<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 10, 1997.
REGISTRATION NO. 333-38207
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SAFECO CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
WASHINGTON 6331 91-0742146
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) 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. / /
------------------------
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 NOVEMBER 10, 1997
PROSPECTUS
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>
[LOGO]
SAFECO CORPORATION
OFFER TO EXCHANGE ITS
6 7/8% NOTES DUE JULY 15, 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
6 7/8% NOTES DUE JULY 15, 2007
------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON DECEMBER 15, 1997 UNLESS EXTENDED.
SAFECO Corporation, a Washington corporation (the "Corporation"), 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 $200,000,000 aggregate
principal amount of its 6 7/8% Notes due July 15, 2007 (the "Exchange Notes")
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 principal amount of its
outstanding 6 7/8% Notes due July 15, 2007 (the "Original Notes"), of which
$200,000,000 aggregate principal amount are issued and outstanding. The Original
Notes and the Exchange Notes are sometimes collectively referred to herein as
the "Notes." See "The Exchange Offer" and "Description of Exchange Notes."
The terms of the Exchange Notes are identical in all material respects to
the terms of the Original Notes, except that (i) the Exchange Notes have been
registered under the Securities Act and therefore will not be subject to certain
restrictions on transfer applicable to the Original Notes, and (ii) the Exchange
Notes will not provide for any increase in the interest rate thereon. See
"Description of Exchange Notes." The Exchange Notes are being offered for
exchange in order to satisfy certain obligations of the Corporation under the
Registration Rights Agreement dated as of July 15, 1997 (the "Registration
Rights Agreement") between the Corporation and the Initial Purchaser (as defined
below).
(CONTINUED ON THE FOLLOWING PAGE)
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of the Original Notes on November 12, 1997.
SEE "RISK FACTORS" COMMENCING ON PAGE 13 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER ORIGINAL NOTES 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>
The Exchange Notes will be unsecured indebtedness of the Corporation, will
rank PARI PASSU in right of payment with all other unsubordinated and unsecured
indebtedness of the Corporation and will mature on July 15, 2007. Interest on
the Exchange Notes will accrue from July 15, 1997 and will be payable in cash on
each January 15 and July 15, commencing January 15, 1998. In the event that the
Exchange Offer is consummated, any Original Notes that remain outstanding after
consummation of the Exchange Offer and the Exchange Notes issued in the Exchange
Offer will vote together as a single class for purposes of determining whether
holders of the requisite percentage in outstanding principal amount thereof have
taken certain actions or exercised certain rights under the Indenture dated as
of July 15, 1997 between the Corporation and The Chase Manhattan Bank, as
trustee (the "Trustee"), as amended and supplemented from time to time relating
to the Notes (the "Indenture").
The Corporation sold the Original Notes 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, a subsidiary trust of the
Corporation also issued $850,000,000 aggregate liquidation amount of 8.072%
Series A capital securities (the "Original 8.072% Capital Securities"), the
proceeds of which were invested in junior subordinated deferrable interest
debentures of the Corporation, and guaranteed payments of cash distributions and
certain other payments by its subsidiary trust (such Original 8.072% Capital
Securities, debentures and guarantee, the "Original Capital Securities"). The
Corporation currently anticipates a separate exchange offer by the Corporation
and its subsidiary trust of up to $850,000,000 aggregate liquidation amount of
8.072% Series B capital securities (the "Exchange 8.072% Capital Securities"),
together with a like principal amount of junior subordinated deferrable interest
debentures and a like guarantee in respect of the Exchange 8.072% Capital
Securities (such Exchange 8.072% Capital Securities, debentures and guarantee,
the "Exchange Capital Securities") which have been registered under the
Securities Act, for the 8.072% Capital Securities. The Original 8.072% Capital
Securities and the Exchange 8.072% Capital Securities are sometimes collectively
referred to herein as the "8.072% Capital Securities"). The exchange offer for
the Original 8.072% Capital Securities 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 8.072% 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 Notes received
in exchange for Original Notes acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Corporation has agreed
that, ending on the close of business on the 180th day following the Expiration
Date (as defined below), it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, a broker-dealer who acquired Original Notes for its own
account, as a result of market-making activities or other trading activities (a
"Participating Broker-Dealer"), and who intends to use this Prospectus in
connection with the resale of Exchange Notes received in exchange for Original
Notes pursuant to the Exchange Offer must notify the Corporation, or cause the
Corporation 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 herein under "The Exchange Offer--
Exchange Agent." Any Participating Broker-Dealer who is an "affiliate" of the
Corporation 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
Notes 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
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 occurrence of certain other events specified in the
Registration Rights Agreement, such Participating Broker-Dealer will suspend the
sale of Exchange Notes pursuant to this Prospectus until the Corporation has
amended or supplemented this Prospectus to correct such misstatement or omission
2
<PAGE>
and has furnished copies of the amended or supplemented Prospectus to such
Participating Broker-Dealer, or the Corporation has given notice that the sale
of the Exchange Notes may be resumed, as the case may be. If the Corporation
gives such notice to suspend the sale of the Exchange Notes, 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 Notes
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 Notes or to and including the date
on which the Corporation has given notice that the sale of Exchange Notes may be
resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Original Notes. The Exchange Notes will be a new
issue of securities for which there currently is no market. Although Smith
Barney Inc., the initial purchaser of the Original Notes (the "Initial
Purchaser'), has informed the Corporation that it currently intends to make a
market in the Exchange Notes, it is 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
Notes. The Corporation currently does not intend to apply for listing of the
Exchange Notes on any securities exchange or for quotation through Nasdaq.
Any Original Notes 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 Indenture (except
for those rights which terminate upon consummation of the Exchange Offer).
Following consummation of the Exchange Offer, the holders of Original Notes will
continue to be subject to all of the existing restrictions upon transfer thereof
and the Corporation will not have any further obligation to such holders (other
than under certain limited circumstances) to provide for registration under the
Securities Act of the Original Notes held by them. To the extent that Original
Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered Original Notes could be adversely affected. See "Risk
Factors--Consequences of a Failure to Exchange Original Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER.
Original Notes may be tendered for exchange on or prior to 5:00 p.m., New
York City time, on December 15, 1997 (such time on such date being hereinafter
called the "Expiration Date"), unless the Exchange Offer is extended by the
Corporation (in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended). Tenders of Original Notes may
be withdrawn at any time on or prior to the Expiration Date. The Exchange Offer
is not conditioned upon any minimum principal amount of Original Notes being
tendered for exchange. However, the Exchange Offer is subject to certain events
and conditions which may be waived by the Corporation and to the terms and
provisions of the Registration Rights Agreement. Original Notes may be tendered
in whole or in part in integral multiples of $1,000 principal amount. The
Corporation has agreed to pay all expenses of the Exchange Offer. See "The
Exchange Offer--Fees and Expenses." Holders of the Original Notes whose Original
Notes are accepted for exchange will not receive interest on such Original Notes
and will be deemed to have waived the right to receive any interest on such
Original Notes accumulated from and after July 15, 1997. Accordingly, holders of
Exchange Notes as of the record date for the payment of interest on January 15,
1998 will be entitled to receive interest accumulated from and after July 15,
1997. See "The Exchange Offer--Interest Payments on Exchange Notes."
The Corporation will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. No dealer-manager is being used in connection
with this Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
3
<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.
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 (the "Acquisition"). Certain information
about American States has been incorporated into this Prospectus by reference.
See "Incorporation of Certain Documents by Reference" and "Prospectus
Summary--SAFECO-- 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.
The Corporation has filed with the Commission a Registration Statement on
Form S-4, of which this Prospectus forms a part (the "Registration Statement"),
to register the securities offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted from this Prospectus in accordance with the rules and regulations of
the Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document do not purport to be complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. Items omitted from this
Prospectus but contained in the Registration Statement may be inspected and
copied as described above.
4
<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),
October 15, 1997 (File No. 1-6563) and November 10, 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.
5
<PAGE>
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 NOTES 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
6
<PAGE>
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 Original Notes, $850 million aggregate liquidation amount of the
8.072% 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."
7
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer................ Up to $200,000,000 aggregate principal amount of
Exchange Notes are being offered in exchange for a like
aggregate principal amount of Original Notes. Original
Notes may be tendered for exchange in whole or in part
in an aggregate principal amount of $100,000 and
integral multiples of $1,000 in excess thereof. The
Corporation is making the Exchange Offer in order to
satisfy its obligations under the Registration Rights
Agreement relating to the Original Notes. For a
description of the procedures for tendering Original
Notes, see "The Exchange Offer--Procedures for Tendering
Original Notes."
Expiration Date................... 5:00 p.m., New York time, on December 15, 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 The Exchange Offer is subject to certain conditions,
Offer........................... which may be waived by the Corporation in its sole
discretion. The Exchange Offer is not conditioned upon
any minimum principal amount of Original Notes being
tendered. See "The Exchange Offer--Conditions to the
Exchange Offer."
Offer............................. The Corporation reserves the right in its sole and
absolute discretion, subject to applicable law, at any
time and from time to time, (i) to delay the acceptance
of the Original Notes 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 Notes
tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Original Notes to
withdraw their tendered Original Notes, 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 Notes 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 below under "The Exchange
Offer--Withdrawal Rights."
Procedures for Tendering
Original Notes.................. Brokers, dealers, commercial banks, trust companies and
other nominees who hold Original Notes through The
Depository Trust Company (the "Depository" or "DTC") may
effect tenders by book-entry transfer in accordance with
DTC's Automated Tender Offer Program ("ATOP"). Holders
of such Original Notes 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 Notes. In order for
Original Notes to be tendered by a means
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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 Notes 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 Notes."
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 Notes......... The Corporation is making the Exchange Offer 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, the Corporation has not
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
believes that Exchange Notes issued pursuant to this
Exchange Offer in exchange for Original Notes 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 Notes 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 Notes. However, any
holder of Original Notes who is an "affiliate," as
defined in Rule 405 under the Securities Act, of the
Corporation or who intends to participate in the
Exchange Offer for the purpose of distributing the
Exchange Notes, or any broker-dealer who purchased the
Original Notes from the Corporation 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
Commission set forth in the above-mentioned interpretive
letters, (b) will not be permitted or entitled to tender
such Original Notes 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 Notes unless
such sale is made pursuant to an exemption from such
requirements. In addition,
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as described below, if any broker-dealer holds Original
Notes acquired for its own account as a result of
market-making or other trading activities and exchanges
such Original Notes for Exchange Notes, then such
broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with
any resales of such Exchange Notes.
Each holder of Original Notes who wishes to exchange
Original Notes for Exchange Notes in the Exchange Offer
will be required to represent that (i) it is not an
"affiliate," as defined in Rule 405 under the Securities
Act, of the Corporation, (ii) any Exchange Notes 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 Notes, 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 Notes.
Each broker-dealer that receives Exchange Notes for its
own account in exchange for Original Notes, where such
Original Notes 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 Notes. See "Plan of Distribution." 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
believes that Participating Broker-Dealers who acquired
Original Notes for their own accounts as a result of
market-making activities or other trading activities may
fulfill their prospectus deliver requirements with
respect to the Exchange Notes received upon exchange of
such Original Notes (other than Original Notes which
represent an unsold allotment from the initial sale of
the Original Notes) 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 Notes.
Accordingly, this Prospectus, as it may be amended or
supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Original
Notes where such Original Notes 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 and to the limitations
described below in "The Exchange Offer--Resales of
Exchange Notes," the Corporation has agreed that this
Prospectus, as it may be
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amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with
resales of such Exchange Notes for a period ending 180
days after the Expiration Date (subject to extension
under certain limited circumstances) or, if earlier,
when all such Exchange Notes have been disposed of by
such Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer who is an
"affiliate" of the Corporation 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 Notes."
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. The Chase Manhattan Bank also
serves as trustee under the Indenture.
Use of Proceeds................... The Corporation will not receive any cash proceeds from
the issuance of the Exchange Notes offered hereby. See
"Use of Proceeds."
Certain United States Federal
Income Tax Consequences;
ERISA Considerations............ Holders of Original Notes should review the information
set forth in "Certain United States Federal Income Tax
Consequences" and "ERISA Considerations" prior to
tendering Original Notes in the Exchange Offer.
THE EXCHANGE NOTES
Securities Offered................ Up to $200,000,000 aggregate principal amount of the
Corporation's Exchange Notes which have been registered
under the Securities Act. The Exchange Notes will be
issued and the Original Notes were issued under the
Indenture. The Exchange Notes and any Original Notes
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 principal amount thereof have
taken certain actions or exercised certain rights under
the Indenture. See "Description of Exchange
Notes--Modification and Waiver." The terms of the
Exchange Notes are identical in all material respects to
the terms of the Original Notes, except that the
Exchange Notes have been registered under the Securities
Act and will not be subject to certain restrictions on
transfer applicable to the Original Notes and will not
provide for any increase in the interest rate thereon.
See "The Exchange Offer--Purpose of the Exchange Offer"
and "Description of Exchange Notes."
Maturity Date..................... July 15, 2007.
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Interest.......................... Interest on the Notes is payable semi-annually on each
January 15 and July 15, commencing January 15, 1998.
Ranking........................... The Notes are unsecured obligations of the Corporation
and will rank PARI PASSU with all secured and
unsubordinated indebtedness of the Corporation.
Redemption........................ The Notes may not be redeemed prior to maturity.
Ratings........................... The Exchange Notes are rated A3 by Moody's Investors
Service, Inc. and A+ by Standard & Poor's Rating
Services.
Book-Entry, Delivery and Form..... It is expected that delivery of the Exchange Notes will
be made in book-entry or certificated form. The
Corporation expects that Exchange Notes exchanged for
Original Notes currently represented by Global Notes (as
defined under "Description of Exchange Notes") deposited
with, or on behalf of the Depository and registered in
the name of Cede & Co., its nominee, will be represented
by Global Notes and deposited upon issuance with the
Depository and registered in its name or the name of its
nominee. Beneficial interests in Global Note(s)
representing the Notes will be shown on, and transfers
thereof will be effected through, records maintained by
the Depository and its participants.
Transfer Restrictions............. The Exchange Notes will be issued, and may be
transferred, only in minimum denominations of not less
than $1,000 principal amount. See "Description of
Exchange Notes--Restrictions on Transfer." Any such
transfer of Exchange Notes in denominations of less than
$1,000 principal amount shall be deemed to be void and
of no legal effect whatsoever.
Absence of Market for the Notes... The Exchange Notes will be a new issue of securities for
which there currently is no market. Although the Initial
Purchaser has informed the Corporation that it currently
intends to make a market in the Notes, the Initial
Purchaser is 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 Notes.
The Corporation does not intend to apply for listing of
the Notes on any securities exchange or for quotation
through Nasdaq. See "Plan of Distribution."
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For additional information regarding the Notes, see "Description of Exchange
Notes" and "Certain Federal Income Tax Considerations."
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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 NOTES SHOULD
CAREFULLY REVIEW THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND
SHOULD PARTICULARLY CONSIDER THE INFORMATION STATED BELOW. SEE "FORWARD-LOOKING
INFORMATION."
CONSEQUENCES OF A FAILURE TO EXCHANGE ORIGINAL NOTES
The Original Notes 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 Notes 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 Notes that remain
outstanding will not be entitled to any rights to have such Original Notes
registered under the Securities Act or to any similar rights under the
Registration Rights Agreement (subject to certain limited exceptions). The
Corporation does not intend to register under the Securities Act any Original
Notes which remain outstanding after consummation of the Exchange Offer (subject
to such limited exceptions, if applicable). To the extent that Original Notes
are tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Original Notes could be adversely affected.
The Exchange Notes and any Original Notes 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 principal amount of Notes have taken certain actions or exercised
certain rights under the Indenture. See "Description of Exchange
Notes--Modification and Waiver."
The Original Notes 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 interest rate borne by the
Original Notes 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 Notes will not be
entitled to any increase in the interest rate thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Description of Exchange Notes."
HOLDING CORPORATION 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 a 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 Notes. 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 stockholders of the
Corporation will have no right to proceed against the assets of such subsidiary
or to cause the liquidation, bankruptcy or winding-up of such subsidiary under
applicable liquidation, 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
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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 stockholder, 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,
from time to time, impose 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 subsidiaries received approval in July
1997 to pay dividends totaling $600 million to SAFECO to fund a portion of the
purchase price for the Acquisition.
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Indenture does not contain provisions that afford holders of the Notes
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.
ABSENCE OF PUBLIC MARKET
The Original Notes were issued to, and the Corporation believes such
securities are currently owned by, a relatively small number of beneficial
owners. The Original Notes have not been registered under the Securities Act and
will be subject to restrictions on transferability if they are not exchanged for
the Exchange Notes. Although the Exchange Notes may be resold or otherwise
transferred by the holders (who are not affiliates of the Corporation) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
The Corporation has been advised by the Initial Purchaser that the Initial
Purchaser presently intends to make a market in the Exchange Notes. However, the
Initial Purchaser is not obligated to do so and any market-making activity with
respect to the Exchange Notes 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 Notes or the Original Notes, or as to the
liquidity or the trading market for the Exchange Notes or the Original Notes. If
an active public market does not develop, the market price and liquidity of the
Exchange Notes may be adversely affected.
If a public trading market develops for the Exchange Notes, 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 Notes may
trade at a discount.
Notwithstanding the registration of the Exchange Notes in the Exchange
Offer, holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of the Corporation may publicly offer for sale or resell the Exchange Notes
only in compliance with the provisions of Rule 144 under the Securities Act.
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Each broker-dealer that receives Exchange Notes for its own account in
exchange for Original Notes, where such Original Notes 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."
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, 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
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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.
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.
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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.
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.
EXCHANGE OFFER PROCEDURES
Subject to the conditions set forth in "The Exchange Offer--Conditions to
the Exchange Offer," delivery of Exchange Notes in exchange for Original Notes
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
Notes or a book-entry confirmation of a book-entry transfer of Original Notes
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
Notes") 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
Notes desiring to tender such Original Notes in exchange for Exchange Notes
should allow sufficient time to ensure timely delivery. The Corporation is not
under a duty to give notification of defects or irregularities with respect to
the tenders of Original Notes for exchange.
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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 8.072% 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 8.072% 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 stockholder 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.
18
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- ADJUSTMENTS PRO
AMERICAN INCREASE NOTE 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>
19
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ADJUSTMENTS PRO
AMERICAN INCREASE NOTE 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>
20
<PAGE>
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ADJUSTMENTS PRO
AMERICAN INCREASE NOTE 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>
21
<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)
22
<PAGE>
(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.
23
<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 Notes 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. The Corporation will not
receive any proceeds from the issuance of the Exchange Notes offered hereby and
has agreed to pay the expenses of the Exchange Offer. In consideration for
issuing the Exchange Notes as contemplated in this Prospectus, the Corporation
will receive, in exchange, Original Notes representing an equal aggregate
principal amount at maturity. The form and terms of the Exchange Notes are
identical in all material respects to the form and terms of the Original Notes,
except as otherwise described in "The Exchange Offer--Terms of the Exchange
Offer." The Original Notes surrendered in the exchange for Exchange Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase in the outstanding debt of the
Corporation.
24
<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 DEC. 31, ENDED ---------------------------------
JUNE 30,1997 1996 JUNE 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 22.0 20.5 11.5 9.5
Ratio of earnings to fixed charges
and distributions on capital
securities, excluding SAFECO
Credit Company, Inc............... 4.6 4.4 22.0 20.5 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.
25
<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 8.072% 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 (each as defined in "Selected Financial
Information"), as the case may be.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------------
AS ADJUSTED FOR AS ADJUSTED FOR
THE ACQUISITION THE 8.072% CAPITAL
SAFECO AND THE RELATED SECURITIES AND THE
ACTUAL FINANCINGS 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.
26
<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)
27
<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........ $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.
(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.
28
<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 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 (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)
29
<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.
