Exhibit (a)(1)(A)
NOTICE OF FUNDAMENTAL CHANGE AND OFFER TO PURCHASE
Washington Mutual, Inc. and New American Capital, Inc.
(as Successor to Providian Financial Corporation)
Offer to Purchase for Cash Any and All of the Outstanding
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3
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% Convertible
Cash to Accreting Senior Notes due March 15, 2016
(CUSIP No. 74406AAD4)
The Offer will expire at 12:00 midnight, Eastern time, on
November 2, 2005 unless extended or earlier terminated
pursuant to a requirement of applicable law (such time and date,
as the same may be extended, referred to as the “expiration
time”). Holders must tender their Notes in the manner
described below on or prior to the expiration time to receive
the purchase price. Notes tendered in the Offer may be withdrawn
at any time prior to the expiration time.
NOTICE IS HEREBY GIVEN pursuant to the terms and conditions of
the Indenture dated as of May 1, 1999, between Providian
Financial Corporation (“Providian”) and
J.P. Morgan Trust Company, National Association, as the
successor trustee (the “Trustee”), as supplemented by
the Fourth Supplemental Indenture dated as of March 19,
2004 and as further supplemented by the Fifth Supplemental
Indenture dated as of October 1, 2005 (the
“Indenture”), that at the option of each holder of the
Company’s
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% Convertible
Cash to Accreting Senior Notes due March 15, 2016 (the
“Notes”), the Notes will be purchased by New American
Capital, Inc. (referred to as “we,” “us,”
“our” or the “Company”), a direct, wholly
owned subsidiary of Washington Mutual, Inc. (referred to as
“Washington Mutual”), as successor to Providian under
the Indenture, subject to the terms and conditions of this
Notice of Fundamental Change and Offer to Purchase (as amended
and supplemented from time to time, the “Offer to
Purchase”). In accordance with the Indenture, we are
offering to purchase each $1,000 original principal amount of
the Notes at a purchase price of 100% of the accreted principal
amount, together with accrued and unpaid cash interest to, but
excluding, the Fundamental Change Repurchase Date, which will be
November 3, 2005 unless the offering period is extended or
earlier terminated. In addition, a Make Whole Premium of
$212.0580, payable in Washington Mutual common stock and cash,
will be paid for each $1,000 original principal amount of Notes
purchased. The offer to purchase the Notes on the terms set
forth in this Offer to Purchase is referred to herein as the
“Offer.”
This Notice of Fundamental Change and Offer to Purchase
constitutes the “Fundamental Change Notice” referenced
in Section 4.01(b) of the Fourth Supplemental Indenture.
Following a Fundamental Change, as defined in the Indenture, of
Providian, each holder of the Notes has the right to have its
Notes repurchased in accordance with the terms of the Indenture.
A Fundamental Change occurred on October 1, 2005 as a
result of the consummation of the merger of Providian with and
into the Company (the “Merger”). In connection with
the Merger, we entered into the Fifth Supplemental Indenture
among us, Washington Mutual and the Trustee (the “New
Supplemental Indenture”) and thereby assumed
Providian’s obligations under the Notes and the Indenture,
including the obligation to make this Offer. Notice of the
execution of the New Supplemental Indenture is hereby provided
to you in accordance with Section 3.06 of the Indenture.
In addition, the Merger constitutes an event that permits the
holders to convert their Notes into cash and Washington Mutual
common stock pursuant to the terms of the Indenture. The
conversion rights arising as a result of the Merger will expire
at 5:00 p.m., Eastern time, on October 19, 2005.
Holders should read “Section 6. Conversion Rights with
Respect to the Notes” beginning on page 14 for more
information about the conversion rights and the circumstances in
which Notes may be converted. Holders who validly tender and do
not properly withdraw their Notes in the Offer will no longer
have conversion rights, unless we fail to purchase and pay for
such Notes pursuant to the Offer.
Based on the closing sale price for Washington Mutual common
stock on October 4, 2005 of $38.60, the purchase price that
the Company is offering to pay to holders pursuant to this Offer
is less than the value of the cash and Washington Mutual common
stock that a holder would receive upon conversion of Notes
pursuant to the Indenture, although the value of Washington
Mutual common stock received upon conversion will fluctuate with
the market price of such common stock. Holders are urged to
review this Offer to Purchase and the documents incorporated by
reference herein carefully and consult with their own financial
and tax advisors before deciding whether to tender their Notes
in the Offer. None of us, the Trustee or the paying agent makes
any recommendation as to whether or not holders should tender
Notes pursuant to this Offer.
Neither the Securities and Exchange Commission nor any state
securities commission nor any other regulatory authority has
approved or disapproved of these transactions or determined if
this statement is truthful or complete. Any representation to
the contrary is a criminal offense.
The date of this Offer to Purchase is October 5, 2005
TABLE OF CONTENTS
No person has been authorized to give any information or to make
any representations other than those contained in this Offer to
Purchase and, if given or made, such information or
representations must not be relied upon as having been
authorized. This Offer to Purchase does not constitute an offer
to buy or the solicitation of an offer to sell securities in any
circumstances or jurisdiction in which such offer or
solicitation is unlawful. The delivery of this Offer to Purchase
shall not, under any circumstances, create any implication that
the information contained or incorporated by reference herein is
current as of any time subsequent to the date of this Offer to
Purchase, or the date of any documents incorporated by
reference, as applicable.
We and our affiliates, including our executive officers and
directors, will be prohibited by Rule 13e-4 under the
Securities Act of 1934, as amended (the “Exchange
Act”), from purchasing any of the Notes outside of the
Offer for ten business days after the expiration of the Offer.
Following that time, we expressly reserve the absolute right, in
our sole discretion from time to time in the future, to purchase
any of the Notes, whether or not any Notes are purchased by the
Company pursuant to the Offer, through open market purchases,
privately negotiated transactions, tender offers, exchange
offers or otherwise, upon such terms and at such prices as we
may determine, which may be more or less than the price to be
paid pursuant to the Offer and could be for cash or other
consideration. We cannot assure you as to which, if any, of
these alternatives, or combination thereof, we will pursue.
i
SUMMARY TERM SHEET
The following are answers to some of the questions that you, as
a holder of our
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3
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% Convertible
Cash to Accreting Senior Notes due March 15, 2016, may
have. We urge you to read the remainder of this Offer to
Purchase carefully because the information in this summary term
sheet is not complete. Additional important information is
contained in the remainder of this Offer to Purchase.
Who is offering to buy my securities?
New American Capital, Inc., a Delaware corporation, is offering
to purchase the Notes. We are a direct, wholly owned subsidiary
of Washington Mutual, Inc. and are the successor to Providian
Financial Corporation, the original issuer of the Notes, as a
result of the merger of Providian with and into us on
October 1, 2005. See “Section 4. Certain
Information Concerning the Offeror.”
What securities are you offering to purchase in the Offer?
We are offering to purchase any and all of the outstanding
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% Convertible
Cash to Accreting Senior Notes due March 15, 2016. As of
September 30, 2005, there was $229,684,000 in aggregate
original principal amount of the Notes outstanding. Providian
issued the Notes under the Indenture, as supplemented by the
Fourth Supplemental Indenture. Pursuant to the Fifth
Supplemental Indenture, we assumed all of Providian’s
obligations under the Notes and the Indenture.
We have also commenced separate offers with respect to our Zero
Coupon Convertible Notes due February 15, 2021 and our
4% Convertible Senior Notes due May 15, 2008, which
were also originally issued by Providian. If you are also a
holder of the Zero Coupon Convertible Notes and/or the
4% Convertible Senior Notes and need copies of the offer
documentation for such notes, please contact J.P. Morgan
Trust Company, National Association, the paying agent,
conversion agent and information agent for both offers, at
(800) 275-2048 or at one of the addresses listed on the
back cover of this Offer to Purchase.
Are there any conditions to the Offer?
We are offering to purchase all outstanding Notes. The Offer is
not conditioned upon the tender of a minimum amount of Notes and
is not subject to any financing condition. The only conditions
to this Offer are (i) the timely and proper delivery and
tender of Notes in accordance with the terms of this Offer to
Purchase and (ii) that the Offer must comply with
applicable law. See “Section 13. Conditions of the
Offer.”
Why are you offering to purchase my securities?
We are offering to purchase the Notes to satisfy our contractual
obligation under Section 4.01 of the Fourth Supplemental
Indenture to repurchase, at the option of each holder thereof,
the Notes after a Fundamental Change, as defined in the
Indenture. A Fundamental Change occurred on October 1, 2005
when Providian merged with and into us.
How much are you offering to pay and what is the form of
payment?
In accordance with the Indenture, we are offering to purchase
the Notes at a purchase price in cash of 100% of the accreted
principal amount of the Notes, plus accrued and unpaid interest
to, but excluding, the Fundamental Change Repurchase Date, as
defined in the Indenture, which will be November 3, 2005
unless the term of the Offer is extended or earlier terminated
pursuant to a requirement of applicable law. We estimate that
the purchase price will be approximately $1,003.67 per
$1,000 original principal amount of Notes. In addition, you will
also receive a Make Whole Premium with a value of approximately
$212.0580, payable in Washington Mutual common stock and cash,
for each $1,000 original principal amount of Notes repurchased.
See “Section 2. Terms of the Offer” and
“Section 7. Make Whole Premium.”
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What are my conversion rights with respect to my Notes?
Each $1,000 original principal amount of the Notes may be
converted, at the option of each holder, into
(i) 23.5470 shares of Washington Mutual common stock,
together with the requisite number of Rights issued pursuant to
the Washington Mutual Rights Agreement, and (ii) $117.5910
in cash, upon the occurrence of any of the following events:
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during any calendar quarter, if the closing sale price of
Washington Mutual common stock exceeds $45.36 for at least 20
trading days in the 30 consecutive trading days ending on the
last trading day of the preceding calendar quarter;
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on and after March 15, 2011, if the closing price of
Washington Mutual common stock exceeds $45.36 on any trading day
on or after March 15, 2011;
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during the five business day period immediately after any five
consecutive trading days in which the trading price of the Notes
per $1,000 original principal amount for each day of such period
was less than 98% of the sum of (i) the product of the
closing sale price of Washington Mutual common stock on such day
multiplied by the number of shares of Washington Mutual common
stock issuable upon conversion of $1,000 original principal
amount of Notes on such day, plus (ii) the amount of cash
payable upon conversion of $1,000 original principal amount of
Notes on such day;
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if we have called the particular Notes for redemption;
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during any period in which the Notes are rated at or below
either CCC+ by Standard & Poor’s Ratings Group or
Caa1 by Moody’s Investors Service;
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during the period from the opening of business on the date we
give advance notice of a Fundamental Change to the close of
business on the 10th trading day after we give notice of
the occurrence of the Fundamental Change or publicly announce
that it will not occur; or
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any time on and after the date that we give notice to the
holders of the Notes of a Specified Distribution, as defined in
the Indenture.
