligibility criteria. In making the underwriting decision, SUCCESS distinguishes
among different levels of
credit standing, based on a proprietary custom score model, the
borrower's Credit Score, and specific policies, application and loan characteristics. WMB has
developed these credit standing levels based on a statistical analysis of
the past performance of
its portfolio of
home equity loans. WMB has used analysis of
the past performance of
its
portfolio of home equity loans. WMB has used SUCCESS to underwrite HELs since May 2001.
WMB regularly evaluates and validates SUCCESS and to date has completed all required
compliance and fair lending evaluations in a satisfactory manner. WMB periodically upgrades
its
proprietary automated underwriting system. SUCCESS was last upgraded in November 2004.
Quality Control Review
WMB's credit risk oversight department conducts quality control reviews of
statistical
samplings of
previously originated HELs on a regular basis.
Credit Risk Management Policies
Credit risk within the WMI Group is managed by means of a broad set of
policies and
principles contained in its credit policy. The Chief Credit Officer is responsible for overseeing the
work of a credit policy committee, monitoring the quality of
the WMI Group's credit portfolio,
determining the reasonableness of
the WMI Group's allowance for loan losses, reviewing and
approving large credit exposures and setting underwriting criteria for credit-related products and
programs. Credit risk management is based on analyzing the creditworthiness of
the borrower,
the adequacy of
the underlying collateral given current events and conditions and the existence
and strength of any guarantor support.
Credit risk assessment is a process that requires the evaluation of
numerous factors, many
of
which are qualitative. Process integrity relies on the ability of
the WMI Group's lending
personnel to analyze all
risk elements. It also depends on maintaining risk rating accuracy by
recognizing changing elements of
credit risk and promptly initiating risk rating changes.
Conflicts of
Interest Policies
Pursuant to WMB's code of
ethics the Code of
Ethics"), WMB extends credit to
borrowers only when such extension of
credit is financially reasonable for both WMB and the
borrower in question. Pursuant to the Code of
Ethics, lending personnel cannot permit personal
relationships or
other considerations to influence lending decisions, and cannot approve
extensions of
credit to,
or
be involved in the funding or
auditing of
any loans made to family or
friends.
Servicing and the Servicers
General
All
of
the HELs owned by the Asset Trust will be serviced by WMB, as the Servicer,
pursuant to the Pooling and Servicing Agreement. WMB will have possession of
the mortgage
files Le., the credit reports, servicing documents, etc.) in its capacity as Servicer and the Loan
Documents as defined below) in its capacity as Custodian for the Asset Trust.
The Pooling and Servicing Agreement will provide that WMB may not resign from its
obligations and duties thereunder as Servicer except upon a determination that
its duties
thereunder are no longer permissible under applicable law. No such resignation will become
effective until a successor Servicer has assumed WMB's servicing obligations and duties under
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00073
the Pooling and Servicing Agreement. In the event of a Servicer resignation, the Company,
subject to the terms of
the Pooling and Servicing Agreement, shall appoint a successor Servicer.
The Servicer will receive a fee for
its services as Servicer under the Pooling and Servicing
Agreement. The servicing fee will be calculated as a per annum percentage for each HEL based
on the principal balance for such HEL. The servicing fee with respect to each such HEL will equal
0.125% per annum and will be paid monthly. This Servicer will be entitled to retain certain
ancillary fees and charges, including, but not limited
to,
any prepayment fees, insufficient funds
fees, modification fees, payoff statement fees and late charges with respect to the HELs as
additional servicing compensation and will also be entitled to certain income generated by
permitted investments made with collections on the HELs. The Servicer generally will pay all
expenses incurred in connection with
its responsibilities as Servicer under the Pooling and
Servicing Agreement subject to reimbursement for certain expenses and advances, including
those incurred by
it in connection with the liquidation of
defaulted HELs, the restoration of
damaged mortgaged properties, and payments by
the Servicer for taxes and insurance premiums
with respect to mortgaged properties).
Any person into which the Servicer may be merged, converted or
consolidated, or any
person resulting from any merger, conversion or
consolidation to which the Servicer is a party
will be the successor Servicer under the Pooling and Servicing Agreement.
The Servicer will outsource to third party vendors some servicing functions, as described
under The Servicer Servicing Procedures The Servicer's Third Party Vendors and
Service Providers" below.
The Servicer's Servicing Experience
WMB, including
its predecessors in interest, has been servicing loans secured by real estate
or
other property for over 115 years. The home equity loans serviced by WMB include closed-
end fixed and adjustable rate home equity loans and open-end home equity lines of
credit. The
HELs in WMB's portfolio have been originated by WMB.
The following table shows the number and aggregate unpaid principal balance of HELs
serviced by the Servicer as
of December 31 for each of
the most recent three years:
Closed-end Home Equity Loans Serviced by the Servicer
December 31,
Dollars in Thousands)
Number of Closed-End Home Equity Loans Serviced
by WMB 150,450 131,105 126,547
Aggregate Unpaid Principal Balance $9,851,722 $7,918,281 $6,364,840
Servicing Procedures
The functions to be performed by the Servicer under the Pooling and
Servicing Agreement will include, among other servicing functions, payment collection, payment
application, and default management. The Servicer will perform its servicing functions at
loan
servicing centers located in Melbourne, Florida; Houston, Texas; San Antonio, Texas; Stockton,
California; Chatsworth, California; Seattle, Washington; and Canyon Park, Washington.
Pursuant to the Pooling and Servicing
Agreement, the Servicer will be required to service the HELs owned by the Asset Trust,
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00074
Loan Servicing System.
Advanced Gonsumer Lending System" AGLS").
GAGS")
Collections and Distributions.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00075
Servicing of
Delinquent HELs; Foreclosure.
Insurance.
Limitations on the Servicer's Liability
60
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00076
Servicer Termination, Servicer Replacement.
The Servicer's Third Party Vendors and Service Providers.
The Servicer's Quality Control Procedures
61
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00077
62
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00078
reviewed and updated periodically. The Servicer is obligated to return to full system functionality within 48 hours of a reported system outage. The Servicer performs annual disaster recovery tests in which it reroutes data and servicing system operations to the designated back-up site, and then processes sample transactions from all servicing locations to ensure the functionality of such back-up site.
It is the Servicer's policy to require its other third party vendors to implement measures similar to those described above to ensure the accuracy and integrity of servicing records.
The Custodian
Washington Mutual Bank will act as custodian (the "Custodian") for the Asset Trust pursuant to a Custody Agreement to be entered into on or before the closing date (the "Custody Agreement"), among the Trustee, the Servicer and the Custodian. The Custodian will hold the notes, mortgages and other legal documents related to the HELs (collectively, the "Loan Documents") for the benefit of the Trustee. The Custodian will maintain the Loan Documents in secure and fire resistant facilities. The mortgage files held by the Servicer will not be physically segregated from Loan Documents in the Custodian's custody but will be kept in shared facilities. The Custodian will review the Loan Documents related to each HEL and deliver to the Trustee a certification to the effect that, except as noted in the certification, all required documents have been executed and received.
In the event of the termination of the Custody Agreement, the Custodian will be required to deliver the Loan Documents in the Custodian's custody to the Trustee or any successor Custodian appointed by the Company.
The Servicer may pay the Custodian a fee for its services under the Custody Agreement from time to time. Payment of this fee will not affect dividends to the Company.
62
General
WMI is a Washington corporation. It owns two federal savings associations as well as
numerous nonbank subsidiaries. WMI is a multiple savings and loan holding company. As a
savings and loan holding company, WMI is subject to regulation by the OTS.
WMI's federal savings associations are subject to extensive regulation and examination by
the OTS, their primary federal regulator, as well as the U.S. Federal Deposit Insurance
Corporation Prior to 2004, WMB had two sister depository institutions which were
both owned directly by WMI. WMB has since acquired both of
these sister institutions. One of
these institutions, Washington Mutual Bank fsb, a federal savings bank, became a wholly-owned
subsidiary of WMB on February 1,
2004. The other institution, Washington Mutual Bank, a
savings bank chartered under the laws of
the state of
Washington, converted into a federally
chartered savings bank and then was merged into WMB on January 1,
2005. Consequently, WMIno longer owns a state savings bank that is subject to regulation and supervision b
y the Director
of
Financial Institutions of
the State of Washington or
by the FDIC. WMl's nonbank financial
subsidiaries are also subject to various federal and state laws and regulations.
All
of WMl's banking subsidiaries are under the common control of WMI and are insured by
the FDIC. If
an insured institution fails, claims for administrative expenses of
the receiver and for
deposits in U.S. branches including claims of
the FDIC as subrogee ofthe failed institution)
have priority over the claims of
general unsecured creditors. In addition, the FDIC has authority
to require any of WMl's banking subsidiaries to reimburse it for losses it incurs in connection
either with the failure of
another of
WMI's banking subsidiaries or
with the FDIC's provision of
assistance to one of
WMl's banking subsidiaries that is in danger of
failure.
Holding Company Status and Acquisitions
WMI is a multiple savings and loan holding company, as defined by federal law, because it
owns more than one savings association. WMI is regulated as a unitary savings and loan holding
company, however, because the OTS deems WMl's federal savings associations to have been
acquired in supervisory transactions. Therefore, WMI is exempt from certain restrictions that
would otherwise apply under federal law to the activities and investments of a multiple savings
and loan holding company. These restrictions will apply to WMI if any of WMI's banking
institutions fails to meet a qualified thrift lender test established by
federal law. As of
December 31, 2004, WMI's banking subsidiaries were in compliance with qualified thrift lender
standards.
WMI may not acquire control of
another savings association without the prior approval of
the OTS. WMI may not be acquired by a company, other than a bank holding company, unless
the OTS approves such an acquisition, or
by
an individual unless the OTS does not object after
receiving notice. WMI may not be acquired by a bank holding company unless the Board of
Governors of
the Federal Reserve System the Federal Reserve") approves. In any case, the
public must have an opportunity to comment on the proposed acquisition, and the OTS or
Federal Reserve must complete an application review. Without prior approval from the OTS, WMI
may not acquire more than 5% of
the voting stock of
any savings institution that is not one of
WMI's subsidiaries.
The Gramm-Leach-Bliley Act generally restricts any non-financial entity from acquiring WMI
unless such non-financial entity was, or
had submitted an
application to become, a savings and
loan holding company as
of May 4,
1999. Because WMI was treated as a unitary savings and
loan holding company prior to that date, WMI may engage in non-financial activities and acquire
non-financial subsidiaries.
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00079
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
de minimis.
64
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00080
DESCRIPTION OF THE WAMU CAYMAN PREFERRED SECURITIES
The following summary describes the materia! terms and provisions of
the WaMu Cayman
Preferred Securities. This description is qualified in its entirety by
reference to the terms and
provisions of WaMu Cayman's Articles of
Association. A copy of WaMu Cayman's Articles of
Association may be obtained upon request to WM! or
free of
charge at
the specified office of
the
Paying Agent in Luxembourg.
General
The WaMu Cayman Preferred Securities are preferred shares issued by WaMu Cayman, the
terms of
which are set forth in WaMu Cayman's Articles of
Association. When issued, the WaMu
Cayman Preferred Securities will be paid-up and non-assessable. The WaMu Cayman Preferred
Securities are perpetual and will not be
convertible into the WaMu Cayman Ordinary Shares and
will not be subject to any sinking fund or
other obligation of WaMu Cayman for their repurchase
or
retirement.
The WaMu Cayman Preferred Securities consist of
3,023 of
the 7.25% Perpetual Non-
cumulative Preferred Securities, Series A-1, liquidation preference $100,000 per security and
$302,300,000 in the aggregate the Series A-1 WaMu Cayman Preferred Securities"), and 44,770
of
the 7.25% Perpetual Non-cumulative Preferred Securities, Series A-2, liquidation preference
$10,000 per security and $447,700,000 in the aggregate the Series A-2 WaMu Cayman
Preferred Securities"). The terms of
the Series A-1 WaMu Cayman Preferred Securities and the
Series A-2 WaMu Cayman Preferred Securities are identical except for their per security
liquidation preference. The aggregate liquidation preference of
the WaMu Cayman Preferred
Securities is $750,000,000.
WaMu Cayman will invest the proceeds of
the WaMu Cayman Preferred Securities offered
hereby in a like amount of
Fixed Rate Company Preferred Securities, liquidation preference
$1,000 per security and $750,000,000 in the aggregate.
The financial entitlements of each WaMu Cayman Preferred Security will be substantially the
same as
the financial entitlements of
a like amount of
Fixed Rate Company Preferred Securities,
with the consequence that dividends and the redemption price on each WaMu Cayman Preferred
Security will be payable on the same dates and in the same amounts as the corresponding
dividends and redemption price, as applicable, that are paid by the Company to WaMu Cayman
on a like amount of
Fixed Rate Company Preferred Securities; provided that if any such payment
of
dividends or
redemption price is received by WaMu Cayman after 2:00 P.M. New York time,
the related payment will instead by made by WaMu Cayman to the holders of
the WaMu Cayman
Preferred Securities on the next day that is a Business Day. The Dividend Payment Dates and
related Dividend Periods are the same for the WaMuCayman Preferred Securities and the Fixed
Rate Company Preferred Securities, and, accordingly, the terms Dividend Payment Date",
Dividend Period" and Business Day" have the same meanings as
applied to each of
those
securities.
The WaMu Cayman Preferred Securities are automatically exchangeable under certain
circumstances into a like amount of
Fixed Rate Depositary Shares. See Conditional
Exchange."
Under WaMu Cayman's Articles of
Association, WaMu Cayman is prohibited from issuing
any securities other than the WaMu Cayman Preferred Securities and the WaMu Cayman
Ordinary Shares without the consent of
the holders of 100% of
the WaMu Cayman Preferred
Securities. Accordingly, WaMu Cayman may not issue any additional securities ranking senior or
pari passu with the WaMu Cayman Preferred Securities as
to dividends or upon liquidation
without the consent of
the holders of 100% of
the WaMu Cayman Preferred Securities. The
holders of
the WaMu Cayman Preferred Securities will have no pre-emptive rights.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00081
The WaMu Cayman Preferred Securities are not obligations of,
or
guaranteed by, WMI,
WMB, Marion, the Company, University Street, WaMu Delaware or any of
their respective
affiliates or
any other entity. The WaMu Cayman Preferred Securities represent equity interests
solely in WaMu Cayman and do not represent an interest in any of
the foregoing entities.
Ranking
The WaMu Cayman Preferred Securities will rank senior to the WaMu Cayman Ordinary
Shares as
to dividends and upon liquidation.
Dividends
Dividends on the WaMu Cayman Preferred Securities will become payable on a non-
cumulative basis except in the limited circumstances described below), on each date on which
the Company pays dividends to WaMu Cayman on the Fixed Rate Company Preferred Securities
owned by WaMu Cayman, in an amount per WaMu Cayman Preferred Security equal to the
amount of
dividends received by WaMu Cayman on such date on a like amount of
Fixed Rate
Company Preferred Securities including with respect to Additional Taxes, if any), in each case
subject to WaMu Cayman having legally available funds for such purpose; provided that if any
such payment of
dividends is received by WaMu Cayman after 2:00 P.M. New York time, the
related payment will instead be made by WaMu Cayman to holders of
the WaMu Cayman
Preferred Securities on the next day that is a Business Day. Accordingly:
if the Company pays full dividends on a Dividend Payment Date for the Fixed Rate
Company Preferred Securities, WaMu Cayman will pay corresponding full dividends on
the WaMu Cayman Preferred Securities on such Dividend Payment Date;
if the Company pays partial dividends on a Dividend Payment Date for the Fixed Rate
Company Preferred Securities, WaMu Cayman will pay partial dividends in the same
proportionate amount on the WaMu Cayman Preferred Securities on such Dividend
Payment Date; and
if the Company pays no dividends on a Dividend Payment Date for the Fixed Rate
Company Preferred Securities, WaMu Cayman will pay no dividends on the WaMu
Cayman Preferred Securities on such Dividend Payment Date.
See Description of
the Fixed Rate Company Preferred Securities Dividends."
Under WaMu Cayman's Articles of
Association, WaMu Cayman's Board of
Directors is not
required to declare the payment of
dividends in order for dividends to be
paid. However, payment
of
dividends may be blocked by WaMu Cayman's Board of
Directors, but only by their unanimous
action including consent of
the Independent Director).
The record date for the payment of
dividends on the WaMu Cayman Preferred Securities
will be the first day of
the month in which the relevant Dividend Payment Date occurs or, if any
such day is not a Business Day, the next day that is a Business Day.
Dividends on the Fixed Rate Company Preferred Securities are non-cumulative. Dividends
on the WaMu Cayman Preferred Securities are non-cumulative, except to the extent that on a
Dividend Payment Date WaMu Cayman has received from the Company a payment of
dividends
on the Fixed Rate Company Preferred Securities but fails to pay the corresponding dividend on
the WaMu Cayman Preferred Securities.
If:
WaMu Cayman pays no dividends or
less than full dividends on the WaMu Cayman
Preferred Securities on a Dividend Payment Date because it received no dividend or
less
than full dividends on the Fixed Rate Company Preferred Securities, then holders of
WaMu Cayman Preferred Securities will have no right to receive, and WaMu Cayman will
have no obligation to pay, such unpaid dividends at a future date, whether or
not
66
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00082
dividends are paid on a future Dividend Payment Date on the WaMu Cayman Preferred
Securities or
the Ordinary Shares; and
WaMu Cayman pays no dividends or
less than full dividends on the WaMu Cayman
Preferred Securities on a Dividend Payment Date where the preceding clause does not
apply, but rather the directors have unanimously determined not to pay dividends or
to
pay less than full dividends on the WaMu Cayman Preferred Securities pursuant to their
authority to block dividends as described above, then holders of
the WaMu Cayman
Preferred Securities will have a cumulative right to receive such unpaid dividends and no
further dividends may be paid on WaMu Cayman Ordinary Shares until such unpaid
dividends have been paid on the WaMu Cayman Preferred Securities.
Restrictions on Dividends
During a Dividend Period, no dividends will be paid on any WaMu Cayman Ordinary Shares,
other than dividends payable in WaMu Cayman Ordinary Shares, and no WaMu Cayman Ordinary
Shares will be repurchased, redeemed or
otherwise acquired for consideration, directly or
indirectly, unless dividends for such Dividend Period on
all outstanding WaMu Cayman Preferred
Securities have been declared and paid in full, or
set aside for payment, as
the case may be.
Under certain circumstances, if the OTS determines that WMB is operating with an
insufficient level of
capital or
is engaged
in,
or
its relationship with the Company results
in,
an
unsafe and unsound banking practice, the OTS could restrict payment of
dividends by
the
Company on the Fixed Rate Company Preferred Securities, resulting in a corresponding
restriction in WaMu Cayman's payment of
dividends on the WaMu Cayman Preferred Securities.
Restrictions on Dividends by WMI
In the Exchange Agreement, WMI will covenant in favor of
the holders of
the WaMu Cayman
Preferred Securities and the Trust Securities, that if full dividends on i) the Company Preferred
Securities,
ii) the WaMu Cayman Preferred Securities or
the Trust Securities for any
Dividend Period have not been declared and paid, then, as
described under Description of
the
Fixed Rate Company Preferred Securities Restrictions on Dividends by WMI", WMI will not
declare or pay dividends with respect
to,
or
redeem, purchase or
acquire any of
its equity capital
securities during the next succeeding Dividend Period, except dividends in connection with a
shareholders' rights plan, if any, or
dividends in connection with benefits plans.
Redemption
The WaMu Cayman Preferred Securities will not be redeemable at
the option of
the holders
thereof. On each day on which the Company redeems Fixed Rate Company Preferred Securities,
WaMu Cayman will redeem a like amount of WaMu Cayman Preferred Securities for a
redemption price in the same amount as the corresponding redemption price on a like amount of
Fixed Rate Company Preferred Securities; provided that if any such payment of
redemption price
is received by WaMu Cayman after 2:00 p.m. New York time, the related payment will instead be
made by WaMu Cayman to holders of
the WaMu Cayman Preferred Securities on the next day
that is a Business Day. See Description of
the Fixed Rate Company Preferred Securities
Redemption."
If the redemption of
the Fixed Rate Company Preferred Securities is in part instead of
in
whole on any redemption date, then WaMu Cayman will allocate the partial redemption between
the Series A-1 WaMu Cayman Preferred Securities and the Series A-2 WaMu Cayman Preferred
Securities in proportion to their aggregate liquidation preferences, rounded by WaMu Cayman's
directors, if necessary, so that no WaMu Cayman Preferred Securities are redeemed in part and
not in whole no fractional shares). The particular WaMu Cayman Preferred Securities to be
redeemed will be selected not more than 60 days prior to the redemption date by WaMu
67
CONFIDENTIAL
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Cayman's Board of
Directors, from the outstanding WaMu Cayman Preferred Securities not
previously called for redemption, by such method as WaMu Cayman's Board of
Directors deems
fair and appropriate.
A notice of
redemption of
the WaMu Cayman Preferred Securities will be mailed by
first
class mail, postage prepaid, addressed to the holders of
record of
the securities to be redeemed
at
their respective last addresses appearing on the books and records of WaMu Cayman. Such
mailing will be
at
least 30 days but not more than 60 days before the date fixed for redemption.
Restriction on Redemption or
Repurchases
At
or
prior to the initial issuance of
the WaMu Cayman Preferred Securities, WMI will enter
into a Replacement Capital Covenant" relating to the WaMu Cayman Preferred Securities, the
Trust Securities, the Fixed Rate Company Preferred Securities, the Fixed Rate Depositary Shares
and related Fixed Rate WMI Preferred Stock), the Fixed-to-Floating Rate Company Preferred
Securities and the Fixed-to-Floating Depositary Shares and related Fixed-to-Floating Rate WMI
Preferred Stock) that may be issued upon a Conditional Exchange collectively, the Replace-
ment Covenant Covered Securities WMl's covenants in the Replacement Capital Covenant run
only to the benefit of
holders of
Covered Debt as defined below), and are not enforceable by
holders of WaMu Cayman Preferred Securities or
of any other Replacement Covenant Covered
Securities. However, those covenants could preclude WMI from redeeming or
repurchasing
Replacement Covenant Covered Securities at a time WMI might otherwise wish to do so.
In the Replacement Capital Covenant, WMI covenants to redeem or
repurchase Replace-
ment Covenant Covered Securities only if and to the extent that the total redemption or
repurchase price is equal to or
less than the sum, as
of
the date of
redemption or
repurchase, of
i) 133.33% of
the aggregate net cash proceeds WMI or
its subsidiaries have received during the
180 days prior to such date from the issuance and sale of
common stock of WMI plus ii
) 100%
of
the aggregate net cash proceeds WMI or
its subsidiaries have received during the 180 days
prior to such date from the issuance of
securities that, among other things:
are, with limited exceptions including for certain hybrid securities that are in the form of
debt), pari passu with or
junior to the Fixed Rate WMI Preferred Stock upon WMl's
liquidation, dissolution or
winding up;
are perpetual, or have a mandatory redemption or
maturity date that is not less than forty
years after the date of
initial issuance of such securities; and
provide for dividends or
other distributions that are either non-cumulative or, if cumulative,
are subject to certain optional or
mandatory deferral provisions and certain explicit
replacement provisions.
WMl's ability to raise proceeds from qualifying securities during the 180 days prior to a
proposed redemption or
repurchase sufficient to allow such redemption or
repurchase to
proceed without violating the Replacement Capital Covenant will depend on, among other things,
market conditions at such times as well as the acceptability to prospective purchasers of
the
terms of
such qualifying securities.
WMl's covenants in the Replacement Capital Covenant will run in favor of
persons that buy,
hold or
sell WMl's indebtedness during the period that such indebtedness is Covered Debt",
which is currently comprised of
WMl's 4.625% Subordinated Notes due 2014, which have CUSIP
No. 939322AN3. Other debt will replace WMI Covered Debt under the Replacement Capital
Covenant on the earlier to occur of
i) the date two years prior to the maturity of such existing
Covered Debt, or
ii) the date WMI gives notice of
a redemption of
such existing Covered Debt
such that the date such existing Covered Debt is repurchased in such an amount that, the
outstanding principal amount of
such existing Covered Debt is or
will become less than
$100 million.
68
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00084
The Replacement Capital Covenant is subject to various additional terms and conditions and
this description is qualified in its entirety by reference to the Replacement Capital Covenant, a
copy of
the form of
which is available upon request from WMI. The ReplacementCapital
Covenant may be terminated if the holders of
at
least 51% by principal amount of each of
the
Covered Debt so agree, or
if WMI no longer has outstanding any long-term indebtedness that
qualifies as Covered Debt, without regard to whether such indebtedness is rated by a nationally
recognized statistical rating organization.
Subject to the Replacement Capital Covenant and the terms of any outstanding debt
instruments, WMI or
its affiliates may from time to time purchase any outstanding WaMu Cayman
Preferred Securities by tender, in the open market or
by private agreement.
Rights Upon Liquidation
In the event WaMu Cayman voluntarily or
involuntarily liquidates, dissolves or
winds up, the
holders of WaMu Cayman Preferred Securities at
the time outstanding will be
entitled to receive
liquidating dividends in the amount of $100,000 per security and $302,300,000 in the aggregate,
in the case of
the Series A-1 WaMu Cayman Preferred Securities, and $10,000 per security and
$447,700,000 in the aggregate, in the case of
the Series A-2 WaMu Cayman Preferred Securities,
in each case, plus the amount of
any dividends theretofore received by WaMu Cayman on a like
amount of
Fixed Rate Company Preferred Securities but not yet distributed as a dividend on the
WaMu Cayman Preferred Securities plus the amount of
dividends on a like amount of
Fixed Rate
Company Preferred Securities that WaMu Cayman is entitled to receive from the Company but
has not yet received because for example, the Company's Board of
Managers has declared but
not yet paid such dividends) before any distribution of
assets is made to holders of WaMu
Cayman Ordinary Shares and subject to the rights of
general creditors.
After payment of
the full amount of
the liquidating distributions to which they are entitled,
the holders of WaMu Cayman Preferred Securities will have no right or
claim to any of WaMu
Cayman's remaining assets. In the event that, upon any such voluntary or
involuntary liquidation,
dissolution, or
winding up, the available assets are insufficient to pay the amount of
the
liquidation distributions on all outstanding WaMu Cayman Preferred Securities, then the holders
of WaMu Cayman Preferred Securities will share ratably in any such distribution of
assets in
proportion to the full liquidating distributions to which they would otherwise be respectively
entitled.
Voting Rights
Except as
expressly required by
applicable law and as
set forth below, the holders of WaMu
Cayman Preferred Securities will have no voting rights. In the event holders of WaMu Cayman
Preferred Securities are entitled to vote on a matter together as a single class or
together with
the holders of
the WaMu Cayman Ordinary Shares, the holders of
the Series A-1 WaMu Cayman
Preferred Securities will be entitled to ten votes per security and the holders of
the Series A-2
WaMu Cayman Preferred Securities will be entitled to one vote per security.
In the event that WaMu Cayman is entitled to exercise its voting rights with respect to the
Fixed Rate Company Preferred Securities, each holder of WaMu Cayman Preferred Securities will
have the right to direct the manner in which WaMu Cayman exercises such voting rights with
respect to a like amount of
Fixed Rate Company Preferred Securities on a proportionate basis. If
WaMu Cayman receives notice from the Company that WaMu Cayman as holder of
Fixed Rate
Company Preferred Securities is entitled to vote on any matter, promptly after learning of such
entitlement WaMu Cayman shall cause to be mailed to each holder of WaMu Cayman Preferred
Securities, by
first class mail, postage prepaid, notice of
such vote including a description of
the
subject matter of
the vote and related circumstances to the extent known to WaMu Cayman),
along with a copy of
any notice or
other written communication received by WaMu Cayman from
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00085
the Company with respect to such vote and related matters. In each such notice WaMu Cayman
shall request direction from each holder of WaMu Cayman Preferred Securities as
to how WaMuCayman a
s a holder of
Fixed Rate Company Preferred Securities shall vote on the matter at
issue a like amount of
Fixed Rate Company Preferred Securities that correspond to such holder's
WaMu Cayman Preferred Securities. Each holder of WaMu Cayman Preferred Securities shall
have the right to direct the manner in which WaMu Cayman exercises such voting rights with
respect to a like amount of
Fixed Rate Company Preferred Securities.
So long as any WaMu Cayman Preferred Securities are outstanding, WaMu Cayman will
not, without the consent or
vote of
the holders of WaMu Cayman Preferred Securities entitled to
at
least two-thirds of
the total voting rights of
all outstanding WaMu Cayman Preferred Securities,
voting together as a single class, i) amend, alter or
repeal or
otherwise change any provision of
WaMu Cayman's Articles of
Association including the terms of
the WaMu Cayman Preferred
Securities) if such amendment, alteration, repeal or
change would materially and adversely affect
the rights, preferences, powers or
privileges of
the WaMu Cayman Preferred Securities, or
merge, convert, consolidate, reorganize or
effect any other business combination involving
WaMu Cayman. WaMu Cayman's Articles of
Association will also provide that so long as any
WaMu Cayman Preferred Securities are outstanding, WaMu Cayman will not, without the consent
of
the holder of
each outstanding WaMu Cayman Preferred Security, authorize, create or
increase the authorized amount of
or
issue any class or
series of
any equity shares of WaMu
Cayman, or any warrants, options or
other rights convertible or
exchangeable into any class or
series of any equity shares of WaMu Cayman, ranking pari passu or
senior to the WaMu Cayman
Preferred Securities, either as
to dividend rights, redemption rights or
rights on dissolution,
liquidation or
winding up of WaMu Cayman.
Independent Director Approval
WaMu Cayman's Articles of
Association will require that, for as long as any WaMu Cayman
Preferred Securities are outstanding, certain actions by WaMu Cayman are subject to prior
approval by the Independent Director as well as
by a majority of
the entire Board of
Directors of
WaMu Cayman. See WaMu Cayman Management of WaMu Cayman Independent Direc-
tor." In order to be considered independent", a director must not during the preceding five
years have been a director or
employee of WMI or
any affiliate of
WMI, other than a direct or
indirect financing subsidiary of
WMI.
The actions that require approval of
the Independent Director include i) redemption or
repurchase of any WaMu Cayman Ordinary Shares and
ii)
to the extent within the power of
the
directors, any action to convert or
approve the conversion of WaMu Cayman into any other type
of
entity or
the consolidation or merger of WaMu Cayman with or
into any other entity, the
consolidation or
merger of
any other entity with or
into WaMu Cayman, or
the sale by WaMu
Cayman of any of
its assets. Additionally, the Independent Director, acting alone and without the
vote or
consent of
the other members of
the Board of
Directors, has the right on behalf of WaMu
Cayman to enforce WaMu Cayman's rights as a holder of
Fixed Rate Company Preferred
Securities, including related rights under the LLC Agreement.
Conditional Exchange
Each WaMu Cayman Preferred Security will be exchanged automatically for a like amount of
newly issued Fixed Rate Depositary Shares, each representing a 1/1 OOOthinterest in one share
of
Fixed Rate WMI Preferred Stock, if the OTS so directs in writing upon or
after the occurrence
of
an Exchange Event. An Exchange Event" will occur when:
WMB becomes undercapitalized" under the OTS' prompt corrective action" regulations;
WMB is placed into conservatorship or
receivership; or
70
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the OTS, in its sole discretion, anticipates WMB becoming undercapitalized" in the near
term or
takes a supervisory action that limits the payment of
dividends by WMB and in
connection therewith, directs an exchange.
For purposes of
this offering circular, this exchange is referred to as
the Conditional
Exchange"
If the OTS so
directs following the occurrence of
an Exchange Event, each holder of WaMu
Cayman Preferred Securities will be unconditionally obligated to surrender to WMI or
its agent
any certificates representing the WaMu Cayman Preferred Securities owned by such holder, and
WMI will be unconditionally obligated to issue to such holder in exchange for each such WaMu
Cayman Preferred Security a depositary receipt representing a like amount of
Fixed Rate
Depositary Shares for Fixed Rate WMI Preferred Stock. Any WaMu Cayman Preferred Securities
purchased or redeemed by WMI or any of
its affiliates prior to the time of exchange will not be
deemed outstanding and will not be subject to Conditional Exchange.
The Conditional Exchange will occur as
of
8:00 A.M., New York time, on the date for such
exchange set forth in the applicable OTS directive, or, if such date is not set forth in the directive,
as
of
8:00 A.M., New York time, on the earliest possible date such exchange could occur
consistent with the directive, as
evidenced by
the issuance by WMI of
a press release prior to
such time. As of
the time of
exchange,
all
of
the WaMu Cayman Preferred Securities will be
transferred to WMI without any further action by WaMu Cayman,
all rights of
the holders of
WaMu Cayman Preferred Securities as WaMu Cayman's shareholders will cease, and such
persons will be, for all purposes, the holders of
Fixed Rate Depositary Shares.
WMI will mail notice of
the issuance of
an OTS directive after the occurrence of
an
Exchange Event to each holder of WaMu Cayman Preferred Securities within 30 days, and WMI
will deliver or cause to be delivered) to each such holder, depositary receipts for Fixed Rate
Depositary Shares upon surrender of
the WaMu Cayman Preferred Securities. Until such
depositary receipts are delivered or
in the event such depositary receipts are not delivered, any
certificates previously representing WaMu Cayman Preferred Securities will be deemed for
all
purposes to represent Fixed Rate Depositary Shares. All
corporate authorization necessary for
WMI to issue the Fixed Rate Depositary Shares and the Fixed Rate WMI Preferred Stock as
of
the time of exchange will be completed prior to or upon completion of
this Offering. Accordingly,
once the OTS directs a Conditional Exchange after the occurrence of
an Exchange Event, no
action will be required to be taken by
holders of WaMu Cayman Preferred Securities, by WMI, by
WMB other than to inform the OTS), by the Company, or
by WaMu Cayman in order to effect
the automatic exchange as
of
the time of
exchange. After the occurrence of
the Conditional
Exchange, the WaMu Cayman Preferred Securities will be owned by WMI.
Holders of WaMu Cayman Preferred Securities, by purchasing such securities, whether in
this Offering or
in the secondary market after this Offering, will be deemed to have agreed to be
bound by the unconditional obligation to exchange such WaMu Cayman Preferred Securities for
Fixed Rate Depositary Shares if the OTS so
directs following the occurrence of
an Exchange
Event. WaMu Cayman's Articles of
Association provide that the holders of WaMu Cayman
Preferred Securities will be unconditionally obligated to surrender such preferred securities. Prior
to issuance of
the WaMu Cayman Preferred Securities, WMI will enter into an Exchange
Agreement on or
before the closing date the Exchange Agreement"), among WMI, WaMuCayman, WaMu Delaware and Mellon Investor Services LLC, a
s depositary the Depositary"),
to implement the Conditional Exchange.
Holders of WaMu Cayman Preferred Securities cannot exchange their WaMu Cayman
Preferred Securities for Fixed Rate Depositary Shares voluntarily. Absent an OTS directive after
the occurrence of
an Exchange Event, no exchange of
the WaMu Cayman Preferred Securities
for Fixed Rate Depositary Shares will occur. Upon the issuance of
an OTS directive on or
following the occurrence of
an Exchange Event, the Fixed Rate WMI Preferred Stock and related
71
CONFIDENTIAL
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pari passu
Form, Transfer and Book-Entry Procedures
Payments and Paying Agents
Nominee")
Principal Paying Agent")
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00088
WTCCayman")
Paying Agents")
event
Series A-2 WaMu Cayman Preferred Securities, Paying Agent in Luxembourg
Paying Agent
in Luxembourg"),
Registrar") Transfer
Agent")
cover
have
lor
Luxemburger Wort).
73
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00089
Governing Law
Restrictions on Transfer
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00090
Governing Law
WaMu Cayman's Articles of Association and the WaMu Cayman Preferred Securities will be governed by and construed in accordance with the laws of the Cayman Islands.
Restrictions on Transfer
For information regarding restrictions on ownership of the WaMu Cayman Preferred Securities, see "Notice to Investors."
74
DESCRIPTION OF THE FIXED RATE COMPANY PREFERRED SECURITIES
The following summary describes the material terms and provisions of
the Fixed Rate
Company Preferred Securities. This description qualified in entirety by reference to the terms
and provisions of
the LLC Agreement. A copy of
the LLC Agreement may be obtained upon request
to WMI or
free of
charge at
the specified office of
the Paying Agent in Luxembourg.
General
The 7.25% Perpetual Non-cumulative Preferred Securities, liquidation preference $1,000 per
security and $750,000,000 in the aggregate the Fixed Rate Company Preferred Securities"), are
limited liability company interests in the Company, the terms of
which are set forth in the LLC
Agreement. When issued, the Fixed Rate Company Preferred Securities will be validly issued,
and no additional payments will be required pursuant to the LLC Act for such securities to
represent limited liability company interests in the Company. The holders of
the Fixed Rate
Company Preferred Securities will have no pre-emptive rights with respect to any limited liability
company interests in the Company or any other securities of
the Company convertible into or
carrying rights or
options to purchase any such securities. The Fixed Rate Company Preferred
Securities are perpetual and will not be
convertible into Company Common Securities or
any
other class or
series of
limited liability company interests in the Company and will not be subject
to any sinking fund or
other obligation of
the Company for their repurchase or
retirement.
The Fixed Rate Company Preferred Securities will be issued in certificated form only.
The Fixed Rate Company Preferred Securities are not obligations
of,
or
guaranteed by,
WMI, WMB, Marion, University Street, or
any of
their respective affiliates or
any other entity. The
Fixed Rate Company Preferred Securities solely represent an interest in the Company and do not
represent an
interest in any of
the foregoing entities.
The Fixed Rate Company Preferred Securities are not insured or
guaranteed by the FDIC.
Ranking
The Fixed Rate Company Preferred Securities will rank senior to the Company Common
Securities and will rank pari passu with the Company's other preferred securities, including the
Fixed-to-Floating Rate Preferred Company Securities, in terms of payment of
dividends and on
liquidation.
The Company's Board of Managers has the power to create and issue Junior Equity
Securities and additional equity securities ranking pari passu with the Fixed Rate Company
Preferred Securities in terms of payment of
dividends or on liquidation or
redemption any such
securities, together with the Fixed-to-Floating Rate Company Preferred Securities, the Parity
Equity Securities") without the consent of
the holders of
the Company Preferred Securities,
provided, that i) after giving effect to the issuance of
any Parity Equity Securities, the pro forma
net book value of
the Company's assets after giving effect to any assets acquired by the
Company in connection with the issuance of
such Parity Equity Securities Assets") will
equal or exceed 1.5 times the sum of
the aggregate liquidation preference of
the preferred
securities of
the Company then outstanding and any such Parity Equity Securities that the
Company proposes to issue,
ii) after giving effect to such issuance, the Company's pro forma
FFO for the four fiscal quarters beginning with the fiscal quarter in which such Parity Equity
Securities are proposed to be issued calculated A) assuming that such proposed Parity Equity
Securities are issued and that, if outstanding or proposed new Parity Equity Securities bear
dividends based on a floating rate, the applicable dividend rate will not change during such four
fiscal quarters from the rate in effect on the applicable date of
determination and B) as
adjusted to reflect any New Assets) equals or exceeds 150% of
the amount that would be
required to pay full annual dividends on
all preferred securities of
the Company then outstanding
75
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plus
Dividends
CONFIDENTIAL
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and any such Parity Equity Securities that the Company proposes to issue, and (iii) the Company is not otherwise in breach of any of its covenants set forth in the LLC Agreement. Funds from operations, or "FFO", means net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.
The LLC Agreement provides that, so long as any Fixed Rate Company Preferred Securities remain outstanding, the Company may not except with the consent of at least two-thirds of the Fixed Rate Company Preferred Securities and the Fixed-to-Floating Rate Company Preferred Securities, voting together as a single class, issue Senior Equity Securities.
Dividends
For purposes of this offering circular, we refer to distributions payable by the Company on its securities as "dividends". Dividends on the Fixed Rate Company Preferred Securities will be payable if, when and as declared by the Company's Board of Managers out of its legally available funds, on a non-cumulative basis at an annual rate of • % on the liquidation preference thereof, which is $1,000 per security. Dividends on the Fixed Rate Company Preferred Securities, if, when and as declared by the Company's Board of Managers, will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year (the "Dividend Payment Date"), commencing on June 15, 2006. If any Dividend Payment Date is not a Business Day, then dividends will be payable on the first Business Day following such Dividend Payment Date with the same force and effect as if payment were made on the date such payment was originally payable. Each period from and including a Dividend Payment Date (or the date of issuance of the Fixed Rate Company Preferred Securities) to but excluding the following Dividend Payment Date is referred to herein as a "Dividend Period". Dividends on the Fixed Rate Company Preferred Securities will accrue as follows: (i) from March 7, 2006 in the case of the Fixed Rate Company Preferred Securities offered hereby, and (ii) if additional Fixed Rate Company Preferred Securities are issued at a future date, from (A) March 7, 2006 if such date is before June 15, 2006, (B) the date of issue if such date is a Dividend Payment Date and (C) the immediately preceding Dividend Payment Date or the date of issue (as determined by the Company) if the date of issue is other than a Dividend Payment Date and is after June 15, 2006. The record date for the payment of dividends, if declared, will be the first day of the month in which the relevant dividend payment occurs or, if any such day is not a Business Day, the next day that is a Business Day. Dividends payable on the Fixed Rate Company Preferred Securities for any period greater or less than a full Dividend Period will be computed on the basis of twelve 30-day months, a 360-day year, and the actual number of days elapsed in the period. No interest will be paid on any dividend payment of Fixed Rate Company Preferred Securities, WaMu Cayman Preferred Securities or Fixed Rate Depositary Shares.
"Business Day" means any day other than a Saturday, Sunday or any other day on which banks in New York, New York, Seattle, Washington or Georgetown, Grand Cayman are generally required or authorized by law to be closed.
Dividends on the Fixed Rate Company Preferred Securities are non-cumulative. If the Company's Board of Managers does not declare a dividend on the Fixed Rate Company Preferred Securities or declares less than a full dividend in respect of any Dividend Period, holders of the Fixed Rate Company Preferred Securities will have no right to receive any dividend or a full dividend, as the case may be, for that Dividend Period, and the Company will have no obligation to pay any dividends or full dividends on the Fixed Rate Company Preferred Securities for that Dividend Period, whether or not dividends are declared and paid for any future Dividend Period with respect to any of the Fixed Rate Company Preferred Securities, the Fixed-to-Floating
76
Rate Company Preferred Securities, any other series of
Parity Equity Securities, any Junior
Equity Securities or
the Company Common Securities.
Restrictions on Dividends
During a Dividend Period, no dividends will be declared or
paid on any securities of
the
Company ranking junior to the Company Preferred Securities in respect of payments of
dividends
or
on liquidation Junior Equity Securities"), other than dividends payable in Junior Equity
Securities, and no Junior Equity Securities will be repurchased, redeemed or
otherwise acquired
for consideration, directly or
indirectly other than as a result of
reclassification of
Junior Equity
Securities for or
into other Junior Equity Securities, or
the exchange or
conversion of
Junior
Equity Securities for or
into other Junior Equity Securities), unless dividends for such Dividend
Period on
all outstanding Company Preferred Securities have been declared and paid in full, or
declared and set aside for payment, as the case may be.
When dividends are not paid in full on, or a sum sufficient for such full payment is not set
apart for, the Fixed Rate Company Preferred Securities, the Fixed-to-Floating Rate Company
Preferred Securities and any other Parity Equity Securities, if any,
all dividends declared upon the
Fixed Rate Company Preferred Securities, the Fixed-to-Floating Rate Company Preferred
Securities and any other Parity Equity Securities, if any, will be declared pro rata. Thus, the
amount of
dividends declared per Fixed Rate Company Preferred Security, the Fixed-to-Floating
Rate Company Preferred Securities and such other Parity Equity Securities, if any, will in all
cases bear to each other the same ratio that i) full dividends per Fixed Rate Company
Preferred Security for the then-current Dividend Period, which will not include any accumulation
in respect of
unpaid dividends for prior Dividend Periods, and ii) full dividends, which will not
include any accumulation in respect of
unpaid dividends for prior Dividend Periods, on such other
capital securities, bear to each other.
Under certain circumstances, if the OTS determines that WMB is operating with an
insufficient level of
capital or
is engaged in,
or
its relationship with the Company results in,
an
unsafe and unsound banking practice, the OTS could restrict the Company's ability to pay
dividends, including dividends to the holders of
the Fixed Rate Company Preferred Securities.
See The Company Business of
the Company."
Restrictions on Dividends by
WMI will covenant in the Exchange Agreement for the benefit of
the holders of
the WaMu
Cayman Preferred Securities and the Trust Securities that if full dividends on i) the Company
Preferred Securities,
ii) the WaMu Cayman Preferred Securities or
the Trust Securities for
any Dividend Period have not been declared and paid, WMI will not declare or
pay dividends with
respect
to,
or
redeem, purchase or
acquire, any of
its equity capital securities during the next
succeeding Dividend Period, except dividends in connection with a shareholders' rights plan, if
any, or
dividends in connection with benefits plans.
Redemption
The Fixed Rate Company Preferred Securities will not be redeemable at
the option of
the
holders thereof. Subject to a covenant in favor of
certain of WMl's debtholders limiting WMl's
and its subsidiaries' right to repurchase or
redeem the Fixed Rate Company Preferred Securities
or
the WaMu Cayman Preferred Securities among others) as described under Description of
the WaMu Cayman Preferred Securities Restriction on Redemption or
Repurchases," and
subject to the Company having received the prior approval of
the OTS for any proposed
CONFIDENTIAL
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redemption of
Fixed Rate Company Preferred Securities, the Company may, at
its option redeem
the Fixed Rate Company Preferred Securities:
in whole but not in part, prior to the Dividend Payment Date in March 2011, upon the
occurrence of a Tax Event, an Investment Company Act Event or a Regulatory Capital
Event, at
a cash redemption price equal to the greater of:
i) $1,000 per Fixed Rate Company Preferred Security, or
ii) the sum of
present values of
$1,000 per Fixed Rate Company Preferred Security
and
all undeclared dividends for the Dividend Period from the redemption date to
and including the Dividend Payment Date in March 2011, discounted to the
redemption date on a quarterly basis assuming a 360-day year consisting of
twelve 3D-day months) at
the Treasury Rate, as calculated by
an Independent
Investment Banker, plus 0.40%,
plus any declared but unpaid dividends to the redemption date; or
in whole or
in part, on or
after the Dividend Payment Date in March 2011, at
a cash
redemption price of
$1,000 per Fixed Rate Company Preferred Security, plus any declared
and unpaid dividends to the redemption date, without accumulation of any undeclared
dividends.
The Fixed-to-Floating Rate Company Preferred Securities will be separately redeemable on
similar terms and conditions.
Comparable Treasury Issue" means the United States Treasury security selected by the
Independent Investment Banker as having a maturity comparable to the term remaining to the
Dividend Payment Date on March 15, 2011 that would be
utilized, at
the time of
selection and in
accordance with customary financial practice, in pricing new issues of
perpetual preferred
securities having similar terms as
the Fixed Rate Company Preferred Securities with respect to
the payment of
dividends and distributions of
assets upon liquidation, dissolution or
winding-up
of
the issuer of such preferred stock.
Comparable Treasury Price" means with respect to any redemption date for the Fixed Rate
Company Preferred Securities the average of
the Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and lowest of
such Reference Treasury Dealer
Quotations, or
if the Independent Investment Banker obtains fewer than five such Reference
Treasury Dealer Quotations, the average of
all such quotations.
Independent Investment Banker" means an independent investment banking institution of
national standing appointed by
the Company.
An Investment Company Act Event" occurs when the Company determines, based upon
receipt of
an opinion of
counsel, that there is a significant risk that the Company, the Asset Trust
or
any other Asset Subsidiary, WaMu Cayman or WaMu Delaware is or
will be considered an
investment company" that is required to be registered under the Investment Company Act, as a
result of
a change in applicable laws, regulations or
related interpretations.
Reference Treasury Dealer" means each of
three primary U.S. government securities
dealers each a Primary Treasury Dealer"), as
specified by
the Company; provided that if any
Primary Treasury Dealer as specified by the Company ceases to be a Primary Treasury Dealer,
the Company will substitute for such Primary Treasury Dealer another Primary Treasury Dealer
and if the Company fails to select a substitute within a reasonable period of
time, then the
substitute will be a Primary Treasury Dealer selected by the Independent Investment Banker after
consultation with the Company.
Reference Treasury Dealer Quotations" means, with respect to the Reference Treasury
Dealer and any redemption date, the average, as
determined by
the Independent Investment
78
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00094
Regulatory Capital Event"
Tax Event"
Hi)
Treasury Rate"
Restrictions on Redemption or
Repurchases
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Rights upon Liquidation
plus
Voting Rights and Covenants
80
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00096
amend or
otherwise change the terms of any Asset Documentation in a manner which is
materially adverse to WaMu Cayman, WaMu Delaware or
the holders of
the WaMu
Cayman Preferred Securities or
Trust Securities;
remove or cause to be removed, as applicable, Washington Mutual" from the
Company's, WaMu Cayman's or WaMu Delaware's name unless the name of WMI
changes and the Company makes a change to the Company's, WaMu Cayman's and
WaMu Delaware's name to be consistent with the new group name;
take or
fail to take any action that would cause the Company to fail to be treated as a
partnership other than a publicly traded partnership taxable as a corporation) for United
States Federal income tax purposes;
amend or
otherwise change the requirement that the Company not engage in a U.S. trade
or
business for United States Federal income tax purposes;
amend or
otherwise change the requirement that the Company hold only assets that
qualify for the portfolio interest exemption under the Code and are exempt from United
States Federal withholding taxes;
amend or
otherwise change the requirement that the Company manage
its affairs such
that its income does not constitute unrelated business taxable income" within the
meaning of
Section 512 of
the Code; or
amend its Certificate of
Formation or
LLC Agreement in a manner that materially and
adversely affects the terms of
the Company Preferred Securities provided, however, that,
if such amendment affects only one class of
Company Preferred Securities, such
amendment will require only the class vote of such class voting separately and not as a
single class with the other class) and, if such amendment affects both classes but affects
them differently, then such amendment will require a class vote of each class of Company
Preferred Securities, each voting separately.
In addition, the LLC Agreement provides that, except with the consent of
all
of
the
Company's managers, including its Independent Manager, the Company will not:
terminate, amend or
otherwise change any Asset Documentation; or
effect a consolidation, merger or
share exchange excluding the Conditional Exchange)
that is not tax-free to the holders of
the Fixed Rate Company Preferred Securities, and
the related WaMu Cayman Preferred Securities, unless such transaction was approved by
the consent or
affirmative vote of
the holders of
at
least two-thirds of
the Fixed Rate
Company Preferred Securities and Fixed-to-Floating Rate Company Preferred Securities,
voting together as
a.single class.
In addition, the LLC Agreement will provide that if i) the Company fails to pay full
dividends on the Company Preferred Securities on any Dividend Payment Date,
ii) WaMu
Cayman fails to pay full dividends on the WaMu Cayman Preferred Securities on any Dividend
Payment Date, or Hi) a Bankruptcy Event occurs, the holders of
the Fixed Rate Company
Preferred Securities and the Fixed-to-Floating Rate Company Preferred Securities, voting
together as a single class, by majority vote, are entitled to remove the initial or any succeeding
Independent Manager and to fill the vacancy created by such removal or any other vacancy
existing in the office of
the Independent Manager.
The LLC Agreement requires that, in assessing the benefits to the Company of any
proposed action requiring his or
her consent, the Company's Independent Manager take into
account the interests of
holders of
both Company Common Securities and the Company
Preferred Securities. The LLC Agreement provides that in considering the interests of
the holders
of
the Company Preferred Securities, the Company's Independent Manager owes the same
81
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duties to such holders which the Independent Manager owes to the holders of Company
Common Securities.
As a condition to effecting any consolidation, merger or
share exchange described above,
the Company will mail to the holders of
record of
the Fixed Rate Company Preferred Securities a
notice of such consolidation, merger or
share exchange. The notice will be mailed at
least
15 days prior to such transaction becoming effective and will contain a description of such
transaction together with a certificate of one of
the Company's officers stating that such
transaction complies with the requirements set forth in the LLC Agreement and that
all conditions
precedent provided therein relating to such transaction have been fulfilled.
As described under Description of
the WaMu Cayman Preferred Securities Voting
Rights," each holder of WaMu Cayman Preferred Securities will have the right to direct the
manner in which WaMu Cayman exercises
its voting rights as
to a like amount of
Fixed Rate
Company Preferred Securities held by WaMu Cayman with respect to any of
the matters on
which a holder of
Fixed Rate Company Preferred Securities is entitled to vote.
WMl's articles of
incorporation do not contain similar covenants regarding the Fixed Rate
WMI Preferred Stock following an exchange of
the WaMu Cayman Preferred Securities.
Therefore, following a Conditional Exchange, holders of
the Fixed Rate Depositary Shares would
no longer have any voting rights, except as provided by Washington law or
in connection with the
right to elect directors if dividends are skipped or
not paid in full. See below under Description
of
the Fixed Rate WMI Preferred Stock Voting Rights."
Additional Amounts
If the Company or WaMu Cayman is required to pay any Additional Taxes as a result of
an
Additional Tax Event, the Company will pay as
additional amounts on the Fixed Rate Company
Preferred Securities such amounts as
will be required so that dividends on the Fixed Rate
Company Preferred Securities or
the WaMu Cayman Preferred Securities, as
applicable, will not
be reduced as a result of
any such Additional Taxes
means the sum of any additional taxes, duties and other governmental
charges to which a WaMu Cayman has become subject from time to time as a result of
an
Additional Tax Event.
An means the determination by
the Company, based upon receipt of
an opinion of
counsel, rendered by a law firm experienced in such matters, in form and
substance reasonably satisfactory to the Company and WMI, to the effect that, as a result of any
amendment to,
or
change including any announced proposed change) in,
the laws or any
regulations thereunder) of
the United States or
the Cayman Islands or
of any political subdivision
or
taxing. authority thereof or
therein, or
as a result of any official administrative pronouncement
or
judicial decision interpreting or
applying such laws or
regulations, which amendment or change
is effective or
which proposed change, pronouncement or
decision is announced on or
after the
date of
issuance of
the WaMu Cayman Preferred Securities, there is a significant risk that i) the
Company or WaMu Cayman
is,
or
will be within 90 days of
the date of such opinion of
counsel,
required by a relevant jurisdiction to withhold amounts from payments to the holders of
the Fixed
Rate Company Preferred Securities or WaMu Cayman Preferred Securities, respectively, for any
taxes, duties and other governmental charges, WaMu Cayman is,
or
will be
within 90 days of
the date of
such opinion of
counsel, subject to United States Federal income tax with respect to
income received or
accrued on the like amount of
Fixed Rate Company Preferred Securities held
by
it,
or WaMu Cayman is,
or
will be
within 90 days of
the date of
such opinion of
counsel,
subject to more than a amount of
other taxes, duties or
other governmental charges.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00098
Amendments and Termination of
the LLC Agreement
provided,
provided
Governing Law
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00099
Amendments and Termination of the LLC Agreement
University Street may, at any time and from time to time, without the consent of the holders of the Fixed Rate Company Preferred Securities, amend the LLC Agreement: (i) (A) to correct or supplement any provision in the LLC Agreement that may be defective or inconsistent with any other provision therein, or (B) to make any other provisions with respect to matters or questions arising under the LLC Agreement, provided, that any such action taken under this clause (i) will not materially adversely affect the interests of the holders of Fixed Rate Company Preferred Securities, as set forth in an officer's certificate; or (ii) to cure any ambiguity or inconsistency or correct any manifest error. Any other amendment of the LLC Agreement must be approved by vote of holders of two-thirds (by aggregate liquidation preference) of the Fixed Rate Company Preferred Securities and Fixed-to-Floating Rate Company Preferred Securities, voting together as a single class (see "-Voting Rights and Covenants"); provided that, for the purpose of such approval, a like amount of Company Preferred Securities as any WaMu Cayman Preferred Securities or Trust Securities that are directly or indirectly held or beneficially owned by any member of WMI Group will be treated as if they were not outstahding. The Company will notify the Paying Agents and the holders of the WaMu Cayman Preferred Securities of any such amendment of the LLC Agreement within a reasonable period of time.
The LLC Agreement will terminate upon the termination of the Company under the LLC Act.
Governing Law
The LLC Agreement and the Fixed Rate Company Preferred Securities will be governed by, and construed in accordance with, the laws of the State of Delaware.
83
DESCRIPTION OF OTHER COMPANY SECURITIES
The following summary of
the terms of
the other Company securities does not purport to be
complete and is subject in all respects to the applicable provisions of
the LLC Act and the LLC
Agreement. A copy of
the LLC Agreement may be obtained upon request to WMI and free of
charge
at
the specified office of
the Paying Agent in Luxembourg.
General
Voting
Dividends
84
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outstanding Company Preferred Securities, as
well as on all
Parity Equity Securities, if any;
provided, that, for the purpose of such approval, a like amount of
Fixed Rate Company Preferred
Securities as any WaMu Cayman Preferred Securities that are directly or
indirectly held or
beneficially owned by any member of WMI Group will be treated as
if they were not outstanding.
Liquidation Rights
The Company Common Securities will rank junior to the Company Preferred Securities upon
liquidation. In the event of any voluntary or
involuntary dissolution of
the Company, after
all
of
the
Company's debts and liabilities have been satisfied and there have been paid or
set aside for the
holders of
the Company Preferred Securities the full preferential amounts to which such holders
are entitled, the holders of
Company Common Securities will be
entitled to share equally and
ratably in any assets remaining.
Fixed-to-Floating Rate Company Preferred Securities
The Fixed-to-Floating Rate Company Preferred Securities rank pari passu with the Fixed
Rate Company Preferred Securities offered hereby as
to dividends and upon liquidation of
the
Company. The terms of
the Fixed-to-Floating Rate Company Preferred Securities are substan-
tially identical to the Fixed Rate Company Preferred Securities other than with respect to the rate
applicable to dividends thereon. The Fixed-to-Floating Rate Company Preferred Securities will,
if,
when and as
declared by
the Company's Board of
Managers, pay dividends at
an annual rate of
6.534% until the Dividend Payment Date in March 2011 and an annual rate equal to three-month
L1BOR plus 1.4825% for the Dividend Period starting on such Dividend Payment Date and each
Dividend Period thereafter. The Fixed-to-Floating Rate Company Preferred Securities will be held
by WaMu Delaware, which will issue a like amount of
Trust Securities to investors in a separate
offering contemporaneous to the Offering. The Fixed-to-Floating Rate Company Preferred
Securities will not be
listed on any securities exchange or
automated dealer quotation system.
Ability to Issue Additional Preferred Securities
Pursuant to the LLC Agreement, the Company may not issue any Senior Equity Securities
or
incur indebtedness except with the consent or
affirmative vote of
holders of
at
least two-thirds
of
the Fixed Rate Company Preferred Securities and the Fixed-to-Floating Rate Company
Preferred Securities, voting together as a single class, as
described under Description of
the
Fixed Rate Company Preferred Securities Voting Rights and Covenants." The Company may
issue additional Parity Equity Securities without the consent of
the holders of Company Preferred
Securities only if the tests described under Description of
the Fixed Rate Company Preferred
Securities Ranking" are satisfied.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00101
DESCRIPTION OF THE FIXED RATE WMI PREFERRED STOCK
The following summary describes the material terms and provisions of
the Fixed Rate WMI
Preferred Stock. The description is qualified in its entirety by
reference to the terms and provisions
of WMl's Articles of
Incorporation and Articles of Amendment establishing the Fixed Rate WMI
Preferred Stock. A copy of
WMl's Articles of
Incorporation and such articles of
amendment may be
obtained free of
charge at
the specified office of
the Paying Agent in Luxembourg.
General
Fixed Rate WMI Preferred Stock").
Fixed Rate Depositary Shares"),
1/1000th
WMI Parity Stock"
Dividend Payment Date" Dividend Period"
Business Day",
86
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Ranking
WMI will covenant in the Exchange Agreement in favor of
the holders of thewaMu Cayman
Preferred Securities and the Trust Securities, as applicable, that prior to the issuance of
the
Fixed Rate WMI Preferred Stock upon a Conditional Exchange, WMI will not issue any preferred
stock that would rank senior to the Fixed Rate WMI Preferred Stock or
the Fixed-to-Floating
Rate WMI Preferred Stock upon
its issuance.
The Fixed Rate WMI Preferred Stock will, upon issuance, rank senior to WMl's common
stock and at
least pari passu with the most senior preferred stock of WMI, if any, then
outstanding, and to any other preferred stock that WMI may issue in the future. WMI may
authorize and issue additional shares of
preferred stock that may rank junior to or
pari passu
with the Fixed Rate WMI Preferred Stock as
to dividends and upon liquidation, winding up, or
dissolution without the consent of
the holders of
the Fixed Rate WMI Preferred Stock.
Dividends
Dividends on the Fixed Rate WMI Preferred Stock will be payable
if, when and as declared
by WMI's Board of
Directors out of
its legally available funds, on a non-cumulative basis at
an
annual rate of 7.25% on the liquidation preference thereof, which is $1,000,000 per share.
Dividends on the Fixed Rate WMI Preferred Stock, if, when and as
declared by WMI's Board of
Directors, will be payable quarterly in arrears on March 15, June 15, September 15, and
December 15 of
each year, commencing on the first such day after issuance of
the Fixed Rate
WMI Preferred Stock. If any Dividend Payment Date is not a Business Day, then dividends will be
payable on the first Business Day following such Dividend Payment Date with the same force and
effect as
if payment were made on the date such payment was originally payable. The record
date for the payment of
dividends, if declared, will be the first day of
the month in which the
relevant Dividend Payment Date occurs or, if any such day is not a Business Day, the next day
that is a Business Day. Dividends payable on the Fixed Rate WMI Preferred Stock for any period
greater or
less than a full Dividend Period will be computed on the basis of
twelve 30-day
months, a 360-day year, and the actual number of
days elapsed in the period. No interest will be
paid on any dividend payment of
Fixed Rate WMI Preferred Stock or
Fixed Rate Depositary
Shares. Holders of
Fixed Rate Depositary Shares will receive 1/1OOOthof any such dividend
payment on the Fixed Rate WMI Preferred Stock.
Dividends on the Fixed Rate WMI Preferred Stock are non-cumulative. If WMI's Board of
Directors does not declare a dividend on the Fixed Rate WMI Preferred Stock or
declares less
than a full dividend in respect of any Dividend Period, the holders of
the Fixed Rate WMIPreferred Stock will have no right to receive any dividend o
r a full dividend, as the case may be,
for the Dividend Period, and WMI will have no obligation to pay a dividend or
to pay full dividends
for that Dividend Period, whether or
not dividends are declared and paid for any future Dividend
Period with respect to the Fixed Rate WMI Preferred Stock, WMl's common stock or any other
class or
series of WM s preferred stock.
Redemption
The Fixed Rate WMI Preferred Stock will not be redeemable at
the option of
the holders
thereof. Subject to a covenant in favor of
certain of WMI's debtholders limiting WMl's and
its
subsidiaries' right to repurchase or
redeem the Fixed Rate WMI Preferred Stock among others)
as described under Description of
the WaMu Cayman Preferred Securities Restriction on
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plus 0.40%,
plus
plus
Replacement
Rights upon Liquidation
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Voting Rights
Voting Parity
Stock")
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90
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shares of a class or series are entitled to vote as a separate voting group if shareholder voting is otherwise required by Washington law and if the amendment would:
• increase the aggregate number of authorized shares of the class or series;
• effect an exchange or reclassification of all or part of the issued and outstanding shares of the class or series into shares of another class or series, thereby adversely affecting the holders of the shares so exchanged or reclassified;
• change the rights, preferences, or limitations of all or part of the issued and outstanding shares of the class or series, thereby adversely affecting the holders of shares of the class or series;
• change all or part of the issued and outstanding shares of the class or series into a different number of shares of the same class or series, thereby adversely affecting the holders of shares of the class or series;
• create a new class or series of shares having rights or preferences with respect to dividends or other distributions or to dissolution that are, or upon designation by the board of directors may be, prior, superior, or substantially equal to the shares of the class or series;
• increase the rights or preferences with respect to distributions, or on liquidations or dissolution, or the number of authorized shares of any class or series that, after giving effect to the amendment, has rights or preferences with respect to distributions, or on liquidations or dissolution that are, or upon designation by the board of directors may be, prior, superior, or substantially equal to the shares of the class or series;
• limit or deny an existing pre-emptive right of all or part of the shares of the class or series;
• cancel or otherwise adversely affect rights to distributions that have accumulated but not yet been declared on all or part of the shares of the class or series; or
• effect a redemption or cancellation of all or part of the shares of the class or series in exchange for cash or any other form of consideration other than shares of the corporation.
WMI will covenant in the Exchange Agreement that in the event WMI, prior to the Conditional Exchange, effects, or is, the subject of a merger, consolidation, statutory share exchange, sale of all or substantially all of its assets or other form of business combination, (i) in which WMI is not the surviving, resulting or receiving corporation thereof or (ii) if WMI is the surviving or resulting corporation, shares representing a majority of WMl's total voting power are either converted or exchanged into securities of another person or into cash or other property (any such transaction in either (i) or (ii) being a "Business Combination"), then WMI (i) shall not enter into such Business Combination unless the Successor Entity agrees, effective upon the consummation of such Business Combination, to abide by all of WMl's obligations under the provisions of the Exchange Agreement restricting the payment of dividends by WMI in the event dividends are not paid with respect to the Company Preferred Securities and (ii) may, at the election of the Board of Directors of WMI prior to the effectiveness of such Business Combination, assign, effective upon the consummation of such Business Combination, all of its other obligations under the Exchange Agreement to a Successor Entity that has both Fixed Rate Substitute Preferred Stock and Fixed-to-Floating Rate Substitute Preferred Stock and, as a result of such assignment, all references to WMI, Fixed Rate WMI Preferred Stock, Fixed-to-Floating Rate WMI Preferred Stock, Fixed Rate Depositary Share and Fixed-to-Floating Rate Depositary Share shall become and be deemed to be references to such Successor Entity, to such Fixed Rate Substitute Preferred Stock, to such Fixed-to-Floating Rate Substitute Preferred Stock, to a Fixed Rate Successor Depositary Share and to a Fixed-to-Floating Rate Successor Depositary Share, respectively.
90
Successor Entity"
Fixed Rate Substitute Preferred Stock"
Fixed-to-Floating Rate Substitute Preferred Stock"
Fixed Rate Successor Depositary Share"
Fixed-to-Floating Rate Successor Depositary Share"
Exchange
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DESCRIPTION OF THE FIXED RATE DEPOSITARY SHARES
The following summary describes the material terms and provisions of
the Fixed Rate
Depositary Shares. This description is qualified in its entirety by reference to the terms and
provisions of
the Deposit Agreement, the form of
depositary receipts, which contain the terms and
provisions of
the Fixed Rate Depositary Shares, and WM/'s articles of
incorporation and articles of
amendment. Copies of
each of
the foregoing documents may be obtained upon request to WMI or
free of
charge at
the specified office of
the Paying Agent in Luxemburg.
1/1000th
Fixed Rate Depositary Shares").
Deposit Agreement"),
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Dividends and Other Distributions
The Depositary will distribute
all cash dividends, dividends paid in Fixed Rate Depositary
Shares representing paid-up and non-assessable shares of
Fixed Rate WMI Preferred Stock or
other cash distributions received in respect of
the Fixed Rate WMI Preferred Stock to the record
holders of
Fixed Rate Depositary Shares in proportion to the numbers of such Fixed Rate
Depositary Shares owned by such holders on the relevant record date. In the event of
a
distribution other than in cash, the Depositary will distribute property received by
it to the record
holders of
Fixed Rate Depositary Shares entitled thereto, unless the Depositary determines that it
is not feasible to make such distribution, in which case the Depositary may, after consultation
with WMI, sell such property and distribute the net proceeds from such sale to such holders.
Redemption of
Fixed Rate Depositary Shares
If the Fixed Rate WMI Preferred Stock underlying the Fixed Rate Depositary Shares are
redeemed, the Fixed Rate Depositary Shares will be redeemed with the proceeds received by the
Depositary resulting from the redemption, in whole or
in part, of such Fixed Rate WMI Preferred
Stock held by the Depositary. The redemption price per Fixed Rate Depositary Share will be
equal to the applicable redemption price per share payable with respect to such Fixed Rate WMI
Preferred Stock. If less than
all the Fixed Rate Depositary Shares are to be redeemed, the Fixed
Rate Depositary Shares to be redeemed will be selected by
lot
or
in WMl's sole
discretion.
After the date fixed for redemption which will be the same date as the redemption date, if
any, for the Fixed Rate WMI Preferred Stock), the Fixed Rate Depositary Shares so
called for
redemption will no longer be deemed to be outstanding and
all rights of
the holders of
the Fixed
Rate Depositary Shares will cease, except the right to receive the moneys payable upon such
redemption and any money or
other property to which the holders of such Fixed Rate Depositary
Shares were entitled upon such redemption upon surrender to the Depositary of
the depositary
receipts evidencing such Fixed Rate Depositary Shares.
Amendment of
Deposit Agreement
The form of
depositary receipt evidencing the Fixed Rate Depositary Shares and any
provision of
the Deposit Agreement may at
any time be amended by agreement between WMI
and the Depositary. However, any amendment which materially and adversely alters the rights of
the holders of
depositary receipts will not be effective unless such amendment has been
approved by
the holders of
at
least a majority of
the Fixed Rate Depositary Shares then
outstanding. Every holder of
an outstanding depositary receipt at
the time any amendment
becomes effective will be deemed, by
continuing to hold such depositary receipt, to consent and
agree to such amendment and to be bound by the Deposit Agreement as amended thereby.
Charges of
Depositary
WMI will pay the charges of
the Depositary in connection with the initial deposit of
the Fixed
Rate WMI Preferred Stock and the initial issuance of
the Fixed Rate Depositary Shares upon the
occurrence of
a Conditional Exchange, and any redemption of
the Fixed Rate WMI Preferred
Stock. Holders of
Fixed Rate Depositary Shares will pay
all other transfer and other taxes and
governmental charges and, in addition, such other charges as are expressly provided in the
Deposit Agreement to be
for their accounts. All
other charges and expenses of
the Depositary
and of any registrar incident to the performance of
their respective obligations arising from the
depositary arrangements will be paid by WMI only after prior consultation and agreement
between the Depositary and WMI and consent by WMI to the incurrence of such expenses, which
consent will not be unreasonably withheld.
93
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Miscellaneous
Resignation and Removal of
Depositary; Termination of
Deposit Agreement
94
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00110
DESCRIPTION OF THE OTHER WMI CAPITAL STOCK
As of
the date hereof, the authorized capital stock of WMI consists of1 600)000,000 shares
of WMI common stock and 10,000,000 shares of
preferred stock, no par value. As of
the close of
business on February 15, 2006, there were 994,380,908 shares of WMI common stock
outstanding and no shares of
preferred stock of WMI outstanding. As of
the close of
business on
February 15, 2006, 700,000 shares of
preferred stock of WMI were authorized, but unissued, as
contemplated by WMl's Rights Agreement, dated as
of
December 20, 2000, entered into by and
between WMI and Mellon Investor Services LLC The shares of WMI preferred stock to be issued
upon the occurrence of
a Conditional Exchange have been duly authorized and when and if
issued will be validly issued, fully paid, nonassessable and free of
preemptive rights, with no
personal liability attaching to the ownership thereof.
WMI has authorized for issuance in connection with the offering of
the Trust Securities and
the related issuance by the Company of
its Fixed-to-Floating Rate Company Preferred Securities
up to 1,250 shares of
its Series I Perpetual Non-cumulative Fixed-to-Floating Rate Preferred
Stock, no par value, and liquidation preference of
$1,000,000 per share the Fixed-to-Floating
Rate WMI Preferred Stock"). The shares of
Fixed-to-Floating WMI Preferred Stock will be issued
by WMI solely upon the occurrence of
a Conditional Exchange. The shares of
Fixed-to-Floating
Rate WMI Preferred Stock, if and when issued upon the occurrence of
a Conditional Exchange,
will be represented by
Fixed-to-Floating Rate Depositary Shares of WMI the Fixed-to-Floating
Rate Depositary Shares"), each of
which will represent a 1/1 OOOthof a share of
Fixed-to-Floating
Rate WMI Preferred Stock.
The Fixed-to-Floating Rate WMI Preferred Stock will rank pari passu with the Fixed Rate
WMI Preferred Stock as
to dividends and upon liquidation of WMI. The terms of
the Fixed-to-
Floating Rate WMI Preferred Stock are substantially identical to the Fixed Rate WMI Preferred
Stock other than with respect to the rate applicable to dividends thereon. The Fixed-to-Floating
Rate WMI Preferred Stock will, if, when and as
declared by WMl's Board of
Directors, pay
dividends at
an annual rate of 6.534% until March 15, 2011 and at
an annual rate equal to three-
month L1BOR plus 1.4825% for the Dividend Period starting on such Dividend Payment Date and
each Dividend Period thereafter. The Fixed-to-Floating Rate WMI Preferred Stock will not be
listed on any securities exchange or
automated dealer quotation system.
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BOOK-ENTRY ISSUANCE
Form, Denomination, Transfer and Book-Entry Procedures
General
96
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BOOK-ENTRY ISSUANCE
Form, Denomination, Transfer and Book-Entry Procedures
General
The Series A-1 WaMu Cayman Preferred Securities are being offered and sold only in the United States and only to U.S. persons who are both qualified institutional buyers within the meaning of Rule 144A under the Securities Act and qualified purchasers within the meaning of Section 2 (a) (51) of the Investment Company Act in reliance on an exemption from registration pursuant to Rule 144A under the Securities Act (the "Rule 144A Offering").
The Series A-1 WaMu Cayman Preferred Securities will be issued only in fully registered form. Each initial purchaser in the Offering and each account for which it is purchasing will hold at least $300,000 liquidation preference of Series A-1 WaMu Cayman Preferred Securities (i.e., at least three Series A-1 WaMu Cayman Preferred Securities) and each subsequent purchaser and each account for which it is purchasing will hold and transfer at least $100,000 liquidation preference of Series A-1 WaMu Cayman Preferred Securities (i.e., at least one Series A-1 WaMu Cayman Preferred Security). Any transfer, sale or other disposition of Series A-1 WaMu Cayman Preferred Securities having a liquidation preference of less than $100,000 or which result in a beneficial owner holding Series A-1 WaMu Cayman Preferred Securities having an aggregate liquidation preference of less than $100,000, will be deemed to be null and void ab initio and of no legal effect whatsoever. Any such transferee will be deemed not to be the beneficial owner of such Series A-1 WaMu Cayman Preferred Securities for any purpose, including, but not limited to, the receipt of dividends on such Series A-1 WaMu Cayman Preferred Securities, and such transferee will be deemed to have no interest whatsoever in such Series A-1 WaMu Cayman Preferred Securities.
Each purchaser of Series A-1 WaMu Cayman Preferred Securities pursuant to the Rule 144A Offering, and each purchaser who holds a beneficial interest in the Rule 144A Global Security at any time, will be deemed to have represented to WaMu Cayman that it is both a qualified institutional buyer within the meaning of Rule 144A under the Securities Act and a qualified purchaser within the meaning of Section 2 (a) (51) under the Investment Company Act. If a beneficial owner of Series A-1 WaMu Cayman Preferred Securities who is required to be a "qualified purchaser" within the meaning of Section 2(a) (51) under the Investment Company Act is at any time not a qualified purchaser, WaMu Cayman may (i) require such beneficial owner to sell its Series A-1 WaMu Cayman Preferred Securities to a person who is a non-U.S. person within the meaning of Rule 902 of Regulation S under the Securities Act or who is a U.S. person that is also a qualified purchaser within the meaning of Section 2 (a) (51) under the Investment Company Act and who is otherwise qualified to purchase such Series A-1 WaMu Cayman Preferred Securities in a transaction exempt from registration under the Securities Act or (ii) require the beneficial owner to sell such Series A-1 WaMu Cayman Preferred Securities to WaMu Cayman or an affiliate thereof at a price equal to the least of (A) the purchase price paid by the holder for such Series A-1 WaMu Cayman Preferred Securities, (B) 100% of the liquidation preference thereof or (C) the fair market value thereof.
The Series A-2 WaMu Cayman Preferred Securities are being offered and sold only to non-U.S. persons within the meaning of Rule 902 of Regulation S under the Securities Act in transactions outside the United States in reliance on an exemption from registration pursuant to Regulation S under the Securities Act (the "Regulation S Offering").
Each purchaser of Series A-2 WaMu Cayman Preferred Securities pursuant to the Regulation S Offering will be deemed to have represented to WaMu Cayman that it is a non-U.S. person within the meaning of Rule 902 of Regulation S under the Securities Act and is not acquiring WaMu Cayman Preferred Securities for the account or benefit of such a U.S. person.
96
The Series A-1 WaMu Cayman Preferred Securities initially will be represented by one or
more securities in registered, global form the The Series A-2
WaMu Cayman Preferred Securities initially will be represented by one or
more securities in
registered, global form the S and together with the Rule 144A
Global Security, the The Global Securities will be deposited upon issuance
with the Registrar as custodian for The Depository Trust Company in New York, New
York, and registered in the name of DTC or
its nominee the in each case for credit
to an account of a DTC Participant, as described below. Through and including the 40th day after
the latter of
the commencement of
the offering and the original issue date of
the Series A-2
WaMu Cayman Preferred Securities such period through and including the 40th day, the
beneficial interests in the Regulation S Global Security may be held only
through the Euroclear System or
Clearstream as indirect participants in DTC), unless
transferred to a person that takes delivery through the Rule 144A Global Security in accordance
with the certification requirements described below. Beneficial interests in the Rule 144A Global
Security may not be exchanged for beneficial interest in the Regulation S Global Security or
vice
versa at
any time except in accordance with the transfer and certification requirements described
below. See Exchanges between Regulation S Global Securities and Rule 144A Global
Securities."
As an
indirect holder, a purchaser's rights relating to a Global Security will be governed by
the account rules of
the purchaser's financial institution and of
DTC, as
well as
the general laws
relating to securities transfers. WaMu Cayman will not recognize the purchaser as a holder of
WaMu Cayman Preferred Securities and instead will deal only with DTC or
its nominee. See
The DTC System."
Purchasers should be aware that because WaMu Cayman Preferred Securities are issued
only in the form of
Global Securities:
they cannot get WaMu Cayman Preferred Securities registered in their name;
they cannot receive physical certificates for their interest in the WaMu Cayman Preferred
Securities;
they will be Street Name" holders and must look to their own bank or
broker for
payments on the WaMu Cayman Preferred Securities and the protection of
their legal
rights relating to the WaMu Cayman Preferred Securities;
they may not be able to sell interests in the WaMu Cayman Preferred Securities to some
insurance companies and other institutions that are required by law to own securities in
the form of
physical certificates; and
DTC's policies will govern payments, transfers, exchanges and other matters relating to
the purchaser's interest in the Global Security. See The DTC System." WaMuCayman, the Company and the Registrar have no responsibility for any aspect o
f DTC's
actions or
for
its records of
ownership interests in the Global Security. WaMu Cayman,
the Company and the Registrar also do not supervise DTC in any way.
In a few special situations, the Global Securities will terminate and interests in them will be
exchanged for physical certificates representing WaMu Cayman Preferred Securities. After that
exchange, the choice of
whether to hold WaMu Cayman Preferred Securities directly or
in Street
Name" will be up to the beneficial owner. Purchasers must consult their own bank or
broker to
97
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The DTG
98
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interests, as
is the case with the WaMu Cayman Preferred Securities held for the account of
customers registered in Street Name". However, payments will be the responsibility of
the OTC
Participants and not of
OTC, the Securities Registrar, WaMu Cayman or
the Company.
Except for trades involving only Euroclear and Clearstream Participants, interests in the
WaMu Cayman Preferred Securities will trade in OTC's settlement system, and secondary market
trading activity in such interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of OTC and
its participants. Transfers between participants in
OTC will be effected in accordance with OTC's procedures, and will be settled in same-day
funds. Transfers between participants in Euroclear and Clearstream will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer and exchange provisions applicable to the WaMuCayman Preferred Securities described elsewhere in this offering circular, cross-market transfers
between OTC Participants, on the one hand, and Euroclear or
Clearstream Participants, on the
other hand, will be effected by OTC in accordance with OTC's rules on behalf of
Euroclear or
Clearstream, as the case may be, by
its respective depositary; however, such cross-market
transfers will require delivery of
instructions to Euroclear or
Clearstream, as
the case may be, by
the counter-party in such system in accordance with the rules and procedures and within the
established deadlines Brussels time) of
such system. Euroclear or
Clearstream, as
the case
may be, will, if the transaction meets
its settlement requirements, deliver instructions to its
respective depositary to take action to elect final settlement on its behalf by
delivering or
receiving interests in the relevant Global Security in OTC, and making or
receiving payment in
accordance with normal procedures for same-day funds settlement applicable to OTC. Euroclear
Participants and Clearstream Participants may not deliver instructions directly to the depositaries
for Euroclear or
Clearstream.
Because of
time zone differences, the securities account of a Euroclear or
Clearstream
participant purchasing an
interest in a Global Security from a OTC Participant will be
credited,
and any such crediting will be reported to the relevant Euroclear or
Clearstream Participant,
during the securities settlement processing day which must be a business day for Euroclear and
Clearstream) immediately following the OTC settlement date. Cash received in Euroclear or
Clearstream as a result of
sales of
interests in a Global Security by
or
through a Euroclear or
Clearstream Participant to a OTC Participant will be received with value on the OTC settlement
date but will be
available in the relevant Euroclear or
Clearstream cash account only as
of
the
business day for Euroclear or
Clearstream following the OTC settlement date.
OTC has advised WaMu Cayman that it will take any action permitted to be taken by a
holder of
the WaMu Cayman Preferred Securities including the presentation of
the WaMu
Cayman Preferred Securities for exchange as described below) only at
the direction of one or
more OTC Participants to whose account in the Global Securities are credited and only in respect
of
such portion of
the aggregate principal amount of
the WaMu Cayman Preferred Securities as
to which such participant or
participants has or have given such direction.
Although OTC, Euroclear and Clearstream have agreed to the foregoing procedures in order
to facilitate transfers of
beneficial ownership interests in the Global Security among OTCParticipants, Euroclear Participants and Clearstream Participants, they are under no obligation to
perform or
continue to perform such procedures, and such procedures may be discontinued at
any time. Neither the Company, WaMu Cayman, the Securities Registrar, or any of
their
representative agents will have any responsibility for the performance by OTC, Euroclear,
Clearstream or
their participants or
indirect participants, of
their respective obligations under the
rules and procedures governing their operations, including maintaining, supervising or
reviewing
the records relating to,
or
payments made on account of,
beneficial ownership interests in the
Global Security.
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00115
Euroc/ear and Clearstream
Clearstream Banking societe anonyme, 42 Avenue JF Kennedy, L-1855, Luxembourg
is a subsidiary of
Clearstream International a
Luxembourg limited liability company formed in January 2000 through the merger of
Cedel
International and Deutsche Boerse Clearing, a subsidiary of
Deutsche Boerse AG. In July 2002,
Deutsche Boerse AG acquired Cedel International and
its 50% ownership of
Clearstream
International.
Clearstream is registered as a bank in Luxembourg, and as such is subject to supervision
by
the Luxembourg Financial Sector Supervisory Commission, which supervises Luxembourg
banks.
Clearstream holds securities for its customers and facilitates
the clearance and settlement of
securities transactions by electronic book-entry transfers
between their accounts. Clearstream provides various services, including safekeeping, adminis-
tration, clearance and settlement of
internationally traded securities and securities lending and
borrowing. Clearstream also deals with domestic securities markets in several countries through
established depository and custodial relationships. Clearstream has established an electronic
bridge with Euroclear Bank as the Euroclear Operator in Brussels to facilitate
settlement of
trades between systems. Clearstream currently accepts over 200,000 securities for
clearance.
Clearstream International's customers are world-wide financial institutions including under-
writers, securities brokers and dealers, banks, trust companies and clearing corporations.
Clearstream International's United States customers are limited to securities brokers and dealers
and banks. Currently, Clearstream International has over 2,500 customers located in over 94
countries, including
all major European countries, Canada and the United States. Indirect access
to Clearstream is available to other institutions which clear through or
maintain custodial
relationship with an account holder of
Clearstream.
The Euroclear System was created in 1968 to hold securities for
its
participants and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of
certificates and any risk from lack of
simultaneous
transfers of
securities and cash. Transactions may be settled in a variety of
currencies, including
United States dollars. Euroclear includes various other securities, including securities lending and
borrowing and interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is operated by
Euroclear Bank the
All operations are conducted by the
Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts
are accounts with the Euroclear Operator. Euroclear pic establishes policy for Euroclear on
behalf of
Euroclear Participants. Euroclear Participants include banks including central banks),
securities brokers and dealers and other professional financial intermediaries. Indirect access to
Euroclear is also available to other firms that clear through or
maintain a custodial relationship
with a Euroclear Participant, either directly or
indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed
by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures
of
the Euroclear System and applicable Belgian law collectively, the
The Euroclear Terms and Conditions govern transfers of
securities and cash within
Euroclear, withdrawals of
securities and cash from Euroclear, and receipts of payments with
respect to securities in Euroclear. All
securities in Euroclear are held on a fungible basis without
attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Euroclear Terms and Conditions only on behalf of
Euroclear Participants,
and has no record
of,
or
relationship with, persons holding through Euroclear Participants.
100
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Exchanges between Regulation S Global Securities and Rule 144A Global Securities
Transfers of WaMu Cayman Preferred Securities
A purchaser (including a beneficial owner) of Series A-1 WaMu Cayman Preferred Securities may sell such securities to a non-U.S. person only if the certifications described below are made and, in connection with such sale, the transferor's interest in the Series A-1 WaMu Cayman Preferred Securities evidenced by the Rule 144A Global Security is exchanged by the transferee for Series A-2 WaMu Cayman Preferred Securities evidenced by the Regulation S Global Security.
Similarly, a purchaser (including a beneficial owner) of Series A-2 WaMu Cayman Preferred Securities may sell such securities in the United States or to a U.S. person only if the certifications described below are made and, in connection with such sale, the transferor's interest in the Series A-2 WaMu Cayman Preferred Securities evidenced by the Regulation S Global Security is exchanged by the transferee for Series A-1 WaMu Cayman Preferred Securities evidenced by the Rule 144A Global Security.
Exchanges between Global Securities
Beneficial interests in the Rule 144A Global Security may be exchanged for beneficial interests in the Regulation S Global Security only in connection with a transfer of such interests or an exchange by the beneficial owner who makes the certifications described below. Beneficial interests in the Regulation S Global Security may be exchanged for beneficial interests in the Rule 144A Global Security only in connection with a transfer of such interests or an exchange by the beneficial owner who makes the certifications described below. Such transfers and exchanges are subject to compliance with the certification requirements described below.
A beneficial interest in the Rule 144A Global Security may be transferred to a person who takes delivery in the form of an interest in the Regulation S Global Security, whether before or after the expiration of the Restricted Period, only upon receipt by the Securities Registrar of a written certificate on behalf of the transferor to the effect that the transferee is a non-U .S. person within the meaning of Rule 902 of Regulation S under the Securities Act, such transfer is being made in accordance with Rule 904 of Regulation S under the Securities Act and that, if such transfer occurs prior to the expiration of the Restricted Period, the interest transferred will be held immediately thereafter through Euroclear or Clearstream.
A beneficial interest in the Regulation S Global Security may be transferred in the United States or to a U.S. person who takes delivery in the form of an interest in the Rule 144A Global Security, whether before or after the expiration of the Restricted Period, only upon receipt by the Securities Registrar of a written certificate on behalf of the transferor to the effect that such transfer is being made to a person who the transferor reasonably believes is both a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and a "qualified purchaser" within the meaning of Section 2 (a) (51) of the Investment Company Act, purchasing for its own account or the account of a "qualified institutional buyer" who is also a "qualified purchaser" in a transaction meeting the requirements of Rule 144A under the Securities Act and in accordance with all applicable securities laws of the states of the United States and other jurisdictions.
Any beneficial interest in one of the Global Securities that is exchanged for an interest in the other Global Security will cease to be an interest in such Global Security and will become an interest in the other Global Security. Accordingly, such interest will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in such other Global Security for as long as it remains such an interest.
Any exchange of a beneficial interest in the Regulation S Global Security for a beneficial interest in the Rule 144A Global Security or vice versa will be effected in DTC by means of an
101
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instruction originated by the Securities Registrar through the DTC Deposit/Withdraw at Custodian ("DWAC") system. Accordingly, in connection with any such exchange, appropriate adjustments will be made in the records of the Securities Registrar to reflect a decrease in the liquidation preference of such Regulation S Global Security and a corresponding increase in the liquidation preference of such Rule 144A Global Security or vice versa, as applicable.
102
CERTAIN TAX CONSIDERATIONS
United States Internal Revenue Service Circular 230 Notice: To ensure compliance with
Internal Revenue Service Circular 230, prospective investors are hereby notified that: i) any
discussion of
U.S. Federal tax issues contained or
referred to in this offering circular or any
document referred to herein is not intended or
written to be used, and cannot be used, by
prospective investors for the purpose of
avoiding penalties that may be imposed on them under the
U.S. Internal Revenue Code; such discussion is written for use in connection with the
promotion or
marketing of
the transactions or
matters addressed herein; and prospective
investors should seek advice based on their particular circumstances from an independent tax
advisor.
General
The following discussion summarizes the United States Federal income taxation of WaMu
Cayman and the principal United States Federal income tax and Cayman Islands tax
consequences to holders of WaMu Cayman Preferred Securities. This discussion is of a general
nature and is not intended to be, nor should it be construed as, tax advice to any holder.
Purchasers should consult their own tax advisor regarding the tax consequences of
acquiring,
owning and disposing of WaMu Cayman Preferred Securities.
The discussion addresses only purchasers that hold WaMu Cayman Preferred Securities as
capital assets and does not purport to be a comprehensive description of
all the tax
considerations that may be relevant to particular holders in light of a purchaser's personal
circumstances. In addition, the discussion is not addressed to any U.S. Holder that beneficially
owns actually or
constructively, within the meaning of Code Section 958) 10% or more the
WaMu Cayman Preferred Securities. The discussion also does not describe
all aspects of
taxation that may be
relevant to certain types of
purchasers to which special provisions of
United
States Federal income tax law may apply, including:
dealers in securities and currencies;
regulated investment companies
traders in securities;
tax-exempt organizations;
banks and insurance companies;
persons that hold WaMu Cayman Preferred Securities as
part of
a hedge, straddle or
conversion transaction;
persons whose functional currency is not the United. States dollar; and
U.S. expatriates.
The summary is based on United States Federal and Cayman Islands tax law, including the
Code, existing and proposed U.S. Treasury regulations, administrative rulings and judicial
decisions
all
as currently in effect. These legal sources are subject to change or
differing
interpretations at
any time, which change or
interpretation could apply retroactively and could
affect the validity of
the discussion below. There can be no assurance that the Internal Revenue
Service IRS") will take the same view of
the United States Federal income tax consequences
of
an investment in the Preferred Securities as described herein.
Each purchaser is urged to consult its own tax advisor as
to the tax consequences of
acquiring, owning and disposing of WaMu Cayman Preferred Securities, including the United
States Federal, state, local, Cayman Islands and any other tax consequences of
acquiring,
owning and disposing of
the WaMu Cayman Preferred Securities and the Fixed Rate WMI
Preferred Stock.
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As used in this discussion, the term means a beneficial owner of
a WaMuCayman Preferred Security that
is,
for United States Federal income tax purposes, a citizen or
resident of
the United States, a corporation or
partnership created or
organized in or
under the
laws of
the United States or any State, an estate the income of
which is includible in gross
income for United States Federal income tax purposes regardless of
its source, or
a trust if a
court within the United States is able to exercise primary supervision over
its administration and
one or more United States persons have authority to control
all substantial decisions of
the trust.
The term means a beneficial owner of a WaMu Cayman Preferred Security that
is not a U.S. Holder.
United States Federal Income Tax Consequences
Tax Treatment of WaMu Cayman and its Investment in Company Preferred Securities
Classification of WaMu Cayman and the Company. WaMu Cayman will be treated as a
foreign corporation for Federal income tax purposes.
All
of
its material assets are expected to
consist of
Fixed Rate Company Preferred Securities. The Company intends to be
classified as a
U.S. domestic partnership for United States Federal income tax purposes, and the Fixed Rate
Company Preferred Securities acquired by WaMu Cayman are expected to constitute equity
interests in such partnership.
An entity that is classified as a partnership for United States Federal income tax purposes
generally is not a taxable entity and incurs no United States Federal income tax liability. Instead,
each partner is required to take into account
its allocable share of
income, gains, losses,
deductions and credits of
the partnership in computing its United States Federal income tax
liability, if any, even if no cash distributions are made by the partnership to the partner. An entity
that is classified as a partnership for United States Federal income tax purposes nevertheless
will be taxable as a corporation if it is a publicly traded partnership" and fails to satisfy a
90% qualifying income" test, within the meaning of
Code Section 7704.
On the date of
the initial issuance of
the WaMu Cayman Preferred Securities, the Company
will receive an opinion from Mayer, Brown, Rowe Maw LLP to the effect that, for United States
Federal income tax purposes, although no activities closely comparable to that contemplated by
the Company have been the subject of
any U.S. Treasury regulation, revenue ruling or
judicial
decision, the Company will not be treated as
an association or
publicly traded partnership taxable
as a corporation. The opinions are based on certain assumptions and on certain representations
and agreements regarding restrictions on the future conduct of
the activities of
the Company.
Although the Company intends to conduct its activities in accordance with such assumptions,
representations and agreements, if it were nonetheless determined that the Company was
taxable as a corporation for United States Federal income tax purposes, then cash available for
distribution to WaMu Cayman in respect of
the Company Preferred Securities would be reduced
on account of
taxes payable by
the Company. A determination by
the Company, based on receipt
of
an opinion of
counsel, that there is a significant risk that the Company is or
will be subject to
federal income tax would constitute a Tax Event see Description of
Fixed Rate Company
Preferred Securities." The remainder of
this discussion assumes that the Company is treated as
a partnership, and not as
an association or
publicly traded partnership taxable as a corporation,
for United States Federal income tax purposes, and that the Fixed Rate Company Preferred
Securities owned by WaMu Cayman will constitute equity interests in such partnership.
U.S. Trade or Business Status. WaMu Cayman intends to conduct
its affairs so
as
to not
be engaged in a trade or
business in the United States or
be subject to taxation on a net income
basis in the United States. On the date of
the initial issuance of
the WaMu Cayman Preferred
Securities, WaMu Cayman will receive an opinion from Mayer, Brown, Rowe Maw LLP to the
effect that, for United States Federal income tax purposes, although no activities closely
comparable to that contemplated by WaMu Cayman have been the subject of any U.S. Treasury
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regulation, revenue ruling or
judicial decision, it will not be treated as engaged in the conduct of
a
trade or
business within the United States and, consequently, WaMu Cayman's income will not
be subject to United States Federal income tax on a net income basis including the U.S. branch
profits tax). Mayer, Brown, Rowe Maw LLP's opinion is not binding on the IRS or
the courts,
and no ruling will be sought from the IRS regarding this, or
any other, aspect of WaMu Cayman's
United States Federal income tax treatment. Accordingly, no assurance can be given that the IRS
will not assert positions contrary to those stated in Mayer, Brown, Rowe Maw LLP's opinion or
that a court would not entertain any such assertions.
Mayer, Brown, Rowe Maw LLP's opinion is based on certain assumptions and on certain
representations and agreements regarding restrictions on the future conduct of WaMu Cayman's
activities. Although WaMu Cayman intends to conduct
its activities in accordance with such
assumptions, representations and agreements, if it were nonetheless determined to be engaged
in a trade or
business in the United States and had taxable income that was effectively
connected with such United States trade or
business including as a result of a determination
that
its distributive share of income derived from the Company in respect of
the Fixed Rate
Company Preferred Securities constituted taxable income effectively connected with a trade or
business carried on in the United States by the Company), then WaMu Cayman would be subject
to United States Federal income tax on such income at
regular United States corporate income
tax rates and possibly to a 30% United States branch profits tax as well. Moreover, in the event
WaMu Cayman were to derive effectively connected income in respect of
its ownership of
the
Fixed Rate Company Preferred Securities the United States corporate income tax imposed
thereon would be required to be
collected in the first instance through a withholding by
the
Company of such tax at a rate of 35% on WaMu Cayman's distributive share of
the income. A
determination by WaMu Cayman, based on receipt of
an opinion of
counsel, that there is a
significant risk that it is or
will be treated as engaged in a trade or
business within the United
States, would constitute a Tax Event see Description of
Fixed Rate Company Preferred
Securities." The remainder of
this discussion assumes that WaMu Cayman will not be considered
to be engaged in a trade or
business within the United States.