30
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Original Notes, the Corporation entered
into the Registration Rights Agreement with the Initial Purchaser, pursuant to
which the Corporation agreed to file and to use reasonable efforts to cause to
become effective with the Commission a registration statement with respect to
the exchange of the Original Notes for notes with terms identical in all
material respects to the terms of the Original Notes. A copy of the Registration
Rights Agreement has been filed as an Exhibit to the Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
The Exchange Offer is being made to satisfy the contractual obligations of
the Corporation under the Registration Rights Agreement. The form and terms of
the Exchange Notes are the same as the form and terms of the Original Notes
except that the Exchange Notes have been registered under the Securities Act and
will not be subject to certain restrictions on transfer applicable to the
Original Notes, and will not provide for any increase in the interest rate
thereon. In that regard, the Original Notes 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 interest rate
borne by the Original Notes 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 Notes will not be
entitled to any increase in the interest 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 Notes" and "Description of Exchange Notes."
The Exchange Offer is not being made to, nor will the Corporation accept
tenders for exchange from, holders of Original Notes 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 Notes are registered
on the books of the Corporation or any other person who has obtained a properly
completed bond power from the registered holder, or any person whose Original
Notes are held of record by DTC who desires to deliver such Original Notes by
book-entry transfer at DTC.
TERMS OF THE EXCHANGE OFFER
The Corporation 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 $200,000,000 aggregate principal amount of Exchange Notes for a
like aggregate principal amount of Original Notes properly tendered on or prior
to the Expiration Date and not properly withdrawn in accordance with the
procedures described below. The Corporation will issue, promptly after the
Expiration Date, an aggregate principal amount of up to $200,000,000 of Exchange
Notes in exchange for a like principal amount of outstanding Original Notes
tendered and accepted in connection with the Exchange Offer. Holders may tender
their Original Notes in whole or in part in an aggregate principal amount of
$100,000 and integral multiples of $1,000 in excess thereof.
The Exchange Offer is not conditioned upon any minimum principal amount of
Original Notes being tendered. As of the date of this Prospectus, $200,000,000
aggregate principal amount of the Original Notes is outstanding.
Holders of Original Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Original Notes 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 Indenture, but will not be
entitled to any further registration rights under the Registration Rights
Agreement, except under
31
<PAGE>
limited circumstances. See "Risk Factors--Consequences of a Failure to Exchange
Original Notes" and "Description of Exchange Notes."
If any tendered Original Notes 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 Notes will be returned,
without expense, to the tendering holder thereof promptly after the Expiration
Date.
Holders who tender Original Notes 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 Notes 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 NOR THE BOARD OF DIRECTORS OF THE CORPORATION MAKES
ANY RECOMMENDATION TO HOLDERS OF ORIGINAL NOTES AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR ORIGINAL NOTES PURSUANT TO
THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF ORIGINAL NOTES MUST MAKE THEIR OWN DECISIONS WHETHER
TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF
ORIGINAL NOTES 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 December
15, 1997 unless the Exchange Offer is extended by the Corporation (in which case
the term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended).
The Corporation expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i) to
delay the acceptance of the Original Notes for exchange, (ii) to terminate the
Exchange Offer (whether or not any Original Notes have theretofore been accepted
for exchange) if the Corporation 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 Notes
tendered pursuant to the Exchange Offer, subject, however, to the right of
holders of Original Notes to withdraw their tendered Original Notes as described
in "--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
to constitute a material change, or if the Corporation waives a material
condition of the Exchange Offer, the Corporation will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
holders of the Original Notes, and the Corporation 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 may choose to make any public announcement
and subject to applicable law, the Corporation 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.
32
<PAGE>
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Corporation will exchange Exchange Notes for Original Notes 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 Notes in exchange for Original Notes 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 Notes or a
book-entry confirmation of a book-entry transfer of Original Notes 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 Notes might not be
made to all tendering holders at the same time, and will depend upon when
certificates for Original Notes, book-entry confirmations with respect to
Original Notes 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 Notes into the Exchange Agent's account at DTC.
See "--Procedures for Tendering Original Notes-- 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 Corporation may enforce such
Letter of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Corporation
will be deemed to have accepted for exchange, and thereby exchanged, Original
Notes validly tendered and not withdrawn as, if and when the Corporation gives
oral or written notice to the Exchange Agent of the Corporation's acceptance of
such Original Notes for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Corporation for the purpose of receiving tenders
of Original Notes, Letters of Transmittal and related documents, and as agent
for tendering holders for the purpose of receiving Original Notes, Letters of
Transmittal and related documents and transmitting Exchange Notes 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 Notes
tendered pursuant to the Exchange Offer is delayed (whether before or after the
Corporation's acceptance for exchange of Original Notes) or the Corporation
extends the Exchange Offer or is unable to accept for exchange or exchange
Original Notes tendered pursuant to the Exchange Offer, then, without prejudice
to the Corporation's rights set forth herein, the Exchange Agent may,
nevertheless, on behalf of the Corporation and subject to Rule 14e-1(c) under
the Exchange Act, retain tendered Original Notes and such Original Notes 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 Notes 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 Notes, that the Corporation will acquire good, marketable and
unencumbered title to the tendered Original Notes, free and clear of all liens,
restrictions, charges and encumbrances, and the Original Notes 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 Corporation or the Exchange Agent to be necessary or
desirable to complete the exchange, sale, assignment, and transfer of the
Original Notes tendered pursuant to the Exchange Offer.
33
<PAGE>
PROCEDURES FOR TENDERING ORIGINAL NOTES
VALID TENDER
Except as set forth below, in order for Original Notes 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 Notes 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 Notes 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 Notes 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 Notes are tendered, a tendering holder should fill
in the amount of Original Notes being tendered in the appropriate box on the
Letter of Transmittal. The entire amount of Original Notes 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 Notes--Description of the Exchange Notes--Depositary
Procedures") in DTC's book-entry transfer facility system may utilize DTC's ATOP
procedures to tender Original Notes. The Exchange Agent will establish an
account with respect to the Original Notes at 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 Notes by causing DTC
to transfer such Original Notes into the Exchange Agent's account at DTC in
accordance with DTC's ATOP procedures for transfer. However, although delivery
of Original Notes 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 Notes need not be endorsed and signature
guarantees on the Letter of Transmittal are unnecessary unless (a) a certificate
for the Original Notes is registered in a name other
34
<PAGE>
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 Notes 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 Notes pursuant to the Exchange Offer
and the certificates for such Original Notes 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 Notes 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 Notes, 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 Notes
in exchange for Original Notes tendered and accepted for exchange pursuant to
the Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Original Notes, or of a book-entry confirmation with respect
to such Original Notes, 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 Notes might not be made to all tendering
holders at the same time, and will depend upon when Original Notes, book-entry
confirmations with respect to Original Notes and other required documents are
received by the Exchange Agent.
The Corporation's acceptance for exchange of Original Notes tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Corporation 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 Notes will
be determined by the Corporation, in its sole discretion, whose determination
shall be final and binding on all parties. The Corporation reserves the absolute
right, in its sole and absolute discretion, to reject any and all tenders
determined by it not to be in proper form or the acceptance of which, or
exchange for, may, in the opinion of counsel to the
35
<PAGE>
Corporation, be unlawful. The Corporation also reserves the absolute right,
subject to applicable law, to waive any of the conditions of the Exchange Offer
as set forth under "--Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Original Notes of any particular holder whether or
not similar conditions or irregularities are waived in the case of other
holders.
The interpretation by the Corporation 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 Notes will be deemed
to have been validly made until all irregularities with respect to such tender
have been cured or waived. Neither the Corporation, any affiliates or assigns of
the Corporation, 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, proper
evidence satisfactory to the Corporation, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Original Notes 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 NOTES
The Corporation is making the Exchange Offer for the Exchange Notes 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, the Corporation has not 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 believes that Exchange Notes issued
pursuant to this Exchange Offer in exchange for Original Notes 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 Notes 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 Notes. However, any holder of Original Notes
who is an "affiliate" of the Corporation or who intends to participate in the
Exchange Offer for the purpose of distributing Exchange Notes, or any
broker-dealer who purchased Original Notes from the Corporation 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 Notes 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 Notes unless such sale is made
pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Original Notes acquired for its own account as
a result of market-making or other trading activities and exchanges such
Original Notes for Exchange Notes, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such Exchange Notes.
Each holder of Original Notes who wishes to exchange Original Notes for
Exchange Notes in the Exchange Offer will be required to represent that (i) it
is not an "affiliate" of the Corporation, (ii) any Exchange Notes to be received
by it are being acquired in the ordinary course of its business, (iii) it has no
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arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Notes, 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 Notes. In addition, the Corporation may require such holder, as
a condition to such holder's eligibility to participate in the Exchange Offer,
to furnish to the Corporation (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 Notes to be exchanged in
the Exchange Offer. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it acquired the
Original Notes 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 Notes. 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
believes that Participating Broker-Dealers who acquired Original Notes 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
Notes received upon exchange of such Original Notes (other than Original Notes
which represent an unsold allotment from the initial sale of the Original Notes)
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 Notes. 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 Notes
received in exchange for Original Notes where such Original Notes 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 has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such Exchange
Notes 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 Notes 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 Notes received in exchange for Original
Notes pursuant to the Exchange Offer must notify the Corporation, or cause the
Corporation 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 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
Notes 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
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 Notes, pursuant to this Prospectus until the
Corporation 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 has given
notice that the sale of the Exchange Notes may be resumed, as the case may be.
If the Corporation gives such notice to suspend the sale of the Exchange
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Notes, 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 Notes 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 Notes or to
and including the date on which the Corporation has given notice that the sale
of Exchange Notes may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original Notes 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 Notes to be withdrawn, the
aggregate principal amount of Original Notes to be withdrawn, and (if
certificates for such Original Notes have been tendered) the name of the
registered holder of the Original Notes as set forth on the Original Notes, if
different from that of the person who tendered such Original Notes. If Original
Notes have been delivered or otherwise identified to the Exchange Agent, then,
prior to the physical release of such Original Notes, the tendering holder must
submit the serial numbers shown on the particular Original Notes to be withdrawn
and the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Original Notes tendered for the account of an
Eligible Institution. If Original Notes have been tendered pursuant to the
procedures for book-entry transfer set forth in "--Procedures for Tendering
Original Notes," the notice of withdrawal must specify the name and number of
the account at DTC to be credited with the withdrawal of Original Notes, 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 Notes may not be rescinded. Original Notes 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 Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Corporation, in
its sole discretion, whose determination shall be final and binding on all
parties. Neither the Corporation, any affiliates or assigns of the Corporation,
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 Notes which
have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
INTEREST PAYMENTS ON EXCHANGE NOTES
Holders of Original Notes whose Original Notes are accepted for exchange
will not receive interest payments on such Original Notes and will be deemed to
have waived the right to receive any interest payments on such Original Notes
accumulated from and after July 15, 1997. Accordingly, holders of Exchange Notes
as of the record date for the payment of interest on January 15, 1998 will be
entitled to receive interest 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 will not be required to accept for
exchange, or to exchange, any Original Notes for any Exchange Notes, and, as
described below, may terminate the Exchange Offer (whether or not any Original
Notes 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:
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(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Original Notes 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 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 Notes 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 Notes; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Corporation, would reasonably be
expected to impair its ability to proceed with the Exchange Offer; or
(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, threatened for that purpose, or any governmental approval
has not been obtained, which approval the Corporation shall, in its sole
discretion, deem necessary for the consummation of the Exchange Offer as
contemplated hereby.
If the Corporation 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 Notes 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 will promptly disclose such waiver or
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the Original Notes 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. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed
as follows:
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND:
The Chase Manhattan Bank (FOR ELIGIBLE INSTITUTIONS ONLY) The Chase Manhattan Bank
450 West 33rd Street, 15th Floor (212) 946-8154 450 West 33rd Street, 15th Floor
New York, New York 10001-2697 New York, New York 10001-2697
Attention: John T. Needham, Jr. CONFIRM BY TELEPHONE: Attention: John T. Needham, Jr.
(212) 946-3041
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.
The Chase Manhattan Bank also serves as Trustee under the Indenture.
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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 Notes, and in
handling or tendering for their customers.
Holders who tender their Original Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, Exchange Notes
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Original Notes tendered, or if a transfer tax
is imposed for any reason other than the exchange of Original Notes 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.
The Corporation will not make any payment to brokers, dealers or other
nominees soliciting acceptances of the Exchange Offer.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Original
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
Original Notes that are not exchanged for the Exchange Notes pursuant to the
Exchange Offer will remain "restricted securities" within the meaning of Rule
144(a)(3)(iv) of the Securities Act. Accordingly, such Original Notes may not be
offered, sold, pledged or otherwise transferred except (i) to a person whom the
seller reasonably believes is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act purchasing for its own account or
for the account of a qualified institutional buyer in a transaction meeting the
requirements of Rule 144A, (ii) in an offshore transaction complying with Rule
903 or Rule 904 of Regulation S under the Securities Act, (iii) pursuant to an
exemption from registration under the Securities Act provided by Rule 144
thereunder (if available), (iv) pursuant to an effective registration statement
under the Securities Act or (v) to institutional accredited investors in a
transaction exempt from the registration requirements of the Securities Act,
and, in each case, in accordance with all other applicable securities laws and
the transfer restrictions set forth in the Indenture.
ACCOUNTING TREATMENT
For accounting purposes, the Corporation will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the remaining term of the Notes.
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DESCRIPTION OF EXCHANGE NOTES
The terms of the Original Notes are identical in all materials respects to
the Exchange Notes, except that (i) the Original Notes have not been registered
under the Securities Act, are subject to certain restrictions on transfer and
are entitled to certain rights under the Registration Rights Agreement (which
rights will terminate upon consummation of the Exchange Offer, except under
limited circumstances) and (ii) the Exchange Notes will not contain the $100,000
minimum principal amount transfer restriction and certain other restrictions on
transfer applicable to Original Notes and (iii) the Exchange Notes will not
provide for any increase in the interest rate thereon. The Original Notes
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
Notes is not declared effective by the time required by the Registration Rights
Agreement, then liquidated damages ("Additional Interest") will accrue at the
rate of 0.50% per annum on the principal amount of the Original Notes 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
Notes are not, and upon consummation of the Exchange Offer the Original Notes
will not be, entitled to any such Additional Interest. Accordingly, holders of
Original Notes should review the information set forth in "Risk
Factors--Consequences of a Failure to Exchange Original Notes."
DESCRIPTION OF THE EXCHANGE NOTES
The Corporation is offering up to $200,000,000 aggregate principal amount of
its 6 7/8% Exchange Notes due July 15, 2007 (the "Exchange Notes"). The Exchange
Notes will be, and the Original Notes were, issued under an indenture, dated as
of July 15, 1997 (the "Indenture"), between the Corporation and The Chase
Manhattan Bank, as Trustee (the "Trustee"), a copy of which is available upon
request to the Corporation. The statements under this caption are brief
summaries of certain provisions of the Indenture, do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all of
the provisions of the Indenture, including the definitions therein of certain
terms. Wherever particular terms that are defined in the Indenture are referred
to herein, it is intended that such defined terms shall be incorporated by
reference herein or therein, as the case may be.
The Exchange Notes will be limited to $200,000,000 aggregate principal
amount. The Exchange Notes will be unsecured obligations of the Corporation,
will rank PARI PASSU with all other unsecured and unsubordinated indebtedness of
the Corporation, and will mature on July 15, 2007. The Indenture does not limit
the incurrence or issuance of other secured or unsecured indebtedness of the
Corporation.
The Exchange Notes will bear interest at the rate per annum shown on the
cover page of this Offering Memorandum, payable semi-annually on January 15 and
July 15 of each year (each an "Interest Payment Date") commencing January 15,
1998 to the Persons in whose names the Exchange Notes (or any predecessor Notes)
are registered at the close of business on January 1 and July 1, as the case may
be, next preceding such Interest Payment Date. 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
Notes 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 6 7/8% thereof, compounded semi-annually. The term
"interest," as used herein, shall include semi-annual interest payments and
interest on semi-annual interest payments not paid on the applicable Interest
Payment Date. The Exchange Notes may not be redeemed prior to maturity and will
not be subject to any sinking fund.
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CERTAIN RESTRICTIONS
LIMITATIONS ON MORTGAGES AND LIENS. The Corporation will not be permitted
to issue, assume, guarantee or permit to exist any indebtedness secured by a
mortgage, pledge, lien or other encumbrance ("liens") on any of its property or
assets, whether now owned or hereafter acquired, without effectively providing
that the Exchange Notes (and, if the Corporation so elects, any other
indebtedness ranking on a parity with the Exchange Notes) shall be equally and
ratably secured with any such indebtedness, so long as any such other
indebtedness shall be secured, except that the foregoing shall not apply to (a)
liens in existence on the date of the Indenture, (b) liens on real estate
(including those existing on property at the time of acquisition) in any amount
not exceeding 100% of the fair value of the property at the time of creation of
such indebtedness, (c) liens arising from the acquisition of a business as a
going concern (whether by merger, acquisition of a controlling stock interest,
acquisition of assets or otherwise) or to which assets acquired by the
Corporation in partial or complete satisfaction of secured indebtedness are
subject, (d) liens to secure extensions, renewals and replacements of
indebtedness secured by any of the liens referred to in (a), (b) and (c) above,
without increase in the amount of such indebtedness, and (e) certain mechanics,
landlords, tax or other statutory liens, including liens and deposits required
or provided for under state insurance laws and similar regulatory statutes.
LIMITATIONS ON SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. Neither
the Corporation nor any Restricted Subsidiary will be permitted to issue, sell,
transfer or dispose of (except to a Restricted Subsidiary of the Corporation)
capital stock of a Restricted Subsidiary, unless the entire capital stock of
such Subsidiary at the time owned by the Corporation and its Restricted
Subsidiaries is disposed of at the same time for a consideration of cash or
property, which in the opinion of the Board of Directors of the Corporation is
at least equal to the fair value of such capital stock.
For the purposes of the foregoing restrictions, "Restricted Subsidiary"
shall mean a subsidiary, including subsidiaries of any such subsidiary, which
meets any of the following conditions: (a) the Corporation's and its other
subsidiaries' investments in and advances to the subsidiary exceed 10% of the
total assets of the Corporation and its subsidiaries consolidated as of the end
of the most recently completed fiscal year; (b) the Corporation's and its other
subsidiaries' proportionate share of the total assets (after inter-company
eliminations) of the subsidiary exceeds 10% of the total assets of the
Corporation and its subsidiaries consolidated as of the end of the most recently
completed fiscal year; or (c) the Corporation's and its other subsidiaries'
equity in the income from continuing operations before income taxes,
extraordinary items and cumulative effect of a change in accounting principle of
the subsidiary exceeds 10% of such income of the Corporation and its
subsidiaries consolidated for the most recently completed fiscal year. For
purposes of making the prescribed income test in clause (c) of the preceding
sentence, when a loss has been incurred by either the Corporation and its
subsidiaries consolidated or the tested subsidiary, but not both, the equity in
the income or loss of the tested subsidiary shall be excluded from the income of
the Corporation and its subsidiaries consolidated for purposes of the
computation and if income of the Corporation and its subsidiaries consolidated
for the most recent fiscal year is at least 10% lower than the average of the
income for the last five fiscal years, such average income shall be substituted
for purposes of the computation and any loss years shall be omitted for purposes
of computing average income.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Corporation shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, and no Person shall consolidate with or merge into the
Corporation or convey or transfer its properties and assets substantially as an
entirety to the Corporation, unless: (i) in case the Corporation consolidates
with or merges into another corporation or conveys or transfers its properties
and assets substantially as an entirety to any Person, the successor corporation
is organized under the laws of the United States of America, or any state or the
District of Columbia, and the successor corporation assumes the Corporation's
obligations under the Exchange
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Notes; (ii) immediately after giving effect thereto, no Event of Default, and no
event which, after notice or lapse of time, or both, would become an Event of
Default, shall have happened and be continuing; and (iii) certain other
conditions are met.
The Corporation shall not lease its properties and assets substantially as
an entirety to any Person.
MODIFICATION AND WAIVER
Modification and amendments of the Indenture may be made by the Corporation
and the Trustee with the consent of the Holders of 66 2/3% in aggregate
principal amount of the outstanding Notes; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
outstanding Note affected thereby: (a) change the Stated Maturity of the
principal of, or any installment of interest on, any outstanding Note; (b)
reduce the principal amount of, or interest on, any outstanding Note; (c) change
the place or currency of payment of principal or interest on any outstanding
Note; (d) impair the right to institute suit for the enforcement of any payment
on or with respect to any outstanding Note after the Stated Maturity; or (e)
reduce the percentage in principal amount of outstanding Notes, the consent of
the Holders of which is required for modification or amendment of the Indenture,
for waiver of compliance with certain provisions of the Indenture or for waiver
of certain defaults.