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Washington Mutual common stock is listed on the New York Stock
Exchange under the symbol “WM.” On October 4,
2005, the closing sale price of Washington Mutual common stock
on the NYSE was $38.60 per share. See “Section 6.
Conversion Rights With Respect to the Notes.”
Are my Notes currently convertible?
Yes, your Notes are convertible until 5:00 p.m., Eastern
time, on October 19, 2005 in connection with the
Fundamental Change of Providian with respect to the Merger. If
you convert your Notes, you will receive for each $1,000
original principal amount, (i) 23.5470 shares of
Washington Mutual common stock, together with the requisite
number of Rights issued pursuant to the Washington Mutual Rights
Agreement, and (ii) $117.5910 in cash, as well as the Make
Whole Premium of approximately $212.0580 of value, 89% of which
is payable in Washington Mutual common stock and 11% of which is
payable in cash, in connection with such conversion. If you
convert your Notes after October 19, 2005 in accordance
with the conversion rights described above, you will not receive
the Make Whole Premium payable in connection with the Merger.
See “Section 6. Conversion Rights With Respect to the
Notes” and “Section 7. Make Whole Premium.”
Washington Mutual common stock is listed on the New York Stock
Exchange under the symbol “WM.” On October 4,
2005, the closing sale price of Washington Mutual common stock
on the NYSE was $38.60 per share. See “Section 6.
Conversion Rights With Respect to the Notes.”
If I do not tender, will I continue to be able to exercise my
conversion rights?
Yes, to the extent your conversion rights are otherwise
exercisable as described above. Provided that you do not submit
your Notes for purchase, your conversion rights will not be
affected. However, if you convert after 5:00 p.m., Eastern
time, on October 19, 2005, you will not receive the Make
Whole Premium
2
payable in connection with the Merger. See “Section 6.
Conversion Rights With Respect to the Notes” and
“Section 7. Make Whole Premium.”
If I do not tender, will I have the right to require the
Company to repurchase my Notes in the future?
We are making the Offer to satisfy our obligation under the
Indenture to repurchase the Notes at the option of each holder
as a result of the Fundamental Change that occurred with respect
to Providian upon the Merger. Upon expiration of the Offer, the
Company will have no further obligation to repurchase your Notes
unless another Fundamental Change occurs in the future with
respect to us or Washington Mutual, in which case you would have
the right, at your option, to require us to repurchase in cash
your Notes. If you do not tender your Notes in the Offer or
convert your Notes and we do not redeem or otherwise repurchase
your Notes, you will also have the right to require us to
repurchase your Notes on each of March 15, 2011 and
March 15, 2014, upon the terms and conditions set forth in
the Indenture, but you will not receive the Make Whole Premium
payable in connection with the Merger.
What is the Make Whole Premium?
If you tender your Notes for repurchase (before 12:00 midnight,
Eastern time, on November 2, 2005) or conversion (before
5 p.m., Eastern time, on October 19, 2005) in
connection with the Fundamental Change, you will receive, in
addition to the purchase price or conversion consideration, as
applicable, for each $1,000 original principal amount of Notes a
Make Whole Premium with a value of approximately $212.0580.
Eleven percent (11%) of the Make Whole Premium will be paid in
cash and eighty-nine percent (89%) will be paid in shares of
Washington Mutual common stock, which is the same form of
consideration into which Providian common stock was converted
upon the Merger. See “Section 7. Make Whole
Premium.” You will not receive the Make Whole Premium
payable in connection with the Merger if you tender your notes
for repurchase or conversion after the above dates.
What is the market value of the Notes?
The Notes are not listed on any national securities exchange or
authorized to be quoted in any inter-dealer quotation system of
any national securities association. Accordingly, there is no
practical way to determine the trading history of the Notes. See
“Section 5. Price Range of Notes and Common Stock;
Dividends.”
Do you have the financial resources to make payment?
We intend to fund our purchase of the Notes from available cash
on hand. See “Section 12. Source and Amount of
Funds.”
How long do I have to tender in the Offer?
You have until 12:00 midnight, Eastern time, on November 2,
2005, unless we extend or earlier terminate the Offer, to tender
your Notes in the Offer. See “Section 2. Terms of the
Offer” and “Section 9. Expiration, Extension,
Amendment, Termination or Withdrawal of the Offer.”
Can the Offer be extended, and under what circumstances?
We may extend the Offer only if we are required to do so under
applicable law. However, in accordance with the Indenture,
unless the Offer is earlier terminated, we must purchase on
November 3, 2005 any validly tendered Notes that have not
been validly withdrawn by 12:00 midnight, Eastern time, on
November 2, 2005. We will publicly announce any extension
as promptly as practicable after the previously scheduled
expiration of the Offer. Without limiting the manner in which we
may choose to make any public announcement, we shall be under no
obligation to publish, advertise or otherwise communicate any
public announcement other than by issuing a press release. See
“Section 9. Expiration, Extension, Amendment,
Termination or Withdrawal of the Offer.”
3
How do I tender my Notes?
To tender your Notes for purchase pursuant to the Offer, you
must tender the Notes through the Automatic Tender Offer Program
(“ATOP”) of The Depository Trust Company
(“DTC”) no later than 12:00 midnight, Eastern time, on
November 2, 2005. DTC’s ATOP system may not be open
after business hours, so you should plan accordingly.
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If your Notes are held by a broker, dealer, commercial bank,
trust company or other nominee, you must contact such nominee if
you desire to tender your Notes and instruct such nominee to
tender the Notes on your behalf through the transmittal
procedures of DTC on or before the expiration time.
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By tendering your Notes through the transmittal procedures of
DTC, you agree to be bound by the terms of the Offer. See
“Section 10. Procedures for Tendering Notes.”
Until what time can I withdraw previously tendered Notes?
You can withdraw previously tendered Notes at any time until the
expiration time, 12:00 midnight, Eastern time, on
November 2, 2005 unless we extend the Offer, in which case
you may withdraw your Notes at any time prior to the new
expiration time. You may also withdraw any tendered Notes if
such Notes have not been accepted for payment after the
expiration of 40 business days from the commencement of the
Offer. See “Section 11. Withdrawal of Tenders.”
How do I withdraw previously tendered Notes?
To withdraw Notes validly tendered in the Offer, you must
withdraw the Notes through the procedures of DTC prior to the
expiration time. You may not rescind a withdrawal of tendered
Notes. However, you may re-tender your Notes by following the
proper tender procedures. See “Section 10. Procedures
for Tendering Notes” and “Section 11. Withdrawal
of Tenders.”
If I tender, when will I receive payment for the Notes?
We will accept for payment Notes validly tendered prior to the
expiration of the Offer and not validly withdrawn subject to the
conditions of the Offer. Promptly after the expiration time, we
will pay the purchase price for all Notes validly tendered and
not withdrawn under the Offer. See “Section 2. Terms
of the Offer.”
If my Notes are purchased in the Offer, when will interest
cease to accrue on them?
Unless we default in making payment of the purchase price,
interest on the Notes we purchase from you will cease to accrue
as of the end of the day of the day preceding the Fundamental
Change Repurchase Date, which will be November 3, 2005
unless the Offer is extended.
If I choose to tender Notes in the Offer, do I have to
surrender all of my Notes?
No. You may tender all, a portion of or none of your Notes in
the Offer. If you wish to tender a portion of your Notes in the
Offer, however, you must tender your Notes in denominations of
$1,000 original principal amount or integral multiples thereof.
What will happen to Notes not tendered in the Offer?
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Any Notes that remain outstanding after the Fundamental Change
Repurchase Date will continue to be our obligations and will
enjoy the benefits of the Indenture, including the accrual of
interest. You also will continue to have the right to convert
the Notes, assuming satisfaction of the conversion conditions.
The other terms and conditions governing the Notes, including
the covenants and other protective provisions contained in the
Indenture governing the Notes, will remain unchanged.
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To the extent that Notes are purchased pursuant to this Offer to
Purchase, the trading markets for the Notes that remain
outstanding may be more limited than the trading markets that
may have existed if all Notes remained outstanding. As a result,
the market price for the remaining Notes may decrease or become
more volatile.
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Whether or not any Notes are purchased by us pursuant to the
Offer, we or any of our affiliates, from time to time at any
time beginning after the tenth business day following the
expiration of the Offer, may acquire Notes otherwise than
pursuant to the Offer, through various means upon such terms and
at prices that may be higher or lower than the prices to be paid
pursuant to this Offer to Purchase, and for cash or other
consideration.
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Do I have to pay a commission if I tender my Notes?
No commissions are payable by holders of the Notes to the
Company, DTC or the paying agent; however, you may be required
to pay commissions to your broker in connection with your tender
of Notes. See “Section 2. Terms of the Offer.”
What are the material federal income tax consequences to me
if I tender?
The sale of Notes pursuant to the Offer will be a taxable event
for U.S. federal income tax purposes. See
“Section 14. United States Federal Income Tax
Consequences.”
Who can I talk to if I have questions about the Offer?
You may contact J.P. Morgan Trust Company, National
Association, which is the paying agent, conversion agent and
information agent for the Notes, at (800) 275-2048 or at
one of the addresses listed on the back cover of this Offer to
Purchase if you have any questions or requests for assistance.
Are you making any recommendation about the Offer?
No. We do not make, and none of our directors or affiliates
make, any recommendation as to whether you should tender your
Notes pursuant to the Offer. You should determine whether or not
to tender your Notes pursuant to the Offer based upon, among
other things, your own assessment of the current market value of
the Notes and your liquidity needs and investment objectives.
This Offer to Purchase contains important information and you
should read the remainder of this document in its entirety
before making a decision with respect to the Offer.
5
DOCUMENTS INCORPORATED BY REFERENCE
We incorporate by reference specified information that
Washington Mutual and Providian have filed with the SEC, which
means that we can disclose important information to you by
referring you to those documents. The information incorporated
by reference is an important part of this Offer to Purchase. Any
statement contained in a document incorporated by reference
shall be deemed to be modified or superseded for purposes of
this Offer to Purchase to the extent that a statement contained
in this Offer to Purchase modifies or replaces that statement.
