SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
WASHINGTON MUTUAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
1201 THIRD AVENUE, SUITE 1500
SEATTLE, WASHINGTON 98101
March 12, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Washington Mutual, Inc. ("Washington Mutual"), which will be held at the Four
Seasons Olympic Hotel, 411 University Street, Seattle, Washington, at 10:00
a.m., Tuesday, April 15, 1997. I look forward to greeting as many of our
shareholders as possible.
At the annual meeting, holders of Washington Mutual common stock will be
asked to vote on the following matters: (1) to elect five directors; (2) to
approve the 1997 Amended and Restated Restricted Stock Plan; and (3) to ratify
the appointment of Deloitte & Touche LLP as the independent auditors for
Washington Mutual for 1997. All of these proposals are more fully described in
the accompanying Notice of Annual Meeting of Shareholders and the Proxy
Statement. Your Board of Directors believes the proposals are in the best
interests of Washington Mutual and its shareholders and, accordingly, recommends
that you vote "FOR" each of them.
In addition to the specific matters to be acted upon, there will be a report
on the progress of Washington Mutual and an opportunity to ask questions of
general interest to shareholders.
Whether or not you attend the annual meeting, it is important that your
shares be represented and voted at the annual meeting. Therefore, I urge you to
sign, date and promptly return the enclosed proxy in the enclosed postage-paid
envelope. If you decide to attend the annual meeting and vote in person, you
will, of course, have that opportunity. If you are planning to attend the annual
meeting, we would greatly appreciate it if you would let us know by so
indicating in the appropriate place on your proxy.
Sincerely,
[LOGO]
Kerry K. Killinger
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
WASHINGTON MUTUAL, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 15, 1997
------------------------
The Annual Meeting of Shareholders of Washington Mutual, Inc. ("Washington
Mutual") will be held at the Four Seasons Olympic Hotel, 411 University Street,
Seattle, Washington, on Tuesday, April 15, 1997 at 10:00 a.m. for the following
purposes:
1. To elect one director to hold office until the 1999 Annual Meeting of
Shareholders and four directors to hold office until the 2000 Annual
Meeting of Shareholders and, in each case, until his successor is elected
and qualified;
2. To approve the 1997 Washington Mutual Amended and Restated Restricted
Stock Plan;
3. To ratify the appointment of Deloitte & Touche LLP as the independent
auditors of Washington Mutual for 1997; and
4. To transact such other business as may properly come before the annual
meeting or any adjournments thereof.
All of these proposals are more fully described in the Proxy Statement,
which follows. Only holders of shares of Washington Mutual common stock at the
close of business on February 28, 1997 are entitled to notice of, and to vote
at, this annual meeting, and any and all adjournments thereof.
By Order of the Board of Directors,
[LOGO]
William L. Lynch
SECRETARY
Seattle, Washington
March 12, 1997
IMPORTANT
Whether or not you expect to attend in person, we urge you to sign, date and
return the enclosed proxy at your earliest convenience. This will ensure the
presence of a quorum at the annual meeting. PROMPTLY SIGNING, DATING AND
RETURNING THE PROXY WILL SAVE WASHINGTON MUTUAL THE EXPENSE AND EXTRA WORK OF
ADDITIONAL SOLICITATION. An addressed envelope for which no postage is required
if mailed in the United States is enclosed for that purpose. Sending in your
proxy will not prevent you from voting your stock at the Annual Meeting if you
desire to do so, as your proxy is revocable at your option in the manner
described in the Proxy Statement.
WASHINGTON MUTUAL, INC.
1201 THIRD AVENUE, SUITE 1500
SEATTLE, WASHINGTON 98101
--------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
APRIL 15, 1997
---------------------
SOLICITATION AND REVOCATION OF PROXY
The enclosed proxy is solicited by the Board of Directors of Washington
Mutual, Inc. (the "Company" or "Washington Mutual") to be voted at the Annual
Meeting of Shareholders to be held at 10:00 a.m. on April 15, 1997, or any
adjournments thereof (the "Annual Meeting"). The persons named as proxies are
William L. Lynch and Marc R. Kittner. The accompanying Notice of Annual Meeting,
this Proxy Statement and the accompanying proxy are being first sent to
shareholders on or about March 12, 1997.
At the Annual Meeting, holders of Washington Mutual common stock, no par
value per share (the "Common Stock"), will be asked to elect five directors, one
of whom is to hold office until the 1999 Annual Meeting of Shareholders and the
other four to hold office until the 2000 Annual Meeting of Shareholders and, in
each case, until his successor is elected and qualified. Holders of Common Stock
will also be asked to approve the Company's 1997 Amended and Restated Restricted
Stock Plan (the "1997 Amended Plan") and to ratify the appointment of Deloitte &
Touche LLP as the Company's independent auditors for 1997.
All shares represented by proxies that are properly executed and returned
will be voted in accordance with the instructions noted thereon. In the absence
of voting instructions, the shares of Common Stock will be voted for the
nominees for director listed herein and on the proxy, for the 1997 Amended Plan
and for the ratification of the Company's independent auditors. A shareholder
giving a proxy has the power to revoke it at any time before it is voted. The
proxy may be revoked by written notice to the Secretary received at Washington
Mutual's offices at 1201 Third Avenue, Suite 1500, Seattle, Washington 98101,
before April 15, 1997, or by written notice delivered in person at the Annual
Meeting to the Secretary prior to the commencement of the Annual Meeting.
Attendance at the Annual Meeting will not, in itself, constitute revocation of a
previously granted proxy.
At the close of business on February 28, 1997, there were 126,323,481 shares
of Common Stock outstanding. Each share of Common Stock is entitled to one vote
in each of the matters properly presented at the Annual Meeting. Only
shareholders of record at the close of business on February 28, 1997 (the
"Record Date") will be entitled to vote at the Annual Meeting.
The holders of a majority of the Common Stock issued and outstanding and
entitled to vote at the Annual Meeting, present in person or represented by
proxy, constitute a quorum for purposes of acting on the election of directors,
for the approval of the 1997 Amended Plan and for the ratification of the
Company's independent auditors.
Under applicable law and the Company's Articles of Incorporation and Bylaws,
and assuming that a quorum is present, in the election of the one director for a
term ending in 1999 and the four directors for terms ending in 2000, the persons
elected will be the one and four persons, respectively, receiving the largest
number of votes cast for the relevant class of directors at the Annual Meeting
by shares present in person or by proxy. Assuming a quorum is present, approval
of the 1997 Amended Plan and ratification of the appointment of Deloitte &
Touche LLP as the Company's independent auditors for 1997 each requires that
1
more votes favor the action than oppose it. Abstentions and broker non-votes
will have no effect on the vote for approval of the 1997 Amended Plan and
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors in 1997, because they are not considered votes cast. In the
election of directors, abstentions and broker non-votes will be counted and will
have the same effect as a vote against the nominees.
In addition to mailing this material to shareholders, the Company has asked
banks and brokers to forward copies to persons for whom they hold shares of the
Common Stock and request authority to execute the proxies. The Company will
reimburse the banks and brokers for their reasonable out-of-pocket expenses in
doing so. Officers and regular employees of the Company may, without being
additionally compensated, solicit proxies by mail, telephone, telegram,
facsimile or personal contact. Washington Mutual also intends to employ and pay
the fees (estimated to be $4,500) and expenses of D.F. King & Co., Inc., a firm
engaged in the business of soliciting the return of proxies. All proxy
soliciting expenses will be paid by the Company in connection with the
solicitation of votes for the Annual Meeting.
INTRODUCTION
Washington Mutual was formed in August 1994 for the purpose of serving as
the holding company of Washington Mutual Savings Bank ("WMSB"), through a plan
of reorganization (the "Reorganization"). The Reorganization was consummated on
November 29, 1994, and Washington Mutual became the resulting holding company of
WMSB's successor, Washington Mutual Bank ("WMB"), and its affiliates. EXCEPT AS
OTHERWISE NOTED HEREIN, REFERENCES IN THIS PROXY STATEMENT TO "WASHINGTON
MUTUAL" OR THE "COMPANY" REFER TO BOTH (I) WASHINGTON MUTUAL, INC. AND ITS
CONSOLIDATED SUBSIDIARIES AFTER THE CONSUMMATION OF THE REORGANIZATION; AND (II)
WMSB AND ITS CONSOLIDATED SUBSIDIARIES PRIOR TO THE CONSUMMATION OF THE
REORGANIZATION.
PRINCIPAL HOLDERS OF COMMON STOCK
The following table sets forth information regarding beneficial ownership of
Common Stock by each person known to the Company to have owned more than 5% of
the outstanding shares of the Common Stock on February 24, 1997. The following
is based solely on statements filed with the Securities and Exchange Commission
(the "SEC") or other reliable information. Each of the named shareholders has
sole voting and investment power with respect to the shares shown, except as
noted below.
NAME AND ADDRESS SHARES OF COMMON STOCK PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- --------------------------------------------------------- ----------------------- -------------
Robert M. Bass .......................................... 11,379,576(1)(2) 9.01%
201 Main Street, Suite 3100
Fort Worth, Texas 76102
FMR Corp. ............................................... 6,481,795(3) 5.13%
82 Devonshire Street
Boston, Massachusetts 02109
- --------------------------
(1) Includes 1,901,276 shares held in escrow for the benefit of Keystone
Holdings Partners, L.P. ("KH Partners") and its transferees pursuant to that
certain agreement for merger dated as of July 21, 1996, as amended November
1, 1996, by and among the Company, KH Partners, Keystone Holdings, Inc. and
certain of its subsidiaries (the "Merger Agreement"). Pursuant to the Merger
Agreement, shares of Common Stock received by KH Partners and a governmental
entity were placed in escrow pending the outcome of certain litigation
between Keystone Holdings, Inc. and the United States of America. Pursuant to
the escrow, KH Partners and its transferees have the sole right to vote the
Common Stock received by KH Partners while it is in escrow. KH Partners has
distributed such voting rights to its partners in accordance with their
sharing percentages, and Mr. Robert M. Bass ("Mr. Bass"), as a limited
partner of KH Partners, may therefore be deemed to be the beneficial owner of
such 1,901,276 shares as to which voting rights have been distributed to him.
2
(2) A Schedule 13D was filed by Mr. Bass; Acadia Partners, L.P. ("Acadia"), a
Delaware limited partnership; Acadia FW Partners, L.P. ("Acadia FW"), a
Delaware limited partnership; Acadia MGP, Inc. ("Acadia MGP"), a Texas
corporation; J. Taylor Crandall ("Mr. Crandall"); Capital Partnership, a
Texas general partnership ("Capital"); Margaret Lee Bass 1980 Trust, a trust
existing under the laws of Texas ("MLBT"); Panther City Investment Company,
a Texas corporation ("Panther City"); W. Robert Cotham ("Mr. Cotham"); KH
Carl Partners, L.P., a Delaware limited partnership ("KH Carl"); Bernard J.
Carl ("Mr. Carl"); Rosecliff New American 1988 Partners, L.P., a Delaware
limited partnership ("Rosecliff"); and Daniel J. Doctoroff ("Mr.
Doctoroff"). The Schedule 13D indicated that, based on overlapping
employment and investment relationships, Mr. Bass, Acadia, Acadia FW, Acadia
MGP, Mr. Crandall, Capital, MLBT, Panther City, Mr. Cotham, KH Carl, Mr.
Carl, Rosecliff and Mr. Doctoroff may be deemed to constitute a "group"
within the meaning of section 13(d)(3) of the Securities Exchange Act of
1934, although the foregoing persons expressly disclaimed that any such
"group" exists. Therefore, this number of shares includes only shares owned
by Mr. Bass and excludes shares owned by the other foregoing persons.
Acadia beneficially owns 6,218,004 shares of the Common Stock and based on
their relationship to Acadia, each of Acadia FW, Acadia MGP and Mr.
Crandall, as President and sole stockholder of Acadia MGP, may also be
deemed the beneficial owner of these 6,218,004 shares. Capital owns
1,126,946 shares of the Common Stock and based on their relationship to
Capital, each of MLBT, Panther City and Mr. Cotham may also be deemed to be
the beneficial owner of these 1,126,946 shares. Rosecliff owns 1,062,535
shares of the Common Stock and Mr. Doctoroff, as sole general partner of
Rosecliff, is also deemed to beneficially own these 1,062,535 shares. Mr.
Carl beneficially owns 2,298,162 shares of the Common Stock, of which
555,514 shares are owned by KH Carl.
(3) Includes 5,928,815 shares owned by Fidelity Management & Research Company, a
wholly-owned subsidiary of FMR Corp.
PRINCIPAL HOLDERS OF PREFERRED STOCK
The Company knows of no person who owns more than 5% of the outstanding
shares of either the 9.12% Noncumulative Perpetual Preferred Stock Series C (the
"Series C Preferred"), or the 7.60% Noncumulative Perpetual Preferred Stock (the
"Series E Preferred"), as of February 24, 1997.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table and accompanying footnotes provides a summary of the
beneficial ownership of the Common Stock, Series C Preferred and Series E
Preferred as of February 24, 1997, by (i) directors, (ii) the Company's Chief
Executive Officer, (iii) the other executive officers named in the executive
compensation table set forth herein and (iv) the directors and executive
officers as a group. The following summary is based
3
on information furnished by the respective directors and officers. Each of the
named directors and officers has sole voting and investment power with respect
to the shares shown, except as noted below.
