EXHIBIT 1.4
SAFECO CORPORATION
COMMON STOCK
PREFERRED STOCK
CONVERTIBLE PREFERRED STOCK
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UNDERWRITING AGREEMENT
November 14, 2002
Goldman, Sachs & Co.,
Lehman Brothers Inc.,
Morgan Stanley & Co. Incorporated,
Credit Suisse First Boston Corporation,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
From time to time SAFECO Corporation, a Washington corporation (the
"Company"), proposes to enter into one or more Pricing Agreements (each, a
"Pricing Agreement") in the form of Annex I hereto, with such additions and
deletions as the parties thereto may determine, and, subject to the terms and
conditions stated herein and therein, to issue and sell to the firms named in
Schedule I to the applicable Pricing Agreement (such firms constituting the
"Underwriters" with respect to such Pricing Agreement and the securities
specified therein) certain shares (the "Shares") of its Common Stock or
Preferred Stock, some of which may be convertible into shares of its Common
Stock (such shares of Common Stock, the "Issuable Shares", and such convertible
Preferred Stock, the "Convertible Preferred Stock"), specified in Schedule II to
such Pricing Agreement (with respect to such Pricing Agreement, the "Firm
Shares"). If specified in such Pricing Agreement, the Company may grant to the
Underwriters the right to purchase at their election an additional number of
shares, specified in such Pricing Agreement as provided in Section 3 hereof (the
"Optional Shares"). The Firm Shares and the Optional Shares, if any, which the
Underwriters elect to purchase pursuant to Section 3 hereof are herein
collectively called the "Designated Shares".
The terms and rights of any particular issuance of Designated Shares
shall be as specified in the Pricing Agreement relating thereto.
1. Particular sales of Designated Shares may be made from time to time
to the Underwriters of such Shares, for whom the firms designated as
representatives of the Underwriters of such Shares in the Pricing Agreement
relating thereto will act as representatives (the "Representatives"). The term
"Representatives" also refers to a single firm acting as sole representative of
the Underwriters and to an Underwriter or Underwriters who act without any firm
being designated as its or their representatives. This Underwriting Agreement
shall not be construed as an obligation of the Company to sell any of the Shares
or as an obligation of any of the Underwriters to purchase any of the Shares.
The obligation of the Company to issue and sell any of the Shares and the
obligation of any of the Underwriters to purchase any of the Shares shall be
evidenced by the Pricing Agreement with respect to the Designated Shares
specified therein. Each Pricing Agreement shall specify the aggregate number of
the Firm Shares, the maximum number of Optional Shares, if any, the initial
public offering price of such Firm and Optional Shares or the manner of
determining such price, the purchase price to the Underwriters of such
Designated Shares, the names of the Underwriters of such Designated Shares, the
names of the Representatives of such Underwriters, the number of such Designated
Shares to be purchased by each Underwriter and the commission, if any, payable
to the Underwriters with respect thereto and shall set forth the date, time and
manner of delivery of such Firm and Optional Shares, if any, and payment
therefor. The Pricing Agreement shall also specify (to the extent not set forth
in the registration statement and prospectus with respect thereto) the terms of
such Designated Shares. A Pricing Agreement shall be in the form of an executed
writing (which may be in counterparts), and may be evidenced by an exchange of
telegraphic communications or any other rapid transmission device designed to
produce a written record of communications transmitted. The obligations of the
Underwriters under this Agreement and each Pricing Agreement shall be several
and not joint.
2. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-87686), as
amended by Amendment No. 1 thereto (the "Initial Registration
Statement"), in respect of the Shares and, in the case of Convertible
Preferred Stock, the Issuable Shares has been filed with the Securities
and Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the form
heretofore delivered or to be delivered to the Representatives and,
excluding exhibits to the Initial Registration Statement, but including
all documents incorporated by reference in the prospectus included
therein, to the Representatives for each of the other Underwriters have
been declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement or document incorporated by reference therein has
heretofore been filed, or transmitted for filing, with the Commission
(other than prospectuses filed pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Act, each in the form heretofore
delivered to the Representatives); and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the
Initial Registration Statement or filed with the Commission pursuant to
Rule 424(a) under the Act, is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement,
any post-effective amendment thereto and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto and the documents
incorporated by reference in the prospectus contained in the Initial
Registration Statement at the time such part of the Initial Registration
Statement became effective but excluding any Form T-1, each as amended
at the time such part of the Initial Registration Statement became
effective or such part of the Rule 462(b) Registration Statement, if
any, became or hereafter becomes effective, are hereinafter collectively
called
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the "Registration Statement"; the prospectus relating to the Shares, in
the form in which it has most recently been filed, or transmitted for
filing, with the Commission on or prior to the date of this Agreement,
is hereinafter called the "Prospectus"; any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to the
applicable form under the Act, as of the date of such Preliminary
Prospectus or Prospectus, as the case may be; any reference to any
amendment or supplement to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include any documents filed after the
date of such Preliminary Prospectus or Prospectus, as the case may be,
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any amendment to the
Initial Registration Statement shall be deemed to refer to and include
any annual report of the Company filed pursuant to Section 13(a) or
15(d) of the Exchange Act after the effective date of the Initial
Registration Statement that is incorporated by reference in the
Registration Statement; and any reference to the Prospectus as amended
or supplemented shall be deemed to refer to the Prospectus as amended or
supplemented in relation to the applicable Designated Shares in the form
in which it is filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 5(a) hereof, including any documents
incorporated by reference therein as of the date of such filing);
(b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter of Designated
Shares through the Representatives expressly for use in the Prospectus
as amended or supplemented relating to such Shares;
(c) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and
do not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the
applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter of Designated
Shares through the Representatives expressly for use in the Prospectus
as amended or supplemented relating to such Shares;
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(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management,
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole, otherwise than as set
forth or contemplated in the Prospectus;
(e) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Washington, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing (or the local equivalent) under the
laws of each jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except where
the failure so to qualify or to be in good standing would not
individually or in the aggregate have a material adverse effect on the
current or future general affairs, management, financial position,
shareholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole;
(f) Each "significant subsidiary" of the Company (as such term is
defined in Rule 1-02 of Regulation S-X) as of the date of this Agreement
