Replacement Capital Covenant - Washington Mutual Inc.
REPLACEMENT CAPITAL COVENANT, Dated as of September -, 2006 (this
"Replacement Capital Covenant"), by Washington Mutual, Inc., a Washington
corporation (together with its successors and assigns, the "Corporation"), in
favor of and for the benefit of each Covered Debtholder (as defined below).
RECITALS
A. On the date hereof, the Corporation is issuing 500 shares of its
Series K Perpetual Non-Cumulative Floating Rate Preferred Stock ("Series K
Preferred Stock"), $1,000,000 liquidation preference per share and $500,000,000
in the aggregate, represented by 20,000,000 depositary shares (together with the
Series K Preferred Stock, the "Securities"), each representing a 1/40,000th
ownership interest in a share of Series K Preferred Stock.
B. This Replacement Capital Covenant is the "Replacement Capital
Covenant" referred to in the Prospectus Supplement, dated September 11, 2006,
relating to the Securities.
C. The Corporation is entering into and disclosing the content of this
Replacement Capital Covenant in the manner provided below with the intent that
the covenants provided for in this Replacement Capital Covenant be enforceable
by each Covered Debtholder and that the Corporation be estopped from
disregarding the covenants in this Replacement Capital Covenant, in each case to
the fullest extent permitted by applicable law.
D. The Corporation acknowledges that reliance by each Covered
Debtholder upon the covenants in this Replacement Capital Covenant is reasonable
and foreseeable by the Corporation and that, were the Corporation to disregard
its covenants in this Replacement Capital Covenant, each Covered Debtholder
would have sustained an injury as a result of its reliance on such covenants.
NOW, THEREFORE, the Corporation hereby covenants and agrees as follows
in favor of and for the benefit of each Covered Debtholder.
SECTION 1. Definitions. Capitalized terms used in this Replacement
Capital Covenant (including the Recitals) have the meanings set forth in
Schedule I hereto.
SECTION 2. Limitations on Redemption and Repurchase of Securities. The
Corporation hereby promises and covenants to and for the benefit of each Covered
Debtholder that the Corporation shall not redeem or repurchase, and no
Subsidiary of the Corporation shall purchase, all or any part of the Securities
except to the extent that the applicable redemption, repurchase or purchase
price does not exceed the sum of the following amounts:
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(i) 133.33% of the aggregate amount of net cash proceeds received by
the Corporation and its Subsidiaries since the most recent Measurement Date
from the sale of Common Stock and rights to acquire Common Stock to Persons
other than the Corporation and its Subsidiaries; plus
(ii) 100% of the aggregate amount of net cash proceeds received by the
Corporation and its Subsidiaries since the most recent Measurement Date
from the sale of Mandatorily Convertible Preferred Stock and Debt
Exchangeable for Equity to Persons other than the Corporation and its
Subsidiaries; plus
(iii) 100% of the aggregate amount of net cash proceeds received by
the Corporation and its Subsidiaries since the most recent Measurement Date
from the sale of Qualifying Capital Securities to Persons other than the
Corporation and its Subsidiaries.
SECTION 3. Covered Debt. (a) The Corporation represents and warrants
that the Initial Covered Debt is Eligible Debt.
(b) On or during the 30-day period immediately preceding any
Redesignation Date with respect to the Covered Debt then in effect, the
Corporation shall identify the series of Eligible Debt that will become the
Covered Debt on and after such Redesignation Date in accordance with the
following procedures:
(i) the Corporation shall identify each series of its and Washington
Mutual Bank's then outstanding long-term indebtedness for money borrowed
that is Eligible Debt;
(ii) if only one series of the Corporation's then outstanding
long-term indebtedness for money borrowed is Eligible Debt, such series
shall become the Covered Debt commencing on the related Redesignation Date;
(iii) if the Corporation has more than one outstanding series of
long-term indebtedness for money borrowed that is Eligible Debt, then the
Corporation shall identify the series that has the latest occurring final
maturity date as of the date the Corporation is applying the procedures in
this Section 3(b) and such series shall become the Covered Debt on the
related Redesignation Date;
(iv) if the Corporation has no outstanding series of long-term
indebtedness for money borrowed that is Eligible Debt, and Washington
Mutual Bank has only one outstanding series of long-term indebtedness for
money borrowed that is Eligible Debt, such series shall become the Covered
Debt commencing on the related Redesignation Date;
(v) if the Corporation has no outstanding series of long-term
indebtedness for money borrowed that is Eligible Debt, but Washington
Mutual Bank has more than one outstanding series of long-term indebtedness
for money
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borrowed that is Eligible Debt, then the Corporation shall identify the
series that has the latest occurring final maturity date as of the date the
Corporation is applying the procedures in this Section 3(b) and such series
shall become the Covered Debt on the related Redesignation Date;
(vi) the series of outstanding long-term indebtedness for money
borrowed that is determined to be Covered Debt pursuant to clause (ii),
(iii), (iv) or (v) above shall be the Covered Debt for purposes of this
Replacement Capital Covenant for the period commencing on the related
Redesignation Date and continuing to but not including the Redesignation
Date as of which a new series of outstanding long-term indebtedness is next
determined to be the Covered Debt pursuant to the procedures set forth in
this Section 3(b); and
(vii) in connection with such identification of a new series of
Covered Debt, the Corporation shall, as provided for in Section 4, give a
notice and file with the Commission a current report on Form 8-K including
or incorporating by reference this Replacement Capital Covenant as an
exhibit within the time frame provided for in such section.