We incorporate by reference the documents of Washington Mutual
and Providian listed below (including all exhibits thereto, in
each case, as applicable).
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(i) The section titled “Description of the Notes”
in Providian’s Prospectus Supplement filed pursuant to
Rule 424(b) on March 16, 2004 (File
No. 333-55937).
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(ii) Washington Mutual’s Annual Report on
Form 10-K for the year ended December 31, 2004 (File
No. 1-14667);
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(iii) Washington Mutual’s Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2005 and
June 30, 2005 (File No. 1-14667);
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(iv) Proxy Statement/ Prospectus of Washington Mutual and
Providian included as part of the Registration Statement on
Form S-4 filed by Washington Mutual on July 6, 2005,
as amended on July 28, 2005 (File No. 333-126353);
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(v) Washington Mutual’s Current Reports on
Form 8-K and Form 8-K/ A filed on January 6,
2005, January 14, 2005, January 20, 2005,
January 24, 2005, February 18, 2005, February 22,
2005, March 2, 2005, March 22, 2005, March 23,
2005, April 19, 2005, June 7, 2005, June 9, 2005,
June 24, 2005, July 6, 2005, July 20, 2005,
July 25, 2005, September 8, 2005, September 23,
2005, September 26, 2005 and October 4, 2005 (other
than the portions of those documents not deemed to be
filed)(File No. 1-14667);
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(vi) Providian’s Annual Report on Form 10-K for
the year ended December 31, 2004 (File
No. 1-12897); and
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(vii) Providian’s Quarterly Reports on Form 10-Q
for the quarters ended March 31, 2005 and June 30,
2005 (File No. 1-12897).
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In addition, this Offer to Purchase constitutes a part of an
Issuer Tender Offer filed on Schedule TO (the
“Schedule TO”) filed by us with the SEC on
October 5, 2005 pursuant to Section 13(e) of the
Exchange Act and the rules and regulations promulgated
thereunder. The Schedule TO and all exhibits thereto are
incorporated in this Offer to Purchase by reference. We will
file an amendment to the Schedule TO to incorporate by
reference into this Offer to Purchase all documents filed by us
pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date hereof and prior to the expiration
time.
You may request a free copy of these filings by writing us at
the following address:
New American Capital, Inc.
1201 Third Avenue
Seattle, Washington 98101
Attn: Corporate Secretary
In addition, you may obtain copies of the information relating
to Washington Mutual, without charge, by accessing Washington
Mutual’s website at http://www.wamu.com under the tab
“About WaMu” and then under the heading “Investor
Relations.”
6
AVAILABLE INFORMATION
Washington Mutual files, and, prior to the Merger, Providian
filed, annual, quarterly and special reports, proxy statements,
and other documents with the Securities and Exchange Commission
(the “SEC”) under the Exchange Act. Such SEC filings
are available to the public at its website at
http://www.wamu.com and the SEC’s website at
http://www.sec.gov. You may also read and copy any document we
file at the SEC’s Public Reference Room located at:
Headquarters Office
100 F Street, N.E.
Room 1580
Washington, DC 20549
(202) 551-8090
You may obtain information regarding the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330
(1-800-732-0330).
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Offer to Purchase and the documents incorporated by
reference into this Offer to Purchase contain or may contain
forward-looking statements. These forward-looking statements
include, but are not limited to, statements about the benefits
of the Merger, including future financial and operating results
and performance; statements about our plans, objectives,
expectations and intentions with respect to future operations,
products and services; and other statements identified by words
such as “expects,” “anticipates,”
“intends,” “plans,” “believes,”
“seeks,” “estimates,” “will,”
“should,” “may” or words of similar meaning.
These forward-looking statements are based upon the current
beliefs and expectations of our management and are inherently
subject to significant business, economic and competitive
uncertainties and contingencies, many of which are difficult to
predict and generally beyond our control. In addition, these
forward-looking statements are subject to assumptions with
respect to future business strategies and decisions that are
subject to change. Actual results may differ materially from the
anticipated results discussed in these forward-looking
statements.
The following factors, among others, could cause actual results
to differ materially from the anticipated results or other
expectations expressed in the forward-looking statements:
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those factors discussed and identified in public filings with
the Securities and Exchange Commission made by Washington Mutual
and Providian;
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the businesses of Washington Mutual and Providian may not be
combined successfully, or such combination may take longer, be
more difficult, time-consuming or costly to accomplish than
expected;
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the expected growth opportunities and cost savings from the
Merger may not be fully realized or may take longer to realize
than expected;
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operating costs, customer losses and business disruption
following the Merger, including adverse effects on relationships
with employees, may be greater than expected;
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adverse governmental or regulatory policies may be enacted;
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competition from other financial services companies in
Washington Mutual’s markets could adversely affect its
operating results and business plans, including plans to expand
credit card originations through Washington Mutual’s
branches and other channels; and
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general business and economic conditions, including movements in
interest rates, could adversely affect credit quality and loan
originations and the costs or availability of funding.
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7
You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of
this document or the date of any document incorporated by
reference in this document. All subsequent written and oral
forward-looking statements concerning the matters addressed in
this document and attributable to Washington Mutual or the
Company or any person acting on our behalf are expressly
qualified in their entirety by the cautionary statements
contained or referred to in this section. Except to the extent
required by applicable law or regulation, neither Washington
Mutual nor the Company undertakes any obligation to update these
forward-looking statements to reflect events or circumstances
after the date of this document or to reflect the occurrence of
unanticipated events.
8
SELECTED HISTORICAL FINANCIAL DATA OF WASHINGTON MUTUAL
Washington Mutual derived the financial information as of and
for the fiscal years ended December 31, 2000 through
December 31, 2004 from its historical audited financial
statements for those fiscal years. Washington Mutual derived the
financial information as of and for the six months ended
June 30, 2004 and 2005 from its unaudited financial
statements, which financial statements include, in the opinion
of Washington Mutual’s management, all adjustments,
consisting of normal and recurring adjustments, necessary for a
fair statement of those results. The results for the six months
ended June 30, 2005 are not necessarily indicative of the
results that may be expected for the year ending
December 31, 2005. This information is only a summary, and
you should read it in conjunction with Washington Mutual’s
consolidated financial statements and the related notes
contained in Washington Mutual’s periodic reports filed
with the Securities and Exchange Commission that have been
incorporated by reference in this document. See “Documents
Incorporated by Reference” beginning on page 6.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions, except per share amounts)
|
|
|
STATEMENT OF INCOME DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
3,816
|
|
|
$
|
3,526
|
|
|
$
|
7,116
|
|
|
$
|
7,629
|
|
|
$
|
8,129
|
|
|
$
|
6,492
|
|
|
$
|
3,952
|
|
|
Provision for loan and lease losses
|
|
|
47
|
|
|
|
116
|
|
|
|
209
|
|
|
|
42
|
|
|
|
404
|
|
|
|
426
|
|
|
|
77
|
|
|
Noninterest income
|
|
|
2,674
|
|
|
|
2,131
|
|
|
|
4,612
|
|
|
|
5,850
|
|
|
|
4,469
|
|
|
|
3,176
|
|
|
|
1,925
|
|
|
Noninterest expense
|
|
|
3,667
|
|
|
|
3,728
|
|
|
|
7,535
|
|
|
|
7,408
|
|
|
|
6,188
|
|
|
|
4,416
|
|
|
|
2,970
|
|
|
Income from continuing operations before income taxes
|
|
|
2,776
|
|
|
|
1,813
|
|
|
|
3,984
|
|
|
|
6,029
|
|
|
|
6,006
|
|
|
|
4,826
|
|
|
|
2,830
|
|
|
|
Income taxes
|
|
|
1,031
|
|
|
|
676
|
|
|
|
1,505
|
|
|
|
2,236
|
|
|
|
2,217
|
|
|
|
1,783
|
|
|
|
1,038
|
|
|
|
|
Income from continuing operations, net of taxes
|
|
|
1,745
|
|
|
|
1,137
|
|
|
|
2,479
|
|
|
|
3,793
|
|
|
|
3,789
|
|
|
|
3,043
|
|
|
|
1,792
|
|
|
Income (loss) from discontinued operations before income taxes
|
|
|
—
|
|
|
|
(32
|
)
|
|
|
(32
|
)
|
|
|
137
|
|
|
|
113
|
|
|
|
96
|
|
|
|
127
|
|
|
|
Gain on disposition of discontinued operations
|
|
|
—
|
|
|
|
676
|
|
|
|
676
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Income taxes
|
|
|
—
|
|
|
|
245
|
|
|
|
245
|
|
|
|
50
|
|
|
|
41
|
|
|
|
35
|
|
|
|
48
|
|
|
|
|
Income from discontinued operations, net of taxes
|
|
|
—
|
|
|
|
399
|
|
|
|
399
|
|
|
|
87
|
|
|
|
72
|
|
|
|
61
|
|
|
|
79
|
|
|
Net income
|
|
|
1,745
|
|
|
|
1,536
|
|
|
|
2,878
|
|
|
|
3,880
|
|
|
|
3,861
|
|
|
|
3,104
|
|
|
|
1,871
|
|
|
Net income attributable to common stock
|
|
|
1,745
|
|
|
|
1,536
|
|
|
|
2,878
|
|
|
|
3,880
|
|
|
|
3,856
|
|
|
|