is identified on Annex III hereto (each a "Significant Subsidiary" and
collectively, the "Significant Subsidiaries") and the Company has no
other subsidiary that constitutes a "significant subsidiary" within such
Rule 1-02 definition; each Significant Subsidiary has been duly
organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as
a foreign corporation for the transaction of business and is in good
standing (or the local equivalent) under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, except where the failure
so to qualify or to be in good standing would not individually or in the
aggregate have a material adverse effect on the current or future
general affairs, management, financial position, shareholders' equity or
results of operations of the Company and its subsidiaries, taken as a
whole;
(g) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company and each Significant Subsidiary have been duly and validly
authorized and issued and are fully paid and non-assessable; and, except
as otherwise set forth in the Prospectus, all of the issued shares of
capital stock of the Significant Subsidiaries are owned by the Company
either directly or through wholly-owned subsidiaries free and clear of
any perfected security interest or any other security interests, claims,
liens, or encumbrances;
(h) The Shares have been duly and validly authorized, and, when the
Firm Shares are issued and delivered pursuant to this Agreement and the
Pricing Agreement with respect to such Designated Shares and, in the
case of any Optional Shares, pursuant to Additional
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Shares Options (as defined in Section 3 hereof) with respect to such
Shares, such Shares will be duly and validly issued and fully paid and
non-assessable; in the case of Convertible Preferred Stock, the Issuable
Shares have been duly and validly authorized and reserved for issuance
and, when issued and delivered in accordance with the provisions of the
Convertible Preferred Stock, will be duly and validly issued and fully
paid and non-assessable; and the Shares and, in the case of Convertible
Preferred Stock, the Issuable Shares conform to the descriptions thereof
contained in the Registration Statement, and the Designated Shares will
conform to the description thereof contained in the Prospectus as
amended or supplemented with respect to such Designated Shares;
(i) The issue and sale of the Shares and, in the case of
Convertible Preferred Stock, the Issuable Shares, and the compliance by
the Company with all of the provisions of this Agreement, any Pricing
Agreement and each Additional Shares Option, if any, and the
consummation of the transactions contemplated herein and therein will
not conflict with or result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
to which the Company is a party or by which the Company is bound or to
which any of the property or assets of the Company is subject, nor will
such actions result in any violation of the provisions of the Articles
of Incorporation or Bylaws of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the issue
and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement or any Pricing Agreement or
any Additional Shares Option, except for the receipt of a solicitation
permit from the Insurance Commissioner of the State of Washington (which
has been received) and except such as have been, or will have been prior
to each Time of Delivery (as defined in Section 4 hereof), obtained
under the Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters;
(j) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject, which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(k) Neither the Company nor any of the Significant Subsidiaries is
in violation of its Articles of Incorporation or Bylaws or in default in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound;
(l) Each insurance company subsidiary of the Company (each, an
"Insurance Subsidiary" and collectively, the "Insurance Subsidiaries")
is duly licensed as an insurance company in its jurisdiction of
organization and is duly licensed or authorized as an insurer in each
jurisdiction outside its jurisdiction of organization where it is
required to be so licensed or
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authorized to conduct its business as described in the Registration
Statement and the Prospectus, except where the failure to be so licensed
or authorized would not individually or in the aggregate have a material
adverse effect on the current or future financial position,
shareholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole;
(m) Each of the Company and its Insurance Subsidiaries is in
compliance with the requirements of the insurance laws of the
jurisdiction of its incorporation or domicile and any applicable
regulations thereunder and has filed all reports, registrations,
documents or other information required to be filed thereunder, except
where the failure to so comply or file would not individually or in the
aggregate have a material adverse effect on the current or future
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole; and each of the
Insurance Subsidiaries is in compliance with the insurance laws and
regulations of each other jurisdiction that is applicable to such
Insurance Subsidiary, except where the failure to so comply would not
individually or in the aggregate have a material adverse effect on the
current or future financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole;
(n) All ceded reinsurance treaties, contracts, agreements and
arrangements to which the Company or any of its Insurance Subsidiaries
is a party are in full force and effect and neither the Company nor any
of its Insurance Subsidiaries is in violation of, or in default in the
performance, observance or fulfillment of, any obligation, agreement,
covenant or condition contained therein, except for such violations or
defaults which would not individually or in the aggregate have a
material adverse effect on the current or future financial position,
shareholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole; and neither the Company nor any of its
Insurance Subsidiaries has received any notice from any of the other
parties to such treaties, contracts, agreements or arrangements that
such other party intends not to perform in any material respect its
obligations thereunder and none of them has any reason to believe that
any such other party will be unable to perform its obligations
thereunder, except to the extent that (i) the Company or such Insurance
Subsidiary has established appropriate reserves for such nonperformance
on its financial statements or (ii) such nonperformance would not
individually or in the aggregate have a material adverse effect on the
current or future financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole;
(o) The statutory annual and quarterly statements of the Insurance
Subsidiaries required to be filed and the statutory balance sheets and
income statements included in such statutory annual and quarterly
statements, as most recently filed in each jurisdiction, have been
prepared in conformity with required or permitted statutory accounting
principles or practices consistently followed, except as may otherwise
be indicated in the notes thereto, and present fairly the financial
position of the Insurance Subsidiaries (on a statutory basis) for the
periods covered thereby;
(p) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the stock and under the captions "Plan of
Distribution" and "ERISA Considerations", insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate, complete and fair;
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(q) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company", as such term is
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(r) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075 of the Florida Statutes; and
(s) Ernst & Young LLP, who have audited certain financial
statements of the Company and its subsidiaries, are independent auditors
as required by the Act and the rules and regulations of the Commission
thereunder.
3. Upon the execution of the Pricing Agreement applicable to any
Designated Shares and authorization by the Representatives of the release of the
Firm Shares, the several Underwriters propose to offer the Firm Shares for sale
upon the terms and conditions set forth in the Prospectus as amended or
supplemented.