(c) Notwithstanding any other provisions of this Replacement Capital
Covenant, if on any Redesignation Date the Corporation has then outstanding one
or more series of Eligible Subordinated Debt, such one or more series of
Eligible Subordinated Debt shall be identified as Covered Debt in accordance
with Section 3(b) and no Eligible Senior Debt shall then be Covered Debt.
SECTION 4. Notice. In order to give effect to the intent of the
Corporation described in Recital C, the Corporation covenants that:
(a) simultaneously with the execution of this Replacement Capital
Covenant or as soon as practicable after the date hereof, the Corporation
shall (x) give notice to the Holders of the Initial Covered Debt, in the
manner provided in the indenture relating to the Initial Covered Debt, of
this Replacement Capital Covenant and the rights granted to such Holders
hereunder and (y) file a copy of this Replacement Capital Covenant with the
Commission as an Exhibit to a Form 8-K under the Securities Exchange Act;
(b) so long as the Corporation is a reporting company under the
Securities Exchange Act, the Corporation shall include in each annual
report filed with the Commission on Form 10-K under the Securities Exchange
Act a description of the covenant set forth in Section 2 and identify the
series of long-term indebtedness for borrowed money that is Covered Debt as
of the date such Form 10-K is filed with the Commission;
(c) if a series of the Corporation's or Washington Mutual Bank's
long-term indebtedness for money borrowed (i) becomes Covered Debt or (ii)
ceases to be Covered Debt, the Corporation shall give notice of such
occurrence within 30
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days to the holders of such long-term indebtedness for money borrowed in
the manner provided for in the indenture, fiscal agency agreement or other
instrument under which such long-term indebtedness for money borrowed was
issued and report such change in the Corporation's next quarterly report on
Form 10-Q or annual report on Form 10-K, as applicable;
(d) if, and only if, the Corporation ceases to be a reporting company
under the Securities Exchange Act, the Corporation shall post on its
website the information otherwise required to be included in Securities
Exchange Act filings pursuant to clauses (b) and (c) above; and
(e) promptly upon request by any Holder of Covered Debt, the
Corporation shall provide such Holder with a copy of this Replacement
Capital Covenant.
SECTION 5. Termination, Amendment and Waiver. (a) The obligations of
the Corporation pursuant to this Replacement Capital Covenant shall remain in
full force and effect until the earlier date (the "Termination Date") to occur
of (i) the date, if any, on which the Holders of a majority by principal amount
of the then-effective series of Covered Debt consent or agree in writing to the
termination of this Replacement Capital Covenant and the obligations of the
Corporation hereunder and (ii) the date on which neither the Corporation nor
Washington Mutual Bank has any series of outstanding Eligible Senior Debt or
Eligible Subordinated Debt (in each case without giving effect to the rating
requirement in clause (b) of the definition of each such term). From and after
the Termination Date, the obligations of the Corporation pursuant to this
Replacement Capital Covenant shall be of no further force and effect.
(b) This Replacement Capital Covenant may be amended or supplemented
from time to time by a written instrument signed by the Corporation with the
consent of the Holders of a majority by principal amount of the then-effective
series of Covered Debt, provided that this Replacement Capital Covenant may be
amended or supplemented from time to time by a written instrument signed only by
the Corporation (and without the consent of the Holders of the then-effective
series of Covered Debt) if (i) such amendment eliminates Common Stock,
Mandatorily Convertible Preferred Stock or Debt Exchangeable for Equity (but
only to the extent exchangeable for Common Stock) as a security or securities
covered by clause (i) of Section 2 and the Corporation has been advised in
writing by a nationally recognized independent accounting firm that there is
more than an insubstantial risk that the failure to do so would result in a
reduction in the Corporation's earnings per share as calculated for financial
reporting purposes or (ii) such amendment or supplement is not adverse to the
Holders of the then effective series of Covered Debt and an officer of the
Corporation has delivered to the Holders of the then effective series of Covered
Debt in the manner provided for in the indenture, fiscal agency agreement or
other instrument with respect to such Covered Debt a written certificate stating
that, in his or her determination, such amendment or supplement is not adverse
to the Holders of the then-effective series of Covered Debt.
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(c) For purposes of Sections 5(a) and 5(b), the Holders whose consent
or agreement is required to terminate, amend or supplement the obligations of
the Corporation under this Replacement Capital Covenant shall be the Holders of
the then-effective Covered Debt as of a record date established by the
Corporation that is not more than 30 days prior to the date on which the
Corporation proposes that such termination, amendment or supplement becomes
effective.
