EX-10.21 7 dex1021.txt AMENDED AND RESTATED INDICATIVE TERM SHEET EXHIBIT 10.21 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets Variable Forward ("Prepaid Forward") on Common Shares of SAFECO Corporation This amended and restated Term Sheet, effective as of March 21, 2002, amends, restates, and supersedes the Term Sheet dated as of March 21, 2002 Prepaid Forward Seller: Fisher Communications, Inc. ("Counterparty") Prepaid Forward Buyer: Merrill Lynch International ("MLI") Underlying Stock: Common Shares ("Shares") of SAFECO Corporation ("Issuer") (Security Symbol: SAFC, NASDAQ) Notional Share Amount: Approximately 3,000,000 Shares (the "Number of Shares") in tranched maturities (subject to current volume limitations of Rule 144 under the Securities Act of 1933, as amended (the "Securities Act")); see the pricing chart attached hereto as Annex A ("Pricing Chart"). Notional Dollar Amount: Notional Share Amount x Initial Price Prepaid Forward Description: Counterparty may receive Initial Proceeds in exchange for the obligation to deliver an amount (as described below) of the Underlying Stock on the Termination Date. Trade Date: March 21, 2002 Effective Date: The date on which the Initial Price is established (the last day of each hedge period per tranche). Pledge Date: The exchange business day three (3) exchange business days immediately following the applicable Effective Date. Initial Price: The average execution price per share of MLI's hedging activity, which is to occur in five (5) tranches. Each tranche hedge period shall not exceed five (5) exchange business days, unless the parties otherwise agree to extend such hedge period. Final Price: The average of the closing prices per Share of the Underlying Stock on the two (2) exchange business days immediately prior to, and including, the Termination Date. Floor Price: See Pricing Chart. Cap Price: See Pricing Chart. Participation Percentage: See Pricing Chart. -------------------------------------------------------------------------------- Prepaid Forward Agreement -------------------------------------------------------------------------------- Initial Proceeds: Expressed as a % of the Floor Price x Notional Share Amount (which shall constitute a Payment Amount if drawn by Counterparty). Notwithstanding the "Payments" provision below, (i) a draw down of the Initial Proceeds for each tranche may be made on the applicable Effective Date and (ii) written notice to MLI requesting such draw down of the Initial Proceeds with respect to the first tranche shall be delivered on the Trade Date and for each successive draw down on the Effective Date of the immediately preceding tranche; see Pricing Chart. Premium: If the Initial Proceeds are not drawn down in full by or on the Effective Date, Counterparty shall pay to MLI a premium in an amount determined by MLI in a commercially reasonable manner. Payment Description: Counterparty may from time to time elect for Payment Amounts to be paid to it by MLI and/or for Repayment Amounts to be paid to MLI by Counterparty, in accordance with the provisions set forth below. 1 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets Payment Period: The period commencing on the date three (3) exchange business days after the Effective Date and ending on the Termination Date. Payments: Counterparty may from time to time during the Payment Period designate a date on which a "Payment Amount" (as defined below) will be paid as described herein. Such designation will be made by providing MLI with (i) at least seven (7) Currency Business Days' prior written notice of the Currency Business Day during the Payment Period (a "Payment Amount Date") on which such payment is to be made, and (ii) notice of the portion expressed as a USD amount of the Outstanding Notional Payment Amount for such Payment Amount Date (a "Payment Amount Portion"). Unless the Payment Amount Portion is equal to the entire Outstanding Notional Payment Amount on such Payment Amount Date, such Payment Amount Portion shall be equal to at least 20% of the Initial Notional Payment Amount. On each Payment Amount Date, MLI shall pay to Counterparty the Payment Amount. "Payment Amount" means an amount in USD equal to the present value on a Payment Amount Date of the related Payment Amount Portion (such present value to be determined by the Calculation Agent using a discount rate equal to the Rate for the period from, and including, such Payment Amount Date to, but excluding, the Settlement Date (the "Payment Calculation Period"), plus the Spread Amount as set forth on the Pricing Chart. Notwithstanding any provision in this Agreement to the contrary, if at any time during the Term of this Transaction any obligation (whether present or future, contingent or otherwise) is owed by Counterparty to Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("MLPFS") (such obligation, a "Loan Obligation") in respect of borrowed money ("Counterparty Loan"), Counterparty shall be deemed to have requested at such time a Payment Amount Portion equal to the entire Outstanding Notional Payment Amount, or if the