COMMON STOCK(1)
-------------------------------------------
NAME NUMBER OF SHARES(2) PERCENT OF CLASS
- ---------------------------------------- ------------------------ ----------------
Douglas P. Beighle...................... 14,520(3) *
David Bonderman......................... 1,894,141(4) 1.50%
Herbert M. Bridge....................... 22,456(5) *
J. Taylor Crandall...................... 6,549,755(6) 5.19%
Roger H. Eigsti......................... 7,000 *
John W. Ellis........................... 28,775(7) *
Daniel J. Evans......................... 15,750(8) *
Anne V. Farrell......................... 4,000 *
William P. Gerberding................... 5,835 *
Kerry K. Killinger...................... 1,044,224(9) *
Lee D. Lannoye.......................... 97,153(10) *
Samuel B. McKinney...................... 5,250 *
Michael K. Murphy....................... 6,750(11) *
Deanna W. Oppenheimer................... 86,052(12) *
Louis H. Pepper......................... 255,854(13) *
William G. Reed, Jr..................... 27,375(14) *
James H. Stever......................... 9,500(15) *
Craig E. Tall........................... 266,714(16) *
S. Liane Wilson......................... 180,062(17) *
All directors and executive officers as
a group (22 persons).................. 10,880,947(4)(6)(18) 8.62%
- --------------------------
* Less than 1%
(1) Other than as set forth below, none of the above named officers and
directors owned any shares of Series C Preferred or Series E Preferred as of
February 24, 1997:
PERCENT OF
SERIES C PREFERRED NUMBER OF SHARES CLASS
- ----------------------------------------------------------- ----------------- --------------
Herbert M. Bridge........................................ 200 shares less than 1%
James H. Stever.......................................... 500 shares less than 1%
All directors and executive officers as a group.......... 700 shares less than 1%
PERCENT OF
SERIES E PREFERRED NUMBER OF SHARES CLASS
- ----------------------------------------------------------- ----------------- --------------
Louis H. Pepper.......................................... 1,525 shares less than 1%
Herbert M. Bridge........................................ 800 shares less than 1%
All directors and executive officers as a group.......... 2,325 shares less than 1%
(2) Includes 3,000 shares issuable pursuant to stock options exercisable within
60 days of February 24, 1997 by each of Messrs. Beighle, Eigsti, Ellis,
Evans, Gerberding, Murphy, Pepper, Reed and Stever; 2,000 shares issuable
pursuant to stock options exercisable within 60 days of February 24, 1997 by
each of Dr. McKinney and Mrs. Farrell, and 1,000 shares issuable pursuant to
stock options exercisable within 60 days of February 24, 1997 by Mr. Bridge.
(3) Includes 1,350 shares held in a Keogh Plan.
(4) Includes 255,517 shares held in escrow for the benefit of KH Partners and
its transferees pursuant to the Merger Agreement. Pursuant to the Merger
Agreement, certain shares of the Common Stock
4
were placed in escrow pending the outcome of certain litigation between
Keystone Holdings, Inc. and the United States of America. Pursuant to the
escrow, KH Partners and its transferees have the sole right to vote such
Common Stock received by KH Partners while it is in escrow. KH Partners has
distributed such voting rights to its partners in accordance with their
sharing percentages, and Mr. Bonderman, as a limited partner of KH Partners,
may therefore be deemed to be the beneficial owner of such shares of the
Common Stock as to which voting rights have been distributed to him.
Includes also 364,810 shares owned by KH Group Management, Inc. ("KH
Group"), of which 60,952 shares are held in escrow for the benefit of KH
Group and its transferees pursuant to the Merger Agreement. KH Group, as a
limited partner of KH Partners, may be deemed to be the beneficial owner of
such shares of the Common Stock as to which voting rights have been
distributed to it.
(5) All shares are held jointly with Mr. Bridge's spouse. Mr. Bridge intends to
retire as a director effective April 15, 1997.
(6) Includes 6,218,004 shares beneficially owned by Acadia, including 1,035,891
shares held in escrow for the benefit of KH Partners (see footnote 2 to the
table in "Principal Holders of Common Stock" above). Mr. Crandall is the
president and sole stockholder of Acadia MGP, which is the managing general
partner of Acadia FW, which is the sole general partner of Acadia, which is
the direct beneficial owner of these 6,218,004 shares.
(7) Includes 14,275 shares held in a Keogh plan and 1,500 shares held in trust
for the benefit of Mr. Ellis' grandchildren.
(8) Includes 5,175 shares held jointly with Mr. Evans' spouse and 7,575 shares
held in a Keogh Plan, which is part of the Evans Family Revocable Trust, of
which Mr. Evans and his spouse serve as co-trustees.
(9) Includes 463,916 shares issuable pursuant to stock options exercisable
within 60 days of February 24, 1997 and 43,401 shares subject to shareholder
approval of the 1997 Amended Plan and to divestiture thereunder if
Washington Mutual fails to achieve certain earnings goals.
(10) Includes 32,586 shares issuable pursuant to stock options exercisable
within 60 days of February 24, 1997 and 9,384 shares subject to shareholder
approval of the 1997 Amended Plan and to divestiture thereunder if
Washington Mutual fails to achieve certain earnings goals.
(11) Includes 1,500 shares held jointly with Mr. Murphy's spouse.
(12) Includes 29,000 shares issuable pursuant to stock options exercisable
within 60 days of February 24, 1997 and 14,076 shares subject to shareholder
approval of the 1997 Amended Plan and to divestiture thereunder if
Washington Mutual fails to achieve certain earnings goals.
(13) Mr. Pepper is retiring as a director. His term as a director ends upon the
election of his successor at the 1997 Annual Meeting of Shareholders.
(14) All shares are held jointly with Mr. Reed's spouse.
(15) Includes 800 shares held in the Stever Family Foundation, for which Mr.
Stever is the President, and 4,500 shares that are held jointly with Mr.
Stever's spouse.
(16) Includes 94,666 shares issuable pursuant to stock options exercisable
within 60 days of February 24, 1997 and 16,422 shares subject to shareholder
approval of the 1997 Amended Plan and to divestiture thereunder if
Washington Mutual fails to achieve certain earnings goals.
(17) Includes 81,833 shares issuable pursuant to stock options exercisable
within 60 days of February 24, 1997 and 16,422 shares subject to shareholder
approval of the 1997 Amended Plan and to divestiture thereunder if
Washington Mutual fails to achieve certain earnings goals.
(18) Includes, in the aggregate, 754,335 shares issuable pursuant to stock
options exercisable within 60 days of February 24, 1997, and 133,722 shares
subject to shareholder approval of the 1997 Amended Plan and to divestiture
thereunder if Washington Mutual fails to achieve certain earnings goals.
5
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of Washington Mutual previously consisted of 13
directors, divided into three classes. On December 20, 1996, the Board of
Directors was increased to 15 and two additional directors were appointed to
fill the two vacancies. Under Washington law, each of these two appointees
serves as a director only until the Annual Meeting. They have been nominated to
election to different classes to cause the three classes of directors to be
approximately equal in number following the Annual Meeting. Otherwise, the
members of each class serve three-year terms, with one class elected annually.
The Board of Directors has nominated the one person listed below for election as
a director to serve a two-year term ending at the Company's Annual Meeting of
Shareholders in 1999 and the four persons listed below for election as directors
to serve three-year terms ending at the Company's Annual Meeting of Shareholders
in 2000, and when each of their respective successors has been duly elected and
qualified. The nominees are:
TERM ENDING 1999
David Bonderman
TERM ENDING 2000
J. Taylor Crandall
Douglas P. Beighle
Kerry K. Killinger
Michael K. Murphy
Each of the nominees has indicated that he is willing and able to serve as a
director. If any nominee becomes unable or unwilling to serve, the accompanying
proxy may be voted for the election of such other person as shall be designated
by the Planning and Nominating Committee of the Board of Directors. Unless
instructions to the contrary are specified in a properly signed and returned
proxy, the proxies will be voted in favor of the five nominees listed above.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE NOMINEES.
6
DIRECTORS
The following table sets forth information regarding each nominee for
election as a director and each director whose term of office will continue
after the Annual Meeting. Except as otherwise indicated, each director has been
engaged in the principal occupation described below for at least five years.
COMPANY EXPIRATION OF
NAME AGE DIRECTOR SINCE TERM AS DIRECTOR
- ------------------------------------------------------- --- --------------- -----------------
Douglas P. Beighle..................................... 64 1989 1997
David Bonderman........................................ 54 1997 1997
J. Taylor Crandall..................................... 43 1997 1997
Roger H. Eigsti........................................ 54 1992 1999
John W. Ellis.......................................... 68 1970 1999
Daniel J. Evans........................................ 71 1989 1998
Anne V. Farrell........................................ 61 1994 1998
William P. Gerberding.................................. 67 1979 1998
Kerry K. Killinger..................................... 47 1988 1997
Samuel B. McKinney..................................... 70 1977 1998
Michael K. Murphy...................................... 60 1985 1997
William G. Reed, Jr.................................... 58 1970 1999
James H. Stever........................................ 53 1991 1999
Mr. Bonderman is a principal and general partner of TPG, L.P., an investment
entity. From 1983 until 1992, Mr. Bonderman was Chief Operating Officer of
Keystone, Inc. (formerly Robert M. Bass Group, Inc.), a company owned by Robert
M. Bass and principally engaged in investment activities. KH Group, a
corporation of which Mr. Bonderman is the sole director and president, is the
managing general partner of KH Partners. He is a director of Bell & Howell
Company, Inc., an information handling, storage and retrieval company, Carr
Realty Co., a real estate investment trust, and Continental Airlines, Inc.
Mr. Beighle is a Senior Vice President of The Boeing Company. Mr. Beighle
also is a director of Puget Sound Power & Light Company.
Mr. Crandall has been Chief Financial Officer and Vice President of
Keystone, Inc. since October 1986, and President of Acadia MGP, which is the
managing general partner of Acadia FW, which is the sole general partner of
Acadia, an investment partnership, since March 1992. In addition, since August
1989, Mr. Crandall has been a Vice President of National Re Holdings Corp., and
he served as Treasurer of that company until June 1990 and has been one of its
directors since November 1989. From July 1976 to October 1986, Mr. Crandall was
employed by The First National Bank of Boston, where he was Vice
President-Corporate Lending at the time of his departure. Mr. Crandall is a
director of Bell & Howell Company, Inc. and Specialty Foods Acquisition
Corporation.
Mr. Eigsti has served as the Chairman and Chief Executive Officer of SAFECO
Corporation since August 1996 and served as its Chairman, President and Chief
Executive Officer from May 1993 to August 1996. Previously, he served at SAFECO
Corporation as Executive Vice President and Chief Financial Officer from
February 1985 to May 1989, President and Chief Operating Officer from May 1989
to January 1992, and President and Chief Executive Officer from January 1992 to
May 1993.
Mr. Ellis has served as the Chairman and Chief Executive Officer of Baseball
Club of Seattle, Inc. since July 1992. Previously, Mr. Ellis served at Puget
Sound Power & Light Company as Chairman from 1988 until 1993 and as Chief
Executive Officer from 1970 until 1993. Mr. Ellis also serves as a director of
Associated Electric & Gas Insurance Service Ltd., SAFECO Corporation and UTILX
Corporation.
Mr. Evans is the Chairman of Daniel J. Evans Associates, consultants on
environmental issues. Mr. Evans also serves as a director of Attachmate Inc.,
Burlington Northern Railroad Company, Flow
7
International, Puget Sound Power & Light and The TERA Computer Co. and is a
member of the Board of Regents of the University of Washington. Mr. Evans
previously served as a director of Washington Mutual from 1977 to 1983.
Mrs. Farrell has served as the President and Chief Executive Officer of The
Seattle Foundation, a charitable and educational corporate foundation, since
1984. Mrs. Farrell is a director of Blue Cross of Washington and Alaska.
Mr. Gerberding serves as a director of SAFECO Corporation and is a member of
the board of directors of the Seattle Opera. Mr. Gerberding served as President
of the University of Washington from 1979 through 1995.
Mr. Killinger has been Chairman, President and Chief Executive Officer of
Washington Mutual, Inc. since its organization. He has been Chairman of the
Board of Directors of WMSB and its successor, WMB, since 1991 and Chief
Executive Officer since 1990. Mr. Killinger became an Executive Vice President
of WMSB in 1983, a Senior Executive Vice President of WMSB in 1986 and the
President and a director of WMSB in 1988.
Dr. McKinney is the Senior Pastor of Mount Zion Baptist Church in Seattle,
Washington.
Mr. Murphy is the Chairman, President and Chief Executive Officer of CPM
Development Corporation, the parent company of Central Pre-Mix Concrete Company
and Inland Asphalt Company.