3,097
|
|
|
|
1,871
|
|
|
Net income per common share(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
2.02
|
|
|
$
|
1.32
|
|
|
$
|
2.88
|
|
|
$
|
4.20
|
|
|
$
|
4.01
|
|
|
$
|
3.57
|
|
|
$
|
2.24
|
|
|
|
|
Income from discontinued operations, net
|
|
|
—
|
|
|
|
0.46
|
|
|
|
0.46
|
|
|
|
0.09
|
|
|
|
0.08
|
|
|
|
0.07
|
|
|
|
0.09
|
|
|
|
|
|
Net income
|
|
|
2.02
|
|
|
|
1.78
|
|
|
|
3.34
|
|
|
|
4.29
|
|
|
|
4.09
|
|
|
|
3.64
|
|
|
|
2.33
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
1.97
|
|
|
|
1.29
|
|
|
|
2.81
|
|
|
|
4.12
|
|
|
|
3.94
|
|
|
|
3.51
|
|
|
|
2.23
|
|
|
|
|
Income from discontinued operations, net
|
|
|
—
|
|
|
|
0.45
|
|
|
|
0.45
|
|
|
|
0.09
|
|
|
|
0.08
|
|
|
|
0.07
|
|
|
|
0.09
|
|
|
|
|
|
Net income
|
|
|
1.97
|
|
|
|
1.74
|
|
|
|
3.26
|
|
|
|
4.21
|
|
|
|
4.02
|
|
|
|
3.58
|
|
|
|
2.32
|
|
|
Average diluted common shares used to calculate per share
(in thousands)
|
|
|
888,020
|
|
|
|
884,940
|
|
|
|
884,050
|
|
|
|
921,757
|
|
|
|
960,152
|
|
|
|
864,658
|
|
|
|
804,695
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions, except per share amounts)
|
|
|
STATEMENT OF FINANCIAL CONDITION DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets(2)
|
|
$
|
323,533
|
|
|
$
|
278,544
|
|
|
$
|
307,918
|
|
|
$
|
275,178
|
|
|
$
|
268,225
|
|
|
$
|
242,468
|
|
|
$
|
194,688
|
|
|
Securities
|
|
|
19,248
|
|
|
|
19,379
|
|
|
|
19,219
|
|
|
|
36,707
|
|
|
|
43,905
|
|
|
|
58,233
|
|
|
|
58,547
|
|
|
Loans held for sale
|
|
|
51,122
|
|
|
|
27,795
|
|
|
|
42,743
|
|
|
|
20,837
|
|
|
|
39,623
|
|
|
|
27,574
|
|
|
|
3,404
|
|
|
Loans held in portfolio
|
|
|
212,737
|
|
|
|
194,543
|
|
|
|
207,071
|
|
|
|
175,150
|
|
|
|
143,028
|
|
|
|
126,396
|
|
|
|
115,898
|
|
|
Deposits
|
|
|
184,317
|
|
|
|
162,466
|
|
|
|
173,658
|
|
|
|
153,181
|
|
|
|
155,516
|
|
|
|
106,946
|
|
|
|
79,384
|
|
|
Borrowings
|
|
|
112,239
|
|
|
|
91,549
|
|
|
|
108,561
|
|
|
|
94,157
|
|
|
|
83,201
|
|
|
|
114,783
|
|
|
|
98,619
|
|
|
Stockholders’ equity
|
|
|
22,350
|
|
|
|
20,369
|
|
|
|
21,226
|
|
|
|
19,742
|
|
|
|
20,061
|
|
|
|
14,025
|
|
|
|
10,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share(1)
|
|
$
|
0.93
|
|
|
$
|
0.85
|
|
|
$
|
1.74
|
|
|
$
|
1.40
|
|
|
$
|
1.06
|
|
|
$
|
0.90
|
|
|
$
|
0.76
|
|
|
Common stock dividend payout ratio
|
|
|
46.04
|
%
|
|
|
47.75
|
%
|
|
|
52.10
|
%
|
|
|
32.63
|
%
|
|
|
25.92
|
%
|
|
|
24.73
|
%
|
|
|
32.62
|
%
|
|
Return on average assets(3)
|
|
|
1.11
|
%
|
|
|
1.11
|
%
|
|
|
1.01
|
%
|
|
|
1.37
|
%
|
|
|
1.42
|
%
|
|
|
1.38
|
%
|
|
|
1.00
|
%
|
|
Return on average common stockholders’ equity(3)
|
|
|
15.98
|
%
|
|
|
15.21
|
%
|
|
|
14.02
|
%
|
|
|
18.85
|
%
|
|
|
19.34
|
%
|
|
|
23.51
|
%
|
|
|
20.87
|
%
|
|
Stockholders’ equity/total assets
|
|
|
6.91
|
%
|
|
|
7.31
|
%
|
|
|
6.89
|
%
|
|
|
7.17
|
%
|
|
|
7.48
|
%
|
|
|
5.78
|
%
|
|
|
5.21
|
%
|
|
Book value per common share(4)
|
|
$
|
25.62
|
|
|
$
|
23.51
|
|
|
$
|
24.45
|
|
|
$
|
22.56
|
|
|
$
|
21.66
|
|
|
$
|
16.40
|
|
|
$
|
12.80
|
|
|
Number of common shares outstanding at end of period
(in thousands)(4)
|
|
|
878,384
|
|
|
|
872,246
|
|
|
|
874,262
|
|
|
|
880,986
|
|
|
|
944,047
|
|
|
|
873,089
|
|
|
|
809,784
|
|
|
|
|
|
(1)
|
Restated for all stock splits.
|
|
|
|
(2)
|
Includes assets of discontinued operations for the years ended
December 31, 2003, 2002, 2001 and 2000.
|
|
|
|
(3)
|
Includes income from continuing and discontinued operations for
the three months ended March 31, 2004, and years ended
December 31, 2004, 2003, 2002, 2001 and 2000.
|
|
|
|
(4)
|
Excludes 6 million shares held in escrow at June 30,
2005, December 31, 2004 and 2003, and 18 million
shares at December 31, 2002, 2001, and 2000.
|
10
THE OFFER
Section 1. Introduction.
We are offering, upon the terms and subject to the conditions
set forth in this Offer to Purchase, to purchase any or all of
our outstanding
2
3
/
4
% Convertible
Cash to Accreting Senior Notes due March 15, 2016 at a
price in cash equal to 100% of the accreted principal amount of
the Notes, plus accrued and unpaid interest to but excluding the
date the Notes are purchased, plus a Make Whole Premium.
This notice of Fundamental Change and Offer to Purchase is being
sent to you pursuant to the Fourth Supplemental Indenture and
constitutes a “Fundamental Change Notice” referenced
in Section 4.01(b) and a notice of execution of a
supplemental indenture referenced in Section 3.06. The
Indenture provides that following a Fundamental Change of
Providian, each holder of the Notes will have the right to have
all of its Notes, or any portion of the principal amount thereof
that is an integral multiple of $1,000, repurchased at a price
determined as set forth in the Indenture. A Fundamental Change
occurred on October 1, 2005 as a result of the consummation
of the Merger. We entered into the Fifth Supplemental Indenture
among us, Washington Mutual and J.P. Morgan Trust Company,
National Association, as trustee, on October 1, 2005 and
thereby assumed Providian’s obligations under the Notes and
the Indenture, including the obligation to make this Offer.
Washington Mutual has fully and unconditionally guaranteed our
obligations under the Notes and the Indenture.
The Offer will expire at the expiration time, which is 12:00
midnight, Eastern time, on November 2, 2005, and we will
purchase on November 3, 2005 any Notes that have been
validly tendered and not withdrawn, unless the Offer is extended
or earlier terminated. If Notes are accepted for payment
pursuant to the Offer, only holders of Notes who validly tender
their Notes pursuant to the Offer at or prior to the expiration
time will receive the purchase price. Notes tendered in the
Offer may be withdrawn at any time prior to the expiration time.
The Notes are currently convertible in connection with the
Fundamental Change of Providian with respect to the Merger and
will remain convertible in connection therewith until
5:00 p.m., Eastern time, on October 19, 2005. If you
convert your Notes, you will receive
(i) 23.5470 shares of Washington Mutual common stock,
together with the requisite number of Rights issued pursuant to
the Washington Mutual Rights Agreement, and (ii) $117.5910
in cash, as well as the Make Whole Premium of approximately
$212.0580 of value, payable in Washington Mutual common stock
and cash, in connection with such conversion.
Based on the current conversion rate and a closing price of
Washington Mutual common stock on the NYSE of $38.60 on
October 4, 2005, a holder that tendered its Notes for
conversion on such date would be entitled to conversion
consideration with a value of approximately $1,238.85 for each
$1,000 original principal amount of Notes so tendered, including
the Make Whole Premium.
The purchase price that we are
offering per $1,000 principal amount of Notes is less than this
hypothetical conversion value. The actual value of the
conversion consideration that a particular holder would be
entitled to receive pursuant to the Indenture and the Notes upon
conversion of such Notes, however, varies based upon the value
of Washington Mutual common stock when the Notes are tendered
for conversion.
There can be no assurance as to the price at
which Washington Mutual common stock may now or in the future
trade or be sold, and no assurance as to whether a holder will
receive an amount greater than, less than, or equal to the
hypothetical conversion value set forth above upon conversion.
Holders of Notes are urged to consult with their own financial
advisors before accepting the offer.
We do not make, and none of our directors or affiliates
makes, any recommendation as to whether holders should tender
their Notes pursuant to the Offer.
Section 2. Terms of the Offer.
Upon the terms and subject to the conditions set forth herein,
we are offering to purchase for cash any and all of the
outstanding Notes at a price in cash equal to 100% of the
accreted principal amount of
11
the Notes, plus accrued and unpaid interest to but excluding the
date the Notes are purchased. We estimate that on
November 3, 2005, which is the Fundamental Change
Repurchase Date (as defined in the Indenture), the purchase
price, including all accrued and unpaid interest to, but
excluding, such date will be approximately $1,003.67 per
$1,000 original principal amount of Notes. In addition, a Make
Whole Premium with a value of approximately $212.0580, payable
in Washington Mutual common stock and cash, will be paid for
each $1,000 original principal amount of Notes repurchased. See
“Section 7. Make Whole Premium.”
The Offer will expire at the expiration time, which is 12:00
midnight, Eastern time, on Wednesday, November 2, 2005
unless extended or earlier terminated. If Notes are accepted for
payment pursuant to the Offer, only holders of Notes who validly
tender their Notes pursuant to the Offer at or prior to the
expiration time will receive the purchase price. Notes tendered
in the Offer may be withdrawn at any time prior to such date and
time.
If we make a material change in the terms of the Offer or the
information concerning the Offer, we will disseminate additional
Offer materials and extend the Offer if required by law.
Subject to applicable securities laws and the terms set forth in
the Indenture and this Offer to Purchase, we reserve the right
to amend the Offer in any respect. In addition, we can extend or
terminate the Offer if such extension or termination is required
by applicable law. Any extension, amendment or termination of
the Offer will be followed as promptly as practicable by public
announcement thereof, the announcement in the case of an
extension of the Offer to be issued no later than
9:00 a.m., Eastern time, on the next business day after the
previously scheduled expiration time. See “Section 9.
Expiration, Extension, Amendment, Termination or Withdrawal of
the Offer.”
In the event that we withdraw or terminate the Offer because
either or both of the conditions to the Offer described in
“Section 13. Conditions of the Offer” have not
been satisfied, the purchase price will not be paid or become
payable to holders who have tendered their Notes. In such event,
the paying agent will return tendered Notes to the tendering
holders promptly following the termination or withdrawal of the
Offer.