SECTION 6. Miscellaneous. (a) THIS REPLACEMENT CAPITAL COVENANT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(b) This Replacement Capital Covenant shall be binding upon the
Corporation and its successors and assigns and shall inure to the benefit of the
Covered Debtholders as they exist from time-to-time (it being understood and
agreed by the Corporation that any Person who is a Covered Debtholder at the
time such Person initiates a claim or proceeding to enforce its rights under
this Replacement Capital Covenant after the Corporation has violated its
covenants in Section 2 and before the series of long-term indebtedness for money
borrowed held by such Person is no longer Covered Debt, such Person's rights
under this Replacement Capital Covenant shall not terminate by reason of such
series of long-term indebtedness for money borrowed no longer being Covered
Debt), Except as specifically provided herein, this Replacement Capital Covenant
shall have no other beneficiaries and no other Persons are entitled to rely on
this Replacement Capital Covenant.
(c) All demands, notices, requests and other communications to the
Corporation under this Replacement Capital Covenant shall be deemed to have been
duly given and made if in writing and (i) if served by personal delivery upon
the Corporation, on the day so delivered (or, if such day is not a Business Day,
the next succeeding Business Day), (ii) if delivered by registered post or
certified mail, return receipt requested, or sent to the Corporation by a
national or international courier service, on the date of receipt by the
Corporation (or, if such date of receipt is not a Business Day, the next
succeeding Business Day), or (iii) if sent by telecopier, on the day telecopied,
or if not a Business Day, the next succeeding Business Day, provided that the
telecopy is promptly confirmed by telephone confirmation thereof, and in each
case to the Corporation at the address set forth below, or at such other address
as the Corporation may thereafter notify to Covered Debtholders or post on its
website as the address for notices under this Replacement Capital Covenant:
Washington Mutual, Inc.
1301 Second Avenue
Seattle, Washington 98101
Attention: Corporate Secretary of Washington Mutual, Inc.
Facsimile No: 206-377-6244 (until October 9, 2006)
206-377-2840 (from and after October 9, 2006)
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IN WITNESS WHEREOF, the Corporation has caused this Replacement
Capital Covenant to be executed by its duly authorized officer, as of the day
and year first above written.
WASHINGTON MUTUAL, INC.
By: /s/ Robert J. Williams
--------------------------------
Name: Robert J. Williams
Title: Senior Vice President
and Treasurer
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Schedule 1
DEFINITIONS
"Alternative Payment Mechanism" means, with respect to any securities or
combination of securities (together in this definition, "such securities"),
provisions in the related transaction documents requiring the Corporation to
issue (or use commercially reasonable efforts to issue) APM Qualifying
Securities raising eligible proceeds at least equal to the deferred
Distributions on such securities and apply the proceeds to pay unpaid
Distributions on such securities, commencing not later than (i) the first
Distribution Date on which the Corporation pays current Distributions on such
securities or (ii) the fifth anniversary of the commencement of the deferral or
other non-payment of Distributions on such securities, and that:
(a) permit the Corporation to pay current Distributions on any
Distribution Date out of any source of funds but require the issuer to pay
deferred Distributions only pursuant to the terms of the Alternative
Payment Mechanism;
(b) if deferral of Distributions continues for more than one year,
require the Corporation not to repurchase Common Stock until at least one
year after payment of deferred (and uncancelled) Distributions in
accordance with the Alternative Payment Mechanism;
(c) notwithstanding sub-clause (a), if the Primary Federal Bank
Regulatory Agency disapproves the issuer's sale of APM Qualifying
Securities, permit the Corporation to pay Distributions (including deferred
Distributions) from any source without a breach of its obligations under
the transaction documents;
(d) if the Primary Federal Bank Regulatory Agency does not disapprove
the Corporation's issuance and sale of APM Qualifying Securities but
disapproves the use of the proceeds thereof to pay deferred Distributions,
permit the Corporation to use such proceeds for other purposes and to
continue to defer Distributions without a breach of its obligations under
the transaction documents; and
(e) limit the obligation of the Corporation to issue (or use
commercially reasonable efforts to issue) APM Qualifying Securities to the
amounts provided in the APM Qualifying Securities Caps;
provided (and it being understood) that:
(x) "eligible proceeds" means, for purposes of an Alternative Payment
Mechanism, the net proceeds (after underwriters' or placement agents' fees,
commissions or discounts and other expenses relating to the issuance or
sale of the relevant securities) that the Corporation has received during
the 180 days prior to the related Distribution Date from the issuance of
APM Qualifying Securities, but in the case of APM Qualifying Securities
that include Non-Cumulative
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perpetual preferred stock only up to the APM Qualifying Securities Cap set
forth in clause (ii) of the definition thereof; and
(y) if the Corporation has outstanding more than one class or series
of securities under which it is obligated to sell APM Qualifying Securities
and apply some part of the proceeds to the payment of deferred
Distributions, then on any date and for any period the amount of net
proceeds received by the Corporation from those sales and available for
payment of deferred Distributions on such securities shall be applied to
such securities on a pro rata basis in proportion to the total amounts that
are due on such securities, or on such other basis as the Primary Federal
Bank Regulatory Agency may approve.
"APM Qualifying Securities" means:
(a) Common Stock or rights to purchase Common Stock; and
(b) non-cumulative perpetual preferred stock, where either (i) the
transaction documents include (x) provisions to the effect that, during
periods as to which the Corporation has failed one or more financial tests,
the Corporation may not pay Distributions on the non-cumulative perpetual
preferred stock and (y) Intent-Based Replacement Disclosure or (ii) such
non-cumulative perpetual preferred stock is subject to a replacement
capital covenant substantially similar to this Replacement Capital Covenant
or is subject to an Other Qualifying Replacement Capital Covenant, and in
the case of both clause (i) and clause (ii) the transaction documents
provide for no remedies as a consequence of non-payment of Distributions
other than Permitted Remedies.