Mr. Reed is the Chairman of Simpson Investment Company, the holding company
for Simpson Paper Company and Simpson Timber Company, forest products companies.
Mr. Reed also serves as a director of Microsoft Corporation, SAFECO Corporation
and The Seattle Times.
Mr. Stever retired as the Executive Vice President--Public Policy of US
West, Inc. on December 31, 1996, which position he had held since January 1996.
He was the Executive Vice President--Public Policy and Human Resources of US
West, Inc. from November 1994 to January 1996 and was the Executive Vice
President--Public Policy from 1993 until 1994. He was President--Public Policy
of US WEST Communications, Inc. from 1990 until 1993 and was President--Business
Division from 1988 until 1990.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of Washington Mutual has an Audit Committee, a
Compensation and Stock Option Committee (the "Compensation Committee"), a Loan
and Investment Committee and a Planning and Nominating Committee.
The Audit Committee's function is to meet with management, the internal
auditors and the independent auditors to review and evaluate the Company's
audited financial statements, internal accounting controls and regulatory
examinations and to monitor the Company's compliance with laws, regulations and
corporate policy. The Committee currently consists of Messrs. Beighle
(Chairman), Eigsti, Evans and Reed. The Audit Committee met five times in 1996.
The Compensation Committee reviews and approves compensation policies for
all employees; approves the salaries, bonuses and equity compensation of all
executive and senior officers of Washington Mutual and its subsidiaries; reviews
compensation programs and practices for the Chief Executive Officer; and has
overall administration of Washington Mutual's compensation, stock option and
other equity incentive plans, pension and retirement plans and its other benefit
plans and programs. The Committee currently consists of Messrs. Ellis
(Chairman), Beighle, Murphy and Stever. The Compensation Committee met four
times in 1996.
The Loan and Investment Committee has supervisory control over all
investments in and dispositions of securities and loans, all purchases of real
estate and dispositions of property of Washington Mutual. The Committee
currently consists of Messrs. Murphy (Chairman), Beighle, Bonderman, Crandall,
Eigsti,
8
Killinger, McKinney, Pepper, Reed and Stever. The Loan and Investment Committee
met eight times in 1996.
The Planning and Nominating Committee monitors Washington Mutual's operating
and financial condition, reviews and approves Washington Mutual's strategic and
operational plans and programs and assists the Board of Directors in policy
making functions. The Committee also recommends persons to fill vacancies on the
Board of Directors and reviews the structure and operation of the Board of
Directors. Pursuant to the Company's Bylaws, the Committee considers
shareholder-recommended nominees for the Board of Directors, provided that such
shareholder nominations must be submitted to the Company's Secretary not less
than 90 days in advance of the mailing of the Proxy Statement as based on the
prior year's mailing date. The Committee currently consists of Messrs. Reed
(Chairman), Bridge, Ellis, Evans, Gerberding, Killinger and Pepper. The Planning
and Nominating Committee met two times in 1996.
During 1996, the Company's Board of Directors met 11 times. Each director
attended at least 75% of the total number of meetings of the Board of Directors
and committees he or she was eligible to attend.
COMPENSATION OF DIRECTORS
Nonemployee directors are compensated for their services on the Board of
Directors and any committees on which they serve. Each nonemployee director is
paid an annual retainer fee of $21,000, plus $1,200 for each board meeting and
$1,000 for each committee meeting he or she attends, plus travel expenses. The
Chairman of the Audit Committee receives an additional annual fee of $5,000; the
Chairman of the Compensation Committee receives an additional annual fee of
$3,000; the Chairman of the Loan and Investment Committee receives an additional
annual fee of $2,000; the Director Liaison to the Washington Mutual Foundation
(Mrs. Farrell) receives an additional annual fee of $4,000 and the Chairman of
the Planning and Nominating Committee receives an additional annual fee of
$1,000. In addition, each of Messrs. Beighle, Bonderman and Ellis has been
designated by the Board of Directors to review on a case by case basis with
Washington Mutual's management all potential acquisitions presented to them, and
each of such directors will receive an additional fee of $5,000 for such special
assignment in 1997. Each nonemployee director also receives an automatic annual
grant of an option to purchase 1,000 shares of Common Stock. The exercise price
of the options is the fair market price of the underlying Common Stock on the
date of grant.
In addition, during 1996 WMB paid Mr. Pepper $25,000 in consulting fees and
$20,000 in office support pursuant to the terms of an employment and consulting
agreement.
9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table and related notes set forth all compensation received
from the Company for the three fiscal years ended December 31, 1996, by the
Company's Chief Executive Officer and the four most highly paid executive
officers (other than the Chief Executive Officer) who were serving as executive
officers at the end of 1996 (collectively, the "Named Executive Officers").
LONG-TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------- RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD($)(1) GRANTED (#) COMPENSATION(2)
- -------------------------------- --------- ---------- ---------- --------------- ------------ ----------- ----------------
Kerry K. Killinger ............. 1996 $ 560,575 $ 372,900 $ 0 $ 120,000 100,000 $ 123,066
Chairman, President and Chief 1995 509,545 288,000 0 100,000 80,000 49,201
Executive Officer 1994 468,789 225,400 0 100,000 45,000 51,172
Craig E. Tall .................. 1996 260,004 130,000 0 35,000 28,000 49,625
Executive Vice President 1995 235,008 108,000 277 30,000 20,000 20,213
1994 220,000 75,800 0 25,000 12,000 20,740
S. Liane Wilson ................ 1996 240,000 130,000 0 35,000 28,000 46,625
Executive Vice President 1995 205,008 108,000 277 20,000 15,000 16,925
1994 193,626 58,200 0 20,000 10,000 17,915
Deanna W. Oppenheimer .......... 1996 215,004 96,100 0 30,000 22,000 27,879
Executive Vice President 1995 170,004 57,500 209 15,000 10,000 12,617
1994 132,000 31,400 0 15,000 6,000 10,158
Lee D. Lannoye ................. 1996 175,008 64,400 0 20,000 15,000 30,420
Executive Vice President 1995 155,004 42,200 0 12,500 10,000 11,649
1994 150,000 38,900 0 10,000 6,000 12,840
- ------------------------
(1) The stock awards reflected in this column were granted pursuant to
Washington Mutual's Amended and Restated Restricted Stock Plan. Pursuant to
applicable securities regulations, the dollar value of each restricted stock
award set forth in the table is based on the fair market value of the Common
Stock on the date of grant. The restricted stock awards set forth in this
column were granted (i) on February 15, 1994, in the amounts of 4,360
shares, 1,090 shares, 436 shares, 872 shares and 654 shares, (ii) on
February 20, 1995, in the amounts of 4,938 shares, 1,482 shares, 617 shares,
988 shares and 741 shares, and (iii) on January 16, 1996 in the amounts of
4,324 shares, 1,261 shares, 720 shares, 1,261 shares and 1,081 shares to
Messrs. Killinger, Tall and Lannoye and Ms. Wilson and Ms. Oppenheimer,
respectively. The restrictions on all such shares of restricted stock lapse
at a rate of 20% per year from the date of grant. Dividends will be paid on
the restricted stock during the restricted period. The value of restricted
stock set forth in this column includes only stock on which the lapsing of
restrictions is based upon criteria other than performance-based criteria.
Stock awards granted to the Named Executive Officers that carry restrictions
based upon performance conditions are not reflected in this column, but are
included in the "Long-Term Incentive Plan Awards Table," which appears
elsewhere.
The number and value of the aggregate restricted stock holdings of each of
the Named Executive Officers, excluding shares with respect to which
restrictions have lapsed and including shares acquired through the
reinvestment of dividends paid on the restricted stock initially awarded,
based on the
10
value of the Common Stock as of the close of trading on December 31, 1996,
is set forth in the table below:
NUMBER VALUE AT
NAME OF SHARES DECEMBER 31, 1996
- ---------------------------------------------------------------- ----------- -----------------
Kerry K. Killinger.............................................. 54,858 $ 2,376,037
Craig E. Tall................................................... 19,679 852,347
S. Liane Wilson................................................. 19,120 828,135
Deanna W. Oppenheimer........................................... 16,238 703,308
Lee D. Lannoye.................................................. 10,929 473,362
(2) The amounts shown in this column include the following:
(a) Profit sharing and Company matching contributions under the Company's
Retirement Savings and Investment Plan during fiscal 1996 of $9,000 for
each of Messrs. Killinger, Lannoye and Tall and Ms. Oppenheimer and Ms.
Wilson.
(b) Allocations under the Company's Supplemental Employee Retirement Plan
(the "SERP") during fiscal 1996 of $58,661, $13,033, $25,725, $18,879 and
$24,325 to the account of Messrs. Killinger,
Lannoye and Tall and Ms. Oppenheimer and Ms. Wilson, respectively. The
SERP is a nonqualified plan of deferred compensation to provide benefits
that exceed certain limits imposed by federal tax laws on benefit
accruals under the Company's Cash Balance Pension Plan (the "Pension
Plan") and Retirement Savings and Investment Plan.
(c) Allocations under the Supplemental Executive Retirement Accumulation
Plan during fiscal 1996 of $53,280, $8,388, $14,900, $0 and $13,300 to
the account of Messrs. Killinger, Lannoye and Tall and Ms. Oppenheimer
and Ms. Wilson, respectively. The purpose of this plan is to provide
retirement benefits for certain executive employees of the Company and
its affiliates.
(d) An award under the Company's Employee Service Award Plan in the amount
of $2,126 was paid to Mr. Killinger during fiscal 1996. This award was
based on the number of years of continuous employment with the Company.
11
GRANTS OF STOCK OPTIONS IN 1996
The following table sets forth information on stock option grants during
fiscal 1996 to the Named Executive Officers. Options granted in December 1996
were granted in connection with each recipient's 1997 compensation.
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
NUMBER OF PERCENT OF FOR TEN YEAR OPTION
SECURITIES TOTAL OPTIONS TERM(2)
UNDERLYING GRANTED TO EXERCISE --------------------------
OPTIONS EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE ($) ($)
- ------------------------------------- ----------- ----------------- ------------- ------------- ------------ ------------
Kerry K. Killinger................... 100,000 10% $ 27.75 01/16/2006 $ 1,745,183 $ 4,422,635
135,000 13 42.625 12/20/2006 3,618,896 9,170,992
Craig E. Tall........................ 28,000 3 27.75 01/16/2006 488,651 1,238,338
40,000 4 42.625 12/20/2006 1,072,265 2,717,331
S. Liane Wilson...................... 28,000 3 27.75 01/16/2006 488,651 1,238,338
40,000 4 42.625 12/20/2006 1,072,265 2,717,331
Deanna W. Oppenheimer................ 22,000 2 27.75 01/16/2006 383,940 972,980
30,000 3 42.625 12/20/2006 804,199 2,037,998
Lee D. Lannoye....................... 15,000 1 27.75 01/16/2006 261,777 663,395
20,000 2 42.625 12/20/2006 536,133 1,358,665
- ------------------------
(1) Each of the options reflected in this table was granted to the respective
Named Executive Officer pursuant to Washington Mutual's 1994 Stock Option
Plan. The exercise price of each option is equal to the fair market value of
Common Stock on the date of grant. The options have a 10-year term and vest
over three years. The exercise price may be paid in cash or in previously
owned shares of Common Stock.
(2) These assumed rates of appreciation are provided in order to comply with the
requirements of the SEC and do not represent the Company's expectation as to
the actual rate of appreciation of the Common Stock. These gains are based
on assumed rates of annual compound stock price appreciation of 5% and 10%
from the date the options were granted over the full option term. The actual
value of the options will depend on the performance of the Common Stock and
may be greater or less than the amounts shown.
AGGREGATE OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
The following table sets forth information on the exercise of stock options
during fiscal 1996 by each of the Named Executive Officers and the value of
unexercised options at December 31, 1996.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)
ON EXERCISE REALIZED -------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- --------- ----------- ------------- ------------- -------------
Kerry K. Killinger.............. 0 0 388,917 303,333 $ 12,042,065 $ 3,190,799
Craig E. Tall................... 0 0 74,667 85,333 2,145,979 853,819
S. Liane Wilson................. 0 0 64,166 81,334 1,811,608 763,050
Deanna W. Oppenheimer........... 19,225 563,770 16,333 60,667 348,886 558,296
Lee D. Lannoye.................. 12,081 277,639 22,252 43,667 571,366 442,484
12
LONG-TERM INCENTIVE PLAN AWARDS TABLE
In December 1996, the Compensation Committee approved performance based
awards of restricted stock to approximately 40 officers, including Messrs.
Killinger, Lannoye and Tall and Ms. Oppenheimer and Ms. Wilson. The restrictions
on these awards will lapse only upon the Company's achievement of certain
targeted levels of cumulative return on common stockholders' equity ("ROCE").
The performance-based awards that were granted to the Company's nine executive
officers are subject to the shareholders' adoption of the 1997 Amended Plan.
The performance-based restricted stock awards were introduced because the
Compensation Committee believes that (i) conditioning the lapse of restrictions
on awards of restricted stock on achievement of certain specified goals of ROCE
will promote increased shareholder value and (ii) that performance-based
restricted stock awards will lead to the attainment of more appropriate levels
of long-term incentive awards. The following table sets forth information on the
awards of restricted stock during fiscal 1996 to each of the Named Executive
Officers that include performance-based conditions to the lapsing of
restrictions.
