<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 17, 1997.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
<TABLE>
<S> <C>
SAFECO CORPORATION SAFECO CAPITAL TRUST I
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
WASHINGTON DELAWARE
(State of other jurisdiction of (State of other jurisdiction of
incorporation or organization) incorporation or organization)
------------------------------ ------------------------------
6331 6159
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
91-0742146 APPLIED FOR
(I.R.S. Employer Identification (I.R.S. Employer Identification
Number) Number)
</TABLE>
4333 BROOKLYN AVENUE N.E.
SEATTLE, WASHINGTON 98185
(206) 545-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
JAMES W. RUDDY
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SAFECO CORPORATION
4333 BROOKLYN AVENUE N.E.
SEATTLE, WASHINGTON 98185
(206) 545-5000
(Name, address and telephone number of agent for service)
------------------------------
COPIES TO:
EVELYN CRUZ SROUFE
PERKINS COIE
1201 THIRD AVENUE, 40TH FLOOR
SEATTLE, WASHINGTON
98101-3099
(206) 583-8888
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN
CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH
GENERAL INSTRUCTION G, PLEASE CHECK THE FOLLOWING BOX. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
OFFERING PRICE PER PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE CAPITAL AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED(1) SECURITY(2) PRICE(2) FEE(3)
<S> <C> <C> <C> <C>
8.072% Exchange Capital Securities of SAFECO
Capital Trust I........................... $850,000,000 100% $850,000,000 $257,576
Exchange Junior Subordinated Deferrable
Interest Debentures of SAFECO
Corporation(3)............................
SAFECO Corporation Exchange Guarantee with
respect to Exchange Capital
Securities(4).............................
Total(5)(6)............................... $850,000,000 100% $850,000,000 $257,576
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933.
(2) Equals the aggregate principal amount of the securities being registered.
(3) No separate consideration will be received for the Exchange Junior
Subordinated Deferrable Interest Debentures of SAFECO Corporation (the
"Exchange Junior Subordinated Debentures") distributed upon any liquidation
of SAFECO Capital Trust I.
(4) No separate consideration will be received for the SAFECO Corporation
Exchange Guarantee.
(5) This Registration Statement is deemed to cover rights of holders of Exchange
Junior Subordinated Debentures under the Indenture, the rights of holders of
Exchange Capital Securities of SAFECO Capital Trust I under an Amended and
Restated Declaration of Trust, the rights of holders of such Exchange
Capital Securities under the Exchange Guarantee and certain backup
undertakings as described herein.
(6) Such amount represents the liquidation amount of SAFECO Capital Trust I
Exchange Capital Securities to be exchanged hereunder and the principal
amount of Exchange Junior Subordinated Debentures that may be distributed to
holders of such Exchange Capital Securities upon any liquidation of SAFECO
Capital Trust I.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 17, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
SAFECO CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.072% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.072% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
SAFECO CORPORATION
------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1997 UNLESS EXTENDED.
SAFECO Capital Trust I, a trust formed under the laws of the State of
Delaware (the "Trust"), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time, this "Prospectus") and in the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange up to $850,000,000 aggregate Liquidation Amount of its 8.072% Series B
Capital Securities (the "Exchange Capital Securities") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like Liquidation Amount of its outstanding
8.072% Series A Capital Securities (the "Original Capital Securities"), of which
$850,000,000 aggregate Liquidation Amount are issued and outstanding. Pursuant
to the Exchange Offer, SAFECO Corporation, a Washington corporation (the
"Corporation"), is also offering to exchange (i) its guarantee of payments of
cash distributions and payments on liquidation of the Trust or redemption of the
Original Capital Securities (the "Original Guarantee") for a like guarantee in
respect of the Exchange Capital Securities (the "Exchange Guarantee") and (ii)
$850,000,000 aggregate principal amount of its 8.072% Series A Junior
Subordinated Deferrable Interest Debentures due July 15, 2037 (the "Original
Junior Subordinated Debentures") for a like aggregate principal amount of its
8.072% Series B Junior Subordinated Deferrable Interest Debentures due July 15,
2037 (the "Exchange Junior Subordinated Debentures"), which Exchange Guarantee
and Exchange Junior Subordinated Debentures also have been registered under the
Securities Act. (CONTINUED ON THE FOLLOWING PAGE)
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of the Original Capital Securities on , 1997.
SEE "RISK FACTORS" COMMENCING ON PAGE 18 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER ORIGINAL CAPITAL
SECURITIES IN THE EXCHANGE OFFER.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
(CONTINUED FROM THE PREVIOUS PAGE)
The Original Capital Securities, the Original Guarantee and the Original Junior
Subordinated Debentures are collectively referred to herein as the "Original
Securities" and the Exchange Capital Securities, the Exchange Guarantee and the
Exchange Junior Subordinated Debentures are collectively referred to herein as
the "Exchange Securities."
The Trust sold the Original Capital Securities in an offering exempt from
the registration requirements of the Securities Act, which was consummated on
July 15, 1997 (the "Closing Date"). On the Closing Date, the Corporation also
issued $200,000,000 aggregate principal amount of 6 7/8% Notes due July 15, 2007
(the "Original Notes"). The Corporation currently anticipates a separate
exchange offer by the Corporation of up to $200,000,000 aggregate principal
amount of 6 7/8% Notes due July 15, 2007 (the "Exchange Notes"), which have been
registered under the Securities Act, for the Original Notes. The Original Notes
and the Exchange Notes are sometimes collectively referred to herein as the
"Notes"). The exchange offer for the Original Notes will be made through a
separate prospectus, and the Exchange Offer made hereby is not contingent upon
completion of the exchange offer for the Original Notes.
The terms of the Exchange Securities are identical in all material respects
to the respective terms of the Original Securities, except that (i) the Exchange
Securities have been registered under the Securities Act and therefore will not
be subject to certain restrictions on transfer applicable to the Original
Securities, (ii) the Exchange Capital Securities will not contain the $100,000
minimum Liquidation Amount transfer restriction, (iii) the Exchange Capital
Securities will not provide for any increase in the Distribution rate thereon
and (iv) the Exchange Junior Subordinated Debentures will not provide for any
increase in the interest rate thereon. See "Description of Exchange Securities."
The Exchange Capital Securities are being offered for exchange in order to
satisfy certain obligations of the Corporation and the Trust under the
Registration Rights Agreement dated as of July 15, 1997 (the "Registration
Rights Agreement") among the Corporation, the Trust and the Initial Purchasers
(as defined herein). In the event that the Exchange Offer is consummated, any
Original Capital Securities which remain outstanding after consummation of the
Exchange Offer and the Exchange Capital Securities issued in the Exchange Offer
will vote together as a single class for purposes of determining whether holders
of the requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Trust Agreement.
The Exchange Capital Securities and the Original Capital Securities
(collectively, the "Capital Securities") represent beneficial interests in the
assets of the Trust. The Corporation is the owner of all of the beneficial
interests represented by common securities of the Trust (the "Common
Securities," and together with the Capital Securities, the "Trust Securities").
The Chase Manhattan Bank is the Property Trustee (the "Property Trustee") of the
Trust. The Trust exists for the sole purpose of issuing the Trust Securities and
investing the proceeds thereof in the Junior Subordinated Debentures (as defined
herein). The Junior Subordinated Debentures will mature on July 15, 2037 (the
"Stated Maturity Date"). The Capital Securities will have a preference over the
Common Securities under certain circumstances with respect to cash distributions
and amounts payable on liquidation, redemption or otherwise. See "Description of
Exchange Securities--Description of Exchange Capital Securities--Subordination
of Common Securities."
As used herein, (i) the "Indenture" means the Indenture, dated as of July
15, 1997, as amended and supplemented from time to time, between the Corporation
and The Chase Manhattan Bank, as trustee (the "Debenture Trustee"), relating to
the Junior Subordinated Debentures, (ii) the "Trust Agreement" means the Amended
and Restated Declaration of Trust relating to the Trust among the Corporation,
as Sponsor, The Chase Manhattan Bank, as Property Trustee, Chase Manhattan Bank
Delaware, an affiliate of the Property Trustee, as Delaware Trustee (the
"Delaware Trustee"), and the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"), (iii) the "Guarantee" means the Guarantee Agreement relating to the
Capital Securities between the
2
<PAGE>
Corporation and The Chase Manhattan Bank, as trustee (the "Guarantee Trustee")
and (iv) the "Common Guarantee" means the Guarantee Agreement relating to the
Common Securities between the Corporation and The Chase Manhattan Bank, as
trustee. In addition, as the context may require, (i) "Junior Subordinated
Debentures" includes the Original Junior Subordinated Debentures and the
Exchange Junior Subordinated Debentures and (ii) "Guarantee" includes the
Original Guarantee and the Exchange Guarantee.
Holders of the Capital Securities and the Common Securities will be entitled
to receive preferential cumulative cash distributions arising from the payment
of interest on the Junior Subordinated Debentures, accruing from the date of
original issuance and payable semi-annually in arrears on January 15 and July 15
of each year, commencing January 15, 1998, at the annual rate of 8.072% of the
Liquidation Amount of $1,000 per Trust Security ("Distributions"). So long as no
Debenture Event of Default (as defined herein) has occurred and is continuing,
the Corporation will have the right to defer payments of interest on the Junior
Subordinated Debentures at any time and from time to time for a period not
exceeding 10 consecutive semi-annual periods with respect to each deferral
period (each, an "Extension Period"), provided that no Extension Period may
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due, the Corporation may
elect to begin a new Extension Period, subject to the requirements set forth
herein. If and for so long as interest payments on the Junior Subordinated
Debentures are so deferred, Distributions on the Trust Securities will also be
deferred and the Corporation will not be permitted, subject to certain
exceptions described herein, to declare or pay any cash distributions with
respect to the Corporation's capital stock (which includes common and preferred
stock) or to make any payment with respect to debt securities of the Corporation
that rank pari passu with or junior to the Junior Subordinated Debentures.
During an Extension Period, interest on the Junior Subordinated Debentures will
continue to accrue (and the amount of Distributions to which holders of the
Trust Securities are entitled will continue to accumulate) at the rate of 8.072%
per annum, compounded semi-annually, and holders of Trust Securities will be
required to accrue interest income for United States federal income tax purposes
prior to the receipt of the cash attributable to such income. See "Description
of Exchange Securities--Description of Exchange Junior Subordinated
Debentures--Option to Extend Interest Payment Date" and "Certain Federal Income
Tax Consequences-- Interest Income and Original Issue Discount."
The Corporation will, through the Guarantee, the Common Guarantee, the Trust
Agreement, the Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally guarantee all of the Trust's obligations
under the Trust Securities. See "Relationship Among the Exchange Capital
Securities, the Exchange Junior Subordinated Debentures and the Exchange
Guarantee--Full and Unconditional Guarantee." The Guarantee and the Common
Guarantee will guarantee payments of Distributions and payments on liquidation
or redemption of the Trust Securities, but in each case only to the extent that
the Trust holds funds on hand legally available therefor and has failed to make
such payments, as described herein. See "Description of Exchange
Securities--Description of Exchange Guarantee." If the Corporation fails to make
a required payment on the Junior Subordinated Debentures, the Trust will not
have sufficient funds to make the related payments, including Distributions, on
the Trust Securities. The Guarantee and the Common Guarantee will not cover any
such payment when the Trust does not have sufficient funds on hand legally
available therefor. In such event, a holder of Capital Securities may institute
a legal proceeding directly against the Corporation to enforce its rights in
respect of such payment. See "Description of Exchange Securities--Description of
Exchange Junior Subordinated Debentures--Enforcement of Certain Rights by
Holders of Capital Securities. " The obligations of the Corporation under the
Guarantee, the Common Guarantee and the Junior Subordinated Debentures will be
unsecured and subordinate and junior in right of payment to all Senior
Indebtedness (as defined in "Description of Exchange Securities--Description of
Exchange Junior Subordinated Debentures--Subordination"), which aggregated
approximately $1.1 billion as of March 31, 1996.
3
<PAGE>
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated Maturity
Date upon repayment of the Junior Subordinated Debentures at a redemption price
equal to the principal amount of, plus accrued and unpaid interest on, the
Junior Subordinated Debentures (the "Maturity Redemption Price"), (ii) in whole
but not in part, contemporaneously with the optional prepayment of the Junior
Subordinated Debentures at any time prior to July 15, 2007 upon the occurrence
and continuation of a Tax Event (as defined herein) at a redemption price equal
to the Special Event Prepayment Price (as defined below) (the "Special Event
Redemption Price"), and (iii) in whole or in part, on or after July 15, 2007,
contemporaneously with the optional prepayment by the Corporation of the Junior
Subordinated Debentures, at a redemption price equal to the Optional Prepayment
Price (as defined below) (the "Optional Redemption Price"). The Trust Securities
were also subject to mandatory redemption prior to March 31, 1998 if the
Agreement and Plan of Merger, dated as of June 6, 1997, by and among American
States Financial Corporation and, SAFECO and a subsidiary of SAFECO were
terminated, pursuant to Article 12 thereof, on or prior to December 31, 1997 (a
"Merger Termination Event"). Because of the closing of the acquisition of
American States Financial Corporation by the Corporation (the "Acquisition") on
October 1, 1997, no Merger Termination Event can occur. Any of the Maturity
Redemption Price, the Special Event Redemption Price and the Optional Redemption
Price may be referred to herein as the "Redemption Price. " See "Description of
Exchange Securities--Description of Exchange Capital Securities--Redemption."
The Junior Subordinated Debentures will be prepayable prior to the Stated
Maturity Date at the option of the Corporation (i) on or after July 15, 2007, in
whole or in part, at a prepayment price (the "Optional Prepayment Price") equal
to 104.036% of the principal amount thereof on July 15, 2007, declining ratably
on each July 15 thereafter to 100% on or after July 15, 2017, plus accrued and
unpaid interest thereon to the date of prepayment, or (ii) in whole but not in
part, at any time prior to July 15, 2007, in whole but not in part, upon the
occurrence and continuation of a Tax Event, at a prepayment price (the "Special
Event Prepayment Price") equal to the greater of (a) 100% of the principal
amount thereof or (b) the sum, as determined by a Quotation Agent (as defined
hereinafter), of the present values of the remaining scheduled payments of
principal and interest on the Junior Subordinated Debentures to the Stated
Maturity Date, discounted to the prepayment date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate (as defined herein) plus, in either case, accrued and unpaid
interest thereon to the date of prepayment. Although the Junior Subordinated
Debentures were also subject to mandatory redemption prior to March 31, 1998
upon the occurrence and continuation of a Merger Termination Event, the closing
of the Acquisition precludes the occurrence of a Merger Termination Event.
Either of the Optional Prepayment Price or the Special Event Prepayment Price
may be referred to herein as the "Prepayment Price." See "Description of
Exchange Securities-- Description of Exchange Junior Subordinated
Debentures--Optional Prepayment" and "--Special Event Prepayment."
The Corporation will have the right at any time to terminate the Trust and
cause a Like Amount of the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust, subject to the
Corporation having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital Securities.
Unless the Junior Subordinated Debentures are distributed to the holders of the
Trust Securities, in the event of a liquidation of the Trust as described
herein, after satisfaction of liabilities to creditors of the Trust as required
by applicable law, the holders of the Trust Securities generally will be
entitled to receive a Liquidation Amount of $1,000 per Trust Security plus
accumulated and unpaid Distributions thereon to the date of payment. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of Junior Subordinated
Debentures."
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Original Capital Securities. The Exchange Capital
Securities will be a new issue of securities for which there currently is no
market. Although Smith Barney Inc., Salomon Brothers Inc and BancAmerica
4
<PAGE>
Securities, Inc., the initial purchasers of the Original Capital Securities (the
"Initial Purchasers"), have informed the Corporation and the Trust that they
each currently intend to make a market in the Exchange Capital Securities, they
are not obligated to do so, and any such market making may be discontinued at
any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Exchange Capital Securities. The
Corporation and the Trust currently do not intend to apply for listing of the
Exchange Capital Securities on any securities exchange or for quotation through
the NASD Automated Quotation System.
Any Original Capital Securities not tendered and accepted in the Exchange
Offer will remain outstanding and will be entitled to all the same rights and
will be subject to the same limitations applicable thereto under the Declaration
(except for those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the holders of Original
Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Corporation nor the Trust
will have any further obligation to such holders (other than under certain
limited circumstances) to provide for registration under the Securities Act of
the Original Capital Securities held by them. To the extent that Original
Capital Securities are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered Original Capital Securities could be adversely
affected. See "Risk Factors--Consequences of a Failure to Exchange Original
Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
Original Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on , 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Corporation or the Trust (in which case the term "Expiration Date" shall
mean the latest date and time to which the Exchange Offer is extended). Tenders
of Original Capital Securities may be withdrawn at any time on or prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Original Capital Securities being tendered for exchange.
However, the Exchange Offer is subject to certain events and conditions which
may be waived by the Corporation or the Trust and to the terms and provisions of
the Registration Rights Agreement. Original Capital Securities may be tendered
in whole or in part having an aggregate Liquidation Amount of not less than
$100,000 (100 Capital Securities) or any integral multiple of $1,000 Liquidation
Amount (one Capital Security) in excess thereof. The Corporation has agreed to
pay all expenses of the Exchange Offer. See "The Exchange Offer--Fees and
Expenses." Holders of the Original Capital Securities whose Original Capital
Securities are accepted for exchange will not receive Distributions on such
Original Capital Securities and will be deemed to have waived the right to
receive any Distributions on such Original Capital Securities accumulated from
and after July 15, 1997. Accordingly, holders of Exchange Capital Securities as
of the record date for the payment of Distributions on January 15, 1998 will be
entitled to receive Distributions accumulated from and after July 15, 1997. See
"The Exchange Offer-- Description of Exchange Capital
Securities--Distributions."
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
5
<PAGE>
FORWARD-LOOKING INFORMATION
This Prospectus includes "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). The PSLRA
provides a "safe harbor" for such statements to encourage companies to provide
prospective information about themselves so long as such information is
identified as forward-looking and is accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in the information. All statements other
than statements of historical fact made in this Prospectus or incorporated by
reference are forward-looking. In particular, the statements under the headings
"Prospectus Summary," and those located elsewhere herein regarding industry
prospects, the Corporation's future results of operations or financial position
and pro forma information are forward-looking statements. Forward-looking
statements represent management's current expectations and are inherently
uncertain. Investors are warned that the Corporation's actual results may differ
significantly from management's expectations and, therefore, from the results
discussed in such forward-looking statements. Factors that might cause such
differences include, but are not limited to, the "Risk Factors" described
herein.
FOR NEW HAMPSHIRE RESIDENTS:
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW
HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT
ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING, NEITHER
ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A
SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO,
ANY PERSON, SECURITY, OR TRANSACTION; IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE
MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT, ANY REPRESENTATION
INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
6
<PAGE>
AVAILABLE INFORMATION
Effective October 1, 1997, the Corporation acquired American States
Financial Corporation ("American States"), through the merger of American States
with a subsidiary of the Corporation. Certain information about American States
has been incorporated into this Prospectus by reference. See "Incorporation of
Certain Documents by Reference" and "Prospectus Summary--SAFECO
Corporation--Acquisition of American States."
The Corporation is, and American States prior to the Acquisition was,
subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith, files (or
filed with respect to American States prior to the Acquisition) reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may also be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such information
may also be accessed electronically by means of the Commission's home page on
the Internet (http://www.sec.gov). In addition, such reports, proxy statements
and other information concerning the Corporation may be inspected at the offices
of the Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006 on which
certain securities of the Corporation are quoted and such reports, proxy
statements and other information concerning American States may be inspected at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005, on which certain securities of American States were listed prior to
the Acquisition.
No separate financial statements of the Trust have been included herein. The
Corporation and the Trust do not consider that such financial statements would
be material to holders of the Capital Securities because the Trust is a newly
formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Junior Subordinated Debentures, issuing
the Trust Securities and engaging in incidental activities. See "SAFECO Capital
Trust I" and "Description of Exchange Securities." In addition, the Corporation
does not expect that the Trust will file reports, proxy statements and other
information under the Exchange Act with the Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Corporation and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Corporation, the
Trust and the Exchange Securities. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
7
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated into this
Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for the year ended December
31, 1996 (File No. 1-6563);
2. The Corporation's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 (File No. 1-6563) and June 30, 1997 (File No. 1-6563);
3. The Corporation's Current Reports on Form 8-K filed with the Commission
on June 24, 1997 (File No. 1-6563), October 14, 1997 (File No. 1-6563)
and October 15, 1997 (File No. 1-6563);
4. American States' Annual Report on Form 10-K, Form 10-K/A(1) and Form
10-K/A(2) for the year ended December 31, 1996 (File No. 1-11733);
5. American States' Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997 (File No. 1-11733) and June 30, 1997 (File No. 1-11733);
and
6. American States' Current Reports on Form 8-K filed with the Commission
on March 28, 1997 (File No. 1-11733) and June 17, 1997 (File No.
1-11733).
All documents subsequently filed by the Corporation pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of any offering of securities made by this
Prospectus shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from their respective dates of filing. Any statement
made in this Prospectus or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that another statement contained
made in this Prospectus or in any other subsequently filed document that also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any modified or superseded statement shall not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Unless otherwise indicated, all references in this Prospectus to
documents "incorporated by reference" are to documents incorporated by reference
into this Prospectus. The Corporation will provide without charge to any person
to whom this Prospectus is delivered, on such person's request, a copy of any or
all of the documents incorporated by reference (other than exhibits not
specifically incorporated by reference into the texts of such documents).
Requests for such documents should be directed to SAFECO Investor Relations,
SAFECO Corporation, SAFECO Plaza, 4333 Brooklyn Avenue N.E., Seattle, Washington
98185. Telephone requests may be directed to SAFECO Investor Relations at (206)
545-5000.
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PROSPECTUS SUMMARY
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN. THE
INFORMATION CONTAINED IN THIS PROSPECTUS REFLECTS THE OCTOBER 1, 1997
ACQUISITION (THE "ACQUISITION") OF AMERICAN STATES FINANCIAL CORPORATION THROUGH
A MERGER OF AMERICAN STATES WITH A NEWLY FORMED SUBSIDIARY OF SAFECO
CORPORATION. THE CORPORATION AND AMERICAN STATES ARE INSURANCE HOLDING
COMPANIES. EACH CONDUCTS ITS OPERATIONS THROUGH ITS SUBSIDIARIES AND HAS NO
DIRECT OPERATIONS. THE CORPORATION'S PRINCIPAL ASSETS ARE THE SHARES OF CAPITAL
STOCK OF ITS SUBSIDIARIES. AS USED IN THIS PROSPECTUS, UNLESS THE CONTEXT
OTHERWISE REQUIRES, "SAFECO" REFERS TO SAFECO CORPORATION AND ITS CONSOLIDATED
SUBSIDIARIES, EXCLUDING AMERICAN STATES, "AMERICAN STATES" REFERS TO AMERICAN
STATES FINANCIAL CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES, AND THE
"CORPORATION" REFERS TO SAFECO, TOGETHER WITH ITS CONSOLIDATED SUBSIDIARIES,
INCLUDING AMERICAN STATES. UNLESS THE CONTEXT OTHERWISE REQUIRES, HISTORICAL
DATA FOR THE CORPORATION REFER TO COMBINED HISTORICAL DATA FROM SAFECO AND
AMERICAN STATES ON A PRO FORMA BASIS GIVING EFFECT TO THE ACQUISITION.
UNLESS OTHERWISE INDICATED, FINANCIAL INFORMATION AND OPERATING STATISTICS
APPLICABLE TO THE CORPORATION, SAFECO AND AMERICAN STATES SET FORTH IN THIS
PROSPECTUS OR INCORPORATED BY REFERENCE ARE BASED ON UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES ("GAAP"), NOT STATUTORY ACCOUNTING PRACTICES
("SAP"). IN CONFORMITY WITH INDUSTRY PRACTICE, FINANCIAL INFORMATION AND
OPERATING STATISTICS APPLICABLE TO THE INSURANCE COMPANY SUBSIDIARIES OF THE
CORPORATION AND DATA DERIVED FROM A.M. BEST CORPORATION, INC. ("A.M. BEST") AND
NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ("NAIC") SOURCES, GENERALLY USED
FOR INDUSTRY COMPARISONS, ARE BASED ON SAP. INDUSTRY RANKINGS FOR THE
CORPORATION, WHICH ARE BASED ON A.M. BEST 1996 DATA, HAVE BEEN ADJUSTED TO GIVE
EFFECT TO THE ACQUISITION.
SEE "RISK FACTORS," IMMEDIATELY FOLLOWING THIS PROSPECTUS SUMMARY, FOR
CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO
TENDER ORIGINAL CAPITAL SECURITIES IN THE EXCHANGE OFFER.
SAFECO CORPORATION
OVERVIEW
The Corporation is one of the largest property and casualty insurance
companies in the United States. On a pro forma basis giving effect to the
Acquisition and related financings, the Corporation had consolidated revenues of
$5.9 billion in 1996, and total assets of $27.3 billion and total stockholders'
equity of $5.0 billion at June 30, 1997. The Corporation provides a broad range
of personal and commercial property and casualty insurance to individuals,
businesses, government entities and associations. SAFECO and American States
have each underwritten property and casualty insurance since the 1920s. Through
its insurance subsidiaries, the Corporation is licensed as a property and
casualty insurer in all 50 states and the District of Columbia, with a
significant presence in the Pacific Northwest and the Midwest. The Corporation's
property and casualty operations generated approximately 92% of the
Corporation's insurance revenues in 1996. Of the Corporation's 1996 net written
property and casualty premiums of $3.9 billion, personal and commercial lines
accounted for 60% and 40%, respectively.
The Corporation is the third largest writer of personal lines insurance
through independent agents in the United States and one of the largest writers
of personal lines insurance overall, based on 1996 net written premiums
published by A.M. Best. The Corporation's principal personal lines are
automobile and homeowners insurance, which accounted for 66% and 27%,
respectively, of the Corporation's approximately $2.4 billion of 1996 personal
lines net written premiums.
SAFECO significantly expanded its commercial lines business through the
Acquisition. Management believes that American States is one of the largest
writers in the United States of property and casualty insurance for businesses
with fewer than 50 employees. The Corporation's principal commercial lines are
commercial multi-peril, commercial automobile, workers' compensation and surety,
which accounted for
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33%, 22%, 21% and 4%, respectively, of the Corporation's approximately $1.6
billion of 1996 commercial lines net written premiums.
The Corporation also offers annuities, retirement services and group life
and health and individual life insurance. In addition, the Corporation conducts
commercial lending and leasing, asset management, insurance agency and financial
services distribution operations, and real estate investment and management.
RECENT DEVELOPMENTS
On September 2, 1997, the Corporation agreed to acquire Washington Mutual,
Inc.'s life insurance subsidiaries, WM Life Insurance Company and Empire Life
Insurance Company, and Washington Mutual, Inc., agreed to distribute SAFECO Life
annuity products through the Washington Mutual multi-state banking network. The
transaction is valued at $140.0 million. It must be approved by state insurance
regulators in the states of Arizona and Washington.
On October 13, 1997, the Corporation announced, based on a preliminary
review of results, that it expects its third quarter earnings from operations to
be $0.20 to $0.25 lower than the consensus estimates of research analysts of
$0.84 per share. Such consensus was based upon the earnings estimates survey by
First Call Corporation, an independent compiler of research analyst estimates of
public company results of operations. The variance relates primarily to several
unusually large losses in commercial lines, reduced credit to operations from
reserve adjustments on claims settled during the quarter, and net interest
charges for funds accumulated during the quarter that were used to close the
Acquisition. Based on the same preliminary review, the Corporation noted that
claims severity and frequency in its core voluntary personal automobile line
continue to be favorable and its overall loss reserve position continues to be
sound.
ACQUISITION OF AMERICAN STATES
Effective October 1, 1997, SAFECO acquired American States through the
merger of American States with a newly formed subsidiary of SAFECO. In
connection with the Acquisition, each share of outstanding common stock of
American States was converted into the right to receive $47.00 in cash, for an
aggregate purchase price of approximately $2.8 billion. SAFECO also repaid
approximately $300 million of outstanding debt obligations of American States.
SAFECO financed the purchase price for the Acquisition from various sources,
including proceeds from the issuance of the $200 million aggregate principal
amount of Notes, $850 million aggregate liquidation amount of the Capital
Securities and $1.5 billion of commercial paper. The Corporation also repaid a
portion of certain other indebtedness incurred to finance the Acquisition with
the net proceeds of $595.5 million from the issuance of common stock, no par
value (the "Common Stock"). See "Capitalization" and "Unaudited Pro Forma
Combined Condensed Financial Statements."
SAFECO CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a trust agreement executed by the Corporation, as Sponsor, The Chase
Manhattan Bank, as Property Trustee, and Chase Manhattan Bank Delaware, as
Delaware Trustee and the three individual Administrative Trustees named therein,
and (ii) the filing of a certificate of trust with the Delaware Secretary of
State on June 19, 1997. The Trust's activities are conducted by the Issuer
Trustees: the Property Trustee, the Delaware Trustee, and the three individual
Administrative Trustees who are employees or officers of or affiliated with the
Corporation. The Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, (ii) using the proceeds from the sale of the Trust
Securities to acquire the Junior Subordinated Debentures issued by the
Corporation and (iii) engaging in only those other activities necessary,
advisable or incidental thereto. Accordingly, the Junior Subordinated Debentures
will be the sole assets of the Trust, and payments under the Junior Subordinated
Debentures will be the sole revenue of the Trust. All of the Common Securities
will be owned by the Corporation.
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THE EXCHANGE OFFER
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THE EXCHANGE OFFER................ Up to $850 million aggregate Liquidation Amount of
Exchange Capital Securities are being offered in
exchange for a like aggregate Liquidation Amount of
Original Capital Securities. Original Capital Securities
may be tendered for exchange in whole or in part in a
Liquidation Amount of $100,000 (100 Capital Securities)
or any integral multiple of $1,000 (one Capital
Security) in excess thereof. The Corporation and the
Trust are making the Exchange Offer in order to satisfy
their obligations under the Registration Rights
Agreement relating to the Original Capital Securities.
For a description of the procedures for tendering
Original Capital Securities, see "The Exchange
Offer--Procedures for Tendering Original Capital
Securities."
EXPIRATION DATE................... 5:00 p.m., New York time, on , 1997, unless the
Exchange Offer is extended by the Corporation (in which
case the Expiration Date will be the latest date and
time to which the Exchange Offer is extended). See "The
Exchange Offer--Terms of the Exchange Offer."
CONDITIONS TO THE EXCHANGE
OFFER........................... The Exchange Offer is subject to certain conditions,
which may be waived by the Corporation and the Trust in
their sole discretion. The Exchange Offer is not
conditioned upon any minimum Liquidation Amount of
Original Capital Securities being tendered. See "The
Exchange Offer--Conditions to the Exchange Offer."
OFFER............................. The Corporation and the Trust reserve the right in their
sole and absolute discretion, subject to applicable law,
at any time and from time to time, (i) to delay the
acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer if
certain specified conditions have not been satisfied,
(iii) to extend the Expiration Date of the Exchange
Offer and retain all Original Capital Securities
tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Original Capital
Securities to withdraw their tendered Original Capital
Securities, or (iv) to waive any condition or otherwise
amend the terms of the Exchange Offer in any respect.
See "The Exchange Offer--Terms of the Exchange Offer."
WITHDRAWAL RIGHTS................. Tenders of Original Capital Securities may be withdrawn
at any time on or prior to the Expiration Date by
delivering a written notice of such withdrawal to the
Exchange Agent (as defined herein) in conformity with
certain procedures set forth in "The Exchange
Offer--Withdrawal Rights."
PROCEDURES FOR TENDERING ORIGINAL
CAPITAL SECURITIES.............. Brokers, dealers, commercial banks, trust companies and
other nominees who hold Original Capital Securities
through The Depository Trust Company ("DTC") may effect
tenders by book-entry transfer in accordance with DTC's
Automated Tender Offer Program ("ATOP"). Holders of such
Original
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Capital Securities registered in the name of a broker,
dealer, commercial bank, trust company or other nominee
are urged to contact such person promptly if they wish
to tender Original Capital Securities. In order for
Original Capital Securities to be tendered by a means
other than by book-entry transfer, a Letter of
Transmittal must be completed and signed in accordance
with the instructions contained therein. The Letter of
Transmittal and any other documents required by the
Letter of Transmittal must be delivered to The Chase
Manhattan Bank (the "Exchange Agent") by mail,
facsimile, hand delivery or overnight courier and either
such Original Capital Securities must be delivered to
the Exchange Agent or specified procedures for
guaranteed delivery must be complied with. See "The
Exchange Offer-- Procedures for Tendering Original
Capital Securities."
Letters of Transmittal and certificates representing
Original Capital Securities should not be sent to the
Corporation. Such documents should be sent only to the
Exchange Agent.
RESALES OF EXCHANGE CAPITAL
SECURITIES...................... The Trust is making the Exchange Offer of the Exchange
Capital Securities in reliance on the position of the
staff of the Division of Corporation Finance of the
Commission as set forth in certain interpretive letters
addressed to third parties in other transactions.
However, neither the Corporation nor the Trust has
sought its own interpretive letter and there can be no
assurance that the staff of the Division of Corporation
Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it
has in such interpretive letters to third parties. Based
on these interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject to
the two immediately following sentences, the Corporation
and the Trust believe that Exchange Capital Securities
issued pursuant to this Exchange Offer in exchange for
Original Capital Securities may be offered for resale,
resold and otherwise transferred by a holder thereof
(other than a holder who is a broker-dealer) without
further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided
that such Exchange Capital Securities are acquired in
the ordinary course of such holder's business and that
such holder is not participating, and has no arrangement
or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act)
of such Exchange Capital Securities. However, any holder
of Original Capital Securities who is an "affiliate" of
the Corporation or the Trust or who intends to
participate in the Exchange Offer for the purpose of
distributing Exchange Capital Securities, or any
broker-dealer who purchased Original Capital Securities
from the Trust to resell pursuant to Rule 144A under the
Securities Act ("Rule 144A") or any other available
exemption under the Securities Act, (a) will not be able
to rely on the interpretations of the staff of the
Division of Corporation Finance of the
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Commission set forth in the above-mentioned interpretive
letters, (b) will not be permitted or entitled to tender
such Original Capital Securities in the Exchange Offer
and (c) must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any sale or other transfer of such
Original Capital Securities unless such sale is made
pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds
Original Capital Securities acquired for its own account
as a result of market-making or other trading activities
and exchanges such Original Capital Securities for
Exchange Capital Securities, then such broker-dealer
must deliver a prospectus meeting the requirements of
the Securities Act in connection with any resales of
such Exchange Capital Securities.
Each holder of Original Capital Securities who wishes to
exchange Original Capital Securities for Exchange
Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate"
of the Corporation or the Trust, (ii) any Exchange
Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii)
it has no arrangement or understanding with any person
to participate in a distribution (within the meaning of
the Securities Act) of such Exchange Capital Securities,
and (iv) if such holder is not a broker-dealer, such
holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities
Act) of such Exchange Capital Securities. In addition,
the Corporation and the Trust may require such holder,
as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the
Corporation and the Trust (or an agent thereof) in
writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the
Exchange Act) on behalf of whom such holder holds the
Capital Securities to be exchanged in the Exchange
Offer. Each broker-dealer that receives Exchange Capital
Securities for its own account pursuant to the Exchange
Offer must acknowledge that it acquired the Original
Capital Securities for its own account as the result of
market-making activities or other trading activities and
must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with
any resale of such Exchange Capital Securities. The
Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
Based on the position taken by the staff of the Division
of Corporation Finance of the Commission in the
interpretive letters referred to above, the Corporation
and the Trust believe that broker-dealers who acquired
Original Capital Securities for their own accounts, as a
result of market-making activities or other trading
activities ("Participating Broker-Dealers"), may fulfill
their prospectus delivery requirements with respect to
the
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Exchange Capital Securities received upon exchange of
such Original Capital Securities (other than Original
Capital Securities which represent an unsold allotment
from the initial sale of the Original Capital
Securities) with a prospectus meeting the requirements
of the Securities Act, which may be the prospectus
prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to
the resale of such Exchange Capital Securities. Each
broker-dealer that receives Exchange Capital Securities
for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Capital
Securities. The Letter of Transmittal states that by so
acknowledging and by delivery of a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in
connection with resales of Exchange Capital Securities
received in exchange for Original Capital Securities
acquired by such broker-dealer as a result of
market-making activities or other trading activities.
The Trust and the Corporation have agreed that, ending
on the close of business on the 180th day following the
Expiration Date (as defined herein), it will make this
Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of
Distribution". However, a Participating Broker-Dealer
who intends to use this Prospectus in connection with
the resale of Exchange Capital Securities received in
exchange for Original Capital Securities pursuant to the
Exchange Offer must notify the Corporation or the Trust,
or cause the Corporation or the Trust to be notified, on
or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in
the space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange Agent at
one of the addresses set forth in "The Exchange
Offer--Exchange Agent." Any Participating Broker-Dealer
who is an "affiliate" of the Corporation or the Trust
may not rely on such interpretive letters and must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with
any resale transaction. See "The Exchange Offer--Resales
of Exchange Capital Securities."
In that regard, each Participating Broker-Dealer who
surrenders Original Capital Securities pursuant to the
Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that upon
receipt of notice from the Corporation or the Trust of
the occurrence of any event or the discovery of any fact
which makes any statement contained or incorporated by
reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state
a material fact necessary in order to make the
statements contained or incorporated by reference
herein, in light of the circumstances under which they
were made, not misleading or of the
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occurrence of certain other events specified in the
Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of Exchange Capital
Securities (or the Exchange Guarantee or the Exchange
Junior Subordinated Debentures, as applicable) pursuant
to this Prospectus until the Corporation or the Trust
has amended or supplemented this Prospectus to correct
such misstatement or omission and has furnished copies
of the amended or supplemented Prospectus to such
Participating Broker-Dealer, or the Corporation or the
Trust has given notice that the sale of the Exchange
Capital Securities (or the Exchange Guarantee or the
Exchange Junior Subordinated Debentures, as applicable)
may be resumed, as the case may be. If the Corporation
or the Trust gives such notice to suspend the sale of
the Exchange Capital Securities (or the Exchange
Guarantee or the Exchange Junior Subordinated
Debentures, as applicable), it shall extend the 180-day
period referred to above during which Participating
Broker-Dealers are entitled to use this Prospectus in
connection with the resale of Exchange Capital
Securities by the number of days during the period from
and including the date of the giving of such notice to
and including the date when Participating Broker-Dealers
shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of
the Exchange Capital Securities or to and including the
date on which the Corporation or the Trust has given
notice that the sale of Exchange Capital Securities (or
the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed,
as the case may be.
EXCHANGE AGENT.................... The exchange agent with respect to the Exchange Offer is
The Chase Manhattan Bank. The addresses, and telephone
and facsimile numbers, of the Exchange Agent are set
forth in "The Exchange Offer--Exchange Agent" and in the
Letter of Transmittal.
USE OF PROCEEDS................... Neither the Corporation nor the Trust will receive any
cash proceeds from the issuance of the Exchange Capital
Securities offered hereby. See "Use of Proceeds."
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES; ERISA
CONSIDERATIONS.................. Holders of Original Capital Securities should review the
information set forth in "Certain Federal Income Tax
Consequences" and "ERISA Considerations" prior to
tendering Original Capital Securities in the Exchange
Offer.
THE EXCHANGE CAPITAL SECURITIES
SECURITIES OFFERED................ Up to $850 million aggregate principal Liquidation
Amount of the Trust's Exchange Capital Securities which
have been registered under the Securities Act
(Liquidation Amount $1,000 per Exchange Capital
Security). The Exchange Capital Securities will be
issued and the Original Capital Securities were issued
under the Trust Agreement. The Exchange Capital
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Securities and any Original Capital Securities which
remain outstanding after consummation of the Exchange
Offer will vote together as a single class for purposes
of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof
have taken certain actions or exercised certain rights
under the Declaration. See "Description of Exchange
Securities--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Trust
Agreement." The terms of the Exchange Capital Securities
are identical in all material respects to the terms of
the Original Capital Securities, except that the
Exchange Capital Securities have been registered under
the Securities Act and will not be subject to certain
restrictions on transfer applicable to the Original
Capital Securities and will not provide for any increase
in the Distribution rate thereon. See "The Exchange
Offer--Purpose of the Exchange Offer and Description of
Exchange Securities."
DISTRIBUTION DATES................ January 15 and July 15 of each year, commencing January
15, 1998.
EXTENSION PERIODS................. Distributions on Exchange Capital Securities will be
deferred for the duration of any Extension Period
elected by the Corporation with respect to the payment
of interest on the Exchange Junior Subordinated
Debentures. No Extension Period will exceed 10
consecutive semi-annual periods or extend beyond the
Stated Maturity Date. See "Description of Exchange
Securities-- Description of Exchange Junior Subordinated
Debentures-- Option to Extend Interest Payment Date" and
"Certain Federal Income Tax Consequences--Interest
Income and Original Issue Discount."
RANKING........................... The Exchange Capital Securities will rank PARI PASSU,
and payments thereon will be made pro rata, with the
Original Capital Securities and the Common Securities
except as described in "Description of Exchange
Securities--Description of Exchange Capital
Securities--Subordination of Common Securities." The
Exchange Junior Subordinated Debentures will rank PARI
PASSU with the Original Junior Subordinated Debentures
and all other junior subordinated debentures to be
issued by the Corporation ("Other Debentures"), which
will be issued and sold (if at all) to other trusts to
be established by the Corporation (if any), in each case
similar to the Trust ("Other Trusts"), and will be
unsecured and subordinate and junior in right of payment
to all Senior Indebtedness to the extent and in the
manner set forth in the Indenture. See "Description of
Exchange Securities--Description of Exchange Junior
Subordinated Debentures." The Exchange Guarantee will
rank PARI PASSU with the Original Guarantee and all
other guarantees (if any) to be issued by the
Corporation with respect to capital or preferred
securities (if any) issued by Other Trusts ("Other
Guarantees") and will constitute an unsecured obligation
of the Corporation and will rank subordinate and junior
in right of payment to all Senior Indebtedness to the
extent and in the
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manner set forth in the Guarantee Agreement. See
"Description of Exchange Securities--Description of
Exchange Guarantee."
REDEMPTION........................ The Trust Securities will be subject to mandatory
redemption in a Like Amount, (i) in whole but not in
part, on the Stated Maturity Date upon repayment of the
Junior Subordinated Debentures, (ii) in whole but not in
part, contemporaneously with the optional prepayment of
the Junior Subordinated Debentures by the Corporation,
at any time prior to July 15, 2007, upon the occurrence
and continuation of a Tax Event and (iii) in whole or in
part, on or after July 15, 2007 contemporaneously with
the optional prepayment by the Corporation of the Junior
Subordinated Debentures, in each case at the applicable
Redemption Price. The Trust Securities were also subject
to mandatory redemption prior to March 31, 1998 upon the
occurrence of a Merger Termination Event. See
"Description of Exchange Securities--Description of
Exchange Capital Securities--Redemption."
RATINGS........................... The Exchange Capital Securities are rated a3 by Moody's
Investors Service, Inc. and "A" by Standard & Poor's
Rating Services.
TRANSFER RESTRICTIONS............. The Exchange Capital Securities will be issued, and may
be transferred, only in minimum denominations of not
less than $1,000. See "Description of Exchange
Securities--Description of Exchange Capital
Securities--Restrictions on Transfer." Any such transfer
of Exchange Capital Securities in denominations of less
than $1,000 shall be deemed to be void and of no legal
effect whatsoever.