You will not be required to pay any commission to us, DTC or the
paying agent in connection with the Offer; however, there may be
commissions you need to pay to your broker in connection with
your tender of Notes.
You may tender, and we will only accept, Notes in denominations
of $1,000 original principal amount and integral multiples
thereof. We will accept for payment, upon the terms and subject
to the conditions of the Offer, all Notes validly tendered in
accordance with the procedures set forth in
“Section 10. Procedures for Tendering Notes” and
not withdrawn in accordance with the procedures set forth in
“Section 11. Withdrawal of Tenders” at or prior
to the expiration time. Each tendering holder of Notes whose
Notes are accepted for payment pursuant to the Offer will
receive the same consideration therefor, per $1,000 original
principal amount thereof, as all other holders of Notes whose
tenders are accepted.
We and our affiliates, including our executive officers and
directors, will be prohibited under applicable federal
securities laws from repurchasing Notes outside of the Offer for
10 business days after the expiration time. Following such
time, if any Notes remain outstanding, we may purchase
additional Notes in the open market, in private transactions,
through a subsequent tender offer or otherwise, any of which
purchases may be consummated at a price higher or lower than
that offered hereby, or which may be paid in cash or other
consideration. The decision to purchase additional Notes, if
any, will depend upon many factors, including the market price
of the Notes, the results of the Offer, the business and
financial position of the Company and Washington Mutual and
general economic and market conditions. Any such purchase may be
on the same terms or on terms more or less favorable to holders
of the Notes than the terms of the Offer as described in this
Offer to Purchase.
12
Section 3. Purpose of the Offer.
Section 4.01 of the Fourth Supplemental Indenture provides that
following a Fundamental Change, you have the right, at your
option, to require the repurchase of your Notes. Such a
Fundamental Change, as defined in the Indenture, occurred on
October 1, 2005 when Providian merged with and into the
Company. In connection with such Merger, we assumed
Providian’s obligations under the Notes and the Indenture,
including the obligation to make this Offer. We are making this
Offer to satisfy our obligations under the Indenture.
Section 4. Certain Information Concerning the
Offeror.
The Company is a direct, wholly owned subsidiary of Washington
Mutual. With a history dating back to 1889, Washington Mutual is
a retailer of financial services that provides a diversified
line of products and services to consumers and commercial
clients. At June 30, 2005, Washington Mutual and its
subsidiaries had reported assets of $323.53 billion.
Washington Mutual currently operates more than 2,400 retail
banking, mortgage lending, commercial banking and financial
services offices throughout the United States.
You may obtain additional information about Washington Mutual at
our website (http://www.wamu.com), and you may obtain copies of
the documents we file with the SEC at http://www.sec.gov.
Section 5. Price Range of Notes and Common Stock;
Dividends.
The Notes are not listed on any national securities exchange or
authorized to be quoted in any inter-dealer quotation system of
any national securities association. There is no existing public
trading market for the Notes, and no reliable pricing
information for the Notes is available. We believe that trading
in the Notes has been limited and sporadic. Quotations for
securities that are not widely traded, such as the Notes, may
differ from actual trading prices and should be viewed as
approximations. To the extent such information is available,
holders are urged to contact their brokers with respect to
current information regarding the market price of the Notes.
To the extent that Notes are tendered and accepted in the Offer,
such Notes will cease to be outstanding. A debt security with a
smaller outstanding principal amount available for trading (a
smaller “float”) may command a lower price and trade
with greater volatility than would a comparable debt security
with a greater float. Consequently, any Notes that we purchase
pursuant to the Offer will reduce the float and may negatively
impact the liquidity, market value and price volatility of the
Notes that remain outstanding following the Offer. We cannot
assure you that a trading market will exist for the Notes
following the Offer. The extent of the market for the Notes
following consummation of the Offer will depend upon, among
other things, the remaining outstanding principal amount of the
Notes at such time, the number of holders of Notes remaining at
such time and the interest in maintaining a market in such Notes
on the part of securities firms.
13
The Washington Mutual common stock into which the Notes are
partially convertible (subject to the satisfaction of certain
conversion conditions) is currently listed on the NYSE under the
symbol “WM.” The following table sets forth, for each
period indicated, the high and low sale prices for Washington
Mutual common stock as reported on the NYSE and the dividends
per share paid during such periods.
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Common Stock
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Price
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Dividends on
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Common Stock
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High
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Low
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(per share)
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2003
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Quarter ended March 31, 2003
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$
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36.95
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$
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32.40
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$
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0.29
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Quarter ended June 30, 2003
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43.99
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35.05
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0.30
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Quarter ended September 30, 2003
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42.95
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36.83
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0.40
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Quarter ended December 31, 2003
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46.85
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38.05
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0.41
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2004
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Quarter ended March 31, 2004
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$
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45.47
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$
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39.45
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$
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0.42
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Quarter ended June 30, 2004
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44.99
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36.80
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0.43
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Quarter ended September 30, 2004
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40.88
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37.54
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0.44
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Quarter ended December 31, 2004
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42.50
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37.51
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0.45
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2005
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Quarter ended March 31, 2005
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$
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42.81
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$
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38.70
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$
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0.46
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Quarter ended June 30, 2005
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42.97
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37.75
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0.47
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Quarter ended September 30, 2005
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43.90
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39.12
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0.48
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Quarter ended December 31, 2005 (through October 4,
2005)
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39.38
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38.50
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—
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On October 4, 2005, the last reported sales price of
Washington Mutual common stock on the NYSE was $38.60.
The declaration and payment of cash dividends on Washington
Mutual common stock in the future and the amount thereof is at
the discretion of Washington Mutual’s board of directors
and will depend upon Washington Mutual’s results of
operations, financial condition, cash requirements, future
prospects, limitations imposed by credit agreements or debt
securities and other factors deemed relevant by its board of
directors. We cannot assure you that cash dividends will
continue to be declared and paid at historical levels or at all.
We urge you to obtain current market quotations for the
Notes, to the extent available, and Washington Mutual common
stock prior to making any decision with respect to the Offer.
Section 6. Conversion Rights With Respect to the
Notes.
Each $1,000 original principal amount of the Notes may be
converted, at the option of each holder, into
(i) 23.5470 shares of Washington Mutual common stock,
together with the requisite number of rights issued pursuant to
the Washington Mutual Rights Agreement, and (ii) $117.5910
in cash, upon the occurrence of any of the following events:
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during any calendar quarter, if the closing sale price of
Washington Mutual common stock exceeded $45.36 for at least 20
trading days in the 30 consecutive trading days period ending on
the last trading day of the immediately preceding calendar
quarter;
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•
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on and after March 15, 2011, if the closing price of
Washington Mutual common stock exceeds $45.36 on any trading day
on or after March 15, 2011;
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during the five business day period immediately after any five
consecutive trading days in which the trading price of the Notes
per $1,000 original principal amount for each day of such period
was less than 98% of the sum of (i) the product of the
closing sale price of Washington Mutual common stock on such day
multiplied by the number of shares of Washington Mutual common
stock
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issuable upon conversion of $1,000 original principal amount of
Notes on such day, plus (ii) the amount of cash payable
upon conversion of $1,000 original principal amount of Notes on
such day; provided that if on the date of any conversion
pursuant to this clause the closing price of Washington Mutual
common stock is greater than the conversion price of the Notes,
a holder of Notes shall receive, in lieu of the default
conversion consideration set forth in the Indenture, cash or
common stock or a combination thereof, at the Company’s
option, with a value equal to the accreted principal amount of
the Notes plus accrued and unpaid interest, including contingent
interest if any, as of the conversion date;
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if we have called the particular Notes for redemption, until the
close of business on the business day immediately prior to the
redemption date;
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•
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during any period in which the Notes are rated at or below
either CCC+ by Standard & Poor’s Ratings Group or
Caa1 by Moody’s Investors Service;
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•
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during the period from the opening of business from the date the
Company gives advance notice of a Fundamental Change to the
close of business on the 10th trading day after the Company
gives notice of the occurrence of the Fundamental Change or
publicly announces that it will not occur; or
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any time on and after the date that the Company gives notice to
the holders of the Notes of a Specified Distribution, as defined
in the Indenture.
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Except under certain circumstances in connection with a
conversion of the Notes effected pursuant to the conditions set
forth in the first bullet point above, the holder will not
receive any additional cash payment representing accrued but
unpaid interest, if any, on Notes tendered for conversion.
The Notes are currently convertible in connection with the
Fundamental Change of Providian with respect to the Merger. The
Notes will be convertible until 5:00 p.m., Eastern time, on
October 19, 2005. Pursuant to Section 3.01 of the
Supplemental Indenture, if you convert your Notes, you will
receive (i) 23.5470 shares of Washington Mutual common
stock, together with the requisite number of Rights issued
pursuant to the Washington Mutual Rights Agreement, and
(ii) $117.5910 in cash, as well as the Make Whole Premium
of approximately $212.0580 of value, 89% of which is payable in
Washington Mutual common stock and 11% of which is payable in
cash, in connection with such conversion. Cash will be paid in
lieu of fractional shares. See “Section 7. Make Whole
Premium.”
In order to exercise the conversion privilege with respect to a
Note held in book-entry form, the beneficial owner must
(i) complete or cause to be completed the appropriate
instruction form for conversion pursuant to DTC’s
book-entry conversion program, (ii) cause to be delivered
by book-entry delivery an interest in the aggregate original
principal amount and corresponding accreted principal amount
represented thereby to be converted of such Note,
(iii) furnish appropriate endorsements and transfer
documents if required by the Company or the Trustee or
conversion agent, and (iv) pay the funds, if any, required
by Section 3.02 of the Supplemental Indenture and any
transfer or similar taxes, if required pursuant to
Section 3.07 of the Supplemental Indenture.
J.P. Morgan Trust Company, National Association is the
trustee and conversion agent for the Notes. See the back cover
of this Offer to Purchase for J.P. Morgan’s contact
information.
For more information regarding the conversion rights with
respect to the Notes, or any of the other terms and conditions
of the Notes, please see the Indenture.
Section 7. Make Whole Premium.