The Corporation may obtain a waiver of compliance with certain restrictive
covenants with respect to the Notes if the Holders of 66 2/3% in aggregate
principal amount of the outstanding Notes consent to such waiver. The Holders of
not less than a majority in principal amount of the outstanding Notes may, on
behalf of the Holders of all outstanding Notes, waive any past default under the
Indenture with respect to such outstanding Notes, except a default in the
payment of the principal of or any interest on any outstanding Note or in
respect of a provision which under the Indenture cannot be modified or amended
without the consent of the Holder of each outstanding Note affected.
The Exchange Notes and any Original Notes that 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 principal amount thereof have taken certain actions or exercised
certain rights under the Indenture, including the right to vote on waivers and
amendments as described above or take certain actions upon an event of default
as described below.
EVENTS OF DEFAULT
The Indenture provides that the following shall constitute Events of
Default: (i) default for 30 days in the payment of any interest when due; (ii)
default in the payment of principal; (iii) default in the performance of any
other covenant in the Indenture for 60 days after written notice; (iv) a failure
to pay when due, or a default resulting in the acceleration of maturity of, any
other indebtedness for borrowed money of the Corporation or a Restricted
Subsidiary in which the principal amount of any such indebtedness, together with
the principal amount of any other such indebtedness which is presently in
Payment Default or the maturity of which has been so accelerated, aggregates $25
million or more, without such acceleration having been rescinded, stayed or
annulled, or such indebtedness having been discharged or, in the case of
indebtedness contested in good faith by the Corporation, a bond, letter of
credit, escrow deposit or other cash equivalent in an amount sufficient to
discharge such indebtedness having been set aside, within 10 days after written
notice of default is given to the Corporation; and (v) certain events in
bankruptcy, insolvency or reorganization. The Corporation is required to furnish
the Trustee annually with a statement as to the fulfillment by the Corporation
of its obligations under the Indenture. The Indenture provides that the Trustee
may withhold notice to the Holders of the Notes of any Default (except in
payment of principal or interest on the Notes) if it considers it in the
interest of the Holders to do so.
If an Event of Default with respect to debt securities of any series
outstanding under the Indenture occurs and is continuing, then and in any every
such case the Trustee or the Holders of not less than 25% in
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principal amount of the outstanding Notes may declare the principal amount to be
due and payable immediately, by notice in writing to the Corporation (and to the
Trustee if given by the Holders), and upon any such declaration such principal
shall become immediately due and payable. However, at any time after a
declaration of acceleration with respect to Notes has been made, but before a
judgment or decree based on such acceleration has been obtained, the Holders of
a majority in principal amount of outstanding Notes of that series may, subject
to certain conditions, rescind and annul such acceleration.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
shall be under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless such
Holders shall have offered to the Trustee reasonable security or indemnity.
Subject to such provisions for the security or indemnification of the Trustee,
the Holders of a majority in principal amount of the outstanding Notes shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or powers
conferred on the Trustee with respect to the Notes.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default with respect to such Note and unless also the Holders of at least 25% in
principal amount of the outstanding Notes shall have made written request, and
offered reasonable security or indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in principal amount of the outstanding Notes a direction
inconsistent with such request, and the Trustee shall have failed to institute
such proceeding within 60 days. However, the Holder of any Note will have an
absolute right to receive payment of the principal of and any interest on such
Note on or after the due dates expressed in such Note and to institute a
proceeding for the enforcement of any such payment.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture provides that when, among other things, all Notes not
previously delivered to the Trustee for cancellation (i) have become due and
payable or (ii) will become due and payable at their Stated Maturity within one
year and the Corporation deposits or causes to be deposited with the Trustee as
trust funds in trust for the purpose an amount in money sufficient to pay and
discharge the entire indebtedness on the Notes not previously delivered to the
Trustee for cancellation, for the principal and interest to the date of the
deposit or to the stated maturity, as the case may be, then the Indenture will
cease to be of further effect (except as to the Corporation's obligations to
compensate, reimburse and indemnify the Trustee pursuant to the Indenture and
certain other obligations), and the Corporation will be deemed to have satisfied
and discharged the Indenture.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The Exchange Notes and beneficial interests therein will be issued only in
fully registered form, without exception, in denominations of $1,000 and
integral multiples thereof.
Exchange Notes initially will be represented by one or more Exchange Notes
in registered, global form (collectively, the "Global Exchange Notes"). The
Global Exchange Notes will be deposited upon issuance with the 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 Exchange Notes may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Exchange Notes may not be
exchanged for Exchange Notes in certificated form except in the
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limited circumstances described below. See "Depositary Procedures Exchange of
Book-Entry Exchange Notes for Certificated Exchange Notes."
DEPOSITARY PROCEDURES
DTC has advised 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, 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 Corporation that, pursuant to procedures
established by it, (i) upon deposit of the Global Exchange Notes, DTC will
credit the accounts of Participants designated by the Initial Purchaser with
portions of the principal amount of the Global Exchange Notes and (ii) ownership
of such interests in the Global Exchange Notes will be shown on, and the
transfer of ownership thereof will 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
Exchange Notes).
Investors in the Global Exchange Notes 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 Exchange Note 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 Exchange Note 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 the Global Exchange Notes 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 Exchange Notes, see "Exchange
of Book-Entry Exchange Notes for Certificated Exchange Notes."
Except as described below, owners of interests in the Global Exchange Notes
will not have Exchange Notes registered in their names, will not receive
physical delivery of Exchange Notes in certificated form and will not be
considered the registered owners or holders thereof under the Indenture for any
purpose.
Payments in respect of the Global Exchange Notes registered in the name of
DTC or its nominee will be payable by the Trustee to DTC in its capacity as the
registered holder under the Indenture. Under the terms of the Indenture, the
Trustee will treat the persons in whose names the Exchange Notes, including the
Global Exchange Notes, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the 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 Exchange Notes, 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 Exchange Notes or (ii) any other matter relating to the actions
and practices of DTC or any of its Participants or Indirect Participants. DTC
has advised the Corporation that its current practice, upon receipt of any
payment in respect of securities such as the Exchange Notes, is to credit the
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accounts of the relevant Participants with the payment on the payment date, in
amounts proportionate to their respective holdings in principal 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 Exchange Notes 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 Trustee
or the Corporation. Neither the Trustee nor the Corporation will be liable for
any delay by DTC or any of its Participants in identifying the beneficial owners
of the Exchange Notes, and the Trustee and the Corporation 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 Exchange Notes
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 Corporation that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
Participants to whose account with DTC interests in the Global Exchange Notes
are credited and only in respect of such portion of the principal amount of the
Exchange Notes as to which such Participant or Participants has or have given
such direction. However, if there is an Event of Default under the Indenture,
DTC reserves the right to exchange the Global Exchange Notes for Exchange Notes
in certificated form and to distribute such Exchange Notes to its Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Corporation believes to be reliable, but
the Corporation takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Exchange Notes 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 Corporation nor the
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.
A Global Exchange Note is exchangeable for Exchange Notes in registered
certificated form if (i) DTC (x) notifies the Corporation that it is unwilling
or unable to continue as Depositary for the Global Exchange Notes and the
Corporation 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 Notes 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 Indenture. In addition,
beneficial interests in a Global Exchange Note may be exchanged for certificated
Exchange Notes upon request but only upon at least 20 days' prior written notice
given to the Trustee by or on behalf of DTC in accordance with customary
procedures. In all cases, certificated Exchange Notes delivered in exchange for
any Global Exchange Note 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).
PAYMENT AND PAYING AGENCY
Payments in respect of the Global Exchange Notes held in global form shall
be made to the Depositary, which shall credit the relevant accounts at the
Depositary on the applicable Interest Payment Dates. In respect of the Exchange
Notes 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 Trustee and any co-paying agent chosen by the Trustee and acceptable to the
Corporation. The Paying Agent shall be permitted to resign as Paying Agent
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upon 30 days' written notice to the Trustee and the Corporation. In the event
that the Trustee shall no longer be the Paying Agent, the Corporation shall
appoint a successor (which shall be a bank or trust company) to act as Paying
Agent.
Any moneys deposited with the 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 Notes and remaining unclaimed for two years
after such principal 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 Note shall thereafter look, as a general unsecured creditor, only to
the Corporation for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Trustee will act as registrar and transfer agent for the Exchange Notes.
Registration of transfers of the Exchange Notes will be effected without
charge by or on behalf of the Corporation, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange.
GOVERNING LAW
The Indenture and the Exchange Notes will be governed by and construed in
accordance with the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
Following the Exchange Offer and the qualification of the Indenture under
the Trust Indenture Act, the 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 Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Exchange Notes, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. The 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 Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
The Chase Manhattan Bank acts as property trustee for SAFECO Capital Trust I
(the issuer of the 8.072% Capital Securities) and for the 8.072% Capital
Securities and the underlying junior subordinated deferrable interest debentures
as well as the related indenture and guarantees. Chase Manhattan Delaware, an
affiliate of The Chase Manhattan Bank, acts as Delaware trustee for SAFECO
Capital Trust I. The Chase Manhattan Bank is also the trustee for the
Corporation's 7.875% Notes due 2005 and its medium term note program, the
custodian for the SAFECO's life and health companies' 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.
CERTAIN TAX CONSIDERATIONS
Perkins Coie, special tax counsel to the Corporation, has advised the
Corporation that because the Exchange Notes should not be considered to differ
materially from the Original Notes, the exchange of the Exchange Notes for the
Original Notes pursuant to the Offer should not result in any material federal
income tax consequences to holders. For a full description of the basis of, and
limitations on, this opinion, see "Certain Federal Income Tax Consequences."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion, which was prepared by Perkins Coie, special tax
counsel to the Corporation, summarizes the material United States federal income
tax consequences of the exchange of the Original Notes for the Exchange Notes
pursuant to the Exchange Offer. This discussion is based on provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), its legislative history,
judicial authority, current administrative rulings and practice, and existing
and proposed Treasury Regulations, all as in effect and existing on the date
hereof. Legislative, judicial or administrative changes or interpretations after
the date hereof could alter or modify the validity of this discussion and the
conclusions set forth below. Any such changes or interpretations may be
retroactive and could adversely affect a holder of the Original Notes or the
Exchange Notes.
This discussion does not purport to deal with all aspects of U.S. federal
income taxation that might be relevant to particular holders in light of their
personal investment or tax circumstances or status, nor does it discuss the U.S.
federal income tax consequences to certain types of holders subject to special
treatment under the U.S. federal income tax laws, such as certain financial
institutions, insurance companies, dealers in securities or foreign currency,
tax-exempt organizations, foreign corporations or nonresident alien individuals,
or persons holding Original Notes or Exchange Notes that are a hedge against, or
that are hedged against, currency risk or that are part of a straddle or
conversion transaction, or persons whose functional currency is not the United
States dollar. Moreover, the effect of any state, local or foreign tax laws is
not discussed.
THE FOLLOWING DISCUSSION IS FOR GENERAL INFORMATION ONLY. EACH HOLDER OF AN
ORIGINAL NOTE THAT IS PARTICIPATING IN THE EXCHANGE OFFER IS STRONGLY URGED TO
CONSULT WITH ITS OWN TAX ADVISORS TO DETERMINE THE IMPACT OF SUCH HOLDER'S
PARTICULAR TAX SITUATION ON THE ANTICIPATED TAX CONSEQUENCES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, OF THE EXCHANGE OF
THE ORIGINAL NOTES FOR THE EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER.
EXCHANGE OFFER
The exchange of the Original Notes by any holder for the Exchange Notes
pursuant to the Exchange Offer should not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes should not be considered
to differ materially in kind or extent from the Original Notes. Rather, the
Exchange Notes received by any holder should be treated as a continuation of the
Original Notes in the hands of such holder. As a result, there should be no
federal income tax consequences to holders exchanging the Original Notes for the
Exchange Notes pursuant to the Exchange Offer, and the federal income tax
consequences of holding and disposing of the Exchange Notes should be the same
as the federal income tax consequences of holding and disposing of the Original
Notes. Accordingly, a holder's adjusted tax basis in the Exchange Notes will be
the same as its adjusted tax basis in the Original Notes exchanged therefor and
its holding period for the Original Notes will be included in its holding period
for the Exchange Notes. Thus, the determination of gain on a sale or other
disposition of the Exchange Notes will be the same as for the Original Notes.
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
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"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
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 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 Notes by (or on behalf of) a Plan
with respect to which the Corporation, the 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 Notes 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).
Any purchaser proposing to acquire Notes 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 Notes with respect to its
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; and whether under the general fiduciary standards of
investment prudence and diversification an investment in the Notes is
appropriate for the Plan, taking into account the overall investment policy of
the Plan and the composition of the Plan's investment portfolio.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes 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 Notes. 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 Notes received in exchange for Original
Notes where such Original Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Corporation has
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 June 15, 1998, all dealers effecting
transactions in the Exchange Securities may be required to deliver a prospectus.
The Corporation will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes 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 Notes 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 Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
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participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of Exchange Notes 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 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 Corporation has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than Commissions or concessions of any brokers or
dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Notes will be passed upon for the Corporation
by James W. Ruddy, Senior Vice President and General Counsel of the Corporation.
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
LLP, 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 LLP, 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.
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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. 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
SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Forward-Looking Information............................................... 4
Available Information..................................................... 4
Incorporation of Certain Documents by Reference........................... 5
Prospectus Summary........................................................ 6
Risk Factors.............................................................. 13
Unaudited Pro Forma Combined Condensed Financial Statements............... 18
SAFECO Corporation........................................................ 24
Use of Proceeds........................................................... 24
Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and
Distributions on Capital Securities..................................... 25
Capitalization............................................................ 26
Selected Financial Information............................................ 27
The Exchange Offer........................................................ 31
Description of Exchange Notes............................................. 41
Certain Federal Income Tax
Consequences............................................................ 48
ERISA Considerations...................................................... 48
Plan of Distribution...................................................... 49
Validity of Exchange Securities........................................... 50
Independent Auditors...................................................... 50
</TABLE>
[LOGO]
SAFECO CORPORATION
---------------
OFFER TO EXCHANGE ITS
6 7/8% NOTES DUE JULY 15, 2007
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
6 7/8% NOTES DUE JULY 15, 2007
---------------------
PROSPECTUS
---------------------
NOVEMBER 10, 1997
- --------------------------------------------------------------------------------
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<C> <S>
4.1 Indenture dated as of July 15, 1997 between SAFECO Corporation and The Chase
Manhattan Bank, as Trustee
4.2* Form of Certificate of Exchange Notes
4.3* Registration Rights Agreement (filed as Exhibit 10.3 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 James W. Ruddy, General Counsel of SAFECO Corporation as
to legality of the Exchange Notes 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 of earnings to fixed charges
23.1 Consent of Ernst & Young LLP
23.2* Consent of Perkins Coie (included in Exhibit 5.1)
23.4* Consent of Perkins Coie (included in Exhibit 8)
24.1* Power of Attorney
25.1* Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee
under the Indenture
</TABLE>
II-1
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<TABLE>
<C> <S>
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
99.3* Form of Exchange Agent Agreement
</TABLE>
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* Previously filed.
(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-2
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Seattle, State of Washington, on the 10th day of November, 1997.
SAFECO CORPORATION
By: /s/ BOH A. DICKEY
-----------------------------------------
Boh A. Dickey
PRESIDENT AND CHIEF OPERATING OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities indicated below on the 10th day of November, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
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<C> <S>
Chairman of the Board and
* 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,
* ROD A. PIERSON Chief Financial Officer,
- ------------------------------ Secretary and Controller
Rod A. Pierson (Principal Financial
Officer)
* H. PAUL LOWBER Vice President and
- ------------------------------ Controller (Principal
H. Paul Lowber Accounting Officer)
- ------------------------------
Phyllis J. Campbell Director
* ROBERT S. CLINE
- ------------------------------ Director
Robert S. Cline
* JOHN W. ELLIS
- ------------------------------ Director
John W. Ellis
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
* WILLIAM P. GERBERDING
- ------------------------------ Director
William P. Gerberding
* JOSHUA GREEN III
- ------------------------------ Director
Joshua Green III
* WILLIAM W. KRIPPAEHNE, JR.
- ------------------------------ Director
William W. Krippaehne, Jr.
* WILLIAM G. REED, JR.
- ------------------------------ Director
William G. Reed, Jr.
* JUDITH M. RUNSTAND
- ------------------------------ Director
Judith M. Runstad
* PAUL W. SKINNER
- ------------------------------ Director
Paul W. Skinner
* GEORGE H. WEYERHAEUSER
- ------------------------------ Director
George H. Weyerhaeuser
</TABLE>
*By: /s/ BOH A. DICKEY
-------------------------
Boh A. Dickey
ATTORNEY-IN-FACT
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
4.1 Indenture dated as of July 15, 1997 between SAFECO Corporation and The Chase Manhattan Bank, as
Trustee
4.2* Form of Certificate of Exchange Notes
4.3* Registration Rights Agreement (filed as Exhibit 10.3 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 James W. Ruddy, General Counsel of SAFECO Corporation as to legality of
the Exchange Notes 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 of earnings to fixed charges
23.1 Consent of Ernst & Young LLP
23.2* Consent of Perkins Coie (included in Exhibit 5.1)
23.4* Consent of Perkins Coie (included in Exhibit 8)
24.1* Power of Attorney
25.1* Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under the
Indenture
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
99.3* Form of Exchange Agent Agreement
</TABLE>
- ------------------------
* Previously filed
II-5
<PAGE>
- ------------------------------------------------------------------------------
------------------------------
SAFECO CORPORATION
------------------------------
INDENTURE
DATED AS OF JULY 15, 1997
------------------------------
THE CHASE MANHATTAN BANK
AS TRUSTEE
------------------------------
6 7/8% NOTES DUE JULY 15, 2007
- ------------------------------------------------------------------------------
<PAGE>
TIE-SHEET
of provisions of Trust Indenture Act of 1939 with Indenture dated as of
July 15 , 1997 between SAFECO Corporation and The Chase Manhattan Bank as
Trustee:
ACT SECTION INDENTURE SECTION
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
310(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
310(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10, 6.11
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.13
311(a) and (b) . . . . . . . . . . . . . . . . . . . . . . . . . N/A
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.01, 4.02(a)
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02
312(b) and (c) . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.04
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
314(c)(1) and (2). . . . . . . . . . . . . . . . . . . . . . . . 6.07
314(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
315(a)(c) and (d). . . . . . . . . . . . . . . . . . . . . . . . 6.01
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.08
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.09
316(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.07
316(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
316(a) last sentence . . . . . . . . . . . . . . . . . . . . . . 2.09
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.02
317(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.05
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.08
- ---------------------------------
THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED.