ABSENCE OF MARKET FOR THE CAPITAL
SECURITIES...................... The Exchange Capital Securities will be a new issue of
securities for which there currently is no market.
Although the Initial Purchasers have informed the Trust
and the Corporation that they each currently intend to
make a market in the Capital Securities, the Initial
Purchasers are not obligated to do so, and any such
market-making may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Capital
Securities. The Trust and the Corporation does not
intend to apply for listing of the Capital Securities on
any securities exchange or for quotation through the
NASD Automated Quotation System. See "Plan of
Distribution."
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For additional information regarding the Capital Securities, see
"Description of Exchange Securities" and "Certain Federal Income Tax
Consequences."
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RISK FACTORS
THE CORPORATION IDENTIFIES THE FOLLOWING IMPORTANT FACTORS WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY RESULTS THAT MIGHT BE PROJECTED,
FORECAST, ESTIMATED OR BUDGETED BY THE CORPORATION AS FORWARD-LOOKING
INFORMATION. ALL SUCH FACTORS ARE DIFFICULT TO PREDICT AND THE MAJORITY ARE
BEYOND THE CONTROL OF THE CORPORATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES
SHOULD CAREFULLY REVIEW THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS
AND SHOULD PARTICULARLY CONSIDER THE INFORMATION STATED BELOW. SEE "FORWARD-
LOOKING INFORMATION."
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Corporation under the Guarantee issued by it for the
benefit of the holders of Capital Securities, as well as under the Junior
Subordinated Debentures, will be unsecured and rank subordinate and junior in
right of payment to all Senior Indebtedness. In addition, in the case of a
bankruptcy or insolvency proceeding, the Corporation's obligations under the
Guarantee will also rank subordinate and junior in right of payment to all
liabilities (other than Other Guarantees) of the Corporation. At June 30, 1997,
the aggregate principal amount of outstanding Senior Indebtedness was
approximately $1.2 billion. In connection with the Acquisition, the aggregate
principal amount of Senior Indebtedness will increase. See "Unaudited Pro Forma
Combined Condensed Financial Statements." None of the Indenture, the Guarantee
or the Trust Agreement places any limitation on the amount of secured or
unsecured debt, including Senior Indebtedness, that may be incurred by the
Corporation or by any subsidiary. See "Description of Exchange
Securities--Description of Exchange Guarantee--Status of the Exchange Guarantee"
and "Description of Exchange Securities--Description of Exchange Junior
Subordinated Debenturs--Subordination."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Corporation's making payments on the Junior
Subordinated Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default (as defined in "Dexcription of
Exchange Securities-- Description of Exchange Junior Subordinated
Debentures--Debenture Events of Default") shall have occurred and be continuing,
the Corporation will have the right under the Indenture to defer payments of
interest on the Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 10 consecutive semi-annual periods with respect to
each Extension Period, provided that no Extension Period may extend beyond the
Stated Maturity Date. As a consequence of any such deferral, semi-annual
Distributions on the Capital Securities by the Trust will be deferred (and the
amount of Distributions to which holders of the Capital Securities are entitled
will accumulate additional Distributions thereon at the rate of 8.072% per
annum, compounded semi-annually), from the relevant payment date for such
Distributions during any such Extension Period.
Prior to the termination of any such Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any Extension
Period and the payment of all interest then accrued and unpaid on the Junior
Subordinated Debentures (together with interest thereon at the annual rate of
8.072%, compounded semi-annually, to the extent permitted by applicable law),
the Corporation may elect to begin a new Extension Period, subject to the above
requirements. There is no limitation on the number of times that the Corporation
may elect to begin an Extension Period. See "Description of Exchange
Securities--Description of Exchange Capital Securities--Distributions" and
"Description of Exchange Securities--Description of Exchange Junior Subordinated
Debentures-- Option to Extend Interest Payment Date."
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Should the Corporation exercise its right to defer payments of interest on
the Junior Subordinated Debentures, each holder of Trust Securities will be
required to accrue income (as original issue discount ("OID")) in respect of the
deferred stated interest allocable to its Trust Securities for United States
federal income tax purposes, which will be allocated but not distributed to
holders of Trust Securities. As a result, each such holder of Capital Securities
will recognize income for United States federal income tax purposes in advance
of the receipt of cash and will not receive the cash related to such income from
the Trust if the holder disposes of the Capital Securities prior to the record
date for the payment of Distributions thereafter. See "Certain Federal Income
Tax Consequences--Interest Income and Original Issue Discount" and "--Sales of
Capital Securities."
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures in the future, the market price
of the Capital Securities is likely to be affected. A holder that disposes of
its Capital Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its Capital
Securities. In addition, merely as a result of the existence of the
Corporation's right to defer payments of interest on the Junior Subordinated
Debentures, the market price of the Capital Securities may be more volatile than
the market prices of other securities that are not subject to such deferrals.
Although the Corporation has the right to exercise its option to defer
payments of interest on the Junior Subordinated Debentures, the Corporation has
no current intention to defer payments of interest on such debentures.
TAX EVENT REDEMPTION; POSSIBLE TAX LAW CHANGES AFFECTING THE CAPITAL SECURITIES
Upon the occurrence and continuation of a Tax Event (as defined in
"Description of Exchange Securities--Description of Exchange Junior Subordinated
Debentures--Special Event Prepayment"), the Corporation will have the right to
prepay the Junior Subordinated Debentures in whole (but not in part) at the
Special Event Prepayment Price prior to July 15, 2007 and within 90 days
following the occurrence of such Tax Event and therefore cause a mandatory
redemption of the Trust Securities at the Special Event Redemption Price. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Redemption."
The Taxpayer Relief Act of 1997, enacted on August 7, 1997, did not contain
certain provisions of President Clinton's Fiscal Budget Proposal (the "Proposed
Legislation") that, among other things, would have denied an issuer a deduction
for United States federal income tax purposes for the payment of interest on
instruments with characteristics similar to the Junior Subordinated Debentures.
There can be no assurance, however, that the Proposed Legislation or other
legislation enacted after the date hereof would not adversely affect the tax
treatment of the Junior Subordinated Debentures or that any legislation enacted
after the date hereof would not cause a Tax Event that may result in the
redemption of the Junior Subordinated Debentures and, consequently, the Trust
Securities. See "Description of Exchange Securities--Description of Exchange
Capital Securities--Redemption" and "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures--Special
Event Prepayment." See also "Certain Federal Income Tax Consequences--Proposed
Tax Legislation."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures distributed to the holders of Capital Securities
if a termination of the Trust were to occur. Accordingly, the Capital Securities
or the Junior Subordinated Debentures may trade at a discount from the price
that the investor paid to purchase the Capital Securities offered hereby.
Because holders of Capital Securities may receive Junior Subordinated Debentures
in liquidation of the Trust and because Distributions are otherwise limited to
payments on the Junior Subordinated Debentures, prospective purchasers of
Exchange Capital Securities are also making an investment decision with regard
to the
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Exchange Junior Subordinated Debentures and should carefully review all the
information regarding the Exchange Junior Subordinated Debentures contained
herein. See "Description of Exchange Securities-- Description of Exchange Junior
Subordinated Debentures."
RIGHTS UNDER THE GUARANTEE
The Chase Manhattan Bank will act as Guarantee Trustee and will hold the
Guarantee for the benefit of the holders of the Capital Securities. The Chase
Manhattan Bank will also act as Property Trustee and as Debenture Trustee under
the Indenture. Chase Manhattan Bank Delaware will act as Delaware Trustee under
the Trust Agreement. The Guarantee will guarantee to the holders of the Capital
Securities the following payments, to the extent not paid by the Trust: (i) any
accumulated and unpaid Distributions required to be paid on the Capital
Securities, to the extent that the Trust has funds on hand legally available
therefor at such time, (ii) the applicable Redemption Price with respect to any
Capital Securities called for redemption, to the extent that the Trust has funds
on hand legally available therefor at such time, and (iii) upon a voluntary or
involuntary termination and liquidation of the Trust (unless the Junior
Subordinated Debentures are distributed to holders of the Capital Securities),
the lesser of (a) the aggregate of the Liquidation Amount and all accumulated
and unpaid Distributions to the date of payment, to the extent that the Trust
has funds on hand legally available therefor at such time and (b) the amount of
assets of the Trust remaining available for distribution to holders of the
Capital Securities upon a termination and liquidation of the Trust. The holders
of a majority in Liquidation Amount of the Capital Securities will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust power conferred upon the Guarantee Trustee. Any
holder of the Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. If the Corporation defaults on its obligation to pay
amounts payable under the Junior Subordinated Debentures, the Trust will not
have sufficient funds for the payment of Distributions or amounts payable on
redemption of the Capital Securities or otherwise, and, in such event, holders
of the Capital Securities will not be able to rely upon the Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing and such event is attributable to the
failure of the Corporation to pay principal of (or premium, if any) or interest
on the Junior Subordinated Debentures on the payment date on which such payment
is due and payable, then a holder of Capital Securities may institute a legal
proceeding directly against the Corporation for enforcement of payment to such
holder of the principal of (or premium, if any) or interest on such Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Capital Securities of such holder (a "Direct Action").
Notwithstanding any payments made to a holder of Capital Securities by the
Corporation in connection with a Direct Action, the Corporation shall remain
obligated to pay the principal of (and premium, if any) and interest on the
Junior Subordinated Debentures, and the Corporation shall be subrogated to the
rights of the holder of such Capital Securities with respect to payments on the
Capital Securities to the extent of any payments made by the Corporation to such
holder in any Direct Action. Except as described herein, holders of Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debentures or to assert directly any
other
rights in respect of the Junior Subordinated Debentures. See "Description of
Exchange Securities-- Description of Exchange Junior Subordinated
Debentures--Enforcement of Certain Rights by Holders of Capital Securities,"
"--Description of Exchange Junior Subordinated Debentures--Debenture Events of
Default" and "--Description of Exchange Guarantee." The Trust Agreement will
provide that each holder of Capital Securities by acceptance thereof agrees to
the provisions of the Indenture.
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CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Indenture does not contain provisions that afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction, including a change of control, or other similar transactions
involving the Corporation that may adversely affect such holders.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have voting rights relating
only to the modification of the Capital Securities, the termination or
liquidation of the Trust, and the exercise of the Trust's rights as holder of
Junior Subordinated Debentures. Holders of Capital Securities will not be
entitled to vote to appoint, remove or replace the Property Trustee or the
Delaware Trustee, and such voting rights are vested exclusively in the holder of
the Common Securities except upon the occurrence of certain events described
herein. See "Description of Exchange Securities--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Trust Agreement" and "--Removal of
Issuer Trustees."
HOLDING COMPANY STRUCTURE; DIVIDEND AND DISTRIBUTION RESTRICTIONS
The Corporation's principal assets are the shares of capital stock of its
insurance subsidiaries. The Corporation relies primarily on dividends from its
subsidiaries to meet its obligations for paying principal and interest on
outstanding debt obligations, distributions on Capital Securities, dividends to
stockholders and corporate expenses. Except to the extent that the holding
company may itself be a creditor with recognized claims against its
subsidiaries, claims of creditors of such subsidiaries, including policyholders,
have priority with respect to the assets and earnings of such subsidiaries over
the claims of creditors of the holding company, including claims under the
Junior Subordinated Debentures. At June 30, 1997, liabilities of the
Corporation's subsidiaries, including provisions for outstanding losses and
unearned premiums, totaled $16.4 billion and assets of the subsidiaries totaled
$20.8 billion.
In the event of the insolvency, liquidation or other reorganization of any
of the Corporation's subsidiaries, the creditors and shareholders of the
Corporation will have no right to proceed against the assets of such subsidiary
or to cause the liquidation or bankruptcy or winding-up of such subsidiary under
applicable bankruptcy or winding-up laws. The applicable insurance laws of the
domiciliary jurisdiction of each of the Corporation's insurance subsidiaries
would govern any proceedings relating to such insurance subsidiary and the
relevant insurance authority would act as a liquidator or rehabilitator for such
subsidiary. Both creditors and policyholders of such subsidiary would be
entitled to payment in full from such assets before the Corporation, as a
shareholder, would be entitled to receive any distribution therefrom.
The payment of dividends to the Corporation by its insurance subsidiaries is
subject to limitations imposed by the insurance laws of the states in which such
subsidiaries are domiciled or deemed to be commercially domiciled, which are
Washington, Indiana, California, Missouri, Illinois, Texas, Pennsylvania and New
York. It is generally the case that unless an insurance subsidiary receives
advance approval from the Insurance Commissioner in its state of domicile, it
may not pay a dividend which, together with any other dividends paid within the
prior 12-month period, would exceed the greater of (i) 10% of such subsidiary's
surplus as of the prior calendar year end and (ii) the net income from such
subsidiary's operations for the prior calendar year In the case of a
Missouri-domiciled property and casualty insurance company, in the absence of
advance approval, dividends cannot be paid if, together with any other dividends
paid within the prior 12-month period, such aggregate dividends would exceed the
insurance company's prior year investment income. Regulatory authorities may
impose, from time to time, other restrictions which may affect the actual
amounts available for dividends. Based on the applicable dividend restrictions,
the annual limit on the amount of dividends available for payment by the
Corporation's insurance subsidiaries for 1997 without regulatory approval is
$665 million. Three of SAFECO's insurance
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subsidiaries received approval in July 1997 to pay dividends totalling $600
million to SAFECO to fund a portion of the purchase price for the Acquisition.
CONSEQUENCES OF A FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES
The Original Capital Securities have not been registered under the
Securities Act or any state securities laws and therefore may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions.
Original Capital Securities which remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Original Capital Securities which remain outstanding will not be entitled to any
rights to have such Original Capital Securities registered under the Securities
Act or to any similar rights under the Registration Rights Agreement (subject to
certain limited exceptions). The Corporation and the Trust do not intend to
register under the Securities Act any Original Capital Securities which remain
outstanding after consummation of the Exchange Offer (subject to such limited
exceptions, if applicable). To the extent that Original Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Original Capital Securities could be adversely affected.
The Exchange Capital Securities and any Original Capital Securities which
remain outstanding after consummation of the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount of Capital Securities have taken
certain actions or exercised certain rights under the Declaration. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Trust Agreement."
The Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by
December 8, 1997 and declared effective by January 21, 1998, the Distribution
rate borne by the Original Capital Securities will increase by 0.50% per annum
until such registration statement has been filed or declared effective, as the
case may be. Upon consummation of the Exchange Offer, holders of Original
Capital Securities will not be entitled to any increase in the Distribution rate
thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Description of Exchange
Securities."
ABSENCE OF PUBLIC MARKET
The Original Capital Securities were issued to, and the Corporation believes
such securities are currently owned by, a relatively small number of beneficial
owners. The Original Capital Securities have not been registered under the
Securities Act and will be subject to restrictions on transferability if they
are not exchanged for the Exchange Capital Securities. Although the Exchange
Capital Securities may be resold or otherwise transferred by the holders (who
are not affiliates of the Corporation or the Trust) without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no established trading market. Original Capital
Securities may be transferred by the holders thereof only in blocks having a
Liquidation Amount of not less than $100,000 (100 Capital Securities). The
Corporation and the Trust have been advised by the Initial Purchasers that the
Initial Purchasers presently intend to make a market in the Exchange Capital
Securities. However, the Initial Purchasers are not obligated to do so and any
market-making activity with respect to the Exchange Capital Securities may be
discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the Exchange Capital Securities or the Original Capital Securities, or as to the
liquidity of or the trading market for the Exchange Capital Securities or the
Original Capital Securities. If an active public
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market does not develop, the market price and liquidity of the Exchange Capital
Securities may be adversely affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, the financial condition of the Corporation
and the market for similar securities. Depending on these and other factors, the
Exchange Capital Securities may trade at a discount.
Notwithstanding the registration of the Exchange Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Corporation or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions of
Rule 144 under the Securities Act. Each broker-dealer that receives Exchange
Capital Securities for its own account in exchange for Original Capital
Securities, where such Original Capital Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Capital Securities. See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Subject to the conditions set forth in "The Exchange Offer--Conditions to
the Exchange Offer," delivery of Exchange Capital Securities in exchange for
Original Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) certificates for Original Capital Securities or a book-entry confirmation of
a book-entry transfer of Original Capital Securities into the Exchange Agent's
account at DTC, including an Agent's Message (as defined in "The Exchange
Offer--Acceptance for Exchange and Issuance of Exchange Capital Securities") if
the tendering holder does not deliver a Letter of Transmittal, (ii) a completed
and signed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal, and (iii) any other documents
required by the Letter of Transmittal. Therefore, holders of Original Capital
Securities desiring to tender such Original Capital Securities in exchange for
Exchange Capital Securities should allow sufficient time to ensure timely
delivery. Neither the Corporation nor the Trust is under a duty to give
notification of defects or irregularities with respect to the tenders of
Original Capital Securities for exchange.
FLUCTUATION AND UNCERTAINTY OF PROPERTY AND CASUALTY INSURANCE INDUSTRY RESULTS
The results of companies in the property and casualty insurance industry
historically have been subject to significant fluctuations and uncertainties.
The industry's profitability can be affected significantly by volatile and
unpredictable developments (including catastrophes); changes in reserves
resulting from the general claims and legal environments as different types of
claims arise and judicial interpretations relating to the scope of insurers'
liability develop; fluctuations in interest rates and other changes in the
investment environment, which affect returns on invested capital; and
inflationary pressures that affect the size of losses. The demand for property
and casualty insurance can also vary significantly, generally rising as the
overall level of economic activity increases and falling as such activity
decreases. The property and casualty insurance industry historically has been
cyclical, and the commercial lines business has been in a soft market since the
late 1980s, primarily due to premium rate competition, which has resulted in
lower underwriting profitability. The Corporation's results of operations may be
adversely affected by these fluctuations.
CATASTROPHE LOSSES
Property and casualty insurers are subject to claims arising out of
catastrophes that may have a significant effect on their results of operations
and financial condition. Losses caused by catastrophes have had a significant
impact on the Corporation's results. Catastrophes can be caused by various
events,
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including hurricanes, windstorms, earthquakes, hailstorms, explosions, severe
winter weather and fires. The incidence and severity of catastrophes are
inherently unpredictable. The extent of losses from a catastrophe is a function
of both the total amount of insured exposure in the area affected by the event
and the severity of the event. Most catastrophes are restricted to small
geographic areas; however, hurricanes and earthquakes may produce significant
damage in large, heavily populated areas. Although catastrophes can cause losses
in a variety of the Corporation's property and casualty lines, most of the
Corporation's past catastrophe-related claims have related to homeowners and
other personal lines coverage. Insurance companies are not permitted to reserve
for a catastrophe until it has occurred. Subject to restrictions imposed by
insurance regulatory authorities and as dictated by business considerations, the
Corporation attempts to limit its exposure to acceptable risk levels through
selective underwriting practices, catastrophe reinsurance and higher deductibles
on earthquake coverage in certain states. There can be no assurance, however,
that such attempts will be successful. It is therefore possible that a
catastrophic event or multiple catastrophic events could have a material adverse
effect on the Corporation.
PROPERTY AND CASUALTY LOSS RESERVES
The Corporation maintains property and casualty loss reserves to cover the
estimated liability for unpaid losses and loss adjustment expenses for reported
and unreported claims incurred as of the end of each accounting period. Reserves
do not represent an exact calculation of liability. Rather, reserves represent
estimates of what the Corporation expects the ultimate settlement and
administration of claims will cost. These estimates, which generally involve
actuarial projections, are based on the Corporation's assessment of facts and
circumstances then known, as well as estimates of future trends in claims
severity, frequency, judicial theories of liability and other factors. These
variables are affected by both internal and external events, such as changes in
claims handling procedures, inflation, judicial trends and legislative changes.
Many of these items are not directly quantifiable, particularly on a prospective
basis. Additionally, there may be a significant reporting lag between the
occurrence of the insured event and the time it is reported to the Corporation.
The inherent uncertainties of estimating reserves are greater for certain types
of property and casualty liabilities, particularly for environmental, asbestos
and construction defect claims where the technological, judicial and political
considerations affecting these types of claims are subject to change and long
periods of time may elapse before a definitive determination of liability is
made. Reserve estimates are continually refined in a regular and ongoing process
as experience develops and further claims are reported and settled. Adjustments
to reserves are reflected in the results of the periods in which such estimates
are changed. Because setting reserves is inherently uncertain, there can be no
assurance that current reserves will prove adequate for the Corporation in light
of subsequent actual experience.
INTEGRATION; ACHIEVEMENT OF REVENUE ENHANCEMENTS AND EXPENSE SAVINGS
The pro forma combined results of operations of SAFECO and American States
do not necessarily indicate the Corporation's future results. Since SAFECO and
American States both engage in the property and casualty insurance business and
write many of the same lines of insurance throughout the United States, it is
possible that, despite the differences in geographic and product line
concentrations of SAFECO and American States, the Corporation could experience a
loss of customers and agents as a result of the Acquisition. Management has
estimated that capitalizing on cross-selling opportunities and capturing a
larger share of business generated by existing agents will produce incremental
annual revenues that will increase to approximately $170 million for the year
2000. In addition, management is working to integrate the operations of SAFECO
and American States and to achieve significant expense savings by eliminating
redundant expenses and facilities, streamlining corporate infrastructure and
improving efficiency. Management has identified annual cost savings from the
Acquisition that will increase to approximately $80 million for the year 2000.
There can be no assurance that the Corporation will generate the projected
revenues or achieve the projected savings.
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INSURANCE REGULATION
The Corporation and its insurance subsidiaries are subject to extensive
regulation and supervision. This regulation is generally designed to protect the
interests of policyholders rather than stockholders and other investors. Such
regulation, generally administered by a department of insurance in each state in
which the insurance subsidiaries do business, relates to, among other things,
the standards of solvency that must be met and maintained; the licensing of
insurers and their agents; the nature of and limitations on investments; the
ability to withdraw from the state; the approval of premium rates; restrictions
on the size of risks that may be insured under a single policy; reserves and
provisions for unearned premiums, losses and other purposes; deposits of
securities for the benefit of policyholders; approval of policy forms; and the
regulation of market conduct, including underwriting and claims practices. State
insurance departments also conduct periodic examinations of the affairs of
insurance companies and require the filing of annual and other reports relating
to the financial condition of insurance companies, holding company issues and
other matters. The Corporation's insurance subsidiaries are collectively
licensed to transact insurance business in all 50 states and the District of
Columbia. See "--Holding Company Structure; Dividend and Distribution
Restrictions."
An insurance company's capacity for premium growth is in part a function of
the amount of its statutory surplus. Maintaining appropriate levels of statutory
surplus is considered important by state insurance regulatory authorities and
the private agencies that rate insurers' claims-paying abilities and financial
strength. Failure to maintain certain levels of statutory surplus could result
in increased regulatory scrutiny, action by state regulatory authorities or a
downgrade by rating agencies.
The NAIC has adopted a system of assessing minimum capital adequacy which is
applicable to the Corporation's insurance subsidiaries. This system, known as
risk-based capital ("RBC"), develops a risk profile of the insurer by comparing
its adjusted surplus to its required surplus in order to determine whether the
insurer merits further regulatory action. At June 30, 1997, the RBC ratios of
the Corporation's insurance subsidiaries were substantially in excess of levels
that would require regulatory action.
In recent years the state insurance regulatory framework has come under
increased federal scrutiny, and certain state legislatures have considered or
enacted laws that altered and, in many cases, increased state authority to
regulate insurance companies and insurance holding companies. Further, the NAIC
and state insurance regulators are reexamining existing laws and regulations,
specifically focusing on investment laws and regulations, modifications to
holding company regulations, codification of statutory accounting practices, RBC
guidelines, interpretations of existing laws and the development of new laws.
Finally, various consumer movements have exerted pressure on elected officials
to regulate or roll back property and casualty insurance rates. While most of
these provisions have failed to become law, these initiatives may continue as
legislators and regulators try to respond to insurance availability and
affordability concerns. The Corporation cannot predict with certainty the effect
any proposed or future legislation or NAIC initiative may have on the conduct of
its business, its financial condition or its results of operations.
All 50 states of the United States and the District of Columbia have laws
requiring all property and casualty insurance companies doing business within
the jurisdiction to participate in guaranty funds or associations, which are
organized to pay contractual obligations under insurance policies issued by
impaired or insolvent insurance companies and are funded by assessments based on
a proportionate share of certain premiums written by such companies. These
assessments may increase in the future depending on the rate of insurance
company insolvencies. In addition, as a condition to the ability to conduct
business in various states, the Corporation's insurance subsidiaries are
required to participate in mandatory property and casualty shared market
mechanisms or pooling arrangements, which provide various types of insurance
coverage to individuals or other entities that otherwise are unable to purchase
such coverage voluntarily from private insurers. The underwriting results of
these pools traditionally have been unprofitable.
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COMPETITION
The insurance business is highly competitive. Competition is based on many
factors, including the perceived overall financial strength of the insurer,
pricing and other terms and conditions of products offered, levels of customer
service (including the speed with which claims are paid) and experience in the
business. Some of the insurers that compete with the Corporation have greater
financial resources or lower cost structures than the Corporation. The
Corporation also competes with insurance companies that use captive agents or
salaried employees to sell their products. Because these companies generally do
not pay commissions, they may be able to obtain business at a lower cost than
the Corporation. In addition, the Corporation competes with organizations
offering alternative forms of risk protection, including self-insurance and
large-deductible programs. Finally, in recent years marketwide premium rates
have leveled or been reduced in certain lines of business in which the
Corporation competes.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed statements of income of
the Corporation for the six months ended June 30, 1997 and for the year ended
December 31, 1996 present results for the Corporation as if the Acquisition, the
issuance of the Capital Securities, the issuance of the Notes and the other
financings consummated by the Corporation in connection with the Acquisition
(including the Related Financings, as hereinafter defined) had occurred at
January 1, 1996. See "Capitalization." The accompanying unaudited pro forma
combined condensed balance sheet as of June 30, 1997 gives effect to the
Acquisition, the issuance of the Capital Securities, the issuance of the Notes
and the other financings consummated by the Corporation in connection with the
Acquisition (including the Related Financings) as if they had occurred as of
June 30, 1997. The unaudited pro forma combined condensed financial statements
do not purport to represent the Corporation's financial position or the
operating results that would have been achieved had the Acquisition been
consummated as of the dates indicated and should not be construed as projecting
the Corporation's future financial position or operating results. The unaudited
pro forma combined condensed financial statements do not reflect any projected
revenue increases or cost savings. The pro forma adjustments are based on
available information and certain assumptions that the Corporation currently
believes are reasonable under the circumstances.
The unaudited pro forma combined condensed financial statements should be
read in conjunction with the accompanying notes thereto, the historical
consolidated financial statements of SAFECO as of and for the year ended
December 31, 1996 and the six months ended June 30, 1997 and the historical
consolidated financial statements of American States as of and for the year
ended December 31, 1996 and the six months ended June 30, 1997, in each case
incorporated by reference in this Prospectus. See "Incorporation of Certain
Documents by Reference."
The pro forma adjustments are applied to the historical financial statements
to account for, among other things, the Acquisition using the purchase method of
accounting. Under purchase accounting, the total purchase cost for the
Acquisition has been allocated to the assets and liabilities of American States
based on their fair values. Allocations are subject to valuations as of the date
of the Acquisition based on appraisals and other studies which are not yet
completed. Accordingly, the final allocations will be different from the amounts
reflected herein. Although the final allocations will differ, the unaudited pro
forma combined condensed financial statements reflect management's best
estimates based on currently available information as of the date of this
Prospectus.
As part of the Acquisition, SAFECO and Lincoln National Corporation, as the
majority shareholder of American States, jointly elected to treat the purchase
of American States by SAFECO as an asset acquisition for federal income tax
purposes pursuant to Section 338(h)(10) of the Internal Revenue Code of 1986, as
amended. This election allows the Corporation to deduct the amortization of
goodwill recorded in the Acquisition, thereby significantly improving the
Corporation's future cash flows.
27
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- ADJUSTMENTS
AMERICAN INCREASE NOTE PRO FORMA
SAFECO STATES (DECREASE) REFERENCE COMBINED
--------- ----------- ----------- ------------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments:
Fixed maturities available-for-sale, at market value... $12,238.2 $ 3,787.6 $ (600.0) (a) $15,425.8
Fixed maturities held-to-maturity, at amortized cost... 2,698.1 -- 2,698.1
Marketable equity securities, at market value.......... 1,501.1 460.6 1,961.7
Mortgage loans......................................... 460.3 21.9 482.2
Real estate............................................ 614.6 -- 614.6
Short-term investments................................. 110.1 74.2 184.3
Other invested assets.................................. 59.4 39.4 98.8
--------- ----------- ----------- -----------
Total investments.................................... 17,681.8 4,383.7 (600.0) 21,465.5
Cash..................................................... 80.5 19.3 (42.0) (b) 57.8
Accrued investment income................................ 247.6 64.9 312.5
Finance receivables...................................... 913.8 -- 913.8
Premiums and other service fees receivable............... 486.9 482.8 969.7
Reinsurance recoverables................................. 129.9 175.1 305.0
Deferred policy acquisition costs........................ 411.6 212.3 623.9
Deferred federal income taxes recoverable................ -- 121.1 102.5 (b) 0.0
(223.6) (b)
Land, buildings and equipment for company use............ 171.7 31.8 203.5
Cost in excess of net assets of acquired subsidiaries.... 41.1 96.1 (96.1) (b) 1,525.1
1,484.0 (b)
Other assets............................................. 223.9 64.8 288.7
Separate account assets.................................. 662.2 -- 662.2
--------- ----------- ----------- -----------
Total assets......................................... $21,051.0 $ 5,651.9 $ 624.8 $27,327.7
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Losses, adjustment expense and future policy benefits.... $ 2,128.8 $ 2,854.7 (c) $ 4,983.5
Unearned premiums........................................ 981.7 746.1 1,727.8
Funds held under deposit contracts....................... 10,402.8 -- 10,402.8
Short-term debt.......................................... 906.3 66.7 (66.7) (a) 1,644.8
738.5 (a)
Long-term debt........................................... 434.9 232.9 (232.9) (a) 634.9
200.0 (a)
Other liabilities........................................ 669.3 334.5 41.0 (b) 1,044.8
(d)
Current federal income taxes payable..................... 12.3 -- 12.3
Deferred federal income taxes payable.................... 482.1 -- (223.6) (b) 258.5
Separate account liabilities............................. 662.2 -- 662.2
--------- ----------- ----------- -----------
Total liabilities.................................... 16,680.4 4,234.9 456.3 21,371.6
Corporation-obligated, mandatorily redeemable capital
securities of subsidiary trusts holding solely junior
subordinated debentures of the Corporation............. 990.0 (a) 990.0
--------- ----------- ----------- -----------
Common stock............................................. 227.9 304.5 (304.5) (e) 823.4
595.5 (a)
Retained earnings........................................ 3,190.4 941.0 (941.0) (e) 3,190.4
Unrealized appreciation of investment securities, net of
tax.................................................... 956.6 171.5 (171.5) (e) 956.6
Unrealized loss from foreign currency translation, net of
tax.................................................... (4.3) -- (4.3)
--------- ----------- ----------- -----------
Total stockholders' equity........................... 4,370.6 1,417.0 (821.5) 4,966.1
--------- ----------- ----------- -----------
Total liabilities and stockholders' equity........... $21,051.0 $ 5,651.9 $ 624.8 $27,327.7
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
</TABLE>
28
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ADJUSTMENTS
AMERICAN INCREASE NOTE PRO FORMA
SAFECO STATES (DECREASE) REFERENCE COMBINED
----------- ----------- ------------- ------------- -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Insurance:
Property and casualty earned premiums.............. $ 1,176.4 $ 824.1 $ 2,000.5
Life and health premiums and other revenues........ 134.9 29.0 163.9
----------- ----------- -----------
Total............................................ 1,311.3 853.1 2,164.4
Real estate.......................................... 32.7 -- 32.7
Finance.............................................. 41.0 -- 41.0
Asset management..................................... 11.7 -- 11.7
Other................................................ 25.1 6.7 31.8
Net investment income................................ 583.7 133.0 $ (16.2) (f) 700.5
Realized investment gain............................. 40.8 19.4 60.2
----------- ----------- ------ -----------
Total revenues................................... 2,046.3 1,012.2 (16.2) 3,042.3
----------- ----------- ------ -----------
EXPENSES:
Losses, adjustment expense and policy benefits....... 1,210.3 620.9 1,831.2
Commissions.......................................... 226.6 148.3 374.9
Interest............................................. 37.4 10.4 17.9 (f) 65.7
Other................................................ 284.9 122.4 24.8 (f) 431.3
(0.8) (f)
Amortization of deferred policy acquisition costs.... 223.1 169.0 392.1
Deferral of policy acquisition costs................. (236.1) (178.1) (414.2)
----------- ----------- ------ -----------
Total expenses................................... 1,746.2 892.9 41.9 2,681.0
----------- ----------- ------ -----------
Income before income taxes............................. 300.1 119.3 (58.1) 361.3
Provision (benefit) for federal income taxes........... 71.4 21.0 (13.1) (g) 79.3
----------- ----------- ------ -----------
Income before distributions on capital securities...... 228.7 98.3 (45.0) 282.0
Distributions on capital securities, net of tax........ -- -- 26.8 (h) 26.8
----------- ----------- ------ -----------
Net income available to common stockholders............ $ 228.7 $ 98.3 $ (71.8) $ 255.2
----------- ----------- ------ -----------
----------- ----------- ------ -----------
Net income per share of common stock:
Income before realized gain........................ $ 1.60 $ 1.56
Realized gain...................................... .21 .27
----------- -----------
Net income per share................................... $ 1.81 $ 1.83
----------- -----------
----------- -----------
Weighted average shares outstanding.................... 126.3 (i) 139.3
</TABLE>
29
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ADJUSTMENTS
AMERICAN INCREASE NOTE PRO FORMA
SAFECO STATES (DECREASE) REFERENCE COMBINED
----------- ----------- ------------- ------------- -----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
REVENUES:
Insurance:
Property and casualty earned premiums.............. $ 2,275.4 $ 1,617.2 $ 3,892.6
Life and health premiums and other revenues........ 265.9 56.9 322.8
----------- ----------- -----------
Total............................................ 2,541.3 1,674.1 4,215.4
Real estate.......................................... 79.9 -- 79.9
Finance.............................................. 75.7 -- 75.7
Asset management..................................... 23.2 -- 23.2
Other................................................ 38.5 -- 38.5
Net investment income................................ 1,116.7 274.3 $ (32.4) (f) 1,358.6
Realized investment gain............................. 90.1 35.6 125.7
----------- ----------- ------------- -----------
Total revenues................................... 3,965.4 1,984.0 (32.4) 5,917.0
----------- ----------- ------------- -----------
EXPENSES:
Losses, adjustment expense and policy benefits....... 2,362.7 1,248.9 3,611.6
Commissions.......................................... 415.7 283.0 698.7
Interest............................................. 72.4 12.4 35.8 (f) 120.6
Other................................................ 552.6 243.8 49.5 (f) 844.4
(1.5) (f)
Amortization of deferred policy acquisition costs.... 426.9 338.0 764.9
Deferral of policy acquisition costs................. (443.4) (337.8) (781.2)
----------- ----------- ------------- -----------
Total expenses................................... 3,386.9 1,788.3 83.8 5,259.0
----------- ----------- ------------- -----------
Income before income taxes............................. 578.5 195.7 (116.2) 658.0
Provision (benefit) for federal income taxes........... 139.5 26.0 (26.2) (g) 139.3
----------- ----------- ------------- -----------
Income before distributions on capital securities...... 439.0 169.7 (90.0) 518.7
Distributions on capital securities, net of tax........ -- -- 53.6 (h) 53.6
----------- ----------- ------------- -----------
Net income available to common stockholders............ $ 439.0 $ 169.7 $ (143.6) $ 465.1
----------- ----------- ------------- -----------
----------- ----------- ------------- -----------
Net income per share of common stock:
Income before realized gain........................ $ 3.02 $ 2.75
Realized gain...................................... .46 .59
----------- -----------
Net income per share................................... $ 3.48 $ 3.34
----------- -----------
----------- -----------
Weighted average shares outstanding.................... 126.1 (i) 139.1
</TABLE>
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
(a) The following adjustments reflect the funding of the Acquisition:
<TABLE>
<S> <C>
SOURCES:
Proceeds from issuance of commercial paper (after application of
the net proceeds of $595.5 from issuance of common stock and
the issuance of an additional $150 aggregate liquidation
amount of capital securities)................................. $ 738.5
Proceeds from issuance of Notes................................. 200.0
Net proceeds from issuance of capital securities................ 990.0
Net proceeds from issuance of common stock...................... 595.5
Dividend from SAFECO's property and casualty subsidiaries....... 600.0
---------
Total......................................................... $ 3,124.0
---------
---------
USES:
Purchase price of outstanding shares of common stock of American
States (60,093,615 shares x $47).............................. $ 2,824.4
Retirement of American States debt.............................. 299.6
---------
Total......................................................... $ 3,124.0
---------
---------
</TABLE>
(b) The following adjustments result from the allocation of the purchase price
for the Acquisition based on the fair value of the net assets acquired:
<TABLE>
<CAPTION>
DEBIT
(CREDIT)
---------
<S> <C>
ASSETS:
Record the direct out-of-pocket costs of the Acquisition......................... $ (42.0)
Adjustment to reflect the deferred tax benefit of purchase accounting
adjustments.................................................................... 102.5
Net American States' deferred tax asset against SAFECO's deferred tax
liability...................................................................... (223.6)
Eliminate American States' goodwill.............................................. (96.1)
Record the excess of the cost to acquire American States over the fair value of
net assets acquired (goodwill)................................................. 1,484.0
LIABILITIES:
Adjustments to other liabilities:
Record lease-related fair value adjustments.................................... $ (18.0)
Record the estimated liability for change of control and other costs for
certain executive officers and employees of American States.................. (30.0)
Increase liability for pension obligations..................................... (9.6)
Reduce liability for postretirement obligations................................ 16.6
---------
Total adjustments to other liabilities....................................... $ (41.0)
---------
---------
</TABLE>
(c) Adjustments of unpaid loss and loss adjustment expense resulting from the
Corporation's evaluation of American States' reserves will be recorded in
operations in the period determined. The Corporation expects to record
$40.0 of additional reserves in the fourth quarter of 1997, which will
result in an after-tax charge of $26.0 for such quarter.
(d) The Corporation expects to accrue in the fourth quarter of 1997 an
estimated liability of $23.0 ($15.0 after-tax) for first-year incentive
commissions on certain American States' personal lines business.
(CONTINUED ON NEXT PAGE)
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT SHARE AMOUNTS) (CONTINUED)
(CONTINUED FROM PREVIOUS PAGE)
(e) Adjustment to eliminate American States' equity:
<TABLE>
<S> <C>
Common stock....................................................... $ (304.5)
Retained earnings.................................................. (941.0)
Unrealized gain.................................................... (171.5)
</TABLE>
(f) The following adjustments reflect the annual income statement effect of the
pro forma adjustments. The income statement adjustments for the six-month
period ended June 30, 1997 are equal to one-half of the annual amounts
presented:
<TABLE>
<CAPTION>
ANNUAL INCREASE
(DECREASE) IN
PRETAX INCOME
---------------
<S> <C>
INVESTMENT INCOME:
Loss of investment income due to dividend from SAFECO's property and
casualty subsidiaries ($600.0 x 5.4%, rate based on market yields for
tax-exempt securities at September 5, 1997).............................. $ (32.4)
INTEREST EXPENSE:
Retire existing American States debt
($100.0 x 7 1/8%, $200.0 x 6.7%)......................................... $ 20.5
Commercial paper interest expense ($738.5 x 5.7%).......................... (42.1)
Notes interest expense ($200.0 x 7.1%)..................................... (14.2)
-------
Total interest expense effect............................................ (35.8)
-------
Record the amortization of goodwill over 30 years.......................... (49.5)
Record amortization of unfavorable lease obligation........................ 1.5
-------
Total pretax income effect............................................... $ (116.2)
-------
(g) Record income tax expense (benefit) of the pro forma.................
adjustments.......................................................... $ (26.2)
(h) Distributions on capital securities, net of tax......................
($1,000 x 8.25% = 82.5) x (100% - 35%)............................... $ 53.6
</TABLE>
The interest rate on the Notes and the distribution rate on the Capital
Securities are based on effective cost, including the cost of an interest rate
lock, of the Notes and the Capital Securities. The Corporation issued $1,500 of
commercial paper in late September 1997 ($750 on September 26, 1997 and $750 on
September 29, 1997) at interest rates ranging from 5.65% to 5.70% and maturities
ranging from October 20, 1997 to January 29, 1998 and used all but $16 to
finance the Acquisition. The Corporation, through a subsidiary trust, may issue
an additional $150 aggregate liquidation amount of capital securities in 1997 to
retire a like amount of commercial paper.
(i) Reflects the issuance of shares of Common Stock at a public offering price
of $47.50 per share and gross proceeds of $617.5.
32
<PAGE>
SAFECO CORPORATION
The Corporation is one of the largest property and casualty insurance
companies in the United States. On a pro forma basis giving effect to the
Acquisition and the Related Financings, the Corporation had consolidated
revenues of $5.9 billion in 1996, and total assets of $27.3 billion and total
stockholders' equity of $5.0 billion at June 30, 1997. The Corporation provides
a broad range of personal and commercial property and casualty insurance to
individuals, businesses, government entities and associations. SAFECO and
American States have each underwritten property and casualty insurance since the
1920s. Through its insurance subsidiaries, the Corporation is licensed as a
property and casualty insurer in all 50 states and the District of Columbia,
with a significant presence in the Pacific Northwest and the Midwest. The
Corporation's property and casualty operations generated approximately 92% of
the Corporation's insurance revenues in 1996. Of the Corporation's 1996 net
written property and casualty premiums of $3.9 billion, personal and commercial
lines accounted for 60% and 40%, respectively.
The Corporation also offers annuities, retirement services and group life
and health and individual life insurance. In addition, the Corporation conducts
commercial lending and leasing, asset management, insurance agency and financial
services distribution operations, and real estate investment and management.
The Corporation's principal executive officers are located at 4333 Brooklyn
Avenue N.E., Seattle, Washington 98185, and its telephone number is (206)
545-5000.
The Corporation is subject to the information requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. For further information regarding the
Corporation, holders of Original Capital Securities may refer to such reports,
proxy statements and other information which are available as described in
"Available Information" and "Incorporation of Certain Documents by Reference."
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain obligations of the
Corporation under the Registration Rights Agreement. Neither the Corporation nor
the Trust will receive any proceeds from the issuance of the Exchange Capital
Securities and the Exchange Guarantee offered hereby and has agreed to pay the
exepnses of the Exchange Offer. In consideration for issuing the Exchange
Capital Securities as contemplated in this Prospectus, the Trust will receive,
in exchange, Original Capital Securities in like Liquidation Amount. The
Original Capital Securities surrendered in exchange for the Exchange Capital
Securities will be retired and canceled and cannot be re-issued.
The proceeds to the Trust (without giving effect to expenses of the offering
payable by the Corporation) from the offering of the Original Capital Securities
was $850,000,000. All of the proceeds from the sale of the Original Capital
Securities were invested by the Trust in the Original Junior Subordinated
Debentures. The net proceeds from the sale of the Original Junior Subordinated
Debentures were used to fund a portion of the cost of the Acquisition. The form
and terms of the Exchange Junior Subordinated Debentures are identical in all
material respects to the form and terms of the Original Junior Subordinated
Debentures, except as otherwise described in "Description of Exchange
Securities--Description of Exchange Junior Subordinated Debentures."
Accordingly, issuance of the Exchange Junior Subordinated Debentures will not
result in any increase in the outstanding debt of the Corporation.
