Washington Mutual (WMI) - Attachments/Exhibits To The Final Report of The Examiner (Part 8/10)

Mr Michael Finn
August 17 2007
Page
4
CONFIDENTIAL TREATMENT REQUESTED
further
requests
that
i
f notwithstanding
the
foregoing
the OTS should determine
preliminarily
to make available to the
public any
of the information contained
i
n this
Submission
i
t will Inform the Association
prior
to
any
such release
I
f
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
Return
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 IVthrough 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
i
n
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
i
n 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
i
s 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 i
f the terms are revised or
i
t 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 or WMB
If
you
have
any questions regarding this letter please contact me at 206
8292603
cc FDIC
CONFIDENTIAL
Return
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
Corporbte
Risk
Manegeinenl
Re Washington Mutual
BattkDocket
Number 08551Requestfor
confitmatid of capital treatment of two classes ofpreferred stock
DeaaMr Dochow
On behalf of Washingtari Mutual WMIn I amwriting
with reference to the riotice
filed
January 30 2006
by Washington Mutual
tank
WMB
toesstablisha 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
a
s
defined
in
th6Notice to outside investors and that the LLC Preferred Securities qualify
for
inclusion
i
i
i
core capital
ofWMB
I
n connection with
thatrequest
t
WM herebytndertakes
that
i
f asa result of
aSupervisory
Event
as defined in the Notice WMI exchanges its
Holding Company
Shares
as
defilned
r
u
n
the Notice for Cayman Co Preferred Securities
andthe Delaware Issuer tecurities or
i
f
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` FRobinson
ExecWve Vice President
Corporate
Risk
Management
1201 Thi%d Avenue
wMr166
Seattle WA98101
phone 7064905100
Fax 2053775316
CONFIDENTIAL
Return
N
Office of Thrift
Supervision
Department
ofthe
Trc4sw7
wane Regina
lot S wzt 5tecd W
i
s l01Q SeMk WA 981012419 Sedde ArwQfjlr
Telaphce 216 3292600 Fac 205 $29200
February 24 2006
Mr John FRobinson
Execultivc Vice President
Corporate Risk Manageunaat
Washington Mutual W
1201 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
i
t now subsidiary Washington
Mutual Preferred Funding YYC
CVb9nfor the
purpose
of
issuing two classes of Preferred Secxnities to be eligible for
inclusion
i
n
cmcapital
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 fromcore
capital
under 12 CFR 5675al footnote 4or 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
i
s 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 i
n its sole dis tion to exchrdc the
Preferred Securities or prospective issuances ofPrefesred
Securities i
f the teems are revised or
i
t otherwise ceases to provide meaningful capital support
and a realistic ability
to absorb
losses
or otherwise 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 LLynch Secretary Washington Mutual
CONFIDENTIAL
Return
Washington
Mutual
November 14 2006
Darrel Dochow
Deputy Regional Director West
Region
Office of Thrift
Supervision
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
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
i
n
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 i
n the Notice the Association
requested
the OTS confirm that the
sale of the
Cayman
Co Preferred Securities and the Delaware Issuer securities
as
defined
i
n the
Notice
to outside investors constitutes the sale of the LLC
Preferred Securities
as
defined
i
n the
Notice
to outside investors and that the LLC
qualify
for inclusion
i
n
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
i
n the Associations core capital
WMPF
i
s
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
I
I will
include terms
substantially
the same as the LLC Variable Rate Preferred
Securities as defined
i
n 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
I
I will have a stated amount to
be determined based
upon
market conditions and will
pay
distributions on a
noncumulative
basis 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
Return
Mr Darrel Dochow
November 14 2006
Page
2
I
I will be issued to the Association
i
n
exchange
for
not more than
approximately
$10 billion
i
n
assets consisting of a pool of option
ARMs
originated by
the Association
Simultaneously
the Association will then sell
the LLC Preferred Securities
1
1
to a new entity Washington
Mutual Preferred
Funding
Trust
I
I
Delaware Issuer III
for not more than
approximately $10 billion
i
n cash Delaware Issuer
1
1
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
i
n 12 CFR

55911 Delaware Issuer
I
I will own all of
1
1 which will be the sole asset of the Delaware Issuer
I
I
Delaware Issuer
I
I
will issue a single class of securities Delaware
Issuer
I
l
Securities which will represent undivided beneficial ownership interests
i
n the LLC
1
1
held
by
Delaware Issuer
I
I
Delaware Issuer
1
1
will
passthrough
any
distributions or payments upon redemption or upon liquidation with
respect
to the LLC Preferred Securities
I
I to be holders of the Delaware Issuer
I
I
Securities Delaware Issuer
1
1
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 i
n a transaction exempt from the registration
requirements of the Securities Act
pursuant
to Rule 144A thereunder
I
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
1
1
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
I
I will constitute no more than
approximately
1402
percent
of the Associations core capital
as of December 31
2006
In connection with the
request I
n the Notice
regarding
the
capital
treatment of the
LLC Preferred Securities WMI by letter to you
dated
February 23 2006 stated
i
I
n addition to the creation of Delaware Issuer
I
I a new asset trust Washington Mutual Option ARM
Trust I Asset Trust l1will be formed Asset Trust
I
t 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
I
I will own approximately $30
billion 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
I
l
acquires
b
y
foreclosure or deed
i
n lieu of foreclosure as well as other assets
authorized for federal
savings
associations under federal law
CONFIDENTIAL
Return
Mr Darrel Dochow
November 14 2006
Page 3
that
i
t will undertake that
i
f as a result of a Supervisory Event as defined
i
n the
Notice
WMI
exchanges its Holding Company
Shares as defined
i
n the Notice
for
Cayman
Co Preferred Securities and the Delaware Issuer Securities or
i
f WMI
subsequent t
o 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
l
i and
the Delaware Issuer
I
I Securities
Based on the foregoing the Association
respectfully requests
the OTS to confirm
that the OTS will not exercise its
and discretion to exclude the
LLC Preferred Securities
I
I 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
1
1
will
qualify
for inclusion
i
n the
Associations core
capital
Request
for Confidential Treatment Consistent with the standards of the Freedom
o
f
Information Act 5 USC
552b
the Association
hereby requests
confidential
treatment of the information contained
i
n this letter
the Submission
The
Submission contains information that
i
s commercial or financial information
obtained from a
person
and
privileged
and confidential that
i
s
exempt
from
disclosure under
paragraph b4 o
f
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
i
s
proprietary compiled
for internal
use only and
i
s made available to
regulatory
authorities
only upon request
The
Association
requests
that the information contained
i
n 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
i
f notwithstanding
the
foregoing
preliminarily to make available to the public any
i
n this
Submission
i
t will inform the Association
prior
to
any
such release
I
f
you
have
this letter please
212
3266104 or me at 206 5004149
ohn F Robinson
Corporate Risk
Management
CONFIDENTIAL
Return
U
M
Office of Thrift
Supervision
1551 Nottb Tssda Avenue Suits 1050 Santa Ana
CA 927058635
TeScpltone 714 7964700 FAX 714 7964710
December 4 2006
Mr John F Robinson
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
1
1 wil bo issued to WMB in
exchange for not morethan $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
I
s
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
1
1
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 i
n WMB core capital
This decision
i
s 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
issuances of Preferred
Securities
if the terms are revised or i
t 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
I
f
you have any questions regarding thisletter please contact we a
t
206 8292603
Sincercly
Darrel W Doehow
Regional Deputy Director
cc FDIC
CONFIDENTIAL
Return
August 17
2007
Michael Finn
Regional Director
West
Region
Office of Thrift
Supervision
101 Stewart
Street Suite 1010
John P Rabhnaan
Executive V ce President
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
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 i
n
core capital
of WMB
the Notice
The Office of Thrift Supervision COTS
provided
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
i
n the Notice
As
you are aware i
n the Notice the Association requested
that the OTS confirm
that the sale of the
Cayman
Securities to outside investors constitutes the sale of the LLC Preferred Securities
to outside investors and that the LLC Preferred Securities qualify
for inclusion
i
n
core capital
of the Association The OTS advised by letter dated
February 24
2006 that
i
t will not exercise its
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
i
n 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
i
supervisory
authority
and discretion to exclude the LLC Preferred Securities
I
I from core capital
under 12 CFR
5675a1footnote 4 or the reservation of authority provision 12
CFR
56711
of the OTS
capital
Preferred
Securities
I
t
qualify
for inclusion
i
Q
Equal Honing
Lander
CONFIDENTIAL
Return
Mr Michael Finn
August 17 2007
Page
2
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
Ill The OTS indicated
i
t consent
b
y
return of the letter
stamped
No
Objection
as of
February 24 2007
WMPF
i
s now planning to issue an additional class of LLC Preferred Securities
the
LLC 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
i
n the
Notice including
the
requirement
for the
prior approval
of the OTS for
Like the LLC Fixed Rate Preferred
Securities the LLC Preferred Securities IV will have a stated amount to be
determined based
upon
pay
distributions on a
noncumulative
basis 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
i
n the discretion of WMPF subject to
prior approval
of the OTS
The LLC Preferred Securities IV will be issued to the Association
i
n
exchange
for
not more than
i
n 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
i
n cash2 Delaware Issuer IV will be a trust formed under the laws of
the State of Delaware and will not be a
subsidiary
purposes
of the notice
requirement
set forth
i
n 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
i
n 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
who
are qualified institutional buyers within
the
meaning
Securities Act
who are also
qualified
1
At the time the letter was submitted WMPF had not determined whether the LLC Preferred
Securities
I
I
I
would be
fixedtofloating rate or fixed rate
2
Alternatively WMPF
may
sell the LLC Preferred Securities
I
I
I
directly
to Delaware Issuer IV for
$10 billion
i
n cash The Association undertakes to advise the OTS
I
f this alternative
i
s selected
prior to the launch date of the issuance
CONFIDENTIAL
Return
Mr Michael Finn
August 17 2007
Page 3
purchasers within
the
meaning
of the Investment
Company act of 1940
n
a transaction
exempt
from the
registration
requirements
of the Securities Act
pursuant to Rule 144A thereunder
I
n the
Notice the Association
agreed that the amount of the Associations core
capital that
may
be
comprised
plus any
other
future issuances of
will not exceed 25
percent
of the
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
Securities LLC Preferred Securities
I
I LLC Preferred Securities
I
I
I
and LLC
Preferred Securities IV will constitute no more than
approximately
1821
percent
of
the Associations core capital at
September 30 2007
I
n connection with the request i
n the Notice regarding the capital treatment of the
LLC Preferred Securities WMI by
letter to the OTS dated
February 23 2006
stated that
i
i
f as a result of a Supervisory Event
WMI
exchanges
its
Holding Company Shares for
Cayman
Co Preferred Securities and
the Delaware Issuer Securities or
i
f 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 IV and the Delaware Issuer IV Securities
Based on the
foregoing
the Association
the OTS to confirm
LLC Preferred Securities IV from core capital under 12 CFR
5675a1footnote 4
CFR
56711
of the OTS capital rule
and confirm that the LLC Preferred Securities IV will
qualify for inclusion
i
n 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
i
n this letter the Submission The
i
obtained from a
person
and
privileged
i
s
exempt from
disclosure under
paragraph b4
of the Freedom of Information Act 5 USC
552b4
and the
of the
Department of the
Treasury
31
CFR
12c1 and 16a The information
i
s
proprietary compiled for internal
use only
and
i
s
made available to
regulatory
authorities
only upon request The
Association
requests that the information contained
i
confidential
indefinitely because the basis for confidential treatment will continue to
presented by
CONFIDENTIAL
Return
Mr Michael Finn
August 17 2007
Page
4
further
requests
that
i
f notwithstanding
the
foregoing
preliminarily
public any
i
n this
Submission
i
prior
to
any
such release
I
f
you
have
this letter please
212 3266104 or me at
206
5004149
hn F Robinson
Corporate
Risk
Management
CONFIDENTIAL
Return
Office of Thrift
Supervision
SEP
d
2007
West Region
Telephone 206 8292600 Fax 206 8292620
September 20 2007
Washington Mutual
Seattle WA 98101
Dew Mr Robinson
This
advising
that
Washington
preferred
securities
LLC
Preferred
Funding
LLC
WMPF
and
requesting
for
i
n
exchange
for
not more than
$
1 billion in cash
i
supervisory
under 12 CFR
and we hereby
confirm that the
preferred
securities will
qualify
This
decision
i
s based on the
representations
made in
your August
17 letter
Notwithstanding
i
concerns This
may
capital
If
you
have
8292603
cc FDIC
CONFIDENTIAL
Return
CONFIDEI ALTREATMENTREQ ESTER
I
February 23 2006
Darrel Dodliow
Deputy Regional DirectorWest Region
Washington Mutual
John F Robinson
Corporbte
Risk
Manegeinenl
Re Washington Mutual
BattkDocket
Number 08551Requestfor
confitmatid of capital treatment of two classes ofpreferred stock
DeaaMr Dochow
On behalf of Washingtari Mutual WMIn I amwriting
with reference to the riotice
filed
January 30 2006
by Washington Mutual
tank
WMB
toesstablisha 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
a
s
defined
in
th6Notice to outside investors and that the LLC Preferred Securities qualify
for
inclusion
i
i
i
core capital
ofWMB
I
n connection with
thatrequest
t
WM herebytndertakes
that
i
f asa result of
aSupervisory
Event
as defined in the Notice WMI exchanges its
Holding Company
Shares
as
defilned
r
u
n
the Notice for Cayman Co Preferred Securities
andthe Delaware Issuer tecurities or
i
f
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` FRobinson
ExecWve Vice President
Corporate
Risk
Management
1201 Thi%d Avenue
wMr166
Seattle WA98101
phone 7064905100
Fax 2053775316
CONFIDENTIAL
Return
N
Office of Thrift
Supervision
Department
ofthe
Trc4sw7
wane Regina
lot S wzt 5tecd W
i
s l01Q SeMk WA 981012419 Sedde ArwQfjlr
Telaphce 216 3292600 Fac 205 $29200
February 24 2006
Mr John FRobinson
Execultivc Vice President
Corporate Risk Manageunaat
Washington Mutual W
1201 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
i
t now subsidiary Washington
Mutual Preferred Funding YYC
CVb9nfor the
purpose
of
issuing two classes of Preferred Secxnities to be eligible for
inclusion
i
n
cmcapital
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 fromcore
capital
under 12 CFR 5675al footnote 4or 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
i
s 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 i
n its sole dis tion to exchrdc the
Preferred Securities or prospective issuances ofPrefesred
Securities i
f the teems are revised or
i
and a realistic ability
to absorb
losses
or otherwise 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 LLynch Secretary Washington Mutual
CONFIDENTIAL
Return
Washington
Mutual
November 14 2006
Darrel Dochow
Deputy Regional Director West
Region
Office of Thrift
Supervision
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
by
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
i
n
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 i
requested
the OTS confirm that the
sale of the
Cayman
Co Preferred Securities and the Delaware Issuer securities
as
defined
i
n the
Notice
to outside investors constitutes the sale of the LLC
as
defined
i
n the
Notice
to outside investors and that the LLC
qualify
for inclusion
i
n
core capital
of the Association You
advised by
letter dated
February 24 2006 that the OTS will not exercise its
and discretion to exclude the LLC Preferred Securities from
core
capital
under 12 CFR
5675a1footnote 4
authority
provision 12 CFR
56711
of the OTS
capital
qualify
for inclusion
i
WMPF
i
s
planning
to issue an additional class of LLC Preferred Securities the
FixedtoFloating Rate
Perpetual
Noncumulative Preferred Securities Series
2006C LLC Preferred Securities
II
I
I will
include terms
substantially
the same as the LLC Variable Rate Preferred
Securities as defined
i
n the
Notice including
the
requirement
for the
prior
approval
of the OTS for
Like the LLC Variable Rate
Preferred Securities the LLC Preferred Securities
I
I will have a stated amount to
be determined based
upon
pay
distributions on a
noncumulative
basis 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
Return
Mr Darrel Dochow
November 14 2006
Page
2
I
I will be issued to the Association
i
n
exchange
for
not more than
approximately
$10 billion
i
n
assets consisting of a pool of option
ARMs
originated by
the Association
Simultaneously
the Association will then sell
1
1
to a new entity Washington
Mutual Preferred
Funding
Trust
I
I
Delaware Issuer III
for not more than
i
n cash Delaware Issuer
1
1
will be a trust formed under the laws of the State of
Delaware and will not be a
subsidiary
purposes
of the
notice
requirement
set forth
i
n 12 CFR

55911 Delaware Issuer
I
I will own all of
1
1 which will be the sole asset of the Delaware Issuer
I
I
Delaware Issuer
I
I
will issue a single class of securities Delaware
Issuer
I
l
Securities which will represent undivided beneficial ownership interests
i
n the LLC
1
1
held
by
Delaware Issuer
I
I
Delaware Issuer
1
1
will
passthrough
any
distributions or payments upon redemption or upon liquidation with
respect
to the LLC Preferred Securities
I
I to be holders of the Delaware Issuer
I
I
Securities Delaware Issuer
1
1
Securities will be sold
solely
to US
persons
who are
qualified institutional buyers within the
meaning
Securities Act
who are also qualified
purchasers within the meaning of the Investment Company act of 1940
n a transaction exempt from the registration
requirements of the Securities Act
pursuant
to Rule 144A thereunder
I
agreed
that the amount of the Associations core
capital
that
may
be
comprised
plus any
other
future issuances of
will not exceed 25
percent
of the
any
future
subsidiary preferred
securities issuances The issuance of LLC Preferred
Securities
1
1
will not cause the Association to exceed this limit On a
pro
forma
basis based upon an October 10 2006
forecast
Securities and LLC Preferred Securities
I
I will constitute no more than
approximately
1402
percent
of the Associations core capital
as of December 31
2006
In connection with the
request I
n the Notice
regarding
the
capital
treatment of the
LLC Preferred Securities WMI by letter to you
dated
February 23 2006 stated
i
I
n addition to the creation of Delaware Issuer
I
I a new asset trust Washington Mutual Option ARM
Trust I Asset Trust l1will be formed Asset Trust
I
t 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
I
I will own approximately $30
billion 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
I
l
acquires
b
y
foreclosure or deed
i
n lieu of foreclosure as well as other assets
authorized for federal
savings
associations under federal law
CONFIDENTIAL
Return
Mr Darrel Dochow
November 14 2006
Page 3
that
i
i
f as a result of a Supervisory Event as defined
i
n the
Notice
WMI
exchanges its Holding Company
Shares as defined
i
n the Notice
for
Cayman
Co Preferred Securities and the Delaware Issuer Securities or
i
f WMI
subsequent t
o such
exchange acquires
the LLC Preferred Securities WMI will
contribute to WMB the
Cayman
Securities
or as appropriate the LLC Preferred Securities On behalf of WMI I
hereby
extend that
undertaking
to the issuance of LLC Preferred Securities
l
i and
the Delaware Issuer
I
I Securities
Based on the foregoing the Association
the OTS to confirm
LLC Preferred Securities
I
I 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
1
1
will
qualify
for inclusion
i
n the
Associations core
capital
Request
for Confidential Treatment Consistent with the standards of the Freedom
o
f
Information Act 5 USC
552b
the Association
hereby requests
confidential
i
n this letter
the Submission
The
i
obtained from a
person
and
privileged
i
s
exempt
from
disclosure under
paragraph b4 o
f
the Freedom of Information Act 5 USC
552b4
and the
of the
Department
of the
Treasury
31
CFR 12c1 and
16a
The information
i
s
proprietary compiled
for internal
use only and
i
s made available to
regulatory
authorities
only upon request
The
Association
requests
that the information contained
i
confidential
indefinitely
because the basis for confidential treatment will continue to
presented by
further
requests
that
i
f notwithstanding
the
foregoing
preliminarily to make available to the public any
i
n this
Submission
i
t will inform the Association
prior
to
any
such release
I
f
you
have
this letter please
212
3266104 or me at 206 5004149
ohn F Robinson
Corporate Risk
Management
CONFIDENTIAL
Return
U
M
Office of Thrift
Supervision
1551 Nottb Tssda Avenue Suits 1050 Santa Ana
CA 927058635
TeScpltone 714 7964700 FAX 714 7964710
December 4 2006
Mr John F Robinson
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
1
1 wil bo issued to WMB in
exchange for not morethan $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
I
s
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
1
1
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 i
n WMB core capital
This decision
i
s 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
issuances of Preferred
Securities
if the terms are revised or i
t 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
I
f
you have any questions regarding thisletter please contact we a
t
206 8292603
Sincercly
Darrel W Doehow
cc FDIC
CONFIDENTIAL
Return
August 17
2007
Michael Finn
Regional Director
West
Region
Office of Thrift
Supervision
101 Stewart
Street Suite 1010
John P Rabhnaan
Executive V ce President
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
WMI
and Washington Mutual Bank the
Association
I am writing
with reference to the notice filed January 30
2006
by
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 i
n
core capital
of WMB
the Notice
The Office of Thrift Supervision COTS
provided
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
i
n the Notice
As
you are aware i
n the Notice the Association requested
that the OTS confirm
that the sale of the
Cayman
Securities to outside investors constitutes the sale of the LLC Preferred Securities
to outside investors and that the LLC Preferred Securities qualify
for inclusion
i
n
core capital
of the Association The OTS advised by letter dated
February 24
2006 that
i
LLC Preferred Securities from core
capital
under 12 CFR 5675a1footnote 4 or
the reservation of
CFR
56711
of the OTS
capital
rule and
confirmed that the LLC Preferred Securities
qualify
for inclusion
i
n 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
i
supervisory
authority
and discretion to exclude the LLC Preferred Securities
I
I from core capital
under 12 CFR
5675a1footnote 4 or the reservation of authority provision 12
CFR
56711
of the OTS
capital
Preferred
Securities
I
t
qualify
for inclusion
i
Q
Equal Honing
Lander
CONFIDENTIAL
Return
Mr Michael Finn
August 17 2007
Page
2
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
Ill The OTS indicated
i
t consent
b
y
return of the letter
stamped
No
Objection
as of
February 24 2007
WMPF
i
s now planning to issue an additional class of LLC Preferred Securities
the
LLC 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
i
n the
Notice including
the
requirement
for the
prior approval
of the OTS for
Like the LLC Fixed Rate Preferred
Securities the LLC Preferred Securities IV will have a stated amount to be
determined based
upon
pay
distributions on a
noncumulative
basis 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
i
n the discretion of WMPF subject to
prior approval
of the OTS
The LLC Preferred Securities IV will be issued to the Association
i
n
exchange
for
not more than
i
n 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
i
n cash2 Delaware Issuer IV will be a trust formed under the laws of
the State of Delaware and will not be a
subsidiary
purposes
of the notice
requirement
set forth
i
n 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
i
n 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
who
are qualified institutional buyers within
the
meaning
Securities Act
who are also
qualified
1
At the time the letter was submitted WMPF had not determined whether the LLC Preferred
Securities
I
I
I
would be
fixedtofloating rate or fixed rate
2
Alternatively WMPF
may
sell the LLC Preferred Securities
I
I
I
directly
to Delaware Issuer IV for
$10 billion
i
n cash The Association undertakes to advise the OTS
I
f this alternative
i
s selected
prior to the launch date of the issuance
CONFIDENTIAL
Return
Mr Michael Finn
August 17 2007
Page 3
purchasers within
the
meaning
of the Investment
Company act of 1940
n
a transaction
exempt
from the
registration
requirements
of the Securities Act
pursuant to Rule 144A thereunder
I
n the
Notice the Association
agreed that the amount of the Associations core
capital that
may
be
comprised
plus any
other
future issuances of
will not exceed 25
percent
of the
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
Securities LLC Preferred Securities
I
I LLC Preferred Securities
I
I
I
and LLC
Preferred Securities IV will constitute no more than
approximately
1821
percent
of
the Associations core capital at
September 30 2007
I
n connection with the request i
n the Notice regarding the capital treatment of the
LLC Preferred Securities WMI by
letter to the OTS dated
February 23 2006
stated that
i
i
f as a result of a Supervisory Event
WMI
exchanges
its
Holding Company Shares for
Cayman
Co Preferred Securities and
the Delaware Issuer Securities or
i
f 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 IV and the Delaware Issuer IV Securities
Based on the
foregoing
the Association
the OTS to confirm
LLC Preferred Securities IV from core capital under 12 CFR
5675a1footnote 4
CFR
56711
of the OTS capital rule
and confirm that the LLC Preferred Securities IV will
qualify for inclusion
i
n 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
i
n this letter the Submission The
i
obtained from a
person
and
privileged
i
s
exempt from
disclosure under
paragraph b4
of the Freedom of Information Act 5 USC
552b4
and the
of the
Department of the
Treasury
31
CFR
12c1 and 16a The information
i
s
proprietary compiled for internal
use only
and
i
s
made available to
regulatory
authorities
only upon request The
Association
requests that the information contained
i
confidential
indefinitely because the basis for confidential treatment will continue to
presented by
CONFIDENTIAL
Return
Mr Michael Finn
August 17 2007
Page
4
further
requests
that
i
f notwithstanding
the
foregoing
preliminarily
public any
i
n this
Submission
i
prior
to
any
such release
I
f
you
have
this letter please
212 3266104 or me at
206
5004149
hn F Robinson
Corporate
Risk
Management
CONFIDENTIAL
Return
Office of Thrift
Supervision
SEP
d
2007
West Region
Telephone 206 8292600 Fax 206 8292620
September 20 2007
Washington Mutual
Seattle WA 98101
Dew Mr Robinson
This
advising
that
Washington
preferred
securities
LLC
Preferred
Funding
LLC
WMPF
and
requesting
for
i
n
exchange
for
not more than
$
1 billion in cash
i
supervisory
under 12 CFR
and we hereby
confirm that the
preferred
securities will
qualify
This
decision
i
s based on the
representations
made in
your August
17 letter
Notwithstanding
i
concerns This
may
capital
If
you
have
8292603
cc FDIC
CONFIDENTIAL
Return
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
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 WMB
plans to establish a new subsidiary Washington Mutual Preferred Funding
LLC
WMPF
for the
purpose
of issuingtwo classes of preferred
securities to be eligible
for inclusion in core capital
of WMB
Based
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 i
s
completedIn
the 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 i
f
you
have
any questions
Sincerely
DarrelW Dochow
cc WilliamL Lynch Secretary Washington
Mutual
CONFIDENTIAL
Return
Washington
Mutual
CONFIDENTIAL TREATMENT QUESTED
Sohn F Robinson
Corporate RiiskManagement
February
23 2006
Darrel Dochow
Deputy Regional
Director West Region
101 Stewart Street
Suite
1
0
10
Seattle
WA 981041048
Re Washington
Mutual Bank Docket
Number 08551 Request
for
confirmation of capital treatment of two classes
of
preferred
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
far inclusion
i
n 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 i
n 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
i
n the Notice to outside investors and that the LLC Preferred Securities qualify
for
inclusion in core capital of WMB In connection wit=h thatrequest
WM1 hereby
undertakes
that
i
f as a result of Supervisory
Event as
defined inthe Notice
WMI exchanges its
Holding Company
Shares as
defined
i
n the Notice
for Cayman
Co Preferred Securities
and the l ielaware Issuer Securities or
i
f WTI subsequent t
o 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
I
f
you
have any questions regarding this letter please
call RobertMonheit at
212 3266104 or me
at
206 4906100
SiereI
oho F Robinson
Corporate
Risk Management
12111 Third Avenue
Seattle WA 981
20649063E phone
fax 206 3 5I8
CONFIDENTIAL
Return
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 FRobinson
Executive Vice President FEB 2 8 2006
c
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
i
s based on the
representations
in the Notice attachment thereto
and commitment
detailed in
your
confidential letter dated February 23 2006
Notwithstanding
the above the 0TS reserves The right in its sole discretion to exclude the
Preferred Securities or prospective
i
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 Subsidiary or WMB
If
you
have
this letter please contact meat 206
8292601
Sincerely
WA WL
Darrel W Dochow
Regional Deputy
Director
cc William L
Lynch Secretary Washington
Mutual
CONFIDENTIAL
Return
Mailstop WMC 3301
1301 Second Avenue
Seattle WA 98101
Via Electronic Mail
September 25 2008
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
l award th D t t e o e
effective September25 2008
WMI has assigned to WMB all of its right
title and interes
i t
p
the 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
By
Name Steve Rotella
Title President and Chief Operating
Officer
CONFIDENTIAL
Return
ASSIGNMENT AGREEMENT
between
WASHINGTON MUTUAL BANK
as Assignee
and
WASHINGTON MUTUAL INC
as Assignor
Effective as of September 25
2008
17535196 05129267
CONFIDENTIAL
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THIS ASSIGNMENT AGREEMENT as amended modified or supplemented
from time to time after the date hereof the Agreement i
s
effective
as of
September
25
2008
and
i
s made
b
y and between WASHINGTON MUTUAL BANK a
federallychartered
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 i
n 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
i
n 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
I
s deemed to occur as of September 25 2008
WMBNWI Master Securities
Assignment Agreement
17535196 05129267
CONFIDENTIAL
Return
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
i
n 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 i
n 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
i
n this Agreement
have the meanings assigned
to them
i
n 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
i
n 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
i
s a
reference to such Subsection as contained i
n the same Section
i
n 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
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ARTICLE
I
I
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 i
n 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 i
n
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
i
n
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 I
I
I
REPRESENTATIONS AND WARRANTIES
Section 301 Mutual Representations and Warranties Each party hereby
represents
and warrants to the other that i
t has all requisite power
and authority
to enter
into and perform
its obligations
under this Agreement
I
t
i
s understood and agreed
that the representations
and warranties set forth
i
n
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 party
shall bear its own costs and expenses
All other costs and expenses
incurred
i
n connection with the transfer and delivery
of the Securities including
without
limitationrecording
and filing fees shall be paid
b
y
Assignee
Each remittance or distribution made pursuant
to this Agreement
shall be made
i
n the manner agreed
to by the parties
To the extent that the amount of a remittance or
distribution made pursuant to this Agreement i
s
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 i
n error
and to refund such overpayment immediately
3
17535196 05129267
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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 i
n 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
i
n accordance with such laws
Section 503 Notices
All demands notices and communications hereunder shall be i
n writing and shall
be deemed to have been duly given i
f
personally
delivered at or mailed by registered
or
certified mail postage prepaid
to a i
n the case of Assignor
1301 Second Avenue
WMC 1411
Seattle Washington
98101
Attention Corporate Secretary
or such other address as may
hereafter be furnished by Assignor
to Assignee i
n
writing
and
b i
n the case of Assignee
Washington
Mutual Bank
Seattle Washington
98101
Attention Corporate Secretary
or such other address as may
hereafter be furnished by Assignee
to Assignor i
n
writing
Section 504 Merger Severability of Provisions
This
Agreement
and the documents and instruments referred to herein
constitute the entire agreement
of and i
s 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
I
f
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
17535196 05129267
CONFIDENTIAL
Return
agreements provisions
or terms shall be deemed severable from the remaining
covenants agreements provisions
or terms of this Agreement
and shall
i
n no
way
affect
the validity or enforceability
of the other provisions
of this Agreement I
f 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 i
n
good
faith to develop a structure the economic effect of which
i
s 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
i
n 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
5
17535196 05129267
CONFIDENTIAL
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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
By$
Name
zh
t i
rTitle
t jA
r1WASHINGTON
MUTUAL
INC
By
Name 1t
Title VVj f vol
s
17535196 05129267
CONFIDENTIAL
Return
EXHIBITA
SECURITIES
I Washington
Mutual Preferred Cayman
I Ltd 725 Perpetual Noncumulative
Series A1
ii Washington
I Ltd 725 Perpetual
Noncumulative
Preferred Securities Series A2
iii Washington
Mutual Preferred Funding Trust FixedtoFloating Rate Perpetual
Noncumulative Trust Securities
iv Washington
Mutual Preferred Funding
Trust
I
I
FixedtoFloating
Rate Perpetual
v Washington Mutual Preferred Funding Trust I
l
l
FixedtoFloating
Rate Perpetual
vi Washington
Trust IV FixedtoFloating
Rate Perpetual
vii Washington Mutual Preferred Funding
LLC FixedtoFloating
Rate Perpetual
Noncumulative Preferred Securities Series 2006A
viii Washington
LLC 725 Perpetual
Noncumulative
Preferred Securities Series 2006B
ix Washington
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
LLC FixedtoFloating
Rate Perpetual
Noncumulative Preferred Securities Series 2007B
ii Any
and all right
title and interest of the Washington Mutual Inc i
n and to
Washington
I Ltd WaMu Cayman Washington
Trust WaMu Delaware I Washington Mutual
Preferred Funding
Trust
I
I
WaMu Delaware Iln Washington
Mutual Preferred
Funding
Trust
I
I
I
WaMu Delaware Ill
and Washington
Mutual Preferred
Funding
Trust IV WaMu
Delaware IV and together
with WaMu Cayman
VJaMu Delaware I WaMu Delaware
1
1 and WaMu Delaware III the Trusts
including any
interests of the Trusts i
n
any
of the Securities
17535196 05129267
CONFIDENTIAL
Return
Washington
Mutual
CONFIDENTIAL TREATMENT QUESTED
Sohn F Robinson
Corporate RiiskManagement
February
23 2006
Darrel Dochow
Deputy Regional
Director West Region
101 Stewart Street
Suite
1
0
10
Seattle
WA 981041048
Re Washington
Mutual Bank Docket
Number 08551 Request
for
confirmation of capital treatment of two classes
of
preferred
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
far inclusion
i
n 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 i
n 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
i
n the Notice to outside investors and that the LLC Preferred Securities qualify
for
inclusion in core capital of WMB In connection wit=h thatrequest
WM1 hereby
undertakes
that
i
f as a result of Supervisory
Event as
defined inthe Notice
WMI exchanges its
Holding Company
Shares as
defined
i
n the Notice
for Cayman
Co Preferred Securities
and the l ielaware Issuer Securities or
i
f WTI subsequent t
o 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
I
f
you
have any questions regarding this letter please
call RobertMonheit at
212 3266104 or me
at
206 4906100
SiereI
oho F Robinson
Corporate
Risk Management
12111 Third Avenue
Seattle WA 981
20649063E phone
fax 206 3 5I8
CONFIDENTIAL
Return
By:
Name: Steve Rotella
Title: President and Chief Operating Officer
CONFIDENTIAL
WaMue
Mailstop: WMC 3301
1301 Second Avenue
Seattle, WA 98101
206-500-8302 direct phone
steve.roteile@wamu.net
V ia Electronic Mall
September 25, 2008
Exaininations
Attn: John Bisset
Attn: Benjamin Franklin
WMI will Issue a press release on September 26, 2008 announcing that each Conditional Exchange will
occur at 8:00 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 Seciiritles") 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 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 Delawa
trust securities, the Cayco Preferred Securities and the WMPF Preferred Securities, and upon receipt
the 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 occur
regardless of any events which may occur prior to such contribution and transfer.
Sincerely,
WASHINGTON MUTUAL, INC.
Restricted For Use in Connection with Plan Confirmation Only
WMIPC_500002025.00004
Ilia Electronic Mall
Se,,!en,h.r 25, 2008
Examinations
Attn: John Bisset
Attn: Benjamin Franklin
CONFIDENTIAL
Mailstop: WMC 3301
1301 Second Avenue
Seatile, WA 98101
206-500-8302 direct phone
steve.rotella@wamu.net
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
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
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,
Title: President and Chief 'Op,''''!ing Officer
I
I I
I I
I I
I I
I
For Use in Connection with Plan Confirmation Only
WMIPC_ 500002025.00004
Return
CONFIDENTIAL
between
WASHINGTON MUTUAL BANK,
as Assignee
and
WASHINGTON MUTUAL, INC.,
as Assignor
Effective as of September 25, 2008
WMIPC_500002025.00005
17535196 05129267
175351% 05129267
between
WASHINGTON MUTUAL
as
and
WASHINGTON
as As"lallor
Effective as
in r:"nn,,,dion with Plan Confirmation Only
2008

L
I
j
I
WM I PC _ 500002025, 00005
Return
CONFIDENTIAL
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, a federally-
chartered savings association, as Assignee (the "Assignee), and WASHINGTON
MUTUAL, INC., a Washington corporation, as Assignor (the 4 Assignor').
RECITALS
(A)Assignor wishes to assign to Assignee certain securities, and Assignee
wishes to accept such assignment, which Securities shalt 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 1.01 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 reguiations
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
Delivery: Is deemed to occur as of September 25, 2008.
WMIIIINMI Mester Securities
Assignment Agreement
WMIPC...500002025.00006
17535196 05129267
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 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:
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
The "J>."innm"nt to A.,.i"""" by Assignor of SecurHies

this
Is deemed to occur as of $e'JIs,nb<" 25, 2008.
WMSMMI Master Sooulitl ..
Asslgnment Agreement
17535196 OSU9267
I I
I I
I
1
in Connection with Plan Confirmation Only
WM I PC _ 500002025.00006
Return
CONFIDENTIAL
Person: Any individual, corporation, limited liability company, partnership, joint
Venture, association, joint-stock company, trust, unincorporated organization or
government 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 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 1.02. 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;
c) 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.
WMIPC_500002025.00007
2
17535196 05129267
corporation, limifed cnrnDa,nv partnership, joint
Venture, joint-stock company, trust: organization or
. govemment or any agency or political subdivision "'"""".
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 .
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,
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,
2
]7535196 0$129267
!
I I
I !
i I
I !
WMIPC_500002025.00007
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CONFIDENTIAL
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, without
recourse, but subject to the terms of this Agreement, all of Assignor's 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 tax-free transactions under Section 351 of the
Code.
ARTICLE III
REPRESENTAT!QNS AND WARRANTIES
Section 3.01. 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 representations and 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 4.01. Costs.
Each party shall 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.
WM I PC_500002025.00008
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17535196 05129267
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CONFIDENTIAL
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 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
acknowledges that the

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
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.
115351960:$129267
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WMIPC _500002025,00008
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CONFIDENTIAL
ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01. Amendment.
This Agreement may be amended from time to time only by written agreement
signed by Assignor and Assignee.
Section 5.02. 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 5.03. Notices.
All demands, notices and communications hereunder shall be in writing and shall
be deemed to have been duly given if personally delivered 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,
1301 Second Avenue, WMC 1411
Attention: 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 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,
WMIPC_500002025.00009
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I7535196 05129261
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CONFIDENTIAL
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'lLolDJaklM,.
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: COlJXlIate 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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WM I PC_ 500002025. 00009
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CONFIDENTIAL
agreements, provisions or 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 provisions of 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 5,05. Execution; Successors and Assigns.
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]
WMIPC_500002025.00010
17535196 05/23267
5
CONFIDENTIAL
provisionsorterms 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
f n ~ ~ ~ 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
5
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CONFIDENTIAL
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.
By.
Name: , .,4 1 4 ,4 A
5e6CONre Fre*trfril--
esti/Alp
Name.
Title: Ic e . c A. Ar k i i . c vi c t- F(r We ti 1 -
.4 :g oki li t, .
Re str i c te d For Use i n Conne c ti on wi th Plan Confi r mati on Only
WMIPC_500002025. 0001 1
1 75351 96 05729267
CONFIDENTIAL
-.",.:
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.
6
1753519605129261
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CONFIDENTIAL
EXHIBIT A
SECURITIES
(i) Washington Mutual Preferred (Cayman)] Ltd. 7.25% Perpetual Non-cumulative
Preferred Securities, Series A-1
(ii) Washington Mutual Preferred (Cayman) I Ltd. 7.25% Perpetual Non-cumulative
Preferred Secirrities, Series A-2
(iii) Washington Mutual Preferred Funding Trust Fixed-to-Floating Rate Perpetual
Non-cumulative Trust Securities
(iv) Washington Mutual Preferred Funding Trust II Fixed-to-Floating Rate Perpetual
(v) Washington Mutual Preferred Funding Trust III Fixed-to-Floating Rate Perpetual
(vi) Washington Mutual Preferred Funding Trust IV Fixed-to-Floating Rate Perpetual
(vii) Washington Mutual Preferred Funding LLC Fixed-to-Floating Rate Perpetual
Non-cumulative Preferred Securities, Series 2006-A
(viii) Washington Mutual Preferred Funding LLC 7.25% Perpetual Non-cumulative
Preferred Securities, Series 2005-B
(ix) Washington Mutual Preferred Funding LLC Fixed-to-Floating Rate Perpetual
Non-cumulative Preferred Securities, Series 2006-C
(x) Washington Mutual Preferred Funding LLC Fixed-to-Floating Rate Perpetual
Non-cumulative Preferred Securities, Series 2007-A
(xi) Washington Mutual Preferred Funding LLC Fixed-to-Floating Rate Perpetual
Non-cumulative Preferred Securities, Series 2007-B
(xii) 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 Washington Mutual
Preferred Funding Trust II ("WaMu Delaware 111, Washington Mutual Preferred
Funding Trust ill ("WaMu Delaware III") and Washington Mutual Preferred
Funding 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
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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
(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
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CONFIDENTIAL
Department of the TreasuryWest Region
Seattle Office (206) 829-2600 Fax: (206) 829-2620
101 Stewart Street, Suite 1010
Seattle, WA 98101
September 25, 2008
Board of Directors
Mr. Steve Frank, Chairman
Mr. Alan Fishman, Chief Executive Officer
1301 Second Avenue
Seattle, 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 of
alternative 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 provide
OTS with an analysis of the earnings, profitability and stability of all existing and projected business lines. In
addition, 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 REIT
Preferred Securities to a like amount of preferred stock in Washington Mutual Incorporated.
Please let me know if you have any questions,
Sincerely,
\Cus.# 4
Darrel W. Dochow
Regional Director
Restricted For Use in Connection with Plan Confirmation Only WMIPC_500002026.00001 Restricted
Seplemb,er 25, 2008
Board of Directors
CONFIDENTIAL
Thrift SUlpervision
the
Senttle Ofnce l1li (206) 8292600 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 ~ 1 u t t . l a l ~ 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
WM I PC _ 500002026.00001
Return
CONFIDENTIAL
Washington
Mutual
$750,000,000
Washington Mutual Preferred Funding Cayman) I Ltd.
7.25% Perpetual Non-cumulative Preferred Securities
Automatically Exchangeable
i
n Specified Circumstances into
Depositary Shares representing Preferred Stock
o
f
Washington Mutual Preferred Funding Cayman) I Ltd., a Cayman Islands exempted company limited
b
y
shares WaMu
Cayman"), will invest the proceeds
o
f
i
t
s
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
i
t
s 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
i
n a like amount
o
f
7.25% Perpetual Non-cumulative Preferred Securities, liquidation preference
$1,000 per security the Fixed Rate Company Preferred Securities"),
o
f
Washington Mutual Preferred Funding LLC, a Delaware
limited liability company the Company"). The terms
o
f
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
n
o
material assets other than the Fixed Rate Company Preferred Securities. The financial entitlements
o
f
each WaMu Cayman
Preferred Security will
b
e
substantially the same
a
s
the financial entitlements
o
f
a like amount
o
f
Fixed Rate Company Preferred
Securities, with the consequence that dividends and the redemption price
o
n the WaMu Cayman Preferred Securities will
b
e
payable
o
n
the same dates and
i
n the same amounts
a
s
the corresponding dividends and redemption price,
a
s
applicable,
o
n
a
like amount
o
f
Fixed Rate Company Preferred Securities. The Company's initial material assets will consist
o
f
indirect interests
i
n mortgages and mortgage-related assets originated
b
y
a
s
described herein.
Dividends
o
n
the Fixed Rate Company Preferred Securities will
b
e
payable
i
f
,
when and
a
s
declared
b
y
the Company's
Board
o
f
Managers out
o
f
legally available funds,
o
n
a non-cumulative basis
a
t
a
n
annual rate
o
f
7.25%
o
n
the liquidation
preference per security, quarterly
i
n arrears
o
n March 15, June 15, September
1
5 and December
1
5
o
f
each year,
commencing
o
n June 15, 2006 each, a Dividend Payment Date"),
o
r
the next Business Day
i
f any such day
i
s not a
Business Day.
I
f the Office
o
f
Thrift Supervision together with any successor regulator, the OTS")
s
o directs following the
occurrence
o
f
a
n
Exchange Event
a
s
described herein, each WaMu Cayman Preferred Security will
b
e
automatically
exchanged for depositary shares representing a like amount
o
f
Washington Mutual, Inc.'s Series J Perpetual Non-
cumulative Fixed Rate Preferred Stock.
See Risk Factors" beginning
o
n
page for a description
o
f
the risk factors you should consider before you invest
i
n 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 ARE
BEING OFFERED AND SOLD ONLY
I
N 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"
I
N RELIANCE ON AN EXEMPTION FROM REGISTRATION PURSUANT TO
RULE 144A. THE SERIES A-2 WAMU CAYMAN PREFERRED SECURITIES ARE BEING OFFERED AND SOLD ONLY TO
NON-U.S. PERSONS
I
N TRANSACTIONS OUTSIDE THE UNITED STATES
I
N RELIANCE ON AN EXEMPTION FROM
REGISTRATION 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
I
N ACCORDANCE WITH THE RESTRICTIONS DESCRIBED UNDER
NOTICE TO INVESTORS."
The Initial Purchasers expect
t
o deliver the Series A-1 WaMu Cayman Preferred Securities through the facilities
o
f
The
Depository Trust Company and the Series A-2 WaMu Cayman Preferred Securities through the facilities
o
f
Clearstream
Banking, societe anonyme, and Euroclear Bank S.A./N.V.,
a
s
operator
o
f
the Euroclear System,
a
s
participants
i
n The
Depository Trust Company,
i
n each case, against payment
i
n New York, New York
o
n
o
r
about March
7
,
2006.
Goldman, Sachs Co.
Senior Co-Manager
Offering Circular dated February 24, 2006.
CONFIDENTIAL
Return
Continued from previous page)
The Fixed Rate Company Preferred Securities will not
b
e redeemable
a
t
the option
o
f
the Company prior
t
o the
Dividend Payment Date
i
n March 2011, except upon the occurrence
o
f
a Tax Event,
a
n
Investment Company Act Event
o
r
a Regulatory Capital Event each
a
s
described herein). Upon the occurrence
o
f
a Tax Event,
a
n Investment
Company Act Event
o
r
a Regulatory Capital Event, the Company may redeem the Fixed Rate Company Preferred
Securities
i
n whole but not
i
n part. On
o
r
after the Dividend Payment Date
i
n March 2011, the Company may redeem
the Fixed Rate Company Preferred Securities
i
n whole
o
r
i
n part. Any redemption will
b
e subject
t
o the prior approval
o
f
the OTS and will
b
e
a
t
a redemption price equal
t
o the liquidation preference per Fixed Rate Company Preferred
Security, plus declared but unpaid dividends,
i
f any, plus a U.S. Treasury-based make whole" amount
i
f the
redemption occurs prior
t
o the Dividend Payment Date
i
n March 2011.
The WaMu Cayman Preferred Securities will
b
e
issued only
i
n book-entry form. Each individual purchaser
o
r
group
o
f
affiliated purchasers that acquires Series A-1 WaMu Cayman Preferred Securities
i
n the initial offering must
acquire
a
t
least three Series A-1 WaMu Cayman Preferred Securities having
a
n
aggregate liquidation preference
o
f
$300,000.
The Initial Purchasers are offering the Series A-2 WaMu Preferred Securities, which are being offered outside the
United States
t
o non-U.S. persons
i
n reliance upon Regulation S under the Securities Act, through their respective
selling agents.
Application will
b
e made
t
o list the Series A-2 WaMu Cayman Preferred Securities
o
n the Euro MTF market
o
f
the
Luxembourg Stock Exchange. The Series A-1 WaMu Cayman Preferred Securities will not
b
e listed
o
n any securities
exchange
o
r
automated dealer quotation system.
The securities offered hereby are not insured
o
r
guaranteed
b
y
the U.S. Federal Deposit Insurance
Corporation.
CONFIDENTIAL
Return
This offering circular
i
s confidential. You are authorized
t
o use this offering circular solely for
the purpose
o
f
considering the purchase
o
f
the securities described
i
n 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
i
n this offering circular. The Initial Purchasers named herein make
n
o
representation
o
r
warranty, express
o
r
implied,
a
s
t
o the accuracy
o
r
completeness
o
f
such
information, and nothing contained
i
n this offering circular
i
s
,
o
r
shall
b
e
relied upon as, a promise
o
r
representation
b
y
the Initial Purchasers. You may not reproduce
o
r
distribute this offering
circular,
i
n whole
o
r
i
n part, and you may not disclose any
o
f
the contents
o
f
this offering circular
o
r
use any information herein for any purpose other than considering the purchase
o
f
the notes.
You agree
t
o the foregoing
b
y
accepting delivery
o
f
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 OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY
I
S A CRIMINAL OFFENSE.
The distribution
o
f
this offering circular and the offering and sale
o
f
the securities offered
hereby
i
n certain jurisdictions may
b
e
restricted
b
y
law. WMI, WMB, University Street, the
Company, WaMu Cayman, the Asset Trust, WaMu Delaware and the Initial Purchasers require
persons
i
n whose possession this offering circular comes
t
o inform themselves about and
t
o
observe any such restrictions. This offering circular does not constitute
a
n
offer
o
f
,
o
r
a
n
invitation
t
o purchase, any
o
f
the securities offered hereby
i
n any jurisdiction
i
n which such offer
o
r
invitation would
b
e
unlawful.
Notwithstanding anything herein
t
o the contrary, each investor and each employee,
representative,
o
r
agent
o
f
any investor) may disclose
t
o any and
a
l
l
persons, without limitation
o
f
any kind, the tax treatment and tax structure
o
f
the transactions contemplated herein and
a
l
l
materials
o
f
any kind including opinions
o
r
other tax analyses) that are provided
t
o the
investors relating
t
o such tax treatment and tax structure. However, any information relating
t
o
the United States Federal income tax treatment
o
r
tax structure will remain confidential and the
foregoing sentence will not apply)
t
o the extent reasonably necessary
t
o enable any person
t
o
comply with applicable securities laws. For this purpose, tax treatment" means United States
Federal
o
r
state income tax treatment, and tax structure" means any facts relevant
t
o the
United States Federal
o
r
state income tax treatment
o
f
the transactions contemplated herein but
does not include information relating
t
o the identity
o
f
the issuer
o
f
the securities, the issuer
o
f
any assets underlying the securities,
o
r
any
o
f
their respective affiliates that are offering the
securities.
No person has been authorized
t
o give any information
o
r
t
o make any representations
other than those contained
i
n this offering circular, and,
i
f given
o
r
made, such information
o
r
representations must not
b
e
relied upon
a
s
having been authorized
b
y
any
o
f
WMI, WMB,
University Street, the Company, WaMu Cayman
o
r
the Asset Trust. Neither the delivery
o
f
this
offering circular nor any sale hereunder will create, under any circumstances, any implication that
there has been no change
i
n the affairs
o
f
WMI, WMB, the Company, WaMu Cayman, University
Street
o
r
the Asset Trust since the date hereof
o
r
that the information contained herein
i
s correct
a
s
o
f
any time subsequent
t
o
i
t
s date.
CONFIDENTIAL
Return
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
I
S
EFFECTIVELY REGISTERED OR A PERSON
I
S LICENSED
I
N THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY
DOCUMENT FILED UNDER RSA 421-B
I
S TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION
I
S AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED
I
N
ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION.
I
T
I
S 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
I
S
BEING MADE TO THE PUBLIC
I
N THE CAYMAN ISLANDS.
I
N 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,
I
F COMMENCED, MAY BE
DISCONTINUED AT ANY TIME, AND MUST BE BROUGHT TO AN END AFTER A LIMITED
PERIOD.
CONFIDENTIAL
Return
NOTICE TO INVESTORS
the following restrictions, purchasers are advised
t
o consult legal counsel prior
t
o
making any offer, purchase, resale, pledge
o
r
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
Return
F) the certificates evidencing the Series A-1 WaMu Cayman Preferred Securities will
bear a legend
t
o the following effect:
THIS SECURITY
I
S 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. 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 NOR ANY BENEFICIAL INTERESTS
HEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
TO A PERSON WHO
I
S 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
I
S BOTH A QUALIFIED INSTITUTIONAL BUYER AND A
QUALIFIED PURCHASER AN ELIGIBLE PURCHASER") AND EACH SUCH PERSON AND
ACCOUNT FOR WHICH SUCH PERSON
I
S PURCHASING A)
I
S NOT A BROKER-DEALER
THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN US$25 MILLION
I
N
SECURITIES OF ISSUERS THAT ARE NOT ITS AFFILIATED PERSONS, B)
I
S NOT A PLAN
REFERRED TO
I
N PARAGRAPH a) 1)
i
) D) OR a) 1)
i
) E) OF RULE 144A, OR A
TRUST FUND REFERRED TO
I
N PARAGRAPH a) 1) F) OF RULE 144A THAT HOLDS
THE ASSETS OF SUCH A PLAN,
I
F INVESTMENT DECISIONS WITH RESPECT TO THE
PLAN ARE MADE BY THE BENEFICIARIES OF SUCH PLAN, C) WAS NOT FORMED FOR
THE PURPOSE OF INVESTING
I
N 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 OF
PARTICIPANTS HOLDING POSITIONS
I
N 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
I
T AGREES TO COMPLY
WITH THE TRANSFER RESTRICTIONS SET FORTH HEREIN AND
I
N 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
I
T
I
S PURCHASING. ANY PURPORTED TRANSFER OF THIS SECURITY OR
ANY BENEFICIAL INTERESTS HEREIN THAT
I
S
I
N BREACH, AT THE TIME MADE, OF ANY
TRANSFER RESTRICTIONS SET FORTH HEREIN OR
I
N THE ARTICLES OF ASSOCIATION
WILL BE VOID AB INITIO.
I
F AT ANY TIME WAMU CAYMAN DETERMINES
I
N GOOD FAITH
THAT A HOLDER OR BENEFICIAL OWNER OF THIS SECURITY OR BENEFICIAL
INTERESTS HEREIN
I
S
I
N 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.
I
N 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.
i
v
CONFIDENTIAL
Return
NO SECURITY MAY BE PURCHASED OR TRANSFERRED TO:
I
) AN EMPLOYEE
BENEFIT PLAN" AS DEFINED
I
N 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
I
N 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
I
T HOLDS THE SECURITIES,
I
)
I
T
I
S 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)
I
T
I
S 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).
UNLESS THIS SECURITY
I
S PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION DTC"), TO
WAMU CAYMAN OR THE TRANSFER AGENT, AND ANY CERTIFICATE ISSUED
I
S
REGISTERED
I
N THE NAME OF CEDE CO. OR
I
N SUCH OTHER NAME AS
I
S
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT
I
S
MADE TO CEDE CO. OR TO SUCH OTHER ENTITY AS
I
S REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
I
S WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE CO., HAS AN INTEREST
HEREIN.
G) the purchaser and each account for which
i
t
i
s purchasing:
i
)
i
s not a broker-dealer that owns and invests on a discretionary basis less
than $25 million
i
n securities
o
f
unaffiliated issuers;
i
s not a participant-directed employee plan, such
a
s
a 401(k) plan,
a
s
referred
t
o
i
n paragraph a) 1)
i
) D)
o
r
a) 1)
i
) E)
o
f
Rule 144A,
o
r
a trust fund
referred
t
o
i
n paragraph a) 1)
i
) F)
o
f
Rule 144A that holds the assets
o
f
such a
plan;
was not formed for the purpose
o
f
investing
i
n WaMu Cayman;
iv) will hold
a
t
least $300,000 liquidation preference
o
f
Series A-1 WaMu
Cayman Preferred Securities i.e.,
a
t
least three Series A-1 WaMu Cayman Preferred
Securities)
i
n the case
o
f
each initial investor, and will hold and transfer $100,000
liquidation preference
o
f
Series A-1 WaMu Cayman Preferred Securities i.e.,
a
t
least
one Series A-1 WaMu Cayman Preferred Security)
i
n the case
o
f
each subsequent
investor;
v
)
will provide notice
o
f
the transfer restrictions described
i
n this Notice
t
o
Investors"
t
o any subsequent transferees;
vi) acknowledges that WaMu Cayman may receive a list
o
f
participants holding
positions
i
n the Series A-1 WaMu Cayman Preferred Securities from one
o
r
more
book-entry depositaries; and
v
CONFIDENTIAL
Return
vii) may not transfer the Series A-1 WaMu Cayman Preferred Securities
o
r
beneficial interests therein except
t
o a transferee who can make the same representa-
tions and agreements
a
s
set forth
i
n this Notice
t
o Investors" and vyaMu Cayman's
Memorandum and Articles
o
f
Association
a
s
i
n effect on the issue date
o
f
the WaMu
Cayman Preferred Securities together,
a
s
amended,
on behalf
o
f
itself and each account for which
i
t
i
s purchasing.
The purchaser acknowledges that the Series A-1 WaMu Cayman Preferred Securities are
being offered only
i
n a transaction not involving any public offering within the meaning
o
f
the
Securities Act. The Series A-1 WaMu Cayman Preferred Securities have not been and will not
b
e
registered under the Securities Act and WaMu Cayman has not been and will not
b
e
registered
under the Investment Company Act, and,
i
f
i
n the future the purchaser decides
t
o offer, resell,
pledge
o
r
otherwise transfer the Series A-1 WaMu Cayman Preferred Securities, such Series A-1
WaMu Cayman Preferred Securities may
b
e
offered, resold, pledged
o
r
otherwise transferred
only
i
n accordance with the legend on such Series A-1 WaMu Cayman Preferred Securities
described above. The purchaser acknowledges that no representation
i
s made
b
y
WaMu
Cayman, the Company
o
r
the Initial Purchasers
a
s
t
o the availability
o
f
any exemption under the
Securities Act
o
r
any state securities laws for resale
o
f
the Series A-1 WaMu Cayman Preferred
Securities.
Reminder Notices
Whenever WaMu Cayman sends
a
n
annual report
o
r
other periodic report
t
o holders
o
f
the
Series A-1 WaMu Cayman Preferred Securities,
i
t will also send a reminder notice each, a
t
o the holders
o
f
the Series A-1 WaMu Cayman Preferred Securities. Each
Reminder Notice will state that
i
) each holder
o
f
a Series A-1 WaMu Cayman Preferred Security
or
a
n
interest
i
n a Series A-1 WaMu Cayman Preferred Security) that
i
s a U.S. person must
b
e
able
t
o make the representations set forth above
i
n paragraphs B) and G) iv) under
Series A-1 WaMu Cayman Preferred Securities Representations
o
f
Purchasers" the
7)
i
i
)
the Series A-1 WaMu Cayman Preferred Securities or
interests
i
n the Series A-1 WaMu Cayman Preferred Securities) are transferable only
t
o
purchasers deemed
t
o have made the 3(c) 7) Representations and
t
o have satisfied the other
transfer restrictions applicable
t
o the securities, iii)
i
f any prospective transferee
o
f
the
Series A-1 WaMu Cayman Preferred Securities or
a
n
interest
i
n the Series A-1 WaMu Cayman
Preferred Securities) that
i
s a U.S. person
i
s determined not
t
o
b
e
a qualified purchaser, then
WaMu Cayman will have the right exercisable
i
n
i
t
s sole discretion)
t
o refuse
t
o honor such
transaction, and iv)
i
f any security holder or any holder
o
f
a
n
interest
i
n a security) that
i
s a
U.S. person
i
s determined not
t
o
b
e
a qualified purchaser, then WaMu Cayman will have the right
exercisable
i
n
i
t
s sole discretion)
t
o treat the transfer
t
o such purchaser
a
s
null and void and
require such purchaser
t
o sell
a
l
l
o
f
i
t
s
securities and
a
l
l
interests therein)
t
o a transferee
designated
b
y
WaMu Cayman
a
t
the then current market price therefor. WaMu Cayman will send
a copy
o
f
each annual
o
r
other periodic reports and each Reminder Notice)
t
o DTC with a
request that participating organizations
i
n DTC forward them
t
o the security
holders
o
r
holders
o
f
a
n
interest
i
n Series A-1 WaMu Cayman Preferred Securities.
CUSIP
WaMu Cayman will cause each CUSIP" obtained for a 144A Global Security
t
o have
a
n
attached fixed field" that contains GRLS" and 144A" indicators.
Each purchaser
o
f
Series A-2 WaMu Cayman Preferred Securities including the registered
holders and beneficial owners
o
f
the Series A-2 WaMu Cayman Preferred Securities,
a
s
they
v
i
CONFIDENTIAL
Return
exist from time
t
o time, including
a
s
a result
o
f
transfers,
i
n each case
a
s
o
f
the time
o
f
purchase) will
b
e
deemed
t
o have represented and agreed
a
s
follows:
A) the purchaser
i
s
i
) a non-U.S. person within the meaning
o
f
Rule 902
o
f
the
Securities Act purchasing the Series A-2 WaMu Cayman Preferred Securities
i
n
a
n
offshore
transaction
i
n accordance with Regulation S under the Securities Act and
i
i
) aware that the
sale
o
f
the Series A-2 WaMu Cayman Preferred Securities
t
o
i
t
i
s being made
i
n reliance on
Regulation S
o
r
another exemption from the registration requirements
o
f
the Securities Act;
B) either
i
) the purchaser
i
s not a Benefit Plan Investor
o
r
i
i
)
the purchaser
i
s
a
n
insurance company general account that represents, warrants and covenants that,
a
t
the
time
o
f
acquisition and throughout the period
i
t holds the securities,
x
)
i
t
i
s eligible for and
meets the requirements
o
f
the Department
o
f
Labor Prohibited Transaction Class
Exemption 95-60, less than 25%
o
f
the assets
o
f
such general account are or
represent) assets
o
f
a Benefit Plan Investor and z)
i
t
i
s not a person who has
discretionary authority
o
r
control with respect
t
o the assets
o
f
WaMu Cayman
o
r
any person
who provides investment advice for a fee direct
o
r
indirect) with respect
t
o such assets,
o
r
any affiliate
o
f
such a person and would not otherwise
b
e
excluded under
29 C.F.R. 2510.3-101 f)(1).
C) the purchaser
i
s not purchasing the Series A-2 WaMu Cayman Preferred
Securities with a view
t
o the resale, distribution
o
r
other disposition thereof
i
n violation
o
f
the Securities Act;
D) neither the purchaser nor any account for which the purchaser
i
s acquiring the
Series A-2 WaMu Cayman Preferred Securities will hold such Series A-2 WaMu Cayman
Preferred Securities for the benefit
o
f
any other person and the purchaser and each such
account will
b
e
the sole beneficial owners thereof for
a
l
l
purposes and will not sell
participation interests
i
n the Series A-2 WaMu Cayman Preferred Securities
o
r
enter into
any other arrangement pursuant
t
o which any other person will
b
e
entitled
t
o
a
n
interest
i
n
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
t
o the following effect:
THIS SECURITY
I
S ONE OF THE 7.25% PERPETUAL NON-CUMULATIVE PREFERRED
SECURITIES, SERIES A-2 SERIES A-2 WAMU CAYMAN PREFERRED SECURITIES")
ISSUED BY WASHINGTON MUTUAL PREFERRED FUNDING CAYMAN) I LTD. WAMU
CAYMAN"). 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)
I
N AN OFFSHORE TRANSAC-
TION MEETINGTHE REQUIREMENTS OF REGULATION S UNDER THE SECURITIES ACT
TO A PERSON OTHER THAN A U.S. PERSON, OR 2)
I
N RELIANCE UPON RULE 144A
UNDER THE SECURITIES ACT
I
N 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
I
S 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
I
S BEING MADE TO A PERSON WHO THE TRANSFEROR REASONA-
BLY BELIEVES
I
S 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
I
S ALSO A QUALIFIED PURCHASER AN ELIGIBLE
v
i
i
CONFIDENTIAL
Return
PURCHASER")
I
N A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
UNDER THE SECURITIES ACT AND
I
N ACCORDANCE WITH ALL APPLICABLE LAWS OF
THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. EACH PURCHASER
OF THIS SECURITY OR ANY BENEFICIAL INTERESTS HEREIN WILL BE DEEMED TO
REPRESENT THAT
I
T AGREES TO COMPLY WITH THE TRANSFER RESTRICTIONS SET
FORTH HEREIN AND
I
N 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 A
PURCHASER WHO CAN MAKE THE SAME REPRESENTATIONS AND AGREEMENTS ON
BEHALF OF ITSELF AND EACH ACCOUNT FOR WHICH
I
T
I
S PURCHASING. ANY
PURPORTED TRANSFER OF THIS SECURITY OR ANY BENEFICIAL INTERESTS HEREIN
THAT
I
S
I
N BREACH, AT THE TIME MADE, OF ANY TRANSFER RESTRICTIONS SET
FORTH HEREIN OR
I
N THE ARTICLES OF ASSOCIATION WILL BE VOID AB INITIO.
I
F AT
ANY TIME WAMU CAYMAN DETERMINES
I
N GOOD FAITH THAT A HOLDER OR
BENEFICIAL OWNER OF THIS SECURITY OR BENEFICIAL INTERESTS HEREIN
I
S
I
N
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.
I
N 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.
NO SECURITY MAY BE PURCHASED OR TRANSFERRED TO:
I
)
AN EMPLOYEE
BENEFIT PLAN" AS DEFINED
I
N SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ERISA"), WHETHER OR NOT
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
OTHER PLAN
I
N SUCH ENTITY EACH OF THE FOREGOING, A BENEFIT PLAN
I
T HOLDS THE SECURITIES,
I
)
I
T
I
S 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)
I
T
I
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 PERSON AND WOULD NOT
OTHERWISE BE EXCLUDED UNDER 29 C.F.R. 2510.3-101 F) 1).
I
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION DTC"), TO
WAMU CAYMAN OR THE TRANSFER AGENT, AND ANY CERTIFICATE ISSUED
I
S
REGISTERED
I
N THE NAME OF CEDE CO. OR
I
I
S
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT
I
S
MADE TO CEDE CO. OR TO SUCH OTHER ENTITY AS
I
S REQUESTED BY AN
v
i
i
i
CONFIDENTIAL
Return
Forced Sale
o
f
Securities
Investment Company Act
CONFIDENTIAL
Return
e.g.,
DTC Actions with respect
t
o the WaMu Cayman Preferred Securities
Bloomberg Screens, etc.
CONFIDENTIAL
Return
CONFIDENTIAL
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
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
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CONFIDENTIAL
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
Return
WHERE YOU CAN FIND MORE INFORMATION
http://www.wamu.com
CONFIDENTIAL
Return
document that was filed later. WMB incorporates herein
b
y
reference the documents listed below
and any documents
i
t files with the OTS
i
n the future under Sections 13(a), 13(c), 14
o
r
15(d)
o
f
the Exchange Act
o
r
regulations
o
f
the OTS
t
o substantially similar effect untjl the Offering
i
s
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
b
y
reference certain other information that
WMB submits
t
o the OTS. WMB submits
t
o 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
o
f
a Consolidated Statement
o
f
Condition, Consolidated Statement
o
f
Operations,
Consolidated Cash Flow Information, Consolidated Capital Requirements and other supporting
schedules
a
s
o
f
the end
o
f
the period
t
o which the report relates. The Thrift Financial Reports
are prepared
i
n accordance with regulatory instructions issued
b
y
the OTS. These regulatory
instructions
i
n most, but not all, cases follow generally accepted accounting principles
i
n the
United States GAAP")
o
r
the opinions and statements
o
f
the Accounting Principles Board
o
r
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
o
f
financial disclosure about WMB, the reports nevertheless provide important information
concerning WMB's financial condition and operating results.
I
n addition, WMB's Thrift Financial
Reports are not audited. The non-confidential portions
o
f
Thrift Financial Reports filed
b
y
WMB
are on file with, and are publicly available upon written request
t
o the Office
o
f
Thrift Supervision,
FOIA, 1700 G Street, N.W., Washington, D.C. 20552, Attention: Dissemination Branch and are
also available
a
t
the U.S. Federal Deposit Insurance Corporation's the web site
a
t
http://www.fdic.gov.
You may request a copy
o
f
these filings, other than
a
n
exhibit
t
o a filing unless that exhibit
i
s specifically incorporated
b
y
reference into that filing,
a
t
no cost,
b
y
writing
t
o
o
r
telephoning
WMI
a
t
:
1201 Third Avenue
206) 461-3187
ENFORCEMENT OF CIVIL LIABILITIES
WaMu Cayman has been advised
b
y
Maples and Calder,
i
t
s Cayman Island counsel, that the
courts
o
f
the Cayman Islands should not
b
e
expected
t
o
i
) enforce judgments
o
f
U.S. courts
obtained
i
n actions against WaMu Cayman's directors who are non-residents
o
f
the United
States predicated upon the civil liability provisions
o
f
the U.S. federal securities laws
o
r
i
i
)
entertain original actions brought
i
n the Cayman Islands against such persons
o
r
WaMu
Cayman predicated solely upon U.S. federal securities laws. There
i
s no treaty
i
n 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
o
f
U.S. courts.
INDEX OF TERMS
An index
o
f
terms used
i
n this offering circular with specific meanings appears
o
n
the inside
back cover
o
f
x
i
v
CONFIDENTIAL
Return
OFFERING CIRCULAR SUMMARY
The fol/owing summary
i
s qualified
i
n
i
t
s entirety
b
y
the detailed information appearing
elsewhere
i
n this offering circular,
i
n particular, the information under the headings. Description
o
f
the WaMu Cayman Preferred Securities" and Description
o
f
the Fixed Rate Company Preferred
Securities," which describe the terms and conditions
o
f
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
b
y
Washington Mutual Preferred Funding Cayman) I Ltd. WaMu Cayman")
i
n a
financing transaction that raises capital for Washington Mutual Bank WMB"). WMB
i
s a
subsidiary
o
f
Washington Mutual, Inc. WMI"). WMI and
i
t
s affiliates are referred
t
o herein
a
s
the WMI Group".
WaMu Cayman will invest the proceeds
o
f
the WaMu Cayman Preferred Securities
i
n a like
amount
o
f
$1,000 per security the Fixed Rate Company Preferred Securities"),
o
f
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
o
f
each WaMu Cayman Preferred Security will
b
e
a
s
o
f
a like amount
o
f
Fixed Rate Company Preferred Securities, with the
consequence that dividends and the redemption price on each WaMu Cayman Preferred Security
will
b
e
payable on the same dates and
i
n the same amounts
a
s
the corresponding dividends and
redemption price,
a
s
applicable, on a like amount
o
f
Fixed Rate Company Preferred Securities.
The Company's initial material assets will consist
o
f
direct
o
r
indirect interests
i
n mortgages
o
r
mortgage-related assets originated
b
y
WMB
a
s
described under The Company Business
o
f
the Company Assets
o
f
the Company" and The Asset Trust."
The terms
o
f
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
i
n reliance upon Rule 144A
under the U.S. Securities Act
o
f
1933,
a
s
amended the Securities Act") only
i
n the United
States and
t
o persons who are qualified institutional buyers" within the meaning
o
f
144A and
qualified purchasers" within the meaning
o
f
Section 2(a) 51)
o
f
the U.S. Investment Company
Act
o
f
1940,
a
s
amended the Investment Company Act"). The Series A-2 WaMu Cayman
Preferred Securities are being offered and sold
i
n reliance upon Regulation S under the
Securities Act only
t
o non-U.S. persons
i
n transactions outside the United States. Resales
o
f
Series A-l WaMu Cayman Preferred Securities
t
o non-U.S. persons and
o
f
Series A-2 WaMu
Cayman Preferred Securities
i
n the United States
o
r
t
o U.S. persons are subject
t
o restrictions
a
s
described under Notice
t
o 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,"
i
n each case subject
t
o the
certification requirements described under Book-Entry Issuance."
By a separate offering circular dated the same date
a
s
this offering circular, Washington
Mutual Preferred Funding Trust
I
, a Delaware statutory trust established
b
y
the Company
a
s
grantor WaMu Delaware"),
i
s offering $1,250,000,000
o
f
i
t
s Perpetual Exchangeable Non-
cumulative Trust Securities the Trust Securities"). WaMu Delaware will invest the proceeds
o
f
the Trust Securities
i
n a like amount
o
f
the Company's Perpetual Non-cumulative Fixed-to-
Floating Rate Preferred Securities the Fixed-to-Floating Rate Company Preferred Securities"
CONFIDENTIAL
Return
and, together with the Fixed Rate Company Preferred Securities, the Company Preferred
Securities"). The terms
o
f
the Fixed-to-Floating Rate Company Preferred Securities are
substantially identical
t
o the Fixed Rate Company Preferred Securities except for the dividend
rate. The Trust Securities are being offered and sold only
i
n the United States and only
t
o
U.S. persons that are both qualified institutional buyers and qualified purchasers
i
n reliance on
the exemption from registration under the Securities Act pursuant
t
o Rule 144A. They are not
being offered
b
y
this offering circular. The WaMu Cayman Preferred Securities are not
exchangeable for Trust Securities,
o
r
vice versa.
WMB has asked for confirmation from the Office
o
f
Thrift Supervision together with any
successor regulator, the that the Company Preferred Securities constitute core capital
o
f
WMB under the OTS' applicable regulatory capital regulations and, upon receipt
o
f
such
confirmation, intends
t
o treat the Company Preferred Securities accordingly.
I
f the OTS
s
o
directs following the occurrence
o
f
a
n
Exchange Event, each WaMu Cayman
Preferred Security will
b
e
automatically exchanged for a like amount
o
f
Fixed Rate Depositary
Shares each representing 111000th
o
f
a share
o
f
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"),
a
s
described below
i
n this Summary under" The Offering
Conditional Exchange." Upon a Conditional Exchange, the Trust Securities will also
b
e
automatically exchanged, but for depositary shares representing a different series
o
f
WMl's
preferred stock, having substantially equivalent terms with certain exceptions)
a
s
t
o dividends,
liquidation preference and redemption preference
a
s
the Fixed-to-Floating Rate Company
Preferred Securities.
This offering circular uses the term like amount"
i
n describing the financial entitlements and
voting rights,
a
s
applicable,
o
f
a
s
compared
t
o the Fixed
Rate Company Preferred Securities and
i
n describing the amount
o
f
Shares, each representing a 1 OOOthinterest
i
n one share
o
f
Fixed Rate WMI Preferred Stock
for which the WaMu Cayman Preferred Securities will
b
e
exchanged upon the occurrence
o
f
a
Conditional Exchange. The term like amount" means:
when describing the financial entitlements
o
r
voting rights,
a
s
applicable,
o
f
WaMu
a
s
compared
t
o Fixed Rate Company Preferred Securities, a
number
o
f
Fixed Rate Company Preferred Securities that have the same aggregate
a
s
t
o which the reference
i
s being made e.g., 1,000 Fixed Rate Company Preferred Securities with
a
n
aggregate
o
f
$1,000,000 are a like amount" for ten Series A-1 WaMu
o
r
100 Series A-2 WaMu Cayman Preferred Securities, each
having
a
n
o
f
$1,000,000); and
when describing the number
o
f
depositary shares for Fixed Rate WMI Preferred Stock
with which WaMu Cayman Preferred Securities will
b
e
exchanged upon a Conditional
Exchange, a number
o
f
Fixed Rate Depositary Shares, each representing a 1 OOOthin-
terest
i
n one share
o
f
Fixed Rate WMI Preferred Stock, having a liquidation preference
equal
t
o the liquidation preference
o
f
the WaMu Cayman Preferred Securities that are
being exchanged e.g., 10,000 Fixed Rate Depositary Shares representing Fixed Rate
WMI Preferred Stock with
a
n
o
f
$10,000,000 are a like
amount" for 100 Series A-1 WaMu Cayman Preferred Securities
o
r
1,000 Series A-2
WaMu Cayman Preferred Securities, each having
a
n
o
f
$10,000,000)
The offering
o
f
the WaMu Cayman Preferred Securities and the related issuance
o
f
the
Fixed Rate Company Preferred Securities are referred
t
o herein
a
s
the Offering".
2
CONFIDENTIAL
Return
The following diagram outlines the relationship among WMI, WMB, University Street, the
Company, the Asset Trust, WaMu Cayman, WaMu Delaware, purchasers
o
f
the WaMu Cayman
Preferred Securities and purchasers
o
f
the Trust Securities:
University Street<")
Assets
Proceeds
Assets
Conditional
Conditional
Exchange
Exchange
Rxed-to-Floating
Fixed Rate Company
Rate Company
Preferred Securities(3)
Preferred Securities(4)
WaMu
Delaware
Trust
Proceeds:
Securities
CONFIDENTIAL
Return
WaMu Cayman
Washington Mutual Preferred Funding Cayman) I Ltd.
i
s a Cayman Islands exempted
company limited
b
y
shares, incorporated on February 23, 2006 for the purposes set forth below
i
n WaMu Cayman."
A
l
l
o
f
WaMu Cayman's ordinary shares the WaMu Cayman Ordinary
Shares") will
b
e
held
i
n trust for the benefit
o
f
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
b
e
prohibited from issuing other equity
securities
o
r
any debt securities. The Fixed Rate Company Preferred Securities will
b
e
the only
material assets
o
f
WaMu Cayman. WaMu Cayman will
b
e
managed
b
y
a Board
o
f
Directors
consisting
o
f
five directors, three
o
f
whom will
b
e
appointed
b
y
such Cayman Islands charitable
trust and two
o
f
whom will
b
e
persons who are also members
o
f
the Company's Board
o
f
Managers.
O
f
the two WaMu Cayman directors who are also members
o
f
the Company's Board
o
f
Managers, one will
b
e
the same individual who
i
s the Company's Independent Manager.
Subject
t
o 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
t
o
b
e
treated
a
s
a corporation, and for the holders
o
f
the
WaMu Cayman Preferred Securities
t
o
b
e
treated
a
s
holders
o
f
stock
i
n such corporation.
The Company
Washington Mutual Preferred Funding LLC
i
s a Delaware limited liability company formed on
February
3
,
2006 for the purpose
o
f
i
) issuing the Fixed Rate Company Preferred Securities
t
o
WaMu Cayman, the Fixed-to-Floating Rate Company Preferred Securities
t
o WaMu Delaware, the
common securities
o
f
the Company the Company Common Securities")
t
o University Street,
Inc.,
a
n
indirect subsidiary
o
f
WMB University Street"), and additional Parity Equity Securities
o
r
Junior Equity Securities subject
t
o certain limitations described
i
i
i
) acquiring and holding Eligible Investments and iii) performing functions necessary
o
r
incidental thereto.
The Fixed-to-Floating Rate Company Preferred Securities rank pari passu with the Fixed
Rate Company Preferred Securities
a
s
t
o dividends and upon liquidation
o
f
the Company. The
terms
o
f
the Fixed-to-Floating Rate Company Preferred Securities are substantially identical
t
o
the terms
o
f
the Fixed Rate Company Preferred Securities other than with respect
t
o the rate
applicable
t
o dividends thereon. The Fixed-to-Floating Rate Company Preferred Securities will,
i
f
,
when and
a
s
declared
b
y
the Company's Board
o
f
Managers, pay dividends
a
t
a
n
annual rate
o
f
6.534% until the Dividend Payment Date on March 15, 2011 and
a
n
annual rate equal
t
o 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
a
l
l
o
f
the Company Common Securities. The Eligible Investments
owned
b
y
the Company from time
t
o time will generate net income for payment
b
y
the Company
t
o WaMu Cayman
a
s
dividends on the Fixed Rate Company Preferred Securities and
consequently for payment
a
s
dividends
b
y
WaMu Cayman
t
o holders
o
f
the WaMu Cayman
Preferred Securities),
t
o WaMu Delaware
a
s
dividends on the Fixed-to-Floating Rate Company
Preferred Securities and consequently for pass through
b
y
WaMu Delaware
t
o the holders
o
f
the Trust Securities) and
t
o University Street
a
s
dividends on the Company Common Securities.
Subject
t
o the limitations and assumptions described under Certain Tax Considerations
United States Federal Income Tax Consequences," the Company intends
t
o
b
e
treated
a
s
a
partnership other than a publicly traded partnership taxable
a
s
a corporation) for United States
Federal income tax purposes and will receive the opinion
o
f
Mayer, Brown, Rowe Maw LLP
t
o
the effect that, for United States Federal income tax purposes, the Company will not
b
e
treated
a
s
a
n
association taxable
a
s
a corporation
o
r
a
s
a publicly traded partnership taxable
a
s
a
corporation.
CONFIDENTIAL
Return
The Company will
b
e
managed
b
y
a Board
o
f
Managers. The Company's Board
o
f
Managers will have three members, one
o
f
whom
i
s not, and has not been during the preceding
five years,
a
n
officer
o
r
employee
o
f
WMI
o
r
any affiliate
o
f
WMI, other than a financing
subsidiary the
Initial Conveyances
I
n connection with the Offering, WMB will convey a portfolio
o
f
first lien, closed-end, fixed
rate home equity loans
t
o the Company
i
n exchange for 100%
o
f
the Company
Preferred Securities. Concurrently with such transfer
b
y
WMB, University Street will convey a
portfolio
o
f
HELs
t
o the Company
i
n exchange for 100%
o
f
the Company Common Securities.
The portfolios conveyed
b
y
WMB and University Street
t
o the Company will consist
o
f
approximately $5,389,459,150
o
f
HELs
i
n the aggregate. The Company will convey 100%
o
f
the
HELs that
i
t owns
t
o the Asset Trust
i
n exchange for the Class A Trust Certificate
o
f
the Asset
Trust. WMB will then sell the Fixed Rate Company Preferred Securities and the Fixed-to-Floating
Rate Company Preferred Securities for cash
t
o WaMu Cayman and WaMu Delaware,
respectively.
University Street
University Street, Inc.
i
s a Washington corporation.
I
t has elected
t
o
b
e
treated
a
s
a real
estate investment trust for United States Federal income tax purposes. University Street will hold
100%
o
f
the Company Common Securities which represent 100%
o
f
the voting rights
i
n the
Company subject
t
o the limited rights
o
f
holders
o
f
the Company Preferred Securities described
herein)
The Asset Trust
Washington Mutual Home Equity Trust I
i
s a Delaware statutory trust formed pursuant
t
o a
trust agreement,
t
o
b
e
entered into on
o
r
before the closing date, between the Company,
a
s
depositor, and Deutsche Bank Trust Company Delaware,
a
s
Delaware trustee the
The Pooling and Servicing Agreement among the Company,
a
s
depositor, WMB,
a
s
Servicer, Deutsche Bank Trust Company Delaware,
a
s
Delaware Trustee, and Deutsche Bank
National Trust Company,
a
s
Trustee the will restate the
trust agreement and will
b
e
the governing instrument
o
f
the Asset Trust. The Asset Trust will
make
a
n
election
t
o
b
e
treated
a
s
a real estate mortgage investment conduit for
United States Federal income tax purposes.
The initial assets
o
f
the Asset Trust will consist
o
f
the portfolio
o
f
HELs
t
o
b
e
conveyed
b
y
the Company
t
o the Asset Trust
i
n connection with the Offering. The HELs were originated
b
y
WMB primarily through
i
t
s
retail branches between September 2001 and September 2005. As
o
f
January 31, 2006, the HELs
t
o
b
e
transferred into the Asset Trust had
a
n
aggregate unpaid
principal balance
o
f
approximately $5,389,459,150.
WMI
With a history dating back
t
o 1889, Washington Mutual, Inc., a Washington corporation,
i
s a
retailer
o
f
financial services
t
o consumers and small businesses. Based on
i
t
s
consolidated
assets
a
t
September 30, 2005, WMI was the largest thrift holding company
i
n the United States
and the seventh largest among
a
l
l
U.S.-based bank and thrift holding companies. As
o
f
September 30, 2005, WMI, together with
i
t
s subsidiaries, had total assets
o
f
approximately
$333.6 billion, total liabilities
o
f
approximately $311.0 billion and total stockholders' equity
o
f
approximately $22.6 billion. As
o
f
September 30, 2005, WMI and
i
t
s subsidiaries also had total
deposits
o
f
approximately $190.4 billion. WMI's common stock
i
s listed on the New York Stock
CONFIDENTIAL
Return
Exchange under the symbol WM". The principal business offices
o
f
WMI are located
a
t
1201 Third Avenue, Seattle, Washington 98101 and
i
t
s telephone number
i
s 206-461-2000.
WMB
Washington Mutual Bank formerly known
a
s
Washington Mutual Bank, FA)
i
s a federally
chartered savings association, chartered and operating under the United States Home Owners'
Loan Act
o
f
1933,
a
s
amended. WMB engages
i
n mortgage banking, consumer banking and
small business banking. WMB,
a
s
a federally chartered association, has the authority
t
o make
various types
o
f
loans, including loans secured
b
y
homes and commercial real estate, secured
and unsecured consumer loans, and secured and unsecured commercial loans. As a federal
savings association, WMB
i
s subject
t
o regulation and examination
b
y
the OTS,
i
t
s primary
regulator. WMB
i
s
a
n
indirect wholly-owned subsidiary
o
f
WMI.
Prior
t
o 2004, WMB had two sister depository institutions which were both owned directly
b
y
WMI. WMB has since acquired both
o
f
these sister institutions. One
o
f
these institutions,
Washington Mutual Bank fsb, a federal savings bank, became a wholly-owned subsidiary
o
f
WMB on February
1
,
2004. The other institution, Washington Mutual Bank, a savings bank
chartered under the laws
o
f
the state
o
f
Washington, converted into a federally chartered savings
bank and then was merged into WMB on January
1
,
2005.
6
CONFIDENTIAL
Return
The Offering
Issuer As
t
o the WaMu Cayman Preferred Securities, Washington
Mutual Preferred Funding Cayman) I Ltd., a Cayman
Islands exempted company limited
b
y
shares.
As
t
o the Fixed Rate Company Preferred Securities,
Washington Mutual Preferred Funding LLC, a Delaware
limited liability company.
As
t
o the Fixed Rate WMI Preferred Stock which will
b
e
represented
b
y
the Fixed Rate Depositary Shares) for
which the WaMu Cayman Preferred Securities will
b
e
o
f
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
i
n the aggregate, and 7.25% Perpetual Non-
cumulative Preferred Securities, Series A-2, liquidation
preference $10,000 per security and $447,700,000
i
n the
aggregate, both issued
b
y
WaMu Cayman. The terms
o
f
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
o
f
each WaMu Cayman Preferred
Security will
b
e
a
s
the financial
entitlements
o
f
a like amount
o
f
Fixed Rate Company
Preferred Securities, with the consequence that dividends
and the redemption price on the WaMu Cayman Preferred
Securities will
b
e
i
n the
same amounts
a
s
the corresponding dividends and re-
demption price,
a
s
applicable, on a like amount
o
f
Fixed
Rate Company Preferred Securities.
Dividends. Dividends on the WaMu Cayman Preferred Securities will
become payable on a non-cumulative basis except
i
n the
limited circumstances set out under Description
o
f
the
WaMu Cayman Preferred Securities Dividends"), on
each date on which the Company pays
t
o WaMu Cayman
dividends on the Fixed Rate Company Preferred Securities,
i
n
a
n
amount per WaMu Cayman Preferred Security equal
t
o the amount
o
f
dividends received
b
y
WaMu Cayman on
a like amount
o
f
Fixed Rate Company Preferred Securities
including with respect
t
o Additional Taxes,
i
f any). WaMu
Cayman's Board
o
f
Directors
i
s not required
t
o declare the
payment
o
f
dividends
i
n order for dividends
t
o
b
e
paid.
However, payment
o
f
dividends may
b
e
blocked
b
y
WaMu
Cayman's Board
o
f
Directors, but only
b
y
their unanimous
action including consent
o
f
the Independent Director).
For purposes
o
f
this offering circular, we refer
t
o distribu-
tions payable
b
y
the Company on
i
t
s securities
a
s
divi-
CONFIDENTIAL
Return
dends." Dividends on the Fixed Rate Company Preferred
Securities are payable
a
s
follows:
Dividend Rate. Dividends on the Fixed Rate Company
Preferred Securities will accrue
a
t
a fixed rate per annum
equal
t
o 7.25% applied
t
o
f
$1,000 per Fixed Rate Company Preferred Security.
Dividend Payment Dates.
I
f
declared
b
y
the Company's
Board
o
f
Managers, the Dividend Payment Dates for the
Fixed Rate Company Preferred Securities are the 15th day
o
f
March, June, September and December
o
f
each year,
commencing on June 15, 2006.
I
f
any Dividend Payment
Date
i
s not a Business Day, then dividends will
b
e
payable
on the first Business Day following such Dividend Payment
Date with the same force and effect
a
s
i
f payment were
made on the date such payment was originally payable.
Declaration
o
f
Dividends, etc. Dividends on the Fixed
Rate Company Preferred Securities when,
a
s
and
i
f
declared
b
y
the Company's Board
o
f
Managers out
o
f
legally available funds, will
b
e
payable
a
t
the applicable
dividend rate applied
t
o the liquidation preference per
Fixed Rate Company Preferred Security accruing on a non-
cumulative basis on each such security
a
s
follows:
i
) from
March
7
,
2006
i
n the case
o
f
the Fixed Rate Company
Preferred Securities offered hereby and
i
f additional
Fixed Rate Company Preferred Securities are issued
a
t
a
future date, from A) March
7
,
2006
i
f such date
i
s before
June 15, 2006, B) the date
o
f
issue
i
f such date
i
s a
Dividend Payment Date and C) either the immediately
preceding Dividend Payment Date
o
r
the date
o
f
issue
a
s
determined
b
y
the Company
i
f the date
o
f
issue
i
s other
than a Dividend Payment Date and
i
s after June 15, 2006.
Any such dividends will
b
e
distributed
t
o holders
o
f
Fixed
i
n the manner de-
scribed under Description
o
f
Preferred Securities Dividends."
Non-cumulative Dividends. Dividends on the Fixed Rate
Company Preferred Securities are not cumulative. Accord-
ingly,
i
n 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
t
o accrue and
b
e
payable.
I
f
the Company's Board
o
f
Managers has not declared a dividend before the
Dividend Payment Date for any Dividend Period, the
Company will have no obligation
t
o pay dividends accrued
for such Dividend Period after the Dividend Payment Date
for that Dividend Period, whether
o
r
not dividends on the
Fixed Rate Company Preferred Securities are declared for
any future Dividend Period.
CONFIDENTIAL
Return
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
o
f
WaMu Cayman Preferred
Securities.
I
f
the redemption
o
f
i
s
i
n part instead
o
f
i
n whole, then
WaMu Cayman will allocate the partial redemption between
i
n propor-
tion
t
o their aggregate liquidation preferences. The re-
demption provisions
o
f
Securities are described below.
Subject
t
o a covenant
i
n favor
o
f
certain
o
f
WMl's
debtholders limiting WMl's and
i
t
s subsidiaries' right
t
o
repurchase
o
r
redeem the Fixed Rate Company Preferred
Securities
o
r
among others)
a
s
described
i
n the next paragraph, and
subject
t
o the Company having received the prior approval
o
f
the OTS for any proposed redemption
o
f
Fixed Rate
Company Preferred Securities, the Company may,
a
t
i
t
s
option, redeem the Fixed Rate Company Preferred
Securities:
i
n whole but not
i
n part, prior
t
o the Dividend Payment
Date
i
n March, 2011,
i
f a Tax Event,
a
n
Investment
Company Act Event
o
r
a Regulatory Capital Event
occurs. The cash redemption price will
b
e
the greater
o
f
i
) $1,000 per Fixed Rate Company Preferred Security
o
r
the sum
o
f
present values
o
f
$1,000 per Fixed
Rate Company Preferred Security and
a
l
l
undeclared
dividends for the Dividend Period from the redemption
date
t
o and including the Dividend Payment Date
i
n
March 2011, discounted
t
o the redemption date on a
quarterly basis assuming a 360-day year consisting
o
f
twelve 30-day months)
a
t
the Treasury Rate,
a
s
calcu-
lated
b
y
a
n
Independent Investment Banker, plus 0.40%,
plus any declared and unpaid dividends
t
o the redemp-
tion date,
o
r
in.whole
o
r
i
n part, on
o
r
after the Dividend Payment
Date
i
n March 2011,
a
t
a cash redemption price
o
f
$1,000 per Fixed Rate Company Preferred Security, plus
any declared and unpaid dividends
t
o the redemption
date, without accumulation
o
f
any undeclared dividends.
See Description
o
f
Securities Redemption."
Restriction on Redemption
o
r
Repurchases.
A
t
o
r
prior
t
o
initial issuance
o
f
the WaMu Cayman Preferred Securities,
WMI will enter into a Replacement Capital Covenant"
a
s
described under Description
o
f
the WaMu Cayman Pre-
ferred Securities Restriction on Redemption
o
r
Repur-
chases."
I
n the Replacement Capital Covenant, WMI will
CONFIDENTIAL
Return
covenant
i
n favor
o
f
certain
o
f
i
t
s
debtholders that,
i
f WMI
o
r
a subsidiary repurchases
o
r
redeems any WaMu Cay-
man Preferred Securities, Trust Securities
o
r
Company
Preferred Securities or, after a Conditional Exchange,
Fixed Rate Depositary Shares or related Fixed Rate WMI
Preferred Stock), WMI
o
r
i
t
s subsidiaries will do
s
o
only
i
f
and
t
o the extent that the total redemption
o
r
purchase
price
i
s equal
t
o
o
r
less than designated percentages
o
f
the net cash proceeds that WMI
o
r
i
t
s subsidiaries have
received during the 180 days prior
t
o such redemption
o
r
repurchase from the issuance
o
f
securities having the
characteristics described under Description
o
f
the WaMu
Cayman Preferred Securities Restriction on Redemption
o
r
Repurchases."
Ranking. WaMu Cayman Preferred Securities. The WaMu Cayman
Preferred Securities will rank senior
t
o the WaMu Cayman
Ordinary Shares
i
n terms
o
f
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
i
n terms
o
f
dividends and liquidation payments and otherwise have
identical terms other than
a
s
t
o their respective per
security liquidation preference.
WaMu Cayman's Memorandum and Articles
o
f
Association
together,
a
s
amended, the WaMu Cayman's Articles
o
f
Association") will provide that WaMu Cayman will not,
without the consent
o
f
the holder
o
f
each outstanding
WaMu Cayman Preferred Security, issue equity securities
ranking pari passu
o
r
senior
t
o the WaMu Cayman
i
n terms
o
f
dividends
o
r
redemption
o
r
liquidation payments
o
r
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
t
o the Company Common Securities
i
n
terms
o
f
dividends and liquidation payments.
During a Dividend Period, the Company may not declare
o
r
pay any. dividends on any
o
f
i
t
s Junior Equity Securities,
other than dividends payable
i
n Junior Equity Securities,
o
r
repurchase, redeem
o
r
otherwise acquire for consideration,
directly
o
r
indirectly, any Junior Equity Securities other
than
a
s
a result
o
f
reclassification
o
f
Junior Equity
Securities for
o
r
into other Junior Equity Securities,
o
r
the
exchange
o
r
conversion
o
f
Junior Equity Securities for
o
r
into other Junior Equity Securities), unless dividends for
such Dividend Period on
a
l
l
outstanding Company Pre-
ferred Securities have been declared and paid
i
n full,
o
r
declared and set aside for payment,
a
s
the case may be.
The Company may from time
t
o time issue additional Parity
Equity Securities without the consent
o
f
the holders
o
f
the
CONFIDENTIAL
Return
provided
pro forma
pro forma
Fixed Rate Depositary Shares").
Exchange Event"
CONFIDENTIAL
Return
pari passu
CONFIDENTIAL
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 liquida-
tion 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 redeem-
able 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 "- Re-
demption 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 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-
12
Return
CONFIDENTIAL
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 Cayman or the holders of the WaMu Cayman
Preferred Securities;
remove or cause to be removed, as applicable, "Wash-
ington 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;
Company not engage in a U.S. trade or business for
United States Federal income tax purposes;
Company hold only assets that qualify for the portfolio
interest exemption under the Code and are exempt from
gross basis United States withholding taxes;
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
Return
CONFIDENTIAL
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 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 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-to-
Floating Rate Company Preferred Securities, voting to-
gether 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 Securi-
ties and with respect to the Fixed-to-Floating Rate Com-
pany Preferred Securities will be passed through to the
holders of the related Trust Securities of WaMu Delaware.
See "Description of the WaMu Cayman Preferred Securi-
ties - 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
Return
additional amounts on the Fixed Rate Company Preferred
Securities such amounts
a
s
will
b
e
required
s
o
that
dividends on the Fixed Rate Company Preferred Securities,
and accordingly on the WaMu Cayman Preferred Securi-
ties, will not
b
e
reduced
a
s
a result
o
f
any such Additional
Taxes. See Description
o
f
Preferred Securities Additional Amounts."
I
f
investors
exchange their Fixed Rate Company Preferred Securities
for Fixed Rate WMI Preferred Stock upon a Conditional
Exchange, WMI will not
b
e
obligated
t
o pay Additional
Amounts on the Fixed Rate WMI Preferred Stock.
Assets and the Asset Trust. The initial assets
o
f
the Company will consist
o
f
the
Class A Asset Trust Certificate representing
i
t
s
interest
i
n
the Asset Trust. The Asset Trust
i
s a Delaware statutory
trust formed pursuant
t
o a trust agreement between the
Company,
a
s
depositor, and Deutsche Bank Trust Com-
pany Delaware,
a
s
Delaware Trustee. The Pooling and
Servicing Agreement among the Company,
a
s
depositor,
WMB,
a
s
Servicer, Deutsche Bank Trust Company Dela-
ware,
a
s
Delaware Trustee, and Deutsche Bank National
Trust Company,
a
s
Trustee, will restate the trust agree-
ment and will thereafter
b
e
o
f
the
Asset Trust. The Asset Trust will make a REMIC election
for federal tax purposes.
The initial assets
o
f
o
f
a
portfolio including payments thereon received from and
after February
1
,
2006)
o
f
HELs and certain related assets
originated
b
y
i
t
s retail branches
between September
1
,
2001 and September 30, 2005. As
o
f
January 31, 2006, the 56,090 HELs had
a
n
aggregate
unpaid principal balance
o
f
These loans typically are made for reasons such
a
s
home
purchases, home improvements, furniture and fixtures
purchases, purchases
o
f
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
t
o time, the Company may acquire Additional
Assets.
A
l
l
Additional Assets acquired
b
y
the Company will
b
e
Eligible Assets.
Listing Application will
b
e
made
t
o list the Series A-2 WaMu
Cayman Preferred Securities on the Euro MTF market
o
f
the Luxembourg Stock Exchange. The Series A-1 WaMu
Cayman Preferred Securities will not
b
e
listed on any
securities exchange
o
r
Use
o
f
Proceeds. WaMu Cayman will use the proceeds
o
f
the sale
o
f
the
t
o purchase a like
amount
o
f
Fixed Rate Company Preferred Securities from
WMB, which the Company will issue
t
o WMB
i
n exchange
for the conveyance
o
f
a portfolio
o
f
HELs
t
o the Company.
CONFIDENTIAL
Return
CONFIDENTIAL
The WMI Group will use the proceeds from the sale of the
Fixed Rate Company Preferred Securities to WaMu Cay-
man 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 Stan-
dard & Poor's Rating Services, a division of The McGraw
Hill Companies, Inc., "Baa2" by Moody's Investors Ser-
vices, 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 corpora-
tion) 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
Return
b
e
governed by, and construed
i
n
accordance with, the laws
o
f
the State
o
f
Delaware. The
Fixed Rate WMI Preferred Stock will
b
e
governed
b
y
and
construed
i
n accordance with the laws
o
f
the State
o
f
Washington. The Fixed Rate Depositary Shares will
b
e
i
n accordance with, the laws
o
f
the State
o
f
New York.
CUSIP ISIN The CUSIP number for the Series A-1 WaMu Cayman
i
s 93934V AA
5
.
The ISIN number for the Series A-1 WaMu Cayman
i
s US93934VAA52.
The CUSIP number for the Series A-2 WaMu Cayman
i
s G9463G AA
6
.
The ISIN number for the Series A-2 WaMu Cayman
i
s USG9463GAA60.
CONFIDENTIAL
Return
RISK FACTORS
Purchasers should carefully consider the following risk factors
i
n conjunction with the other
information contained
i
a
s
well
a
s
information that
i
s incorporated
b
y
reference
i
n this offering circular, before purchasing any WaMu Cayman Preferred Securities, the
o
f
which will
b
e
substantially similar
t
o those
o
f
a like amount
o
f
Fixed Rate
Company Preferred Securities and which are conditionally exchangeable into Fixed Rate Depositary
Shares representing interests
i
n Fixed Rate WMI Preferred Stock.
Risks Relating
t
o the Terms
o
f
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
o
n
the Fixed Rate Company Preferred Securities.
The only material assets
o
f
WaMu Cayman will
b
e
Securities. Consequently, WaMu Cayman's ability
t
o pay dividends on the WaMu Cayman
Preferred Securities depends entirely on whether the Company pays dividends on the Fixed Rate
Company Preferred Securities held
b
y
WaMu Cayman.
I
f
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
i
f the Company pays dividends
o
n
the Fixed Rate Company Preferred Securities held
WaMu Cayman,
i
t
i
s possible that WaMu Cayman's Board
o
f
Directors prevent
payment
o
f
dividends
o
n
the WaMu Cayman Preferred Securities.
Even though WaMu Cayman's Articles
o
f
Association provide that dividends on the WaMu
Cayman Preferred Securities will
b
e
automatically payable on each date on which the Company
pays
t
o WaMu Cayman dividends on the Fixed Rate Company Preferred Securities owned
b
y
WaMu Cayman, WaMu Cayman's Articles
o
f
Association also provide that WaMu Cayman's
Board
o
f
Directors, acting unanimously including the two directors who are also members
o
f
the
Company's Board
o
f
Managers one
o
f
whom
i
s the Independent Manager) may prevent the
payment
o
f
such dividends on the WaMu Cayman Preferred Securities. However,
i
f full dividends
on the WaMu Cayman Preferred Securities for any Dividend Period have not been declared and
paid, then,
a
s
o
f
the Fixed Rate Company Preferred Securities-
Restrictions on Dividends
b
y
WMI," WMI will not declare
o
r
pay dividends with respect
t
o any
o
f
i
t
s equity capital securities during the next succeeding Dividend Period, except dividends
i
n
connection with a shareholder's rights plan,
i
f any,
o
r
dividends
i
n connection with benefits plans.
The level
o
f
the Company's relative the aggregate liquidation preference
o
f
the
Company Preferred Securities could shrink over time other things, dividends
paid the Company the Common Securities
o
r
other Junior Equity Securities
i
f
are issued future date.
The LLC Agreement includes provisions that limit the Company's ability
t
o pay dividends on
the Company's Junior Equity Securities but, subject
t
o satisfaction
o
f
those limitations, does not
prohibit dividends that could cause the level
o
f
the Company's assets relative
t
o the aggregate
o
f
the Company Preferred Securities
t
o shrink. These limitations are
o
f
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,
o
r
repurchase, redeem
o
r
otherwise acquire for consideration directly
o
r
indirectly with limited exceptions) Junior Equity Securities, unless dividends for such
Dividend Period on
a
l
l
outstanding Company Preferred Securities have been declared and
paid
i
n full,
o
r
set aside for payment,
a
s
the case may be; and
CONFIDENTIAL
Return
without the consent
o
r
affirmative vote the holders
o
f
a
t
least two-thirds
o
f
the Fixed Rate
Company Preferred Securities and the Fixed-to-Floating Rate Company Securities, voting
together
a
s
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
o
r
exceeds 150%
o
f
the amount that would
b
e
required
t
o pay full dividends on the outstanding Company Preferred Securities,
a
s
well
a
s
o
r
amend
o
r
otherwise change the requirement that the Company make investments
and distributions with the proceeds
o
f
the Company's assets such that the
Company's FFO for any period
o
f
four fiscal quarters will equal
o
r
exceed 150%
o
f
b
e
required
t
o pay full annual dividends on
a
l
l
outstanding Company Preferred Securities,
a
s
well
a
s
any other Parity Equity
Securities.
As HELs
i
n the Asset Trust prepay
o
r
repay principal and distributions with respect
t
o such
principal payments are made
b
y
the Asset Trust
t
o the Company on the Class A Asset Trust
Certificate, subject
t
o the limitations referenced above, the Company may choose
t
o apply such
amounts
t
o pay dividends on the Company Common Securities
o
r
reinvest such amounts
i
n
additional Eligible Assets. Additionally, subject
t
o the limitations referenced above, the Company
could distribute a portion
o
f
the Class A Asset Trust Certificate
a
s
a dividend on the Company
Common Securities. The Company has no current intention
t
o pay
a
n
extraordinary dividend, and
WMI has no current intention
t
o cause
o
r
permit the Company
t
o pay such
a
n
extraordinary
dividend. Nevertheless, dividends paid
b
y
the Company on the Company Common Securities could
result
i
n a reduction
i
n the Company's assets that could have the consequence, notwithstanding
i
t
s
compliance with the limitations referred
t
o above,
o
f
the Company not having funds available
t
o
pay full dividends on the Company Preferred Securities
i
n future periods
o
r
loss
b
y
investors
o
f
some
o
r
a
l
l
o
f
the amount
o
f
their investment were the Company
t
o
b
e
liquidated.
The WaMu Cayman Preferred Securities may not
b
e
redeemed
a
t
the option
o
f
the holder
thereof under any circumstances, are perpetual and have no maturity date. While the WaMu
Cayman Preferred Securities may
b
e
redeemed
a
t
the option
o
f
the Company under certain
circumstances described herein, any such redemption
i
s subject
t
o the approval
o
f
the OTS and
may
b
e
constrained
b
y
operation
o
f
the Replacement Capital Covenant. Investors
i
n the WaMu
Cayman Preferred Securities will have no right
t
o reclaim their initial investment from WaMu
Cayman and there can
b
e
no guarantee that the WaMu Cayman Preferred Securities will ever
b
e
redeemed.
I
f investors
i
n the WaMu Cayman Preferred Securities choose
t
o sell their WaMu
i
n order
t
o reclaim
a
l
l
o
r
part
o
f
their initial investment
i
n the
absence
o
f
any redemption, there can
b
e
no guarantee that such investors would
b
e
able
t
o sell
their securities
i
n the secondary market,
o
r
that
i
f such sale occurred the sale price would
a
t
o
r
above the initial price.
o
n
o
n
Dividends on the Fixed Rate Company Preferred Securities are not cumulative. Conse-
quently,
i
f the Company's Board
o
f
Managers does not declare a dividend on the Fixed Rate
CONFIDENTIAL
Return
Company Preferred Securities for any quarter, WaMu Cayman will not
b
e
entitled
t
o receive
dividends for such quarter, and consequently holders
o
f
will not receive dividends with respect
t
o their securities for that quarter.
I
n addition, the
Company's Board
o
f
Managers may determine that
i
t would
b
e
i
n the Company's best interests
t
o pay less than the full amount
o
f
the stated dividends on the Fixed Rate Company Preferred
Securities
o
r
no dividends for any quarter even though funds are available. Factors that would
generally
b
e
considered
b
y
the Company's Board
o
f
Managers
i
n making this determination are
the amount
o
f
available funds, the Company's financial condition and capital needs, the impact
o
f
current and pending legislation and regulations, economic conditions, and tax considerations.
t
o
o
n
i
t
Even
i
f the Company pays dividends on Fixed Rate Company Preferred Securities held
b
y
WaMu Cayman,
i
t
i
s possible that WaMu Cayman may not
b
e
able
t
o pay dividends because
WaMu Cayman may only pay dividends on the WaMu Cayman Preferred Securities out
o
f
funds
legally available therefor. Although WaMu Cayman's Articles
o
f
Association restrict
i
t
s
activities
a
s
described under WaMu Cayman" and WaMu Cayman
i
s otherwise precluded from incurring
any indebtedness for borrowed money and does not anticipate having any material liabilities,
i
t
i
s
possible that WaMu Cayman may incur involuntary liabilities that may,
i
n turn, preclude
i
t from
paying dividends on the WaMu Cayman Preferred Securities even
i
f the Company has paid
dividends on the Fixed Rate Company Preferred Securities owned
b
y
WaMu Cayman.
a a
The returns from
a
n
investment
i
n the WaMu Cayman Preferred Securities will
b
e
dependent
t
o a significant extent on the performance and capital
o
f
WMB due
t
o the potential for a
Conditional Exchange. A decline
i
n the performance and capital levels
o
f
WMB
o
r
the placement
b
y
the OTS
o
f
WMB into conservatorship
o
r
receivership could result
i
n a Conditional Exchange
o
f
the WaMu Cayman Preferred Securities for Fixed Rate Depositary Shares representing Fixed
Rate WMI Preferred Stock. The Fixed Rate WMI Preferred Stock would represent
a
n
investment
i
n WMI and not
i
n the Company
o
r
WaMu Cayman. Under these circumstances:
the WaMu Cayman Preferred Securities would
b
e
exchanged for a preferred equity
interest
i
n WMI
a
t
a time when WMB's and, ultimately, WMl's financial condition has
deteriorated
o
r
when WMB may have been placed into conservatorship
o
r
receivership
and, accordingly,
i
t
i
s unlikely that WMI would
b
e
i
n a financial position
t
o make any
dividend payment on the amount
o
f
Fixed Rate WMI Preferred Stock;
i
n the event
o
f
a liquidation
o
f
WMI, the claims
o
f
creditors
o
f
WMI would
b
e
entitled
t
o
priority
i
n payment over the claims
o
f
holders
o
f
equity interests such
a
s
the Fixed Rate
Depositary Shares, and, therefore, the former holders
o
f
the WaMu Cayman Preferred
Securities who would then hold the Fixed Rate Depositary Shares representing Fixed
Rate WMI Preferred Stock because
o
f
the occurrence
o
f
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
t
o Fixed Rate Depositary Shares Issued
i
n a Conditional
Exchange The Fixed Rate WMI Preferred Stock will rank subordinate
t
o the direct
indebtedness
o
f
WMI;"
for United States Federal income tax purposes, a Conditional Exchange would most likely
b
e
a taxable event
t
o holders
o
f
the WaMu Cayman Preferred Securities, and
i
n that
20
CONFIDENTIAL
Return
event such holders generally would incur a gain
o
r
loss,
a
s
the case may be, measured
b
y
the difference between their adjusted tax basis
i
n the WaMu Cayman Preferred
Securities and the fair market value
o
f
the Fixed Rate Depositary Shares.
I
n addition,
dividends,
i
f any, paid
t
o Foreign Holders
o
f
Fixed Rate Depositary Shares received upon
a Conditional Exchange generally will
b
e
subject
t
o a 30% United States withholding tax
unless the holder qualifies for a reduction from withholding tax under
a
n
applicable United
States income tax treaty; and
although the terms
o
f
Fixed Rate Depositary Shares are substantially similar
t
o the terms
o
f
the Fixed Rate Company Preferred Securities, there are differences that holders
o
f
WaMu Cayman Preferred Securities might deem
t
o
b
e
important, such
a
s
the fact that
holders
o
f
Fixed Rate Depositary Shares will not generally have voting rights, except
a
s
required
b
y
law
o
r
i
n connection with the right
t
o elect directors
i
f dividends are missed
see Description
o
f
the Fixed Rate WMI Preferred Stock Voting Rights"),
o
r
benefit
from any protective covenants.
I
n addition, neither the Fixed Rate WMI Preferred Stock
nor the Fixed Rate Depositary Shares will
b
e
listed on any securities exchange
o
r
automated dealer quotation system, and the Initial Purchasers are under no obligation
t
o
and do not intend
t
o make a market
i
n the Fixed Rate Depositary Shares.
Except
a
s
specified
i
n WaMu Cayman's Articles
o
f
Association
o
r
i
n relation
t
o the right
t
o
direct the manner
i
n which WaMu Cayman exercises
i
t
s
voting rights with respect
t
o the Fixed
Rate Company Preferred Securities, holders
o
f
WaMu Cayman Preferred Securities are not
entitled
t
o voting rights. Except
a
s
specified
i
n the LLC Agreement, WaMu Cayman,
a
s
holder
o
f
Fixed Rate Company Preferred Securities,
i
s not entitled
t
o voting rights. However, the Company
i
s prohibited
b
y
the LLC Agreement from taking certain actions without the consent
o
r
vote
o
f
a
t
least two-thirds
o
f
either the Fixed Rate Company Preferred Securities voting separately
o
r
the
Fixed Rate Company Preferred Securities and the Fixed-to-Floating Rate Company Preferred
Securities, voting together
a
s
a single class,
a
s
applicable. For a description
o
f
the matters on
which the holders
o
f
Fixed Rate Company Preferred Securities have a right
t
o vote, see
Description
o
f
the Fixed Rate Company Preferred Securities Voting Rights and Covenants."
n
o
o
f
a
a
n
Subject
t
o the Replacement Capital Covenant and the prior approval
o
f
the OTS, the
Company may redeem the Fixed Rate Company Preferred Securities
i
)
i
n whole but not
i
n part
upon the occurrence
o
f
a Tax Event,
a
n
o
r
a Regulatory Capital
Event prior
t
o March 15, 2011 and
i
n whole
o
r
i
n part,
a
t
any time on
o
r
after March 15, 2011.
The redemption
b
y
the Company
o
f
the Fixed Rate Company Preferred Securities will automatically
cause a redemption
o
f
the WaMu Cayman Preferred Securities for which the redemption price will
b
e
paid from the proceeds WaMu Cayman receives from the Company
a
s
a consequence
o
f
the
redemption
o
f
the Fixed Rate Company Preferred Securities. The occurrence
o
f
a Tax Event,
a
n
o
r
a Regulatory Capital Event will not, however, give a holder
o
f
the WaMu Cayman Preferred Securities any right
t
o request that the Fixed Rate Company
o
r
b
e
redeemed.
I
f
the Company redeems the Fixed Rate Company Preferred Securities, the WaMu Cayman
b
e
automatically redeemed, and the former holders
o
f
the WaMu
2
1
CONFIDENTIAL
Return
Cayman Preferred Securities may not
b
e
able
t
o invest their redemption proceeds
i
n securities
with a dividend yield and other terms comparable
t
o that
o
f
Securities. A Treasury based make whole" amount will
b
e
payable only
i
n connection with a
redemption prior
t
o March 15, 2011.
The WaMu Cayman Preferred Securities will rank subordinate
t
o claims
o
f
WaMu Cayman's
creditors.
Although WaMu Cayman
i
s a special purpose vehicle and
i
t
s
activities will
b
e
limited
b
y
WaMu Cayman's Articles
o
f
Association, the WaMu Cayman Preferred Securities will rank
subordinate
t
o claims
o
f
WaMu Cayman's creditors,
i
f any. Accordingly,
i
f
WaMu Cayman does not have funds legally available
t
o pay full dividends on the WaMu
Cayman Preferred Securities;
o
r
i
n the event
o
f
WaMu Cayman's liquidation, dissolution
o
r
winding up, WaMu Cayman
does not have funds legally available
t
o pay the full liquidation value
o
f
the WaMu
Cayman Preferred Securities,
i
n each case, because
o
f
claims
o
f
any such creditors, any funds that are legally available
t
o pay
such amounts will
b
e
paid pro rata
t
o the WaMu Cayman Preferred Securities.
The Fixed Rate Company Preferred Securities will rank subordinate
t
o claims
o
f
the Company's
creditors and
o
n
a parity with other series
o
f
preferred securities issued the Company.
The Fixed Rate Company Preferred Securities will rank subordinate
t
o
a
l
l
claims
o
f
the
Company's creditors. The Fixed Rate Company Preferred Securities will rank pari passu
a
s
t
o
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
t
o WaMu Delaware
a
t
a time substantially
contemporaneous with this Offering and may issue additional Parity Equity Securities
a
t
any time
i
n the future, subject
t
o certain conditions
a
t
the time
o
f
issuance, without the consent
o
r
approval
o
f
the holders
o
f
the WaMu Cayman Preferred Securities. Accordingly,
i
f
the Company does not have funds legally available
t
o pay full dividends on the Fixed Rate
Company Preferred Securities and any Parity Equity Securities;
o
r
i
n the event
o
f
the Company's liquidation, dissolution
o
r
winding up, the Company does
not have funds legally available
t
o
f
the Fixed R"ate
Company Preferred Securities and any Parity Equity Securities,
any funds that are legally available
t
o pay such amounts will
b
e
paid pro rata
t
o the Fixed Rate
Company Preferred Securities and any other Parity Equity Securities then outstanding. See
Description
o
f
Other Company Securities Fixed-to-Floating Rate Company Preferred
Securities."
There has never been a market for the WaMu Cayman Preferred Securities.
Prior
t
o this Offering, there was no market for the WaMu Cayman Preferred Securities.
Although the Initial Purchasers intend
t
o make a market
i
Securities, they are under no obligation
t
o do
s
o
and,
t
o the extent that such market making
i
s
commenced,
i
t may
b
e
discontinued
a
t
any time. The Series A-1 WaMu Cayman Preferred
Securities will not
b
e
o
r
automated dealer quotation system,
and although WaMu Cayman will apply
t
o list the Series A-2 WaMu Cayman Preferred Securities
on the Euro MTF market
o
f
the Luxembourg Stock Exchange, there can
b
e
no assurance that
a
n
active and liquid trading market for the WaMu Cayman Preferred Securities will develop
o
r
b
e
sustained.
I
f
such a market were
t
o develop, the prices
a
t
which the WaMu Cayman Preferred
CONFIDENTIAL
Return
Securities trade would depend on many factors, including prevailing interest rates, the operating
results
o
f
the Company, WMB and WMI, and the market for similar securities. Hqlders
o
f
WaMu
Cayman Preferred Securities may not
b
e
able
t
o resell their WaMu Cayman Preferred Securities
a
t
o
r
above the initial price. Furthermore, the WaMu Cayman Preferred Securities are not and will
not
b
e
registered under the Securities Act, will
b
e
deemed
t
o
b
e
restricted securities within the
meaning
o
f
Rule 144 under the Securities Act and are subject
t
o significant transfer restrictions
a
s
described
i
n Notice
t
o Investors." These restrictions on transfer may inhibit the development
o
f
a
n
active and liquid trading market for the WaMu Cayman Preferred Securities and may
adversely impact the market price
o
f
o
f
,
The WaMu Cayman Preferred Securities do not constitute obligations
o
r
equity securities
o
f
WMI, WMB, the Company, Marion Holdings Inc.,
a
n
intermediate holding company between WMB
and University Street University Street, the Asset Trust, WaMu Delaware
o
r
any
other entity, nor are WaMu Cayman's obligations with respect
t
o the WaMu Cayman Preferred
Securities guaranteed
b
y
any other entity.
I
n particular, neither WMI, WMB, the Company,
University Street, Marion, the Asset Trust, WaMu Delaware nor any other entity guarantees that
WaMu Cayman will declare
o
r
pay any dividends, nor are they obligated
t
o provide additional
capital
o
r
other support
t
o WaMu Cayman
t
o enable WaMu Cayman
t
o pay dividends
i
n the event
the Company fails
t
o pay dividends on the Fixed Rate Company Preferred Securities and WaMu
Cayman
i
s thus unable
t
o pay dividends on the WaMu Cayman Preferred Securities. The WaMu
Cayman Preferred Securities are not exchangeable for Fixed Rate Depositary Shares
o
r
Fixed
Rate WMI Preferred Stock except upon a Conditional Exchange. No holder
o
f
WaMu Cayman
Preferred Securities will have the right
t
o require WaMu Cayman
t
o exchange the WaMu Cayman
Preferred Securities for Fixed Rate Depositary Shares.
o
f
,
The Fixed Rate Company Preferred Securities do not constitute obligations
o
r
equity
securities
o
f
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
t
o the Fixed Rate Company Preferred Securities guaranteed
b
y
any other entity.
I
n
particular, neither WMI, WMB, Marion, University Street, WaMu Cayman, the Asset Trust, WaMu
Delaware nor any other entity, guarantees that the Company will declare
o
r
pay any dividends
t
o
WaMu Cayman, nor are they obligated
t
o provide additional capital
o
r
other support
t
o the
Company
t
o enable the Company
t
o pay dividends on the Fixed Rate Company Preferred
Securities
t
o WaMu Cayman
i
n the event the Company's assets and results from operations are
insufficient for such purpose.
A
l
l
o
f
the Company's officers and certain
o
f
the Company's managers are also officers
o
f
WMI
o
r
WMB
o
r
their affiliates. After this Offering, WMI, WMB and University Street will continue
t
o control
a
l
l
o
f
the Company's outstanding voting securities. WMI, WMB, and University Street
will have the right
t
o elect
a
l
l
o
f
the Company's managers, including the Independent Manager.
WMB and University Street may have interests that are not identical
t
o the Company's
interests. WMI, through
i
t
s subsidiary, New American Capital, Inc.,
i
s the ultimate owner
o
f
WMB's and University Street's common stock, and may have investment goals and strategies
CONFIDENTIAL
Return
The Company
i
s dependent on the officers and employees
o
f
WMI and WMB for the selection,
structuring and monitoring
o
f
the loans
i
n the Asset Trust and the Company's relationship with
WMI and/or WMB may create potential conflicts
o
f
interest.
The Company
i
s dependent on the officers and employees
o
f
WMB for the servicing
o
f
the loans
i
n 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
t
o implement the Company's business plan and may
restrict the Company's ability
t
o pay dividends.
24
CONFIDENTIAL
Return
a
o
n
25
CONFIDENTIAL
Return
which
i
t conducts
i
t
s operations
t
o avoid being required
t
o register
a
s
a
n
investment company,
o
r
t
o register
a
s
a
n
investment company, either
o
f
which could have a material adverse effect
on the Company
o
r
the Asset Trust,
a
s
the case may be, the Company's ability
t
o make
payments
i
n respect
o
f
the Fixed Rate Company Preferred Securities and, accordingly, the
trading price
o
f
the WaMu Cayman Preferred Securities. Further,
i
n order
t
o ensure that the
Company and the Asset Trust
a
t
a
l
l
times continues
t
o qualify for the above exemption from the
Investment Company Act, the Company and the Asset Trust may
b
e
required
a
t
times
t
o adopt
less efficient methods
o
f
financing certain
o
f
the Company's and the Asset Trust's assets than
would otherwise
b
e
the case and may
b
e
precluded from acquiring certain types
o
f
assets whose
yield
i
s higher than the yield on assets that could
b
e
purchased
i
n a manner consistent with the
exemption. The net effect
o
f
these factors may
b
e
t
o lower
a
t
times the Company's net interest
income. Finally,
i
f the Company
o
r
the Asset Trust were
a
n
unregistered investment company,
there would
b
e
a risk that the Company
o
r
the Asset Trust,
a
s
the case may be, would
b
e
subject
t
o monetary penalties and injunctive relief
i
n
a
n
action brought
b
y
the SEC, that the
Company
o
r
the Asset Trust,
a
s
b
e
unable
t
o enforce contracts with
third parties and that third parties could seek
t
o obtain rescission
o
f
transactions undertaken
during the period the Company
o
r
the Asset Trust was determined
t
o
b
e
a
n
unregistered
investment company.
I
n addition,
a
n
issuer that
i
s organized outside the United States, such
a
s
WaMu Cayman,
i
s
not permitted
t
o register under the Investment Company Act without first obtaining
a
n
order from
the SEC permitting
i
t
t
o register
a
s
a
n
investment company under the Investment Company Act.
WaMu Cayman does not intend
t
o seek such
a
n
order and could not satisfy some
o
f
the
requirements
o
f
the Investment Company Act e.g., limitations on the ratio
o
f
preferred equity
t
o
common equity) that would have
t
o
b
e
satisfied for WaMu Cayman
t
o obtain such
a
n
order.
Accordingly, WaMu Cayman has not and does not intend
t
o register under the Investment
Company Act
i
n reliance on the exemption from registration set forth
i
n Section 3(c) thereof.
Were such
a
n
exemption no longer available, potential ramifications
o
f
a failure
b
y
WaMu Cayman
t
o obtain
a
n
order permitting
i
t
t
o register,
i
f such registration were
i
n fact required, include, but are
not limited
t
o
,
a
n
injunctive
o
r
administrative proceeding
b
y
the SEC for disgorgement and/or
monetary penalties and
a
n
order prohibiting WaMu Cayman from committing
o
r
causing future
violations
o
f
the federal securities laws.
I
n the event the Company, the Asset Trust
o
r
WaMu
Cayman
i
s ever considered
a
n
investment company under the Investment Company Act
a
s
a result
o
f
a
n
Investment Company Act Event, the Company would likely redeem the Fixed Rate Company
Preferred Securities. See above under Risks Relating
t
o the Terms
o
f
the WaMu Cayman
Preferred Securities and the Fixed Rate Company Preferred Securities Holders
o
f
WaMu
Cayman Preferred Securities and Fixed Rate Company Preferred Securities have no redemption
rights; however, the Company may but
i
s not required to) redeem the Fixed Rate Company
Preferred Securities upon the occurrence
o
f
a Tax Event,
a
n
o
r
a
Regulatory Capital Event prior
t
o March 15, 2011, and
a
t
any time thereafter and such redemption
will cause
a
n
automatic redemption
o
f
the WaMu Cayman Preferred Securities."
Additionally, the Company may from time
t
o time have Asset Subsidiaries other than the
Asset Trust. The Company may not establish
a
n
Asset Subsidiary unless the establishment and
operation
o
f
such Asset Subsidiary will not cause the Company
t
o
b
e
a
n
investment company
which
i
s required
t
o register under the Investment Company Act and such Asset Subsidiary
i
s not
itself
a
n
investment company which
i
s required
t
o register under the Investment Company Act.
I
f
any such Asset Subsidiary were
t
o
b
e
required
t
o register
a
s
a
n
investment company, the results
would
b
e
similar
t
o those described above
i
n respect
t
o the Asset Trust being required
t
o register
a
s
a
n
investment company.
Adverse Effect
o
f
Determination
o
f
Company's Partnership Status
Prior
t
o the issuance
o
f
the Company Preferred Securities, the Company will receive
a
n
opinion from Mayer, Brown, Rowe Maw LLP
t
o the effect that, for United States Federal
CONFIDENTIAL
Return
income tax purposes,
i
) the Company will not
b
e
treated
a
s
a
n
association taxable
a
s
a
corporation and
i
i
) although no activities closely comparable
t
o that contemplated
b
y
the
Company have been the subject
o
f
any U.S. Treasury regulation, revenue ruling
o
r
judicial
decision, the Company will not
b
e
treated
a
s
a
s
a
corporation. The opinions are based on certain assumptions and on certain representations and
agreements regarding restrictions on the future conduct
o
f
the activities
o
f
the Company.
Although the Company intends
t
o conduct
i
t
s activities
i
n accordance with such assumptions,
representations and agreements,
i
f
i
t were nonetheless determined that the Company was
taxable
a
s
a corporation for United States Federal income tax purposes, then the Company
would
b
e
subject under the Code
t
o the regular corporate income tax. Such taxes would reduce
the amounts available
t
o make payments on the Company Preferred Securities.
Adverse Effect
o
f
Determination
o
f
U.S. Trade
o
r
Business Status
Prior
t
o the issuance
o
f
the WaMu Cayman Preferred Securities, WaMu Cayman will receive
a
n
t
o the effect that, for United States Federal
income tax purposes, although no activities closely comparable
t
o that contemplated
b
y
WaMu
Cayman have been the subject
o
f
o
r
judicial
decision, WaMu Cayman will not
b
e
treated
a
s
engaged
i
n the conduct
o
f
a trade
o
r
business
within the United States and, consequently, WaMu Cayman's profits will not
b
e
subject
t
o United
States Federal income tax on a net income basis including the branch profits tax). The opinion
i
s based on certain assumptions and on certain representations and agreements regarding
restrictions on the future conduct
o
f
the activities
o
f
WaMu Cayman and the Company. Although
WaMu Cayman intends
t
o conduct
i
t
s
activities
i
i
f
i
t were nonetheless determined that WaMu Cayman was
engaged
i
n a United States trade
o
r
business and had taxable income that
i
s effectively
connected with such United States trade
o
r
business, then WaMu Cayman would
b
e
subject
under the Code
t
o the regular corporate income tax on such effectively connected taxable
income and possibly
t
o the 30% branch profits tax
a
s
well. Such taxes would reduce the amounts
available
t
o make payments on the WaMu Cayman Preferred Securities.
The Company has control over changes
i
n interest rates and such changes could negatively
impact the Company's financial condition, results
o
f
operations, and ability
t
o pay dividends.