The Company may specify in the Pricing Agreement applicable to any
Designated Shares that the Company thereby grants to the Underwriters the right
(an "Additional Shares Option") to purchase at their election up to the number
of Optional Shares set forth in such Pricing Agreement, on the terms set forth
in the paragraph above, for the sole purpose of covering sales of shares in
excess of the number of Firm Shares. Any such election to purchase Optional
Shares may be exercised by written notice from the Representatives to the
Company, given within a period specified in the Pricing Agreement, setting forth
the aggregate number of Optional Shares to be purchased and the date on which
such Optional Shares are to be delivered, as determined by the Representatives
but in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless the Representatives and the Company otherwise agree in
writing, earlier than or later than the respective number of business days after
the date of such notice set forth in such Pricing Agreement.
The number of Optional Shares to be added to the number of Firm Shares
to be purchased by each Underwriter as set forth in Schedule I to the Pricing
Agreement applicable to such Designated Shares shall be, in each case, the
number of Optional Shares which the Company has been advised by the
Representatives have been attributed to such Underwriter; provided that, if the
Company has not been so advised, the number of Optional Shares to be so added
shall be, in each case, that proportion of Optional Shares which the number of
Firm Shares to be purchased by such Underwriter under such Pricing Agreement
bears to the aggregate number of Firm Shares (rounded as the Representatives may
determine to the nearest 100 shares). The total number of Designated Shares to
be purchased by all the Underwriters pursuant to such Pricing Agreement shall be
the aggregate number of Firm Shares set forth in Schedule I to such Pricing
Agreement plus the aggregate number of Optional Shares which the Underwriters
elect to purchase (which amount shall not be greater than the aggregate maximum
amount of Optional Shares set forth in Schedule I to such Pricing Agreement).
4. Certificates for the Firm Shares and the Optional Shares to be
purchased by each Underwriter pursuant to the Pricing Agreement relating
thereto, in the form specified in such Pricing Agreement and in such authorized
denominations and registered in such names as the Representatives may request
upon at least forty-eight hours' prior notice to the Company, shall be delivered
by or on behalf of the Company to the Representatives for the account of such
Underwriter, against payment by such Underwriter or on its behalf of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company to the Representatives at least
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forty-eight hours in advance as specified in such Pricing Agreement, (i)
with respect to the Firm Shares, all in the manner and at the place and
time and date specified in such Pricing Agreement or at such other place
and time and date as the Representatives and the Company may agree upon
in writing, such time and date being herein called the "First Time of
Delivery" and (ii) with respect to the Optional Shares, if any, in the
manner and at the time and date specified by the Representatives in the
written notice given by the Representatives of the Underwriters'
election to purchase such Optional Shares, or at such other time and
date as the Representatives and the Company may agree upon in writing,
such time and date, if not the First Time of Delivery, herein called the
"Second Time of Delivery". Each such time and date for delivery is
herein called a "Time of Delivery".
5. The Company agrees with each of the Underwriters of any Designated
Shares:
(a) To prepare the Prospectus as amended or supplemented in
relation to the applicable Designated Shares in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Act not later than the Commission's close of business on the
second business day following the execution and delivery of the Pricing
Agreement relating to the applicable Designated Shares or, if
applicable, such earlier time as may be required by Rule 424(b); to make
no further amendment or any supplement to the Registration Statement or
Prospectus as amended or supplemented after the date of the Pricing
Agreement relating to such Shares and prior to any Time of Delivery for
such Shares which shall be disapproved by the Representatives for such
Shares promptly after reasonable notice thereof; to advise the
Representatives promptly of any such amendment or supplement after any
Time of Delivery for such Shares and furnish the Representatives with
copies thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act for so long as the delivery of a prospectus is required in
connection with the offering or sale of such Shares, and during such
same period to advise the Representatives, promptly after it receives
notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed with the Commission,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any prospectus relating to the
Shares, of the suspension of the qualification of such Shares or any
Issuable Shares for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any such stop order or of any such order
preventing or suspending the use of any prospectus relating to the
Shares or suspending any such qualification, promptly to use its best
efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify such Shares and any
Issuable Shares for offering and sale under the securities laws of such
jurisdictions as the Representatives may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of such Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the business day
next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with written and electronic copies of the
Prospectus as amended or supplemented in New York City in such
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quantities as the Representatives may reasonably request, and, if the
delivery of a prospectus is required at any time in connection with the
offering or sale of the Shares or any Issuable Shares and if at such
time any event shall have occurred as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such same
period to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the Prospectus in
order to comply with the Act or the Exchange Act, to notify the
Representatives and upon their request to file such document and to
prepare and furnish without charge to each Underwriter and to any dealer
in securities as many written and electronic copies as the
Representatives may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance;
(d) To make generally available to its security holders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a) of
the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date of the Pricing
Agreement for such Designated Shares and continuing to and including the
later of (i) the last date of any blackout period provided for in such
Pricing Agreement and (ii) the last Time of Delivery for such Designated
Shares, not to offer, sell, contract to sell or otherwise dispose of any
securities of the Company that are substantially similar to the
Designated Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, stock or any such substantially similar securities (other than
pursuant to director or employee stock option or benefit plans existing
on, or upon the conversion of convertible or exchangeable securities
outstanding as of, the date of the Pricing Agreement for such Designated
Shares) without the prior written consent of the Representatives;
(f) If the Company elects to rely upon Rule 462(b), to file a Rule
462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and at the time of filing either to pay the Commission the
filing fee for the Rule 462(b) Registration Statement or give
irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act;
(g) In the case of Convertible Preferred Stock, to reserve and keep
available at all times, free of preemptive rights, shares of Common
Stock for the purpose of enabling the Company to satisfy any obligations
to issue Issuable Shares; and
(h) Upon request of any Underwriter, to furnish, or cause to be
furnished, to such Underwriter an electronic version of the Company's
trademarks, servicemarks or corporate logo for use on the website, if
any, operated by such Underwriter for the purpose of facilitating the
on-line offering of the Shares (the "License"); provided, however, that
the License shall be used solely for the purpose described above, shall
be granted without any fee and may not be assigned or transferred.