<PAGE>
CONTENTS
Page
----
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2. Execution and Authentication. . . . . . . . . . . . . . . . . . 6
2.3. Form and Payment. . . . . . . . . . . . . . . . . . . . . . . . 6
2.4. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5. Global Security . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . 8
2.8. Replacement Securities. . . . . . . . . . . . . . . . . . . . . 14
2.9. Temporary Securities. . . . . . . . . . . . . . . . . . . . . . 14
2.10. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.11. Defaulted Interest. . . . . . . . . . . . . . . . . . . . . . . 15
2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III PARTICULAR COVENANTS OF THE COMPANY . . . . . . . . . . . . . . 16
3.1. Payment of Principal and Interest . . . . . . . . . . . . . . . 16
3.2. Offices for Notices and Payments, etc.. . . . . . . . . . . . . 16
3.3. Appointments to Fill Vacancies in Trustee's Office. . . . . . . 17
3.4. Provision as to Paying Agent. . . . . . . . . . . . . . . . . . 17
3.5. Certificate to Trustee. . . . . . . . . . . . . . . . . . . . . 17
3.6. Compliance with Consolidation Provisions. . . . . . . . . . . . 18
3.7. Limitation Upon Sales of Capital Stock of Restricted
Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.8. Limitation Upon Mortgages and Liens . . . . . . . . . . . . . . 19
3.9. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . 20
ARTICLE IV SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.1. Securityholders' Lists. . . . . . . . . . . . . . . . . . . . . 20
4.2. Preservation and Disclosure of Lists. . . . . . . . . . . . . . 20
4.3. Reports by Company. . . . . . . . . . . . . . . . . . . . . . . 21
4.4. Reports by the Trustee. . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF
DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 22
5.2. Acceleration of Maturity; Rescission and Annulment. . . . . . . 24
5.3. Payment of Securities on Default; Suit Therefor . . . . . . . . 25
5.4. Application of Moneys Collected by Trustee. . . . . . . . . . . 27
5.5. Proceedings by Securityholders. . . . . . . . . . . . . . . . . 27
5.6. Unconditional Right of Holders to Receive Principal and
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.7. Proceedings by Trustee. . . . . . . . . . . . . . . . . . . . . 28
i
<PAGE>
Page
----
5.8. Remedies Cumulative and Continuing. . . . . . . . . . . . . . . 28
5.9. Direction of Proceedings and Waiver of Defaults by Majority
of Securityholders. . . . . . . . . . . . . . . . . . . . . . . 28
5.10. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . 29
5.11. Notice of Defaults. . . . . . . . . . . . . . . . . . . . . . . 29
5.12. Undertaking to Pay Costs. . . . . . . . . . . . . . . . . . . . .29
ARTICLE VI CONCERNING THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . 30
6.1. Duties and Responsibilities of Trustee. . . . . . . . . . . . . 30
6.2. Reliance on Documents, Opinions, etc. . . . . . . . . . . . . . 31
6.3. No Responsibility for Recitals, etc.. . . . . . . . . . . . . . 32
6.4. Trustee, Authenticating Agent, Paying Agents, Transfer Agents
or Registrar May Own Securities . . . . . . . . . . . . . . . . 32
6.5. Moneys to be Held in Trust. . . . . . . . . . . . . . . . . . . 32
6.6. Compensation and Expenses of Trustee. . . . . . . . . . . . . . 32
6.7. Officers' Certificate as Evidence . . . . . . . . . . . . . . . .33
6.8. Conflicting Interest of Trustee . . . . . . . . . . . . . . . . .33
6.9. Eligibility of Trustee. . . . . . . . . . . . . . . . . . . . . 33
6.10. Resignation or Removal of Trustee . . . . . . . . . . . . . . . 34
6.11. Acceptance by Successor Trustee . . . . . . . . . . . . . . . . 35
6.12. Succession by Merger, etc.. . . . . . . . . . . . . . . . . . . 35
6.13. Limitation on Rights of Trustee as a Creditor . . . . . . . . . 36
6.14. Authenticating Agents . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII CONCERNING THE SECURITYHOLDERS. . . . . . . . . . . . . . . . . 37
7.1. Action by Securityholders . . . . . . . . . . . . . . . . . . . 37
7.2. Proof of Execution by Securityholders . . . . . . . . . . . . . 37
7.3. Who Are Deemed Absolute Owners. . . . . . . . . . . . . . . . . 38
7.4. Securities Owned by Company Deemed Not Outstanding. . . . . . . 38
7.5. Revocation of Consents; Future Holders Bound. . . . . . . . . . 38
ARTICLE VIII SECURITYHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . 39
8.1. Purposes of Meetings. . . . . . . . . . . . . . . . . . . . . . 39
8.2. Call of Meetings by Trustee . . . . . . . . . . . . . . . . . . 39
8.3. Call of Meetings by Company or Securityholders. . . . . . . . . 39
8.4. Qualifications for Voting . . . . . . . . . . . . . . . . . . . 39
8.5. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.6. Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.1. Without Consent of Securityholders. . . . . . . . . . . . . . . 41
9.2. Supplemental Indentures with Consent of Holders . . . . . . . . 42
9.3. Compliance with Trust Indenture Act; Effect of Supplemental
Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.4. Notation on Securities. . . . . . . . . . . . . . . . . . . . . 43
9.5. Evidence of Compliance of Supplemental Indenture to be
Furnished Trustee . . . . . . . . . . . . . . . . . . . . . . . 43
ii
<PAGE>
Page
----
ARTICLE X CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE . . . . . . . 43
10.1. Company May Consolidate, Etc., Only on Certain Terms. . . . . . 43
10.2. Successor Corporation Substituted . . . . . . . . . . . . . . . 44
10.3. Limitation on Lease of Properties as an Entirety. . . . . . . . 44
ARTICLE XI SATISFACTION AND DISCHARGE OF INDENTURE . . . . . . . . . . . . 45
11.1. Discharge of Indenture. . . . . . . . . . . . . . . . . . . . . 45
11.2. Deposited Moneys and U.S. Government Obligations to be Held
in Trust by Trustee . . . . . . . . . . . . . . . . . . . . . . 46
11.3. Paying Agent to Repay Moneys Held . . . . . . . . . . . . . . . 46
11.4. Return of Unclaimed Moneys. . . . . . . . . . . . . . . . . . . 46
11.5. Defeasance Upon Deposit of Moneys or U.S. Government
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE XII IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.1. Indenture and Securities Solely Corporate Obligations . . . . . 48
ARTICLE XIII MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 48
13.1. Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
13.2. Official Acts by Successor Corporation. . . . . . . . . . . . . 48
13.3. Surrender of Company Powers . . . . . . . . . . . . . . . . . . 48
13.4. Addresses for Notices, etc. . . . . . . . . . . . . . . . . . . 48
13.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.6. Evidence of Compliance with Conditions Precedent. . . . . . . . 49
13.7. Business Days . . . . . . . . . . . . . . . . . . . . . . . . . 49
13.8. Trust Indenture Act to Control. . . . . . . . . . . . . . . . . 49
13.9. Table of Contents, Headings, etc. . . . . . . . . . . . . . . . 50
13.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . 50
13.11. Separability. . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.12. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
EXHIBIT A (FORM OF FACE OF ORIGINAL SECURITY) . . . . . . . . . . . . . . A-1
EXHIBIT B (FORM OF FACE OF EXCHANGE SECURITY) . . . . . . . . . . . . . . B-1
Testimonium
Signatures
Acknowledgements
iii
<PAGE>
THIS INDENTURE, dated as of July 15, 1997, between SAFECO Corporation,
a Washington corporation (hereinafter sometimes called the "Company"), and
The Chase Manhattan Bank, a New York banking corporation, as trustee
(hereinafter sometimes called the "Trustee"),
W I T N E S S E T H :
In consideration of the premises, and the purchase of the Securities
by the holders thereof, the Company covenants and agrees with the Trustee for
the equal and proportionate benefit of the respective holders from time to
time of the Securities, as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS
The terms defined in this Section 1.1 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes
of this Indenture shall have the respective meanings specified in this
Section 1.1. All other terms used in this Indenture which are defined in the
Trust Indenture Act or which are by reference therein defined in the
Securities Act, shall (except as herein otherwise expressly provided or
unless the context otherwise requires) have the meanings assigned to such
terms in said Trust Indenture Act and in said Securities Act as in force at
the date of this Indenture as originally executed. All accounting terms used
herein and not expressly defined shall have the meanings assigned to such
terms in accordance with generally accepted accounting principles and the
term "generally accepted accounting principles" means such accounting
principles as are generally accepted at the time of any computation. The
words "herein", "hereof" and "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section
or other subdivision. Headings are used for convenience of reference only
and do not affect interpretation. The singular includes the plural and vice
versa.
"Affiliate" means, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding the power to vote 10%
or more of the outstanding voting securities or other ownership interests of
the specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control
with the specified Person, (d) a partnership in which the specified Person is
a general partner, (e) any officer or director of the specified Person, and
(f) if the specified Person is an individual, any entity of which the
specified Person is an officer, director or general partner.
"Authenticating Agent" shall mean any agent or agents of the Trustee
which at the time shall be appointed and acting pursuant to Section 6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors.
"Board of Directors" shall mean either the Board of Directors of the
Company or any duly authorized committee of that board.
<PAGE>
"Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Business Day" shall mean, with respect to any series of Securities,
any day other than a Saturday or a Sunday or a day on which banking
institutions in The City of New York or in The City of Seattle, Washington
are authorized or required by law or executive order to close.
"Commission" shall mean the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any
time after the execution of this Indenture such Commission is not existing
and performing the duties now assigned to it under the Trust Indenture Act,
then the body performing such duties at such time.
"Company" shall mean SAFECO Corporation, a Washington corporation,
and, subject to the provisions of Article X, shall include its successors and
assigns.
"Company Request" or "Company Order" shall mean a written request or
order signed in the name of the Company by the Chairman, the Chief Executive
Officer, the President, the Chief Financial Officer, a Vice President, the
Treasurer or an Assistant Treasurer, the Controller or an Assistant
Controller, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee.
"Custodian" shall mean any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Definitive Securities" shall mean those securities issued in fully
registered certificated form not otherwise in global form.
"Depositary" shall mean, with respect to Securities the Company shall
determine will be issued as a Global Security, The Depository Trust Company,
New York, New York, another clearing agency, or any successor registered as a
clearing agency under the Exchange Act or other applicable statute or
regulation, which, in each case, shall be designated by the Company pursuant
to Section 2.5(c).
"Event of Default" shall mean any event specified in Section 5.1,
continued for the period of time, if any, and after the giving of the notice,
if any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the offer that may be made pursuant to the
Registration Rights Agreement by the Company to exchange Exchange Securities
for Original Securities.
"Exchange Securities" shall mean the 6 7/8% Notes due July 15, 2007,
as authenticated and issued under this Indenture in exchange for an Original
Security or Original Securities pursuant to the offer to be made pursuant to
the Registration Rights Agreement to exchange Exchange Securities for
Original Securities.
2
<PAGE>
"Global Security" shall mean, with respect to the Securities, a
Security executed by the Company and delivered by the Trustee to the
Depositary or pursuant to the Depositary's instruction, all in accordance
with the Indenture, which shall be registered in the name of the Depositary
or its nominee.
"Indenture" shall mean this instrument as originally executed or, if
amended as herein provided, as so amended.
"Interest Payment Date" shall have the meaning set forth in Section 2.6.
"Issue Date" shall mean July 15, 1997.
The term "lien" shall have, for purposes of Section 3.8, the meaning
set forth therein.
"Liquidated Damages" shall have the meaning set forth in the
Registration Rights Agreement.
"Maturity Date" shall mean July 15, 2007.
"Officers" shall mean any of the Chairman, the Chief Executive
Officer, the President, the Chief Financial Officer, a Vice President, the
Treasurer, any Assistant Treasurer, the Controller or the Secretary of the
Company.
"Officers' Certificate" shall mean a certificate signed by two
Officers and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel, who may
be an employee of the Company, and who shall be acceptable to the Trustee.
"Original Securities" shall mean the 6 7/8% Notes due July 15, 2007,
as authenticated and issued under this Indenture on the Issue Date.
The term "outstanding" when used with reference to Securities, shall,
subject to the provisions of Section 7.4, mean, as of any particular time,
all Securities authenticated and delivered by the Trustee or the
Authenticating Agent under this Indenture, except
(a) Securities theretofore cancelled by the Trustee or the
Authenticating Agent or delivered to the Trustee for cancellation;
(b) Securities for whose payment moneys in the necessary amount shall
have been deposited in trust with the Trustee or with any paying agent (other
than the Company) or shall have been set aside and segregated in trust by the
Company (if the Company shall act as its own paying agent); and
(c) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered pursuant to the terms of
Section 2.8 unless proof satisfactory to the Company and the Trustee is
presented that any such Securities are held by bona fide holders in due course.
3
<PAGE>
"Payment Default" shall have the meaning set forth in Section 5.1.
"Person" shall mean any individual, corporation, estate, partnership,
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by
such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 2.8 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Purchase Agreement" shall mean the Purchase Agreement dated July 10,
1997 between the Company and Smith Barney Inc.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Company and the
Initial Purchaser named therein as such agreement may be amended, modified or
supplemented from time to time.
"Responsible Officer" means, with respect to the Trustee, any officer
within the Corporate Trust Office of the Trustee, including any
vice-president, any assistant vice-president, any assistant secretary, the
treasurer, any assistant treasurer or other officer of the Corporate Trust
Office of the 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.
"Restricted Security" shall mean any Security that is subject to the
transfer restrictions set forth in Section 2.7 (a).
"Restricted Subsidiary" shall have the meaning set forth in Section 3.7.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or under any similar rule or regulation
hereafter adopted by the Commission.
"Securities" means, collectively, the Original Securities and the
Exchange Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securityholder", "holder of Securities", or other similar terms,
shall mean any person in whose name at the time a particular Security is
registered on the register kept by the Company or the Trustee for that
purpose in accordance with the terms hereof.
"Security Register" shall mean the list of holders provided to the
Trustee pursuant to Section 4.1 or any security register maintained by a
security registrar for the Securities appointed by the Company.
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"Stated Maturity" shall mean, when used with respect to any Security
or any installment of interest thereon, the date specified in such Security
as the fixed date on which the principal of such Security or such installment
of interest is due and payable.
"Subsidiary" shall mean with respect to any Person, (i) any
corporation at least a majority of whose outstanding voting stock is owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries,
or by such Person and one or more of its Subsidiaries, (ii) any general
partnership, joint venture or similar entity, at least a majority of whose
outstanding partnership or similar interests shall at the time be owned by
such Person, or by one or more of its Subsidiaries, or by such Person and one
or more of its Subsidiaries and (iii) any limited partnership of which such
Person or any of its Subsidiaries is a general partner. For the purposes of
this definition, "voting stock" means shares, interests, participation or
other equivalents in the equity interest (however designated) in such Person
having ordinary voting power for the election of a majority of the directors
(or the equivalent) of such Person, other than shares, interests,
participation or other equivalents having such power only by reason of the
occurrence of a contingency.
"Trustee" shall mean the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder. The term
"Trustee" as used with respect to a particular series of the Securities shall
mean the trustee with respect to that series.
"Trust Indenture Act of 1939" shall mean the Trust Indenture Act of
1939 as in force at the date of execution of this Indenture, except as
provided in Section 9.3.
"U.S. Government Obligations" shall mean securities that are (i)
direct obligations of the United States of America for the payment of which
its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the payment of which is unconditionally guaranteed
as a full faith and credit obligation by the United States of America, which,
in either case under clauses (i) or (ii) are not callable or redeemable at
the option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of
any such U.S. Government Obligation held by such custodian for the account of
the holder of a depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of interest on or principal of the U.S. Government Obligation
evidenced by such depository receipt.
ARTICLE II
SECURITIES
2.1. FORMS GENERALLY
The Original Securities and related Trustee's certificate of
authentication shall be substantially in the form of Exhibit A and the
Exchange Securities and related Trustee's certificate of authentication shall
be substantially in the form of Exhibit B, the terms of each of which are
incorporated in and
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made a part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Company is subject or usage. Each Security shall be dated the date of its
authentication. The Securities shall be issued in denominations of $1,000
and integral multiples thereof. Notwithstanding the foregoing Definitive
Securities issued to any "institutional accredited investor" within the
meaning of Rule 502 (A) (1), (2), (3) or (7) under the Securities Act shall
be issued only in minimum denominations of $100,000 and any amount in excess
thereof that is an integral multiple of $1,000.
2.2. EXECUTION AND AUTHENTICATION
Two Officers shall sign the Securities for the Company by manual or
facsimile signature in the manner set forth in Exhibits A and B. If an
Officer whose signature is on a Security no longer holds that office at the
time the Security is authenticated, the Security shall nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of an authorized officer of the Trustee. The signature of the
Trustee shall be conclusive evidence that the Security has been authenticated
under this Indenture. The form of Trustee's certificate of authentication to
be borne by the Securities shall be substantially as set forth in Exhibits A
and B hereto.
The Trustee shall, upon a Company Order, authenticate for original
issue up to, and the aggregate principal amount of Securities outstanding at
any time may not exceed the sum of, $200,000,000 principal amount of the
Securities, except as provided in Sections 2.7, 2.8 and 2.9. The series of
Securities to be initially issued hereunder shall be the Original Securities.
2.3. FORM AND PAYMENT
Except as provided in Section 2.5, the Securities shall be issued in
fully registered certificated form without interest coupons. Principal of
and interest on the Securities issued in certificated form will be payable,
the transfer of such Securities will be registrable and such Securities will
be exchangeable for Securities bearing identical terms and provisions at the
office or agency of the Company maintained for such purpose under Section
3.2; PROVIDED, HOWEVER, that payment of interest with respect to the
Securities may be made at the option of the Company (i) by 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 transfer instructions have been received in writing by the
relevant record date.
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2.4. LEGENDS
(a) Except as permitted by subsection (b) of this Section 2.4 or as
otherwise determined by the Company in accordance with applicable law, each
Security shall bear the applicable legends relating to restrictions on
transfer pursuant to the securities laws in substantially the form set forth
in Section 2.7 (g) (1).
(b) The Company shall issue and the Trustee shall authenticate
Exchange Securities in exchange for Original Securities accepted for exchange
in the Exchange Offer, which Exchange Securities shall not bear the legends
required by subsection (a) above. Pursuant to the terms of the Exchange
Offer as set forth in the Registration Rights Agreement, certain Persons are
not eligible to tender their Original Securities in the Exchange Offer.
Accordingly, a holder of Original Securities who is either (A) a
broker-dealer who purchased such Original Securities directly from the
Company for resale pursuant to Rule 144A or any other available exemption
under the Securities Act, (B) a Person participating in the distribution of
the Original Securities or (C) a Person who is an affiliate (as defined in
Rule 144 under the Securities Act) of the Company shall, pursuant to the
terms of the Registration Rights Agreement, only receive Exchange Securities
other than in connection with the Exchange Offer, which Exchange Securities,
notwithstanding anything else herein to the contrary, shall bear the legends
required by subsection (a) above and shall not be represented by a Global
Security.
2.5. GLOBAL SECURITY
(a) The Global Securities shall represent the aggregate amount of
outstanding Securities from time to time endorsed thereon; PROVIDED, that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. At such time as all beneficial interests in a Global Security have
either been exchanged for Definitive Securities, redeemed, repurchased or
cancelled, such Global Security shall be returned to or retained and cancelled
by the Trustee. Any endorsement of a Global Security to reflect the amount of
any increase or decrease in the amount of outstanding Securities represented
thereby shall be made by the Trustee, in accordance with instructions given by
the Company as required by this Section 2.5.
(b) The Global Securities may be transferred, in whole but not in
part, only to the Depositary, another nominee of the Depositary, or to a
successor Depositary selected or approved by the Company or to a nominee of
such successor Depositary.
(c) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or the Depositary has ceased to
be a clearing agency registered under the Exchange Act, and a successor
Depositary is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such condition, as the case may be,
the Company will execute, and the Trustee, upon written notice from the
Company, will authenticate and make available for delivery the Definitive
Securities, in authorized denominations, and in an aggregate principal amount
equal to the principal amount of the Global Security in exchange for such
Global Security. If there is an Event of Default, the Depositary shall have
the right to exchange the Global Securities for Definitive Securities. In
addition, the Company may at any time determine that the Securities shall no
longer be represented by a Global Security. In the event of such an Event of
Default or such a determination, the Company shall execute, and subject to
Section 2.7, the Trustee, upon receipt of an Officers' Certificate evidencing
such determination by the Company, will authenti-
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cate and make available for delivery the Definitive Securities, in authorized
denominations, and in an aggregate principal amount equal to the principal
amount of the Global Security, in exchange for such Global Security. Upon
the exchange of the Global Security for such Definitive Securities, in
authorized denominations, the Global Security shall be cancelled by the
Trustee. Such Definitive Securities issued in exchange for the Global
Security shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Definitive Securities to the Depositary for delivery to
the Persons in whose names such Definitive Securities are so registered.