Initially, the Company's income consists primarily
o
f
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
t
o any Additional Assets, the Company's Portfolio").
A
t
January 31, 2006, 100%
o
f
the HELs
t
o
b
e
included
i
n the Company's Portfolio bear interest
a
t
fixed rates; however,
i
n the future, the Company could acquire Additional Assets which include
o
r
are secured
b
y
adjustable rate loans. Adjustable-rate loans decrease the risks
t
o a lender
associated with changes
i
n interest rates but involve other risks. As interest rates rise, the
payment
b
y
the borrower rises
t
o the extent permitted
b
y
the terms
o
f
the loan, and the
increased payment increases the potential for default.
A
t
the same time, the marketability
o
f
the
underlying property may
b
e
adversely affected
b
y
higher interest rates.
I
n a declining interest rate
environment, there may
b
e
a
n
increase
i
n prepayments on the HELs
o
r
other assets
i
n the
Company's Portfolio
a
s
the borrowers refinance their mortgages
a
t
lower interest rates. Under
these circumstances, the Company may find
i
t more difficult
t
o acquire Additional Assets with
rates sufficient
t
o support the payment
o
f
the dividends on the Fixed Rate Company Preferred
Securities. A declining interest rate environment would adversely affect the Company's ability
t
o
pay full,
o
r
even partial, dividends on the Fixed Rate Company Preferred Securities.
CONFIDENTIAL
Return
The value
o
f
the collateral underlying the Company's Portfolio and
l
o
r
the results
o
f
the
Company's operations could
b
e
affected
b
y
various conditions
i
n the economy, such as:
local and other economic conditions affecting real estate and other collateral values;
sudden
o
r
unexpected changes
i
n economic conditions, including changes that might
result from terrorist attacks and the United States' response
t
o such attaCks;
the continued financial stability
o
f
a borrower and the borrower's ability
t
o make loan
principal and interest payments, which may
b
e
adversely affected
b
y
job loss, recession,
divorce, illness
o
r
personal bankruptcy; and
interest rate levels and the availability
o
f
credit
t
o refinance loans
a
t
o
r
prior
t
o maturity.
A
t
January 31, 2006, more than 79% as a percentage
o
f
loan principal balances)
o
f
the
assets
i
n the Company's Portfolio were located
i
n Texas and California. Because
o
f
the
concentration
o
f
the Company's interest
i
n those states,
i
n the event
o
f
adverse economic
conditions
i
n those states, the Company would likely experience higher rates
o
f
loss and
delinquency on the Company's Portfolio than
i
f the underlying HELs were more geographically
diversified. Additionally, the HELs
i
n the Company's Portfolio may
b
e
subject
t
o a greater risk
o
f
default than other comparable loans
i
n the event
o
f
adverse economic, political,
o
r
business
developments
o
r
natural hazards that may affect Texas and California, and the ability
o
f
property
owners
o
r
commercial borrowers
i
n those states
t
o make payments
o
f
principal and interest on
the underlying loans.
I
n the event
o
f
any adverse development
o
r
natural disaster
i
n those states,
the Company's ability
t
o pay dividends on the Fixed Rate Company Preferred Securities could
b
e
adversely affected.
The Company has adopted policies with a view
t
o ensuring that
a
l
l
financial dealings
between WMB, University Street and the Company will
b
e
fair
t
o each party and consistent with
market terms. However, there has been no third party valuation
o
f
a
l
l
o
f
the Company's assets.
I
n addition,
i
t
i
s not anticipated that third party valuations will
b
e
obtained
i
n connection with
future acquisitions
o
r
dispositions
o
f
assets even
i
n circumstances where
a
n
affiliate
o
f
the
Company.is selling the assets
t
o the Company,
o
r
purchasing the assets from the Company.
Accordingly, the Company cannot assure purchasers that the purchase price the Company paid
for
a
l
l
o
f
the Company's assets was equal
t
o the fair market value
o
f
those assets. Nor can the
Company assure purchasers that the consideration
t
o
b
e
paid
b
y
the Company
t
o
,
o
r
received
b
y
the Company from, WMB, University Street
o
r
any
o
f
the Company's affiliates
i
n connection with
future acquisitions
o
r
dispositions
o
f
assets will
b
e
equal
t
o
f
such assets.
The Asset Trust
o
r
any other Asset Subsidiary may
b
e
forced
t
o foreclose on
a
n
underlying
HEL
o
r
other assets where the borrower has defaulted on
i
t
s obligation
t
o repay the applicable
CONFIDENTIAL
Return
loan.
I
t
i
s possible that the Asset Trust
o
r
any other Asset Subsidiary, and therefore, the Company,
may
b
e
subject
t
o environmental liabilities with respect
t
o foreclosed property. The discovery
o
f
these liabilities and any associated costs for removal
o
f
hazardous substances, wastes,
contaminants
o
r
pollutants, could have a material adverse effect on the fair value
o
f
such assets.
Substantial delays could
b
e
encountered
i
n connection with the liquidation
o
f
the collateral
securing defaulted loans
i
n the Company's Portfolio, with corresponding delays
i
n the Company's
receipt
o
f
related proceeds. An action
t
o foreclose on a mortgaged property
o
r
repossess and
sell other collateral securing a loan
i
s regulated
b
y
state statutes and rules. Any such action
i
s
subject
t
o many
o
f
the delays and expenses
o
f
lawsuits, which may impede the Company's ability
t
o foreclose on
o
r
sell the collateral
o
r
t
o obtain proceeds sufficient
t
o repay
a
l
l
amounts due on
the related loan
i
n the Company's Portfolio.
Although the Company's Portfolio currently consists primarily
o
f
HELs held through the
Asset Trust,
t
o the extent
i
t acquires Additional Assets
i
n the future, the Company
i
s not required
t
o limit
i
t
s investments
t
o assets
o
f
the types currently
i
n the Company's Portfolio. See The
Company Business
o
f
the Company Assets
o
f
the Company." Assets such
a
s
second lien
closed end home equity loans, first
o
r
second lien home equity lines
o
f
credit, mortgage loans on
single family
o
r
multi-family residences, commercial mortgage loans
o
r
other real estate assets
may involve different risks not described
i
n this offering circular. Moreover, while the LLC
Agreement will call for maintaining specified levels
o
f
FFO coverage
a
s
t
o expected dividends,
the Company
i
s not required
t
o maintain the levels
o
f
asset coverage that currently exist.
The dependency
o
f
the Company on WMI, University Street and WMB and the Company's
close relationship with WMI, University Street and WMB may create potential conflicts
o
f
interest
i
n
connection with the Company's acquisition
o
f
Additional Assets. The Company will
b
e
dependent on
WMI, University Street and WMB
t
o identify Additional Assets which
i
t may acquire, but WMI,
University Street and WMB are not required
t
o contribute
o
r
sell Additional Assets
t
o the Company.
I
f
WMI, University Street and WMB are unable
t
o identify,
o
r
are unwilling
t
o contribute
o
r
sell, suitable
Additional Assets, then over time the Company's level
o
f
FFO coverage
a
s
t
o expected dividends will
decline. Moreover, conflicts
o
f
interest may arise because the employees
o
f
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
o
f
future acquisitions
b
y
the Company
o
f
Additional
Assets from University Street, WMB
o
r
other members
o
f
the WMI Group
a
s
well
a
s
future
dispositions
o
f
assets
t
o WMB, University Street
o
r
third parties.
For United States Federal income tax purposes, a Conditional Exchange would most likely
b
e
a taxable event
t
o holders
o
f
WaMu Cayman Preferred Securities under the Code, and they
generally would incur a gain
o
r
loss,
a
s
b
y
the difference between
their adjusted tax basis
i
n the WaMu Cayman Preferred Securities and the fair market value
o
f
the Fixed Rate Depositary Shares.
I
n addition, dividends,
i
f any, paid
t
o Foreign Holders
o
f
Fixed
CONFIDENTIAL
Return
t
o
30
CONFIDENTIAL
Return
Upon the occurrence
o
f
a Conditional Exchange, the holders
o
f
the Fixed Rate Depositary
Shares will not benefit from the same favorable covenants
a
s
Securities.
Dividends on the Fixed Rate WMI Preferred Stock are not cumulative. Consequently,
i
f the
board
o
f
directors
o
f
WMI
o
f
does not declare dividends on the Fixed
Rate WMI Preferred Stock for any quarterly period, the holders
o
f
the Fixed Rate Depositary
Shares would not
b
e
entitled
t
o any such dividend whether
o
r
not funds are
o
r
subsequently
become available.
WMl's Board
o
f
Directors may determine that
i
t would
b
e
i
n WMl's best interest
t
o pay less
than the full amount
o
f
the stated dividends on the Fixed Rate WMI Preferred Stock
o
r
no
dividends for any quarter even
i
f funds are available. Factors that would
b
e
considered
b
y
WMl's
Board
o
f
Directors
i
n making this determination are WMl's financial condition and capital needs,
the impact
o
f
current and pending legislation and regulations, economic conditions, tax
considerations, and such other factors
a
s
WMI's Board
o
f
Directors may deem relevant.
The Fixed Rate WMI Preferred Stock and the Fixed Rate Depositary Shares will
b
e
new
issues
o
f
securities. WMI does not intend
t
o cause the listing
o
r
quotation
o
f
the Fixed Rate WMI
Preferred Stock
o
r
the Fixed Rate Depositary Shares on any securities exchange
o
r
automated
dealer quotation system, including any such securities exchange
o
r
automated dealer quotation
system on which the Series A-2 WaMu Cayman Preferred Securities are listed
o
r
quoted. The
Initial Purchasers are under no obligation
t
o and do not intend
t
o make a market
i
n the Fixed
Rate Depositary Shares. Consequently,
i
t
i
s unlikely that
a
n
active and liquid trading public
market for the Fixed Rate Depositary Shares
o
r
the underlying Fixed Rate WMI Preferred Stock
will develop
o
r
b
e
maintained. The lack
o
f
liquidity and
a
n
active trading market could adversely
affect ability
o
f
the holders
o
f
Fixed Rate Depositary Shares
t
o dispose
o
f
such shares.
I
n addition, neither the Fixed Rate Depositary Shares nor the Fixed Rate WMI Preferred
Stock represented
b
y
such shares have
o
r
will
b
e
registered under the Securities Act and will
b
e
deemed
t
o
b
e
restricted securities within the meaning
o
f
Rule 144
o
f
the Securities Act. Holders
o
f
Fixed Rate Depositary Shares will not
b
e
able
t
o offer, sell, pledge
o
r
otherwise transfer the
Fixed Rate Depositary Shares other than:
t
o a qualified institutional buyer within the meaning
o
f
Rule 144A
o
f
the Securities Act
i
n a
transaction complying with Rule 144A;
t
o a non-U.S. person within the meaning
o
f
Rule 902
o
f
Regulation S
i
n a transaction
complying with Regulation
S
;
otherwise
i
n accordance with
a
n
applicable exemption from the registration requirements
o
f
the Securities Act;
o
r
t
o WMI
o
r
one
o
f
WMl's affiliates, and
i
n any case,
i
n accordance with exemptions from
any applicable state securities
o
r
blue sky laws.
These restrictions on transfer may inhibit the development
o
f
a
n
active and liquid trading market
for the Fixed Rate Depositary Shares and may adversely impact the market price
o
f
such shares.
3
1
CONFIDENTIAL
Return
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
Return
lated gains losses) on certain available-for-sale securities and cash flow hedges. For purposes
o
f
determining risk-weighted assets for the risk-based capital ratios, the book value
o
f
each
o
f
the savings association's on-balance sheet assets, and a portion
o
f
certain off-bcl.lance sheet
items and exposures, are weighted from 0%
t
o 100% based on broad categories. For instance,
U.S. government debt obligations are generally risk-weighted
a
t
0%; certain qualifying residential
mortgage loans on one-to-four family dwellings are generally risk weighted
a
t
50%; and
commercial loans and most other assets are generally risk-weighted
a
t
100%. Off-balance sheet
items including letters
o
f
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
t
o certain asset-backed securities
may vary from 20%
t
o 200% depending on credit rating. Subordinated residual interests retained
i
n asset securitizations, credit enhancement and forms
o
f
recourse" can result
i
n higher capital
charges
o
r
deductions from capital.
For purposes
o
f
the OTS regulations,
i
s defined
a
s
the sum
o
f
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
i
n the equity accounts
o
f
consolidated
subsidiaries which may include such instruments
a
s
qualifying REIT preferred stock and the
Company Preferred Securities). generally includes subject
t
o 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
t
o a maximum
o
f
1.25%
o
f
total risk-weighted assets); and up
t
o 45%
o
f
the pretax net unrealized gains
o
f
available-for-sale equity securities investments. Supplemen-
tary capital
i
s permitted
t
o count towards only one-half
o
f
total capital. Both core capital and
tangible capital are subject
t
o various deductions. Some
o
f
these deductions are more stringent
for tangible capital than core capital, including goodwill, certain other intangible assets, and
certain servicing assets
i
n excess
o
f
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
i
s treated
a
s
well-capitalized
i
f
i
t
s ratio
o
f
total
capital
t
o risk-weighted assets
i
s 10.00%
o
r
more,
i
t
s
ratio
o
f
core capital
t
i
s 6.00%
o
r
more,
i
t
s leverage ratio
i
s 5.00%
o
r
more, and
i
t
i
s not subject
t
o any federal
supervisory agreement order
o
r
directive
t
o meet a specific capital level.
I
n order
t
o
b
e
adequately capitalized, any savings association must have a ratio
o
f
total capital
t
o risk-weighted
assets
o
f
not less than 8.00%, a ratio
o
f
core capital
t
o
f
not less than
4.00%, and unless
i
t
i
s
i
n the most highly-rated category) a leverage ratio
o
f
not less than
4.00%. Any savings association that
i
s neither well-capitalized nor adequately capitalized will
b
e
considered undercapitalized. Any savings association with a tangible equity ratio
o
f
2.00%
o
r
less
will
b
e
considered critically undercapitalized.
Undercapitalized savings associations are subject
t
o certain prompt corrective action
requirements, regulatory controls and restrictions, which become more extensive
a
s
a
n
association becomes more severely undercapitalized. Failure
b
y
WMB
t
o comply with applicable
capital requirements,
i
f unremedied, would result
i
n restrictions on
i
t
s
activities and lead
t
o
regulatory enforcement actions against WMB including, but not limited
t
o
,
the issuance
o
f
a
capital directive
t
o ensure the maintenance
o
f
required capital levels. The Federal Deposit
Insurance Corporation Improvement Act
o
f
1991 requires the federal banking regulators
t
o take
prompt corrective action with respect
t
o depository institutions that do not meet minimum capital
requirements. Additionally, FDIC
o
r
OTS approval
o
f
any regulatory application filed for
i
t
s review
may
b
e
dependent on compliance with capital requirements.
CONFIDENTIAL
Return
I
n addition, the OTS from time
t
o time may impose higher specific capital requirements on
any savings association that
i
s perceived
t
o have risks, exposures, credit concentration, rapid
growth
o
r
other circumstances warranting special attention. Failure
t
o satisfy such a capital
directive could subject
a
n
association
t
o civil money penalties, judicial enforcement and
administrative remedies available
t
o the OTS,
a
s
well
a
s
a finding that a savings association
i
s
undercapitalized"
Whether WMB would ever
b
e
determined
b
y
the OTS
t
o
b
e
undercapitalized",
o
r
a
t
risk
o
f
becoming undercapitalized"
i
n the near term thereby triggering the exchange
o
f
the WaMu
Cayman Preferred Securities for Fixed Rate Depositary Shares could
b
e
influenced not only
b
y
the OTS' capital adequacy regulations, but also
b
y
the regulator's interpretations and judgment
on other matters. For example, the OTS' views on asset credit quality potentially could affect a
thrift
o
r
savings association's capital status. Among other things, the OTS typically evaluates
asset quality, loan loss reserves and procedures during periodic regulatory examinations
o
f
each
federal savings association.
I
f
,
following such
a
n
examination
o
r
otherwise, the OTS
i
n
i
t
s
discretion were
t
o require WMB
t
o significantly increase
i
t
s 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
i
s includable within supplementary capital only up
t
o a limit, and
i
s not includable
a
t
a
l
l
i
n
core capital.
A savings association's regulatory capital status, and the risk
o
f
being deemed undercapi-
talized" could also
b
e
affected
b
y
other developments
o
r
b
y
future changes
i
n regulatory capital
and other standards. WMB and WMI continue
t
o actively follow the progress
o
f
the U.S. banking
agencies and the Basel Committee on Banking Supervision
i
n developing a new set
o
f
regulatory
risk-based capital requirements. The Basel Committee on Banking Supervision
i
s a committee
established
b
y
the central bank governors
o
f
certain industrialized nations, including the United
States. The new requirements are commonly referred
t
o
a
s
Basel
I
I
o
r
The New Basel Capital
Accord; however, final requirements have not been adopted. WMB and WMI are assessing the
potential impacts
o
f
Basel
I
I
.
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
t
o
b
e
categorized
a
s
well-capitalized under the regulatory framework for prompt corrective action were
a
s
follows:
Total capital
t
o total risk-weighted
assets $26,530 11.62% $18,260 8.00% $22,825 10.00%
Core capital
t
assets 19,661 8.61 9,130 4.00 13,695 6.00
Core capital
t
o adjusted total assets
leverage) 21,098 6.56 12,860 4.00(1)
16,075 5.00
Tangible capital
t
o tangible assets
tangible equity) 20,642 6.43 4,816 1.50
3
4
CONFIDENTIAL
Return
Total capital
t
assets $20,698 11.68% $14,174 8.00% $17,718 10.00%
Core capital
t
assets 14,392 8.12 7,087 4.00 10,631 6.00
Core capital
t
leverage) 14,530 5.46 10,635
4.00(1) 13,294 5.00
Tangible capital
t
o tangible assets
tangible equity) 14,530 5.46 3,988 1.50 nfa nfa
Total capital
t
assets $15,444 10.80% $11,441 8.00% $14,302 10.00%
Core capital
t
assets 12,472 8.72 5,721 4.00 8,581 6.00
Core capital
t
leverage) 12,531 5.50 9,116
4.00(1) 11,395 5.00
Tangible capital
t
o 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
o
f
WMB under the OTS's applicable regulatory capital regulations and,
upon receipt
o
f
such confirmation, intends
t
CONFIDENTIAL
Return
USE OF PROCEEDS
CONFIDENTIAL
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
Return
Washington Mutual Preferred Funding Cayman) I Ltd. WaMu Cayman")
i
s a Cayman
Islands exempted company limited
b
y
shares incorporated on February 23, 2006 under the
Companies Law 2004 Revision)
o
f
the Cayman Islands the Companies Law") and
i
t
s
o
f
Association together,
a
s
amended, WaMu Cayman's Articles
o
f
Association")
o
f
Association limit
i
t
s activities
t
o
i
) holding the 7.25% Perpetual
Non-Cumulative Preferred Securities, liquidation preference $1,000 per security the Fixed Rate
Company Preferred Securities"),
i
i
) issuing the 7.25% Perpetual Non-cumulative Preferred
Securities, Series A-1, liquidation preference $100,000 per security and $302,300,000
i
n 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
i
n 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
t
o the Cayman Trust and
iv) performing functions necessary
o
r
incidental thereto. WaMu Cayman
i
s prohibited from
issuing other equity
o
r
any debt securities
o
r
engaging
i
n any other activities. Subject
t
o the
limitations and assumptions described under Certain Tax Considerations," WaMu Cayman will
b
e
treated
a
s
a corporation for United States Federal income tax purposes. The Fixed Rate
Company Preferred Securities will
b
e
the only assets
o
f
WaMu Cayman, other than the sum
o
f
$1,000 representing the issued and paid-up share capital. The registered office
o
f
WaMu Cayman
i
s
a
t
PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman,
Cayman Islands. Copies
o
f
o
f
Association will
b
e
available upon
request
t
o WMI
o
r
free
o
f
charge
a
t
the specified office
o
f
the co-paying agent
i
n Luxembourg
maintained
b
y
WaMu Cayman the Paying Agent
i
n Luxembourg").
Capitalization
The authorized share capital
o
f
WaMu Cayman consists
o
f
i
) 3,023 Series A-1 WaMu
Cayman Preferred Securities par value $1.00 and liquidation preference $100,000 each,
a
l
l
o
f
which will
b
e
issued
i
n connection with this Offering,
i
i
) 44,770 Series A-2 WaMu Cayman
Preferred Securities par value $1.00 and liquidation preference $10,000 each,
a
l
l
o
f
which will
b
e
issued
i
n connection with this Offering and iii) 1,000 ordinary shares, par value $1.00 each the
WaMu Cayman Ordinary Shares"),
a
l
l
o
f
which have been issued.
The WaMu Cayman Preferred Securities are described under Description
o
f
WaMu
Cayman Preferred Securities."
A
l
l
o
f
the issued WaMu Cayman Ordinary Shares are paid-up and
are held
b
y
Maples Finance Limited,
a
s
share trustee
i
n such capacity, the Share Trustee")
o
f
a trust the Cayman Trust") established under the terms
o
f
a declaration
o
f
trust the
Declaration
o
f
Trust") dated February 23, 2006 under which the Share Trustee holds the WaMu
Cayman Ordinary Shares
i
n trust until the termination
o
f
the Cayman Trust. The Cayman Trust
will not terminate for
s
o
long
a
s
any WaMu Cayman Preferred Securities are outstanding. The
Cayman Trust may not dispose
o
f
o
r
otherwise deal with the WaMu Cayman Ordinary Shares for
s
o
long
a
s
the WaMu Cayman Preferred Securities are outstanding. Prior
t
o the termination
o
f
the Cayman Trust, the Cayman Trust
i
s
a
n
accumulation trust, and no distributions will
b
e
made
while any WaMu Cayman Preferred Security
i
s outstanding. Following the termination
o
f
the
Cayman Trust, the Share Trustee will wind up the Cayman Trust and make a final distribution
t
o
charity. The Share Trustee has no beneficial interest
i
n
,
and derives no benefit other than
i
t
s
fee
for acting
a
s
Share Trustee) from,
i
t
s
holding
o
f
the WaMu Cayman Ordinary Shares.
CONFIDENTIAL
Return
The following table illustrates the expected capitalization
o
f
WaMu Cayman
a
s
o
f
the closing
o
f
this Offering, after giving effect
t
o the issuance
o
f
the WaMu Cayman Preferred Securities on
the closing date:
As
o
f
the Closing Date
Unaudited)
$302,300,000
$447,700,000
WaMu Cayman Ordinary Shares
$ 1,000
Total Capitalization
$750,001,000
Business
o
f
WaMu Cayman
Assets
o
f
WaMu Cayman
WaMu Cayman's sole assets will
b
e
the Fixed Rate Company Preferred Securities and
$1,000 from the issuance
o
f
the WaMu Cayman Ordinary Shares
t
o the Cayman Trust.
Administration
Maples Finance Limited, a licensed trust company incorporated under the laws
o
f
the
Cayman Islands, acts
a
s
the administrator
o
f
WaMu Cayman the under the
Administration Agreement
t
o
b
e
entered into on
o
r
before the closing date the
between WaMu Cayman and Maples Finance Limited. The office
o
f
the
Administrator serves
a
s
the general business office
o
f
WaMu Cayman. Through this office and
pursuant
t
o the terms
o
f
the Administration Agreement, the Administrator performs various
management functions on behalf
o
f
WaMu Cayman, including the provision
o
f
clerical,
administrative and other services.
The Administrator will serve until
i
t resigns,
i
s dissolved
o
r
i
s removed
b
y
WaMu Cayman.
The Administrator may delegate
i
t
s duties under the Administration Agreement
t
o other parties,
but doing
s
o
will not release the Administrator from any
o
f
i
t
s obligations under the
Administration Agreement.
Under the Administration Agreement, WaMu Cayman may remove the Administrator
a
t
any
time, without paying any penalty,
b
y
giving
a
t
least 30 days' written notice
t
o the Administrator.
However,
i
f the Administrator
i
s dissolved
o
r
commits
a
n
act
o
f
bankruptcy,
o
r
i
f
i
t breaches the
Administration Agreement and the breach,
i
f capable
o
f
being cured, remains uncured for
30 days after receiving notice
o
f
such breach from WaMu Cayman
o
r
WMI), WaMu Cayman may
remove the Administrator on 14 days' notice
t
o the Administrator.
The Administrator may resign
a
t
any time
b
y
giving
a
t
least 30 days' written notice
t
o WaMu
Cayman. Noresignation
o
r
removal
o
f
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
i
t
s
duties. The Administration Agreement may
b
e
amended
b
y
the Administrator and WaMu Cayman; that such amendment may not have a
material adverse affect on the rights and interests
o
f
the holders
o
f
Securities.
Under the Expenses Agreement,
t
o
b
e
entered into on
o
r
before the closing date the
among WaMu Cayman and WMB,
a
l
l
charges
o
r
expenses
o
f
WaMu
Cayman other than payments required under the terms
o
f
Securities, including the fees, charges and expenses
o
f
the Administrator, the Registrar, the
Transfer Agent
o
r
any Paying Agent, will
b
e
paid
o
r
caused
t
o
b
e
paid
b
y
WMB, that
i
f
the Administrator incurs fees, charges
o
r
expenses, for which they are not otherwise liable under
CONFIDENTIAL
Return
the Administration Agreement,
a
t
the request
o
f
a holder
o
f
o
r
other person, such holder
o
r
other person will
b
e
liable for such fees, charges and expenses.
Management
o
f
WaMu Cayman
Directors
WaMu Cayman will
b
e
managed
b
y
a Board
o
f
Directors. WaMu Cayman's Articles
o
f
Association will provide that WaMu Cayman's Board
o
f
Directors will
b
e
composed
o
f
five
members. Pursuant
t
o WaMu Cayman's Articles
o
f
Association, two
o
f
the five directors will
automatically and
a
t
a
l
l
times consist
o
f
two
o
f
the persons who are then currently serving
a
s
members
o
f
the Company's Board
o
f
Managers the
a
s
designated
b
y
the Company
i
n a notice
t
o WaMu Cayman. One
o
f
the Company Designated
Directors will
a
t
a
l
l
times
b
e
the person who
i
s the Company's Independent Manager,
a
s
designated
b
y
the Company
i
n a notice
t
o WaMu Cayman. The person who
i
s the Company's
Independent Manager will also
b
e
designated
a
s
WaMu Cayman's Independent Director the
The other three directors
o
f
WaMu Cayman will
b
e
appointed
b
y
the Share Trustee
a
s
holder
o
f
100%
o
f
the WaMu Cayman Ordinary Shares. These persons will not
b
e
o
r
have been
directors
o
r
employees
o
f
WMI
o
r
any affiliate
o
f
WMI. The directors
o
f
WaMu Cayman will serve
until their successors are duly appointed
b
y
the Share Trustee
a
s
holder
o
f
100%
o
f
the WaMu
Cayman Ordinary Shares,
o
r
the Company
i
n the case
o
f
the Company Designated Directors
including the Independent Director),
a
s
applicable. Except
i
n certain circumstances described
under Independent Director" below
o
r
i
n connection with the prevention
o
f
the dividend on
the WaMu Company Preferred Securities
i
n circumstances where the Company has paid
dividends on the Fixed Rate Company Preferred Securities held
b
y
WaMu Cayman, action
b
y
the
WaMu Cayman's Board
o
f
Directors will
b
e
b
y
majority vote.
The persons who will
b
e
the directors
o
f
the Company upon completion
o
f
this Offering are
a
s
follows:
Wendy Ebanks
Director
Carlos Fallajah
Director
Guy Major
Director
Robert Williams
Director
Kenneth Uva
Independent Director
As a consequence
o
f
the WaMu Cayman's Independent Director being the same person
a
s
the Company's Independent Manager, WaMu Cayman's Independent Director will
b
e
a person
who must not during the preceding five years have been a director
o
r
employee
o
f
WMI
o
r
any
affiliate
o
f
WMI, other than a direct
o
r
indirect financing subsidiary
o
f
WMI.
I
n addition, the
holders
o
f
the WaMu Cayman Preferred Securities and the holders
o
f
the Trust Securities,
b
y
exercise
o
f
their right
t
o direct the manner
i
n which WaMu Cayman and WaMu Delaware exercise
their voting rights with respect
t
o the Fixed Rate Company Preferred Securities and Fixed-to-
Floating Rate Company Preferred Securities, respectively, voting together
a
s
a single class, will
b
e
entitled
t
o remove the initial
o
r
any succeeding Independent Manager
o
f
the Company, and
consequently WaMu Cayman's Independent Director, and
t
o
f
i
l
l
the vacancies
s
o
created
b
y
such
removals
o
r
any other vacancy existing
i
n the office
o
f
WaMu Cayman's Independent Director
and Independent Manager
o
f
the Company
i
f
i
) the Company fails
t
o pay full dividends on the
Fixed Rate Company Preferred Securities on any Dividend Payment Date,
i
i
)
WaMu Cayman
fails
t
o pay full dividends on the WaMu Cayman Preferred Securities on any Dividend Payment
CONFIDENTIAL
Return
Compensation
o
f
Directors
Additional Information
40
CONFIDENTIAL
Return
THE COMPANY
Washington Mutual Preferred Funding LLC the
i
s a Delaware;limited liability
company formed on February
3
,
2006 under the Delaware Limited Liability Company Act,
a
s
amended the pursuant
t
o
a
n
initial limited liability company agreement and a
certificate
o
f
formation filed with the Secretary
o
f
State
o
f
the State
o
f
Delaware. The limited
liability company agreement will
b
e
amended and restated
i
n
i
t
s
entirety on
o
r
about March
7
,
2006 as
s
o
amended and restated, the
The LLC Agreement generally limits the Company's activities
t
o
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
o
f
the Company the and additional Parity Equity
Securities
o
f
the Company acquiring and holding Eligible Investments, including the Class A
Asset Trust Certificate which will
b
e
the sole initial Eligible Investments
o
f
the Company)
i
n
accordance with the investment policy
a
s
described
i
n Business
o
f
the Company Assets
o
f
the Company" and iii) performing functions necessary
o
r
incidental thereto. Subject
t
o the
limitations and assumptions described under Certain Tax Considerations United States
Federal Income Tax Consequences", the Company intends
t
o
b
e
treated
a
s
a partnership for
United States Federal income tax purposes other than a publicly traded partnership taxable
a
s
a
corporation) and may not take any action,
o
r
permit any action
t
o
b
e
taken, that would cause the
Company
t
o fail
t
o
b
e
treated
a
s
a partnership for United States Federal income tax purposes for
s
o
long
a
s
any Company Preferred Securities are outstanding, except with the consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two-thirds
o
f
Securities and the Fixed-to-Floating Rate Company Preferred Securities, voting together
a
s
a
single class. The principal executive office
o
f
the Company
i
s 1201 Third Avenue, Seattle,
Washington 98101. Copies
o
f
the LLC Agreement will
b
e
available upon request
t
o WMI
o
r
free
o
f
charge
a
t
o
f
the Paying Agent
i
n Luxembourg.
The Company will receive the opinion
o
f
t
o the effect that,
for United States Federal income tax purposes, the Company will not
b
e
treated
a
s
a
n
association taxable
a
s
a corporation
o
r
a
s
a
s
a corporation.
Capitalization
Upon completion
o
f
this Offering, University Street, Inc.,
a
n
indirect subsidiary
o
f
WMB
will hold
a
l
l
o
f
the Company Common Securities, representing 100%
o
f
the
voting rights
i
n the Company subject
t
o the limited voting rights
o
f
holders
o
f
the Company
Preferred Securities described under Description
o
f
Fixed Rate Company Preferred Securi-
ties"). Upon completion
o
f
this Offering, WaMu Cayman will hold
a
l
l
o
f
Preferred Securities and WaMu Delaware will hold
a
l
l
o
f
the Fixed-to-Floating Rate Company
4
1
CONFIDENTIAL
Return
As
o
f
the Closing
Date
Unaudited)
Business
o
f
the Company
Assets
o
f
the Company
42
CONFIDENTIAL
Return
Additional Assets")
Eligible Assets"
provided, however,
CONFIDENTIAL
Return
Asset Documentation"
provided
Asset Subsidiary"
44
CONFIDENTIAL
Return
Asset Tax Opinion"
Asset Portfolio"
Eligible Investments"
Permitted Investments"
provided,
provided further,
provided,
provided,
provided.
CONFIDENTIAL
Return
provided, however,
Rating Agencies"
Rating Agency Condition"
Administrative Services Agreement")
d
e
minimis
Managers and Officers
Independent Manager").
46
CONFIDENTIAL
Return
Company's Board
o
f
Managers will
b
e
b
y
majority vote. The Company will have five officers upon
issuance
o
f
the Fixed Rate Preferred Securities.
b
e
the managers and executive officers
o
f
the Company upon
completion
o
f
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
o
f
the initial managers other than the Independent Manager) and officers
o
f
the
Company are individuals who are officers
o
r
employees
o
f
WMI
o
r
one
o
f
i
t
s
affiliates. The initial
Independent Manager
i
s Kenneth Uva, who
i
s
a
n
employee
o
f
CT Corporation.
The Company will designate two
o
f
the persons then currently serving
a
s
members
o
f
the
Company's Board
o
f
Managers
t
o serve
a
s
members
o
f
WaMu Cayman's Board
o
f
Directors
i
n a
notice
t
o WaMu Cayman. One
o
f
the Company Designated Directors will
a
t
a
l
l
times
b
e
the
person who
i
s the Company's Independent Manager,
a
s
designated
b
y
the Company
i
n a notice
t
o WaMu Cayman. The person who
i
s the Company's Independent Manager will also
b
e
designated
a
s
WaMu Cayman's Independent Director. The Company Designated Directors will
serve
a
s
directors
o
f
WaMu Cayman until their successors are duly elected and qualified.
Independent Manager
Under the LLC Agreement,
i
n order
t
o
b
e
considered independent", a manager must not,
during the preceding five years, have been a director
o
r
employee
o
f
WMI
o
r
any affiliate
o
f
WMI,
other than a direct
o
r
o
f
WMI.
The LLC Agreement will require that,
i
n assessing the benefits
t
o the Company
o
f
any
proposed action requiring his
o
r
her consent, the Company's Independent Manager take into
account the interests
o
f
holders
o
f
both Company Common Securities and the Company
Preferred Securities. The LLC Agreement provides that
i
n considering the interests
o
f
the holders
o
f
the Company Preferred Securities, the Company's Independent Manager owes such holders
the same duties which the Independent Manager owes
t
o the holders
o
f
Company Common
Securities.
The LLC Agreement will provide that, for
s
o
long
a
s
any Company Preferred Securities are
outstanding, certain actions
b
y
the Company are subject
t
o prior approval
o
f
a
l
l
Managers
including the Independent Manager. The Company will not
b
e
able, without the approval
o
f
the
Independent Manager,
t
o
i
) terminate, amend
o
r
otherwise change any Asset Documentation
o
r
i
i
) effect a consolidation, merger
o
r
share exchange that
i
s not tax-free
t
o the holders
o
f
the
Company Preferred Securities unless such consolidation, merger
o
r
share exchange was
approved
b
y
the consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two-thirds
o
f
the Fixed
Rate Company Preferred Securities and the Fixed-to-Floating Rate Company Preferred Securi-
ties, voting together
a
s
a single class.
I
n addition,
i
n the event that the Asset Trust fails
t
o make
a payment
t
o the Company
o
r
any payments are not received with regard
t
o any Additional Asset
i
n violation
o
f
the terms
o
f
the related Asset Documentation on any scheduled payment date, the
Independent Manager will have the authority
t
o cause the Company,
a
s
the holder
o
f
the
Series A Asset Trust Certificate
o
r
any Additional Asset,
a
s
applicable,
t
o enforce
i
t
s rights
i
n
such capacity until payments have been resumed and a year has passed since the date
o
f
the
latest scheduled payment date with respect
t
o which the Asset Trust
o
r
the Additional Asset
failed
t
o make a payment.
47
CONFIDENTIAL
Return
Bankruptcy Event"
d
e
minimis.
provided, however,
48
CONFIDENTIAL
Return
49
CONFIDENTIAL
Return
CONFIDENTIAL
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
Return
A Trust Certificate")
R Trust Certificate").
Cut-Off Date").
Description
o
f
the Portfolio
General
5
1
CONFIDENTIAL
Return
The following tables represent information
a
s
o
f
January 31, 2006 with respect
t
o the HELs
included
i
n the portfolio
o
f
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
6
1
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
Return
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
Idaho
334 27,517,454 0.51
Arizona
305 26,256,800 0.49
Other
973 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
Return
Distribution by Current Loan-to-Value Ratio
Percent
o
f
Number
o
f
Current Principal Overall Portfolio
Current Loan-to-Value Ratio(1) Balance Balance
Total
Distribution by Remaining Months
t
o Maturity
Percent
o
f
Number
o
f
Remaining Months
t
o
Maturity Loans Balance Balance
Total
Distribution by Year
o
f
Origination
Percent
o
f
Number
o
f
Year
o
f
Origination Loans Balance Balance
Total
CONFIDENTIAL
Return
General
Evaluation the Borrower's Credit Standing
Evaluation the Borrower's Repayment Ability
Evaluation the Adequacy the Collateral
CONFIDENTIAL
Return
l
o
r
l
o
r
alternative services".
Documentation Programs
Exceptions Program Parameters
Automated Underwriting System
CONFIDENTIAL
Return
conditions, which may include the receipt
o
f
additional documentation,
i
i
)
refers the loan
application
t
o
a
n
underwriter for manual underwriting,
o
r
declines the file based on
predetermined eligibility criteria.
I
n making the underwriting decision, SUCCESS distinguishes
among different levels
o
f
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
o
f
the past performance
o
f
i
t
s
portfolio
o
f
home equity loans. WMB has used analysis
o
f
o
f
i
t
s
portfolio
o
f
home equity loans. WMB has used SUCCESS
t
o underwrite HELs since May 2001.
WMB regularly evaluates and validates SUCCESS and
t
o date has completed
a
l
l
required
compliance and fair lending evaluations
i
n a satisfactory manner. WMB periodically upgrades
i
t
s
proprietary automated underwriting system. SUCCESS was last upgraded
i
n November 2004.
Quality Control Review
WMB's credit risk oversight department conducts quality control reviews
o
f
statistical
samplings
o
f
previously originated HELs on a regular basis.
Credit Risk Management Policies
Credit risk within the WMI Group
i
s managed
b
y
means
o
f
a broad set
o
f
policies and
principles contained
i
n
i
t
s credit policy. The Chief Credit Officer
i
s responsible for overseeing the
work
o
f
a credit policy committee, monitoring the quality
o
f
the WMI Group's credit portfolio,
determining the reasonableness
o
f
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
i
s based on analyzing the creditworthiness
o
f
the borrower,
the adequacy
o
f
the underlying collateral given current events and conditions and the existence
and strength
o
f
any guarantor support.
Credit risk assessment
i
s a process that requires the evaluation
o
f
numerous factors, many
o
f
which are qualitative. Process integrity relies on the ability
o
f
the WMI Group's lending
personnel
t
o analyze
a
l
l
risk elements.
I
t
also depends on maintaining risk rating accuracy
b
y
recognizing changing elements
o
f
credit risk and promptly initiating risk rating changes.
Conflicts
o
f
Interest Policies
Pursuant
t
o WMB's code
o
f
ethics the Code
o
f
Ethics"), WMB extends credit
t
o
borrowers only when such extension
o
f
credit
i
s financially reasonable for both WMB and the
borrower
i
n question. Pursuant
t
o the Code
o
f
Ethics, lending personnel cannot permit personal
relationships
o
r
other considerations
t
o influence lending decisions, and cannot approve
extensions
o
f
credit
t
o
,
o
r
b
e
involved
i
n the funding
o
r
auditing
o
f
any loans made
t
o family
o
r
friends.
Servicing and the Servicers
General
A
l
l
o
f
the HELs owned
b
y
the Asset Trust will
b
e
serviced
b
y
WMB,
a
s
the Servicer,
pursuant
t
o the Pooling and Servicing Agreement. WMB will have possession
o
f
the mortgage
files Le., the credit reports, servicing documents, etc.)
i
n
i
t
s capacity
a
s
Servicer and the Loan
Documents as defined below)
i
n
i
t
s capacity
a
s
Custodian for the Asset Trust.
The Pooling and Servicing Agreement will provide that WMB may not resign from
i
t
s
obligations and duties thereunder
a
s
Servicer except upon a determination that
i
t
s 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
Return
the Pooling and Servicing Agreement.
I
n the event
o
f
a Servicer resignation, the Company,
subject
t
o the terms
o
f
the Pooling and Servicing Agreement, shall appoint a successor Servicer.
The Servicer will receive a fee for
i
t
s services
a
s
Servicer under the Pooling and Servicing
Agreement. The servicing fee will
b
e
calculated
a
s
a per annum percentage for each HEL based
on the principal balance for such HEL. The servicing fee with respect
t
o each such HEL will equal
0.125% per annum and will
b
e
paid monthly. This Servicer will
b
e
entitled
t
o retain certain
ancillary fees and charges, including, but not limited
t
o
,
any prepayment fees, insufficient funds
fees, modification fees, payoff statement fees and late charges with respect
t
o the HELs
a
s
additional servicing compensation and will also
b
e
entitled
t
o certain income generated
b
y
permitted investments made with collections on the HELs. The Servicer generally will pay
a
l
l
expenses incurred
i
n connection with
i
t
s responsibilities
a
s
Servicer under the Pooling and
Servicing Agreement subject
t
o reimbursement for certain expenses and advances, including
those incurred
b
y
i
t
i
o
f
defaulted HELs, the restoration
o
f
damaged mortgaged properties, and payments
b
y
the Servicer for taxes and insurance premiums
with respect
t
o mortgaged properties).
Any person into which the Servicer may
b
e
merged, converted
o
r
consolidated,
o
r
any
person resulting from any merger, conversion
o
r
consolidation
t
o which the Servicer
i
s a party
will
b
e
the successor Servicer under the Pooling and Servicing Agreement.
The Servicer will outsource
t
o third party vendors some servicing functions,
a
s
described
under The Servicer Servicing Procedures The Servicer's Third Party Vendors and
Service Providers" below.
The Servicer's Servicing Experience
WMB, including
i
t
s predecessors
i
n interest, has been servicing loans secured
b
y
real estate
o
r
other property for over 115 years. The home equity loans serviced
b
y
WMB include closed-
end fixed and adjustable rate home equity loans and open-end home equity lines
o
f
credit. The
HELs
i
n WMB's portfolio have been originated
b
y
WMB.
The following table shows the number and aggregate unpaid principal balance
o
f
HELs
serviced
b
y
the Servicer
a
s
o
f
December 31 for each
o
f
the most recent three years:
Closed-end Home Equity Loans Serviced
b
y
the Servicer
December 31,
Dollars
i
n Thousands)
Number
o
f
Closed-End Home Equity Loans Serviced
b
y
WMB 150,450 131,105 126,547
Aggregate Unpaid Principal Balance $9,851,722 $7,918,281 $6,364,840
Servicing Procedures
The functions
t
o
b
e
performed
b
y
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
i
t
s
servicing functions
a
t
loan
servicing centers located
i
n Melbourne, Florida; Houston, Texas; San Antonio, Texas; Stockton,
California; Chatsworth, California; Seattle, Washington; and Canyon Park, Washington.
Pursuant
t
o the Pooling and Servicing
Agreement, the Servicer will
b
e
required
t
o service the HELs owned
b
y
the Asset Trust,
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Return
Loan Servicing System.
Advanced Gonsumer Lending System" AGLS").
GAGS")
Collections and Distributions.
CONFIDENTIAL
Return
Servicing
o
f
Delinquent HELs; Foreclosure.
Insurance.
Limitations on the Servicer's Liability
60
CONFIDENTIAL
Return
Servicer Termination, Servicer Replacement.
The Servicer's Third Party Vendors and Service Providers.
The Servicer's Quality Control Procedures
6
1
CONFIDENTIAL
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62
CONFIDENTIAL
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
Return
General
WMI
i
I
t owns two federal savings associations
a
s
well
a
s
numerous nonbank subsidiaries. WMI
i
s a multiple savings and loan holding company. As a
savings and loan holding company, WMI
i
s subject
t
o regulation
b
y
the OTS.
WMI's federal savings associations are subject
t
o extensive regulation and examination
b
y
the OTS, their primary federal regulator,
a
s
well
a
s
the U.S. Federal Deposit Insurance
Corporation Prior
t
o 2004, WMB had two sister depository institutions which were
both owned directly
b
y
o
f
o
f
these institutions, Washington Mutual Bank fsb, a federal savings bank, became a wholly-owned
subsidiary
o
f
WMB on February
1
,
2004. The other institution, Washington Mutual Bank, a
savings bank chartered under the laws
o
f
the state
o
f
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
i
s subject
t
o regulation and supervision
b
y
the Director
o
f
Financial Institutions
o
f
the State
o
f
Washington
o
r
b
y
the FDIC. WMl's nonbank financial
subsidiaries are also subject
t
o various federal and state laws and regulations.
A
l
l
o
f
WMl's banking subsidiaries are under the common control
o
f
WMI and are insured
b
y
the FDIC.
I
f
a
n
insured institution fails, claims for administrative expenses
o
f
the receiver and for
deposits
i
n U.S. branches including claims
o
f
the FDIC
a
s
subrogee ofthe failed institution)
have priority over the claims
o
f
general unsecured creditors.
I
n addition, the FDIC has authority
t
o require any
o
f
WMl's banking subsidiaries
t
o reimburse
i
t for losses
i
t incurs
i
n connection
either with the failure
o
f
another
o
f
WMI's banking subsidiaries
o
r
with the FDIC's provision
o
f
assistance
t
o one
o
f
WMl's banking subsidiaries that
i
s
i
n danger
o
f
failure.
Holding Company Status and Acquisitions
WMI
i
s a multiple savings and loan holding company,
a
s
defined
b
y
federal law, because
i
t
owns more than one savings association. WMI
i
s regulated
a
s
a unitary savings and loan holding
company, however, because the OTS deems WMl's federal savings associations
t
o have been
acquired
i
n supervisory transactions. Therefore, WMI
i
s exempt from certain restrictions that
would otherwise apply under federal law
t
o the activities and investments
o
f
a multiple savings
and loan holding company. These restrictions will apply
t
o WMI
i
f any
o
f
WMI's banking
institutions fails
t
o meet a qualified thrift lender test established
b
y
federal law. As
o
f
December 31, 2004, WMI's banking subsidiaries were
i
n compliance with qualified thrift lender
standards.
WMI may not acquire control
o
f
another savings association without the prior approval
o
f
the OTS. WMI may not
b
e
acquired
b
y
a company, other than a bank holding company, unless
the OTS approves such
a
n
acquisition,
o
r
b
y
a
n
individual unless the OTS does not object after
receiving notice. WMI may not
b
e
acquired
b
y
a bank holding company unless the Board
o
f
Governors
o
f
the Federal Reserve System the Federal Reserve") approves.
I
n any case, the
public must have
a
n
opportunity
t
o comment on the proposed acquisition, and the OTS
o
r
Federal Reserve must complete
a
n
application review. Without prior approval from the OTS, WMI
may not acquire more than 5%
o
f
the voting stock
o
f
any savings institution that
i
s not one
o
f
WMI's subsidiaries.
The Gramm-Leach-Bliley Act generally restricts any non-financial entity from acquiring WMI
unless such non-financial entity was,
o
r
had submitted
a
n
application
t
o become, a savings and
loan holding company
a
s
o
f
May
4
,
1999. Because WMI was treated
a
s
a unitary savings and
loan holding company prior
t
o that date, WMI may engage
i
n non-financial activities and acquire
non-financial subsidiaries.
CONFIDENTIAL
Return
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
d
e
minimis.
64
CONFIDENTIAL
Return
DESCRIPTION OF THE WAMU CAYMAN PREFERRED SECURITIES
The following summary describes the materia! terms and provisions
o
f
the WaMu Cayman
Preferred Securities. This description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the terms and
provisions
o
f
o
f
Association. A copy
o
f
o
f
Association may
b
e
obtained upon request
t
o WM!
o
r
free
o
f
charge
a
t
o
f
the
Paying Agent
i
n Luxembourg.
General
The WaMu Cayman Preferred Securities are preferred shares issued
b
y
WaMu Cayman, the
terms
o
f
which are set forth
i
n WaMu Cayman's Articles
o
f
Association. When issued, the WaMu
b
e
paid-up and non-assessable. The WaMu Cayman Preferred
Securities are perpetual and will not
b
e
convertible into the WaMu Cayman Ordinary Shares and
will not
b
e
subject
t
o any sinking fund
o
r
other obligation
o
f
WaMu Cayman for their repurchase
o
r
retirement.
The WaMu Cayman Preferred Securities consist
o
f
3,023
o
f
the 7.25% Perpetual Non-
cumulative Preferred Securities, Series A-1, liquidation preference $100,000 per security and
$302,300,000
i
n the aggregate the Series A-1 WaMu Cayman Preferred Securities"), and 44,770
o
f
the 7.25% Perpetual Non-cumulative Preferred Securities, Series A-2, liquidation preference
$10,000 per security and $447,700,000
i
n the aggregate the Series A-2 WaMu Cayman
Preferred Securities"). The terms
o
f
Series A-2 WaMu Cayman Preferred Securities are identical except for their per security
liquidation preference. The aggregate liquidation preference
o
f
Securities
i
s $750,000,000.
WaMu Cayman will invest the proceeds
o
f
the WaMu Cayman Preferred Securities offered
hereby
i
n a like amount
o
f
Fixed Rate Company Preferred Securities, liquidation preference
$1,000 per security and $750,000,000
i
n the aggregate.
The financial entitlements
o
f
each WaMu Cayman Preferred Security will
b
e
substantially the
same
a
s
o
f
a like amount
o
f
Fixed Rate Company Preferred Securities,
with the consequence that dividends and the redemption price on each WaMu Cayman Preferred
Security will
b
e
i
n the same amounts
a
s
the corresponding
dividends and redemption price,
a
s
applicable, that are paid
b
y
the Company
t
o WaMu Cayman
on a like amount
o
f
Fixed Rate Company Preferred Securities; provided that
i
f any such payment
o
f
dividends
o
r
redemption price
i
s received
b
y
WaMu Cayman after 2:00 P.M. New York time,
the related payment will instead
b
y
made
b
y
WaMu Cayman
t
o the holders
o
f
the WaMu Cayman
Preferred Securities on the next day that
i
s 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
a
s
applied
t
o each
o
f
those
securities.
The WaMu Cayman Preferred Securities are automatically exchangeable under certain
circumstances into a like amount
o
f
Fixed Rate Depositary Shares. See Conditional
Exchange."
Under WaMu Cayman's Articles
o
f
Association, WaMu Cayman
i
s prohibited from issuing
any securities other than the WaMu Cayman Preferred Securities and the WaMu Cayman
Ordinary Shares without the consent
o
f
the holders
o
f
100%
o
f
Securities. Accordingly, WaMu Cayman may not issue any additional securities ranking senior
o
r
pari passu with the WaMu Cayman Preferred Securities
a
s
t
o dividends
o
r
upon liquidation
without the consent
o
f
the holders
o
f
100%
o
f
the WaMu Cayman Preferred Securities. The
holders
o
f
the WaMu Cayman Preferred Securities will have no pre-emptive rights.
CONFIDENTIAL
Return
The WaMu Cayman Preferred Securities are not obligations
o
f
,
o
r
guaranteed by, WMI,
WMB, Marion, the Company, University Street, WaMu Delaware
o
r
any
o
f
their respective
affiliates
o
r
any other entity. The WaMu Cayman Preferred Securities represent equity interests
solely
i
n WaMu Cayman and do not represent
a
n
interest
i
n any
o
f
the foregoing entities.
Ranking
The WaMu Cayman Preferred Securities will rank senior
t
o the WaMu Cayman Ordinary
Shares
a
s
t
o dividends and upon liquidation.
Dividends
Dividends on the WaMu Cayman Preferred Securities will become payable on a non-
cumulative basis except
i
n the limited circumstances described below), on each date on which
the Company pays dividends
t
o WaMu Cayman on the Fixed Rate Company Preferred Securities
owned
b
y
WaMu Cayman,
i
n
a
n
amount per WaMu Cayman Preferred Security equal
t
o the
amount
o
f
dividends received
b
y
WaMu Cayman on such date on a like amount
o
f
Fixed Rate
Company Preferred Securities including with respect
t
o Additional Taxes,
i
f any),
i
n each case
subject
t
o WaMu Cayman having legally available funds for such purpose; provided that
i
f any
such payment
o
f
dividends
i
s received
b
y
WaMu Cayman after 2:00 P.M. New York time, the
related payment will instead
b
e
made
b
y
WaMu Cayman
t
o holders
o
f
the WaMu Cayman
Preferred Securities on the next day that
i
s a Business Day. Accordingly:
i
f 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;
i
f the Company pays partial dividends on a Dividend Payment Date for the Fixed Rate
Company Preferred Securities, WaMu Cayman will pay partial dividends
i
n the same
proportionate amount on the WaMu Cayman Preferred Securities on such Dividend
Payment Date; and
i
f 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
o
f
the Fixed Rate Company Preferred Securities Dividends."
Under WaMu Cayman's Articles
o
f
Association, WaMu Cayman's Board
o
f
Directors
i
s not
required
t
o declare the payment
o
f
dividends
i
n order for dividends
t
o
b
e
paid. However, payment
o
f
dividends may
b
e
blocked
b
y
WaMu Cayman's Board
o
f
Directors, but only
b
y
their unanimous
action including consent
o
f
the Independent Director).
The record date for the payment
o
f
dividends on the WaMu Cayman Preferred Securities
will
b
e
the first day
o
f
the month
i
n which the relevant Dividend Payment Date occurs or,
i
f any
such day
i
s not a Business Day, the next day that
i
s 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
t
o the extent that on a
Dividend Payment Date WaMu Cayman has received from the Company a payment
o
f
dividends
on the Fixed Rate Company Preferred Securities but fails
t
o pay the corresponding dividend on
I
f
:
WaMu Cayman pays no dividends
o
r
less than full dividends on the WaMu Cayman
Preferred Securities on a Dividend Payment Date because
i
t received no dividend
o
r
less
than full dividends on the Fixed Rate Company Preferred Securities, then holders
o
f
WaMu Cayman Preferred Securities will have no right
t
o receive, and WaMu Cayman will
have no obligation
t
o pay, such unpaid dividends
a
t
a future date, whether
o
r
not
66
CONFIDENTIAL
Return
dividends are paid on a future Dividend Payment Date on the WaMu Cayman Preferred
Securities
o
r
the Ordinary Shares; and
WaMu Cayman pays no dividends
o
r
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
t
o pay dividends
o
r
t
o
pay less than full dividends on the WaMu Cayman Preferred Securities pursuant
t
o their
authority
t
o block dividends
a
s
described above, then holders
o
f
the WaMu Cayman
Preferred Securities will have a cumulative right
t
o receive such unpaid dividends and no
further dividends may
b
e
paid on WaMu Cayman Ordinary Shares until such unpaid
dividends have been paid on the WaMu Cayman Preferred Securities.
During a Dividend Period, no dividends will
b
e
paid on any WaMu Cayman Ordinary Shares,
i
n WaMu Cayman Ordinary Shares, and no WaMu Cayman Ordinary
Shares will
b
e
repurchased, redeemed
o
r
otherwise acquired for consideration, directly
o
r
indirectly, unless dividends for such Dividend Period on
a
l
l
outstanding WaMu Cayman Preferred
Securities have been declared and paid
i
n full,
o
r
set aside for payment,
a
s
the case may be.
Under certain circumstances,
i
f the OTS determines that WMB
i
s operating with
a
n
insufficient level
o
f
capital
o
r
i
s engaged
i
n
,
o
r
i
t
s relationship with the Company results
i
n
,
a
n
unsafe and unsound banking practice, the OTS could restrict payment
o
f
dividends
b
y
the
Company on the Fixed Rate Company Preferred Securities, resulting
i
n a corresponding
restriction
i
n WaMu Cayman's payment
o
f
dividends on the WaMu Cayman Preferred Securities.
b
y
WMI
I
n the Exchange Agreement, WMI will covenant
i
n favor
o
f
the holders
o
f
the WaMu Cayman
Preferred Securities and the Trust Securities, that
i
f full dividends on
i
) the Company Preferred
Securities,
i
i
) the WaMu Cayman Preferred Securities
o
r
the Trust Securities for any
Dividend Period have not been declared and paid, then,
a
s
o
f
the
Fixed Rate Company Preferred Securities Restrictions on Dividends
b
y
WMI", WMI will not
declare
o
r
t
o
,
o
r
redeem, purchase
o
r
acquire any
o
f
i
t
s equity capital
securities during the next succeeding Dividend Period, except dividends
i
n connection with a
shareholders' rights plan,
i
f any,
o
r
dividends
i
Redemption
The WaMu Cayman Preferred Securities will not
b
e
redeemable
a
t
the option
o
f
the holders
thereof. On each day on which the Company redeems Fixed Rate Company Preferred Securities,
WaMu Cayman will redeem a like amount
o
f
WaMu Cayman Preferred Securities for a
redemption price
i
n the same amount
a
s
the corresponding redemption price on a like amount
o
f
Fixed Rate Company Preferred Securities; provided that
i
f any such payment
o
f
redemption price
i
s received
b
y
WaMu Cayman after 2:00 p.m. New York time, the related payment will instead
b
e
made
b
y
WaMu Cayman
t
o holders
o
f
the WaMu Cayman Preferred Securities on the next day
that
i
s a Business Day. See Description
o
f
Redemption."
I
f the redemption
o
f
i
s
i
n part instead
o
f
i
n
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
i
n proportion
t
o their aggregate liquidation preferences, rounded
b
y
WaMu Cayman's
directors,
i
f necessary,
s
o
that no WaMu Cayman Preferred Securities are redeemed
i
n part and
not
i
n whole no fractional shares). The particular WaMu Cayman Preferred Securities
t
o
b
e
redeemed will
b
e
selected not more than 60 days prior
t
o the redemption date
b
y
WaMu
67
CONFIDENTIAL
Return
Cayman's Board
o
f
Directors, from the outstanding WaMu Cayman Preferred Securities not
previously called for redemption,
b
y
such method
a
s
WaMu Cayman's Board
o
f
Directors deems
fair and appropriate.
A notice
o
f
redemption
o
f
the WaMu Cayman Preferred Securities will
b
e
mailed
b
y
first
class mail, postage prepaid, addressed
t
o the holders
o
f
record
o
f
the securities
t
o
b
e
redeemed
a
t
their respective last addresses appearing on the books and records
o
f
WaMu Cayman. Such
mailing will
b
e
a
t
least 30 days but not more than 60 days before the date fixed for redemption.
Restriction on Redemption
o
r
Repurchases
A
t
o
r
prior
t
o the initial issuance
o
f
the WaMu Cayman Preferred Securities, WMI will enter
into a Replacement Capital Covenant" relating
t
o 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
b
e
issued upon a Conditional Exchange collectively, the Replace-
ment Covenant Covered Securities WMl's covenants
i
n the Replacement Capital Covenant run
only
t
o the benefit
o
f
holders
o
f
Covered Debt as defined below), and are not enforceable
b
y
holders
o
f
o
r
o
f
any other Replacement Covenant Covered
Securities. However, those covenants could preclude WMI from redeeming
o
r
repurchasing
Replacement Covenant Covered Securities
a
t
a time WMI might otherwise wish
t
o do so.
I
n the Replacement Capital Covenant, WMI covenants
t
o redeem
o
r
repurchase Replace-
ment Covenant Covered Securities only
i
f and
t
o
r
repurchase price
i
s equal
t
o
o
r
less than the sum,
a
s
o
f
the date
o
f
redemption
o
r
repurchase,
o
f
i
) 133.33%
o
f
the aggregate net cash proceeds WMI
o
r
i
t
s subsidiaries have received during the
180 days prior
t
o such date from the issuance and sale
o
f
common stock
o
f
WMI plus
i
i
)
100%
o
f
o
r
i
t
s subsidiaries have received during the 180 days
prior
t
o such date from the issuance
o
f
securities that, among other things:
are, with limited exceptions including for certain hybrid securities that are
i
n the form
o
f
debt), pari passu with
o
r
junior
t
o the Fixed Rate WMI Preferred Stock upon WMl's
liquidation, dissolution
o
r
winding up;
are perpetual,
o
r
have a mandatory redemption
o
r
maturity date that
i
s not less than forty
years after the date
o
f
initial issuance
o
f
such securities; and
provide for dividends
o
r
other distributions that are either non-cumulative or,
i
f cumulative,
are subject
t
o certain optional
o
r
mandatory deferral provisions and certain explicit
replacement provisions.
WMl's ability
t
o raise proceeds from qualifying securities during the 180 days prior
t
o a
proposed redemption
o
r
repurchase sufficient
t
o allow such redemption
o
r
repurchase
t
o
proceed without violating the Replacement Capital Covenant will depend on, among other things,
market conditions
a
t
such times
a
s
well
a
s
the acceptability
t
o prospective purchasers
o
f
the
terms
o
f
such qualifying securities.
WMl's covenants
i
n the Replacement Capital Covenant will run
i
n favor
o
f
persons that buy,
hold
o
r
sell WMl's indebtedness during the period that such indebtedness
i
s Covered Debt",
which
i
s currently comprised
o
f
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
t
o occur
o
f
i
) the date two years prior
t
o the maturity
o
f
such existing
Covered Debt,
o
r
i
i
)
the date WMI gives notice
o
f
a redemption
o
f
such existing Covered Debt
such that the date such existing Covered Debt
i
s repurchased
i
n such
a
n
amount that, the
outstanding principal amount
o
f
i
s
o
r
will become less than
$100 million.
68
CONFIDENTIAL
Return
The Replacement Capital Covenant
i
s subject
t
o various additional terms and conditions and
this description
i
s qualified
i
n
i
t
s entirety
b
y
reference
t
o the Replacement Capital Covenant, a
copy
o
f
the form
o
f
which
i
s available upon request from WMI. The ReplacementCapital
Covenant may
b
e
terminated
i
f the holders
o
f
a
t
least 51%
b
y
principal amount
o
f
each
o
f
the
Covered Debt
s
o
agree,
o
r
i
f WMI no longer has outstanding any long-term indebtedness that
qualifies
a
s
Covered Debt, without regard
t
o whether such indebtedness
i
s rated
b
y
a nationally
recognized statistical rating organization.
Subject
t
o the Replacement Capital Covenant and the terms
o
f
any outstanding debt
instruments, WMI
o
r
i
t
s
affiliates may from time
t
o time purchase any outstanding WaMu Cayman
b
y
tender,
i
n the open market
o
r
b
y
private agreement.
Rights Upon Liquidation
I
n the event WaMu Cayman voluntarily
o
r
involuntarily liquidates, dissolves
o
r
winds up, the
holders
o
f
a
t
the time outstanding will
b
e
entitled
t
o receive
liquidating dividends
i
n the amount
o
f
$100,000 per security and $302,300,000
i
n the aggregate,
i
n the case
o
f
the Series A-1 WaMu Cayman Preferred Securities, and $10,000 per security and
$447,700,000
i
n the aggregate,
i
n the case
o
f
the Series A-2 WaMu Cayman Preferred Securities,
i
n each case, plus the amount
o
f
any dividends theretofore received
b
y
WaMu Cayman on a like
amount
o
f
Fixed Rate Company Preferred Securities but not yet distributed
a
s
a dividend on the
WaMu Cayman Preferred Securities plus the amount
o
f
dividends on a like amount
o
f
Fixed Rate
Company Preferred Securities that WaMu Cayman
i
s entitled
t
o receive from the Company but
has not yet received because for example, the Company's Board
o
f
Managers has declared but
not yet paid such dividends) before any distribution
o
f
assets
i
s made
t
o holders
o
f
WaMu
Cayman Ordinary Shares and subject
t
o the rights
o
f
general creditors.
After payment
o
f
the full amount
o
f
the liquidating distributions
t
o which they are entitled,
the holders
o
f
WaMu Cayman Preferred Securities will have no right
o
r
claim
t
o any
o
f
WaMu
Cayman's remaining assets.
I
n the event that, upon any such voluntary
o
r
involuntary liquidation,
dissolution,
o
r
winding up, the available assets are insufficient
t
o pay the amount
o
f
the
liquidation distributions on
a
l
l
outstanding WaMu Cayman Preferred Securities, then the holders
o
f
WaMu Cayman Preferred Securities will share ratably
i
n any such distribution
o
f
assets
i
n
proportion
t
o the full liquidating distributions
t
o which they would otherwise
b
e
respectively
entitled.
Voting Rights
Except
a
s
expressly required
b
y
applicable law and
a
s
set forth below, the holders
o
f
WaMu
Cayman Preferred Securities will have no voting rights.
I
n the event holders
o
f
WaMu Cayman
Preferred Securities are entitled
t
o vote on a matter together
a
s
a single class
o
r
together with
the holders
o
f
the WaMu Cayman Ordinary Shares, the holders
o
f
the Series A-1 WaMu Cayman
b
e
entitled
t
o ten votes per security and the holders
o
f
the Series A-2
WaMu Cayman Preferred Securities will
b
e
entitled
t
o one vote per security.
I
n the event that WaMu Cayman
i
s entitled
t
o exercise
i
t
s
t
o the
Fixed Rate Company Preferred Securities, each holder
o
f
WaMu Cayman Preferred Securities will
have the right
t
o direct the manner
i
n which WaMu Cayman exercises such voting rights with
respect
t
o a like amount
o
f
Fixed Rate Company Preferred Securities on a proportionate basis.
I
f
WaMu Cayman receives notice from the Company that WaMu Cayman
a
s
holder
o
f
Fixed Rate
i
s entitled
t
o vote on any matter, promptly after learning
o
f
such
entitlement WaMu Cayman shall cause
t
o
b
e
mailed
t
o each holder
o
f
Securities,
b
y
first class mail, postage prepaid, notice
o
f
such vote including a description
o
f
the
subject matter
o
f
the vote and related circumstances
t
o the extent known
t
o WaMu Cayman),
along with a copy
o
f
any notice
o
r
other written communication received
b
y
WaMu Cayman from
CONFIDENTIAL
Return
the Company with respect
t
o such vote and related matters.
I
n each such notice WaMu Cayman
shall request direction from each holder
o
f
a
s
t
o how WaMu
Cayman
a
s
a holder
o
f
Fixed Rate Company Preferred Securities shall vote on the matter
a
t
issue a like amount
o
f
Fixed Rate Company Preferred Securities that correspond
t
o such holder's
WaMu Cayman Preferred Securities. Each holder
o
f
WaMu Cayman Preferred Securities shall
have the right
t
o direct the manner
i
n which WaMu Cayman exercises such voting rights with
respect
t
o a like amount
o
f
Fixed Rate Company Preferred Securities.
So long
a
s
any WaMu Cayman Preferred Securities are outstanding, WaMu Cayman will
not, without the consent
o
r
vote
o
f
the holders
o
f
WaMu Cayman Preferred Securities entitled
t
o
a
t
least two-thirds
o
f
the total voting rights
o
f
a
l
l
outstanding WaMu Cayman Preferred Securities,
voting together
a
s
a single class,
i
) amend, alter
o
r
repeal
o
r
otherwise change any provision
o
f
o
f
Association including the terms
o
f
Securities)
i
f such amendment, alteration, repeal
o
r
change would materially and adversely affect
the rights, preferences, powers
o
r
privileges
o
f
o
r
merge, convert, consolidate, reorganize
o
r
effect any other business combination involving
WaMu Cayman. WaMu Cayman's Articles
o
f
Association will also provide that
s
o
long
a
s
any
WaMu Cayman Preferred Securities are outstanding, WaMu Cayman will not, without the consent
o
f
the holder
o
f
each outstanding WaMu Cayman Preferred Security, authorize, create
o
r
increase the authorized amount
o
f
o
r
issue any class
o
r
series
o
f
any equity shares
o
f
WaMu
Cayman,
o
r
any warrants, options
o
r
other rights convertible
o
r
exchangeable into any class
o
r
series
o
f
any equity shares
o
f
WaMu Cayman, ranking pari passu
o
r
senior
t
o the WaMu Cayman
Preferred Securities, either
a
s
t
o dividend rights, redemption rights
o
r
rights on dissolution,
liquidation
o
r
winding up
o
f
WaMu Cayman.
Independent Director Approval
o
f
Association will require that, for
a
s
long
a
s
any WaMu Cayman
Preferred Securities are outstanding, certain actions
b
y
WaMu Cayman are subject
t
o prior
approval
b
y
the Independent Director
a
s
well
a
s
b
y
a majority
o
f
the entire Board
o
f
Directors
o
f
WaMu Cayman. See WaMu Cayman Management
o
f
WaMu Cayman Independent Direc-
tor."
I
n order
t
o
b
e
considered independent", a director must not during the preceding five
years have been a director
o
r
employee
o
f
WMI
o
r
any affiliate
o
f
WMI, other than a direct
o
r
o
f
WMI.
The actions that require approval
o
f
the Independent Director include
i
) redemption
o
r
repurchase
o
f
any WaMu Cayman Ordinary Shares and
i
i
)
t
o the extent within the power
o
f
the
directors, any action
t
o convert
o
r
approve the conversion
o
f
WaMu Cayman into any other type
o
f
entity
o
r
the consolidation
o
r
merger
o
f
WaMu Cayman with
o
r
into any other entity, the
consolidation
o
r
merger
o
f
any other entity with
o
r
into WaMu Cayman,
o
r
the sale
b
y
WaMu
Cayman
o
f
any
o
f
i
t
s assets. Additionally, the Independent Director, acting alone and without the
vote
o
r
consent
o
f
the other members
o
f
the Board
o
f
Directors, has the right on behalf
o
f
WaMu
Cayman
t
o enforce WaMu Cayman's rights
a
s
a holder
o
f
Securities, including related rights under the LLC Agreement.
Each WaMu Cayman Preferred Security will
b
e
exchanged automatically for a like amount
o
f
newly issued Fixed Rate Depositary Shares, each representing a 1/1 OOOthinterest
i
n one share
o
f
Fixed Rate WMI Preferred Stock,
i
f the OTS
s
o
directs
i
n writing upon
o
r
after the occurrence
o
f
a
n
Exchange Event. An Exchange Event" will occur when:
WMB becomes undercapitalized" under the OTS' prompt corrective action" regulations;
WMB
i
s placed into conservatorship
o
r
receivership;
o
r
70
CONFIDENTIAL
Return
the OTS,
i
n
i
t
s sole discretion, anticipates WMB becoming undercapitalized"
i
n the near
term
o
r
takes a supervisory action that limits the payment
o
f
dividends
b
y
WMB and
i
n
connection therewith, directs
a
n
exchange.
For purposes
o
f
this offering circular, this exchange
i
s referred
t
o
a
s
the Conditional
Exchange"
I
f
the OTS
s
o
o
f
a
n
Exchange Event, each holder
o
f
WaMu
b
e
unconditionally obligated
t
o surrender
t
o WMI
o
r
i
t
s agent
any certificates representing the WaMu Cayman Preferred Securities owned
b
y
such holder, and
WMI will
b
e
t
o issue
t
o such holder
i
n exchange for each such WaMu
Cayman Preferred Security a depositary receipt representing a like amount
o
f
Fixed Rate
Depositary Shares for Fixed Rate WMI Preferred Stock. Any WaMu Cayman Preferred Securities
purchased
o
r
redeemed
b
y
WMI
o
r
any
o
f
i
t
s affiliates prior
t
o the time
o
f
exchange will not
b
e
deemed outstanding and will not
b
e
subject
t
o Conditional Exchange.
The Conditional Exchange will occur
a
s
o
f
8:00 A.M., New York time, on the date for such
exchange set forth
i
n the applicable OTS directive, or,
i
f such date
i
s not set forth
i
n the directive,
a
s
o
f
8:00 A.M., New York time, on the earliest possible date such exchange could occur
consistent with the directive,
a
s
evidenced
b
y
the issuance
b
y
WMI
o
f
a press release prior
t
o
such time. As
o
f
the time
o
f
exchange,
a
l
l
o
f
b
e
transferred
t
o WMI without any further action
b
y
WaMu Cayman,
a
l
l
rights
o
f
the holders
o
f
a
s
WaMu Cayman's shareholders will cease, and such
persons will be, for
a
l
l
purposes, the holders
o
f
Fixed Rate Depositary Shares.
WMI will mail notice
o
f
the issuance
o
f
a
n
OTS directive after the occurrence
o
f
a
n
Exchange Event
t
o each holder
o
f
WaMu Cayman Preferred Securities within 30 days, and WMI
will deliver or cause
t
o
b
e
delivered)
t
o each such holder, depositary receipts for Fixed Rate
Depositary Shares upon surrender
o
f
the WaMu Cayman Preferred Securities. Until such
depositary receipts are delivered
o
r
i
n the event such depositary receipts are not delivered, any
certificates previously representing WaMu Cayman Preferred Securities will
b
e
deemed for
a
l
l
purposes
t
o represent Fixed Rate Depositary Shares.
A
l
l
corporate authorization necessary for
WMI
t
o issue the Fixed Rate Depositary Shares and the Fixed Rate WMI Preferred Stock
a
s
o
f
the time
o
f
exchange will
b
e
completed prior
t
o
o
r
upon completion
o
f
this Offering. Accordingly,
once the OTS directs a Conditional Exchange after the occurrence
o
f
a
n
Exchange Event, no
action will
b
e
required
t
o
b
e
taken
b
y
holders
o
f
WaMu Cayman Preferred Securities,
b
y
WMI,
b
y
WMB other than
t
o inform the OTS),
b
y
the Company,
o
r
b
y
WaMu Cayman
i
n order
t
o effect
the automatic exchange
a
s
o
f
the time
o
f
exchange. After the occurrence
o
f
the Conditional
Exchange, the WaMu Cayman Preferred Securities will
b
e
owned
b
y
WMI.
Holders
o
f
WaMu Cayman Preferred Securities,
b
y
purchasing such securities, whether
i
n
this Offering
o
r
i
n the secondary market after this Offering, will
b
e
deemed
t
o have agreed
t
o
b
e
bound
b
y
the unconditional obligation
t
o exchange such WaMu Cayman Preferred Securities for
i
f the OTS
s
o
o
f
a
n
Exchange
Event. WaMu Cayman's Articles
o
f
Association provide that the holders
o
f
WaMu Cayman
b
e
t
o surrender such preferred securities. Prior
t
o issuance
o
f
the WaMu Cayman Preferred Securities, WMI will enter into
a
n
Exchange
Agreement on
o
r
before the closing date the Exchange Agreement"), among WMI, WaMu
Cayman, WaMu Delaware and Mellon Investor Services LLC,
a
s
depositary the Depositary"),
t
o implement the Conditional Exchange.
Holders
o
f
WaMu Cayman Preferred Securities cannot exchange their WaMu Cayman
Preferred Securities for Fixed Rate Depositary Shares voluntarily. Absent
a
n
OTS directive after
the occurrence
o
f
a
n
Exchange Event, no exchange
o
f
for Fixed Rate Depositary Shares will occur. Upon the issuance
o
f
a
n
OTS directive on
o
r
following the occurrence
o
f
a
n
Exchange Event, the Fixed Rate WMI Preferred Stock and related
7
1
CONFIDENTIAL
Return
pari passu
Form, Transfer and Book-Entry Procedures
Payments and Paying Agents
Nominee")
Principal Paying Agent")
CONFIDENTIAL
Return
WTC
Cayman")
Paying Agents")
event
Series A-2 WaMu Cayman Preferred Securities, Paying Agent
i
n Luxembourg
Paying Agent
i
n Luxembourg"),
Registrar") Transfer
Agent")
cover
have
l
o
r
Luxemburger Wort).
73
CONFIDENTIAL
Return
Governing Law
Restrictions on Transfer
CONFIDENTIAL
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
Return
DESCRIPTION OF THE FIXED RATE COMPANY PREFERRED SECURITIES
The following summary describes the material terms and provisions
o
f
the Fixed Rate
Company Preferred Securities. This description qualified
i
n entirety
b
y
reference
t
o the terms
and provisions
o
f
the LLC Agreement. A copy
o
f
the LLC Agreement may
b
e
t
o WMI
o
r
free
o
f
charge
a
t
o
f
the Paying Agent
i
n Luxembourg.
General
The 7.25% Perpetual Non-cumulative Preferred Securities, liquidation preference $1,000 per
security and $750,000,000
i
n the aggregate the Fixed Rate Company Preferred Securities"), are
limited liability company interests
i
n the Company, the terms
o
f
which are set forth
i
n the LLC
Agreement. When issued, the Fixed Rate Company Preferred Securities will
b
e
validly issued,
and no additional payments will
b
e
required pursuant
t
o the LLC Act for such securities
t
o
represent limited liability company interests
i
n the Company. The holders
o
f
the Fixed Rate
Company Preferred Securities will have no pre-emptive rights with respect
t
o any limited liability
company interests
i
n the Company
o
r
any other securities
o
f
the Company convertible into
o
r
carrying rights
o
r
options
t
o purchase any such securities. The Fixed Rate Company Preferred
Securities are perpetual and will not
b
e
convertible into Company Common Securities
o
r
any
other class
o
r
series
o
f
limited liability company interests
i
n the Company and will not
b
e
subject
t
o any sinking fund
o
r
other obligation
o
f
the Company for their repurchase
o
r
retirement.
The Fixed Rate Company Preferred Securities will
b
e
issued
i
n certificated form only.
The Fixed Rate Company Preferred Securities are not obligations
o
f
,
o
r
guaranteed by,
WMI, WMB, Marion, University Street,
o
r
any
o
f
their respective affiliates
o
r
any other entity. The
Fixed Rate Company Preferred Securities solely represent
a
n
interest
i
n the Company and do not
represent
a
n
interest
i
n any
o
f
The Fixed Rate Company Preferred Securities are not insured
o
r
guaranteed
b
y
the FDIC.
Ranking
The Fixed Rate Company Preferred Securities will rank senior
t
o 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,
i
n terms
o
f
payment
o
f
dividends and on
liquidation.
The Company's Board
o
f
Managers has the power
t
o create and issue Junior Equity
Securities and additional equity securities ranking pari passu with the Fixed Rate Company
i
n terms
o
f
payment
o
f
dividends
o
r
on liquidation
o
r
redemption any such
securities, together with the Fixed-to-Floating Rate Company Preferred Securities, the Parity
Equity Securities") without the consent
o
f
the holders
o
f
the Company Preferred Securities,
provided, that
i
) after giving effect
t
o the issuance
o
f
any Parity Equity Securities, the pro forma
net book value
o
f
the Company's assets after giving effect
t
o any assets acquired
b
y
the
Company
i
n connection with the issuance
o
f
such Parity Equity Securities Assets") will
equal
o
r
exceed 1.5 times the sum
o
f
the aggregate liquidation preference
o
f
the preferred
securities
o
f
the Company then outstanding and any such Parity Equity Securities that the
Company proposes
t
o issue,
i
i
t
o such issuance, the Company's pro forma
FFO for the four fiscal quarters beginning with the fiscal quarter
i
n which such Parity Equity
Securities are proposed
t
o
b
e
issued calculated A) assuming that such proposed Parity Equity
Securities are issued and that,
i
f outstanding
o
r
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
i
n effect on the applicable date
o
f
determination and B)
a
s
adjusted
t
o reflect any New Assets) equals
o
r
exceeds 150%
o
f
b
e
required
t
o pay full annual dividends on
a
l
l
preferred securities
o
f
the Company then outstanding
75
CONFIDENTIAL
Return
plus
Dividends
CONFIDENTIAL
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
Return
Rate Company Preferred Securities, any other series
o
f
Parity Equity Securities, any Junior
Equity Securities
o
r
During a Dividend Period, no dividends will
b
e
declared
o
r
paid on any securities
o
f
the
Company ranking junior
t
o the Company Preferred Securities
i
n respect
o
f
payments
o
f
dividends
o
r
on liquidation Junior Equity Securities"), other than dividends payable
i
n Junior Equity
Securities, and no Junior Equity Securities will
b
e
o
r
otherwise acquired
for consideration, directly
o
r
indirectly other than
a
s
a result
o
f
reclassification
o
f
Junior Equity
Securities for
o
r
o
r
the exchange
o
r
conversion
o
f
Junior
Equity Securities for
o
r
into other Junior Equity Securities), unless dividends for such Dividend
Period on
a
l
l
outstanding Company Preferred Securities have been declared and paid
i
n full,
o
r
declared and set aside for payment,
a
s
the case may be.
When dividends are not paid
i
n full on,
o
r
a sum sufficient for such full payment
i
s not set
apart for, the Fixed Rate Company Preferred Securities, the Fixed-to-Floating Rate Company
Preferred Securities and any other Parity Equity Securities,
i
f any,
a
l
l
dividends declared upon the
Fixed Rate Company Preferred Securities, the Fixed-to-Floating Rate Company Preferred
Securities and any other Parity Equity Securities,
i
f any, will
b
e
declared pro rata. Thus, the
amount
o
f
dividends declared per Fixed Rate Company Preferred Security, the Fixed-to-Floating
Rate Company Preferred Securities and such other Parity Equity Securities,
i
f any, will
i
n
a
l
l
cases bear
t
o 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
i
n respect
o
f
unpaid dividends for prior Dividend Periods, and
i
i
)
full dividends, which will not
include any accumulation
i
n respect
o
f
unpaid dividends for prior Dividend Periods, on such other
capital securities, bear
t
o each other.
i
i
s operating with
a
n
insufficient level
o
f
capital
o
r
i
s engaged
i
n
,
o
r
i
t
s
relationship with the Company results
i
n
,
a
n
unsafe and unsound banking practice, the OTS could restrict the Company's ability
t
o pay
dividends, including dividends
t
o the holders
o
f
See The Company Business
o
f
the Company."
b
y
WMI will covenant
i
n the Exchange Agreement for the benefit
o
f
the holders
o
f
the WaMu
Cayman Preferred Securities and the Trust Securities that
i
f full dividends on
i
) the Company
Preferred Securities,
i
i
) the WaMu Cayman Preferred Securities
o
r
the Trust Securities for
any Dividend Period have not been declared and paid, WMI will not declare
o
r
pay dividends with
respect
t
o
,
o
r
redeem, purchase
o
r
acquire, any
o
f
i
t
s equity capital securities during the next
succeeding Dividend Period, except dividends
i
n connection with a shareholders' rights plan,
i
f
any,
o
r
dividends
i
Redemption
The Fixed Rate Company Preferred Securities will not
b
e
redeemable
a
t
the option
o
f
the
holders thereof. Subject
t
o a covenant
i
n favor
o
f
certain
o
f
WMl's debtholders limiting WMl's
and
i
t
s
subsidiaries' right
t
o repurchase
o
r
redeem the Fixed Rate Company Preferred Securities
o
r
the WaMu Cayman Preferred Securities among others)
a
s
o
f
the WaMu Cayman Preferred Securities Restriction on Redemption
o
r
Repurchases," and
subject
t
o
f
the OTS for any proposed
CONFIDENTIAL
Return
redemption
o
f
Fixed Rate Company Preferred Securities, the Company may,
a
t
i
t
s option redeem
the Fixed Rate Company Preferred Securities:
i
n whole but not
i
n part, prior
t
i
n March 2011, upon the
occurrence
o
f
a Tax Event,
a
n
o
r
Event,
a
t
a cash redemption price equal
t
o the greater
o
f
:
i
) $1,000 per Fixed Rate Company Preferred Security,
o
r
i
i
)
the sum
o
f
present values
o
f
$1,000 per Fixed Rate Company Preferred Security
and
a
l
l
undeclared dividends for the Dividend Period from the redemption date
t
o
and including the Dividend Payment Date
i
n March 2011, discounted
t
o the
redemption date on a quarterly basis assuming a 360-day year consisting
o
f
twelve 3D-day months)
a
t
the Treasury Rate,
a
s
calculated
b
y
a
n
Independent
Investment Banker, plus 0.40%,
plus any declared but unpaid dividends
t
o the redemption date;
o
r
i
n whole
o
r
i
n part, on
o
r
i
n March 2011,
a
t
a cash
redemption price
o
f
$1,000 per Fixed Rate Company Preferred Security, plus any declared
and unpaid dividends
t
o the redemption date, without accumulation
o
f
any undeclared
dividends.
The Fixed-to-Floating Rate Company Preferred Securities will
b
e
separately redeemable on
similar terms and conditions.
Comparable Treasury Issue" means the United States Treasury security selected
b
y
the
Independent Investment Banker
a
s
having a maturity comparable
t
o the term remaining
t
o the
Dividend Payment Date on March 15, 2011 that would
b
e
utilized,
a
t
the time
o
f
selection and
i
n
accordance with customary financial practice,
i
n pricing new issues
o
f
perpetual preferred
securities having similar terms
a
s
the Fixed Rate Company Preferred Securities with respect
t
o
the payment
o
f
dividends and distributions
o
f
assets upon liquidation, dissolution
o
r
winding-up
o
f
the issuer
o
f
such preferred stock.
Comparable Treasury Price" means with respect
t
o any redemption date for the Fixed Rate
Company Preferred Securities the average
o
f
the Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and lowest
o
f
such Reference Treasury Dealer
Quotations,
o
r
i
f the Independent Investment Banker obtains fewer than five such Reference
Treasury Dealer Quotations, the average
o
f
a
l
l
such quotations.
Independent Investment Banker" means
a
n
independent investment banking institution
o
f
national standing appointed
b
y
the Company.
An Investment Company Act Event" occurs when the Company determines, based upon
receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a significant risk that the Company, the Asset Trust
o
r
any other Asset Subsidiary, WaMu Cayman
o
r
WaMu Delaware
i
s
o
r
will
b
e
considered
a
n
investment company" that
i
s required
t
o
b
e
registered under the Investment Company Act,
a
s
a
result
o
f
a change
i
n applicable laws, regulations
o
r
related interpretations.
Reference Treasury Dealer" means each
o
f
three primary U.S. government securities
dealers each a Primary Treasury Dealer"),
a
s
specified
b
y
the Company; provided that
i
f any
Primary Treasury Dealer
a
s
specified
b
y
the Company ceases
t
o
b
e
a Primary Treasury Dealer,
the Company will substitute for such Primary Treasury Dealer another Primary Treasury Dealer
and
i
f the Company fails
t
o select a substitute within a reasonable period
o
f
time, then the
substitute will
b
e
a Primary Treasury Dealer selected
b
y
the Independent Investment Banker after
consultation with the Company.
Reference Treasury Dealer Quotations" means, with respect
t
o the Reference Treasury
Dealer and any redemption date, the average,
a
s
determined
b
y
the Independent Investment
78
CONFIDENTIAL
Return
Regulatory Capital Event"
Tax Event"
Hi)
Treasury Rate"
Restrictions on Redemption
o
r
Repurchases
CONFIDENTIAL
Return
Rights upon Liquidation
plus
Voting Rights and Covenants
80
CONFIDENTIAL
Return
amend
o
r
otherwise change the terms
o
f
any Asset Documentation
i
n a manner which
i
s
materially adverse
t
o WaMu Cayman, WaMu Delaware
o
r
the holders
o
f
the WaMu
o
r
Trust Securities;
remove
o
r
cause
t
o
b
e
removed,
a
s
applicable, Washington Mutual" from the
Company's, WaMu Cayman's
o
r
WaMu Delaware's name unless the name
o
f
WMI
changes and the Company makes a change
t
o the Company's, WaMu Cayman's and
WaMu Delaware's name
t
o
b
e
consistent with the new group name;
take
o
r
fail
t
o take any action that would cause the Company
t
o fail
t
o
b
e
treated
a
s
a
partnership other than a publicly traded partnership taxable
a
s
a corporation) for United
States Federal income tax purposes;
amend
o
r
otherwise change the requirement that the Company not engage
i
n a U.S. trade
o
r
business for United States Federal income tax purposes;
amend
o
r
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
o
r
otherwise change the requirement that the Company manage
i
t
s affairs such
that
i
t
s
income does not constitute unrelated business taxable income" within the
meaning
o
f
Section 512
o
f
the Code;
o
r
amend
i
t
s
Certificate
o
f
Formation
o
r
LLC Agreement
i
n a manner that materially and
adversely affects the terms
o
f
the Company Preferred Securities provided, however, that,
i
f such amendment affects only one class
o
f
Company Preferred Securities, such
amendment will require only the class vote
o
f
such class voting separately and not
a
s
a
single class with the other class) and,
i
f such amendment affects both classes but affects
them differently, then such amendment will require a class vote
o
f
each class
o
f
Company
Preferred Securities, each voting separately.
I
n addition, the LLC Agreement provides that, except with the consent
o
f
a
l
l
o
f
the
Company's managers, including
i
t
s
Independent Manager, the Company will not:
terminate, amend
o
r
otherwise change any Asset Documentation;
o
r
effect a consolidation, merger
o
r
share exchange excluding the Conditional Exchange)
that
i
s not tax-free
t
o the holders
o
f
the Fixed Rate Company Preferred Securities, and
the related WaMu Cayman Preferred Securities, unless such transaction was approved
b
y
the consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two-thirds
o
f
the Fixed Rate
Company Preferred Securities and Fixed-to-Floating Rate Company Preferred Securities,
voting together
a
s
a.single class.
I
n addition, the LLC Agreement will provide that
i
f
i
) the Company fails
t
o pay full
dividends on the Company Preferred Securities on any Dividend Payment Date,
i
i
) WaMu
Cayman fails
t
o pay full dividends on the WaMu Cayman Preferred Securities on any Dividend
Payment Date,
o
r
Hi) a Bankruptcy Event occurs, the holders
o
f
Preferred Securities and the Fixed-to-Floating Rate Company Preferred Securities, voting
together
a
s
a single class,
b
y
majority vote, are entitled
t
o
r
any succeeding
Independent Manager and
t
o
f
i
l
l
the vacancy created
b
y
such removal
o
r
any other vacancy
existing
i
n the office
o
f
the Independent Manager.
The LLC Agreement requires that,
i
t
o the Company
o
f
any
o
r
o
f
holders
o
f
i
o
f
the holders
o
f
the Company Preferred Securities, the Company's Independent Manager owes the same
8
1
CONFIDENTIAL
Return
duties
t
o such holders which the Independent Manager owes
t
o the holders
o
f
Company
Common Securities.
As a condition
t
o effecting any consolidation, merger
o
r
share exchange described above,
the Company will mail
t
o the holders
o
f
record
o
f
the Fixed Rate Company Preferred Securities a
notice
o
f
such consolidation, merger
o
r
share exchange. The notice will
b
e
mailed
a
t
least
15 days prior
t
o such transaction becoming effective and will contain a description
o
f
such
transaction together with a certificate
o
f
one
o
f
the Company's officers stating that such
transaction complies with the requirements set forth
i
n the LLC Agreement and that
a
l
l
conditions
precedent provided therein relating
t
o such transaction have been fulfilled.
As described under Description
o
f
the WaMu Cayman Preferred Securities Voting
Rights," each holder
o
f
WaMu Cayman Preferred Securities will have the right
t
o direct the
manner
i
n which WaMu Cayman exercises
i
t
s voting rights
a
s
t
o a like amount
o
f
Fixed Rate
b
y
WaMu Cayman with respect
t
o any
o
f
the matters on
which a holder
o
f
i
s entitled
t
o vote.
WMl's articles
o
f
incorporation do not contain similar covenants regarding the Fixed Rate
WMI Preferred Stock following
a
n
exchange
o
f
Therefore, following a Conditional Exchange, holders
o
f
the Fixed Rate Depositary Shares would
no longer have any voting rights, except
a
s
provided
b
y
Washington law
o
r
i
n connection with the
right
t
o elect directors
i
f dividends are skipped
o
r
not paid
i
n full. See below under Description
o
f
the Fixed Rate WMI Preferred Stock Voting Rights."
Additional Amounts
I
f the Company
o
r
WaMu Cayman
i
s required
t
o pay any Additional Taxes
a
s
a result
o
f
a
n
Additional Tax Event, the Company will pay
a
s
additional amounts on the Fixed Rate Company
Preferred Securities such amounts
a
s
will
b
e
required
s
o
that dividends on the Fixed Rate
o
r
a
s
applicable, will not
b
e
reduced
a
s
a result
o
f
any such Additional Taxes
means the sum
o
f
any additional taxes, duties and other governmental
charges
t
o which a WaMu Cayman has become subject from time
t
o time
a
s
a result
o
f
a
n
Additional Tax Event.
An means the determination
b
y
the Company, based upon receipt
o
f
a
n
opinion
o
f
counsel, rendered
b
y
a law firm experienced
i
n such matters,
i
n form and
substance reasonably satisfactory
t
o the Company and WMI,
t
o the effect that,
a
s
a result
o
f
any
amendment
t
o
,
o
r
change including any announced proposed change)
i
n
,
the laws or any
regulations thereunder)
o
f
the United States
o
r
the Cayman Islands
o
r
o
f
any political subdivision
o
r
taxing. authority thereof
o
r
therein,
o
r
a
s
a result
o
f
any official administrative pronouncement
o
r
judicial decision interpreting
o
r
applying such laws
o
r
regulations, which amendment
o
r
change
i
s effective
o
r
which proposed change, pronouncement
o
r
decision
i
s announced on
o
r
after the
date
o
f
issuance
o
f
the WaMu Cayman Preferred Securities, there
i
s a significant risk that
i
) the
Company
o
r
WaMu Cayman
i
s
,
o
r
will
b
e
within 90 days
o
f
the date
o
f
such opinion
o
f
counsel,
required
b
y
a relevant jurisdiction
t
o withhold amounts from payments
t
o the holders
o
f
the Fixed
o
r
WaMu Cayman Preferred Securities, respectively, for any
taxes, duties and other governmental charges, WaMu Cayman
i
s
,
o
r
will
b
e
within 90 days
o
f
the date
o
f
such opinion
o
f
counsel, subject
t
o United States Federal income tax with respect
t
o
income received
o
r
accrued on the like amount
o
f
Fixed Rate Company Preferred Securities held
b
y
i
t
,
o
r
WaMu Cayman
i
s
,
o
r
will
b
e
within 90 days
o
f
the date
o
f
such opinion
o
f
counsel,
subject
t
o more than a amount
o
f
other taxes, duties
o
r
other governmental charges.
CONFIDENTIAL
Return
Amendments and Termination
o
f
the LLC Agreement
provided,
provided
Governing Law
CONFIDENTIAL
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
Return
DESCRIPTION OF OTHER COMPANY SECURITIES
The following summary
o
f
the terms
o
f
the other Company securities does not purport
t
o
b
e
complete and
i
s subject
i
n
a
l
l
respects
t
o the applicable provisions
o
f
the LLC Act and the LLC
Agreement. A copy
o
f
b
e
t
o WMI and free
o
f
charge
a
t
o
f
the Paying Agent
i
n Luxembourg.
General
Voting
Dividends
84
CONFIDENTIAL
Return
a
s
well
a
s
on
a
l
l
Parity Equity Securities,
i
f any;
provided, that, for the purpose
o
f
such approval, a like amount
o
f
Securities
a
s
any WaMu Cayman Preferred Securities that are directly
o
r
indirectly held
o
r
beneficially owned
b
y
any member
o
f
WMI Group will
b
e
treated
a
s
i
f they were not outstanding.
Liquidation Rights
The Company Common Securities will rank junior
t
o the Company Preferred Securities upon
liquidation.
I
n the event
o
f
any voluntary
o
r
involuntary dissolution
o
f
the Company, after
a
l
l
o
f
the
Company's debts and liabilities have been satisfied and there have been paid
o
r
set aside for the
holders
o
f
the Company Preferred Securities the full preferential amounts
t
o which such holders
are entitled, the holders
o
f
Company Common Securities will
b
e
entitled
t
o share equally and
ratably
i
n 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
a
s
t
o
f
the
Company. The terms
o
f
the Fixed-to-Floating Rate Company Preferred Securities are substan-
tially identical
t
o the Fixed Rate Company Preferred Securities other than with respect
t
o the rate
applicable
t
o dividends thereon. The Fixed-to-Floating Rate Company Preferred Securities will,
i
f
,
when and
a
s
declared
b
y
the Company's Board
o
f
a
t
a
n
annual rate
o
f
6.534% until the Dividend Payment Date
i
n March 2011 and
a
n
annual rate equal
t
o 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
b
e
held
b
y
WaMu Delaware, which will issue a like amount
o
f
Trust Securities
t
o investors
i
n a separate
offering contemporaneous
t
o the Offering. The Fixed-to-Floating Rate Company Preferred
Securities will not
b
e
o
r
Ability
t
o Issue Additional Preferred Securities
Pursuant
t
o the LLC Agreement, the Company may not issue any Senior Equity Securities
o
r
incur indebtedness except with the consent
o
r
affirmative vote
o
f
holders
o
f
a
t
least two-thirds
o
f
the Fixed Rate Company Preferred Securities and the Fixed-to-Floating Rate Company
Preferred Securities, voting together
a
s
a single class,
a
s
o
f
the
Fixed Rate Company Preferred Securities Voting Rights and Covenants." The Company may
issue additional Parity Equity Securities without the consent
o
f
the holders
o
f
Company Preferred
Securities only
i
f the tests described under Description
o
f
Securities Ranking" are satisfied.
CONFIDENTIAL
Return
DESCRIPTION OF THE FIXED RATE WMI PREFERRED STOCK
o
f
the Fixed Rate WMI
Preferred Stock. The description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the terms and provisions
o
f
WMl's Articles
o
f
Incorporation and Articles
o
f
Amendment establishing the Fixed Rate WMI
Preferred Stock. A copy
o
f
WMl's Articles
o
f
Incorporation and such articles
o
f
amendment may
b
e
obtained free
o
f
charge
a
t
o
f
the Paying Agent
i
n Luxembourg.
General
Fixed Rate WMI Preferred Stock").
Fixed Rate Depositary Shares"),
1/1000th
WMI Parity Stock"
Dividend Payment Date" Dividend Period"
Business Day",
8
6
CONFIDENTIAL
Return
Ranking
WMI will covenant
i
n the Exchange Agreement
i
n favor
o
f
the holders
o
f
thewaMu Cayman
Preferred Securities and the Trust Securities,
a
s
applicable, that prior
t
o the issuance
o
f
the
Fixed Rate WMI Preferred Stock upon a Conditional Exchange, WMI will not issue any preferred
stock that would rank senior
t
o the Fixed Rate WMI Preferred Stock
o
r
the Fixed-to-Floating
Rate WMI Preferred Stock upon
i
t
s issuance.
The Fixed Rate WMI Preferred Stock will, upon issuance, rank senior
t
o WMl's common
stock and
a
t
least pari passu with the most senior preferred stock
o
f
WMI,
i
f any, then
outstanding, and
t
o any other preferred stock that WMI may issue
i
n the future. WMI may
authorize and issue additional shares
o
f
preferred stock that may rank junior
t
o
o
r
pari passu
with the Fixed Rate WMI Preferred Stock
a
s
t
o dividends and upon liquidation, winding up,
o
r
dissolution without the consent
o
f
the holders
o
f
the Fixed Rate WMI Preferred Stock.
Dividends
Dividends on the Fixed Rate WMI Preferred Stock will
b
e
payable
i
f
, when and
a
s
declared
b
y
WMI's Board
o
f
Directors out
o
f
i
t
s
legally available funds, on a non-cumulative basis
a
t
a
n
annual rate
o
f
7.25% on the liquidation preference thereof, which
i
s $1,000,000 per share.
Dividends on the Fixed Rate WMI Preferred Stock,
i
f
,
when and
a
s
declared
b
y
WMI's Board
o
f
Directors, will
b
e
payable quarterly
i
n arrears on March 15, June 15, September 15, and
December 15
o
f
each year, commencing on the first such day after issuance
o
f
the Fixed Rate
WMI Preferred Stock.
I
f any Dividend Payment Date
i
s not a Business Day, then dividends will
b
e
payable on the first Business Day following such Dividend Payment Date with the same force and
effect
a
s
i
f payment were made on the date such payment was originally payable. The record
date for the payment
o
f
dividends,
i
f declared, will
b
e
the first day
o
f
the month
i
n which the
relevant Dividend Payment Date occurs or,
i
f any such day
i
s not a Business Day, the next day
that
i
s a Business Day. Dividends payable on the Fixed Rate WMI Preferred Stock for any period
greater
o
r
less than a full Dividend Period will
b
e
computed on the basis
o
f
twelve 30-day
months, a 360-day year, and the actual number
o
f
days elapsed
i
n the period. No interest will
b
e
paid on any dividend payment
o
f
o
r
Shares. Holders
o
f
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.
I
f
WMI's Board
o
f
Directors does not declare a dividend on the Fixed Rate WMI Preferred Stock
o
r
declares less
than a full dividend
i
n respect
o
f
any Dividend Period, the holders
o
f
the Fixed Rate WMI
Preferred Stock will have no right
t
o receive any dividend
o
r
a full dividend,
a
s
the case may be,
for the Dividend Period, and WMI will have no obligation
t
o pay a dividend
o
r
t
o pay full dividends
for that Dividend Period, whether
o
r
not dividends are declared and paid for any future Dividend
Period with respect
t
o the Fixed Rate WMI Preferred Stock, WMl's common stock
o
r
any other
class
o
r
series
o
f
WM s preferred stock.
Redemption
The Fixed Rate WMI Preferred Stock will not
b
e
redeemable
a
t
the option
o
f
the holders
thereof. Subject
t
o a covenant
i
n favor
o
f
certain
o
f
WMI's debtholders limiting WMl's and
i
t
s
subsidiaries' right
t
o repurchase
o
r
redeem the Fixed Rate WMI Preferred Stock among others)
a
s
o
f
the WaMu Cayman Preferred Securities Restriction on
CONFIDENTIAL
Return
plus 0.40%,
plus
plus
Replacement
CONFIDENTIAL
Return
Voting Rights
Voting Parity
Stock")
CONFIDENTIAL
Return
90
CONFIDENTIAL
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
Return
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
CONFIDENTIAL
Return
DESCRIPTION OF THE FIXED RATE DEPOSITARY SHARES
o
f
the Fixed Rate
Depositary Shares. This description
i
s qualified
i
n
i
t
s entirety
b
y
reference
t
o the terms and
provisions
o
f
the Deposit Agreement, the form
o
f
depositary receipts, which contain the terms and
provisions
o
f
the Fixed Rate Depositary Shares, and WM/'s articles
o
f
incorporation and articles
o
f
amendment. Copies
o
f
each
o
f
the foregoing documents may
b
e
t
o WMI
o
r
free
o
f
charge
a
t
o
f
the Paying Agent
i
n Luxemburg.
1/1000th
Fixed Rate Depositary Shares").
Deposit Agreement"),
CONFIDENTIAL
Return
Dividends and Other Distributions
The Depositary will distribute
a
l
l
cash dividends, dividends paid
i
n Fixed Rate Depositary
Shares representing paid-up and non-assessable shares
o
f
o
r
other cash distributions received
i
n respect
o
f
the Fixed Rate WMI Preferred Stock
t
o the record
holders
o
f
i
n proportion
t
o the numbers
o
f
such Fixed Rate
Depositary Shares owned
b
y
such holders on the relevant record date.
I
n the event
o
f
a
distribution other than
i
n cash, the Depositary will distribute property received
b
y
i
t
t
o the record
holders
o
f
Fixed Rate Depositary Shares entitled thereto, unless the Depositary determines that
i
t
i
s not feasible
t
o make such distribution,
i
n which case the Depositary may, after consultation
with WMI, sell such property and distribute the net proceeds from such sale
t
o such holders.
Redemption
o
f
I
f the Fixed Rate WMI Preferred Stock underlying the Fixed Rate Depositary Shares are
redeemed, the Fixed Rate Depositary Shares will
b
e
redeemed with the proceeds received
b
y
the
Depositary resulting from the redemption,
i
n whole
o
r
i
n part,
o
f
such Fixed Rate WMI Preferred
Stock held
b
y
the Depositary. The redemption price per Fixed Rate Depositary Share will
b
e
equal
t
o the applicable redemption price per share payable with respect
t
o such Fixed Rate WMI
Preferred Stock.
I
f less than
a
l
l
the Fixed Rate Depositary Shares are
t
o
b
e
redeemed, the Fixed
Rate Depositary Shares
t
o
b
e
redeemed will
b
e
selected
b
y
l
o
t
o
r
i
n WMl's sole
discretion.
After the date fixed for redemption which will
b
e
the same date
a
s
the redemption date,
i
f
any, for the Fixed Rate WMI Preferred Stock), the Fixed Rate Depositary Shares
s
o
called for
redemption will no longer
b
e
deemed
t
o
b
e
outstanding and
a
l
l
rights
o
f
the holders
o
f
the Fixed
Rate Depositary Shares will cease, except the right
t
o receive the moneys payable upon such
redemption and any money
o
r
other property
t
o which the holders
o
f
such Fixed Rate Depositary
Shares were entitled upon such redemption upon surrender
t
o the Depositary
o
f
the depositary
receipts evidencing such Fixed Rate Depositary Shares.
Amendment
o
f
Deposit Agreement
The form
o
f
depositary receipt evidencing the Fixed Rate Depositary Shares and any
provision
o
f
the Deposit Agreement may
a
t
any time
b
e
amended
b
y
agreement between WMI
and the Depositary. However, any amendment which materially and adversely alters the rights
o
f
the holders
o
f
depositary receipts will not
b
e
effective unless such amendment has been
approved
b
y
the holders
o
f
a
t
least a majority
o
f
the Fixed Rate Depositary Shares then
outstanding. Every holder
o
f
a
n
outstanding depositary receipt
a
t
the time any amendment
becomes effective will
b
e
deemed,
b
y
continuing
t
o hold such depositary receipt,
t
o consent and
agree
t
o such amendment and
t
o
b
e
bound
b
y
the Deposit Agreement
a
s
amended thereby.
Charges
o
f
Depositary
WMI will pay the charges
o
f
the Depositary
i
n connection with the initial deposit
o
f
the Fixed
Rate WMI Preferred Stock and the initial issuance
o
f
the Fixed Rate Depositary Shares upon the
occurrence
o
f
a Conditional Exchange, and any redemption
o
f
the Fixed Rate WMI Preferred
Stock. Holders
o
f
Fixed Rate Depositary Shares will pay
a
l
l
other transfer and other taxes and
governmental charges and,
i
n addition, such other charges
a
s
are expressly provided
i
n the
Deposit Agreement
t
o
b
e
for their accounts.
A
l
l
other charges and expenses
o
f
the Depositary
and
o
f
any registrar incident
t
o the performance
o
f
their respective obligations arising from the
depositary arrangements will
b
e
paid
b
y
WMI only after prior consultation and agreement
between the Depositary and WMI and consent
b
y
WMI
t
o the incurrence
o
f
such expenses, which
consent will not
b
e
unreasonably withheld.
93
CONFIDENTIAL
Return
Miscellaneous
Resignation and Removal
o
f
Depositary; Termination
o
f
Deposit Agreement
94
CONFIDENTIAL
Return
DESCRIPTION OF THE OTHER WMI CAPITAL STOCK
As
o
f
the date hereof, the authorized capital stock
o
f
WMI consists of1 600)000,000 shares
o
f
WMI common stock and 10,000,000 shares
o
f
preferred stock, no par value. As
o
f
the close
o
f
business on February 15, 2006, there were 994,380,908 shares
o
f
WMI common stock
outstanding and no shares
o
f
preferred stock
o
f
WMI outstanding. As
o
f
the close
o
f
business on
February 15, 2006, 700,000 shares
o
f
preferred stock
o
f
WMI were authorized, but unissued,
a
s
contemplated
b
y
WMl's Rights Agreement, dated
a
s
o
f
December 20, 2000, entered into
b
y
and
between WMI and Mellon Investor Services LLC The shares
o
f
WMI preferred stock
t
o
b
e
issued
upon the occurrence
o
f
a Conditional Exchange have been duly authorized and when and
i
f
issued will
b
e
validly issued, fully paid, nonassessable and free
o
f
preemptive rights, with no
personal liability attaching
t
o the ownership thereof.
WMI has authorized for issuance
i
n connection with the offering
o
f
the Trust Securities and
the related issuance
b
y
the Company
o
f
i
t
s Fixed-to-Floating Rate Company Preferred Securities
up
t
o 1,250 shares
o
f
i
t
s Series I Perpetual Non-cumulative Fixed-to-Floating Rate Preferred
Stock, no par value, and liquidation preference
o
f
$1,000,000 per share the Fixed-to-Floating
Rate WMI Preferred Stock"). The shares
o
f
Fixed-to-Floating WMI Preferred Stock will
b
e
issued
b
y
WMI solely upon the occurrence
o
f
a Conditional Exchange. The shares
o
f
Fixed-to-Floating
Rate WMI Preferred Stock,
i
f and when issued upon the occurrence
o
f
a Conditional Exchange,
will
b
e
represented
b
y
Fixed-to-Floating Rate Depositary Shares
o
f
WMI the Fixed-to-Floating
Rate Depositary Shares"), each
o
f
which will represent a 1/1 OOOthof a share
o
f
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
a
s
t
o
f
WMI. The terms
o
f
the Fixed-to-
Floating Rate WMI Preferred Stock are substantially identical
t
o the Fixed Rate WMI Preferred
Stock other than with respect
t
o the rate applicable
t
o dividends thereon. The Fixed-to-Floating
Rate WMI Preferred Stock will,
i
f
,
when and
a
s
declared
b
y
WMl's Board
o
f
Directors, pay
dividends
a
t
a
n
annual rate
o
f
6.534% until March 15, 2011 and
a
t
a
n
annual rate equal
t
o 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
b
e
o
r
CONFIDENTIAL
Return
BOOK-ENTRY ISSUANCE
Form, Denomination, Transfer and Book-Entry Procedures
General
96
CONFIDENTIAL
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
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
Return
The Series A-1 WaMu Cayman Preferred Securities initially will
b
e
represented
b
y
one
o
r
more securities
i
n registered, global form the The Series A-2
WaMu Cayman Preferred Securities initially will
b
e
represented
b
y
one
o
r
more securities
i
n
registered, global form the S and together with the Rule 144A
Global Security, the The Global Securities will
b
e
deposited upon issuance
with the Registrar
a
s
custodian for The Depository Trust Company
i
n New York, New
York, and registered
i
n the name
o
f
DTC
o
r
i
t
s
nominee the
i
n each case for credit
t
o
a
n
account
o
f
a DTC Participant,
a
s
described below. Through and including the 40th day after
the latter
o
f
the commencement
o
f
the offering and the original issue date
o
f
the Series A-2
WaMu Cayman Preferred Securities such period through and including the 40th day, the
beneficial interests
i
n the Regulation S Global Security may
b
e
held only
through the Euroclear System
o
r
Clearstream as indirect participants
i
n DTC), unless
transferred
t
o a person that takes delivery through the Rule 144A Global Security
i
n accordance
with the certification requirements described below. Beneficial interests
i
n the Rule 144A Global
Security may not
b
e
exchanged for beneficial interest
i
n the Regulation S Global Security
o
r
vice
versa
a
t
any time except
i
n accordance with the transfer and certification requirements described
below. See Exchanges between Regulation S Global Securities and Rule 144A Global
Securities."
As
a
n
indirect holder, a purchaser's rights relating
t
o a Global Security will
b
e
governed
b
y
the account rules
o
f
the purchaser's financial institution and
o
f
DTC,
a
s
well
a
s
the general laws
relating
t
o securities transfers. WaMu Cayman will not recognize the purchaser
a
s
a holder
o
f
WaMu Cayman Preferred Securities and instead will deal only with DTC
o
r
i
t
s nominee. See
The DTC System."
Purchasers should
b
e
aware that because WaMu Cayman Preferred Securities are issued
only
i
n the form
o
f
Global Securities:
they cannot get WaMu Cayman Preferred Securities registered
i
n their name;
they cannot receive physical certificates for their interest
i
Securities;
they will
b
e
Street Name" holders and must look
t
o their own bank
o
r
broker for
payments on the WaMu Cayman Preferred Securities and the protection
o
f
their legal
rights relating
t
o the WaMu Cayman Preferred Securities;
they may not
b
e
able
t
o sell interests
i
n the WaMu Cayman Preferred Securities
t
o some
insurance companies and other institutions that are required
b
y
law
t
o own securities
i
n
the form
o
f
physical certificates; and
DTC's policies will govern payments, transfers, exchanges and other matters relating
t
o
the purchaser's interest
i
n the Global Security. See The DTC System." WaMu
Cayman, the Company and the Registrar have no responsibility for any aspect
o
f
DTC's
actions
o
r
for
i
t
s records
o
f
ownership interests
i
n the Global Security. WaMu Cayman,
the Company and the Registrar also do not supervise DTC
i
n any way.
I
n a few special situations, the Global Securities will terminate and interests
i
n them will
b
e
exchanged for physical certificates representing WaMu Cayman Preferred Securities. After that
exchange, the choice
o
f
whether
t
o hold WaMu Cayman Preferred Securities directly
o
r
i
n Street
Name" will
b
e
up
t
o the beneficial owner. Purchasers must consult their own bank
o
r
broker
t
o
97
CONFIDENTIAL
Return
The DTG
98
CONFIDENTIAL
Return
interests,
a
s
i
s the case with the WaMu Cayman Preferred Securities held for the account
o
f
customers registered
i
n Street Name". However, payments will
b
e
the responsibility
o
f
the OTC
Participants and not
o
f
OTC, the Securities Registrar, WaMu Cayman
o
r
the Company.
Except for trades involving only Euroclear and Clearstream Participants, interests
i
n the
WaMu Cayman Preferred Securities will trade
i
n OTC's settlement system, and secondary market
trading activity
i
n such interests will therefore settle
i
n immediately available funds, subject
i
n
a
l
l
cases
t
o the rules and procedures
o
f
OTC and
i
t
s participants. Transfers between participants
i
n
OTC will
b
e
effected
i
n accordance with OTC's procedures, and will
b
e
settled
i
n same-day
funds. Transfers between participants
i
n Euroclear and Clearstream will
b
e
effected
i
n the
ordinary way
i
n accordance with their respective rules and operating procedures.
Subject
t
o compliance with the transfer and exchange provisions applicable
t
o the WaMu
Cayman Preferred Securities described elsewhere
i
n this offering circular, cross-market transfers
between OTC Participants, on the one hand, and Euroclear
o
r
Clearstream Participants, on the
other hand, will
b
e
effected
b
y
OTC
i
n accordance with OTC's rules on behalf
o
f
Euroclear
o
r
Clearstream,
a
s
the case may be,
b
y
i
t
s respective depositary; however, such cross-market
transfers will require delivery
o
f
instructions
t
o Euroclear
o
r
Clearstream,
a
s
the case may be,
b
y
the counter-party
i
n such system
i
n accordance with the rules and procedures and within the
established deadlines Brussels time)
o
f
such system. Euroclear
o
r
Clearstream,
a
s
the case
may be, will,
i
f the transaction meets
i
t
s settlement requirements, deliver instructions
t
o
i
t
s
respective depositary
t
o take action
t
o elect final settlement on
i
t
s
behalf
b
y
delivering
o
r
receiving interests
i
n the relevant Global Security
i
n OTC, and making
o
r
receiving payment
i
n
accordance with normal procedures for same-day funds settlement applicable
t
o OTC. Euroclear
Participants and Clearstream Participants may not deliver instructions directly
t
o the depositaries
for Euroclear
o
r
Clearstream.
Because
o
f
time zone differences, the securities account
o
f
a Euroclear
o
r
Clearstream
participant purchasing
a
n
interest
i
n a Global Security from a OTC Participant will
b
e
credited,
and any such crediting will
b
e
reported
t
o the relevant Euroclear
o
r
Clearstream Participant,
during the securities settlement processing day which must
b
e
a business day for Euroclear and
Clearstream) immediately following the OTC settlement date. Cash received
i
n Euroclear
o
r
Clearstream
a
s
a result
o
f
sales
o
f
interests
i
n a Global Security
b
y
o
r
through a Euroclear
o
r
Clearstream Participant
t
o a OTC Participant will
b
e
received with value on the OTC settlement
date but will
b
e
available
i
n the relevant Euroclear
o
r
Clearstream cash account only
a
s
o
f
the
business day for Euroclear
o
r
Clearstream following the OTC settlement date.
OTC has advised WaMu Cayman that
i
t will take any action permitted
t
o
b
e
taken
b
y
a
holder
o
f
the WaMu Cayman Preferred Securities including the presentation
o
f
the WaMu
Cayman Preferred Securities for exchange
a
s
described below) only
a
t
the direction
o
f
one
o
r
more OTC Participants
t
o whose account
i
n the Global Securities are credited and only
i
n respect
o
f
such portion
o
f
the aggregate principal amount
o
f
a
s
t
o which such participant
o
r
participants has
o
r
have given such direction.
Although OTC, Euroclear and Clearstream have agreed
t
o the foregoing procedures
i
n order
t
o facilitate transfers
o
f
beneficial ownership interests
i
n the Global Security among OTC
Participants, Euroclear Participants and Clearstream Participants, they are under no obligation
t
o
perform
o
r
continue
t
o perform such procedures, and such procedures may
b
e
discontinued
a
t
any time. Neither the Company, WaMu Cayman, the Securities Registrar,
o
r
any
o
f
their
representative agents will have any responsibility for the performance
b
y
OTC, Euroclear,
Clearstream
o
r
their participants
o
r
indirect participants,
o
f
their respective obligations under the
rules and procedures governing their operations, including maintaining, supervising
o
r
reviewing
the records relating
t
o
,
o
r
payments made on account
o
f
,
i
n the
Global Security.
CONFIDENTIAL
Return
Euroc/ear and Clearstream
Clearstream Banking societe anonyme, 42 Avenue JF Kennedy, L-1855, Luxembourg
i
s a subsidiary
o
f
Clearstream International a
Luxembourg limited liability company formed
i
n January 2000 through the merger
o
f
Cedel
International and Deutsche Boerse Clearing, a subsidiary
o
f
Deutsche Boerse AG.
I
n July 2002,
Deutsche Boerse AG acquired Cedel International and
i
t
s 50% ownership
o
f
Clearstream
International.
Clearstream
i
s registered
a
s
a bank
i
n Luxembourg, and
a
s
such
i
s subject
t
o supervision
b
y
the Luxembourg Financial Sector Supervisory Commission, which supervises Luxembourg
banks.
Clearstream holds securities for
i
t
s
customers and facilitates
the clearance and settlement
o
f
securities transactions
b
y
electronic book-entry transfers
between their accounts. Clearstream provides various services, including safekeeping, adminis-
tration, clearance and settlement
o
f
internationally traded securities and securities lending and
borrowing. Clearstream also deals with domestic securities markets
i
n several countries through
established depository and custodial relationships. Clearstream has established
a
n
electronic
bridge with Euroclear Bank
a
s
the Euroclear Operator
i
n Brussels
t
o facilitate
settlement
o
f
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
t
o securities brokers and dealers
and banks. Currently, Clearstream International has over 2,500 customers located
i
n over 94
countries, including
a
l
l
major European countries, Canada and the United States. Indirect access
t
o Clearstream
i
s available
t
o other institutions which clear through
o
r
maintain custodial
relationship with
a
n
account holder
o
f
Clearstream.
The Euroclear System was created
i
n 1968
t
o hold securities for
i
t
s
participants and
t
o clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement
o
f
certificates and any risk from lack
o
f
simultaneous
transfers
o
f
securities and cash. Transactions may
b
e
settled
i
n a variety
o
f
currencies, including
United States dollars. Euroclear includes various other securities, including securities lending and
borrowing and interfaces with domestic markets
i
n several countries generally similar
t
o the
arrangements for cross-market transfers with DTC described above. Euroclear
i
s operated
b
y
Euroclear Bank the
A
l
l
operations are conducted
b
y
the
Euroclear Operator, and
a
l
l
Euroclear securities clearance accounts and Euroclear cash accounts
are accounts with the Euroclear Operator. Euroclear pic establishes policy for Euroclear on
behalf
o
f
Euroclear Participants. Euroclear Participants include banks including central banks),
securities brokers and dealers and other professional financial intermediaries. Indirect access
t
o
Euroclear
i
s also available
t
o other firms that clear through
o
r
maintain a custodial relationship
with a Euroclear Participant, either directly
o
r
indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed
b
y
the Terms and Conditions Governing Use
o
f
Euroclear and the related Operating Procedures
o
f
the Euroclear System and applicable Belgian law collectively, the
The Euroclear Terms and Conditions govern transfers
o
f
securities and cash within
Euroclear, withdrawals
o
f
securities and cash from Euroclear, and receipts
o
f
payments with
respect
t
o securities
i
n Euroclear.
A
l
l
securities
i
n Euroclear are held on a fungible basis without
attribution
o
f
specific certificates
t
o specific securities clearance accounts. The Euroclear
Operator acts under the Euroclear Terms and Conditions only on behalf
o
f
Euroclear Participants,
and has no record
o
f
,
o
r
relationship with, persons holding through Euroclear Participants.
100
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CONFIDENTIAL
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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CONFIDENTIAL
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.
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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
o
f
U.S. Federal tax issues contained
o
r
referred
t
o
i
o
r
any
document referred
t
o herein
i
s not intended
o
r
written
t
o
b
e
used, and cannot
b
e
used,
b
y
prospective investors for the purpose
o
f
avoiding penalties that may
b
e
imposed
o
n
them under the
U.S. Internal Revenue Code; such discussion
i
s written for use
i
promotion
o
r
marketing
o
f
the transactions
o
r
matters addressed herein; and prospective
investors should seek advice based
o
n
their particular circumstances from
a
n
independent tax
advisor.
General
The following discussion summarizes the United States Federal income taxation
o
f
WaMu
Cayman and the principal United States Federal income tax and Cayman Islands tax
consequences
t
o holders
o
f
WaMu Cayman Preferred Securities. This discussion
i
s
o
f
a general
nature and
i
s not intended
t
o be, nor should
i
t
b
e
construed as, tax advice
t
o any holder.
Purchasers should consult their own tax advisor regarding the tax consequences
o
f
acquiring,
owning and disposing
o
f
WaMu Cayman Preferred Securities.
The discussion addresses only purchasers that hold WaMu Cayman Preferred Securities
a
s
capital assets and does not purport
t
o
b
e
a comprehensive description
o
f
a
l
l
the tax
considerations that may
b
e
relevant
t
o particular holders
i
n light
o
f
a purchaser's personal
circumstances.
I
n addition, the discussion
i
s not addressed
t
o any U.S. Holder that beneficially
owns actually
o
r
constructively, within the meaning
o
f
Code Section 958) 10%
o
r
more the
WaMu Cayman Preferred Securities. The discussion also does not describe
a
l
l
aspects
o
f
taxation that may
b
e
relevant
t
o certain types
o
f
purchasers
t
o which special provisions
o
f
United
States Federal income tax law may apply, including:
dealers
i
n securities and currencies;
regulated investment companies
traders
i
n securities;
tax-exempt organizations;
banks and insurance companies;
persons that hold WaMu Cayman Preferred Securities
a
s
part
o
f
a hedge, straddle
o
r
conversion transaction;
persons whose functional currency
i
s not the United. States dollar; and
U.S. expatriates.
The summary
i
s 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
a
l
l
a
s
currently
i
n effect. These legal sources are subject
t
o change
o
r
differing
interpretations
a
t
any time, which change
o
r
interpretation could apply retroactively and could
affect the validity
o
f
the discussion below. There can
b
e
no assurance that the Internal Revenue
Service IRS") will take the same view
o
f
the United States Federal income tax consequences
o
f
a
n
investment
i
n the Preferred Securities
a
s
described herein.
Each purchaser
i
s urged
t
o consult
i
t
s
own tax advisor
a
s
t
o the tax consequences
o
f
acquiring, owning and disposing
o
f
WaMu Cayman Preferred Securities, including the United
States Federal, state, local, Cayman Islands and any other tax consequences
o
f
acquiring,
owning and disposing
o
f
the WaMu Cayman Preferred Securities and the Fixed Rate WMI
Preferred Stock.
103
CONFIDENTIAL
Return
As used
i
n this discussion, the term means a beneficial owner
o
f
a WaMu
Cayman Preferred Security that
i
s
,
for United States Federal income tax purposes, a citizen
o
r
resident
o
f
the United States, a corporation
o
r
partnership created
o
r
organized
i
n
o
r
under the
laws
o
f
the United States
o
r
any State,
a
n
estate the income
o
f
which
i
s includible
i
n gross
income for United States Federal income tax purposes regardless
o
f
i
t
s
source,
o
r
a trust
i
f a
court within the United States
i
s able
t
o exercise primary supervision over
i
t
s administration and
one
o
r
more United States persons have authority
t
o control
a
l
l
substantial decisions
o
f
the trust.
The term means a beneficial owner
o
f
a WaMu Cayman Preferred Security that
i
s not a U.S. Holder.
United States Federal Income Tax Consequences
Tax Treatment
o
f
WaMu Cayman and its Investment
i
n Company Preferred Securities
Classification
o
f
WaMu Cayman and the Company. WaMu Cayman will
b
e
treated
a
s
a
foreign corporation for Federal income tax purposes.
A
l
l
o
f
i
t
s material assets are expected
t
o
consist
o
f
Fixed Rate Company Preferred Securities. The Company intends
t
o
b
e
classified
a
s
a
U.S. domestic partnership for United States Federal income tax purposes, and the Fixed Rate
Company Preferred Securities acquired
b
y
WaMu Cayman are expected
t
o constitute equity
interests
i
n such partnership.
An entity that
i
s classified
a
s
a partnership for United States Federal income tax purposes
generally
i
s not a taxable entity and incurs no United States Federal income tax liability. Instead,
each partner
i
s required
t
o take into account
i
t
s allocable share
o
f
income, gains, losses,
deductions and credits
o
f
the partnership
i
n computing
i
t
s
United States Federal income tax
liability,
i
f any, even
i
f no cash distributions are made
b
y
the partnership
t
o the partner. An entity
that
i
s classified
a
s
a partnership for United States Federal income tax purposes nevertheless
will
b
e
taxable
a
s
a corporation
i
f
i
t
i
s a publicly traded partnership" and fails
t
o satisfy a
90% qualifying income" test, within the meaning
o
f
Code Section 7704.
On the date
o
f
the initial issuance
o
f
the WaMu Cayman Preferred Securities, the Company
will receive
a
n
t
o the effect that, for United States
Federal income tax purposes, although no activities closely comparable
t
o that contemplated
b
y
the Company have been the subject
o
f
o
r
judicial
b
e
treated
a
s
a
n
association
o
r
publicly traded partnership taxable
a
s
a corporation. The opinions are based on certain assumptions and on certain representations
and agreements regarding restrictions on the future conduct
o
f
the activities
o
f
the Company.
t
o conduct
i
t
s
activities
i
i
f
i
taxable
a
s
a corporation for United States Federal income tax purposes, then cash available for
distribution
t
o WaMu Cayman
i
n respect
o
f
the Company Preferred Securities would
b
e
reduced
on account
o
f
taxes payable
b
y
the Company. A determination
b
y
the Company, based on receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a significant risk that the Company
i
s
o
r
will
b
e
subject
t
o
federal income tax would constitute a Tax Event see Description
o
f
Fixed Rate Company
Preferred Securities." The remainder
o
f
this discussion assumes that the Company
i
s treated
a
s
a partnership, and not
a
s
a
n
association
o
r
a
s
a corporation,
for United States Federal income tax purposes, and that the Fixed Rate Company Preferred
Securities owned
b
y
WaMu Cayman will constitute equity interests
i
n such partnership.
U.S. Trade
o
r
Business Status. WaMu Cayman intends
t
o conduct
i
t
s affairs
s
o
a
s
t
o not
b
e
engaged
i
n a trade
o
r
business
i
n the United States
o
r
b
e
subject
t
o taxation on a net income
basis
i
n the United States. On the date
o
f
o
f
Securities, WaMu Cayman will receive
a
n
t
o the
effect that, for United States Federal income tax purposes, although no activities closely
comparable
t
o that contemplated
b
y
WaMu Cayman have been the subject
o
f
any U.S. Treasury
CONFIDENTIAL
Return
regulation, revenue ruling
o
r
judicial decision,
i
t will not
b
e
treated
a
s
engaged
i
n the conduct
o
f
a
trade
o
r
business within the United States and, consequently, WaMu Cayman's income will not
b
e
subject
t
o United States Federal income tax on a net income basis including the U.S. branch
profits tax). Mayer, Brown, Rowe Maw LLP's opinion
i
s not binding on the IRS
o
r
the courts,
and no ruling will
b
e
sought from the IRS regarding this,
o
r
any other, aspect
o
f
WaMu Cayman's
United States Federal income tax treatment. Accordingly, no assurance can
b
e
given that the IRS
will not assert positions contrary
t
o those stated
i
n Mayer, Brown, Rowe Maw LLP's opinion
o
r
that a court would not entertain any such assertions.
