<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1995
REGISTRATION NO. 33-60413
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
MERRILL LYNCH & CO., INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-2740599
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1334
(212) 449-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
ROSEMARY T. BERKERY, ESQ.
ASSOCIATE GENERAL COUNSEL
MERRILL LYNCH & CO., INC.
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1334
(212) 449-6990
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
NORMAN D. SLONAKER, ESQ.
BROWN & WOOD
ONE WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PROSPECTUS PRELIMINARY PROSPECTUS DATED JULY 10, 1995
LOGO
5,000,000 STRYPES
MERRILL LYNCH & CO., INC.
% STRYPES SM DUE AUGUST 15, 1998
PAYABLE WITH SHARES OF COMMON STOCK OF MGIC INVESTMENT CORPORATION
(OR CASH WITH AN EQUAL VALUE)
----------
The issue price of each Structured Yield Product Exchangeable for Stock SM,
% STRYPES SM Due August 15, 1998 (each, a "STRYPES") of Merrill Lynch & Co.,
Inc. (the "Company") being offered hereby is $ , which amount is equal to the
last sale price of the common stock, par value $1.00 per share (the "MGIC
Common Stock"), of MGIC Investment Corporation, a Wisconsin corporation ("MGIC
Investment"), on , 1995, as reported on the New York Stock Exchange
Composite Tape (the "Initial Price"). The STRYPES will mature on August 15,
1998 (the "Maturity Date"). Interest on the STRYPES, at the rate of % of the
issue price per annum, is payable in cash quarterly in arrears on February 15,
May 15, August 15 and November 15, beginning November 15, 1995, and on the
Maturity Date. The STRYPES are not subject to redemption or any sinking fund
prior to maturity. The STRYPES will be unsecured obligations of the Company
ranking pari passu with all of its other unsecured and unsubordinated
indebtedness. See "Description of the STRYPES--Ranking."
On the Maturity Date, the Company will pay and discharge each STRYPES by
delivering to the holder thereof a number of shares of MGIC Common Stock (or,
at the Company's option, which may be exercised with respect to all, but not
less than all, shares of MGIC Common Stock deliverable on the Maturity Date,
cash with an equal value) determined in accordance with the following formula
(the "Payment Rate Formula"), subject to certain adjustments: (a) if the
Maturity Price is greater than or equal to $ per share of MGIC Common Stock
(the "Threshold Appreciation Price"), shares of MGIC Common Stock per
STRYPES, (b) if the Maturity Price is less than the Threshold Appreciation
Price but is greater than the Initial Price, a number of shares of MGIC Common
Stock per STRYPES so that the value thereof (determined based on the Maturity
Price) equals the Initial Price and (c) if the Maturity Price is less than or
equal to the Initial Price, one share of MGIC Common Stock per STRYPES. The
"Maturity Price" means the average Closing Price (as defined herein) per share
of MGIC Common Stock on the 20 Trading Days (as defined herein) immediately
prior to the Maturity Date. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE MATURITY DATE WILL BE EQUAL
TO OR GREATER THAN THE ISSUE PRICE OF THE STRYPES. IF THE MATURITY PRICE OF THE
MGIC COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE ON THE
MATURITY DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE STRYPES, IN WHICH
CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS. See "Description of the
STRYPES."
Reference is made to the accompanying prospectus of MGIC Investment covering
the shares of MGIC Common Stock which may be received by a holder of the
STRYPES at Maturity.
MGIC Investment is not affiliated with the Company, will not receive any of
the proceeds from the sale of the STRYPES and will have no obligations with
respect to the STRYPES.
SEE "RISK FACTORS" ON PAGE 6 OF THIS PROSPECTUS FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE STRYPES.
For a discussion of certain United States Federal income tax consequences for
holders of the STRYPES, see "Certain United States Federal Income Tax
Considerations."
The MGIC Common Stock is listed on the New York Stock Exchange ("NYSE") under
the trading symbol "MTG." The STRYPES have been approved for listing on the
NYSE, subject to official notice of issuance.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per STRYPES................................. $ $ $
- --------------------------------------------------------------------------------
Total(4).................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from , 1995 to the date of delivery.
(2) The Company, MGIC Investment and The Northwestern Mutual Life Insurance
Company have agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(3) Before deducting expenses payable by the Company estimated at $ .
(4) The Company has granted the Underwriter an option for 30 days to purchase
up to an additional 750,000 STRYPES at the initial public offering price
per STRYPES, less the underwriting discount, solely to cover over-
allotments. If such over-allotment option is exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
----------
The STRYPES are offered by the Underwriter, subject to prior sale, when, as
and if issued to and accepted by the Underwriter and subject to certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the STRYPES will be made in New York, New York, on or about July ,
1995.
This Prospectus may be used by the Underwriter in connection with offers and
sales related to market-making transactions in the STRYPES. The Underwriter may
act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale.
----------
SM Service Mark of Merrill Lynch & Co., Inc.
MERRILL LYNCH & CO.
----------
The date of this Prospectus is July , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE STRYPES AND
THE MGIC COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports, proxy and
information statements and other information concerning the Company may also
be inspected at the offices of the New York Stock Exchange, the American Stock
Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange.
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") with the Commission pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), covering the STRYPES. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits thereto, to which reference is hereby made.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Report on Form 10-Q for the period ended March 31, 1995, and
Current Reports on Form 8-K dated January 12, 1995, January 23, 1995, February
8, 1995, February 9, 1995, March 3, 1995, March 9, 1995, April 18, 1995, May
2, 1995 and May 23, 1995 filed pursuant to Section 13 of the Exchange Act, are
hereby incorporated by reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the STRYPES shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
(WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE)
OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T. RUSSO,
SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR, NEW YORK,
NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER
OF INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF
INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the information
incorporated by reference in this Prospectus and by the more detailed
information included elsewhere in this Prospectus. Unless otherwise indicated,
the information contained in this Prospectus assumes that the Underwriter's
over-allotment option is not exercised.
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its subsidiaries
and affiliates, provides investment, financing, insurance, and related services
on a global basis. Its principal subsidiary, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"), is one of the largest securities firms in the
world.
MGIC INVESTMENT CORPORATION
MGIC Investment Corporation is a holding company which, through its indirect
wholly owned subsidiary, Mortgage Guaranty Insurance Corporation, is a leading
provider of private mortgage insurance coverage in the United States to
mortgage bankers, savings institutions, commercial banks, mortgage brokers,
credit unions and other lenders. Private mortgage insurance covers residential
first mortgage loans and expands home ownership opportunities by enabling
people to purchase homes with less than 20% down payments. If the home owner
defaults, private mortgage insurance reduces and, in some instances, eliminates
the loss to the insured institution. Private mortgage insurance also
facilitates the sale of low down payment mortgage loans in the secondary
mortgage market, principally to the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation. In addition to mortgage insurance,
MGIC Investment, through other subsidiaries, provides various underwriting and
contract services related to home mortgage lending.
Reference is made to the accompanying prospectus of MGIC Investment covering
the shares of MGIC Common Stock which may be received by a holder of STRYPES on
the Maturity Date. MGIC Investment is not affiliated with the Company, will not
receive any of the proceeds from the sale of the STRYPES and will have no
obligations with respect to the STRYPES. THE PROSPECTUS OF MGIC INVESTMENT IS
BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF STRYPES
TOGETHER WITH THIS PROSPECTUS FOR CONVENIENCE OF REFERENCE ONLY. THE PROSPECTUS
OF MGIC INVESTMENT DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS, NOR IS IT
INCORPORATED BY REFERENCE HEREIN.
3
<PAGE>
THE STRYPES
Offering.................. 5,000,000 STRYPES
Issue Price............... $ per STRYPES
Maturity Date.............
August 15, 1998
Interest Rate............. % of the issue price per annum, or $ per
STRYPES per quarter, payable in cash quarterly in
arrears
Interest Payment Dates....
February 15, May 15, August 15 and November 15, be-
ginning November 15, 1995, and the Maturity Date.
Payment at Maturity.......
On the Maturity Date, the Company will pay and dis-
charge each STRYPES by delivering to the holder
thereof a number of shares of MGIC Common Stock
(or, at the Company's option, which may be exer-
cised with respect to all, but not less than all,
shares of MGIC Common Stock deliverable on the Ma-
turity Date, cash with an equal value) determined
in accordance with the following Payment Rate For-
mula, subject to certain adjustments: (a) if the
Maturity Price is greater than or equal to $ per
share of MGIC Common Stock (the "Threshold Appre-
ciation Price"), shares of MGIC Common Stock
per STRYPES, (b) if the Maturity Price is less
than the Threshold Appreciation Price but is
greater than the Initial Price, a number of shares
of MGIC Common Stock per STRYPES so that the value
thereof (determined based on the Maturity Price)
equals the Initial Price and (c) if the Maturity
Price is less than or equal to the Initial Price,
one share of MGIC Common Stock per STRYPES. The
"Maturity Price" means the average Closing Price
per share of MGIC Common Stock on the 20 Trading
Days immediately prior to the Maturity Date. AC-
CORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE
MATURITY DATE WILL BE EQUAL TO OR GREATER THAN THE
ISSUE PRICE OF THE STRYPES. IF THE MATURITY PRICE
OF THE MGIC COMMON STOCK IS LESS THAN THE INITIAL
PRICE, SUCH AMOUNT RECEIVABLE ON THE MATURITY DATE
WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE
STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES
WILL RESULT IN A LOSS. See "Description of the
STRYPES--General."
No Redemption, Sinking
Fund or Payment prior to
Maturity................. The STRYPES are not subject to redemption by the
Company prior to the Maturity Date and do not con-
tain any sinking fund or other mandatory redemp-
tion provisions. The STRYPES are not subject to
payment prior to the Maturity Date at the option
of the holder.
Ranking...................
The STRYPES will be unsecured obligations of the
Company ranking pari passu with all of its other
unsecured and unsubordinated indebtedness. See
"Description of the STRYPES--Ranking."
4
<PAGE>
Relationship to MGIC
Common Stock.............
The STRYPES will bear interest at % of the issue
price per annum, a yield substantially in excess
of the % dividend yield of MGIC Common Stock
based on the last sale price of the MGIC Common
Stock on , 1995, as reported on the NYSE Com-
posite Tape, and the current $ per share quar-
terly dividend payable on the MGIC Common Stock.
However, the opportunity for equity appreciation
afforded by an investment in the STRYPES is less
than the opportunity for equity appreciation af-
forded by a direct investment in the MGIC Common
Stock because the amount receivable by a holder of
a STRYPES on the Maturity Date will only exceed
the issue price of such STRYPES if the Maturity
Price of the MGIC Common Stock exceeds the Thresh-
old Appreciation Price (which represents an appre-
ciation of % over the Initial Price). Moreover,
holders of the STRYPES will only be entitled to
receive on the Maturity Date % (the percentage
equal to the Initial Price divided by the Thresh-
old Appreciation Price) of any appreciation of the
value of MGIC Common Stock in excess of the
Threshold Appreciation Price. Holders of the
STRYPES will not be entitled to any rights with
respect to the MGIC Common Stock (including, with-
out limitation, voting rights and rights to re-
ceive any dividends or other distributions in re-
spect thereof) unless and until such time, if any,
as the Company shall have delivered shares of MGIC
Common Stock for STRYPES on the Maturity Date and
unless the applicable record date, if any, for the
exercise of such rights occurs after such deliv-
ery.
Purchase Contract with
The Northwestern Mutual
Life Insurance Company...
The Company has entered into a contract (the "Pur-
chase Contract") to purchase from The Northwestern
Mutual Life Insurance Company ("NML") immediately
prior to the Maturity Date of the STRYPES, at an
aggregate purchase price equal to the total issue
price for the STRYPES, less the total underwriting
discount, plus an adjustment for an interest dif-
ferential factor, a number of shares of MGIC Com-
mon Stock equal to the number required by the Com-
pany to pay and discharge all of the STRYPES (in-
cluding any STRYPES issued pursuant to the over-
allotment option granted by the Company to the Un-
derwriter). See "Certain Arrangements With NML."
NML will be obligated to deliver such shares of
MGIC Common Stock pursuant to the Purchase Con-
tract only upon payment by the Company of the con-
sideration therefor. In lieu of delivering shares
of MGIC Common Stock, NML has the option, exercis-
able in its sole discretion, to require that obli-
gations under the Purchase Contract be satisfied
by a cash payment or net cash settlement based
upon the value of such number of shares of MGIC
Common Stock at the Maturity Price. Such option,
if exercised by NML, must be exercised with re-
spect to all shares of MGIC Common Stock delivera-
ble pursuant to the Purchase Contract. NML has no
obligations with respect to the STRYPES or amounts
to be paid to holders thereof, including
5
<PAGE>
any obligation to take the needs of the Company or
of holders of the STRYPES into consideration in
determining whether to deliver shares of MGIC Com-
mon Stock or cash or for any other reason. The
Purchase Contract between the Company and NML is a
commercial transaction and does not create any
rights in, or for the benefit of, any third party,
including any holder of STRYPES.
Under the Purchase Contract, the Company has agreed
to pay and discharge the STRYPES by delivering to
the holders thereof on the Maturity Date the form
of consideration that it receives from NML.
Certain United States
Federal Income Tax
Considerations......
Prospective investors in the STRYPES should be
aware that there exists uncertainty concerning the
proper United States Federal income tax character-
ization and treatment of the STRYPES. Accordingly,
prospective investors should consider the tax con-
sequences of investing in the STRYPES. See "Risk
Factors--Tax Matters" and "Certain United States
Federal Income Tax Considerations."
Global Notes.........
Upon issuance, all STRYPES will be represented by
one or more global securities deposited with, and
registered in the name of, the Securities Deposi-
tory or a nominee thereof. As a result, the Secu-
rities Depository, or its nominee, will be consid-
ered the sole owner of the STRYPES under the In-
denture. Ownership interests of actual purchasers
of STRYPES will be recorded on the records of par-
ticipants in the Securities Depository. See "De-
scription of the STRYPES--Securities Depository."
Use of Proceeds........... For general corporate purposes. The net proceeds
will be temporarily invested by the Company or ap-
plied by the Company to the reduction of short-
term indebtedness pending their application. See
"Use of Proceeds."
6
<PAGE>
RISK FACTORS
COMPARISON TO OTHER DEBT SECURITIES; RELATIONSHIP TO MGIC COMMON STOCK
The terms of the STRYPES differ from those of ordinary debt securities in
that the value of the MGIC Common Stock (or, pursuant to the option of the
Company, the amount of cash) that a holder of a STRYPES will receive on the
Maturity Date is not fixed, but is based on the Maturity Price of the MGIC
Common Stock (see "Description of the STRYPES"). THERE CAN BE NO ASSURANCE
THAT SUCH AMOUNT RECEIVABLE BY THE HOLDER ON THE MATURITY DATE WILL BE EQUAL
TO OR GREATER THAN THE ISSUE PRICE OF THE STRYPES. IF THE MATURITY PRICE OF
THE MGIC COMMON STOCK IS LESS THAN THE INITIAL PRICE, SUCH AMOUNT RECEIVABLE
ON THE MATURITY DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE STRYPES,
IN WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS. ACCORDINGLY, A
HOLDER OF STRYPES ASSUMES THE RISK THAT THE MARKET VALUE OF THE MGIC COMMON
STOCK MAY DECLINE, AND THAT SUCH DECLINE COULD BE SUBSTANTIAL. REFERENCE IS
MADE TO THE ACCOMPANYING PROSPECTUS OF MGIC INVESTMENT, INCLUDING THE
INFORMATION UNDER THE CAPTION "RISK FACTORS" THEREIN.
LIMITATIONS ON OPPORTUNITY FOR EQUITY APPRECIATION
The opportunity for equity appreciation afforded by an investment in the
STRYPES is less than the opportunity for equity appreciation afforded by a
direct investment in the MGIC Common Stock, because the amount receivable by a
holder of a STRYPES on the Maturity Date will only exceed the issue price of
such STRYPES if the Maturity Price of the MGIC Common Stock exceeds the
Threshold Appreciation Price (which represents an appreciation of % over
the Initial Price). Moreover, holders of the STRYPES will only be entitled to
receive on the Maturity Date % (the percentage equal to the Initial Price
divided by the Threshold Appreciation Price) of any appreciation of the value
of MGIC Common Stock in excess of the Threshold Appreciation Price. Because
the price of the MGIC Common Stock is subject to market fluctuations, the
value of the MGIC Common Stock (or, pursuant to the option of the Company, the
amount of cash) received by a holder of a STRYPES on the Maturity Date,
determined as described herein, may be more or less than the issue price of
the STRYPES.
FACTORS AFFECTING TRADING PRICES
The trading prices of the STRYPES in the secondary market will be directly
affected by the trading prices of the MGIC Common Stock in the secondary
market. It is impossible to predict whether the price of MGIC Common Stock
will rise or fall. Trading prices of MGIC Common Stock will be influenced by
MGIC Investment's operating results and prospects and by economic, financial
and other factors and market conditions that can affect the capital markets
generally, including the level of, and fluctuations in, the trading prices of
stocks generally and sales of substantial amounts of MGIC Common Stock in the
market subsequent to the offering of the STRYPES or the perception that such
sales could occur.
NO STOCKHOLDER RIGHTS
Holders of the STRYPES will not be entitled to any rights with respect to
the MGIC Common Stock (including, without limitation, voting rights and rights
to receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Company shall have delivered shares of MGIC
Common Stock for STRYPES on the Maturity Date and, unless the applicable
record date, if any, for the exercise of such rights occurs after such date.
For example, in the event that an amendment is proposed to the Articles of
Incorporation or By-Laws of MGIC Investment and the record date for
determining the stockholders of record entitled to vote on such amendment
occurs prior to such delivery, holders of the STRYPES will not be entitled to
vote on such amendment.
NO AFFILIATION BETWEEN THE COMPANY AND MGIC INVESTMENT
The Company has no affiliation with MGIC Investment, and MGIC Investment has
no obligations with respect to the STRYPES or amounts to be paid to holders
thereof, including any obligation to take the needs of the Company or of
holders of the STRYPES into consideration for any reason. MGIC Investment will
not receive
7
<PAGE>
any of the proceeds of the offering of the STRYPES made hereby and is not
responsible for, and has not participated in, the determination of the timing
of, prices for or quantities of the STRYPES to be issued or the determination
or calculation of the amount receivable by holders of the STRYPES at maturity.
MGIC Investment is not involved with the administration or trading of the
STRYPES and has no obligations with respect to the amount receivable by
holders of the STRYPES at maturity.
PURCHASE FROM NML
Pursuant to the Purchase Contract, the Company will purchase from NML
immediately prior to the Maturity Date of the STRYPES, at an aggregate
purchase price equal to the total issue price for the STRYPES, less the total
underwriting discount, plus an adjustment for an interest differential factor,
a number of shares of MGIC Common Stock equal to the number required by the
Company to pay and discharge all of the STRYPES (including any STRYPES issued
pursuant to the over-allotment option granted by the Company to the
Underwriter). See "Certain Arrangements With NML." NML will be obligated to
deliver such shares of MGIC Common Stock pursuant to the Purchase Contract
only upon payment by the Company of the consideration therefor. In lieu of
delivering shares of MGIC Common Stock, NML has the option, exercisable in its
sole discretion, to require that obligations under the Purchase Contract be
satisfied by a cash payment or net cash settlement based upon the value of
such number of shares of MGIC Common Stock at the Maturity Price. Such option,
if exercised by NML, must be exercised with respect to all shares of MGIC
Common Stock deliverable pursuant to the Purchase Contract. The Company has
agreed to pay and discharge the STRYPES by delivering to the holders thereof
on the Maturity Date the form of consideration that it receives from NML under
the Purchase Contract. The net proceeds from the sale of the STRYPES will be
used by the Company for general corporate purposes. See "Use of Proceeds."
The Company has no affiliation with NML, and NML has no obligations with
respect to the STRYPES or amounts to be paid to holders thereof, including any
obligation to take the needs of the Company or of holders of the STRYPES into
consideration in determining whether to deliver shares of MGIC Common Stock or
cash or for any other reason. NML is not responsible for the determination or
calculation of the amount receivable by holders of the STRYPES at maturity.
The Purchase Contract between the Company and NML is a commercial transaction
and does not create any rights in, or for the benefit of, any third party,
including any holder of STRYPES.
In the event NML does not perform under the Purchase Contract, the Company
will be required to otherwise acquire shares of MGIC Common Stock for delivery
to the holders of the STRYPES, unless it elects to exercise its option to
deliver cash with an equal value.
TAX MATTERS
Because of an absence of authority as to the proper characterization of the
STRYPES, their ultimate tax treatment is uncertain. Accordingly, no assurances
can be given that any particular characterization and treatment of the STRYPES
will be accepted by the Internal Revenue Service ("IRS") or upheld by a court.
However, it is the opinion of Brown & Wood, counsel to the Company, that the
characterization and tax treatment of the STRYPES described herein (and
described in greater detail under "Certain United States Federal Income Tax
Considerations"), while not the only reasonable characterization and tax
treatment, is based on reasonable interpretations of law currently in effect
and, even if successfully challenged by the IRS, will not result in the
imposition of penalties. The Indenture will require that any holder subject to
U.S. Federal income tax include currently in income, for U.S. Federal income
tax purposes, payments denominated as interest that are made with respect to a
STRYPES in accordance with such holder's regular method of tax accounting. The
Indenture also requires the Company and holders to treat each STRYPES for tax
purposes as a unit (a "Unit") consisting of (i) a debt instrument (the "Debt
Instrument") with a fixed principal amount unconditionally payable on the
Maturity Date equal to the issue price of the STRYPES and bearing interest at
the stated interest rate on the STRYPES and (ii) a forward purchase contract
(the "Forward Contract") pursuant to which the holder agrees to use the
principal payment due on the Debt Instrument to purchase on the Maturity Date
the MGIC Common Stock which the Company is obligated under the STRYPES to
deliver at that time (subject to the Company's right to deliver cash with an
equal value in lieu of the MGIC Common Stock). The Indenture also requires
that upon the
8
<PAGE>
acquisition of a STRYPES and upon a holder's sale or other disposition of a
STRYPES prior to the Maturity Date, the amount paid or realized by the holder
be allocated by the holder between the Debt Instrument and the Forward
Contract based upon their relative fair market values (as determined on the
date of acquisition or disposition). For these purposes, with respect to
acquisitions of STRYPES in connection with the original issuance thereof, the
Company and each holder agrees, pursuant to the terms of the Indenture, to
allocate $ of the entire initial purchase price of a STRYPES (i.e., the
issue price of a STRYPES) to the Debt Instrument and to allocate the remaining
$ of the entire initial purchase price of a STRYPES to the Forward
Contract. As previously mentioned, the appropriate character and timing of
income, gain or loss to be recognized on a STRYPES is uncertain and investors
should consult their own tax advisers concerning the application of the United
States Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the STRYPES arising
under the laws of any other taxing jurisdiction. The tax consequences of
investing in the STRYPES are described in greater detail under "Certain United
States Federal Income Tax Considerations."
DILUTION OF MGIC COMMON STOCK
The number of shares of MGIC Common Stock (or cash with an equal value) that
holders of the STRYPES are entitled to receive on the Maturity Date is subject
to adjustment for certain events arising from stock splits and combinations,
stock dividends and certain other actions of MGIC Investment that modify its
capital structure. See "Description of the STRYPES--Dilution Adjustments."
Such number of shares of MGIC Common Stock (or cash amount) to be received by
such holders on the Maturity Date will not be adjusted for other events, such
as offerings of MGIC Common Stock for cash or in connection with acquisitions.
MGIC Investment is not restricted from issuing additional MGIC Common Stock
during the term of the STRYPES and has no obligation to consider the interests
of the holders of the STRYPES for any reason. Additional issuances may
materially and adversely affect the price of the MGIC Common Stock and,
because of the relationship of the number of shares (or cash amount) to be
received on the Maturity Date to the price of the MGIC Common Stock, such
other events may adversely affect the trading price of the STRYPES.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the STRYPES will trade in the secondary
market or whether such market will be liquid or illiquid. The STRYPES are
novel securities and there is currently no secondary market for the STRYPES.
The STRYPES have been approved for listing on the NYSE, subject to official
notice of issuance. However, there can be no assurance that an active trading
market for the STRYPES will develop, that such listing will provide the
holders of the STRYPES with liquidity of investment, or that the STRYPES will
not later be delisted or that trading of the STRYPES on the NYSE will not be
suspended. In the event of a delisting or suspension of trading on the NYSE,
the Company will apply for listing of the STRYPES on another national
securities exchange or for quotation on another trading market. If the STRYPES
are not listed or traded on any securities exchange or trading market, or if
trading of the STRYPES is suspended, pricing information for the STRYPES may
be more difficult to obtain and the liquidity of the STRYPES may be adversely
affected.
HOLDING COMPANY STRUCTURE
Since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the holders of the STRYPES),
to participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that claims of the
Company itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Exchange Act
and under rules of certain exchanges and other regulatory bodies.
9
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one of
the largest securities firms in the world, is a leading broker in securities,
options contracts, and commodity and financial futures contracts; a leading
dealer in options and in corporate and municipal securities; a leading
investment banking firm that provides advice to, and raises capital for, its
clients; and an underwriter of selected insurance products. Other subsidiaries
provide financial services on a global basis similar to those of MLPF&S and
are engaged in such other activities as international banking, lending, and
providing other investment and financing services. Merrill Lynch International
Incorporated, through subsidiaries and affiliates, provides investment,
financing, and related services outside the United States and Canada. Merrill
Lynch Government Securities Inc. is a primary dealer in obligations issued or
guaranteed by the U.S. Government and by Federal agencies or
instrumentalities. Merrill Lynch Capital Services, Inc., Merrill Lynch
Derivative Products, Inc., and Merrill Lynch Capital Markets PLC are the
Company's primary derivative product dealers and enter into interest rate and
currency swaps and other derivative transactions as intermediaries and as
principals. Merrill Lynch Asset Management L.P., with its related affiliates,
is one of the largest mutual fund managers in the world and provides
investment advisory services. The Company's insurance underwriting operations
consist of the underwriting of life insurance and annuity products. Banking,
trust, and mortgage lending operations conducted through subsidiaries of the
Company include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities and
other related services.
