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