33
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO FIXED CHARGES AND
DISTRIBUTIONS ON CAPITAL SECURITIES
The following table sets forth the Corporation's ratios of earnings to fixed
charges and earnings to fixed charges and distributions on capital securities:
<TABLE>
<CAPTION>
PRO FORMA
--------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED JUNE DEC. 31, ENDED JUNE ---------------------------------
30, 1997 1996 30, 1997 1996 1995 1994
------------- ----------- ----------- --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(1).......... 6.0 6.0 8.4 8.6 6.7 6.2
Ratio of earnings to fixed charges and
distributions on capital securities.......... 3.8 3.7 8.4 8.6 6.7 6.2
Ratio of earnings to fixed charges excluding
SAFECO Credit Company, Inc.(1)............... 8.8 8.7 21.9 20.4 11.5 9.5
Ratio of earnings to fixed charges and
distributions on capital securities,
excluding SAFECO Credit Company, Inc......... 4.6 4.3 21.9 20.4 11.5 9.5
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Ratio of earnings to fixed charges(1).......... 10.1 7.0
Ratio of earnings to fixed charges and
distributions on capital securities.......... 10.1 7.0
Ratio of earnings to fixed charges excluding
SAFECO Credit Company, Inc.(1)............... 16.1 10.6
Ratio of earnings to fixed charges and
distributions on capital securities,
excluding SAFECO Credit Company, Inc......... 16.1 10.6
</TABLE>
- ------------------------
(1) Excludes distributions on capital securities.
For purposes of computing the ratios of earnings to fixed charges, earnings
represent net income before extraordinary items and cumulative effect of changes
in accounting principles plus applicable income taxes and fixed charges. Fixed
charges include all interest expense, distributions on capital securities
(except where noted) and the proportion deemed representative of the interest
factor of rent expense. The table also presents the pro forma ratios of earnings
to fixed charges for the six months ended June 30, 1997 and for the year ended
December 31, 1996 as if the Acquisition and related transactions had been
consummated on January 1, 1996.
34
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
SAFECO as of June 30, 1997, as adjusted to reflect the consummation of the
Acquisition and the issuance of an additional $150 million aggregate liquidation
amount of capital securities, $1,334 million of commercial paper and the
issuance of Common Stock in an equity offering with net proceeds of $595.5
million (collectively, the "Related Financings"), and as further adjusted to
reflect the issuance of the Capital Securities and the Notes and the application
of the net proceeds therefrom. The issuance of the Exchange Notes and the
Exchange Capital Securities will have no effect on the capitalization of the
Corporation. The information presented below should be read in conjunction with
the historical consolidated financial statements of SAFECO and the related notes
thereto, the historical consolidated financial statements of American States and
the related notes thereto and the unaudited pro forma combined condensed
financial statements of the Corporation, included elsewhere in this Prospectus
or incorporated by reference herein from the SAFECO Annual Report and the
American States Annual Report (as defined in "Selected Financial Information"),
as the case may be.
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------------------------
AS ADJUSTED FOR
AS ADJUSTED FOR THE 8.072%
THE ACQUISITION CAPITAL
SAFECO AND THE RELATED SECURITIES AND
ACTUAL FINANCINGS THE NOTES
--------- ------------------ ----------------
(IN MILLIONS)
<S> <C> <C> <C>
Credit company debt............................................. $ 907.7 $ 907.7 $ 907.7
Commercial paper(1)............................................. -- 1,334.0 738.5
7 7/8% Notes due 2005........................................... 200.0 200.0 200.0
Notes........................................................... -- 200.0 200.0
Other notes and mortgages....................................... 233.5 233.5 233.5
--------- -------- --------
Total debt.................................................. 1,341.2 2,875.2 2,279.7
Corporation-obligated, mandatorily redeemable capital securities
of subsidiary trusts holding solely junior subordinated
debentures of the Corporation................................. -- 990.0 990.0
Total stockholders' equity...................................... 4,370.6 4,370.6 4,966.1
--------- -------- --------
Total capitalization........................................ $ 5,711.8 $ 8,235.8 $ 8,235.8
--------- -------- --------
--------- -------- --------
</TABLE>
- ------------------------
(1) The Corporation issued $1,500 million of commercial paper in late September
1997 and used all but $16 million to finance the Acquisition. The $1,334
million of commercial paper is net of the $16 million not used to finance
the Acquisition and the $150 million aggregate liquidation amount of capital
securities that may be issued in the fourth quarter of 1997.
35
<PAGE>
SELECTED FINANCIAL INFORMATION
SELECTED GAAP CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF SAFECO
The selected consolidated financial information presented below is derived
from the consolidated financial statements of SAFECO and its subsidiaries. Such
financial statements have been audited by Ernst & Young LLP, independent
auditors, for each of the three years in the period ended December 31, 1996. The
consolidated financial statements of SAFECO and its subsidiaries as of December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996 are incorporated by reference to the SAFECO Annual Report on Form 10-K
for the year ended December 31, 1996 (the "SAFECO Annual Report"), and the
information set forth below should be read in conjunction with such consolidated
financial statements and the notes thereto. See "Incorporation of Certain
Documents by Reference." The selected consolidated financial information as of
June 30, 1997 and for the six months ended June 30, 1997 and 1996 are derived
from unaudited consolidated financial statements of SAFECO which, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such financial information.
The results for the six months ended June 30, 1997 do not necessarily indicate
the results for the entire year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Insurance:
Property and casualty earned premiums.... $ 1,176.4 $ 1,112.4 $ 2,275.4 $ 2,162.1 $ 2,053.4
Life and health premiums and other
revenues............................... 134.9 132.3 265.9 261.6 276.8
--------- --------- --------- --------- ---------
Total.................................. 1,311.3 1,244.7 2,541.3 2,423.7 2,330.2
Other...................................... 110.5 106.3 217.3 191.6 201.8
Net investment income...................... 583.7 549.8 1,116.7 1,075.3 991.6
Realized investment gain................... 40.8 52.8 90.1 64.3 39.0
--------- --------- --------- --------- ---------
Total revenues........................... 2,046.3 1,953.6 3,965.4 3,754.9 3,562.6
--------- --------- --------- --------- ---------
Expenses:
Losses, adjustment expense and policy
benefits................................. 1,210.3 1,167.7 2,362.7 2,250.4 2,202.3
Commissions................................ 226.6 201.4 415.7 401.2 394.1
Interest................................... 37.4 35.4 72.4 85.4 70.3
Other...................................... 271.9 264.3 536.1 504.1 506.2
--------- --------- --------- --------- ---------
Total expenses......................... 1,746.2 1,668.8 3,386.9 3,241.1 3,172.9
--------- --------- --------- --------- ---------
Income before income taxes................... 300.1 284.8 578.5 513.8 389.7
Provision for federal income taxes........... 71.4 68.1 139.5 114.8 75.3
--------- --------- --------- --------- ---------
Net income................................... $ 228.7 $ 216.7 $ 439.0 $ 399.0 $ 314.4
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share of common stock:
Income before realized gain................ $ 1.60 $ 1.45 $ 3.02 $ 2.84 $ 2.29
Realized gain.............................. .21 .27 .46 .33 .21
--------- --------- --------- --------- ---------
Net income per share......................... $ 1.81 $ 1.72 $ 3.48 $ 3.17 $ 2.50
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average shares outstanding.......... 126.3 126.0 126.1 126.0 125.9
</TABLE>
(CONTINUED ON NEXT PAGE)
36
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
AT JUNE AT DECEMBER 31,
30, ----------------------------------
1997 1996 1995 1994
---------- ---------- ---------- ----------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets:
Investments:
Fixed maturities available-for-sale, at market value...... $ 12,238.2 $ 11,936.2 $ 11,928.1 $ 9,509.1
Fixed maturities held-to-maturity, at amortized cost...... 2,698.1 2,488.3 2,044.5 2,053.1
Marketable equity securities, at market value............. 1,501.1 1,298.8 1,119.4 855.1
Other invested assets..................................... 1,244.4 1,166.2 1,040.2 1,049.7
---------- ---------- ---------- ----------
Total investments....................................... 17,681.8 16,889.5 16,132.2 13,467.0
Finance receivables......................................... 913.8 829.1 741.2 619.1
Premiums and other service fees receivable.................. 486.9 467.2 444.6 418.7
Deferred policy acquisition costs........................... 411.6 396.1 356.4 388.8
Other assets................................................ 894.7 844.6 817.0 849.8
Separate account assets..................................... 662.2 491.2 276.4 158.3
---------- ---------- ---------- ----------
Total assets............................................ $ 21,051.0 $ 19,917.7 $ 18,767.8 $ 15,901.7
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Liabilities and Stockholders' Equity:
Losses, adjustment expense and future policy benefits....... $ 2,128.8 $ 2,237.8 $ 2,361.3 $ 2,421.2
Unearned premiums........................................... 981.7 946.9 910.8 867.0
Funds held under deposit contracts.......................... 10,402.8 9,792.7 8,756.4 7,988.5
Short-term debt............................................. 906.3 793.4 608.6 639.3
Long-term debt.............................................. 434.9 440.1 458.9 343.6
Other liabilities........................................... 1,163.7 1,100.3 1,412.8 654.3
Separate account liabilities................................ 662.2 491.2 276.4 158.3
---------- ---------- ---------- ----------
Total liabilities....................................... 16,680.4 15,802.4 14,785.2 13,072.2
---------- ---------- ---------- ----------
Common stock................................................ 227.9 225.3 217.4 211.2
Retained earnings........................................... 3,190.4 3,042.2 2,755.5 2,495.8
Unrealized appreciation of investment securities, net of
tax/other................................................. 952.3 847.8 1,009.7 122.5
---------- ---------- ---------- ----------
Total stockholders' equity.............................. 4,370.6 4,115.3 3,982.6 2,829.5
---------- ---------- ---------- ----------
Total liabilities and stockholders' equity.............. $ 21,051.0 $ 19,917.7 $ 18,767.8 $ 15,901.7
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
OTHER PROPERTY AND CASUALTY DATA-- STATUTORY BASIS:
Policyholders' surplus(1)..................................... $ 2,431.1 $ 2,166.2 $ 1,864.7 $ 1,506.1
Ratio of net written premiums to policyholders' surplus(2).... 1.0x 1.1x 1.2x 1.4x
Combined ratio(3)............................................. 97.6% 98.8% 99.6% 103.6%
Industry combined ratio(4).................................... N/A 105.8% 106.5% 108.4%
</TABLE>
- ------------------------
(1) Excludes surplus of SAFECO's life and health subsidiaries of $619.0, $587.7,
$504.7 and $416.8 at June 30, 1997 and December 31, 1996, 1995 and 1994,
respectively.
(2) Annual ratios represent statutory net written premiums for the year divided
by statutory policyholders' surplus at the end of the year attributable to
the property and casualty business. The six-month ratio is based on
annualized statutory net written premiums divided by statutory
policyholders' surplus at the end of the six-month period.
37
<PAGE>
(3) The combined ratio is an industry measurement of the results of property and
casualty insurance underwriting. This ratio is the sum of the ratio of
incurred losses and loss adjustment expenses to net earned premiums (the
"loss and LAE ratio"), the ratio of underwriting expenses incurred to net
written premiums (the "underwriting expense ratio") and, where applicable,
the ratio of dividends to policyholders to net earned premiums. A combined
ratio under 100% generally indicates an underwriting profit; a combined
ratio over 100% generally indicates an underwriting loss.
(4) Source: A.M. Best; data for 1997 are not yet available.
38
<PAGE>
SELECTED GAAP CONSOLIDATED HISTORICAL FINANCIAL INFORMATION OF AMERICAN STATES
The selected consolidated financial information presented below is derived
from the consolidated financial statements of American States and its
subsidiaries. Such financial statements have been audited by Ernst & Young LLP,
independent auditors, for each of the three years in the period ended December
31, 1996. The consolidated financial statements of American States and its
subsidiaries as of December 31, 1996 and 1995 and for each of the three years in
the period ended December 31, 1996 are incorporated by reference to the American
States Annual Report on Form 10-K, Form 10-K/A(1) and Form 10-K/A(2) for the
year ended December 31, 1996 (collectively, the "American States Annual
Report"), and the information set forth below should be read in conjunction with
such consolidated financial statements and the notes thereto. See "Incorporation
of Certain Documents by Reference." The selected consolidated financial
information as of June 30, 1997 and for the six months ended June 30, 1997 and
1996 are derived from unaudited consolidated financial statements of American
States which, in the opinion of management, include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of such
financial information. The results for the six months ended June 30, 1997 do not
necessarily indicate the results for the entire year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Insurance:
Property and casualty earned premiums.... $ 824.1 $ 819.6 $ 1,617.2 $ 1,689.6 $ 1,693.5
Life and health premiums and other
revenues............................... 29.0 28.9 56.9 56.8 52.5
--------- --------- --------- --------- ---------
Total.................................. 853.1 848.5 1,674.1 1,746.4 1,746.0
Other...................................... 6.7 -- -- (28.4) --
Net investment income...................... 133.0 134.5 274.3 266.6 260.5
Realized investment gain................... 19.4 28.4 35.6 41.0 19.9
--------- --------- --------- --------- ---------
Total revenues......................... 1,012.2 1,011.4 1,984.0 2,025.6 2,026.4
--------- --------- --------- --------- ---------
Expenses:
Losses, adjustment expense and policy
benefits................................. 620.9 655.9 1,248.9 1,242.3 1,272.0
Commissions................................ 140.8 144.4 283.0 291.6 296.9
Interest................................... 10.4 1.8 12.4 -- --
Other...................................... 120.8 122.4 244.0 282.6 257.2
--------- --------- --------- --------- ---------
Total expenses......................... 892.9 924.5 1,788.3 1,816.5 1,826.1
--------- --------- --------- --------- ---------
Income before income taxes................... 119.3 86.9 195.7 209.1 200.3
Provision for federal income taxes........... 21.0 10.2 26.0 30.8 15.7
--------- --------- --------- --------- ---------
Net income................................... $ 98.3 $ 76.7 $ 169.7 $ 178.3 $ 184.6
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income before realized investment gain... $ 88.0 $ 59.6 $ 146.2 $ 156.7 $ 171.6
</TABLE>
(CONTINUED ON NEXT PAGE)
39
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, -------------------------------
1997 1996 1995 1994
----------- --------- --------- ---------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets:
Investments:
Fixed maturities available-for-sale, at market value.......... $ 3,787.6 $ 3,763.9 $ 3,860.9 $ 3,429.9
Marketable equity securities, at market value................. 460.6 435.1 437.7 522.5
Other invested assets......................................... 135.5 143.6 131.6 188.9
----------- --------- --------- ---------
Total investments........................................... 4,383.7 4,342.6 4,430.2 4,141.3
Premiums receivable............................................. 482.8 413.4 377.8 384.0
Deferred policy acquisition costs............................... 212.3 202.2 199.2 210.8
Other assets.................................................... 573.1 582.9 532.0 683.2
----------- --------- --------- ---------
Total assets................................................ $ 5,651.9 $ 5,541.1 $ 5,539.2 $ 5,419.3
----------- --------- --------- ---------
----------- --------- --------- ---------
Liabilities and Stockholders' Equity:
Losses, adjustment expense and future policy benefits........... $ 2,854.7 $ 2,868.3 $ 2,828.3 $ 2,878.2
Unearned premiums............................................... 746.1 712.0 718.5 725.4
Short-term debt................................................. 66.7 66.7 -- --
Long-term debt.................................................. 232.9 232.9 -- --
Other liabilities............................................... 334.5 325.2 323.7 347.1
----------- --------- --------- ---------
Total liabilities........................................... 4,234.9 4,205.1 3,870.5 3,950.7
----------- --------- --------- ---------
Common stock.................................................... 304.5 304.5 387.5 387.5
Retained earnings............................................... 941.0 867.9 1,069.4 1,090.1
Unrealized appreciation (depreciation) of investment securities,
net of tax.................................................... 171.5 163.6 211.8 (9.0)
----------- --------- --------- ---------
Total stockholders' equity.................................. 1,417.0 1,336.0 1,668.7 1,468.6
----------- --------- --------- ---------
Total liabilities and stockholders' equity.................. $ 5,651.9 $ 5,541.1 $ 5,539.2 $ 5,419.3
----------- --------- --------- ---------
----------- --------- --------- ---------
OTHER PROPERTY AND CASUALTY DATA-- STATUTORY BASIS:
Policyholders' surplus(1)......................................... $ 1,092.9 $ 966.0 $ 1,011.0 $ 980.7
Ratio of net written premiums to policyholders' surplus(2)........ 1.5x 1.7x 1.7x 1.7x
Combined ratio(3)................................................. 102.9% 105.8% 103.6% 104.6%
Industry combined ratio(4)........................................ N/A 105.8% 106.5% 108.4%
</TABLE>
- ------------------------
(1) Excludes surplus of American States Life Insurance Company of $60.6, $57.4,
$51.7 and $61.2 at June 30, 1997 and December 31, 1996, 1995 and 1994,
respectively.
(2) Annual ratios represent statutory net written premiums for the year divided
by statutory policyholders' surplus at the end of the year attributable to
the property and casualty business. The six-month ratio is based on
annualized statutory net written premiums divided by statutory
policyholders' surplus at the end of the six-month period.
(3) The combined ratio is an industry measurement of the results of property and
casualty insurance underwriting. This ratio is the sum of the loss and LAE
ratio, the underwriting expense ratio and, where applicable, the ratio of
dividends to policyholders to net earned premiums. A combined ratio under
100% generally indicates an underwriting profit; a combined ratio over 100%
generally indicates an underwriting loss.
(4) Source: A.M. Best; data for 1997 are not yet available.
40
<PAGE>
SAFECO CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Trust Agreement executed by the Corporation, as Sponsor, The Chase
Manhattan Bank, as Property Trustee, Chase Manhattan Bank Delaware, as Delaware
Trustee, and the Administrative Trustees named therein, and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on June 19, 1997. The
Trust exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, (ii) using the proceeds from the sale of Trust Securities to acquire
the Junior Subordinated Debentures and (iii) engaging in only those other
activities incidental thereto. Accordingly, the Junior Subordinated Debentures
will be the sole assets of the Trust, and payments under the Junior Subordinated
Debentures will be the sole revenues of the Trust. All of the Common Securities
will be owned by the Corporation. The Common Securities will rank pari passu,
and payments will be made thereon pro rata, with the Capital Securities, except
that upon the occurrence and continuance of an event of default under the Trust
Agreement, the rights of the Corporation as holder of the Common Securities to
payments in respect of Distributions and payments upon liquidation, redemption
or otherwise will be subordinated to the rights of the holders of the Capital
Securities. See "Description of Exchange Securities--Description of Exchange
Capital Securities--Subordination of Common Securities." The Corporation has
acquired Common Securities in a Liquidation Amount equal to approximately 3% of
the total capital of the Trust. The Trust has a term of 41 years, but may
terminate earlier as provided in the Trust Agreement. The Trust's business and
affairs are conducted by its trustees, each appointed by the Corporation as
holder of the Common Securities. The trustees for the Trust are The Chase
Manhattan Bank, as the Property Trustee (the "Property Trustee"), Chase
Manhattan Bank Delaware, as the Delaware Trustee (the "Delaware Trustee"), and
three individual trustees (the "Administrative Trustees") who are employees or
officers of or affiliated with the Corporation (collectively, the "Issuer
Trustees"). The Chase Manhattan Bank, as Property Trustee, will act as sole
indenture trustee under the Trust Agreement. Chase Manhattan Bank Delaware will
also act as indenture trustee under the Guarantee and the Indenture. See
"Description of Exchange Securities--Description of Exchange Guarantee" and
"--Description of Exchange Junior Subordinated Debentures." The Chase Manhattan
Bank also is the trustee for the Notes, the Corporation's 7.875% notes due 2005
and its medium term note program, the custodian for the SAFECO Life portfolios
of investments, a lender under the Corporation's bank revolving credit
facilities and a dealer under the Corporation's commercial paper program. In
addition, the Corporation and its subsidiaries maintain various depository and
disbursement accounts with The Chase Manhattan Bank.
The holder of the Common Securities of the Trust or, if an Event of Default
under the Trust Agreement has occurred and is continuing, the holders of a
majority in Liquidation Amount of the Capital Securities, will be entitled to
appoint, remove or replace the Property Trustee and/or the Delaware Trustee. In
no event will the holders of the Capital Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such voting rights will
be vested exclusively in the holder of the Common Securities. The duties and
obligations of each Issuer Trustee are governed by the Trust Agreement. The
Corporation has and will continue to pay all fees, expenses, debts and
obligations (other than the Trust Securities) related to the Trust and the
offering of the Capital Securities and has and will continue to pay, directly or
indirectly, all ongoing costs, expenses and liabilities of the Trust. The
principal executive office of the Trust is c/o SAFECO Corporation, SAFECO Plaza,
4333 Brooklyn Avenue N.E., Seattle, Washington 98185.
41
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Original Capital Securities, the
Corporation and the Trust entered into the Registration Rights Agreement with
the Initial Purchasers, pursuant to which the Corporation and the Trust agreed
to file and to use their reasonable efforts to cause to become effective with
the Commission a registration statement with respect to the exchange of the
Original Capital Securities for capital securities with terms identical in all
material respects to the terms of the Original Capital Securities. A copy of the
Registration Rights Agreement has been filed as an Exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Corporation and the Trust under the Registration Rights Agreement. The form
and terms of the Exchange Capital Securities are the same as the form and terms
of the Original Capital Securities except that the Exchange Capital Securities
have been registered under the Securities Act and will not be subject to certain
restrictions on transfer applicable to the Original Capital Securities, and will
not provide for any increase in the Distribution rate thereon. In that regard,
the Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by
December 8, 1997 and declared effective by January 21, 1998, the Distribution
rate borne by the Original Capital Securities will increase by 0.50% per annum
until such registration statement is filed or declared effective, as the case
may be. Upon consummation of the Exchange Offer, holders of Original Capital
Securities will not be entitled to any increase in the Distribution rate thereon
or any further registration rights under the Registration Rights Agreement,
except under limited circumstances. See "Risk Factors--Consequences of a Failure
to Exchange Original Capital Securities" and "Description of Exchange
Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Original Capital Securities in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Original Capital Securities
are registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Original Capital Securities are held of record by The Depository Trust Company
("DTC") who desires to deliver such Original Capital Securities by book-entry
transfer at DTC.
Pursuant to the Exchange Offer, the Corporation will exchange as soon as
practicable after the date hereof, the Original Guarantee for the Exchange
Guarantee and the Original Junior Subordinated Debentures, in an amount
corresponding to the Original Capital Securities accepted for exchange, for a
like aggregate principal amount of the Exchange Junior Subordinated Debentures.
The Exchange Guarantee and Exchange Junior Subordinated Debentures have been
registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $850 million aggregate Liquidation Amount of Exchange Capital
Securities for a like aggregate Liquidation Amount of Original Capital
Securities properly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with the procedures described below. The Trust will
issue, promptly after the Expiration Date, an aggregate Liquidation Amount of up
to $850 million of Exchange Capital Securities in exchange for a like principal
amount of outstanding Original Capital Securities tendered and accepted in
connection with the Exchange Offer. Holders may tender their Original Capital
Securities in whole or in part in a Liquidation Amount of not less than $100,000
(100 Capital Securities) or any integral multiple of $1,000 Liquidation Amount
(one Capital Security) in excess thereof.
42
<PAGE>
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Original Capital Securities being tendered. As of the date of this Prospectus,
$850 million aggregate Liquidation Amount of the Original Capital Securities is
outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original Capital
Securities which are not tendered for or are tendered but not accepted in
connection with the Exchange Offer will remain outstanding and be entitled to
the benefits of the Declaration, but will not be entitled to any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors--Consequences of a Failure to Exchange
Original Capital Securities" and "Description of Exchange Securities."
If any tendered Original Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Original Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Original Capital Securities in connection with the
Exchange Offer. The Corporation will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the Exchange Offer.
See "--Fees and Expenses."
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE CORPORATION NOR ANY
ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF ORIGINAL
CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY
PORTION OF THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN
ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF
ORIGINAL CAPITAL SECURITIES MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER
PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF ORIGINAL
CAPITAL SECURITIES TO TENDER BASED ON SUCH HOLDERS' OWN FINANCIAL POSITIONS AND
REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1997 unless the Exchange Offer is extended by the Corporation or the
Trust (in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended).
The Corporation and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Original
Capital Securities have theretofore been accepted for exchange) if the Trust
determines, in its sole and absolute discretion, that any of the events or
conditions referred to in "--Conditions to the Exchange Offer" have occurred or
exist or have not been satisfied, (iii) to extend the Expiration Date of the
Exchange Offer and retain all Original Capital Securities tendered pursuant to
the Exchange Offer, subject, however, to the right of holders of Original
Capital Securities to withdraw their tendered Original Capital Securities as
described under "--Withdrawal Rights," and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in any respect.
If the Exchange Offer is amended in a manner determined by the Corporation
and the Trust to constitute a material change, or if the Corporation and the
Trust waive a material condition of the Exchange Offer, the Corporation and the
Trust will promptly disclose such amendment by means of a prospectus supplement
that will be distributed to the holders of the Original Capital Securities, and
the
43
<PAGE>
Corporation and the Trust will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Corporation and the Trust may choose to make any public
announcement and subject to applicable law, the Corporation and the Trust shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a release to an appropriate news
agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange Exchange Capital Securities for Original Capital Securities
validly tendered and not withdrawn (pursuant to the withdrawal rights described
in "--Withdrawal Rights") promptly after the Expiration Date.
Subject to the conditions set forth in "--Conditions to the Exchange Offer,"
delivery of Exchange Capital Securities in exchange for Original Capital
Securities tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of (i) certificates
for Original Capital Securities or a book-entry confirmation of a book-entry
transfer of Original Capital Securities into the Exchange Agent's account at
DTC, including an Agent's Message if the tendering holder does not deliver a
Letter of Transmittal, (ii) a completed and signed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal,
and (iii) any other documents required by the Letter of Transmittal.
Accordingly, the delivery of Exchange Capital Securities might not be made to
all tendering holders at the same time, and will depend upon when certificates
for Original Capital Securities, book-entry confirmations with respect to
Original Capital Securities and other required documents are received by the
Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Original Capital Securities into the Exchange Agent's
account at DTC. See "--Procedures for Tendering Original Capital
Securities--Book-Entry Transfer." The term "Agent's Message" means a message,
transmitted by DTC to and received by the Exchange Agent and forming a part of a
book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering participant, which acknowledgment states that
such participant has received and agrees to be bound by the Letter of
Transmittal and that the Trust and the Corporation may enforce such Letter of
Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Corporation
and the Trust will be deemed to have accepted for exchange, and thereby
exchanged, Original Capital Securities validly tendered and not withdrawn as, if
and when the Trust gives oral or written notice to the Exchange Agent of the
Corporation's and the Trust's acceptance of such Original Capital Securities for
exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent
for the Corporation and the Trust for the purpose of receiving tenders of
Original Capital Securities, Letters of Transmittal and related documents, and
as agent for tendering holders for the purpose of receiving Original Capital
Securities, Letters of Transmittal and related documents and transmitting
Exchange Capital Securities which will not be held in global form by DTC or a
nominee of DTC to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If for any reason whatsoever, acceptance for exchange
or the exchange of any Original Capital Securities tendered pursuant to the
Exchange Offer is delayed (whether before or after the Corporation's and the
Trust's acceptance for exchange of Original Capital Securities) or the
Corporation and the Trust extend the Exchange Offer or are unable to accept for
exchange or exchange Original Capital Securities tendered pursuant to the
Exchange Offer, then, without prejudice to the Corporation's and the Trust's
rights set forth herein, the Exchange Agent may, nevertheless, on behalf of
44
<PAGE>
the Corporation and the Trust and subject to Rule 14e-1(c) under the Exchange
Act, retain tendered Original Capital Securities and such Original Capital
Securities may not be withdrawn except to the extent tendering holders are
entitled to withdrawal rights as described in "--Withdrawal Rights."
Pursuant to an Agent's Message or a Letter of Transmittal, a holder of
Original Capital Securities will represent, warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Original Capital Securities, that the Trust will acquire
good, marketable and unencumbered title to the tendered Original Capital
Securities, free and clear of all liens, restrictions, charges and encumbrances,
and the Original Capital Securities tendered for exchange are not subject to any
adverse claims or proxies. The holder also will warrant and agree that it will,
upon request, execute and deliver any additional documents deemed by the Trust
or the Exchange Agent to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the Original Capital Securities tendered
pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
VALID TENDER
Except as set forth below, in order for Original Capital Securities to be
validly tendered by book-entry transfer, an Agent's Message or a completed and
signed Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, and in either case any other documents required by the Letter of
Transmittal, must be delivered to the Exchange Agent by mail, facsimile, hand
delivery or overnight courier at one of the Exchange Agent's addresses set forth
in "--Exchange Agent" on or prior to the Expiration Date and either (i) such
Original Capital Securities must be tendered pursuant to the procedures for
book-entry transfer set forth below or (ii) the guaranteed delivery procedures
set forth below must be complied with.
Except as set forth below, in order for Original Capital Securities to be
validly tendered by a means other than by book-entry transfer, a completed and
signed Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, and any other documents required by the Letter of Transmittal must
be delivered to the Exchange Agent by mail, facsimile, hand delivery or
overnight courier at one of the Exchange Agent's addresses set forth in
"--Exchange Agent" on or prior to the Expiration Date and either (i) such
Original Capital Securities must be delivered to the Exchange Agent on or prior
to the Expiration Date or (ii) the guaranteed delivery procedures set forth
below must be complied with.
If less than all Original Capital Securities are tendered, a tendering
holder should fill in the amount of Original Capital Securities being tendered
in the appropriate box on the Letter of Transmittal. The entire amount of
Original Capital Securities delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS TO BE BY MAIL, THE USE OF REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER
The Exchange Agent and DTC have confirmed that any Participant (as defined
in "Description of Exchange Securities--Description of Exchange Capital
Securities--Depositary Procedures") in DTC's book-entry transfer facility system
may utilize DTC's ATOP procedures to tender Original Capital Securities. The
Exchange Agent will establish an account with respect to the Original Capital
Securities at
45
<PAGE>
DTC for purposes of the Exchange Offer within two business days after the date
of this Prospectus. Any Participant may make a book-entry delivery of the
Original Capital Securities by causing DTC to transfer such Original Capital
Securities into the Exchange Agent's account at DTC in accordance with DTC's
ATOP procedures for transfer. However, although delivery of Original Capital
Securities may be effected through book-entry transfer into the Exchange Agent's
account at DTC, an Agent's Message or a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
any other documents required by the Letter of Transmittal, must in any case be
delivered to and received by the Exchange Agent at one of its addresses set
forth in "--Exchange Agent" on or prior to the Expiration Date, or the
guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
SIGNATURE GUARANTEES
Certificates for the Original Capital Securities need not be endorsed and
signature guarantees on the Letter of Transmittal are unnecessary unless (a) a
certificate for the Original Capital Securities is registered in a name other
than that of the person surrendering the certificate or (b) such holder
completes the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the Letter of Transmittal. In the case of (a) or (b) above,
such certificates for Original Capital Securities must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or signature
on the bond power and on the Letter of Transmittal guaranteed by a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible
guarantor institution," including (as such terms are defined therein): (i) a
bank; (ii) a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (an
"Eligible Institution"), unless surrendered on behalf of such Eligible
Institution. See Instruction 1 to the Letter of Transmittal.
GUARANTEED DELIVERY
If a holder desires to tender Original Capital Securities pursuant to the
Exchange Offer and the certificates for such Original Capital Securities are not
immediately available or time will not permit all required documents to reach
the Exchange Agent on or prior to the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, such Original Capital
Securities may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is
received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(c) the certificates (or a book-entry confirmation) representing all
tendered Original Capital Securities, in proper form for transfer, together
with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees and any other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of Exchange Capital
Securities in exchange for Original Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in
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all cases be made only after timely receipt by the Exchange Agent of Original
Capital Securities, or of a book-entry confirmation with respect to such
Original Capital Securities, and a properly completed and duly executed Letter
of Transmittal (or facsimile thereof), together with any required signature
guarantees and any other documents required by the Letter of Transmittal.
Accordingly, the delivery of Exchange Capital Securities might not be made to
all tendering holders at the same time, and will depend upon when Original
Capital Securities, book-entry confirmations with respect to Original Capital
Securities and other required documents are received by the Exchange Agent.
The Trust's acceptance for exchange of Original Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and subject
to the conditions of the Exchange Offer.
DETERMINATION OF VALIDITY
All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered Original Capital
Securities will be determined by the Corporation and the Trust, in their sole
discretion, whose determination shall be final and binding on all parties. The
Corporation and the Trust reserve the absolute right, in their sole and absolute
discretion, to reject any and all tenders determined by them not to be in proper
form or the acceptance of which, or exchange for, may, in the opinion of counsel
to the Corporation and the Trust, be unlawful. The Corporation and the Trust
also reserve the absolute right, subject to applicable law, to waive any of the
conditions of the Exchange Offer as set forth in "--Conditions to the Exchange
Offer" or any condition or irregularity in any tender of Original Capital
Securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders.
The interpretation by the Corporation and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Original Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Corporation,
the Trust, any affiliates or assigns of the Corporation or the Trust, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and unless waived by the Corporation and the
Trust, proper evidence satisfactory to the Corporation and the Trust, in their
sole discretion, of such person's authority to so act must be submitted.
A beneficial owner of Original Capital Securities that are held by or
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Exchange Capital Securities
in reliance on the position of the staff of the Division of Corporation Finance
of the Commission as set forth in certain interpretive letters addressed to
third parties in other transactions. However, neither the Corporation nor the
Trust sought its own interpretive letter and there can be no assurance that the
staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance of the Commission, and subject to
the two immediately following sentences, the Corporation and the Trust believe
that Exchange Capital Securities issued pursuant to this Exchange Offer in
exchange for Original Capital Securities may be offered for resale, resold and
otherwise
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transferred by a holder thereof (other than a holder who is a broker-dealer)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of
Original Capital Securities who is an "affiliate" of the Corporation or the
Trust or who intends to participate in the Exchange Offer for the purpose of
distributing Exchange Capital Securities, or any broker-dealer who purchased
Original Capital Securities from the Trust to resell pursuant to Rule 144A or
any other available exemption under the Securities Act, (a) will not be able to
rely on the interpretations of the staff of the Division of Corporation Finance
of the Commission set forth in the above-mentioned interpretive letters, (b)
will not be permitted or entitled to tender such Original Capital Securities in
the Exchange Offer and (c) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or other
transfer of such Original Capital Securities unless such sale is made pursuant
to an exemption from such requirements. In addition, as described below, if any
broker-dealer holds Original Capital Securities acquired for its own account as
a result of market-making or other trading activities and exchanges such
Original Capital Securities for Exchange Capital Securities, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such Exchange Capital
Securities.
Each holder of Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will be
required to represent that (i) it is not an "affiliate" of the Corporation or
the Trust, (ii) any Exchange Capital Securities to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Capital Securities. In addition, the Corporation and the Trust
may require such holder, as a condition to such holder's eligibility to
participate in the Exchange Offer, to furnish to the Corporation and the Trust
(or an agent thereof) in writing information as to the number of "beneficial
owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of
whom such holder holds the Capital Securities to be exchanged in the Exchange
Offer. Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it acquired the
Original Capital Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Capital Securities. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters referred to
above, the Corporation and the Trust believe that Participating Broker-Dealers
who acquired Original Capital Securities for their own accounts as a result of
market-making activities or other trading activities may fulfill their
prospectus delivery requirements with respect to the Exchange Capital Securities
received upon exchange of such Original Capital Securities (other than Original
Capital Securities which represent an unsold allotment from the initial sale of
the Original Capital Securities) with a prospectus meeting the requirements of
the Securities Act, which may be the prospectus prepared for an exchange offer
so long as it contains a description of the plan of distribution with respect to
the resale of such Exchange Capital Securities. Accordingly, this Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer during the period referred to below in connection
with resales of Exchange Capital Securities received in exchange for Original
Capital Securities where such Original Capital Securities were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Corporation and the Trust have agreed that
this Prospectus, as it may be amended or supplemented from time to time, may be
used
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by a Participating Broker-Dealer in connection with resales of such Exchange
Capital Securities for a period ending 180 days after the Expiration Date
(subject to extension under certain limited circumstances described below) or,
if earlier, when all such Exchange Capital Securities have been disposed of by
such Participating Broker-Dealer. See "Plan of Distribution."
However, a Participating Broker-Dealer who intends to use this Prospectus in
connection with the resale of Exchange Capital Securities received in exchange
for Original Capital Securities pursuant to the Exchange Offer must notify the
Corporation or the Trust, or cause the Corporation or the Trust to be notified,
on or prior to the Expiration Date, that it is a Participating Broker-Dealer.
Such notice may be given in the space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange Agent at one of the addresses
set forth in "--Exchange Agent." Any Participating Broker-Dealer who is an
"affiliate" of the Corporation or the Trust may not rely on such interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Original
Capital Securities pursuant to the Exchange Offer will be deemed to have agreed,
by execution of the Letter of Transmittal, that upon receipt of notice from the
Corporation or the Trust of the occurrence of any event or the discovery of (i)
any fact which makes any statement contained or incorporated by reference in
this Prospectus untrue in any material respect or (ii) any fact which causes
this Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference herein, in light of the
circumstances under which they were made, not misleading, or (iii) of the
occurrence of certain other events specified in the Registration Rights
Agreement, such Participating Broker-Dealer will suspend the sale of Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) pursuant to this Prospectus until the
Corporation or the Trust has amended or supplemented this Prospectus to correct
such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer, or the Corporation
or the Trust has given notice that the sale of the Exchange Capital Securities
(or the Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Corporation or the Trust
gives such notice to suspend the sale of the Exchange Capital Securities (or the
Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable), it shall extend the 180-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of Exchange Capital Securities by the number of days during the
period from and including the date of the giving of such notice to and including
the date when Participating Broker-Dealers shall have received copies of the
amended or supplemented Prospectus necessary to permit resales of the Exchange
Capital Securities or to and including the date on which the Corporation or the
Trust has given notice that the sale of Exchange Capital Securities (or the
Exchange Guarantee or the Exchange Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original Capital Securities
may be withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth in "--Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Original Capital Securities to be withdrawn,
the aggregate principal amount of Original Capital Securities to be withdrawn,
and (if certificates for such Original Capital Securities have been tendered)
the name of the registered holder of the Original Capital Securities as set
forth on the Original Capital Securities, if different from that of the person
who tendered such Original Capital Securities. If Original Capital Securities
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the physical release of such Original Capital
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Securities, the tendering holder must submit the serial numbers shown on the
particular Original Capital Securities to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Original Capital Securities tendered for the account of an Eligible
Institution. If Original Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "--Procedures for Tendering
Original Capital Securities," the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of Original
Capital Securities, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written, telegraphic, telex or facsimile
transmission. Withdrawals of tenders of Original Capital Securities may not be
rescinded. Original Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described above in "--Procedures for Tendering Original Capital
Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its sole
discretion, whose determination shall be final and binding on all parties.
Neither the Corporation, the Trust, any affiliates or assigns of the Corporation
or the Trust, the Exchange Agent nor any other person shall be under any duty to
give any notification of any irregularities in any notice of withdrawal or incur
any liability for failure to give any such notification. Any Original Capital
Securities which have been tendered but which are withdrawn will be returned to
the holder thereof promptly after withdrawal.
DISTRIBUTION ON EXCHANGE CAPITAL SECURITIES
Holders of Original Capital Securities whose Original Capital Securities are
accepted for exchange will not receive Distributions on such Original Capital
Securities and will be deemed to have waived the right to receive any
Distributions on such Original Capital Securities accumulated from and after
July 15, 1997. Accordingly, holders of Exchange Capital Securities as of the
record date for the payment of Distributions on January 15, 1998 will be
entitled to receive Distributions accumulated from and after July 15, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Corporation and the Trust will not be required to
accept for exchange, or to exchange, any Original Capital Securities for any
Exchange Capital Securities, and, as described below, may terminate the Exchange
Offer (whether or not any Original Capital Securities have theretofore been
accepted for exchange) or may waive any conditions to or amend the Exchange
Offer, if any of the following conditions have occurred or exists or have not
been satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Capital Securities issued
pursuant to the Exchange Offer in exchange for Original Capital Securities
to be offered for resale, resold and otherwise transferred by holders
thereof (other than broker-dealers and any such holder which is an
"affiliate" of the Corporation or the Trust within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Capital Securities are acquired in the ordinary course of such
holders' business and such holders have no arrangement or understanding with
any person to participate in the distribution of such Exchange Capital
Securities; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Corporation or the Trust, would
reasonably be expected to impair its ability to proceed with the Exchange
Offer; or
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(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement, or proceedings shall have been initiated or, to the knowledge of
the Corporation or the Trust, threatened for that purpose, or any
governmental approval has not been obtained, which approval the Corporation
or the Trust shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby; or
(d) the Corporation shall receive an opinion of counsel experienced in
such matters to the effect that there is more than an insubstantial risk
that consummation of the Exchange Offer would result in interest payable to
the Trust on the Junior Subordinated Debentures being not deductible by the
Corporation for United States federal income tax purposes.
If the Corporation or the Trust determines in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or exists
or has not been satisfied, it may, subject to applicable law, terminate the
Exchange Offer (whether or not any Original Capital Securities have theretofore
been accepted for exchange) or may waive any such condition or otherwise amend
the terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Corporation or the
Trust will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Original
Capital Securities and will extend the Exchange Offer to the extent required by
Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent as follows:
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND:
The Chase Manhattan Bank (FOR ELIGIBLE INSTITUTIONS The Chase Manhattan Bank
450 West 33rd Street, 15th ONLY) 450 West 33rd Street, 15th
Floor (212) 946-8154 Floor
New York, New York 10001-2697 New York, New York 10001-2697
Attention: John T. Needham, CONFIRM BY TELEPHONE: Attention: John T. Needham,
Jr. (212) 946-3041 Jr.
BY OVERNIGHT DELIVERY:
The Chase Manhattan Bank
450 West 33rd Street, 15th
Floor
New York, New York 10001-2697
</TABLE>
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Corporation has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Corporation will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Original Capital Securities,
and in handling or tendering for their customers.
Holders who tender their Original Capital Securities for exchange will not
be obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Original Capital
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Original
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Capital Securities in connection with the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Neither the Corporation nor the Trust will make any payment to brokers,
dealers or other nominees soliciting acceptances of the Exchange Offer.
DESCRIPTION OF EXCHANGE SECURITIES
The terms of the Original Securities are identical in all materials respects
to the Exchange Securities, except that (i) the Original Securities have not
been registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the applicable Registration
Rights Agreement (which rights will terminate upon consummation of the Exchange
Offer, except under limited circumstances), (ii) the Exchange Capital Securities
will not contain the $100,000 minimum Liquidation Amount transfer restriction
and certain other restrictions on transfer applicable to Original Capital
Securities, (iii) the Exchange Capital Securities will not provide for any
increase in the Distribution rate thereon and (iv) the Exchange Junior
Subordinated Debentures will not provide for any increase in the interest rate
thereon. The Original Securities provide that, in the event that a registration
statement relating to the Exchange Offer has not been filed by December 8, 1997
and been declared effective by January 21, 1998, or, in certain limited
circumstances, in the event a shelf registration statement with respect to the
resale of the Original Capital Securities is not declared effective by the time
required by the Registration Rights Agreement, then liquidated damages will
accrue at the rate of 0.50% per annum on the principal amount of the Original
Junior Subordinated Debentures and Distributions will accrue at the rate of
0.50% per annum on the Liquidation Amount of the Original Capital Securities,
for the period from the occurrence of such event until such time as such
registration statement has been filed or declared effective, as the case may be.