The principal executive office of the Company is located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281; its telephone
number is (212) 449-1000.
10
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary of consolidated financial information was derived
from, and is qualified in its entirety by reference to, the financial
statements, condensed financial statements and other information and data
contained in the Company's Annual Report on Form 10-K for the year ended
December 30, 1994 and Quarterly Report on Form 10-Q for the period ended March
31, 1995 (the "Quarterly Report"). See "Incorporation of Certain Documents by
Reference." The condensed consolidated financial statements contained in the
Company's Quarterly Report are unaudited; however, in the opinion of
management of the Company, all adjustments (consisting only of normal
recurring accruals) necessary for a fair statement of the results of
operations have been included. The year-end results include 52 weeks for 1990,
1991, 1992 and 1994 and 53 weeks for 1993.
The Company conducts its business in highly volatile markets. Consequently,
the Company's results can be affected by many factors, including general
market conditions, the liquidity of secondary markets, the level and
volatility of interest rates and currency values, the valuation of securities
positions, competitive conditions, and the size, number, and timing of
transactions. In periods of unfavorable market activity, profitability can be
adversely affected because certain expenses remain relatively fixed. As a
result, net earnings and revenues can vary significantly from period to
period. Thus, interim results may not necessarily be representative of the
full year results of operations.
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN DECEMBER THREE MONTHS ENDED
---------------------------------------------------------------- -------------------------
APRIL 1, MARCH 31,
1990 1991 1992 1993 1994 1994 1995
----------- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
INFORMATION
(In thousands, except
ratios)
Revenues................ $11,147,229 $12,352,812 $ 13,412,668 $ 16,588,177 $ 18,233,091 $ 4,738,811 $ 5,203,877
Net revenues(1)......... $ 5,783,329 $ 7,246,468 $ 8,577,401 $ 10,558,230 $ 9,624,521 $ 2,831,828 $ 2,420,485
Earnings before income
taxes and cumulative
effect of changes in
accounting
principles(2).......... $ 282,328 $ 1,017,418 $ 1,621,389 $ 2,424,808 $ 1,729,604 $ 652,208 $ 378,792
Cumulative effect of
changes in accounting
principles (net of
applicable income
taxes)(2).............. -- -- $ (58,580) $ (35,420) -- -- --
Net earnings(2)......... $ 191,856 $ 696,117 $ 893,825 $ 1,358,939 $ 1,016,761 $ 371,759 $ 227,275
Ratio of earnings to
fixed charges(3)....... 1.1 1.2 1.3 1.4 1.2 1.3 1.1
BALANCE SHEET
INFORMATION
(In thousands)
Total assets(4)......... $68,129,527 $86,259,343 $107,024,173 $152,910,362 $163,749,327 $179,683,796 $176,732,993
Long-term borrowings(5). $ 6,341,559 $ 7,964,424 $ 10,871,100 $ 13,468,900 $ 14,863,383 $ 14,852,894 $ 14,484,523
Stockholders' equity.... $ 3,225,430 $ 3,818,088 $ 4,569,104 $ 5,485,913 $ 5,817,545 $ 5,603,067 $ 5,704,148
</TABLE>
- --------
(1) Net revenues are revenues net of interest expense.
(2) Net earnings for 1992 were reduced by $58,580,000 to reflect the adoption
of Statement of Financial Accounting Standards ("SFAS") No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, and
SFAS No. 109, Accounting for Income Taxes. Net earnings for 1993 were
reduced by $35,420,000 to reflect the adoption of SFAS No. 112, Employers'
Accounting for Postemployment Benefits.
(3) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs and
that portion of rentals estimated to be representative of the interest
factor.
(4) In 1994, the Company adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts,
and FASB Interpretation No. 41, Offsetting of Amounts Related to Certain
Repurchase and Reverse Repurchase Agreements, which increased assets and
liabilities at December 30, 1994 by approximately $8,500,000,000.
(5) To finance its diverse activities, the Company and certain of its
subsidiaries borrow substantial amounts of short-term funds on a regular
basis. Although the amount of short-term borrowings significantly varies
with the level of general business activity, on March 31, 1995,
$538,157,000 of bank loans and $14,821,594,000 of commercial paper were
outstanding. In addition, certain of the Company's subsidiaries lend
securities and enter into repurchase agreements to obtain financing. At
March 31, 1995, cash deposits for securities loaned and securities sold
under agreements to repurchase amounted to $5,406,241,000 and
$57,110,193,000, respectively. From April 1, 1995 to June 19, 1995, long-
term borrowings, net of repayments and repurchases, increased by
approximately $1,139,857,000.
11
<PAGE>
FISCAL YEAR 1994
Financial markets, strong from 1991 through the first six weeks of 1994,
changed significantly after inflationary fears prompted the Federal Reserve to
increase short-term interest rates in February 1994. As the U.S. economy
continued to expand, the Federal Reserve acted to further curb inflation and
to moderate growth by increasing short-term interest rates five additional
times during the year. The combination of rising interest rates, a falling
U.S. dollar, unsettled global stock, bond, and currency markets, reduced
foreign investment in U.S. financial markets, and overall investor caution
contributed to lower earnings for most U.S. securities firms. These conditions
affected the Company's 1994 fourth quarter and full year results. Net earnings
for the 1994 fourth quarter were $161.6 million, down 30% from the 1994 third
quarter and down 53% from the 1993 fourth quarter.
Net earnings for 1994 were $1,016.8 million, down 25% from record 1993
earnings of $1,358.9 million. Net earnings for 1993 included a $35.4 million
cumulative effect charge (net of $25.1 million of applicable income tax
benefits) related to the adoption of Statement of Financial Accounting
Standards No. 112, Employers' Accounting for Postemployment Benefits. Earnings
for 1993 before the cumulative effect of the change in accounting principle
were $1,394.4 million. Earnings per common share in 1994 were $4.75 primary
and $4.74 fully diluted, compared with $5.98 primary and $5.95 fully diluted
($6.14 primary and $6.11 fully diluted before the accounting change) in 1993.
As previously reported, 1993 results included a non-recurring pretax lease
charge totaling $103.0 million ($59.7 million after income taxes) related to
the Company's decision not to occupy certain space at the World Financial
Center Headquarters ("Headquarters") facility. This space was sublet in 1994.
Total revenues were $18,233 million, up 10% from 1993. Net revenues
(revenues after interest expense) totaled $9,625 million in 1994, down 9% from
1993.
Commission revenues were $2,871 million, virtually unchanged from $2,894
million in 1993. Higher commission revenues from mutual funds and commodity
transactions were offset by lower revenues from money market instruments,
particularly medium-term notes, and listed securities transactions. Sales of
mutual funds, particularly front-end funds, declined as investors were less
active due to uncertain markets and rising interest rates. For the first time
since 1974, both stock and bond funds fell in value industrywide, on average,
in the same year. Distribution fees from deferred charge funds benefited from
strong mutual fund sales in prior periods, while redemption fees increased as
investors repositioned their portfolios primarily from fixed-income funds to
stock and money market funds. Commissions on listed securities transactions
decreased due to a decline in the relative amount of business by retail
clients versus institutional clients. Other commission revenues declined
principally as a result of lower commissions from money market instruments,
partially offset by higher revenues from commodity transactions.
Interest and dividend revenues increased 35% to $9,578 million from $7,099
million in 1993. Interest expense, which includes dividend expense, rose 43%
to $8,609 million from $6,030 million in 1993. Net interest and dividend
profit decreased 9% to $969 million as a significant increase in short-term
interest rates, year over year, led to a substantial flattening of the yield
curve. The change in the yield curve, the relationship between interest rates
and maturities, resulted from short-term interest rates rising faster than
long-term interest rates in 1994. As a result, interest spreads declined,
while financing and hedging costs increased from 1993.
Principal transactions revenues fell 20% to $2,335 million from the 1993
record $2,920 million due to rising interest rates, a declining U.S. dollar,
and volatile world financial markets. Revenues from taxable fixed-income
securities, equities and equity derivatives, and foreign exchange and
commodities decreased, while interest rate and currency swaps, and municipal
securities revenues increased. Taxable fixed-income revenues declined 52% to
$462 million as higher interest rates, wider credit spreads, and uncertainty
in emerging markets led to reduced demand and lower inventory values. Equities
and equity derivatives trading revenues decreased 28% to $627 million,
reflecting lower trading results in virtually all categories, including a loss
in convertible securities. Foreign exchange and commodities revenues, in the
aggregate, declined 31% to $109 million. Weakness in the
12
<PAGE>
U.S. dollar versus other major currencies depressed foreign exchange trading,
while commodities trading revenues benefited from increased volume. Interest
rate and currency swaps revenues advanced 24% to $749 million reflecting
higher revenues from U.S. dollar-denominated swap trading activities,
particularly those related to structured financing transactions. Municipal
securities trading revenues increased 20% to $388 million due to strong retail
investor demand for tax-exempt investments.
Investment banking revenues were $1,239 million, down 32% from $1,831
million in 1993 due primarily to the effects of rising interest rates and
reduced demand. Underwriting revenues declined in almost all categories, with
significant decreases in equities, corporate bonds and preferred stock, and
convertible securities. Strategic services revenues, which include fees for
debt restructuring, merger and acquisition activity, and other advisory
services, benefited from increased merger and acquisition advisory assignments
in various industries.
Asset management and portfolio services fees rose 12% from $1,558 million in
1993 to a record $1,739 million. Asset management fees advanced due primarily
to an increase in stock funds under management. Portfolio service fees
advanced due to the continued growth in the number of Asset Power(R) accounts,
a product with fees and transaction limits based on asset levels, and
increased revenues from the ML Consults(R) product.
Other revenues were $471 million, up 65% from $285 million in 1993. The
increase in other revenues was attributable to net realized investment gains
related to merchant banking activities of $81 million, compared with
unrealized losses of $133 million in 1993.
Non-interest expenses were $7,895 million, down 3% from $8,133 million in
the year-ago period. Excluding the 1993 non-recurring lease charge totaling
$103.0 million, non-interest expenses declined 2%.
Compensation and benefits expense, which represented approximately 63% of
total non-interest expenses, declined 6% due principally to lower incentive
and production-related compensation. Compensation and benefits expense, as a
percentage of net revenues, was 51.5% in 1994, compared with 49.8% in 1993.
Occupancy costs declined 24% (7% excluding the 1993 non-recurring lease
charge) benefiting from continued relocation of support staff to lower-cost
facilities and reduced space requirements at the Headquarters facility. Other
facilities costs, which include communications and equipment rental, and
depreciation and amortization, were up 9% due to increased use of market data,
news, and statistical services and higher depreciation expense from the
acquisition of technology-related equipment.
Advertising and market development expenses were down 1% with discretionary
costs decreasing as business conditions became less favorable. Lower sales
promotion and a reduction in advertising campaigns were partially offset by
increased travel related to international business activities. Professional
fees increased 26% due primarily to the use of system and management
consultants to upgrade technology and processing capabilities in trading,
credit, and customer services, as well as higher legal fees. Brokerage,
clearing, and exchange fees increased 20% reflecting higher international
equity volume and expanded risk management activities related to volatile
global market conditions. Other expenses increased 1% from 1993, due to an
increase in office supplies and postage costs.
Income tax expense totaled $713 million in 1994, down 31% from $1,030
million in 1993. The effective tax rate was 41.2% in 1994 versus 42.5% in 1993
as a result of lower state income taxes.
The Company's Annual Report on Form 10-K for the year ended December 30,
1994 describes an action commenced against the Company by Orange County,
California (the "County") and the Orange County Investment Pools (the
"Pools"). See "Incorporation of Certain Documents by Reference." The County
and the Pools seek relief in excess of $2 billion in connection with various
securities transactions between the County and/or the Pools and the Company
and its subsidiaries. Other actions have also been commenced against the
Company and its subsidiaries arising out of the Company's dealings with the
County Treasurer and the Pools.
13
<PAGE>
The Company will vigorously contest these actions and believes it has
meritorious defenses. Although the ultimate outcome of these actions cannot be
ascertained at this time and the results of legal proceedings cannot be
predicted with certainty, it is the opinion of management that the resolution
of these actions will not have a material adverse effect on the consolidated
financial condition or results of operations of the Company for the year ended
December 30, 1994.
The Company has also received inquiries from various governmental entities
examining the underlying events and is cooperating with these inquiries.
CERTAIN BALANCE SHEET INFORMATION AS OF DECEMBER 30, 1994
On January 1, 1994, the Company adopted Financial Accounting Standards Board
Interpretation No. 39 ("Interpretation No. 39"), Offsetting of Amounts Related
to Certain Contracts. Interpretation No. 39 affects the financial statement
presentation of balances related to swap, forward, and other similar exchange
or conditional type contracts, and unconditional type contracts. To offset
unconditional contracts, such as resale and repurchase agreements, net cash
settlement of the related receivable and payable balances is also required by
Interpretation No. 39, as modified by Interpretation No. 41, Offsetting of
Amounts Related to Certain Repurchase and Reverse Repurchase Agreements. Prior
to the adoption of these Interpretations, the Company followed industry
practice in reporting balances related to certain types of contracts on a net
basis. Unrealized gains and losses for swap, forward, and other similar
contracts were reported net on the balance sheet by contract type, while
certain receivables and payables related to resale and repurchase agreements
were reported net by counterparty. The effect of these Interpretations
increased assets and liabilities at December 30, 1994 by approximately $8.5
billion.
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its market-making,
investment banking, and derivative structuring activities. These activities
are subject to risks related to the creditworthiness of the issuers and the
liquidity of the market for such securities, in addition to the usual risks
associated with investing in, extending credit, underwriting, and trading in
investment grade instruments.
At December 30, 1994, the fair value of long and short non-investment grade
trading inventories amounted to $3,309 million and $456 million, respectively,
and in the aggregate (i.e., the sum of long and short trading inventories)
represented 4.3% of aggregate consolidated trading inventories.
At December 30, 1994, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $257 million
(excluding unutilized revolving lines of credit and other lending commitments
of $50 million), consisting primarily of senior term and subordinated
financings to 35 medium-sized corporations. At December 30, 1994, the Company
had no bridge loans outstanding. Loans to highly leveraged corporations are
carried at unpaid principal balance less a reserve for estimated losses. The
allowance for loan losses is estimated based on a review of each loan, and
consideration of economic, market, and credit conditions. Direct equity
investments made in conjunction with the Company's investment and merchant
banking activities aggregated $289 million at December 30, 1994, representing
investments in 80 enterprises. Equity investments in privately-held
corporations for which sale is restricted by government or contractual
requirements are carried at the lower of cost or estimated net realizable
value. At December 30, 1994, the Company held interests in partnerships,
totaling $93 million (recorded on the cost basis), that invest in highly
leveraged transactions and non-investment grade securities. Prior to July 1,
1994, the Company had a co-investment arrangement to enter into direct equity
investments. At December 30, 1994, the Company also committed to invest an
additional $80 million in partnerships that invest in leveraged transactions.
The Company's insurance subsidiaries hold non-investment grade securities.
As a percentage of total insurance investments, non-investment grade
securities were 5.5% at December 30, 1994. Non-investment grade
14
<PAGE>
securities of insurance subsidiaries were classified as available-for-sale and
were carried at fair value at December 30, 1994.
At December 30, 1994, the largest non-investment grade concentration
consisted of various issues of a South American sovereign totaling $235
million, of which $60 million represented on-balance-sheet hedges for off-
balance-sheet instruments. No one industry sector accounted for more than 21%
of total non-investment grade positions. At December 30, 1994, the Company
held an aggregate carrying value of $292 million in debt and equity securities
of issuers in various stages of bankruptcy proceedings. Approximately 71% of
this amount resulted from the Company's market-making activities in such
securities.
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1995
Financial markets, which steadily weakened throughout 1994, improved in the
first quarter of 1995 on the prospects of a slowing U.S. economy, relatively
stable interest rates, and heightened investor activity. Net earnings were
$227 million in the 1995 first quarter, down 39% from the record $372 million
in the 1994 first quarter, but up 41% from $162 million in the 1994 fourth
quarter. Total revenues in the 1995 first quarter were $5,204 million, up 10%
and 16% from the 1994 first and fourth quarters, respectively. Net revenues in
the 1995 first quarter were $2,420 million, down 15% from the 1994 first
quarter, but up 16% from the 1994 fourth quarter. Non-interest expenses were
$2,042 million, down 6% from the 1994 first quarter, but up 11% from the 1994
fourth quarter.
Commission revenues were $685 million, down 21% from the 1994 first quarter,
primarily as a result of lower mutual fund and listed securities transactions
revenues. Mutual fund commissions were affected by lower volumes due to
declines in value experienced by most stock and bond mutual funds throughout
1994. Commission on listed securities transactions also decreased, primarily
reflecting a change in the mix of transactions between institutional and
retail clients.
Interest and dividend revenues rose 38% from the 1994 first quarter to
$3,029 million. Interest expense, which includes dividend expense, increased
46% to $2,783 million. Net interest profit declined 16% to $246 million as a
result of a significant increase in short-term interest rates, quarter over
quarter, and the continued flattening of the yield curve, which is the
difference between short-term and long-term interest rates. As a result,
interest spreads declined, while financing and hedging costs increased from
the 1994 first quarter.
Principal transactions revenues increased 1% from the first quarter of 1994
to $675 million. Taxable fixed-income trading revenues increased as a result
of higher revenues from corporate bonds and preferred stock and money market
instruments. Trading results were negatively affected by higher interest
rates, leading to a modest loss in mortgage-backed products and lower revenues
from U.S. Government and agencies securities. Net trading results from
mortgage-backed products were positive, however, when combined with related
net interest income. Revenues from interest rate and currency swaps increased
due to higher trading revenues from non-U.S. dollar and U.S. dollar
denominated swap transactions. Municipal securities revenues advanced due to
continued demand for tax-exempt investments. Equities and equity derivatives
trading revenues decreased primarily as a result of lower revenues from
international equities. Foreign exchange and commodities trading revenues
decreased due primarily to lower commodity trading volume.
Investment banking revenues were $248 million, down 44% from the first
quarter of 1994, as domestic and global underwriting volumes industrywide
declined 50% and 44%, respectively, compared to volumes in the 1994 first
quarter. Underwriting activity continued at low levels as relatively higher
interest rates and increased cash flows from strong corporate earnings
continued to decrease demand for debt and equity issuances. Lower underwriting
revenues were reported in most categories, including equities, high yield
securities, and corporate debt and preferred stock. Strategic services
revenues, which include merger and acquisition fees and advisory fees,
benefited from increased merger and acquisition advisory assignments in
various industries.
15
<PAGE>
Asset management and portfolio service fees increased 1% from the 1994 first
quarter to $448 million principally as a result of increased fees earned from
certain mutual fund investor services, variable annuity products, and asset
management activities. Other revenues rose 1% from the 1994 first quarter to
$117 million, reflecting higher income from partnership investments partially
offset by net losses on certain other investments.
Non-interest expenses were $2,042 million, down 6% from the 1994 first
quarter. Compensation and benefits expenses, which represented approximately
62% on non-interest expenses, decreased 11% from the 1994 first quarter, due
primarily to lower levels of variable incentive compensation. Compensation and
benefits expense as a percentage of net revenues was 52.5% in the first
quarter of 1995, compared with 50.5% in the year-ago period.
Occupancy costs decreased 3% from the 1994 first quarter, benefiting from
continued relocation of support staff to lower cost facilities and reduced
space requirements at the headquarters facility. Other facilities-related
costs, which include communications and equipment rental expense and
depreciation and amortization expense, rose 11% primarily due to increased
usage of market information services, as well as higher depreciation expense
from the purchase of technology-related equipment over the past year.
Advertising and market development expenses decreased 12% from the 1994
first quarter due to lower discretionary travel costs and reduced production-
related recognition costs. Professional fees increased 5% from the year-ago
quarter, due primarily to higher legal fees, partially offset by lower systems
and management consulting fees. Brokerage, clearing, and exchange fees
decreased 3% from the 1994 first quarter as a result of lower commodity
exchange fees related to reduced trading volume. Other expenses increased 9%
from the 1994 first quarter due primarily to a $26 million charge for the
write-off of an asset related to a technology contract.
Income tax expense totaled $152 million in the 1995 first quarter. The
effective tax rate in the 1995 first quarter was 40.0%, compared with 43.0% in
the year-ago period. The decrease in the effective tax rate was attributable
to lower state income taxes and higher tax-exempt interest and dividend
income.
CERTAIN BALANCE SHEET INFORMATION AS OF MARCH 31, 1995
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market-making, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers of, and the
liquidity of the market for, such securities, in addition to the usual risks
associated with investing in, financing, underwriting, and trading in
investment grade instruments.
At March 31, 1995, the fair value of long and short non-investment grade
trading inventories amounted to $3,446 million and $471 million, respectively,
and in the aggregate (i.e. the sum of long and short trading inventories),
represented 4.1% of aggregate consolidated trading inventories.
At March 31, 1995, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $225 million
(excluding unutilized revolving lines of credit and other lending commitments
of $45 million), consisting primarily of senior term and subordinated
financings to 34 medium-sized corporations. Subsequent to March 31, 1995, the
Company extended financing to a non-investment grade counterparty totaling $15
million. At March 31, 1995, the Company had no bridge loans outstanding. Loans
to highly leveraged corporations are carried at unpaid principal balances less
a reserve for estimated losses. The allowance for loan losses is estimated
based on a review of each loan, and consideration of economic, market, and
credit conditions. Direct equity investments made in conjunction with the
Company's investment and merchant banking activities aggregated $261 million
at March 31, 1995, representing investments in 76 enterprises. Equity
investments in privately-held companies for which sale is restricted by
government or
16
<PAGE>
contractual requirements are carried at the lower of cost or estimated net
realizable value. At March 31, 1995, the Company held interests in
partnerships, totaling $102 million (recorded on the cost basis), that invest
in highly leveraged transactions and non-investment grade securities. At March
31, 1995, the Company also committed to invest an additional $91 million in
partnerships that invest in leveraged transactions.
The Company's insurance subsidiaries hold non-investment grade securities.
As a percentage of total insurance investments, non-investment grade
securities were 4.5% at March 31, 1995. Non-investment grade securities of
insurance subsidiaries are classified as available-for-sale and are carried at
fair value.
At March 31, 1995, the largest non-investment grade concentration consisted
of government and corporate obligations of a Latin American sovereign totaling
$307 million, of which $38 million represented on-balance-sheet hedges for
off-balance-sheet financial instruments. No one industry sector accounted for
more than 23% of total non-investment grade positions. At March 31, 1995, the
Company held an aggregate carrying value of $227 million in debt and equity
securities of issuers in various stages of bankruptcy proceedings or in
default, of which 75% of this amount resulted from the Company's market-making
activities in such securities.
MGIC INVESTMENT CORPORATION
MGIC Investment Corporation is a holding company which, through its indirect
wholly owned subsidiary, Mortgage Guaranty Insurance Corporation, is a leading
provider of private mortgage insurance coverage in the United States to
mortgage bankers, savings institutions, commercial banks, mortgage brokers,
credit unions and other lenders. Private mortgage insurance covers residential
first mortgage loans and expands home ownership opportunities by enabling
people to purchase homes with less than 20% down payments. If the home owner
defaults, private mortgage insurance reduces and, in some instances,
eliminates the loss to the insured institution. Private mortgage insurance
also facilitates the sale of low down payment mortgage loans in the secondary
mortgage market, principally to the Federal National Mortgage Association and
the Federal Home Loan Mortgage Corporation. In addition to mortgage insurance,
MGIC Investment, through other subsidiaries, provides various underwriting and
contract services related to home mortgage lending.
MGIC Investment is subject to the informational requirements of the Exchange
Act. Accordingly, MGIC Investment files reports, proxy and information
statements and other information with the Commission. Copies of such material
can be inspected and copied at the public reference facilities maintained by
the Commission at the addresses specified under "Available Information."
Reports, proxy and information statements and other information concerning
MGIC Investment may also be inspected at the offices of the NYSE.
THE COMPANY IS NOT AFFILIATED WITH MGIC INVESTMENT, AND MGIC INVESTMENT HAS
NO OBLIGATIONS WITH RESPECT TO THE STRYPES. THIS PROSPECTUS RELATES ONLY TO
THE STRYPES OFFERED HEREBY AND DOES NOT RELATE TO MGIC INVESTMENT OR THE MGIC
COMMON STOCK. MGIC INVESTMENT HAS FILED A REGISTRATION STATEMENT ON FORM S-3
WITH THE COMMISSION COVERING THE SHARES OF MGIC COMMON STOCK THAT MAY BE
RECEIVED BY A HOLDER OF STRYPES ON THE MATURITY DATE. THE PROSPECTUS OF MGIC
INVESTMENT (THE "MGIC PROSPECTUS") CONSTITUTING A PART OF SUCH REGISTRATION
STATEMENT INCLUDES INFORMATION RELATING TO MGIC INVESTMENT AND THE MGIC COMMON
STOCK, INCLUDING CERTAIN RISK FACTORS RELEVANT TO AN INVESTMENT IN MGIC COMMON
STOCK. THE MGIC PROSPECTUS IS BEING ATTACHED HERETO AND DELIVERED TO
PROSPECTIVE PURCHASERS OF STRYPES TOGETHER WITH THIS PROSPECTUS FOR
CONVENIENCE OF REFERENCE ONLY. THE MGIC PROSPECTUS DOES NOT CONSTITUTE A PART
OF THIS PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN.