Mayer, Brown, Rowe Maw LLP's opinion
i
s based on certain assumptions and on certain
representations and agreements regarding restrictions on the future conduct
o
f
WaMu Cayman's
activities. Although WaMu Cayman intends
t
o conduct
i
t
s activities
i
n accordance with such
assumptions, representations and agreements,
i
f
i
t were nonetheless determined
t
o
b
e
engaged
i
n a trade
o
r
business
i
n the United States and had taxable income that was effectively
o
r
business including
a
s
a result
o
f
a determination
that
i
t
s distributive share
o
f
income derived from the Company
i
n respect
o
f
the Fixed Rate
Company Preferred Securities constituted taxable income effectively connected with a trade
o
r
business carried on
i
n the United States
b
y
the Company), then WaMu Cayman would
b
e
subject
t
o United States Federal income tax on such income
a
t
regular United States corporate income
tax rates and possibly
t
o a 30% United States branch profits tax
a
s
well. Moreover,
i
n the event
WaMu Cayman were
t
o derive effectively connected income
i
n respect
o
f
i
t
s
ownership
o
f
the
Fixed Rate Company Preferred Securities the United States corporate income tax imposed
thereon would
b
e
required
t
o
b
e
collected
i
n the first instance through a withholding
b
y
the
Company
o
f
such tax
a
t
a rate
o
f
35% on WaMu Cayman's distributive share
o
f
the income. A
determination
b
y
WaMu Cayman, based on receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a
significant risk that
i
t
i
s
o
r
will
b
e
treated
a
s
engaged
i
n a trade
o
r
business within the United
States, would constitute a Tax Event see Description
o
f
Securities." The remainder
o
f
this discussion assumes that WaMu Cayman will not
b
e
considered
t
o
b
e
engaged
i
n a trade
o
r
business within the United States.
United States Withholding Tax. Interest that constitutes portfolio interest" within the
meaning
o
f
the Code
i
s generally exempt from United States withholding tax. As a partner
i
n the
Company, WaMu Cayman will
b
e
treated
a
s
earning directly
i
t
s share
o
f
the income earned
b
y
the Company. Company's material assets will initially consist
o
f
the regular interest" the
Class A Asset Trust Certificate) issued
i
n registered form
b
y
the Asset Trust, which will
b
e
treated
a
s
a real estate mortgage investment conduit" under the Code a REMIC"). REMIC
regular interests are generally treated
a
s
indebtedness for United States Federal income tax
purposes that qualifies for the portfolio interest exemption. Accordingly, WaMu Cayman expects
that
i
t
s distributive share
o
f
interest paid on the Asset Trust regular interest will constitute
portfolio interest" under the Code, and thus, will not
b
e
subject
t
o United States withholding tax.
I
n addition, during the term
o
f
the transaction, Company expects, pursuant
t
o
i
t
s investment
guidelines,
t
o invest cash on hand from time
t
o time
i
n 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
a
s
equity for United States
Federal income tax purposes.
I
n general, the characterization
a
s
o
f
the time
o
f
issuance
o
f
a
n
instrument
b
y
a
n
issuer
a
s
debt
o
r
equity
i
s binding for United States Federal income tax
purposes on
a
l
l
holders but not the IRS), unless a holder discloses on
i
t
s tax return that
i
t
i
s
treating the instrument
i
n a manner inconsistent with the issuer's characterization.
I
n addition,
because WaMu Cayman
i
s a foreign corporation, special rules described below apply
t
o certain
U.S. Holders
o
f
the Preferred Securities.
CONFIDENTIAL
Return
a WaMu Cayman will constitute a
passive foreign investment company" under the Code Except
a
s
provided below,
U.S. Holders
o
f
b
e
considered U.S. Holders
i
n a PFIC.
I
n
general, U.S. Holders
i
n a PFIC may desire
t
o make
a
n
election
t
o treat WaMu Cayman
a
s
a
qualified electing fund" Generally, a QEF election should
b
e
made on
o
r
before the due
date for tiling a U.S. Holder's Federal income tax return for the first taxable year for which
i
t held
I
f a timely QEF election
i
s made for WaMu Cayman, a U.S. Holder will
b
e
required
t
o include
i
n gross income
i
t
s pro rata share
o
f
WaMu Cayman's ordinary earnings and
t
o
include
a
s
long-term capital gain
i
t
s pro rata share
o
f
our net capital gain as defined
i
n applicable
Treasury regulations),
i
f any, whether
o
r
not any cash
i
s distributed.
I
n certain cases
i
n which a QEF
does not distribute
a
l
l
o
f
i
t
s earnings
i
n a taxable year, U.S. Holders may also
b
e
permitted
t
o elect
t
o defer payment
o
f
some
o
r
a
l
l
o
f
the taxes on the QEF's income subject
t
o
a
n
interest charge on
the deferred amount. WaMu Cayman will provide, upon request,
a
l
l
information that a U.S. Holder
making a QEF election
i
s required
t
o obtain for Federal income tax purposes the U.S. Holder's
pro rata share
o
f
ordinary income and net capital gain,
i
f any), and will provide, upon request, a
PFIC Annual Information Statement"
a
s
described
i
n Treasury regulation Section 1.1295-1 or
i
n
any successor Treasury regulation), including
a
l
l
representations and statements required
b
y
such
statement, and will take any other reasonable steps
t
o facilitate such election.
I
f
a U.S. Holder does not make a timely QEF election,
i
t will
b
e
subject
t
o 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
o
f
the Preferred Securities. The amount
o
f
United States Federal tax on excess distributions will
b
e
increased
b
y
a
n
interest charge
reflecting the deemed amount
o
f
tax deferral that the taxpayer has experienced.
I
n many cases,
the application
o
f
the tax on excess distributions will
b
e
substantially more onerous than the
treatment applicable
i
f a timely QEF election
i
s made. U.S. Holders should consult with their tax
counsel regarding the United States Federal income tax consequences
o
f
investing
i
n a PFIC and
the desirability
o
f
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 NOT
MAKING SUCH AN ELECTION.
on
t
o U.S. The treatment
o
f
actual distributions
o
f
cash on the Preferred Securities,
i
n very general terms, will vary depending on whether a
U.S. Holder has made a timely QEF election
a
s
described above. See Tax Consequences
t
o
U.S. Holders
o
f
WaMu Cayman Preferred Securities Investment
i
n a Passive Foreign
Investment Company."
I
f
a timely QEF election has been made, distributions should
b
e
allocated
first
t
o amounts previously taxed pursuant
t
o the QEF election and
t
o this extent would not
b
e
taxable
t
o U.S. Holders. Distributions
i
n excess
o
f
such previously taxed amounts will
b
e
taxable
t
o such U.S. Holders
a
s
ordinary income upon receipt,
t
o the extent
o
f
any remaining amounts
o
f
WaMu Cayman's current and accumulated earnings and profits. Distributions
i
n excess
o
f
previously taxed amounts and any remaining current and accumulated earnings and profits will
b
e
treated
b
y
such U.S. Holders first
a
s
a nontaxable return
o
f
capital and then
a
s
capital gain.
I
n the event that a U.S. Holder does not make a timely QEF election some
o
r
a
l
l
o
f
any
dividends distributed with respect
t
o
i
t
s
Preferred Securities may constitute excess distributions,
taxable
a
s
previously described. See Tax Consequences
t
o U.S. Holders
o
f
WaMu Cayman
Preferred Securities Investment
i
n a Passive Foreign Investment Company."
o
f
I
n general, a U.S. Holder
o
f
a WaMu Cayman Preferred Security will recognize gain
o
r
loss upon the sale
o
r
exchange
o
f
the
Preference Share equal
t
o the difference between the amount realized and such holder's
adjusted tax basis
i
n the Preference Share. Initially, the tax basis
o
f
a U.S. Holder should equal
the amount paid for a WaMu Cayman Preferred Security. Such basis will
b
e
increased
b
y
106
CONFIDENTIAL
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Tax Treatment
o
f
Tax-Exempt U.S. Holders
o
f
Tax-Exempt U.S. Holder"
Tax Treatment
o
f
Foreign Holders
o
f
Certain Reporting Requirements
t
o U.S. Holders
CONFIDENTIAL
Return
Information Reporting and Backup Withholding
Tax Return Disclosure Requirements
CONFIDENTIAL
Return
Foreign, State, and Local Taxes
CONFIDENTIAL
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ERISA CONSIDERATIONS
CONFIDENTIAL
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).
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RATINGS
I
t
CONFIDENTIAL
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.
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PLAN OF DISTRIBUTION
The Company, WaMu Cayman, WMI and the Initial Purchasers have enterEld into a purchase
agreement with respect
t
o the WaMu Cayman Preferred Securities. Subject
t
o certain conditions,
each Initial Purchaser has severally agreed
t
o purchase the amount by liquidation preference)
o
f
WaMu Cayman Preferred Securities indicated
i
n the following tables.
Liquidation Preference
o
f
Series A-1
WaMu Cayman
Initial Purchasers
Goldman, Sachs Co
$302,300,000
Total
$302,300,000
o
f
Series A-2
WaMu Cayman
Initial Purchasers
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
t
o take and pay for
a
l
l
o
f
the securities being offered
hereby,
i
f any are taken. The initial offering price
i
s set forth on the cover page
o
f
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
t
o reimburse WMI and
i
t
s
affiliates for certain expenses incurred
i
n connection with this Offering.
The securities offered hereby have not been and will not
b
e
registered under the Securities
Act. The Initial Purchasers have agreed that they will only offer
o
r
sell
i
) the Series A-1 WaMu
i
t
o U.S. persons who are both qualified
institutional buyers" within the meaning
o
f
Rule 144A under the Securities Act and qualified
purchasers" within the meaning
o
f
Section 2(a) 51) under the Investment Company Act
i
n
transactions meeting the requirements
o
f
Rule 144A and the Series A-2 WaMu Cayman
Preferred Securities outside the United States
t
o non-U.S. persons" within the meaning
o
f
Regulation S under the Securities Act)
i
n offshore transactions
i
n reliance on Regulation
S
.
I
n connection with sales
o
f
the Series A-2 WaMu Cayman Preferred Securities outside the
United States, the Initial Purchasers have agreed that they will not offer, sell
o
r
deliver the
securities
t
o
,
o
r
for the account
o
r
benefit
o
f
,
U.S. persons" within the meaning
o
f
Rule 902
o
f
Regulation S under the Securities Act
i
)
a
s
part
o
f
the Initial Purchasers' distribution
a
t
any time
o
r
i
i
) otherwise until 40 days after the later
o
f
the commencement
o
f
the Offering
o
r
the date
the securities were originally issued. The Initial Purchasers will send
t
o each dealer
t
o whom they
112
CONFIDENTIAL
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sell such Series A-2 WaMu Cayman Preferred Securities during such 40-day period a
confirmation
o
r
other notice setting forth the restrictions on offers and sales
o
f
the securities
within the United States
o
r
t
o
,
o
r
for the account
o
r
benefit
o
f
,
U.S. persons.
I
n addition, with respect
t
o Series A-2 WaMu Cayman Preferred Securities initially sold
pursuant
t
o Regulation
S
,
until 40 days after the period referred
t
o above,
a
n
offer
o
r
sale
o
f
such securities within the United States
b
y
a dealer that
i
s not participating
i
n the Offering may
violate the registration requirements
o
f
the Securities Act.
I
n connection with the Offering, the Initial Purchasers may purchase and sell securities
i
n
the open market. These transactions may include short sales, stabilizing transactions and
purchases
t
o cover positions created
b
y
short sales. Short sales involve the sale
b
y
the Initial
Purchasers
o
f
a greater number
o
f
securities than they are required
t
o purchase
i
n the Offering.
Stabilizing transactions consist
o
f
certain bids
o
r
purchases made for the purpose
o
f
preventing
o
r
retarding a decline
i
n the market price
o
f
the securities while the Offering
i
s
i
n progress.
These activities
b
y
the Initial Purchasers may stabilize, maintain
o
r
otherwise affect the
market price
o
f
the securities. As a result, the price
o
f
the securities may
b
e
higher than the price
that otherwise might exist
i
n the open market.
I
f
these activities are commenced, they may
b
e
discontinued
b
y
a
t
any time. These transactions may
b
e
effected
i
n the
over-the-counter market
o
r
otherwise.
Each
o
f
the underwriters has represented and agreed that:
I
t has not made
o
r
will not make
a
n
offer
o
f
the securities being offered hereby
t
o the
public
i
n the United Kingdom within the meaning
o
f
section 1026
o
f
the Financial Services
and Markets Act 2000 as amended) except
t
o legal entities which are
authorized
o
r
regulated
t
o operate
i
n the financial markets or,
i
f not
s
o
authorized
o
r
regulated, whose corporate purpose
i
s solely
t
o invest
i
n securities
o
r
otherwise
i
n
circumstances which do not require the publication
b
y
the company
o
f
a prospectus
pursuant
t
o the Prospectus Rules
o
f
the Financial Services Authority
I
t has only communicated
o
r
caused
t
o
b
e
communicated and will only communicate
o
r
cause
t
o
b
e
communicated
a
n
invitation
o
r
inducement
t
o engage
i
n investment activity
within the meaning
o
f
section 21
o
f
FSMA)
t
o persons who have professional
experience
i
n matters relating
t
o investments falling within Article 19(5)
o
f
the Financial
Services and Markets Act 2000 Financial Promotion) Order 2005
o
r
i
n circumstances
i
n
which section 21
o
f
FSMA does not apply
t
o the company; and
I
t has complied with, and will comply with
a
l
l
applicable provisions
o
f
FSMA with respect
t
o anything done
b
y
i
t
i
n relation
t
o the shares
i
n
,
from
o
r
otherwise involving the United
Kingdom.
I
n relation
t
o each Member State
o
f
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
i
s implemented
i
n that Relevant Member State the
i
t
has not made and will not make
a
n
offer
o
f
t
o the public
i
n
that Relevant Member State prior
t
o the publication
o
f
a prospectus
i
n relation
t
o the securities
which has been approved
b
y
the competent authority
i
n that Relevant Member State or, where
appropriate, approved
i
n another Relevant Member State and notified
t
o the competent authority
i
n that Relevant Member State,
a
l
l
i
n accordance with the Prospectus Directive, except that
i
t
may, with effect from and including the Relevant Implementation Date, make
a
n
offer
o
f
securities
t
o the public
i
n that Relevant Member State
a
t
any time:
t
o legal entities which are authorized
o
r
regulated
t
o operate
i
n the financial markets or,
i
f
not
s
o
authorized
o
r
i
s solely
t
o invest
i
n securities;
113
CONFIDENTIAL
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CONFIDENTIAL
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
Return
t
o
a
n
exemption from the registration requirements
o
f
,
and otherwise
i
n compliance with, the
Securities and Exchange Law and any other applicable laws, regulations and ministerial
guidelines
o
f
Japan.
WMI and the Company have agreed
i
n the purchase agreement, subject
t
o certain
exceptions, that for a period
o
f
180 days after the date
o
f
this offering circular, neither they, nor
any
o
f
their subsidiaries
o
r
other affiliates over which they exercise management
o
r
voting
control, nor any person acting on their behalf will, without the prior written consent
o
f
Goldman,
Sachs Co., offer, sell, contract
t
o sell
o
r
otherwise dispose
o
f
any securities that are
t
o the securities.
WMl, the Company and WaMu Cayman have agreed
t
o indemnify the Initial Purchasers
against certain liabilities, including liabilities under the Securities Act.
Certain
o
f
the Initial Purchasers and their respective affiliates have, from time
t
o time,
performed, and may
i
n the future perform, various financial advisory and investment banking
services for the company, for which they received
o
r
will receive customary fees and expenses.
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VALIDITY OF SECURITIES
The validity
o
f
b
e
passed upon for WMI and the
Initial Purchasers
b
y
Maples and Calder, George Town, Grand Cayman. The validity
o
f
the Fixed
Rate Company Preferred Securities will
b
e
passed upon for the Company
b
y
Richards, Layton
Finger, P.A., special Delaware counsel for the Company, for WMI
b
y
Mayer, Brown, Rowe Maw
LLP, New York, New York, and for the Initial Purchasers
b
y
Sullivan Cromwell LLP, New York,
New York. The validity
o
f
the Fixed Rate Depositary Shares and
o
f
the Fixed Rate WMI Preferred
Stock will
b
e
passed upon for WMI
b
y
Heller Ehrman LLP, Seattle, Washington, and
b
y
Mayer,
Brown, Rowe Maw LLP, and for the Initial Purchasers
b
y
Sullivan Cromwell LLP. Mayer,
Brown, Rowe Maw LLP and Sullivan Cromwell LLP will rely upon the opinion
o
f
Richards,
Layton Finger, P.A.,
a
s
t
o matters
o
f
Delaware law, and upon the opinion
o
f
Heller Ehrman LLP
a
s
t
o matters
o
f
Washington law.
CONFIDENTIAL
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GENERAL INFORMATION
Listing
Application will
b
e
made
t
o list the Series A-2 WaMu Cayman Preferred Securities offered
hereby
t
o non-U.S. persons
i
n reliance on
a
n
exemption from registration pursuant
t
o
Regulation
S
,
on the Euro MTF market
o
f
the Luxembourg Stock Exchange,
i
n accordance with
the rules thereof. The Series A-1 WaMu Cayman Preferred Securities will not
b
e
listed on any
securities exchange
o
r
automated dealer quotation system. Prior
t
o such listing, a legal notice
relating
t
o the issue
o
f
the Series A-2 WaMu Cayman Preferred Securities will
b
e
filed with the
Chief Registrar
o
f
the District Court
o
f
Luxembourg Greffier
e
n
Chef
d
u
Tribunal
d'Arrondissement
d
e
e
t
Luxembourg) where such legal notice will
b
e
available for inspection
free
o
f
charge and where copies
o
f
such documents will
b
e
obtainable upon request.
Upon such listing, the Series A-2 WaMu Cayman Preferred Securities will
b
e
freely
transferable on the Euro MTF Market
o
f
the Luxembourg Stock Exchange. Once executed,
transactions carried out on the Euro MTF Market may not
b
e
cancelled.
Authorization
The issuance
o
f
the Series A-2 WaMu Cayman Preferred Securities was authorized
b
y
WaMu Cayman's Board
o
f
Directors on February 23, 2006. The issuance
o
f
the Fixed Rate
Company Preferred Securities was authorized
b
y
the Company's Board
o
f
Managers on
February 23, 2006. The issuance
o
f
the Fixed Rate WMI Preferred Stock was authorized
b
y
WMl's Board
o
f
Directors on January 17, 2006 and February 21,2006.
Independent Accountants
The independent registered public accountants
o
f
the Company will
b
e
Deloitte Touche
LLP. WaMu Cayman will engage a nationally recognized accounting firm
t
o act
a
s
i
t
s independent
registered public accountant. Deloitte Touche LLP are also the independent registered public
accountants for WMI and WMB.
Documents
Copies
o
f
the LLC Agreement and WaMu Cayman's Articles
o
f
Association will,
s
o
long
a
s
any Series A-2 WaMu Cayman Preferred Securities are outstanding,
b
e
available free
o
f
charge
for inspection during usual business hours
a
t
o
f
the Paying Agent
i
n
Luxembourg.
For
s
o
long
a
s
the Series A-2 WaMu Cayman Preferred Securities are listed on the Euro
MTF Market
o
f
the Luxembourg Stock Exchange, a copy
o
f
WMl's Restated Articles
o
f
Incorporation,
a
s
amended, and Restated Bylaws,
a
s
amended, will
b
e
available for inspection
a
t
o
f
the Paying Agent
i
n Luxembourg.
For
s
o
long
a
s
the Series A-2 WaMu Cayman Preferred Securities are listed on the Euro
MTF Market
o
f
the Luxembourg Stock Exchange, copies
o
f
the audited annual consolidated
financial statements and the unaudited consolidated interim financial statements for the quarters
ending March 31, June 30 and September 30
o
f
WMI,
o
f
WaMu Cayman and the Company will
b
e
available, free
o
f
charge,
a
t
o
f
the Paying Agent
i
n Luxembourg.
No Material Adverse Change
Except
a
s
disclosed
i
n this offering circular, there has been no adverse change
i
n the
financial position
o
f
the Company, WaMu Cayman, WMB
o
r
WMI since December 31,2005,
o
r
their respective dates
o
f
establishment which was February
3
,
2006
i
n the case
o
f
the Company
CONFIDENTIAL
Return
and February 23, 2006
i
n the case
o
f
WaMu Cayman), that would
b
e
deemed material
i
n the
context
o
f
the issue and sale
o
f
i
n this Offering.
Legal Proceedings
Neither the Company nor WaMu Cayman are involved
i
n any litigation, arbitration
o
r
administrative proceeding relating
t
o claims
o
r
amounts that are material
i
n the context
o
f
the
issue and sale
o
f
o
r
Securities
t
o which the Company
o
r
WaMu Cayman are a party, nor
t
o the best
o
f
the
Company's
o
r
WaMu Cayman's knowledge,
i
s there any threatened litigation, arbitration
o
r
administrative proceedings relating
t
o claims
o
r
i
n the context
o
f
the
issue and sale
o
f
o
r
Securities that would
i
n either case jeopardize the Company's
o
r
WaMu Cayman's ability
t
o
discharge the Company's
o
r
WaMu Cayman's respective obligations
i
n respect
o
f
the issue and
sale
o
f
o
r
Neither the Company nor the Asset Trust
i
s the subject
o
f
any litigation. None
o
f
the
Company, WMI
o
r
WMB
i
s currently involved
i
n or,
t
o WMB's knowledge, currently threatened
with, any material litigation with respect
t
o the assets included
i
n the Asset Trust's portfolio,
other than routine litigation arising
i
n the ordinary course
o
f
business. Based on information
currently available, advice
o
f
counsel, available insurance coverage and established reserves,
WMB believes that the eventual outcome
o
f
the actions with respect
t
i
n the
Asset Trust's portfolio will not,
i
n the aggregate, have a material adverse effect on the
Company's consolidated financial position
o
r
results
o
f
operations. However,
i
n the event
o
f
unexpected future developments,
i
t
i
s possible that the ultimate resolution
o
f
those matters,
i
f
unfavorable, may
b
e
material
t
o the Company's results
o
f
operations for any particular period.
WMB, the Company, the Asset Trust, WaMu Cayman and WaMu Delaware have not been
named
a
s
defendants
i
n any
o
f
the following lawsuits and, on that basis they do not expect such
lawsuits
t
o materially affect their respective operations
o
r
financial results.
South Ferry L.P.
v
.
Killinger
e
t
a/., No. CV04-1599C W.D. Wa., Filed Jul. 19,2004) the
Securities Action"). This class action lawsuit
i
s currently pending against WMI and certain
o
f
i
t
s
senior executives
i
n the U.S. District Court, Western Division
o
f
Washington. On behalf
o
f
a
putative class
o
f
purchasers
o
f
WMI securities from April 15, 2003 through June 28, 2004, lead
plaintiffs allege that
i
n various public statements the defendants purportedly made misrepresenta-
tions and failed
t
o disclose material facts concerning, among other things, alleged internal
systems problems and hedging issues.
The defendants moved
t
o dismiss the Securities Action on May 17, 2005. After briefing, but
without oral argument, the Court on November 17, 2005 denied the motion
i
n principal part;
however, the Court dismissed the claims against certain
o
f
the individual defendants, dismissed
claims pleaded on behalf
o
f
sellers
o
f
put options on WMI stock, and concluded that the plaintiffs
could not rely on supposed violations
o
f
generally accepted accounting principles
t
o support their
claims. The remaining defendants subsequently moved for reconsideration or,
i
n the alternative,
certification
o
f
the opinion for interlocutory appeal
t
o the United States Court
o
f
Appeals for the
Ninth Circuit. The District Court denied the motion for reconsideration, but the motion for
certification remains pending.
Lee Family Investments,
b
y
and through
i
t
s Trustee W.B. Lee, Derivatively and
o
n
behalf
o
f
Nominal Defendant Washington Mutual, Inc.
v
.
Killinger
e
t
a
I
,
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
t
o dismiss the Securities Action, a separate plaintiff filed
i
n Washington State Superior
Court a derivative shareholder lawsuit purportedly asserting claims for the benefit
o
f
WMI. The
defendants include those individuals remaining
a
s
defendants
i
n the Securities Action,
a
s
well
a
s
those
o
f
WMl's current independent directors who were directors
a
t
any time from April 15, 2003
118
CONFIDENTIAL
Return
through June 2004. The allegations
i
n the Derivative Action mirror those
i
but seek relief based on claims that the independent director defendants failed
t
o take action
t
o
respond
t
o the misrepresentations alleged
i
n the Securities Action and that the filing
o
f
that
action has caused WMI
t
o expend sums
t
o defend itself and the individual defendants and
t
o
conduct internal investigations related
t
o the underlying claims. The defendants have not yet
responded
t
o the complaint
i
n the Derivative Action.
Governing Law
The LLC Agreement and the Fixed Rate Company Preferred Securities will
b
e
governed by,
and construed
i
o
f
the State
o
f
Delaware. WaMu Cayman's Articles
o
f
Association and the WaMu Cayman Preferred Securities will
b
e
i
n
accordance with, the laws
o
f
the Cayman Islands. The Rxed Rate WMI Preferred Stock will
b
e
governed
b
y
and construed
i
o
f
tile State
o
f
Washington. The Fixed
Rate Depositary Shares will
b
e
i
o
f
the
State
o
f
New York.
CONFIDENTIAL
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CONFIDENTIAL
Return
1201 Third Avenue
Seattle, WA 98101
WMB WAMUCAYMAN
THE COMPANY
Washington Mutual Preferred
1201 Third Avenue Funding Cayman) I Ltd.
Funding LLC
Seattle, 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."
8
5
Broad Street
New York, NY 10004
LEGAL ADVISORS TO INITIAL PURCHASERS
As
t
o 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 COMPANY
As
t
o U.S. Federal and New York law:
1675 Broadway
New York, NY 10019
As
t
o 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
t
o Delaware law:
As
t
o Cayman Islands law:
Richards, Layton Finger, P.A
Maples and Calder
One Rodney Square
P.O. Box 309GT
Wilmington, 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
DEPOSITORY
JPMorgan Bank Luxembourg S.A.
Mellon Investor Services LLC
6
,
route
d
e
Treves
480 Washington Blvd.
L-2633 Senningerberg
Jersey City, NJ 07310
TRUSTEE
DELAWARE TRUSTEE
Deutsche Bank National Trust Company
Deutsche Bank Trust Company Delaware
1761 East Saint Andrew Place
1011 Centre Road, Suite 200
Santa Ana, CA 92705
Wilmington, DE 19805
CONFIDENTIAL
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CONFIDENTIAL
Return
INDEX OF TERMS
3(c) 7) Representations v
i
Declaration
o
f
Trust 37
Additional Amounts 82 Delaware Trustee
5
,
5
0
Additional Assets 43 Deposit Agreement 92
Additional Tax Event 82 Depositary
7
1
Additional Taxes 82 Derivative Action 118
Administration Agreement
Dividend Payment Date cover, 65, 76,
8
6
Dividend Period 65, 76,
8
6
Administrative Services
DTC
9
7
Agreement
Administrator
DTC Participants
Advanced Consumer Lending
DWAC 102
System
o
r
ACLS
Eligible Assets
4
3
alternative services 56
Eligible Investments
Asset Documentation 44
employee benefit plan
Asset Portfolio 45
ERISA
i
i
i
,
110
Asset Subsidiary 44
Euroclear 100
Asset Tax Opinion 45 Euroclear Operator 100
Asset Trust
Euroclear Participants 100
Euroclear Terms and
back-end ratio
Conditions 100
Bankruptcy Event 48 Exchange Agreement
7
1
Benefit Plan Investor i
i
i
, 110 Exchange Event 11,70
Business Combination 90 Expenses Agreement
Business Day 65, 76,
8
6 FDiC xiv,
6
3
CACS
Federal Reserve
Cayman Trust
FFO 11,76
Fitch 111
Class A Asset Trust
Certificate
5
1 Fixed Rate Company
Preferred Securities cover,
1
,
37,
7
5
Class R Asset Trust
Certificate 5
1
Clearstream 100 Shares 11,86,92
Clearstream International 100 Fixed Rate Substitute
Clearstream Participants 100 Preferred Stock
9
1
Code i
i
i
,
110 Fixed Rate Successor
Code
o
f
Ethics
Depositary Share
9
1
Companies Law
Fixed Rate WMI Preferred
Company cover, 1,41 Stock 2
,
8
6
Company Common
Fixed-to-Floating Rate
Securities 4,41 Company Preferred
Securities 1,41
Company Designated
Directors
Depositary Shares
Company Preferred
Securities 2,41 Fixed-to-Floating Rate
Company's Portfolio
Substitute Preferred
Comparable Treasury Issue
7
8 Stock
9
1
Comparable Treasury Price 78
7
1 Successor Depositary
core capital
Share
9
1
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 5
1
FSMA 113
debt-to-income ratio
GAAP xiv,
4
0
123
CONFIDENTIAL
Return
Global Securities
REMIC
5
,
105
HELs
Reminder Notice
v
i
Replacement Capital
Independent Investment
Covenant
Banker
Replacement Covenant
Independent Manager
5
,
4
6
Covered Securities
Indirect Participants
Restricted Period
9
7
Investment Company Act cover,
x
i
,
1
Rule 144A Global Security
Rule 144A Offering
Event
7
8
S&P
111
IRS
103 SEC
x
i
i
i
Japan Securities and
Section3(c)(7)
x
Exchange Law
114 Securities Act.
cover,
x
i
,
1
Junior Equity Securities
77 Securities Action
like amount
Senior Equity Securities
LLC Act
4
1
Series A-1 WaMu Cayman
LLC Agreement
4
1
cover,
1
,
37,
6
5
Loan Documents
Series A-2 WaMu Cayman
Marion
Preferred Securities cover,
1
,
37,
6
5
Moody's
111
Servicer
New Assets
Servicer Indemnified Parties
60
Nominee
SFA
114
Offering
Share Trustee
3
7
OTS
cover, 2,32
SUCCESS
Parity Equity Securities
Successor Entity
9
1
Paying Agent
i
n Luxembourg
37,
7
3
supplementary capital
Paying Agent s)
Tax Event
Permitted Investments
Tax-Exempt U.S. Holder
107
PFIC
16, 106
Thrift Financial Report s)
x
i
v
plan
i
i
i
total capital
Plan 110
Transfer Agent
plan assets
Treasury Rate
Pooling and Servicing
Trust Securities
Agreement
Trustee
UBTI
107
Principal Paying Agent
University Street
i
,
4
,
4
1
QEF
106 U.S. Holder
104
qualified institutional
Voting Parity Stock
buyer s)
i
i
i
, 1
WaMu Cayman
cover, 1,37
qualified purchaser s)
WaMu Cayman Ordinary
Qualifying Interests
Shares
4,37
Rating Agencies
Rating Agency Condition
Securities
cover, 1,37
Reference Treasury Dealer
o
f
Association
10,
3
7
Quotations
WaMu Delaware
Registrar
7
3
WMB
i
, 1,32
Regulation
110 WMI
cover, 1
Regulation S Global Security
WMI Group
Regulation S Offering
WMl's Board
o
f
Directors
Regulatory Capital Event
WMI Parity Stock
Relevant Implementation Date 113
WTC Cayman
Relevant Member State
113
124
CONFIDENTIAL
Return
$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
o
f
Washington
Goldman, Sachs Co.
Sole Global Coordinator and
Sole Structuring Coordinator
Citigroup
Credit Suisse
HSBC
Morgan Stanley
Senior Co-Manager
UBS Investment Bank
CONFIDENTIAL
Return
CONFIDENTIAL
CONFIDENTIAL
Washington
Mutual
$750,000,000
Washington Mutual Preferred Funding (Cayman) I Ltd.
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 ("Wa Mu
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 ("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 the
securities offered hereby,
(Continued on next page)
$ 10,000.00 per Series A-2 WaMu Cayman Preferred Security
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SERIES A-1 WAMU CAYMAN PREFERRED SECURITIES ARE
BEING 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 "INVESTMENT COMPANY ACT")) IN RELIANCE ON AN EXEMPTION FROM REGISTRATION PURSUANT TO
RULE 144A. 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 IN RELIANCE ON AN EXEMPTION FROM
REGISTRATION 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 Clearstrearn
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.
Sole Global Coordinator and Sole Structuring Coordinator
CitigroupCredit SuisseHSBCMorgan StanleyUBS investment Bank
Senior Co-Manager
WMIPC__500002044.00001
CONFIDENTIAL
CONFIDENTIAL
$750,000,000
( ) I
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 Non-
cumulative Preferred Securities, Series AM2, liquidation preference $10,000 per security (the "Series A-2 WaMu Cayman
Preferred Securities" and, together w!th the Series 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 Preferred Funding llC, a Delaware
Hmlted liability company (the "Company"). The terms of the Series 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 Non-
cumulative 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)
$ 10)000.00 per Series A-2 WaMu Cayman Preferred Security
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 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 Only
WMIPC_500002044.00001
Return
CONFIDENTIAL
(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 Dale 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.
VVM1PC 500002044.00002
Restricted
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. "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 1 WaMu Cayman Preferred Securities in the inmal offering must
acquire at least three Series 1 WaMu Cayman Preferred Securities having an aggregate liquidation preference of
$300,000.
The Initral Purchasers are offering the SerIes 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
Return
CONFIDENTIAL
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 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. ("WM/"). 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
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-1 WaMu Cayman Preferred. Securities to non-U.S. persons and of Series A-2 WaMu
Cayman Preferred Securities in the United States or 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"
VVMIPC_500002044.00017
1
CONFIDENTIAL
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 7.25
0
/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
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 U n i t e ~
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 Non-
cumUlative 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-to-
Floating Rate Preferred Securities (the "Fixed-to-Floating Rate Company Preferred Securities"
Restricted For Use in Connection with
Confirmation Only
WMIPC_500002044,00017
Return
CONFIDENTIAL
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 "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 WaMu Cayman
Preferred Security will be automatically exchanged for a like amount of Fixed Rate Depositary
Shares each representing 1/1000th of a share of WMI's Series J Perpetual Non-cumulative Fixed
Rate Preferred Stock, no par value and liquidation preference $1,000,000 per share ("Fixed Rate
WM1 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 WMI'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
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 /1000th interest 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 1/1000th in-
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".
WMI PC 500002044.00018
2
Restricted
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 Offerjng-
Conditional 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 Securities with an aggregate
Hqurdation preference of $1,000,000 are a "like amount" for ten Series WaMu
Cayman Preferred Securities or 100 Series WaMu Cayman Preferred Securities, each
having an 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 in-
terest 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".
2
WMIPC_500002044 00018
Return
The following diagram outlines the relationship among WM1, 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:
Proceeds
Fixed-to-Reeling
\ Rate Company
Preferred SecuritiesM
Fixed Rate Company
Preferred Securitiesm
111111! 1111-
University Street')
Proceeds
Company
WaMu
Delaware
WaMu
Cayman
Proceeds
WaMu Cayman
Proceeds
Trust
Securities
Investors
Assets
109%
Common
interest
Assets
Conditional
Exchange
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.
Conditional
Exchange
CONFIDENTIAL
3
Restricted For Use in Connection with Plan Confirmation Only VVMIPC 500002044.00019
Restricted 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: .

Exchange
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
Proceeds
Fixed ROlli! Company
Securi!1esf.J)
I ______ -!!>-
University Streetp)
Assets
(1) New American Gapili:ll. Inc., not shown here, is WMB's direct parent

,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
,
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.
3
in Connection with
Confirmation Only
Cor.diticnaf
Exchange
WMIPC_500002044000019
Return
CONFIDENTIAL
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
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 pail 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 LIBOR 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 & MawLLP 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.
WMIPC_500002044.00020
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
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 three-
month 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!derations-
United 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,
4
WM I PC _500002044,00020
Return
CONFIDENTIAL
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 firfancing
subsidiary (the "Independent Manager").
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 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
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 "Delaware
Trustee"). 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 "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
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
5
WMIPC_500002044.00621
Restricted
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
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
5
WMIPC_500002044,00021
Return
CONFIDENTIAL
Exchange under the symbol "WM". The principal business offices of WM1 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
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
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.
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
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 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
Return
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 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 Rate Company Preferred Securi-
ties Ranking,"
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 (iii) the Trust 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 WaMu Cayman Preferred Security
will be automatically exchanged for a like amount of Fixed
Rate Depositary Shares representing 1/1000th of a share
of WMI's Series J Perpetual Non-cumulative Fixed Rate
Preferred 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 or
receivership or (iii) the ()TS, in its sole discretion, directing
such 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
Company proposes to issue, (II) after giving effect to such
operations, Dr "FFO", for the four fiscal quarters beginning
wlth the fiscal quarter in which such Parity Equity Securi-
ties 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 Securi-
ties - 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 connec-
tJor). 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 Fixed Rate
Preferred 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 or
receivership or (iii) the OTS, in Its sale discretion, directing
SUGh exchange in anticipation of WMB becoming "under-
capitalized" in the near term or taking supervIsory action
Restricted For Use in Connection with Plan Confirmation
Return
CONFIDENTIAL
that limits the payment of dividends, as applicable, by
The Fixed Rate WM1 Preferred Stock will'have substantially
equivalent terms as to dividends, redemption and liquida-
Stock: (i) will not have the benefit of the covenants
Preferred SecuritiesVoting Rights and Covenants;"
(ii) will not be listed on any securities exchange or
automated dealer quotation system; (iii) will be redeem-
able 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
WMI Preferred Stock; and (v) if WMI fails to pay, or
declare and set aside for payment, kill dividends on the
the authorized number of WMI's directors will increase by
securities of WMI having similar voting rights, including the
Fixed-to-Floating Rate WM1 Preferred Stock, will have the
Fixed Rate WM1 Preferred Stock will be subject to the
Replacement Capital Covenant described under " Re-
demption/Replacement Capital Covenant" above.
to the Fixed Rate WMI Preferred Stock upon its issuance.
Each share of Fixed Rate WM1 Preferred Stock will, upon
issuance, rank at least pad passu with the most senior
Covenants 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
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, the Company will not:
into another entity other than an entity controlled by, or
issue any securities of the Company ranking senior to
WMIPC_500002044.00028
12
Restricted For
Covenants ... . .. , ........ .
that limits the payment of dividends, as applicabte, by
The Fixed Rate WM! Preferred Stock wilr have substantlatly
equivafent terms as to dividends, redemption and lIquida-
Stock: (l) will not have the benefit of the covenants
Preferred Securities - Voting Rights and Covenants;"
(il) wm not be listed on any securities exchange or
automated dealer quotation system; (iii) wi!! be redeem-
able 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
WMI Preferrod Stock; and (v) If WMI fails to pay, or
declare and set aside for payment, fuJi dividends on the
the authorjzed number of WMI's directors will increase by
securities of WMI having Similar voting rights, inclUding the
Fixed-to-Floating Rate WMJ Preferred Stock, will have the
Fixed Rate WMI Preferred Stock: will be subject to the
Replacement Capital Covenant described under "- R 8 ~
demption/Rep!acement CapitaJ Covenant" above,
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
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
two-thirds of the Fixed Rate Company Preferred Securittes
and the Fixed-to-Hoating Rate Company Preferred Securi-
ties, voting together as a single class, the Company wlil not
into another entity other tban an entity controlled by, or
issue any securitios of the Company ranking senior to
12
WMI PC _500002044,00028
Return
CONFIDENTIAL
Washington
Mutual
$1,250,000,000
Washington Mutual Preferred Funding Trust I
Fixed-
t
o
-
Floating Rate Perpetual Non- cumulative Trust Securities
Automatically Exchangeable
i
n
Specified Circumstances into
Depositary Shares representing Preferred Stock
o
f
The Fixed-
t
o
-
Floating Rate Perpetual Non- cumulative Trust Securities, liquidation preference $100,000 per security (the
" Trust Securities"),
o
f
Washington Mutual Preferred Funding Trust
I
, a Delaware statutory trust
(
" WaMu Delaware"), offered
hereby represent undivided beneficial ownership interests
i
n a like amount
o
f
Fixed-
t
o
-
Floating Rate Perpetual Non- cumulative
Preferrecj Securities, liquidation preference $1,000 per security (the " Fixed-
t
o
-
Floating Rate Company Preferred Securities"),
o
f
Washington Mutual Preferred Funding LLC, a Delaware limited liability company (
t
h
e
" Company"). WaMu Delaware will have
n
o
assets other than the Fixed-
t
o
-
Floating Rate Company Preferred Securities. WaMu Delaware will pass through dividends paid and
redemption and liquidation payments made
b
y
the Company
o
n
the Fixed-
t
o
-
a
s
distributions and redemption and liquidation payments
o
n
the Trust Securities. The Company's initial material assets will consist
o
f
indirect interests
i
n mortgages and mortgage- related assets originated
b
y
a
s
described herein.
Dividends
o
n
the Fixed-to- Floating Rate Company Preferred Securities will
b
e
payable
i
f
,
when and
a
s
declared
b
y
the
Company's Board
o
f
Managers out
o
f
o
n a noncumulative basis
a
t
an annual rate
o
f
6.534% until
March 15, 2011 and
3
-
month USD UBOR plus 1.4825% thereafter
o
n
the liquidation preference per security, quarterly
i
n arrears
o
n
March 15, June 15, September
1
5
and December
1
5
o
f
each year, commencing
o
n
June 15, 2006,
o
r
the next Business Day
i
f
any such day
i
s not a Business Day ( each, a " Dividend Payment Date").
I
f
t
h
e
Office
o
f
Thrift Supervision ( together with any successor regulator, the " OTS")
s
o
o
f
a
n
Exchange Event
a
s
described herein, each Trust Security will
b
e
automatically exchanged
f
o
r
depositary shares representing a
like amount
o
f
Washington Mutual, Inc.' s
(
" WMI") Series I Perpetual Non- cumulative Fixed-
t
o
-
Floating Rate Preferred Stock.
The Fixed-
t
o
-
Floating Rate Company Preferred Securities will not
b
e
redeemable
a
t
the option
o
f
the Company prior
t
o the
i
n March 2011, except upon the occurrence
o
f
a Tax Event,
a
n
o
r
a
Regulatory Capital Event ( each
a
s
described herein). Upon the occurrence
o
f
a Tax Event,
a
n
o
r
a Regulatory Capital Event, the Company may redeem the Fixed-
t
o
-
i
n whole but not
i
n part. On
o
r
i
n March 2011, the Company may redeem the Fixed-
t
o
-
Floating Rate Company
i
n whole
o
r
i
n part. Any redemption will
b
e subject
t
o the prior approval
o
f
the OTS and will
b
e
a
t
a
redemption price equal
t
p
e
r
Fixed-
t
o
-
Floating Rate Company Preferred Security, plus declared but
unpaid dividends,
i
f any, plus a
U
.
S
.
Treasury- based " make whole" amount
i
f the redemption occurs prior
t
o the Dividend
Payment Date
i
n March 2011.
The Trust Securities will
b
e
issued only
i
n book- entry form. Each individual purchaser
o
r
group
o
f
affiliated
purchasers that acquires Trust Securities
i
n the initial offering must acquire
a
t
least three Trust Securities having
a
n
o
f
$300,000.
The Trust Securities will not
b
e listed
o
n any securities exchange
o
r
The securities offered hereby are not insured
o
r
guaranteed
b
y
the
U
.
S
.
Federal Deposit Insurance Corporation.
See " Risk Factors" beginning
o
n page
1
7
f
o
r
a description
o
f
the risk factors you should consider before you invest
i
n
Offering price: $100,000.00 per Trust Security
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT
B
E
REGISTERED UNDER THE U
.
S
.
SECURITIES ACT
OF 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
O
F
1940, AS
AMENDED ( THE " INVESTMENT COMPANY ACT"
I
N RELIANCE ON AN EXEMPTION FROM REGISTRATION PURSUANT TO RULE
144A. PROSPECTIVE PURCHASERS OF TRUST SECURITIES ARE HEREBY NOTIFIED THAT THE SELLER
O
F
THE TRUST
SECURITIES MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
O
F
THE SECURITIES ACT PROVIDED
B
Y
RULE 144A. THE SECURITIES ARE NOT TRANSFERABLE EXCEPT
I
N ACCORDANCE WITH THE RESTRICTIONS DESCRIBED
UNDER " NOTICE
T
O
INVESTORS."
The Initial Purchasers expect
t
o deliver the Trust Securities through
t
h
e
facilities
o
f
The Depository Trust Company and
Euroclear Bank
S
.
A./
N
.
V.,
a
s
operator
o
f
the Euroclear System, and Clearstream Banking, societe anonyme,
a
s
participants
i
n
The Depository Trust Company,
i
n each case, against payment
i
n New York, New York on
o
r
about March
7
,
2006.
Sale Global Coordinator,
Sale Structuring Coordinator and
Joint Bookrunner
Credit Suisse
Joint Bookrunner
Morgan Stanley
Jomt Bookrunner
CONFIDENTIAL
Return
This offering circular
i
s confidential. You are authorized
t
o use this offering circular solely
f
o
r
the purpose
o
f
considering the purchase
o
f
the securities described
i
n the offering circular. WMI,
(
"
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
i
n this offering circular. The Initial Purchasers named herein
make
n
o
representation
o
r
warranty, express
o
r
implied,
a
s
t
o the accuracy
o
r
completeness
o
f
such information, and nothing contained
i
i
s
,
o
r
shall
b
e
relied upon as, a
promise
o
r
representation
b
y
the Initial Purchasers. You may not reproduce
o
r
distribute this
offering circular,
i
n whole
o
r
i
n part, and you may not disclose any
o
f
the contents
o
f
this offering
circular
o
r
use any information herein
f
o
r
any purpose other than considering the purchase
o
f
the
notes. You agree
t
o the foregoing
b
y
accepting delivery
o
f
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 OR
DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY
I
S A CRIMINAL OFFENSE.
The distribution
o
f
this offering circular and the offering and sale
o
f
the securities offered
hereby
i
n certain jurisdictions may
b
e
restricted
b
y
law. WMI, WMB, University Street, the
Company, WaMu Delaware, the Asset Trust, WaMu Cayman and the Initial Purchasers require
persons
i
n whose possession this offering circular comes
t
o inform themselves about and
t
o
observe any such restrictions. This offering circular does not constitute
a
n
offer
o
f
,
o
r
a
n
invitation
t
o purchase, any
o
f
the securities offered hereby
i
n any jurisdiction
i
n which such offer
o
r
invitation would
b
e
unlawful.
Notwithstanding anything herein
t
o the contrary, each investor (and each employee,
representative,
o
r
agent
o
f
any investor) may disclose
t
o any and
a
l
l
persons, without limitation
o
f
any kind, the tax treatment and tax structure
o
f
the transactions contemplated herein and
a
l
l
materials
o
f
any kind (including opinions
o
r
other tax analyses) that are provided
t
o the
investors relating
t
o such tax treatment and tax structure. However, any information relating
t
o
the United States Federal income tax treatment
o
r
tax structure will remain confidential (and the
foregoing sentence will not apply)
t
o the extent reasonably necessary
t
o enable any person
t
o
comply with applicable securities laws. For this purpose, " tax treatment" means United States
Federal
o
r
state income tax treatment, and " tax structure" means any facts relevant
t
o the
o
r
state income tax treatment
o
f
the transactions contemplated herein but
does not include information relating
t
o the identity
o
f
the issuer
o
f
the securities, the issuer
o
f
any assets underlying the securities,
o
r
any
o
f
their respective affiliates that are offering the
securities.
No person has been authorized
t
o
r
t
o make any representations
other than those contained
i
n this offering circular, and,
i
f given
o
r
made, such information
o
r
representations must not
b
e
relied upon
a
s
having been authorized
b
y
any
o
f
WMI, WMB,
University Street, the Company, WaMu Delaware, WaMu Cayman
o
r
the Asset Trust. Neither the
delivery
o
f
this offering circular nor any sale hereunder will create, under any circumstances, any
implication that there has been
n
o
change
i
n the affairs
o
f
WMI, WMB, the Company, WaMu
Delaware, University Street,
o
r
the Asset Trust since the date hereof
o
r
that the information
contained herein
i
s correct
a
s
o
f
any time subsequent
t
o
i
t
s
date.
CONFIDENTIAL
Return
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
O
F
THE NEW HAMPSHIRE REVISED
STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY
I
S
EFFECTIVELY REGISTERED OR A PERSON
I
S LICENSED
I
N THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY
DOCUMENT FILED UNDER RSA 421- B
I
S TRUE, COMPLETE AND NOT MISLEADING. NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION
I
S AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED
I
N
ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION.
I
T
I
S UNLAWFUL TO MAKE, OR
CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY
REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
I
N 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,
I
F COMMENCED, MAY BE
DISCONTINUED
A
T
ANY TIME, AND MUST BE BROUGHT TO AN END AFTER A LIMITED
PERIOD.
i
i
CONFIDENTIAL
Return
NOTICE
T
O
INVESTORS
Because
o
f
the following restrictions, purchasers are advised
t
o consult legal counsel prior
t
o
making any offer, purchase, resale, pledge
o
r
other transfer
o
f
Representations
o
f
Purchasers
Each purchaser
o
f
Trust Securities (including the registered holders and beneficial owners
o
f
a
s
they exist from time
t
o time, including
a
s
a result
o
f
transfers,
i
n each
case
a
s
o
f
the time
o
f
purchase) will
b
e
deemed
t
o have represented and agreed
a
s
follows:
(
A
)
the purchaser (
i
)
i
s a " qualified institutional buyer" within the meaning
o
f
Rule 144A
o
f
t
h
e
Securities Act, (
i
i
)
i
s aware that
t
h
e
sale
o
f
t
h
e
Trust Securities
t
o
i
t
i
s
being made
i
n reliance
o
n
Rule 144A
o
r
another exemption from the registration
requirements
o
f
the Securities Act and (
i
i
i
)
i
s acquiring such Trust Securities
f
o
r
i
t
s
own
account
o
r
the account
o
f
one
o
r
more qualified institutional buyers;
(
B
)
the purchaser (
i
)
i
s a " qualified purchaser" within the meaning
o
f
Sec-
tion 2 (
a
)
(51)
o
f
the Investment Company Act and the rules and regulations thereunder,
(
i
i
)
i
s aware that WaMu Delaware will not
b
e
registered under the Investment Company Act
i
n reliance
o
n
the exemption set forth
i
n Section 3(
c
)
(
7
)
thereof and that the Trust
Securities have not been and will not
b
e
registered under the Securities Act and (
i
i
i
)
i
s
acquiring such Trust Securities
f
o
r
i
t
s
own account
o
r
the account
o
f
one
o
r
more qualified
purchasers
a
s
t
o which the purchaser exercises sole investment discretion,
a
s
the case may
be;
(
C
)
either (
i
) the purchaser
i
s not (
A
)
a
n
" employee benefit plan"
a
s
defined
i
n
Section
3
(
3
)
o
f
the Employee Retirement Income Security Act
o
f
1974,
a
s
amended
(
"
ERISA"), whether
o
r
not subject
t
o ERISA and including, without limitation, foreign
o
r
governmental plans (
B
)
a " plan" within the meaning
o
f
Section 4975
o
f
the Internal
Revenue Code
o
f
1986,
a
s
amended (the " Code"),
o
r
(
c
)
any entity whose underlying
assets include " plan assets"
o
f
any
o
f
the foregoing
b
y
reason
o
f
investment
b
y
a
n
employee benefit plan
o
r
other plan
i
n such entity (each
o
f
the foregoing, a " Benefit Plan
Investor"),
o
r
(
i
i
)
the purchaser
i
s
a
n
insurance company general account that represents,
warrants and covenants that,
a
t
the time
o
f
acquisition and throughout the period
i
t holds
the securities, (
A
)
i
t
i
s eligible
f
o
r
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
o
f
such
general account are (
o
r
represent) assets
o
f
a Benefit Plan Investor and (
C
)
i
t
i
s not a
person who has discretionary authority
o
r
t
o the assets
o
f
WaMu
Delaware
o
r
any person who provides investment advice
f
o
r
a fee (direct
o
r
indirect) with
respect
t
o such assets,
o
r
any affiliate
o
f
b
e
excluded under
2
9
C
.
F
.
R
.
2510.3- 101 (
f
)
(
1
)
;
(
D
)
the purchaser
i
s not purchasing the Trust Securities with a view
t
o the resale,
distribution
o
r
other disposition thereof
i
n violation
o
f
the Securities Act;
(
E
)
neither the purchaser nor any account
f
o
r
which the purchaser
i
s acquiring the
Trust Securities will hold such Trust Securities
f
o
r
the benefit
o
f
any other person and the
purchaser and each such account will
b
e
the sole beneficial owners thereof
f
o
r
a
l
l
purposes
and will not sell participation interests
i
n the Trust Securities
o
r
enter into any other
arrangement pursuant
t
o which any other person will
b
e
entitled
t
o
a
n
interest
i
n the
distributions
o
n
t
h
e
Trust Securities;
i
i
i
CONFIDENTIAL
Return
(
F
)
the certificates evidencing the Trust Securities will bear a legend
t
o the following
effect:
THIS SECURITY
I
S 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
A
S
A
N
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
B
E
OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT TO A PERSON WHO
I
S 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
O
F
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 PERSON
WHO
I
S BOTH A QUALIFIED INSTITUTIONAL BUYER AND A QUALIFIED PURCHASER
(AN " ELIGIBLE PURCHASER") AND EACH SUCH PERSON AND ACCOUNT FOR WHICH
SUCH PERSON
I
S PURCHASING (
A
)
I
S NOT A BROKER- DEALER THAT OWNS AND
INVESTS ON A DISCRETIONARY BASIS LESS THAN US$
2
5
MILLION
I
N SECURITIES OF
ISSUERS THAT ARE NOT ITS AFFILIATED PERSONS, (
B
)
I
S NOT A PLAN REFERRED
TO
I
N PARAGRAPH (
a
)
(
1
)
(
i
) (
D
)
OR (
a
)
(
1
)
(
i
) (
E
)
OF RULE 144A, OR A TRUST FUND
REFERRED TO
I
N PARAGRAPH (
a
)
(
1
)
(
i
) (
F
)
OF RULE 144A THAT HOLDS THE ASSETS
OF SUCH A PLAN,
I
F INVESTMENT DECISIONS WITH RESPECT TO THE PLAN ARE
MADE BY THE BENEFICIARIES OF SUCH PLAN, (
C
)
WAS NOT FORMED FOR THE
PURPOSE
O
F
INVESTING
I
N WAMU DELAWARE, (
D
)
WILL HOLD
A
T
LEAST $300,000
LIQUIDATION PREFERENCE OF TRUST SECURITIES (
i
.
e
.
,
A
T
LEAST THREE TRUST
SECURITIES) AND TRANSFER
A
T
LEAST $100,000 LIQUIDATION PREFERENCE OF
TRUST SECURITIES (
i
.
e
.
,
A
T
LEAST ONE TRUST SECURITY)
I
N THE CASE
O
F
EACH
INITIAL INVESTOR, AND WILL HOLD AND TRANSFER
A
T
LEAST $100,000 LIQUIDATION
PREFERENCE OF TRUST SECURITIES (
i
.
e
.
,
AT LEAST ONE TRUST SECURITY)
I
N THE
CASE OF EACH SUBSEQUENT INVESTOR AND (
E
)
UNDERSTANDS THAT WAMU
DELAWARE MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS
I
N 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
I
T AGREES TO COMPLY WITH THE TRANSFER RESTRICTIONS SET
FORTH HEREIN AND
I
N THE AMENDED AND RESTATED TRUST AGREEMENT OF WAMU
DELAWARE (THE " TRUST AGREEMENT"), 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
I
T
I
S PURCHASING. ANY PURPORTED TRANSFER OF
THIS SECURITY OR ANY BENEFICIAL INTERESTS HEREIN THAT
I
S
I
N BREACH, AT THE
TIME MADE, OF ANY TRANSFER RESTRICTIONS SET FORTH HEREIN OR
I
N THE
TRUST AGREEMENT WILL BE VOID AB INITIO.
I
F AT ANY TIME WAMU DELAWARE
DETERMINES
I
N GOOD FAITH THAT A HOLDER OR BENEFICIAL OWNER
O
F
THIS
SECURITY OR BENEFICIAL INTERESTS HEREIN
I
S
I
N BREACH, AT THE TIME GIVEN, OF
ANY OF THE TRANSFER RESTRICTIONS SET FORTH HEREIN, WAMU DELAWARE
SHALL CONSIDER THE ACQUISITION OF THIS SECURITY OR SUCH BENEFICIAL
INTERESTS VOID, OF NO FORCE AND EFFECT AND WILL NOT,
A
T
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
O
F
TRANSFER, EXCHANGE OR PAYMENT (THE
i
v
CONFIDENTIAL
Return
'
' TRANSFER AGENT"), OR ANY OTHER INTERMEDIARY.
I
N 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"
A
S
DEFINED
I
N SECTION
3
(
3
)
OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED
(
"
ERISA"), WHETHER OR NOT
MENTAL PLANS, (
I
I
)
A " PLAN" WITHIN THE MEANING OF SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE " CODE"), OR (
I
I
I
)
ANY
ENTITY WHOSE UNDERLYING ASSETS INCLUDE " PLAN ASSETS" OF ANY OF THE
OTHER PLAN
I
N SUCH ENTITY (EACH
O
F
THE FOREGOING, A " BENEFIT PLAN
I
T HOLDS THE SECURITIES, (
I
)
I
T
I
S ELIGIBLE FOR
AND MEETS THE REQUIREMENTS
O
F
THE DEPARTMENT
O
F
LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION 95- 60, (
I
I
)
LESS THAN 25% OF THE ASSETS OF
SUCH GENERAL ACCOUNT ARE (OR REPRESENT) ASSETS OF A BENEFIT PLAN
INVESTOR AND (
I
I
I
)
I
T
I
CONTROL WITH RESPECT TO THE ASSETS OF WAMU DELAWARE OR ANY PERSON
WHO PROVIDES INVESTMENT ADVICE FOR A FEE (DIRECT OR INDIRECT) WITH
RESPECT
T
O
SUCH ASSETS, OR ANY AFFILIATE
O
F
SUCH A PERSON AND WOULD
NOT OTHERWISE BE EXCLUDED UNDER
2
9
C
.
F
.
R
.
2510.3- 101 (
F
)
(
1
)
.
I
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
(
" DTC"), TO
WAMU DELAWARE OR THE TRANSFER AGENT, AND ANY CERTIFICATE ISSUED
I
S
REGISTERED
I
N THE NAME OF CEDE & CO. OR
I
I
S
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
I
S
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
A
S
I
S REQUESTED
B
Y
AN
HEREOF FOR VALUE OR OTHERWISE
B
Y
OR TO ANY PERSON
I
S WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
(
G
)
the purchaser and each account
f
o
r
which
i
t
i
s purchasing:
(
i
)
i
s not a broker- dealer that owns and invests
o
n
a discretionary basis less
than $
2
5
million
i
n securities
o
f
unaffiliated issuers;
(
i
i
)
i
s not a participant- directed employee plan, such
a
s
a 401 (
k
)
plan,
a
s
referred
t
o
i
n paragraph (
a
)
(
1
)
(
i
) (
D
)
o
r
(
a
)
(
1
)
(
i
) (
E
)
o
f
Rule 144A,
o
r
a trust fund referred
t
o
i
n paragraph (
a
)
(1 ) (
i
) (
F
)
o
f
Rule 144A that holds the assets
o
f
such a plan;
(
i
i
i
)
was not formed
f
o
r
the purpose
o
f
investing
i
n WaMu Delaware;
(
i
v
)
will hold
a
t
o
f
Trust Securities (
i
.
e
.
,
a
t
least three Trust Securities) and transfer
a
t
o
f
Trust Securities (
i
.
e
.
,
a
t
least one Trust Security)
i
n the case
o
f
each initial investor,
and will hold and transfer
a
t
o
f
Trust Securities
(
i
.
e
.
,
a
t
least one Trust Security)
i
n the case
o
f
each subsequent investor;
(
v
)
will provide notice
o
f
the transfer restrictions described
i
n this " Notice
t
o
Investors"
t
o any subsequent transferees;
v
CONFIDENTIAL
Return
(
v
i
)
acknowledges that WaMu Delaware may receive a
l
i
s
t
o
f
positions
i
n the Trust Securities from one
o
r
more book- entry depositaries; and
(vii) may not transfer the Trust Securities
o
r
beneficial interests therein except
t
o
a transferee who can make the same representations and agreements
a
s
set forth
i
n
this " Notice
t
o Investors" and Amended and Restated Trust Agreement
o
f
WaMu
Delaware (the " Trust Agreement")
o
n
behalf
o
f
itself and each account
f
o
r
which
i
t
i
s
purchasing.
The purchaser acknowledges that the Trust Securities are being offered only
i
n a
transaction not involving any public offering within the meaning
o
f
the Securities Act. The Trust
Securities have not been and will not
b
e
registered under the Securities Act and WaMu Delaware
has not been and will not
b
e
registered under the Investment Company Act, and,
i
f
i
n the future
the purchaser decides
t
o offer, resell, pledge
o
r
otherwise transfer the Trust Securities, such
Trust Securities may
b
e
offered, resold, pledged
o
r
otherwise transferred only
i
n accordance with
the legend
o
n
such Trust Securities described above. The purchaser acknowledges that
n
o
representation
i
s made
b
y
WaMu Delaware, the Company
o
r
a
s
t
o the
availability
o
f
any exemption under the Securities Act
o
r
any state securities laws
f
o
r
resale
o
f
the Trust Securities.
Forced Sale
o
f
Securities
Any transfer
o
f
Trust Securities
i
n breach
o
f
the transfer restrictions set forth
i
n this " Notice
t
o Investors" and the Trust Agreement will
b
e
o
f
n
o
force and effect, will
b
e
void
a
b
initio, and
will not operate
t
o transfer any rights
t
o the transferee, notwithstanding any instructions
t
o the
contrary
t
o WaMu Delaware,
i
t
s
Transfer Agent
o
r
any other intermediary.
The purchaser agrees that
i
n the event that WaMu Delaware
o
r
i
t
s
Transfer Agent
determines
i
n good faith that a holder
o
r
beneficial owner
o
f
i
s
i
n breach,
a
t
the time given,
o
f
any
o
f
the representations
o
r
agreements set forth above, WaMu Delaware
shall consider the acquisition
o
f
o
r
beneficial interests therein void,
o
f
n
o
force and effect and will not,
a
t
the discretion
o
f
WaMu Delaware, operate
t
o transfer any rights
t
o the transferee notwithstanding any instructions
t
o the contrary
t
o WaMu Delaware, the
Transfer Agent
o
r
any other intermediary.
I
n addition, WaMu Delaware
o
r
the Transfer Agent may
require such acquirer
o
r
beneficial owner
t
o transfer such Trust Securities
o
r
therein
t
o a transferee acceptable
t
o WaMu Delaware who
i
s able
t
o and who does make
a
l
l
o
f
the representations and agreements set forth
i
n this " Notice
t
o Investors". Pending such
transfer, such holder will
b
e
deemed not
t
o
b
e
the holder
o
f
such Trust Securities
f
o
r
any
purpose, including but not limited
t
o receipt
o
f
dividend and redemption payments
o
n
such Trust
Securities
o
r
distributions upon
t
h
e
liquidation
o
f
WaMu Delaware, and such holder
w
i
l
l
b
e
deemed
t
o have
n
o
interest whatsoever
i
n such Trust Securities except
a
s
otherwise required
t
o
redeem
o
r
sell
i
t
s
interest therein
a
s
described
i
n this paragraph.
I
n reliance
o
n
Section
3
(
c
)
(
7
)
under the Investment Company Act
(
"
Section
3
(
c
)
(
7
)
"
)
,
WaMu Delaware has not registered
a
s
a
n
investment company pursuant
t
o the Investment
Company Act.
T
o
rely
o
n
Section
3
(
c
)
(7), WaMu Delaware must have a " reasonable belief" that
a
l
l
purchasers
o
f
the Trust Securities (including the Initial Purchasers and subsequent
transferees) are qualified purchasers
a
t
the time
o
f
their purchase
o
f
such securities. WaMu
Delaware will establish a reasonable belief
f
o
r
purposes
o
f
Section 3 (
c
)
(
7
)
based upon the
representations deemed made
b
y
the purchasers
o
f
the securities
a
s
s
e
t
forth under
"
-
Representations
o
f
Purchasers", the covenants and undertakings
o
f
WaMu Delaware
referred
t
o below and the agreements
o
f
the Initial Purchasers relating
t
o the private placement
o
f
the securities pursuant
t
o Rule 144A referred
t
o under " Plan
o
f
Distribution."
v
i
CONFIDENTIAL
Return
Reminder Notices
Whenever WaMu Delaware sends
a
n
annual report
o
r
other periodic report
t
o holders
o
f
the
Trust Securities,
i
t will also send a reminder notice (each, a " Reminder Notice")
t
o the holders
o
f
the Trust Securities. Each Reminder Notice will state that (
i
) each holder
o
f
a Trust Security (
o
r
a
n
interest
i
n a Trust Security) must
b
e
able
t
o make the representations set forth above
i
n
paragraphs (
B
)
and (
G
)
(
i
v
)
under
"
-
Representations
o
f
Purchasers" (the "
3
(
c
)
(
7
)
Representations"), (
i
i
)
the Trust Securities (
o
r
interests
i
n the Trust Securities) are transferable
only
t
o purchasers deemed
t
o have made the 3 (
c
)
(
7
)
Representations and
t
o have satisfied the
other transfer restrictions applicable
t
o the securities, (
H
i
)
i
f any prospective transferee
o
f
the
Trust Securities (
o
r
a
n
interest
i
n the Trust Securities)
i
s determined not
t
o
b
e
a qualified
purchaser, then WaMu Delaware will have the right (exercisable
i
n
i
t
s
sole discretion)
t
o refuse
t
o honor such transaction, and (
i
v
)
i
f any security holder (
o
r
any holder
o
f
a
n
interest
i
n a
security)
i
s determined not
t
o
b
e
a qualified purchaser, then WaMu Delaware will have the right
(exercisable
i
n
i
t
s
sole discretion)
t
o treat the transfer
t
o such purchaser
a
s
null and void and
require such purchaser
t
o sell
a
l
l
o
f
i
t
s
securities (and
a
l
l
interests therein)
t
o a transferee
designated
b
y
WaMu Delaware
a
t
the then current market price therefor. WaMu Delaware will
send a copy
o
f
each annual
o
r
other periodic reports ( and each Reminder Notice)
t
o DTC with a
request that participating organizations
i
n DTC
(
" DTe Participants") forward them
t
o the security
holders
o
r
holders
o
f
a
n
interest
i
n Trust Securities.
DTC Actions with respect
t
o the Trust Securities
WaMu Delaware will direct DTC
t
o take the following steps
i
n connection with the Trust
Securities:
t
o include the " 3cT' marker and,
i
n lieu
o
f
the " GABS" marker
o
r
otherwise, the " GRLS"
marker
i
n the DTC 20- character security descriptor, and the 48- character additional
descriptor
f
o
r
i
n order
t
o indicate that sales are limited
t
o Qualified
Purchasers;
t
o cause (
i
) each physical DTC delivery order ticket delivered
b
y
DTC
t
o purchasers
t
o
contain the 20- character security descriptors and (
i
i
)
each DTC delivery order ticket
delivered
b
y
DTC
t
o purchasers
i
n electronic form
t
o contain the " 3cT' and " GRLS"
indicators and the related user manual
f
o
r
participants, which will contain a description
o
f
relevant restrictions;
t
o send,
o
n
o
r
prior
t
o the closing date
o
f
this Offering,
a
n
" Important Notice"
t
o
a
l
l
DTC
Participants
i
n connection with the Offering
o
f
the securities. WaMu Delaware may
instruct DTC from time
t
o time (but not more frequently than every six months)
t
o
reissue the " Important Notice";
t
o include WaMu Delaware
i
n DTC's " Reference Directory"
o
f
Section
3
(
c
)
(
7
)
offerings;
t
o include
i
n
a
l
l
" confirms"
o
f
trades
o
f
i
n DTC, CUSIP numbers with
a " fixed field" attached
t
o the CUSIP number that has the " 3cT' and " GRLS" markers;
and
t
o deliver
t
o WaMu Delaware from time
t
o time a
l
i
s
t
o
f
a
l
l
DTC Participants holding
a
n
interest
i
n the securities.
v
i
i
CONFIDENTIAL
Return
Euroclear Actions with respect
t
WaMu Delaware will instruct Euroclear Bank
S
.
A
.
/
N
.
V.,
a
s
operator
o
f
the Euroclear System
(
"
Euroclear"),
t
o take the following steps
i
n connection with the Trust Securities:
t
o reference " 144A
1
3
(
c
)
(
7
)
"
a
s
part
o
f
the security name
i
n
t
h
e
Euroclear securities
database;
i
n each daily securities balances report and daily transactions report
t
o Euroclear
participants holding positions
i
n
t
h
e
Trust Securities,
t
o include " 144A
1
3
(
c
)
(
7
)
"
i
n the
securities name
f
o
r
the Trust Securities;
periodically (and
a
t
least annually)
t
o send
t
o the Euroclear participants holding positions
i
a
n
electronic " Important Notice" outlining
t
h
e
restrictions
applicable
t
o 3(
c
)
(
7
)
securities;
t
o deliver
t
t
o time, upon
i
t
s request, a list
o
f
a
l
l
Euroclear
a
n
interest
i
n the Trust Securities; and
t
o include the 3(
c
)
(
7
)
marker
i
n the name
o
f
i
n lists distributed
b
y
Euroclear monthly
t
o
i
t
s participants showing
a
l
l
securities accepted within the Euroclear
securities' database.
Clearstream Actions with respect
t
WaMu Delaware will instruct Clearstream Banking, societe anonyme
(
"
Clearstream")
t
o
take the following steps
i
n connection with the Trust Securities:
t
o reference " 144A
1
3
(
c
)
( 7)"
a
s
part
o
f
the security name
i
n the Clearstream securities
database;
i
n each daily portfolio report and daily settlement report
t
o Clearstream participants
holding positions
i
n the Trust Securities,
t
o include " 144A/
3
(
c
)
(7)"
i
n the securities
name
f
o
r
periodically (and
a
t
least annually)
t
o send
t
o the Clearstream participants holding
positions
i
a
n
electronic " Important Notice" outlining the restrictions
applicable
t
o 3 (c ) (
7
)
securities;
t
o deliver
t
t
o time, upon
i
t
s
request, a
l
i
s
t
o
f
a
l
l
Clearstream
a
n
interest
i
n the Trust Securities; and
t
o include the
3
(
c
)
(
7
)
marker
i
n the name
o
f
i
n the continuously
updated
l
i
s
t
made available
b
y
Clearstream
t
o
i
t
s
participants showing
a
l
l
securities
accepted within the Clearstream securities' database and
t
o include the 3(
c
)
(
7
)
marker
i
n the name
o
f
Bloomberg Screens, etc.
WaMu Delaware will from time
t
o time request
a
l
l
third- party vendors
t
o include
o
n
screens
maintained
b
y
such vendors appropriate legends regarding Rule 144A and Section 3 (
c
)
(
7
)
restrictions
o
n
the Trust Securities. Without limiting the foregoing, the Initial Purchasers will
request that Bloomberg,
L
.
P
.
include the following
o
n
each Bloomberg screen containing
information about the securities
a
s
applicable:
the bottom
o
f
the " Security Display" page describing the Trust Securities should state:
" Iss'd under 144A/ 3cT' and " GRLS";
v
i
i
i
CONFIDENTIAL
Return
t
h
e
" Security Display" page should have a flashing red indicator stating " Additional Note
Pg";
such indicator
f
o
r
the Trust Securities should link
t
o
a
n
" Additional Security Information"
page, which should state that the Trust Securities " are being offered
i
n reliance
o
n
the
exception from registration under Rule 144A
o
f
the Securities Act
o
f
1933,
a
s
amended
(the " Securities Act")
t
o persons that are (
i
) " qualified institutional buyers"
a
s
defined
i
n
Rule 144A under
t
h
e
Securities Act, and (
i
i
) " qualified purchasers"
a
s
defined under
Section 2 (
a
)
(51)
o
f
the Investment Company Act
o
f
1940,
a
s
amended";
the " Disclaimer" pages
f
o
r
the Trust Securities should state that the securities " have not
been and will not
b
e
registered under the Securities Act
o
f
1933,
a
s
amended, and
Washington Mutual Preferred Funding Trust I has not been registered under the
o
f
1940,
a
s
amended (the " Investment Company Act"), and the
Fixed-
t
o
-
Floating Rate Perpetual Non- cumulative Trust
S
~
curities may not
b
e
offered
o
r
sold absent
a
n
applicable exemption from registration requirements and any such offer
and sale
o
f
these securities must
b
e
i
n accordance with Section 3 (
c
)
(
7
)
o
f
the
Investment Company Act".
CUSIP
WaMu Delaware will cause each " CUSIP" obtained
f
o
r
a Global Security
t
o have
a
n
attached " fixed field" that contains " 3cT', " GRLS" and " 144A" indicators.
Legends
WaMu Delaware
w
i
l
l
n
o
t
remove
t
h
e
legend
s
e
t
forth
i
n
"
-
Representations
o
f
Purchasers"
a
t
any time.
i
x
CONFIDENTIAL
Return
SPECIAL NOTE REGARDING FORWARD- LOOKING STATEMENTS
This offering circular and the documents incorporated herein
b
y
reference qontain certain
" forward- looking statements" within the meaning
o
f
the Private Securities Litigation Reform Act
o
f
1995 with respect
t
o financial condition, results
o
f
operations, and other matters. Statements
i
n this offering circular, including those incorporated herein
b
y
reference, that are
n
o
t
historical
facts are " forward- looking statements" for the purpose
o
f
the safe harbor provided
b
y
Section 21E
o
f
the Exchange Act and Section 27A
o
f
the Securities Act. Forward- looking
statements can
b
e
identified
b
y
the fact that they
d
o
not relate strictly
t
o historical
o
r
current
facts. They often include words, such
a
s
" expects", " anticipates", " intends", " plans",
" believes", " seeks", " estimates"
o
r
words
o
f
similar meaning,
o
r
future
o
r
conditional verbs,
such
a
s
" will", " should", " could"
o
r
" may".
Forward- looking statements provide WMl's
o
r
WMB's (
a
s
applicable) expectations
o
r
predictions
o
f
future conditions, events
o
r
results. They are not guarantees
o
f
future
performance.
B
y
their nature forward- looking statements are subject
t
o risks and uncertainties.
These statements speak only
a
s
o
f
the date they are made. WMI and WMB
d
o
not undertake
t
o
update forward- looking statements
t
o reflect the impact
o
f
circumstances
o
r
events that arise
after the date the forward- looking statements were made. There are a number
o
f
factors, many
o
f
which are beyond WMl's
o
r
WMB's (
a
s
applicable) control, that could cause actual
conditions, events
o
r
results
t
o differ significantly from those described
i
n the forward- looking
statements. The factors are generally described
i
n WMI's
o
r
WMB's (
a
s
applicable) most recent
Form 10- K and Form 10- Q under the caption " Risk Factors."
x
CONFIDENTIAL
Return
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
a
t
the SEC's public reference room
i
n Washington,
D
.
C
.
Please call
the SEC
a
t
1
-
800- SEC- 0330
f
o
r
further information
o
n
the public reference room.
I
n addition,
WMI's SEC filings are available
t
o the public
a
t
the SEC's web site
a
t
http:// www. sec. gov. You
can also inspect reports, proxy statements and other information about WMI
a
t
the offices
o
f
the
New York Stock Exchange,
2
0
Broad Street, New York, New York.
This offering circular incorporates
b
y
reference certain information that WMI files with the
SEC. The information incorporated
b
y
reference
i
s considered
t
o
b
e
a part
o
f
and should
b
e
read with the same care. When WMI updates
t
h
e
i
n
documents that have been incorporated
b
y
reference
b
y
making future filings with the SEC, the
information incorporated
b
y
reference
i
i
s considered
t
o
b
e
automatically
updated and superseded.
I
n other words,
i
n the case
o
f
a conflict
o
r
inconsistency between
information with respect
t
o WMI contained
i
n this offering circular and information incorporated
b
y
reference into this offering circular, you should rely
o
n
i
n the
document that was filed later. WMI incorporates
b
y
reference the documents listed below and
any documents
i
t files with the SEC
i
n the future under Sections
1
3
(
a
)
,
13(
c
)
,
14,
o
r
1
5
(
d
)
o
f
the Exchange Act until the Offering
i
s completed:
Annual Report
o
n
Form 10- K
f
o
r
the year ended December 31, 2004;
Quarterly Reports
o
n
Form 10- Q
f
o
r
the quarterly periods ended March 31, 2005,
June 30, 2005 and September 30, 2005; and
Current Reports
o
n
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
1
9
,
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
o
f
WMI dated January 18, 2006 and the
financial supplement
o
f
WMI, included
a
s
Exhibits 99.1 and 99.2
t
o WMI's Current Report
o
n
Form
8
-
K
,
dated January 18, 2006, are incorporated
b
y
reference
i
n 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
i
n the January 18, 2006 Current Report
o
n
Form
8
-
K
has not been audited
b
y
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
a
t
the
OTS's offices
a
t
1700 G Street, NW., Washington,
D
.
C
.
20552.
I
n addition, WMB's most recent
periodic filings with the OTS are available
t
o the investors
a
t
WMI's website
a
t
http:// www. wamu. com
f
i
r
and then clicking the " Fixed Income" button.
This offering circular incorporates
b
y
reference certain information that WMB files with the
OTS. The information incorporated
b
y
reference
i
s considered
t
o
b
e
a part
o
f
and should
b
e
read with the same care. When WMB updates the information contained
i
n
documents that have been incorporated
b
y
reference
b
y
making future filings with the OTS, the
information incorporated
b
y
reference
i
i
s considered
t
o
b
e
automatically
updated and superseded.
I
n other words,
i
n the case
o
f
a conflict
o
r
inconsistency between
information with respect
t
o WMB contained
i
n this offering circular and information incorporated
b
y
reference into this offering circular, you should rely
o
n
i
n the
x
i
CONFIDENTIAL
Return
document that was filed later. WMB incorporates
b
y
reference the documents listed below and
any documents
i
t files with the OTS
i
n the future under Sections
1
3
(
a
)
,
1
3
( c
)
,
14,
o
r
15(
d
)
o
f
the Exchange Act
o
r
regulations
o
f
the OTS
t
o substantially similar effect until the Offering
i
s
completed:
Annual Report
o
n
Form 10- K
f
o
r
the year ended December 31, 2004; and
Quarterly Reports
o
n
Form 10- Q
f
o
r
the quarterly periods ended March 31, 2005,
June 30, 2005 and September 30, 2005.
This offering circular also incorporates herein
b
y
reference certain other information that
WMB submits
t
o the OTS. WMB submits
t
o the OTS quarterly reports regarding WMB's financial
condition and operations
o
n
OTS Form 1313 entitled ' Thrift Financial Report" ( each, a " Thrift
Financial Report" and collectively, the " Thrift Financial Reports"). Each Thrift Financial Report
consists
o
f
a Consolidated Statement
o
f
Condition, Consolidated Statement
o
f
Operations,
Consolidated Cash Flow Information, Consolidated Capital Requirements and other supporting
schedules
a
s
o
f
the end
o
f
the period
t
o which the report relates. The Thrift Financial Reports
are prepared
i
n accordance with regulatory instructions issued
b
y
the OTS. These regulatory
instructions
i
n most, but not all, cases follow generally accepted accounting principles
i
n the
United States
(
" GAAP")
o
r
the opinions and statements
o
f
the Accounting Principles Board
o
r
the Financial Accounting Standards Board. While the Thrift Financial Reports are supervisory and
regulatory documents, not previously accounting documents, and
d
o
not provide a complete
range
o
f
financial disclosure about WMB, the reports nevertheless provide important information
concerning WMB's financial condition and operating results.
I
n addition, WMB's Thrift Financial
Reports are not audited. The non- confidential portions
o
f
Thrift Financial Reports filed
b
y
WMB
are
o
n
file with, and are publicly available upon written request
t
o the Office
o
f
Thrift Supervision,
FOIA, 1700 G Street, NW., Washington,
D
.
C
.
20552, Attention: Dissemination Branch and are
also available
a
t
the
U
.
S
.
Federal Deposit Insurance Corporation's (the " FDIC") web site
a
t
http:// www. fdic. gov.
You may request a copy
o
f
these filings, other than
a
n
exhibit
t
o a filing unless that exhibit
i
s specifically incorporated
b
y
reference into that filing,
a
t
n
o
cost,
b
y
writing
t
o
o
r
telephoning
WMI
a
t
:
1201 Third Avenue
(206) 461- 3187
INDEX
O
F
TERMS
A
n
index
o
f
terms used
i
n this offering circular with specific meanings appears
o
n
the inside
back cover
o
f
x
i
i
CONFIDENTIAL
Return
The following summary
i
s qualified
i
n
i
t
s entirety
b
y
the detailed information appearing
elsewhere
i
i
n particular, the information under the headings " Description
o
f
t
h
e
Trust Securities" and " Description
o
f
t
h
e
Fixed-
t
o
-
Floating Rate Company Preferred Securities, "
which describe the terms and conditions
o
f
Introduction
The Fixed-
t
o
-
Floating Rate Perpetual Non- cumulative Trust Securities, liquidation preference
$100,000 per security (the " Trust Securities"), are being issued
b
y
Funding Trust I
(
"
WaMu Delaware")
i
n a financing transaction that raises capital for Washington
Mutual Bank
(
"
WMB"). WMB
i
s a subsidiary
o
f
(
"
WMI"). WMI and
i
t
s
affiliates are referred
t
o herein
a
s
the " WMI Group".
WaMu Delaware will invest the proceeds
o
f
i
n a like amount
o
f
Fixed-
t
o
-
Floating Rate Perpetual Non- cumulative Preferred Securities, liquidation preference
$1,000 per security (the " Fixed-
t
o
-
Floating Rate Company Preferred Securities"),
o
f
Washington
Mutual Preferred Funding LLC, a Delaware limited liability company (the " Company"). WaMu
Delaware will have
n
o
assets other than the Fixed-
t
o
-
Floating Rate Company Preferred
Securities. Dividends paid and redemption and liquidation payments made
b
y
the Company
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities will pass through WaMu Delaware
a
s
distributions and redemption and liquidation payments
o
n
the Trust Securities. The Company's
initial material assets will consist
o
f
direct
o
r
indirect interests
i
n mortgages
o
r
mortgage- related
assets originated
b
y
WMB
a
s
described under " The Company - Business
o
f
the Company-
Assets
o
f
the Company" and
'
' The Asset Trust."
The Trust Securities are being offered
i
n reliance upon Rule 144A under the
U
.
S
.
Securities
Act
o
f
1933,
a
s
amended (the " Securities Act") only
t
o persons who are " qualified institutional
buyers" within the meaning
o
f
144A and " qualified purchasers" within the meaning
o
f
Section
2
(
a
)
(51)
o
f
the
U
.
S
.
o
f
1940,
a
s
amended the (the
" Investment Company Act"). Resales
o
f
the Trust Securities are subject
t
o restrictions
a
s
described under " Notice
t
o Investors".
B
y
a separate offering circular dated the date
o
f
this offering circular, Washington Mutual
Preferred Funding (Cayman) I Ltd., a Cayman Islands exempted company limited
b
y
shares
(
"
WaMu Cayman"),
i
s offering 3,023
o
f
i
t
s
7.25% Perpetual Non- cumulative Preferred Securities,
Series
A
-
1
,
liquidation preference $100,000 per security and $302,300,000
i
n the aggregate (the
" Series
A
-
1 WaMu Cayman Preferred Securities"), and 44,770
o
f
i
t
s
7.25% Perpetual Non-
cumulative Preferred Securities, Series
A
-
2
,
liquidation preference $10,000 per security and
$447,700,000
i
n 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
o
f
i
n a like amount
o
f
$1,000 per security and $750,000,000
i
n the aggregate
(
" Fixed Rate Company Preferred
Securities" and, together with the Fixed- to-Floating Rate Company Preferred Securities, the
" Company Preferred Securities"). The terms
o
f
a
r
e
substantially identical
t
o the Fixed-
t
o
-
Floating Rate Company Preferred Securities except
f
o
r
the
dividend rate. The Series
A
-
1 WaMu Cayman Preferred Securities are being offered and sold only
i
t
o
U
.
S
.
persons and the Series
A
-
2 WaMu Cayman Preferred
Securities are being offered and sold only
t
o non-
U
.
S
.
persons
i
n transactions outside the United
States. They are not being offered
b
y
this offering circular. The Trust Securities are not
exchangeable
f
o
r
o
r
vice versa.
1
CONFIDENTIAL
Return
WMB has asked
f
o
r
confirmation from the Office
o
f
Thrift Supervision (together with any
successor regulator, the " OTS") that the Company Preferred Securities constitute core capital
o
f
WMB under the OTS' applicable regulatory capital regulations and, upon receipt .
o
f
such
confirmation, intends
t
I
f
the OTS
s
o
o
f
a
n
Exchange Event, each Trust Security
will
b
e
automatically exchanged
f
o
r
a like amount
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares
each representing 111000th
o
f
a share
o
f
WMI's Series I Perpetual Non-cumulative Fixed-
t
o
-
Floating Rate Preferred Stock,
n
o
par value and liquidation preference $1,000,000 per share (the
" Fixed-
t
o
-
Floating Rate WMI Preferred Stock"),
a
s
described below
i
n this summary under
"
-
The Offering - Conditional Exchange." Upon a Conditional Exchange, the WaMu Cayman
Preferred Securities will also
b
e
automatically exchanged, but
f
o
r
depositary shares representing
a different series
o
f
WMI's preferred stock, having substantially equivalent terms (with certain
exceptions)
a
s
t
o dividends, liquidation preference and redemption preference
a
s
the Fixed Rate
Company Preferred Securities.
This offering circular uses the term " like amount"
i
n describing the number
o
f
Fixed-
t
o
-
i
n which a holder
o
f
Trust Securities has a beneficial
interest and
i
n describing the number
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares, each
representing a
1
/
1 OOOthof interest
i
n one share
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock
f
o
r
which the Trust Securities will
b
e
exchanged upon a Conditional Exchange. The term " like
amount" means:
o
f
Fixed-
t
o
-
i
n
which a holder
o
f
Trust Securities has a beneficial interest, the number
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities that has the same aggregate
a
s
t
o which the reference
i
s being made (
e
.
g
.
,
1,000 Fixed-
t
o
-
Floating Rate Company Preferred Securities with
a
n
aggregate liquidation
preference
o
f
$1,000,000 are a " like amount"
f
o
r
1
0
Trust Securities having
a
n
aggregate
o
f
$1,000,000); and
o
f
Fixed-
t
o
-
f
o
r
Fixed-
t
o
-
Floating Rate WMI Preferred Stock with which Trust Securities will
b
e
exchanged upon a
Conditional Exchange, a number
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares each
representing 111000th
o
f
a
n
interest
i
n one share
o
f
Fixed-
t
o
-
Floating Rate WMI
Preferred Stock having a liquidation preference equal
t
o
f
the
Trust Securities that are being exchanged (
e
.
g
.
,
1,000 Fixed-
t
o
-
Floating Rate Depositary
Shares representing Fixed-
t
o
-
Floating Rate WMI Preferred Stock with
a
n
aggregate
o
f
$1,000,000 are a " like amount"
f
o
r
1
0
Trust Securities having
a
n
o
f
$1,000,000).
The offering
o
f
the Trust Securities and the related issuance
o
f
the Fixed-
t
o
-
Floating Rate
a
.
r
e referred
t
o herein
a
s
the " Offering".
2
CONFIDENTIAL
Return
The following diagram outlines the relationship among WMI, WMB, University Street, the
Company, the Asset Trust, WaMu Delaware, WaMu Cayman, purchasers
o
f
and purchasers
o
f
the WaMu Cayman Preferred Securities:
University Street!')
Conditional
1 Exchange
1
1
1
1
1
1
I
I
I
I
I
I
1
1
1
I
I
I
1
I
1
1
1
1
1
.
. - 1
Proceeds
Assets
Fixed Rate Company
Preferred Securities!')
Assets
100%
Common
Interest
Proceeds
1
1
1
1
1
I
: Proceeds WaMu Cayman
: Preferred Securities
1
1
1
1
'--------
Conditional
Exchange
( 1
)
New American Capital, Inc., not shown here,
i
s WMB's direct parent.
( 2
)
Marion Holdings, Inc.,
n
o
t
shown here,
i
s University Street's direct parent.
( 3) Transferred
b
y
WMB
t
o WaMu Cayman.
(
4
)
Transferred
b
y
WMB
t
o WaMu Delaware.
3
CONFIDENTIAL
Return
WaMu Delaware
i
s a statutory trust created under
t
h
e
Delaware
Statutory Trust Act
o
n
February 23, 2006
f
o
r
the purposes set forth below
i
n " WaMu Delaware."
The Fixed-
t
o
-
Floating Rate Company Preferred Securities will
b
e
the only assets
o
f
WaMu
Delaware. Under the Trust Agreement, WaMu Delaware
i
s prohibited from issuing any securities
other than the Trust Securities.
Subject
t
o the limitations and assumptions described under " Certain
U
.
S
.
Federal Income
Tax Considerations," WaMu Delaware
w
i
l
l
b
e
treated
a
s
a grantor trust
f
o
r
income tax purposes, with the result that holders
o
f
Trust Securities will
b
e
treated
a
s
beneficial
owners
o
f
Fixed-
t
o
-
f
o
r
United States Federal income
tax purposes.
The Company
Washington Mutual Preferred Funding LLC
i
s a Delaware limited liability company formed
o
n
February
3
,
2006
f
o
r
the purpose
o
f
(
i
) issuing the Fixed-
t
o
-
Securities
t
o WaMu Delaware, the Fixed Rate Company Preferred Securities
t
o WaMu Cayman,
the common securities
o
f
the Company (the " Company Common Securities")
t
o University
Street, Inc.,
a
n
indirect subsidiary
o
f
WMB
(
"
University Street"), and additional Parity Equity
Securities
o
r
Junior Equity Securities subject
t
o certain limitations described
i
n this offering
circular, (
i
i
) acquiring and holding Eligible Investments and (
H
i
)
performing functions necessary
o
r
incidental thereto.
The Fixed Rate Company Preferred Securities rank pari passu with the Fixed-
t
o
-
Floating
a
s
t
o
f
the Company. The
terms
o
f
t
h
e
Fixed Rate Company Preferred Securities are substantially identical
t
o
t
h
e
terms
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities other than with respect
t
o the rate
applicable
t
o dividends
o
r
distributions thereon. The Fixed Rate Company Preferred Securities
will,
i
f
,
when and
a
s
declared
b
y
the Company's Board
o
f
a
t
a
n
annual
rate
o
f
7.25%.
University Street will own
a
l
l
o
f
the Company Common Securities. The Eligible Investments
owned
b
y
t
o time will generate net income
f
o
r
payment
b
y
the Company
t
o WaMu Delaware
a
s
dividends
o
n
t
h
e
Fixed-
t
o
-
(and consequently
f
o
r
pass through
b
y
WaMu Delaware
a
s
distributions
t
o the holders
o
f
the
Trust Securities),
t
o WaMu Cayman
a
s
dividends
o
n
Securities (and consequently
f
o
r
payment
b
y
WaMu Cayman
a
s
dividends
t
o holders
o
f
the
WaMu Cayman Preferred Securities) and
t
o University Street
a
s
dividends
o
n
the Company
Common Securities.
Subject
t
o
t
h
e
limitations and assumptions described under " Certain
U
.
S
.
Federal Income
Tax Considerations," the Company intends
t
o
b
e
treated
a
s
a partnership (other than a publicly
traded partnership taxable
a
s
a corporation)
f
o
r
t
a
x
purposes and
will receive the opinion
o
f
Mayer, Brown, Rowe & Maw LLP
t
o the effect that,
f
o
r
United States
Federal income tax purposes, the Company will not
b
e
treated
a
s
a
n
association taxable
a
s
a
corporation
o
r
a
s
a
s
a corporation.
The Company will
b
e
managed
b
y
a Board
o
f
Managers. The Company's Board
o
f
Managers will have three members, one
o
f
whom
i
s not, and has not been during the preceding
five years,
a
n
officer
o
r
employee
o
f
WMI
o
r
any affiliate
o
f
WMI, other than a financing
subsidiary (
t
h
e
" Independent Manager").
4
CONFIDENTIAL
Return
Initial Conveyances
I
n connection with the Offering, WMB will convey a portfolio
o
f
first lien, closed- end, fixed
rate home equity loans
(
"
HELs")
t
o the Company
i
n exchange
f
o
r
100%
o
f
the Company
Preferred Securities. Concurrently with such transfer
b
y
WMB, University Street will convey a
portfolio
o
f
HELs
t
o the Company
i
n exchange
f
o
r
100%
o
f
The portfolio conveyed
b
y
t
o
f
o
f
HELs
i
n the aggregate. The Company will convey 100%
o
f
the
HELs that
i
t owns
t
o the Asset Trust
i
n exchange
f
o
r
o
f
the
Asset Trust. WMB will then sell
t
h
e
Fixed-
t
o
-
Floating Rate Company Preferred Securities and
t
h
e
f
o
r
cash
t
o WaMu Delaware and WaMu Cayman,
respectively.
University Street
i
I
t
has elected
t
o
b
e
treated
a
s
a real
estate investment trust
f
o
r
United States Federal income tax purposes. University Street will hold
100%
o
f
the Company Common Securities which represent 100%
o
f
the voting rights
i
n the
Company (subject
t
o
f
holders
o
f
the Company Preferred Securities described
herein).
The Asset Trust
Washington Mutual Home Equity Trust I
i
s a Delaware statutory trust formed pursuant
t
o a
trust agreement,
t
o
b
e
entered into
o
n
o
r
before the closing date, between the Company,
a
s
a
s
Delaware trustee (the " PSA
Delaware Trustee"). The Pooling and Servicing Agreement among the Company, WMB,
a
s
servicer, Deutsche Bank Trust Company Delaware,
a
s
Delaware trustee, and Deutsche Bank
National Trust Company,
a
s
Trustee (the " Pooling and Servicing Agreement"), will restate the
trust agreement and will
b
e
o
f
the Asset Trust. The Asset Trust will
make
a
n
election
t
o
b
e
treated
a
s
a real estate mortgage investment conduit
(
"
REMIC")
f
o
r
The initial assets
o
f
o
f
the portfolio
o
f
HELs
t
o
b
e
conveyed
b
y
the Company
t
o the Asset Trust
i
n connection with the Offering. The HELs were originated
b
y
i
t
s retail branches between September 2001 and September 2005.
A
s
o
f
January 31, 2006, the HELs
t
o
b
e
transferred into the Asset Trust had
a
n
aggregate unpaid
principal balance
o
f
WMI
With a history dating back
t
o 1889, Washington Mutual, Inc., a Washington corporation,
i
s a
retailer
o
f
financial services
t
o consumers and small businesses. Based
o
n
i
t
s
consolidated
assets
o
n
September 30, 2005, WMI was the largest thrift holding company
i
n the United States
and the seventh largest among
a
l
l
U
.
S.-based bank and thrift holding companies.
A
s
o
f
September 30, 2005, WMI, together with
i
t
s
subsidiaries, had total assets
o
f
approximately
$333.6 billion, total liabilities
o
f
approximately $311.0 billion and total stockholders' equity
o
f
approximately $22.6 billion.
A
s
o
f
September 30, 2005, WMI and
i
t
s subsidiaries also had total
deposits
o
f
approximately $190.4 billion. WMI's common stock
i
s listed
o
n
the New York Stock
Exchange under the symbol " WM". The principal business offices
o
f
WMI are located
a
t
1201
Third Avenue, Seattle, Washington 98101 and
i
t
s
telephone number
i
s 206- 461- 2000.
WMB
Washington Mutual Bank (formerly known
a
s
Washington Mutual Bank, FA)
i
s a federally
5
CONFIDENTIAL
Return
Loan Act
o
f
1933,
a
s
i
n mortgage banking, consumer banking and
small business banking. WMB,
a
s
a federally chartered association, has the authority
t
o make
various types
o
f
b
y
homes and commercial real estate, secured
and unsecured consumer loans, and secured and unsecured commercial loans.
A
s
a federal
savings association, WMB
i
s subject
t
o regulation and examination
b
y
the OTS,
i
t
s
primary
regulator. WMB
i
s
a
n
indirect wholly-owned subsidiary
o
f
WMI.
Prior
t
o 2004, WMB had two sister depositary institutions which were both owned directly
b
y
o
f
o
f
these institutions,
Washington Mutual Bank fsb, a federal savings bank, became a wholly-owned subsidiary
o
f
WMB
o
n
February
1
,
o
f
the state
o
f
bank and then was merged into WMB
o
n
January
1
,
2005.
6
CONFIDENTIAL
Return
The Offering
Issuer
A
s
t
o the Trust Securities, Washington Mutual Preferred
Funding Trust
I
,
a Delaware statutory trust.
A
s
t
o the Fixed-
t
o
-
Floating Rate Company Preferred Secu-
rities, Washington Mutual Preferred Funding LLC, a Dela-
ware limited liability company.
A
s
t
o the Fixed-
t
o
-
(which will
b
e
represented
b
y
the Fixed-
t
o
-
Floating Rate
Depositary Shares)
f
o
r
which the Trust Securities will
b
e
o
f
a Conditional Ex-
change, Washington Mutual, Inc., a Washington
corporation.
Offered Securities Fixed-
t
o
-
Floating Rate Perpetual Non-cumulative Trust Se-
curities, liquidation preference $100,000 per security and
$1,250,000,000
i
n the aggregate, issued
b
y
WaMu
Delaware.
Dividends. . . . . . . . . . . . . . . . . . . . . . . . Dividends
o
n
the Fixed-
t
o
-
Floating Rate Company Pre-
ferred Securities will
b
e
passed through
b
y
WaMu Dela-
ware
a
s
distributions
o
n
o
n
each date
o
n
which the Company pays
t
o WaMu Delaware dividends
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securi-
ties,
i
n
a
n
amount per Trust Security equal
t
o the amount
o
f
dividends received
b
y
WaMu Delaware
o
n
a like amount
o
f
Fixed-
t
o
-
(including Additional Amounts,
i
f any).
For purposes
o
f
t
o distribu-
tions payable
b
y
the Company
o
n
i
t
s
securities
a
s
" divi-
dends". Dividends
o
n
the Fixed-
t
o
-
Preferred Securities are payable
a
s
follows:
Dividend Rate. Dividends
o
n
the Fixed-
t
o
-
Floating Rate
Company Preferred Securities will accrue
a
t
a rate per
annum equal
t
o 6.534% until March 15, 2011 and
3
-
month
USD L1BOR plus 1.4825%
f
o
r
the Dividend Period starting
i
n March, 2011 and each Dividend Period thereafter applied
t
o
f
$1,000 per Fixed-
t
o
-
Floating Rate Company Preferred Security.
Dividend Payment Dates.
I
f
declared
b
y
the Company's
Board
o
f
Managers, the Dividend Payment Dates
f
o
r
the
Fixed-
t
o
-
b
e
(
i
) March 15, June
1
5
,
September
1
5
and December
1
5
o
f
each year commencing
o
n
June 15, 2006 and through
and including March 15, 2011, and (
i
i
)
each March 15,
June 15, September
1
5
and December
1
5
thereafter,
o
r
i
n
each case the next Business Day
i
f any such day
i
s not a
Business Day.
Declaration
o
f
Dividends, etc. Dividends
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities when,
a
s
and
i
f declared
b
y
the Company's Board
o
f
Managers out
o
f
7
CONFIDENTIAL
Return
Redemption / Replacement Capital
Covenant .
legally available funds, will
b
e
payable
a
t
the applicable
dividend rate applied
t
o the liquidation preference per
Fixed-
t
o
-
Floating Rate Company Preferred Security accru-
ing
o
n
a noncumulative basis
o
n
each such security
a
s
follows: (
i
) from March
7
,
2006
i
n the case
o
f
the
Fixed-
t
o
-
o
f
-
fered hereby and (
i
i
)
i
f additional Fixed-
t
o
-
Floating Rate
Company Preferred Securities are issued
a
t
a future date,
from (
A
)
March
7
,
2006
i
f such date
i
s before the Dividend
Payment Date
i
n June 2006, (
B
)
the date
o
f
issue
i
f such
date
i
s a Dividend Payment Date and (
C
)
either the
immediately preceding Dividend Payment Date
o
r
the date
o
f
issuance
a
s
determined
b
y
the Company
i
f the date
o
f
issuance
i
s other than a Dividend Payment Date and
i
s
i
n June 2006. Any such
dividends will
b
e
distributed
t
o holders
o
f
Fixed-
t
o
-
Floating
i
n the manner de-
scribed under " Description
o
f
the Fixed-
t
o
-
Floating Rate
Company Preferred Securities - Dividends."
Non-cumulative Dividends. Dividends
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities are not cumu-
lative. Accordingly,
i
n the event dividends are not declared
o
n
the Fixed-
t
o
-
ties
f
o
r
payment
o
n
any Dividend Payment Date, then any
accrued dividends will cease
t
o accrue and
b
e
payable.
I
f
the Company's Board
o
f
Managers has not declared a
dividend before the Dividend Payment Date
f
o
r
any Divi-
dend Period, the Company will have
n
o
obligation
t
o pay
dividends accrued
f
o
r
such Dividend Period after the
f
o
r
that Dividend Period, whether
o
r
not dividends
o
n
the Fixed-
t
o
-
o
r
the Company Common Securities
are declared
f
o
r
any future Dividend Period.
General. On each day
o
n
which the Company redeems
Fixed-
t
o
-
Floating Rate Company Preferred Securities,
WaMu Delaware will apply the redemption proceeds
i
t
receives
o
n
the Fixed-
t
o
-
Securities
t
o redeem a like amount
o
f
Trust Securities. The
redemption provisions
o
f
the Fixed-
t
o
-
Floating Rate Com-
pany Preferred Securities are described below.
Subject
t
o a covenant
i
n favor
o
f
certain
o
f
WMI's
debtholders limiting WMl's and
i
t
s
subsidiaries' right
t
o
repurchase
o
r
redeem the Fixed-
t
o
-
o
r
the Trust Securities (among
others)
a
s
described
i
n the next paragraph, and subject
t
o
the Company having received the prior approval
o
f
the
OTS
f
o
r
o
f
Fixed-
t
o
-
Floating
Rate Company Preferred Securities, the Company may,
a
t
8
CONFIDENTIAL
Return
i
t
s
option, redeem the Fixed-
t
o
-
Preferred Securities:
i
n whole but not
i
n part, prior
t
o the Dividend Payment
Date
i
n March 2011,
i
f a Tax Event,
a
n
Investment
Company Act Event
o
r
occurs. The cash redemption price will
b
e
the greater
o
f
(
i
) $1,000 per Fixed-
t
o
-
ferred Security
o
r
(
i
i
)
the sum
o
f
present values
o
f
$1,000 per Fixed-
t
o
-
Security and
a
l
l
undeclared dividends
f
o
r
the Dividend
Period from the redemption date
t
o and including the
i
t
o the
redemption date
o
n
a quarterly basis (assuming a
360- day year consisting
o
f
twelve 3D-day months)
a
t
t
h
e
Treasury Rate,
a
s
calculated
b
y
a
n
Independent Invest-
ment Banker, plus 0.30%,
t
o the redemp-
tion date;
o
r
i
n whole
o
r
i
n part,
o
n
o
r
after the Dividend Payment
Date
i
n March 2011,
a
t
a cash redemption price
o
f
$1,000
p
e
r
Fixed-
t
o
-
Security, plus any declared and unpaid dividends
t
o the
redemption date, without accumulation
o
f
any undeclared
dividends.
See " Description
o
f
Fixed-
t
o
-
ferred Securities - Redemption."
Restriction
o
n
Redemption
o
r
Repurchases.
A
t
o
r
prior
t
o
initial issuance
o
f
the Trust Securities, WMI will enter into a
" Replacement Capital Covenant"
a
s
described under
" Description
o
f
the Trust Securities - Restriction
o
n
Re-
demption
o
r
Repurchases."
I
n the Replacement Capital
Covenant, WMI will covenant
i
n favor
o
f
certain
o
f
i
t
s
debtholders that,
i
f WMI
o
r
a subsidiary repurchases
o
r
redeems any Trust Securities, WaMu Cayman Preferred
Securities
o
r
o
r
,
after a
Conditional Exchange, Fixed-
t
o
-
Shares (
o
r
related Fixed-
t
o
-
Floating Rate WMI Preferred
Stock), WMI
o
r
i
t
s subsidiaries will
d
o
s
o
only
i
f and
t
o the
extent that the total redemption
o
r
purchase price
i
s equal
t
o
o
r
less than designated percentages
o
f
the
n
e
t
cash
proceeds that WMI
o
r
i
t
s
subsidiaries have received during
the 180 days prior
t
o such redemption
o
r
repurchase from
the issuance
o
f
other securities
o
r
combinations
o
f
securi-
ties having the characteristics described under " Descrip-
tion
o
f
o
n
Redemption
o
r
Repurchases.' ,
Ranking. . . . . . . . . . . . . . . . . . . . . . . .
.
.
Trust Securities. The Trust Securities will
b
e
the only
securities issued
b
y
WaMu Delaware. The Amended and
Restated Trust Agreement
o
f
WaMu Delaware (the " Trust
9
CONFIDENTIAL
Return
Agreement") will provide that WaMu Delaware will not
issue any other securities.
Fixed-
t
o
-
Floating Rate Company Preferred Securities. The
Fixed-
t
o
-
rank pari passu with the Fixed Rate Company Preferred
Securities and senior
t
o the Company Common Securities
i
n terms
o
f
dividends and liquidation payments.
During a Dividend Period, the Company may not declare
o
r
pay any dividends
o
n
any
o
f
i
t
s
i
n Junior Equity Securities,
o
r
repurchase, redeem
o
r
otherwise acquire
f
o
r
consideration,
directly
o
r
indirectly, any Junior Equity Securities (other
than
a
s
a result
o
f
reclassification
o
f
Junior Equity
Securities
f
o
r
o
r
o
r
the
exchange
o
r
conversion
o
f
f
o
r
o
r
into other Junior Equity Securities), unless dividends
f
o
r
such Dividend Period
o
n
a
l
l
outstanding Company Pre-
ferred Securities have been declared and paid
i
n full,
o
r
declared and set aside
f
o
r
payment,
a
s
the case may be.
The Company may from time
t
o time issue additional Parity
Equity Securities without the consent
o
f
the holders
o
f
the
Company Preferred Securities, provided that (
i
) after
giving effect
t
o such issuance, the pro forma net book
value
o
f
the Company's assets (after giving effect
t
o the
acquisition
o
f
any New Assets
i
issuance
o
f
such Parity Equity Securities) will equal
o
r
o
f
the aggregate liquidation
preference
o
f
the preferred securities
o
f
the Company then
Company proposes
t
o issue, (
i
i
)
after giving effect
t
o such
operations,
o
r
" FFO", for the four fiscal quarters beginning
with the fiscal quarter
i
n which such Parity Equity Securi-
ties are proposed
t
o
b
e
issued (calculated (
A
)
assuming
that such proposed Parity Equity Securities are issued and
that,
i
f any Parity Equity Securities (including the Parity
Equity Securities that the Company proposes
t
o issue)
bear dividends based
o
n
a floating rate, the applicable
dividend rate will not change during such four fiscal
quarters from the rate
i
n effect
o
n
the applicable date
o
f
determination and (
B
)
a
s
adjusted
t
o reflect any New
Assets) equals
o
r
exceeds 150%
o
f
b
e
required
t
o pay full annual dividends
o
n
a
l
l
preferred
securities
o
f
the Company then outstanding and any such
Parity Equity Securities that the Company proposes
t
o
issue and (
i
i
i
)
the Company
i
s not otherwise
i
n breach
o
f
any
o
f
i
t
s
covenants set forth
i
n the LLC Agreement. See
" Description
o
f
the Fixed-
t
o
-
ferred Securities - Ranking."
I
n the Exchange Agreement, WMI will covenant
i
n favor
o
f
the holders
o
f
the Trust Securities and the WaMu Cayman
1
0
CONFIDENTIAL
Return
Preferred Securities that,
i
f full dividends
o
n
(
i
) the
Company Preferred Securities, (
i
i
)
o
r
(Hi) the WaMu Cayman Preferred Securities
f
o
r
any
Dividend Period are not paid, then WMI will not declare
o
r
t
o
,
o
r
redeem, purchase
o
r
acquire, any
o
f
i
t
s equity capital securities during the next
i
n connec-
tion with a shareholders' rights plan,
i
f any,
o
r
dividends
i
n
connection with benefits plans.
Conditional Exchange. . . . . . . . . . .
.
.
I
f the OTS
s
o
o
f
a
n
Exchange Event, each Trust Security will
b
e
automatically
exchanged
f
o
r
a like amount
o
f
Fixed-
t
o
-
Floating Rate
Depositary Shares representing
1
/
1 OOOthof a share
o
f
WMl's Series I Perpetual Non-cumulative Fixed-
t
o
-
Floating
Rate Preferred Stock (the " Fixed-
t
o
-
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
o
r
receivership
o
r
(iH) the OTS,
i
n
i
t
s
sole discretion, directing
such exchange
i
n anticipation
o
f
WMB becoming " under-
capitalized"
i
n the near term
o
r
taking supervisory action
that limits the payment
o
f
dividends,
a
s
applicable,
b
y
WMB, and
i
n connection therewith, directs such exchange.
The Fixed-
t
o
-
Floating Rate WMI Preferred Stock will have
substantially equivalent terms
a
s
t
o dividends, redemption
and liquidation preference
a
s
the Fixed-
t
o
-
Floating Rate
Company Preferred Securities, except that: (
i
) the
Fixed-
t
o
-
Floating Rate WMI Preferred Stock will not have
the benefit
o
f
the covenants described under " Description
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities -
Voting Rights and Covenants;" (
i
i
)
the Fixed- to-Floating
Rate WMI Preferred Stock will
b
e
redeemable prior
t
o the
Dividend Payment Date occurring
i
n March 2011 only upon
the occurrence
o
f
a Regulatory Capital Event (
a
s
de-
scribed herein); (
i
i
i
)
Additional Amounts will not
b
e
payable with respect
t
o the Fixed-
t
o
-
Floating Rate WMI
Preferred Stock; and (
i
v
)
i
f WMI fails
t
o pay,
o
r
declare
and set aside
f
o
r
payment,
f
u
l
l
dividends
o
n
the Fixed-
t
o
-
f
o
r
six Dividend Peri-
ods, the authorized number
o
f
WMl's directors will
i
n
-
crease
b
y
two, and the holders
o
f
Fixed- to-Floating Rate
WMI Preferred Stock, voting together with the holders
o
f
any other equity capital securities
o
f
WMI having similar
voting rights, including the Fixed Rate WMI Preferred
Stock, will have the right
t
o elect two directors
i
n addition
t
o the directors then
i
n office
a
t
the next annual meeting
o
f
shareholders. The Fixed-
t
o
-
Stock will
b
e
subject
t
o the Replacement Capital Covenant
provisions described under" - Redemption / Replacement
Capital Covenant" above.
1
1
CONFIDENTIAL
Return
Covenants .
WMI will covenant
i
i
n favor
o
f
the holders
o
f
the Trust Securities that
i
t will not issue any
preferred stock that would rank senior
t
o
t
h
e
Fixed-
t
o
-
Floating Rate WMI Preferred Stock upon
i
t
s
issuance. Each
share
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock will,
upon issuance, rank
a
t
least pari passu with the most
senior preferred stock
o
f
WMI,
i
f any, then outstanding.
Except
a
s
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities will not have
voting rights.
The LLC Agreement will provide that, except with the
consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two-
thirds
o
f
the Fixed-
t
o
-
Securities and
t
h
e
Fixed Rate Company Preferred Securi-
ties, voting together
a
s
a single class, the Company will
not:
o
r
share exchange with
o
r
into another entity other than
a
n
entity controlled by,
o
r
issue any securities
o
f
the Company ranking senior
t
o
i
n respect
o
f
pay-
ments
o
f
dividends
o
r
o
n
liquidation
t
o the Company
(
" Senior Equity Securities");
incur any indebtedness for borrowed money;
pay dividends
o
n
the Company's Junior Equity Securities
unless the Company's FFO
f
o
r
the four prior fiscal
quarters equals
o
r
exceeds 150%
o
f
the amount that
would
b
e
required
t
o pay
f
u
l
l
annual dividends
o
n
a
l
l
a
s
well
a
s
amend
o
r
otherwise change the requirement that the
Company make investments and distributions with the
proceeds
o
f
the Company's assets such that the Com-
pany's FFO over any period
o
f
four fiscal quarters will
equal
o
r
exceed 150%
o
f
b
e
required
t
o
n
a
l
l
outstanding
Company Preferred Securities,
a
s
well
a
s
any other
issue any additional Company Common Securities
t
o any
person, other than University Street
o
r
another affiliate
ofWMI;
amend
o
r
o
f
any Asset
Documentation
i
n a manner which
i
s materially adverse
t
o WaMu Delaware
o
r
the holders
o
f
remove
o
r
cause
t
o
b
e
removed,
a
s
applicable, " Wash-
ington Mutual" from the Company's, WaMu Delaware's
o
r
WaMu Cayman's name unless
t
h
e
name
o
f
WMI
1
2
CONFIDENTIAL
Return
t
o the
Company's, WaMu Delaware's and WaMu Cayman's
name
t
o
b
e
take any action
o
r
fail
t
o take any action that would
cause the Company
t
o fail
t
o
b
e
treated
a
s
a partnership
(other than a publicly traded partnership taxable
a
s
a
corporation)
f
o
r
t
a
x
purposes;
amend
o
r
Company not engage
i
n a
U
.
S
.
trade
o
r
business
f
o
r
amend
o
r
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
o
r
Company manage
i
t
s
affairs such that income with
respect
t
o the Trust Securities does not constitute
" unrelated business taxable income"
f
o
r
United States
Federal income tax purposes;
o
r
amend
i
t
s
Certificate
o
f
Formation
o
r
LLC Agreement
i
n
a manner that materially and adversely affects the terms
o
f
the Company Preferred Securities; provided, however,
that,
i
o
f
Company Preferred Securities, such amendment will
require only the class vote
o
f
the holders
o
f
a
t
least two-
thirds
o
f
the applicable Company Preferred Securities
o
f
such class (voting separately and not
a
s
a single class
with the other class) and,
i
f such amendment affects
both classes but affects them differently, then such
amendment will require a class vote
o
f
each class
o
f
Company Preferred Securities, each voting separately.
I
n addition, the LLC Agreement will provide that, without
the consent
o
f
a
l
l
o
f
the Managers, including the Indepen-
dent Manager, the Company will not:
terminate, amend
o
r
otherwise change any Asset
Documentation;
o
r
o
r
share exchange (ex-
cluding the Conditional Exchange) that
i
s not tax- free
t
o
the holders
o
f
the Fixed-
t
o
-
Preferred Securities, and the related Trust Securities,
unless such transaction was approved
b
y
the consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
the Fixed-
t
o
-
and the Fixed Rate Preferred Securities, voting together
a
s
a single class.
I
i
f (
i
) the
Company fails
t
o
n
the Company
1
3
CONFIDENTIAL
Return
o
n
any Dividend Payment Date,
(
i
i
) WaMu Delaware fails
t
o pass through full dividends
paid
b
y
t
h
e
Company
o
n
the Fixed-
t
o
-
Floating Rate
t
o the holders
o
f
the Trust
Securities
o
n
any Dividend Payment Date
o
r
(
i
i
i
)
a
Bankruptcy Event occurs, the holders
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities and the Fixed
Rate Company Preferred Securities, voting together
a
s
a
single class,
b
y
t
o remove the
initial
o
r
any succeeding Independent Manager and
t
o
f
i
l
l
the vacancy created
b
y
such removal
o
r
any other vacancy
existing
i
n the office
o
f
Each holder
o
f
Trust Securities will have the right
t
o direct
the Property Trustee acting
f
o
r
WaMu Delaware,
a
s
holder
o
f
t
h
e
Fixed-
t
o
-
ties,
a
s
t
o the exercise
o
f
the voting rights described above
pertaining
t
o a like amount
o
f
Fixed-
t
o
-
Floating Rate
Company Preferred Securities representing
i
t
s
respective
Trust Securities. The voting rights described above with
respect
t
o the Fixed Rate Company Preferred Securities
will
b
e
passed
o
n
t
o the holders
o
f
the related WaMu
Cayman Preferred Securities. See " Description
o
f
the Trust
Securities - Voting Rights."
Additional Amounts. . . . . . . . . . . . .
.
.
I
f
the Company
o
r
WaMu Delaware
i
s required
t
o pay any
Additional Taxes
a
s
a result
o
f
a
n
Additional Tax Event, the
Company
w
i
l
l
pay
a
s
additional amounts
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities such amounts
a
s
will
b
e
required
s
o
that dividends
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities, and accord-
ingly the amounts passed through
b
y
WaMu Delaware
o
n
the Trust Securities, will not
b
e
reduced
a
s
a result
o
f
any
such Additional Taxes. See " Description
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities - Additional
Amounts."
I
f investors exchange their Fixed-
t
o
-
Floating
f
o
r
Fixed-
t
o
-
Floating
Rate WMI Preferred Stock upon a Conditional Exchange,
WMI will not
b
e
obligated
t
o pay Additional Amounts
o
n
the
Fixed-
t
o
-
Floating Rate WMI Preferred Stock.
Assets and the Asset Trust. . . . . .
.
.
The initial assets
o
f
the Company will consist
o
f
the
Class A Asset Trust Certificate representing
i
t
s
interest
i
n
the Asset Trust. The Asset Trust
i
s a Delaware statutory
trust formed under the laws
o
f
the State
o
f
Delaware
pursuant
t
o a trust agreement between the Company,
a
s
a
s
Delaware trustee. The Pooling and Servicing Agreement
among the Company,
a
s
depositor, WMB,
a
s
Servicer,
Deutsche Bank Trust Company Delaware,
a
s
PSA Dela-
ware Trustee, and Deutsche Bank National Trust Company,
a
s
Trustee, will restate the trust agreement and will
thereafter
b
e
o
f
t
h
e
Asset Trust.
1
4
CONFIDENTIAL
Return
The Asset Trust will make a REMIC election
f
o
r
United
States Federal income tax purposes.
The initial assets
o
f
o
f
a
portfolio (including payments thereon received from and
after February
1
,
2006)
o
f
HELs and certain related assets
originated
b
y
i
t
s
retail branches
between September 1,2001 and September 30, 2005.
A
s
o
f
January 31, 2006, the 56,090 HELs had
a
n
aggregate
unpaid principal balance
o
f
These loans typically are made
f
o
r
reasons such
a
s
home
purchases, home improvements, furniture and fixtures
purchases, purchases
o
f
automobiles and debt consolida-
tion. These HELs are first lien, closed- end fixed rate home
equity loans and are generally repaid
o
n
a self- amortizing
basis.
From time
t
o time, the Company may acquire Additional
Assets.
A
l
l
Additional Assets acquired
b
y
the Company will
b
e
Eligible Assets.
Listing . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
b
e
listed
o
n
any securities
exchange
o
r
Use
o
f
Proceeds.. . . .
.
.
. .
.
.
. . . . .
.
.
WaMu Delaware will use the proceeds
o
f
the sale
o
f
the
Trust Securities
t
o purchase a like amount
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities from WMB,
which the Company will issue
t
o WMB
i
n exchange
f
o
r
the
conveyance
o
f
a portfolio
o
f
HELs
t
o the Company. The
WMI Group will use the proceeds from the sale
o
f
the
Fixed-
t
o
-
t
o
WaMu Delaware and the Fixed Rate Preferred Securities
t
o
WaMu Cayman
f
o
r
general corporate purposes, which may
include the repurchase
o
f
WMI's common stock.
Ratings. . . . . . . . . . . . . . . . . . . . . . . .
.
.
The Trust Securities are expected
t
o
b
e
assigned upon
issuance ratings
o
f
" BBB"
b
y
Standard & Poor's Rating
Services, a division
o
f
The McGraw Hill Companies, Inc.,
" Baa2"
b
y
Moody's Investors Services, Inc. and " A-"
b
y
Fitch, Inc. A rating
i
s not a recommendation
t
o buy, sell
o
r
hold securities and may
b
e
subject
t
o revision, suspension
o
r
withdrawal
a
t
any time
b
y
the assigning rating
organization.
Tax Consequences . . . . . . . . .
I
t
i
s anticipated that WaMu Delaware will
b
e
treated
a
s
a
grantor trust
f
o
r
United States Federal income tax pur-
poses. Accordingly, each holder
o
f
a Trust Security will
b
e
treated
a
s
i
f
i
t owned directly the Fixed- to-Floating Rate
Company Preferred Securities allocable
t
o such Trust
Security.
The Company intends
t
o qualify
a
s
a partnership (other
than a publicly traded partnership taxable
a
s
a corpora-
tion)
f
o
r
United States Federal income tax purposes, and
thus, the Fixed-
t
o
-
Floating Rate Company Preferred Secu-
rities held
b
y
WaMu Delaware are intended
t
o constitute
1
5
CONFIDENTIAL
Return
equity interests
i
n such partnership.
A
s
a partnership, the
Company intends that
i
t will not
b
e
subject
t
o United States
Federal income tax. Instead, each holder
o
.
f a Trust
Security will
b
e
required
t
o report
o
n
i
t
s United States
Federal income tax return
i
t
s
share
o
.
f the income, gains,
losses, deductions and credits
o
.
f the Company that are
allocable
t
o 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. . . . . . . . . . . . .
N
o
Trust Security may
b
e
purchased
b
y
o
r
trans.ferred
t
o
any Bene.
f
i
t
Plan Investor, except .
f
o
r
a
n
insurance com-
pany general account that represents, warrants and cove-
nants that,
a
t
the time
o
.
f acquisition and throughout the
period
i
t holds the securities, (
A
)
i
t
i
s eligible .
f
o
r
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
o
f
such general account are (
o
r
represent) assets
o
f
C
)
i
t
i
s
not a person who has discretionary authority
o
r
control
with respect
t
o the assets
o
f
WaMu Delaware
o
r
any
person who provides investment advice
f
o
r
a fee ( direct
o
r
indirect) with respect
t
o such assets,
o
r
any affiliate
o
f
b
e
excluded under
2
9
C
.
F
.
R
.
2510.3- 101 (
f
)
(
1
)
.
Governing Law . . . . . . . . . . . . . . . . .
.
.
The Trust Agreement, the Trust Securities, the LLC Agree-
ment and the Fixed-
t
o
-
Securities will
b
e
governed
b
y
,
and construed
i
n accor-
dance with, the laws
o
.
f the State
o
f
Delaware. The
Fixed-
t
o
-
Floating Rate WMI Preferred Stock will
b
e
gov-
erned
b
y
and construed
i
o
f
the
State
o
f
Washington. The Fixed-
t
o
-
Floating Rate Deposi-
tary Shares will
b
e
i
n accor-
dance with, the laws
o
f
the State
o
.
f New York.
CUSIP . . . . . . . . . . . . . . . . . . . . . . . . .
.
.
93934W AA 3
ISIN US93934WAA36
1
6
CONFIDENTIAL
Return
RISK FACTORS
Purchasers should carefully consider
t
h
e
following risk factors
i
n conjunction with the other
i
a
s
well
a
s
information that
i
s incorporated
b
y
reference
i
n this offering circular, before purchasing any Trust Securities, the financial entitlements
o
f
which will
b
e
t
o those
o
f
a like amount
o
f
Fixed-
t
o
-
Preferred Securities and which are conditionally exchangeable into Fixed-
t
o
-
Floating Rate
Depositary Shares representing interests
i
n Fixed-
t
o
-
Floating WMI Preferred Stock.
Risks Relating
t
o the Terms
o
f
the Trust Securities and the Fixed- to-Floating Rate Company
Holders
o
f
Trust Securities will only receive distributions
i
f the Company pays dividends
o
n
the
Fixed-to-Floating Rate Company Preferred Securities.
Amounts available
t
o WaMu Delaware
f
o
r
payment
o
n
the Trust Securities will
b
e
limited
t
o
dividends received
b
y
WaMu Delaware
a
s
the holder
o
f
the Fixed-
t
o
-
I
f
the Company does not declare and pay dividends
o
n
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities, WaMu Delaware will not pass through such dividends
t
o
holders
o
f
Dividends
o
n
the Fixed-to-Floating Rate Company Preferred Securities are not cumulative and
purchasers will not receive dividends
o
n
the Trust Securities for any quarter unless dividends
are authorized and declared
b
y
the Company's Board
o
f
Managers
f
o
r
that quarter
o
n
the like
amount
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities held
b
y
WaMuDelaware.
Dividends
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities are not cumulative.
Consequently,
i
f the Board
o
f
Managers does not declare a dividend
o
n
the Fixed-
t
o
-
Floating
f
o
r
any quarter, WaMu Delaware,
a
s
holder
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities, and consequently the holders
o
f
Trust Securities,
will not receive dividends
f
o
r
that quarter.
I
n addition, the Company's Board
o
f
Managers may
determine that
i
t would
b
e
i
n the Company's best interests
t
o pay less than the
f
u
l
l
amount
o
f
the
stated dividends
o
n
the Fixed-
t
o
-
o
r
n
o
dividends
f
o
r
any quarter even though funds are available. Factors that would generally
b
e
considered
b
y
the
Company's Board
o
f
Managers
i
n making this determination are the amount
o
f
available funds,
the Company's financial condition and capital needs, the impact
o
f
current and pending
legislation and regulations, economic conditions, and tax considerations.
The level
o
f
t
o the aggregate liquidation preference
o
f
the
Company Preferred Securities could shrink over time because
o
f
,
among other things, dividends
paid
b
y
the Company
o
n
o
r
other Junior Equity Securities
i
f
any are issued
a
t
a future date.
The LLC Agreement includes provisions that limit the Company's ability
t
o pay dividends
o
n
the Company's Junior Equity Securities but, subject
t
o satisfaction
o
f
those limitations, does not
prohibit dividends that could cause the level
o
f
t
o the aggregate
o
f
t
o shrink. These limitations are
described under " Description
o
f
the Fixed-
t
o
-
Ranking,"
"
-
Restrictions
o
n
Dividends" and " Voting Rights and Covenants." They include the
following:
during a Dividend Period, the Company may not pay dividends
o
n
Junior Equity
Securities,
o
r
repurchase, redeem
o
r
otherwise acquire
f
o
r
consideration directly
o
r
indirectly (with limited exceptions) Junior Equity Securities, unless dividends
f
o
r
such
Dividend Period
o
n
a
l
l
outstanding Company Preferred Securities have been declared and
paid
i
n full,
o
r
set aside
f
o
r
payment,
a
s
the case may be; and
1
7
CONFIDENTIAL
Return
without the consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
the
Fixed-to-
Floating Rate Company Preferred Securities and the Fixed Rate Company Securities,
voting together
a
s
a single class, the Company may not:
pay dividends
o
n
Junior Equity Securities unless the Company's FFO
f
o
r
the four prior
fiscal quarters equals
o
r
exceeds 150%
o
f
b
e
required
t
o pay full
dividends
o
n
the outstanding Company Preferred Securities,
a
s
well
a
s
any other Parity
Equity Securities;
o
r
amend
o
r
otherwise change the requirement that the Company make investments and
distributions with the proceeds
o
f
the Company's assets such that the Company's FFO
f
o
r
any period
o
f
four fiscal quarters
w
i
l
l
equal
o
r
exceed 150%
o
f
t
h
e
amount that would
b
e
required
t
o
n
a
l
l
a
s
well
a
s
any other Parity Equity Securities.