The Exchange Securities are not, and upon consummation of the Exchange Offer the
Original Securities will not be, entitled to any such additional interest or
Distributions. Accordingly, holders of Original Capital Securities should review
the information set forth in "Risk Factors--Consequences of a Failure to
Exchange Original Capital Securities" and "Description of Exchange Securities."
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
The Exchange Capital Securities will represent preferred beneficial
interests in the Trust and the holders thereof will be entitled to a preference
over the Common Securities in certain circumstances with respect to
Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust. See "--Subordination of Common Securities." The Trust
Agreement has been qualified under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). This summary of certain provisions of the Exchange
Capital Securities, the Common Securities and the Trust Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Trust Agreement, including the
definitions therein of certain terms.
GENERAL
The Exchange Capital Securities will be limited to $850 million aggregate
Liquidation Amount at any one time outstanding. The Exchange Capital Securities
will rank pari passu, and payments will be made thereon pro rata, with the
Common Securities except as described in "--Subordination of Common Securities."
Legal title to the Junior Subordinated Debentures will be held by the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
Exchange Guarantee will not guarantee payment of Distributions or amounts
payable on redemption of the Exchange Capital Securities or liquidation of the
Trust when the Trust does not have funds on hand legally available for such
payments. See "--Description of Exchange Guarantee."
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DISTRIBUTIONS
Distributions on the Exchange Capital Securities will be cumulative, will
accumulate from July 15, 1997 and will be payable semi-annually in arrears on
January 15 and July 15 of each year, commencing January 15, 1998, at the annual
rate of 8.072% of the Liquidation Amount to the holders of record of the
Exchange Capital Securities on the January 1 or July 1 immediately preceding
such date. The amount of Distributions payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months. In the event that any
date on which Distributions are payable on the Exchange Capital Securities is
not a Business Day (as defined below), payment of the Distribution payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect to any such delay), in each
case with the same force and effect as if made on such date (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date"). A "Business Day" shall mean any day other than a Saturday or a Sunday,
or a day on which banking institutions in The City of New York or Seattle,
Washington are authorized or required by law or executive order to remain
closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer the
payment of interest on the Exchange Junior Subordinated Debentures at any time
or from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period, provided that no Extension Period
may extend beyond the Stated Maturity Date. Upon any such election, semi-annual
Distributions on the Exchange Capital Securities will be deferred by the Trust
during any such Extension Period. Distributions to which holders of the Exchange
Capital Securities are entitled during any such Extension Period will accumulate
additional Distributions thereon at the rate per annum of 8% thereof, compounded
semi-annually from the relevant Distribution Date. The term "Distributions," as
used herein, shall include any such additional Distributions.
Prior to the termination of any such Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due, and subject to the
foregoing limitations, the Corporation may elect to begin a new Extension
Period. The Corporation must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any such Extension
Period at least five Business Days prior to the earlier of (i) the date the
Distributions on the Exchange Capital Securities would have been payable except
for the election to begin such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to any securities exchange
or to holders of such Exchange Capital Securities of the record date or the date
such Distributions are payable but in any event not less than five Business Days
prior to such record date. There is no limitation on the number of times that
the Corporation may elect to begin an Extension Period. See "--Description of
Exchange Junior Subordinated Debentures--Option to Extend Interest Payment Date"
and "Certain Federal Income Tax Consequences--Interest Income and Original Issue
Discount."
During any such Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal of or premium, if any, or interest on or repay, repurchase or redeem
any debt securities of the Corporation (including Other Debentures) that rank
pari passu with or junior in right of payment to the Exchange Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to any
guarantee by the Corporation of the debt securities of any subsidiary of the
Corporation (including Other Guarantees) if such guarantee ranks pari passu with
or junior in right of payment to the Exchange Junior Subordinated Debentures
(other than (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, common stock of the Corporation,
(b) any declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
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(c) payments under the Guarantee, (d) the purchase of fractional shares
resulting from a reclassification of the Corporation's capital stock or the
exchange or conversion of one class, or series of the Corporation's capital
stock for another class or series of the Corporation's capital stock, and (e)
the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged).
Although the Corporation has the right in the future to exercise its option
to defer payments of interest on the Exchange Junior Subordinated Debentures in
the future, the Corporation has no current intention to defer payments of
interest on such Exchange Junior Subordinated Debentures.
The revenue of the Trust available for distribution to holders of the
Capital Securities will be limited to payments under the Junior Subordinated
Debentures in which the Trust will invest the proceeds from the issuance and
sale of the Trust Securities. See "--Description of Exchange Junior Subordinated
Debentures--General." If the Corporation does not make interest payments on the
Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Capital Securities. The payment of
Distributions (if and to the extent the Trust has funds on hand legally
available for the payment of such Distributions) will be guaranteed by the
Corporation on a limited basis as set forth in "--Description of Exchange
Guarantee."
REDEMPTION
Upon the repayment on the Stated Maturity Date or prepayment prior to the
Stated Maturity Date of the Junior Subordinated Debentures, the proceeds from
such repayment or prepayment shall be applied by the Property Trustee to redeem
a Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days' notice of a date of redemption (the "Redemption Date"),
at the applicable Redemption Price, which shall be equal to (i) in the case of
the repayment of the Junior Subordinated Debentures on the Stated Maturity Date,
the Maturity Redemption Price (equal to the principal of, and accrued interest
on, the Junior Subordinated Debentures), (ii) in the case of the optional
prepayment of the Junior Subordinated Debentures prior to July 15, 2007 upon the
occurrence and continuation of a Tax Event, the Special Event Redemption Price
(equal to the Special Event Prepayment Price in respect of the Junior
Subordinated Debentures) and (iii) in the case of the optional prepayment of the
Junior Subordinated Debentures on or after July 15, 2007, the Optional
Redemption Price (equal to the Optional Prepayment Price in respect of the
Junior Subordinated Debentures). See "--Description of Exchange Junior
Subordinated Debentures--Optional Prepayment" and "--Special Event Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Junior Subordinated Debentures to be paid in accordance with their
terms and (ii) with respect to a distribution of Junior Subordinated Debentures
upon the liquidation of the Trust, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Junior Subordinated Debentures are distributed.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
The Corporation will have the right at any time to terminate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities in liquidation of the Trust. Such right is subject to the
Corporation having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital Securities.
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures to
the holders of the Trust Securities, if the Corporation, as Sponsor, has given
written direction to the Property Trustee to terminate the Trust (which
direction and distribution is optional and, except as described above, wholly
within the discretion of the Corporation, as Depositor);
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(iii) redemption of all of the Trust Securities as described in "--Redemption";
(iv) expiration of the term of the Trust; or (v) the entry of an order for the
dissolution of the Trust by a court of competent jurisdiction.
If a termination occurs as described in clause (i), (ii), (iv), or (v)
above, the Trust shall be liquidated by the Issuer Trustees as expeditiously as
the Issuer Trustees determine to be possible by distributing, after satisfaction
of liabilities to creditors of the Trust as provided by applicable law, to the
holders of the Trust Securities a Like Amount of the Junior Subordinated
Debentures, unless such distribution is determined by the Property Trustee not
to be practicable, in which event such holders will be entitled to receive out
of the assets of the Trust legally available for distribution to holders, after
satisfaction of liabilities to creditors of the Trust as provided by applicable
law, an amount equal to the aggregate of the Liquidation Amount plus accumulated
and unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because the Trust has insufficient assets on hand legally available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Capital Securities and the Common Securities shall
be paid on a pro rata basis, except that if a Debenture Event of Default has
occurred and is continuing, the Capital Securities shall have a priority over
the Common Securities. See "--Subordination of Common Securities."
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each registered
global certificate, if any, representing Trust Securities and held by DTC or its
nominee will receive a registered global certificate or certificates
representing the Junior Subordinated Debentures to be delivered upon such
distribution and (iii) any certificates representing Trust Securities not held
by DTC or its nominee will be deemed to represent Junior Subordinated Debentures
having a principal amount equal to the Liquidation Amount of such Trust
Securities, and bearing accrued and unpaid interest in an amount equal to the
accumulated and unpaid Distributions on such Trust Securities until such
certificates are presented to the Administrative Trustees or their agent for
cancellation, whereupon the Corporation will issue to such holder, and the
Debenture Trustee will authenticate, a certificate representing such Junior
Subordinated Debentures.
There can be no assurance as to the market prices for the Capital Securities
or the Junior Subordinated Debentures that may be distributed in exchange for
the Trust Securities if a dissolution and liquidation of the Trust were to
occur. Accordingly, the Capital Securities that an investor may purchase, or the
Junior Subordinated Debentures that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Capital Securities offered hereby.
REDEMPTION PROCEDURES
If applicable, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous payment of the
Exchange Junior Subordinated Debentures. Any redemption of Trust Securities
shall be made and the applicable Redemption Price shall be payable on the
Redemption Date only to the extent that the Trust has funds legally available
for the payment of such applicable Redemption Price.
If the Trust gives a notice of redemption in respect of the Exchange Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are legally available, with respect to the Exchange Capital
Securities held by DTC or its nominees, the Property Trustee will deposit
irrevocably with DTC funds sufficient to pay the applicable Redemption Price.
See "--Form, Denomination, Book-Entry Procedures and Transfer." With respect to
the Exchange Capital Securities held in certificated form, the Property Trustee,
to the extent funds are legally available, will irrevocably deposit with the
paying agent for the Exchange Capital Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the applicable
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Redemption Price to the holders thereof upon surrender of their certificates
evidencing the Exchange Capital Securities. See "--Payment and Paying Agency."
Notwithstanding the foregoing, Distributions payable on or prior to the
Redemption Date shall be payable to the holders of such Exchange Capital
Securities on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required, then
upon the date of such deposit, all rights of the holders of the Exchange Capital
Securities will cease, except the right of the holders of the Exchange Capital
Securities to receive the applicable Redemption Price, but without interest on
such Redemption Price, and the Exchange Capital Securities will cease to be
outstanding. In the event that any Redemption Date of Exchange Capital
Securities is not a Business Day, then the applicable Redemption Price payable
on such date will be paid on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day. In the event that payment of the
applicable Redemption Price is improperly withheld or refused and not paid
either by the Trust or by the Corporation pursuant to the Exchange Guarantee as
described in "--Description of Exchange Guarantee," Distributions on Exchange
Capital Securities will continue to accumulate at the then applicable rate, from
the Redemption Date originally established by the Trust to the date such
applicable Redemption Price is actually paid, in which case the actual payment
date will be the Redemption Date for purposes of calculating the applicable
Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Capital Securities by tender, in the open
market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Corporation defaults in payment of the applicable
Redemption Price on, or in the repayment of, the Junior Subordinated Debentures,
on and after the Redemption Date, Distributions will cease to accrue on the
Trust Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and Common Securities, as applicable, shall be made pro rata based on
the Liquidation Amount of the Trust Securities; provided, however, that if on
any Distribution Date or Redemption Date an Event of Default shall have occurred
and be continuing, no payment of any Distribution on, or applicable Redemption
Price of, any of the Common Securities, and no other payment on account of the
redemption, liquidation or other acquisition of the Common Securities, shall be
made unless payment in full in cash of all accumulated and unpaid Distributions
on all of the outstanding Capital Securities for all Distribution periods
terminating on or prior thereto, or in the case of payment of the applicable
Redemption Price the full amount of such Redemption Price, shall have been made
or provided for, and all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on, or Redemption
Price of, the Capital Securities then due and payable.
In the case of any Event of Default, the Corporation as holder of the Common
Securities will be deemed to have waived any right to act with respect to such
Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Capital Securities and not on behalf of the
Corporation as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act on
their behalf.
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EVENTS OF DEFAULT; NOTICE
The occurrence of a Debenture Event of Default (see "--Description of
Exchange Junior Subordinated Debentures--Debenture Events of Default")
constitutes an "Event of Default" under the Trust Agreement.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Corporation, as Sponsor, unless such Event of
Default shall have been cured or waived. The Corporation, as Sponsor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described in
"--Liquidation of the Trust and Distribution of Junior Subordinated Debentures"
and "--Subordination of Common Securities."
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Corporation as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such Issuer Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of such Issuer Trustee, shall be the successor of such Issuer
Trustee under the Trust Agreement, provided such corporation shall be otherwise
qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other Person,
except as described below. The Trust may, at the request of the Corporation, as
Sponsor, with the consent of the Administrative Trustees but without the consent
of the holders of the Capital Securities, merge with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to a trust organized as
such under the laws of any State; provided, that (i) such successor entity
either (a) expressly assumes all of the obligations of the Trust with respect to
the Capital Securities or (b) substitutes for the Capital Securities other
securities having substantially the same terms as the Capital Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Capital Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Corporation expressly
appoints a trustee of such successor entity possessing the same powers and
duties as the Property Trustee with respect to the Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which
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the Capital Securities are then listed, if any, (iv) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Capital Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material respect,
(vi) such successor entity has a purpose identical to that of the Trust, (vii)
prior to such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, the Corporation has received an opinion from independent
counsel to the Trust experienced in such matters to the effect that (a) such
merger, consolidation, amalgamation, replacement, conveyance, transfer or lease
does not adversely affect the rights, preferences and privileges of the holders
of the Capital Securities (including any Successor Securities) in any material
respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such successor
entity will be required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
(viii) the Corporation or any permitted successor or assignee owns all of the
common securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in Liquidation Amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
would cause the Trust or the successor entity not to be classified as a grantor
trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
Except as provided below and in "--Mergers, Consolidations, Amalgamations or
Replacements of the Trust" and "--Description of Exchange Guarantee--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Capital Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Corporation, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities (i) to cure any ambiguity, correct or supplement
any provisions in the Trust Agreement that may be inconsistent with any other
provision, or to make any other provisions with respect to matters or questions
arising under the Trust Agreement, which shall not be inconsistent with the
other provisions of the Trust Agreement, or (ii) to modify, eliminate or add to
any provisions of the Trust Agreement to such extent as shall be necessary to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as an
"investment company" under the Investment Company Act; provided, however, that
such action shall not adversely affect in any material respect the interests of
the holders of the Trust Securities, and any amendments of the Trust Agreement
shall become effective when notice thereof is given to the holders of the Trust
Securities. The Trust Agreement may be amended by the Issuer Trustees and the
Corporation (i) with the consent of holders representing a majority (based upon
Liquidation Amount) of the outstanding Trust Securities, and (ii) upon receipt
by the Issuer Trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect the Trust's status as a grantor
trust for United States federal income tax purposes or the Trust's exemption
from status as an "investment company" under the Investment Company Act,
provided that, without the consent of each holder of Trust Securities, the Trust
Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
The Exchange Capital Securities and any Original Capital Securities which remain
outstanding after consummation of the Exchange Offer will
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vote together as a single class for purposes of determining whether holders of
the requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Trust Agreement.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on such Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive certain past defaults under the
Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Junior Subordinated
Debentures or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in Liquidation Amount of all outstanding Capital Securities;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Junior Subordinated Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior approval
of each holder of the Capital Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote of such holders. The Property
Trustee shall notify each holder of Capital Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of such holders of the Capital Securities, prior to taking
any of the foregoing actions, the Issuer Trustees shall obtain an opinion of
counsel experienced in such matters to the effect that the Trust will not be
classified as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of Exchange Capital Securities may be given
at a meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Exchange Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of Exchange Capital Securities in the manner set forth
in the Trust Agreement.
No vote or consent of the holders of Capital Securities will be required for
the Trust to redeem and cancel the Capital Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The Exchange Capital Securities initially will be represented by one or more
Capital Securities in registered, global form (collectively, the "Global Capital
Securities"). The Global Capital Securities will be deposited upon issuance with
the Property Trustee as custodian for DTC, in New York, New York, and registered
in the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee, and such transfer shall be effective only when reflected in
the securities register maintained by or on behalf of the Trust. Beneficial
interests in the Global Capital Securities may not be exchanged for Capital
Securities in certificated form except in the limited circumstances described
below. See "--Exchange of Book-Entry Capital Securities for Certificated Capital
Securities."
Other Capital Securities will be issued only in registered, certificated
(i.e., non-global) form. Other Capital Securities may not be exchanged for
beneficial interests in any Global Capital Securities except in
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the limited circumstances described below. See "--Exchange of Certificated
Capital Securities for Book-Entry Capital Securities."
DEPOSITARY PROCEDURES
DTC has advised the Trust and the Corporation that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital Securities,
DTC will credit the accounts of Participants designated by the Initial
Purchasers with portions of the Liquidation Amount of the Global Capital
Securities and (ii) ownership of such interests in the Global Capital Securities
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Capital Securities).
Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are participants in such system, or indirectly
through organizations which are participants in such system. All interests in a
Global Capital Security may be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take physical delivery
in certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Capital Security to such persons will
be limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a Global Capital Security to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests. For certain
other restrictions on the transferability of the Capital Securities, see
"--Exchange of Book-Entry Capital Securities for Certificated Capital
Securities" and "-- Exchange of Certificated Capital Securities for Book-Entry
Capital Securities."
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof under the Trust
Agreement for any purpose.
Payments in respect of the Global Capital Security registered in the name of
DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms of
the Trust Agreement, the Property Trustee will treat the persons in whose names
the Capital Securities, including the Global Capital Securities, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Capital Securities, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or Indirect Participant's records relating to
the beneficial ownership interests in the Global Capital Securities or (ii) any
other matter relating to the
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actions and practices of DTC or any of its Participants or Indirect
Participants. DTC has advised the Trust and the Corporation that its current
practice, upon receipt of any payment in respect of securities such as the
Capital Securities, is to credit the accounts of the relevant Participants with
the payment on the payment date, in amounts proportionate to their respective
holdings in Liquidation Amount of beneficial interests in the relevant security
as shown on the records of DTC unless DTC has reason to believe it will not
receive payment on such payment date. Payments by the Participants and the
Indirect Participants to the beneficial owners of Capital Securities will be
governed by standing instructions and customary practices and will be the
responsibility of the Participants or the Indirect Participants and will not be
the responsibility of DTC, the Property Trustee, the Trust or the Corporation.
Neither the Trust or the Corporation nor the Property Trustee will be liable for
any delay by DTC or any of its Participants in identifying the beneficial owners
of the Capital Securities, and the Trust or the Corporation and the Property
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Secondary market trading activity in interests in the Global Capital
Securities will settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its participants. Transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds.
DTC has advised the Trust and the Corporation that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction of
one or more Participants to whose account with DTC interests in the Global
Capital Securities are credited and only in respect of such portion of the
Liquidation Amount of the Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event of
Default under the Trust Agreement, DTC reserves the right to exchange the Global
Capital Securities for legended Capital Securities in certificated form and to
distribute such Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Trust and the Corporation believe to be
reliable, but neither the Trust nor the Corporation takes responsibility for the
accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Capital Securities among participants in DTC, it is
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Trust or the
Corporation nor the Property Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF BOOK-ENTRY CAPITAL SECURITIES FOR CERTIFICATED CAPITAL
SECURITIES
A Global Capital Security is exchangeable for Exchange Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as Depositary for the Global Capital Security
and the Trust thereupon fails to appoint a successor Depositary within 90 days
or (y) has ceased to be a clearing agency registered under the Exchange Act,
(ii) the Corporation in its sole discretion elects to cause the issuance of the
Exchange Capital Securities in certificated form or (iii) there shall have
occurred and be continuing an Event of Default or any event which after notice
or lapse of time or both would be an Event of Default under the Trust Agreement.
In all cases, certificated Capital Securities delivered in exchange for any
Global Capital Security or beneficial interests therein will be registered in
the names, and issued in any approved denominations, requested by or on behalf
of the Depositary (in accordance with its customary procedures).
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EXCHANGE OF CERTIFICATED CAPITAL SECURITIES FOR BOOK-ENTRY CAPITAL
SECURITIES
Other Capital Securities, which will be issued in certificated form, may not
be exchanged for beneficial interests in any Global Capital Security unless such
exchange occurs in connection with a transfer of such Other Capital Securities
and the transferor first delivers to the Property Trustee a written certificate
(in the form provided in the Trust Agreement) to the effect that such transfer
will comply with the appropriate transfer restrictions applicable to such
Capital Securities.
PAYMENT AND PAYING AGENCY
Payments in respect of the Exchange Capital Securities held in global form
shall be made to the Depositary, which shall credit the relevant accounts at the
Depositary on the applicable Distribution Dates or in respect of the Exchange
Capital Securities that are not held by the Depositary, such payments shall be
made by check mailed to the address of the holder entitled thereto as such
address shall appear on the register. The paying agent (the "Paying Agent")
shall initially be the Property Trustee and any co-paying agent chosen by the
Property Trustee and acceptable to the Administrative Trustees and the
Corporation. The Paying Agent shall be permitted to resign as Paying Agent upon
30 days' written notice to the Property Trustee and the Corporation. In the
event that the Property Trustee shall no longer be the Paying Agent, the
Administrative Trustees shall appoint a successor (which shall be a bank or
trust company acceptable to the Administrative Trustees and the Corporation) to
act as Paying Agent.
RESTRICTIONS ON TRANSFER
The Exchange Capital Securities will be issued, and may be transferred only,
in minimum denominations of not less than $1,000 and multiples of $1,000 in
excess thereof. Any transfer, sale or other disposition of Exchange Capital
Securities in a denomination of less than $1,000 shall be deemed to be void and
of no legal effect whatsoever. Any such transferee shall be deemed not to be the
holder of such Exchange Capital Securities for any purpose, including but not
limited to the receipt of Distributions on such Exchange Capital Securities, and
such transferee shall be deemed to have no interest whatsoever in such Exchange
Capital Securities.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the
Exchange Capital Securities. Registration of transfers of the Exchange Capital
Securities will be effected without charge by or on behalf of the Trust, but
upon payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. The Trust will not be required to
register or cause to be registered the transfer of the Exchange Capital
Securities after they have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than during the occurrence and continuance of an
Event of Default, undertakes to perform only such duties as are specifically set
forth in the Trust Agreement and, after such Event of Default, must exercise the
same degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Trust Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. If no Event of Default has occurred and is continuing
and the Property Trustee is required to decide between alternative causes of
action, construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of the Capital Securities or the Common Securities are entitled
under the Trust Agreement to vote, then the Property Trustee shall take such
action as is directed by the Corporation and
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if not so directed, shall take such action as it deems advisable and in the best
interests of the holders of the Trust Securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the Corporation for
United States federal income tax purposes. In this connection, the Corporation
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Trust or the
Trust Agreement, that the Corporation and the Administrative Trustees determine
in their discretion to be necessary or desirable for such purposes, as long as
such action does not materially adversely affect the interests of the holders of
the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Original Junior Subordinated Debentures were issued and the Exchange
Junior Subordinated Debentures will be issued under an Indenture, as
supplemented from time to time (as so supplemented, the "Indenture"), between
the Corporation and The Chase Manhattan Bank, as trustee (the "Debenture
Trustee"). The Indenture has been qualified under the Trust Indenture Act. This
summary of certain terms and provisions of the Exchange Junior Subordinated
Debentures and the Indenture does not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, some of which are not otherwise
defined herein, are qualified in their entirety by reference to all of the
provisions of the Indenture and those terms made a part of the Indenture by the
Trust Indenture Act.
GENERAL
Concurrently with the issuance of the Trust Securities, the Trust invested
the proceeds thereof in the Original Junior Subordinated Debentures issued by
the Corporation. The Exchange Junior Subordinated Debentures will bear interest
at the annual rate of 8.072% of the principal amount thereof, payable semi-
annually in arrears on January 15 and July 15 of each year (each, an "Interest
Payment Date"), commencing January 15, 1998, to the person in whose name each
Exchange Junior Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the January 1 or July 1 immediately
preceding the relevant payment date. It is anticipated that, until the
liquidation, if any, of the Trust, each Exchange Junior Subordinated Debenture
will be held in the name of the Property Trustee in trust for the benefit of the
holders of the Trust Securities. The amount of interest payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months. In the
event that any date on which interest is payable on the Exchange Junior
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay)
with the same force and effect as if made on the date such payment was
originally payable. Accrued interest that is not paid on the applicable Interest
Payment Date will bear additional interest on the amount thereof (to the extent
permitted by law) at the rate per annum of 8.072% thereof, compounded
semi-annually. The term "interest," as used herein, shall include semi-annual
interest payments, interest on semi-annual interest payments not paid on the
applicable Interest Payment Date and Additional Interest (as defined below), as
applicable.
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The Exchange Junior Subordinated Debentures will be issued in denominations
of $1,000 and integral multiples thereof. The Exchange Junior Subordinated
Debentures will mature on July 15, 2037 (the "Stated Maturity Date").
The Exchange Junior Subordinated Debentures will rank pari passu with the
Original Junior Subordinated Debentures and all Other Debentures and will be
unsecured and subordinate and junior in right of payment to the extent and in
the manner set forth in the Indenture to all Senior Indebtedness. See
"--Subordination." The Indenture does not limit the incurrence or issuance of
other secured or unsecured debt of the Corporation, including Senior
Indebtedness. See "--Subordination."
FORM, REGISTRATION AND TRANSFER
If the Exchange Junior Subordinated Debentures are distributed to the
holders of the Trust Securities, the Exchange Junior Subordinated Debentures may
be represented by one or more global certificates registered in the name of Cede
& Co. as the nominee of DTC. The depositary arrangements for such Exchange
Junior Subordinated Debentures are expected to be substantially similar to those
in effect for the Capital Securities. For a description of DTC and the terms of
the depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "--Description of Exchange
Capital Securities--Form, Denomination, Book-Entry Procedures and Transfer."
PAYMENT AND PAYING AGENTS
Payment of principal of (and premium, if any) and any interest on Exchange
Junior Subordinated Debentures will be made at the office of the Debenture
Trustee in The City of New York or at the office of such Paying Agent or Paying
Agents as the Corporation may designate from time to time, except that at the
option of the Corporation payment of any interest may be made except in the case
of Exchange Junior Subordinated Debentures in global form, (i) by check mailed
to the address of the Person entitled thereto as such address shall appear in
the register for Exchange Junior Subordinated Debentures or (ii) by transfer to
an account maintained by the Person entitled thereto as specified in such
register, provided that proper transfer instructions have been received by the
relevant record date. Payment of any interest on any Exchange Junior
Subordinated Debenture will be made to the Person in whose name such Exchange
Junior Subordinated Debenture is registered at the close of business on the
record date for such interest, except in the case of defaulted interest. The
Corporation may at any time designate additional Paying Agents or rescind the
designation of any Paying Agent; however the Corporation will at all times be
required to maintain a Paying Agent in each Place of Payment for the Exchange
Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by the Corporation in trust, for the payment of the principal of (and
premium, if any) or interest on any Exchange Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any) or
interest has become due and payable shall, at the request of the Corporation, be
repaid to the Corporation and the holder of such Exchange Junior Subordinated
Debenture shall thereafter look, as a general unsecured creditor, only to the
Corporation for payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no Debenture Event of Default has occurred and is continuing, the
Corporation will have the right under the Indenture at any time during the term
of the Exchange Junior Subordinated Debentures to defer the payment of interest
at any time or from time to time for a period not exceeding 10 consecutive
semi-annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity Date. At the end of such
Extension Period, the Corporation must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of 8.072%, compounded
semi-annually, to the extent permitted by applicable law). During an Extension
Period,
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interest will continue to accrue and holders of Exchange Junior Subordinated
Debentures (and holders of the Trust Securities while Trust Securities are
outstanding) will be required to accrue interest income for United States
federal income tax purposes prior to the receipt of cash attributable to such
income. See "Certain Federal Income Tax Consequences--Interest Income and
Original Issue Discount."
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no Debenture Event of Default has occurred and is continuing, the
Corporation will have the right under the Indenture at any time during the term
of the Junior Subordinated Debentures to defer the payment of interest at any
time or from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period, provided that no Extension Period
may extend beyond the Stated Maturity Date. At the end of such Extension Period,
the Corporation must pay all interest then accrued and unpaid (together with
interest thereon at the annual rate of 8.072%, compounded semi-annually, to the
extent permitted by applicable law). During an Extension Period, interest will
continue to accrue and holders of Junior Subordinated Debentures (and holders of
the Trust Securities while Trust Securities are outstanding) will be required to
accrue interest income for United States federal income tax purposes prior to
the receipt of cash attributable to such income. See "Certain Federal Income Tax
Consequences--Interest Income and Original Issue Discount."
During any such Extension Period, the Corporation may not (i) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Corporation (including any Other Debentures) that rank
PARI PASSU with or junior in right of payment to the Junior Subordinated
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Corporation of the debt securities of any subsidiary of the Corporation
(including any Other Guarantees) if such guarantee ranks PARI PASSU with or
junior in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
shareholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) the purchase of fractional shares resulting
from a reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock, and (e) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged).
Prior to the termination of any such Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Corporation may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Corporation must give the Property
Trustee, the Administrative Trustees and the Debenture Trustee notice of its
election of any Extension Period (or an extension thereof) at least five
Business Days prior to the earlier of (i) the date the Distributions on the
Trust Securities would have been payable except for the election to begin or
extend such Extension Period or (ii) the date the Administrative Trustees are
required to give notice to any securities exchange or to holders of Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. The
Debenture Trustee shall give notice of the Corporation's election to begin or
extend a new Extension Period to the holders of the Capital Securities. There is
no limitation on the number of times that the Corporation may elect to begin an
Extension Period.
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OPTIONAL PREPAYMENT
The Exchange Junior Subordinated Debentures will be prepayable, in whole or
in part, at the option of the Corporation on or after July 15, 2007, at a
prepayment price (the "Optional Prepayment Price") equal to the percentage of
the outstanding principal amount of the Exchange Junior Subordinated Debentures
specified below, plus, in each case, accrued interest thereon to the date of
prepayment if redeemed during the 12-month period beginning July 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2007............................................................................. 104.036%
2008............................................................................. 103.632
2009............................................................................. 103.229
2010............................................................................. 102.825
2011............................................................................. 102.422
2012............................................................................. 102.018
2013............................................................................. 101.614
2014............................................................................. 101.211
2015............................................................................. 100.807
2016............................................................................. 100.404
2017 and thereafter.............................................................. 100.000%
</TABLE>
SPECIAL EVENT PREPAYMENT
If a Tax Event shall occur and be continuing, the Corporation may, at its
option, prepay the Junior Subordinated Debentures in whole (but not in part) at
any time prior to July 15, 2007 and within 90 days of the occurrence of such Tax
Event, at a prepayment price (the "Special Event Prepayment Price") equal to the
greater of (i) 100% of the principal amount of such Junior Subordinated
Debentures or (ii) the sum, as determined by a Quotation Agent, of the present
values of the remaining scheduled payments of principal and interest on the
Junior Subordinated Debentures to the Stated Maturity Date, discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued
interest thereon to the date of prepayment.
A "Merger Termination Event" means the termination on or prior to December
31, 1997 of the Agreement and Plan of Merger, dated as of June 6, 1997, by and
among American States SAFECO, and ASFC Acquisition Co. pursuant to Article 12
thereof.
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or any amendment to or
change in an interpretation or application of such laws or regulations, which
amendment or change is effective or is announced on or after the Issue Date,
there is more than an insubstantial risk that (i) the Trust would be subject to
United States federal income tax with respect to income received or accrued on
the Junior Subordinated Debentures, (ii) interest payable by the Corporation on
the Junior Subordinated Debentures would not be deductible by the Corporation,
in whole or in part, for United States federal income tax purposes, or (iii) the
Trust would be subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication which is
published weekly by the Federal Reserve and which established yields on actively
traded United States Treasury securities adjusted to constant maturity under the
caption "Treasury Constant Maturities," for the
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maturity date corresponding to the Stated Maturity Date (if no maturity date is
within three months before or after the Stated Maturity Date, yields for the
first two published maturities most closely corresponding to the Stated Maturity
Date shall be interpolated and the Adjusted Treasury Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding to the
nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such prepayment date plus, in either case (A)
1.23% if such prepayment date occurs on or prior to July 15, 1998 and (B) 0.50%
in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity date corresponding to the
Stated Maturity Date that would be utilized at the time of selection and in
accordance with customary financial practice, in pricing new issues of corporate
debt securities with a maturity date corresponding to the Stated Maturity Date.
If no United States Treasury security has a maturity date which is within three
months before or after the Stated Maturity Date, the two most closely
corresponding United States Treasury securities shall be used as the Comparable
Treasury Issue, and the calculation of the Adjusted Treasury Rate pursuant to
clause (ii) of the definition thereof shall be interpolated or extrapolated on a
straight-line basis, rounding to the nearest month.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Corporation. "Reference Treasury Dealer" means: (i) Smith Barney Inc. and its
successors; PROVIDED, HOWEVER, that if the foregoing shall cease to be a primary
U.S. Government securities dealer in New York City (a "Primary Treasury
Dealer"), the Corporation shall substitute therefor another Primary Treasury
Dealer; and (ii) any other Primary Treasury Dealer selected by the Corporation.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the Reference Treasury Dealer Quotations for such prepayment date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Debenture Trustee obtains fewer than three such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any prepayment date, the average, as determined by the
Debenture Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be prepaid at its registered address. Unless the Corporation
defaults in payment of the prepayment price, on and after the prepayment date
interest ceases to accrue on such Junior Subordinated Debentures called for
prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums.
"Additional Sums" means the additional amounts as may be necessary in order that
the amount available to pay Distributions then due and payable by the Trust on
the outstanding Capital Securities and Common Securities shall not be reduced as
a result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event.
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RESTRICTIONS ON CERTAIN PAYMENTS
The Corporation will also covenant that it will not, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal, interest or premium, if any, on or repay or repurchase or redeem any
debt securities of the Corporation (including Other Debentures) that rank PARI
PASSU with or junior in right of payment to the Junior Subordinated Debentures
or (iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation
(including under Other Guarantees) if such guarantee ranks PARI PASSU or junior
in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
shareholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) the purchase of fractional shares resulting
from a reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock and (e) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged), if at such time (1) there shall have occurred and
be continuing a Declaration Event of Default, (2) there shall have occurred and
be continuing a Debenture Event of Default, (3) there shall have occurred and be
continuing a payment default under the Declaration or the Indenture, (4) if such
Junior Subordinated Debentures are held by the Trust, the Corporation shall be
in default with respect to its payment of any obligations under the Guarantee or
(5) the Corporation shall have given notice of its election of an Extension
Period as provided in the Indenture and shall not have rescinded such notice,
and such Extension Period, or any extension thereof, shall have commenced.
MODIFICATION OF INDENTURE
From time to time the Corporation and the Debenture Trustee may, without the
consent of the holders of Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interest of the holders of Junior
Subordinated Debentures) and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Corporation and the Debenture Trustee, with the consent of the
holders of a majority in principal amount of Junior Subordinated Debentures, to
modify the Indenture in a manner affecting the rights of the holders of Junior
Subordinated Debentures; PROVIDED, that no such modification may, without the
consent of the holders of each outstanding Junior Subordinated Debenture so
affected, (i) extend the Stated Maturity Date, or reduce the principal amount of
the Junior Subordinated Debentures or reduce the rate or extend the time of
payment of interest thereon or (ii) reduce the percentage of principal amount of
Junior Subordinated Debentures, the holders of which are required to consent to
any such modification of the Indenture.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures constitutes a
"Debenture Event of Default" (whatever the reason for such Debenture Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures or any Other Debentures, when due (subject to the deferral of any
due date in the case of an Extension Period); or
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(ii) failure to pay any principal or premium, if any, on the Junior
Subordinated Debentures or any Other Debentures when due whether at
maturity, upon redemption, by declaration of acceleration of maturity or
otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to the
Corporation from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of Junior Subordinated Debentures; or
(iv) certain events of bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal (or premium, if any) on or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest (and premium, if any) and principal due otherwise than by acceleration
has been deposited with the Debenture Trustee) or a default in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Junior Subordinated
Debenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of the Corporation to pay interest (or
premium, if any) on or principal of the Junior Subordinated Debentures on the
due date, a holder of Capital Securities may institute a Direct Action. The
Corporation may not amend the Indenture to remove the foregoing right to bring a
Direct Action without the prior written consent of the holders of all of the
Capital Securities. If the right to bring a Direct Action is removed following
the Exchange Offer, the Trust may become subject to the reporting obligations
under the Exchange Act. Notwithstanding any payments made to a holder of Capital
Securities by the Corporation in connection with a Direct Action, the
Corporation shall remain obligated to pay the principal of (or premium, if any)
or interest on the Junior Subordinated Debentures, and the Corporation shall be
subrogated to the rights of the holder of such Capital Securities with respect
to payments on the Capital Securities to the extent of any payments made by the
Corporation to such holder in any Direct Action.
The holders of the Capital Securities will not be able to exercise directly
any remedies, other than those set forth in the preceding paragraph, available
to the holders of the Junior Subordinated Debentures unless there shall have
been an Event of Default under the Trust Agreement. See "--Description of
Exchange Capital Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Corporation shall not consolidate with or
merge into any other Person or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any Person, and no
Person shall consolidate with or merge into the Corporation or convey, transfer
or
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lease its properties and assets as an entirety or substantially as an entirety
to the Corporation, unless: (i) in case the Corporation consolidates with or
merges into another Person or conveys or transfers its properties and assets
substantially as an entirety to any Person, the successor Person is organized
under the laws of the United States or any State or the District of Columbia,
and such successor Person expressly assumes the Corporation's obligations on the
Junior Subordinated Debentures; (ii) immediately after giving effect thereto, no
Debenture Event of Default, and no event which, after notice or lapse of time or
both, would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Junior Subordinated Debentures.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at maturity within one year, and the Corporation deposits or causes to be
deposited with the Debenture Trustee funds, in trust, for the purpose and in an
amount sufficient to pay and discharge the entire indebtedness on the Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation, for the principal (and premium, if any) and interest to the date
of the deposit or to the Stated Maturity Date, as the case may be, then the
Indenture will cease to be of further effect (except as to the Corporation's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Corporation will be deemed to have satisfied and discharged the Indenture.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures issued
thereunder will be subordinate and junior in right of payment to all Senior
Indebtedness. No payment of principal (including redemption payments), premium,
if any, or interest on the Junior Subordinated Debentures may be made at any
time when (i) any Senior Indebtedness is not paid when due, (ii) any applicable
grace period with respect to such default has ended and such default has not
been cured or waived or ceased to exist, or (iii) the maturity of any Senior
Indebtedness has been accelerated because of a default.
Upon any distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, all Senior Indebtedness must be paid
in full before the holders of the Junior Subordinated Debentures are entitled to
receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect of the Junior Subordinated Debentures.
"Senior Indebtedness" shall mean all Indebtedness for Money Borrowed,
whether outstanding on the date of execution of the Indenture or thereafter
created, assumed or incurred, unless the terms thereof specifically provide that
it is not superior in right of payment to the Junior Subordinated Debentures,
and any deferrals, renewals or extensions of such Senior Indebtedness.
"Indebtedness for Money Borrowed" shall mean any obligation of, or any
obligation guaranteed by, the Corporation for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments, but shall not include (i) any trade accounts payable in the
ordinary
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course of business, (ii) any such indebtedness that by its terms ranks PARI
PASSU with or junior in right of payment to the Junior Subordinated Debentures,
(iii) all other debt securities, and guarantees in respect of those debt
securities, issued to any other trust, or a trustee of such trust, partnership
or other entity affiliated with the Corporation that is a financing vehicle of
the Corporation (a "financing entity") in connection with the issuance by such
financing entity of equity securities or other securities guaranteed by the
Corporation pursuant to an instrument that ranks PARI PASSU with or junior in
right of payment to the Guarantee, and (iv) any other indebtedness that would
otherwise qualify as "Indebtedness for Money Borrowed" to the extent that such
indebtedness by its terms ranks PARI PASSU with or junior in right of payment to
any of the indebtedness described in (i), (ii) or (iii).
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness.
RESTRICTIONS ON TRANSFER
The Exchange Junior Subordinated Debentures will be issued, and may be
transferred only, in blocks having an aggregate principal amount of not less
than $1,000. Any such transfer of Exchange Junior Subordinated Debentures in a
block having an aggregate principal amount of less than $1,000 shall be deemed
to be void and of no legal effect whatsoever. Any such transferee shall be
deemed not to be the holder of such Exchange Junior Subordinated Debentures for
any purpose, including but not limited to the receipt of payments on such
Exchange Junior Subordinated Debentures, and such transferee shall be deemed to
have no interest whatsoever in such Exchange Junior Subordinated Debentures.
GOVERNING LAW
The Indenture and the Exchange Junior Subordinated Debentures will be
governed by and construed in accordance with the laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
Following the Exchange Offer and the qualification of the Indenture under
the Trust Indenture Act, the Debenture Trustee shall have and be subject to all
the duties and responsibilities specified with respect to an indenture trustee
under the Trust Indenture Act. Subject to such provisions, the Debenture Trustee
is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Junior Subordinated Debentures, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF EXCHANGE GUARANTEE
The Exchange Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Exchange Capital Securities
for the benefit of the holders from time to time of the Exchange Capital
Securities. The Chase Manhattan Bank will act as Guarantee Trustee under the
Exchange Guarantee. The Exchange Guarantee has been qualified under the Trust
Indenture Act. This summary of certain provisions of the Exchange Guarantee does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Exchange Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act. The Guarantee
Trustee will hold the Exchange Guarantee for the benefit of the holders of the
Exchange Capital Securities.
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GENERAL
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined below)
to the holders of the Exchange Capital Securities, as and when due, regardless
of any defense, right of set-off or counterclaim that the Trust may have or
assert other than the defense of payment. The following payments with respect to
the Exchange Capital Securities, to the extent not paid by or on behalf of the
Trust (the "Guarantee Payments"), will be subject to the Exchange Guarantee: (i)
any accumulated and unpaid Distributions required to be paid on Exchange Capital
Securities, to the extent that the Trust has funds on hand legally available
therefor at such time, (ii) the applicable Redemption Price with respect to
Exchange Capital Securities called for redemption, to the extent that the Trust
has funds on hand legally available therefor at such time, or (iii) upon a
voluntary or involuntary termination and liquidation of the Trust, the lesser of
(a) the Liquidation Distribution and (b) the amount of assets of the Trust
remaining available for distribution to holders of Exchange Capital Securities.
The Corporation's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Corporation to the holders of the
Exchange Capital Securities or by causing the Trust to pay such amounts to such
holders.
The Exchange Guarantee will rank subordinate and junior in right of payment
to all Senior Indebtedness to the extent provided therein. See "--Status of the
Exchange Guarantee." The Exchange Guarantee does not limit the incurrence or
issuance of other secured or unsecured debt of the Corporation, including Senior
Indebtedness, whether under the Indenture, any other indenture that the
Corporation may enter into in the future or otherwise.
The Corporation will, through the Exchange Guarantee, the Trust Agreement,
the Exchange Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally guarantee all of the Trust's obligations
under the Exchange Capital Securities.
STATUS OF THE EXCHANGE GUARANTEE
The Exchange Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Indebtedness in the same manner as Exchange Junior Subordinated
Debentures.
The Exchange Guarantee will rank pari passu with the Original Guarantee and
all Other Guarantees issued by the Corporation. The Exchange Guarantee will
constitute a guarantee of payment and not of collection (i.e., the guaranteed
party may institute a legal proceeding directly against the Corporation to
enforce its rights under the Exchange Guarantee without first instituting a
legal proceeding against any other person or entity). The Exchange Guarantee
will be held for the benefit of the holders of the Exchange Capital Securities.