17
<PAGE>
PRICE RANGE OF MGIC COMMON STOCK AND DIVIDENDS
MGIC Common Stock is listed on the NYSE under the trading symbol "MTG." The
following table sets forth the high and low sales prices of the MGIC Common
Stock for the periods indicated as reported on the NYSE Composite Tape and the
cash dividends per share of MGIC Common Stock paid during such periods. Data
reflected in the table for periods prior to MGIC Investment's 100% stock
dividend paid in December 1993 have been adjusted to reflect such stock
dividend.
The future payment of cash dividends is subject to the discretion of the
Board of Directors of MGIC Investment and will be dependent on MGIC
Investment's results of operations, financial condition, cash requirements and
other relevant factors. MGIC Investment is a holding company whose principal
source of cash flow is dividends from its subsidiaries, including Mortgage
Guaranty Insurance Corporation.
<TABLE>
<CAPTION>
DIVIDENDS
PERIOD HIGH LOW PER SHARE
- ------ ------- ------- ---------
<S> <C> <C> <C>
1993:
First Quarter....................................... $30.375 $24.750 $.035
Second Quarter...................................... 29.813 26.563 .035
Third Quarter....................................... 35.688 28.438 .035
Fourth Quarter...................................... 35.375 28.125 .040
1994:
First Quarter....................................... $32.875 $27.500 $.040
Second Quarter...................................... 31.500 25.000 .040
Third Quarter....................................... 31.125 26.125 .040
Fourth Quarter...................................... 34.250 28.500 .040
1995:
First Quarter....................................... $42.375 $32.750 $.040
Second Quarter...................................... 52.250 40.375 .040
Third Quarter (through July 7, 1995)................ 50.000 46.125 --
</TABLE>
On July 7, 1995, the last reported sale price of the MGIC Common Stock on
the NYSE Composite Tape was $49.75 per share.
The Company makes no representation as to the amount of dividends, if any,
that MGIC Investment will pay in the future. In any event, holders of STRYPES
will not be entitled to receive any dividends that may be payable on MGIC
Common Stock until such time as the Company, if it so elects, delivers MGIC
Common Stock at the Maturity Date of the STRYPES, and then only with respect
to dividends having a record date on or after the date of delivery of such
MGIC Common Stock. See "Description of the STRYPES."
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the STRYPES for
general corporate purposes. Such uses may include the funding of investments
in, or extensions of credit to, its subsidiaries, the funding of assets held
by the Company or its subsidiaries, including securities inventories, customer
receivables and loans (including business loans, home equity loans, and loans
in connection with investment banking-related merger and acquisition
activities), and the refunding of maturing indebtedness. The precise amount
and timing of investments in, and extensions of credit to, its subsidiaries
will depend upon their funding requirements and the availability of other
funds to the Company and its subsidiaries. Pending such applications, the net
proceeds will be temporarily invested or applied to the reduction of short-
term indebtedness. Management of the Company expects that it will, on a
recurrent basis, engage in additional financings as the need arises to finance
the growth of the Company or to lengthen the average maturity of its
borrowings. To the extent that STRYPES being purchased for resale by MLPF&S
are not resold, the aggregate proceeds to the Company and its subsidiaries
would be reduced.
See "Certain Arrangements With NML" for a discussion of the Company's
obligations under the Purchase Contract.
18
<PAGE>
DESCRIPTION OF THE STRYPES
The STRYPES are a series of Senior Debt Securities to be issued under an
indenture, dated as of April 1, 1983 and restated as of April 1, 1987, as
amended and supplemented as of , 1995 (the indenture dated as of April 1,
1983 and restated as of April 1, 1987, as amended and supplemented from time
to time, the "Indenture") between the Company and Chemical Bank (successor by
merger to Manufacturers Hanover Trust Company), as trustee (the "Trustee").
The following summary of certain provisions of the Indenture does not purport
to be complete and is qualified in its entirety by reference to the Indenture,
a copy of which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part. All capitalized terms not otherwise defined herein
have the meanings specified in the Indenture. Whenever defined terms of the
Indenture are referred to herein, such defined terms are incorporated by
reference herein.
GENERAL
The aggregate number of STRYPES to be issued under the Indenture will be
limited to 5,000,000, plus such additional number of STRYPES as may be issued
pursuant to the over-allotment option granted by the Company to the
Underwriter. See "Underwriting." No fractional STRYPES will be issued.
Each STRYPES, which will be issued at a price of $ , will bear interest
at the rate of % of the issue price per annum (or $ per annum) from
, 1995, or from the most recent Interest Payment Date to which interest has
been paid or provided for until the Maturity Date or such earlier date on
which the issue price of such STRYPES is repaid pursuant to the terms thereof.
Interest on the STRYPES will be payable in cash quarterly in arrears on
February 15, May 15, August 15 and November 15, commencing November 15, 1995,
and on the Maturity Date (each, an "Interest Payment Date"), to the persons in
whose names the STRYPES are registered at the close of business on the last
day (whether or not a Business Day) of the calendar month immediately
preceding such Interest Payment Date. Interest on the STRYPES will be computed
on the basis of a 360-day year of twelve 30-day months. If an Interest Payment
Date falls on a day that is not a Business Day, the interest payment to be
made on such Interest Payment Date will be made on the next succeeding
Business Day with the same force and effect as if made on such Interest
Payment Date, and no additional interest will accrue as a result of such
delayed payment.
The STRYPES will mature on August 15, 1998. On the Maturity Date, the
Company will pay and discharge each STRYPES by delivering to the holder
thereof a number of shares (such number of shares being hereinafter referred
to as the "Payment Rate") of MGIC Common Stock (or, at the Company's option,
which may be exercised with respect to all, but not less than all, shares of
all MGIC Common Stock deliverable on the Maturity Date, cash with an equal
value) determined in accordance with the Payment Rate Formula. The "Payment
Rate Formula" is, subject to adjustment as a result of certain dilution
events: the Payment Rate equals (a) if the Maturity Price (as defined below)
per share of MGIC Common Stock is greater than or equal to the Threshold
Appreciation Price, shares of MGIC Common Stock per STRYPES, (b) if the
Maturity Price is less than the Threshold Appreciation Price but is greater
than the Initial Price, a number of shares of MGIC Common Stock per STRYPES so
that the value thereof (determined based on the Maturity Price) is equal to
the Initial Price and (c) if the Maturity Price is less than or equal to the
Initial Price, one share of MGIC Common Stock per STRYPES. ACCORDINGLY, THERE
CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON
THE MATURITY DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE OF THE
STRYPES. IF THE MATURITY PRICE OF THE MGIC COMMON STOCK IS LESS THAN THE
INITIAL PRICE, SUCH AMOUNT RECEIVABLE ON THE MATURITY DATE WILL BE LESS THAN
THE ISSUE PRICE PAID FOR THE STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES
WILL RESULT IN A LOSS. The numbers of shares of MGIC Common Stock per STRYPES
specified in clauses (a) and (c) of the Payment Rate Formula are hereinafter
referred to as the "Share Components."
Notwithstanding the foregoing, the Company may, at its option, in lieu of
delivering shares of MGIC Common Stock, deliver cash in an amount equal to the
value of such number of shares of MGIC Common Stock
19
<PAGE>
at the Maturity Price, subject to the Company's agreement contained in the
Purchase Contract to deliver on the Maturity Date the form of consideration
that it receives from NML. Such option, if exercised by the Company, must be
exercised with respect to all shares of MGIC Common Stock otherwise deliverable
on the Maturity Date in payment of all outstanding STRYPES. On or prior to the
fourth Business Day prior to the Maturity Date, the Company will notify the
Trustee and publish a notice in The Wall Street Journal or another daily
newspaper of national circulation stating whether the STRYPES will be paid and
discharged with shares of MGIC Common Stock or cash. At the time such notice is
published, the Maturity Price will not have been determined. If the Company
elects to deliver shares of MGIC Common Stock, holders of the STRYPES will be
responsible for the payment of any and all brokerage costs upon their
subsequent sale of such stock.
The "Maturity Price" is defined as the average Closing Price per share of
MGIC Common Stock on the 20 Trading Days immediately prior to, but not
including, the Maturity Date. The "Closing Price" of any security on any date
of determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of such security on the NYSE on such
date or, if such security is not listed for trading on the NYSE on any such
date, as reported in the composite transactions for the principal United States
securities exchange on which such security is so listed, or if such security is
not so listed on a United States national or regional securities exchange, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System, or, if such security is not so reported, the last quoted bid
price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of such security on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. In the event that the Payment Rate is adjusted as
described under "--Dilution Adjustments" below, the Maturity Price is subject
to adjustment to reflect the average Closing Price per share of MGIC Common
Stock on a pre-adjusted basis. A "Trading Day" is defined as a day on which the
security the Closing Price of which is being determined (A) is not suspended
from trading on any national or regional securities exchange or association or
over-the-counter market at the close of business and (B) has traded at least
once on the national or regional securities exchange or association or over-
the-counter market that is the primary market for the trading of such security.
For illustrative purposes only, the following chart shows the number of
shares of MGIC Common Stock or the amount of cash that a holder of STRYPES
would receive for each STRYPES at various Maturity Prices. The table assumes
that there will be no dilution adjustments to the Payment Rate Formula as
described below. There can be no assurance that the Maturity Price will be
within the range set forth below. Given the Initial Price of $ and the
Threshold Appreciation Price of $ , a STRYPES holder would receive on the
Maturity Date the following number of shares of MGIC Common Stock or amount of
cash (if the Company elects to pay and discharge the STRYPES with cash) per
STRYPES:
<TABLE>
<CAPTION>
NUMBER OF
MATURITY PRICE SHARES OF
OF MGIC MGIC
COMMON STOCK COMMON STOCK AMOUNT OF CASH
-------------- ------------ --------------
<S> <C> <C>
$ $
</TABLE>
DILUTION ADJUSTMENTS
The Payment Rate Formula is subject to adjustment if MGIC Investment shall:
(i) pay a stock dividend or make a distribution with respect to MGIC Common
Stock in shares of such stock; (ii) subdivide or split the
20
<PAGE>
outstanding shares of MGIC Common Stock into a greater number of shares; (iii)
combine the outstanding shares of MGIC Common Stock into a smaller number of
shares; (iv) issue by reclassification of shares of MGIC Common Stock any
shares of common stock of MGIC Investment; (v) issue rights or warrants to all
holders of MGIC Common Stock entitling them to subscribe for or purchase
shares of MGIC Common Stock at a price per share less than the then current
market price of the MGIC Common Stock (other than rights to purchase MGIC
Common Stock pursuant to a plan for the reinvestment of dividends or
interest); or (vi) pay a dividend or make a distribution to all holders of
MGIC Common Stock of evidences of its indebtedness or other assets (excluding
any stock dividends or distributions referred to in clause (i) above or any
cash dividends other than any Extraordinary Cash Dividends (as defined below))
or issue to all holders of MGIC Common Stock rights or warrants to subscribe
for or purchase any of its securities (other than those referred to in clause
(v) above). In the case of the events referred to in clauses (i), (ii), (iii)
and (iv) above, the Payment Rate Formula shall be adjusted so that each holder
of any STRYPES shall thereafter be entitled to receive, upon payment and
discharge of such STRYPES on the Maturity Date, the number of shares of MGIC
Common Stock which such holder would have owned or been entitled to receive
immediately following any event described above had such STRYPES been paid and
discharged immediately prior to such event or any record date with respect
thereto. Nevertheless, the Maturity Price shall equal the average Closing
Price per share of MGIC Common Stock on the 20 Trading Days immediately prior
to, but not including, the Maturity Date. In the case of the event referred to
in clause (v) above, the Payment Rate Formula shall be adjusted by multiplying
each of the Share Components in the Payment Rate Formula in effect immediately
prior to the date of issuance of the rights or warrants referred to in clause
(v) above, by a fraction, of which the numerator shall be the number of shares
of MGIC Common Stock outstanding on the date of issuance of such rights or
warrants, immediately prior to such issuance, plus the number of additional
shares of MGIC Common Stock offered for subscription or purchase pursuant to
such rights or warrants, and of which the denominator shall be the number of
shares of MGIC Common Stock outstanding on the date of issuance of such rights
or warrants, immediately prior to such issuance, plus the number of additional
shares of MGIC Common Stock which the aggregate offering price of the total
number of shares of MGIC Common Stock so offered for subscription or purchase
pursuant to such rights or warrants would purchase at the market price
(determined as the average Closing Price per share of MGIC Common Stock on the
20 Trading Days immediately prior to the date such rights or warrants are
issued), which shall be determined by multiplying such total number of shares
by the exercise price of such rights or warrants and dividing the product so
obtained by such market price. To the extent that shares of MGIC Common Stock
are not delivered after the expiration of such rights or warrants, the Payment
Rate Formula shall be readjusted to the Payment Rate Formula which would then
be in effect had such adjustments for the issuance of such rights or warrants
been made upon the basis of delivery of only the number of shares of MGIC
Common Stock actually delivered. In the case of the event referred to in
clause (vi) above, the Payment Rate Formula shall be adjusted by multiplying
each of the Share Components in the Payment Rate Formula in effect on the
record date, by a fraction of which the numerator shall be the market price
per share of the MGIC Common Stock on the record date for the determination of
stockholders entitled to receive the dividend or distribution referred to in
clause (vi) above (such market price being determined as the average Closing
Price per share of MGIC Common Stock on the 20 Trading Days immediately prior
to such record date), and of which the denominator shall be such market price
per share of MGIC Common Stock less the fair market value (as determined by
the Board of Directors of the Company, whose determination shall be
conclusive, and described in a resolution adopted with respect thereto) as of
such record date of the portion of the assets or evidences of indebtedness so
distributed or of such subscription rights or warrants applicable to one share
of MGIC Common Stock. An "Extraordinary Cash Dividend" means, with respect to
any consecutive 12-month period, all cash dividends on the MGIC Common Stock
during such period to the extent such dividends exceed on a per share basis
10% of the average Closing Price of the MGIC Common Stock over such period
(less any such dividends for which a prior adjustment to the Payment Rate
Formula was previously made). All adjustments to the Payment Rate Formula will
be calculated to the nearest 1/10,000th of a share of MGIC Common Stock (or if
there is not a nearest 1/10,000th of a share to the next lower 1/10,000th of a
share). No adjustment in the Payment Rate Formula shall be required unless
such adjustment would require an increase or decrease of at least one percent
therein; provided, however, that any adjustments which by reason of the
foregoing are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. If an adjustment is made to the Payment
Rate Formula as described above, an adjustment will also
21
<PAGE>
be made to the Maturity Price solely to determine which of clauses (a), (b) or
(c) of the Payment Rate Formula will apply on the Maturity Date. The required
adjustment to the Maturity Price will be made by multiplying each of the
Closing Prices used in determining the Maturity Price by a fraction of which
the numerator shall be the Share Component in clause (c) of the Payment Rate
Formula immediately after such adjustment described above and of which the
denominator shall be the Share Component in clause (c) of the Payment Rate
Formula immediately before such adjustment described above. Each such
adjustment to the Payment Rate Formula shall be made successively.
In the event of (A) any consolidation or merger of MGIC Investment, or any
surviving entity or subsequent surviving entity of MGIC Investment (a "MGIC
Successor"), with or into another entity (other than a merger or consolidation
in which MGIC Investment is the continuing corporation and in which the MGIC
Common Stock outstanding immediately prior to the merger or consolidation is
not exchanged for cash, securities or other property of MGIC Investment or
another corporation), (B) any sale, transfer, lease or conveyance to another
corporation of the property of MGIC Investment or any MGIC Successor as an
entirety or substantially as an entirety, (C) any statutory exchange of
securities of MGIC Investment or any MGIC Successor with another corporation
(other than in connection with a merger or acquisition) or (D) any
liquidation, dissolution or winding up of MGIC Investment or any MGIC
Successor (any such event described in clause (A), (B), (C) or (D), a
"Reorganization Event"), the Payment Rate Formula used to determine the amount
payable on the Maturity Date for each STRYPES will be adjusted to provide that
each holder of STRYPES will receive on the Maturity Date for each STRYPES cash
in an amount equal to (a) if the Transaction Value (as defined below) is
greater than or equal to the Threshold Appreciation Price, multiplied by
the Transaction Value, (b) if the Transaction Value is less than the Threshold
Appreciation Price but greater than the Initial Price, the Initial Price and
(c) if the Transaction Value is less than or equal to the Initial Price, the
Transaction Value. "Transaction Value" means (i) for any cash received in any
such Reorganization Event, the amount of cash received per share of MGIC
Common Stock, (ii) for any property other than cash or securities received in
any such Reorganization Event, an amount equal to the market value on the
Maturity Date of such property received per share of MGIC Common Stock as
determined by a nationally recognized independent investment banking firm
retained for this purpose by the Company and (iii) for any securities received
in any such Reorganization Event, an amount equal to the average Closing Price
per unit of such securities on the 20 Trading Days immediately prior to the
Maturity Date multiplied by the number of such securities received for each
share of MGIC Common Stock. Notwithstanding the foregoing, in the event that
property or securities, or a combination of cash, on the one hand, and
property or securities, on the other, are received in such Reorganization
Event, the Company may, at its option, in lieu of delivering cash as described
above, deliver the amount of cash, securities and other property, received per
share of MGIC Common Stock in such Reorganization Event determined in
accordance with clause (i), (ii) or (iii) above, as applicable. If the Company
elects to deliver securities or other property, holders of the STRYPES will be
responsible for the payment of any and all brokerage and other transaction
costs upon any subsequent sale of such securities or other property. The kind
and amount of securities with which the STRYPES shall be paid and discharged
after consummation of such transaction shall be subject to adjustment as
described in the immediately preceding paragraph following the date of
consummation of such transaction.
No adjustments will be made for certain other events, such as offerings of
MGIC Common Stock by MGIC Investment for cash or in connection with
acquisitions. Likewise, no adjustments will be made for any sales of MGIC
Common Stock by NML.
The Company is required, within ten Business Days following the occurrence
of an event that requires an adjustment to the Payment Rate Formula (or if the
Company is not aware of such occurrence, as soon as practicable after becoming
so aware), to provide written notice to the Trustee and to the holders of the
STRYPES of the occurrence of such event and a statement in reasonable detail
setting forth the adjusted Payment Rate Formula and the method by which the
adjustment to the Payment Rate Formula was determined, provided that, in
respect of any adjustment to the Maturity Price, such notice will only
disclose the factor by which each of the Closing Prices used in determining
the Maturity Price is to be multiplied in order to determine the Payment Rate
on the Maturity Date. Until the Maturity Date, the Payment Rate itself cannot
be determined.
22
<PAGE>
FRACTIONAL SHARES
No fractional shares of MGIC Common Stock will be delivered if the Company
pays and discharges the STRYPES by delivering shares of MGIC Common Stock. In
lieu of any fractional share otherwise deliverable in respect of all STRYPES
of any holder on the Maturity Date, such holder shall be entitled to receive
an amount in cash equal to the value of such fractional share at the Maturity
Price.
REDEMPTION, SINKING FUND AND PAYMENT PRIOR TO MATURITY
The STRYPES are not subject to redemption by the Company prior to the
Maturity Date and do not contain sinking fund or other mandatory redemption
provisions. The STRYPES are not subject to payment prior to the Maturity Date
at the option of the holder.
RANKING
The STRYPES will be unsecured obligations and will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. At March 31,
1995, the Company had long-term borrowings outstanding of $14,484,523,000. In
addition, at March 31, 1995, there were $538,157,000 of bank loans and
$14,821,594,000 of commercial paper outstanding.
The Company had no secured debt at March 31, 1995. At such date,
collateralized financing transactions of the Company's subsidiaries consisted
of $5,406,241,000 of cash deposits for securities loaned and $57,110,193,000
of securities sold under agreements to repurchase. See Note 5 to "Summary
Financial Information."
There are no contractual restrictions on the ability of the Company or its
subsidiaries to incur additional secured or unsecured debt. However,
borrowings by certain subsidiaries, including MLPF&S, are restricted by net
capital requirements under the Exchange Act and under rules of certain
exchanges and other regulatory bodies.
Since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the holders of the STRYPES),
to participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that claims of the
Company itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Exchange Act
and under rules of certain exchanges and other regulatory bodies.
PURCHASE CONTRACT
Pursuant to the Purchase Contract described under "Certain Arrangements With
NML," the Company will purchase from NML immediately prior to the Maturity
Date of the STRYPES a number of shares of MGIC Common Stock equal to the
number required by the Company to pay and discharge all of the STRYPES
(including any STRYPES issued pursuant to the over-allotment option granted by
the Company to the Underwriter). In lieu of delivering shares of MGIC Common
Stock, NML has the option, exercisable in its sole discretion, to require that
obligations under the Purchase Contract be satisfied by a cash payment or net
cash settlement based upon the value of such number of shares of MGIC Common
Stock at the Maturity Price. Such option, if exercised by NML, must be
exercised with respect to all shares of MGIC Common Stock deliverable pursuant
to the Purchase Contract.
In the event NML does not perform under the Purchase Contract, the Company
will be required to otherwise acquire shares of MGIC Common Stock for delivery
to the holders of the STRYPES, unless it elects to exercise its option to
deliver cash with an equal value.
23
<PAGE>
SECURITIES DEPOSITORY
Upon issuance, all STRYPES will be represented by one or more fully
registered global securities (the "Global Notes"). Each such Global Note will
be deposited with, or on behalf of, The Depository Trust Company, as
Securities Depository, and registered in the name of the Securities Depository
or a nominee thereof. Unless and until it is exchanged in whole or in part for
STRYPES in definitive form under the limited circumstances described below, no
Global Note may be transferred except as a whole by the Securities Depository
to a nominee of such Securities Depository or by a nominee of such Securities
Depository to such Securities Depository or another nominee of such Securities
Depository or by such Securities Depository or any such nominee to a successor
of such Securities Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: The Securities
Depository is a limited-purpose trust company organized under the Banking Law
of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Securities Depository was
created to hold securities of its participants ("Participants") and to
facilitate the clearance and settlement of securities transactions among its
Participants in such securities through electronic book-entry changes in
accounts of the Participants, thereby eliminating the need for physical
movement of securities certificates. The Securities Depository's Participants
include securities brokers and dealers (including MLPF&S), banks, trust
companies, clearing corporations, and certain other organizations.
The Securities Depository is owned by a number of Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the Securities
Depository book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Purchases of STRYPES must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each STRYPES ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmations from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written confirmation providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Ownership of
beneficial interest in such Global Note will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained by
the Securities Depository (with respect to interests of Participants) and on
the records of Participants (with respect to interests of persons held through
Participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to own, transfer or pledge
beneficial interests in Global Notes.
So long as the Securities Depository, or its nominee, is the registered
owner of a Global Note, the Securities Depository or its nominee, as the case
may be, will be considered the sole owner or holder of the STRYPES represented
by such Global Note for all purposes under the Indenture. Except as provided
below, Beneficial Owners in a Global Note will not be entitled to have the
STRYPES represented by such Global Notes registered in their names, will not
receive or be entitled to receive physical delivery of the STRYPES in
definitive form and will not be considered the owners or holders thereof under
the Indenture. Accordingly, each Person owning a beneficial interest in a
Global Note must rely on the procedures of the Securities Depository and, if
such Person is not a Participant, on the procedures of the Participant through
which such Person owns its interest, to exercise any rights of a holder under
the Indenture. The Company understands that under existing industry practices,
in the event that the Company requests any action of holders or that an owner
of a beneficial interest in such a Global Note desires to give or take any
action which a holder is entitled to give or take under the Indenture, the
Securities Depository would authorize the Participants holding the relevant
beneficial interests to give or take such action, and such Participants would
authorize Beneficial Owners owning through such Participants to give or take
such action or would otherwise act upon the instructions of beneficial owners.
Conveyance of notices
24
<PAGE>
and other communications by the Securities Depository to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Payment of any amount with respect to STRYPES registered in the name of the
Securities Depository or its nominee will be made to the Securities Depository
or its nominee, as the case may be, as the holder of the Global Notes
representing such STRYPES. None of the Company, the Trustee or any other agent
of the Company or agent of the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests or for supervising or reviewing any
records relating to such beneficial ownership interests. The Company expects
that the Securities Depository, upon receipt of any payment in respect of a
Global Note, will credit the accounts of the Participants with payment in
amounts proportionate to their respective holdings of beneficial interest in
such Global Note as shown on the records of the Securities Depository. The
Company also expects that payments by Participants to Beneficial Owners will
be governed by standing customer instructions and customary practices, as is
now the case with securities held for the accounts of customers in bearer form
or registered in "street name", and will be the responsibility of such
Participants.
If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not appointed
by the Company within 60 days, (y) the Company executes and delivers to the
Trustee a Company Order to the effect that the Global Notes shall be
exchangeable or (z) an Event of Default has occurred and is continuing with
respect to the STRYPES, the Company will issue STRYPES in definitive form in
exchange for all of the Global Notes representing the STRYPES. Such definitive
STRYPES shall be registered in such name or names as the Securities Depository
shall instruct the Trustee. It is expected that such instructions may be based
upon directions received by the Securities Depository from Participants with
respect to ownership of beneficial interests in such Global Notes.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other corporation, and
the Company may sell, lease or convey all or substantially all of its assets
to any corporation, provided that (i) the corporation (if other than the
Company) formed by or resulting from any such consolidation or merger or which
shall have received such assets shall be a corporation organized and existing
under the laws of the United States of America or a state thereof and shall
assume the due and punctual delivery or payment of the shares of MGIC Common
Stock (or cash with an equal value) in respect of, and interest on, the
STRYPES and the due and punctual performance and observance of all of the
covenants and conditions of the Indenture to be performed or observed by the
Company, and (ii) the Company or such successor corporation, as the case may
be, shall not immediately thereafter be in default under the Indenture.
Except as provided above, there are no "event risk" or similar provisions of
the Indenture or the STRYPES that are intended to afford protection to holders
in the event of a merger or other significant corporate event involving the
Company.