"APM Qualifying Securities Caps" mean:
(i) in the case of APM Qualifying Securities that are Common Stock or
rights to purchase Common Stock, aggregate proceeds from the issuance
thereof pursuant to the related Alternative Payment Mechanism (including at
any point in time from all prior issuances thereof pursuant to such
Alternative Payment Mechanism) with respect to deferred Distributions
attributable to the first five years of any deferral period exceeding an
amount equal to 2% of the product of the average of the current stock
market price of the Common Stock on the ten consecutive trading days ending
on the fourth trading day immediately preceding the date of issuance
multiplied by the total number of issued and outstanding shares of Common
Stock as of the date of the Corporation's most recent publicly available
consolidated financial statements (the "Common Cap"); and
(ii) in the case of APM Qualifying Securities that are Non-Cumulative
perpetual preferred stock, aggregate proceeds from the issuance thereof
pursuant to the related Alternative Payment Mechanism (including at any
point in time from all prior issuances thereof pursuant to such Alternative
Payment
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Mechanism) exceeding 25% of the principal or stated amount of the
securities that are the subject of the related Alternative Payment
Mechanism (the "Preferred Cap");
provided (and it being understood) that:
(a) once the Corporation reaches the Common Cap, it will not be
required to issue more Common Stock or rights to purchase Common Stock
under the Alternative Payment Mechanism with respect to deferred
Distributions attributable to the first five years of any deferral period
even if the amount referred to in clause (i) subsequently increases because
of a subsequent increase in the current market price of Common Stock or the
number of outstanding shares of Common Stock; and
(b) if, due to a Market Disruption Event or otherwise, the Corporation
is able to raise some, but not all, of the eligible proceeds necessary to
pay all deferred Distributions on any Distribution Date, the Corporation
will apply any available eligible proceeds to pay accrued and unpaid
Distributions on the applicable Distribution Date in chronological order
subject to the APM Qualifying Securities Caps.
"Business Day" means each day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in The City of New York or in Seattle,
Washington are authorized or required by law or executive order to remain
closed.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means common stock of the Corporation (including common
stock and rights to acquire common stock issued pursuant to the Corporation's
dividend reinvestment plan and employee benefit plans).
"Corporation" has the meaning specified in the introduction to this
instrument.
"Corporation's Existing Replacement Capital Covenant" means the Replacement
Capital Covenant, dated as of March 7, 2006, entered into by the Corporation in
connection with the issuance by Washington Mutual Preferred Funding Trust I of
its Fixed-to-Floating Rate Perpetual Non-Cumulative Trust Preferred Securities
and by Washington Mutual Preferred Funding (Cayman) I Ltd. of its 7.25%
Perpetual Non-cumulative Preferred Securities, Series A-1 and Series A-2.
"Covered Debt" means (a) at the date of this Replacement Capital Covenant
and continuing to but not including the first Redesignation Date, the Initial
Covered Debt and (b) thereafter, commencing with each Redesignation Date and
continuing to but not including the next succeeding Redesignation Date, the
Eligible Debt identified pursuant to Section 3(b) as the Covered Debt for such
period; provided that a Person who has sold or disposed of all its right, title
and interest in Covered Debt shall cease to be a Covered
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Debtholder at the time of such sale or disposition if, while such Person was an
owner of Covered Debt, the Corporation has not breached or repudiated, or
threatened to breach or repudiate, its obligations hereunder; and provided
further that if the Corporation has breached or repudiated, or threatened to
breach or repudiate, its obligation hereunder while such Person was an owner of
Covered Debt, such Person shall continue to be a Covered Debtholder until the
later of (i) one year after any such sale or other disposition or (ii) the
termination of any legal proceeding brought by such Person before the date in
clause (i) to enforce the obligations of the Corporation hereunder.
"Covered Debtholder" means each Person (whether a Holder or a beneficial
owner holding through a participant in a clearing agency) that buys, holds or
sells long-term indebtedness for money borrowed of the Corporation or its
Depository Institution Subsidiary during the period that such long-term
indebtedness for money borrowed is Covered Debt.
