ARTICLES OF INCORPORATION

OF

CITY BANK

 

ARTICLE I

Name

The name of this corporation is CITY BANK.

 

ARTICLE II

Head Office

The head office and principal place of business of this corporation is located in Lynnwood,

County of Snohomish, State of Washington.

 

ARTICLE 111

Purpose

The purpose for which the corporation is organized is to carry on such activities as are

permitted to banks under applicable law.

 

ARTICLE 1V

Capitalization

The total number of shares of stock which the corporation is authorized to issue is Fifiy

Million (50,000,000) common shares with a par value of One Dollar ($ 1.00) per share.

 

ARTICLE V

Shareholder Rights

Section 5.1. Shareholders shall not have a preemptive right to acquire unissued shares of

capital stock of the corporation, whether now or hereafter authorized, or to acquire any obligations

issued or sold which are convertible into stock of the corporation, other than such rights, if any, as

the Board of Directors, in its discretion, may from time to time determine, and at such price as the

Board of Directors may from time to time fix.

 

Section 5.2. Each share of the capital stock of this corporation shall be entitled to one vote

at all meetings of shareholders. Each shareholder entitled to vote at any election for directors shall

have the right to vote, in person or by proxy, the number of shares owned by him for as many

persons as there are directors to be elected and for whose election he has a right to vote, and no

shareholder shall be entitled to cumulate his votes.

 

ARTICLE VI

Board of Directors

Section 6.1. The Board of Directors shall consist of not fewer than five (5) or more than

nine (9) persons. The exact number within such minimum and maximum limits shall be fixed and

determined by resolution of the Board of Directors. The number of directors elected by the

shareholders at the last preceding annual meeting may be increased by not more than two (2)

directors by the Board behveen annual meetings of the shareholders, and no decrease in the number

of directors shall have the effect of shortening the term of any incumbent director.

 

Section 6.2. Nominations for election to the Board of Directors maybe made by the Board

of Directors or by any stockholder of any outstanding class of stock of the corporation entitled to

vote for the election of directors. Nominations, other than those made by the Board of Directors

must be made in writing and delivered or mailed to the Chairman of the corporation not less than

fourteen (14) days nor more than sixty (60) days prior to any meeting of shareholders called for the

election of directors; provided, however, if less than twenty-one (21) days’ notice of the meeting is

given to shareholders, such nominations shall be mailed or delivered not later than the close of

business on the seventh day following the day on which the notice of meeting was mailed. Such

notification shall contain the following information to the extent known to the noti~ing

shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of

each proposed nominee; (c) the total number of shares of stock of the corporation that will be voted

for each proposed nominee; (d) the name and address of the notifying shareholder; and (e) the

number of shares of common stock of the corporation owned by the notifying shareholder. Any

nomination not made in accordance with these provisions may, at the discretion of the Chairperson

of the meeting, be disregarded,

 

ARTICLE VII

Fair Price Provision

Section 7.1. For purposes of this Article:

(a) An interested shareholder transaction means any transaction between a corporation,

or any subsidiary thereof, and an interested shareholder of such corporation or an affiliated person

to an interested shareholder, that must be authorized pursuant to applicable law by a vote of the

shareholders. (b) An interested shareholder:

(1) Includes any person or group of affiliated persons who beneficially own

twenty percent or more of the outstanding voting shares of a corporation. An affiliated person is

any person who either acts jointly or in concert with, or directly or indirectly controls, is controlled

by, or is under common control with another person; and

(2) Excludes any person who, in good faith and not for the purpose of

circumventing this Article, is an agent, custodial bank, broker, nominee, or trustee for another

person, if such other person is not an interested shareholder under Section 7.1 (b)(l ) of this Article.

 

Section 7.2. Except as provided in Section 7.3 of this Article, an interested shareholder

transaction must be approved by the affirmative vote of the holders of two-thirds of the shares

entitled to be counted under this Section 7.2, or if any class of shares is entitled to vote thereon as a

class, then by the affirmative vote of two-thirds of the shares of each class entitled to be counted

under this Section 7.2 and of the total shares entitled to be counted under this Section 7.2. All

outstanding shares entitled to vote under applicable law or the Articles of Incorporation shall be

entitled to be counted under this Section 7.2, except shares owned by or voted under the control of

an interested shareholder may not be counted to determine whether shareholders have approved a

transaction for purposes of this Section 7.2. The vote of the shares owned by or voted under the

control of an interested shareholder, however, shall be counted in determining whether a transaction

is approved under other provisions of applicable law and for purposes of determining a quorum.

 

Section 7.3. This Article shall not apply to a transaction:

(a) Approved by a majority vote of the board of directors. For such purpose, the vote of

directors whose votes are otherwise entitled to be counted under the Articles of Incorporation and

applicable law who are directors or officers of, or have a material financial interest in, an interested

shareholder, or who were nominated for election as a director as a result of an arrangement with an

interested shareholder and first elected as a director within twenty-four months of the proposed

transaction, shall not be counted in determining whether the transaction is approved by such

directors; or

(b) In which a majority of directors whose votes are entitled to be counted under

Section 7.3(a) determines that the fair market value of the consideration to be received by

noninterested shareholders for shares of any class of which shares are owned by any interested

shareholder is not less than the highest fair market value of the consideration paid by any interested

shareholder in acquiring shares of the same class within twenty-four months of the proposed

transaction.