Holders who tender their Notes for repurchase or conversion in
connection with the Merger shall receive for each $1,000
original principal amount of Notes a Make Whole Premium with an
approximate value of $212.0580. The Make Whole Premium was
calculated, in accordance with Section 2.01(b) of the
Fourth Supplemental Indenture, as the sum of 1% and an
additional premium of 20.2058%, multiplied by $1,000. The
additional premium was determined, in accordance with
Section 2.01(b)(ii)(B) of the Fourth Supplemental
Indenture, based on a Stock Price (as defined in the Indenture)
of $18.10, which was the
15
average closing price of Providian common stock for the ten
trading days prior to the Merger. The Make Whole Premium will be
paid by delivery of the same form of consideration into which
Providian’s common stock was converted in the Merger;
therefore, eleven percent (11%) of the Make Whole Premium, or
approximately $23.3264, will be paid in cash and eighty-nine
percent (89%), or approximately $188.7316, will be paid by
delivering shares of Washington Mutual common stock. The number
of shares of the Washington Mutual common stock deliverable will
be determined by assuming a value per share equal to 98% of the
average closing price of Washington Mutual common stock over the
ten trading days prior to, but excluding, the date the Make
Whole Premium is paid, which will be November 3, 2005. Cash
will be paid in lieu of any fractional shares.
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Example:
If the average closing price of Washington
Mutual common stock for the ten trading days prior to
November 3, 2005 is $42, the assumed value of Washington
Mutual common stock for purposes of the Make Whole Provision
would be $41.16. A holder who tenders a Note with $1,000
original principal amount for repurchase or conversion in
connection with the Merger would therefore be entitled to
receive 4.5853 shares of Washington Mutual common stock and
$23.33 in cash as payment of the Make Whole Premium. However,
since cash will be paid in lieu of fractional shares, Washington
Mutual would actually deliver to such holder four
(4) shares of Washington Mutual common stock and $47.91 in
cash (which includes $24.58 for the fractional share).
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The Make Whole Premium is only payable to holders who tender
their Notes for repurchase or conversion in connection with the
Merger. Pursuant to the Indenture, the Make Whole Premium is not
payable in the event that the Notes are converted in connection
with those events other than a Fundamental Change which result
in the Notes becoming convertible (see “Section 6.
Conversion Rights With Respect to the Notes.”) Accordingly
if you do not tender your Notes for repurchase prior to the
expiration of this Offer or for conversion prior to 5 p.m.,
Eastern time, on October 19, 2005, you will not have the
right to receive the Make Whole Premium unless and until a
subsequent Fundamental Change occurs with respect to the Company
or Washington Mutual.
Section 8. Acceptance of Notes for Payment.
Upon the terms and subject to the conditions of the Offer
(including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment) and applicable
law, we will, on the Fundamental Change Repurchase Date, which
will be November 3, 2005 unless the term of the Offer is
extended or the Offer is earlier terminated or withdrawn,
purchase by accepting for payment, and will make payment for,
all Notes validly tendered (and not properly withdrawn) pursuant
to the Offer. Such payment will be made by the deposit, on or
prior to the Fundamental Change Repurchase Date, of immediately
available funds with the paying agent, which will act as agent
for tendering Holders for the purpose of receiving payment from
us and transmitting such payment to tendering Holders. Payment
for Notes for which an election to repurchase is validly made
shall be delivered promptly following the later of (i) the
expiration time of the Offer and (ii) the time of
book-entry transfer or delivery of the Note to the paying agent.
Under no circumstances will interest on the purchase price be
paid by us by reason of any delay on behalf of the paying agent
in making such payment.
We expressly reserve the right, in our sole discretion and
subject to the terms of the Indenture and the Notes and
Rule 14e-1(c) and Rule 13e-4(f)(5) under the Exchange
Act, to delay acceptance for payment of the Notes in order to
comply, in whole or in part, with any applicable law. We also
expressly reserve the right, in our sole discretion, to withdraw
or terminate the Offer if either or both of the conditions
specified in the section captioned “Section 13.
Conditions of the Offer” are not satisfied.
In all cases, payment by the paying agent to holders of Notes
accepted for payment pursuant to the Offer will be made only
after timely receipt by the paying agent of confirmation of a
book-entry transfer of such Notes into the paying agent’s
account at DTC and a properly transmitted agent’s message.
See “Section 10. Procedures for Tendering Notes.”
16
For purposes of the Offer, validly tendered Notes (or
defectively tendered Notes for which we have waived such defect)
will be deemed to have been accepted for payment by us if, as
and when we give oral or written notice of acceptance for
payment to the paying agent. We reserve the right to transfer or
assign, in whole at any time or in part from time to time, to
one or more of our affiliates, the right to purchase any Notes
tendered pursuant to the Offer, but any such transfer or
assignment will not relieve us of our obligations under the
Offer or prejudice the rights of tendering holders of Notes to
receive the purchase price pursuant to the Offer.
We will only accept tenders of Notes pursuant to the Offer in
principal amounts equal to $1,000 or integral multiples thereof.
If we do not accept tendered Notes for payment for any reason
pursuant to the terms and conditions of the Offer, such Notes
will be credited to an account maintained at the book-entry
transfer facility designated by the participant therein who so
delivered such Notes, promptly following the expiration time or
the termination of the Offer.
Section 9. Expiration, Extension, Amendment, Termination
or Withdrawal of the Offer.
The Offer will expire at the expiration time, which is 12:00
midnight, Eastern time, on November 2, 2005 unless extended
or earlier terminated.
We expressly reserve the right, at any time or from time to
time, subject to applicable law and the provisions of the
Indenture, to amend the Offer in any respect by giving oral or
written notice of such amendment to the paying agent.
We also expressly reserve the right, in our sole discretion, to
extend or terminate the Offer in order to comply, in whole or in
part, with any applicable law, or to withdraw or terminate the
Offer if either or both of the conditions specified in the
section captioned “Section 13. Conditions of the
Offer” are not satisfied.
Any extension, amendment or termination of the Offer will be
followed as promptly as practicable by public announcement
thereof, the announcement in the case of an extension of the
Offer to be issued no later than 9:00 a.m., Eastern time,
on the next business day after the previously scheduled
expiration time. Without limiting the manner in which any public
announcement may be made, we shall have no obligation to
publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release.
If we make a material change in the terms of the Offer or the
information concerning the Offer, we will disseminate additional
Offer materials and extend the Offer if required by law.
If we extend the Offer, or if, for any reason, the acceptance
for payment of, or the payment for, Notes is delayed or if we
are unable to accept for payment or pay for Notes pursuant to
the Offer, then, without prejudice to our rights under the
Offer, the paying agent may retain tendered Notes on our behalf,
and such Notes may not be withdrawn except to the extent
tendering holders are entitled to withdrawal rights as described
in “Section 11. Withdrawal of Tenders.” However,
our ability to delay the payment for Notes which we have
accepted for payment is limited by Rules 13e-4(f)(5) and
14e-1(c) under the Exchange Act, which require that a bidder pay
the consideration offered or return the securities deposited by
or on behalf of holders of securities promptly after the
termination or withdrawal of a tender offer.
Any Notes received by the paying agent that are not properly
tendered and as to which the irregularities have not been cured
or waived will be returned by the paying agent to the tendering
holders promptly following the earlier to occur of the
expiration time or the termination of the Offer.
Section 10. Procedures for Tendering Notes.
You will not be entitled to receive the purchase price for your
Notes unless you validly tender and do not withdraw your Notes
on or before the expiration time of the Offer, which is 12:00
midnight, Eastern time, on November 2, 2005. You may tender
some or all of your Notes; however, any Notes tendered
17
must be in $1,000 principal amount or an integral multiple
thereof. If you do not validly tender your Notes on or before
the expiration time, your Notes will remain outstanding subject
to the existing terms of the Indenture and the Notes.
Method of Tendering Notes.
The Trustee under the
Indenture has informed us that, as of the date of this Offer to
Purchase, all custodians and beneficial holders of the Notes
hold the Notes through DTC accounts and that there are no
certificated Notes in non-global form. Accordingly, all Notes
tendered for purchase hereunder must be delivered through
DTC’s Automatic Tenders over the Participant Terminal
System, or ATOP. Delivery of Notes and all other required
documents, including delivery and acceptance through ATOP, is at
the election and risk of the person tendering Notes.
Agreement to Be Bound by the Terms of the Offer.
By
tendering your Notes through ATOP, you acknowledge and agree as
follows:
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pursuant to the Offer, such Notes shall be purchased as of the
date the Notes are accepted for purchase pursuant to the terms
and conditions of the Indenture and the Notes, and that under
the Indenture Notes must be surrendered to the paying agent to
collect payment of the purchase price;
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you have received this Offer to Purchase and acknowledge that it
provides the notice required by the Indenture;
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upon the terms and subject to the conditions of the Offer, and
effective upon the acceptance for payment thereof, you
irrevocably surrender, sell, assign and transfer to us, all
right, title and interest in and to all the Notes tendered and
so accepted for payment, waive any and all rights with respect
to the Notes (including without limitation any existing or past
defaults and their consequences in respect of the Notes and the
Indenture), release and discharge us and our affiliates, and our
and their respective directors, officers and employees, from any
and all claims you may have now, or may have in the future
arising out of, or related to, the Notes, including, without
limitation, any claims that you are entitled to receive
additional principal or interest payments with respect to the
Notes or to participate in any conversion, redemption or
defeasance of the Notes and irrevocably constitute and appoint
the paying agent as your true and lawful agent and
attorney-in-fact with respect to any such tendered Notes, with
full power of substitution and resubstitution (such power of
attorney being deemed to be an irrevocable power coupled with an
interest) to:
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transfer ownership of such Notes, on the account books
maintained by DTC, together, in any such case, with all
accompanying evidences of transfer and authenticity, to us,
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present such Notes for transfer on the relevant security
register, and
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receive all benefits or otherwise exercise all rights of
beneficial ownership of such Notes (except that the paying agent
will have no rights to, or control over, funds from us, except
as our agent, for the purchase price of any tendered Notes that
are purchased by us), all in accordance with the terms set forth
in this Offer to Purchase;
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you represent and warrant that you (i) own the Notes
tendered and are entitled to tender such Notes and
(ii) have full power and authority to tender, surrender,
sell, assign and transfer the Notes tendered and that when such
Notes are accepted for payment by us, we will acquire good title
thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim or right;
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you agree, upon request from us, to execute and deliver any
additional documents deemed by the paying agent or us to be
necessary or desirable to complete the sale, assignment and
transfer of the Notes tendered;
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you understand that all Notes properly tendered and not validly
withdrawn prior to expiration time will be purchased at the
purchase price, in cash, subject to the terms and conditions of
the Offer;
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18
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payment for Notes purchased pursuant to this Offer to Purchase
will be made by deposit of the purchase price for Notes with the
paying agent, which will act as your agent for the purpose of
receiving payments from us and transmitting such payments to you;
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tenders for Notes may be withdrawn prior to the expiration time
by following the procedures described in “Section 11.
