<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1)(2) PRICE(1)(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
% STRYPES Due 1998(3).. 5,750,000 STRYPES(4) $47.125 $270,968,750 $93,438
</TABLE>
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(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.
(2) Exclusive of accrued interest, if any.
(3) The shares of Common Stock, par value $1.00 per share, of MGIC Investment
Corporation ("MGIC Investment") deliverable at maturity of such STRYPES
(including such indeterminate number of shares as may be deliverable as a
result of the anti-dilution provisions thereof) are registered pursuant to
a separate registration statement on Form S-3 filed concurrently herewith
by MGIC Investment.
(4) Includes 750,000 STRYPES that the Underwriter has the option to purchase
from Merrill Lynch & Co., Inc. to cover over-allotments, if any.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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
PRELIMINARY PROSPECTUS DATED , 1995
PROSPECTUS
- ----------
LOGO
5,000,000 STRYPES
MERRILL LYNCH & CO., INC.
% STRYPES SM DUE , 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 , 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 , 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 January 15, April
15, July 15 and October 15, beginning , 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.
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) based on the Payment Rate. The Payment Rate is equal
to, 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 fractional share of MGIC Common Stock per STRYPES so that the value
thereof (determined at 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.
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." Application will be made to list the STRYPES on the
NYSE.
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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.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
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<S> <C> <C> <C>
Per STRYPES............................... $ $ $
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Total(4).................................. $ $ $
</TABLE>
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(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 ,
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 , 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: Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and New York 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"), 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.
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............. , 1998
Interest Rate............. % of the issue price per annum, or $ per
STRYPES per quarter, payable in cash quarterly in
arrears
Interest Payment Dates.... January 15, April 15, July 15 and October 15, be-
ginning , 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) based on
the Payment Rate. The Payment Rate is equal to,
subject to certain adjustments, (a) if the Matu-
rity 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 fractional share
of MGIC Common Stock per STRYPES so that the value
thereof (determined at 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 imme-
diately prior to the Maturity Date. ACCORDINGLY,
THERE CAN BE NO ASSURANCE THAT THE AMOUNT RECEIV-
ABLE BY HOLDERS OF THE STRYPES ON THE MATURITY
DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE
PRICE OF THE STRYPES. 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.
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
4
<PAGE>
Tape, and the current $ per share quarterly div-
idend 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 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 Apprecia-
tion Price) of any appreciation of the value of
MGIC Common Stock in excess of the Threshold Ap-
preciation Price. Holders of the STRYPES will not
be entitled to any rights with respect to the MGIC
Common Stock (including, without limitation, vot-
ing 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 delivery.
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."
5
<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.
In addition, 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.
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.
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 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.
6
<PAGE>
PURCHASE FROM THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
The Company has entered into a contract (the "Purchase Contract") to
purchase from The Northwestern Mutual Life Insurance Company ("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) 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. 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. 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 for any 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.
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 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 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
are urged to consult their own tax advisers as to the proper tax treatment of
the STRYPES. 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
7
<PAGE>
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, that may 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.
Application will be made to list the STRYPES on the NYSE. 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.
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.
8
<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 12, 1995, long-
term borrowings, net of repayments and repurchases, increased by
approximately $1,268,680,000.
9
<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
10
<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.
11
<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
12
<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.
13
<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
14
<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 FILED A REGISTRATION STATEMENT ON FORM S-3 WITH
THE COMMISSION ON JUNE 20, 1995, 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.
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<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 (through , 1995).................
</TABLE>
For a recent closing price of the MGIC Common Stock, see the cover page of
this Prospectus.
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.
16
<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, as amended and supplemented as of ,
1995 (the indenture dated as of April 1, 1983, 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. The
STRYPES will be unsecured obligations and will rank pari passu with all other
unsecured and unsubordinated indebtedness of the Company. 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.