The Exchange Guarantee will not be discharged except by payment of the Guarantee
Payments in full to the extent not paid by the Trust or upon distribution to the
holders of the Exchange Capital Securities of the Exchange Junior Subordinated
Debentures. The Exchange Guarantee does not place a limitation on the amount of
additional Senior Indebtedness that may be incurred by the Corporation. The
Corporation expects from time to time to incur additional indebtedness
constituting Senior Indebtedness.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Exchange Capital Securities (in which case no vote
will be required), the Exchange Guarantee may not be amended without the prior
approval of the holders of a majority of the Liquidation Amount of such
outstanding Exchange Capital Securities. The manner of obtaining any such
approval will be as set forth in "--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Trust Agreement." All guarantees and
agreements contained in the Guarantee Agreement shall bind the successors,
assigns,
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receivers, trustees and representatives of the Corporation and shall inure to
the benefit of the holders of the Exchange Capital Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Exchange Guarantee will occur upon the failure
of the Corporation to perform any of its payment or other obligations
thereunder. The holders of a majority in Liquidation Amount of the Exchange
Capital Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Exchange Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Exchange Guarantee.
Any holder of the Exchange Capital Securities may institute a legal
proceeding directly against the Corporation to enforce its rights under the
Exchange Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity.
The Corporation, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Exchange Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
default by the Corporation in performance of the Exchange Guarantee, will
undertake to perform only such duties as are specifically set forth in the
Exchange Guarantee and, after default with respect to the Exchange Guarantee,
must exercise the same degree of care and skill as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Guarantee Trustee will be under no obligation to exercise any of
the powers vested in it by the Exchange Guarantee at the request of any holder
of the Exchange Capital Securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that might be incurred thereby.
TERMINATION OF THE EXCHANGE GUARANTEE
The Exchange Guarantee will terminate and be of no further force and effect
upon full payment of the applicable Redemption Price of the Exchange Capital
Securities, upon full payment of the Liquidation Amount payable upon liquidation
of the Trust or upon distribution of Exchange Junior Subordinated Debentures to
the holders of the Exchange Capital Securities. The Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the Exchange Capital Securities must restore payment of any sums paid
under the Exchange Capital Securities or the Exchange Guarantee.
GOVERNING LAW
The Exchange Guarantee will be governed by and construed in accordance with
the laws of the State of New York.
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RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE JUNIOR
SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Exchange Capital
Securities (to the extent the Trust has funds on hand legally available for the
payment of such Distributions) will be irrevocably guaranteed by the Corporation
as and to the extent set forth in "Description of Exchange Securities--
Description of Exchange Guarantee." Taken together, the Corporation's
obligations under the Exchange Junior Subordinated Debentures, the Indenture,
the Trust Agreement and the Exchange Guarantee will provide, in the aggregate, a
full, irrevocable and unconditional guarantee of payments of Distributions and
other amounts due on the Exchange Capital Securities. No single document
standing alone or operating in conjunction with fewer than all of the other
documents constitutes such guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and unconditional
guarantee of the Trust's obligations under the Exchange Capital Securities. If
and to the extent that the Corporation does not make the required payments on
the Exchange Junior Subordinated Debentures, the Trust will not have sufficient
funds to make the related payments, including Distributions, on the Exchange
Capital Securities. The Exchange Guarantee will not cover any such payment when
the Trust does not have sufficient funds on hand legally available therefor. In
such event, the remedy of a holder of Exchange Capital Securities is to
institute a Direct Action. The obligations of the Corporation under the Exchange
Guarantee will be subordinate and junior in right of payment to all Senior
Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Exchange Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Exchange Capital Securities,
primarily because: (i) the aggregate principal amount or Prepayment Price of the
Exchange Junior Subordinated Debentures will be equal to the sum of the
Liquidation Amount or Redemption Price, as applicable, of the Exchange Capital
Securities and Common Securities; (ii) the interest rate and interest and other
payment dates on the Exchange Junior Subordinated Debentures will match the
Distribution rate and Distribution and other payment dates for the Trust
Securities; (iii) the Corporation shall pay for all and any costs, expenses and
liabilities of the Trust except the Trust's obligations to holders of Trust
Securities under such Trust Securities; and (iv) the Trust Agreement provides
that the Trust is not authorized to engage in any activity that is not
consistent with the limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the Exchange
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity. A default or event of default
under any Senior Indebtedness would not constitute a default or Event of Default
under the Trust Agreement. However, in the event of payment defaults under, or
acceleration of, Senior Indebtedness, the subordination provisions of the
Indenture will provide that no payments may be made in respect of the Exchange
Junior Subordinated Debentures until such Senior Indebtedness has been paid in
full or any payment default thereunder has been cured or waived. Failure to make
required payments on Exchange Junior Subordinated Debentures would constitute an
Event of Default under the Trust Agreement.
LIMITED PURPOSE OF THE TRUST
The Exchange Capital Securities will represent preferred beneficial
interests in the Trust, and the Trust exists for the sole purpose of issuing and
selling the Trust Securities, using the proceeds from the sale
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of the Trust Securities to acquire the Junior Subordinated Debentures and
engaging in only those other activities incidental thereto.
RIGHTS UPON TERMINATION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary termination and liquidation
of the Trust, the holders of the Trust Securities will be entitled to receive,
out of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of Junior Subordinated
Debentures." Upon any voluntary or involuntary liquidation or bankruptcy of the
Corporation, the Property Trustee, as holder of the Exchange Junior Subordinated
Debentures, would be a subordinated creditor of the Corporation, subordinated in
right of payment to all Senior Indebtedness as set forth in the Indenture, but
entitled to receive payment in full of principal (and premium, if any) and
interest, before any stockholders of the Corporation receive payments or
distributions. Since the Corporation will be the guarantor under the Exchange
Guarantee and will agree to pay for all costs, expenses and liabilities of the
Trust (other than the Trust's obligations to the holders of its Trust
Securities), the positions of a holder of Exchange Capital Securities and a
holder of Exchange Junior Subordinated Debentures relative to other creditors
and to stockholders of the Corporation in the event of liquidation or bankruptcy
of the Corporation are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Perkins Cole, counsel to the Corporation and the Trust
("Tax Counsel"), the following is a summary of certain of the material United
States federal income tax consequences of the exchange of Original Capital
Securities for Exchange Capital Securities and the ownership and disposition of
Exchange Capital Securities held as capital assets by a holder who purchased
such Original Capital Securities upon initial issuance. It does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, Non-U.S. Holders (as defined below)
engaged in a trade or business within the United States, insurance companies,
dealers in securities or currencies, tax-exempt investors (including pension
funds), or persons that will hold the Capital Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part of a
"conversion transaction" or other integrated investment, or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of Capital
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or of
any foreign government that may be applicable to the Capital Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury regulations thereunder (the "Regulations") and the administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Original Securities for Exchange Securities should not be a
taxable event to holders for United States federal income tax purposes. The
exchange of Original Securities for Exchange Securities pursuant to the Exchange
Offer should not be treated as an "exchange" for United States federal income
tax purposes because the Exchange Securities should not be considered to differ
materially in kind or extent from the Original Securities and because the
exchange will occur by operation of the terms of the Original Securities.
Accordingly, the Exchange Capital Securities should have the same issue price as
the Original Capital Securities, and a holder should have the same adjusted tax
basis and holding period in the Exchange Capital Securities as the holder had in
the Original Capital Securities immediately before the exchange. Moreover, a
holder which had acquired Original Capital Securities with either market
discount
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or bond premium will be treated as holding Exchange Capital Securities with the
same amount of market discount or bond premium and will be required to include
such market discount in or deduct such bond premium from their income in the
same manner as on the Original Capital Securities. Holders are urged to consult
their tax advisors regarding the applicability of the market discount and bond
premium rules.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Corporation intends to, and by acceptance of an Original Capital
Security each holder covenanted to, treat the Junior Subordinated Debentures as
debt for U.S. federal income tax purposes. In connection with the issuance of
the Original Junior Subordinated Debentures, Tax Counsel rendered its opinion
generally to the effect that, under the law in effect at the time of issuance of
the Original Junior Subordinated Debentures and assuming full compliance with
the terms of the Indenture (and the related documents), and based on certain
facts and assumptions contained in such opinion and certain representations of
the Corporation to Tax Counsel, the Original Junior Subordinated Debentures will
be classified for United States federal income tax purposes as indebtedness of
the Corporation. An opinion of Tax Counsel, however, is not binding on the
Internal Revenue Service (the "IRS") or the courts. Prospective investors should
note that no rulings have been or are expected to be sought from the IRS with
respect to any of these issues and no assurance can be given that the IRS will
not take contrary positions. Moreover, no assurance can be given that any of the
opinions expressed herein will not be challenged by the IRS or, if challenged,
that such a challenge would not be successful.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Original Capital Securities, Tax
Counsel rendered its opinion generally to the effect that, under the law then in
effect and assuming full compliance with the terms of the Trust Agreement and
the Indenture (and the related documents), and based on certain facts and
assumptions contained in such opinion, the Trust will be classified for United
States federal income tax purposes as a grantor trust and not as an association
taxable as a corporation. Accordingly, for United States federal income tax
purposes, each holder of Capital Securities (and not the Trust) generally will
be considered the owner of an undivided interest in the Junior Subordinated
Debentures, and each holder will be required to include in its gross income any
interest (or OID accrued) with respect to its allocable share of those Junior
Subordinated Debentures.
Even if the Trust were to be denied grantor trust status, it would not be
treated as a corporation for U.S. federal income tax purposes under the recently
finalized "check-the-box" Regulations, which provide that, if there is no
election to the contrary, a trust that has multiple beneficiaries and that is
treated as a "business entity" will be classified as a partnership for federal
income tax purposes. If the Trust were so characterized, there would be no
material difference in the federal income tax treatment of the holders (other
than possibly the Non-U.S. Holders as described below under "Non-U.S. Holders").
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under certain Regulations applicable to debt instruments, a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Corporation has
represented that the likelihood of its exercising its option to defer payments
of interest is "remote" since exercising that option would prevent the
Corporation from declaring dividends on any class of its equity securities.
Accordingly, the Corporation intends to take the position, based on the advice
of Tax Counsel in reliance on such representation, that the Junior Subordinated
Debentures will not be considered to be issued with OID and, accordingly, stated
interest on the Junior Subordinated Debentures generally will be taxable to a
holder as ordinary income at the time it is paid or accrued in accordance with
such holder's method of accounting.
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Under the Regulations, if the Corporation were to exercise its option to
defer payments of interest, the Junior Subordinated Debentures would at that
time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the Junior
Subordinated Debentures remain outstanding. In such event, all of a holder's
taxable interest income with respect to the Junior Subordinated Debentures would
thereafter be accounted for on an economic accrual basis regardless of such
holder's method of tax accounting, and actual distributions of stated interest
would not be reported as taxable income. Consequently, a holder of Capital
Securities would be required to include in gross income OID even though the
Corporation would not make actual cash payments during an Extension Period.
Moreover, under the Regulations, if the option to defer the payment of interest
was determined not to be "remote," the Junior Subordinated Debentures would be
treated as having been originally issued with OID. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would be accounted for on an economic accrual basis regardless of
such holder's method of tax accounting, and actual distributions of stated
interest would not be reported as taxable income.
The Regulations discussed above have not yet been addressed in any rulings
or other interpretations by the IRS, and it is possible that the IRS could take
a position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
The Corporation will have the right at any time to liquidate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities. Under current law, such a distribution, for United States
federal income tax purposes, would be treated as a nontaxable event to each
holder, and each holder would receive an aggregate tax basis in the Junior
Subordinated Debentures equal to such holder's aggregate tax basis in its
Capital Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however, as a
result of a change in law the Trust were to be characterized for United States
federal income tax purposes as an association taxable as a corporation at the
time of its dissolution, the distribution of the Junior Subordinated Debentures
may constitute a taxable event to holders of Capital Securities and a holder's
holding period in Junior Subordinated Debentures would begin on the date such
Junior Subordinated Debentures were received.
Under certain circumstances described herein (see "Description of Exchange
Securities--Description of Exchange Capital Securities"), the Junior
Subordinated Debentures may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Under current law, such a redemption would, for United States federal income tax
purposes, constitute a taxable disposition of the redeemed Capital Securities,
and a holder could recognize gain or loss as if it sold such redeemed Capital
Securities for cash. See "Sales of Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Capital Securities and the
amount realized on the sale of such Capital Securities (other than with respect
to accrued and unpaid interest, OID, or market discount which has not yet been
included in income, which will be treated as ordinary income). A holder's
adjusted tax basis in the Capital Securities generally will be its initial
purchase price increased by OID (if any) previously includable in such holder's
gross income to the date of disposition and decreased by payments (if any)
received on the Capital
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Securities in respect of OID. Such gain or loss generally will be a capital gain
or loss and generally will be a long-term capital gain or loss if the Capital
Securities have been held for more than one year.
The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individual taxpayers for more
than 18 months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). Holders should consult
their own tax advisors concerning these tax law changes.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest with respect to the underlying Junior
Subordinated Debentures. A holder who uses the accrual method of accounting for
tax purposes (and a cash method holder, if the Junior Subordinated Debentures
are deemed to have been issued with OID) which disposes of its Capital
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income (i.e.,
interest or, possibly, OID), and to add such amount to its adjusted tax basis in
its pro rata share of the underlying Junior Subordinated Debentures deemed
disposed of. To the extent the selling price is less than the holder's adjusted
tax basis (which will include all accrued but unpaid interest) a holder will
recognize a capital loss. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States federal income tax
purposes.
PROPOSED TAX LEGISLATION
On February 6, 1997, President Clinton's Proposed Legislation, among other
things, would have denied an issuer a deduction for United States federal income
tax purposes for the payment of interest on instruments with characteristics
similar to the Junior Subordinated Debentures. The Taxpayer Relief Act of 1997,
enacted on August 7, 1997, did not contain these provisions. There can be no
assurance, however, that the Proposed Legislation or similar legislation, if
enacted after the date hereof, would not adversely affect the tax treatment of
the Junior Subordinated Debentures or that any legislation enacted after the
date hereof would not cause a Tax Event that may result in a redemption of the
Junior Subordinated Debentures at the Special Event Prepayment Price and,
consequently, the Trust Securities at the Special Event Redemption Price. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Redemption" and "Description of Exchange Securities--Description of
Exchange Junior Subordinated Debentures--Special Event Prepayment."
NON-U.S. HOLDERS
For purposes of this discussion, a "Non-U.S. Holder" is any holder that is
not a U.S. Holder for United States federal income tax purposes. A "U.S. Holder"
is a holder of Capital Securities who or which is a citizen or individual
resident (or is treated as a citizen or individual resident) of the United
States for federal income tax purposes, a corporation or partnership created or
organized (or treated as created or organized for federal income tax purposes)
in or under the laws of the United States or any political subdivision thereof,
or a trust or estate the income of which is includable in its gross income for
federal income tax purposes without regard to its source. For taxable years
beginning after December 31, 1996 (or for the immediately preceding taxable
year, if the trustee of a trust so elects), a trust is a U.S. Holder for federal
income tax purposes if, and only if, (i) a court within the United States is
able to exercise primary supervision over the administration of the trust and
(ii) one or more United States trustees have the authority to control all
substantial decisions of the trust.
Under present United States federal income tax laws: (i) payments by the
Trust or any of its paying agents to any holder of a Capital Security who or
which is a Non-U.S. Holder will not be subject to United States federal
withholding tax; provided that, (a) the beneficial owner of the Capital Security
does not actually or constructively own 10 percent or more of the total combined
voting power of all classes of stock
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of the Corporation entitled to vote, (b) the beneficial owner of the Capital
Security is not a controlled foreign corporation that is related to the
Corporation through stock ownership, and (c) the beneficial owner of the Capital
Securities is not a bank whose receipt of interest with respect to the Capital
Securities (or the Junior Subordinated Debentures) is described in Section
881(c)(3)(A) of the Code and (d) either (1) the beneficial owner of the Capital
Security certifies to the Trust or its agent, under penalties of perjury, that
it is not a U.S. Holder and provides its name and address or (2) a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Capital Security in such capacity, certifies to the
Trust or its agent, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a Financial Institution between
it and the beneficial owner and furnishes the Trust or its agent with a copy
thereof; and (ii) a Non-U.S. Holder of a Capital Security will not be subject to
United States federal withholding tax on any gain realized upon the sale or
other disposition of a Capital Security.
If the Trust were to be denied grantor trust status and instead were to be
treated as a trade or business conducted as a partnership for U.S. federal
income tax purposes, it is possible that a Non-U.S. Holder could be subject to
federal income tax (including withholding) with respect to income (including
OID) generated by the Junior Subordinated Debentures.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will be allowed as a
credit against the holder's United States federal income tax, provided the
required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL
OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
ERISA and the Code impose certain restrictions on (a) employee benefit plans
(as defined in Section 3(3) of ERISA) subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (b) plans (as
defined in Section 4975(e)(1) of the Code) subject to Section 4975 of the Code,
including individual retirement accounts and Keogh plans, (c) entities whose
underlying assets include plan assets by reason of a plan's investment in such
entities (each of (a), (b) and (c), a "Plan") and (d) persons who have certain
specified relationships to such Plans ("Parties in Interest" under ERISA and
"Disqualified Persons" under the Code). Moreover, based on the reasoning of the
United States Supreme Court in JOHN HANCOCK MUTUAL LIFE INSURANCE CO. V. HARRIS
TRUST AND SAVINGS BANK, 114 S. Ct. 517 (1993), an insurance company's general
account may be deemed to include the assets of the Plans investing in the
general account (e.g., through the purchase of an annuity contract), and the
insurance company might be treated as a Party In Interest and a Disqualified
Person with respect to such Plans by virtue of such investment. ERISA also
imposes certain duties on persons who are fiduciaries of Plans, and both ERISA
79
<PAGE>
and the Code prohibit certain transactions involving "plan assets" between a
Plan and Parties in Interest or Disqualified Persons with respect to such Plans.
Each of the Corporation (the obligor with respect to the Exchange Junior
Subordinated Debentures held by the Trust), the Property Trustee and the
affiliates of either of them may be considered a Party in Interest or a
Disqualified Person with respect to many Plans. The purchase and/or holding of
Exchange Capital Securities by (or on behalf of) a Plan with respect to which
the Corporation, the Property Trustee or any affiliate of either of them is a
service provider (or otherwise is a Party in Interest or a Disqualified Person)
may constitute or result in a prohibited transaction under ERISA or Section 4975
of the Code, unless such Exchange Capital Securities are acquired and held
pursuant to and in accordance with an applicable exemption, such as Prohibited
Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (an exemption for
transactions involving certain insurance company general accounts), or PTCE
96-23 (an exemption for certain transactions determined by an in-house asset
manager).
A Plan fiduciary considering the purchase of Exchange Capital Securities
should also be aware that the assets of the Trust may be considered "plan
assets" for ERISA purposes. In such event, service providers with respect to the
assets of the Trust may become Parties in Interest or Disqualified Persons with
respect to investing Plans, and any discretionary authority exercised with
respect to the Junior Subordinated Debentures by such persons could be deemed to
constitute a prohibited transaction under ERISA or the Code. In order to
minimize the likelihood that such prohibited transactions will occur, each
investing Plan (and each person acting on behalf of, or investing with the
assets of, a Plan), by purchasing the Exchange Capital Securities, will be
deemed to have directed the Trust to invest in the Exchange Junior Subordinated
Debentures and to have appointed the Property Trustee. However, none of the
Corporation, the Property Trustee or any affiliate of either of them can
guaranty that such prohibited transactions will not occur.
Any purchaser proposing to acquire Exchange Capital Securities with assets
of any Plan should consult with its legal counsel concerning the impact of ERISA
and the Code and the potential consequences of acquiring and holding Exchange
Capital Securities with respect to their specific circumstances. Moreover, each
Plan fiduciary should take into account, among other considerations, whether the
fiduciary has the authority to make the investment; the composition of the
Plan's portfolio with respect to diversification by type of asset; the Plan's
funding objectives; the tax effects of the investment; whether under the general
fiduciary standards of investment prudence and diversification an investment in
the Certificates is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio; and whether the Exchange Capital Securities will be traded with
sufficient regularity to permit such fiduciary to satisfy ERISA's annual
valuation requirement.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Capital
Securities received in exchange for Original Capital Securities where such
Original Capital Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Trust and the
Corporation have agreed that, starting on the Expiration Date and ending on the
close of business on the 180th day following the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until , 1997,
all dealers effecting transactions in the Exchange Securities may be required to
deliver a prospectus.
80
<PAGE>
The Trust and the Corporation will not receive any proceeds from any sale of
Exchange Capital Securities by broker-dealers. Exchange Capital Securities
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions, in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Capital Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Capital Securities. Any
broker-dealer that resells Exchange Capital Securities that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Capital Securities may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
of any such resale of Exchange Capital Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Trust and the
Corporation will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Trust and the Corporation have
agreed to pay all expenses incident to the Exchange Offer (including the
expenses of one counsel for the holders of the Capital Securities) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Capital Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Capital Securities, the Exchange Guarantee and
the Exchange Junior Subordinated Debentures will be passed upon for the
Corporation by James W. Ruddy, General Counsel of the Corporation. Certain
matters of Delaware law relating to the validity of the Exchange Capital
Securities will be passed upon on behalf of the Trust by Skadden, Arps, Slate,
Meagher & Flom LLP, as special counsel to the Trust. Certain matters relating to
United States federal income tax considerations will be passed upon for the
Corporation by Perkins Coie, Seattle, Washington.
INDEPENDENT AUDITORS
The consolidated financial statements of SAFECO at December 31, 1996 and
1995, and for each of the three years in the period ended December 31, 1996,
incorporated by reference in the SAFECO Annual Report on Form 10-K for the year
ended December 31, 1996, have been incorporated by reference into this
Prospectus and the Registration Statement and have been audited by Ernst & Young
L.L.P., independent auditors, as set forth in their report thereon also
incorporated by reference in the SAFECO Annual Report on Form 10-K, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of American States at December 31,
1996 and 1995, and for each of the three years in the period ended December 31,
1996, included in the American States Annual Report on Form 10-K, Form 10-K/A(1)
and Form 10-K/A(2) for the year ended December 31, 1996, have been incorporated
by reference into this Prospectus and the Registration Statement and have been
audited by Ernst & Young L.L.P., independent auditors, as set forth in their
report thereon also included in the American States Annual Report on Form 10-K,
Form 10-K/A(1) and Form 10-K/A(2), and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
81
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE CORPORATION OR THE TRUST SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Information............................................... 6
Available Information..................................................... 7
Incorporation of Certain Documents by Reference........................... 8
Prospectus Summary........................................................ 9
Risk Factors.............................................................. 18
Unaudited Pro Forma Combined Condensed Financial Statements............... 27
SAFECO Corporation........................................................ 33
Use of Proceeds........................................................... 33
Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and
Distributions on Capital Securities..................................... 34
Capitalization............................................................ 35
Selected Financial Information............................................ 36
Safeco Capital Trust I.................................................... 41
The Exchange Offer........................................................ 42
Description of Exchange Securities........................................ 52
Relationship Among the Exchange Capital Securities, the Exchange Junior
Subordinated Debentures and the Exchange Guarantee...................... 74
Certain Federal Income Tax Consequences................................... 75
ERISA Considerations...................................................... 79
Plan of Distribution...................................................... 80
Validity of Exchange Securities........................................... 81
Independent Auditors...................................................... 81
</TABLE>
[LOGO]
SAFECO CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.072% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000
PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS
OUTSTANDING
8.072% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000
PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
SAFECO CORPORATION
---------------------
PROSPECTUS
---------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the exchange of the Capital Securities being registered hereby. All amounts
shown are estimates, except the Securities and Exchange Commission registration
fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 257,576
Blue Sky fees and expenses........................................ *
Printing and engraving expenses................................... *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Transfer Agent and Registrar fees................................. *
Miscellaneous expenses............................................ *
---------
Total......................................................... $ *
---------
---------
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article VII of the registrant's Bylaws, as amended (the
"Bylaws"), provides for indemnification of the registrant's directors, officers,
employees and agents to the maximum extent permitted by Washington law.
Section 23B.08.320 of the WBCA authorizes a corporation to eliminate or
limit a director's personal liability to the corporation or its shareholders for
monetary damages for conduct as a director, except in certain circumstances
involving acts or omissions, intentional midsconduct by a director or knowing
violations of law by a director or distributions illegal under Washington law,
or any transaction from which the director will personally receive a benefit in
money, property or services to which the director is not legally entitled.
Article VIII of the registrant's Restated Articles of Incorporation (the
"Articles of Incorporation") contains provisions implementing, to the fullest
extent permitted by Washington law, such limitations on a director's liability
to the registrant and its shareholders.
Officers and directors of the registrant are covered by insurance (with
certain exceptions and certain limitations) that indemnifies them against losses
and liabilities arising from certain alleged "wrongful acts," including alleged
errors or misstatements, or certain other alleged wrongful acts or omissions
constituting neglect or breach of duty.
The above discussion of the WBCA and the registrant's Bylaws and Articles of
Incorporation is not intended to be exhaustive and is qualified in its entirety
by reference to such statute, the Bylaws and the Articles of Incorporation.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<C> <S>
4.1 Indenture of SAFECO Corporation relating to the Junior Subordinated
Debentures (filed as Exhibit 4.2 to SAFECO Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997 (File No.
1-6563) and incorporated herein by reference)
4.2 Form of Certificate of Exchange Junior Subordinated Debentures
4.3 Certificate of Trust of SAFECO Capital Trust I (filed as Exhibit 4.4 to
SAFECO Corporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997 (File No. 1-6563) and incorporated herein by reference)
4.4 Amended and Restated Declaration of Trust of SAFECO Capital Trust I (filed
as Exhibit 4.5 to SAFECO Corporation's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997 (File No. 1-6563) and incorporated
herein by reference)
4.5 Form of Exchange Capital Security Certificate for SAFECO Capital Trust I
4.6 Form of Exchange Guarantee of SAFECO Corporation relating to the Exchange
Capital Securities
4.7 Registration Rights Agreement (filed as Exhibit 10.2 to SAFECO
Corporation's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 (File No. 1-6563) and incorporated herein by reference)
5.1 Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP, special
Delaware counsel to SAFECO Corporation and SAFECO Capital Trust I, as to
legality of the Exchange Capital Securities to be issued by SAFECO
Capital Trust I
5.2 Opinion and Consent of James W. Ruddy, General Counsel of SAFECO
Corporation as to the Exchange Junior Subordinated Debentures and the
Exchange Guarantee to be issued by SAFECO Corporation
8 Opinion and Consent of Perkins Coie, special tax counsel, as to certain
federal income tax matters
12.1 Computation of ratio earnings of fixed charges (excluding interest on
deposits)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom (Delaware) (included in
Exhibit 5.1)
23.3 Consent of James W. Ruddy, General Counsel, SAFECO Corporation (included
in Exhibit 5.2)
23.4 Consent of Perkins Coie (included in Exhibit 8)
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as
trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as
Property Trustee under the Amended and Restated Declaration of Trust of
SAFECO Capital Trust I
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank under the
Exchange Guarantee for the benefit of the holders of Exchange Capital
Securities of SAFECO Capital Trust I
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
</TABLE>
II-2
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are inapplicable or the requested
information is shown in the financial statements of the registrant or related
notes thereto.
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of a Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934(and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of each
undersigned Registrant pursuant to the provisions, or otherwise, each Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by each undersigned Registrant of
expenses incurred or paid by a director, officer of controlling person or each
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, each Registrant will, unless in the opinion of its
counsel the matter has been settled by the controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington, on the 17th day of October, 1997.
<TABLE>
<S> <C> <C>
SAFECO CORPORATION
By: /s/ ROGER H. EIGSTI
-----------------------------------------
Roger H. Eigsti
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes and
appoints Boh A. Dickey and Rod A. Pierson, and each of them, with full power of
substitution and resubstitution and full power to act without the other, as his
or her true and lawful attorney-in-fact and agent to act in his or her name,
place and stead and to execute in the name and on behalf of each person,
individually and in each capacity stated below, and to file, any and all
amendments to this Registration Statement, including any and all post-effective
amendments, and any registration statement relating to the same offering as this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing, ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 17th day of October, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
Chairman of the Board and
/s/ ROGER H. EIGSTI Chief Executive Officer
- ------------------------------ (Principal Executive
Roger H. Eigsti Officer)
/s/ BOH A. DICKEY
- ------------------------------ President, Chief Operating
Boh A. Dickey Officer, Director
Senior Vice President,
/s/ ROD A. PIERSON Chief Financial Officer,
- ------------------------------ Secretary and Controller
Rod A. Pierson (Principal Financial and
Accounting Officer)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
/s/ H. PAUL LOWBER Vice President and
- ------------------------------ Controller (Principal
H. Paul Lowber Accounting Officer)
- ------------------------------
Phyllis J. Campbell Director
/s/ ROBERT S. CLINE
- ------------------------------ Director
Robert S. Cline
/s/ JOHN W. ELLIS
- ------------------------------ Director
John W. Ellis
/s/ WILLIAM P. GERBERDING
- ------------------------------ Director
William P. Gerberding
/s/ JOSHUA GREEN III
- ------------------------------ Director
Joshua Green III
/s/ WILLIAM W. KRIPPAEHNE,
JR.
- ------------------------------ Director
William W. Krippaehne, Jr.
/s/ WILLIAM G. REED, JR.
- ------------------------------ Director
William G. Reed, Jr.
/s/ JUDITH M. RUNSTAD
- ------------------------------ Director
Judith M. Runstad
/s/ PAUL W. SKINNER
- ------------------------------ Director
Paul W. Skinner
/s/ GEORGE H. WEYERHAEUSER
- ------------------------------ Director
George H. Weyerhaeuser
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ----------- -------------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
4.1 Indenture of SAFECO Corporation relating to the Junior Subordinated Debentures (filed as Exhibit
4.2 to SAFECO Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997
(File No. 1-6563) and incorporated herein by reference)
4.2 Form of Certificate of Exchange Junior Subordinated Debentures
4.3 Certificate of Trust of SAFECO Capital Trust I (filed as Exhibit 4.4 to SAFECO Corporation's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (File No. 1-6563) and
incorporated herein by reference)
4.4 Amended and Restated Declaration of Trust of SAFECO Capital Trust I (filed as Exhibit 4.5 to
SAFECO Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (File No.
1-6563) and incorporated herein by reference)
4.5 Form of Exchange Capital Security Certificate for SAFECO Capital Trust I
4.6 Form of Exchange Guarantee of SAFECO Corporation relating to the Exchange Capital Securities
4.7 Registration Rights Agreement (filed as Exhibit 10.2 to SAFECO Corporation's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997 (File No. 1-6563) and incorporated herein by
reference)
5.1 Opinion and Consent of Skadden, Arps, Slate, Meagher & Flom LLP, special Delaware counsel to
SAFECO Corporation and SAFECO Capital Trust I, as to legality of the Exchange Capital Securities
to be issued by SAFECO Capital Trust I
5.2 Opinion and Consent of James W. Ruddy, General Counsel of SAFECO Corporation as to the Exchange
Junior Subordinated Debentures and the Exchange Guarantee to be issued by SAFECO Corporation
8 Opinion and Consent of Perkins Coie, special tax counsel, as to certain federal income tax matters
12.1 Computation of ratio earnings of fixed charges (excluding interest on deposits)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom (Delaware) (included in Exhibit 5.1)
23.3 Consent of James W. Ruddy, General Counsel of SAFECO Corporation (included in Exhibit 5.2)
23.4 Consent of Perkins Coie (included in Exhibit 8)
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under the
Indenture
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as Property Trustee under the
Amended and Restated Declaration of Trust of SAFECO Capital Trust I
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank under the Exchange Guarantee for the
benefit of the holders of Exchange Capital Securities of SAFECO Capital Trust I
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
</TABLE>
II-6
<PAGE>
EXHIBIT A
(FORM OF FACE OF SECURITY)
[IF THE SECURITY IS A GLOBAL SECURITY, INSERT: - THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL IN AS MUCH AS SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY "AFFILIATE" OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY)
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3)
<PAGE>
OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR
(E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE COMPANY PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION
SATISFACTORY TO THE COMPANY, AND (ii) PURSUANT TO CLAUSE (D), TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE REVERSE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE COMPANY. SUCH HOLDER FURTHER
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
No. ___________ CUSIP No. ______________
-2-
<PAGE>
SAFECO CORPORATION
8.072% SERIES B__ JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURE
DUE JULY 15, 2037
SAFECO Corporation, a Washington corporation (the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to SAFECO Capital Trust I, or registered
assigns, the principal sum of (__________) on July 15, 2037 (the "Maturity
Date"), unless previously redeemed, and to pay interest on the outstanding
principal amount hereof from July 15, 1997, or from the most recent interest
payment date (each such date, an "Interest Payment Date") to which interest has
been paid or duly provided for, semi-annually (subject to deferral as set forth
herein) in arrears on January 15 and July 15 of each year, commencing
January 15, 1998 at the rate of 8.072% per annum until the principal hereof
shall have become due and payable, and at the same rate per annum on any overdue
principal and premium, if any, and (without duplication and to the extent that
payment of such interest is enforceable under applicable law) on any overdue
installment of interest at the same rate per annum compounded semi-annually.
The amount of interest payable on any Interest Payment Date shall be computed on
the basis of a 360-day year of twelve 30-day months and, for any period less
than a full calendar month, the number of days elapsed in such month. In the
event that any date on which the principal of (or premium, if any) or interest
on this Security is payable is not a Business Day, then the payment payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), with the
same force and effect as if made on such date. Pursuant to the Registration
Rights Agreement, in certain limited circumstances the Company will be required
to pay Liquidated Damages (as defined in the Registration Rights Agreement) with
respect to this Security.
The interest installment so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture, be paid to
the person in whose name this Security (or one or more Predecessor Securities,
as defined in said Indenture) is registered at the close of business on the
regular record date for such interest installment, which shall be the January 1
or July 1 immediately preceding the relevant interest payment date. Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the holders on such regular record date and may be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the holders of Securities not less than 10 days prior
to such special record date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture.
The principal of and premium, if any, and interest on this Security shall
be payable at the office or agency of the Trustee maintained for that purpose in
any coin or currency of the United States of America that at the time of payment
is legal tender for payment of public and private debts; PROVIDED, HOWEVER,
that, payment of interest may be made at the option of the Company by (i) check
mailed to the holder at such address as shall appear in the Security Register or
(ii) by transfer to an account maintained by the Person entitled thereto,
provided that proper written transfer instructions have been received by the
relevant record date. Notwithstanding the foregoing, so long as the Holder of
this Security is the Property Trustee, the payment of the principal of and
premium, if any, and interest on
-3-
<PAGE>
this Security will be made at such place and to such account as may be
designated by the Property Trustee.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness, and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions,
(b) authorizes and directs the Trustee on his or her behalf to take such action
as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the Indenture
hereinafter referred to, or be valid or become obligatory for any purpose until
the Certificate of Authentication hereon shall have been signed by or on behalf
of the Trustee.
The provisions of this Security are continued on the reverse side hereof
and such provisions shall for all purposes have the same effect as though fully
set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
SAFECO CORPORATION
By
--------------------------------------
Name: Boh A. Dickey
Title: President
Attest:
By:
--------------------------------------
Name: Rodney A. Pierson
Title: Senior Vice President and Chief
Financial Officer
-4-
<PAGE>
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
Dated
THE CHASE MANHATTAN BANK
as Trustee
By
-----------------------------------------------------------------------------
Authorized Officer
-5-
<PAGE>
(FORM OF REVERSE OF SECURITY)
This Security is one of the Securities of the Company (herein sometimes
referred to as the "Securities"), specified in the Indenture, all issued or to
be issued under and pursuant to an Indenture, dated as of July 15, 1997 (the
"Indenture"), duly executed and delivered between the Company and The Chase
Manhattan Bank, as Trustee (the "Trustee"), to which Indenture reference is
hereby made for a description of the rights, limitations of rights, obligations,
duties and immunities thereunder of the Trustee, the Company and the holders of
the Securities.
Upon the occurrence and continuation of a Merger Termination Event or a Tax
Event, the Company shall have the right at any time, within 90 days following
the occurrence of a Merger Termination Event or a Tax Event, prior to March 31,
1998 (in the case of a Merger Termination Event) or July 15, 2007 (the "Initial
Optional Redemption Date") (in the case of a Tax Event), to redeem this Security
in whole (but not in part) at the Special Event Redemption Price. "Special
Event Redemption Price" shall mean, with respect to any redemption of the
Securities following a Merger Termination Event or a Tax Event, an amount in
cash equal to the greater of (i) 100% of the principal amount to be redeemed or
(ii) the sum, as determined by a Quotation Agent, of the present values of the
remaining scheduled payments of principal and interest on the Securities to
Maturity Date, discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate, plus, in each case, any accrued and unpaid interest thereon,
including Compounded Interest and Additional Interest, if any, to the date of
such redemption.
In addition, the Company shall have the right to redeem this Security, in
whole or in part, at any time on or after the Initial Optional Redemption Date
(an "Optional Redemption"), at a redemption price (the "Optional Redemption
Price") equal to the percentage of the outstanding principal amount of the
Debentures specified below, plus, in each case, accrued interest thereon to the
date of redemption if redeemed during the 12-month period beginning July 15 of
the years indicated below.
YEAR PERCENTAGE
--------------------- ---------------------
2007 104.036%
2008 103.632%
2009 103.229%
2010 102.825%
2011 102.422%
2012 102.018%
2013 101.614%
2014 101.211%
2015 100.807%
2016 100.404%
2017 and thereafter 100.000%
The Optional Redemption Price or the Special Event Redemption Price, as the
case requires, shall be paid prior to 12:00 noon, New York time, on the date of
such redemption or at such earlier time as the Company determines, provided,
that the Company shall deposit with the Trustee an amount sufficient to pay the
applicable Redemption Price by 10:00 a.m., New York City time, on the date such
Redemption Price is to be paid. Any redemption pursuant to this paragraph will
be made upon not less
-6-
<PAGE>
than 30 days nor more than 60 days notice. If the Securities are only partially
redeemed by the Company pursuant to an Optional Redemption, the Securities will
be redeemed PRO RATA or by lot or by any other method utilized by the Trustee;
PROVIDED that if, at the time of redemption, the Securities are registered as a
Global Security, the Depositary shall determine in accordance with its
procedures the principal amount of such Securities held for the account of its
participants to be redeemed.
In the event of redemption of this Security in part only, a new Security or
Securities for the unredeemed portion hereof will be issued in the name of the
holder hereof upon the cancellation hereof.
Notwithstanding the foregoing, any redemption of Securities by the Company
shall be subject to the receipt by the Company of any required regulatory
approval.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of a majority in aggregate principal amount of
the Securities at the time outstanding, as defined in the Indenture, to execute
supplemental indentures for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Indenture or of
modifying in any manner the rights of the holders of the Securities; provided,
however, that no such supplemental indenture shall, without the consent of each
holder of Securities then outstanding and affected thereby, (i) extend the
Maturity Date of any Securities, or reduce the principal amount thereof, or
reduce any amount payable on redemption thereof, or reduce the rate or extend
the time of payment of interest thereon (subject to Article XVI of the
Indenture), or make the principal of, premium, if any, or interest on, the
Securities payable in any coin or currency other than U.S. dollars, or impair or
affect the right of any holder of Securities to institute suit for the payment
thereof, or (ii) reduce the aforesaid percentage of Securities, the holders of
which are required to consent to any such supplemental indenture. The Indenture
also contains provisions permitting the holders of a majority in aggregate
principal amount of the Securities at the time outstanding, on behalf of all of
the holders of the Securities, to waive any past default in the performance of
any of the covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a default in the payment of the
principal of or premium, if any, or interest on any of the Securities or a
default in respect of any covenant or provision under which the Indenture cannot
be modified or amended without the consent of each holder of Securities then
outstanding. Any such consent or waiver by the holder of this Security (unless
revoked as provided in the Indenture) shall be conclusive and binding upon such
Holder and upon all future holders and owners of this Security and of any
Security issued in exchange herefor or in place hereof (whether by registration
of transfer or otherwise), irrespective of whether or not any notation of such
consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Security at the time and place and at the rate and in the money
herein prescribed.
The Company shall have the right, at any time and from time to time during
the term of the Securities, to defer payments of interest by extending the
interest payment period of such Securities for a period not exceeding 10
consecutive semi-annual periods, including the first such semi-annual period
-7-
<PAGE>
during such extension period, and not to extend beyond the Maturity Date of the
Securities (an "Extended Interest Payment Period"), at the end of which period
the Company shall pay all interest then accrued and unpaid (together with
interest thereon at the rate specified for the Securities to the extent that
payment of such interest is enforceable under applicable law). Before the
termination of any such Extended Interest Payment Period, the Company may
further defer payments of interest by further extending such Extended Interest
Payment Period, PROVIDED that such Extended Interest Payment Period, together
with all such previous and further extensions within such Extended Interest
Payment Period, shall not exceed 10 consecutive semi-annual periods, including
the first semi-annual period during such Extended Interest Payment Period shall
not end on any date other than an Interest Payment Date, or extend beyond the
Maturity Date of the Securities. Upon the termination of any such Extended
Interest Payment Period and the payment of all accrued and unpaid interest and
any additional amounts then due, the Company may commence a new Extended
Interest Payment Period, subject to the foregoing requirements.
The Company has agreed that it will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock) or (ii) make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any debt securities of the Company that
rank PARI PASSU with or junior in right of payment to the Securities or
(iii) make any guarantee payments with respect to any guarantee by the Company
of any securities or any Subsidiary of the Company (including any Other
Guarantees) if such guarantee ranks PARI PASSU or junior in right of payment to
the Securities (other than (a) dividends or distributions in shares of, or
options, warrants or rights to subscribe for or purchase shares of, Common Stock
of the Company; (b) any declaration of a dividend in connection with the
implementation of a stockholder's rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto; (c) payments under the Capital Securities Guarantee; (d) as a
direct result of, and only to the extent required in order to avoid the issuance
of fractional shares of capital stock, following a reclassification of the
Company's capital stock or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of the Company's capital
stock; and (e) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the exchange or conversion of such capital stock or
the security being exchanged or converted) if at such time (i) an Event of
Default shall have occurred and be continuing, (ii) there shall have occurred
any event of which the Company has actual knowledge that (a) is, or with the
giving of notice or the lapse of time, or both, would be, an Event of Default
and (b) in respect of which the Company shall not have taken reasonable steps to
cure, (iii) the Company shall be in default with respect to its payment
obligations under the Capital Securities Guarantee or (iv) the Company shall
have given notice of its election of the exercise of its right to extend the
interest payment period, or any extension thereof, pursuant to Section 16.1 of
the Indenture and shall not have rescinded such notice, and such exercise of its
right to extend the interest payment period, or any extension thereof, shall
have commenced.
The Securities are issuable only in registered form without coupons in
denominations of $1,000.00 and any integral multiple thereof. As provided in
the Indenture and subject to the transfer restrictions limitations as may be
contained herein and therein from time to time, this Security is transferable by
the holder hereof on the Security Register of the Company, upon surrender of
this Security for registration of transfer at the office or agency of the
Company in the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Security
registrar duly executed by the holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of authorized denominations
and for the same
-8-
<PAGE>
aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such transfer,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Security, the
Company, the Trustee, any authenticating agent, any paying agent, any transfer
agent and the registrar may deem and treat the holder hereof as the absolute
owner hereof (whether or not this Security shall be overdue and notwithstanding
any notice of ownership or writing hereon made by anyone other than the Security
registrar) for the purpose of receiving payment of or on account of the
principal hereof and premium, if any, and (subject to the Indenture) interest
due hereon and for all other purposes, and neither the Company nor the Trustee
nor any authenticating agent nor any paying agent nor any transfer agent nor any
registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or premium, if
any, or interest on this Security, or for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor Person, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF
LAW PROVISIONS THEREOF.