related Payment Amount of the Outstanding Notional Payment Amount is greater than the Loan Obligation, a Payment Amount Portion with a related Payment Amount equal to the Loan Obligation. Such Payment Amount will not be paid to Counterparty on the related Payment Date, but instead shall be paid to MLPFS in satisfaction of all or part of such Loan Obligation. Counterparty hereby irrevocably authorizes and instructs MLI to use any such Payment Amount solely to satisfy, in whole or in part, on behalf of Counterparty, any Loan Obligation. Initial Notional Payment Amount: The Number of Shares x Floor Price Outstanding Notional Payment Amount: An amount in USD equal to the excess, if any, of (i) the Initial Notional Payment Amount over (ii) (a) the sum of the Payment Amount Portions for all Payment Amount Dates occurring prior to such date (the "Prepaid Notional Amount") less (b) the sum of all prior Repayment Amounts. Repayments: Counterparty may from time to time during the Payment Period designate a date on which all or a portion of the Prepaid Notional Amount will be re-paid to MLI as described herein. Such designation will be made by providing MLI with (i) at least seven (7) Currency Business Days' prior written notice of the Currency Business Day during the Payment Period (a "Repayment Date") on which such payment is to be made, and (ii) notice of the portion expressed as a USD amount of the Prepaid Notional Amount to be repaid on such Repayment Date (a "Repayment Amount"). Unless the Repayment Amount is equal to the entire Outstanding Notional Payment Amount on such Repayment Date, such Repayment Amount shall be equal to at least 20% of the Initial Notional Payment Amount. On the Repayment Date, Counterparty shall pay to MLI an amount in USD equal to (i) the present value on such Repayment Date of the related Repayment Amount (such present value to be 2 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets determined by the Calculation Agent using a discount rate equal to the Rate for the period from, and including, such Repayment Date, to but excluding, the Settlement Date (the "Repayment Calculation Period"), plus the Spread Amount as set forth on the Pricing Chart) plus (ii) any breakage costs. Rate: If the Payment Calculation Period or the Repayment Calculation Period, as applicable, is (i) equal to or less than 360 calendar days, the rate shall be the zero coupon rate derived from the prevailing LIBOR curve that appears on page IYC1 I5Z of Bloomberg. If such rate does not appear on page IYC1 I5Z of Bloomberg, the rate will be determined as if the parties had specified "USD-LIBOR-BBA", or (ii) greater than 360 calendar days, the rate shall be the zero coupon rate derived from the prevailing rate curve that appears on page IYC1 I5Z of Bloomberg. If such rate does not appear on page IYC1 I5Z of Bloomberg, the rate will be determined as if the parties had specified "USD-ISDA-Swap Rate", in each case, (x) on a semi-annual basis, (y) with a Day Count Fraction (as defined in the 2000 ISDA Definitions) equal to Actual/360, and (z) interpolated as necessary to account for the actual number of calendar days within such Payment Calculation Period or Repayment Calculation Period, as reasonably determined by the Calculation Agent. Initial Hedge Shares ("Delta"): Approximately 2,220,000 Shares of the Underlying Stock, which is equivalent to the Notional Share Amount multiplied by the respective Initial Hedge Delta Ratio; see Pricing Chart. Termination Date: Effective Date + Term; see Pricing Chart. -------------------------------------------------------------------------------- Other Provisions -------------------------------------------------------------------------------- Dividend Adjustment: In the event the issuer of the Underlying Stock makes a change in dividends payable on the Underlying Stock, Counterparty shall notify MLI of its election either: (i) to have the Calculation Agent adjust the Cap Price in a commercially reasonable manner to reflect the cumulative impact of such change or (ii) to pay MLI a US dollar amount (determined by the Calculation Agent) three (3) exchange business days after each applicable dividend payment date as determined by the Calculation Agent. Settlement: Physical Settlement: Counterparty may elect to satisfy its forward obligation by delivering registered, unrestricted and freely transferable physical Shares. Cash Settlement: Counterparty may elect to satisfy its forward obligation in cash. Settlement Date: Three (3) exchange business days after the Termination Date. Physical Settlement: A. On the Settlement Date, MLI shall pay to Counterparty an amount in cash equal to the Outstanding Notional Payment Amount ("MLI Settlement Obligation"); and B. Counterparty shall deliver to MLI a number of Shares equal to the Number of Shares multiplied by the Variability Factor ("Counterparty Settlement Shares"). Variability Factor: A factor calculated by the Calculation Agent on the Termination Date based on one of the following three scenarios (as applicable): Scenario 1: If the Final Price is less than the Floor Price