2.6. INTEREST
(a) Each Security will bear interest at the rate of 6 7/8% per annum
from the most recent date to which interest has been paid or duly provided
for or, if no interest has been paid or duly provided for, from the Issue
Date, until the principal thereof becomes due and payable, and at the rate of
6 7/8% per annum on any overdue principal and (to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment
of interest, compounded semi-annually, payable semi-annually in arrears on
January 15 and July 15 of each year (each, an "Interest Payment Date")
commencing on January 15, 1998 to the Person in whose name such Security or
any Predecessor Security is registered, at the close of business on the
regular record date for such interest installment, which shall be the first
day of the month in which the relevant Interest Payment Date occurs.
(b) Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months and, for any period of less than a full
calendar month, the number of days lapsed in such month. In the event that
any Interest Payment Date falls on a day that is not a Business Day, then
payment of interest payable on such date will be made on the next succeeding
day which 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.
(c) The Company will not be responsible for, and will not be required
to compensate holders of or investors in the Securities for, any withholding
taxes that are imposed on interest payments on the Securities.
2.7. TRANSFER AND EXCHANGE
(a) TRANSFER RESTRICTIONS. The Original Securities, and those
Exchange Securities with respect to which any Person described in Section
2.4(b)(A), (B) or (C) is the beneficial owner, may not be transferred except
in compliance with the legend contained in Exhibit A unless otherwise
determined by the Company in accordance with applicable law.
(b) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. Upon
surrender for registration of transfer of any Security at the office or
agency of the Company maintained for such purpose pursuant to Section 3.2,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new
Securities of the same series, of any authorized denominations and of a like
aggregate principal amount.
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All Definitive Securities and Global Securities issued upon any
registration of transfer or exchange of Definitive Securities or Global
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the
Definitive Securities or Global Securities surrendered upon such registration
of transfer or exchange.
No service charge shall be made to a holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith.
Prior to due presentment for registration or transfer of any Security,
the Trustee and the Company may deem and treat the Person in whose name the
Security is registered as the absolute owner of such Security, and neither
the Trustee nor the Company shall be affected by notice to the contrary.
(c) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES. When Definitive
Securities are presented to the Security registrar with a request:
(y) to register the transfer of such Definitive Securities; or
(z) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized denominations,
the Security registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are met; PROVIDED,
HOWEVER, that the Definitive Securities surrendered for registration of transfer
or exchange:
(1) shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Company and the
Security registrar duly executed by the Securityholder or such holder's attorney
duly authorized in writing; and
(2) in the case of Definitive Securities that are Restricted
Securities, such request shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Restricted Securities are being delivered to
the Security registrar by a Securityholder for registration in the
name of such Securityholder, without transfer, a certification from
such Securityholder to that effect (in substantially the form set
forth on the reverse of the Security); or
(B) if such Restricted Security is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A) in
accordance with Rule 144A a certification to that effect (in
substantially the form set forth on the reverse of the Security); or
(C) if such Restricted Security is being transferred (i)
pursuant to an exemption from registration in accordance with Rule 144
or Regulation S under the Securities Act or (ii) pursuant to an
effective registration statement under the Securities Act, or (iii) in
a minimum principal amount of $100,000 to an "institutional accredited
investor" within the meaning of Rule 501(A)(1), (2), (3) or (7) under
the Securities
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Act that is acquiring the security for its own account, or for the
account of such an institutional accredited investor, not with a
view to or for offer or sale in connection with any distribution in
violation of the Securities Act, or (iv) in reliance on another
exemption from the registration requirements of the Securities Act,
a certification to that effect (in substantially the form set forth
on the reverse of the Security) and in the case of (i), (iii) and
(iv) above, if the Company or the Security registrar so request, an
Opinion of Counsel reasonably acceptable to the Company and to the
Security registrar to the effect that such transfer is in
compliance with the Securities Act.
(d) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the
Security registrar of a Definitive Security, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Security
registrar, together with:
(1) if such Definitive Security is a Restricted Security,
certification, substantially in the form set forth on the reverse of the
Security, that such Definitive Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A) in accordance with Rule 144A;
and
(2) whether or not such Definitive Security is a Restricted
Security, written instructions of the Securityholder directing the Security
registrar to make, or to direct the Trustee to make, an endorsement on the
Global Security to reflect an increase in the aggregate principal amount of
the Securities represented by the Global Security,
then the Security registrar shall cancel such Definitive Security and cause,
or direct the Trustee to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Trustee, the aggregate
principal amount of Securities represented by the Global Security to be
increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate a new Global Security
in the appropriate principal amount.
(e) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer and
exchange of Global Securities or beneficial interests therein shall be
effected through the Depositary, in accordance with this Indenture (including
applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depositary therefor which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act.
(f) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
DEFINITIVE SECURITY.
(1) Any Person having a beneficial interest in a Global Security
may upon request exchange such beneficial interest for a Definitive Security.
Upon receipt by the Security registrar of written instructions or such other
form of instructions as is customary for the Depositary from the Depositary
or its nominee on behalf of any Person having a beneficial interest in a
Global Security and upon receipt by the Security registrar of a written order
or such other form of instructions as is customary for the Depositary or the
Person designated by the Depositary as having such a beneficial interest in a
Restricted Security only, the following additional information and documents
(all of which may be submitted by facsimile):
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(A) if such beneficial interest is being transferred to the
Person designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in substantially the
form set forth on the reverse of the Security); or
(B) if such beneficial interest is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A) in
accordance with Rule 144A a certification to that effect from the
transferor (in substantially the form set forth on the reverse of the
Security); or
(C) if such beneficial interest is being transferred (i)
pursuant to an exemption from registration in accordance with Rule 144
or Regulation S under the Securities Act or (ii) pursuant to an
effective registration statement under the Securities Act, or (iii) in
a minimum principal amount of $100,000 to an "institutional accredited
investor" within the meaning of Rule 501(A)(1), (2), (3) or (7) under
the Securities Act that is acquiring the security for its own account,
or for the account of such an institutional accredited investor, not
with any distribution in violation of the Securities Act, or (iv) in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect from the transferee
or transferor (in substantially the form set forth on the reverse of
the Security) and in the case of (i), (iii) and (iv) above, if the
Company or the Security registrar so requests, an Opinion of Counsel
from the transferee or transferor reasonably acceptable to the Company
and to the Security registrar to the effect that such transfer is in
compliance with the Securities Act;
then the Security registrar, or the Trustee, will cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Trustee, the aggregate principal amount of the Global Security to be reduced
and, following such reduction, the Company will execute and, upon receipt of an
authentication order in the form of an Officers' Certificate, the Trustee or the
Trustee's authenticating agent will authenticate and deliver to the transferee a
Definitive Security.
(2) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.7(f) shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect participants
or otherwise, shall instruct the Security registrar. The Security registrar
shall deliver such Definitive Securities to the persons in whose names such
Securities are so registered.
(g) LEGENDS.
(1) Except as permitted by the following paragraph (2), each
Security certificate evidencing the Global Securities and the Definitive
Securities (and all securities issued in exchange therefor or substitution
thereof, but not including Exchange Securities as defined herein) shall bear
legends in substantially the following form:
THE 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 SECURITY NOR ANY
INTEREST OR PARTICI-
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PATION 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 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 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) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) IN A MINIMUM PRINCIPAL AMOUNT OF
$100,000 TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) 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 (F) 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), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR
OTHER INFORMATION SATISFACTORY TO THE COMPANY, AND
(ii) PURSUANT TO CLAUSE (E), 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
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WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
(2) Upon any sale or transfer of a Restricted Security
(including any Restricted Security represented by a Global Security) pursuant
to Rule 144 under the Securities Act or an effective registration statement
under the Securities Act:
(A) in the case of any Restricted Security that is a Definitive
Security, the Security registrar shall permit the Securityholder to
exchange such Restricted Security for a Definitive Security that does
not bear the legend set forth above and rescind any restriction on the
transfer of such Restricted Security in the case of a sale or transfer
pursuant to Rule 144 under the Securities Act, after the Resale
Restriction Termination Date (as defined in clause (g)(1) above) or
delivery of an Opinion of Counsel; and
(B) any such Restricted Security represented by a Global
Security shall not be subject to the provisions set forth in (1) above
(such sales or transfers being subject only to the provisions of
Section 2.7(e) hereof); PROVIDED, HOWEVER, that with respect to any
request for an exchange of a Restricted Security that is represented
by a Global Security for a Definitive Security that does not bear a
legend, which request is made in reliance upon Rule 144 under the
Securities Act, the Securityholder shall certify in writing (to be
accompanied by an Opinion of Counsel) to the Security registrar that
such request is being made pursuant to Rule 144 under the Securities
Act (such certification to be substantially in the form set forth on
the reverse of the Security).
(h) EXCHANGE OF ORIGINAL SECURITIES FOR EXCHANGE SECURITIES. The
Original Securities may be exchanged for Exchange Securities pursuant to the
terms of the Exchange Offer and in accordance with the provisions set forth
in this Section 2.7, as may be applicable. The Trustee shall make the
exchange as follows:
The Company shall present the Trustee with an Officers' Certificate
certifying the following:
(A) upon issuance of the Exchange Securities, the transactions
contemplated by the Exchange Offer have been consummated; and
(B) the principal amount of Original Securities properly tendered in
the Exchange Offer that are represented by a Global Security and the principal
amount of Original Securities properly tendered in the Exchange Offer that are
represented by Definitive Securities, the name of each holder of such Definitive
Securities, the principal amount properly tendered in the Exchange Offer by each
such holder and the name and address to which Definitive Securities representing
Exchange Securities shall be registered and sent for each such holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Exchange Securities have been
registered under Section 5 of the Securities Act and the Indenture has been
qualified under the Trust Indenture Act and (y) with respect to the matters
set forth in Section 3(p) of the Registration Rights Agreement and (iii) a
Company Order, shall authenticate (A) a Global Security representing Exchange
Securities in aggregate principal amount equal to the aggregate principal
amount of Original Securities represented by a Global Security indicated in
such
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Officers' Certificate as having been properly tendered and (B) Definitive
Securities representing Exchange Securities registered in the names of, and
in the principal amounts indicated in, such Officers' Certificate.
If the principal amount of the Global Security representing Exchange
Securities is less than the principal amount of the Global Security
representing Original Securities, the Trustee shall make an endorsement on
such Global Security representing Original Securities indicating a reduction
in the principal amount represented thereby.
The Trustee shall deliver such Definitive Securities representing
Exchange Securities to the holders thereof as indicated in such Officers'
Certificate.
2.8. REPLACEMENT SECURITIES
If any mutilated Security is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, the Company shall issue and the
Trustee shall authenticate a replacement Security if the Trustee's
requirements for replacements of Securities are met. An indemnity bond must
be supplied by the holder that is sufficient in the judgment of the Trustee
and the Company to protect the Company, the Trustee, any agent thereof or any
authenticating agent from any loss that any of them may suffer if a Security
is replaced. The Company or the Trustee may charge for its expenses in
replacing a Security.
Every replacement Security is an obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
2.9. TEMPORARY SECURITIES
Pending the preparation of Definitive Securities, the Company may
execute, and upon receipt of a Company Order the Trustee shall authenticate
and make available for delivery, temporary Securities that are printed,
lithographed, typewritten, mimeographed or otherwise reproduced, in any
authorized denomination, substantially of the tenor of the Definitive
Securities in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Securities may determine, as conclusively evidenced by their
execution of such Securities.
If temporary Securities are issued, the Company shall cause Definitive
Securities to be prepared without unreasonable delay. The Definitive
Securities shall be printed, lithographed or engraved, or provided by any
combination thereof, or in any other manner permitted by the rules and
regulations of any applicable securities exchange, all as determined by the
officers executing such Definitive Securities. After the preparation of
Definitive Securities, the temporary Securities shall be exchangeable for
Definitive Securities upon surrender of the temporary Securities at the
office or agency maintained by the Company for such purpose pursuant to
Section 3.2 hereof, without charge to the holder of Securities. Upon
surrender for cancellation of any one or more temporary Securities, the
Company shall execute, and the Trustee shall authenticate and make available
for delivery, in exchange therefor the same aggregate principal amount of
Definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as Definitive Securities.
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2.10. CANCELLATION
The Company at any time may deliver Securities to the Trustee for
cancellation. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall retain or dispose of cancelled Securities in
accordance with its normal practices (subject to the record retention
requirement of the Exchange Act) unless the Company directs them to be
returned to it. The Company may not issue new Securities to replace
Securities that have been paid or that have been delivered to the Trustee for
cancellation.
2.11. DEFAULTED INTEREST
Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the holder of
Securities on the relevant regular record date by virtue of having been such
holder; and such Defaulted Interest shall be paid by the Company, at its
election, as provided in clause (a) or clause (b) below:
(a) The Company may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their respective
Predecessor Securities) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be fixed
in the following manner: the Company shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each such Security
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment, such money when deposited to be held in trust for
the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a special record date for
the payment of such Defaulted Interest which shall not be more than 15 nor
less than 10 days prior to the date of the proposed payment and not less than
10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such special
record date and, in the name and at the expense of the Company, shall cause
notice of the proposed payment of such Defaulted Interest and the special
record date therefor to be mailed, first class postage prepaid, to each
Securityholder at his or her address as it appears in the Security Register,
not less than 10 days prior to such special record date. Notice of the
proposed payment of such Defaulted Interest and the special record date
therefor having been mailed as aforesaid, such Defaulted Interest shall be
paid to the Persons in whose names such Securities (or their respective
Predecessor Securities) are registered on such special record date and shall
be no longer payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest on any
Securities in any other lawful manner not inconsistent with the requirements
of any securities exchange on which such Securities may be listed, and upon
such notice as may be required by such exchange, if, after notice given by
the Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
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2.12. CUSIP NUMBERS
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use). The Company will promptly notify the Trustee of any
change in the CUSIP numbers of the Securities.
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
3.1. PAYMENT OF PRINCIPAL AND INTEREST
The Company covenants and agrees for the benefit of the holders of the
Securities that it will duly and punctually pay or cause to be paid the
principal of and interest on the Securities at the place, at the respective
times and in the manner provided herein. Except as provided in Section 2.3,
each installment of interest on the Securities may be paid by mailing checks
for such interest payable to the order of the holders of the Securities
entitled thereto as they appear in the Security Register. The Company
further covenants to pay any and all amounts including, without limitation,
Liquidated Damages, if any, on the dates and in the manner required under the
Registration Rights Agreement.
3.2. OFFICES FOR NOTICES AND PAYMENTS, ETC.
So long as any of the Securities remain outstanding, the Company will
maintain in the Borough of Manhattan, The City of New York, an office or
agency where the Securities may be presented for payment, an office or agency
where the Securities may be presented for registration of transfer and for
exchange as in this Indenture provided and an office or agency where notices
and demands to or upon the Company in respect of the Securities or of this
Indenture may be served. The Company will give to the Trustee written notice
of the location of any such office or agency and of any change of location
thereof. Until otherwise designated from time to time by the Company in a
notice to the Trustee, any such office or agency for all of the above
purposes shall be the Principal Office of the Trustee. In case the Company
shall fail to maintain any such office or agency in the Borough of Manhattan,
The City of New York, or shall fail to give such notice of the location or of
any change in the location thereof, presentations and demands may be made and
notices may be served at the principal office of the Trustee.
In addition to any such office or agency, the Company may from time to
time designate one or more offices or agencies outside the Borough of
Manhattan, The City of New York, where the Securities may be presented for
payment, registration of transfer and for exchange in the manner provided in
this Indenture, and the Company may from time to time rescind such
designation, as the Company may deem desirable or expedient; provided,
however, that no such designation or rescission shall in any manner relieve
the Company of its obligation to maintain any such office or agency in the
Borough of Manhattan, The City of New York, for the purposes above mentioned.
The Company will give to the Trustee prompt written notice of any such
designation or rescission thereof.
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3.3. APPOINTMENTS TO FILL VACANCIES IN TRUSTEE'S OFFICE
The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.
3.4. PROVISION AS TO PAYING AGENT
(a) If the Company shall appoint a paying agent other than the
Trustee with respect to the Securities, it will cause such paying agent to
execute and deliver to the Trustee an instrument in which such agent shall
agree with the Trustee, subject to the provision of this Section 3.4,
(1) that it will hold all sums held by it as such agent for
the payment of the principal of or interest on the Securities (whether such
sums have been paid to it by the Company or by any other obligor on the
Securities of such series) in trust for the benefit of the holders of the
Securities;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Securities) to make any payment of
the principal of and premium or interest on the Securities when the same
shall be due and payable; and
(3) that it will at any time during the continuance of any
such failure, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by it as such paying agent.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of or interest on the Securities, set
aside, segregate and hold in trust for the benefit of the holders of the
Securities a sum sufficient to pay such principal or interest so becoming due
and will notify the Trustee of any failure to take such action and of any
failure by the Company (or by any other obligor under the Securities) to make
any payment of the principal of or interest on the Securities when the same
shall become due and payable.
(c) Anything in this Section 3.4 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Securities hereunder, or for any other reason,
pay or cause to be paid to the Trustee all sums held in trust for any such
series by the Trustee or any paying agent hereunder, as required by this
Section 3.4, such sums to be held by the Trustee upon the trusts herein
contained.
(d) Anything in this Section 3.4 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.4 is subject to
Sections 11.3 and 11.4.
3.5. CERTIFICATE TO TRUSTEE
The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year, a written statement signed by the President or a
Vice President and by the Treasurer, an Assistant Treasurer, the Controller
or an Assistant Controller of the Company, stating, as to each signer
thereof, that
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(1) a review of the activities of the Company during such year and of
performance under this Indenture has been made under such signer's
supervision, and
(2) to the best of such signer's knowledge, based on such review,
(a) the Company has fulfilled all its obligations under this Indenture
throughout such year, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default known to such signer and
the nature and status thereof, and (b) no event has occurred and is
continuing which is, or after notice or lapse of time or both would become,
an Event of Default under Section 5.1(c) or (d), or, if such an event has
occurred and is continuing, specifying each such event known to such signer
and the nature and status thereof.
3.6. COMPLIANCE WITH CONSOLIDATION PROVISIONS
The Company will not, while any of the Securities remain outstanding,
consolidate with, or merge into, or merge into itself, or sell or convey all
or substantially all of its property to any other Person unless the
provisions of Article X hereof are complied with.
3.7. LIMITATION UPON SALES OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
The Company will not sell, transfer or otherwise dispose of (except
to a Restricted Subsidiary), and it will not permit any Restricted Subsidiary
to sell, transfer or otherwise dispose of (except to the Company or to a
Restricted Subsidiary), any shares of capital stock of a Restricted Subsidiary,
unless the entire capital stock of such Restricted Subsidiary at the time
owned by the Company and its Restricted Subsidiaries shall be disposed of at
the same time for a consideration consisting of cash or other property, which,
in the opinion of the Board of Directors, is at least equal to the fair value
thereof.
For the purposes of the foregoing paragraph, "Restricted Subsidiary"
shall mean a Subsidiary including Subsidiaries of any such Subsidiary, which
meets any of the following conditions:
(a) the Company's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed 10% of the total assets of the Company and
its Subsidiaries consolidated as of the end of the most recently completed
fiscal year;
(b) the Company's and its other Subsidiaries' proportionate share
of the total assets (after inter-company eliminations) of the Subsidiary
exceeds 10% of the total assets of the Company and its Subsidiaries
consolidated as of the end of the most recently completed fiscal year; or
(c) the Company's and its other Subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of the Subsidiary
exceeds 10% of such income of the Company and its Subsidiaries consolidated
for the most recently completed fiscal year.
For purposes of making the prescribed income test in clause (c) of
the preceding sentence, when a loss has been incurred by either the Company
and its Subsidiaries consolidated or the tested Subsidiary, but not both, the
equity in the income or loss of the tested subsidiary shall be excluded from
the income of the Company and its Subsidiaries consolidated for purposes of
the computation and if income of the Company and its Subsidiaries
consolidated for the most recent fiscal year is at
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least 10% lower than the average of the income for the last five fiscal
years, such average income shall be substituted for purposes of the
computation and any loss years shall be omitted for purposes of computing
average income.