-9-
<PAGE>
EXHIBIT A-1
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS GLOBAL SECURITY IS A GLOBAL CAPITAL SECURITY, INSERT: THIS
CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE
CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING
AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.]
UNLESS THIS CAPITAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE
TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CAPITAL SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[IF THIS SECURITY IS A RESTRICTED CAPITAL SECURITY, INSERT: THE CAPITAL
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS CAPITAL SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH
-1-
<PAGE>
IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF
THIS CAPITAL SECURITY (OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501
OF REGULATION D UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS CAPITAL SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) PURSUANT TO CLAUSE (D), TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE REVERSE OF
THIS CAPITAL SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE TRUST.
SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
CAPITAL SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
-2-
<PAGE>
Certificate Number Number of Capital Securities
CUSIP NO.
Certificate Evidencing Capital Securities
of
SAFECO Capital Trust I
8.072% Series B__ Capital Securities
(liquidation amount $1,000 per Capital Security)
SAFECO Capital Trust I, a statutory business trust created under the laws
of the State of Delaware (the "Trust"), hereby certifies that ______________
(the "Holder") is the registered owner of [ $_________ in aggregate liquidation
amount of Capital Securities of the Trust] [the aggregate liquidation amount of
Capital Securities of the Trust specified in Schedule A hereto.] representing
undivided beneficial interests in the assets of the Trust designated the 8.072%
Series B__ Capital Securities (liquidation amount $1,000 per Capital Security)
(the "Capital Securities"). The Capital Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer.
The designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Capital Securities represented hereby are issued and shall
in all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of July 15, 1997, as the same may be
amended from time to time (the "Declaration"), including the designation of the
terms of the Capital Securities as set forth in Annex I to the Declaration.
Capitalized terms used but not defined herein shall have the meaning given them
in the Declaration. The Sponsor will provide a copy of the Declaration, the
Capital Securities Guarantee and the Indenture to a Holder without charge upon
written request to the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder and to the benefits of the Capital
Securities Guarantee to the extent provided therein.
-3-
<PAGE>
By acceptance, the Holder agrees to treat, for United States federal income
tax purposes, the Debentures as indebtedness and the Capital Securities as
evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this ____ day
of ____________, 1997.
SAFECO CAPITAL TRUST I
By:
-----------------------------
Name:
-----------------------
Administrative Trustee
-4-
<PAGE>
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the within-mentioned
Declaration.
Dated: ____________, 1997
THE CHASE MANHATTAN BANK,
As Property Trustee
By:
--------------------------
Authorized Signatory
-5-
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Capital Security will be fixed at a rate per
annum of 8.072% (the "Coupon Rate") of the liquidation amount of $1,000 per
Capital Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
semi-annual period will bear interest thereon compounded semi-annually at the
Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any such
interest and such Liquidated Damages payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds on hand legally available therefor.
Distributions on the Capital Securities will be cumulative, will accumulate
from the most recent date to which Distributions have been paid or, if any
Distributions have been paid, from July 15, 1997 and will be payable
semi-annually in arrears, on January 15 and July 15 of each year, commencing on
January 15, 1998, except as otherwise described below. Distributions will be
computed on the basis of a 360-day year consisting of twelve 30-day months and,
for any period less than a full calendar month, the number of days elapsed in
such month. As long as no Event of Default has occurred and is continuing under
the Indenture, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for a period not exceeding 10 consecutive
calendar semi-annual periods, including the first such semi-annual period during
such extension period (each an "Extension Period"), PROVIDED THAT no Extension
Period shall extend beyond the Maturity Date of the Debentures. As a
consequence of such deferral, Distributions will also be deferred. Despite such
deferral, semi-annual Distributions will continue to accumulate with interest
thereon (to the extent permitted by applicable law) at the Coupon Rate
compounded semi-annually during any such Extension Period. Prior to the
termination of any such Extension Period, the Debenture Issuer may further defer
payments of interest by further extending such Extension Period; PROVIDED THAT
such Extension Period, together with all such previous and further extensions
within such Extension Period, may not exceed 10 consecutive semi-annual periods,
including the first semi-annual period during such Extension Period, or extend
beyond the Maturity Date of the Debentures. Payments of accumulated
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the first record date after the end of the Extension Period.
Upon the termination of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.
Subject to the prior obtaining of any regulatory approval then required and
to certain other conditions set forth in the Declaration and the Indenture, the
Property Trustee may, at the direction of the Sponsor, at any time liquidate the
Trust and cause the Debentures to be distributed to the holders of the
Securities in liquidation of the Trust or, simultaneous with any
-6-
<PAGE>
redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the Declaration.
-7-
<PAGE>
-------------------------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security Certificate to:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
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(Insert assignee's social security or tax identification number)
--------------------------------------------------------------------------
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(Insert address and zip code of assignee)
and irrevocably appoints
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---------------------------------------------------------------, agent
to transfer this Capital Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
-----------------------------------
Signature:
------------------------------
(Sign exactly as your name appears on the other side of this Capital
Security Certificate)
Signature Guarantee:
--------------------------------------------------
* Signature must be guaranteed by an "eligible guarantor institution"
that is a bank, stockbroker, savings and loan association or credit
union meeting that requirements of the Registrar, which requirements
include membership or participation in the Securities Transfer Agents
Medallion Program ("STAMP") or such other "signature guarantee program"
as may be determined by the Registrar in addition to, or in substitution
for, STAMP, all in accordance with the Securities and Exchange Act of 1934,
as amended.
[Include the following if the Capital Security bears a Restricted Capital
Securities Legend]
In connection with any transfer of any of the Capital Securities evidenced by
this certificate, the undersigned confirms that such Capital Securities are
being:
-8-
<PAGE>
CHECK ONE BOX BELOW
(1) [ ] exchanged for the undersigned's own account without transfer; or
(2) [ ] transferred pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
(3) [ ] transferred pursuant to and in compliance with Regulation S under
the Securities Act of 1933; or
(4) [ ] transferred to an institutional "accredited investor" within the
meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 of
Regulation D under the Securities Act of 1933 that is acquiring
the Capital Securities for its own account, or for the account of
such an institutional "accredited investor," for investment
purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities
Act of 1933; or
(5) [ ] transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(6) [ ] transferred pursuant to an effective registration statement.
Unless one of the boxes is checked, the Exchange Agent will refuse to register
any of the Capital Securities evidenced by this certificate in the name of any
person other than the registered Holder thereof; PROVIDED, HOWEVER, that if box
(3), (4) or (5) is checked, the Registrar may require, prior to registering any
such transfer of the Capital Securities such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act; PROVIDED, FURTHER, that
(i) if box 2 is checked, the transferee must also certify that it is a qualified
institutional buyer as defined in Rule 144A or (ii) if box (4) is checked, the
transferee must also provide to the Registrar a Transferee Letter of
Representation in the form attached to the Offering Memorandum of the Trust
dated July 10, 1997; provided, further, that after the date that a Registration
Statement has been filed and so long as such Registration Statement continues to
be effective, the Registrar may only permit transfers for which box (5) has been
checked.
-------------------------------
Signature
-9-
<PAGE>
SCHEDULE A (1)
The initial aggregate liquidation amount of Capital Securities evidenced by
the Certificate to which this Schedule is attached is $__________ (equivalent to
________ Capital Securities). The notations on the following table evidence
decreases and increases in the number of Capital Securities evidenced by such
Certificate.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------ ------------------------ ------------------------ ------------------------
LIQUIDATION AMOUNT OF
DECREASE IN INCREASE IN CAPITAL SECURITIES
LIQUIDATION AMOUNT OF LIQUIDATION AMOUNT OF REMAINING AFTER SUCH NOTATION BY
CAPITAL SECURITIES CAPITAL SECURITIES DECREASE OR INCREASE REGISTRATION
- ------------------------ ------------------------ ------------------------ ------------------------
</TABLE>
- ---------------------------
(1) Append to Global Capitol Securities only.
-10-
<PAGE>
-----------------------------------------------
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
SAFECO CORPORATION
DATED AS OF ____________, 1997
-----------------------------------------------
<PAGE>
CONTENTS
ARTICLE I - DEFINITIONS AND INTERPRETATION. . . . . . . . . . . . . . . . 2
ARTICLE II - TRUST INDENTURE ACT. . . . . . . . . . . . . . . . . . . . . 6
2.1 Trust Indenture Act; Application . . . . . . . . . . . . . . . 6
2.2 Lists of Holders of Securities 6
2.3 Reports by the Capital Securities Guarantee Trustee. . . . . . 6
2.4 Periodic Reports to Capital Securities Guarantee Trustee . . . 6
2.5 Evidence of Compliance With Conditions Precedent . . . . . . . 7
2.6 Events of Default; Waiver. . . . . . . . . . . . . . . . . . . 7
2.7 Event of Default; Notice . . . . . . . . . . . . . . . . . . . 7
2.8 Conflicting Interests. . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III - POWERS, DUTIES AND RIGHTS OF CAPITAL
SECURITIES GUARANTEE TRUSTEE. . . . . . . . . . . . . . . . . . . . . 8
3.1 Powers and Duties of the Capital Securities Guarantee
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Certain Rights of Capital Securities Guarantee Trustee . . . . 10
3.3 Not Responsible for Recitals or Issuance of Series B Capital
Securities Guarantee . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV - CAPITAL SECURITIES GUARANTEE TRUSTEE . . . . . . . . . . . . 12
4.1 Capital Securities Guarantee Trustee; Eligibility. . . . . . . 12
4.2 Appointment, Removal and Resignation of Capital Securities
Guarantee Trustee. . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V - GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Waiver of Notice and Demand. . . . . . . . . . . . . . . . . . 14
5.3 Obligations Not Affected . . . . . . . . . . . . . . . . . . . 14
5.4 Rights of Holders. . . . . . . . . . . . . . . . . . . . . . . 15
5.5 Guarantee of Payment . . . . . . . . . . . . . . . . . . . . . 16
5.6 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 Independent Obligations. . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI - LIMITATION OF TRANSACTIONS; SUBORDINATION. . . . . . . . . . 17
6.1 Limitation of Transactions . . . . . . . . . . . . . . . . . . 17
6.2 Ranking. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
ARTICLE VII - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII - COMPENSATION AND EXPENSES OF CAPITAL
SECURITIES GUARANTEE TRUSTEE. . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX - INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 19
9.1 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE X - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 20
10.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 20
10.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.4 Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
This SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT (this "Series B
Capital Securities Guarantee"), dated as of ________, 1997, is executed and
delivered by SAFECO Corporation, a Washington corporation (the "Guarantor"), and
The Chase Manhattan Bank, a New York banking corporation, as trustee (the
"Capital Securities Guarantee Trustee"), for the benefit of the Holders (as
defined herein) from time to time of the Series B Capital Securities (as defined
herein) of SAFECO Capital Trust I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of July 15, 1997, among the trustees of the Issuer, the
Guarantor, as sponsor, and the holders from time to time of undivided beneficial
interests in the assets of the Issuer, the Issuer issued on July 15, 1997
850,000 capital securities, having an aggregate liquidation amount of
$850,000,000, such capital securities being designated the 8.072% Series A
Capital Securities (collectively the "Series A Capital Securities"), executed
and delivered a guarantee agreement dated as of July 15, 1997 (the "Series A
Capital Securities Guarantee") and, in connection with the Exchange Offer (as
defined in the Declaration), is issuing on the date hereof this Series B Capital
Securities Guarantee (as defined in the Declaration) for the benefit of holders
of the Series B Capital Securities (as defined in the Declaration).
WHEREAS, as incentive for the holders of the Series A Capital Securities to
exchange such securities for the Series B Capital Securities, the Guarantor
desires irrevocably and unconditionally to agree, to the extent set forth in
this Series B Capital Securities Guarantee, to pay to the Holders (as defined
below) the Guarantee Payments (as defined below). The Guarantor agrees to make
certain other payments on the terms and conditions set forth herein.
WHEREAS, the Guarantor has executed and delivered a guarantee agreement
(the "Common Securities Guarantee"), with substantially identical terms to this
Series B Capital Securities Guarantee, for the benefit of the holders of the
Common Securities (as defined herein), except that if an Event of Default (as
defined in the Declaration) has occurred and is continuing, the rights of
holders of the Common Securities to receive Guarantee Payments under the Common
Securities Guarantee are subordinated, to the extent and in the manner set forth
in the Common Securities Guarantee, to the rights of holders of Series A Capital
Securities and the Series B Capital Securities to receive Guarantee Payments
under the Series A Capital Securities Guarantee and this Series B Capital
Securities Guarantee, as the case may be.
NOW, THEREFORE, in consideration of the exchange by each Holder of Series A
Capital Securities for Series B Capital Securities, which exchange
<PAGE>
the Guarantor hereby acknowledges shall benefit the Guarantor, the Guarantor
executes and delivers this Series B Capital Securities Guarantee for the benefit
of the Holders.
ARTICLE I - DEFINITIONS AND INTERPRETATION
In this Series B Capital Securities Guarantee, unless the context otherwise
requires:
(a) Capitalized terms used in this Series B Capital Securities
Guarantee but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) Terms defined in the Declaration as at the date of execution of
this Series B Capital Securities Guarantee have the same meaning when used in
this Series B Capital Securities Guarantee unless otherwise defined in this
Series B Capital Securities Guarantee;
(c) a term defined anywhere in this Series B Capital Securities
Guarantee has the same meaning throughout;
(d) all references to "the Series B Capital Securities Guarantee" or
"this Series B Capital Securities Guarantee" are to this Series B Capital
Securities Guarantee as modified, supplemented or amended from time to time;
(e) all references in this Series B Capital Securities Guarantee to
Articles and Sections are to Articles and Sections of this Series B Capital
Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning
when used in this Series B Capital Securities Guarantee, unless otherwise
defined in this Series B Capital Securities Guarantee or unless the context
otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 under
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a Saturday or a Sunday, or a day on
which banking institutions in The City of New York are authorized or required by
law or executive order to close.
"Capital Securities Guarantee Trustee" means The Chase Manhattan Bank, a
New York banking corporation, until a Successor Capital Securities Guarantee
Trustee has been appointed and has accepted such appointment pursuant to the
terms of this
-2-
<PAGE>
Series B Capital Securities Guarantee and thereafter means each such Successor
Capital Securities Guarantee Trustee.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Capital Securities
Guarantee Trustee at which the corporate trust business of the Capital
Securities Guarantee Trustee shall, at any particular time, be principally
administered, which office at the date of execution of this Agreement is located
at 450 West 33rd Street, 15th Floor, New York, New York 10001-2697.
"Covered Person" means any Holder or beneficial owner of Series B Capital
Securities.
"Debentures" means the series of subordinated debt securities of the
Guarantor designated the 8.072% Series B Junior Subordinated Deferrable Interest
Debentures due July 15, 2037 held by the Property Trustee (as defined in the
Declaration) of the Issuer.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Series B Capital Securities Guarantee.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Series B Capital Securities, to the extent not
paid or made by the Issuer: (i) any accumulated and unpaid Distributions (as
defined in the Declaration) that are required to be paid on such Series B
Capital Securities to the extent the Issuer has funds on hand legally available
therefor at such time, (ii) the applicable redemption price, including all
accumulated and unpaid Distributions to the date of redemption (the "Redemption
Price") to the extent the Issuer has funds on hand legally available therefor at
such time, with respect to any Series B Capital Securities called for redemption
by the Issuer, and (iii) upon a voluntary or involuntary termination and
liquidation of the Issuer (other than in connection with the distribution of
Debentures to the Holders in exchange for Series B Capital Securities as
provided in the Declaration), the lesser of (a) the aggregate of the liquidation
amount and all accumulated and unpaid Distributions on the Series B Capital
Securities to the date of payment, to the extent the Issuer has funds on hand
legally available therefor, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer. If an Event
of Default has occurred and is continuing, no Guarantee Payments under the
Common Securities Guarantee with respect to the Common Securities or any
guarantee payment under any Other Common Securities Guarantees shall be made
until the Holders shall be paid in full the Guarantee Payments to which they are
entitled under this Series B Capital Securities Guarantee.
-3-
<PAGE>
"Holder" shall mean any holder, as registered on the books and records of
the Issuer, of any Series B Capital Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Series B Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Capital Securities Guarantee Trustee, any
Affiliate of the Capital Securities Guarantee Trustee, or any officers,
directors, shareholders, members, partners, employees, representatives,
nominees, custodians or agents of the Capital Securities Guarantee Trustee.
"Indenture" means the Indenture dated as of July 15, 1997, among the
Guarantor (the "Debenture Issuer") and The Chase Manhattan Bank, as trustee (the
"Debenture Trustee"), pursuant to which the Debentures are to be issued to the
Property Trustee of the Issuer.
"Indenture Event of Default" shall mean any event specified in Section 5.01
of the Indenture.
"Majority in liquidation amount of the Series B Capital Securities" means,
except as provided by the Trust Indenture Act, a vote by Holder(s) of more than
50% of the aggregate liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accumulated and unpaid
Distributions to the date upon which the voting percentages are determined) of
all Series B Capital Securities.
"Officers' Certificate" means, with respect to any person, a certificate
signed by any two of the following officers of such person: the Chairman, a Vice
Chairman, the Chief Executive Officer, the President, a Vice President, the
Controller or an Assistant Controller, the Secretary or an Assistant Secretary,
the Treasurer or an Assistant Treasurer. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Series A Capital Securities Guarantee (other than pursuant to Section 314(d)(4)
of the Trust Indenture Act) shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(c) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
-4-
<PAGE>
"Other Common Securities Guarantees" shall have the same meaning as "Other
Guarantees" in the Common Securities Guarantee.
"Other Debentures" means all junior subordinated debentures issued by the
Guarantor from time to time and sold to trusts to be established by the
Guarantor (if any), in each case similar to the Issuer.
"Other Guarantees" means all guarantees to be issued by the Guarantor with
respect to capital securities (if any) similar to the Series B Capital
Securities issued by other trusts to be established by the Guarantor (if any),
in each case similar to the Issuer.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of July 15, 1997, by and among the Guarantor, the Issuer and the
Initial Purchasers named therein as such agreement may be amended, modified or
supplemented from time to time.
"Responsible Officer" means, with respect to the Capital Securities
Guarantee Trustee, any officer within the Corporate Trust Office of the Capital
Securities Guarantee Trustee, including any vice president, any assistant vice
president, any assistant secretary, the treasurer, any assistant treasurer, any
trust officer, any senior trust officer or other officer in the Corporate Trust
Office of the Capital Securities Guarantee Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Successor Capital Securities Guarantee Trustee" means a successor Capital
Securities Guarantee Trustee possessing the qualifications to act as Capital
Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trust Securities" means the Common Securities and the Series A Capital
Securities and Series B Capital Securities, collectively.
-5-
<PAGE>
ARTICLE II - TRUST INDENTURE ACT
2.1 TRUST INDENTURE ACT; APPLICATION
(a) This Series B Capital Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this
Series B Capital Securities Guarantee and shall, to the extent applicable, be
governed by such provisions; and
(b) if and to the extent that any provision of this Series B Capital
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
2.2 LISTS OF HOLDERS OF SECURITIES
(a) The Guarantor shall provide the Capital Securities Guarantee
Trustee (unless the Capital Securities Guarantee Trustee is otherwise the
registrar of the Capital Securities) with a list, in such form as the Capital
Securities Guarantee Trustee may reasonably require, of the names and addresses
of the Holders ("List of Holders") as of such date, (i) within 14 days after
each record date for payment of Distributions, and (ii) at any other time within
30 days of receipt by the Guarantor of a written request for a List of Holders
as of a date no more than 14 days before such List of Holders is given to the
Capital Securities Guarantee Trustee PROVIDED, that the Guarantor shall not be
obligated to provide such List of Holders at any time the List of Holders does
not differ from the most recent List of Holders given to the Capital Securities
Guarantee Trustee by the Guarantor. The Capital Securities Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.
(b) The Capital Securities Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
2.3 REPORTS BY THE CAPITAL SECURITIES GUARANTEE TRUSTEE
Within 60 days after December 31 of each year, commencing December 31,
1997, the Capital Securities Guarantee Trustee shall provide to the Holders such
reports as are required by Section 313(a) of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Capital Securities Guarantee Trustee shall also comply with the other
requirements of Section 313(d) of the Trust Indenture Act.
2.4 PERIODIC REPORTS TO CAPITAL SECURITIES GUARANTEE TRUSTEE
The Guarantor shall provide to the Capital Securities Guarantee Trustee
such documents, reports and information as required by Section 314 of the Trust
Indenture Act
-6-
<PAGE>
(if any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314(a)(4) of the Trust Indenture Act provided that such compliance certificate
shall be delivered on or before 120 days after the end of each fiscal year of
the Guarantor. Delivery of such reports, information and documents to the
Capital Securities Guarantee Trustee is for informational purposes only and the
Capital Securities Guarantee Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Guarantor's compliance with any of
its covenants hereunder (as to which the Capital Securities Guarantee Trustee is
entitled to rely exclusively on Officers' Certificates).
2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT
The Guarantor shall provide to the Capital Securities Guarantee Trustee
such evidence of compliance with any conditions precedent, if any, provided for
in this Series B Capital Securities Guarantee that relate to any of the matters
set forth in Section 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to Section 314(c)(1) may be
given in the form of an Officers' Certificate.
2.6 EVENTS OF DEFAULT; WAIVER
The Holders of a Majority in liquidation amount of Series B Capital
Securities may, by vote, on behalf of all the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Series B Capital Securities
Guarantee, but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.
2.7 EVENT OF DEFAULT; NOTICE
(a) The Capital Securities Guarantee Trustee shall, within 90 days
after the occurrence of a default with respect to this Capital Securities
Guarantee actually known to a Responsible Officer of the Capital Securities
Guarantee Trustee, mail by first class postage prepaid, to all Holders, notices
of all such defaults, unless such defaults have been cured before the giving of
such notice, provided, that, except in the case of default in the payment of any
Guarantee Payment, the Capital Securities Guarantee Trustee shall be protected
in withholding such notice if and so long as the board of directors, the
executive committee, or a trust committee of directors and/or Responsible
Officers of the Capital Securities Guarantee Trustee in good faith determines
that the withholding of such notice is in the interests of the holders of the
Series B Capital Securities.
-7-
<PAGE>
(b) The Capital Securities Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default unless the Capital Securities Guarantee
Trustee shall have received written notice from the Guarantor or a Holder, or a
Responsible Officer of the Capital Securities Guarantee Trustee charged with the
administration of the Declaration shall have obtained actual knowledge, of such
Event of Default.
2.8 CONFLICTING INTERESTS
The Declaration shall be deemed to be specifically described in this
Series B Capital Securities Guarantee for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III - POWERS, DUTIES AND RIGHTS OF CAPITAL
SECURITIES GUARANTEE TRUSTEE
3.1 POWERS AND DUTIES OF THE CAPITAL SECURITIES GUARANTEE TRUSTEE
(a) This Series B Capital Securities Guarantee shall be held by the
Capital Securities Guarantee Trustee for the benefit of the Holders, and the
Capital Securities Guarantee Trustee shall not transfer this Series B Capital
Securities Guarantee to any Person except a Holder exercising his or her rights
pursuant to Section 5.4(b) below or to a Successor Capital Securities Guarantee
Trustee on acceptance by such Successor Capital Securities Guarantee Trustee of
its appointment to act as Successor Capital Securities Guarantee Trustee. The
right, title and interest of the Capital Securities Guarantee Trustee shall
automatically vest in any Successor Capital Securities Guarantee Trustee, and
such vesting and succession of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Capital Securities Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Capital Securities Guarantee Trustee has occurred and is continuing, the
Capital Securities Guarantee Trustee shall enforce this Series B Capital
Securities Guarantee for the benefit of the Holders.
(c) The Capital Securities Guarantee Trustee, before the occurrence
of any Event of Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Series B Capital Securities Guarantee, and no implied
covenants shall be read into this Series B Capital Securities Guarantee against
the Capital Securities Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6 above) and
is actually known to a Responsible Officer of the Capital Securities Guarantee
Trustee, the Capital Securities Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Series B Capital Securities Guarantee,
and use the same
-8-
<PAGE>
degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(d) No provision of this Series B Capital Securities Guarantee shall
be construed to relieve the Capital Securities Guarantee Trustee from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Capital
Securities Guarantee Trustee shall be determined solely by the express
provisions of this Series B Capital Securities Guarantee, and the Capital
Securities Guarantee Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Series B
Capital Securities Guarantee, and no implied covenants or obligations shall be
read into this Series B Capital Securities Guarantee against the Capital
Securities Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Capital Securities Guarantee Trustee and conforming to the requirements of
this Series B Capital Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof are specifically required
to be furnished to the Capital Securities Guarantee Trustee, the Capital
Securities Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Series B
Capital Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall not be liable
for any error of judgment made in good faith by a Responsible Officer of the
Capital Securities Guarantee Trustee, unless it shall be proved that the Capital
Securities Guarantee Trustee was negligent in ascertaining the pertinent facts
upon which such judgment was made;
(iii) the Capital Securities Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of a Majority in
liquidation amount of the Series B Capital Securities relating to the time,
method and place of conducting any proceeding for any remedy available to the
Capital Securities Guarantee Trustee, or exercising any trust or power conferred
upon the Capital Securities Guarantee Trustee under this Series B Capital
Securities Guarantee; and
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(iv) no provision of this Series B Capital Securities Guarantee
shall require the Capital Securities Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers, if the Capital
Securities Guarantee Trustee shall have reasonable grounds for believing that
the repayment of such funds or liability is not reasonably assured to it under
the terms of this Series B Capital Securities Guarantee or indemnity, reasonably
satisfactory to the Capital Securities Guarantee Trustee, against such risk or
liability is not reasonably assured to it.
3.2 CERTAIN RIGHTS OF CAPITAL SECURITIES GUARANTEE TRUSTEE
(a) Subject to the provisions of Section 3.1:
(i) The Capital Securities Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining from acting, upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Series B Capital Securities Guarantee may be sufficiently evidenced by an
Officers' Certificate.
(iii) Whenever, in the administration of this Series B
Capital Securities Guarantee, the Capital Securities Guarantee Trustee shall
deem it desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Capital Securities Guarantee
Trustee (unless other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and conclusively rely upon an
Officers' Certificate which, upon receipt of such request, shall be promptly
delivered by the Guarantor.
(iv) The Capital Securities Guarantee Trustee shall have no duty
to see to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).
(v) The Capital Securities Guarantee Trustee may consult with
counsel of its selection, and the advice or opinion of such counsel with respect
to legal matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by the Capital Securities
Guarantee Trustee hereunder in good faith and in accordance with such advice or
opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates
and may include any of its employees. The Capital Securities Guarantee Trustee
shall have the right at any time to seek instructions
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concerning the administration of this Series B Capital Securities Guarantee
from any court of competent jurisdiction.
(vi) The Capital Securities Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Series B Capital Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Capital Securities
Guarantee Trustee such security and indemnity, reasonably satisfactory to the
Capital Securities Guarantee Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the Capital Securities
Guarantee Trustee's agents, nominees or custodians) and liabilities that
might be incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the Capital
Securities Guarantee Trustee; provided that, nothing contained in this
Section 3.2(a)(vi) shall be taken to relieve the Capital Securities Guarantee
Trustee, upon the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Series B Capital
Securities Guarantee.
(vii) The Capital Securities Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Capital Securities Guarantee
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(viii) The Capital Securities Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys, and the
Capital Securities Guarantee Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with due care by it
hereunder.
(ix) Any action taken by the Capital Securities Guarantee Trustee
or its agents hereunder shall bind the Holders, and the signature of the Capital
Securities Guarantee Trustee or its agents alone shall be sufficient and
effective to perform any such action. No third party shall be required to
inquire as to the authority of the Capital Securities Guarantee Trustee to so
act or as to its compliance with any of the terms and provisions of this
Series B Capital Securities Guarantee, both of which shall be conclusively
evidenced by the Capital Securities Guarantee Trustee's or its agent's taking
such action.
(x) Whenever in the administration of this Series B Capital
Securities Guarantee the Capital Securities Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy or right
or taking any other action hereunder, the Capital Securities Guarantee Trustee
(i) may request instructions from the Holders of a Majority in liquidation
amount of the Series B Capital Securities,
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(ii) may refrain from enforcing such remedy or right or taking such other action
until such instructions are received and (iii) shall be protected in
conclusively relying on or acting in accordance with such instructions.
(xi) The Capital Securities Guarantee Trustee shall not be liable
for any action taken, suffered or omitted to be taken by it in good faith,
without negligence, and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Series B Capital
Securities Guarantee.
(b) No provision of this Series B Capital Securities Guarantee shall
be deemed to impose any duty or obligation on the Capital Securities Guarantee
Trustee to perform any act or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Capital Securities Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power
or authority available to the Capital Securities Guarantee Trustee shall be
construed to be a duty.
3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SERIES B CAPITAL SECURITIES
GUARANTEE
The recitals contained in this Series B Capital Securities Guarantee shall
be taken as the statements of the Guarantor, and the Capital Securities
Guarantee Trustee does not assume any responsibility for their correctness. The
Capital Securities Guarantee Trustee makes no representation as to the validity
or sufficiency of this Series B Capital Securities Guarantee.
ARTICLE IV - CAPITAL SECURITIES GUARANTEE TRUSTEE
4.1 CAPITAL SECURITIES GUARANTEE TRUSTEE; ELIGIBILITY
(a) There shall at all times be a Capital Securities Guarantee
Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Securities and
Exchange Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, and subject to supervision
or examination by Federal, State, Territorial or District of Columbia authority.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or examining authority
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referred to above, then, for the purposes of this Section 4.1(a)(ii), the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published.
(b) If at any time the Capital Securities Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the Capital Securities
Guarantee Trustee shall immediately resign in the manner and with the effect set
out in Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Capital Securities Guarantee Trustee and Guarantor shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act, subject to the penultimate paragraph thereof.
4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF CAPITAL SECURITIES GUARANTEE
TRUSTEE
(a) Subject to Section 4.2(b), the Capital Securities Guarantee
Trustee may be appointed or removed without cause at any time by the Guarantor
except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Capital Securities Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Capital Securities Guarantee Trustee and
delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office until
a Successor Capital Securities Guarantee Trustee shall have been appointed or
until its removal or resignation. The Capital Securities Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Capital Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery of an instrument of removal or resignation, the Capital
Securities Guarantee Trustee resigning or being removed may petition any court
of competent jurisdiction for appointment of a Successor Capital Securities
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Capital Securities Guarantee
Trustee.
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(e) No Capital Securities Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Capital Securities Guarantee Trustee.
(f) Upon termination of this Series B Capital Securities Guarantee or
removal or resignation of the Capital Securities Guarantee Trustee pursuant to
this Section 4.2, the Guarantor shall pay to the Capital Securities Guarantee
Trustee all amounts due to the Capital Securities Guarantee Trustee accrued to
the date of such termination, removal or resignation.
ARTICLE V - GUARANTEE
5.1 GUARANTEE
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Issuer), as and when due, regardless of any defense, right of set-off or
counterclaim that the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.
5.2 WAIVER OF NOTICE AND DEMAND
The Guarantor hereby waives notice of acceptance of this Series B Capital
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
5.3 OBLIGATIONS NOT AFFECTED
The obligations, covenants, agreements and duties of the Guarantor under
this Series B Capital Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Series B Capital Securities to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Series B Capital Securities or the
extension of time for the performance of any other obligation under, arising out
of, or in connection with, the Series B Capital Securities (other than an
extension of time for payment of Distribu-
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tions, Redemption Price, Liquidation Distribution or other sum payable that
results from the extension of any interest payment period on the Debentures
permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Series B Capital
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the benefit
of creditors, reorganization, arrangement, composition or readjustment of debt
of, or other similar proceedings affecting, the Issuer or any of the assets of
the Issuer;
(e) any invalidity of, or defect or deficiency in, the Series B
Capital Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred;
(g) the consummation of the Exchange Offer; or
(h) any other circumstance whatsoever that might otherwise constitute
a legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor with respect to the
Guarantee Payments shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
5.4 RIGHTS OF HOLDERS
(a) The Holders of a Majority in liquidation amount of the Series B
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Capital Securities
Guarantee Trustee in respect of this Series B Capital Securities Guarantee or
exercising any trust or power conferred upon the Capital Securities Guarantee
Trustee under this Series B Capital Securities Guarantee; provided, however,
that, subject to the duties and responsibilities of the Trustee pursuant to the
Indenture, the Capital Securities Guarantee Trustee shall have the right to
decline to follow any such direction if the Capital Securities Guarantee Trustee
shall determine that the action so directed would be unjustly prejudicial to the
Holders not taking part in such direction or if the Capital Securities Guarantee
Trustee being advised by counsel determines that the action or proceeding so
directed may not lawfully be taken or if the Capital Securities Guarantee
Trustee in good faith by its board
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of directors or trustees, executive committee, or a trust committee of directors
or trustees and/or Responsible Officers shall determine that the action or
proceedings so directed would involve the Capital Securities Guarantee Trustee
in personal liability.
(b) If the Capital Securities Guarantee Trustee fails to enforce such
Series B Capital Securities Guarantee, any Holder may institute a legal
proceeding directly against the Guarantor to enforce the Capital Securities
Guarantee Trustee's rights under this Series B Capital Securities Guarantee,
without first instituting a legal proceeding against the Issuer, the Capital
Securities Guarantee Trustee or any other person or entity. The Guarantor
waives any right or remedy to require that any action be brought first against
the Issuer or any other person or entity before proceeding directly against the
Guarantor.
5.5 GUARANTEE OF PAYMENT
This Series B Capital Securities Guarantee creates a guarantee of payment
and not of collection.
5.6 SUBROGATION
The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Series B Capital Securities Guarantee; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any right that it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Series B Capital
Securities Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Series B Capital Securities Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
5.7 INDEPENDENT OBLIGATIONS
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Series B Capital
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Series B
Capital Securities Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof.
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ARTICLE VI - LIMITATION OF TRANSACTIONS; SUBORDINATION
6.1 LIMITATION OF TRANSACTIONS
So long as any Capital Securities remain outstanding, the Guarantor shall
not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of the Guarantor's
capital stock (which includes common and preferred stock) or (ii) make any
payment of principal of or premium, if any, or interest on or repay, repurchase
or redeem any debt securities of the Guarantor (including Other Debentures) that
rank pari passu with or junior in right of payment to the Debentures or (iii)
make any guarantee payments with respect to any guarantee by the Guarantor of
the debt securities of any subsidiary of the Guarantor (including Other
Guarantees) if such guarantee ranks pari passu with or junior in right of
payment to the Debentures (other than (a) dividends or distributions in shares
of, or options, warrants, rights to subscribe for or purchase shares of, common
stock of the Guarantor, (b) any declaration of a dividend in connection with the
implementation of a shareholders' rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such rights
pursuant thereto, (c) payments under the Series A Capital Securities Guarantee,
this Series B Capital Securities Guarantee, (d) the purchase of fractional
shares resulting from a reclassification of the Guarantor's capital stock, (e)
the exchange or the conversion of one class, or series of the Guarantor's
capital stock for another class or series of the Guarantor's capital stock, and
(f) the purchase of fractional interests in shares of the Guarantor's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged) if at such time (1) there shall have
occurred and be continuing an event of default under the Declaration, (2) there
shall have occurred and be continuing an Event of Default under the Indenture,
(3) there shall have occurred and be continuing a payment default under the
Declaration or the Indenture, (4) if the Debentures are held by the Issuer, the
Guarantor shall be in default with respect to its payment of any obligations
under this Agreement, or (5) the Guarantor shall have given notice of its
election of an Extension Period as provided in the Indenture and shall not have
rescinded such notice, and such Extension Period, or any extension thereof,
shall have commenced.
6.2 RANKING
This Series B Capital Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to Senior Indebtedness (as defined in the Indenture), to the same extent
and in the same manner that the Debentures are subordinated to Senior
Indebtedness pursuant to the Indenture, it being understood that the terms of
Article XV of the Indenture shall apply to the obligations of the Guarantor
under this Series B Capital Securities Guarantee as if (x) such Article XV were
set forth herein in full and (y) such obligations were substituted
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for the term "Securities" appearing in such Article XV, (ii) pari passu with the
Debentures, the Other Debentures and with the most senior preferred or
preference stock hereafter issued by the Guarantor and with any Other Guarantee
(as defined herein) and any Other Common Securities Guarantee and any guarantee
now or hereafter entered into by the Guarantor in respect of any preferred or
preference stock of any Affiliate of the Guarantor, and (iii) senior to the
Guarantor's common stock.
ARTICLE VII - TERMINATION
This Series B Capital Securities Guarantee shall terminate (i) upon full payment
of the applicable Redemption Price (as defined in the Declaration) of all
Series B Capital Securities or, (ii) upon liquidation of the Issuer, the full
payment of the amounts payable in accordance with the Declaration or the
distribution of the Debentures to the Holders of all of the Series B Capital
Securities. Notwithstanding the foregoing, this Series B Capital Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must restore payment of any sums paid under the
Series A Capital Securities or under this Series B Capital Securities Guarantee.
ARTICLE VIII - COMPENSATION AND EXPENSES OF CAPITAL SECURITIES GUARANTEE TRUSTEE
The Guarantor covenants and agrees to pay to the Capital Securities
Guarantee Trustee from time to time, and the Capital Securities Guarantee
Trustee shall be entitled to, such compensation as shall be agreed to in writing
between the Guarantor and the Capital Securities Guarantee Trustee (which shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust), and the Guarantor will pay or reimburse the
Capital Securities Guarantee Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Capital Securities
Guarantee Trustee in accordance with any of the provisions of this Capital
Securities Guarantee (including the reasonable compensation and the expenses and
disbursements of its counsel and of all persons not regularly in its employ)
except any such expense, disbursement or advance as may arise from its
negligence or bad faith. The Guarantor also covenants to indemnify the Capital
Securities Guarantee Trustee (and its officers, agents, directors and employees)
for, and to hold it harmless against, any and all loss, damage, claim, liability
or expense including taxes (other than taxes based on the income of the Capital
Securities Guarantee Trustee) incurred without negligence or bad faith on the
part of the Capital Securities Guarantee Trustee and arising out of or in
connection with the acceptance or administration of this guarantee, including
the costs and expenses of defending itself against any claim of liability in the
premises. The obligations of the
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Guarantor under this Article VIII to compensate and indemnify the Capital
Securities Guarantee Trustee and to pay or reimburse the Capital Securities
Guarantee Trustee for expenses, disbursements and advances shall be secured by a
lien prior to that of the Series B Capital Securities upon all property and
funds held or collected by the Capital Securities Guarantee Trustee as such,
except funds held in trust for the benefit of the holders of particular Series B
Capital Securities.
The provisions of this Article shall survive the termination of this
Capital Securities Guarantee or the resignation or removal of the Capital
Securities Guarantee Trustee.
ARTICLE IX - INDEMNIFICATION
9.1 EXCULPATION
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Series B
Capital Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Series B Capital Securities Guarantee or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders might properly be paid.
9.2 INDEMNIFICATION
The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any and all loss, liability, damage,
claim or expense incurred without negligence or bad faith on its part, arising
out of or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses (including reasonable legal
fees and expenses) of defending itself against, or investigating, any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. The obligation to indemnify as set forth in this Section 9.2
shall survive the termination of this Series B Capital Securities Guarantee or
the resignation or removal of the Capital Securities Guarantee Trustee.
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ARTICLE X - MISCELLANEOUS
10.1 SUCCESSORS AND ASSIGNS
All guarantees and agreements contained in this Series B Capital
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Guarantor and shall inure to the benefit of the
Holders then outstanding.
10.2 AMENDMENTS
Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Series B Capital Securities Guarantee may only be amended
with the prior approval of the Holders of a Majority in liquidation amount of
the Securities (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined). The provisions of the
Declaration with respect to consents to amendments thereof (whether at a
meeting or otherwise) shall apply to the giving of such approval.
10.3 NOTICES
All notices provided for in this Series B Capital Securities
Guarantee shall be in writing, duly signed by the party giving such notice,
and shall be delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of the Administrative Trustee at
the Issuer's mailing address set forth below (or such other address as the
Issuer may give notice of to the Holders and the Capital Securities Guarantee
Trustee):
SAFECO Capital Trust I
c/o SAFECO Corporation
SAFECO Plaza
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Attention: George P. Yonker, Administrative Trustee
Telecopy: (206) 545-5500
(b) If given to the Capital Securities Guarantee Trustee, at the
Capital Securities Guarantee Trustee's mailing address set forth below (or such
other address as the Capital Securities Guarantee Trustee may give notice of to
the Holders and the Issuer):
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The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001-2697
Attention: Global Trust Services
Telecopy: (212) 946-3041
(c) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Series B Capital Securities and the Capital Securities Guarantee
Trustee):
SAFECO Corporation
SAFECO Plaza
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Attention: Chief Financial Officer
Telecopy: (206) 545-5363
(d) If given to any Holder of Series B Capital Securities, at the
address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
10.4 BENEFIT
This Series B Capital Securities Guarantee is solely for the benefit
of the Holders and, subject to Section 3.1(a), is not separately transferable
from the Series B Capital Securities.
10.5 GOVERNING LAW
THIS SERIES B CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
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THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES THEREOF.
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THIS SERIES B CAPITAL SECURITIES GUARANTEE is executed as of the day and
year first above written.
SAFECO CORPORATION
As Guarantor
By:
------------------------------------
Name: Rodney A. Pierson
Title: Chief Financial Officer
THE CHASE MANHATTAN BANK
As Capital Securities Guarantee Trustee
By:
------------------------------------
Name: [John T. Needham, Jr.]
Title: Trust Officer
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[Letterhead of Skadden, Arps, Slate, Meagher & Flom LLP]
Exhibit 5.1
October 17, 1997
SAFECO Capital Trust I
SAFECO Corporation
c/o SAFECO Corporation
4333 Brooklyn Avenue N.E.
Seattle, WA 98185
Re: 8.072% Capital Securities of SAFECO Capital Trust I
Ladies and Gentlemen:
We have acted as special Delaware counsel to SAFECO Corporation, a
Washington corporation (the "Company"), and SAFECO Capital Trust I, a business
trust formed under the Business Trust Act of the State of Delaware (Chapter 38,
Title 12, of the Delaware Code, 12 Del. C. Sec. 3801 ET. SEQ.) (the "Trust"), in
connection with the registration under the Securities Act of 1933, as amended
(the "Act"), by the Trust of $850,000,000 aggregate liquidation amount of 8.072%
Capital Securities (the "Capital Securities") to be issued pursuant to a
proposed exchange offer (the "Exchange Offer"). The Capital Securities will be
registered under the Act pursuant to a Registration Statement on Form S-4 (the
"Registration Statement") to be filed by the Company and the Trust with the
Securities and Exchange Commission (the "Commission") on the date hereof.
The Capital Securities are to be issued pursuant to the Amended and
Restated Declaration of Trust of the Trust, dated as of July 15, 1997 (the
"Declaration"), by and among Boh A. Dickey, Rodney A. Pierson and George P.
Yonker, as administrative trustees, The Chase Manhattan Bank, as property
trustee (the "Property Trustee"), Chase Manhattan Bank Delaware, as Delaware
trustee and the Company, as sponsor.
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Act.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement;
<PAGE>
SAFECO Capital Trust I
SAFECO Corporation
October 17, 1997
Page 2
(ii) an executed copy of the Registration Rights Agreement, dated as of July 15,
1997 (the "Registration Rights Agreement"), among the Company, Smith Barney
Inc., Salomon Brothers Inc and BancAmerica Securities, Inc.; (iii) the form of
the Capital Securities and a specimen certificate thereof; (iv) the Certificate
of Trust of the Trust filed with the Secretary of State of the State of Delaware
on June 19, 1997; and (v) the Declaration. We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such other
documents, certificates and records as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties other than the Trust, we have
assumed that such parties had the power, corporate or other, to enter into and
perform all obligations thereunder and have also assumed the due authorization
by all requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof on such
parties. As to any facts material to the opinions expressed herein which we did
not independently establish or verify, we have relied upon oral or written
statements and representations of officers, trustees and other representatives
of the Company, the Trust and others.