United States Withholding Tax. Interest that constitutes portfolio interest" within the
meaning of
the Code is generally exempt from United States withholding tax. As a partner in the
Company, WaMu Cayman will be treated as earning directly
its share of
the income earned by
the Company. Company's material assets will initially consist of
the regular interest" the
Class A Asset Trust Certificate) issued in registered form by the Asset Trust, which will be
treated as a real estate mortgage investment conduit" under the Code a REMIC"). REMIC
regular interests are generally treated as indebtedness for United States Federal income tax
purposes that qualifies for the portfolio interest exemption. Accordingly, WaMu Cayman expects
that
its distributive share of
interest paid on the Asset Trust regular interest will constitute
portfolio interest" under the Code, and thus, will not be subject to United States withholding tax.
In addition, during the term of
the transaction, Company expects, pursuant to its investment
guidelines, to invest cash on hand from time to time in short term debt instruments and other
debt securities that qualify for the portfolio interest exemption.
Tax Consequences U.S. Holders WaMu Cayman Preferred Securities
WaMu Cayman will treat the WaMu Cayman Preferred Securities as equity for United States
Federal income tax purposes. In general, the characterization as
of
the time of
issuance of
an
instrument by
an
issuer as
debt or
equity is binding for United States Federal income tax
purposes on
all holders but not the IRS), unless a holder discloses on
its tax return that it is
treating the instrument in a manner inconsistent with the issuer's characterization. In addition,
because WaMu Cayman is a foreign corporation, special rules described below apply to certain
U.S. Holders of
the Preferred Securities.
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a WaMu Cayman will constitute a
passive foreign investment company" under the Code Except as
provided below,
U.S. Holders of
the WaMu Cayman Preferred Securities will be considered U.S. Holders in a PFIC. In
general, U.S. Holders in a PFIC may desire to make an
election to treat WaMu Cayman as a
qualified electing fund" Generally, a QEF election should be made on or
before the due
date for tiling a U.S. Holder's Federal income tax return for the first taxable year for which it held
Preferred Securities. If a timely QEF election is made for WaMu Cayman, a U.S. Holder will be
required to include in gross income
its pro rata share of WaMu Cayman's ordinary earnings and to
include as long-term capital gain
its pro rata share of
our net capital gain as defined in applicable
Treasury regulations), if any, whether or
not any cash is distributed. In certain cases in which a QEFdoes not distribute
all
of
its earnings in a taxable year, U.S. Holders may also be permitted to elect
to defer payment of some or
all
of
the taxes on the QEF's income subject to an interest charge on
the deferred amount. WaMu Cayman will provide, upon request, all information that a U.S. Holder
making a QEF election is required to obtain for Federal income tax purposes the U.S. Holder's
pro rata share of
ordinary income and net capital gain, if any), and will provide, upon request, a
PFIC Annual Information Statement" as described in Treasury regulation Section 1.1295-1 or in
any successor Treasury regulation), including all representations and statements required by such
statement, and will take any other reasonable steps to facilitate such election.
If a U.S. Holder does not make a timely QEF election, it will be subject to a special United
States Federal tax on so-called excess distributions", which includes both certain distributions
on the Preferred Securities and gain on any disposition of
the Preferred Securities. The amount
of
United States Federal tax on excess distributions will be increased by
an interest charge
reflecting the deemed amount of
tax deferral that the taxpayer has experienced. In many cases,
the application of
the tax on excess distributions will be substantially more onerous than the
treatment applicable if a timely QEF election is made. U.S. Holders should consult with their tax
counsel regarding the United States Federal income tax consequences of
investing in a PFIC and
the desirability of making a QEF election.
U.S. HOLDERS OF WAMU CAYMAN PREFERRED SECURITIES SHOULD CONSIDER
CAREFULLY WHETHER TO MAKE A QEF ELECTION AND THE CONSEQUENCES OF NOTMAKING SUCH AN ELECTION.
on to U.S. The treatment of
actual distributions
of cash on the Preferred Securities, in very general terms, will vary depending on whether a
U.S. Holder has made a timely QEF election as
described above. See Tax Consequences to
U.S. Holders of WaMu Cayman Preferred Securities Investment in a Passive Foreign
Investment Company." If a timely QEF election has been made, distributions should be allocated
first to amounts previously taxed pursuant to the QEF election and to this extent would not be
taxable to U.S. Holders. Distributions in excess of
such previously taxed amounts will be taxable
to such U.S. Holders as ordinary income upon receipt, to the extent of any remaining amounts of
WaMu Cayman's current and accumulated earnings and profits. Distributions in excess of
previously taxed amounts and any remaining current and accumulated earnings and profits will
be treated by such U.S. Holders first as a nontaxable return of
capital and then as
capital gain.
In the event that a U.S. Holder does not make a timely QEF election some or
all
of any
dividends distributed with respect to its Preferred Securities may constitute excess distributions,
taxable as previously described. See Tax Consequences to U.S. Holders of WaMu Cayman
Preferred Securities Investment in a Passive Foreign Investment Company."
of
In general, a U.S. Holder of
a WaMu Cayman Preferred Security will recognize gain or
loss upon the sale or exchange of
the
Preference Share equal to the difference between the amount realized and such holder's
adjusted tax basis in the Preference Share. Initially, the tax basis of a U.S. Holder should equal
the amount paid for a WaMu Cayman Preferred Security. Such basis will be increased by
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Tax Treatment of
Tax-Exempt U.S. Holders of
Preferred Securities
Tax-Exempt U.S. Holder"
Tax Treatment of
Foreign Holders of
Preferred Securities
Certain Reporting Requirements to U.S. Holders
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Information Reporting and Backup Withholding
Tax Return Disclosure Requirements
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Foreign, State, and Local Taxes
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ERISA CONSIDERATIONS
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ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA "J and Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") prohibit pension, profit-sharing or other retirement plans and accounts subject to ERISA or Section 4975 of the Code and entities that are deemed to hold "plan assets" of any of the foregoing (each, a "Plan") from engaging in certain transactions with persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to such Plan. A violation of these "prohibited transaction" rules may result in an excise tax or other penalties and liabilities under ERISA and the Code for such persons or the fiduciaries of the Plan. In addition, Title I of ERISA also requires fiduciaries of a Plan subject to ERISA to make investments that are prudent, diversified and in accordance with the governing plan documents.
Certain transactions involving WaMu Cayman might be deemed to constitute prohibited transactions under ERISA and the Code with respect to a Plan that purchased WaMu Cayman Preferred Securities or Fixed Rate Company Preferred Securities if assets of WaMu Cayman were deemed to be assets of the Plan. Under a regulation issued by the United States Department of Labor (the "Regulation"), the assets of WaMu Cayman would be treated as plan assets of a Plan for the purposes of ERISA and the Code only if the Plan acquired an "equity interest" in WaMu Cayman and none of the exceptions to plan assets contained in the Regulation was applicable. An equity interest is defined under the Regulation as an interest other than an instrument that is treated as indebtedness under applicable local law and that has no substantial equity features. The WaMu Cayman Preferred Securities and the Fixed Rate Company Preferred Securities are not likely to be treated as indebtedness for purposes of the Regulation. As such, WaMu Cayman intends to prohibit the acquisition and holding of any WaMu Cayman Preferred Security or Fixed Rate Company Preferred Security or any interest in a WaMu Cayman Preferred Security or Fixed Rate Company Preferred Security by or on behalf of a Benefit Plan Investor (as defined below).
For the purposes of the Regulation, the term "Benefit Plan Investor" includes all employee benefit plans, regardless of whether or not they are subject to ERISA (such as, for example, governmental plans), individual retirement accounts, Keogh Plans and other plans subject to Section 4975 of the Code, and entities whose underlying assets are deemed to include plan assets by reason of the investment in that entity by Benefit Plan Investors, such as group trusts, bank collective investment trusts, insurance company separate accounts, and certain insurance company general accounts.
By acquiring a WaMu Cayman Preferred Security or Fixed Rate Company Preferred Security (or any interest therein), each purchaser and transferee will be deemed to represent, warrant and covenant that, from the date of acquisition throughout the period of holding such WaMu Cayman Preferred Security or Fixed Rate Company Preferred Security (or interest therein), it is not, and it is not acquiring such WaMu Cayman Preferred Security or Fixed Rate Company Preferred Security (or interest therein) with the assets of a Benefit Plan Investor, except for an insurance company general account that represents, warrants and covenants that, at the time of acquisition and throughout the period it holds the securities, (i) it is eligible for and meets the requirements of the Department of Labor Prohibited Transaction Class Exemption 95-60, (ii) less than 25% of the assets of such general account are (or represent) assets of a Benefit Plan Investor and (iii) it is not a person who has discretionary authority or control with respect to the assets of WaMu Cayman or any person who provides investment advice for a fee (direct or indirect) with respect to such assets, or any affiliate of such a person and would not otherwise be excluded under 29 C.F.R. 2510.3-101 (f) (1).
110
RATINGSIt
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RATINGS
It is expected that the WaMu Cayman Preferred Securities will be rated "Baa2" by Moody's Investor Services, Inc. ("Moody's"), "BBB" by Standard & Poors Rating Services, a division of the McGraw Hill Companies, Inc. ("S&P"), and "A-" by Fitch, Inc. ("Fitch"). The ratings of the WaMu Cayman Preferred Securities are not recommendations to purchase, hold or sell shares of Preferred Stock, inasmuch as the ratings do not comment as to the market price or suitability for a particular purchaser. Nor do the ratings described above address the likelihood that a holder of WaMu Cayman Preferred Securities will be able to sell such securities. The ratings are based on current information furnished to S&P, Moody's and Fitch by WMI, WMB, the Company and WaMu Cayman and information obtained from other sources. The ratings may be changed, suspended or withdrawn at any time as a result of changes in, or the unavailability of, such information.
111
PLAN OF DISTRIBUTION
The Company, WaMu Cayman, WMI and the Initial Purchasers have enterEld into a purchase
agreement with respect to the WaMu Cayman Preferred Securities. Subject to certain conditions,
each Initial Purchaser has severally agreed to purchase the amount by liquidation preference)
of WaMu Cayman Preferred Securities indicated in the following tables.
Liquidation Preference
of
Series A-1
WaMu CaymanInitial Purchasers Preferred Securities
Goldman, Sachs Co $302,300,000
Total $302,300,000
Liquidation Preference
of
Series A-2
WaMu CaymanInitial Purchasers Preferred Securities
Goldman, Sachs Co $267,700,000
Morgan Stanley Co. Incorporated $ 90,000,000
Citigroup Global Markets Limited $ 22,500,000
Credit Suisse Securities USA) LLC $ 22,500,000
HSBC Bank pic $ 22,500,000
UBS Securities LLC $ 22,500,000
Total $447,700,000
The Initial Purchasers are committed to take and pay for
all
of
the securities being offered
hereby, if any are taken. The initial offering price is set forth on the cover page of
this offering
circular. After the securities are released for sale, the Initial Purchasers may change the offering
price and other selling terms. The Initial Purchasers have agreed to reimburse WMI and its
affiliates for certain expenses incurred in connection with this Offering.
The securities offered hereby have not been and will not be registered under the Securities
Act. The Initial Purchasers have agreed that they will only offer or
sell i) the Series A-1 WaMu
Cayman Preferred Securities in the United States and only to U.S. persons who are both qualified
institutional buyers" within the meaning of
Rule 144A under the Securities Act and qualified
purchasers" within the meaning of
Section 2(a) 51) under the Investment Company Act in
transactions meeting the requirements of
Rule 144A and the Series A-2 WaMu Cayman
Preferred Securities outside the United States to non-U.S. persons" within the meaning of
Regulation S under the Securities Act) in offshore transactions in reliance on Regulation S.
In connection with sales of
the Series A-2 WaMu Cayman Preferred Securities outside the
United States, the Initial Purchasers have agreed that they will not offer, sell or
deliver the
securities
to,
or
for the account or
benefit
of, U.S. persons" within the meaning of
Rule 902 of
Regulation S under the Securities Act i) as
part of
the Initial Purchasers' distribution at
any time
or
ii) otherwise until 40 days after the later of
the commencement of
the Offering or
the date
the securities were originally issued. The Initial Purchasers will send to each dealer to whom they
112
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sell such Series A-2 WaMu Cayman Preferred Securities during such 40-day period a
confirmation or
other notice setting forth the restrictions on offers and sales of
the securities
within the United States or
to,
or
for the account or
benefit
of, U.S. persons.
In addition, with respect to Series A-2 WaMu Cayman Preferred Securities initially sold
pursuant to Regulation S,
until 40 days after the period referred to above, an offer or
sale of
such securities within the United States by a dealer that is not participating in the Offering may
violate the registration requirements of
the Securities Act.
In connection with the Offering, the Initial Purchasers may purchase and sell securities in
the open market. These transactions may include short sales, stabilizing transactions and
purchases to cover positions created by short sales. Short sales involve the sale by the Initial
Purchasers of
a greater number of
securities than they are required to purchase in the Offering.
Stabilizing transactions consist of
certain bids or
purchases made for the purpose of
preventing
or
retarding a decline in the market price of
the securities while the Offering is in progress.
These activities by
the Initial Purchasers may stabilize, maintain or
otherwise affect the
market price of
the securities. As a result, the price of
the securities may be higher than the price
that otherwise might exist in the open market. If these activities are commenced, they may be
discontinued by the Initial Purchasers at any time. These transactions may be effected in the
over-the-counter market or
otherwise.
Each of
the underwriters has represented and agreed that:
It has not made or
will not make an offer of
the securities being offered hereby to the
public in the United Kingdom within the meaning of
section 1026 of
the Financial Services
and Markets Act 2000 as amended) except to legal entities which are
authorized or
regulated to operate in the financial markets or, if not so authorized or
regulated, whose corporate purpose is solely to invest in securities or
otherwise in
circumstances which do not require the publication by the company of a prospectus
pursuant to the Prospectus Rules of
the Financial Services Authority
It has only communicated or caused to be communicated and will only communicate or
cause to be communicated an invitation or
inducement to engage in investment activity
within the meaning of
section 21 of FSMA) to persons who have professional
experience in matters relating to investments falling within Article 19(5) of
the Financial
Services and Markets Act 2000 Financial Promotion) Order 2005 or
in circumstances in
which section 21 of FSMA does not apply to the company; and
It has complied with, and will comply with
all applicable provisions of FSMA with respect
to anything done by
it in relation to the shares in,
from or
otherwise involving the United
Kingdom.
In relation to each Member State of
the European Economic Area which has implemented
the. Prospectus Directive each, a each Initial Purchaser has
represented and agreed that with effect from and including the date on which the Prospectus
Directive is implemented in that Relevant Member State the it
has not made and will not make an offer of
the securities being offered hereby to the public in
that Relevant Member State prior to the publication of a prospectus in relation to the securities
which has been approved by
the competent authority in that Relevant Member State or, where
appropriate, approved in another Relevant Member State and notified to the competent authority
in that Relevant Member State, all
in accordance with the Prospectus Directive, except that it
may, with effect from and including the Relevant Implementation Date, make an offer of
securities
to the public in that Relevant Member State at any time:
to legal entities which are authorized or
regulated to operate in the financial markets or, if
not so authorized or
regulated, whose corporate purpose is solely to invest in securities;
113
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• to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than €43,000,000; and (iii) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or
• in any other circumstances which do not require the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an "offer of securities to the public" in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe the securities, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.
The securities offered hereby may not be offered or sold by means of any document other than to persons whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32) of Hong Kong, and no advertisement, invitation or document relating to the shares may be issued, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571 ) of Hong Kong and any rules made thereunder.
This offering circular has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this offering circular and any other document or material in connection with the offer or sale, or invitation for subscription or purchase of the securities may not be circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or, (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the securities offered hereby are subscribed or purchased under Section 275 by a relevant person which is: (i) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (ii) a trust (where the Trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust will not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (A) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275 (1 A), and in accordance with the conditions, specified in Section 275 of the SFA; (B) where no consideration is given for the transfer; or (C) by operation of law.
The securities offered hereby have not been and will not be registered under the Securities and Exchange Law of Japan (the "Japan Securities and Exchange Law") and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant
114
to an exemption from the registration requirements
of, and otherwise in compliance with, the
Securities and Exchange Law and any other applicable laws, regulations and ministerial
guidelines of
Japan.
WMI and the Company have agreed in the purchase agreement, subject to certain
exceptions, that for a period of 180 days after the date of
this offering circular, neither they, nor
any of
their subsidiaries or
other affiliates over which they exercise management or
voting
control, nor any person acting on their behalf will, without the prior written consent of Goldman,
Sachs Co., offer, sell, contract to sell or
otherwise dispose of any securities that are
substantially similar to the securities.
WMl, the Company and WaMu Cayman have agreed to indemnify the Initial Purchasers
against certain liabilities, including liabilities under the Securities Act.
Certain of
the Initial Purchasers and their respective affiliates have, from time to time,
performed, and may in the future perform, various financial advisory and investment banking
services for the company, for which they received or
will receive customary fees and expenses.
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VALIDITY OF SECURITIES
The validity of
the WaMu Cayman Preferred Securities will be passed upon for WMI and the
Initial Purchasers by Maples and Calder, George Town, Grand Cayman. The validity of
the Fixed
Rate Company Preferred Securities will be passed upon for the Company by
Richards, Layton
Finger, P.A., special Delaware counsel for the Company, for WMI by Mayer, Brown, Rowe Maw
LLP, New York, New York, and for the Initial Purchasers by
Sullivan Cromwell LLP, New York,
New York. The validity of
the Fixed Rate Depositary Shares and of
the Fixed Rate WMI Preferred
Stock will be passed upon for WMI by
Heller Ehrman LLP, Seattle, Washington, and by
Mayer,
Brown, Rowe Maw LLP, and for the Initial Purchasers by Sullivan Cromwell LLP. Mayer,
Brown, Rowe Maw LLP and Sullivan Cromwell LLP will rely upon the opinion of
Richards,
Layton Finger, P.A., as
to matters of
Delaware law, and upon the opinion of
Heller Ehrman LLP
as
to matters of Washington law.
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GENERAL INFORMATION
Listing
Application will be made to list the Series A-2 WaMu Cayman Preferred Securities offered
hereby to non-U.S. persons in reliance on an exemption from registration pursuant to
Regulation S,
on the Euro MTF market of
the Luxembourg Stock Exchange, in accordance with
the rules thereof. The Series A-1 WaMu Cayman Preferred Securities will not be
listed on any
securities exchange or automated dealer quotation system. Prior to such listing, a legal notice
relating to the issue of
the Series A-2 WaMu Cayman Preferred Securities will be
filed with the
Chief Registrar of
the District Court of
Luxembourg Greffier en Chef du Tribunal
d'Arrondissement de
et Luxembourg) where such legal notice will be available for inspection
free of
charge and where copies of
such documents will be obtainable upon request.
Upon such listing, the Series A-2 WaMu Cayman Preferred Securities will be
freely
transferable on the Euro MTF Market of
the Luxembourg Stock Exchange. Once executed,
transactions carried out on the Euro MTF Market may not be cancelled.
Authorization
The issuance of
the Series A-2 WaMu Cayman Preferred Securities was authorized by
WaMu Cayman's Board of
Directors on February 23, 2006. The issuance of
the Fixed Rate
Company Preferred Securities was authorized by the Company's Board of Managers on
February 23, 2006. The issuance of
the Fixed Rate WMI Preferred Stock was authorized by
WMl's Board of
Directors on January 17, 2006 and February 21,2006.
Independent Accountants
The independent registered public accountants of
the Company will be
Deloitte Touche
LLP. WaMu Cayman will engage a nationally recognized accounting firm to act as
its independent
registered public accountant. Deloitte Touche LLP are also the independent registered public
accountants for WMI and WMB.
Documents
Copies of
the LLC Agreement and WaMu Cayman's Articles of
Association will, so long as
any Series A-2 WaMu Cayman Preferred Securities are outstanding, be
available free of
charge
for inspection during usual business hours at
the specified office of
the Paying Agent in
Luxembourg.
For so long as
the Series A-2 WaMu Cayman Preferred Securities are listed on the Euro
MTF Market of
the Luxembourg Stock Exchange, a copy of WMl's Restated Articles of
Incorporation, as amended, and Restated Bylaws, as amended, will be available for inspection at
the specified office of
the Paying Agent in Luxembourg.
For so long as the Series A-2 WaMu Cayman Preferred Securities are listed on the Euro
MTF Market of
the Luxembourg Stock Exchange, copies of
the audited annual consolidated
financial statements and the unaudited consolidated interim financial statements for the quarters
ending March 31, June 30 and September 30 of WMI, of WaMu Cayman and the Company will
be available, free of
charge, at
the specified office of
the Paying Agent in Luxembourg.
No Material Adverse Change
Except as disclosed in this offering circular, there has been no adverse change in the
financial position of
the Company, WaMu Cayman, WMB or WMI since December 31,2005, or
their respective dates of
establishment which was February 3, 2006 in the case of
the Company
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00133
and February 23, 2006 in the case of WaMu Cayman), that would be deemed material in the
context of
the issue and sale of
the WaMu Cayman Preferred Securities in this Offering.
Legal Proceedings
Neither the Company nor WaMu Cayman are involved in any litigation, arbitration or
administrative proceeding relating to claims or amounts that are material in the context of
the
issue and sale of
the WaMu Cayman Preferred Securities or
the Fixed Rate Company Preferred
Securities to which the Company or WaMu Cayman are a party, nor to the best of
the
Company's or WaMu Cayman's knowledge, is there any threatened litigation, arbitration or
administrative proceedings relating to claims or amounts that are material in the context of
the
issue and sale of
the WaMu Cayman Preferred Securities or
the Fixed Rate Company Preferred
Securities that would in either case jeopardize the Company's or WaMu Cayman's ability to
discharge the Company's or WaMu Cayman's respective obligations in respect of
the issue and
sale of
the WaMu Cayman Preferred Securities or
the Fixed Rate Company Preferred Securities.
Neither the Company nor the Asset Trust is the subject of
any litigation. None of
the
Company, WMI or WMB is currently involved in or, to WMB's knowledge, currently threatened
with, any material litigation with respect to the assets included in the Asset Trust's portfolio,
other than routine litigation arising in the ordinary course of
business. Based on information
currently available, advice of
counsel, available insurance coverage and established reserves,
WMB believes that the eventual outcome of
the actions with respect to the assets included in the
Asset Trust's portfolio will not, in the aggregate, have a material adverse effect on the
Company's consolidated financial position or
results of
operations. However, in the event of
unexpected future developments, it is possible that the ultimate resolution of
those matters, if
unfavorable, may be material to the Company's results of
operations for any particular period.
WMB, the Company, the Asset Trust, WaMu Cayman and WaMu Delaware have not been
named as defendants in any of
the following lawsuits and, on that basis they do not expect such
lawsuits to materially affect their respective operations or
financial results.
South Ferry L.P. v.
Killinger et
a/., No. CV04-1599C W.D. Wa., Filed Jul. 19,2004) the
Securities Action"). This class action lawsuit is currently pending against WMI and certain of
its
senior executives in the U.S. District Court, Western Division of
Washington. On behalf of
a
putative class of
purchasers of WMI securities from April 15, 2003 through June 28, 2004, lead
plaintiffs allege that in various public statements the defendants purportedly made misrepresenta-
tions and failed to disclose material facts concerning, among other things, alleged internal
systems problems and hedging issues.
The defendants moved to dismiss the Securities Action on May 17, 2005. After briefing, but
without oral argument, the Court on November 17, 2005 denied the motion in principal part;
however, the Court dismissed the claims against certain of
the individual defendants, dismissed
claims pleaded on behalf of
sellers of
put options on WMI stock, and concluded that the plaintiffs
could not rely on supposed violations of
generally accepted accounting principles to support their
claims. The remaining defendants subsequently moved for reconsideration or, in the alternative,
certification of
the opinion for interlocutory appeal to the United States Court of
Appeals for the
Ninth Circuit. The District Court denied the motion for reconsideration, but the motion for
certification remains pending.
Lee Family Investments, by and through
its Trustee W.B. Lee, Derivatively and on behalf of
Nominal Defendant Washington Mutual, Inc. v.
Killinger et
aI, No. CV05-2121C W.o. Wa., Filed
Nov. 29, 2005) the Derivative Action"). On November 29,2005,12 days after the Court denied
the motion to dismiss the Securities Action, a separate plaintiff filed in Washington State Superior
Court a derivative shareholder lawsuit purportedly asserting claims for the benefit of WMI. The
defendants include those individuals remaining as
defendants in the Securities Action, as
well as
those of WMl's current independent directors who were directors at any time from April 15, 2003
118
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00134
through June 2004. The allegations in the Derivative Action mirror those in the Securities Action,
but seek relief based on claims that the independent director defendants failed to take action to
respond to the misrepresentations alleged in the Securities Action and that the filing of
that
action has caused WMI to expend sums to defend itself and the individual defendants and to
conduct internal investigations related to the underlying claims. The defendants have not yet
responded to the complaint in the Derivative Action.
Governing Law
The LLC Agreement and the Fixed Rate Company Preferred Securities will be governed by,
and construed in accordance with, the laws of
the State of
Delaware. WaMu Cayman's Articles of
Association and the WaMu Cayman Preferred Securities will be governed by, and construed in
accordance with, the laws of
the Cayman Islands. The Rxed Rate WMI Preferred Stock will be
governed by and construed in accordance with the laws of
tile State of
Washington. The Fixed
Rate Depositary Shares will be governed by, and construed in accordance with, the laws of
the
State of New York.
CONFIDENTIAL
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Washington Mutual, Inc.
1201 Third Avenue
Seattle, WA 98101
WMB WAMUCAYMAN THE COMPANYWashington Mutual Bank Washington Mutual Preferred Washington Mutual Preferred
1201 Third Avenue Funding Cayman) I Ltd. Funding LLCSeattle, WA 98101 c10 M&C Corporate Services 1201 Third Avenue
Limited Seattle, WA 98101
P.O. Box 309GT
Ugland House, South Churcfl'>.Street
George Town, Grand Cayman,
Cayman Islands
SOLE GLOBAL COORDINATOR AND SOLE STRUCTURING COORDINATOR
Goldman, Sachs Co."
85 Broad Street
New York, NY 10004
LEGAL ADVISORS TO INITIAL PURCHASERS
As to U.S. Federal and New York law:
Sullivan Cromwell LLP
125 Broad Street
New York, NY 10004-2498
LEGAL ADVISORS TO WMI, WMB AND THE COMPANYAs
to U.S. Federal and New York law:
Mayer, Brown, Rowe Maw LLP
1675 Broadway
New York, NY 10019
As to Washington law:
Heller Ehrman LLP
701 Fifth Avenue, Suite 6100
Seattle, WA 98104-7098
SPECIAL LEGAL ADVISORS TO WASHINGTON MUTUAL PREFERRED FUNDING CAYMAN) I LTD
As to Delaware law: As
to
Cayman Islands law:
Richards, Layton Finger, P.AMaples and Calder
One Rodney Square P.O. Box 309GTWilmington, DE 19801
Ugland House, South Church Street
George Town, Grand Cayman
Cayman Islands
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
Wilmington Trust Cayman), Ltd.
4 Floor, Century Yard
Cricket Square, Elgin Avenue
George Town, Grand Cayman
Cayman Islands
LUXEMBOURG LISTING AGENT AND PAYING AGENT DEPOSITORYJPMorgan Bank Luxembourg S.A.
Mellon Investor Services LLC
6,
route de Treves 480 Washington Blvd.
L-2633 SenningerbergJersey City, NJ 07310
TRUSTEE DELAWARE TRUSTEEDeutsche Bank National Trust Company
Deutsche Bank Trust Company Delaware
1761 East Saint Andrew Place1011 Centre Road, Suite 200
Santa Ana, CA 92705 Wilmington, DE 19805
CONFIDENTIAL
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INDEX OF TERMS
3(c) 7) Representations vi
Declaration of
Trust 37
Additional Amounts 82 Delaware Trustee 5,
50
Additional Assets 43 Deposit Agreement 92
Additional Tax Event 82 Depositary 71
Additional Taxes 82 Derivative Action 118
Administration Agreement Dividend Payment Date cover, 65, 76,
86
Dividend Period 65, 76,
86
Administrative Services
DTC 97
Agreement
Administrator DTC Participants
Advanced Consumer Lending DWAC 102
System
or ACLS Eligible Assets 43
alternative services 56 Eligible Investments
Asset Documentation 44 employee benefit plan
Asset Portfolio 45 ERISA
iii, 110
Asset Subsidiary 44 Euroclear 100
Asset Tax Opinion 45 Euroclear Operator 100
Asset Trust Euroclear Participants 100
Euroclear Terms and
back-end ratioConditions 100
Bankruptcy Event 48 Exchange Agreement 71
Benefit Plan Investor iii, 110 Exchange Event 11,70
Business Combination 90 Expenses Agreement
Business Day 65, 76, 86 FDiC xiv, 63
CACS Federal Reserve
Cayman Trust FFO 11,76
Fitch 111Class A Asset Trust
Certificate 51 Fixed Rate Company
Preferred Securities cover, 1,
37, 75
Class R Asset Trust
Certificate 51 Fixed Rate Depositary
Clearstream 100 Shares 11,86,92
Clearstream International 100 Fixed Rate Substitute
Clearstream Participants 100 Preferred Stock 91
Code iii, 110 Fixed Rate Successor
Code
of
Ethics Depositary Share 91
Companies Law Fixed Rate WMI Preferred
Company cover, 1,41 Stock 2,
86
Company Common Fixed-to-Floating Rate
Securities 4,41 Company Preferred
Securities 1,41Company Designated
Directors Fixed-to-Floating Rate
Depositary SharesCompany Preferred
Securities 2,41 Fixed-to-Floating Rate
Company's Portfolio Substitute Preferred
Comparable Treasury Issue 78 Stock 91
Comparable Treasury Price 78 Fixed-to-Floating Rate
Conditional Exchange 71 Successor Depositary
core capital Share 91
Covered Debt 68 Fixed-to-Floating Rate WMI
Credit Score Preferred Stock 95
Custodian 62 Foreign Holder 104
Custody Agreement 62 FSA 113
Cut-Off Date 51 FSMA 113
debt-to-income ratioGAAP xiv, 4
0
123
CONFIDENTIAL
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Global Securities REMIC
5, 105
HELsReminder Notice
vi
Independent DirectorReplacement Capital
Independent InvestmentCovenant
BankerReplacement Covenant
Independent Manager
5,
46
Covered Securities
Indirect ParticipantsRestricted Period
97
Investment Company Act cover,
xi, 1 Rule 144A Global Security
Investment Company ActRule 144A Offering
Event
78
S&P 111IRS 103 SEC
xiii
Japan Securities andSection3(c)(7) x
Exchange Law 114 Securities Act. cover,
xi, 1
Junior Equity Securities 77 Securities Action
like amountSenior Equity Securities
LLC Act
41
Series A-1 WaMu CaymanLLC Agreement
41
Preferred Securities cover,
1,
37,
65
Loan DocumentsSeries A-2 WaMu Cayman
MarionPreferred Securities cover,
1,
37,
65
Moody's 111 Servicer
New AssetsServicer Indemnified Parties
60Nominee SFA
114Offering
Share Trustee
37
OTS cover, 2,32 SUCCESSParity Equity Securities
Successor Entity
91
Paying Agent
in
Luxembourg 37,
73
supplementary capital
Paying Agent s)Tax Event
Permitted InvestmentsTax-Exempt U.S. Holder 107
PFIC 16, 106Thrift Financial Report s)
xiv
plan
iii
total capital
Plan 110 Transfer Agent
plan assetsTreasury Rate
Pooling and ServicingTrust Securities
AgreementTrustee
Primary Treasury DealerUBTI 107
Principal Paying AgentUniversity Street
i, 4,
41
QEF 106 U.S. Holder 104qualified institutional
Voting Parity Stock
buyer s)
iii, 1 WaMu Cayman cover, 1,37
qualified purchaser s) WaMu Cayman Ordinary
Qualifying InterestsShares 4,37
Rating Agencies WaMu Cayman Preferred
Rating Agency ConditionSecurities cover, 1,37
Reference Treasury Dealer WaMu Cayman's Articles
of
Reference Treasury DealerAssociation 10, 3
7
Quotations WaMu Delaware
Registrar
73 WMB
i,
1,32
Regulation 110 WMI cover, 1Regulation S Global Security WMI GroupRegulation S Offering
WMl's Board of
Directors
Regulatory Capital Event WMI Parity Stock
Relevant Implementation Date 113 WTC CaymanRelevant Member State 113
124
CONFIDENTIAL
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$750,000,000
Washington Mutual
Preferred Funding
Cayman) I Ltd.
7.25% Perpetual Non-cumulative
Preferred Securities Automatically
Exchangeable Specified
Circumstances into Depositary
Shares representing Preferred
Stock of Washington Mutual, Inc.
Washington
Goldman, Sachs Co.Sole Global Coordinator and
Sole Structuring Coordinator
Citigroup
Credit Suisse
HSBC
Morgan Stanley
Senior Co-Manager
UBS Investment Bank
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00141
CONFIDENTIAL
CONFIDENTIAL
WashingtonMutual
$750,000,000Washington Mutual Preferred Funding (Cayman) I Ltd.
7.25% Perpetual Non-cumulative Preferred SecuritiesAutomatically Exchangeable in Specified Circumstances into
Depositary Shares representing Preferred Stock of Washington Mutual, Inc.
Washington Mutual Preferred Funding (Cayman) I Ltd., a Cayman Islands exempted company limited by shares ("Wa MuCayman"), will invest the proceeds of its 7.25% Perpetual Non-cumulative Preferred Securities, Series A-1, liquidationpreference $100,000 per security (the "Series A-1 WaMu Cayman Preferred Securities"), and its 7.25% Perpetual Non-cumulative Preferred Securities, Series A-2, liquidation preference $10,000 per security (the "Series A-2 WaMu CaymanPreferred Securities" and, together with the Series A-1 WaMu Cayman Preferred Securities, the "WaMu Cayman PreferredSecurities") offered hereby in a like amount of 7.25% Perpetual Non-cumulative Preferred Securities, liquidation preference$1,000 per security (the "Fixed Rate Company Preferred Securities"), of Washington Mutual Preferred Funding LLC, a Delawarelimited liability company (the "Company"). The terms of the Series A-1 WaMu Cayman Preferred Securities and the Series A-2WaMu Cayman Preferred Securities are identical except for their per security liquidation preference. WaMu Cayman will haveno material assets other than the Fixed Rate Company Preferred Securities. The financial entitlements of each WaMu CaymanPreferred Security will be substantially the same as the financial entitlements of a like amount of Fixed Rate Company PreferredSecurities, with the consequence that dividends and the redemption price on the WaMu Cayman Preferred Securities will bepayable on the same dates and in the same amounts as the corresponding dividends and redemption price, as applicable, on alike amount of Fixed Rate Company Preferred Securities. The Company's initial material assets will consist of indirect interestsin mortgages and mortgage-related assets originated by Washington Mutual Bank as described herein.
Dividends on the Fixed Rate Company Preferred Securities will be payable if, when and as declared by the Company'sBoard of Managers out of legally available funds, on a non-cumulative basis at an annual rate of 7.25% on the liquidationpreference per security, quarterly in arrears on March 15, June 15, September 15 and December 15 of each year,commencing on June 15, 2006 (each, a "Dividend Payment Date"), or the next Business Day if any such day is not aBusiness Day.
If the Office of Thrift Supervision (together with any successor regulator, the "OTS") so directs following theoccurrence of an Exchange Event as described herein, each WaMu Cayman Preferred Security will be automaticallyexchanged for depositary shares representing a like amount of Washington Mutual, Inc.'s ("WMJ") Series J Perpetual Non-cumulative Fixed Rate Preferred Stock.
See "Risk Factors" beginning on page 18 for a description of the risk factors you should consider before you invest in thesecurities offered hereby,
(Continued on next page)
Offering price: $100,000.00 per Series A-1 WaMu Cayman Preferred Security$ 10,000.00 per Series A-2 WaMu Cayman Preferred Security
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIESACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SERIES A-1 WAMU CAYMAN PREFERRED SECURITIES AREBEING OFFERED AND SOLD ONLY IN THE UNITED STATES AND ONLY TO U.S. PERSONS THAT ARE BOTH "QUALIFIEDINSTITUTIONAL BUYERS" (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND "QUALIFIEDPURCHASERS" (WITHIN THE MEANING OF SECTION 2(a)(51) OF THE U.S. INVESTMENT COMPANY ACT OF 1940, ASAMENDED (THE "INVESTMENT COMPANY ACT")) IN RELIANCE ON AN EXEMPTION FROM REGISTRATION PURSUANT TORULE 144A. THE SERIES A-2 WAMU CAYMAN PREFERRED SECURITIES ARE BEING OFFERED AND SOLD ONLY TONON-U.S. PERSONS IN TRANSACTIONS OUTSIDE THE UNITED STATES IN RELIANCE ON AN EXEMPTION FROMREGISTRATION PURSUANT TO REGULATION S UNDER THE SECURITIES ACT. PROSPECTIVE PURCHASERS OF SERIES A-1WAMU CAYMAN PREFERRED SECURITIES ARE HEREBY NOTIFIED THAT THE SELLER OF THE SECURITIES MAY BERELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A.THE SECURITIES ARE NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS DESCRIBED UNDER"NOTICE TO INVESTORS."
The Initial Purchasers expect to deliver the Series A-1 WaMu Cayman Preferred Securities through the facilities of TheDepository Trust Company and the Series A-2 WaMu Cayman Preferred Securities through the facilities of ClearstrearnBanking, societe anonyme, and Euroclear Bank S.A./N.V., as operator of the Euroclear System, as participants in TheDepository Trust Company, in each case, against payment in New York, New York on or about March 7, 2006.
Goldman, Sachs & Co.Sole Global Coordinator and Sole Structuring Coordinator
Citigroup Credit Suisse HSBC Morgan Stanley UBS investment BankSenior Co-Manager
Offering Circular dated February 24, 2006.
Restricted For Use in Connection with Plan Confirmation Only WMIPC__500002044.00001
CONFIDENTIAL
CONFIDENTIAL
$750,000,000 ( ) I
7.25% Perpetual Non-cumulative Preferred Securities Automatically Exchangeable in Specified Circumstances into
Shares representing Preferred Stock of Washington Mutual, Inc.
Washington Mutual Preferred Funding (Cayman) 1 Ltd., a Cayman lslands exempted company Hmited by shares ("WaMu Cayman"), will [nvest the proceods of Its 7.25"'/"" Perpetual Non-cumulative Preferred Securities, Series A-1, !iquldation preference $100,000 per security (the "Series A-1 WaMu Cayman Preferred Securities"), and its 7.25% Perpetual Noncumulative Preferred Securities, Series AM2, liquidation preference $10,000 per security (the "Series A-2 WaMu Cayman Preferred Securities" and, together w!th the Series A~1 WaMu Cayman Preferred Securities, the ''WaMu Cayman Preferred Securities") offered hereby in a like amount of 7.25% Perpetual Non-cumurative Preferred Securities, liquidation preference $1,000 per security (the "Fixed Rate Company Preferred Securities"), of Washington Mutua~ Preferred Funding llC, a Delaware Hmlted liability company (the "Company"). The terms of the Series A~1 WaMu Cayman Preferred Securities and the Sertes A-2 WaMu Cayman Preferred Secudtles are identical except lor theIr per security liqutdatlon preference. WaMu Cayman wi1l have no materiaJ assets other than the Fixed Rate Company Preferred Sccurittes. The financial entitlements of each WaMu Cayman Preferred Securlty will be substantially the same as the financial entitlements of a like amount of Fixed Rate Company Preferred Securities, with the consequence that dividends and the redemption prtce on the WaMu Cayman Preferred Secur!t[es wi!! be payable on the same dates and [n the same amounts as the corresponding dividends and redemption price, as appljcable, on a like amount of Fixed Rate Company Preferred Securities. The Company's initial material assets wilt consist of indlrect interests in mortgages and mortgage-related assets orlginated by Washington Mutual Bank as described herein.
Dividends on the Fixed Rate Company Preferred Securities will be payable [f, when and as declared by the Company's Board of Managers out of legaHy available funds, on a mlll-cumulative basis at an annual rate of 7.25°/¢ on the liquidation preference per security, quarterly In arrears on March 15, June i5, September i5 and 08t:ember i5 of each year, commencing on June 15,2006 (each, a "Dividend Payment Date"), or the next Business Day if any such day 1s not a Business Day,
!f the Office of Thrift Supervision (together with any successor regulator, the "OTS") so directs foHow[ng the occurrence of an Exchange Event as described herein, each WaMu Cayman Preferred Security wlli be automatically exchanged for depositary shares representing a llke amount of Washington Mutual, lnc.'s ("WM1") Series J Perpetual Noncumulative Fjxed Rate Preferred Stock.
See "Risk Factors" beginning on page 18 for a description of the n:<{k factors you should consider before yot! invest in the securities offered hereby.
(Continued on next page)
Offering price: $100,000.00 per Series A-1 WaMu Cayman Preferred Security $ 10)000.00 per Series A-2 WaMu Cayman Preferred Security
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES THE SERIES 1'-1 WAMU CAYMAN PREFERRED SECURITIES ARE BEING OFFERED AND SOLD ONLY IN THE UNITED AND ONLY TO U,S. PERSONS THAT ARE BOTH "QUALIFIED INSTITUTIONAL BUYERS" (WITHIN THE MEANING OF 144A UNDER THE SECURITIES ACT) AND "QUALIFIED PURCHASERS" (WITHIN THE MEANING OF SECTION 2(8)(51) OF THE U.S. INVESTMENT COMPANY ACT AS AMENDED (THE "INVESTMENT COMPANY ACT"» IN RELIANCE AN EXEMPTION FROM REGISTRATION TO RULE 1441\. THE SERIES A-2 WAMU CAYMAN PREFERRED ARE BEING OFfERED AND SOLD ONLY TO NON-U.S. PERSONS IN TRANSACTIONS OUTSIDE THE UNITED STATES IN REliANCE ON AN EXEMPTION fROM REGISTRATION PURSUANT TO REGULATION S UNDER THE SECURiTIES ACT. PROSPECTIVE OF SERIES A-1 WAMU PREFERRED SECURITIES ARE HEREBY THAT THE SELLER OF MAY BE RELYING THE EXEMPTION FROM THE PROVISIONS Of 5 Of THE SECURITIES ACT BY RULE 144A. THE SECURITIES ARE NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS DESCRIBED UNDER "NOTICE TO INVESTORS."
The Inltial Purchasers Bxpcct to deliver lhe Serjes A-1 WaMu Cayman Preferred Securities through the fac1!ities of The Depository Trust Company and the Series A~2 WaMu Cayman Preferred Securities through the facUlties of Clearstream Banking. societe anonyme, and Euroclear Bank S.A,IN.V" as operator of the Euroclear System, as part[cipants In The Depository Trust Company, in each case, against payment in New York, New York on or about March 7. 2006.
Sole
Credit Suisse HSBC Morgan Slalnle,y UBS Investment Bank Senior Co-Maflti'ger
---Offering Circular dated February 24. 2006.
R",,,tridpri For Use in Connection Plan ~nn'firml"tir'n Only WMIPC_500002044.00001
CONFIDENTIAL
(Continued from previous page)
The Fixed Rate Company Preferred Securities will not be redeemable at the option of the Company prior to theDividend Payment Date in March 2011, except upon the occurrence of a Tax Event, an Investment Company Act Eventor a Regulatory Capital Event (each as described herein). Upon the occurrence of a Tax Event, an InvestmentCompany Act Event or a Regulatory Capital Event, the Company may redeem the Fixed Rate Company PreferredSecurities in whole but not in part. On or after the Dividend Payment Date in March 2011, the Company may redeemthe Fixed Rate Company Preferred Securities in whole or in part. Any redemption will be subject to the prior approvalof the OTS and will be at a redemption price equal to the liquidation preference per Fixed Rate Company PreferredSecurity, plus declared but unpaid dividends, if any, plus a U.S. Treasury-based "make whole" amount if theredemption occurs prior to the Dividend Payment Dale in March 2011.
The WaMu Cayman Preferred Securities will be issued only in book-entry form. Each individual purchaser orgroup of affiliated purchasers that acquires Series A-1 WaMu Cayman Preferred Securities in the initial offering mustacquire at least three Series A-1 WaMu Cayman Preferred Securities having an aggregate liquidation preference of$300,000.
The Initial Purchasers are offering the Series A-2 WaMu Preferred Securities, which are being offered outside theUnited States to non-U.S. persons in reliance upon Regulation S under the Securities Act, through their respectiveselling agents.
Application will be made to list the Series A-2 WaMu Cayman Preferred Securities on the Euro MTF market of theLuxembourg Stock Exchange. The Series A-1 WaMu Cayman Preferred Securities will not be listed on any securitiesexchange or automated dealer quotation system.
The securities offered hereby are not insured or guaranteed by the U.S. Federal Deposit InsuranceCorporation.
Restricted For Use in Connection with Plan Confirmation Only VVM1PC 500002044.00002Restricted
CONFIDENTIAL
(Continued frorn previous page)
The Fixed Rate Company Preferred Securitles wi![ not be redeemable at the option of the Company prior to the Dlvldend Payment Date in March 2011, except upon tile occurrence of a Tax Event, an Investment Company Act Event or a Regulatory Capita! Event (each as described herern). Upon the occurrence of a Tax Event, an Investment Cornpany Act Event or a Regulatory Capltal Event, the Company may redeem the Fixed Rate Company Preferred Securities in whole but not in part. On or after the Dividend Payment Date in March 2011, the Company may rsdeem the Fixed Rate Company Preferred Securities in whole or in part. Any redemption wlll be subject to the prior approval of ihe OTS and will be at a redemptjon price equa! to the liquidation preference per Fixed Rate Company Preferred Security, plus declared but unpard dMdends, if any, plus a U.S. Treasury~based "make who!e" amount if the redemption occurs prior to the DivIdend Payment Dale in March 2011.
The WaMu Cayman Preferred Securities will be issued only in book-entry form. Each jndfvlduai purchaser or group of affiHated purchasers that acquires Series A~ 1 WaMu Cayman Preferred Securities in the inmal offering must acquire at least three Series A~ 1 WaMu Cayman Preferred Securities having an aggregate liquidation preference of $300,000.
The Initral Purchasers are offering the SerIes A~2 WaMu Preferred Securitres, whlch are being offered outside the United States to non-U.s. persons in reliance upon Regu!atlon S under the Securities Act, through thejr respective selling agents.
ApplicatIon wi!! be made to fist the Series A-2 WaMu Cayman Preferred SecuritIes on the Euro MTF market of the Luxembourg Stock Exchange, The Series A-1 WaMu Cayman Preferred Securities wlH not be listed on any securities eXChange or automated dealer quotation system.
The securlties offered hereby are not insured or guaranteed by the U.S. Federal Deposit Insurance Corporation.
in :nn,npr.tirln with :nn'firrr,,,ti()n Only WMIPC _500002044.00002
CONFIDENTIAL
OFFERING CIRCULAR SUMMARY
The following summary is qualified in its entirety by the detailed information appearingelsewhere in this offering circular, in particular, the information under the headings' "Description ofthe WaMu Cayman Preferred Securities" and "Description of the Fixed Rate Company PreferredSecurities," which deScribe the terms and conditions of the securities offered hereby.
Introduction
The 7.25% Perpetual Non-cumulative Preferred Securities, Series A-1, liquidation preference$100,000 per security (the "Series A-1 WaMu Cayman Preferred Securities"), and the7.25% Perpetual Non-cumulative Preferred Securities, Series A-2, liquidation preference $10,000per security (the "Series A-2 WaMu Cayman Preferred Securities" and, together with theSeries A-1 WaMu Cayman Preferred Securities, the "WaMu Cayman Preferred Securities"), arebeing issued by Washington Mutual Preferred Funding (Cayman) I Ltd. ("WaMu Cayman") in afinancing transaction that raises capital for Washington Mutual Bank ("WMB"). WMB is asubsidiary of Washington Mutual, Inc. ("WM/"). WMI and its affiliates are referred to herein asthe "WMI Group".
WaMu Cayman will invest the proceeds of the WaMu Cayman Preferred Securities in a likeamount of 7.25% Perpetual Non-cumulative Preferred Securities, liquidation preference$1,000 per security (the "Fixed Rate Company Preferred Securities"), of Washington MutualPreferred Funding LLC, a Delaware limited liability company (the "Company"). WaMu Caymanwill have no material assets other than the Fixed Rate Company Preferred Securities. Thefinancial entitlements of each WaMu Cayman Preferred Security will be substantially the same asthe financial entitlements of a like amount of Fixed Rate Company Preferred Securities, with theconsequence that dividends and the redemption price on each WaMu Cayman Preferred Securitywill be payable on the same dates and in the same amounts as the corresponding dividends andredemption price, as applicable, on a like amount of Fixed Rate Company Preferred Securities.The Company's initial material assets will consist of direct or indirect interests in mortgages ormortgage-related assets originated by WMB as described under "The Company — Business ofthe Company --Assets of the Company" and "The Asset Trust."
The terms of the Series A-1 WaMu Cayman Preferred Securities and the Series A-2 WaMuCayman Preferred Securities are identical except for their per security liquidation preference. TheSeries A-1 WaMu Cayman Preferred Securities are being offered in reliance upon Rule 144Aunder the U.S. Securities Act of 1933, as amended (the "Securities Act") only in the UnitedStates and to persons who are "qualified institutional buyers" within the meaning of 144A and"qualified purchasers" within the meaning of Section 2(a) (51) of the U.S. Investment CompanyAct of 1940, as amended (the "investment Company. Act"). The Series A-2 WaMu CaymanPreferred Securities are being offered and sold in reliance upon Regulation S under theSecurities Act only to non-U.S. persons in transactions outside the. United States. Resales ofSeries A-1 WaMu Cayman Preferred. Securities to non-U.S. persons and of Series A-2 WaMuCayman Preferred Securities in the United States or to U.S. persons are subject to restrictions asdescribed under "Notice to investors — Exchanges Between Rule 144A Global SecurityEvidencing Series A-1 WaMu Cayman Preferred Securities and Regulation S Global SecurityEvidencing Series A-2 WaMu Cayman Preferred Securities," in each case subject to thecertification requirements described under "Book-Entry Issuance."
By a separate offering circular dated the same date as this offering circular, WashingtonMutual Preferred Funding Trust I, a Delaware statutory trust established by the Company asgrantor ("WaMu Delaware"), is offering $1,250,000,000 of its Perpetual Exchangeable Non-cumulative Trust Securities (the "Trust Securities"). WaMu Delaware will invest the proceeds ofthe Trust Securities in a like amount of the Company's Perpetual Non-cumulative Fixed-to-Floating Rate Preferred Securities (the "Fixed-to-Floating Rate Company Preferred Securities"
Restricted For Use in Connection with Plan Confirmation Only VVMIPC_500002044.00017
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CONFIDENTIAL
OFFERING CIRCULAR SUMMARY
The {o!fawing summary is qualified in its entirety by the detailed information appearing elsewhere in this offering circular, in particular, the information under the headings· "Description of the WaMu Cayman Preferred Securities" and "Description of the Fixed Rate Company Preferred Securities," which describe the ferms and conditions of the securities offered hereby.
Introduction
The 7.25°/" Perpetual Non-cumulative Preferred Securities, Series A-1, liquidation preference $100,000 per security (the "Series A-1 WaMu Cayman Preferred Securities"), and the 7.25"/<1 Perpetual Non-cumulative Preferred Securities, Series A-2, liquidation preference $10,000 per securlty (the "Series A-2 WaMu Cayman Preferred Securities" and, together with the Series A-1 WaMu Cayman Preferred Securities, tho "WaMu Cayman Preferred Securities"), are being issued by Washington Mutual Preferred Funding (Cayman) I Ltd, ("WaMu Cayman") in a financing transaction that raises capital for Washington Mutual Bank ("WMB"). WMB is a subsidiary of Washington Mutual, Inc. ("WMI"). WMI and lts affitlates are referred to herein as the "WMI Group",
Wa.Mu Cayman will invest the proceeds of the WaMu Cayman Preferred Securities in a like amount of 7.250/0 Perpetual Non-cumUlative Preferred Securitles, ]rquidation preference $1,000 per security (tl18 "FIxed Rate Company Preferred Securities"), of Wasrtington Mutual Preferred Funding LL.C, a Delaware limited liabill1y company (the "Company"), WaMu Cayman wi!! have no material assets other than the Fixed Rate Company Preferred Securities. The financial entitlements of each WaMu Cayman Preferred Security wlH be substantially the same as the flnandal entitlements of a Ilke amount of Fixed Rate Company Preferred Securities, with the consequence that dividends and the redemption price on each WaMu Cayman Preferred Security w1l! be payable on the same dates and in the same amounts as the corresponding dividends and redemption price, as app!icab!e, on a like amount of Fixed Rate Company Preferred Securities. The Company's inmal material assets will consist of direct or indirect interests in mortgages or mortgage-related assets originated by WMB as described under "The Company - Business of the Company - Assets of the Company" and "The Asset Trust,"
The terms of the Series A-1 WaMu Cayman Preferred Securities and the Series A-2 WaMu Cayman Preferred Securities are Identical except for their per security llquldation preference. The Series A-1 WaMu Cayman Preferred Securities are being offered in reliance upon Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act") only in the Unite~ States and to persons who are "quafitied institutional buyers" within the meaning of 144A and "qualifIed purchasers" within the mcan[ng of Section 2(a) (51) of the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act"). The SElries A-2 WaMu Cayman Preferred Securities are being offered and sold in reliance upon Regulation S' under the Securities'Act only to non,..U .. S. persons in-transactions outside the United States. Resales of Series A-1 WaMu Cayman Preferred Securities to non-U.S. persons and of Series A-2 WaMu Cayman Preferred Securlties in the Unlted States or to U.K persons are subject to restrictions as described under "Notice to Investors - Exchanges Between Rule 144A Globa! Security Evidencing Sertes A-1 WaMu Cayman Preferred Securities and Regu!ation S Global Security EvidenCing Sories A-2 WaMu Cayman Preferred Securities," in each case subject to the certification requirements described under "Book-Entry Issuance."
By a separate offering cirCUlar dated the same date as this offering circular, Washington Mutua! Preferred Funding Trust I, a Delaware statuto!), trust established by the Company as grantor ("WaMu Delaware"), is offering $1,250,000,000 of its Perpetual Exchangeable NoncumUlative Trust Securities (the "Trust Securities"), WaMu Delaware wi!! invest the proceeds of the Trust Securities in a like amount of the Company's Perpetual Non-cumulative Fixed-toFloating Rate Preferred Securities (the "Fixed-to-Floating Rate Company Preferred Securities"
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CONFIDENTIAL
and, together with the Fixed Rate Company Preferred Securities, the "Company PreferredSecurities"). The terms of the Fixed-to-Floating Rate Company Preferred Securities aresubstantially identical to the Fixed Rate Company Preferred Securities except for the dividendrate. The Trust Securities are being offered and sold only in the United States and only toU.S. persons that are both qualified institutional buyers and qualified purchasers in reliance onthe exemption from registration under the Securities Act pursuant to Rule '144A. They are notbeing offered by this offering circular. The WaMu Cayman Preferred Securities are notexchangeable for Trust Securities, or vice versa.
WMB has asked for confirmation from the Office of Thrift Supervision (together with anysuccessor regulator, the "OTS") that the Company Preferred Securities constitute core capital ofWMB under the OTS' applicable regulatory capital regulations and, upon receipt of suchconfirmation, intends to treat the Company Preferred Securities accordingly.
If the OTS so directs following the occurrence of an Exchange Event, each WaMu CaymanPreferred Security will be automatically exchanged for a like amount of Fixed Rate DepositaryShares each representing 1/1000th of a share of WMI's Series J Perpetual Non-cumulative FixedRate Preferred Stock, no par value and liquidation preference $1,000,000 per share ("Fixed RateWM1 Preferred Stock"), as described below in this Summary under "— The Offering —Conditional Exchange." Upon a Conditional Exchange, the Trust Securities will also beautomatically exchanged, but for depositary shares representing a different series of WMI'spreferred stock, having substantially equivalent terms (with certain exceptions) as to dividends,liquidation preference and redemption preference as the Fixed-to-Floating Rate CompanyPreferred Securities.
This offering circular uses the term "like amount" in describing the financial entitlements andvoting rights, as applicable, of the WaMu Cayman Preferred Securities as compared to the FixedRate Company Preferred Securities and in describing the amount of Fixed Rate DepositaryShares, each representing a 1 /1000th interest in one share of Fixed Rate WMI Preferred Stockfor which the WaMu Cayman Preferred Securities will be exchanged upon the occurrence of aConditional Exchange. The term "like amount" means:
• when describing the financial entitlements or voting rights, as applicable, of WaMuCayman Preferred Securities as compared to Fixed Rate Company Preferred Securities, anumber of Fixed Rate Company Preferred Securities that have the same aggregateliquidation preference as the WaMu Cayman Preferred Securities to which the referenceis being made (e.g., 1,000 Fixed Rate Company Preferred Securities with an aggregateliquidation preference of $1,000,000 are a "like amount" for ten Series A-1 WaMuCayman Preferred Securities or 100 Series A-2 WaMu Cayman Preferred Securities, eachhaving an aggregate liquidation preference of $1,000,000); and
• when describing the number of depositary shares for Fixed Rate WMI Preferred Stockwith which WaMu Cayman Preferred Securities will be exchanged upon a ConditionalExchange, a number of Fixed Rate Depositary Shares, each representing a 1/1000th in-terest in one share of Fixed Rate WMI Preferred Stock, having a liquidation preferenceequal to the liquidation preference of the WaMu Cayman Preferred Securities that arebeing exchanged (e.g., 10,000 Fixed Rate Depositary Shares representing Fixed RateWMI Preferred Stock with an aggregate liquidation preference of $10,000,000 are a "likeamount" for 100 Series A-1 WaMu Cayman Preferred Securities or 1,000 Series A-2WaMu Cayman Preferred Securities, each having an aggregate liquidation preference of$10,000,000).
The offering of the WaMu Cayman Preferred Securities and the related issuance of theFixed Rate Company Preferred Securities are referred to herein as the "Offering".
Restricted For Use in Connection with Plan Confirmation Only WMI PC 500002044.00018
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CONFIDENTIAL
and, together with the fixed Rate Company Preferrod Securities, the "Company Preferred Securities"). The terms of the Fixed-to-Floatlng Rate Company Preferred Securities are substantially Identical to the Fixed Rate Company Preferred Secliritres except the dividend rate. The Trust Securities are befng offered and sold only in the United States and only to UB. persons that are both qualified instItUtional buyers and quatrfied purchasers in reliance on the exemption from registration under the Securities Act pursuant to Rute 144A. They are not being offered by this offering circular. The WaMu Cayman Preferred Securities are not exchangeable for Trust Securities, or 'lice versa.
WMB has asked for confirmation from the Office of Thrift Supervision (together with any successor regulator, tho "OTS") that the Company Preferred Securities constitute core capital of WMB under the 01"8' applicable regulatory capita! regulations and, upon receipt of such confirmation, intends to treat the Company Proferred SecuritIes accordlngly.
If the 01"8 so d[rocts following the occurrence of an Exchange Event, each WaMu Cayman Preferred Security will be automatically oxchanged for a like amount of Fixed Rate Depositary Shares each mpresenHng 1 !100Oth of a share of WMI's Series J Perpetual Non-cumulative Fixod Rate Preferred Stock, no par value and liquidation preference $'1,000,000 por share ("Fixed Rate WM} Preferred Stock"), as described below in this Summary under "- The OfferjngConditional Exchange." Upon a Conditional Exchange, the Trust Securities will also be automaUcal1y exchanged, but for depOSitary shares representing a different series of WMJ's preferred stock, having substantially equivalent terms (with certain exceptions) as to d[vldends, liqUidation preference and redemption preference as the Flxed-io-Floating Rate Company Preferred Secudtles.
This offering circular uses the term "lfke amount" in describing the financial entitlements and voting rights, as applicable, of the WaMu Cayman Preferred Securities as compared to the Fixed Rate Company Preferred Securities and in descrlbing the amount of Fixed Rate Depositary Shares, each representing a 111 OOOth interest in one share of Fixed Rate WMf Preferred Stock for which tile WaMu Cayman Preferred Securities will be exchanged upon the occurrence of a Conditional Exchange. The term "lfke amount" moans:
When describing the financia! entitlements or voting rights, as appllcable, of WaMu Cayman Preferred Securitios as compared to Fixed Rate Company Preferred Securities, a number of Fixed Rate Company Preferred Securities that have the same aggregate liquIdation preference as tho WaMu Cayman Preferred Securlties to which the reference is being made (e.g., 1,000 Fixed Rate Company Preferre~ Securities with an aggregate Hqurdation preference of $1,000,000 are a "like amount" for ten Series A~1 WaMu Cayman Preferred Securities· or 100 Series A~2 WaMu Cayman Preferred Securities, each having an aggr~gate [iq~jdation pmfo:en?e of $1,000,000); and
when descrlbfng the number of depositary shares for Fixed Rate WMI Preferred Stock with whlch WaMu -,o.J "C:' Preferred Securities will be exchanged upon a Conditional Exchange, a number of Ftxed Rate Depositary Shares, each representing a '111 OOOth interest in one share of Fixed Rate WMI Preforrod Slock, having a liquidation preforence equal to the !iquidatlon preference of the WaMu Cayman Preferred Securities that are being exchanged (e.g., 10,000 Frxed Rate DepOSitary Shares representing Fixed Rato WMI Preferred Stock with an aggregate liquidation preference of $10,000,000 arc a "like amount" for 100 Series A-1 WaMu Cayman Preferred Securitios or 1,000 Series A-2 WaMu Cayman Preferred SecurIties, each having an aggregate JlquidaUon preference of $10,000,000) ,
Tho offering of the WaMu Cayman Preferred Securltles and the related issuance of the Axed Rate Company Preferred Securitlos are referred to herein as the "Offering".
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The following diagram outlines the relationship among WM1, WMB, University Street, theCompany, the Asset Trust, WaMu Cayman, WaMu Delaware, purchasers of the WaMu CaymanPreferred Securities and purchasers of the Trust Securities:
Proceeds
Fixed-to-Reeling\ Rate Company
Preferred SecuritiesM
Fixed Rate CompanyPreferred Securitiesm
111111!1111-
University Street' )
Proceeds
Company
WaMuDelaware
WaMuCayman
ProceedsWaMu CaymanPreferred Securities
Proceeds TrustSecurities
Investors
Assets
109%Common
interest
Assets
ConditionalExchange
hl New American Capital, Inc., not shown here, is WMB's direct parent.
PI Marion holdings, Inc., not shown here, is University Street's direct parent.
(3) Transferred by WMB to WaMu Cayman.
(41 Transferred by WMB to WaMu Delaware.
ConditionalExchange
CONFIDENTIAL
3
Restricted For Use in Connection with Plan Confirmation Only VVMIPC 500002044.00019Restricted For
CONFIDENTIAL
The following diagram outlines the relationship among WMI, WMB. University Street, the Company, the Asset Trust, WaMu Cayman, WaMu Delaware, purchasers of the vyaMu Cayman Preferred Securities and purchasers of the Trust SecuritIes: .
C()nd~tfonat
Exchange
, , , , , , , , , , , , , , , , , , ,
Proceeds
Fixed ROlli! Company Pref~rred Securi!1esf.J)
I ______ -!!>-
University Streetp)
Assets
(1) New American Gapili:ll. Inc., not shown here, is WMB's direct parent
--~-----I , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Pro;;ends 1 , , , , , , , , , , , , , , , , , , , ,
WaMu : Delaware I
Investors
, , , , , , , ,
..... -----j
(2) Marion Holdings, Inc., not shown here, is UI1Jversity Street's direct parent.
is) Transferred by WMB to WaMu Cayman.
(4) Transferred by WMB to WaMu Delaware.
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Cor.diticnaf Exchange
WMIPC_500002044000019
CONFIDENTIAL
WaMu Cayman
Washington Mutual Preferred Funding (Cayman) I Ltd. is a Cayman Islands exemptedcompany limited by shares, incorporated on February 23, 2006 for the purposeS set forth belowin "WaMu Cayman." All of WaMu Cayman's ordinary shares (the "WaMu Cayman OrdinaryShares") will be held in trust for the benefit of a Cayman Islands charity. WaMu Cayman will notissue any securities other than the WaMu Cayman Ordinary Shares, and the WaMu CaymanPreferred Securities offered hereby. WaMu Cayman will be prohibited from issuing other equitysecurities or any debt securities. The Fixed Rate Company Preferred Securities will be the onlymaterial assets of WaMu Cayman. WaMu Cayman will be managed by a Board of Directorsconsisting of five directors, three of whom will be appointed by such Cayman Islands charitabletrust and two of whom will be persons who are also members of the Company's Board ofManagers. Of the two WaMu Cayman directors who are also members of the Company's Boardof Managers, one will be the same individual who is the Company's Independent Manager.
Subject to the limitations and assumptions described under "Certain Tax Considerations —United States Federal Income Tax Consequences," for United States Federal income taxpurposes, WaMu Cayman intends to be treated as a corporation, and for the holders of theWaMu Cayman Preferred Securities to be treated as holders of stock in such corporation.
The Company
Washington Mutual Preferred Funding LLC is a Delaware limited liability company formed onFebruary 3, 2006 for the purpose of (i) issuing the Fixed Rate Company Preferred Securities toWaMu Cayman, the Fixed-to-Floating Rate Company Preferred Securities to WaMu Delaware, thecommon securities of the Company (the "Company Common Securities") to University Street,Inc., an indirect subsidiary of WMB ("University Street"), and additional Parity Equity Securitiesor Junior Equity Securities subject to certain limitations described in this offering circular(ii) acquiring and holding Eligible Investments and (iii) performing functions necessary orincidental thereto.
The Fixed-to-Floating Rate Company Preferred Securities rank pail passu with the FixedRate Company Preferred Securities as to dividends and upon liquidation of the Company. Theterms of the Fixed-to-Floating Rate Company Preferred Securities are substantially identical tothe terms of the Fixed Rate Company Preferred Securities other than with respect to the rateapplicable to dividends thereon. The Fixed-to-Floating Rate Company Preferred Securities will, if,when and as declared by the Company's Board of Managers, pay dividends at an annual rate of6.534% until the Dividend Payment Date on March 15, 2011 and an annual rate equal to three-month LIBOR plus 1.4825% for the Dividend Period starting on such Dividend Payment Date andeach Dividend Period thereafter.
University Street will own all of the Company Common Securities. The Eligible Investmentsowned by the Company from time to time will generate net income for payment by the Companyto WaMu Cayman as dividends on the Fixed Rate Company Preferred Securities (andconsequently for payment as dividends by WaMu Cayman to holders of the WaMu CaymanPreferred Securities), to WaMu Delaware as dividends on the Fixed-to-Floating Rate CompanyPreferred Securities (and consequently for pass through by WaMu Delaware to the holders ofthe Trust Securities) and to University Street as dividends on the Company Common Securities.
Subject to the limitations and assumptions described under "Certain Tax Considerations —United States Federal Income Tax Consequences," the Company intends to be treated as apartnership (other than a publicly traded partnership taxable as a corporation) for United StatesFederal income tax purposes and will receive the opinion of Mayer, Brown, Rowe & Maw LLP tothe effect that, for United States Federal Income tax purposes, the Company will not be treatedas an association taxable as a corporation or as a publicly traded partnership taxable as acorporation.
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00020R",~lriirlc.rl For
WaMu Cayman
Washington Mutual Preferred Funding (Cayman) I Ud, is a Cayman exempted company IJmited by shares, Incorporated on February 23, 2006 for the set forth be10w in "WaMu Cayman." All of WaMu Cayman's ordinary shares (the "WaMu Cayman Ordinary Shares") wi![ be hel9 in trust for the benefit of a Cayman Islands charity. WaMu Cayman will not issue any securities other than the WaMu Cayman Ordinary Shares, and the WaMu Cayman Preferred SecurHlcs offered hereby. WaMu Cayman will be prohibited from issuing other equity securities or any debt securlties. The Fixed Rate Company Preferred Securitres wil! be the only material assets of WaMu Cayman. WaMu Cayman wir! be managed by a Board of Directors consisting of five directors, three of whom wW be appointod by such Cayman !slands charitable trust and two of whom will be persons who are also members of the Company's Board of Managers. Of the two WaMu Cayman directors who are also members of the Company's Board of Managers, one wlll be the same individual wtJo is the Company's Independont Managor.
Sublect to the limitations and assumptions described under "Certain Tax Considerations -United States Federa! Income Tax Consequences," for United States Federal income tax purposos, WaMu Cayman intends to be treated as a corporation, and for the holders of the WaMu Cayman Preferred Securities to be treated as holders of stock in such corporatIon.
The COlrnD,mv
Washington Mutual Preferred Funding LlC is a Delaware limited !lability company formod on February 3, 2006 for the purpose of (i) Issuing the Fixed Rate Company Preferred Securities to WaMu Cayman, the Fixed-to-Floating Rate Company Preferred Securities to WaMu Delaware, the common securities of the Company (the "Company Common Securities") to University Street, Inc., an indIrect subsidiary of WMB ("University Street"). and additional Parity Equity Securities or Junior Equity Securities subject to cenair! limitations doscribed in this offering circular (ii) acquiring and holding Eligible Investments and (1il) porforming functions necessary or incidental thereto.
The Fixed-to-Floating Rate Company Preferred Securitios rank pari passu wIth the Fixed Rate Company Preferred Securities as to dividends and upon liquidation of the Company_ The terms of tho Frxed-to-Floating Rate Company Preferred Securities arc substantially identical to the terms of the Flxed Rate Company Preferred Securities other than with respect to the rate appllcable to dividends'thereon. The Fixed-to-F!oating Rate Company Preferred Securlflos will, If, when and as declared by the Company's Board of Managers, pay dividends at an annual rate of 6,534"/0 until the D!vidend Payment Date on March 15, 2011 and an annual rate equal to threemonth LlBDH plus 1.4825% for the Dividend Period starting ,on such Dividend Payment Date and oach Dividend Period Ulereafter.
University Street will own aU of the Company Commoll,Securities. The Eligible Investments owned by the Company from time to time wiH generate not income for payment by tho Company to WaMu Cayman as divldends on the Fixed Rate Company Preferred Securities (and consequently for payment as dividends by WaMu Cayman to holders of the WaMu Cayman Preferred Securities) , to WaMu Delaware as dividends on the Fixed-to-Floating Rate Company Preferred Securities (and consequently for pass through by WaMu Delaware to the holders of the Trust Securities) and to University Stroet as dividends on the Company Common Securities,
SubJoct to the limitations and assumptions described under "Certain Tax Cons!derationsUnited States Federa! Income Tax Consequences:' tho Company intends to be treated as a partnership (uHler than a publicly traded partnership taxable as a corporation) for United States Federal Income lax purposes and will receive the opinion of Mayer, Brown, Rowe & Maw LLP to the effect that, for United States Federal income tax purposes, the Company wlll not be treated as an associatiun taxable as a corporation or as a publicly traded partners hlp taxable as a corporation,
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The Company will be managed by a Board of Managers. The Company's Board ofManagers will have three members, one of whom is not, and has not been during the precedingfive years, an officer or employee of WMI or any affiliate of WMI, other than a firfancingsubsidiary (the "Independent Manager").
Initial Conveyances
In connection with the Offering, WMB will convey a portfolio of first lien, closed-end, fixedrate home equity loans ("HELs") to the Company in exchange for 100% of the CompanyPreferred Securities. Concurrently with such transfer by WMB, University Street will convey aportfolio of HELs to the Company in exchange for 100% of the Company Common Securities.The portfolios conveyed by WMB and University Street to the Company will consist ofapproximately $5,389,459,150 of HELs in the aggregate. The Company will convey 100% of theHELs that it owns to the Asset Trust in exchange for the Class A Trust Certificate of the AssetTrust. WMB will then sell the Fixed Rate Company Preferred Securities and the Fixed-to-FloatingRate Company Preferred Securities for cash to WaMu Cayman and WaMu Delaware,respectively.
University Street
University Street, Inc. is a Washington corporation. It has elected to be treated as a realestate investment trust for United States Federal income tax purposes. University Street will hold100% of the Company Common Securities which represent 100% of the voting rights in theCompany (subject to the limited rights of holders of the Company Preferred Securities describedherein).
The Asset Trust
Washington Mutual Home Equity Trust I is a Delaware statutory trust formed pursuant to atrust agreement, to be entered into on or before the closing date, between the Company, asdepositor, and Deutsche Bank Trust Company Delaware, as Delaware trustee (the "DelawareTrustee"). The Pooling and Servicing Agreement among the Company, as depositor, WMB, asServicer, Deutsche Bank Trust Company Delaware, as Delaware Trustee, and Deutsche BankNational Trust Company, as Trustee (the "Pooling and Servicing Agreement"), will restate thetrust agreement and will be the governing instrument of the Asset Trust. The Asset Trust willmake an election to be treated as a real estate mortgage investment conduit ("REMIC") forUnited States Federal income tax purposes.
The initial assets of the Asset Trust will consist of the portfolio of HELs to be conveyed bythe Company to the Asset Trust in connection with the Offering. The HELs were originated byWMB primarily through its retail branches between September 2001 and September 2005. As ofJanuary 31, 2006, the HELs to be transferred into the Asset Trust had an aggregate unpaidprincipal balance of approximately $5,389,459,150.
WMI
With a history dating back to 1889, Washington Mutual, Inc., a Washington corporation, is aretailer of financial services to consumers and small businesses. Based on its consolidatedassets at September 30, 2005, WMI was the largest thrift holding company in the United Statesand the seventh largest among all U.S.-based bank and thrift holding companies. As ofSeptember 30, 2005, WMI, together with its subsidiaries, had total assets of approximately$333.6 billion, total liabilities of approximately $311.0 billion and total stockholders' equity ofapproximately $22.6 billion. As of September 30, 2005, WMI and its subsidiaries also had totaldeposits of approximately $190.4 billion. WMI's common stock is listed on the New York Stock
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The Company wil! be managed by a Board of Managers. The Company's Board of Managers will have three members, one of whom is not, and has not been during the preceding five years, an officer or employee of WMI or any afflllate of WMI, other than a fidanclng subsidiary (the "Independent Manager").
Initial Conveyances
In connection with the Offering, WMB will convey a portfolio of first lien, closed-end, fixed rate hom'e equity loans ("HELs") to the Company in exchange for 100"/0 of the Company Preferred Securities. Concurrently with such transfer by WMB, University Street wH! convey a portfollo of HELs to U''1B Company In exchange for 1 00% of the Company Common Securrties. The portfolios conveyed by WMB and University Street to the Company will consist of approximately $5,389,459,150 01 HELs in the aggregate. The Company will convey 100% of the HELs that it owns to the Asset Trust in exchange for the Class A Trust Certificate 01 the Asset Trust WMB will then sell the Fixed Rate Company Preferred SecuritIes and the Fixed-to-Floating Rate Company Preferred Securities for cash to WaMu Cayman and WaMu Delaware, respectively.
University Street
UniversIty Street, Inc. IS a Washington corporation. It has elected to be treated as a real estate investment trust for United States Federal income tax purposes. University Street will hold 1000;,;, of the Company Common Securities whIch represent 100"/0 of the voting rights in the Company (subject to the limited rights of tl0iders of the Company Preferred Securities descrIbed herein).
The Asset Trust
Washington Mutual Home Equlty Trust I is a Delaware statutory trust formed pursuant to a trust agreement, to be entered into on or before the closing date, betvlJeen the Company, as depositor, and Deutsche Bank Trust Company Deiaware, as Delaware trustee (tile "Delaware Trustee"), The Pooling and Servicing Agreement among the Company, as depositor, WMB, as Servlcer, Deutsche Bank Trust Company Delaware, as Delaware Trustee, and Deutsche Bank National Trust Company, as Trustee (the "Pooling and Servicing Agreement"), wm restate the trust agreement and will be the governing instrument of the Asset Trust. The Asset Trust win make an election to be treated as a real estate mortgage investment conduit ("REM1C") for United States Federal [ncome tax purposes.
The Initial assets of the Asset Trust will consist of the portfolio of HEls to be conveyed by the Company to the Asset Trust in connection wah the Offering. The HELs were originated by WMB primarHy through its retal! branches between September 2001 and 2005. As of January 31,2006, the HELs to be transferred into the Asset Trust had an aggregate unpaid principal balance of approximately $5,389,459,150.
WMI
With a history dating back to 1889, Washington Mutual, Inc" a WashIngton corporat!on, is a retailer of financiai services to consumers and small businesses. Based on its consolidated assets at September 30, 2005, WMI was the largest thrift holding company in the United States and the seventh largest among al1 U.s.-based bank and thrift holding companIes. As of September 30, 2005, WMI, together wlth its subsidiarIes, had totai assets of approximately 5333.6 bHHon, totalliabilitles of approximately $311.0 billion and total stOCkholders' equity of approxlmatoly $22.6 billion, As of Septernber 30, 2005, WMI and its subsidiaries also had total deposits of approximately $190.4 billion. WMj's common stock is listed on the New York Stock
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Exchange under the symbol "WM". The principal business offices of WM1 are located at1201 Third Avenue, Seattle, Washington 98101 and its telephone number is 206-461-2000.
WMB
Washington Mutual Bank (formerly known as Washington Mutual Bank, FA) is a federallychartered savings association, chartered and operating under the United States Home Owners'Loan Act of 1933, as amended. WMB engages in mortgage banking, consumer banking andsmall business banking. WMB, as a federally chartered association, has the authority to makevarious types of loans, including loans secured by homes and commercial real estate, securedand unsecured consumer loans, and secured and unsecured commercial loans. As a federalsavings association, WMB is subject to regulation and examination by the OTS, its primaryregulator. WMB is an indirect wholly-owned subsidiary of WMI.
Prior to 2004, WMB had two sister depository institutions which were both owned directlyby WMI. WMB has since acquired both of these sister institutions. One of these institutions,Washington Mutual Bank fsb, a federal savings bank, became a wholly-owned subsidiary ofWMB on February 1, 2004. The other institution, Washington Mutual Bank, a savings bankchartered under the laws of the state of Washington, converted into a federally chartered savingsbank and then was merged into WMB on January 1, 2005.
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00022
6
Restricted
Exchange under the symbol "WM". The principal business offices of WMI are located at 1201 Third Avenue, Seattle, Washington 98101 and its telephone number is 206-461-2000.
WMB
Washington Mutua! Bank (formerly known as Washington Mutua! Bank, FA) is a federally chartered savings association, chartered and under tile United States Home Owners' Loan Act of 1933, as amended. WMB engages in mortgage banking, consumer banking and sma!! business banking. WMB, as a federally chartered association, has the authority to make various types of loans, including loans secured by homes and commercial real estate, secured and unsecured consumer loans, and secured and unsecured commercial loans. As a federal savings association, WMB is subject to regulation and examination by the OTS, its primary regulator. WMB is an indIrect wholly-owned subsidiary of WMI.
Prior to 2004, WMB had tv/D sister depository institutions which were both owned directly by WMI. WMB has since acquired both of these sister instftutions. One of these institutions, Washington Mutual Bank fso, a federal savings bank, became a who!!y~owned subsidiary of WMB on February 1, 2004. The other institution, Washington Mutual Bank, .a savings bank chartered under the laws of the state of Washington, converted into a federally chartered savings bank and then was merged into WMB on January 1,2005.
6
Use in Connection with Confirmation Only WMIPC_500002044.00022
CONFIDENTIAL
Company Preferred Securities, provided that (i) aftergiving effect to such issuance, the pro forma net bookvalue of the Company's assets (after giving effect to theacquisition of any New Assets in connection with theissuance of such Parity Equity Securities) will equal orexceed 1.5 times the sum of the aggregate liquidationpreference of the preferred securities of the Company thenoutstanding and any such Parity Equity Securities that theCompany proposes to issue, (ii) after giving effect to suchissuance, the Company's pro forma funds from continuingoperations, or "FFO", for the four fiscal quarters beginningwith the fiscal quarter in which such Parity Equity Securi-ties are proposed to be issued (calculated (A) assumingthat such proposed Parity Equity Securities are issued andthat, if any Parity Equity Securities (including the ParityEquity Securities that the Company proposes to issue)bear dividends based on a floating rate, the applicabledividend rate will not change during such four fiscalquarters from the rate in effect on the applicable date ofdetermination and (B) as adjusted to reflect any NewAssets) equals or exceeds 150% of the amount that wouldbe required to pay full annual dividends on all preferredsecurities of the Company then outstanding and any suchParity Equity Securities that the Company proposes toissue and (iii) the Company is not otherwise in breach ofany of its covenants set forth in the LLC Agreement. See"Description of the Fixed Rate Company Preferred Securi-ties — Ranking,"
in the Exchange Agreement, WMI will covenant in favor ofthe holders of the WaMu Cayman Preferred Securities andthe Trust Securities that, if full dividends on (i) theCompany Preferred Securities, (ii) the WaMu CaymanPreferred Securities or (iii) the Trust Securities for anyDividend Period are not paid, then WMI will not declare orpay dividends with respect to, or redeem, purchase oracquire, any of its equity capital securities during the nextsucceeding Dividend Period, except dividends in connec-tion with a shareholders' rights plan, if any, or dividends inconnection with, benefits plans.
Conditional Exchange If the OTS so directs following the occurrence of anExchange Event, each WaMu Cayman Preferred Securitywill be automatically exchanged for a like amount of FixedRate Depositary Shares representing 1/1000th of a shareof WMI's Series J Perpetual Non-cumulative Fixed RatePreferred Stock (the "Fixed Rate Depositary Shares").
"Exchange Event" means (i) WMB becoming "undercapi-talized" under the OTS' "prompt corrective action" regula-tions, (ii) WMB being placed into conservatorship orreceivership or (iii) the ()TS, in its sole discretion, directingsuch exchange in anticipation of WMB becoming "under-capitalized" in the near term or taking supervisory action
Restricted For Use in Connection with Plan Confirmation Only WMI PC 500002044.00027
11
Conditional Exchange ...... " ..
CONFIDENTIAL
Company Preferred Securities, provided that (i) after giving effect to such issuance, the pro forma net book value of the Company's assets (after givin:g effect to the acquisitIon of any New Assets in connection with the issuance of such Parity Equity Securities) wm equal or exceed 1.5 times the sum of the aggregate liqu[dation preference of preferred securities of the Company then outstanding and any such Parity Equity Securities that the Company proposes to issue, (II) after giving effect to such issuance, the Company's pro forma funds from continuing operations, Dr "FFO", for the four fiscal quarters beginning wlth the fiscal quarter in which such Parity Equity Securities are proposed to be issued (calculated (A) assuming that such proposed Parity Equlty Securities are issued and that, if any Parity Equity Securities (including the Parity Equity Securitles that the Company proposes to issue) bear dividends based on a floating rate, the applicable divjdend rate will not change during such four fiscal quarters from the rate in effect on the applicable date of determination and (B) as adjusted to reflect any New Assets) equals or exceeds 150% of the amount that would be required to pay full annual dividends on all preferred securities of the Company then outstanding and any such Parity Equity Securities that the Company proposes to issue and (Iii) the Company is not otherwise in breach of any of its covenants set forth in the LLC AgreemenL See "Description of the Fixed Rate Company Preferred Securities - Ranking,"
In the Exchange Agreement, WMI wi!! covenant rn favor of the holders of the WaMu Cayman Preferred Securities and the Trust Secur!tles that, if full dividends on (I) the Company Preferred Securities, (Ii) the WaMu Cayman Preferred Securitles or (iii) the Trust Securitfes for any Dividend Period are- not pajd, then WM! wlll not declare or pay dividends with respect to, or redeem, purchase or acquire, any of its equity capita! securities during the next succeeding Dividend Period, except dividends In connectJor). wi~h a shareholders' rights plan, jf any, or dividends in connection with, benefits plans.
If the OTS so directs following the occurrence of an Exchango Event, each WaMu Cayman Preferred Security will be automatically exchanged for a like amount of Fixed Rate DepositalY Shares representtng 1/1 OOOth of a share of WMl's Series J Perpetual Non~Gumu!atjve Fixed Rate Preferred Stock (the "Fixed Rate Depositary Shares").
"Exchange Event" means (i) WMB becoming "undercapitalized" under the OTS' "prompt corrective action" regulations, (ii) WMB being placed into conservatorship or receivership or (iii) the OTS, in Its sale discretion, directing SUGh exchange in anticipation of WMB becoming "undercapitalized" in the near term or taking supervIsory action
Restricted For Use in Connection with Plan Confirmation
CONFIDENTIAL
that limits the payment of dividends, as applicable, byWMB, and in connection therewith, directs such exchange.
The Fixed Rate WM1 Preferred Stock will'have substantiallyequivalent terms as to dividends, redemption and liquida-tion preference as the Fixed Rate Company PreferredSecurities, except that the Fixed Rate WMI PreferredStock: (i) will not have the benefit of the covenantsdescribed under "Description of the Fixed Rate CompanyPreferred Securities Voting Rights and Covenants;"(ii) will not be listed on any securities exchange orautomated dealer quotation system; (iii) will be redeem-able prior to the Dividend Payment Date occurring onMarch 15, 2011 only upon the occurrence of a RegulatoryCapital Event as described herein); (iv) AdditionalAmounts will not be payable with respect to the Fixed RateWMI Preferred Stock; and (v) if WMI fails to pay, ordeclare and set aside for payment, kill dividends on theFixed Rate WMI Preferred Stock for six Dividend Periods,the authorized number of WMI's directors will increase bytwo, and the holders of Fixed Rate WMI Preferred Stock,voting together with the holders of any other equity capitalsecurities of WMI having similar voting rights, including theFixed-to-Floating Rate WM1 Preferred Stock, will have theright to elect two directors in addition to the directors thenin office at the next annual meeting of shareholders. TheFixed Rate WM1 Preferred Stock will be subject to theReplacement Capital Covenant described under "— Re-demption/Replacement Capital Covenant" above.
WMI will covenant in the Exchange Agreement in favor ofthe holders of the WaMu Cayman Preferred Securities thatit will not issue any preferred stock that would rank seniorto the Fixed Rate WMI Preferred Stock upon its issuance.Each share of Fixed Rate WM1 Preferred Stock will, uponissuance, rank at least pad passu with the most seniorpreferred stock of WMI, if any, then outstanding.
Voting Rights and CertainCovenants Except as otherwise set forth below, the holders of the
Fixed Rate Company Preferred Securities will not havevoting rights.
However, the LLC Agreement will provide that, except withthe consent or affirmative vote of the holders of at leasttwo-thirds of the Fixed Rate Company Preferred Securitiesand the Fixed-to-Floating Rate Company Preferred Securi-ties, voting together as a single class, the Company will not:
• effect a consolidation, merger or share exchange with orinto another entity other than an entity controlled by, orunder common control with, WMI;
• issue any securities of the Company ranking senior tothe Company Preferred Securities in respect of pay-
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002044.00028
12
Restricted For
Voting Rights and Certain Covenants ... . .. , ........ .
that limits the payment of dividends, as applicabte, by WMB, and in connection therewith, directs such exchange.
The Fixed Rate WM! Preferred Stock wilr have substantlatly equivafent terms as to dividends, redemption and lIquidation preference as the Fixed Rate Company Preferred Securities, except that the Fixed Rate WMI Preferred Stock: (l) will not have the benefit of the covenants described under "Description of the Fixed Rate Company Preferred Securities - Voting Rights and Covenants;" (il) wm not be listed on any securities exchange or automated dealer quotation system; (iii) wi!! be redeemable prior to the Dividend Payment Date occurrlng on March 15,2011 only upon the occurrence of a Regulatory Capita! Event (as described herein); (iv) Additional Amounts will not be payable with respect to the Fixed Rate WMI Preferrod Stock; and (v) If WMI fails to pay, or declare and set aside for payment, fuJi dividends on the Fixed Rate WMI Preferred Stock for six Dividend Periods, the authorjzed number of WMI's directors will increase by two, and the holders of Fixed Rate WMI Preferred Stock, voting together with the holders of any other equity capital securities of WMI having Similar voting rights, inclUding the Fixed-to-Floating Rate WMJ Preferred Stock, will have the right to elect two directors in addition to the directors then in office at the next annual meeting of shareholders. The Fixed Rate WMI Preferred Stock: will be subject to the Replacement Capital Covenant described under "- R8~ demption/Rep!acement CapitaJ Covenant" above,
WMI will covenant in the Exchange Agreement in favor of the holders of the WaMu Cayman Preferred Securities that it will not issue any preferred stock that would rank senior to the Fixed Rate WM t Preferred Stock upon its issuance. Each share of fixed Rate WMI Preferred Stock wHl, upon issuance, rank at least pari passu wlth tho most senior preferred stock of WMI, if any, then outstanding.
Except as othflrwise set forth below, the holders of the Fixed Rate Company Preferred SecurIties wHl not have voting rights.
However, the LLC Agreement will provide ttlat, except with the consent or affirmative vote of the holders of at least two-thirds of the Fixed Rate Company Preferred Securittes and the Fixed-to-Hoating Rate Company Preferred Securities, voting together as a single class, the Company wlil not
effect a consolidation, merger or share exchange with or into another entity other tban an entity controlled by, or under common control with, WMI;
issue any securitios of the Company ranking senior to the Company Preferred Securities in respect of pay-
12
in Connection with Plan Confirmation Only WMI PC _500002044,00028
CONFIDENTIAL
Washington
Mutual$1,250,000,000
Washington Mutual Preferred Funding Trust I
Fixed-
to-
Floating Rate Perpetual Non-cumulative Trust Securities
Automatically Exchangeable in Specified Circumstances into
Depositary Shares representing Preferred Stock of
Washington Mutual, Inc.
The Fixed- to-
Floating Rate Perpetual Non-cumulative Trust Securities, liquidation preference $100,000 per security (the
" Trust Securities"),
of Washington Mutual Preferred Funding Trust
I, a Delaware statutory trust
(" WaMu Delaware"), offered
hereby represent undivided beneficial ownership interests in a like amount of
Fixed-
to
-
Floating Rate Perpetual Non-cumulative
Preferrecj Securities, liquidation preference $1,000 per security (the " Fixed- to-
Floating Rate Company Preferred Securities"), of
Washington Mutual Preferred Funding LLC, a Delaware limited liability company ( the
" Company"). WaMu Delaware will have no
assets other than the Fixed- to-
Floating Rate Company Preferred Securities. WaMu Delaware will pass through dividends paid and
redemption and liquidation payments made by
the Company on the Fixed-
to
-
Floating Rate Company Preferred Securities as
distributions and redemption and liquidation payments on the Trust Securities. The Company's initial material assets will consist
of
indirect interests in mortgages and mortgage- related assets originated by Washington Mutual Bank as
described herein.
Dividends on the Fixed-to-Floating Rate Company Preferred Securities will be payable
if, when and as
declared by
the
Company's Board
of Managers out
of
legally available funds,
on a non- cumulative basis
at an annual rate
of 6.534% until
March 15, 2011 and 3-
month USD UBOR plus 1.4825% thereafter on the liquidation preference per security, quarterly in arrears
on March 15, June 15, September 15 and December 15
of
each year, commencing on June 15, 2006, or
the next Business Day if
any such day is not a Business Day (each, a " Dividend Payment Date").
If
the
Office of
Thrift Supervision ( together with any successor regulator, the "OTS") so
directs following the occurrence of
an Exchange Event as
described herein, each Trust Security will be automatically exchanged
fo
r
depositary shares representing alike amount
of Washington Mutual, Inc.' s
(" WMI") Series I Perpetual Non-cumulative Fixed-
to
-
Floating Rate Preferred Stock.
The Fixed-
to
-
Floating Rate Company Preferred Securities will not be redeemable at
the option of
the Company prior to the
Dividend Payment Date in March 2011, except upon the occurrence of
a Tax Event, an Investment Company Act Event or
a
Regulatory Capital Event (each as described herein). Upon the occurrence of
a Tax Event, an Investment Company Act Event or
a Regulatory Capital Event, the Company may redeem the Fixed- to-
Floating Rate Company Preferred Securities in whole but not
in part. On or
after the Dividend Payment Date in March 2011, the Company may redeem the Fixed- to-
Floating Rate Company
Preferred Securities
in
whole
or
in
part. Any redemption will
be subject
to
the prior approval
of
the OTS and will
be
at a
redemption price equal to the liquidation preference pe
r
Fixed- to-
Floating Rate Company Preferred Security, plus declared but
unpaid dividends, if any, plus a U.
S.
Treasury- based " make whole" amount if the redemption occurs prior to the Dividend
Payment Date in March 2011.
The Trust Securities will be issued only in book- entry form. Each individual purchaser or
group of
affiliated
purchasers that acquires Trust Securities
in
the initial offering must acquire
at
least three Trust Securities having
an
aggregate liquidation preference of
$300,000.
The Trust Securities will not
be listed
on any securities exchange
or automated dealer quotation system.
The securities offered hereby are not insured or
guaranteed by
the U.
S.
Federal Deposit Insurance Corporation.
See " Risk Factors" beginning
on page 17
fo
r a description of
the risk factors you should consider before you invest
inthe securities offered hereby.
Offering price: $100,000.00 per Trust Security
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.
S.
SECURITIES ACTOF 1933, AS AMENDED (THE " SECURfTlES ACT") AND ARE BEING OFFERED AND SOLD ONLY T
O PERSONS THAT ARE BOTH" QUALIFIED INSTITUTIONAL BUYERS" (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND "QUALIFIED
PURCHASERS" (WITHIN THE MEANING OF SECTION 2(
a)(
51) OF THE U.
S.
INVESTMENT COMPANY ACT OF
1940, ASAMENDED (THE " INVESTMENT COMPANY ACT" » IN RELIANCE ON AN EXEMPTION FROM REGISTRATION PURSUANT TO RULE
144A. PROSPECTIVE PURCHASERS OF TRUST SECURITIES ARE HEREBY NOTIFIED THAT THE SELLER OF THE TRUST
SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A. THE SECURITIES ARE NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS DESCRIBED
UNDER " NOTICE TO INVESTORS."
The Initial Purchasers expect to deliver the Trust Securities through the
facilities of
The Depository Trust Company and
Euroclear Bank S.
A./ N.
V., as
operator of
the Euroclear System, and Clearstream Banking, societe anonyme, as
participants in
The Depository Trust Company, in each case, against payment in New York, New York on or
about March 7,
2006.
Goldman, Sachs & Co.Sale Global Coordinator,
Sale Structuring Coordinator and
Joint Bookrunner
Credit SuisseJoint Bookrunner
Offering Circular dated February 24, 2006.
Morgan StanleyJomt Bookrunner
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00001
This offering circular is confidential. You are authorized to use this offering circular solely
for
the purpose of
considering the purchase of
the securities described in the offering circular. WMI,
Washington Mutual Bank ("WMB"), University Street, Inc. ("University Street"), the Company,
WaMu Delaware, Washington Mutual Home Equity Trust I (the "Asset Trust"), Washington Mutual
Preferred Funding (Cayman) I Ltd. ("WaMu Cayman") and other sources identified herein have
provided the information contained in this offering circular. The Initial Purchasers named herein
make no representation or
warranty, express or
implied, as
to the accuracy or completeness of
such information, and nothing contained in this offering circular
is,
or
shall be relied upon as, a
promise or
representation by the Initial Purchasers. You may not reproduce or
distribute this
offering circular, in whole or
in part, and you may not disclose any of
the contents of
this offering
circular or
use any information herein
for
any purpose other than considering the purchase of
the
notes. You agree to the foregoing by
accepting delivery of
this offering circular.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY UNITED
STATES FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY ORDETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The distribution of
this offering circular and the offering and sale of the securities offered
hereby in certain jurisdictions may be restricted by
law. WMI, WMB, University Street, the
Company, WaMu Delaware, the Asset Trust, WaMu Cayman and the Initial Purchasers require
persons in whose possession this offering circular comes to inform themselves about and to
observe any such restrictions. This offering circular does not constitute an
offer
of,
or
an
invitation to purchase, any of
the securities offered hereby in any jurisdiction in which such offer
or
invitation would be
unlawful.
Notwithstanding anything herein to the contrary, each investor (and each employee,
representative, or
agent of
any investor) may disclose to any and
all persons, without limitation
of
any kind, the tax treatment and tax structure of
the transactions contemplated herein and
all
materials of
any kind (including opinions or
other tax analyses) that are provided to the
investors relating to such tax treatment and tax structure. However, any information relating tothe United States Federal income tax treatment o
r
tax structure will remain confidential (and the
foregoing sentence will not apply) to the extent reasonably necessary to enable any person to
comply with applicable securities laws. For this purpose, " tax treatment" means United States
Federal or
state income tax treatment, and "tax structure" means any facts relevant to the
United States Federal or
state income tax treatment of
the transactions contemplated herein but
does not include information relating to the identity of
the issuer of
the securities, the issuer of
any assets underlying the securities, or
any of
their respective affiliates that are offering the
securities.