"Debt Exchangeable for Equity" means a security or combination of
securities (together in this definition, "securities") that either (A):
(i) gives the holder a beneficial interest in (a) debt securities of
the Corporation that are Non-Cumulative and that are the most junior
subordinated debt of the Corporation (or rank pari passu with the most
junior subordinated debt of the Corporation) and (b) a fractional interest
in a stock purchase contract;
(ii) includes a remarketing feature pursuant to which the subordinated
debt of the Corporation is remarketed to new investors initially within
five years from the date of issuance of the securities or earlier in the
event of an early settlement of the purchase of Qualifying Non-Cumulative
Preferred Stock or Common Stock pursuant to clause (iii) based upon
specified financial tests applied to the Corporation or its Subsidiaries;
(iii) provides for the proceeds raised in the remarketing, if
successful, to be used to purchase Qualifying Non-Cumulative Preferred
Stock or Common Stock;
(iv) includes a replacement capital covenant substantially similar to
this Replacement Capital Covenant, provided that such replacement capital
covenant will apply to such security (or combination of securities) and to
the Qualifying Non-Cumulative Preferred Stock and will not include Debt
Exchangeable for Equity in the definition of "qualifying capital
securities"; and
(v) after the issuance of such Qualifying Non-Cumulative Preferred
Stock, provides the holder of the security with a beneficial interest in
such Qualifying Non-Cumulative Preferred Stock; or
(B) combines trust preferred securities of a statutory trust sponsored by the
Corporation with a right on the part of the Corporation to cause a third-party
("Third Party") to
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purchase Qualifying Non-Cumulative Preferred Stock or Common Stock, in a manner
that includes the following terms:
(i) the trust preferred securities meet all of the requirements for
"qualifying trust preferred securities" within the meaning assigned to such
term in the risk-based capital guidelines of the Board of Governors of the
Federal Reserve System applicable to bank holding companies except that the
maturity of the underlying junior subordinated notes issued by the
Corporation may be as short as five years;
(ii) the transaction documents give the Corporation an enforceable
right to require a Third Party to purchase Qualifying Non-Cumulative
Preferred Stock or Common Stock by a date that (x) under normal
circumstances is not later than five years after initial issuance of the
securities and (y) is accelerated to an earlier date based upon specified
financial tests applied to the Corporation or its Subsidiaries;
(iii) the stated amount of the qualifying trust preferred securities
that are a component of such securities at initial issuance thereof equals
the liquidation preference of the Qualifying Non-Cumulative Preferred Stock
that the Corporation may require the Third Party to purchase; and
(iv) such securities if issued by a bank holding company would be
"qualifying mandatory convertible preferred securities" within the meaning
assigned to such term in the risk-based capital guidelines of the Board of
Governors of the Federal Reserve System applicable to bank holding
companies.
"Distribution Date" means, as to any securities or combination of
securities, the dates on which Distributions on such securities are scheduled to
be made.
"Distribution Period" means, as to any securities or combination of
securities, each period from and including a Distribution Date for such
securities to but not including the next succeeding Distribution Date for such
securities.
"Distributions" means, as to a security or combination of securities,
dividends, interest or other income distributions to the holders thereof that
are not Subsidiaries of the Corporation. For the avoidance of doubt, if the
terms of any security or combination of securities provide for the accrual of
declared but unpaid, or deferred, Distributions, such accrued amounts will be
considered to be included within the term "Distributions".
"Eligible Debt" means, at any time, Eligible Subordinated Debt or, if no
Eligible Subordinated Debt is then outstanding, Eligible Senior Debt.
"Eligible Senior Debt" means, at any time in respect of any issuer, each
series of outstanding long-term indebtedness for money borrowed of such issuer
that (a) upon a bankruptcy, liquidation, dissolution or winding up of the
issuer, ranks most senior among
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the issuer's then outstanding classes of indebtedness for money borrowed, (b) is
then assigned a rating by at least one NRSRO (provided that this clause (b)
shall apply on a Redesignation Date only if on such date the issuer has
outstanding senior long-term indebtedness for money borrowed that satisfies the
requirements of clauses (a), (c) and (d) that is then assigned a rating by at
least one NRSRO), (c) has an outstanding aggregate principal amount of not less
than $100,000,000, and (d) was issued through or with the assistance of a
commercial or investment banking firm or firms acting as underwriters, initial
purchasers or placement or distribution agents. For purposes of this definition
as applied to securities with a CUSIP number, each issuance of long-term
indebtedness for money borrowed that has (or, if such indebtedness is held by a
trust or other intermediate entity established directly or indirectly by the
issuer, the securities of such intermediate entity that have) a separate CUSIP
number shall be deemed to be a series of the issuer's long-term indebtedness for
money borrowed that is separate from each other series of such indebtedness.
"Eligible Subordinated Debt" means, at any time in respect of any issuer,
each series of the issuer's then-outstanding long-term indebtedness for money
borrowed that (a) upon a bankruptcy, liquidation, dissolution or winding up of
the issuer, ranks subordinate to the issuer's then outstanding series of
indebtedness for money borrowed that ranks most senior, (b) is then assigned a
rating by at least one NRSRO (provided that this clause (b) shall apply on a
Redesignation Date only if on such date the issuer has outstanding subordinated
long-term indebtedness for money borrowed that satisfies the requirements in
clauses (a), (c) and (d) that is then assigned a rating by at least one NRSRO),
(c) has an outstanding aggregate principal amount of not less than $100,000,000,
and (d) was issued through or with the assistance of a commercial or investment
banking firm or firms acting as underwriters, initial purchasers or placement or
distribution agents. For purposes of this definition as applied to securities
with a CUSIP number, each issuance of long-term indebtedness for money borrowed
that has (or, if such indebtedness is held by a trust or other intermediate
entity established directly or indirectly by the issuer, the securities of such
intermediate entity that have) a separate CUSIP number shall be deemed to be a
series of the issuer's long-term indebtedness for money borrowed that is
separate from each other series of such indebtedness.