LIMITATIONS UPON LIENS
The Indenture provides that the Company may not, and may not permit any
Subsidiary (defined in the Indenture as any corporation of which at the time
of determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly more than 50% of the shares of Voting Stock) to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Indenture) on the Voting Stock owned directly or
indirectly by the Company of any Subsidiary (other than a Subsidiary which, at
the time of incurrence of such secured indebtedness, has a net worth of less
than $3,000,000) without making effective provision whereby the Outstanding
STRYPES will be secured equally and ratably with such secured indebtedness.
LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or otherwise
dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue, sell or
otherwise dispose of any of its Voting Stock, unless, after giving
25
<PAGE>
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or indirectly
by the Company). In addition, the Indenture provides that the Company may not
permit MLPF&S to (i) merge or consolidate, unless the surviving company is a
Controlled Subsidiary, or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled Subsidiaries.
EVENTS OF DEFAULT
Each of the following will constitute an Event of Default under the
Indenture with respect to the STRYPES: (a) failure to pay and discharge the
STRYPES with MGIC Common Stock or, if the Company so elects, to pay an
equivalent amount in cash in lieu thereof when due; (b) failure to pay any
interest on any STRYPES when due, continued for 30 days; (c) failure to
perform any other covenant of the Company in the Indenture, continued for 60
days after written notice has been given to the Company by the Trustee, or to
the Company and the Trustee by the holders of at least 10% of the aggregate
issue price of the Outstanding STRYPES, as provided in the Indenture; and (d)
certain events in bankruptcy, insolvency or reorganization of the Company.
If an Event of Default (other than an Event of Default described in clause
(d) of the immediately preceding paragraph) with respect to the STRYPES shall
occur and be continuing, either the Trustee or the holders of at least 25% of
the aggregate issue price of the Outstanding STRYPES by notice as provided in
the Indenture may declare an amount equal to the issue price of all the
STRYPES to be immediately due and payable in cash. If an Event of Default
described in said clause (d) shall occur, an amount equal to the issue price
of all the STRYPES will become immediately due and payable in cash without any
declaration or other action on the part of the Trustee or any holder. After
such acceleration, but before a judgment or decree based on acceleration, the
holders of a majority of the aggregate issue price of the Outstanding STRYPES
may, under certain circumstances, rescind and annul such acceleration if all
Events of Default, other than the non-payment of the amount equal to the issue
price of all the STRYPES due by reason of such acceleration, have been cured
or waived as provided in the Indenture. See "Modification and Waiver" below.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the holders of
STRYPES, unless such holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request or direction. Subject to
such provisions for the indemnification of the Trustee, the holders of a
majority of the aggregate issue price of the STRYPES will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the STRYPES.
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their
knowledge, is in default in the fulfillment of any of its obligations under
the Indenture and, if so, specifying all such known defaults.
The STRYPES and other series of Senior Debt Securities issued under the
Indenture do not have the benefit of any cross-default provisions with other
indebtedness of the Company.
MODIFICATION AND WAIVER
Modifications of and amendments to the Indenture affecting the STRYPES may
be made by the Company and the Trustee with the consent of the holders of 66
2/3% of the aggregate issue price of the Outstanding STRYPES; provided,
however, that no such modification or amendment may, without the consent of
the holder of each Outstanding STRYPES affected thereby, (a) change the
Maturity Date or the Stated Maturity of any installment of interest on any
STRYPES or reduce the amount of MGIC Common Stock payable with respect to any
STRYPES (or reduce the amount of cash payable in lieu thereof), (b) reduce the
amount of interest payable on any STRYPES or reduce the amount of cash payable
with respect to any STRYPES upon acceleration of the Maturity thereof, (c)
change the place or currency of payment of interest on, or any amount of cash
payable with
26
<PAGE>
respect to, any STRYPES, (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any STRYPES, including the
payment of MGIC Common Stock with respect to any STRYPES, (e) reduce the
percentage of the aggregate issue price of Outstanding STRYPES, the consent of
whose holders is required to modify or amend the Indenture, (f) reduce the
percentage of the aggregate issue price of Outstanding STRYPES necessary for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults or (g) modify such provisions with respect to modification
and waiver.
The holders of a majority of the aggregate issue price of the STRYPES may
waive compliance by the Company with certain restrictive provisions of the
Indenture. The holders of a majority of the aggregate issue price of the
STRYPES may waive any past default under the Indenture, except a default in
the payment of MGIC Common Stock with respect to any STRYPES, or the payment
of cash payable in lieu thereof, or in the payment of interest and certain
covenants and provisions of the Indenture which cannot be amended without the
consent of the holder of each Outstanding STRYPES affected.
GOVERNING LAW
The Indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
LISTING
The STRYPES have been approved for listing on the NYSE, subject to official
notice of issuance.
CERTAIN ARRANGEMENTS WITH NML
Pursuant to the Purchase Contract, the Company is obligated to purchase from
NML immediately prior to maturity of the STRYPES, at an aggregate purchase
price equal to the total issue price for the STRYPES, less the total
underwriting discount, plus an adjustment for an interest differential factor,
a number of shares of MGIC Common Stock equal to the number required by the
Company to pay and discharge all of the STRYPES (including any STRYPES issued
pursuant to the over-allotment option granted by the Company to the
Underwriter). In lieu of delivering shares of MGIC Common Stock, NML has the
option, exercisable in its sole discretion, to require that obligations under
the Purchase Contract be satisfied by a cash payment or net cash settlement
based upon the value of such number of shares of MGIC Common Stock at the
Maturity Price. Such option, if exercised by NML, must be exercised with
respect to all shares of MGIC Common Stock deliverable pursuant to the
Purchase Contract. The Company has agreed with NML that, without the prior
consent of NML, it will not amend the Indenture to increase the consideration
that NML is obligated to deliver pursuant to the Purchase Contract. The
Company has also agreed to pay and discharge the STRYPES by delivering to the
holders thereof on the Maturity Date the form of consideration that it
receives from NML under the Purchase Contract.
The Purchase Contract does not contain any restriction on the ability of NML
to sell, pledge or otherwise convey all or any portion of the MGIC Common
Stock held by it, and no such shares of MGIC Common Stock will be pledged or
otherwise held in escrow for use at maturity of the STRYPES. In the event of a
significant sale, pledge or conveyance by NML, or an insolvency or liquidation
of NML (in which case the MGIC Common Stock, if any, owned by NML will be
subject to the claims of policyholders and/or creditors of NML), the Company
may be more likely to deliver to a holder of STRYPES cash in lieu of MGIC
Common Stock.
Until such time, if any, as NML shall have delivered shares of MGIC Common
Stock to the Company at maturity of the STRYPES pursuant to the terms of the
Purchase Contract, NML will retain all ownership rights with respect to the
MGIC Common Stock held by it (including, without limitation, voting rights and
rights to receive any dividends or other distributions in respect thereof).
NML has no obligations with respect to the STRYPES or amounts to be paid to
holders thereof, including any obligation to take the needs of the Company or
of holders of the STRYPES into consideration in determining whether to deliver
shares of MGIC Common Stock or cash or for any other reason. The Purchase
Contract
27
<PAGE>
between the Company and NML is a commercial transaction and does not create
any rights in, or for the benefit of, any third party, including any holder of
STRYPES.
In the event NML does not perform under the Purchase Contract, the Company
will be required to otherwise acquire shares of MGIC Common Stock for delivery
to the holders of the STRYPES, unless it elects to exercise its option to
deliver cash with an equal value.
For more information regarding the relationship between NML and MGIC
Investment and the MGIC Common Stock that may be delivered to the holders of
STRYPES on the Maturity Date, see the MGIC Prospectus which accompanies this
Prospectus.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Set forth in full below is the opinion of Brown & Wood, counsel to the
Company, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the STRYPES. Such opinion is based upon
laws, regulations, rulings and decisions now in effect (or, in the case of
certain regulations, in proposed form), all of which are subject to change
(including retroactive changes in effective dates) or possible differing
interpretations. The discussion below deals only with STRYPES held as capital
assets and does not purport to deal with persons in special tax situations,
such as financial institutions, insurance companies, regulated investment
companies, dealers in securities or currencies, tax-exempt entities, or
persons holding STRYPES as a hedge against currency risks or as a position in
a "straddle" for tax purposes. It also does not deal with holders of STRYPES
other than original purchasers thereof (except where otherwise specifically
noted herein). The following discussion also does not address the tax
consequences of investing in the STRYPES arising under the laws of any state,
local or foreign jurisdiction. Persons considering the purchase of the STRYPES
should consult their own tax advisors concerning the application of the United
States Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the STRYPES arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a STRYPES
that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its source or
(iv) any other person whose income or gain in respect of a STRYPES is
effectively connected with the conduct of a United States trade or business.
As used herein, the term "non-U.S. Holder" means a beneficial owner of a
STRYPES that is not a U.S. Holder.
GENERAL
There are no statutory provisions, regulations (except possibly the Proposed
Regulations as described below), published rulings or judicial decisions
addressing or involving the characterization, for United States Federal income
tax purposes, of the STRYPES or securities with terms substantially the same
as the STRYPES. Accordingly, the proper United States Federal income tax
characterization and treatment of the STRYPES is uncertain. Pursuant to the
terms of the Indenture, the Company and any holder of a STRYPES agree to treat
each STRYPES as a unit (a "Unit") consisting of (i) a debt instrument (the
"Debt Instrument") with a fixed principal amount unconditionally payable on
the Maturity Date equal to the issue price of the STRYPES and bearing interest
at the stated interest rate on the STRYPES and (ii) a forward purchase
contract (the "Forward Contract") pursuant to which the holder agrees to use
the principal payment due on the Debt Instrument to purchase on the Maturity
Date the MGIC Common Stock which the Company is obligated to deliver at that
time (subject to the Company's right to deliver cash with an equal value in
lieu of the MGIC Common Stock). Therefore, the Company currently intends to
treat each STRYPES as a Unit consisting of the Debt Instrument and the Forward
Contract for United States Federal income tax purposes and, where required,
intends to file information returns with the Internal Revenue Service ("IRS")
in accordance with such treatment, in the absence of any change or
clarification in the law, by regulation or otherwise, requiring a different
characterization and treatment of the STRYPES for United States Federal income
tax purposes. In the opinion of Brown & Wood,
28
<PAGE>
counsel to the Company, such characterization and tax treatment of the
STRYPES, although not the only reasonable characterization and tax treatment,
is based on reasonable interpretations of law currently in effect and, even if
successfully challenged by the IRS, will not result in the imposition of
penalties.
Prospective investors in the STRYPES should be aware, however, that no
ruling is being requested from the IRS with respect to the STRYPES, the IRS is
not bound by the characterization of each STRYPES by the Company and the
holders thereof as a Unit consisting of the Debt Instrument and the Forward
Contract, and the IRS could possibly assert a different position as to the
proper United States Federal income tax characterization and treatment of the
STRYPES. For instance, it is possible that the IRS could assert that each
STRYPES should be treated entirely as a single debt instrument of the Company
for United States Federal income tax purposes. Except where otherwise
specifically provided herein, the following discussion of the principal United
States Federal income tax consequences of the purchase, ownership and
disposition of the STRYPES is based upon the assumption that each STRYPES will
be characterized and treated as a Unit consisting of the Debt Instrument and
the Forward Contract for United States Federal income tax purposes. As
discussed in greater detail herein, if the STRYPES are not in fact ultimately
characterized and treated as a Unit consisting of the Debt Instrument and the
Forward Contract for United States Federal income tax purposes, then the
United States Federal income tax treatment of the purchase, ownership and
disposition of the STRYPES could significantly differ from the treatment
discussed immediately below with the result that the timing and character of
income, gain or loss recognized on a STRYPES could significantly differ from
the timing and character of income, gain or loss recognized on a STRYPES had
each STRYPES in fact been characterized and treated as a Unit consisting of
the Debt Instrument and the Forward Contract for United States Federal income
tax purposes.
U.S. HOLDERS
As previously discussed, pursuant to the terms of the Indenture, the Company
and any holder of a STRYPES agree to treat each STRYPES as a Unit consisting
of the Debt Instrument and the Forward Contract. Consistent with this
treatment of the STRYPES, pursuant to the terms of the Indenture, a U.S.
Holder of a STRYPES will be required to include currently in income payments
denominated as interest that are made with respect to a STRYPES in accordance
with such U.S. Holder's regular method of tax accounting. Furthermore,
pursuant to the agreement contained in the Indenture to treat each STRYPES as
a Unit consisting of the Debt Instrument and the Forward Contract, any holder
of a STRYPES agrees to allocate the purchase price paid by such holder to
acquire the STRYPES between the two components of the Unit (i.e., the Debt
Instrument and the Forward Contract) based upon their relative fair market
values (as determined on the purchase date). The portion of the total purchase
price so allocated by the holder to each component of the Unit will generally
constitute the holder's initial tax basis for each such component of the Unit.
Accordingly, in the event that the fair market value of the Debt Instrument
(as determined on the purchase date) exceeds the purchase price paid by the
holder to acquire the STRYPES, the holder would be deemed to have acquired the
Debt Instrument for an amount equal to the fair market value of the Debt
Instrument (as determined on the purchase date) and would be deemed to have
assumed the Forward Contract component of the STRYPES in exchange for a
payment in an amount equal to the excess of the fair market value of the Debt
Instrument (as determined on the purchase date) over the purchase price paid
by the holder to acquire the STRYPES. In such event, such deemed payment
received by the holder in respect of the Forward Contract should only be
includible in income by the holder as an additional amount realized with
respect to the Forward Contract on the earlier of the sale or other
disposition of the STRYPES by the holder or the Maturity Date (which would
increase the amount of gain or decrease the amount of loss realized with
respect to the Forward Contract). Pursuant to the terms of the Indenture, with
respect to acquisitions of STRYPES in connection with the original issuance
thereof, the Company and the holders agree to allocate $ of the entire
initial purchase price of a STRYPES (i.e., the issue price of a STRYPES) to
the Debt Instrument component and to allocate the remaining $ of the entire
initial purchase price of a STRYPES to the Forward Contract component. Based
upon the foregoing, pursuant to the agreement to treat each STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract, a holder who
acquires a STRYPES in connection with the original issuance thereof, will have
agreed to treat such acquisition of the STRYPES by the holder as a purchase of
the Debt Instrument by the holder for $ and the making of an initial
payment by the holder with respect to the Forward Contract of $ .
29
<PAGE>
Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument (e.g., the Debt Instrument)
generally will be taxable to a U.S. Holder as ordinary interest income at the
time such payments are accrued or are received (in accordance with the U.S.
Holder's regular method of tax accounting). In addition, a debt instrument
will be treated as having been issued with original issue discount for United
States Federal income tax purposes to the extent that the stated redemption
price at maturity of the debt instrument (generally the debt instrument's
stated principal amount) exceeds the debt instrument's issue price, if such
excess equals or exceeds a de minimis amount (generally 1/4 of 1% of the debt
instrument's stated redemption price at maturity multiplied by the number of
complete years to maturity from its issue date). Pursuant to the agreement to
treat each STRYPES as a Unit consisting of the Debt Instrument and the Forward
Contract, each such Debt Instrument component will be treated for these
purposes as having an issue price equal to $ . Since the stated redemption
price at maturity of each such Debt Instrument component (i.e., $ ) does not
exceed its issue price (i.e., $ ) by an amount that is equal to or greater
than $ (i.e., the applicable de minimis amount), the Debt Instrument
component of each Unit will not be treated as having been issued with any
original issue discount.
Under the foregoing principles and in accordance with the agreement to treat
each STRYPES as a Unit consisting of the Debt Instrument and the Forward
Contract, the quarterly interest payments payable with respect to the STRYPES
at the stated interest rate of % of the issue price of the STRYPES per annum
(the "Interest Payments") generally will be taxable to a U.S. Holder as
ordinary interest income on the respective dates that such Interest Payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting). On the Maturity Date, pursuant to the agreement to
treat each STRYPES as a Unit consisting of the Debt Instrument and the Forward
Contract, a U.S. Holder will recognize capital gain or loss with respect to
the Debt Instrument in an amount equal to the difference, if any, between the
principal amount of the Debt Instrument (i.e., the issue price of the STRYPES)
and such U.S. Holder's adjusted tax basis in the Debt Instrument. Such capital
gain or loss will generally be long-term capital gain or loss if the STRYPES
has been held by the U.S. Holder for more than one year as of the Maturity
Date. In addition, pursuant to the agreement to treat each STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract, on the Maturity
Date, if the Company delivers MGIC Common Stock upon payment of the STRYPES, a
U.S. Holder will generally not realize any taxable gain or loss on the
exchange, pursuant to the Forward Contract, of the principal amount of the
Debt Instrument for the MGIC Common Stock. However, a U.S. Holder will
generally be required to recognize taxable gain or loss with respect to any
cash received in lieu of fractional shares. The amount of such gain or loss
recognized by a U.S. Holder will be equal to the difference, if any, between
the amount of cash received by the U.S. Holder and the portion of the sum of
the principal amount of the Debt Instrument and the U.S. Holder's tax basis in
the Forward Contract that is allocable to the fractional shares. Any such
taxable gain or loss will be treated as short-term capital gain or loss. A
U.S. Holder will have an initial tax basis in any MGIC Common Stock received
on the Maturity Date in an amount equal to the sum of the principal amount of
the Debt Instrument and the U.S. Holder's tax basis in the Forward Contract
less the portion of such sum that is allocable to any fractional shares (as
described above) and will realize taxable gain or loss with respect to such
MGIC Common Stock received on the Maturity Date only upon the subsequent sale
or disposition by the U.S. Holder of such MGIC Common Stock. In addition, a
U.S. Holder's holding period for any MGIC Common Stock received by such U.S.
Holder on the Maturity Date will begin on the day immediately following the
Maturity Date and will not include the period during which the U.S. Holder
held such STRYPES.
Alternatively, pursuant to the agreement to treat the STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract, if the Company
pays the STRYPES in cash on the Maturity Date, a U.S. Holder will recognize
taxable gain or loss on the Maturity Date with respect to the Forward Contract
(in addition to any gain or loss recognized with respect to the Debt
Instrument as described above) in an amount equal to the difference, if any,
between the total amount of cash received by such U.S. Holder on the Maturity
Date and an amount equal to the sum of the principal amount of the Debt
Instrument and the U.S. Holder's tax basis in the Forward Contract. It is
uncertain whether such gain or loss would be treated as capital or ordinary.
If such gain or loss is properly treated as capital, then such gain or loss
will be treated as long-term capital gain or loss if the STRYPES has been held
by the U.S. Holder for more than one year as of the Maturity Date. If such
gain or loss is properly
30
<PAGE>
treated as ordinary gain or loss, it is possible that the deductibility of any
loss recognized on the Maturity Date with respect to the Forward Contract by a
U.S. Holder who is an individual could be subject to the limitations
applicable to miscellaneous itemized deductions provided for under Section
67(a) of the Internal Revenue Code of 1986, as amended (the "Code"). In
general, Section 67(a) of the Code provides that an individual may only deduct
miscellaneous itemized deductions for a particular taxable year to the extent
that the aggregate amount of the individual's miscellaneous itemized
deductions for such taxable year exceed two percent of the individual's
adjusted gross income for such taxable year (although, the miscellaneous
itemized deductions allowable to high-income individuals are generally subject
to further limitations). Prospective investors in the STRYPES are urged to
consult their own tax advisors concerning the character of any gain or loss
realized on the Maturity Date with respect to the Forward Contract in the
event that the Company elects to pay the STRYPES in cash on the Maturity Date
as well as the deductibility of any such loss.
Pursuant to the agreement to treat each STRYPES as a Unit consisting of the
Debt Instrument and the Forward Contract, upon the sale or other disposition
of a STRYPES prior to the Maturity Date, a U.S. Holder generally will be
required to allocate the total amount realized by such U.S. Holder upon such
sale or other disposition between the two components of the Unit (i.e., the
Debt Instrument and the Forward Contract) based upon their relative fair
market values (as determined on the date of disposition). Accordingly, in the
event that the fair market value of the Debt Instrument (as determined on the
date of disposition) exceeds the actual amount realized by the U.S. Holder
upon the sale or other disposition of a STRYPES prior to the Maturity Date,
the U.S. Holder would be deemed to have sold the Debt Instrument for an amount
equal to the fair market value of the Debt Instrument (as determined on the
date of disposition) and would be deemed to have made a payment to the
purchaser of the STRYPES in exchange for such purchaser's assumption of the
Forward Contract in an amount equal to the excess of the fair market value of
the Debt Instrument (as determined on the date of disposition) over the actual
amount realized by the U.S. Holder upon such sale or disposition of the
STRYPES. A U.S. Holder will generally be required to recognize taxable gain or
loss with respect to each such component in an amount equal to the difference,
if any, between (or, in some cases, the sum of) the amount realized (or paid)
with respect to each such component upon the sale or disposition of the
STRYPES (as determined in the manner described above) and the U.S. Holder's
adjusted tax basis in each such component. Any such gain or loss will
generally be treated as long-term capital gain or loss if the U.S. Holder has
held the STRYPES for more than one year at the time of disposition.
As previously discussed, prospective investors in the STRYPES should be
aware that the IRS is not bound by the characterization of the STRYPES by the
Company and the holders thereof as a Unit consisting of the Debt Instrument
and the Forward Contract, and the IRS could possibly assert a different
position as to the proper United States Federal income tax characterization
and treatment of the STRYPES. For instance, it is possible that the IRS could
assert that each STRYPES should be treated entirely as a single debt
instrument of the Company for United States Federal income tax purposes.
If the STRYPES were ultimately characterized and treated entirely as debt
instruments of the Company for United States Federal income tax purposes, then
the timing and character of income, gain or loss recognized on a STRYPES would
differ from the timing and character of income, gain or loss recognized on a
STRYPES had each STRYPES in fact been characterized and treated for United
States Federal income tax purposes as a Unit consisting of the Debt Instrument
and the Forward Contract. If the STRYPES were ultimately characterized and
treated entirely as indebtedness of the Company for United States Federal
income tax purposes, under general principles of current United States Federal
income tax law, the Interest Payments generally would be taxable to a U.S.
Holder as ordinary interest income on the respective dates that such Interest
Payments are accrued or are received (in accordance with the U.S. Holder's
regular method of tax accounting). Under this same analysis and treatment of
each STRYPES as a single debt instrument of the Company for United States
Federal income tax purposes, under general principles of current United States
Federal income tax law, if the fair market value (as determined on the
Maturity Date) of the amount of MGIC Common Stock or cash payable on the
Maturity Date with respect to a STRYPES exceeds the issue price thereof, such
excess would be treated as contingent interest and generally would be
includible in income by a U.S. Holder as ordinary interest on the Maturity
Date
31
<PAGE>
(regardless of the U.S. Holder's regular method of tax accounting). In
addition, if the fair market value (as determined on the Maturity Date) of the
amount of MGIC Common Stock or cash payable on the Maturity Date with respect
to a STRYPES exceeds the issue price thereof, then such STRYPES would be
treated as having been retired on the Maturity Date in exchange for an amount
equal to the issue price thereof. If, however, the fair market value (as
determined on the Maturity Date) of the amount of MGIC Common Stock or cash
payable on the Maturity Date with respect to a STRYPES is equal to or less
than the issue price thereof, then such STRYPES would be treated as having
been retired on the Maturity Date in exchange for an amount equal to the fair
market value (as determined on the Maturity Date) of the entire amount payable
on the Maturity Date with respect to such STRYPES and no portion of the amount
payable on the Maturity Date with respect to such STRYPES would be treated as
contingent interest. A U.S. Holder's initial tax basis in any MGIC Common
Stock received by such U.S. Holder on the Maturity Date of a STRYPES would
equal the fair market value (as determined on the Maturity Date) of the MGIC
Common Stock received by such U.S. Holder. Furthermore, a U.S. Holder's
holding period for any MGIC Common Stock received by such U.S. Holder on the
Maturity Date of a STRYPES would begin on the day immediately following the
Maturity Date and would not include the period during which the U.S. Holder
held such STRYPES.
Moreover, under this analysis and treatment of each STRYPES as a single debt
instrument of the Company for United States Federal income tax purposes, upon
the sale, exchange or retirement of a STRYPES, a U.S. Holder generally would
recognize taxable gain or loss in an amount equal to the difference, if any,
between the amount realized on the sale, exchange or retirement (other than
amounts representing accrued and unpaid Interest Payments) and such U.S.
Holder's adjusted tax basis in the STRYPES. A U.S. Holder's adjusted tax basis
in a STRYPES generally would equal such U.S. Holder's initial investment in
the STRYPES (as adjusted pursuant to the market discount and bond premium
rules described below). Such gain or loss generally would be long-term capital
gain or loss if the STRYPES were held by the U.S. Holder for more than one
year (subject to the market discount rules, as discussed below). It is
possible, however, that under this analysis and treatment of the STRYPES the
IRS could assert that any amounts realized upon the sale or exchange of a
STRYPES prior to the Maturity Date in excess of the STRYPES's issue price
constitutes ordinary interest income (subject to the bond premium rules, as
discussed below). Nonetheless, if the STRYPES were ultimately characterized
and treated entirely as indebtedness of the Company for United States Federal
income tax purposes, although the matter is not free from doubt, in the
opinion of Brown & Wood, counsel to the Company, under current law, any gain
realized upon the sale or exchange of a STRYPES prior to the Maturity Date
should be treated entirely as capital gain (subject to the market discount
rules, as discussed below).