No person has been authorized to give any information or
to make any representations
other than those contained in this offering circular, and, if given or made, such information or
representations must not be relied upon as having been authorized by any of
WMI, WMB,
University Street, the Company, WaMu Delaware, WaMu Cayman or
the Asset Trust. Neither the
delivery of
this offering circular nor any sale hereunder will create, under any circumstances, any
implication that there has been no change in the affairs of
WMI, WMB, the Company, WaMuDelaware, University Street, o
r
the Asset Trust since the date hereof or
that the information
contained herein is correct as
of
any time subsequent to its date.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00002
NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421- B OF THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY
DOCUMENT FILED UNDER RSA 421- B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN
ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, ORCAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
IN CONNECTION WITH THIS OFFERING, GOLDMAN, SACHS & CO. AND ITS AFFILIATES,
ON BEHALF OF THE INITIAL PURCHASERS, MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY
AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL FOR A LIMITED
PERIOD OF TIME AFTER THE ISSUE DATE. HOWEVER, THERE MAY BE NO OBLIGATION ON
GOLDMAN, SACHS & CO. TO DO THIS. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME, AND MUST BE BROUGHT TO AN END AFTER A LIMITED
PERIOD.
ii
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00003
NOTICE TO INVESTORS
Because of
the following restrictions, purchasers are advised to consult legal counsel prior to
making any offer, purchase, resale, pledge or
other transfer of
the securities offered hereby.
Representations of
Purchasers
Each purchaser of
Trust Securities (including the registered holders and beneficial owners
of
the Trust Securities as
they exist from time to time, including as a result of
transfers, in each
case as
of
the time of purchase) will be deemed to have represented and agreed as follows:
( A)
the purchaser ( i) is a "qualified institutional buyer" within the meaning of
Rule 144A of
the
Securities Act, (
ii)
is aware that
the
sale of
the
Trust Securities to it is
being made in reliance on Rule 144A or
another exemption from the registration
requirements of
the Securities Act and (
iii) is acquiring such Trust Securities
for
its own
account or
the account of
one or
more qualified institutional buyers;
( B)
the purchaser ( i) is a "qualified purchaser" within the meaning of
Sec-
tion 2 ( a)
(51) of
the Investment Company Act and the rules and regulations thereunder,
(
ii)
is aware that WaMu Delaware will not be registered under the Investment Company Act
in reliance on the exemption set forth in Section 3 ( c)
( 7)
thereof and that the Trust
Securities have not been and will not be registered under the Securities Act and (
iii) is
acquiring such Trust Securities
for
its own account or
the account of
one or
more qualified
purchasers as
to which the purchaser exercises sole investment discretion, as the case may
be;
( C)
either ( i) the purchaser is not ( A)
an
"employee benefit plan" as
defined in
Section 3(
3)
of
the Employee Retirement Income Security Act of
1974, as amended
(" ERISA"), whether or
not subject to ERISA and including, without limitation, foreign or
governmental plans ( B)
a " plan" within the meaning of
Section 4975 of
the Internal
Revenue Code of
1986, as amended (the " Code"), or
( c)
any entity whose underlying
assets include "plan assets" of
any of
the foregoing by reason of
investment by
an
employee benefit plan or
other plan in such entity (each of
the foregoing, a " Benefit Plan
Investor"), or
(
ii) the purchaser is an insurance company general account that represents,
warrants and covenants that, at
the time of
acquisition and throughout the period it holds
the securities, ( A)
it is eligible
for
and meets the requirements of
the Department of
Labor
Prohibited Transaction Class Exemption 95- 60, ( B)
less than 25% of
the assets of such
general account are ( or
represent) assets of a Benefit Plan Investor and ( C)
it is not a
person who has discretionary authority or
control with respect to the assets of WaMu
Delaware or
any person who provides investment advice
for
a fee (direct or
indirect) with
respect to such assets, or
any affiliate of
such a person and would not otherwise be
excluded under 29
C.
F.
R.
2510.3- 101 ( f) (
1);
( D)
the purchaser is not purchasing the Trust Securities with a view to the resale,
distribution or
other disposition thereof in violation of
the Securities Act;
( E)
neither the purchaser nor any account
for
which the purchaser is acquiring the
Trust Securities will hold such Trust Securities
for
the benefit of
any other person and the
purchaser and each such account will be the sole beneficial owners thereof
for
all purposes
and will not sell participation interests in the Trust Securities or
enter into any other
arrangement pursuant to which any other person will be entitled to an interest in the
distributions on
the
Trust Securities;
iii
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00004
( F)
the certificates evidencing the Trust Securities will bear a legend to the following
effect:
THIS SECURITY IS ONE OF THE FIXED- TO-FLOATING RATE PERPETUAL NON-
CUMULATIVE TRUST SECURITIES (" TRUST SECURITIES") ISSUED BY WASHINGTON
MUTUAL PREFERRED FUNDING TRUST I ("WAMU DELAWARE"). THE ISSUER OF THIS
SECURITY HAS NOT BEEN REGISTERED AS
AN INVESTMENT COMPANY UNDER THE
U.
S.
INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE " INVESTMENT
COMPANY ACT"), AND THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
U.
S.
SECURITIES ACT OF 1933, AS AMENDED (THE " SECURITIES ACT"), AND NEITHER
THIS SECURITY NOR ANY BENEFICIAL INTERESTS HEREIN MAY BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A PERSON WHO IS BOTH A
" QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE 144A UNDERTHE SECURITIES ACT (
"QUALIFIED INSTITUTIONAL BUYER") AND A " QUALIFIED
PURCHASER" WITHIN THE MEANING OF SECTION 2(
a)
(51) OF THE INVESTMENT
COMPANY ACT AND THE RULES AND REGULATIONS THEREUNDER ("QUALIFIED
PURCHASER") ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A PERSONWHO IS BOTH A QUALIFIED INSTITUTIONAL BUYER AND A QUALIFIED PURCHASER
(AN " ELIGIBLE PURCHASER") AND EACH SUCH PERSON AND ACCOUNT FOR WHICH
SUCH PERSON IS PURCHASING ( A)
IS NOT A BROKER- DEALER THAT OWNS AND
INVESTS ON A DISCRETIONARY BASIS LESS THAN US$ 25 MILLION IN SECURITIES OF
ISSUERS THAT ARE NOT ITS AFFILIATED PERSONS, ( B)
IS NOT A PLAN REFERRED
TO IN PARAGRAPH ( a)
( 1)
( i) ( D) OR ( a)
( 1)
( i) ( E)
OF RULE 144A, OR A TRUST FUNDREFERRED TO IN PARAGRAPH ( a
)
( 1)
( i) ( F)
OF RULE 144A THAT HOLDS THE ASSETS
OF SUCH A PLAN, IF INVESTMENT DECISIONS WITH RESPECT TO THE PLAN AREMADE BY THE BENEFICIARIES OF SUCH PLAN, ( C
)
WAS NOT FORMED FOR THE
PURPOSE OF INVESTING IN WAMU DELAWARE, ( D)
WILL HOLD AT LEAST $300,000
LIQUIDATION PREFERENCE OF TRUST SECURITIES ( i. e.,
AT LEAST THREE TRUST
SECURITIES) AND TRANSFER AT LEAST $100,000 LIQUIDATION PREFERENCE OF
TRUST SECURITIES ( i. e.,
AT LEAST ONE TRUST SECURITY) IN THE CASE OF EACH
INITIAL INVESTOR, AND WILL HOLD AND TRANSFER AT LEAST $100,000 LIQUIDATION
PREFERENCE OF TRUST SECURITIES ( i. e., AT LEAST ONE TRUST SECURITY) IN THE
CASE OF EACH SUBSEQUENT INVESTOR AND ( E)
UNDERSTANDS THAT WAMUDELAWARE MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN THIS
SECURITY FROM ONE OR MORE BOOK-ENTRY DEPOSITARIES. EACH PURCHASER OF
THIS SECURITY OR ANY BENEFICIAL INTERESTS HEREIN WILL BE DEEMED TO
REPRESENT THAT IT AGREES TO COMPLY WITH THE TRANSFER RESTRICTIONS SET
FORTH HEREIN AND IN THE AMENDED AND RESTATED TRUST AGREEMENT OF WAMUDELAWARE (THE "TRUST AGREEMENT"), AND WILL NOT TRANSFER THIS SECURITY
OR ANY BENEFICIAL INTERESTS HEREIN EXCEPT TO AN ELIGIBLE PURCHASER WHOCAN MAKE THE SAME REPRESENTATIONS AND AGREEMENTS ON BEHALF OF ITSELF
AND EACH ACCOUNT FOR WHICH IT IS PURCHASING. ANY PURPORTED TRANSFER OF
THIS SECURITY OR ANY BENEFICIAL INTERESTS HEREIN THAT IS IN BREACH, AT THE
TIME MADE, OF ANY TRANSFER RESTRICTIONS SET FORTH HEREIN OR IN THE
TRUST AGREEMENT WILL BE VOID AB INITIO. IF AT ANY TIME WAMU DELAWARE
DETERMINES IN GOOD FAITH THAT A HOLDER OR BENEFICIAL OWNER OF
THIS
SECURITY OR BENEFICIAL INTERESTS HEREIN IS IN BREACH, AT THE TIME GIVEN, OF
ANY OF THE TRANSFER RESTRICTIONS SET FORTH HEREIN, WAMU DELAWARESHALL CONSIDER THE ACQUISITION OF THIS SECURITY OR SUCH BENEFICIAL
INTERESTS VOID, OF NO FORCE AND EFFECT AND WILL NOT, AT THE DISCRETION OF
WAMU DELAWARE, OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE
NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO WAMU DELAWARE,
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT (THE
iv
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00005
'' TRANSFER AGENT"), OR ANY OTHER INTERMEDIARY. IN ADDITION, WAMU DELA-
WARE OR THE TRANSFER AGENT MAY REQUIRE SUCH ACQUIRER OR BENEFICIAL
OWNER TO SELL THIS SECURITY OR SUCH BENEFICIAL INTERESTS TO AN ELIGIBLE
PURCHASER.
NO SECURITY MAY BE PURCHASED OR TRANSFERRED TO: ( I) AN " EMPLOYEE
BENEFIT PLAN" AS DEFINED IN SECTION 3(
3)
OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), WHETHER OR NOT
SUBJECT TO ERISA AND INCLUDING, WITHOUT LIMITATION, FOREIGN OR GOVERN-
MENTAL PLANS, (
II) A " PLAN" WITHIN THE MEANING OF SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE " CODE"), OR (
III) ANY
ENTITY WHOSE UNDERLYING ASSETS INCLUDE " PLAN ASSETS" OF ANY OF THE
FOREGOING BY REASON OF INVESTMENT BY AN EMPLOYEE BENEFIT PLAN OR
OTHER PLAN IN SUCH ENTITY (EACH OF THE FOREGOING, A " BENEFIT PLAN
INVESTOR"), EXCEPT FOR AN INSURANCE COMPANY GENERAL ACCOUNT THAT
REPRESENTS, WARRANTS AND COVENANTS THAT, AT THE TIME OF ACQUISITION
AND THROUGHOUT THE PERIOD IT HOLDS THE SECURITIES, ( I)
IT IS ELIGIBLE FOR
AND MEETS THE REQUIREMENTS OF THE DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION 95- 60, (
II) LESS THAN 25% OF THE ASSETS OF
SUCH GENERAL ACCOUNT ARE (OR REPRESENT) ASSETS OF A BENEFIT PLAN
INVESTOR AND (
III)
IT IS NOT A PERSON WHO HAS DISCRETIONARY AUTHORITY ORCONTROL WITH RESPECT TO THE ASSETS OF WAMU DELAWARE OR ANY PERSONWHO PROVIDES INVESTMENT ADVICE FOR A FEE (DIRECT OR INDIRECT) WITH
RESPECT TO SUCH ASSETS, OR ANY AFFILIATE OF SUCH A PERSON AND WOULD
NOT OTHERWISE BE EXCLUDED UNDER 29
C.
F.
R.
2510.3- 101 ( F)
(
1).
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OFTHE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (
"DTC"), TO
WAMU DELAWARE OR THE TRANSFER AGENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTERESTHEREIN.
( G)
the purchaser and each account
for
which it is purchasing:
( i) is not a broker- dealer that owns and invests on a discretionary basis less
than $ 25
million in securities of
unaffiliated issuers;
(
ii)
is not a participant- directed employee plan, such as
a 401 ( k)
plan, as
referred
to in paragraph ( a)
( 1)
( i) ( D)
or
( a)
( 1)
( i) ( E)
of
Rule 144A, or
a trust fund referred to
in paragraph ( a)
(1 ) ( i) ( F)
of
Rule 144A that holds the assets of
such a plan;
(
iii) was not formed
for
the purpose of
investing in WaMu Delaware;
(
iv)
will hold at
least $300,000 liquidation preference of
Trust Securities ( i. e.,
at
least three Trust Securities) and transfer at
least $100,000 liquidation preference of
Trust Securities ( i. e.,
at
least one Trust Security) in the case of
each initial investor,
and will hold and transfer at
least $100,000 liquidation preference of
Trust Securities
( i. e.,
at
least one Trust Security) in the case of
each subsequent investor;
( v)
will provide notice of
the transfer restrictions described in this " Notice to
Investors" to any subsequent transferees;
v
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00006
(
vi) acknowledges that WaMu Delaware may receive a
list
of
participants holding
positions in the Trust Securities from one or more book- entry depositaries; and
(vii) may not transfer the Trust Securities or
beneficial interests therein except to
a transferee who can make the same representations and agreements as set forth in
this " Notice to Investors" and Amended and Restated Trust Agreement of WaMu
Delaware (the " Trust Agreement") on behalf of
itself and each account
for
which it is
purchasing.
The purchaser acknowledges that the Trust Securities are being offered only in a
transaction not involving any public offering within the meaning of
the Securities Act. The Trust
Securities have not been and will not be registered under the Securities Act and WaMu Delaware
has not been and will not be
registered under the Investment Company Act, and, if in the future
the purchaser decides to offer, resell, pledge or
otherwise transfer the Trust Securities, such
Trust Securities may be offered, resold, pledged or
otherwise transferred only in accordance with
the legend on such Trust Securities described above. The purchaser acknowledges that no
representation is made by WaMu Delaware, the Company or
the Initial Purchasers as
to the
availability of
any exemption under the Securities Act or
any state securities laws
for
resale of
the Trust Securities.
Forced Sale of
Securities
Any transfer of
Trust Securities in breach of
the transfer restrictions set forth in this "Notice
to Investors" and the Trust Agreement will be
of
no force and effect, will be void ab initio, and
will not operate to transfer any rights to the transferee, notwithstanding any instructions to the
contrary to WaMu Delaware,
its Transfer Agent or
any other intermediary.
The purchaser agrees that in the event that WaMu Delaware or
its Transfer Agent
determines in good faith that a holder or
beneficial owner of
the Trust Securities is in breach, at
the time given, of
any of
the representations or
agreements set forth above, WaMu Delaware
shall consider the acquisition of
the Trust Securities or
beneficial interests therein void, of
no
force and effect and will not, at
the discretion of WaMu Delaware, operate to transfer any rights
to the transferee notwithstanding any instructions to the contrary to WaMu Delaware, the
Transfer Agent or
any other intermediary. In addition, WaMu Delaware or
the Transfer Agent may
require such acquirer or
beneficial owner to transfer such Trust Securities or
beneficial interests
therein to a transferee acceptable to WaMu Delaware who is able to and who does make
all
of
the representations and agreements set forth in this " Notice to Investors". Pending such
transfer, such holder will be deemed not to be the holder of such Trust Securities
for
any
purpose, including but not limited to receipt of
dividend and redemption payments on such Trust
Securities or
distributions upon
the
liquidation of WaMu Delaware, and such holder
will
be
deemed to have no interest whatsoever in such Trust Securities except as
otherwise required to
redeem or
sell
its interest therein as
described in this paragraph.
Investment Company Act
In reliance on Section 3(
c)
( 7)
under the Investment Company Act ("Section 3(
c)
( 7)
"),
WaMu Delaware has not registered as
an investment company pursuant to the Investment
Company Act. To
rely on Section 3(
c)
(7), WaMu Delaware must have a " reasonable belief" that
all purchasers of
the Trust Securities (including the Initial Purchasers and subsequent
transferees) are qualified purchasers at
the time of
their purchase of
such securities. WaMuDelaware will establish a reasonable belief
for
purposes of
Section 3 ( c)
( 7)
based upon the
representations deemed made by
the purchasers of
the securities as
se
t
forth under
"- Representations of
Purchasers", the covenants and undertakings of WaMu Delaware
referred to below and the agreements of
the Initial Purchasers relating to the private placement
of the securities pursuant to Rule 144A referred to under "Plan of
Distribution."
vi
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00007
Reminder Notices
Whenever WaMu Delaware sends an annual report or
other periodic report to holders of
the
Trust Securities, it will also send a reminder notice (each, a "Reminder Notice") to the holders of
the Trust Securities. Each Reminder Notice will state that ( i) each holder of
a Trust Security ( or
an interest in a Trust Security) must be able to make the representations set forth above in
paragraphs ( B)
and ( G)
(
iv) under "- Representations of Purchasers" (the " 3(
c)
( 7)
Representations"), (
ii) the Trust Securities ( or
interests in the Trust Securities) are transferable
only to purchasers deemed to have made the 3 ( c)
( 7)
Representations and to have satisfied the
other transfer restrictions applicable to the securities, (
Hi)
if any prospective transferee of
the
Trust Securities ( or
an interest in the Trust Securities) is determined not to be a qualified
purchaser, then WaMu Delaware will have the right (exercisable in its sole discretion) to refuse
to honor such transaction, and (
iv)
if any security holder ( or
any holder of
an interest in a
security) is determined not to be a qualified purchaser, then WaMu Delaware will have the right
(exercisable in its sole discretion) to treat the transfer to such purchaser as
null and void and
require such purchaser to sell
all
of
its securities (and
all
interests therein) to a transferee
designated by WaMu Delaware at
the then current market price therefor. WaMu Delaware will
send a copy of
each annual or
other periodic reports (and each Reminder Notice) to DTC with a
request that participating organizations in DTC (" DTe Participants") forward them to the security
holders or
holders of
an interest in Trust Securities.
DTC Actions with respect to the Trust Securities
WaMu Delaware will direct DTC to take the following steps in connection with the Trust
Securities:
• to include the " 3cT' marker and, in lieu of
the "GABS" marker or
otherwise, the " GRLS"
marker in the DTC 20-character security descriptor, and the 48-character additional
descriptor
for
the Trust Securities in order to indicate that sales are limited to Qualified
Purchasers;
• to cause ( i) each physical DTC delivery order ticket delivered by DTC to purchasers to
contain the 20-character security descriptors and (
ii) each DTC delivery order ticket
delivered by DTC to purchasers in electronic form to contain the " 3cT' and "GRLS"
indicators and the related user manual
for
participants, which will contain a description of
relevant restrictions;
• to send, on
or
prior to the closing date of
this Offering, an
" Important Notice" to all DTC
Participants in connection with the Offering of
the securities. WaMu Delaware may
instruct DTC from time to time (but not more frequently than every six months) to
reissue the " Important Notice";
• to include WaMu Delaware in DTC's " Reference Directory" of
Section 3(
c)
( 7)
offerings;
• to include in all
" confirms" of
trades of
the Trust Securities in DTC, CUSIP numbers with
a " fixed field" attached to the CUSIP number that has the " 3cT' and "GRLS" markers;
and
• to deliver to WaMu Delaware from time to time a
list
of
all DTC Participants holding an
interest in the securities.
vii
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Euroclear Actions with respect to the Trust Securities
WaMu Delaware will instruct Euroclear Bank S.
A./
N.
V., as
operator of
the Euroclear System
("Euroclear"), to take the following steps in connection with the Trust Securities:
• to reference "144A 13
( c)
(
7)"
as part of
the security name in the
Euroclear securities
database;
• in each daily securities balances report and daily transactions report to Euroclear
participants holding positions in the
Trust Securities, to include "144A 13
( c)
(
7)"
in the
securities namefor
the Trust Securities;
• periodically (and at
least annually) to send to the Euroclear participants holding positions
in the Trust Securities an electronic " Important Notice" outlining
the
restrictions
applicable to 3 ( c)
( 7)
securities;
• to deliver to WaMu Delaware from time to time, upon
its request, a list of
all Euroclear
participants holding an interest in the Trust Securities; and
• to include the 3 ( c)
( 7) marker in the name of
the Trust Securities in lists distributed by
Euroclear monthly to its participants showing
all securities accepted within the Euroclear
securities' database.
Clearstream Actions with respect to the Trust Securities
WaMu Delaware will instruct Clearstream Banking, societe anonyme ("Clearstream") to
take the following steps in connection with the Trust Securities:
• to reference "144A 13
( c)
(7)" as
part of
the security name in the Clearstream securities
database;
• in each daily portfolio report and daily settlement report to Clearstream participants
holding positions in the Trust Securities, to include " 144A/ 3(
c)
(7)" in the securities
name
for
the Trust Securities;
• periodically (and at
least annually) to send to the Clearstream participants holding
positions in the Trust Securities an electronic " Important Notice" outlining the restrictions
applicable to 3 (c ) ( 7)
securities;
• to deliver to WaMu Delaware from time to time, upon
its request, a
list
of
all Clearstream
participants holding an interest in the Trust Securities; and
• to include the 3(
c)
( 7)
marker in the name of
the Trust Securities in the continuously
updated
list
made available by
Clearstream to its participants showing
all
securities
accepted within the Clearstream securities' database and to include the 3 ( c)
( 7)
marker
in the name of
the Trust Securities.
Bloomberg Screens, etc.
WaMu Delaware will from time to time request
all third- party vendors to include on screens
maintained by such vendors appropriate legends regarding Rule 144A and Section 3 ( c)
( 7)
restrictions on the Trust Securities. Without limiting the foregoing, the Initial Purchasers will
request that Bloomberg, L.
P.
include the following on each Bloomberg screen containing
information about the securities as
applicable:
• the bottom of
the " Security Display" page describing the Trust Securities should state:
" Iss'd under 144A/ 3cT' and " GRLS";
viii
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•
the
" Security Display" page should have a flashing red indicator stating " Additional Note
Pg";
• such indicator
for
the Trust Securities should link to an
"Additional Security Information"
page, which should state that the Trust Securities " are being offered in reliance on
the
exception from registration under Rule 144A of
the Securities Act of
1933, as amended
(the "Securities Act") to persons that are ( i) " qualified institutional buyers" as defined in
Rule 144A under
the
Securities Act, and (
ii) "qualified purchasers" as defined under
Section 2 ( a)
(51) of
the Investment Company Act of
1940, as amended";
• the " Disclaimer" pages
for
the Trust Securities should state that the securities " have not
been and will not be
registered under the Securities Act of
1933, as
amended, and
Washington Mutual Preferred Funding Trust I has not been registered under the
Investment Company Act of 1940, as amended (the " Investment Company Act"), and the
Fixed-
to-
Floating Rate Perpetual Non- cumulative Trust S~ curities may not be offered or
sold absent an applicable exemption from registration requirements and any such offer
and sale of
these securities must be
in accordance with Section 3 ( c)
( 7)
of
the
Investment Company Act".
CUSIP
WaMu Delaware will cause each " CUSIP" obtained
for
a Global Security to have an
attached " fixed field" that contains " 3cT', "GRLS" and "144A" indicators.
Legends
WaMu Delaware
will
no
t
remove
the
legend
se
t
forth in "- Representations of
Purchasers"
at
any time.
ix
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00010
SPECIAL NOTE REGARDING FORWARD- LOOKING STATEMENTS
This offering circular and the documents incorporated herein by
reference qontain certain
" forward- looking statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 with respect to financial condition, results of
operations, and other matters. Statements
in this offering circular, including those incorporated herein by reference, that are
no
t
historical
facts are " forward- looking statements" for the purpose of
the safe harbor provided by
Section 21E of
the Exchange Act and Section 27A of
the Securities Act. Forward- looking
statements can be
identified by the fact that they do not relate strictly to historical or
current
facts. They often include words, such as
" expects", "anticipates", " intends", "plans",
"believes", " seeks", "estimates" or
words of
similar meaning, or
future or
conditional verbs,
such as
"will", " should", "could" or
" may".
Forward- looking statements provide WMl's or
WMB's ( as
applicable) expectations or
predictions of
future conditions, events or
results. They are not guarantees of
future
performance. By
their nature forward- looking statements are subject to risks and uncertainties.
These statements speak only as
of
the date they are made. WMI and WMB do
not undertake to
update forward- looking statements to reflect the impact of
circumstances or
events that arise
after the date the forward- looking statements were made. There are a number of
factors, many
of
which are beyond WMl's or
WMB's ( as
applicable) control, that could cause actual
conditions, events or
results to differ significantly from those described in the forward- looking
statements. The factors are generally described in WMI's or
WMB's ( as
applicable) most recent
Form 10-K and Form 10-Q under the caption "Risk Factors."
x
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00011
WHERE YOU CAN FIND MORE INFORMATION
WMI files annual, quarterly and current reports, proxy statements and other information with
the Securities and Exchange Commission (the " SEe"). You may read and copy, any document
that WMI files with the SEC at
the SEC's public reference room in Washington, D.
C.
Please call
the SEC at
1-
800-SEC- 0330
for
further information on the public reference room. In addition,
WMI's SEC filings are available to the public at
the SEC's web site at
http:// www. sec. gov. You
can also inspect reports, proxy statements and other information about WMI at
the offices of
the
New York Stock Exchange, 20 Broad Street, New York, New York.
This offering circular incorporates by reference certain information that WMI files with the
SEC. The information incorporated by reference is considered to be a part of
this offering circular
and should be read with the same care. When WMI updates
the
information contained in
documents that have been incorporated by
reference by making future filings with the SEC, the
information incorporated by
reference in this offering circular is considered to be
automatically
updated and superseded. In other words, in the case of
a conflict or
inconsistency between
information with respect to WMI contained in this offering circular and information incorporated
by
reference into this offering circular, you should rely on the information contained in the
document that was filed later. WMI incorporates by
reference the documents listed below and
any documents it files with the SEC in the future under Sections 13
(
a),
13(
c),
14, or
15
( d)
of
the Exchange Act until the Offering is completed:
• Annual Report on Form 10-K
for
the year ended December 31, 2004;
• Quarterly Reports on Form 10-Q
for
the quarterly periods ended March 31, 2005,
June 30, 2005 and September 30, 2005; and
• Current Reports on Form 8-
K dated January 6,
2005, January 14, 2005, January 20, 2005,
January 24, 2005, February 18, 2005, February 22, 2005, March 2,
2005, March 22, 2005,
March 23, 2005, April 19, 2005, June 7, 2005, June 9, 2005, June 24, 2005, July 6, 2005,
July 20, 2005, July 25, 2005, September 8,
2005, September 23, 2005, September 26,
2005, October 4,2005, October
19
,
2005, October 27,2005, November 2,2005,
December 23, 2005, January 18, 2006, January 23, 2006, February 7,
2006 and
February 21, 2006. The press release text of
WMI dated January 18, 2006 and the
financial supplement of
WMI, included as
Exhibits 99.1 and 99.2 to WMI's Current Report
on Form 8-
K,
dated January 18, 2006, are incorporated by
reference in this offering
circular notwithstanding that such Current Report provides that the press release and
financial statements were " furnished" but not " filed" under the Exchange Act. Please
note that the information included in the January 18, 2006 Current Report on Form 8-
K
has not been audited by
Deloitte & Touche LLP, WMI's independent registered public
accountants.
WMB files annual and quarterly reports and other information with the OTS. You may read
and copy these reports and other non-confidential information that WMB files with the OTS at
the
OTS's offices at 1700 G Street, NW., Washington, D.
C.
20552. In addition, WMB's most recent
periodic filings with the OTS are available to the investors at WMI's website at
http:// www. wamu. com
fir and then clicking the "Fixed Income" button.
This offering circular incorporates by
reference certain information that WMB files with the
OTS. The information incorporated by
reference is considered to be a part of
this offering circular
and should be read with the same care. When WMB updates the information contained in
documents that have been incorporated by
reference by making future filings with the OTS, the
information incorporated by
reference in this offering circular is considered to be
automatically
updated and superseded. In other words, in the case of
a conflict or
inconsistency between
information with respect to WMB contained in this offering circular and information incorporated
by
reference into this offering circular, you should rely on the information contained in the
xi
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00012
document that was filed later. WMB incorporates by
reference the documents listed below and
any documents it files with the OTS in the future under Sections 13
(
a),
13
( c ), 14, or
15( d)
of
the Exchange Act or
regulations of
the OTS to substantially similar effect until the Offering is
completed:
• Annual Report on Form 10-K
for
the year ended December 31, 2004; and
• Quarterly Reports on Form 10-Q
for
the quarterly periods ended March 31, 2005,
June 30, 2005 and September 30, 2005.
This offering circular also incorporates herein by
reference certain other information that
WMB submits to the OTS. WMB submits to the OTS quarterly reports regarding WMB's financial
condition and operations on OTS Form 1313 entitled ' Thrift Financial Report" (each, a "Thrift
Financial Report" and collectively, the "Thrift Financial Reports"). Each Thrift Financial Report
consists of
a Consolidated Statement of
Condition, Consolidated Statement of
Operations,
Consolidated Cash Flow Information, Consolidated Capital Requirements and other supporting
schedules as
of
the end of
the period to which the report relates. The Thrift Financial Reports
are prepared in accordance with regulatory instructions issued by
the OTS. These regulatory
instructions in most, but not all, cases follow generally accepted accounting principles in the
United States (" GAAP") or
the opinions and statements of
the Accounting Principles Board or
the Financial Accounting Standards Board. While the Thrift Financial Reports are supervisory and
regulatory documents, not previously accounting documents, and do not provide a complete
range of
financial disclosure about WMB, the reports nevertheless provide important information
concerning WMB's financial condition and operating results. In addition, WMB's Thrift Financial
Reports are not audited. The non-confidential portions of
Thrift Financial Reports filed by WMB
are on
file with, and are publicly available upon written request to the Office of
Thrift Supervision,
FOIA, 1700 G Street, NW., Washington, D.
C.
20552, Attention: Dissemination Branch and are
also available at
the U.
S.
Federal Deposit Insurance Corporation's (the " FDIC") web site at
http:// www. fdic. gov.
You may request a copy of
these filings, other than an exhibit to a filing unless that exhibit
is specifically incorporated by reference into that filing, at
no cost, by writing to or
telephoning
WMI
at:
1201 Third Avenue
Seattle, Washington 98101
(206) 461- 3187
INDEX OF TERMS
An
index of
terms used in this offering circular with specific meanings appears on the inside
back cover of
this offering circular.
xii
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00013
OFFERING CIRCULAR SUMMARY
The following summary is qualified in its entirety by the detailed information appearing
elsewhere in this offering circular, in particular, the information under the headings "Description of
the
Trust Securities" and "Description of
the
Fixed-
to-
Floating Rate Company Preferred Securities, "
which describe the terms and conditions of
the securities offered hereby.
Introduction
The Fixed-
to-
Floating Rate Perpetual Non- cumulative Trust Securities, liquidation preference
$100,000 per security (the " Trust Securities"), are being issued by
Washington Mutual Preferred
Funding Trust I ("WaMu Delaware") in a financing transaction that raises capital for Washington
Mutual Bank ("WMB"). WMB is a subsidiary of
Washington Mutual, Inc. ("WMI"). WMI and
its
affiliates are referred to herein as the " WMI Group".
WaMu Delaware will invest the proceeds of
the Trust Securities in a like amount of
Fixed-
to-
Floating Rate Perpetual Non- cumulative Preferred Securities, liquidation preference
$1,000 per security (the "Fixed-
to-
Floating Rate Company Preferred Securities"), of
Washington
Mutual Preferred Funding LLC, a Delaware limited liability company (the "Company"). WaMuDelaware will have n
o assets other than the Fixed-to
-Floating Rate Company Preferred
Securities. Dividends paid and redemption and liquidation payments made by the Company on
the Fixed-
to-
Floating Rate Company Preferred Securities will pass through WaMu Delaware as
distributions and redemption and liquidation payments on the Trust Securities. The Company's
initial material assets will consist of
direct or
indirect interests in mortgages or
mortgage- related
assets originated by WMB as described under " The Company - Business of
the Company-
Assets of
the Company" and '' The Asset Trust."
The Trust Securities are being offered in reliance upon Rule 144A under the U.
S.
Securities
Act of
1933, as amended (the " Securities Act") only to persons who are " qualified institutional
buyers" within the meaning of
144A and "qualified purchasers" within the meaning of
Section 2(
a)
(51) of
the U.
S.
Investment Company Act of
1940, as amended the (the
" Investment Company Act"). Resales of
the Trust Securities are subject to restrictions as
described under "Notice to Investors".
By a separate offering circular dated the date of
this offering circular, Washington Mutual
Preferred Funding (Cayman) I Ltd., a Cayman Islands exempted company limited by shares
("WaMu Cayman"), is offering 3,023 of
its 7.25% Perpetual Non- cumulative Preferred Securities,
Series A-
1,
liquidation preference $100,000 per security and $302,300,000 in the aggregate (the
" Series A-
1 WaMu Cayman Preferred Securities"), and 44,770 of
its 7.25% Perpetual Non-
cumulative Preferred Securities, Series A-
2,
liquidation preference $10,000 per security and
$447,700,000 in the aggregate (the "Series A-
2 WaMu Cayman Preferred Securities" and,
together with the Series A-
1 WaMu Cayman Preferred Securities, the " WaMu Cayman Preferred
Securities"). WaMu Cayman will invest the proceeds of
the WaMu Cayman Preferred Securities
in a like amount of
7.25% Perpetual Non-cumulative Preferred Securities, liquidation preference
$1,000 per security and $750,000,000 in the aggregate (" Fixed Rate Company Preferred
Securities" and, together with the Fixed- to-Floating Rate Company Preferred Securities, the
" Company Preferred Securities"). The terms of
the Fixed Rate Company Preferred Securities
are
substantially identical to the Fixed-
to-
Floating Rate Company Preferred Securities except
for
the
dividend rate. The Series A-
1 WaMu Cayman Preferred Securities are being offered and sold only
in the United States and only to U.
S.
persons and the Series A-
2 WaMu Cayman Preferred
Securities are being offered and sold only to non- U.
S.
persons in transactions outside the United
States. They are not being offered by
this offering circular. The Trust Securities are not
exchangeable
for
the WaMu Cayman Preferred Securities, or
vice versa.
1
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00014
WMB has asked
for
confirmation from the Office of
Thrift Supervision (together with any
successor regulator, the " OTS") that the Company Preferred Securities constitute core capital of
WMB under the OTS' applicable regulatory capital regulations and, upon receipt . of such
confirmation, intends to treat the Company Preferred Securities accordingly.
If the OTS so directs following the occurrence of
an Exchange Event, each Trust Security
will be automatically exchanged
for
a like amount of
Fixed-
to-
Floating Rate Depositary Shares
each representing 111000th of
a share of
WMI's Series I Perpetual Non-cumulative Fixed-
to-
Floating Rate Preferred Stock, no par value and liquidation preference $1,000,000 per share (the
"Fixed-
to-
Floating Rate WMI Preferred Stock"), as
described below in this summary under
"- The Offering - Conditional Exchange." Upon a Conditional Exchange, the WaMu Cayman
Preferred Securities will also be automatically exchanged, but
for
depositary shares representing
a different series of
WMI's preferred stock, having substantially equivalent terms (with certain
exceptions) as
to dividends, liquidation preference and redemption preference as
the Fixed Rate
Company Preferred Securities.
This offering circular uses the term " like amount" in describing the number of
Fixed-
to-
Floating Rate Company Preferred Securities in which a holder of
Trust Securities has a beneficial
interest and in describing the number of
Fixed-
to-
Floating Rate Depositary Shares, each
representing a 1/
1 OOOthof interest in one share of
Fixed-
to-
Floating Rate WMI Preferred Stock
for
which the Trust Securities will be exchanged upon a Conditional Exchange. The term " like
amount" means:
• when describing the number of
Fixed-
to-
Floating Rate Company Preferred Securities in
which a holder of
Trust Securities has a beneficial interest, the number of
Fixed-
to-
Floating Rate Company Preferred Securities that has the same aggregate
liquidation preference as
the Trust Securities to which the reference is being made ( e.
g.,
1,000 Fixed-
to-
Floating Rate Company Preferred Securities with an aggregate liquidation
preference of $1,000,000 are a " like amount"
for
10 Trust Securities having an aggregate
liquidation preference of $1,000,000); and
• when describing the number of
Fixed-
to-
Floating Rate Depositary Shares
for
Fixed-
to-
Floating Rate WMI Preferred Stock with which Trust Securities will be exchanged upon a
Conditional Exchange, a number of
Fixed-
to-
Floating Rate Depositary Shares each
representing 111000th of
an
interest in one share of
Fixed-
to-
Floating Rate WMIPreferred Stock having a liquidation preference equal to the liquidation preference o
f
the
Trust Securities that are being exchanged ( e.
g., 1,000 Fixed-
to-
Floating Rate Depositary
Shares representing Fixed-
to-
Floating Rate WMI Preferred Stock with an aggregate
liquidation preference of
$1,000,000 are a " like amount"
for
10 Trust Securities having an
aggregate liquidation preference of
$1,000,000).
The offering of
the Trust Securities and the related issuance of
the Fixed-
to-
Floating Rate
Company Preferred Securities a.
re referred to herein as the " Offering".
2
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00015
The following diagram outlines the relationship among WMI, WMB, University Street, the
Company, the Asset Trust, WaMu Delaware, WaMu Cayman, purchasers of
the Trust Securities
and purchasers of
the WaMu Cayman Preferred Securities:
University Street!')
Conditional
1 Exchange
1
1
111
1
I
IIII
I11
1
I
II1
I11
111
..
- 1
Proceeds
Assets
Fixed Rate Company
Preferred Securities!')
Assets
100%
Common
Interest
Proceeds
11
11
1
I
: Proceeds WaMu Cayman
: Preferred Securities
11
11
'--------
Conditional
Exchange
( 1) New American Capital, Inc., not shown here, is WMB's direct parent.
( 2)
Marion Holdings, Inc., no
t
shown here, is University Street's direct parent.
(3) Transferred by WMB to WaMu Cayman.
( 4)
Transferred by WMB to WaMu Delaware.
3
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00016
WaMu Delaware
Washington Mutual Preferred Funding Trust I is a statutory trust created under
the
Delaware
Statutory Trust Act on February 23, 2006
for
the purposes set forth below in " WaMu Delaware."
The Fixed-
to-
Floating Rate Company Preferred Securities will be the only assets of WaMu
Delaware. Under the Trust Agreement, WaMu Delaware is prohibited from issuing any securities
other than the Trust Securities.
Subject to the limitations and assumptions described under " Certain U.
S.
Federal Income
Tax Considerations," WaMu Delaware
will
be
treated as
a grantor trust
for
United States Federal
income tax purposes, with the result that holders of
Trust Securities will be treated as
beneficial
owners of
Fixed-
to-
Floating Rate Company Preferred Securities
for
United States Federal income
tax purposes.
The Company
Washington Mutual Preferred Funding LLC is a Delaware limited liability company formed on
February 3,
2006
for
the purpose of
( i) issuing the Fixed-
to-
Floating Rate Company Preferred
Securities to WaMu Delaware, the Fixed Rate Company Preferred Securities to WaMu Cayman,
the common securities of
the Company (the " Company Common Securities") to University
Street, Inc., an
indirect subsidiary of WMB ("University Street"), and additional Parity Equity
Securities or
Junior Equity Securities subject to certain limitations described in this offering
circular, (
ii) acquiring and holding Eligible Investments and (
Hi) performing functions necessary
or
incidental thereto.
The Fixed Rate Company Preferred Securities rank pari passu with the Fixed-
to-
Floating
Rate Company Preferred Securities as
to dividends and upon liquidation of
the Company. The
terms of
the
Fixed Rate Company Preferred Securities are substantially identical to the
terms of
the Fixed-
to-
Floating Rate Company Preferred Securities other than with respect to the rate
applicable to dividends or
distributions thereon. The Fixed Rate Company Preferred Securities
will,
if, when and as
declared by
the Company's Board of
Managers, pay dividends at
an annual
rate of
7.25%.
University Street will own
all
of
the Company Common Securities. The Eligible Investments
owned by
the Company from time to time will generate net income
for
payment by
the Company
to WaMu Delaware as
dividends on
the
Fixed-
to-
Floating Rate Company Preferred Securities
(and consequently
for
pass through by WaMu Delaware as
distributions to the holders of
the
Trust Securities), to WaMu Cayman as
dividends on the Fixed Rate Company Preferred
Securities (and consequently
for
payment by WaMu Cayman as
dividends to holders of
the
WaMu Cayman Preferred Securities) and to University Street as
dividends on
the Company
Common Securities.
Subject to the
limitations and assumptions described under "Certain U.
S.
Federal Income
Tax Considerations," the Company intends to be treated as a partnership (other than a publicly
traded partnership taxable as
a corporation)
for
United States Federal income
tax
purposes and
will receive the opinion of
Mayer, Brown, Rowe & Maw LLP to the effect that,
for
United States
Federal income tax purposes, the Company will not be treated as
an association taxable as a
corporation or
as
a publicly traded partnership taxable as
a corporation.
The Company will be managed by
a Board of
Managers. The Company's Board of
Managers will have three members, one of
whom is not, and has not been during the preceding
five years, an
officer or
employee of WMI or
any affiliate of
WMI, other than a financing
subsidiary (
the
" Independent Manager").
4
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00017
Initial Conveyances
In connection with the Offering, WMB will convey a portfolio of
first lien, closed-end, fixed
rate home equity loans (" HELs") to the Company in exchange
for
100% of
the Company
Preferred Securities. Concurrently with such transfer by WMB, University Street will convey a
portfolio of
HELs to the Company in exchange
for
100% of
the Company Common Securities.
The portfolio conveyed by WMB and University Street to the Company will consist of
approximately $5,389,459,150 of HELs in the aggregate. The Company will convey 100% of the
HELs that it owns to the Asset Trust in exchange
for
the Class A Asset Trust Certificate of
the
Asset Trust. WMB will then sell
the
Fixed-
to-
Floating Rate Company Preferred Securities and
the
Fixed Rate Company Preferred Securities
for
cash to WaMu Delaware and WaMu Cayman,
respectively.
University Street
University Street, Inc. is a Washington corporation. It has elected to be treated as a real
estate investment trust
for
United States Federal income tax purposes. University Street will hold
100% of
the Company Common Securities which represent 100% of
the voting rights in the
Company (subject to the limited rights of
holders of
the Company Preferred Securities described
herein).
The Asset Trust
Washington Mutual Home Equity Trust I is a Delaware statutory trust formed pursuant to a
trust agreement, to be entered into on
or
before the closing date, between the Company, as
depositor, and Deutsche Bank Trust Company Delaware, as Delaware trustee (the " PSA
Delaware Trustee"). The Pooling and Servicing Agreement among the Company, WMB, as
servicer, Deutsche Bank Trust Company Delaware, as Delaware trustee, and Deutsche Bank
National Trust Company, as Trustee (the " Pooling and Servicing Agreement"), will restate the
trust agreement and will be the governing instrument of
the Asset Trust. The Asset Trust will
make an election to be treated as a real estate mortgage investment conduit ("REMIC")
for
United States Federal income tax purposes.
The initial assets of
the Asset Trust will consist of
the portfolio of
HELs to be conveyed by
the Company to the Asset Trust in connection with the Offering. The HELs were originated by
WMB primarily through
its retail branches between September 2001 and September 2005. As
of
January 31, 2006, the HELs to be transferred into the Asset Trust had an aggregate unpaid
principal balance of
approximately $5,389,459,150.
WMI
With a history dating back to 1889, Washington Mutual, Inc., a Washington corporation, is a
retailer of
financial services to consumers and small businesses. Based on
its consolidated
assets on September 30, 2005, WMI was the largest thrift holding company in the United States
and the seventh largest among
all
U.
S.-based bank and thrift holding companies. As
of
September 30, 2005, WMI, together with
its subsidiaries, had total assets of
approximately
$333.6 billion, total liabilities of
approximately $311.0 billion and total stockholders' equity of
approximately $22.6 billion. As
of September 30, 2005, WMI and
its subsidiaries also had total
deposits of
approximately $190.4 billion. WMI's common stock is listed on the New York Stock
Exchange under the symbol " WM". The principal business offices of WMI are located at
1201
Third Avenue, Seattle, Washington 98101 and
its telephone number is 206-461-2000.
WMB
Washington Mutual Bank (formerly known as Washington Mutual Bank, FA) is a federally
chartered savings association, chartered and operating under the United States Home Owners'
5
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00018
Loan Act of
1933, as amended. WMB engages in mortgage banking, consumer banking and
small business banking. WMB, as
a federally chartered association, has the authority to make
various types of
loans, including loans secured by homes and commercial real estate, secured
and unsecured consumer loans, and secured and unsecured commercial loans. As a federal
savings association, WMB is subject to regulation and examination by
the OTS,
its primary
regulator. WMB is an
indirect wholly-owned subsidiary of
WMI.
Prior to 2004, WMB had two sister depositary institutions which were both owned directly
by
WMI. WMB has since acquired both of
these sister institutions. One of
these institutions,
Washington Mutual Bank fsb, a federal savings bank, became a wholly-owned subsidiary of
WMB on February 1,
2004. The other institution, Washington Mutual Bank, a savings bank
chartered under the laws of
the state of
Washington, converted into a federally chartered savings
bank and then was merged into WMB on January 1,
2005.
6
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00019
The Offering
Issuer As
to the Trust Securities, Washington Mutual Preferred
Funding Trust I, a Delaware statutory trust.
As
to the Fixed-
to-
Floating Rate Company Preferred Secu-
rities, Washington Mutual Preferred Funding LLC, a Dela-
ware limited liability company.
As
to the Fixed-
to-
Floating Rate WMI Preferred Stock
(which will be represented by
the Fixed-
to-
Floating Rate
Depositary Shares)
for
which the Trust Securities will be
exchanged upon the occurrence of a Conditional Ex-
change, Washington Mutual, Inc., a Washington
corporation.
Offered Securities Fixed-
to-
Floating Rate Perpetual Non-cumulative Trust Se-
curities, liquidation preference $100,000 per security and
$1,250,000,000 in the aggregate, issued by WaMu
Delaware.
Dividends. . . . . . . . . . . . . . . . . . . . . . . . Dividends on the Fixed-
to-
Floating Rate Company Pre-
ferred Securities will be passed through by WaMu Dela-
ware as
distributions on the Trust Securities on each date
on which the Company pays to WaMu Delaware dividends
on
the Fixed-
to-
Floating Rate Company Preferred Securi-
ties, in an amount per Trust Security equal to the amount
of
dividends received by WaMu Delaware on a like amount
of
Fixed-
to-
Floating Rate Company Preferred Securities
(including Additional Amounts, if any).
For purposes of
this offering circular, we refer to distribu-
tions payable by
the Company on
its securities as
" divi-
dends". Dividends on the Fixed-
to-
Floating Rate Company
Preferred Securities are payable as
follows:
Dividend Rate. Dividends on the Fixed-
to-
Floating Rate
Company Preferred Securities will accrue at
a rate per
annum equal to 6.534% until March 15, 2011 and 3-
month
USD L1BOR plus 1.4825%
for
the Dividend Period starting
in March, 2011 and each Dividend Period thereafter applied
to the liquidation preference of
$1,000 per Fixed-
to-
Floating Rate Company Preferred Security.
Dividend Payment Dates. If declared by
the Company's
Board of Managers, the Dividend Payment Dates
for
the
Fixed-
to-
Floating Rate Company Preferred Securities will
be ( i) March 15, June
15
,
September 15 and December 15
of
each year commencing on June 15, 2006 and through
and including March 15, 2011, and (
ii) each March 15,
June 15, September 15 and December 15 thereafter, or
in
each case the next Business Day if any such day is not a
Business Day.
Declaration of
Dividends, etc. Dividends on the Fixed-
to-
Floating Rate Company Preferred Securities when, as and
if declared by
the Company's Board of
Managers out of
7
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00020
Redemption / Replacement Capital
Covenant .
legally available funds, will be payable at
the applicable
dividend rate applied to the liquidation preference per
Fixed-
to-
Floating Rate Company Preferred Security accru-
ing on a non-cumulative basis on each such security as
follows: ( i) from March 7, 2006 in the case of
the
Fixed-
to-
Floating Rate Company Preferred Securities
of-
fered hereby and (
ii)
if additional Fixed-
to-
Floating Rate
Company Preferred Securities are issued at
a future date,
from ( A)
March 7,
2006 if such date is before the Dividend
Payment Date in June 2006, ( B)
the date of
issue if such
date is a Dividend Payment Date and ( C)
either the
immediately preceding Dividend Payment Date or
the date
of
issuance as
determined by
the Company if the date of
issuance is other than a Dividend Payment Date and is
after the Dividend Payment Date in June 2006. Any such
dividends will be distributed to holders of
Fixed-
to-
Floating
Rate Company Preferred Securities in the manner de-
scribed under "Description of
the Fixed-
to-
Floating Rate
Company Preferred Securities - Dividends."
Non-cumulative Dividends. Dividends on the Fixed-
to-
Floating Rate Company Preferred Securities are not cumu-
lative. Accordingly, in the event dividends are not declared
on the Fixed-
to-
Floating Rate Company Preferred Securi-
ties
for
payment on any Dividend Payment Date, then any
accrued dividends will cease to accrue and be payable. If
the Company's Board of
Managers has not declared a
dividend before the Dividend Payment Date
for
any Divi-
dend Period, the Company will have no
obligation to pay
dividends accrued
for
such Dividend Period after the
Dividend Payment Date
for
that Dividend Period, whether
or
not dividends on the Fixed-
to-
Floating Rate Company
Preferred Securities or
the Company Common Securities
are declared
for
any future Dividend Period.
General. On each day on which the Company redeems
Fixed-
to-
Floating Rate Company Preferred Securities,
WaMu Delaware will apply the redemption proceeds it
receives on the Fixed-
to-
Floating Rate Company Preferred
Securities to redeem a like amount of
Trust Securities. The
redemption provisions of the Fixed-
to-
Floating Rate Com-
pany Preferred Securities are described below.
Subject to a covenant in favor of
certain of
WMI's
debtholders limiting WMl's and
its subsidiaries' right to
repurchase or
redeem the Fixed-
to-
Floating Rate Company
Preferred Securities or
the Trust Securities (among
others) as
described in the next paragraph, and subject to
the Company having received the prior approval of
the
OTS
for
any proposed redemption of
Fixed-
to-
Floating
Rate Company Preferred Securities, the Company may, at
8
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00021
its option, redeem the Fixed-
to-
Floating Rate Company
Preferred Securities:
• in whole but not in part, prior to the Dividend Payment
Date in March 2011, if a Tax Event, an Investment
Company Act Event or
a Regulatory Capital Event
occurs. The cash redemption price will be the greater of
( i) $1,000 per Fixed-
to-
Floating Rate Company Pre-
ferred Security or
(
ii) the sum of
present values of
$1,000 per Fixed-
to-
Floating Rate Company Preferred
Security and
all undeclared dividends
for
the Dividend
Period from the redemption date to and including the
Dividend Payment Date in March 2011, discounted to the
redemption date on a quarterly basis (assuming a
360-day year consisting of
twelve 3D-day months) at
the
Treasury Rate, as
calculated by
an Independent Invest-
ment Banker, plus 0.30%,
plus any declared and unpaid dividends to the redemp-
tion date; or
• in whole or
in part, on
or
after the Dividend Payment
Date in March 2011, at a cash redemption price of
$1,000
pe
r
Fixed-to-
Floating Rate Company Preferred
Security, plus any declared and unpaid dividends to the
redemption date, without accumulation of
any undeclared
dividends.
See "Description of
Fixed-
to-
Floating Rate Company Pre-
ferred Securities - Redemption."
Restriction on Redemption or Repurchases. At
or
prior to
initial issuance of
the Trust Securities, WMI will enter into a
" Replacement Capital Covenant" as
described under
" Description of
the Trust Securities - Restriction on Re-
demption or
Repurchases." In the Replacement Capital
Covenant, WMI will covenant in favor of
certain of
its
debtholders that, if WMI or
a subsidiary repurchases or
redeems any Trust Securities, WaMu Cayman Preferred
Securities or
Company Preferred Securities
or,
after a
Conditional Exchange, Fixed-
to-
Floating Rate Depositary
Shares ( or
related Fixed-
to-
Floating Rate WMI Preferred
Stock), WMI or
its subsidiaries will do
so only if and to the
extent that the total redemption or purchase price is equal
to or
less than designated percentages of
the
ne
t
cash
proceeds that WMI or
its subsidiaries have received during
the 180 days prior to such redemption or
repurchase from
the issuance of
other securities or
combinations of
securi-
ties having the characteristics described under "Descrip-
tion of
the Trust Securities - Restriction on Redemption or
Repurchases.' ,
Ranking. . . . . . . . . . . . . . . . . . . . . . . . .. Trust Securities. The Trust Securities will be the only
securities issued by WaMu Delaware. The Amended and
Restated Trust Agreement of WaMu Delaware (the " Trust
9
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00022
Agreement") will provide that WaMu Delaware will not
issue any other securities.
Fixed-
to-
Floating Rate Company Preferred Securities. The
Fixed-
to-
Floating Rate Company Preferred Securities will
rank pari passu with the Fixed Rate Company Preferred
Securities and senior to the Company Common Securities
in terms of
dividends and liquidation payments.
During a Dividend Period, the Company may not declare or
pay any dividends on any of
its Junior Equity Securities
other than dividends payable in Junior Equity Securities, or
repurchase, redeem or
otherwise acquire
for
consideration,
directly or
indirectly, any Junior Equity Securities (other
than as a result of
reclassification of
Junior Equity
Securities
for
or
into other Junior Equity Securities, or
the
exchange or
conversion of
Junior Equity Securities
for
or
into other Junior Equity Securities), unless dividends
for
such Dividend Period on
all outstanding Company Pre-
ferred Securities have been declared and paid in full, or
declared and set aside
for
payment, as
the case may be.
The Company may from time to time issue additional Parity
Equity Securities without the consent of
the holders of
the
Company Preferred Securities, provided that ( i) after
giving effect to such issuance, the pro forma net book
value of
the Company's assets (after giving effect to the
acquisition of
any New Assets in connection with the
issuance of
such Parity Equity Securities) will equal or
exceed 1.5 times the sum of the aggregate liquidation
preference of
the preferred securities of the Company then
outstanding and any such Parity Equity Securities that the
Company proposes to issue, (
ii) after giving effect to such
issuance, the Company's pro forma funds from continuing
operations, or
" FFO", for the four fiscal quarters beginning
with the fiscal quarter in which such Parity Equity Securi-
ties are proposed to be issued (calculated ( A)
assuming
that such proposed Parity Equity Securities are issued and
that, if any Parity Equity Securities (including the Parity
Equity Securities that the Company proposes to issue)
bear dividends based on a floating rate, the applicable
dividend rate will not change during such four fiscal
quarters from the rate in effect on the applicable date of
determination and ( B)
as
adjusted to reflect any New
Assets) equals or
exceeds 150% of
the amount that would
be required to pay full annual dividends on
all preferred
securities of
the Company then outstanding and any such
Parity Equity Securities that the Company proposes to
issue and (
iii) the Company is not otherwise in breach of
any of
its covenants set forth in the LLC Agreement. See
"Description of
the Fixed-
to-
Floating Rate Company Pre-
ferred Securities - Ranking."
In the Exchange Agreement, WMI will covenant in favor of
the holders of the Trust Securities and the WaMu Cayman
10
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00023
Preferred Securities that, if full dividends on
( i) the
Company Preferred Securities, (
ii) the Trust Securities or
(Hi) the WaMu Cayman Preferred Securities
for
any
Dividend Period are not paid, then WMI will not declare or
pay dividends with respect
to,
or
redeem, purchase or
acquire, any of
its equity capital securities during the next
succeeding Dividend Period, except dividends in connec-
tion with a shareholders' rights plan, if any, or
dividends in
connection with benefits plans.
Conditional Exchange. . . . . . . . . . . ..
If the OTS so directs following the occurrence of
an
Exchange Event, each Trust Security will be automatically
exchanged
for
a like amount of
Fixed-
to-
Floating Rate
Depositary Shares representing 1/ 1 OOOthof a share of
WMl's Series I Perpetual Non-cumulative Fixed-
to-
Floating
Rate Preferred Stock (the "Fixed-
to-
Floating Rate Deposi-
tary Shares").
"Exchange Event" means ( i) WMB becoming " undercapi-
talized" under the OTS' "prompt corrective action" regula-
tions, ( H) WMB being placed into conservatorship or
receivership or
(iH) the OTS, in its sole discretion, directing
such exchange in anticipation of WMB becoming "under-
capitalized" in the near term or
taking supervisory action
that limits the payment of
dividends, as
applicable, by
WMB, and in connection therewith, directs such exchange.
The Fixed-
to-
Floating Rate WMI Preferred Stock will have
substantially equivalent terms as
to dividends, redemption
and liquidation preference as
the Fixed-
to-
Floating Rate
Company Preferred Securities, except that: ( i) the
Fixed-
to-
Floating Rate WMI Preferred Stock will not have
the benefit of the covenants described under "Description
of
Fixed-
to-
Floating Rate Company Preferred Securities -
Voting Rights and Covenants;" (
ii) the Fixed- to-Floating
Rate WMI Preferred Stock will be redeemable prior to the
Dividend Payment Date occurring in March 2011 only upon
the occurrence of
a Regulatory Capital Event ( as de-
scribed herein); (
iii) Additional Amounts will not be
payable with respect to the Fixed-
to-
Floating Rate WMIPreferred Stock; and (
iv)
if WMI fails to pay, or
declare
and set aside
for
payment,
full
dividends on
the Fixed-
to-
Floating Rate WMI Preferred Stock
for
six Dividend Peri-
ods, the authorized number of
WMl's directors will
in-
crease by two, and the holders of
Fixed- to-Floating Rate
WMI Preferred Stock, voting together with the holders of
any other equity capital securities of WMI having similar
voting rights, including the Fixed Rate WMI Preferred
Stock, will have the right to elect two directors in addition
to the directors then in office at
the next annual meeting of
shareholders. The Fixed-
to-
Floating Rate WMI Preferred
Stock will be subject to the Replacement Capital Covenant
provisions described under" - Redemption / Replacement
Capital Covenant" above.
11
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00024
Voting Rights and Certain
Covenants .
WMI will covenant in the Exchange Agreement in favor of
the holders of
the Trust Securities that it will not issue any
preferred stock that would rank senior to the
Fixed-
to-
Floating Rate WMI Preferred Stock upon
its issuance. Each
share of
Fixed-
to-
Floating Rate WMI Preferred Stock will,
upon issuance, rank at
least pari passu with the most
senior preferred stock of
WMI, if any, then outstanding.
Except as
set forth below, the holders of
the Fixed-
to-
Floating Rate Company Preferred Securities will not have
voting rights.
The LLC Agreement will provide that, except with the
consent or
affirmative vote of
the holders of
at
least two-
thirds of
the Fixed-
to-
Floating Rate Company Preferred
Securities and
the
Fixed Rate Company Preferred Securi-
ties, voting together as a single class, the Company will
not:
• effect a consolidation, merger or
share exchange with or
into another entity other than an
entity controlled by, or
under common control with, WMI;
• issue any securities of
the Company ranking senior to
the Company Preferred Securities in respect of
pay-
ments of
dividends or
on liquidation to the Company
Preferred Securities (" Senior Equity Securities");
• incur any indebtedness for borrowed money;
• pay dividends on the Company's Junior Equity Securities
unless the Company's FFO
for
the four prior fiscal
quarters equals or
exceeds 150% of
the amount that
would be
required to pay
full
annual dividends on
all
outstanding Company Preferred Securities, as
well as
any other Parity Equity Securities;
• amend or
otherwise change the requirement that the
Company make investments and distributions with the
proceeds of
the Company's assets such that the Com-
pany's FFO over any period of
four fiscal quarters will
equal or exceed 150% of
the amount that would be
required to pay full annual dividends on
all outstanding
Company Preferred Securities, as
well as any other
Parity Equity Securities;
• issue any additional Company Common Securities to any
person, other than University Street or
another affiliate
ofWMI;
• amend or
otherwise change the terms of
any Asset
Documentation in a manner which is materially adverse
to WaMu Delaware or
the holders of
the Trust Securities;
• remove or cause to be removed, as applicable, "Wash-
ington Mutual" from the Company's, WaMu Delaware's
or WaMu Cayman's name unless
the name of WMI
12
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00025
changes and the Company makes a change to the
Company's, WaMu Delaware's and WaMu Cayman's
name to be consistent with the new group name;
• take any action or
fail to take any action that would
cause the Company to fail to be treated as a partnership
(other than a publicly traded partnership taxable as a
corporation)
for
United States Federal income
tax
purposes;
• amend or
otherwise change the requirement that the
Company not engage in a U.
S.
trade or
business
for
United States Federal income tax purposes;
• amend or
otherwise change the requirement that the
Company hold only assets that qualify for the portfolio
interest exemption under the Code and are exempt from
gross basis United States withholding taxes;
• amend or
otherwise change the requirement that the
Company manage
its affairs such that income with
respect to the Trust Securities does not constitute
" unrelated business taxable income"
for
United States
Federal income tax purposes; or
• amend
its Certificate of
Formation or
LLC Agreement in
a manner that materially and adversely affects the terms
of
the Company Preferred Securities; provided, however,
that, if such amendment affects only one class of
Company Preferred Securities, such amendment will
require only the class vote of
the holders of
at
least two-
thirds of
the applicable Company Preferred Securities of
such class (voting separately and not as a single class
with the other class) and, if such amendment affects
both classes but affects them differently, then such
amendment will require a class vote of
each class of
Company Preferred Securities, each voting separately.
In addition, the LLC Agreement will provide that, without
the consent of
all
of
the Managers, including the Indepen-
dent Manager, the Company will not:
• terminate, amend or
otherwise change any Asset
Documentation; or
• effect a consolidation, merger or
share exchange (ex-
cluding the Conditional Exchange) that is not tax- free to
the holders of
the Fixed-
to-
Floating Rate Company
Preferred Securities, and the related Trust Securities,
unless such transaction was approved by
the consent or
affirmative vote of
the holders of
at
least two- thirds of
the Fixed-
to-
Floating Rate Company Preferred Securities
and the Fixed Rate Preferred Securities, voting together
as a single class.
In addition, the LLC Agreement will provide that if ( i) the
Company fails to pay full dividends on the Company
13
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00026
Preferred Securities on any Dividend Payment Date,
(
ii) WaMu Delaware fails to pass through full dividends
paid by
the Company on the Fixed-
to-
Floating Rate
Company Preferred Securities to the holders of
the Trust
Securities on any Dividend Payment Date or
(
iii) a
Bankruptcy Event occurs, the holders of
the Fixed-
to-
Floating Rate Company Preferred Securities and the Fixed
Rate Company Preferred Securities, voting together as a
single class, by
majority vote, are entitled to remove the
initial or
any succeeding Independent Manager and to fill
the vacancy created by such removal or
any other vacancy
existing in the office of
the Independent Manager.
Each holder of
Trust Securities will have the right to direct
the Property Trustee acting
for WaMu Delaware, as holder
of
the
Fixed-
to-
Floating Rate Company Preferred Securi-
ties, as
to the exercise of
the voting rights described above
pertaining to a like amount of
Fixed-
to-
Floating Rate
Company Preferred Securities representing
its respective
Trust Securities. The voting rights described above with
respect to the Fixed Rate Company Preferred Securities
will be passed on
to the holders of
the related WaMu
Cayman Preferred Securities. See "Description of
the Trust
Securities - Voting Rights."
Additional Amounts. . . . . . . . . . . . . ..
If the Company or WaMu Delaware is required to pay any
Additional Taxes as a result of
an Additional Tax Event, the
Company
will
pay as additional amounts on the Fixed-
to-
Floating Rate Company Preferred Securities such amounts
as
will be
required so
that dividends on
the Fixed-
to-
Floating Rate Company Preferred Securities, and accord-
ingly the amounts passed through by WaMu Delaware on
the Trust Securities, will not be reduced as a result of
any
such Additional Taxes. See "Description of
the Fixed-
to-
Floating Rate Company Preferred Securities - Additional
Amounts." If investors exchange their Fixed-
to-
Floating
Rate Company Preferred Securities
for
Fixed-
to-
Floating
Rate WMI Preferred Stock upon a Conditional Exchange,
WMI will not be obligated to pay Additional Amounts on the
Fixed-
to-
Floating Rate WMI Preferred Stock.
Assets and the Asset Trust. . . . . . .. The initial assets of
the Company will consist of
the
Class A Asset Trust Certificate representing
its interest in
the Asset Trust. The Asset Trust is a Delaware statutory
trust formed under the laws of
the State of
Delaware
pursuant to a trust agreement between the Company, as
depositor, and Deutsche Bank Trust Company Delaware,
as Delaware trustee. The Pooling and Servicing Agreement
among the Company, as
depositor, WMB, as
Servicer,
Deutsche Bank Trust Company Delaware, as PSA Dela-
ware Trustee, and Deutsche Bank National Trust Company,
as Trustee, will restate the trust agreement and will
thereafter be the governing instrument of
the
Asset Trust.
14
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00027
The Asset Trust will make a REMIC election
for
United
States Federal income tax purposes.
The initial assets of
the Asset Trust will consist of
a
portfolio (including payments thereon received from and
after February 1,
2006) of
HELs and certain related assets
originated by WMB primarily through
its
retail branches
between September 1,2001 and September 30, 2005. As
of
January 31, 2006, the 56,090 HELs had an aggregate
unpaid principal balance of
approximately $5,389,459,150.
These loans typically are made
for
reasons such as home
purchases, home improvements, furniture and fixtures
purchases, purchases of automobiles and debt consolida-
tion. These HELs are first lien, closed- end fixed rate home
equity loans and are generally repaid on a self-amortizing
basis.
From time to time, the Company may acquire Additional
Assets.
All
Additional Assets acquired by
the Company will
be Eligible Assets.
Listing . . . . . . . . . . . . . . . . . . . . . . . . . .. The Trust Securities will not be
listed on any securities
exchange or
automated dealer quotation system.
Use of
Proceeds.. . . . .. . . ..
. . . . . .. WaMu Delaware will use the proceeds of
the sale of
the
Trust Securities to purchase a like amount of
Fixed-
to-
Floating Rate Company Preferred Securities from WMB,which the Company will issue to WMB in exchange
for
the
conveyance of
a portfolio of
HELs to the Company. The
WMI Group will use the proceeds from the sale of
the
Fixed-
to-
Floating Rate Company Preferred Securities to
WaMu Delaware and the Fixed Rate Preferred Securities to
WaMu Cayman
for
general corporate purposes, which may
include the repurchase of
WMI's common stock.
Ratings. . . . . . . . . . . . . . . . . . . . . . . . .. The Trust Securities are expected to be assigned upon
issuance ratings of
" BBB" by
Standard & Poor's Rating
Services, a division of
The McGraw Hill Companies, Inc.,
" Baa2" by
Moody's Investors Services, Inc. and "A-" by
Fitch, Inc. A rating is not a recommendation to buy, sell or
hold securities and may be
subject to revision, suspension
or
withdrawal at
any time by
the assigning rating
organization.
Tax Consequences . . . . . . . . . It is anticipated that WaMu Delaware will be
treated as
a
grantor trust
for
United States Federal income tax pur-
poses. Accordingly, each holder of
a Trust Security will be
treated as
if it owned directly the Fixed-to-Floating Rate
Company Preferred Securities allocable to such Trust
Security.
The Company intends to qualify as a partnership (other
than a publicly traded partnership taxable as a corpora-
tion)
for
United States Federal income tax purposes, and
thus, the Fixed-
to-
Floating Rate Company Preferred Secu-
rities held by WaMu Delaware are intended to constitute
15
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00028
equity interests in such partnership. As a partnership, the
Company intends that it will not be
subject to United States
Federal income tax. Instead, each holder o.
f a Trust
Security will be required to report on
its United States
Federal income tax return
its share o.
f the income, gains,
losses, deductions and credits o.
f the Company that are
allocable to WaMu Delaware, even i. f such holder has not
received any cash distributions.
See " Certain U.
S.
Federal Income Tax Considerations-
United States Federal Income Tax Consequences."
ERISA Considerations. . . . . . . . . . . . . No
Trust Security may be purchased by
or
trans.ferred to
any Bene.
fit Plan Investor, except .
for
an
insurance com-
pany general account that represents, warrants and cove-
nants that, at
the time o.
f acquisition and throughout the
period it holds the securities, ( A)
it is eligible .
for
and
meets the requirements o.
f the Department o.
f Labor
Prohibited Transaction Class Exemption 95- 60, ( B)
less
than 25% o.
f the assets of
such general account are ( or
represent) assets of
a Benefit Plan Investor and ( C)
it is
not a person who has discretionary authority or
control
with respect to the assets of WaMu Delaware or
any
person who provides investment advice
for
a fee (direct or
indirect) with respect to such assets, or
any affiliate of
such a person and would not otherwise be excluded under
29
C.
F.
R.
2510.3- 101 ( f) (
1).
Governing Law . . . . . . . . . . . . . . . . . .. The Trust Agreement, the Trust Securities, the LLC Agree-
ment and the Fixed-
to-
Floating Rate Company Preferred
Securities will be governed
by,
and construed in accor-
dance with, the laws o.
f the State of
Delaware. The
Fixed-
to-
Floating Rate WMI Preferred Stock will be gov-
erned by and construed in accordance with the laws of
the
State of
Washington. The Fixed-
to-
Floating Rate Deposi-
tary Shares will be governed by, and construed in accor-
dance with, the laws of
the State o.
f New York.
CUSIP . . . . . . . . . . . . . . . . . . . . . . . . . .. 93934W AA 3
ISIN US93934WAA36
16
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00029
RISK FACTORS
Purchasers should carefully consider
the
following risk factors in conjunction with the other
information contained in this offering circular, as
well as
information that is incorporated by
reference in this offering circular, before purchasing any Trust Securities, the financial entitlements
of
which will be
substantially similar to those of
a like amount of
Fixed-
to-
Floating Rate Company
Preferred Securities and which are conditionally exchangeable into Fixed-
to-
Floating Rate
Depositary Shares representing interests in Fixed-
to-
Floating WMI Preferred Stock.
Risks Relating to the Terms of the Trust Securities and the Fixed- to-Floating Rate Company
Preferred Securities
Holders of
Trust Securities will only receive distributions if the Company pays dividends on the
Fixed-to-Floating Rate Company Preferred Securities.
Amounts available to WaMu Delaware
for
payment on the Trust Securities will be limited to
dividends received by WaMu Delaware as
the holder of
the Fixed-
to-
Floating Rate Company
Preferred Securities. If the Company does not declare and pay dividends on the Fixed-
to-
Floating
Rate Company Preferred Securities, WaMu Delaware will not pass through such dividends to
holders of
the Trust Securities.
Dividends on
the Fixed-to-Floating Rate Company Preferred Securities are not cumulative and
purchasers will not receive dividends on
the Trust Securities for any quarter unless dividends
are authorized and declared by the Company's Board of Managers
for
that quarter on the like
amount of Fixed-
to-
Floating Rate Company Preferred Securities held by WaMuDelaware.
Dividends on the Fixed-
to-
Floating Rate Company Preferred Securities are not cumulative.
Consequently, if the Board of
Managers does not declare a dividend on the Fixed-
to-
Floating
Rate Company Preferred Securities
for
any quarter, WaMu Delaware, as
holder of
the Fixed-
to-
Floating Rate Company Preferred Securities, and consequently the holders of
Trust Securities,
will not receive dividends
for
that quarter. In addition, the Company's Board of
Managers may
determine that it would be
in the Company's best interests to pay less than the
full
amount of
the
stated dividends on the Fixed-
to-
Floating Rate Company Preferred Securities or
no dividends
for
any quarter even though funds are available. Factors that would generally be
considered by
the
Company's Board of
Managers in making this determination are the amount of
available funds,
the Company's financial condition and capital needs, the impact of
current and pending
legislation and regulations, economic conditions, and tax considerations.
The level of
the Company's assets relative to the aggregate liquidation preference of
the
Company Preferred Securities could shrink over time because
of, among other things, dividends
paid by
the Company on the Company Common Securities or
other Junior Equity Securities if
any are issued at
a future date.
The LLC Agreement includes provisions that limit the Company's ability to pay dividends on
the Company's Junior Equity Securities but, subject to satisfaction of
those limitations, does not
prohibit dividends that could cause the level of
the Company's assets relative to the aggregate
liquidation preference of
the Company Preferred Securities to shrink. These limitations are
described under "Description of
the Fixed-
to-
Floating Rate Company Preferred Securities -
Ranking," "- Restrictions on
Dividends" and "Voting Rights and Covenants." They include the
following:
• during a Dividend Period, the Company may not pay dividends on Junior Equity
Securities, or
repurchase, redeem or
otherwise acquire
for
consideration directly or
indirectly (with limited exceptions) Junior Equity Securities, unless dividends
for
such
Dividend Period on
all outstanding Company Preferred Securities have been declared and
paid in full, or
set aside
for
payment, as the case may be; and
17
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00030
• without the consent or
affirmative vote of
the holders of
at
least two- thirds of
theFixed-to-Floating Rate Company Preferred Securities and the Fixed Rate Company Securities,
voting together as a single class, the Company may not:
• pay dividends on Junior Equity Securities unless the Company's FFO
for
the four prior
fiscal quarters equals or
exceeds 150% of
the amount that would be required to pay full
dividends on the outstanding Company Preferred Securities, as well as any other Parity
Equity Securities; or
• amend or
otherwise change the requirement that the Company make investments and
distributions with the proceeds of
the Company's assets such that the Company's FFO
for
any period of
four fiscal quarters
will
equal or
exceed 150% of
the
amount that would
be required to pay full annual dividends on
all outstanding Company Preferred Securities,
as
well as any other Parity Equity Securities.
As
HELs in the Asset Trust prepay or
repay principal and distributions with respect to such
principal payments are made by
the Asset Trust to the Company on the Class A Asset Trust
Certificate, subject to the limitations referenced above, the Company may choose to apply such
amounts to pay dividends on the Company Common Securities or
reinvest such amounts in
additional Eligible Assets. Additionally, subject to the limitations referenced above, the Company
could distribute a portion of
the Class A Asset Trust Certificate as a dividend on the Company
Common Securities. The Company has no
current intention to pay an
extraordinary dividend, and
WMI has no current intention to cause or
permit the Company to pay an extraordinary dividend.
Nevertheless, dividends paid by
the Company on
the Company Common Securities could result
in a reduction in the Company's assets that could have the consequence, notwithstanding
its
compliance with the limitations referred to above, of
the Company not having funds available to
pay full dividends on the Company Preferred Securities in future periods or
loss by
investors of
some or
all
of
the amount of
their investment were the Company to be liquidated.
The Trust Securities and the Fixed-
to-
Floating Rate Company Preferred Securities are perpetual
and not redeemable at
the option of
the holder, and holders of
the Trust Securities can have no
assurance of
receiving their initial investment back.
The Trust Securities may not be redeemed at
the option of
the holder thereof under any
circumstances, are perpetual and have no maturity date. If and when the Company redeemsFixed-to-
Floating Rate Company Preferred Securities, WaMu Delaware will redeem a like amount of
Trust
Securities. While the Fixed-
to-
Floating Rate Company Preferred Securities may be redeemed at
the
option of
the Company under certain circumstances described herein, any such redemption is
subject to the approval of
the OTS and may be constrained by
operation of
the Replacement
Capital Covenant. Investors in the Trust Securities will have no
right to reclaim their initial
investment from WaMu Delaware and there can be
no guarantee that the Trust Securities will ever
be redeemed. If investors in the Trust Securities choose to sell their Trust Securities in order to
reclaim
all
or
part of
their initial investment in the absence of
any redemption, there can be
no
guarantee that such investors would be
able to sell their securities in the secondary market, or
that
if such sale occurred the sale price would be
at
or
above the initial price.
A decline in WMB's capital levels may result in a Conditional Exchange. If a Conditional
Exchange occurs, it is likely to occur at
a time when WMB's and WMJ'sfinancial condition has
deteriorated and may have other adverse consequences.
The returns from an investment in the Trust Securities will be dependent to a significant
extent on
the performance and capital of WMB due to the potential
for
a Conditional Exchange.
A decline in the performance and capital levels of WMB or
the placement by
the OTS of WMB
into conservatorship or
receivership could result in a Conditional Exchange of
the Trust
Securities for Fixed-
to-
Floating Rate Depositary Shares representing Fixed-
to-
Floating Rate WMI
18
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00031
Preferred Stock. The Fixed-
to-
Floating Rate WMI Preferred Stock would represent an investment
in WMI and not in the Company or
WaMu Delaware. Under these circumstances:
• the Trust Securities would be exchanged
for
a preferred equity interest in WMI at a time
when WMB's and, ultimately, WMI's financial condition has deteriorated or
when WMBmay have been placed into conservatorship o
r
receivership and, accordingly, it is unlikely
that WMI would be
in a financial position to make any dividend payment on the amount of
Fixed-
to-
Floating Rate WMI Preferred Stock;
• in the event of
a liquidation of
WMI, the claims of
creditors of WMI would be
entitled to
priority in payment over the claims of
holders of
equity interests such as
the Fixed-
to-
Floating Rate Depositary Shares, and, therefore, the former holders of
the Trust
Securities who would then hold the Fixed-
to-
Floating Rate Depositary Shares represent-
ing Fixed-
to-
Floating Rate WMI Preferred Stock because of
the occurrence of
the
Conditional Exchange may receive substantially less than such holders would receive had
the Trust Securities not been exchanged
for
the Fixed-
to-
Floating Rate Depositary
Shares. See "- Risk Factors Applicable to Fixed-
to-
Floating Rate Depositary Shares
Issued in a Conditional Exchange - The Fixed-
to-
Floating Rate WMI Preferred Stock will
rank subordinate to the direct indebtedness of
WMI;"
•
for
United States Federal income tax purposes, a Conditional Exchange would most likely
be a taxable event to holders of
the Trust Securities, and in that event such holders
generally would incur a gain or
loss, as
the case may be, measured by
the difference
between their adjusted tax basis in the Trust Securities and the fair market value of
the
Fixed-
to-
Floating Rate Depositary Shares; and
• although the terms of
Fixed-
to-
Floating Rate Depositary Shares are substantially similar
to the terms of
the Fixed-
to-
Floating Rate Company Preferred Securities, there are
differences that holders of
Trust Securities might deem to be important, such as
the fact
that holders of
Fixed-
to-
Floating Rate Depositary Shares will not generally have voting
rights, except as
required by law or
in connection with the right to elect directors if
dividends are missed (see "Description of
the Fixed-
to-
Floating Rate WMI Preferred
Stock - Voting Rights"), or
benefit from any protective covenants.
The terms of
the Trust Securities and the Fixed-to-Floating Rate Company Preferred Securities
provide
for
limited voting rights.
Except as
specified in the Trust Agreement or
in relation to the right to direct the manner in
which the Property Trustee acting on behalf of WaMu Delaware exercises
its voting rights with
respect to the Fixed-
to-
Floating Rate Company Preferred Securities, holders of
Trust Securities
are not entitled to voting rights. Except as
specified in the LLC Agreement, WaMu Delaware, as
holder of
Fixed-
to-
Floating Rate Company Preferred Securities, is not entitled to voting rights.
However, the Company is prohibited by the LLC Agreement from taking certain actions without
the consent or
vote of
at
least two- thirds of
either
the
Fixed-
to-
Floating Rate Company Preferred
Securities voting separately or
the Fixed-
to-
Floating Rate Company Preferred Securities and the
Fixed Rate Company Preferred Securities, voting together as
a single class, as
applicable. For a
description of
the matters on which the holders of
Fixed-
to-
Floating Rate Company Preferred
Securities have a right to vote, see "Description of
the Fixed-
to-
Floating Rate Company
Preferred Securities - Voting Rights and Covenants."
19
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00032
Holders of
the Trust Securities and Fixed- to-Floating Rate Company Preferred Securities have
no redemption rights; however, the Company may (but is not required
to)
redeem the Fixed-
to-
F/
oating Rate Company Preferred Securities upon the occurrence of
a Tax Event, an Investment
Company Act Event or
a Regulatory Capital Event prior to March 15, 2011, and at
any time
thereafter and such redemption will cause an automatic redemption of
the Trust Securities.
Subject to the Replacement Capital Covenant and the prior approval of
the OTS, the
Company may redeem the Fixed-
to-
Floating Rate Company Preferred Securities ( i) in whole but
not in part upon the occurrence of
a Tax Event, an Investment Company Act Event or
a
Regulatory Capital Event prior to March 15, 2011, and (
ii)
in whole or
in part, at
any time on
or
after March 15, 2011, at
a redemption price equal to the liquidation preference per Fixed-
to-
Floating Rate Company Preferred Security, plus declared but unpaid dividends, if any, plus a
U.
S.
Treasury- based "make-whole" amount if the redemption occurs prior to March 15, 2011.
The redemption by
the Company of
the Fixed-
to-
Floating Rate Company Preferred Securities will
automatically cause a redemption of
the Trust Securities
for
which the redemption price will be
paid from the proceeds WaMu Delaware receives from the Company as a consequence of
the
redemption of
the Fixed-
to-
Floating Rate Company Preferred Securities. The occurrence of
a Tax
Event, an Investment Company Act Event or
a Regulatory Capital Event will not, however, give a
holder of
the Trust Securities any right to request that the Fixed-
to-
Floating Rate Company
Preferred Securities or
the Trust Securities be redeemed.
If the Company redeems the Fixed-
to-
Floating Rate Company Preferred Securities, the Trust
Securities will be automatically redeemed, and the former holders of
the Trust Securities may not
be able to invest their redemption proceeds in securities with a dividend yield and other terms
comparable to that of
the Trust Securities. A Treasury based "make whole" amount will be
payable only in connection with a redemption prior to the Dividend Payment Date in March 2011.
The Fixed-
to-
F/
oating Rate Company Preferred Securities will rank subordinate to claims of
the
Company's creditors and on a parity with other series of
preferred securities issued by the
Company.
The Fixed-
to-
Floating Rate Company Preferred Securities will rank subordinate to all
claims
of
the Company's creditors. The Fixed-
to-
Floating Rate Company Preferred Securities will rank
pari passu as
to dividends and upon liquidation with the Fixed Rate Company Preferred
Securities and other Parity Equity Securities that the Company may issue. The Company will
issue the Fixed Rate Company Preferred Securities to WaMu Cayman at
a time substantially
contemporaneous with this Offering, and may issue additional Parity Equity Securities at any time
in the future, subject to certain conditions at
the time of
issuance, without the consent or
approval of
the holders of
the
Trust Securities. Accordingly, if
• the Company does not have funds legally available to pay full dividends on the Fixed-
to-
Floating Rate Company Preferred Securities and any Parity Equity Securities; or
• in the event of
the Company's liquidation, dissolution or
winding up, the Company does
not have funds legally available to pay the full liquidation value of
the Fixed-
to-
Floating
Rate Company Preferred Securities and any Parity Equity Securities,
any funds that are legally available to pay such amounts will be
paid pro rata to the Fixed-
to-
Floating Rate Company Preferred Securities and any other Parity Equity Securities then
outstanding. See " Description of
Other Company Securities - Fixed Rate Company Preferred
Securities.' ,
There has never been a market for the Trust Securities.
Prior to this Offering, there was no market
for
the Trust Securities. Although the Initial
Purchasers intend to make a market in the Trust Securities, they are under no obligation to do
so
20
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00033
and, to the extent that such market making is commenced, it may be discontinued at
any time.
The Trust Securities will not be
listed on any securities exchange or
automated dealer quotation
system. There can be
no assurance that an
active and liquid trading market
for
the Trust
Securities will develop or
be sustained. If such a market were to develop, the prices at
which the
Trust Securities trade would depend on many factors, including prevailing interest rates, the
operating results of
the Company, WMB and WMI, and the market
for
similar securities. Holders
of
Trust Securities may not be able to resell their Trust Securities at
or above the initial price.
Furthermore, the Trust Securities are not and will not be registered under the Securities Act, will
be deemed to be restricted securities within the meaning of Rule 144 under the Securities Act
and are subject to significant transfer restrictions as
described in "Notice to Investors." These
restrictions on transfer may inhibit the development of
an active and liquid trading market
for
the
Trust Securities and may adversely impact the market price of
the Trust Securities.
The Trust Securities are not obligations
of,
or
guaranteed
by,
any other entity_
The Trust Securities do not constitute obligations or
equity securities of WMI, WMB, the
Company, Marion Holdings Inc., an intermediate holding company between WMB and University
Street ("Marion"), University Street, the Asset Trust, WaMu Cayman or
any other entity, nor are
WaMu Delaware's obligations with respect to the Trust Securities guaranteed by
any other entity.
In particular, neither WMI, WMB, the Company, University Street, Marion, the Asset Trust, WaMu
Cayman nor any other entity guarantees that WaMu Delaware will pass through any dividends
paid by
the Company to WaMu Delaware as
the holder of
the Trust Securities, nor are they
obligated to provide additional capital or
other support to WaMu Delaware to enable WaMuDelaware to make distributions in the event the Company fails to pay dividends o
n the Fixed-
to-
Floating Rate Company Preferred Securities and WaMu Delaware is thus unable to pass through
such dividends on the Trust Securities to holders of
the Trust Securities. The Trust Securities are
not
exchangeable
for
Fixed-
to-
Floating Rate Depositary Shares or
Fixed-
to-
Floating Rate WMIPreferred Stock except upon a Conditional Exchange. No holder o
f
Trust Securities will have the
right to require WaMu Delaware to exchange the Trust Securities
for
Fixed-
to-
Floating Rate
Depositary Shares.
The Fixed- to-Floating Rate Company Preferred Securities represent solely an interest in the
Company and are not obligations
of,
or
guaranteed
by,
any other entity_
The Fixed-
to-
Floating Rate Company Preferred Securities do not constitute obligations or
equity securities of any entity other than the Company, including WMI, WMB, Marion, University
Street, WaMu Cayman, the Asset Trust and WaMu Delaware, nor are the Company's obligations
with respect to the Fixed-
to-
Floating Rate Company Preferred Securities guaranteed by any other
entity. In particular, neither WMI, WMB, Marion, University Street, WaMu Delaware, the Asset
Trust, WaMu Cayman nor any other entity, guarantees that the Company will declare or
pay any
dividends to WaMu Delaware, nor are they obligated to provide additional capital or
other support
to the Company to enable the Company to pay dividends on the Fixed-
to-
Floating Rate Company
Preferred Securities to WaMu Delaware in the event the Company's assets and results from
operations are insufficient
for
such purpose.
Risks Associated with the Company's Business
The Company is effectively controlled by WMI and the Company's relationship with WMI, and
lor
WMB may create potential conflicts of
interest.
All
of
the Company's officers and certain of
the Company's managers are also officers of
WMI or WMB or
their affiliates. After this Offering, WMI, WMB and University Street will continue
to control
all
of
the Company's outstanding voting securities. WMI, WMB, and University Street
will have the right to elect
all
of
the Company's managers, including the Independent Manager.
21
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00034
WMB and University Street may have interests that are not identical to the Company's
interests. WMI, through
its subsidiary, New American Capital, Inc., is the ultimate owner of
WMB's and University Street's common stock, and may have investment goals and strategies
that differ from those of
the holders of
the Trust Securities. Consequently, conflicts of
interest
between the Company, on one hand, and WMB, University Street and/ or
WMI, on the other
hand, may arise.
The Company is dependent on the officers and employees of WMI and WMBfor the selection,
structuring and monitoring of
the loans in the Asset Trust and the Company's relationship with
WMI and / or WMBmay create potential conflicts of
interest.
WMI and WMB are involved in virtually every aspect of
the Company's existence. WMBadministers the Company's day-
to-
day activities under the terms of
certain agreements between
WMB and the Company. The Company is dependent on
the diligence and skill of
the officers and
employees of WMB
for
the selection, structuring and monitoring of
the HELs in the Asset Trust
and the Company's other Eligible Investments.
This dependency and the Company's close relationship with WMI and WMB may create
potential conflicts of
interest. Specifically, such conflicts of
interest may arise because the
employees of
WMI and WMB ( i) were directly involved in the decisions regarding the amount,
type and price of
HELs and other assets acquired indirectly from University Street and WMBprior to the Offering and (
ii) will make decisions on
the amount, type and ( if applicable) price of
any future acquisitions by
the Company of
Additional Assets from University Street, WMI or
other
parties.
The Company is dependent on the officers and employees of WMBfor the servicing of
the loans
in the Asset Trust and the Company's relationship with WMBmay create potential conflicts of
interest.
The Company is dependent on WMB and others
for
the servicing of
the HELs in the Asset
Trust and is expected to be dependent on WMB and others
for
the servicing of
any underlying
collateral with respect to Additional Assets. WMB administers the Company's day-
to-
day
activities under the terms of
the Asset Documentation relating to the Company's assets. These
agreements contain and will contain terms which the Company believes are consistent with those
resulting from arm's-length negotiations. With respect to the Pooling and Servicing Agreement
and the Asset Trust, WMB's servicing fee will be a per annum fee, paid monthly,
for
each HEL
based on the unpaid principal balance of
such HEL and will equal 0.125% per annum. WMB, as
Servicer, will be entitled to retain certain fees and ancillary charges, including any prepayment
fees, insufficient funds fees, modification fees, payoff statement fees and late charges with
respect to the HELs as
additional servicing compensation and will also be
entitled to certain
income generated by
permitted investments made with collections on the HELs.
Despite the Company's belief that the terms of
the Asset Documentation between WMB and
the Company reflect and will reflect terms consistent with those negotiated on
an arm's- length
basis, the Company's dependency on WMB's officers and employees and the Company's close
relationship with WMB may create potential conflicts of
interest. Specifically, such conflicts of
interest may arise because the employees of WMB have the power to modify the terms of
HELs
and other assets in the Asset Trust and other Eligible Assets and make business decisions with
respect to the servicing of
such underlying assets, particularly to the extent such underlying
collateral is defaulted or
otherwise non-performing.
22
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00035
Regulators may limit the Company's ability to implement the Company's business plan and may
restrict the Company's ability to pay dividends.
Because the Company is an
indirect subsidiary of WMB, regulatory authorities will have the
right to examine the Company and
its activities and, under certain circumstances, to impose
restrictions on WMB or
the Company that could impact
its ability to conduct business pursuant to
the Company's business plan and that could adversely affect the Company's financial condition
and results of
operations.
If the OTS, which is WMB's primary regulator, determines that WMB's relationship with the
Company results in an unsafe or unsound practice, or
if,
in certain instances, WMB is no longer
well-capitalized, then the OTS has the authority
to:
• restrict the Company's ability to transfer assets;
• restrict the Company's ability to pay dividends to its security holders;
• restrict the Company's ability to redeem
its preferred securities; or
• require WMB to sever
its relationship with the Company or
divest
its ownership of
the
Company.
If the OTS determines that WMB is operating with an
insufficient level of
capital, or
that the
payment of
dividends by
either WMB or
its subsidiaries, under the then- present circumstances, is
an unsafe and unsound practice, the OTS could restrict the Company's ability to pay dividends.
If any of
the Company, the Asset Trust or WaMu Delaware loses
its exemption under the
Investment Company Act it could have a material adverse effect on
the Company and would
likely result in a redemption of
the Fixed-
to-
Floating Rate Company Preferred Securities and the
Trust Securities.
Each of
the Company, the Asset Trust and WaMu Delaware believes that it is not, and
intends to conduct
its operations so
as not to be, required to register as
an investment company
under the Investment Company Act. Under the Investment Company Act, a non-exempt entity
that is an investment company is required to register with
the SEC and is subject to extensive,
restrictive and potentially adverse regulation relating
to,
among other things, operating methods,
management, capital structure, dividends and transactions with affiliates. The Investment
Company Act exempts entities that, directly or
through majority-owned subsidiaries, are
" primarily engaged in the business of
purchasing or
otherwise acquiring mortgages and other
liens on and interests in real estate" (which the Company refers to as
"Qualifying Interests").
Under current interpretations of
the staff of
the SEC, in order to qualify
for
this exemption, each
of
the Company and the Asset Trust, among other things, must maintain at
least 55% of
the
Company's assets in Qualifying Interests and also may be required to maintain an additional 25%
in Qualifying Interests or
other real estate related assets. The assets that the Company or
the
Asset Trust may acquire therefore may be
limited by
the provisions of
the Investment Company
Act. The Company and the Asset Trust have each established a policy of
limiting authorized
investments which are
no
t
Qualifying Interests to no more than 20% of
the
value of
their
respective total assets. The Investment Company Act does not treat cash and cash equivalents
as
either Qualifying Interests or
other real estate related assets.
Based on the criteria outlined above, the Company and the Asset Trust each believe that,
as
of
the time of
the Offering, the Company's and the Asset Trust's Qualifying Interests will
comprise at
least 90% of
the estimated fair market value of
their respective total assets. As a
result, the Company and the Asset Trust each believe that they are not required to register as
an
investment company under the Investment Company Act. Neither the Company nor the Asset
Trust intends, however, to seek an exemptive order, no-action letter or
other form of
interpretive
guidance from the SEC or
its staff on
this position. If the SEC or
its staff were to take a different
23
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00036
position with respect to whether the Company's or
the Asset Trust's assets constitute Qualifying
Interests, the Company or
the Asset Trust could be
required either ( i) to change the manner in
which it conducts
its operations to avoid being required to register as
an investlllent company, or
(
ii)
to register as
an investment company, either of which could have a material adverse effect
on the Company or
the Asset Trust, as
the case may be, the Company's ability to make
payments in respect of
the Fixed- to-Floating Rate Company Preferred Securities and, accord-
ingly, the trading price of
the Trust Securities. Further, in order to ensure that the Company and
the Asset Trust at
all times continues to qualify
for
the above exemption from the Investment
Company Act, the Company and the Asset Trust may be
required at
times to adopt less efficient
methods of
financing certain of
the Company's and the Asset Trust's assets than would
otherwise be
the case and may be precluded from acquiring certain types of
assets whose yield
is higher than the yield on assets that could be purchased in a manner consistent with the
exemption. The net effect of
these factors may be
to lower at
times the Company's net interest
income. Finally, if the Company or
the Asset Trust were an unregistered investment company,
there would be a risk that the Company or
the Asset Trust, as
the case may be, would be
subject to monetary penalties and injunctive relief in an action brought by the SEC, that the
Company or
the Asset Trust, as the case may be, would be unable to enforce contracts with
third parties and that third parties could seek to obtain rescission of
transactions undertaken
during the period the Company or
the Asset Trust was determined to be
an unregistered
investment company. In the event the Company, the Asset Trust or WaMu Delaware is ever
considered an investment company under the Investment Company Act as a result of
an
Investment Company Act Event, the Company would likely redeem the Fixed-
to-
Floating Rate
Company Preferred Securities. See "Description of
the Fixed-
to-
Floating Rate Company
Preferred Securities - Redemption."
Additionally, the Company may from time to time have Asset Subsidiaries other than the
Asset Trust. The Company may not establish an Asset Subsidiary unless the establishment and
operation of
such Asset Subsidiary will not cause the Company to be
an investment company
which is required to register under the Investment Company Act and such Asset Subsidiary is not
itself an investment company which is required to register under the Investment Company Act. If
any such Asset Subsidiary were to be
required to register as
an
investment company, the results
would be
similar to those described above in respect to the Asset Trust being required to register
as
an
investment company.
Adverse Effect of
Determination of
Company's Partnership Status
Prior to the issuance of
the Company Preferred Securities, the Company will receive an
opinion from Mayer, Brown, Rowe & Maw LLP to the effect that,
for
United States Federal
income
tax
purposes, ( i) the Company will not be
treated as
an
association taxable as a
corporation and (
ii) although no activities closely comparable to that contemplated by the
Company have been the subject of any U.
S.
Treasury regulation, revenue ruling or
judicial
decision, the Company will not be treated as a publicly traded partnership taxable as a
corporation. The opinions are based on certain assumptions and on certain representations and
agreements regarding restrictions on the future conduct of
the activities of
the Company.
Although the Company intends to conduct
its activities in accordance with such assumptions,
representations and agreements, if it were nonetheless determined that the Company was
taxable as a corporation
for
United States Federal income tax purposes, then the Company
would be
subject under the Code to the regular corporate income tax. Such taxes would reduce
the amounts available to make payments on the Company Preferred Securities.
24
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00037
The Company has no
control over changes in interest rates and such changes could negatively
impact the Company's financial condition, results of
operations, and ability to pay dividends.