Each STRYPES, which will be issued at a price of $ , will bear interest
at the annual 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 such STRYPES is paid and
discharged on the Maturity Date pursuant to the terms thereof. Interest on the
STRYPES will be payable in cash quarterly in arrears on January 15, April 15,
July 15 and October 15, commencing , 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 , 1998. 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 all MGIC
Common Stock deliverable on the Maturity Date, cash with an equal value) based
on the Payment Rate (as defined below). 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.
The "Payment Rate" is equal to, subject to adjustment as a result of certain
dilution events, (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 fractional share of MGIC Common Stock per STRYPES so that the value
thereof (determined at 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. 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. Such option, if exercised by the Company,
must be exercised with respect to all shares of MGIC
17
<PAGE>
Common Stock otherwise deliverable on the Maturity Date in payment of all
outstanding STRYPES. On or prior to the fifth 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. 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 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 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 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
18
<PAGE>
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 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 shall be
adjusted by multiplying the Payment Rate 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 shall be readjusted to the Payment Rate 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 shall be adjusted by multiplying the Payment Rate 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 was previously made). All adjustments to the Payment Rate 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 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.
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
19
<PAGE>
"Reorganization Event"), the Payment Rate 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 (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 method by which the adjustment to the Payment Rate was
determined and setting forth the revised Payment Rate.
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.
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, 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.
20
<PAGE>
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 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
21
<PAGE>
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 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 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
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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 due and payable immediately. 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 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.
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 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.
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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
Application will be made to list the STRYPES on the NYSE.
CERTAIN ARRANGEMENTS WITH NML
Pursuant to the Purchase Contract, the Company is obligated to purchase from
NML immediately prior to maturity 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) 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.
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 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).
For more information regarding the relationship between NML and MGIC
Investment, 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
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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, 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.
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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. 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 $ .
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
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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 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.
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A U.S. Holder will be required to recognize taxable gain or loss with respect
to each such component in an amount equal to the difference, if any, between
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 (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
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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 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.
29
<PAGE>
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. 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.
30
<PAGE>
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.
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.
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.
Application will be made to list the STRYPES on the NYSE.
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.
31
<PAGE>
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.
32
<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............................................................... 6
Merrill Lynch & Co., Inc................................................... 8
Summary Financial Information.............................................. 9
MGIC Investment Corporation................................................ 15
Price Range of MGIC Common Stock and Dividends............................. 16
Use of Proceeds............................................................ 16
Description of the STRYPES................................................. 17
Certain Arrangements With NML.............................................. 24
Certain United States Federal Income Tax Considerations.................... 24
Underwriting............................................................... 31
Validity of the STRYPES.................................................... 31
Experts.................................................................... 32
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5,000,000 STRYPES
LOGO
MERRILL LYNCH & CO., INC.
% STRYPES SM
DUE , 1998
PAYABLE WITH SHARES OF COMMON STOCK
OF MGIC INVESTMENT CORPORATION
(OR CASH WITH AN EQUAL VALUE)
---------------
PROSPECTUS
---------------
MERRILL LYNCH & CO.
, 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)+--Seventh Supplemental Indenture to the Senior Indenture, dated as of
, 1995, 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 Agreement 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.
- --------
+ To be filed by amendment.
* 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, MERRILL LYNCH &
CO., INC. 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
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 20TH DAY
OF JUNE, 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 REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES WITH
MERRILL LYNCH & CO., INC. INDICATED ON THE 20TH DAY OF JUNE, 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)+ --Seventh Supplemental Indenture to the Senior
Indenture, dated as of , 1995, 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 Agreement 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>
- --------
+ To be filed by amendment.
* Filed herewith.
II-6
<PAGE>
EXHIBIT 1.(A)
DRAFT
MERRILL LYNCH & CO., INC.