PERFORMANCE PERIOD
UNTIL
NUMBER OF MATURATION OR
NAME SHARES PAYMENT(1)
- --------------------------------------------------------- ----------- -----------------------
Kerry K. Killinger....................................... 43,401 2000-2002
Craig E. Tall............................................ 16,422 2000-2002
S. Liane Wilson.......................................... 16,422 2000-2002
Deanna W. Oppenheimer.................................... 14,076 2000-2002
Lee D. Lannoye........................................... 9,384 2000-2002
- ------------------------
(1) The five-year performance measurement period commences on January 1, 1997
and ends on December 31, 2001. One-third of the shares vest on April 1, 2000
if the cumulative ROCE for the three preceding fiscal years equals or
exceeds the target. Two-thirds of the shares vest on April 1, 2001
(regardless of whether any of the shares vested on April 1, 2000) if the
cumulative ROCE for the four preceding fiscal years equals or exceeds the
target. All of the shares vest on April 1, 2002 (regardless of whether any
of the shares previously vested) if the cumulative ROCE for the preceding
five fiscal years equals or exceeds the target. In addition, if the
cumulative ROCE for the relevant number of preceding fiscal years on April
1, 2000, 2001 or 2002 is below the target but in excess of a minimum
threshold, then there will be pro rata vesting. Pro rata vesting will be
based on a 10% reduction in the total number of shares subject to vesting on
such date for every 1% the cumulative ROCE for the relevant measurement
period is below the target.
PENSION PLANS AND AGREEMENTS
CASH BALANCE PENSION PLAN
Pursuant to the terms of the Cash Balance Pension Plan (the "Pension Plan"),
participants annually receive benefit credits based upon eligible compensation
and interest credits on current and prior benefit accruals. Through December 31,
1994, the Pension Plan annually credited each participant with 3% of total
eligible cash compensation. Beginning January 1, 1995, the crediting rate is
based on years of service with Washington Mutual. For service up to four years,
the benefit credit is 2.5%; for service from five to nine years, the benefit
credit is 3%; for 10 or more years, the benefit credit is 4%. Eligible
compensation includes base salary, incentive payments, bonuses and overtime.
Effective October 1, 1995, the Pension Plan annually credits interest on all
benefit accruals at the rate quoted for the yield on U.S. government securities
adjusted to a constant maturity of 30 years at the beginning of each Pension
Plan year. The interest credit rate for 1996 was 6.06%. Participants may elect
to receive, at the time of termination, a lump sum distribution of their vested
balances or an annuitized payment from the Pension Plan's Trust Fund.
13
The Pension Plan complies with ERISA. In general, all employees become eligible
to participate in the Pension Plan beginning with the quarter following
completion of one year of service with Washington Mutual during which they work
a minimum of 1,000 hours. An employee's balance in the Pension Plan becomes
vested at a graduated rate after two years of service, with full vesting after
five years of active service. There are no employee contributions to the Pension
Plan.
The following is an estimate of annual benefits payable upon retirement at
normal retirement age to each of the Named Executive Officers under the Pension
Plan. These projections are based on an average interest crediting rate of 6.5%.
ESTIMATED ANNUAL
BENEFITS AT 65 YEARS OF
NAME AGE
- ---------------------------------------------------------- ------------------------
Kerry K. Killinger........................................ $ 48,400
Craig E. Tall............................................. 33,740
S. Liane Wilson........................................... 24,525
Deanna W. Oppenheimer..................................... 65,961
Lee D. Lannoye............................................ 9,998
RELATED PARTY TRANSACTIONS
Murphey Favre has contracted with a third party to make margin accounts
available to its customers. In this contract, Murphey Favre had previously
indemnified the third party against any loss arising out of such margin
accounts. This indemnification arrangement ceased as of December 2, 1996. Prior
to such date, each of Messrs. Killinger, Tall and Lannoye and Ms. Wilson had a
margin account pursuant to that arrangement.
EMPLOYMENT, TERMINATION AND CHANGE OF CONTROL AGREEMENTS
Washington Mutual has entered into an employment agreement with Mr.
Killinger for a term that continues until terminated in accordance with the
terms of the agreement. Mr. Killinger's agreement provides for a 1997 annual
salary of $800,000. Upon termination other than for cause, upon termination for
any reason upon or within three years after a change in control, or upon
resignation for good cause upon or within three years after a change in control,
the agreement provides for a payment of three times Mr. Killinger's total annual
compensation (excluding grants of stock options or restricted stock),
acceleration of all outstanding, unvested options and, subject to certain
conditions, acceleration of the lapsing of restrictions on restricted stock. In
addition, Mr. Killinger entered into a deferred bonus arrangement with
Washington Mutual pursuant to which certain deferred bonus amounts and accrued
interest thereon are payable to Mr. Killinger upon death, resignation or
retirement. As of December 31, 1996, the accrued benefits under such arrangement
totaled $117,926.
Messrs. Tall and Lannoye and Ms. Oppenheimer and Ms. Wilson have at-will
employment agreements with Washington Mutual that provide for 1997 salaries in
the amounts of $300,000, $200,000, $275,000 and $280,000, respectively. In
addition, upon termination or resignation for good cause upon or within three
years after a change in control, the agreements require payment in an amount
equal to three times the respective executive's total annual compensation
(excluding grants of stock options or restricted stock), acceleration of all
outstanding, unvested options and, subject to certain conditions, acceleration
of the lapsing of restrictions on restricted stock.
14
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
OVERVIEW
As part of its duties, the Compensation Committee of the Board of Directors
develops and administers Washington Mutual's executive and senior management
compensation programs, makes awards of restricted stock and stock options, and
establishes and administers annual and long-term incentive compensation plans
for executive and senior management. The Compensation Committee also makes
recommendations to the Board of Directors with respect to the compensation
philosophy, program and practices for the Chief Executive Officer of Washington
Mutual, including annual and long-term incentive compensation plans. The
compensation of Washington Mutual's executive officers for 1996 consisted of a
combination of base salary, restricted stock awards under Washington Mutual's
existing Amended and Restated Restricted Stock Plan, cash bonus awards, and
option grants under Washington Mutual's 1994 Stock Option Plan (the "Stock
Option Plan"). The Compensation Committee is comprised of independent directors,
none of whom is or has been an employee of Washington Mutual. The Compensation
Committee employs an independent compensation consultant to assist it in its
deliberations.
COMPENSATION POLICY
In determining the compensation for a particular executive officer or senior
manager, the Compensation Committee is guided by the following objectives:
- Attracting and retaining highly qualified officers by maintaining
competitive compensation packages for officers;
- Motivating those officers to achieve and maintain superior performance
levels;
- Maintaining compensation packages that are equitable relative to efforts,
skills and responsibility of the officer when compared to other positions
in Washington Mutual; and
- Making a significant portion of each officer's total compensation package
at risk and dependent on Company performance and creation of long-term
shareholder value.
The Compensation Committee believes that total compensation for executive
officers and senior managers should be sufficiently competitive with
compensation paid by financial institutions of a similar size, lines of
business, geographic dispersion and market place position to Washington Mutual
so that the Company can attract and retain qualified officers who will
contribute to Washington Mutual's long-term success. The Compensation
Committee's independent compensation consultant provides the Compensation
Committee with a market survey of such information for use in its deliberations.
Nine of the companies included in this market survey are also included in the
Standard & Poor's ("S&P") Financial Index used in the stock performance graph
located elsewhere in this Proxy Statement. The compensation survey group differs
from the S&P Financial Index group in that it includes a larger number of thrift
institutions and also more regional commercial banks that approximate the asset
size of the Company. Base salary, target bonus, and restricted stock awards are
combined to provide targeted pay at median market levels for each position.
Generally, total compensation is set at a slight discount to that market target.
Compensation payments in excess of $1 million to the Chief Executive Officer
or the Company's other four most highly compensated executive officers are
subject to a limitation on deductibility for Washington Mutual under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Certain
performance-based compensation is not subject to the limitation on
deductibility. The Company's Stock Option Plan and the Bonus and Incentive Plan
for Executive Offices and Senior Management (the "Bonus Plan") comply with the
provisions of Section 162(m) so that stock option awards under the Stock Option
Plan and cash bonuses granted under the Bonus Plan qualify for the
performance-based exception to the
15
$1 million limitation on deductibility of compensation payments. In addition, if
approved by the shareholders, Section 6.6 of the Company's 1997 Amended Plan
will comply with the provisions of Section 162(m) so that grants of restricted
stock made under that Section will qualify for the performance-based exception
to the $1 million limitation on deductibility. The Compensation Committee does
not expect compensation in 1996, other than stock options and cash bonuses, to
its Chief Executive Officer or any other executive officer to be in excess of $1
million.
SALARY
Individual performance of the executive officers is evaluated based on
performance reviews by the Chief Executive Officer. The evaluations
qualitatively review the significance of the position and the experience and
contribution of the officer, based on an assessment of each officer's management
skills, judgment and support of corporate values and priorities. The
Compensation Committee sets base salary levels for the executive officers, and
recommends to the Board of Directors a base salary level for the Chief Executive
Officer, based primarily on the market data provided by its outside consultant
and the performance of each executive officer for the previous year. The
Compensation Committee then determines the closest comparable position in the
market data and adjustments are made to the recommended target based on specific
job responsibilities within the Company and the individual performance review.
The base salary component is intended to be slightly below market median
salaries.
RESTRICTED STOCK
For 1996 the Compensation Committee used grants of restricted stock as a
component of compensation to provide a long-term incentive for creation of
shareholder value and to encourage the recipient to remain at Washington Mutual.
This component of total compensation was combined with the base salary and cash
bonus components and is compared to the market salary as disclosed by market
surveys. The Compensation Committee also evaluates the attainment of previously
established financial and business goals and key performance indicators that are
long-term determinants of shareholder value, including return on average assets
and operating efficiency, in determining the grant of restricted stock to
individual executive officers. As a part of their 1996 compensation, Mr.
Lannoye, Ms. Oppenheimer, Mr. Tall and Ms. Wilson received grants of 720, 1,081,
1,261, and 1,261 shares of restricted stock, respectively. The restrictions on
these shares of restricted stock lapse over a five-year period, with the
restrictions on 20% of such shares lapsing in each year.
The Compensation Committee also, from time to time, uses additional grants
of restricted stock to recognize individual performance and provide a long term
incentive for creation of shareholder value. In December 1996, the Compensation
Committee approved performance-based grants of restricted stock to approximately
40 officers, including Mr. Lannoye, Ms. Oppenheimer, Mr. Tall and Ms. Wilson.
The restrictions on these shares of restricted stock lapse over a five-year
period in years 3, 4 and 5 only if the Company achieves certain targeted levels
of cumulative return on common stockholders' equity, a measure of shareholder
value. The number of shares of performance-based restricted stock awarded in
1996 as compensation for 1997 to Mr. Lannoye, Ms. Oppenheimer, Mr. Tall and Ms.
Wilson was 9,384, 14,076, 16,422 and 16,422, respectively. These awards are
subject to shareholder approval of the 1997 Amended Plan.
CASH BONUS AWARD
Each year, in its determination of bonuses for executive officers, the
Compensation Committee first identifies a target bonus based on the market
survey provided by its outside consultant (the "Target Bonus"). The Target Bonus
is set based on market data regarding competitive levels for bonuses. Executive
officers are entitled to receive some percentage of the Target Bonus based on
the Company's achievement of established business goals that are long-term
determinants of shareholder value. For 1996, 60% of the Target Bonus depended on
Washington Mutual achieving its goal for return on average assets and 40%
16
depended on achieving its goal for operating efficiency. No bonus would be paid
if Washington Mutual did not achieve an established minimum return on average
assets. Executive officers could receive up to 150% of their Target Bonus if
Washington Mutual exceeded its business targets, which is indicative of the
creation of long-term shareholder value. For 1996, executive officers received
113% of their Target Bonuses. For 1997, the Compensation Committee has adopted
business goals for the Bonus Plan that base 60% of the Target Bonus on
cumulative return on common stockholders' equity and 40% on operating
efficiency.
STOCK OPTIONS
Awards of stock options under Washington Mutual's Stock Option Plan are
designed to provide long-term incentives for executive officers that are
directly linked to the enhancement of long-term shareholder value. The
Compensation Committee selects the executive officers who will receive stock
options and determines the number of shares subject to each option. The size of
the individual option grants is generally intended to reflect an officer's
position within Washington Mutual and his or her performance and contributions
to the Company. In determining the size of the option grant, the Compensation
Committee also analyzes the value of the options using an option valuation
methodology, the number of option grants outstanding, and the number of options
previously exercised. Based on these factors, as compensation for 1996 Mr.
Lannoye, Ms. Oppenheimer, Mr. Tall, and Ms. Wilson received options to purchase
15,000, 22,000, 28,000 and 28,000 shares, respectively. In December 1996 as
compensation for 1997, Mr. Lannoye, Ms. Oppenheimer, Mr. Tall and Ms. Wilson
received options to purchase 20,000, 30,000, 40,000 and 40,000 shares,
respectively.