Prospective investors in the STRYPES should also be aware that on December
15, 1994, the Treasury Department issued proposed regulations (the "Proposed
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments. In the event that the STRYPES were
characterized and treated entirely as debt instruments of the Company for
United States Federal income tax purposes, the STRYPES would be treated as
contingent payment debt instruments. The Proposed Regulations, however, are
proposed to only be effective 60 days after the date on which the Proposed
Regulations are published as final Treasury regulations. Accordingly, due to
the proposed prospective effective date of the Proposed Regulations, if
ultimately adopted in their current form, the Proposed Regulations would not
apply to the STRYPES even if the STRYPES were characterized and treated
entirely as debt instruments of the Company for United States Federal income
tax purposes. Furthermore, proposed Treasury regulations are not binding upon
either the IRS or taxpayers prior to becoming effective as temporary or final
regulations. In general, if ultimately adopted in their current form, the
Proposed Regulations would cause the timing and character of income, gain or
loss reported on a contingent payment debt instrument to substantially differ
from the timing and character of income, gain or loss reported on a contingent
payment debt instrument under general principles of current United States
Federal income tax law (as described immediately above). Prospective investors
in the STRYPES are urged to consult their own tax advisers concerning the
effect, if any, of the Proposed Regulations on their investment in the
STRYPES.
Prospective investors in the STRYPES should also be aware that it is
possible that the ultimate characterization and treatment of the STRYPES for
United States Federal income tax purposes could differ from
32
<PAGE>
the possible characterizations and treatments described herein with the result
that the ultimate United States Federal income tax treatment of the purchase,
ownership and disposition of the STRYPES could significantly differ from any
of the treatments described herein.
Despite the foregoing, as previously discussed, pursuant to the agreement
contained in the Indenture to treat each STRYPES as a Unit consisting of the
Debt Instrument and the Forward Contract, the Company, where required,
currently intends to file information returns with the IRS treating each
STRYPES as a Unit consisting of the Debt Instrument and the Forward Contract
for United States Federal income tax purposes (as described above), in the
absence of any change or clarification in the law, by regulation or otherwise,
requiring another characterization and treatment of the STRYPES for United
States Federal income tax purposes.
MARKET DISCOUNT AND PREMIUM
In general, if a U.S. Holder purchases a debt instrument (e.g., the Debt
Instrument component of a Unit) for an amount that is less than the principal
amount thereof, the amount of the difference will be treated as "market
discount," unless such difference is less than a specified de minimis amount
(generally 1/4 of 1% of the debt instrument's stated principal amount
multiplied by the number of complete years to maturity from the date the U.S.
Holder purchased such debt instrument).
Under the market discount rules, a U.S. Holder will be required to treat any
gain realized on the sale, exchange, retirement or other disposition of a debt
instrument as ordinary income to the extent of the lesser of (i) the amount of
such realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such debt instrument at
the time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the maturity
of the debt instrument, unless the U.S. Holder elects to accrue market
discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a debt instrument with market discount until the maturity of
the debt instrument or its earlier disposition in a taxable transaction and
certain nontaxable transactions, because a current deduction is only allowed
to the extent that the interest expense exceeds an allocable portion of the
market discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in which case the rules described above regarding the deferral of interest
deductions will not apply. Generally, such currently included market discount
is treated as ordinary interest income for United States Federal income tax
purposes and a U.S. Holder would increase its tax basis in a debt instrument
by the amount of any such currently included market discount. Such an election
will apply to all debt instruments acquired by the U.S. Holder on or after the
first day of the first taxable year to which such election applies and may be
revoked only with the consent of the IRS.
In general, if a U.S. Holder purchases a debt instrument for an amount that
is greater than the principal amount thereof, such U.S. Holder will be
considered to have purchased the debt instrument with "amortizable bond
premium" equal in amount to such excess. A U.S. Holder may elect to amortize
such premium using a constant yield method over the remaining term of the debt
instrument and may offset ordinary interest otherwise required to be included
in respect of the debt instrument during any taxable year by the amortized
amount of such premium for such year (or, prior years, if such amortized
premium for prior years has not yet offset interest) and would reduce its tax
basis in the debt instrument by the amount of any such interest offset taken.
Such election, if made, would apply to all debt instruments held by the U.S.
Holder at the beginning of the taxable year to which such election applies and
to all debt instruments acquired by the U.S. Holder thereafter. Such election
would also be irrevocable once made, unless the U.S. Holder making such an
election obtains the express written consent of the IRS to revoke such
election.
MISCELLANEOUS TAX MATTERS
Special tax rules may apply to persons holding a STRYPES as part of a
"synthetic security" or other integrated investment, or as part of a straddle,
hedging transaction or other combination of offsetting positions.
33
<PAGE>
For instance, Section 1258 of the Code may possibly require certain U.S.
Holders of the STRYPES who enter into hedging transactions or offsetting
positions with respect to the STRYPES to treat all or a portion of any gain
realized on the STRYPES as ordinary income in instances where such gain may
have otherwise been treated as capital gain. U.S. Holders hedging their
positions with respect to the STRYPES or otherwise holding their STRYPES in a
manner described above should consult their own tax advisors regarding the
applicability of Section 1258 of the Code, or any other provision of the Code,
to their investment in the STRYPES.
NON-U.S. HOLDERS
Based on the treatment of each STRYPES as a Unit consisting of the Debt
Instrument and the Forward Contract, in the case of a non-U.S. Holder,
payments made with respect to the STRYPES should not be subject to United
States withholding tax, provided that such non-U.S. Holder complies with
applicable certification requirements. Any capital gain realized upon the sale
or other disposition of a STRYPES by a non-U.S. Holder will generally not be
subject to United States Federal income tax if (i) such gain is not
effectively connected with a United States trade or business of such non-U.S.
Holder and (ii) in the case of an individual non-U.S. Holder, such individual
is not present in the United States for 183 days or more in the taxable year
of the sale or other disposition, or the gain is not attributable to a fixed
place of business maintained by such individual in the United States and such
individual does not have a "tax home" (as defined for United States Federal
income tax purposes) in the United States.
As discussed above, alternative characterizations of the STRYPES for United
States Federal income tax purposes are possible. Should an alternative
characterization of the STRYPES, by reason of a change or clarification of the
law, by regulation or otherwise, cause payments with respect to the STRYPES to
become subject to withholding tax, the Company will withhold tax at the
statutory rate. Prospective non-U.S. Holders of the STRYPES should consult
their own tax advisors in this regard.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A beneficial owner of a STRYPES may be subject to information reporting and
to backup withholding at a rate of 31 percent of certain amounts paid to the
beneficial owner unless such beneficial owner provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the backup withholding rules.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Underwriter"), and the Underwriter has agreed to purchase
from the Company, 5,000,000 STRYPES. Under the terms and conditions of the
Underwriting Agreement, the Underwriter is committed to take and pay for all
of the STRYPES, if any are taken.
The Underwriter has advised the Company that it proposes initially to offer
the STRYPES directly to the public at the public offering price set forth on
the cover page of this Prospectus, and to certain dealers at such price less a
concession not to exceed $ per STRYPES. The Underwriter may allow, and such
dealers may reallow, a discount not to exceed $ per STRYPES to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.
The Company has granted the Underwriter an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 750,000
additional STRYPES at the public offering price set forth on the cover page of
this Prospectus, less the underwriting discount. The Underwriter may exercise
this option only to cover over-allotments, if any, made on the sale of the
STRYPES offered hereby.
34
<PAGE>
MGIC Investment and its executive officers have agreed not to offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any shares
of MGIC Common Stock, securities convertible into, exchangeable for or
repayable with such shares or rights or warrants to acquire such shares, for a
period of 90 days after the date of this Prospectus without the prior written
consent of the Underwriter. The foregoing agreement of MGIC Investment does
not apply to MGIC Common Stock offered to MGIC Investment's employees under
its existing employee benefit plans nor does it apply to rights with respect
to MGIC Common Stock under a shareholder rights plan. NML has agreed not to
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
or cause to be filed a registration statement under the Securities Act with
respect to, any shares of MGIC Common Stock, securities convertible into,
exchangeable for or repayable with such shares or rights or warrants to
acquire such shares, for a period of 90 days after the date of this Prospectus
without the prior written consent of the Underwriter.
European Reinsurance Company of Zurich ("European Reinsurance"), a
stockholder of MGIC Investment, will be offering for sale 90,000 shares of
MGIC Common Stock. Pursuant to an agreement between European Reinsurance and
the Underwriter, such offering will not commence earlier than 30 days after
the date of this Prospectus unless the consent of the Underwriter is obtained.
The underwriting of the STRYPES will conform to the requirements set forth
in the applicable sections of Schedule E to the By-Laws of the National
Association of Securities Dealers, Inc.
The STRYPES have been approved for listing on the NYSE, subject to official
notice of issuance.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act relating to this
Prospectus (including the documents incorporated by reference herein).
VALIDITY OF THE STRYPES
The validity of the STRYPES offered hereby will be passed upon for the
Company and for the Underwriter by Brown & Wood, New York, New York.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K, and incorporated
by reference in this Prospectus, have been audited by Deloitte & Touche llp,
independent auditors, as stated in their reports incorporated by reference
herein. The information under the caption "Summary Financial Information" for
each of the five years in the period ended December 30, 1994 included in this
Prospectus and the Selected Financial Data under the captions "Operating
Results," "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual Report
to Stockholders of the Company, and incorporated by reference herein, has been
derived from consolidated financial statements audited by Deloitte & Touche
llp, as set forth in their reports incorporated by reference herein. Such
consolidated financial statements and related financial statement schedules,
such Summary Financial Information and Selected Financial Data appearing or
incorporated by reference in this Prospectus and the Registration Statement of
which this Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche llp given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche llp have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their report included in any such Quarterly
Report on Form 10-Q and incorporated by reference herein, they did not audit
and they do not express an opinion on such interim financial information.
Accordingly, the degree of reliance on their reports on such information
should be restricted in light of the limited nature of the review procedures
applied. Deloitte & Touche llp are not subject to the liability provisions of
Section 11 of the Securities Act for any such report on unaudited interim
financial information because any such report is not a "report" or a "part" of
the registration statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Securities Act.
35
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURI-
TIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN OF-
FER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 7
Merrill Lynch & Co., Inc................................................... 10
Summary Financial Information.............................................. 11
MGIC Investment Corporation................................................ 17
Price Range of MGIC Common Stock and Dividends............................. 18
Use of Proceeds............................................................ 18
Description of the STRYPES................................................. 19
Certain Arrangements With NML.............................................. 27
Certain United States Federal Income Tax Considerations.................... 28
Underwriting............................................................... 34
Validity of the STRYPES.................................................... 35
Experts.................................................................... 35
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5,000,000 STRYPES
LOGO
MERRILL LYNCH & CO., INC.
% STRYPES SM
DUE AUGUST 15, 1998
PAYABLE WITH SHARES OF COMMON STOCK
OF MGIC INVESTMENT CORPORATION
(OR CASH WITH AN EQUAL VALUE)
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
JULY , 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses in connection with the issuance
and distribution of the securities being registered. All the amounts shown are
estimates, except the registration fee and the NASD fee.
<TABLE>
<S> <C>
Registration fee.................................................. $93,438
Fees and expenses of accountants.................................. *
Fees and expenses of counsel...................................... *
NASD fee.......................................................... 27,597
Listing fees...................................................... *
Blue Sky fees and expenses........................................ *
Printing expenses................................................. *
Printing and engraving of Securities.............................. *
Rating agency fees................................................ *
Miscellaneous..................................................... *
-------
Total........................................................... $ *
=======
</TABLE>
- --------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director, officer, employee or agent of the corporation or is or was
serving at its request in such capacity in another corporation or business
association, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Article XIII, Section 2 of the Restated Certificate of Incorporation of the
Registrant provides in effect that, subject to certain limited exceptions, the
Registrant shall indemnify its directors and officers to the extent authorized
or permitted by the General Corporation Law of the State of Delaware.
The Form of Underwriting Agreement filed as Exhibit 1(a) provides for the
indemnification of the Registrant, its controlling persons, its directors and
certain of its officers by the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. The Form
of Registration Agreement filed as Exhibit 1(b) provides for the
indemnification of the Registrant and its controlling persons by MGIC
Investment against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
The directors and officers of the Registrant are insured under policies of
insurance maintained by the Registrant, subject to the limits of the policies,
against certain losses arising from any claim made against them by reason of
being or having been such directors or officers. In addition, the Registrant
has entered into contracts with all of its directors providing for
indemnification of such persons by the Registrant to the full extent
authorized or permitted by law, subject to certain limited exceptions.
II-1
<PAGE>
ITEM 16. LIST OF EXHIBITS.
1(a)*--Form of Underwriting Agreement.
1(b)*--Form of Registration Agreement.
4(a)--Senior Indenture, dated as of April 1, 1983, as amended and
restated, between the Company and Chemical Bank (successor by merger
to Manufacturers Hanover Trust Company), incorporated herein by
reference to Exhibit 99(c) to Registrant's Registration Statement on
Form 8-A dated July 20, 1992.
4(b)+--Form of Seventh Supplemental Indenture to the Senior Indenture
between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
4(c)+--Form of certificate representing the STRYPES.
5+--Opinion of Brown & Wood.
10+--Form of Purchase Contract between the Company and The Northwestern
Mutual Life Insurance Company relating to shares of MGIC Common
Stock.
12*--Computation of Ratio of Earnings to Fixed Charges.
15*--Letter of Deloitte & Touche LLP regarding unaudited interim financial
information.
23(a)*--Consent of Deloitte & Touche LLP.
23(b)+--Consent of Brown & Wood (included in Exhibit 5).
24*--Powers of Attorney.
25+--Form T-1 Statement of Eligibility under the Trust Indenture Act of
1939 of Chemical Bank.
99*--Report of Deloitte & Touche LLP with respect to certain financial data
appearing in the Registration Statement.
- --------
* Previously filed.
+ Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 and the information required to
be included in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the Registrant pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to sections 13(a) or 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 15 of this
registration statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective; and (2) for the purpose of determining any
liability under the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT TO
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED IN THE CITY OF NEW YORK AND STATE OF NEW YORK ON THE
10TH DAY OF JULY, 1995.
Merrill Lynch & Co., Inc.
/s/ Daniel P. Tully
By __________________________________
DANIEL P. TULLY
(CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES WITH THE REGISTRANT INDICATED ON THE 10TH DAY OF JULY, 1995.
SIGNATURE TITLE
/s/ Daniel P. Tully Chairman of the Board,
- ------------------------------------- Chief Executive Officer
(DANIEL P. TULLY) and Director
/s/ David H. Komansky President, Chief
- ------------------------------------- Operating Officer and
(DAVID H. KOMANSKY) Director
/s/ Joseph T. Willett Senior Vice President
- ------------------------------------- and Chief Financial
(JOSEPH T. WILLETT) Officer (Principal
Financial and Accounting
Officer)
* Director
- -------------------------------------
(WILLIAM O. BOURKE)
* Director
- -------------------------------------
(JILL K. CONWAY)
* Director
- -------------------------------------
(STEPHEN L. HAMMERMAN)
* Director
- -------------------------------------
(EARLE H. HARBISON, JR.)
II-4
<PAGE>
SIGNATURE TITLE
* Director
- -------------------------------------
(GEORGE B. HARVEY)
* Director
- -------------------------------------
(WILLIAM R. HOOVER)
* Director
- -------------------------------------
(ROBERT P. LUCIANO)
* Director
- -------------------------------------
(AULANA L. PETERS)
* Director
- -------------------------------------
(JOHN J. PHELAN, JR.)
* Director
- -------------------------------------
(WILLIAM L. WEISS)
/s/ Joseph T. Willett
*By _________________________________
ATTORNEY-IN-FACT
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ------------
<C> <S> <C>
1(a)* --Form of Underwriting Agreement.
1(b)* --Form of Registration Agreement.
4(a) --Senior Indenture, dated as of April 1, 1983, as
amended and restated, between the Company and
Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), incorporated
herein by reference to Exhibit 99(c) to
Registrant's Registration Statement on Form 8-A
dated July 20, 1992.
4(b)+ --Form of Seventh Supplemental Indenture to the
Senior Indenture between the Company and Chemical
Bank (successor by merger to Manufacturers Hanover
Trust Company).
4(c)+ --Form of certificate representing the STRYPES.
5+ --Opinion of Brown & Wood.
10+ --Form of Purchase Contract between the Company and
The Northwestern Mutual Life Insurance Company
relating to shares of MGIC Common Stock.
12* --Computation of Ratio of Earnings to Fixed
Charges.
15* --Letter of Deloitte & Touche LLP regarding
unaudited interim financial information.
23(a)* --Consent of Deloitte & Touche LLP.
23(b)+ --Consent of Brown & Wood (included in Exhibit 5).
24* --Powers of Attorney.
25+ --Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of Chemical Bank.
99* --Report of Deloitte & Touche LLP with respect to
certain financial data appearing in the
Registration Statement.
</TABLE>
- --------
* Previously filed.
+ Filed herewith.
II-6
<PAGE>
EXHIBIT 4(b)
MERRILL LYNCH & CO., INC.
TO
CHEMICAL BANK,
as Trustee
__________________________________
SEVENTH SUPPLEMENTAL INDENTURE
Dated as of ___________, 1995
__________________________________
Creating a series of Securities designated
Structured Yield Product Exchangeable for Stock/SM/
_____% STRYPES/SM/ Due ______, 1998
Supplemental to Indenture
Dated as of April 1, 1983,
as Amended
<PAGE>
Seventh Supplemental Indenture, dated as of July __, 1995 (the
"Supplemental Indenture"), by and between Merrill Lynch & Co., Inc., a
corporation organized and existing under the laws of the State of Delaware,
having its principal office at World Financial Center, New York, New York 10281
(the "Company"), and Chemical Bank, a corporation duly organized and existing
under the laws of the State of New York and successor by merger to Manufacturers
Hanover Trust Company, having its Corporate Trust Office at 450 West 33rd
Street, New York, New York 10001, as trustee (the "Trustee").
WHEREAS, the Company has heretofore executed and delivered its Indenture,
dated as of April 1, 1983 and restated as of April 1, 1987 (as amended and
supplemented to the date hereof, the "Principal Indenture"), to the Trustee to
provide for the issuance from time to time of its unsecured and unsubordinated
debentures, notes or other evidences of senior indebtedness (the "Securities"),
unlimited as to principal amount; and
WHEREAS, the Principal Indenture, as amended by the Trust Indenture Reform
Act of 1990, and this Supplemental Indenture are hereinafter collectively
referred to as the "Indenture"; and
WHEREAS, the Company proposes to create and issue a new series of
Securities denominated its Structured Yield Product Exchangeable for Stock/SM/,
____ % STRYPES/SM/ Due _____, 1998 (each such Security being referred to herein
as a "STRYPES"), the terms of which will require the Company to pay and
discharge the STRYPES on their maturity date by delivering to the Holders
thereof shares of common stock, par value $1.00 per share, of MGIC Investment
Corporation (or, in the event there shall occur a Reorganization Event (as
defined in Section 203(b) of Article Two), cash, securities and/or other
property in lieu thereof) or, at the option of the Company, cash, in either case
at the Payment Rate as provided herein; and
WHEREAS, Section 901 of the Principal Indenture provides that, without the
consent of any Holders, the Company, when authorized by a Board Resolution, and
the Trustee, at any time and from time to time, may enter into one or more
indentures supplemental to the Principal Indenture, in form satisfactory to the
Trustee, (a) to establish the form or terms of Securities of any series as
permitted by Section 201 and 301 thereof and (b) to cure any ambiguity, to
correct or supplement any provision in the Principal Indenture which may be
defective or inconsistent with any other provision of the Principal Indenture,
or to make any other provisions with respect to matters or questions arising
_______________________
/SM/ Service Mark of Merrill Lynch & Co., Inc.
<PAGE>
under the Principal Indenture which shall not adversely affect the interests of
the Holders of Securities of any series or any related coupons in any material
respect; and
WHEREAS, the Company has duly authorized the execution and delivery of this
Supplemental Indenture, and all things necessary to make this Supplemental
Indenture a valid agreement of the Company, in accordance with its terms, have
been done;
NOW, THEREFORE, the Company and the Trustee, in consideration of the
premises and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby covenant and agree, for the
equal and proportionate benefit of all Holders, as follows:
ARTICLE ONE
THE STRYPES
SECTION 101. The Securities shall be known and designated as the
"Structured Yield Product Exchangeable for Stock, ___% STRYPES Due ______, 1998"
of the Company. The aggregate number of STRYPES which may be authenticated and
delivered under this Supplemental Indenture is limited to 5,750,000 with an
issue price of $_____ per STRYPES, or $__________ in the aggregate, except for
STRYPES evidenced by STRYPES Certificates (as defined in Section 102)
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other STRYPES Certificates evidencing such STRYPES pursuant
to Section 304, 305, 306 or 906 of the Principal Indenture.
The STRYPES shall mature on _______, 1998 (the "Maturity Date"). On the
Maturity Date, the STRYPES shall be paid and discharged as provided in Article
Two of this Supplemental Indenture.
The STRYPES shall bear interest at the rate of ____% of the issue price per
annum, from _______, 1995, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, as the case may be, until the
Maturity Date or such earlier date on which the issue price of all STRYPES is
repaid in accordance with the provisions of the Indenture. Interest shall be
payable in cash quarterly in arrears on February 15, May 15, August 15 and
November 15, commencing November 15, 1995, and on the Maturity Date.
The interest on the STRYPES shall be payable and the Maturity Consideration
(as defined in Section 201 of Article Two) shall be deliverable or payable at
the office or agency of the Company in the Borough of Manhattan, The City of New
York maintained for such purpose and at any other office or agency maintained by
the Company for such purpose; provided, however, that at the option of the
Company payment of interest may be made
2
<PAGE>
by check mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register.
The STRYPES shall not be redeemable at the option of the Company, or
payable at the option of the Holders, prior to the Maturity Date.
The STRYPES shall be issuable only in registered form without coupons. No
fractional STRYPES or scrip representing fractional STRYPES shall be issued.
SECTION 102. The STRYPES shall be evidenced by certificates ("STRYPES
Certificates") in the form attached hereto as Exhibit A.
ARTICLE TWO
PAYMENT AND DISCHARGE OF STRYPES
SECTION 201. Payment and Discharge on the Maturity Date. On the Maturity
------------------------------------------
Date, the Company shall pay and discharge each STRYPES by delivering to the
Holder thereof a number of shares (such number of shares being hereinafter
referred to as the "Payment Rate") of common stock, par value $1.00 per share
("MGIC Common Stock"), of MGIC Investment Corporation ("MGIC Investment")
determined in accordance with the following formula (the "Payment Rate
Formula"), subject to adjustment as a result of certain dilution events relating
to the MGIC Common Stock as provided for in Section 203 of this Article Two: the
Payment Rate shall equal (a) if the Maturity Price (as defined below) is greater
than or equal to $_____ per share of MGIC Common Stock (the "Threshold
Appreciation Price"), ______ shares of MGIC Common Stock per STRYPES, (b) if the
Maturity Price is less than the Threshold Appreciation Price but is greater than
$______ per share of MGIC Common Stock (the "Initial Price"), a number of shares
of MGIC Common Stock per STRYPES so that the value thereof (determined based on
the Maturity Price) is equal to the Initial Price (such fractional share being
calculated to the nearest 1/10,000th of a share or, if there is not a nearest
1/10,000th of a share, to the next highest 1/10,000th of a share) and (c) if the
Maturity Price is less than or equal to the Initial Price, one share of MGIC
Common Stock per STRYPES. The numbers of shares of MGIC Common Stock per STRYPES
specified in clauses (a) and (c) of the Payment Rate Formula are hereinafter
referred to as the "Share Components". No fractional shares of MGIC Common Stock
shall be delivered on the Maturity Date as provided in Section 202 of this
Article Two. Notwithstanding the foregoing, the Company may, at its option, in
lieu of delivering shares of MGIC Common Stock, deliver cash in an amount
(calculated to the nearest 1/100th of a dollar per STRYPES or, if there is not a
nearest 1/100th of a dollar, then to the next higher 1/100th of a dollar) equal
to the value of such number of shares of MGIC Common Stock at the Maturity
Price. Such option,
3
<PAGE>
if exercised by the Company, must be exercised with respect to all shares of
MGIC Common Stock otherwise deliverable on the Maturity Date upon payment and
discharge of all Outstanding STRYPES. In determining the amount of cash
deliverable upon payment and discharge of the STRYPES in lieu of shares of MGIC
Common Stock pursuant to the second preceding sentence, if more than one STRYPES
shall be held at one time by the same Holder, the amount of cash which shall be
delivered to such Holder upon payment and discharge shall be computed on the
basis of the aggregate number of STRYPES so held on the Maturity Date. Such
number of shares of MGIC Common Stock (or amount of cash or, in the event there
shall occur a Reorganization Event, cash, securities and/or other property, in
lieu thereof) deliverable upon payment and discharge of the STRYPES on the
Maturity Date is hereinafter referred to as the "Maturity Consideration."
The term "Maturity Price" means, subject to Section 203(a)(v) of this
Article Two, the average Closing Price per share of MGIC Common Stock on the 20
Trading Days immediately prior to, but not including, the Maturity Date. The
term "Closing Price" means, with respect to any security on any date of
determination, the closing sale price (or, if no closing price is reported, the
last reported sale price) of such security on the New York Stock Exchange (the
"NYSE") on such date or, if such security is not listed for trading on the NYSE
on any such date, as reported in the composite transactions for the principal
United States securities exchange on which such security is so listed, or if
such security is not so listed on a United States national or regional
securities exchange, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System, or, if such security is not so
reported, the last quoted bid price for such security in the over-the-counter
market as reported by the National Quotation Bureau or similar organization, or,
if such bid price is not available, the market value of such security on such
date as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Company. The term "Trading Day" means,
with respect to any security the Closing Price of which is being determined, a
day on which such security (A) is not suspended from trading on any national or
regional securities exchange or association or over-the-counter market at the
close of business and (B) has traded at least once on the national or regional
securities exchange or association or over-the-counter market that is the
primary market for the trading of such security.