then: 1 3 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets Scenario 2: If the Final Price is greater than the Cap Price, then: Floor Price + ((Final Price - Cap Price) x (1 - Participation Percentage)) / Final Price Scenario 3: If the Final Price is greater than Floor Price and less than the Cap Price, then: Floor Price / Final Price Cash Settlement: If the Cash Settlement Amount is a positive number, MLI will pay the Cash Settlement Amount to Counterparty. If the Cash Settlement Amount is a negative number, Counterparty will pay the absolute value of the Cash Settlement Amount to MLI. Such amounts will be paid on the Settlement Date. Cash Settlement Amount: An amount determined by the Calculation Agent on the Termination Date based on the following formula: MLI Settlement Obligation - Counterparty Cash Settlement Amount; Where, "Counterparty Cash Settlement Amount" means: Counterparty Settlement Shares x Final Price Buyer Early Termination: Upon the occurrence of an Event of Default, Termination Event or a Stock Borrow Event, MLI shall have the right to cause immediate settlement of this transaction. Collateral: On or prior to the Trade Date, Counterparty shall deliver and shall thereafter continually maintain with MLI or its custodian ("Custodian") during the Term of this Transaction, 3,000,000 Shares and a stock transfer power related thereto (such Shares, the "Collateral"). Counterparty represents that (i) it is the legal and record owner of all Collateral free of all liens, claims, equities, and encumbrances, (ii) it has the power and has obtained all of the necessary consents and approvals to grant to MLI a legal, valid, binding and enforceable first priority security interest in, and lien on, the Collateral and (iii) the pledge of the Collateral to MLI hereunder shall not breach any covenant in any agreement or contract entered into by Counterparty or any Affiliate thereof. Throughout the term of this transaction, Counterparty hereby grants MLI a first-priority security interest in, and a first-priority lien on, the Collateral for its obligations under this Transaction and the Agreement; provided, however, that if any Counterparty Loan is outstanding at any time from and including the Trade Date to but excluding the third exchange business day immediately following the Effective Date, MLI's security interest will be subordinate to any security interest and/or lien on the Collateral granted in favor of MLPFS in connection with such Counterparty Loan. Notwithstanding Section 9-207 of the New York Uniform Commerical Code, MLI will have the right to (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business, any Collateral it holds free from any claim or right of any nature whatsoever of Counterparty, including any equity or right of redemption by Counterparty ("Use of Collateral"), provided that MLI shall not have Use of Collateral five exchange business days 4 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets following the effectiveness of notice from Counterparty to MLI restricting MLI's Use of Collateral , and (ii) register any Collateral in the name of MLI, its Custodian or a nominee for either. For the avoidance of doubt, nothing in the foregoing is intended to restrict or impede in any way MLI's ability to foreclose, sell, dispose of, or otherwise exercise its rights and remedies with respect to the Collateral upon a Counterparty Event of Default, Termination Event. Collateral Agent: Merrill Lynch, Pierce, Fenner & Smith, Incorporated ("Merrill Lynch") Calculation Agent: MLI Events of Default; Termination Events: Events of Default and Termination Events as set forth in Section 5 of the ISDA Master Agreement; provided, however, that for the sole purpose of this transaction and provided that no other transactions under the ISDA Master Agreement other than this transaction or other substantially similar variable forward sale transactions shall be outstanding between Counterparty and MLI, (i) the "Cross Default" provisions of Section 5(a)(vi) of the Agreement will not apply to MLI and will apply to Counterparty, and for such purpose, "Specified Indebtedness" means solely any Counterparty Loan and the "Threshold Amount" means zero and (ii) the "Credit Event Upon Merger" provisions of Section 5(b)(iv) of the Agreement will not apply to Counterparty and will not apply to MLI. Stock Borrow Event: The occurrence of a Hedging Disruption Event shall constitute an Additional Termination Event with respect to Counterparty, giving MLI the right to designate an Early Termination Date in respect of this Transaction. For this purpose, "Hedging Disruption Event" means (i) any inability of MLI due to market illiquidity, Illegality (as defined in the Agreement, but with respect to the transaction hedge) or lack of availability of third-party institutional stock lenders or MLI is otherwise unable to borrow the Shares, to establish, re-establish or maintain any hedging transaction(s) necessary in the normal course of MLI's business of hedging the price and market risk of entering into and performing under the Transaction, provided