CEO COMPENSATION
Compensation for Washington Mutual's Chief Executive Officer, Mr. Killinger,
was determined based on the same general policies and criteria as the
compensation for the other executive officers. Mr. Killinger's base salary,
target bonus and restricted stock grant for 1996 were set after review of the
outside consultant's market survey. Based in part on the financial and operating
results of Washington Mutual in fiscal 1995 and the Company's 1995 financial and
business plans, Mr. Killinger's base salary for 1996 was increased by 9% and he
received 4,324 shares of restricted stock for which restrictions lapse over five
years. In December 1996 as compensation for future services, Mr. Killinger
received 43,401 shares of restricted stock for which restrictions lapse only
upon the Company's achievement of targeted levels of cumulative return on common
stockholders' equity. This award is subject to shareholder approval of the 1997
Amended Plan. Based on the factors set out in "Cash Bonus Award," Mr. Killinger
received 113% of his Target Bonus for 1996.
In evaluating Mr. Killinger's performance, the Compensation Committee uses
both quantitative and qualitative criteria such as Washington Mutual's financial
performance, which is indicative of the creation of shareholder value; capital
strength; asset quality; operating efficiency; expansion during the previous
year; the resulting size and quality of the organization; Mr. Killinger's
leadership of the Company; and his industry and community leadership. The
Compensation Committee's assessment of Mr. Killinger's performance was reviewed
with the Board of Directors. In determining the size of Mr. Killinger's option
grant, the Compensation Committee reviews the market survey provided by its
outside consultant. Based on these considerations, as compensation for 1996, Mr.
Killinger was awarded an option to purchase 100,000 shares. The Compensation
Committee concluded that Mr. Killinger's performance in 1996 fully supported the
total compensation awarded. In December 1996 as compensation for 1997, Mr.
Killinger was awarded an option to purchase 135,000 shares.
John W. Ellis, Chairman
Douglas P. Beighle
Michael K. Murphy
James H. Stever
17
PERFORMANCE GRAPH
The following two graphs compare the cumulative total shareholder return
(stock price appreciation plus reinvested dividends) on Washington Mutual Common
Stock against the cumulative total return of the S&P 500 Composite Index and the
S&P Financial Index since 1991 and since Washington Mutual first became a
publicly traded company on March 11, 1983, respectively. The graphs assume that
$100 was invested on, respectively, December 31, 1991 and March 11, 1983 in each
of the Company Common Stock, the S&P 500 Composite Index and the S&P Financial
Index, and that all dividends were reinvested. Management of Washington Mutual
cautions that the stock price performance shown in the graphs below should not
be considered indicative of potential future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMMON STOCK OF WASHINGTON
MUTUAL, THE S&P 500 COMPOSITE
INDEX, AND THE S&P FINANCIAL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
DEC 91 DEC 92 DEC 93 DEC 94 DEC 95 DEC 96
WASHINGTON MUTUAL $100 $153 $168 $121 $215 $332
S&P 500 INDEX 100 108 118 120 165 203
S&P FINANCIAL INDEX 100 123 137 132 204 275
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
WASHINGTON MUTUAL S&P 500 INDEX S&P FINANCIAL INDEX
Mar 83 $100 $100 $100
Dec 83 106 111 99
Dec 84 93 118 108
Dec 85 137 156 155
Dec 86 281 185 167
Dec 87 264 194 139
Dec 88 269 226 164
Dec 89 365 298 218
Dec 90 245 289 171
Dec 91 699 376 258
Dec 92 1,066 405 318
Dec 93 1,172 445 353
Dec 94 849 451 340
Dec 95 1,505 621 524
Dec 96 2,319 763 709
18
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, and
the regulations thereunder, Washington Mutual's directors, executive officers
and beneficial owners of more than 10% of any registered class of Washington
Mutual equity securities are required to file reports of their ownership, and
any changes in that ownership, with the SEC. Based solely on its review of
copies of these reports and on written representations from certain reporting
persons, Washington Mutual believes that during fiscal year 1996, such SEC
filing requirements were complied with, except that the report on Form 5 for
1995 was filed one day late by each of Kerry K. Killinger, Deanna W.
Oppenheimer, Craig E. Tall and Douglas G. Wisdorf.
PROPOSAL 2. APPROVAL OF THE 1997 AMENDED AND RESTATED RESTRICTED STOCK PLAN
Subject to approval by the shareholders, the Board of Directors has adopted
the 1997 Amended Plan, a copy of which is attached as an appendix to this proxy
statement. Pursuant to the 1997 Amended Plan, employees, consultants, advisors
of the Company and its consolidated subsidiaries and members of the Company's
Board of Directors ("Participants") may be awarded shares of restricted stock at
the discretion of a committee comprised of two or more non-employee members of
the Board of Directors (the "Committee"). The 1997 Amended Plan amends and
restates the existing Amended and Restated Restricted Stock Plan (the "1994
Plan").
KEY DIFFERENCES FROM THE EXISTING 1994 PLAN
The 1997 Amended Plan is intended to provide the Committee with greater
flexibility and discretion in making determinations regarding qualification for
an award of restricted stock and the terms and conditions of such an award. The
1994 Plan limited participation to employees of the Company. Under the terms of
the 1997 Amended Plan, the Committee may grant awards to the Company's
directors, advisors and consultants as well.
The 1994 Plan provides that the restrictions for each award of restricted
stock lapse over a period of five years according to one of two schedules set
out in the 1994 Plan. Under the 1997 Amended Plan, the Committee will have
discretion to determine in each case the basis upon which restrictions on a
particular award will lapse, which basis may or may not be tied solely to length
of continued employment. Furthermore, unlike the 1994 Plan, the Committee will
be granted discretion to accelerate or otherwise modify the lapsing of
restrictions on an outstanding award of restricted stock, without regard to the
five-year schedules set out in the 1994 Plan.
In addition, under Section 6.6 of the 1997 Amended Plan, the Committee will
have the discretion to grant awards of restricted stock in which the
restrictions will lapse based on the Company's achievement of certain
performance objectives. If the shareholders approve the 1997 Amended Plan
(including the business criteria on which the performance goals under Section
6.6 of the 1997 Amended Plan will be based), restricted stock awarded under
Section 6.6 of the 1997 Amended Plan generally will qualify as performance based
compensation that may be deducted by Washington Mutual without limitation in
amount under federal tax law.
The 1997 Amended Plan also gives the Committee authority generally to amend
or terminate the 1997 Amended Plan, provided that the shareholders must approve
any amendment that changes the aggregate number of shares that may be issued
pursuant to restricted stock grants or the maximum number of shares of
restricted stock that may be granted to any Participant in any calendar year.
The 1994 Plan has been used primarily to give awards to senior management of
the Company. As of February 24, 1997, 332,862 shares remained available for
grant. Since the 1994 Plan was adopted, the Company has grown substantially,
more than tripling in size, and the number of persons who are considered senior
managers has increased as well. Because the Company believes grants of
restricted stock
19
are a valuable component of compensation, providing a long-term incentive for
the creation of shareholder value and encouraging employee recipients to remain
at Washington Mutual, the Company intends to expand the number of Participants
who have the opportunity to receive awards of restricted stock under the 1997
Amended Plan. Therefore, the Board of Directors proposes that the maximum
aggregate number of shares that may be issued pursuant to awards under the 1997
Amended Plan (including all predecessor Plans) will be increased by 700,000
shares (to 1,383,415), which would increase the number of shares available to be
granted to approximately 1,000,000 shares.
The 1997 Amended Plan, if approved, will provide the Committee greater
flexibility to establish different time and performance conditions required to
be satisfied for restrictions on restricted stock awards under the 1997 Amended
Plan to lapse. The Board of Directors believes that this flexibility will help
the Company better match the awards of restricted stock with the contributions
made by Participants to the success of the Company and will enable the Company
to better motivate Participants to work for the Company's future success. The
Board of Directors believes that the previously granted restricted stock, which
is a part of the Company's compensation plan, has helped the Company to motivate
and focus the attention of key employees on the long-term performance and
success of the Company and that it is in the best interests of the Company and
its shareholders to approve the 1997 Amended Plan as proposed.
The following description of the Company's 1997 Amended Plan is qualified in
its entirety by and subject to the terms and conditions of the 1997 Amended Plan
as set forth in Appendix A following this proxy statement.
PURPOSE
The purpose of the 1997 Amended Plan is to advance the interests of the
Company, to provide a performance incentive and to align the interests of
Participants with those of the Company and its shareholders through increased
stock ownership by Participants.
ADMINISTRATION
The 1997 Amended Plan will be administered, construed and interpreted by the
Committee. Members of the Committee will be members of the Board of Directors
and cannot be employees of the Company or its subsidiaries. Consistent with the
terms of the 1997 Amended Plan, the Committee will select the persons to whom
awards of restricted stock will be made, the number of shares of restricted
stock awarded and other terms and conditions of the award of restricted stock.
ELIGIBILITY
All members of the Company's Board of Directors and all employees,
consultants and advisors of the Company and its affiliates are eligible to
participate in the 1997 Amended Plan. The Committee has discretion to determine
which eligible Participants are to receive awards of restricted stock. Any award
granted under the 1997 Amended Plan will be evidenced by an agreement subject to
all applicable provisions of the 1997 Amended Plan. As in the 1994 Plan, the
maximum number of shares of common stock that may be awarded under the 1997
Amended Plan to any Participant in any calendar year is 150,000.
SHARES AVAILABLE FOR AWARD
The maximum aggregate number of shares of stock that may be issued pursuant
to the 1997 Amended Plan will be increased by 700,000 shares (to 1,383,415) so
that approximately 1,000,000 shares will be available for future issuance as of
February 24, 1997, subject to increases and adjustments for stock dividends,
stock splits and other events as provided in the 1997 Amended Plan.
20
IMPORTANT TERMS AND CONDITIONS OF THE 1997 AMENDED PLAN
Awards made under the 1997 Amended Plan are subject to the following terms
and conditions:
PARTICIPATION. In general, members of the Company's Board of Directors and
all employees, consultants and advisors of Washington Mutual and its affiliates
are eligible to participate. The Committee has discretion to determine, from
time to time, which eligible employees will be granted awards under the 1997
Amended Plan.
GENERAL RESTRICTIONS. Participants are not permitted to: (i) sell,
transfer, pledge (as collateral for a loan or as security for the performance of
an obligation or for any other purpose) or assign shares of restricted stock
awarded (or purchased through dividend or distribution reinvestment) under the
1997 Amended Plan, (ii) receive cash payment of any dividends or distributions
made in respect of restricted stock, or (iii) receive a stock certificate
representing restricted stock, until, in each case, the restrictions stated in
the Participant's agreement lapse. Subject only to these restrictions, a
Participant otherwise enjoys all of the rights of a shareholder of Common Stock,
including the right to vote shares of restricted stock.
PERFORMANCE-BASED RESTRICTIONS. The lapsing of restrictions on restricted
stock awarded pursuant to Section 6.6 of the 1997 Amended Plan will be based on
the extent of Washington Mutual's achievement of financial performance targets
established by the Committee. The performance targets will be based on one or
more of the following business criteria: return on average assets, return on
average common stockholders' equity, efficiency ratio (ratio of other expense to
the sum of other income and net interest income), and return on Washington
Mutual's investment in any affiliate of Washington Mutual. The selection of
which one or more of the four business criteria will be used, and if more than
one criteria is selected, the weight assigned to each, will be determined by the
Committee. The first three business criteria have the meanings used in
Washington Mutual's financial statements and annual reports. The business
criteria and performance targets are subject to adjustments the Committee may
establish to exclude extraordinary items.
MAXIMUM AMOUNT OF INDIVIDUAL AWARDS. As in the 1994 Plan, the maximum
number of shares of restricted stock that may be awarded to any Participant
under the 1997 Amended Plan in any calendar year is 150,000.
SHAREHOLDER APPROVAL. With respect to awards of restricted stock made under
Section 6.6 of the 1997 Amended Plan (including awards granted under the 1994
Plan that the Committee determines shall be treated as if granted under Section
6.6 of the 1997 Amended Plan), no stock will be issued until after the above
terms are approved by Washington Mutual's shareholders.
RETIREMENT. In the event of a Participant's retirement from the Company and
its affiliates or a Participant's death or permanent disability after the
Participant has attained age 60, all remaining restrictions on such
Participant's restricted stock that relate solely to the Participant's length of
service with the Company or an affiliate automatically are waived. Other
restrictions (such as performance-based restrictions in awards issued pursuant
to Section 6.6 of the 1997 Amended Plan) generally are not affected.
LAPSE OF RESTRICTIONS. The Committee has full discretion to establish the
schedule and terms under which restrictions associated with each grant of
restricted stock will lapse, including the authority to choose one of two
five-year schedules set out in the 1997 Amended Plan, to establish a shorter or
longer period for the lapsing of restrictions on any award, and to impose
performance-based goals that must be achieved for restrictions to lapse. The
restrictions selected by the Committee are set out in agreements governing the
terms of each award. The Committee also has full discretion to accelerate or
otherwise modify the basis upon which the restrictions on any award granted
under the 1997 Amended Plan or any predecessor plan will lapse, provided that
the consent of the Participant must be obtained for any modification that
reduces the benefits to the Participant.