A
s
HELs
i
n the Asset Trust prepay
o
r
repay principal and distributions with respect
t
o such
principal payments are made
b
y
the Asset Trust
t
o the Company
o
n
the Class A Asset Trust
Certificate, subject
t
o the limitations referenced above, the Company may choose
t
o apply such
amounts
t
o pay dividends
o
n
o
r
reinvest such amounts
i
n
additional Eligible Assets. Additionally, subject
t
o the limitations referenced above, the Company
could distribute a portion
o
f
a
s
a dividend
o
n
the Company
Common Securities. The Company has
n
o
current intention
t
o pay
a
n
extraordinary dividend, and
WMI has
n
o
current intention
t
o cause
o
r
permit the Company
t
o pay
a
n
extraordinary dividend.
Nevertheless, dividends paid
b
y
the Company
o
n
the Company Common Securities could result
i
n a reduction
i
n the Company's assets that could have the consequence, notwithstanding
i
t
s
compliance with the limitations referred
t
o above,
o
f
the Company not having funds available
t
o
pay full dividends
o
n
i
n future periods
o
r
loss
b
y
investors
o
f
some
o
r
a
l
l
o
f
the amount
o
f
their investment were the Company
t
o
b
e
liquidated.
The Trust Securities and the Fixed-
t
o
-
Floating Rate Company Preferred Securities are perpetual
and not redeemable
a
t
the option
o
f
the holder, and holders
o
f
the Trust Securities can have
n
o
assurance
o
f
receiving their initial investment back.
The Trust Securities may not
b
e
redeemed
a
t
the option
o
f
the holder thereof under any
circumstances, are perpetual and have
n
o
maturity date.
I
f
and when the Company redeems
Fixed-to-
Floating Rate Company Preferred Securities, WaMu Delaware will redeem a like amount
o
f
Trust
Securities. While the Fixed-
t
o
-
Floating Rate Company Preferred Securities may
b
e
redeemed
a
t
the
option
o
f
the Company under certain circumstances described herein, any such redemption
i
s
subject
t
o the approval
o
f
the OTS and may
b
e
constrained
b
y
operation
o
f
the Replacement
Capital Covenant. Investors
i
n the Trust Securities will have
n
o
right
t
o reclaim their initial
investment from WaMu Delaware and there can
b
e
n
o
guarantee that the Trust Securities will ever
b
e
redeemed.
I
f investors
i
n the Trust Securities choose
t
o sell their Trust Securities
i
n order
t
o
reclaim
a
l
l
o
r
part
o
f
their initial investment
i
n the absence
o
f
any redemption, there can
b
e
n
o
guarantee that such investors would
b
e
able
t
o sell their securities
i
n the secondary market,
o
r
that
i
f such sale occurred the sale price would
b
e
a
t
o
r
A decline
i
n WMB's capital levels may result
i
n a Conditional Exchange.
I
f
a Conditional
Exchange occurs,
i
t
i
s likely
t
o occur
a
t
a time when WMB's and WMJ'sfinancial condition has
deteriorated and may have other adverse consequences.
The returns from
a
n
investment
i
n the Trust Securities will
b
e
dependent
t
o a significant
extent
o
n
the performance and capital
o
f
WMB due
t
o the potential
f
o
r
a Conditional Exchange.
A decline
i
n the performance and capital levels
o
f
WMB
o
r
the placement
b
y
the OTS
o
f
WMB
into conservatorship
o
r
receivership could result
i
n a Conditional Exchange
o
f
the Trust
Securities for Fixed-
t
o
-
Floating Rate Depositary Shares representing Fixed-
t
o
-
Floating Rate WMI
1
8
CONFIDENTIAL
Return
Preferred Stock. The Fixed-
t
o
-
Floating Rate WMI Preferred Stock would represent
a
n
investment
i
n WMI and not
i
n the Company
o
r
WaMu Delaware. Under these circumstances:
the Trust Securities would
b
e
exchanged
f
o
r
a preferred equity interest
i
n WMI
a
t
a time
when WMB's and, ultimately, WMI's financial condition has deteriorated
o
r
when WMB
may have been placed into conservatorship
o
r
receivership and, accordingly,
i
t
i
s unlikely
that WMI would
b
e
i
n a financial position
t
o make any dividend payment
o
n
the amount
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock;
i
n the event
o
f
a liquidation
o
f
WMI, the claims
o
f
creditors
o
f
WMI would
b
e
entitled
t
o
priority
i
n payment over the claims
o
f
holders
o
f
equity interests such
a
s
the Fixed-
t
o
-
Floating Rate Depositary Shares, and, therefore, the former holders
o
f
the Trust
Securities who would then hold the Fixed-
t
o
-
Floating Rate Depositary Shares represent-
ing Fixed-
t
o
-
Floating Rate WMI Preferred Stock because
o
f
the occurrence
o
f
the
Conditional Exchange may receive substantially less than such holders would receive had
the Trust Securities not been exchanged
f
o
r
the Fixed-
t
o
-
Shares. See
"
-
t
o Fixed-
t
o
-
Issued
i
n a Conditional Exchange - The Fixed-
t
o
-
rank subordinate
t
o the direct indebtedness
o
f
WMI;"
f
o
r
United States Federal income tax purposes, a Conditional Exchange would most likely
b
e
a taxable event
t
o holders
o
f
the Trust Securities, and
i
n that event such holders
generally would incur a gain
o
r
loss,
a
s
b
y
the difference
between their adjusted tax basis
i
n the Trust Securities and the fair market value
o
f
the
Fixed-
t
o
-
Floating Rate Depositary Shares; and
although the terms
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares are substantially similar
t
o the terms
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities, there are
differences that holders
o
f
Trust Securities might deem
t
o
b
e
important, such
a
s
the fact
that holders
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares will not generally have voting
rights, except
a
s
required
b
y
law
o
r
i
n connection with the right
t
o elect directors
i
f
dividends are missed (see " Description
o
f
the Fixed-
t
o
-
Stock - Voting Rights"),
o
r
benefit from any protective covenants.
The terms
o
f
the Trust Securities and the Fixed- to-Floating Rate Company Preferred Securities
provide
f
o
r
limited voting rights.
Except
a
s
specified
i
n the Trust Agreement
o
r
i
n relation
t
o the right
t
o direct the manner
i
n
which the Property Trustee acting
o
n
behalf
o
f
WaMu Delaware exercises
i
t
s
voting rights with
respect
t
o the Fixed-
t
o
-
Floating Rate Company Preferred Securities, holders
o
f
Trust Securities
are not entitled
t
o voting rights. Except
a
s
specified
i
n the LLC Agreement, WaMu Delaware,
a
s
holder
o
f
Fixed-
t
o
-
i
s not entitled
t
o voting rights.
However, the Company
i
s prohibited
b
y
the LLC Agreement from taking certain actions without
the consent
o
r
vote
o
f
a
t
least two- thirds
o
f
either
t
h
e
Fixed-
t
o
-
Securities voting separately
o
r
the Fixed-
t
o
-
Floating Rate Company Preferred Securities and the
Fixed Rate Company Preferred Securities, voting together
a
s
a single class,
a
s
applicable. For a
description
o
f
the matters
o
n
which the holders
o
f
Fixed-
t
o
-
Securities have a right
t
o vote, see " Description
o
f
the Fixed-
t
o
-
Preferred Securities - Voting Rights and Covenants."
1
9
CONFIDENTIAL
Return
Holders
o
f
the Trust Securities and Fixed- to-Floating Rate Company Preferred Securities have
n
o
redemption rights; however, the Company may (but
i
s not required
t
o
)
redeem the Fixed-
t
o
-
F
/
oating Rate Company Preferred Securities upon the occurrence
o
f
a Tax Event, an Investment
Company Act Event
o
r
a Regulatory Capital Event prior
t
o March 15, 2011, and
a
t
any time
thereafter and such redemption will cause
a
n
automatic redemption
o
f
Subject
t
o the Replacement Capital Covenant and the prior approval
o
f
the OTS, the
Company may redeem the Fixed-
t
o
-
Floating Rate Company Preferred Securities (
i
)
i
n whole but
not
i
n part upon the occurrence
o
f
a Tax Event,
a
n
o
r
a
Regulatory Capital Event prior
t
o March 15, 2011, and (
i
i
)
i
n whole
o
r
i
n part,
a
t
any time
o
n
o
r
after March 15, 2011,
a
t
a redemption price equal
t
o the liquidation preference per Fixed-
t
o
-
Floating Rate Company Preferred Security, plus declared but unpaid dividends,
i
f any, plus a
U
.
S
.
Treasury- based " make- whole" amount
i
f the redemption occurs prior
t
o March 15, 2011.
The redemption
b
y
the Company
o
f
the Fixed-
t
o
-
automatically cause a redemption
o
f
f
o
r
which the redemption price will
b
e
paid from the proceeds WaMu Delaware receives from the Company
a
s
a consequence
o
f
the
redemption
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities. The occurrence
o
f
a Tax
Event,
a
n
o
r
a Regulatory Capital Event will not, however, give a
holder
o
f
the Trust Securities any right
t
o request that the Fixed-
t
o
-
o
r
b
e
redeemed.
I
f the Company redeems the Fixed-
t
o
-
Floating Rate Company Preferred Securities, the Trust
Securities will
b
e
automatically redeemed, and the former holders
o
f
the Trust Securities may not
b
e
able
t
o invest their redemption proceeds
i
n securities with a dividend yield and other terms
comparable
t
o that
o
f
the Trust Securities. A Treasury based " make whole" amount will
b
e
payable only
i
n connection with a redemption prior
t
i
n March 2011.
The Fixed-
t
o
-
F
/
oating Rate Company Preferred Securities will rank subordinate
t
o claims
o
f
the
Company's creditors and on a parity with other series
o
f
preferred securities issued
b
y
the
Company.
The Fixed-
t
o
-
Floating Rate Company Preferred Securities will rank subordinate
t
o
a
l
l
claims
o
f
the Company's creditors. The Fixed-
t
o
-
Floating Rate Company Preferred Securities will rank
pari passu
a
s
t
o 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
t
o WaMu Cayman
a
t
a time substantially
contemporaneous with this Offering, and may issue additional Parity Equity Securities
a
t
any time
i
n the future, subject
t
o certain conditions
a
t
the time
o
f
issuance, without the consent
o
r
approval
o
f
the holders
o
f
t
h
e
Trust Securities. Accordingly,
i
f
the Company does not have funds legally available
t
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities and any Parity Equity Securities;
o
r
i
n the event
o
f
the Company's liquidation, dissolution
o
r
winding up, the Company does
not have funds legally available
t
o
f
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities and any Parity Equity Securities,
any funds that are legally available
t
o pay such amounts will
b
e
paid
p
r
o
rata
t
o the Fixed-
t
o
-
Floating Rate Company Preferred Securities and any other Parity Equity Securities then
outstanding. See " Description
o
f
Other Company Securities - Fixed Rate Company Preferred
Securities.' ,
There has never been a market for the Trust Securities.
Prior
t
o this Offering, there was
n
o
market
f
o
r
the Trust Securities. Although the Initial
Purchasers intend
t
o make a market
i
n the Trust Securities, they are under
n
o
obligation
t
o
d
o
s
o
2
0
CONFIDENTIAL
Return
and,
t
o the extent that such market making
i
s commenced,
i
t may
b
e
discontinued
a
t
any time.
b
e
listed
o
n
any securities exchange
o
r
automated dealer quotation
system. There can
b
e
n
o
assurance that
a
n
f
o
r
the Trust
Securities will develop
o
r
b
e
sustained.
I
f
such a market were
t
o develop, the prices
a
t
which the
Trust Securities trade would depend
o
n
many factors, including prevailing interest rates, the
operating results
o
f
the Company, WMB and WMI, and the market
f
o
r
similar securities. Holders
o
f
Trust Securities may not
b
e
able
t
o resell their Trust Securities
a
t
o
r
Furthermore, the Trust Securities are not and will not
b
e
registered under the Securities Act, will
b
e
deemed
t
o
b
e
o
f
Rule 144 under the Securities Act
and are subject
t
o significant transfer restrictions
a
s
described
i
n " Notice
t
o Investors." These
restrictions
o
n
transfer may inhibit the development
o
f
a
n
f
o
r
the
Trust Securities and may adversely impact the market price
o
f
The Trust Securities are not obligations
o
f
,
o
r
guaranteed
b
y
,
any other entity_
The Trust Securities
d
o
not constitute obligations
o
r
equity securities
o
f
WMI, WMB, the
Company, Marion Holdings Inc.,
a
n
intermediate holding company between WMB and University
Street
(
"
Marion"), University Street, the Asset Trust, WaMu Cayman
o
r
any other entity, nor are
WaMu Delaware's obligations with respect
t
o the Trust Securities guaranteed
b
y
any other entity.
I
n 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
b
y
the Company
t
o WaMu Delaware
a
s
the holder
o
f
the Trust Securities, nor are they
obligated
t
o
r
other support
t
o WaMu Delaware
t
o enable WaMu
Delaware
t
o make distributions
i
n the event the Company fails
t
o pay dividends
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities and WaMu Delaware
i
s thus unable
t
o pass through
such dividends
o
n
t
o holders
o
f
the Trust Securities. The Trust Securities are
n
o
t
exchangeable
f
o
r
Fixed-
t
o
-
o
r
Fixed-
t
o
-
Floating Rate WMI
Preferred Stock except upon a Conditional Exchange. No holder
o
f
Trust Securities will have the
right
t
o require WaMu Delaware
t
o exchange the Trust Securities
f
o
r
Fixed-
t
o
-
Floating Rate
Depositary Shares.
The Fixed- to-Floating Rate Company Preferred Securities represent solely
a
n
interest
i
n the
Company and are not obligations
o
f
,
o
r
guaranteed
b
y
,
any other entity_
The Fixed-
t
o
-
d
o
not constitute obligations
o
r
equity securities
o
f
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
t
o the Fixed-
t
o
-
Floating Rate Company Preferred Securities guaranteed
b
y
any other
entity.
I
n particular, neither WMI, WMB, Marion, University Street, WaMu Delaware, the Asset
Trust, WaMu Cayman nor any other entity, guarantees that the Company will declare
o
r
pay any
dividends
t
o WaMu Delaware, nor are they obligated
t
o
r
other support
t
o the Company
t
o enable the Company
t
o pay dividends
o
n
the Fixed-
t
o
-
t
o WaMu Delaware
i
n the event the Company's assets and results from
operations are insufficient
f
o
r
such purpose.
Risks Associated with the Company's Business
The Company
i
s effectively controlled
b
y
WMI and the Company's relationship with WMI, and
l
o
r
WMB may create potential conflicts
o
f
interest.
A
l
l
o
f
the Company's officers and certain
o
f
the Company's managers are also officers
o
f
WMI
o
r
WMB
o
r
their affiliates. After this Offering, WMI, WMB and University Street will continue
t
o control
a
l
l
o
f
the Company's outstanding voting securities. WMI, WMB, and University Street
will have the right
t
o elect
a
l
l
o
f
the Company's managers, including the Independent Manager.
2
1
CONFIDENTIAL
Return
WMB and University Street may have interests that are not identical
t
o the Company's
interests. WMI, through
i
t
s subsidiary, New American Capital, Inc.,
i
s the ultimate owner
o
f
WMB's and University Street's common stock, and may have investment goals and strategies
that differ from those
o
f
the holders
o
f
the Trust Securities. Consequently, conflicts
o
f
interest
between the Company,
o
n
one hand, and WMB, University Street and/
o
r
WMI,
o
n
the other
hand, may arise.
The Company
i
s dependent
o
n
the officers and employees
o
f
WMI and WMBfor the selection,
structuring and monitoring
o
f
the loans
i
n the Asset Trust and the Company's relationship with
WMI and /
o
r
WMBmay create potential conflicts
o
f
interest.
WMI and WMB are involved
i
n virtually every aspect
o
f
the Company's existence. WMB
administers the Company's day-
t
o
-
day activities under the terms
o
f
certain agreements between
WMB and the Company. The Company
i
s dependent
o
n
the diligence and skill
o
f
the officers and
employees
o
f
WMB
f
o
r
the selection, structuring and monitoring
o
f
the HELs
i
n 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
o
f
interest. Specifically, such conflicts
o
f
interest may arise because the
employees
o
f
WMI and WMB (
i
) were directly involved
i
n the decisions regarding the amount,
type and price
o
f
HELs and other assets acquired indirectly from University Street and WMB
prior
t
o the Offering and (
i
i
)
will make decisions
o
n
the amount, type and (
i
f applicable) price
o
f
any future acquisitions
b
y
the Company
o
f
Additional Assets from University Street, WMI
o
r
other
parties.
The Company
i
s dependent
o
n
the officers and employees
o
f
WMBfor the servicing
o
f
the loans
i
n the Asset Trust and the Company's relationship with WMBmay create potential conflicts
o
f
interest.
The Company
i
s dependent
o
n
WMB and others
f
o
r
the servicing
o
f
the HELs
i
n the Asset
Trust and
i
s expected
t
o
b
e
dependent
o
n
WMB and others
f
o
r
the servicing
o
f
any underlying
collateral with respect
t
o Additional Assets. WMB administers the Company's day-
t
o
-
day
activities under the terms
o
f
the Asset Documentation relating
t
o 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
t
o the Pooling and Servicing Agreement
and the Asset Trust, WMB's servicing fee will
b
e
a per annum fee, paid monthly,
f
o
r
each HEL
based
o
n
the unpaid principal balance
o
f
such HEL and will equal 0.125% per annum. WMB,
a
s
Servicer, will
b
e
entitled
t
o retain certain fees and ancillary charges, including any prepayment
fees, insufficient funds fees, modification fees, payoff statement fees and late charges with
respect
t
o the HELs
a
s
b
e
entitled
t
o certain
income generated
b
y
permitted investments made with collections
o
n
the HELs.
Despite the Company's belief that the terms
o
f
the Asset Documentation between WMB and
the Company reflect and will reflect terms consistent with those negotiated
o
n
a
n
arm's- length
basis, the Company's dependency
o
n
WMB's officers and employees and the Company's close
relationship with WMB may create potential conflicts
o
f
interest. Specifically, such conflicts
o
f
interest may arise because the employees
o
f
WMB have the power
t
o modify the terms
o
f
HELs
and other assets
i
n the Asset Trust and other Eligible Assets and make business decisions with
respect
t
o the servicing
o
f
such underlying assets, particularly
t
o the extent such underlying
collateral
i
s defaulted
o
r
otherwise non- performing.
2
2
CONFIDENTIAL
Return
Regulators may limit the Company's ability
t
o
implement the Company's business plan and may
t
o pay dividends.
Because the Company
i
s
a
n
indirect subsidiary
o
f
WMB, regulatory authorities will have the
right
t
o examine the Company and
i
t
s
activities and, under certain circumstances,
t
o impose
restrictions
o
n
WMB
o
r
the Company that could impact
i
t
s
ability
t
o conduct business pursuant
t
o
the Company's business plan and that could adversely affect the Company's financial condition
and results
o
f
operations.
I
f the OTS, which
i
s WMB's primary regulator, determines that WMB's relationship with the
Company results
i
n
a
n
unsafe
o
r
unsound practice,
o
r
i
f
,
i
n certain instances, WMB
i
s
n
o
longer
well-capitalized, then the OTS has the authority
t
o
:
t
o transfer assets;
t
o pay dividends
t
o
i
t
s
security holders;
t
o redeem
i
t
s
preferred securities;
o
r
require WMB
t
o sever
i
t
s
relationship with the Company
o
r
divest
i
t
s
ownership
o
f
the
Company.
I
f
the OTS determines that WMB
i
s operating with
a
n
insufficient level
o
f
capital,
o
r
that the
payment
o
f
dividends
b
y
either WMB
o
r
i
t
s
subsidiaries, under the then- present circumstances,
i
s
a
n
unsafe and unsound practice, the OTS could restrict the Company's ability
t
o pay dividends.
I
f
any
o
f
the Company, the Asset Trust
o
r
WaMu Delaware loses
i
t
s
exemption under the
i
t could have a material adverse effect
o
n
the Company and would
likely result
i
n a redemption
o
f
the Fixed-
t
o
-
Trust Securities.
Each
o
f
the Company, the Asset Trust and WaMu Delaware believes that
i
t
i
s not, and
intends
t
o conduct
i
t
s operations
s
o
a
s
not
t
o be, required
t
o register
a
s
a
n
investment company
under the Investment Company Act. Under the Investment Company Act, a non- exempt entity
that
i
s
a
n
investment company
i
s required
t
o register with
t
h
e
SEC and
i
s subject
t
o extensive,
restrictive and potentially adverse regulation relating
t
o
,
among other things, operating methods,
management, capital structure, dividends and transactions with affiliates. The Investment
Company Act exempts entities that, directly
o
r
through majority-owned subsidiaries, are
" primarily engaged
i
n the business
o
f
purchasing
o
r
otherwise acquiring mortgages and other
liens
o
n
and interests
i
n real estate" (which the Company refers
t
o
a
s
" Qualifying Interests").
Under current interpretations
o
f
the staff
o
f
the SEC,
i
n order
t
o qualify
f
o
r
this exemption, each
o
f
the Company and the Asset Trust, among other things, must maintain
a
t
least 55%
o
f
the
Company's assets
i
n Qualifying Interests and also may
b
e
required
t
o maintain
a
n
additional 25%
i
n Qualifying Interests
o
r
other real estate related assets. The assets that the Company
o
r
the
Asset Trust may acquire therefore may
b
e
limited
b
y
the provisions
o
f
the Investment Company
Act. The Company and the Asset Trust have each established a policy
o
f
limiting authorized
investments which are
n
o
t
Qualifying Interests
t
o
n
o
more than 20%
o
f
t
h
e
value
o
f
their
respective total assets. The Investment Company Act does not treat cash and cash equivalents
a
s
either Qualifying Interests
o
r
other real estate related assets.
Based
o
n
the criteria outlined above, the Company and the Asset Trust each believe that,
a
s
o
f
the time
o
f
the Offering, the Company's and the Asset Trust's Qualifying Interests will
comprise
a
t
least 90%
o
f
the estimated fair market value
o
f
their respective total assets.
A
s
a
result, the Company and the Asset Trust each believe that they are not required
t
o register
a
s
a
n
investment company under the Investment Company Act. Neither the Company nor the Asset
Trust intends, however,
t
o seek
a
n
exemptive order, no-action letter
o
r
other form
o
f
interpretive
guidance from the SEC
o
r
i
t
s
staff
o
n
this position.
I
f
the SEC
o
r
i
t
s
staff were
t
o take a different
2
3
CONFIDENTIAL
Return
position with respect
t
o whether the Company's
o
r
the Asset Trust's assets constitute Qualifying
Interests, the Company
o
r
the Asset Trust could
b
e
required either (
i
)
t
o change the manner
i
n
which
i
t conducts
i
t
s operations
t
o avoid being required
t
o register
a
s
a
n
investlllent company,
o
r
(
i
i
)
t
o register
a
s
a
n
investment company, either
o
f
which could have a material adverse effect
o
n
the Company
o
r
the Asset Trust,
a
s
the case may be, the Company's ability
t
o make
payments
i
n respect
o
f
the Fixed- to-Floating Rate Company Preferred Securities and, accord-
ingly, the trading price
o
f
the Trust Securities. Further,
i
n order
t
o ensure that the Company and
the Asset Trust
a
t
a
l
l
times continues
t
o qualify
f
o
r
the above exemption from the Investment
Company Act, the Company and the Asset Trust may
b
e
required
a
t
times
t
o adopt less efficient
methods
o
f
financing certain
o
f
the Company's and the Asset Trust's assets than would
otherwise
b
e
the case and may
b
e
precluded from acquiring certain types
o
f
assets whose yield
i
s higher than the yield
o
n
assets that could
b
e
purchased
i
n a manner consistent with the
exemption. The net effect
o
f
these factors may
b
e
t
o lower
a
t
times the Company's net interest
income. Finally,
i
f the Company
o
r
the Asset Trust were
a
n
unregistered investment company,
there would
b
e
a risk that the Company
o
r
the Asset Trust,
a
s
b
e
subject
t
o monetary penalties and injunctive relief
i
n
a
n
action brought
b
y
the SEC, that the
Company
o
r
the Asset Trust,
a
s
b
e
unable
t
o enforce contracts with
third parties and that third parties could seek
t
o obtain rescission
o
f
transactions undertaken
during the period the Company
o
r
the Asset Trust was determined
t
o
b
e
a
n
unregistered
investment company.
I
n the event the Company, the Asset Trust
o
r
WaMu Delaware
i
s ever
considered
a
n
investment company under the Investment Company Act
a
s
a result
o
f
a
n
Investment Company Act Event, the Company would likely redeem the Fixed-
t
o
-
Floating Rate
Company Preferred Securities. See " Description
o
f
the Fixed-
t
o
-
Preferred Securities - Redemption."
Additionally, the Company may from time
t
o time have Asset Subsidiaries other than the
Asset Trust. The Company may not establish
a
n
Asset Subsidiary unless the establishment and
operation
o
f
such Asset Subsidiary will not cause the Company
t
o
b
e
a
n
investment company
which
i
s required
t
o register under the Investment Company Act and such Asset Subsidiary
i
s not
itself
a
n
investment company which
i
s required
t
o register under the Investment Company Act.
I
f
any such Asset Subsidiary were
t
o
b
e
required
t
o register
a
s
a
n
investment company, the results
would
b
e
similar
t
i
n respect
t
o the Asset Trust being required
t
o register
a
s
a
n
investment company.
Adverse Effect
o
f
Determination
o
f
Company's Partnership Status
Prior
t
o the issuance
o
f
the Company Preferred Securities, the Company will receive
a
n
opinion from Mayer, Brown, Rowe & Maw LLP
t
o the effect that,
f
o
r
income
t
a
x
purposes, (
i
) the Company will not
b
e
treated
a
s
a
n
association taxable
a
s
a
corporation and (
i
i
) although
n
o
activities closely comparable
t
o that contemplated
b
y
the
o
f
any
U
.
S
.
Treasury regulation, revenue ruling
o
r
judicial
b
e
treated
a
s
a
s
a
corporation. The opinions are based
o
n
certain assumptions and
o
n
certain representations and
agreements regarding restrictions
o
n
the future conduct
o
f
the activities
o
f
the Company.
t
o conduct
i
t
s
activities
i
i
f
i
taxable
a
s
a corporation
f
o
r
United States Federal income tax purposes, then the Company
would
b
e
subject under the Code
t
o the regular corporate income tax. Such taxes would reduce
the amounts available
t
o make payments
o
n
the Company Preferred Securities.
2
4
CONFIDENTIAL
Return
The Company has
n
o
control over changes
i
n interest rates and such changes could negatively
impact the Company's financial condition, results
o
f
operations, and ability
t
o pay dividends.
Initially, the Company's income consists primarily
o
f
payments received
o
n
the HELs which
are the underlying assets supporting the Class A Asset Trust Certificate (such underlying assets,
together with any collateral with respect
t
o any Additional Assets, the " Company's Portfolio").
A
t
January 31, 2006, 100%
o
f
the HELs
t
o
b
e
included
i
n the Company's Portfolio bore interest
a
t
fixed rates; however,
i
n the future, the Company could acquire Additional Assets which include
o
r
are secured
b
y
adjustable rate loans. Adjustable rate loans decrease the risks
t
o a lender
associated with changes
i
n interest rates but involve other risks.
A
s
interest rates rise, the
payment
b
y
the borrower rises
t
o the extent permitted
b
y
the terms
o
f
the loan, and the
increased payment increases the potential
f
o
r
default.
A
t
the same time, the marketability
o
f
the
underlying property may
b
e
adversely affected
b
y
higher interest rates.
I
n a declining interest rate
environment, there may
b
e
a
n
increase
i
n prepayments
o
n
the HELs
o
r
other assets
i
n the
Company's Portfolio
a
s
the borrowers refinance their mortgages
a
t
lower interest rates. Under
these circumstances, the Company may find
i
t more difficult
t
o acquire Additional Assets with
rates sufficient
t
o support the payment
o
f
the dividends
o
n
the Fixed-
t
o
-
Preferred Securities. A declining interest rate environment would adversely affect the Company's
ability
t
o pay full,
o
r
even partial, dividends
o
n
the Fixed-
t
o
-
Securities.
The loans
i
n the Company's Portfolio are subject
t
o economic conditions that could negatively
affect the value
o
f
the collateral securing such loans andI
o
r
the results
o
f
the Company's
operations.
The value
o
f
the collateral underlying the Company's Portfolio and
l
o
r
the results
o
f
the
Company's operations could
b
e
affected
b
y
various conditions
i
n the economy, such as:
local and other economic conditions affecting real estate and other collateral values;
sudden
o
r
unexpected changes
i
n economic conditions, including changes that might
result from terrorist attacks and the United States' response
t
o such attacks;
the continued financial stability
o
f
a borrower and the borrower's ability
t
o make loan
principal and interest payments, which may
b
e
adversely affected
b
y
j
o
b
loss, recession,
divorce, illness
o
r
personal bankruptcy; and
interest rate levels and the availability
o
f
credit
t
o refinance loans
a
t
o
r
prior
t
o maturity.
The loans
i
n the Company's Portfolio that are held through the Asset Trust are concentrated
i
n
two states, and adverse conditions
i
n those states,
i
n particular, could negatively impact the
Company's operations.
A
t
January 31, 2006, more than 79% (
a
s
a percentage
o
f
loan principal balances)
o
f
the
assets
i
n the Company's Portfolio were located
i
n Texas and California. Because
o
f
the
concentration
o
f
the Company's interest
i
n those states,
i
n the event
o
f
adverse economic
conditions
i
n those states, the Company would likely experience higher rates
o
f
loss and
delinquency
o
n
t
h
e
Company's Portfolio than
i
f
t
h
e
underlying HELs were more geographically
diversified. Additionally, the HELs
i
n the Company's Portfolio may
b
e
subject
t
o a greater risk
o
f
.
default than other comparable loans
i
n the event
o
f
adverse economic, political,
o
r
business
developments
o
r
natural hazards that may affect Texas and California, and the ability
o
f
property
owners
o
r
commercial borrowers
i
n those states
t
o make payments
o
f
principal and interest
o
n
the underlying loans.
I
n the event
o
f
any adverse development
o
r
natural disaster
i
n those states,
the Company's ability
t
o pay dividends
o
n
the Fixed-
t
o
-
Securities could
b
e
adversely affected.
2
5
CONFIDENTIAL
Return
The Company cannot assure purchasers that
i
t paid WMBand University Street fair market
value
f
o
r
a
l
l
o
f
the Company's assets because the Company has not obtained any third party
valuations
o
f
a
l
l
such assets. Nor can the Company assure purchasers that the) Company will
acquire
o
r
dispose
o
f
i
t
s assets
i
n the future
a
t
their fair market value.
The Company has adopted policies with a view
t
o ensuring that
a
l
l
financial dealings
between WMB, University Street and the Company will
b
e
fair
t
o each party and consistent with
market terms. However, there has been
n
o
third party valuation
o
f
a
l
l
o
f
the Company's assets.
I
n addition,
i
t
i
s not anticipated that third party valuations will
b
e
obtained
i
n connection with
future acquisitions
o
r
dispositions
o
f
assets even
i
n circumstances where
a
n
affiliate
o
f
the
Company
i
s selling the assets
t
o the Company,
o
r
purchasing the assets from the Company.
Accordingly, the Company cannot assure purchasers that the purchase price the Company paid
f
o
r
a
l
l
o
f
the Company's assets was equal
t
o
f
those assets. Nor can the
Company assure purchasers that the consideration
t
o
b
e
paid
b
y
the Company
t
o
,
o
r
received
b
y
the Company from, WMB, University Street
o
r
any
o
f
the Company's affiliates
i
n connection with
future acquisitions
o
r
dispositions
o
f
assets will
b
e
equal
t
o
f
such assets.
The Asset Trust
o
r
any other Asset Subsidiary, and therefore, the Company, could incur losses
a
s
a result
o
f
environmental liabilities
o
f
properties underlying the Company's assets
i
n the
Company's Portfolio through foreclosure action.
The Asset Trust
o
r
any other Asset Subsidiary may
b
e
forced
t
o foreclose
o
n
a
n
underlying
HEL
o
r
other assets where the borrower has defaulted
o
n
i
t
s
obligation
t
o repay the applicable
loans.
I
t
i
s possible that the Asset Trust
o
r
any other Asset Subsidiary, and therefore, the
Company, may
b
e
subject
t
o environmental liabilities with respect
t
o foreclosed property. The
discovery
o
f
these liabilities and any associated costs
f
o
r
removal
o
f
hazardous substances,
wastes, contaminants
o
r
pollutants, could have a material adverse effect
o
n
the fair value
o
f
such
assets.
Delays
i
n liquidating defaulted loans could occur and could cause the Company's business
t
o
suffer.
Substantial delays could
b
e
encountered
i
o
f
the collateral
securing defaulted loans
i
n the Company's Portfolio, with corresponding delays
i
n the Company's
receipt
o
f
related proceeds. An action
t
o foreclose
o
n
a mortgaged property
o
r
repossess and
sell other collateral securing a loan
i
s regulated
b
y
state statutes and rules. Any such action
i
s
subject
t
o many
o
f
the delays and expenses
o
f
lawsuits, which may impede the Company's ability
t
o foreclose
o
n
o
r
sell the collateral
o
r
t
o obtain proceeds sufficient
t
o repay
a
l
l
amounts due
o
n
the related loan
i
n the Company's Portfolio.
The Company may invest
i
n assets that involve new risks and need not maintain the current
asset coverage.
Although the Company's Portfolio currently consists primarily
o
f
HELs held through the
Asset Trust,
t
o the extent
i
t acquires Additional Assets
i
n the future, the Company
i
s not required
t
o limit
i
t
s
investments
t
o assets
o
f
the types currently
i
n the Company's Portfolio. See ' The
Company - Business
o
f
the Company - Assets
o
f
the Company." Assets such
a
s
second lien
o
r
o
f
credit, mortgage loans
o
n
single family
o
r
multi-family residences, commercial mortgage loans
o
r
may involve different risks not described
i
n this offering circular. Moreover, while the LLC
Agreement will call for maintaining specified levels
o
f
FFO coverage
a
s
t
o expected dividends,
the Company
i
s not required
t
o maintain the levels
o
f
asset coverage that currently exist.
2
6
CONFIDENTIAL
Return
The Company
i
s dependent
o
n
WMI, WMBand University Street with respect
t
o
i
t
s
acquisition
o
f
Additional Assets and may
b
e
subject
t
o conflicts
o
f
interest with respect
t
o
i
t
s
acquisition
o
f
new assets.
The dependency
o
f
the Company
o
n
WMI, University Street and WMB and the Company's
close relationship with WMI, University Street and WMB may create potential conflicts
o
f
interest
i
n connection with the Company's acquisition
o
f
Additional Assets. The Company will
b
e
dependent
o
n
WMI, University Street and WMB
t
o identify Additional Assets which
i
t may acquire,
but WMI, University Street and WMB are not required
t
o contribute
o
r
sell Additional Assets
t
o
the Company.
I
f
WMI, University Street and WMB are unable
t
o identify,
o
r
are unwilling
t
o
contribute
o
r
sell, suitable Additional Assets, then over time the Company's level
o
f
FFO
coverage
a
s
t
o expected dividends will decline. Moreover, conflicts
o
f
interest may arise because
the employees
o
f
WMI, University Street and WMB will, subject
t
o certain restrictions, make
decisions
o
n
the amount, type and (
t
o the extent the Company purchases Additional Assets)
price
o
f
future acquisitions
b
y
the Company
o
f
Additional Assets from University Street, WMB
o
r
other members
o
f
the WMI Group
a
s
well
a
s
future dispositions
o
f
assets
t
o WMB, University
Street
o
r
third parties.
t
o Fixed-
t
o
-
Floating Rate Depositary Shares Issued
i
n a Conditional
Exchange.
Holders
o
f
Trust Securities may have adverse tax consequences
a
s
a result
o
f
a Conditional
Exchange.
For United States Federal income tax purposes, a Conditional Exchange would most likely
b
e
a taxable event
t
o holders
o
f
Trust Securities under the Code, and they would incur a gain
o
r
loss,
a
s
b
y
the difference between their adjusted tax basis
i
n the
Trust Securities and the fair market value
o
f
the Fixed-
t
o
-
Floating Rate Depositary Shares.
I
n
addition, dividends,
i
f any, paid
t
o Foreign Holders
o
f
Fixed-
t
o
-
received upon a Conditional Exchange generally will
b
e
subject
t
o a 30%
U
.
S
.
withholding tax
unless the holder qualifies
f
o
r
a reduction from withholding tax under
a
n
applicable United States
income tax treaty.
A decline
i
n WMI's financial condition may restrict
i
t
s
ability
t
o pay dividends and could result
i
n a loss
o
n
the investment
o
f
the former holders
o
f
Trust Securities.
I
f
WMl's financial condition were
t
o deteriorate, the holders
o
f
the Fixed-
t
o
-
Floating Rate
Depositary Shares could suffer direct and materially adverse consequences, including suspension
o
f
the payment
o
f
noncumulative dividends
o
n
the Fixed-
t
o
-
and,
i
f a liquidation, dissolution
o
r
winding
u
p
o
f
WMI were
t
o occur, loss
b
y
holders
o
f
Fixed-
t
o
-
o
f
a
l
l
o
r
part
o
f
their investment. See " Description
o
f
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock."
A Conditional Exchange may
b
e
based
o
n
WMB's receivership, which could lead
t
o WMI's
bankruptcy and would mean that others are likely
t
o have liquidation claims senior
t
o that
o
f
t
h
e
holders
o
f
the Fixed-
t
o
-
A
n
Exchange Event triggering a Conditional Exchange will occur
i
f WMB
i
s placed into
conservatorship
o
r
receivership. WMB's conservatorship
o
r
receivership could lead
t
o WMI
becoming subject
t
o a voluntary
o
r
involuntary proceeding under the
U
.
S
.
Bankruptcy Code.
I
n the
event
o
f
WMI's bankruptcy, the claims
o
f
WMl's secured, senior, general and subordinated
creditors would
b
e
entitled
t
o a priority
o
f
payment over the claims
o
f
holders
o
f
equity interests
such
a
s
the Fixed-
t
o
-
A
s
a result
o
f
such subordination,
i
f WMI
became subject
t
o a bankruptcy proceeding after a Conditional Exchange the holders
o
f
the
2
7
CONFIDENTIAL
Return
Fixed-
t
o
-
Floating Rate Depositary Shares would likely receive,
i
f anything, substantially less than
they would have received had the Conditional Exchange not occurred.
The Fixed-
t
o
-
Floating Rate WMI Preferred Stock will rank subordinate
t
o the direct indebtedness
o
f
WMI.
The Fixed-
t
o
-
b
e
subordinate and rank junior
i
n right
o
f
payment
t
o
a
l
l
o
f
WMI's indebtedness
f
o
r
borrowed money and indebtedness evidenced
b
y
notes
o
r
other securities. Because the sole source
o
f
funds
f
o
r
payment
i
n respect
o
f
the
Fixed-
t
o
-
i
s the Fixed-
t
o
-
Floating Rate WMI Preferred Stock, the
Fixed-
t
o
-
Floating Rate Depositary Shares are effectively subordinated
o
n
the same basis
a
s
the
Fixed-
t
o
-
Floating Rate WMI Preferred Stock. The terms
o
f
the Fixed-
t
o
-
Shares and the Fixed-
t
o
-
Floating Rate WMI Preferred Stock will not limit
i
n any way WMI's ability
t
o incur additional indebtedness.
The Fixed-
t
o
-
b
e
structurally subordinated
t
o
a
l
l
obligations
o
f
WMJ'ssubsidiaries, and
a
s
a holding company, WMI may require cash from
i
t
s
subsidiaries
t
o make payments with respect
t
o the Fixed-
t
o
-
WMI
i
s a holding company that conducts
i
t
s
operations through
i
t
s
operating subsidiaries and
relies primarily
o
n
interest payments, dividends, proceeds from inter- company transactions and
loans from those subsidiaries
t
o meet
i
t
s
obligations
f
o
r
payment with respect
t
o
i
t
s
outstanding
equity securities, any and
a
l
l
o
f
which may
b
e
subject
t
o contractual restrictions and regulatory
restrictions. Accordingly, the Fixed-
t
o
-
Floating Rate WMI Preferred Stock (and thus the Fixed-
t
o
-
Floating Rate Depositary Shares)
i
s structurally subordinated
t
o
a
l
l
existing and future liabilities
o
f
WMl's subsidiaries. Holders
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares should look only
t
o the
assets
o
f
WMI, and not any
o
f
i
t
s
subsidiaries,
f
o
r
payments with respect
t
o the Fixed-
t
o
-
Floating
Rate Depositary Shares.
I
f
WMI
i
s unable
t
o obtain cash from
i
t
s
subsidiaries
i
t may
b
e
unable
t
o
fund dividend payments
i
n respect
o
f
the Fixed-
t
o
-
Upon the occurrence
o
f
o
f
the Fixed-
t
o
-
Floating Rate
Depositary Shares will not have the benefit
o
f
the same favorable covenants
a
s
the Fixed-
t
o
-
Floating Rate Company Preferred Securities.
Upon the occurrence
o
f
o
f
the Fixed-
t
o
-
Floating Rate
Depositary Shares will not benefit from the same favorable covenants
a
s
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities.
WMI
i
s not obligated
t
o pay dividends
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock and
dividends
o
n
these securities
a
r
e
not cumulative.
Dividends
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock are not cumulative.
Consequently,
i
f the board
o
f
directors
o
f
WMI
(
"
WMl's Board
o
f
Directors") does not declare
dividends
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock for any quarterly period, the
holders
o
f
the Fixed-
t
o
-
Floating Rate Depositary Shares would not
b
e
entitled
t
o any such
dividend whether
o
r
not funds are
o
r
subsequently become available.
WMl's Board
o
f
Directors may determine that
i
t would
b
e
i
n WMl's best interest
t
o pay less
than the full amount
o
f
the stated dividends
o
n
the Fixed-
t
o
-
o
r
n
o
dividends
f
o
r
any quarter even
i
f funds are available. Factors that would
b
e
considered
b
y
WMI's Board
o
f
Directors
i
n making this determination are WMI's financial condition and capital
needs, the impact
o
f
current and pending legislation and regulations, economic conditions,
t
a
x
considerations, and such other factors
a
s
WMI's Board
o
f
Directors may deem relevant.
2
8
CONFIDENTIAL
Return
There
i
s
n
o
active trading market for Fixed-
t
o
-
o
r
the Fixed- to-
Floating Rate Depositary Shares and such trading market may never develop.
The Fixed-
t
o
-
Floating Rate WMI Preferred Stock and the Fixed-
t
o
-
FloatingRate Depositary
Shares will
b
e
new issues
o
f
securities. WMI does not intend
t
o cause the listing
o
r
quotation
o
f
the Fixed-
t
o
-
o
r
the Fixed-
t
o
-
o
n
o
r
automated dealer quotation system. The Initial Purchasers are
under
n
o
obligation
t
o and
d
o
not intend
t
o make a market
i
n the Fixed-
t
o
-
Floating Rate
Depositary Shares. Consequently,
i
t
i
s unlikely that
a
n
active and liquid trading public market
f
o
r
the Fixed-
t
o
-
o
r
the underlying Fixed-
t
o
-
Floating Rate WMI
Preferred Stock will develop
o
r
b
e
maintained. The lack
o
f
liquidity and
a
n
active trading market
could adversely affect ability
o
f
the holders
o
f
Fixed-
t
o
-
t
o
dispose
o
f
such shares.
I
n addition, neither the Fixed-
t
o
-
Floating Rate Depositary Shares nor the Fixed-
t
o
-
Floating
Rate WMI Preferred Stock represented
b
y
such shares have
o
r
will
b
e
registered under the
Securities Act and will
b
e
deemed
t
o
b
e
o
f
Rule 144
o
f
the Securities Act. Holders
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares will not
b
e
able
t
o offer,
sell, pledge
o
r
otherwise transfer the Fixed-
t
o
-
Floating Rate Depositary Shares other than:
t
o a qualified institutional buyer within the meaning
o
f
Rule 144A
o
f
the Securities Act
i
n a
transaction complying with Rule 144A;
otherwise
i
n accordance with
a
n
applicable exemption from the registration requirements
o
f
the Securities Act;
o
r
t
o WMI
o
r
one
o
f
WMI's affiliates, and
i
n any case,
i
n accordance with exemptions from
any applicable state securities
o
r
blue sky laws.
These restrictions
o
n
transfer may inhibit the development
o
f
a
n
active and liquid trading
market
f
o
r
the Fixed-
t
o
-
Floating Rate Depositary Shares and may adversely impact the market
price
o
f
such shares.
2
9
CONFIDENTIAL
Return
CERTAIN INFORMATION CONCERNING WMB
General
Washington Mutual Bank (formerly known
a
s
Washington Mutual Bank, FA and referred
t
o
herein
a
s
" WMB")
i
s a federally chartered savings association, chartered and operating under
the United States Home Owners' Loan Act
o
f
1933,
a
s
i
n mortgage
banking, consumer banking and small business banking. WMB,
a
s
a federally chartered
association, has the authority
t
o make various types
o
f
b
y
homes
and commercial real estate, secured and unsecured consumer loans, and secured and unsecured
commercial loans.
A
s
a federal savings association, WMB
i
s subject
t
o regulation and
examination
b
y
the
U
.
S
.
Office
o
f
Thrift Supervision (together with any successor regulator, the
" OTS"),
i
t
s
primary regulator. WMB
i
s
a
n
indirect wholly- owned subsidiary
o
f
WMI.
Prior
t
o 2004, WMB had two sister depository institutions which were both owned directly
b
y
o
f
o
f
these institutions,
Washington Mutual Bank fsb, a federal savings bank, became a wholly- owned subsidiary
o
f
WMB
o
n
February
1
,
o
f
the state
o
f
bank and then was merged into WMB
o
n
January
1
,
2005.
WMB has applied
t
o the OTS
f
o
r
approval
t
o acquire Long Beach Mortgage Company. Long
Beach Mortgage Company's primary business
i
s
t
o originate, purchase, securitize and sell
subprime loans. Long Beach Mortgage Company
i
s a wholly- owned subsidiary
o
f
WMI and
i
s a
nonbank affiliate
o
f
WMB. Assets originated
b
y
Long Beach Mortgage Company will not
b
e
owned
b
y
the Asset Trust.
b
e
exchangeable, without the approval
o
r
any action
o
n
the part
o
f
the holders
o
f
such securities,
f
o
r
Fixed-
t
o
-
Floating Rate Depositary Shares under any
o
f
the
following circumstances, each
o
f
which
i
s referred
t
o
a
s
a
n
Exchange Event:
WMB becomes " undercapitalized" under the OTS' " prompt corrective action" regulations;
WMB
i
o
r
receivership;
o
r
the OTS,
i
n
i
t
s
sole discretion, anticipates that WMB may become " undercapitalized"
i
n
the near term
o
r
takes supervisory action that limits the payment
o
f
dividends
b
y
WMB,
and
i
n connection therewith, directs such exchange.
Capital Adequacy
WMB
i
s subject
t
o OTS capital requirements. The capital adequacy requirements are
quantitative measures established
b
y
OTS regulations that require WMB
t
o maintain minimum
amounts and ratios
o
f
capital. The OTS requires WMB
t
o maintain minimum ratios
o
f
core and
total capital
t
o risk- weighted assets,
a
s
well
a
s
core capital
t
o adjusted total assets and tangible
capital
t
o 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 OTS
regulations, WMB
i
s required
t
o have a (
i
) leverage ratio
o
f
core capital
t
o
f
a
t
least 4.00%, (
i
i
)
a ratio
o
f
core capital
t
o total risk- weighted assets ratio
o
f
a
t
least 4.00%,
(
i
i
i
)
a ratio
o
f
total capital
t
o risk- weighted assets
o
f
a
t
least 8.00% and (
i
v
)
a ratio
o
f
tangible
capital
t
o total adjusted assets
o
f
a
t
least 1.50%. A savings association's adjusted total assets
represent the savings association's total assets
o
n
i
t
s
Thrift Financial Report Consolidated
Statement
o
f
Condition filed with the OTS less assets
o
f
non- includable subsidiaries, goodwill
and other intangibles assets (exclusive
o
f
mortgage servicing rights and purchased credit card
relationships), disallowed servicing assets and purchased credit card relationships and accumu-
3
0
CONFIDENTIAL
Return
lated gains (losses)
o
n
certain available- for- sale securities and cash flow hedges. For purposes
o
f
determining risk- weighted assets
f
o
r
the risk- based capital ratios, the book value
o
f
each
o
f
the savings association's on- balance sheet assets, and a portion
o
f
certain off- balance sheet
items and exposures, are weighted from 0%
t
o 100% based
o
n
broad categories. For instance,
U
.
S
.
government debt obligations are generally risk- weighted
a
t
0%; certain qualifying residential
mortgage loans
o
n
one-
t
o
-
four family dwellings are generally risk weighted
a
t
50%; and
commercial loans and most other assets are generally risk- weighted
a
t
100%. Off- balance sheet
items (including letters
o
f
credit, loan commitments, swaps and other derivatives) are converted
into on- balance sheet " equivalent" amounts
f
o
r
risk- based capital purposes, then assigned a risk
weight like other assets. The capital risk weighting assigned
t
o certain asset- backed securities
may vary from 20%
t
o 200% depending
o
n
credit rating. Subordinated residual interests retained
i
n asset securitizations, credit enhancement and forms
o
f
" recourse" can result
i
n higher capital
charges
o
r
deductions from capital.
For purposes
o
f
the OTS regulations, " total capital"
i
s defined
a
s
the sum
o
f
core capital
and supplementary capital. " Core capital" generally includes: common shareholders' equity
(which includes related surplus); noncumulative perpetual preferred stock (which includes
related surplus); and qualifying minority interests
i
n the equity accounts
o
f
consolidated
subsidiaries (which may include such instruments
a
s
qualifying REIT preferred stock and the
Company Preferred Securities). " Supplementary capital" generally includes (subject
t
o 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
f
o
r
loan and lease losses (
u
p
t
o a maximum
o
f
1.25%
o
f
total risk- weighted assets); and
u
p
t
o 45%
o
f
the pretax net unrealized gains
o
f
available- for-sale equity securities investments. Supplemen-
tary capital
i
s permitted
t
o count towards only one- half
o
f
total capital. Both core capital and
tangible capital are subject
t
o various deductions. Some
o
f
these deductions are more stringent
f
o
r
tangible capital than core capital, including goodwill, certain other intangible assets, and
certain servicing assets
i
n excess
o
f
certain limits.
Federal law and regulations also establish five capital categories
f
o
r
savings associations:
well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and criti-
cally undercapitalized. A savings association
i
s treated
a
s
well-capitalized
i
f
i
t
s ratio
o
f
total
capital
t
i
s 10.00%
o
r
more,
i
t
s
ratio
o
f
core capital
t
i
s 6.00%
o
r
more,
i
t
s
leverage ratio
i
s 5.00%
o
r
more, and
i
t
i
s not subject
t
o any federal
supervisory agreement order
o
r
directive
t
o meet a specific capital level.
I
n order
t
o
b
e
adequately capitalized, any savings association must have a ratio
o
f
total capital
t
o risk- weighted
assets
o
f
not less than 8.00%, a ratio
o
f
core capital
t
o
f
not less than
4.00%, and ( unless
i
t
i
s
i
n the most highly- rated category) a leverage ratio
o
f
not less than
4.00%. Any savings association that
i
s neither well-capitalized nor adequately capitalized will
b
e
considered undercapitalized. Any savings association with a tangible equity ratio
o
f
2.00%
o
r
less
will
b
e
considered critically undercapitalized.
Undercapitalized savings associations are subject
t
o certain prompt corrective action
requirements, regulatory controls and restrictions, which become more extensive
a
s
a
n
association becomes more severely undercapitalized. Failure
b
y
WMB
t
o comply with applicable
capital requirements,
i
f unremedied, would result
i
n restrictions
o
n
i
t
s
activities and lead
t
o
regulatory enforcement actions against WMB including, but not limited
t
o
,
the issuance
o
f
a
capital directive
t
o ensure the maintenance
o
f
required capital levels. The Federal Deposit
Insurance Corporation Improvement Act
o
f
1991 requires the federal banking regulators
t
o take
prompt corrective action with respect
t
o depository institutions that
d
o
not meet minimum capital
requirements. Additionally, FDIC
o
r
OTS approval
o
f
any regulatory application filed
f
o
r
i
t
s
review
may
b
e
dependent
o
n
compliance with capital requirements.
3
1
CONFIDENTIAL
Return
I
n addition, the OTS from time
t
o time may impose higher specific capital requirements
o
n
any savings association that
i
s perceived
t
o have risks, exposures, credit concentration, rapid
growth
o
r
other circumstances warranting special attention. Failure
t
o satisfy sUc;
h
a
capital
directive could subject
a
n
association
t
o civil money penalties, judicial enforcement and
administrative remedies available
t
o the OTS,
a
s
well
a
s
a finding that a savings association
i
s
" undercapitalized" .
Whether WMB would ever
b
e
determined
b
y
t
h
e
OTS
t
o
b
e
" undercapitalized"
o
r
a
t
risk
o
f
becoming " undercapitalized"
i
n the near term - thereby triggering the exchange
o
f
the Trust
Securities
f
o
r
Fixed-
t
o
-
Floating Rate Depositary Shares - could
b
e
influenced not only
b
y
the
OTS' capital adequacy regulations,
b
u
t
also
b
y
t
h
e
regulator's interpretations and judgment
o
n
other matters. For example, the OTS' views
o
n
asset credit quality potentially could affect a thrift
o
r
savings association's capital status. Among other things,
t
h
e
OTS typically evaluates asset
quality, loan loss reserves and procedures during periodic regulatory examinations
o
f
each
federal savings association.
I
f
,
following such
a
n
examination
o
r
otherwise, the OTS
i
n
i
t
s
discretion were
t
o require WMB
t
o significantly increase
i
t
s
reserves against credit losses (
i
.
e
.
,
t
h
e
allowance
f
o
r
loan and lease losses), this could potentially reduce WMB's retained earnings
and regulatory capital.
A
s
noted above, a savings association's allowance
f
o
r
loan and lease
losses
i
s includable within supplementary capital only
u
p
t
o a limit, and
i
s not includable
a
t
a
l
l
i
n
core capital.
A savings association's regulatory capital status, and the risk
o
f
being deemed " undercapi-
talized" could also
b
e
affected
b
y
other developments
o
r
b
y
future changes
i
n regulatory capital
and other standards. WMB and WMI continue
t
o actively follow the progress
o
f
the
U
.
S
.
banking
agencies and the Basel Committee
o
n
Banking Supervision
i
n developing a new
s
e
t
o
f
regulatory
risk- based capital requirements. The Basel Committee
o
n
Banking Supervision
i
s a committee
established
b
y
t
h
e
central bank governors
o
f
certain industrialized nations, including the United
States. The new requirements are commonly referred
t
o
a
s
Basel"
o
r
The New Basel Capital
Accord; however, final requirements have not been adopted. WMB and WMI are also assessing
the potential impacts
o
f
Basel
I
I
.
The regulatory capital ratios calculated
f
o
r
WMB, along with the capital amounts and ratios
f
o
r
the minimum regulatory requirement and the minimum amounts and ratios required
t
o
b
e
categorized
a
s
well-capitalized under the regulatory framework
f
o
r
prompt corrective action were
a
s
follows:
December 31, 2005
WMB
Actual
Amount Ratio
Minimum
t
o
b
e
Categorized
a
s
Well- Capitalized
Minimum Under the OTS'
Regulatory Prompt Corrective
Requirement Action Regulations
Amount Ratio Amount Ratio
(Dollars
i
n millions)
Total capital
t
o total risk- weighted
assets .......................... $26,530 11.62% $18,260 8.00% $22,825 10.00%
Core capital
t
assets .......................... 19,661 8.61 9,130 4.00 13,695 6.00
Core capital
t
(leverage) ...................... 21,098 6.56 12,860
4.00(
1
)
16,075 5.00
Tangible capital
t
o tangible assets
(tangible equity) ................ 20,642 6.43 4,816 1.50
n
/
a
n
/
a
3
2
CONFIDENTIAL
Return
WMB
Actual
Amount Ratio
December 31, 2004
Minimum
t
o
b
e
.
. Categorized
a
s
Well-Capitalized
Requirement Action Provisions
(Dollars
i
n millions)
Total capital
t
assets ........................... $20,698 11.68% $14,174 8.00% $17,718 10.00%
Core capital
t
assets ........................... 14,392 8.12 7,087 4.00 10,631 6.00
Core capital
t
(leverage) ....................... 14,530 5.46 10,635 4.00( 1 ) 13,294 5.00
Tangible capital
t
o tangible assets
(tangible equity) ................. 14,530 5.46 3,988 1.50
n
/
a
n
/
a
December
3
1
,
2003
WMB
Actual
Amount Ratio
Minimum
t
o
b
e
Categorized
a
s
Well- Capitalized
Requirement Action Regulations
(Dollars
i
n millions)
Total capital
t
assets .......................... $15,444 10.80% $11,441 8.00% $14,302 10.00%
Core capital
t
assets .......................... 12,472 8.72 5,721 4.00 8,581 6.00
Core capital
t
(leverage) ...................... 12,531 5.50 9,116
4.00(
1
)
11,395 5.00
Tangible capital
t
o tangible assets
(tangible equity) ................ 12,531 5.50 3,419 1.50
n
/
a
n
/
a
( 1
)
The minimum leverage ratio guideline
i
s 3%
f
o
r
financial institutions that
d
o
not anticipate significant growth and that
have well-diversified risk, excellent asset quality, high liquidity, good earnings, effective management and monitoring
o
f
market risk and,
i
n general, are considered top- rate, strong banking organizations.
Benefits
t
o WMB
WMB has requested confirmation from the OTS that the Company Preferred Securities
constitute core capital
o
f
WMB under
t
h
e
OTS's applicable regulatory capital regulations and,
upon receipt
o
f
such confirmation, intends
t
3
3
CONFIDENTIAL
Return
USE OF PROCEEDS
WaMu Delaware will use the proceeds
o
f
the sale
o
f
i
n this Offering,
expected
t
o
b
e
approximately $1,225,000,000, net
o
f
underwriting commissions,
t
o purchase from
WMB a like amount
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities, which the Company
will issue
t
o WMB
i
n exchange
f
o
r
the conveyance from WMB
o
f
a portfolio
o
f
HELs. The WMI
Group will use the proceeds from the sale
o
f
the Fixed-
t
o
-
Securities
t
o WaMu Delaware and the Fixed Rate Company Preferred Securities
t
o WaMu
Cayman
f
o
r
general corporate purposes, which may include the repurchase
o
f
WMl's common
stock.
3
4
CONFIDENTIAL
Return
WAMU DELAWARE
(
"
WaMu Delaware")
i
s a statutory trust
created under the Delaware Statutory Trust Act,
a
s
amended (the " Trust Act") , pursuant
t
o a
certificate
o
f
trust filed with the Secretary
o
f
State
o
f
the State
o
f
Delaware and the execution
o
f
a trust agreement
o
f
WaMu Delaware
o
n
February 23, 2006. WaMu Delaware will continue
i
t
s
existence from and after the closing
o
f
the Offering pursuant
t
o
a
n
amended and restated trust
agreement (
a
s
s
o
amended and restated, the " Trust Agreement"),
t
o
b
e
entered into
b
y
and
among
t
h
e
Company,
a
s
grantor, Wilmington Trust Company,
a
s
property trustee (
t
h
e
" Property
Trustee"), and Wilmington Trust Company,
a
s
Delaware trustee (the " Delaware Trustee"),
a
s
o
f
the date the Trust Securities are issued. The rights
o
f
the holders
o
f
including economic rights, rights
t
o information and voting rights, are
a
s
set forth
i
n the Trust
Agreement and the Trust Act.
The Trust Agreement generally limits WaMu Delaware's activities
t
o (
i
) holding the
Fixed-
t
o
-
Floating Rate Company Preferred Securities, (
i
i
) issuing the Trust Securities,
(
i
i
i
) passing through dividends paid
b
y
the Company
t
o WaMu Delaware
o
n
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities and (
i
v
)
o
r
incidental
thereto. WaMu Delaware
i
s prohibited from issuing other equity securities
o
r
any debt securities
o
r
engaging
i
n any other activities. Subject
t
o the limitations and assumptions described under
" Certain
U
.
S
.
Federal Income Tax Considerations," WaMu Delaware will
b
e
treated
a
s
a grantor
trust
f
o
r
United States Federal income tax purposes, with the result that holders
o
f
Trust
Securities will
b
e
treated
a
s
beneficial owners
o
f
Fixed-
t
o Floating Rate Company Preferred
Securities
f
o
r
United States Federal income tax purposes. The Fixed-
t
o
-
b
e
the only assets
o
f
WaMu Delaware. The principal executive offices
o
f
WaMu Delaware will
b
e
located
a
t
1201 Third Avenue, Seattle, WA 98101. The office
o
f
the
Delaware Trustee
i
s Rodney Square North, 1100 North Market Street, Wilmington, DE 19890.
Copies
o
f
the Trust Agreement will
b
e
t
o WMI.
A
s
set forth
i
n
,
and subject
t
o
,
the Trust Agreement, the Property Trustee and the Delaware
Trustee will have exclusive and complete authority
t
o carry out the purposes
o
f
WaMu Delaware.
The Property Trustee will hold title
t
o the Fixed-
t
o
-
Securities
f
o
r
the benefit
o
f
the holders
o
f
the Trust Securities, and,
a
s
such holder, the Property
Trustee will have the power
t
o exercise
a
l
l
rights, powers and privileges with respect
t
o the
Fixed-
t
o
-
Floating Rate Company Preferred Securities under the LLC Agreement.
I
n addition, the
Property Trustee will maintain exclusive control
o
f
a segregated non- interest bearing bank
account
t
o hold
a
l
l
payments made
i
n respect
o
f
the Fixed-
t
o
-
Securities
f
o
r
the benefit
o
f
the holders
o
f
Pursuant
t
o the Trust Agreement,
a
l
l
charges
o
r
expenses
o
f
WaMu Delaware other than
payments required under the terms
o
f
the Trust Securities, including the fees, charges and
expenses
o
f
the Property Trustee, the Delaware Trustee, the Registrar, and Transfer Agent
o
r
any Paying Agent, will
b
e
paid
o
r
caused
t
o
b
e
paid
b
y
the Company; provided, however, that
i
f
the Company does not payor cause
t
o
b
e
paid such fees, charges and expenses
o
r
can only
pay such fees, charges and expenses
i
n a manner that would allocate such fees, charges and
expenses against the interests
o
f
the holders
o
f
the Fixed-
t
o Floating Rate Company Preferred
Securities, WMB will pay such fees, charges and expenses; provided further, that
i
f the Property
Trustee
o
r
the Delaware Trustee incurs fees, charges
o
r
expenses,
f
o
r
which they are not
otherwise liable under the Trust Agreement,
o
r
i
f the Paying Agent
o
r
Registrar and Transfer
Agent incurs fees, charges
o
r
expenses
f
o
r
which they are not otherwise liable under the Agency
Agreement,
i
n each case
a
t
the request
o
f
a holder
o
f
Trust Securities
o
r
other person, such
holder
o
r
other person will
b
e
liable
f
o
r
such fees, charges and expenses.
The information with respect
t
o WaMu Delaware that
i
s required
b
y
paragraph (
d
)
(
4
)
(
i
)
o
f
Rule 144A under the Securities Act, will
b
e
t
o the Property Trustee until
the earlier
o
f
(
i
) the redemption
i
n full
o
f
o
r
(
i
i
)
the Conditional Exchange.
3
5
CONFIDENTIAL
Return
THE COMPANY
Washington Mutual Preferred Funding LLC (the " Company")
i
s a Delaware; limited liability
company formed
o
n
February
3
,
2006 under the Delaware Limited Liability Company Act,
a
s
amended (the " LLC Act"), pursuant
t
o
a
n
initial limited liability company agreement and a
certificate
o
f
formation filed with the Secretary
o
f
State
o
f
the State
o
f
Delaware. The limited
liability company agreement will
b
e
i
n
i
t
s
entirety
o
n
o
r
about March
7
,
2006 (
a
s
s
o
amended and restated, the " LLC Agreement").
The LLC Agreement generally limits the Company's activities
t
o (
i
) issuing the Fixed-
t
o
-
Floating Rate Company Preferred Securities, the Fixed Rate Company Preferred Securities and
the common securities
o
f
the Company (the " Company Common Securities") and additional
Parity Equity Securities
o
f
the Company, (
i
i
)
acquiring and holding Eligible Investments, including
the Class A Asset Trust Certificate ( which will
b
e
the sole initial Eligible Investments
o
f
the
Company)
i
n accordance with the investment policy
a
s
described
i
n
"
-
Business
o
f
the
Company - Assets
o
f
the Company" and (
i
i
i
)
o
r
incidental
thereto. Subject
t
o the limitations and assumptions described under " Certain
U
.
S
.
Federal Income
Tax Considerations," the Company intends
t
o
b
e
treated
a
s
a partnership (other than a publicly
traded partnership taxable
a
s
a corporation)
f
o
r
t
a
x
purposes.
Further, the Company may not take any action,
o
r
permit any action
t
o
b
e
taken, that would
cause the Company
t
o
f
a
i
l
t
o
b
e
treated
a
s
a partnership
f
o
r
purposes
f
o
r
s
o
long
a
s
any Company Preferred Securities are outstanding, except with the
consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
the Fixed-
t
o
-
Floating Rate
Company Preferred Securities and the Fixed Rate Company Preferred Securities, voting together
a
s
a single class. The principal executive office
o
f
the Company
i
s 1201 Third Avenue, Seattle,
Washington 98101. Copies
o
f
the LLC Agreement will
b
e
t
o WMI.
The Company will receive the opinion
o
f
Mayer, Brown, Rowe & Maw LLP
t
o the effect that,
f
o
r
United States Federal income tax purposes, the Company will not
b
e
treated
a
s
a
n
association taxable
a
s
a corporation
o
r
a
s
a
s
a corporation.
Capitalization
Upon completion
o
f
this Offering, University Street, Inc.,
a
n
indirect subsidiary
o
f
WMB
(
"
University Street"), will hold
a
l
l
o
f
the Company Common Securities, representing 100%
o
f
the
voting rights
i
n the Company (subject
t
o the limited voting rights
o
f
holders
o
f
the Company
Preferred Securities described under " Description
o
f
Fixed-
t
o
-
Securities - Voting Rights and Covenants"). Upon completion
o
f
this Offering, WaMu Delaware
will hold
a
l
l
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities and WaMu Cayman will
hold
a
l
l
o
f
The following table illustrates the expected capitalization
o
f
the Company
a
s
o
f
the closing
o
f
this Offering, after giving effect
t
o the issuance
o
f
the Company Common Securities, the
Fixed-
t
o
-
Floating Rate Company Preferred Securities and the Fixed Rate Company Preferred
Securities
o
n
the closing date:
Fixed-
t
o
-
Floating Rate Company Preferred Securities .
Fixed Rate Company Preferred Securities .
Company Common Securities .
Total Capitalization .
3
6
A
s
o
f
the Closing Date
(Unaudited)
$1,250,000,000
$750,000,000
$3,389,459,150
$5,389,459,150
CONFIDENTIAL
Return
Business
o
f
the Company
Assets
o
f
the Company
I
n connection with
t
h
e
Offering, WMB
w
i
l
l
convey a portfolio
o
f
HELs
t
o
t
h
e
Company
i
n
exchange for 100%
o
f
the Company Preferred Securities. Concurrently, University Street will
convey a portfolio
o
f
HELs
t
o the Company
i
n exchange
f
o
r
The portfolios conveyed
b
y
t
o
f
HELs
having
a
n
aggregate principal balance
o
f
a
s
o
f
January 31, 2006
and includes payments received
o
n
such portfolio from and after February
1
,
2006. The Company
will then convey the assets received
b
y
i
t from WMB and University Street
t
o the Asset Trust
i
n
exchange for interests
i
n the Asset Trust represented
b
y
the Class A Asset Trust Certificate and
the Class R Asset Trust Certificate.
The Eligible Investments (which will initially consist
o
f
owned
b
y
the Company) from time
t
o time will generate net income
f
o
r
payment
o
f
dividends
b
y
the Company
t
o WaMu Delaware
a
s
holder
o
f
the Fixed-
t
o
-
Securities (and consequently
f
o
r
pass through
b
y
WaMu Delaware
t
o holders
o
f
the Trust
Securities),
t
o WaMu Cayman
a
s
holder
o
f
the Fixed Rate Company Preferred Securities (and,
consequently for payment
a
s
dividends
b
y
WaMu Cayman
t
o the holders
o
f
the WaMu Cayman
Preferred Securities), and
t
o University Street
a
s
holder
o
f
The Company intends
t
o manage
i
t
s
assets
s
o
a
s
(
i
)
t
o ensure that the Company will
a
t
a
l
l
times maintain
i
t
s
exemption under the Investment Company Act, (
i
i
)
t
o result
i
n the Company
a
t
a
l
l
times maintaining sufficient FFO
t
o allow payments
t
o
b
e
made with respect
t
o
i
t
s
Junior
Equity Securities (including payments
t
o University Street
a
s
holder
o
f
the Company Common
Securities) and (
i
i
i
)
t
o maintain the desired treatment under the Code
f
o
r
the Company's assets
and obligations.
Current requirements under the Investment Company Act mandate that
i
n order
t
o maintain
i
t
s
exemption from registration
a
s
a
n
investment company the Company must limit
i
t
s
assets
which are not Qualifying Interests
t
o
n
o
more than 20%
o
f
i
t
s
total assets
a
t
any time. The
Company expects that initially the distributions
i
t receives from the Asset Trust
a
s
holder
o
f
the
Class A Asset Trust Certificate will significantly exceed the amount required
t
o pay dividends
o
n
the Company Preferred Securities and any Parity Equity Securities. Cash received from
t
h
e
Asset
Trust and any Permitted Investments purchased with such funds are not Qualifying Interests, and
therefore funds received from the Asset Trust and retained
b
y
the Company will
b
e
limited
(together with any other assets which are not Qualifying Interests)
t
o 20%
o
f
the Company's
total assets
a
t
any time. For this and other reasons,
i
n the ordinary course, the Company expects
that
i
t will distribute
a
l
l
o
r
substantially
a
l
l
o
f
the funds
i
t receives from the Asset Trust
t
o
University Street,
a
s
holder
o
f
the Company Common Securities,
t
o the extent
i
t
i
s permitted
t
o
d
o
s
o
i
n accordance with the restrictions
o
n
dividends with respect
t
o the Company Common
Securities and such funds are not otherwise required
t
o pay dividends
o
n
the Company Preferred
Securities and any other Parity Equity Securities. The Company intends
t
o invest funds
i
t receives
from the Asset Trust
i
n Permitted Investments prior
t
o such funds being distributed
t
o the holders
o
f
the Company Common Securities, the Company Preferred Securities and any other Parity
Equity Securities.
The Company also expects that over time
t
h
e
principal balance
o
f
t
h
e
HELs held
b
y
the
Asset Trust will decrease
a
s
a result
o
f
principal payments and payoffs. Since (
i
)
i
n accordance
with the terms
o
f
the Pooling and Servicing Agreement, additional assets may only
b
e
added
t
o
the Asset Trust
i
n very limited circumstances and (
i
i
)
funds distributed
t
o the Company
b
y
the
Asset Trust may
b
e
distributed
t
o University Street
a
s
discussed above and
t
o the extent held
b
y
the Company will generally (when invested
i
n Permitted Investments) generate a lower rate
o
f
return than the HELs held
i
n the Asset Trust, over time the Company expects that
i
t
s
FFO will
decline. Accordingly, prior
t
o the point that the Company's FFO level
i
s reduced
t
o a level that
3
7
CONFIDENTIAL
Return
would prevent payments with respect
t
o
i
t
s
Junior Equity Securities ( including payments
t
o
University Street
a
s
holder
o
f
the Company Common Securities) the Company intends
t
o acquire
additional income producing investments which constitute Eligible Assets. Any additional assets
which are acquired
b
y
the Company will not
b
e
transferred
t
o the Asset Trust
o
r
serviced
i
n
accordance with the Pooling and Servicing Agreement. Additional assets which are acquired
b
y
the Company and are not Permitted Investments ( such assets, " Additional Assets") may (but
are
n
o
t
i
n
a
l
l
cases required
t
o
)
consist
o
f
obligations
o
f
Asset Subsidiaries. The terms
o
f
the
Asset Documentation with respect
t
o any Additional Assets will provide
f
o
r
the servicing
o
f
such
Additional Assets.
" Eligible Assets" means assets:
(
a
)
which (
i
) are securities, interests
o
r
other obligations
o
f
a
n
Asset Subsidiary
which are backed
o
r
collateralized
b
y
first
o
r
second lien closed end home equity
loans, first
o
r
o
f
o
n
single
family
o
r
multi- family residences, commercial mortgage loans
o
r
other real estate
assets,
i
n each case, with respect
t
o real estate located
i
n the United States;
provided, however, that the Company may acquire and hold first
o
r
second lien
o
r
o
f
credit,
mortgage loans
o
n
single family
o
r
multi-family residences, commercial mortgage
loans
o
r
other real estate assets directly
i
f the Company receives
a
n
Asset Tax
Opinion
i
n connection with such assets
o
r
(
i
i
) otherwise satisfy the Rating Agency
Condition and are approved
b
y
a
l
l
o
f
the managers, including the Independent
Manager;
(
b
)
which will
b
e
serviced and maintained
i
n accordance with Asset Documentation;
(
c
)
the collateral
f
o
r
which
i
s not permitted
t
o include under the related Asset
Documentation any first
o
r
second lien closed end home equity loans, first
o
r
o
f
o
n
single family
o
r
multi-
family residences, commercial mortgage loans
o
r
a
s
t
o
which the applicable obligor was more than
3
0
days delinquent
a
s
o
f
the
applicable cut-
o
f
f
date
o
r
transfer date;
(
d
)
the collateral
f
o
r
which does not create
o
r
carry any obligation
o
f
the Company
o
r
any Asset Subsidiary
t
o make future advances
o
r
loans
t
o any obligor with respect
t
o such collateral under lines
o
f
credit, revolving loan facilities
o
r
other similar
features; and
(
e
)
the acquisition, maintenance and servicing
o
f
which will not (
i
n itself
o
r
i
n
connection with any
o
f
t
h
e
Company's other assets):
(
i
) cause the Company
t
o
b
e
a
n
" investment company" which
i
s required
t
o
register under the Investment Company Act;
(
i
i
)
cause the imposition
o
f
United States Federal income withholding tax
i
n
respect
o
f
payments made
b
y
the Company
o
n
o
r
any Parity Equity Securities;
(
i
i
i
)
cause the Company
t
o
b
e
treated under the Code
a
s
a publicly traded
partnership taxable
a
s
a corporation;
o
r
(
i
v
)
cause the Company
t
o
b
e
treated
a
s
engaged
i
n a
U
.
S
.
trade
o
r
business,
a
s
determined for United States Federal income tax purposes.
" Asset Documentation" means (
a
)
with respect
t
o the Asset Trust and the Class A Asset
Trust Certificate, the Pooling and Servicing Agreement and any related Custody Agreement and
(
b
)
with respect
t
o any Additional Assets, the documentation (
i
) governing the maintenance and
3
8
CONFIDENTIAL
Return
servicing
o
f
such Additional Assets and custodial arrangements related thereto and (
t
o the extent
applicable) any underlying collateral related
t
o such Additional Assets and (
i
i
)
establishing (
i
f
applicable) any Asset Subsidiary created
i
n connection with such Additional Assets; provided that
the execution
o
f
any such documentation,
t
o the extent such documentation
i
s not substantially
similar
i
n
a
l
l
material respects
t
o the Pooling and Servicing Agreement (with such changes
a
s
may
b
e
necessary
o
r
desirable
t
o reflect the collateral
f
o
r
such Additional Assets), must satisfy
the Rating Agency Condition and
b
e
approved
b
y
a
l
l
o
f
the managers, including the Independent
Manager.
" Asset Subsidiary" means the Asset Trust and, with respect
t
o any Additional Assets,
a
n
entity formed
f
o
r
the purpose holding the collateral related
t
o such Additional Assets and making
payments with respect thereto
t
o the Company and:
(
a
)
i
n which the Company holds
a
l
l
o
r
substantially
a
l
l
o
f
t
h
e
economic interests;
(
b
)
which
i
s established and governed pursuant
t
o Asset Documentation;
(
c
)
which
i
s not
a
n
i
s required
t
o register under the
Investment Company Act;
(
d
)
the establishment and operation
o
f
which will not cause the Company
t
o
b
e
a
n
i
s required
t
o register under the Investment Company
Act;
(
e
)
o
f
which will not cause the imposition
o
f
United States
Federal withholding tax
i
n respect
o
f
payments
b
y
the Company
o
n
the Company
o
r
any Parity Equity Securities;
(
f
)
o
f
t
o
b
e
treated
under the Code
a
s
a
s
a corporation; and
(
g
)
o
f
t
o
b
e
treated
a
s
engaged
i
n a US trade
o
r
business,
a
s
determined
f
o
r
tax purposes.
" Asset Tax Opinion" means, with respect
t
o any assets,
a
n
opinion
o
f
counsel from a
nationally recognized tax counsel
t
o the effect that the acquisition and ownership
o
f
such assets
b
y
the Company will not (
i
n itself
o
r
i
n connection with any
o
f
the Company's other assets):
(
a
)
cause the imposition
o
f
United States Federal withholding tax
i
n respect
o
f
payments made
b
y
the Company
o
n
o
r
any
(
b
)
cause the Company
t
o
b
e
treated under the Code
a
s
a publicly traded partnership
taxable
a
s
a corporation;
o
r
(
c
)
cause the Company
t
o
b
e
treated
a
s
engaged
i
n a
U
.
S
.
trade
o
r
business,
a
s
determined
f
o
r
t
a
x
purposes.
" Asset Portfolio" means the Class A Asset Trust Certificate and any Permitted Investments
and Additional Assets held
b
y
t
o time.
" Eligible Investments" means Permitted Investments, the Class A Trust Certificate, the
Class R Asset Trust Certificate and Eligible Assets.
" Permitted Investments" means one
o
r
more
o
f
the obligations
o
r
securities listed below:
(
a
)
obligations
o
f
,
o
r
guaranteed
a
s
t
o principal and interest by, the United States
o
f
America
o
r
any agency
o
r
instrumentality thereof when such obligations are
backed
b
y
the full faith and credit
o
f
the United States
o
f
America;
3
9
CONFIDENTIAL
Return
(
b
)
repurchase agreements
o
n
obligations described
i
n clause (
a
)
o
f
this definition
o
f
" Permitted Investments"; provided further, that the unsecured obligations
o
f
the
party agreeing
t
o repurchase such obligations have
a
t
the time one
o
f
the two
highest short term debt ratings
o
f
each
o
f
the Rating Agencies; and provided that
such repurchaser's unsecured long term debt has one
o
f
the two highest
unsecured long term debt ratings
o
f
each
o
f
the Rating Agencies;
(
c
)
federal funds, certificates
o
f
deposit, time deposits and bankers' acceptances
o
f
any bank
o
r
trust company incorporated under the laws
o
f
the United States
o
f
America
o
r
any state; provided that the debt obligations
o
f
such bank
o
r
trust
company (
o
r
,
i
n the case
o
f
the principal bank
i
n a bank holding company system,
debt obligations
o
f
the bank holding company)
a
t
the date
o
f
acquisition thereof
have one
o
f
the two highest short term debt ratings
o
f
each
o
f
the Rating
Agencies and unsecured long term debt has one
o
f
the two highest unsecured
long term debt ratings
o
f
each
o
f
(
d
)
federal funds, certificates
o
f
deposit, time deposits, demand deposits and bankers'
acceptances
o
f
WMB;
(
e
)
obligations
o
f
,
o
r
obligations guaranteed
b
y
,
any state
o
f
the United States
o
f
America
o
r
the District
o
f
Columbia, provided that such obligations
a
t
the date
o
f
acquisition thereof shall have one
o
f
the two highest long- term debt ratings
available
f
o
r
such securities from each
o
f
(
f
)
commercial paper
o
f
any corporation incorporated under the laws
o
f
the United
States
o
f
America
o
r
any state thereof, which
o
n
the date
o
f
acquisition has the
highest commercial paper rating
o
f
each
o
f
the Rating Agencies; provided that the
corporation has unsecured long term debt that has one
o
f
the two highest
unsecured long term debt ratings
o
f
each
o
f
(
g
)
securities (other than stripped bonds
o
r
stripped coupons) bearing interest
o
r
sold
a
t
a discount that are issued
b
y
any corporation incorporated under the laws
o
f
the United States
o
f
America
o
r
any state thereof and have one
o
f
the two
highest long- term unsecured ratings available
f
o
r
such securities from each
o
f
the
Rating Agencies; and
(
h
)
any other category
o
f
investments that satisfy the Rating Agency Condition and
i
s
approved
b
y
a
l
l
o
f
the managers, including the Independent Manager; subject
t
o
the receipt
b
y
the Company
o
f
a
n
Asset Tax Opinion with respect
t
o such
category
o
f
investments;
provided, however, that any
o
f
the investments listed above will not
b
e
Permitted Investments
t
o
the extent that investment therein would cause the outstanding principal amount
o
f
Permitted
Investments that are then held
b
y
the Company
t
o exceed 20%
o
f
the aggregate principal amount
o
f
a
l
l
Eligible Investments.
I
n
n
o
event shall
a
n
instrument
b
e
a Permitted Investment
i
f such
instrument (
x
)
evidences a right
t
o receive only interest payments with respect
t
o the obligations
underlying such instrument
o
r
(
y
)
has been purchased
a
t
a price greater than the outstanding
principal balance
o
f
such instrument.
" Rating Agencies" means,
a
t
any time, S&
P
,
Moody's and Fitch, but only
i
n the case
o
f
each
such agency
i
f
i
t
i
s rating the relevant security, including the Trust Securities
o
r
the WaMu
Cayman Preferred Securities,
a
t
the time
o
r
,
i
f none
o
f
them
i
s providing a rating
f
o
r
the relevant
security, including the Trust Securities
o
r
a
t
such time,
then any " nationally recognized statistical rating organization"
a
s
that phrase
i
s defined
f
o
r
purposes
o
f
Rule 436 (
g
)
(
2
)
under the Securities Act, which
i
s rating such relevant security.
4
0
CONFIDENTIAL
Return
" Rating Agency Condition" means written notice from each Rating Agency confirming that
the proposed change
o
r
modification will not result
i
n a reduction
o
f
the rating then currently
assigned
b
y
such Rating Agency
t
o
r
the WaMu Cayman preferred
Securities. .
Employees and Administration Agreement
Prior
t
o issuing the Fixed-
t
o
-
Floating Rate Company Preferred Securities, the Company and
WMB will enter into
a
n
Administrative Services Agreement (
t
h
e
" Administrative Services
Agreement") pursuant
t
o which WMB will provide (
o
r
cause
t
o
b
e
provided) certain accounting,
legal, tax and other support services
t
o the Company, assist the Company
i
n maintaining
compliance with
a
l
l
pertinent
U
.
S
.
local, state and federal laws and provide necessary
administrative, record keeping and secretarial services
t
o the Company. Under such agreement,
the Company will agree
t
o reimburse the provider
o
f
such services from time
t
o time
f
o
r
the
value
o
f
services provided
b
y
such provider
t
o the Company. The Company expects that any
such reimbursement will
b
e
i
n a
d
e
minimis amount.
The Company will maintain limited liability company records and audited financial statements
that are separate from those
o
f
WMI and any
o
f
i
t
s
other affiliates. None
o
f
the officers,
employees
o
r
managers
o
f
the Company will have any direct
o
r
indirect pecuniary interest
i
n any
security
t
o
b
e
acquired
o
r
disposed
o
f
b
y
the Company
o
r
i
n any transaction
i
n which the
Company has
a
n
interest.
Management
o
f
the Company
The Company will
b
e
managed
b
y
a Board
o
f
Managers. The LLC Agreement will provide
that the Company's Board
o
f
Managers will
a
t
a
l
l
times
b
e
composed
o
f
three members, one
o
f
whom
i
s not and has not been during the preceding five years
a
n
officer
o
r
employee
o
f
WMI
o
r
any affiliate
o
f
WMI, other than a financing subsidiary (the " Independent Manager"). The
Company's managers will serve until their successors are duly elected and qualified. Except
i
n
certain circumstances described under
"
-
Independent Manager" below, action
b
y
the
Company's Board
o
f
Managers will
b
e
b
y
majority vote. The Company will have five officers upon
issuance
o
f
the Fixed-
t
o
-
b
e
the managers and executive officers
o
f
the Company upon
completion
o
f
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 Manager
First Vice President and Assistant Secretary
Vice President
First Vice President and Secretary
Each
o
f
the initial managers (other than the Independent Manager) and officers
o
f
the
Company are individuals who are officers
o
r
employees
o
f
WMI
o
r
one
o
f
i
t
s
affiliates. The initial
Independent Manager
i
s Kenneth
J
.
Uva, who
i
s
a
n
employee
o
f
CT Corporation.
Independent Manager
Under the LLC Agreement,
i
n order
t
o
b
e
considered " independent", a manager must not,
during the preceding five years, have been a director
o
r
employee
o
f
WMI
o
r
any affiliate
o
f
WMI,
other than a direct
o
r
o
f
WMI.
4
1
CONFIDENTIAL
Return
The LLC Agreement will require that,
i
t
o the Company
o
f
any
proposed action requiring
h
i
s
o
r
o
f
holders
o
f
i
o
f
the holders
o
f
the Company Preferred Securities, the Company's Independent Manager owes such holders
the same duties which the Independent Manager owes
t
o the holders
o
f
Company Common
Securities.
The LLC Agreement will provide that, for
s
o
long
a
s
outstanding, certain actions
b
y
t
o prior approval
o
f
a
l
l
Managers
including the Independent Manager. The Company will not
b
e
able, without the approval
o
f
the
Independent Manager,
t
o (
i
) terminate, amend
o
r
otherwise change any
o
f
the Company's Asset
Documentation
o
r
(
i
i
)
o
r
share exchange that
i
s not tax- free
t
o the
holders
o
f
the Company Preferred Securities unless such consolidation, merger
o
r
share
exchange was approved
b
y
the consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities and the Fixed Rate Company Preferred
Securities, voting together
a
s
a single class.
I
n addition,
i
n the event that the Asset Trust fails
t
o
make a payment
t
o the Company
o
r
any payments are not received with regard
t
o any Additional
Asset
i
n violation
o
f
the terms
o
f
the related Asset Documentation
o
n
any scheduled payment
date, the Independent Manager will have the authority
t
o cause the Company,
a
s
the holder
o
f
the Series A Asset Trust Certificate
o
r
any Additional Asset,
a
s
applicable
t
o enforce
i
t
s
rights
i
n
such capacity until payments have been resumed and a year has passed since the date
o
f
the
latest scheduled payment date with respect
t
o which the Asset Trust
o
r
the Additional Asset
failed
t
o make a payment.
The holders
o
f
the Company Preferred Securities, voting together
a
s
a single class,
b
y
majority vote
o
f
the votes cast
o
n
such matter
a
t
a meeting properly called and held
o
r
b
y
written
instructions signed
b
y
the holders
o
f
Company Preferred Securities representing a majority
o
f
the
voting rights
o
f
a
l
l
outstanding Company Preferred Securities, voting together
a
s
a single class,
are entitled
t
o
r
any succeeding Independent Manager and
t
o
f
i
l
l the vacancy
created
b
y
such removal
o
r
i
n the office
o
f
the Independent Manager
i
f (
i
) the Company fails
t
o pay
f
u
l
l
dividends
o
n
t
h
e
o
n
any
Dividend Payment Date, (
i
i
)
WaMu Delaware fails
t
o pass through dividends paid
b
y
the
Company
o
n
the Fixed-
t
o
-
t
o the holders
o
f
the Trust
Securities
o
n
o
r
(
i
i
i
)
a Bankruptcy Event occurs. The person
s
o
elected will
b
e
deemed
t
o
b
e
a
n
Independent Manager irrespective
o
f
whether
h
e
o
r
she meets
the independence test described above. Such right will continue
f
o
r
a
s
long
a
s
any Fixed-
t
o
-
Floating Rate Company Preferred Securities are outstanding.
" Bankruptcy Event" means the Company, WaMu Delaware
o
r
WaMu Cayman (
i
) becomes
insolvent
o
r
i
s unable
t
o pay
i
t
s
debts
o
r
fails
o
r
admits
i
n writing
i
t
s
inability generally
t
o pay
i
t
s
debts
a
s
they become due, (
i
i
)
makes a general assignment, arrangement
o
r
composition with
o
r
f
o
r
the benefit
o
f
i
t
s creditors
o
r
(
i
i
i
) institutes
o
r
has instituted against
i
t a proceeding seeking a
judgment
o
f
insolvency
o
r
bankruptcy
o
r
any other relief under any bankruptcy
o
r
insolvency law
o
r
other similar law affecting creditors' rights,
o
r
a petition
i
s presented
f
o
r
i
t
s
winding
u
p
o
r
liquidation.
Compensation
o
f
The Company intends
t
o pay the initial Independent Manager a reasonable fee
f
o
r
his
o
r
her
services
a
s
a manager
o
f
the Company, plus reimbursement
o
f
expenses
f
o
r
attendance
a
t
each
meeting
o
f
the Company's Board
o
f
Managers.
A
s
t
o managers and officers
o
f
the Company who
are also officers
o
r
employees
o
f
WMI
o
r
one
o
f
i
t
s
affiliates, the Company will pay,
o
r
reimburse
the related affiliate for, a portion
o
f
the salary and benefits
o
f
any such persons
i
n proportion
t
o
the estimated amount
o
f
time spent
b
y
such person
o
n
the Company's business
a
s
compared
t
o
4
2
CONFIDENTIAL
Return
time spent
o
n
the business
o
f
WMI
o
r
one
o
f
i
t
s
other affiliates. However, the Company expects
such amount
t
o
b
e
d
e
minimis.
Indemnification
o
f
The LLC Agreement will provide that the Company will,
t
o the fullest extent permitted
b
y
law, indemnify any manager
o
r
officer
o
f
the Company
f
o
r
any liability and related expenses
(including reasonable counsel's fees) arising out
o
f
such manager's
o
r
officer's status
a
s
a
manager
o
r
officer
o
f
the Company; provided, however, that a court
o
f
competent jurisdiction has
not determined that such manager
o
r
officer did not act
i
n good faith and
i
n a manner that
h
e
o
r
she reasonably believed
t
o
b
e
i
n
,
o
r
not opposed
t
o
,
the best interests
o
f
the Company and, with
respect
t
o any criminal action
o
r
proceeding, had
n
o
reasonable cause
t
o believe that his
o
r
her
conduct was unlawful. The LLC Agreement will provide that the right
t
o indemnification
i
s a
contract right and set forth certain procedural and evidentiary standards applicable
t
o
enforcement
o
f
a claim. The LLC Agreement will provide that the Company may purchase and
maintain insurance
t
o protect any manager
o
r
officer against any liability asserted against him
o
r
her,
o
r
incurred
b
y
him
o
r
her, arising out
o
f
his
o
r
her status
a
s
such.
Additional Covenants
o
f
the Company
i
n the LLC Agreement
The LLC Agreement provides that,
s
o
long
a
s
outstanding, the Company will not authorize, create
o
r
increase the authorized amount
o
f
o
r
issue any class
o
r
series
o
f
any equity shares
o
f
the Company,
o
r
any warrants, options
o
r
other
rights convertible
o
r
exchangeable into any class
o
r
series
o
f
any equity shares
o
f
the Company,
ranking senior
t
o the Company Preferred Securities, either
a
s
t
o dividend rights, redemption
rights
o
r
rights
o
n
dissolution, liquidation
o
r
winding
u
p
o
f
the Company without the consent
o
r
a
n
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
the Fixed-
t
o
-
Preferred Securities and the Fixed Rate Company Preferred Securities, voting together
a
s
a
single class. The LLC Agreement also provides that, except with the consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
the Fixed-
t
o
-
and the Fixed Rate Company Preferred Securities, voting together
a
s
a single class, the
Company will not take certain other actions.
These actions are described under " Description
o
f
the Fixed-
t
o
-
Preferred Securities - Voting Rights and Covenants."
The information with respect
t
o the Company that
i
s required
b
y
paragraph (
d
)
(
4
)
(
i
)
o
f
Rule 144A under the Securities Act, including quarterly unaudited and annual audited financial
statements,
i
n each case prepared
i
n accordance with
U
.
S
.
GAAP, will
b
e
t
o WMI until the earlier
o
f
(
i
) the redemption
i
n full
o
f
the Fixed-
t
o
-
o
r
(
i
i
)
the Conditional Exchange.
4
3
CONFIDENTIAL
Return
THE ASSET TRUST
General
Washington Mutual Home Equity Trust I (the " Asset Trust")
i
s a statutory trust formed
under the laws
o
f
the State
o
f
Delaware pursuant
t
o a trust agreement between the Company,
a
s
a
s
Delaware trustee. The Pooling and
Servicing Agreement among the Company,
a
s
depositor, WMB,
a
s
servicer (the " Servicer"),
Deutsche Bank Trust Company Delaware,
a
s
Delaware trustee (the " PSA Delaware Trustee")
and Deutsche Bank National Trust Company,
a
s
trustee (the " Trustee"), will restate the trust
agreement and will
b
e
o
f
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
i
n
connection with the Pooling and Servicing Agreement and any related agreement. The Asset
Trust will not have any directors, officers
o
r
other employees. No equity contribution will
b
e
made
t
o the Asset Trust
b
y
WMB, the depositor
o
r
any other party, except
f
o
r
a
d
e
minimis contribution
made
b
y
the depositor pursuant
t
o the initial trust agreement, and the Asset Trust will not have
any other capital. The fiscal year end
o
f
b
e
December 31. The Asset Trust
will act through the Trustee and the PSA Delaware Trustee, whose fees and reasonable
expenses will
b
e
paid
o
r
reimbursed
b
y
the Servicer.
For purposes
o
f
this offering circular with respect
t
o the underwriting, origination and
servicing
o
f
the HELs
i
n the Asset Trust, references
t
o WMB include WMB, originators acquired
b
y
WMB and WMB's subsidiaries.
General Description
o
f
Assets
The assets
o
f
o
f
HELs having,
a
s
o
f
the Cut- Off Date, a value
o
f
approximately $5,389,459,150, payments received thereon and certain other investments. The
HELs were originated
b
y
i
t
s
retail branches between September
1
,
2001
and September 30, 2005.
A
s
o
f
January 31, 2006, the HELs transferred into the Asset Trust had
a
n
aggregate unpaid principal balance
o
f
The assets
o
f
o
f
56,090 HELs that had
a
n
aggregate unpaid
principal balance
a
s
o
f
the Cut- Off Date
o
f
approximately $5,389,459,150. The HELs have a
weighted average gross interest rate
o
f
6.076% and range from a gross interest rate
o
f
4.00%
t
o
11.315%. The weighted average current, unpaid principal balance
o
f
the HELs
i
s $96,086 with a
minimum current, unpaid principal balance
o
f
$25,002 and a maximum current, unpaid principal
balance
o
f
$965,000. Assets
i
n the Asset Trust have various original maturities ranging from
5 years
t
o
4
0
years and werE:),
o
n
average, originated within the last 25.46 months. The current
averageloan-
t
o
-
value ratio
i
s 53.48% and the average loan-
t
o
-
value ratio
a
t
origination was
57.51%. The HELs have a weighted average Credit Score (
a
s
defined below)
o
f
757. Most
o
f
the
properties underlying the HELs are owner occupied with 3.86%
o
f
the properties non- owner
occupied. The HELs are geographically concentrated
i
n Texas (49.01%), California (30.59%),
Florida (7.17%), and New York (5.08%). HELs are typically made
f
o
r
reasons such
a
s
home
purchases, home improvements, furniture and fixtures purchases, purchases
o
f
automobiles and
debt consolidation. The HELs are generally repaid
o
n
a fully- amortizing basis.
Acquisition
o
f
the Portfolio and Related Transactions
I
n anticipation
o
f
the transactions described
i
n this offering circular, WMB contributed a pool
o
f
HELs
t
o the Company
i
n exchange
f
o
r
a corresponding amount
o
f
the Company's Fixed-
t
o
-
Floating Rate Company Preferred Securities and Fixed Rate Company Preferred Securities.
I
n
addition, University Street contributed a pool
o
f
HELs
t
o the Company
i
n exchange for
a
l
l
o
f
the
4
4
CONFIDENTIAL
Return
Company Common Securities. The aggregate value
o
f
these contributions totaled approximately
$5,389,459,150.
Concurrently with the issuance
o
f
the Trust Securities, the Company will cOntribute
t
o the
Asset Trust
a
l
l
o
f
the HELs
i
t received from WMB and University Street. Such contribution will
b
e
made
i
n exchange
f
o
r
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
o
f
regular interests
i
n
the Asset Trust, and the Class R Asset Trust Certificate will represent the sole class
o
f
residual
interests
i
n the Asset Trust. The Company will retain the Class A Asset Trust Certificate and
expects
t
o sell the Class R Asset Trust Certificate
t
o WMB.
The Asset Trust will own the right
t
o receive
a
l
l
payments
o
f
principal and interest
o
n
the
HELs due after January 31, 2006 (the " Cut- Off Date"). A schedule
t
Agreement will include information about each HEL, including:
the outstanding principal balance
a
s
o
f
the close
o
f
business
o
n
the Cut- Oft Date;
the term
o
f
the HEL; and
the applicable interest rate
a
s
o
f
the close
o
f
business
o
n
the Cut- Oft Date.
The notes relating
t
o
t
h
e
HELs
w
i
l
l
not
b
e
endorsed
t
o
t
h
e
Asset Trust and
n
o
assignments
t
o the Asset Trust
o
f
the mortgages securing the HELs will
b
e
prepared. WMB,
i
n
i
t
s
capacity
a
s
initial Custodian, will have possession
o
f
and will review such notes and the HELs
a
s
Custodian
f
o
r
the Asset Trust and financing statements will
b
e
filed evidencing the Asset Trust's interest
i
n
the HELs.
I
n exchange
f
o
r
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
t
o the order
o
f
the depositor.
Description
o
f
the Portfolio
General
A
l
l
o
f
the HELs
i
n the portfolio
o
f
o
f
closed- end, first lien home
equity loans secured
b
y
a first lien that primarily
i
s
o
n
the borrower's residence. Such residences
are largely single family properties. These loans typically are made
f
o
r
reasons such
a
s
home
purchases, home improvements, acquisition
o
f
furniture and fixtures, purchases
o
f
automobiles,
and debt consolidation. The HELs are generally paid
o
n
a fully- amortizing basis.
A
s
o
f
January 31, 2006, none
o
f
the HELs were delinquent
i
n payments
f
o
r
a period
o
f
more than
3
0
days; however, the process
o
f
selection
f
o
r
the HELs conveyed
t
o the Asset Trust excluded any
such loans. Nevertheless, there can
b
e
n
o
assurance that HELs held
i
n the portfolio
o
f
the Asset
Trust will not become delinquent
i
n the future. WMB's delinquency experience with respect
t
o
first lien, closed- end home equity loans owned
b
y
WMB and
i
t
s subsidiaries has consistently
been less than one percent
o
f
the total outstanding unpaid principal balance
o
f
such loans.
A
s
o
f
December 31, 2005, total delinquencies
o
f
the first lien, closed- end home equity loans owned
b
y
WMB and
i
t
s
subsidiaries, including charge- ofts during 2005, were 0.60%
o
f
the total unpaid
principal balances
o
f
such loans.
4
5
CONFIDENTIAL
Return
The following tables represent information
a
s
o
f
January 31, 2006 with respect
t
o the HELs
included
i
n the portfolio
o
f
t
h
e
Asset Trust:
Distribution
b
y
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
b
y
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-
1
1
.99 .
Total .
Distribution
b
y
Property Type
Property Type
Single Family .
Townhouse .
Condominium .
Manufactured Housing .
Total .
Number
o
f
Loans
11,198
13,561
11,231
17,073
2,322
644
6
1
56,090
Number
o
f
Loans
1
5
26,026
27,509
2,277
209
2
6
2
5
3
56,090
Number
o
f
Loans
51,667
2,071
2,269
8
3
56,090
4
6
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
o
f
Overall Portfolio
Balance
8.02%
15.83
18.12
42.92
10.01
4.39
0.70
100.00%
Percent
o
f
Overall Portfolio
Balance
0.04%
48.70
47.72
3.22
0.26
0.03
0.03
0.00
100.00%
Percent
o
f
Overall Portfolio
Balance
92.00%
4.70
3.18
0.12
100.00%
CONFIDENTIAL
Return
Distribution
b
y
State
State
Texas .
California .
Florida .
New York .
Washington .
New Jersey .
Oregon .
Georgia .
Idaho .
Arizona .
Other .
Total .
Distribution
b
y
Credit Score
Credit Score(
1
)
Less than 600 .
600- 649 .
650- 699 .
700- 749 .
750- 799 .
800- 849 .
Total .
Number
o
f
Loans
28,652
15,288
4,943
2,486
1,181
694
788
446
334
305
973
56,090
Number
o
f
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
o
f
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
o
f
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
b
y
WMB and many other mortgage lenders
i
n connection with
a loan application
t
o help assess a borrower's creditworthiness. A Credit Score
i
s generated
b
y
models developed
b
y
a third party, Fair, Isaac & Co., and made available
t
o WMB through three national consumer reporting agencies. The
Credit Score
i
s based
o
n
a borrower's historical credit data, including, among other things, payment history,
delinquencies
o
n
accounts, levels
o
f
outstanding indebtedness, length
o
f
credit history, types
o
f
credit and bankruptcy
experience. A higher Credit Score indicates a more favorable credit rating.
4
7
CONFIDENTIAL
Return
Distribution
b
y
Current Loan-
t
o
-
Value Ratio
Current Loan-
t
o
-
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
o
f
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
o
f
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
o
f
a mortgage loan
i
s a fraction, the numerator
o
f
which
i
s the outstanding principal
balance
o
f
the mortgage loan and
t
h
e
denominator
o
f
which
i
s
t
h
e
collateral value, generally
a
t
time
o
f
origination
o
f
the related mortgage property. expressed
a
s
a percentage.
Distribution
b
y
Remaining Months
t
o
Maturity
Remaining Months
t
o Maturity
Less than
6
1
.
61-120 .
121- 180 .
181- 240 .
241- 300 .
301- 360 .
Greater than 360 .
Total .
Distribution
b
y
Year
o
f
Origination
Year
o
f
Origination
2001 .
2002 .
2003 .
2004 .
2005 .
Total .
Number
o
f
Loans
939
5,522
12,882
28,716
342
7,688
1
56,090
Number
o
f
Loans
266
5,685
27,005
16,285
6,849
56,090
4
8
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
o
f
Overall Portfolio
Balance
0.72%
5.90
18.78
56.31
0.70
17.59
0.00
100.00%
Percent
o
f
Overall Portfolio
Balance
0.40%
10.19
49.16
29.57
10.68
100.00%
CONFIDENTIAL
Return
Underwriting
General
The HELs owned
b
y
the Asset Trust were,
i
n
a
l
l
material respects, originated
i
n accordance
with the underwriting guidelines
o
f
WMB
a
s
described herein. The HELs have been underwritten
b
y
WMB using automated underwriting systems.
WMB's underwriting guidelines generally are intended
t
o evaluate the prospective borrower's
credit standing and repayment ability and the value and adequacy
o
f
the mortgaged property
a
s
collateral. Some HELs are manually underwritten,
i
n which case
a
n
underwriter reviews
information submitted
b
y
the borrower and supporting documentation,
i
f required, and a credit
report
o
f
t
h
e
borrower, and based
o
n
that review determines whether
t
o originate a loan
i
n the
amount and with the terms requested
b
y
the borrower. Some HELs are underwritten through
WMB's automated underwriting system, described below.
Prospective borrowers are required
t
o provide details about their financial factors such
a
s
their assets, liabilities and related monthly expenses,
a
s
well
a
s
income and employment
information. Borrowers may provide this information
b
y
electronic transmission
t
o a bank
representative who inputs the information directly into the lending system. Each borrower also
provides
a
n
authorization
t
o access a credit report that summarizes the borrower's credit history.
Evaluation
o
f
the Borrower's Credit Standing
T
o
evaluate a prospective borrower's credit history, the loan underwriter obtains a credit
report relating
t
o the borrower from one
o
r
more credit reporting agencies. The credit report
typically contains information relating
t
o such matters
a
s
credit history with local and national
merchants and lenders, installment debt payments and any record
o
f
defaults, bankruptcy,
repossession, suits
o
r
judgments.
I
n most cases the credit report provides a Credit Score
f
o
r
the
borrower. Credit Scores are designed
t
o assess a borrower's creditworthiness and likelihood
t
o
default
o
n
a
n
obligation over a defined period (usually two
t
o three years) based
o
n
a
borrower's credit history. Credit Scores
d
o
not necessarily correspond
t
o the probability
o
f
default over the life
o
f
a HEL because they reflect past credit history, rather than
a
n
assessment
o
f
future payment performance. Credit Scores range from approximately 430
t
o approxi-
mately 850, with higher scores indicating more favorable credit history.
I
n the case
o
f
co-
borrowers, the Credit Score
f
o
r
the primary borrower
i
s typically used, unless the co- borrower
has a Credit Score that
i
s
4
0
points lower than that
o
f
the primary borrower,
i
n which case the
lower score
i
s then used. The primary borrower
i
s determined
b
y
the applicant
a
t
the time the
borrowing request
i
s made. Minimum Credit Scores are required for some loan products and
loan programs. Credit Scores may not
b
e
available
f
o
r
some borrowers.
Evaluation
o
f
the Borrower's Repayment Ability
I
n evaluating a prospective borrower's ability
t
o repay a HEL, the loan underwriter considers
the ratio
o
f
the borrower's total monthly debt (including non- housing expenses)
t
o
t
h
e
borrower's gross income ( referred
t
o
a
s
the " debt- to-income ratio"
o
r
" back- end ratio"). The
maximum acceptable ratios may vary depending
o
n
other loan factors, such
a
s
loan amount and
loan purpose, loan-
t
o
-
value ratio, credit score and the availability
o
f
other liquid assets.
Exceptions
t
o the ratio guidelines may
b
e
made when compensating factors are present.
Evaluation
o
f
the Adequacy
o
f
the Collateral
The adequacy
o
f
the property being pledged
a
s
collateral generally
i
s determined
b
y
a
n
appraisal made
i
n accordance with pre- established appraisal guidelines.
A
t
origination,
a
l
l
appraisals are required
t
o conform
t
o the Uniform Standards
o
f
Professional Appraisal Practice
adopted
b
y
the Appraisal Standards Board
o
f
the Appraisal Foundation, and are made
o
n
forms
4
9
CONFIDENTIAL
Return
acceptable
t
o the Federal National Mortgage Association and/
o
r
the Federal Home Loan
Mortgage Corporation. Appraisers may
b
e
staff appraisers employed
b
y
WMB
o
r
independent
appraisers selected
i
n accordance with the pre-established appraisal guidelines. Such guidelines
generally require that the appraiser,
o
r
a
n
agent
o
n
i
t
s
behalf, personally inspect the property and
verify whether the property
i
s
i
n adequate condition and,
i
f the property
i
s new construction,
whether
i
t
i
s substantially completed. However,
i
n the case
o
f
HELs underwritten through WMB's
automated underwriting system,
a
n
automated valuation method
(
"
AVM") may
b
e
used
i
n lieu
o
f
a traditional appraisal. The AVM relies
o
n
public records regarding the encumbered property
and /
o
r
neighboring properties and statistically derives a value using that information.
I
f
AVMs are
used, they comply with the requirements
o
f
the Financial Institutions Reform and Recovery Act
o
f
1989,
a
s
amended, and are independently verified periodically.
I
n either case, the appraisal
normally
i
s based upon a market data analysis
o
f
recent sales
o
f
comparable properties and,
when deemed applicable, a replacement cost analysis based
o
n
the current cost
o
f
constructing
o
r
purchasing a similar property.
Title insurance
o
r
alternative services (
e
.
g
.
,
lien insurance) are required
f
o
r
a
l
l
HELs.
Certain
o
f
the HELs owned
b
y
the Asset Trust involve the use
o
f
" alternative services". These
services consist
o
f
three services (including property reports and recording services) and are
used
i
n lieu
o
f
title insurance, endorsements and title company services. Alternative services may
b
e
used
i
n certain circumstances including
i
n connection with first liens that
a
r
e
being granted
t
o
a lender other than
i
n connection with the purchase
o
f
a home;
o
r
i
n connection with loans made
t
o borrowers who already own,
o
n
a free and clear basis, the property being used
a
s
collateral
t
o
secure the loan
i
n question. Alternative services provide a low cost alternative
t
o standard title
insurance and provide acceptable risk coverage
i
n the event
o
f
default.
Documentation Programs
Each HEL owned
b
y
the Asset Trust has been underwritten using either WMB's
f
u
l
l
income
documentation program
o
r
i
t
s
stated income program. Under WMB's full documentation program,
the prospective borrower's stated income
i
s verified through receipt
o
f
the borrower's most
recent pay stub and most recent W- 2 form
o
r
,
i
n the case
o
f
self- employed borrowers
o
r
borrowers with more than 25%
o
f
their income from commissions, two years
o
f
personal (and,
i
f
applicable, business) tax returns. For self- employed borrowers, profit and loss statements may
also
b
e
required.
Under WMB's stated income program, the prospective borrower's income and assets either
are not required
t
o
b
e
obtained
o
r
are obtained but not verified. Eligibility criteria and the amount
o
f
the loan are determined
b
y
a
n
automated underwriting system. Purchase loans
a
s
well
a
s
refinance loans may
b
e
eligible
f
o
r
participation
i
n WMB's stated income program.
A credit report
f
o
r
the borrower generally
i
s required
f
o
r
a
l
l
HELs underwritten under either
program.
Exceptions
t
o Program Parameters
Exceptions
t
o WMB's loan program parameters may
b
e
made
o
n
a case-
b
y
-
case basis
i
f
compensating factors are present.
I
n those cases, the basis
f
o
r
the exception
i
s documented,
and
i
n some cases the approval
o
f
a senior underwriter
i
s required. Compensating factors may
include, but are not limited
t
o
,
low loan-
t
o
-
value ratio, good credit standing, the availability
o
f
other liquid assets and stable employment.
Automated Underwriting System
Currently,
a
l
l
HELs originated
b
y
WMB utilize a proprietary automated underwriting system
known
a
s
" SUCCESS". Based
o
n
the borrower's credit report and the information provided
b
y
the borrower, the system either (
i
) approves the loan subject
t
o the satisfaction
o
f
specified
5
0
CONFIDENTIAL
Return
conditions, which may include the receipt
o
f
additional documentation, (
i
i
)
refers the loan
application
t
o
a
n
underwriter for manual underwriting,
o
r
(
i
i
i
)
declines the file based
o
n
predetermined eligibility criteria.
I
n making the underwriting decision, SUCCESS pistinguishes
among different levels
o
f
credit standing, based
o
n
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
o
n
a statistical analysis
o
f
o
f
i
t
s
portfolio
o
f
home equity loans. WMB has used analysis
o
f
o
f
i
t
s
portfolio
o
f
home equity loans. WMB has used SUCCESS
t
o underwrite HELs since May 2001.
WMB regularly evaluates and validates SUCCESS and
t
o date has completed
a
l
l
required
compliance and fair lending evaluations
i
n a satisfactory manner. WMB periodically upgrades
i
t
s
proprietary automated underwriting system. SUCCESS was last upgraded
i
n November 2004.
Quality Control Review
WMB's credit risk oversight department conducts quality control reviews
o
f
statistical
samplings
o
f
previously originated HELs
o
n
a regular basis.
Credit Risk Management Policies
Credit risk within the WMI Group
i
s managed
b
y
means
o
f
a broad set
o
f
policies and
principles contained
i
n
i
t
s
credit policy. The Chief Credit Officer
i
s responsible for overseeing the
work
o
f
a credit policy committee, monitoring the quality
o
f
the WMI Group's credit portfolio,
determining the reasonableness
o
f
the WMI Group's allowance
f
o
r
loan losses, reviewing and
approving large credit exposures and setting underwriting criteria
f
o
r
credit- related products and
programs. Credit risk management
i
s based
o
n
analyzing the creditworthiness
o
f
the borrower,
the adequacy
o
f
the underlying collateral given current events and conditions and the existence
and strength
o
f
any guarantor support.
Credit risk assessment
i
s a process that requires the evaluation
o
f
numerous factors, many
o
f
which are qualitative. Process integrity relies
o
n
the ability
o
f
the WMI Group's lending
personnel
t
o analyze
a
l
l
risk elements.
I
t
also depends
o
n
maintaining risk rating accuracy
b
y
recognizing changing elements
o
f
credit risk and promptly initiating risk rating changes.
Conflicts
o
f
Interest Policies
Pursuant
t
o WMB's code
o
f
ethics (the " Code
o
f
Ethics"), WMB extends credit
t
o
borrowers only when such extension
o
f
credit
i
s financially reasonable
f
o
r
both WMB and the
borrower
i
n question. Pursuant
t
o the Code
o
f
Ethics, lending personnel cannot permit personal
relationships
o
r
other considerations
t
o influence lending decisions, and cannot approve
extensions
o
f
credit
t
o
,
o
r
b
e
involved
i
n the funding
o
r
auditing
o
f
any loans made
t
o family
o
r
friends.
Servicing and the Servicers
General
A
l
l
o
f
the HELs owned
b
y
b
e
serviced
b
y
WMB,
a
s
the Servicer,
pursuant
t
o the Pooling and Servicing Agreement. WMB will have possession
o
f
the mortgage
files (Le., the credit reports, servicing documents, etc.)
i
n
i
t
s
capacity
a
s
Servicer and the Loan
Documents (
a
s
defined below)
i
n
i
t
s
capacity
a
s
Custodian
f
o
r
the Asset Trust.
The Pooling and Servicing Agreement will provide that WMB may not resign from
i
t
s
obligations and duties thereunder
a
s
Servicer except upon a determination that
i
t
s
duties
thereunder are
n
o
longer permissible under applicable law. No such resignation will become
effective until a successor Servicer has assumed WMB's servicing obligations and duties under
5
1
CONFIDENTIAL
Return
I
n the event
o
f
a Servicer resignation, the Company,
subject
t
o the terms
o
f
the Pooling and Servicing Agreement, shall appoint a successor Servicer.
The Servicer will receive a fee
f
o
r
i
t
s
services
a
s
Servicer under the Pooling and Servicing
Agreement. The servicing fee will
b
e
calculated
a
s
a per annum percentage
f
o
r
each HEL based
o
n
the principal balance
f
o
r
such HEL. The servicing fee with respect
t
o each such HEL will equal
0.125%
p
e
r
annum and
w
i
l
l
b
e
paid monthly. This Servicer
w
i
l
l
b
e
entitled
t
o retain certain
ancillary fees and charges, including, but not limited
t
o
,
any prepayment fees, insufficient funds
fees, modification fees, payoff statement fees and late charges with respect
t
o the HELs
a
s
b
e
entitled
t
o certain income generated
b
y
permitted investments made with collections
o
n
the HELs. The Servicer generally will pay
a
l
l
expenses incurred
i
n connection with
i
t
s
responsibilities
a
s
Servicer under the Pooling and
Servicing Agreement (subject
t
o reimbursement
f
o
r
certain expenses and advances, including
those incurred
b
y
i
t
i
o
f
defaulted HELs, the restoration
o
f
damaged mortgaged properties, and payments
b
y
the Servicer
f
o
r
taxes and insurance premiums
with respect
t
o mortgaged properties).
Any person into which the Servicer may
b
e
merged, converted
o
r
consolidated,
o
r
any
person resulting from any merger, conversion
o
r
consolidation
t
o which the Servicer
i
s a party
will
b
e
the successor Servicer under the Pooling and Servicing Agreement.
The Servicer
w
i
l
l
outsource
t
o third party vendors some servicing functions,
a
s
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
i
t
s
predecessors
i
n interest, has been servicing loans secured
b
y
real estate
o
r
other property
f
o
r
over 115 years. The home equity loans serviced
b
y
WMB include c1osed-
end fixed and adjustable rate home equity loans and open- end home equity lines
o
f
credit. The
HELs
i
n WMB's portfolio have been originated
b
y
WMB.
The following table shows the number and aggregate unpaid principal balance
o
f
HELs
serviced
b
y
the Servicer
a
s
o
f
December
3
1
f
o
r
each
o
f
the most recent three years:
Closed-end Home Equity Loans Serviced
b
y
t
h
e
Servicer
December
3
1
2004 2003 2002
(Dollars
i
n Thousands)
Number
o
f
Closed-End Home Equity Loans Serviced
b
y
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
t
o
b
e
performed
b
y
t
h
e
Servicer under
t
h
e
Pooling and
Servicing Agreement will include, among other servicing functions, payment collection, payment
application, and default management. The Servicer will perform
i
t
s
servicing functions
a
t
loan
servicing centers located
i
n Melbourne, Florida; Houston, Texas; San Antonio, Texas; Stockton,
California; Chatsworth, California; Seattle, Washington; and Canyon Park, Washington.
Servicing Standard; Waivers and Modifications. Pursuant
t
Agreement, the Servicer will
b
e
required
t
o service the HELs owned
b
y
the Asset Trust,
5
2
CONFIDENTIAL
Return
consistent with prudent first lien, closed- end home equity loan servicing practices and (unless
inconsistent with those servicing practices)
i
n the same manner
i
n which, and with the same
care, skill, prudence and diligence with which,
i
t services and administers similar. HELs
f
o
r
i
t
s
own portfolio. The Servicer will
b
e
required
t
o make reasonable efforts
t
o collect
o
r
cause
t
o
b
e
collected
a
l
l
payments under the HELs and,
t
o the extent consistent with the Pooling and
Servicing Agreement and applicable insurance policies, follow such collection procedures
a
s
are
followed with respect
t
o comparable HELs that are held
i
n portfolios
o
f
responsible mortgage
lenders
i
n the local areas where each mortgaged property
i
s located. Under the terms
o
f
the
Pooling and Servicing Agreement, the servicing standard applicable
t
o the Servicer may only
b
e
modified with the consent
o
f
the Company.
Under
t
h
e
terms
o
f
t
h
e
Pooling and Servicing Agreement,
t
h
e
Servicer (subject
t
o certain
conditions) may waive, modify
o
r
vary any term
o
f
any HEL
o
r
consent
t
o the postponement
o
f
strict compliance with any such term
o
r
i
n any manner grant indulgence
t
o the applicable obligor
i
f
i
t has determined, exercising
i
t
s
good faith business judgment
i
n the same manner
a
s
i
t would
i
f
i
t were the owner
o
f
the related HEL, that the security for, and the timely and full collectability
o
f
,
such HEL would not
b
e
adversely affected
b
y
such waiver, modification, postponement
o
r
indulgence, and may make certain other modifications with respect
t
o the HELs and the related
property
i
n accordance with the terms
o
f
Loan Servicing System.
I
n performing
i
t
s
servicing functions, the Servicer generally will
use computerized loan servicing systems. The Servicer leases
i
t
s
primary servicing system from
AMS- CGI (known
a
s
" Advanced Gonsumer Lending System"
o
r
" AGLS"). ACLS produces
detailed information about the financial status
o
f
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
o
f
each payment, the date
o
f
receipt
o
f
each payment,
and how the payment was applied. ACLS works
i
n conjunction with AMS- CGI's Computer
Automated Collection System
(
"
GAGS")
t
o monitor payment collections and
t
o provide default
collection activity information regarding delinquent consumer loans. The Servicer began using
ACLS
i
n 2003. Prior
t
o November 2003, the Servicer serviced equity HELs using
a
n
ALLTEL loan
servicing system;
i
n November 2003, the Servicer transferred servicing onto the ACLS servicing
platform
b
y
converting approximately 948,000 loan records from the ALLTEL loan servicing
system
t
o ACLS.
Collections and Distributions. Under the terms
o
f
the Pooling and Servicing Agreement,
collections with respect
t
o the HELs will
b
e
collected
b
y
the Servicer and initially deposited into
accounts controlled
b
y
the Servicer and may
b
e
commingled with funds with respect
t
o other
HELs
o
r
mortgage loans serviced
o
r
owned
b
y
t
h
e
Servicer. The Servicer
i
s required
t
o deposit
collections received with respect
t
o the HELs owned
b
y
the Asset Trust into a certificate account
controlled
b
y
the Trustee under the Pooling and Servicing Agreement
o
n
a monthly basis. The
amount
o
f
collections required
t
o
b
e
remitted
t
o the Trustee
i
n any given monthly deposit
i
s
determined
b
y
the timing
o
f
the Servicer's receipt
o
f
collections and the type
o
f
collections they
represent.
I
n accordance with the terms
o
f
the Pooling and Servicing Agreement, the Servicer
may retain certain amounts with respect
t
o expenses and advances from collections
o
r
apply
them towards the costs
o
f
certain costs and permitted expenses connected with the servicing
o
f
the HELs. The Servicer will neither
b
e
permitted nor required
t
o make servicer advances
t
o cover
any gap between scheduled payments
o
n
the HELs and the actual collections thereon
i
n any
given period.
Subject
t
o the terms and conditions set forth
i
n the Pooling and Servicing Agreement,
o
n
a
monthly basis the Trustee will distribute collections deposited
i
n the certificate account
t
o the
Company,
a
s
holder
o
f
the Class A Asset Trust Certificate, less (
a
)
fees, expenses and
indemnities payable
t
o the Trustee and the PSA Delaware Trustee and (
b
)
fees and certain other
amounts payable
t
o the Servicer. No amounts will
b
e
payable from collections with respect
t
o the
Class R Asset Trust Certificate.
5
3
CONFIDENTIAL
Return
Under the terms
o
f
the Pooling and Servicing Agreement, collections with respect
t
o the
HELs may
b
e
invested
i
n certain permitted investments prior
t
o their distribution
t
o the Company,
a
s
holder
o
f
the Class A Asset Trust Certificate. The Servicer shall
b
e
entitled
t
o ; retain any
investment income produced
b
y
such investment
a
s
additional servicing compensation.
Servicing
o
f
Delinquent HELs; Foreclosure. The Servicer will make reasonable efforts
t
o
collect
o
r
cause
t
o
b
e
collected
a
l
l
payments
o
n
the HELs owned
b
y
the Asset Trust that are
1
6
o
r
more days delinquent. Strategic decisions regarding early stage collection efforts are guided
b
y
Experian's Strategic Account Management System, Probe@. Early stage collections,
i
n other
words, collections beginning
o
n
the 16th day
o
f
delinquency and continuing through the 89th day
o
f
delinquency, are conducted primarily through the use
o
f
automated outbound collection
telephone calls and debt collection letters. Late stage collections,
o
r
collection efforts taking
place from the 90th day and through the 180th day
o
f
delinquency, are segregated
i
n CACS
b
y
risk and a combination
o
f
manual and automated collection efforts are used. CACS also
segregates delinquent accounts
b
y
status, including bankruptcy, probate, foreclosure, real- estate-
owned and " special activities" (
e
.
g
.
,
consumer credit counseling and recovery). These collection
efforts are carried out
b
y
personnel who specialize
i
n debt collection and recovery. Such efforts
may include payment reminder telephone calls
t
o the borrower, letter campaigns, drive-
b
y
property inspections and other collection activities permissible under the Loan Documents and
applicable law.
The Servicer will
b
e
required under the Pooling and Servicing Agreement
t
o foreclose upon
the mortgaged property related
t
o each defaulted HEL
a
s
t
o which
n
o
satisfactory arrangements
can
b
e
made
f
o
r
collection
o
f
delinquent payments. Under the Pooling and Servicing Agreement,
the Servicer will
b
e
permitted,
i
n lieu
o
f
foreclosure,
i
f prudent
t
o
d
o
s
o
and taking into account
the desirability
o
f
maximizing net liquidation proceeds,
t
o accept a payment
o
f
less than the
outstanding principal balance
o
f
the defaulted HELs. The Servicer will not
b
e
permitted
t
o
foreclose upon a mortgaged property
i
f
i
t
i
s aware
o
f
evidence
o
f
toxic waste
o
r
other
environmental contamination
o
n
the mortgaged property and
i
t determines that
i
t would
b
e
imprudent
t
o foreclose.
Insurance. The Servicer maintains a blanket hazard policy
f
o
r
a
l
l
HELs.
I
n addition, the
Servicer tracks
a
l
l
HELs
f
o
r
compliance with applicable law regarding flood insurance coverage.
When necessary, the Servicer " force places" flood insurance policies.
Limitations
o
n
the Servicer's Liability
The Pooling and Servicing Agreement will provide that neither the Servicer nor any director,
officer, employee
o
r
agent
o
f
the Servicer (the " Servicer Indemnified Parties") will
b
e
under any
liability
t
o the Asset Trust, the Company
o
r
the holder
o
f
the Class A Asset Trust Certificate and
the Class R Asset Trust Certificate
o
r
others
f
o
r
any action taken (
o
r
not taken)
b
y
any Servicer
Indemnified Party
i
n good faith pursuant
t
o the Pooling and Servicing Agreement,
o
r
for errors
i
n
judgment; provided, however, that the Servicer shall not
b
e
protected against any liability that
would otherwise
b
e
imposed
b
y
reason
o
f
willful misfeasance, bad faith
o
r
gross negligence
i
n
the performance
o
f
duties
o
r
b
y
reason
o
f
reckless disregard
o
f
obligations and duties
thereunder. The Pooling and Servicing Agreement will further provide that any Servicer
Indemnified Party
i
s entitled
t
o indemnification
b
y
the Asset Trust and will
b
e
held harmless
against any loss, liability
o
r
expense incurred
i
n connection with any legal action relating
t
o the
Pooling and Servicing Agreement
o
r
the certificates issued thereunder ( except any such loss,
liability,
o
r
expense otherwise reimbursable pursuant
t
o the Pooling and Servicing Agreement)
and any loss, liability
o
r
expense incurred
b
y
reason
o
f
willful misfeasance, bad faith
o
r
gross
negligence
i
n the performance
o
f
duties thereunder
o
r
b
y
reason
o
f
reckless disregard
o
f
obligations and duties thereunder.
I
n addition, the Pooling and Servicing Agreement will provide
that the Servicer
i
s not under any obligation
t
o appear
i
n
,
prosecute
o
r
defend any legal action
that
i
s not incidental
t
o
i
t
s
responsibilities under the Pooling and Servicing Agreement and that
i
n
5
4
CONFIDENTIAL
Return
i
t
s
opinion may involve
i
t
i
n any expense
o
r
liability. The Servicer may however,
i
n
i
t
s
discretion,
undertake any such action that
i
t may deem necessary
o
r
desirable with respect
t
o the Pooling
and Servicing Agreement and the rights and duties
o
f
the parties thereto and
t
h
l
:
3interests
o
f
the
holders
o
f
the Class A Asset Trust Certificate and the Class R Asset Trust Certfficate.
I
n such
event, the legal expenses and costs
o
f
such action and any liability resulting therefrom will
b
e
expenses, costs and liabilities
o
f
the Asset Trust, and the Servicer will
b
e
entitled
t
o
b
e
reimbursed therefor and
t
o charge
t
h
e
certificate account.
Servicer Termination, Servicer Replacement. Under the terms
o
f
the Pooling and Servicing
Agreement, after the occurrence
o
f
anyone
o
f
several typical Servicer termination events,
including but not limited
t
o a receivership with respect
t
o the Servicer
o
r
(subject
t
o the
expiration
o
f
typical grace periods and materiality requirements) the failure
b
y
the Servicer
t
o
make required deposits
t
o the certificate account, the Company may remove the Servicer.
I
f
the
Servicer
i
s removed
b
y
the Company, the Company shall have the sole power
t
o appoint a
replacement Servicer.