 

Section 7.4. This Article may be amended or repealed only by the affirmative vote of the

holders of two-thirds of the shares entitled to be counted under this Section 7.4. All outstanding

shares entitled to vote under applicable law or the Articles of Incorporation shall be entitled to be

counted under this Section 7.4, except shares owned by or voted under the control of an interested

shareholder may not be counted to determine whether shareholders have voted to approve the

amendment or repeal. The vote of the shares owned by or voted under the control of an interested

shareholder, however, shall be counted in determining whether the amendment or repeal is

approved under other provisions of applicable law and for purposes of determining a quorum.

 

Section 7,5. The requirements imposed by this Article are to be in addition to, and not in

lieu of, requirements imposed on any transaction by any provision of applicable law, or any other

provision of the Articles of Incorporation, or the Bylaws or otherwise.

 

ARTICLE VIII

Consideration of Non-R’lonetary Factors

The Board of Directors of the corporation, when evaluating any offer of another party to (a)

mke a tender or exchange offer for any equity security of the corporation, (b) merge or consolidate

the corporation with another corporation, or (c) purchase or otherwise acquire all or substantially all

of the properties and assets of the corporation, shall, in connection with the exercise of its judgment

in determining what is in the best interests of the corporation and its stockholders, give due

consideration to all relevant factors, including without limitation the social and economic effects on

the employees, customers, suppliers, and other constituents of the corporation and its subsidiaries

and on the communities in which the corporation and its subsidiaries operate or are located.

 

ARTICLE IX

Director Liabili@ and Indemnification

Section 10.1- Definitions. As used in this Article:

(a) The term “Egregious Conduct” by a person shall mean acts or omissions that

involve intentional misconduct or a knowing violation of law, conduct violating Section

23B,08.310 of the Revised Code of Washington, as amended, or participation in any transaction

from which the person will personally receive a benefit in money, property, or services to which the

person is not legally entitled.

(b) The term “Finally Adjudged” shall mean stated in a judgment based upon clear and

convincing evidence by a court having jurisdiction, from which there is no further right to appeal.

(c) The term “Director” shall mean any person who is a director of the corporation and

any person who, while a director of the corporation, is serving at the request of the corporation as a

director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation,

partnership, joint venture, trust, or other enterprise, or is a fiduciary or party in interest in relation to

any employee benefit plan covering any ernplo yee of the corporation or of any employer in which it

has an ownership interest; and “conduct as a Director” shall include conduct while a Director is

acting in any of such capacities.

(d) The term “Officer-Director” shall mean any person who is simultaneously both an

officer and director of the corporation and any person \vho, while simultaneously both an officer

and director of the corporation, is serving at the request of the corporation as a director, officer.

manager, partner, trustee, employee, or agent of another foreign or domestic corporation, limited

liability company, partnership, joint venture, trust, or other enterprise, or is a fiduciary or party in

interest in relation to any employee benefit plan covering any employee of the corporation or of any

employer in which it has an ownership interest; and “conduct as an Officer-Director” shall include

conduct while such a person is acting as an officer of the corporation or in any of such other

capacities.

(e) The term “Subsidiary Corporation” shall mean any corporation or limited liability

company at least eighty percent of the voting interests of which is held beneficially by this

corporation.  The term “Subsidiary Outside Director” shall mean any person who, while not

principally employed by this corporation or any Subsidiary Corporation, is a director or manager of

a Subsidiary Corporation and any such person who, while a director or manager of a Subsidiary

Corporation, is serving at the request of such corporation as a director, officer, manager, partner,

trustee, employee, or agent of another foreign or domestic corporation, limited liability company,

partnership, joint venture, trust, or other enterprise, or is a fiduciary or party in interest in relation to

any employee benefit plan covering any employee of such corporation or of any employer in which

it has an ownership interest; and “conduct as a Subsidiary Outside Director” shall include conduct

while such a person is acting in any of such capacities.

 

Section 10.2 - Liabilitv of Directors. No Director, Officer-Director, former Director or

former Officer-Director shall be personally liable to the corporation or its shareholders for

monetary damages for conduct as a Director or Officer-Director occurring after the effective date of

this Article unless the conduct is Finally Adjudged to have been Egregious Conduct.

 

Section 10.3- Liability of Subsidi m Outside Directors. No Subsidiary Outside Director or

former Subsidiary Outside Director shall be personally liable in any action brought directly by this

corporation as a shareholder of the Subsidiary Corporation or derivatively on behalf of the

Subsidiary Corporation (or by any shareholder of this corporation double-derivatively on behalf of

this corporation and the Subsidiary Corporation) for monetary damages for conduct as a Subsidiary

Outside Director occurring after the effective date of this Article unless the conduct is Finally

Adjudged to have been Egregious Conduct.