21
BIFURCATION. The Committee also has full discretion to bifurcate the 1997
Amended Plan so as to restrict, limit or condition the use of certain provisions
of the Restricted Stock Plan by Participants who are "covered employees" under
Section 162(m) of the Code, without so restricting, limiting or conditioning the
1997 Amended Plan with respect to other Participants.
AMENDMENT AND TERMINATION
The Committee may amend or terminate the 1997 Amended Plan at any time.
However, any amendment that would have a material adverse effect on the rights
of a Participant under an outstanding award is not valid with respect to such
award without the Participant's consent. The Committee may not increase the
aggregate number of shares that may be awarded under the 1997 Amended Plan or
the maximum number of shares with respect to which any Participant may be
granted awards in any calendar year without approval of the holders of a
majority of the shares of Common Stock of the Company present at a meeting of
shareholders at which such approval is sought.
FEDERAL INCOME TAX CONSEQUENCES
Common Stock awarded under the 1997 Amended Plan is generally taxable to the
recipient at the time that all of the restrictions on any portion of such awards
lapse, based upon the fair market value of such stock at the time of the lapse.
Alternatively, a recipient may make an election pursuant to Section 83(b) of the
Code within 30 days of the date of the award to elect to include in gross income
for the current taxable year the fair market value of such stock as of the date
of the award. Such election must be filed with the Internal Revenue Service
within 30 days of the date of the restricted stock grant. The Company will be
allowed a tax deduction for federal income tax purposes as a compensation
expense equal to the amount of ordinary income recognized by the recipient of
the restricted stock at the time the recipient recognizes taxable ordinary
income.
SHAREHOLDER APPROVAL
The affirmative vote of holders of a majority of the shares of Common Stock
represented at the Annual Meeting is required to approve the 1997 Amended Plan.
Approval of the 1997 Amended Plan by the shareholders will (i) enable awards of
restricted stock made pursuant to Section 6.6 of the 1997 Amended Plan to
qualify as performance-based compensation that may be deducted by the Company
without limitation in amount under federal tax law and (ii) enable the 1997
Amended Plan to meet the requirements for listing of these shares of stock on
the National Market tier of The Nasdaq Stock Market. If the 1997 Amended Plan is
not approved by the shareholders, the 1994 Plan will continue to be used.
OTHER INFORMATION
In January 1996 as compensation for 1996, the Committee approved the award
of restricted stock to certain executive officers of the Company. Restrictions
on such shares lapse over five years provided the executive officer remains an
employee of the Company ("Time-Based Awards"). In December 1996 as part of 1997
compensation, the Committee approved the award of restricted stock on which the
restrictions lapse in years 3, 4 and 5 only if the Company's achieves targeted
levels of cumulative return on common stockholders' equity ("Performance-Based
Awards"). The Performance-Based Awards granted to the nine executive officers
are subject to shareholder approval of the 1997 Amended Plan. See "Executive
Compensation--Long-Term Incentive Plan Awards Table." The following table sets
forth the Time-Based and Performance-Based Awards that were made in 1996 to (i)
the Company's Chief Executive Officer, (ii) the other executive officers named
in the executive compensation table set forth herein, (iii) all current
22
executive officers as a group and (iv) all non-executive officers as a group.
Directors who are not executive officers did not receive any awards of
restricted stock:
TIME-BASED PERFORMANCE-BASED
------------------------------- -------------------------------
NAMED EXECUTIVE OFFICERS DOLLAR VALUE NUMBER OF SHARES DOLLAR VALUE NUMBER OF SHARES
- ------------------------------------------------ ------------ ----------------- ------------ -----------------
Kerry K. Killinger
Chairman, President and Chief Executive
Officer....................................... $ 120,000 4,324 $ 1,850,000 43,401
Craig E. Tall
Executive Vice President...................... $ 35,000 1,261 $ 700,000 16,422
S. Liane Wilson
Executive Vice President...................... $ 35,000 1,261 $ 700,000 16,422
Deanna W. Oppenheimer
Executive Vice President...................... $ 30,000 1,081 $ 600,000 14,076
Lee D. Lannoye
Executive Vice President...................... $ 20,000 720 $ 400,000 9,384
All Executive Officers as a group (9 persons)... $ 287,500 10,358 $ 5,700,000 133,722
All Non-Executive Officer Employees as a group
(127 persons)................................. $ 1,615,525 55,008 $ 4,475,000 104,957
Unless instructions to the contrary are specified in a properly signed and
returned proxy, the proxies will be voted for the approval of the 1997 Amended
Plan.
THE BOARD RECOMMENDS A VOTE FOR THE ADOPTION OF THE COMPANY'S 1997 AMENDED
AND RESTATED RESTRICTED STOCK PLAN.
PROPOSAL 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors requests that the shareholders ratify its selection
of Deloitte & Touche LLP as independent auditors for the Company for the current
fiscal year. In the event that ratification of this selection of independent
auditors is not obtained, the Board of Directors will review its future
selection of auditors.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting of Shareholders, with the opportunity to make a statement if so desired,
and will be available to respond to appropriate questions submitted to the
Secretary of Washington Mutual in advance of the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT AUDITORS.
ANNUAL REPORT
A copy of Washington Mutual's 1996 Annual Report to Shareholders, including
the Annual Report to the SEC on Form 10-K and the financial statements, is
enclosed. ADDITIONAL COPIES OF WASHINGTON MUTUAL'S ANNUAL REPORT MAY BE OBTAINED
WITHOUT CHARGE BY WRITING TO JOANN DEGRANDE, INVESTOR RELATIONS, WASHINGTON
MUTUAL, INC., 1201 THIRD AVENUE, SUITE 1213, SEATTLE, WASHINGTON 98101.
23
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1998 Annual Meeting of
Shareholders must be received by the Company no later than January 16, 1998.
Proposals may be mailed to the Company, to the attention of the Secretary, 1201
Third Avenue, Suite 1503, Seattle, Washington 98101.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters that
will be presented for consideration at the Annual Meeting other than the
proposals set forth in this Proxy Statement. If any other matters properly come
before the Annual Meeting, it is intended that the shares represented by proxies
will be voted in accordance with the judgment of the persons voting such
proxies.
By Order of the Board of Directors,
[LOGO]
William L. Lynch
SECRETARY
March 12, 1997
24
WASHINGTON MUTUAL
RESTRICTED STOCK PLAN
As Amended and Restated as of February 18, 1997
WASHINGTON MUTUAL RESTRICTED STOCK PLAN
TABLE OF CONTENTS
ARTICLE 1. PURPOSE OF PLAN
ARTICLE 2. DEFINITIONS
2.1 Affiliate....................................................................... 1
2.2 Agreement....................................................................... 1
2.3 Award........................................................................... 1
2.4 Board........................................................................... 1
2.5 Code............................................................................ 1
2.6 Committee....................................................................... 1
2.7 Company......................................................................... 2
2.8 Exchange Act.................................................................... 2
2.9 Grant Date...................................................................... 2
2.10 Participant..................................................................... 2
2.11 Plan............................................................................ 2
2.12 Restricted Stock................................................................ 2
2.13 Stock........................................................................... 2
2.14 Unrestricted Stock.............................................................. 2
ARTICLE 3. ADMINISTRATION
3.1 Administration of Plan.......................................................... 2
3.2 Authority to Grant Awards....................................................... 2
3.3 Participants' Accounts.......................................................... 2
3.4 Transfer of Unrestricted Stock.................................................. 2
3.5 Discretionary Authority of Committee............................................ 3
3.6 Persons Subject to Section 162(m)............................................... 4
3.7 Shareholder Rights.............................................................. 4
ARTICLE 4. ELIGIBILITY AND LIMITATIONS ON GRANTS
4.1 Participation................................................................... 4
4.2 Limitations on Grants........................................................... 4
ARTICLE 5. STOCK SUBJECT TO PLAN
5.1 Maximum Number of Shares........................................................ 4
ARTICLE 6. RESTRICTIONS AND FORFEITURES
6.1 General Restrictions............................................................ 4
6.2 Termination of Employment....................................................... 5
6.3 Retirement...................................................................... 5
6.4 Lapse of Restrictions........................................................... 5
6.5 Employee Status................................................................. 5
6.6 Performance-Based Grants........................................................ 5
i
ARTICLE 7. ADJUSTMENT UPON CORPORATE CHANGES
7.1 Adjustments to Shares........................................................... 7
7.2 Substitution of Awards on Merger or Acquisition................................. 7
7.3 Effect of Certain Transactions.................................................. 7
7.4 No Preemptive Rights............................................................ 7
ARTICLE 8. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
8.1 General......................................................................... 8
8.2 Representations by Participants................................................. 8
ARTICLE 9. TAXES
9.1 Immediate Taxation.............................................................. 8
9.2 Deferred Taxation............................................................... 8
ARTICLE 10. GENERAL PROVISIONS
10.1 Effect on Employment............................................................ 9
10.2 Unfunded Plan................................................................... 9
10.3 Rules of Construction........................................................... 9
10.4 Governing Law................................................................... 9
10.5 Compliance With Section 16 of the Exchange Act.................................. 9
10.6 Amendment....................................................................... 9
10.7 Effective Date of Plan.......................................................... 9
ii
WASHINGTON MUTUAL RESTRICTED STOCK PLAN
AS AMENDED AND RESTATED FEBRUARY 18, 1997
ARTICLE 1. PURPOSE OF PLAN
The purpose of the Plan is to advance the interests of the Company, to
provide a performance incentive and to align the interests of the Participants
with the interests of the Company, its Affiliates and its shareholders through
increased stock ownership by the Participants. It is intended that Participants
may acquire or increase their proprietary interests in the Company and that
Participant employees will be encouraged to remain in the employ of the Company
or of its Affiliates.
The Plan was established January 1, 1986 as the WM Financial, Inc.
Restricted Stock Plan. Washington Mutual Savings Bank, the prior Plan sponsor,
amended the Plan by a First Amendment, effective as of July 1, 1987, a Second
Amendment, effective as of March 31, 1988, a Third Amendment, effective as of
June 30, 1991, a Fourth Amendment, effective as of June 18, 1991, and a Fifth
Amendment, effective as of October 20, 1992.
By action of the respective boards of directors of Washington Mutual Savings
Bank and the Company, the Company became the sponsor of the Plan, effective
November 29, 1994, after which the Company adopted an amendment and restatement
of the Plan, effective November 29, 1994, that incorporated all material
provisions of the Plan prior to such date, but amended the Plan to provide for
sponsorship by the Company and to modify certain administrative provisions,
including the treatment of forfeited shares.
This Plan and its prior amendments were previously approved by the
shareholders of Washington Mutual Savings Bank, the prior sponsor of the Plan.
The Company is now adopting this amendment and restatement of the Plan,
effective February 18, 1997, to, among other things, grant to the Committee
greater discretion to modify the conditions under which restrictions will lapse
for both existing and future grants of restricted stock, give the Committee
discretion to establish the terms of each grant without regard to the specific
schedules set out in the Plan, provide for a category of performance-based
grants that will be qualified under Section 162(m) of the Code, and increase the
number of shares authorized to be awarded under the Plan.
The adoption of this Amended and Restated Plan was approved by action of the
Board on February 18, 1997, subject to its approval by the shareholders of the
Company.
ARTICLE 2. DEFINITIONS
2.1 AFFILIATE. A "parent corporation," as defined in section 424(e) of the
Code, or "subsidiary corporation," as defined in section 424(f) of the Code, of
the Company.
2.2 AGREEMENT. A written agreement (including any amendment or supplement
thereto) between the Company or an Affiliate and a Participant specifying the
terms and conditions of an Award granted to such Participant.
2.3 AWARD. An award under the Plan that is expressed as a stated number of
whole shares of Restricted Stock. An Award shall be subject to the terms of an
Agreement.
2.4 BOARD. The board of directors of the Company.
2.5 CODE. The Internal Revenue Code of 1986, as amended.
2.6 COMMITTEE. A committee composed of two or more members of the Board
who are not officers or employees of the Company or an Affiliate, who are
otherwise qualified as Non-Employee Directors as defined under Rule 16b-3(i) of
the Exchange Act, and who qualify as outside directors as defined in Section
162(m) of the Code.
1
2.7 COMPANY. Washington Mutual, Inc., successor to Washington Mutual
Savings Bank as Plan sponsor, and its successors.
2.8 EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.
2.9 GRANT DATE. The date that an Award of Restricted Stock is granted to a
Participant hereunder.
2.10 PARTICIPANT. A person who is awarded Restricted Stock hereunder.
Members of the Board, and employees, consultants and advisors of the Company or
of an Affiliate, are the only persons who are eligible to be Participants.
2.11 PLAN. The Washington Mutual Restricted Stock Plan, as embodied herein
and as amended from time to time, and including all predecessor versions of this
Plan.