Initially, the Company's income consists primarily of
payments received on
the HELs which
are the underlying assets supporting the Class A Asset Trust Certificate (such underlying assets,
together with any collateral with respect to any Additional Assets, the " Company's Portfolio"). At
January 31, 2006, 100% of
the HELs to be included in the Company's Portfolio bore interest at
fixed rates; however, in the future, the Company could acquire Additional Assets which include or
are secured by
adjustable rate loans. Adjustable rate loans decrease the risks to a lender
associated with changes in interest rates but involve other risks. As
interest rates rise, the
payment by the borrower rises to the extent permitted by the terms of
the loan, and the
increased payment increases the potential
for
default. At
the same time, the marketability of
the
underlying property may be adversely affected by higher interest rates. In a declining interest rate
environment, there may be
an increase in prepayments on the HELs or
other assets in the
Company's Portfolio as
the borrowers refinance their mortgages at
lower interest rates. Under
these circumstances, the Company may find it more difficult to acquire Additional Assets with
rates sufficient to support the payment of
the dividends on
the Fixed-
to-
Floating Rate Company
Preferred Securities. A declining interest rate environment would adversely affect the Company's
ability to pay full, or
even partial, dividends on
the Fixed-
to-
Floating Rate Company Preferred
Securities.
The loans in the Company's Portfolio are subject to economic conditions that could negatively
affect the value of
the collateral securing such loans andI or
the results of
the Company's
operations.
The value of
the collateral underlying the Company's Portfolio and
lor
the results of
the
Company's operations could be affected by
various conditions in the economy, such as:
• local and other economic conditions affecting real estate and other collateral values;
• sudden or
unexpected changes in economic conditions, including changes that might
result from terrorist attacks and the United States' response to such attacks;
• the continued financial stability of a borrower and the borrower's ability to make loan
principal and interest payments, which may be adversely affected by
job
loss, recession,
divorce, illness or
personal bankruptcy; and
• interest rate levels and the availability of
credit to refinance loans at
or
prior to maturity.
The loans in the Company's Portfolio that are held through the Asset Trust are concentrated in
two states, and adverse conditions in those states, in particular, could negatively impact the
Company's operations.
At
January 31, 2006, more than 79% ( as a percentage of
loan principal balances) of
the
assets in the Company's Portfolio were located in Texas and California. Because of
the
concentration of
the Company's interest in those states, in the event of adverse economic
conditions in those states, the Company would likely experience higher rates of
loss and
delinquency on
the
Company's Portfolio than if the
underlying HELs were more geographically
diversified. Additionally, the HELs in the Company's Portfolio may be subject to a greater risk of
.
default than other comparable loans in the event of
adverse economic, political, or
business
developments or
natural hazards that may affect Texas and California, and the ability of
property
owners or
commercial borrowers in those states to make payments of
principal and interest on
the underlying loans. In the event of
any adverse development or
natural disaster in those states,
the Company's ability to pay dividends on the Fixed-
to-
Floating Rate Company Preferred
Securities could be adversely affected.
25
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00038
The Company cannot assure purchasers that it paid WMBand University Street fair market
valuefo
r
all
of
the Company's assets because the Company has not obtained any third party
valuations of
all such assets. Nor can the Company assure purchasers that the) Company will
acquire or dispose of
its assets in the future at
their fair market value.
The Company has adopted policies with a view to ensuring that
all
financial dealings
between WMB, University Street and the Company will be
fair to each party and consistent with
market terms. However, there has been no
third party valuation of
all
of
the Company's assets.
In addition, it is not anticipated that third party valuations will be obtained in connection with
future acquisitions or
dispositions of
assets even in circumstances where an
affiliate of
the
Company is selling the assets to the Company, or
purchasing the assets from the Company.
Accordingly, the Company cannot assure purchasers that the purchase price the Company paid
for
all
of
the Company's assets was equal to the fair market value of
those assets. Nor can the
Company assure purchasers that the consideration to be paid by
the Company
to,
or
received by
the Company from, WMB, University Street or any of the Company's affiliates in connection with
future acquisitions or
dispositions of assets will be equal to the fair market value of such assets.
The Asset Trust or
any other Asset Subsidiary, and therefore, the Company, could incur losses
as a result of
environmental liabilities of
properties underlying the Company's assets in the
Company's Portfolio through foreclosure action.
The Asset Trust or
any other Asset Subsidiary may be forced to foreclose on
an underlying
HEL or
other assets where the borrower has defaulted on
its obligation to repay the applicable
loans. It
is possible that the Asset Trust or any other Asset Subsidiary, and therefore, the
Company, may be subject to environmental liabilities with respect to foreclosed property. The
discovery of
these liabilities and any associated costs
for
removal of
hazardous substances,
wastes, contaminants or
pollutants, could have a material adverse effect on
the fair value of
such
assets.
Delays in liquidating defaulted loans could occur and could cause the Company's business to
suffer.
Substantial delays could be encountered in connection with the liquidation of the collateral
securing defaulted loans in the Company's Portfolio, with corresponding delays in the Company's
receipt of
related proceeds. An action to foreclose on a mortgaged property or
repossess and
sell other collateral securing a loan is regulated by
state statutes and rules. Any such action is
subject to many of
the delays and expenses of
lawsuits, which may impede the Company's ability
to foreclose on
or
sell the collateral or
to obtain proceeds sufficient to repay
all amounts due on
the related loan in the Company's Portfolio.
The Company may invest in assets that involve new risks and need not maintain the current
asset coverage.
Although the Company's Portfolio currently consists primarily of
HELs held through the
Asset Trust, to the extent it acquires Additional Assets in the future, the Company is not required
to limit
its investments to assets of
the types currently in the Company's Portfolio. See ' The
Company - Business of
the Company - Assets of
the Company." Assets such as second lien
closed end home equity loans, first or
second lien home equity lines of
credit, mortgage loans on
single family or
multi-family residences, commercial mortgage loans or
other real estate assets
may involve different risks not described in this offering circular. Moreover, while the LLC
Agreement will call for maintaining specified levels of FFO coverage as
to expected dividends,
the Company is not required to maintain the levels of
asset coverage that currently exist.
26
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00039
The Company is dependent on WMI, WMBand University Street with respect to its acquisition of
Additional Assets and may be subject to conflicts of
interest with respect to its acquisition of
new assets.
The dependency of
the Company on WMI, University Street and WMB and the Company's
close relationship with WMI, University Street and WMB may create potential conflicts of
interest
in connection with the Company's acquisition of
Additional Assets. The Company will be
dependent on WMI, University Street and WMB to identify Additional Assets which it may acquire,
but WMI, University Street and WMB are not required to contribute or
sell Additional Assets to
the Company. If WMI, University Street and WMB are unable to identify, or
are unwilling to
contribute or
sell, suitable Additional Assets, then over time the Company's level of
FFO
coverage as
to expected dividends will decline. Moreover, conflicts of
interest may arise because
the employees of
WMI, University Street and WMB will, subject to certain restrictions, make
decisions on the amount, type and ( to the extent the Company purchases Additional Assets)
price of
future acquisitions by
the Company of
Additional Assets from University Street, WMB or
other members of
the WMI Group as
well as
future dispositions of
assets to WMB, University
Street or
third parties.
Risk Factors Applicable to Fixed-
to-
Floating Rate Depositary Shares Issued in a Conditional
Exchange.
Holders of
Trust Securities may have adverse tax consequences as a result of
a Conditional
Exchange.
For United States Federal income tax purposes, a Conditional Exchange would most likely
be a taxable event to holders of
Trust Securities under the Code, and they would incur a gain or
loss, as
the case may be, measured by
the difference between their adjusted tax basis in the
Trust Securities and the fair market value of
the Fixed-
to-
Floating Rate Depositary Shares. In
addition, dividends, if any, paid to Foreign Holders of
Fixed-
to-
Floating Rate Depositary Shares
received upon a Conditional Exchange generally will be subject to a 30% U.
S.
withholding tax
unless the holder qualifies
for
a reduction from withholding tax under an applicable United States
income tax treaty.
A decline in WMI's financial condition may restrict
its ability to pay dividends and could result
in a loss on the investment of
the former holders of
Trust Securities.
If WMl's financial condition were to deteriorate, the holders of
the Fixed-
to-
Floating Rate
Depositary Shares could suffer direct and materially adverse consequences, including suspension
of
the payment of
non- cumulative dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock
and, if a liquidation, dissolution or
winding up
of WMI were to occur, loss by
holders of
Fixed-
to-
Floating Rate Depositary Shares of
all
or
part of
their investment. See "Description of
the Fixed-
to-
Floating Rate WMI Preferred Stock."
A Conditional Exchange may be based on WMB's receivership, which could lead to WMI's
bankruptcy and would mean that others are likely to have liquidation claims senior to that of
the
holders of
the Fixed-
to-
Floating Rate Depositary Shares.
An
Exchange Event triggering a Conditional Exchange will occur if WMB is placed into
conservatorship or
receivership. WMB's conservatorship or
receivership could lead to WMI
becoming subject to a voluntary or
involuntary proceeding under the U.
S.
Bankruptcy Code. In the
event of WMI's bankruptcy, the claims of WMl's secured, senior, general and subordinated
creditors would be entitled to a priority of payment over the claims of
holders of
equity interests
such as the Fixed-
to-
Floating Rate WMI Preferred Stock. As a result of such subordination, if WMI
became subject to a bankruptcy proceeding after a Conditional Exchange the holders of
the
27
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00040
Fixed-
to-
Floating Rate Depositary Shares would likely receive, if anything, substantially less than
they would have received had the Conditional Exchange not occurred.
The Fixed-to
-Floating Rate WMI Preferred Stock will rank subordinate to the direct indebtedness
of
WMI.
The Fixed-to
-Floating Rate WMI Preferred Stock will b
e subordinate and rank junior in right
of
payment to all
of
WMI's indebtedness
for
borrowed money and indebtedness evidenced by
notes or
other securities. Because the sole source of
funds
for
payment in respect of
the
Fixed-
to-
Floating Rate Depositary Shares is the Fixed-
to-
Floating Rate WMI Preferred Stock, the
Fixed-
to-
Floating Rate Depositary Shares are effectively subordinated on the same basis as
the
Fixed-
to-
Floating Rate WMI Preferred Stock. The terms of
the Fixed-
to-
Floating Rate Depositary
Shares and the Fixed-
to-
Floating Rate WMI Preferred Stock will not limit in any way WMI's ability
to incur additional indebtedness.
The Fixed-
to-
Floating Rate WMI Preferred Stock will be structurally subordinated to all
obligations of
WMJ'ssubsidiaries, and as a holding company, WMI may require cash from
its
subsidiaries to make payments with respect to the Fixed-
to-
Floating Rate Depositary Shares.
WMI is a holding company that conducts
its operations through
its operating subsidiaries and
relies primarily on interest payments, dividends, proceeds from inter- company transactions and
loans from those subsidiaries to meet
its obligations
for
payment with respect to its outstanding
equity securities, any and
all
of
which may be subject to contractual restrictions and regulatory
restrictions. Accordingly, the Fixed-
to-
Floating Rate WMI Preferred Stock (and thus the Fixed-
to-
Floating Rate Depositary Shares) is structurally subordinated to all existing and future liabilities of
WMl's subsidiaries. Holders of
Fixed-
to-
Floating Rate Depositary Shares should look only to the
assets of
WMI, and not any of
its subsidiaries,
for
payments with respect to the Fixed-
to-
Floating
Rate Depositary Shares. If WMI is unable to obtain cash from
its subsidiaries it may be unable to
fund dividend payments in respect of
the Fixed-
to-
Floating Rate Depositary Shares.
Upon the occurrence of
a Conditional Exchange, the holders of
the Fixed-
to-
Floating Rate
Depositary Shares will not have the benefit of
the same favorable covenants as
the Fixed-
to-
Floating Rate Company Preferred Securities.
Upon the occurrence of
a Conditional Exchange, the holders of
the Fixed-
to-
Floating Rate
Depositary Shares will not benefit from the same favorable covenants as
the Fixed-
to-
Floating
Rate Company Preferred Securities.
WMI is not obligated to pay dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock and
dividends on these securities
are
not cumulative.
Dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock are not cumulative.
Consequently, if the board of
directors of WMI ("WMl's Board of
Directors") does not declare
dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock for any quarterly period, the
holders of
the Fixed-
to-
Floating Rate Depositary Shares would not be entitled to any such
dividend whether or not funds are or subsequently become available.
WMl's Board of
Directors may determine that it would be
in WMl's best interest to pay less
than the full amount of
the stated dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock
or
no
dividends
for
any quarter even if funds are available. Factors that would be considered by
WMI's Board of
Directors in making this determination are WMI's financial condition and capital
needs, the impact of
current and pending legislation and regulations, economic conditions,
tax
considerations, and such other factors as WMI's Board of
Directors may deem relevant.
28
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00041
There is no
active trading market for Fixed-
to-
Floating Rate WMI Preferred Stock or
the Fixed- to-
Floating Rate Depositary Shares and such trading market may never develop.
The Fixed-
to-
Floating Rate WMI Preferred Stock and the Fixed-
to-
FloatingRate Depositary
Shares will be new issues of
securities. WMI does not intend to cause the listing or
quotation of
the Fixed-
to-
Floating Rate WMI Preferred Stock or
the Fixed-
to-
Floating Rate Depositary Shares
on any securities exchange or
automated dealer quotation system. The Initial Purchasers are
under no obligation to and do not intend to make a market in the Fixed-
to-
Floating Rate
Depositary Shares. Consequently, it is unlikely that an active and liquid trading public market
for
the Fixed-
to-
Floating Rate Depositary Shares or
the underlying Fixed-
to-
Floating Rate WMI
Preferred Stock will develop or
be maintained. The lack of
liquidity and an active trading market
could adversely affect ability of
the holders of
Fixed-
to-
Floating Rate Depositary Shares to
dispose of
such shares.
In addition, neither the Fixed-to
-Floating Rate Depositary Shares nor the Fixed-
to-
Floating
Rate WMI Preferred Stock represented by
such shares have or
will be
registered under the
Securities Act and will be deemed to be restricted securities within the meaning of
Rule 144 of
the Securities Act. Holders of
Fixed-
to-
Floating Rate Depositary Shares will not be
able to offer,
sell, pledge or
otherwise transfer the Fixed-to
-Floating Rate Depositary Shares other than:
• to a qualified institutional buyer within the meaning of
Rule 144A of
the Securities Act in a
transaction complying with Rule 144A;
• otherwise in accordance with an applicable exemption from the registration requirements
of the Securities Act; or
• to WMI or
one of
WMI's affiliates, and in any case, in accordance with exemptions from
any applicable state securities or
blue sky laws.
These restrictions on transfer may inhibit the development of
an active and liquid trading
market
for
the Fixed-
to-
Floating Rate Depositary Shares and may adversely impact the market
price of
such shares.
29
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00042
CERTAIN INFORMATION CONCERNING WMB
General
Washington Mutual Bank (formerly known as Washington Mutual Bank, FA and referred to
herein as
" WMB") is a federally chartered savings association, chartered and operating under
the United States Home Owners' Loan Act of
1933, as
amended. WMB engages in mortgage
banking, consumer banking and small business banking. WMB, as a federally chartered
association, has the authority to make various types of
loans, including loans secured by homes
and commercial real estate, secured and unsecured consumer loans, and secured and unsecured
commercial loans. As
a federal savings association, WMB is subject to regulation and
examination by
the U.
S.
Office of
Thrift Supervision (together with any successor regulator, the
"OTS"),
its primary regulator. WMB is an indirect wholly-owned subsidiary of
WMI.
Prior to 2004, WMB had two sister depository institutions which were both owned directly
by WMI. WMB has since acquired both of
these sister institutions. One of
these institutions,
Washington Mutual Bank fsb, a federal savings bank, became a wholly- owned subsidiary of
WMB on February 1,
2004. The other institution, Washington Mutual Bank, a savings bank
chartered under the laws of
the state of
Washington, converted into a federally chartered savings
bank and then was merged into WMB on January 1,
2005.
WMB has applied to the OTS
for
approval to acquire Long Beach Mortgage Company. Long
Beach Mortgage Company's primary business is to originate, purchase, securitize and sell
subprime loans. Long Beach Mortgage Company is a wholly- owned subsidiary of WMI and is a
non-bank affiliate of WMB. Assets originated by Long Beach Mortgage Company will not be
owned by the Asset Trust.
The Trust Securities will be exchangeable, without the approval or
any action on the part of
the holders of
such securities,
for
Fixed-
to-
Floating Rate Depositary Shares under any of
the
following circumstances, each of
which is referred to as
an Exchange Event:
• WMB becomes " undercapitalized" under the OTS' "prompt corrective action" regulations;
• WMB is placed into conservatorship or
receivership; or
• the OTS, in its sole discretion, anticipates that WMB may become "undercapitalized" in
the near term or
takes supervisory action that limits the payment of
dividends by WMB,
and in connection therewith, directs such exchange.
Capital Adequacy
WMB is subject to OTS capital requirements. The capital adequacy requirements are
quantitative measures established by OTS regulations that require WMB to maintain minimum
amounts and ratios of
capital. The OTS requires WMB to maintain minimum ratios of core and
total capital to risk-weighted assets, as well as core capital to adjusted total assets and tangible
capital to adjusted total assets. Under applicable OTS regulations " Tier 1 capital" and " core
capital" have the same meaning.
Federal law and regulations establish minimum capital standards, and under the OTSregulations, WMB is required to have a ( i) leverage ratio o
f
core capital to adjusted total assets
of
at
least 4.00%, (
ii) a ratio of
core capital to total risk-weighted assets ratio of
at
least 4.00%,
(
iii) a ratio of
total capital to risk-weighted assets of
at
least 8.00% and (
iv)
a ratio of
tangible
capital to total adjusted assets of
at
least 1.50%. A savings association's adjusted total assets
represent the savings association's total assets on
its
Thrift Financial Report Consolidated
Statement of
Condition filed with the OTS less assets of
non- includable subsidiaries, goodwill
and other intangibles assets (exclusive of
mortgage servicing rights and purchased credit card
relationships), disallowed servicing assets and purchased credit card relationships and accumu-
30
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00043
lated gains (losses) on certain available- for- sale securities and cash flow hedges. For purposes
of
determining risk-weighted assets
for
the risk-based capital ratios, the book value of
each of
the savings association's on-balance sheet assets, and a portion of
certain off-balance sheet
items and exposures, are weighted from 0% to 100% based on broad categories. For instance,
U.
S.
government debt obligations are generally risk-weighted at
0%; certain qualifying residential
mortgage loans on one-
to-
four family dwellings are generally risk weighted at
50%; and
commercial loans and most other assets are generally risk-weighted at 100%. Off-balance sheet
items (including letters of
credit, loan commitments, swaps and other derivatives) are converted
into on-balance sheet "equivalent" amounts
for
risk-based capital purposes, then assigned a risk
weight like other assets. The capital risk weighting assigned to certain asset- backed securities
may vary from 20% to 200% depending on credit rating. Subordinated residual interests retained
in asset securitizations, credit enhancement and forms of
" recourse" can result in higher capital
charges or
deductions from capital.
For purposes of
the OTS regulations, " total capital" is defined as
the sum of
core capital
and supplementary capital. "Core capital" generally includes: common shareholders' equity
(which includes related surplus); non- cumulative perpetual preferred stock (which includes
related surplus); and qualifying minority interests in the equity accounts of
consolidated
subsidiaries (which may include such instruments as qualifying REIT preferred stock and the
Company Preferred Securities). " Supplementary capital" generally includes (subject to certain
limits and sub- limits): cumulative perpetual preferred stock; maturing capital instruments; Dutch
auction and money market preferred stock; hybrid capital instruments (including certain
mandatory convertible notes); term subordinated debt; the savings association's allowance
for
loan and lease losses ( up
to a maximum of
1.25% of
total risk-weighted assets); and up
to 45%
of
the pretax net unrealized gains of
available- for-sale equity securities investments. Supplemen-
tary capital is permitted to count towards only one-half of
total capital. Both core capital and
tangible capital are subject to various deductions. Some of
these deductions are more stringent
for
tangible capital than core capital, including goodwill, certain other intangible assets, and
certain servicing assets in excess of
certain limits.
Federal law and regulations also establish five capital categories
for
savings associations:
well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and criti-
cally undercapitalized. A savings association is treated as well-capitalized if its ratio of
total
capital to risk-weighted assets is 10.00% or
more,
its ratio of
core capital to risk-weighted assets
is 6.00% or
more,
its leverage ratio is 5.00% or
more, and it is not subject to any federal
supervisory agreement order or
directive to meet a specific capital level. In order to be
adequately capitalized, any savings association must have a ratio of
total capital to risk-weighted
assets of
not less than 8.00%, a ratio of
core capital to risk-weighted assets of
not less than
4.00%, and (unless it is in the most highly- rated category) a leverage ratio of
not less than
4.00%. Any savings association that is neither well-capitalized nor adequately capitalized will be
considered undercapitalized. Any savings association with a tangible equity ratio of
2.00% or
less
will be considered critically undercapitalized.
Undercapitalized savings associations are subject to certain prompt corrective action
requirements, regulatory controls and restrictions, which become more extensive as
an
association becomes more severely undercapitalized. Failure by WMB to comply with applicable
capital requirements, if unremedied, would result in restrictions on
its activities and lead to
regulatory enforcement actions against WMB including, but not limited
to,
the issuance of
a
capital directive to ensure the maintenance of
required capital levels. The Federal Deposit
Insurance Corporation Improvement Act of
1991 requires the federal banking regulators to take
prompt corrective action with respect to depository institutions that do not meet minimum capital
requirements. Additionally, FDIC or OTS approval of
any regulatory application filed
for
its review
may be dependent on compliance with capital requirements.
31
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00044
In addition, the OTS from time to time may impose higher specific capital requirements on
any savings association that is perceived to have risks, exposures, credit concentration, rapid
growth or
other circumstances warranting special attention. Failure to satisfy sUc; ha capital
directive could subject an association to civil money penalties, judicial enforcement and
administrative remedies available to the OTS, as
well as a finding that a savings association is
" undercapitalized" .
Whether WMB would ever be
determined by
the OTS to be
" undercapitalized" or
at
risk of
becoming " undercapitalized" in the near term - thereby triggering the exchange of
the Trust
Securities
for
Fixed-
to-
Floating Rate Depositary Shares - could be influenced not only by the
OTS' capital adequacy regulations,
bu
t
also by
the
regulator's interpretations and judgment on
other matters. For example, the OTS' views on asset credit quality potentially could affect a thrift
or
savings association's capital status. Among other things,
the OTS typically evaluates asset
quality, loan loss reserves and procedures during periodic regulatory examinations of
each
federal savings association.
If, following such an examination or
otherwise, the OTS in its
discretion were to require WMB to significantly increase
its reserves against credit losses ( i. e.,
the
allowance
for
loan and lease losses), this could potentially reduce WMB's retained earnings
and regulatory capital. As
noted above, a savings association's allowance
for
loan and lease
losses is includable within supplementary capital only up
to a limit, and is not includable at
all
in
core capital.
A savings association's regulatory capital status, and the risk of
being deemed "undercapi-
talized" could also be
affected by
other developments or
by
future changes in regulatory capital
and other standards. WMB and WMI continue to actively follow the progress of
the U.
S.
banking
agencies and the Basel Committee on Banking Supervision in developing a new
se
t
of
regulatory
risk- based capital requirements. The Basel Committee on Banking Supervision is a committee
established by
the
central bank governors of
certain industrialized nations, including the United
States. The new requirements are commonly referred to as Basel" or The New Basel Capital
Accord; however, final requirements have not been adopted. WMB and WMI are also assessing
the potential impacts of
Basel
II.
The regulatory capital ratios calculated
for
WMB, along with the capital amounts and ratios
for
the minimum regulatory requirement and the minimum amounts and ratios required to be
categorized as well-capitalized under the regulatory framework
for
prompt corrective action were
as follows:
December 31, 2005
WMB
Actual
Amount Ratio
Minimum to be
Categorized as
Well- Capitalized
Minimum Under the OTS'
Regulatory Prompt Corrective
Requirement Action Regulations
Amount Ratio Amount Ratio
(Dollars in millions)
Total capital to total risk- weighted
assets .......................... $26,530 11.62% $18,260 8.00% $22,825 10.00%
Core capital to total risk- weighted
assets .......................... 19,661 8.61 9,130 4.00 13,695 6.00
Core capital to adjusted total assets
(leverage) ...................... 21,098 6.56 12,860 4.00( 1)
16,075 5.00
Tangible capital to tangible assets
(tangible equity) ................ 20,642 6.43 4,816 1.50 n/ a n/ a
32
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00045
WMB
Actual
Amount Ratio
December 31, 2004
Minimum to be
..Categorized as
Well-Capitalized
Minimum Under the OTS'
Regulatory Prompt Corrective
Requirement Action Provisions
Amount Ratio Amount Ratio
(Dollars in millions)
Total capital to total risk- weighted
assets ........................... $20,698 11.68% $14,174 8.00% $17,718 10.00%
Core capital to total risk- weighted
assets ........................... 14,392 8.12 7,087 4.00 10,631 6.00
Core capital to adjusted total assets
(leverage) ....................... 14,530 5.46 10,635 4.00( 1 ) 13,294 5.00
Tangible capital to tangible assets
(tangible equity) ................. 14,530 5.46 3,988 1.50 n/ a n/ a
December
31
,
2003
WMB
Actual
Amount Ratio
Minimum to be
Categorized as
Well- Capitalized
Minimum Under the OTS'
Regulatory Prompt Corrective
Requirement Action Regulations
Amount Ratio Amount Ratio
(Dollars in millions)
Total capital to total risk- weighted
assets .......................... $15,444 10.80% $11,441 8.00% $14,302 10.00%
Core capital to total risk- weighted
assets .......................... 12,472 8.72 5,721 4.00 8,581 6.00
Core capital to adjusted total assets
(leverage) ...................... 12,531 5.50 9,116 4.00( 1)
11,395 5.00
Tangible capital to tangible assets
(tangible equity) ................ 12,531 5.50 3,419 1.50 n/ a n/
a
( 1) The minimum leverage ratio guideline is 3% for
financial institutions that do
not anticipate significant growth and that
have well-diversified risk, excellent asset quality, high liquidity, good earnings, effective management and monitoring
of
market risk and, in general, are considered top- rate, strong banking organizations.
Benefits to WMB
WMB has requested confirmation from the OTS that the Company Preferred Securities
constitute core capital of WMB under
the
OTS's applicable regulatory capital regulations and,
upon receipt of
such confirmation, intends to treat the Company Preferred Securities accordingly.
33
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00046
USE OF PROCEEDS
WaMu Delaware will use the proceeds of
the sale of
the Trust Securities in this Offering,
expected to be approximately $1,225,000,000, net of
underwriting commissions, to purchase from
WMB a like amount of
Fixed-
to-
Floating Rate Company Preferred Securities, which the Company
will issue to WMB in exchange
for
the conveyance from WMB of
a portfolio of
HELs. The WMIGroup will use the proceeds from the sale o
f
the Fixed-
to-
Floating Rate Company Preferred
Securities to WaMu Delaware and the Fixed Rate Company Preferred Securities to WaMu
Cayman
for
general corporate purposes, which may include the repurchase of
WMl's common
stock.
34
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00047
WAMU DELAWARE
Washington Mutual Preferred Funding Trust I ("WaMu Delaware") is a statutory trust
created under the Delaware Statutory Trust Act, as amended (the "Trust Act") ,pursuant to a
certificate of
trust filed with the Secretary of
State of
the State of
Delaware and the execution of
a trust agreement of WaMu Delaware on February 23, 2006. WaMu Delaware will continue
its
existence from and after the closing of
the Offering pursuant to an amended and restated trust
agreement ( as
so amended and restated, the " Trust Agreement"), to be entered into by and
among
the
Company, as grantor, Wilmington Trust Company, as property trustee (
the
"Property
Trustee"), and Wilmington Trust Company, as Delaware trustee (the "Delaware Trustee"), as
of
the date the Trust Securities are issued. The rights of
the holders of
the Trust Securities,
including economic rights, rights to information and voting rights, are as
set forth in the Trust
Agreement and the Trust Act.
The Trust Agreement generally limits WaMu Delaware's activities to ( i) holding the
Fixed-
to-
Floating Rate Company Preferred Securities, (
ii) issuing the Trust Securities,
(
iii) passing through dividends paid by the Company to WaMu Delaware on the Fixed-
to-
Floating
Rate Company Preferred Securities and (iv
)performing functions necessary o
r
incidental
thereto. WaMu Delaware is prohibited from issuing other equity securities or
any debt securities
or
engaging in any other activities. Subject to the limitations and assumptions described under
"Certain U.
S.
Federal Income Tax Considerations," WaMu Delaware will be
treated as
a grantor
trust
for
United States Federal income tax purposes, with the result that holders of
Trust
Securities will be
treated as
beneficial owners of
Fixed- to Floating Rate Company Preferred
Securities
for
United States Federal income tax purposes. The Fixed-
to-
Floating Rate Company
Preferred Securities will be
the only assets of WaMu Delaware. The principal executive offices of
WaMu Delaware will be located at
1201 Third Avenue, Seattle, WA 98101. The office of
the
Delaware Trustee is Rodney Square North, 1100 North Market Street, Wilmington, DE 19890.
Copies of
the Trust Agreement will be available upon request to WMI.
As
set forth
in,
and subject
to,
the Trust Agreement, the Property Trustee and the Delaware
Trustee will have exclusive and complete authority to carry out the purposes of
WaMu Delaware.
The Property Trustee will hold title to the Fixed-
to-
Floating Rate Company Preferred
Securities
for
the benefit of
the holders of
the Trust Securities, and, as such holder, the Property
Trustee will have the power to exercise
all
rights, powers and privileges with respect to the
Fixed-
to-
Floating Rate Company Preferred Securities under the LLC Agreement. In addition, the
Property Trustee will maintain exclusive control of
a segregated non- interest bearing bank
account to hold
all payments made in respect of
the Fixed-
to-
Floating Rate Company Preferred
Securities
for
the benefit of
the holders of
the Trust Securities.
Pursuant to the Trust Agreement,
all charges or
expenses of WaMu Delaware other than
payments required under the terms of
the Trust Securities, including the fees, charges and
expenses of
the Property Trustee, the Delaware Trustee, the Registrar, and Transfer Agent or
any Paying Agent, will be paid or
caused to be paid by the Company; provided, however, that if
the Company does not payor cause to be paid such fees, charges and expenses or
can only
pay such fees, charges and expenses in a manner that would allocate such fees, charges and
expenses against the interests of
the holders of
the Fixed- to Floating Rate Company Preferred
Securities, WMB will pay such fees, charges and expenses; provided further, that if the Property
Trustee or
the Delaware Trustee incurs fees, charges or
expenses,
for
which they are not
otherwise liable under the Trust Agreement, or
if the Paying Agent or
Registrar and Transfer
Agent incurs fees, charges or
expenses
for
which they are not otherwise liable under the Agency
Agreement, in each case at the request of a holder of
Trust Securities or
other person, such
holder or
other person will be liable
for
such fees, charges and expenses.
The information with respect to WaMu Delaware that is required by paragraph ( d)
( 4)
( i) of
Rule 144A under the Securities Act, will be available upon request to the Property Trustee until
the earlier of
( i) the redemption in full of
the Trust Securities or
(
ii) the Conditional Exchange.
35
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00048
THE COMPANY
Washington Mutual Preferred Funding LLC (the "Company") is a Delaware; limited liability
company formed on February 3, 2006 under the Delaware Limited Liability Company Act, as
amended (the "LLC Act"), pursuant to an initial limited liability company agreement and a
certificate of
formation filed with the Secretary of
State of
the State of
Delaware. The limited
liability company agreement will be amended and restated in its entirety on
or
about March 7,
2006 ( as
so amended and restated, the "LLC Agreement").
The LLC Agreement generally limits the Company's activities to ( i) issuing the Fixed-
to-
Floating Rate Company Preferred Securities, the Fixed Rate Company Preferred Securities and
the common securities of
the Company (the " Company Common Securities") and additional
Parity Equity Securities of
the Company, (
ii) acquiring and holding Eligible Investments, including
the Class A Asset Trust Certificate (which will be the sole initial Eligible Investments of
the
Company) in accordance with the investment policy as
described in "- Business of
the
Company - Assets of
the Company" and (
iii) performing functions necessary or
incidental
thereto. Subject to the limitations and assumptions described under "Certain U.
S.
Federal Income
Tax Considerations," the Company intends to be treated as a partnership (other than a publicly
traded partnership taxable as a corporation)
for
United States Federal income
tax
purposes.
Further, the Company may not take any action, or
permit any action to be taken, that would
cause the Company to fail
to be
treated as a partnership
for
United States Federal income tax
purposes
for
so long as any Company Preferred Securities are outstanding, except with the
consent or
affirmative vote of
the holders of
at
least two- thirds of
the Fixed-
to-
Floating Rate
Company Preferred Securities and the Fixed Rate Company Preferred Securities, voting together
as a single class. The principal executive office of
the Company is 1201 Third Avenue, Seattle,
Washington 98101. Copies of
the LLC Agreement will be available upon request to WMI.
The Company will receive the opinion of
Mayer, Brown, Rowe & Maw LLP to the effect that,
for
United States Federal income tax purposes, the Company will not be treated as
an
association taxable as a corporation or
as a publicly traded partnership taxable as a corporation.
Capitalization
Upon completion of
this Offering, University Street, Inc., an
indirect subsidiary of WMB
("University Street"), will hold
all
of
the Company Common Securities, representing 100% of
the
voting rights in the Company (subject to the limited voting rights of
holders of
the Company
Preferred Securities described under "Description of
Fixed-
to-
Floating Rate Company Preferred
Securities - Voting Rights and Covenants"). Upon completion of
this Offering, WaMu Delaware
will hold
all
of
the Fixed-
to-
Floating Rate Company Preferred Securities and WaMu Cayman will
hold
all
of
the Fixed Rate Company Preferred Securities.
The following table illustrates the expected capitalization of
the Company as
of
the closing
of
this Offering, after giving effect to the issuance of
the Company Common Securities, the
Fixed-
to-
Floating Rate Company Preferred Securities and the Fixed Rate Company Preferred
Securities on
the closing date:
Fixed-
to-
Floating Rate Company Preferred Securities .
Fixed Rate Company Preferred Securities .
Company Common Securities .
Total Capitalization .
36
As
of
the Closing Date
(Unaudited)
$1,250,000,000
$750,000,000
$3,389,459,150
$5,389,459,150
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00049
Business of
the Company
Assets of
the CompanyIn connection with
the
Offering, WMB
will
convey a portfolio of
HELs to the Company in
exchange for 100% of
the Company Preferred Securities. Concurrently, University Street will
convey a portfolio of
HELs to the Company in exchange
for
the Company Common Securities.
The portfolios conveyed by WMB and University Street to the Company will consist of
HELs
having an aggregate principal balance of
approximately $5,389,459,150 as
of
January 31, 2006
and includes payments received on such portfolio from and after February 1,
2006. The Company
will then convey the assets received by
it from WMB and University Street to the Asset Trust in
exchange for interests in the Asset Trust represented by
the Class A Asset Trust Certificate and
the Class R Asset Trust Certificate.
The Eligible Investments (which will initially consist of
the Class A Asset Trust Certificate
owned by
the Company) from time to time will generate net income
for
payment of
dividends by
the Company to WaMu Delaware as
holder of
the Fixed-
to-
Floating Rate Company Preferred
Securities (and consequently
for
pass through by WaMu Delaware to holders of
the Trust
Securities), to WaMu Cayman as holder of
the Fixed Rate Company Preferred Securities (and,
consequently for payment as
dividends by WaMu Cayman to the holders of
the WaMu Cayman
Preferred Securities), and to University Street as
holder of
the Company Common Securities.
The Company intends to manage
its assets so
as
( i) to ensure that the Company will at
all
times maintain
its exemption under the Investment Company Act, (
ii)
to result in the Company at
all
times maintaining sufficient FFO to allow payments to be made with respect to its Junior
Equity Securities (including payments to University Street as
holder of
the Company Common
Securities) and (
iii) to maintain the desired treatment under the Code
for
the Company's assets
and obligations.
Current requirements under the Investment Company Act mandate that in order to maintain
its exemption from registration as
an investment company the Company must limit
its assets
which are not Qualifying Interests to no more than 20% of
its
total assets at
any time. The
Company expects that initially the distributions it receives from the Asset Trust as holder of
the
Class A Asset Trust Certificate will significantly exceed the amount required to pay dividends on
the Company Preferred Securities and any Parity Equity Securities. Cash received from
the
Asset
Trust and any Permitted Investments purchased with such funds are not Qualifying Interests, and
therefore funds received from the Asset Trust and retained by
the Company will be
limited
(together with any other assets which are not Qualifying Interests) to 20% of
the Company's
total assets at
any time. For this and other reasons, in the ordinary course, the Company expects
that it will distribute
all
or
substantially
all
of
the funds it receives from the Asset Trust to
University Street, as
holder of
the Company Common Securities, to the extent it is permitted to
do
so
in accordance with the restrictions on dividends with respect to the Company Common
Securities and such funds are not otherwise required to pay dividends on the Company Preferred
Securities and any other Parity Equity Securities. The Company intends to invest funds it receives
from the Asset Trust in Permitted Investments prior to such funds being distributed to the holders
of
the Company Common Securities, the Company Preferred Securities and any other Parity
Equity Securities.
The Company also expects that over time
the
principal balance of
the HELs held by the
Asset Trust will decrease as a result of
principal payments and payoffs. Since ( i) in accordance
with the terms of
the Pooling and Servicing Agreement, additional assets may only be added to
the Asset Trust in very limited circumstances and (
ii) funds distributed to the Company by
the
Asset Trust may be distributed to University Street as discussed above and to the extent held by
the Company will generally (when invested in Permitted Investments) generate a lower rate of
return than the HELs held in the Asset Trust, over time the Company expects that
its FFO will
decline. Accordingly, prior to the point that the Company's FFO level is reduced to a level that
37
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would prevent payments with respect to its Junior Equity Securities ( including payments to
University Street as
holder of
the Company Common Securities) the Company intends to acquire
additional income producing investments which constitute Eligible Assets. Any additional assets
which are acquired by
the Company will not be
transferred to the Asset Trust or
serviced in
accordance with the Pooling and Servicing Agreement. Additional assets which are acquired by
the Company and are not Permitted Investments (such assets, " Additional Assets") may (but
are
no
t
in all cases required
to)
consist of
obligations of
Asset Subsidiaries. The terms of
the
Asset Documentation with respect to any Additional Assets will provide
for
the servicing of
such
Additional Assets.
" Eligible Assets" means assets:
( a)
which ( i) are securities, interests or
other obligations of
an Asset Subsidiary
which are backed or
collateralized by
first or
second lien closed end home equity
loans, first or
second lien home equity lines of
credit, mortgage loans on single
family or
multi- family residences, commercial mortgage loans or
other real estate
assets, in each case, with respect to real estate located in the United States;
provided, however, that the Company may acquire and hold first or
second lien
closed end home equity loans, first or
second lien home equity lines of
credit,
mortgage loans on
single family or
multi-family residences, commercial mortgage
loans or
other real estate assets directly if the Company receives an Asset Tax
Opinion in connection with such assets or
(
ii) otherwise satisfy the Rating Agency
Condition and are approved by
all
of
the managers, including the Independent
Manager;
( b)
which will be
serviced and maintained in accordance with Asset Documentation;
( c)
the collateral
for
which is not permitted to include under the related Asset
Documentation any first or
second lien closed end home equity loans, first or
second lien home equity lines of
credit, mortgage loans on single family or
multi-
family residences, commercial mortgage loans or
other real estate assets as
to
which the applicable obligor was more than 30 days delinquent as
of
the
applicable cut-
off date or
transfer date;
( d)
the collateral
for
which does not create or
carry any obligation of
the Company or
any Asset Subsidiary to make future advances or
loans to any obligor with respect
to such collateral under lines of
credit, revolving loan facilities or
other similar
features; and
( e) the acquisition, maintenance and servicing of which will not ( in itself or
in
connection with any of
the
Company's other assets):
( i) cause the Company to be
an " investment company" which is required to
register under the Investment Company Act;
(
ii) cause the imposition of
United States Federal income withholding tax in
respect of
payments made by
the Company on the Company Preferred Securities
or
any Parity Equity Securities;
(
iii) cause the Company to be treated under the Code as a publicly traded
partnership taxable as a corporation; or
(
iv)
cause the Company to be
treated as
engaged in a U.
S.
trade or
business, as
determined for United States Federal income tax purposes.
"Asset Documentation" means ( a)
with respect to the Asset Trust and the Class A Asset
Trust Certificate, the Pooling and Servicing Agreement and any related Custody Agreement and
( b)
with respect to any Additional Assets, the documentation ( i) governing the maintenance and
38
CONFIDENTIAL
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servicing of
such Additional Assets and custodial arrangements related thereto and ( to the extent
applicable) any underlying collateral related to such Additional Assets and (
ii) establishing ( if
applicable) any Asset Subsidiary created in connection with such Additional Assets; provided that
the execution of
any such documentation, to the extent such documentation is not substantially
similar in all material respects to the Pooling and Servicing Agreement (with such changes as
may be necessary or
desirable to reflect the collateral
for
such Additional Assets), must satisfy
the Rating Agency Condition and be approved by
all
of
the managers, including the Independent
Manager.
" Asset Subsidiary" means the Asset Trust and, with respect to any Additional Assets, an
entity formed
for
the purpose holding the collateral related to such Additional Assets and making
payments with respect thereto to the Company and:
( a)
in which the Company holds
all
or
substantially
all
of
the
economic interests;
( b)
which is established and governed pursuant to Asset Documentation;
( c) which is not an " investment company" which is required to register under the
Investment Company Act;
( d)
the establishment and operation of
which will not cause the Company to be
an
" investment company" which is required to register under the Investment Company
Act;
( e)
the establishment and operation of
which will not cause the imposition of
United States
Federal withholding tax in respect of
payments by
the Company on
the Company
Preferred Securities or
any Parity Equity Securities;
( f) the establishment and operation of
which will not cause the Company to be treated
under the Code as
a publicly traded partnership taxable as
a corporation; and
( g)
the establishment and operation of
which will not cause the Company to be
treated as
engaged in a US trade or
business, as determined
for
United States Federal income
tax purposes.
" Asset Tax Opinion" means, with respect to any assets, an
opinion of
counsel from a
nationally recognized tax counsel to the effect that the acquisition and ownership of
such assets
by
the Company will not ( in itself or
in connection with any of
the Company's other assets):
( a)
cause the imposition of
United States Federal withholding tax in respect of
payments made by the Company on the Company Preferred Securities or any
Parity Equity Securities;
( b) cause the Company to be treated under the Code as a publicly traded partnership
taxable as a corporation; or
( c)
cause the Company to be treated as engaged in a U.
S.
trade or
business, as
determined
for
United States Federal income
tax
purposes.
" Asset Portfolio" means the Class A Asset Trust Certificate and any Permitted Investments
and Additional Assets held by
the Company from time to time.
" Eligible Investments" means Permitted Investments, the Class A Trust Certificate, the
Class R Asset Trust Certificate and Eligible Assets.
" Permitted Investments" means one or
more of
the obligations or
securities listed below:
( a)
obligations
of,
or
guaranteed as
to principal and interest by, the United States of
America or
any agency or
instrumentality thereof when such obligations are
backed by
the full faith and credit of
the United States of
America;
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( b)
repurchase agreements on obligations described in clause ( a)
of
this definition of
"Permitted Investments"; provided further, that the unsecured obligations of
the
party agreeing to repurchase such obligations have at
the time one of
the two
highest short term debt ratings of
each of
the Rating Agencies; and provided that
such repurchaser's unsecured long term debt has one of the two highest
unsecured long term debt ratings of each of the Rating Agencies;
( c)
federal funds, certificates of
deposit, time deposits and bankers' acceptances of
any bank or
trust company incorporated under the laws of
the United States of
America or
any state; provided that the debt obligations of
such bank or
trust
company (
or,
in the case of
the principal bank in a bank holding company system,
debt obligations of
the bank holding company) at the date of
acquisition thereof
have one of the two highest short term debt ratings of each of the Rating
Agencies and unsecured long term debt has one of
the two highest unsecured
long term debt ratings of
each of
the Rating Agencies;
( d)
federal funds, certificates of
deposit, time deposits, demand deposits and bankers'
acceptances of WMB;
( e)
obligations
of,
or
obligations guaranteed
by,
any state of
the United States of
America or
the District of
Columbia, provided that such obligations at
the date of
acquisition thereof shall have one of
the two highest long- term debt ratings
available
for
such securities from each of
the Rating Agencies;
( f) commercial paper of
any corporation incorporated under the laws of
the United
States of
America or
any state thereof, which on
the date of
acquisition has the
highest commercial paper rating of
each of
the Rating Agencies; provided that the
corporation has unsecured long term debt that has one ofthe two highest
unsecured long term debt ratings of
each of
the Rating Agencies;
( g)
securities (other than stripped bonds or
stripped coupons) bearing interest or
sold at
a discount that are issued by
any corporation incorporated under the laws
of
the United States of
America or
any state thereof and have one of
the two
highest long- term unsecured ratings available
for
such securities from each of
the
Rating Agencies; and
( h)
any other category of
investments that satisfy the Rating Agency Condition and isapproved b
y
all
of
the managers, including the Independent Manager; subject to
the receipt by
the Company of
an Asset Tax Opinion with respect to such
category of
investments;
provided, however, that any of
the investments listed above will not be Permitted Investments to
the extent that investment therein would cause the outstanding principal amount of
Permitted
Investments that are then held by
the Company to exceed 20% of
the aggregate principal amount
of
all
Eligible Investments. In no event shall an instrument be a Permitted Investment if such
instrument ( x)
evidences a right to receive only interest payments with respect to the obligations
underlying such instrument or
( y)
has been purchased at
a price greater than the outstanding
principal balance of
such instrument.
" Rating Agencies" means, at
any time, S& P,
Moody's and Fitch, but only in the case of
each
such agency if it is rating the relevant security, including the Trust Securities or
the WaMu
Cayman Preferred Securities, at
the time
or,
if none of
them is providing a rating
for
the relevant
security, including the Trust Securities or
the WaMu Cayman Preferred Securities at
such time,
then any " nationally recognized statistical rating organization" as
that phrase is defined
for
purposes of
Rule 436 ( g)
( 2)
under the Securities Act, which is rating such relevant security.
40
CONFIDENTIAL
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"Rating Agency Condition" means written notice from each Rating Agency confirming that
the proposed change or
modification will not result in a reduction of
the rating then currently
assigned by such Rating Agency to the Trust Securities or
the WaMu Cayman preferred
Securities. .
Employees and Administration Agreement
Prior to issuing the Fixed-
to-
Floating Rate Company Preferred Securities, the Company and
WMB will enter into an Administrative Services Agreement (
the
"Administrative Services
Agreement") pursuant to which WMB will provide ( or
cause to be provided) certain accounting,
legal, tax and other support services to the Company, assist the Company in maintaining
compliance with
all pertinent U.
S.
local, state and federal laws and provide necessary
administrative, record keeping and secretarial services to the Company. Under such agreement,
the Company will agree to reimburse the provider of
such services from time to time
for
the
value of
services provided by such provider to the Company. The Company expects that any
such reimbursement will be
in a de
minimis amount.
The Company will maintain limited liability company records and audited financial statements
that are separate from those of WMI and any of
its other affiliates. None of
the officers,
employees or
managers of
the Company will have any direct or
indirect pecuniary interest in any
security to be acquired or
disposed of
by the Company or
in any transaction in which the
Company has an
interest.
Management of
the Company
Managers and Officers
The Company will be managed by a Board of Managers. The LLC Agreement will provide
that the Company's Board of
Managers will at
all times be composed of
three members, one of
whom is not and has not been during the preceding five years an
officer or
employee of WMI or
any affiliate of
WMI, other than a financing subsidiary (the " Independent Manager"). The
Company's managers will serve until their successors are duly elected and qualified. Except in
certain circumstances described under "- Independent Manager" below, action by the
Company's Board of
Managers will be
by
majority vote. The Company will have five officers upon
issuance of
the Fixed-
to-
Floating Rate Company Preferred Securities.
The persons who will be
the managers and executive officers of
the Company upon
completion of
the Offering will include:
Name
Robert Williams .
Peter Freilinger .
Kenneth J.
Uva .
Doreen Logan .
Paul Phillips .
Chad Smith .
Position and Offices Held
Manager and Senior Vice-President
Manager and Senior Vice-President
Independent ManagerFirst Vice President and Assistant Secretary
Vice President
First Vice President and Secretary
Each of
the initial managers (other than the Independent Manager) and officers of
the
Company are individuals who are officers or
employees of WMI or
one of
its affiliates. The initial
Independent Manager is Kenneth J.
Uva, who is an employee of
CT Corporation.
Independent Manager
Under the LLC Agreement, in order to be considered " independent", a manager must not,
during the preceding five years, have been a director or
employee of WMI or
any affiliate of
WMI,
other than a direct or
indirect financing subsidiary of
WMI.
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The LLC Agreement will require that, in assessing the benefits to the Company of
any
proposed action requiring
his
or
her consent, the Company's Independent Manager take into
account the interests of
holders of
both Company Common Securities and the Company
Preferred Securities. The LLC Agreement provides that in considering the interests of
the holders
of
the Company Preferred Securities, the Company's Independent Manager owes such holders
the same duties which the Independent Manager owes to the holders of Company Common
Securities.
The LLC Agreement will provide that, for so long as any Company Preferred Securities are
outstanding, certain actions by
the Company are subject to prior approval of
all Managers
including the Independent Manager. The Company will not be
able, without the approval of
the
Independent Manager, to ( i) terminate, amend or
otherwise change any of
the Company's Asset
Documentation or
(
ii) effect a consolidation, merger or
share exchange that is not tax- free to the
holders of
the Company Preferred Securities unless such consolidation, merger or
share
exchange was approved by
the consent or
affirmative vote of
the holders of
at
least two- thirds of
the Fixed-
to-
Floating Rate Company Preferred Securities and the Fixed Rate Company Preferred
Securities, voting together as
a single class. In addition, in the event that the Asset Trust fails to
make a payment to the Company or any payments are not received with regard to any Additional
Asset in violation of
the terms of
the related Asset Documentation on any scheduled payment
date, the Independent Manager will have the authority to cause the Company, as
the holder of
the Series A Asset Trust Certificate or
any Additional Asset, as
applicable to enforce
its rights in
such capacity until payments have been resumed and a year has passed since the date of
the
latest scheduled payment date with respect to which the Asset Trust or
the Additional Asset
failed to make a payment.
The holders of
the Company Preferred Securities, voting together as a single class, by
majority vote of
the votes cast on such matter at
a meeting properly called and held or
by
written
instructions signed by
the holders of
Company Preferred Securities representing a majority of
the
voting rights of
all outstanding Company Preferred Securities, voting together as a single class,
are entitled to remove the initial or any succeeding Independent Manager and to f
ill the vacancy
created by such removal or any other vacancy existing in the office of
the Independent Manager
if ( i) the Company fails to pay
full dividends on
the Company Preferred Securities on any
Dividend Payment Date, (
ii) WaMu Delaware fails to pass through dividends paid by
the
Company on
the Fixed-
to-
Floating Rate Company Preferred Securities to the holders of
the Trust
Securities on any Dividend Payment Date or
(
iii) a Bankruptcy Event occurs. The person so
elected will be deemed to be
an Independent Manager irrespective of
whether he
or
she meets
the independence test described above. Such right will continue
for
as
long as any Fixed-
to-
Floating Rate Company Preferred Securities are outstanding.
"Bankruptcy Event" means the Company, WaMu Delaware or
WaMu Cayman ( i) becomes
insolvent or
is unable to pay
its debts or
fails or
admits in writing
its inability generally to pay
its
debts as
they become due, (
ii) makes a general assignment, arrangement or
composition with or
for
the benefit of
its creditors or
(
iii) institutes or has instituted against it a proceeding seeking a
judgment of
insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law
or
other similar law affecting creditors' rights, or
a petition is presented
for
its winding up
or
liquidation.
Compensation of
Managers and Officers
The Company intends to pay the initial Independent Manager a reasonable fee
for
his or
her
services as a manager of
the Company, plus reimbursement of
expenses
for
attendance at
each
meeting of
the Company's Board of
Managers. As
to managers and officers of
the Company who
are also officers or
employees of WMI or
one of
its affiliates, the Company will pay, or
reimburse
the related affiliate for, a portion of
the salary and benefits of
any such persons in proportion to
the estimated amount of
time spent by such person on the Company's business as compared to
42
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time spent on
the business of
WMI or
one of
its other affiliates. However, the Company expects
such amount to be
de minimis.
Indemnification of
Managers and Officers
The LLC Agreement will provide that the Company will, to the fullest extent permitted by
law, indemnify any manager or
officer of
the Company
for
any liability and related expenses
(including reasonable counsel's fees) arising out of such manager's or
officer's status as a
manager or
officer of
the Company; provided, however, that a court of competent jurisdiction has
not determined that such manager or
officer did not act in good faith and in a manner that he
or
she reasonably believed to be
in,
or
not opposed
to,
the best interests of
the Company and, with
respect to any criminal action or
proceeding, had no reasonable cause to believe that his or
her
conduct was unlawful. The LLC Agreement will provide that the right to indemnification is a
contract right and set forth certain procedural and evidentiary standards applicable to
enforcement of
a claim. The LLC Agreement will provide that the Company may purchase and
maintain insurance to protect any manager or
officer against any liability asserted against him or
her, or
incurred by him or
her, arising out of
his or
her status as
such.
Additional Covenants of
the Company in the LLC Agreement
The LLC Agreement provides that, so
long as
any Company Preferred Securities are
outstanding, the Company will not authorize, create or
increase the authorized amount of
or
issue any class or
series of any equity shares of
the Company, or any warrants, options or
other
rights convertible or
exchangeable into any class or
series of
any equity shares of
the Company,
ranking senior to the Company Preferred Securities, either as
to dividend rights, redemption
rights or
rights on dissolution, liquidation or
winding up
of
the Company without the consent or
an affirmative vote of
the holders of
at
least two- thirds of
the Fixed-
to-
Floating Rate Company
Preferred Securities and the Fixed Rate Company Preferred Securities, voting together as a
single class. The LLC Agreement also provides that, except with the consent or
affirmative vote
of
the holders of
at
least two- thirds of
the Fixed-
to-
Floating Rate Company Preferred Securities
and the Fixed Rate Company Preferred Securities, voting together as a single class, the
Company will not take certain other actions.
These actions are described under " Description of
the Fixed-
to-
Floating Rate Company
Preferred Securities - Voting Rights and Covenants."
Additional Information
The information with respect to the Company that is required by
paragraph ( d)
( 4)
( i) of
Rule 144A under the Securities Act, including quarterly unaudited and annual audited financial
statements, in each case prepared in accordance with U.
S.
GAAP, will be available upon request
to WMI until the earlier of
( i) the redemption in full of
the Fixed-
to-
Floating Rate Company
Preferred Securities or
(
ii) the Conditional Exchange.
43
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THE ASSET TRUST
General
Washington Mutual Home Equity Trust I (the " Asset Trust") is a statutory trust formed
under the laws of
the State of
Delaware pursuant to a trust agreement between the Company, as
depositor, and Deutsche Bank Trust Company Delaware, as Delaware trustee. The Pooling and
Servicing Agreement among the Company, as
depositor, WMB, as
servicer (the "Servicer"),
Deutsche Bank Trust Company Delaware, as Delaware trustee (the " PSA Delaware Trustee")
and Deutsche Bank National Trust Company, as trustee (the " Trustee"), will restate the trust
agreement and will be the governing instrument of
the Asset Trust.
The Asset Trust will not own any assets other than the HELs and the other assets
described below. The Asset Trust will not have any liabilities other than those incurred in
connection with the Pooling and Servicing Agreement and any related agreement. The Asset
Trust will not have any directors, officers or
other employees. No equity contribution will be made
to the Asset Trust by WMB, the depositor or
any other party, except
for
a de minimis contribution
made by
the depositor pursuant to the initial trust agreement, and the Asset Trust will not have
any other capital. The fiscal year end of
the Asset Trust will be December 31. The Asset Trust
will act through the Trustee and the PSA Delaware Trustee, whose fees and reasonable
expenses will be paid or
reimbursed by
the Servicer.
For purposes of
this offering circular with respect to the underwriting, origination and
servicing of
the HELs in the Asset Trust, references to WMB include WMB, originators acquired
by WMB and WMB's subsidiaries.
General Description of
Assets
The assets of
the Asset Trust will consist of
HELs having, as
of
the Cut-Off Date, a value of
approximately $5,389,459,150, payments received thereon and certain other investments. The
HELs were originated by WMB primarily through
its retail branches between September 1,
2001
and September 30, 2005. As
of
January 31, 2006, the HELs transferred into the Asset Trust had
an aggregate unpaid principal balance of
approximately $5,389,459,150.
The assets of
the Asset Trust will consist of
56,090 HELs that had an aggregate unpaid
principal balance as
of the Cut-Off Date of
approximately $5,389,459,150. The HELs have a
weighted average gross interest rate of 6.076% and range from a gross interest rate of 4.00% to
11.315%. The weighted average current, unpaid principal balance of
the HELs is $96,086 with a
minimum current, unpaid principal balance of
$25,002 and a maximum current, unpaid principal
balance of
$965,000. Assets in the Asset Trust have various original maturities ranging from
5 years to 40 years and werE:), on average, originated within the last 25.46 months. The current
averageloan-
to-
value ratio is 53.48% and the average loan-
to-
value ratio at
origination was
57.51%. The HELs have a weighted average Credit Score ( as
defined below) of
757. Most of
the
properties underlying the HELs are owner occupied with 3.86% of
the properties non-owner
occupied. The HELs are geographically concentrated in Texas (49.01%), California (30.59%),
Florida (7.17%), and New York (5.08%). HELs are typically made
for
reasons such as home
purchases, home improvements, furniture and fixtures purchases, purchases of
automobiles and
debt consolidation. The HELs are generally repaid on a fully- amortizing basis.
Acquisition of
the Portfolio and Related Transactions
In anticipation of
the transactions described in this offering circular, WMB contributed a pool
of
HELs to the Company in exchange
for
a corresponding amount of
the Company's Fixed-
to-
Floating Rate Company Preferred Securities and Fixed Rate Company Preferred Securities. In
addition, University Street contributed a pool of HELs to the Company in exchange for
all
of the
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Company Common Securities. The aggregate value of
these contributions totaled approximately
$5,389,459,150.
Concurrently with the issuance of
the Trust Securities, the Company will cOntribute to the
Asset Trust
all
of
the HELs it received from WMB and University Street. Such contribution will be
made in exchange
for
the Class A-
1 Washington Mutual Home Equity Trust I Certificate (the
"Class A Asset Trust Certificate") and the Class R Washington Mutual Home Equity Trust I
Certificate (the "Class R Asset Trust Certificate"). For United States Federal income tax
purposes, the Class A Asset Trust Certificate will represent the sole class of
regular interests in
the Asset Trust, and the Class R Asset Trust Certificate will represent the sole class of
residual
interests in the Asset Trust. The Company will retain the Class A Asset Trust Certificate and
expects to sell the Class R Asset Trust Certificate to WMB.
The Asset Trust will own the right to receive
all payments of
principal and interest on the
HELs due after January 31, 2006 (the "Cut-Off Date"). A schedule to the Pooling and Servicing
Agreement will include information about each HEL, including:
• the outstanding principal balance as
of
the close of
business on the Cut-Oft Date;
• the term of
the HEL; and
• the applicable interest rate as
of
the close of
business on the Cut-Oft Date.
The notes relating to the HELs
will
not be endorsed to the
Asset Trust and no assignments
to the Asset Trust of
the mortgages securing the HELs will be prepared. WMB, in its capacity as
initial Custodian, will have possession of
and will review such notes and the HELs as
Custodian
for
the Asset Trust and financing statements will be
filed evidencing the Asset Trust's interest in
the HELs.
In exchange
for
the HELs and the other assets described above, the Trustee will
authenticate and deliver the Class A Asset Trust Certificate and the Class R Asset Trust Certifi-
cate pursuant to the order of
the depositor.
Description of
the Portfolio
General
All
of
the HELs in the portfolio of
the Asset Trust will consist of
closed- end, first lien home
equity loans secured by a first lien that primarily is on the borrower's residence. Such residences
are largely single family properties. These loans typically are made
for
reasons such as home
purchases, home improvements, acquisition of
furniture and fixtures, purchases of
automobiles,
and debt consolidation. The HELs are generally paid on a fully- amortizing basis. As
of
January 31, 2006, none of
the HELs were delinquent in payments
for
a period of
more than 30
days; however, the process of
selection
for
the HELs conveyed to the Asset Trust excluded any
such loans. Nevertheless, there can be
no assurance that HELs held in the portfolio of
the Asset
Trust will not become delinquent in the future. WMB's delinquency experience with respect to
first lien, closed-end home equity loans owned by WMB and
its subsidiaries has consistently
been less than one percent of
the total outstanding unpaid principal balance of such loans. As
of
December 31, 2005, total delinquencies of
the first lien, closed-end home equity loans owned by
WMB and
its subsidiaries, including charge- ofts during 2005, were 0.60% of
the total unpaid
principal balances of
such loans.
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The following tables represent information as
of
January 31, 2006 with respect to the HELs
included in the portfolio of
the
Asset Trust:
Distribution by
Current Principal Balance
Current Principal Balance
$0-$ 49,999 .
$50,000-$ 74,999 .
$75,000-$ 99,999 .
$100,000-$ 199,999 .
$200,000-$ 299,999 .
$300,000-$ 499,999 .
Greater than $500,000 .
Total .
Distribution by
Current Gross Interest Rate
Current Gross Interest Rate
4.00- 4.99% .
5.00-5.99 .
6.00-6.99 .
7.00-7.99 .
8.00- 8.99 .
9.00- 9.99 .
10.00- 10.99 .
11.00- 11 .99 .
Total .
Distribution by Property Type
Property Type
Single Family .
Townhouse .
Condominium .
Manufactured Housing .
Total .
Number of
Loans
11,198
13,561
11,231
17,073
2,322
644
61
56,090
Number of
Loans
15
26,026
27,509
2,277
209
26
25
3
56,090
Number of
Loans
51,667
2,071
2,269
83
56,090
46
Current Principal
Balance
$ 432,387,414
853,233,512
976,769,683
2,313,001,283
539,701,841
236,692,050
37,673,368
$5,389,459,150
Current Principal
Balance
$ 1,977,067
2,624,484,236
2,571,843,320
173,421,367
14,243,687
1,654,510
1,658,731
176,232
$5,389,459,150
Current Principal
Balance
$4,958,055,897
253,335,974
171,618,855
6,448,424
$5,389,459,150
Percent of
Overall Portfolio
Balance
8.02%
15.83
18.12
42.92
10.01
4.39
0.70
100.00%
Percent of
Overall Portfolio
Balance
0.04%
48.70
47.72
3.22
0.26
0.03
0.03
0.00
100.00%
Percent of
Overall Portfolio
Balance
92.00%
4.70
3.18
0.12
100.00%
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Distribution by
State
State
Texas .
California .
Florida .
New York .
Washington .
New Jersey .
Oregon .
Georgia .
Idaho .
Arizona .
Other .
Total .
Distribution by
Credit Score
Credit Score( 1)
Less than 600 .
600- 649 .
650- 699 .
700- 749 .
750- 799 .
800- 849 .
Total .
Number of
Loans
28,652
15,288
4,943
2,486
1,181
694
788
446
334
305
973
56,090
Number of
Loans
900
1,786
5,866
11,759
21,633
14,146
56,090
Current Principal
Balance
$2,641,385,492
1,648,481,206
386,598,404
273,920,738
110,746,674
76,275,944
74,128,630
38,773,740
27,517,454
26,256,800
85,374,067
$5,389,459,150
Current Principal
Balance
$ 80,943,626
169,408,159
566,608,998
1,160,863,350
2,144,571,619
1,267,063,398
$5,389,459,150
Percent of
Overall Portfolio
Balance
49.01%
30.59
7.17
5.08
2.05
1.42
1.38
0.72
0.51
0.49
1.58
100.00%
Percent of
Overall Portfolio
Balance
1.50%
3.14
10.51
21.54
39.79
23.51
100.00%
( 1)
"Credit Score" means a statistical credit score obtained by WMB and many other mortgage lenders in connection with
a loan application to help assess a borrower's creditworthiness. A Credit Score is generated by
models developed by
a third party, Fair, Isaac & Co., and made available
to
WMB through three national consumer reporting agencies. The
Credit Score is based on
a borrower's historical credit data, including, among other things, payment history,
delinquencies on
accounts, levels of
outstanding indebtedness, length of
credit history, types of
credit and bankruptcy
experience. A higher Credit Score indicates a more favorable credit rating.
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Distribution by
Current Loan-
to-
Value Ratio
Current Loan-
to-
Value Ratio( 1)
Less than 10.001% .
10.001- 20.000 .
20.001- 30.000 .
30.001- 40.000 .
40.001- 50.000 .
50.001- 60.000 .
60.001- 70.000 .
70.001- 80.000 .
80.001- 90.000 .
90.001- 100.000 .
Total .
Number of
Loans
887
4,030
5,876
7,745
8,680
9,517
9,082
9,703
567
3
56,090
Current Principal
Balance
$ 35,940,629
218,673,171
416,715,161
645,895,191
815,139,892
997,096,237
1,018,570,234
1,173,314,741
67,808,505
305,389
$5,389,459,150
Percent of
Overall Portfolio
Balance
0.67%
4.06
7.73
11.98
15.12
18.50
18.90
21.77
1.26
0.01
100.00%
( 1) The current loan-to-value ratio of
a mortgage loan is a fraction, the numerator of
which is the outstanding principal
balance of
the mortgage loan and
the denominator of
which is the
collateral value, generally at
time of
origination of
the related mortgage property. expressed as a percentage.
Distribution by
Remaining Months to Maturity
Remaining Months to Maturity
Less than 61 .
61-120 .
121- 180 .
181- 240 .
241- 300 .
301- 360 .
Greater than 360 .
Total .
Distribution by
Year of
Origination
Year of
Origination
2001 .
2002 .
2003 .
2004 .
2005 .
Total .
Number of
Loans
939
5,522
12,882
28,716
342
7,688
1
56,090
Number of
Loans
266
5,685
27,005
16,285
6,849
56,090
48
Current Principal
Balance
$ 39,046,979
318,110,997
1,011,975,772
3,034,564,574
37,686,873
948,039,671
34,284
$5,389,459,150
Current Principal
Balance
$ 21,414,942
548,951,912
2,649,489,615
1,593,766,430
575,836,251
$5,389,459,150
Percent of
Overall Portfolio
Balance
0.72%
5.90
18.78
56.31
0.70
17.59
0.00
100.00%
Percent of
Overall Portfolio
Balance
0.40%
10.19
49.16
29.57
10.68
100.00%
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Underwriting
General
The HELs owned by
the Asset Trust were, in all material respects, originated in accordance
with the underwriting guidelines of WMB as
described herein. The HELs have been underwritten
by WMB using automated underwriting systems.
WMB's underwriting guidelines generally are intended to evaluate the prospective borrower's
credit standing and repayment ability and the value and adequacy of
the mortgaged property as
collateral. Some HELs are manually underwritten, in which case an underwriter reviews
information submitted by the borrower and supporting documentation, if required, and a credit
report of
the
borrower, and based on that review determines whether to originate a loan in the
amount and with the terms requested by
the borrower. Some HELs are underwritten through
WMB's automated underwriting system, described below.
Prospective borrowers are required to provide details about their financial factors such as
their assets, liabilities and related monthly expenses, as
well as income and employment
information. Borrowers may provide this information by
electronic transmission to a bank
representative who inputs the information directly into the lending system. Each borrower also
provides an
authorization to access a credit report that summarizes the borrower's credit history.
Evaluation of
the Borrower's Credit Standing
To evaluate a prospective borrower's credit history, the loan underwriter obtains a credit
report relating to the borrower from one or
more credit reporting agencies. The credit report
typically contains information relating to such matters as
credit history with local and national
merchants and lenders, installment debt payments and any record of
defaults, bankruptcy,
repossession, suits or
judgments. In most cases the credit report provides a Credit Score
for
the
borrower. Credit Scores are designed to assess a borrower's creditworthiness and likelihood to
default on
an obligation over a defined period (usually two to three years) based on a
borrower's credit history. Credit Scores do
not necessarily correspond to the probability of
default over the life of
a HEL because they reflect past credit history, rather than an assessment
of
future payment performance. Credit Scores range from approximately 430 to approxi-
mately 850, with higher scores indicating more favorable credit history. In the case of
co-
borrowers, the Credit Score
for
the primary borrower is typically used, unless the co- borrower
has a Credit Score that is 40 points lower than that of
the primary borrower, in which case the
lower score is then used. The primary borrower is determined by
the applicant at
the time the
borrowing request is made. Minimum Credit Scores are required for some loan products and
loan programs. Credit Scores may not be
available
for
some borrowers.
Evaluation of
the Borrower's Repayment Ability
In evaluating a prospective borrower's ability to repay a HEL, the loan underwriter considers
the ratio of
the borrower's total monthly debt (including non-housing expenses) to the
borrower's gross income (referred to as
the "debt- to-income ratio" or
"back- end ratio"). The
maximum acceptable ratios may vary depending on other loan factors, such as
loan amount and
loan purpose, loan-
to-
value ratio, credit score and the availability of
other liquid assets.
Exceptions to the ratio guidelines may be made when compensating factors are present.
Evaluation of
the Adequacy of
the Collateral
The adequacy of
the property being pledged as
collateral generally is determined by
an
appraisal made in accordance with pre-established appraisal guidelines. At
origination,
all
appraisals are required to conform to the Uniform Standards of
Professional Appraisal Practice
adopted by
the Appraisal Standards Board of
the Appraisal Foundation, and are made on forms
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acceptable to the Federal National Mortgage Association and/ or
the Federal Home Loan
Mortgage Corporation. Appraisers may be
staff appraisers employed by WMB or
independent
appraisers selected in accordance with the pre-established appraisal guidelines. Such guidelines
generally require that the appraiser, or
an agent on
its behalf, personally inspect the property and
verify whether the property is in adequate condition and, if the property is new construction,
whether it is substantially completed. However, in the case of HELs underwritten through WMB's
automated underwriting system, an automated valuation method (" AVM") may be used in lieu of
a traditional appraisal. The AVM relies on public records regarding the encumbered property
and / or
neighboring properties and statistically derives a value using that information. If AVMs are
used, they comply with the requirements of
the Financial Institutions Reform and Recovery Act of
1989, as
amended, and are independently verified periodically. In either case, the appraisal
normally is based upon a market data analysis of
recent sales of
comparable properties and,
when deemed applicable, a replacement cost analysis based on
the current cost of
constructing
or
purchasing a similar property.
Title insurance or
alternative services ( e.
g.,
lien insurance) are required
for
all HELs.
Certain of
the HELs owned by the Asset Trust involve the use of
"alternative services". These
services consist of
three services (including property reports and recording services) and are
used in lieu of
title insurance, endorsements and title company services. Alternative services may
be used in certain circumstances including in connection with first liens that
are
being granted to
a lender other than in connection with the purchase of
a home; or
in connection with loans made
to borrowers who already own, on a free and clear basis, the property being used as
collateral to
secure the loan in question. Alternative services provide a low cost alternative to standard title
insurance and provide acceptable risk coverage in the event of
default.
Documentation Programs
Each HEL owned by
the Asset Trust has been underwritten using either WMB's
full
income
documentation program or
its stated income program. Under WMB's full documentation program,
the prospective borrower's stated income is verified through receipt of
the borrower's most
recent pay stub and most recent W- 2 form
or,
in the case of
self-employed borrowers or
borrowers with more than 25% of
their income from commissions, two years of personal (and, if
applicable, business) tax returns. For self-employed borrowers, profit and loss statements may
also be required.
Under WMB's stated income program, the prospective borrower's income and assets either
are not required to be obtained or
are obtained but not verified. Eligibility criteria and the amount
of
the loan are determined by
an automated underwriting system. Purchase loans as
well as
refinance loans may be
eligible
for
participation in WMB's stated income program.
A credit report
for
the borrower generally is required
for
all HELs underwritten under either
program.
Exceptions to Program Parameters
Exceptions to WMB's loan program parameters may be made on a case-
by-
case basis if
compensating factors are present. In those cases, the basis
for
the exception is documented,
and in some cases the approval of
a senior underwriter is required. Compensating factors may
include, but are not limited
to,
low loan-
to-
value ratio, good credit standing, the availability of
other liquid assets and stable employment.
Automated Underwriting System
Currently,
all HELs originated by WMB utilize a proprietary automated underwriting system
known as
"SUCCESS". Based on
the borrower's credit report and the information provided by
the borrower, the system either ( i) approves the loan subject to the satisfaction of
specified
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conditions, which may include the receipt of
additional documentation, (
ii) refers the loan
application to an underwriter for manual underwriting, or
(
iii) declines the file based on
predetermined eligibility criteria. In making the underwriting decision, SUCCESS pistinguishes
among different levels of
credit standing, based on a proprietary custom score model, the
borrower's Credit Score, and specific policies, application and loan characteristics. WMB has
developed these credit standing levels based on a statistical analysis of
the past performance of
its
portfolio of
home equity loans. WMB has used analysis of
the past performance of
its
portfolio of home equity loans. WMB has used SUCCESS to underwrite HELs since May 2001.
WMB regularly evaluates and validates SUCCESS and to date has completed
all required
compliance and fair lending evaluations in a satisfactory manner. WMB periodically upgrades
its
proprietary automated underwriting system. SUCCESS was last upgraded in November 2004.
Quality Control Review
WMB's credit risk oversight department conducts quality control reviews of
statistical
samplings of
previously originated HELs on a regular basis.
Credit Risk Management Policies
Credit risk within the WMI Group is managed by means of
a broad set of
policies and
principles contained in its credit policy. The Chief Credit Officer is responsible for overseeing the
work of
a credit policy committee, monitoring the quality of
the WMI Group's credit portfolio,
determining the reasonableness of the WMI Group's allowance
for
loan losses, reviewing and
approving large credit exposures and setting underwriting criteria
for
credit- related products and
programs. Credit risk management is based on analyzing the creditworthiness of
the borrower,
the adequacy of
the underlying collateral given current events and conditions and the existence
and strength of
any guarantor support.
Credit risk assessment is a process that requires the evaluation of
numerous factors, many
of
which are qualitative. Process integrity relies on
the ability of
the WMI Group's lending
personnel to analyze
all
risk elements. It also depends on maintaining risk rating accuracy by
recognizing changing elements of
credit risk and promptly initiating risk rating changes.
Conflicts of
Interest Policies
Pursuant to WMB's code of
ethics (the "Code of
Ethics"), WMB extends credit to
borrowers only when such extension of
credit is financially reasonable
for
both WMB and the
borrower in question. Pursuant to the Code of
Ethics, lending personnel cannot permit personal
relationships or
other considerations to influence lending decisions, and cannot approve
extensions of
credit
to,
or
be involved in the funding or
auditing of
any loans made to family or
friends.
Servicing and the Servicers
General
All
of
the HELs owned by the Asset Trust will be serviced by WMB, as the Servicer,
pursuant to the Pooling and Servicing Agreement. WMB will have possession of
the mortgage
files (Le., the credit reports, servicing documents, etc.) in its capacity as
Servicer and the Loan
Documents ( as
defined below) in its capacity as
Custodian
for
the Asset Trust.
The Pooling and Servicing Agreement will provide that WMB may not resign from
its
obligations and duties thereunder as
Servicer except upon a determination that
its duties
thereunder are no longer permissible under applicable law. No such resignation will become
effective until a successor Servicer has assumed WMB's servicing obligations and duties under
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the Pooling and Servicing Agreement. In the event of
a Servicer resignation, the Company,
subject to the terms of
the Pooling and Servicing Agreement, shall appoint a successor Servicer.
The Servicer will receive a fee
for
its services as
Servicer under the Pooling and Servicing
Agreement. The servicing fee will be calculated as a per annum percentage
for
each HEL based
on the principal balance
for
such HEL. The servicing fee with respect to each such HEL will equal
0.125%
pe
r
annum and
will
be paid monthly. This Servicer
will
be entitled to retain certain
ancillary fees and charges, including, but not limited
to,
any prepayment fees, insufficient funds
fees, modification fees, payoff statement fees and late charges with respect to the HELs as
additional servicing compensation and will also be
entitled to certain income generated by
permitted investments made with collections on the HELs. The Servicer generally will pay
all
expenses incurred in connection with
its responsibilities as
Servicer under the Pooling and
Servicing Agreement (subject to reimbursement
for
certain expenses and advances, including
those incurred by
it in connection with the liquidation of
defaulted HELs, the restoration of
damaged mortgaged properties, and payments by
the Servicer
for
taxes and insurance premiums
with respect to mortgaged properties).
Any person into which the Servicer may be merged, converted or
consolidated, or
any
person resulting from any merger, conversion or
consolidation to which the Servicer is a party
will be the successor Servicer under the Pooling and Servicing Agreement.
The Servicer
will
outsource to third party vendors some servicing functions, as described
under" - The Servicer - Servicing Procedures - The Servicer's Third Party Vendors and
Service Providers" below.
The Servicer
The Servicer's Servicing Experience
WMB, including
its predecessors in interest, has been servicing loans secured by
real estate
or
other property
for
over 115 years. The home equity loans serviced by WMB include c1osed-
end fixed and adjustable rate home equity loans and open- end home equity lines of
credit. The
HELs in WMB's portfolio have been originated by WMB.
The following table shows the number and aggregate unpaid principal balance of
HELs
serviced by the Servicer as
of December 31
for
each of
the most recent three years:
Closed-end Home Equity Loans Serviced by
the
Servicer
December 31
2004 2003 2002(Dollars in Thousands)
Number of
Closed-End Home Equity Loans Serviced by
WMB .
Aggregate Unpaid Principal Balance .
150,450
$9,851,722
131,105
$7,918,281
126,547
$6,364,840
Servicing Procedures
Servicing Functions. The functions to be
performed by
the
Servicer under
the
Pooling and
Servicing Agreement will include, among other servicing functions, payment collection, payment
application, and default management. The Servicer will perform
its servicing functions at
loan
servicing centers located in Melbourne, Florida; Houston, Texas; San Antonio, Texas; Stockton,
California; Chatsworth, California; Seattle, Washington; and Canyon Park, Washington.
Servicing Standard; Waivers and Modifications. Pursuant to the Pooling and Servicing
Agreement, the Servicer will be required to service the HELs owned by
the Asset Trust,
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consistent with prudent first lien, closed- end home equity loan servicing practices and (unless
inconsistent with those servicing practices) in the same manner in which, and with the same
care, skill, prudence and diligence with which, it services and administers similar. HELs
for
its
own portfolio. The Servicer will be required to make reasonable efforts to collect or
cause to be
collectedall payments under the HELs and, to the extent consistent with the Pooling and
Servicing Agreement and applicable insurance policies, follow such collection procedures as are
followed with respect to comparable HELs that are held in portfolios of
responsible mortgage
lenders in the local areas where each mortgaged property is located. Under the terms of
the
Pooling and Servicing Agreement, the servicing standard applicable to the Servicer may only be
modified with the consent of
the Company.
Under
the
terms of
the
Pooling and Servicing Agreement,
the
Servicer (subject to certain
conditions) may waive, modify or
vary any term of
any HEL or
consent to the postponement of
strict compliance with any such term or
in any manner grant indulgence to the applicable obligor
if it has determined, exercising
its good faith business judgment in the same manner as
it would
if it were the owner of
the related HEL, that the security for, and the timely and full collectability
of, such HEL would not be adversely affected by such waiver, modification, postponement or
indulgence, and may make certain other modifications with respect to the HELs and the related
property in accordance with the terms of
the Pooling and Servicing Agreement.
Loan Servicing System. In performing
its servicing functions, the Servicer generally will
use computerized loan servicing systems. The Servicer leases
its primary servicing system from
AMS- CGI (known as " Advanced Gonsumer Lending System" or
" AGLS"). ACLS produces
detailed information about the financial status of each HEL, including outstanding principal
balance, current interest rate, outstanding fees and information about transactions that affect the
HEL, including the amount and due date of
each payment, the date of
receipt of
each payment,
and how the payment was applied. ACLS works in conjunction with AMS- CGI's Computer
Automated Collection System ("GAGS") to monitor payment collections and to provide default
collection activity information regarding delinquent consumer loans. The Servicer began using
ACLS in 2003. Prior to November 2003, the Servicer serviced equity HELs using an ALLTEL loan
servicing system; in November 2003, the Servicer transferred servicing onto the ACLS servicing
platform by
converting approximately 948,000 loan records from the ALLTEL loan servicing
system to ACLS.
Collections and Distributions. Under the terms of
the Pooling and Servicing Agreement,
collections with respect to the HELs will be collected by the Servicer and initially deposited into
accounts controlled by the Servicer and may be commingled with funds with respect to other
HELs or
mortgage loans serviced or
owned by
the
Servicer. The Servicer is required to deposit
collections received with respect to the HELs owned by
the Asset Trust into a certificate account
controlled by
the Trustee under the Pooling and Servicing Agreement on a monthly basis. The
amount of
collections required to be remitted to the Trustee in any given monthly deposit is
determined by
the timing of
the Servicer's receipt of
collections and the type of
collections they
represent. In accordance with the terms of
the Pooling and Servicing Agreement, the Servicer
may retain certain amounts with respect to expenses and advances from collections or
apply
them towards the costs of
certain costs and permitted expenses connected with the servicing of
the HELs. The Servicer will neither be
permitted nor required to make servicer advances to cover
any gap between scheduled payments on the HELs and the actual collections thereon in any
given period.
Subject to the terms and conditions set forth in the Pooling and Servicing Agreement, on a
monthly basis the Trustee will distribute collections deposited in the certificate account to the
Company, as
holder of
the Class A Asset Trust Certificate, less ( a)
fees, expenses and
indemnities payable to the Trustee and the PSA Delaware Trustee and ( b)
fees and certain other
amounts payable to the Servicer. No amounts will be payable from collections with respect to the
Class R Asset Trust Certificate.
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Under the terms of
the Pooling and Servicing Agreement, collections with respect to the
HELs may be invested in certain permitted investments prior to their distribution to the Company,
as holder of
the Class A Asset Trust Certificate. The Servicer shall be entitled to ; retain any
investment income produced by such investment as additional servicing compensation.
Servicingo
fDelinquent HELs; Foreclosure. The Servicer will make reasonable efforts to
collect or
cause to be collected
all payments on the HELs owned by
the Asset Trust that are 16
or
more days delinquent. Strategic decisions regarding early stage collection efforts are guided
by
Experian's Strategic Account Management System, Probe@. Early stage collections, in other
words, collections beginning on
the 16th day of
delinquency and continuing through the 89th day
of
delinquency, are conducted primarily through the use of
automated outbound collection
telephone calls and debt collection letters. Late stage collections, or
collection efforts taking
place from the 90th day and through the 180th day of
delinquency, are segregated in CACS by
risk and a combination of
manual and automated collection efforts are used. CACS also
segregates delinquent accounts by
status, including bankruptcy, probate, foreclosure, real-estate-
owned and "special activities" ( e.
g., consumer credit counseling and recovery). These collection
efforts are carried out by personnel who specialize in debt collection and recovery. Such efforts
may include payment reminder telephone calls to the borrower, letter campaigns, drive- by
property inspections and other collection activities permissible under the Loan Documents and
applicable law.
The Servicer will be required under the Pooling and Servicing Agreement to foreclose upon
the mortgaged property related to each defaulted HEL as
to which no satisfactory arrangements
can be made
for
collection of
delinquent payments. Under the Pooling and Servicing Agreement,
the Servicer will be
permitted, in lieu of
foreclosure, if prudent to do
so and taking into account
the desirability of
maximizing net liquidation proceeds, to accept a payment of
less than the
outstanding principal balance of
the defaulted HELs. The Servicer will not be
permitted to
foreclose upon a mortgaged property if it is aware of
evidence of
toxic waste or
other
environmental contamination on the mortgaged property and it determines that it would be
imprudent to foreclose.
Insurance. The Servicer maintains a blanket hazard policy
for
all HELs. In addition, the
Servicer tracks
all HELs
for
compliance with applicable law regarding flood insurance coverage.
When necessary, the Servicer " force places" flood insurance policies.
Limitations on the Servicer's Liability
The Pooling and Servicing Agreement will provide that neither the Servicer nor any director,
officer, employee or
agent of
the Servicer (the " Servicer Indemnified Parties") will be under any
liability to the Asset Trust, the Company or
the holder of
the Class A Asset Trust Certificate and
the Class R Asset Trust Certificate or
others
for
any action taken ( or
not taken) by any Servicer
Indemnified Party in good faith pursuant to the Pooling and Servicing Agreement, or
for errors in
judgment; provided, however, that the Servicer shall not be protected against any liability that
would otherwise be imposed by reason of
willful misfeasance, bad faith or
gross negligence in
the performance of
duties or
by reason of
reckless disregard of
obligations and duties
thereunder. The Pooling and Servicing Agreement will further provide that any Servicer
Indemnified Party is entitled to indemnification by the Asset Trust and will be held harmless
against any loss, liability or
expense incurred in connection with any legal action relating to the
Pooling and Servicing Agreement or
the certificates issued thereunder (except any such loss,
liability, or
expense otherwise reimbursable pursuant to the Pooling and Servicing Agreement)
and any loss, liability or
expense incurred by reason of
willful misfeasance, bad faith or
gross
negligence in the performance of
duties thereunder or
by reason of
reckless disregard of
obligations and duties thereunder. In addition, the Pooling and Servicing Agreement will provide
that the Servicer is not under any obligation to appear
in,
prosecute or
defend any legal action
that is not incidental to its responsibilities under the Pooling and Servicing Agreement and that in
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its opinion may involve it in any expense or
liability. The Servicer may however, in its discretion,
undertake any such action that it may deem necessary or
desirable with respect to the Pooling
and Servicing Agreement and the rights and duties of
the parties thereto and
thl:
3interests of
the
holders of
the Class A Asset Trust Certificate and the Class R Asset Trust Certfficate. In such
event, the legal expenses and costs of such action and any liability resulting therefrom will be
expenses, costs and liabilities of
the Asset Trust, and the Servicer will be entitled to be
reimbursed therefor and to charge
the
certificate account.
Servicer Termination, Servicer Replacement. Under the terms of
the Pooling and Servicing
Agreement, after the occurrence of
anyone of
several typical Servicer termination events,
including but not limited to a receivership with respect to the Servicer or
(subject to the
expiration of
typical grace periods and materiality requirements) the failure by
the Servicer to
make required deposits to the certificate account, the Company may remove the Servicer. If the
Servicer is removed by
the Company, the Company shall have the sole power to appoint a
replacement Servicer.
The Servicer's Third Party Vendors and Service Providers. Under the Pooling and
Servicing Agreement, the Servicer may perform
its servicing responsibilities through agents or
independent contractors, but shall not thereby be
released from any of
its responsibilities
thereunder. The Servicer expects that it will outsource some of
its responsibilities pursuant to
these provisions, which services may include some or
all
of
the following: ( i) management of
foreclosure actions, (
ii) monitoring of
borrower bankruptcy proceedings, (
iii) preservation of
properties related to delinquent loans, (
iv)
processing of
primary mortgage insurance claims,
( v) maintenance, marketing and sale of
real-estate- owned properties, (
vi) assuring that hazard
insurance coverage is maintained, (
vii)
determining whether flood insurance coverage is required
and assuring that any required coverage is maintained, (viii) tax bill procurement and tracking of
delinquent
tax
payments, (
ix)
printing and mailing billing statements, ( x)
depositing borrower
payments into lockbox accounts, (
xi) performing certain calculations with respect to scheduled
and actual collections, (
xii)
performing certain
tax
related calculations, (xiii) performing
calculations with respect to monthly distributions from the Asset Trust and (xiv) performing
reporting functions required under the Pooling and Servicing Agreement. From time to time, the
Servicer may cease to outsource one or
more of
the foregoing servicing functions or
may choose
to outsource additional servicing functions. Some vendors may perform more than one function,
and some functions may be performed by more than one vendor.
The Servicer's Quality Control Procedures
The Servicer uses a combination of
management controls and technology controls to ensure
the accuracy and integrity of
servicing records. Management controls include the use of
approval
levels, the segregation of
duties, and reconciliations of
servicing data and accounts, among
others. Technology controls include the use of
data security controls and interface controls to
ensure that only authorized persons have
the
ability to access and change system data or
to
submit data to or
receive data from vendors and investors. Specific security profiles
for
each job
function include a predetermined
se
t
of
data security controls that are appropriate
for
that
job
function. The regional data center
for
the ACLS Server, which is located in Seattle, Washington,
is kept in a fire resistant environment, and commercial electrical power is backed up
by
generators.
In addition, the Servicer conducts periodic internal audits of
critical servicing and technology
functions. External audits by
entities such as
the OTS and United Guaranty and the annual
examination by
WMl's independent accountants in connection with their audit of
WMI and
its
subsidiaries may provide independent verification of
the adequacy of
such functions.
The Servicer maintains detailed business continuity plans so
that it can resume critical
business functions in the event of
a disaster or
other serious system outage, which plans are
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reviewed and updated periodically. The Servicer is obligated to return to full system functionality
within 48 hours of
a reported system outage. The Servicer performs annual disaster recovery
tests in which it reroutes data and servicing system operations to the designated back- up
site,
and then processes sample transactions from
all servicing locations to ensure the functionality of
such back- up
site.
It
is the Servicer's policy to require
its other third party vendors to implement measures
similar to those described above to ensure the accuracy and integrity of
servicing records.
The Custodian
Washington Mutual Bank will act as
custodian (the " Custodian")
for
the Asset Trust
pursuant to a Custody Agreement, to be entered into on
or
before the closing date (the "Custody
Agreement"), among the Trustee, the Servicer and the Custodian. The Custodian will hold the
notes, mortgages and other legal documents related to the HELs (collectively, the " Loan
Documents")
for
the benefit of
the Trustee. The Custodian will maintain the Loan Documents in
secure and fire resistant facilities. The mortgage files held by
the Servicer will not be
physically
segregated from Loan Documents in the Custodian's custody but will be kept in shared facilities.
The Custodian
will
review the Loan Documents related to each HEL and deliver to the
Trustee a
certification to the effect that, except as
noted in the certification,
all required documents have
been executed and received.
In the event of
the termination of
the Custody Agreement, the Custodian will be required to
deliver the Loan Documents in the Custodian's custody to the Trustee or
any successor
Custodian appointed by
the Company.
The Servicer may pay the Custodian a fee
for
its services under the Custody Agreement
from time to time. Payment of
this fee will not affect dividends to the Company.
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WMI
General
WMI is a Washington corporation. It owns two federal savings associations as
well as
numerous nonbank subsidiaries. WMI is a multiple savings and loan holding company. As
a
savings and loan holding company, WMI is subject to regulation by
the OTS.
WMl's federal savings associations are subject to extensive regulation and examination by
the OTS, their primary federal regulator, as
well as
the
U.
S.
Federal Deposit Insurance
Corporation (" FDIC"). Prior to 2004, WMB had two sister depository institutions which were
both owned directly by WMI. WMB has since acquired both of
these sister institutions. One of
these institutions, Washington Mutual Bank fsb, a federal savings bank, became a wholly-owned
subsidiary of WMB on February 1,
2004. The other institution, Washington Mutual Bank, a
savings bank chartered under
the
laws of
the state of
Washington, converted into a federally
chartered savings bank and then was merged into WMB on January 1,
2005. Consequently, WMI
no
longer owns a state savings bank that is subject to regulation and supervision by
the
Director
of
Financial Institutions of
the State of
Washington or
by
the FDIC. WMl's nonbank financial
subsidiaries are also subject to various federal and state laws and regulations.
All
of
WMl's banking subsidiaries are under the common control of
WMI and are insured by
the FDIC. If an
insured institution fails, claims
for
administrative expenses of
the receiver and
for
deposits in U.
S.
branches (including claims of
the FDIC as subrogee of
the failed institution)
have priority over the claims of
general unsecured creditors. In addition, the FDIC has authority
to require any of
WMI's banking subsidiaries to reimburse it for
losses it incurs in connection
either with the failure of
another of
WMl's banking subsidiaries or
with the FDIC's provision of
assistance to one of
WMI's banking subsidiaries that is in danger of
failure.
Holding Company Status and Acquisitions
WMI is a multiple savings and loan holding company, as defined by federal law, because it
owns more than one savings association. WMI is regulated as a unitary savings and loan holding
company, however, because the OTS deems WMI's federal savings associations to have been
acquired in supervisory transactions. Therefore, WMI is exempt from certain restrictions that
would otherwise apply under federal law to the
activities and investments of
a multiple savings
and loan holding company. These restrictions will apply to WMI if any of
WMl's banking
institutions fails to meet a qualified thrift lender test established by
federal law. As
of
December 31, 2004, WMl's banking subsidiaries were in compliance with qualified thrift lender
standards.
WMI may not acquire control of
another savings association without the prior approval of
the OTS. WMI may
not
be
acquired by
a company, other than a bank holding company, unless
the OTS approves such an
acquisition, or
by
an
individual unless the OTS does not object after
receiving notice. WMI may not be
acquired by
a bank holding company unless
the
Board of
Governors of
the Federal Reserve System (the "Federal Reserve") approves. In any case, the
public must have an opportunity to comment on the proposed acquisition, and the OTS or
Federal Reserve must complete an application review. Without prior approval from
the
OTS, WMI
may not acquire more than 5% of
the voting stock of
any savings institution that is not one of
WMl's subsidiaries.
The Gramm-Leach- Bliley
Act
generally restricts any non- financial entity from acquiring WMI
unless such non- financial entity was, or
had submitted an application to become, a savings and
loan holding company as
of
May 4,
1999. Because WMI was treated as
a unitary savings and
loan holding company prior to that date, WMI may engage in non- financial activities and acquire
non- financial subsidiaries.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
WMB is the Servicer and the originator of
the HELs. WMB is expected to be the Servicer
and may be the originator with respect to any Additional Assets. University Street is an indirect
subsidiary of WMB. The Company is a subsidiary of
University Street.
There is not currently, and there was not during the past two years, any material business
relationship, agreement, arrangement, transaction or
understanding that is or
was entered into
outside the ordinary course of
business or
is or
was on terms other than would be obtained in an
arm's- length transaction with an unrelated third party, between ( i) any of WMB or
University
Street on
the one hand and (
ii) any of
the Company, the Asset Trust, WaMu Delaware or WaMu
Cayman on the other hand.
Employees of WMB administer the day-
to-
day activities of
the Company under the terms of
Administrative Services Agreement, which obligates the Company to pay an annual service fee as
provided under such agreement. Additionally, the Company periodically reimburses WMB
for
general overhead expenses. The Company expects that the amount of
such service fees and
reimbursements will be
de minimis.
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DESCRIPTION OF THE TRUST SECURITIES
The following summary describes the material terms and provisions of
the Trust Securities,
which will represent undivided beneficial ownership interests in a like amount of
Fixed-
to-
Floating
Rate Company Preferred Securities held by WaMu Delaware. This description is qualified in its
entirety by reference to the terms and provisions of
the Trust Agreement. A copy of
the Trust
Agreement may be obtained upon request to WMI.
General
The Fixed-
to-
Floating Rate Perpetual Non-cumulative Trust Securities, liquidation preference
$100,000 per security (the " Trust Securities"), of WaMu Delaware are beneficial ownership
interests in WaMu Delaware, the terms of
which are
se
t
forth in the Trust Agreement. The
aggregate liquidation preference of
the Trust Securities is $1,250,000,000.
The funds of WaMu Delaware available
for
distribution to the holders of
the Trust Securities
will be
limited solely to payments received by WaMu Delaware from the Company as
dividends
on, or upon redemption
of, the Fixed-
to-
Floating Rate Company Preferred Securities, which
payments will be passed through upon receipt by WaMu Delaware to the holders of
the Trust
Securities. Consequently, if the Company does not pay any dividend or
make any redemption
payment on the Fixed-
to-
Floating Rate Company Preferred Securities, WaMu Delaware will not
have funds to make the related distribution or
redemption payment on the Trust Securities.
Distributions on and the redemption price of
each Trust Security will be passed through to the
holders of
the Trust Securities on the same dates and in the same amounts as
the corresponding
dividends and redemption price, as
applicable, that are paid by
the Company to WaMu Delaware
on a like amount of
Fixed-
to-
Floating Rate Company Preferred Securities; provided that if any
such payment of
dividends or
redemption price is received by WaMu Delaware after 2:
00
P.
M.
New York time, such payment will instead be passed through to the holders of
the Trust
Securities on the next day that is a Business Day. The Dividend Payment Dates and related
Dividend Periods are the same
for
the Trust Securities and the Fixed-
to-
Floating Rate Company
Preferred Securities, and, accordingly, the terms " Dividend Payment Date", " Dividend Period" and
" Business Day" have the same meanings as
applied to each of
those securities.