SECTION 202. No Fractional Shares. No fractional shares or scrip
--------------------
representing fractional shares of MGIC Common Stock shall be delivered on the
Maturity Date. If more than one STRYPES shall be held at one time by the same
Holder, the number of full shares of MGIC Common Stock which shall be delivered
in payment of such Holder's STRYPES shall be computed on the basis of the
aggregate number of STRYPES so held on the Maturity Date. In lieu of any
fractional share of MGIC Common Stock which would
4
<PAGE>
otherwise be deliverable upon payment and discharge of any STRYPES on the
Maturity Date, the Company, through any applicable Paying Agent, shall make a
cash payment in respect of such fractional interest in an amount equal to the
value of such fractional share at the Maturity Price.
SECTION 203. Adjustment of Payment Rate Formula.
----------------------------------
(a) Adjustment for Distributions, Reclassifications, etc. The Payment
-----------------------------------------------------
Rate Formula shall be subject to adjustment from time to time as follows:
(i) If MGIC Investment shall:
(A) pay a stock dividend or make a distribution with respect to
MGIC Common Stock in shares of such stock;
(B) subdivide or split the outstanding shares of MGIC Common
Stock into a greater number of shares;
(C) combine the outstanding shares of MGIC Common Stock into a
smaller number of shares; or
(D) issue by reclassification of shares of MGIC Common Stock any
shares of common stock of MGIC Investment;
then, in any such event, the Payment Rate Formula shall be adjusted so that each
Holder of any STRYPES shall thereafter be entitled to receive, upon payment and
discharge of such STRYPES on the Maturity Date, as set forth in Section 201 of
this Article Two, the number of shares of MGIC Common Stock which such Holder
would have owned or been entitled to receive immediately following any event
described above had such STRYPES been paid and discharged immediately prior to
such event or any record date with respect thereto. Each such adjustment shall
become effective at the opening of business on the Business Day next following
the record date for determination of holders of MGIC Common Stock entitled to
receive such dividend or distribution in the case of a dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, split, combination or reclassification. Each such adjustment shall
be made successively.
(ii) If MGIC Investment shall, after the date hereof, issue rights or
warrants to all holders of MGIC Common Stock entitling them to subscribe for or
purchase shares of MGIC Common Stock (other than rights to purchase MGIC Common
Stock pursuant to a plan for the reinvestment of dividends or interest) at a
price per share less than the then current market price of the MGIC Common Stock
(determined for purposes of this subparagraph (ii) as the average Closing Price
per share of MGIC Common Stock on the 20 Trading Days immediately prior to the
date such rights or warrants are issued), then in each case the Payment Rate
5
<PAGE>
Formula shall be adjusted by multiplying each of the Share Components in the
Payment Rate Formula in effect immediately prior to the date of issuance of such
rights or warrants, by a fraction, of which the numerator shall be the number of
shares of MGIC Common Stock outstanding on the date of issuance of such rights
or warrants, immediately prior to such issuance, plus the number of additional
shares of MGIC Common Stock offered for subscription or purchase pursuant to
such rights or warrants, and of which the denominator shall be the number of
shares of MGIC Common Stock outstanding on the date of issuance of such rights
or warrants, immediately prior to such issuance, plus the number of additional
shares of MGIC Common Stock which the aggregate offering price of the total
number of shares of MGIC Common Stock so offered for subscription or purchase
pursuant to such rights or warrants would purchase at such current market price
(determined as the average Closing Price per share of MGIC Common Stock on the
20 Trading Days immediately prior to the date such rights or warrants are
issued), which shall be determined by multiplying such total number of shares by
the exercise price of such rights or warrants and dividing the product so
obtained by such current market price. Such adjustment shall become effective
at the opening of business on the Business Day next following the record date
for the determination of stockholders entitled to receive such rights or
warrants. To the extent that shares of MGIC Common Stock are not delivered
after the expiration of such rights or warrants, the Payment Rate Formula shall
be readjusted to the Payment Rate Formula which would then be in effect had such
adjustments for the issuance of such rights or warrants been made upon the basis
of delivery of only the number of shares of MGIC Common Stock actually
delivered. Each such adjustment shall be made successively.
(iii) If MGIC Investment shall pay a dividend or make a distribution
to all holders of MGIC Common Stock of evidences of its indebtedness or other
assets (excluding any stock dividends or distributions referred to in
subparagraph (i) above or any ordinary periodic cash dividends that do not
constitute Extraordinary Cash Dividends (as defined in subparagraph (vi) below))
or shall issue to all holders of MGIC Common Stock rights or warrants to
subscribe for or purchase any of its securities (other than those referred to in
subparagraph (ii) above), then in each such case, the Payment Rate Formula shall
be adjusted by multiplying each of the Share Components in the Payment Rate
Formula in effect on the record date referred to below, by a fraction of which
the numerator shall be the current market price per share of the MGIC Common
Stock on the record date for the determination of stockholders entitled to
receive such dividend or distribution (such current market price being
determined for purposes of this subparagraph (iii) as the average Closing Price
per share of MGIC Common Stock on the 20 Trading Days immediately prior to such
record date), and of which the denominator shall be such current market price
per share of MGIC Common Stock less the fair market value (as determined by the
Board of Directors of the
6
<PAGE>
Company, whose determination shall be conclusive, and described in a resolution
adopted with respect thereto) as of such record date of the portion of the
assets or evidences of indebtedness so distributed or of such subscription
rights or warrants applicable to one share of MGIC Common Stock. Each such
adjustment shall become effective on the opening of business on the Business Day
next following the record date for the determination of stockholders entitled to
receive such dividend or distribution. Each such adjustment shall be made
successively.
(iv) Any shares of MGIC Common Stock issuable in payment of a
dividend shall be deemed to have been issued immediately prior to the close of
business on the record date for such dividend for purposes of calculating the
number of outstanding shares of MGIC Common Stock under subparagraph (ii) above.
(v) All adjustments to the Payment Rate Formula shall be calculated
to the nearest 1/10,000th of a share of MGIC Common Stock (or if there is not a
nearest 1/10,000th of a share to the next lower 1/10,000th of a share). No
adjustment in the Payment Rate Formula shall be required unless such adjustment
would require an increase or decrease of at least one percent therein; provided,
however, that any adjustments which by reason of this subparagraph are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. If an adjustment is made to the Payment Rate Formula
pursuant to subparagraph (i), (ii) or (iii) of this Section 203(a), an
adjustment shall also be made to the Maturity Price solely to determine which of
clauses (a), (b) or (c) of the Payment Rate Formula in Section 201 will apply on
the Maturity Date. The required adjustment shall be made by multiplying each of
the Closing Prices used in determining the Maturity Price by a fraction of which
the numerator shall be the Share Component in clause (c) of the Payment Rate
Formula immediately after such adjustment pursuant to subparagraph (i), (ii) or
(iii) and of which the denominator shall be the Share Component in clause (c) of
the Payment Rate Formula immediately before such adjustment. Each such
adjustment shall be made successively. This subparagraph (v) shall be so used
to adjust the definition of Maturity Price only as such term is used for the
first time in each of clauses (a), (b) and (c) of the Payment Rate Formula.
(vi) For purposes of the foregoing, the term "Extraordinary Cash
Dividend" shall mean, with respect to any consecutive 12-month period, any cash
dividend with respect to MGIC Common Stock the amount of which, together with
the aggregate amount of all other such cash dividends on the MGIC Common Stock
occurring in such 12-month period, exceeds on a per share basis 10% of the
average of the Closing Prices per share of the MGIC Common Stock over such 12-
month period, and for purposes of applying the formula set forth in subparagraph
(iii) above, the fair market value of such dividends being calculated pursuant
7
<PAGE>
to such subparagraph (iii) shall be equal to (x) the aggregate amount of such
cash dividend together with the amounts of such other cash dividends occurring
in such period minus (y) the aggregate amount of such other cash dividends
occurring in such period for which a prior adjustment in the Payment Rate
Formula was previously made under this Section 203(a). In making the
determinations required by the foregoing sentence, the amount of cash dividends
paid on a per share basis shall be appropriately adjusted to reflect the
occurrence during such period of any event described in this Section 203(a).
(b) Adjustment for Consolidation, Merger or Other Reorganization Event.
------------------------------------------------------------------
In the event of (i) any consolidation or merger of MGIC Investment, or any
surviving entity or subsequent surviving entity of MGIC Investment (a "MGIC
Successor"), with or into another entity (other than a merger or consolidation
in which MGIC Investment is the continuing corporation and in which the MGIC
Common Stock outstanding immediately prior to the merger or consolidation is not
exchanged for cash, securities or other property of MGIC Investment or another
corporation), (ii) any sale, transfer, lease or conveyance to another
corporation of the property of MGIC Investment or any MGIC Successor as an
entirety or substantially as an entirety, (iii) any statutory exchange of
securities of MGIC Investment or any MGIC Successor with another corporation
(other than in connection with a merger or acquisition) or (iv) any liquidation,
dissolution or winding up of MGIC Investment or any MGIC Successor (any such
event described in clause (i), (ii), (iii) or (iv), a "Reorganization Event"),
the Payment Rate Formula used to determine the amount payable on the Maturity
Date for each STRYPES will be adjusted to provide that each Holder of STRYPES
will receive for each STRYPES on the Maturity Date cash in an amount equal to
(a) if the Transaction Value (as defined below) is greater than or equal to the
Threshold Appreciation Price, _________ multiplied by the Transaction Value, (b)
if the Transaction Value is less than the Threshold Appreciation Price but
greater than the Initial Price, the Initial Price and (c) if the Transaction
Value is less than or equal to the Initial Price, the Transaction Value.
"Transaction Value" means (x) for any cash received in any such Reorganization
Event, the amount of cash received per share of MGIC Common Stock, (y) for any
property other than cash or securities received in any such Reorganization
Event, an amount equal to the market value on the Maturity Date of such property
received per share of MGIC Common Stock as determined by a nationally recognized
independent investment banking firm retained for this purpose by the Company and
(z) for any securities received in any such Reorganization Event, an amount
equal to the average Closing Price per unit of such securities on the 20 Trading
Days immediately prior to the Maturity Date, multiplied by the number of such
securities received for each share of MGIC Common Stock. Notwithstanding the
foregoing, in the event that property or securities, or a combination of cash,
on the one hand, and property or securities, on the other, are
8
<PAGE>
received in such Reorganization Event, the Company may, at its option, in lieu
of delivering cash as described above, deliver the amount of cash, securities
and other property received per share of MGIC Common Stock in such
Reorganization Event determined in accordance with clause (x), (y) or (z) above,
as applicable. If the Company elects to deliver securities or other property,
Holders of the STRYPES will be responsible for the payment of any and all
brokerage and transaction costs upon any subsequent sale of such securities or
other property. The kind and amount of securities with which the STRYPES shall
be paid and discharged after consummation of such transaction shall be subject
to adjustment as described in paragraph (a) above following the date of
consummation of such transaction.
SECTION 204. Notice of Adjustments and Certain Other Events.
----------------------------------------------
(a) Whenever the Payment Rate Formula requires adjustment as herein
provided, the Company shall:
(i) forthwith compute the adjusted Payment Rate Formula in accordance
with Section 203 of this Article Two and prepare a certificate signed by an
officer of the Company setting forth the adjusted Payment Rate Formula, the
method of calculation thereof in reasonable detail, and the facts requiring such
adjustment and upon which such adjustment is based, which certificate shall be
conclusive, final and binding evidence of the correctness of the adjustment, and
file such certificate forthwith with the Trustee; and
(ii) within 10 Business Days following the occurrence of an event
that requires an adjustment to the Payment Rate Formula pursuant to Section 203
of this Article Two (or if the Company is not aware of such occurrence, as soon
as practicable after becoming so aware), provide written notice to the Trustee
and to the Holders of the STRYPES of the occurrence of such event and a
statement in reasonable detail setting forth the adjusted Payment Rate Formula
and the method by which the adjustment to the Payment Rate Formula was
determined, provided, that, in respect of any adjustment to the Maturity Price
required pursuant to Section 203(a)(v), such notice need only disclose the
factor by which each of the Closing Prices used in determining the Maturity
Price is to be multiplied in order to determine the Payment Rate on the Maturity
Date, it being understood that, until the Maturity Date, the Payment Rate itself
cannot be determined.
(b) In case at any time while any of the STRYPES are outstanding the
Company receives notice that:
(i) MGIC Investment shall declare a dividend (or any other
distribution) on or in respect of the MGIC Common Stock to which Section
203(a)(i) or (iii) shall apply (other than any
9
<PAGE>
cash dividends and distributions, if any, paid from time to time by MGIC
Investment that do not constitute Extraordinary Cash Dividends);
(ii) MGIC Investment shall authorize the issuance to all holders of
MGIC Common Stock of rights or warrants to subscribe for or purchase shares of
MGIC Common Stock or of any other subscription rights or warrants;
(iii) there shall occur any conversion or reclassification of MGIC
Common Stock (other than a subdivision or combination of outstanding shares of
such MGIC Common Stock) or any consolidation, merger or reorganization to which
MGIC Investment is a party and for which approval of any stockholders of MGIC
Investment is required, or the sale or transfer of all or substantially all of
the assets of MGIC Investment; or
(iv) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of MGIC Investment;
then the Company shall promptly cause to be delivered to the Trustee and any
applicable Paying Agent and filed at the office or agency maintained for the
purpose of payment and discharge of STRYPES on the Maturity Date in the Borough
of Manhattan, The City of New York by the Trustee (or any applicable Paying
Agent), and shall promptly cause to be mailed to the Holders of STRYPES at their
last addresses as they shall appear in the Security Register, at least 10 days
before the date hereinafter specified (or the earlier of the dates hereinafter
specified, in the event that more than one is specified), a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution or grant of rights or warrants, or, if a record is not to be taken,
the date as of which the holders of MGIC Common Stock of record to be entitled
to such dividend, distribution or grant of rights or warrants are to be
determined, or (y) the date, if known by the Company, on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective.
(c) On or prior to the day four Business Days preceding the Maturity Date,
the Company will notify the Trustee and will publish a notice in The Wall Street
Journal or another daily newspaper of national circulation stating whether the
STRYPES will be paid and discharged with shares of MGIC Common Stock or cash (or
any other property or securities that may be delivered pursuant to Section
203(b)) on the Maturity Date in accordance with Section 201.
SECTION 205. Taxes.
-----
(a) The Company will pay any and all documentary, stamp, transfer or
similar taxes that may be payable in respect of the
10
<PAGE>
transfer and delivery of MGIC Common Stock pursuant hereto; provided, however,
that the Company shall not be required to pay any such tax which may be payable
in respect of any transfer involved in the delivery of MGIC Common Stock in a
name other than that in which the STRYPES so paid and discharged were
registered, and no such transfer or delivery shall be made unless and until the
Person requesting such transfer has paid to the Company the amount of any such
tax, or has established, to the satisfaction of the Company, that such tax has
been paid.
(b) The parties hereto hereby agree, and each Holder of a STRYPES by its
purchase of a STRYPES hereby agrees:
(i) to treat, for all United States Federal, state and local tax purposes,
each STRYPES as a unit (a "Unit") consisting of (A) a debt instrument
(the "Debt Instrument") with a fixed principal amount unconditionally
payable on the Maturity Date equal to the issue price of the STRYPES
and bearing interest at the stated interest rate on the STRYPES and
(B) a forward purchase contract (the "Forward Contract") pursuant to
which the Holder is irrevocably committed to use the principal payment
due on the Debt Instrument to purchase on the Maturity Date the MGIC
Common Stock which the Company is obligated to deliver at that time
(subject to the Company's right to deliver cash with an equal value in
lieu of the MGIC Common Stock), which treatment will require, among
other things, each Holder that is subject to United States Federal
income tax in connection with its ownership of the STRYPES to include
currently in income payments denominated as interest that are made
with respect to the STRYPES in accordance with such Holder's regular
method of tax accounting;
(ii) in the case of purchases of STRYPES in connection with the original
issuance thereof, to allocate $_______ of the entire initial purchase
price of a STRYPES (i.e., the issue price of a STRYPES) to the Debt
Instrument component and to allocate the remaining $_________ of the
entire initial purchase price of a STRYPES to the Forward Contract
component;
(iii) in the case of purchases and sales of STRYPES subsequent to the
original issuance thereof, the purchase price paid (or received) by a
Holder will be allocated by the Holder between the Debt Instrument and
the Forward Contract based upon their relative fair market values (as
determined on the date of acquisition or disposition);
(iv) to file all United States Federal, state and local income, franchise
and estate tax returns consistent with the treatment of each STRYPES
as a Unit consisting
11
<PAGE>
of the Debt Instrument and the Forward Contract (in the absence of any
change or clarification in applicable law, by regulation or otherwise,
requiring a different characterization or treatment of the STRYPES).
SECTION 206. Shares Free and Clear. The Company hereby warrants that upon
---------------------
payment and discharge of a STRYPES on the Maturity Date pursuant to this
Supplemental Indenture, the Holder of a STRYPES shall receive all rights held by
the Company in the MGIC Common Stock with which such STRYPES is at such time
payable and dischargeable pursuant to this Supplemental Indenture, free and
clear of any and all liens, claims, charges and encumbrances, other than any
liens, claims, charges and encumbrances which may have been placed on any MGIC
Common Stock by the prior owner thereof prior to the time such MGIC Common
Stock was acquired by the Company. Except as provided in Section 205(a), the
Company will pay all taxes and charges with respect to the delivery of MGIC
Common Stock delivered upon payment and discharge of STRYPES hereunder. In
addition, the Company further warrants that any MGIC Common Stock so delivered
upon payment and discharge of STRYPES hereunder shall be free of any transfer
restrictions (other than such as are solely attributable to any Holder's status
as an affiliate of MGIC Investment).
SECTION 207. Cancellation of STRYPES Certificates. Upon receipt by the
------------------------------------
Trustee of a STRYPES Certificate delivered to it for payment and discharge of
the STRYPES evidenced thereby under this Article Two, the Trustee shall cancel
and dispose of the same as provided in Section 309 of the Principal Indenture.
ARTICLE THREE
AMENDMENT OF CERTAIN PROVISIONS
OF THE PRINCIPAL INDENTURE
SECTION 301. Section 301 of the Principal Indenture is hereby amended by
(i) adding as a new clause (16) the following: "(16) the obligation, if any, of
the Company to pay and discharge the Securities of such series at maturity by
delivering to the Holders thereof other securities (whether or not issued by, or
the obligation of, the Company), or a combination of cash, other securities
and/or other property, and the terms and conditions upon which such payment and
discharge shall be effected (including, without limitation, the initial payment
price or rate and any other provision in addition to or in lieu of those set
forth in this Indenture relative to such obligation);"; and (ii) renumbering
current clauses (16) and (17) of Section 301 to clauses (17) and (18),
respectively.
SECTION 302. The Principal Indenture is hereby amended, solely with
respect to the STRYPES, as follows:
12
<PAGE>
(a) By deleting Section 308 of the Principal Indenture in its entirety
and inserting in its stead the following:
"SECTION 308. Persons Deemed Owners. Prior to due presentment of a STRYPES
Certificate for registration of transfer of STRYPES evidenced thereby, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such STRYPES Certificate is registered as the owner of the
STRYPES evidenced thereby for the purpose of receiving delivery or payment of
the Maturity Consideration in respect of, and (subject to Sections 305 and 307)
interest on, such STRYPES and for all other purposes whatsoever, whether or not
such STRYPES be overdue, and neither the Company, the Trustee nor any agent of
the Company or the Trustee shall be affected by notice to the contrary."
(b) By deleting Section 501 of the Principal Indenture in its entirety
and inserting in its stead the following:
"SECTION 501. Events of Default. "Event of Default", wherever used herein
with respect to STRYPES, means any one of the following events (whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) failure to deliver or pay the Maturity Consideration on the
Maturity Date; or
(2) failure to pay any interest on any STRYPES when due, and
continuance of such failure for a period of 30 days; or
(3) failure to perform any other covenant of the Company in this
Indenture (other than a covenant a failure in whose performance is
elsewhere in this Section specifically dealt with), and the continuance of
such failure for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee, or to the
Company and the Trustee by the Holders of at least 10% of the aggregate
issue price of the Outstanding STRYPES a written notice specifying such
failure and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(4) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or for any
substantial part of its property, or ordering the
13
<PAGE>
winding-up or liquidation of its affairs, and such decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(5) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or similar official) of the Company or for any substantial
part of its property, or shall fail generally to pay its debts as they
become due or shall take any corporate action in furtherance of any of the
foregoing."
(c) By deleting Section 502 of the Principal Indenture in its entirety
and inserting in its stead the following:
"SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default (other than an Event of Default specified in Section
501(4) or 501(5)) occurs and is continuing, then and in every such case the
Trustee or the Holders of not less than 25% of the aggregate issue price of
the Outstanding STRYPES may declare an amount equal to the issue price of
all the STRYPES to be due and payable immediately, by a notice in writing
to the Company (and to the Trustee if given by the Holders), and upon any
such declaration such amount shall become immediately due and payable in
cash. If an Event of Default specified in Section 501(4) or 501(5) occurs,
an amount equal to the issue price of all the STRYPES shall automatically,
and without any declaration or other action on the part of the Trustee or
any Holder, become immediately due and payable in cash.
At any time after such a declaration of acceleration has been made or an
Event of Default specified in Section 501(4) or 501(5) has occurred, and
before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter provided, the Holders of a majority of the
aggregate issue price of the Outstanding STRYPES, by written notice to the
Company and the Trustee, may rescind and annul such declaration or Event of
Default and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on all STRYPES,
14
<PAGE>
(B) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate borne
by the STRYPES, and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel,
and
(2) all Events of Default with respect to the STRYPES, other than the
non-payment of the amount equal to the issue price of all the STRYPES
due solely by reason of such declaration of acceleration or Event of
Default specified in Section 501(4) or 501(5), have been cured or
waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon."
(d) By deleting the first paragraph of Section 503 of the Principal
Indenture in its entirety and inserting in its stead the following:
"The Company covenants that, if default is made in the payment of any
installment of interest on any STRYPES (other than interest due on the
Maturity Date) when such interest becomes due and payable and such default
continues for a period of 30 days, the Company will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such STRYPES, an
amount equal to the issue price of all the STRYPES, the whole amount of
interest then due and payable on such STRYPES and, to the extent that
payment of such interest shall be legally enforceable, interest on any
overdue interest, at the rate borne by the STRYPES, and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
The Company further covenants that, if the Maturity Consideration or
any interest due on the Maturity Date is not delivered or paid in respect
of any STRYPES on the Maturity Date, the Company will, upon demand of the
Trustee, pay to it, for the benefit of the Holders of such STRYPES, the
Maturity Consideration then due and payable on such STRYPES, the whole
amount of interest then due and payable on such STRYPES and, to the extent
that payment of such interest shall be legally enforceable, interest on any
Maturity Consideration that is overdue and on any overdue interest, at the
rate borne by the STRYPES, and, in addition thereto, such further amount as
shall be sufficient to cover
15
<PAGE>
the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel."
(e) By deleting Section 506 of the Principal Indenture in its entirety
and inserting in its stead the following:
"SECTION 506. Application of Money Collected. Any money collected by the
Trustee pursuant to this Article shall be applied in the following order,
at the date or dates fixed by the Trustee and, in case of the distribution
of such money on account of the Maturity Consideration or interest, upon
presentation of the relevant STRYPES Certificate and the notation thereon
of the payment if only partially paid and upon surrender thereof if fully
paid:
FIRST: To the payment of all amounts due the Trustee under Section
607;
SECOND: To the payment of any amounts then due and unpaid on the
STRYPES in respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such STRYPES; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto."
(f) By deleting Section 508 of the Principal Indenture in its entirety
and inserting in its stead the following:
"SECTION 508. Unconditional Right of Holders to Receive the Maturity
Consideration and Interest. Notwithstanding any other provision in this
Indenture, the Holder of any STRYPES shall have the right, which is
absolute and unconditional, to receive (subject to Section 502) payment of
the Maturity Consideration in respect of and (subject to Sections 305 and
307) interest on such STRYPES and to institute suit for the enforcement of
any such payment, and such right shall not be impaired without the consent
of such Holder."
(g) By deleting the first sentence of Section 513 of the Principal
Indenture in its entirety and inserting in its stead the following:
"The Holders of not less than a majority of the aggregate issue price of
the Outstanding STRYPES may on behalf of the Holders of all STRYPES waive
any past default hereunder and its consequences, except a default
(1) in the delivery or payment of the Maturity Consideration or in the
payment of interest on any STRYPES, or
16
<PAGE>
(2) in respect of a covenant or provision hereof which under Article Nine
cannot be modified or amended without the consent of the Holder of each
Outstanding STRYPES affected."
(h) By deleting Section 801 of the Principal Indenture in its entirety
and inserting in its stead the following:
"SECTION 801. Consolidations and Mergers of the Company and Sales, Leases
and Conveyances Permitted Subject to Certain Conditions. The Company may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into any other corporation, provided that in
any such case, (i) either the Company shall be the continuing corporation,
or the successor corporation shall be a corporation organized and existing
under the laws of the United States of America or a State thereof and such
successor corporation shall expressly assume the due and punctual delivery
or payment of the Maturity Consideration in respect of and interest on all
the STRYPES, according to their tenor, and the due and punctual performance
and observance of all of the covenants and conditions of this Indenture to
be performed by the Company by supplemental indenture satisfactory to the
Trustee, executed and delivered to the Trustee by such corporation, and
(ii) the Company or such successor corporation, as the case may be, shall
not, immediately after such merger or consolidation, or such sale, lease or
conveyance, be in default in the performance of any such covenant or
condition."