"Existing Junior Subordinated Debentures" means the Corporation's -% Junior
Subordinated Debentures due -, issued by the Corporation on - to -. [DISCUSS:
this would be the most recently issued junior sub debt in connection with a
traditional offering of trust preferred securities by the Corporation. It may be
the same debt as the Initial Covered Debt.]
"Holder" means, as to the Covered Debt then in effect, each holder of such
Covered Debt as reflected on the securities register maintained by or on behalf
of the Corporation with respect to such Covered Debt.
"Initial Covered Debt" means the Corporation's 4.625% Subordinated Notes
due 2014, CUSIP No. 939322AN3..
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"Intent-Based Replacement Disclosure" means, as to any security or
combination of securities, that the Corporation has publicly stated its
intention, either in the prospectus or other offering document under which such
securities were initially offered for sale or in filings with the Commission
made by the Corporation under the Securities Exchange Act prior to or
contemporaneously with the issuance of such securities, that the Corporation
will redeem or repurchase such securities only with the proceeds of specified
replacement capital securities that have terms and provisions at the time of
redemption or repurchase that are as or more equity-like than the securities
then being redeemed or repurchased, raised within 180 days prior to the
applicable redemption or repurchase date.
"Mandatorily Convertible Preferred Stock" means cumulative or
non-cumulative preferred stock with (a) no prepayment obligation on the part of
the issuer thereof, whether at the election of the holders or otherwise, and (b)
a requirement that the preferred stock convert into Common Stock of the
Corporation within three years from the date of its issuance at a conversion
ratio within a range established at the time of issuance of the preferred stock.
"Mandatory Trigger Provision" means, as to any security or combination of
securities (together in this definition, "securities"), provisions in the terms
thereof or of the related transaction agreements that (A) require, or at its
option in the case of non-cumulative perpetual preferred stock permit, the
issuer of such securities to make payment of Distributions on such securities
only pursuant to the issuance and sale of APM Qualifying Securities, within two
years of a failure to satisfy one or more financial tests set forth in the terms
of such securities or related transaction agreements, in an amount such that the
net proceeds of such sale at least equal the amount of unpaid Distributions on
such securities (including without limitation all deferred and accumulated
amounts) and in either case requires the application of the net proceeds of such
sale to pay such unpaid Distributions, provided that (i) the amount of
non-cumulative perpetual preferred stock the net proceeds of which the issuer
may apply to pay such Distributions pursuant to such provision may not exceed
25% of the liquidation or principal amount of such securities, and (ii) if the
Mandatory Trigger Provision permits the payment of Distributions amounting to up
to 25% of the liquidation or principal amount of such securities pursuant to the
issuance and sale of non-cumulative perpetual preferred stock and the Mandatory
Trigger Provision requires or permits such issuance and sale within more than
one year of such failure and the securities include an Optional Deferral
Provision, such Mandatory Trigger Provision may not require the issuance of
Common Stock or rights to purchase Common Stock in excess of 2% of the Company's
market capitalization, (B) if the APM Qualifying Securities are Common Stock,
prohibit the issuer from repurchasing any Common Stock prior to the date six
months after the issuer applies the net proceeds of the sales described in
clause (A) to pay such unpaid Distributions in full, and (C) upon any
liquidation, dissolution, winding up, reorganization or in connection with any
insolvency, receivership or proceeding under any bankruptcy law with respect to
the Corporation, limit the claim of the holders of such securities (other than
non-cumulative perpetual preferred stock) to Distributions that
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accumulate during a period in which the Corporation fails to satisfy one or more
financial tests set forth in the terms of such securities or related transaction
agreements to (x) 25% of the stated or principal amount of such securities then
outstanding in the case of securities not permitting the issuance and sale
pursuant to the provisions described in clause (A) above of securities other
than Common Stock or rights to acquire Common Stock or (y) two years of
accumulated and unpaid Distributions in all other cases. No remedy other than
Permitted Remedies will arise by the terms of such securities or related
transaction agreements in favor of the holders of such securities as a result of
the issuer's failure to pay Distributions because of the Mandatory Trigger
Provision or as a result of the issuer's exercise of its right under an Optional
Deferral and Forgiveness Provision until Distributions have been deferred for
one or more Distribution Periods that total together at least ten years.