The Trust Securities are automatically exchangeable under certain circumstances into a like
amount of
Fixed-
to-
Floating Rate Depositary Shares. See "- Conditional Exchange."
Under the Trust Agreement, WaMu Delaware is prohibited from issuing any securities other
than the Trust Securities.
The Trust Securities are not obligations
of,
or
guaranteed by, WMI, WMB, Marion, the
Company, University Street, WaMu Cayman or
any of
their respective affiliates or
any other
entity. The Trust Securities represent equity interests solely in WaMu Delaware and do not
represent an interest in any of
the foregoing entities.
Distributions
Distributions on the Trust Securities will be passed through on each date on which the
Company pays to WaMu Delaware dividends on the Fixed-
to-
Floating Rate Company Preferred
Securities owned by WaMu Delaware, in an amount per Trust Security equal to the amount of
dividends received by WaMu Delaware on such date on a like amount of
Fixed-
to-
Floating Rate
Company Preferred Securities (including Additional Amounts, if any); provided that if any such
payment of
dividends is received by WaMu Delaware after 2:
00
P.
M.
New York time, such
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payment will instead be passed through to the holders of
the Trust Securities on
the next day
that is a Business Day. Accordingly:
• if the Company pays full dividends on a Dividend Payment Date
for
the Fixed-
to-
Floating
Rate Company Preferred Securities, WaMu Delaware will pass through corresponding full
distributions on the Trust Securities on such Dividend Payment Date;
• if the Company pays partial dividends on a Dividend Payment Date
for
the Fixed-
to-
Floating Rate Company Preferred Securities, WaMu Delaware will pass through partial
distributions in the same proportionate amount on the Trust Securities on such Dividend
Payment Date; and
• if the Company pays no dividends on a Dividend Payment Date
for
the Fixed-
to-
Floating
Rate Company Preferred Securities, WaMu Delaware will not pass through any
distributions on
the Trust Securities on such Dividend Payment Date.
See "Description of
the Fixed-
to-
Floating Rate Company Preferred Securities - Dividends."
The record date
for
distributions on the Trust Securities will be the first day of
the month in
which the relevant Dividend Payment Date occurs
or,
if any such day is not a Business Day, the
next day that is a Business Day.
Dividends on the Fixed-
to-
Floating Rate Company Preferred Securities are non-cumulative.
Accordingly, distributions on the Trust Securities are non-cumulative. If WaMu Delaware passes
through no
distributions or
less than
full
distributions on
the Trust Securities on a Dividend
Payment Date because it received no dividend or
less than full dividends on the Fixed-
to-
Floating
Rate Company Preferred Securities, holders of
Trust Securities will have no right to receive, and
WaMu Delaware will have no obligation to pass through, such unpaid distributions at
a future
date, whether or
not dividends or
distributions are paid on a future Dividend Payment Date on
the Company Common Securities or
the Trust Securities.
Restrictions on
Dividends
Under certain circumstances, if the OTS determines that WMB is operating with an
insufficient level of
capital or
is engaged
in,
or
its relationship with the Company results
in,
an
unsafe and unsound banking practice, the OTS could restrict payment of
dividends by
the
Company on
the Fixed-
to-
Floating Rate Company Preferred Securities, resulting in a correspond-
ing restriction in the distributions passed through by WaMu Delaware to the holders of
the Trust
Securities.
Restrictions on Dividends by WMI
WMI will covenant in the Exchange Agreement
for
the benefit of
the holders of
the Trust
Securities and
the WaMu Cayman Preferred Securities that if f
or
any Dividend Period
full
dividends on
( i) the Company Preferred Securities, (
ii) the Trust Securities or
(
iii) the WaMu
Cayman Preferred Securities have not been declared and paid, then, as
described under
" Description of
the Fixed-
to-
Floating Rate Company Preferred Securities - Restrictions on
Dividends by
WMI", WMI will not declare or
pay dividends with respect
to,
or
redeem, purchase
or
acquire, any of
its equity capital securities during the next succeeding Dividend Period, except
dividends in connection with a shareholders' rights plan, if any, or
dividends in connection with
benefits plans.
Redemption
The Trust Securities will not be redeemable at
the option of
the holders thereof. On each
day on which the Company redeems Fixed-
to-
Floating Rate Company Preferred Securities,
WaMu Delaware will redeem a like amount of
Trust Securities
for
a redemption price in the same
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amount as the corresponding redemption price paid to WaMu Delaware on a like amount of
Fixed-
to-
Floating Rate Company Preferred Securities; provided that if any such payment of
the
redemption price is received by WaMu Delaware after 2:
00
P.
M.
New York Time, WaMu
Delaware will redeem the like amount of
Trust Securities on the next day that is a Business Day.
See " Description of
the Fixed-
to-
Floating Rate Company Preferred Securities - Redemption."
If the redemption of
the Fixed-
to-
Floating Rate Company Preferred Securities is in part
instead of
in whole on any redemption date, then the particular Trust Securities to be redeemed
will be
selected not more than 60 days prior to the redemption date by
the Property Trustee from
the outstanding Trust Securities not previously called
for
redemption, by such method as
the
Property Trustee deems fair and appropriate.
A notice of
redemption of
the Trust Securities will be mailed by
first class mail, postage
prepaid, addressed to the holders of
record of
the securities to be redeemed at
their respective
last addresses appearing on
the books and records of WaMu Delaware. Such mailing will be
at
least 30 days but not more than 60 days before the date fixed
for
redemption.
Restriction on Redemption or
Repurchases
At
or
prior to the initial issuance of
the Trust Securities, WMI will enter into a "Replacement
Capital Covenant" relating to the Trust Securities, the WaMu Cayman Preferred Securities, the
Fixed-
to-
Floating Rate Company Preferred Securities, the Fixed-
to-
Floating Rate Depositary
Shares (and related Fixed-
to-
Floating Rate WMI Preferred Stock), the Fixed Rate Company
Preferred Securities, and the Fixed Rate Depositary Shares (and related Fixed Rate WMIPreferred Stock) that may b
e issued upon a Conditional Exchange (collectively, the " Replace-
ment Covenant Covered Securities"). WMl's covenants in the Replacement Capital Covenant run
only to the benefit of
holders of
Covered Debt ( as
defined below), and are not enforceable by
holders of
Trust Securities or
of
any other Replacement Covenant Covered Securities. However,
those covenants could preclude WMI from redeeming or
repurchasing Replacement Covenant
Covered Securities at
a time WMI might otherwise wish to do so.
In the Replacement Capital Covenant, WMI covenants to redeem or
repurchase Replace-
ment Covenant Covered Securities only if and to the extent that the total redemption or
repurchase price is equal to or
less than the sum, as
of
the date of
redemption or
repurchase, of
( i) 133.33% of
the aggregate net cash proceeds WMI or
its subsidiaries have received during the
180 days prior to such date from the issuance and sale of
common stock of WMI plus (
ii) 100%
of
the aggregate net cash proceeds WMI or
its subsidiaries have received during the 180 days
prior to such date from the issuance of
securities that, among other things:
-are, with limited exceptions (including for certain hybrid securities that are in the form of
debt), pari passu with or
junior to the Fixed-
to-
Floating Rate WMI Preferred Stock upon
WMl's liquidation, dissolution or
winding up;
- are perpetual, or
have a mandatory redemption or
maturity date that is not less than forty
years after the date of
initial issuance of
such securities; and
- provide
for
dividends or
other distributions that are either non-cumulative
or,
if cumulative,
are subject to certain optional or
mandatory deferral provisions and certain explicit
replacement provisions.
WMI's ability to raise proceeds from qualifying securities during the 180 days prior to a
proposed redemption or
repurchase sufficient to allow such redemption or
repurchase to
proceed without violating the Replacement Capital Covenant will depend on, among other things,
market conditions at
such times as
well as
the acceptability to prospective purchasers of
the
terms of
such qualifying securities.
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WMI's covenants in the Replacement Capital Covenant will run in favor of
persons that buy,
hold or
sell WMl's indebtedness during the period that such indebtedness is "Covered Debt",
which is currently comprised of WMl's 4.625% Subordinated Notes due 2014, wh. ich have CUSIP
No. 939322AN3. Other debt will replace WMI Covered Debt under the Replacement Capital
Covenant on the earlier to occur of
( i) the date two years prior to the maturity of
such existing
Covered Debt or
(
ii) the date WMI gives notice of
a redemption of
such existing Covered Debt
such that the date such existing Covered Debt is repurchased in such an amount that, the
outstanding principal amount of
such existing Covered Debt is or
will become less than
$100 million.
The Replacement Capital Covenant is subject to various additional terms and conditions and
this description is qualified in its entirety by
reference to the Replacement Capital Covenant, a
copy of
which is available upon request from WMI. The Replacement Capital Covenant may be
terminated if the holders of
at
least 51% by
principal amount of
each of
the Covered Debt so
agree, or
if WMI no longer has outstanding any long- term indebtedness that qualifies as Covered
Debt, without regard to whether such indebtedness is rated by a nationally recognized statistical
rating organization.
Subject to the Replacement Capital Covenant and the terms of
any outstanding debt
instruments, WMI or
its
affiliates may from time to time purchase any outstanding Trust
Securities by tender, in the open market or
by private agreement.
Voting Rights
Except as set forth below, the holders of
Trust Securities will have no voting rights.
In the event that WaMu Delaware is entitled to exercise
its voting rights with respect to the
Fixed-
to-
Floating Rate Company Preferred Securities, each holder of
Trust Securities will have
the
right to direct the manner in which the Property Trustee on behalf of WaMu Delaware
exercises such voting rights with respect to a like amount of
Fixed-
to-
Floating Rate Company
Preferred Securities on a proportionate basis. If the Property Trustee receives notice from the
Company that WaMu Delaware as
holder of
Fixed-
to-
Floating Rate Company Preferred Securities
is entitled to vote on any matter, promptly after learning of
such entitlement, the Property Trustee
shall cause to be mailed to each holder of
Trust Securities, notice of
such vote (including a
description of
the subject matter of
the vote and related circumstances to the extent known to
the Property Trustee), along with a copy of
any notice or
other written communication received
by the Property Trustee from the Company with respect to such vote and related matters. In
each such notice the Property Trustee shall request direction from each holder of
Trust
Securities as
to how WaMu Delaware as a holder of
Fixed-
to-
Floating Rate Company Preferred
Securities shall vote on the matter at
issue. Each holder of
Trust Securities shall have the right to
direct the manner in which
the
Property Trustee on behalf of WaMu Delaware exercises such
voting rights with respect to a like amount of
Fixed-
to-
Floating Rate Company Preferred
Securities.
Notwithstanding the description above of
the voting rights available to holders of
the Trust
Securities under the Trust Agreement, such voting rights may be exercised only by a beneficial
owner of
a Trust Security that is a U.
S.
Person or
by a U.
S.
Person acting as
irrevocable agent
with discretionary powers
for
the beneficial owner of
a Trust Security that is not a U.
S.
Person.
Beneficial owners of
Trust Securities that are not U.
S.
Persons must irrevocably appoint a
U.
S.
Person with discretionary powers to act as
their agent with respect to such voting rights. As
used in this paragraph, the term " U.
S.
Person" means,
for
United States Federal income tax
purposes, a citizen or
resident of
the United States, a corporation created or
organized in or
under the laws of
the United States or
any state, an estate the income of
which is includible in
gross income
for
United States Federal income tax purposes regardless of
its source, or
a trust
if a court within the United States is able to exercise primary supervision over
its administration
62
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00075
and one or
more United States persons have authority to control
all substantial decisions of
the
trust.
In the case where the Company, the Property Trustee and the Delaware Trustee wish to
enter into one or
more agreements supplemental to the Trust Agreement, they may do
so without
the consent of
the holders of
the Trust Securities
for
the following purposes: ( i) to evidence the
succession of
another entity to the Company and the assumption by any such successor of
the
covenants of
the Company contained in the Trust Agreement; (
ii)
to add to the covenants of
the
Company
for
the benefit of
the holders of
the Trust Securities, or
to surrender any right or
power
conferred upon the Company; (
iii) ( A)
to correct or
supplement any provision of
the Trust
Agreement which may be defective or
inconsistent with any other provision therein or
( B)
to
make any other provisions with respect to matters or
questions arising under the Trust
Agreement, provided that any such action taken under this clause (
iii) shall not materially
adversely affect the interests of
the holders of
the Trust Securities; or
(
iv)
to cure any ambiguity
or
correct any manifest error. Any other amendment or agreement supplemental to the Trust
Agreement must be
in writing and approved by a majority of
the holders ( by aggregate
liquidation preference) of
the Trust Securities then outstanding, provided that,
for
the purpose of
such approval, any Fixed-
to-
Floating Rate Company Preferred Securities that are directly or
indirectly held or
beneficially owned by any member of
the WMI Group will be treated as
if they
were not outstanding.
Conditional Exchange
Each Trust Security will be exchanged automatically
for
a like amount of
newly issued
Fixed-
to-
Floating Rate Depositary Shares, each representing a 1/
1 OOOthinterest in one share of
Fixed- to-Floating Rate WMI Preferred Stock, if the OTS so directs in writing upon or
after the
occurrence of
an Exchange Event. An
"Exchange Event"
will
occur when:
• WMB becomes " undercapitalized" under the OTS' "prompt corrective action" regulations;
• WMB is placed into conservatorship or
receivership; or
• the OTS, in its sole discretion, anticipates WMB becoming " undercapitalized" in the near
term or
takes a supervisory action that limits the payment of
dividends by WMB and in
connection therewith, directs an exchange.
For purposes of
this offering circular, this exchange is referred to as the " Conditional
Exchange".
If the OTS so directs following the occurrence of
an Exchange Event, each holder of
Trust
Securities will be unconditionally obligated to surrender to WMI or
its agent any certificates
representing the Trust Securities owned by such holder, and WMI will be unconditionally
obligated to issue to such holder, in exchange
for
each such Trust Security, a depositary receipt
representing a like amount of
Fixed-
to-
Floating Rate Depositary Shares. Any Trust Securities
purchased or
redeemed by WMI or
any of
its affiliates prior to the time of
exchange will not be
deemed outstanding and will not be subject to the Conditional Exchange.
The Conditional Exchange will occur as
of
8:
00
A.
M. New York time, on the date
for
such
exchange set forth in the applicable OTS directive,
or,
if such date is not set forth in the directive,
as
of
8:
00
A.
M., New York time, on
the
earliest possible date such exchange could occur
consistent with the directive, as evidenced by
the issuance by WMI of
a press release prior to
such time. As
of
the time of
exchange,
all
of
the Trust Securities will be transferred to WMI
without any further action by WaMu Delaware,
all
rights of
the holders of
Trust Securities as
holders of
beneficial interests in WaMu Delaware will cease, and such persons will be,
for
all
purposes, the holders of
Fixed-
to-
Floating Rate Depositary Shares.
63
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00076
WMI will mail notice of
the issuance of
an OTS directive after the occurrence of
an
Exchange Event to each holder of
Trust Securities within 30 days, and WMI will deliver ( or
cause
to be
delivered) to each such holder depositary receipts
for
Fixed-
to-
Floating Ra, te Depositary
Shares upon surrender of
the Trust Securities. Until such depositary receipts are delivered or
in
the event such depositary receipts are not delivered, any certificates previously representing
Trust Securities will be deemed
for
all purposes to represent Fixed-
to-
Floating Rate Depositary
Shares.
All
corporate authorization necessary
for
WMI to issue the Fixed-
to-
Floating Rate
Depositary Shares and the Fixed-
to-
Floating Rate WMI Preferred Stock as
of
the time of
exchange will be completed prior to or
upon completion of
this Offering. Accordingly, once the
OTS directs a Conditional Exchange after the occurrence of
an Exchange Event, no action will be
required to be taken by
holders of
Trust Securities, by WMI, by WMB (other than to inform the
OTS), by the Company or
by WaMu Delaware in order to effect the automatic exchange as
of
the time of
exchange. After the occurrence of
the Conditional Exchange, the Trust Securities will
be owned by WMI.
Holders of
Trust Securities, by
purchasing such securities, whether in this Offering or
in the
secondary market after this Offering, will be deemed to have agreed to be bound by
the
unconditional obligation to exchange such Trust Securities
for
Fixed-
to-
Floating Rate Depositary
Shares if the OTS so directs following the occurrence of
an Exchange Event. The Trust
Agreement provides that the holders of
Trust Securities will be unconditionally obligated to
surrender such Trust Securities. Prior to issuance of
the Trust Securities, WMI will enter into an
Exchange Agreement (the "Exchange Agreement") among WMI, WaMu Delaware, WaMuCayman and Mellon Investor Services LLC, a
s
depositary (the "Depositary"), to implement the
Conditional Exchange.
Holders of
Trust Securities cannot exchange their Trust Securities
for
Fixed-
to-
Floating Rate
Depositary Shares voluntarily. Absent an OTS directive after the occurrence of
an Exchange
Event, no exchange of
the Trust Securities
for
Fixed-
to-
Floating Rate Depositary Shares will
occur. Upon the issuance of
an OTS directive on
or
following the occurrence of
an Exchange
Event, the Fixed-
to-
Floating Rate WMI Preferred Stock and the related Fixed-
to-
Floating Rate
Depositary Shares to be issued in the Conditional Exchange will constitute a newly issued series
of
preferred stock of WMI and will have substantially similar terms and provisions with respect to
dividends, liquidation, and redemption as the Fixed-
to-
Floating Rate Company Preferred
Securities, except that the Fixed-
to-
Floating Rate Depositary Shares:
• will not have the benefit of the covenants, including with respect to any additional taxes,
described under " Description of
Fixed-
to-
Floating Rate Company Preferred Securities -
Voting Rights and Covenants;"
• will be redeemable prior to the Dividend Payment Date occurring in March 2011 only upon
the occurrence of
a Regulatory Capital Event; and
• Additional Amounts will not be payable with respect to the Fixed-
to-
Floating Rate WMI
Preferred Stock.
In addition, if WMI fails to pay, or
declare and set aside
for
payment, full dividends on the
Fixed-
to-
Floating Rate WMI Preferred Stock
for
six Dividend Periods, the authorized number of
WMI's directors will increase by
two, and the holders of
Fixed- to-Floating Rate WMI Preferred
Stock, voting together with the holders of
any other Voting Parity Stock, including the Fixed Rate
WMI Preferred Stock, will have the right to elect two directors in addition to the directors then in
office at
the next annual meeting of
shareholders.
WMI will covenant in the Exchange Agreement in favor of
the holders of
the Trust Securities
and the WaMu Cayman Preferred Securities that, prior to the issuance of
the Fixed-
to-
Floating
Rate WMI Preferred Stock upon a Conditional Exchange, WMI will not issue any preferred stock
that would rank senior to the Fixed-
to-
Floating Rate WMI Preferred Stock upon
its issuance.
64
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00077
Each share of
Fixed-
to-
Floating Rate WMI Preferred Stock will upon issuance rank at
least pari
passu with the most senior preferred stock of
WMI, if any, then outstanding. The Initial
Purchasers are under no obligation to and do not intend to make a market in th.
e Fixed-
to-
Floating Rate Depositary Shares. Absent the occurrence of
a Conditional Exchange, holders of
Trust Securities will have no dividend, liquidation preference, redemption or
other rights with
respect to any security of
WMI, WMB or
University Street.
Form, Transfer and Book- Entry Procedures
The Trust Securities will be issued only in book- entry form. See " Book- Entry Issuance."
Payments and Paying Agent
Payments in respect of
the Trust Securities in the form of
Global Securities will be made to
the address of
the holder entitled thereto as such address will appear on the register. The DTC
nominee (the "Nominee") will be the registered holder of
the Trust Securities in the form of
Global Securities. Payments made to the order of
the Nominee will be made by
wire transfer to
DTC and DTC will credit the relevant accounts of
the DTC Participants. In the event that the
circumstances described under "Book- Entry Issuance - Form, Denomination, Transfer and
Book- Entry Procedures - Special Situations When the Global Security Will Be Terminated" apply
and the Trust Securities are not in the form of
Global Securities, payments in respect of the Trust
Securities will be made by wire transfer, direct deposit or check mailed to the address of
the
holder entitled thereto as such address
will
appear on
the
securities register. The paying agent
(the "Paying Agent")
for
the Trust Securities initially will be Wilmington Trust Company ( in its
individual capacity, "WTe") and any co- paying agent will be appointed by WaMu Delaware. The
Paying Agent and any co- paying agent (collectively, the " Paying Agents") will be permitted to
resign as
Paying Agents upon 30
days' written notice to the Company. In the event that WTC will
no longer be the Paying Agent, the Company will appoint a successor to act as Paying Agent.
Registrar and Transfer Agent
WTC will act as
Registrar (the " Registrar") and Transfer Agent (the "Transfer Agent")
for
the Trust Securities.
Registration of
transfers of
Trust Securities will be effected without charge by
or
on behalf
of WaMu Delaware, but the Property Trustee or
the Registrar and Transfer Agent will require,
prior to registration, payment ( or
the giving of
such indemnity as
the Registrar and Transfer
Agent may require) of
a sum sufficient to cover any tax or
other governmental charges that may
be imposed in connection with any transfer of
definitive Trust Securities. WaMu Delaware will not
be required to register or
cause to be registered the transfer of
definitive Trust Securities during
the period of
15 days before the day of
selection
for
redemption of
such Trust Securities and
ending at
the close of
business on the day of
mailing of
the notice of
redemption
for
the Trust
Securities that have been called for redemption.
Expenses of the Paying Agent, Transfer Agent and Registrar
If
the
Paying Agent, Transfer Agent or
Registrar incurs fees, charges or
expenses,
for
which
it is not otherwise liable under the Agency Agreement, to be entered into on
or
before the closing
date, among WTC, as
Registrar, Transfer Agent and Paying Agent, and WaMu Delaware acting
through the Property Trustee at
the request of
a holder of
Trust Securities or
other person, such
holder or
other person will be
liable
for
such fees, charges or
expenses.
65
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00078
Notices
Notices to the holders of
the Trust Securities will be given by
delivery of
the relevant notice
to DTC and any other relevant securities clearing system identified in writing by WaMu Delaware
for
communication by each of
them to entitled participants.
Listing
The Trust Securities will not be
listed on any securities exchange or
automated dealer
quotation system.
Governing Law
The Trust Agreement and the Trust Securities will be governed by and construed in
accordance with the laws of
the State of
Delaware.
Restrictions on
Transfer
For information regarding restrictions on ownership and transfer of
the Trust Securities, see
"Notice to Investors."
66
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00079
DESCRIPTION OF THE FIXED-TO- FLOATING RATE COMPANY PREFERRED SECURITIES
The following summary describes the material terms and provisions of
the Fixed-
to-
Floating
Rate Company Preferred Securities. This description is qualified in its entirety by
reference to the
terms and provisions of
the LLC Agreement. A copy of
the LLC Agreement may be obtained upon
request to WMI.
General
The Fixed-
to-
Floating Rate Perpetual Non- cumulative Preferred Securities, liquidation
preference $1,000 per security and $1,250,000,000 in the aggregate (
the
" Fixed-
to-
Floating Rate
Company Preferred Securities"), are limited liability company interests in the Company, the terms
of
which are set forth in the LLC Agreement. When issued, the Fixed-
to-
Floating Rate Company
Preferred Securities will be
validly issued, and no additional payments will be required pursuant
to the LLC Act
for
such securities to represent limited liability company interests in the Company.
The holders of
the Fixed-
to-
Floating Rate Company Preferred Securities will have no pre-emptive
rights with respect to any limited liability company interests in the Company or
any other
securities of
the Company convertible into or
carrying rights or
options to purchase any such
securities. The Fixed-
to-
Floating Rate Company Preferred Securities are perpetual and will not be
convertible into Company Common Securities or
any other class or
series of
limited liability
company interests in the Company and will not be subject to any sinking fund or
other obligation
of
the Company
for
their repurchase or
retirement.
The Fixed-
to-
Floating Rate Company Preferred Securities will be issued in certificated form
only.
The Fixed-
to-
Floating Rate Company Preferred Securities are
not
obligations
of,
or
guaranteed by, WMI, WMB, Marion, University Street or any of
their respective affiliates or any
other entity. The Fixed-
to-
Floating Rate Company Preferred Securities solely represent an
interest in the Company and do not represent an
interest in any of
the foregoing entities.
The Fixed-
to-
Floating Rate Company Preferred Securities are not insured or
guaranteed by
the
FDIC.
Ranking
The Fixed-
to-
Floating Rate Company Preferred Securities will rank senior to the Company
Common Securities and will rank pari passu with the Company's other preferred securities,
including the Fixed Rate Company Preferred Securities, in terms of
payment of
dividends and on
liquidation.
The Company's Board of
Managers has
the
power to create and issue Junior Equity
Securities and additional equity securities ranking pari passu with the Fixed-
to-
Floating Rate
Company Preferred Securities in terms of
payment of
dividends or
on
liquidation or
redemption
(any such securities together with the Fixed Rate Company Preferred Securities, the "Parity
Equity Securities") without the consent of
the holders of
the Company Preferred Securities,
provided, that ( i) after giving effect to the issuance of any Parity Equity Securities, the pro forma
net book value of
the Company's assets (after giving effect to any assets acquired by the
Company in connection with the issuance of
such Parity Equity Securities (" New Assets")) will
equal or
exceed 1.5 times the sum of
the aggregate liquidation preference of
the preferred
securities of
the Company then outstanding and any such Parity Equity Securities that the
Company proposes to issue, (
ii) after giving effect to such issuance, the Company's pro forma
FFO
for
the four fiscal quarters beginning with
the
fiscal quarter in which such Parity Equity
Securities are proposed to be issued (calculated ( A)
assuming that such proposed Parity Equity
Securities are issued and that, if outstanding or
proposed new Parity Equity Securities bear
dividends based on a floating rate, the applicable dividend rate will not change during such four
67
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00080
fiscal quarters from the rate in effect on the applicable date of
determination and ( B)
as
adjusted to reflect any New Assets) equals or
exceeds 150% of
the amount that would be
required to pay full annual dividends on
all preferred securities of
the Company tren outstanding
and any such Parity Equity Securities that the Company proposes to issue and (Hi) the Company
is not otherwise in breach of any of
its covenants set forth in the LLC Agreement. Funds from
operations, or
"FFO", means
ne
t
income (computed in accordance with GAAP), excluding gains
( or
losses) from sales of
property, plus depreciation and amortization, and after adjustments
for
unconsolidated partnerships and joint ventures. Adjustments
for
unconsolidated partnerships and
joint ventures will be
calculated to reflect funds from operations on
the same basis.
The LLC Agreement provides that, so long as any Fixed-
to-
Floating Rate Company
Preferred Securities remain outstanding, the Company may not, except with the consent of
at
least two- thirds of
the Fixed Rate Company Preferred Securities and the Fixed-
to-
Floating Rate
Company Preferred Securities, voting together as
a single class, issue Senior Equity Securities.
Dividends
For purposes of
this offering circular, we refer to distributions payable by
the Company on
its securities as
" dividends". Dividends on the Fixed-
to-
Floating Rate Company Preferred
Securities will be payable
if, when and as declared by
the Company's Board of
Managers out of
its legally available funds, on a non-cumulative basis at
an annual rate of
6.534% until March 15,
2011 and 3- month USD L1BOR plus 1.4825%
for
the Dividend Period starting in March 2011 and
each Dividend Period thereafter, in each case, on the liquidation preference thereof, which is
$1,000 per security.
Dividends on the Fixed-
to-
Floating Rate Company Preferred Securities,
if, when and as
declared by
the Company's Board of
Managers, will be payable quarterly in arrears on March 15,
June 15, September 15 and December 15
of
each year, commencing on June 15, 2006,
or,
if any
such day is not a Business Day, the next Business Day (each such date, a "Dividend Payment
Date"). Each period from and including a Dividend Payment Date ( or
the date of
issuance of
the
Fixed-
to-
Floating Rate Company Preferred Securities) to but excluding the following Dividend
Payment Date is referred to herein as a " Dividend Period", except that the Dividend Period
for
the Dividend Payment Date in June 2011 shall commence on March 15, 2011. Dividends on the
Fixed- to-Floating Rate Company Preferred Securities will accrue as
follows: ( i) from March 7,
2006 in the case of
the Fixed-
to-
Floating Rate Company Preferred Securities offered hereby and
(
ii)
if additional Fixed-
to-
Floating Rate Company Preferred Securities are issued at
a future date,
from ( A)
March 7,
2006 if such date is before June 15, 2006, ( B)
the date of
issue if such date
is a Dividend Payment Date, and ( C)
the immediately preceding Dividend Payment Date or
the
date of
issue ( as
determined by
the Company) if the date of
issue is other than a Dividend
Payment Date and is after June 15, 2006. The record date
for
the payment of
dividends, if
declared, will be
the first day of
the month in which the relevant dividend payment occurs
or,
if
any such day is not a Business Day, the next day that is a Business Day. Dividends payable on
the Fixed- to-Floating Rate Company Preferred Securities
for
any period greater or
less than a full
Dividend Period will be computed on the basis of
( x)
for
any Dividend Period ending prior to the
Dividend Payment Date in March 2011, twelve 30-day months, a 360-day year, and the actual
number of
days elapsed in the period, and ( y)
for
any Dividend Period thereafter, the actual
number of
days in the relevant period divided by 360. No interest will be paid on any dividend
payment of
Fixed-
to-
Floating Rate Company Preferred Securities, Trust Securities or
Fixed-
to-
Floating Rate Depositary Shares.
" Business Day" means any day other than a Saturday, Sunday or
any other day on which
banks in New York, New York, London, England, Seattle, Washington or
Wilmington, Delaware
are generally required or
authorized by
law to be
closed.
68
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00081
" 3-
Month USD LlBOR" means, with respect to any Dividend Period, a rate determined on the
basis of
the offered rates
for
three- month U.
S.
dollar deposits of
not less than a principal amount
equal to that which is representative
for
a single transaction in such market at
such time,
commencing on the first day of
such Dividend Period, which appears on US L1BOR Telerate
Page 3750 as
of
approximately 11: 00
a.
m., London time, on the L1BOR Determination Date
for
such Dividend Period. If
on any L1BOR Determination Date no rate appears on US L1BOR
Telerate Page 3750 as
of
approximately 11: 00
a.
m., London time, the Company or
another
affiliate of
WMI on behalf of
the Company
will
on such L1BOR Determination Date request four
major reference banks in the London interbank market selected by
the Company to provide the
Company with a quotation of
the rate at
which three-month deposits in U.
S.
dollars, commencing
on the first day of
such Dividend Period, are offered by them to prime banks in the London
interbank market as
of
approximately 11: 00
a.
m., London time, on such L1BOR Determination
Date and in a principal amount equal to that which is representative
for
a single transaction in
such market at
such time. If
at
least two such quotations are provided, 3-
Month USD L1BOR
for
such Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest
.00001 of
1%) of
such quotations as
calculated by
the Company. If fewer than two quotations
are provided, 3-
Month USD L1BOR
for
such Dividend Period will be the arithmetic mean
(rounded upward if necessary to the nearest .00001 of
1%) of
the rates quoted as
of
approximately 11: 00
a.
m., New York time, on the first day of such Dividend Period by three major
banks in New York, New York selected by the Company
for
loans in U.
S.
dollars to leading
European banks,
for
a three-month period commencing on
the
first day of
such Dividend Period
and in a principal amount of
not less than $1,000,000.
"LIB OR Business Day" means any day on which commercial banks are open
for
general
business (including dealings in deposits in U.
S.
dollars) in London.
"LlBOR Determination Date" means, as
to each Dividend Period, the date that is two L1BOR
Business Days prior to the first day of
such Dividend Period.
" US LlBOR Telerate Page 3750" means the display page of
Moneyline's Telerate Service
designated as 3750 ( or
such other page as may replace that page on
that service, or
such other
service as may be nominated as
the information vendor,
for
the purpose of
displaying rates
comparable to 3-
month USD L1BOR).
Dividends on the Fixed-
to-
Floating Rate Company Preferred Securities are non- cumulative.
If the Company's Board of
Managers does not declare a dividend on the Fixed-
to-
Floating Rate
Company Preferred Securities or
declares less than a full dividend in respect of
any Dividend
Period, holders of
the Fixed-
to-
Floating Rate Company Preferred Securities will have no
right to
receive any dividend or
a full dividend, as
the case may be,
for
that Dividend Period, and the
Company will have no
obligation to pay any dividends or
full
dividends on
the
Fixed-
to-
Floating
Rate Company Preferred Securities
for
that Dividend Period, whether or
not dividends are
declared and paid
for
any future Dividend Period with respect to any of
the Fixed-
to-
Floating
Rate Company Preferred Securities, the Fixed Rate Company Preferred Securities, any other
series of
Parity Equity Securities, any Junior Equity Securities or
the Company CommonSecurities.
Restrictions on Dividends
During a Dividend Period, no dividends will be declared or
paid on any securities of
the
Company ranking junior to the Company Preferred Securities in respect of
payments of
dividends
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00082
or
on liquidation (" Junior Equity Securities"), other than dividends payable in Junior Equity
Securities, and no Junior Equity Securities will be repurchased, redeemed or
otherwise acquired
for
consideration, directly or
indirectly (other than as a result of
reclassification of
Junior Equity
Securitiesfo
r
or
into other Junior Equity Securities, or the exchange or conversion of
Junior
Equity Securities
for
or
into other Junior Equity Securities), unless dividends
for
such Dividend
Period on
all outstanding Company Preferred Securities have been declared and paid in full, or
declared and
se
t
aside
for
payment, as
the
case may be.
When dividends are not paid in full on, or
a sum sufficient for such full payment is not set
apart for, the Fixed-
to-
Floating Rate Company Preferred Securities, the Fixed Rate Company
Preferred Securities and any other Parity Equity Securities, if any,
all dividends declared upon the
Fixed-to-Floating Rate Company Preferred Securities, the Fixed Rate Company Preferred
Securities and any other Parity Equity Securities, if any, will be declared pro rata. Thus, the
amount of
dividends declared per Fixed-
to-
Floating Rate Company Preferred Security, the Fixed
Rate Company Preferred Securities and such other Parity Equity Securities, if any, will in all
cases bear to each other the same ratio that ( i) full dividends per Fixed- to-Floating Rate
Company Preferred Security
for
the then- current Dividend Period, which will not include any
accumulation in respect of
unpaid dividends for prior Dividend Periods, and (
ii) full dividends,
which will not include any accumulation in respect of unpaid dividends
for
prior Dividend Periods,
on such other capital securities, bear to each other.
Under certain circumstances, if the OTS determines that WMB is operating with an
insufficient level of
capital or
is engaged
in,
or
its relationship with the Company results
in,
an
unsafe and unsound banking practice, the OTS could restrict the Company's ability to pay
dividends, including dividends to the holders of
the Fixed-
to-
Floating Rate Company Preferred
Securities. See "The Company - Business of
the Company."
Restrictions on Dividends by WMI
WMI will covenant in the Exchange Agreement for the benefit of
the holders of
the Trust
Securities and the WaMu Cayman Preferred Securities that if full dividends on
( i) the Company
Preferred Securities, (
ii) the Trust Securities or
(
iii) the WaMu Cayman Preferred Securities for
any Dividend Period have not been declared and paid, WMI will not declare or
pay dividends with
respect
to,
or
redeem, purchase or
acquire any of
its equity capital securities during the next
succeeding Dividend Period, except dividends in connection with a shareholders' rights plan, if
any, or
dividends in connection with benefits plans.
Redemption
The Fixed-
to-
Floating Rate Company Preferred Securities will not be redeemable at the
option of
the holders thereof. Subject to a covenant in favor of
certain of
WMl's debtholders
limiting WMl's and
its subsidiaries' right to repurchase or
redeem the Fixed-
to-
Floating Rate
Company Preferred Securities or
the Trust Securities (among others) as
described under
" Description of
the Trust Securities - Restriction on Redemption or
Repurchases", and subject
to the Company having received the prior approval of
the OTS
for
any proposed redemption of
Fixed-
to-
Floating Rate Company Preferred Securities, the Company may, at
its option redeem the
Fixed-
to-
Floating Rate Company Preferred Securities:
• in whole but not in part, prior to the Dividend Payment Date in March, 2011, upon the
occurrence of
a Tax Event, an Investment Company Act Event or
a Regulatory Capital
Event, at
a cash redemption price equal to the greater
of:
( i) $1,000 per Fixed-
to-
Floating Rate Company Preferred Security, or
(
ii) the sum of
present values of
$1,000 per Fixed-
to-
Floating Rate Company Preferred
Security and
all undeclared dividends
for
the Dividend Period from the redemption
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date to and including the Dividend Payment Date in March 2011, discounted to the
redemption date on a quarterly basis (assuming a 360-day year consisting of
twelve
30-day months) at
the Treasury Rate, as
calculated by
an Independent Investment
Banker, plus 0.30%, .
plus any declared but unpaid dividends to the redemption date; or
• in whole or
in part, on
or
after the Dividend Payment Date in March 2011, at
a cash
redemption price of
$1,000 per Fixed-
to-
Floating Rate Company Preferred Security, plus
any declared and unpaid dividends to the redemption date, without accumulation of any
undeclared dividends.
The Fixed Rate Company Preferred Securities will be separately redeemable on similar
terms and conditions.
"Comparable Treasury Issue" means the United States Treasury security selected by
the
Independent Investment Banker as having a maturity comparable to the term remaining to the
Dividend Payment Date in March 2011 that would be
utilized, at
the time of
selection and in
accordance with customary financial practice, in pricing new issues of
perpetual preferred
securities having similar terms as the Fixed-
to-
Floating Rate Company Preferred Securities with
respect to the payment of
dividends and distributions of
assets upon liquidation, dissolution or
winding up
of
the issuer of
such preferred stock.
"Comparable Treasury Price" means with respect to any redemption date
for
the Fixed-
to-
Floating Rate Company Preferred Securities the average of
the Reference Treasury Dealer
Quotations
for
such redemption date, after excluding the highest and lowest of
such Reference
Treasury Dealer Quotations, or
if the Independent Investment Banker obtains fewer than five
such Reference Treasury Dealer Quotations, the average of
all such quotations.
" Independent Investment Banker" means an independent investment banking institution of
national standing appointed by
the Company.
An
" Investment Company Act Event" occurs when the Company determines, based upon
receipt of
an opinion of
counsel, that there is a significant risk that the Company, the Asset Trust
or
any other Asset Subsidiary, WaMu Delaware or
WaMu Cayman is or
will be
considered an
" investment company" that is required to be registered under the Investment Company Act, as a
result of a change in applicable laws, regulations or
related interpretations.
"Reference Treasury Dealer" means each of
three primary U.
S.
government securities
dealers (each a "Primary Treasury Dealer"), as specified by
the
Company; provided that if any
Primary Treasury Dealer as
specified by the Company ceases to be a Primary Treasury Dealer,
the Company will substitute
for
such Primary Treasury Dealer another Primary Treasury Dealer
and if the Company fails to select a substitute within a reasonable period of
time, then the
substitute will be a Primary Treasury Dealer selected by
the Independent Investment Banker after
consultation with the Company.
" Reference Treasury Dealer Quotations" means, with respect to the Reference Treasury
Dealer and any redemption date, the average, as
determined by
the Independent Investment
Banker, of
the bid and asked prices
for
the Comparable Treasury Issue (expressed, in each
case, as a percentage of
its principal amount) quoted in writing to the Independent Investment
Banker by such Reference Treasury Dealer at
5:
00
p.
m., New York City time, on the third
Business Day preceding such redemption date.
A " Regulatory Capital Event" occurs when
the Company determines, based upon receipt of
an opinion of
counsel, that there is a significant risk that the Company Preferred Securities will
no
longer constitute core capital of WMB
for
purposes of
the capital adequacy regulations issued
by
the OTS as a result of
a change in applicable laws, regulations or
related interpretations after
issuance of
the Fixed Rate Company Preferred Securities.
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A " Tax Event" occurs when the Company determines, based upon receipt of
an
opinion of
counsel, that there is a significant risk that ( i) the Company will be required by a relevant
jurisdiction to withhold amounts from payments to the holders of any Company I? referred
Securities
for
taxes or
any other governmental charges, ( H)
WaMu Delaware will be required by
a relevant jurisdiction to withhold amounts from payments to the holders of
the Trust Securities
for
taxes or
any other governmental charges, (Hi) WaMu Cayman will be
required by
a relevant
jurisdiction to withhold amounts from payments to the holders of
the WaMu Cayman Preferred
Securities
for
taxes or
any other governmental charges, (
iv)
WaMu Cayman is or
will be
treated
as engaged in a trade or
business within the United States
for
United States Federal income tax
purposes or
( v)
the Company is or
will be
treated as a publicly traded partnership taxable as
a
corporation or
as
an association taxable as a corporation
for
United States Federal income tax
purposes.
"Treasury Rate" means the rate per year equal to the quarterly equivalent yield to maturity
of
the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of
its principal amount) equal to the Comparable Treasury Price
for
such redemption date. The Treasury Rate will be calculated on the third Business Day preceding
the redemption date.
A notice of redemption of
the Fixed-
to-
Floating Rate Company Preferred Securities will be
mailed by
first class mail, postage prepaid, addressed to the holders of
record of
the securities
to be redeemed at
their respective last addresses appearing on
the books and records of
the
Company. Such mailing will be
at
least 35 days but not more than 65 days before the date fixed
for
redemption.
The Company's ability to redeem any Fixed-
to-
Floating Rate Company Preferred Security is
subject to compliance with applicable regulatory requirements, including the prior approval of
the
OTS, relating to the redemption of
capital instruments. Under current policies of
the OTS, such
approval would be granted only if the redemption were to be made out of
the proceeds of
the
issuance of
another capital instrument or
if the OTS were to determine that the conditions and
circumstances of WMB warrant the reduction of
a source of
permanent capital.
The Fixed Rate Company Preferred Securities are subject to their own redemption
provisions and may be redeemed separately.
Restrictions on Redemption or Repurchases
At
or
prior to issuance of
the Fixed-
to-
Floating Rate Company Preferred Securities and the
Trust Securities, WMI
will
enter into the Replacement Capital Covenant described under
" Description of
the Trust Securities - Restriction on Redemption or
Repurchases," limiting
WMl's and
its subsidiaries, including the Company's, ability to redeem or
repurchase certain
securities, including the Fixed-
to-
Floating Rate Company Preferred Securities.
Rights upon Liquidation
In the event the Company voluntarily or
involuntarily dissolves and winds up, the holders of
Fixed-
to-
Floating Rate Company Preferred Securities at
the time outstanding will be entitled to
receive liquidating dividends in the amount of
$1,000 per security, plus any authorized, declared,
but unpaid dividends to the date of
liquidation, out of
the Company's assets legally available
for
distribution, before any distribution of
assets is made to holders of
Junior Equity Securities and
subject to the rights of
general creditors.
After payment of
the full amount of
the liquidating distributions to which they are entitled,
the holders of
Fixed-
to-
Floating Rate Company Preferred Securities will have no
right or
claim to
any of
the Company's remaining assets. In the event that, upon any such voluntary or
involuntary
dissolution and winding up, the available assets are insufficient to pay the amount of
the
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liquidation distributions on
all outstanding Fixed-
to-
Floating Rate Company Preferred Securities
and the corresponding amounts payable on
the Fixed Rate Company Preferred Securities and
any other Parity Equity Securities, if any, then the holders of
Fixed-
to-
Floating Rate Company
Preferred Securities, the Fixed Rate Company Preferred Securities and any other Parity Equity
Securities, if any, will share ratably in any such distribution of
assets in proportion to the full
liquidating distributions to which they would otherwise be
respectively entitled.
For such purposes, the Company's consolidation or
merger with or
into any other entity, the
consolidation or
merger of
any other entity with or
into the Company, or
the sale of
all
or
substantially
all
of
the Company's property or
business, will not be deemed to constitute the
Company's dissolution and winding
up
.
Voting Rights and Covenants
Except as
set forth below, holders of
Fixed-
to-
Floating Rate Company Preferred Securities
will not have voting rights. The LLC Agreement provides that, so long as any Fixed-
to-
Floating
Rate Company Preferred Securities are outstanding, the Company will not, except with the
consent or
affirmative vote of
the holders of
at
least two- thirds of
the Fixed-
to-
Floating Rate
Company Preferred Securities and the Fixed Rate Company Preferred Securities (provided that
for
the purpose of
such approval, a like amount of
Company Preferred Securities as any Trust
Securities or WaMu Cayman Preferred Securities that are directly or
indirectly held or
beneficially
owned by any member of WMI Group will be treated as
if they were not outstanding), voting
together as a single class:
• effect a consolidation, merger or
share exchange with or
into another entity other than an
entity controlled
by,
or
under common control with, WMI;
• issue any Senior Equity Securities;
• incur any indebtedness
for
borrowed money;
• pay dividends on the Company's Junior Equity Securities unless the Company's FFO
for
the
four prior fiscal quarters, equals or
exceeds 150% of
the
amount that would be
required to pay full annual dividends on
all outstanding Company Preferred Securities, as
well as any other Parity Equity Securities;
• amend or
otherwise change the requirement that the Company make investments and
distributions with the proceeds of
the Company's assets such that the Company's FFOover any period o
f
four fiscal quarters will equal or
exceed 150% of
the amount that
would be required to pay full annual dividends on
all outstanding Company Preferred
Securities, as
well as any other Parity Equity Securities;
• issue any additional Company Common Securities to any person, other than University
Street or
another affiliate of
WMI;
• amend or
otherwise change the terms of
any Asset Documentation in a manner which is
materially adverse of WaMu Delaware, WaMu Cayman, or
the holders of
the Trust
Securities or
the WaMu Cayman Preferred Securities;
• remove or
cause to be removed, as
applicable, "Washington Mutual" from the
Company's, WaMu Delaware's or
WaMu Cayman's name unless the name of
WMIchanges and the Company makes a change to the Company's, WaMu Delaware's and
WaMu Cayman's name to be
consistent with the new group name;
• take or
fail
to take any action that would cause the Company to fail
to be
treated as
a
partnership (other than a publicly traded partnership taxable as a corporation)
for
United
States Federal income tax purposes;
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• amend or
otherwise change the requirement that the Company not engage in a U.
S.
trade
or
business
for
United States Federal income tax purposes;
• amend or
otherwise change the requirement that the Company hold only assets that
qualify
for
the portfolio interest exemption under the Code and are exempt from United
States Federal withholding taxes;
• amend or
otherwise change the requirement that the Company manage
its affairs such
that
its income does not constitute "unrelated business taxable income"
for
United States
Federal income tax purposes; or
• amend
its Certificate of
Formation or
LLC Agreement in a manner that materially and
adversely affects the terms of
the Company Preferred Securities, provided, however, that,
if such amendment affects only one class of
Company Preferred Securities, such
amendment will require only the class vote of
such class (voting separately and not as a
single class with the other class) and, if such amendment affects both classes but affects
them differently, then such amendment will require a class vote of each class of Company
Preferred Securities, each voting separately.
In addition, the LLC Agreement provides that, except with the consent of
all
of
the
Company's managers, including
its Independent Manager, the Company will not:
• terminate, amend or
otherwise change any Asset Documentation; or
• effect a consolidation, merger or
share exchange (excluding the Conditional Exchange)
that is not tax- free to the holders of
the Fixed-
to-
Floating Rate Company Preferred
Securities, and the related Trust Securities, unless such transaction was approved by
the
consent or
affirmative vote of
the holders of
at
least two- thirds of
the Fixed-
to-
Floating
Rate Company Preferred Securities and Fixed Rate Company Preferred Securities, voting
together as a single class.
In addition, the LLC Agreement will provide that if ( i) the Company fails to pay
full
dividends on the Company Preferred Securities on any Dividend Payment Date, (
ii) WaMu
Delaware fails to pass through full dividends paid by
the Company on
the Fixed-to-
Floating Rate
Company Preferred Securities to the holders of
the Trust Securities on any Dividend Payment
Date or
(
iii) a Bankruptcy Event occurs, the holders of the Fixed-
to-
Floating Rate Company
Preferred Securities and the Fixed Rate Company Preferred Securities, voting together as a
single class, by
majority vote, are entitled to remove the initial or
any succeeding Independent
Manager and to fill the vacancy created by such removal or
any other vacancy existing in the
office of
the Independent Manager.
The LLC Agreement requires that, in assessing the benefits to the Company of
any
proposed action requiring his or
her consent, the Company's Independent Manager take into
account the interests of
holders of
both Company Common Securities and the Company
Preferred Securities. The LLC Agreement provides that in considering the interests of
the holders
of
the Company Preferred Securities, the Company's Independent Manager owes the same
duties to such holders which the Independent Manager owes to the holders of
Company
Common Securities.
As a condition to effecting any consolidation, merger or
share exchange described above,
the Company will mail to the holders of
record of
the Fixed-
to-
Floating Rate Company Preferred
Securities a notice of
such consolidation, merger or
share exchange. The notice will be mailed at
least 15 days prior to such transaction becoming effective and will contain a description of
such
transaction together with a certificate of
one of
the Company's officers stating that such
transaction complies with the requirements set forth in the LLC Agreement and that
all conditions
precedent provided therein relating to such transaction have been fulfilled.
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As
described under "Description of
the Trust Securities - Voting Rights," each holder of
Trust Securities will have the right to direct the manner in which Property Trustee on behalf of
WaMu Delaware exercises
its voting rights as
to a like amount of
Fixed-
to-
Floating Rate
Company Preferred Securities held by WaMu Delaware with respect to any of
the matters on
which a holder of
Fixed-
to-
Floating Rate Company Preferred Securities is entitled to vote.
WMI's articles of
incorporation do
not
contain similar covenants regarding the Fixed-
to-
Floating Rate WMI Preferred Stock following an exchange of
the Trust Securities. Therefore,
following a Conditional Exchange, holders of
the Fixed-
to-
Floating Rate Depositary Shares would
no longer have any voting rights, except as
provided by Washington law or
in connection with the
right to elect directors if dividends are skipped or
not paid in full. See below under "Description
of
the Fixed-
to-
Floating Rate WMI Preferred Stock - Voting Rights."
Additional Amounts
If the Company or
WaMu Delaware is required to pay any Additional Taxes as
a result of
an
Additional Tax Event, the Company will pay as additional amounts on the Fixed-
to-
Floating Rate
Company Preferred Securities such amounts as will be required so that dividends on the
Fixed-
to-
Floating Rate Company Preferred Securities or
the Trust Securities, as
applicable, will
not be reduced as a result of
any such Additional Taxes ("Additional Amounts").
"Additional Taxes" means the sum of
any additional taxes, duties and other governmental
charges to which a WaMu Delaware has become subject from time to time as a result of
an
Additional Tax Event.
An
"Additional Tax Event" means the determination by
the Company, based upon receipt of
an opinion of
counsel, rendered by a law firm experienced in such matters, in form and
substance reasonably satisfactory to the Company and WMI, to the effect that, as a result of
any
amendment
to,
or
change (including any announced proposed change)
in,
the laws ( or
any
regulations thereunder) of
the United States or
of
any political subdivision or
taxing authority
thereof or
therein, or
as a result of
any official administrative pronouncement or
judicial decision
interpreting or
applying such laws or
regulations, which amendment or
change is effective or
which proposed change, pronouncement or
decision is announced on
or
after the date of
issuance of
the Trust Securities, there is a significant risk that ( i) the Company or WaMu
Delaware
is,
or
will
be within 90 days of
the
date of
such opinion of
counsel, required by a
relevant jurisdiction to withhold amounts from payments to the holders of
the Fixed-
to-
Floating
Rate Company Preferred Securities or
Trust Securities, respectively,
for
any taxes, duties and
other governmental charges, (
ii) WaMu Delaware
is,
or
will be
within 90 days of
the date of
such
opinion of
counsel, subject to United States Federal income
tax
with respect to income received
or
accrued on the like amount of
Fixed-
to-
Floating Rate Company Preferred Securities held by
it
or
(
iii) WaMu Delaware
is,
or
will be
within 90 days of
the date of
such opinion of
counsel,
subject to more than a de minimis amount of
other taxes, duties or
other governmental charges.
Amendments and Termination of
the LLC Agreement
University Street may, at
any time and from time to time, without the consent of
the holders
of
the Fixed-
to-
Floating Rate Company Preferred Securities, amend the LLC Agreement: ( i) ( A)
to
correct or
supplement any provision in the LLC Agreement that may be defective or
inconsistent
with any other provision therein, or
( B)
to make any other provisions with respect to matters or
questions arising under the LLC Agreement, provided, that any such action taken under this
clause ( x)
will not materially adversely affect the interests of
the holders of
Fixed-
to-
Floating Rate
Company Preferred Securities, as
set forth in an
officer's certificate; or
( y)
will cure any ambiguity
or
inconsistency or
correct any manifest error. Any other amendment of
the LLC Agreement must
be approved by
vote of
holders of
two- thirds ( by
aggregate liquidation preference) of
the
Fixed-
to-
Floating Rate Company Preferred Securities and Fixed Rate Company Preferred Securities, voting
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together as
a single class (see
..-
Voting Rights and Covenants"); provided that,
for
the purpose
of
such approval, a like amount of
Company Preferred Securities as any Trust Securities or WaMu
Cayman Preferred Securities that are directly or
indirectly held or
beneficially owned by
any
member of WMI Group will be treated as
if they were not outstanding. The Company will notify the
Paying Agents and the holders of
the Trust Securities of any such amendment of
the LLC
Agreement within a reasonable period of
time.
The LLC Agreement will terminate upon the termination of
the Company under the LLC Act.
Governing Law
The LLC Agreement and the Fixed-
to-
Floating Rate Company Preferred Securities will be
governed
by,
and construed in accordance with, the laws of
the State of
Delaware.
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DESCRIPTION OF OTHER COMPANY SECURITIES
The fol/ owing summary of
the terms of
the other Company securities does not purport to be
complete and is subject in aI/ respects to the applicable provisions of
the LLC ACt and the LLC
Agreement. A copy of
the LLC Agreement may be
obtained upon request to WMI.
Common Securities
General
Upon consummation of
this Offering, the Company will have outstanding 1,000 Company
Common Securities,
all
of
which will be held by
University Street.
The Company Common Securities may be sold, assigned or
otherwise transferred by
University Street to another entity, subject to WMI maintaining direct or
indirect ownership of
100% of
the outstanding Company Common Securities and receipt by
University Street of
an
opinion of
counsel to the effect that as a result of
any such sale, transfer or
assignment the
Company will not be taxable as a corporation
for
United States Federal income tax purposes.
Pursuant to the LLC Agreement, except with the consent or
the affirmative vote of
the
holders of
at
least two- thirds of
the Fixed-
to-
Floating Rate Company Preferred Securities and the
Fixed Rate Company Preferred Securities, voting together as a single class, the Company will not
issue any additional Company Common Securities to any person, other than University Street or
another affiliate of
WMI.
No
additional payments will be
required pursuant to the LLC Act
for
Company CommonSecurities to represent limited liability company interests in the Company upon issuance against
full payment of
the purchase price therefor.
Voting
Subject to the limited rights of
the holders of
the Fixed-
to-
Floating Rate Company Preferred
Securities, as described under " Description of
the Fixed-
to-
Floating Rate Company Preferred
Securities - Voting Rights and Covenants," and corresponding rights of
the holders of
the Fixed
Rate Company Preferred Securities and any voting rights granted to holders of
Parity Equity
Securities
all voting rights of
the Company's security holders are vested in the Company
Common Securities.
Dividends
The Company Common Securities will rank junior to the Company Preferred Securities as
to
payment of
dividends. No dividends will be declared or
paid in any Dividend Period on the
Company Common Securities, other than dividends payable in Company Common Securities, and
no Company Common Securities will be repurchased, redeemed or
otherwise acquired
for
consideration, directly or
indirectly (other than as a result of
reclassification of
Company
Common Securities
for
or
into Company Common Securities, or
the exchange or
conversion of
Company Common Securities
for
or
into Company Common Securities), unless dividends in such
Dividend Period on
all
outstanding Company Preferred Securities have been declared and paid in
full, or
set aside
for
payment, as the case may be. Pursuant to the LLC Agreement, except with
the consent or the affirmative vote of
the holders of
at
least two- thirds of
the Fixed-
to-
Floating
Rate Company Preferred Securities and the Fixed Rate Company Preferred Securities, voting
together as a single class, the Company will not pay any dividends on the Company Common
Securities unless the Company's FFO
for
the four prior fiscal quarters equals or
exceeds 150%
of
the amount that would be required to pay full annual dividends on
all outstanding Company
Preferred Securities, as
well as
on
all
Parity Equity Securities, if any; provided, that,
for
the
purpose of
such approval, a like amount of
Company Preferred Securities as any Trust Securities
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or WaMu Cayman Preferred Securities that are directly or
indirectly held or
beneficially owned by
any member of
WMI Group will be
treated as
if they were not outstanding.
Liquidation Rights
The Company Common Securities will rank junior to the Company Preferred Securities upon
liquidation. In the event of any voluntary or
involuntary dissolution of the Company, after
all
of
the
Company's debts and liabilities have been satisfied and there have been paid or
set aside
for
the
holders of
the Company Preferred Securities
the
full preferential amounts to which such holders
are entitled, the holders of
Company Common Securities will be entitled to share equally and
ratably in any assets remaining.
Fixed Rate Company Preferred Securities
The Fixed Rate Company Preferred Securities rank pari passu with the Fixed-
to-
Floating
Rate Company Preferred Securities offered hereby as
to dividends and upon liquidation of
the
Company. The terms of
the Fixed Rate Company Preferred Securities are substantially identical
to the Fixed-
to-
Floating Rate Company Preferred Securities other than with respect to the rate
applicable to dividends thereon. The Fixed Rate Company Preferred Securities will,
if, when and
as
declared by
the Company's Board of
Managers, pay dividends at
an annual rate of
7.25%.
The Fixed Rate Company Preferred Securities will be held by WaMu Cayman, which will issue a
like amount of WaMu Cayman Preferred Securities to investors in a separate offering
contemporaneous to the Offering. The Fixed Rate Company Preferred Securities will not be
listed
on any securities exchange or
automated dealer quotation system.
Ability to Issue Additional Preferred Securities
Pursuant to the LLC Agreement, the Company may not issue any Senior Equity Securities
or
incur any indebtedness except with the consent or
affirmative vote of
holders of
at
least
two- thirds of
the Fixed-
to-
Floating Rate Company Preferred Securities and the Fixed Rate
Company Preferred Securities, voting together as a single class, as
described under " Description
of
the Fixed-
to-
Floating Rate Company Preferred Securities - Voting Rights and Covenants".
The Company may issue additional Parity Equity Securities without the consent of
the holders of
Company Preferred Securities only if the tests described under " Description of
the Fixed-
to-
Floating Rate Company Preferred Securities - Ranking" are satisfied.
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DESCRIPTION OF THE FIXED-TO- FLOATING RATE WMI PREFERRED STOCK
The following summary describes the material terms and provisions of
the Fixed-
to-
Floating
Rate WMI Preferred Stock. The description is qualified in its entirety by
reference to the terms and
provisions of
WMl's articles of
incorporation and articles of
amendment establishing the Fixed-
to-
Floating Rate WMI Preferred Stock. A copy of
WMl's articles of
incorporation and such articles of
amendment can be obtained upon request to WMI.
General
WMI has authorized and reserved
for
issuance, upon a Conditional Exchange as described
under "Description of
the Trust Securities - Conditional Exchange," 1,250 shares of
its Series I
Perpetual Non- cumulative Fixed-
to-
Floating Rate Preferred Stock, no par value and liquidation
preference $1,000,000 per share (the "Fixed-
to-
Floating Rate WMI Preferred Stock"). The shares
of
Fixed-
to-
Floating Rate WMI Preferred Stock, if and when issued upon a Conditional Exchange,
will be represented by
fixed-
to-
floating rate depositary shares of WMI (the "Fixed-
to-
Floating
Rate Depositary Shares"), each representing 111000th of
a share of
Fixed-
to-
Floating Rate WMIPreferred Stock. The holders o
f
the Fixed-to
-Floating Rate WMI Preferred Stock will have n
o pre-
emptive rights with respect to any shares of
WMl's capital stock or
any of
its other securities
convertible into or
carrying rights or
options to purchase any such capital stock. The Fixed-
to-
Floating Rate WMI Preferred Stock is perpetual and will not be
convertible into shares of
WMIcommon stock o
r
any other class or
series of
its capital stock, and will not be subject to any
sinking fund or
other obligation
for
its repurchase or
retirement.
The Fixed-
to-
Floating Rate WMI Preferred Stock, upon issuance, will have substantially
equivalent terms as
to dividends, redemption, liquidation preference and redemption preference
as
the Fixed- to-Floating Rate Company Preferred Securities and Trust Securities
for
which they
may be exchanged, except that the Fixed-
to-
Floating Rate WMI Preferred Stock: ( i) will not have
the benefit of
the covenants described under " Description of
Fixed-to
-Floating Rate Company
Preferred Securities - Voting Rights and Covenants" or
"- Additional Amounts" and (
ii) will be
redeemable prior to the Dividend Payment Date occurring in March 2011 only upon the
occurrence of
a Regulatory Capital Event. In addition, if WMI fails to pay, or
declare and set
aside
for
payment, full dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock after
its
issuance
for
six Dividend Periods, the authorized number of
WMl's directors will increase by
two,
and the holders of
Fixed-
to-
Floating Rate WMI Preferred Stock, voting together with the holders
of any other shares after
its issuance of WMI ranking on a parity with the Fixed-
to-
Floating Rate
WMI Preferred Stock as
to dividends or upon liquidation, including the Fixed Rate WMI Preferred
Stock ("WMI Parity Stock"),
will
have
the
right to elect two directors in addition to the directors
then in office at
the next annual meeting of
shareholders. Accordingly, the Dividend Payment
Dates and related Dividend Periods
for
the Fixed-
to-
Floating Rate WMI Preferred Stock, once
issued, will be the same as
the Dividend Payment Dates and related Dividend Periods for the
Trust Securities and the Fixed-
to-
Floating Rate Company Preferred Securities, and the terms
"Dividend Payment Date" and " Dividend Period" have the same meanings as
applied to the
Fixed-
to-
Floating Rate WMI Preferred Stock as
applied to each of
those securities; it being
understood that in the event that the Fixed-
to-
Floating Rate WMI Preferred Stock is not issued
prior to March 15, 2011, a Dividend Payment Date shall be deemed to occur on such date with
respect to the Fixed-
to-
Floating Rate WMI Preferred Stock
for
the purposes of
determining the
interest rate and the terms of
redemption thereof. The term "Business Day", when used with
reference to the Fixed-
to-
Floating Rate WMI Preferred Stock, means any day other than a
Saturday, Sunday or any other day on which banks in New York, New York or
Seattle,
Washington are generally required or
authorized by law to be closed.
The Fixed-
to-
Floating Rate WMI Preferred Stock will be subject to the Replacement Capital
Covenant described under "Description of
the Trust Securities - Restriction on Redemption or
Repurchases" above.
79
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00092
Ranking
WMI will covenant in the Exchange Agreement in favor of the holders of
th~ Trust Securities
and the WaMu Cayman Preferred Securities, as applicable, that, prior to the issuance of
the
Fixed-
to-
Floating Rate WMI Preferred Stock upon a Conditional Exchange, WMI will not issue
any preferred stock that would rank senior to the Fixed-
to-
Floating Rate WMI Preferred Stock or
the Fixed Rate WMI Preferred Stock upon
its issuance.
The Fixed-
to-
Floating Rate WMI Preferred Stock will, upon issuance, rank senior to WMl's
common stock and at
least pari passu with the most senior preferred stock of
WMI, if any, then
outstanding, and to any other preferred stock that WMI may issue in the future. WMI may
authorize and issue additional shares of
preferred stock that may rank junior to or
pari passu
with the Fixed- to-Floating Rate WMI Preferred Stock as
to dividends and upon liquidation,
winding up, or
dissolution without the consent of
the holders of
the Fixed- to-Floating Rate WMI
Preferred Stock.
Dividends
Dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock will be payable
if, when and
as declared by WMI's Board of
Directors out of
its legally available funds, on a non- cumulative
basis at
an annual rate of
6.534%
to,
but not including, March 15, 2011 (whether or
not a
Business Day) and 3-
Month USD L1BOR plus 1.4825% thereafter on the liquidation preference
thereof, which is $1,000,000 per share, from and including the Dividend Payment Date on
or
prior
to their date of
issuance. Dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock,
if, when
and as declared by WMI's Board of
Directors, will be payable quarterly in arrears on each
Dividend Payment Date, commencing on the first such day after issuance of
the Fixed-
to-
Floating
Rate WMI Preferred Stock. The record date
for
the payment of
dividends, if declared, will be the
first day of
the month in which the relevant Dividend Payment Date occurs
or,
if any such day is
not a Business Day, the next day that is a Business Day. Dividends payable on the Fixed-
to-
Floating Rate WMI Preferred Stock for any period greater or
less than a full Dividend Period will
be computed on the basis of
( i) for
any Dividend Periods ending prior to or
in March 2011,
twelve 3D-day months, a 360-day year, and the actual number of
days elapsed in the period and
(
ii)
for
any Dividend Periods thereafter in the actual numbers elapsed in the relevant dividend
period by 360. No interest will be paid on any dividend payment of
Fixed-
to-
Floating Rate WMIPreferred Stock o
f
or
Fixed- to-Floating Rate Depositary Shares. Holders of
Fixed-
to-
Floating
Rate Depositary Shares will receive 1/
1 OOOthof any such dividend payment on the Fixed- to-
Floating Rate WMI Preferred Stock.
Dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock are non-cumulative. If WMl's
Board of
Directors does not declare a dividend on the Fixed Rate WMI Preferred Stock or
declares less than a full dividend in respect of
any Dividend Period, the holders of
the Fixed- to-
Floating Rate WMI Preferred Stock will have no
right to receive any dividend or
a full dividend, as
the case may be, for the Dividend Period, and WMI will have no obligation to pay a dividend or
to
pay full dividends for that Dividend Period, whether or
not dividends are declared and paid
for
any future Dividend Period with respect to the Fixed-
to-
Floating Rate WMI Preferred Stock,
WMl's common stock or
any other class or
series of
WMI's preferred stock.
Redemption
The Fixed-
to-
Floating Rate WMI Preferred Stock will not be redeemable at
the option of
the
holders thereof. Subject to a covenant in favor of
certain of
WMI's debtholders limiting WMI's
and
its subsidiaries' right to repurchase or
redeem the Fixed-
to-
Floating Rate WMI Preferred
Stock (among others) as
described under " Description of
the Trust Securities - Restriction on
80
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00093
Redemption or
Repurchases," WMI may, at
its option redeem the Fixed- to-Floating Rate WMI
Preferred Stock:
• in whole but not in part, prior to the Dividend Payment Date in March 2011, upon the
occurrence of
a Regulatory Capital Event at
a cash redemption price equal to the greater
of:
( i) $1,000,000 per share of
Fixed-
to-
Floating Rate WMI Preferred Stock or
(
ii) the sum of
present values of
$1,000,000 per share of
Fixed-
to-
Floating Rate WMIPreferred Stock and
all undeclared dividends
for
the Dividend Period from the
redemption date to and including the Dividend Payment Date in March 2011,
discounted to the redemption date on a quarterly basis (assuming a 360-day year
consisting of
twelve 30-day months) at the Treasury Rate, as calculated by
an
Independent Investment Banker, plus 0.30%,
plus any declared but unpaid dividends to the redemption date; or
• in whole or
in part, on
or
after the Dividend Payment Date in March 2011, at
a cash
redemption price of
$1,000,000 per share of
Fixed-
to-
Floating Rate WMI Preferred Stock,
plus any declared and unpaid dividends to the redemption date, without accumulation of
any undeclared dividends.
Dividends will cease to accrue on the Fixed-
to-
Floating Rate WMI Preferred Stock called
for
redemption on and as
of
the date fixed
for
redemption and such Fixed-to-Floating Rate WMI
Preferred Stock will be deemed to cease to be outstanding; provided, that the redemption price,
including any authorized and declared but unpaid dividendsfo
rthe current Dividend Period, if
any, to the date fixed for redemption, has been duly paid or
provision has been made
for
such
payment.
Notice of
any redemption will be mailed at
least 30 days, but not more than 60 days, prior to
any redemption date to each holder of
the Fixed-
to-
Floating Rate WMI Preferred Stock to be
redeemed at
such holder's registered address.
Replacement
At
or
prior to issuance of
the Fixed-
to-
Floating Fixed Rate Company Preferred Securities
and the Trust Securities, WMI will enter into the Replacement Capital Covenant described under
" Description of
the Trust Securities - Restriction on Redemption or
Repurchases," limiting
WMI's ability to redeem or
repurchase certain securities, including the Fixed Rate WMI Preferred
Stock.
Rights upon Liquidation
In the event WMI voluntarily or
involuntarily liquidates, dissolves or
winds up, the holders of
Fixed-
to-
Floating Rate WMI Preferred Stock at
the time outstanding will be entitled to receive
liquidating distributions in the amount of
$1,000,000 per share, or
$1,000 per Fixed- to-Floating
Rate Depositary Share representing a 1/ 1OOOthinterest in the Fixed- to~Floating Rate WMI
Preferred Stock, plus an amount equal to declared but unpaid dividends
for
the current Dividend
Period to the date of
liquidation, out of
WMl's assets legally available
for
distribution to its
shareholders, before any distribution of
assets is made to holders of
WMI's common stock or
any securities ranking junior to the Fixed-
to-
Floating Rate WMI Preferred Stock and subject to
the rights of
the holders of
any class or
series of
securities ranking on a parity upon liquidation
with the Fixed-
to-
Floating Rate WMI Preferred Stock upon liquidation and the rights of
its
depositors and creditors.
After payment of
the
full amount of
the
liquidating distributions to which they are entitled,
the holders of
the Fixed-
to-
Floating Rate WMI Preferred Stock will have no
right or
claim to any
81
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00094
of
WMI's remaining assets. In the event that, upon any such voluntary or
involuntary liquidation,
dissolution, or
winding up, WMI's available assets are insufficient to pay the amount of
the
liquidation distributions on
all outstanding Fixed-
to-
Floating Rate WMI Preferred $tock and the
corresponding amounts payable on any other securities of
equal ranking, then the holders of the
Fixed-
to-
Floating Rate WMI Preferred Stock and any other securities of
equal ranking will share
ratably in any such distribution of
assets in proportion to the full liquidating distributions to which
they would otherwise be respectively entitled.
For such purposes, WMI's consolidation or
merger with or
into any other entity, the
consolidation or
merger of
any other entity with or
into
it,
or
the sale of
all
or
substantially
all
of
WMl's property or
business, will not be deemed to constitute
its liquidation, dissolution, or
winding up.
Voting Rights
Holders of
Fixed-
to-
Floating Rate WMI Preferred Stock will not have any voting rights,
including the right to elect any directors, except upon issuance as required by law, or
as set forth
below if WMI fails to pay, or
declare and set aside
for
payment, full dividends on Fixed-
to-
Floating Rate WMI Preferred Stock for six Dividend Periods.
If WMI fails to pay, or
declare and set asidefor
payment,
full
dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock after issuance or
any other class or
series of WMI Parity
Stock (including the Fixed Rate WMI Preferred Stock) having similar voting rights (" Voting Parity
Stock")
for
six Dividend Periods or
their equivalent, the authorized number of
WMl's directors
will be
increased by
two. Subject to compliance with any requirement
for
regulatory approval
of,
or
non-objection
to,
persons serving as
directors, the holders of
Fixed-
to-
Floating Rate WMI
Preferred Stock, voting together as a single class with the holders of
any Voting Parity Stock, will
have the right to elect two directors in addition to the directors then in office at
WMI's next
annual meeting of
shareholders. This right will continue at
each subsequent annual meeting until
WMI pays dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock and any Voting Parity
Stock
for
three consecutive Dividend Periods or
its equivalent and pays or
declares and sets
aside
for
payment dividends
for
the fourth consecutive Dividend Period or
its equivalent.
The term of
such additional directors will terminate, and the total number of
directors will be
decreased by
two, at
the first annual meeting of
shareholders after WMI pays dividends on the
Fixed-
to-
Floating Rate WMI Preferred Stock and any Voting Parity Stock
for
three consecutive
Dividend Periods or
its equivalent and declares and pays or
sets aside for payment dividends on
the Fixed-
to-
Floating Rate WMI Preferred Stock and any Voting Parity Stock
for
the fourth
consecutive Dividend Period
or,
if earlier, upon the redemption of
all Fixed-
to-
Floating Rate WMIPreferred Stock. After the term o
f
such additional directors terminates, the holders of
the
Fixed-
to-
Floating Rate WMI Preferred Stock will not be able to elect additional directors unless
dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock have again not been paid or
declared and set aside
for
payment
for
six future Dividend Periods.
Any additional director elected by the holders of
Fixed- to-Floating Rate WMI Preferred
Stock and Voting Parity Stock may only be removed by
the vote of
the holders of
record of
the
outstanding Fixed-
to-
Floating Rate WMI Preferred Stock and Voting Parity Stock, voting together
as a single and separate class, at
a meeting of WMI shareholders called
for
that purpose. As
long as
dividends on the Fixed-
to-
Floating Rate WMI Preferred Stock or
any Voting Parity Stock
have not been paid
for
six Dividend Periods or
their equivalent, any vacancy created by
the
removal of
any such director may be
filled only by
the vote of
the holders of
the outstanding
Fixed-
to-
Floating Rate WMI Preferred Stock and any Voting Parity Stock, voting together as a
single class, at
the same meeting at
which such removal is considered.
Washington law attaches mandatory voting rights to classes or
series of
shares that are
affected by certain amendments to the articles of
incorporation. The holders of
the outstanding
82
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00095
shares of
a class or
series are entitled to vote as a separate voting group if shareholder voting is
otherwise required by
Washington law and if the amendment would:
• increase the aggregate number of
authorized shares of
the class or
series;
• effect an exchange or
reclassification of
all
or
part of
the issued and outstanding shares
of
the class or
series into shares of
another class or
series, thereby adversely affecting
the holders of
the shares so exchanged or
recl9.ssified;
• change the rights, preferences, or
limitations of
all
or
part of
the issued and outstanding
shares of
the class or
series, thereby adversely affecting the holders of
shares of
the
class or
series;
• change
all
or
part of
the
issued and outstanding shares of
the
class or
series into a
different number of
shares of
the same class or
series, thereby adversely affecting the
holders of
shares of
the class or
series;
• create a new class or
series of
shares having rights or
preferences with respect to
dividends or
other distributions or
to dissolution that are, or
upon designation by
the
board of
directors may be, prior, superior, or
substantially equal to the shares of
the class
or
series;
• increase the rights or
preferences with respect to distributions, or
on liquidations or
dissolution, or
the number of
authorized shares of
any class or
series that, after giving
effect to the amendment, has rights or
preferences with respect to distributions, or
on
liquidations or
dissolution that are, or
upon designation by
the board of
directors may be,
prior, superior, or
substantially equal to the shares of
the class or
series;
• limit or
deny an
existing pre-emptive right of
all
or
part of
the shares of
the class or
series;
• cancel or
otherwise adversely affect rights to distributions that have accumulated but not
ye
t
been declared on
all
or
part of
the shares of
the class or
series; or
• effect a redemption or
cancellation of
all
or
part of
the shares of
the class or
series in
exchange
for
cash or
any other form of
consideration other than shares of
the
corporation.
WMI will covenant in the Exchange Agreement that in the event WMI, prior to the
Conditional Exchange, effects, or
is,
the subject of
a merger, consolidation, statutory share
exchange, sale of
all
or
substantially
all
of
its assets or
other form of business combination,
( i) in which WMI is not the surviving, resulting or
receiving corporation thereof or
(
ii)
if WMI isthe surviving o
r
resulting corporation, shares representing a majority of
WMI's total voting power
are either converted or
exchanged into securities of
another person or
into cash or
other
property (any such transaction in either ( i) or
(
ii) being a " Business Combination"), then WMI
( i) shall not enter into such Business Combination unless the Successor Entity agrees, effective
upon the consummation of
such Business Combination, to abide by
all
of
WMI's obligations
under the provisions of
the Exchange Agreement restricting the payment of
dividends by WMI in
the event dividends are not paid with respect to the Company Preferred Securities and (
ii) may,
at
the election of
the Board of
Directors of WMI prior to the effectiveness of
such Business
Combination, assign, effective upon the consummation of
such Business Combination,
all
of
its
other obligations under the Exchange Agreement to a Successor Entity that has both Fixed Rate
Substitute Preferred Stock and Fixed-
to-
Floating Rate Substitute Preferred Stock and, as a result
of such assignment,
all references to WMI, Fixed Rate WMI Preferred Stock, Fixed-
to-
Floating
Rate WMI Preferred Stock, Fixed Rate Depositary Share and Fixed-to-Floating Rate Depositary
Share shall become and be deemed to be references to such Successor Entity, to such Fixed
Rate Substitute Preferred Stock, to such Fixed-
to-
Floating Rate Substitute Preferred Stock, to a
Fixed Rate Successor Depositary Share and to a Fixed-
to-
Floating Rate Successor Depositary
Share, respectively.
83
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00096
" Successor Entity" means a corporation designated by
the Board of
Directors of WMI
( i) that is the surviving, resulting or
receiving corporation, as
applicable, in any Business
Combination, (
ii) the securities of
which are received in a Business Combination, by some or
all
holders of
WMI voting shares or
(
iii) that the Board of
Directors of
WMI determines to be
an
acquiror of WMI in a Business Combination.
"Fixed-
to-
Floating Rate Substitute Preferred Stock" means a class or
series of
equity
securities of
a Successor Entity having the preferences, limitations and relative rights in its
articles or
certificate of
incorporation or
other constituent documents that are substantially similar
to those set forth in the articles of
amendment establishing the Fixed-
to-
Floating Rate WMI
Preferred Stock.
"Fixed Rate Substitute Preferred Stock" means a class or
series of
equity securities of
a
Successor Entity having the preferences, limitations and relative rights in its articles or
certificate
of
incorporation or
other constituent documents that are substantially similar to those set forth in
the articles of
amendment establishing the Fixed Rate WMI Preferred Stock.
"Fixed-
to-
Floating Rate Successor Depositary Share" means a depositary share substantially
similar to a Fixed-
to-
Floating Rate Depositary Share representing an interest in the Fixed-
to-
Floating Rate Substitute Preferred Stock.
"Fixed Rate Successor Depositary Share" means a depositary share substantially similar to a
Fixed Rate Depositary Share representing an interest in the Fixed Rate Substitute Preferred
Stock.
Conditional Exchange
For a description of
how an exchange of
the Trust Securities into Fixed-
to-
Floating Rate
Depositary Shares may occur upon an Exchange Event, purchasers should read " Description of
the Trust Securities - Conditional Exchange."
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DESCRIPTION OF THE FIXED- TO-FLOATING RATE DEPOSITARY SHARES
The following summary describes the material terms and provisions of
the Fixed-
to-
Floating
Rate Depositary Shares. This description is qualified in its entirety by
reference to the terms and
provisions of
the Deposit Agreement, the form of
depositary receipts, which contain the terms and
provisions of
the Fixed-
to-
Floating Rate Depositary Shares, and WMl's articles of
incorporation and
articles of
amendment. Copies of
each of
the foregoing documents may be obtained upon request
to WMI.
General
Each depositary share will represent a 1/
1 OOOthinterest in one share of
Fixed-
to-
Floating
Rate WMI Preferred Stock (the " Fixed-
to-
Floating Rate Depositary Shares"). The Fixed-
to-
Floating Rate Depositary Shares will be evidenced by
depositary receipts. The shares of
Fixed-
to-
Floating Rate WMI Preferred Stock underlying the Fixed-
to-
Floating Rate Depositary
Shares will, upon an exchange as a result of
an Exchange Event, be deposited with the, as
Depositary, under a Deposit Agreement, to be entered into on
or
before the closing date (the
" Deposit Agreement"), among WMI, the Depositary, the registrar appointed thereunder and
all
holders from time to time of
depositary receipts issued by
the
Depositary thereunder. WMI does
not intend to list or
quote the Fixed-
to-
Floating Rate Depositary Shares or
the Fixed-
to-
Floating
Rate WMI Preferred Stock on any securities exchange or
automated dealer quotation system.
Accordingly, there will be
no public trading market
for
the Fixed-
to-
Floating Rate Depositary
Shares or
the Fixed-
to-
Floating Rate WMI Preferred Stock. The Initial Purchasers are under no
obligation to and do not intend to make a market in the Fixed-
to-
Floating Rate Depositary
Shares.
Subject to the terms of
the Deposit Agreement, each owner of
a Fixed-
to-
Floating Rate
Depositary Share will be
entitled, through the Depositary, to all the rights, preferences and
privileges of
a share of
Fixed-
to-
Floating Rate WMI Preferred Stock. Owners of
a single Fixed-
to-
Floating Rate Depositary Share, representing a 1/
1 OOOthinterest in one share of
Fixed-
to-
Floating Rate WMI Preferred Stock, will be subject to all
of
the limitations of
the fractional share
represented thereby, which are summarized above under " Description of the Fixed-
to-
Floating
Rate WMI Preferred Stock."
The Depositary
will
act
as transfer agent and registrar and paying agent with respect to the
Fixed-
to-
Floating Rate Depositary Shares.
The Depositary's office at
which the depositary receipts will be administered is located at
480 Washington Blvd., Jersey City, NJ 07310.
Purchasers may hold Fixed-
to-
Floating Rate Depositary Shares either directly or
indirectly
through their broker or
other financial institution. If purchasers hold Fixed-
to-
Floating Rate
Depositary Shares directly, by having Fixed-to-Floating Rate Depositary Shares registered in their
name on the books of
the Depositary, the purchaser is a depositary receipt holder. If purchasers
hold the Fixed- to-Floating Rate Depositary Shares through their broker or
financial institution
nominee, the purchasers must rely on the procedures of
such broker or
financial institution to
assert the rights of
a depositary receipt holder described in this section. Purchasers should
consult with their broker or
financial institution to find out what those procedures are.
Issuance of
Depositary Receipts
Automatically upon a Conditional Exchange, WMI will issue the shares of
Fixed-
to-
Floating
Rate WMI Preferred Stock, and WMI will deposit such shares of
the Fixed-
to-
Floating Rate WMI
Preferred Stock with the Depositary, which will then issue and deliver the depositary receipts to
WMI. WMI will, in turn, deliver the depositary receipts to the holders of
Trust Securities as
of
the
date of
a Conditional Exchange. Depositary receipts will be issued evidencing only whole
85
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00098
Fixed-to-Floating Rate Depositary Shares. Following the occurrence of
a Conditional Exchange,
each Trust Security will be exchanged
for
a like amount of
depositary receipts. See " Description
of
the Trust Securities - Conditional Exchange."
Dividends and Other Distributions
The Depositary will distribute
all cash dividends, dividends paid in Fixed-
to-
Floating Rate
Depositary Shares representing paid- up and non-assessable shares of
Fixed-
to-
Floating Rate
WMI Preferred Stock or
other cash distributions received in respect of
the Fixed- to-Floating Rate
WMI Preferred Stock to the record holders of
Fixed-
to-
Floating Rate Depositary Shares in
proportion to the numbers of
such Fixed-
to-
Floating Rate Depositary Shares owned by such
holders on the relevant record date. In the event of
a distribution other than in cash, the
Depositary will distribute property received by
it to the record holders of
Fixed-
to-
Floating Rate
Depositary Shares entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, after consultation with WMI, sell such
property and distribute the net proceeds from such sale to such holders.
Redemption of
Fixed-
to-
Floating Rate Depositary Shares
If the Fixed-
to-
Floating Rate WMI Preferred Stock underlying the Fixed-
to-
Floating Rate
Depositary Shares are redeemed, the Fixed-
to-
Floating Rate Depositary Shares will be redeemed
with the proceeds received by
the Depositary resulting from the redemption, in whole or
in part,
of
such Fixed-
to-
Floating Rate WMI Preferred Stock held by
the Depositary. The redemption
price per Fixed-
to-
Floating Rate Depositary Share will be equal to the applicable redemption
price per share payable with respect to such Fixed-
to-
Floating Rate WMI Preferred Stock. If less
than
all the Fixed-
to-
Floating Rate Depositary Shares are to be redeemed, the Fixed- to-Floating
Rate Depositary Shares to be redeemed will be selected by
lot
or
pro rata, in WMI's sole
discretion.
After the date fixed
for
redemption (which will be the same date as
the redemption date, if
any, for the Fixed-
to-
Floating Rate WMI Preferred Stock), the Fixed-
to-
Floating Rate Depositary
Shares so called
for
redemption will no longer be deemed to be outstanding and
all rights of
the
holders of
the Fixed-
to-
Floating Rate Depositary Shares will cease, except the right to receive
the moneys payable upon such redemption and any money or
other property to which the
holders of
such Fixed-
to-
Floating Rate Depositary Shares were entitled upon such redemption
upon surrender to the Depositary of
the depositary receipts evidencing such Fixed-
to-
Floating
Rate Depositary Shares.
Amendment of
Deposit Agreement
The form of
depositary receipt evidencing the Fixed- to-Floating Rate Depositary Shares and
any provision of the Deposit Agreement may at any time be amended by agreement between
WMI and the Depositary. However, any amendment which materially and adversely alters the
rights of
the holders of
depositary receipts will not be effective unless such amendment has been
approved by
the holders of
at
least a majority of
the Fixed-
to-
Floating Rate Depositary Shares
then outstanding. Every holder of
an outstanding depositary receipt at
the time any amendment
becomes effective will be deemed, by
continuing to hold such depositary receipt, to consent and
agree to such amendment and to be bound by
the Deposit Agreement as amended thereby.
Charges of
Depositary
WMI will pay the charges of
the Depositary in connection with the initial deposit of
the
Fixed-
to-
Floating Rate WMI Preferred Stock and the initial issuance of
the Fixed to Floating Rate
Depositary Shares upon a Conditional Exchange, and any redemption of
the Fixed- to-Floating
Rate WMI Preferred Stock. Holders of
Fixed-
to-
Floating Rate Depositary Shares will pay
all other
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transfer and other taxes and governmental charges and, in addition, such other charges as
are
expressly provided in the Deposit Agreement to be
for
their accounts.
All
other charges and
expenses of
the Depositary and of
any registrar incident to the performance of
their respective
obligations arising from the depositary arrangements will be paid by WMI only after prior
consultation and agreement between the Depositary and WMI and consent by WMI to the
incurrence of
such expenses, which consent will not be unreasonably withheld.
Miscellaneous
The Depositaryw
ill
forward to the
holders of
the
Fixed-
to-
Floating Rate Depositary Shares
all reports and communications from WMI which WMI would be required to furnish to the holders
of
the Fixed-
to-
Floating Rate WMI Preferred Stock.
Neither the Depositary nor WMI will be
liable if it is prevented or
delayed by law or
any
circumstances beyond
its control in performing
its obligations under the Deposit Agreement. The
obligations of WMI and the Depositary under the Deposit Agreement will be limited to
performance in good faith of
their duties thereunder, and they will not be
obligated to prosecute
or
defend any legal proceedings in respect of
any Fixed- to-Floating Rate Depositary Shares or
the Fixed-
to-
Floating Rate WMI Preferred Stock unless satisfactory indemnity is furnished. They
may rely upon written advice of
counselor independent accountants, or
information provided by
persons presenting Fixed-
to-
Floating Rate WMI Preferred Stock for deposit, holders of
Fixed- to-
Floating Rate Depositary Shares or
other persons believed to be competent and on documents
believed to be genuine.
Resignation and Removal of
Depositary; Termination of
Deposit Agreement
The Depositary may resign at
any time by
delivering to WMI notice of
its election to do so,
and WMI may at
any time remove the Depositary, with any such resignation or
removal taking
effect upon the appointment of
a successor depositary and
its acceptance of
such appointment.
Such successor depositary will be appointed by WMI within 60 days after delivery of
the notice of
resignation or
removal. Upon termination of
the Deposit Agreement, the Depositary will
discontinue the transfer of
depositary receipts, will suspend the distribution of
dividends to the
holders thereof and will not give any further notices (other than notice of
such termination) or
perform any further acts under the Deposit Agreement, except that the Depositary will continue
to collect dividends and other distributions pertaining to Fixed-
to-
Floating Rate WMI Preferred
Stock and
will
continue to deliver Fixed-
to-
Floating Rate WMI Preferred Stock certificates
together with such dividends and distributions and the net proceeds of
any sales of
rights,
preferences, privileges, or
other property in exchange
for
depositary receipts surrendered. At
any
time after the expiration of
three years from the date of
termination, the Depositary may sell the
Fixed-
to-
Floating Rate WMI Preferred Stock and hold the proceeds of
such sale, without interest,
for
the benefit of
the holders of
depositary receipts who have not then surrendered their
depositary receipts. After making. such sale, the Depositary will be
discharged from
all
obligations
under the Deposit Agreement except to account
for
such proceeds.
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DESCRIPTION OF THE OTHER WMI CAPITAL STOCK
As
of
the date hereof, the authorized capital stock of WMI consists of
1,60Q,000,000 shares
of WMI common stock and 10,000,000 shares of
preferred stock, no par value. As
of
the close of
business on February 15, 2006, there were 994,380,908 shares of
WMI common stock
outstanding and no shares of
preferred stock of WMI outstanding. As
of
the close of
business on
February 15, 2006, 700,000 shares of
preferred stock of WMI were authorized, but unissued, as
contemplated by WMI's Rights Agreement, dated as
of
December 20, 2000, entered into by and
between WMI and Mellon Investor Services LLC The shares of WMI preferred stock to be issued
upon the occurrence of a Conditional Exchange have been duly authorized and when and if
issued will be validly issued, fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the
ownership thereof.
WMI has authorized
for
issuance in connection with the offering of
the Trust Securities and
the related issuance by the Company of
its Fixed-
to-
Floating Rate Company Preferred Securities
up
to 750 shares of
its Series J Perpetual Non- cumulative Fixed Rate Preferred Stock, no par
value, and liquidation preference of
$1,000,000 per share (the "Fixed Rate WMI Preferred
Stock"). The shares of
Fixed Rate WMI Preferred Stock will be
issued by WMI solely upon the
occurrence of
a Conditional Exchange. The shares of
Fixed Rate WMI Preferred Stock, if and
when issued upon the occurrence of
a Conditional Exchange, will be represented by
Fixed Rate
Depositary Shares of WMI (the "Fixed Rate Depositary Shares"), each of
which will represent
1/ 1OOOthof a share of
Fixed Rate WMI Preferred Stock.
The Fixed Rate WMI Preferred Stock will rank pari passu with the Fixed-
to-
Floating Rate
WMI Preferred Stock as
to dividends and upon liquidation of
WMI. The terms of
the Fixed Rate
WMI Preferred Stock are substantially identical to the Fixed-
to-
Floating Rate WMI Preferred
Stock other than with respect to the rate applicable to dividends thereon. The Fixed Rate WMI
Preferred Stock will,
if, when and as
declared by
WMl's Board of
Directors, pay dividends at
an
annual rate of
7.25%. The Fixed Rate WMI Preferred Stock will not be
listed on any securities
exchange or
automated dealer quotation system.
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BOOK-ENTRY ISSUANCE
Form, Denomination, Transfer and Book- Entry Procedures
General
The Trust Securities are being offered and sold only to persons who are both qualified
institutional buyers within the meaning of
Rule 144A under the Securities Act and qualified
purchasers within the meaning of
Section 2 ( a)
(51) of
the Investment Company Act in reliance
on
an exemption from registration pursuant to Rule 144A under the Securities Act.
The Trust Securities will be issued only in fully registered form. Each purchaser in the
Offering and each account
for
which it is purchasing will hold at
least $300,000 liquidation
preference of
Trust Securities ( i. e.,
at
least three Trust Securities) and transfer at
least $100,000
liquidation preference of
Trust Securities ( i. e.,
at
least one Trust Security) and each subsequent
purchaser and each account
for
which it is purchasing will hold and transfer at
least $100,000
liquidation preference of
Trust Securities ( i. e.,
at
least one Trust Security). Any transfer, sale or
other disposition of
Trust Securities having a liquidation preference of
less than $100,000 or
which result in a beneficial owner holding Trust Securities having an aggregate liquidation
preference of
less than $100,000, will be deemed to be
null and void ab
initio and of
no legal
effect whatsoever. Any such transferee will be deemed not to be
the beneficial owner of
such
Trust Securities
for
any purpose, including, but not limited
to,
the receipt of
dividends on such
Trust Securities, and such transferee will be deemed to have no interest whatsoever in such
Trust Securities.
Each purchaser of
Trust Securities pursuant to the Offering, and each purchaser who holds
a beneficial interest in the Global Security at
any time, will be deemed to have represented to
WaMu Delaware that it is both a qualified institutional buyer within the meaning of
Rule 144A
under the Securities Act and a qualified purchaser within the meaning of
Section 2 ( a)
(51) under
the Investment Company Act. If a beneficial owner of
Trust Securities who is required to be a
qualified purchaser within the meaning of
Section 2(
a)
(51) under the Investment Company Act
is at
any time not a qualified purchaser, WaMu Delaware may ( i) require such beneficial owner
to sell
its Trust Securities to a person who is a qualified purchaser and who is otherwise
qualified to purchase such Trust Securities in a transaction exempt from registration under the
Securities Act or
(
ii) require the beneficial owner to sell such Trust Securities to WaMu Delaware
or
an
affiliate thereof at
a price equal to the least of
( A)
the purchase price paid by
the holder
for
such Trust Securities, ( B)
100% of
the liquidation preference thereof or
( C)
the fair market
value thereof.
Global Security
The Trust Securities initially will be represented by one or
more securities in registered,
global form (the " Global Security"). The Global Security will be deposited upon issuance with
the Registrar as Custodian
for
The Depository Trust Company (" DTG") in New York, New York,
and registered in the name of DTC or
its nominee (the " Nominee"), in each case
for
credit to an
account of a DTC Participant, as described below.
Special Considerations for Global Securities
As
an
indirect holder, a purchaser's rights relating to a Global Security will be governed by
the account rules of
the purchaser's financial institution and of DTC, as well as the general laws
relating to securities transfers. WaMu Delaware will not recognize the purchaser as a holder of
Trust Securities and instead will deal only with DTC or
its nominee. See "- The DTC System."
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Purchasers should be aware that because Trust Securities are issued only in the form of
a
Global Security:
• they cannot get Trust Securities registered in their name;
• they cannot receive physical certificates
for
their interest in the Trust Securities;
• they will be
" Street Name" holders and must look to their own bank or
broker
for
payments on the Trust Securities and the protection of
their legal rights relating to the
Trust Securities;
• they may not be able to sell interests in the Trust Securities to some insurance
companies and other institutions that are required by law to own securities in the form of
physical certificates; and
• DTC's policies will govern payments, transfers, exchanges and other matters relating to
the purchaser's interest in the Global Security. See "- The DTC System". WaMu
Delaware, the Company and the Registrar have no responsibility
for
any aspect of
DTC's
actions or
for
its records of
ownership interests in the Global Security. WaMu Delaware,
the Company and the Registrar also do not supervise DTC in any way.
Special Situations When the Global Security Will Be Terminated
In a few special situations, the Global Security will terminate and interests in it will be
exchanged
for
physical certificates representing Trust Securities. After that exchange, the choice
of
whether to hold Trust Securities directly or
in " Street Name" will be
up
to the beneficial
owner. Purchasers must consult their own bank or
broker to find out how to have their interests
in Trust Securities transferred to their own name, so that they will be
direct holders.
The special situations for termination of
the Global Security are:
• DTC notifies WaMu Delaware that it is unwilling, unable or
no
longer qualified to continue
as
the depositary
for
the Trust Securities; or
• WaMu Delaware in its sole discretion determines that the Global Security will be
exchangeable for certificated Trust Securities.
When the Global Security terminates, DTC (and not WaMu Delaware,
the Company or
the
Securities Registrar) is responsible
for
deciding the names of
the institutions that will be the
initial direct holders.
If Trust Securities are issued in certificated form, dividends, if any, will be payable, and
Trust Securities may be transferred or
exchanged, at
the corporate trust office of
the Registrar in
New York, New York, provided that payment of
interest on certificated Trust Securities may be
made at
the option of WaMu Delaware by check mailed to the address of
the persons entitled
thereto.
The DTC System
DTC is a limited-purpose trust company created to hold securities for
its participating
organizations (the " OTe Participants"). DTC also facilitates the clearance and settlement
between Participants of
transactions of
securities deposited with DTC through changes in the
account records of DTC Participants. DTC Participants include securities brokers and dealers
( including the Initial Purchasers), banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such as
securities
brokers and dealers, banks and trust companies that work through a DTC Participant (the
" Indirect Participants").