 

Section 10.4- Mandato~ Indemnification of Directors. Subject to Sections 10.7 and 10.8

of this Article, the corporation shall indemni@ any person who is, or is threatened to be made, a

party to any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and

\vhether formal or itlformal, and whether by or in the right of the corporation or its shareholders or

by any other party, by reason of the fact that the person is or was a Director, Officer-Director, or

SubsidiaryOutsideDirector againstjudgments, penalties or penalty taxes, fines, settlements(even

if paid or payable to the corporation or its shareholders or to a Subsidiary Corporation) and

reasonable expenses, including attorneys’ fees, actually incurred in connection with such action, suit

or proceeding unless the liability and expenses were on account of conduct Finally Adjudged to be

Egregious Conduct.

 

Section 10.5- Advancinr Ext)enses. Except as prohibited by Sections 10.7 and 10.8 of this

Article, the reasonable expenses, including attorneys’ fees, of a Director, Officer-Director,

Subsidiary Outside Director, or person formerly serving in any such capacities, incurred in

connection \vith an action, suit or proceeding in which the individual is entitled to indemnification

under Section 10.4 shall be paid or reimbursed by the corporation, upon request of such person, in

advance of the final disposition of such action, suit or proceeding upon receipt by the corporation of

a written, unsecured promise by the person to repay such amount if it shall be Finally Adjudged

that the person is not eligible for indemnification. All expenses incurred by such person in

connection with such action, suit or proceeding shall be considered reasonable unless Finally

Adjudged to be unreasonable.

 

Section 10.6- Procedure. Except as required by Sections 10.7 and 10.8 of this Article, no

action by the Board of Directors, the shareholders, independent counsel, or any other person or

persons shall be necessary or appropriate to the determination of the corporation’s indemnification

obligation under this Article in any specific case, to the determination of the reasonableness of any

expenses incurred by a person entitled to indemnification under this Article, nor to the authorization

of indemnification in any specific case.

 

Section 10.7 - Exception for Internal Claims. Notwithstanding anything else in these

Articles, the corporation shall not be obligated to indemni& any person for any expenses, including

attorneys’ fees, incurred to assert any claim against the corporation (except a claim to enforce rights

to indemnification) or any person related to or associated with it, including any person who would

be entitled hereby to indemnification in connection with the claim.

 

Section 10.8- Exception for Re~ulatow Claims.

(a) Rexulaton’ Proceedings Generallv. Notwithstanding anything else in these

Articles, indemnification of any Director, Officer-Director or Subsidiary Outside Director,,

or any person formerly serving in any such capacities, and advancement of expenses in

connection with either an administrative proceeding or a civil action instituted by a federal

banking agency (“Regulatory Proceedings”) shall be governed by this Section.

(b) Banking Regulations Defined. The term “Baling Regulations” shall mean

any state or federal laws or regulations applicable to the corporation, or any formal policies

adopted by a regulatory agency having jurisdiction over the corporation.

(c) Indemnification in Reaulatom Proceedin~s. The corporation shall provide

indemniftc.ation and advancement of expenses in connection with Regulatory Proceedings

to the extent permitted, and in the manner prescribed by Banking Regulations. Insurance

and other means to ensure payment of costs and expenses in Regulatory Proceedings may

be obtained or provided to the extent permitted and in the manner prescribed by BaAing

Regulations.

 

Section 10.9- Enforcement of Rights. The corporation shall indemnify any person grantecl

indemnification rights under this Article against any reasonable expenses incurred by the person tc)

enforce such rights.

 

Section 10.10- Set-off of Claims. Any person granted indemnification rights herein may

directly assert such rights in set-off of any claim raised against the person by or in the right of the

corporation and shall be entitled to have the same tribunal which adjudicates the corporation’s claim

adjudicate the person’s entitlement to indemnification by the corporation.

 

Section 10.11- Continuation of R.i~hts. The indemnification rights provided in this Article

shall continue as to a person who has ceased to be a Director, Officer-Director, or Subsidiary

Outside Director and shall inure to the benefit of the heirs, executors, and administrators of such

person.

 

Section 10.12- Effect of Amendment or Repeal. Any amendment or repeal of this Article

shall not adversely affect any right or protection of a Director, Officer-Director, or Subsidiary

Outside Director or person fomlerly serving in any of such capacities existing at the time of such

amendment or repeal with respect to acts or omissions occurring prior to such amendment or repeal.

 

Section 10.13 - Severability of Provisions. Each of the substantive provisions of this

Article is separate and independent of the others, so that if any provision hereof shall be held to be

invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the

validity or enforceability of the other provisions.

 

ARTICLE X

Amendment to Bylaws

The Board of Directors shall have full power to adopt, alter, amend, or repeal the Bylaws or

adopt ne~v Bylaws; provided nothing herein shall deny the concurrent power of the shareholders to

adopt, alter, amend, or repeal the Bylaws so long as any Bylaw is not inconsistent with law or these

Articles.

 

 

I HEREBY CERTIFY, as President of City Bank, that these Amended and Restated

Articles of Incorporation were approved by shareholders owning two-thirds of the outstanding

shares of the Ba& at the Annual hieeting of Shareholders held on April 9, 1998.

 

 

Conrad Hanson,

President and Chief Executive Officer

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