The Servicer's Third Party Vendors and Service Providers. Under the Pooling and
Servicing Agreement, the Servicer may perform
i
t
s
servicing responsibilities through agents
o
r
independent contractors, but shall not thereby
b
e
released from any
o
f
i
t
s
responsibilities
thereunder. The Servicer expects that
i
t will outsource some
o
f
i
t
s
responsibilities pursuant
t
o
these provisions, which services may include some
o
r
a
l
l
o
f
the following: (
i
) management
o
f
foreclosure actions, (
i
i
)
monitoring
o
f
borrower bankruptcy proceedings, (
i
i
i
)
preservation
o
f
properties related
t
o delinquent loans, (
i
v
)
processing
o
f
primary mortgage insurance claims,
(
v
)
maintenance, marketing and sale
o
f
real- estate- owned properties, (
v
i
)
assuring that hazard
insurance coverage
i
s maintained, (
v
i
i
)
determining whether flood insurance coverage
i
s required
and assuring that any required coverage
i
s maintained, (viii) tax bill procurement and tracking
o
f
delinquent
t
a
x
payments, (
i
x
)
printing and mailing billing statements, (
x
)
depositing borrower
payments into lockbox accounts, (
x
i
)
performing certain calculations with respect
t
o scheduled
and actual collections, (
x
i
i
)
performing certain
t
a
x
related calculations, (xiii) performing
calculations with respect
t
o monthly distributions from the Asset Trust and (xiv) performing
reporting functions required under the Pooling and Servicing Agreement. From time
t
o time, the
Servicer may cease
t
o outsource one
o
r
more
o
f
the foregoing servicing functions
o
r
may choose
t
o outsource additional servicing functions. Some vendors may perform more than one function,
and some functions may
b
e
performed
b
y
more than one vendor.
The Servicer's Quality Control Procedures
The Servicer uses a combination
o
f
management controls and technology controls
t
o ensure
the accuracy and integrity
o
f
servicing records. Management controls include the use
o
f
approval
levels, the segregation
o
f
duties, and reconciliations
o
f
servicing data and accounts, among
others. Technology controls include the use
o
f
data security controls and interface controls
t
o
ensure that only authorized persons have
t
h
e
ability
t
o access and change system data
o
r
t
o
submit data
t
o
o
r
receive data from vendors and investors. Specific security profiles
f
o
r
each job
function include a predetermined
s
e
t
o
f
data security controls that are appropriate
f
o
r
that
j
o
b
function. The regional data center
f
o
r
the ACLS Server, which
i
s located
i
n Seattle, Washington,
i
s kept
i
n a fire resistant environment, and commercial electrical power
i
s backed
u
p
b
y
generators.
I
n addition, the Servicer conducts periodic internal audits
o
f
critical servicing and technology
functions. External audits
b
y
entities such
a
s
the OTS and United Guaranty and the annual
examination
b
y
WMl's independent accountants
i
n connection with their audit
o
f
WMI and
i
t
s
subsidiaries may provide independent verification
o
f
the adequacy
o
f
such functions.
The Servicer maintains detailed business continuity plans
s
o
that
i
t can resume critical
business functions
i
n the event
o
f
a disaster
o
r
other serious system outage, which plans are
5
5
CONFIDENTIAL
Return
reviewed and updated periodically. The Servicer
i
s obligated
t
o return
t
o full system functionality
within
4
8
hours
o
f
a reported system outage. The Servicer performs annual disaster recovery
tests
i
n which
i
t reroutes data and servicing system operations
t
o the designated back-
u
p
site,
and then processes sample transactions from
a
l
l
servicing locations
t
o ensure the functionality
o
f
such back-
u
p
site.
I
t
i
s the Servicer's policy
t
o require
i
t
s
other third party vendors
t
o implement measures
similar
t
t
o ensure the accuracy and integrity
o
f
servicing records.
The Custodian
Washington Mutual Bank will act
a
s
custodian (the " Custodian")
f
o
r
the Asset Trust
pursuant
t
o a Custody Agreement,
t
o
b
e
entered into
o
n
o
r
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
t
o the HELs (collectively, the " Loan
Documents")
f
o
r
the benefit
o
f
the Trustee. The Custodian will maintain the Loan Documents
i
n
secure and fire resistant facilities. The mortgage files held
b
y
the Servicer will not
b
e
physically
segregated from Loan Documents
i
n the Custodian's custody but will
b
e
kept
i
n shared facilities.
The Custodian
w
i
l
l
review the Loan Documents related
t
o each HEL and deliver
t
o
t
h
e
Trustee a
certification
t
o the effect that, except
a
s
noted
i
n the certification,
a
l
l
required documents have
been executed and received.
I
n the event
o
f
the termination
o
f
the Custody Agreement, the Custodian will
b
e
required
t
o
deliver the Loan Documents
i
n the Custodian's custody
t
o the Trustee
o
r
any successor
Custodian appointed
b
y
the Company.
The Servicer may pay the Custodian a fee
f
o
r
i
t
s
services under the Custody Agreement
from time
t
o time. Payment
o
f
this fee will not affect dividends
t
o the Company.
5
6
CONFIDENTIAL
Return
WMI
General
WMI
i
I
t
owns two federal savings associations
a
s
well
a
s
numerous nonbank subsidiaries. WMI
i
s a multiple savings and loan holding company.
A
s
a
savings and loan holding company, WMI
i
s subject
t
o regulation
b
y
the OTS.
WMl's federal savings associations are subject
t
o extensive regulation and examination
b
y
the OTS, their primary federal regulator,
a
s
well
a
s
t
h
e
U
.
S
.
Federal Deposit Insurance
Corporation
(
"
FDIC"). Prior
t
o 2004, WMB had two sister depository institutions which were
both owned directly
b
y
o
f
o
f
these institutions, Washington Mutual Bank fsb, a federal savings bank, became a wholly-owned
subsidiary
o
f
WMB
o
n
February
1
,
2004. The other institution, Washington Mutual Bank, a
savings bank chartered under
t
h
e
laws
o
f
the state
o
f
Washington, converted into a federally
chartered savings bank and then was merged into WMB
o
n
January
1
,
2005. Consequently, WMI
n
o
longer owns a state savings bank that
i
s subject
t
o regulation and supervision
b
y
t
h
e
Director
o
f
Financial Institutions
o
f
the State
o
f
Washington
o
r
b
y
the FDIC. WMl's nonbank financial
subsidiaries are also subject
t
o various federal and state laws and regulations.
A
l
l
o
f
WMl's banking subsidiaries are under the common control
o
f
WMI and are insured
b
y
the FDIC.
I
f
a
n
insured institution fails, claims
f
o
r
administrative expenses
o
f
the receiver and
f
o
r
deposits
i
n
U
.
S
.
branches (including claims
o
f
the FDIC
a
s
subrogee
o
f
the failed institution)
have priority over the claims
o
f
general unsecured creditors.
I
n addition, the FDIC has authority
t
o require any
o
f
WMI's banking subsidiaries
t
o reimburse
i
t
f
o
r
losses
i
t incurs
i
n connection
either with the failure
o
f
another
o
f
WMl's banking subsidiaries
o
r
with the FDIC's provision
o
f
assistance
t
o one
o
f
WMI's banking subsidiaries that
i
s
i
n danger
o
f
failure.
Holding Company Status and Acquisitions
WMI
i
s a multiple savings and loan holding company,
a
s
defined
b
y
federal law, because
i
t
owns more than one savings association. WMI
i
s regulated
a
s
a unitary savings and loan holding
company, however, because the OTS deems WMI's federal savings associations
t
o have been
acquired
i
n supervisory transactions. Therefore, WMI
i
s exempt from certain restrictions that
would otherwise apply under federal law
t
o
t
h
e
activities and investments
o
f
a multiple savings
and loan holding company. These restrictions will apply
t
o WMI
i
f any
o
f
WMl's banking
institutions fails
t
o meet a qualified thrift lender test established
b
y
federal law.
A
s
o
f
December 31, 2004, WMl's banking subsidiaries were
i
n compliance with qualified thrift lender
standards.
WMI may not acquire control
o
f
another savings association without the prior approval
o
f
the OTS. WMI may
n
o
t
b
e
acquired
b
y
a company, other than a bank holding company, unless
the OTS approves such
a
n
acquisition,
o
r
b
y
a
n
individual unless the OTS does not object after
receiving notice. WMI may not
b
e
acquired
b
y
a bank holding company unless
t
h
e
Board
o
f
Governors
o
f
the Federal Reserve System (the " Federal Reserve") approves.
I
n any case, the
public must have
a
n
opportunity
t
o comment
o
n
the proposed acquisition, and the OTS
o
r
Federal Reserve must complete
a
n
application review. Without prior approval from
t
h
e
OTS, WMI
may not acquire more than 5%
o
f
the voting stock
o
f
any savings institution that
i
s not one
o
f
WMl's subsidiaries.
The Gramm-Leach- Bliley
A
c
t
generally restricts any non- financial entity from acquiring WMI
unless such non- financial entity was,
o
r
had submitted
a
n
application
t
o become, a savings and
loan holding company
a
s
o
f
May
4
,
1999. Because WMI was treated
a
s
a unitary savings and
loan holding company prior
t
o that date, WMI may engage
i
n non- financial activities and acquire
non- financial subsidiaries.
5
7
CONFIDENTIAL
Return
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
WMB
i
s the Servicer and the originator
o
f
the HELs. WMB
i
s expected
t
o
b
e
the Servicer
and may
b
e
the originator with respect
t
o any Additional Assets. University Street
i
s
a
n
indirect
subsidiary
o
f
WMB. The Company
i
s a subsidiary
o
f
University Street.
There
i
s not currently, and there was not during the past two years, any material business
relationship, agreement, arrangement, transaction
o
r
understanding that
i
s
o
r
was entered into
outside the ordinary course
o
f
business
o
r
i
s
o
r
was
o
n
terms other than would
b
e
obtained
i
n
a
n
arm's- length transaction with
a
n
unrelated third party, between (
i
) any
o
f
WMB
o
r
University
Street
o
n
the one hand and (
i
i
)
any
o
f
the Company, the Asset Trust, WaMu Delaware
o
r
WaMu
Cayman
o
n
the other hand.
Employees
o
f
WMB administer the day-
t
o
-
day activities
o
f
the Company under the terms
o
f
Administrative Services Agreement, which obligates the Company
t
o pay
a
n
annual service fee
a
s
provided under such agreement. Additionally, the Company periodically reimburses WMB
f
o
r
general overhead expenses. The Company expects that the amount
o
f
such service fees and
reimbursements will
b
e
d
e
minimis.
5
8
CONFIDENTIAL
Return
DESCRIPTION
O
F
THE TRUST SECURITIES
o
f
which will represent undivided beneficial ownership interests
i
n a like amount
o
f
Fixed-
t
o
-
Floating
Rate Company Preferred Securities held
b
y
WaMu Delaware. This description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the terms and provisions
o
f
the Trust Agreement. A copy
o
f
the Trust
Agreement may
b
e
t
o WMI.
General
The Fixed-
t
o
-
Floating Rate Perpetual Non-cumulative Trust Securities, liquidation preference
$100,000 per security (the " Trust Securities"),
o
f
WaMu Delaware are beneficial ownership
interests
i
n WaMu Delaware, the terms
o
f
which are
s
e
t
forth
i
n the Trust Agreement. The
o
f
i
s $1,250,000,000.
The funds
o
f
WaMu Delaware available
f
o
r
distribution
t
o the holders
o
f
will
b
e
limited solely
t
o payments received
b
y
WaMu Delaware from the Company
a
s
dividends
on,
o
r
upon redemption
o
f
,
the Fixed-
t
o
-
Floating Rate Company Preferred Securities, which
payments will
b
e
passed through upon receipt
b
y
WaMu Delaware
t
o the holders
o
f
the Trust
Securities. Consequently,
i
f the Company does not pay any dividend
o
r
make any redemption
payment
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities, WaMu Delaware will not
have funds
t
o make the related distribution
o
r
redemption payment
o
n
Distributions
o
n
and the redemption price
o
f
each Trust Security will
b
e
passed through
t
o the
holders
o
f
o
n
the same dates and
i
n the same amounts
a
s
the corresponding
dividends and redemption price,
a
s
applicable, that are paid
b
y
the Company
t
o WaMu Delaware
o
n
a like amount
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities; provided that
i
f any
such payment
o
f
dividends
o
r
redemption price
i
s received
b
y
WaMu Delaware after
2
:
0
0
P
.
M
.
New York time, such payment will instead
b
e
passed through
t
o the holders
o
f
the Trust
Securities
o
n
the next day that
i
s a Business Day. The Dividend Payment Dates and related
Dividend Periods are the same
f
o
r
the Trust Securities and the Fixed-
t
o
-
Preferred Securities, and, accordingly, the terms " Dividend Payment Date", " Dividend Period" and
" Business Day" have the same meanings
a
s
applied
t
o each
o
f
those securities.
The Trust Securities are automatically exchangeable under certain circumstances into a like
amount
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares. See
"
-
Conditional Exchange."
Under the Trust Agreement, WaMu Delaware
i
s prohibited from issuing any securities other
than the Trust Securities.
The Trust Securities are not obligations
o
f
,
o
r
guaranteed by, WMI, WMB, Marion, the
Company, University Street, WaMu Cayman
o
r
any
o
f
o
r
any other
entity. The Trust Securities represent equity interests solely
i
n WaMu Delaware and
d
o
not
represent
a
n
interest
i
n any
o
f
Distributions
Distributions
o
n
b
e
passed through
o
n
each date
o
n
which the
Company pays
t
o WaMu Delaware dividends
o
n
the Fixed-
t
o
-
Securities owned
b
y
WaMu Delaware,
i
n
a
n
amount per Trust Security equal
t
o the amount
o
f
dividends received
b
y
WaMu Delaware
o
n
such date
o
n
a like amount
o
f
Fixed-
t
o
-
Floating Rate
Company Preferred Securities (including Additional Amounts,
i
f any); provided that
i
f any such
payment
o
f
dividends
i
s received
b
y
WaMu Delaware after
2
:
0
0
P
.
M
.
New York time, such
5
9
CONFIDENTIAL
Return
payment will instead
b
e
passed through
t
o the holders
o
f
o
n
the next day
that
i
s a Business Day. Accordingly:
i
f the Company pays full dividends
o
n
a Dividend Payment Date
f
o
r
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities, WaMu Delaware will pass through corresponding full
distributions
o
n
o
n
such Dividend Payment Date;
i
f the Company pays partial dividends
o
n
f
o
r
the Fixed-
t
o
-
Floating Rate Company Preferred Securities, WaMu Delaware will pass through partial
distributions
i
n the same proportionate amount
o
n
o
n
such Dividend
Payment Date; and
i
f the Company pays
n
o
dividends
o
n
f
o
r
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities, WaMu Delaware will not pass through any
distributions
o
n
o
n
such Dividend Payment Date.
See " Description
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities - Dividends."
The record date
f
o
r
distributions
o
n
b
e
the first day
o
f
the month
i
n
which the relevant Dividend Payment Date occurs
o
r
,
i
f any such day
i
s not a Business Day, the
next day that
i
s a Business Day.
Dividends
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities are noncumulative.
Accordingly, distributions
o
n
the Trust Securities are noncumulative.
I
f
WaMu Delaware passes
through
n
o
distributions
o
r
less than
f
u
l
l
distributions
o
n
o
n
a Dividend
Payment Date because
i
t received
n
o
dividend
o
r
less than full dividends
o
n
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities, holders
o
f
Trust Securities will have
n
o
right
t
o receive, and
WaMu Delaware will have
n
o
obligation
t
o pass through, such unpaid distributions
a
t
a future
date, whether
o
r
not dividends
o
r
distributions are paid
o
n
a future Dividend Payment Date
o
n
o
r
Restrictions
o
n
Dividends
i
i
s operating with
a
n
insufficient level
o
f
capital
o
r
i
s engaged
i
n
,
o
r
i
t
s
i
n
,
a
n
unsafe and unsound banking practice, the OTS could restrict payment
o
f
dividends
b
y
the
Company
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities, resulting
i
n a correspond-
ing restriction
i
n the distributions passed through
b
y
WaMu Delaware
t
o the holders
o
f
the Trust
Securities.
Restrictions
o
n
Dividends
b
y
WMI
WMI will covenant
i
f
o
r
the benefit
o
f
the holders
o
f
the Trust
Securities and
t
h
e
WaMu Cayman Preferred Securities that
i
f
f
o
r
any Dividend Period
f
u
l
l
dividends
o
n
(
i
) the Company Preferred Securities, (
i
i
)
o
r
(
i
i
i
)
the WaMu
Cayman Preferred Securities have not been declared and paid, then,
a
s
described under
" Description
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities - Restrictions
o
n
Dividends
b
y
WMI", WMI will not declare
o
r
t
o
,
o
r
redeem, purchase
o
r
acquire, any
o
f
i
t
s
equity capital securities during the next succeeding Dividend Period, except
dividends
i
i
f any,
o
r
dividends
i
n connection with
benefits plans.
Redemption
b
e
redeemable
a
t
the option
o
f
the holders thereof. On each
day
o
n
which the Company redeems Fixed-
t
o
-
WaMu Delaware will redeem a like amount
o
f
Trust Securities
f
o
r
a redemption price
i
n the same
6
0
CONFIDENTIAL
Return
amount
a
s
the corresponding redemption price paid
t
o WaMu Delaware
o
n
a like amount
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities; provided that
i
f any such payment
o
f
the
redemption price
i
s received
b
y
WaMu Delaware after
2
:
0
0
P
.
M
.
New York Time, WaMu
Delaware will redeem the like amount
o
f
Trust Securities
o
n
the next day that
i
s a Business Day.
See " Description
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities - Redemption."
I
f
the redemption
o
f
the Fixed-
t
o
-
i
s
i
n part
instead
o
f
i
n whole
o
n
any redemption date, then the particular Trust Securities
t
o
b
e
redeemed
will
b
e
selected not more than
6
0
days prior
t
b
y
the Property Trustee from
the outstanding Trust Securities not previously called
f
o
r
redemption,
b
y
such method
a
s
the
Property Trustee deems fair and appropriate.
A notice
o
f
redemption
o
f
b
e
mailed
b
y
first class mail, postage
prepaid, addressed
t
o the holders
o
f
record
o
f
the securities
t
o
b
e
redeemed
a
t
their respective
last addresses appearing
o
n
the books and records
o
f
WaMu Delaware. Such mailing will
b
e
a
t
least
3
0
days but not more than
6
0
days before the date fixed
f
o
r
redemption.
Restriction
o
n
Redemption
o
r
Repurchases
A
t
o
r
prior
t
o the initial issuance
o
f
the Trust Securities, WMI will enter into a " Replacement
Capital Covenant" relating
t
o the Trust Securities, the WaMu Cayman Preferred Securities, the
Fixed-
t
o
-
Floating Rate Company Preferred Securities, the Fixed-
t
o
-
Shares (and related Fixed-
t
o
-
Floating Rate WMI Preferred Stock), the Fixed Rate Company
Preferred Securities, and the Fixed Rate Depositary Shares (and related Fixed Rate WMI
Preferred Stock) that may
b
e
issued upon a Conditional Exchange (collectively, the " Replace-
ment Covenant Covered Securities"). WMl's covenants
i
n the Replacement Capital Covenant run
only
t
o the benefit
o
f
holders
o
f
Covered Debt (
a
s
defined below), and are not enforceable
b
y
holders
o
f
Trust Securities
o
r
o
f
any other Replacement Covenant Covered Securities. However,
those covenants could preclude WMI from redeeming
o
r
repurchasing Replacement Covenant
Covered Securities
a
t
a time WMI might otherwise wish
t
o
d
o
so.
I
n the Replacement Capital Covenant, WMI covenants
t
o redeem
o
r
repurchase Replace-
ment Covenant Covered Securities only
i
f and
t
o
r
repurchase price
i
s equal
t
o
o
r
less than the sum,
a
s
o
f
the date
o
f
redemption
o
r
repurchase,
o
f
(
i
) 133.33%
o
f
o
r
i
t
s
subsidiaries have received during the
180 days prior
t
o such date from the issuance and sale
o
f
common stock
o
f
WMI plus (
i
i
)
100%
o
f
o
r
i
t
s subsidiaries have received during the 180 days
prior
t
o such date from the issuance
o
f
securities that, among other things:
-are, with limited exceptions (including for certain hybrid securities that are
i
n the form
o
f
debt), pari passu with
o
r
junior
t
o the Fixed-
t
o
-
WMl's liquidation, dissolution
o
r
winding up;
- are perpetual,
o
r
have a mandatory redemption
o
r
maturity date that
i
s not less than forty
years after the date
o
f
initial issuance
o
f
such securities; and
- provide
f
o
r
dividends
o
r
other distributions that are either noncumulative
o
r
,
i
f cumulative,
are subject
t
o certain optional
o
r
mandatory deferral provisions and certain explicit
replacement provisions.
WMI's ability
t
o raise proceeds from qualifying securities during the 180 days prior
t
o a
proposed redemption
o
r
repurchase sufficient
t
o allow such redemption
o
r
repurchase
t
o
proceed without violating the Replacement Capital Covenant will depend on, among other things,
market conditions
a
t
such times
a
s
well
a
s
the acceptability
t
o prospective purchasers
o
f
the
terms
o
f
such qualifying securities.
6
1
CONFIDENTIAL
Return
WMI's covenants
i
n the Replacement Capital Covenant will run
i
n favor
o
f
persons that buy,
hold
o
r
sell WMl's indebtedness during the period that such indebtedness
i
s " Covered Debt",
which
i
s currently comprised
o
f
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
o
n
the earlier
t
o occur
o
f
(
i
) the date two years prior
t
o the maturity
o
f
such existing
Covered Debt
o
r
(
i
i
)
the date WMI gives notice
o
f
a redemption
o
f
such that the date such existing Covered Debt
i
s repurchased
i
n such
a
n
amount that, the
outstanding principal amount
o
f
i
s
o
r
will become less than
$100 million.
The Replacement Capital Covenant
i
s subject
t
o various additional terms and conditions and
this description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the Replacement Capital Covenant, a
copy
o
f
which
i
s available upon request from WMI. The Replacement Capital Covenant may
b
e
terminated
i
f the holders
o
f
a
t
least 51%
b
y
principal amount
o
f
each
o
f
the Covered Debt
s
o
agree,
o
r
i
f WMI
n
o
longer has outstanding any long- term indebtedness that qualifies
a
s
Covered
Debt, without regard
t
o whether such indebtedness
i
s rated
b
y
a nationally recognized statistical
rating organization.
Subject
t
o the Replacement Capital Covenant and the terms
o
f
any outstanding debt
instruments, WMI
o
r
i
t
s
affiliates may from time
t
o time purchase any outstanding Trust
Securities
b
y
tender,
i
n the open market
o
r
b
y
private agreement.
Voting Rights
Except
a
s
o
f
n
o
voting rights.
I
n the event that WaMu Delaware
i
s entitled
t
o exercise
i
t
s voting rights with respect
t
o the
Fixed-
t
o
-
Floating Rate Company Preferred Securities, each holder
o
f
t
h
e
right
t
o direct the manner
i
n which the Property Trustee
o
n
behalf
o
f
WaMu Delaware
exercises such voting rights with respect
t
o a like amount
o
f
Fixed-
t
o
-
o
n
a proportionate basis.
I
f
the Property Trustee receives notice from the
Company that WaMu Delaware
a
s
holder
o
f
Fixed-
t
o
-
i
s entitled
t
o vote
o
n
any matter, promptly after learning
o
f
such entitlement, the Property Trustee
shall cause
t
o
b
e
mailed
t
o each holder
o
f
Trust Securities, notice
o
f
such vote (including a
description
o
f
the subject matter
o
f
the vote and related circumstances
t
o the extent known
t
o
the Property Trustee), along with a copy
o
f
any notice
o
r
other written communication received
b
y
the Property Trustee from the Company with respect
t
o such vote and related matters.
I
n
each such notice the Property Trustee shall request direction from each holder
o
f
Trust
Securities
a
s
t
o how WaMu Delaware
a
s
a holder
o
f
Fixed-
t
o
-
Securities shall vote
o
n
the matter
a
t
issue. Each holder
o
f
Trust Securities shall have the right
t
o
direct the manner
i
n which
t
h
e
Property Trustee
o
n
behalf
o
f
WaMu Delaware exercises such
t
o a like amount
o
f
Fixed-
t
o
-
Securities.
Notwithstanding the description above
o
f
the voting rights available
t
o holders
o
f
the Trust
Securities under the Trust Agreement, such voting rights may
b
e
exercised only
b
y
a beneficial
owner
o
f
a Trust Security that
i
s a
U
.
S
.
Person
o
r
b
y
a
U
.
S
.
Person acting
a
s
irrevocable agent
with discretionary powers
f
o
r
the beneficial owner
o
f
a Trust Security that
i
s not a
U
.
S
.
Person.
Beneficial owners
o
f
Trust Securities that are not
U
.
S
.
Persons must irrevocably appoint a
U
.
S
.
Person with discretionary powers
t
o act
a
s
their agent with respect
t
o such voting rights.
A
s
used
i
n this paragraph, the term "
U
.
S
.
Person" means,
f
o
r
purposes, a citizen
o
r
resident
o
f
the United States, a corporation created
o
r
organized
i
n
o
r
under the laws
o
f
the United States
o
r
any state,
a
n
estate the income
o
f
which
i
s includible
i
n
gross income
f
o
r
United States Federal income tax purposes regardless
o
f
i
t
s
source,
o
r
a trust
i
f a court within the United States
i
s able
t
i
t
s administration
6
2
CONFIDENTIAL
Return
and one
o
r
more United States persons have authority
t
o control
a
l
l
o
f
the
trust.
I
n the case where the Company, the Property Trustee and the Delaware Trustee wish
t
o
enter into one
o
r
more agreements supplemental
t
o the Trust Agreement, they may
d
o
s
o
without
the consent
o
f
the holders
o
f
f
o
r
the following purposes: (
i
)
t
o evidence the
succession
o
f
another entity
t
o the Company and the assumption
b
y
any such successor
o
f
the
covenants
o
f
the Company contained
i
n the Trust Agreement; (
i
i
)
t
o add
t
o the covenants
o
f
the
Company
f
o
r
the benefit
o
f
the holders
o
f
o
r
t
o surrender any right
o
r
power
conferred upon the Company; (
i
i
i
)
(
A
)
t
o correct
o
r
supplement any provision
o
f
the Trust
Agreement which may
b
e
defective
o
r
inconsistent with any other provision therein
o
r
(
B
)
t
o
make any other provisions with respect
t
o matters
o
r
questions arising under the Trust
Agreement, provided that any such action taken under this clause (
i
i
i
)
shall not materially
adversely affect the interests
o
f
the holders
o
f
o
r
(
i
v
)
t
o cure any ambiguity
o
r
correct any manifest error. Any other amendment
o
r
agreement supplemental
t
o the Trust
Agreement must
b
e
i
n writing and approved
b
y
a majority
o
f
the holders (
b
y
aggregate
liquidation preference)
o
f
the Trust Securities then outstanding, provided that,
f
o
r
the purpose
o
f
such approval, any Fixed-
t
o
-
Floating Rate Company Preferred Securities that are directly
o
r
indirectly held
o
r
beneficially owned
b
y
any member
o
f
the WMI Group will
b
e
treated
a
s
i
f they
were not outstanding.
Each Trust Security will
b
e
exchanged automatically
f
o
r
a like amount
o
f
newly issued
Fixed-
t
o
-
Floating Rate Depositary Shares, each representing a
1
/
1 OOOthinterest
i
n one share
o
f
Fixed- to-Floating Rate WMI Preferred Stock,
i
f the OTS
s
o
directs
i
n writing upon
o
r
after the
occurrence
o
f
a
n
Exchange Event.
A
n
" Exchange Event"
w
i
l
l
occur when:
WMB becomes " undercapitalized" under the OTS' " prompt corrective action" regulations;
WMB
i
o
r
receivership;
o
r
the OTS,
i
n
i
t
s
sole discretion, anticipates WMB becoming " undercapitalized"
i
n the near
term
o
r
takes a supervisory action that limits the payment
o
f
dividends
b
y
WMB and
i
n
connection therewith, directs
a
n
exchange.
For purposes
o
f
this offering circular, this exchange
i
s referred
t
o
a
s
the " Conditional
Exchange".
I
f
the OTS
s
o
o
f
a
n
Exchange Event, each holder
o
f
Trust
Securities will
b
e
t
o surrender
t
o WMI
o
r
i
t
s
agent any certificates
representing the Trust Securities owned
b
y
such holder, and WMI will
b
e
unconditionally
obligated
t
o issue
t
o such holder,
i
n exchange
f
o
r
each such Trust Security, a depositary receipt
representing a like amount
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares. Any Trust Securities
purchased
o
r
redeemed
b
y
WMI
o
r
any
o
f
i
t
s
affiliates prior
t
o the time
o
f
exchange will not
b
e
deemed outstanding and will not
b
e
subject
t
o the Conditional Exchange.
The Conditional Exchange will occur
a
s
o
f
8
:
0
0
A
.
M
.
New York time,
o
n
the date
f
o
r
such
exchange set forth
i
n the applicable OTS directive,
o
r
,
i
f such date
i
s not set forth
i
n the directive,
a
s
o
f
8
:
0
0
A
.
M
.
,
New York time,
o
n
t
h
e
earliest possible date such exchange could occur
consistent with the directive,
a
s
evidenced
b
y
the issuance
b
y
WMI
o
f
t
o
such time.
A
s
o
f
the time
o
f
exchange,
a
l
l
o
f
b
e
transferred
t
o WMI
without any further action
b
y
WaMu Delaware,
a
l
l
rights
o
f
the holders
o
f
Trust Securities
a
s
holders
o
f
i
n WaMu Delaware will cease, and such persons will be,
f
o
r
a
l
l
purposes, the holders
o
f
Fixed-
t
o
-
6
3
CONFIDENTIAL
Return
WMI will mail notice
o
f
the issuance
o
f
a
n
o
f
a
n
Exchange Event
t
o each holder
o
f
Trust Securities within
3
0
days, and WMI will deliver (
o
r
cause
t
o
b
e
delivered)
t
o each such holder depositary receipts
f
o
r
Fixed-
t
o
-
Floating Ra,
t
e Depositary
Shares upon surrender
o
f
the Trust Securities. Until such depositary receipts are delivered
o
r
i
n
the event such depositary receipts are not delivered, any certificates previously representing
b
e
deemed
f
o
r
a
l
l
purposes
t
o represent Fixed-
t
o
-
Shares.
A
l
l
corporate authorization necessary
f
o
r
WMI
t
o issue the Fixed-
t
o
-
Floating Rate
Depositary Shares and the Fixed-
t
o
-
a
s
o
f
the time
o
f
exchange will
b
e
completed prior
t
o
o
r
upon completion
o
f
this Offering. Accordingly, once the
OTS directs a Conditional Exchange after the occurrence
o
f
a
n
Exchange Event,
n
o
action will
b
e
required
t
o
b
e
taken
b
y
holders
o
f
Trust Securities,
b
y
WMI,
b
y
WMB (other than
t
o inform the
OTS),
b
y
the Company
o
r
b
y
WaMu Delaware
i
n order
t
o effect the automatic exchange
a
s
o
f
the time
o
f
exchange. After the occurrence
o
f
the Conditional Exchange, the Trust Securities will
b
e
owned
b
y
WMI.
Holders
o
f
Trust Securities,
b
y
purchasing such securities, whether
i
n this Offering
o
r
i
n the
secondary market after this Offering, will
b
e
deemed
t
o have agreed
t
o
b
e
bound
b
y
the
unconditional obligation
t
o exchange such Trust Securities
f
o
r
Fixed-
t
o
-
Shares
i
f the OTS
s
o
o
f
a
n
Exchange Event. The Trust
Agreement provides that the holders
o
f
b
e
t
o
surrender such Trust Securities. Prior
t
o issuance
o
f
the Trust Securities, WMI will enter into
a
n
Exchange Agreement (the " Exchange Agreement") among WMI, WaMu Delaware, WaMu
Cayman and Mellon Investor Services LLC,
a
s
depositary (the " Depositary"),
t
o implement the
Conditional Exchange.
Holders
o
f
Trust Securities cannot exchange their Trust Securities
f
o
r
Fixed-
t
o
-
Floating Rate
Depositary Shares voluntarily. Absent
a
n
o
f
a
n
Exchange
Event,
n
o
exchange
o
f
f
o
r
Fixed-
t
o
-
Floating Rate Depositary Shares will
occur. Upon the issuance
o
f
a
n
OTS directive
o
n
o
r
following the occurrence
o
f
a
n
Exchange
Event, the Fixed-
t
o
-
Floating Rate WMI Preferred Stock and the related Fixed-
t
o
-
Floating Rate
Depositary Shares
t
o
b
e
issued
i
n the Conditional Exchange will constitute a newly issued series
o
f
preferred stock
o
f
WMI and will have substantially similar terms and provisions with respect
t
o
dividends, liquidation, and redemption
a
s
the Fixed-
t
o
-
Securities, except that the Fixed-
t
o
-
Floating Rate Depositary Shares:
will not have the benefit
o
f
the covenants, including with respect
t
o any additional taxes,
o
f
Fixed-
t
o
-
Voting Rights and Covenants;"
will
b
e
redeemable prior
t
o the Dividend Payment Date occurring
i
n March 2011 only upon
the occurrence
o
f
a Regulatory Capital Event; and
Additional Amounts will not
b
e
payable with respect
t
o the Fixed-
t
o
-
Floating Rate WMI
Preferred Stock.
I
n addition,
i
f WMI fails
t
o pay,
o
r
declare and set aside
f
o
r
payment, full dividends
o
n
the
Fixed-
t
o
-
f
o
r
s
i
x
Dividend Periods, the authorized number
o
f
WMI's directors will increase
b
y
two, and the holders
o
f
Fixed- to-Floating Rate WMI Preferred
Stock, voting together with the holders
o
f
any other Voting Parity Stock, including the Fixed Rate
WMI Preferred Stock, will have the right
t
i
n addition
t
i
n
office
a
t
o
f
shareholders.
WMI will covenant
i
i
n favor
o
f
the holders
o
f
and the WaMu Cayman Preferred Securities that, prior
t
o the issuance
o
f
the Fixed-
t
o
-
Floating
Rate WMI Preferred Stock upon a Conditional Exchange, WMI will not issue any preferred stock
that would rank senior
t
o the Fixed-
t
o
-
i
t
s
issuance.
6
4
CONFIDENTIAL
Return
Each share
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock will upon issuance rank
a
t
least pari
passu with the most senior preferred stock
o
f
WMI,
i
f any, then outstanding. The Initial
Purchasers are under
n
o
obligation
t
o and
d
o
not intend
t
o make a market
i
n
t
h
.
e Fixed-
t
o
-
Floating Rate Depositary Shares. Absent the occurrence
o
f
a Conditional Exchange, holders
o
f
n
o
dividend, liquidation preference, redemption
o
r
other rights with
respect
t
o any security
o
f
WMI, WMB
o
r
University Street.
Form, Transfer and Book- Entry Procedures
b
e
issued only
i
n book- entry form. See " Book- Entry Issuance."
Payments and Paying Agent
Payments
i
n respect
o
f
i
n the form
o
f
Global Securities will
b
e
made
t
o
the address
o
f
the holder entitled thereto
a
s
such address will appear
o
n
the register. The DTC
nominee (the " Nominee") will
b
e
the registered holder
o
f
i
n the form
o
f
Global Securities. Payments made
t
o the order
o
f
the Nominee will
b
e
made
b
y
wire transfer
t
o
DTC and DTC will credit the relevant accounts
o
f
the DTC Participants.
I
n the event that the
circumstances described under " Book- Entry Issuance - Form, Denomination, Transfer and
Book- Entry Procedures - Special Situations When the Global Security Will
B
e
Terminated" apply
and the Trust Securities are not
i
n the form
o
f
Global Securities, payments
i
n respect
o
f
the Trust
Securities will
b
e
made
b
y
wire transfer, direct deposit
o
r
check mailed
t
o the address
o
f
the
holder entitled thereto
a
s
such address
w
i
l
l
appear
o
n
t
h
e
securities register. The paying agent
(the " Paying Agent")
f
o
r
the Trust Securities initially will
b
e
Wilmington Trust Company (
i
n
i
t
s
individual capacity, " WTe") and any co- paying agent will
b
e
appointed
b
y
WaMu Delaware. The
Paying Agent and any co- paying agent (collectively, the " Paying Agents") will
b
e
permitted
t
o
resign
a
s
Paying Agents upon
3
0
days' written notice
t
o the Company.
I
n the event that WTC will
n
o
longer
b
e
the Paying Agent, the Company will appoint a successor
t
o act
a
s
Paying Agent.
Registrar and Transfer Agent
WTC will act
a
s
Registrar (the " Registrar") and Transfer Agent (the " Transfer Agent")
f
o
r
Registration
o
f
transfers
o
f
b
e
effected without charge
b
y
o
r
o
n
behalf
o
f
WaMu Delaware, but the Property Trustee
o
r
the Registrar and Transfer Agent will require,
prior
t
o registration, payment (
o
r
the giving
o
f
such indemnity
a
s
the Registrar and Transfer
Agent may require)
o
f
a sum sufficient
t
o cover any tax
o
r
other governmental charges that may
b
e
imposed
i
n connection with any transfer
o
f
definitive Trust Securities. WaMu Delaware will not
b
e
required
t
o register
o
r
cause
t
o
b
e
registered the transfer
o
f
definitive Trust Securities during
the period
o
f
1
5
days before the day
o
f
selection
f
o
r
redemption
o
f
such Trust Securities and
ending
a
t
the close
o
f
business
o
n
the day
o
f
mailing
o
f
the notice
o
f
redemption
f
o
r
the Trust
Securities that have been called for redemption.
Expenses
o
f
the Paying Agent, Transfer Agent and Registrar
I
f
t
h
e
Paying Agent, Transfer Agent
o
r
Registrar incurs fees, charges
o
r
expenses,
f
o
r
which
i
t
i
s not otherwise liable under the Agency Agreement,
t
o
b
e
entered into
o
n
o
r
before the closing
date, among WTC,
a
s
Registrar, Transfer Agent and Paying Agent, and WaMu Delaware acting
through the Property Trustee
a
t
the request
o
f
a holder
o
f
Trust Securities
o
r
other person, such
holder
o
r
other person will
b
e
liable
f
o
r
such fees, charges
o
r
expenses.
6
5
CONFIDENTIAL
Return
Notices
Notices
t
o the holders
o
f
b
e
given
b
y
delivery
o
f
the relevant notice
t
o DTC and any other relevant securities clearing system identified
i
n writing
b
y
WaMu Delaware
f
o
r
communication
b
y
each
o
f
them
t
o entitled participants.
Listing
b
e
listed
o
n
o
r
automated dealer
quotation system.
Governing Law
The Trust Agreement and the Trust Securities will
b
e
governed
b
y
and construed
i
n
accordance with the laws
o
f
the State
o
f
Delaware.
Restrictions
o
n
Transfer
For information regarding restrictions
o
n
ownership and transfer
o
f
the Trust Securities, see
" Notice
t
o Investors."
6
6
CONFIDENTIAL
Return
DESCRIPTION OF THE FIXED-TO- FLOATING RATE COMPANY PREFERRED SECURITIES
o
f
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities. This description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the
terms and provisions
o
f
the LLC Agreement. A copy
o
f
b
e
obtained upon
request
t
o WMI.
General
The Fixed-
t
o
-
Floating Rate Perpetual Non- cumulative Preferred Securities, liquidation
preference $1,000 per security and $1,250,000,000
i
n the aggregate (
t
h
e
" Fixed-
t
o
-
Floating Rate
Company Preferred Securities"), are limited liability company interests
i
n the Company, the terms
o
f
which are set forth
i
n the LLC Agreement. When issued, the Fixed-
t
o
-
b
e
validly issued, and
n
o
additional payments will
b
e
required pursuant
t
o the LLC Act
f
o
r
such securities
t
o represent limited liability company interests
i
n the Company.
The holders
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities will have
n
o
pre-emptive
rights with respect
t
o any limited liability company interests
i
n the Company
o
r
any other
securities
o
f
the Company convertible into
o
r
carrying rights
o
r
options
t
o purchase any such
securities. The Fixed-
t
o
-
Floating Rate Company Preferred Securities are perpetual and will not
b
e
convertible into Company Common Securities
o
r
any other class
o
r
series
o
f
limited liability
company interests
i
n the Company and will not
b
e
subject
t
o any sinking fund
o
r
other obligation
o
f
the Company
f
o
r
their repurchase
o
r
retirement.
The Fixed-
t
o
-
b
e
issued
i
n certificated form
only.
The Fixed-
t
o
-
Floating Rate Company Preferred Securities are
n
o
t
obligations
o
f
,
o
r
guaranteed by, WMI, WMB, Marion, University Street
o
r
any
o
f
o
r
any
other entity. The Fixed-
t
o
-
Floating Rate Company Preferred Securities solely represent
a
n
interest
i
n the Company and
d
o
not represent
a
n
interest
i
n any
o
f
The Fixed-
t
o
-
Floating Rate Company Preferred Securities are not insured
o
r
guaranteed
b
y
t
h
e
FDIC.
Ranking
The Fixed-
t
o
-
Floating Rate Company Preferred Securities will rank senior
t
o the Company
Common Securities and will rank pari passu with the Company's other preferred securities,
including the Fixed Rate Company Preferred Securities,
i
n terms
o
f
payment
o
f
dividends and
o
n
liquidation.
The Company's Board
o
f
Managers has
t
h
e
power
t
o create and issue Junior Equity
Securities and additional equity securities ranking pari passu with the Fixed-
t
o
-
Floating Rate
i
n terms
o
f
payment
o
f
dividends
o
r
o
n
liquidation
o
r
redemption
(any such securities together with the Fixed Rate Company Preferred Securities, the " Parity
Equity Securities") without the consent
o
f
the holders
o
f
the Company Preferred Securities,
provided, that (
i
t
o the issuance
o
f
any Parity Equity Securities, the pro forma
net book value
o
f
the Company's assets (after giving effect
t
o any assets acquired
b
y
the
Company
i
o
f
such Parity Equity Securities
(
"
New Assets")) will
equal
o
r
o
f
the aggregate liquidation preference
o
f
the preferred
securities
o
f
the Company then outstanding and any such Parity Equity Securities that the
Company proposes
t
o issue, (
i
i
)
after giving effect
t
o such issuance, the Company's pro forma
FFO
f
o
r
the four fiscal quarters beginning with
t
h
e
fiscal quarter
i
n which such Parity Equity
Securities are proposed
t
o
b
e
issued (calculated (
A
)
assuming that such proposed Parity Equity
Securities are issued and that,
i
f outstanding
o
r
proposed new Parity Equity Securities bear
dividends based
o
n
a floating rate, the applicable dividend rate will not change during such four
6
7
CONFIDENTIAL
Return
fiscal quarters from the rate
i
n effect
o
n
the applicable date
o
f
determination and (
B
)
a
s
adjusted
t
o reflect any New Assets) equals
o
r
exceeds 150%
o
f
b
e
required
t
o
n
a
l
l
preferred securities
o
f
the Company tren outstanding
and any such Parity Equity Securities that the Company proposes
t
o issue and (Hi) the Company
i
s not otherwise
i
n breach
o
f
any
o
f
i
t
s covenants set forth
i
n the LLC Agreement. Funds from
operations,
o
r
" FFO", means
n
e
t
income (computed
i
n accordance with GAAP), excluding gains
(
o
r
losses) from sales
o
f
property, plus depreciation and amortization, and after adjustments
f
o
r
unconsolidated partnerships and joint ventures. Adjustments
f
o
r
unconsolidated partnerships and
joint ventures will
b
e
calculated
t
o reflect funds from operations
o
n
the same basis.
The LLC Agreement provides that,
s
o
long
a
s
any Fixed-
t
o
-
Preferred Securities remain outstanding, the Company may not, except with the consent
o
f
a
t
least two- thirds
o
f
the Fixed Rate Company Preferred Securities and the Fixed-
t
o
-
Floating Rate
Company Preferred Securities, voting together
a
s
a single class, issue Senior Equity Securities.
Dividends
For purposes
o
f
t
o distributions payable
b
y
the Company
o
n
i
t
s
securities
a
s
" dividends". Dividends
o
n
the Fixed-
t
o
-
Securities will
b
e
payable
i
f
,
when and
a
s
declared
b
y
the Company's Board
o
f
Managers out
o
f
i
t
s
o
n
a noncumulative basis
a
t
a
n
annual rate
o
f
6.534% until March 15,
2011 and
3
-
month USD L1BOR plus 1.4825%
f
o
r
the Dividend Period starting
i
n March 2011 and
each Dividend Period thereafter,
i
n each case,
o
n
the liquidation preference thereof, which
i
s
$1,000 per security.
Dividends
o
n
the Fixed-
t
o
-
i
f
,
when and
a
s
declared
b
y
the Company's Board
o
f
Managers, will
b
e
payable quarterly
i
n arrears
o
n
March 15,
June 15, September
1
5
and December
1
5
o
f
each year, commencing
o
n
June 15, 2006,
o
r
,
i
f any
such day
i
s not a Business Day, the next Business Day (each such date, a " Dividend Payment
Date"). Each period from and including a Dividend Payment Date (
o
r
the date
o
f
issuance
o
f
the
Fixed-
t
o
-
Floating Rate Company Preferred Securities)
t
o but excluding the following Dividend
Payment Date
i
s referred
t
o herein
a
s
a " Dividend Period", except that the Dividend Period
f
o
r
the Dividend Payment Date
i
n June 2011 shall commence
o
n
March 15, 2011. Dividends
o
n
the
Fixed- to-Floating Rate Company Preferred Securities will accrue
a
s
follows: (
i
) from March
7
,
2006
i
n the case
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities offered hereby and
(
i
i
)
i
f additional Fixed-
t
o
-
Floating Rate Company Preferred Securities are issued
a
t
a future date,
from (
A
)
March
7
,
2006
i
f such date
i
s before June 15, 2006, (
B
)
the date
o
f
issue
i
f such date
i
s a Dividend Payment Date, and (
C
)
the immediately preceding Dividend Payment Date
o
r
the
date
o
f
issue (
a
s
determined
b
y
the Company)
i
f the date
o
f
issue
i
s other than a Dividend
Payment Date and
i
s after June 15, 2006. The record date
f
o
r
the payment
o
f
dividends,
i
f
declared, will
b
e
the first day
o
f
the month
i
n which the relevant dividend payment occurs
o
r
,
i
f
any such day
i
s not a Business Day, the next day that
i
s a Business Day. Dividends payable
o
n
the Fixed- to-Floating Rate Company Preferred Securities
f
o
r
any period greater
o
r
less than a full
Dividend Period will
b
e
computed
o
n
the basis
o
f
(
x
)
f
o
r
any Dividend Period ending prior
t
o the
i
n March 2011, twelve 30- day months, a 360- day year, and the actual
number
o
f
days elapsed
i
n the period, and (
y
)
f
o
r
any Dividend Period thereafter, the actual
number
o
f
days
i
n the relevant period divided
b
y
360. No interest will
b
e
paid
o
n
any dividend
payment
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities, Trust Securities
o
r
Fixed-
t
o
-
" Business Day" means any day other than a Saturday, Sunday
o
r
any other day
o
n
which
banks
i
n New York, New York, London, England, Seattle, Washington
o
r
Wilmington, Delaware
are generally required
o
r
authorized
b
y
law
t
o
b
e
closed.
6
8
CONFIDENTIAL
Return
"
3
-
Month USD LlBOR" means, with respect
t
o any Dividend Period, a rate determined
o
n
the
basis
o
f
the offered rates
f
o
r
three- month
U
.
S
.
dollar deposits
o
f
not less than a principal amount
equal
t
o that which
i
s representative
f
o
r
a single transaction
i
n such market
a
t
such time,
commencing
o
n
the first day
o
f
such Dividend Period, which appears
o
n
US L1BOR Telerate
Page 3750
a
s
o
f
approximately 11:
0
0
a
.
m., London time,
o
n
the L1BOR Determination Date
f
o
r
such Dividend Period.
I
f
o
n
any L1BOR Determination Date
n
o
rate appears
o
n
US L1BOR
Telerate Page 3750
a
s
o
f
approximately 11:
0
0
a
.
m., London time, the Company
o
r
another
affiliate
o
f
WMI
o
n
behalf
o
f
t
h
e
Company
w
i
l
l
o
n
such L1BOR Determination Date request four
major reference banks
i
n the London interbank market selected
b
y
the Company
t
o provide the
Company with a quotation
o
f
the rate
a
t
which three-month deposits
i
n
U
.
S
.
dollars, commencing
o
n
the first day
o
f
such Dividend Period, are offered
b
y
them
t
o prime banks
i
n the London
interbank market
a
s
o
f
approximately 11:
0
0
a
.
m., London time,
o
n
such L1BOR Determination
Date and
i
n a principal amount equal
t
o that which
i
s representative
f
o
r
a single transaction
i
n
such market
a
t
such time.
I
f
a
t
least two such quotations are provided,
3
-
Month USD L1BOR
f
o
r
such Dividend Period will
b
e
the arithmetic mean (rounded upward
i
f necessary
t
o the nearest
.00001
o
f
1%)
o
f
such quotations
a
s
calculated
b
y
the Company.
I
f
fewer than two quotations
are provided,
3
-
Month USD L1BOR
f
o
r
such Dividend Period will
b
e
the arithmetic mean
(rounded upward
i
f necessary
t
o the nearest .00001
o
f
1%)
o
f
the rates quoted
a
s
o
f
approximately 11:
0
0
a
.
m., New York time,
o
n
the first day
o
f
b
y
three major
banks
i
n New York, New York selected
b
y
the Company
f
o
r
loans
i
n
U
.
S
.
dollars
t
o leading
European banks,
f
o
r
a three-month period commencing
o
n
t
h
e
first day
o
f
and
i
n a principal amount
o
f
not less than $1,000,000.
" LIB OR Business Day" means any day
o
n
which commercial banks are open
f
o
r
general
business (including dealings
i
n deposits
i
n
U
.
S
.
dollars)
i
n London.
" LlBOR Determination Date" means,
a
s
t
o each Dividend Period, the date that
i
s two L1BOR
Business Days prior
t
o the first day
o
f
such Dividend Period.
"
U
S
LlBOR Telerate Page 3750" means the display page
o
f
Moneyline's Telerate Service
designated
a
s
3750 (
o
r
such other page
a
s
may replace that page
o
n
that service,
o
r
such other
service
a
s
may
b
e
nominated
a
s
the information vendor,
f
o
r
the purpose
o
f
displaying rates
comparable
t
o
3
-
month USD L1BOR).
Dividends
o
n
the Fixed-
t
o
-
Floating Rate Company Preferred Securities are noncumulative.
I
f
the Company's Board
o
f
Managers does not declare a dividend
o
n
the Fixed-
t
o
-
Floating Rate
o
r
declares less than a full dividend
i
n respect
o
f
any Dividend
Period, holders
o
f
the Fixed-
t
o
-
n
o
right
t
o
receive any dividend
o
r
a full dividend,
a
s
the case may be,
f
o
r
that Dividend Period, and the
Company will have
n
o
obligation
t
o pay any dividends
o
r
f
u
l
l
dividends
o
n
t
h
e
Fixed-
t
o
-
Floating
f
o
r
that Dividend Period, whether
o
r
not dividends are
declared and paid
f
o
r
any future Dividend Period with respect
t
o any
o
f
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities, the Fixed Rate Company Preferred Securities, any other
series
o
f
Parity Equity Securities, any Junior Equity Securities
o
r
the Company Common
Securities.
Restrictions
o
n
Dividends
During a Dividend Period,
n
o
dividends will
b
e
declared
o
r
paid
o
n
any securities
o
f
the
t
i
n respect
o
f
payments
o
f
dividends
6
9
CONFIDENTIAL
Return
o
r
o
n
liquidation
(
"
Junior Equity Securities"), other than dividends payable
i
n Junior Equity
Securities, and
n
o
Junior Equity Securities will
b
e
o
r
otherwise acquired
f
o
r
consideration, directly
o
r
indirectly ( other than
a
s
a result
o
f
reclassification
o
f
Junior Equity
Securities
f
o
r
o
r
o
r
the exchange
o
r
conversion
o
f
Junior
Equity Securities
f
o
r
o
r
into other Junior Equity Securities), unless dividends
f
o
r
such Dividend
Period
o
n
a
l
l
i
n full,
o
r
declared and
s
e
t
aside
f
o
r
payment,
a
s
t
h
e
case may be.
When dividends are not paid
i
n full on,
o
r
a sum sufficient for such full payment
i
s not set
apart for, the Fixed-
t
o
-
Floating Rate Company Preferred Securities, the Fixed Rate Company
Preferred Securities and any other Parity Equity Securities,
i
f any,
a
l
l
dividends declared upon the
Fixed- to-Floating Rate Company Preferred Securities, the Fixed Rate Company Preferred
Securities and any other Parity Equity Securities,
i
f any, will
b
e
declared pro rata. Thus, the
amount
o
f
dividends declared per Fixed-
t
o
-
Floating Rate Company Preferred Security, the Fixed
Rate Company Preferred Securities and such other Parity Equity Securities,
i
f any, will
i
n
a
l
l
cases bear
t
o each other the same ratio that (
i
) full dividends per Fixed- to-Floating Rate
Company Preferred Security
f
o
r
the then- current Dividend Period, which will not include any
accumulation
i
n respect
o
f
unpaid dividends for prior Dividend Periods, and (
i
i
)
full dividends,
which will not include any accumulation
i
n respect
o
f
unpaid dividends
f
o
r
prior Dividend Periods,
o
n
such other capital securities, bear
t
o each other.
i
i
s operating with
a
n
insufficient level
o
f
capital
o
r
i
s engaged
i
n
,
o
r
i
t
s
i
n
,
a
n
unsafe and unsound banking practice, the OTS could restrict the Company's ability
t
o pay
dividends, including dividends
t
o the holders
o
f
the Fixed-
t
o
-
Securities. See " The Company - Business
o
f
the Company."
Restrictions
o
n
Dividends
b
y
WMI
WMI will covenant
i
n the Exchange Agreement for the benefit
o
f
the holders
o
f
the Trust
Securities and the WaMu Cayman Preferred Securities that
i
f full dividends
o
n
(
i
) the Company
Preferred Securities, (
i
i
)
o
r
(
i
i
i
)
the WaMu Cayman Preferred Securities for
any Dividend Period have not been declared and paid, WMI will not declare
o
r
pay dividends with
respect
t
o
,
o
r
redeem, purchase
o
r
acquire any
o
f
i
t
s
equity capital securities during the next
i
i
f
any,
o
r
dividends
i
Redemption
The Fixed-
t
o
-
Floating Rate Company Preferred Securities will not
b
e
redeemable
a
t
the
option
o
f
the holders thereof. Subject
t
o a covenant
i
n favor
o
f
certain
o
f
WMl's debtholders
limiting WMl's and
i
t
s
subsidiaries' right
t
o repurchase
o
r
redeem the Fixed-
t
o
-
Floating Rate
o
r
the Trust Securities (among others)
a
s
described under
" Description
o
f
o
n
Redemption
o
r
Repurchases", and subject
t
o
f
the OTS
f
o
r
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities, the Company may,
a
t
i
t
s
option redeem the
Fixed-
t
o
-
Floating Rate Company Preferred Securities:
i
n whole but not
i
n part, prior
t
i
n March, 2011, upon the
occurrence
o
f
a Tax Event,
a
n
o
r
Event,
a
t
t
o the greater
o
f
:
(
i
) $1,000 per Fixed-
t
o
-
Floating Rate Company Preferred Security,
o
r
(
i
i
)
the sum
o
f
present values
o
f
$1,000 per Fixed-
t
o
-
Security and
a
l
l
f
o
r
the Dividend Period from the redemption
7
0
CONFIDENTIAL
Return
date
t
i
t
o the
redemption date
o
n
a quarterly basis (assuming a 360- day year consisting
o
f
twelve
30- day months)
a
t
the Treasury Rate,
a
s
calculated
b
y
a
n
Banker, plus 0.30%, .
t
o
r
i
n whole
o
r
i
n part,
o
n
o
r
i
n March 2011,
a
t
a cash
redemption price
o
f
$1,000 per Fixed-
t
o
-
Floating Rate Company Preferred Security, plus
any declared and unpaid dividends
t
o
f
any
undeclared dividends.
b
e
separately redeemable
o
n
similar
terms and conditions.
" Comparable Treasury Issue" means the United States Treasury security selected
b
y
the
Independent Investment Banker
a
s
having a maturity comparable
t
o the term remaining
t
o the
i
n March 2011 that would
b
e
utilized,
a
t
the time
o
f
selection and
i
n
accordance with customary financial practice,
i
n pricing new issues
o
f
perpetual preferred
securities having similar terms
a
s
the Fixed-
t
o
-
Floating Rate Company Preferred Securities with
respect
t
o the payment
o
f
dividends and distributions
o
f
assets upon liquidation, dissolution
o
r
winding
u
p
o
f
the issuer
o
f
such preferred stock.
" Comparable Treasury Price" means with respect
t
o any redemption date
f
o
r
the Fixed-
t
o
-
Floating Rate Company Preferred Securities the average
o
f
the Reference Treasury Dealer
Quotations
f
o
r
such redemption date, after excluding the highest and lowest
o
f
such Reference
Treasury Dealer Quotations,
o
r
i
f the Independent Investment Banker obtains fewer than five
such Reference Treasury Dealer Quotations, the average
o
f
a
l
l
such quotations.
" Independent Investment Banker" means
a
n
independent investment banking institution
o
f
national standing appointed
b
y
the Company.
A
n
" Investment Company Act Event" occurs when the Company determines, based upon
receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a significant risk that the Company, the Asset Trust
o
r
any other Asset Subsidiary, WaMu Delaware
o
r
WaMu Cayman
i
s
o
r
will
b
e
considered
a
n
" investment company" that
i
s required
t
o
b
e
registered under the Investment Company Act,
a
s
a
result
o
f
a change
i
o
r
related interpretations.
" Reference Treasury Dealer" means each
o
f
three primary
U
.
S
.
government securities
dealers (each a " Primary Treasury Dealer"),
a
s
specified
b
y
t
h
e
Company; provided that
i
f any
a
s
specified
b
y
the Company ceases
t
o
b
e
a Primary Treasury Dealer,
the Company will substitute
f
o
r
such Primary Treasury Dealer another Primary Treasury Dealer
and
i
f the Company fails
t
o select a substitute within a reasonable period
o
f
time, then the
substitute will
b
e
a Primary Treasury Dealer selected
b
y
the Independent Investment Banker after
consultation with the Company.
" Reference Treasury Dealer Quotations" means, with respect
t
o the Reference Treasury
Dealer and any redemption date, the average,
a
s
determined
b
y
the Independent Investment
Banker,
o
f
the bid and asked prices
f
o
r
the Comparable Treasury Issue (expressed,
i
n each
case,
a
s
a percentage
o
f
i
t
s
principal amount) quoted
i
n writing
t
o the Independent Investment
Banker
b
y
such Reference Treasury Dealer
a
t
5
:
0
0
p
.
m., New York City time,
o
n
the third
Business Day preceding such redemption date.
A " Regulatory Capital Event" occurs when
t
h
e
Company determines, based upon receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a significant risk that the Company Preferred Securities will
n
o
longer constitute core capital
o
f
WMB
f
o
r
purposes
o
f
the capital adequacy regulations issued
b
y
the OTS
a
s
a result
o
f
a change
i
o
r
related interpretations after
issuance
o
f
7
1
CONFIDENTIAL
Return
A " Tax Event" occurs when the Company determines, based upon receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a significant risk that (
i
) the Company will
b
e
required
b
y
a relevant
jurisdiction
t
t
o the holders
o
f
any Company
I
? referred
Securities
f
o
r
taxes
o
r
any other governmental charges, (
H
)
WaMu Delaware will
b
e
required
b
y
a relevant jurisdiction
t
t
o the holders
o
f
f
o
r
taxes
o
r
any other governmental charges, (Hi) WaMu Cayman will
b
e
required
b
y
a relevant
jurisdiction
t
t
o the holders
o
f
Securities
f
o
r
taxes
o
r
any other governmental charges, (
i
v
)
WaMu Cayman
i
s
o
r
will
b
e
treated
a
s
engaged
i
n a trade
o
r
business within the United States
f
o
r
purposes
o
r
(
v
)
the Company
i
s
o
r
will
b
e
treated
a
s
a
s
a
corporation
o
r
a
s
a
n
association taxable
a
s
a corporation
f
o
r
purposes.
" Treasury Rate" means the rate per year equal
t
o the quarterly equivalent yield
t
o maturity
o
f
the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed
a
s
a percentage
o
f
i
t
s
principal amount) equal
t
o the Comparable Treasury Price
f
o
r
such redemption date. The Treasury Rate will
b
e
calculated
o
n
the third Business Day preceding
the redemption date.
A notice
o
f
redemption
o
f
the Fixed-
t
o
-
b
e
mailed
b
y
first class mail, postage prepaid, addressed
t
o the holders
o
f
record
o
f
the securities
t
o
b
e
redeemed
a
t
their respective last addresses appearing
o
n
the books and records
o
f
the
Company. Such mailing will
b
e
a
t
least
3
5
6
5
days before the date fixed
f
o
r
redemption.
The Company's ability
t
o redeem any Fixed-
t
o
-
Floating Rate Company Preferred Security
i
s
subject
t
o compliance with applicable regulatory requirements, including the prior approval
o
f
the
OTS, relating
t
o the redemption
o
f
capital instruments. Under current policies
o
f
the OTS, such
approval would
b
e
granted only
i
f the redemption were
t
o
b
e
made out
o
f
the proceeds
o
f
the
issuance
o
f
another capital instrument
o
r
i
f the OTS were
t
o determine that the conditions and
circumstances
o
f
WMB warrant the reduction
o
f
a source
o
f
permanent capital.
The Fixed Rate Company Preferred Securities are subject
t
o their own redemption
provisions and may
b
e
redeemed separately.
Restrictions
o
n
Redemption
o
r
Repurchases
A
t
o
r
prior
t
o issuance
o
f
the Fixed-
t
o
-
Trust Securities, WMI
w
i
l
l
enter into the Replacement Capital Covenant described under
" Description
o
f
o
n
Redemption
o
r
Repurchases," limiting
WMl's and
i
t
s
subsidiaries, including the Company's, ability
t
o redeem
o
r
repurchase certain
securities, including the Fixed-
t
o
-
I
n the event the Company voluntarily
o
r
involuntarily dissolves and winds up, the holders
o
f
Fixed-
t
o
-
a
t
b
e
entitled
t
o
receive liquidating dividends
i
n the amount
o
f
$1,000 per security, plus any authorized, declared,
but unpaid dividends
t
o the date
o
f
liquidation, out
o
f
the Company's assets legally available
f
o
r
distribution, before any distribution
o
f
assets
i
s made
t
o holders
o
f
Junior Equity Securities and
subject
t
o the rights
o
f
general creditors.
After payment
o
f
the full amount
o
f
t
the holders
o
f
Fixed-
t
o
-
n
o
right
o
r
claim
t
o
any
o
f
the Company's remaining assets.
I
o
r
involuntary
dissolution and winding up, the available assets are insufficient
t
o pay the amount
o
f
the
7
2
CONFIDENTIAL
Return
liquidation distributions
o
n
a
l
l
outstanding Fixed-
t
o
-
and the corresponding amounts payable
o
n
the Fixed Rate Company Preferred Securities and
any other Parity Equity Securities,
i
f any, then the holders
o
f
Fixed-
t
o
-
Preferred Securities, the Fixed Rate Company Preferred Securities and any other Parity Equity
Securities,
i
f any, will share ratably
i
o
f
assets
i
n proportion
t
o the full
liquidating distributions
t
o which they would otherwise
b
e
respectively entitled.
For such purposes, the Company's consolidation
o
r
merger with
o
r
consolidation
o
r
merger
o
f
o
r
into the Company,
o
r
the sale
o
f
a
l
l
o
r
substantially
a
l
l
o
f
the Company's property
o
r
business, will not
b
e
deemed
t
o constitute the
Company's dissolution and winding
u
p
.
Voting Rights and Covenants
Except
a
s
set forth below, holders
o
f
Fixed-
t
o
-
will not have voting rights. The LLC Agreement provides that,
s
o
long
a
s
any Fixed-
t
o
-
Floating
Rate Company Preferred Securities are outstanding, the Company will not, except with the
consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
the Fixed-
t
o
-
Floating Rate
Company Preferred Securities and the Fixed Rate Company Preferred Securities (provided that
f
o
r
the purpose
o
f
o
f
a
s
any Trust
Securities
o
r
WaMu Cayman Preferred Securities that are directly
o
r
indirectly held
o
r
beneficially
owned
b
y
any member
o
f
WMI Group will
b
e
treated
a
s
i
f they were not outstanding), voting
together
a
s
a single class:
o
r
share exchange with
o
r
into another entity other than
a
n
entity controlled
b
y
,
o
r
issue any Senior Equity Securities;
incur any indebtedness
f
o
r
borrowed money;
pay dividends
o
n
the Company's Junior Equity Securities unless the Company's FFO
f
o
r
t
h
e
four prior fiscal quarters, equals
o
r
exceeds 150%
o
f
t
h
e
amount that would
b
e
required
t
o
n
a
l
l
a
s
well
a
s
amend
o
r
otherwise change the requirement that the Company make investments and
distributions with the proceeds
o
f
the Company's assets such that the Company's FFO
over any period
o
f
four fiscal quarters will equal
o
r
exceed 150%
o
f
the amount that
would
b
e
required
t
o
n
a
l
l
outstanding Company Preferred
Securities,
a
s
well
a
s
t
o any person, other than University
Street
o
r
another affiliate
o
f
WMI;
amend
o
r
o
f
any Asset Documentation
i
n a manner which
i
s
materially adverse
o
f
WaMu Delaware, WaMu Cayman,
o
r
the holders
o
f
the Trust
Securities
o
r
the WaMu Cayman Preferred Securities;
remove
o
r
cause
t
o
b
e
removed,
a
s
applicable, " Washington Mutual" from the
Company's, WaMu Delaware's
o
r
WaMu Cayman's name unless the name
o
f
WMI
t
o the Company's, WaMu Delaware's and
WaMu Cayman's name
t
o
b
e
take
o
r
f
a
i
l
t
o take any action that would cause the Company
t
o
f
a
i
l
t
o
b
e
treated
a
s
a
partnership ( other than a publicly traded partnership taxable
a
s
a corporation)
f
o
r
United
States Federal income tax purposes;
7
3
CONFIDENTIAL
Return
amend
o
r
otherwise change the requirement that the Company not engage
i
n a
U
.
S
.
trade
o
r
business
f
o
r
amend
o
r
otherwise change the requirement that the Company hold only assets that
qualify
f
o
r
the portfolio interest exemption under the Code and are exempt from United
States Federal withholding taxes;
amend
o
r
otherwise change the requirement that the Company manage
i
t
s
affairs such
that
i
t
s
income does not constitute " unrelated business taxable income"
f
o
r
United States
Federal income tax purposes;
o
r
amend
i
t
s
Certificate
o
f
Formation
o
r
LLC Agreement
i
n a manner that materially and
adversely affects the terms
o
f
the Company Preferred Securities, provided, however, that,
i
o
f
Company Preferred Securities, such
amendment will require only the class vote
o
f
such class ( voting separately and not
a
s
a
single class with the other class) and,
i
f such amendment affects both classes but affects
them differently, then such amendment will require a class vote
o
f
each class
o
f
Company
Preferred Securities, each voting separately.
I
n addition, the LLC Agreement provides that, except with the consent
o
f
a
l
l
o
f
the
Company's managers, including
i
t
s
Independent Manager, the Company will not:
terminate, amend
o
r
otherwise change any Asset Documentation;
o
r
o
r
share exchange (excluding the Conditional Exchange)
that
i
s not tax- free
t
o the holders
o
f
the Fixed-
t
o
-
Securities, and the related Trust Securities, unless such transaction was approved
b
y
the
consent
o
r
affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities and Fixed Rate Company Preferred Securities, voting
together
a
s
a single class.
I
i
f (
i
) the Company fails
t
o pay
f
u
l
l
dividends
o
n
o
n
any Dividend Payment Date, (
i
i
)
WaMu
Delaware fails
t
o pass through full dividends paid
b
y
the Company
o
n
the Fixed-
t
o
-
Floating Rate
t
o the holders
o
f
o
n
any Dividend Payment
Date
o
r
(
i
i
i
) a Bankruptcy Event occurs, the holders
o
f
the Fixed-
t
o
-
Preferred Securities and the Fixed Rate Company Preferred Securities, voting together
a
s
a
single class,
b
y
t
o
r
any succeeding Independent
Manager and
t
o
f
i
l
l
the vacancy created
b
y
such removal
o
r
i
n the
office
o
f
The LLC Agreement requires that,
i
t
o the Company
o
f
any
o
r
o
f
holders
o
f
i
o
f
the holders
o
f
the Company Preferred Securities, the Company's Independent Manager owes the same
duties
t
o such holders which the Independent Manager owes
t
o the holders
o
f
Company
Common Securities.
A
s
a condition
t
o effecting any consolidation, merger
o
r
share exchange described above,
the Company will mail
t
o the holders
o
f
record
o
f
the Fixed-
t
o
-
Securities a notice
o
f
such consolidation, merger
o
r
share exchange. The notice will
b
e
mailed
a
t
least
1
5
days prior
t
o such transaction becoming effective and will contain a description
o
f
such
transaction together with a certificate
o
f
one
o
f
the Company's officers stating that such
transaction complies with the requirements set forth
i
n the LLC Agreement and that
a
l
l
conditions
precedent provided therein relating
t
o such transaction have been fulfilled.
7
4
CONFIDENTIAL
Return
A
s
o
f
the Trust Securities - Voting Rights," each holder
o
f
Trust Securities will have the right
t
o direct the manner
i
n which Property Trustee
o
n
behalf
o
f
WaMu Delaware exercises
i
t
s
voting rights
a
s
t
o a like amount
o
f
Fixed-
t
o
-
Floating Rate
b
y
WaMu Delaware with respect
t
o any
o
f
the matters
o
n
which a holder
o
f
Fixed-
t
o
-
i
s entitled
t
o vote.
WMI's articles
o
f
incorporation
d
o
n
o
t
contain similar covenants regarding the Fixed-
t
o
-
Floating Rate WMI Preferred Stock following
a
n
exchange
o
f
the Trust Securities. Therefore,
following a Conditional Exchange, holders
o
f
the Fixed-
t
o
-
Floating Rate Depositary Shares would
n
o
longer have any voting rights, except
a
s
provided
b
y
Washington law
o
r
i
right
t
o elect directors
i
f dividends are skipped
o
r
not paid
i
n full. See below under " Description
o
f
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock - Voting Rights."
Additional Amounts
I
f
t
h
e
Company
o
r
WaMu Delaware
i
s required
t
o pay any Additional Taxes
a
s
a result
o
f
a
n
Additional Tax Event, the Company will pay
a
s
additional amounts
o
n
the Fixed-
t
o
-
Floating Rate
Company Preferred Securities such amounts
a
s
will
b
e
required
s
o
that dividends
o
n
the
Fixed-
t
o
-
o
r
a
s
applicable, will
not
b
e
reduced
a
s
a result
o
f
any such Additional Taxes
(
"
Additional Amounts").
" Additional Taxes" means the sum
o
f
any additional taxes, duties and other governmental
charges
t
o which a WaMu Delaware has become subject from time
t
o time
a
s
a result
o
f
a
n
Additional Tax Event.
A
n
" Additional Tax Event" means the determination
b
y
the Company, based upon receipt
o
f
a
n
opinion
o
f
counsel, rendered
b
y
a law firm experienced
i
n such matters,
i
n form and
substance reasonably satisfactory
t
o the Company and WMI,
t
o the effect that,
a
s
a result
o
f
any
amendment
t
o
,
o
r
change (including any announced proposed change)
i
n
,
the laws (
o
r
any
regulations thereunder)
o
f
the United States
o
r
o
f
any political subdivision
o
r
taxing authority
thereof
o
r
therein,
o
r
a
s
a result
o
f
any official administrative pronouncement
o
r
judicial decision
interpreting
o
r
applying such laws
o
r
regulations, which amendment
o
r
change
i
s effective
o
r
which proposed change, pronouncement
o
r
decision
i
s announced
o
n
o
r
after the date
o
f
issuance
o
f
the Trust Securities, there
i
s a significant risk that (
i
) the Company
o
r
WaMu
Delaware
i
s
,
o
r
w
i
l
l
b
e
within
9
0
days
o
f
t
h
e
date
o
f
such opinion
o
f
counsel, required
b
y
a
relevant jurisdiction
t
t
o the holders
o
f
the Fixed-
t
o
-
Floating
o
r
Trust Securities, respectively,
f
o
r
any taxes, duties and
other governmental charges, (
i
i
)
WaMu Delaware
i
s
,
o
r
will
b
e
within
9
0
days
o
f
the date
o
f
such
opinion
o
f
counsel, subject
t
o United States Federal income
t
a
x
with respect
t
o income received
o
r
accrued
o
n
the like amount
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities held
b
y
i
t
o
r
(
i
i
i
)
WaMu Delaware
i
s
,
o
r
will
b
e
within
9
0
days
o
f
the date
o
f
such opinion
o
f
counsel,
subject
t
o more than a
d
e
minimis amount
o
f
other taxes, duties
o
r
other governmental charges.
Amendments and Termination
o
f
the LLC Agreement
University Street may,
a
t
any time and from time
t
o time, without the consent
o
f
the holders
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities, amend the LLC Agreement: (
i
) (
A
)
t
o
correct
o
r
supplement any provision
i
n the LLC Agreement that may
b
e
defective
o
r
inconsistent
with any other provision therein,
o
r
(
B
)
t
o make any other provisions with respect
t
o matters
o
r
questions arising under the LLC Agreement, provided, that any such action taken under this
clause (
x
)
will not materially adversely affect the interests
o
f
the holders
o
f
Fixed-
t
o
-
Floating Rate
Company Preferred Securities,
a
s
set forth
i
n
a
n
officer's certificate;
o
r
(
y
)
will cure any ambiguity
o
r
inconsistency
o
r
correct any manifest error. Any other amendment
o
f
the LLC Agreement must
b
e
approved
b
y
vote
o
f
holders
o
f
two- thirds (
b
y
aggregate liquidation preference)
o
f
t
h
e
Fixed-
t
o
-
Floating Rate Company Preferred Securities and Fixed Rate Company Preferred Securities, voting
7
5
CONFIDENTIAL
Return
together
a
s
a single class (see
.
.
-
Voting Rights and Covenants"); provided that,
f
o
r
the purpose
o
f
o
f
a
s
any Trust Securities
o
r
WaMu
Cayman Preferred Securities that are directly
o
r
indirectly held
o
r
beneficially owned
b
y
any
member
o
f
WMI Group will
b
e
treated
a
s
i
f they were not outstanding. The Company will notify the
Paying Agents and the holders
o
f
o
f
any such amendment
o
f
the LLC
Agreement within a reasonable period
o
f
time.
The LLC Agreement will terminate upon the termination
o
f
the Company under the LLC Act.
Governing Law
The LLC Agreement and the Fixed-
t
o
-
b
e
governed
b
y
,
and construed
i
o
f
the State
o
f
Delaware.
7
6
CONFIDENTIAL
Return
DESCRIPTION
O
F
OTHER COMPANY SECURITIES
The fol/ owing summary
o
f
the terms
o
f
the other Company securities does not purport
t
o
b
e
complete and
i
s subject
i
n
a
I
/
respects
t
o the applicable provisions
o
f
the LLC ACt and the LLC
Agreement. A copy
o
f
b
e
t
o WMI.
Common Securities
General
Upon consummation
o
f
this Offering, the Company will have outstanding 1,000 Company
Common Securities,
a
l
l
o
f
which will
b
e
held
b
y
University Street.
The Company Common Securities may
b
e
sold, assigned
o
r
otherwise transferred
b
y
University Street
t
o another entity, subject
t
o WMI maintaining direct
o
r
indirect ownership
o
f
100%
o
f
the outstanding Company Common Securities and receipt
b
y
University Street
o
f
a
n
opinion
o
f
counsel
t
o the effect that
a
s
a result
o
f
any such sale, transfer
o
r
assignment the
Company will not
b
e
taxable
a
s
a corporation
f
o
r
Pursuant
t
o the LLC Agreement, except with the consent
o
r
the affirmative vote
o
f
the
holders
o
f
a
t
least two- thirds
o
f
the Fixed-
t
o
-
Fixed Rate Company Preferred Securities, voting together
a
s
a single class, the Company will not
t
o any person, other than University Street
o
r
another affiliate
o
f
WMI.
N
o
additional payments will
b
e
required pursuant
t
o the LLC Act
f
o
r
Company Common
Securities
t
o represent limited liability company interests
i
n the Company upon issuance against
full payment
o
f
the purchase price therefor.
Voting
Subject
t
o
f
the holders
o
f
the Fixed-
t
o
-
Securities,
a
s
o
f
the Fixed-
t
o
-
Securities - Voting Rights and Covenants," and corresponding rights
o
f
the holders
o
f
the Fixed
Rate Company Preferred Securities and any voting rights granted
t
o holders
o
f
Parity Equity
Securities
a
l
l
voting rights
o
f
the Company's security holders are vested
i
n the Company
Common Securities.
Dividends
t
a
s
t
o
payment
o
f
dividends. No dividends will
b
e
declared
o
r
paid
i
n any Dividend Period
o
n
the
Company Common Securities, other than dividends payable
i
n Company Common Securities, and
n
o
b
e
o
r
otherwise acquired
f
o
r
consideration, directly
o
r
indirectly (other than
a
s
a result
o
f
reclassification
o
f
Company
Common Securities
f
o
r
o
r
into Company Common Securities,
o
r
the exchange
o
r
conversion
o
f
Company Common Securities
f
o
r
o
r
into Company Common Securities), unless dividends
i
n such
Dividend Period
o
n
a
l
l
i
n
full,
o
r
set aside
f
o
r
payment,
a
s
the case may be. Pursuant
t
o the LLC Agreement, except with
the consent
o
r
the affirmative vote
o
f
the holders
o
f
a
t
least two- thirds
o
f
the Fixed-
t
o
-
Floating
Rate Company Preferred Securities and the Fixed Rate Company Preferred Securities, voting
together
a
s
a single class, the Company will not pay any dividends
o
n
the Company Common
Securities unless the Company's FFO
f
o
r
the four prior fiscal quarters equals
o
r
exceeds 150%
o
f
b
e
required
t
o
n
a
l
l
outstanding Company
a
s
well
a
s
o
n
a
l
l
Parity Equity Securities,
i
f any; provided, that,
f
o
r
the
purpose
o
f
o
f
a
s
any Trust Securities
7
7
CONFIDENTIAL
Return
o
r
WaMu Cayman Preferred Securities that are directly
o
r
indirectly held
o
r
beneficially owned
b
y
any member
o
f
WMI Group will
b
e
treated
a
s
i
f they were not outstanding.
Liquidation Rights
t
o the Company Preferred Securities upon
liquidation.
I
n the event
o
f
any voluntary
o
r
involuntary dissolution
o
f
the Company, after
a
l
l
o
f
the
Company's debts and liabilities have been satisfied and there have been paid
o
r
set aside
f
o
r
the
holders
o
f
t
h
e
t
h
e
f
u
l
l
preferential amounts
t
o which such holders
are entitled, the holders
o
f
b
e
entitled
t
o share equally and
ratably
i
n any assets remaining.
The Fixed Rate Company Preferred Securities rank pari passu with the Fixed-
t
o
-
Floating
Rate Company Preferred Securities offered hereby
a
s
t
o
f
the
Company. The terms
o
f
the Fixed Rate Company Preferred Securities are substantially identical
t
o the Fixed-
t
o
-
Floating Rate Company Preferred Securities other than with respect
t
o the rate
applicable
t
o dividends thereon. The Fixed Rate Company Preferred Securities will,
i
f
,
when and
a
s
declared
b
y
the Company's Board
o
f
a
t
a
n
annual rate
o
f
7.25%.
b
e
held
b
y
WaMu Cayman, which will issue a
like amount
o
f
t
o investors
i
n a separate offering
contemporaneous
t
o the Offering. The Fixed Rate Company Preferred Securities will not
b
e
listed
o
n
o
r
Ability
t
o Issue Additional Preferred Securities
Pursuant
t
o the LLC Agreement, the Company may not issue any Senior Equity Securities
o
r
incur any indebtedness except with the consent
o
r
affirmative vote
o
f
holders
o
f
a
t
least
two- thirds
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities and the Fixed Rate
Company Preferred Securities, voting together
a
s
a single class,
a
s
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities - Voting Rights and Covenants".
The Company may issue additional Parity Equity Securities without the consent
o
f
the holders
o
f
Company Preferred Securities only
i
f the tests described under " Description
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities - Ranking" are satisfied.
7
8
CONFIDENTIAL
Return
DESCRIPTION OF THE FIXED-TO- FLOATING RATE WMI PREFERRED STOCK
o
f
the Fixed-
t
o
-
Floating
Rate WMI Preferred Stock. The description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the terms and
provisions
o
f
WMl's articles
o
f
incorporation and articles
o
f
amendment establishing the Fixed-
t
o
-
Floating Rate WMI Preferred Stock. A copy
o
f
WMl's articles
o
f
incorporation and such articles
o
f
amendment can
b
e
t
o WMI.
General
WMI has authorized and reserved
f
o
r
issuance, upon a Conditional Exchange
a
s
described
under " Description
o
f
the Trust Securities - Conditional Exchange," 1,250 shares
o
f
i
t
s Series I
Perpetual Non- cumulative Fixed-
t
o
-
n
o
par value and liquidation
preference $1,000,000 per share (the " Fixed-
t
o
-
Floating Rate WMI Preferred Stock"). The shares
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock,
i
f and when issued upon a Conditional Exchange,
will
b
e
represented
b
y
fixed-
t
o
-
floating rate depositary shares
o
f
WMI (the " Fixed-
t
o
-
Floating
Rate Depositary Shares"), each representing 111000th
o
f
a share
o
f
Fixed-
t
o
-
Floating Rate WMI
Preferred Stock. The holders
o
f
the Fixed-
t
o
-
n
o
pre-
emptive rights with respect
t
o any shares
o
f
WMl's capital stock
o
r
any
o
f
i
t
s
other securities
convertible into
o
r
carrying rights
o
r
options
t
o purchase any such capital stock. The Fixed-
t
o
-
i
s perpetual and will not
b
e
convertible into shares
o
f
WMI
common stock
o
r
any other class
o
r
series
o
f
i
t
s
capital stock, and will not
b
e
subject
t
o any
sinking fund
o
r
other obligation
f
o
r
i
t
s repurchase
o
r
retirement.
The Fixed-
t
o
-
Floating Rate WMI Preferred Stock, upon issuance, will have substantially
equivalent terms
a
s
t
o dividends, redemption, liquidation preference and redemption preference
a
s
the Fixed- to-Floating Rate Company Preferred Securities and Trust Securities
f
o
r
which they
may
b
e
exchanged, except that the Fixed-
t
o
-
Floating Rate WMI Preferred Stock: (
i
) will not have
the benefit
o
f
the covenants described under " Description
o
f
Fixed-
t
o
-
Preferred Securities - Voting Rights and Covenants"
o
r
"
-
Additional Amounts" and (
i
i
)
will
b
e
redeemable prior
t
o the Dividend Payment Date occurring
i
n March 2011 only upon the
occurrence
o
f
a Regulatory Capital Event.
I
n addition,
i
f WMI fails
t
o pay,
o
r
declare and set
aside
f
o
r
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock after
i
t
s
issuance
f
o
r
s
i
x
Dividend Periods, the authorized number
o
f
WMl's directors will increase
b
y
two,
and the holders
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock, voting together with the holders
o
f
any other shares after
i
t
s issuance
o
f
WMI ranking
o
n
a parity with the Fixed-
t
o
-
Floating Rate
WMI Preferred Stock
a
s
t
o dividends
o
r
upon liquidation, including the Fixed Rate WMI Preferred
Stock
(
"
WMI Parity Stock"),
w
i
l
l
have
t
h
e
right
t
i
n addition
t
o the directors
then
i
n office
a
t
o
f
shareholders. Accordingly, the Dividend Payment
Dates and related Dividend Periods
f
o
r
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock, once
issued, will
b
e
the same
a
s
the Dividend Payment Dates and related Dividend Periods for the
Trust Securities and the Fixed-
t
o
-
Floating Rate Company Preferred Securities, and the terms
" Dividend Payment Date" and " Dividend Period" have the same meanings
a
s
applied
t
o the
Fixed-
t
o
-
a
s
applied
t
o each
o
f
those securities;
i
t being
understood that
i
n the event that the Fixed-
t
o
-
i
s not issued
prior
t
o March 15, 2011, a Dividend Payment Date shall
b
e
deemed
t
o occur
o
n
such date with
respect
t
o the Fixed-
t
o
-
f
o
r
the purposes
o
f
determining the
interest rate and the terms
o
f
redemption thereof. The term " Business Day", when used with
reference
t
o the Fixed-
t
o
-
Floating Rate WMI Preferred Stock, means any day other than a
Saturday, Sunday
o
r
any other day
o
n
which banks
i
n New York, New York
o
r
Seattle,
Washington are generally required
o
r
authorized
b
y
law
t
o
b
e
closed.
The Fixed-
t
o
-
b
e
subject
t
o the Replacement Capital
Covenant described under " Description
o
f
o
n
Redemption
o
r
Repurchases" above.
7
9
CONFIDENTIAL
Return
Ranking
WMI will covenant
i
i
n favor
o
f
the holders
o
f
th~ Trust Securities
and the WaMu Cayman Preferred Securities,
a
s
applicable, that, prior
t
o the issuance
o
f
the
Fixed-
t
o
-
Floating Rate WMI Preferred Stock upon a Conditional Exchange, WMI will not issue
any preferred stock that would rank senior
t
o the Fixed-
t
o
-
o
r
the Fixed Rate WMI Preferred Stock upon
i
t
s
issuance.
The Fixed-
t
o
-
Floating Rate WMI Preferred Stock will, upon issuance, rank senior
t
o WMl's
common stock and
a
t
least pari passu with the most senior preferred stock
o
f
WMI,
i
f any, then
outstanding, and
t
o any other preferred stock that WMI may issue
i
n the future. WMI may
authorize and issue additional shares
o
f
preferred stock that may rank junior
t
o
o
r
pari passu
with the Fixed- to-Floating Rate WMI Preferred Stock
a
s
t
o dividends and upon liquidation,
winding up,
o
r
dissolution without the consent
o
f
the holders
o
f
the Fixed- to-Floating Rate WMI
Preferred Stock.
Dividends
Dividends
o
n
the Fixed-
t
o
-
b
e
payable
i
f
,
when and
a
s
declared
b
y
WMI's Board
o
f
Directors out
o
f
i
t
s
o
n
a noncumulative
basis
a
t
a
n
annual rate
o
f
6.534%
t
o
,
but not including, March 15, 2011 (whether
o
r
not a
Business Day) and
3
-
Month USD L1BOR plus 1.4825% thereafter
o
n
the liquidation preference
thereof, which
i
s $1,000,000 per share, from and including the Dividend Payment Date
o
n
o
r
prior
t
o their date
o
f
issuance. Dividends
o
n
the Fixed-
t
o
-
i
f
,
when
and
a
s
declared
b
y
WMI's Board
o
f
Directors, will
b
e
payable quarterly
i
n arrears
o
n
each
Dividend Payment Date, commencing
o
n
the first such day after issuance
o
f
the Fixed-
t
o
-
Floating
Rate WMI Preferred Stock. The record date
f
o
r
the payment
o
f
dividends,
i
f declared, will
b
e
the
first day
o
f
the month
i
n which the relevant Dividend Payment Date occurs
o
r
,
i
f any such day
i
s
not a Business Day, the next day that
i
s a Business Day. Dividends payable
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock for any period greater
o
r
less than a full Dividend Period will
b
e
computed
o
n
the basis
o
f
(
i
)
f
o
r
any Dividend Periods ending prior
t
o
o
r
i
n March 2011,
twelve 3D-day months, a 360- day year, and the actual number
o
f
days elapsed
i
n the period and
(
i
i
)
f
o
r
any Dividend Periods thereafter
i
n the actual numbers elapsed
i
n the relevant dividend
period
b
y
360. No interest will
b
e
paid
o
n
any dividend payment
o
f
Fixed-
t
o
-
Floating Rate WMI
Preferred Stock
o
f
o
r
Fixed- to-Floating Rate Depositary Shares. Holders
o
f
Fixed-
t
o
-
Floating
Rate Depositary Shares will receive
1
/
1 OOOthof any such dividend payment
o
n
the Fixed- to-
Dividends
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock are noncumulative.
I
f WMl's
Board
o
f
Directors does not declare a dividend
o
n
the Fixed Rate WMI Preferred Stock
o
r
declares less than a full dividend
i
n respect
o
f
any Dividend Period, the holders
o
f
the Fixed- to-
n
o
right
t
o receive any dividend
o
r
a full dividend,
a
s
the case may be, for the Dividend Period, and WMI will have
n
o
obligation
t
o pay a dividend
o
r
t
o
pay full dividends for that Dividend Period, whether
o
r
not dividends are declared and paid
f
o
r
any future Dividend Period with respect
t
o the Fixed-
t
o
-
WMl's common stock
o
r
any other class
o
r
series
o
f
WMI's preferred stock.
Redemption
The Fixed-
t
o
-
Floating Rate WMI Preferred Stock will not
b
e
redeemable
a
t
the option
o
f
the
holders thereof. Subject
t
o a covenant
i
n favor
o
f
certain
o
f
WMI's debtholders limiting WMI's
and
i
t
s
subsidiaries' right
t
o repurchase
o
r
redeem the Fixed-
t
o
-
Stock (among others)
a
s
o
f
o
n
8
0
CONFIDENTIAL
Return
Redemption
o
r
Repurchases," WMI may,
a
t
i
t
s
option redeem the Fixed- to-Floating Rate WMI
Preferred Stock:
i
n whole but not
i
n part, prior
t
i
n March 2011, upon the
occurrence
o
f
a
t
t
o the greater
o
f
:
(
i
) $1,000,000 per share
o
f
Fixed-
t
o
-
o
r
(
i
i
)
the sum
o
f
present values
o
f
$1,000,000 per share
o
f
Fixed-
t
o
-
Floating Rate WMI
Preferred Stock and
a
l
l
f
o
r
the Dividend Period from the
redemption date
t
i
n March 2011,
discounted
t
o
n
a quarterly basis ( assuming a 360- day year
consisting
o
f
twelve 30- day months)
a
t
the Treasury Rate,
a
s
calculated
b
y
a
n
Independent Investment Banker, plus 0.30%,
t
o
r
i
n whole
o
r
i
n part,
o
n
o
r
i
n March 2011,
a
t
a cash
redemption price
o
f
$1,000,000 per share
o
f
Fixed-
t
o
-
t
o
f
any undeclared dividends.
Dividends will cease
t
o accrue
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock called
f
o
r
redemption
o
n
and
a
s
o
f
the date fixed
f
o
r
redemption and such Fixed- to-Floating Rate WMI
Preferred Stock will
b
e
deemed
t
o cease
t
o
b
e
outstanding; provided, that the redemption price,
including any authorized and declared but unpaid dividends
f
o
r
the current Dividend Period,
i
f
any,
t
o the date fixed for redemption, has been duly paid
o
r
provision has been made
f
o
r
such
payment.
Notice
o
f
any redemption will
b
e
mailed
a
t
least
3
0
days, but not more than
6
0
days, prior
t
o
any redemption date
t
o each holder
o
f
the Fixed-
t
o
-
t
o
b
e
redeemed
a
t
such holder's registered address.
Replacement
A
t
o
r
prior
t
o issuance
o
f
the Fixed-
t
o
-
Floating Fixed Rate Company Preferred Securities
and the Trust Securities, WMI will enter into the Replacement Capital Covenant described under
" Description
o
f
o
n
Redemption
o
r
Repurchases," limiting
WMI's ability
t
o redeem
o
r
repurchase certain securities, including the Fixed Rate WMI Preferred
Stock.
I
n the event WMI voluntarily
o
r
o
r
winds up, the holders
o
f
Fixed-
t
o
-
a
t
b
e
entitled
t
o receive
i
n the amount
o
f
$1,000,000 per share,
o
r
$1,000 per Fixed- to-Floating
Rate Depositary Share representing a
1
/
1OOOthinterest
i
n the Fixed- to~Floating Rate WMI
Preferred Stock, plus
a
n
amount equal
t
o declared but unpaid dividends
f
o
r
the current Dividend
Period
t
o the date
o
f
liquidation, out
o
f
WMl's assets legally available
f
o
r
distribution
t
o
i
t
s
shareholders, before any distribution
o
f
assets
i
s made
t
o holders
o
f
WMI's common stock
o
r
any securities ranking junior
t
o the Fixed-
t
o
-
Floating Rate WMI Preferred Stock and subject
t
o
the rights
o
f
the holders
o
f
any class
o
r
series
o
f
securities ranking
o
n
a parity upon liquidation
with the Fixed-
t
o
-
Floating Rate WMI Preferred Stock upon liquidation and the rights
o
f
i
t
s
depositors and creditors.
After payment
o
f
t
h
e
f
u
l
l
amount
o
f
t
h
e
t
the holders
o
f
the Fixed-
t
o
-
n
o
right
o
r
claim
t
o any
8
1
CONFIDENTIAL
Return
o
f
WMI's remaining assets.
I
o
r
involuntary liquidation,
dissolution,
o
r
winding up, WMI's available assets are insufficient
t
o pay the amount
o
f
the
liquidation distributions
o
n
a
l
l
outstanding Fixed-
t
o
-
Floating Rate WMI Preferred $tock and the
corresponding amounts payable
o
n
any other securities
o
f
equal ranking, then the holders
o
f
the
Fixed-
t
o
-
Floating Rate WMI Preferred Stock and any other securities
o
f
equal ranking will share
ratably
i
o
f
assets
i
n proportion
t
o the full liquidating distributions
t
o which
they would otherwise
b
e
For such purposes, WMI's consolidation
o
r
merger with
o
r
consolidation
o
r
merger
o
f
o
r
into
i
t
,
o
r
the sale
o
f
a
l
l
o
r
substantially
a
l
l
o
f
WMl's property
o
r
business, will not
b
e
deemed
t
o constitute
i
t
s
liquidation, dissolution,
o
r
winding up.
Voting Rights
Holders
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock will not have any voting rights,
including the right
t
o elect any directors, except upon issuance
a
s
required
b
y
law,
o
r
a
s
set forth
below
i
f WMI fails
t
o pay,
o
r
f
o
r
o
n
Fixed-
t
o
-
Floating Rate WMI Preferred Stock for six Dividend Periods.
I
f
WMI fails
t
o pay,
o
r
f
o
r
payment,
f
u
l
l
dividends
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock after issuance
o
r
any other class
o
r
series
o
f
WMI Parity
Stock (including the Fixed Rate WMI Preferred Stock) having similar voting rights
(
"
Voting Parity
Stock")
f
o
r
six Dividend Periods
o
r
their equivalent, the authorized number
o
f
WMl's directors
will
b
e
increased
b
y
two. Subject
t
o compliance with any requirement
f
o
r
regulatory approval
o
f
,
o
r
nonobjection
t
o
,
persons serving
a
s
directors, the holders
o
f
Fixed-
t
o
-
Floating Rate WMI
Preferred Stock, voting together
a
s
a single class with the holders
o
f
any Voting Parity Stock, will
have the right
t
i
n addition
t
i
n office
a
t
WMI's next
annual meeting
o
f
shareholders. This right will continue
a
t
each subsequent annual meeting until
WMI pays dividends
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock and any Voting Parity
Stock
f
o
r
three consecutive Dividend Periods
o
r
i
t
s equivalent and pays
o
r
declares and sets
aside
f
o
r
payment dividends
f
o
r
the fourth consecutive Dividend Period
o
r
i
t
s
equivalent.
The term
o
f
such additional directors will terminate, and the total number
o
f
directors will
b
e
decreased
b
y
two,
a
t
the first annual meeting
o
f
shareholders after WMI pays dividends
o
n
the
Fixed-
t
o
-
Floating Rate WMI Preferred Stock and any Voting Parity Stock
f
o
r
three consecutive
Dividend Periods
o
r
i
t
s
equivalent and declares and pays
o
r
sets aside for payment dividends
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock and any Voting Parity Stock
f
o
r
the fourth
consecutive Dividend Period
o
r
,
i
f earlier, upon the redemption
o
f
a
l
l
Fixed-
t
o
-
Floating Rate WMI
Preferred Stock. After the term
o
f
such additional directors terminates, the holders
o
f
the
Fixed-
t
o
-
Floating Rate WMI Preferred Stock will not
b
e
able
t
o elect additional directors unless
dividends
o
n
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock have again not been paid
o
r
declared and set aside
f
o
r
payment
f
o
r
s
i
x
future Dividend Periods.
Any additional director elected
b
y
the holders
o
f
Fixed- to-Floating Rate WMI Preferred
Stock and Voting Parity Stock may only
b
e
removed
b
y
the vote
o
f
the holders
o
f
record
o
f
the
outstanding Fixed-
t
o
-
Floating Rate WMI Preferred Stock and Voting Parity Stock, voting together
a
s
a single and separate class,
a
t
a meeting
o
f
WMI shareholders called
f
o
r
that purpose.
A
s
long
a
s
dividends
o
n
the Fixed-
t
o
-
o
r
any Voting Parity Stock
have not been paid
f
o
r
s
i
x
Dividend Periods
o
r
their equivalent, any vacancy created
b
y
the
removal
o
f
any such director may
b
e
filled only
b
y
the vote
o
f
the holders
o
f
the outstanding
Fixed-
t
o
-
Floating Rate WMI Preferred Stock and any Voting Parity Stock, voting together
a
s
a
single class,
a
t
the same meeting
a
t
which such removal
i
s considered.
Washington law attaches mandatory voting rights
t
o classes
o
r
series
o
f
shares that are
affected
b
y
certain amendments
t
o the articles
o
f
incorporation. The holders
o
f
the outstanding
8
2
CONFIDENTIAL
Return
shares
o
f
a class
o
r
series are entitled
t
o vote
a
s
a separate voting group
i
f shareholder voting
i
s
otherwise required
b
y
Washington law and
i
f the amendment would:
increase the aggregate number
o
f
authorized shares
o
f
the class
o
r
series;
effect
a
n
exchange
o
r
reclassification
o
f
a
l
l
o
r
part
o
f
the issued and outstanding shares
o
f
the class
o
r
series into shares
o
f
another class
o
r
series, thereby adversely affecting
the holders
o
f
the shares
s
o
exchanged
o
r
recl9. ssified;
change the rights, preferences,
o
r
limitations
o
f
a
l
l
o
r
part
o
f
the issued and outstanding
shares
o
f
the class
o
r
series, thereby adversely affecting the holders
o
f
shares
o
f
the
class
o
r
series;
change
a
l
l
o
r
part
o
f
t
h
e
issued and outstanding shares
o
f
t
h
e
class
o
r
series into a
different number
o
f
shares
o
f
the same class
o
r
series, thereby adversely affecting the
holders
o
f
shares
o
f
the class
o
r
series;
create a new class
o
r
series
o
f
shares having rights
o
r
preferences with respect
t
o
dividends
o
r
other distributions
o
r
t
o dissolution that are,
o
r
upon designation
b
y
the
board
o
f
directors may be, prior, superior,
o
r
substantially equal
t
o the shares
o
f
the class
o
r
series;
increase the rights
o
r
t
o distributions,
o
r
o
n
liquidations
o
r
dissolution,
o
r
the number
o
f
authorized shares
o
f
any class
o
r
series that, after giving
effect
t
o the amendment, has rights
o
r
t
o distributions,
o
r
o
n
liquidations
o
r
dissolution that are,
o
r
upon designation
b
y
the board
o
f
directors may be,
prior, superior,
o
r
substantially equal
t
o the shares
o
f
the class
o
r
series;
limit
o
r
deny
a
n
existing preemptive right
o
f
a
l
l
o
r
part
o
f
the shares
o
f
the class
o
r
series;
cancel
o
r
otherwise adversely affect rights
t
o distributions that have accumulated but not
y
e
t
been declared
o
n
a
l
l
o
r
part
o
f
the shares
o
f
the class
o
r
series;
o
r
effect a redemption
o
r
cancellation
o
f
a
l
l
o
r
part
o
f
the shares
o
f
the class
o
r
series
i
n
exchange
f
o
r
cash
o
r
any other form
o
f
consideration other than shares
o
f
the
corporation.
WMI will covenant
i
n the Exchange Agreement that
i
n the event WMI, prior
t
o the
Conditional Exchange, effects,
o
r
i
s
,
the subject
o
f
a merger, consolidation, statutory share
exchange, sale
o
f
a
l
l
o
r
substantially
a
l
l
o
f
i
t
s assets
o
r
other form
o
f
business combination,
(
i
)
i
n which WMI
i
s not the surviving, resulting
o
r
receiving corporation thereof
o
r
(
i
i
)
i
f WMI
i
s
the surviving
o
r
resulting corporation, shares representing a majority
o
f
WMI's total voting power
are either converted
o
r
exchanged into securities
o
f
another person
o
r
into cash
o
r
other
property (any such transaction
i
n either (
i
)
o
r
(
i
i
)
being a " Business Combination"), then WMI
(
i
) shall not enter into such Business Combination unless the Successor Entity agrees, effective
upon the consummation
o
f
such Business Combination,
t
o abide
b
y
a
l
l
o
f
WMI's obligations
under the provisions
o
f
the Exchange Agreement restricting the payment
o
f
dividends
b
y
WMI
i
n
the event dividends are not paid with respect
t
o the Company Preferred Securities and (
i
i
)
may,
a
t
the election
o
f
the Board
o
f
Directors
o
f
WMI prior
t
o the effectiveness
o
f
such Business
Combination, assign, effective upon the consummation
o
f
a
l
l
o
f
i
t
s
other obligations under the Exchange Agreement
t
o a Successor Entity that has both Fixed Rate
Substitute Preferred Stock and Fixed-
t
o
-
Floating Rate Substitute Preferred Stock and,
a
s
a result
o
f
such assignment,
a
l
l
references
t
o WMI, Fixed Rate WMI Preferred Stock, Fixed-
t
o
-
Floating
Rate WMI Preferred Stock, Fixed Rate Depositary Share and Fixed- to-Floating Rate Depositary
Share shall become and
b
e
deemed
t
o
b
e
references
t
o such Successor Entity,
t
o such Fixed
Rate Substitute Preferred Stock,
t
o such Fixed-
t
o
-
Floating Rate Substitute Preferred Stock,
t
o a
Fixed Rate Successor Depositary Share and
t
o a Fixed-
t
o
-
Floating Rate Successor Depositary
Share, respectively.
8
3
CONFIDENTIAL
Return
" Successor Entity" means a corporation designated
b
y
the Board
o
f
Directors
o
f
WMI
(
i
) that
i
s the surviving, resulting
o
r
receiving corporation,
a
s
applicable,
i
n any Business
Combination, (
i
i
)
the securities
o
f
which are received
i
n a Business Combination,
b
y
some
o
r
a
l
l
holders
o
f
WMI voting shares
o
r
(
i
i
i
)
that the Board
o
f
Directors
o
f
WMI determines
t
o
b
e
a
n
acquiror
o
f
WMI
i
n a Business Combination.
" Fixed-
t
o
-
Floating Rate Substitute Preferred Stock" means a class
o
r
series
o
f
equity
securities
o
f
a Successor Entity having the preferences, limitations and relative rights
i
n
i
t
s
articles
o
r
certificate
o
f
incorporation
o
r
other constituent documents that are substantially similar
t
o those set forth
i
n the articles
o
f
amendment establishing the Fixed-
t
o
-
Floating Rate WMI
Preferred Stock.
" Fixed Rate Substitute Preferred Stock" means a class
o
r
series
o
f
equity securities
o
f
a
Successor Entity having the preferences, limitations and relative rights
i
n
i
t
s
articles
o
r
certificate
o
f
incorporation
o
r
other constituent documents that are substantially similar
t
o those set forth
i
n
the articles
o
f
amendment establishing the Fixed Rate WMI Preferred Stock.
" Fixed-
t
o
-
Floating Rate Successor Depositary Share" means a depositary share substantially
similar
t
o a Fixed-
t
o
-
Floating Rate Depositary Share representing
a
n
interest
i
n the Fixed-
t
o
-
Floating Rate Substitute Preferred Stock.
" Fixed Rate Successor Depositary Share" means a depositary share substantially similar
t
o a
Fixed Rate Depositary Share representing
a
n
interest
i
n the Fixed Rate Substitute Preferred
Stock.
For a description
o
f
how
a
n
exchange
o
f
the Trust Securities into Fixed-
t
o
-
Floating Rate
Depositary Shares may occur upon
a
n
Exchange Event, purchasers should read " Description
o
f
the Trust Securities - Conditional Exchange."
8
4
CONFIDENTIAL
Return
DESCRIPTION
O
F
THE FIXED- TO-FLOATING RATE DEPOSITARY SHARES
o
f
the Fixed-
t
o
-
Floating
Rate Depositary Shares. This description
i
s qualified
i
n
i
t
s
entirety
b
y
reference
t
o the terms and
provisions
o
f
the Deposit Agreement, the form
o
f
depositary receipts, which contain the terms and
provisions
o
f
the Fixed-
t
o
-
Floating Rate Depositary Shares, and WMl's articles
o
f
incorporation and
articles
o
f
amendment. Copies
o
f
each
o
f
the foregoing documents may
b
e
t
o
WMI.
General
Each depositary share will represent a
1
/
1 OOOthinterest
i
n one share
o
f
Fixed-
t
o
-
Floating
Rate WMI Preferred Stock (the " Fixed-
t
o
-
Floating Rate Depositary Shares"). The Fixed-
t
o
-
b
e
evidenced
b
y
depositary receipts. The shares
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock underlying the Fixed-
t
o
-
Shares will, upon
a
n
exchange
a
s
a result
o
f
a
n
Exchange Event,
b
e
deposited with the,
a
s
Depositary, under a Deposit Agreement,
t
o
b
e
entered into
o
n
o
r
before the closing date (the
" Deposit Agreement"), among WMI, the Depositary, the registrar appointed thereunder and
a
l
l
holders from time
t
o time
o
f
depositary receipts issued
b
y
t
h
e
Depositary thereunder. WMI does
not intend
t
o list
o
r
quote the Fixed-
t
o
-
o
r
the Fixed-
t
o
-
Floating
Rate WMI Preferred Stock
o
n
o
r
Accordingly, there will
b
e
n
o
public trading market
f
o
r
the Fixed-
t
o
-
Shares
o
r
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock. The Initial Purchasers are under
n
o
obligation
t
o and
d
o
not intend
t
o make a market
i
n the Fixed-
t
o
-
Shares.
Subject
t
o the terms
o
f
the Deposit Agreement, each owner
o
f
a Fixed-
t
o
-
Floating Rate
Depositary Share will
b
e
entitled, through the Depositary,
t
o
a
l
l
the rights, preferences and
privileges
o
f
a share
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock. Owners
o
f
a single Fixed-
t
o
-
Floating Rate Depositary Share, representing a
1
/
1 OOOthinterest
i
n one share
o
f
Fixed-
t
o
-
Floating Rate WMI Preferred Stock, will
b
e
subject
t
o
a
l
l
o
f
the limitations
o
f
the fractional share
represented thereby, which are summarized above under " Description
o
f
the Fixed-
t
o
-
Floating
Rate WMI Preferred Stock."
The Depositary
w
i
l
l
a
c
t
a
s
transfer agent and registrar and paying agent with respect
t
o
t
h
e
Fixed-
t
o
-
The Depositary's office
a
t
which the depositary receipts will
b
e
administered
i
s located
a
t
480 Washington Blvd., Jersey City, NJ 07310.
Purchasers may hold Fixed-
t
o
-
Floating Rate Depositary Shares either directly
o
r
indirectly
through their broker
o
r
other financial institution.
I
f
purchasers hold Fixed-
t
o
-
Floating Rate
Depositary Shares directly,
b
y
having Fixed- to-Floating Rate Depositary Shares registered
i
n their
name
o
n
the books
o
f
the Depositary, the purchaser
i
s a depositary receipt holder.
I
f
purchasers
hold the Fixed- to-Floating Rate Depositary Shares through their broker
o
r
financial institution
nominee, the purchasers must rely
o
n
the procedures
o
f
such broker
o
r
t
o
assert the rights
o
f
a depositary receipt holder described
i
n this section. Purchasers should
consult with their broker
o
r
t
o find out what those procedures are.
Issuance
o
f
Depositary Receipts
Automatically upon a Conditional Exchange, WMI will issue the shares
o
f
Fixed-
t
o
-
Floating
Rate WMI Preferred Stock, and WMI will deposit such shares
o
f
the Fixed-
t
o
-
Floating Rate WMI
Preferred Stock with the Depositary, which will then issue and deliver the depositary receipts
t
o
WMI. WMI will,
i
n turn, deliver the depositary receipts
t
o the holders
o
f
Trust Securities
a
s
o
f
the
date
o
f
a Conditional Exchange. Depositary receipts will
b
e
issued evidencing only whole
8
5
CONFIDENTIAL
Return
Fixed- to-Floating Rate Depositary Shares. Following the occurrence
o
f
a Conditional Exchange,
each Trust Security will
b
e
exchanged
f
o
r
a like amount
o
f
depositary receipts. See " Description
o
f
the Trust Securities - Conditional Exchange."
Dividends and Other Distributions
The Depositary will distribute
a
l
l
cash dividends, dividends paid
i
n Fixed-
t
o
-
Floating Rate
Depositary Shares representing paid-
u
p
and nonassessable shares
o
f
Fixed-
t
o
-
Floating Rate
WMI Preferred Stock
o
r
other cash distributions received
i
n respect
o
f
the Fixed- to-Floating Rate
WMI Preferred Stock
t
o the record holders
o
f
Fixed-
t
o
-
i
n
proportion
t
o the numbers
o
f
such Fixed-
t
o
-
Floating Rate Depositary Shares owned
b
y
such
holders
o
n
the relevant record date.
I
n the event
o
f
a distribution other than
i
n cash, the
Depositary will distribute property received
b
y
i
t
t
o the record holders
o
f
Fixed-
t
o
-
Floating Rate
Depositary Shares entitled thereto, unless the Depositary determines that
i
t
i
s not feasible
t
o
make such distribution,
i
n which case the Depositary may, after consultation with WMI, sell such
property and distribute the net proceeds from such sale
t
o such holders.
Redemption
o
f
Fixed-
t
o
-
I
f
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock underlying the Fixed-
t
o
-
Floating Rate
Depositary Shares are redeemed, the Fixed-
t
o
-
b
e
redeemed
with the proceeds received
b
y
the Depositary resulting from the redemption,
i
n whole
o
r
i
n part,
o
f
such Fixed-
t
o
-
Floating Rate WMI Preferred Stock held
b
y
the Depositary. The redemption
price per Fixed-
t
o
-
Floating Rate Depositary Share will
b
e
equal
t
o the applicable redemption
price per share payable with respect
t
o such Fixed-
t
o
-
I
f less
than
a
l
l
the Fixed-
t
o
-
Floating Rate Depositary Shares are
t
o
b
e
redeemed, the Fixed- to-Floating
Rate Depositary Shares
t
o
b
e
redeemed will
b
e
selected
b
y
l
o
t
o
r
p
r
o
rata,
i
n WMI's sole
discretion.
After the date fixed
f
o
r
redemption (which will
b
e
the same date
a
s
the redemption date,
i
f
any, for the Fixed-
t
o
-
Floating Rate WMI Preferred Stock), the Fixed-
t
o
-
Shares
s
o
called
f
o
r
redemption will
n
o
longer
b
e
deemed
t
o
b
e
outstanding and
a
l
l
rights
o
f
the
holders
o
f
the Fixed-
t
o
-
Floating Rate Depositary Shares will cease, except the right
t
o receive
the moneys payable upon such redemption and any money
o
r
other property
t
o which the
holders
o
f
such Fixed-
t
o
-
Floating Rate Depositary Shares were entitled upon such redemption
upon surrender
t
o the Depositary
o
f
the depositary receipts evidencing such Fixed-
t
o
-
Floating
Rate Depositary Shares.
Amendment
o
f
Deposit Agreement
The form
o
f
depositary receipt evidencing the Fixed- to-Floating Rate Depositary Shares and
any provision
o
f
the Deposit Agreement may
a
t
any time
b
e
amended
b
y
agreement between
WMI and the Depositary. However, any amendment which materially and adversely alters the
rights
o
f
the holders
o
f
depositary receipts will not
b
e
effective unless such amendment has been
approved
b
y
the holders
o
f
a
t
least a majority
o
f
the Fixed-
t
o
-
then outstanding. Every holder
o
f
a
n
outstanding depositary receipt
a
t
the time any amendment
becomes effective will
b
e
deemed,
b
y
continuing
t
o hold such depositary receipt,
t
o consent and
agree
t
o such amendment and
t
o
b
e
bound
b
y
the Deposit Agreement
a
s
amended thereby.
Charges
o
f
Depositary
WMI will pay the charges
o
f
the Depositary
i
n connection with the initial deposit
o
f
the
Fixed-
t
o
-
Floating Rate WMI Preferred Stock and the initial issuance
o
f
the Fixed
t
o Floating Rate
Depositary Shares upon a Conditional Exchange, and any redemption
o
f
the Fixed- to-Floating
Rate WMI Preferred Stock. Holders
o
f
Fixed-
t
o
-
Floating Rate Depositary Shares will pay
a
l
l
other
8
6
CONFIDENTIAL
Return
transfer and other taxes and governmental charges and,
i
n addition, such other charges
a
s
are
expressly provided
i
n the Deposit Agreement
t
o
b
e
f
o
r
their accounts.
A
l
l
other charges and
expenses
o
f
the Depositary and
o
f
any registrar incident
t
o the performance
o
f
their respective
obligations arising from the depositary arrangements will
b
e
paid
b
y
WMI only after prior
consultation and agreement between the Depositary and WMI and consent
b
y
WMI
t
o the
incurrence
o
f
such expenses, which consent will not
b
e
unreasonably withheld.
Miscellaneous
The Depositary
w
i
l
l
forward
t
o
t
h
e
holders
o
f
t
h
e
Fixed-
t
o
-
a
l
l
reports and communications from WMI which WMI would
b
e
required
t
o furnish
t
o the holders
o
f
the Fixed-
t
o
-
Neither the Depositary nor WMI will
b
e
liable
i
f
i
t
i
s prevented
o
r
delayed
b
y
law
o
r
any
circumstances beyond
i
t
s
control
i
n performing
i
t
s
obligations under the Deposit Agreement. The
obligations
o
f
WMI and the Depositary under the Deposit Agreement will
b
e
limited
t
o
performance
i
n good faith
o
f
their duties thereunder, and they will not
b
e
obligated
t
o prosecute
o
r
defend any legal proceedings
i
n respect
o
f
any Fixed- to-Floating Rate Depositary Shares
o
r
the Fixed-
t
o
-
Floating Rate WMI Preferred Stock unless satisfactory indemnity
i
s furnished. They
may rely upon written advice
o
f
counselor independent accountants,
o
r
information provided
b
y
persons presenting Fixed-
t
o
-
Floating Rate WMI Preferred Stock for deposit, holders
o
f
Fixed- to-
o
r
other persons believed
t
o
b
e
competent and
o
n
documents
believed
t
o
b
e
genuine.
Resignation and Removal
o
f
Depositary; Termination
o
f
Deposit Agreement
The Depositary may resign
a
t
any time
b
y
delivering
t
o WMI notice
o
f
i
t
s
election
t
o
d
o
so,
and WMI may
a
t
any time remove the Depositary, with any such resignation
o
r
removal taking
effect upon the appointment
o
f
a successor depositary and
i
t
s
acceptance
o
f
such appointment.
Such successor depositary will
b
e
appointed
b
y
WMI within
6
0
days after delivery
o
f
the notice
o
f
resignation
o
r
removal. Upon termination
o
f
the Deposit Agreement, the Depositary will
discontinue the transfer
o
f
depositary receipts, will suspend the distribution
o
f
dividends
t
o the
holders thereof and will not give any further notices (other than notice
o
f
such termination)
o
r
perform any further acts under the Deposit Agreement, except that the Depositary will continue
t
o collect dividends and other distributions pertaining
t
o Fixed-
t
o
-
Stock and
w
i
l
l
continue
t
o deliver Fixed-
t
o
-
Floating Rate WMI Preferred Stock certificates
together with such dividends and distributions and the net proceeds
o
f
any sales
o
f
rights,
preferences, privileges,
o
r
other property
i
n exchange
f
o
r
depositary receipts surrendered.
A
t
any
time after the expiration
o
f
three years from the date
o
f
termination, the Depositary may sell the
Fixed-
t
o
-
Floating Rate WMI Preferred Stock and hold the proceeds
o
f
such sale, without interest,
f
o
r
the benefit
o
f
the holders
o
f
depositary receipts who have not then surrendered their
depositary receipts. After making. such sale, the Depositary will
b
e
discharged from
a
l
l
obligations
under the Deposit Agreement except
t
o account
f
o
r
such proceeds.
8
7
CONFIDENTIAL
Return
DESCRIPTION
O
F
THE OTHER WMI CAPITAL STOCK
A
s
o
f
the date hereof, the authorized capital stock
o
f
WMI consists
o
f
1,60Q, 000,000 shares
o
f
WMI common stock and 10,000,000 shares
o
f
preferred stock,
n
o
par value.
A
s
o
f
the close
o
f
business
o
n
February 15, 2006, there were 994,380,908 shares
o
f
WMI common stock
outstanding and
n
o
shares
o
f
preferred stock
o
f
WMI outstanding.
A
s
o
f
the close
o
f
business
o
n
February 15, 2006, 700,000 shares
o
f
preferred stock
o
f
WMI were authorized, but unissued,
a
s
contemplated
b
y
WMI's Rights Agreement, dated
a
s
o
f
December 20, 2000, entered into
b
y
and
between WMI and Mellon Investor Services LLC The shares
o
f
WMI preferred stock
t
o
b
e
issued
upon the occurrence
o
f
a Conditional Exchange have been duly authorized and when and
i
f
issued will
b
e
validly issued, fully paid, nonassessable and free
o
f
preemptive rights, with
n
o
personal liability attaching
t
o
t
h
e
ownership thereof.
WMI has authorized
f
o
r
issuance
i
n connection with the offering
o
f
the Trust Securities and
the related issuance
b
y
the Company
o
f
i
t
s Fixed-
t
o
-
u
p
t
o 750 shares
o
f
i
t
s
Series J Perpetual Non- cumulative Fixed Rate Preferred Stock,
n
o
par
value, and liquidation preference
o
f
$1,000,000 per share (the " Fixed Rate WMI Preferred
Stock"). The shares
o
f
Fixed Rate WMI Preferred Stock will
b
e
issued
b
y
WMI solely upon the
occurrence
o
f
a Conditional Exchange. The shares
o
f
Fixed Rate WMI Preferred Stock,
i
f and
when issued upon the occurrence
o
f
a Conditional Exchange, will
b
e
represented
b
y
Fixed Rate
Depositary Shares
o
f
WMI (the " Fixed Rate Depositary Shares"), each
o
f
which will represent
1
/
1OOOthof a share
o
f
Fixed Rate WMI Preferred Stock.
The Fixed Rate WMI Preferred Stock will rank pari passu with the Fixed-
t
o
-
Floating Rate
WMI Preferred Stock
a
s
t
o
f
WMI. The terms
o
f
the Fixed Rate
WMI Preferred Stock are substantially identical
t
o the Fixed-
t
o
-
Stock other than with respect
t
o the rate applicable
t
o dividends thereon. The Fixed Rate WMI
Preferred Stock will,
i
f
,
when and
a
s
declared
b
y
WMl's Board
o
f
Directors, pay dividends
a
t
a
n
annual rate
o
f
7.25%. The Fixed Rate WMI Preferred Stock will not
b
e
listed
o
n
any securities
exchange
o
r
8
8
CONFIDENTIAL
Return
BOOK- ENTRY ISSUANCE
Form, Denomination, Transfer and Book- Entry Procedures
General
The Trust Securities are being offered and sold only
t
o persons who are both qualified
institutional buyers within the meaning
o
f
Rule 144A under the Securities Act and qualified
purchasers within the meaning
o
f
Section 2(
a
)
(51)
o
f
the Investment Company Act
i
n reliance
o
n
a
n
exemption from registration pursuant
t
o Rule 144A under the Securities Act.
b
e
issued only
i
n fully registered form. Each purchaser
i
n the
Offering and each account
f
o
r
which
i
t
i
s purchasing will hold
a
t
least $300,000 liquidation
preference
o
f
Trust Securities (
i
.
e
.
,
a
t
least three Trust Securities) and transfer
a
t
least $100,000
o
f
Trust Securities (
i
.
e
.
,
a
t
least one Trust Security) and each subsequent
purchaser and each account
f
o
r
which
i
t
i
s purchasing will hold and transfer
a
t
least $100,000
o
f
Trust Securities (
i
.
e
.
,
a
t
least one Trust Security). Any transfer, sale
o
r
other disposition
o
f
Trust Securities having a liquidation preference
o
f
less than $100,000
o
r
which result
i
n a beneficial owner holding Trust Securities having
a
n
preference
o
f
less than $100,000, will
b
e
deemed
t
o
b
e
null and void
a
b
initio and
o
f
n
o
legal
effect whatsoever. Any such transferee will
b
e
deemed not
t
o
b
e
the beneficial owner
o
f
such
Trust Securities
f
o
r
any purpose, including, but not limited
t
o
,
the receipt
o
f
dividends
o
n
such
Trust Securities, and such transferee will
b
e
deemed
t
o have
n
o
interest whatsoever
i
n such
Trust Securities.
Each purchaser
o
f
Trust Securities pursuant
t
o the Offering, and each purchaser who holds
a beneficial interest
i
n the Global Security
a
t
any time, will
b
e
deemed
t
o have represented
t
o
WaMu Delaware that
i
t
i
s both a qualified institutional buyer within the meaning
o
f
Rule 144A
under the Securities Act and a qualified purchaser within the meaning
o
f
Section 2 (
a
)
(51) under
the Investment Company Act.
I
f a beneficial owner
o
f
Trust Securities who
i
s required
t
o
b
e
a
qualified purchaser within the meaning
o
f
Section
2
(
a
)
(51) under the Investment Company Act
i
s
a
t
any time not a qualified purchaser, WaMu Delaware may (
i
) require such beneficial owner
t
o sell
i
t
s
Trust Securities
t
o a person who
i
s a qualified purchaser and who
i
s otherwise
qualified
t
o purchase such Trust Securities
i
n a transaction exempt from registration under the
Securities Act
o
r
(
i
i
)
require the beneficial owner
t
o sell such Trust Securities
t
o WaMu Delaware
o
r
a
n
affiliate thereof
a
t
a price equal
t
o the least
o
f
(
A
)
the purchase price paid
b
y
the holder
f
o
r
such Trust Securities, (
B
)
100%
o
f
the liquidation preference thereof
o
r
(
C
)
the fair market
value thereof.
Global Security
The Trust Securities initially will
b
e
represented
b
y
one
o
r
more securities
i
n registered,
global form (the " Global Security"). The Global Security will
b
e
deposited upon issuance with
the Registrar
a
s
Custodian
f
o
r
The Depository Trust Company
(
"
DTG")
i
n New York, New York,
and registered
i
n the name
o
f
DTC
o
r
i
t
s
nominee (the " Nominee"),
i
n each case
f
o
r
credit
t
o
a
n
account
o
f
a DTC Participant,
a
s
described below.
Special Considerations for Global Securities
A
s
a
n
indirect holder, a purchaser's rights relating
t
o a Global Security will
b
e
governed
b
y
the account rules
o
f
the purchaser's financial institution and
o
f
DTC,
a
s
well
a
s
the general laws
relating
t
o securities transfers. WaMu Delaware will not recognize the purchaser
a
s
a holder
o
f
Trust Securities and instead will deal only with DTC
o
r
i
t
s
nominee. See
"
-
The DTC System."
8
9
CONFIDENTIAL
Return
Purchasers should
b
e
aware that because Trust Securities are issued only
i
n the form
o
f
a
Global Security:
they cannot get Trust Securities registered
i
n their name;
they cannot receive physical certificates
f
o
r
their interest
i
n the Trust Securities;
they will
b
e
" Street Name" holders and must look
t
o their own bank
o
r
broker
f
o
r
payments
o
n
the Trust Securities and the protection
o
f
their legal rights relating
t
o the
Trust Securities;
they may not
b
e
able
t
o sell interests
i
t
o some insurance
companies and other institutions that are required
b
y
law
t
o own securities
i
n the form
o
f
physical certificates; and
DTC's policies will govern payments, transfers, exchanges and other matters relating
t
o
the purchaser's interest
i
n the Global Security. See
"
-
The DTC System". WaMu
Delaware, the Company and the Registrar have
n
o
responsibility
f
o
r
any aspect
o
f
DTC's
actions
o
r
f
o
r
i
t
s
records
o
f
ownership interests
i
n the Global Security. WaMu Delaware,
the Company and the Registrar also
d
o
not supervise DTC
i
n any way.
Special Situations When the Global Security Will
B
e
Terminated
I
n a few special situations, the Global Security will terminate and interests
i
n
i
t will
b
e
exchanged
f
o
r
physical certificates representing Trust Securities. After that exchange, the choice
o
f
whether
t
o hold Trust Securities directly
o
r
i
n " Street Name" will
b
e
u
p
t
o the beneficial
owner. Purchasers must consult their own bank
o
r
broker
t
o find out how
t
o have their interests
i
n Trust Securities transferred
t
o their own name,
s
o
that they will
b
e
direct holders.
The special situations for termination
o
f
the Global Security are:
DTC notifies WaMu Delaware that
i
t
i
s unwilling, unable
o
r
n
o
longer qualified
t
o continue
a
s
the depositary
f
o
r
o
r
WaMu Delaware
i
n
i
t
s
sole discretion determines that the Global Security will
b
e
exchangeable for certificated Trust Securities.
When the Global Security terminates, DTC (and not WaMu Delaware,
t
h
e
Company
o
r
the
Securities Registrar)
i
s responsible
f
o
r
deciding the names
o
f
the institutions that will
b
e
the
initial direct holders.
I
f
Trust Securities are issued
i
n certificated form, dividends,
i
f any, will
b
e
payable, and
b
e
transferred
o
r
exchanged,
a
t
the corporate trust office
o
f
the Registrar
i
n
New York, New York, provided that payment
o
f
interest
o
n
certificated Trust Securities may
b
e
made
a
t
the option
o
f
WaMu Delaware
b
y
check mailed
t
o the address
o
f
the persons entitled
thereto.
The DTC System
DTC
i
s a limited-purpose trust company created
t
o hold securities for
i
t
s
participating
organizations (the " OTe Participants"). DTC also facilitates the clearance and settlement
between Participants
o
f
transactions
o
f
securities deposited with DTC through changes
i
n the
account records
o
f
DTC Participants. DTC Participants include securities brokers and dealers
( including the Initial Purchasers), banks, trust companies, clearing corporations and certain other
organizations. Access
t
o DTC's system
i
s also available
t
o other entities such
a
s
securities
brokers and dealers, banks and trust companies that work through a DTC Participant (the
" Indirect Participants").
9
0
CONFIDENTIAL
Return
When the Trust Securities are purchased through the DTC system, the purchase must
b
e
made
b
y
o
r
through a DTC Participant, who will receive credit
f
o
r
o
n
DTC's
records. The purchaser's ownership interest will only
b
e
recorded
o
n
the DTC Participants' (
o
r
Indirect Participants') records. DTC has
n
o
knowledge
o
f
a purchaser's individual ownership
o
f
the Trust Securities. DTC's records only show the identity
o
f
the DTC Participants and the
amount
o
f
the Trust Securities held
b
y
o
r
through them. A purchaser will not receive a written
confirmation
o
f
i
t
s
purchase
o
r
sale
o
r
any periodic statement directly from DTC;
i
t will receive
these from the DTC Participant
o
r
Indirect Participant. Thus, the DTC Participants (
o
r
Indirect
Participants) are responsible
f
o
r
keeping
a
n
accurate account
o
f
the holdings
o
f
their customers.