3.8. LIMITATION UPON MORTGAGES AND LIENS
The Company will not at any time directly or indirectly issue,
assume, guarantee or permit to exist any indebtedness secured by a mortgage,
pledge, lien or other encumbrance (any mortgage, pledge, lien or other
encumbrance being hereinafter in this Section referred to as a "lien") on any
of its property or assets, whether now owned or hereafter acquired, without
making effective provisions whereby the Securities then outstanding (and, if
the Company so elects, any other indebtedness ranking on a parity with the
Securities) shall be equally and ratably secured with any such secured
indebtedness, so long as any such other indebtedness shall be secured;
PROVIDED, HOWEVER, that the foregoing covenant shall not be applicable to the
following:
(a) liens in existence at the Issue Date;
(b) liens on real estate (including liens existing in respect of
such real estate at the time of acquisition thereof) securing indebtedness in
an amount not in excess of 100% of the fair value of the real estate at the
time of creation of such indebtedness (as determined by the Board of
Directors);
(c) liens arising from the acquisition of a business as a going
concern (whether by merger, acquisition of a controlling stock interest,
acquisition of assets or otherwise) or to which assets acquired by the
Company in partial or complete satisfaction of secured indebtedness are
subject;
(d) liens to secure the extension, renewal or replacement of any
indebtedness secured by any of the liens referred to in (a), (b) and (c)
above, provided that there shall not be an increase in the amount of
indebtedness secured by such extension, renewal or replacement; and
(e) liens of taxes or assessments or governmental charges or levies
not then due and delinquent or the validity of which is being contested in
good faith or which are less than $10,000,000 in amount; pledges or deposits
to secure public or statutory obligations including liens and deposits
required or provided for under state insurance laws and similar regulatory
statutes; materialmen's, mechanics', carrier's, workmen's, repairmen's, or
other like liens, and pledges or deposits made in the ordinary course of
business to obtain the release of such liens; liens created by or resulting
from any litigation or legal proceeding which is being contested in good
faith by appropriate proceedings or which involve claims of less than
$10,000,000; deposits to secure (or in lieu of) surety, stay, appeal or
customs bonds; deposits to secure the payment of taxes, assessments, customs
duties or other similar charges; landlords, liens on property held under
lease; and any other liens similar to those described in this Subsection, the
existence of which does not, in the opinion of the Company, materially impair
the use by the Company of the affected property in the operation of its
business, or the value of such property for the purpose of such business.
3.9. WAIVER OF CERTAIN COVENANTS
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 3.7 and 3.8, with respect to the
Securities if before or after the time for such
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compliance the Holders of at least 66-2/3% in principal amount of the
outstanding Securities shall, by act of such Holders, either waive such
compliance in such instance or generally waive compliance with such covenant
or condition, but no such waiver shall extend to or affect such covenant or
condition except to the extent so expressly waived, and, until such waiver
shall become effective, the obligations of the Companies in respect of any
such covenant or condition shall remain in full force and effect.
ARTICLE IV
SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
4.1. SECURITYHOLDERS' LISTS
The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee:
(a) on a semi-annual basis on each regular record date for the
Securities, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Securityholders as of such record date; and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company, of any such request, a list of
similar form and content with respect to the Securityholders as of a date not
more than 15 days prior to the time such list is furnished, except that, no
such lists need be furnished so long as the Trustee is in possession thereof
by reason of its acting as Security registrar.
4.2. PRESERVATION AND DISCLOSURE OF LISTS
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, all information as to the names and addresses of the
holders of the Securities (1) contained in the most recent list furnished to
it as provided in Section 4.1 or (2) received by it in the capacity of
Securities registrar (if so acting) hereunder. The Trustee may destroy any
list furnished to it as provided in Section 4.1 upon receipt of a new list so
furnished.
(b) In case three or more holders of Securities (hereinafter
referred to as "applicants") apply in writing to the Trustee and furnish to
the Trustee reasonable proof that each such applicant has owned a Security
for a period of at least six months preceding the date of such application,
and such application states that the applicants desire to communicate with
other holders of Securities or with holders of all Securities with respect to
their rights under this Indenture and is accompanied by a copy of the form of
proxy or other communication which such applicants propose to transmit, then
the Trustee shall within 5 Business Days after the receipt of such
application, at its election, either:
(1) afford such applicants access to the information preserved
at the time by the Trustee in accordance with the provisions of subsection
(a) of this Section 4.2, or
(2) inform such applicants as to the approximate number of
holders of all Securities, whose names and addresses appear in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.2, and as to the approximate
cost
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of mailing to such Securityholders the form of proxy or other communication,
if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Securityholder whose name and address appear in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section 4.2 a copy of the form of proxy
or other communication which is specified in such request with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Commission, together with a copy of the material
to be mailed, a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of the holders
of Securities of such series or all Securities, as the case may be, or would
be in violation of applicable law. Such written statement shall specify the
basis of such opinion. If the Commission, after opportunity for a hearing
upon the objections specified in the written statement so filed, shall enter
an order refusing to sustain any of such objections or if, after the entry of
an order sustaining one or more of such objections, the Commission shall
find, after notice and opportunity for hearing, that all the objections so
sustained have been met and shall enter an order so declaring, the Trustee
shall mail copies of such material to all such Securityholders with
reasonable promptness after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any obligation or duty to
such applicants respecting their application.
(c) Each and every holder of Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither the Company
nor the Trustee nor any paying agent shall be held accountable by reason of
the disclosure of any such information as to the names and addresses of the
holders of Securities in accordance with the provisions of subsection (b) of
this Section 4.2, regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of
mailing any material pursuant to a request made under said subsection (b).
4.3. REPORTS BY COMPANY
(a) The Company covenants and agrees to file with the Trustee,
within 15 days after the date on which the Company is required to file the
same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any
of the foregoing as said Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or,
if the Company is not required to file information, documents or reports
pursuant to either of such sections, then to file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from time to
time by the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules and
regulations.
(b) The Company covenants and agrees to file with the Trustee and
the Commission, in accordance with the rules and regulations prescribed from
time to time by said Commission, such additional information, documents and
reports with respect to compliance by the Company with the
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conditions and covenants provided for in this Indenture as may be required
from time to time by such rules and regulations.
(c) The Company covenants and agrees to transmit by mail to all
holders of Securities, as the names and addresses of such holders appear upon
the Security Register, within 30 days after the filing thereof with the
Trustee, such summaries of any information, documents and reports required to
be filed by the Company pursuant to subsections (a) and (b) of this Section
4.3 as may be required by rules and regulations prescribed from time to time
by the Commission.
(d) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein
or determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(e) So long as is required for an offer or sale of the Securities
to qualify for an exemption under Rule 144A under the Securities Act, the
Company shall, upon request, provide the information required by clause
(d)(4) thereunder to each Holder and to each beneficial owner and prospective
purchaser of Securities identified by any holder of Restricted Securities,
unless such information is furnished to the Commission pursuant to Section 13
or 15(d) of the Exchange Act.
4.4. REPORTS BY THE TRUSTEE
(a) The Trustee shall transmit to Securityholders such reports
concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act at the times and in the manner
provided pursuant thereto. If required by Section 313(a) of the Trust
Indenture Act, the Trustee shall, within 60 days after each December 31
following the date of this Indenture, commencing December 31, 1997, deliver
to Securityholders a brief report which complies with the provisions of such
Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Securityholders, be filed by the Trustee with each stock
exchange, if any, upon which the Securities are listed, with the Commission
and with the Company. The Company will promptly notify the Trustee when the
Securities are listed on any stock exchange.
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON EVENT OF DEFAULT
5.1. EVENTS OF DEFAULT
"Event of Default", wherever used herein means with respect to the
Securities, any one of the following events (whatever the reason for such
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):
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(a) default in the payment of any interest upon any Security when
it becomes due and payable, and continuance of such default for a period of
30 days; or
(b) default in the payment of the principal of any Security as and
when the same shall become due and payable either at maturity, by declaration
or otherwise; or
(c) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or warranty
a default in whose performance or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such default or breach for a
period of 60 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by the
holders of at least 25% in principal amount of the outstanding Securities a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder; or
(d) a default occurs under any bond, mortgage, indenture (including
this Indenture) or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness for money borrowed of the
Company or any Restricted Subsidiary, whether such indebtedness now exists or
shall hereafter be created, which default (a) is caused by a failure to pay
principal on such indebtedness prior to the expiration of the grace period
provided in such indebtedness (a "Payment Default") or (b) results in the
acceleration of such indebtedness prior to its express maturity, and in each
case, the principal amount of any such indebtedness together with the
principal amount of any other such indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$25 million or more, without such acceleration having been rescinded, stayed
or annulled, or such indebtedness having been discharged or, in the case of
indebtedness contested in good faith by the Company, a bond, letter of
credit, escrow deposit or other cash equivalent in an amount sufficient to
discharge such indebtedness having been set aside by the Company, within a
period of 10 days after there has been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in principal amount of the outstanding Securities a
written notice specifying such event of default and requiring the Company to
cause such acceleration to be rescinded or annulled or to cause such
indebtedness to be discharged and stating that such notice is a "Notice of
Default" hereunder; or
(e) the entry of a decree or order by a court having jurisdiction
in the premises adjudging the Company a bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under the Bankruptcy Law or
any other applicable Federal or State law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the Company or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 90 consecutive days; or
(f) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy
or insolvency proceedings against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under the Bankruptcy Law
or any other applicable Federal or State law, or the consent by it to
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the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the Company or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due and
its willingness to be adjudicated a bankrupt, or the taking of corporate
action by the Company in furtherance of any such action.
Upon receipt by the Trustee of any Notice of Default pursuant to
this Section 5.1 with respect to Securities all or part of which are
represented by a Global Security, a record date shall be established for
determining Holders of outstanding Securities entitled to join in such Notice
of Default, which record date shall be at the close of business on the day
the Trustee receives such Notice of Default. The holders as of such record
date, or their duly designated proxies, and only such Persons, shall be
entitled to join in such Notice of Default, whether or not such holders
remain holders after such record date; PROVIDED, that unless holders of at
least 25% in principal amount of the outstanding Securities, or their
proxies, shall have joined in such Notice of Default prior to the day which
is 90 days after such record date, such Notice of Default shall automatically
and without further action by any holder be cancelled and of no further
effect. Nothing in this paragraph shall prevent a holder, or a proxy of a
holder, from giving, after expiration of such 90-day period, a new Notice of
Default identical to a Notice of Default which has been cancelled pursuant to
the proviso to the preceding sentence, in which event a new record date shall
be established pursuant to the provisions of this Section 5.1.
5.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT
If an Event of Default with respect to Securities outstanding occurs
and is continuing, then and in every such case the Trustee or the holders of
not less than 25% in principal amount of the outstanding Securities may
declare the principal of all Securities to be due and payable immediately, by
a notice in writing to the Company (and to the Trustee if given by holders),
and upon any such declaration such principal shall become immediately due and
payable.
At any time after such a declaration of acceleration with respect to
Securities has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the holders of a majority in principal amount of the outstanding
Securities, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on all Securities,
(B) the principal of any Securities which have become due
otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Securities,
(C) to the extent that payment of such interest is legally
enforceable, interest upon overdue installments of interest at the
rate borne by the Securities, and
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(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(2) all Events of Default with respect to the Securities, other
than the non-payment of the principal of Securities which have become
due solely by such acceleration, have been cured or waived as provided
in Section 5.10.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Upon receipt by the Trustee of written notice declaring such an
acceleration, or rescission and annulment thereof, with respect to Securities
all or part of which are represented by a Global Security, a record date
shall be established for determining holders of outstanding Securities
entitled to join in such notice, which record date shall be at the close of
business on the day the Trustee receives such notice. The Holders on such
record date, or their duly designated proxies, and only such Persons, shall
be entitled to join in such notice, whether or not such holders remain
holders after such record date; PROVIDED, that unless such declaration of
acceleration, or rescission and annulment, as the case may be, shall have
become effective by virtue of the requisite percentage having joined in such
notice prior to the day which is 90 days after such record date, such notice
of declaration of acceleration, or rescission and annulment, as the case may
be, shall automatically and without further action by any holder be cancelled
and of no further effect. Nothing in this paragraph shall prevent a holder,
or a proxy of a holder, from giving, after expiration of such 90-day period,
a new written notice of declaration of acceleration, or rescission and
annulment thereof, as the case may be, that is identical to a written notice
which has been cancelled pursuant to the proviso to the preceding sentence,
in which event a new record date shall be established pursuant to the
provisions of this Section 5.2. Notwithstanding anything to the contrary
herein, the Trustee shall not be deemed to have notice of defaults or Events
of Default until a Responsible Officer has received written notice of such
default or Event of Default.
5.3. PAYMENT OF SECURITIES ON DEFAULT; SUIT THEREFOR
The Company covenants that (a) in case default shall be made in the
payment of any installment of interest upon any of the Securities as and when
the same shall become due and payable, and such default shall have continued
for a period of 30 days, or (b) in case default shall be made in the payment
of the principal of any of the Securities as and when the same shall have
become due and payable, whether at maturity of the Securities or by
declaration or otherwise, then, upon demand of the Trustee, the Company will
pay to the Trustee, for the benefit of the holders of the Securities, the
whole amount that then shall have become due and payable on all such
Securities for principal or interest, or both, as the case may be, with
interest upon the overdue principal and (to the extent that payment of such
interest is enforceable under applicable law) upon the overdue installments
of interest at the rate borne by the Securities; and, in addition thereto,
such further amount as shall be sufficient to cover all sums paid or advanced
by the Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at
law or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such
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judgment or final decree against the Company or any other obligor on the
Securities and collect in the manner provided by law out of the property of
the Company or any other obligor on the Securities wherever situated the
moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Securities
under the Bankruptcy Law, or any other applicable law, or in case a receiver
or trustee shall have been appointed for the property of the Company or such
other obligor, or in the case of any other similar judicial proceedings
relative to the Company or other obligor upon the Securities, or to the
creditors or property of the Company or such other obligor, the Trustee,
irrespective of whether the principal of the Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made any demand pursuant to the provisions
of this Section 5.3, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the
Securities and, in case of any judicial proceedings, to file such proofs of
claim and other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including for all sums paid or advanced by
the Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Securityholders allowed in such judicial proceedings relative to the Company
or any other obligor on the Securities, or to the creditors or property of
the Company or such other obligor, unless prohibited by applicable law and
regulations, to vote on behalf of the holders of the Securities in any
election of a trustee or a standby trustee in arrangement, reorganization,
liquidation or other bankruptcy or insolvency proceedings or person
performing similar functions in comparable proceedings, and to collect and
receive any moneys or other property payable or deliverable on any such
claims, and to distribute the same after the deduction of its charges and
expenses; and any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized by each of the Securityholders to make
such payments to the Trustee, and, in the event that the Trustee shall
consent to the making of such payments directly to the Securityholders, to
pay to the Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Trustee, each predecessor Trustee and their respective
agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee and each predecessor Trustee
except as a result of negligence or bad faith.
Nothing herein contained shall be construed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting
the Securities or the rights of any holder thereof or to authorize the
Trustee to vote in respect of the claim of any Securityholder in any such
proceeding.
All rights of action and of asserting claims under this Indenture,
or under any of the Securities, may be enforced by the Trustee without the
possession of any of the Securities, or the production thereof on any trial
or other proceeding relative thereto, and any such suit or proceeding
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment shall be for the ratable benefit
of the holders of the Securities.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the
holders of the Securities, and it shall not be necessary to make any holders
of the Securities parties to any such proceedings.
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5.4. APPLICATION OF MONEYS COLLECTED BY TRUSTEE
Any moneys collected by the Trustee shall be applied in the order
following, at the date or dates fixed by the Trustee for the distribution of
such moneys, upon presentation of the Securities in respect of which moneys
have been collected, and stamping thereon the payment, if only partially
paid, and upon surrender thereof if fully paid:
First: To the payment of all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel;
Second: To the payment of the amounts then due and unpaid upon
Securities for principal of and interest on the Securities, in respect of
which or for the benefit of which money has been collected, ratably, without
preference of priority of any kind, according to the amounts due on such
Securities for principal and interest, respectively; and
Third: To the Company.
5.5. PROCEEDINGS BY SECURITYHOLDERS
No holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or for the
appointment of a receiver, assignee, trustee, liquidator, sequestrator (or
other similar official) or for any other remedy hereunder, unless
(1) such holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the
Securities;
(2) the holders of not less than 25% in principal amount of the
outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such holder or holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the holders of a
majority in principal amount of the outstanding Securities;
it being understood and intended that no one or more holders of Securities
shall have any right in any manner whatever by virtue of, or by availing of,
any provision of this Indenture to affect, disturb or prejudice the rights of
any other holders of Securities, or to obtain or to seek to obtain priority
or preference over any other holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all the holders of Securities.
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5.6. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL AND INTEREST
Notwithstanding any other provision in this Indenture, the holder of
any Security shall have the right which is absolute and unconditional to
receive payment of the principal of and (subject to Section 2.11) interest on
such Security on the Stated Maturity and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Holder.
5.7. PROCEEDINGS BY TRUSTEE
In case an Event of Default occurs with respect to Securities and is
continuing, the Trustee may in its discretion proceed to protect and enforce
the rights vested in it by this Indenture by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect and enforce
any of such rights, either by suit in equity or by action at law or by
proceeding in bankruptcy or otherwise, whether for the specific enforcement
of any covenant or agreement contained in this Indenture or in aid of the
exercise of any power granted in this Indenture, or to enforce any other
legal or equitable right vested in the Trustee by this Indenture or by law.
5.8. REMEDIES CUMULATIVE AND CONTINUING
All powers and remedies given by this Article V to the Trustee or to
the Securityholders shall, to the extent permitted by law, be deemed
cumulative and not exclusive of any other powers and remedies available to
the Trustee or the holders of the Securities, by judicial proceedings or
otherwise, to enforce the performance or observance of the covenants and
agreements contained in this Indenture or otherwise established with respect
to the Securities, and no delay or omission of the Trustee or of any holder
of any of the Securities to exercise any right or power accruing upon any
Event of Default occurring and continuing as aforesaid shall impair any such
right or power, or shall be construed to be a waiver of any such default or
an acquiescence therein; and, subject to the provisions of Section 5.5, every
power and remedy given by this Article V or by law to the Trustee or to the
Securityholders may be exercised from time to time, and as often as shall be
deemed expedient, by the Trustee or by the Securityholders.
5.9. DIRECTION OF PROCEEDINGS AND WAIVER OF DEFAULTS BY MAJORITY OF
SECURITYHOLDERS
The holders of a majority in principal amount of the outstanding
Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, with respect to the
Securities, PROVIDED that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) subject to the provisions of Section 6.1, the Trustee shall
have the right to decline to follow such direction if the Trustee in
good faith shall determine that the proceeding so directed would be
unjustly prejudicial to the holders not joining in any such direction
or would involve the Trustee in personal liability.
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Upon receipt by the Trustee of any written notice directing the
time, method or place of conducting any such proceeding or exercising any
such trust or power, with respect to Securities all or part of which are
represented by a Global Security, a record date shall be established for
determining holders of outstanding Securities entitled to join in such
notice, which record date shall be at the close of business on the day the
Trustee receives such notice. The holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such holders remain holders after such record date;
PROVIDED, that unless the holders of a majority in principal amount of the
outstanding Securities shall have joined in such notice prior to the day
which is 90 days after such record date, such notice shall automatically and
without further action by any holder be cancelled and of no further effect.
Nothing in this paragraph shall prevent a holder, or a proxy of a holder,
from giving, after expiration of such 90-day period, a new notice identical
to a notice which has been cancelled pursuant to the proviso to the preceding
sentence, in which event a new record date shall be established pursuant to
the provisions of this Section 5.9.
5.10. WAIVER OF PAST DEFAULTS
The Holders of not less than a majority in principal amount of the
outstanding Securities may on behalf of the holders of all the Securities
waive any past default hereunder with respect to such Securities and its
consequences, except a default
(1) in the payment of the principal of or interest on any
Security, or
(2) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of the
holder of each outstanding Security.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
5.11. NOTICE OF DEFAULTS
Within 90 days after the occurrence of any default hereunder with
respect to the Securities, the Trustee shall transmit by mail to all holders
of Securities, as their names and addresses appear in the Securities
Register, notice of such default hereunder known to the Trustee, unless such
default shall have been cured or waived; PROVIDED, HOWEVER, that, except in
the case of a default in the payment of the principal of or interest on any
Security, the 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 Trustee in good faith
determine that the withholding of such notice is in the interests of the
holders of Securities; and PROVIDED, FURTHER, that in the case of any default
of the character specified in Section 5.1(c) or (d) no such notice to holders
of Securities shall be given until at least 30 days after the occurrence
thereof. For the purpose of this Section, the term "default" means any event
which is, or after notice or lapse of time or both would become, an Event of
Default with respect to Securities.