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6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares and any Issuable Shares under the
Act and all other expenses in connection with the preparation, printing and
filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing and delivering
of copies thereof to the Underwriters and dealers; (ii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, any Pricing
Agreement, any Blue Sky Memorandum, closing documents (including compilations
thereof) and any other documents in connection with the offering, purchase, sale
and delivery of the Shares; (iii) all expenses in connection with the
qualification of the Shares and any Issuable Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey(s); (iv) any filing
fees incident to, and the fees and disbursements of counsel for the Underwriters
in connection with, any required reviews by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; (v) the cost of
preparing certificates for the Shares; (vi) the cost and charges of any transfer
agent or registrar or dividend disbursing agent in connection with the Shares;
and (vii) all other costs and expenses incident to the performance of its
obligations hereunder and under any Additional Shares Options which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Shares by them, and any
advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters of any Designated Shares under
the Pricing Agreement relating to such Designated Shares shall be subject, in
the discretion of the Representatives, to the condition that all representations
and warranties and other statements of the Company in or incorporated by
reference in the Pricing Agreement relating to such Designated Shares are, at
and as of each Time of Delivery for such Designated Shares, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus as amended or supplemented in relation to such
Designated Shares shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with
Section 5(a) hereof; if the Company has elected to rely upon Rule
462(b), the Rule 462(b) Registration Statement shall have become
effective by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by
the Commission; and all requests for additional information on the part
of the Commission shall have been complied with to the Representatives'
reasonable satisfaction;
(b) Counsel for the Underwriters shall have furnished to the
Representatives such written opinion or opinions (a draft of each such
opinion is attached as Annex II(a) hereto), dated each Time of Delivery
for such Designated Shares, with respect to the due incorporation of the
Company, the validity of the Designated Shares and any Issuable Shares,
the due authorization and execution of this Agreement, certain matters
related to the Registration Statement and the Prospectus and such other
related matters as the Representatives may reasonably request (in giving
such opinion, such counsel may rely as to
10
matters of Washington law on the opinions of counsel to the Company
referred to below), and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon
such matters;
(c)(1)Counsel for the Company satisfactory to the Representatives
shall have furnished to the Representatives their written opinion (a
draft of such opinion is attached as Annex II(b) hereto), dated each
Time of Delivery for such Designated Shares, in form and substance
satisfactory to the Representatives, to the effect that:
(i) The Company is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation;
(ii) This Agreement and the Pricing Agreement with respect
to the Designated Shares have been duly authorized, executed and
delivered by the Company;
(iii) The Designated Shares have been duly and validly
authorized and issued and are fully paid and non-assessable and
conform to the description thereof in the Prospectus as amended or
supplemented; and in the case of Convertible Preferred Stock, the
Issuable Shares have been duly and validly authorized and reserved
for issuance and, when issued and delivered in accordance with the
provisions of the Convertible Preferred Stock, will be duly and
validly issued and fully paid and non-assessable, and will conform
to the description thereof in the Prospectus as amended or
supplemented;
(iv) The issue and sale of the Designated Shares being
delivered at such Time of Delivery and, in the case of Convertible
Preferred Stock, the Issuable Shares and the compliance by the
Company with all of the provisions of this Agreement and the
Pricing Agreement with respect to the Designated Shares and the
consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of the
provisions of the Articles of Incorporation or Bylaws of the
Company or any Applicable Laws (as defined below) or any judgment,
order or decree known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of its
properties;
(v) Except as previously made or obtained, as the case may
be, and except for any Governmental Approval pursuant to laws,
rules and regulations governing insurance companies, as to which
such counsel has not been requested to render an opinion, no
Governmental Approval is required for the issue and sale of the
Designated Shares being delivered at the applicable Time of
Delivery or the consummation by the Company of the transactions
contemplated by this Agreement or the applicable Pricing
Agreement, except such as have been obtained under the Act and
such consents, approvals, authorizations, orders, registrations or
qualifications as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Designated Shares by the Underwriters; the term "Governmental
Approval" means any filing with, or authorization, approval,
consent, license, order, registration, qualification or decree of
any Governmental Authority pursuant to Applicable Laws (as defined
below); the term "Applicable Laws" means only those laws, rules
and regulations of the State of Washington and of the United
States of America which, in such counsel's experience, are
ordinarily applicable to transactions of the type contemplated by
this Agreement; the term "Governmental Authority" means any
11
Washington or federal legislative, judicial, administrative or
regulatory body under Applicable Laws;
(vi) The statements set forth in the Prospectus as amended
or supplemented under the caption "Description of Capital Stock"
(excluding the subsection captioned "Insurance Regulations
Concerning Change of Control"), insofar as they purport to
constitute a summary of the terms of the stock, and under the
captions "Underwriting", "Plan of Distribution" and "ERISA
Considerations", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are
accurate, complete and fair;
(vii) The Company is not an "Investment Company", as such
term is defined in the Investment Company Act; and
(viii) The Registration Statement and the Prospectus as
amended or supplemented and any further amendments and supplements
thereto made by the Company prior to the Time of Delivery for the
Designated Shares (other than the financial statements and related
schedules therein (whether directly included or incorporated by
reference) and any documents incorporated by reference therein, as
to which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the Act and the
rules and regulations thereunder;
In addition, such counsel shall state that they have participated
in the preparation of the Registration Statement and the Prospectus as
amended or supplemented and participated in conferences with
representatives of the Company and its independent auditors and your
representatives and counsel, at which the contents of the Registration
Statement and the Prospectus as amended or supplemented and related
matters were discussed. Such counsel shall further state that they did
not participate in the preparation of the documents incorporated by
reference in the Registration Statement and Prospectus (but have,
however, reviewed such documents and discussed the business and affairs
of the Company with officers and other representatives of the Company).