"Market Disruption Event" means the occurrence or existence of any of the
following events or sets of circumstances:
(a) the Corporation would be required to obtain the consent or
approval of its shareholders or a regulatory body (including, without
limitation, any securities exchange) or governmental authority to issue or
sell APM Qualifying Securities and such consent or approval has not yet
been obtained notwithstanding the Corporation's commercially reasonable
efforts to obtain such consent or approval or the Primary Federal Bank
Regulatory Authority instructs the Corporation not to sell or offer for
sale APM Qualifying Securities at such time;
(b) trading in securities generally on the New York Stock Exchange or
any other national securities exchange or over-the-counter market on which
the Common Stock and/or the Corporation's preferred stock is then listed or
traded shall have been suspended or the settlement of such trading
generally shall have been materially disrupted;
(c) a banking moratorium shall have been declared by the federal or
state authorities of the United States such that market trading in the
Common Stock and/or the Corporation's preferred stock has been disrupted or
ceased;
(d) a material disruption shall have occurred in commercial banking or
securities settlement or clearance services in the United States such that
market trading in the Common Stock and/or the Corporation's preferred stock
has been disrupted or ceased;
(e) the United States shall have become engaged in hostilities, there
shall have been an escalation in hostilities involving the United States,
there shall have been a declaration of a national emergency or war by the
United States or there shall have occurred any other national or
international calamity or crisis such that market trading in the Common
Stock and/or the Corporation's preferred stock has been disrupted or
ceased;
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(f) there shall have occurred such a material adverse change in
general domestic or international economic, political or financial
conditions, including without limitation as a result of terrorist
activities, or the effect of international conditions on the financial
markets in the United States shall be such, as to make it, in the
Corporation's reasonable judgment, impracticable or inadvisable to proceed
with the offer and sale of APM Qualifying Securities; or
(g) an event occurs and is continuing as a result of which the
offering document for such offer and sale of APM Qualifying Securities
would, in the judgment of the Corporation, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and
either (a) the disclosure of that event at such time, in the judgment of
the Corporation, is not otherwise required by law and would have a material
adverse effect on the business of the Corporation or (b) the disclosure
relates to a previously undisclosed proposed or pending material business
transaction, the disclosure of which would impede the ability of the
Corporation to consummate such transaction, provided that no single
suspension period contemplated by this subsection (vii) shall exceed 90
consecutive days and multiple suspension periods contemplated by this
subsection (vii) shall not exceed an aggregate of 180 days in any 360-day
period.
The definition of "Market Disruption Event" as used in any securities or
combination of securities that constitute Qualifying Securities may include less
than all of the paragraphs outlined above, as determined by the Corporation at
the time of issuance of such securities, and in the case of clauses (a), (b),
(c) and (d), as applicable to a circumstance where the Corporation would
otherwise endeavor to issue preferred stock, shall be limited to circumstances
affecting markets where the Corporation's preferred stock trades or where a
listing for its trading is being sought.
"Measurement Date" means, with respect to any redemption, repurchase or
purchase of Securities, the date six months prior to the delivery of notice of
such redemption or the date of such repurchase or purchase.
"Non-Cumulative" means, with respect to any securities, that the issuer
thereof may elect not to make any number of periodic Distributions without any
remedy arising under the terms of the securities or related agreements in favor
of the holders, other than one or more Permitted Remedies. Securities that
include either (i) an Alternative Payment Mechanism associated with an Optional
Deferral and Forgiveness Provision or (ii) a Mandatory Trigger Provision shall
also be deemed to be "Non-Cumulative" securities for all purposes of this
Replacement Capital Covenant other than the definition of "Qualifying
Non-Cumulative Preferred Stock".
"NRSRO" means a nationally recognized statistical rating organization
within the meaning of Rule 15c3-1(c)(2)(vi)(F) under the Securities Exchange
Act.
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"Optional Deferral and Forgiveness Provision" means, as to any securities
or combination of securities (together in this definition, "such securities"), a
provision in the terms thereof or of the related transaction agreements to the
following effect:
(a) the issuer of such securities thereof may, in its sole discretion,
or shall in response to a directive or order from the Primary Federal Bank
Regulatory Agency, defer in whole or in part payment of Distributions on
such securities for one or more consecutive Distribution Periods of up to
five years or, if a Market Disruption Event is continuing, ten years,
without any remedy other than Permitted Remedies and the obligation
described in clause (b) below; and
(b) if the issuer of such securities has exhausted its right to defer
Distributions and no Market Disruption Event is continuing, an Alternative
Payment Mechanism will apply;
(c) if deferral of Distributions on such securities continues for ten
years and at the expiration of such ten-year period (i) no event of default
or acceleration under any transaction document for such securities is
continuing and (ii) due to the APM Qualifying Securities Caps the
Corporation has been unable to raise sufficient proceeds from the sale of
APM Qualifying Securities to pay all deferred Distributions on such
securities attributable to the portion of the deferral period prior to the
date on which the Corporation's obligation to issue (or use commercially
reasonable efforts to issue) APM Qualifying Securities under the
Alternative Payment Mechanism became operative, then deferred and unpaid
Distributions attributable to that portion of the deferral period will be
permanently cancelled (provided, and it being understood that, cancellation
of such deferred and unpaid Distributions shall occur only with respect to
a single deferral period); and
(d) if the Corporation becomes subject to a bankruptcy, insolvency,
receivership or similar proceeding prior to the redemption or repayment of
such securities, the holders of such securities will have no claim for
accrued and unpaid Distributions to the extent the amount thereof exceeds
two years of Distributions on such securities.
Clauses (b), (c) and (d) of this definition shall have no effect for purposes of
the use of this definition in the last sentence of the definition of "Mandatory
Trigger Provisions".