5.12. UNDERTAKING TO PAY COSTS
All parties to this Indenture agree, and each holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may
in its discretion require, in any suit for the
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enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable
costs, including reasonable attorneys' fees and expenses, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section 5.12 shall not apply to any suit instituted by the Trustee, to any
suit instituted by any Securityholder, or group of Securityholders, holding
in the aggregate more than 10% in aggregate principal amount of the
Securities outstanding, or to any suit instituted by any Securityholder for
the enforcement of the payment of the principal of or interest on any
Security against the Company on or after the same shall have become due and
payable.
ARTICLE VI
CONCERNING THE TRUSTEE
6.1. DUTIES AND RESPONSIBILITIES OF TRUSTEE
With respect to the holders of the Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default and after the curing
or waiving of all Events of Default which may have occurred, undertakes to
perform such duties and only such duties as are specifically set forth in
this Indenture. In case an Event of Default has occurred (which has not been
cured or waived) the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that
(a) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default which may have occurred
(1) the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Indenture, and the
Trustee shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on the part of the Trustee,
the 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 Trustee and conforming to the requirements of this
Indenture; but, in the case of any such certificates or opinions which by any
provision hereof are specifically required to be furnished to the Trustee,
the Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the pertinent
facts; and
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(c) the 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 Securityholders pursuant to Section 5.5, relating to the
time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture.
None of the provisions contained in this Indenture shall require the
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 there is reasonable ground for believing that the
repayment of such funds or liability is not reasonably assured to it under
the terms of this Indenture or adequate indemnity against such risk is not
reasonably assured to it.
6.2. RELIANCE ON DOCUMENTS, OPINIONS, ETC.
Subject to the provisions of Section 6.1:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, Security or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith
on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;
(f) the 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, indenture, Security or other paper or document, but the Trustee in its
discretion may make such inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such inquiry
or investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible
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for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
6.3. NO RESPONSIBILITY FOR RECITALS, ETC.
The recitals contained herein and in the Securities (except in the
certificate of authentication of the Trustee or the Authenticating Agent)
shall be taken as the statements of the Company and the Trustee and the
Authenticating Agent assume no responsibility for the correctness of the
same. The Trustee and the Authenticating Agent make no representations as to
the validity or sufficiency of this Indenture or of the Securities. The
Trustee and the Authenticating Agent shall not be accountable for the use or
application by the Company of any Securities or the proceeds of any
Securities authenticated and delivered by the Trustee or the Authenticating
Agent in conformity with the provisions of this Indenture.
6.4. TRUSTEE, AUTHENTICATING AGENT, PAYING AGENTS, TRANSFER AGENTS OR
REGISTRAR MAY OWN SECURITIES
The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Security registrar, in its individual or any other
capacity, may become the owner or pledgee of Securities with the same rights
it would have if it were not Trustee, Authenticating Agent, paying agent,
transfer agent or Security registrar.
6.5. MONEYS TO BE HELD IN TRUST
Subject to the provisions of Section 11.4, all moneys received by
the Trustee or any paying agent shall, until used or applied as herein
provided, be held in trust for the purpose for which they were received, but
need not be segregated from other funds except to the extent required by law.
The Trustee and any paying agent shall be under no liability for interest on
any money received by it hereunder except as otherwise agreed in writing with
the Company. So long as no Event of Default shall have occurred and be
continuing, all interest allowed on any such moneys shall be paid from time
to time upon the written order of the Company, signed by the Chairman of the
Board of Directors, the President, the Chief Financial Officer or a Vice
President or the Treasurer or an Assistant Treasurer of the Company.
6.6. COMPENSATION AND EXPENSES OF TRUSTEE
The Company, as borrower, covenants and agrees to pay to the Trustee
from time to time, and the Trustee shall be entitled to, such compensation as
shall be agreed to in writing between the Company and the 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 Company will pay or reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the
provisions of this Indenture (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 Company also covenants to indemnify
each of the Trustee or any predecessor 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 Trustee) incurred without negligence or bad faith
on the part of the Trustee and arising out of or in
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connection with the acceptance or administration of this trust, including the
costs and expenses of defending itself against any claim of liability in the
premises. The obligations of the Company under this Section 6.6 to
compensate and indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder. Such additional indebtedness shall be secured by a lien prior to
that of the Securities upon all property and funds held or collected by the
Trustee as such, except funds held in trust for the benefit of the holders of
particular Securities.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.1(d) or Section
5.1(e), the expenses (including the reasonable charges and expenses of its
counsel) and the compensation for the services are intended to constitute
expenses of administration under any applicable federal or state bankruptcy,
insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
6.7. OFFICERS' CERTIFICATE AS EVIDENCE
Except as otherwise provided in Sections 6.1 and 6.2, whenever in
the administration of the provisions of this Indenture the Trustee shall deem
it necessary or desirable that a matter be proved or established prior to
taking or omitting any action hereunder, such matter (unless other evidence
in respect thereof is herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an Officers' Certificate delivered to
the Trustee, and such certificate, in the absence of negligence or bad faith
on the part of the Trustee, shall be full warrant to the Trustee for any
action taken or omitted by it under the provisions of this Indenture upon the
faith thereof.
6.8. CONFLICTING INTEREST OF TRUSTEE
If the Trustee has or shall acquire any "conflicting interest"
within the meaning of Section 310(b) of the Trust Indenture Act, the Trustee
and the Company shall in all respects comply with the provisions of Section
310(b) of the Trust Indenture Act.
6.9. ELIGIBILITY OF TRUSTEE
The Trustee hereunder shall at all times 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
other Person permitted to act as trustee by the Commission authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least 50 million U.S. dollars ($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 aforesaid
supervising or examining authority, then for the purposes of this Section 6.9
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.
The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve
as Trustee.
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In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.9, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.10.
6.10. RESIGNATION OR REMOVAL OF TRUSTEE
(a) The Trustee, or any trustee or trustees hereafter appointed, may
at any time resign by giving written notice of such resignation to the
Company and by mailing notice thereof to the holders of the Securities at
their addresses as they shall appear on the Security register. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee or trustees by written instrument, in duplicate, one copy
of which instrument shall be delivered to the resigning Trustee and one copy
to the successor trustee. If no successor trustee shall have been so
appointed and have accepted appointment within 60 days after the mailing of
such notice of resignation to the Securityholders, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a
successor trustee, or any Securityholder who has been a bona fide holder of a
Security for at least six months may, subject to the provisions of Section
5.9, on behalf of himself and all others similarly situated, petition any
such court for the appointment of a successor trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
appoint a successor trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of
Section 6.8 after written request therefor by the Company or by any
Securityholder who has been a bona fide holder of a Security or Securities
for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 6.9 and shall fail to resign after written request
therefor by the Company or by any such Securityholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee, or, subject to the provisions of Section 5.9, any
Securityholder who has been a bona fide holder of a Security for at least six
months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, remove the Trustee and
appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Securities at the time outstanding may at any time remove the Trustee and
nominate a successor trustee, which shall be deemed appointed as successor
trustee unless within 10 days after such nomination the Company objects
thereto or if no successor trustee shall have been so appointed and shall
have accepted appointment within 30 days after such removal, in which case
the Trustee so removed or any
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Securityholder, upon the terms and conditions and otherwise as in subsection
(a) of this Section 6.10 provided, may petition any court of competent
jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 6.10
shall become effective upon acceptance of appointment by the successor
trustee as provided in Section 6.11.
6.11. ACCEPTANCE BY SUCCESSOR TRUSTEE
Any successor trustee appointed as provided in Section 6.10 shall
execute, acknowledge and deliver to the Company and to its predecessor
trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with like effect as if originally named as trustee
herein; but, nevertheless, on the written request of the Company or of the
successor trustee, the trustee ceasing to act shall, upon payment of any
amounts then due it pursuant to the provisions of Section 6.6, execute and
deliver an instrument transferring to such successor trustee all the rights
and powers of the trustee so ceasing to act and shall duly assign, transfer
and deliver to such successor trustee all property and money held by such
retiring trustee thereunder. Upon request of any such successor trustee, the
Company shall execute any and all instruments in writing for more fully and
certainly vesting in and confirming to such successor trustee all such rights
and powers. Any trustee ceasing to act shall, nevertheless, retain a lien
upon all property or funds held or collected by such trustee to secure any
amounts then due it pursuant to the provisions of Section 6.6.
No successor trustee shall accept appointment as provided in this
Section 6.11 unless at the time of such acceptance such successor trustee
shall be qualified under the provisions of Section 6.8 and eligible under the
provisions of Section 6.9.
Upon acceptance of appointment by a successor trustee as provided in
this Section 6.11, the Company shall mail notice of the succession of such
trustee hereunder to the holders of Securities at their addresses as they
shall appear on the Security Register. If the Company fails to mail such
notice within 10 days after the acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Company.
6.12. SUCCESSION BY MERGER, ETC.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder
without the execution or filing of any paper or any further act on the part
of any of the parties hereto.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any Securities shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time any of the Securities
shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder
or in the name of the successor trustee; and in all such cases such
certificates
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shall have the full force which the Securities or this Indenture elsewhere
provides that the certificate of the Trustee shall have; provided, however,
that the right to adopt the certificate of authentication of any predecessor
Trustee or authenticate Securities in the name of any predecessor Trustee
shall apply only to its successor or successors by merger, conversion or
consolidation.
6.13. LIMITATION ON RIGHTS OF TRUSTEE AS A CREDITOR
The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship described in Section 311(b) of the
Trust Indenture Act. A Trustee who has resigned or been removed shall be
subject to Section 311(a) of the Trust Indenture Act to the extent included
therein.
6.14. AUTHENTICATING AGENTS
There may be one or more Authenticating Agents appointed by the
Trustee upon the request of the Company with power to act on its behalf and
subject to its direction in the authentication and delivery of Securities
issued upon exchange or transfer thereof as fully to all intents and purposes
as though any such Authenticating Agent had been expressly authorized to
authenticate and deliver Securities; PROVIDED, that the Trustee shall have no
liability to the Company for any acts or omissions of the Authenticating
Agent with respect to the authentication and delivery of Securities. Any
such Authenticating Agent shall at all times be a corporation organized and
doing business under the laws of the United States or of any state or
territory thereof or of the District of Columbia authorized under such laws
to act as Authenticating Agent, having a combined capital and surplus of at
least $5,000,000 and being 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 the
requirements of such authority, then for the purposes of this Section 6.14
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. If at any time an Authenticating Agent shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect herein specified in this
Section.
Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating
Agent shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of any Authenticating Agent, shall be the
successor of such Authenticating Agent hereunder, if such successor
corporation is otherwise eligible under this Section 6.14 without the
execution or filing of any paper or any further act on the part of the
parties hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at
any time terminate the agency of any Authenticating Agent by giving written
notice of termination to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in case
at any time any Authenticating Agent shall cease to be eligible under this
Section 6.14, the Trustee may, and upon the request of the Company shall,
promptly appoint a successor Authenticating Agent eligible under this Section
6.14, shall give written notice of such appointment to the Company and shall
mail notice of such appointment to all Securityholders as the names and
addresses of such holders appear on the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment
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hereunder shall become vested with all rights, powers, duties and
responsibilities of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent herein.
The Company, as borrower, agrees to pay to any Authenticating Agent
from time to time reasonable compensation for its services. Any
Authenticating Agent shall have no responsibility or liability for any action
taken by it as such in accordance with the directions of the Trustee.
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
7.1. ACTION BY SECURITYHOLDERS
Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Securities may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the holders of such specified percentage
have joined therein may be evidenced (a) by any instrument or any number of
instruments of similar tenor executed by such Securityholders in person or by
agent or proxy appointed in writing, or (b) by the record of such holders of
Securities voting in favor thereof at any meeting of such Securityholders
duly called and held in accordance with the provisions of Article VIII, or
(c) by a combination of such instrument or instruments and any such record of
such a meeting of such Securityholders.
If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action,
the Company may, at its option, as evidenced by an Officers' Certificate, fix
in advance a record date for the determination of Securityholders entitled to
give such request, demand, authorization, direction, notice, consent, waiver
or other action or to revoke any such action, but the Company shall have no
obligation to do so. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other action or
revocation may be given before or after the record date, but only the
Securityholders of record at the close of business on the record date shall
be deemed to be Securityholders for the purposes of determining whether
Securityholders of the requisite proportion of Securities outstanding have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action, and for that purpose the
Securities outstanding shall be computed as of the record date; PROVIDED,
HOWEVER, that no such authorization, agreement or consent by such
Securityholders on the record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than
six months after the record date.
7.2. PROOF OF EXECUTION BY SECURITYHOLDERS
Subject to the provisions of Sections 6.1, 6.2 and 8.5, proof of the
execution of any instrument by a Securityholder or his agent or proxy shall
be sufficient if made in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be
satisfactory to the Trustee. The ownership of Securities shall be proved by
the Security Register or by a certificate of the Security registrar. The
Trustee may require such additional proof of any matter referred to in this
Section as it shall deem necessary.
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The record of any Securityholders' meeting shall be proved in the
manner provided in Section 8.6.
7.3. WHO ARE DEEMED ABSOLUTE OWNERS
Prior to due presentment for registration of transfer of any Security,
the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Security registrar may deem the person in whose name
such Security shall be registered upon the Security Register to be, and may
treat him or her as, the absolute owner of such Security (whether or not such
Security shall be overdue) for the purpose of receiving payment of or on
account of the principal of and (subject to Section 2.6) interest on such
Security 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 Security registrar shall be affected by any notice to the contrary. All
such payments so made to any holder for the time being or upon his order
shall be valid, and, to the extent of the sum or sums so paid, effectual to
satisfy and discharge the liability for moneys payable upon any such Security.
7.4. SECURITIES OWNED BY COMPANY DEEMED NOT OUTSTANDING
In determining whether the holders of the requisite aggregate
principal amount of Securities have concurred in any direction, consent or
waiver under this Indenture, Securities which are owned by the Company or any
other obligor on the Securities or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Company or any other obligor on the Securities shall be disregarded and
deemed not to be outstanding for the purpose of any such determination;
PROVIDED THAT for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, consent or waiver, only
Securities which the Trustee actually knows are so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may
be regarded as outstanding for the purposes of this Section 7.4 if the
pledgee shall establish to the satisfaction of the Trustee the pledgee's
right to vote such Securities and that the pledgee is not the Company or any
such other obligor or person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company or any such
other obligor. In the case of a dispute as to such right, any decision by
the Trustee taken upon the advice of counsel shall be full protection to the
Trustee.
7.5. REVOCATION OF CONSENTS; FUTURE HOLDERS BOUND
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.1, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Securities specified in this
Indenture in connection with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor),
subject to Section 7.1, the serial number of which is shown by the evidence
to be included in the Securities the holders of which have consented to such
action may, by filing written notice with the Trustee at its principal office
and upon proof of holding as provided in Section 7.2, revoke such action so
far as concerns such Security (or so far as concerns the principal amount
represented by any exchanged or substituted Security). Except as aforesaid
any such action taken by the holder of any Security shall be conclusive and
binding upon such holder and upon all future holders and owners of such
Security, and of any Security issued in exchange or substitution therefor,
irrespective of whether or not any notation in regard thereto is made upon
such Security or any Security issued in exchange or substitution therefor.
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ARTICLE VIII
SECURITYHOLDERS' MEETINGS
8.1. PURPOSES OF MEETINGS
A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article VIII for any of the
following purposes:
(a) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by Securityholders pursuant to any of the provisions of Article V;
(b) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 9.2; or
(d) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of such Securities
under any other provision of this Indenture or under applicable law.
8.2. CALL OF MEETINGS BY TRUSTEE
The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 8.1, to be held at such time and at such
place in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of the Securityholders, setting forth the
time and the place of such meeting and in general terms the action proposed
to be taken at such meeting, shall be mailed to holders of Securities at
their addresses as they shall appear on the Securities Register. Such notice
shall be mailed not less than 20 nor more than 180 days prior to the date
fixed for the meeting.
8.3. CALL OF MEETINGS BY COMPANY OR SECURITYHOLDERS
In case at any time the Company pursuant to a resolution of the Board
of Directors, or the holders of at least 10% in aggregate principal amount of
the Securities then outstanding, shall have requested the Trustee to call a
meeting of Securityholders, by written request setting forth in reasonable
detail the action proposed to be taken at the meeting, and the Trustee shall
not have mailed the notice of such meeting within 20 days after receipt of
such request, then the Company or such Securityholders may determine the time
and the place in said Borough of Manhattan for such meeting and may call such
meeting to take any action authorized in Section 8.1, by mailing notice
thereof as provided in Section 8.2.
8.4. QUALIFICATIONS FOR VOTING
To be entitled to vote at any meeting of Securityholders a person
shall (a) be a holder of one or more Securities or (b) a person appointed by
an instrument in writing as proxy by a holder of one
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or more Securities. The only persons who shall be entitled to be present or
to speak at any meeting of Securityholders shall be the persons entitled to
vote at such meeting and their counsel and any representatives of the Trustee
and its counsel and any representatives of the Company and its counsel.
8.5. REGULATIONS
Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting
of Securityholders, in regard to proof of the holding of Securities and of
the appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning
the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 8.3, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by majority vote of the
meeting.
Subject to the provisions of Section 8.4, at any meeting each holder
of Securities or proxy therefor shall be entitled to one vote for each $1,000
principal amount of Securities held or represented by him; PROVIDED, HOWEVER,
that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not outstanding and ruled by the chairman of the
meeting to be not outstanding. The chair of the meeting shall have no right
to vote other than by virtue of Securities held by him or her or instruments
in writing as aforesaid duly designating him as the person to vote on behalf
of other Securityholders. Any meeting of Securityholders duly called pursuant
to the provisions of Section 8.2 or 8.3 may be adjourned from time to time by
a majority of those present, whether or not constituting a quorum, and the
meeting may be held as so adjourned without further notice.
8.6. VOTING
The vote upon any resolution submitted to any meeting of holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of such holders or of their representatives by proxy and the
serial number or numbers of the Securities held or represented by them. The
permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and
who shall make and file with the secretary of the meeting their verified
written reports in triplicate of all votes cast at the meeting. A record in
duplicate of the proceedings of each meeting of Securityholders shall be
prepared by the secretary of the meeting and there shall be attached to said
record the original reports of the inspectors of votes on any vote by ballot
taken thereat and affidavits by one or more persons having knowledge of the
facts setting forth a copy of the notice of the meeting and showing that said
notice was mailed as provided in Section 8.2. The record shall show the
serial numbers of the Securities voting in favor of or against any
resolution. The record shall be signed and verified by the affidavits of the
permanent chairman and secretary of the meeting and one of the duplicates
shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting. The holders of the Original Securities and the
Exchange Securities shall vote for all purposes as a single class.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
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ARTICLE IX
AMENDMENTS
9.1. WITHOUT CONSENT OF SECURITYHOLDERS
The Company and the Trustee may from time to time and at any time
amend the Indenture, without the consent of the Securityholders, for one or
more of the following purposes:
(a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation of
the covenants, agreements and obligations of the Company pursuant to Article
X hereof;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the Securityholders as the
Board of Directors and the Trustee shall consider to be for the protection of
the Securityholders, and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants, restrictions
or conditions a default or an Event of Default permitting the enforcement of
all or any of the remedies provided in this Indenture as herein set forth;
PROVIDED, HOWEVER, that in respect of any such additional covenant,
restriction or condition such amendment may provide for a particular period
of grace after default (which period may be shorter or longer than that
allowed in the case of other defaults) or may provide for an immediate
enforcement upon such default or may limit the remedies available to the
Trustee upon such default;
(c) to provide for the issuance under this Indenture of Securities in
coupon form (including Securities registrable as to principal only) and to
provide for exchangeability of such Securities with the Securities issued
hereunder in fully registered form and to make all appropriate changes for
such purpose;
(d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture; PROVIDED THAT any such action shall not
materially adversely affect the interests of the holders of the Securities;
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the Securities;
(f) to provide for the issuance and authentication of the Exchange
Securities in exchange for the Original Securities in compliance with this
Indenture and the Registration Rights Agreement;
(g) to qualify or maintain qualification of this Indenture under the
Trust Indenture Act; or
(h) to make any change that does not adversely affect the rights of
any Securityholder in any material respect.