Although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus as
amended or supplemented and has made no independent check or
verification thereof, except for those referred to in the opinion in
subsection (vi) of this Section 7(c)(1), no facts have come to the
attention of such counsel that have led such counsel to believe that, as
of its effective date, the Registration Statement or any further
amendment thereto made by the Company prior to the applicable Time of
Delivery (other than financial statements and related schedules included
or incorporated by reference therein, as to which such counsel need
express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that, as of
its date, the Prospectus as amended or supplemented or any further
amendment or supplement thereto made by the Company prior to the
applicable Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading or that, as of the applicable Time of
Delivery, either the Registration Statement or the Prospectus as amended
or supplemented or any other further amendment or supplement thereto
made by the Company prior to the applicable Time of Delivery (other than
the financial statements and
12
related schedules therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
nor have any facts come to the attention of such counsel that have led
such counsel to believe that there is any amendment to the Registration
Statement required to be filed or any contracts or other documents of a
character required to be filed as an exhibit to the Registration
Statement or required to be incorporated by reference into the
Prospectus as amended or supplemented or required to be described in the
Registration Statement or the Prospectus as amended or supplemented
which are not filed or incorporated by reference or described as
required;
The opinion of such counsel shall be limited to the laws of the
United States and the State of Washington, and may rely on the
certificate or certificates to be delivered pursuant to Section 7(j)
below to the extent necessary to furnish such counsel's opinion. Such
counsel may also state that insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and
certificates of public officials;
(c)(2) James W. Ruddy, Esq., General Counsel of the Company, shall
have furnished to the Representatives his written opinion (a draft of
such opinion is attached as Annex II(c) hereto), dated the Time of
Delivery for such Designated Shares, in form and substance satisfactory
to the Representatives, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus as amended or
supplemented, and has been duly qualified as a foreign corporation
for the transaction of business and is in good standing (or the
local equivalent) under the laws of each jurisdiction in which it
owns or leases properties or conducts any business so as to
require such qualification, except where the failure to be so
qualified or in good standing would not individually or in the
aggregate have a material adverse effect on the current or future
general affairs, management, financial position, shareholders'
equity or results of operations of the Company and its
subsidiaries, taken as a whole;
(ii) Each of the Company's Significant Subsidiaries has been
duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation,
with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus
as amended or supplemented, and has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing (or the local equivalent) under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, except where the
failure to be so qualified or in good standing would not
individually or in the aggregate have a material adverse effect on
the current or future general affairs, management, financial
position, shareholders' equity or results of operations of the
Company and its subsidiaries, taken as a whole;
(iii) The Company has an authorized capitalization as set
forth in the Prospectus as amended or supplemented, and all of the
issued shares of capital stock of the Company have been duly and
validly authorized and issued and are fully paid
13
and non-assessable, and, except as otherwise set forth in the
Prospectus as amended or supplemented, all of the issued shares of
capital stock of the Significant Subsidiaries have been duly and
validly authorized and issued and are fully paid and
non-assessable and are owned by the Company either directly or
through wholly-owned subsidiaries free and clear of any perfected
security interest and, to the knowledge of such counsel, after due
inquiry, any other security interests, claims, liens or
encumbrances;
(iv) To the best of such counsel's knowledge and other than
as set forth in or incorporated by reference in the Prospectus,
there are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the current or future general affairs,
management, financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole;
and, to the best of such counsel's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or
threatened by others;
(v) The issue and sale of the Designated Shares being
delivered at such Time of Delivery and, in the case of Convertible
Preferred Stock, the Issuable Shares and the compliance by the
Company with all of the provisions of this Agreement and the
Pricing Agreement with respect to the Designated Shares and the
consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company
is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject, except where such
conflict, breach, violation or default would not individually or
in the aggregate have a material adverse effect on the current or
future general affairs, management, financial position,
shareholders' equity or results of operations of the Company and
its subsidiaries, taken as a whole, nor will such actions result
in any violation of the provisions of the Articles of
Incorporation or Bylaws of the Company or any statute, rule or
regulation of the State of Washington or the United States of
America or any governmental agency or body thereof which, in such
counsel's experience, is ordinarily applicable to transactions of
the type contemplated by the Pricing Agreement, or any judgment,
order or decree known to such counsel of any Washington State or
U.S. federal court or governmental agency or body having
jurisdiction over the Company or any of its properties;
(vi) No consent, approval, authorization, order,
registration or qualification of or with any court or governmental
agency or body is required for the issue and sale of the
Designated Shares being delivered at such Time of Delivery or the
consummation by the Company of the transactions contemplated by
this Agreement or such Pricing Agreement, except for the receipt
of a solicitation permit from the Insurance Commissioner of the
State of Washington (which has been received) and except such as
have been obtained under the Act and such consents, approvals,
authorizations, orders, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Designated Shares by the
Underwriters;
14
(vii) Neither the Company nor any of its Significant
Subsidiaries is in violation of its Articles of Incorporation or
Bylaws or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which
it or any of its properties may be bound;
(viii) The statements set forth in the Prospectus as amended
or supplemented under the caption "Risk Factors" in the
subsections captioned "Our businesses are heavily regulated and
changes in regulation may reduce our profitability and limit our
growth", "Assessments and other surcharges for guaranty funds and
second-injury funds and other mandatory pooling arrangements may
reduce our profitability" and "Changes in federal tax laws and
regulations could make some of our products less attractive to
consumers", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete
and fair;
(ix) The documents incorporated by reference in the
Prospectus as amended or supplemented (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion), when they became effective or were filed
with the Commission, as the case may be, complied as to form in
all material respects with the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder; and such counsel has no reason to believe
that any of such documents, when they became effective or were
filed, as the case may be, contained, in the case of a
registration statement which became effective under the Act, an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or, in the case of other
documents which were filed under the Act or the Exchange Act with
the Commission, an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made when such documents were so filed, not misleading; and
(x) The Registration Statement and the Prospectus as amended
or supplemented and any further amendments and supplements thereto
made by the Company prior to such Time of Delivery for such
Designated Shares (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder;
In addition, such counsel shall state that he, or attorneys in his
office working under his direction, have participated in conferences
with officers and other representatives of the Company, outside counsel
for the Company, representatives of the independent auditors for the
Company and your representatives and counsel at which the contents of