Withdrawal of Tenders”;
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all authority conferred or agreed to be conferred pursuant to
the terms of the Offer hereby shall survive your death or
incapacity and every one of your obligation and shall be binding
upon your heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and
other legal representatives;
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the tender, delivery and surrender of the Notes is not
effective, and the risk of loss of the Notes does not pass to
the paying agent, until receipt by the paying agent of any and
all evidences of authority and any other required documents in
form satisfactory to us; and
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all questions as to the validity, form, eligibility (including
time of receipt) and acceptance for payment of any Notes
pursuant to the procedures described in this Offer to Purchase
and the form and validity (including time of receipt of notices
of withdrawal) of all documents will be determined by us, in our
sole direction, which determination shall be final and binding
on all parties.
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Tender of Notes Held Through a Custodian.
If your
Notes are held by a broker, dealer, commercial bank, trust
company or other nominee, you must contact such nominee if you
desire to tender your Notes and instruct such nominee to tender
your Notes for purchase on your behalf through the transmittal
procedures of DTC as set forth below under the caption
“— Tender of Notes in Global Form” on or
prior to the expiration time.
Tender of Notes in Global Form.
If you are a DTC
participant, you may elect to tender to us your beneficial
interest in the Notes by:
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delivering to the paying agent’s account at DTC through
DTC’s book-entry system your beneficial interest in the
Notes on or prior to the expiration time; and
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electronically transmitting your acceptance of the Offer through
ATOP, subject to the terms and procedures of that system, on or
prior to expiration time. Upon receipt of such Holder’s
acceptance through ATOP, DTC will edit and verify the acceptance
and send an agent’s message to the paying agent for its
acceptance. The term “agent’s message” means a
message transmitted by DTC to, and received by, the paying
agent, which states that DTC has received an express
acknowledgment from the participant in DTC described in that
agent’s message, stating the principal amount of Notes that
have been tendered by such participant under the Offer and that
such participant has received and agrees to be bound by the
terms of the Offer, including those set forth above under the
caption “— Agreement to Be Bound by the Terms of
the Offer.”
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Section 11. Withdrawal of Tenders.
You may withdraw your tendered Notes at any time prior to the
expiration time but not thereafter, except as set forth below.
In addition, you may withdraw tendered Notes if we terminate the
Offer without purchasing any Notes. If we terminate the Offer or
do not purchase any Notes in the Offer, we will instruct the
paying agent to return your tendered Notes to you promptly
following the earlier of such termination or the expiration
time, without cost or expense to you. You may also withdraw
tendered Notes if we have not yet accepted them for payment
after the expiration of 40 business days from the date of this
Offer to Purchase.
If, for any reason whatsoever, acceptance for payment of, or
payment for, any Notes tendered pursuant to the Offer is delayed
(whether before or after our acceptance for payment of Notes) or
we are unable to accept for payment or pay for the Notes
tendered pursuant to the Offer, we may (without prejudice to our
rights set forth herein) instruct the paying agent to retain
tendered Notes (subject to the
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right of withdrawal in certain circumstances and subject to
Rules 13e-4(f)(5) and 14e-1(c) under the Exchange Act,
which requires that an offeror pay the consideration offered or
return the securities deposited by or on behalf of the investor
promptly after the termination or withdrawal of a tender offer).
For a withdrawal of a tender of Notes to be effective, a
“request message” as defined below must be received by
the paying agent prior to the expiration time, or after such
time, so long as the Notes have not already been accepted for
payment by us. DTC participants may electronically transmit a
request for withdrawal to DTC. DTC will then edit the request
and send a request message to the paying agent. The term
“request message” means a message transmitted by DTC
and received by the paying agent, which states that DTC has
received a request for withdrawal from a DTC participant and
identifies the Notes to which such request relates.
If the Notes to be withdrawn have been delivered or otherwise
identified to the paying agent, a request message is effective
immediately upon receipt thereof. If Notes have been delivered
under the procedures for book-entry transfer, any notice of
withdrawal must specify the name and number of the account of
the appropriate book-entry transfer facility to be credited with
the withdrawn Notes and must otherwise comply with that
book-entry transfer facility’s procedures.
Any Notes properly withdrawn will be deemed to be not validly
tendered for purposes of the Offer and we will not pay any
consideration in respect of Notes that are so withdrawn.
Any permitted withdrawal of Notes may not be rescinded;
provided, however, that withdrawn Notes may be re-tendered by
following one of the procedures described in
“Section 10. Procedures for Tendering Notes,” at
any time at or prior to the expiration time.
Withdrawal of Notes can be accomplished only in accordance with
the foregoing procedures.
If you tender your Notes in the Offer, you may convert your
Notes into Washington Mutual common stock and cash only if you
withdraw your Notes prior to the time at which your right to
withdraw has expired. The Notes are convertible into shares of
common stock and cash as described in “Section 6.
Conversion Rights With Respect to the Notes.”
All questions as to the form and validity (including time of
receipt) of notices of withdrawal, including a request message,
will be determined by us, in our sole discretion (and our
determination shall be final and binding). Neither we, the
paying agent, the trustee nor any other person will be under any
duty to give notification of any defects or irregularities in
any request message or incur any liability for failure to give
any such notification.
Section 12. Source and Amount of Funds.
The total amount of funds we need to purchase all of the Notes
pursuant to the Offer and to pay related fees and expenses is
estimated to be approximately $236,067,000 (assuming 100% of the
outstanding Notes are tendered and accepted for payment). We
intend to fund the cash consideration for our purchase of the
Notes from available cash on hand. In addition, eighty-nine
percent (89%) of the aggregate Make Whole Premium will be paid
in shares of Washington Mutual common stock. The aggregate value
of the Make Whole Premium payable in connection with the Offer
(assuming 100% of the Notes are tendered and accepted for
payment) is $48,706,330.
Section 13. Conditions of the Offer.
There are no conditions to this Offer except (i) for the
timely and proper delivery and tender of the Notes in accordance
with the terms of the Offer and (ii) that the Offer must
comply with applicable law. We reserve the right to withdraw or
terminate the Offer in our sole discretion if either or both of
such conditions have not been satisfied. The Offer is not
conditioned on our ability to obtain sufficient financing to
purchase the Notes.
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Section 14. United States Federal Income Tax
Consequences.
The following is a summary of certain U.S. federal income
tax consequences to holders of Notes in connection with the
Offer described herein. This discussion is not a complete
analysis of all potential U.S. federal income tax
consequences, nor does it address any tax consequences arising
under any state, local or foreign tax law. This discussion is
based on the Internal Revenue Code of 1986, as amended, Treasury
Regulations promulgated thereunder, judicial decisions, and
published rulings and administrative pronouncements of the
Internal Revenue Service, all as in effect as of the date of
this Offer. These authorities may change, possibly
retroactively, resulting in U.S. federal income tax
consequences different from those discussed below. No ruling has
been or will be sought from the IRS with respect to the matters
discussed below, and there can be no assurance that the IRS will
not take a contrary position regarding the tax consequences
relating to the Offer, or that any such contrary position would
not be sustained by a court.
This discussion is limited to holders who hold Notes as capital
assets within the meaning of Code Section 1221 (generally,
property held for investment). This discussion does not address
all U.S. federal income tax considerations that may be
relevant to a particular holder in light of that holder’s
particular circumstances. This discussion also does not consider
any specific facts or circumstances that may be relevant to
holders subject to special rules under the U.S. federal
income tax laws, including certain financial institutions,
insurance companies, tax-exempt organizations, U.S. holders
whose functional currency for U.S. federal income tax
purposes is not the United States dollar, dealers in securities,
persons subject to the alternative minimum tax, persons who hold
Notes or shares of Washington Mutual common stock as part of a
hedge, conversion or constructive sale transaction, or straddle
or other integrated or risk reduction transaction, controlled
foreign corporations, passive foreign investment companies, or
persons who have ceased to be United States citizens or to be
taxed as resident aliens. In addition, the discussion does not
apply to holders of Notes that are treated as partnerships for
U.S. federal income tax purposes.
We recommend that you consult your tax advisor regarding the
application of the U.S. federal tax laws to your particular
situation, as well as any tax consequences arising under any
state, local or foreign tax law.
As used in this discussion, a U.S. holder is any beneficial
owner of Notes who for U.S. federal income tax purposes is
or is treated as:
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an individual citizen or resident of the United States;
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a corporation or other entity treated as a corporation for
U.S. federal income tax purposes, created or organized in
or under the laws of the United States, any state thereof or the
District of Columbia;
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an estate the income of which is subject to U.S. federal
income tax regardless of its source; or
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a trust if it (1) is subject to the primary supervision of
a court within the United States and one or more United States
persons have the authority to control all substantial decisions
of the trust or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a
United States person.
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A non-U.S. holder is any beneficial owner of Notes who is
neither a U.S. holder nor a partnership for
U.S. federal income tax purposes.
If a partnership or other entity taxable as a partnership holds
the Notes, the tax treatment of a partner generally will depend
on the status of the partner and the activities of the
partnership. Accordingly, partnerships that hold Notes and
partners in such partnerships are urged to consult their tax
advisors as to the tax consequences to them in connection with
the Offer with respect to Notes described herein.
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Classification of the Notes.
Under the Indenture, we and
each holder of the Notes agree (in the absence of an
administrative determination or judicial ruling to the
contrary), for U.S. federal income tax purposes, to treat
the Notes as indebtedness that is subject to the regulations
governing contingent payment debt instruments (the
“Contingent Debt Regulations”), and this discussion
assumes that the Notes will be so treated and does not address
any possible differing treatments of the Notes. However, the tax
treatment of the Notes is subject to various substantial
uncertainties, particularly with regard to the application of
the Contingent Debt Regulations, and no rulings have been sought
from the IRS or a court with respect to any of the tax
consequences discussed below. Accordingly, no assurance can be
given that the IRS or a court will agree with the treatment
described herein. Any differing treatment could affect the
amount, timing and character of income, gain or loss in respect
of an investment in, or a holding or sale or conversion of, the
Notes. In particular, a holder might be required to accrue
interest or original issue discount at a different rate and
might recognize capital gain or loss upon a disposition of its
Notes. Holders should consult their tax advisors concerning the
tax treatment of holding, selling or converting the Notes.
Modification and Deemed Exchange of the Notes.