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When the Trust Securities are purchased through the DTC system, the purchase must be
made by
or
through a DTC Participant, who will receive credit
for
the Trust Securities on DTC's
records. The purchaser's ownership interest will only be recorded on the DTC Participants' ( or
Indirect Participants') records. DTC has no knowledge of
a purchaser's individual ownership of
the Trust Securities. DTC's records only show the identity of
the DTC Participants and the
amount of
the Trust Securities held by
or
through them. A purchaser will not receive a written
confirmation of
its purchase or
sale or
any periodic statement directly from DTC; it will receive
these from the DTC Participant or
Indirect Participant. Thus, the DTC Participants ( or
Indirect
Participants) are responsible
for
keeping an accurate account of
the holdings of
their customers.
Any redemption notices with respect to the Trust Securities will be
sent by
the Company
and WaMu Delaware directly to DTC, who will in turn inform the DTC Participants, who will then
contact the beneficial owners. If less than
all
of
the Trust Securities are being redeemed, DTC's
current practice is to choose by
lot
the amount of
the interest of each DTC Participant to be
redeemed. Each DTC Participant will then use an appropriate method to allocate the redemption
among
its beneficial holders.
Itis DTC's current practice, upon receipt of any payment to credit DTC Participants'
accounts on the payment date based on their holdings of
beneficial interests in the Global
Securities as shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or
voting rights to DTC Participants whose accounts are credited with Trust Securities
on a record date, by
using an omnibus proxy. Payments by DTC Participants to owners of
beneficial interests in the Global Security, and voting by DTC Participants, will be based on
the
customary practices between the DTC Participants and owners of
beneficial interests, as
is the
case with securities held
for
the account of
customers registered in "Street Name". However,
payments will be the responsibility of
the DTC Participants and not of
DTC, the Securities
Registrar, WaMu Delaware or
the Company.
Interests in the Trust Securities will trade in DTC's same-day funds settlement system, and
secondary market trading activity in such interests will therefore settle in immediately available
funds, subject in all cases to the rules and procedures of
DTC and
its participants.
DTC has advised WaMu Delaware that it will take any action permitted to be taken by a
holder of
the Trust Securities only at
the direction of
one or
more participants to whose account
with DTC interests in the Global Security are credited and only in respect of
such portion of
the
aggregate principal amount of
the Trust Securities as
to which such participant or
participants
has or have given such direction.
Although DTC has agreed to the foregoing procedures in order to facilitate transfers of
beneficial ownership interests in the Global Security among participants of DTC it is under no
obligation to perform or
continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company, WaMu Delaware, the Securities Registrar or any
of
their representative agents
will
have any responsibility
for
the performance by DTC
its
participants or
indirect participants of
its obligations under the rules and procedures governing
their operations, including maintaining, supervising or
reviewing the records relating
to,
or
payments made on account
of, beneficial ownership interests in the Global Security.
Euroc/ ear and Clearstream
Clearstream Banking, societe anonyme, 42 Avenue JF Kennedy, L- 1855, Luxembourg
("Clearstream"), is a subsidiary of
Clearstream International ("Clearstream International"), a
Luxembourg limited liability company formed in January 2000 through the merger of
CedeI
International and Deutsche Boerse Clearing, a subsidiary of
Deutsche Boerse AG. In July 2002,
Deutsche Boerse AG acquired Cedel International and
its 50% ownership of
Clearstream
International.
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Clearstream is registered as a bank in Luxembourg, and as such is subject to supervision
by
the Luxembourg Financial Sector Supervisory Commission, which supervises Luxembourg
banks.
Clearstream holds securities
for
its customers ("
C/
earstream Participants") and facilitates
the clearance and settlement of
securities transactions by
electronic book- entry transfers
between their accounts. Clearstream provides various services, including safekeeping, adminis-
tration, clearance and settlement of
internationally traded securities and securities lending and
borrowing. Clearstream also deals with domestic securities markets in several countries through
established depository and custodial relationships. Clearstream has established an electronic
bridge with Euroclear Bank S.
A./ N.
V.
as
the Euroclear Operator in Brussels to facilitate
settlement of
trades between systems. Clearstream currently accepts over 200,000 securities
for
clearance.
Clearstream International's customers are world- wide financial institutions including under-
writers, securities brokers and dealers, banks, trust companies and clearing corporations.
Clearstream International's United States customers are limited to securities brokers and dealers
and banks. Currently, Clearstream International has over 2,500 customers located in over
94 countries, including
all major European countries, Canada and the United States. Indirect
access to Clearstream is available to other institutions which clear through or
maintain custodial
relationship with an account holder of
Clearstream.
The Euroclear System (" Euroc/ ear") was created in 1968 to hold securities
for
its
participants (" Euroc/ ear Participants") and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book- entry delivery against payment, thereby
eliminating the need for physical movement of
certificates and any risk from lack of
simultaneous
transfers of
securities and cash. Transactions may be
settled in a variety of
currencies, including
United States dollars. Euroclear includes various other securities, including securities lending and
borrowing and interfaces with domestic markets in several countries generally similar to the
arrangements
for
cross- market transfers with DTC described above. Euroclear is operated by
Euroclear Bank S.
A./
N.
V.
(
the
" Euroc/ ear Operator").
All
operations are conducted by
the
Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear cash accounts
are accounts with the Euroclear Operator. Euroclear pic establishes policy
for
Euroclear on
behalf of
Euroclear Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries. Indirect access to
Euroclear is also available to other firms that clear through or
maintain a custodial relationship
with a Euroclear Participant, either directly or
indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed
by
the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures
of
the Euroclear System and applicable Belgian law (collectively, the "Euroc/ ear Terms and
Conditions"). The Euroclear Terms and Conditions govern transfers of
securities and cash within
Euroclear, withdrawals of
securities and cash from Euroclear, and receipts of payments with
respect to securities in Euroclear.
All
securities in Euroclear are held on a fungible basis without
attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Euroclear Terms and Conditions only on
behalf of
Euroclear Participants,
and has no record
of,
or
relationship with, persons holding through Euroclear Participants.
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CERTAIN U.
S.
FEDERAL INCOME TAX CONSIDERATIONS
United States Internal Revenue Service Circular 230 Notice: To ensure compliance with
Internal Revenue Service Circular 230, prospective investors are hereby notified that: ( i) any
discussion of
U.
S.
Federal tax issues contained or
referred to in this offering circular or
any
document referred to herein is not intended or
written to be used, and cannot be used, by
prospective investors
for
the purpose of
avoiding penalties that may be imposed on them under the
U.
S.
Internal Revenue Code; (
ii) such discussion is written
for
use in connection with the
promotion or
marketing of
the transactions or
matters addressed herein; and (
iii) prospective
investors should seek advice based on their particular circumstances from an independent tax
advisor.
General
The following discussion summarizes the principal United States Federal income tax
treatment of WaMu Delaware and the Company, and the principal United States Federal income
tax consequences to holders of
the Trust Securities. This discussion is of
a general nature and is
not intended to be, nor should it be construed as, tax advice to any holder. Purchasers should
consult their own tax advisor regarding the tax consequences of
acquiring, owning and disposing
of
Trust Securities.
The discussion is addressed only to holders that beneficially own Trust Securities as
capital
assets and does not purport to be a comprehensive description of
all the
tax
considerations that
may be relevant to particular holders in light of
their personal circumstances. The discussion also
does not describe
all aspects of
taxation that may be relevant to certain types of
holders to
which special provisions of
United States Federal income tax law may apply, including:
• dealers in securities and currencies;
• regulated investment companies;
• traders in securities;
• tax-exempt organizations;
• banks and insurance companies;
o persons that hold Trust Securities as
part of
a hedge, straddle or
conversion transaction;
o persons whose functional currency is not the United States dollar; and
• U.
S.
expatriates.
The summary is based on United States Federal income tax law, including the Code,
existing and proposed U.
S.
Treasury regulations, administrative rulings and judicial decisionsall
as
currently in effect. These legal sources are subject to change or
differing interpretations at
any time, which change or
interpretation could apply retroactively and could affect the validity of
the discussion below. There can be
no assurance that the Internal Revenue Service (" IRS") will
take the same view of
the United States Federal income tax consequences of
an investment in
the Trust Securities as
described herein.
Each purchaser is urged to consult
its own tax advisor as
to the tax consequences of
acquiring, owning and disposing of
Trust Securities, including the United States Federal, state,
local and any other tax consequences of
acquiring, owning and disposing of
Fixed-
to-
Floating
Rate Depository Shares.
As used in this discussion, the term " U.
S.
Holder" means a beneficial owner of a Trust
Security that
is,
for
United States Federal income tax purposes, a citizen or
resident of
the
United States, a corporation or
partnership created or
organized in or
under the laws of
the
United States or
any state, an estate the income of
which is includible in gross income for United
States Federal income tax purposes regardless of
its source, or
a trust if a court within the
United States is able to exercise primary supervision over
its administration and one or
more
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United States persons have authority to control
all substantial decisions of
the trust. The term
"Foreign Holder" means a beneficial owner of
Trust Securities that is not a U.
S.
Holder.
United States Federal Income Tax Consequences
Tax Treatment of WaMu Delaware and
its Investment in Fixed- to-Floating Rate Company
Preferred Securities
Classification of WaMu Delaware and the Company. WaMu Delaware intends to be treated
as
a grantor trust
for
United States Federal income tax purposes. Accordingly, each holder of
a
Trust Security will be treated as
if it owned directly the Fixed-
to-
Floating Rate Company
Preferred Securities allocable to such Trust Security.
All
of
WaMu Delaware's assets are
expected to consist of
Fixed-to
-Floating Rate Company Preferred Securities. The Company
intends to be classified as a U.
S.
domestic partnership
for
United States Federal income tax
purposes, and the Fixed-
to-
Floating Rate Company Preferred Securities acquired by WaMu
Delaware are intended to constitute equity interests in such partnership.
An entity that is classified as a partnership
for
United States Federal income tax purposes
generally is not a taxable entity and incurs no United States Federal income tax liability. Instead,
each partner is required to take into accountits allocable share of income, gains, losses,
deductions and credits of
the partnership in computing
its United States Federal income
tax
liability, if any, even if no cash distributions are made by
the partnership to the partner. An entity
that is classified as a partnership
for
United States Federal income
tax
purposes nevertheless
will be taxable as a corporation if it is a "publicly traded partnership" and fails to satisfy a "90%
qualifying income" test, within the meaning of
Code Section 7704.
On the date of
the initial issuance of
the Trust Securities, the Company will receive an
opinion from Mayer, Brown, Rowe & Maw LLP to the effect that,fo
rUnited States Federal
income tax purposes, although no
activities closely comparable to that contemplated by the
Company have been the subject of
any U.
S.
Treasury regulation, revenue ruling or
judicial
decision, the Company will not be treated as
an association or
publicly traded partnership taxable
as a corporation. The opinions are based on certain assumptions and on certain representations
and agreements regarding restrictions on the future conduct of the activities of
the Company.
Although the Company intends to conduct
its activities in accordance with such assumptions,
representations and agreements, if it were nonetheless determined that
the Company was
taxable as a corporation
for
United States Federal income tax purposes, then cash available
for
distribution in respect of
the Company Preferred Securities would be reduced on account of
taxes payable by
the Company. A determination by the Company, based on receipt of
an opinion
of
counsel, that there is a significant risk that the Company is or
will be treated as
an association
or
publicly traded partnership taxable as a corporation would constitute a Tax Event - see
"Description of
the Fixed- to-Floating Rate Company Preferred Securities - Redemption." The
remainder of
this discussion assumes that the Company is treated as a partnership, and not as
an association or
publicly traded partnership taxable as a corporation,
for
Federal income tax
purposes, and that the Fixed-
to-
Floating Rate Company Preferred Securities will constitute equity
interests in such partnership.
Tax Consequences to U.
S.
Holders of
Trust Securities
Income and Deductions in General. Each U.
S.
Holder of
Trust Securities will be required
to report on
its United States Federal income tax return
its share of
income, gains, losses,
deductions and credits of
the Company that are allocable to WaMu Delaware, even if such holder
has not received any cash distributions from WaMu Delaware.
Distributions on Trust Securities. Distributions of
money by WaMu Delaware to a
U.
S.
Holder of
Trust Securities generally will not result in taxable gain to the U.
S.
Holder. A
U.
S.
Holder of
Trust Securities will recognize taxable gain as a result of
a distribution of
money
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by
the Company to WaMu Delaware with respect to the Fixed-
to-
Floating Rate Company
Preferred Securities only if and to the extent that the U.
S.
Holder's share of
such distribution
exceeds the U.
S.
Holder's adjusted tax basis in the Fixed-
to-
Floating Rate Company Preferred
Securities allocable to such U.
S.
Holder's Trust Securities immediately before the distribution. In
general, each U.
S.
Holder of
Trust Securities will have an
initial basis in the Fixed-
to-
Floating
Rate Company Preferred Securities allocable to such U.
S.
Holder's Trust Securities equal to the
amount paid by WaMu Delaware to purchase such Fixed-
to-
Floating Rate Company Preferred
Securities. Such U.
S.
Holder's basis in such Fixed-to-Floating Rate Company Preferred Securities
generally will be increased by such U.
S.
Holder's share of
the Company's taxable income and
decreased, but not below zero, by such holder's share of
amounts distributed with respect to the
Fixed-
to-
Floating Rate Company Preferred Securities and Company losses, deductions and
nondeductible expenditures that are not chargeable to capital allocable to WaMu Delaware.
Allocations of
Company Income, Gain, Loss and Deductions. Each holder of
Trust
Securities must report
its proportionate share of
the Company income, gain, loss and deduction
allocated to WaMu Delaware
for
such year. Under Section 704( b)
of
the Code, a partnership's
allocation of
any item of
income, gain, loss or
deduction to a partner will be given effect
for
United States Federal income tax purposes so long as
it has " substantial economic effect," or
is
otherwise in accordance with the " partner's interest in the partnership." If
an allocation of
an
item does not satisfy this standard, it will
be reallocated among the partners on the basis of
their
respective interests in the partnership, taking into account
all facts and circumstances. The
Company believes that the allocations of
items of
income, gain, loss and deduction under the
Company Operating Agreement will be considered to have substantial economic effect under the
applicable Treasury regulations.
Limitations on Use of
Losses. U.
S.
Holders
are
not expected to be allocated any losses
for
United States Federal income tax purposes with respect to their indirect interests in the
Company. The deductibility of
losses arising from a partnership such as
the Company are subject
to certain limitations under the Code. In the event losses are allocated to U.
S.
Holders of
the
Trust Securities, such U.
S.
Holders should consult their tax advisors to determine the
deductibility of
such losses.
Sale, Exchange or
Other Disposition of
Trust Securities. In general, a U.
S.
Holder will
recognize gain or
loss upon the sale or
exchange of
such U.
S.
Holder's Trust Securities equal to
the difference between the amount realized and such U.
S.
Holder's adjusted tax basis in the
Fixed-
to-
Floating Rate Company Preferred Securities allocable to such U.
S.
Holder's Trust
Securities. Initially, the tax basis of
a U.
S.
Holder should equal the amount paid
for
its Trust
Securities. Such basis will be increased or
decreased as described above and, as a general
matter, at
all times is expected to equal the face value of
the U.
S.
Holder's Trust Securities. If a
holder's Trust Securities are exchanged
for
Fixed-
to-
Floating Rate Depositary Shares, the
transaction will be a fully taxable sale to the holder. The amount realized by a holder on
this kind
of
disposition of
a Trust Security will equal the fair market value of
the Fixed-
to-
Floating Rate
Depositary Shares received.
Company Audits. The
tax
treatment of
Company- related items is determined at
the
Company level. University Street will be appointed as
" tax matters partner" with the authority to
determine the Company's response to an
audit. The limitations period
for
assessment of
deficiencies and claims
for
refunds with respect to items related to the Company is three years
after the Company's return
for
the taxable year in question is filed, and the tax matters partner
has the authority
to,
and may, extend such period with respect to all members of the Company. If
an audit results in an adjustment, the holders of
the Trust Securities, as the deemed owners of
the Fixed-
to-
Floating Rate Company Preferred Securities, may be required to restate their
taxable income which could cause holders of
Trust Securities to pay additional taxes, interest
and possibly penalties and such holders may themselves also be subject to audits. There can be
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no assurance that the Company's or
a U.
S.
Holder's tax return will not be audited by
the IRS or
that no adjustments to such returns will be made as a result of
such an
audit.
Tax Treatment of
Tax- Exempt U.
S.
Holders of
Trust Securities
For purposes of
this discussion, a " Tax- Exempt U.
S.
Holder" means any United States do-
mestic organization qualified under Code Section 501 ( c)
(
3),
any trust or
governmental plan
qualified under Code Section 401 (
a),
any individual retirement account and any other non-
governmental U.
S.
Holder generally exempt from United States Federal income taxation. A Tax-
Exempt U.
S.
Holder is not expected to be subject to the tax on unrelated business taxable
income (" UBTI") with respect to its share of
Company income and gain allocable to WaMuDelaware o
r
any capital gains derived from an investment in the Trust Securities. However,
notwithstanding the foregoing, a Tax-Exempt U.
S.
Holder which incurs "acquisition indebted-
ness" ( as
defined in Code Section 514 (c» with respect to its Trust Securities may be subject to
the tax on UBTI in respect of
any income or
gains derived in respect of
the Trust Securities to
the extent that such Trust Securities constitute " debt- financed property" of
the Tax-Exempt
U.
S.
Holder within the meaning of
Code Section 514(b).
Tax-Exempt U.
S.
Holders should consult their own
tax
advisors regarding
the
tax
consequences to them of
an investment in the Trust Securities.
Tax Treatment of
Foreign Holders of
Trust Securities
U.
S.
Trade or
Business Status. The Company intends to conduct
its affairs so
as
to not be
engaged in a trade or
business in the United States. On the date of
the initial issuance of
the
Trust Securities, the Company will receive an opinion from Mayer, Brown, Rowe & Maw LLP to
the effect that,
for
United States Federal income tax purposes, although no
activities closely
comparable to that contemplated by the Company have been the subject of
any U.
S.
Treasury
regulation, revenue ruling or
judicial decision, it will not be
treated as
engaged in the conduct of
a
trade or
business within the United States. Mayer, Brown, Rowe & Maw LLP's opinion is not
binding on the IRS or
the courts, and no
ruling will be sought from the IRS regarding this, or
any
other, aspect of
the Company's United States Federal income tax treatment. Accordingly, no
assurance can be given that the IRS will not assert positions contrary to those stated in Mayer,
Brown, Rowe & Maw LLP's opinion or
that a court would not entertain any such assertions.
Mayer, Brown, Rowe & Maw LLP's opinion is based on certain assumptions and on certain
representations and agreements regarding restrictions on the future conduct of
the Company's
activities. Although the Company intends to conduct
its activities in accordance with such
assumptions, representations and agreements, if it were nonetheless determined to be engaged
in a trade or
business in the United States and had taxable income that was effectively
connected with such United States trade or
business, then each Foreign Holder would be
subject
to United States Federal income tax on such Foreign Holder's share of
the Company's effectively
connected taxable income allocable to WaMu Delaware at
regular United States corporate
income tax rates and possibly to a 30% United States branch profits tax as
well. Moreover, in the
event a Foreign Holder were to derive effectively connected income in respect of
its ownership of
Trust Securities the United States corporate income tax imposed thereon would be required to
be collected in the first instance through a withholding by
the Company of
such tax at
a rate of
35% on such Foreign Holder's distributive share of
the income. A determination by
the Company,
based on receipt of
an opinion of
counsel, that there is a significant risk that it is or
will be
treated as
engaged in a trade or
business within the United States would constitute a Tax
Event - see " Description of
Fixed-
to-
Floating Rate Company Preferred Securities." The
remainder of
this discussion assumes that the Company will not be considered to be engaged in
a trade or
business in the United States.
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United States Withholding Tax. Interest that constitutes "portfolio interest" within the
meaning of
the Code is generally exempt from United States withholding tax. A Foreign Holder
will be treated as
earning directly
its share of
the income earned by the Company. The
Company's material assets will initially consist of
the " regular interest" ( i. e., the Class A Asset
Trust Certificate) issued in registered form by
the Asset Trust, which will be treated as a " real
estate mortgage investment conduit" under the Code ( a" REMIC"). REMIC regular interests are
generally treated as indebtedness
for
United States Federal income tax purposes that qualifies
for
the
portfolio interest exemption. In addition, during
the
term of
the transaction, the Company
expects, pursuant to its investment guidelines, to invest cash on hand from time to time in short
term debt instruments and other debt securities that qualify
for
the portfolio interest exemption.
Accordingly, it is expected that a Foreign Holder's share of WaMu Delaware's distributive
share of
the Company's interest income will constitute " portfolio interest", and thus, will not be
subject to U.
S.
withholding tax, so long as the Foreign Holder has certified
its status as a Foreign
Holder under penalties of
perjury on
an
appropriate IRS Form W-
8.
In addition, gain realized on
the sale, exchange or
redemption of
the Trust Securities held by a Foreign Holder generally will
not be subject to United States Federal income or
withholding tax, as
the case may be, unless
such Foreign Holder is a nonresident alien individual who holds the Trust Securities as a capital
asset and who is present in the United States more than 182 days in the taxable year of
the sale
and certain other conditions are met.
Information Reporting and Backup Withholding
Under certain circumstances, the Code requires " information reporting", and may require
" backup withholding", with respect to certain payments made on the Trust Securities and the
payment of
the proceeds from the disposition of
such instruments. Backup withholding generally
will not apply to corporations, tax-exempt organizations, qualified pension and profit sharing
trusts, and individual retirement accounts. Backup withholding will apply to a U.
S.
Holder if the
U.
S.
Holder fails to provide certain identifying information (such as
the U.
S.
Holder's taxpayer
identification number) or
otherwise comply with the applicable requirements of
the backup
withholding rules. The application
for
exemption from backup withholdingfo
ra U
.S
.
Holder is
available by providing a properly completed IRS Form W- 9.
The payment of
the proceeds from the disposition of a Trust Security by a Foreign Holder
generally
will
no
t
be subject to information reporting and backup withholding if the
Foreign Holder
certifies
its status as a Foreign Holder (and, if applicable,
its beneficial owners also certify their
status as
non-United States persons) under penalties of
perjury on
the appropriate IRS
Form W- 8,
satisfies certain documentary evidence requirements
for
establishing that it is a
Foreign Holder or
otherwise establishes an exemption.
Backup withholding is not an additional tax and may be refunded ( or
credited against the
U.
S.
Holder's or
Foreign Holder's United States Federal income tax liability, if any), provided that
certain required information is furnished. The information reporting requirements may apply
regardless of
whether withholding is required.
Tax Return Disclosure Requirements
Recently issued Treasury Regulations and other administrative guidance promulgated by the
IRS prescribe certain circumstances under which holders of
the Trust Securities could be
required to file information returns with the IRS ( the "New Reporting Rules").
The New Reporting Rules could apply to a U.
S.
Holder (and to certain Foreign Holders who
hold their Trust Securities in connection with a United States trade or
business) if WaMuDelaware o
r
the Company were to enter into one or
more "reportable transactions". The
definition of
" reportable transaction" is highly technical. It
is not expected that WaMu Delaware
or
the Company will engage in activities that would give rise to any reportable transactions. If
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WaMu Delaware or
the Company were to engage in any "reportable transaction," then, subject
to certain exceptions and threshold limitations, a U.
S.
Holder or
Foreign Holder may be required
to file IRS Form 8886 with such holder's United States Federal income tax return
for
each
taxable year in which such " reportable transaction" affects such holder's taxable income, and to
file a copy of such form with the IRS's Office of Tax Shelter Analysis. WaMu Delaware intends to
provide to the holders of
Trust Securities any information necessary to complete such form.
In addition, subject to certain significant exceptions, any holder of
Trust Securities that
recognizes a loss on a sale or
exchange of
such holder's Trust Securities may be required to file
IRS Form 8886 in the manner described above if the loss exceeds certain thresholds and no
exception applies.
Prospective purchasers of
Trust Securities are urged to consult their own tax advisors
regarding the application to them of
the New Reporting Rules with respect to an investment in
the Trust Securities.
Foreign, State, and Local Taxes
Holders may be liable
for
foreign, state, and local taxes in the country, state, or
locality in
which they are resident or
doing business or
in a state or
locality in which WaMu Delaware or
the
Company conducts or
is deemed to conduct business. Because the tax laws of each country,
state, and locality may differ, each prospective purchaser should consult
its own tax advisors
with respect to any taxes that may be payable as a result of
an investment in the Trust
Securities.
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ERISA CONSIDERATIONS
Section 406 of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and Section 4975 of
the Internal Revenue Code of 1986, as amended (the "Code")
prohibit pension, profit- sharing or
other retirement plans and accounts subject to ERISA or
Section 4975 of
the Code and entities that are deemed to hold " plan assets" of
any of
the
foregoing (each, a " Plan") from engaging in certain transactions with persons that are " parties
in interest" under ERISA or
"disqualified persons" under the Code with respect to such Plan. Aviolation o
f
these " prohibited transaction" rules may result in an excise tax or
other penalties
and liabilities under ERISA and the Code
for
such persons or
the fiduciaries of
the Plan. In
addition, Title I of
ERISA also requires fiduciaries of
a Plan subject to ERISA to make
investments that are prudent, diversified and in accordance with the governing plan documents.
Certain transactions involving WaMu Delaware might be deemed to constitute prohibited
transactions under ERISA and the Code with respect to a Plan that purchased Trust Securities or
Fixed-
to-
Floating Rate Company Preferred Securities if assets of WaMu Delaware were deemed
to be assets of
the Plan. Under a regulation issued by
the United States Department of
Labor
(the "Regulation"), the assets of WaMu Delaware would be treated as
plan assets of
a Plan
for
the purposes of
ERISA and the Code only if the Plan acquired an
" equity interest" in WaMu
Delaware and none of
the exceptions to plan assets contained in the Regulation was applicable.
An
equity interest is defined under the Regulation as
an interest other than an instrument that is
treated as indebtedness under applicable local law and that has no substantial equity features.
The WaMu Cayman Preferred Securities and the Fixed-to
-Floating Rate Company Preferred
Securities are not likely to be treated as indebtedness
for
purposes of
the Regulation. As such,
WaMu Delaware intends to prohibit
the
acquisition and holding of
any Trust Security or
Fixed-
to-
Floating Rate Company Preferred Security or
any interest in a Trust Security or
Fixed-
to-
Floating
Rate Company Preferred Security by
or
on
behalf of
a Benefit Plan Investor ( as
defined below).
For the purposes of
the Regulation, the term "Benefit Plan Investor" includes
all employee
benefit plans, regardless of whether or
not they are subject to ERISA (such as,
for
example,
governmental plans), individual retirement accounts, Keogh Plans and other plans subject to
Section 4975 of
the Code, and entities whose underlying assets are deemed to include plan
assets by reason of
the investment in that entity by
Benefit Plan Investors, such as group trusts,
bank collective investment trusts, insurance company separate accounts, and certain insurance
company general accounts.
By acquiring a Trust Security or
Fixed-
to-
Floating Rate Company Preferred Security ( or any
interest therein), each purchaser and transferee
will
be deemed to represent, warrant and
covenant that, from the date of
acquisition throughout the period of
holding such Trust Security
or
Fixed-
to-
Floating Rate Company Preferred Security ( or
interest therein), it is not, and it is not
acquiring such Trust Security or
Fixed-
to-
Floating Rate Company Preferred Security ( or
interest
therein) with the assets of
a Benefit Plan Investor, except
for
an insurance company general
account that represents, warrants and covenants that, at
the time of
acquisition and throughout
the period it holds the securities, ( i) it is eligible
for
and meets the requirements of
the
Department of
Labor Prohibited Transaction Class Exemption 95-60, (
ii) less than 25% of
the
assets of
such general account are ( or
represent) assets of
a Benefit Plan Investor and (
iii) it is
not a person who has discretionary authority or
control with respect to the assets of WaMu
Delaware or
any person who provides investment advice
for
a fee (direct or
indirect) with
respect to such assets, or any affiliate of such a person and would not otherwise be excluded
under 29
C.
F.
R.
2510.3- 101 ( f) (1).
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RATINGSIt
is expected that the Trust Securities will be rated "Baa2" by Moody's Investor Services,
Inc. (" Moody's"), " BBB" by Standard & Poors Rating Services, a division of
the McGraw Hill
Companies, Inc. ("S&P") and" A-" by Fitch, Inc. (" Fitch"). The ratings of
the Trust Securities
are not recommendations to purchase, hold or
sell the Trust Securities, inasmuch as the ratings
do
no
t
comment as
to the
market price or
suitability
for
a particular purchaser. Nor do
the
ratings
described above address the likelihood that a holder of
Trust Securities will be able to sell such
securities. The ratings are based on current information furnished to S& P,
Moody's and Fitch by
WMI, WMB, the Company and WaMu Delaware and information obtained from other sources.
The ratings may be changed, suspended or
withdrawn at
any time as a result of
changes
in,
or
the unavailability
of, such information.
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PLAN OF DISTRIBUTION
The Company, WaMu Delaware, WMI and the Initial Purchasers have entered into a
purchase agreement with respect to the Trust Securities. Subject to certain conditions, each
Initial Purchaser has severally agreed to purchase the amount ( by
liquidation preference) of
Trust Securities indicated in the following table.
Initial Purchasers
Goldman, Sachs & Co. . .
Credit Suisse Securities (USA) LLC .
Morgan Stanley & Co. Incorporated .
Total .
Liquidation
Preference
of
Trust
Securities
$ 750,000,000
$ 250,000,000
$ 250,000,000
$1,250,000,000
The Initial Purchasers are committed to take and pay
for
all
of
the securities being offered
hereby, if any are taken. The initial offering price is set forth on the cover page of
this offering
circular. After the securities are released
for
sale, the Initial Purchasers may change the offering
price and other selling terms.
The securities offered hereby have not been and will not be registered under the Securities
Act. The Initial Purchasers have agreed that they will only offer or
sell the Trust Securities to
persons who are both "qualified institutional buyers" within the meaning of
Rule 144A under the
Securities Act and " qualified purchasers" within the meaning of
Section 2 ( a)
(51) under the
Investment Company Act in transactions meeting the requirements of
Rule 144A.
In connection with the Offering, the Initial Purchasers may purchase and sell securities in
the open market. These transactions may include short sales, stabilizing transactions and
purchases to cover positions created by short sales. Short sales involve the sale by the Initial
Purchasers of
a greater number of
securities than they are required to purchase in the Offering.
Stabilizing transactions consist of
certain bids or
purchases made
for
the purpose of
preventing
or
retarding a decline in the market price of
the securities while the Offering is in progress.
These activities by
the Initial Purchasers may stabilize, maintain or
otherwise affect the
market price of
the securities. As
a result, the price of
the securities may be higher than the price
that otherwise might exist in the open market. If these activities are commenced, they may be
discontinued by the Initial Purchasers at
any time. These transactions may be effected in the
over- the- counter market or
otherwise.
Each of
the Initial Purchasers has represented and agreed that:
( a)
It has not made or
will not make an
offer of
the securities being offered hereby to the
public in the United Kingdom within the meaning of
section 1028 of
the Financial
Services and Markets Act 2000 ( as
amended) (" FSMA") except to legal entities which
are authorized or
regulated to operate in the financial markets
or,
if not so authorized
or
regulated, whose corporate purpose is solely to invest in securities or otherwise in
circumstances which do
no
t
require
the
publication by the company of
a prospectus
pursuant to the Prospectus Rules of
the Financial Services Authority (" FSA");
( b)
It has only communicated or
caused to be communicated and will only communicate or
cause to be communicated an
invitation or
inducement to engage in investment activity
(within the meaning of
section 21
of
FSMA) to persons who have professional
experience in matters relating to investments falling within Article 19( 5)
of
the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005 or
in circumstances
in which section 21
of FSMA does not apply to the company; and
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( c)
It has complied with, and will comply with
all applicable provisions of FSMA with
respect to anything done by
it in relation to the Trust Securities
in,
from or
otherwise
involving the United Kingdom.
In relation to each Member State of
the European Economic Area which has implemented
the Prospectus Directive (each, a " Relevant Member State"), each Initial Purchaser has
represented and agreed that with effect from and including the date on which the Prospectus
Directive is implemented in that Relevant Member State (the " Relevant Implementation Date") it
has not made and will not make an offer of
the securities being offered hereby to the public in
that Relevant Member State prior to the publication of
a prospectus in relation to the securities
which has been approved by the competent authority in that Relevant Member State
or,
where
appropriate, approved in another Relevant Member State and notified to the competent authority
in that Relevant Member State,all
in accordance with the Prospectus Directive, except that it
may, with effect from and including the Relevant Implementation Date, make an offer of
securities
to the public in that Relevant Member State at
any time:
( a)
to legal entities which are authorized or
regulated to operate in the financial markets
or,
if not so authorized or
regulated, whose corporate purpose is solely to invest in
securities;
( b)
to any legal entity which has two or
more of
( i) an average of
at
least 250 employees
during the last financial year; (
ii) a total balance sheet of more than €43,000,000; and
(
iii) an annual net turnover of more than €50,000,000, as shown in its last annual or
consolidated accounts; or
( c)
in any other circumstances which do not require the publication by
the Company of
a
prospectus pursuant to Article 3 of
the Prospectus Directive.
For the purposes of
this provision, the expression an
" offer of
securities to the public" in
relation to any securities in any Relevant Member State means the communication in any form
and by any means of
sufficient information on the terms of
the offer and the securities to be
offered so
as
to enable an investor to decide to purchase or
subscribe the securities, as
the
same may be varied in that Relevant Member State by any measure implementing the Prospectus
Directive in that Relevant Member State and the expression Prospectus Directive means Directive
2003/ 71 IEC and includes any relevant implementing measure in each Relevant Member State.
The securities offered hereby may not be offered or
sold by means of
any document other
than to persons whose ordinary business is to buy or
sell shares or
debentures, whether as
principal or
agent, or
in circumstances which do not constitute an offer to the public within the
meaning of
the Companies Ordinance (Cap. 32) of
Hong Kong, and no advertisement, invitation
or
document relating to the shares may be issued, whether in Hong Kong or
elsewhere, which is
directed
at,
or
the contents of
which are likely to be accessed or
read by, the public in Hong
Kong (except if permitted to do
so under the securities laws of
Hong Kong) other than with
respect to securities which are or
are intended to be disposed of
only to persons outside Hong
Kong or
only to " professional investors" within the meaning of
the Securities and Futures
Ordinance (Cap. 571) of
Hong Kong and any rules made thereunder.
This offering circular has not been registered as a prospectus with the Monetary Authority
of
Singapore. Accordingly, this offering circular and any other document or
material in connection
with the offer or
sale, or
invitation
for
subscription or
purchase of
the securities may not be
circulated or
distributed, nor may the securities be offered or
sold, or
be made the subject of
an
invitation
for
subscription or
purchase, whether directly or
indirectly, to persons in Singapore
other than ( i) to an
institutional investor under Section 274 of
the Securities and Futures Act,
Chapter 289 of
Singapore (the " SFA"), (
ii)
to a relevant person, or
any person pursuant to
Section 275(1A), and in accordance with the conditions, specified in Section 275 of
the SFA or
102
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00115
(iii) otherwise pursuant
to,
and in accordance with the conditions
of, any other applicable
provision of
the SFA.
Where the securities offered hereby are subscribed or purchased under Section 275 by a
relevant person which
is:
( i) a corporation (which is not an accredited investor) the sole
business of
which is to hold investments and the entire share capital of
which is owned by one
or
more individuals, each of whom is an accredited investor; or
(
ii) a trust (where the trustee is
not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an
accredited investor, shares, debentures and units of
shares and debentures of
that corporation
or
the beneficiaries' rights and interest in that trust will not be transferable
for
6 months after that
corporation or
that trust has acquired the shares under Section 275 except: ( A)
to an
institutional investor under Section 274 of
the SFA or
to a relevant person, or
any person
pursuant to Section 275 (1A), and in accordance with the conditions, specified in Section 275 of
the SFA; ( 8)
where no consideration is given
for
the transfer; or
( C)
by
operation of
law.
The securities offered hereby have not been and will not be registered under the Securities
and Exchange Law of
Japan (the "Japan Securities and Exchange Law") and each Initial
Purchaser has agreed that it will not offer or
sell any securities, directly or
indirectly, in Japan or
to,
or
for
the benefit
of,
any resident of
Japan (which term as
used herein means any person
resident in Japan, including any corporation or
other entity organized under the laws of
Japan),
or
to others
for
re-
offering or
resale, directly or
indirectly, in Japan or
to a resident of
Japan,
except pursuant to an exemption from the registration requirements
of, and otherwise in
compliance with, the Securities and Exchange Law and any other applicable laws, regulations
and ministerial guidelines of Japan.
WMI, the Company and WaMu Delaware have agreed in the purchase agreement, subject to
certain exceptions, that
for
a period of
180 days after the date of
this offering circular, neither
they, nor any of
their subsidiaries or
other affiliates over which they exercise management or
voting control, nor any person acting on
their behalf will, without the prior written consent of
Goldman, Sachs & Co., offer, sell, contract to sell or
otherwise dispose of
any securities that are
substantially similar to the Trust Securities.
WMI and the Company have agreed to indemnify the Initial Purchasers against certain
liabilities, including liabilities under the Securities Act.
Certain of
the
Initial Purchasers and their respective affiliates have, from time to time,
performed, and may in the future perform, various financial advisory and investment banking
services
for
the company,
for
which they received or
will receive customary fees and expenses.
103
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00116
VALIDITY OF SECURITIES
The validity of
the Trust Securities will be passed upon
for
WMI and the Initial Purchasers
by Richards, Layton & Finger, P.
A., Wilmington, Delaware. The validity of
the Fixed-
to-
Floating
Rate Company Preferred Securities
will
be passed upon
for
the Company by Richards, Layton &
Finger, P.
A.,
special Delaware counsel
for
the Company,
for
WMI by
Mayer, Brown, Rowe & Maw
LLP, New York, New York, and
for
the Initial Purchasers by
Sullivan & Cromwell LLP, New York,
New York. The validity of
the Fixed-
to-
Floating Rate Depositary Shares and of
the Fixed-
to-
Floating Rate WMI Preferred Stock will be passed upon
for
WMI by
Heller Ehrman LLP, Seattle,
Washington, and by Mayer, Brown, Rowe & Maw LLP, and
for
the Initial Purchasers by
Sullivan & Cromwell LLP. Mayer, Brown, Rowe & Maw LLP and Sullivan & Cromwell LLP will rely
upon the opinion of
Richards, Layton & Finger, P.
A.,
as
to matters of
Delaware law, and upon the
opinion of
Heller Ehrman LLP as
to matters of
Washington law.
104
CONFIDENTIAL
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ADDITIONAL INFORMATION
Independent Accountants
The independent registered public accountants of
the Company will be
Deloitte & Touche
LLP. Deloitte & Touche LLP are also the independent registered public accountants
for
WMI and
WMB.
No
Material Adverse Change
Except as
disclosed in this offering circular, there has been no adverse change in the
financial position of
the Company, WaMu Delaware, WMB or WMI since December 31, 2005, or
their respective dates of
establishment (which was February 3, 2006 in the case of
the Company
and February 23, 2006 in the case of WaMu Delaware), that would be deemed material in the
context of
the issue and sale of
the Trust Securities in this Offering.
Legal Proceedings
Neither the Company nor WaMu Delaware are involved in any litigation, arbitration or
administrative proceeding relating to claims or
amounts that are material in the context of
the
issue and sale of
the Trust Securities or
the Fixed- to-Floating Rate Company Preferred Securities
to which the Company or WaMu Delaware are a party, nor to the best of
the Company's or
WaMu Delaware's knowledge, is there any threatened litigation, arbitration or
administrative
proceedings relating to claims or
amounts that are material in the context of
the issue and sale
of
the Trust Securities or
the Fixed-
to-
Floating Rate Company Preferred Securities that would in
either case jeopardize the Company's or
WaMu Delaware's ability to discharge the Company's or
WaMu Delaware's respective obligations in respect of
the issue and sale of
the Trust Securities
or the Fixed-
to-
Floating Rate Company Preferred Securities.
Neither the Company nor the Asset Trust is the subject of any litigation. None of the
Company, WMI or WMB is currently involved in or, to WMB's knowledge, currently threatened
with, any material litigation with respect to the
assets included in the
Asset Trust's portfolio,
other than routine litigation arising in the ordinary course of
business. Based on information
currently available, advice of
counsel, available insurance coverage and established reserves,
WMB believes that the eventual outcome of
the actions with respect to the assets included in the
Asset Trust's portfolio will not, in the aggregate, have a material adverse effect on the
Company's consolidated financial position or
results of
operations. However, in the event of
unexpected future developments, it is possible that the ultimate resolution of
those matters, ifunfavorable, may b
e material to the Company's results of
operations
for
any particular period.
WMB, the Company, the Asset Trust, WaMu Cayman and WaMu Delaware have not been
named as defendants in any of
the following lawsuits and, on that basis they do not expect such
lawsuits to materially affect their respective operations or
financial results.
South Ferry L.
P.
# 2 v.
Killinger et
al., No. CV04- 1599C ( W.
O.
Wa., Filed Jul. 19,2004) (the
" Securities Action"). This class action lawsuit is currently pending against WMI and certain of
its
senior executives in the U.
S.
District Court, Western Division of Washington. On behalf of a
putative class of
purchasers of WMI securities from April 15, 2003 through June 28, 2004, lead
plaintiffs allege that in various public statements the defendants purportedly made misrepresenta-
tions and failed to disclose material facts concerning, among other things, alleged internal
systems problems and hedging issues.
The defendants moved to dismiss the Securities Action on May 17, 2005. After briefing, but
without oral argument, the Court on November 17, 2005 denied the motion in principal part;
however, the Court dismissed the claims against certain of
the individual defendants, dismissed
claims pleaded on behalf of
sellers of
put options on WMI stock, and concluded that the plaintiffs
105
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could not rely on supposed violations of
generally accepted accounting principles to support their
claims. The remaining defendants subsequently moved
for
reconsideration
or,
in the alternative,
certification of
the opinion
for
interlocutory appeal to the United States Court of Appeals
for
the
Ninth Circuit. The District Court denied the motion
for
reconsideration, but the motion
for
certification remains pending.
Lee Family Investments, by and through
its Trustee W.
B.
Lee, Derivatively and on behalf of
Nominal Defendant Washington Mutual, Inc. v.
Killinger et
ai, No. CV05- 2121C ( W.
O.
Wa., Filed
Nov. 29, 2005) (the "Derivative Action"). On November 29, 2005,12 days after the Court denied
the motion to dismiss the Securities Action, a separate plaintiff filed in Washington State Superior
Court a derivative shareholder lawsuit purportedly asserting claims
for
the benefit of
WMI. The
defendants include those individuals remaining as
defendants in the Securities Action, as
well as
those of
WMI's current independent directors who were directors at
any time from April 15, 2003
through June 2004. The allegations in the Derivative Action mirror those in the Securities Action,
but seek relief based on claims that the independent director defendants failed to take action to
respond to the misrepresentations alleged in the Securities Action and that the filing of
that
action has caused WMI to expend sums to defend itself and the individual defendants and to
conduct internal investigations related to the underlying claims. The defendants have not yet
responded to the complaint in the Derivative Action.
Governing Law
The LLC Agreement, the Trust Agreement, the Trust Securities and the Fixed-
to-
Floating
Rate Company Preferred Securities will be governed by, and construed in accordance with, the
laws of
the State of
Delaware. The Fixed-
to-
Floating Rate WMI Preferred Stock will be governed
by and construed in accordance with the laws of
the State of
Washington. The Fixed-
to-
Floating
Rate Depositary Shares will be governed by, and construed in accordance with, the laws of
the
State of New York.
106
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INDEX OF TERMS
3 ( c)
( 7)
Representations .
3-
Month USD L1BOR .
Additional Amounts .
Additional Assets .
Additional Tax Event .
Additional Taxes .
Administrative Services
Agreement .
Advanced Consumer Lending
System or
ACLS .
alternative services .
Asset Documentation .
Asset Portfolio .
Asset Subsidiary .
Asset Tax Opinion .
Asset Trust .
AVM .
back- end ratio .
Bankruptcy Event .
Benefit Plan Investor .
Business Combination .
Business Day .
CACS .
Class A Asset Trust
Certificate .
Class R Asset Trust
Certificate .
Clearstream .
. Clearstream International .
Clearstream Participants .
Code .
Code of
Ethics .
Company .
Company Common Securities ..
Company Preferred
Securities .
Company's Portfolio .
Comparable Treasury Issue ..
Comparable Treasury Price ..
Conditional Exchange .
core capital .
Covered Debt .
Credit Score .
Custodian .
Custody Agreement .
Cut-Off Date .
debt- to
-
income ratio .
Delaware Trustee .
Deposit Agreement .
Depositary .
Dividend Payment Date .
Dividend Period .
DTC .
DTC Participants .
vii
69
75
38
75
75
41
53
50
38
39
39
39
i, 44
50
49
42
iii, 99
83
59, 68, 79
53
45
45
91
91
92
iii, 99
51
cover, 1,36
4,
36
1
25
71
71
63
31
62
47
56
56
45
49
35
85
64
cover, 59, 68, 79
59, 68, 79
89
vii,
90
107
Eligible Assets .
Eligible Investments .
employee benefit plan .
ERISA .
Euroclear .
Euroclear Operator .
Euroclear Participants .
Euroclear Terms and
Conditions .
Exchange Agreement. .
Exchange Event .
FDiC .
Federal Reserve .
FFO .
Fitch .
Fixed Rate Company
Preferred Securities .
Fixed Rate Depositary Shares ..
Fixed Rate Substitute
Preferred Stock .
Fixed Rate Successor
Depositary Share .
Fixed Rate WMI Preferred
Stock .
Fixed- to-
Floating Rate
Company Preferred
Securities .
Fixed- to
-
Floating Rate
Depositary Shares .
Fixed- to
-
Floating Rate
Substitute Preferred Stock
Fixed-
to
-
Floating Rate
Successor Depositary
Share .
Fixed- to
-
Floating Rate WMI
Preferred Stock .
Foreign Holder .
FSA .
FSMA .
GAAP .
Global Security .
HELs .
Independent Investment
Banker .
Independent Manager .
Indirect Participants .
Investment Company Act
.
Investment Company Act
Event .
IRS .
Japan Securities and
Exchange Law .
Junior Equity Securities .
L1BOR Business Day .
38
39
iii
iii, 99
92
92
92
92
64
11,63
xii,
57
57
10, 68
100
1
88
84
84
88
cover, 1,67
11,79,85
84
84
2,
79
94
101
101xii
89
5
71
4,41
90
cover, ix,
1
71
93
103
70
69
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00120
L1BOR Determination Date .
like amount .
LLC Act
.
LLC Agreement .
Loan Documents .
Marion .
Moody's .
New Assets .
New Reporting Rules .
Nominee .
Offering .
OTS .
Parity Equity Securities .
Paying Agent( s)
.
Permitted Investments .
plan .
Plan .
plan assets .
Pooling and Servicing
Agreement .
Primary Treasury Dealer .
Property Trustee .
PSA Delaware Trustee .
qualified institutional
buyer ( s)
.
qualified purchaser ( s)
.
Qualifying Interests .
Rating Agencies .
Rating Agency Condition .
Reference Treasury Dealer ..
Reference Treasury Dealer
Quotations .
Registrar .
Regulation .
Regulatory Capital Event .
Relevant Implementation Date
Relevant Member State .
REMIC .
Reminder Notice .
Replacement Capital
Covenant .
Replacement Covenant
Covered Securities .
69
2
36
36
56
21
100
67
97
65, 89
2
cover, 2,
30
67
65
39
iii
99
iii, 99
5
71
35
5,
44
iii, 1
iii, 1
23
40
41
71
71
65
99
71
102
102
5,
97
vii
9,61
61
108
S&P .
SEC .
Section 3 ( c)
( 7)
.
Securities Act .
Securities Action .
Senior Equity Securities .
Series A-
1 WaMu Cayman
Preferred Securities .
Series A-
2 WaMu Cayman
Preferred Securities .
Servicer .
Servicer Indemnified Parties
SFA .
SUCCESS .
Successor Entity .
supplementary capital .
Tax Event .
Tax- Exempt U.
S.
Holder .
Thrift Financial Report( s)
.
total capital .
Transfer Agent. .
Treasury Rate .
Trust Act .
Trust Agreement .
Trust Securities .
Trustee .
UBTI .
University Street .
U.
S.
Holder .
US L1BOR Telerate
Page 3750 .
U.
S.
Person .
Voting Parity Stock .
WaMu Cayman .
WaMu Cayman Preferred
Securities .
WaMu Delaware .
WMB .
WMI .
WMI Group .
WMI's Board of
Directors .
WM I Parity Stock .
WTC .
100
xi
vi
cover,
ix,
1
105
12
1
44
54
102
50
84
31
72
96
xii
31
65
72
35
vi,
35
cover, 1,59
44
96
i, 4,
36
93
69
62
82
i, 1
1
cover, 1,
35
i, 1,30
cover, 1
1
28
79
65
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00121
No
dealer, salesperson or
other person
is authorized to give any information or
to
represent anything not contained in this offer-
ing circular. You must not rely on any unau-
thorized information or
representations. This
offering circular is an offer to sell only the
notes offered hereby, but only under circum-
stances and in jurisdictions where it is lawful
to do
so. The information contained in this
offering circular is current only as
of
its date.
TABLE OF CONTENTS
Page
Notice to Investors
iii
Special Note Regarding Forward-
Looking Statements x
Where You Can Find More Information xi
Index of
Terms. . . . . . . . . . . . . . . . . . . . . .
xii
Offering Circular Summary . . . . . . . . . . . 1
Risk Factors
....
. . . . . . . . . . . . . . . . . . . . 17
Certain Information Concerning WMB 30
Use of
Proceeds 34
WaMu Delaware. . . . . . . . . . . . . . . . . . . . . 35
The Company. . . . . . . . . . . . . . . . . . . . . . . 36
The Asset Trust. . . . . . . . . . . . . . . . . . . . . 44
WMI................................ 57
Certain Relationships and Related
Party Transactions 58
Description of
the Trust Securities. . . . 59
Description of
the Fixed-
to-
Floating
Rate Company Preferred Securities 67
Description of
Other Company
Securities. . . . . . . . . . . . . . . . . . . . . . . . . 77
Description of
the Fixed-
to-
Floating
Rate WMI Preferred Stock. . . . . . . . . 79
Description of
the Fixed-
to-
Floating
Rate Depositary Shares. . . . . . . . . . . . 85
Description of the Other WMI Capital
Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Book- Entry Issuance 89
Certain U.
S.
Federal Income Tax
Considerations . . . . . . . . . . . . . . . . . . . . 93
ERISA Considerations. . . . . . . . . . . . . . . 99
Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Plan of
Distribution . . . . . . . . . . . . . . . . . . 101
Validity of
Securities. . . . . . . . . . . . . . . . . 104
Additional Information. . . .. 105
Index of
Terms..... . ..
. ..
..
. .. 107
$1,250,000,000
Washington Mutual
Preferred Funding
Trust I
Fixed-
to-
Floating Rate Perpetual
Non-cumulative Trust
Securities Automatically
Exchangeable in Specified
Circumstances into Depositary
Shares representing Preferred
Stock of
Washington Mutual, Inc.
Washington
Mutual
Goldman, Sachs & Co.Sole Global Coordinator and
Sole Structuring Coordinator
Credit Suisse
Morgan Stanley
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002048.00122
Date.
(TO: The Registrar o
f
Companies
Crighton Building
GeorgeTown
WASHINGTON MUTUAL PREFERRED FUNDING (CAYMAN) I LTD.
(
the " Company")
TAKE NOTICE that the
following resolution was adopted on
7th March 2006 by
written
resolution of
the
Sole Shareholder of
the
Company:
" IT IS HEREBY RESOLVED as a Special Resolution that
the
form of
restated
Memorandum and Articles of
Association of
the
Company as
annexed hereto be
and
is hereby approved and adopted with immediate effect in substitution for
the
original
Memorandum and Articles of
Association of
the
Company as
previously filed with
the Registrar of
Companies. It
M C rporate Services Limited
by
Nick Bullmore
Dated tIlls 8th day of
March 2006.
CERTIFIED TO
BE A TRUE AND CORRECT COPY
SlG. --~~~___ ----
NEVDIS TAVERAS
AsstRegllltrar
(\
J\
CVf""<... J/\ L£ ClLJ
HSH/ 6J
65251 J 6027 J6
/
v 1
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00001
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00002
,--
(
THE COMP ANTES LAW (2004 REVISION)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
RESTATED MEMORANDUM AND ARTICLES
OF
ASSOCIATION
OF
WASHINGTON MUTUAL PREFERRED FUNDING (CAYMAN) I LTD.
(adopted by
Special Resolution on 7 March, 2006)
NPBf616525fl600336fv2
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00003
THE COMPANIES LAW (2004 REVISION)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
RESTATED MEMORANDUM OF ASSOCIATION
OF
WASIDNGTON MUTUAL PREFERRED FUNDING (CAYMAN) I LTD.
(adopted by
Special Resolution on 7 March, 2006)
The name of
the Company is Washington Mutual Preferred Funding (Cayman) I
Ltd.
2 The registered office of
the Company shall be
at
the
offices of M&C Corporate
Services Limited, PO Box 309GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands, or
at
such other place as
the
Directors
may from time to time decide.
3 The objects
for
which
the Company is established
for
the
following:
( a)
to issue Ordinary Shares to the Cayman Trust;
( b)
to issue Preferred Securities and sell
the
Preferred Securities to the
Purchasers pursuant to Purchase Agreement;
( c)
to apply
the
proceeds of
sale of
the
Preferred Securities to acquire a like
amount ofWaMu LLC Preferred Securities;
( d)
to enter into, exercise its
rights under, and perform its
obligations under,
the
Administration Agreement, the
Exchange Agreement, the
Expenses
Agreement, the Purchase Agreement,
the
Agency Agreement and
the
WaMu LLC Agreement;
( e)
( f) to take
all
other actions that
the
Directors consider nece
in connection with or
incidental to the
matters contemp .
3(
a)-( d)
above, inclusive. a:
The Company shall
not
engage in any activities other than those
NPB/ 616525/ 1600336/ v 3
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00004
( 4
2
The liability of
each Member is limited to the
amount from time to time unpaid on
such Member's shares.
SIG.
5 The authorized share capital of
the Company is US$ 83,500 divided into ( i) 1,000
Ordinary Shares, par value $1.00
per
Share, (
ii) 7,500 Series A-
I Preferred
Securities,
pa
r
value $1.00
pe
r
Share, and (
iii) 75,000 Series A-
2 Preferred
Securities, pa
rvalue $1.00 p
er
Share.
6 The Company has
power to register by
way of
continuation as
a body corporate
limited by
shares under the
laws of
any jurisdiction outside the
Cayman Islands
and to be
deregistered in the Cayman Islands.
7 Terms that
are
not
defined in this Memorandum of
Association but
are used
herein and are defined in the
Articles of
Association of
the
company bear the
same meaning as
those given in the
Articles of
Association of
the
Company.
CERTIFIED TO BEA TRUE AND CORRECT COpy
-~
NEYDIS TAVERAS
Asst. Rrgislnr of
C6lIIPilits
Date. ~ 1b
lli{ LyC~ ,;)
00
6.
NPB/ 616525/ 1600336/ v2
CONFIDENTIAL
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CONFIDENTIAL
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(
THE COMPANIES LAW (2004 REVISION)
OF
THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
RESTATED ARTICLES OF ASSOCIATION
OF
WASIDNGTON MUTUAL PREFERRED FUNDING (CAYMAN) I LTD.
(adopted by Special Resolution on 7 March, 2006)
INTERPRETATION
1 In these Articles Table A in the
First Schedule to the Statute does
not
apply and,
unless there is something in the
subject or
context inconsistent therewith:
" Accountholder"
" Administration
Agreement"
" Administrator"
" Agency Agreement"
" Articles"
" Auditor"
" Bankruptcy Event"
NPB/ 616525/ 1600336/ v3
means any person designated as
such by
the
Registrar.
means
the
Administration Agreement dated March 6,
2006
( as
amended, modified or
supplemented from time-
to-
time),
between the Company andth
eAdministrator.
means
the
Person identified as
such in the
Administration
Agreement. The initial Administrator shall be Maples
Finance Limited, a licensed trust company incorporated
under the laws of
the Cayman Islands.
means the Agency Agreement, to be
dated as
of
March 7,
2006 ( as
amended, modified or
supplemented from time to
time), among the
Company, WaMu LLC, Wilmington
Trust (Cayman), Ltd., as
the
initial Securities Registrar,
Transfer Agent and Paying Agent and
lP.
Morgan Bank
Luxembourg S.
A.,
as Luxembourg Paying Agent.
means these articles of
association of
the
Company.
means
the
Person
for
the
time being performing
the
duties of
auditor of
the Company ( if any).
means
the
Company, WaMu LLC or
( i) becomes insolvent or
is unable to p
admits in writing
its
inability genera
they become due, (
ii) makes a.
arrangement or
composition with 0
creditors, or
(
iii) institutes or
has •
tit
ted
against it
proceeding seeking a judgment of
ins
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00007
" Book Entry Preferred
Securities"
" Book- Entry Transfer"
" Business Day"
"Cayman Trust"
"Clearing Agency"
"Clearing Agency
Participant"
" Clearstream"
"Company"
"Conditional Exchange"
" Consent"
NPB/ 616525/ 1600336/ v2
2
or
any other relief under any bankruptcy or
insolvency law
or
other similar law affecting creditors' rights, or
a petition
is presented
for
its winding- up
or
liquidation.
means Preferred Securities
the
ownership and transfer of
which shall be made through Book- Entry Transfers by
a
Clearing Agency.
means transfer or
delivery of
beneficial interests in Book-
Entry Preferred Securities in accordance with
the
rules and
procedures of
the
applicable Clearing Agency (including, in
the
case of
DTC if it is the
Clearing Agency, book- entry
transfers and deliveries through DTC's DepositlWithdrawal
at
Custodian DWAC system).
means any day other than a Saturday, Sunday or
any other
day on which banks in New York, New York, Seattle,
Washington or
Georgetown, Grand Cayman,
are generally
required or
authorized by
law to be
closed.
means the trust organized under the laws of
the Cayman
Islands
for
the
purpose of
holding
the
Ordinary Shares,
existing pursuant to a Declaration of
Trust, dated March 6,
2006 ( as
amended, modified orsupplemented from time to
time), and having Maples Finance Limited as
its
initial
trustee.
means an
organization whose principal business is the
clearance and settlement of
securities transactions,
including
the
transfer of
record ownership and
the
safeguarding of
securities and funds related thereto. DTC
will be
the initial Clearing Agency.
means a broker, dealer, bank, other financial institution or
other Person (including Euroclear and Clearstream)
for
whom from time to time a Clearing Agency effects book-
entry transfers and pledges of
securities deposited with
the
Clearing Agency.
means Clearstream banking, a societe anonyme.
means
the
above named company.
has
the
meaning specified in Article 9(
f).
means ( i) as
to the
Independent Director the
written consent
of
the
Independent Director, and ( ii)
as
to the
Directors as
a
whole, the
act
of
the
Directors ( x)
by
their unanimous
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00008
(
" Deposit Agreement"
" Directors"
" dividend"
" Dividend Amount"
" Dividend Payment
Date"
" Dividend Period"
" DTC"
" Electronic Record"
" Euroclear"
" Exchange Agreement"
An
" Exchange Event"
NPB/ 616525/ 1600336/
v2
3
written consent or
( y)
by
resolution at
a meeting duly called
and held adopted in accordance with these Articles and
the
Statute.
means
the
Deposit Agreement, to be dated as
of
March 7,
2006 ( as
amended or
supplemented from time-
to-
time),
among ( i) WMI, (
ii) Mellon Investor Services LLC, as
shares depositary, (
iii) Mellon Investor Services LLC, as
registrar, and ( iv)
the
holders from time- to-
time of
the
WMI Depositary Receipts.
means
the
directors
for
the
time being of
the
Company.
includes an
interim dividend.
means, as
to a Preferred Security and a Dividend Payment
Date,
the
amount of
dividends received or
receivable by
the
Company on a like amount of WaMu LLC Preferred
Securities on such Dividend Payment Date.
means, with respect to the
Preferred Securities, each
Business Day on which
the Company or
its paying agent
receives payment of
dividends on WaMu LLC Preferred
Securities; provided, however, that, if the Company or
its
paying agent receives payment of
dividends on WaMu LLC
Preferred Securities after 2:
00
P.
M., New York time, on a
Business Day, then
the
related Dividend Payment Date
shall be
the
next succeeding Business Day.
means each period from and including a Dividend Payment
Date ( or
the Issue Date, if earlier) to but
not including
the
next succeeding Dividend Payment Date.
means The Depositary Trust Company.
has the same meaning as
in the Electronic Transactions Law
(2003 Revision).
means Euroclear Bank, S.
A./
N.
B,
as
operator of
the
Euroclear System.
means
the
Exchange Agreement, to be
dated March 7,
2006
( as amended or
supplemented from time to time), among
WMI,
the
Company, WaMu Delaware and Mellon Investor
Services LLC, as
depositary.
will occur when:
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00009
(
" ExpensesAgreement"
" Fixed Rate Substitute
Preferred Stock"
" Fixed Rate WMIPreferred Stock"
"Fixed- to-
Floating Rate
Substitute Preferred
Stock"
"Fixed- to-
Floating Rate
WMI Preferred Stock"
" Global Securities"
" bolder"
" Independent Director"
" Independent Manager"
NPB/ 616525! I 600336/ v2
4
( a) WMB becomes undercapitalized under
the
OTS'
"prompt corrective action" regulations at
12
C.
F.
R.
Part 565 (and including any successor regulations);
( b) WMB is placed into conservatorship or
receivership;
or
( c)
the
OTS, in its
sole discretion, anticipates WMBbecoming undercapitalized in th
e
near term or
takes a
supervisory action that limits
the
payment of
dividends by WMB and in connection therewith
directs a Conditional Exchange.
means
the
Expenses Agreement dated February 28,2006 ( as
amended, modified or
supplemented from time to time),
between
the Company and WMB.
means a class or
series of
equity securities of
a Successor
Entity havingth
epreferences, limitations and relative rights
in its
articles or
certificate of
incorporation or
other
constituent documents that are substantially similar to those
set
forth in the
articles of
amendment establishing the
Fixed
Rate WMI Preferred Stock.
WMI's Series J Perpetual Non- cumulative Fixed Rate
Preferred Stock, no
pa
r
value and liquidation preference
$1,000,000
pe
r
share.
means a class or
series of
equity securities of
a Successor
Entity having the
preferences, limitations and relative rights
in its
articles or
certificate of
incorporation or
other
constituent documents that are substantially similar to those
se
t
forth in the
articles of
amendment establishing
the
Fixed- to-
Floating Rate WMI Preferred Stock.
WMI's Series I Perpetual Non- cumulative Fixed-
to-
Floating Rate Preferred Stock, no
par
value, and liquidation
preference of$ I,OOO, OOOper share.
has
the
meaning specified in Article 15.
means a Member.
has
the
meaning specified in Article
87.
has
the
meaning specified in Article 87.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00010
( " Issue Date"
" Issue Price"
" like amount"
NPB/ 616525/ l600336/ v2
5
means, with respect to a Series,
the
date of
first issue of
the
Preferred Securities of
such Series.
means:
( a)
in the
case ofthe Series A-
I Preferred Securities,
$98,000 pe
r
Share; and
( b)
in the
case of
the
Series A-
2 Preferred Securities,
$9,800 pe
r
Share.
means:
( a)
when used with respect to dividends, redemption
price or
other financial entitlements of
one or
more
Series A-
I Preferred Securities, a number ofWaMu
LLC Preferred Securities having the
same aggregate
liquidation preference as
such Series A-
I Preferred
Securities ( i.~., 100 WaMu LLC Preferred Securities
for
each Series A-
I Preferred Security);
( b)
when used with respect to dividends, redemption price
or
other financial entitlements of
one or
more Series
A-
2 Preferred Securities, a number of
WaMu LLC
Preferred Securities having the
same aggregate
liquidation preference as
such Series A-
I Preferred
Securities (i.~.,
ten WaMu LLC Preferred Securities
for
each Series A-
2 Preferred Security);
( c) when used in connection with a Conditional Exchange
of
one or
more Series A-
I Preferred Securities
for
WMI Depositary Shares, a number of WMI
Depositary Shares representing Fixed Rate WMIPreferred Stock having a
n
aggregate liquidation
preference equal to the
aggregate liquidation
preference of
such Series A-
I Preferred Securities
(!.~.,
for
each Series A-
I Preferred Security, 100 WMIDepositary Shares); and
( d)
when used in connection with a Conditional Exchange
of
one or
more Series A-
2 Preferred Securities for
WMI Depositary Shares, a number of
WMIDepositary Shares representing Fixed Rate WMIPreferred Stock having
the
an
aggregate liquidation
preference equal to the
aggregate liquidation
preference of
such Series A-
2 Preferred Securities
(i.~.,
for
each Series A-
2 Preferred Security,
ten WMI
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00011
6
(..
Depositary Shares).
" Liquidation Preference" when used in connection with the
Series A-
I Preferred
Securities means $100,000 per Share and when used in
connection with
the
Series A-
2 Preferred Securities means
$10,000 per Share.
"Member" has
the
same meaning as
in the
Statute.
"Memorandum" means
the memorandum of
association of
the Company.
"Offering Circular" means the final Offering Circular, dated February 24, 2006,
relating to the
offer and sale of
the
Preferred Securities.
" Ordinary Directors" has
the
meaning specified in Article
87
.
"Ordinary Resolution" means a resolution passed by a simple majority of
the
Membersa
s,
being entitled to do
so
,
vote in Person
or,
where proxies
are allowed, by
proxy at
a general meeting,
and includes a unanimous written resolution. In computing
the
majority when a poll is demanded regard shall be
had to
the
number of
votes to which each Member is entitled by
the
Articles.
" Ordinary Share" an
ordinary share in the
capital of
the Company of
$1.00
par value and issued subject to and in accordance with
the
provisions of
the Statute and having
the
rights provided
for
Ordinary Shares under these Articles.
"Ordinary Shareholder" a registered holder of
an
Ordinary Share.
" OTS" means
the
United States Office of
Thrift Supervision or
any
successor United States Federal bank or
thrift regulatory
agency that is the
primary supervisory agency
for
WMB.
"Owner" means each Person who is the
beneficial owner of
Book-
Entry Preferred Securities as
reflected in the
records of
the
Clearing Agency
or,
if a Clearing Agency Participant is not
the
Owner, then as
reflected in the records of
a Person
maintaining an
account with such Clearing Agency
(directly or
indirectly, in accordance with
the
rules of
such
Clearing Agency).
" Paying Agent" means the Person identified as
such In the
Agency
Agreement.
" Person" means a legal Person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock
NPB/ 6 I652511 600336/ v2
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00012
(
" Preferred Securities"
" Preferred
Securityholder" or
" holder of
Preferred
Securities"
" Purchase Agreement"
" Purchasers"
" Redemption Date"
" Redemption Price"
" Register of
Members"
NPB/ 616525/ 1600336/ v2
7
company, company, limited liability company, trust,
unincorporated association, or
govemmient or
any agency or
political subdivision thereof, or
any other entity of
whatever nature.
means the Series A-
1 Preferred Securities and
the
Series
A-
2 Preferred Securities.
means a registered holder of
a Preferred Security.
means
the
Purchase Agreement, dated as
of
February
24,
2006 ( as
amended, modified or
supplemented from time to
time), among ( i) WMI, (
ii) WMB, (
iii) WaMu LLC,
(
iv) WaMu Delaware, ( v)
the Company and (
vi) Goldman,
Sachs & Co., as
representative of
the
Purchasers, pursuant
to which, among other things, at
the
Time of
Delivery ( x)
the
Purchasers designated therein will purchase newly-
issued Preferred Securities from
the Company and ( y)
the
Company will purchase
the WaMu LLC Preferred
Securities from WaMu LLC.
has
the
meaning specified in the
Purchase Agreement.
means, with respect to the
Preferred Securities, each
Business Day on which
the Company or
its paying agent
receives payment of
the
redemption price of WaMu LLC
Preferred Securities; provided, however, that, if the
Company or
its paying agent receives payment of
the
redemption price of
WaMu LLC Preferred Securities after
2:
00
P.
M., New York time, on
a Business Day, then
the
related Redemption Date shall be
the
next succeeding
Business Day.
means, as
to a Preferred Security and a Redemption Date,
the redemption price received or
receivable by
the
Company on a like amount of WaMu LLC Preferred
Securities (including, where applicable,
the
related
Additional Taxes ( as
defined in the WaMu LLC
Agreement), if any).
means
the
register maintained in accordance with
the
Statute
and includes (except where otherwise stated) any duplicate
Register of
Members.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00013
" Registered Office"
" Registrar"
" Regulation S Global
Security"
" Relevant Event"
" Rule I44A Global
Security"
" Seal"
" Securities Registrar"
" Series"
" Series A-
I Preferred
Securities"
" Series A-
2 Preferred
Securities"
" Share" and " Shares"
NPB/ 616525/ J 600336/ v2
8
means
the
registered office
for
the time being of
the
Company.
means
the
Person identified as such In the
Agency
Agreement.
has
the
meaning specified in Article 15.
means if ( a)
the
Clearing Agency notifies the
Company that
it is unwilling or
unable to continue as
depositary
for
such
Preferred Securities or
( b)
the Company, in its sole
discretion, determines that
the
Regulation S Global
Security or
Rule 144A Global Security, as
applicable, willbe
exchangeable
for
the
applicable Preferred Security in
registered certificated form.
has
the
meaning specified in Article
15
.
means
the common seal of
the Company and includes every
duplicate seal.
means
the
Person identified assuch in the
Agency
Agreement.
means a series of
Preferred Securities of
the Company
established in accordance with these Articles and the
Statute.
means the Series of
Shares designated in Article 5 as
the
Company's "7.25% Perpetual Non- cumulative Preferred
Securities, Series A-
I," issued subject to and in accordance
with
the
Statute and these Articles and having
the
rights,
preferences, powers and privileges provided
for
Series A-}
Preferred Securities under these Articles.
means
the
Series of
Shares designated in Article 5 as
the
Company's " 7.25% Perpetual Non- cumulative Preferred
Securities, Series A-
2," issued subject to and in accordance
with
the
Statute and these Articles and having
the
rights,
preferences, powers and privileges provided
for
Series A-
2
Preferred Securities under these Articles.
means a share or
shares in the Company and includes the
Preferred Securities and the
Ordinary Shares.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00014
( " Special Resolution"
" Statute"
" Successor Depositary
Share"
" Successor Entity"
"Time of
Delivery"
"Transfer Agent"
" vote"
" WaMu Delaware"
" WaMuLLC"
" WaMuLLC
Agreement"
"WaMuLLC
Designated Directors"
" WaMu LLC Preferred
Securities"
NPB/ 61652511600336/ v2
9
has
the
same meaning as
in the Statute, and includes a
unanimous written resolution.
means the
Companies Law (2004 Revision) of
the
Cayman
Islands.
means a depositary share substantially similar to a WMIDepositary Share representing a
n
interest in the
Fixed Rate
Substitute Preferred Stock.
means a corporation designated by
the
Board of
Directors
of WMI that ( i) is the
surviving, resulting or
receiving
corporation, as applicable, in any Business Combination,
( ii)
the
securities of
which are received in a Business
Combination by some or
all
holders of WMI voting shares
or
(
iii) that the Board of
Directors ofWMI determines to be
an
acquiror ofWMI in a Business Combination.
has
the
meaning specified in the
Purchase Agreement
means the
Person identified as
such in the
Agency
Agreement.
means, with respect to any security,
its issuer and
its holder,
the exercise of
any applicable voting, approval or
other
consensual rights, whether at
a meeting, by
poll or
by
a
written consent ( as provided by applicable law and
the
issuer's charter documents).
means Washington Mutual Preferred Funding Trust I, a
Delaware statutory trust having WaMu LLC as
depositor.
means Washington Mutual Preferred Funding LLC, a
Delaware limited liability company.
means the Amended and Restated Limited Liability
Company Agreement of WaMu LLC, to be
dated as
of
March 7,
2006 ( as
amended, modified or
supplemented
from time to time).
has
the
meaning specified in Article
87
.
means the
7.25% Perpetual Non-cumulative Preferred
Securities ofWaMu LLC, liquidation preference $1,000 pe
r
security and $750,000,000 in the
aggregate.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00015
( " WMB"
" WMI"
" WMI Depositary
Receipts"
"WMI Depositary
Shares"
10
means Washington Mutual Bank, FA, a federal savings
bank and a wholly-owned subsidiary ofWMI.
means Washington Mutual, Inc., a Washington corporation.
means receipts issued pursuant to the
Deposit Agreement
evidencing Depositary Shares.
means
the
depositary shares issuable upon a Conditional
Exchange pursuant to the
Deposit Agreement, each
representing a 1/
100th interest in one Fixed Rate WMIPreferred Stock.
2 In the
Articles:
2.1 words importing
the
singular number include
the
plural number and
vice-versa;
2.2 words importing
the
masculine gender include
the
feminine gender;
2.3 words importing Persons include corporations;
2.4 "written" and " in writing" include
all modes of
representing or
reproducing words in visible form, including in the
form of
an
Electronic
Record;
2.5 references to provisions of
any law or
regulation shall be
construed as
references to those provisions as amended, modified,
re-
enacted or
replaced from time to time;
2.6 any phrase introduced by
the terms " including", " include", " in particular"
or
any similar expression shall be
construed as
illustrative and shall not
limit
the
sense of
the words preceding those terms;
2.7 headings
are inserted
for
reference only and shall be
ignored in construing
these Articles; and
2.8 in these Articles Section 8 of
the
Electronic Transactions Law (2003
Revision) shall
no
t
apply.
COMMENCEMENT OF
BUSINESS
3 The business of
the Company may be commenced as
soon after incorporation as
the
Directors shall see
fit.
4 The Directors may pay,
out
of
the capital or
any other monies of
the
Company,
all
expenses incurred in or
about
the
formation and establishment of
the Company,
including
the
expenses of
registration.
SHARE CAPITAL
5 The authorized share capital of
the Company is ( i) 1,000 Ordinary Shares,
pa
r
value $1.00 per Share, (
ii) 7,500 "7.25% Perpetual Non-cumulative Preferred
Securities, Series A-
I",
par
value $1.00 per Share and liquidation preference
NPB/ 6165251l600336/ v2
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00016
6
11
$100,000 per Share, and (
iii) 75,000 " 7.25% Perpetual Non- cumulative Preferred
Securities, Series A-
2," par value $1.00 per Share and liquidation preference
$10,000
pe
r
Share. The Company shall
no
t
issue Shares other than Ordinary
Shares and Preferred Securities. Series A-
I Preferred Securities in addition to
those issued pursuant to Article 8 may be
issued only in connection with an
exchange of
an
interest in the
Regulation S Global Security representing
the
Series A-
2 Preferred Securities for
an
interest in the
Rule 144A Global Security
representingth
ebeneficial interests in the Series A
-
I Preferred Securities in
accordance with these Articles and
the
Agency Agreement; Series A-
2 Preferred
Securities in addition to those issued pursuant to Article 8 may be issued only in
connection with an exchange of
an
interest in the
Rule 144A Global Security
representing the beneficial interests in the
Series A-
I Preferred Securities
for
an
interest in the
Regulation S Global Security representing the
Series A-
2 Preferred
Securities in accordance with these Articles and the Agency Agreement; and
the
aggregate liquidation preference of
the
Preferred Securities at
any time
outstanding may not exceed $750,000,000.
The Company shall not issue Shares to bearer.
ISSUE OF ORDINARY SHARES
7 For so long as any Preferred Securities
are
outstanding, Ordinary Shares may only
be
issued to or
registered in the
name of
the
trustee of
Cayman Trust, at
such
price( s)
and on
such date( s)
as
may be
determined by
the
Directors. From and
after the
first date on
which the
Preferred Securities after their initial issuance
have been redeemed in full, Ordinary Shares may be
issued to or
registered in the
name of
such Persons, and issued at
such price( s)
and on
such date(
s),
as may be
determined by
the Directors from time-
to-
time.
ISSUE OF PREFERRED SECURITIES
8 Subject to the provisions of
these Articles and
the
terms and conditions of
the
Purchase Agreement, at
the
Time of
Delivery provided
for
in the
Purchase
Agreement the Directors may issue to the
Purchasers provided
for
therein up
to
3,023 Series A-
I Preferred Securities at
the
applicable Issue Price and up
to
44,770 Series A-
2 Preferred Securities at
the
applicable Issue Price.
RIGHTS, POWERS, PREFERENCES AND PRIVILEGES
OF THE PREFERRED SECURITIES
9 The Preferred Securities shall have
the
rights, powers, preferences and privileges
as
are
se
t
forth in this Article 9 and provided in the
Statute.
( a)
Series A-
I Preferred Securities and Series A-
2 Preferred Securities. Subject to ( i)
paragraph ( e)
of
th
is
Article 9 with respect to voting rights and ( ii)
the
liquidation
preference pe
r
Share of
the
Series A-
I Preferred Securities being $100,000 and
per Share of
the Series A-
2 Preferred Securities being $10,000,
the
rights, powers,
preferences and privileges of
the
Series A-
I Preferred Securities and
the
Series A-
2 Preferred Securities
are
the
same.
NPB/ 616525/ l600336/
v2
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00017
( ( b)
12
Dividends. Subject to the
next succeeding sentence, dividends on
the
Preferred
Securities shall be deemed automatically declared and become due: and payable
on
each Dividend Payment Date in the Dividend Amount
for
such Dividend
Payment Date, subject to the Company having legally available funds
for
such
purpose and
the
other qualifications provided
for
in these Articles.
Notwithstanding
the
foregoing, no
dividends or
less than full dividends on
the
Preferred Securities on any Dividend Payment Date shall become due and payable
if the
Directors, by
their unanimous vote or
consent, resolve that
the Company
shall pay on
such Dividend Payment Date no
dividends or
less than full dividends
on
the
Preferred Securities. Accordingly, unless dividends otherwise payable on a
Dividend Payment Date have been eliminated or
reduced by
the unanimous vote
or
consent of
the
Directors:
( i) ifWaMu LLC pays full dividends on
the WaMu LLC Preferred Securities
on
a Dividend Payment Date,
the Company will pay corresponding full
dividends on
the
Preferred Securities on
such Dividend Payment Date;
(
ii)
if WaMu LLC pays partial dividends on
the WaMu LLC Preferred
Securities on a Dividend Payment Date,
the Company will pay partial
dividends in the
same proportionate amount (relative to the applicable
liquidation preference) on
the
Preferred Securities on
such Dividend
Payment Date; and
(
iii) ifWaMu LLC pays no
dividends on
the WaMu LLC Preferred Securities
on
a Dividend Payment Date, the
Company will pay no
dividends on
the
Preferred Securities on
such Dividend Payment Date.
Dividends on
the
Preferred Securities payable on
a Dividend Payment Date shall
be
paid to the
Preferred Securityholders on
the
Register of
Members on
the
related record date, which shall be
the
first day of
the
month in which
the
relevant
Dividend Payment Date occurs
or,
if any such day is not a Business Day,
the
next
day that is a Business Day.
Dividends on
the
Preferred Securities
are non-cumulative, except to the
extent
that on
a Dividend Payment Date the
Company has
received from WaMu LLC a
payment of
dividends on
the WaMu LLC Preferred Securities bu
t
fails to pay the
corresponding dividend on
the
Preferred Securities.
If:
( i) the Company pays no
dividends or
less than full dividends on
the
Preferred Securities on a Dividend Payment Date because it received no
dividend or
less than full dividends on
the WaMu LLC Preferred
Securities, then Preferred Securityholders will have no
right to receive,
and the Company will have no
obligation to pay, such unpaid dividends at
a future date, whether or
not dividends
are paid on
a future Dividend
Payment Date on
the
Preferred Securities or
the Ordinary Shares; and
NPB/ 6 I 6525/ 1 600336/ v2
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00018
( (
ii)
13
the Company pays no
dividends or
less than full dividends on
the
Preferred Securities on a Dividend Payment Date where clause ( i) does
no
t
apply
but
the
Directors have unanimously detennined not to pay dividends
or
to pay less than full dividends pursuant to their authority in the second
sentence of
the
first paragraph of
this Article 9(
b),
then no
further
dividends may be
paid on
Ordinary Shares until such unpaid dividends
have been paid on
the
Preferred Securities.
( c) Term and Redemption. The Preferred Securities
are perpetual Shares, subject to
the
redemption provisions of
this Article 9(
c).
The Preferred Securitiesare not redeemable at
the
option of
the
holders thereof.
The Preferred Securities shall be redeemed on each Redemption Date at
a
redemption price equal to the
Redemption Price pe
r
Preferred Security for
such
Redemption Date (which, as
reflected in the definitions of
those terms, has the
consequence that the Preferred Securities will be redeemed on
the
same dates on
which
the WaMu LLC Preferred Securities
are redeemed at
a redemption price
pe
r
Preferred Security equal to the
redemption price received by
the
Company on
a like amount ofWaMu LLC Preferred Securities).
If a redemption of WaMu LLC Preferred Securities and, as
a consequence,
Preferred Securities on any Redemption Date is in part instead of
in whole, then
the
Directors shall first allocate
the
total amount available to pay
the
Redemption
Price between
the
Series A-
I Preferred Securities andth
e
Series A-
2 Preferred
Securities in proportion to their aggregate liquidation preferences ( rounded by
the
Directors, if necessary, so
that no
Shares are redeemed in part and no
t
in whole).
The Directors shall select the
particular Shares of
Series A-
I Preferred Securities
and Series A-
2 Preferred Securities, as
applicable, to be redeemed not more than
60 days prior to the
Redemption Date from the outstanding Preferred Securities
no
t
previously called
for
redemption, such selection to be made by such method
as
the
Directors deem fair and appropriate.
The Company will give to the
Preferred Securityholders and publish notice of
any
proposed redemption as
provided in Articles 142 to 146. Such notice will be
given and published at
least 30
days but not more than 60
days before
the
date
fixed.
for
n~ demption.
The Directors may redeem or
cause the Company to redeem
all
or
some of
the
Preferred Securities held by
any Person to give effect to an
exchange, conversion
or
roll up policy ( an " Exchange") disclosed in the
Offering Circular or
otherwise
adopted by
the
Directors pursuant to which Preferred Securities of
one
class ( the
" Old Shares") may, at
the
option of
the
Company, be exchanged
for
Preferred
Securities of
another class (
the
" New Shares") by
means of
the
redemption of
the
Old Shares and
the
immediate
re-
subscription on
behalf of
the
relevant Members
of
the
redemption proceeds in paying up
the New Shares.
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( d)
14
On
an Exchange a Person holding Old Shares shall immediately following the
redemption of
the
Old Shares hereby subscribe
for
and shall be deemed to have
subscribed
for
without any further action required by
the
relevant Member and
shall be alloted such number of New Shares as has
the
same aggregate
Liquidation Preference as
the
Old Shares subject to the Exchange. The
subscription price
for
such New Shares shall be deemed to have been paid by
the
application of
the
redemption proceeds
for
the
Old Shares and the Company is
hereby authorised to se
t
off
any redemption proceeds payable in respect of
the
compulsory redemption of
the
Old Shares against
the
relevant Member's
obligation to payth
esubscription price
for
New Shares.
Ranking. During a Dividend Period,
the Company shall
not
pay any dividends on
the
Ordinary Shares, other than dividends payable in Ordinary Shares, and
the
Company shall not repurchase, redeem or
otherwise acquire
for
consideration
Ordinary Shares, directly or
indirectly, unless full dividends on
the
Preferred
Securities have been paid for
such Dividend Period, or
set
aside for
payment, as
the
case may
be.
In the event the Company voluntarily or
involuntarily liquidates, dissolves or
winds
up,
the
holders of
Preferred Securities at
the time outstanding will be
entitled to receive liquidating distributions in the
amount equal to the aggregate
Liquidation Preference of
the
Preferred Securities held, in each case plus
the
relevant amount of
any dividends theretofore received by
the
Company on
a like
amount of
WaMu LLC Preferred Securities no
t
yet
distributed as
a dividend on
the
Preferred Securities plus the
relevant amount of
dividends on
a like amount of
WaMu LLC Preferred Securities that
the Company is entitled to receive from
WaMu LLC but has not
ye
t
received (because,
for
example, WaMu LLC's board
of
managers has declared
but
not
ye
t
paid such dividends) before any distribution
of
assets is made to holders of
Ordinary Shares, subject to the
rights of
general
creditors ofthe Company.
After payment of
the
full amount of
the
liquidating distributions to which they
are
entitled, Preferred Securityholders will have no
right or
claim to any of
the
Company's remaining assets. In the
event that, upon any such voluntary or
involuntary liquidation, dissolution or
winding- up
,
the
available assets are
insufficient to pay
the
amount of
the liquidating distributions on
all
outstanding
Preferred Securities, then
the
Preferred Securityholders will share ratably in any
such distribution of
assets in proportion to the
full liquidating distributions to
which they would otherwise be
respectively entitled.
( e)
Voting Rights. Except as
expressly provided or
required by
these Articles, the
Statute or
other applicable law, the
holder of
Preferred Securities shall no
t
have
any voting rights. In the
event holders of
Preferred Securities are entitled to vote
on
a matter together as
a single class, or
together with holders of
Ordinary Shares,
the
holders of
Series A-
I Preferred Securities will be entitled to ten
votes
pe
r
Share and
the
holders of
the
Series A-
2 Preferred Securities will be
entitled to one
vote
per
Share.
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In the
event the Company receives notice from WaMu LLC that
the Company as
holder of WaMu LLC Preferred Securities is entitled to vote on any matter,
promptly after learning of
such entitlement
the Company shall cause to be
given
and published as provided in Articles 142 to 146, notice of
such vote (including a
description of
the
subject matter of
the
vote and
related circumstances to the
extent known to the
Company), along with a copy of
any notice or
other written
communication received by
the Company from WaMu LLC with respect to such
vote and related matters. In each such notice the Company shall request direction
from each holder of
Preferred Securities as
to how the Company as
a holder of
WaMu LLC Preferred Securities shall vote a like amount of WaMu LLC
Preferred Securities on
the
matter at
issue. Each holder of
Preferred Securities
shall have the
right to direct the
manner in which the
Company exercises such
voting rights with respect to a like amount ofWaMu LLC Preferred Securities.
So
long as
any Preferred Securities
are outstanding,
the Company will not,
without
the
consent of
Preferred Securityholders entitled to at
least two- thirds of
the
total voting rights of
all
outstanding Preferred Securities, voting together as
a
single class:
( i) ( x)
vary any right, power, preference or
privilege of
the
Preferred
Securities or
( y)
amend, alter, repeal or
otherwise change any other
provision of
these Articles (including this Article 9)
if such amendment,
alteration, repeal or
change pursuant to this clause ( y)
would materially
and adversely affect
the
right, powers, preferences or
privileges of
the
Preferred Securities; or
(
ii) merge, convert, consolidate, reorganize or
effect any other business
combination involving
the
Company.
Additionally so
long as
any Preferred Securities
are outstanding,
the Company
will not, without the
consent of
each holder of
outstanding Preferred Securities,
authorize, create or
increase
the
authorized amount of
or
issue any class or
series
of
Shares, or
any warrants, options otherwise convertible or
exchangeable into
any class or
series of
Shares, ranking pari passu or
senior to the
Preferred
Securities, or
as
to dividend rights, redemption rights or
rights on
dissolution,
liquidation or
winding up
of
the
Company.
( f) Conditional Exchange. If the OTS directs upon
the
occurrence of
an Exchange
Event, each Preferred Security then outstanding shall be exchanged automatically
for
a like amount of
newly issued WMI Depositary Shares.
Upon the
occurrence of
a Conditional Exchange:
( i) each holder of
Preferred Securities shall be
unconditionally obligated to
surrender to WMI any certificates representing
the
Preferred Securities
owned by
such holder on
the
date and time provided in the
next
succeeding paragraph;
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ii)
16
effective on such date and time
the Company shall ( or
shall cause
the
Securities Registrar
to)
record in the
Register of
Members WMI as
owner
of
all
of
the
Preferred Securities, as
transferee from
the
Persons who are
holders of
Preferred Securities immediately prior to such date and time;
and
(
iii) the Directors shall have
the
authority to execute and deliver
all
such
documents, instruments of
transfer and notices or
otherwise on
behalf of
holders of
Preferred Securities as
the
Directors shall, in their absolute
discretion, deem necessary to effect
the
Conditional Exchange.
The Conditional Exchange shall occur as
of
8:
00
A.
M., New York time, on
the
date
for
such exchange
se
t
forth in the
applicable OTS directive,
or,
if such date is
no
t
set
forth in the
directive, as
of
8:
00
A.
M., New York time, on
the
earliest
possible date such exchange could occur consistent with the
directive, as
evidenced by
the
issuance by WMI of
a press release prior to such time. As
of
the
time of
the
Conditional Exchange,all
rights of
the
exchanging holders of
Preferred Securities as
the
Company's shareholders shall cease, and such Persons
shall
be
,
for
all purposes, solely holders of WMI Depositary Shares, and WMI
shall be
the
holder of
all
outstanding Preferred Securities.
Within 30
days of
the
occurrence of
an Exchange Event and in connection
therewith,
the
issuance by
the OTS of
a directive requiring a Conditional
Exchange,
the Company shall cause to be
mailed to each of
the
holders of
record
of
the
Preferred Securities immediately prior to such Conditional Exchange and
published in the
manner provided in Articles 142 to 146, notice setting forth ( i)
the
occurrence of
an Exchange Event and directive requiring a Conditional
Exchange and
( ii)
instructions where such holders of
record shall deliver the
certificates representing
the
Preferred Securities in exchange
for
WMI Depositary
Shares. WMI shall, pursuant to the
Exchange Agreement, deliver to each such
holder of
record of
the
Preferred Securities a like amount of WMI Depositary
Shares upon surrender of
the
certificates representing Preferred Securities. Any
such notice to the
holders of
record of
Preferred Securities shall be
addressed to
each such holder at
his last known address shown on
the
Register of
Members of
the
Company and
the
time of
mailing of
such notice shall be
deemed to be
the
time of
the
giving thereof Until replacement certificates representative of
WMIDepositary Shares a
re delivered or
in the
event such replacement certificates are
no
t
delivered, any certificates previously representing Preferred Securities shall be
deemed
for
all
purposes to represent WMI Depositary Shares.
Holders of
Preferred Securities, by
purchasing Preferred Securities (whether in
connection with the initial offering of
the
Preferred Securities or
in the
secondary
market), will be deemed to have agreed to be bound by
the
unconditional
obligation to exchange Preferred Securities
for
a like amount of
Depositary
Shares as
provided in this Article 9(
f).
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( g)
17
In the
event WMI effects or
is the subject of
a merger, consolidation, statutory
share exchange, sale of
all,
or
substantially all, of
its
assets or
other form of
business combination, ( i) in which WMI is not
the
surviving, resulting or
receiving corporation thereof or
(
ii)
if WMI is the
surviving or
resulting
corporation, shares representing a majority ofWMI's total voting power
are either
converted or
exchanged into securities of
another Person or
into cash or
other
property (any such transaction in either ( i) or
(
ii) being a " Business
Combination"), then, WMI ( i) shall not enter into such Business Combination
unless the Successor Entity agrees, effective upon
the
consummation of
such
Business Combination, to abide by
all
of
WMI's obligations under
the
provisions
of
the
Exchange Agreement restricting
the
payment of
dividends by WMI in the
event dividends
are
not
paid with respect to the Company Preferred Securities and
(
ii) may, at
the
election of
the
Board of
Directors of WMI prior to the
effectiveness of
such Business Combination, assign, effective upon
the
consummation of
such Business Combination, all
of
its
other obligations under
the Exchange Agreement to a Successor Entity that has both Fixed Rate Substitute
Preferred Stock and Fixed-
to-
Floating Rate Substitute Preferred Stock and, as
a
result of
such assignment,
all references to WMI, Fixed Rate WMI Preferred
Stock, Fixed-
to-
Floating Rate WMI Preferred Stock, Depositary Share shall
become and be deemed to be
references to such Successor Entity, to such Fixed
Rate Substitute Preferred Stock, to such Fixed-to-
Floating Rate Substitute
Preferred Stock, to a Successor Depositary Share, respectively. This paragraph
shall apply to any subsequent Business Combination mutatis mutandis.
Acknowledgments and Agreements Relating to Preferred Securities. Each
Preferred Securityholder ( by
purchasing a Preferred Security) and each Owner ( by
purchasing a beneficial interest in a Book- Entry Preferred Security)
( i) acknowledges that
the
offer and sale of
the
Preferred Securities has not been
and will
not
be
registered under
the
U.
S.
Securities Act of
1933, as
amended, (
ii)
acknowledges and agrees that the Company has not been and will not be
registered as
an
" investment company" within the meaning of
the
U.
S.
Investment
Company Act of
1940, as amended, and (
iii) by purchasing Preferred Securities or
interests therein, makes each of
the
representations, warranties and agreements
se
t
forth in the
Offering Circular under. the caption "Notice to Investors" to be made
by
purchasers ( as
provided in the Offering Circular to be
applicable to the
purchasers of
Series A-
I Preferred Securities or
Series A-
2 Preferred Securities,
respectively). The Company covenants and agrees to take each of
the
actions and
steps specified in the
Offering Circular under
the
caption " Notice to Investors" to
be taken by
the Company ( it being understood that
the Company is identified as
" WaMu Cayman" in the
Offering Circular), including, without limitation, those
se
t
forth under
the
sub- captions "- Series A-
I WaMu Cayman Preferred
Securities", "- Reminder Notices," "-DTC Actions with Respect to the WaMu
Cayman Preferred Securities," "-Bloomberg Screens, Etc.," "- CUSIP," and "-
Legends."
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18
REGISTER OF MEMBERS10
The Company shall maintain or
cause to be
maintained the
Register of
Membersin accordance with
the
Statute. For so
long as
the Agency Agreement is in effect,th
e
Securities Registrar shall maintain
the
Register of
Members on
behalf of
the
Company in accordance with such Agreement.
CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE
11 For the purpose of
determining Members entitled to notice
of,
or
to vote at
any
meeting of
Members or
any adjournment thereof, or
Members entitled to receive
payment of
any dividend, or
in order to make a determination of
Members
for
any
other proper purpose, the
Directors may provide that the
Register of
Members
shall be
closed
for
transfers
for
a stated period which shall not in any case exceed
forty days. If the
Register of
Members shall be
closed
for
the purpose of
determining Members entitled to notice
of,
or
to vote
at,
a meeting of
Members
the Register of
Members shall be
closed
for
at
least ten days immediately
preceding
the
meeting.
12
In lieu
of,
or
apart from, closing
the
Register of
Members,
the
Directors may
fix in
advance or
arrears a date as
the record date
for
any such determination of
Members
entitled to notice
of,
or
to vote at
any meeting of
the Members or
any adjournment
thereof, or
for
the
purpose of
determining the
Members entitled to receive payment
of
any dividend or
in order to make a determination of
Members
for
any other
proper purpose (subject to Article 9(
b)
in the
case of
dividends on
Preferred
Securities).
13
If the
Register of
Members is not so
closed and no
record date is fixed
for
the
determination of
Members entitled to notice
of,
or
to vote
at,
a meeting of
Members or
Members entitled to receive payment of
a dividend,
the
date on
which notice of
the
meeting is sent or
the date on which
the
resolution of
the
Directors declaring such dividend is adopted, as
the
case may
be,
shall be
the
record date
for
such determination of
Members. When a determination of
Members entitled to vote at
any meeting of
Members has been made as
provided
in this Article, such determination shall apply to any adjournment thereof
CERTWICATES FOR SHARES
14 A Member shall only be
entitled to a share certificate if the Directors resolve that
share certificates shall be
issued. Share certificates representing Shares, if any,
shall be
in such form as
the
Directors may determine, subject to Article
15.
Share
certificates shall be
signed by
one or
more Directors or
other Person authorised by
the Directors. The Directors may authorise certificates to be
issued with the
authorised signature( s)
affixed by mechanical process. All certificates
for
Shares
shall be
consecutively numbered or
otherwise identified and shall specify the
Shares to which they relate.
All
certificates surrendered to the Company
for
transfer shall be
cancelled and subject to these Articles no new certificate shall be
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19
issued until
the
former certificate representing a like number of
relevant Shares
shall have been surrendered and cancelled.
15 Each share certificate representing Series A-
I Preferred Securities shall bear
the
following legend:
"THIS SECURITY IS ONE OF THE 7.25% PERPETUAL NON-
CUMULATIVE PREFERRED SECURITIES, SERIES A-
I
(" SERIES Al WAMU CAYMAN PREFERRED SECURITIES")
ISSUED BY WASHINGTON MUTUAL PREFERRED
FUNDING (CAYMAN) I LTD. ("WAMU CAYMAN"). THE
ISSUER OF THIS SECURITY HAS NOT BEEN REGISTERED
AS AN INVESTMENT COMPANY UNDER THE U.
S.