the Registration Statement and the Prospectus as amended or supplemented
and related matters were discussed. Although such counsel is not passing
upon, and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus as amended or supplemented, and has made no
independent check or verification thereof except for those referred to
in the opinion in subsection (viii) of this Section 7(c)(2), on the
basis of the foregoing, no facts have come to such counsel's attention
that have led him to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by the
Company prior to the applicable Time of Delivery (other than the
financial statements and related schedules therein,
15
as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus as
amended or supplemented or any further amendment or supplement thereto
made by the Company prior to the applicable Time of Delivery (other than
the financial statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or that, as of the applicable Time of
Delivery, either the Registration Statement or the Prospectus as amended
or supplemented or any further amendment or supplement thereto made by
the Company prior to the applicable Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; nor have any facts come to such counsel's
attention that have led him to believe that there is any amendment to
the Registration Statement required to be filed or any contracts or
other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be incorporated by reference into
the Prospectus as amended or supplemented or required to be described in
the Registration Statement or the Prospectus as amended or supplemented
which are not filed or incorporated by reference or described as
required;
The opinion of such counsel shall be limited to the laws of the
United States and the State of Washington, and he may rely on the
certificate or certificates to be delivered pursuant to Section 7(j)
below to the extent necessary to furnish his opinion;
(d) On the date of the Pricing Agreement for such Designated Shares
at a time prior to the execution of the Pricing Agreement with respect
to such Designated Shares and at each Time of Delivery for such
Designated Shares, the independent auditors of the Company who have
audited the financial statements of the Company and its subsidiaries
included or incorporated by reference in the Registration Statement
shall have furnished to the Representatives a letter, dated the
effective date of the Registration Statement or the date of the most
recent report filed with the Commission containing financial statements
and incorporated by reference in the Registration Statement, if the date
of such report is later than such effective date, and a letter dated
such Time of Delivery, respectively, to the effect set forth in Annex II
hereto, and with respect to such letter dated such Time of Delivery, as
to such other matters as the Representatives may reasonably request and
in form and substance satisfactory to the Representatives (the executed
copy of the letter delivered prior to the execution of this Agreement is
attached as Annex I(a) hereto and a draft of the form of letter to be
delivered on the effective date of any post-effective amendment to the
Registration Statement and as of each Time of Delivery is attached as
Annex I(b) hereto);
(e) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus as amended prior
to the date of the Pricing Agreement relating to the Designated Shares
any loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus as amended
prior to the date of the Pricing Agreement relating to the Designated
Shares, and (ii)
16
since the respective dates as of which information is given in the
Prospectus as amended prior to the date of the Pricing Agreement
relating to the Designated Shares there shall not have been any change
in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company
and its subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus as amended prior to the date of the
Pricing Agreement relating to the Designated Shares, the effect of
which, in any such case described in clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Designated Shares on the terms and in the manner
contemplated in the Prospectus as amended relating to the Designated
Shares;
(f) On or after the date of the Pricing Agreement relating to the
Designated Shares (i) no downgrading shall have occurred in the rating
accorded the Company's debt securities or preferred stock or the
Company's financial strength or claims paying ability by any "nationally
recognized statistical rating organization", as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no
such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating
of any of the Company's debt securities or preferred stock or the
Company's financial strength or claims paying ability;
(g) On or after the date of the Pricing Agreement relating to the
Designated Shares there shall not have occurred any of the following:
(i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension
or material limitation in trading in the Company's securities on NASDAQ;
(iii) a general moratorium on commercial banking activities declared by
either Federal or New York State authorities or a material disruption in
commercial banking or securities settlement or clearance services in the
United States; (iv) the outbreak or escalation of hostilities involving
the United States or the declaration by the United States of a national
emergency or war; or (v) the occurrence of any other calamity or crisis
or any change in financial, political or economic conditions in the
United States or elsewhere, if the effect of any such event specified in
clause (iv) or (v) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Firm Shares or Optional Shares or both on the terms and
in the manner contemplated in the Prospectus as first amended or
supplemented relating to the Designated Shares;
(h) The Shares at each Time of Delivery and, in the case of
Convertible Preferred Stock, the Issuable Shares shall have been
approved for quotation on NASDAQ;
(i) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the
business day next succeeding the date of this Agreement; and
(j) The Company shall have furnished or caused to be furnished to
the Representatives at each Time of Delivery for the Designated Shares
certificates of officers of the Company satisfactory to the
Representatives as to the accuracy of the representations and warranties
of the Company herein at and as of such Time of Delivery, as to the
performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of
17
Delivery, as to the matters set forth in subsections (a) and (e) of this
Section and as to such other matters as the Representatives may
reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Shares, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, any preliminary prospectus supplement, the Registration Statement,
the Prospectus as amended or supplemented and any other prospectus relating to
the Shares, or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
of Designated Shares through the Representatives expressly for use in the
Prospectus as amended or supplemented relating to such Shares.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any preliminary prospectus supplement,
the Registration Statement, the Prospectus as amended or supplemented and any
other prospectus relating to the Shares, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Shares, or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives expressly for use therein; and will reimburse the Company for
any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party
18
(who shall not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include any statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters of the Designated Shares on
the other from the offering of the Designated Shares to which such loss, claim,
damage or liability (or action in respect thereof) relates. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters of the Designated
Shares on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and such Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from such offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by such Underwriters.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the applicable Designated Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or
19
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The obligations
of the Underwriters of Designated Shares in this subsection (d) to contribute
are several in proportion to their respective underwriting obligations with
respect to such Shares and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Firm Shares or Optional Shares which it has agreed to purchase under the
Pricing Agreement relating to such Shares, the Representatives may in their
discretion arrange for themselves or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter the Representatives do not arrange for the purchase
of such Firm Shares or Optional Shares, as the case may be, then the Company
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to the Representatives to
purchase such Shares on such terms. In the event that, within the respective
prescribed period, the Representatives notify the Company that they have so