(i) By deleting the first sentence of Section 902 of the Principal
Indenture in its entirety and inserting in its stead the following:
"With the consent of the Holders of not less than 66-2/3% of the aggregate
issue price of the Outstanding STRYPES, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board
Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of STRYPES under this
Indenture; provided, however, that no such supplemental indenture shall,
without the consent of the Holder of each Outstanding STRYPES affected
thereby,
(1) change the Maturity Date or the Stated Maturity of any installment
of interest on any STRYPES, or reduce the amount of Maturity Consideration
deliverable or payable on the Maturity Date or reduce the amount of
interest payable on any STRYPES or reduce the amount of cash payable with
respect to any STRYPES upon acceleration of the Maturity, or change any
Place of Payment where, or the coin or currency
17
<PAGE>
in which, any interest on or any amount of cash payable with respect to any
STRYPES is payable, or impair the right to institute suit for the
enforcement of (i) any payment on or with respect to any STRYPES or (ii)
the delivery or payment of the Maturity Consideration with respect to any
STRYPES, or
(2) reduce the percentage of the aggregate issue price of Outstanding
STRYPES, the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required for waiver (of
compliance with certain provisions of this Indenture or certain defaults
hereunder and their consequences) provided for in this Indenture, or reduce
the requirements of Section 1404 for quorum or voting, or
(3) modify any of the provisions of this Section, or Section 513, or
Section 1007, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding STRYPES affected
thereby.
(j) By deleting Section 1001 of the Principal Indenture in its entirety
and inserting in its stead the following:
"SECTION 1001. Delivery and Payment of the Maturity Consideration and
Interest. The Company covenants and agrees for the benefit of the Holders
of the STRYPES that it will duly and punctually deliver or pay the Maturity
Consideration in respect of, and interest on, the STRYPES in accordance
with the terms of the STRYPES and this Indenture."
(k) By deleting Section 1003 of the Principal Indenture in its entirety
and inserting in its stead the following:
"SECTION 1003. Money for Security Payments to Be Held in Trust. If the
Company shall at any time act as its own Paying Agent, it will, on or
before each due date of the Maturity Consideration in respect of, or
interest on, any of the STRYPES, segregate and hold in trust for the
benefit of the Persons entitled thereto consideration in an amount
sufficient to deliver or pay the Maturity Consideration or a sum sufficient
to pay the interest so becoming due until such consideration shall be
delivered or paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so
to act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to each due date of the Maturity Consideration in respect of, or interest
on, any STRYPES,
18
<PAGE>
deposit with a Paying Agent consideration in an amount sufficient to
deliver or pay the Maturity Consideration or a sum sufficient to pay the
interest so becoming due, such consideration to be held as provided by the
Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to
act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall
agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will (i) comply with the provisions of the Trust
Indenture Act applicable to it as Paying Agent and (ii) during the
continuance of any default by the Company (or any other obligor upon the
STRYPES) in the making of any payment in respect of the STRYPES, upon the
written request of the Trustee, forthwith pay to the Trustee all sums held
in trust by such Paying Agent as such.
The Company may at any time, for any purpose, pay, or by Company Order
direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon
the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability
with respect to such money.
Any consideration deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the interest on or
delivery upon discharge of any STRYPES and remaining unclaimed for two
years after such consideration has become due and payable shall be paid to
the Company on Company Request, or (if then held by the Company) shall be
discharged from such trust; and the Holder of such STRYPES shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust consideration, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee
or such Paying Agent, before being required to make any such repayment, may
at the expense of the Company cause to be published once, in an Authorized
Newspaper in each Place of Payment or to be mailed to Holders of the
STRYPES, or both, notice that such consideration remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days
from the date of such publication or mailing, any unclaimed balance of such
consideration then remaining will be repaid to the Company."
19
<PAGE>
SECTION 303. Except as otherwise specifically provided in this Supplemental
Indenture, whenever in the Principal Indenture there is mentioned, in any
context, the principal of or principal amount of any Security of any series or a
percentage in principal amount of the Outstanding Securities of any series, such
mention shall be deemed to be, solely with respect to the STRYPES, the issue
price of the STRYPES or a percentage of the aggregate issue price of the
Outstanding STRYPES.
ARTICLE FOUR
MISCELLANEOUS
SECTION 401. The Principal Indenture, as supplemented and amended by this
Supplemental Indenture and all other indentures supplemental thereto, is in all
respects ratified and confirmed, and the Principal Indenture, this Supplemental
Indenture and all indentures supplemental thereto shall be read, taken and
construed as one and the same instrument.
SECTION 402. If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Supplemental
Indenture by any of the provisions of the Trust Indenture Act, such required
provision shall control.
SECTION 403. All covenants and agreements in this Supplemental Indenture
by the Company shall bind its successors and assigns, whether so expressed or
not.
SECTION 404. In case any provision in this Supplemental Indenture or in
the STRYPES shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions (or of the other series of
Securities) shall not in any way be affected or impaired thereby.
SECTION 405. Nothing in this Supplemental Indenture, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders of the STRYPES, any benefit or any legal or equitable
right, remedy or claim under this Supplemental Indenture.
SECTION 406. This Supplemental Indenture and each STRYPES shall be deemed
to be a contract made under the laws of the State of New York and this
Supplemental Indenture and each such STRYPES shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 407. All terms used in this Supplemental Indenture not otherwise
defined herein that are defined in the Principal Indenture shall have the
meanings set forth therein.
20
<PAGE>
SECTION 408. This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
SECTION 409. The recitals contained herein shall be taken as statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of the
Principal Indenture or this Supplemental Indenture.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
Merrill Lynch & Co., Inc.
By: ____________________________
Name:
Title:
Chemical Bank, as Trustee
By: ____________________________
Name:
Title:
22
<PAGE>
EXHIBIT A
[Form of Face of STRYPES Certificate]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS
A WHOLE BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE
DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS SECURITY IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
No. ____________ ___________ STRYPES
CUSIP NO. [___]
MERRILL LYNCH & CO., INC.
Structured Yield Product Exchangeable for Stock/SM/
______% STRYPES/SM/ Due ______, 1998
(Payable with Shares of Common Stock,
par value $1.00 per share, of MGIC Investment Corporation)
Issue Price Per STRYPES: $___________
Merrill Lynch & Co., Inc., a Delaware corporation (hereinafter called the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay and
discharge each STRYPES evidenced hereby on ________, 1998 (the "Maturity Date")
by delivering to _____________________________________________, or registered
assigns, a number of shares (such number of shares, the "Payment Rate") of
common stock, par value $1.00 per share ("MGIC Common Stock"), of MGIC
Investment Corporation ("MGIC Investment") determined in accordance with the
Payment Rate Formula (as defined below), and to pay interest (computed on the
basis of a 360-day year of twelve 30-day months) on such STRYPES from
____________, 1995, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, on
23
<PAGE>
February 15, May 15, August 15 and November 15 in each year, commencing November
15, 1995, and on the Maturity Date, at the rate of ___% of the Issue Price per
annum, until the Maturity Date or such earlier date on which the Issue Price is
repaid in accordance with the provisions described below. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in said Indenture, be paid to the Person in whose name this
STRYPES Certificate (or one or more Predecessor STRYPES Certificates) is
registered at the close of business on the last day (whether or not a Business
Day) of the month next preceding such Interest Payment Date (each a "Regular
Record Date"). In any case where such Interest Payment Date shall not be a
Business Day, then (notwithstanding any other provision of said Indenture or
this STRYPES Certificate) payment of such interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on such date, and, if such payment is so made, no interest
shall accrue for the period from and after such date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date, and may be paid to the
Person in whose name this STRYPES Certificate (or one or more Predecessor
STRYPES Certificates) is registered at the close of business on a Special Record
Date for the payment of such interest to be fixed by the Trustee hereinafter
referred to, notice whereof shall be given to Holders of STRYPES not less than
10 days prior to such Special Record Date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the STRYPES may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
The Payment Rate shall be determined in accordance with the following
formula (the "Payment Rate Formula"), subject to adjustment as a result of
certain dilution events relating to the MGIC Common Stock as provided for in the
Indenture: the Payment Rate shall equal (a) if the Maturity Price (as defined
below) is greater than or equal to $______ per share of MGIC Common Stock (the
"Threshold Appreciation Price"), _________ shares of MGIC Common Stock per
STRYPES, (b) if the Maturity Price is less than the Threshold Appreciation Price
but is greater than $________ per share of MGIC Common Stock (the "Initial
Price"), a number of shares of MGIC Common Stock per STRYPES so that the value
thereof (determined based on the Maturity Price) is equal to the Initial Price
(such fractional share being calculated to the nearest 1/10,000th of a share or,
if there is not a nearest 1/10,000th of a share, to the next higher 1/10,000th
of a share) and (c) if the Maturity Price is less than or equal to the Initial
Price, one share of MGIC Common Stock per STRYPES. Notwithstanding the
foregoing, the Company may, at its option in lieu of delivering shares of MGIC
Common Stock, deliver cash in an amount equal to the value of such number of
shares of MGIC Common Stock at the Maturity Price as provided in the Indenture.
24
<PAGE>
Such number of shares of MGIC Common Stock (or amount of cash or, in the event
there shall occur a Reorganization Event as provided in the Indenture, cash,
securities and/or other property, in lieu thereof) deliverable upon payment and
discharge hereof is hereinafter referred to as the "Maturity Consideration."
The term "Maturity Price" means, except as otherwise provided in the Indenture,
the average Closing Price per share of MGIC Common Stock on the 20 Trading Days
immediately prior to, but not including the Maturity Date. The term "Closing
Price" means, with respect to any security on any date of determination, the
closing sale price (or, if no closing price is reported, the last reported sale
price) of such security on the New York Stock Exchange (the "NYSE") on such date
or, if such security is not listed for trading on the NYSE on any such date, as
reported in the composite transactions for the principal United States
securities exchange on which such security is so listed, or if such security is
not so listed on a United States national or regional securities exchange, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System, or, if such security is not so reported, the last quoted bid
price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization or, if such bid price is not
available, the market value of such security on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. The term "Trading Day" means, with respect to any
security the Closing Price of which is being determined, a day on which such
security (A) is not suspended from trading on any national or regional
securities exchange or association or over-the-counter market at the close of
business and (B) has traded at least once on the national or regional securities
exchange or association or over-the-counter market that is the primary market
for the trading of such security.
Interest on the STRYPES evidenced hereby will be payable, and delivery of
the Maturity Consideration in payment of the STRYPES evidenced hereby on the
Maturity Date will be made, upon surrender of this STRYPES Certificate, at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, and payment of interest on the STRYPES
evidenced by this STRYPES Certificate (and, if the Company elects to deliver
cash in lieu of MGIC Common Stock on the Maturity Date, the amount of cash
payable on the Maturity Date) will be made in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear on the Securities Register.
ADDITIONAL PROVISIONS OF THIS STRYPES CERTIFICATE ARE CONTAINED ON THE
REVERSE HEREOF AND SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY
SET FORTH IN THIS PLACE.
25
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this STRYPES Certificate shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose. "Structured Yield Product Exchangeable for Stock" and "STRYPES" are
service marks of Merrill Lynch & Co., Inc.
IN WITNESS WHEREOF, Merrill Lynch & Co., Inc. has caused this instrument to
be duly executed under its corporate seal.
Dated:
Merrill Lynch & Co., Inc.
By:
-----------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This certificate evidences Securities of the series designated herein and
referred to in the within-mentioned Indenture.
Chemical Bank, as Trustee
By:
-----------------------
Authorized Officer
26
<PAGE>
[Form of Reverse of STRYPES Certificate]
MERRILL LYNCH & CO., INC.
Structured Yield Product Exchangeable for Stock
______% STRYPES Due ______, 1998
(Payable with Shares of Common Stock, par value $1.00 per share, of MGIC
Investment Corporation)
This STRYPES Certificate evidences part of a duly authorized issue of
unsecured and unsubordinated debentures, notes or other evidences of senior
indebtedness (hereinafter called the "Securities") of the Company of the series
hereinafter specified, all such Securities issued and to be issued under an
indenture dated as of April 1, 1983 and restated as of April 1, 1987, as amended
and supplemented as of ________, 1995, between the Company and Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company), as Trustee (the
indenture dated as of April 1, 1983 and restated as of April 1, 1987, as
amended, restated and supplemented from time to time, the "Indenture"), to which
Indenture and all other indentures supplemental thereto reference is hereby made
for a statement of the rights and limitation of rights thereunder of the Holders
of the Securities and of the rights, obligations, duties and immunities of the
Trustee for each series of Securities and of the Company, and the terms upon
which the Securities are and are to be authenticated and delivered. As provided
in the Indenture, the Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may be
denominated in currencies other than U.S. Dollars (including composite
currencies), may mature at different times, may bear interest, if any, at
different rates, may be subject to different redemption provisions, if any, may
be subject to different sinking, purchase and analogous funds, if any, may be
subject to different covenants and Events of Default and may otherwise vary as
in the Indenture provided or permitted. This STRYPES Certificate evidences
Securities of the series designated as Structured Yield Product Exchangeable for
Stock, ____% STRYPES Due _______, 1998 (each, a "STRYPES").
The STRYPES may not be redeemed at the option of the Company, or paid at
the option of the Holders, prior to the Maturity Date.
If an Event of Default with respect to the STRYPES, as defined in the
Indenture, shall occur and be continuing, then an amount equal to the issue
price of all the STRYPES may be declared immediately due and payable in cash in
the manner and with the effect provided in the Indenture.
27
<PAGE>
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the STRYPES under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of 66-2/3%
of the aggregate issue price of the Outstanding STRYPES. The Indenture also
contains provisions permitting the Holders of a majority of the aggregate issue
price of the Outstanding STRYPES, on behalf of the Holders of all STRYPES, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences with respect to
the STRYPES. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of the
STRYPES evidenced by this STRYPES Certificate and of any STRYPES evidenced by a
STRYPES Certificate issued upon the transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent of waiver is made upon this
STRYPES Certificate.
No reference herein to the Indenture and no provision of this STRYPES
Certificate or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to deliver or pay the interest on,
and Maturity Consideration in respect of, the STRYPES evidenced by this STRYPES
Certificate at the times, place and rate, and in the manner, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the STRYPES evidenced by this STRYPES Certificate are transferable on the
Security Register of the Company, upon surrender of this STRYPES Certificate for
registration of transfer at the office or agency of the Company to be maintained
for that purpose in The City of New York, New York, or at any other office or
agency of the Company maintained for that purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new STRYPES
Certificates, evidencing the same aggregate number of STRYPES, will be issued to
the designated transferee or transferees.
No service charge shall be made for any such transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of such transfer
or exchange, other than certain exchanges not involving any transfer. Certain
terms used in this STRYPES Certificate which are defined in the Indenture have
the meanings set forth therein.
This STRYPES Certificate shall for all purposes be governed by, and
construed in accordance with, the laws of the State of
28
<PAGE>
New York. The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this STRYPES Certificate is registered as the
owner of the STRYPES evidenced hereby for the purpose of receiving payment as
herein provided and for all other purposes, whether or not the STRYPES be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
29
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations.
TEN COM -- as tenants in UNIF GIFT MIN -- Custodian
------ -------
common (Cust) (Minor)
TEN ENT -- as tenants by the Under Uniform Gifts to Minors
entireties Act
-----------------
(State)
JT TEN -- as joint tenants with
right of survivorship
and not as tenants in common
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY
OR TAXPAYER I.D. OR OTHER
IDENTIFYING NUMBER OF
ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including postal
zip code of assignee)
STRYPES and all rights thereunder, hereby
- ---------------------------
irrevocably constituting and appointing
attorney to transfer said STRYPES on the books of the Company, with full power
of substitution in the premises.
Dated:
------------------------------------------------------------
NOTICE: The signature to this assignment must correspond
with the name as written upon on the face of the within
Security in every particular, without alteration or
enlargement or any change whatever.
30
<PAGE>
EXHIBIT 4(c)
[Form of Face of STRYPES Certificate]
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS
A WHOLE BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE
DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS SECURITY IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
No. ____________ ___________ STRYPES
CUSIP NO. [___]
MERRILL LYNCH & CO., INC.
Structured Yield Product Exchangeable for Stock/SM/
______% STRYPES/SM/ Due ______, 1998
(Payable with Shares of Common Stock,
par value $1.00 per share, of MGIC Investment Corporation)
Issue Price Per STRYPES: $___________
Merrill Lynch & Co., Inc., a Delaware corporation (hereinafter called the
"Company", which term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to pay and
discharge each STRYPES evidenced hereby on ________, 1998 (the "Maturity Date")
by delivering to _____________________________________________, or registered
assigns, a number of shares (such number of shares, the "Payment Rate") of
common stock, par value $1.00 per share ("MGIC Common Stock"), of MGIC
Investment Corporation ("MGIC Investment") determined in accordance with the
Payment Rate Formula (as defined below), and to pay interest (computed on the
basis of a 360-day year of twelve 30-day months) on such STRYPES from
____________, 1995, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, on
1
<PAGE>
February 15, May 15, August 15 and November 15 in each year, commencing November
15, 1995, and on the Maturity Date, at the rate of ___% of the Issue Price per
annum, until the Maturity Date or such earlier date on which the Issue Price is
repaid in accordance with the provisions described below. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in said Indenture, be paid to the Person in whose name this
STRYPES Certificate (or one or more Predecessor STRYPES Certificates) is
registered at the close of business on the last day (whether or not a Business
Day) of the month next preceding such Interest Payment Date (each a "Regular
Record Date"). In any case where such Interest Payment Date shall not be a
Business Day, then (notwithstanding any other provision of said Indenture or
this STRYPES Certificate) payment of such interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on such date, and, if such payment is so made, no interest
shall accrue for the period from and after such date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date, and may be paid to the
Person in whose name this STRYPES Certificate (or one or more Predecessor
STRYPES Certificates) is registered at the close of business on a Special Record
Date for the payment of such interest to be fixed by the Trustee hereinafter
referred to, notice whereof shall be given to Holders of STRYPES not less than
10 days prior to such Special Record Date, or may be paid at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the STRYPES may be listed, and upon such notice as may be
required by such exchange, all as more fully provided in said Indenture.
The Payment Rate shall be determined in accordance with the following
formula (the "Payment Rate Formula"), subject to adjustment as a result of
certain dilution events relating to the MGIC Common Stock as provided for in the
Indenture: the Payment Rate shall equal (a) if the Maturity Price (as defined
below) is greater than or equal to $______ per share of MGIC Common Stock (the
"Threshold Appreciation Price"), _________ shares of MGIC Common Stock per
STRYPES, (b) if the Maturity Price is less than the Threshold Appreciation Price
but is greater than $________ per share of MGIC Common Stock (the "Initial
Price"), a number of shares of MGIC Common Stock per STRYPES so that the value
thereof (determined based on the Maturity Price) is equal to the Initial Price
(such fractional share being calculated to the nearest 1/10,000th of a share or,
if there is not a nearest 1/10,000th of a share, to the next higher 1/10,000th
of a share) and (c) if the Maturity Price is less than or equal to the Initial
Price, one share of MGIC Common Stock per STRYPES. Notwithstanding the
foregoing, the Company may, at its option in lieu of delivering shares of MGIC
Common Stock, deliver cash in an amount equal to the value of such number of
shares of MGIC Common Stock at the Maturity Price as provided in the Indenture.
2
<PAGE>
Such number of shares of MGIC Common Stock (or amount of cash or, in the event
there shall occur a Reorganization Event as provided in the Indenture, cash,
securities and/or other property, in lieu thereof) deliverable upon payment and
discharge hereof is hereinafter referred to as the "Maturity Consideration."
The term "Maturity Price" means, except as otherwise provided in the Indenture,
the average Closing Price per share of MGIC Common Stock on the 20 Trading Days
immediately prior to, but not including the Maturity Date. The term "Closing
Price" means, with respect to any security on any date of determination, the
closing sale price (or, if no closing price is reported, the last reported sale
price) of such security on the New York Stock Exchange (the "NYSE") on such date
or, if such security is not listed for trading on the NYSE on any such date, as
reported in the composite transactions for the principal United States
securities exchange on which such security is so listed, or if such security is
not so listed on a United States national or regional securities exchange, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System, or, if such security is not so reported, the last quoted bid
price for such security in the over-the-counter market as reported by the
National Quotation Bureau or similar organization or, if such bid price is not
available, the market value of such security on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. The term "Trading Day" means, with respect to any
security the Closing Price of which is being determined, a day on which such
security (A) is not suspended from trading on any national or regional
securities exchange or association or over-the-counter market at the close of
business and (B) has traded at least once on the national or regional securities
exchange or association or over-the-counter market that is the primary market
for the trading of such security.
Interest on the STRYPES evidenced hereby will be payable, and delivery of
the Maturity Consideration in payment of the STRYPES evidenced hereby on the
Maturity Date will be made, upon surrender of this STRYPES Certificate, at the
office or agency of the Company maintained for that purpose in the Borough of
Manhattan, The City of New York, and payment of interest on the STRYPES
evidenced by this STRYPES Certificate (and, if the Company elects to deliver
cash in lieu of MGIC Common Stock on the Maturity Date, the amount of cash
payable on the Maturity Date) will be made in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear on the Securities Register.
ADDITIONAL PROVISIONS OF THIS STRYPES CERTIFICATE ARE CONTAINED ON THE
REVERSE HEREOF AND SUCH PROVISIONS SHALL HAVE THE SAME EFFECT AS THOUGH FULLY
SET FORTH IN THIS PLACE.
3
<PAGE>
Unless the certificate of authentication hereon has been executed by or on
behalf of the Trustee by manual signature, this STRYPES Certificate shall not be
entitled to any benefit under the Indenture, or be valid or obligatory for any
purpose. "Structured Yield Product Exchangeable for Stock" and "STRYPES" are
service marks of Merrill Lynch & Co., Inc.
IN WITNESS WHEREOF, Merrill Lynch & Co., Inc. has caused this instrument to
be duly executed under its corporate seal.
Dated:
Merrill Lynch & Co., Inc.
By:
-----------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This certificate evidences Securities of the series designated herein and
referred to in the within-mentioned Indenture.
Chemical Bank, as Trustee
By:
-----------------------
Authorized Officer
4
<PAGE>
[Form of Reverse of STRYPES Certificate]
MERRILL LYNCH & CO., INC.
Structured Yield Product Exchangeable for Stock
______% STRYPES Due ______, 1998
(Payable with Shares of Common Stock, par value $1.00 per share, of MGIC
Investment Corporation)
This STRYPES Certificate evidences part of a duly authorized issue of
unsecured and unsubordinated debentures, notes or other evidences of senior
indebtedness (hereinafter called the "Securities") of the Company of the series
hereinafter specified, all such Securities issued and to be issued under an
indenture dated as of April 1, 1983 and restated as of April 1, 1987, as amended
and supplemented as of ________, 1995, between the Company and Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company), as Trustee (the
indenture dated as of April 1, 1983 and restated as of April 1, 1987, as
amended, restated and supplemented from time to time, the "Indenture"), to which
Indenture and all other indentures supplemental thereto reference is hereby made
for a statement of the rights and limitation of rights thereunder of the Holders
of the Securities and of the rights, obligations, duties and immunities of the
Trustee for each series of Securities and of the Company, and the terms upon
which the Securities are and are to be authenticated and delivered. As provided
in the Indenture, the Securities may be issued in one or more series, which
different series may be issued in various aggregate principal amounts, may be
denominated in currencies other than U.S. Dollars (including composite
currencies), may mature at different times, may bear interest, if any, at
different rates, may be subject to different redemption provisions, if any, may
be subject to different sinking, purchase and analogous funds, if any, may be
subject to different covenants and Events of Default and may otherwise vary as
in the Indenture provided or permitted. This STRYPES Certificate evidences
Securities of the series designated as Structured Yield Product Exchangeable for
Stock, ____% STRYPES Due _______, 1998 (each, a "STRYPES").
The STRYPES may not be redeemed at the option of the Company, or paid at
the option of the Holders, prior to the Maturity Date.
If an Event of Default with respect to the STRYPES, as defined in the
Indenture, shall occur and be continuing, then an amount equal to the issue
price of all the STRYPES may be declared immediately due and payable in cash in
the manner and with the effect provided in the Indenture.
5
<PAGE>
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the STRYPES under the Indenture at any
time by the Company and the Trustee with the consent of the Holders of 66-2/3%
of the aggregate issue price of the Outstanding STRYPES. The Indenture also
contains provisions permitting the Holders of a majority of the aggregate issue
price of the Outstanding STRYPES, on behalf of the Holders of all STRYPES, to
waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences with respect to
the STRYPES. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of the
STRYPES evidenced by this STRYPES Certificate and of any STRYPES evidenced by a
STRYPES Certificate issued upon the transfer hereof or in exchange herefor or in
lieu hereof whether or not notation of such consent of waiver is made upon this
STRYPES Certificate.
No reference herein to the Indenture and no provision of this STRYPES
Certificate or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to deliver or pay the interest on,
and Maturity Consideration in respect of, the STRYPES evidenced by this STRYPES
Certificate at the times, place and rate, and in the manner, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the STRYPES evidenced by this STRYPES Certificate are transferable on the
Security Register of the Company, upon surrender of this STRYPES Certificate for
registration of transfer at the office or agency of the Company to be maintained
for that purpose in The City of New York, New York, or at any other office or
agency of the Company maintained for that purpose, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new STRYPES
Certificates, evidencing the same aggregate number of STRYPES, will be issued to
the designated transferee or transferees.
No service charge shall be made for any such transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of such transfer
or exchange, other than certain exchanges not involving any transfer. Certain
terms used in this STRYPES Certificate which are defined in the Indenture have
the meanings set forth therein.
This STRYPES Certificate shall for all purposes be governed by, and
construed in accordance with, the laws of the State of
6
<PAGE>
New York. The Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this STRYPES Certificate is registered as the
owner of the STRYPES evidenced hereby for the purpose of receiving payment as
herein provided and for all other purposes, whether or not the STRYPES be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
7
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations.