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder that are
currently in effect.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Capital Securities have been duly authorized for issuance by the
Trust, and when (i) the Registration Statement becomes effective and the
Declaration has been qualified under the Trust Indenture Act of 1939, as
amended, and (ii) the Capital Securities are duly executed, authenticated and
issued in accordance with the Declaration and delivered and issued in the
Exchange Offer as contemplated by the
<PAGE>
SAFECO Capital Trust I
SAFECO Corporation
October 17, 1997
Page 3
Registration Rights Agreement and the Registration Statement, the Capital
Securities will represent, subject to the qualifications set forth in paragraph
2 below, fully paid and nonassessable undivided beneficial interests in the
assets of the Trust.
2. The holders of the Capital Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. We bring to your attention, however, that the holders of the
Capital Securities may be obligated, pursuant to the Declaration, to (i) provide
indemnity and/or security in connection with, and pay taxes or governmental
charges arising from, transfers of Capital Securities and the issuance of
replacement Capital Securities and (ii) provide security and indemnity in
connection with requests of or directions to the Property Trustee and to
exercise its rights and powers under the Declaration.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement. We also consent to the reference to our
firm under the caption "Validity of Exchange Securities" in the Registration
Statement. In giving this consent, we do not thereby admit that we are included
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Commission. This opinion is expressed as of
the date hereof, and we disclaim any undertaking to advise you of any subsequent
changes in the facts stated or assumed herein or of any subsequent changes in
applicable law.
Very truly yours,
SKADDEN, ARPS, SLATE, MEAGHER &
FLOM LLP
<PAGE>
EXHIBIT 5.2
[Letterhead of SAFECO]
October 17, 1997
SAFECO Capital Trust I
c/o SAFECO Corporation
4333 Brooklyn Avenue N.E.
Seattle, WA 98185
RE: EXCHANGE OFFER RELATING TO 8.072% CAPITAL SECURITIES OF SAFECO CAPITAL
TRUST I
Ladies and Gentlemen:
I am General Counsel of SAFECO Corporation, a Washington corporation (the
"Company"), and in that capacity I have acted as counsel to the Company in
connection with the preparation of a Registration Statement on Form S-4 (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"Commission") on the date hereof by the Company and SAFECO Capital Trust I, a
trust formed under the laws of the State of Delaware (the "Trust"), with respect
to the registration under the Securities Act of 1933, as amended (the "Act"),
(i) by the Trust of $850 million aggregate liquidation amount of 8.072% Capital
Securities (the "Capital Securities"), (ii) by the Company of its guarantee of
payment of cash distributions and payments on liquidation of the Trust or
redemption of the Capital Securities pursuant to the Capital Securities
Guarantee Agreement (the "Guarantee Agreement"), and (iii) by the Company of
$850 million aggregate principal amount of its 8.072% Junior Subordinated
Deferrable Interest Debentures due July 15, 2037 (the "Junior Subordinated
Debentures").
In rendering the opinions set forth herein, I have examined, among other
things, (i) the Registration Statement; (ii) the Registration Rights Agreement
dated as of July 15, 1997 (the "Registration Rights Agreement"), among the
Company, the Trust, Smith Barney Inc., Salomon Brothers Inc. and BancAmerica
Securities, Inc.; (iii) the Indenture dated as of July 15, 1997 (the
"Indenture") between The Chase Manhattan Bank, as Indenture Trustee, and the
Company; (iv) the Amended and Restated Declaration of Trust, dated as of July
15, 1997 (the "Declaration") among Boh A. Dickey, Rodney A. Pierson and George
P. Yonker, as administrative trustees, The Chase Manhattan Bank, as property
trustee, Chase Manhattan Bank Delaware, as Delaware trustee and the Company, as
sponsor; (v) the form of the Junior Subordinated Debentures and a specimen
certificate thereof; (vi) the Guarantee Agreement; and (vii) the Amended and
Restated Articles of Incorporation and Bylaws of the Company. I have examined
original or reproduced or certified copies of such Company records, certificates
of public officials and Company officers, and other instruments and documents,
<PAGE>
SAFECO Capital Trust I
SAFECO Corporation
October 17, 1997
Page 2
and have made such other investigations, as I have deemed necessary or
appropriate to enable me to express the opinions set forth herein.
In rendering such opinions, I have assumed the genuineness of all
signatures on original documents, the completeness and authenticity of all
records and documents submitted to me as originals and the conformity to
authentic originals of all copies submitted to me as conformed or photostatic
copies. In examining documents executed by parties other than the Company, I
have assumed that such parties had the power, corporate or other, to enter into
and perform all obligations thereunder and have also assumed the due
authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents and the validity and binding effect
thereof on such parties.
Subject to the qualifications and limitations expressed above, and on the
basis of the foregoing, I am of the opinion that:
(a) The Guarantee Agreement has been duly authorized by the Company,
and when (i) the Declaration and Indenture have been qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), and (ii) the Guarantee Agreement
is duly executed and delivered by the Company and issued in the exchange offer
as contemplated by the Registration Rights Agreement and the Registration
Statement, the Guarantee Agreement will constitute a valid and binding agreement
of the Company in favor of the holders of Capital Securities, enforceable
against the Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, reorganization,
insolvency, moratorium, fraudulent conveyance or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity); and
(b) The Junior Subordinated Debentures have been duly authorized for
issuance and sale by the Company and when (i) the Declaration and Indenture have
been qualified under the TIA and (ii) the Junior Subordinated Debentures are
duly executed, authenticated and issued in accordance with the Indenture and
delivered and issued in the exchange offer as contemplated by the Registration
Rights Agreement and the Registration Statement, the Junior Subordinated
Debentures will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except to the
extent that enforcement thereof may be limited by (i) bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
<PAGE>
SAFECO Capital Trust I
SAFECO Corporation
October 17, 1997
Page 3
The opinions expressed above also are subject to the following exclusions
and qualifications:
1. I express no opinion as to any laws other than the federal laws
of the United States and the internal laws of the State of Washington ordinarily
applicable to the transactions contemplated by the Guarantee Agreement, the
Declaration, the Indenture and the Registration Rights Agreement.
2. This opinion is being furnished to you in connection with the
filing of the Registration Statement and may be relied upon by you, but may not
otherwise be relied upon by any other person. No other use or distribution of
this opinion may be made without prior consent.
I hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. I also consent to the reference to
myself under the caption "Validity of Exchange Securities" in the Registration
Statement. In giving this consent, I do not hereby admit that I am included in
the category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Commission.
Very truly yours,
/s/ James W. Ruddy
James W. Ruddy
General Counsel
cc: Boh A. Dickey, President
<PAGE>
October 17, 1997
SAFECO CORPORATION
4333 Brooklyn Avenue N.E.
Seattle, WA 98185
RE: 8.072% CAPITAL SECURITIES (THE "CAPITAL SECURITIES" OF SAFECO
CAPITAL TRUST I.
Ladies and Gentlemen:
We have acted as counsel to SAFECO Corporation, a Washington corporation
(the "Corporation") and SAFECO Capital Trust I, a Delaware business trust
(the "Trust") in connection with an offer of exchange by the Trust of
$850,000,000 aggregate Liquidation Amount of its Series B Capital Securities,
which are issued and outstanding, in a registration statement on Form S-4
(Registration No. 333- ) filed with the Securities and Exchange
Commission on October 17, 1997 and the Prospectus contained therein (together
with amendments thereto, the "Registration Statement"), for a like
Liquidation Amount of its outstanding 8.072% Series A Capital Securities (the
"Original Capital Securities"), Capitalized terms used herein without
definition have the respective meanings specified in the Registration
Statement.
In connection with this opinion, we have examined the Registration
Statement and such other documents as we have deemed necessary. Furthermore,
we have relied upon certain statements and representation made by officers of
the corporation and others. We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such other
documents, certificates and records as we have deemed necessary or
appropriate as a basis for the opinion set forth herein.
In rendering our opinion, we have participated in the preparation of the
Registration Statement. Our opinion is conditioned on, among other things,
the initial and continuing accuracy of the facts, information, covenants and
representations set forth in the documents referred to above and the
statements and representations made by officers of the Corporation and
others. In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents
of all
<PAGE>
October 17, 1997
Page 2
documents submitted to us as certified or photostatic copies and the
transactions related to exchange of the Capital Securities will be
consummated in the manner contemplated by the Registration Statement.
In rendering our opinion, we have considered the provisions of the
Internal Revenue Code of 1986, as amended, Treasury Regulations promulgated
thereunder, judicial decisions, and Internal Revenue Service rulings, all as
in effect on the date hereof and all of which are subject to change, which
changes may be retroactively applied. A change in the authorities upon which
our opinions based could affect our conclusions.
Based upon and subject to the foregoing, and subject to the discussion
and limitations set forth in the Registration Statement under the heading
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES," we are of the opinion that,
although the discussion set forth in the Registration Statement under the
heading "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" does not purport to discuss
all possible United States federal income tax consequences of the purchase,
ownership and disposition of Capital Securities, such discussion constitutes
a fair and accurate summary of the material United States federal income tax
considerations (other than considerations that are material to a Non-U.S.
Holder based on such Non-U.S. Holder's particular tax situation) for holders
of the Capital Securities under current law.
Except as set forth above, we express no opinion to any party as to the
tax consequences, whether federal, state, local or foreign, of the issuance,
exchange or sale of the Capital Securities or any transactions related to or
contemplated by such issuance, exchange or sale. We hereby consent to the
filing of this opinion as an exhibit to the Registration Statement and any
amendment thereto. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended.
We disclaim any undertaking to advise you of any subsequent changes of
the facts assumed herein or any subsequent changes in applicable law.
Very truly yours,
PERKINS COIE
<PAGE>
EXHIBIT 12
SAFECO CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
and Earnings to Fixed Charges and
Distributions on Capital Securities
- --------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT RATIOS)
Ratio of Earnings to Fixed Charges,
Excluding Distributions on Capital Securities:
<TABLE>
<CAPTION>
Pro Forma
-----------------------------
Six Months Six Months Years Ended December 31,
Ended Year Ended Ended --------------------------------------
June 30, 1997 Dec. 31, 1996 June 30, 1997 1996 1995 1994 1993 1992
------------- ------------- ------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income Before Income Taxes and
Distributions on Capital Securities $361.3 $658.0 $300.1 $578.5 $513.8 $389.7 $576.9 $403.2
Total Fixed Charges Below 71.6 130.3 40.5 76.3 89.7 75.1 63.6 67.8
Less Interest Capitalized (1.0) (0.1) (0.9) (0.1) (0.3) (0.8) (1.4) (0.2)
Less Loss from Unconsolidated
Subsidiary -- -- -- 0.9 1.0 0.2 0.6 0.6
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL EARNINGS $431.9 $788.2 $339.7 $655.6 $604.2 $464.2 $639.7 $471.4
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
Fixed Charges:
Interest $ 65.7 $120.6 $ 37.5 $ 72.4 $ 85.4 $ 70.3 $ 58.8 $ 64.1
Interest Capitalized 1.0 0.1 0.9 0.1 0.3 0.8 1.4 0.2
Interest Portion of Rental Expenses 4.3 9.0 1.5 3.3 3.2 3.1 2.8 2.9
Amortization of Deferred Debt
Expenses 0.6 0.6 0.6 0.5 0.8 0.9 0.6 0.6
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL FIXED CHARGES $ 71.6 $130.3 $ 40.5 $ 76.3 $ 89.7 $ 75.1 $ 63.6 $ 67.8
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
RATIO OF EARNINGS TO FIXED CHARGES,
EXCLUDING DISTRIBUTIONS ON CAPITAL
SECURITIES 6.0 6.0 8.4 8.6 6.7 6.2 10.1 7.0
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
</TABLE>
<PAGE>
SAFECO CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
and Earnings to Fixed Charges and
Distributions on Capital Securities
- --------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT RATIOS)
Ratio of Earnings to Fixed Charges,
and Distributions on Capital Securities:
<TABLE>
<CAPTION>
Pro Forma
-----------------------------
Six Months Six Months Years Ended December 31,
Ended Year Ended Ended --------------------------------------
June 30, 1997 Dec. 31, 1996 June 30, 1997 1996 1995 1994 1993 1992
------------- ------------- ------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income Before Income Taxes $320.0 $575.5 $300.1 $578.5 $513.8 $389.7 $576.9 $403.2
Total Fixed Charges Below 112.9 212.8 40.5 76.3 89.7 75.1 63.6 67.8
Less Interest Capitalized (1.0) (0.1) (0.9) (0.1) (0.3) (0.8) (1.4) (0.2)
Less Loss from Unconsolidated
Subsidiary -- -- -- 0.9 1.0 0.2 0.6 0.6
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL EARNINGS $431.9 $788.2 $339.7 $655.6 $604.2 $464.2 $639.7 $471.4
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
Fixed Charges:
Interest $ 65.7 $120.6 $ 37.5 $ 72.4 $ 85.4 $ 70.3 $ 58.8 $ 64.1
Distributions on Capital Securities 41.3 82.5 -- -- -- -- -- --
Interest Capitalized 1.0 0.1 0.9 0.1 0.3 0.8 1.4 0.2
Interest Portion of Rental Expenses 4.3 9.0 1.5 3.3 3.2 3.1 2.8 2.9
Amortization of Deferred Debt
Expenses 0.6 0.6 0.6 0.5 0.8 0.9 0.6 0.6
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL FIXED CHARGES $112.9 $212.8 $ 40.5 $ 76.3 $ 89.7 $ 75.1 $ 63.6 $ 67.8
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
RATIO OF EARNINGS TO FIXED CHARGES AND
DISTRIBUTIONS ON CAPITAL SECURITIES 3.8 3.7 8.4 8.6 6.7 6.2 10.1 7.0
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
</TABLE>
<PAGE>
SAFECO CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
and Earnings to Fixed Charges and
Distributions on Capital Securities
- --------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT RATIOS)
Ratio of Earnings to Fixed Charges,
Excluding Distributions on Capital Securities
and Excluding SAFECO Credit Company, Inc.:
<TABLE>
<CAPTION>
Pro Forma
-----------------------------
Six Months Six Months Years Ended December 31,
Ended Year Ended Ended --------------------------------------
June 30, 1997 Dec. 31, 1996 June 30, 1997 1996 1995 1994 1993 1992
------------- ------------- ------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income Before Income Taxes and
Distributions on Capital Securities
(Excluding SAFECO Credit) $351.5 $638.9 $290.3 $559.4 $500.5 $378.9 $566.7 $394.1
Total Fixed Charges Below 44.9 82.8 13.8 28.9 47.9 144.4 37.6 41.1
Less Interest Capitalized (1.0) (0.1) (0.9) (0.1) (0.3) (0.8) (1.4) (0.2)
Less Undistributed Loss from
Unconsolidated Subsidiary -- -- -- 0.9 1.0 0.2 0.6 0.6
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL EARNINGS $395.4 $721.6 $303.2 $589.1 $549.1 $422.7 $603.5 $435.6
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
Fixed Charges (Excluding SAFECO Credit
Company, Inc.):
Interest $ 39.0 $ 73.1 $ 10.8 $ 25.0 $ 43.6 $ 39.6 $ 32.9 $ 37.5
Interest Capitalized 1.0 0.1 0.9 0.1 0.3 0.8 1.4 0.2
Interest Portion of Rental Expenses 4.3 9.0 1.5 3.3 3.2 3.1 2.8 2.9
Amortization of Deferred Debt
Expenses 0.6 0.6 0.6 0.5 0.8 0.9 0.5 0.5
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL FIXED CHARGES $ 44.9 $ 82.8 $ 13.8 $ 28.9 $ 47.9 $ 44.4 $ 37.6 $ 41.1
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
RATIO OF EARNINGS TO FIXED CHARGES,
EXCLUDING DISTRIBUTIONS ON CAPITAL
SECURITIES AND EXCLUDING SAFECO
CREDIT COMPANY, INC. 8.8 8.7 22.0 20.4 11.5 9.5 16.1 10.6
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
</TABLE>
<PAGE>
SAFECO CORPORATION AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
and Earnings to Fixed Charges and
Distributions on Capital Securities
- --------------------------------------------------------------------------------
(IN MILLIONS, EXCEPT RATIOS)
Ratio of Earnings to Fixed Charges
and Distributions on Capital Securities,
Excluding SAFECO Credit Company, Inc.:
<TABLE>
<CAPTION>
Pro Forma
-----------------------------
Six Months Six Months Years Ended December 31,
Ended Year Ended Ended --------------------------------------
June 30, 1997 Dec. 31, 1996 June 30, 1997 1996 1995 1994 1993 1992
------------- ------------- ------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income Before Income Taxes
(Excluding SAFECO Credit Company,
Inc.) $310.2 $556.4 $290.3 $559.4 $500.5 $378.9 $566.7 $394.1
Total Fixed Charges Below 86.2 165.3 13.8 28.9 47.9 44.4 37.6 41.1
Less Interest Capitalized (1.0) (0.1) (0.9) (0.1) (0.3) (0.8) (1.4) (0.2)
Less Undistributed Loss from
Unconsolidated Subsidiary -- -- -- 0.9 1.0 0.2 0.6 0.6
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL EARNINGS $395.4 $721.6 $303.2 $589.1 $549.1 $422.7 $603.5 $435.6
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
Fixed Charges (Excluding SAFECO Credit
Company, Inc.):
Interest $ 39.0 $ 73.1 $ 10.8 $ 25.0 $ 43.6 $ 39.6 $ 32.9 $ 37.5
Distributions on Capital Securities 41.3 82.5 -- -- -- -- -- --
Interest Capitalized 1.0 0.1 0.9 0.1 0.3 0.8 1.4 0.2
Interest Portion of Rental Expenses 4.3 9.0 1.5 3.3 3.2 3.1 2.8 2.9
Amortization of Deferred Debt
Expenses 0.6 0.6 0.6 0.5 0.8 0.9 0.5 0.5
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL FIXED CHARGES $ 86.2 $165.3 $ 13.8 $ 28.9 $ 47.9 $ 44.4 $ 37.6 $ 41.1
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
RATIO OF EARNINGS TO FIXED CHARGES AND
DISTRIBUTIONS ON CAPITAL SECURITIES,
EXCLUDING SAFECO CREDIT COMPANY,
INC. 4.6 4.4 22.0 20.4 11.5 9.5 16.1 10.6
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the headings "Selected
Financial Information" and "Independent Auditors" in the Registration Statement
(Form S-4 No. 333- ) of SAFECO Corporation and SAFECO Capital Trust I for
the registration of $850,000,000 of 8.072% Capital Securities and to the
incorporation by reference therein of our report dated February 14, 1997, with
respect to the consolidated financial statements of SAFECO Corporation and
subsidiaries incorporated by reference in its Annual Report (Form 10-K) for the
year ended December 31, 1996 and the related financial statement schedules
included in the Annual Report (Form 10-K), filed with the Securities and
Exchange Commission, and to the incorporation by reference therein of our report
dated January 28, 1997 with respect to the consolidated financial statements and
schedules of American States Financial Corporation and subsidiaries included in
its Annual Report (Form 10-K, Form 10-K/A(1) and Form 10-K/A(2)) for the year
ended December 31, 1996, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Seattle, Washington
October 17, 1997
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
SAFECO CORPORATION
(Exact name of obligor as specified in its charter)
WASHINGTON 91-0742146
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4333 BROOKLYN AVENUE N.E.
SEATTLE, WASHINGTON 98185
(Address of principal executive offices) (Zip Code)
--------------------------------------------
EXCHANGE JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES OF SAFECO CORPORATION
(Title of the indenture securities)
------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
- 2 -
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of
Amendment dated February 17, 1969, August 31, 1977, December 31, 1980,
September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see
Exhibit 1 to Form T-1 filed in connection with Registration Statement No.
333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to
Commence Business (see Exhibit 2 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by reference. On
July 14, 1996, in connection with the merger of Chemical Bank and The Chase
Manhattan Bank (National Association), Chemical Bank, the surviving
corporation, was renamed The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement
No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York and State of New York, on the 17th
day of October 1997.
THE CHASE MANHATTAN BANK
By
--------------------------------
Trust Officer
<PAGE>
- 3 -
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of
Amendment dated February 17, 1969, August 31, 1977, December 31, 1980,
September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see
Exhibit 1 to Form T-1 filed in connection with Registration Statement No.
333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to
Commence Business (see Exhibit 2 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by reference. On
July 14, 1996, in connection with the merger of Chemical Bank and The Chase
Manhattan Bank (National Association), Chemical Bank, the surviving
corporation, was renamed The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement
No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 17th day of October 1997.
THE CHASE MANHATTAN BANK
By John T. Needham, Jr.
--------------------------------
Trust Officer
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business June 30, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ...................................... $ 13,892
Interest-bearing balances .............................. 4,282
Securities: ................................................
Held to maturity securities................................. 2,857
Available for sale securities............................... 34,091
Federal Funds sold and securities purchased under
agreements to resell ................................... 29,970
Loans and lease financing receivables:
Loans and leases, net of unearned income $124,827
Less: Allowance for loan and lease losses 2,753
Less: Allocated transfer risk reserve ... 13
--------
Loans and leases, net of unearned income,
allowance, and reserve ................................. 122,061
Trading Assets ............................................. 56,042
Premises and fixed assets (including capitalized
leases)................................................. 2,904
Other real estate owned .................................... 306
Investments in unconsolidated subsidiaries and
associated companies.................................... 232
Customers' liability to this bank on acceptances
outstanding ............................................ 2,092
Intangible assets .......................................... 1,532
Other assets ............................................... 10,448
---------
TOTAL ASSETS ............................................... $280,709
---------
---------
-4-
<PAGE>
LIABILITIES
Deposits
In domestic offices .................................... $ 91,249
Noninterest-bearing ...........................$ 38,157
Interest-bearing .............................. 53,092
--------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's .............................................. 70,192
Noninterest-bearing .................................... $ 3,712
Interest-bearing ....................................... 66,480
Federal funds purchased and securities sold under agree-
ments to repurchase ........................................ 35,185
Demand notes issued to the U.S. Treasury ................... 1,000
Trading liabilities ........................................ 42,307
Other Borrowed money (includes mortgage indebtedness
and obligations under calitalized leases):
With a remaining maturity of one year or less .......... 4,593
With a remaining maturity of more than one year .
through three years.............................. 260
With a remaining maturity of more than three
years....................................................... 146
Bank's liability on acceptances executed and outstanding 2,092
Subordinated notes and debentures .......................... 5,715
Other liabilities .......................................... 11,373
TOTAL LIABILITIES .......................................... 264,112
--------
EQUITY CAPITAL
Perpetual Preferred stock and related surplus 0
Common stock ............................................... 1,211
Surplus (exclude all surplus related to preferred stock)... 10,283
Undivided profits and capital reserves ..................... 5,280
Net unrealized holding gains (Losses)
on available-for-sale securities ........................... (193)
Cumulative foreign currency translation adjustments ........ 16
TOTAL EQUITY CAPITAL ....................................... 16,597
--------
TOTAL LIABILITIES AND EQUITY CAPITAL ....................... $280,709
--------
--------
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
--------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
--------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------
SAFECO CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
WASHINGTON APPLIED FOR
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4333 BROOKLYN AVENUE N.E.
SEATTLE, WASHINGTON 98185
(Address of principal executive offices) (Zip Code)
--------------------------------------
8.072% EXCHANGE CAPITAL SECURITIES
OF SAFECO CAPITAL TRUST I
(Title of the indenture securities)
--------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
-3-
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of
Amendment dated February 17, 1969, August 31, 1977, December 31, 1980,
September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see
Exhibit 1 to Form T-1 filed in connection with Registration Statement No.
333-06249, which is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to
Commence Business (see Exhibit 2 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by reference. On
July 14, 1996, in connection with the merger of Chemical Bank and The Chase
Manhattan Bank (National Association), Chemical Bank, the surviving
corporation, was renamed The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement
No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 17th day of October 1997.
THE CHASE MANHATTAN BANK
By John T. Needham, Jr.
-------------------------------
Trust Officer
-3-
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business June 30, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin. . . . . . . . . . . . . . . . . . . . $ 13,892
Interest-bearing balances. . . . . . . . . . . . . . . . 4,282
Securities:. . . . . . . . . . . . . . . . . . . . . . . .
Held to maturity securities. . . . . . . . . . . . . . . . 2,857
Available for sale securities. . . . . . . . . . . . . . . 34,091
Federal Funds sold and securities purchased under
agreements to resell . . . . . . . . . . . . . . . . . . 29,970
Loans and lease financing receivables:
Loans and leases, net of unearned income $124,827
Less: Allowance for loan and lease losses 2,753
Less: Allocated transfer risk reserve . . . 13
--------
Loans and leases, net of unearned income,
allowance, and reserve . . . . . . . . . . . . . . . . . 122,061
Trading Assets . . . . . . . . . . . . . . . . . . . . . . 56,042
Premises and fixed assets (including capitalized
leases). . . . . . . . . . . . . . . . . . . . . . . . . 2,904
Other real estate owned. . . . . . . . . . . . . . . . . . 306
Investments in unconsolidated subsidiaries and
associated companies . . . . . . . . . . . . . . . . . . 232
Customers' liability to this bank on acceptances
outstanding. . . . . . . . . . . . . . . . . . . . . . . 2,092
Intangible assets. . . . . . . . . . . . . . . . . . . . . 1,532
Other assets . . . . . . . . . . . . . . . . . . . . . . . 10,448
--------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . $280,709
--------
--------
-4-
<PAGE>
LIABILITIES
Deposits
In domestic offices. . . . . . . . . . . . . . . . . . . $91,249
Noninterest-bearing. . . . . . . . . . . . . . $38,157
Interest-bearing . . . . . . . . . . . . . . . 53,092
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's. . . . . . . . . . . . . . . . . . . . . . . . 70,192
Noninterest-bearing. . . . . . . . . . . . . . $ 3,712
Interest-bearing . . . . . . . . . . . . . . . 66,480
Federal funds purchased and securities sold under agree-
ments to repurchase. . . . . . . . . . . . . . . . . . . . 35,185
Demand notes issued to the U.S. Treasury . . . . . . . . . 1,000
Trading liabilities. . . . . . . . . . . . . . . . . . . . 42,307
Other Borrowed money (includes mortgage indebtedness
and obligations under calitalized leases):
With a remaining maturity of one year or less. . . . . . 4,593
With a remaining maturity of more than one year
through three. . . . . . . . . . . . . . . . . . . . 260
With a remaining maturity of more than three years . . . 146
Bank's liability on acceptances executed and outstanding . 2,092
Subordinated notes and debentures. . . . . . . . . . . . . 5,715
Other liabilities. . . . . . . . . . . . . . . . . . . . . 11,373
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . 264,112
-------
EQUITY CAPITAL
Perpetual Preferred stock and related surplus. . . . . . . 0
Common stock . . . . . . . . . . . . . . . . . . . . . . . 1,211
Surplus (exclude all surplus related to preferred stock). 10,283
Undivided profits and capital reserves . . . . . . . . . . 5,280
Net unrealized holding gains (Losses)
on available-for-sale securities . . . . . . . . . . . . . (193)
Cumulative foreign currency translation adjustments. . . . 16
TOTAL EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . 16,597
-------
TOTAL LIABILITIES AND EQUITY CAPITAL . . . . . . . . . . . $280,709
----------
----------
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<PAGE>
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
--------
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
--------------------------------------------
SAFECO CORPORATION
(Exact name of obligor as specified in its charter)
WASHINGTON 91-0742146
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
4333 BROOKLYN AVENUE N.E.
SEATTLE, WASHINGTON 98185
(Address of principal executive offices) (Zip Code)
--------------------------------------------
SAFECO CORPORATION EXCHANGE GUARANTEE
WITH RESPECT TO EXCHANGE CAPITAL SECURITIES
(Title of the indenture securities)
-------------------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
- 2 -
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of
Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September
9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996,
in connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 17th day of October 1997.
THE CHASE MANHATTAN BANK
By /s/ John T. Needham, Jr.
--------------------------------
Trust Officer
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business June 30, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
IN MILLIONS
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin . . . . . . . . . . . . . . . . . . . $ 13,892
Interest-bearing balances . . . . . . . . . . . . . . . 4,282
Securities: . . . . . . . . . . . . . . . . . . . . . . .
Held to maturity securities. . . . . . . . . . . . . . . . 2,857
Available for sale securities. . . . . . . . . . . . . . . 34,091
Federal Funds sold and securities purchased under
agreements to resell. . . . . . . . . . . . . . . . . . 29,970
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . . . $124,827
Less: Allowance for loan and lease losses . . . . . . . 2,753
Less: Allocated transfer risk reserve . . . . . . . . . 13
--------
Loans and leases, net of unearned income,
allowance, and reserve. . . . . . . . . . . . . . . . . 122,061
Trading Assets . . . . . . . . . . . . . . . . . . . . . . 56,042
Premises and fixed assets (including capitalized
leases) . . . . . . . . . . . . . . . . . . . . . . . . 2,904
Other real estate owned. . . . . . . . . . . . . . . . . . 306
Investments in unconsolidated subsidiaries and
associated companies. . . . . . . . . . . . . . . . . . 232
Customers' liability to this bank on acceptances
outstanding . . . . . . . . . . . . . . . . . . . . . . 2,092
Intangible assets. . . . . . . . . . . . . . . . . . . . . 1,532
Other assets . . . . . . . . . . . . . . . . . . . . . . . 10,448
--------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . $280,709
--------
--------
-4-
<PAGE>
LIABILITIES
Deposits
In domestic offices . . . . . . . . . . . . . . . . . . $91,249
Noninterest-bearing . . . . . . . . . . . . . . . . . . $38,157
Interest-bearing. . . . . . . . . . . . . . . . . . . . 53,092
--------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's . . . . . . . . . . . . . . . . . . . . . . . 70,192
Noninterest-bearing . . . . . . . . . . . . . . . . . . $ 3,712
Interest-bearing. . . . . . . . . . . . . . . . . . . . 66,480
Federal funds purchased and securities sold under agree-
ments to repurchase. . . . . . . . . . . . . . . . . . . . 35,185
Demand notes issued to the U.S. Treasury . . . . . . . . . 1,000
Trading liabilities. . . . . . . . . . . . . . . . . . . . 42,307
Other Borrowed money (includes mortgage indebtedness
and obligations under calitalized leases):
With a remaining maturity of one year or less . . . . . 4,593
With a remaining maturity of more than one year
through three years . . . . . . . . . . . . . . . . . . 260
With a remaining maturity of more than three years . 146
Bank's liability on acceptances executed and outstanding . 2,092
Subordinated notes and debentures. . . . . . . . . . . . . 5,715
Other liabilities. . . . . . . . . . . . . . . . . . . . . 11,373
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . 264,112
--------
EQUITY CAPITAL
Perpetual Preferred stock and related surplus. . . . . . . 0
Common stock . . . . . . . . . . . . . . . . . . . . . . . 1,211
Surplus (exclude all surplus related to preferred stock).. 10,283
Undivided profits and capital reserves . . . . . . . . . . 5,280
Net unrealized holding gains (Losses)
on available-for-sale securities . . . . . . . . . . . . . (193)
Cumulative foreign currency translation adjustments. . . . 16
TOTAL EQUITY CAPITAL . . . . . . . . . . . . . . . . . . . 16,597
--------
TOTAL LIABILITIES AND EQUITY CAPITAL . . . . . . . . . . . $280,709
--------
--------
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued
by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE )DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
SAFECO CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.072% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.072% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED,
AS DESCRIBED HEREIN BY
SAFECO CORPORATION
PURSUANT TO THE PROSPECTUS DATED OCTOBER __, 1997
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ____________________, 1997 UNLESS THE OFFER IS EXTENDED. TENDERS MAY
BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer Is:
THE CHASE MANHATTAN BANK
By Mail, Hand or Overnight Delivery:
The Chase Manhattan Bank
55 Water Street, Room 234
New York, New York 10041
Attention: Carlos Esteves
By Facsimile Transmission:
(For Eligible Institutions Only):
(212) 638-7380
CONFIRM BY TELEPHONE:
Carlos Esteves (212) 638-0828
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE NUMBER
OTHER THAN THE ONES LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same
meanings given them in the Prospectus (as defined below).
<PAGE>
This Letter of Transmittal is to be completed by holders (which term, for
purposes of this document, shall include any participant in the Depository Trust
Company ("DTC")) either if (a) certificates are to be forwarded herewith or
(b) tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth under "The Exchange Offer--Procedures for Tendering Original
Capital Securities" in the Prospectus and an Agent's Message (as defined below)
is not delivered. Certificates, or book-entry confirmation of a book-entry
transfer of such Original Capital Securities into the Exchange Agent's account
at DTC, as well as this Letter of Transmittal (or facsimile thereof or delivery
of an Agent's Message in lieu thereof), properly completed and duly executed,
with any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its address set
forth herein on or prior to the Expiration Date. Tenders by book-entry transfer
may also be made by delivering an Agent's Message in lieu of this Letter of
Transmittal. The term "book-entry confirmation" means a timely confirmation of
a book-entry transfer of Original Capital Securities into the Exchange Agent's
account at DTC. The term "Agent's Message" means a message, transmitted by DTC
to and received by the Exchange Agent and forming part of a book-entry
confirmation, which states that DTC has received an express acknowledgment from
the tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by this Letter of Transmittal and that the Trust
and SAFECO Corporation (the "Company") may enforce this Letter of Transmittal
against such participant.
Holders of Original Capital Securities whose certificates (the
"Certificates") for such Original Capital Securities are not immediately
available or who cannot deliver their Certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date or who cannot
complete the procedures for book-entry transfer on or prior to the Expiration
Date, must tender their Original Capital Securities according to the guaranteed
delivery procedures set forth in "The Exchange Offer--Procedures for Tendering
Original Capital Securities" in the Prospectus.
-2-
<PAGE>
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
- --------------------------------------------------------------------------------
DESCRIPTION OF ORIGINAL CAPITAL SECURITIES TENDERED
- --------------------------------------------------------------------------------
AGGREGATE
LIQUIDATION
AMOUNT OF LIQUIDATION
ORIGINAL AMOUNT OF
CERTIFICATE CAPITAL ORIGINAL
NAME(S) AND ADDRESS(ES) NUMBER(S)* SECURITIES CAPITAL
REGISTERED HOLDER (ATTACH (ATTACH SECURITIES
PLEASE FILL IN, IF BLANK ADDITIONAL LIST ADDITIONAL LIST TENDERED (IF
IF NECESSARY) IF NECESSARY) LESS THAN ALL)**
$ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL AMOUNT TENDERED: $ $
-----------------------------------
-----------------------------------
* Need not be completed by book-entry holders. Such holders should check
the appropriate box below and provide the requested information.
** Need not be completed if tendering for exchange all Original Capital
Securities held. Original Capital Securities may be tendered in whole or
in part in denominations of $100,000 and integral multiples of $1,000 in
excess thereof, provided that if any Original Capital Securities are
tendered for exchange in part, the untendered Liquidation Amount thereof
must be $100,000 or any integral multiple of $1,000 in excess thereof.
All Original Capital Securities held shall be deemed tendered unless a
lesser number is specified in this column.
-3-
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS (DEFINED IN
INSTRUCTION 1) ONLY)
/ / CHECK HERE IF TENDERED ORIGINAL CAPITAL SECURITIES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH
DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
---------------------------------------------------
DTC Account Number
--------------------------------------------------------------
Transaction Code Number
---------------------------------------------------------
By crediting the Original Capital Securities to the Exchange Agent's
account at the DTC in accordance with DTC's Automated Tender Offer Program
("ATOP") and by complying with applicable ATOP procedures with respect to the
Exchange Offer, including transmitting an Agent's Message to the Exchange Agent
in which the holder of the Original Capital Securities acknowledges and agrees
to be bound by the terms of this Letter of Transmittal, the participant in ATOP
confirms on behalf of itself and the beneficial owners of such Original Capital
Securities all provisions of this Letter of Transmittal applicable to it and
such beneficial owners as fully as if it had completed the information required
herein and executed and transmitted this Letter of Transmittal to the Exchange
Agent.
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED ORIGINAL CAPITAL SECURITIES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name of Registered Holder
-------------------------------------------------------
Window Ticket Number (if any)
---------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
------------------------------
Name of Institution which Guaranteed Delivery
----------------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
--------------------------------------------------
DTC Account Number
--------------------------------------------------------------
Transaction Code Number
---------------------------------------------------------
-4-
<PAGE>
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED ORIGINAL
CAPITAL SECURITIES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET
FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL CAPITAL
SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Area Code and Telephone Number:
-------------------------------------------------
Contact Person:
-----------------------------------------------------------------
-5-
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SAFECO Capital Trust I, a Delaware
statutory business trust (the "Trust"), and SAFECO Corporation, a Washington
corporation, as Sponsor (the "Company"), the above-described aggregate
Liquidation Amount of the Trust's 8.072% Capital Securities (the "Original
Capital Securities") in exchange for a like aggregate Liquidation Amount of the
Trust's 8.072% Capital Securities (the "Exchange Capital Securities") which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), upon the terms and subject to the conditions set forth in the Prospectus
dated October __, 1997 (as the same may be amended or supplemented from time to
time, the "Prospectus"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with the Prospectus, constitutes the
"Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Original Capital Securities tendered herewith in accordance with
the terms and conditions of the Exchange Offer (including, if the Exchange Offer
is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Trust all right, title and interest in and to such Original Capital
Securities as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company and the Trust in connection with the Exchange Offer) with respect to the
tendered Original Capital Securities, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), subject only to the right of withdrawal described in the Prospectus
to (i) deliver Certificates for Original Capital Securities to the Trust
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Trust, upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Capital Securities to be issued in exchange
for such Original Capital Securities, (ii) present Certificates for such
Original Capital Securities for registration of transfer, and to transfer the
Original Capital Securities on the books of the Trust, and (iii) receive for the
account of the Trust all benefits and otherwise exercise all rights of
beneficial ownership of such Original Capital Securities, all in accordance with
the terms and conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE
ORIGINAL CAPITAL SECURITIES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED
FOR EXCHANGE, THE TRUST WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE ORIGINAL CAPITAL SECURITIES TENDERED HEREBY ARE NOT SUBJECT TO ANY
ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND
DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY, THE TRUST OR THE
EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT
AND TRANSFER OF THE ORIGINAL CAPITAL
-6-
<PAGE>
SECURITIES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS
OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ
AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) (which term, for
the purposes of this Letter of Transmittal, shall include any participant in
DTC) of the Original Capital Securities tendered hereby should be printed above,
if they are not already set forth above, as they appear on the Certificates
representing such Original Capital Securities. The Certificate number(s) and
the Original Capital Securities that the undersigned wishes to tender should be
indicated in the appropriate boxes above.
If any tendered Original Capital Securities are not exchanged pursuant to
the Exchange Offer for any reason, or if Certificates are submitted for more
Original Capital Securities than are tendered or accepted for exchange,
Certificates for such nonexchanged or nontendered Original Capital Securities
will be returned (or, in the case of Original Capital Securities tendered by
book-entry transfer, such Original Capital Securities will be credited to an
account maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Original Capital Securities
pursuant to any one of the procedures described under "The Exchange
Offer--Procedures for Tendering Original Capital Securities" in the Prospectus
and in the instructions herein will, upon the Company's and the Trust's
acceptance for exchange of such tendered Original Capital Securities, constitute
a binding agreement between the undersigned, the Company and the Trust upon the
terms and subject to the conditions of the Exchange Offer. The undersigned
recognizes that, under certain circumstances set forth in the Prospectus, the
Company and the Trust may not be required to accept for exchange any of the
Original Capital Securities tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Exchange Capital
Securities be issued in the name of the undersigned or, in the case of a
book-entry transfer of Original Capital Securities, that such Exchange Capital
Securities be credited to the account indicated above maintained at DTC. If
applicable, substitute Certificates representing Original Capital Securities not
exchanged or not accepted for exchange will be issued to the undersigned or, in
the case of a book-entry transfer of Original Capital Securities, will be
credited to the account indicated above maintained at DTC. Similarly, unless
otherwise indicated under "Special Delivery Instructions" below, please deliver
Exchange Capital Securities to the undersigned at the address shown below the
undersigned's signature.
BY TENDERING ORIGINAL CAPITAL SECURITIES AND EXECUTING THIS LETTER OF
TRANSMITTAL, OR EFFECTING DELIVERY OF AN AGENT'S MESSAGE IN LIEU THEREOF, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (i) THE UNDERSIGNED IS NOT AN
"AFFILIATE" OF THE COMPANY OR THE TRUST WITHIN THE MEANING OF RULE 405 UNDER THE
-7-
<PAGE>
SECURITIES ACT, (ii) ANY EXCHANGE CAPITAL SECURITIES TO BE RECEIVED BY THE
UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (iii) THE
UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE
IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF EXCHANGE CAPITAL
SECURITIES TO BE RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS
NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO
ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH
EXCHANGE CAPITAL SECURITIES. BY TENDERING ORIGINAL CAPITAL SECURITIES PURSUANT
TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, OR EFFECTING
DELIVERY OF AN AGENT'S MESSAGE IN LIEU THEREOF, A HOLDER OF ORIGINAL CAPITAL
SECURITIES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH
CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION
FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT
(A) SUCH ORIGINAL CAPITAL SECURITIES HELD BY THE BROKER-DEALER ARE HELD ONLY AS
A NOMINEE OR (B) SUCH ORIGINAL CAPITAL SECURITIES WERE ACQUIRED BY SUCH
BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR
OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR
SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT
IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE CAPITAL SECURITIES (PROVIDED
THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER
WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF
THE SECURITIES ACT).
THE COMPANY AND THE TRUST HAVE AGREED THAT, SUBJECT TO THE PROVISIONS OF
THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS
DEFINED BELOW) IN CONNECTION WITH RESALES OF EXCHANGE CAPITAL SECURITIES
RECEIVED IN EXCHANGE FOR ORIGINAL CAPITAL SECURITIES, WHERE SUCH ORIGINAL
CAPITAL SECURITIES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR
A PERIOD ENDING 180 DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER
CERTAIN LIMITED CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN
ALL SUCH EXCHANGE CAPITAL SECURITIES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING
BROKER-DEALER. IN THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED ORIGINAL CAPITAL
SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH ORIGINAL CAPITAL
SECURITIES AND EXECUTING THIS LETTER OF
-8-
<PAGE>
TRANSMITTAL, OR EFFECTING DELIVERY OF AN AGENT'S MESSAGE IN LIEU THEREOF, AGREES
THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OR THE TRUST OF THE OCCURRENCE OF
ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR
INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR
WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER
TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT
OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING, OR OF THE
OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS
AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF EXCHANGE
CAPITAL SECURITIES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY OR THE TRUST HAS
AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION
AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE
PARTICIPATING BROKER-DEALER, OR THE COMPANY OR THE TRUST HAS GIVEN NOTICE THAT
THE SALE OF THE EXCHANGE CAPITAL SECURITIES MAY BE RESUMED, AS THE CASE MAY BE.
IF THE COMPANY OR THE TRUST GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE
EXCHANGE CAPITAL SECURITIES, IT SHALL EXTEND THE 180-DAY PERIOD REFERRED TO
ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE
PROSPECTUS IN CONNECTION WITH THE RESALE OF EXCHANGE CAPITAL SECURITIES BY THE
NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING OF
SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL
HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO
PERMIT RESALES OF THE EXCHANGE CAPITAL SECURITIES OR TO AND INCLUDING THE DATE
ON WHICH THE COMPANY OR THE TRUST HAS GIVEN NOTICE THAT THE SALE OF EXCHANGE
CAPITAL SECURITIES MAY BE RESUMED, AS THE CASE MAY BE.