that if MLI is able to borrow Shares from MLPFS under the Counterparty Loan or from Counterparty (including by way of rehypothecation as contemplated in the Collateral provison hereunder) this clause (i) shall not apply; or (ii) an increase in the cost of borrowing the Shares (from an entity other than Counterparty) and Counterparty's failure to agree (within five Business Days of its receipt of written notice from MLI in this regard) to adjustments to the terms of the Transaction as the Calculation Agent, in its reasonable discretion, deems necessary to compensate MLI for such increase in costs, including, without limitation, costs incurred by MLI during such five Business Day period. Representations and Acknowledgements: . Counterparty (i) has such knowledge and experience in financial and business affairs as to be capable of evaluating the merits and risks of entering into the Transaction; (ii) has consulted with its own legal, financial, accounting and tax advisors in connection with the Transaction; (iii) is entering into the Transaction for a bona fide business purpose to hedge an existing position; and (iv) acknowledges that in return for downside protection against a decline in the market price of the Shares below the Floor Price, Counterparty is foregoing, in part, the upside value of an increase in the market price of the Shares above the Cap Price. . Neither Counterparty nor any person who would be considered to be the same "person" (as such term is used in Rule 144(a)(2) under the Securities Act has sold any Shares (or security entitlements in respect thereof) or hedged (through swaps, options, short sales or otherwise) any long position in the Shares (or security entitlements in respect thereof), including any sales pursuant to an agreement to act in concert by such persons for the purpose of selling such Shares, during the preceding three (3) months prior to the Trade Date of this Transaction. Counterparty covenants and agrees that until the last Effective Date, it will not sell, nor will it permit any person to sell, Shares without the prior written consent of MLI. The Shares shall be deemed to include securities convertible into or exchangeable or exercisable for Shares and any other security or instrument that would be subject to aggregation under Rule 144(e) under the Securities Act. 5 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets . As of the Trade Date, Counterparty owns 3,002,376 Shares. . Counterparty acknowledges and agrees that (i) it has not taken and will not take any action that would cause any sale deemed to be made under the Interpretive Letter (as defined below) to exceed the volume limitation of Rule 144(e), (ii) it has not taken and will not take any action that could cause any sale deemed to be made under the Interpretive Letter to fail to meet all applicable requirements of Rule 144 and (iii) on the Trade Date of this Transaction it has transmitted a Form 144 for filing with the Securities and Exchange Commission. Counterparty covenants that it will send to MLI via facsimile a copy of each Form 144 and each filing under Section 13 or 16 of the Securities and Exchange Act relating to this Transaction concurrently with filing or transmission for filing, as the case may be, of such form to or with the SEC. . Counterparty does not know or have any reason to believe that the Issuer has not complied with the reporting requirements of Rule 144. . Counterparty shall file the appropriate Form 144 concurrently with the execution of this Term Sheet pursuant to the interpretive letter from the SEC to Goldman, Sachs & Co. dated December 20, 1999 (the "Interpretive Letter"). The parties shall further comply with all additional terms the Interpretive Letter. . The directors, officers and/or employees of Counterparty ("Contract Persons") who are directly or indirectly involved with the negotiation, execution and delivery of this Agreement and the performance of the transactions contemplated by this Agreement have no material, nonpublic information in respect of the Issuer. Counterparty further represents that (1) it has established and implemented written policies and procedures to ensure that no Contract Person will violate federal and state securities laws prohibiting the purchase or sale of securities on the basis of material nonpublic information in connection with this transaction and (2) if any third-party cause of action asserts that Counterparty has violated such federal and state securities laws, Counterparty may duly and in good faith assert in its responsive pleading an affirmative defense under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. . Counterparty represents that all proceeds from the Counterparty Loan and any other credit facility entered into by Counterparty as of the date hereof through and including March 31, 2002 shall be used to satisfy in full all outstanding payment obligations (principal, interest or otherwise) of Counterparty pursuant to (i) the Credit Agreement dated as of May 26, 1998 among Counterparty, Bank of America, N.A., and U.S. Bank National Association, as lenders, and