2.12 RESTRICTED STOCK. Stock that is awarded subject to restrictions
hereunder and has not become Unrestricted Stock in accordance with Article 6.
2.13 STOCK. The common stock of the Company.
2.14 UNRESTRICTED STOCK. Shares of Stock granted under this Plan that are
no longer subject to restrictions that constitute a substantial risk of
forfeiture, in accordance with Article 6.
ARTICLE 3. ADMINISTRATION
3.1 ADMINISTRATION OF PLAN. The Plan shall be administered by the
Committee. The express grant in the Plan of any specific power to the Committee
shall not be construed as limiting any power or authority of the Committee. Any
decision made or action taken by the Committee to administer the Plan shall be
final and conclusive. No member of the Committee shall be liable for any act
done in good faith with respect to this Plan or any Agreement or Award. The
Company shall bear all expenses of Plan administration.
3.2 AUTHORITY TO GRANT AWARDS. The Committee shall have authority to grant
Awards upon such terms as the Committee deems appropriate and that are not
inconsistent with the provisions of Articles 4 and 5 of this Plan. Such terms
may include restrictions on the transfer of all or any portion of the Stock
granted under an Award.
3.3 PARTICIPANTS' ACCOUNTS. The Committee shall establish and maintain
adequate records to disclose the Participants and their respective Awards, the
restrictions thereon, the stock certificates related thereto, any dividends or
distributions payable or paid thereon, any votes taken with respect thereto, and
such other matters as may be relevant to the proper administration of this Plan.
(a) DIVIDENDS AND DISTRIBUTIONS. All cash dividends and other cash
distributions paid in respect of Restricted Stock shall be credited to the
account of the Participant and invested in Stock pursuant to the Company's
general dividend reinvestment program for shareholders of the Company. All
such amounts and their proceeds shall be subject to the same restrictions on
the same basis as the underlying Restricted Stock and shall be treated as
Restricted Stock for all purposes under this Plan.
(b) FORFEITURES. Upon the occurrence of a forfeiture hereunder, all
shares of Restricted Stock subject to the Award (including any Restricted
Stock purchased with dividends paid on the underlying Restricted Stock)
shall be retained by the Company.
3.4 TRANSFER OF UNRESTRICTED STOCK. The Company shall generally transfer
Unrestricted Stock to the Participant at an administratively feasible time after
the lapse of restrictions hereunder on an Award of Restricted Stock. Any
fractional shares of Unrestricted Stock shall be paid to the Participant in
cash.
(a) TERMINATION OF EMPLOYMENT. Upon the termination of employment for
any reason of a Participant who is an employee of the Company or an
Affiliate (including upon the Participant's
2
death), or upon such a Participant's retirement or permanent and total
disability, the Company shall deliver to the Participant (or his personal
representative) all Unrestricted Stock held for his account.
(b) DEATH OF PARTICIPANT. Each Participant shall have the right, at any
time, to designate any person or persons as his beneficiary or beneficiaries
(both principal as well as contingent) to whom all amounts that are
otherwise due hereunder after termination of employment shall be paid upon
his death. Each beneficiary designation shall become effective only when
filed in writing with the Committee during the Participant's lifetime on a
form acceptable to the Committee.
(1) If the Participant is married as of the date of filing a
beneficiary designation and names a principal beneficiary other than his
spouse, such designation shall not be effective unless the spouse
consents to the beneficiary designation in writing, witnessed by a notary
public.
(2) The filing of a new beneficiary designation form as provided
herein shall cancel all beneficiary designations previously filed. Any
finalized divorce or marriage (other than a common law marriage) of a
Participant subsequent to the date of filing a beneficiary designation
form, which divorce or marriage is communicated to the Committee in
writing, shall revoke any prior designation. As used herein "divorce"
includes a dissolution of a marriage or an annulment of a marriage.
(3) If all designated beneficiaries predecease a Participant or die
prior to complete distribution, the Committee shall make distributions to
the Participant's personal representative or executor. If a Participant
fails to designate a beneficiary as provided above, the Committee shall
make distributions to the Participant's personal representative or
executor.
3.5 DISCRETIONARY AUTHORITY OF COMMITTEE. The Committee shall have full
discretionary power, subject to, and within the limits of, Articles 4 and 5 of
the Plan:
(a) To determine from time to time who of the eligible persons shall be
granted Awards, and the time or times when, and the number of shares for
which, an Award or Awards shall be granted to such persons.
(b) To prescribe the other terms and provisions (which need not be
identical) of each Award granted under the Plan to eligible persons.
(c) To modify or amend any term or provision of any Award granted under
the Plan (including without limitation in the ways described in Sections 3.5
(f), (g) and (h) below), provided that the consent of the holder thereof
must be obtained for any modification or amendment that reduces the benefits
to the holder of the Award.
(d) To construe and interpret the Plan and Awards granted hereunder, and
to establish, amend, and revoke rules and regulations for administration.
The Committee, in the exercise of this power, may correct any defect or
supply any omission, or reconcile any inconsistency in the Plan, or in any
Award or Agreement, in the manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective. In exercising this power the
Committee may retain counsel at the expense of the Company. All decisions
and determinations by the Committee in exercising this power shall be final
and binding upon the Company and the Participants.
(e) To determine the duration and purposes of leaves of absence which
may be granted to a Participant without constituting a termination of his or
her employment for purposes of the Plan or an Agreement.
(f) To accelerate the time at which the restrictions on Restricted Stock
granted under an Award will lapse, or otherwise modify the restrictions on
Restricted Stock in a manner favorable to the Participant.
3
(g) To determine, for any group or class of Participants, that
restrictions on Restricted Stock shall lapse upon specified events occurring
upon or after a change in control of the Company or an Affiliate, subject to
such terms and limitations as the Committee may determine.
(h) To waive or modify the application of Section 6.2 (forfeiture of
Restricted Stock upon termination of employment) as to any Award, in whole
or in part.
(i) To authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Award previously granted
hereunder.
(j) To interpret the Plan and make any determinations that are necessary
or desirable in the administration of the Plan.
(k) To exercise such powers and to make all other determinations deemed
necessary or expedient to promote the best interests of the Company with
respect to the Plan.
3.6 PERSONS SUBJECT TO SECTION 162(M). Notwithstanding anything in the
Plan to the contrary, the Committee, in its absolute discretion, may bifurcate
the Plan so as to restrict, limit or condition the use of certain provisions of
the Plan by Participants who are officers subject to Section 162(m) of the Code,
without so restricting, limiting or conditioning the Plan with respect to other
Participants.
3.7 SHAREHOLDER RIGHTS. Except as provided in Section 6.1, each
Participant shall have, with respect to Restricted Stock, all the rights of a
shareholder of Stock including the right to vote the shares.
ARTICLE 4. ELIGIBILITY AND LIMITATIONS ON GRANTS
4.1 PARTICIPATION. The Committee may from time to time designate persons
to whom Awards are to be granted from among those who are eligible to become
Participants. Such designation shall specify the number of shares of Restricted
Stock subject to each Award. All Awards granted under this Plan shall be
evidenced by Agreements which shall be subject to applicable provisions of this
Plan or such other provisions as the Committee may adopt that are not
inconsistent with the Plan.
4.2 LIMITATIONS ON GRANTS. Awards may be granted only to persons who are
eligible to be Participants. The maximum number of shares of Stock with respect
to which Awards may be granted to any Participant in any calendar year under the
Plan is 150,000.
ARTICLE 5. STOCK SUBJECT TO PLAN
5.1 MAXIMUM NUMBER OF SHARES. The maximum aggregate number of shares of
Stock that may be issued pursuant to Awards under this Plan (including all
predecessors of this Plan) is one million three hundred eighty-three thousand
four hundred fifteen (1,383,415) shares, subject to adjustments as provided in
Article 7 made after February 18, 1997.
ARTICLE 6. RESTRICTIONS AND FORFEITURES
6.1 GENERAL RESTRICTIONS. A Participant shall not be permitted (i) to
sell, transfer, pledge (as collateral for a loan or as security for the
performance of an obligation or for any other purpose) or assign shares of
Restricted Stock awarded (or purchased through dividend or distribution
reinvestment) under the Plan, (ii) to receive payment of any dividends or
distributions made in respect of Restricted Stock, or (iii) to receive a stock
certificate representing Restricted Stock, until, in each case, the restrictions
stated in the Participant's Agreement lapse.
4
6.2 TERMINATION OF EMPLOYMENT. Upon the termination of employment for any
reason of a Participant who is an employee of the Company or an Affiliate before
the Participant has attained age 60 (including termination because of the death
or permanent disability of the Participant), all Restricted Stock shall be
forfeited without compensation to the Participant, unless otherwise determined
by the Committee.
6.3 RETIREMENT. In the event of a Participant's retirement from the
Company and its Affiliates or a Participant's death or permanent disability
after the Participant has attained age 60, all remaining restrictions on such
Participant's Restricted Stock that relate solely to the Participant's length of
service with the Company or an Affiliate shall automatically be waived.
Restrictions not related solely to the Participant's length of service with the
Company or an Affiliate (such as restrictions tied to the performance of the
Company) shall remain in effect unless otherwise determined by the Committee.
6.4 LAPSE OF RESTRICTIONS--GENERAL. Each Award of Restricted Stock granted
to a Participant shall become Unrestricted Stock according to the terms
established by the Committee and specified in the Participant's Agreement. The
Committee is authorized but not required to subject an Award to the restrictions
described in Schedule A or Schedule B below by setting forth this determination
in the Participant's Agreement.
SCHEDULE A
YEARS OF CONTINUED EMPLOYMENT PERCENTAGE UNRESTRICTED
- ----------------------------------------------------------------------- -----------------------
Less than 1............................................................ 0%
1 but less than 2...................................................... 20%
2 but less than 3...................................................... 40%
3 but less than 4...................................................... 60%
4 but less than 5...................................................... 80%
5 or more.............................................................. 100%
SCHEDULE B
Less than 3............................................................ 0%
3 but less than 4...................................................... 3.33%
4 but less than 5...................................................... 66.67%
5 or more.............................................................. 100%
For purposes of Schedules A and B, unless otherwise determined by the
Committee and stated in the relevant Agreement, a Year of Continued Employment
shall be credited to a Participant with respect to each Award on each March 31,
beginning in the calendar year that follows the Grant Date of an Award, provided
that the Participant has been continuously employed by the Company or one of its
Affiliates since the Grant Date of the Award.
The lapse of restrictions on Restricted Stock (including, if applicable, the
number of Years of Continued Employment) shall be calculated separately with
respect to each Award granted to a Participant.
6.5 EMPLOYEE STATUS. As provided in Section 3.5(e), the Committee shall
determine the extent to which a leave of absence for military or government
service, illness, temporary disability, or other reasons shall be treated as
termination or interruption of employment for purposes of determining questions
of forfeiture and Years of Employment for purposes of the lapse of restrictions
on Restricted Stock.
6.6 PERFORMANCE-BASED GRANTS. The Committee may provide in any Award for
the restrictions on Restricted Stock to lapse upon the Company's attainment of
performance-based goals established by the Committee. Any such Award may, but
need not be, granted under and pursuant to the terms of this Section 6.6. In
addition, the Committee may determine that any performance-based Award granted
by the
5
Committee before the adoption of this Amended and Restated Plan shall be treated
as if granted under this Section 6.6, provided that the Award is modified so as
to comply with the terms of this Section 6.6.
(a) INTENT TO QUALIFY UNDER SECTION 162(M). This Section 6.6 is intended
to qualify the Awards granted under it as performance-based compensation
under Section 162(m) of the Code. All Awards granted pursuant to this
Section 6.6 shall be construed in a manner consistent with that intent.
(b) SHAREHOLDER APPROVAL. As to Awards granted under this Section 6.6,
no Restricted Stock may become Unrestricted Stock until after the material
terms of the performance goals set out below are disclosed to and approved
by the Company's shareholders. To the extent necessary for Awards under this
Section 6.6 to qualify as performance-based compensation under Section
162(m) of the Code under then applicable law, the material terms of the
performance goals shall be disclosed to and reapproved by the shareholders
no later than the first shareholder meeting that occurs in the fifth year
following the year in which shareholders previously approved the performance
goals.
(c) BUSINESS CRITERIA ON WHICH PERFORMANCE GOALS SHALL BE BASED. The
lapse of restrictions on Awards granted under this Section 6.6 shall be
based on the Company's attainment of performance goals based on one or more
of the following business criteria: return on average assets, return on
average common stockholders' equity, efficiency ratio (other expense as a
percentage of (a) other income plus (b) net interest income (before
provision for loan losses)), and return on the Company's investment in any
Affiliate. Return on average assets and return on average common
stockholders' equity shall be calculated in the same manner as the figures
the Company reports in its annual report. The terms in the definition of
efficiency ratio shall be construed in a manner consistent with the use of
the same terms in the Company's financial statements. The foregoing
notwithstanding, for purposes of Awards granted under this Section 6.6, the
calculation of any business criteria or performance goal shall be subject to
any adjustments that the Committee may establish pursuant to Section 6.6(d)
below.