(A DELAWARE CORPORATION)
____% STRYPES/SM/ DUE , 1998
UNDERWRITING AGREEMENT
----------------------
_________, 1995
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281-1201
Dear Sirs:
Merrill Lynch & Co., Inc., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Underwriter") an aggregate of 5,000,000 of the Company's Structured Yield
Product Exchangeable for Stock/SM/, ____% STRYPES/SM/ Due _________, 1998 (each,
a "STRYPES"), payable at maturity by the delivery of common stock, par value
$1.00 per share (the "MGIC Common Stock"), of MGIC Investment Corporation ("MGIC
Investment"), and, at the option of the Underwriter, all or any part of 750,000
additional STRYPES to cover over-allotments. The aforesaid 5,000,000 STRYPES
(the "Initial Securities") to be purchased by the Underwriter and all or any
part of the 750,000 additional STRYPES subject to the option described in
Section 2(b) hereof (the "Option Securities") are hereinafter collectively
referred to as the "Securities". The Securities are to be issued under an
indenture, dated as of April 1, 1983, as supplemented as of ________, 1995 (the
"Indenture"), between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee").
Prior to the purchase and public offering of the Securities by the
Underwriter, the Company and the Underwriter shall enter into an agreement
substantially in the form of Exhibit A hereto (the "Pricing Agreement"). The
Pricing Agreement may take the form of an exchange of any standard form of
written telecommunication between the Company and the Underwriter and shall
specify such applicable information as is indicated in Exhibit A hereto. The
offering of the Securities shall be governed by this Agreement, as supplemented
by the Pricing Agreement. From and after the date of the execution and delivery
of the Pricing Agreement, this Agreement shall be deemed to incorporate the
Pricing Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-_____) and related
preliminary prospectus for the registration of the Securities under the
Securities Act of 1933, as amended (the "1933 Act"), has filed such amendments
thereto, if any, and such amended preliminary prospectuses as may have been
required to the date hereof, and will file such additional amendments thereto
and such amended prospectuses as may hereafter be required. Such registration
statement (as amended, if applicable) at the time it becomes effective and the
prospectus constituting a part thereof (including the information, if any,
incorporated by reference therein and the information, if any, deemed to be part
thereof pursuant to Rule 430A(b) of the rules and regulations of the Commission
under the 1933 Act (the "1933 Act
_________________________
/SM/ Service Mark of Merrill Lynch & Co., Inc.
<PAGE>
Regulations")), as from time to time amended or supplemented pursuant to the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act"), or
otherwise, are hereinafter referred to as the "ML&Co. Registration Statement"
and the "ML&Co. Prospectus", respectively, except that if any revised prospectus
shall be provided to the Underwriter by the Company for use in connection with
the offering of the Securities which differs from the ML&Co. Prospectus on file
at the Commission at the time the ML&Co. Registration Statement becomes
effective (whether or not such revised prospectus is required to be filed by the
Company pursuant to Rule 424(b) of the 1933 Act Regulations), the term "ML&Co.
Prospectus" shall refer to such revised prospectus (excluding any MGIC
Prospectus (as defined below) included therein) from and after the time it is
first provided to the Underwriter for such use and if the Company files any
documents pursuant to Section 13 or 14 of the 1934 Act, after the ML&Co.
Registration Statement becomes effective and prior to the termination of the
offering of the Securities by the Underwriter, which documents are deemed to be
incorporated by reference into the ML&Co. Prospectus, the term "ML&Co.
Prospectus" shall refer to said prospectus as supplemented by the documents so
filed from and after the time said documents are filed with the Commission.