"Other Qualifying Replacement Capital Covenant" means a replacement capital
covenant, as identified by the Corporation's Board of Directors acting in good
faith and in its reasonable discretion, (i) entered into by a company that at
the time it enters into such replacement capital covenant is a reporting company
under the Securities Exchange Act and (ii) that restricts the related issuer
from redeeming or repurchasing identified securities that at the time of initial
issuance were rated by at least two NRSROs except out of the proceeds of
specified replacement capital securities that have terms and provisions at the
time of redemption or repurchase that are as or more equity-like than the
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securities then being redeemed or repurchased, raised within 180 days prior to
the applicable redemption or repurchase date (and, if the replacement capital
securities are Common Stock, with the Corporation being deemed to receive the
applicable percentage (which, depending upon the equity-like characteristics
being redeemed or repurchased as of the date of redemption or repurchase will be
133.33% if such securities are perpetual or have a remaining term to maturity of
more than 50 years, 200% if such securities have a remaining term to maturity of
50 years or less but more than 30 years, and 400% if such securities have a
remaining term to maturity of 30 years or less but more than 10 years) of the
proceeds actually received). The Corporation's Existing Replacement Capital
Covenant is an Other Qualifying Replacement Capital Covenant.
"Permitted Remedies" means, with respect to any securities, one or more of
the following remedies:
(a) rights in favor of the holders of such securities permitting such
holders to elect one or more directors of the issuer (including any such
rights required by the listing requirements of any stock or securities
exchange on which such securities may be listed or traded); and
(b) complete or partial prohibitions on the issuer paying
Distributions on or repurchasing or redeeming common stock or other
securities that rank pari passu with or junior as to Distributions to such
securities for so long as Distributions on such securities, including
unpaid Distributions, remain unpaid.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof.
"Primary Federal Bank Regulatory Agency" means, as to the Corporation at
any time, the Federal bank regulatory agency that has primary regulatory
authority with respect to the Corporation (currently the Office of Thrift
Supervision).
"Qualifying Capital Securities" means securities (other than Common Stock,
rights to acquire Common Stock and securities convertible into Common Stock)
that, in the determination of the Corporation's Board of Directors reasonably
construing the definitions and other terms of this Replacement Capital Covenant,
meet one of the following criteria:
(i) securities issued by the Corporation or its Subsidiaries that (1)
rank (or would rank if the Existing Junior Subordinated Debentures remained
outstanding) junior to the Existing Junior Subordinated Debentures upon a
liquidation, dissolution or winding up of the Corporation, (2) are
Non-Cumulative, (3) have no maturity or a legal final maturity of at least
60 years and (4) either (x) are subject to a replacement capital covenant
substantially similar to this Replacement Capital Covenant or an Other
Qualifying Replacement Capital
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Covenant or (y) have a Mandatory Trigger Provision and are subject to
Intent-Based Replacement Disclosure; or
(ii) securities issued by the Corporation or its Subsidiaries that (1)
rank pari passu with or junior to other preferred stock of the issuer, (2)
have no maturity or a legal final maturity of at least 40 years, (3) are
subject to a replacement capital covenant substantially similar to this
Replacement Capital Covenant or an Other Qualifying Replacement Capital
Covenant, (4) are Non-Cumulative and (5) to the extent approved by the
Primary Federal Bank Regulatory Authority (if applicable), have a Mandatory
Trigger Provision and are subject to Intent-Based Replacement Disclosure;
or
(iii) any other security that is a "Replacement Capital Security" as
such term is defined in the Corporation's Existing Replacement Capital
Covenant.
Additionally, and notwithstanding the foregoing, any securities or combinations
of securities if issued to any Subsidiary of the Corporation, without the
contemporaneous issuance of any security by such Subsidiary to a Person other
than the Corporation or a Subsidiary of the Corporation, shall not qualify as
Replacement Capital Securities (it being understood and agreed for the avoidance
of doubt that person's covered by the Corporation's dividend reinvestment plan
and employee benefit plans shall not be deemed to be affiliates of the
Corporation for this purpose).
"Qualifying Non-Cumulative Preferred Stock" means Non-Cumulative perpetual
preferred stock of the Corporation or its Subsidiaries that ranks pari passu
with or junior to other outstanding preferred stock of the issuer.
"Redesignation Date" means, as to the Covered Debt in effect at any time,
the earliest of (a) the date that is two years prior to the final maturity date
of such Covered Debt, (b) if the Corporation elects to redeem, or the
Corporation or a Subsidiary of the Corporation elects to repurchase, such
Covered Debt either in whole or in part with the consequence that after giving
effect to such redemption or repurchase the outstanding principal amount of such
Covered Debt is less than $100,000,000, the applicable redemption or repurchase
date and (c) if such Covered Debt is not Eligible Subordinated Debt of the
Corporation, the date on which the Corporation issues long-term indebtedness for
money borrowed that is Eligible Subordinated Debt.
"Replacement Capital Covenant" has the meaning specified in the
introduction to this instrument.
"Securities" has the meaning specified in Recital A.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Series K Preferred Stock" has the meaning specified in Recital A.
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"Subsidiary" means, at any time, any Person the shares of stock or other
ownership interests of which having ordinary voting power to elect a majority of
the board of directors or other managers of such Person are at the time owned,
or the management or policies of which are otherwise at the time controlled,
directly or indirectly through one or more intermediaries (including other
Subsidiaries) or both, by another Person.
"Termination Date" has the meaning specified in Section 5(a).
"Washington Mutual Bank" means Washington Mutual Bank, a federal Savings
Bank.