(d) ESTABLISHING PERFORMANCE GOALS. The Committee shall establish, for
each Award granted under this Section 6.6: (i) the specific business
criterion or criteria (i.e., either return on average assets, return on
average common stockholders' equity, efficiency ratio, return on investment
in an Affiliate, or some combination of the four) that will be used; (ii)
the specific performance targets that will be used for the selected business
criterion or criteria; (iii) the measurement period(s) to which the
performance targets will be applied, (iv) any special adjustments that will
be applied in calculating whether the performance targets have been met to
factor out extraordinary items, and (v) the formula for determining the
lapse of restrictions in relation to the performance targets. These
determinations shall be set out in the Agreement for each Award. Except as
otherwise permitted under Section 162(m) of the Code, each Award under this
Section 6.6 shall be granted no later than 90 days after the start of any
applicable measurement period, on or before the date that 25 percent of each
applicable measurement period has elapsed, and while the outcome is
substantially uncertain.
(e) DETERMINATION OF ATTAINMENT OF PERFORMANCE GOALS. The Committee
shall determine, pursuant to the performance goals and other elements
established pursuant to section 6.6(d) above, whether the criteria for the
lapse of restrictions have been satisfied. The Committee's determinations
shall be final and binding on all Participants. These determinations must be
certified in writing before Stock is transferred to the Participant. This
requirement may be satisfied by a writing that sets out the determinations
made by the Committee that is signed on behalf of the Committee by the
Committee's secretary.
(f) LAPSE OF RESTRICTIONS UPON DEATH, DISABILITY OR CHANGE OF OWNERSHIP
OR CONTROL. Notwithstanding the other terms of this Section 6.6, the
performance-related criteria for the lapse of restrictions on an Award made
under this Section 6.6 may lapse (i) as provided in Section 7.3, or (ii)
upon a Participant's death or disability or upon a change of ownership or
control, to the extent so provided in any Agreement, employment agreement or
action of the Committee.
6
(g) OTHER RESTRICTIONS. In addition to the performance goals described
above, the Committee may determine to subject any Award granted under this
Section 6.6 to other, additional restrictions, including restrictions
requiring the Participant to remain in the employ of the Company or an
Affiliate for specified lengths of time.
ARTICLE 7. ADJUSTMENT UPON CORPORATE CHANGES
7.1 ADJUSTMENTS TO SHARES. The maximum number and kind of shares of Stock
with respect to which Awards hereunder may be granted and which are the subject
of outstanding Awards shall be adjusted by way of increase or decrease as the
Committee determines (in its sole discretion) to be appropriate, in the event
that:
(a) the Company effects one or more stock dividends, stock splits,
reverse stock splits, subdivisions, consolidations or other similar events;
(b) the Company or an Affiliate engages in a transaction to which
section 424 of the Code applies; or
(c) there occurs any other event which in the judgment of the Committee
necessitates such action.
Provided, however, that if an event described in paragraph (a) or (b) above
occurs, the Committee shall make adjustments to the limits on Awards specified
in Section 4.2 and in the limitation on aggregate Awards under Section 5.1 that
are proportionate to the modifications of the Stock that are on account of such
corporate changes.
7.2 SUBSTITUTION OF AWARDS ON MERGER OR ACQUISITION. The Committee may
grant Awards in substitution for stock awards, stock options, stock appreciation
rights or similar awards held by an individual who becomes an employee of the
Company or an Affiliate in connection with a transaction to which section 424(a)
of the Code applies. The terms of such substituted Awards shall be determined by
the Committee in its sole discretion, subject only to the limitations of Article
5.
7.3 EFFECT OF CERTAIN TRANSACTIONS. Upon a merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation of
the Company, as a result of which the shareholders of the Company receive cash,
stock or other property in exchange for their shares of Stock (an 'Event'),
restrictions on any Award of Restricted Stock granted hereunder shall lapse,
whether or not the requirements for lapse of restrictions set forth in any
Agreement have been satisfied, unless otherwise specifically stated in the
Agreement. The foregoing notwithstanding, an Event shall not cause restrictions
related solely to the Participant's length of service with the Company or any
Affiliate to lapse on any Awards that the Committee elects, before the Event, to
convert into restricted stock of an acquiring corporation. If the Committee so
elects to convert the Awards, the number of shares of such converted restricted
stock shall be determined by adjusting the amount and price of the Awards
granted hereunder in the same proportion as used for determining the number of
shares of stock of the acquiring corporation the holders of the Stock receive in
such merger, consolidation, acquisition of property or stock, separation or
reorganization, and the schedule for lapse of restrictions set forth in the
Agreement shall continue to apply to the converted restricted stock. Nothing in
this Section 7.3 or elsewhere in the Plan shall authorize the Committee to take
any action contrary to any provision regarding lapse of restrictions that is
contained in any Agreement or employment agreement if the action would reduce
the benefits to the Participant, unless the Participant consents to the action.
7.4 NO PREEMPTIVE RIGHTS. The issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, for
cash or property, or for labor or services rendered, either upon direct sale or
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of
7
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, outstanding Awards.
ARTICLE 8. COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
8.1 GENERAL. No Award shall be granted, no Stock shall be issued, and no
certificates for shares of Stock shall be delivered under this Plan except in
compliance with all federal and state laws and regulations (including, without
limitation, withholding tax requirements), federal and state securities laws and
regulations and the rules of all national securities exchanges or
self-regulatory organizations on which the Company's shares may be listed. The
Company shall have the right to rely on an opinion of its counsel as to such
compliance. Any certificate issued to evidence shares of Stock awarded hereunder
may bear such legends and statements as the Committee upon advice of counsel may
deem advisable to assure compliance with federal and state laws and regulations.
No Award shall be granted, no Stock shall be issued, and no certificate for
shares shall be delivered under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from any regulatory
bodies having jurisdiction over such matters.
8.2 REPRESENTATIONS BY PARTICIPANTS. As a condition to receiving an Award,
the Company may require a Participant to represent and warrant at the time of
any such award that the shares are being held only for investment and without
any present intention to sell or distribute such shares, if, in the opinion of
counsel for the Company, such representation is required by any relevant
provision of the laws referred to in Section 8.1. At the option of the Company,
a stop transfer order against any shares of Stock may be placed on the official
stock books and records of the Company, and a legend indicating that the Stock
may not be pledged, sold or otherwise transferred unless an opinion of counsel
is provided (concurred in by counsel for the Company) and stating that such
transfer is not in violation of any applicable law or regulation may be stamped
on the stock certificate in order to assure exemption from registration. The
Committee may also require such other action or agreement by the Participants as
may from time to time be necessary to comply with the federal and state
securities laws. This provision shall not obligate the Company or any Affiliate
to undertake registration of Stock hereunder.
ARTICLE 9. TAXES
9.1 IMMEDIATE TAXATION. If an employee elects, pursuant to Section 83(b)
of the Code, to include in gross income for federal income tax purposes an
amount equal to the fair market value of Restricted Stock subject to an Award,
the employee shall make arrangements satisfactory to the Company to pay to the
Company or its Affiliate any federal, state or local taxes required to be
withheld with respect to such Stock. If an employee who makes such an election
fails to pay the necessary amounts to the Company or its Affiliate, the Company
or its Affiliate shall, to the extent permitted by law, have the right to deduct
from any payment of any kind otherwise due to the employee any taxes of any kind
required by law to be withheld with respect to the Stock covered by the Award.
9.2 DEFERRED TAXATION. If an election under Section 83(b) of the Code has
not been made, then at the time Restricted Stock becomes Unrestricted Stock, the
Participant shall, upon notification of the amount due and prior to or
concurrently with the delivery of the certificates representing the shares of
Stock to which the Participant is entitled hereunder, pay to the Company or its
Affiliate amounts necessary to satisfy applicable federal, state and local
withholding tax requirements or shall otherwise make arrangements satisfactory
to the Company for such requirements. The Company or its Affiliate shall, to the
extent permitted by law, have the right to deduct from any payment of any kind
otherwise due to the employee any federal, state or local taxes of any kind
required by law to be withheld with respect to the Restricted Stock becoming
Unrestricted Stock.
8
ARTICLE 10. GENERAL PROVISIONS
10.1 EFFECT ON EMPLOYMENT. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any employee any right to continue in the employ of
the Company or an Affiliate or in any way affect any right and power of the
Company or an Affiliate to terminate the employment of any employee at any time
with or without assigning a reason therefor.
10.2 UNFUNDED PLAN. The Plan shall be unfunded, and the Company shall not
be required to segregate any assets that may at any time be represented by
grants under this Plan. Any liability of the Company to any person with respect
to any grant under this Plan shall be based solely upon contractual obligations
that may be created hereunder. No such obligation of the Company shall be deemed
to be secured by any pledge of, or other encumbrance on, any property of the
Company.
10.3 RULES OF CONSTRUCTION. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
masculine gender when used herein refers to both masculine and feminine. The
reference to any statute, regulation or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
10.4 GOVERNING LAW. The laws of the State of Washington shall apply to all
matters arising under this Plan, to the extent that federal law does not apply.
10.5 COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT. With respect to
persons subject to Section 16 of the Exchange Act, transactions under this Plan
are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of this Plan or
action by the Committee fails to so comply, it shall be deemed null and void to
the extent permitted by law and deemed advisable by the Committee.
10.6 AMENDMENT. The Committee may amend or terminate this Plan at any
time; provided, however, an amendment that would have a material adverse effect
on the rights of a Participant under an outstanding Award is not valid with
respect to such Award without the Participant's consent. Provided further that
the shareholders of the Company must approve any amendment that changes the
number of shares in the aggregate which may be issued pursuant to Awards granted
under the Plan or the maximum number of shares with respect to which any
Participant may be granted Awards in any calendar year, except pursuant to
Article 7.
10.7 EFFECTIVE DATE OF PLAN. No Award under this Restated and Amended Plan
will be effective unless and until this Restated and Amended Plan is approved by
shareholders holding a majority of the Company's outstanding voting stock
present or represented by proxy and entitled to vote at the Company's next
annual shareholders' meeting, which is duly held, that occurs after February 18,
1997, the date that the Board authorized the Company to adopt this Amended and
Restated Plan. If this Amended and Restated Plan is not so approved by the
shareholders of the Company, then this Amended and Restated Plan shall be of no
force or effect and the Plan as amended and restated as of November 29, 1994
shall continue to govern.
9
IN WITNESS WHEREOF, the Company has caused this Plan to be executed on this
the day of , 1997, but to be effective on February 18, 1997.
WASHINGTON MUTUAL, INC.
By: __________________________________
Its: _________________________________
10
WASHINGTON MUTUAL, INC.
1201 THIRD AVENUE, SEATTLE, WA 98101
PROXY FOR THE APRIL 15, 1997 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF WASHINGTON MUTUAL, INC.
The undersigned shareholder(s) of Washington Mutual, Inc. (the "Company")
hereby appoints William L. Lynch and Marc R. Kittner, and each of them, as
proxies, each with the power of substitution to represent and to vote, as
designated below, all the shares of Common Stock of the Company held of record
by the undersigned on February 28, 1997, at the Annual Meeting of Shareholders
to be held at 10:00 a.m., Tuesday, April 15, 1997, and at any and all
adjournments thereof.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
WASHINGTON MUTUAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, April 15, 1997
10:00 a.m.
Four Seasons Olympic Hotel
411 University Street
Seattle, Washington
Please mark / X /
your votes as
indicated in
this example
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below) listed below
/ / / /
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.
NOMINEE (Term Will Expire in 1999): David Bonderman
NOMINEES (Term Will Expire in 2000): Douglas P. Beighle Michael K. Murphy
Kerry K. Killinger J. Taylor Crandall
2. APPROVAL OF THE 1997 WASHINGTON MUTUAL AMENDED AND RESTATED RESTRICTED
STOCK PLAN
FOR AGAINST ABSTAIN
/ / / / / /
3. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP as the Company's
independent auditors
FOR AGAINST ABSTAIN
/ / / / / /
4. ANNUAL MEETING R.S.V.P:
________________(ENTER NUMBER OF PEOPLE ATTENDING).
WILL NOT be
attending the
I/WE WILL Annual Meeting
/ / / /
Shares represented by all properly executed proxies will be voted in accordance
with instructions appearing on the proxy and in the discretion of the proxy
holders as to any other matter that may properly come before the Annual Meeting
of Shareholders. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2, AND
3. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL BE VOTED FOR ITEMS 1,
2, AND 3 AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTER THAT
MAY PROPERLY COME BEFORE THE ANNUAL MEETING OF SHAREHOLDERS
DATED:____________________________________________________________________, 1997
SIGNATURE(S)____________________________________________________________________
________________________________________________________________________________
Please sign as name(s) appear on this proxy and date this proxy. If a joint
account, each joint owner must sign. If signing for a corporation or
partnership or as agent, attorney or fiduciary, indicate the capacity in which
you are signing.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
WASHINGTON MUTUAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
Tuesday, April 15, 1997
10:00 a.m.
Four Seasons Olympic Hotel
411 University Street
Seattle, Washington