Bank of America, N.A., as administrative agent, as amended; and (ii) the Credit Agreement dated as of June 24, 1999 among Counterparty, the various lenders thereto, Bank of America, N.A., as administrative agent, and Credit Suisse First Boston, as syndication agent, as amended. A breach of this representation shall constitute an Additional Termination Event with respect to Counterparty with Counterparty as the Affected Party, giving MLI a right to designate an Early Termination Date (as defined in the ISDA Master Agreement). . Counterparty is not insolvent. . The parties intend for the transaction to qualify for applicable bankruptcy safe-harbor treatment as more fully set forth in MLI's standard Confirmation. . Counterparty shall make such further representations and acknowledgments as are contained in MLI's standard Confirmation. Documentation: ISDA Master Agreement, Schedule to the ISDA, and Transaction Confirmation. Except as specifically modified below, until we enter into an ISDA Master Agreement and a 6 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets Confirmation for this Transaction, this Term Sheet shall (i) constitute a complete binding agreement between us as to the terms and conditions of the Transaction to which this Term Sheet relates, and (ii) supplement, form a part of, and be subject to an agreement in the form of the ISDA Master Agreement (without any Schedule thereto) as if we had actually executed an agreement in such form. Underlying Stock Merger Event: . Share-for-Share Consideration: The share consideration will be substituted for the underlying Shares on the exchange business day following the business combination or other similar event ("Merger Event) with mutually agreed upon commercially reasonable adjustments to the transaction terms to preserve the economics of the transaction as originally bargained for pursuant to the terms stated herein, provided that after the Merger Event, MLI shall be permitted to elect to cancel the transaction and pay or receive the value thereof ("Cancellation and Payment") within three (3) exchange business days of such Merger Event. . Share for Other Consideration: Cancellation and Payment on the business day following the Merger Event. . Share for Combined Consideration: As soon as practicable but not to exceed three (3) exchange business days after the Merger Event has occurred, the parties shall mutually agree upon appropriate adjustments to the terms of the transaction and, if the parties are unable to so agree, Cancellation and Payment shall apply. Indemnity: . Counterparty agrees to indemnify MLI for any losses arising from Counterparty's failure to perform its obligations hereunder, including any failure to enter into the definitive documentation described in "Documentation" above. Counterparty further agrees to indemnify MLI and its Affiliates and their respective directors, officers, agents and controlling parties (MLI and each such person being an "Indemnified Party") from and against any and all losses, claims, damages and liabilities, joint and several, to which such Indemnified Party may become subject under, in connection with, relating to, or arising out of, this Agreement or Transaction with respect to any applicable securities laws and will reimburse any Indemnified Party for all reasonable expenses (including reasonable legal fees and reasonable expenses) as they are incurred in connection with the investigation of, preparation for, or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto. Counterparty will not be liable under this Indemnity paragraph to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted from MLI's gross negligence, fraud, bad faith and/or willful misconduct. 7 [LOGO] Merrill Lynch & Co. Equity Linked Capital Markets This term sheet serves as the agreement between Counterparty and MLI during the initial hedge period of the above transaction until a formal confirmation can be executed. Counterparty also represents to MLI that it is not relying on any communication (written or oral) of MLI as investment advice or as a recommendation to enter into this Transaction, it being understood that information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. No communication (written or oral) received by Counterparty from MLI shall be deemed to be an assurance or guarantee as to the expected results of this Transaction. Counterparty represents and warrants that it is legally and financially able to enter into the above transaction and that the signatory to this document is authorized to transact on Counterparty's behalf. For Fisher Communications Inc. For Merrill Lynch International By: /s/ Warren Spector By: /s/ Vivian Jackson -------------------------------- -------------------------------- Warren Spector Vivian Jackson ------------------------------------- ------------------------------------- Print Name Print Name Exec. V.P. V.P. ------------------------------------- ------------------------------------- Title Title March 27, 2002 March 27, 2002 ------------------------------------- ------------------------------------- Date Date 8