AS A RESULT, A PARTICIPATING BROKER-DEALER WHO INTENDS TO USE THE
PROSPECTUS IN CONNECTION WITH RESALES OF EXCHANGE CAPITAL SECURITIES RECEIVED IN
EXCHANGE FOR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER MUST
NOTIFY THE COMPANY AND THE TRUST, OR CAUSE THE COMPANY AND THE TRUST TO BE
NOTIFIED, ON OR PRIOR TO THE EXPIRATION DATE, THAT IT IS A PARTICIPATING
BROKER-DEALER. SUCH NOTICE MAY BE GIVEN IN THE SPACE PROVIDED ABOVE OR MAY BE
DELIVERED TO THE EXCHANGE AGENT AT THE ADDRESS SET FORTH IN THE PROSPECTUS UNDER
"THE EXCHANGE OFFER--EXCHANGE AGENT."
-9-
<PAGE>
Holders of Original Capital Securities whose Original Capital Securities
are accepted for exchange will not receive Distributions on such Original
Capital Securities, and the undersigned waives the right to receive any
Distributions on such Original Capital Securities accumulated from and after
July 15, 1997. Accordingly, a holder of Exchange Capital Securities as of the
record date for the payment of Distributions on January 15, 1998 will be
entitled to Distributions accumulated from and after July 15, 1997.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company or the Trust to be necessary or desirable to
complete the sale, assignment and transfer of the Original Capital Securities
tendered hereby. All authority herein conferred or agreed to be conferred in
this Letter of Transmittal shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, executors, administrators, personal representatives, trustees in
bankruptcy, legal representatives, successors and assigns of the undersigned.
Except as stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL CAPITAL
SECURITIES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE
ORIGINAL CAPITAL SECURITIES AS SET FORTH IN SUCH BOX.
-10-
<PAGE>
HOLDERS SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY
INSTRUCTION 2)
Must be signed by registered holder(s) (which term, for purposes of this
document, shall include any participant in DTC) exactly as name(s) appear(s) on
Certificate(s) for the Original Capital Securities hereby tendered or on the
register of holders maintained by the Trust, or by any person authorized to
become the registered holder by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and other information as may
be required by the Trust or the Trustee for the Original Capital Securities to
comply with the restrictions on transfer applicable to the Original Capital
Securities). If signature is by an attorney-in-fact, executor, administrator,
trustee, guardian, officer of a corporation or another acting in a fiduciary
capacity or representative capacity, please set forth the signer's full title.
See Instruction 5.
-----------------------------------------
-----------------------------------------
(Signature of Holder(s) or Authorized
Signatory)
Date: ____________________, 1997
Name(s)
-------------------------------------------------------------------------
(Please Print)
Capacity (full title)
-----------------------------------------------------------
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
--------------------------------------------------
Tax Identification or Social Security Number(s)
---------------------------------
SIGNATURE(S) GUARANTEE
(IF REQUIRED--SEE INSTRUCTIONS 2 AND 5)
-----------------------------------------
(Authorized Signature)
Date: ____________________, 1997
Name of Eligible Institution Guaranteeing Signatures
----------------------------
Capacity (full title)
-----------------------------------------------------------
(Please Print)
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
--------------------------------------------------
-11-
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the Exchange Capital Securities or any Original
Capital Securities that are not tendered are to be issued in the name of someone
other than the registered holder of the Original Capital Securities whose name
appears above.
Issue
/ / Exchange Capital Securities and/or
/ / Original Capital Securities not tendered
to:
Name
----------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
--------------------------------------------------
Tax Identification or Social Security Number
------------------------------------
-12-
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the Exchange Capital Securities or any Original
Capital Securities that are not tendered are to be sent to someone other than
the registered holder of the Original Capital Securities whose name appears
above, or to such registered holder at an address other than that shown above.
Mail
/ / Exchange Capital Securities and/or
/ / Original Capital Securities not tendered
to:
Name
----------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
--------------------------------------------------
Tax Identification or Social Security Number
------------------------------------
-13-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES.
This Letter of Transmittal is to be completed either if (a) Certificates
are to be forwarded herewith or (b) tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth under "The Exchange
Offer--Procedures for Tendering Original Capital Securities" in the Prospectus
and an Agent's Message is not delivered. Certificates, or book-entry
confirmation of a book-entry transfer of such Original Capital Securities into
the Exchange Agent's account at DTC, as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message in lieu thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein on or prior to the Expiration
Date. Original Capital Securities may be tendered in whole or in part in the
liquidation amount of $100,000 (100 Capital Securities) and integral multiples
of $1,000 in excess thereof, provided that, if any Original Capital Securities
are tendered for exchange in part, the untendered liquidation amount thereof
must be $100,000 (100 Capital Securities) or any integral multiple of $1,000 in
excess thereof.
Holders who wish to tender their Original Capital Securities and (i)
whose Original Capital Securities are not immediately available or (ii) who
cannot deliver their Original Capital Securities, this Letter of Transmittal and
all other required documents to the Exchange Agent on or prior to the Expiration
Date or (iii) who cannot complete the procedures for delivery by book-entry
transfer on or prior to the Expiration Date, may tender their Original Capital
Securities by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedures set forth under "The
Exchange Offer--Procedures for Tendering Original Capital Securities" in the
Prospectus. Pursuant to such procedures: (i) such tender must be made by or
through an Eligible Institution (as defined below); (ii) a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the form made
available by the Company and the Trust, must be received by the Exchange Agent
on or prior to the Expiration Date; and (iii) the Certificates (or a book-entry
confirmation (as defined in the Prospectus)) representing all tendered Original
Capital Securities, in proper form for transfer, together with a Letter of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof), properly
completed and duly executed, with any required signature guarantees and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery, all as provided in "The
Exchange Offer--Procedures for Tendering Original Capital Securities" in the
Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Original Capital
Securities to be properly
-14-
<PAGE>
tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must
receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As
used herein and in the Prospectus, "Eligible Institution" means a firm or other
entity identified in Rule 17Ad-15 under the Exchange Act as "an eligible
guarantor institution," including (as such terms are defined therein) (i) a
bank; (ii) a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association
recognized program.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY ON OR
PRIOR TO THE EXPIRATION DATE. NO DOCUMENTS SHOULD BE SENT TO THE COMPANY OR THE
TRUST. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
Neither the Company nor the Trust will accept any alternative,
conditional or contingent tenders. Each tendering holder, by execution of a
Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof),
waives any right to receive any notice of the acceptance of such tender.
2. GUARANTEE OF SIGNATURES.
No signature guarantee on this Letter of Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of
the Original Capital Securities) of Original Capital Securities tendered
herewith, unless such holder has completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" above, or
(ii) such Original Capital Securities are tendered for the account
of a firm that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature
on this Letter of Transmittal. See Instruction 5.
-15-
<PAGE>
3. INADEQUATE SPACE.
If the space provided in the box captioned "Description of Original
Capital Securities" is inadequate, the Certificate numbers and/or the
liquidation amount of Original Capital Securities and any other required
information should be listed on a separate signed schedule which is attached to
this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS.
Tenders of Original Capital Securities will be accepted only in the
liquidation amount of $100,000 (100 Capital Securities) and integral multiples
of $1,000 in excess thereof, provided that if any Original Capital Securities
are tendered for exchange in part, the untendered liquidation amount thereof
must be $100,000 (100 Capital Securities) or any integral multiple of $1,000 in
excess thereof. If less than all of the Original Capital Securities evidenced
by any Certificate submitted are to be tendered, fill in the liquidation amount
of Original Capital Securities which are to be tendered in the box entitled
"Liquidation Amount of Original Capital Securities Tendered (If Less than All)."
In such case, a new Certificate for the remainder of the Original Capital
Securities that were evidenced by your Old Certificate will be sent to the
holder of the Original Capital Securities, promptly after the Expiration Date
unless the appropriate boxes on this Letter of Transmittal are completed. All
Original Capital Securities represented by Certificates delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Original Capital
Securities may be withdrawn at any time on or prior to the Expiration Date. In
order for a withdrawal to be effective on or prior to that time, a written or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth above or in the Prospectus on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Original Capital Securities to be withdrawn,
the aggregate liquidation amount of Original Capital Securities to be withdrawn,
and (if Certificates for Original Capital Securities have been tendered) the
name of the registered holder of the Original Capital Securities as set forth on
the Certificate for the Original Capital Securities, if different from that of
the person who tendered such Original Capital Securities. If Certificates for
the Original Capital Securities have been delivered or otherwise identified to
the Exchange Agent, then prior to the physical release of such Certificates for
the Original Capital Securities, the tendering holder must submit the serial
numbers shown on the particular Certificates for the Original Capital Securities
to be withdrawn and the signature on the notice of withdrawal must be guaranteed
by an Eligible Institution, except in the case of Original Capital Securities
tendered for the account of an Eligible Institution. If Original Capital
Securities have been tendered pursuant to the procedures for book-entry transfer
set forth under "The Exchange Offer--Procedures for Tendering Original Capital
Securities," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawal of Original Capital
Securities, in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by written or facsimile transmission on or prior to the
Expiration Date. Withdrawals of tenders of Original Capital Securities may not
be
-16-
<PAGE>
rescinded. Original Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer--Procedures for
Tendering Original Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and binding
on all parties. Neither the Company, the Trust, any affiliates or assigns of
the Company or the Trust, the Exchange Agent nor any other person shall be under
any duty to give any notification of any irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Original Capital Securities which have been tendered but which are withdrawn
on or prior to the Expiration Date will be returned to the holder thereof
without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of
the Original Capital Securities tendered hereby, the signature(s) must
correspond exactly with the name(s) as written on the face of the Certificate(s)
or on a security position listing without alteration, enlargement or any change
whatsoever.
If any of the Original Capital Securities tendered hereby are owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any tendered Original Capital Securities are registered in different
names on several Certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal (or facsimiles thereof or Agent's
Messages in lieu thereof) as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company and the Trust, in their sole discretion, of
such persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner of the
Original Capital Securities listed and transmitted hereby, no endorsement of
Certificates or separate bond powers are required unless Exchange Capital
Securities are to be issued in the name of a person other than the registered
holder. Signatures on such Certificates or bond powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner of the Original Capital Securities listed, the Certificates
must be endorsed or accompanied by appropriate bond powers, signed exactly as
the name of the registered owner appears on the
-17-
<PAGE>
Certificates, and also must be accompanied by such opinions of counsel,
certifications and other information as the Company, the Trust or the Exchange
Agent may require in accordance with the restrictions on transfer applicable to
the Original Capital Securities. Signatures on such Certificates or bond powers
must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
If Exchange Capital Securities are to be issued in the name of a person
other than the signer of this Letter of Transmittal, or if Exchange Capital
Securities are to be sent to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this Letter of Transmittal should be completed. Certificates for Original
Capital Securities not exchanged will be returned by mail or, if tendered by
book-entry transfer, by crediting the account indicated above maintained at DTC
unless the appropriate boxes on this Letter of Transmittal are completed. See
Instruction 4.
7. IRREGULARITIES.
The Company and the Trust will determine, in their sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Original Capital
Securities, which determination shall be final and binding on all parties. The
Company and the Trust reserve the absolute right to reject any and all tenders
determined by either of them not to be in proper form or the acceptance of
which, or exchange for, may, in the view of counsel to the Company or the Trust,
be unlawful. The Company and the Trust also reserve the absolute right, subject
to applicable law, to waive any of the conditions of the Exchange Offer set
forth in the Prospectus under "The Exchange Offer--Conditions to Exchange
Offer," or any conditions or irregularities in any tender of Original Capital
Securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders. The Company and the
Trust's interpretation of the terms and conditions of the Exchange Offer
(including this Letter of Transmittal and the instructions hereto) will be final
and binding. No tender of Original Capital Securities will be deemed to have
been validly made until all irregularities with respect to such tender have been
cured or waived. The Company, the Trust, any affiliates or assigns of the
Company, the Trust, the Exchange Agent, or any other person shall not be under a
duty to give notification of any irregularities in tenders or incur any
liability for failure to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Exchange
Agent at its address and telephone number set forth on the front of this Letter
of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
-18-
<PAGE>
9. LOST, DESTROYED OR STOLEN CERTIFICATES.
If any Certificates representing Original Capital Securities have been
lost, destroyed or stolen, the holder should promptly notify the Exchange Agent.
The holder will then be instructed as to the steps that must be taken in order
to replace the Certificates. This Letter of Transmittal and related documents
cannot be processed until the procedures for replacing lost, destroyed or stolen
Certificates have been followed.
10. SECURITY TRANSFER TAXES.
Holders who tender their Original Capital Securities for exchange will
not be obligated to pay any transfer taxes in connection therewith. If,
however, Exchange Capital Securities are to be delivered to, or are to be issued
in the name of, any person other than the registered holder of the Original
Capital Securities tendered, or if a transfer tax is imposed for any reason
other than the exchange of Original Capital Securities in connection with the
Exchange Offer, then the amount of any such transfer tax (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
11. INCORPORATION OF LETTER OF TRANSMITTAL.
This Letter of Transmittal shall be deemed to be incorporated in and
acknowledged and accepted by any tender through the DTC's ATOP procedures by any
participant in DTC on behalf of itself and the beneficial owners of any Original
Capital Securities so tendered.
12. WAIVER OF CONDITIONS.
The Company and the Trust reserve the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
13. NO CONDITIONAL TENDERS.
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Original Capital Securities, by execution of this Letter of
Transmittal, shall waive any right to receive notice of the acceptance of
Original Capital Securities for exchange.
Neither the Company, the Trust, the Exchange Agent nor any other person
is obligated to give notice of any defect or irregularity with respect to any
tender of Original Capital Securities nor shall any of them incur any liability
for failure to give any such notice.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF OR AN AGENT'S
MESSAGE IN LIEU HEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
EXCHANGE AGENT AT OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
-19-
<PAGE>
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered Original Capital
Securities are accepted for exchange is required by law to provide the Exchange
Agent with such holder's correct taxpayer identification number ("TIN") on
Substitute Form W-9 included herein or otherwise establish a basis for exemption
from backup withholding. If such holder is an individual, the TIN is his social
security number. If the Exchange Agent is not provided with the correct TIN,
the Internal Revenue Service may subject the holder or transferee to a $50
penalty. In addition, delivery of such holder's Exchange Capital Securities may
be subject to backup withholding. Failure to comply truthfully with the backup
withholding requirements also may result in the imposition of severe criminal
and/or civil fines and penalties.
Certain holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt holders should furnish their TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign, date and return the Substitute Form
W-9 to the Exchange Agent. A foreign person, including entities, may qualify as
an exempt recipient by submitting to the Exchange Agent a properly completed
Internal Revenue Service Form W-8, signed under penalties of perjury, attesting
to that holder's foreign status. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
If backup withholding applies, the Exchange Agent is required to withhold
31% of any payments made to the holder or other transferee. Backup withholding
is not an additional federal income tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund
may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made with respect to Original
Capital Securities exchanged in the Exchange Offer, the holder is required to
provide the Exchange Agent with either: (i) the holder's correct TIN by
completing the form included herein, certifying that the TIN provided on
Substitute Form W-9 is correct (or that such holder is awaiting a TIN) and that
(A) the holder has not been notified by the Internal Revenue Service that the
holder is subject to backup withholding as a result of failure to report all
interest or dividends or (B) the Internal Revenue Service has notified the
holder that the holder is no longer subject to backup withholding; or (ii) an
adequate basis for exemption.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day
-20-
<PAGE>
period following the date of the Substitute Form W-9. If the holder furnishes
the Exchange Agent with its TIN within 60 days after the date of the Substitute
Form W-9, the amounts retained during the 60-day period will be remitted to the
holder and no further amounts shall be retained or withheld from payments made
to the holder thereafter. If, however, the holder has not provided the Exchange
Agent with its TIN within such 60-day period, amounts withheld will be remitted
to the IRS as backup withholding. In addition, 31% of all payments made
thereafter will be withheld and remitted to the IRS until a correct TIN is
provided.
NUMBER TO GIVE THE DEPOSITARY
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Original Capital Securities or of the last transferee appearing on the
transfers attached to, or endorsed on, the Original Capital Securities. If the
Original Capital Securities are held in more than one name or are held not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
-21-
<PAGE>
TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS
PAYOR'S NAME: THE CHASE MANHATTAN BANK
- --------------------------------------------------------------------------------
SUBSTITUTE FORM W-9 PART 1-PLEASE PROVIDE YOUR TIN Social Security Number or
DEPARTMENT OF THE IN THE BOX AT RIGHT AND CERTIFY Employer
TREASURER INTERNAL BY SIGNING AND DATING BELOW. Identification Number
REVENUE SERVICE
PAYER'S REQUEST FOR TIN:
TAXPAYER ---------------------
IDENTIFICATION
NUMBER ("TIN")
----------------------------------------------------------
PART 2-Awaiting TIN / /
CERTIFICATION-UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or am waiting for
a number to be issued to me) and
(2) I am not subject to backup withholding either
because (i) I am exempt from backup withholding,
(ii) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, (iii) or the IRS
has notified me that I am no longer subject to
backup withholding.
(3) Any other information provided in this form is
true and correct.
CERTIFICATION INSTRUCTIONS--You must cross out
item (2) above if you have been notified by the
IRS that you are currently subject to backup
withholding because of underreporting interest or
dividends on your tax return. However, if after
being notified by the IRS that you were subject to
backup withholding you received another
notification from the IRS that you are no longer
subject to backup withholding, do not cross out
such item (2).
----------------------------------------------------------
SIGNATURE DATE
-------------------- ---------------------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON FORM
W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number by the time of
payment, 31% of all reportable payments made to me will be withheld, but that
such amounts will be refunded to me if I then provide a Taxpayer Identification
Number within 60 days.
, 1997
- ----------------------------------- --------------------------------
Signature Date
-22-
<PAGE>
[Letterhead of SAFECO]
Re: SAFECO CORPORATION 8.072% ORIGINAL CAPITAL SECURITIES (LIQUIDATION
AMOUNT $1,000 PER CAPITAL SECURITY) IN EXCHANGE FOR 8.072% EXCHANGE
CAPITAL SECURITIES OF SAFECO CAPITAL TRUST I FULLY AND
UNCONDITIONALLY GUARANTEED BY SAFECO CORPORATION
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
SAFECO Corporation (the "Company") and SAFECO Capital Trust I (the
"Trust") are offering, upon and subject to the terms and conditions set forth in
a prospectus dated October __, 1997 (the "Prospectus"), and the enclosed letter
of transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer")
the Trust's 8.072% Capital Securities (the "Exchange Capital Securities") for
its outstanding 8.072% Capital Securities (the "Original Capital Securities").
The Exchange Offer is being made in order to satisfy certain obligations of the
Company and the Trust contained in the Registration Rights Agreement, dated as
of July 15, 1997, among the Company, the Trust and the initial purchasers
referred to therein.
We are requesting that you contact your clients for whom you hold
Original Capital Securities regarding the Exchange Offer. For your information
and for forwarding to your clients for whom you hold Original Capital Securities
registered in your name or in the name of your nominee, or who hold Original
Capital Securities registered in their own names, we are enclosing the following
documents:
1. Prospectus dated October __, 1997;
2. The Letter of Transmittal for your use and for the information (or
the use, where relevant) of your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Original Capital Securities are not immediately
available or time will not permit all required documents to reach the Exchange
Agent prior to the Expiration Date (as defined below) or if the procedure for
book-entry transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Original Capital Securities registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
<PAGE>
6. Return envelopes addressed to The Chase Manhattan Bank, the Exchange
Agent for the Original Capital Securities.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON __________, 1997, UNLESS EXTENDED BY THE
COMPANY OR THE TRUST (THE "EXPIRATION DATE"). THE ORIGINAL CAPITAL SECURITIES
TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE
EXPIRATION DATE.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof or an Agent's Message (as
defined in the Prospectus) in lieu thereof), with any required signature
guarantees and any other required documents, should be sent to the Exchange
Agent and certificates representing the Original Capital Securities should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and the Prospectus.
If holders of Original Capital Securities wish to tender, but it is
impracticable for them to forward their certificates for Original Capital
Securities prior to the expiration of the Exchange Offer or to comply with the
book-entry transfer procedures on a timely basis, a tender may be effected by
following the guaranteed delivery procedures described in the Prospectus under
"The Exchange Offer--Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial banks and
trust companies for reasonable and necessary costs and expenses incurred by them
in forwarding the Prospectus and the related documents to the beneficial owners
of the Original Capital Securities held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Original Capital Securities pursuant to the
Exchange Offer, except as set forth in Instruction 10 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed to
The Chase Manhattan Bank, the Exchange Agent for the Original Capital
Securities, at its address and telephone number set forth on the front of the
Letter of Transmittal.
Very truly yours,
SAFECO Corporation
SAFECO Capital Trust I
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY
-2-
<PAGE>
DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE
EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE
LETTER OF TRANSMITTAL.
Enclosures
-3-
<PAGE>
Re: SAFECO CORPORATION 8.072% ORIGINAL CAPITAL SECURITIES (LIQUIDATION
AMOUNT $1,000 PER CAPITAL SECURITY) IN EXCHANGE FOR 8.072% EXCHANGE
CAPITAL SECURITIES OF SAFECO CAPITAL TRUST I FULLY AND
UNCONDITIONALLY GUARANTEED BY SAFECO CORPORATION
To Our Clients:
Enclosed for your consideration is a prospectus dated October __, 1997
(the "Prospectus"), and the related letter of transmittal (the "Letter of
Transmittal"), relating to the offer (the "Exchange Offer") of SAFECO
Corporation (the "Company") and SAFECO Capital Trust I (the "Trust") to exchange
the Trust's 8.072% Capital Securities (the "Exchange Capital Securities") for
its outstanding 8.072% Capital Securities (the "Original Capital Securities"),
upon the terms and subject to the conditions described in the Prospectus. The
Exchange Offer is being made in order to satisfy certain obligations of the
Company and the Trust contained in the Registration Rights Agreement dated as of
July 15, 1997, among the Company, the Trust and the initial purchasers referred
to therein.
This material is being forwarded to you as the beneficial owner of the
Original Capital Securities carried by us in your account but not registered in
your name. A TENDER OF SUCH ORIGINAL CAPITAL SECURITIES MAY BE MADE ONLY BY US
AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS.
Accordingly, we request instructions as to whether you wish us to tender
on your behalf the Original Capital Securities held by us for your account,
pursuant to the terms and conditions set forth in the enclosed Prospectus and
Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Original Capital Securities on your behalf in
accordance with the provisions of the Exchange Offer. The Exchange Offer will
expire at 5:00 p.m., New York City time, on __________, 1997, unless extended by
the Company or the Trust. Any Original Capital Securities tendered pursuant to
the Exchange Offer may be withdrawn at any time before the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Original Capital
Securities.
2. The Exchange Offer is subject to certain conditions set
forth in the Prospectus in the section captioned "The Exchange
Offer--Conditions to the Exchange Offer."
<PAGE>
3. Any transfer taxes incident to the transfer of Original
Capital Securities from the holder to the Company will be paid
by the Company, except as otherwise provided in the
Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City
time, on __________, 1997, unless extended by the Company or
the Trust.
If you wish to have us tender your Original Capital Securities, please so
instruct us by completing, executing and returning to us the instruction form on
the back of this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR
INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER ORIGINAL CAPITAL
SECURITIES.
-2-
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE EXCHANGE OFFER
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Exchange Offer made by SAFECO
Corporation and SAFECO Capital Trust I with respect to its Original Capital
Securities.
This will instruct you to tender the Original Capital Securities held by
you for the account of the undersigned, upon and subject to the terms and
conditions set forth in the Prospectus and the related Letter of Transmittal.
Please tender the Original Capital Securities held by you for my account
as indicated below.
8.072% Original Capital Securities_______________________________Aggregate
Liquidation Amount at Maturity of Original Capital Securities Tendered
/ / Please do not tender any Original Capital Securities held by you for my
account.
Dated: , 1997
-----------------------------------------------------------
Signature(s)
--------------------------------------------------------------------
Please print name(s) here
------------------------------------------------------
Address(es)
---------------------------------------------------------------------
Area Code and Telephone Number(s)
-----------------------------------------------
Tax Identification or Social Security Number(s)
----------------------------------
None of the Original Capital Securities held by us for your account will
be tendered unless we receive written instructions from you to do so. Unless a
specific contrary instruction is given in the space provided, your signature(s)
hereon shall constitute an instruction to us to tender all the Original Capital
Securities held by us for your account.
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR TENDER
OF 8.072% ORIGINAL CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER ORIGINAL CAPITAL SECURITY)
OF SAFECO CAPITAL TRUST I
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if
(i) certificates for the Trust's (as defined below) 8.072% Capital Securities
(the "Original Capital Securities") are not immediately available, (ii) Original
Capital Securities, the Letter of Transmittal and all other required documents
cannot be delivered to The Chase Manhattan Bank (the "Exchange Agent") on or
prior to the Expiration Date (as defined in the Prospectus referred to below) or
(iii) the procedures for delivery by book-entry transfer cannot be completed on
a timely basis. This Notice of Guaranteed Delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile transmission, to the
Exchange Agent. See "The Exchange Offer--Procedures for Tendering Original
Capital Securities" in the Prospectus. In addition, in order to utilize the
guaranteed delivery procedure to tender Original Capital Securities pursuant to
the Exchange Offer, a completed, signed and dated Letter of Transmittal relating
to the Original Capital Securities (or facsimile thereof) must also be received
by the Exchange Agent on or prior to the Expiration Date. Capitalized terms not
defined herein have the meanings assigned to them in the Prospectus.
The Exchange Agent For The Exchange Offer Is:
THE CHASE MANHATTAN BANK
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: Facsimile Transmissions: By Hand or Overnight
(Registered or Certified (Eligible Institutions Only) Delivery:
Mail recommended) (212) 638-7380
The Chase Manhattan Bank To Confirm by Telephone The Chase Manhattan Bank
55 Water Street, Room 234 or for Information Call: c/o The Chase Manhattan Bank
North Building (212) 638-0828 55 Water Street, Room 234
New York, NY 10041 North Building
New York, NY 10041
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SAFECO Capital Trust I, a Delaware
business trust (the "Trust") and to SAFECO Corporation, a Washington corporation
(the "Company"), upon the terms and subject to the conditions set forth in the
Prospectus dated October __, 1997 (as the same may be amended or supplemented
from time to time, the "Prospectus"), and the related Letter of Transmittal
(which together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, the aggregate liquidation amount of Original Capital Securities
set forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer--Procedures for Tendering
Original Capital Securities."
Aggregate Liquidation Amount
---------------------------------------------------
Name(s) of Registered Holder(s):
------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Amount Tendered: $
--------------------------------------------------------------
Certificate No.(s) (if available):
----------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Total Liquidation Amount Represented by Original Capital Securities
Certificates(s))
$
-------------------------------------------------------------------------------
If Original Capital Securities will be tendered by book-entry transfer, provide
the following information:
DTC Account Number:
-------------------------------------------------------------
Date:
---------------------------------------------------------------------------
*Must be in denominations of a Liquidation Amount of $1,000 and any integral
multiple thereof, and not less than $100,000 aggregate Liquidation Amount.
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
x
-------------------------------------------------------------------------------
x
-------------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S) OR DATE AUTHORIZED SIGNATORY
- --------------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER:
Must be signed by the holder(s) of the Original Capital Securities as their
name(s) appear(s) on certificates for Original Capital Securities or on a
security position listing, or by person(s) authorized to become registered
holder(s) by endorsement and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
Please print name(s) and address(es)
(Name(s):
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
-----------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-2-
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker or government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent, at one of its addresses set forth above, either the Original
Capital Securities tendered hereby in proper form for transfer, or confirmation
of the book-entry transfer of such Original Capital Securities to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case
together with one or more properly completed and duly executed Letter(s) of
Transmittal (or facsimile thereof) and any other required documents within three
business days after the date of execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Original Capital Securities tendered hereby to the Exchange
Agent within the time period set forth above and that failure to do so could
result in a financial loss to the undersigned.
(PLEASE TYPE OR PRINT)
Name of Firm:
----------------------------- -----------------------------------
Authorized Signature
Address: Title:
---------------------------------- ------------------------------
Dated:
- ------------------------------------------ ------------------------------
Zip Code
- ------------------------------------------
AREA CODE AND TELEPHONE NO.
NOTE: DO NOT SEND CERTIFICATES FOR ORIGINAL CAPITAL SECURITIES WITH THIS
FORM. CERTIFICATES FOR ORIGINAL CAPITAL SECURITIES SHOULD BE SENT
ONLY WITH YOUR LETTER OF TRANSMITTAL.
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<PAGE>
EXHIBIT 99.3
October __, 1997
EXCHANGE AGENT AGREEMENT
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Ladies and Gentlemen:
SAFECO Capital Trust I, a statutory business trust formed under the laws of
the state of Delaware (the "Trust"), proposes to make an offer (the "Exchange
Offer") to exchange up to $850,000,000 aggregate liquidation amount of its
8.072% Capital Securities (Liquidation Amount $1,000 per Capital Security) fully
and unconditionally guaranteed by SAFECO Corporation (the "Company") (the
"Exchange Capital Securities"), which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), for a like liquidation amount of
its outstanding 8.072% Capital Securities (Liquidation Amount $1,000 per Capital
Security) (the Original Capital Securities"), of which $850,000,000 aggregate
liquidation amount is outstanding. The terms and conditions of the Exchange
Offer as currently contemplated are set forth in a Prospectus (the
"Prospectus"), distributed to record holders of the Original Capital Securities
on October __, 1997. The Original Capital Securities and the Exchange Capital
Securities are collectively referred to herein as the "Capital Securities."
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to them in the Prospectus.
The Trust hereby appoints The Chase Manhattan Bank to act as exchange agent
(the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The Chase Manhattan Bank.
The Exchange Offer is expected to be commenced by the Trust on or about
October __, 1997. The Letter of Transmittal accompanying the Prospectus is to
be used by the holders of the Original Capital Securities to accept the Exchange
Offer and contains certain instructions with respect to (i) the delivery of
certificates for Original Capital Securities tendered in connection therewith
and (ii) the book entry transfer of Capital Securities to the Exchange Agent's
account at The Depository Trust Company ("DTC").
The Exchange Offer shall expire at 5:00 p.m., New York City time, on
__________, 1997 or on such later date or time to which the Trust or the Company
may extend the Exchange Offer (the "Expiration Date"). Subject to the terms and
conditions set forth in the Prospectus, the Trust and the Company expressly
reserve the right to extend the Exchange Offer from time to time by giving oral
(to be confirmed in writing) or written notice to you no later than 5:00 p.m.,
New York City time, on the Business Day following the previously scheduled
Expiration Date.
<PAGE>
The Trust and the Company expressly reserve the right to amend or terminate
the Exchange Offer, and not to accept for exchange any Original Capital
Securities not theretofore accepted for exchange, upon the occurrence of any of
the conditions of the Exchange Offer specified in the Prospectus under the
caption "The Exchange Offer--Conditions to the Exchange Offer." The Trust or
the Company will give oral (to be confirmed in writing) or written notice of any
amendment, termination or nonacceptance of Original Capital Securities to you as
promptly as practicable.
In carrying out your duties as Exchange Agent, you are to act in accordance
with the following instructions:
1. You will perform such duties and only such duties as are specifically
set forth herein and such duties which are necessarily incidental thereto;
provided, however, that in no way will your general duty to act in good faith be
discharged by the foregoing.
2. You will establish an account with respect to the Original Capital
Securities at DTC (the "Book-Entry Transfer Facility") for purposes of the
Exchange Offer within two Business Days after the date of the Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of the Original Capital
Securities by causing the Book-Entry Transfer Facility to transfer such Original
Capital Securities into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal, certificates
for Original Capital Securities (or confirmations of book-entry transfers into
your account at the Book-Entry Transfer Facility) and any Agent's Message or
other documents delivered or mailed to you by or for holders of the Original
Capital Securities to ascertain whether (i) the Letters of Transmittal and any
such other documents are duly executed and properly completed in accordance with
instructions set forth therein and (ii) the Original Capital Securities have
otherwise been properly tendered. In each case where the Letter of Transmittal
or any other document has been improperly completed or executed or any of the
certificates for Original Capital Securities are not in proper form for transfer
or some other irregularity in connection with the acceptance of the Exchange
Offer exists, you will endeavor to inform the presenters of the need for
fulfillment of all requirements and to take any other action as may be necessary
or advisable to cause such irregularity to be corrected.
4. With the approval of any Administrator of the Trust or any person
designated in writing by the Company (a "Designated Officer") (such approval, if
given orally, to be confirmed in writing) or any other party designated by any
such Administrator or Designated Officer in writing, you are authorized to waive
any irregularities in connection with any tender of Original Capital Securities
pursuant to the Exchange Offer.
5. Tenders of Original Capital Securities may be made only as set forth
in the Letter of Transmittal and in the section of the Prospectus captioned "The
Exchange Offer--
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<PAGE>
Procedures for Tendering Original Capital Securities" and Original Capital
Securities shall be considered properly tendered to you only when tendered in
accordance with the procedures set forth therein.
Notwithstanding the provisions of this paragraph 5, Original Capital
Securities which any Administrator of the Trust or Designated Officer of the
Company shall approve as having been properly tendered shall be considered to be
properly tendered (such approval, if given orally, shall be confirmed in
writing).
6. You shall advise the Trust and the Company with respect to any
Original Capital Securities delivered subsequent to the Expiration Date and
accept their instructions with respect to disposition of such Original Capital
Securities.
7. You shall accept tenders:
(a) in cases where the Original Capital Securities are registered in
two or more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity only when
proper evidence of such person's authority to so act is submitted; and
(c) from persons other than the registered holder of Original Capital
Securities provided that customary transfer requirements, including payment of
any applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Original Capital Securities where so
indicated and as permitted in the Letter of Transmittal and deliver certificates
for Original Capital Securities to the transfer agent for split-up and return
any untendered Original Capital Securities to the holder (or to such other
person as may be designated in the Letter of Transmittal) as promptly as
practicable after expiration or termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Trust will notify you (such notice, if given orally, to be confirmed
in writing) of the Company's and the Trust's acceptance, promptly after the
Expiration Date, of all Original Capital Securities properly tendered and you,
on behalf of the Trust, will exchange such Original Capital Securities for
Exchange Capital Securities and cause such Original Capital Securities to be
canceled. Delivery of Exchange Capital Securities will be made on behalf of the
Trust by you at the rate of $1,000 Liquidation Amount at maturity of Exchange
Capital Securities for each $1,000 Liquidation Amount at maturity of the
Original Capital Securities tendered promptly after notice (such notices, if
given orally, to be confirmed in writing) of acceptance of said Original Capital
Securities by the Trust; PROVIDED, HOWEVER, that in all cases, Original Capital
Securities tendered pursuant to the Exchange Offer will be exchanged only after
timely receipt by you of certificates for such Original Capital Securities (or
confirmation of book-entry transfer into your account at the Book-Entry Transfer
Facility), a
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<PAGE>
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or an Agent's Message in lieu
thereof) and any other required documents. You shall issue Exchange Capital
Securities only in denominations of $1,000 or any integral multiple thereof.
Original Capital Securities may be tendered in whole or in part in denominations
of $100,000 and integral multiples of $1,000 in excess thereof provided that if
any Original Capital Securities are tendered for exchange in part, the untended
liquidation amount thereof must be $100,000 or any integral multiple of $1,000
in excess thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus and the
Letter of Transmittal, Original Capital Securities tendered pursuant to the
Exchange Offer may be withdrawn at any time on or prior to the Expiration Date.
10. The Company and the Trust shall not be required to exchange any
Original Capital Securities tendered if any of the conditions set forth in the
Exchange Offer are not met. Notice of any decision by the Company and the Trust
not to exchange any Original Capital Securities tendered shall be given (such
notice, if given orally, shall be confirmed in writing) by the Company or the
Trust to you.
11. If, pursuant to the Exchange Offer, the Company or the Trust does not
accept for exchange all or part of the Original Capital Securities tendered
because of an invalid tender, the occurrence of certain other events set forth
in the Prospectus under the caption "The Exchange Offer--Conditions to the
Exchange Offer" or otherwise, you shall as soon as practicable after the
expiration or termination of the Exchange Offer return those certificates for
unaccepted Original Capital Securities (or effect the appropriate book-entry
transfer of the unaccepted Original Capital Securities), together with any
related required documents and the Letter of Transmittal relating thereto that
are in your possession, to the persons who deposited them.
12. All certificates for reissued Original Capital Securities, unaccepted
Original Capital Securities or for Exchange Capital Securities shall be
forwarded by (a) first-class mail, return receipt requested, under a blanket
surety bond protecting you, the Trust and the Company from loss or liability
arising out of the nonreceipt or nondelivery of such certificates or (b) by
registered mail insured separately for the replacement value of each of such
certificates.
13. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other persons or
to engage or utilize any person to solicit tenders.
14. As Exchange Agent hereunder, you
(a) will be regarded as making no representations and having no
responsibilities at to the validity, sufficiency, value or genuineness of any of
the certificates or the Original Capital Securities represented thereby
deposited with you pursuant to the
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<PAGE>
Exchange Offer, and will not be required to and will make no representation as
to the validity, value or genuineness of the Exchange Offer; PROVIDED, HOWEVER,
that in no way will your general duty to act in good faith be discharged by the
foregoing;
(b) shall not be obligated to take any legal action hereunder which
might in your reasonable judgment involve any expense or liability, unless you
shall have been furnished with reasonable indemnity satisfactory to you;
(c) may conclusively rely on and shall be fully protected in acting
in good faith in reliance upon any certificate, instrument, opinion, notice,
letter, facsimile or other document or security delivered to you and reasonably
believed by you to be genuine and to have been signed by the proper party or
parties;
(d) may conclusively act upon any tender, statement, request,
agreement or other instrument whatsoever not only as to its due execution and
validity and effectiveness of its provisions, but also as to the truth and
accuracy of any information contained therein, which you shall in good faith
reasonably believe to be genuine or to have been signed or represented by a
proper person or persons;
(e) may conclusively rely on and shall be fully protected in acting
upon written or oral instructions from any Administrator of the Trust or from
any Designated Officer of the Company with respect to the Exchange Offer;
(f) shall not advise any person tendering Original Capital Securities
pursuant to the Exchange Offer as to the wisdom of making such tender or as to
the market value or decline or appreciation in market value of any Original
Capital Securities; and
(g) may consult with your counsel with respect to any questions
relating to your duties and responsibilities, and the written opinion or advice
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by you hereunder in good faith
and in accordance with such written opinion of such counsel.
15. You shall take such action as may from time to time be requested by
any Administrator of the Trust or any Designated Officer of the Company (and
such other action as you may reasonably deem appropriate) to furnish copies of
the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery, or
such other forms as may be approved from time to time by the Company or the
Trust, to all persons requesting such documents and to accept and comply with
telephone requests for information relating to the Exchange Offer, provided that
such information shall relate only to the procedures for accepting (or
withdrawing from) the Exchange Offer. The Company or the Trust shall furnish
you with copies of such documents at your request.
16. You shall advise by facsimile transmission or telephone, and promptly
thereafter confirm in writing to George P. Yonker, Vice President--Finance of
the Company, and such other person or persons as the Trust or the Company may
request, daily (and more
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<PAGE>
frequently during the week immediately preceding the Expiration Date and if
otherwise requested) up to and including the Expiration Date, as to the
liquidation amount of the Original Capital Securities which have been tendered
pursuant to the Exchange Offer and the items received by you pursuant to this
Agreement, separately reporting and giving cumulative totals as to items
properly received and items improperly received and items covered by Notices of
Guaranteed Delivery. In addition, you will also inform, and cooperate in making
available to, the Company and the Trust or any such other person or persons as
the Company or the Trust requests from time to time prior to the Expiration Date
of such other information as they or such person reasonably request. Such
cooperation shall include, without limitation, the granting by you to the
Company, the Trust and such person as the Company or the Trust may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date, the Company
and the Trust shall have received information in sufficient detail to enable
them to decide whether to extend the Exchange Offer. You shall prepare a list
of persons who failed to tender or whose tenders were not accepted and the
aggregate Liquidation Amount of Original Capital Securities not tendered or
Original Capital Securities not accepted and deliver said list to the Company
and the Trust at least seven days prior to the Expiration Date. You shall also
prepare a final list of all persons whose tenders were accepted, the Aggregate
Liquidation Amount of Original Capital Securities tendered and the Aggregate
Liquidation Amount of Original Capital Securities accepted and deliver said list
to the Company.
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be
stamped by you as to the date and the time of receipt thereof and shall be
preserved by you for a period of time at least equal to the period of time you
preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company at the address set forth below for notices.
18. For services rendered as Exchange Agent hereunder, you shall be
entitled to such compensation and reimbursement of reasonable out-of-pocket
expenses as set forth on Schedule I attached hereto.
19. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal and further acknowledge that you have examined each of them to the
extent necessary to perform your duties hereunder. Any inconsistency between
this Agreement, on the one hand, and the Prospectus and the Letter of
Transmittal (as they may be amended from time to time), on the other hand, shall
be resolved in favor of the latter two documents except with respect to the
duties, liabilities and indemnification of you as Exchange Agent, which shall be
controlled by this Agreement.
20. The Company agrees to indemnify and hold you (and your officers,
directors, employees and agents) harmless in your capacity as Exchange Agent
hereunder against any liability, cost or expense, including reasonable
attorneys' fees, arising out of or in connection with the performance of your
duties hereunder, other than those losses resulting from your negligence or
willful misconduct.
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<PAGE>
21. This Agreement and your appointment as Exchange Agent hereunder shall
be construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such state,
and without regard to conflicts of law principles, and shall inure to the
benefit of, and the obligations created hereby shall be binding upon, the
successors and assigns of each of the parties hereto.
22. All communications, including notices, required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
if (i) delivered personally with receipt acknowledged, (ii) sent by registered
or certified mail, return receipt requested, (iii) transmitted by facsimile
(which shall be confirmed by telephone and by a writing sent by registered or
certified mail on the business day that such facsimile is sent) or (iv) sent by
recognized overnight courier for next business day delivery, addressed to the
parties at the addresses or facsimile numbers as any party shall hereafter
specify by communication to the other parties in the manner provided herein:
Company: SAFECO Corporation
4333 Brooklyn Avenue N.E.
Seattle, Washington 98185
Fax No.: (206) 545-5363
Attention: James W. Ruddy and
George P. Yonker
with a copy to: Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
Fax No.: (206) 583-8500
Attention: Evelyn Cruz Sroufe
Exchange Agent: The Chase Manhattan Bank
c/o Chase Trust Company of California
Suite 2725
101 California Street
San Francisco, California 94111
Fax No.: (415) 693-8850
Attention: Cecil D. Bobey
with a copy to: Seward & Kissel
One Battery Park Plaza
New York, New York 10004
Fax No.: (212) 480-8421
Attention: Kalyan Das, Esq.
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<PAGE>
23. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
24. In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
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<PAGE>
Please acknowledge receipt of this Agreement and confirm the arrangements
herein provided by signing and returning the enclosed copy.
SAFECO Capital Trust I
By:
-------------------------------
Name: Rodney A. Pierson
Title: Administrative Trustee
SAFECO CORPORATION
By:
-------------------------------
Name: George P. Yonker
Title: Vice President--Finance
Accepted as of the date
first above written:
THE CHASE MANHATTAN BANK,
as Exchange Agent
By:
-------------------------------
Name:
Title:
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