arranged for the purchase of such Shares, or the Company notifies the
Representatives that it has so arranged for the purchase of such Shares, the
Representatives or the Company shall have the right to postpone a Time of
Delivery for such Shares for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus as amended or supplemented, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments or supplements to the Registration Statement or the Prospectus which
in the opinion of the Representatives may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to the Pricing Agreement with respect to such Designated Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Firm Shares or Optional Shares, as the case may be, of a defaulting Underwriter
or Underwriters by the Representatives and the Company as provided in subsection
(a) above, the aggregate number of such Shares which remains unpurchased does
not exceed one-eleventh of the aggregate number of the Firm Shares or Optional
Shares, as the case may be, to be purchased at the respective Time of Delivery,
then the Company shall have the right to require each non-defaulting Underwriter
to purchase the number of Firm Shares or Optional Shares, as the case may be,
which such Underwriter agreed to purchase under the Pricing Agreement relating
to such Designated Shares and, in addition, to require each non-defaulting
Underwriter to purchase its pro rata share (based on the number of Firm Shares
or Optional Shares, as the case may be, which such Underwriter agreed to
purchase under such Pricing Agreement) of the Firm Shares or Optional Shares, as
the case may be, of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Firm Shares or Optional Shares, as the case may be, of a defaulting Underwriter
or Underwriters by the
20
Representatives and the Company as provided in subsection (a) above, the
aggregate number of Firm Shares or Optional Shares, as the case may be, which
remains unpurchased exceeds one-eleventh of the aggregate number of the Firm
Shares or Optional Shares, as the case may be, to be purchased at the applicable
Time of Delivery, as referred to in subsection (b) above, or if the Company
shall not exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Firm Shares or Optional Shares, as the
case may be, of a defaulting Underwriter or Underwriters, then the Pricing
Agreement relating to such Firm Shares or the Additional Shares Option relating
to such Optional Shares, as the case may be, shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company, except
for the expenses to be borne by the Company and the Underwriters as provided in
Section 6 hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If any Pricing Agreement or Additional Shares Option shall be
terminated pursuant to Section 9 hereof, the Company shall not then be under any
liability to any Underwriter with respect to the Firm Shares or Optional Shares
with respect to which such Pricing Agreement shall have been terminated except
as provided in Sections 6 and 8 hereof; but, if for any other reason, Designated
Shares are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through the Representatives for all
out-of-pocket expenses approved in writing by the Representatives, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of such Designated
Shares, but the Company shall then be under no further liability to any
Underwriter with respect to such Designated Shares except as provided in
Sections 6 and 8 hereof.
12. In all dealings hereunder, the Representatives of the Underwriters
of Designated Shares shall act on behalf of each of such Underwriters, and the
parties hereto shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: General Counsel; provided, however, that any
notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or
sent by mail, telex or facsimile transmission to such Underwriter at its address
set forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
21
13. This Agreement and each Pricing Agreement shall be binding upon, and
inure solely to the benefit of, the Underwriters, the Company and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement or any such Pricing Agreement. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of each Pricing Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
15. THIS AGREEMENT AND EACH PRICING AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement and each Pricing Agreement may be executed by any one
or more of the parties hereto and thereto in any number of counterparts, each of
which shall be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument.
17. The Company is authorized, subject to applicable law, to disclose
any and all aspects of this potential transaction that are necessary to support
any U.S. federal income tax benefits expected to be claimed with respect to such
transaction, and all materials of any kind (including tax opinions and other tax
analyses) related to those benefits, without the Underwriters imposing any
limitation of any kind.
22
If the foregoing is in accordance with your understanding, please sign
and return to us seven counterparts hereof.
Very truly yours,
SAFECO Corporation
By:
.................................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Lehman Brothers Inc.
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
By:
...................................
(Goldman, Sachs & Co.)
23
ANNEX I
PRICING AGREEMENT
Goldman, Sachs & Co.,
[Name(s) of Co-Representative(s),]
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
______ __, 2002
Ladies and Gentlemen:
SAFECO Corporation, a Washington corporation (the "Company"), proposes,
subject to the terms and conditions stated herein and in the Underwriting
Agreement, dated November __, 2002 (the "Underwriting Agreement"), between the
Company on the one hand and Goldman, Sachs & Co., Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and Credit Suisse First Boston Corporation on the
other hand, to issue and sell to the Underwriters named in Schedule I hereto
(the "Underwriters") the Shares specified in Schedule II hereto (the "Designated
Shares" consisting of Firm Shares and any Optional Shares the Underwriters may
elect to purchase). Each of the provisions of the Underwriting Agreement is
incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set forth
therein shall be deemed to have been made at and as of the date of this Pricing
Agreement, except that each representation and warranty which refers to the
Prospectus in Section 2 of the Underwriting Agreement shall be deemed to be a
representation or warranty as of the date of the Underwriting Agreement in
relation to the Prospectus (as therein defined), and also a representation and
warranty as of the date of this Pricing Agreement in relation to the Prospectus
as amended or supplemented relating to the Designated Shares which are the
subject of this Pricing Agreement. Each reference to the Representatives herein
and in the provisions of the Underwriting Agreement so incorporated by reference
shall be deemed to refer to you. Unless otherwise defined herein, terms defined
in the Underwriting Agreement are used herein as therein defined. The
Representatives designated to act on behalf of the Representatives and on behalf
of each of the Underwriters of the Designated Shares pursuant to Section 12 of
the Underwriting Agreement and the address of the Representatives referred to in
such Section 12 are set forth in Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Shares, in the form
heretofore delivered to you is now proposed to be filed with the Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, (a) the Company agrees
to issue and sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company, at the time and
place and at the purchase price to the Underwriters set forth in Schedule II
hereto, the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto, and (b) in the event and to the extent that
the Underwriters shall exercise the election to
purchase Optional Shares, as provided below, the Company agrees to issue and
sell to each of the Underwriters, and each of the Underwriters agrees, severally
and not jointly, to purchase from the Company at the purchase price to the
Underwriters set forth in Schedule II hereto that portion of the number of
Optional Shares as to which such election shall have been exercised.
The Company hereby grants to each of the Underwriters the right to
purchase at their election up to the number of Optional Shares set forth
opposite the name of such Underwriter in Schedule I hereto on the terms referred
to in the paragraph above for the sole purpose of covering sales of shares in
excess of the number of Firm Shares. Any such election to purchase Optional
Shares may be exercised by written notice from the Representatives to the
Company given within a period of 30 calendar days after the date of this Pricing
Agreement, setting forth the aggregate number of Optional Shares to be purchased
and the date on which such Optional Shares are to be delivered, as determined by
the Representatives, but in no event earlier than the First Time of Delivery or,
unless the Representatives and the Company otherwise agree in writing, no
earlier than two or later than ten business days after the date of such notice.