INVESTMENT COMPANY ACT OF 1940, AS AMENDED(THE " INVESTMENT COMPANY ACT"), AND THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE U.
S.
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND NEITHER THIS SECURITY NORANY BENEFICIAL INTERESTS HEREIN MAY B
E OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
TO A PERSON WHO IS BOTH A " QUALIFIED
INSTITUTIONAL BUYER" WITHIN THE MEANING OF
RULE l44A UNDER THE SECURITIES ACT (" QUALIFIED
INSTITUTIONAL BUYER") AND A " QUALIFIED
PURCHASER" WITHIN THE MEANING OF SECTION 2(
a)(
51)
OF THE INVESTMENT COMPANY ACT AND THE RULES
AND REGULATIONS THEREUNDER (" QUALIFIED
PURCHASER") ACQUIRING FOR ITS OWN ACCOUNT ORTHE ACCOUNT O
F A PERSON WHO IS BOTH A QUALIFIED
INSTITUTIONAL BUYER AND A QUALIFIED PURCHASER
(AN "ELIGIBLE PURCHASER") AND EACH SUCH PERSON
AND ACCOUNT FOR WHICH SUCH PERSON IS
PURCHASING ( A)
IS NOT A BROKER- DEALER THAT
OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS
THAN US$ 25 MILLION IN SECURITIES OF
ISSUERS THAT
ARE NOT ITS AFFILIATED PERSONS, ( B)
IS NOT A PLAN
REFERRED TO IN PARAGRAPH (
a)(
I)(
i)(
D)
OR (
a)(
I)(
i)(
E)
OF RULE 144A, OR A TRUST FUND REFERRED TO IN
PARAGRAPH (
a)(
l)(
i)(
F)
OF RULE 144A THAT HOLDS THE
ASSETS OF SUCH A PLAN, IF INVESTMENT DECISIONS
WITH RESPECT TO THE PLAN ARE MADE BY THE
BENEFICIARIES OF SUCH PLAN, ( C)
WAS NOT FORMED
FOR THE PURPOSE OF INVESTING IN WAMU CAYMAN,
( D)
WILL HOLD AND TRANSFER AT LEAST $100,000
LIQUIDATION PREFERENCE OF SERIES A-
I WAMUCAYMAN PREFERRED SECURITIES (i.~., A
T LEAST ONE
WAMU CAYMAN PREFERRED SECURITY), AND ( E)
UNDERSTANDS THAT WAMU CAYMAN MAY RECEIVE A
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LIST OF PARTICIPANTS HOLDING POSITIONS IN THIS
SECURITY FROM ONE OR MORE BOOK-ENTRY
DEPOSITARIES. EACH PURCHASER OF THIS SECURITY
OR ANY BENEFICIAL INTERESTS HEREIN WILL BE
DEEMED TO REPRESENT THAT IT AGREES TO COMPLY
WITH THE TRANSFER RESTRICTIONS SET FORTH HEREIN
AND IN THE MEMORANDUM AND ARTICLES OF
ASSOCIATION OF WAMU CAYMAN (AS AMENDED, THE
"ARTICLES OF ASSOCIATION") AND WILL NOT
TRANSFER THIS SECURITY OR ANY BENEFICIAL
INTERESTS HEREIN EXCEPT TO AN ELIGIBLE
PURCHASER WHO CAN MAKE THE SAME
REPRESENTATIONS AND AGREEMENTS ON BEHALF OF
ITSELF AND EACH ACCOUNT FOR WHICH IT IS
PURCHASING. ANY PURPORTED TRANSFER OF THIS
SECURITY OR ANY BENEFICIAL INTERESTS HEREIN
THAT IS IN BREACH, AT THE TIME MADE, OF ANYTRANSFER RESTRICTIONS SET FORTH HEREIN OR IN
THE ARTICLES OF ASSOCIATION WILL BE VOID AB
INITIO. IF AT ANY TIME WAMU CAYMAN DETERMINES
IN GOOD FAITH THAT A HOLDER OR BENEFICIAL
OWNER OF THIS SECURITY OR BENEFICIAL INTERESTS
HEREIN IS IN BREACH, AT THE TIME GIVEN, OF ANY OF
THE TRANSFER RESTRICTIONS SET FORTH HEREIN,
WAMU CAYMAN SHALL CONSIDER THE ACQUISITION
OF THIS SECURITY OR SUCH BENEFICIAL INTERESTS
VOID, OF NO FORCE AND EFFECT AND WILL NOT, AT
THE DISCRETION OF WAMU CAYMAN, OPERATE TO
TRANSFER ANY RIGHTS TO THE TRANSFEREE
NOTWITHSTANDING ANY INSTRUCTIONS TO THE
CONTRARY TO WAMU CAYMAN, ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT
(THE "TRANSFER AGENT"), OR ANY OTHER
INTERMEDIARY. IN ADDITION, WAMU CAYMAN OR ITS
TRANSFER AGENT MAY REQUIRE SUCH ACQUIRER ORBENEFICIAL OWNER TO SELL THIS SECURITY OR SUCH
BENEFICIAL INTERESTS TO AN ELIGIBLE PURCHASER.
NO SECURITY MAY BE PURCHASED OR TRANSFERRED
TO: ( 1) AN " EMPLOYEE BENEFIT PLAN" AS DEFINED IN
SECTION 3(
3)
OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF
1974, AS AMENDED ("ERISA"),
WHETHER OR NOT SUBJECT TO ERISA AND INCLUDING,
WITHOUT LIMITATION, FOREIGN OR GOVERNMENTAL
PLANS, (
II) A "PLAN" WITHIN THE MEANING OF SECTION
4975 OF THE INTERNAL REVENUE CODE OF
1986, AS
AMENDED (THE "CODE"), OR (
III) ANY ENTITY WHOSE
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'..
(
21
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" OF ANY
OF THE FOREGOING BY REASON OF INVESTMENT BY AN
EMPLOYEE BENEFIT PLAN OR OTHER PLAN IN SUCHENTITY (EACH OF THE FOREGOING, A " BENEFIT PLANINVESTOR"), EXCEPT FOR AN INSURANCE COMPANYGENERAL ACCOUNT THAT REPRESENTS, WARRANTSAND COVENANTS THAT, AT THE TIME O
F ACQUISITION
AND THROUGHOUT THE PERIOD IT HOLDS THESECURITIES, ( 1
)
IT IS ELIGIBLE FOR AND MEETS THEREQUIREMENTS O
F THE DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION 95-60,
( II) LESS THAN 25% OF
THE ASSETS OF
SUCH GENERALACCOUNT ARE (OR REPRESENT) ASSETS O
F A BENEFIT
PLAN INVESTOR AND (III) IT IS NOT A PERSON WHO HASDISCRETIONARY AUTHORITY OR CONTROL WITHRESPECT TO THE ASSETS O
F WAMU CAYMAN OR ANY
PERSON WHO PROVIDES INVESTMENT ADVICE FOR AFEE (DIRECT OR INDIRECT) WITH RESPECT TO SUCHASSETS, OR ANY AFFILIATE OF SUCH A PERSON ANDWOULD NOT OTHREWISE BE EXCLUDED UNDER 2
9
C.
F.
R.
2510.3- 101( F)(
1).
UNLESS THIS SECURITY IS PRESENTED BY ANAUTHORIZED REPRESENTATIVE O
F THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (" DTC"),
TO WAMU CAYMAN OR THE TRANSFER AGENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAMEOF CEDE & CO. OR IN SUCH OTHER NAME AS ISREQUESTED BY AN AUTHORIZED REPRESENTATIVE OFDTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS
IS REQUESTED BY ANAUTHORIZED REPRESENTATIVE OF DTC), ANYTRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH. AS .THE REGISTERED OWNERHEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
Each share certificate evidencing Series A-
2 Preferred Securities shall bear the
following legend:
"THIS SECURITY IS ONE OF THE 7.25% PERPETUAL NON-
CUMULATIVE PREFERRED SECURITIES, SERIES A-
2
(" SERIES A-
2 WAMU CAYMAN PREFERRED SECURITIES")
ISSUED BY WASHINGTON MUTUAL PREFERREDFUNDING (CAYMAN) I LTD. (
" WAMU CAYMAN"). THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE U.
S.
SECURITIES ACT OF
1933, AS AMENDED (THE
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22
" SECURITIES ACT"), AND NEITHER THIS SECURITY NORANY BENEFICIAL INTERESTS HEREIN MAYBE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
( 1)
IN AN OFFSHORE TRANSACTION MEETING THEREQUIREMENTS O
F
REGULATION S UNDER THESECURITIES ACT TO A PERSON OTHER THAN A U
.S
.
PERSON, OR ( 2)
IN RELIANCE UPON RULE 144A UNDERTHE SECURITIES ACT IN A TRANSACTION INVOLVING
AN EXCHANGE OF THIS SECURITY FOR A LIKE AMOUNT
OF 7.25% PERPETUAL NON- CUMULATIVE PREFERRED
SECURITIES, SERIES A-
I,
OF WAMU CAYMAN, WHICH IS
ALSO THE ISSUER OF
THIS SECURITY, BUT ONLY UPONRECEIPT BY WAMU CAYMAN'S TRANSFER AGENT O
F
AWRITTEN CERTIFICATE ON BEHALF OF THETRANSFEROR TO THE EFFECT THAT SUCH TRANSFER IS
BEING MADE TO A PERSON WHO THE TRANSFERORREASONABLY BELIEVES IS BOTH A "QUALIFIED
INSTITUTIONAL BUYER" WITHIN THE MEANING OFRULE 144A UNDER THE SECURITIES ACT (
" QUALIFIED
INSTITUTIONAL BUYER") AND A " QUALIFIED
PURCHASER" WITHIN THE MEANING OF
SECTION 2(
a)(
51)
OF
THE U.
S.
INVESTMENT COMPANY ACT OF
1940, AS
AMENDED (" QUALIFIED PURCHASER"), ACQUIRING FOR
ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER WHO IS ALSO A QUALIFIED
PURCHASER (AN " ELIGIBLE PURCHASER") IN ATRANSACTION MEETING THE REQUIREMENTS OF RULE144A UNDER THE SECURITIES ACT AND INACCORDANCE WITH ALL APPLICABLE LAWS OF THESTATES O
F THE UNITED STATES AND OTHER
JURISDICTIONS. EACH PURCHASER OF THIS SECURITY
OR ANY BENEFICIAL INTERESTS HEREIN WILL BE
DEEMED TO REPRESENT THAT IT AGREES TO COMPLYWITH THE TRANSFER RESTRICTIONS SET FORTH HEREIN
AND IN THE MEMORANDUM AND ARTICLES OFASSOCIATION OF WAMU CAYMAN (AS AMENDED, THE" ARTICLES O
F
ASSOCIATION"), AND WILL NOT
TRANSFER THIS SECURITY OR ANY BENEFICIAL
INTERESTS HEREIN EXCEPT TO A PURCHASER WHO CAN
MAKE THE SAME REPRESENTATIONS ANDAGREEMENTS ON BEHALF O
F
ITSELF AND EACHACCOUNT FOR WHICH IT IS PURCHASING. ANYPURPORTED TRANSFER OF THIS SECURITY OR ANYBENEFICIAL INTERESTS HEREIN THAT IS IN BREACH, ATTHE TIME MADE, OF ANY TRANSFER RESTRICTIONS SET
FORTH HEREIN OR IN THE ARTICLES OF ASSOCIATION
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23
WILL BE VOID AB INITIO. IF AT ANY TlME WAMU
CAYMAN DETERMINES IN GOOD FAITH THAT A HOLDEROR BENEFICIAL OWNER OF THIS SECURITY ORBENEFICIAL INTERESTS HEREIN IS IN BREACH, AT THETlME GIVEN, OF ANY OF THE TRANSFER RESTRICTIONS
SET FORTH HEREIN, WAMU CAYMAN SHALL CONSIDER
THE ACQUISITION OF
THIS SECURITY OR SUCHBENEFICIAL INTERESTS VOID, O
F NO FORCE ANDEFFECT AND WILL NOT, AT THE DISCRETION OF WAMUCAYMAN, OPERATE TO TRANSFER ANY RIGHTS TO THETRANSFEREE NOTWITHSTANDING ANY INSTRUCTIONS
TO THE CONTRARY TO WAMU CAYMAN, ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT
(THE "TRANSFER AGENT"), OR ANY . OTHERINTERMEDIARY. IN ADDITION, WAMU CAYMAN OR ITS
TRANSFER AGENT MAY REQUIRE SUCH ACQUIRER ORBENEFICIAL OWNER TO SELL THIS SECURITY OR SUCHBENEFICIAL INTERESTS TO AN ELIGIBLE PURCHASER.
NO SECURITY MAY BE PURCHASED OR TRANSFERREDTO: ( I) AN "EMPLOYEE BENEFIT PLAN" AS DEFINED IN
SECTION 3(
3)
OF THE EMPLOYEE RETIREMENT INCOMESECURITY ACT O
F
1974, AS AMENDED (" ERISA"),
WHETHER OR NOT SUBJECT TO ERISA AND INCLUDING,
WITHOUT LlMITATION, FOREIGN OR GOVERNMENTAL
PLANS, ( II) A "PLAN" WITHIN THE MEANING OF SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986, ASAMENDED (THE " CODE"), OR (III) ANY ENTITY WHOSEUNDERLYING ASSETS INCLUDE "PLAN ASSETS" OF ANY
OF THE FOREGOING BY REASON OF INVESTMENT BY AN
EMPLOYEE BENEFIT PLAN OR OTHER PLAN IN SUCHENTITY (EACH O
F
THE FOREGOING, A " BENEFIT PLANINVESTOR"), EXCEPT FOR AN INSURANCE COMPANYGENERAL ACCOUNT THAT REPRESENTS, WARRANTSAND COVENANTS THAT, AT THE TIME OF ACQUISITION
AND THROUGHOUT THE PERIOD IT HOLDS THESECURITIES, ( I) IT IS ELIGIBLE FOR AND MEETS THEREQUIREMENTS O
F
THE DEPARTMENT OF
LABORPROHIBITED TRANSACTION CLASS EXEMPTION 9
5-
60,
( II) LESS THAN 25% OF THE ASSETS OF SUCH GENERAL
ACCOUNT ARE (OR REPRESENT) ASSETS OF A BENEFIT
PLAN INVESTOR AND (III) IT IS NOT A PERSON WHO HASDISCRETIONARY AUTHORITY OR CONTROL WITHRESPECT T
O THE ASSETS OF WAMU CAYMAN OR ANY
PERSON WHO PROVIDES INVESTMENT ADVICE FOR AFEE (DIRECT OR INDIRECT) WITH RESPECT TO SUCHASSETS, OR ANY AFFILIATE OR SUCH PERSON AND
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-' -
24
WOULD NOT OTHERWISE BE EXCLUDED UNDER
29
C.
F.
R.
25IO. 3-
IOI( F)(
1).
" UNLESS THIS SECURITY IS PRESENTED BY ANAUTHORIZED REPRESENTATIVE O
F THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION (" DTC"),
TO WAMU CAYMAN OR THE TRANSFER AGENT, ANDANY CERTIFICATE ISSUED IS REGISTERED IN THE NAMEOF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OFDTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS
IS REQUESTED BY ANAUTHORIZED REPRESENTATIVE OF DTC), ANYTRANSFER, PLEDGE, OR OTHER USE HEREOF FORVALUE OR OTHERWISE BY OR T
O ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE &CO., HAS AN INTEREST HEREIN."
Notwithstanding any other provision of
these Articles:
( h)
The Series A-
I Preferred Securities will initially be
represented by
one or
more Share certificates in registered, global form, including
the
legend
set
forth above
for
Share certificates evidencing Series
A-
I Preferred Securities and any legend required by
a Clearing
Agency (a " Rule 144A Global Security"), and
the
Series A-
2
Preferred Securities initially will be
represented by
one or
more
Share certificates in registered, global form including the
legend
set
forth above and any other legends required by
any applicable
Clearing Agency ( the
" Regulation S Global Security" and, together
with
the
Rule I44A Global Security,
the
"Global Securities").
Each Global Security shall be a Book- Entry Preferred Security.
( i) On
the
Issue Date,
the
Company will cause
the
Global Securities to
be deposited with
the
Securities Registrar as custodian
for
DTC in
New York, New York, and registered in the name of
DTC or
a
nominee designated by DTC.
( j) Share certificates that are not Global Securities will be
issued only
in the circumstances described in the
Offering Circular under the
caption " Book- Entry Issuance- Special Circumstances When
Global Security Will Be
Terminated."
16 The Company shall
no
t
be bound to issue more than one certificate
for
Shares
held jointly by
more than one Person and delivery of
a certificate to one joint
holder shall be
a sufficient delivery to all
of
them.
17
If a share certificate is defaced, worn out, lost or
destroyed, it may be
renewed on
such terms ( if any) as
to evidence and indemnity and on
the
payment of
such
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25
expenses reasonably incurred by
the Company in investigating evidence, as
the
Directors may prescribe, and ( in the
case of
defacement or
wearing out) upon
delivery of
the
old certificate.
TRANSFER OF SHARES
18
Shares
are transferable subject to the
consent of
the
Directors who may, in their
absolute discretion, decline to register any transfer of
Shares without giving any
reason. If the Directors refuse to register a transfer they shall notify
the
transferee
within two months of
such refusal provided, however, that
( i) notwithstanding
the
foregoing, if for
so
long as
any Preferred Securities
are outstanding, Ordinary Shares may not be
issued or
transferred to or
registered in the
name of
any Person other than
the
trustee of
the Cayman
Trust; and
(
ii) unless and until the circumstances described in the
Offering Circular under
the
caption " Book- Entry Issuance - Special Situations when Global
Security Will Be
Terminated" apply (and, as
a consequence
the
Preferred
Securities are no
longer represented by
Global Securities), Preferred
Securities may not be
recorded on
the
Register of
Members as
owned of
record by
any Person other than
the
Clearing Agency or
its nominee
(initially Cede & Co. as nominee
for
DTC).
19 Notwithstanding any other provision of
these Articles, if any Preferred Securities
are
held by
a Clearing Agency or
its nominee (initially Cede & Co. as
nominee
for
DTC) and a Relevant Event occurs, such Preferred Securities shall, upon notification
of
the
Company or
its
agent by
the
Registrar of
the
identity of
the
Accountholders
and the
number of
Preferred Securities in which they are respectively beneficially
interested as
at
the occurrence of
such Relevant Event, be
automatically transferred
to such Accountholders in the
appropriate amounts and
the
Registrar, failing whom
the Company or
such other person as
the
Directors may designate, shall forthwith
make
the
relevant entries in the
Register and shall, if the Directors deem appropriate,
issue share certificates in respect of
such transfer.
The instrument of
transfer of
any Share shall be
in writing and shall be
executed
by
or
on
behalf of
the . transferor (and if the
Directors
so
.
require, signed by
the
transferee); provided, however, that no such instrument shall be
necessary to
effect a Conditional Exchange in accordance with Article 9(
f).
The transferor
shall be deemed to remain
the
holder of
a Share until
the name of
the transferee is
entered in the
Register of
Members.
REDEMPTION AND REPURCHASE OF SHARES
20 The Ordinary Shares shall not be
redeemable. The Preferred Securities shall be
redeemable only as
provided in Article 9(
c).
21
Subject to the
provisions of
the
Statute,
the Company may purchase
its own
Shares (including any redeemable Shares) provided that the Members shall have
approved
the
manner of
purchase by Ordinary Resolution.
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26
The Company may make a payment in respect of
the redemption or
purchase of
its own Shares in any manner permitted by
the
Statute, including
ou
t
of
capital.
VARIATION OF RlGHTS OF SHARES
23 Subject to Article 9(
e)
with respect to the
Preferred Securities, if at
any time
the
share capital of
the Company is divided into different classes of
Shares,
the
rights
. attached to any class (unless otherwise provided by
the terms of
issue of
the
Shares of
that class) may, whether or
not
the Company is being wound-
up,
be
varied with the consent in writing of
the holders of
two- thirds of
the
issued Shares
of
that class, or
with the sanction of
a Special Resolution passed at
a general
meeting of
the holders of
the
Shares of
that class.
24 The provisions of
these Articles relating to general meetings shall apply to every
class meeting of
the
holders of
one class of
Shares except that
the
necessary
quorum shall be
one Person holding or
representing by
proxy at
least one- third of
the
issued Shares of
the
class and that any holder of
Shares of
the
class present in
Person or
by
proxy may demand a poll.
COMMISSION ON SALE OF
SHARES
25 The Company may, in so
far
as
the
Statute permits, pay a commission to any
Person in consideration of
his subscribing or
agreeing to subscribe whether
absolutely or
conditionally
for
any Shares of
the
Company. Such commissions
may be satisfied by
the
payment of
cash and/ or
the
issue of
fully or
partly paid- up
Shares. The Company may also on any issue of
Shares pay such brokerage as
may be
lawful.
NON- RECOGNITION OF TRUSTS
26 The Company shall not be bound by
or
compelled to recognise in any way (even
when notified) any equitable, contingent, future or
partial interest in any Share, or
(except only as
is otherwise provided by
these Articles or
the
Statute) any other
rights in respect of
any Share other than an absolute right to the
entirety thereof in
the
registered holder.
LIEN ON SHARES
27
The Company shall have a first and paramount lien on
all
Shares (whether fully
paid- up
or
not) registered in the
name of
a Member (whether solely or
jointly with
others)
for
all
debts, liabilities or
engagements to or
with the Company (whether
presently payable or
not) by
such Member or
his
estate, either alone or
jointly
with any other Person, whether a Member or
not, but
the
Directors may at
any
time declare any Share to be wholly or
in part exempt from
the
provisions of
this
Article. The registration of
a transfer of
any such Share shall operate as
a waiver
of
the
Company's lien thereon. The Company's lien on a Share shall also extend
to any amount payable in respect of
that Share.
28 The Company may sell, in such manner as
the
Directors think
fit, any Shares on
which
the Company has a lien, if a sum in respect of
which the lien exists is
presently payable, and is no
t
paid within fourteen clear days after notice
has
been
given to the
holder of
the
Shares, or
to the
Person entitled to it in consequence of
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30
27
the
death or
bankruptcy of
the
holder, demanding payment and stating that if the
notice is not complied with
the
Shares may be
sold.
To give effect to any such sale
the
Directors may authorise any Person to executean
instrument of
transfer of
the
Shares sold
to,
or
in accordance with
the
directions
of,
the
purchaser. The purchaser or
his nominee shall be
registered as
the
holder of
the
Shares comprised in any such transfer, and he
shall not be bound
to see to the
application of
the
purchase money, nor shall
his
title to the
Shares be
affected by
any irregularity or
invalidity in the
sale or
the
exercise of
the
Company's power of
sale under these Articles.
The
ne
t
proceeds of
such sale after payment of
costs, shall be applied in payment
of
such part of
the
amount in respect of
which
the
lien exists as
is presently
payable and any residue shall (subject to a like lien for
sums no
t
presently payable
as
existed upon the Shares before
the
sale) be
paid to the
Person entitled to the
Shares at
the
date of
the sale.
CALL ON SHARES
31
Subject to the
terms of
the
allotment the
Directors may from time to time make
calls upon the Members in respect of
any monies unpaid on
their Shares (whether
in respect of
par value or
premium), and each Member shall (subject to receiving
at
least fourteen days' notice specifying
the
time or
times of
payment) pay to the
Company at
the time or
times so
specified
the
amount called on
the
Shares. Acall may b
e
revoked or
postponed as
the
Directors may determine. A call may be
required to be
paid by
instalments. A Person upon whom a call is made shall
remain liable for
calls made upon him notwithstanding the
subsequent transfer of
the
Shares in respect of
which
the
call was made.
32 A call shall be deemed to have been made at
the
time when the resolution of
the
Directors authorising such call was passed.
33 The joint holders of
a Share shall be jointly and severally liable to pay
all calls in
respect thereof
34
If a call remains unpaid after it has become due and payable,
the
Person from
whom it is due shall pay interest on
the amount unpaid from
the
day it became
due and payable until it is paid at
such rate as
the
Directors may determine,
but
the
Directors may waive payment of
the interest wholly or
in part.
35
An
amount payable in respect of
a Share on
allotment or
at
any fixed date,
whether on
account of
the
par value of
the
Share or
premium or
otherwise, shall
be deemed to be a call and if it is no
t
paid
all
the
provisions of
these Articles shall
apply as
if that amount had become due and payable by
virtue
ofa call.
36 The Directors may issue Shares with different terms as
to the
amount and times of
payment of
calls, or
the
interest to be
paid.
37 The Directors may, if they think
fit, receive an amount from any Member willing
to advance
all
or
any part of
the
monies uncalled and unpaid upon any Shares held
by him, and may (until
the
amount would otherwise become payable) pay interest
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28
at
such rate as
may be
agreed upon between the
Directors and the
Member paying
such amount in advance.
No
such amount paid in advance of
calls shall entitle the Member paying such
amount to any portion of
a Dividend declared in respect of
any period prior to the
date upon which such amount would, but
for
such payment, become payable.
FORFEITURE OF SHARES
41
(
39
If a call remains unpaid after it has become due and payable
the
Directors may
give to the
Person from whom it is due not less than fourteen clear days' notice
requiring payment of
the
amount unpaid together with any interest, which may
have accrued. The notice shall specify where payment is to be made and shall
state that if the
notice is not
complied with
the
Shares In respect of
which
the
call
was made will be
liable to be
forfeited.
40
If
the
notice is no
t
complied with any Share in respect of
which it was given !Jlay,
before the
payment required by
the
notice has
been made, be
forfeited by
a
resolution of
the Directors. Such forfeiture shall include
all
dividends or
other
monies declared payable in respect of
the
forfeited Share and not paid before the
forfeiture.
A forfeited Share may be
sold,
re-
allotted or
otherwise disposed of
on
such terms
and in such manner as
the
Directors think
fit and at
any time before a sale,
re-
allotment or
disposition
the
forfeiture may be
cancelled on
such terms as
the
Directors think
fit. Where
for
the
purposes of
its disposal a forfeited Share is to
be
transferred to any Person
the
Directors may authorise some Person to execute
an
instrument of
transfer of
the
Share in favour of
that Person.
42 A Person any of
whose Shares have been forfeited shall cease to be
a Member in
respect of
them and shall surrender to the Company
for
cancellation the certificate
for
the
Shares forfeited and shall remain liable to pay to the Company
all monies
which at
the
date of
forfeiture were payable by
him to the Company in respect of
those Shares together with interest, but
his liability shall cease if and when
the
Company shall have received payment in fu
ll
of
all
monies due
and payable by
him in respect of
those Shares.
43 A certificate in writing under the hand of
one Director or
officer of
the Company
that a Share has been forfeited on a specified date shall be
conclusive evidence of
the
fact as
against
all
Persons claiming to be
entitled to the
Share. The certificate
shall (subject to the
execution of
an
instrument of
transfer) constitute a good title
to the
Share and
the
Person to whom
the
Share is disposed of
shall
no
t
be bound
to see
to the
application of
the
purchase money, if any, no
r
shall his
title to the
Share be
affected by
any irregularity or
invalidity in the
proceedings in reference
to the
forfeiture, sale or
disposal of
the
Share.
44 The provisions of
these Articles as
to forfeiture shall apply in the
case of
non- payment of
any sum which, by
the
terms of
issue of
a Share, becomes
payable at
a fixed time, whether on
account of
the
par value of
the Share or
by
way of
premium as
if it had been payable by
virtue of
a
ca
ll
duly made and
notified.
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( TRANSMISSION OF SHARES45
48
46
47
If a Member dies
the
survivor or
survivors where he was a joint holder, and
his
legal personal representatives where he was a sole holder, shall be
the
only
Persons recognised by
the Company as
having any title to his
interest. The estate
of
a deceased Member is not thereby released from any liability in respect of
any
Share, which had been jointly held by
him.
Any Person becoming entitled to a Share in consequence of
the
death or
bankruptcy or
liquidation or
dissolution of
a Member ( or
in any other way than by
transfer) may, upon such evidence being produced as may from time to time be
required by
the
Directors, elect either to become
the
holder ofthe Share or
to have
some Person nominated by
him as
the
transferee. If he
elects to become the
holder he
shall give notice to the
Company to that effect, bu
t
the
Directors shall,
in either case, have
the
same right to decline or
suspend registration as
they would
have had in the
case of
a transfer of
the Share by
that Member before
his death or
bankruptcy, as
the
case may
be.
If the
Person so becoming entitled shall elect to be
registered himself as
holder he
shall deliver or
send to the Company a notice in writing signed by
him stating that
he
so
elects.
A Person becoming entitled to a Share by reason of
the
death or
bankruptcy or
liquidation or
dissolution of
the
holder ( or
in any other case than by
transfer) shall
be
entitled to the
same dividends and other advantages to which he would be
entitled if he were
the
registered holder of
the
Share. However, he
shall not,
before being registered as
a Member in respect of
the
Share, be
entitled in respect
of
it to exercise any right conferred by
membership in relation to meetings of
the
Company and
the
Directors may at
any time give notice requiring any such
Person to elect either to be registered himself or
to transfer
the
Share. If
the
notice
is not complied with within ninety days
the
Directors may thereafter withhold
payment of
all
dividends, bonuses or
other monies payable in respect of
the
Share
until
the
requirements of
the
notice have been complied with.
AMENDMENTS OF MEMORANDUM AND ARTICLES OF ASSOCIATION ANDALTERATION OF CAPITAL
49
Subject to the
provisions of
the
Statute and
the
provisions of
these Articles as
regards
the
matters to be
dealt with by
Ordinary Resolution, and subject to Article
9(
e),
the Company may by Special Resolution:
49.1 change its name;
49.2 alter or
add to these Articles;
49.3 alter or
add to the Memorandum with respect to any objects, powers or
other matters specified therein; and
49.4 reduce
its share capital and any capital redemption reserve fund.
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REGISTERED OFFICE50
Subject to the provisions of
the
Statute, the Company may by
resolution of
the
Directors change the location of
its Registered Office.
GENERAL MEETINGS
51
All
general meetings other than annual general meetings shall be called
extraordinary general meetings.
52 The Company shall, if required by
the
Statute, in each year hold a general meeting
as
its armual general meeting, and shall specify
the
meeting as
such in the notices
calling
it. The annual general meeting shall be
held at
such time and place as
the
Directors shall appoint and if no
other time and place is prescribed by
them, it
shall be
held at
the
Registered Office on
the
second Wednesday in December of
each year at
ten
o'clock in the
morning. At
these meetings
the
report of
the
Directors ( if any) shall be presented.
53 The Company may hold an
annual general meeting,
but
shall
not
(unless required
by
Statute) be
obliged to hold an
armual general meeting.
54 The Directors may call general meetings, and they shall on
a Members'
requisition forthwith proceed to convene an
extraordinary general meeting of
the
Company.
55 A Members' requisition is a requisition of
Members of
the Company holding at
the
date of
deposit of
the
requisition not less than
ten
per cent. in par value of
the
capital of
the Company which as
at
that date carries
the
right of
voting at
general
meetings of
the
Company.
56 The requisition must state the objects of
the
meeting and must be
signed by
the
requisitionists and deposited at
the
Registered Office, and may consist of
several
documents in like form each signed by
one or
more requisitionists.
57
If the
Directors do
not within twenty- one days from the date of
the
deposit of
the
requisition duly proceed to convene a general meeting to be
held within a further
twenty- one days,
the
requisitionists, or
any of
them representing more than one-
half of
the
total voting rights of
all
of
them, may themselves convene a general
meeting, but any meeting so convened shall not be
held after
the
expiration of
three months after
the
expiration of
the
said twenty- one days.
58 A general meeting convened as
aforesaid by
requisitionists shall be
convened in
the
same manner as
nearly as
possible as
that in which general meetings are to be
convened by
Directors.
NOTICE OF GENERAL MEETINGS
59
At
least five days' notice shall be given of
any general meeting. Every notice
shall be
exclusive of
the
day on which it is given or
deemed to be
given and of
the
day
for
which it is given and shall specify
the
place,
the
day and
the
hour of
the
meeting and
the
general nature of
the
business and shall be
given in marmer
hereinafter mentioned or
in such other manner if any as may be
prescribed by
the
Company, provided that a general meeting of
the Company shall, whether or
not
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the
notice specified in this regulation has been given and whether or
not
the
provisions of
the
Articles regarding general meetings have been complied with, be
deemed to have been duly convened if it is so
agreed:
59.1 in the case of
an
annual general meeting, by
all
the Members ( or
their
proxies) entitled to attend and vote thereat; and
59.2 in the case of
an
extraordinary general meeting, by
a majority in number
of
the Members ( or
their proxies) having a right to attend and vote at
the
meeting, being a majority together holding
no
t
less than ninety- five
pe
r
cent. in par value of
the Shares giving that right.
The accidental omission to give notice of
a general meeting
to,
or
the
non- receipt
of
notice of
a meeting
by,
any Person entitled to receive notice shall not invalidate
the
proceedings of
that meeting.
PROCEEDINGS AT GENERAL MEETINGS
61
No
business shall be
transacted at
any general meeting unless a quorum is present.
Two Members being individuals present in Person or
by
proxy or
if a corporation
or
other non- natural Person by
its duly authorised representative shall be a
quorum unless
the Company
has
only one Member entitled to vote at
such general
meeting in which case
the
quorum shall be
that one Member present in Person or
by
proxy or
( in the
case of
a corporation or
other non- natural Person) by
a duly
authorised representative.
62 A Person may participate at
a general meeting by
conference telephone or
other
communications equipment by
means of
which
all
the
Persons participating in the
meeting can communicate with each other. Participation by
a Person in a general
meeting in this manner is treated as presence in Person at
that meeting.
63 A resolution (including a Special Resolution) in writing ( in one or
more
counterparts) signed by
all Members
for
the
time being entitled to receive notice
of
and to attend and vote at
general meetings (
or,
being corporations, signed by
their duly authorised representatives) shall be
as
valid and effective as
if the
resolution had been passed at
a general meeting of
the
Company duly convened
and held.
64
If a quorum is not present within half an hour from the time appointed
for
the
meeting or
if during such a meeting a quorum ceases to be present,
the
meeting, if
convened upon the
requisition of
Members, shall be
dissolved and in any other
case it shall stand adjourned to the
same day in the
next week at
the
same time
and place or
to such other day, time or
such other place as
the
Directors may
determine, and if at
the
adjourned meeting a quorum is no
t
present within half an
hour from
the
time appointed
for
the
meeting
the Members present shall be
a
quorum.
65 The chairman, if any, of
the
board of
Directors shall preside as chairman at
every
general meeting of
the
Company, or
if there is no
such chairman, or
ifhe shall not
be
present within fifteen minutes after
the
time appointed
for
the holding of
the
meeting, or
is unwilling to act, the Directors present shall elect one of
their
number to be chairman of
the
meeting.
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69
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If no
Director is willing to act
as
chairman or
if no
Director is present within
fifteen minutes after the time appointed
for
holding
the
meeting,
the Members
present shall choose one of
their number to be chairman of
the
meeting.
The chairman may, with
the
consent of
a meeting at
which a quorum is present,
(and shall if so
directed by
the
meeting), adjourn
the
meeting from time to time
and from place to place,
but
no
business shall be
transacted at
any adjourned
meeting other than
the
business left unfinished at
the
meeting from which
the
adjournment took place. When a general meeting is adjourned
for
thirty days or
more, notice of
the
adjourned meeting shall be
given as
in the
case of
an
original
meeting. Otherwise it shall not be
necessary to give any such notice.
A resolution
pu
t
to the
vote of
the
meeting shall be decided on a show of
hands
unless before, or
on
the
declaration of
the
result of,
the
show of
hands, the
chairman demands a poll, or
any other Member or
Members collectively present
in Person or
by
proxy and holding at
least
ten
per cent. in par value of
the
Shares
giving a right to attend and vote at
the
meeting demand a poll.
Unless a poll is duly demanded a declaration by
the
chairman that a resolution has
been carried or
carried unanimously, or
by
a particular majority, or
lost or
not
carried by
a particular majority, an
entry to that effect in the minutes of
the
proceedings of
the
meeting shall be conclusive evidence of
that fact without proof
of
the
number or
proportion of
the
votes recorded in favour of
or
against such
resolution.
70 The demand
for
a poll may be
withdrawn.
71
Except on
a poll demanded on
the
election of
a chairman or
on
a question of
adjournment, a poll shall be
taken as
the
chairman directs, and the
result of
the
poll shall be deemed to be
the
resolution of
the general meeting at
which
the
poll
was demanded.
72 A poll demanded on
the
election of
a chairman or
on a question of
adjournment
shall be
taken forthwith. A poll demanded on
any other question shall be
taken at
such time as
the
chairman of
the
general meeting directs, and any business other
than that upon which a poll has been demanded or
is contingent thereon may
proceed pending
the
taking of
the poll.
73
In the
case of
an
equality of
votes, whether on
a show of
hands or
on
a poll, the
chairman shall be
entitled to a second or
casting vote.
VOTES OF MEMBERS
74 Subject to any rights or
restrictions attached to any Shares, on a show of
hands
every Member who (being an
individual) is present in Person or
by
proxy or,
if a
corporation or
other non- natural Person is present by
its duly authorised
representative or
proxy, shall have one vote and on a poll every Member shall
have one vote
for
every Share of
which he
is the
holder.
75
In the
case of
joint holders of
record
the
vote of
the
senior holder who tenders a
vote, whether in Person or
by proxy, shall be accepted to the
exclusion of
the
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77
79
78
votes of
the
other joint holders, and seniority shall be determined by
the
order in
which
the
names of
the
holders stand in the
Register of
Members.
A Member of
unsound mind, or
in respect of
whom an
order has been made by
any court, having jurisdiction in lunacy, may vote, whether on a show of
hands or
on a poll, by
his committee, receiver, curator bonis, or
other Person on
such
Member's behalf appointed by
that court, and any such committee, receiver,
curator bonis or
other Person may vote by
proxy.
No
Person shall be
entitled to vote at
any general meeting or
at
any separate
meeting of
the holders of
a class of
Shares unless he
is registered as a Member on
the record date
for
such meeting and
all
calls or
other monies then payable by
him
in respect of
Shares have been paid.
No
objection shall be
raised to the qualification of
any voter except at
the
general
meeting or
adjourned general meeting at
which
the
vote objected to is given or
tendered and every vote not disallowed at
the
meeting shall be
valid. Any
objection made in due time shall be
referred to the
chairman whose decision shall
be
final and conclusive.
On a poll or
on a show of
hands votes may be cast either personally or
by proxy.
A Member may appoint more than one proxy or
the
same proxy under one or
more instruments to attend and vote at
a meeting. Where a Member appoints more
than one proxy
the
instrument of
proxy shall state which proxy is entitled to vote
on
a show of
hands.
80 A Member holding more than one Share need no
t
cast the
votes in respect of
his
Shares in the
same way on any resolution and therefore may vote a Share or
some
or
all such Shares either
for
or
against a resolution and/ or
abstain from voting a
Share or
some or
all
of
the
Shares and, subject to the
terms of
the
instrument
appointing him, a proxy appointed under one or
more instruments may vote a
Share or
some or
all
of
the Shares in respect of
which he
is appointed eitherfor
or
against a resolution and/ or
abstain from voting.
(
PROXIES
81
The instrument appointing a proxy shall be
in writing, be
executed under the
hand
of
the
appointor or
of
his attorney duly authorised in writing,
or,
if the
appointor
is a corporation under
the
hand of
an
officer or
attorney duly authorised
for
that
purpose. A proxy need
no
t
be a Member of
the
Company.
82
The instrument appointing a proxy shall be
deposited at
the
Registered Office or
at
such other place as
is specified for
that purpose in the
notice convening the
meeting, or
in any instrument of
proxy sent ou
t
by
the
Company:
82.1 not less than 48
hours before the time
for
holding
the
meeting or
adjourned meeting at
which the Person named in the
instrument proposes
to vote; or
82.2 in the
case of
a poll taken more than 48 hours after it is demanded, be
deposited as
aforesaid after the poll has been demanded and not less than
24
hours before
the
time appointed
for
the
taking of
the poll; or
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82.3 where
the
poll is not
taken forthwith
but
is taken not more than 48
hours
after it was demanded be
delivered at
the
meeting at
which: the poll was
demanded to the
chairman or
to the
secretary or
to any director;
provided that
the
Directors may in the
notice convening
the
meeting, or
in an
instrument of
proxy sent out by
the Company, direct that
the
instrument
appointing a proxy may be
deposited ( no
later than
the
time
for
holding
the
meeting
or
adjourned meeting) at
the
Registered Office or
at
such other place as
is
specified
for
that purpose in the
notice convening
the
meeting, or
in any
instrument of
proxy sent out by
the
Company. The chairman may in any event at
his discretion direct that an
instrument of
proxy shall be deemed to have been duly
deposited. An instrument of
proxy that is no
t
deposited in the
manner permitted
shall be
invalid.
(
83
84
The instrument appointing a proxy may be
in any usual or
common form and may
be
expressed to be
for
a particular meeting or
any adjournment thereof or
generally until revoked. An
instrument appointing a proxy shall be
deemed to
include
the
power to demand or
join or
concur in demanding a poll.
Votes given in accordance with
the
terms of
an
instrument of
proxy shall be
valid
notwithstanding the previous death or
insanity ofthe principal or
revocation of
the
proxy or
of
the authority under which
the
proxy was executed, or
the
transfer of
the
Share in respect of
which
the
proxy is given unless notice in writing of
such
death, insanity, revocation or
transfer was received by
the Company at
the
Registered Office before
the
commencement of
the
general meeting, or
adjourned
meeting at
which it is sought to use
the
proxy.
CORPORATE MEMBERS
85 Any corporation or
other non-natural Person which is a Member may in
accordance with
its constitutional documents, or
in the
absence of
such provision
by resolution of
its directors or
other governing body, authorise such Person as
itthinks
fit to act
as
its representative at
any meeting of
the Company or
of
any
class of
Members, and
the
Person so
authorised shall be
entitled to exercise
the
same powers on
behalf of
the
corporation which he
represents as
the
corporation
could exercise
ifit were an
individual Member.
SHARES THAT MAY NOT BE VOTED
86
Shares in the Company that
are beneficially owned by
the Company shall not be
voted, directly or
indirectly, at
any meeting and shall not be
counted in
determining
the
total number of
outstanding Shares at
any given time.
DIRECTORS
87
There shall be a board of
Directors consisting of
five members. Two of
the
five
Directors will automatically and at
all
times be
the WaMu LLC Designated
Directors. The other three Directors shall be
the "Ordinary Directors". For
purposes ofthe foregoing:
( k)
"WaMu LLC Designated Directors" means, on any day, the two
natural Persons most recently identified by WaMu LLC to the
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,..
( Company in writing as
the
members of
WaMu LLC's Board of
Managers that shall be
Directors of
the
Company, one of
whom
shall be
the individual who is the
" Independent Manager" of
WaMu LLC within
the
meaning of
the WaMu LLC Agreement;
( 1)
" Ordinary Directors"
are
the
three Directors elected from time-
to-
time by
the
holders of
the
Ordinary Shares in accordance with
these Articles; and
( m)
The WaMu LLC Designated Director who is the
" Independent
Manager" of WaMu LLC
for
purposes of
the WaMu LLC
Agreement, as
most recently identified by WaMu LLC to the
Company in writing (except as
provided below), shall be
the
" Independent Director" of
the Company.
If ( x) WaMu LLC fails to pay full dividends on
the WaMu LLC Preferred
Securities or
on
its Fixed-
to-
Floating Rate Perpetual Non- cumulative Preferred
Securities, liquidation preference $1,000 pe
rsecurity, o
n
any dividend payment
date
for
such securities determined in accordance with the WaMu LLC
Agreement, ( y)
the Company fails to pay full dividends on
the
Preferred
Securities on any Dividend Payment Date or
( z)
a Bankruptcy Event occurs, then
( i) under the WaMu LLC Agreement the
holders of
the WaMu LLC Preferred
Securities and the
Fixed- to-
Floating Rate Perpetual Non- cumulative Preferred
Securities of
WaMu LLC, voting as
a single class, will be
entitled to remove the
Person who has been
the
Independent Manager of WaMu LLC from
his office as
both a member ofWaMu LLC's Board of
Managers and
its Independent Manager
and replace such Person in such capacities with a natural Person elected by
such
securityholders, (
ii)
in order to give effect to the
rights of
the
Preferred
Securityholders to direct the manner in which
the Company exercises
its voting
rights on
such matter,
the Company shall give a notice and
act
in accordance with
the
provisions of
Article 9(
e),
and (
iii) effective upon the
Person so
elected or
nominated becoming the
Independent Manager of
WaMu LLC, such Person shall
also become
the
Independent Director of
the Company.
POWERS OF DIRECTORS
88
Subject to the
provisions of
the
Statute, the Memorandum and these Articles
(including Article
89
)
and to any directions given by Special Resolution,
the
business of
the
Company shall be
managed by
the
Directors who may exercise all
the
powers of
the
Company. No
alteration of
the
Memorandum or
Articles and no
such direction shall invalidate any prior act
of
the
Directors which would have
been valid if that alteration had not been made or
that direction had not been
given. A duly convened meeting of
Directors at
which a quorum is present may
exercise
all powers exercisable by
the
Directors.
89 Notwithstanding
the
provisions of
Article 88 and any other provisions of
these
Articles, the
Directors shall no
t
have the
power, without the
prior Consent of
the
Independent Director and the
approval of
a majority of
the
Directors, to ( i)
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repurchase any Ordinary Shares or
(
ii)
to the
extent within the power of
the
Directors, convert or
approve
the
conversion of
the Company into another type of
entity or
the consolidation or
merger of
the Company with or
into any other
entity,
the
consolidation or
merger of
any other entity with or
into
the
Company,
or
the
sale by
the Company of
any of
its
assets.
All cheques, promissory notes, drafts, bills of
exchange and other negotiable
instruments and
all
receipts
for
monies paid to the Company shall be
signed,
drawn, accepted, endorsed or
otherwise executed as
the case may be
in such
manner as
the
Directors shall determine by
resolution.
Subject to the
Memorandum,
the
Directors may exercise
all
the
powers of
the
Company to borrow money and to mortgage or
charge
its undertaking, property
and uncalled capital or
any part thereof and to issue debentures, debenture stock,
mortgages, bonds and other such securities whether outright or
as
security for
any
debt, liability or
obligation of
the Company or
of
any third party ..
APPOINTMENT AND REMOVAL OF
DIRECTORS
92 The Company may by
Ordinary Resolution appoint any Person to be
an
Ordinary
Director or
may by
Ordinary Resolution remove any Director.
93 The Directors may appoint any Person to be
an
Ordinary Director, either to fill a
vacancy or
as
an additional Ordinary Director provided that
the
appointment does
not
cause
the
number of
Directors to exceed any number fixed by
or
in
accordance with these Articles as
the maximmn nmnber of
Ordinary Directors.
94 WaMu LLC Designated Directors may be
appointed and removed only In
accordance with Article
87.
VACATION OF
OFFICE OF
DIRECTOR
95 The office of
a Director shall be
vacated
if:
95.1 he
gives notice in writing to the Company that he
resigns
the
office of
Director; or
95.2 if he
absents himself (without being represented by
proxy or
an
alternate Director
appointed by him) from three consecutive meetings of
the
board of
Directors
without special leave of
absence from the
Directors, and
they pass a resolution
that he
has
by
reason of
such absence vacated office; or
95.3 if he
dies, becomes bankrupt or
makes any arrangement or
composition with
his
creditors generally; or
95.4 ifhe is found to be
or
becomes of
unsound mind; or
95.5 in the
case of
Ordinary Directors, if all
the other Ordinary Directors of
the
Company (being not less than two in nmnber) resolve that he
should be removed
as
an Ordinary Director.
PROCEEDINGS OF DIRECTORS
96 The quorum
for
the
transaction of
the business of
the Directors may be
fixed by
the
Directors, and unless so
fixed shall be two if there
are two or
more Directors,
and shall be one if there is only one Director; provided, however, that a quorum
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for
the
transaction of
the
business of
the Directors will not exist without
the
presence of
the
Independent Director. A Person who holds office as
an
alternate
Director shall, if his appointor is not
present, be
counted in the quorum. ADirector who also acts a
s
an
alternate Director shall, if his appointor is not
present, count twice towards
the
quorum.
97
Subject to the
provisions of
the
Articles,
the
Directors may regulate their
proceedings as they think
fit. Questions arising at
any meeting shall be decided
by
a majority of
votes. In the case of
an
equality of
votes,
the
chairman shall have
a second or
casting vote. A Director who is also an
alternate Director shall be
entitled in the
absence of
his
appointor to a separate vote on
behalf of
his
appointor in addition to his own vote.
98 A Person may participate in a meeting of
the
Directors or
committee of
Directors
by
conference telephone or
other communications equipment by
means of
which
all
the
Persons participating in the
meeting can communicate with each other at
the
same time. Participation by a Person in a meeting in this manner is treated as
presence in Person at
that meeting. Unless otherwise determined by
the
Directors
the meeting shall be deemed to be
held at
the
place where the chairman is at
the
start of
the
meeting.
99 A resolution in writing ( in one or
more counterparts) signed by
all
the
Directors or
all
the
members of
a committee of
Directors ( an
alternate Director being entitled
to sign such a resolution on
behalf of
his appointor) shall be
as
valid and effectual
as
if it had been passed at
a meeting of
the
Directors, or
committee of
Directors as
the
case may
be
,
duly convened and held.
100 A Director or
alternate Director may, or
other officer of
the
Company on
the
requisition of
a Director or
alternate Director shall, call a meeting of
the
Directors
by
at
least two days' notice in writing to every Director and alternate Director
which notice shall
se
t
forth the general nature of
the
business to be
considered
unless notice is waived by
all
the
Directors ( or
their alternates) either
at,
before or
after
the
meeting is held.
101 The continuing Directors may
act
notwithstanding any vacancy in their body, but
if and so long as
their number is reduced below
the
number fixed by
or
pursuant
to these Articles as
the
necessary quorum of
Directors
the
continuing Directors or
Director may
act
for
the
purpose of
increasing
the
number of
Directors to that
number, or
of
summoning a general meeting of
the
Company, but
for
no
other
purpose.
102 The Directors may elect a chairman of
their board and determine the period
for
which he
is to hold office; but if no
such chairman is elected, or
if at
any meeting
the
chairman is no
t
present within five minutes after the
time appointed for
holding the
same, the
Directors present may choose one of
their number to be
chairman of
the
meeting.
103
All
acts done by
any meeting of
the
Directors or
of
a committee of
Directors
(including any Person acting as
an
alternate Director) shall, notwithstanding that it
be
afterwards discovered that there was some defect in the
appointment of
any
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Director or
alternate Director, or
that they or
any of
them were disqualified, be
as
valid as
if every such Person had been duly appointed and qualified to be a
Director or
alternate Director as
the
case may be
.
l04 A Director
but
not an
alternate Director may be
represented at
any meetings of
the
board of
Directors by
a proxy appointed in writing by
him. The proxy shall count
towardsth
equorum and the vote o
f
the proxy shall
for
all
purposes be deemed to
be
that ofthe appointing Director.
PRESUMPTION OF ASSENT
l05 A Director of
the Company who is present at
a meeting of
the
board of
Directors
at
which action on any Company matter is taken shall be presumed to have
assented to the
action taken unless
his dissent shall be entered in the
minutes of
the
meeting or
unless he
shall file
his written dissent from such action with
the
Person acting as
the
chairman or
secretary of
the
meeting before
the
adjournment
thereof or
shall forward such dissent by
registered post to such Person
immediately after the
adjournment of
the
meeting. Such right to dissent shall no
t
apply to a Director who voted in favour of
such action.
DIRECTORS' INTERESTS
l06 A Director may hold any other office or
place of
profit under
the Company (other
than
the
office of
Auditor) in conjunction withhis office of
Director
for
such
period and on such terms as
to remuneration and otherwise as
the
Directors may
determine.
l07 A Director may
act
by
himself or
his firm in a professional capacity
for
the
Company and he
or
his firm shall be
entitled to remuneration
for
professional
services as
if he were not a Director or
alternate Director.
l08 A Director or
alternate Director of
the Company may be
or
become a director or
other officer of
or
otherwise interested in any company promoted by
the Company
or
in which
the Company may be interested as shareholder or
otherwise, and no
such Director or
alternate Director shall be
accountable to the Company
for
any
remuneration or
other benefits received by
him as
a director or
officer
of,
or
from
his
interest in,
such other company.
l09 No
Person shall be
disqualified from the office of
Director or
alternate Director or
prevented by
such office from contracting with
the
Company, either as
vendor,
purchaser or
otherwise, nor shall any such contract or
any contract or
transaction
entered into by
or
on behalf of
the Company in which any Director or
alternate
Director shall be
in any way interested be
or
be
liable to be
avoided, nor shall any
Director or
alternate Director so
contracting or
being so
interested be
liable to
account to the Company
for
any profit realised by
any such contract or
transaction
by
reason of
such Director holding office or
of
the
fiduciary relation thereby
established. A Director ( or
his
alternate Director in his absence) shall be
at
liberty
to vote in respect of
any contract or
transaction in which he
is interested provided
that
the
nature of
the
interest of
any Director or
alternate Director in any such
contract or
transaction shall be
disclosed by
him at
or
prior to its consideration
and any vote thereon.
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110 A general notice that a Director or
alternate Director is a shareholder, director,
officer or
employee of
any specified firm or
company and is to be
regarded as
interested in any transaction with such firm or
company shall be
sufficient
disclosure for
the
purposes of
voting on
a resolution in respect of
a contract or
transaction in which he has an
interest, and after such general notice it shall not be
necessary to give special notice relating to any particular transaction.
MINUTES
111 The Directors shall cause minutes to be made in books kept
for
the
purpose of
all
appointments of
officers made by
the
Directors,
all
proceedings at
meetings of
the
Company or
the
holders of
any class of
Shares and of
the Directors, and of
committees of
Directors including the
names of
the
Directors or
alternate
Directors present at
each meeting.
DELEGATION OF DIRECTORS' POWERS
112 The Directors may delegate any of
their powers to any committee consisting of
one or
more Directors; provided, however, that
the
Directors may
not
delegate to
any committee any of
the
powers reserved to the
Independent Director by Article
89
or
otherwise requiring
the
Consent of
the
Independent Director except with
the
consent of
the
Independent Director. They may also delegate to any managing
director or
any Director holding any other executive office such of
their powers as
they consider desirable to be
exercised by
him provided that an
alternate Director
may not
act
as
managing director and
the
appointment of
a managing director
shall be
revoked forthwith ifhe ceases to be a Director. Any such delegation may
be made subject to any conditions
the
Directors may impose, and either
collaterally with or
to the
exclusion of
their own powers and may be revoked or
altered. Subject to any such conditions,
the
proceedings of
a committee of
Directors shall be governed by
the
Articles regulating
the
proceedings of
Directors, so
far
as
they
are capable of
applying.
113 The Directors may establish any committees, local boards or
agencies or
appoint
any Person to be
a manager or
agent
for
managing
the
affairs of
the Company and
may appoint any Person to be a member of
such committees or
local boards. Any
such appointment may be made subject to any conditions
the
Directors may
impose, and either collaterally with or
to the exclusion of
their own powers and
may be
revoked or
altered. Subject to any such conditions,
the
proceedings of
any
such committee, local board or
agency shall be
governed by
the
Articles
regulating the
proceedings of
Directors, so
far
as
they are capable of
applying.
114 The Directors may by
power of
attorney or
otherwise appoint any Person to be
the
agent of
the Company on such conditions as
the Directors may determine,
provided that
the
delegation is no
t
to the
exclusion of
their own powers and may
be
revoked by
the
Directors at
any time.
115 The Directors may by
power of
attorney or
otherwise appoint any company, firm,
Person or
body of
Persons, whether nominated directly or
indirectly by
the
Directors, to be
the
attorney or
authorised signatory of
the Company
for
such
purpose and with such powers, authorities and discretions (not exceeding those
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( vested in or
exercisable by
the Directors under these Articles) and
for
such period
and subject to such conditions as they may think
fit, and any such powers of
attorney or
other appointment may contain such provisions for
the
protection and
convenience of
Persons dealing with any such attorneys or
authorised signatories
as
the
Directors may think fit and may also authorise any such attorney or
authorised signatory to delegate
all
or
any of
the
powers, authorities and
discretions vested in him.
116 The Directors may appoint such officers as
they consider necessary on
such
terms, at
such remuneration and to perform such duties, and subject to such
provisions as
to disqualification and removal as
the
Directors may think
fit.
Unless otherwise specified in the
terms of
his appointment an
officer may be
removed by
resolution of
the Directors or
Members.
ALTERNATE DIRECTORS
117 Any Director (other than an
alternate Director) may by
writing appoint any other
Director, or
any other Person willing to act, to be
an
alternate Director and by
writing may remove from office an
alternate Director so
appointed by
him.
118 An
alternate Director shall be
entitled to receive notice of
all meetings of
Directors and of
all
meetings of
committees of
Directors of
which
his appointor is
a member, to attend and vote at
every such meeting at
which
the
Director
appointing him is not
personally present, and generally to perform
all
the
functions of
his appointor as
a Director in his absence.
119 An
alternate Director shall cease to be
an
alternate Director if his
appointor ceases
to be
a Director.
120 Any appointment or
removal of
an
alternate Director shall be
by
notice to the
Company signed by
the
Director making or
revoking
the
appointment or
in any
other manner approved by
the
Directors.
121 An
alternate Director shall be deemed
for
all purposes to be a Director and shall
alone be
responsible
for
his own acts and defaults and shall not be deemed to be
the
agent of
the
Director appointing him.
NO MINIMUM SHAREHOLDING
122 The Company in general meeting may
fix a minimum shareholding required to be
held by
a Director, bu
t
unless and until such a shareholding qualification is fixed a
Director is not required to hold Shares.
REMUNERATION OF DIRECTORS
123 For so long as any Preferred Securities
are
outstanding,
the
Directors shall
no
t
be
entitled to any fees, other remuneration or
expense reimbursement from
the
Company in connection with their service as
Directors ( it being understood that
the WaMu LLC Directors will receive fees and expense reimbursement in their
capacity as
members of
the
Board of
Managers of
WaMu LLC and the Ordinary
Directors shall receive fees and expense reimbursement in their capacity as
employees of
the
Administrator). Thereafter,
the
remuneration to be paid to the
Directors, if any, shall be such remuneration as
the
Directors shall determine.
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Additionally, at
any time when no
Preferred Securities are outstanding, the
Directors shall also be
entitled to be
paid
all
travelling, hotel and other expenses
properly incurred by
them in connection with their attendance at
meetings of
Directors or
committees of
Directors, or
general meetings of
the
Company, or
separate meetings of
the holders of
any class of
Shares or
debentures of
the
Company, or
otherwise in connection with
the
business of
the
Company, or
to
receive a fixed allowance in respect thereof as
may be
determined by
the
Directors, or
a combination partly of
one such method and partly the other.
124 At
any time when no
Preferred Securities
are outstanding,
the
Directors may by
resolution approve additional remuneration to any Director
for
any services other
than
his ordinary routine work as
a Director. Any fees paid to a Director who is
also counselor solicitor to the Company, or
otherwise serves it in a professional
capacity shall be
in addition to his remuneration as
a Director.
SEAL
125 The Company may, if the
Directors so determine, have a Seal. The Seal shall only
be
used by
the
authority of
the
Directors or
of
a committee of
the
Directors
authorised by
the
Directors. Every instrument to which
the
Seal has been affixed
shall be
signed by
at
least one Person who shall be
either a Director or
some
officer or
other Person appointed by
the
Directorsfor
the
purpose.
126 The Company may have for
use in any place or
places outside the
Cayman Islands
a duplicate Seal or
Seals each of
which shall be a facsimile of
the common Seal of
the Company and, if the
Directors so
determine, with
the
addition on
its face of
the name of
every place where it is to be used.
127 A Director or
officer, representative or
attorney of
the
Company may without
further authority of
the
Directors affix
the
Seal over
his signature alone to any
document of
the Company required to be
authenticated by
him under seal or
to be
filed with
the
Registrar of
Companies in the Cayman Islands or
elsewhere
wheresoever.
DIVIDENDS, DISTRIBUTIONS AND RESERVE
128 Subject to the Statute and
the
other provisions of
these Articles ( including Article
9),
the
Directors may declare dividends and distributions on Shares in issue and
authorise payment of
the
dividends or
distributions ou
t
of
the
funds of
the
Company lawfully available therefor. No
dividend or
distribution shall be
paid
except out of
the
realised or
umealised profits of
the
Company, or
out of
the
share
premium account or
as
otherwise permitted by
the
Statute.
129 Except as
otherwise provided by
the
rights attached to Shares ( it being understood
that the first sentence of
this Article 129 shall
not
apply to the
Preferred
Securities),
all dividends shall be declared and paid according to the
pa
r
value of
the
Shares that a Member holds. If any Share is issued on
terms providing that it
shall rank
for
dividend as
from a particular date, that Share shall rank
for
dividend
accordingly.
130 Subject to Article 9(
b)
with respect to dividends on
the Preferred Securities, the
Directors may deduct from any dividend or
distribution payable to any Member
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(
all sums of
money ( if any) then payable by
him to the Company on
account of
calls or
otherwise.
131 Subject to Article 9(
b)
with respect to dividends on
the
Preferred Securities,
the
Directors may declare that any
dividend or
distribution be
paid wholly or
partly
by
the
distribution of
specific assets and in particular of
shares, debentures, or
securities of
any other company or
in anyone or
more of
such ways and where
any difficulty arises in regard to such distribution,
the
Directors may settle the
same as
they think expedient and in particular may issue fractional Shares and
fix
the
value
for
distribution of
such specific assets or
any part thereof and may
determine that cash payments shall be made to any Members upon
the
basis of
the
value so
fixed in order to adjust the
rights of
all Members and
may vest any such
specific assets in trustees as may seem expedient to the Directors.
132 Any dividend, distribution, interest or
other monies payable in cash in respect of
Shares may be
paid by
wire transfer to the
holder or
by
cheque or
warrant sent
through the post directed to the registered address of
the holder
or,
in the
case of
joint holders, to the
registered address of
the
holder who is first named on
the
Register of
Members or
to such Person and to such address as
such holder or
joint
holders may in writing direct. Every such cheque or
warrant shall be made
payable to the
order of
the Person to whom it is sent. Anyone of
two or
more
joint holders may give effectual receipts
for
any dividends, bonuses, or
other
monies payable in respect of
the Share held by
them as
joint holders.
Notwithstanding
the
foregoing,
for
so
long as
the Preferred Securities
are Book-
Entry Preferred Securities, the Company shall pay dividends on
the
Preferred
Securities by
wire transfer of
Federal (same day) funds to the
Clearing Agency at
such bank account of
the
Clearing Agency as
shall be designated from time to
time by
the
Clearing Agency to the
Company.
133 No
dividend or
distribution shall bear interest against
the
Company.
134 Any dividend which cannot be
paid to a Member and/ or
which remains unclaimed
after six months from the
date of
declaration of
such dividend may, in the
discretion of
the
Directors, be
paid into a separate account in the
Company's
name, provided that the Company shall not be
constituted as
a trustee in respect of
that account and the Dividend shall remain as
a debt due to the
Member. Any
dividend which remains unclaimed after a period of
six years from
the
date of
declaration of
such dividend shall be
forfeited and shall revert to the Company.
CAPIT ALISA nON
135 The Directors may capitalise any sum standing to the
credit of
any of
the
Company's reserve accounts ( including share premium account and capital
redemption reserve fund) or
any sum standing to the
credit of
profit and loss
account or
otherwise available
for
distribution and to appropriate such sum to
Members in the
proportions in which such sum would have been divisible
amongst them had
the
same been a distribution of
profits by way of
dividend and
to apply such sum on
their behalf in paying up
in full unissued Shares
for
allotment and distribution credited as
fully paid- up
to and amongst them in the
proportion aforesaid. In such event
the
Directors shall do
all
acts and things
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required to give effect to such capitalisation, with full power to the
Directors to
make such provisions as
they think fit
for
the
case of
Shares becoming
distributable in fractions (including provisions whereby the
benefit of
fractional
entitlements accrue to the Company rather than to the Members concerned). The
Directors may authorise any Person to enter on
behalf of
all
of
the Members
interested into an agreement with
the Company providing
for
such capitalisation
and matters incidental thereto and any agreement made under such authority shall
be effective and binding on
all concerned.
BOOKS OF ACCOUNT
136 The Directors shall cause proper books of
account to be
kept with respect to all
sums of
money received and expended by
the Company and
the
matters in respect
of
which
the
receipt or
expenditure takes place,
all
sales and purchases of
goods
by
the Company and the assets and liabilities of
the
Company. Proper books shall
not be deemed to be
kept if there are not kept such books of
account as
are
necessary to give a true and fair view of
the state of
the Company's affairs and to
explain
its transactions.
137 The Directors shall from time to time determine whether and to what extent and at
what times and places and under what conditions or
regulations
the
accounts and
books of
the Company or
any of
them shall be open to the
inspection of
Members
not being Directors and no Member (
not
being a Director) shall have any right of
inspecting any account or
book or
document of
the Company except as
conferred
by
Statute or
authorised by
the
Directors or
by
the Company in general meeting.
138 The Directors may from time to time cause to be
prepared and to be
laid before
the Company in general meeting profit and loss accounts, balance sheets, group
accounts ( if any) and such other reports and accounts as may be required by law.
AUDIT
139 The Directors may appoint an
Auditor of
the Company who shall hold office until
removed from office by
a resolution of
the
Directors, and may
fix
his
or
their
remuneration.
140 Every Auditor of
the Company shall have a right of
access at
all
times to the
books and accounts and vouchers of
the Company and shall be
entitled to require
from the Directors and officers of
the Company such information and explanation
as may be necessary
for
the
performance of
the
duties of
the
Auditor.
141 Auditors shall, if so required by
the
Directors, make a report on
the
accounts of
the Company during their tenure of
office at
the
next annual general meeting
following their appointment in the
case of
a company which is registered with
the
Registrar of
Companies as
an
ordinary company, and at
the next extraordinary
general meeting following their appointment in the
case of
a company which is
registered with
the
Registrar of
Companies as
an exempted company, and at
any
other time during their term of
office, upon request of
the
Directors or
any general
meeting of
the Members.
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(- NOTICES
142 Notices shall be
in writing and may be
given by
the Company to any Member
either personally or
by sending it by courier, post, cable, telex,
fax
or
e-
mail to
him or
to his
address as
shown in the
Register of
Members ( or
where the
notice is
given bye-mail by
sending it to the
e-
mail address provided by
such Member);
provided that any notice to Preferred Securityholders, with respect to redemption
of
Preferred Securities or
their voting or
consensual rights shall in each case be
mailed, by
first class mail, postage prepaid, to the
holders of
Preferred Securities
of
record at
the
respective last addresses appearing on
the
Register of
Members.
Any notice, if posted from one country to another, is to be sent airmail.
143 Where a notice is sent by courier, service of
the
notice shall be deemed to be
effected by
delivery of
the
notice to a courier company, and shall be deemed to
have been received on
the third day (not including Saturdays or
Sundays or
public
holidays) following the
day on
which the
notice was delivered to the
courier.
Where a notice is sent by
post, service of
the
notice shall be deemed to be
effected
by
properly addressing, pre-paying and posting a letter containing the notice, and
shall be deemed to have been received on
the
fifth day (
not
including Saturdays or
Sundays or
public holidays) following
the
day on which
the
notice was posted.
Where a notice is sent by
cable, telex or
fax, service of
the
notice shall be deemed
to be
effected by
properly addressing and sending such notice and shall be
deemed to have been received on
the
same day that it was transmitted. Where a
notice is given bye- mail service shall be deemed to be
effected by
transmitting
the
e-
mail to the
e-
mail address provided by
the
intended recipient and shall be
deemed to have been received on
the
same day that it was sent, and it shall not be
necessary
for
the
receipt ofthe e-
mail to be acknowledged by the recipient.
144 A notice may be given by
the Company to the
Person or
Persons which
the
Company has been advised
are entitled to a Share or
Shares in consequence of
the
death or
bankruptcy of
a Member in the
same manner as
other notices which
are
required to be
given under these Articles and shall be
addressed to them by
name,
or
by
the
title of
representatives of
the
deceased, or
trustee of
the
bankrupt, or
by
any like description at
the
address supplied
for
that purpose by
the
Persons
claiming to be
so
entitled, or
at
the option of
the Company by
giving the notice in
any manner in which
the
same might have been given if the
death or
bankruptcy
had
no
t
occurred.
145 Notice of
every general meeting shall be
given in any manner hereinbefore
authorised to every Person shown as
a Member in the
Register of
Members on
the
record date
for
such meeting except that in the
case of
joint holders
the
notice
shall be
sufficient if given to the
joint holder first named in the
Register of
Members and every Person upon whom
the
ownership of
a Share devolves by
reason of
his being a legal personal representative or
a trustee in bankruptcy of
a
Member of
record where
the Member of
record but
for
his death or
bankruptcy
would be
entitled to receive notice of
the
meeting, and no
other Person shall be
entitled to receive notices of
general meetings.
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146 Notwithstanding
the
provisions of
the
foregoing Articles 142 to 145,
for
so long
as
any Series A-
2 Preferred Securities are listed on
the
Euro MTS Market of
the
Luxembourg Stock Exchange and such exchange so
requires,
the Company will
publish any notice given to holders of
Series A-
2 Preferred Securities in one
English language newspaper that is a daily newspaper of
general circulation in
Luxembourg (expected initially to be
the Luxemburger Wort).
WlNDINGUP
147 Subject to Article 9(
d)
with respect to the
Preferred Securities, if the Company
shall be wound
up
,
and
the
assets available
for
distribution amongst
the
Members
shall be
insufficient to repay the whole of
the share capital, such assets shall be
distributed so
that, as
nearly as may
be,
the
losses shall be
borne by
the Members
in proportion to the
par
value of
the
Shares held by
them. If in a winding up
the
assets available for
distribution amongst the
Members shall be
more than
sufficient to repay
the
whole of
the
share capital at
the
commencement of
the
winding up,
the
surplus shall be
distributed amongst
the Members in proportion to
the
pa
r
value of
the
Shares held by them at
the
commencement of
the
winding up
subject to a deduction from those Shares in respect of
which there
are
monies due,
of
all monies payable to the Company
for
unpaid calls or
otherwise. This Article
is without prejudice to the
rights of
the
holders of
Shares issued upon special
terms and conditions (including Article 9(
d)
as
to the
Preferred Securities).
148 If the Company shall be wound up
the liquidator may, with the sanction of
a
Special Resolution of
the Company and any other sanction required by
the
Statute, divide amongst
the Members in kind
the
whole or
any part of
the
assets of
the Company (whether they shall consist of
property of
the
same kind or
not) and
may
for
that purpose value any assets and determine how
the
division shall be
carried out as
between the Members or
different classes of
Members. The
liquidator may, with the
like sanction, vest the
whole or
any part of
such assets in
trustees upon such trusts for
the
benefit of
the
Members as
the
liquidator, with the
like sanction, shall think
fit, but so
that no Member shall be compelled to accept
any asset upon which there is a liability.
INDEMNITY
149 Every Director, agent or
officer of
the Company shall be indemnified
ou
t
of
the
assets of
the Company against any liability incurred by
him as
a result of
any
act
or
failure to act
in carrying out
his functions other than such liability ( if any) that
he may incur by
his own wilful neglect or
default. No
such Director, agent or
officer shall be
liable to the Company
for
any loss or
damage in carrying out
his
functions unless that liability arises through
the
wilful neglect or
default of
such
Director, agent or
officer.
FINANCIAL YEAR
150 Unless
the
Directors otherwise prescribe, the financial year of
the Company shall
end on
31
st
December in each year and, following
the
year of
incorporation, shall
begin on
1st
January in each year.
TRANSFER BY WAY OF CONTINUATION
NPB/ 6165251l600336/ v2
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46
151 If the Company is exempted as
defined in the
Statute, it shall, subject to the
provisions of
the
Statute and with
the
approval of
a Special Resolution, have
the
power to register by
way of
continuation as
a body corporate under the laws of
any jurisdiction outside
the Cayman Islands and to be
deregistered in the Cayman
Islands.
CERTIFIED TO
BE A TRUE AND CORRECf COpy
SIG..
_~
~
NEYD/ S TAVERAS
Am Rtgillrar of
C9Illpuits
Dat~ < iR / tJJkCb, JoDb-,
NPB/ 616525/ 1600336/ v2
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002065.00052
Exhibit A
WASHINGTON MUTUAL BANK
Board of
Directors Resolutions
WHEREAS, Washington Mutual Bank (the "Bank") indirectly owns
all
of
the issued and
outstanding common stock of
University Street, Inc. (" University Street");
WHEREAS, it is proposed that the Bank will make a contribution to University Street to
consist of
loans or
interests thereon not to exceed $1.2 billion in book value (the "University
Street Contribution) in exchangefo
r
preferred stock issued by
University Street;
WHEREAS, University Street proposes to cause the formation of
a Delaware limited
liability company (the "LLC") and in connection therewith University Street and the Bank will
contribute to the LLC assets of
approximately $5 billion, with the Bank's portion (
the
" LLC
Contribution") to consist of
loans or
interests therein not to exceed $1.0 billion in book value;
WHEREAS, in exchange
for
such contributions, University Street
will
receive
substantially
all
of
the common interests of
the LLC and the Bank or
its designee will receive
two classes or
series preferred stock of
the LLC (" LLC Preferred Interests");
WHEREAS, it is proposed that the LLC Preferred Interests
will
be
transferred by WMB or
its designee to two special purpose entities (" SPEs") which in turn will issue substantially similar
securities (the "SPE Securities") to investors; and
WHEREAS, it is proposed that the Bank's parent, Washington Mutual, Inc. ("WMI"), will
authorize two series of
preferred stock (the "WMI Preferred Stock")
for
which under certain
circumstances each class of
SPE Securities will be automatically exchanged.
THEREFORE, IT IS HEREBY RESOLVED, that the University Street Contribution and
the LLC Contribution are hereby authorized and approved, and any Authorized Officer ( as
defined below) is hereby authorized on behalf of
the Bank to negotiate, execute and deliver any
agreements or documents as such Authorized Officer deems necessary or
appropriate in
connection with the University Street Contribution or
the LLC Contribution.
RESOLVED FURTHER, that
the
Bank is hereby authorized to transfer, or
to cause
its
designee to transfer, the LLC Preferred Interests to the SPEs in exchange
for
cash and any
Authorized Officer is hereby authorized on behalf of
the Bank to negotiate, execute and deliver
any agreements or documents as such Authorized Officer deems necessary or
appropriate in
connection with such transfers;
,
RESOLVED FURTHER, each of
the Authorized Officers is her~ by
authorized on behalf
of
the Bank to negotiate, execute and deliver any agreements with the LLC as such Authorized
Officer deems necessary or
appropriate in connection with the management, operation or
administration of
the LLC;
RESOLVED FURTHER, that the Authorized Officers, or
any of
them, are authorized and
empowered, on behalf of
the Bank and in its name, with
fu
ll power and authority to delegate
such authority to one or
more attorneys-
in-
fact or
agents acting
for
such Authorized Officers, or
any of
them, in the event that it is deemed necessary or
desirable so
to do, in connection with
the offering of
the Preferred Stock, the LLC Preferred Interests or
the SPE Securities in a
127695.1
WM: CONFIDENTIAL LIMITED ACCESS
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002081.00001
private/ Regulation S offering, to prepare, cause to be
prepared or
to participate in the
preparation of,
an
offering circular or
offering memorandum with respect to such securities (and
any supplements or
amendments thereto), as
the Authorized Officers, or
any of
them, taking
such action shall approve in connection therewith in order to effect the offering of
such
securities in a private/ Regulation S offering;
RESOLVED FURTHER, that any Authorized Officer, together with other proper officers
of
the Bank (including, without limitation, those authorized from time to time pursuant to the
Bank's Asset and Liability Management Policy and the standards and procedures from time to
time in effect thereunder), is hereby authorized to negotiate, enter into, execute and deliver any
and
all
additional agreements, any undertakings or
other documents or
supplemental
agreements on
behalf of
the Bank ( including, without limitation, filings or
applications with
banking regulators, securities regulators or
stock exchanges, domestic or
foreign) and to take
any other actions, in each case, as
such Authorized Officer or
other proper officer deems to be
necessary or
advisable in connection with the issuance of
the University Street Contribution, the
LLC Contribution or
the transfers of
the LLC Preferred Interests or
to further the intent of
these
resolutions; and
RESOLVED FURTHER, that for
purposes of
these resolutions and the transactions
contemplated hereby, each of
the following shall be
an
" Authorized Officer": ( i) the Chief
Executive Officer, (
ii) the Chief Operating Officer, (
iii) the Chief Financial Officer, (
iv)
any Senior
Executive Vice President, ( v)
any Executive Vice President, (
vi) the Senior Vice President and
Treasurer, (vii) the Senior Vice President and Assistant Treasurer and (viii) the Senior Vice
President and Controller.
127695 v1
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/
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/
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Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002081.00002
ASSISTANT SECRETARY'S CERTIFICATE
OFWASHINGTON MUTUAL, INC.
March 7,
2006
The undersigned, a duly qualified and acting Assistant Secretary of
Washington Mutual,
Inc., a Washington corporation ( the "Company"), does hereby certify as
follows:
1.
Attached hereto as
Exhibit A-
1 is a true, complete and correct copy of
the
Amended and Restated Articles of
Incorporation of
the
Company as
of
the open of
business on
March 6,
2006 and certified on such date by
the Secretary of
State of
the state of
Washington
(the "Secretary of
State"). Except for
two sets of
articles of
amendment filed on March 6,
2006
with the Secretary of
State which are attached hereto as
Exhibits A-
2 and A-
3,
there have been
no amendments or
other documents relating to or
affecting the Amended and Restated Articles
of
Incorporation filed with the Secretary of
State of
the State of
Washington since the date of
the
attached certification, and no amendments have been authorized or
approved by
the board of
directors of
the Company (the " Board"), or
its
shareholders, as
of
the date hereof, nor has any
action been taken by
the Board, the Company or
its shareholders in contemplation of
the
liquidation or
dissolution of
the Company or
any other material development~.
2.
Attached hereto as
Exhibit B-
1 is a true, complete and correct copy of
the
currently effective Bylaws of
the Company. Except as
set forth on
Exhibit B-
2 attached hereto,
such Bylaws have not been modified, amended or
rescinded and remain in full force and effect
as
of
the date hereof.
3.
Attached hereto as
Exhibit C is a true, complete and correct copy of
a certificate
issued by
the Secretary of
State of
the State of
Washington with respect to the due
incorporation and legal existence of
the Company.
4.
Attached hereto as
Exhibit 0-
1 is a true, complete and correct copy of
the
resolutions ( the
"Resolutions") duly adopted by
the
Board at
meetings duly called and held on
January 17
,
2006 and February 21
,
2006, in each case at
which a quorum was present and
acting throughout, approving and authorizing, among other things, the
transactions described
therein relating to ( i) the
authorization and reservation of
the
Series I Perpetual Non- cumulative
Fixed- to-
Floating Rate Preferred Stock and the Series J Perpetual Non- cumulative Fixed Rate
Preferred Stock (together, the
"Preferred Stock") and the
filing of
articles of
amendment with
respect thereto, and ( ii)
the
offer and sale of
( a)
$1,250,000,000 of
Fixed- to-
Floating Rate
Perpetual Non- cumulative Trust Securities, liquidation preference $100,000 pe
r
security ("
Trust
Securities"), by
Washington Mutual Preferred Funding Trust I, and ( b)
( i) $302,300,000 of
7.25% Perpetual Non- cumulative Preferred Securities, Series A-
1,
liquidation preference
$100,000 per security, and ( ii) $447,700,000 of
7.25% Perpetual Non- cumulative Preferred
Securities, Series A-
2,
liquidation preference $10,000 pe
r
security, in each case by
Washington
Mutual Preferred Funding (Cayman) I Ltd. Except as
set forth on
Exhibit 0-
2,
the Resolutions
attached hereto as
Exhibit 0-
1 have not been amended, supplemented, modified, revoked or
rescinded and have been in fu
ll
force and effect since their adoption to and including the
date
hereof and are now in fu
ll
force and effect and the
Resolutions as
so amended as
set
forth on
Exhibit 0-
2 are the
only resolutions adopted by
the Board or
any committee thereof relating to
the
Preferred Stock or
the
Securities. Attached hereto as
Exhibits 0-
2,
0-
3 and 0-
4 are true,
complete and correct copies of
the actions of
Authorized Officers effected pursuant to the
17357747 WMI Assistant Secretary's Certificate
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00001
Resolutions relating, respectively, to the pricing, articles of
amendment and forms of
certificates
for
the Preferred Stock. Each such action remains in full force and effect.5.
Attached hereto as
Exhibit E is a list of
duly elected or
appointed, qualified and
acting officers of
the Company (the "Authorized Officers"), holding the titles indicated next to
their respective names, and the signatures appearing opposite their respective names are the
true and genuine signatures of
such Authorized Officers, and each such Authorized Officer is
duly authorized to execute and deliver, on
behalf of
the Company, the agreements, documents
and other instruments related to the transactions more specifically described in or
contemplated
by
the Resolutions and was so
duly authorized at
the time of
signing and delivery of
any such
agreements, documents or
other instruments signed and delivered prior to the date hereof, and
the signatures of
such .Authorized Officers appearing on such agreements, documents or
other
instruments are the genuine signatures.
[Signature Pages to Follow]
17357747 WMI Assistant Secretwy's Certificate
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00002
INWITNESS WHEREOF, the undersigned has signed this Certificate a
s
of
the date first
hereinabove written. ~ IJ /
By:
j!~
Name: Susan Taylor
Title: Assistant Secretary
I, Sophie Hager Hume, an
Assistant Secretary, hereby certify that Susan Taylor is a duly
elected, qualified and acting Assistant Secretary of
the Company as
of
the date hereof and that
the signature set
forth opposite his name is his genuine signature.
~~ me $ M!
ft+~Title: Assistant Secretary
IN WITNESS WHEREOF, I have hereunto signed my name as
of
the date first
hereinabove written.
17357747WMJAssistant Secretary's Certificate
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00003
EXHIBIT AI
Amended and Restated Articles of Incorporation
17357747 WMI Assistant Secretarys Certificate
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00004
I, Sam Reed, Secretary of
State of
the State of
Washington and custodian of
its
seal,
hereby issue this
certificate that the attached is a true and correct copy of
ARTICLES OF AMENDMENT
of
WASHINGTON MUTUAL, INC.
as
filed in this office on
February 8,
2001.
Date: March 6,
2006
Given under my hand and
the Seal of
the
State
of
Washington at
Olympia.
the
State Capital
Sam Reed, Secretary of
State
""
l{\
n n(\ 1
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00005
~....
Secretary of
State
I, Sam Reed, Secretary of
State of
the
State of
Washington and custodian of
its
seal,
hereby issue this
ARTICLES OF AMENDMENTto
WASHINGTON MUTUAL, INC.
a Washington Profit Corporation. Articles of
Amendment were filed
for
record in this office on
the
date indicated below.
UBI Number: 601 566389
:~
Date: February 8,
2001
Effective Date:
Given under my hand and
the Seal of
the
State of
Washington at
Olympia,
cFirn~
Sam Reed, Secretary of
State
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00006
043-
1663,
0
20
01
ARTICLES OF AMENDMENT
TO THE
FIl.
ED
STATE OF
WASI- IIM~ TON
FE
B
08 2001 ~
'
cr.
RETARY OF
STATe
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WASIDNGTON MUTUAL, INC.
Pursuant to the provisions of
Chapter 23B. 10 and Section 23B. 06.020 of
the
Washington Business Corporation Act, Washington Mutual, Inc., a Washington
corporation, hereby adopts the
following articles of
amendment to its amended and
restated articles of
incorporation: .
FIRST: The name of
the
corporation
is:
Washington Mutual, Inc.
SECOND: The rights, preferences, privileges, restrictions and other matters
relating to the
Series H Preferred Stock of
the
corporation are as
follows:
1.
Designation. The designation of
this Series shall be
Series H Preferred Stock
(hereinafter referred to as
this " Series"), and
the
number of
shares constituting this Series
shall be 2,000,000. Shares of
this Series shall have a liquidation preference
of$
50
.
2.
Dividends. ( a)
The holders of
shares of
this Series shall be
entitled to receive
cash dividends, when, as
and if declared by
the
Board of
Directors, out of
funds legally
available
for
that purpose, at
the
rates
se
t
forth below in this Section 2.
Dividends on
the
shares of
this Series shall be
payable, when, as
and if declared by
the
Board of
Directors,
quarterly in arrears on February
16
,
May
16
,
August 16 and November 16
of
each year
(each, a "Dividend Payment Date"), commencing on
the
Initial Dividend Payment Date.
The " Initial Dividend Payment Date" shall mean
the
first Dividend Payment Date
following the effective date of
the
merger (the " Merger") of
Bank United Corp. with and
into
the
Company, or
if any such date is not a Business Day ( as
defined below),
the
next
succee!! ing Business Day. Each such dividend shall be
paid to the
holders of
record of
shares of
this Series as
they appear on
the
stock register of
the Company on
the
applicable Record Date, as
shall be fixed by
the
Board of
Directors; provided, however,
that holders of
shares of
this Series called for
redemption on
a Redemption Date falling
between
the
record date associated with a Dividend Payment Date and such Dividend
Payment Date shall receive
the
applicable dividend payment, together with
all
other
accumulated and unpaid dividends on
such date as
shall be
fixed
for
redemption.
Dividends on
the
shares ofthis Series shall accumulate and be
cumulative from the date
of
original issuance. " Business Day" shall mean any day other than a Saturday or
Sunday
or
a day on which banking institutions in New York City
are authorized or
required by
law or
executive order to remain closed.
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CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00007
02
04
03
1-
1563.
.
1
( b)
For each quarterly dividend period (each, a "Dividend Period") from
the
Initial Dividend Payment Date, through and including
the
Dividend Period ending August
16,2002, dividends payable on
the
shares of
this Series shall be
payable at
a'rate per
annum of
the
liquidation preference thereof equal to 7.25% (
the
" Initial Rate Period").
For each Dividend Period after
the
Initial Rate Period, dividends payable on
the
shares of
this Series shall be
payable at
a rate per annum of
the
liquidation preference thereof equal
to the
Reset Rate ( as
defined below). The amount of
dividends per share
for
each
Dividend Period shall be computed by
dividing the applicable rate
for
such Dividend
Period by
four and applying
the
resulting rate to the
liquidation preference per share of
this Series. Each Dividend Period (other than
the
Initial Dividend Period, defmed below)
shall commence on
a Dividend Payment Date and shall end on and include
the
day next
preceding
the
next Dividend Payment Date. The " Initial Dividend Period" shall mean
the
period commencing on
the
effective date of
the
Merger and ending on
the Initial
Dividend Payment Date.
( c)
Dividends payable on
this Seriesfor
any period greater or
less than a full
Dividend Period, other than
the
Initial Dividend Period, shall be computed on
the
basis of
a 360-day year consisting of
twelve 30- day months and,
for
any period less than one
month,
the
actual number of
days elapsed in the
period. In connection with
the
Merger,
the
shares of
Bank United Corp.'s Series B Preferred Stock (
the
" Predecessor Shares")
shall be
converted into shares of
this Series. Prior to the
completion of
the
Merger, the
board of
directors of
Bank United Corp. declared a dividend on
the
Predecessor Shares
payable on
the
Initial Dividend Payment Date. AB
successor to Bank United Corp.,
the
Company will pay on
the
Initial Dividend Payment Date
the
dividend declared
bu
t
not
paid on
the Predecessor Shares; provided that in no
event shall a holder of
this Series be
entitled to a dividend on
the
Initial Dividend Payment Date that is greater than such
holder would have been entitled to on
the
Initial Dividend Payment Date had
the
Merger
not been completed and the Predecessor Shares not been converted into shares of
this
Series.
( d)
No
full dividends shall be declared or
paid or
se
t
apart
for
payment on
the
Preferred Stock of
any series ranking, as
to dividends, on a parity with or
junior to this
Series
for
any period unless full cumulative dividends on
the shares of
this Series
for
all
full Dividend Periods ending on
or
prior to the
date of
such dividends on
such other series
ofPr. ef!
lrred Stock have been or
contemporaneously are declared and paid or
declared and
a sum sufficient
for
the
payment thereof
se
t
apart
for
such payment. When dividends are
not paid in full, as
aforesaid, upon
the
shares of
this Series and any other series of
Preferred Stock ranking on a parity as
to dividends with this Series,
all dividends
declared upon shares of
this Series and any other series of
Preferred Stock ranking on
a
parity as
to dividends with this Series shall be
declared pro rata so
that
the
amount of
dividends declared
per
share on
this Series and such other Preferred Stock shall in all
cases bear to each other the same ratio that accrued and unpaid dividends per share on
the
shares of
this Series and such other Preferred Stock bear to each other. No
interest, or
sum of
money in lieu of
interest, shall be payable in respect of
any dividend payment or
payments on
this Series which may be
in arrears.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00008
04
.3-
1663.
2
20
01
( e)
So
long as
any shares of
this Series are outstanding, no
dividend (other than a
dividend in Common Stock or
in any other stock ranking junior to this Series as
to
dividends and upon liquidation and other than as
provided in paragraph ( d)
of
this Section
2)
shall be
declared or
paid or
se
t
aside
for
payment or
other distribution declared or
made uponth
e Common Stock or
upon any other stock ranking junior to or
on a parity
with this Series as
to dividends or
upon liquidation, no
r
shall any Common Stock or
any
other stock of
the
Company ranking junior to or
on
a parity with this Series as
to
dividends or
upon liquidation be
redeemed, purchased or
otherwise acquired for
any
consideration ( or
any moneys be
paid to or
made available for
a sinking fund for
the
redemption of
any shares of
any such stock) by
the Company (except by
conversion into
or
exchange
for
stock of
the Company ranking junior to this Series as
to dividends and
upon liquidation), unless, in each case, full cumulative dividends on
all outstanding
shares of
this Series for
all
fu
ll
Dividend Periods ending on
or
prior to the
date of
such
other dividend, distribution, redemption, purchase or
other acquisition, shall have been or
contemporaneously are paid or
declared and a sum sufficient for
the
payment thereof set
aside
for
such payment.
3.
Remarketin~. ( a)
The dividend rate on this Series shall be reset to the
Reset
Rate on
the
Purchase Contract Settlement Date ( as
defmed below). The Company shall
request,
not
later than 15
nor more than 30
calendar days prior to the
Remarketing Date
( as
defined below), that
the
Depositary ( as
defined below) notifY the Holders of
shares of
this Series and the
holders of
Corporate PIES of
the
Remarketing and of
the
procedures
that must be
followed if a Holder of
Corporate PIES wishes to make a cash settlement of
its obligation to purchase Common Stock ofthe Company pursuant to the
Purchase
Contract Agreement.
( b)
Not later than 5:
00
p.
m., New York City time, on
the
seventh Business Day
preceding the
Purchase Contract Settlement Date, each Holder may elect to have the
shares of
this Series held by
such Holder remarketed in the
Remarketing. Holders of
Corporate PIES that do
not give notice of
their intention to make a cash settlement of
the
purchase contract component of
their Corporate PIES prior to such time in the
manner
specified in the
Purchase Contract Agreement, or
that give such notice
bu
t
fail to deliver
cash prior to 11: 00
a.
m., New York City time, on
or
prior to the fifth Business Day
preceding the
Purchase Contract Settlement Date, shall be
deemed to have consented to
the
disRosition of
the
shares of
this Series that are a component of
their Corporate PIES in
the
Remarketing. Holders of
the
shares of
this Series that
are not a component of
Corporate PIES. wishing to have their shares of
this Series remarketed shall give to the
Purchase Contract Agent notice of
their election prior to 11: 00
a.
m., New York City time
on such fifth Business Day. Any such notice shall be irrevocable and may
no
t
be
conditioned upon the
level at
which the
Reset Rate is established in the
Remarketing.
Promptly after 11: 00
a.
m.,
New York City time, on
such fifth Business Day, the
Purchase
Contract Agent, based on
the
notices received by
it prior to such time (including notices
from the
Purchase Contract Agent as
to purchase contracts for
which cash settlement has
been elected and cash received), shall notifY
the
Remarketing Agent of
the
number of
shares of
this Series to be
tendered
for
purchase in the
Remarketing.
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( c)
If any Holder of
shares of
this Series does
no
t
give a notice of
its intention to
make a cash settlement or
gives such notice bu
t
fails to deliver cash as
described in
Section 3(
b)
above, or
gives a notice of
election to have shares of
this Series'that are
no
t
a
component of
Corporate PIES remarketed, then the
shares of
this Series of
such Holder
shall be
deemed tendered for
purchase in the
Remarketing, notwithstanding any failure
by
such Holder to deliver or
properly deliver such shares to the
Remarketing Agent
for
purchase.
( d)
The right of
each Holder to have shares ofthis Series tendered
for
purchase
shall be
limited to the
extent that ( i) the
Remarketing Agent conducts a remarketing
pursuant to the
terms of
the
Remarketing Agreement, (
ii)
the
shares of
this Series
tendered have not been called
for
redemption, (
iii)
the
Remarketing Agent is able to find
a purchaser or
purchasers
for
the
tendered shares of
this Series and (
iv)
such purchaser or
purchasers deliver
the
purchase price therefor to the
Remarketing Agent.
( e)
On
the
Remarketing Date,
the
Remarketing Agent shall use commercially
reasonable efforts to remarket, at
a price equal to 100.50% of
the
aggregate liquidation
preference thereof,
the
shares of
this Series tendered or
deemed tendered
for
purchase.
( f)
If,
as a result ofthe efforts described in Section 3(
e),
the
Remarketing Agent
determines that it will be able to remarket
all
of
the
shares of
this Series tendered or
deemed tendered
for
purchase at
a price of
100.50% of
the
aggregate liquidation
preference of
such shares prior to 4:
00
p.
m., New York City time, on
the
Remarketing
Date,
the
Remarketing Agent shall determine
the
Reset Rate, which shall be
the
rate
per
annum (rounded to the
nearest one- thousandth (0.001) of
one percentper
annum) that the
Remarketing Agent determines, in its sole judgment, to be
the
lowest rate
per
annum that
will enable it to remarket
all
of
the
shares ofthis Series tendered or
deemed tendered
for
Remarketing.
( g)
If none of
the Holders of
the
shares of
this Series or
the
holders of
the
Corporate PIES elects to have shares of
this Series remarketed in the
Remarketing,
the
Reset Rate shall be
the
rate determined by
the Remarketing Agent,
in:
i. ts sole discretion,
as
the
rate that would have been established had a Remarketing of
all
the
shares of
this
Series been held on
the
Remarketing Date.
:( h)
If,
by
4:
00
p.
m.,
New York City time, on
the
Remarketing Date, the
Remarketing Agent is unable to remarket
all
of
the
Preferred Securities tendered or
deemed tendered for
purchase, a "Failed Remarketing" shall be
deemed to have occurred
and the Remarketing Agent shall so
advise by
telephone
the
Depositary and
the
Company. Inthe event of
a Failed Remarketing,
the
Reset Rate shall equal ( 1)
the
"AA"
Composite Commercial Paper Rate ( as defmed below), plus ( 2)
the
Applicable Margin
( as
defined below).
( i) By
approximately 4:
30
p.
m., New York City time, on
the Remarketing Date,
proVided that there has not been a Failed Remarketing,
the
Remarketing Agent shall
advise, by
telephone ( i) the
Depositary and
the Company of
the
Reset Rate determined in
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the Remarketing and
the
number of
shares of
this Series sold in the
Remarketing, (
ii)
each purchaser ( or
the Depositary Participant thereof) of
the
Reset Rate and
the
number
of
shares of
this Series such purchaser is to purchase and (
iii) each purchaserio give
instructions to its Depositary Participant to pay
the
purchase price on
the Purchase
Contract Settlement Date in same day funds against delivery of
the shares of
this Series
purchased through
the
facilities of
the
Depositary.
( j) In accordance with
the
Depositary's normal procedures, on
the
Purchase
Contract Settlement Date, the transactions described above with respect to each Preferred
Security tendered
for
purchase and sold in the
Remarketing shall be
executed through
the
Depositary, and
the
accounts of
the respective Depositary Participants shall be
debited
and credited and such shares of
this Series delivered by book- entry as necessary to effect
purchases and
sales of
such shares of
this Series. The Depositary shall make payment in
accordance with
its normal procedures.
( k)
If any Holder of
shares of
this Series selling shares of
this Series in the
Remarketing fails to deliver such shares, the Depositary Participant of
such selling holder
and of
any other Person that was to have purchased shares of
this Series in the
Remarketing may deliver to any such other Person a number of
shares of
this Series that
is less than the
number of
shares of
this Series that otherwise was to be
purchased by
such Person. In such event,
the
number of
shares of
this Series to be
so
delivered shall be
determined by
such Depositary Participant, and delivery of
such lesser number of
shares
of
this Series shall constitute good delivery.