Any redemption notices with respect
t
o the Trust Securities will
b
e
sent
b
y
the Company
and WaMu Delaware directly
t
o DTC, who will
i
n turn inform the DTC Participants, who will then
contact the beneficial owners.
I
f less than
a
l
l
o
f
the Trust Securities are being redeemed, DTC's
current practice
i
s
t
o choose
b
y
l
o
t
the amount
o
f
the interest
o
f
each DTC Participant
t
o
b
e
redeemed. Each DTC Participant will then use
a
n
appropriate method
t
o allocate the redemption
among
i
t
s
beneficial holders.
I
t
i
s DTC's current practice, upon receipt
o
f
any payment
t
o credit DTC Participants'
accounts
o
n
the payment date based
o
n
their holdings
o
f
i
n the Global
Securities
a
s
shown
o
n
DTC's records.
I
n addition,
i
t
i
s DTC's current practice
t
o assign any
consenting
o
r
voting rights
t
o DTC Participants whose accounts are credited with Trust Securities
o
n
a record date,
b
y
using
a
n
omnibus proxy. Payments
b
y
DTC Participants
t
o owners
o
f
i
n the Global Security, and voting
b
y
DTC Participants, will
b
e
based
o
n
the
customary practices between the DTC Participants and owners
o
f
beneficial interests,
a
s
i
s the
case with securities held
f
o
r
the account
o
f
customers registered
i
n " Street Name". However,
payments will
b
e
the responsibility
o
f
the DTC Participants and not
o
f
DTC, the Securities
Registrar, WaMu Delaware
o
r
the Company.
Interests
i
n the Trust Securities will trade
i
n DTC's same-day funds settlement system, and
secondary market trading activity
i
n such interests will therefore settle
i
n immediately available
funds, subject
i
n
a
l
l
cases
t
o the rules and procedures
o
f
DTC and
i
t
s
participants.
DTC has advised WaMu Delaware that
i
t will take any action permitted
t
o
b
e
taken
b
y
a
holder
o
f
the Trust Securities only
a
t
the direction
o
f
one
o
r
more participants
t
o whose account
with DTC interests
i
n the Global Security are credited and only
i
n respect
o
f
such portion
o
f
the
aggregate principal amount
o
f
a
s
t
o which such participant
o
r
participants
has
o
r
have given such direction.
Although DTC has agreed
t
o the foregoing procedures
i
n order
t
o facilitate transfers
o
f
i
n the Global Security among participants
o
f
DTC
i
t
i
s under
n
o
obligation
t
o perform
o
r
continue
t
o perform such procedures, and such procedures may
b
e
discontinued
a
t
any time. Neither the Company, WaMu Delaware, the Securities Registrar
o
r
any
o
f
their representative agents
w
i
l
l
have any responsibility
f
o
r
the performance
b
y
DTC
i
t
s
participants
o
r
indirect participants
o
f
i
t
s
obligations under the rules and procedures governing
their operations, including maintaining, supervising
o
r
reviewing the records relating
t
o
,
o
r
payments made
o
n
account
o
f
,
i
n the Global Security.
Euroc/ ear and Clearstream
Clearstream Banking, societe anonyme,
4
2
Avenue
J
F
Kennedy,
L
-
1855, Luxembourg
(
"
Clearstream"),
i
s a subsidiary
o
f
Clearstream International
(
"
Clearstream International"), a
Luxembourg limited liability company formed
i
n January 2000 through the merger
o
f
CedeI
International and Deutsche Boerse Clearing, a subsidiary
o
f
Deutsche Boerse AG.
I
n July 2002,
Deutsche Boerse AG acquired Cedel International and
i
t
s
50% ownership
o
f
Clearstream
International.
9
1
CONFIDENTIAL
Return
Clearstream
i
s registered
a
s
a bank
i
n Luxembourg, and
a
s
such
i
s subject
t
o supervision
b
y
the Luxembourg Financial Sector Supervisory Commission, which supervises Luxembourg
banks.
Clearstream holds securities
f
o
r
i
t
s
customers
(
"
C
/
earstream Participants") and facilitates
the clearance and settlement
o
f
securities transactions
b
y
electronic book- entry transfers
between their accounts. Clearstream provides various services, including safekeeping, adminis-
tration, clearance and settlement
o
f
internationally traded securities and securities lending and
borrowing. Clearstream also deals with domestic securities markets
i
n several countries through
established depository and custodial relationships. Clearstream has established
a
n
electronic
bridge with Euroclear Bank
S
.
A./
N
.
V
.
a
s
the Euroclear Operator
i
n Brussels
t
o facilitate
settlement
o
f
trades between systems. Clearstream currently accepts over 200,000 securities
f
o
r
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
t
o securities brokers and dealers
and banks. Currently, Clearstream International has over 2,500 customers located
i
n over
9
4
countries, including
a
l
l
major European countries, Canada and the United States. Indirect
access
t
o Clearstream
i
s available
t
o other institutions which clear through
o
r
maintain custodial
relationship with
a
n
account holder
o
f
Clearstream.
The Euroclear System
(
"
Euroc/ ear") was created
i
n 1968
t
o hold securities
f
o
r
i
t
s
participants
(
"
Euroc/ ear Participants") and
t
o clear and settle transactions between Euroclear
Participants through simultaneous electronic book- entry delivery against payment, thereby
eliminating the need for physical movement
o
f
certificates and any risk from lack
o
f
simultaneous
transfers
o
f
securities and cash. Transactions may
b
e
settled
i
n a variety
o
f
currencies, including
United States dollars. Euroclear includes various other securities, including securities lending and
borrowing and interfaces with domestic markets
i
n several countries generally similar
t
o the
arrangements
f
o
r
cross- market transfers with DTC described above. Euroclear
i
s operated
b
y
Euroclear Bank
S
.
A
.
/
N
.
V
.
(
t
h
e
" Euroc/ ear Operator").
A
l
l
operations are conducted
b
y
t
h
e
Euroclear Operator, and
a
l
l
Euroclear securities clearance accounts and Euroclear cash accounts
are accounts with the Euroclear Operator. Euroclear pic establishes policy
f
o
r
Euroclear
o
n
behalf
o
f
Euroclear Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries. Indirect access
t
o
Euroclear
i
s also available
t
o other firms that clear through
o
r
maintain a custodial relationship
with a Euroclear Participant, either directly
o
r
indirectly.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed
b
y
the Terms and Conditions Governing Use
o
f
Euroclear and the related Operating Procedures
o
f
the Euroclear System and applicable Belgian law (collectively, the " Euroc/ ear Terms and
Conditions"). The Euroclear Terms and Conditions govern transfers
o
f
securities and cash within
Euroclear, withdrawals
o
f
securities and cash from Euroclear, and receipts
o
f
payments with
respect
t
o securities
i
n Euroclear.
A
l
l
securities
i
n Euroclear are held
o
n
a fungible basis without
attribution
o
f
specific certificates
t
o specific securities clearance accounts. The Euroclear
Operator acts under the Euroclear Terms and Conditions only
o
n
behalf
o
f
Euroclear Participants,
and has
n
o
record
o
f
,
o
r
relationship with, persons holding through Euroclear Participants.
9
2
CONFIDENTIAL
Return
CERTAIN
U
.
S
.
FEDERAL INCOME TAX CONSIDERATIONS
United States Internal Revenue Service Circular 230 Notice:
T
o
ensure compliance with
Internal Revenue Service Circular 230, prospective investors are hereby notified that: (
i
) any
discussion
o
f
U
.
S
.
Federal tax issues contained
o
r
referred
t
o
i
o
r
any
document referred
t
o herein
i
s not intended
o
r
written
t
o
b
e
used, and cannot
b
e
used,
b
y
prospective investors
f
o
r
the purpose
o
f
avoiding penalties that may
b
e
imposed
o
n
them under the
U
.
S
.
Internal Revenue Code; (
i
i
)
such discussion
i
s written
f
o
r
use
i
promotion
o
r
marketing
o
f
the transactions
o
r
matters addressed herein; and (
i
i
i
)
prospective
investors should seek advice based
o
n
their particular circumstances from
a
n
independent tax
advisor.
General
The following discussion summarizes the principal United States Federal income tax
treatment
o
f
WaMu Delaware and the Company, and the principal United States Federal income
tax consequences
t
o holders
o
f
the Trust Securities. This discussion
i
s
o
f
a general nature and
i
s
not intended
t
o be, nor should
i
t
b
e
construed as, tax advice
t
o any holder. Purchasers should
consult their own tax advisor regarding the tax consequences
o
f
o
f
Trust Securities.
The discussion
i
s addressed only
t
o holders that beneficially own Trust Securities
a
s
capital
assets and does not purport
t
o
b
e
a comprehensive description
o
f
a
l
l
the
t
a
x
considerations that
may
b
e
relevant
t
o particular holders
i
n light
o
f
their personal circumstances. The discussion also
does not describe
a
l
l
aspects
o
f
taxation that may
b
e
relevant
t
o certain types
o
f
holders
t
o
which special provisions
o
f
United States Federal income tax law may apply, including:
dealers
i
n securities and currencies;
regulated investment companies;
traders
i
n securities;
tax- exempt organizations;
banks and insurance companies;
o persons that hold Trust Securities
a
s
part
o
f
a hedge, straddle
o
r
conversion transaction;
o persons whose functional currency
i
s not the United States dollar; and
U
.
S
.
expatriates.
The summary
i
s based
o
n
United States Federal income tax law, including the Code,
existing and proposed
U
.
S
.
Treasury regulations, administrative rulings and judicial decisions
a
l
l
a
s
currently
i
n effect. These legal sources are subject
t
o change
o
r
differing interpretations
a
t
any time, which change
o
r
interpretation could apply retroactively and could affect the validity
o
f
the discussion below. There can
b
e
n
o
assurance that the Internal Revenue Service
(
"
IRS") will
take the same view
o
f
the United States Federal income tax consequences
o
f
a
n
investment
i
n
a
s
described herein.
Each purchaser
i
s urged
t
o consult
i
t
s
own tax advisor
a
s
t
o the tax consequences
o
f
o
f
Trust Securities, including the United States Federal, state,
local and any other tax consequences
o
f
o
f
Fixed-
t
o
-
Floating
Rate Depository Shares.
A
s
used
i
n this discussion, the term "
U
.
S
.
Holder" means a beneficial owner
o
f
a Trust
Security that
i
s
,
f
o
r
United States Federal income tax purposes, a citizen
o
r
resident
o
f
the
United States, a corporation
o
r
partnership created
o
r
organized
i
n
o
r
under the laws
o
f
the
United States
o
r
any state,
a
n
estate the income
o
f
which
i
s includible
i
n gross income for United
States Federal income tax purposes regardless
o
f
i
t
s
source,
o
r
a trust
i
f a court within the
United States
i
s able
t
i
t
s
administration and one
o
r
more
9
3
CONFIDENTIAL
Return
United States persons have authority
t
o control
a
l
l
o
f
the trust. The term
" Foreign Holder" means a beneficial owner
o
f
Trust Securities that
i
s not a
U
.
S
.
Holder.
United States Federal Income Tax Consequences
Tax Treatment
o
f
WaMu Delaware and
i
t
s
Investment
i
n Fixed- to-Floating Rate Company
Classification
o
f
WaMu Delaware and the Company. WaMu Delaware intends
t
o
b
e
treated
a
s
a grantor trust
f
o
r
United States Federal income tax purposes. Accordingly, each holder
o
f
a
Trust Security will
b
e
treated
a
s
i
f
i
t owned directly the Fixed-
t
o
-
Preferred Securities allocable
t
o such Trust Security.
A
l
l
o
f
WaMu Delaware's assets are
expected
t
o consist
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities. The Company
intends
t
o
b
e
classified
a
s
a
U
.
S
.
domestic partnership
f
o
r
purposes, and the Fixed-
t
o
-
Floating Rate Company Preferred Securities acquired
b
y
WaMu
Delaware are intended
t
o constitute equity interests
i
n such partnership.
An entity that
i
s classified
a
s
a partnership
f
o
r
United States Federal income tax purposes
generally
i
s not a taxable entity and incurs
n
o
United States Federal income tax liability. Instead,
each partner
i
s required
t
o take into account
i
t
s allocable share
o
f
o
f
the partnership
i
n computing
i
t
s
t
a
x
liability,
i
f any, even
i
f
n
o
cash distributions are made
b
y
the partnership
t
o the partner. An entity
that
i
s classified
a
s
a partnership
f
o
r
t
a
x
purposes nevertheless
will
b
e
taxable
a
s
a corporation
i
f
i
t
i
s a " publicly traded partnership" and fails
t
o satisfy a " 90%
qualifying income" test, within the meaning
o
f
Code Section 7704.
On the date
o
f
o
f
the Trust Securities, the Company will receive
a
n
t
o the effect that,
f
o
r
income tax purposes, although
n
o
activities closely comparable
t
o that contemplated
b
y
the
o
f
any
U
.
S
.
Treasury regulation, revenue ruling
o
r
judicial
b
e
treated
a
s
a
n
association
o
r
a
s
a corporation. The opinions are based
o
n
o
n
certain representations
and agreements regarding restrictions
o
n
the future conduct
o
f
the activities
o
f
the Company.
t
o conduct
i
t
s activities
i
i
f
i
t were nonetheless determined that
t
h
e
Company was
taxable
a
s
a corporation
f
o
r
United States Federal income tax purposes, then cash available
f
o
r
distribution
i
n respect
o
f
the Company Preferred Securities would
b
e
reduced
o
n
account
o
f
taxes payable
b
y
the Company. A determination
b
y
the Company, based
o
n
receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a significant risk that the Company
i
s
o
r
will
b
e
treated
a
s
a
n
association
o
r
a
s
a corporation would constitute a Tax Event - see
" Description
o
f
the Fixed- to-Floating Rate Company Preferred Securities - Redemption." The
remainder
o
f
this discussion assumes that the Company
i
s treated
a
s
a partnership, and not
a
s
a
n
association
o
r
a
s
a corporation,
f
o
r
Federal income tax
purposes, and that the Fixed-
t
o
-
Floating Rate Company Preferred Securities will constitute equity
interests
i
n such partnership.
Tax Consequences
t
o
U
.
S
.
Holders
o
f
Trust Securities
Income and Deductions
i
n General. Each
U
.
S
.
Holder
o
f
b
e
required
t
o report
o
n
i
t
s
United States Federal income tax return
i
t
s
share
o
f
o
f
the Company that are allocable
t
o WaMu Delaware, even
i
f such holder
has not received any cash distributions from WaMu Delaware.
Distributions
o
n
Trust Securities. Distributions
o
f
money
b
y
WaMu Delaware
t
o a
U
.
S
.
Holder
o
f
Trust Securities generally will not result
i
n taxable gain
t
o the
U
.
S
.
Holder. A
U
.
S
.
Holder
o
f
Trust Securities will recognize taxable gain
a
s
a result
o
f
a distribution
o
f
money
9
4
CONFIDENTIAL
Return
b
y
the Company
t
o WaMu Delaware with respect
t
o the Fixed-
t
o
-
Preferred Securities only
i
f and
t
o the extent that the
U
.
S
.
Holder's share
o
f
such distribution
exceeds the
U
.
S
.
Holder's adjusted tax basis
i
n the Fixed-
t
o
-
Securities allocable
t
o such
U
.
S
.
Holder's Trust Securities immediately before the distribution.
I
n
general, each
U
.
S
.
Holder
o
f
a
n
initial basis
i
n the Fixed-
t
o
-
Floating
Rate Company Preferred Securities allocable
t
o such
U
.
S
.
Holder's Trust Securities equal
t
o the
amount paid
b
y
WaMu Delaware
t
o purchase such Fixed-
t
o
-
Securities. Such
U
.
S
.
Holder's basis
i
n such Fixed- to-Floating Rate Company Preferred Securities
generally will
b
e
increased
b
y
such
U
.
S
.
Holder's share
o
f
the Company's taxable income and
decreased, but not below zero,
b
y
such holder's share
o
f
amounts distributed with respect
t
o the
Fixed-
t
o
-
Floating Rate Company Preferred Securities and Company losses, deductions and
nondeductible expenditures that are not chargeable
t
o capital allocable
t
o WaMu Delaware.
Allocations
o
f
Company Income, Gain, Loss and Deductions. Each holder
o
f
Trust
Securities must report
i
t
s
proportionate share
o
f
the Company income, gain, loss and deduction
allocated
t
o WaMu Delaware
f
o
r
such year. Under Section 704(
b
)
o
f
the Code, a partnership's
allocation
o
f
any item
o
f
income, gain, loss
o
r
deduction
t
o a partner will
b
e
given effect
f
o
r
United States Federal income tax purposes
s
o
long
a
s
i
t has " substantial economic effect,"
o
r
i
s
otherwise
i
n accordance with the " partner's interest
i
n the partnership."
I
f
a
n
allocation
o
f
a
n
item does not satisfy this standard,
i
t
w
i
l
l
b
e
reallocated among the partners
o
n
the basis
o
f
their
respective interests
i
n the partnership, taking into account
a
l
l
facts and circumstances. The
Company believes that the allocations
o
f
items
o
f
income, gain, loss and deduction under the
Company Operating Agreement will
b
e
considered
t
o have substantial economic effect under the
applicable Treasury regulations.
Limitations
o
n
Use
o
f
Losses.
U
.
S
.
Holders
a
r
e
not expected
t
o
b
e
allocated any losses
f
o
r
United States Federal income tax purposes with respect
t
o their indirect interests
i
n the
Company. The deductibility
o
f
losses arising from a partnership such
a
s
t
o certain limitations under the Code.
I
n the event losses are allocated
t
o
U
.
S
.
Holders
o
f
the
Trust Securities, such
U
.
S
.
Holders should consult their tax advisors
t
o determine the
deductibility
o
f
such losses.
Sale, Exchange
o
r
Other Disposition
o
f
Trust Securities.
I
n general, a
U
.
S
.
Holder will
recognize gain
o
r
loss upon the sale
o
r
exchange
o
f
such
U
.
S
.
Holder's Trust Securities equal
t
o
the difference between the amount realized and such
U
.
S
.
Holder's adjusted tax basis
i
n the
Fixed-
t
o
-
Floating Rate Company Preferred Securities allocable
t
o such
U
.
S
.
Holder's Trust
Securities. Initially, the tax basis
o
f
a
U
.
S
.
Holder should equal the amount paid
f
o
r
i
t
s
Trust
Securities. Such basis will
b
e
increased
o
r
decreased
a
s
described above and,
a
s
a general
matter,
a
t
a
l
l
times
i
s expected
t
o equal the face value
o
f
the
U
.
S
.
Holder's Trust Securities.
I
f
a
holder's Trust Securities are exchanged
f
o
r
Fixed-
t
o
-
Floating Rate Depositary Shares, the
transaction will
b
e
a fully taxable sale
t
o the holder. The amount realized
b
y
a holder
o
n
this kind
o
f
disposition
o
f
a Trust Security will equal the fair market value
o
f
the Fixed-
t
o
-
Floating Rate
Depositary Shares received.
Company Audits. The
t
a
x
treatment
o
f
Company- related items
i
s determined
a
t
the
Company level. University Street will
b
e
appointed
a
s
" tax matters partner" with the authority
t
o
determine the Company's response
t
o
a
n
audit. The limitations period
f
o
r
assessment
o
f
deficiencies and claims
f
o
r
refunds with respect
t
o items related
t
o the Company
i
s three years
after the Company's return
f
o
r
the taxable year
i
n question
i
s filed, and the tax matters partner
has the authority
t
o
,
and may, extend such period with respect
t
o
a
l
l
members
o
f
the Company.
I
f
a
n
audit results
i
n
a
n
adjustment, the holders
o
f
a
s
the deemed owners
o
f
the Fixed-
t
o
-
Floating Rate Company Preferred Securities, may
b
e
required
t
o restate their
taxable income which could cause holders
o
f
Trust Securities
t
o pay additional taxes, interest
and possibly penalties and such holders may themselves also
b
e
subject
t
o audits. There can
b
e
9
5
CONFIDENTIAL
Return
n
o
assurance that the Company's
o
r
a
U
.
S
.
Holder's tax return will not
b
e
audited
b
y
the IRS
o
r
that
n
o
adjustments
t
o such returns will
b
e
made
a
s
a result
o
f
such
a
n
audit.
Tax Treatment
o
f
Tax- Exempt
U
.
S
.
Holders
o
f
Trust Securities
For purposes
o
f
this discussion, a " Tax- Exempt
U
.
S
.
Holder" means any United States do-
mestic organization qualified under Code Section 501 (
c
)
(
3
)
,
any trust
o
r
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
i
s not expected
t
o
b
e
subject
t
o the tax
o
n
unrelated business taxable
income
(
"
UBTI") with respect
t
o
i
t
s
share
o
f
Company income and gain allocable
t
o WaMu
Delaware
o
r
any capital gains derived from
a
n
investment
i
n the Trust Securities. However,
notwithstanding the foregoing, a Tax- Exempt
U
.
S
.
Holder which incurs " acquisition indebted-
ness" (
a
s
defined
i
n Code Section 514 (c with respect
t
o
i
t
s
b
e
subject
t
o
the tax
o
n
UBTI
i
n respect
o
f
any income
o
r
gains derived
i
n respect
o
f
t
o
the extent that such Trust Securities constitute " debt- financed property"
o
f
the Tax- Exempt
U
.
S
.
Holder within the meaning
o
f
Code Section 514( b).
Tax- Exempt
U
.
S
.
Holders should consult their own
t
a
x
advisors regarding
t
h
e
tax
consequences
t
o them
o
f
a
n
investment
i
n the Trust Securities.
Tax Treatment
o
f
Foreign Holders
o
f
Trust Securities
U
.
S
.
Trade
o
r
Business Status. The Company intends
t
o conduct
i
t
s
affairs
s
o
a
s
t
o not
b
e
engaged
i
n a trade
o
r
business
i
n the United States. On the date
o
f
o
f
the
Trust Securities, the Company will receive
a
n
t
o
the effect that,
f
o
r
United States Federal income tax purposes, although
n
o
activities closely
comparable
t
o that contemplated
b
y
the Company have been the subject
o
f
any
U
.
S
.
Treasury
regulation, revenue ruling
o
r
judicial decision,
i
t will not
b
e
treated
a
s
engaged
i
n the conduct
o
f
a
trade
o
r
business within the United States. Mayer, Brown, Rowe & Maw LLP's opinion
i
s not
binding
o
n
the IRS
o
r
the courts, and
n
o
ruling will
b
e
sought from the IRS regarding this,
o
r
any
other, aspect
o
f
the Company's United States Federal income tax treatment. Accordingly,
n
o
assurance can
b
e
given that the IRS will not assert positions contrary
t
o those stated
i
n Mayer,
Brown, Rowe & Maw LLP's opinion
o
r
that a court would not entertain any such assertions.
Mayer, Brown, Rowe & Maw LLP's opinion
i
s based
o
n
o
n
certain
representations and agreements regarding restrictions
o
n
the future conduct
o
f
the Company's
activities. Although the Company intends
t
o conduct
i
t
s
activities
i
n accordance with such
assumptions, representations and agreements,
i
f
i
t were nonetheless determined
t
o
b
e
engaged
i
n a trade
o
r
business
i
n the United States and had taxable income that was effectively
o
r
business, then each Foreign Holder would
b
e
subject
t
o United States Federal income tax
o
n
such Foreign Holder's share
o
f
the Company's effectively
connected taxable income allocable
t
o WaMu Delaware
a
t
regular United States corporate
income tax rates and possibly
t
o a 30% United States branch profits tax
a
s
well. Moreover,
i
n the
event a Foreign Holder were
t
o derive effectively connected income
i
n respect
o
f
i
t
s
ownership
o
f
Trust Securities the United States corporate income tax imposed thereon would
b
e
required
t
o
b
e
collected
i
n the first instance through a withholding
b
y
the Company
o
f
such tax
a
t
a rate
o
f
35%
o
n
such Foreign Holder's distributive share
o
f
the income. A determination
b
y
the Company,
based
o
n
receipt
o
f
a
n
opinion
o
f
counsel, that there
i
s a significant risk that
i
t
i
s
o
r
will
b
e
treated
a
s
engaged
i
n a trade
o
r
business within the United States would constitute a Tax
Event - see " Description
o
f
Fixed-
t
o
-
Floating Rate Company Preferred Securities." The
remainder
o
f
this discussion assumes that the Company will not
b
e
considered
t
o
b
e
engaged
i
n
a trade
o
r
business
i
n the United States.
9
6
CONFIDENTIAL
Return
United States Withholding Tax. Interest that constitutes " portfolio interest" within the
meaning
o
f
the Code
i
s generally exempt from United States withholding tax. A Foreign Holder
will
b
e
treated
a
s
earning directly
i
t
s
share
o
f
the income earned
b
y
the Company. The
Company's material assets will initially consist
o
f
the " regular interest" (
i
.
e
.
,
the Class A Asset
Trust Certificate) issued
i
n registered form
b
y
the Asset Trust, which will
b
e
treated
a
s
a " real
estate mortgage investment conduit" under the Code (
a
"
REMIC"). REMIC regular interests are
generally treated
a
s
indebtedness
f
o
r
United States Federal income tax purposes that qualifies
f
o
r
t
h
e
portfolio interest exemption.
I
n addition, during
t
h
e
term
o
f
the transaction, the Company
expects, pursuant
t
o
i
t
s
investment guidelines,
t
o invest cash
o
n
hand from time
t
o time
i
n short
term debt instruments and other debt securities that qualify
f
o
r
the portfolio interest exemption.
Accordingly,
i
t
i
s expected that a Foreign Holder's share
o
f
WaMu Delaware's distributive
share
o
f
the Company's interest income will constitute " portfolio interest", and thus, will not
b
e
subject
t
o
U
.
S
.
withholding tax,
s
o
long
a
s
the Foreign Holder has certified
i
t
s
status
a
s
a Foreign
Holder under penalties
o
f
perjury
o
n
a
n
appropriate IRS Form
W
-
8
.
I
n addition, gain realized
o
n
the sale, exchange
o
r
redemption
o
f
the Trust Securities held
b
y
a Foreign Holder generally will
not
b
e
subject
t
o United States Federal income
o
r
withholding tax,
a
s
the case may be, unless
such Foreign Holder
i
s a nonresident alien individual who holds the Trust Securities
a
s
a capital
asset and who
i
s present
i
n the United States more than 182 days
i
n the taxable year
o
f
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
t
o certain payments made
o
n
the Trust Securities and the
payment
o
f
the proceeds from the disposition
o
f
such instruments. Backup withholding generally
will not apply
t
o corporations, tax- exempt organizations, qualified pension and profit sharing
trusts, and individual retirement accounts. Backup withholding will apply
t
o a
U
.
S
.
Holder
i
f the
U
.
S
.
Holder fails
t
o provide certain identifying information (such
a
s
the
U
.
S
.
Holder's taxpayer
identification number)
o
r
otherwise comply with the applicable requirements
o
f
the backup
withholding rules. The application
f
o
r
exemption from backup withholding
f
o
r
a
U
.
S
.
Holder
i
s
available
b
y
providing a properly completed IRS Form W-
9
.
The payment
o
f
the proceeds from the disposition
o
f
a Trust Security
b
y
a Foreign Holder
generally
w
i
l
l
n
o
t
b
e
subject
t
o information reporting and backup withholding
i
f
t
h
e
Foreign Holder
certifies
i
t
s
status
a
s
a Foreign Holder (and,
i
f applicable,
i
t
s
beneficial owners also certify their
status
a
s
non- United States persons) under penalties
o
f
perjury
o
n
the appropriate IRS
Form W-
8
,
satisfies certain documentary evidence requirements
f
o
r
establishing that
i
t
i
s a
Foreign Holder
o
r
otherwise establishes
a
n
exemption.
Backup withholding
i
s not
a
n
additional tax and may
b
e
refunded (
o
r
credited against the
U
.
S
.
Holder's
o
r
Foreign Holder's United States Federal income tax liability,
i
f any), provided that
certain required information
i
s furnished. The information reporting requirements may apply
regardless
o
f
whether withholding
i
s required.
Tax Return Disclosure Requirements
Recently issued Treasury Regulations and other administrative guidance promulgated
b
y
the
IRS prescribe certain circumstances under which holders
o
f
the Trust Securities could
b
e
required
t
o file information returns with the IRS ( the " New Reporting Rules").
The New Reporting Rules could apply
t
o a
U
.
S
.
Holder (and
t
o certain Foreign Holders who
hold their Trust Securities
i
n connection with a United States trade
o
r
business)
i
f WaMu
Delaware
o
r
the Company were
t
o enter into one
o
r
more " reportable transactions". The
definition
o
f
" reportable transaction"
i
s highly technical.
I
t
i
s not expected that WaMu Delaware
o
r
the Company will engage
i
n activities that would give rise
t
o any reportable transactions.
I
f
9
7
CONFIDENTIAL
Return
WaMu Delaware
o
r
the Company were
t
o engage
i
n any " reportable transaction," then, subject
t
o certain exceptions and threshold limitations, a
U
.
S
.
Holder
o
r
Foreign Holder may
b
e
required
t
o file IRS Form 8886 with such holder's United States Federal income tax return
f
o
r
each
taxable year
i
n which such " reportable transaction" affects such holder's taxable income, and
t
o
file a copy
o
f
such form with the IRS's Office
o
f
Tax Shelter Analysis. WaMu Delaware intends
t
o
provide
t
o the holders
o
f
Trust Securities any information necessary
t
o complete such form.
I
n addition, subject
t
o certain significant exceptions, any holder
o
f
Trust Securities that
recognizes a loss
o
n
a sale
o
r
exchange
o
f
such holder's Trust Securities may
b
e
required
t
o file
IRS Form 8886
i
n the manner described above
i
f the loss exceeds certain thresholds and
n
o
exception applies.
Prospective purchasers
o
f
Trust Securities are urged
t
o consult their own tax advisors
regarding the application
t
o them
o
f
the New Reporting Rules with respect
t
o
a
n
investment
i
n
Foreign, State, and Local Taxes
Holders may
b
e
liable
f
o
r
foreign, state, and local taxes
i
n the country, state,
o
r
locality
i
n
which they are resident
o
r
doing business
o
r
i
n a state
o
r
locality
i
n which WaMu Delaware
o
r
the
Company conducts
o
r
i
s deemed
t
o conduct business. Because the tax laws
o
f
each country,
state, and locality may differ, each prospective purchaser should consult
i
t
s
own tax advisors
with respect
t
o any taxes that may
b
e
payable
a
s
a result
o
f
a
n
investment
i
n the Trust
Securities.
9
8
CONFIDENTIAL
Return
Section 406
o
f
the Employee Retirement Income Security Act
o
f
1974,
a
s
amended
(
" ERISA") and Section 4975
o
f
the Internal Revenue Code
o
f
1986,
a
s
amended (the " Code")
prohibit pension, profit- sharing
o
r
other retirement plans and accounts subject
t
o ERISA
o
r
Section 4975
o
f
the Code and entities that are deemed
t
o hold " plan assets"
o
f
any
o
f
the
foregoing (each, a " Plan") from engaging
i
n certain transactions with persons that are " parties
i
n interest" under ERISA
o
r
" disqualified persons" under the Code with respect
t
o such Plan. A
violation
o
f
these " prohibited transaction" rules may result
i
n
a
n
excise tax
o
r
other penalties
and liabilities under ERISA and the Code
f
o
r
such persons
o
r
the fiduciaries
o
f
the Plan.
I
n
addition, Title I
o
f
ERISA also requires fiduciaries
o
f
a Plan subject
t
o ERISA
t
o make
investments that are prudent, diversified and
i
n accordance with the governing plan documents.
Certain transactions involving WaMu Delaware might
b
e
deemed
t
o constitute prohibited
transactions under ERISA and the Code with respect
t
o a Plan that purchased Trust Securities
o
r
Fixed-
t
o
-
i
f assets
o
f
WaMu Delaware were deemed
t
o
b
e
assets
o
f
the Plan. Under a regulation issued
b
y
the United States Department
o
f
Labor
(the " Regulation"), the assets
o
f
WaMu Delaware would
b
e
treated
a
s
plan assets
o
f
a Plan
f
o
r
the purposes
o
f
ERISA and the Code only
i
f the Plan acquired
a
n
" equity interest"
i
n WaMu
Delaware and none
o
f
the exceptions
t
o plan assets contained
i
n the Regulation was applicable.
A
n
equity interest
i
s defined under the Regulation
a
s
a
n
interest other than
a
n
instrument that
i
s
treated
a
s
indebtedness under applicable local law and that has
n
o
substantial equity features.
The WaMu Cayman Preferred Securities and the Fixed-
t
o
-
Securities are not likely
t
o
b
e
treated
a
s
indebtedness
f
o
r
purposes
o
f
the Regulation.
A
s
such,
WaMu Delaware intends
t
o prohibit
t
h
e
acquisition and holding
o
f
any Trust Security
o
r
Fixed-
t
o
-
Floating Rate Company Preferred Security
o
r
any interest
i
n a Trust Security
o
r
Fixed-
t
o
-
Floating
Rate Company Preferred Security
b
y
o
r
o
n
behalf
o
f
a Benefit Plan Investor (
a
s
defined below).
For the purposes
o
f
the Regulation, the term " Benefit Plan Investor" includes
a
l
l
employee
benefit plans, regardless
o
f
whether
o
r
not they are subject
t
o ERISA (such as,
f
o
r
example,
governmental plans), individual retirement accounts, Keogh Plans and other plans subject
t
o
Section 4975
o
f
the Code, and entities whose underlying assets are deemed
t
o include plan
assets
b
y
reason
o
f
the investment
i
n that entity
b
y
Benefit Plan Investors, such
a
s
group trusts,
bank collective investment trusts, insurance company separate accounts, and certain insurance
company general accounts.
B
y
acquiring a Trust Security
o
r
Fixed-
t
o
-
Floating Rate Company Preferred Security (
o
r
any
interest therein), each purchaser and transferee
w
i
l
l
b
e
deemed
t
o represent, warrant and
covenant that, from the date
o
f
acquisition throughout the period
o
f
holding such Trust Security
o
r
Fixed-
t
o
-
o
r
interest therein),
i
t
i
s not, and
i
t
i
s not
acquiring such Trust Security
o
r
Fixed-
t
o
-
o
r
interest
therein) with the assets
o
f
a Benefit Plan Investor, except
f
o
r
a
n
insurance company general
account that represents, warrants and covenants that,
a
t
the time
o
f
acquisition and throughout
the period
i
t holds the securities, (
i
)
i
t
i
s eligible
f
o
r
and meets the requirements
o
f
the
Department
o
f
Labor Prohibited Transaction Class Exemption 95- 60, (
i
i
)
less than 25%
o
f
the
assets
o
f
such general account are (
o
r
represent) assets
o
f
i
i
i
)
i
t
i
s
not a person who has discretionary authority
o
r
t
o the assets
o
f
WaMu
Delaware
o
r
any person who provides investment advice
f
o
r
a fee (direct
o
r
indirect) with
respect
t
o such assets,
o
r
any affiliate
o
f
b
e
excluded
under
2
9
C
.
F
.
R
.
2510.3- 101 (
f
) (1).
9
9
CONFIDENTIAL
Return
RATINGS
I
t
i
s expected that the Trust Securities will
b
e
rated " Baa2"
b
y
Moody's Investor Services,
Inc.
(
"
Moody's"), " BBB"
b
y
Standard & Poors Rating Services, a division
o
f
the McGraw Hill
Companies, Inc.
(
" S&P") and" A-"
b
y
Fitch, Inc.
(
" Fitch"). The ratings
o
f
are not recommendations
t
o purchase, hold
o
r
sell the Trust Securities, inasmuch
a
s
the ratings
d
o
n
o
t
comment
a
s
t
o
t
h
e
market price
o
r
suitability
f
o
r
a particular purchaser. Nor
d
o
t
h
e
ratings
described above address the likelihood that a holder
o
f
b
e
able
t
o sell such
securities. The ratings are based
o
n
current information furnished
t
o S&
P
,
Moody's and Fitch
b
y
WMI, WMB, the Company and WaMu Delaware and information obtained from other sources.
The ratings may
b
e
changed, suspended
o
r
withdrawn
a
t
any time
a
s
a result
o
f
changes
i
n
,
o
r
the unavailability
o
f
,
such information.
100
CONFIDENTIAL
Return
PLAN OF DISTRIBUTION
The Company, WaMu Delaware, WMI and the Initial Purchasers have entered into a
purchase agreement with respect
t
o the Trust Securities. Subject
t
o certain conditions, each
Initial Purchaser has severally agreed
t
o purchase the amount (
b
y
o
f
Trust Securities indicated
i
n the following table.
Initial Purchasers
Goldman, Sachs & Co. . .
Credit Suisse Securities ( USA) LLC .
Morgan Stanley & Co. Incorporated .
Total .
Liquidation
Preference
o
f
Trust
Securities
$ 750,000,000
$ 250,000,000
$ 250,000,000
$1,250,000,000
The Initial Purchasers are committed
t
o take and pay
f
o
r
a
l
l
o
f
the securities being offered
hereby,
i
f any are taken. The initial offering price
i
s set forth
o
n
the cover page
o
f
this offering
circular. After the securities are released
f
o
r
sale, the Initial Purchasers may change the offering
price and other selling terms.
b
e
Act. The Initial Purchasers have agreed that they will only offer
o
r
sell the Trust Securities
t
o
persons who are both " qualified institutional buyers" within the meaning
o
f
Rule 144A under the
Securities Act and " qualified purchasers" within the meaning
o
f
Section 2 (
a
)
(51) under the
i
n transactions meeting the requirements
o
f
Rule 144A.
I
n connection with the Offering, the Initial Purchasers may purchase and sell securities
i
n
the open market. These transactions may include short sales, stabilizing transactions and
purchases
t
o cover positions created
b
y
short sales. Short sales involve the sale
b
y
the Initial
Purchasers
o
f
a greater number
o
f
securities than they are required
t
o purchase
i
n the Offering.
Stabilizing transactions consist
o
f
certain bids
o
r
purchases made
f
o
r
the purpose
o
f
preventing
o
r
retarding a decline
i
n the market price
o
f
the securities while the Offering
i
s
i
n progress.
These activities
b
y
the Initial Purchasers may stabilize, maintain
o
r
otherwise affect the
market price
o
f
the securities.
A
s
a result, the price
o
f
the securities may
b
e
higher than the price
that otherwise might exist
i
n the open market.
I
f
these activities are commenced, they may
b
e
discontinued
b
y
a
t
any time. These transactions may
b
e
effected
i
n the
over- the- counter market
o
r
otherwise.
Each
o
f
the Initial Purchasers has represented and agreed that:
(
a
)
I
t
has not made
o
r
will not make
a
n
offer
o
f
t
o the
public
i
n the United Kingdom within the meaning
o
f
section 1028
o
f
the Financial
Services and Markets Act 2000 (
a
s
amended)
(
"
FSMA") except
t
o legal entities which
are authorized
o
r
regulated
t
o operate
i
n the financial markets
o
r
,
i
f not
s
o
authorized
o
r
i
s solely
t
o invest
i
n securities
o
r
otherwise
i
n
circumstances which
d
o
n
o
t
require
t
h
e
publication
b
y
the company
o
f
a prospectus
pursuant
t
o the Prospectus Rules
o
f
the Financial Services Authority
(
"
FSA");
(
b
)
I
t
has only communicated
o
r
caused
t
o
b
e
communicated and will only communicate
o
r
cause
t
o
b
e
communicated
a
n
invitation
o
r
inducement
t
o engage
i
n investment activity
(within the meaning
o
f
section
2
1
o
f
FSMA)
t
o persons who have professional
experience
i
n matters relating
t
o investments falling within Article 19(
5
)
o
f
the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005
o
r
i
n circumstances
i
n which section
2
1
o
f
FSMA does not apply
t
o the company; and
101
CONFIDENTIAL
Return
(
c
)
I
t
has complied with, and will comply with
a
l
l
o
f
FSMA with
respect
t
o anything done
b
y
i
t
i
n relation
t
i
n
,
from
o
r
otherwise
involving the United Kingdom.
I
n relation
t
o each Member State
o
f
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
o
n
which the Prospectus
Directive
i
s implemented
i
n that Relevant Member State (the " Relevant Implementation Date")
i
t
has not made and will not make
a
n
offer
o
f
t
o the public
i
n
that Relevant Member State prior
t
o the publication
o
f
a prospectus
i
n relation
t
o the securities
which has been approved
b
y
the competent authority
i
o
r
,
where
appropriate, approved
i
n another Relevant Member State and notified
t
o the competent authority
i
n that Relevant Member State,
a
l
l
i
n accordance with the Prospectus Directive, except that
i
t
may, with effect from and including the Relevant Implementation Date, make
a
n
offer
o
f
securities
t
o the public
i
a
t
any time:
(
a
)
t
o legal entities which are authorized
o
r
regulated
t
o operate
i
n the financial markets
o
r
,
i
f not
s
o
authorized
o
r
i
s solely
t
o invest
i
n
securities;
(
b
)
t
o any legal entity which has two
o
r
more
o
f
(
i
)
a
n
average
o
f
a
t
least 250 employees
during the last financial year; (
i
i
) a total balance sheet
o
f
more than 43,000,000; and
(
i
i
i
)
a
n
annual net turnover
o
f
more than 50,000,000,
a
s
shown
i
n
i
t
s last annual
o
r
consolidated accounts;
o
r
(
c
)
i
n any other circumstances which
d
o
not require the publication
b
y
the Company
o
f
a
prospectus pursuant
t
o Article 3
o
f
the Prospectus Directive.
For the purposes
o
f
this provision, the expression
a
n
" offer
o
f
securities
t
o the public"
i
n
relation
t
o any securities
i
n any Relevant Member State means the communication
i
n any form
and
b
y
any means
o
f
sufficient information
o
n
the terms
o
f
the offer and the securities
t
o
b
e
offered
s
o
a
s
t
o enable
a
n
investor
t
o decide
t
o purchase
o
r
subscribe the securities,
a
s
the
same may
b
e
varied
i
b
y
any measure implementing the Prospectus
Directive
i
n that Relevant Member State and the expression Prospectus Directive means Directive
2003/
7
1
IEC and includes any relevant implementing measure
i
n each Relevant Member State.
The securities offered hereby may not
b
e
offered
o
r
sold
b
y
means
o
f
any document other
than
t
o persons whose ordinary business
i
s
t
o buy
o
r
sell shares
o
r
debentures, whether
a
s
principal
o
r
agent,
o
r
i
n circumstances which
d
o
not constitute
a
n
offer
t
o the public within the
meaning
o
f
the Companies Ordinance ( Cap. 32)
o
f
Hong Kong, and
n
o
advertisement, invitation
o
r
document relating
t
o the shares may
b
e
issued, whether
i
n Hong Kong
o
r
elsewhere, which
i
s
directed
a
t
,
o
r
the contents
o
f
which are likely
t
o
b
e
accessed
o
r
read by, the public
i
n Hong
Kong (except
i
f permitted
t
o
d
o
s
o
under the securities laws
o
f
Hong Kong) other than with
respect
t
o securities which are
o
r
are intended
t
o
b
e
disposed
o
f
only
t
o persons outside Hong
Kong
o
r
only
t
o " professional investors" within the meaning
o
f
the Securities and Futures
Ordinance (Cap. 571)
o
f
Hong Kong and any rules made thereunder.
This offering circular has not been registered
a
s
a prospectus with the Monetary Authority
o
f
Singapore. Accordingly, this offering circular and any other document
o
r
material
i
n connection
with the offer
o
r
sale,
o
r
invitation
f
o
r
subscription
o
r
purchase
o
f
the securities may not
b
e
circulated
o
r
distributed, nor may the securities
b
e
offered
o
r
sold,
o
r
b
e
made the subject
o
f
a
n
invitation
f
o
r
subscription
o
r
purchase, whether directly
o
r
indirectly,
t
o persons
i
n Singapore
other than (
i
)
t
o
a
n
institutional investor under Section 274
o
f
the Securities and Futures Act,
Chapter 289
o
f
Singapore (the " SFA"), (
i
i
)
t
o a relevant person,
o
r
any person pursuant
t
o
Section 275( 1A), and
i
n accordance with the conditions, specified
i
n Section 275
o
f
the SFA
o
r
102
CONFIDENTIAL
Return
(
i
i
i
)
otherwise pursuant
t
o
,
and
i
n accordance with the conditions
o
f
,
any other applicable
provision
o
f
the SFA.
Where the securities offered hereby are subscribed
o
r
purchased under Section 275
b
y
a
relevant person which
i
s
:
(
i
) a corporation (which
i
s not
a
n
accredited investor) the sole
business
o
f
which
i
s
t
o hold investments and the entire share capital
o
f
which
i
s owned
b
y
one
o
r
more individuals, each
o
f
whom
i
s
a
n
accredited investor;
o
r
(
i
i
)
a trust (where the trustee
i
s
not
a
n
accredited investor) whose sole purpose
i
s
t
o hold investments and each beneficiary
i
s
a
n
accredited investor, shares, debentures and units
o
f
shares and debentures
o
f
that corporation
o
r
the beneficiaries' rights and interest
i
n that trust will not
b
e
transferable
f
o
r
6 months after that
corporation
o
r
that trust has acquired the shares under Section 275 except: (
A
)
t
o
a
n
institutional investor under Section 274
o
f
the SFA
o
r
t
o a relevant person,
o
r
any person
pursuant
t
o Section 275 (1A), and
i
n accordance with the conditions, specified
i
n Section 275
o
f
the SFA; (
8
)
where
n
o
consideration
i
s given
f
o
r
the transfer;
o
r
(
C
)
b
y
operation
o
f
law.
b
e
and Exchange Law
o
f
Japan (the " Japan Securities and Exchange Law") and each Initial
Purchaser has agreed that
i
t will not offer
o
r
sell any securities, directly
o
r
indirectly,
i
n Japan
o
r
t
o
,
o
r
f
o
r
the benefit
o
f
,
any resident
o
f
Japan (which term
a
s
used herein means any person
resident
i
n Japan, including any corporation
o
r
other entity organized under the laws
o
f
Japan),
o
r
t
o others
f
o
r
r
e
-
offering
o
r
resale, directly
o
r
indirectly,
i
n Japan
o
r
t
o a resident
o
f
Japan,
except pursuant
t
o
a
n
exemption from the registration requirements
o
f
,
and otherwise
i
n
compliance with, the Securities and Exchange Law and any other applicable laws, regulations
and ministerial guidelines
o
f
Japan.
WMI, the Company and WaMu Delaware have agreed
i
n the purchase agreement, subject
t
o
certain exceptions, that
f
o
r
a period
o
f
180 days after the date
o
f
this offering circular, neither
they, nor any
o
f
their subsidiaries
o
r
other affiliates over which they exercise management
o
r
voting control, nor any person acting
o
n
their behalf will, without the prior written consent
o
f
Goldman, Sachs & Co., offer, sell, contract
t
o sell
o
r
otherwise dispose
o
f
any securities that are
t
o the Trust Securities.
WMI and the Company have agreed
t
o indemnify the Initial Purchasers against certain
liabilities, including liabilities under the Securities Act.
Certain
o
f
t
h
e
Initial Purchasers and their respective affiliates have, from time
t
o time,
performed, and may
i
n the future perform, various financial advisory and investment banking
services
f
o
r
the company,
f
o
r
which they received
o
r
will receive customary fees and expenses.
103
CONFIDENTIAL
Return
VALIDITY OF SECURITIES
The validity
o
f
b
e
passed upon
f
o
r
WMI and the Initial Purchasers
b
y
Richards, Layton & Finger,
P
.
A
.
,
Wilmington, Delaware. The validity
o
f
the Fixed-
t
o
-
Floating
w
i
l
l
b
e
passed upon
f
o
r
t
h
e
Company
b
y
Richards, Layton &
Finger,
P
.
A
.
,
special Delaware counsel
f
o
r
the Company,
f
o
r
WMI
b
y
Mayer, Brown, Rowe & Maw
LLP, New York, New York, and
f
o
r
b
y
Sullivan & Cromwell LLP, New York,
New York. The validity
o
f
the Fixed-
t
o
-
Floating Rate Depositary Shares and
o
f
the Fixed-
t
o
-
b
e
passed upon
f
o
r
WMI
b
y
Heller Ehrman LLP, Seattle,
Washington, and
b
y
Mayer, Brown, Rowe &Maw LLP, and
f
o
r
b
y
Sullivan & Cromwell LLP. Mayer, Brown, Rowe & Maw LLP and Sullivan & Cromwell LLP will rely
upon the opinion
o
f
Richards, Layton & Finger,
P
.
A
.
,
a
s
t
o matters
o
f
Delaware law, and upon the
opinion
o
f
Heller Ehrman LLP
a
s
t
o matters
o
f
Washington law.
104
CONFIDENTIAL
Return
ADDITIONAL INFORMATION
Independent Accountants
The independent registered public accountants
o
f
the Company will
b
e
Deloitte & Touche
LLP. Deloitte & Touche LLP are also the independent registered public accountants
f
o
r
WMI and
WMB.
N
o
Material Adverse Change
Except
a
s
disclosed
i
n this offering circular, there has been
n
o
adverse change
i
n the
financial position
o
f
the Company, WaMu Delaware, WMB
o
r
WMI since December 31, 2005,
o
r
their respective dates
o
f
establishment (which was February
3
,
2006
i
n the case
o
f
the Company
and February 23, 2006
i
n the case
o
f
WaMu Delaware), that would
b
e
deemed material
i
n the
context
o
f
the issue and sale
o
f
i
n this Offering.
Legal Proceedings
Neither the Company nor WaMu Delaware are involved
i
n any litigation, arbitration
o
r
administrative proceeding relating
t
o claims
o
r
i
n the context
o
f
the
issue and sale
o
f
o
r
the Fixed- to-Floating Rate Company Preferred Securities
t
o which the Company
o
r
WaMu Delaware are a party, nor
t
o the best
o
f
the Company's
o
r
WaMu Delaware's knowledge,
i
s there any threatened litigation, arbitration
o
r
administrative
proceedings relating
t
o claims
o
r
i
n the context
o
f
the issue and sale
o
f
o
r
the Fixed-
t
o
-
Floating Rate Company Preferred Securities that would
i
n
either case jeopardize the Company's
o
r
WaMu Delaware's ability
t
o discharge the Company's
o
r
WaMu Delaware's respective obligations
i
n respect
o
f
the issue and sale
o
f
o
r
the Fixed-
t
o
-
Neither the Company nor the Asset Trust
i
s the subject
o
f
any litigation. None
o
f
the
Company, WMI
o
r
WMB
i
s currently involved
i
n or,
t
o WMB's knowledge, currently threatened
with, any material litigation with respect
t
o
t
h
e
assets included
i
n
t
h
e
Asset Trust's portfolio,
other than routine litigation arising
i
n the ordinary course
o
f
business. Based
o
n
information
currently available, advice
o
f
counsel, available insurance coverage and established reserves,
WMB believes that the eventual outcome
o
f
the actions with respect
t
i
n the
Asset Trust's portfolio will not,
i
n the aggregate, have a material adverse effect
o
n
the
Company's consolidated financial position
o
r
results
o
f
operations. However,
i
n the event
o
f
unexpected future developments,
i
t
i
s possible that the ultimate resolution
o
f
those matters,
i
f
unfavorable, may
b
e
material
t
o the Company's results
o
f
operations
f
o
r
any particular period.
WMB, the Company, the Asset Trust, WaMu Cayman and WaMu Delaware have not been
named
a
s
defendants
i
n any
o
f
the following lawsuits and,
o
n
that basis they
d
o
not expect such
lawsuits
t
o materially affect their respective operations
o
r
financial results.
South Ferry
L
.
P
.
# 2
v
.
Killinger
e
t
al., No. CV04- 1599C (
W
.
O
.
Wa., Filed Jul. 19,2004) (the
" Securities Action"). This class action lawsuit
i
s currently pending against WMI and certain
o
f
i
t
s
senior executives
i
n the
U
.
S
.
District Court, Western Division
o
f
Washington. On behalf
o
f
a
putative class
o
f
purchasers
o
f
WMI securities from April 15, 2003 through June 28, 2004, lead
plaintiffs allege that
i
n various public statements the defendants purportedly made misrepresenta-
tions and failed
t
o disclose material facts concerning, among other things, alleged internal
systems problems and hedging issues.
The defendants moved
t
o dismiss the Securities Action
o
n
May 17, 2005. After briefing, but
without oral argument, the Court
o
n
November 17, 2005 denied the motion
i
n principal part;
however, the Court dismissed the claims against certain
o
f
the individual defendants, dismissed
claims pleaded
o
n
behalf
o
f
sellers
o
f
put options
o
n
WMI stock, and concluded that the plaintiffs
105
CONFIDENTIAL
Return
could not rely
o
n
supposed violations
o
f
generally accepted accounting principles
t
o support their
claims. The remaining defendants subsequently moved
f
o
r
reconsideration
o
r
,
i
n the alternative,
certification
o
f
the opinion
f
o
r
interlocutory appeal
t
o the United States Court
o
f
Appeals
f
o
r
the
Ninth Circuit. The District Court denied the motion
f
o
r
reconsideration, but the motion
f
o
r
certification remains pending.
Lee Family Investments,
b
y
and through
i
t
s
Trustee
W
.
B
.
Lee, Derivatively and
o
n
behalf
o
f
Nominal Defendant Washington Mutual, Inc.
v
.
Killinger
e
t
a
i
,
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
t
o dismiss the Securities Action, a separate plaintiff filed
i
n Washington State Superior
Court a derivative shareholder lawsuit purportedly asserting claims
f
o
r
the benefit
o
f
WMI. The
defendants include those individuals remaining
a
s
defendants
i
a
s
well
a
s
those
o
f
WMI's current independent directors who were directors
a
t
any time from April 15, 2003
through June 2004. The allegations
i
n the Derivative Action mirror those
i
but seek relief based
o
n
claims that the independent director defendants failed
t
o take action
t
o
respond
t
o the misrepresentations alleged
i
n the Securities Action and that the filing
o
f
that
action has caused WMI
t
o expend sums
t
o defend itself and the individual defendants and
t
o
conduct internal investigations related
t
o the underlying claims. The defendants have not yet
responded
t
o the complaint
i
n the Derivative Action.
Governing Law
The LLC Agreement, the Trust Agreement, the Trust Securities and the Fixed-
t
o
-
Floating
Rate Company Preferred Securities will
b
e
i
n accordance with, the
laws
o
f
the State
o
f
Delaware. The Fixed-
t
o
-
b
e
governed
b
y
and construed
i
o
f
the State
o
f
Washington. The Fixed-
t
o
-
Floating
Rate Depositary Shares will
b
e
i
o
f
the
State
o
f
New York.
106
CONFIDENTIAL
Return
INDEX
O
F
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
o
r
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
o
f
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-
t
o
-
income ratio .
Delaware Trustee .
Deposit Agreement .
Depositary .
Dividend Payment Date .
Dividend Period .
DTC .
DTC Participants .
v
i
i
6
9
7
5
3
8
7
5
7
5
4
1
5
3
5
0
3
8
3
9
3
9
3
9
i
, 44
5
0
4
9
4
2
i
i
i
,
9
9
8
3
59, 68,
7
9
5
3
4
5
4
5
9
1
9
1
9
2
i
i
i
,
9
9
5
1
cover, 1,36
4
,
3
6
1
2
5
7
1
7
1
6
3
3
1
6
2
4
7
5
6
5
6
4
5
4
9
3
5
8
5
6
4
cover, 59, 68,
7
9
59, 68,
7
9
8
9
v
i
i
,
9
0
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 Substitute
Preferred Stock .
Fixed Rate Successor
Depositary Share .
Fixed Rate WMI Preferred
Stock .
Fixed-
t
o
-
Floating Rate
Company Preferred
Securities .
Fixed-
t
o
-
Floating Rate
Depositary Shares .
Fixed-
t
o
-
Floating Rate
Substitute Preferred Stock
Fixed-
t
o
-
Floating Rate
Successor Depositary
Share .
Fixed-
t
o
-
Floating Rate WMI
Preferred Stock .
Foreign Holder .
FSA .
FSMA .
GAAP .
Global Security .
HELs .
Banker .
Independent Manager .
Indirect Participants .
Investment Company
A
c
t
.
Investment Company
A
c
t
Event .
IRS .
Japan Securities and
Exchange Law .
Junior Equity Securities .
L1BOR Business Day .
3
8
3
9
i
i
i
i
i
i
,
9
9
9
2
9
2
9
2
9
2
6
4
11,63
x
i
i
,
5
7
5
7
10,
6
8
100
1
8
8
8
4
8
4
8
8
cover, 1,67
11,79,85
8
4
8
4
2
,
7
9
9
4
101
101
x
i
i
8
9
5
7
1
4,41
9
0
cover,
i
x
,
1
7
1
9
3
103
7
0
6
9
CONFIDENTIAL
Return
L1BOR Determination Date .
like amount .
LLC
A
c
t
.
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 .
.
.
Quotations .
Registrar .
Regulation .
Regulatory Capital Event .
Relevant Implementation Date
Relevant Member State .
REMIC .
Reminder Notice .
Replacement Capital
Covenant .
Replacement Covenant
Covered Securities .
6
9
2
3
6
3
6
5
6
2
1
100
6
7
9
7
65,
8
9
2
cover,
2
,
3
0
6
7
6
5
3
9
i
i
i
9
9
i
i
i
,
9
9
5
7
1
3
5
5
,
4
4
i
i
i
,
1
i
i
i
,
1
2
3
4
0
4
1
7
1
7
1
6
5
9
9
7
1
102
102
5
,
9
7
v
i
i
9,61
6
1
108
S&P .
SEC .
Section 3 (
c
)
(
7
)
.
Securities Act .
Securities Action .
Senior Equity Securities .
Series
A
-
1 WaMu Cayman
Series
A
-
2 WaMu Cayman
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 .
Securities .
WaMu Delaware .
WMB .
WMI .
WMI Group .
WMI's Board
o
f
Directors .
WM I Parity Stock .
WTC .
100
x
i
v
i
cover,
i
x
,
1
105
1
2
1
4
4
5
4
102
5
0
8
4
3
1
7
2
9
6
x
i
i
3
1
6
5
7
2
3
5
v
i
,
3
5
cover, 1,59
4
4
9
6
i
,
4
,
3
6
9
3
6
9
6
2
8
2
i
, 1
1
cover,
1
,
3
5
i
,
1,30
cover, 1
1
2
8
7
9
6
5
CONFIDENTIAL
Return
N
o
dealer, salesperson
o
r
other person
i
s authorized
t
o
r
t
o
represent anything not contained
i
n this offer-
ing circular. You must not rely
o
n
any unau-
thorized information
o
r
representations. This
offering circular
i
s
a
n
offer
t
o sell only the
notes offered hereby, but only under circum-
stances and
i
n jurisdictions where
i
t
i
s lawful
t
o
d
o
so. The information contained
i
n this
offering circular
i
s current only
a
s
o
f
i
t
s date.
TABLE OF CONTENTS
Page
Notice
t
o Investors
i
i
i
Special Note Regarding Forward-
Looking Statements x
Where You Can Find More Information
x
i
Index
o
f
Terms. . . . . . . . . . . . . . . . . . . . . .
x
i
i
Offering Circular Summary . . . . . . . . . . . 1
Risk Factors
.
.
.
.
. . . . . . . . . . . . . . . . . . . .
1
7
Certain Information Concerning WMB
3
0
Use
o
f
Proceeds
3
4
WaMu Delaware. . . . . . . . . . . . . . . . . . . . .
3
5
The Company. . . . . . . . . . . . . . . . . . . . . . .
3
6
The Asset Trust. . . . . . . . . . . . . . . . . . . . .
4
4
WMI................................
5
7
Certain Relationships and Related
Party Transactions
5
8
Description
o
f
the Trust Securities. . . .
5
9
Description
o
f
the Fixed-
t
o
-
Floating
6
7
Description
o
f
Other Company
Securities. . . . . . . . . . . . . . . . . . . . . . . . .
7
7
Description
o
f
the Fixed-
t
o
-
Floating
Rate WMI Preferred Stock. . . . . . . . .
7
9
Description
o
f
the Fixed-
t
o
-
Floating
Rate Depositary Shares. . . . . . . . . . . .
8
5
Description
o
f
the Other WMI Capital
Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
8
Book- Entry Issuance
8
9
Certain
U
.
S
.
Federal Income Tax
Considerations . . . . . . . . . . . . . . . . . . . .
9
3
ERISA Considerations. . . . . . . . . . . . . . .
9
9
Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Plan
o
f
Distribution . . . . . . . . . . . . . . . . . . 101
Validity
o
f
Securities. . . . . . . . . . . . . . . . . 104
Additional Information. . .
.
.
105
Index
o
f
Terms..... .
.
.
.
.
.
.
.
.
.
.
107
$1,250,000,000
Washington Mutual
Preferred Funding
Trust I
Fixed-
t
o
-
Floating Rate Perpetual
Non-cumulative Trust
Securities Automatically
Exchangeable
i
n Specified
Circumstances into Depositary
Shares representing Preferred
Stock
o
f
Washington
Mutual
Sole Global Coordinator and
Sole Structuring Coordinator
Credit Suisse
Morgan Stanley
CONFIDENTIAL
Return
Date.
(
TO: The Registrar
o
f
Companies
Crighton Building
GeorgeTown
WASHINGTON MUTUAL PREFERRED FUNDING (CAYMAN) I LTD.
(
t
h
e
" Company")
TAKE NOTICE that
t
h
e
following resolution was adopted
o
n
7
t
h
March 2006
b
y
written
resolution
o
f
t
h
e
Sole Shareholder
o
f
t
h
e
Company:
"
I
T
I
S HEREBY RESOLVED
a
s
a Special Resolution that
t
h
e
form
o
f
restated
o
f
Association
o
f
t
h
e
Company
a
s
annexed hereto
b
e
and
i
s hereby approved and adopted with immediate effect
i
n substitution
f
o
r
t
h
e
original
o
f
Association
o
f
t
h
e
Company
a
s
previously filed with
the Registrar
o
f
Companies. I
t
M C rporate Services Limited
b
y
Nick Bullmore
Dated tIlls 8th day
o
f
March 2006.
CERTIFIED
T
O
B
E
A TRUE AND CORRECT COPY
SlG. --~~~___ ----
NEVDIS TAVERAS
AsstRegllltrar
(
\
J
\
CVf""<...
J
/
\
L
ClLJ
HSH/
6
J
65251 J 6027
J
6
/
v 1
CONFIDENTIAL
Return
CONFIDENTIAL
Return
,
-
-
(
THE COMP ANTES LAW (2004 REVISION)
OF THE CAYMAN ISLANDS
COMPANY LIMITED BY SHARES
RESTATED MEMORANDUM AND ARTICLES
OF
ASSOCIATION
O
F
WASHINGTON MUTUAL PREFERRED FUNDING (CAYMAN) I LTD.
( adopted
b
y
Special Resolution
o
n
7 March, 2006)
NPBf616525fl600336fv2
CONFIDENTIAL
Return
THE COMPANIES LAW (2004 REVISION)
OF THE CAYMAN ISLANDS
RESTATED MEMORANDUM OF ASSOCIATION
O
F
WASIDNGTON MUTUAL PREFERRED FUNDING (CAYMAN) I LTD.
(adopted
b
y
Special Resolution
o
n
7 March, 2006)
The name
o
f
t
h
e
Company
i
s Washington Mutual Preferred Funding (Cayman) I
Ltd.
2 The registered office
o
f
t
h
e
Company shall
b
e
a
t
t
h
e
offices
o
f
M&C Corporate
Services Limited, PO Box 309GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands,
o
r
a
t
such other place
a
s
t
h
e
Directors
may from time
t
o time decide.
3 The objects
f
o
r
which
t
h
e
Company
i
s established
f
o
r
t
h
e
following:
(
a
)
t
o issue Ordinary Shares
t
o
t
h
e
Cayman Trust;
(
b
)
t
o issue Preferred Securities and sell
t
h
e
t
o
t
h
e
Purchasers pursuant
t
o Purchase Agreement;
(
c
)
t
o apply
t
h
e
proceeds
o
f
sale
o
f
t
h
e
t
o acquire a like
amount ofWaMu LLC Preferred Securities;
(
d
)
t
o
enter into, exercise
i
t
s
rights under, and perform
i
t
s
obligations under,
t
h
e
Administration Agreement,
t
h
e
Exchange Agreement,
t
h
e
Expenses
Agreement, the Purchase Agreement,
t
h
e
Agency Agreement and
t
h
e
WaMu LLC Agreement;
(
e
)
(
f
)
t
o take
a
l
l
other actions that
t
h
e
Directors consider nece
i
n connection with
o
r
incidental
t
o
t
h
e
matters contemp .
3
(
a)-(
d
)
above, inclusive.
a
:
The Company shall
n
o
t
engage
i
n any activities other than those
NPB/ 616525/ 1600336/ v 3
CONFIDENTIAL
Return
( 4
2
The liability
o
f
each Member
i
s limited
t
o
t
h
e
amount from time
t
o
time unpaid
o
n
such Member's shares.
SIG.
5 The authorized share capital
o
f
t
h
e
Company
i
s US$ 83,500 divided into (
i
) 1,000
Ordinary Shares, par value $1.00
p
e
r
Share, (
i
i
)
7,500 Series
A
-
I Preferred
Securities,
p
a
r
value $1.00
p
e
r
Share, and (
i
i
i
)
75,000 Series
A
-
2 Preferred
Securities,
p
a
r
value $1.00
p
e
r
Share.
6 The Company
h
a
s
power
t
o
register
b
y
way
o
f
continuation
a
s
a body corporate
limited
b
y
shares under
t
h
e
laws
o
f
any jurisdiction outside
t
h
e
Cayman Islands
and
t
o
b
e
deregistered
i
n
t
h
e
Cayman Islands.
7 Terms that
a
r
e
n
o
t
defined
i
n this Memorandum
o
f
Association but
a
r
e
used
herein and are defined
i
n
t
h
e
Articles
o
f
Association
o
f
t
h
e
company bear the
same meaning
a
s
those given
i
n
t
h
e
Articles
o
f
Association
o
f
t
h
e
Company.
CERTIFIED
T
O
BEA TRUE AND CORRECT COpy
-
~
NEYDIS TAVERAS
Asst. Rrgislnr
o
f
C6lIIPilits
Date. ~
1
b
lli{ LyC~
,
;
)
0
0
6
.
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
CONFIDENTIAL
Return
(
THE COMPANIES LAW (2004 REVISION)
O
F
THE CAYMAN ISLANDS
RESTATED ARTICLES OF ASSOCIATION
OF
WASIDNGTON MUTUAL PREFERRED FUNDING (CAYMAN) I LTD.
( adopted
b
y
Special Resolution
o
n
7 March, 2006)
INTERPRETATION
1
I
n these Articles Table A
i
n
t
h
e
First Schedule
t
o the Statute does
n
o
t
apply and,
unless there
i
s something
i
n
t
h
e
subject
o
r
context inconsistent therewith:
" Accountholder"
" Administration
Agreement"
" Administrator"
" Agency Agreement"
" Articles"
" Auditor"
" Bankruptcy Event"
NPB/ 616525/ 1600336/
v
3
means any person designated
a
s
such
b
y
t
h
e
Registrar.
means
t
h
e
Administration Agreement dated March
6
,
2006
(
a
s
amended, modified
o
r
supplemented from time-
t
o
-
time),
between the Company and
t
h
e
Administrator.
means
t
h
e
Person identified
a
s
such
i
n
t
h
e
Administration
Agreement. The initial Administrator shall
b
e
Maples
Finance Limited, a licensed trust company incorporated
under the laws
o
f
t
h
e
Cayman Islands.
means the Agency Agreement,
t
o
b
e
dated
a
s
o
f
March
7
,
2006 (
a
s
amended, modified
o
r
supplemented from time
t
o
time), among
t
h
e
Company, WaMu LLC, Wilmington
Trust (Cayman), Ltd.,
a
s
t
h
e
initial Securities Registrar,
Transfer Agent and Paying Agent and
l
P
.
Morgan Bank
Luxembourg
S
.
A
.
,
a
s
Luxembourg Paying Agent.
means these articles
o
f
association
o
f
t
h
e
Company.
means
t
h
e
Person
f
o
r
t
h
e
time being performing
t
h
e
duties
o
f
auditor
o
f
t
h
e
Company (
i
f any).
means
t
h
e
Company, WaMu LLC
o
r
(
i
) becomes insolvent
o
r
i
s unable
t
o p
admits
i
n writing
i
t
s
inability genera
they become due, (
i
i
)
makes
a
.
arrangement
o
r
composition with 0
creditors,
o
r
(
i
i
i
)
institutes
o
r
has
t
i
t
t
e
d
against
i
t
proceeding seeking a judgment
o
f
i
n
s
CONFIDENTIAL
Return
" Book Entry Preferred
Securities"
" Book- Entry Transfer"
" Business Day"
" Cayman Trust"
" Clearing Agency"
" Clearing Agency
Participant"
" Clearstream"
" Company"
" Conditional Exchange"
" Consent"
NPB/ 616525/ 1600336/
v
2
2
o
r
any other relief under any bankruptcy
o
r
insolvency law
o
r
other similar law affecting creditors' rights,
o
r
a petition
i
s presented
f
o
r
i
t
s
winding-
u
p
o
r
liquidation.
means Preferred Securities
t
h
e
ownership and transfer
o
f
which shall
b
e
made through Book- Entry Transfers
b
y
a
Clearing Agency.
means transfer
o
r
delivery
o
f
i
n Book-
Entry Preferred Securities
i
n accordance with
t
h
e
rules and
procedures
o
f
t
h
e
applicable Clearing Agency (including,
i
n
t
h
e
case
o
f
DTC
i
f
i
t
i
s
t
h
e
Clearing Agency, book- entry
transfers and deliveries through DTC's DepositlWithdrawal
a
t
Custodian DWAC system).
means any day other than a Saturday, Sunday
o
r
any other
day
o
n
which banks
i
n New York, New York, Seattle,
Washington
o
r
Georgetown, Grand Cayman,
a
r
e
generally
required
o
r
authorized
b
y
law
t
o
b
e
closed.
means the trust organized under the laws
o
f
t
h
e
Cayman
Islands
f
o
r
t
h
e
purpose
o
f
holding
t
h
e
Ordinary Shares,
existing pursuant
t
o a Declaration
o
f
Trust, dated March
6
,
2006 (
a
s
amended, modified
o
r
t
o
time), and having Maples Finance Limited
a
s
i
t
s
initial
trustee.
means
a
n
organization whose principal business
i
s
t
h
e
clearance and settlement
o
f
securities transactions,
including
t
h
e
transfer
o
f
record ownership and
t
h
e
safeguarding
o
f
securities and funds related thereto. DTC
will
b
e
the initial Clearing Agency.
means a broker, dealer, bank, other financial institution
o
r
other Person (including Euroclear and Clearstream)
f
o
r
whom from time
t
o time a Clearing Agency effects book-
entry transfers and pledges
o
f
securities deposited with
t
h
e
Clearing Agency.
means Clearstream banking, a societe anonyme.
means
t
h
e
above named company.
h
a
s
t
h
e
meaning specified
i
n Article
9
(
f
)
.
means (
i
)
a
s
t
o
t
h
e
t
h
e
written consent
o
f
t
h
e
Independent Director, and (
i
i
)
a
s
t
o
t
h
e
Directors
a
s
a
whole,
t
h
e
a
c
t
o
f
t
h
e
Directors (
x
)
b
y
their unanimous
CONFIDENTIAL
Return
(
" Deposit Agreement"
" Directors"
" dividend"
" Dividend Amount"
" Dividend Payment
Date"
" Dividend Period"
" DTC"
" Electronic Record"
" Euroclear"
" Exchange Agreement"
A
n
" Exchange Event"
NPB/ 616525/ 1600336/
v
2
3
written consent
o
r
(
y
)
b
y
resolution
a
t
a meeting duly called
and held adopted
i
n accordance with these Articles and
t
h
e
Statute.
means
t
h
e
Deposit Agreement,
t
o
b
e
dated
a
s
o
f
March
7
,
2006 (
a
s
amended
o
r
supplemented from time-
t
o
-
time),
among (
i
) WMI, (
i
i
)
Mellon Investor Services LLC,
a
s
shares depositary, (
i
i
i
)
Mellon Investor Services LLC,
a
s
registrar, and (
i
v
)
t
h
e
holders from time-
t
o
-
time
o
f
t
h
e
WMI Depositary Receipts.
means
t
h
e
directors
f
o
r
t
h
e
time being
o
f
t
h
e
Company.
includes
a
n
interim dividend.
means,
a
s
t
o a Preferred Security and a Dividend Payment
Date,
t
h
e
amount
o
f
dividends received
o
r
receivable
b
y
t
h
e
Company
o
n
a like amount
o
f
WaMu LLC Preferred
Securities
o
n
means, with respect
t
o
t
h
e
Preferred Securities, each
Business Day
o
n
which
t
h
e
Company
o
r
i
t
s
paying agent
receives payment
o
f
dividends
o
n
WaMu LLC Preferred
Securities; provided, however, that,
i
f the Company
o
r
i
t
s
paying agent receives payment
o
f
dividends
o
n
WaMu LLC
Preferred Securities after
2
:
0
0
P
.
M., New York time,
o
n
a
Business Day, then
t
h
e
related Dividend Payment Date
shall
b
e
t
h
e
next succeeding Business Day.
means each period from and including a Dividend Payment
Date (
o
r
the Issue Date,
i
f earlier)
t
o
b
u
t
not including
t
h
e
next succeeding Dividend Payment Date.
means The Depositary Trust Company.
has the same meaning
a
s
i
n the Electronic Transactions Law
(2003 Revision).
means Euroclear Bank,
S
.
A
.
/
N
.
B
,
a
s
operator
o
f
t
h
e
Euroclear System.
means
t
h
e
Exchange Agreement,
t
o
b
e
dated March
7
,
2006
(
a
s
amended
o
r
t
o time), among
WMI,
t
h
e
Company, WaMu Delaware and Mellon Investor
Services LLC,
a
s
depositary.
will occur when:
CONFIDENTIAL
Return
(
" ExpensesAgreement"
" Fixed Rate Substitute
Preferred Stock"
" Fixed Rate WMI
Preferred Stock"
" Fixed-
t
o
-
Floating Rate
Substitute Preferred
Stock"
" Fixed-
t
o
-
Floating Rate
WMI Preferred Stock"
" Global Securities"
" bolder"
" Independent Director"
" Independent Manager"
NPB/ 616525! I 600336/
v
2
4
(
a
)
WMB becomes undercapitalized under
t
h
e
OTS'
" prompt corrective action" regulations
a
t
1
2
C
.
F
.
R
.
Part 565 ( and including any successor regulations);
(
b
)
WMB
i
o
r
receivership;
o
r
(
c
)
t
h
e
OTS,
i
n
i
t
s
sole discretion, anticipates WMB
becoming undercapitalized
i
n
t
h
e
near term
o
r
takes a
supervisory action that limits
t
h
e
payment
o
f
dividends
b
y
WMB and
i
n connection therewith
directs a Conditional Exchange.
means
t
h
e
Expenses Agreement dated February 28,2006 (
a
s
amended, modified
o
r
t
o time),
between
t
h
e
Company and WMB.
means a class
o
r
series
o
f
equity securities
o
f
a Successor
Entity having
t
h
e
preferences, limitations and relative rights
i
n
i
t
s
articles
o
r
certificate
o
f
incorporation
o
r
other
constituent documents that
a
r
e
t
o
those
s
e
t
forth
i
n
t
h
e
articles
o
f
amendment establishing
t
h
e
Fixed
Rate WMI Preferred Stock.
WMI's Series J Perpetual Non- cumulative Fixed Rate
Preferred Stock,
n
o
p
a
r
value and liquidation preference
$1,000,000
p
e
r
share.
means a class
o
r
series
o
f
equity securities
o
f
a Successor
Entity having
t
h
e
preferences, limitations and relative rights
i
n
i
t
s
articles
o
r
certificate
o
f
incorporation
o
r
other
constituent documents that are substantially similar
t
o those
s
e
t
forth
i
n
t
h
e
articles
o
f
amendment establishing
t
h
e
Fixed-
t
o
-
WMI's Series I Perpetual Non- cumulative Fixed-
t
o
-
n
o
p
a
r
value, and liquidation
preference of$
I
,
OOO, OOOper share.
h
a
s
t
h
e
meaning specified
i
n Article 15.
means a Member.
has
t
h
e
meaning specified
i
n Article
8
7
.
has
t
h
e
meaning specified
i
n Article 87.
CONFIDENTIAL
Return
( " Issue Date"
" Issue Price"
" like amount"
NPB/ 616525/ l600336/
v
2
5
means, with respect
t
o a Series,
t
h
e
date
o
f
first issue
o
f
the
o
f
such Series.
means:
(
a
)
i
n
t
h
e
case ofthe Series
A
-
I Preferred Securities,
$98,000
p
e
r
Share;
a
n
d
(
b
)
i
n
t
h
e
case
o
f
t
h
e
Series
A
-
2 Preferred Securities,
$9,800
p
e
r
Share.
means:
(
a
)
when used with respect
t
o dividends, redemption
price
o
r
other financial entitlements
o
f
one
o
r
more
Series
A
-
I Preferred Securities, a number ofWaMu
LLC Preferred Securities having
t
h
e
same aggregate
a
s
such Series
A
-
I Preferred
Securities ( i.~., 100 WaMu LLC Preferred Securities
f
o
r
each Series
A
-
I Preferred Security);
(
b
)
when used with respect
t
o dividends, redemption price
o
r
other financial entitlements
o
f
one
o
r
more Series
A
-
2 Preferred Securities, a number
o
f
WaMu LLC
Preferred Securities having
t
h
e
same aggregate
a
s
such Series
A
-
I Preferred
Securities (i.~.,
t
e
n
WaMu LLC Preferred Securities
f
o
r
each Series
A
-
2 Preferred Security);
(
c
)
when used
i
n connection with a Conditional Exchange
o
f
one
o
r
more Series
A
-
I Preferred Securities
f
o
r
WMI Depositary Shares, a number
o
f
WMI
Depositary Shares representing Fixed Rate WMI
Preferred Stock having
a
n
preference equal
t
o
t
h
e
preference
o
f
such Series
A
-
(!.~.,
f
o
r
each Series
A
-
I Preferred Security, 100 WMI
Depositary Shares); and
(
d
)
when used
i
n connection with a Conditional Exchange
o
f
one
o
r
more Series
A
-
2 Preferred Securities
f
o
r
WMI Depositary Shares, a number
o
f
WMI
Depositary Shares representing Fixed Rate WMI
Preferred Stock having
t
h
e
a
n
preference equal
t
o
t
h
e
preference
o
f
such Series
A
-
(i.~.,
f
o
r
each Series
A
-
2 Preferred Security,
t
e
n
WMI
CONFIDENTIAL
Return
6
(
.
.
Depositary Shares).
" Liquidation Preference" when used
i
n connection with
t
h
e
Series
A
-
I Preferred
Securities means $100,000 per Share and when used
i
n
connection with
t
h
e
Series
A
-
2 Preferred Securities means
$10,000 per Share.
" Member" has
t
h
e
same meaning
a
s
i
n
t
h
e
Statute.
" Memorandum" means
t
h
e
memorandum
o
f
association
o
f
the Company.
" Offering Circular" means the final Offering Circular, dated February 24, 2006,
relating
t
o
t
h
e
offer and sale
o
f
t
h
e
" Ordinary Directors" has
t
h
e
meaning specified
i
n Article
8
7
.
" Ordinary Resolution" means a resolution passed
b
y
a simple majority
o
f
t
h
e
Members
a
s
,
being entitled
t
o
d
o
s
o
,
vote
i
n Person
o
r
,
where proxies
a
r
e
allowed,
b
y
proxy
a
t
a general meeting,
and includes a unanimous written resolution.
I
n computing
t
h
e
majority when a poll
i
s demanded regard shall
b
e
had
t
o
t
h
e
number
o
f
votes
t
o which each Member
i
s entitled
b
y
t
h
e
Articles.
" Ordinary Share"
a
n
ordinary share
i
n
t
h
e
capital
o
f
t
h
e
Company
o
f
$1.00
par value and issued subject
t
o and
i
n accordance with
t
h
e
provisions
o
f
the Statute and having
t
h
e
rights provided
f
o
r
Ordinary Shares under these Articles.
" Ordinary Shareholder" a registered holder
o
f
a
n
Ordinary Share.
" OTS" means
t
h
e
United States Office
o
f
Thrift Supervision
o
r
any
successor United States Federal bank
o
r
thrift regulatory
agency that
i
s
t
h
e
primary supervisory agency
f
o
r
WMB.
" Owner" means each Person who
i
s
t
h
e
beneficial owner
o
f
Book-
Entry Preferred Securities
a
s
reflected
i
n
t
h
e
records
o
f
t
h
e
Clearing Agency
o
r
,
i
f a Clearing Agency Participant
i
s not
t
h
e
Owner, then
a
s
reflected
i
n the records
o
f
a Person
maintaining
a
n
account with such Clearing Agency
(directly
o
r
indirectly,
i
n accordance with
t
h
e
rules
o
f
such
Clearing Agency).
" Paying Agent" means the Person identified
a
s
such
I
n
t
h
e
Agency
Agreement.
" Person" means a legal Person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock
NPB/ 6 I652511 600336/
v
2
CONFIDENTIAL
Return
(
" Preferred Securities"
" Preferred
Securityholder"
o
r
" holder
o
f
Preferred
Securities"
" Purchase Agreement"
" Purchasers"
" Redemption Date"
" Redemption Price"
" Register
o
f
Members"
NPB/ 616525/ 1600336/
v
2
7
company, company, limited liability company, trust,
unincorporated association,
o
r
govemmient
o
r
any agency
o
r
political subdivision thereof,
o
r
any other entity
o
f
whatever nature.
means the Series
A
-
1 Preferred Securities and
t
h
e
Series
A
-
2 Preferred Securities.
means a registered holder
o
f
a Preferred Security.
means
t
h
e
Purchase Agreement, dated
a
s
o
f
February
2
4
,
2006 (
a
s
amended, modified
o
r
t
o
time), among (
i
) WMI, (
i
i
) WMB, (
i
i
i
)
WaMu LLC,
(
i
v
)
WaMu Delaware, (
v
)
the Company and (
v
i
)
Goldman,
Sachs &Co.,
a
s
representative
o
f
t
h
e
Purchasers, pursuant
t
o
which, among other things,
a
t
t
h
e
Time
o
f
Delivery (
x
)
t
h
e
Purchasers designated therein will purchase newly-
issued Preferred Securities from
t
h
e
Company and (
y
)
t
h
e
Company will purchase
t
h
e
WaMu LLC Preferred
Securities from WaMu LLC.
h
a
s
t
h
e
meaning specified
i
n
t
h
e
Purchase Agreement.
means, with respect
t
o
t
h
e
Preferred Securities, each
Business Day
o
n
which
t
h
e
Company
o
r
i
t
s
paying agent
receives payment
o
f
t
h
e
redemption price
o
f
WaMu LLC
Preferred Securities; provided, however, that,
i
f
t
h
e
Company
o
r
i
t
s
paying agent receives payment
o
f
t
h
e
redemption price
o
f
WaMu LLC Preferred Securities after
2
:
0
0
P
.
M., New York time,
o
n
a Business Day, then
t
h
e
related Redemption Date shall
b
e
t
h
e
next succeeding
Business Day.
means,
a
s
t
o a Preferred Security and a Redemption Date,
the redemption price received
o
r
receivable
b
y
t
h
e
Company
o
n
a like amount
o
f
WaMu LLC Preferred
Securities (including, where applicable,
t
h
e
related
Additional Taxes (
a
s
defined
i
n
t
h
e
WaMu LLC
Agreement),
i
f any).
means
t
h
e
register maintained
i
n accordance with
t
h
e
Statute
and includes (except where otherwise stated) any duplicate
Register
o
f
Members.
CONFIDENTIAL
Return
" 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/
v
2
8
means
t
h
e
registered office
f
o
r
the time being
o
f
t
h
e
Company.
means
t
h
e
Person identified
a
s
such
I
n
t
h
e
Agency
Agreement.
has
t
h
e
meaning specified
i
n Article 15.
means
i
f (
a
)
t
h
e
Clearing Agency notifies
t
h
e
Company that
i
t
i
s unwilling
o
r
unable
t
o continue
a
s
depositary
f
o
r
such
o
r
(
b
)
the Company,
i
n
i
t
s
sole
discretion, determines that
t
h
e
Regulation S Global
Security
o
r
Rule 144A Global Security,
a
s
applicable, will
b
e
exchangeable
f
o
r
t
h
e
applicable Preferred Security
i
n
registered certificated form.
h
a
s
t
h
e
meaning specified
i
n Article
1
5
.
means
t
h
e
common seal
o
f
the Company and includes every
duplicate seal.
means
t
h
e
Person identified
a
s
such
i
n
t
h
e
Agency
Agreement.
means a series
o
f
o
f
t
h
e
Company
established
i
n accordance with these Articles and the
Statute.
means the Series
o
f
Shares designated
i
n Article 5
a
s
t
h
e
Company's " 7.25% Perpetual Non- cumulative Preferred
Securities, Series
A
-
I
,
"
issued subject
t
o and
i
n accordance
with
t
h
e
Statute and these Articles and having
t
h
e
rights,
preferences, powers and privileges provided
f
o
r
Series A-}
Preferred Securities under these Articles.
means
t
h
e
Series
o
f
Shares designated
i
n Article 5
a
s
t
h
e
Company's " 7.25% Perpetual Non- cumulative Preferred
Securities, Series
A
-
2
,
"
issued subject
t
o and
i
n accordance
with
t
h
e
Statute and these Articles and having
t
h
e
rights,
preferences, powers and privileges provided
f
o
r
Series
A
-
2
Preferred Securities under these Articles.
means a share
o
r
shares
i
n
t
h
e
Company and includes the
Preferred Securities and
t
h
e
Ordinary Shares.
CONFIDENTIAL
Return
( " Special Resolution"
" Statute"
" Successor Depositary
Share"
" Successor Entity"
" Time
o
f
Delivery"
" Transfer Agent"
" vote"
" WaMu Delaware"
" WaMuLLC"
" WaMuLLC
Agreement"
" WaMuLLC
Designated Directors"
" WaMu LLC Preferred
Securities"
NPB/ 61652511600336/
v
2
9
has
t
h
e
same meaning
a
s
i
n the Statute, and includes a
unanimous written resolution.
means
t
h
e
Companies Law (2004 Revision)
o
f
t
h
e
Cayman
Islands.
means a depositary share substantially similar
t
o a WMI
Depositary Share representing
a
n
interest
i
n
t
h
e
Fixed Rate
Substitute Preferred Stock.
means a corporation designated
b
y
t
h
e
Board
o
f
Directors
o
f
WMI that (
i
)
i
s
t
h
e
surviving, resulting
o
r
receiving
corporation,
a
s
applicable,
i
n any Business Combination,
(
i
i
)
t
h
e
securities
o
f
which
a
r
e
received
i
n a Business
Combination
b
y
some
o
r
a
l
l
holders
o
f
WMI voting shares
o
r
(
i
i
i
)
that the Board
o
f
Directors ofWMI determines
t
o
b
e
a
n
acquiror ofWMI
i
n a Business Combination.
h
a
s
t
h
e
meaning specified
i
n
t
h
e
Purchase Agreement
means
t
h
e
Person identified
a
s
such
i
n
t
h
e
Agency
Agreement.
means, with respect
t
o any security,
i
t
s
issuer and
i
t
s
holder,
the exercise
o
f
any applicable voting, approval
o
r
other
consensual rights, whether
a
t
a meeting,
b
y
poll
o
r
b
y
a
written consent (
a
s
provided
b
y
applicable law and
t
h
e
issuer's charter documents).
means Washington Mutual Preferred Funding Trust
I
,
a
Delaware statutory trust having WaMu LLC
a
s
depositor.
means Washington Mutual Preferred Funding LLC, a
Delaware limited liability company.
means the Amended and Restated Limited Liability
Company Agreement
o
f
WaMu LLC,
t
o
b
e
dated
a
s
o
f
March
7
,
2006 (
a
s
amended, modified
o
r
supplemented
from time
t
o time).
h
a
s
t
h
e
meaning specified
i
n Article
8
7
.
means
t
h
e
7.25% Perpetual Non-cumulative Preferred
Securities ofWaMu LLC, liquidation preference $1,000
p
e
r
security and $750,000,000
i
n
t
h
e
aggregate.
CONFIDENTIAL
Return
( " WMB"
" WMI"
" WMI Depositary
Receipts"
" WMI Depositary
Shares"
1
0
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
t
o
t
h
e
Deposit Agreement
evidencing Depositary Shares.
means
t
h
e
depositary shares issuable upon a Conditional
Exchange pursuant
t
o
t
h
e
Deposit Agreement, each
representing a
1
/
100th interest
i
n one Fixed Rate WMI
Preferred Stock.
2
I
n
t
h
e
Articles:
2
.
1
words importing
t
h
e
singular number include
t
h
e
plural number and
vice- versa;
2
.
2
words importing
t
h
e
masculine gender include
t
h
e
feminine gender;
2
.
3
words importing Persons include corporations;
2
.
4
" written" and "
i
n writing" include
a
l
l
modes
o
f
representing
o
r
reproducing words
i
n visible form, including
i
n
t
h
e
form
o
f
a
n
Electronic
Record;
2.5 references
t
o provisions
o
f
any law
o
r
regulation shall
b
e
construed
a
s
references
t
o those provisions
a
s
amended, modified,
r
e
-
enacted
o
r
replaced from time
t
o time;
2.6 any phrase introduced
b
y
the terms " including", " include", "
i
n particular"
o
r
any similar expression shall
b
e
construed
a
s
illustrative and shall not
limit
t
h
e
sense
o
f
the words preceding those terms;
2
.
7
headings
a
r
e
inserted
f
o
r
reference only and shall
b
e
ignored
i
n construing
these Articles; and
2.8
i
n these Articles Section 8
o
f
t
h
e
Electronic Transactions Law (2003
Revision) shall
n
o
t
apply.
COMMENCEMENT
O
F
BUSINESS
3 The business
o
f
t
h
e
Company may
b
e
commenced
a
s
soon after incorporation
a
s
t
h
e
Directors shall
s
e
e
f
i
t
.
4 The Directors may pay,
o
u
t
o
f
the capital
o
r
any other monies
o
f
t
h
e
Company,
a
l
l
expenses incurred
i
n
o
r
about
t
h
e
formation and establishment
o
f
the Company,
including
t
h
e
expenses
o
f
registration.
SHARE CAPITAL
5 The authorized share capital
o
f
t
h
e
Company
i
s (
i
) 1,000 Ordinary Shares,
p
a
r
value $1.00 per Share, (
i
i
)
7,500 " 7.25% Perpetual Non-cumulative Preferred
Securities, Series
A
-
I
"
,
p
a
r
value $1.00 per Share and liquidation preference
NPB/ 6165251l600336/
v
2
CONFIDENTIAL
Return
6
1
1
$100,000 per Share, and (
i
i
i
)
75,000 " 7.25% Perpetual Non- cumulative Preferred
Securities, Series
A
-
2
,
"
par value $1.00 per Share and liquidation preference
$10,000
p
e
r
Share. The Company shall
n
o
t
issue Shares other than Ordinary
Shares and Preferred Securities. Series
A
-
i
n addition
t
o
those issued pursuant
t
o Article 8 may
b
e
issued only
i
n connection with
a
n
exchange
o
f
a
n
interest
i
n
t
h
e
Regulation S Global Security representing
t
h
e
Series
A
-
f
o
r
a
n
interest
i
n
t
h
e
representing
t
h
e
i
n the Series
A
-
i
n
accordance with these Articles and
t
h
e
Agency Agreement; Series
A
-
2 Preferred
Securities
i
n addition
t
o those issued pursuant
t
o Article 8 may
b
e
issued only
i
n
connection with
a
n
exchange
o
f
a
n
interest
i
n
t
h
e
representing the beneficial interests
i
n
t
h
e
Series
A
-
f
o
r
a
n
interest
i
n
t
h
e
Regulation S Global Security representing
t
h
e
Series
A
-
2 Preferred
Securities
i
n accordance with these Articles and the Agency Agreement; and
t
h
e
o
f
t
h
e
a
t
any time
outstanding may not exceed $750,000,000.
The Company shall not issue Shares
t
o bearer.
ISSUE OF ORDINARY SHARES
7 For
s
o
long
a
s
any Preferred Securities
a
r
e
outstanding, Ordinary Shares may only
b
e
issued
t
o
o
r
registered
i
n
t
h
e
name
o
f
t
h
e
trustee
o
f
Cayman Trust,
a
t
such
price(
s
)
and
o
n
such date(
s
)
a
s
may
b
e
determined
b
y
t
h
e
Directors. From and
after
t
h
e
first date
o
n
which
t
h
e
Preferred Securities after their initial issuance
have been redeemed
i
n full, Ordinary Shares may
b
e
issued
t
o
o
r
registered
i
n the
name
o
f
such Persons, and issued
a
t
such price(
s
)
and
o
n
such date(
s
)
,
a
s
may
b
e
determined
b
y
the Directors from time-
t
o
-
time.
ISSUE OF PREFERRED SECURITIES
8 Subject
t
o the provisions
o
f
these Articles and
t
h
e
terms and conditions
o
f
the
Purchase Agreement,
a
t
t
h
e
Time
o
f
Delivery provided
f
o
r
i
n
t
h
e
Purchase
Agreement the Directors may issue
t
o
t
h
e
Purchasers provided
f
o
r
therein
u
p
t
o
3,023 Series
A
-
a
t
t
h
e
applicable Issue Price and
u
p
t
o
44,770 Series
A
-
a
t
t
h
e
applicable Issue Price.
RIGHTS, POWERS, PREFERENCES AND PRIVILEGES
OF THE PREFERRED SECURITIES
9 The Preferred Securities shall have
t
h
e
rights, powers, preferences and privileges
a
s
a
r
e
s
e
t
forth
i
n this Article 9 and provided
i
n
t
h
e
Statute.
(
a
)
Series
A
-
I Preferred Securities and Series
A
-
2 Preferred Securities. Subject
t
o (
i
)
paragraph (
e
)
o
f
t
h
i
s
Article 9 with respect
t
o
voting rights and (
i
i
)
t
h
e
liquidation
preference
p
e
r
Share
o
f
t
h
e
Series
A
-
I Preferred Securities being $100,000 and
per Share
o
f
the Series
A
-
2 Preferred Securities being $10,000,
t
h
e
rights, powers,
preferences and privileges
o
f
t
h
e
Series
A
-
I Preferred Securities and
t
h
e
Series
A
-
a
r
e
t
h
e
same.
NPB/ 616525/ l600336/
v
2
CONFIDENTIAL
Return
( (
b
)
1
2
Dividends. Subject
t
o
t
h
e
next succeeding sentence, dividends
o
n
t
h
e
Preferred
Securities shall
b
e
deemed automatically declared and become due: and payable
o
n
each Dividend Payment Date
i
n the Dividend Amount
f
o
r
such Dividend
Payment Date, subject
t
o the Company having legally available funds
f
o
r
such
purpose and
t
h
e
other qualifications provided
f
o
r
i
n these Articles.
Notwithstanding
t
h
e
foregoing,
n
o
dividends
o
r
o
n
t
h
e
o
n
any Dividend Payment Date shall become due and payable
i
f
t
h
e
Directors,
b
y
their unanimous vote
o
r
consent, resolve that
t
h
e
Company
shall pay
o
n
such Dividend Payment Date
n
o
dividends
o
r
o
n
t
h
e
Preferred Securities. Accordingly, unless dividends otherwise payable
o
n
a
Dividend Payment Date have been eliminated
o
r
reduced
b
y
the unanimous vote
o
r
consent
o
f
t
h
e
Directors:
(
i
) ifWaMu LLC pays full dividends
o
n
t
h
e
o
n
a Dividend Payment Date,
t
h
e
Company will pay corresponding full
dividends
o
n
t
h
e
o
n
such Dividend Payment Date;
(
i
i
)
i
f WaMu LLC pays partial dividends
o
n
t
h
e
WaMu LLC Preferred
Securities
o
n
t
h
e
Company will pay partial
dividends
i
n
t
h
e
same proportionate amount (relative
t
o the applicable
o
n
t
h
e
o
n
such Dividend
Payment Date; and
(
i
i
i
)
ifWaMu LLC pays
n
o
dividends
o
n
t
h
e
o
n
t
h
e
Company will pay
n
o
dividends
o
n
t
h
e
o
n
Dividends
o
n
t
h
e
Preferred Securities payable
o
n
a Dividend Payment Date shall
b
e
paid
t
o
t
h
e
Preferred Securityholders
o
n
t
h
e
Register
o
f
Members
o
n
t
h
e
related record date, which shall
b
e
t
h
e
first day
o
f
t
h
e
month
i
n which
t
h
e
relevant
Dividend Payment Date occurs
o
r
,
i
f any such day
i
s not a Business Day,
t
h
e
next
day that
i
s a Business Day.
Dividends
o
n
t
h
e
a
r
e
noncumulative, except
t
o
t
h
e
extent
that
o
n
t
h
e
Company
h
a
s
received from WaMu LLC a
payment
o
f
dividends
o
n
t
h
e
b
u
t
fails
t
o
pay
t
h
e
corresponding dividend
o
n
t
h
e
I
f
:
(
i
)
t
h
e
Company pays
n
o
dividends
o
r
o
n
the
o
n
a Dividend Payment Date because
i
t received
n
o
dividend
o
r
o
n
t
h
e
WaMu LLC Preferred
Securities, then Preferred Securityholders will have
n
o
right
t
o receive,
and the Company will have
n
o
obligation
t
o pay, such unpaid dividends
a
t
a future date, whether
o
r
not dividends
a
r
e
paid
o
n
a future Dividend
Payment Date
o
n
t
h
e
o
r
the Ordinary Shares; and
NPB/ 6 I 6525/ 1 600336/
v
2
CONFIDENTIAL
Return
(
(
i
i
)
1
3
t
h
e
Company pays
n
o
dividends
o
r
o
n
t
h
e
o
n
a Dividend Payment Date where clause (
i
) does
n
o
t
apply
b
u
t
t
h
e
Directors have unanimously detennined not
t
o pay dividends
o
r
t
o pay less than full dividends pursuant
t
o their authority
i
n the second
sentence
o
f
t
h
e
first paragraph
o
f
this Article
9
(
b
)
,
then
n
o
further
dividends may
b
e
paid
o
n
Ordinary Shares until such unpaid dividends
have been paid
o
n
t
h
e
(
c
)
Term and Redemption. The Preferred Securities
a
r
e
perpetual Shares, subject
t
o
t
h
e
redemption provisions
o
f
this Article
9
(
c
)
.
The Preferred Securities
a
r
e
not redeemable
a
t
t
h
e
option
o
f
t
h
e
holders thereof.
The Preferred Securities shall
b
e
redeemed
o
n
each Redemption Date
a
t
a
redemption price equal
t
o
t
h
e
Redemption Price
p
e
r
Preferred Security
f
o
r
such
Redemption Date (which,
a
s
reflected
i
n the definitions
o
f
those terms, has the
consequence that the Preferred Securities will
b
e
redeemed
o
n
t
h
e
same dates
o
n
which
t
h
e
a
r
e
redeemed
a
t
a redemption price
p
e
r
Preferred Security equal
t
o
t
h
e
redemption price received
b
y
t
h
e
Company
o
n
a like amount ofWaMu LLC Preferred Securities).
I
f
a redemption
o
f
WaMu LLC Preferred Securities and,
a
s
a consequence,
o
n
any Redemption Date
i
s
i
n part instead
o
f
i
n whole, then
t
h
e
Directors shall first allocate
t
h
e
total amount available
t
o pay
t
h
e
Redemption
Price between
t
h
e
Series
A
-
I Preferred Securities and
t
h
e
Series
A
-
2 Preferred
Securities
i
n proportion
t
o their aggregate liquidation preferences ( rounded
b
y
the
Directors,
i
f necessary,
s
o
that
n
o
Shares
a
r
e
redeemed
i
n part and
n
o
t
i
n whole).
The Directors shall select
t
h
e
particular Shares
o
f
Series
A
-
and Series
A
-
a
s
applicable,
t
o
b
e
redeemed not more than
6
0
days prior
t
o
t
h
e
Redemption Date from the outstanding Preferred Securities
n
o
t
previously called
f
o
r
redemption, such selection
t
o
b
e
made
b
y
such method
a
s
t
h
e
Directors deem fair and appropriate.
The Company will give
t
o
t
h
e
Preferred Securityholders and publish notice
o
f
any
proposed redemption
a
s
provided
i
n Articles 142
t
o 146. Such notice will
b
e
given and published
a
t
least
3
0
6
0
days before
t
h
e
date
fixed.
f
o
r
n
~
demption.
The Directors may redeem
o
r
cause the Company
t
o redeem
a
l
l
o
r
some
o
f
t
h
e
Preferred Securities held
b
y
any Person
t
o give effect
t
o
a
n
exchange, conversion
o
r
roll
u
p
policy (
a
n
" Exchange") disclosed
i
n
t
h
e
Offering Circular
o
r
otherwise
adopted
b
y
t
h
e
Directors pursuant
t
o
which Preferred Securities
o
f
o
n
e
class (
t
h
e
" Old Shares") may,
a
t
t
h
e
option
o
f
t
h
e
Company,
b
e
exchanged
f
o
r
Preferred
Securities
o
f
another class (
t
h
e
" New Shares")
b
y
means
o
f
t
h
e
redemption
o
f
t
h
e
Old Shares and
t
h
e
immediate
r
e
-
subscription
o
n
behalf
o
f
t
h
e
relevant Members
o
f
t
h
e
redemption proceeds
i
n paying
u
p
t
h
e
New Shares.
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CONFIDENTIAL
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)
1
4
O
n
a
n
Exchange a Person holding Old Shares shall immediately following the
redemption
o
f
t
h
e
Old Shares hereby subscribe
f
o
r
and shall
b
e
deemed
t
o have
subscribed
f
o
r
without any further action required
b
y
t
h
e
relevant Member and
shall
b
e
alloted such number
o
f
New Shares
a
s
has
t
h
e
same aggregate
a
s
t
h
e
Old Shares subject
t
o the Exchange. The
subscription price
f
o
r
such New Shares shall
b
e
deemed
t
o have been paid
b
y
t
h
e
application
o
f
t
h
e
redemption proceeds
f
o
r
t
h
e
Old Shares and the Company
i
s
hereby authorised
t
o
s
e
t
o
f
f
any redemption proceeds payable
i
n respect
o
f
t
h
e
compulsory redemption
o
f
t
h
e
Old Shares against
t
h
e
relevant Member's
obligation
t
o pay
t
h
e
subscription price
f
o
r
New Shares.
Ranking. During a Dividend Period,
t
h
e
Company shall
n
o
t
pay any dividends
o
n
t
h
e
Ordinary Shares, other than dividends payable
i
n Ordinary Shares, and
t
h
e
Company shall not repurchase, redeem
o
r
otherwise acquire
f
o
r
consideration
Ordinary Shares, directly
o
r
indirectly, unless full dividends
o
n
t
h
e
Preferred
Securities have been paid
f
o
r
such Dividend Period,
o
r
s
e
t
aside
f
o
r
payment,
a
s
t
h
e
case may
b
e
.
I
n the event the Company voluntarily
o
r
o
r
winds
u
p
,
t
h
e
holders
o
f
a
t
b
e
entitled
t
o receive liquidating distributions
i
n
t
h
e
amount equal
t
o the aggregate
o
f
t
h
e
Preferred Securities held,
i
n each case plus
t
h
e
relevant amount
o
f
any dividends theretofore received
b
y
t
h
e
Company
o
n
a like
amount
o
f
n
o
t
y
e
t
distributed
a
s
a dividend
o
n
t
h
e
Preferred Securities plus
t
h
e
relevant amount
o
f
dividends
o
n
a like amount
o
f
WaMu LLC Preferred Securities that
t
h
e
Company
i
s entitled
t
o receive from
WaMu LLC but has not
y
e
t
received ( because,
f
o
r
example, WaMu LLC's board
o
f
managers has declared
b
u
t
not
y
e
t
paid such dividends) before any distribution
o
f
assets
i
s made
t
o holders
o
f
Ordinary Shares, subject
t
o
t
h
e
rights
o
f
general
creditors ofthe Company.
After payment
o
f
t
h
e
full amount
o
f
t
h
e
t
o which they
a
r
e
entitled, Preferred Securityholders will have
n
o
right
o
r
claim
t
o
any
o
f
t
h
e
Company's remaining assets.
I
n
t
h
e
event that, upon any such voluntary
o
r
involuntary liquidation, dissolution
o
r
winding-
u
p
,
t
h
e
available assets
a
r
e
insufficient
t
o pay
t
h
e
amount
o
f
o
n
a
l
l
outstanding
Preferred Securities, then
t
h
e
Preferred Securityholders will share ratably
i
n any
such distribution
o
f
assets
i
n proportion
t
o
t
h
e
f
u
l
l
t
o
which they would otherwise
b
e
(
e
)
Voting Rights. Except
a
s
expressly provided
o
r
required
b
y
these Articles,
t
h
e
Statute
o
r
other applicable law,
t
h
e
holder
o
f
Preferred Securities shall
n
o
t
have
any voting rights.
I
n
t
h
e
event holders
o
f
Preferred Securities are entitled
t
o vote
o
n
a matter together
a
s
a single class,
o
r
together with holders
o
f
Ordinary Shares,
t
h
e
holders
o
f
Series
A
-
I Preferred Securities will
b
e
entitled
t
o
t
e
n
votes
p
e
r
Share and
t
h
e
holders
o
f
t
h
e
Series
A
-
2 Preferred Securities will
b
e
entitled
t
o one
vote
p
e
r
Share.
NPB/ 616525/ 16003361v2
CONFIDENTIAL
Return
/
!
1
5
I
n
t
h
e
event the Company receives notice from WaMu LLC that
t
h
e
Company
a
s
holder
o
f
i
s entitled
t
o vote
o
n
any matter,
promptly after learning
o
f
such entitlement
t
h
e
Company shall cause
t
o
b
e
given
and published
a
s
provided
i
n Articles 142
t
o 146, notice
o
f
such vote (including a
description
o
f
t
h
e
subject matter
o
f
t
h
e
vote
a
n
d
related circumstances
t
o
t
h
e
extent known
t
o
t
h
e
Company), along with a copy
o
f
any notice
o
r
other written
communication received
b
y
the Company from WaMu LLC with respect
t
o such
vote and related matters.
I
n each such notice the Company shall request direction
from each holder
o
f
a
s
t
o how the Company
a
s
a holder
o
f
WaMu LLC Preferred Securities shall vote a like amount
o
f
WaMu LLC
o
n
t
h
e
matter
a
t
issue. Each holder
o
f
shall have
t
h
e
right
t
o
direct
t
h
e
manner
i
n which
t
h
e
Company exercises such
t
o a like amount ofWaMu LLC Preferred Securities.
S
o
long
a
s
a
r
e
outstanding,
t
h
e
Company will not,
without
t
h
e
consent
o
f
Preferred Securityholders entitled
t
o
a
t
least two- thirds
o
f
t
h
e
total voting rights
o
f
a
l
l
outstanding Preferred Securities, voting together
a
s
a
single class:
(
i
) (
x
)
vary any right, power, preference
o
r
privilege
o
f
t
h
e
Preferred
Securities
o
r
(
y
)
amend, alter, repeal
o
r
otherwise change any other
provision
o
f
these Articles (including this Article
9
)
i
f such amendment,
alteration, repeal
o
r
change pursuant
t
o this clause (
y
)
would materially
and adversely affect
t
h
e
right, powers, preferences
o
r
privileges
o
f
the
Preferred Securities;
o
r
(
i
i
)
merge, convert, consolidate, reorganize
o
r
effect any other business
combination involving
t
h
e
Company.
Additionally
s
o
long
a
s
a
r
e
outstanding,
t
h
e
Company
will not, without
t
h
e
consent
o
f
each holder
o
f
outstanding Preferred Securities,
authorize, create
o
r
increase
t
h
e
authorized amount
o
f
o
r
issue any class
o
r
series
o
f
Shares,
o
r
any warrants, options otherwise convertible
o
r
exchangeable into
any class
o
r
series
o
f
Shares, ranking pari passu
o
r
senior
t
o
t
h
e
Preferred
Securities,
o
r
a
s
t
o dividend rights, redemption rights
o
r
rights
o
n
dissolution,
liquidation
o
r
winding
u
p
o
f
t
h
e
Company.
(
f
)
I
f
the OTS directs upon
t
h
e
occurrence
o
f
a
n
Exchange
Event, each Preferred Security then outstanding shall
b
e
exchanged automatically
f
o
r
a like amount
o
f
newly issued WMI Depositary Shares.
Upon
t
h
e
occurrence
o
f
a Conditional Exchange:
(
i
) each holder
o
f
b
e
t
o
surrender
t
o WMI any certificates representing
t
h
e
owned
b
y
such holder
o
n
t
h
e
date and time provided
i
n
t
h
e
next
succeeding paragraph;
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6525/ 1 600336/
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CONFIDENTIAL
Return
i
I (
i
i
)
1
6
effective
o
n
such date and time
t
h
e
Company shall (
o
r
shall cause
t
h
e
Securities Registrar
t
o
)
record
i
n
t
h
e
Register
o
f
Members WMI
a
s
owner
o
f
a
l
l
o
f
t
h
e
a
s
transferee from
t
h
e
Persons who are
holders
o
f
Preferred Securities immediately prior
t
o such date and time;
and
(
i
i
i
)
the Directors shall have
t
h
e
authority
t
o execute and deliver
a
l
l
such
documents, instruments
o
f
transfer and notices
o
r
otherwise
o
n
behalf
o
f
holders
o
f
a
s
t
h
e
Directors shall,
i
n their absolute
discretion, deem necessary
t
o effect
t
h
e
The Conditional Exchange shall occur
a
s
o
f
8
:
0
0
A
.
M., New York time,
o
n
t
h
e
date
f
o
r
such exchange
s
e
t
forth
i
n
t
h
e
applicable OTS directive,
o
r
,
i
f such date
i
s
n
o
t
s
e
t
forth
i
n
t
h
e
directive,
a
s
o
f
8
:
0
0
A
.
M., New York time,
o
n
t
h
e
earliest
possible date such exchange could occur consistent with
t
h
e
directive,
a
s
evidenced
b
y
t
h
e
issuance
b
y
WMI
o
f
t
o such time.
A
s
o
f
the
time
o
f
t
h
e
Conditional Exchange,
a
l
l
rights
o
f
t
h
e
exchanging holders
o
f
a
s
t
h
e
Company's shareholders shall cease, and such Persons
shall
b
e
,
f
o
r
a
l
l
purposes, solely holders
o
f
WMI Depositary Shares, and WMI
shall
b
e
t
h
e
holder
o
f
a
l
l
outstanding Preferred Securities.
Within
3
0
days
o
f
t
h
e
occurrence
o
f
a
n
Exchange Event and
i
n connection
therewith,
t
h
e
issuance
b
y
the OTS
o
f
a directive requiring a Conditional
Exchange,
t
h
e
Company shall cause
t
o
b
e
mailed
t
o each
o
f
t
h
e
holders
o
f
record
o
f
t
h
e
Preferred Securities immediately prior
t
o such Conditional Exchange and
published
i
n
t
h
e
manner provided
i
n Articles 142
t
o 146, notice setting forth (
i
)
t
h
e
occurrence
o
f
a
n
Exchange Event and directive requiring a Conditional
Exchange
a
n
d
(
i
i
)
instructions where such holders
o
f
record shall deliver
t
h
e
certificates representing
t
h
e
i
n exchange
f
o
r
WMI Depositary
Shares. WMI shall, pursuant
t
o
t
h
e
Exchange Agreement, deliver
t
o
each such
holder
o
f
record
o
f
t
h
e
Preferred Securities a like amount
o
f
WMI Depositary
Shares upon surrender
o
f
t
h
e
certificates representing Preferred Securities. Any
such notice
t
o
t
h
e
holders
o
f
record
o
f
b
e
addressed
t
o
each such holder
a
t
h
i
s
last known address shown
o
n
t
h
e
Register
o
f
Members
o
f
t
h
e
Company
a
n
d
t
h
e
time
o
f
mailing
o
f
such notice shall
b
e
deemed
t
o
b
e
t
h
e
time
o
f
t
h
e
giving thereof Until replacement certificates representative
o
f
WMI
Depositary Shares
a
r
e
delivered
o
r
i
n
t
h
e
event such replacement certificates
a
r
e
n
o
t
delivered, any certificates previously representing Preferred Securities shall
b
e
deemed
f
o
r
a
l
l
purposes
t
o represent WMI Depositary Shares.
Holders
o
f
b
y
purchasing Preferred Securities (whether
i
n
connection with the initial offering
o
f
t
h
e
o
r
i
n
t
h
e
secondary
market), will
b
e
deemed
t
o have agreed
t
o
b
e
bound
b
y
t
h
e
unconditional
obligation
t
o exchange Preferred Securities
f
o
r
a like amount
o
f
Depositary
Shares
a
s
provided
i
n this Article
9
(
f
)
.
NPB/ 616525/ 1600336/
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CONFIDENTIAL
Return
/
(
(
g
)
1
7
I
n
t
h
e
event WMI effects
o
r
i
s the subject
o
f
a merger, consolidation, statutory
share exchange, sale
o
f
a
l
l
,
o
r
substantially all,
o
f
i
t
s
assets
o
r
other form
o
f
business combination, (
i
)
i
n which WMI
i
s
n
o
t
t
h
e
surviving, resulting
o
r
receiving corporation thereof
o
r
(
i
i
)
i
f WMI
i
s
t
h
e
surviving
o
r
resulting
corporation, shares representing a majority ofWMI's total voting power
a
r
e
either
converted
o
r
exchanged into securities
o
f
another Person
o
r
into cash
o
r
other
property (any such transaction
i
n either (
i
)
o
r
(
i
i
)
being a " Business
Combination"), then, WMI (
i
) shall not enter into such Business Combination
unless the Successor Entity agrees, effective upon
t
h
e
consummation
o
f
such
Business Combination,
t
o abide
b
y
a
l
l
o
f
WMI's obligations under
t
h
e
provisions
o
f
t
h
e
Exchange Agreement restricting
t
h
e
payment
o
f
dividends
b
y
WMI
i
n
t
h
e
event dividends
a
r
e
n
o
t
paid with respect
t
o
t
h
e
Company Preferred Securities and
(
i
i
)
may,
a
t
t
h
e
election
o
f
t
h
e
Board
o
f
Directors
o
f
WMI prior
t
o
t
h
e
effectiveness
o
f
such Business Combination, assign, effective upon
t
h
e
consummation
o
f
a
l
l
o
f
i
t
s
other obligations under
the Exchange Agreement
t
o a Successor Entity that has both Fixed Rate Substitute
Preferred Stock and Fixed-
t
o
-
Floating Rate Substitute Preferred Stock and,
a
s
a
result
o
f
such assignment,
a
l
l
references
t
o WMI, Fixed Rate WMI Preferred
Stock, Fixed-
t
o
-
Floating Rate WMI Preferred Stock, Depositary Share shall
become and
b
e
deemed
t
o
b
e
references
t
o such Successor Entity,
t
o such Fixed
Rate Substitute Preferred Stock,
t
o such Fixed-
t
o
-
Floating Rate Substitute
Preferred Stock,
t
o a Successor Depositary Share, respectively. This paragraph
shall apply
t
o any subsequent Business Combination mutatis mutandis.
Acknowledgments and Agreements Relating
t
o Preferred Securities. Each
Preferred Securityholder (
b
y
purchasing a Preferred Security) and each Owner (
b
y
purchasing a beneficial interest
i
n a Book- Entry Preferred Security)
(
i
) acknowledges that
t
h
e
offer and sale
o
f
t
h
e
Preferred Securities has not been
and will
n
o
t
b
e
registered under
t
h
e
U
.
S
.
Securities Act
o
f
1933,
a
s
amended, (
i
i
)
acknowledges and agrees that the Company has not been and will not
b
e
registered
a
s
a
n
" investment company" within the meaning
o
f
t
h
e
U
.
S
.
Investment
Company Act
o
f
1940,
a
s
amended, and (
i
i
i
)
b
y
purchasing Preferred Securities
o
r
interests therein, makes each
o
f
t
h
e
representations, warranties and agreements
s
e
t
forth
i
n
t
h
e
Offering Circular under. the caption " Notice
t
o Investors"
t
o
b
e
made
b
y
purchasers (
a
s
provided
i
n the Offering Circular
t
o
b
e
applicable
t
o
t
h
e
purchasers
o
f
Series
A
-
o
r
Series
A
-
respectively). The Company covenants and agrees
t
o take each
o
f
t
h
e
actions and
steps specified
i
n
t
h
e
Offering Circular under
t
h
e
caption " Notice
t
o Investors"
t
o
b
e
taken
b
y
t
h
e
Company (
i
t being understood that
t
h
e
Company
i
s identified
a
s
" WaMu Cayman"
i
n
t
h
e
Offering Circular), including, without limitation, those
s
e
t
forth under
t
h
e
sub- captions
"
-
Series
A
-
I WaMu Cayman Preferred
Securities",
"
-
Reminder Notices,"
"
-
DTC Actions with Respect
t
o
t
h
e
WaMu
Cayman Preferred Securities,"
"
-
Bloomberg Screens, Etc.,"
"
-
CUSIP," and
"
-
Legends."
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
(
1
8
REGISTER OF MEMBERS
1
0
The Company shall maintain
o
r
cause
t
o
b
e
maintained
t
h
e
Register
o
f
Members
i
n accordance with
t
h
e
Statute. For
s
o
long
a
s
the Agency Agreement
i
s
i
n effect,
t
h
e
Securities Registrar shall maintain
t
h
e
Register
o
f
Members
o
n
behalf
o
f
t
h
e
Company
i
n accordance with such Agreement.
CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE
1
1
For the purpose
o
f
determining Members entitled
t
o notice
o
f
,
o
r
t
o vote
a
t
any
meeting
o
f
Members
o
r
any adjournment thereof,
o
r
Members entitled
t
o receive
payment
o
f
any dividend,
o
r
i
n order
t
o make a determination
o
f
Members
f
o
r
any
other proper purpose,
t
h
e
Directors may provide that
t
h
e
Register
o
f
Members
shall
b
e
closed
f
o
r
transfers
f
o
r
a stated period which shall not
i
n any case exceed
forty days.
I
f
t
h
e
Register
o
f
Members shall
b
e
closed
f
o
r
the purpose
o
f
determining Members entitled
t
o notice
o
f
,
o
r
t
o vote
a
t
,
a meeting
o
f
Members
the Register
o
f
Members shall
b
e
closed
f
o
r
a
t
least ten days immediately
preceding
t
h
e
meeting.
1
2
I
n lieu
o
f
,
o
r
apart from, closing
t
h
e
Register
o
f
Members,
t
h
e
Directors may
f
i
x
i
n
advance
o
r
arrears a date
a
s
the record date
f
o
r
any such determination
o
f
Members
entitled
t
o notice
o
f
,
o
r
t
o vote
a
t
any meeting
o
f
t
h
e
Members
o
r
any adjournment
thereof,
o
r
f
o
r
t
h
e
purpose
o
f
determining
t
h
e
Members entitled
t
o
receive payment
o
f
any dividend
o
r
i
n order
t
o make a determination
o
f
Members
f
o
r
any other
proper purpose (subject
t
o Article
9
(
b
)
i
n
t
h
e
case
o
f
dividends
o
n
Preferred
Securities).
1
3
I
f
t
h
e
Register
o
f
Members
i
s not
s
o
closed and
n
o
record date
i
s fixed
f
o
r
the
determination
o
f
Members entitled
t
o notice
o
f
,
o
r
t
o vote
a
t
,
a meeting
o
f
Members
o
r
Members entitled
t
o receive payment
o
f
a dividend,
t
h
e
date
o
n
which notice
o
f
t
h
e
meeting
i
s sent
o
r
the date
o
n
which
t
h
e
resolution
o
f
the
Directors declaring such dividend
i
s adopted,
a
s
t
h
e
case may
b
e
,
shall
b
e
t
h
e
record date
f
o
r
such determination
o
f
Members. When a determination
o
f
Members entitled
t
o vote
a
t
any meeting
o
f
Members has been made
a
s
provided
i
n this Article, such determination shall apply
t
o any adjournment thereof
CERTWICATES FOR SHARES
1
4
A Member shall only
b
e
entitled
t
o a share certificate
i
f the Directors resolve that
share certificates shall
b
e
issued. Share certificates representing Shares,
i
f any,
shall
b
e
i
n such form
a
s
t
h
e
Directors may determine, subject
t
o Article
1
5
.
Share
certificates shall
b
e
signed
b
y
one
o
r
more Directors
o
r
other Person authorised
b
y
the Directors. The Directors may authorise certificates
t
o
b
e
issued with the
authorised signature(
s
)
affixed
b
y
mechanical process. All certificates
f
o
r
Shares
shall
b
e
consecutively numbered
o
r
otherwise identified and shall specify the
Shares
t
o which they relate.
A
l
l
certificates surrendered
t
o
t
h
e
Company
f
o
r
transfer shall
b
e
cancelled and subject
t
o these Articles
n
o
new certificate shall
b
e
NPB/ 6 I652511 600336/
v
2
CONFIDENTIAL
Return
1
9
issued until
t
h
e
former certificate representing a like number
o
f
relevant Shares
shall have been surrendered and cancelled.
1
5
Each share certificate representing Series
A
-
I Preferred Securities shall bear
t
h
e
following legend:
" THIS SECURITY
I
S ONE
O
F
THE 7.25% PERPETUAL NON-
CUMULATIVE PREFERRED SECURITIES, SERIES
A
-
I
(
"
SERIES
A
l
WAMU CAYMAN PREFERRED SECURITIES")
ISSUED BY WASHINGTON MUTUAL PREFERRED
FUNDING (CAYMAN) I LTD.
(
"
WAMU CAYMAN"). THE
ISSUER OF THIS SECURITY HAS NOT BEEN REGISTERED
A
S
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
B
E
OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
T
O
A PERSON WHO
I
S 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 OR
THE ACCOUNT
O
F
A PERSON WHO
I
S BOTH A QUALIFIED
INSTITUTIONAL BUYER AND A QUALIFIED PURCHASER
( AN " ELIGIBLE PURCHASER") AND EACH SUCH PERSON
AND ACCOUNT FOR WHICH SUCH PERSON
I
S
PURCHASING (
A
)
I
S NOT A BROKER- DEALER THAT
OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS
THAN US$
2
5
MILLION
I
N SECURITIES
O
F
ISSUERS THAT
ARE NOT ITS AFFILIATED PERSONS, (
B
)
I
S NOT A PLAN
REFERRED TO
I
N PARAGRAPH (
a
)
(
I
)
(
i
)
(
D
)
OR (
a
)
(
I
)
(
i
)
(
E
)
OF RULE 144A, OR A TRUST FUND REFERRED TO
I
N
PARAGRAPH (
a
)
(
l
)
(
i
)
(
F
)
O
F
RULE 144A THAT HOLDS THE
ASSETS OF SUCH A PLAN,
I
F INVESTMENT DECISIONS
WITH RESPECT
T
O
THE PLAN ARE MADE
B
Y
THE
BENEFICIARIES
O
F
SUCH PLAN, (
C
)
WAS NOT FORMED
FOR THE PURPOSE OF INVESTING
I
N WAMU CAYMAN,
(
D
)
WILL HOLD AND TRANSFER
A
T
LEAST $100,000
LIQUIDATION PREFERENCE OF SERIES
A
-
I WAMU
CAYMAN PREFERRED SECURITIES (i.~.,
A
T
LEAST ONE
WAMU CAYMAN PREFERRED SECURITY), AND (
E
)
UNDERSTANDS THAT WAMU CAYMAN MAY RECEIVE A
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
2
0
LIST OF PARTICIPANTS HOLDING POSITIONS
I
N THIS
SECURITY FROM ONE OR MORE BOOK-ENTRY
DEPOSITARIES. EACH PURCHASER OF THIS SECURITY
O
R
ANY BENEFICIAL INTERESTS HEREIN WILL
B
E
DEEMED
T
O
REPRESENT THAT
I
T AGREES
T
O
COMPLY
WITH THE TRANSFER RESTRICTIONS SET FORTH HEREIN
AND
I
N THE MEMORANDUM AND ARTICLES
O
F
ASSOCIATION OF WAMU CAYMAN ( AS AMENDED, THE
" ARTICLES
O
F
ASSOCIATION") AND WILL NOT
TRANSFER THIS SECURITY OR ANY BENEFICIAL
INTERESTS HEREIN EXCEPT
T
O
AN ELIGIBLE
PURCHASER WHO CAN MAKE THE SAME
REPRESENTATIONS AND AGREEMENTS ON BEHALF OF
ITSELF AND EACH ACCOUNT FOR WHICH
I
T
I
S
PURCHASING. ANY PURPORTED TRANSFER OF THIS
SECURITY OR ANY BENEFICIAL INTERESTS HEREIN
THAT
I
S
I
N BREACH, AT THE TIME MADE, OF ANY
TRANSFER RESTRICTIONS SET FORTH HEREIN OR
I
N
THE ARTICLES
O
F
ASSOCIATION WILL
B
E
VOID AB
INITIO.
I
F AT ANY TIME WAMU CAYMAN DETERMINES
I
N GOOD FAITH THAT A HOLDER OR BENEFICIAL
OWNER OF THIS SECURITY OR BENEFICIAL INTERESTS
HEREIN
I
S
I
N BREACH,
A
T
THE TIME GIVEN,
O
F
ANY
O
F
THE TRANSFER RESTRICTIONS SET FORTH HEREIN,
WAMU CAYMAN SHALL CONSIDER THE ACQUISITION
O
F
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.
I
N 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.
NO SECURITY MAY
B
E
PURCHASED OR TRANSFERRED
TO: (
1
)
AN " EMPLOYEE BENEFIT PLAN" AS DEFINED
I
N
SECTION
3
(
3
)
O
F
THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT
O
F
1974, AS AMENDED
(
"
ERISA"),
WHETHER OR NOT SUBJECT TO ERISA AND INCLUDING,
WITHOUT LIMITATION, FOREIGN OR GOVERNMENTAL
PLANS, (
I
I
)
A " PLAN" WITHIN THE MEANING
O
F
SECTION
4975
O
F
THE INTERNAL REVENUE CODE
O
F
1986, AS
AMENDED (THE " CODE"), OR (
I
I
I
)
ANY ENTITY WHOSE
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
t
'..
(
2
1
UNDERLYING ASSETS INCLUDE " PLAN ASSETS"
O
F
ANY
O
F
THE FOREGOING BY REASON OF INVESTMENT BY AN
EMPLOYEE BENEFIT PLAN OR OTHER PLAN
I
N 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
O
F
ACQUISITION
I
T HOLDS THE
SECURITIES, (
1
)
I
T
I
S ELIGIBLE FOR AND MEETS THE
REQUIREMENTS
O
F
THE DEPARTMENT
O
F
LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION 95- 60,
(
I
I
)
LESS THAN 25%
O
F
THE ASSETS
O
F
SUCH GENERAL
ACCOUNT ARE (OR REPRESENT) ASSETS
O
F
A BENEFIT
PLAN INVESTOR AND (III)
I
T
I
S NOT A PERSON WHO HAS
DISCRETIONARY AUTHORITY OR CONTROL WITH
RESPECT TO THE ASSETS
O
F
WAMU CAYMAN
O
R
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 OTHREWISE BE EXCLUDED UNDER
2
9
C
.
F
.
R
.
2510.3- 101(
F
)
(
1
)
.