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The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture to effect such amendment, to make any
further appropriate agreements and stipulations which may be therein
contained and to accept the conveyance, transfer and assignment of any
property thereunder, but the Trustee shall not be obligated to, but may in
its discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any amendment to the Indenture authorized by the provisions of this
Section 9.1 may be executed by the Company and the Trustee without the
consent of the holders of any of the Securities at the time outstanding,
notwithstanding any of the provisions of Section 9.2.
9.2. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS
With the consent of the Holders of not less than 66-2/3% in principal
amount of the outstanding Securities affected by such supplemental indenture,
by act of said holders delivered to the Company and the Trustee, the Company,
when authorized by Board Resolution, and the Trustee may enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of this Indenture or of modifying in any manner the rights of the holders of
Securities under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the holder of each outstanding
Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any outstanding Security, or reduce the
principal amount thereof or the interest thereon, or change the place
of payment, or the coin or currency in which any outstanding Security
or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated
Maturity thereof, or
(2) reduce the percentage in principal amount of the
outstanding Securities, the consent of whose holders is required for
any such supplemental indenture, or the consent of whose holders is
required for any waiver (of compliance with certain provisions of
this Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section
5.10 or Section 3.9, except to increase any such percentage or to
provide that certain other provisions of this Indenture cannot be
modified or waived without the consent of the Holder of each Security
affected thereby.
It shall not be necessary for any act of holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such act shall approve the substance thereof.
9.3. COMPLIANCE WITH TRUST INDENTURE ACT; EFFECT OF SUPPLEMENTAL INDENTURES
Any supplemental indenture executed pursuant to the provisions of this
Article IX shall comply with the Trust Indenture Act. Upon the execution of
any supplemental indenture pursuant to the provisions of this Article IX,
this Indenture shall be and be deemed to be modified and amended in
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accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Securities shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such
modifications and amendments and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
9.4. NOTATION ON SECURITIES
Securities authenticated and delivered after the execution of any
supplemental indenture affecting such series pursuant to the provisions of
this Article IX may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Securities so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of
this Indenture contained in any such supplemental indenture may be prepared
and executed by the Company, authenticated by the Trustee or the
Authenticating Agent and delivered in exchange for the Securities then
outstanding.
9.5. EVIDENCE OF COMPLIANCE OF SUPPLEMENTAL INDENTURE TO BE FURNISHED TRUSTEE
The Trustee, subject to the provisions of Sections 6.1 and 6.2, may
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant hereto complies
with the requirements of this Article IX.
The Trustee may receive an Opinion of Counsel as conclusive evidence
that any supplemental indenture executed pursuant to this Article is
authorized or permitted by, and conforms to, the terms of this Article and
that it is proper for the Trustee under the provisions of this Article to
join in the execution thereof.
ARTICLE X
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
10.1. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS
The Company shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as
an entirety to any Person, and no Person shall consolidate with or merge into
the Company or convey or transfer its properties and assets substantially as
an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into
another corporation or convey or transfer its properties and assets
substantially as an entirety to any Person, the corporation formed by
such consolidation or into which the Company is merged or the Person
which acquires by conveyance or transfer the properties and assets of
the Company substantially as an entirety shall be a corporation
organized and existing under the laws of the United States of America
or any state or the District of Columbia, and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, the due and punctual
payment of the principal of and interest on all the Securities
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and the performance of every covenant of this Indenture on the part of
the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time,
or both, would become an Event of Default, shall have happened and be
continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and such supplemental
indenture comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied
with; and the Trustee, subject to Section 6.1, may rely upon such
Officers' Certificate and Opinion of Counsel as conclusive evidence
that such transaction complies with this Section 10.1.
10.2. SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or the merger by the Company with or into any
other corporation, or any conveyance or transfer by the Company of its
properties and assets substantially as an entirety to any Person in
accordance with Section 10.1, the successor corporation formed by such
consolidation or into which the Company is merged or to which such conveyance
or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor corporation had been named as the Company
herein; and in the event of any such conveyance or transfer, the Company
(which term shall for this purpose mean any Person named as the "Company" in
the first paragraph of this Indenture or any successor corporation which
shall theretofore become such in the manner described in Section 10.1) shall
be discharged from all obligations and covenants under the Indenture and the
Securities and may be dissolved and liquidated. Such successor corporation
may cause to be signed, and may issue either in its own name or in the name
of the Company prior to such successor, any or all of the Securities issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee; and, upon the order of such successor corporation
instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Securities which previously shall have been signed and
delivered by the officers of the Company to the Trustee for authentication
pursuant to such provisions and any Securities which such successor
corporation thereafter shall cause to be signed and delivered to the Trustee
on its behalf for that purpose pursuant to such provisions. All the
Securities so issued shall in all respects have the same legal rank and
benefit under this Indenture as the Securities theretofore or thereafter
issued in accordance with the terms of this Indenture as though all of such
Securities had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance, such
changes in phraseology and form may be made in the Securities thereafter to
be issued as may be appropriate.
10.3. LIMITATION ON LEASE OF PROPERTIES AS AN ENTIRETY
The Company shall not lease its properties and assets substantially as
an entirety to any Person.
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ARTICLE XI
SATISFACTION AND DISCHARGE OF INDENTURE
11.1. DISCHARGE OF INDENTURE
This Indenture shall cease to be of further effect (except as to (i)
any surviving rights of transfer, substitution and exchange of Securities,
(ii) rights hereunder of Holders to receive payments of principal of and
interest on the Securities and other rights, duties and obligations of the
Holders as beneficiaries hereof with respect to the amounts, if any, so
deposited with the Trustee and (iii) the rights and obligations of the
Trustee hereunder), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 2.8 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 3.4) have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, and the Company, in the case of (i) or (ii)
above, have deposited or caused to be deposited with the Trustee
as trust funds in trust for the purpose an amount sufficient to
pay and discharge the entire indebtedness on such Securities not
theretofore delivered to the Trustee for cancellation, for
principal and interest to the date of such deposit (in the case
of Securities which have become due and payable) or to the Stated
Maturity;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an opinion of Counsel each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee and any predecessor Trustee under
Section 6.6 shall survive.
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11.2. DEPOSITED MONEYS AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST BY TRUSTEE
Subject to the provisions of Section 11.4, all moneys and U.S.
Government Obligations deposited with the Trustee pursuant to Sections 11.1
or 11.5 shall be held in trust and applied by it to the payment, either
directly or through any paying agent (including the Company if acting as its
own paying agent), to the holders of the particular Securities for the
payment of which such moneys or U.S. Government Obligations have been
deposited with the Trustee, of all sums due and to become due thereon for
principal, premium, if any, and interest.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 11.5 or the principal and interest
received in respect thereof other than any such tax, fee or other charge
which by law is for the account of the holders of outstanding Securities.
11.3. PAYING AGENT TO REPAY MONEYS HELD
Upon the satisfaction and discharge of this Indenture all moneys then
held by any paying agent of the Securities (other than the Trustee) shall,
upon written demand of the Company, be repaid to it or paid to the Trustee,
and thereupon such paying agent shall be released from all further liability
with respect to such moneys.
11.4. RETURN OF UNCLAIMED MONEYS
Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of or interest on Securities and not applied but
remaining unclaimed by the holders of Securities for two years after the date
upon which the principal of or interest on such Securities, as the case may
be, shall have become due and payable, shall be repaid to the Company by the
Trustee or such paying agent on Company Request; and the holder of any of the
Securities shall thereafter look only to the Company for any payment which
such holder may be entitled to collect and all liability of the Trustee or
such paying agent with respect to such moneys shall thereupon cease.
11.5. DEFEASANCE UPON DEPOSIT OF MONEYS OR U.S. GOVERNMENT OBLIGATIONS
The Company shall be deemed to have been Discharged (as defined below)
from its obligations with respect to the Securities on the 91st day after the
conditions set forth below have been satisfied:
(1) The Company shall have deposited or caused to be deposited
irrevocably with the Trustee or the Defeasance Agent (as defined below) as
trust funds in trust, specifically pledged as security for, and dedicated
solely to, the benefit of the holders of the Securities (i) money in an
amount, or (ii) U.S. Government Obligations which through the payment of
interest and principal in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment, money in
an amount, or (iii) a combination of (i) and (ii), sufficient, in the opinion
(with respect to (ii) and (iii)) of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee and the Defeasance Agent, if any, to pay and
discharge each installment of principal of and interest and premium, if any,
on the outstanding Securities on the dates such installments of principal,
interest or premium are due;
46
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(2) if the Securities are then listed on any national securities
exchange, the Company shall have delivered to the Trustee and the Defeasance
Agent, if any, an Opinion of Counsel to the effect that the exercise of the
option under this Section 11.5 would not cause such Securities to be delisted
from such exchange;
(3) no Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit; and
(4) the Company shall have delivered to the Trustee and the
Defeasance Agent, if any, an Opinion of Counsel to the effect that holders of
the Securities will not recognize income, gain or loss for United States
federal income tax purposes as a result of the exercise of the option under
this Section 11.5 and will be subject to United States federal income tax on
the same amount and in the same manner and at the same times as would have
been the case if such option had not been exercised, and such opinion shall
be based on a statute so providing or be accompanied by a private letter
ruling to that effect received from the United States Internal Revenue
Service or a revenue ruling pertaining to a comparable form of transaction to
that effect published by the United States Internal Revenue Service.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities and to have satisfied all the obligations under this Indenture
relating to the Securities (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), except (A) the
rights of holders of Securities to receive, from the trust fund described in
clause (1) above, payment of the principal of and the interest and premium,
if any, on the Securities when such payments are due; (B) the Company's
obligations with respect to the Securities under Sections 2.2, 2.7, 2.8, 3.2,
3.4, 6.10 and 11.4; and (C) the rights, powers, trusts, duties and immunities
of the Trustee hereunder.
"Defeasance Agent" means another financial institution which is
eligible to act as Trustee hereunder and which assumes all of the obligations
of the Trustee necessary to enable the Trustee to act under this Article. In
the event such a Defeasance Agent is appointed pursuant to this Section, the
following conditions shall apply:
(1) The Trustee shall have approval rights over the document
appointing such Defeasance Agent and the document setting forth such
Defeasance Agent's rights and responsibilities;
(2) The Defeasance Agent shall provide verification to the
Trustee acknowledging receipt of sufficient money and/or U.S. Government
Obligations to meet the applicable conditions set forth in this Section 11.5.
47
<PAGE>
ARTICLE XII
IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS
12.1. INDENTURE AND SECURITIES SOLELY CORPORATE OBLIGATIONS
No recourse for the payment of the principal of or interest on any
Security, or for any claim based thereon or otherwise in respect thereof, and
no recourse under or upon any obligation, covenant or agreement of the
Company in this Indenture, or in any Security, or because of the creation of
any indebtedness represented thereby, shall be had against any incorporator,
shareholder, officer or director, as such, past, present or future, of the
Company or of any successor Person to the Company, either directly or through
the Company or any successor Person to the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment
or penalty or otherwise; it being expressly understood that all such
liability is hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Indenture and the issue of the
Securities.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1. SUCCESSORS
All the covenants, stipulations, promises and agreements in this
Indenture contained by the Company shall bind its successors and assigns
whether so expressed or not.
13.2. OFFICIAL ACTS BY SUCCESSOR CORPORATION
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any corporation that shall at the time be
the lawful sole successor of the Company.
13.3. SURRENDER OF COMPANY POWERS
The Company by instrument in writing executed by authority of 2/3
(two-thirds) of its Board of Directors and delivered to the Trustee may
surrender any of the powers reserved to the Company, and thereupon such power
so surrendered shall terminate both as to the Company, as the case may be,
and as to any successor Person.
13.4. ADDRESSES FOR NOTICES, ETC.
Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders
of Securities on the Company may be given or served by being deposited
postage prepaid by registered or certified mail in a post office letter box
addressed (until another address is filed by the Company with the Trustee for
the purpose) to the Company, SAFECO Plaza, 4333 Brooklyn Ave. N.E., Seattle,
Washington 98185, Attention: Chief Financial
48
<PAGE>
Officer, Treasurer or Secretary. Any notice, direction, request or demand by
any Securityholder to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or made in writing at
the office of the Trustee, The Chase Manhattan Bank, Attention: Global Trust
Services (unless another address is provided by the Trustee to the Company
for the purpose).
Any notice or communication to a Holder shall be mailed by first class
mail to his or her address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
13.5. GOVERNING LAW
This Indenture and each Security shall be deemed to be a contract made
under the laws of the State of New York, and for all purposes shall be
governed by and construed in accordance with the laws of said State, without
regard to conflicts of laws principles thereof.
13.6. EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT
Upon any application or demand by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion
of the signers all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with and an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or
covenant provided for in this Indenture (except pursuant to Section 3.5)
shall include (1) a statement that the person making such certificate or
opinion has read such covenant or condition; (2) a brief statement as to the
nature and scope of the examination or investigation upon which the
statements or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.
13.7. BUSINESS DAYS
In any case where the date of payment of principal of or interest on
the Securities will not be a Business Day, the payment of such principal of
or interest on the Securities need not be made on such date but may be made
on the next succeeding Business Day, with the same force and effect as if
made on the date of payment and no interest shall accrue for the period from
and after such date.
13.8. TRUST INDENTURE ACT TO CONTROL
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
49
<PAGE>
13.9. TABLE OF CONTENTS, HEADINGS, ETC.
The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.
13.10. EXECUTION IN COUNTERPARTS
This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute
but one and the same instrument.
13.11. SEPARABILITY
In case any one or more of the provisions contained in this Indenture
or in the Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Securities,
but this Indenture and the Securities shall be construed as if such invalid
or illegal or unenforceable provision had never been contained herein or
therein.
13.12. ASSIGNMENT
The Company will have the right at all times to assign any of its
respective rights or obligations under this Indenture to a direct or indirect
wholly owned Subsidiary of the Company, PROVIDED that, in the event of any such
assignment, the Company will remain primarily liable for all its obligations.
Subject to the foregoing, the Indenture is binding upon and inures to the
benefit of the parties thereto and their respective successors and assigns.
This Indenture may not otherwise be assigned by the parties thereto.
50
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers thereunto duly authorized, as of the
day and year first above written.
SAFECO CORPORATION
By /s/ Rodney A. Pierson
------------------------------
Name: Rodney A. Pierson
Title: Chief Financial Officer
THE CHASE MANHATTAN BANK
as Trustee
By /s/ John T. Needham, Jr.
------------------------------
Name: John T. Needham, Jr.
Title: Trust Officer
<PAGE>
EXHIBIT A
(FORM OF FACE OF ORIGINAL 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.]
THE 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 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 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 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) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
A-1
<PAGE>
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) IN A MINIMUM
PRINCIPAL AMOUNT OF $100,000 TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) 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 (F) 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), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO THE COMPANY,
AND (ii) PURSUANT TO CLAUSE (E), 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. 786429 AA 2
A-2
<PAGE>
SAFECO CORPORATION
6 7/8% NOTES DUE JULY 15, 2007
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 ____________, or registered assigns,
the principal sum of (__________) on July 15, 2007 (the "Maturity Date"), 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 6 7/8% per annum until
the principal hereof shall have become due and payable, and at the same rate per
annum on any overdue principal 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 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 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.
A-3
<PAGE>
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:
Title:
Attest:
By: ________________________________
Name:
Title:
A-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
A-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.
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
Stated Maturity of any Securities, or reduce the principal amount thereof, or
reduce the rate of payment of interest thereon, or make the principal of, 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 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 interest on this
Security at the time and place and at the rate and in the money herein
prescribed.
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
A-6
<PAGE>
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 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 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.
A-7
<PAGE>
EXHIBIT B
(FORM OF FACE OF EXCHANGE SECURITY)(1)
[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.]
No.____________
_____________________________
(1) Except as provided in Section 2.4(b) of the Indenture.
B-1
<PAGE>
SAFECO CORPORATION
6 7/8% NOTES DUE JULY 15, 2007
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 ____________, or registered assigns,
the principal sum of (__________) on July 15, 2007 (the "Maturity Date"), 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 6 7/8% per annum until
the principal hereof shall have become due and payable, and at the same rate per
annum on any overdue principal 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 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.
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 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.
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.
B-2
<PAGE>
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
B-3
<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
B-4
<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.
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
Stated Maturity of any Securities, or reduce the principal amount thereof, or
reduce the rate of payment of interest thereon, or make the principal of, 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 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 interest on this
Security at the time and place and at the rate and in the money herein
prescribed.
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
B-5
<PAGE>
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 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 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.
B-6
<PAGE>
[Letterhead of SAFECO]
October 17, 1997
SAFECO Corporation
4333 Brooklyn Avenue N.E.
Seattle, WA 98185
RE: EXCHANGE OFFER RELATING TO 6 7/8% NOTES DUE JULY 15, 2007
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 its offer to exchange its 6 7/8% Notes due July 15, 2007 (the
"Exchange Notes"), which are being registered under the Securities Act of 1933,
as amended (the "Act"), pursuant to a Registration Statement on Form S-4 (the
"Registration Statement"), for an equal principal amount at maturity of the
outstanding 6 7/8% Notes due July 15, 2007 (the "Original Notes").
In rendering the opinions set forth herein, I have examined, among other
things, (i) the Indenture dated as of July 15, 1997, between the Company and The
Chase Manhattan Bank, as Trustee (the "Indenture"); (ii) the form of Exchange
Notes; (iii) the Registration Rights Agreement dated as of July 15, 1997 (the
"Registration Rights Agreement") between the Company and Smith Barney Inc.; and
(iv) the Amended and Restated Articles of Incorporation and Bylaws of the
Corporation. 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, 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:
<PAGE>
SAFECO Corporation
October 17, 1997
Page 2
(a) The Indenture has been duly authorized, executed and
delivered by, and is a binding agreement of, the Company enforceable 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 Exchange Notes have been duly authorized and, when
authenticated in accordance with the provisions of the Indenture and issued and
delivered pursuant to the Registration Rights Agreement, will constitute valid
and binding obligations of the Company enforceable 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).
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 transactions contemplated by the Indenture and
Registration Rights Agreement.
2. This opinion is being furnished solely 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 my prior written consent.
I hereby consent to the filing of this opinion with the Securities and
Exchange Commission (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>
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 $394.2
Total Fixed Charges Below 44.9 82.7 13.8 28.8 47.8 44.3 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 $721.5 $303.2 $589.0 $549.0 $422.6 $603.5 $435.7
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
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 8.9 1.5 3.2 3.1 3.0 2.7 2.8
Amortization of Deferred Debt
Expenses 0.6 0.6 0.6 0.5 0.8 0.9 0.6 0.6
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL FIXED CHARGES $ 44.9 $ 82.7 $ 13.8 $ 28.8 $ 47.8 $ 44.3 $ 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 20.5 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 $394.2
Total Fixed Charges Below 86.2 165.2 13.8 28.8 47.8 44.3 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 $721.5 $303.2 $589.0 $549.0 $422.6 $603.5 $435.7
------------- ------------- ------------- ------ ------ ------ ------ ------
------------- ------------- ------------- ------ ------ ------ ------ ------
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 8.9 1.5 3.2 3.1 3.0 2.7 2.8
Amortization of Deferred Debt
Expenses 0.6 0.6 0.6 0.5 0.8 0.9 0.6 0.6
------------- ------------- ------------- ------ ------ ------ ------ ------
TOTAL FIXED CHARGES $ 86.2 $165.2 $ 13.8 $ 28.8 $ 47.8 $ 44.3 $ 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 20.5 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. 333-38207) of SAFECO Corporation for the registration of
$200,000,000 of 6.875% Notes due July 15, 2007 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
November 10, 1997