( 1)
Under
the
Remarketing Agreement,
the Company shall be
liable for, and shall
pay, any and
all costs and expenses incurred in connection with
the
Remarketing.
( m)
The tender and settlement procedures
se
t
in this Section 3,
including
provisions
for
payment by
purchasers of
the shares of
this Series in the Remarketing,
shall be
subject to modification to the
extent required by
the Depositary or
if the
book-
entry system is no
longer available
for
the shares ofthis Series at
the
time of
the
Remarketing, to facilitate
the
tendering and remarketing of
the
shares-. Qf
this Series in
certificated form. In addition,
the
Remarketing Agent may modify
the
settlement
procedures
se
t
forth herein in order to facilitate
the
settlement process.
:-.
( n)
Definitions:
"'AA' Composite Commercial Paper Rate" on any date shall mean ( i) the
interest
equivalent of
the
60-day rate on commercial paper placed on behalf of
issuers whose
corporate bonds
are rated "AN' by S&P or
the
equivalent of
such rating by S&P or
the
equivalent of
such rating by S&P or
another rating agency, as made available on
a
discount basis or
otherwise by
the
Federal Reserve Board for
the
business day
.immediately preceding such date or
(
ii)
if the
Federal Reserve Board does not make
available any such rate, then
the
arithmetic average of
those rates, as
quoted on a discount
basis or
otherwise, by
the
Commercial Paper Dealers to the
Remarketing Agent
for
the
close of
business on
the
Business Day next preceding such date. If any Commercial
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Paper Dealer does no
t
quote a rate required to determine the
" AA" Composite
Commercial Paper Rate, the
" AA" Composite Commercial Paper Rate will be
determined
on
the
basis of
the
quotation or
quotations fumished by
the
remaining COmnlercial Paper
Dealer or
Commercial Paper Dealers and any substitute commercial paper dealer or
substitute commercial paper dealers selected by
the
Remarketing Agent
or,
if the
Remarketing Agent does
no
t
select any such substitute commercial paper dealer or
substitute commercial paper dealers, by
the
remaining Commercial Paper Dealer or
Commercial Paper Dealers.
" Applicable Margin" shall mean
the
spread determined as
se
t
forth below, based
on
the
prevailing rating of
the Remarketed shares of
this Series in effect at
the
close of
business on
the
Business Day immediately preceding the date of
a Failed Remarketing:
Prevailing Rating
AAJ " aa"
AI
" a"
BBB/ " baa"
Below BBB/ '' baa''
Spread
3.00%
4.00%
5.00%
7.00%
For purposes of
this definition, the
" prevailing rating" of
the
Remarketed shares
of
this Series shall
be:
( i) AAJ aa
if such shares have a credit rating of
AA- or
better by S&P and
" aa3" or
better by
Moody's or
the
equivalent of
such ratings by
such
agencies or
a substitute rating agency or
substitute rating agencies selected
by
the
Remarketing Agent;
(
ii)
if not under clause ( i) above, then AI
a if the
Remarketed Securities
have a credit rating of
A-
or
better by S&P and " a3"
ex.
better by Moody's
or
the
equivalent of
such ratings by
such agencies or
a substitute rating
agency or
substitute rating agencies selected by
the. Remarketing Agent;
(
iii) if not
under clauses ( i) or
(
ii) above, then BBB/ " baa" if the
Remarketed Securities have a credit rating ofBBB- or
better by S&P and
" baa3" or
better by
Moody's or
the equivalent of
such ratings by
such
agencies or
a substitute rating agency or
substitute rating agencies selected
by
the Remarketing Agent~ or
iv)
ifnot under clauses ( i) - (
iii) above, then below BBB/ " baa."
" Certificate" shall mean a Corporate PIES Certificate.
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"Commercial Paper Dealers" shall mean Lehman Commercial Paper Inc.,
Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated or
their
affiliates or
successors, if such affiliates or
successors
are
commercial paper lfealers.
"Common Stock" shall mean the Common Stock, no
par value, of
the
Company.
"Corporate PIES" shall mean a stock purchase unit consisting of
( A)
a stock
purchase contract under which ( i) the
holder of
the
unit will purchase from
the
Company,
for
$50.00 in cash, a certain number of
shares of
common stock of
the Company and (
ii)
the Company will pay such holder contract adjustment paYments and ( B)
beneficial
ownership of
a shares of
this Series.
"Corporate PIES Certificate" means a certificate evidencing the
rights and
obligations of
a Holder in respect of
the
number of
Corporate PIES' specified on such
certificate.
"Depositary" shall mean, with respect to shares of
this Series issuable in whole or
in part in the form of
one or
more Global Securities, a clearing agency registered under
the Exchange Act that is designated to act
as
depositary
for
such shares, and initially shall
be The Depository Trust Company.
"Depositary Participant" shall mean a member
of,
or
participant
in,
the
Depositary.
" Exchange Act" shall mean
the
Securities Exchange Act of
1934 and any statute
successor thereto, in each case as
amended from time to time, and
the
rules and
regulations promulgated thereunder.
"Global Certificate" means a Certificate that evidences
all
or
part of
the
shares of
this Series and is registered in the name of
a clearing agency or
a nominee thereof.
"Global Security" shall mean a global Series H Preferred Stock Certificate
registered in the
name of
a Depositary or
its nominee.
";:
Holder" shall mean any holder of
shares of
this Series.
''Moody's'' shall mean Moody's Investors Service, Inc.
" Purchase Contract Agent" shall mean the purchase contract agent under the
Purchase Contract Agreement, including successor purchase contract agents.
" Purchase Contract Agreement" shall mean
the
Purchase Contract Agreement
dated as
of
August
10
,
1999 between
the Company ( through
its predecessor entity, Bank
United Corp.) and Bank One N.
A.
(under
its
prior name, The First National Bank of
Chicago), as
Purchase Contract Agent.
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" Purchase Contract Settlement Date" shall mean August 16,2002.
" Record Date"
for
dividends on
the
shares of
this Series on any Payn1ent Date
shall mean, as
to any Global Certificate,
the
Business Day next preceding such Payment
Date, and as
to any other Certificate, 15
Business Days prior to such Payment Date.
" Remarketing Agent" shall mean
the
remarketing agent selected by
the
Company,
including any successor remarketing agents selected by
the
Company.
" Remarketing Date" shall mean
the
third Business Day preceding
the
Purchase
Contract Settlement Date.
" Reset Rate" shall mean shall mean
the
distribution rate per annum that results
from
the
Remarketing pursuant this Section 3.
" S&
P"
shall mean Standard & Poor's Ratings Services, a division of
McGraw- Hill Corporation.
4.
Redemption. ( a)
Optional Redemption. The shares of
this Series
are
not
redeemable prior to October 16
,
2002. The Company, at
its
option, may redeem shares of
this Series, as
a whole or
in part, at
any time or
from time'to time, on
or
after October 16,
2002 at
a redemption price of$ 50
per share plus accrued and unpaid cumulative
dividends thereon (whether or
no
t
declared) to the
date fixed
for
redemption.
( b)
Mandatory Redemption. The Company shall redeem, from any source of
funds legally available therefor,
all
issued and outstanding shares of
this Series, in whole
and
not
in part, on August 16, 2004, at
a redemption price of
$ 50
per
share plus accrued
and unpaid cumulative dividends thereon (whether or
not declared) to the
date fixed
for
redemption.
( c)
Redemption Procedures.
( i) In the
event that, pursuant to paragraph ( a)
above, fewer than
all
the
outstanding shares of
this Series are to be redeemed;
the
number of
shares
to be redeemed shall be
determined by
the
Board of
Directors and
the
shares to be redeemed shall be
determined by
lot
or
pro rata as may be
determined by
the
Board of
Directors or
by any other method as may be
determined by
the Board of
Directors in its sole discretion to be
equitable,
provided that such method satisfies any applicable requirements of
any
securities exchange on which this Series is listed.
(
ii)
In the
event
the Company shall redeem shares of
this Series, notice of
such redemption shall be given by
first class mail, postage prepaid, mailed
not less than 30
or
more than 60
days prior to the
redemption date, to each
holder of
record of
the
shares to be
redeemed, at
such holder's address as
the
same appears on
the stock register of
the
Company. Each such notice
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shall state: ( a)
the
redemption date; ( b)
the
number of
shares of
this Series
to be redeemed and, if fewer than
all
the
shares held by
such holder are to
be redeemed,
the
number of
such shares to be redeemed from ~ ch holder;
( c)
the
redemption price; ( d)
the
place or
places where certificates
for
such
shares
are to be
surrendered
for
payment of
the
redemption price; and ( e)
that dividends on
the
shares to be redeemed shall cease to accrue on
the
redemption date.
(
iii) Notice having been mailed as
aforesaid, from and after the redemption
date (unless default shall be made by
the Company in providing money
for
the
payment of
the
redemption price) dividends on
the
shares of
this Series
so
called for
redemption shall cease to accrue, and said shares shall no
longer be
deemed to be
outstanding, and all
rights of
the
holders thereof as
stockholders of
the
Company (except the
right to receive from the
Company
the
redemption price) shall cease. Upon surrender in accordance
with said notice ofthe certificates
for
any shares so redeemed (properly
endorsed or
assigned
for
transfer, if the
Board of
Directors shall so
by
the
Company at
the
redemption price aforesaid. In case fewer than
all
the
shares represented by
any such certificate
are redeemed, a without cost to
the
holder thereof.
(
iv)
Any shares of
this Series which shall at
any time have been redeemed
shall, after such redemption, have
the
status of
authorized
bu
t
unissued
shares of
Preferred Stock, without designation as
to series until such shares
are once more designated as
part of
a particular series by
the
Board of
Directors.
( v)
Notwithstanding the foregoing provisions of
this Section 4,
if full
cumulative dividends on
all outstanding shares of
this Series
are
in arrears,
no shares of
this Series shall be redeemed unless
all outstanding shares of
this Series
are simultaneously redeemed, and
the Company shall
not
purchase or
otherwise acquire any shares ofthis Series;.: provided, however,
that
the
foregoing shall not prevent
the
purchase or
acquisition of
shares of
this Series pursuant to a:
purchase or
exchange offer made on
the
same
terms to holders of
all
outstanding shares of
this Series.
5.
Conversion. The holders of
shares of
this Series shall
no
t
have any rights to
convert such shares into shares of
any other class or
series of
capital stock of
the
Company.
6.
Liquidation Ril: hts. ( a)
Upon
the
voluntary or
involuntary dissolution,
liquidation or
winding up
of
the
Company,
the
holders of
the shares of
this Series shall be
entitled to receive and to be paid
ou
t
of
the
assets of
the Company available
for
distribution to its stockholders, before any payment or
distribution shall be made on
the
Common Stock or
on any other class of
stock ranking junior to this Series upon
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liquidation, the
amount of
$ 50
pe
r
share, plus accrued and unpaid cumulative dividends
(whether or
not declared) to the date ofthe liquidating distribution.
( b)
After
the
payment to the
holders of
the
shares of
this Series of
the
full
preferential amounts provided
for
in this Section 6,
the
holders of
this Series as such shall
have no
right or
claim to any of
the remaining assets of
the
Company.
( c)
If, upon any voluntary or
involuntary dissolution, liquidation, or
winding up
of
the
Company,
the
amounts payable with respect to the
shares of
this Series and any
other shares of
stock of
the Company ranking as
to any such distribution on
a parity with
the
shares of
this Series
are
not paid in full,
the
holders of
the
shares ofthis Series and of
such other shares shall share ratably in any
such distribution of
assets of
the
Company in
proportion to the
full respective distributions to which they
are entitled.
( d)
Neither the sale of
all
or
substantially
all
the property or
business of
the
Company, nor the merger or
consolidation of
the Company into or
with any other
corporation or
the
merger or
consolidation of
any other corporation into or
with
the
Company, shall be deemed to be a dissolution, liquidation or
winding up, voluntary or
involuntary, for
the
purposes ofthis Section 6.
.
7.
Rankin~. For purposes of
this reso lution, any stock of
any class or
classes 0f
the
Company shall be
deemed to rank:
( a)
prior to the shares of
this Series, either as
to dividends or
upon liquidation, if
the
holders of
such class or
classes shall be entitled to the
receipt of
dividends or
of
amounts distributable upon dissolution, liquidation or
winding up
of
the
Company, as
the
case may
be,
in preference or
priority to the
holders of
shares of
this Series;
( b)
on
a parity with shares of
this Series, either as
to dividends or
upon
liquidation, whether or
not
the
dividend rates, dividend payment dates or
redemption or
liquidation prices
pe
r
share or
sinking fund provisions, if any, be different from those of
this Series (and whether or
not such dividends shall accumulate), if~~ holders of
such
stock shall be
entitled to the
receipt of
dividends or
of
amounts distributable upon
dissolution, liquidation or
winding up
ofthe Company; as
the
case maybe, without
prefer~
n.~ ce'
or
priority, one over the
other, as
between the
holders of
such stock and the
holders of
shares of
this Series; and
( c)
junior to shares of
this Series, either as
to dividends or
upon liquidation, if
such class shall be Common Stock or
if the
holders of
shares of
this Series shall be
entitled to receipt of
dividends or
of
amounts distributable upon dissolution, liquidation
or
winding up
of
the
Company, as
the
case may be
,
in preference or
priority to the
holders of
shares of
such class or
classes.
( d)
The shares of
each of
the
other series of
preferred stock ofthe Company shall
rank on
a parity with the
shares of
this Series.
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8.
Yotin~ Ri2hts. The holders of
the
shares of
this Series shall have.
the
following voting rights:
( a)
Each share of
this Series will have
the
right to vote, with each share of
this
Series having 0.10 vote, in connection with matters submitted generally to the holders of
the common stock and other capital stock ofthe Company entitled to yote in respect of
matters submitted to the stockholders of
the Company generally. For these purposes,
the
holders ofthe shares of
this Series and the holders of
the common stock and such other
capital stock of
the
Company, so entitled to vote, shall vote as a single class.
( b)
Unless the vote or
consent of
the holders of
a greater number of
shares shall
then be
required by
law,
the
approval ofthe holders of
at
least two- thirds of
the
then-
outstanding shares ofthis Series, given in person or
by
proxy, either in writing or
by
a
vote at
a meeting called for
the
purpose at
which the
holders of
shares of
this Series shall
vote together as
a separate class, shall be
required
for
authorizing, effecting or
validating
any amendment, alteration or
repeal, whether by
merger, consolidation or
otherwise, of
any of
the
provisions ofthe Amended and Restated Articles of
Incorporation of
the
Company or
of
any certificate amendatory thereof or
supplemental thereto ( including any
Certificate of
Designations or
any similar document relating to any series of
Preferred
Stock) that adversely affect the
powers, preferences, privileges or
rights of
this Series;
provided, however, that the
creation and issuance of
any other class or
series of
preferred
stock, or
any increase in the number of
authorized shares of
any Preferred Stock of
any
other class or
series, in each case ranking on
a parity with or
junior to this Series with
respect to the
payment of
dividends and
the
distribution of
assets upon liquidation,
dissolution or
winding up
of
the
affairs of
the Company shall not be deemed to adversely
affect such powers, preferences or
other special rights.
( c)
Unless
the
vote or
consent of
the
holders of
a greater number of
shares shall
then be
required by
law,
the
approval of
the holders of
at
least two- thirds of
all
of
the
then- outstanding shares of
this Series and
all other series of
preferred stock ranking on a
parity with shares of
this Series, either as
to dividends or
upon liquidation, given in
person or
by
proxy, either in writing or
by
a vote at
a meeting called Jq[.
the
purpose at
which the holders of
shares of
this Series and such other series of
Preferred Stock shall
vote together as
a single class without regard to series, shall be
necessary
for
authorizing,
effectin~ or
validating ( i) the
creation, authorization or
issuance
of,
(
ii)
the
reclassification of
any authorized stock of
the Company into, or
(
iii)
the
creation,
authorization or
issuance of
any obligation or
security convertible into or
evidencing
the
right to purchase, any additional class or
series of
stock ranking prior to this Series, either
as
to dividends or
upon liquidation.
( d)
( i) If at
any time dividends on
this Series shall be
in arrears in an
amount
equal to six quarterly dividends thereon,
the
occurrence of
such
contingency shall mark
the
beginning of
a period (herein called a " default
period") which shall extend until such time as
all
accrued and unpaid
dividends for
all
previous dividend periods and for
the
current dividend
period. on
all
shares of
this Series then outstanding shall have been
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00017
:~
043.1663. 11
20
01
declared and paid or
se
t
apart
for
payment. During each default period,
the
holders of
shares of
this Series and other shares of
Preferred Stock on
which dividends
are
in arrears and as
to which similar voting tights have
been conferred, voting as
a class, irrespective of
series, shall have
the
right
to elect two Directors to the
Board of
Directors of
the
Company.
(
ii) During any default period, such voting right of
the
holders of
this
Series may be
exercised by
written consent, at
a special meeting called
pursuant to Section 7(
d)(
iii) hereof or
at
any annual meeting of
stockholders. The absence ofa quorum of
the
holders of
Common Stock
at
any such special or
annual meeting shall not affect
the
exercise by
the
holders of
Preferred Stock of
such voting right. At
any meeting at
which
the
holders of
Preferred Stock shall exercise such voting right initially
during an
existing default period, they shall have the-right, voting as
a
class, to elect Directors to fill such vacancies, if any, in the
Board of
Directors as may then exist up
to two Directors
or,
if such- right is
exercised at
an
annual meeting, to elect two Directors. If the
number
which may be
so
elected at
any special meeting does no
t
amount to the
required number, the
holders of
Preferred Stock shall have the
right to
make such increase in the
number of
Directors as
shall be
necessary to
permit
the
election by
them of
the
required number. After
the
holders of
the
Preferred Stock shall have exercised their right to elect Directors in
any default period and during
the
continuance of
such period,
the
number
of
Directors shall no
t
be
increased or
decreased except by
vote of
the
holders of
Preferred Stock as
herein provided. Any Director elected by
a
vote of
the
holders of
Preferred Stock may be
removed from office, with
or
without cause, only by
the
affirmative vote of
the
requisite percentage
of
holders of
Preferred Stock required to elect Directors as
specified in this
Section 8(
d).
(
iii) Unless
the
holders of
Preferred Stock, during an
existing default
period, shall have previously exercised their right
to,
el€
ct
Directors,
the
Board of
Directors may order, or
any shareholder or
shareholders owning
in the
aggregate not less than
ten
percent (10%) of
the
total number of
shares of
Preferred Stock outstanding, irrespective of
series, on which
dividends
are
in arrears and as
to which similar voting rights have been
conferred, may request,
the
calling ofa special meeting of
the
holders of
Preferred Stock, which meeting shall thereupon be
called by
the
Chairman, a Vice Chairman or
the Secretary of
the
Company. Notice of
such meeting and of
any annual meeting at
which holders of
Preferred
Stock
are entitled to vote pursuant to this Section 7(
d)(
iii) shall be
given to
each holder of
record of
Preferred Stock entitled to vote thereat by mailing
a copy of
such notice to him at
his
last address as
the same appears on
the
books of
the Company on such record date, not more than 45
days prior to
the date of
such notice, as
the
Board of
Directors may
fix
for
this purpose.
Such meeting shall be
called
for
a time not earlier than 10
days and not
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00018
043,1663.12
20
01
later than 60
days after such order or
request
or,
in default ofthe calling of
such meeting within 60
days after such order or
request, such meeting may
be
called on
similar notice by
any shareholder or
shareholders'Owning in
the
aggregate not less than 10% of
the
total number of
shares of
Preferred
Stock outstanding, irrespective of
series, entitled to vote thereat.
(
iv) m any default period
the
holders of
Common Stock, and other classes
of
stock of
the Company if applicable, shall continue to be
entitled to elect
the
whole number of
Directors constituting
the
Board of
Directors until
the
holders of
Preferred Stock, voting as
a class, shall have exercised their
right to elect two Directors, after
the
exercise of
which right ( A)
the
Directors so
elected by
the
holders of
Preferred Stock shall continue in
office until their successors shall have been elected by
such holders or
until
the
expiration of
the default period, and ( B)
any vacancy on
the
Board of
Directors may (except as
provided in Section 8(
d)(
ii) hereof) be
filled by
vote of
a majority of
the
remaining Directors theretofore elected
by
the
holders of
the
class of
stock which elected
the
Director whose
office shall have become vacant. References in this Section 8(
d)
to
Directors elected by
the
holders of
a particular class of
stock shall include
Directors elected by
such Directors to fill
vacancies as
provided in clause
( B)
of
the
foregoing sentence.
( v)
Immediately upon the expiration of
a default period, ( A)
the right of
the
holders of
Preferred Stock as a class to elect Directors shall cease, ( B)
the
term of
any Directors elected by
the
holders of
Preferred Stock as
a
class shall terminate, and ( C)
the
number of
Directors shall be
such
number as may be
provided
for
in the Amended and Restated Articles of
mcorporation or
Bylaws of
the Company or
by
resolution ofthe Board of
Directors, irrespective of
any increase made pursuant to the
provisions of
Section 8(
d)(
ii) hereof (such number being subject, however, to change
thereafter in any
manner provided by
law or
in the
Amended and Restated
Articles ofmcorporation or
Bylaws of
the
Company~=Any vacancies on
the
Board of
DireCtors effected by
the
provisions of
clauses ( B)
and ( C)
in
the preceding sentence may be
filled by
a majority of
the
-remaining
Directors.
( e)
Except as
se
t
forth herein or
required by
applicable law, holders of
shares of
this Series shall have no voting rights and their consent shall
no
t
be required
for
taking
any corporate action.
TmRD: These amendments do
not provide
for
an
exchange, reclassification
or
cancellation of
any issued shares.
FOURTH: The foregoing amendments to the
amended and restated articles of
incorporation were adopted by
the
Board of
Directors of
Washington Mutual, mc. on
October 17, 2000. Shareholder action was not required.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00019
043-
1663.13
20
01
EXECUTED this
8th day of
February, 2001.
:~
, t
'..
WASHINGTON MUTUAL, INC.
By:
Its:
-
.- u~-=
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00020
f~'.
I, Sam Reed, Secretary of
State of
the
State of
Washington and custodian of
its
seal,
hereby issue this
certificate that
the
attached is a true and correct copy of
ARTICLES OF AMENDMENT
of
WASHINGTON MUTUAL, INC.
RESTATED
as
filed in this office on
January
22,
2001.
Date: March 6,
20~
''
If\
f\
f\
f\1
Given under my hand and
the
Seal of
the
State
of
Washington at
Olympia. the
State Capital
Sam Reed. Secrelary of
State
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00021
I ~ • ~
', 0;
•
...'
.'
JAN 222001
SEeR/?
1{.
Ry
() r :; J I,
T£
:
TO THE
OF
WASHINGTON MUTlJAL. INC..
REST ATEf) ARTICLES OF
INCORPORA TJON
Pursuaill to the
provisions of RCW 23
B.
1/)
of
the
Washingtoli Business Corporation Act.
Washington Mutual,
Inc
.. a Washington corp() rUlioll ( tfH''' Corponltion'' j berehy . idopts
the
1()
llowing articles 1.)
1'
amendment to its restated ankles ofincorpofmjoo.
Seclion
.:!.
ARTICLES OF
AMENDMENT
SF-CONI): The C,
lrpOfalion hefell> (TCalL's. rrOri1lhe 10.000.000 shares of
rfcl~' rrcd
:-.
lock. no
par
\ alw:
r': f share. ullthorih'd pUfsuant to Articlc II
of
[ hercstatt'd anicks or
in~' nrpnrati()n or
the
Cnrpnr<lliort. a Sl'fil~ S of
rrcf1:rred StocK and hereby Jiws
the
designation.
\'()\\
ers.
preferences. limiwlions.
Jn
d
rdati\ e
ri;:
hb
of
thcsharcs of
such StTICS ( IS jllllows:
FIRST: Tht'namc of
the
CorpMatioll is Washington Mutufil. llil.:,
Section I. Iksiul1, Hion. Pa
r
Vahle and AmouriL . The~ harcs ( 11'
such sNiessha:llbe
dl'sii2natcd as
"Serids
lip Pn:: i~ rred~;~ k"-
ih~~~ 1~
al;~ 7rd'crl( rl'eadf\"'~~' riC! 5RP Pren.~
h'ip
~Qek"). [ he Shares
pI'
SUChSl: l'ks shallOe wilh
rar
vaJu~ Sr$. o I r~ rshar~:~~~ i~ i- lhJ-~of~-;;
hci
shares constituting slIch s\! ril~ sshailbc 700.()() O:
v.
ri~ y!
dc~
l, I. 1i!).\:. t:~~ tT.
fhiafl. mOT!: thah, iltOlal of
7()
O.() OO
;;;
harc5 orScric~
fU'
Yrl'icf1'(' JStoch ~ hallhe isslJableup( lnfhcl'xclci~ e o{
Higlits (
the
" Rights") issueJ pursuant Ii) till' Rif'hts Agrecment. Jatt'd as
l1f
Ikct: tl1l'wr
20.
Joo( j, hclwVt'n the
Corporation and \ kllol1
lll\ estnr Sa\ jCt~ S,
I
,1.
C..
llS Rights Agenl ( as
amended from linlctiJ
time.
the
"HighJs.. 5.
l! J~~ m\-' J)
t"),
Ihe
l~'
lard
III
!) ir~'(' lors of
the
Corporatioll shall direct b}
resolution oTreSOIUlions thaI J -:
crtilil'ate he
pl() perl~
I.'
xccutd. acknowkdged ;
tnd
riled
prmiding (' urlhe tOlal number o(
slwres
<,[
Scril's
R!'
Pt.
c'krred Stud. authorJ/ ed
ill
h~
'
lssu-:d
1."
he
inen:Jscd( tn th"':;.; tenl that
tlw Anil.'!(- s or
! rworpn( Ution lh~' ll p~ril1its) to lilt' I;,
rgest nlitnher
of\
\
hole shares (rounded up
to th"
JJeme:, 1 \\ hoil' nUl1lbcri issuahle 1JrOll e\
t'ITi~
c,,-
q:, Lbe Rjgh!~
2.
J SuhiLl'lln IhL' pri( lr and sUllL'rillr
ri! rhlS " ftht' holder;, ( II al1~
...hares pJ
;1l1~
;;<
:
ri~
'
s(
If Prel'cm: d Slock r;
il1killt! pri\\ r and ~ llrl'rior
ill
Ihe
slwrc.: s
Ill' Se'.: cs
RP
Pr('
l('
rrcd Stud
\\ ith resrect (0
di\.
idcnds. !L :
Iii
d<
kr',
pr
share
...
or
S(' I
i~'
s RP
Preferred Slod ,,11< 111ht' ultitkd III
rt'l'c.:
in',
\\ I1c.: n.
as
an
d
if lk'CI, tfcd h~
('
ll' Board
1".
1 ) ircclors OHIO/"
as:
icts ( q!
illi~; l\ ailahk Ii"
the
purpose, qllal1erly
di\ idend, payahle in lash (Hllhe lirSI hll'. illL's'\ < by
oj
\ larlh. Junt', Septemher
an
d
f) eccrnhc- r in each :,
car
{call1 :, Ud1 date heing tdCftcd to herein as
a
"()
uil!
1~
:
ri}
.
J)
I\:
i! l( i!\
j
e.'
Jl!
11l'Jl!
J2
~
I!.
C"),
l'( Jrnn1l'l1cing lIn
till'
lirst ()
uartt'fl:- Di.\ idl'nd Paymenl Date ann
thl.'
lirsl
i. s.
u.;
lI1cc of
a shart' or
fral'li,
lll
of
a " harc ( If " eries
10'
Prdi.: rred "(
DeL il1 <In:.\ IlI,\ Ulll
I'I.
'
f sharI:
(tolllHkd tll th~' J1~' aresln'n;)
\.'
ljlwl 1(
1Ih(' grc; lkr
( If ( al
~ I. DO
(
II"
(h J " lIhil'd
Iii tll,: rr
..... l'JOn j'IlI
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00022
adjustment
se
t
forth in Seclion 6.1. 1,000 times
the
aggregate
per
share amount of
all
caf; h
dividends. and 1,000 times
the
aggregate
per
share amount (payahle in kind) of
all
non- cash
dividends or
other distributions other than a dividend payable in shares of
COnimon Stock,
par
value $.
01
per
share. orthe COrPOration (
the
"Common Stock") or
a subdivision of
the
outstanding shares of
Common Stock ( by
rec!
a<
;
silication or
othcnvise), declared on the Common
Stock since
the
immediately preceding, Quarterly Dividend Payment Date.
or.
v.
iith respect to the
first Quarterly Dividend Payment Date, since
the
lirstissuance of
any share or
fraction of
a share
of
Series RP
Preferred Stock. '
2.2 The CorporatiiJirshalldeclareadi:idend ordistributionim
the
Scrie~ RP',
Preferred Stock asprovidcdin Sectioii' 2.
J abo've immediately ,atler itdec1ares a dividcndtJr
distribution on
the
Common Stock (btherlhull: adividendpayablc insllarcs ofCommohStock): '
provideg tha!. in the
eventrio dividclldoTdisfrihtitioii shall have been (
lce
/
aredon theColllmon
Stock during
the
period between
ah
y
QUai1erly DividcmlPaymenl Date and
the
next subsequent
Quarterly Dividend Paym~ nt
Date. a dividl'nd of
$1.00
per
share ( lll
the
Series RP
Preferred
Stock shall nevertheless be
payahle on
such subsequent Quarterly Dividend Paymelt Date.
2.3 Dividends shall begin to ;; CCfue andbc cumulative 011 oUlstanding shares
of
Series RP
Preferred Stock fronTtheQuartcr1y Dividend Payment Dritcncxtprcccdiligthc date
of
issue of
such shares of
Series RP
Preferred Siock. ullltssthe date of
issue of
sud) shares is
prior to the record date
fo
r
the firsrQuarierlYplvidend Payrncht Date. in'whichcasedividcnds
1m such shares shall begin to accruefr( j~ lthbc1atc ofissuc'ofsuch shares~ orurilcss thedatc of
assuc is a QuartcrIvDi;,' idcndPavmenfDalc0f"
iSa
datc alter the record dale
for
the
dclemlination
of
holders of
shar6s of
Series
RI;
Preferred Sl()ckcntitledto receive a quarterlrdi\ idcndand
before such Quarterly Dividend PaymcnrDate, in either of
whkh eventsSlIchdividel1ds, shall
begin to accrue
an
d
hI.'
cumulative from such Quanctl.\ Dividend Payment Dale. Accrued
but
unpaid
di\'
idendsshall
not
bear interest Dividends paid on
the
shares of
Series RP
Preferred
Stock in an
amount less than
thc
t6tal amount of
such dividends al
the
time accrued
an
d
pil): nhlc
on
such shares shall bl:
allocated
pro nHa on
il share-
by-
share basis among
nil
such shares at
lht::
time outstanding. Th
e
Bnurdor Directors llwyflx a record date /()
r the
Jctcmlinati~ lc)
f holders
of
shares of
Series RP
Prerared Sl() ek
entitled to receive payment of
a diviJl'nd orol:' rtriblllion
dcdarcd thereoll, which record dare shall he
not more than 30
days rrio!'
I'l the
dale fixed
Itll'
the
payment thert'of.
Section J.
Y..
2(
ingJ~ igb!~. The holdetii of
shares of
Series RP
Preferred Stock shall h<
l\' c
the
following voting rights;
3.1 Except as
provided in Section J.
J an
d
subjeCT to the
provisioll
li)
t
adjustment hercinalicr
se
t
forth. each shure of
Series RP
!' referred Stock shall entitle
the
holder
thereof to 1,000 votes onalllllattcrs sunmilted 10 a n)
te of
the
stockholders of
the
Corporation,
3.2
!;,'\ ccpt as
othcr\. l: Jg
c
provided hel- cin or
by
law. the
holder, of
shatcs of
Series RP
Pre/ erreu SIOlk
and
Ihe
holders of
shur'!.' s of
COfllnlOll Stock shall \'
o\
e together as
, lllC
class on
all
matters sllhntitled
tll a vote of~ hKkholders <,
rthe'< 'orrmJtion,
lffllRl~
Ir/
l!!
lftl_
a'filI!!
lI!
I __
lTlIlI'IIiIIII"'
II.
I. lIIIII!
W:
l. l.ilWUIiIIIII_==_.=... ~~
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00023
3.3
':"";
L'
j( llll1\\
ing
additional rrnvisions shall apply with respect to the
voting
of
shares of
Scril: s RP
Preferred
Sl\
l!.'
k:
.,
.1 4 ~o
I('
ng
as a
Jc/
millirrany
l) rc!
cl'L'OCC ('
i\ idt'lllb 0/
th
('
S",
ric
s
RP
I'rckrreJ Stock shull exisi or
thr:
ilqldl'rS of
any
othet ~(~6(!, sorVoting I'rcktn. J St<'
l'k shall
bt:
entitled!() dect Pn: krrnl D,
rl'L"
to,
s.
lai
.
Ill\
\ ilGHTCyillt1Kof'fiCl.' Ill':! I'rd"
rri; d Din'dm 1I1L1\
hI'
filled / except as pfo .. idc. J in Ill\.> fllll'\\\ lllg't1all~
l:(
h)
jbyan in51rUf1il.'
l1t
!') whIm!, :- igncd n~
' tht?
remaining I'rcft! rred Dir<..'dPr and rikJ with
the
C',
1rp(' r,
Hil'll imJ ( h,
in the
Gl~("( lflhe rel11ma! \' 1'
am f'rckrn.: l1 f)
irt:
"
l" tor.
Ilw nll', IIlI:\ ma\
hI.'
Ii
Ikl1
liv,
tlJe
\. tlle1ll'\<. ritlt'n ,'\
lll~
ellt
lit
t1w
h..
ldt"
r" < If
a ';lajorit:
(, rlh<.' " tll:';! i1nolllgshart:" Of\: IHillg
I't\
lft'rrvd
Sti.
JlJklhc! l. crHitli: d
Itl
,,\
ti..'
1\
1!
Ihl' .
eleetion ( If directof's.
pf:
sl'nUin pt'l'WIl \ It I,:
rro.~
yr,
inil';;()(
if\ g
lo~
cihgl il~ a smVk das:>. , Il ~
ll( h
time as
the
remo\ al
s11;.
1I1
Iw l'ffl'dl'r. l. Fad1 dirl,' i; wr
,
lf~
t'( lillkdifS afllrl"
aid h~
Ih.:
r': I11, lininl,'
Prl'l~:
rr\.
'
d Dirl'dllr ~ha! l h"
dCl'l1Jnl. 1M
all PlIl" p(
ISI'S rlnrol.
III hl,'; 1 Prel'.' ne'! !) irrllol' \\
lll" r)('
H'r
(\} no dd'ault in rrCkrl'lIl:<..'
dj\
idL
"
tH.
b liD th..: " L"
lil::-' RP
l'rl'krr.: d SInd , h;
tlll.'\ iq ;. H1J(~ I lh ....
h"
idcr, ( If tIther
',,'
1'
1,', 1'
1'
\" rill~ l'n: icrn'd "{
lId ,11< 1111111llln~ n
hL
"
CI11itkd 1" elect s\
lei!
3.3.1
If.
on
lhe
dute lISCdlod~ I~
'
Jil1jncslockholdl: rs
of
record
I()
r
an
\'
meeting of
stockholders !(
lr the
ckction
ill' Jirc'; I( lrS~\
I,\
lcfaulfjlT preference di
" idcnds ( as
d~ lincd
in Section 3.35 bclO\ v)
orilhcSerksRPPrc" ciregStikk, f; hail~,<
isi.
ihe
holdcrsof
tlie
ScricsRP
Preferred StockshaHhave. l! 1crighL vllling as
alil(
L<
;
s~
s;
d.
esctf{ jedjn~ ecti;) n3.3;2bclo~', meleet
two directors ( in . idditiori to tile directors c1ccle& btholdhs~
f(:
ditlBion Siockoflhc
(; orpomtion). SlIchright may he
e~
;
crci~
cd(
a )diil;)
Yi:
iJ4~ ling{ lf'Sl( lckholdcrs I(
lr thcdcction <,
I'
directors or
( b)
alanlcctirigofthe holders of
sh4tt~; s'qr\ jt)
titig: l) i:~
tcrred SnlCk « ls hereinaner .
defined), called
for
the
IJUmN; c in accord(\ JJcc wi~ hlh~
J3)'
htws'i. jf tlicCOm(
lfa
t
idli; uilii I
all
Sild. l
cunlill<itivedivideh4s( tctertctl' 1o'
above ).
shal ihf\'~- b@ hpititFihrujJ( ir un
ti
I nl)
b~
c(
tinlllafiw,
di\'
idelldsha\' ebec11paid1"~~ urarlyforalreustoij#,
y4
~
ti:':'
,..
.. . '. .
..3.3'.
1..'
1'
h<
::
right 0rlhe
.'.
hJj(
dJfi'$i'sgrj~~. JH~< PrcthrcdS\ tlckl( lC IccltZvr)
directors, as
descrihcdabovc: shall he
c:\ erciscd~
i~'
i~ JJ{
iSS~(\ hcnrr6ntIY with tlJcrighls ofhbldcrs
of
any other series of
Preferred Stock upon whkh\; dtihgrighlk to Clect such dircctor~ havc been
conferred.
an
d
arc
then
ex('
rcisabk. ' lheScrk~ R()PtcfcrredSfock and <
In\
additional saiesof
Preferred Stoc, k
tha
t
the
Corpl)rminnll1il »issll~~ llldJHh~ nlIlypr(\\' idcj~) rthe right to\''.
1tt.
wiii1
Ihe
. ls~
tmo
c:
gko
'"il1g series of
Prelcm.' dSlockar'.
e colketivt:
ly.
refcrrcdllil1e,re1l111S
.."
y.~
~\
il.
l. g.
Y£.
i!'..
L~
}:
r.£
g
., -,"
.
":";':.:":':\;,,<' "'"
,),-', 3 V.~ leh
diren6rd~ I:!
cBl( tn.
h~
h(
j) dltr.,'( W:
ihar~ sl,
fVoting' Prc
tcrrc~
S!() ck
shall
bt~ rckrrt: d t( lhen~' in asa" f'reft: rrL'dT5irJ'diJT/:.' XPreli.' rred l) ifl":". llfsl1alll; onlifltie hI
serve as
such
for
alem) of
on~)
ca
c
1';~~~- ih;
t~ E[
l~)~' wj5: t~ nl1inat(ihoeilroigfht ofalllllllder~
ofVotinl! PrcfcrrcdSloi: khJnlle as
a class
ftJl'
I'r"
lcrte4J)
ir~
cti;
lfs,
thc
term oi'llIfn:
co
/
.
Prcferrc, l f) ircclOrslhcn ~m:inl!~ hallterminate An;, j> rcfcrrcJDin:
cln
r
rnav he
fl.'
fllll\ l'dhv,a
nd
shan Mt
he removcd
\.'\ eert hY~ I! H:\[ 1lC{\ f lilt hold~ r"
i) rrC( Nd Qra ! llainl"
iiy
IIf
[
h\.'
<\
utslaJ; ding
shares of
Vl)(
ing
Prcfi::
rn:
d Sr{~(: k1\ 1I:
nl'milkd lovot(.' tiwthc c!
ccti( lfloJ dil
L..
..
llll"". prescnt , if I
person or
hy
proxv) and \' oling. tllgclhcr as
it singl"
I.'
lass
fai
ara Il1ci: lin).!
,)(
the
SHlcklwldns. { lr
( b)
at
a meeting Oflh", holdersof ~,
hares (>
1'
such V6rillgPt'(' fctrcd:-< tnd,. t, I! lcdhlrlhc plirpil!, c in
accordance Wilh thl" B~
1:
1\\<; oFthv Cllrj10((llioll .
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00024
4
IJl.
lMlI!
l'I"
I••
~
liI'IliI'"
I"
IUI-
.'
Il'llilli'
.•..
••
IIIiI.
II1
_
Preferred Directors. then
the
nllm~r of
director~ constitutingtnc Board of
Directors of
the
Corpomtion shaUb<: reducedbYlwO. .
'.
-~'. .
'. '.. . 3.3;$ FQI"Plln'Pscsherc(
jf.
a~
'
detilllltM;
rn:
efercnCCdjViQ~ ndl" on'lbc
..'.'.
SeriesRP PrcfeiTedSI~ k$ hal!~ decn¥
jt( lhaveoccuiTcd: wfiencver thcamdunt ofcim1iii'atiyt
...
IIn
d.
QOPaiddividendson; Jltei: SeHesJ{ PPreferr~& StofkShali~. o~ quival~
Ttlol
sixfu~ I'qua~ ifly:'"
. qividcllds or
lil{)
re(
Wliet}
j.;:
rfl{ i1ofconS~ Cl1! ivc). und" having, sCl'I) CCulTcd, suchdefault ~hanbe." .
•g.!~!£ i~ i11Itl~~!~~~~..~. f! i~ f.~~. ":-...::;;.:.< . "
,
, .
.".
.','
....•
J..
4...
J.]~~; c~ t~¥.~~
tt9
~
h.#
.
c.
rcirJf~ h~~'~ thctWi~~ lrcquircdbyaphlicilb.'#. l. a..
w.
):
holders. ofSeriesRPPrct~~~ 4 .. St(
)
cKshalJbavcn( JgCDeral orspe6ialv()ting rights'andthdi'
consent shall notbel'cqtJirJdftJrtllking any corporatcaciion. .
Section 4.~~ rtajn. Restd£ tjons.
. 4.
J.
'" WhltrjC\' j) rq~'artcrWdjvjd(:
rl~ S(>toth~ rdi\. JdcndsordistdbllHoiJ~ paY:ilbl~
.."•.'
0l1
.
thcBeri es
RP
.Bref~ rred'St()C~~ 5.
pro',
j4~
dilt~ cBtiO?2ureilj'al'rcars, therea1terariWtl11ti ljilt .•'..'.
;,:~~~~~ 6~
i~ 4~ 1~:(~ 1~~~ 1t~~~~";: it~~~[; f.~~~
J~
~
WtfJ~ i~~\;~
.'..
....
...
4,.(~
J,.
d.~ 2Iitre.( i(~~ Yd
iVi~
7ti4H, pr
n~
ak~
tallY'otller'd istriJJui j( lns.
(1 n.:
1f} Y
shareso[ stock
ran
kingjunlo( (eiiIi~
ra$
lodjyidcnd sarup() n)
igurda lion. d issoillliooor winding
up) tothl~ SeriesRPPrcierrcdSlock: .'
4:
1.2 dCCUlh~ orpaydivid~ rjds, or
1114RiJ:!
nj'
othi..' rdisltihutlol1s,
nn:
my
shares of
stock rariking( lIlaparlly( cillicrusto dividcndH ()
r opMlliquidatiol1. dissoluti(
l;)
or
winding up) with the
SeriesRP Preferred Stock. except dividends paid t: ltably 011 the Series
RI'
Prcferrcd Stock unclall such parity stock (
lni,
l,'
hich/ dixidend" afe, payablc or
it1 arr~< j, 4fl
proportion to the
totaJamouills toWhichtflcholdcrsotallsul: hshilrCs
arc
thcnclilit. lcd:
...... 4.1,3.. rcdeenl ( lr purchase or
( j[ hctwisc acquire
lilt c(
lnsidel'arion (except
as
provided in Seclion4, IAhelow) sharcs oFany sl( lckrankin¥ JlIoior (either as
h)
di\
ictcnds 01'
upon liquidation. diRsolulioncir \ vinding
lip
)
to IhctSe{ ics
RP
Vrcfcrred Stock. providcdll18t the
Corporation may at
any
lime redeem. plircha! it'
i. JtothcKvise iI~
quirl' shares orany such junior
stock in exchange
for
shares nf
8/
1)'
SlOckoftlw Corporati( llJr~ itki\ 1g ju~ inr'( cith~ rMrU)
dividends or
upon diss()lut1{) ll. Iiquidatib/
i.(
lrwjmJiflgup}
i()
thc$ C'tks /{ PPrclcrtt'd Stoe!':
4.104 redeem or
purchase ( ir otherwise acquire
tilt tlH1Sideralj( lh allY
shares of
Series RP Pre1erred Slock. or
any s!
lares{ lf stocK tut1kit1g (
lh
a parity (either as
to
dividend5 or
upon IiquiJation. di5solutiollor winding
urll
\-\
ith
the
Series R P Prrfem:d Slock.
except in accordance with a / lurdJasc offer made in "" riling or
by
puhlicatioll ( a~ dcl': nnincd by
the
Board of
Directors) to allh(}! ders { If such shares upon ~ uch Jenns as
the Board of
Directors.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00025
•
{.
rp
-j' 7\ I .. J.
r
G 1
alier consideration of
:'
le n:
spectivc annual dividcnd ratcs
an
d
other relative rights and
preferenccs of
the
rcspectin: series
an
d
classes. shall dClcrminc in good Ifllth will result in filir
and equitable treatll1enlamong
the
rcspective series or
cl[(
sses.
4.2 The Cqrporationshall nOlpcr. mirany subsidiary (lfthc, Corpornlion to
purchase or
othenvi seacquireJ'orconsidcnlt
ion
anyshard.~, ofstdck, of
the. Cor'ponltilmunlc$ sthc:
Corporation could. underSe.6tion 4~
Lptirchas(' 6r(
i'nhjr\ vj~~ e[
J2qujr. C:~
llCh$ h!
ti'Cs atsllch iimc ~
tld
in such manner.' . " , ,. . .
" .
" Section 5.
Reacquired. Shares; Any shares ofSbfjesRi) l') refcrrcd'St() ck
purch4scd 6t
otherwise acquired bythcCorpomtion
in;
lny
mailner\. yhal~ocVer$ hallht~
re~
ired ~ nd
canceled
promptly after
the
acqllisitioh thereof
Air
slichsharC:~' Slmllupbl: l tilcireancdJationbccolllc .
authorized but'unissued sharcsof'I> r. efcrrcd Stock
lln
<
llniIYbe reissued aspJrtof a n~
wseric:'
l;)
f
Preferred St() ck subjecl \ 0
the
condillClIlS
an
d
restricli6l1~. bn
iSSU4hcc, selJ() rlhJicl'cin;; n
1h
e
'.
Certificate of
IncorP() rJltion. in an
y
othcrCcrtilicutc o:
fi\ rriend; n~
htbrcaiil;
g~
'
scricsnf Preferred
Stock Or
as
otherwise required hy
law.',','
, .
Section 6.
L.
ig,)
id<
lticll1; Dissoll! tioILQ.
r..~
iJlQlQgUP,. - "
;. . .
6,
1 Subject to thcpriorand ~.
upcriorrIghts of
holders orany shares () fany
series of
Preferred Stock rankingpriorai1dsupcrior
to:
thc'sharesof SericsRPPrclctrccj Stock
wi
threspcct to rights uponl, iquidarioti.
di$
so!
lltiollC;' F"
yin( l! ngnp:(
vol
illltai5' or
01her..\<
ls(;
). rio
distribution ~;
hall'be made to.
the
h()
I<!
Cl'S( ifshan,'
s()
fst() Qkr:. lllWilgjuniorrdther
asl(
j. divkknd:<;
or
UPO!! liquidation. diss(lltlliQllOrwindingup) , toJheSeri'es. RPTlrcfcrrcd Stock u]
ilcSK ,prior
thereto.
the
holders of
shares of
ScricsRP; PrefcrrcdSt() c~ shalihave rccejvi: dp~ rsh( J:
rc
iln
amount equal to the
grcatlTof I. OOOlimcs $200.(
j()
or
l: o()
O{
ifJ1C~
the
pUY1' ncntll1adcpcr sharl,' l) f
Common Stock.!,
lus
an amount equal! o
il(.' cruedtl'lUUIJl1aidd. ividends, HnddistribuU(
ih~
theri: o'n.
whether or
not
declared. to , he
date of
such payment (lhe":
B..'
djg;? J3J:Jj@ j~ tYJLVI1.
J~
[l.': i.~[~ u.<.:
s")
Following the
payment of
the full amount of
the
Series f{ lil. iquidation lire/ crepe..:. no
ilddilional
distributions shall he made to the
holders of
, har<: s of
:': cries RVPrcferrcd ShIck I: nlcss, prior
thereto.
the
holders of
shares
01
'
Commoll$ totk shall h,
I'lc, n::.: eive< 1 an
ill1lO\
lllt pu
sl1areOh.;'
"Capili'! lA~
ll1
'
i. t. lJlc
..m") equal to the
quoticnl ohlainc: dhydividing( i} the
Series R!:"- h.
i;;
tuidnlinn
Prefercllc<: hy
( ii) 1.0( 1)
{
iiS apprnl" riately ndjuslcd as
sc(
t(
lrth
ill SectiOJ1 (dtn relke! :; 11( 11
events as
stock spl
its.
~;
tock di\ idends and recapi lalil. ilti(\ flS wllh res!' ccl
III
the
('
llllini<. ln St()ck)
(such numher in clause (
ii) heing hc'reancr l'clem: d to a<
:
the
":,:\& LV~.! D!
C~
l! Lt{
I! mb~' r"
l Follo,,\
ing
the
paymcnlof the
fu
ll
HIlIOlJlll of
lh..'. S
...
rit's R P LiquidHI10ll l'rtttercncc lInd the
Carll, l!
Adjustmcllt in respl'ct ,)
1'
all
olllst< lnJillg slwrl's or
SenesRP Preferred Stock
an
d
(' Pinnwn Sto,:L
n:
spcctivcly. holders or'S
...
ril's RP
I'rt.'
li: rred Stock
an
d
holders ot'(" oll1lllon Slod
...
Irall rccei\ l:
their ratable
an
d
propottiunalC: share of
th\.' renlUining
a:~
scts
to he
distributed in the
rat", of
the
Adjustment 1\
umhc: r to I with res/ wet tosudl Pn: terrcd S(
ock;
lIld Common Stnd. on
a pe
r
shati.~
hasis. respectively.
().
2 In the (' vcnt. hl\\ Vl,'\ C:
I'. thut there Me !
lot
suf'ficicnt asst'ts ; I\ llil<
lhk
tn
pcrmit pa~: rnl'Jlt in full
{ If
the
Series RP
Liquidatioll I'rclercllcc ;
lIld
the
iiquid<
lli<
lll rrd(.' rcllcc:" of
all othn series ( 1"
preferred swck. ifltlly. \\ hid] rank
01
1
a parity
\\'
ith
the
Serie~ ({ P PrekrTL'd
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00026
Sloek. then S-
tXhreroaininl? a~ SCh ;, hall
h.:
Jistrihuie: d r.
ltahJ~ 10
the
holders of
Series RP
Prd'crred Stock andkij." IJers ofsuch parityshMt:$ Cmproporiion 10 their respective liquir. lalion
preti;
n..'
ncC" S.
InlheeV~
nt.
l)() weva. thal dWTCaron<, i. sulllbcnl
as~
t:,
a\'
alI:
tQlc to remiil
p.
ayrnen: inf4! loft! le q;
lpital-,.\ iJJusi" ment. lhcnsuChre~ kining < l. SsCI.
ss,
ha.
1!
he
( listrihlJicdriltably
10
the
holders QfC()tnmm- iSliiCL ' '
,.,.
Section 9,
R.
illl1
.
U!
g.
The ScricsRP Prcfl'l1' l'dStllcks! JnIJ Tank junior to all
olher series or
the
Corporation' s PrcfcTrt.? d Stock as
IOlbe payment ofdividcllos <llidtllf.: dislrihu!
i\\
11
of
a!>
st.'
ts.
unless
rhe
terms or
an
y
slIl,; holhet sctic$ shnllpi'lwidcnthcrwise.===" '
Section
10,
i.\!
.
11£
Jl.
9.!
1l.£
u.!.
Th
e
;\:
rtieks of
lileorporation or
the
Corpnu.: i( lllshaJl
not
be
further amended inany ll1nnncrrfJaf wOlild
ll1!
lkriallyalterorlh:. ll1gl'
the
rowel's. prcfl> rCtl(; C~ of
special rights of
(
he-
Series
RI'
Pn.: lCrn .. d Stock so
as
tn aftt.' cf
thell1 udv(.> rscly \ Allholll ( he
affinnative V01(' of
the
lwlders ofa
ll1ajority or
1110re oCthe, outstanding :: haics
nt'
S\?
i'ks
RI'
Preferred Stock. Hllillg :; cparalcly as
a r:
laiis.
Section 1L
FractiOllClI ShUtes. Series
Rl'
I'ide/' red
Stock ll1a\ be
if'fHtCt! ill fhlClillll~ of
H
share which
:-;
hall
cniTli; ti;
I~'~, IJc~~ pTrotplOl1i( Jn
[osuch hOlder s J"
til'cliolla! ~hiltl'S, io t: xcreisl'
voting rights. reccivedivldclllf" partkirutc in distributinJ1Salld haw till' hCllelil \ 11'
all
olh~ r
rights ofholdl'rs ofSClit'S
HI'
PrckrteJ SInd.
, " ,( 1.'" ' (nlh.: c\.('
nt[ hcCQrr( lTati( ln~ tWll\ ildcdaTcunydjvidcnd ,mCommon
Slockpayablcin "
sJ}
ar.~. ! In.\ yriutmnSt~ k.
{ in S~
i\~ iQe.'@~() u!
standj ng
.
C (in1tlioh .Si~) ck;
or(
iIi)
combine the:( juL\; tanuin£
('(
jl! HJl(loStffl; kimoa
sJl),
ilJei;
ril.
imbcr of
sharcs; thcilin eachsuchca$ c
;: t~ 1£
s~
~
t~~~ 1~!,; t, i;:~~~~~!: 1i%~;isthe number ofsli&resdf<:(jrTJmo.
n.~
ti) ck
Ihill\\ ;: redlft. siiin( jiJ1gimrl1~ diUlcIJprjod() s[
jchcvCht.
Section 7.
,ConSolidaIion, Mcrger. s.
tc.
fri'casl.'" lhct'Qrporati6n shall cntcriJito any
consolidation, merger. Cfll11hiri: iiion or
other
tr[
lfl~ acti( mitlsvhichth
esharcs'ot' ComJilon Stock
are exchangcd
for
~ r changed into other slock()
rsi!
ctiri( ics~
c;) shand! oriill)' othtr prbpcrty. fhcn
in any such case the shares of
Serks RI} Prcl~ n~ dSt(} l: k~ li~ lla( thcsunw tini2 bcsimilarly
exchanged or
chat1~ edinan al11qunt'pqr~ harccqllalloih~'. lJ9jtJstmt7nt Ni!
mber (asappropr! a:
tdy
adjusted as
set
fort~ in Seclion6J. IO r~ t]~ Clslichcvcl) t$#$ stocksplits, sWck "dividcllds'and'
rccapi
tal
izatiolls\ yHlr rcspcc t toithe Cotlimon
St(
j~ k}~ ilh~~ I~ lCaggrcgatc3nlOun ( oi
st~) ck
securities, cashand! Oranyp(hcrpropcriy( payablc.'
in"
ki~~}~- as
the
cuse may
bc;'
intowhichortbr
whicheaeh share of
Coon
non
Stock ischilngcdorc~ chling(.' H:
.
',..'
Scction 8.
No
Regcmption. Thesharc5 orScr: ics'R} Jl'teJcm: dSI~}( k
sh
;
1I111o( be
redeemable.
THlRl>:ThcSl' i\ r
t iclc" of
!\mendmcl1t
V..
cn~ duh' ;\ dop! ed
nn Ikccmhcl
19.
200!!.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00027
"
023.1837.6
20
01
FOURTH: These Articles of
Directors, pursuant to the
provisions of RCW
December 19~ 2(
jOO;SharHlOlderapprov,~ 1 is no
t
. .,.-:."' .
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00028
Exec~
ted
' his/$ J,
y OfJ; j~ j-"
2001.
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00029
I, Sam Reed, Secretary of
State of
the
State of
Washington and custodian of
its
seal,
hereby issue this
certificate that the attached is a true and correct copy of
ARTICLES OF AMENDMENT
of
WASHINGTON MUTUAL, INC.
AMENDED &RESTATED
as
filed in this office on
October 29
,
1999.
Date: March 6,
2006'~='"
Given under my
hand and
the
Seal of
the
State
of
Washington at
Olympia.
the
State Capital
Sam Reed. Secretary of
State
' O{\ f\{\ 1
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00030
-,'
\;
.
Date: October.~ 1999
Given. under my
han. dandthe Seal oftheBtate
a/
Washington at
Olympillrthe State Capital
Amending and Restating Articles
to
WASHlNGTONMUTUAL, INC.
~(~
.
l ~SECRETARY ' if $TATE
CERTIFICATE OF AMENDMENT
STAJorE.' if WASHING'ION
UBI NtUuber: 601 566389
a Washington Profit corporation. Articles of
Amendment were filed
for
fi? cordillthis
office on
the date indicated below. :
I, RALPH MUNRO, Secretnry of
State of
tire
State of
Washington and custodian of# sseal,
hereby issue this
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00031
AMENDED AND RESTATED ARTICLES OF
INCORPORATION
OF
WASHINGTON MUTUAL, INe.
Pursuant to the
provisions ofRCW 23B. 1O. 070 of
the
Washington Business
Corporation Act, Washington Mutual, Inc., a Washington corporation, hereby restates
its Articles ofIncorporation as now and heretofore amended:
ARTICLE I
Name
The name ofthis corporation is:
WASHINGTON MUTUAL, INe.
ARTICLE II
Capital Stock
A.
Issuance of
and Payment for
Stock. The total number of
shares of
capital
stock which
the Company has authority to issue is 1,610,000,000 shares of
which
1,600,000,000 shares shall be
shares of
common stock with no
par
value per
share and
10,000,000 shares shall be
shares of
preferred stock with no
par value per share. The
shares may be
issued by
the
Company from time to time as
approveg by
its Board of
Directors without the
approval of
the
shareholders. The considerationfor issuance of
the
shares shall be paid in full before their issuance. Neither promissory notes nor
the
promise. at
future services shall constitute payment or
part payment for
the
issuance of
shares of
the
Company. The consideration
for
the
shares shall be cash, tangible or
intangible property, labor or
services actually performed for
the
Company or
any
combination of
the
foregoing. In the
absence of
actual fraud in the
transaction, the
value
of
such property, labor or
services, as determined by
the
Board of
Directors of
the
Company, shall be
conclusive. Upon payment of
such consideration, such shares shall be
deemed to be
fully paid and non- assessable.
B.
Voting by
Class or
Series. Except as
expressly provided in these Articles or
in any resolutions of
the Board of
Directors designating and establishing the
terms of
any
series of
preferred stock, no
holders of
any class or
series of
capital stock shall have any
CONFIDENTIAL
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002099.00032
right to vote as
a separate class or
series or
to vote more than one vote per
share.
Notwithstanding
the
foregoing,
the
restriction on voting separately by
clas~~ r series shall
not apply to the
extent that applicable law requires such voting, nor shall this restriction
apply to any amendment to these Articles which would adversely change
the
specific
terms of
any class or
series of
capital stock as
set
forth in this Article II or
in any
resolution of
the
Board of
Directors designating and establishing the
terms of
any series
of
preferred stock. For purposes of
the
preceding sentence, an amendment which
increases the
number of
authorized shares of
any class or
series of
capital stock, or
substitutes the
surviving institution in a merger or
consolidation for
the Company, shall
not
be
such an
adverse change.
C.
Common Stock. On matters on which holders of
common stock are entitled
to vote, each holder of
shares of
common stock shall be entitled to one vote
for
each share
held by
such holder.
Whenever there shall have been paid, or
declared and set
aside for
payment, to the
holders of
the
outstanding shares of
any class of
stock having preference over the
common stock as
to the
payment of
dividends, the full amount of
dividends and of
sinking fund or
retirement fund or
other retirement payments, if any, to which such
holders are respectively entitled in preference to the common stock, then dividends may
be
paid on
the common stock and on
any class or
series of
stock entitled to participate:
therewith as
to dividends, out
of
any assets legally available for
the
payment of
dividends;
but
only when and as
declared by
the
Board of
Directors.
In the
event of
any liquidation, dissolution or
winding up
of
the Company, after.
there shall have been paid to or
set
aside for
the holders of
any class having preferences
over the common stock in the event of
liquidation, dissolution or
winding up
of
the full
preferential amounts to which they are respectively entitled, the
holders of
the
common
stock, and of
any class or
series of
stock entitled to participate therewith, in whole or
in
part, as
to distribution of
assets, shall be entitled, after payment or
provision
for
payment
of
all
debts and liabilities of
the
Company, to receive pro rata the
remaining assets of
the
Company available for
distribution, in cash or
in kind.
Each share of
common stock shall have the
same relative rights as
and be
identical
in all
respects with all
the other shares of
common stock.
D.
Preferred Stock. The authorized Preferred Stock shall be comprised of
10,000,000 shares no
par
value per
share. The Board of
Directors of
the
Company is
authorized by
resolution or
resolutions from time to time adopted, to provide for
the
issuance of
preferred stock in one or
more additional series by
designating and
establishing the
terms of
such a series. With respect to any such series, the
Board of
Directors is authorized to fix and state
the
voting powers, designations, preferences and
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relative, participating, optional or
other special right of
the shares of
each such series and
the
qualifications, limitations and restrictions thereon, including, but
not
liI¥ ited to,
determination of
any of
the
following: ..
( I) The distinctive serial designation and
the number of
shares
constituting such series;
( 2)
The dividend rates or
the
amount of
dividends to be
paid on
the
shares of
such series, whether dividends shall be
cumulative and, if so,
from which date
or
dates, the
payment date or
dates for
dividends, and the participating or
other special
rights, if any, with respect to dividends;
( 3)
The voting powers, full, special or
limited, if any, of
shares of
such
series;
( 4)
Whether the
shares of
such series shall be
redeemable and, if so,
the
price or
prices at
which, and
the
terms and conditions on which, such shares may be
redeemed;
( 5)
The amount or
amounts payable upon the shares of
such series in the
event of
voluntary or
involuntary liquidation, dissolution or
winding up
of
the Company;
( 6)
Whether the
shares of
such series shall be
entitled to the
benefit of
a
sinking or
retirement fund to be
applied to the
purchase or
redemption of
such shares, and
if so
entitled, the amount of
such fund and the
manner of
its
application, including the
price or
prices at
which such shares may be redeemed or
purchased throughth
e
application of
such fund;
( 7)
Whether the
shares of
such series shall be
convertible into, or
exchangeable for, shares of
any other class or
classes or
of
any othe~ eties of
the same or
any other class or
classes of
stock ofthe Company and, if so
convertible or
exchangeable,
the
conversion price or
prices, or
the
rate of
exchange, and
the
adjustments thereof, if any,
at
which'soch conversion or
exchange may be
made, and any other terms and conditions
of
such conversion or
exchange; and
( 8)
Whether
the
shares of
such series which
are redeemed or
converted
shall have the
status of
authorized but
unissued shares of
serial preferred stock and
whether such shares may be
reissued as
shares of
the
same or
any other series of
serial
Preferred Stock.
Each share of
each series of
preferred stock shall have the
same relative rights as
and be
identical in all
respects with all
the other shares of
the same series.
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While the
foregoing authorizes the Board of
Directors, in establishing the terms of
a series of
Preferred Stock, to permit holders of
that series of
Preferred Sto~ to elect
separately one or
more directors, in no
event shall the
total number of
directors separately
elected by
holders of
one or
more series of
Preferred Stock equal or
exceed fifty percent
(50%) of
the
total number of
authorized directors.
ARTICLE
III
Preemptive Rights
The shareholders of
the
Company shall have no
preemptive rights to acquire
additional shares of
the
Company.
ARTICLE IVBoard o
f
Directors
The Company shall be managed by
a Board of
Directors. The number of
directors
shall be
stated in the
Company's Bylaws, provided, however, that such number shall be
not less than five (
5).
There shall be three classes of
elected directors designated as Class
1,
Class 2,
and Class 3 directors. Each class shall contain one- third of
the total number of
directors, as
near as may be
.
The terms of
the
Class 1 directors shall expire at
the
first
annual shareholders' meeting after their election. The terms of
the Class 2 directors shall
expire at
the second annual shareholders' meeting after their election. The terms of
the
Class 3 directors shall expire at
the
third annual shareholders' meeting after their election.
At
each annual shareholders' meeting held thereafter, directors shall be
chosen for
a term
of
three years to succeed those whose terms expire. A vacancy on
the
Board of
Directors
may be
filled by
the Board in accordance with the
applicable provisions of
the
,.:~-=
Company's Bylaws. A director elected to fill a vacancy shall be elected
for
a term of
office continuing only until the
next election of
directors by
shareholders.
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ARTICLE V
Removal of
Directors
Any director may be removed by
the shareholders only with good cause and in
accordance with the
applicable provisions of
the
Company's Bylaws.
ARTICLE VI
Cumulative Voting
The right to cumulate votes in the election of
directors shall not exist with respect
to shares of
stock of
the
Company.
ARTICLE VII
Bylaws
The Board of
Directors has the power to adopt, amend or
repeal the Bylaws of
the
Company, subject to the
concurrent power of
the
shareholders, by
at
least two- thirds
affirmative vote of
the
shares ofthe Company entitled to vote thereon, to adopt, amend or
repeal the
Bylaws.
ARTICLE VIII
Shareholder Vote Required to Approve Substantial Business Transaction
If pursuant to the
Washington Business Corporations Act the_ Company's
shareholders are required to approve a plan of
merger, share exchange: or
other
disposition of
all,
or
substantially all
of
the
Company's property, otherwise than in the
usual and:! egular course of
business (each of
the foregoing, a "Substantial Business
Transaction"), then ( a)
if two- thirds ofthe 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, shall
control.
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ARTICLE IX
Indemnification
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 ofthe 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.
ARTICLE X
Business Combinations
A.
For the
purposes ofthis Article X:
( 1)
The terms "Affiliate" and "Associate" shall have the meanings
attached to them by
Rule 12b- 2 under the
Securities Exchange Act of
1934, as
amended,
or
any similar successor rule.
( 2)
The term "beneficial owner" and correlative terms shall have
the
meaning as
set
forth in Rule 13d- 3 under the
Securities Exchange Act of
1934, as
amended, or
any similar successor rule. Without limitation and in addition to the
foregoing, any shares of
Voting Stock of
the
Company which any Major Stockholder has
the
right to vote or
to acquire ( i) pursuant to any agreement, ( ii) byr~son of
tenders of
shares by
shareholders of
the Company in connection with or
pursu; ntto a tender offer
made by
such Major Stockholder (whether or
not
any tenders have been accepted, but
excluding , tenders which have been rejected), or
(
iii) upon the
exercise of
conversion
rights, warrants, options or
otherwise, shall be deemed " beneficially owned" by
such
Major Stockholder.
( 3)
The term "Business Combination" shall mean:
( a)
any merger or
consolidation (whether in a single transaction
or
a series of
related transactions, including a series of
separate transactions with a Major
Stockholder, any Affiliate or
Associate thereof or
any Person acting in concert therewith)
of
the
Company or
any Subsidiary with or
into a Major Stockholder or
of
a Major
Stockholder into the
Company or
a Subsidiary;
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( b)
any sale, lease, exchange, transfer, distribution to
stockholders or
other disposition, including without limitation, a mortgage,( pledge or
any
other security device, to or
with a Major Stockholder by
the
Company or
any of
its
Subsidiaries ( in a single transaction or
a series of
related transactions) of
all,
substantially
all
or
any Substantial Part of
the
assets of
the
Company or
a Subsidiary (including,
without limitation, any securities of
a Subsidiary);
( c)
the
purchase, exchange, lease or
other acquisition by
the
Company or
any of
its
Subsidiaries ( in a single transaction or
a series of
related
transactions) of
all,
substantially all
or
any Substantial Part of
the
assets or
business of
a
Major Stockholder;
( d)
the
issuance of
any securities, or
of
any rights, warrants or
options to acquire any securities, of
the
Company or
a Subsidiary to a Major Stockholder
or
the
acquisition by
the Company or
a Subsidiary of
any securities, or
of
any rights,
warrants or
options to acquire any securities, of
a Major Stockholder;
( e)
any reclassification of
Voting Stock, recapitalization or
other
transaction (other than a redemption in accordance withth
eterms o
f
the
security
redeemed) which ha
s
the
effect, directly or
indirectly, of
increasing the
proportionate
amount of
Voting Stock ofthe Company or
any Subsidiary which is beneficially owned
by
a Major Stockholder, or
any partial or
complete liquidation, spin
off,
split off
or
split
up
of
the
Company or
any Subsidiary; provided, however, that this Section A(
3)(
e)
shall
not
relate to any transaction of
the
types specified herein that has been approved by
a
majority of
the
Continuing Directors; and
( f) any agreement, contract or
other arrangement providing for
any of
the
transactions described herein.
-
( 4)
The term "Continuing Director" shall mean (ijaperson who was a
member of
the
Board of
Directors of
the Company immediately prior to the time that any
then- existjllg. Major Stockholder became a Major Stockholder, or
( ii) a person designated
.( before initially becoming a director) as
a Continuing Director by
a majority of
the
then
Continuing Directors. All
references to a vote of
the
Continuing Directors shall mean a
vote of
the
total number of
Continuing Directors.
( 5)
The term " Major Stockholder" shall mean any Person which,
together with its
Affiliates and Associates and any Person acting in concert therewith, is
the
beneficial owner of
five percent (5%) or
more of
the
votes held by
the holders of
the
outstanding shares of
the
Voting Stock of
the Company, and any Affiliate or
Associate of
a Major Stockholder, including a Person acting in concert therewith. The term "Major
Stockholder" shall not
include a Subsidiary.
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( 6)
The term "other consideration to be
received" shall include, without
limitation, Voting Stock retained by
the
Company's existing shareholders
ip...
the
event of
a Business Combination which is a merger or
consolidation in which
the Company is the
surviving corporation.
( 7)
The term " Person" shall mean any individual, corporation,
partnership or
other person, group or
entity (other than the
Company, any Subsidiary or
a
trustee holding stock for
the benefit of
employees of
the Company or
its
Subsidiaries, or
anyone of
them, pursuant to one or
more employee benefit plans or
arrangements).
When two or
more persons act
as
a partnership, limited partnership, syndicate, association
or
other group for
the
purpose of
acquiring, holding or
disposing of
shares of
stock, such
partnerships, syndicate, association or
group will be deemed a "Person."
( 8)
The term " Subsidiary" shall mean any business entity fifty percent
(50%) or
more of
which is beneficially owned by
the
Company.
( 9)
The term " Substantial Part," as
used in reference to the
assets of
the
Company or
any Subsidiary or
of
any Major Stockholder means assets having a value of
more than five percent (5%) of
the
total consolidated assets ofthe Company and its
Subsidiaries as
of
the end of
the Company's most recent fiscal year ending prior to the
time the
determination is made.
( l0)
The term " Voting Stock" shall mean the
stock or
other securities
entitled to vote upon any action to be
taken in connection with any Business Combination
or
entitled to vote generally in the election of
directors, including stock or
other securities
convertible into Voting Stock.
B.
Notwithstanding any other provisions of
these Articles ofIncorporation and
except as
set
forth in Section C of
this Article X,
neither
the Comp~nor any Subsidiary
shall be
a party to a Business Combination unless:
( I) The Business Combination was approved by
the Board of
Directors
of
the Co~ pany prior to the
Major Stockholder involved in the
Business Combination
becoming such; or
( 2)
The Major Stockholder involved in the
Business Combination sought
and obtained the
unanimous prior approval of
the
Board of
Directors to become a Major
Stockholder and the Business Combination was approved by
a majority of
the
Continuing
Directors; or
( 3)
The Business Combination was approved by
at
least eighty percent
(80%) of
the
Continuing Directors of
the
Company; or
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( 4)
The Business Combination was approved by
at
least ninety-five
percent (95%) of
the
outstanding Voting Stock beneficially owned by
shar{(holders other
than any Major Stockholder. ...
C.
The approval requirements of
Section B shall no
t
apply if:
( 1)
The Business Combination is approved by
at
least the
majority vote
of
the
shares of
the
Voting Stock and
the
majority vote of
the
shares of
the Voting Stock
beneficially owned by
shareholders other than any Major Stockholder; and
( 2)
All
of
the
following conditions
are satisfied:
( a)
The aggregate ofthe cash and the
fa
ir
market value of
other
consideration to be
received per
share ( as
adjusted for
stock splits, stock dividends,
reclassification of
shares into a lesser number and similar events) by
holders of
the
common stock ofthe Company in the
Business Combination is not
less than the
higher of
( i) the
highest per share price (including brokerage commissions, soliciting dealers' fees,
dealer-management compensation, and other expenses, including, but not limited to,
costs
of
newspaper advertisements, printing expenses and attorneys' fees) paid by
the
Major
Stockholder in acquiring any of
the Company's common stock; or
(
ii)
an amount which
bears the
same or
a greater percentage relationship to the
market price of
the Company's
common stock immediately prior to the announcement of
such Business Combination as
the
highest per
share price determined in ( i) above bears to the
market price of
the
Company's common stock immediately prior to the commencement of
acquisition of
the
Company's common stock by
such Major Stockholder, but
in no
event in excess of
two
times the
highest per share price determined in ( i) above; and
( b)
The consideration to be received in such Business
Combination by
holders of
the common stock of
the Company shallbe, except to the
extent that a stockholder agrees otherwise as
to all
or
a part of
his
ill" 7'
hershares, in the
same form and of
the
same kind as
paid by
the
Major Stockholder in acquiring his Voting
Stock .. :~
( c)
After becoming a Major Stockholder and prior to the
consummation of
such Business Combination, ( i) such Major Stockholder shall not have
acquired any newly issued shares of
capital stock, directly or
indirectly, from
the
Company or
a Subsidiary (except upon conversion of
convertible securities acquired by
it
prior to becoming a Major Stockholder or
upon compliance with the
provisions of
this
Article X or
as a result of
a pro rata stock dividend or
stock split), and (
ii) such Major
Stockholder shall not
have received the
benefit, directly or
indirectly (except
proportionately as
a shareholder), of
any loans, advances, guarantees, pledges or
other
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financial assistance or
tax
credits provided by
the
Company or
a Subsidiary, or
made any
major changes in the
Company's business or
equity capital structure; and t
"
( d)
A proxy statement responsive to the
requirements of
the
Securities Exchange Act of
1934, whether or
not
the
Company is then subject to such
requirements, shall be mailed to all shareholders of
the Company
for
the purpose of
soliciting shareholder approval of
such Business Combination and shall contain on
the
front thereof, in a prominent place, ( i) any recommendations as
to the advisability ( or
inadvisability) ofthe Business Combination which the
Continuing Directors may choose
to state, and ( ii)
the
opinion of
a reputable national investment banking firm as
to the
fairness ( or
lack thereof) of
the
terms of
such Business Combination, from
the
point of
view of
the remaining shareholders of
the
Company. Such investment banking firm shall
be engaged solely on behalf of
the
remaining shareholders, be paid a reasonable
fee
for
their services by
the
Company upon receipt of
such opinion, and be
one of
the
so-
called
major bracket investment banking firms which has not previously been associated with
such Major Stockholder and to be
selected by
a majority of
the
Continuing Directors.
D.
During the time a Major Stockholder exists, a resolution to voluntarily
dissolve
the
Company shall be adopted only upon: ( 1)
the
consent of
all
of
the
Company's shareholders; or
( 2)
the
affirmative vote of
at
least two- thirds of
the
total
number of
directors, the affirmative vote of
the
holders of
at
least two- thirds ofthe shares
of
the Company entitled to vote thereon, and
the
affirmative vote of
the
holders of
at
least
two- thirds of
the
shares of
each class of
shares entitled to vote thereon as
a class, if any.
E.
As
to any particular transaction, the Continuing Directors shall have the
power and duty to determine, on
the
basis of
information known to them:
( 1)
The amount of
Voting Stock beneficially held by
any Person;
-~-=
( 2)
Whether a Person is an Affiliate or
an Associate of
another;
( 3)
Whether a Person is acting in concert with another;
:-
( 4)
Whether the
assets subject to any Business Combination constitute a
Substantial Part;
( 5)
Whether a proposed transaction is subject to the
provisions of
this
Article; and
( 6)
Such other matters with respect to which a determination is required
under this Article.
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Any such determination shall be
conclusive and binding for
all
purposes of
this
Article.
The affirmative vote required by
this Article is in addition to the
vote of
the
holders of
any class or
series of
stock of
the
Company otherwise required by
law, these
Articles of
Incorporation, any resolution which has been adopted by
the
Board of
Directors providing
for
the
issuance of
a class or
series of
stock or
any agreement
between the Company and any national securities exchange.
ARTICLE XI
Amendment
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 Bylaw. s,
provided, however, that ArticleX 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.
ARTICLE XII
Limitation of
Liability
-'~.;,;=.~
A director ofthe Company shall
not
be
personally liable to the Company or
its
sharehoW~ rs
for
monetary damages for
conduct as
a director ("
Protected Conduct").
However, Protected Conduct shall exclude ( i) acts or
omissions which involve intentional
misconduct by
the
director or
a knowing violation of
law by
the
director, (
ii) any conduct
violating Section 23B. 08.31O of
the
Revised Code of
Washington, and (iii), any
transaction from which the
director will personally receive a benefit in money, property
or
services to which the director is not legally entitled. If Washington law is amended to
authorize corporate action further eliminating or
limiting
the
personal liability of
directors, then the
liability of
a director of
the
Company shall be
eliminated or
limited to
the
fullest extent permitted by
Washington law, as
so
amended. Any repeal or
modification of
this Article XII by
the
shareholders of
the
Company shall
not
adversely
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affect any right or
protection of
a director ofthe Company existing at
the
time of
such
repeal or
modification.
ARTICLE XIII
The street address of
the
registered office of
the
Company is:
1201 Third Avenue
15th Floor
Seattle, Washington 98101
and the
name ofthe registered agent at
that address is:
Marc R.
Kittner
ARTICLE XIV
Special Meetings of
Shareholders
Special meetings of
the
shareholders for
any purpose or
purposes, unless otherwise
prescribed by
statute, may be
called by
the board of
directors or
by
any other person or
persons authorized to do
so
in the
Company's Bylaws. Notwithstanding RCW
23B. 07.020( 1)
( b)
or
any other provision in these Articles or
the
Company's Bylaws, a
special meeting of
the
shareholders may be called by
the
shareholders only if the
holders
of
at
least twenty- five percent of
all
the
votes to be
cast on
any issue proposed to be
considered at
the
proposed special meeting sign, date and deliver to the
Company's
secretary
one
or
more written demands
for
the
meeting describing
tile purpose or
purposes for
which it is to be
held. .~~
~ ATE. D at
Seattle, Washington, on
the 02g!b day of
October, 1999.
:~
WASHINGTON MUTUAL, INC.
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CERTIFICATE OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WASHINGTON MUTUAL, INC.
ce
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t, ~. LJ. JJ
Pursuant to the
provisions ofRCW 23B.
IO.
070 of
the
Washington Business
Corporation Act, Washington Mutual, Inc., a Washington corporation ( the
"Company"),
hereby certifies that it has amended and restated its
articles of
incorporation:
FIRST: The name of
the Company is:
Washington Mutual, Inc.
SECOND: The Amended and Restated Articles ofIncorporation are hereby
adopted by
the
Company and supersede the
Restated Articles of
Incorporation of
the
Company, as
amended, and contain the following amendments to the
Articles of
Incorporation, none of
which require shareholder approval:
1.
The Restated Articles ofIncorporation are amended and restated to read in
their entirety as
set
forth in the
Amended and Restated Articles of
Incorporation, attached
hereto as
Exhibit A.
2.
The amendments do
not provide for
an
exchange, reclassification or
cancellation of
any issued shares. _~~~
THIRD: At
a duly called meeting of
the board of
directors of
the Company,
held on Qctober 19, 1999,
the
foregoing amendments to the
Articles of
Incorporation
were duly:approved and adopted by
the
board of
directors
DATED this ~ day of
October, 1999.
WASHINGTON MUTUAL, INC.
By:~ it~
Kerry K.
Kil! inger
President, Chairman and Chief Executive Officer
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Exhibit A
(..
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WASHINGTON MUTUAL, INC.
Pursuant to the provisions ofRCW 23B. 1O.070 of
the Washington Business
Corporation Act, Washington Mutual, Inc., a Washington corporation, hereby restates
its
Articles ofIncorporation as now and heretofore amended:
ARTICLE I
Name
The name of
this corporation
is:
WASHINGTON MUTUAL, INC.
ARTICLE II
Capital Stock
A.
Issuance of
and Payment for
Stock. The total number of
shares of
capital
stock which the
Company has authority to issue is 1,610,000,000 shares of
which
1,600,000,000 shares shall be shares of
common stock with no
pa
r
value
pe
r
share and
10,000,000 shares shall be
shares of
preferred stock with no
par value per share. The
shares may be issued by
the
Company from time to time as
approveCfby
its Board of
Directors without the
approval of
the
shareholders. The consideration for
issuance of
the
shares sh.
all
b~ paid in full before their issuance. Neither promissory notes nor the
promise ofruture services shall constitute payment or
part payment for
the issuance of
shares of
the
Company. The consideration for
the
shares shall be
cash, tangible or
intangible property, labor or
services actually performed for
the Company or
any
combination of
the
foregoing. In the
absence of
actual fraud in the
transaction, the
value
dfsuch property, labor or
services, as
determined by
the
Board of
Directors of
the
Company, shall be conclusive. Upon payment of
such consideration, such shares shall be
deemed to be
fully paid and non- assessable.
B.
Voting by
Class or
Series. Except as
expressly provided in these Articles or
in any resolutions of
the
Board of
Directors designating and establishing the
terms of
any
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series of
preferred stock, no
holders of
any class or
series of
capital stock shall have any
right to vote as
a separate class or
series or
to vote more than one vote per
s4are.
Notwithstanding
the
foregoing,
the
restriction on voting separately by
class or
series shall
not
apply to the
extent that applicable law requires such voting, nor
shall this restriction
apply to any amendment to these Articles which would adversely change
the
specific
terms of
any class or
series of
capital stock as
set
forth in th
is
Article II
or
in any
resolution of
the Board of
Directors designating and establishing the
terms of
any series
of
preferred stock. For
purposes of
the
preceding sentence, an
amendment which
increases the
number of
authorized shares of
any class or
series of
capital stock, or
substitutes
the
surviving institution in a merger or
consolidation
for
the Company, shall
not
be
such an
adverse change.
C.
Common Stock. On matters on
which holders of
common stock are entitled
to vote, each holder of
shares of
common stock shall be
entitled to one vote for
each share
held by
such holder.
Whenever there shall have been paid, or
declared and
set
aside
for
payment, to the
holders of
the
outstanding shares of
any class of
stock having preference over the
common stock as
to the
payment of
dividends,
the
full amount of
dividends and of
sinking fund or
retirement fund or
other retirement payments, if any, to which such
holders are respectively entitled in preference to the
common stock, then dividends may
be paid on
the common stock and on any class or
series of
stock entitled to participate
therewith as
to dividends, out
of
any assets legally available for
the
payment of
dividends;
but
only when and as
declared by
the
Board of
Directors.
In the
event of
any liquidation, dissolution or
winding up
of
the Company, after
there shall have been paid to or
set
aside for
the
holders of
any class having preferences
over
the common stock in the event ofliquidation, dissolution or
winding up ofthe full
preferential amounts to which they are respectively entitled, the
hol~ ofthe common
stock, and of
any class or
series of
stock entitled to participate therewith, in whole or
in
part, as
to distribution of
assets, shall be
entitled, after payment or
provision for
payment
of
all
del5ts--andliabilities of
the
Company, to receive pro rata the
remaining assets of
the
Company available
for
distribution, in cash or
in kind.
Each share of
common stock shall have the same relative rights as
and be
identical
in all respects with
all
the
other shares of
common stock.
D.
Preferred Stock. The authorized Preferred Stock shall be
comprised of
10,000,000 shares no
par
value per
share. TheBoard of
Directors ofthe Company is
authorized by
resolution or
resolutions from time to time adopted, to provide
for
the
issuance of
preferred stock in one or
more additional series by
designating and
establishing the terms of
such a series. With respect to any such series, the
Board of
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Directors is authorized to fix
and
state the
voting powers, designations, preferences and
relative, participating, optional or
other special right of
the shares of
each s\
lch
series and
the
qualifications, limitations and restrictions thereon, including, but
not
limited to,
determination of
any of
the
following:
( 1)
The distinctive serial designation and the
number of
shares
constituting such series;
( 2)
The dividend rates or
the
amount of
dividends to be
paid on
the
shares of
such series, whether dividends shall be
cumulative and, if so,
from which date
or
dates, the payment date or
dates for
dividends, and the participating or
other special
rights, if any, with respect to dividends;
( 3)
The voting powers, full, special or
limited, if any, of
shares of
such
series;
( 4)
Whether the
shares of
such series shall be
redeemable and, if so,
the
price or
prices at
which, and the terms and conditions on
which, such shares may be
redeemed;
( 5)
The amount or
amounts payable upon the
shares of
such series in the
event of
voluntary or
involuntary liquidation, dissolution or
winding up
of
the Company;
( 6)
Whether the shares of
such series shall be
entitled to the benefit of
a
sinking or
retirement fund to be
applied to the purchase or
redemption of
such shares, and
if so
entitled, the
amount of
such fund and the
manner of
its
application, including the
price or
prices at
which such shares may be
redeemed or
purchased through the
application of
such fund;
-
( 7)
Whether the
shares of
such series shall be
convertible into, or
exchangeable for, shares of
any other class or
classes or
of
any other series of
the same or
any other class or
classes of
stock of
the
Company and, if so
convertible or
exchangeable,
the
conversion price or
prices, or
the
rate of
exchange, and the
adjustments thereof, if any,
at
which such conversion or
exchange may be made, and any other terms and conditions
of
such conversion or
exchange; and
( 8)
Whether the
shares of
such series which are redeemed or
converted
shall have the
status of
authorized but
unissued shares of
serial preferred stock and
whether such shares may be
reissued as
shares of
the
same or
any other series of
serial
Preferred Stock.
Each share of
each series of
preferred stock shall have the same relative rights as
and be
identical in all
respects with
all
the
other shares of
the
same series.
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While the foregoing authorizes the Board of
Directors, in establishi, ng
the
terms of
a series of
Preferred Stock, to permit holders ofthat series of
PreferredStQ(~.. k
to elect
separately one or
more directors, in no
event shall the
total number of
directors separately
elected by
holders of
one or
more series of
Preferred Stock equal or
exceed fifty percent
(50%) of
the
total number of
authorized directors.
ARTICLE
III
Preemptive Rights
The shareholders ofthe Company shall have no
preemptive rights to acquire
additional shares of
the
Company.
ARTICLE IVBoard o
f
Directors
The Company shall be managed by
a Board of
Directors. The number of
directors
shall be stated in the Company's Bylaws, provided, however, that such number shall be
not
less than five ( 5).
There shall be
three classes of
elected directors designated as
Class
1,
Class 2,
and Class 3 directors. Each class shall contain one- third of
the
total number of
directors, as
near as
may be.
The terms ofthe Class 1 directors shall expire at
the
first
annual shareholders' meeting after their election. The terms of
the
Class 2 directors shall
expire at
the
second annual shareholders' meeting after their election. The terms of
the
Class 3 directors shall expire at
the
third annual shareholders' meeting after their election.
At
each annual shareholders' meeting held thereafter, directors shall be
chosen for
a term
of
three years to succeed those whose terms expire. A vacancy on
the Board of
Directors
may be
filled by
the
Board in accordance with
the
applicable provis~ ons of
the
Company's Bylaws. A director elected to fill
a vacancy shall be
eleCted for
a term of
office continuing only until the
next election. of
directors by
shareholders.
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ARTICLE V
Removal of
Directors
Any director may be
removed by
the
shareholders only with good cause and in
accordance with the
applicable provisions ofthe Company's Bylaws.
ARTICLE VI
Cumulative Voting
The right to cumulate votes in the
election of
directors shall no
t
exist with respect
to shares of
stock of
the
Company.
ARTICLE VII
Bylaws
The Board of
Directors has the power to adopt, amend or
repeal the Bylaws of
the
Company, subject to the
concurrent power ofthe shareholders, by
at
least two- thirds
affirmative vote of
the
shares of
the
Company entitled to vote thereon, to adopt, amend or
repeal
the
Bylaws.
ARTICLE VIII
Shareholder Vote Required to Approve Substantial Business Transaction
If pursuant to the
Washington Business Corpotations Act the .company's
shareholders
are required to approve a plan of
merger, share exchang~,-" or
other
disposition of
all,
or
substantially all
of
the
Company's property, otherwise than in the
usual and ~~ gular 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, shall
control.
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ARTICLE IX
Indemnification
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.
ARTICLE X
Business Combinations
A.
For the
purposes of
this Article X:
( 1)
The terms " Affiliate" and "Associate" shall have
the
meanings
attached to them by
Rule 12b-2 under the
Securities Exchange Act of
1934, as
amended,
or
any similar successor rule.
( 2)
The term " beneficial owner" and correlative terms shall have the
meaning as
set
forth in Rule 13d-3 under the
Securities Exchange Act of
1934, as
amended, or
any similar successor rule. Without limitation and in addition to the
foregoing, any shares of
Voting Stock of
the
Company which any Major Stockholder has
the right to vote or
to acquire ( i) pursuant to any agreement, ( ii)
by
reason of
tenders of
shares by
shareholders of
the Company in connection with or
pursuifrrto a tender offer
made by
such Major Stockholder (whether or
not
any tenders have been accepted, but
excluding tenders which have been rejected), or
(
iii) upon
the
exercise of
conversion
rights, warrants, options or
otherwise, shall be deemed "beneficially owned" by
such
Major Stockholder.
( 3)
The term " Business Combination" shall mean:
( a)
any merger or
consolidation (whether in a single transaction
or
a series of
related transactions, including a series of
separate transactions with a Major
Stockholder, any Affiliate or
Associate thereof or
any Person acting in concert therewith)
of
the
Company or
any Subsidiary with or
into a Major Stockholder or
of
a Major
Stockholder into the Company or
a Subsidiary;
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( b)
any sale, lease, exchange, transfer, distributionto
stockholders or
other disposition, including without limitation, a mortgage, eledge or
any
other security device, to or
with a Major Stockholder by
the
Company or
any of
its
Subsidiaries ( in a single transaction or
a series of
related transactions) of
all,
substantially
all
or
an
y
Substantial Part ofthe assets ofthe Company or
a Subsidiary (including,
without limitation, any securities of
a Subsidiary);
( c)
the
purchase, exchange, lease or
other acquisition by
the
Company or
any of
its
Subsidiaries ( in a single transaction or
a series of
related
transactions) of
all,
substantiallya
ll
or
any Substantial Part of
the
assets or
business of
a
Major Stockholder;
( d)
the
issuance of
any securities, or
of
any rights, warrants or
options to acquire any securities, ofthe Company or
a Subsidiary to a Major Stockholder
or
the
acquisition by
the
Company or
a Subsidiary of
any securities, or
of
any rights,
warrants or
options to acquire any securities, of
a Major Stockholder;
( e)
any reclassification of
Voting Stock, recapitalization or
other
transaction (othe! than a redemption in accordance with the
terms of
the security
redeemed) which has
the
effect, directly or
indirectly, of
increasing
the
proportionate
amount of
Voting Stock ofthe Company or
any Subsidiary which is beneficially owned
by
a Major Stockholder, or
any partial or
complete liquidation, spin off, split
off
or
split
up
of
the Company or
any Subsidiary; provided, however, that this Section A(
3)(
e)
shall
not
relate to any transaction of
the
types specified herein that
ha
s
been approved by
a
majority of
the
Continuing Directors; and
( f) any agreement, contract or
other arrangement providing for
any of
the
transactions described herein.
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( 4)
The term " Continuing Director" shall mean ( i) a person who was a
member of
the
Board of
Directors of
the
Company immediately prior to the time that any
then- existirrg Major Stockholder became a Major Stockholder, or
(
ii) a person designated
(before initially becoming a director) as
a Continuing Director by
a majority of
the
then
Continuing Directors. All references to a vote of
the
Continuing Directors shall mean a
vote of
the
total number of
Continuing Directors.
( 5)
The term " Major Stockholder" shall mean any Person which,
together with its
Affiliates and Associates and any Person acting in concert therewith, is
the
beneficial owner of
five percent (5%) or
more of
the votes held by
the
holders of
the
outstanding shares of
the Voting Stock of
the Company, and any Affiliate or
Associate of
a Major Stockholder, including a Person acting in concert therewith. The term " Major
Stockholder" shall not include a Subsidiary.
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( 6)
The term " other consideration to be
received" shall include, without
limitation, Voting Stock retained by
the
Company's existing shareholders iJ;
l... th
e
event of
a Business Combination which is a merger or
consolidation in which the Company is the
surviving corporation.
( 7)
The term " Person" shall mean any individual, corporation,
partnership or
other person, group or
entity (other than the
Company, any Subsidiary or
a
trustee holding stock for
the
benefit of
employees of
the
Company or
its
Subsidiaries, or
anyone of
them, pursuant to one or
more employee benefit plans or
arrangements).
When two or
more persons act
as
a partnership, limited partnership, syndicate, association
or
other group for
the
purpose of
acquiring, holding or
disposing of
shares of
stock, such
partnerships, syndicate, association or
group will be deemed a "Person."
( 8)
The term "Subsidiary" shall mean any business entity fifty percent
(50%) or
more of
which is beneficially owned by
the
Company.
( 9)
The term "Substantial Part," as
used in reference to the
assets of
the
Company or
any Subsidiary or
of
any Major Stockholder means assets having a value of
more than five percent (5%) of
the total consolidated assets ofthe Company and its
Subsidiaries as
of
the
end ofthe Company's most recent fiscal year ending prior to the
time
the
determination is made.
(10) The term "Voting Stock" shall mean the stock or
other securities
entitled to vote upon any action to be taken in connection with any Business Combination
or
entitled to vote generally in the
election of
directors, including stock or
other securities
convertible into Voting Stock.
B.
Notwithstanding any other provisions ofthese Articles ofIncorporation and
except as
set
forth in Section C of
this Article X,
neither
the Comp~~ nor any Subsidiary
shall be a party to a Business Combination unless:
. ( 1)
The Business Combination was approved by
the
Board of
Directors
of
the Company prior to the Major Stockholder involved in the
Business Combination
becoming such; or
( 2)
The Major Stockholder involved in the
Business Combination sought
and obtained the
unanimous prior approval ofthe Board of
Directors to become a Mttior
Stockholder and the Business Combination was approved by
a majority ofthe Continuing
Directors; or
( 3)
The Business Combination was approved by
at
least eighty percent
(80%) of
the
Continuing Directors ofthe Company; or
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( 4)
The Business Combination was approved by
at
least ninety-five
percent (95%) of
the
outstanding Voting Stock beneficially owned by
share) lOlders other
than any Major Stockholder. ..
C.
The approval requirements of
Section B shall not
apply if:
( l) The Business Combination is approved by
at
least the
majority vote
of
the shares of
the
Voting Stock and the
majority vote of
the
shares of
the Voting Stock
beneficially owned by
shareholders other than any Major Stockholder; and
( 2)
All
ofthe following conditions
are satisfied:
( a)
The aggregate of
the
cash and the
fair market value of
other
consideration to be
received per share ( as
adjusted for
stock splits, stock dividends,
reclassification of
shares into a lesser number and similar events) by
holders of
the
common stock ofthe Company in the
Business Combination is not less than the higher of
( i) the
highest per
share price (including brokerage commissions, soliciting dealers' fees,
dealer- management compensation, and other expenses, including, but not limited to,
costs
of
newspaper advertisements, printing expenses and attorneys' fees) paid by
the Major
Stockholder in acquiring any of
the
Company's common stock; or
( ii)
an amount which
bears the same or
a greater percentage relationship to the market price of
the Company's
common stock immediately prior to the
announcement of
such Business Combination as
the
highest per share price determined in ( i) above bears to the market price of
the
Company's common stock immediately prior to the commencement of
acquisition of
the
Company's common stock by
such Major Stockholder, but in no
event in excess of
two
times
the
highest
per
share price determined in ( i) above; and
( b)
The consideration to be
received in such Business
Combination by
holders of
the
common stock of
the
Company shall be, except to the
extent that a stockholder agrees otherwise as
to all
or
a part of
his
or
he
r
shares, in the
same form and of
the
same kind as
paid by
the
Major Stockholder in acquiring his Voting
Stock. ,
( c)
After becoming a Major Stockholder and prior to the
consummation of
such Business Combination, ( i) such Major Stockholder shall not
have
acquired any newly issued shares of
capital stock, directly or
indirectly, from the
Company or
a Subsidiary (except upon conversion of
convertible securities acquired by
it
prior to becoming a Major Stockholder or
upon compliance with the
provisions of
this
Article X or
as
a result of
a pro rata stock dividend or
stock split), and ( ii) such Major
Stockholder shall not
have received the
benefit, directly or
indirectly (except
proportionately as a shareholder), of
any loans, advances, guarantees, pledges or
other
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