I
S
PRESENTED BY AN
AUTHORIZED REPRESENTATIVE
O
F
THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION
(
"
DTC"),
T
O
WAMU CAYMAN OR THE TRANSFER AGENT, AND
ANY CERTIFICATE ISSUED
I
S REGISTERED
I
N THE NAME
OF CEDE & CO. OR
I
I
S
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT
I
S MADE TO CEDE & CO. OR
T
O
SUCH OTHER ENTITY
A
S
I
S REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE
B
Y
OR TO ANY PERSON
I
S
WRONGFUL INASMUCH. AS . THE REGISTERED OWNER
HEREOF, CEDE &CO., HAS AN INTEREST HEREIN."
Each share certificate evidencing Series
A
-
2 Preferred Securities shall bear
t
h
e
following legend:
" THIS SECURITY
I
S ONE
O
F
THE 7.25% PERPETUAL NON-
CUMULATIVE PREFERRED SECURITIES, SERIES
A
-
2
(
"
SERIES
A
-
2 WAMU CAYMAN PREFERRED SECURITIES")
ISSUED BY WASHINGTON MUTUAL PREFERRED
FUNDING ( CAYMAN) I LTD.
(
"
WAMU CAYMAN"). THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE
U
.
S
.
SECURITIES ACT
O
F
1933,
A
S
AMENDED (THE
NPB/ 616525! 1600336/
v
2
CONFIDENTIAL
Return
(
2
2
" SECURITIES ACT"), AND NEITHER THIS SECURITY NOR
ANY BENEFICIAL INTERESTS HEREIN MAYBE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
(
1
)
I
N AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS
O
F
REGULATION S UNDER THE
SECURITIES ACT TO A PERSON OTHER THAN A
U
.
S
.
PERSON, OR (
2
)
I
N RELIANCE UPON RULE 144A UNDER
THE SECURITIES ACT
I
N A TRANSACTION INVOLVING
AN EXCHANGE OF THIS SECURITY FOR A LIKE AMOUNT
O
F
7.25% PERPETUAL NON- CUMULATIVE PREFERRED
SECURITIES, SERIES
A
-
I
,
O
F
WAMU CAYMAN, WHICH
I
S
ALSO THE ISSUER
O
F
THIS SECURITY, BUT ONLY UPON
RECEIPT BY WAMU CAYMAN'S TRANSFER AGENT
O
F
A
WRITTEN CERTIFICATE ON BEHALF OF THE
TRANSFEROR TO THE EFFECT THAT SUCH TRANSFER
I
S
BEING MADE TO A PERSON WHO THE TRANSFEROR
REASONABLY BELIEVES
I
S 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
O
F
SECTION
2
(
a
)
(
51)
O
F
THE
U
.
S
.
INVESTMENT COMPANY ACT
O
F
1940,
A
S
AMENDED
(
"
QUALIFIED PURCHASER"), ACQUIRING FOR
ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER WHO
I
S ALSO A QUALIFIED
PURCHASER (AN " ELIGIBLE PURCHASER")
I
N A
TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A UNDER THE SECURITIES ACT AND
I
N
ACCORDANCE WITH ALL APPLICABLE LAWS OF THE
STATES
O
F
THE UNITED STATES AND OTHER
JURISDICTIONS. EACH PURCHASER
O
F
THIS SECURITY
OR ANY BENEFICIAL INTERESTS HEREIN WILL
B
E
DEEMED TO REPRESENT THAT
I
T AGREES TO COMPLY
WITH THE TRANSFER RESTRICTIONS SET FORTH HEREIN
AND
I
N THE MEMORANDUM AND ARTICLES OF
ASSOCIATION OF WAMU CAYMAN (AS AMENDED, THE
" ARTICLES
O
F
ASSOCIATION"), AND WILL NOT
TRANSFER THIS SECURITY OR ANY BENEFICIAL
INTERESTS HEREIN EXCEPT
T
O
A PURCHASER WHO CAN
MAKE THE SAME REPRESENTATIONS AND
AGREEMENTS ON BEHALF
O
F
ITSELF AND EACH
ACCOUNT FOR WHICH
I
T
I
S PURCHASING. ANY
PURPORTED TRANSFER OF THIS SECURITY OR ANY
BENEFICIAL INTERESTS HEREIN THAT
I
S
I
N BREACH, AT
THE TIME MADE, OF ANY TRANSFER RESTRICTIONS SET
FORTH HEREIN OR
I
N THE ARTICLES OF ASSOCIATION
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
(
2
3
WILL
B
E
VOID AB INITIO.
I
F
AT ANY TlME WAMU
CAYMAN DETERMINES
I
N GOOD FAITH THAT A HOLDER
OR BENEFICIAL OWNER OF THIS SECURITY OR
BENEFICIAL INTERESTS HEREIN
I
S
I
N BREACH, AT THE
TlME GIVEN, OF ANY OF THE TRANSFER RESTRICTIONS
SET FORTH HEREIN, WAMU CAYMAN SHALL CONSIDER
THE ACQUISITION
O
F
THIS SECURITY OR SUCH
BENEFICIAL INTERESTS VOID,
O
F
NO FORCE AND
EFFECT AND WILL NOT, AT THE DISCRETION OF WAMU
CAYMAN, OPERATE TO TRANSFER ANY RIGHTS TO THE
TRANSFEREE NOTWITHSTANDING ANY INSTRUCTIONS
T
O
THE CONTRARY
T
O
WAMU CAYMAN, ITS AGENT FOR
REGISTRATION
O
F
TRANSFER, EXCHANGE
O
R
PAYMENT
( THE " TRANSFER AGENT"), OR ANY . OTHER
INTERMEDIARY.
I
N 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.
NO SECURITY MAY BE PURCHASED OR TRANSFERRED
TO: (
I
)
AN " EMPLOYEE BENEFIT PLAN" AS DEFINED
I
N
SECTION
3
(
3
)
OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT
O
F
1974,
A
S
AMENDED
(
"
ERISA"),
WHETHER OR NOT SUBJECT TO ERISA AND INCLUDING,
WITHOUT LlMITATION, FOREIGN
O
R
GOVERNMENTAL
PLANS, (
I
I
)
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
O
F
THE FOREGOING BY REASON
O
F
INVESTMENT BY AN
EMPLOYEE BENEFIT PLAN OR OTHER PLAN
I
N SUCH
ENTITY (EACH
O
F
THE FOREGOING, A " BENEFIT PLAN
INVESTOR"), EXCEPT FOR AN INSURANCE COMPANY
GENERAL ACCOUNT THAT REPRESENTS, WARRANTS
AND COVENANTS THAT, AT THE TIME OF ACQUISITION
I
T HOLDS THE
SECURITIES, (
I
)
I
T
I
S ELIGIBLE FOR AND MEETS THE
REQUIREMENTS
O
F
THE DEPARTMENT
O
F
LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION
9
5
-
6
0
,
(
I
I
)
LESS THAN 25% OF THE ASSETS OF SUCH GENERAL
ACCOUNT ARE ( OR REPRESENT) ASSETS OF A BENEFIT
PLAN INVESTOR AND (III)
I
T
I
S NOT A PERSON WHO HAS
DISCRETIONARY AUTHORITY OR CONTROL WITH
RESPECT
T
O
THE ASSETS
O
F
WAMU CAYMAN OR ANY
PERSON WHO PROVIDES INVESTMENT ADVICE FOR A
FEE (DIRECT OR INDIRECT) WITH RESPECT TO SUCH
ASSETS, OR ANY AFFILIATE OR SUCH PERSON AND
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
(
-
' -
2
4
WOULD NOT OTHERWISE BE EXCLUDED UNDER
2
9
C
.
F
.
R
.
25IO.
3
-
IOI(
F
)
(
1
)
.
" UNLESS THIS SECURITY
I
S
PRESENTED BY AN
AUTHORIZED REPRESENTATIVE
O
F
THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION
(
"
DTC"),
TO WAMU CAYMAN OR THE TRANSFER AGENT, AND
ANY CERTIFICATE ISSUED
I
S REGISTERED
I
N THE NAME
OF CEDE & CO. OR
I
I
S
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT
I
S
MADE TO CEDE & CO. OR
T
O
SUCH OTHER ENTITY
A
S
I
S REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR
T
O
ANY PERSON
I
S
WRONGFUL INASMUCH
A
S
THE REGISTERED OWNER
HEREOF, CEDE &CO., HAS AN INTEREST HEREIN."
Notwithstanding any other provision
o
f
these Articles:
(
h
)
The Series
A
-
I Preferred Securities will initially
b
e
represented
b
y
one
o
r
more Share certificates
i
n
registered, global form, including
t
h
e
legend
s
e
t
forth above
f
o
r
Share certificates evidencing Series
A
-
I Preferred Securities and any legend required
b
y
a Clearing
Agency (a " Rule 144A Global Security"), and
t
h
e
Series
A
-
2
Preferred Securities initially will
b
e
represented
b
y
one
o
r
more
Share certificates
i
n registered, global form including
t
h
e
legend
s
e
t
forth above and any other legends required
b
y
any applicable
Clearing Agency (
t
h
e
" Regulation S Global Security" and, together
with
t
h
e
Rule I44A Global Security,
t
h
e
" Global Securities").
Each Global Security shall
b
e
a Book- Entry Preferred Security.
(
i
)
O
n
t
h
e
Issue Date,
t
h
e
Company will cause
t
h
e
Global Securities
t
o
b
e
deposited with
t
h
e
Securities Registrar
a
s
custodian
f
o
r
DTC
i
n
New York, New York, and registered
i
n the name
o
f
DTC
o
r
a
nominee designated
b
y
DTC.
(
j
) Share certificates that
a
r
e
not Global Securities will
b
e
issued only
i
n the circumstances described
i
n
t
h
e
t
h
e
caption " Book- Entry Issuance- Special Circumstances When
Global Security Will
B
e
Terminated."
1
6
The Company shall
n
o
t
b
e
bound
t
o issue more than one certificate
f
o
r
Shares
held jointly
b
y
more than one Person and delivery
o
f
a certificate
t
o
one joint
holder shall
b
e
a sufficient delivery
t
o
a
l
l
o
f
them.
1
7
I
f
a share certificate
i
s
defaced, worn out, lost
o
r
destroyed,
i
t
may
b
e
renewed
o
n
such terms (
i
f
any)
a
s
t
o
evidence and indemnity and
o
n
t
h
e
payment
o
f
such
NPB/ 61652511600336/
v
2
CONFIDENTIAL
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(
2
5
expenses reasonably incurred
b
y
the Company
i
n investigating evidence,
a
s
the
Directors may prescribe, and (
i
n
t
h
e
case
o
f
defacement
o
r
wearing out) upon
delivery
o
f
t
h
e
old certificate.
TRANSFER OF SHARES
1
8
Shares
a
r
e
transferable subject
t
o
t
h
e
consent
o
f
t
h
e
Directors who may,
i
n their
absolute discretion, decline
t
o register any transfer
o
f
Shares without giving any
reason.
I
f
the Directors refuse
t
o register a transfer they shall notify
t
h
e
transferee
within two months
o
f
such refusal provided, however, that
(
i
) notwithstanding
t
h
e
foregoing,
i
f
f
o
r
s
o
long
a
s
a
r
e
outstanding, Ordinary Shares may not
b
e
issued
o
r
transferred
t
o
o
r
registered
i
n
t
h
e
name
o
f
any Person other than
t
h
e
trustee
o
f
t
h
e
Cayman
Trust; and
(
i
i
)
unless and until the circumstances described
i
n
t
h
e
t
h
e
caption " Book- Entry Issuance - Special Situations when Global
Security Will
B
e
Terminated" apply (and,
a
s
a consequence
t
h
e
Preferred
Securities
a
r
e
n
o
longer represented
b
y
Global Securities), Preferred
Securities may not
b
e
recorded
o
n
t
h
e
Register
o
f
Members
a
s
owned
o
f
record
b
y
any Person other than
t
h
e
Clearing Agency
o
r
i
t
s
nominee
(initially Cede &Co.
a
s
nominee
f
o
r
DTC).
1
9
Notwithstanding any other provision
o
f
these Articles,
i
f any Preferred Securities
a
r
e
held
b
y
a Clearing Agency
o
r
i
t
s
nominee (initially Cede & Co.
a
s
nominee
f
o
r
DTC) and a Relevant Event occurs, such Preferred Securities shall, upon notification
o
f
t
h
e
Company
o
r
i
t
s
agent
b
y
t
h
e
Registrar
o
f
t
h
e
identity
o
f
t
h
e
Accountholders
and
t
h
e
number
o
f
i
n which they
a
r
e
respectively beneficially
interested
a
s
a
t
the occurrence
o
f
such Relevant Event,
b
e
automatically transferred
t
o such Accountholders
i
n
t
h
e
appropriate amounts and
t
h
e
Registrar, failing whom
t
h
e
Company
o
r
such other person
a
s
t
h
e
Directors may designate, shall forthwith
make
t
h
e
relevant entries
i
n
t
h
e
Register and shall,
i
f the Directors deem appropriate,
issue share certificates
i
n respect
o
f
such transfer.
The instrument
o
f
transfer
o
f
any Share shall
b
e
i
n writing and shall
b
e
executed
b
y
o
r
o
n
behalf
o
f
the . transferor ( and
i
f
t
h
e
Directors
s
o
.
require, signed
b
y
the
transferee); provided, however, that
n
o
such instrument shall
b
e
necessary
t
o
effect a Conditional Exchange
i
n accordance with Article
9
(
f
)
.
The transferor
shall
b
e
deemed
t
o remain
t
h
e
holder
o
f
a Share until
t
h
e
name
o
f
the transferee
i
s
entered
i
n
t
h
e
Register
o
f
Members.
REDEMPTION AND REPURCHASE OF SHARES
2
0
The Ordinary Shares shall not
b
e
redeemable. The Preferred Securities shall
b
e
redeemable only
a
s
provided
i
n Article
9
(
c
)
.
2
1
Subject
t
o
t
h
e
provisions
o
f
t
h
e
Statute,
t
h
e
Company may purchase
i
t
s
own
Shares (including any redeemable Shares) provided that the Members shall have
approved
t
h
e
manner
o
f
purchase
b
y
Ordinary Resolution.
NPB/ 6 I6525/ 1600336/
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CONFIDENTIAL
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(
2
2
2
6
The Company may make a payment
i
n respect
o
f
the redemption
o
r
purchase
o
f
i
t
s
own Shares
i
n any manner permitted
b
y
t
h
e
Statute, including
o
u
t
o
f
capital.
VARIATION
O
F
RlGHTS
O
F
SHARES
2
3
Subject
t
o Article
9
(
e
)
with respect
t
o
t
h
e
i
f
a
t
any time
t
h
e
share capital
o
f
t
h
e
Company
i
s divided into different classes
o
f
Shares,
t
h
e
rights
. attached
t
o any class ( unless otherwise provided
b
y
the terms
o
f
issue
o
f
t
h
e
Shares
o
f
that class) may, whether
o
r
not
t
h
e
Company
i
s being wound-
u
p
,
b
e
varied with the consent
i
n writing
o
f
the holders
o
f
two- thirds
o
f
t
h
e
issued Shares
o
f
that class,
o
r
with the sanction
o
f
a Special Resolution passed
a
t
a general
meeting
o
f
the holders
o
f
t
h
e
Shares
o
f
that class.
2
4
The provisions
o
f
these Articles relating
t
o general meetings shall apply
t
o every
class meeting
o
f
t
h
e
holders
o
f
one class
o
f
Shares except that
t
h
e
necessary
quorum shall
b
e
one Person holding
o
r
representing
b
y
proxy
a
t
least one- third
o
f
t
h
e
issued Shares
o
f
t
h
e
class and that any holder
o
f
Shares
o
f
t
h
e
class present
i
n
Person
o
r
b
y
proxy may demand a poll.
COMMISSION ON SALE
O
F
SHARES
2
5
The Company may,
i
n
s
o
f
a
r
a
s
t
h
e
Statute permits, pay a commission
t
o any
Person
i
n consideration
o
f
h
i
s
subscribing
o
r
agreeing
t
o subscribe whether
absolutely
o
r
conditionally
f
o
r
any Shares
o
f
t
h
e
Company. Such commissions
may
b
e
satisfied
b
y
t
h
e
payment
o
f
cash and/
o
r
t
h
e
issue
o
f
fully
o
r
partly paid-
u
p
Shares. The Company may also
o
n
any issue
o
f
Shares pay such brokerage
a
s
may
b
e
lawful.
NON- RECOGNITION OF TRUSTS
2
6
The Company shall not
b
e
bound
b
y
o
r
compelled
t
o recognise
i
n any way (even
when notified) any equitable, contingent, future
o
r
partial interest
i
n any Share,
o
r
(except only
a
s
i
s otherwise provided
b
y
these Articles
o
r
t
h
e
Statute) any other
rights
i
n respect
o
f
any Share other than
a
n
absolute right
t
o
t
h
e
entirety thereof
i
n
t
h
e
registered holder.
LIEN ON SHARES
2
7
The Company shall have a first and paramount lien
o
n
a
l
l
Shares ( whether fully
paid-
u
p
o
r
not) registered
i
n
t
h
e
name
o
f
a Member (whether solely
o
r
jointly with
others)
f
o
r
a
l
l
debts, liabilities
o
r
engagements
t
o
o
r
with the Company (whether
presently payable
o
r
not)
b
y
such Member
o
r
h
i
s
estate, either alone
o
r
jointly
with any other Person, whether a Member
o
r
not, but
t
h
e
Directors may
a
t
any
time declare any Share
t
o
b
e
wholly
o
r
i
n part exempt from
t
h
e
provisions
o
f
this
Article. The registration
o
f
a transfer
o
f
any such Share shall operate
a
s
a waiver
o
f
t
h
e
Company's lien thereon. The Company's lien
o
n
a Share shall also extend
t
o any amount payable
i
n respect
o
f
that Share.
2
8
The Company may sell,
i
n such manner
a
s
t
h
e
Directors think
f
i
t
,
any Shares
o
n
which
t
h
e
Company has a lien,
i
f a sum
i
n respect
o
f
which the lien exists
i
s
presently payable, and
i
s
n
o
t
paid within fourteen clear days after notice
h
a
s
been
given
t
o
t
h
e
holder
o
f
t
h
e
Shares,
o
r
t
o
t
h
e
Person entitled
t
o
i
t
i
n consequence
o
f
NPB/ 616525/ 1600336/
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CONFIDENTIAL
Return
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9
3
0
2
7
t
h
e
death
o
r
bankruptcy
o
f
t
h
e
holder, demanding payment and stating that
i
f
t
h
e
notice
i
s not complied with
t
h
e
Shares may
b
e
sold.
T
o
give effect
t
o any such sale
t
h
e
Directors may authorise any Person
t
o execute
a
n
instrument
o
f
transfer
o
f
t
h
e
Shares sold
t
o
,
o
r
i
n accordance with
t
h
e
directions
o
f
,
t
h
e
purchaser. The purchaser
o
r
h
i
s
nominee shall
b
e
registered
a
s
t
h
e
holder
o
f
t
h
e
Shares comprised
i
n any such transfer, and
h
e
shall not
b
e
bound
t
o see
t
o
t
h
e
application
o
f
t
h
e
purchase money, nor shall
h
i
s
title
t
o
t
h
e
Shares
b
e
affected
b
y
any irregularity
o
r
invalidity
i
n
t
h
e
sale
o
r
t
h
e
exercise
o
f
t
h
e
Company's power
o
f
sale under these Articles.
The
n
e
t
proceeds
o
f
such sale after payment
o
f
costs, shall
b
e
applied
i
n payment
o
f
such part
o
f
t
h
e
amount
i
n respect
o
f
which
t
h
e
lien exists
a
s
i
s presently
payable and any residue shall (subject
t
o
a like lien
f
o
r
sums
n
o
t
presently payable
a
s
existed upon the Shares before
t
h
e
sale)
b
e
paid
t
o
t
h
e
Person entitled
t
o the
Shares
a
t
t
h
e
date
o
f
the sale.
CALL ON SHARES
3
1
Subject
t
o
t
h
e
terms
o
f
t
h
e
allotment
t
h
e
Directors may from time
t
o
time make
calls upon the Members
i
n respect
o
f
any monies unpaid
o
n
their Shares (whether
i
n respect
o
f
par value
o
r
premium), and each Member shall (subject
t
o receiving
a
t
least fourteen days' notice specifying
t
h
e
time
o
r
times
o
f
payment) pay
t
o
t
h
e
Company
a
t
the time
o
r
times
s
o
specified
t
h
e
amount called
o
n
t
h
e
Shares. A
call may
b
e
revoked
o
r
postponed
a
s
t
h
e
Directors may determine. A call may
b
e
required
t
o
b
e
paid
b
y
instalments. A Person upon whom a call
i
s made shall
remain liable
f
o
r
calls made upon him notwithstanding
t
h
e
subsequent transfer
o
f
t
h
e
Shares
i
n respect
o
f
which
t
h
e
call was made.
3
2
A call shall
b
e
deemed
t
o have been made
a
t
t
h
e
time when the resolution
o
f
the
Directors authorising such call was passed.
3
3
The joint holders
o
f
a Share shall
b
e
jointly and severally liable
t
o pay
a
l
l
calls
i
n
respect thereof
3
4
I
f
a call remains unpaid after
i
t has become due and payable,
t
h
e
Person from
whom
i
t
i
s due shall pay interest
o
n
the amount unpaid from
t
h
e
day
i
t became
due and payable until
i
t
i
s paid
a
t
such rate
a
s
t
h
e
Directors may determine,
b
u
t
t
h
e
Directors may waive payment
o
f
the interest wholly
o
r
i
n part.
3
5
A
n
amount payable
i
n respect
o
f
a Share
o
n
allotment
o
r
a
t
any fixed date,
whether
o
n
account
o
f
t
h
e
par value
o
f
t
h
e
Share
o
r
premium
o
r
otherwise, shall
b
e
deemed
t
o
b
e
a call and
i
f
i
t
i
s
n
o
t
paid
a
l
l
t
h
e
provisions
o
f
these Articles shall
apply
a
s
i
f that amount had become due and payable
b
y
virtue
o
f
a
call.
3
6
The Directors may issue Shares with different terms
a
s
t
o
t
h
e
amount and times
o
f
payment
o
f
calls,
o
r
t
h
e
interest
t
o
b
e
paid.
3
7
The Directors may,
i
f they think
f
i
t
,
receive
a
n
amount from any Member willing
t
o advance
a
l
l
o
r
any part
o
f
t
h
e
monies uncalled and unpaid upon any Shares held
b
y
him, and may (until
t
h
e
amount would otherwise become payable) pay interest
NPB! 616525! 1600336!
v
2
CONFIDENTIAL
Return
(
3
8
2
8
a
t
such rate
a
s
may
b
e
agreed upon between
t
h
e
Directors and
t
h
e
Member paying
such amount
i
n advance.
N
o
such amount paid
i
n advance
o
f
calls shall entitle the Member paying such
amount
t
o any portion
o
f
a Dividend declared
i
n respect
o
f
any period prior
t
o
t
h
e
date upon which such amount would, but
f
o
r
such payment, become payable.
FORFEITURE OF SHARES
4
1
(
3
9
I
f a call remains unpaid after
i
t has become due and payable
t
h
e
Directors may
give
t
o
t
h
e
Person from whom
i
t
i
s due not less than fourteen clear days' notice
requiring payment
o
f
t
h
e
amount unpaid together with any interest, which may
have accrued. The notice shall specify where payment
i
s
t
o
b
e
made and shall
state that
i
f
t
h
e
notice
i
s
n
o
t
complied with
t
h
e
Shares
I
n respect
o
f
which
t
h
e
call
was made will
b
e
liable
t
o
b
e
forfeited.
4
0
I
f
t
h
e
notice
i
s
n
o
t
complied with any Share
i
n respect
o
f
which
i
t was given ! Jlay,
before
t
h
e
payment required
b
y
t
h
e
notice
h
a
s
been made,
b
e
forfeited
b
y
a
resolution
o
f
the Directors. Such forfeiture shall include
a
l
l
dividends
o
r
other
monies declared payable
i
n respect
o
f
t
h
e
forfeited Share and not paid before the
forfeiture.
A forfeited Share may
b
e
sold,
r
e
-
allotted
o
r
otherwise disposed
o
f
o
n
such terms
and
i
n such manner
a
s
t
h
e
Directors think
f
i
t
and
a
t
any time before a sale,
r
e
-
allotment
o
r
disposition
t
h
e
forfeiture may
b
e
cancelled
o
n
such terms
a
s
t
h
e
Directors think
f
i
t
.
Where
f
o
r
t
h
e
purposes
o
f
i
t
s
disposal a forfeited Share
i
s
t
o
b
e
transferred
t
o any Person
t
h
e
Directors may authorise some Person
t
o execute
a
n
instrument
o
f
transfer
o
f
t
h
e
Share
i
n favour
o
f
that Person.
4
2
A Person any
o
f
whose Shares have been forfeited shall cease
t
o
b
e
a Member
i
n
respect
o
f
them and shall surrender
t
o
t
h
e
Company
f
o
r
cancellation the certificate
f
o
r
t
h
e
Shares forfeited and shall remain liable
t
o pay
t
o
t
h
e
Company
a
l
l
monies
which
a
t
t
h
e
date
o
f
forfeiture were payable
b
y
him
t
o the Company
i
n respect
o
f
those Shares together with interest, but
h
i
s
liability shall cease
i
f and when
t
h
e
Company shall have received payment
i
n
f
u
l
l
o
f
a
l
l
monies
d
u
e
and payable
b
y
him
i
n respect
o
f
those Shares.
4
3
A certificate
i
n writing under the hand
o
f
one Director
o
r
officer
o
f
t
h
e
Company
that a Share has been forfeited
o
n
a specified date shall
b
e
conclusive evidence
o
f
t
h
e
fact
a
s
against
a
l
l
Persons claiming
t
o
b
e
entitled
t
o
t
h
e
Share. The certificate
shall ( subject
t
o
t
h
e
execution
o
f
a
n
instrument
o
f
transfer) constitute a good title
t
o
t
h
e
Share and
t
h
e
Person
t
o whom
t
h
e
Share
i
s disposed
o
f
shall
n
o
t
b
e
bound
t
o
s
e
e
t
o
t
h
e
application
o
f
t
h
e
purchase money,
i
f any,
n
o
r
shall
h
i
s
title
t
o
t
h
e
Share
b
e
affected
b
y
any irregularity
o
r
invalidity
i
n
t
h
e
proceedings
i
n reference
t
o
t
h
e
forfeiture, sale
o
r
disposal
o
f
t
h
e
Share.
4
4
The provisions
o
f
these Articles
a
s
t
o forfeiture shall apply
i
n
t
h
e
case
o
f
non- payment
o
f
any sum which,
b
y
t
h
e
terms
o
f
issue
o
f
a Share, becomes
payable
a
t
a fixed time, whether
o
n
account
o
f
t
h
e
par value
o
f
the Share
o
r
b
y
way
o
f
premium
a
s
i
f
i
t had been payable
b
y
virtue
o
f
a
c
a
l
l
duly made and
notified.
NPB/ 616525/ I 600336/
v
2
CONFIDENTIAL
Return
2
9
(
TRANSMISSION OF SHARES
4
5
4
8
4
6
4
7
I
f
a Member dies
t
h
e
survivor
o
r
survivors where
h
e
was a joint holder, and
h
i
s
legal personal representatives where
h
e
was a sole holder, shall
b
e
t
h
e
only
Persons recognised
b
y
the Company
a
s
having any title
t
o
h
i
s
interest. The estate
o
f
a deceased Member
i
s not thereby released from any liability
i
n respect
o
f
any
Share, which had been jointly held
b
y
him.
Any Person becoming entitled
t
o a Share
i
n consequence
o
f
t
h
e
death
o
r
bankruptcy
o
r
liquidation
o
r
dissolution
o
f
a Member (
o
r
i
n any other way than
b
y
transfer) may, upon such evidence being produced
a
s
may from time
t
o time
b
e
required
b
y
t
h
e
Directors, elect either
t
o become
t
h
e
holder ofthe Share
o
r
t
o have
some Person nominated
b
y
him
a
s
t
h
e
transferee.
I
f
h
e
elects
t
o
become
t
h
e
holder
h
e
shall give notice
t
o
t
h
e
Company
t
o
that effect,
b
u
t
t
h
e
Directors shall,
i
n either case, have
t
h
e
same right
t
o decline
o
r
suspend registration
a
s
they would
have had
i
n
t
h
e
case
o
f
a transfer
o
f
the Share
b
y
that Member before
h
i
s
death
o
r
bankruptcy,
a
s
t
h
e
case may
b
e
.
I
f
t
h
e
Person
s
o
becoming entitled shall elect
t
o
b
e
registered himself
a
s
holder
h
e
shall deliver
o
r
send
t
o
t
h
e
Company a notice
i
n writing signed
b
y
him stating that
h
e
s
o
elects.
A Person becoming entitled
t
o a Share
b
y
reason
o
f
t
h
e
death
o
r
bankruptcy
o
r
liquidation
o
r
dissolution
o
f
t
h
e
holder (
o
r
i
n any other case than
b
y
transfer) shall
b
e
entitled
t
o
t
h
e
same dividends and other advantages
t
o which
h
e
would
b
e
entitled
i
f
h
e
were
t
h
e
registered holder
o
f
t
h
e
Share. However,
h
e
shall not,
before being registered
a
s
a Member
i
n respect
o
f
t
h
e
Share,
b
e
entitled
i
n respect
o
f
i
t
t
o exercise any right conferred
b
y
membership
i
n relation
t
o meetings
o
f
t
h
e
Company and
t
h
e
Directors may
a
t
any time give notice requiring any such
Person
t
o elect either
t
o
b
e
registered himself
o
r
t
o transfer
t
h
e
Share.
I
f
t
h
e
notice
i
s not complied with within ninety days
t
h
e
Directors may thereafter withhold
payment
o
f
a
l
l
dividends, bonuses
o
r
other monies payable
i
n respect
o
f
t
h
e
Share
until
t
h
e
requirements
o
f
t
h
e
notice have been complied with.
AMENDMENTS OF MEMORANDUM AND ARTICLES OF ASSOCIATION AND
ALTERATION OF CAPITAL
4
9
Subject
t
o
t
h
e
provisions
o
f
t
h
e
Statute and
t
h
e
provisions
o
f
these Articles
a
s
regards
t
h
e
matters
t
o
b
e
dealt with
b
y
Ordinary Resolution, and subject
t
o Article
9
(
e
)
,
t
h
e
Company may
b
y
Special Resolution:
49.1 change
i
t
s
name;
49.2 alter
o
r
add
t
o these Articles;
49.3 alter
o
r
add
t
o
t
h
e
Memorandum with respect
t
o any objects, powers
o
r
other matters specified therein; and
49.4 reduce
i
t
s
share capital and any capital redemption reserve fund.
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
(
3
0
REGISTERED OFFICE
5
0
Subject
t
o the provisions
o
f
t
h
e
Statute, the Company may
b
y
resolution
o
f
t
h
e
Directors change the location
o
f
i
t
s
Registered Office.
GENERAL MEETINGS
5
1
A
l
l
general meetings other than annual general meetings shall
b
e
called
extraordinary general meetings.
5
2
The Company shall,
i
f required
b
y
t
h
e
Statute,
i
n each year hold a general meeting
a
s
i
t
s
armual general meeting, and shall specify
t
h
e
meeting
a
s
such
i
n the notices
calling
i
t
.
The annual general meeting shall
b
e
held
a
t
such time and place
a
s
t
h
e
Directors shall appoint and
i
f
n
o
other time and place
i
s prescribed
b
y
them,
i
t
shall
b
e
held
a
t
t
h
e
Registered Office
o
n
t
h
e
second Wednesday
i
n December
o
f
each year
a
t
t
e
n
o'clock
i
n
t
h
e
morning.
A
t
these meetings
t
h
e
report
o
f
t
h
e
Directors (
i
f any) shall
b
e
presented.
5
3
The Company may hold
a
n
annual general meeting,
b
u
t
shall
n
o
t
(unless required
b
y
Statute)
b
e
obliged
t
o
hold
a
n
armual general meeting.
5
4
The Directors may call general meetings, and they shall
o
n
a Members'
requisition forthwith proceed
t
o convene
a
n
extraordinary general meeting
o
f
t
h
e
Company.
5
5
A Members' requisition
i
s a requisition
o
f
Members
o
f
the Company holding
a
t
t
h
e
date
o
f
deposit
o
f
t
h
e
requisition not less than
t
e
n
per cent.
i
n par value
o
f
t
h
e
capital
o
f
t
h
e
Company which
a
s
a
t
that date carries
t
h
e
right
o
f
voting
a
t
general
meetings
o
f
t
h
e
Company.
5
6
The requisition must state the objects
o
f
t
h
e
meeting and must
b
e
signed
b
y
the
requisitionists and deposited
a
t
t
h
e
Registered Office, and may consist
o
f
several
documents
i
n like form each signed
b
y
one
o
r
more requisitionists.
5
7
I
f
t
h
e
Directors
d
o
not within twenty- one days from the date
o
f
t
h
e
deposit
o
f
t
h
e
requisition duly proceed
t
o convene a general meeting
t
o
b
e
held within a further
twenty- one days,
t
h
e
requisitionists,
o
r
any
o
f
them representing more than one-
half
o
f
t
h
e
total voting rights
o
f
a
l
l
o
f
them, may themselves convene a general
meeting, but any meeting
s
o
convened shall not
b
e
held after
t
h
e
expiration
o
f
three months after
t
h
e
expiration
o
f
t
h
e
said twenty- one days.
5
8
A general meeting convened
a
s
aforesaid
b
y
requisitionists shall
b
e
convened
i
n
t
h
e
same manner
a
s
nearly
a
s
possible
a
s
that
i
n which general meetings
a
r
e
t
o
b
e
convened
b
y
Directors.
NOTICE OF GENERAL MEETINGS
5
9
A
t
least five days' notice shall
b
e
given
o
f
any general meeting. Every notice
shall
b
e
exclusive
o
f
t
h
e
day
o
n
which
i
t
i
s given
o
r
deemed
t
o
b
e
given and
o
f
t
h
e
day
f
o
r
which
i
t
i
s given and shall specify
t
h
e
place,
t
h
e
day and
t
h
e
hour
o
f
t
h
e
meeting and
t
h
e
general nature
o
f
t
h
e
business and shall
b
e
given
i
n marmer
hereinafter mentioned
o
r
i
n such other manner
i
f any
a
s
may
b
e
prescribed
b
y
the
Company, provided that a general meeting
o
f
t
h
e
Company shall, whether
o
r
not
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
6
0
3
1
t
h
e
notice specified
i
n this regulation has been given and whether
o
r
not
t
h
e
provisions
o
f
t
h
e
Articles regarding general meetings have been complied with,
b
e
deemed
t
o
have been duly convened
i
f
i
t
i
s
s
o
agreed:
59.1
i
n the case
o
f
a
n
annual general meeting,
b
y
a
l
l
t
h
e
Members (
o
r
their
proxies) entitled
t
o attend and vote thereat; and
59.2
i
n the case
o
f
a
n
extraordinary general meeting,
b
y
a majority
i
n number
o
f
the Members (
o
r
their proxies) having a right
t
o attend and vote
a
t
t
h
e
meeting, being a majority together holding
n
o
t
less than ninety- five
p
e
r
cent.
i
n par value
o
f
the Shares giving that right.
The accidental omission
t
o give notice
o
f
a general meeting
t
o
,
o
r
t
h
e
non- receipt
o
f
notice
o
f
a meeting
b
y
,
any Person entitled
t
o receive notice shall not invalidate
t
h
e
proceedings
o
f
that meeting.
PROCEEDINGS AT GENERAL MEETINGS
6
1
N
o
business shall
b
e
transacted
a
t
any general meeting unless a quorum
i
s present.
Two Members being individuals present
i
n Person
o
r
b
y
proxy
o
r
i
f a corporation
o
r
other non- natural Person
b
y
i
t
s
duly authorised representative shall
b
e
a
quorum unless
t
h
e
Company
h
a
s
only one Member entitled
t
o vote
a
t
such general
meeting
i
n which case
t
h
e
quorum shall
b
e
that one Member present
i
n Person
o
r
b
y
proxy
o
r
(
i
n
t
h
e
case
o
f
a corporation
o
r
other non- natural Person)
b
y
a duly
authorised representative.
6
2
A Person may participate
a
t
a general meeting
b
y
conference telephone
o
r
other
communications equipment
b
y
means
o
f
which
a
l
l
t
h
e
Persons participating
i
n
t
h
e
meeting can communicate with each other. Participation
b
y
a Person
i
n a general
meeting
i
n this manner
i
s treated
a
s
presence
i
n Person
a
t
that meeting.
6
3
A resolution (including a Special Resolution)
i
n writing (
i
n one
o
r
more
counterparts) signed
b
y
a
l
l
Members
f
o
r
t
h
e
time being entitled
t
o receive notice
o
f
and
t
o attend and vote
a
t
general meetings (
o
r
,
being corporations, signed
b
y
their duly authorised representatives) shall
b
e
a
s
valid and effective
a
s
i
f
t
h
e
resolution had been passed
a
t
a general meeting
o
f
t
h
e
Company duly convened
and held.
6
4
I
f
a quorum
i
s not present within half
a
n
hour from the time appointed
f
o
r
t
h
e
meeting
o
r
i
f during such a meeting a quorum ceases
t
o
b
e
present,
t
h
e
meeting,
i
f
convened upon
t
h
e
requisition
o
f
Members, shall
b
e
dissolved and
i
n any other
case
i
t shall stand adjourned
t
o
t
h
e
same day
i
n
t
h
e
next week
a
t
t
h
e
same time
and place
o
r
t
o
such other day, time
o
r
such other place
a
s
t
h
e
Directors may
determine, and
i
f
a
t
t
h
e
adjourned meeting a quorum
i
s
n
o
t
present within half
a
n
hour from
t
h
e
time appointed
f
o
r
t
h
e
meeting
t
h
e
Members present shall
b
e
a
quorum.
6
5
The chairman,
i
f any,
o
f
t
h
e
board
o
f
Directors shall preside
a
s
chairman
a
t
every
general meeting
o
f
t
h
e
Company,
o
r
i
f there
i
s
n
o
such chairman,
o
r
ifhe shall not
b
e
present within fifteen minutes after
t
h
e
time appointed
f
o
r
the holding
o
f
t
h
e
meeting,
o
r
i
s unwilling
t
o act, the Directors present shall elect one
o
f
their
number
t
o
b
e
chairman
o
f
t
h
e
meeting.
NPB/ 61652511600336/
v
2
CONFIDENTIAL
Return
(
.
6
6
6
7
6
8
6
9
3
2
I
f
n
o
Director
i
s willing
t
o
a
c
t
a
s
chairman
o
r
i
f
n
o
Director
i
s present within
fifteen minutes after the time appointed
f
o
r
holding
t
h
e
meeting,
t
h
e
Members
present shall choose one
o
f
their number
t
o
b
e
chairman
o
f
t
h
e
meeting.
The chairman may, with
t
h
e
consent
o
f
a meeting
a
t
which a quorum
i
s present,
( and shall
i
f
s
o
directed
b
y
t
h
e
meeting), adjourn
t
h
e
meeting from time
t
o time
and from place
t
o place,
b
u
t
n
o
business shall
b
e
transacted
a
t
any adjourned
meeting other than
t
h
e
business left unfinished
a
t
t
h
e
meeting from which
t
h
e
adjournment took place. When a general meeting
i
s adjourned
f
o
r
thirty days
o
r
more, notice
o
f
t
h
e
adjourned meeting shall
b
e
given
a
s
i
n
t
h
e
case
o
f
a
n
original
meeting. Otherwise
i
t shall not
b
e
necessary
t
o give any such notice.
A resolution
p
u
t
t
o
t
h
e
vote
o
f
t
h
e
meeting shall
b
e
decided
o
n
a show
o
f
hands
unless before,
o
r
o
n
t
h
e
declaration
o
f
t
h
e
result
o
f
,
t
h
e
show
o
f
hands,
t
h
e
chairman demands a poll,
o
r
any other Member
o
r
Members collectively present
i
n Person
o
r
b
y
proxy and holding
a
t
least
t
e
n
per cent.
i
n par value
o
f
t
h
e
Shares
giving a right
t
o attend and vote
a
t
t
h
e
meeting demand a poll.
Unless a poll
i
s duly demanded a declaration
b
y
t
h
e
chairman that a resolution has
been carried
o
r
carried unanimously,
o
r
b
y
a particular majority,
o
r
lost
o
r
n
o
t
carried
b
y
a particular majority,
a
n
entry
t
o that effect
i
n the minutes
o
f
t
h
e
proceedings
o
f
t
h
e
meeting shall
b
e
conclusive evidence
o
f
that fact without proof
o
f
t
h
e
number
o
r
proportion
o
f
t
h
e
votes recorded
i
n favour
o
f
o
r
against such
resolution.
7
0
The demand
f
o
r
a poll may
b
e
withdrawn.
7
1
Except
o
n
a poll demanded
o
n
t
h
e
election
o
f
a chairman
o
r
o
n
a question
o
f
adjournment, a poll shall
b
e
taken
a
s
t
h
e
chairman directs, and
t
h
e
result
o
f
t
h
e
poll shall
b
e
deemed
t
o
b
e
t
h
e
resolution
o
f
the general meeting
a
t
which
t
h
e
poll
was demanded.
7
2
A poll demanded
o
n
t
h
e
election
o
f
a chairman
o
r
o
n
a question
o
f
adjournment
shall
b
e
taken forthwith. A poll demanded
o
n
any other question shall
b
e
taken
a
t
such time
a
s
t
h
e
chairman
o
f
t
h
e
general meeting directs, and any business other
than that upon which a poll has been demanded
o
r
i
s contingent thereon may
proceed pending
t
h
e
taking
o
f
the poll.
7
3
I
n
t
h
e
case
o
f
a
n
equality
o
f
votes, whether
o
n
a show
o
f
hands
o
r
o
n
a poll,
t
h
e
chairman shall
b
e
entitled
t
o a second
o
r
casting vote.
VOTES OF MEMBERS
7
4
Subject
t
o any rights
o
r
restrictions attached
t
o any Shares,
o
n
a show
o
f
hands
every Member who (being
a
n
individual)
i
s present
i
n Person
o
r
b
y
proxy
o
r
,
i
f a
corporation
o
r
other non- natural Person
i
s present
b
y
i
t
s
duly authorised
representative
o
r
proxy, shall have one vote and
o
n
a poll every Member shall
have one vote
f
o
r
every Share
o
f
which
h
e
i
s
t
h
e
holder.
7
5
I
n
t
h
e
case
o
f
joint holders
o
f
record
t
h
e
vote
o
f
t
h
e
senior holder who tenders a
vote, whether
i
n Person
o
r
b
y
proxy, shall
b
e
accepted
t
o
t
h
e
exclusion
o
f
t
h
e
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3
3
7
6
7
7
7
9
7
8
votes
o
f
t
h
e
other joint holders, and seniority shall
b
e
determined
b
y
t
h
e
order
i
n
which
t
h
e
names
o
f
t
h
e
holders stand
i
n
t
h
e
Register
o
f
Members.
A Member
o
f
unsound mind,
o
r
i
n respect
o
f
whom
a
n
order has been made
b
y
any court, having jurisdiction
i
n lunacy, may vote, whether
o
n
a show
o
f
hands
o
r
o
n
a poll,
b
y
h
i
s
committee, receiver, curator bonis,
o
r
other Person
o
n
such
Member's behalf appointed
b
y
that court, and any such committee, receiver,
curator bonis
o
r
other Person may vote
b
y
proxy.
N
o
Person shall
b
e
entitled
t
o vote
a
t
any general meeting
o
r
a
t
any separate
meeting
o
f
the holders
o
f
a class
o
f
Shares unless
h
e
i
s registered
a
s
a Member
o
n
the record date
f
o
r
such meeting and
a
l
l
calls
o
r
other monies then payable
b
y
him
i
n respect
o
f
Shares have been paid.
N
o
objection shall
b
e
raised
t
o the qualification
o
f
any voter except
a
t
t
h
e
general
meeting
o
r
adjourned general meeting
a
t
which
t
h
e
vote objected
t
o
i
s given
o
r
tendered and every vote not disallowed
a
t
t
h
e
meeting shall
b
e
valid. Any
objection made
i
n due time shall
b
e
referred
t
o
t
h
e
chairman whose decision shall
b
e
final and conclusive.
O
n
a poll
o
r
o
n
a show
o
f
hands votes may
b
e
cast either personally
o
r
b
y
proxy.
A Member may appoint more than one proxy
o
r
t
h
e
same proxy under one
o
r
more instruments
t
o attend and vote
a
t
a meeting. Where a Member appoints more
than one proxy
t
h
e
instrument
o
f
proxy shall state which proxy
i
s entitled
t
o vote
o
n
a show
o
f
hands.
8
0
A Member holding more than one Share need
n
o
t
cast
t
h
e
votes
i
n respect
o
f
h
i
s
Shares
i
n
t
h
e
same way
o
n
any resolution and therefore may vote a Share
o
r
some
o
r
a
l
l
such Shares either
f
o
r
o
r
against a resolution and/
o
r
abstain from voting a
Share
o
r
some
o
r
a
l
l
o
f
t
h
e
Shares and, subject
t
o
t
h
e
terms
o
f
t
h
e
instrument
appointing him, a proxy appointed under one
o
r
more instruments may vote a
Share
o
r
some
o
r
a
l
l
o
f
the Shares
i
n respect
o
f
which
h
e
i
s appointed either
f
o
r
o
r
against a resolution and/
o
r
abstain from voting.
(
PROXIES
8
1
The instrument appointing a proxy shall
b
e
i
n writing,
b
e
executed under
t
h
e
hand
o
f
t
h
e
appointor
o
r
o
f
h
i
s
attorney duly authorised
i
n writing,
o
r
,
i
f
t
h
e
appointor
i
s a corporation under
t
h
e
hand
o
f
a
n
officer
o
r
attorney duly authorised
f
o
r
that
purpose. A proxy need
n
o
t
b
e
a Member
o
f
t
h
e
Company.
8
2
The instrument appointing a proxy shall
b
e
deposited
a
t
t
h
e
Registered Office
o
r
a
t
such other place
a
s
i
s specified
f
o
r
that purpose
i
n
t
h
e
notice convening
t
h
e
meeting,
o
r
i
n any instrument
o
f
proxy sent
o
u
t
b
y
t
h
e
Company:
82.1 not less than
4
8
hours before the time
f
o
r
holding
t
h
e
meeting
o
r
adjourned meeting
a
t
which the Person named
i
n
t
h
e
instrument proposes
t
o vote;
o
r
82.2
i
n
t
h
e
case
o
f
a poll taken more than
4
8
hours after
i
t
i
s demanded,
b
e
deposited
a
s
aforesaid after the poll has been demanded and not less than
2
4
hours before
t
h
e
time appointed
f
o
r
t
h
e
taking
o
f
the poll;
o
r
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CONFIDENTIAL
Return
(
"
3
4
82.3 where
t
h
e
poll
i
s
n
o
t
taken forthwith
b
u
t
i
s taken not more than
4
8
hours
after
i
t was demanded
b
e
delivered
a
t
t
h
e
meeting
a
t
which: the poll was
demanded
t
o
t
h
e
chairman
o
r
t
o
t
h
e
secretary
o
r
t
o any director;
provided that
t
h
e
Directors may
i
n
t
h
e
notice convening
t
h
e
meeting,
o
r
i
n
a
n
instrument
o
f
proxy sent out
b
y
the Company, direct that
t
h
e
instrument
appointing a proxy may
b
e
deposited (
n
o
later than
t
h
e
time
f
o
r
holding
t
h
e
meeting
o
r
adjourned meeting)
a
t
t
h
e
Registered Office
o
r
a
t
such other place
a
s
i
s
specified
f
o
r
that purpose
i
n
t
h
e
notice convening
t
h
e
meeting,
o
r
i
n any
instrument
o
f
proxy sent out
b
y
t
h
e
Company. The chairman may
i
n any event
a
t
h
i
s
discretion direct that
a
n
instrument
o
f
proxy shall
b
e
deemed
t
o have been duly
deposited.
A
n
instrument
o
f
proxy that
i
s
n
o
t
deposited
i
n
t
h
e
manner permitted
shall
b
e
invalid.
(
8
3
8
4
The instrument appointing a proxy may
b
e
i
n any usual
o
r
common form and may
b
e
expressed
t
o
b
e
f
o
r
a particular meeting
o
r
any adjournment thereof
o
r
generally until revoked.
A
n
instrument appointing a proxy shall
b
e
deemed
t
o
include
t
h
e
power
t
o demand
o
r
join
o
r
concur
i
n demanding a poll.
Votes given
i
n accordance with
t
h
e
terms
o
f
a
n
instrument
o
f
proxy shall
b
e
valid
notwithstanding the previous death
o
r
insanity ofthe principal
o
r
revocation
o
f
t
h
e
proxy
o
r
o
f
the authority under which
t
h
e
proxy was executed,
o
r
t
h
e
transfer
o
f
t
h
e
Share
i
n respect
o
f
which
t
h
e
proxy
i
s given unless notice
i
n writing
o
f
such
death, insanity, revocation
o
r
transfer was received
b
y
t
h
e
Company
a
t
t
h
e
Registered Office before
t
h
e
commencement
o
f
t
h
e
general meeting,
o
r
adjourned
meeting
a
t
which
i
t
i
s sought
t
o
u
s
e
t
h
e
proxy.
CORPORATE MEMBERS
8
5
Any corporation
o
r
other non- natural Person which
i
s a Member may
i
n
accordance with
i
t
s
constitutional documents,
o
r
i
n
t
h
e
absence
o
f
such provision
b
y
resolution
o
f
i
t
s
directors
o
r
other governing body, authorise such Person
a
s
i
t
thinks
f
i
t
t
o
a
c
t
a
s
i
t
s
representative
a
t
any meeting
o
f
t
h
e
Company
o
r
o
f
any
class
o
f
Members, and
t
h
e
Person
s
o
authorised shall
b
e
entitled
t
o exercise
t
h
e
same powers
o
n
behalf
o
f
t
h
e
corporation which
h
e
represents
a
s
t
h
e
corporation
could exercise
i
f
i
t
were
a
n
individual Member.
SHARES THAT MAY NOT
B
E
VOTED
8
6
Shares
i
n
t
h
e
Company that
a
r
e
beneficially owned
b
y
the Company shall not
b
e
voted, directly
o
r
indirectly,
a
t
any meeting and shall not
b
e
counted
i
n
determining
t
h
e
total number
o
f
outstanding Shares
a
t
any given time.
DIRECTORS
8
7
There shall
b
e
a board
o
f
Directors consisting
o
f
five members. Two
o
f
t
h
e
five
Directors will automatically and
a
t
a
l
l
times
b
e
t
h
e
WaMu LLC Designated
Directors. The other three Directors shall
b
e
the " Ordinary Directors". For
purposes ofthe foregoing:
(
k
)
" WaMu LLC Designated Directors" means,
o
n
any day, the two
natural Persons most recently identified
b
y
WaMu LLC
t
o
t
h
e
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CONFIDENTIAL
Return
3
5
,
.
.
( Company
i
n writing
a
s
t
h
e
members
o
f
WaMu LLC's Board
o
f
Managers that shall
b
e
Directors
o
f
t
h
e
Company, one
o
f
whom
shall
b
e
the individual who
i
s
t
h
e
" Independent Manager"
o
f
WaMu LLC within
t
h
e
meaning
o
f
t
h
e
WaMu LLC Agreement;
(
1
)
" Ordinary Directors"
a
r
e
t
h
e
three Directors elected from time-
t
o
-
time
b
y
t
h
e
holders
o
f
t
h
e
Ordinary Shares
i
n accordance with
these Articles; and
(
m
)
The WaMu LLC Designated Director who
i
s
t
h
e
" Independent
Manager"
o
f
WaMu LLC
f
o
r
purposes
o
f
t
h
e
WaMu LLC
Agreement,
a
s
most recently identified
b
y
WaMu LLC
t
o
t
h
e
Company
i
n writing (except
a
s
provided below), shall
b
e
t
h
e
" Independent Director"
o
f
the Company.
I
f
(
x
)
WaMu LLC fails
t
o
n
the WaMu LLC Preferred
Securities
o
r
o
n
i
t
s
Fixed-
t
o
-
Floating Rate Perpetual Non- cumulative Preferred
Securities, liquidation preference $1,000
p
e
r
security,
o
n
date
f
o
r
such securities determined
i
n accordance with the WaMu LLC
Agreement, (
y
)
t
h
e
Company fails
t
o
n
t
h
e
Preferred
Securities
o
n
o
r
(
z
)
a Bankruptcy Event occurs, then
(
i
) under
t
h
e
WaMu LLC Agreement
t
h
e
holders
o
f
t
h
e
WaMu LLC Preferred
Securities and
t
h
e
Fixed-
t
o
-
Floating Rate Perpetual Non- cumulative Preferred
Securities
o
f
WaMu LLC, voting
a
s
a single class, will
b
e
entitled
t
o
remove
t
h
e
Person who has been
t
h
e
Independent Manager
o
f
WaMu LLC from
h
i
s
office
a
s
both a member ofWaMu LLC's Board
o
f
Managers and
i
t
s
Independent Manager
and replace such Person
i
n such capacities with a natural Person elected
b
y
such
securityholders, (
i
i
)
i
n order
t
o give effect
t
o
t
h
e
rights
o
f
t
h
e
Preferred
Securityholders
t
o direct the manner
i
n which
t
h
e
Company exercises
i
t
s
voting
rights
o
n
such matter,
t
h
e
Company shall give a notice and
a
c
t
i
n accordance with
t
h
e
provisions
o
f
Article
9
(
e
)
,
and (
i
i
i
)
effective upon
t
h
e
Person
s
o
elected
o
r
nominated becoming
t
h
e
Independent Manager
o
f
WaMu LLC, such Person shall
also become
t
h
e
o
f
the Company.
POWERS OF DIRECTORS
8
8
Subject
t
o
t
h
e
provisions
o
f
t
h
e
Statute, the Memorandum and these Articles
(including Article
8
9
)
and
t
o any directions given
b
y
Special Resolution,
t
h
e
business
o
f
t
h
e
Company shall
b
e
managed
b
y
t
h
e
Directors who may exercise
a
l
l
t
h
e
powers
o
f
t
h
e
Company.
N
o
alteration
o
f
t
h
e
Memorandum
o
r
Articles and
n
o
such direction shall invalidate any prior
a
c
t
o
f
t
h
e
Directors which would have
been valid
i
f that alteration had not been made
o
r
that direction had not been
given. A duly convened meeting
o
f
Directors
a
t
which a quorum
i
s present may
exercise
a
l
l
powers exercisable
b
y
t
h
e
Directors.
8
9
Notwithstanding
t
h
e
provisions
o
f
Article
8
8
and any other provisions
o
f
these
Articles,
t
h
e
Directors shall
n
o
t
have
t
h
e
power, without
t
h
e
prior Consent
o
f
t
h
e
Independent Director and
t
h
e
approval
o
f
a majority
o
f
t
h
e
Directors,
t
o
(
i
)
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9
1
9
0
3
6
repurchase any Ordinary Shares
o
r
(
i
i
)
t
o
t
h
e
extent within the power
o
f
t
h
e
Directors, convert
o
r
approve
t
h
e
conversion
o
f
t
h
e
Company into another type
o
f
entity
o
r
the consolidation
o
r
merger
o
f
the Company with
o
r
into any other
entity,
t
h
e
consolidation
o
r
merger
o
f
o
r
into
t
h
e
Company,
o
r
t
h
e
sale
b
y
t
h
e
Company
o
f
any
o
f
i
t
s
assets.
All cheques, promissory notes, drafts, bills
o
f
exchange and other negotiable
instruments and
a
l
l
receipts
f
o
r
monies paid
t
o
t
h
e
Company shall
b
e
signed,
drawn, accepted, endorsed
o
r
otherwise executed
a
s
the case may
b
e
i
n such
manner
a
s
t
h
e
Directors shall determine
b
y
resolution.
Subject
t
o
t
h
e
Memorandum,
t
h
e
Directors may exercise
a
l
l
t
h
e
powers
o
f
the
Company
t
o borrow money and
t
o mortgage
o
r
charge
i
t
s
undertaking, property
and uncalled capital
o
r
any part thereof and
t
o issue debentures, debenture stock,
mortgages, bonds and other such securities whether outright
o
r
a
s
security
f
o
r
any
debt, liability
o
r
obligation
o
f
the Company
o
r
o
f
any third party
.
.
APPOINTMENT AND REMOVAL
O
F
DIRECTORS
9
2
The Company may
b
y
Ordinary Resolution appoint any Person
t
o
b
e
a
n
Ordinary
Director
o
r
may
b
y
Ordinary Resolution remove any Director.
9
3
The Directors may appoint any Person
t
o
b
e
a
n
Ordinary Director, either
t
o
f
i
l
l
a
vacancy
o
r
a
s
a
n
additional Ordinary Director provided that
t
h
e
appointment does
n
o
t
cause
t
h
e
number
o
f
Directors
t
o exceed any number fixed
b
y
o
r
i
n
accordance with these Articles
a
s
t
h
e
maximmn nmnber
o
f
Ordinary Directors.
9
4
WaMu LLC Designated Directors may
b
e
appointed and removed only
I
n
accordance with Article
8
7
.
VACATION
O
F
OFFICE
O
F
DIRECTOR
9
5
The office
o
f
a Director shall
b
e
vacated
i
f
:
95.1
h
e
gives notice
i
n writing
t
o the Company that
h
e
resigns
t
h
e
office
o
f
Director;
o
r
95.2
i
f
h
e
absents himself (without being represented
b
y
proxy
o
r
a
n
alternate Director
appointed
b
y
him) from three consecutive meetings
o
f
t
h
e
board
o
f
Directors
without special leave
o
f
absence from
t
h
e
Directors,
a
n
d
they pass a resolution
that
h
e
h
a
s
b
y
reason
o
f
such absence vacated office;
o
r
95.3
i
f
h
e
dies, becomes bankrupt
o
r
makes any arrangement
o
r
composition with
h
i
s
creditors generally;
o
r
95.4 ifhe
i
s found
t
o
b
e
o
r
becomes
o
f
unsound mind;
o
r
95.5
i
n
t
h
e
case
o
f
Ordinary Directors,
i
f
a
l
l
the other Ordinary Directors
o
f
the
Company (being not less than two
i
n nmnber) resolve that
h
e
should
b
e
removed
a
s
a
n
Ordinary Director.
PROCEEDINGS OF DIRECTORS
9
6
The quorum
f
o
r
t
h
e
transaction
o
f
the business
o
f
the Directors may
b
e
fixed
b
y
t
h
e
Directors, and unless
s
o
fixed shall
b
e
two
i
f there
a
r
e
two
o
r
more Directors,
and shall
b
e
one
i
f there
i
s only one Director; provided, however, that a quorum
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3
7
f
o
r
t
h
e
transaction
o
f
t
h
e
business
o
f
the Directors will not exist without
t
h
e
presence
o
f
t
h
e
Independent Director. A Person who holds office
a
s
a
n
alternate
Director shall,
i
f
h
i
s
appointor
i
s
n
o
t
present,
b
e
counted
i
n the quorum. A
Director who also acts
a
s
a
n
alternate Director shall,
i
f
h
i
s
appointor
i
s not
present, count twice towards
t
h
e
quorum.
9
7
Subject
t
o
t
h
e
provisions
o
f
t
h
e
Articles,
t
h
e
Directors may regulate their
proceedings
a
s
they think
f
i
t
.
Questions arising
a
t
any meeting shall
b
e
decided
b
y
a majority
o
f
votes.
I
n the case
o
f
a
n
equality
o
f
votes,
t
h
e
chairman shall have
a second
o
r
casting vote. A Director who
i
s also
a
n
alternate Director shall
b
e
entitled
i
n
t
h
e
absence
o
f
h
i
s
appointor
t
o
a separate vote
o
n
behalf
o
f
h
i
s
appointor
i
n addition
t
o
h
i
s
own vote.
9
8
A Person may participate
i
n a meeting
o
f
t
h
e
Directors
o
r
committee
o
f
Directors
b
y
conference telephone
o
r
other communications equipment
b
y
means
o
f
which
a
l
l
t
h
e
Persons participating
i
n
t
h
e
meeting can communicate with each other
a
t
t
h
e
same time. Participation
b
y
a Person
i
n a meeting
i
n this manner
i
s treated
a
s
presence
i
n Person
a
t
that meeting. Unless otherwise determined
b
y
t
h
e
Directors
the meeting shall
b
e
deemed
t
o
b
e
held
a
t
t
h
e
place where the chairman
i
s
a
t
t
h
e
start
o
f
t
h
e
meeting.
9
9
A resolution
i
n writing (
i
n one
o
r
more counterparts) signed
b
y
a
l
l
t
h
e
Directors
o
r
a
l
l
t
h
e
members
o
f
a committee
o
f
Directors (
a
n
alternate Director being entitled
t
o sign such a resolution
o
n
behalf
o
f
h
i
s
appointor) shall
b
e
a
s
valid and effectual
a
s
i
f
i
t had been passed
a
t
a meeting
o
f
t
h
e
Directors,
o
r
committee
o
f
Directors
a
s
t
h
e
case may
b
e
,
duly convened and held.
100 A Director
o
r
alternate Director may,
o
r
other officer
o
f
t
h
e
Company
o
n
t
h
e
requisition
o
f
a Director
o
r
alternate Director shall, call a meeting
o
f
t
h
e
Directors
b
y
a
t
least two days' notice
i
n writing
t
o every Director and alternate Director
which notice shall
s
e
t
forth the general nature
o
f
t
h
e
business
t
o
b
e
considered
unless notice
i
s waived
b
y
a
l
l
t
h
e
Directors (
o
r
their alternates) either
a
t
,
before
o
r
after
t
h
e
meeting
i
s held.
101 The continuing Directors may
a
c
t
notwithstanding any vacancy
i
n their body, but
i
f and
s
o
long
a
s
their number
i
s reduced below
t
h
e
number fixed
b
y
o
r
pursuant
t
o these Articles
a
s
t
h
e
necessary quorum
o
f
Directors
t
h
e
continuing Directors
o
r
Director may
a
c
t
f
o
r
t
h
e
purpose
o
f
increasing
t
h
e
number
o
f
Directors
t
o that
number,
o
r
o
f
summoning a general meeting
o
f
t
h
e
Company, but
f
o
r
n
o
other
purpose.
102 The Directors may elect a chairman
o
f
their board and determine the period
f
o
r
which
h
e
i
s
t
o hold office; but
i
f
n
o
such chairman
i
s elected,
o
r
i
f
a
t
any meeting
t
h
e
chairman
i
s
n
o
t
present within five minutes after
t
h
e
time appointed
f
o
r
holding
t
h
e
same,
t
h
e
Directors present may choose one
o
f
their number
t
o
b
e
chairman
o
f
t
h
e
meeting.
103
A
l
l
acts done
b
y
any meeting
o
f
t
h
e
Directors
o
r
o
f
a committee
o
f
Directors
(including any Person acting
a
s
a
n
alternate Director) shall, notwithstanding that
i
t
b
e
afterwards discovered that there was some defect
i
n
t
h
e
appointment
o
f
any
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Director
o
r
alternate Director,
o
r
that they
o
r
any
o
f
them were disqualified,
b
e
a
s
valid
a
s
i
f every such Person had been duly appointed and qualified
t
o
b
e
a
Director
o
r
alternate Director
a
s
t
h
e
case may
b
e
.
l04 A Director
b
u
t
not
a
n
alternate Director may
b
e
represented
a
t
any meetings
o
f
t
h
e
board
o
f
Directors
b
y
a proxy appointed
i
n writing
b
y
him. The proxy shall count
towards
t
h
e
quorum and the vote
o
f
the proxy shall
f
o
r
a
l
l
purposes
b
e
deemed
t
o
b
e
that ofthe appointing Director.
PRESUMPTION OF ASSENT
l05 A Director
o
f
the Company who
i
s present
a
t
a meeting
o
f
t
h
e
board
o
f
Directors
a
t
which action
o
n
any Company matter
i
s taken shall
b
e
presumed
t
o have
assented
t
o
t
h
e
action taken unless
h
i
s
dissent shall
b
e
entered
i
n
t
h
e
minutes
o
f
t
h
e
meeting
o
r
unless
h
e
shall file
h
i
s
written dissent from such action with
t
h
e
Person acting
a
s
t
h
e
chairman
o
r
secretary
o
f
t
h
e
meeting before
t
h
e
adjournment
thereof
o
r
shall forward such dissent
b
y
registered post
t
o such Person
immediately after
t
h
e
adjournment
o
f
t
h
e
meeting. Such right
t
o
dissent shall
n
o
t
apply
t
o a Director who voted
i
n favour
o
f
such action.
DIRECTORS' INTERESTS
l
0
6
A Director may hold any other office
o
r
place
o
f
profit under
t
h
e
Company (other
than
t
h
e
office
o
f
Auditor)
i
n conjunction with
h
i
s
office
o
f
Director
f
o
r
such
period and
o
n
such terms
a
s
t
o remuneration and otherwise
a
s
t
h
e
Directors may
determine.
l
0
7
A Director may
a
c
t
b
y
himself
o
r
h
i
s
firm
i
n a professional capacity
f
o
r
the
Company and
h
e
o
r
h
i
s
firm shall
b
e
entitled
t
o remuneration
f
o
r
professional
services
a
s
i
f
h
e
were not a Director
o
r
alternate Director.
l
0
8
A Director
o
r
alternate Director
o
f
t
h
e
Company may
b
e
o
r
become a director
o
r
other officer
o
f
o
r
otherwise interested
i
n any company promoted
b
y
t
h
e
Company
o
r
i
n which
t
h
e
Company may
b
e
interested
a
s
shareholder
o
r
otherwise, and
n
o
such Director
o
r
b
e
accountable
t
o the Company
f
o
r
any
remuneration
o
r
other benefits received
b
y
him
a
s
a director
o
r
officer
o
f
,
o
r
from
h
i
s
interest
i
n
,
such other company.
l09
N
o
Person shall
b
e
disqualified from the office
o
f
Director
o
r
alternate Director
o
r
prevented
b
y
such office from contracting with
t
h
e
Company, either
a
s
vendor,
purchaser
o
r
otherwise, nor shall any such contract
o
r
any contract
o
r
transaction
entered into
b
y
o
r
o
n
behalf
o
f
t
h
e
Company
i
n which any Director
o
r
alternate
Director shall
b
e
i
n any way interested
b
e
o
r
b
e
liable
t
o
b
e
avoided, nor shall any
Director
o
r
alternate Director
s
o
contracting
o
r
being
s
o
interested
b
e
liable
t
o
account
t
o
t
h
e
Company
f
o
r
any profit realised
b
y
any such contract
o
r
transaction
b
y
reason
o
f
such Director holding office
o
r
o
f
t
h
e
fiduciary relation thereby
established. A Director (
o
r
h
i
s
alternate Director
i
n
h
i
s
absence) shall
b
e
a
t
liberty
t
o vote
i
n respect
o
f
any contract
o
r
transaction
i
n which
h
e
i
s interested provided
that
t
h
e
nature
o
f
t
h
e
interest
o
f
any Director
o
r
alternate Director
i
n any such
contract
o
r
transaction shall
b
e
disclosed
b
y
him
a
t
o
r
prior
t
o
i
t
s
consideration
and any vote thereon.
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110 A general notice that a Director
o
r
alternate Director
i
s a shareholder, director,
officer
o
r
employee
o
f
any specified firm
o
r
company and
i
s
t
o
b
e
regarded
a
s
interested
i
n any transaction with such firm
o
r
company shall
b
e
sufficient
disclosure
f
o
r
t
h
e
purposes
o
f
voting
o
n
a resolution
i
n respect
o
f
a contract
o
r
transaction
i
n which
h
e
has
a
n
interest, and after such general notice
i
t shall not
b
e
necessary
t
o give special notice relating
t
o any particular transaction.
MINUTES
111 The Directors shall cause minutes
t
o
b
e
made
i
n books kept
f
o
r
t
h
e
purpose
o
f
a
l
l
appointments
o
f
officers made
b
y
t
h
e
Directors,
a
l
l
proceedings
a
t
meetings
o
f
t
h
e
Company
o
r
t
h
e
holders
o
f
any class
o
f
Shares and
o
f
the Directors, and
o
f
committees
o
f
Directors including
t
h
e
names
o
f
t
h
e
Directors
o
r
alternate
Directors present
a
t
each meeting.
DELEGATION
O
F
DIRECTORS' POWERS
112 The Directors may delegate any
o
f
their powers
t
o any committee consisting
o
f
one
o
r
more Directors; provided, however, that
t
h
e
Directors may
n
o
t
delegate
t
o
any committee any
o
f
t
h
e
powers reserved
t
o
t
h
e
b
y
Article
8
9
o
r
otherwise requiring
t
h
e
Consent
o
f
t
h
e
Independent Director except with
t
h
e
consent
o
f
t
h
e
Independent Director. They may also delegate
t
o any managing
director
o
r
any Director holding any other executive office such
o
f
their powers
a
s
they consider desirable
t
o
b
e
exercised
b
y
him provided that
a
n
alternate Director
may not
a
c
t
a
s
managing director and
t
h
e
appointment
o
f
a managing director
shall
b
e
revoked forthwith ifhe ceases
t
o
b
e
a Director. Any such delegation may
b
e
made subject
t
o any conditions
t
h
e
Directors may impose, and either
collaterally with
o
r
t
o
t
h
e
exclusion
o
f
their own powers and may
b
e
revoked
o
r
altered. Subject
t
o any such conditions,
t
h
e
proceedings
o
f
a committee
o
f
Directors shall
b
e
governed
b
y
t
h
e
Articles regulating
t
h
e
proceedings
o
f
Directors,
s
o
f
a
r
a
s
they
a
r
e
capable
o
f
applying.
113 The Directors may establish any committees, local boards
o
r
agencies
o
r
appoint
any Person
t
o
b
e
a manager
o
r
agent
f
o
r
managing
t
h
e
affairs
o
f
t
h
e
Company and
may appoint any Person
t
o
b
e
a member
o
f
such committees
o
r
local boards. Any
such appointment may
b
e
made subject
t
o any conditions
t
h
e
Directors may
impose, and either collaterally with
o
r
t
o the exclusion
o
f
their own powers and
may
b
e
revoked
o
r
altered. Subject
t
o any such conditions,
t
h
e
proceedings
o
f
any
such committee, local board
o
r
agency shall
b
e
governed
b
y
t
h
e
Articles
regulating
t
h
e
proceedings
o
f
Directors,
s
o
f
a
r
a
s
they
a
r
e
capable
o
f
applying.
114 The Directors may
b
y
power
o
f
attorney
o
r
otherwise appoint any Person
t
o
b
e
t
h
e
agent
o
f
t
h
e
Company
o
n
such conditions
a
s
the Directors may determine,
provided that
t
h
e
delegation
i
s
n
o
t
t
o
t
h
e
exclusion
o
f
their own powers and may
b
e
revoked
b
y
t
h
e
Directors
a
t
any time.
115 The Directors may
b
y
power
o
f
attorney
o
r
otherwise appoint any company, firm,
Person
o
r
body
o
f
Persons, whether nominated directly
o
r
indirectly
b
y
t
h
e
Directors,
t
o
b
e
t
h
e
attorney
o
r
authorised signatory
o
f
t
h
e
Company
f
o
r
such
purpose and with such powers, authorities and discretions (not exceeding those
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CONFIDENTIAL
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0
( vested
i
n
o
r
exercisable
b
y
the Directors under these Articles) and
f
o
r
such period
and subject
t
o such conditions
a
s
they may think
f
i
t
,
and any such powers
o
f
attorney
o
r
other appointment may contain such provisions
f
o
r
t
h
e
protection and
convenience
o
f
Persons dealing with any such attorneys
o
r
authorised signatories
a
s
t
h
e
Directors may think
f
i
t
and may also authorise any such attorney
o
r
authorised signatory
t
o delegate
a
l
l
o
r
any
o
f
t
h
e
powers, authorities and
discretions vested
i
n him.
116 The Directors may appoint such officers
a
s
they consider necessary
o
n
such
terms,
a
t
such remuneration and
t
o perform such duties, and subject
t
o such
provisions
a
s
t
o disqualification and removal
a
s
t
h
e
Directors may think
f
i
t
.
Unless otherwise specified
i
n
t
h
e
terms
o
f
h
i
s
appointment
a
n
officer may
b
e
removed
b
y
resolution
o
f
the Directors
o
r
Members.
ALTERNATE DIRECTORS
117 Any Director (other than
a
n
alternate Director) may
b
y
writing appoint any other
Director,
o
r
any other Person willing
t
o
act,
t
o
b
e
a
n
alternate Director and
b
y
writing may remove from office
a
n
alternate Director
s
o
appointed
b
y
him.
118
A
n
b
e
entitled
t
o receive notice
o
f
a
l
l
meetings
o
f
Directors and
o
f
a
l
l
meetings
o
f
committees
o
f
Directors
o
f
which
h
i
s
appointor
i
s
a member,
t
o attend and vote
a
t
every such meeting
a
t
which
t
h
e
Director
appointing him
i
s
n
o
t
personally present, and generally
t
o perform
a
l
l
t
h
e
functions
o
f
h
i
s
appointor
a
s
a Director
i
n
h
i
s
absence.
119
A
n
alternate Director shall cease
t
o
b
e
a
n
alternate Director
i
f
h
i
s
appointor ceases
t
o
b
e
a Director.
120 Any appointment
o
r
removal
o
f
a
n
b
e
b
y
notice
t
o
t
h
e
Company signed
b
y
t
h
e
Director making
o
r
revoking
t
h
e
appointment
o
r
i
n any
other manner approved
b
y
t
h
e
Directors.
121
A
n
b
e
deemed
f
o
r
a
l
l
purposes
t
o
b
e
a Director and shall
alone
b
e
responsible
f
o
r
h
i
s
own acts and defaults and shall not
b
e
deemed
t
o
b
e
t
h
e
agent
o
f
t
h
e
Director appointing him.
NO MINIMUM SHAREHOLDING
122 The Company
i
n general meeting may
f
i
x
a minimum shareholding required
t
o
b
e
held
b
y
a Director,
b
u
t
unless and until such a shareholding qualification
i
s fixed a
Director
i
s not required
t
o hold Shares.
REMUNERATION OF DIRECTORS
123 For
s
o
long
a
s
a
r
e
outstanding,
t
h
e
Directors shall
n
o
t
b
e
entitled
t
o any fees, other remuneration
o
r
expense reimbursement from
t
h
e
Company
i
n connection with their service
a
s
Directors (
i
t being understood that
t
h
e
WaMu LLC Directors will receive fees and expense reimbursement
i
n their
capacity
a
s
members
o
f
t
h
e
Board
o
f
Managers
o
f
WaMu LLC and the Ordinary
Directors shall receive fees and expense reimbursement
i
n their capacity
a
s
employees
o
f
t
h
e
Administrator). Thereafter,
t
h
e
remuneration
t
o
b
e
paid
t
o the
Directors,
i
f any, shall
b
e
such remuneration
a
s
t
h
e
Directors shall determine.
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Additionally,
a
t
any time when
n
o
a
r
e
outstanding,
t
h
e
Directors shall also
b
e
entitled
t
o
b
e
paid
a
l
l
travelling, hotel and other expenses
properly incurred
b
y
them
i
n connection with their attendance
a
t
meetings
o
f
Directors
o
r
committees
o
f
Directors,
o
r
general meetings
o
f
t
h
e
Company,
o
r
separate meetings
o
f
the holders
o
f
any class
o
f
Shares
o
r
debentures
o
f
t
h
e
Company,
o
r
otherwise
i
n connection with
t
h
e
business
o
f
t
h
e
Company,
o
r
t
o
receive a fixed allowance
i
n respect thereof
a
s
may
b
e
determined
b
y
t
h
e
Directors,
o
r
a combination partly
o
f
one such method and partly the other.
124
A
t
any time when
n
o
a
r
e
outstanding,
t
h
e
Directors may
b
y
resolution approve additional remuneration
t
o any Director
f
o
r
any services other
than
h
i
s
ordinary routine work
a
s
a Director. Any fees paid
t
o a Director who
i
s
also counselor solicitor
t
o the Company,
o
r
otherwise serves
i
t
i
n a professional
capacity shall
b
e
i
n addition
t
o
h
i
s
remuneration
a
s
a Director.
SEAL
125 The Company may,
i
f
t
h
e
Directors
s
o
determine, have a Seal. The Seal shall only
b
e
used
b
y
t
h
e
authority
o
f
t
h
e
Directors
o
r
o
f
a committee
o
f
t
h
e
Directors
authorised
b
y
t
h
e
Directors. Every instrument
t
o which
t
h
e
Seal has been affixed
shall
b
e
signed
b
y
a
t
least one Person who shall
b
e
either a Director
o
r
some
officer
o
r
other Person appointed
b
y
t
h
e
Directors
f
o
r
t
h
e
purpose.
126 The Company may have
f
o
r
use
i
n any place
o
r
places outside
t
h
e
Cayman Islands
a duplicate Seal
o
r
Seals each
o
f
which shall
b
e
a facsimile
o
f
t
h
e
common Seal
o
f
t
h
e
Company and,
i
f
t
h
e
Directors
s
o
determine, with
t
h
e
addition
o
n
i
t
s
face
o
f
t
h
e
name
o
f
every place where
i
t
i
s
t
o
b
e
used.
127 A Director
o
r
officer, representative
o
r
attorney
o
f
t
h
e
Company may without
further authority
o
f
t
h
e
Directors affix
t
h
e
Seal over
h
i
s
signature alone
t
o any
document
o
f
the Company required
t
o
b
e
authenticated
b
y
him under seal
o
r
t
o
b
e
filed with
t
h
e
Registrar
o
f
Companies
i
n
t
h
e
Cayman Islands
o
r
elsewhere
wheresoever.
DIVIDENDS, DISTRIBUTIONS AND RESERVE
128 Subject
t
o the Statute and
t
h
e
other provisions
o
f
these Articles ( including Article
9
)
,
t
h
e
Directors may declare dividends and distributions
o
n
Shares
i
n issue and
authorise payment
o
f
t
h
e
dividends
o
r
distributions
o
u
t
o
f
t
h
e
funds
o
f
t
h
e
Company lawfully available therefor.
N
o
dividend
o
r
distribution shall
b
e
paid
except out
o
f
t
h
e
realised
o
r
umealised profits
o
f
t
h
e
Company,
o
r
out
o
f
t
h
e
share
premium account
o
r
a
s
otherwise permitted
b
y
t
h
e
Statute.
129 Except
a
s
otherwise provided
b
y
t
h
e
rights attached
t
o Shares (
i
t being understood
that the first sentence
o
f
this Article 129 shall
n
o
t
apply
t
o
t
h
e
Preferred
Securities),
a
l
l
dividends shall
b
e
declared and paid according
t
o
t
h
e
p
a
r
value
o
f
t
h
e
Shares that a Member holds.
I
f
any Share
i
s issued
o
n
terms providing that
i
t
shall rank
f
o
r
dividend
a
s
from a particular date, that Share shall rank
f
o
r
dividend
accordingly.
130 Subject
t
o Article
9
(
b
)
with respect
t
o dividends
o
n
the Preferred Securities, the
Directors may deduct from any dividend
o
r
distribution payable
t
o any Member
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(
a
l
l
sums
o
f
money (
i
f any) then payable
b
y
him
t
o the Company
o
n
account
o
f
calls
o
r
otherwise.
131 Subject
t
o Article
9
(
b
)
with respect
t
o dividends
o
n
t
h
e
t
h
e
Directors may declare that
a
n
y
dividend
o
r
distribution
b
e
paid wholly
o
r
partly
b
y
t
h
e
distribution
o
f
specific assets and
i
n particular
o
f
shares, debentures,
o
r
securities
o
f
any other company
o
r
i
n anyone
o
r
more
o
f
such ways and where
any difficulty arises
i
n regard
t
o such distribution,
t
h
e
Directors may settle the
same
a
s
they think expedient and
i
n particular may issue fractional Shares and
f
i
x
t
h
e
value
f
o
r
distribution
o
f
such specific assets
o
r
any part thereof and may
determine that cash payments shall
b
e
made
t
o any Members upon
t
h
e
basis
o
f
t
h
e
value
s
o
fixed
i
n order
t
o
adjust
t
h
e
rights
o
f
a
l
l
Members
a
n
d
may vest any such
specific assets
i
n trustees
a
s
may seem expedient
t
o the Directors.
132 Any dividend, distribution, interest
o
r
other monies payable
i
n cash
i
n respect
o
f
Shares may
b
e
paid
b
y
wire transfer
t
o
t
h
e
holder
o
r
b
y
cheque
o
r
warrant sent
through the post directed
t
o the registered address
o
f
the holder
o
r
,
i
n
t
h
e
case
o
f
joint holders,
t
o
t
h
e
registered address
o
f
t
h
e
holder who
i
s first named
o
n
the
Register
o
f
Members
o
r
t
o such Person and
t
o such address
a
s
such holder
o
r
joint
holders may
i
n writing direct. Every such cheque
o
r
warrant shall
b
e
made
payable
t
o
t
h
e
order
o
f
the Person
t
o whom
i
t
i
s sent. Anyone
o
f
two
o
r
more
joint holders may give effectual receipts
f
o
r
any dividends, bonuses,
o
r
other
monies payable
i
n respect
o
f
the Share held
b
y
them
a
s
joint holders.
Notwithstanding
t
h
e
foregoing,
f
o
r
s
o
long
a
s
the Preferred Securities
a
r
e
Book-
Entry Preferred Securities, the Company shall pay dividends
o
n
t
h
e
Preferred
Securities
b
y
wire transfer
o
f
Federal ( same day) funds
t
o
t
h
e
Clearing Agency
a
t
such bank account
o
f
t
h
e
Clearing Agency
a
s
shall
b
e
designated from time
t
o
time
b
y
t
h
e
Clearing Agency
t
o
t
h
e
Company.
133
N
o
dividend
o
r
distribution shall bear interest against
t
h
e
Company.
134 Any dividend which cannot
b
e
paid
t
o
a Member and/
o
r
which remains unclaimed
after
s
i
x
months from
t
h
e
date
o
f
declaration
o
f
such dividend may,
i
n
t
h
e
discretion
o
f
t
h
e
Directors,
b
e
paid into a separate account
i
n
t
h
e
Company's
name, provided that the Company shall not
b
e
constituted
a
s
a trustee
i
n respect
o
f
that account and the Dividend shall remain
a
s
a debt due
t
o
t
h
e
Member. Any
dividend which remains unclaimed after a period
o
f
s
i
x
years from
t
h
e
date
o
f
declaration
o
f
such dividend shall
b
e
forfeited and shall revert
t
o the Company.
CAPIT ALISA nON
135 The Directors may capitalise any sum standing
t
o
t
h
e
credit
o
f
any
o
f
t
h
e
Company's reserve accounts ( including share premium account and capital
redemption reserve fund)
o
r
any sum standing
t
o
t
h
e
credit
o
f
profit and loss
account
o
r
otherwise available
f
o
r
distribution and
t
o appropriate such sum
t
o
Members
i
n
t
h
e
proportions
i
n which such sum would have been divisible
amongst them had
t
h
e
same been a distribution
o
f
profits
b
y
way
o
f
dividend and
t
o apply such sum
o
n
their behalf
i
n paying
u
p
i
n full unissued Shares
f
o
r
allotment and distribution credited
a
s
fully paid-
u
p
t
o and amongst them
i
n
t
h
e
proportion aforesaid.
I
n such event
t
h
e
Directors shall
d
o
a
l
l
acts and things
NPB/ 6165251l600336/
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required
t
o give effect
t
o such capitalisation, with full power
t
o
t
h
e
Directors
t
o
make such provisions
a
s
they think
f
i
t
f
o
r
t
h
e
case
o
f
Shares becoming
distributable
i
n fractions (including provisions whereby
t
h
e
benefit
o
f
fractional
entitlements accrue
t
o the Company rather than
t
o
t
h
e
Members concerned). The
Directors may authorise any Person
t
o enter
o
n
behalf
o
f
a
l
l
o
f
the Members
interested into
a
n
agreement with
t
h
e
Company providing
f
o
r
such capitalisation
and matters incidental thereto and any agreement made under such authority shall
b
e
effective and binding
o
n
a
l
l
concerned.
BOOKS
O
F
ACCOUNT
136 The Directors shall cause proper books
o
f
account
t
o
b
e
kept with respect
t
o
a
l
l
sums
o
f
money received and expended
b
y
t
h
e
Company and
t
h
e
matters
i
n respect
o
f
which
t
h
e
receipt
o
r
expenditure takes place,
a
l
l
sales and purchases
o
f
goods
b
y
the Company and the assets and liabilities
o
f
t
h
e
Company. Proper books shall
not
b
e
deemed
t
o
b
e
kept
i
f there are not kept such books
o
f
account
a
s
are
necessary
t
o give a true and fair view
o
f
the state
o
f
the Company's affairs and
t
o
explain
i
t
s
transactions.
137 The Directors shall from time
t
o time determine whether and
t
o what extent and
a
t
what times and places and under what conditions
o
r
regulations
t
h
e
accounts and
books
o
f
t
h
e
Company
o
r
any
o
f
them shall
b
e
open
t
o
t
h
e
inspection
o
f
Members
not being Directors and
n
o
Member (
n
o
t
being a Director) shall have any right
o
f
inspecting any account
o
r
book
o
r
document
o
f
t
h
e
Company except
a
s
conferred
b
y
Statute
o
r
authorised
b
y
t
h
e
Directors
o
r
b
y
the Company
i
n general meeting.
138 The Directors may from time
t
o time cause
t
o
b
e
prepared and
t
o
b
e
laid before
t
h
e
Company
i
n general meeting profit and loss accounts, balance sheets, group
accounts (
i
f any) and such other reports and accounts
a
s
may
b
e
required
b
y
law.
AUDIT
139 The Directors may appoint
a
n
Auditor
o
f
t
h
e
Company who shall hold office until
removed from office
b
y
a resolution
o
f
t
h
e
Directors, and may
f
i
x
h
i
s
o
r
their
remuneration.
140 Every Auditor
o
f
the Company shall have a right
o
f
access
a
t
a
l
l
times
t
o
t
h
e
books and accounts and vouchers
o
f
the Company and shall
b
e
entitled
t
o require
from the Directors and officers
o
f
t
h
e
Company such information and explanation
a
s
may
b
e
necessary
f
o
r
t
h
e
performance
o
f
t
h
e
duties
o
f
t
h
e
Auditor.
141 Auditors shall,
i
f
s
o
required
b
y
t
h
e
Directors, make a report
o
n
t
h
e
accounts
o
f
the Company during their tenure
o
f
office
a
t
t
h
e
next annual general meeting
following their appointment
i
n
t
h
e
case
o
f
a company which
i
s registered with
t
h
e
Registrar
o
f
Companies
a
s
a
n
ordinary company, and
a
t
the next extraordinary
general meeting following their appointment
i
n
t
h
e
case
o
f
a company which
i
s
registered with
t
h
e
Registrar
o
f
Companies
a
s
a
n
exempted company, and
a
t
any
other time during their term
o
f
office, upon request
o
f
t
h
e
Directors
o
r
any general
meeting
o
f
the Members.
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(
-
NOTICES
142 Notices shall
b
e
i
n writing and may
b
e
given
b
y
t
h
e
Company
t
o any Member
either personally
o
r
b
y
sending
i
t
b
y
courier, post, cable, telex,
f
a
x
o
r
e
-
mail
t
o
him
o
r
t
o
h
i
s
address
a
s
shown
i
n
t
h
e
Register
o
f
Members (
o
r
where
t
h
e
notice
i
s
given bye-mail
b
y
sending
i
t
t
o
t
h
e
e
-
mail address provided
b
y
such Member);
provided that any notice
t
o Preferred Securityholders, with respect
t
o redemption
o
f
o
r
their voting
o
r
consensual rights shall
i
n each case
b
e
mailed,
b
y
first class mail, postage prepaid,
t
o
t
h
e
holders
o
f
o
f
record
a
t
t
h
e
respective last addresses appearing
o
n
t
h
e
Register
o
f
Members.
Any notice,
i
f posted from one country
t
o another,
i
s
t
o
b
e
sent airmail.
143 Where a notice
i
s sent
b
y
courier, service
o
f
t
h
e
notice shall
b
e
deemed
t
o
b
e
effected
b
y
delivery
o
f
t
h
e
notice
t
o a courier company, and shall
b
e
deemed
t
o
have been received
o
n
the third day (not including Saturdays
o
r
Sundays
o
r
public
holidays) following
t
h
e
day
o
n
which
t
h
e
notice was delivered
t
o
t
h
e
courier.
Where a notice
i
s sent
b
y
post, service
o
f
t
h
e
notice shall
b
e
deemed
t
o
b
e
effected
b
y
properly addressing, pre-paying and posting a letter containing the notice, and
shall
b
e
deemed
t
o have been received
o
n
t
h
e
fifth day (
n
o
t
including Saturdays
o
r
Sundays
o
r
public holidays) following
t
h
e
day
o
n
which
t
h
e
notice was posted.
Where a notice
i
s sent
b
y
cable, telex
o
r
fax, service
o
f
t
h
e
notice shall
b
e
deemed
t
o
b
e
effected
b
y
properly addressing and sending such notice and shall
b
e
deemed
t
o
n
t
h
e
same day that
i
t was transmitted. Where a
notice
i
s given bye- mail service shall
b
e
deemed
t
o
b
e
effected
b
y
transmitting
t
h
e
e
-
mail
t
o
t
h
e
e
-
mail address provided
b
y
t
h
e
intended recipient and shall
b
e
deemed
t
o
n
t
h
e
same day that
i
t was sent, and
i
t shall not
b
e
necessary
f
o
r
t
h
e
receipt ofthe
e
-
mail
t
o
b
e
acknowledged
b
y
the recipient.
144 A notice may
b
e
given
b
y
t
h
e
Company
t
o
t
h
e
Person
o
r
Persons which
t
h
e
Company has been advised
a
r
e
entitled
t
o a Share
o
r
Shares
i
n consequence
o
f
t
h
e
death
o
r
bankruptcy
o
f
a Member
i
n
t
h
e
same manner
a
s
other notices which
a
r
e
required
t
o
b
e
given under these Articles and shall
b
e
addressed
t
o them
b
y
name,
o
r
b
y
t
h
e
title
o
f
representatives
o
f
t
h
e
deceased,
o
r
trustee
o
f
t
h
e
bankrupt,
o
r
b
y
any like description
a
t
t
h
e
address supplied
f
o
r
that purpose
b
y
t
h
e
Persons
claiming
t
o
b
e
s
o
entitled,
o
r
a
t
the option
o
f
t
h
e
Company
b
y
giving the notice
i
n
any manner
i
n which
t
h
e
same might have been given
i
f
t
h
e
death
o
r
bankruptcy
had
n
o
t
occurred.
145 Notice
o
f
every general meeting shall
b
e
given
i
n any manner hereinbefore
authorised
t
o every Person shown
a
s
a Member
i
n
t
h
e
Register
o
f
Members
o
n
t
h
e
record date
f
o
r
such meeting except that
i
n
t
h
e
case
o
f
joint holders
t
h
e
notice
shall
b
e
sufficient
i
f given
t
o
t
h
e
joint holder first named
i
n
t
h
e
Register
o
f
Members and every Person upon whom
t
h
e
ownership
o
f
a Share devolves
b
y
reason
o
f
h
i
s
being a legal personal representative
o
r
a trustee
i
n bankruptcy
o
f
a
Member
o
f
record where
t
h
e
Member
o
f
record but
f
o
r
h
i
s
death
o
r
bankruptcy
would
b
e
entitled
t
o receive notice
o
f
t
h
e
meeting, and
n
o
other Person shall
b
e
entitled
t
o
receive notices
o
f
general meetings.
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
(
.
4
5
146 Notwithstanding
t
h
e
provisions
o
f
t
h
e
foregoing Articles 142
t
o 145,
f
o
r
s
o
long
a
s
any Series
A
-
2 Preferred Securities are listed
o
n
t
h
e
Euro MTS Market
o
f
the
Luxembourg Stock Exchange and such exchange
s
o
requires,
t
h
e
Company will
publish any notice given
t
o holders
o
f
Series
A
-
i
n one
English language newspaper that
i
s a daily newspaper
o
f
general circulation
i
n
Luxembourg (expected initially
t
o
b
e
the Luxemburger Wort).
WlNDINGUP
147 Subject
t
o Article
9
(
d
)
with respect
t
o
t
h
e
i
f
t
h
e
Company
shall
b
e
wound
u
p
,
and
t
h
e
assets available
f
o
r
distribution amongst
t
h
e
Members
shall
b
e
insufficient
t
o repay the whole
o
f
the share capital, such assets shall
b
e
distributed
s
o
that,
a
s
nearly
a
s
may
b
e
,
t
h
e
losses shall
b
e
borne
b
y
t
h
e
Members
i
n proportion
t
o
t
h
e
p
a
r
value
o
f
t
h
e
Shares held
b
y
them.
I
f
i
n a winding
u
p
t
h
e
assets available
f
o
r
distribution amongst
t
h
e
Members shall
b
e
more than
sufficient
t
o repay
t
h
e
whole
o
f
t
h
e
share capital
a
t
t
h
e
commencement
o
f
the
winding up,
t
h
e
surplus shall
b
e
distributed amongst
t
h
e
Members
i
n proportion
t
o
t
h
e
p
a
r
value
o
f
t
h
e
Shares held
b
y
them
a
t
t
h
e
commencement
o
f
t
h
e
winding
u
p
subject
t
o a deduction from those Shares
i
n respect
o
f
which there
a
r
e
monies due,
o
f
a
l
l
monies payable
t
o
t
h
e
Company
f
o
r
unpaid calls
o
r
otherwise. This Article
i
s without prejudice
t
o
t
h
e
rights
o
f
t
h
e
holders
o
f
Shares issued upon special
terms and conditions (including Article
9
(
d
)
a
s
t
o
t
h
e
Preferred Securities).
148
I
f
t
h
e
Company shall
b
e
wound
u
p
the liquidator may, with the sanction
o
f
a
Special Resolution
o
f
t
h
e
Company and any other sanction required
b
y
t
h
e
Statute, divide amongst
t
h
e
Members
i
n kind
t
h
e
whole
o
r
any part
o
f
t
h
e
assets
o
f
t
h
e
Company (whether they shall consist
o
f
property
o
f
t
h
e
same kind
o
r
not) and
may
f
o
r
that purpose value any assets and determine how
t
h
e
division shall
b
e
carried out
a
s
between the Members
o
r
different classes
o
f
Members. The
liquidator may, with
t
h
e
like sanction, vest
t
h
e
whole
o
r
any part
o
f
such assets
i
n
trustees upon such trusts
f
o
r
t
h
e
benefit
o
f
t
h
e
Members
a
s
t
h
e
liquidator, with
t
h
e
like sanction, shall think
f
i
t
,
but
s
o
that
n
o
Member shall
b
e
compelled
t
o accept
any asset upon which there
i
s a liability.
INDEMNITY
149 Every Director, agent
o
r
officer
o
f
t
h
e
Company shall
b
e
indemnified
o
u
t
o
f
t
h
e
assets
o
f
t
h
e
Company against any liability incurred
b
y
him
a
s
a result
o
f
any
a
c
t
o
r
failure
t
o
a
c
t
i
n carrying out
h
i
s
functions other than such liability (
i
f any) that
h
e
may incur
b
y
h
i
s
own wilful neglect
o
r
default.
N
o
such Director, agent
o
r
officer shall
b
e
liable
t
o the Company
f
o
r
any loss
o
r
damage
i
n carrying out
h
i
s
functions unless that liability arises through
t
h
e
wilful neglect
o
r
default
o
f
such
Director, agent
o
r
officer.
FINANCIAL YEAR
150 Unless
t
h
e
Directors otherwise prescribe, the financial year
o
f
t
h
e
Company shall
end
o
n
3
1
s
t
December
i
n each year and, following
t
h
e
year
o
f
incorporation, shall
begin
o
n
1
s
t
January
i
n each year.
TRANSFER BY WAY OF CONTINUATION
NPB/ 6165251l600336/
v
2
CONFIDENTIAL
Return
4
6
151
I
f
t
h
e
Company
i
s exempted
a
s
defined
i
n
t
h
e
Statute,
i
t shall, subject
t
o
t
h
e
provisions
o
f
t
h
e
Statute and with
t
h
e
approval
o
f
a Special Resolution, have
t
h
e
power
t
o register
b
y
way
o
f
continuation
a
s
a body corporate under the laws
o
f
any jurisdiction outside
t
h
e
Cayman Islands and
t
o
b
e
deregistered
i
n
t
h
e
Cayman
Islands.
CERTIFIED
T
O
B
E
A TRUE AND CORRECf COpy
SIG..
_
~
~
NEYD/ S TAVERAS
AmRtgillrar
o
f
C9Illpuits
Dat~ <
i
R / tJJkCb, JoDb-
,
NPB/ 616525/ 1600336/
v
2
CONFIDENTIAL
Return
Exhibit A
Board
o
f
Directors Resolutions
WHEREAS, Washington Mutual Bank (the " Bank") indirectly owns
a
l
l
o
f
the issued and
outstanding common stock
o
f
(
"
University Street");
WHEREAS,
i
t
i
s proposed that the Bank will make a contribution
t
o University Street
t
o
consist
o
f
loans
o
r
interests thereon not
t
o exceed $1.2 billion
i
n book value (the " University
Street Contribution)
i
n exchange
f
o
r
preferred stock issued
b
y
University Street;
WHEREAS, University Street proposes
t
o cause the formation
o
f
a Delaware limited
liability company (the " LLC") and
i
n connection therewith University Street and the Bank will
contribute
t
o the LLC assets
o
f
approximately $5 billion, with the Bank's portion (
t
h
e
" LLC
Contribution")
t
o consist
o
f
loans
o
r
interests therein not
t
o exceed $1.0 billion
i
n book value;
WHEREAS,
i
n exchange
f
o
r
such contributions, University Street
w
i
l
l
receive
substantially
a
l
l
o
f
the common interests
o
f
the LLC and the Bank
o
r
i
t
s
designee will receive
two classes
o
r
series preferred stock
o
f
the LLC
(
"
LLC Preferred Interests");
WHEREAS,
i
t
i
s proposed that the LLC Preferred Interests
w
i
l
l
b
e
transferred
b
y
WMB
o
r
i
t
s
designee
t
o two special purpose entities
(
"
SPEs") which
i
n turn will issue substantially similar
securities (the " SPE Securities")
t
o investors; and
WHEREAS,
i
t
i
s proposed that the Bank's parent, Washington Mutual, Inc.
(
"
WMI"), will
authorize two series
o
f
preferred stock (the " WMI Preferred Stock")
f
o
r
which under certain
circumstances each class
o
f
SPE Securities will
b
e
automatically exchanged.
THEREFORE,
I
T
I
S HEREBY RESOLVED, that the University Street Contribution and
the LLC Contribution are hereby authorized and approved, and any Authorized Officer (
a
s
defined below)
i
s hereby authorized
o
n
behalf
o
f
the Bank
t
o negotiate, execute and deliver any
agreements
o
r
documents
a
s
such Authorized Officer deems necessary
o
r
appropriate
i
n
connection with the University Street Contribution
o
r
the LLC Contribution.
RESOLVED FURTHER, that
t
h
e
Bank
i
s hereby authorized
t
o transfer,
o
r
t
o cause
i
t
s
designee
t
o transfer, the LLC Preferred Interests
t
o the SPEs
i
n exchange
f
o
r
cash and any
Authorized Officer
i
s hereby authorized
o
n
behalf
o
f
the Bank
t
o negotiate, execute and deliver
any agreements
o
r
documents
a
s
such Authorized Officer deems necessary
o
r
appropriate
i
n
connection with such transfers;
,
RESOLVED FURTHER, each
o
f
the Authorized Officers
i
s her~
b
y
authorized
o
n
behalf
o
f
the Bank
t
o negotiate, execute and deliver any agreements with the LLC
a
s
such Authorized
Officer deems necessary
o
r
appropriate
i
n connection with the management, operation
o
r
administration
o
f
the LLC;
RESOLVED FURTHER, that the Authorized Officers,
o
r
any
o
f
them, are authorized and
empowered,
o
n
behalf
o
f
the Bank and
i
n
i
t
s
name, with
f
u
l
l
power and authority
t
o delegate
such authority
t
o one
o
r
more attorneys-
i
n
-
fact
o
r
agents acting
f
o
r
such Authorized Officers,
o
r
any
o
f
them,
i
n the event that
i
t
i
s deemed necessary
o
r
desirable
s
o
t
o do,
i
n connection with
the offering
o
f
the Preferred Stock, the LLC Preferred Interests
o
r
the SPE Securities
i
n a
127695.1
WM: CONFIDENTIAL LIMITED ACCESS
CONFIDENTIAL
Return
private/ Regulation S offering,
t
o
prepare, cause
t
o
b
e
prepared
o
r
t
o
participate
i
n the
preparation
o
f
,
a
n
offering circular
o
r
offering memorandum with respect
t
o
such securities (and
any supplements
o
r
amendments thereto),
a
s
the Authorized Officers,
o
r
any
o
f
them, taking
such action shall approve
i
n connection therewith
i
n order
t
o
effect the offering
o
f
such
securities
i
n a private/ Regulation S offering;
RESOLVED FURTHER, that any Authorized Officer, together with other proper officers
o
f
the Bank (including, without limitation, those authorized from time
t
o time pursuant
t
o the
Bank's Asset and Liability Management Policy and the standards and procedures from time
t
o
time
i
n effect thereunder),
i
s hereby authorized
t
o negotiate, enter into, execute and deliver any
and
a
l
l
additional agreements, any undertakings
o
r
other documents
o
r
supplemental
agreements
o
n
behalf
o
f
the Bank ( including, without limitation, filings
o
r
applications with
banking regulators, securities regulators
o
r
stock exchanges, domestic
o
r
foreign) and
t
o
take
any other actions,
i
n each case,
a
s
such Authorized Officer
o
r
other proper officer deems
t
o
b
e
necessary
o
r
advisable
i
o
f
the University Street Contribution, the
LLC Contribution
o
r
the transfers
o
f
the LLC Preferred Interests
o
r
t
o further the intent
o
f
these
resolutions; and
RESOLVED FURTHER, that
f
o
r
purposes
o
f
these resolutions and the transactions
contemplated hereby, each
o
f
the following shall
b
e
a
n
" Authorized Officer": (
i
) the Chief
Executive Officer, (
i
i
)
the Chief Operating Officer, (
i
i
i
)
the Chief Financial Officer, (
i
v
)
any Senior
Executive Vice President, (
v
)
any Executive Vice President, (
v
i
)
the Senior Vice President and
Treasurer, (vii) the Senior Vice President and Assistant Treasurer and (viii) the Senior Vice
President and Controller.
127695
v
1
0
1
/
1
2
/
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4
9
PM
CONFIDENTIAL
Return
ASSISTANT SECRETARY'S CERTIFICATE
OF
March
7
,
2006
The undersigned, a duly qualified and acting Assistant Secretary
o
f
Washington Mutual,
Inc., a Washington corporation ( the " Company"), does hereby certify
a
s
follows:
1
.
Attached hereto
a
s
Exhibit
A
-
1
i
s a true, complete and correct copy
o
f
the
Amended and Restated Articles
o
f
Incorporation
o
f
t
h
e
Company
a
s
o
f
the open
o
f
business
o
n
March
6
,
2006 and certified
o
n
such date
b
y
the Secretary
o
f
State
o
f
the state
o
f
Washington
(the " Secretary
o
f
State"). Except
f
o
r
two sets
o
f
articles
o
f
amendment filed
o
n
March
6
,
2006
with the Secretary
o
f
State which are attached hereto
a
s
Exhibits
A
-
2 and
A
-
3
,
there have been
n
o
amendments
o
r
other documents relating
t
o
o
r
affecting the Amended and Restated Articles
o
f
Incorporation filed with the Secretary
o
f
State
o
f
the State
o
f
Washington since the date
o
f
the
attached certification, and
n
o
amendments have been authorized
o
r
approved
b
y
the board
o
f
directors
o
f
the Company (the " Board"),
o
r
i
t
s
shareholders,
a
s
o
f
the date hereof, nor has any
action been taken
b
y
the Board, the Company
o
r
i
t
s
shareholders
i
n contemplation
o
f
the
liquidation
o
r
dissolution
o
f
the Company
o
r
any other material development~.
2
.
Attached hereto
a
s
Exhibit
B
-
1
i
o
f
the
currently effective Bylaws
o
f
the Company. Except
a
s
set forth
o
n
Exhibit
B
-
2 attached hereto,
such Bylaws have not been modified, amended
o
r
rescinded and remain
i
n full force and effect
a
s
o
f
the date hereof.
3
.
Attached hereto
a
s
Exhibit C
i
o
f
a certificate
issued
b
y
the Secretary
o
f
State
o
f
the State
o
f
Washington with respect
t
o
the due
incorporation and legal existence
o
f
the Company.
4
.
Attached hereto
a
s
Exhibit
0
-
1
i
o
f
t
h
e
resolutions (
t
h
e
" Resolutions") duly adopted
b
y
t
h
e
Board
a
t
meetings duly called and held
o
n
January
1
7
,
2006 and February
2
1
,
2006,
i
n each case
a
t
which a quorum was present and
acting throughout, approving and authorizing, among other things,
t
h
e
transactions described
therein relating
t
o
(
i
)
t
h
e
authorization and reservation
o
f
t
h
e
Series I Perpetual Non- cumulative
Fixed-
t
o
-
Floating Rate Preferred Stock and the Series J Perpetual Non- cumulative Fixed Rate
Preferred Stock (together,
t
h
e
" Preferred Stock") and
t
h
e
filing
o
f
articles
o
f
amendment with
respect thereto, and (
i
i
)
t
h
e
offer and sale
o
f
(
a
)
$1,250,000,000
o
f
Fixed-
t
o
-
Floating Rate
Perpetual Non- cumulative Trust Securities, liquidation preference $100,000
p
e
r
security
(
"
Trust
Securities"),
b
y
Washington Mutual Preferred Funding Trust
I
,
and (
b
)
(
i
) $302,300,000
o
f
7.25% Perpetual Non- cumulative Preferred Securities, Series
A
-
1
,
$100,000 per security, and (
i
i
)
$447,700,000
o
f
7.25% Perpetual Non- cumulative Preferred
Securities, Series
A
-
2
,
liquidation preference $10,000
p
e
r
security,
i
n each case
b
y
Washington
Mutual Preferred Funding (Cayman) I Ltd. Except
a
s
set forth
o
n
Exhibit
0
-
2
,
the Resolutions
attached hereto
a
s
Exhibit
0
-
1 have not been amended, supplemented, modified, revoked
o
r
rescinded and have been
i
n
f
u
l
l
force and effect since their adoption
t
o
and including
t
h
e
date
hereof and
a
r
e
now
i
n
f
u
l
l
force and effect and
t
h
e
Resolutions
a
s
s
o
amended
a
s
s
e
t
forth
o
n
Exhibit
0
-
2 are
t
h
e
only resolutions adopted
b
y
the Board
o
r
any committee thereof relating
t
o
t
h
e
Preferred Stock
o
r
t
h
e
Securities. Attached hereto
a
s
Exhibits
0
-
2
,
0
-
3 and
0
-
4
a
r
e
true,
complete and correct copies
o
f
the actions
o
f
Authorized Officers effected pursuant
t
o the
17357747 WMI Assistant Secretary's Certificate
CONFIDENTIAL
Return
Resolutions relating, respectively,
t
o
the pricing, articles
o
f
amendment and forms
o
f
certificates
f
o
r
the Preferred Stock. Each such action remains
i
n full force and effect.
5
.
Attached hereto
a
s
Exhibit E
i
s a list
o
f
duly elected
o
r
appointed, qualified and
acting officers
o
f
the Company (the " Authorized Officers"), holding the titles indicated next
t
o
their respective names, and the signatures appearing opposite their respective names are the
true and genuine signatures
o
f
such Authorized Officers, and each such Authorized Officer
i
s
duly authorized
t
o execute and deliver,
o
n
behalf
o
f
the Company, the agreements, documents
and other instruments related
t
o the transactions more specifically described
i
n
o
r
contemplated
b
y
the Resolutions and was
s
o
duly authorized
a
t
the time
o
f
signing and delivery
o
f
any such
agreements, documents
o
r
other instruments signed and delivered prior
t
o the date hereof, and
the signatures
o
f
such . Authorized Officers appearing
o
n
such agreements, documents
o
r
other
instruments are the genuine signatures.
[ Signature Pages
t
o
Follow]
17357747
WMI Assistant Secretwy's Certificate
CONFIDENTIAL
Return
I
N
WITNESS WHEREOF, the undersigned has signed this Certificate
a
s
o
f
the date first
hereinabove written. ~
I
J
/
B
y
:
j
!
~
Name: Susan Taylor
Title: Assistant Secretary
I
,
Sophie Hager Hume,
a
n
Assistant Secretary, hereby certify that Susan Taylor
i
s a duly
elected, qualified and acting Assistant Secretary
o
f
the Company
a
s
o
f
the date hereof and that
the signature
s
e
t
forth opposite
h
i
s
name
i
s
h
i
s
genuine signature.
~
~
me $
M
!
ft+~
Title: Assistant Secretary
I
N WITNESS WHEREOF, I have hereunto signed my name
a
s
o
f
the date first
hereinabove written.
17357747
WMJAssistant Secretary's Certificate
CONFIDENTIAL
Return
EXHIBIT AI
Amended and Restated Articles of
Incorporation
17357747
WMI Assistant Secretarys Certificate
CONFIDENTIAL
Return
I
,
Sam Reed, Secretary
o
f
State
o
f
the State
o
f
Washington and custodian
o
f
i
t
s
seal,
hereby issue this
certificate that the attached
i
s a true and correct copy
o
f
ARTICLES
O
F
AMENDMENT
o
f
a
s
filed
i
n this office
o
n
February
8
,
2001.
Date: March
6
,
2006
Given under my hand and
t
h
e
Seal
o
f
t
h
e
State
o
f
Washington
a
t
Olympia.
t
h
e
State Capital
Sam Reed, Secretary
o
f
State
"
"
l{
\
n n(\ 1
CONFIDENTIAL
Return
~
.
.
.
.
Secretary
o
f
State
I
,
Sam Reed, Secretary
o
f
State
o
f
t
h
e
State
o
f
o
f
i
t
s
seal,
hereby issue this
ARTICLES OF AMENDMENT
t
o
a Washington Profit Corporation. Articles
o
f
Amendment were filed
f
o
r
record
i
n this office
o
n
t
h
e
date indicated below.
UBI Number: 601 566389
:
~
Date: February
8
,
2001
Effective Date:
t
h
e
Seal
o
f
t
h
e
State
o
f
Washington
a
t
Olympia,
cFirn~
Sam Reed, Secretary
o
f
State
CONFIDENTIAL
Return
0
4
3
-
1
6
6
3
,
0
2
0
0
1
TO THE
F
I
l
.
E
D
STATE
O
F
WASI- IIM~ TON
F
E
B
0
8
2001 ~
'
c
r
.
RETARY
O
F
STATe
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WASIDNGTON MUTUAL, INC.
Pursuant
t
o the provisions
o
f
Chapter 23B.
1
0
and Section 23B. 06.020
o
f
the
Washington Business Corporation Act, Washington Mutual, Inc., a Washington
corporation, hereby adopts
t
h
e
following articles
o
f
amendment
t
o
i
t
s
amended and
restated articles
o
f
incorporation: .
FIRST: The name
o
f
t
h
e
corporation
i
s
:
SECOND: The rights, preferences, privileges, restrictions and other matters
relating
t
o
t
h
e
Series H Preferred Stock
o
f
t
h
e
corporation
a
r
e
a
s
follows:
1
.
Designation. The designation
o
f
this Series shall
b
e
Series H Preferred Stock
(hereinafter referred
t
o
a
s
this " Series"), and
t
h
e
number
o
f
shares constituting this Series
shall
b
e
2,000,000. Shares
o
f
this Series shall have a liquidation preference
o
f
$
5
0
.
2
.
Dividends. (
a
)
The holders
o
f
shares
o
f
this Series shall
b
e
entitled
t
o receive
cash dividends, when,
a
s
and
i
f declared
b
y
t
h
e
Board
o
f
Directors, out
o
f
funds legally
available
f
o
r
that purpose,
a
t
t
h
e
rates
s
e
t
forth below
i
n this Section
2
.
Dividends
o
n
t
h
e
shares
o
f
this Series shall
b
e
payable, when,
a
s
and
i
f declared
b
y
t
h
e
Board
o
f
Directors,
quarterly
i
n arrears
o
n
February
1
6
,
May
1
6
,
August
1
6
and November
1
6
o
f
each year
( each, a " Dividend Payment Date"), commencing
o
n
t
h
e
Initial Dividend Payment Date.
The " Initial Dividend Payment Date" shall mean
t
h
e
first Dividend Payment Date
following the effective date
o
f
t
h
e
merger (the " Merger")
o
f
Bank United Corp. with and
into
t
h
e
Company,
o
r
i
f any such date
i
s not a Business Day (
a
s
defined below),
t
h
e
next
succee!! ing Business Day. Each such dividend shall
b
e
paid
t
o
t
h
e
holders
o
f
record
o
f
shares
o
f
this Series
a
s
they appear
o
n
t
h
e
stock register
o
f
the Company
o
n
t
h
e
applicable Record Date,
a
s
shall
b
e
fixed
b
y
t
h
e
Board
o
f
Directors; provided, however,
that holders
o
f
shares
o
f
this Series called
f
o
r
redemption
o
n
a Redemption Date falling
between
t
h
e
record date associated with a Dividend Payment Date and such Dividend
Payment Date shall receive
t
h
e
applicable dividend payment, together with
a
l
l
other
accumulated and unpaid dividends
o
n
such date
a
s
shall
b
e
fixed
f
o
r
redemption.
Dividends
o
n
t
h
e
shares ofthis Series shall accumulate and
b
e
cumulative from the date
o
f
original issuance. " Business Day" shall mean any day other than a Saturday
o
r
Sunday
o
r
a day
o
n
which banking institutions
i
n New York City
a
r
e
authorized
o
r
required
b
y
law
o
r
executive order
t
o remain closed.
n
:
: r
J
1
)
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f
)
!
l
I
A I-'
1
-
1
1
'
1
9
-
1
-
9
.
J
m
i
S
l
f
( l ..........
1
'
9
-
1
1
9
9
1
9
C
O
-
-
.
J
'
-
'
- Of!)
m
:
:
l
i
S
l
1
1
9
9
1
9
.
1
.
9
.
.
.
.....
p
)
' I
119
C
O
r
L
i
lJJ'rLi
(
.
j P
)
.
.
.
.
.
-
m
-
.
J
1
i
S
9
l
l
(
J
,
J
J
m
.
.
.
.
.
1
9
CONFIDENTIAL
Return
0
2
0
4
0
3
1
-
1
5
6
3
.
.
1
(
b
)
For each quarterly dividend period (each, a " Dividend Period") from
t
h
e
Initial Dividend Payment Date, through and including
t
h
e
Dividend Period ending August
16,2002, dividends payable
o
n
t
h
e
shares
o
f
this Series shall
b
e
payable
a
t
a'rate per
annum
o
f
t
h
e
liquidation preference thereof equal
t
o 7.25% (
t
h
e
" Initial Rate Period").
For each Dividend Period after
t
h
e
Initial Rate Period, dividends payable
o
n
t
h
e
shares
o
f
this Series shall
b
e
payable
a
t
a rate per annum
o
f
t
h
e
liquidation preference thereof equal
t
o
t
h
e
Reset Rate (
a
s
defined below). The amount
o
f
dividends per share
f
o
r
each
Dividend Period shall
b
e
computed
b
y
dividing the applicable rate
f
o
r
such Dividend
Period
b
y
four and applying
t
h
e
resulting rate
t
o
t
h
e
liquidation preference per share
o
f
this Series. Each Dividend Period (other than
t
h
e
Initial Dividend Period, defmed below)
shall commence
o
n
a Dividend Payment Date and shall end
o
n
and include
t
h
e
day next
preceding
t
h
e
next Dividend Payment Date. The " Initial Dividend Period" shall mean
t
h
e
period commencing
o
n
t
h
e
effective date
o
f
t
h
e
Merger and ending
o
n
the Initial
Dividend Payment Date.
(
c
)
Dividends payable
o
n
this Series
f
o
r
any period greater
o
r
less than a full
Dividend Period, other than
t
h
e
Initial Dividend Period, shall
b
e
computed
o
n
t
h
e
basis
o
f
a 360- day year consisting
o
f
twelve 30- day months and,
f
o
r
any period less than one
month,
t
h
e
actual number
o
f
days elapsed
i
n
t
h
e
period.
I
n connection with
t
h
e
Merger,
t
h
e
shares
o
f
Bank United Corp.'s Series B Preferred Stock (
t
h
e
" Predecessor Shares")
shall
b
e
converted into shares
o
f
this Series. Prior
t
o
t
h
e
completion
o
f
t
h
e
Merger,
t
h
e
board
o
f
directors
o
f
Bank United Corp. declared a dividend
o
n
t
h
e
Predecessor Shares
payable
o
n
t
h
e
Initial Dividend Payment Date.
A
B
successor
t
o Bank United Corp.,
t
h
e
Company will pay
o
n
t
h
e
Initial Dividend Payment Date
t
h
e
dividend declared
b
u
t
not
paid
o
n
the Predecessor Shares; provided that
i
n
n
o
event shall a holder
o
f
this Series
b
e
entitled
t
o a dividend
o
n
t
h
e
Initial Dividend Payment Date that
i
s greater than such
holder would have been entitled
t
o
o
n
t
h
e
Initial Dividend Payment Date had
t
h
e
Merger
not been completed and the Predecessor Shares not been converted into shares
o
f
this
Series.
(
d
)
N
o
full dividends shall
b
e
declared
o
r
paid
o
r
s
e
t
apart
f
o
r
payment
o
n
t
h
e
Preferred Stock
o
f
any series ranking,
a
s
t
o dividends,
o
n
a parity with
o
r
junior
t
o this
Series
f
o
r
any period unless full cumulative dividends
o
n
the shares
o
f
this Series
f
o
r
a
l
l
full Dividend Periods ending
o
n
o
r
prior
t
o
t
h
e
date
o
f
such dividends
o
n
such other series
ofPr.
e
f
!
lrred Stock have been
o
r
contemporaneously
a
r
e
declared and paid
o
r
declared and
a sum sufficient
f
o
r
t
h
e
payment thereof
s
e
t
apart
f
o
r
such payment. When dividends are
not paid
i
n full,
a
s
aforesaid, upon
t
h
e
shares
o
f
this Series and any other series
o
f
Preferred Stock ranking
o
n
a parity
a
s
t
o dividends with this Series,
a
l
l
dividends
declared upon shares
o
f
this Series and any other series
o
f
Preferred Stock ranking
o
n
a
parity
a
s
t
o dividends with this Series shall
b
e
declared pro rata
s
o
that
t
h
e
amount
o
f
dividends declared
p
e
r
share
o
n
this Series and such other Preferred Stock shall
i
n
a
l
l
cases bear
t
o each other the same ratio that accrued and unpaid dividends per share
o
n
t
h
e
shares
o
f
this Series and such other Preferred Stock bear
t
o each other.
N
o
interest,
o
r
sum
o
f
money
i
n lieu
o
f
interest, shall
b
e
payable
i
n respect
o
f
o
r
payments
o
n
this Series which may
b
e
i
n arrears.
CONFIDENTIAL
Return
0
4
.
3
-
1
6
6
3
.
2
2
0
0
1
(
e
)
S
o
long
a
s
any shares
o
f
this Series
a
r
e
outstanding,
n
o
dividend (other than a
dividend
i
n Common Stock
o
r
i
n any other stock ranking junior
t
o
this Series
a
s
t
o
dividends and upon liquidation and other than
a
s
provided
i
n paragraph (
d
)
o
f
this Section
2
)
shall
b
e
declared
o
r
paid
o
r
s
e
t
aside
f
o
r
payment
o
r
other distribution declared
o
r
made upon
t
h
e
Common Stock
o
r
upon any other stock ranking junior
t
o
o
r
o
n
a parity
with this Series
a
s
t
o
dividends
o
r
upon liquidation,
n
o
r
shall any Common Stock
o
r
any
other stock
o
f
t
h
e
t
o
o
r
o
n
a parity with this Series
a
s
t
o
dividends
o
r
upon liquidation
b
e
redeemed, purchased
o
r
otherwise acquired
f
o
r
any
consideration (
o
r
any moneys
b
e
paid
t
o
o
r
made available
f
o
r
a sinking fund
f
o
r
t
h
e
redemption
o
f
any shares
o
f
any such stock)
b
y
t
h
e
Company (except
b
y
conversion into
o
r
exchange
f
o
r
stock
o
f
t
h
e
t
o this Series
a
s
t
o dividends and
upon liquidation), unless,
i
n each case, full cumulative dividends
o
n
a
l
l
outstanding
shares
o
f
this Series
f
o
r
a
l
l
f
u
l
l
Dividend Periods ending
o
n
o
r
prior
t
o
t
h
e
date
o
f
such
other dividend, distribution, redemption, purchase
o
r
other acquisition, shall have been
o
r
contemporaneously
a
r
e
paid
o
r
declared and a sum sufficient
f
o
r
t
h
e
payment thereof
s
e
t
aside
f
o
r
such payment.
3
.
Remarketin~. (
a
)
The dividend rate
o
n
this Series shall
b
e
reset
t
o
t
h
e
Reset
Rate
o
n
t
h
e
Purchase Contract Settlement Date (
a
s
defmed below). The Company shall
request,
n
o
t
later than
1
5
nor more than
3
0
calendar days prior
t
o
t
h
e
Remarketing Date
(
a
s
defined below), that
t
h
e
Depositary (
a
s
defined below) notifY the Holders
o
f
shares
o
f
this Series and
t
h
e
holders
o
f
Corporate PIES
o
f
t
h
e
Remarketing and
o
f
t
h
e
procedures
that must
b
e
followed
i
f a Holder
o
f
Corporate PIES wishes
t
o make a cash settlement
o
f
i
t
s
obligation
t
o purchase Common Stock ofthe Company pursuant
t
o
t
h
e
Purchase
Contract Agreement.
(
b
)
Not later than
5
:
0
0
p
.
o
n
t
h
e
seventh Business Day
preceding
t
h
e
Purchase Contract Settlement Date, each Holder may elect
t
o
have
t
h
e
shares
o
f
this Series held
b
y
such Holder remarketed
i
n
t
h
e
Remarketing. Holders
o
f
Corporate PIES that
d
o
not give notice
o
f
their intention
t
o make a cash settlement
o
f
t
h
e
purchase contract component
o
f
their Corporate PIES prior
t
o such time
i
n
t
h
e
manner
specified
i
n
t
h
e
Purchase Contract Agreement,
o
r
that give such notice
b
u
t
fail
t
o deliver
cash prior
t
o 11:
0
0
a
.
o
n
o
r
prior
t
o the fifth Business Day
preceding
t
h
e
Purchase Contract Settlement Date, shall
b
e
deemed
t
o
have consented
t
o
t
h
e
disRosition
o
f
t
h
e
shares
o
f
this Series that are a component
o
f
their Corporate PIES
i
n
t
h
e
Remarketing. Holders
o
f
t
h
e
shares
o
f
this Series that
a
r
e
not a component
o
f
Corporate PIES. wishing
t
o have their shares
o
f
this Series remarketed shall give
t
o
t
h
e
Purchase Contract Agent notice
o
f
their election prior
t
o 11:
0
0
a
.
m
.
,
New York City time
o
n
such fifth Business Day. Any such notice shall
b
e
irrevocable and may
n
o
t
b
e
conditioned upon
t
h
e
level
a
t
which
t
h
e
Reset Rate
i
s established
i
n
t
h
e
Remarketing.
Promptly after 11:
0
0
a
.
m
.
,
New York City time,
o
n
such fifth Business Day,
t
h
e
Purchase
Contract Agent, based
o
n
t
h
e
notices received
b
y
i
t prior
t
o such time (including notices
from
t
h
e
Purchase Contract Agent
a
s
t
o
purchase contracts
f
o
r
which cash settlement has
been elected and cash received), shall notifY
t
h
e
Remarketing Agent
o
f
t
h
e
number
o
f
shares
o
f
this Series
t
o
b
e
tendered
f
o
r
purchase
i
n
t
h
e
Remarketing.
CONFIDENTIAL
Return
-
0
4
-
3
-
1
-
6
6
*
3.3---
2
0
0
1
(
c
)
I
f any Holder
o
f
shares
o
f
this Series does
n
o
t
give a notice
o
f
i
t
s
intention
t
o
make a cash settlement
o
r
gives such notice
b
u
t
fails
t
o
deliver cash
a
s
described
i
n
Section
3
(
b
)
above,
o
r
gives a notice
o
f
election
t
o
have shares
o
f
this Series'that
a
r
e
n
o
t
a
component
o
f
Corporate PIES remarketed, then
t
h
e
shares
o
f
this Series
o
f
such Holder
shall
b
e
deemed tendered
f
o
r
purchase
i
n
t
h
e
Remarketing, notwithstanding any failure
b
y
such Holder
t
o deliver
o
r
properly deliver such shares
t
o
t
h
e
Remarketing Agent
f
o
r
purchase.
(
d
)
The right
o
f
each Holder
t
o have shares ofthis Series tendered
f
o
r
purchase
shall
b
e
limited
t
o
t
h
e
extent that (
i
)
t
h
e
Remarketing Agent conducts a remarketing
pursuant
t
o
t
h
e
terms
o
f
t
h
e
Remarketing Agreement, (
i
i
)
t
h
e
shares
o
f
this Series
tendered have not been called
f
o
r
redemption, (
i
i
i
)
t
h
e
Remarketing Agent
i
s able
t
o find
a purchaser
o
r
purchasers
f
o
r
t
h
e
tendered shares
o
f
this Series and (
i
v
)
such purchaser
o
r
purchasers deliver
t
h
e
purchase price therefor
t
o
t
h
e
Remarketing Agent.
(
e
)
O
n
t
h
e
Remarketing Date,
t
h
e
Remarketing Agent shall use commercially
reasonable efforts
t
o remarket,
a
t
a price equal
t
o 100.50%
o
f
t
h
e
preference thereof,
t
h
e
shares
o
f
this Series tendered
o
r
deemed tendered
f
o
r
purchase.
(
f
)
I
f
,
a
s
a result ofthe efforts described
i
n Section
3
(
e
)
,
t
h
e
Remarketing Agent
determines that
i
t will
b
e
able
t
o remarket
a
l
l
o
f
t
h
e
shares
o
f
this Series tendered
o
r
deemed tendered
f
o
r
purchase
a
t
a price
o
f
100.50%
o
f
t
h
e
preference
o
f
such shares prior
t
o
4
:
0
0
p
.
m
.
,
New York City time,
o
n
t
h
e
Remarketing
Date,
t
h
e
Remarketing Agent shall determine
t
h
e
Reset Rate, which shall
b
e
t
h
e
rate
p
e
r
annum (rounded
t
o
t
h
e
nearest one- thousandth (0.001)
o
f
one percent
p
e
r
annum) that the
Remarketing Agent determines,
i
n
i
t
s
sole judgment,
t
o
b
e
t
h
e
lowest rate
p
e
r
annum that
will enable
i
t
t
o remarket
a
l
l
o
f
t
h
e
shares ofthis Series tendered
o
r
deemed tendered
f
o
r
Remarketing.
(
g
)
I
f
none
o
f
the Holders
o
f
t
h
e
shares
o
f
this Series
o
r
t
h
e
holders
o
f
the
Corporate PIES elects
t
o have shares
o
f
this Series remarketed
i
n
t
h
e
Remarketing,
t
h
e
Reset Rate shall
b
e
t
h
e
rate determined
b
y
the Remarketing Agent,
i
n
:
i
.
t
s
sole discretion,
a
s
t
h
e
rate that would have been established had a Remarketing
o
f
a
l
l
t
h
e
shares
o
f
this
Series been held
o
n
t
h
e
Remarketing Date.