TEN COM -- as tenants in UNIF GIFT MIN -- Custodian
------ -------
common (Cust) (Minor)
TEN ENT -- as tenants by the Under Uniform Gifts to Minors
entireties Act
-----------------
(State)
JT TEN -- as joint tenants with
right of survivorship
and not as tenants in common
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY
OR TAXPAYER I.D. OR OTHER
IDENTIFYING NUMBER OF
ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address including postal
zip code of assignee)
STRYPES and all rights thereunder, hereby
- ---------------------------
irrevocably constituting and appointing
attorney to transfer said STRYPES on the books of the Company, with full power
of substitution in the premises.
Dated:
------------------------------------------------------------
NOTICE: The signature to this assignment must correspond
with the name as written upon on the face of the within
Security in every particular, without alteration or
enlargement or any change whatever.
8
<PAGE>
EXHIBIT 5
July 10, 1995
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
New York, New York 10281-1334
Gentlemen:
We have acted as your counsel and are familiar with the corporate
proceedings had in connection with the proposed issuance and sale by Merrill
Lynch & Co., Inc. (the "Company") of up to 5,750,000 of its Structured Yield
Product Exchangeable for Stock, % STRYPES Due August 15, 1998 (the
"Securities").
We have examined such documents and records as we deemed appropriate,
including the following:
(a) a copy of the Restated Certificate of Incorporation of the Company,
certified by the Secretary of State of the State of Delaware;
(b) a copy of the Company's Registration Statement on Form S-3 relating
to the Securities (the "Registration Statement");
(c) a copy of the indenture with respect to the Company's senior debt
securities between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"), dated as
of April 1, 1983, as amended and restated (the "Principal Indenture"), in
the form executed by the Company and the Trustee; and
(d) a copy of the supplemental indenture with respect to the Securities
between the Company and the Trustee (the "Supplemental Indenture"), in the
form filed as an exhibit to the Registration Statement.
The term "Indenture" shall mean the Principal Indenture as amended by the
Trust Indenture Reform Act of 1990 and as amended and supplemented by the
Supplemental Indenture.
Based upon the foregoing and upon such further investigation as we deem
relevant in the premises, we are of the opinion:
1. The Company has been duly incorporated under the laws of the State of
Delaware.
2. The Principal Indenture has been duly and validly authorized, executed
and delivered by the Company and, as amended by the Trust Indenture Reform
Act of 1990, constitutes a valid and binding agreement of the Company,
enforceable in accordance with its terms.
3. The Supplemental Indenture has been duly authorized by the Company
and, when the Supplemental Indenture has been duly executed and delivered
by the Company and the Trustee, such Supplemental Indenture will constitute
a valid and binding agreement of the Company, enforceable in accordance
with its terms.
4. When the Supplemental Indenture has been duly executed and delivered
by the Company and the Trustee, and when the Securities shall have been
duly authenticated or countersigned by the Trustee and duly issued under
the Indenture, such Securities will constitute valid and binding
obligations of the Company, enforceable in accordance with their terms.
<PAGE>
With respect to enforcement, the above opinions are qualified to the extent
that enforcement of the Principal Indenture, the Supplemental Indenture or the
Securities may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability relating to or
affecting enforcement of creditors' rights or by general equity principles.
We consent to the filing of this opinion as an exhibit to the Registration
Statement, to the quotation in the Registration Statement of our opinion with
respect to certain tax matters and to the use of our name wherever appearing
in the Registration Statement and any amendment thereto.
Very truly yours,
/s/ Brown & Wood
<PAGE>
EXHIBIT 10
PURCHASE AGREEMENT
------------------
THIS AGREEMENT is made as of this ______ day of ______, 1995 between
MERRILL LYNCH & CO., INC., a Delaware corporation ("Purchaser"), and THE
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation ("Seller").
WHEREAS, Seller owns shares of the common stock, par value $1.00 per share
(the "MGIC Common Stock"), of MGIC INVESTMENT CORPORATION, a Wisconsin
corporation.
WHEREAS, Purchaser has filed with the Securities and Exchange Commission
(the "SEC") a registration statement on Form S-3 (File No. 33-______) and
amendments thereto contemplating the offering of up to 5,750,000 of its
Structured Yield Product Exchangeable for Stock/SM/, ____% STRYPES/SM/ Due
______, 1998 (the "STRYPES"), the terms of which require Purchaser to pay and
discharge the STRYPES on _______, 1998 (the "Maturity Date") by delivering to
the holders thereof a specified number of shares of MGIC Common Stock or, at
Purchaser's option, cash with an equal value.
WHEREAS, Purchaser has agreed, pursuant to an underwriting agreement dated
the date hereof (the "Underwriting Agreement") among Purchaser, Seller and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Underwriter"), to issue and sell to the Underwriter an aggregate of 5,000,000
STRYPES (the "Initial STRYPES") and, at the Underwriter's option, all or any
part of 750,000 additional STRYPES (the "Option STRYPES") to cover over-
allotments.
WHEREAS, the STRYPES are to be issued under an indenture, dated as of April
1, 1983 and restated as of April 1, 1987 (as amended and supplemented, the
"Principal Indenture"), between Purchaser and Chemical Bank (successor by merger
to Manufacturers Hanover Trust Company), as trustee (the "Trustee"), as further
amended and supplemented by the Seventh Supplemental Indenture, dated as of
_______, 1995 (the "Supplemental Indenture"), between Purchaser and the Trustee,
relating to the STRYPES. The Principal Indenture, as amended and supplemented
by the Supplemental Indenture, is hereinafter referred to as the "Indenture."
WHEREAS, Purchaser and Seller desire to provide for the future sale and
purchase of that number of shares of MGIC Common Stock (or, in the event there
shall occur a Reorganization Event, cash, securities and/or other property in
lieu thereof) that would be required by Purchaser to pay and discharge all of
the STRYPES on the Maturity Date pursuant to the Supplemental Indenture,
assuming all of the STRYPES are held by the same Holder at such time and without
taking into account any default with respect to the STRYPES or any
_______________________
/SM/ Service Mark of Merrill Lynch & Co., Inc.
1
<PAGE>
acceleration of the maturity of the STRYPES resulting therefrom (such number of
shares of MGIC Common Stock (or, in the event there shall occur a Reorganization
Event, such cash, securities or other property in lieu thereof) that would be
required to pay and discharge all of the STRYPES on the Maturity Date, assuming
all of the STRYPES are held by the same Holder at such time and without taking
into account any default with respect to the STRYPES or any acceleration of the
maturity of the STRYPES resulting therefrom, being hereinafter referred to as
the "Contract Shares") at a price to be established under this Agreement.
WHEREAS, Seller and Purchaser desire that, at the option of Seller, the
respective future purchase and sale obligations can be settled entirely, but not
less than entirely, through cash payment in lieu of delivery of the Contract
Shares.
WHEREAS, Seller and Purchaser desire that ownership of the Contract Shares
(including, without limitation, voting rights, rights to receive any dividends
or other distributions in respect thereof and rights to sell, transfer or
otherwise dispose of the Contract Shares) remain in Seller unless and until
delivery, if any, of such Contract Shares to Purchaser pursuant to Section 2.3
hereof.
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
I.
Definitions
-----------
1.1 Definitions. Capitalized words and phrases used herein and not
-----------
otherwise defined shall have the meanings ascribed to them in the Supplemental
Indenture.
II.
Future Sale of Contract Shares or Cash Settlement
-------------------------------------------------
2.1 Sale and Purchase. On the basis of the representations and warranties
-----------------
herein contained and subject to the terms and conditions herein set forth, at
the Closing (as defined in Section 2.3 hereof), Seller agrees to sell, assign,
transfer, convey and deliver to Purchaser, and Purchaser agrees to purchase and
acquire from Seller, the Contract Shares.
2.2 Consideration. The aggregate consideration to be delivered for the
-------------
Contract Shares at the Closing shall consist of (i) $_______, (ii) the aggregate
proceeds to Purchaser (consisting of the aggregate initial public offering price
less the aggregate underwriting discount) from the sale of such number of Option
STRYPES as may be issued and sold by the Purchaser to the Underwriter, and (iii)
an amount equal to the product of (x) $___ and (y) such number
2
<PAGE>
of Option STRYPES as may be issued and sold by the Purchaser to the Underwriter
(such aggregate consideration being hereinafter referred to as the "Forward
Price"),
2.3 Closing. Consummation of the purchase and sale of the Contract Shares
-------
shall take place on a date mutually agreeable to Purchaser and Seller, not later
than one (1) Trading Day prior to the Maturity Date ("Closing"). Payment of the
purchase price for, and delivery of the certificates representing, the Contract
Shares shall be made at the offices of Brown & Wood, One World Trade Center, New
York, New York 10048, or at such other place as shall be agreed upon by
Purchaser and Seller. Payment of the purchase price for the Contract Shares
shall be made by Fedwire transfer of immediately available funds, or such other
form of payment specified by Seller, against delivery to Purchaser of
certificates for the Contract Shares (unless the Contract Shares are represented
by one or more global certificates registered in the name of a depositary or a
nominee of a depositary, in which event Purchaser's interest in such Contract
Shares shall be noted in a manner satisfactory to Purchaser and its counsel).
Any certificates for the Contract Shares delivered shall be registered in
Purchaser's name (or endorsed in blank or otherwise registered as requested by
Purchaser).
2.4 No Fractional Shares. No fractional shares or scrip representing
--------------------
fractional shares of MGIC Common Stock shall be delivered at the Closing.
Instead of any fractional share of MGIC Common Stock which would otherwise be
deliverable by Seller at the Closing, Seller shall make a cash payment in
respect of such fractional interest in an amount equal to the value of such
fractional share at the Maturity Price.
2.5 Cash Settlement. (a) Notwithstanding the provisions of Sections 2.1,
---------------
2.2, 2.3 and 2.4 hereof, Seller shall have the option, exercisable in its sole
discretion, to require that the respective obligations contained therein be
settled, in whole, through a cash payment at Closing in lieu of delivery of the
Contract Shares. The amount of such cash settlement payment shall be equal to
the difference between (i) the Forward Price and (ii) the value of the Contract
Shares at the Maturity Price (the "Share Value"). In the event that the Forward
Price exceeds the Share Value, such excess amount shall be paid by Purchaser to
Seller and in the event that the Share Value exceeds the Forward Price, such
excess amount shall be paid by Seller to Purchaser, so that such cash settlement
will reflect changes after the date hereof in the value of the respective rights
and obligations of Seller and Purchaser under this Agreement. On or prior to
the day five Business Days preceding the Maturity Date, Seller shall notify
Purchaser whether it will exercise its option to require cash settlement
pursuant to this Section 2.5.
(b) Consummation of the purchase and sale of the Contract Shares as
provided in Sections 2.1, 2.2, 2.3 and 2.4 hereof shall be conditioned upon
Purchaser receiving at Closing a certificate of the Chairman of the Board, the
President, a Vice President, the Treasurer or Controller of Seller, dated as of
the date of Closing, to the effect that the Contract Shares so delivered
hereunder may be transferred without further registration under the Securities
Act of 1933 and are free of any transfer restrictions (other than such as are
solely attributable to any holder's status as MGIC Investment or an affiliate of
MGIC Investment). If the condition set forth in the preceding sentence shall not
be satisfied, then, notwithstanding the provisions of Sections 2.1, 2.2, 2.3 and
2.4 hereof, the respective
3
<PAGE>
obligations contained therein shall be settled, in whole, through a cash payment
at Closing in lieu of delivery of the Contract Shares as provided in Section
2.5(a).
2.6 Seller's Conditions to Closing. Seller's obligation to consummate the
------------------------------
transactions contemplated hereunder is conditioned upon (i) the purchase and
sale of the Initial STRYPES pursuant to the Underwriting Agreement having been
consummated as contemplated therein, (ii) Seller having received, at or prior to
the date of Closing, notice from Purchaser specifying the number of shares of
MGIC Common Stock, or such cash, securities or other property as may have been
received in a Reorganization Event, that would be required by Purchaser to pay
and discharge all of the STRYPES at the Maturity Date, assuming all of the
STRYPES are held by the same Holder at such time and without taking in account
any default with respect to the STRYPES or any acceleration of the maturity of
the STRYPES resulting therefrom, and (iii) the representations and warranties of
Purchaser contained in paragraphs (iii) and (iv) of Article IV hereof being true
and correct as of the date of the Closing.
2.7 Purchaser's Conditions to Closing. Purchaser's obligation to
---------------------------------
consummate the transactions contemplated hereunder is conditioned upon (i) the
purchase and sale of the Initial STRYPES pursuant to the Underwriting Agreement
having been consummated as contemplated therein and (ii) the representations and
warranties of Seller contained in paragraphs (iii)(b), (iv) and (v) of Article
III hereof being true and correct as of the date of the Closing.
III.
Representations and Warranties of Seller
----------------------------------------
Seller represents and warrants to Purchaser as of the date hereof and as of
the date of Closing as follows:
(i) Seller has been duly incorporated and is validly existing as an
insurance corporation under the laws of the State of Wisconsin with corporate
power and authority to enter into and perform its obligations under this
Agreement.
(ii) This Agreement has been duly authorized, executed and delivered by
Seller and constitutes a valid and legally binding agreement of Seller
enforceable against Seller in accordance with its terms, except as the
enforcement hereof may be limited by insolvency, reorganization, moratorium or
other similar laws of general applicability relating to or affecting enforcement
of policyholders' or creditors' rights or by general equity principles.
(iii) (a) At the date hereof, Seller has good and marketable title to at
least 5,750,000 shares of MGIC Common Stock, free and clear of any mortgage,
pledge, lien, encumbrance, claim or equity; and (b) to the extent Seller elects
to deliver the Contract Shares at Closing, upon delivery of such Contract Shares
against payment therefor pursuant to this Agreement, good and marketable title
to such Contract Shares, free and clear of any mortgage, pledge, lien,
encumbrance, claim or equity, will pass to Purchaser.
4
<PAGE>
(iv) No consent, approval, authorization or order of any court or
governmental authority or agency (including all state insurance officials and
bodies) is required for the execution, delivery or performance by Seller of this
Agreement or the consummation by Seller of the transactions contemplated herein,
except such as may be required under the Securities Act of 1933 or the rules and
regulations promulgated thereunder or state securities or Blue Sky laws; and
Seller has full right, power and authority to enter into this Agreement and to
sell, assign, transfer and deliver the Contract Shares pursuant to this
Agreement.
(v) The execution, delivery and performance by Seller of this Agreement
and the consummation by Seller of the transactions contemplated herein 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 Seller is a
party or by which Seller is bound, or to which any of the property or assets of
Seller is subject if such conflict, breach, violation or default would impair
the ability of Seller to perform its obligations under this Agreement, nor will
such action result in any violation of the provisions of the Articles of
Incorporation or By-laws of Seller, or any statute or any order, rule or
regulation (other than any statute, order, rule or regulation with regard to
state securities or Blue Sky laws) of any court or governmental agency or body
having jurisdiction over Seller or the property of Seller if such violation
would impair the ability of Seller to perform its obligations under this
Agreement.
IV.
Representations and Warranties of Purchaser
-------------------------------------------
Purchaser represents and warrants to Seller as of the date hereof and as of
the date of Closing as follows:
(i) Purchaser has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties and
conduct its business as now being conducted and to enter into and perform its
obligations under this Agreement.
(ii) This Agreement has been duly authorized, executed and delivered by
Purchaser and constitutes a valid and legally binding agreement of Purchaser
enforceable against Purchaser in accordance with its terms, except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability relating to or
affecting enforcement of creditors' rights or by general equity principles.
(iii) No consent, approval, authorization or order of any court or
governmental authority or agency is required for the execution, delivery or
performance by Purchaser of this Agreement or the consummation by Purchaser of
the transactions contemplated herein, except such as have been obtained under
the Securities Act of 1933 or the rules and regulations promulgated
5
<PAGE>
thereunder or state securities or Blue Sky laws; and Purchaser has full right,
power and authority to enter into this Agreement and to purchase the Contract
Shares pursuant to this Agreement.
(iv) The execution, delivery and performance by Purchaser of this
Agreement and the consummation by Purchaser of the transactions contemplated
herein 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
Purchaser is a party or by which Purchaser is bound, or to which any of the
property or assets of Purchaser is subject if such conflict, breach, violation
or default would impair the ability of Purchaser to perform its obligations
under this Agreement, nor will such action result in any violation of the
provisions of the charter or by-laws of Purchaser, or any statute or any order,
rule or regulation (other than any statute, order, rule or regulation with
regard to state securities or Blue Sky laws) of any court or governmental agency
or body having jurisdiction over Purchaser or the property of Purchaser if such
violation would impair the ability of Purchaser to perform its obligations under
this Agreement.
V.
Covenants
---------
5.1 Taxes. Seller shall pay any and all documentary, stamp, transfer or
-----
similar taxes and charges that may be payable in respect of the transfer and
delivery of the Contract Shares pursuant hereto.
5.2 Amounts Due to Trustee. Purchaser shall pay any and all amounts due
----------------------
to the Trustee under Section 607 of the Indenture.
5.3 Certain Notices. (a) Purchaser shall notify Seller of any notice of
---------------
default with respect to the STRYPES received by Purchaser from the Trustee or
any holders of STRYPES pursuant to the Indenture as promptly as reasonably
practicable after receipt thereof.
(b) In case at any time while any of the STRYPES are outstanding Seller
receives notice that:
(i) MGIC Investment shall declare a dividend (or any other
distribution) on or in respect of the MGIC Common Stock to which Section
203(a)(i) or 203(a)(iii) of the Supplemental Indenture shall apply (other than
any cash dividends and distributions, if any, paid from time to time by MGIC
Investment that do not constitute Extraordinary Cash Dividends);
(ii) MGIC Investment shall authorize the issuance to all holders of
MGIC Common Stock of rights or warrants to subscribe for or purchase shares of
MGIC Common Stock or of any other subscription rights or warrants;
6
<PAGE>
(iii) there shall occur any conversion or reclassification of MGIC
Common Stock (other than a subdivision or combination of outstanding shares of
such MGIC Common Stock) or any consolidation, merger or reorganization to which
MGIC Investment is a party and for which approval of any stockholders of MGIC
Investment is required, or the sale or transfer of all or substantially all of
the assets of MGIC Investment; or
(iv) there shall occur the voluntary or involuntary dissolution,
liquidation or winding up of MGIC Investment;
then Seller shall promptly notify Purchaser of such fact and of (x) the date on
which a record is to be taken for the purpose of such dividend, distribution or
grant of rights or warrants, or, if a record is not to be taken, the date as of
which the holders of MGIC Common Stock of record to be entitled to such
dividend, distribution or grant of rights or warrants are to be determined, or
(y) the date, if known by Seller, on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up is expected to
become effective.
5.4 No Supplemental Indentures Without Consent. Purchaser shall not,
------------------------------------------
without the consent of Seller, enter into any indenture supplemental to the
Indenture which would have the effect of increasing the consideration that
Seller is obligated to deliver at Closing pursuant to this Agreement.
5.5 Limitations on Trading During Certain Days. Each of Seller and
------------------------------------------
Purchaser hereby agrees that it will not, and it will cause each of its
Majority-Owned Subsidiaries not to, buy or sell shares of MGIC Common Stock for
their own account during the 20 Trading Days prior to the Stated Maturity of the
STRYPES. For purposes hereof, "Majority-Owned Subsidiaries" with respect to
either party means a subsidiary more than 50% of whose outstanding securities
representing the right to vote for the election of directors is owned by such
party and/or one or more of such party's other Majority-Owned Subsidiaries.
5.6 Payment and Discharge of STRYPES With Contract Shares.
-----------------------------------------------------
Purchaser agrees that it shall pay and discharge its obligations under the
STRYPES by delivering to the holders of the STRYPES on the Maturity Date the
form of consideration that it receives from Seller hereunder.
5.7 Further Assurances. From time to time on and after the date hereof
------------------
through the date of Closing, each of the parties hereto shall use its best
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper and advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement in accordance with the terms and conditions hereof, including (i)
using best efforts to remove any legal impediment to the consummation of such
transactions and (ii) the execution and delivery of all such deeds, agreements,
assignments and further instruments of transfer and conveyance necessary, proper
or advisable to consummate and make effect the transactions contemplated by this
Agreement in accordance with the terms and conditions hereof.
7
<PAGE>
VI.
Miscellaneous
-------------
6.1 Adjustments of Payment Rate; Selection of Independent Investment
----------------------------------------------------------------
Banking Firm. Purchaser shall provide Seller reasonable opportunity to review
- ------------
the calculations pertaining to any adjustment of the Payment Rate made pursuant
to Section 203 of the Supplemental Indenture. If, pursuant to the terms and
conditions of the Supplemental Indenture and the STRYPES, Purchaser shall be
required to retain a nationally recognized independent investment banking firm
for any purpose provided in the Supplemental Indenture or the STRYPES, such
nationally recognized independent investment banking firm shall be selected and
retained by Purchaser only after consultation with Seller.
6.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given if mailed or transmitted by
any standard form of telecommunication. Notices to Purchaser shall be directed
to it at 100 Church Street, 12th Floor, New York, New York 10007, attention of
the Secretary, with a copy to the Treasurer at World Financial Center, South
Tower, New York, New York, 10080-6107; notices to Seller shall be directed to it
at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, attention of
Securities Department c/o Gary A. Poliner.
6.3 Governing Law; Consent to Jurisdiction. This Agreement shall be
--------------------------------------
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed wholly within such State. For
the purpose of any suit, action or proceeding arising out of or relating to this
Agreement, the parties hereto hereby expressly and irrevocably consent and
submit to the non-exclusive jurisdiction of any competent court in the place of
its domicile and any United States Federal court sitting in the Borough of
Manhattan, City and State of New York, and expressly and irrevocably waive, to
the extent permitted under applicable law, any immunity from the jurisdiction
thereof and any claim or defense in such suit, action or proceeding based on a
claim of improper venue, forum non conveniens or any similar basis to which it
might otherwise be entitled.
6.4 Entire Agreement. Except as expressly set forth herein, this Agreement
----------------
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among the parties with respect to the
subject matter of this Agreement.
6.5 Amendments; Waivers. Any provision of this Agreement may be amended
-------------------
or waived prior to the Closing if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by Purchaser and Seller or, in
the case of a waiver, by the party against whom the waiver is to be effective.
No failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
8
<PAGE>
6.6 No Third Party Rights. This Agreement is not intended and shall not
---------------------
be construed to create any rights in any person other than Seller and Purchaser
and no person shall assert any rights as third party beneficiary hereunder.
6.7 Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
and year first above written.
PURCHASER: SELLER:
MERRILL LYNCH & CO., INC. THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By By
----------------------- -----------------------
Name: Name:
Title: Title:
9
<PAGE>
EXHIBIT 25
___________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
CHEMICAL BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
Merrill Lynch & Co., Inc.
(Exact name of obligor as specified in its charter)
DELAWARE 13-2740599
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1334
(Address of principal executive offices) (Zip Code)
___________________________________________
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
(Title of the indenture securities)
_____________________________________________________
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985 and December 2, 1991 (see Exhibit 1 to Form T-1 filed in
connection with Registration Statement No. 33-50010, which is incorporated by
reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 33-84460, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-
50010, which is incorporated by reference).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Chemical Bank, a corporation organized and existing under the laws of
the State of New York, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of New York and State of New York, on the 7TH day of JULY, 1995.
CHEMICAL BANK
By /s/ Andrew M. Deck .
--------------------------------------
Andrew M. Deck
Trust Officer
- 3 -
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
Chemical Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1995, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ................................. $ 5,797
Interest-bearing balances ......................... 5,523
Securities: .......... .............................
Held to maturity securities.......................... 6,195
Available for sale securities........................ 17,785
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold................................. 2,493
Securities purchased under agreements to resell.... 50
Loans and lease financing receivables:
Loans and leases, net of unearned income. $ 68,937
Less: Allowance for loan and lease losses 1,898
Less: Allocated transfer risk reserve.... 113
--------
Loans and leases, net of unearned income,
allowance, and reserve............................. 66,926
Trading Assets....................................... 37,294
Premises and fixed assets (including capitalized
leases)............................................ 1,402
Other real estate owned.............................. 99
Investments in unconsolidated subsidiaries and
associated companies............................... 148
Customer's liability to this bank on acceptances
outstanding........................................ 1,051
Intangible assets.................................... 512
Other assets......................................... 6,759
--------
TOTAL ASSETS......................................... $149,034
========
</TABLE>
- 4 -
<PAGE>
<TABLE>
<S> <C>
LIABILITIES
Deposits
In domestic offices................................ $ 44,882
Noninterest-bearing ....................... $14,690
Interest-bearing .......................... 30,192
-------
In foreign offices, Edge and Agreement
subsidiaries, and IBF's............................ 32,537
Noninterest-bearing ....................... $ 146
Interest-bearing .......................... 32,391
-------
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the
bank and of its Edge and Agreement subsidiaries, and
in IBF's
Federal funds purchased............................ 10,587
Securities sold under agreements to repurchase..... 3,083
Demand notes issued to the U.S. Treasury............. 464
Trading liabilities.................................. 31,358
Other Borrowed money:
With original maturity of one year or less......... 7,527
With original maturity of more than one year....... 914
Mortgage indebtedness and obligations under
capitalized leases................................. 20
Bank's liability on acceptances executed and
outstanding........................................ 1,054
Subordinated notes and debentures.................... 3,410
Other liabilities.................................... 5,986
TOTAL LIABILITIES.................................... 141,822
--------
EQUITY CAPITAL
Common stock......................................... 620
Surplus.............................................. 4,501
Undivided profits and capital reserves............... 2,558
Net unrealized holding gains (Losses)
on available-for-sale securities..................... (476)
Cumulative foreign currency translation adjustments.. 9
TOTAL EQUITY CAPITAL................................. 7,212
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL............................ $149,034
========
</TABLE>
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
WILLIAM B. HARRISON )
- 5 -