2
If the foregoing is in accordance with your understanding, please sign
and return to us [seven] counterparts hereof, and upon acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the Underwriters
and the Company. It is understood that your acceptance of this letter on behalf
of each of the Underwriters is or will be pursuant to the authority set forth in
a form of Agreement among Underwriters, the form of which shall be submitted to
the Company for examination upon request, but without warranty on the part of
the Representatives as to the authority of the signers thereof.
Very truly yours,
SAFECO Corporation
By:
......................................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
[Name(s) of Co-Representative(s)]
By:
..........................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
3
SCHEDULE I
MAXIMUM NUMBER
OF OPTIONAL
NUMBER OF SHARES WHICH
FIRM SHARES MAY BE
UNDERWRITER TO BE PURCHASED PURCHASED
----------- --------------- --------------
Goldman, Sachs & Co.........................................
[Name(s) of Co-Representative(s)]...........................
[Names of other Underwriters]...............................
--------- ---------
Total.......................................
========= =========
4
SCHEDULE II
TITLE OF DESIGNATED SHARES:
NUMBER OF DESIGNATED SHARES:
Number of Firm Shares:
Maximum Number of Optional Shares:
INITIAL OFFERING PRICE TO PUBLIC:
[$........ per Share] [Formula]
PURCHASE PRICE BY UNDERWRITERS:
[$........ per Share] [Formula]
[COMMISSION PAYABLE TO UNDERWRITERS:
$........ per Share in Federal (same-day) funds]
FORM OF DESIGNATED SHARES:
Definitive form, to be made available for checking [and packaging] at least
twenty-four hours prior to the Time of Delivery at the office of [The Depository
Trust Company or its designated custodian] [the Representatives]
SPECIFIED FUNDS FOR PAYMENT OF PURCHASE PRICE:
Federal (same-day) funds
[DESCRIBE ANY BLACKOUT PROVISIONS WITH RESPECT TO THE DESIGNATED SHARES]
TIME OF DELIVERY:
.......... a.m. (New York City time), .................., 20..
CLOSING LOCATION:
NAMES AND ADDRESSES OF REPRESENTATIVES:
Designated Representatives:
Address for Notices, etc.:
[OTHER TERMS]* :
- --------
* A description of particular tax, accounting or other unusual features
(including any event risk provisions) of the Designated Shares should be set
forth, or referenced to an attached or accompanying description, if necessary,
to ensure agreement as to the terms of the Designated Shares to be purchased and
sold. Such a description might appropriately be in the form in which such
features will be described in the Prospectus Supplement for the offering.
5
ANNEX II
Pursuant to Section 7(d) of the Underwriting Agreement, the auditors
shall furnish letters to the Underwriters to the effect that:
(i) They are independent auditors with respect to the Company and
its subsidiaries within the meaning of the Act and the applicable
published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) audited by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified Public
Accountants of the consolidated interim financial statements, selected
financial data, pro forma financial information, financial forecasts
and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included in the Company's quarterly reports on Form
10-Q incorporated by reference into the Prospectus; and on the basis of
specified procedures including inquiries of officials of the Company who
have responsibility for financial and accounting matters regarding
whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all
material respects with the applicable accounting requirements of the Act
and the Exchange Act and the related published rules and regulations,
nothing came to their attention that caused them to believe that the
unaudited condensed consolidated financial statements do not comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published
rules and regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Prospectus
and included or incorporated by reference in Item 6 of the Company's
Annual Report on Form 10-K for the most recent fiscal year agrees with
the corresponding amounts (after restatement where applicable) in the
audited consolidated financial statements for such five fiscal years
which were included or incorporated by reference in the Company's Annual
Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and
on the basis of limited procedures specified in such letter nothing came
to their attention as a result of the foregoing procedures that caused
them to believe that this information does not conform in all material
respects with the disclosure requirements of Items 301, 302, 402 and
503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, inspection of the minute books of the
Company and its subsidiaries since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing
came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus and/or included or
incorporated by reference in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus
or included in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus for them to be in
conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the
unaudited condensed financial statements referred to in clause (A)
and any unaudited income statement data and balance sheet items
included in the Prospectus and referred to in clause (B) were not
determined on a basis substantially consistent with the basis for
the audited financial statements included or incorporated by
reference in the Company's Annual Report on Form 10-K for the most
recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus
do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the published
rules and regulations thereunder or the pro forma adjustments have
not been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of performance shares and upon conversions of
convertible securities, in each case which were outstanding on the
date of the latest balance sheet included or incorporated by
reference in the Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated assets or shareholders' equity, or any
increases or decreases in other items that the representative or
representatives of the Underwriters (the "Representatives", such
term to include an Underwriter or Underwriters who act without any
firm being designated as
2
its or their representatives) reasonably request to be covered in
such letter, in each case as compared with amounts shown in the
latest balance sheet included or incorporated by reference in the
Prospectus, except in each case for changes, increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus
to the specified date referred to in clause (E) there were any
decreases in consolidated revenues or the total or per share
amounts of consolidated net income, or any increases or decreases
in other items that the Representatives reasonably request to be
covered in such letter, in each case as compared with the
comparable period of the preceding year and with any other period
of corresponding length reasonably specified by the
Representatives, except in each case for increases or decreases
which the Prospectus discloses have occurred or may occur or which
are described in such letter; and
(vii) In addition to the audit referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an audit in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus
(excluding documents incorporated by reference), or in Part II of, or in
exhibits and schedules to, the Registration Statement specified by the
Representatives or in documents incorporated by reference in the
Prospectus specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement.
All references in this Annex II to the Prospectus shall be deemed to
refer to the Prospectus (including the documents incorporated by reference
therein) as defined in the Underwriting Agreement as of the date of the letter
delivered on the date of the Pricing Agreement for purposes of such letter and
to the Prospectus as amended or supplemented (including the documents
incorporated by reference therein) in relation to the applicable Designated
Shares for purposes of the letter delivered at the Time of Delivery for such
Designated Shares.
3
ANNEX III
SIGNIFICANT SUBSIDIARIES
SAFECO Life Insurance Company
SAFECO Insurance Company of America
General Insurance Company of America
American States Insurance Company
American Economy Insurance Company