:
(
h
)
I
f
,
b
y
4
:
0
0
p
.
m
.
,
New York City time,
o
n
t
h
e
Remarketing Date,
t
h
e
Remarketing Agent
i
s unable
t
o remarket
a
l
l
o
f
t
h
e
Preferred Securities tendered
o
r
deemed tendered
f
o
r
purchase, a " Failed Remarketing" shall
b
e
deemed
t
o
have occurred
and the Remarketing Agent shall
s
o
advise
b
y
telephone
t
h
e
Depositary and
t
h
e
Company. Inthe event
o
f
a Failed Remarketing,
t
h
e
Reset Rate shall equal (
1
)
t
h
e
" AA"
Composite Commercial Paper Rate (
a
s
defmed below), plus (
2
)
t
h
e
Applicable Margin
(
a
s
defined below).
(
i
)
B
y
approximately
4
:
3
0
p
.
o
n
the Remarketing Date,
proVided that there has not been a Failed Remarketing,
t
h
e
Remarketing Agent shall
advise,
b
y
telephone (
i
)
t
h
e
Depositary and
t
h
e
Company
o
f
t
h
e
Reset Rate determined
i
n
CONFIDENTIAL
Return
04.3.1663. 4
2
0
0
1
the Remarketing and
t
h
e
number
o
f
shares
o
f
this Series sold
i
n
t
h
e
Remarketing, (
i
i
)
each purchaser (
o
r
the Depositary Participant thereof)
o
f
t
h
e
Reset Rate and
t
h
e
number
o
f
shares
o
f
this Series such purchaser
i
s
t
o purchase and (
i
i
i
)
each purchaserio give
instructions
t
o
i
t
s
Depositary Participant
t
o pay
t
h
e
purchase price
o
n
the Purchase
Contract Settlement Date
i
n same day funds against delivery
o
f
the shares
o
f
this Series
purchased through
t
h
e
facilities
o
f
t
h
e
Depositary.
(
j
)
I
n accordance with
t
h
e
Depositary's normal procedures,
o
n
t
h
e
Purchase
Contract Settlement Date, the transactions described above with respect
t
o each Preferred
Security tendered
f
o
r
purchase and sold
i
n
t
h
e
Remarketing shall
b
e
executed through
t
h
e
Depositary, and
t
h
e
accounts
o
f
the respective Depositary Participants shall
b
e
debited
and credited and such shares
o
f
this Series delivered
b
y
book- entry
a
s
necessary
t
o effect
purchases
a
n
d
sales
o
f
such shares
o
f
this Series. The Depositary shall make payment
i
n
accordance with
i
t
s
normal procedures.
(
k
)
I
f
any Holder
o
f
shares
o
f
this Series selling shares
o
f
this Series
i
n the
Remarketing fails
t
o deliver such shares, the Depositary Participant
o
f
such selling holder
and
o
f
any other Person that was
t
o have purchased shares
o
f
this Series
i
n
t
h
e
Remarketing may deliver
t
o any such other Person a number
o
f
shares
o
f
this Series that
i
s less than
t
h
e
number
o
f
shares
o
f
this Series that otherwise was
t
o
b
e
purchased
b
y
such Person.
I
n such event,
t
h
e
number
o
f
shares
o
f
this Series
t
o
b
e
s
o
delivered shall
b
e
determined
b
y
such Depositary Participant, and delivery
o
f
such lesser number
o
f
shares
o
f
this Series shall constitute good delivery.
(
1
)
Under
t
h
e
Remarketing Agreement,
t
h
e
Company shall
b
e
liable for, and shall
pay, any and
a
l
l
costs and expenses incurred
i
n connection with
t
h
e
Remarketing.
(
m
)
The tender and settlement procedures
s
e
t
i
n this Section
3
,
including
provisions
f
o
r
payment
b
y
purchasers
o
f
the shares
o
f
this Series
i
n the Remarketing,
shall
b
e
subject
t
o modification
t
o
t
h
e
extent required
b
y
the Depositary
o
r
i
f
t
h
e
book-
entry system
i
s
n
o
longer available
f
o
r
the shares ofthis Series
a
t
t
h
e
time
o
f
t
h
e
Remarketing,
t
o facilitate
t
h
e
tendering and remarketing
o
f
t
h
e
shares-.
Q
f
this Series
i
n
certificated form.
I
n
addition,
t
h
e
Remarketing Agent may modify
t
h
e
settlement
procedures
s
e
t
forth herein
i
n order
t
o facilitate
t
h
e
settlement process.
:
-
.
(
n
)
Definitions:
"
'
AA' Composite Commercial Paper Rate"
o
n
any date shall mean (
i
)
t
h
e
interest
equivalent
o
f
t
h
e
60- day rate
o
n
commercial paper placed
o
n
behalf
o
f
issuers whose
corporate bonds
a
r
e
rated " AN'
b
y
S&P
o
r
t
h
e
equivalent
o
f
such rating
b
y
S&P
o
r
t
h
e
equivalent
o
f
such rating
b
y
S&P
o
r
another rating agency,
a
s
made available
o
n
a
discount basis
o
r
otherwise
b
y
t
h
e
Federal Reserve Board
f
o
r
t
h
e
business day
. immediately preceding such date
o
r
(
i
i
)
i
f
t
h
e
Federal Reserve Board does not make
available any such rate, then
t
h
e
arithmetic average
o
f
those rates,
a
s
quoted
o
n
a discount
basis
o
r
otherwise,
b
y
t
h
e
Commercial Paper Dealers
t
o
t
h
e
Remarketing Agent
f
o
r
t
h
e
close
o
f
business
o
n
t
h
e
Business Day next preceding such date.
I
f
any Commercial
CONFIDENTIAL
Return
0
4
3
-
1
6
6
3
,
5
2
0
0
1 . ,
,.......
Paper Dealer does
n
o
t
quote a rate required
t
o
determine
t
h
e
" AA" Composite
Commercial Paper Rate,
t
h
e
" AA" Composite Commercial Paper Rate will
b
e
determined
o
n
t
h
e
basis
o
f
t
h
e
quotation
o
r
quotations fumished
b
y
t
h
e
remaining COmnlercial Paper
Dealer
o
r
Commercial Paper Dealers and any substitute commercial paper dealer
o
r
substitute commercial paper dealers selected
b
y
t
h
e
Remarketing Agent
o
r
,
i
f
t
h
e
Remarketing Agent does
n
o
t
select any such substitute commercial paper dealer
o
r
substitute commercial paper dealers,
b
y
t
h
e
remaining Commercial Paper Dealer
o
r
Commercial Paper Dealers.
" Applicable Margin" shall mean
t
h
e
spread determined
a
s
s
e
t
forth below, based
o
n
t
h
e
prevailing rating
o
f
the Remarketed shares
o
f
this Series
i
n effect
a
t
t
h
e
close
o
f
business
o
n
t
h
e
Business Day immediately preceding the date
o
f
a Failed Remarketing:
Prevailing Rating
AAJ " aa"
A
I
"
a
"
BBB/ " baa"
Below BBB/
'
' baa''
Spread
3.00%
4.00%
5.00%
7.00%
For purposes
o
f
this definition,
t
h
e
" prevailing rating"
o
f
t
h
e
Remarketed shares
o
f
this Series shall
b
e
:
(
i
) AAJ
a
a
i
f such shares have a credit rating
o
f
AA-
o
r
better
b
y
S&P and
" aa3"
o
r
better
b
y
Moody's
o
r
t
h
e
equivalent
o
f
such ratings
b
y
such
agencies
o
r
a substitute rating agency
o
r
substitute rating agencies selected
b
y
t
h
e
Remarketing Agent;
(
i
i
)
i
f not under clause (
i
) above, then
A
I
a
i
f
t
h
e
Remarketed Securities
have a credit rating
o
f
A
-
o
r
better
b
y
S&P and " a3"
e
x
.
better
b
y
Moody's
o
r
t
h
e
equivalent
o
f
such ratings
b
y
such agencies
o
r
a substitute rating
agency
o
r
b
y
the. Remarketing Agent;
(
i
i
i
)
i
f
n
o
t
under clauses (
i
)
o
r
(
i
i
)
above, then BBB/ " baa"
i
f the
Remarketed Securities have a credit rating ofBBB-
o
r
better
b
y
S&P and
" baa3"
o
r
better
b
y
Moody's
o
r
the equivalent
o
f
such ratings
b
y
such
agencies
o
r
a substitute rating agency
o
r
b
y
the Remarketing Agent~
o
r
i
v
)
ifnot under clauses (
i
) - (
i
i
i
)
above, then below BBB/ " baa."
" Certificate" shall mean a Corporate PIES Certificate.
CONFIDENTIAL
Return
043.1663. 6
2
0
0
1
" Commercial Paper Dealers" shall mean Lehman Commercial Paper Inc.,
Goldman, Sachs &Co. and Merrill Lynch, Pierce, Fenner &Smith Incorporated
o
r
their
affiliates
o
r
successors,
i
f such affiliates
o
r
successors
a
r
e
commercial paper lfealers.
" Common Stock" shall mean the Common Stock,
n
o
par value,
o
f
t
h
e
Company.
" Corporate PIES" shall mean a stock purchase unit consisting
o
f
(
A
)
a stock
purchase contract under which (
i
)
t
h
e
holder
o
f
t
h
e
unit will purchase from
t
h
e
Company,
f
o
r
$50.00
i
n cash, a certain number
o
f
shares
o
f
common stock
o
f
t
h
e
Company and (
i
i
)
t
h
e
Company will pay such holder contract adjustment paYments and (
B
)
beneficial
ownership
o
f
a shares
o
f
this Series.
" Corporate PIES Certificate" means a certificate evidencing
t
h
e
rights and
obligations
o
f
a Holder
i
n respect
o
f
t
h
e
number
o
f
Corporate PIES' specified
o
n
such
certificate.
" Depositary" shall mean, with respect
t
o shares
o
f
this Series issuable
i
n whole
o
r
i
n part
i
n the form
o
f
one
o
r
more Global Securities, a clearing agency registered under
the Exchange Act that
i
s designated
t
o
a
c
t
a
s
depositary
f
o
r
such shares, and initially shall
b
e
The Depository Trust Company.
" Depositary Participant" shall mean a member
o
f
,
o
r
participant
i
n
,
t
h
e
Depositary.
" Exchange Act" shall mean
t
h
e
Securities Exchange Act
o
f
1934 and any statute
successor thereto,
i
n each case
a
s
amended from time
t
o time, and
t
h
e
rules and
regulations promulgated thereunder.
" Global Certificate" means a Certificate that evidences
a
l
l
o
r
part
o
f
t
h
e
shares
o
f
this Series and
i
s registered
i
n
t
h
e
name
o
f
a clearing agency
o
r
a nominee thereof.
" Global Security" shall mean a global Series H Preferred Stock Certificate
registered
i
n
t
h
e
name
o
f
a Depositary
o
r
i
t
s
nominee.
"
;
:
Holder" shall mean any holder
o
f
shares
o
f
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
t
h
e
Purchase Contract Agreement
dated
a
s
o
f
August
1
0
,
1999 between
t
h
e
Company ( through
i
t
s
predecessor entity, Bank
United Corp.) and Bank One
N
.
A
.
(under
i
t
s
prior name, The First National Bank
o
f
Chicago),
a
s
Purchase Contract Agent.
CONFIDENTIAL
Return
0
4
3
-
1
6
6
3
.
7
2
0
0
1
" Purchase Contract Settlement Date" shall mean August 16,2002.
" Record Date"
f
o
r
dividends
o
n
t
h
e
shares
o
f
this Series
o
n
any Payn1ent Date
shall mean,
a
s
t
o any Global Certificate,
t
h
e
Business Day next preceding such Payment
Date, and
a
s
t
o
any other Certificate,
1
5
Business Days prior
t
o
such Payment Date.
" Remarketing Agent" shall mean
t
h
e
remarketing agent selected
b
y
t
h
e
Company,
including any successor remarketing agents selected
b
y
t
h
e
Company.
" Remarketing Date" shall mean
t
h
e
third Business Day preceding
t
h
e
Purchase
Contract Settlement Date.
" Reset Rate" shall mean shall mean
t
h
e
distribution rate per annum that results
from
t
h
e
Remarketing pursuant this Section
3
.
"
S
&
P
"
shall mean Standard & Poor's Ratings Services, a division
o
f
McGraw- Hill Corporation.
4
.
Redemption. (
a
)
Optional Redemption. The shares
o
f
this Series
a
r
e
n
o
t
redeemable prior
t
o
October
1
6
,
2002. The Company,
a
t
i
t
s
option, may redeem shares
o
f
this Series,
a
s
a whole
o
r
i
n part,
a
t
any time
o
r
from time'to time,
o
n
o
r
after October 16,
2002
a
t
a redemption price of$
5
0
per share plus accrued and unpaid cumulative
dividends thereon (whether
o
r
n
o
t
declared)
t
o
t
h
e
date fixed
f
o
r
redemption.
(
b
)
Mandatory Redemption. The Company shall redeem, from any source
o
f
funds legally available therefor,
a
l
l
issued and outstanding shares
o
f
this Series,
i
n whole
and
n
o
t
i
n part,
o
n
August 16, 2004,
a
t
a redemption price
o
f
$
5
0
p
e
r
share plus accrued
and unpaid cumulative dividends thereon (whether
o
r
not declared)
t
o
t
h
e
date fixed
f
o
r
redemption.
(
c
)
Redemption Procedures.
(
i
)
I
n
t
h
e
event that, pursuant
t
o paragraph (
a
)
above, fewer than
a
l
l
t
h
e
outstanding shares
o
f
this Series are
t
o
b
e
redeemed;
t
h
e
number
o
f
shares
t
o
b
e
redeemed shall
b
e
determined
b
y
t
h
e
Board
o
f
Directors and
t
h
e
shares
t
o
b
e
redeemed shall
b
e
determined
b
y
l
o
t
o
r
pro rata
a
s
may
b
e
determined
b
y
t
h
e
Board
o
f
Directors
o
r
b
y
any other method
a
s
may
b
e
determined
b
y
the Board
o
f
Directors
i
n
i
t
s
sole discretion
t
o
b
e
equitable,
provided that such method satisfies any applicable requirements
o
f
any
securities exchange
o
n
which this Series
i
s listed.
(
i
i
)
I
n
t
h
e
event
t
h
e
Company shall redeem shares
o
f
this Series, notice
o
f
such redemption shall
b
e
given
b
y
first class mail, postage prepaid, mailed
not less than
3
0
o
r
more than
6
0
days prior
t
o
t
h
e
redemption date,
t
o each
holder
o
f
record
o
f
t
h
e
shares
t
o
b
e
redeemed,
a
t
such holder's address
a
s
t
h
e
same appears
o
n
the stock register
o
f
t
h
e
Company. Each such notice
CONFIDENTIAL
Return
0
4
3
-
1663,8
2
0
0
1
shall state: (
a
)
t
h
e
redemption date; (
b
)
t
h
e
number
o
f
shares
o
f
this Series
t
o
b
e
redeemed and,
i
f fewer than
a
l
l
t
h
e
shares held
b
y
such holder are
t
o
b
e
redeemed,
t
h
e
number
o
f
such shares
t
o
b
e
redeemed from ~
c
h
holder;
(
c
)
t
h
e
redemption price; (
d
)
t
h
e
place
o
r
places where certificates
f
o
r
such
shares
a
r
e
t
o
b
e
surrendered
f
o
r
payment
o
f
t
h
e
redemption price; and (
e
)
that dividends
o
n
t
h
e
shares
t
o
b
e
redeemed shall cease
t
o accrue
o
n
the
redemption date.
(
i
i
i
)
Notice having been mailed
a
s
aforesaid, from and after the redemption
date ( unless default shall
b
e
made
b
y
t
h
e
Company
i
n providing money
f
o
r
t
h
e
payment
o
f
t
h
e
redemption price) dividends
o
n
t
h
e
shares
o
f
this Series
s
o
called
f
o
r
redemption shall cease
t
o
accrue, and said shares shall
n
o
longer
b
e
deemed
t
o
b
e
outstanding, and
a
l
l
rights
o
f
t
h
e
holders thereof
a
s
stockholders
o
f
t
h
e
Company ( except
t
h
e
right
t
o
receive from
t
h
e
Company
t
h
e
redemption price) shall cease. Upon surrender
i
n accordance
with said notice ofthe certificates
f
o
r
any shares
s
o
redeemed (properly
endorsed
o
r
assigned
f
o
r
transfer,
i
f
t
h
e
Board
o
f
Directors shall
s
o
b
y
t
h
e
Company
a
t
t
h
e
redemption price aforesaid.
I
n case fewer than
a
l
l
the
shares represented
b
y
any such certificate
a
r
e
redeemed, a without cost
t
o
t
h
e
holder thereof.
(
i
v
)
Any shares
o
f
this Series which shall
a
t
any time have been redeemed
shall, after such redemption, have
t
h
e
status
o
f
authorized
b
u
t
unissued
shares
o
f
Preferred Stock, without designation
a
s
t
o series until such shares
a
r
e
once more designated
a
s
part
o
f
a particular series
b
y
t
h
e
Board
o
f
Directors.
(
v
)
Notwithstanding the foregoing provisions
o
f
this Section
4
,
i
f full
cumulative dividends
o
n
a
l
l
outstanding shares
o
f
this Series
a
r
e
i
n arrears,
n
o
shares
o
f
this Series shall
b
e
redeemed unless
a
l
l
outstanding shares
o
f
this Series
a
r
e
simultaneously redeemed, and
t
h
e
Company shall
n
o
t
purchase
o
r
otherwise acquire any shares ofthis Series;.: provided, however,
that
t
h
e
foregoing shall not prevent
t
h
e
purchase
o
r
acquisition
o
f
shares
o
f
this Series pursuant
t
o
a
:
purchase
o
r
exchange offer made
o
n
t
h
e
same
terms
t
o holders
o
f
a
l
l
outstanding shares
o
f
this Series.
5
.
Conversion. The holders
o
f
shares
o
f
this Series shall
n
o
t
have any rights
t
o
convert such shares into shares
o
f
any other class
o
r
series
o
f
capital stock
o
f
t
h
e
Company.
6
.
Liquidation Ril: hts. (
a
)
Upon
t
h
e
voluntary
o
r
involuntary dissolution,
liquidation
o
r
winding
u
p
o
f
t
h
e
Company,
t
h
e
holders
o
f
the shares
o
f
this Series shall
b
e
entitled
t
o receive and
t
o
b
e
paid
o
u
t
o
f
t
h
e
assets
o
f
t
h
e
Company available
f
o
r
distribution
t
o
i
t
s
stockholders, before any payment
o
r
distribution shall
b
e
made
o
n
t
h
e
Common Stock
o
r
o
n
any other class
o
f
stock ranking junior
t
o this Series upon
CONFIDENTIAL
Return
0
4
3
-
1
6
6
3
.
9
2
0
0
1
.
.
liquidation,
t
h
e
amount
o
f
$
5
0
p
e
r
share, plus accrued and unpaid cumulative dividends
(whether
o
r
not declared)
t
o the date ofthe liquidating distribution.
(
b
)
After
t
h
e
payment
t
o
t
h
e
holders
o
f
t
h
e
shares
o
f
this Series
o
f
t
h
e
full
preferential amounts provided
f
o
r
i
n this Section
6
,
t
h
e
holders
o
f
this Series
a
s
such shall
have
n
o
right
o
r
claim
t
o any
o
f
the remaining assets
o
f
t
h
e
Company.
(
c
)
I
f
,
upon any voluntary
o
r
involuntary dissolution, liquidation,
o
r
winding
u
p
o
f
t
h
e
Company,
t
h
e
amounts payable with respect
t
o
t
h
e
shares
o
f
this Series and any
other shares
o
f
stock
o
f
t
h
e
Company ranking
a
s
t
o any such distribution
o
n
a parity with
t
h
e
shares
o
f
this Series
a
r
e
not paid
i
n full,
t
h
e
holders
o
f
t
h
e
shares ofthis Series and
o
f
such other shares shall share ratably
i
n
a
n
y
such distribution
o
f
assets
o
f
t
h
e
Company
i
n
proportion
t
o
t
h
e
full respective distributions
t
o which they
a
r
e
entitled.
(
d
)
Neither the sale
o
f
a
l
l
o
r
substantially
a
l
l
the property
o
r
business
o
f
the
Company, nor the merger
o
r
consolidation
o
f
the Company into
o
r
with any other
corporation
o
r
t
h
e
merger
o
r
consolidation
o
f
any other corporation into
o
r
with
t
h
e
Company, shall
b
e
deemed
t
o
b
e
a dissolution, liquidation
o
r
winding up, voluntary
o
r
involuntary,
f
o
r
t
h
e
purposes ofthis Section
6
.
.
7
.
Rankin~. For purposes
o
f
this reso lution, any stock
o
f
any class
o
r
classes
0
f
t
h
e
Company shall
b
e
deemed
t
o
rank:
(
a
)
prior
t
o the shares
o
f
this Series, either
a
s
t
o dividends
o
r
upon liquidation,
i
f
t
h
e
holders
o
f
such class
o
r
classes shall
b
e
entitled
t
o
t
h
e
receipt
o
f
dividends
o
r
o
f
amounts distributable upon dissolution, liquidation
o
r
winding
u
p
o
f
t
h
e
Company,
a
s
t
h
e
case may
b
e
,
i
n preference
o
r
priority
t
o
t
h
e
holders
o
f
shares
o
f
this Series;
(
b
)
o
n
a parity with shares
o
f
this Series, either
a
s
t
o dividends
o
r
upon
liquidation, whether
o
r
n
o
t
t
h
e
dividend rates, dividend payment dates
o
r
redemption
o
r
liquidation prices
p
e
r
share
o
r
sinking fund provisions,
i
f any,
b
e
different from those
o
f
this Series (and whether
o
r
not such dividends shall accumulate), if~~ holders
o
f
such
stock shall
b
e
entitled
t
o
t
h
e
receipt
o
f
dividends
o
r
o
f
amounts distributable upon
dissolution, liquidation
o
r
winding
u
p
ofthe Company;
a
s
t
h
e
case maybe, without
prefer~
n
.
~
c
e
'
o
r
priority, one over
t
h
e
other,
a
s
between
t
h
e
holders
o
f
such stock and
t
h
e
holders
o
f
shares
o
f
this Series; and
(
c
)
junior
t
o shares
o
f
this Series, either
a
s
t
o dividends
o
r
upon liquidation,
i
f
such class shall
b
e
Common Stock
o
r
i
f
t
h
e
holders
o
f
shares
o
f
this Series shall
b
e
entitled
t
o receipt
o
f
dividends
o
r
o
f
amounts distributable upon dissolution, liquidation
o
r
winding
u
p
o
f
t
h
e
Company,
a
s
t
h
e
case may
b
e
,
i
n preference
o
r
priority
t
o
t
h
e
holders
o
f
shares
o
f
such class
o
r
classes.
(
d
)
The shares
o
f
each
o
f
t
h
e
other series
o
f
preferred stock ofthe Company shall
rank
o
n
a parity with
t
h
e
shares
o
f
this Series.
CONFIDENTIAL
Return
0
2
4
0
3
0
-
11663.10
'
.
8
.
Yotin~ Ri2hts. The holders
o
f
t
h
e
shares
o
f
this Series shall have.
t
h
e
following voting rights:
(
a
)
Each share
o
f
this Series will have
t
h
e
right
t
o vote, with each share
o
f
this
Series having 0.10 vote,
i
n connection with matters submitted generally
t
o the holders
o
f
t
h
e
common stock and other capital stock ofthe Company entitled
t
o yote
i
n respect
o
f
matters submitted
t
o the stockholders
o
f
t
h
e
Company generally. For these purposes,
t
h
e
holders ofthe shares
o
f
this Series and the holders
o
f
t
h
e
common stock and such other
capital stock
o
f
t
h
e
Company,
s
o
entitled
t
o vote, shall vote
a
s
a single class.
(
b
)
Unless the vote
o
r
consent
o
f
the holders
o
f
a greater number
o
f
shares shall
then
b
e
required
b
y
law,
t
h
e
approval ofthe holders
o
f
a
t
least two- thirds
o
f
t
h
e
then-
outstanding shares ofthis Series, given
i
n person
o
r
b
y
proxy, either
i
n writing
o
r
b
y
a
vote
a
t
a meeting called
f
o
r
t
h
e
purpose
a
t
which
t
h
e
holders
o
f
shares
o
f
this Series shall
vote together
a
s
a separate class, shall
b
e
required
f
o
r
authorizing, effecting
o
r
validating
any amendment, alteration
o
r
repeal, whether
b
y
merger, consolidation
o
r
otherwise,
o
f
any
o
f
t
h
e
provisions ofthe Amended and Restated Articles
o
f
Incorporation
o
f
t
h
e
Company
o
r
o
f
any certificate amendatory thereof
o
r
supplemental thereto ( including any
Certificate
o
f
Designations
o
r
any similar document relating
t
o any series
o
f
Preferred
Stock) that adversely affect
t
h
e
powers, preferences, privileges
o
r
rights
o
f
this Series;
provided, however, that
t
h
e
creation and issuance
o
f
any other class
o
r
series
o
f
preferred
stock,
o
r
any increase
i
n the number
o
f
authorized shares
o
f
any Preferred Stock
o
f
any
other class
o
r
series,
i
n each case ranking
o
n
a parity with
o
r
junior
t
o this Series with
respect
t
o
t
h
e
payment
o
f
dividends and
t
h
e
distribution
o
f
assets upon liquidation,
dissolution
o
r
winding
u
p
o
f
t
h
e
affairs
o
f
t
h
e
Company shall not
b
e
deemed
t
o adversely
affect such powers, preferences
o
r
other special rights.
(
c
)
Unless
t
h
e
vote
o
r
consent
o
f
t
h
e
holders
o
f
a greater number
o
f
shares shall
then
b
e
required
b
y
law,
t
h
e
approval
o
f
the holders
o
f
a
t
least two- thirds
o
f
a
l
l
o
f
t
h
e
then- outstanding shares
o
f
this Series and
a
l
l
other series
o
f
preferred stock ranking
o
n
a
parity with shares
o
f
this Series, either
a
s
t
o dividends
o
r
upon liquidation, given
i
n
person
o
r
b
y
proxy, either
i
n writing
o
r
b
y
a vote
a
t
a meeting called Jq[.
t
h
e
purpose
a
t
which the holders
o
f
shares
o
f
this Series and such other series
o
f
Preferred Stock shall
vote together
a
s
a single class without regard
t
o series, shall
b
e
necessary
f
o
r
authorizing,
effectin~
o
r
validating (
i
)
t
h
e
creation, authorization
o
r
issuance
o
f
,
(
i
i
)
t
h
e
reclassification
o
f
any authorized stock
o
f
t
h
e
Company into,
o
r
(
i
i
i
)
t
h
e
creation,
authorization
o
r
issuance
o
f
any obligation
o
r
security convertible into
o
r
evidencing
t
h
e
right
t
o
purchase, any additional class
o
r
series
o
f
stock ranking prior
t
o
this Series, either
a
s
t
o
dividends
o
r
upon liquidation.
(
d
)
(
i
)
I
f
a
t
any time dividends
o
n
this Series shall
b
e
i
n arrears
i
n
a
n
amount
equal
t
o
s
i
x
quarterly dividends thereon,
t
h
e
occurrence
o
f
such
contingency shall mark
t
h
e
beginning
o
f
a period (herein called a " default
period") which shall extend until such time
a
s
a
l
l
accrued and unpaid
dividends
f
o
r
a
l
l
previous dividend periods and
f
o
r
t
h
e
current dividend
period.
o
n
a
l
l
shares
o
f
this Series then outstanding shall have been
CONFIDENTIAL
Return
:
~
043.1663.
1
1
2
0
0
1
declared and paid
o
r
s
e
t
apart
f
o
r
payment. During each default period,
t
h
e
holders
o
f
shares
o
f
this Series and other shares
o
f
Preferred Stock
o
n
which dividends
a
r
e
i
n arrears and
a
s
t
o which similar voting tights have
been conferred, voting
a
s
a class, irrespective
o
f
series, shall have
t
h
e
right
t
o elect two Directors
t
o
t
h
e
Board
o
f
Directors
o
f
t
h
e
Company.
(
i
i
)
During any default period, such voting right
o
f
t
h
e
holders
o
f
this
Series may
b
e
exercised
b
y
written consent,
a
t
a special meeting called
pursuant
t
o Section
7
(
d
)
(
i
i
i
)
hereof
o
r
a
t
any annual meeting
o
f
stockholders. The absence ofa quorum
o
f
t
h
e
holders
o
f
Common Stock
a
t
any such special
o
r
annual meeting shall not affect
t
h
e
exercise
b
y
t
h
e
holders
o
f
Preferred Stock
o
f
such voting right.
A
t
any meeting
a
t
which
t
h
e
holders
o
f
Preferred Stock shall exercise such voting right initially
during
a
n
existing default period, they shall have the-right, voting
a
s
a
class,
t
o elect Directors
t
o
f
i
l
l
such vacancies,
i
f any,
i
n
t
h
e
Board
o
f
Directors
a
s
may then exist
u
p
t
o two Directors
o
r
,
i
f such- right
i
s
exercised
a
t
a
n
annual meeting,
t
o
elect two Directors.
I
f
t
h
e
number
which may
b
e
s
o
elected
a
t
any special meeting does
n
o
t
amount
t
o
t
h
e
required number,
t
h
e
holders
o
f
Preferred Stock shall have
t
h
e
right
t
o
make such increase
i
n
t
h
e
number
o
f
Directors
a
s
shall
b
e
necessary
t
o
permit
t
h
e
election
b
y
them
o
f
t
h
e
required number. After
t
h
e
holders
o
f
t
h
e
Preferred Stock shall have exercised their right
t
o elect Directors
i
n
any default period and during
t
h
e
continuance
o
f
such period,
t
h
e
number
o
f
Directors shall
n
o
t
b
e
increased
o
r
decreased except
b
y
vote
o
f
t
h
e
holders
o
f
Preferred Stock
a
s
herein provided. Any Director elected
b
y
a
vote
o
f
t
h
e
holders
o
f
Preferred Stock may
b
e
removed from office, with
o
r
without cause, only
b
y
t
h
e
affirmative vote
o
f
t
h
e
requisite percentage
o
f
holders
o
f
Preferred Stock required
t
o elect Directors
a
s
specified
i
n this
Section
8
(
d
)
.
(
i
i
i
)
Unless
t
h
e
holders
o
f
Preferred Stock, during
a
n
existing default
period, shall have previously exercised their right
t
o
,
e
l
c
t
Directors,
t
h
e
Board
o
f
Directors may order,
o
r
any shareholder
o
r
shareholders owning
i
n
t
h
e
aggregate not less than
t
e
n
percent (10%)
o
f
t
h
e
total number
o
f
shares
o
f
Preferred Stock outstanding, irrespective
o
f
series,
o
n
which
dividends
a
r
e
i
n arrears and
a
s
t
o which similar voting rights have been
conferred, may request,
t
h
e
calling ofa special meeting
o
f
t
h
e
holders
o
f
Preferred Stock, which meeting shall thereupon
b
e
called
b
y
t
h
e
Chairman, a Vice Chairman
o
r
the Secretary
o
f
t
h
e
Company. Notice
o
f
such meeting and
o
f
any annual meeting
a
t
which holders
o
f
Preferred
Stock
a
r
e
entitled
t
o vote pursuant
t
o this Section
7
(
d
)
(
i
i
i
)
shall
b
e
given
t
o
each holder
o
f
record
o
f
Preferred Stock entitled
t
o vote thereat
b
y
mailing
a copy
o
f
such notice
t
o him
a
t
h
i
s
last address
a
s
the same appears
o
n
the
books
o
f
t
h
e
Company
o
n
such record date, not more than
4
5
days prior
t
o
the date
o
f
such notice,
a
s
t
h
e
Board
o
f
Directors may
f
i
x
f
o
r
this purpose.
Such meeting shall
b
e
called
f
o
r
a time not earlier than
1
0
days and not
CONFIDENTIAL
Return
043,1663.12
2
0
0
1
later than
6
0
days after such order
o
r
request
o
r
,
i
n default ofthe calling
o
f
such meeting within
6
0
days after such order
o
r
request, such meeting may
b
e
called
o
n
similar notice
b
y
any shareholder
o
r
shareholders'Owning
i
n
t
h
e
aggregate not less than 10%
o
f
t
h
e
total number
o
f
shares
o
f
Preferred
Stock outstanding, irrespective
o
f
series, entitled
t
o vote thereat.
(
i
v
)
m any default period
t
h
e
holders
o
f
Common Stock, and other classes
o
f
stock
o
f
t
h
e
Company
i
f applicable, shall continue
t
o
b
e
entitled
t
o elect
t
h
e
whole number
o
f
Directors constituting
t
h
e
Board
o
f
Directors until
t
h
e
holders
o
f
Preferred Stock, voting
a
s
a class, shall have exercised their
right
t
o elect two Directors, after
t
h
e
exercise
o
f
which right (
A
)
t
h
e
Directors
s
o
elected
b
y
t
h
e
holders
o
f
Preferred Stock shall continue
i
n
office until their successors shall have been elected
b
y
such holders
o
r
until
t
h
e
expiration
o
f
the default period, and (
B
)
any vacancy
o
n
t
h
e
Board
o
f
Directors may (except
a
s
provided
i
n Section
8
(
d
)
(
i
i
)
hereof)
b
e
filled
b
y
vote
o
f
a majority
o
f
t
h
e
remaining Directors theretofore elected
b
y
t
h
e
holders
o
f
t
h
e
class
o
f
stock which elected
t
h
e
Director whose
office shall have become vacant. References
i
n this Section
8
(
d
)
t
o
Directors elected
b
y
t
h
e
holders
o
f
a particular class
o
f
stock shall include
Directors elected
b
y
such Directors
t
o
f
i
l
l
vacancies
a
s
provided
i
n clause
(
B
)
o
f
t
h
e
foregoing sentence.
(
v
)
Immediately upon the expiration
o
f
a default period, (
A
)
the right
o
f
t
h
e
holders
o
f
Preferred Stock
a
s
a class
t
o elect Directors shall cease, (
B
)
t
h
e
term
o
f
any Directors elected
b
y
t
h
e
holders
o
f
Preferred Stock
a
s
a
class shall terminate, and (
C
)
t
h
e
number
o
f
Directors shall
b
e
such
number
a
s
may
b
e
provided
f
o
r
i
n
t
h
e
o
f
mcorporation
o
r
Bylaws
o
f
t
h
e
Company
o
r
b
y
resolution ofthe Board
o
f
Directors, irrespective
o
f
any increase made pursuant
t
o
t
h
e
provisions
o
f
Section
8
(
d
)
(
i
i
) hereof (such number being subject, however,
t
o change
thereafter
i
n
a
n
y
manner provided
b
y
law
o
r
i
n
t
h
e
Amended and Restated
Articles ofmcorporation
o
r
Bylaws
o
f
t
h
e
Company~=Any vacancies
o
n
t
h
e
Board
o
f
DireCtors effected
b
y
t
h
e
provisions
o
f
clauses (
B
)
and (
C
)
i
n
the preceding sentence may
b
e
filled
b
y
a majority
o
f
t
h
e
-remaining
Directors.
(
e
)
Except
a
s
s
e
t
forth herein
o
r
required
b
y
applicable law, holders
o
f
shares
o
f
this Series shall have
n
o
voting rights and their consent shall
n
o
t
b
e
required
f
o
r
taking
any corporate action.
TmRD: These amendments
d
o
not provide
f
o
r
a
n
exchange, reclassification
o
r
cancellation
o
f
any issued shares.
FOURTH: The foregoing amendments
t
o
t
h
e
amended and restated articles
o
f
incorporation were adopted
b
y
t
h
e
Board
o
f
Directors
o
f
Washington Mutual, mc.
o
n
October 17, 2000. Shareholder action was not required.
CONFIDENTIAL
Return
0
4
3
-
1663.13
2
0
0
1
EXECUTED this
8
t
h
day
o
f
February, 2001.
:
~
, t
'
.
.
By:
I
t
s
:
-
.
-
u~-=
CONFIDENTIAL
Return
f
~
'
.
I
,
Sam Reed, Secretary
o
f
State
o
f
t
h
e
State
o
f
o
f
i
t
s
seal,
hereby issue this
certificate that
t
h
e
attached
i
o
f
o
f
RESTATED
a
s
filed
i
n this office
o
n
January
2
2
,
2001.
Date: March
6
,
20~
'' If\
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f
\ 1
t
h
e
Seal
o
f
t
h
e
State
o
f
Washington
a
t
Olympia.
t
h
e
State Capital
Sam Reed. Secrelary
o
f
State
CONFIDENTIAL
Return
I ~ ~
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.
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JAN 222001
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1
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TO THE
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WASHINGTON MUTlJAL. INC..
REST ATEf) ARTICLES
O
F
INCORPORA TJON
Pursuaill
t
o
t
h
e
provisions
o
f
RCW
2
3
B
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t
h
e
Washingtoli Business Corporation Act.
Washington Mutual,
I
n
c
.
.
a Washington corp() rUlioll (tfH''' Corponltion'' j berehy . idopts
t
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e
1
(
)
llowing articles
1
.
)
1
'
amendment
t
o
i
t
s
restated ankles ofincorpofmjoo.
Seclion
.
:
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.
ARTICLES
O
F
AMENDMENT
SF-CONI): The
C
,
lrpOfalion hefell> (TCalL's. rrOri1lhe 10.000.000 shares
o
f
rfcl~' rrcd
:
-
.
lock.
n
o
p
a
r
\ alw:
r
'
:
f share. ullthorih'd pUfsuant
t
o Articlc
I
I
o
f
[ hercstatt'd anicks
o
r
in~' nrpnrati()n
o
r
t
h
e
Cnrpnr<lliort. a Sl'fil~ S
o
f
rrcf1: rred StocK and hereby Jiws
t
h
e
designation.
\'()\\
e
r
s
.
preferences. limiwlions.
J
n
d
rdati\ e
r
i
;
:
h
b
o
f
thcsharcs
o
f
such StTICS (
I
S jllllows:
FIRST: Tht'namc
o
f
t
h
e
CorpMatioll
i
s Washington Mutufil. llil.:,
Section
I
.
Iksiul1, Hion.
P
a
r
Vahle and AmouriL . The~ harcs (
1
1
'
such sNiessha:llbe
dl'sii2natcd
a
s
" Serids
l
i
p
Pn::
i
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k
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1
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al;~ 7rd'crl( rl'eadf\"'~~' riC! 5RP Pren.~
h
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~Qek"). [
h
e
Shares
p
I
'
SUChSl: l'ks shallOe wilh
r
a
r
vaJu~ Sr$. o I
r
~
rshar~:~~~
i
~
i
- lhJ-~of~-;;
h
c
i
shares constituting slIch
s
\
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ril~ sshailbc 700.()()
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7
(
)
O.()
O
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harc5 orScric~
f
U
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Yrl'icf1'(' JStoch ~ hallhe isslJableup( lnfhcl'xclci~ e
o
{
Higlits (
t
h
e
" Rights") issueJ pursuant I
i
)
till' Rif'hts Agrecment. Jatt'd
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Ikct: tl1l'wr
2
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hclwVt'n
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Corporation and \ kllol1
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Rights Agenl (
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time.
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" HighJs..
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t
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Corporatioll shall direct
b
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resolution oTreSOIUlions thaI J
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h
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pl() perl~
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t
n
d
riled
prmiding
(
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o
(
slwres
<
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[
Scril's
R
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d
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t
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rgest nlitnher
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JJeme:, 1
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b
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CONFIDENTIAL
Return
adjustment
s
e
t
forth
i
n Seclion 6.1. 1,000 times
t
h
e
aggregate
p
e
r
share amount
o
f
a
l
l
caf; h
dividends. and 1,000 times
t
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e
aggregate
p
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r
share amount (payahle
i
n kind)
o
f
a
l
l
non- cash
dividends
o
r
other distributions other than a dividend payable
i
n shares
o
f
COnimon Stock,
p
a
r
value
$
.
0
1
p
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r
share. orthe COrPOration (
t
h
e
" Common Stock")
o
r
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o
f
t
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outstanding shares
o
f
Common Stock (
b
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rec!
a
<
;
silication
o
r
othcnvise), declared
o
n
the Common
Stock since
t
h
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immediately preceding, Quarterly Dividend Payment Date.
o
r
.
v
.
i
i
t
h
respect
t
o
t
h
e
first Quarterly Dividend Payment Date, since
t
h
e
lirstissuance
o
f
any share
o
r
fraction
o
f
a share
o
f
Series
R
P
Preferred Stock. '
2
.
2
The CorporatiiJirshalldeclareadi:idend ordistributionim
t
h
e
Scrie~ RP',
Preferred Stock asprovidcdin Sectioii'
2
.
J abo've immediately , atler itdec1ares a dividcndtJr
distribution
o
n
t
h
e
Common Stock (btherlhull: adividendpayablc insllarcs ofCommohStock): '
provideg tha!.
i
n
t
h
e
eventrio dividclldoTdisfrihtitioii shall have been (
l
c
e
/
aredon theColllmon
Stock during
t
h
e
period between
a
h
y
QUai1erly DividcmlPaymenl Date and
t
h
e
next subsequent
Quarterly Dividend Paym~
n
t
Date. a dividl'nd
o
f
$1.00
p
e
r
share ( l
l
l
t
h
e
Series
R
P
Preferred
Stock shall nevertheless
b
e
payahle
o
n
such subsequent Quarterly Dividend Paymelt Date.
2
.
3
Dividends shall begin
t
o
;
; CCfue andbc cumulative 011 oUlstanding shares
o
f
Series
R
P
Preferred Stock fronTtheQuartcr1y Dividend Payment Dritcncxtprcccdiligthc date
o
f
issue
o
f
such shares
o
f
Series
R
P
Preferred Siock. ullltssthe date
o
f
issue
o
f
sud) shares
i
s
prior
t
o the record date
f
o
r
the firsrQuarierlYplvidend Payrncht Date. in'whichcasedividcnds
1
m
such shares shall begin
t
o
accruefr(
j
~ lthbc1atc ofissuc'ofsuch shares~ orurilcss thedatc
o
f
assuc
i
s a QuartcrIvDi;,' idcndPavmenfDalc0f"
i
S
a
datc alter the record dale
f
o
r
t
h
e
dclemlination
o
f
holders
o
f
shar6s
o
f
Series
R
I
;
Preferred Sl()ckcntitledto receive a quarterlrdi\ idcndand
before such Quarterly Dividend PaymcnrDate,
i
n either
o
f
whkh eventsSlIchdividel1ds, shall
begin
t
o accrue
a
n
d
h
I
.
'
cumulative from such Quanctl.\ Dividend Payment Dale. Accrued
b
u
t
unpaid
d
i
\
'
idendsshall
n
o
t
bear interest Dividends paid
o
n
t
h
e
shares
o
f
Series
R
P
Preferred
Stock
i
n
a
n
amount less than
t
h
c
t6tal amount
o
f
such dividends
a
l
t
h
e
time accrued
a
n
d
pil): nhlc
o
n
such shares shall
b
l
:
allocated
p
r
o
nHa
o
n
i
l share-
b
y
-
share basis among
n
i
l
such shares
a
t
lht::
time outstanding.
T
h
e
Bnurdor Directors llwyflx a record date
/
(
)
r
t
h
e
Jctcmlinati~
l
c
)
f holders
o
f
shares
o
f
Series
R
P
Prerared Sl()
e
k
entitled
t
o receive payment
o
f
a diviJl'nd orol:' rtriblllion
dcdarcd thereoll, which record dare shall
h
e
not more than
3
0
days rrio!'
I
'
l
t
h
e
dale fixed
I
t
l
l
'
t
h
e
payment thert'of.
Section
J
.
Y
.
.
2
(
ingJ~ igb!~. The holdetii
o
f
shares
o
f
Series
R
P
Preferred Stock shall
h
<
l
\
'
c
t
h
e
following voting rights;
3
.
1
Except
a
s
provided
i
n Section
J
.
J
a
n
d
subjeCT
t
o
t
h
e
provisioll
l
i
)
t
adjustment hercinalicr
s
e
t
forth. each shure
o
f
Series
R
P
!
'
referred Stock shall entitle
t
h
e
holder
thereof
t
o 1,000 votes onalllllattcrs sunmilted
1
0
a
n
)
t
e
o
f
t
h
e
stockholders
o
f
t
h
e
Corporation,
3
.
2
!;,'\ ccpt
a
s
othcr\.
l
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c
provided hel-
c
i
n
o
r
b
y
law.
t
h
e
holder,
o
f
shatcs
o
f
Series
R
P
Pre/ erreu SIOlk
a
n
d
I
h
e
holders
o
f
shur'!.' s
o
f
COfllnlOll Stock shall
\
'
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\
e together
a
s
, lllC
class
o
n
a
l
l
matters sllhntitled
t
l
l
a vote of~ hKkholders
<
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rthe'< ' orrmJtion,
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CONFIDENTIAL
Return
3
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additional rrnvisions shall apply with respect
t
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voting
o
f
shares
o
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Scril: s
R
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Preferred
S
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remaining I'rcft! rred Dir<..' dPr and rikJ with
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a
s
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Section 3.35 bclO\
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orilhcSerksRPPrc" ciregStikk,
f
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hail~,<
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i
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l
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e
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Preferred StockshaHhave.
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s
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two directors (
i
n . idditiori
t
o
t
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l
e
directors c1ccle& btholdhs~
f
(
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ditlBion Siockoflhc
(
;
orpomtion). SlIchright may
h
e
e
~
;
crci~
c
d
(
a )diil;)
Y
i
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r thcdcction
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directors
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r
(
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)
alanlcctirigofthe holders
o
f
sh4tt~; s'qr\
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titig:
l
)
i
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tcrred SnlCk
l
s hereinaner .
defined), called
f
o
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e
IJUmN; c
i
n accord(\ JJcc wi~ hlh~
J
3
)
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htws'i.
j
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a
l
l
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above
)
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shal ihf\'~-
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y
4
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1
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right 0rlhe
.
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h
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(
dJfi'$i'sgrj~~. JH~< PrcthrcdS\ tlckl(
l
C IccltZvr)
directors,
a
s
descrihcdabovc: shall
h
e
c
:
\
erciscd~
i
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'
i
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J
J
{
iSS~(\ hcnrr6ntIY with tlJcrighls ofhbldcrs
o
f
any other series
o
f
Preferred Stock upon whkh\; dtihgrighlk
t
o Clect such dircctor~ havc been
conferred.
a
n
d
a
r
c
then
e
x
(
'
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I
n
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additional saiesof
Preferred Stoc, k
t
h
a
t
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e
Corpl)rminnll1il issll~~llldJHh~ nlIlypr(\\' idcj~) rthe right to\''.
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l
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k
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e colketivt:
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such V6rillgPt'(' fctrcd:-< tnd,.
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lcdhlrlhc plirpil!, c
i
n
accordance Wilh thl"
B
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1\\<; oFthv Cllrj10((llioll .
CONFIDENTIAL
Return
4
I
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M
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.
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Il'llilli'
.
.
.
I
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.
I
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1
_
Preferred Directors. then
t
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e
nllm~r
o
f
director~ constitutingtnc Board
o
f
Directors
o
f
t
h
e
Corpomtion shaUb<: reducedbYlwO. .
'
. -~'. .
'
.
'
.
. . 3.3;$ FQI"Plln'Pscsherc(
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a
~
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detilllltM;
r
n
:
efercnCCdjViQ~ ndl" on'lbc
.
.
'.
'.
SeriesRP PrcfeiTedSI~
k
$
hal!~ decn
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lhaveoccuiTcd: wfiencver thcamdunt ofcim1iii'atiyt
.
.
.
I
I
n
d
.
QOPaiddividendson; Jltei: SeHesJ{ PPreferr~&StofkShali~.
o
~
quival~
T
t
l
o
l
sixfu~ I'qua~ ifly:'"
. qividcllds
o
r
lil{)
r
e
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Wliet}
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rfl{ i1ofconS~ Cl1! ivc). und" having, sCl'I) CCulTcd, suchdefault ~hanbe." .
g.!~!
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:
holders. ofSeriesRPPrct~~~ 4
.
.
S
t
(
)
cKshalJbavcn( JgCDeral orspe6ialv()ting rights'andthdi'
consent shall notbel'cqtJirJdftJrtllking any corporatcaciion. .
Section 4.~~ rtajn. Restd tjons.
.
4
.
J
.
'
" WhltrjC\'
j
) rq~' artcrWdjvjd(:
r
l
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S(>toth~ rdi\. JdcndsordistdbllHoiJ~ paY:ilbl~
.
.
"
.
'
0
l
1
.
thcBeri
e
s
R
P
. Bref~rred'St()C~~
5
.
pro',
j
4
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dilt~ cBtiO?2ureilj'al'rcars, therea1terariWtl11ti ljilt .'..'.
;,:~~~~~
6
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4
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Y
shareso[ stock
r
a
n
kingjunlo( (eiiIi~
r
a
$
lodjyidcnd sarup()
n
)
igurda lion. d issoillliooor winding
up) tothl~ SeriesRPPrcierrcdSlock:
.
'
4
:
1
.
2
dCCUlh~ orpaydivid~ rjds,
o
r
1114RiJ:!
n
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othi..' rdisltihutlol1s,
n
n
:
m
y
shares
o
f
stock rariking( lIlaparlly( cillicrusto dividcndH
(
)
r opMlliquidatiol1. dissoluti(
l
;
)
o
r
winding up) with
t
h
e
SeriesRP Preferred Stock. except dividends paid
t
: ltably 011 the Series
R
I
'
Prcferrcd Stock unclall such parity stock (
l
n
i
,
l
,
'
hich/ dixidend" afe, payablc
o
r
i
t
1
arr~<
j
,
4
f
l
proportion
t
o
t
h
e
totaJamouills toWhichtflcholdcrsotallsul: hshilrCs
a
r
c
thcnclilit. lcd:
...... 4.1,3.. rcdeenl (
l
r purchase
o
r
(
j
[ hctwisc acquire
l
i
l
t
c
(
lnsidel'arion (except
a
s
provided
i
n Seclion4, IAhelow) sharcs oFany
s
l
(
lckrankin JlIoior (either
a
s
h
)
d
i
\
ictcnds
0
1
'
upon liquidation. diRsolulioncir \ vinding
l
i
p
)
t
o
IhctSe{
i
c
s
R
P
Vrcfcrred Stock. providcdll18t
t
h
e
Corporation may
a
t
a
n
y
lime redeem. plircha!
i
t
'
i
. JtothcKvise
i
I
~
quirl' shares orany such junior
stock
i
n exchange
f
o
r
shares
n
f
8
/
1
)
'
SlOckoftlw Corporati( llJr~ itki\
1
g
ju~ inr'( cith~ rMrU)
dividends
o
r
upon diss()lut1{)
l
l
.
Iiquidatib/
i
.
(
lrwjmJiflgup}
i
(
)
thc$ C'tks
/
{ PPrclcrtt'd Stoe!':
4.104 redeem
o
r
purchase (
i
r otherwise acquire
t
i
l
t
tlH1Sideralj(
l
h allY
shares
o
f
Series
R
P
Pre1erred Slock.
o
r
any
s
!
lares{
l
f stocK tut1kit1g (
l
h a parity (either
a
s
t
o
dividend5
o
r
upon IiquiJation. di5solutiollor winding
u
r
l
l
\
-
\
i
t
h
t
h
e
Series R P Prrfem:d Slock.
except
i
n accordance with a / lurdJasc offer made
i
n
"
"
riling
o
r
b
y
puhlicatioll (
a
~
dcl': nnincd
b
y
t
h
e
Board
o
f
Directors)
t
o allh(}! ders {
I
f such shares upon ~ uch Jenns
a
s
t
h
e
Board
o
f
Directors.
CONFIDENTIAL
Return
{
.
r
p
-
j
' 7
\ I .
.
J
.
r
G 1
alier consideration
o
f
:
'
l
e
n
:
spectivc annual dividcnd ratcs
a
n
d
other relative rights and
preferenccs
o
f
t
h
e
rcspectin: series
a
n
d
classes. shall dClcrminc
i
n good Ifllth will result
i
n filir
and equitable treatll1enlamong
t
h
e
rcspective series
o
r
c
l
[
(
sses.
4
.
2
The Cqrporationshall nOlpcr. mirany subsidiary (lfthc, Corpornlion
t
o
purchase
o
r
othenvi seacquireJ'orconsidcnlt
i
o
n
anyshard.~, ofstdck,
o
f
the. Cor'ponltilmunlc$ sthc:
Corporation could. underSe. 6tion
4
~
Lptirchas('
6
r
(
i'nhjr\ vj~~
e
[
J2qujr.
C
:
~
llCh$
h
!
ti'Cs atsllch iimc ~
t
l
d
i
n such manner.' . " ,
,
. . .
" .
" Section
5
.
Reacquired. Shares; Any shares ofSbfjesRi)
l
'
)
refcrrcd'St()
c
k
purch4scd
6
t
otherwise acquired bythcCorpomtion
i
n
;
l
n
y
mailner\. yhal~ocVer$ hallht~
r
e
~
ired ~
n
d
canceled
promptly after
t
h
e
acqllisitioh thereof
A
i
r
slichsharC:~' Slmllupbl: l tilcireancdJationbccolllc .
authorized but'unissued sharcsof'I>
r
.
efcrrcd Stock
l
l
n
<
llniIYbe reissued aspJrtof a
n
~
wseric:'
l
;
)
f
Preferred St()
c
k
subjecl \ 0
t
h
e
condillClIlS
a
n
d
restricli6l1~.
b
n
iSSU4hcc, selJ() rlhJicl'cin;; n
1
h
e
'
.
Certificate
o
f
IncorP() rJltion.
i
n
a
n
y
othcrCcrtilicutc
o
:
f
i
\
rriend;
n
~
htbrcaiil;
g
~
'
scricsnf Preferred
Stock
O
r
a
s
otherwise required
h
y
law.
'
,
'
,
'
, .
Section
6
.
L
.
i
g
,
)
i
d
<
lticll1; Dissoll! tioILQ.
r
.
.
~
iJlQlQgUP,
. - " ;. . .
6
,
1 Subject
t
o thcpriorand
~
.
upcriorrIghts
o
f
holders orany shares
(
)
fany
series
o
f
Preferred Stock rankingpriorai1dsupcrior
t
o
:
thc'sharesof SericsRPPrclctrccj Stock
w
i
threspcct
t
o rights uponl, iquidarioti.
d
i
$
s
o
!
lltiollC;'
F
"
yin(
l
! ngnp:(
v
o
l
illltai5'
o
r
01her..\<
l
s
(
;
)
.
rio
distribution
~
;
hall'be made
t
o
.
t
h
e
h
(
)
I
<
!
Cl'S( ifshan,'
s
(
)
fst() Qkr:. lllWilgjuniorrdther
a
s
l
(
j
. divkknd:<;
o
r
UPO!! liquidation. diss(lltlliQllOrwindingup) , toJheSeri'es. RPTlrcfcrrcd Stock
u
]
ilcSK , prior
thereto.
t
h
e
holders
o
f
shares
o
f
ScricsRP; PrefcrrcdSt()
c
~
shalihave rccejvi: dp~ rsh(
J
:
r
c
i
l
n
amount equal
t
o
t
h
e
grcatlTof
I
.
OOOlimcs $200.(
j
(
)
o
r
l
:
o
(
)
O
{
ifJ1C~
t
h
e
pUY1' ncntll1adcpcr sharl,'
l
)
f
Common Stock.!,
l
u
s
a
n
amount equal! o
i
l
(
.
'
cruedtl'lUUIJl1aidd. ividends, HnddistribuU(
i
h
~
theri: o'n.
whether
o
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n
o
t
declared.
t
o ,
h
e
date
o
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such payment (lhe":
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Following
t
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o
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the full amount
o
f
t
h
e
Series
f
{
l
i
l
.
iquidation lire/ crepe..:.
n
o
ilddilional
distributions shall
h
e
made
t
o
t
h
e
holders
o
f
, har<: s
o
f
:
'
:
cries RVPrcferrcd ShIck
I
: nlcss, prior
thereto.
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h
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holders
o
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shares
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1
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1
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a
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olllst< lnJillg slwrl's
o
r
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a
n
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Pinnwn Sto,: L
n
:
spcctivcly. holders or'S
.
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.
ril's
R
P
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l
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rred Stock
a
n
d
holders ot'(" oll1lllon Slod
.
.
.
Irall rccei\
l
:
their ratable
a
n
d
propottiunalC: share
o
f
th\.' renlUining
a
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~
s
c
t
s
t
o
h
e
distributed
i
n
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e
rat",
o
f
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e
Adjustment
1
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t
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l
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a
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e
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)
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2
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(
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thut there Me !
l
o
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n
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{
I
f
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h
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Series
R
P
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l
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l
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h
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iiquid<
l
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i
<
l
l
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rrd(.' rcllcc:"
o
f
a
l
l
othn series (
1
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preferred swck. ifltlly.
\
\ hid] rank
0
1
1
a parity
\
\
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i
t
h
t
h
e
Serie~
(
{ P PrekrTL'd
CONFIDENTIAL
Return
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,
.
,
.
Section
9
,
R
.
i
l
l
l
1
.
U
!
g
.
The ScricsRP Prcfl'l1' l'dStllcks! JnIJ Tank junior
t
o
a
l
l
olher series
o
r
t
h
e
Corporation' s PrcfcTrt.? d Stock
a
s
IOlbe payment ofdividcllos <llidtllf.: dislrihu!
i
\
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1
1
o
f
a
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>
s
t
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s
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unless
r
h
e
terms
o
r
a
n
y
slIl,; holhet sctic$ shnllpi'lwidcnthcrwise.===" '
Section
1
0
,
i
.
\
!
.
11
J
l
.
9
.
!
1l.
u
.
!
.
T
h
e
;
\
:
rtieks
o
f
lileorporation
o
r
t
h
e
Corpnu.:
i
( lllshaJl
n
o
t
b
e
further amended inany ll1nnncrrfJaf wOlild
l
l
1
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lkriallyalterorlh:. ll1gl'
t
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e
rowel's. prcfl> rCtl(; C~
o
f
special rights
o
f
(
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e
-
Series
R
I
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Pn.: lCrn
.
.
d Stock
s
o
a
s
t
n aftt.'
c
f
thell1 udv(.> rscly \ Allholll (
h
e
affinnative V01('
o
f
t
h
e
lwlders
o
f
a
ll1ajority
o
r
1110re oCthe, outstanding
:
:
haics
n
t
'
S
\
?
i
'
k
s
R
I
'
Preferred Stock. Hllillg
:
;
cparalcly
a
s
a
r
:
laiis.
Section
1
L
FractiOllClI ShUtes. Series
R
l
'
I'ide/'
r
e
d
Stock ll1a\
b
e
if'fHtCt!
i
l
l
fhlClillll~
o
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H
share which
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a
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n
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til'cliolla! ~hiltl'S,
i
o
t
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xcreisl'
voting rights. reccivedivldclllf" partkirutc
i
n distributinJ1Salld haw till' hCllelil \ 11'
a
l
l
olh~ r
rights ofholdl'rs ofSClit'S
H
I
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PrckrteJ SInd.
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1.'" ' (nlh.: c\.('
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hcCQrr( lTati( ln~tWll\ ildcdaTcunydjvidcnd , mCommon
Slockpayablcin "
s
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ar.~. ! In.\ yriutmnSt~
k
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{
i
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u
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C (in1tlioh . Si~)
c
k
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r
(
i
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)
combine the:( juL\; tanuin
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l
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HJl(loStffl; kimoa
s
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l
)
,
ilJei;
r
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sharcs; thcilin eachsuchca$ c
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:
t
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t
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isthe number ofsli&resdf<:(jrTJmo.
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)
c
k
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;
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redlft. siiin( jiJ1gimrl1~ diUlcIJprjod()
s
[
jchcvCht.
Section
7
.
, ConSolidaIion, Mcrger.
s
.
t
c
.
fri'casl.'" lhct'Qrporati6n shall cntcriJito any
consolidation, merger. Cfll11hiri: iiion
o
r
other
t
r
[
lfl~ acti( mitlsvhich
t
h
e
sharcs'ot' ComJilon Stock
a
r
e
exchangcd
f
o
r
~r changed into other slock()
r
s
i
!
ctiri( ics~
c
;
)
shand! oriill)' othtr prbpcrty. fhcn
i
n any such case the shares
o
f
Serks RI} Prcl~
n
~
dSt(}
l
:
k
~
l
i
~ lla( thcsunw tini2 bcsimilarly
exchanged
o
r
chat1~ edinan al11qunt'pqr~ harccqllalloih~'. lJ9jtJstmt7nt
N
i
!
mber (asappropr!
a
:
t
d
y
adjusted
a
s
s
e
t
fort~
i
n Seclion6J.
I
O
r
~
t
]
~
Clslichcvcl) t$#$ stocksplits, sWck " dividcllds'and'
rccapi
t
a
l
izatiolls\ yHlr rcspcc t toithe Cotlimon
S
t
(
j
~ k}~ ilh~~
I
~ lCaggrcgatc3nlOun (
o
i
st~)
c
k
securities, cashand! Oranyp( hcrpropcriy( payablc.'
i
n
"
ki~~}~-
a
s
t
h
e
cuse may
b
c
;
'
intowhichortbr
whicheaeh share
o
f
Coon
n
o
n
Stock ischilngcdorc~ chling(.'
H
:
.
'
,
.
.
'
Scction
8
.
N
o
Regcmption. Thesharc5 orScr: ics'R} Jl'teJcm: dSI~}( k
s
h
;
1I111o(
b
e
redeemable.
THlRl>:
ThcSl'
i
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r
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iclc"
o
f
!
\
mendmcl1t
V
.
.
cn~ duh'
;
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dop!
e
d
n
n
Ikccmhcl
1
9
.
200!!.
CONFIDENTIAL
Return
"
023.1837.6
2
0
0
1
FOURTH: These Articles
o
f
Directors, pursuant
t
o
t
h
e
provisions
o
f
RCW
December 19~
2
(
jOO;SharHlOlderapprov,~ 1
i
s
n
o
t
. .,.-:."' .
CONFIDENTIAL
Return
Exec~
t
e
d
' his/$
J
,
y OfJ;
j
~
j
-
"
2001.
CONFIDENTIAL
Return
I
,
Sam Reed, Secretary
o
f
State
o
f
t
h
e
State
o
f
o
f
i
t
s
seal,
hereby issue this
certificate that the attached
i
o
f
o
f
AMENDED &RESTATED
a
s
filed
i
n this office
o
n
October
2
9
,
1999.
Date: March
6
,
2006
'~='"
Given under
m
y
hand and
t
h
e
Seal
o
f
t
h
e
State
o
f
Washington
a
t
Olympia.
t
h
e
State Capital
Sam Reed. Secretary
o
f
State
' O{\ f\{\ 1
CONFIDENTIAL
Return
-,'
\
;
.
Date: October.~ 1999
Given. under
m
y
han. dandthe Seal oftheBtate
a
/
Washington
a
t
Olympillrthe State Capital
Amending and Restating Articles
t
o
WASHlNGTONMUTUAL, INC.
~
(
~
.
l
~
SECRETARY '
i
f
$TATE
CERTIFICATE OFAMENDMENT
STAJorE.'
i
f WASHING'ION
UBI NtUuber: 601 566389
a Washington Profit corporation. Articles
o
f
Amendment were filed
f
o
r
f
i
?
cordillthis
office
o
n
the date indicated below. :
I
,
RALPH MUNRO, Secretnry
o
f
State
o
f
t
i
r
e
State
o
f
o
f
#
sseal,
hereby issue this
CONFIDENTIAL
Return
AMENDED AND RESTATED ARTICLES
O
F
INCORPORATION
O
F
WASHINGTON MUTUAL, INe.
Pursuant
t
o
t
h
e
provisions ofRCW 23B. 1O. 070
o
f
t
h
e
Washington Business
Corporation Act, Washington Mutual, Inc., a Washington corporation, hereby restates
i
t
s
Articles ofIncorporation
a
s
now and heretofore amended:
ARTICLE I
Name
The name ofthis corporation
i
s
:
WASHINGTON MUTUAL, INe.
ARTICLE
I
I
Capital Stock
A
.
Issuance
o
f
and Payment
f
o
r
Stock. The total number
o
f
shares
o
f
capital
stock which
t
h
e
Company has authority
t
o issue
i
s 1,610,000,000 shares
o
f
which
1,600,000,000 shares shall
b
e
shares
o
f
common stock with
n
o
p
a
r
value
p
e
r
share and
10,000,000 shares shall
b
e
shares
o
f
preferred stock with
n
o
par value per share. The
shares may
b
e
issued
b
y
t
h
e
Company from time
t
o
time
a
s
approveg
b
y
i
t
s
Board
o
f
Directors without
t
h
e
approval
o
f
t
h
e
shareholders. The considerationfor issuance
o
f
t
h
e
shares shall
b
e
paid
i
n full before their issuance. Neither promissory notes nor
t
h
e
promise.
a
t
future services shall constitute payment
o
r
part payment
f
o
r
t
h
e
issuance
o
f
shares
o
f
t
h
e
Company. The consideration
f
o
r
t
h
e
shares shall
b
e
cash, tangible
o
r
intangible property, labor
o
r
services actually performed
f
o
r
t
h
e
Company
o
r
any
combination
o
f
t
h
e
foregoing.
I
n
t
h
e
absence
o
f
actual fraud
i
n
t
h
e
transaction,
t
h
e
value
o
f
such property, labor
o
r
services,
a
s
determined
b
y
t
h
e
Board
o
f
Directors
o
f
t
h
e
Company, shall
b
e
conclusive. Upon payment
o
f
such consideration, such shares shall
b
e
deemed
t
o
b
e
fully paid and nonassessable.
B
.
Voting
b
y
Class
o
r
Series. Except
a
s
expressly provided
i
n
these Articles
o
r
i
n any resolutions
o
f
the Board
o
f
Directors designating and establishing
t
h
e
terms
o
f
any
series
o
f
preferred stock,
n
o
holders
o
f
any class
o
r
series
o
f
capital stock shall have any
CONFIDENTIAL
Return
right
t
o
vote
a
s
a separate class
o
r
series
o
r
t
o
vote more than one vote
p
e
r
share.
Notwithstanding
t
h
e
foregoing,
t
h
e
restriction
o
n
voting separately
b
y
clas~~ r series shall
not apply
t
o
t
h
e
extent that applicable law requires such voting, nor shall this restriction
apply
t
o any amendment
t
o these Articles which would adversely change
t
h
e
specific
terms
o
f
any class
o
r
series
o
f
capital stock
a
s
s
e
t
forth
i
n this Article
I
I
o
r
i
n any
resolution
o
f
t
h
e
Board
o
f
t
h
e
terms
o
f
any series
o
f
preferred stock. For purposes
o
f
t
h
e
preceding sentence,
a
n
amendment which
increases
t
h
e
number
o
f
authorized shares
o
f
any class
o
r
series
o
f
capital stock,
o
r
substitutes
t
h
e
surviving institution
i
n a merger
o
r
consolidation
f
o
r
the Company, shall
n
o
t
b
e
such
a
n
adverse change.
C
.
Common Stock. On matters
o
n
which holders
o
f
common stock
a
r
e
entitled
t
o vote, each holder
o
f
shares
o
f
common stock shall
b
e
entitled
t
o one vote
f
o
r
each share
held
b
y
such holder.
Whenever there shall have been paid,
o
r
declared and
s
e
t
aside
f
o
r
payment,
t
o
the
holders
o
f
t
h
e
outstanding shares
o
f
any class
o
f
stock having preference over
t
h
e
common stock
a
s
t
o
t
h
e
payment
o
f
dividends, the full amount
o
f
dividends and
o
f
sinking fund
o
r
retirement fund
o
r
other retirement payments,
i
f
any,
t
o
which such
holders
a
r
e
respectively entitled
i
n preference
t
o
the common stock, then dividends may
b
e
paid
o
n
the common stock and
o
n
any class
o
r
series
o
f
stock entitled
t
o
participate:
therewith
a
s
t
o
dividends,
o
u
t
o
f
any assets legally available
f
o
r
t
h
e
payment
o
f
dividends;
b
u
t
only when and
a
s
declared
b
y
t
h
e
Board
o
f
Directors.
I
n
t
h
e
event
o
f
any liquidation, dissolution
o
r
winding
u
p
o
f
t
h
e
Company, after.
there shall have been paid
t
o
o
r
s
e
t
aside
f
o
r
the holders
o
f
any class having preferences
over
t
h
e
common stock
i
n the event
o
f
liquidation, dissolution
o
r
winding
u
p
o
f
the full
t
o
which they
a
r
e
respectively entitled,
t
h
e
holders
o
f
t
h
e
common
stock, and
o
f
any class
o
r
series
o
f
stock entitled
t
o
participate therewith,
i
n whole
o
r
i
n
part,
a
s
t
o distribution
o
f
assets, shall
b
e
entitled, after payment
o
r
provision
f
o
r
payment
o
f
a
l
l
debts and liabilities
o
f
t
h
e
Company,
t
o
receive pro rata
t
h
e
remaining assets
o
f
t
h
e
Company available
f
o
r
distribution,
i
n cash
o
r
i
n kind.
Each share
o
f
common stock shall have
t
h
e
same relative rights
a
s
and
b
e
identical
i
n
a
l
l
respects with
a
l
l
the other shares
o
f
common stock.
D
.
Preferred Stock. The authorized Preferred Stock shall
b
e
comprised
o
f
10,000,000 shares
n
o
p
a
r
value
p
e
r
share. The Board
o
f
Directors
o
f
t
h
e
Company
i
s
authorized
b
y
resolution
o
r
resolutions from time
t
o
time adopted,
t
o
provide
f
o
r
the
issuance
o
f
preferred stock
i
n
one
o
r
more additional series
b
y
designating and
establishing
t
h
e
terms
o
f
such a series. With respect
t
o
any such series,
t
h
e
Board
o
f
Directors
i
s authorized
t
o
f
i
x
and state
t
h
e
voting powers, designations, preferences and
-
2
-
'_.! ..; '-' f . .;'.:, "
-
CONFIDENTIAL
Return
relative, participating, optional
o
r
other special right
o
f
the shares
o
f
each such series and
t
h
e
qualifications, limitations and restrictions thereon, including,
b
u
t
n
o
t
liI ited
t
o
,
determination
o
f
any
o
f
t
h
e
following:
.
.
(
I
) The distinctive serial designation and
t
h
e
number
o
f
shares
constituting such series;
(
2
)
The dividend rates
o
r
t
h
e
amount
o
f
dividends
t
o
b
e
paid
o
n
t
h
e
shares
o
f
such series, whether dividends shall
b
e
cumulative and,
i
f
s
o
,
from which date
o
r
dates,
t
h
e
payment date
o
r
dates
f
o
r
dividends, and the participating
o
r
other special
rights,
i
f any, with respect
t
o dividends;
(
3
)
The voting powers, full, special
o
r
limited,
i
f any,
o
f
shares
o
f
such
series;
(
4
)
Whether
t
h
e
shares
o
f
such series shall
b
e
redeemable and,
i
f
s
o
,
t
h
e
price
o
r
prices
a
t
which, and
t
h
e
terms and conditions
o
n
which, such shares may
b
e
redeemed;
(
5
)
The amount
o
r
amounts payable upon the shares
o
f
such series
i
n
t
h
e
event
o
f
voluntary
o
r
o
r
winding
u
p
o
f
t
h
e
Company;
(
6
)
Whether
t
h
e
shares
o
f
such series shall
b
e
entitled
t
o
t
h
e
benefit
o
f
a
sinking
o
r
retirement fund
t
o
b
e
applied
t
o
t
h
e
purchase
o
r
redemption
o
f
such shares, and
i
f
s
o
entitled, the amount
o
f
such fund and
t
h
e
manner
o
f
i
t
s
application, including the
price
o
r
prices
a
t
which such shares may
b
e
redeemed
o
r
purchased through
t
h
e
application
o
f
such fund;
(
7
)
Whether
t
h
e
shares
o
f
such series shall
b
e
convertible into,
o
r
exchangeable for, shares
o
f
any other class
o
r
classes
o
r
o
f
any othe~ eties
o
f
t
h
e
same
o
r
any other class
o
r
classes
o
f
stock ofthe Company and,
i
f
s
o
convertible
o
r
exchangeable,
t
h
e
conversion price
o
r
prices,
o
r
t
h
e
rate
o
f
exchange, and
t
h
e
adjustments thereof,
i
f any,
a
t
which'soch conversion
o
r
exchange may
b
e
made, and any other terms and conditions
o
f
such conversion
o
r
exchange; and
(
8
)
Whether
t
h
e
shares
o
f
such series which
a
r
e
redeemed
o
r
converted
shall have
t
h
e
status
o
f
authorized
b
u
t
unissued shares
o
f
serial preferred stock and
whether such shares may
b
e
reissued
a
s
shares
o
f
t
h
e
same
o
r
any other series
o
f
serial
Preferred Stock.
Each share
o
f
each series
o
f
preferred stock shall have
t
h
e
same relative rights
a
s
and
b
e
identical
i
n
a
l
l
respects with
a
l
l
the other shares
o
f
the same series.
- 3 -
-
<
.
.
.
.
.
.
-
:
.
.
.
.
:
.
,
.
.
.
CONFIDENTIAL
Return
While
t
h
e
foregoing authorizes the Board
o
f
Directors,
i
n establishing the terms
o
f
a series
o
f
Preferred Stock,
t
o permit holders
o
f
that series
o
f
Preferred Sto~
t
o elect
separately one
o
r
more directors,
i
n
n
o
event shall
t
h
e
total number
o
f
directors separately
elected
b
y
holders
o
f
one
o
r
more series
o
f
Preferred Stock equal
o
r
exceed fifty percent
(50%)
o
f
t
h
e
total number
o
f
authorized directors.
ARTICLE
I
I
I
Preemptive Rights
The shareholders
o
f
t
h
e
Company shall have
n
o
preemptive rights
t
o
acquire
additional shares
o
f
t
h
e
Company.
ARTICLE
I
V
Board
o
f
Directors
The Company shall
b
e
managed
b
y
a Board
o
f
Directors. The number
o
f
directors
shall
b
e
stated
i
n
t
h
e
Company's Bylaws, provided, however, that such number shall
b
e
not less than five (
5
)
.
There shall
b
e
three classes
o
f
elected directors designated
a
s
Class
1
,
Class
2
,
and Class 3 directors. Each class shall contain one- third
o
f
the total number
o
f
directors,
a
s
near
a
s
may
b
e
.
The terms
o
f
t
h
e
Class 1 directors shall expire
a
t
t
h
e
first
annual shareholders' meeting after their election. The terms
o
f
the Class 2 directors shall
expire
a
t
the second annual shareholders' meeting after their election. The terms
o
f
the
a
t
t
h
e
third annual shareholders' meeting after their election.
A
t
each annual shareholders' meeting held thereafter, directors shall
b
e
chosen
f
o
r
a term
o
f
three years
t
o succeed those whose terms expire. A vacancy
o
n
t
h
e
Board
o
f
Directors
may
b
e
filled
b
y
the Board
i
n accordance with
t
h
e
o
f
t
h
e
,.:~-=
Company's Bylaws. A director elected
t
o
f
i
l
l
a vacancy shall
b
e
elected
f
o
r
a term
o
f
office continuing only until
t
h
e
next election
o
f
directors
b
y
shareholders.
-
4
-
. ',.....
,
.
.
.
:
'
.
,
" .1:::
CONFIDENTIAL
Return
ARTICLE V
Removal
o
f
Directors
Any director may
b
e
removed
b
y
the shareholders only with good cause and
i
n
accordance with
t
h
e
o
f
t
h
e
Company's Bylaws.
ARTICLE
V
I
Cumulative Voting
The right
t
o cumulate votes
i
n the election
o
f
directors shall not exist with respect
t
o
shares
o
f
stock
o
f
t
h
e
Company.
ARTICLE VII
Bylaws
The Board
o
f
Directors has the power
t
o
adopt, amend
o
r
repeal the Bylaws
o
f
t
h
e
Company, subject
t
o
t
h
e
concurrent power
o
f
t
h
e
shareholders,
b
y
a
t
least two- thirds
affirmative vote
o
f
t
h
e
shares ofthe Company entitled
t
o
vote thereon,
t
o
adopt, amend
o
r
repeal
t
h
e
Bylaws.
ARTICLE VIII
Shareholder Vote Required
t
o Approve Substantial Business Transaction
I
f
pursuant
t
o
t
h
e
Washington Business Corporations Act the_Company's
shareholders are required
t
o
approve a plan
o
f
merger, share exchange:
o
r
other
disposition
o
f
a
l
l
,
o
r
substantially
a
l
l
o
f
t
h
e
Company's property, otherwise than
i
n
t
h
e
usual and:! egular course
o
f
business ( each
o
f
the foregoing, a " Substantial Business
Transaction"), then (
a
)
i
f two- thirds ofthe directors vote
t
o recommend
t
h
e
Substantial
Business Transaction
t
o
the shareholders,
t
h
e
Substantial Business Transaction shall
b
e
approved
b
y
each voting group entitled
t
o vote thereon
b
y
a simple majority
o
f
a
l
l
votes
entitled
t
o
b
e
cast
b
y
that group; (
b
)
i
n
a
l
l
other cases where a shareholder vote
i
s required
b
y
t
h
e
Washington Business Corporation Act, such Act,
a
s
i
t
may
b
e
amended, shall
control.
- 5 -
CONFIDENTIAL
Return
ARTICLE
I
X
Indemnification
The Company shall indemnify any individual made a party
t
o a proceeding
because that individual
i
s
o
r
was a'director
o
f
t
h
e
Company and shall advance
o
r
reimburse
t
h
e
reasonable expenses incurred
b
y
such individual
i
n advance
o
f
final
disposition
o
f
t
h
e
proceeding, without regard
t
o
t
h
e
limitations
i
n
RCW 23B. 08.510
through 23B. 08.550 ofthe Washington Business Corporation Act,
o
r
any other limitation
that may hereafter
b
e
enacted
t
o
t
h
e
extent such limitation may
b
e
disregarded
i
f
authorized
b
y
the articles
o
f
incorporation,
t
o
the full extent and under
a
l
l
circumstances
permitted
b
y
applicable law.
ARTICLE X
Business Combinations
A
.
For
t
h
e
purposes ofthis Article
X
:
(
1
)
The terms " Affiliate" and " Associate" shall have the meanings
attached
t
o
them
b
y
Rule 12b- 2 under
t
h
e
o
f
1934,
a
s
amended,
o
r
any similar successor rule.
(
2
)
The term " beneficial owner" and correlative terms shall have
t
h
e
meaning
a
s
s
e
t
forth
i
n
Rule 13d- 3 under
t
h
e
o
f
1934,
a
s
amended,
o
r
any similar successor rule. Without limitation and
i
n addition
t
o
the
foregoing, any shares
o
f
Voting Stock
o
f
t
h
e
Company which any Major Stockholder has
t
h
e
right
t
o
vote
o
r
t
o
acquire (
i
) pursuant
t
o
any agreement, (
i
i
)
byr~son
o
f
tenders
o
f
shares
b
y
shareholders
o
f
the Company
i
n connection with
o
r
pursu; ntto a tender offer
made
b
y
such Major Stockholder ( whether
o
r
n
o
t
any tenders have been accepted,
b
u
t
excluding , tenders which have been rejected),
o
r
(
i
i
i
)
upon
t
h
e
exercise
o
f
conversion
rights, warrants, options
o
r
otherwise, shall
b
e
deemed " beneficially owned"
b
y
such
Major Stockholder.
(
3
)
The term " Business Combination" shall mean:
(
a
)
any merger
o
r
consolidation ( whether
i
n a single transaction
o
r
a series
o
f
related transactions, including a series
o
f
separate transactions with a Major
Stockholder, any Affiliate
o
r
Associate thereof
o
r
any Person acting
i
n concert therewith)
o
f
t
h
e
Company
o
r
any Subsidiary with
o
r
into a Major Stockholder
o
r
o
f
a Major
Stockholder into
t
h
e
Company
o
r
a Subsidiary;
-
6
-
" : .
: . "' .
. :..;.. .~ ; .... I
,
.
,".:;'
CONFIDENTIAL
Return
(
b
)
any sale, lease, exchange, transfer, distribution
t
o
stockholders
o
r
other disposition, including without limitation, a mortgage,( pledge
o
r
any
other security device,
t
o
o
r
with a Major Stockholder
b
y
t
h
e
Company
o
r
any
o
f
i
t
s
Subsidiaries (
i
o
r
a series
o
f
related transactions)
o
f
a
l
l
,
substantially
a
l
l
o
r
any Substantial Part
o
f
t
h
e
assets
o
f
t
h
e
Company
o
r
a Subsidiary (including,
without limitation, any securities
o
f
a Subsidiary);
(
c
)
t
h
e
purchase, exchange, lease
o
r
other acquisition
b
y
t
h
e
Company
o
r
any
o
f
i
t
s
Subsidiaries (
i
o
r
a series
o
f
related
transactions)
o
f
a
l
l
,
substantially
a
l
l
o
r
o
f
t
h
e
assets
o
r
business
o
f
a
Major Stockholder;
(
d
)
t
h
e
issuance
o
f
any securities,
o
r
o
f
any rights, warrants
o
r
options
t
o
acquire any securities,
o
f
t
h
e
Company
o
r
a Subsidiary
t
o
a Major Stockholder
o
r
t
h
e
acquisition
b
y
the Company
o
r
a Subsidiary
o
f
any securities,
o
r
o
f
any rights,
warrants
o
r
options
t
o
o
f
a Major Stockholder;
(
e
)
any reclassification
o
f
Voting Stock, recapitalization
o
r
other
transaction (other than a redemption
i
n accordance with
t
h
e
terms
o
f
t
h
e
security
redeemed) which
h
a
s
t
h
e
effect, directly
o
r
indirectly,
o
f
increasing
t
h
e
proportionate
amount
o
f
Voting Stock ofthe Company
o
r
any Subsidiary which
i
s beneficially owned
b
y
a Major Stockholder,
o
r
any partial
o
r
complete liquidation, spin
o
f
f
,
split
o
f
f
o
r
split
u
p
o
f
t
h
e
Company
o
r
any Subsidiary; provided, however, that this Section
A
(
3
)
(
e
)
shall
n
o
t
relate
t
o
any transaction
o
f
t
h
e
types specified herein that has been approved
b
y
a
majority
o
f
t
h
e
Continuing Directors; and
(
f
)
any agreement, contract
o
r
other arrangement providing
f
o
r
any
o
f
t
h
e
transactions described herein.
-
(
4
)
The term " Continuing Director" shall mean (ijaperson who was a
member
o
f
t
h
e
Board
o
f
Directors
o
f
t
h
e
Company immediately prior
t
o the time that any
then- existjllg. Major Stockholder became a Major Stockholder,
o
r
(
i
i
)
a person designated
.
(
before initially becoming a director)
a
s
a Continuing Director
b
y
a majority
o
f
t
h
e
then
Continuing Directors.
A
l
l
references
t
o
a vote
o
f
t
h
e
Continuing Directors shall mean a
vote
o
f
t
h
e
total number
o
f
(
5
)
The term " Major Stockholder" shall mean any Person which,
together with
i
t
s
Affiliates and Associates and any Person acting
i
n concert therewith,
i
s
t
h
e
beneficial owner
o
f
five percent (5%)
o
r
more
o
f
t
h
e
votes held
b
y
the holders
o
f
the
outstanding shares
o
f
t
h
e
Voting Stock
o
f
the Company, and any Affiliate
o
r
Associate
o
f
a Major Stockholder, including a Person acting
i
n concert therewith. The term " Major
Stockholder" shall
n
o
t
include a Subsidiary.
-
7
.
,
_"" f
'
-
.
:
.
.
.
.
.
.
.
CONFIDENTIAL
Return
(
6
)
The term " other consideration
t
o
b
e
received" shall include, without
limitation, Voting Stock retained
b
y
t
h
e
Company's existing shareholders
i
p
.
.
.
t
h
e
event
o
f
a Business Combination which
i
s a merger
o
r
consolidation
i
n which
t
h
e
Company
i
s
t
h
e
surviving corporation.
(
7
)
The term " Person" shall mean any individual, corporation,
partnership
o
r
other person, group
o
r
entity (other than
t
h
e
Company, any Subsidiary
o
r
a
trustee holding stock
f
o
r
the benefit
o
f
employees
o
f
t
h
e
Company
o
r
i
t
s
Subsidiaries,
o
r
anyone
o
f
them, pursuant
t
o
one
o
r
more employee benefit plans
o
r
arrangements).
When two
o
r
more persons
a
c
t
a
s
a partnership, limited partnership, syndicate, association
o
r
other group
f
o
r
t
h
e
purpose
o
f
acquiring, holding
o
r
disposing
o
f
shares
o
f
stock, such
partnerships, syndicate, association
o
r
group will
b
e
deemed a " Person."
(
8
)
The term " Subsidiary" shall mean any business entity fifty percent
( 50%)
o
r
more
o
f
which
i
s
beneficially owned
b
y
t
h
e
Company.
(
9
)
The term " Substantial Part,"
a
s
used
i
n
reference
t
o
t
h
e
assets
o
f
t
h
e
Company
o
r
any Subsidiary
o
r
o
f
any Major Stockholder means assets having a value
o
f
more than five percent (5%)
o
f
t
h
e
total consolidated assets ofthe Company and
i
t
s
Subsidiaries
a
s
o
f
the end
o
f
the Company's most recent fiscal year ending prior
t
o
the
time
t
h
e
determination
i
s made.
(
l
0
)
The term " Voting Stock" shall mean
t
h
e
stock
o
r
other securities
entitled
t
o
vote upon any action
t
o
b
e
taken
i
n
connection with any Business Combination
o
r
entitled
t
o
vote generally
i
n the election
o
f
directors, including stock
o
r
other securities
convertible into Voting Stock.
B
.
Notwithstanding any other provisions
o
f
these Articles ofIncorporation and
except
a
s
s
e
t
forth
i
n Section C
o
f
this Article
X
,
neither
t
h
e
Comp~nor any Subsidiary
shall
b
e
a party
t
o
a Business Combination unless:
(
I
)
The Business Combination was approved
b
y
the Board
o
f
Directors
o
f
t
h
e
Co~ pany prior
t
o
t
h
e
Major Stockholder involved
i
n
t
h
e
Business Combination
becoming such;
o
r
(
2
)
The Major Stockholder involved
i
n
t
h
e
Business Combination sought
and obtained
t
h
e
unanimous prior approval
o
f
t
h
e
Board
o
f
Directors
t
o
become a Major
Stockholder and the Business Combination was approved
b
y
a majority
o
f
t
h
e
Continuing
Directors;
o
r
(
3
)
b
y
a
t
least eighty percent
(80%)
o
f
t
h
e
Continuing Directors
o
f
t
h
e
Company;
o
r
- 8 -
CONFIDENTIAL
Return
.
.
.
.
.
.
,
"
'
.
(
4
)
b
y
a
t
least ninety-five
percent (95%)
o
f
t
h
e
outstanding Voting Stock beneficially owned
b
y
shar{(holders other
than any Major Stockholder.
.
.
.
C
.
The approval requirements
o
f
Section B shall
n
o
t
apply
i
f
:
(
1
)
The Business Combination
i
s
approved
b
y
a
t
least
t
h
e
majority vote
o
f
t
h
e
shares
o
f
t
h
e
Voting Stock and
t
h
e
majority vote
o
f
t
h
e
shares
o
f
the Voting Stock
beneficially owned
b
y
shareholders other than any Major Stockholder; and
(
2
)
A
l
l
o
f
t
h
e
following conditions
a
r
e
satisfied:
(
a
)
The aggregate ofthe cash and
t
h
e
f
a
i
r
market value
o
f
other
consideration
t
o
b
e
received
p
e
r
share (
a
s
adjusted
f
o
r
stock splits, stock dividends,
reclassification
o
f
shares into a lesser number and similar events)
b
y
holders
o
f
t
h
e
common stock ofthe Company
i
n
t
h
e
i
s
n
o
t
less than
t
h
e
higher
o
f
(
i
)
t
h
e
highest per share price (including brokerage commissions, soliciting dealers' fees,
dealer-management compensation, and other expenses, including, but not limited
t
o
,
costs
o
f
newspaper advertisements, printing expenses and attorneys' fees) paid
b
y
t
h
e
Major
Stockholder
i
n acquiring any
o
f
t
h
e
Company's common stock;
o
r
(
i
i
)
a
n
amount which
bears
t
h
e
same
o
r
a greater percentage relationship
t
o
t
h
e
market price
o
f
the Company's
common stock immediately prior
t
o
the announcement
o
f
such Business Combination
a
s
t
h
e
highest
p
e
r
share price determined
i
n
(
i
)
above bears
t
o
t
h
e
market price
o
f
t
h
e
Company's common stock immediately prior
t
o
the commencement
o
f
acquisition
o
f
the
Company's common stock
b
y
such Major Stockholder,
b
u
t
i
n
n
o
event
i
n
excess
o
f
two
times
t
h
e
highest per share price determined
i
n (
i
) above; and
(
b
)
The consideration
t
o
b
e
received
i
n such Business
Combination
b
y
holders
o
f
the common stock
o
f
t
h
e
Company shallbe, except
t
o
t
h
e
extent that a stockholder agrees otherwise
a
s
t
o
a
l
l
o
r
a part
o
f
h
i
s
i
l
l
"
7
'
hershares,
i
n
t
h
e
same form and
o
f
t
h
e
same kind
a
s
paid
b
y
t
h
e
Major Stockholder
i
n acquiring
h
i
s
Voting
Stock
.
.
:
~
(
c
)
After becoming a Major Stockholder and prior
t
o
t
h
e
consummation
o
f
such Business Combination, (
i
) such Major Stockholder shall not have
acquired any newly issued shares
o
f
capital stock, directly
o
r
indirectly, from
t
h
e
Company
o
r
a Subsidiary (except upon conversion
o
f
convertible securities acquired
b
y
i
t
prior
t
o
becoming a Major Stockholder
o
r
upon compliance with
t
h
e
provisions
o
f
this
Article X
o
r
a
s
a result
o
f
a pro rata stock dividend
o
r
stock split), and (
i
i
)
such Major
Stockholder shall
n
o
t
have received
t
h
e
benefit, directly
o
r
indirectly (except
proportionately
a
s
a shareholder),
o
f
any loans, advances, guarantees, pledges
o
r
other
-
9
-
CONFIDENTIAL
Return
financial assistance
o
r
t
a
x
credits provided
b
y
t
h
e
Company
o
r
a Subsidiary,
o
r
made any
major changes
i
n
t
h
e
Company's business
o
r
equity capital structure; and t
"
(
d
)
A proxy statement responsive
t
o
t
h
e
requirements
o
f
t
h
e
o
f
1934, whether
o
r
n
o
t
t
h
e
Company
i
s
then subject
t
o
such
requirements, shall
b
e
mailed
t
o
a
l
l
shareholders
o
f
t
h
e
Company
f
o
r
the purpose
o
f
soliciting shareholder approval
o
f
such Business Combination and shall contain
o
n
t
h
e
front thereof,
i
n a prominent place, (
i
) any recommendations
a
s
t
o
the advisability (
o
r
inadvisability) ofthe Business Combination which
t
h
e
Continuing Directors may choose
t
o
state, and (
i
i
)
t
h
e
opinion
o
f
a reputable national investment banking firm
a
s
t
o
t
h
e
fairness (
o
r
lack thereof)
o
f
t
h
e
terms
o
f
such Business Combination, from
t
h
e
point
o
f
view
o
f
the remaining shareholders
o
f
t
h
e
Company. Such investment banking firm shall
b
e
engaged solely
o
n
behalf
o
f
t
h
e
remaining shareholders,
b
e
paid a reasonable
f
e
e
f
o
r
their services
b
y
t
h
e
Company upon receipt
o
f
such opinion, and
b
e
one
o
f
t
h
e
s
o
-
called
major bracket investment banking firms which has not previously been associated with
such Major Stockholder and
t
o
b
e
selected
b
y
a majority
o
f
t
h
e
D
.
During the time a Major Stockholder exists, a resolution
t
o
voluntarily
dissolve
t
h
e
Company shall
b
e
adopted only upon: (
1
)
t
h
e
consent
o
f
a
l
l
o
f
t
h
e
Company's shareholders;
o
r
(
2
)
t
h
e
affirmative vote
o
f
a
t
least two- thirds
o
f
t
h
e
total
number
o
f
directors, the affirmative vote
o
f
t
h
e
holders
o
f
a
t
least two- thirds ofthe shares
o
f
t
h
e
Company entitled
t
o vote thereon, and
t
h
e
affirmative vote
o
f
t
h
e
holders
o
f
a
t
least
two- thirds
o
f
t
h
e
shares
o
f
each class
o
f
shares entitled
t
o
vote thereon
a
s
a class,
i
f any.
E
.
A
s
t
o
any particular transaction, the Continuing Directors shall have
t
h
e
power and duty
t
o
determine,
o
n
t
h
e
basis
o
f
information known
t
o
them:
(
1
)
The amount
o
f
Voting Stock beneficially held
b
y
any Person;
-~-=
(
2
)
Whether a Person
i
s
a
n
Affiliate
o
r
a
n
Associate
o
f
another;
(
3
)
Whether a Person
i
s
acting
i
n
concert with another;
:
-
(
4
)
Whether
t
h
e
assets subject
t
o
any Business Combination constitute a
Substantial Part;
(
5
)
Whether a proposed transaction
i
s subject
t
o
t
h
e
provisions
o
f
this
Article; and
(
6
)
Such other matters with respect
t
o
which a determination
i
s required
under this Article.
- 10-
CONFIDENTIAL
Return
.
.
.
.
.
.
.
Any such determination shall
b
e
conclusive and binding
f
o
r
a
l
l
purposes
o
f
this
Article.
The affirmative vote required
b
y
this Article
i
s
i
n addition
t
o
t
h
e
vote
o
f
t
h
e
holders
o
f
any class
o
r
series
o
f
stock
o
f
t
h
e
Company otherwise required
b
y
law, these
Articles
o
f
Incorporation, any resolution which has been adopted
b
y
t
h
e
Board
o
f
Directors providing
f
o
r
t
h
e
issuance
o
f
a class
o
r
series
o
f
stock
o
r
any agreement
between the Company and any national securities exchange.
ARTICLE
X
I
Amendment
The Company may amend these Articles
o
f
Incorporation
i
f approved
b
y
each
voting group entitled
t
o
vote thereon
b
y
a simple majority
o
f
a
l
l
t
h
e
votes entitled
t
o
b
e
cast
b
y
that voting group
a
t
any regular meeting
o
r
special meeting duly called
f
o
r
that
purpose
i
n
t
h
e
manner prescribed
b
y
i
t
s
Bylaw.
s
,
provided, however, that ArticleX may
not
b
e
repealed
o
r
amended
i
n any respect unless such action
i
s approved
b
y
a
t
least a
ninety-five percent (95%) vote
o
f
the outstanding Voting Stock beneficially owned
b
y
shareholders other than any Major Stockholder, and provided further, that
t
h
e
board
o
f
Directors may, without shareholder approval, amend these Articles (
i
)
t
o
t
h
e
extent
permitted under the Washington Business Corporation Act
o
r
(
i
i
)
a
s
necessary
t
o
designate
t
h
e
preferences, limitations, and relative rights
o
f
a class
o
r
series
o
f
shares
o
f
t
h
e
Company prior
t
o issuance
o
f
any shares
i
n that class
o
r
series.
ARTICLE XII
Limitation
o
f
Liability
-
'~.;,;=.~
A director ofthe Company shall
n
o
t
b
e
personally liable
t
o
t
h
e
Company
o
r
i
t
s
sharehoW~
r
s
f
o
r
monetary damages
f
o
r
conduct
a
s
a director
(
"
Protected Conduct").
However, Protected Conduct shall exclude (
i
) acts
o
r
omissions which involve intentional
misconduct
b
y
t
h
e
director
o
r
a knowing violation
o
f
law
b
y
t
h
e
director, (
i
i
)
any conduct
violating Section 23B. 08.31O
o
f
t
h
e
Revised Code
o
f
Washington, and (iii), any
transaction from which
t
h
e
director will personally receive a benefit
i
n money, property
o
r
services
t
o
which the director
i
s not legally entitled.
I
f
Washington law
i
s amended
t
o
authorize corporate action further eliminating
o
r
limiting
t
h
e
personal liability
o
f
directors, then
t
h
e
liability
o
f
a director
o
f
t
h
e
Company shall
b
e
eliminated
o
r
limited
t
o
t
h
e
fullest extent permitted
b
y
Washington law,
a
s
s
o
amended. Any repeal
o
r
modification
o
f
this Article XII
b
y
t
h
e
shareholders
o
f
t
h
e
Company shall
n
o
t
adversely
-
1
1
-
CONFIDENTIAL
Return
affect any right
o
r
protection
o
f
a director ofthe Company existing
a
t
t
h
e
time
o
f
such
repeal
o
r
modification.
ARTICLE XIII
The street address
o
f
t
h
e
registered office
o
f
t
h
e
Company
i
s
:
1201 Third Avenue
15th Floor
and
t
h
e
name ofthe registered agent
a
t
that address
i
s
:
Marc
R
.
Kittner
ARTICLE XIV
Special Meetings
o
f
Shareholders
Special meetings
o
f
t
h
e
shareholders
f
o
r
any purpose
o
r
purposes, unless otherwise
prescribed
b
y
statute, may
b
e
called
b
y
the board
o
f
directors
o
r
b
y
any other person
o
r
persons authorized
t
o
d
o
s
o
i
n
t
h
e
Company's Bylaws. Notwithstanding RCW
23B. 07.020(
1
)
(
b
)
o
r
any other provision
i
n these Articles
o
r
t
h
e
Company's Bylaws, a
special meeting
o
f
t
h
e
shareholders may
b
e
called
b
y
t
h
e
shareholders only
i
f
t
h
e
holders
o
f
a
t
least twenty- five percent
o
f
a
l
l
t
h
e
votes
t
o
b
e
cast
o
n
any issue proposed
t
o
b
e
considered
a
t
t
h
e
proposed special meeting sign, date and deliver
t
o
t
h
e
Company's
secretary
o
n
e
o
r
more written demands
f
o
r
t
h
e
meeting describing
t
i
l
e
purpose
o
r
purposes
f
o
r
which
i
t
i
s
t
o
b
e
held.
.
~
~
~ATE. D
a
t
Seattle, Washington,
o
n
t
h
e
02g! b day
o
f
October, 1999.
:
~
- 12-
.
. '
.
-
. , .
t...... !
CONFIDENTIAL
Return
. .
.
.
.
,
.
.
~
.
CERTIFICATE OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
c
e
T
2
:
~
-
1000
t
, ~. LJ.
J
J
Pursuant
t
o
t
h
e
provisions ofRCW 23B.
I
O
.
070
o
f
t
h
e
Washington Business
Corporation Act, Washington Mutual, Inc., a Washington corporation (
t
h
e
" Company"),
hereby certifies that
i
t has amended and restated
i
t
s
articles
o
f
incorporation:
FIRST: The name
o
f
the Company
i
s
:
SECOND: The Amended and Restated Articles ofIncorporation
a
r
e
hereby
adopted
b
y
t
h
e
Company and supersede
t
h
e
Restated Articles
o
f
Incorporation
o
f
t
h
e
Company,
a
s
amended, and contain the following amendments
t
o
t
h
e
Articles
o
f
Incorporation, none
o
f
which require shareholder approval:
1
.
The Restated Articles ofIncorporation
a
r
e
t
o
read
i
n
their entirety
a
s
s
e
t
forth
i
n
t
h
e
o
f
Incorporation, attached
hereto
a
s
Exhibit
A
.
2
.
The amendments
d
o
not provide
f
o
r
a
n
exchange, reclassification
o
r
cancellation
o
f
any issued shares. _
~~~
THIRD:
A
t
a duly called meeting
o
f
the board
o
f
directors
o
f
the Company,
held
o
n
Qctober 19, 1999,
t
h
e
foregoing amendments
t
o
t
h
e
Articles
o
f
Incorporation
were duly: approved and adopted
b
y
t
h
e
board
o
f
directors
DATED this ~ day
o
f
October, 1999.
By:~
i
t
~
Kerry
K
.
Kil! inger
President, Chairman and Chief Executive Officer
<
:
:
c
:
!
.
l.'.....
:
;
t
H
-
u
!
l
J
l
~
~ !
S
J
.
.
.
.
.
' 0
I !
S
J
'
.
G
r
(
,
...
w
.
.
00
-
'
.
...~.. : 1 1'-"
r
( i
l
{ i
U ...-.
U
i
'
-
.
IS'lil
~
.
-
........
l
D r
(
1 !
l
l
i
l
i
l
t
t
:
.....-.
t
.
.
f
- . .
j
:
.
I
l
i
' ......
lilUi
i
'.
:
l
i
l
6
,
CONFIDENTIAL
Return
Exhibit A
(
.
.
AMENDED AND RESTATED ARTICLES
O
F
INCORPORATION
OF
Pursuant
t
o
the provisions ofRCW 23B. 1O. 070
o
f
the Washington Business
Corporation Act, Washington Mutual, Inc., a Washington corporation, hereby restates
i
t
s
Articles ofIncorporation
a
s
now and heretofore amended:
ARTICLE I
Name
The name
o
f
this corporation
i
s
:
ARTICLE
I
I
Capital Stock
A
.
Issuance
o
f
and Payment
f
o
r
Stock. The total number
o
f
shares
o
f
capital
stock which
t
h
e
Company has authority
t
o
issue
i
s
1,610,000,000 shares
o
f
which
1,600,000,000 shares shall
b
e
shares
o
f
common stock with
n
o
p
a
r
value
p
e
r
share and
10,000,000 shares shall
b
e
shares
o
f
preferred stock with
n
o
par value per share. The
shares may
b
e
issued
b
y
t
h
e
Company from time
t
o time
a
s
approveCfby
i
t
s
Board
o
f
Directors without
t
h
e
approval
o
f
t
h
e
shareholders. The consideration
f
o
r
issuance
o
f
t
h
e
shares
s
h
.
a
l
l
b
~
paid
i
n full before their issuance. Neither promissory notes nor
t
h
e
promise ofruture services shall constitute payment
o
r
part payment
f
o
r
the issuance
o
f
shares
o
f
t
h
e
Company. The consideration
f
o
r
t
h
e
shares shall
b
e
cash, tangible
o
r
intangible property, labor
o
r
services actually performed
f
o
r
the Company
o
r
any
combination
o
f
t
h
e
foregoing.
I
n
t
h
e
absence
o
f
actual fraud
i
n
t
h
e
transaction,
t
h
e
value
dfsuch property, labor
o
r
services,
a
s
determined
b
y
t
h
e
Board
o
f
Directors
o
f
t
h
e
Company, shall
b
e
conclusive. Upon payment
o
f
such consideration, such shares shall
b
e
deemed
t
o
b
e
fully paid and nonassessable.
B
.
Voting
b
y
Class
o
r
Series. Except
a
s
expressly provided
i
n these Articles
o
r
i
n
any resolutions
o
f
t
h
e
Board
o
f
t
h
e
terms
o
f
any
- 1 -
-
,
',
"". .
.
.
'
CONFIDENTIAL
Return
series
o
f
preferred stock,
n
o
holders
o
f
any class
o
r
series
o
f
capital stock shall have any
right
t
o
vote
a
s
a separate class
o
r
series
o
r
t
o
vote more than one vote
p
e
r
s4are.
Notwithstanding
t
h
e
foregoing,
t
h
e
restriction
o
n
voting separately
b
y
class
o
r
series shall
n
o
t
apply
t
o
t
h
e
extent that applicable law requires such voting,
n
o
r
shall this restriction
apply
t
o any amendment
t
o these Articles which would adversely change
t
h
e
specific
terms
o
f
any class
o
r
series
o
f
capital stock
a
s
s
e
t
forth
i
n
t
h
i
s
Article
I
I
o
r
i
n
any
resolution
o
f
the Board
o
f
t
h
e
terms
o
f
any series
o
f
preferred stock.
F
o
r
purposes
o
f
t
h
e
preceding sentence,
a
n
amendment which
increases
t
h
e
number
o
f
authorized shares
o
f
any class
o
r
series
o
f
capital stock,
o
r
substitutes
t
h
e
surviving institution
i
n a merger
o
r
consolidation
f
o
r
t
h
e
Company, shall
n
o
t
b
e
such
a
n
adverse change.
C
.
Common Stock. On matters
o
n
which holders
o
f
common stock
a
r
e
entitled
t
o
vote, each holder
o
f
shares
o
f
common stock shall
b
e
entitled
t
o
one vote
f
o
r
each share
held
b
y
such holder.
Whenever there shall have been paid,
o
r
declared and
s
e
t
aside
f
o
r
payment,
t
o
t
h
e
holders
o
f
t
h
e
outstanding shares
o
f
any class
o
f
stock having preference over
t
h
e
common stock
a
s
t
o
t
h
e
payment
o
f
dividends,
t
h
e
full amount
o
f
dividends and
o
f
sinking fund
o
r
retirement fund
o
r
other retirement payments,
i
f
any,
t
o
which such
holders
a
r
e
respectively entitled
i
n
preference
t
o
t
h
e
common stock, then dividends may
b
e
paid
o
n
t
h
e
common stock and
o
n
any class
o
r
series
o
f
stock entitled
t
o participate
therewith
a
s
t
o
dividends,
o
u
t
o
f
any assets legally available
f
o
r
t
h
e
payment
o
f
dividends;
b
u
t
only when and
a
s
declared
b
y
t
h
e
Board
o
f
Directors.
I
n
t
h
e
event
o
f
any liquidation, dissolution
o
r
winding
u
p
o
f
the Company, after
there shall have been paid
t
o
o
r
s
e
t
aside
f
o
r
t
h
e
holders
o
f
any class having preferences
over
t
h
e
common stock
i
n the event ofliquidation, dissolution
o
r
winding
u
p
ofthe full
t
o
which they
a
r
e
respectively entitled,
t
h
e
hol~ ofthe common
stock, and
o
f
any class
o
r
series
o
f
stock entitled
t
o
participate therewith,
i
n whole
o
r
i
n
part,
a
s
t
o
distribution
o
f
assets, shall
b
e
entitled, after payment
o
r
provision
f
o
r
payment
o
f
a
l
l
del5ts--andliabilities
o
f
t
h
e
Company,
t
o
receive pro rata
t
h
e
remaining assets
o
f
t
h
e
Company available
f
o
r
distribution,
i
n cash
o
r
i
n kind.
Each share
o
f
common stock shall have the same relative rights
a
s
and
b
e
identical
i
n
a
l
l
respects with
a
l
l
t
h
e
other shares
o
f
common stock.
D
.
Preferred Stock. The authorized Preferred Stock shall
b
e
comprised
o
f
10,000,000 shares
n
o
p
a
r
value
p
e
r
share. TheBoard
o
f
Directors ofthe Company
i
s
authorized
b
y
resolution
o
r
resolutions from time
t
o time adopted,
t
o provide
f
o
r
t
h
e
issuance
o
f
preferred stock
i
n
one
o
r
more additional series
b
y
designating and
establishing the terms
o
f
such a series. With respect
t
o
any such series,
t
h
e
Board
o
f
- 2 -
CONFIDENTIAL
Return
.
.
.
.
.
' ........... \
.
Directors
i
s
authorized
t
o
f
i
x
a
n
d
state
t
h
e
voting powers, designations, preferences and
relative, participating, optional
o
r
other special right
o
f
the shares
o
f
each
s
\
l
c
h
series and
t
h
e
qualifications, limitations and restrictions thereon, including,
b
u
t
n
o
t
limited
t
o
,
determination
o
f
any
o
f
t
h
e
following:
(
1
)
The distinctive serial designation and
t
h
e
number
o
f
shares
constituting such series;
(
2
)
The dividend rates
o
r
t
h
e
amount
o
f
dividends
t
o
b
e
paid
o
n
the
shares
o
f
such series, whether dividends shall
b
e
cumulative and,
i
f
s
o
,
from which date
o
r
dates, the payment date
o
r
dates
f
o
r
dividends, and the participating
o
r
other special
rights,
i
f
any, with respect
t
o
dividends;
(
3
)
The voting powers, full, special
o
r
limited,
i
f
any,
o
f
shares
o
f
such
series;
(
4
)
Whether
t
h
e
shares
o
f
such series shall
b
e
redeemable and,
i
f
s
o
,
t
h
e
price
o
r
prices
a
t
which, and the terms and conditions
o
n
which, such shares may
b
e
redeemed;
(
5
)
The amount
o
r
amounts payable upon
t
h
e
shares
o
f
such series
i
n
t
h
e
event
o
f
voluntary
o
r
o
r
winding
u
p
o
f
the Company;
(
6
)
Whether the shares
o
f
such series shall
b
e
entitled
t
o
the benefit
o
f
a
sinking
o
r
retirement fund
t
o
b
e
applied
t
o
the purchase
o
r
redemption
o
f
such shares, and
i
f
s
o
entitled,
t
h
e
amount
o
f
such fund and
t
h
e
manner
o
f
i
t
s
application, including
t
h
e
price
o
r
prices
a
t
which such shares may
b
e
redeemed
o
r
purchased through
t
h
e
application
o
f
such fund;
-
(
7
)
Whether
t
h
e
shares
o
f
such series shall
b
e
convertible into,
o
r
exchangeable for, shares
o
f
any other class
o
r
classes
o
r
o
f
any other series
o
f
the same
o
r
any other class
o
r
classes
o
f
stock
o
f
t
h
e
Company and,
i
f
s
o
convertible
o
r
exchangeable,
t
h
e
conversion price
o
r
prices,
o
r
t
h
e
rate
o
f
exchange, and
t
h
e
adjustments thereof,
i
f any,
a
t
which such conversion
o
r
exchange may
b
e
made, and any other terms and conditions
o
f
such conversion
o
r
exchange; and
(
8
)
Whether
t
h
e
shares
o
f
such series which are redeemed
o
r
converted
shall have
t
h
e
status
o
f
authorized
b
u
t
unissued shares
o
f
serial preferred stock and
whether such shares may
b
e
reissued
a
s
shares
o
f
t
h
e
same
o
r
any other series
o
f
serial
Preferred Stock.
Each share
o
f
each series
o
f
preferred stock shall have the same relative rights
a
s
and
b
e
identical
i
n
a
l
l
respects with
a
l
l
t
h
e
other shares
o
f
t
h
e
same series.
-
3
-
._..': I
<
_
.
.
.
.
;
,
,
"
;
.
.
.
.
t... ....: ... : '
l
.
.
:
.
CONFIDENTIAL
Return
.
:.........
While the foregoing authorizes the Board
o
f
Directors,
i
n establishi,
n
g
t
h
e
terms
o
f
a series
o
f
Preferred Stock,
t
o
permit holders ofthat series
o
f
Preferred
StQ(~.. k
t
o
elect
separately one
o
r
more directors,
i
n
n
o
event shall
t
h
e
total number
o
f
directors separately
elected
b
y
holders
o
f
one
o
r
more series
o
f
Preferred Stock equal
o
r
exceed fifty percent
(50%)
o
f
t
h
e
total number
o
f
authorized directors.
ARTICLE
I
I
I
Preemptive Rights
The shareholders ofthe Company shall have
n
o
preemptive rights
t
o
acquire
additional shares
o
f
t
h
e
Company.
ARTICLE
I
V
Board
o
f
Directors
The Company shall
b
e
managed
b
y
a Board
o
f
Directors. The number
o
f
directors
shall
b
e
stated
i
n the Company's Bylaws, provided, however, that such number shall
b
e
n
o
t
less than five (
5
)
.
There shall
b
e
three classes
o
f
elected directors designated
a
s
Class
1
,
Class
2
,
and Class 3 directors. Each class shall contain one- third
o
f
t
h
e
total number
o
f
directors,
a
s
near
a
s
may
b
e
.
The terms ofthe Class 1 directors shall expire
a
t
t
h
e
first
annual shareholders' meeting after their election. The terms
o
f
t
h
e
Class 2 directors shall
expire
a
t
t
h
e
second annual shareholders' meeting after their election. The terms
o
f
t
h
e
a
t
t
h
e
third annual shareholders' meeting after their election.
A
t
each annual shareholders' meeting held thereafter, directors shall
b
e
chosen
f
o
r
a term
o
f
three years
t
o
succeed those whose terms expire. A vacancy
o
n
the Board
o
f
Directors
may
b
e
filled
b
y
t
h
e
Board
i
n accordance with
t
h
e
applicable provis~ ons
o
f
t
h
e
Company's Bylaws. A director elected
t
o
f
i
l
l
a vacancy shall
b
e
eleCted
f
o
r
a term
o
f
office continuing only until
t
h
e
next election.
o
f
directors
b
y
shareholders.
-
4
-
", . ' I : '.. .: '; ,. ~. :"., : I.
CONFIDENTIAL
Return
ARTICLE V
Removal
o
f
Directors
Any director may
b
e
removed
b
y
t
h
e
shareholders only with good cause and
i
n
accordance with
t
h
e
applicable provisions ofthe Company's Bylaws.
ARTICLE
V
I
Cumulative Voting
The right
t
o
cumulate votes
i
n
t
h
e
election
o
f
directors shall
n
o
t
exist with respect
t
o
shares
o
f
stock
o
f
t
h
e
Company.
ARTICLE
V
I
I
Bylaws
The Board
o
f
Directors has the power
t
o
adopt, amend
o
r
repeal the Bylaws
o
f
t
h
e
Company, subject
t
o
t
h
e
concurrent power ofthe shareholders,
b
y
a
t
least two- thirds
affirmative vote
o
f
t
h
e
shares
o
f
t
h
e
Company entitled
t
o
vote thereon,
t
o
adopt, amend
o
r
repeal
t
h
e
Bylaws.
ARTICLE VIII
Shareholder Vote Required
t
o
Approve Substantial Business Transaction
I
f
pursuant
t
o
t
h
e
Washington Business Corpotations Act the . company's
shareholders
a
r
e
required
t
o approve a plan
o
f
merger, share exchang~,-"
o
r
other
disposition
o
f
a
l
l
,
o
r
substantially
a
l
l
o
f
t
h
e
Company's property, otherwise than
i
n
t
h
e
usual and
~
~
gular course
o
f
business (each
o
f
the foregoing, a " Substantial Business
Transaction"), then (
a
)
i
f
two- thirds
o
f
t
h
e
directors vote
t
o
recommend
t
h
e
Substantial
Business Transaction
t
o
t
h
e
shareholders, the Substantial Business Transaction shall
b
e
approved
b
y
each voting group entitled
t
o
vote thereon
b
y
a simple majority
o
f
a
l
l
votes
entitled
t
o
b
e
cast
b
y
that group; (
b
)
i
n
a
l
l
other cases where a shareholder vote
i
s required
b
y
t
h
e
Washington Business Corporation Act, such Act,
a
s
i
t may
b
e
amended, shall
control.
- 5 -
CONFIDENTIAL
Return
.
.
.
.
.
,
.
.
.
.
.
.
ARTICLE
I
X
Indemnification
The Company shall indemnify any individual made a party
t
o a proceeding
because that individual
i
s
o
r
was a director
o
f
t
h
e
Company and shall advance
o
r
,
reimburse
t
h
e
reasonable expenses incurred
b
y
such individual
i
n advance
o
f
final
disposition
o
f
t
h
e
proceeding, without regard
t
o
t
h
e
limitations
i
n
RCW 23B. 08.510
through 23B. 08.550
o
f
the Washington Business Corporation Act,
o
r
any other limitation
that may hereafter
b
e
enacted
t
o
t
h
e
extent such limitation may
b
e
disregarded
i
f
authorized
b
y
t
h
e
articles
o
f
incorporation,
t
o
the full extent and under
a
l
l
circumstances
permitted
b
y
applicable law.
ARTICLE X
Business Combinations
A
.
For
t
h
e
purposes
o
f
this Article
X
:
(
1
)
The terms " Affiliate" and " Associate" shall have
t
h
e
meanings
attached
t
o
them
b
y
Rule 12b-2 under
t
h
e
o
f
1934,
a
s
amended,
o
r
any similar successor rule.
(
2
)
The term " beneficial owner" and correlative terms shall have
t
h
e
meaning
a
s
s
e
t
forth
i
n
Rule 13d-3 under
t
h
e
o
f
1934,
a
s
amended,
o
r
any similar successor rule. Without limitation and
i
n addition
t
o
t
h
e
foregoing, any shares
o
f
Voting Stock
o
f
t
h
e
Company which any Major Stockholder has
the right
t
o
vote
o
r
t
o
acquire (
i
) pursuant
t
o
any agreement, (
i
i
)
b
y
reason
o
f
tenders
o
f
shares
b
y
shareholders
o
f
the Company
i
n connection with
o
r
pursuifrrto a tender offer
made
b
y
such Major Stockholder ( whether
o
r
n
o
t
any tenders have been accepted,
b
u
t
excluding tenders which have been rejected),
o
r
(
i
i
i
)
upon
t
h
e
exercise
o
f
conversion
rights, warrants, options
o
r
otherwise, shall
b
e
deemed " beneficially owned"
b
y
such
Major Stockholder.
(
3
)
The term " Business Combination" shall mean:
(
a
)
any merger
o
r
consolidation ( whether
i
o
r
a series
o
f
related transactions, including a series
o
f
separate transactions with a Major
Stockholder, any Affiliate
o
r
Associate thereof
o
r
any Person acting
i
n concert therewith)
o
f
t
h
e
Company
o
r
any Subsidiary with
o
r
into a Major Stockholder
o
r
o
f
a Major
Stockholder into the Company
o
r
a Subsidiary;
-
6
-
CONFIDENTIAL
Return
.
,
.
-
.
.
.
.
.
.
.
. - . ,
,
-
(
b
)
any sale, lease, exchange, transfer, distributionto
stockholders
o
r
other disposition, including without limitation, a mortgage, eledge
o
r
any
other security device,
t
o
o
r
with a Major Stockholder
b
y
t
h
e
Company
o
r
any
o
f
i
t
s
Subsidiaries (
i
o
r
a series
o
f
related transactions)
o
f
a
l
l
,
substantially
a
l
l
o
r
a
n
y
Substantial Part ofthe assets ofthe Company
o
r
a Subsidiary (including,
without limitation, any securities
o
f
a Subsidiary);
(
c
)
t
h
e
purchase, exchange, lease
o
r
other acquisition
b
y
t
h
e
Company
o
r
any
o
f
i
t
s
Subsidiaries (
i
o
r
a series
o
f
related
transactions)
o
f
a
l
l
,
substantially
a
l
l
o
r
o
f
t
h
e
assets
o
r
business
o
f
a
Major Stockholder;
(
d
)
t
h
e
issuance
o
f
any securities,
o
r
o
f
any rights, warrants
o
r
options
t
o acquire any securities, ofthe Company
o
r
a Subsidiary
t
o a Major Stockholder
o
r
t
h
e
acquisition
b
y
t
h
e
Company
o
r
a Subsidiary
o
f
any securities,
o
r
o
f
any rights,
warrants
o
r
options
t
o
o
f
a Major Stockholder;
(
e
)
any reclassification
o
f
Voting Stock, recapitalization
o
r
other
transaction (othe! than a redemption
i
n accordance with
t
h
e
terms
o
f
the security
redeemed) which has
t
h
e
effect, directly
o
r
indirectly,
o
f
increasing
t
h
e
proportionate
amount
o
f
Voting Stock ofthe Company
o
r
any Subsidiary which
i
b
y
a Major Stockholder,
o
r
any partial
o
r
complete liquidation, spin off, split
o
f
f
o
r
split
u
p
o
f
the Company
o
r
any Subsidiary; provided, however, that this Section
A
(
3
)
(
e
)
shall
n
o
t
relate
t
o any transaction
o
f
t
h
e
types specified herein that
h
a
s
been approved
b
y
a
majority
o
f
t
h
e
Continuing Directors; and
(
f
)
any agreement, contract
o
r
other arrangement providing
f
o
r
any
o
f
t
h
e
transactions described herein.
-
-
.'.",..~.~-~
(
4
)
The term " Continuing Director" shall mean (
i
) a person who was a
member
o
f
t
h
e
Board
o
f
Directors
o
f
t
h
e
Company immediately prior
t
o
the time that any
then- existirrg Major Stockholder became a Major Stockholder,
o
r
(
i
i
)
a person designated
(before initially becoming a director)
a
s
a Continuing Director
b
y
a majority
o
f
t
h
e
then
Continuing Directors. All references
t
o
a vote
o
f
t
h
e
Continuing Directors shall mean a
vote
o
f
t
h
e
total number
o
f
(
5
)
The term " Major Stockholder" shall mean any Person which,
together with
i
t
s
Affiliates and Associates and any Person acting
i
n
concert therewith,
i
s
t
h
e
beneficial owner
o
f
five percent (5%)
o
r
more
o
f
the votes held
b
y
t
h
e
holders
o
f
the
outstanding shares
o
f
the Voting Stock
o
f
the Company, and any Affiliate
o
r
Associate
o
f
a Major Stockholder, including a Person acting
i
n concert therewith. The term " Major
Stockholder" shall not include a Subsidiary.
- 7 -
CONFIDENTIAL
Return
(
6
)
The term " other consideration
t
o
b
e
received" shall include, without
limitation, Voting Stock retained
b
y
t
h
e
Company's existing shareholders
i
J
;
l
.
.
.
t
h
e
event
o
f
a Business Combination which
i
s a merger
o
r
consolidation
i
n which the Company
i
s
t
h
e
surviving corporation.
(
7
)
The term " Person" shall mean any individual, corporation,
partnership
o
r
other person, group
o
r
entity ( other than
t
h
e
Company, any Subsidiary
o
r
a
trustee holding stock
f
o
r
t
h
e
benefit
o
f
employees
o
f
t
h
e
Company
o
r
i
t
s
Subsidiaries,
o
r
anyone
o
f
them, pursuant
t
o one
o
r
more employee benefit plans
o
r
arrangements).
When two
o
r
more persons
a
c
t
a
s
a partnership, limited partnership, syndicate, association
o
r
other group
f
o
r
t
h
e
purpose
o
f
acquiring, holding
o
r
disposing
o
f
shares
o
f
stock, such
partnerships, syndicate, association
o
r
group will
b
e
deemed a " Person."
(
8
)
The term " Subsidiary" shall mean any business entity fifty percent
(50%)
o
r
more
o
f
which
i
b
y
t
h
e
Company.
(
9
)
The term " Substantial Part,"
a
s
used
i
n reference
t
o
t
h
e
assets
o
f
the
Company
o
r
any Subsidiary
o
r
o
f
any Major Stockholder means assets having a value
o
f
more than five percent (5%)
o
f
the total consolidated assets ofthe Company and
i
t
s
Subsidiaries
a
s
o
f
t
h
e
end ofthe Company's most recent fiscal year ending prior
t
o
t
h
e
time
t
h
e
determination
i
s made.
(10) The term " Voting Stock" shall mean the stock
o
r
other securities
entitled
t
o vote upon any action
t
o
b
e
taken
i
n connection with any Business Combination
o
r
entitled
t
o
vote generally
i
n
t
h
e
election
o
f
directors, including stock
o
r
other securities
convertible into Voting Stock.
B
.
Notwithstanding any other provisions ofthese Articles ofIncorporation and
except
a
s
s
e
t
forth
i
n Section C
o
f
this Article
X
,
neither
t
h
e
Comp~~ nor any Subsidiary
shall
b
e
a party
t
o a Business Combination unless:
. (
1
)
b
y
t
h
e
Board
o
f
Directors
o
f
t
h
e
Company prior
t
o
the Major Stockholder involved
i
n
t
h
e
becoming such;
o
r
(
2
)
The Major Stockholder involved
i
n
t
h
e
Business Combination sought
and obtained
t
h
e
unanimous prior approval ofthe Board
o
f
Directors
t
o
become a Mttior
Stockholder and the Business Combination was approved
b
y
a majority ofthe Continuing
Directors;
o
r
(
3
)
b
y
a
t
least eighty percent
(80%)
o
f
t
h
e
Continuing Directors ofthe Company;
o
r
- 8 -
CONFIDENTIAL
Return
(
4
)
b
y
a
t
least ninety-five
percent (95%)
o
f
t
h
e
outstanding Voting Stock beneficially owned
b
y
share) lOlders other
than any Major Stockholder.
.
.
C
.
The approval requirements
o
f
Section B shall
n
o
t
apply
i
f
:
(
l
) The Business Combination
i
s approved
b
y
a
t
least
t
h
e
majority vote
o
f
the shares
o
f
t
h
e
Voting Stock and
t
h
e
majority vote
o
f
t
h
e
shares
o
f
the Voting Stock
beneficially owned
b
y
shareholders other than any Major Stockholder; and
(
2
)
A
l
l
ofthe following conditions
a
r
e
satisfied:
(
a
)
The aggregate
o
f
t
h
e
cash and
t
h
e
fair market value
o
f
other
consideration
t
o
b
e
received per share (
a
s
adjusted
f
o
r
stock splits, stock dividends,
reclassification
o
f
shares into a lesser number and similar events)
b
y
holders
o
f
t
h
e
common stock ofthe Company
i
n
t
h
e
i
s not less than the higher
o
f
(
i
)
t
h
e
highest
p
e
r
share price (including brokerage commissions, soliciting dealers' fees,
dealer- management compensation, and other expenses, including, but not limited
t
o
,
costs
o
f
newspaper advertisements, printing expenses and attorneys' fees) paid
b
y
the Major
Stockholder
i
n acquiring any
o
f
t
h
e
Company's common stock;
o
r
(
i
i
)
a
n
amount which
bears the same
o
r
a greater percentage relationship
t
o
the market price
o
f
the Company's
common stock immediately prior
t
o
t
h
e
announcement
o
f
such Business Combination
a
s
t
h
e
highest per share price determined
i
n (
i
) above bears
t
o
the market price
o
f
t
h
e
Company's common stock immediately prior
t
o
the commencement
o
f
acquisition
o
f
t
h
e
Company's common stock
b
y
such Major Stockholder, but
i
n
n
o
event
i
n excess
o
f
two
times
t
h
e
highest
p
e
r
share price determined
i
n (
i
) above; and
(
b
)
The consideration
t
o
b
e
received
i
n such Business
Combination
b
y
holders
o
f
t
h
e
common stock
o
f
t
h
e
Company shall be, except
t
o
t
h
e
extent that a stockholder agrees otherwise
a
s
t
o
a
l
l
o
r
a part
o
f
h
i
s
o
r
h
e
r
shares,
i
n
t
h
e
same form and
o
f
t
h
e
same kind
a
s
paid
b
y
t
h
e
Major Stockholder
i
n
acquiring
h
i
s
Voting
Stock. ,
(
c
)
After becoming a Major Stockholder and prior
t
o
t
h
e
consummation
o
f
such Business Combination, (
i
)
such Major Stockholder shall
n
o
t
have
acquired any newly issued shares
o
f
capital stock, directly
o
r
indirectly, from
t
h
e
Company
o
r
a Subsidiary ( except upon conversion
o
f
convertible securities acquired
b
y
i
t
prior
t
o
becoming a Major Stockholder
o
r
upon compliance with
t
h
e
provisions
o
f
this
Article X
o
r
a
s
a result
o
f
a pro rata stock dividend
o
r
stock split), and (
i
i
)
such Major
Stockholder shall
n
o
t
have received
t
h
e
benefit, directly
o
r
indirectly ( except
proportionately
a
s
a shareholder),
o
f
any loans, advances, guarantees, pledges
o
r
other
-
9
-
.
.
.
.
.
:
.
;
;
-
:
:
.
1
.
.
.
'
: _
.
.
.
.
.
CONFIDENTIAL
Return

Washington Mutual (WMI) - Attachments/Exhibits To The Final Report of The Examiner (Part 8/10)

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Washington Mutual (WMI) - Attachments/Exhibits To The Final Report of The Examiner (Part 8/10)

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Mr Michael Finn

This Assignment Agreement including all exhibits

The "J>."innm"nt to A.,.i"""" by Assignor of SecurHies

acknowledges that the

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