Our
assumption of the Notes or the change in conversion rights of
the Notes from the right to convert into Providian common stock
to the right to convert into Washington Mutual common stock and
cash, in each case as a result of the merger of Providian with
and into us, may be considered a “significant
modification” of the Notes for U.S. federal income tax
purposes. Under applicable Treasury Regulations, the significant
modification of a debt instrument will result in a deemed
exchange of the “old” debt instrument for a
“new” debt instrument upon which gain or loss may be
recognized in certain circumstances. A modification of a debt
instrument generally is significant if the modified instrument
differs materially either in kind or extent from the original
debt instrument.
If the Merger resulted in a deemed exchange of the Notes, it is
expected that any such deemed exchange would be a tax-free
recapitalization that would qualify for non-recognition
treatment. Gain would only be recognized to the extent that the
“principal amount” of the “new” Notes deemed
received exceeded the “principal amount” of the
“old” Notes deemed surrendered in exchange therefor.
As a result, a holder’s initial tax basis in a Note
following the Merger would be the same as such holder’s tax
basis in the Note deemed to have been surrendered in exchange
therefor, increased by the amount of any gain recognized on the
deemed exchange, and a holder’s holding period in a Note
following the Merger would include the period during which the
holder held the Note deemed to have been surrendered in exchange
therefor. If the Internal Revenue Service were to successfully
assert that the deemed exchange did not qualify for
nonrecognition treatment, a U.S. holder could recognize
ordinary gain or loss.
See “U.S. Holders — Continuing to Hold
Notes” and “Non-U.S. Holders —
Continuing to Hold Notes” below for certain additional
consequences relating to any new Notes deemed issued as a result
of the Merger.
Repurchase of Notes.
A U.S holder of a Note sold pursuant
to the Offer will recognize gain or loss equal to the difference
between the aggregate amount of the cash and the fair market
value of Washington Mutual common stock received and such
holder’s adjusted tax basis in the Note. Any such gain
generally will be treated as ordinary income; any such loss
generally will be treated as ordinary loss to the extent of the
U.S. holder’s prior net original issue discount
inclusions with respect to the Notes. If the Merger resulted in
a deemed exchange, it is not clear whether a U.S. Holder
could take into account prior original issue discount inclusions
with respect to the “old” Notes for purposes of
determining the amount of ordinary loss with respect to the
disposition of “new” Notes received in the deemed
exchange; consequently, the deemed reissuance of new Notes could
result in recharacterization of a substantial amount of ordinary
loss as capital loss. Any loss in excess of that amount
generally will be treated as
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capital loss, which will be long-term if the Notes were held for
more than one year. The deductibility of net capital losses by
individuals and corporations is subject to limitation.
See “Continuing to Hold Notes” below for certain tax
considerations applicable to new Notes received in any deemed
exchange arising from the Merger.
Conversion.
Upon a conversion of a Note, a
U.S. holder will recognize gain or loss equal to the
difference between the amount realized and such holder’s
adjusted tax basis in the Note. As a holder of a Note, a
U.S. holder has agreed that under the Contingent Debt
Regulations, the amount realized will include the fair market
value of the stock that such holder receives on conversion as a
contingent payment. Any such gain or loss generally will be
treated in the same manner as that described under
“Repurchase of Notes” above, provided that a
conversion which postdates the Merger may be regarded as
occurring after a deemed exchange of Notes, and hence may be
regarded as occurring with respect to new Notes; see
“Continuing to Hold Notes” below for certain important
tax considerations applicable to new Notes received in any
deemed exchange arising from the Merger.
Continuing to Hold Notes.
As discussed above, we and each
holder have agreed to treat the Notes as indebtedness subject to
the Contingent Debt Regulations, and that agreement will
continue to apply to Notes which are not tendered in connection
with the Offer described herein. Further, that agreement extends
to Notes even if they represent new Notes deemed received in
connection with any deemed exchange attributable to the Merger.
However, the manner in which the Contingent Debt Regulations
apply to the Notes may differ depending upon whether a deemed
exchange occurs or not.
If the Merger did not result in a deemed exchange of the Notes,
a holder’s tax basis and holding period in the Notes held
at the time of the Merger would be unchanged by the Merger. If
the Merger did result in a deemed exchange, a holder’s tax
basis and holding period would be determined as described above
under “Modification and Deemed Exchange of the Notes.”
If new Notes are deemed to be issued and are treated as
indebtedness subject to the Contingent Debt Regulations, and
assuming the Notes are treated as “publicly traded”
within the meaning of applicable Treasury Regulations, a
U.S. holder will be required to include original issue
discount under the methodology generally applicable with respect
to the old Notes, except that such methodology would be applied
on the basis of certain facts existing at the time of such
reissuance. In particular, the “new” Notes would have
a new comparable yield and projected payment schedule determined
with respect to us and Washington Mutual common stock instead of
Providian and its stock. A holder whose tax basis in the
“new” Notes differs from their issue price would still
be required to accrue income at the comparable yield, though
adjustments would be made for such difference to more closely
reflect the holder’s economic accrual. Any gain on the
conversion or other disposition of the Notes generally would be
treated as described above under “— Repurchase of
Notes.” If the Notes are not treated as “publicly
traded” the methodology for determining the amount, timing,
and character of income resulting from the ownership and
disposition of the “new” Notes could differ
significantly from that applicable to the “old” Notes.
Repurchase and Conversion.
Non-U.S. holders
generally will not be subject to U.S. federal income tax on
gain realized on the repurchase or conversion of a Note unless:
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the non-U.S. holder does not meet the conditions for
exemption from U.S. federal withholding tax, as described
under “Continuing to Hold Notes” below; or
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the gain is effectively connected with the
non-U.S. holder’s conduct of a United States trade or
business.
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Continuing to Hold Notes.
Whether new Notes are deemed to
be issued or not, payment to the non-U.S. holder of
principal and interest (including amounts accrued as original
issue discount as discussed above under
“U.S. Holders — Continuing to Hold
Notes”) on a Note by us or any paying agent of ours will
not be subject to the 30% U.S. federal withholding tax,
provided that (i) interest is not
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effectively connected with the non-U.S. holder’s
conduct of a United States trade or business; (ii) the
non-U.S. holder does not actually or constructively own 10%
or more of the total combined voting power of all classes of
Washington Mutual common stock; (iii) the
non-U.S. holder is not a controlled foreign corporation
that is related to us within the meaning of the Code;
(iv) the non-U.S. holder is not a bank whose receipt
of interest on the notes is described in
section 881(c)(3)(A) of the Code; (v) Washington
Mutual common stock continues to be actively traded within the
meaning of Section 871(h)(4)(C)(v)(I) of the Code and
Washington Mutual is not a U.S. real property holding
corporation (a “USRPHC”); and (vi) the
non-U.S. holder complies with applicable certification
requirements. The non-U.S. holder’s eligibility for
exemption from U.S. federal income tax on any gain realized
on the sale, exchange or redemption of a Note, including any
deemed exchange and an exchange of a Note for shares of
Washington Mutual common stock, likewise will depend upon
satisfying the conditions in the preceding sentence as well as
those described under “Repurchase and Conversion”
above.
Any gain to a non-U.S. holder upon our repurchase of Notes,
their conversion into shares and cash or any deemed issuance of
new Notes or other disposition may be subject to
U.S. federal income tax if, for such purposes, the Notes
constitute a U.S. real property interest by reason of
Providian’s or our status as a USRPHC during the relevant
statutory period. We do not believe that either we or Providian
has been a USRPHC during the relevant statutory period and
neither do we expect to become one, although we can give no
absolute assurances in that regard.
Payments of cash or stock received by U.S. holders in
exchange for Notes purchased pursuant to this Offer may be
subject to backup withholding (currently, at a rate of 28%).
Additionally, the issuance of a new Note in any deemed exchange
attributable to the Merger as well as any post-Merger conversion
of a Note could be subject to backup withholding. To avoid
backup withholding, U.S. holders that do not otherwise
establish an exemption from backup withholding should complete
and submit the IRS Form W-9, certifying that such holder is
a U.S. person, the tax identification number provided is
correct, and that such holder is not subject to backup
withholding.
Non-U.S. holders that do not otherwise establish an
exemption from backup withholding likewise should complete and
submit an IRS Form W-8BEN or W-8ECI, as applicable, signed
under penalties of perjury, to avoid backup withholding.
Backup withholding is not an additional tax. Taxpayers may use
amounts withheld as a credit against their U.S. federal
income tax liability or may claim a refund if they timely
provide certain information to the IRS.
We are required to report to the IRS and to certain
U.S. holders information with respect to payments or
property received or deemed received by U.S. holders
pursuant to this Offer. A non-U.S. holder generally will
not be subject to information reporting on any payments or
property received or deemed received upon the sale or exchange
of Notes provided the non-U.S. holder provides us or our
paying agent with a properly completed IRS Form W-8BEN or
W-8ECI, as applicable, and we or our paying agent do not have
actual knowledge or reason to know that the holder is a
U.S. person.
Failure to complete and return the IRS Form W-9 or an
IRS Form W-8BEN or W-8ECI may result in backup withholding
of 28% of any payments made or property conveyed, including our
stock and any Note deemed issued in connection with the Merger,
to you pursuant to the Offer.
Section 15. Fees and Expenses; Solicitations.
We will not pay any fees or commissions to any broker, dealer or
other person for soliciting or making recommendations with
respect to tenders of Notes pursuant to the Offer.
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Directors, officers and regular employees of either us or our
affiliates (who will not be specifically compensated for such
services) and the paying agent may contact holders of Notes by
mail, telephone, or facsimile regarding the Offer and may
request brokers, dealers and other nominees to forward this
Offer to Purchase to beneficial owners of the Notes.
Section 16. Miscellaneous.
We are not aware of any jurisdiction in which the making of the
Offer is not in compliance with applicable law. If we become
aware of any jurisdiction in which the making of the Offer would
not be in compliance with applicable law, we will make a good
faith effort to comply with any such law. If, after such good
faith effort, we cannot comply with any such law, the Offer will
not be made to (nor will tenders of Notes be accepted from or on
behalf of) the owners of Notes residing in such jurisdiction.
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October 5, 2005
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NEW AMERICAN CAPITAL, INC.
WASHINGTON MUTUAL, INC.
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THE PAYING AGENT AND INFORMATION AGENT FOR THIS OFFER IS:
J.P. Morgan Trust Company
(800) 275-2048
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To Contact by Mail
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To Contact in Person
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JP Morgan Trust Company, N.A.
Institutional Trust Services
P.O. Box 2320
Dallas, TX 75221-2320
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JP Morgan Chase Bank
Institutional Trust Securities Window
4 New York Plaza — 1st Floor
New York, NY 10004-2413
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