MGIC Investment has filed with the Commission a registration statement on
Form S-3 (No. 33-_____) and related preliminary prospectus for the registration
of the MGIC Common Stock deliverable upon payment and discharge of the
Securities under the 1933 Act, has filed such amendments thereto, if any, and
such amended preliminary prospectuses as may have been required to the date
hereof, and will file such additional amendments thereto and such amended
prospectuses as may hereafter be required. Such registration statement (as
amended, if applicable) at the time it becomes effective and the prospectus
constituting a part thereof (including the information, if any, incorporated by
reference therein), as from time to time amended or supplemented pursuant to the
1933 Act, the 1934 Act, or otherwise, are hereinafter referred to as the "MGIC
Registration Statement" and the "MGIC Prospectus", respectively, except that if
any revised prospectus shall be prepared by MGIC Investment for use by the
Underwriter which differs from the MGIC Prospectus on file at the Commission at
the time the MGIC Registration Statement becomes effective (whether or not such
revised prospectus is required to be filed by MGIC Investment pursuant to Rule
424(b) of the 1933 Act Regulations), the term "MGIC Prospectus" shall refer to
such revised prospectus from and after the time it is first provided to the
Underwriter for use and if MGIC Investment files any documents pursuant to
Section 13 or 14 of the 1934 Act after the MGIC Registration Statement becomes
effective and prior to the termination of the offering of the Securities by the
Underwriter, which documents are deemed to be incorporated by reference into the
MGIC Prospectus, the term "MGIC Prospectus" shall refer to said prospectus as
supplemented by the documents so filed from and after the time said documents
are filed with the Commission. The ML&Co. Registration Statement and the MGIC
Registration Statement are hereinafter collectively referred to as the
"Registration Statements"; and the ML&Co. Prospectus and the MGIC Prospectus are
hereinafter collectively referred to as the "Prospectuses".
The Company understands that the Underwriter proposes to make a public
offering of the Securities as soon as it deems advisable after the Registration
Statements become effective and the Pricing Agreement has been executed and
delivered.
Prior to the closing under this Agreement, the Company will enter into a
contract (the "Forward Purchase Contract") with The Northwestern Mutual Life
Insurance Company, a Wisconsin corporation ("NML"), pursuant to which NML will
agree to sell, and the Company will agree to purchase, immediately prior to
maturity of the Securities, a number of shares of MGIC Common Stock equal to the
number of shares required by the Company to pay and discharge the Securities at
maturity as described in the ML&Co. Prospectus or NML will deliver cash with an
equal value (the "Forward Purchase").
Section 1. Representations and Warranties. (a) The Company represents and
warrants to the Underwriter as of the date hereof and as of the date of the
Pricing Agreement (such later date being hereinafter referred to as the
"Representation Date") as follows:
(i) At the time the ML&Co. Registration Statement and any post-
effective amendments thereto become effective and at the Representation
Date, the ML&Co. Registration Statement will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations
and the Trust Indenture Act of 1939, as amended (the "1939 Act"), and the
rules and regulations of the Commission under the 1939 Act, and will not
contain any untrue statement of a material fact or omit to state any
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material fact required to be stated therein or necessary to make the
statements therein not misleading. The ML&Co. Prospectus, at the
Representation Date (unless the term "ML&Co. Prospectus" refers to a
prospectus that has been provided to the Underwriter by the Company for use
in connection with the offering of the Securities that differs from the
ML&Co. Prospectus on file at the Commission at the time the ML&Co.
Registration Statement first becomes effective, in which case at the time
such prospectus is first provided to the Underwriter for such use) and at
Closing Time and each Date of Delivery referred to in Section 2, will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection shall
not apply to (A) statements in or omissions from the ML&Co. Registration
Statement or ML&Co. Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by the Underwriter
expressly for use in the ML&Co. Registration Statement or ML&Co.
Prospectus, (B) that part of the ML&Co. Registration Statement which shall
constitute the Statement of Eligibility under the 1939 Act (Form T-1) of
the Trustee and (C) information contained in or omitted from the MGIC
Prospectus.
(ii) The Company meets the requirements for the use of Form S-3 under
the 1933 Act.
(iii) The accountants who certified the financial statements and
supporting schedules of the Company and its subsidiaries included or
incorporated by reference in the ML&Co. Registration Statement are
independent public accountants as required by the 1933 Act and the 1933 Act
Regulations.
(iv) The consolidated financial statements of the Company and its
consolidated subsidiaries included or incorporated by reference in the
ML&Co. Registration Statement and ML&Co. Prospectus present fairly the
consolidated financial position of the Company and its consolidated
subsidiaries as at the dates indicated and the results of their operations
for the periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved, except as indicated therein;
and the supporting schedules included in the ML&Co. Registration Statement
present fairly the information required to be stated therein.
(v) The documents incorporated by reference in the ML&Co. Prospectus,
at the time they were or hereafter are filed with the Commission, complied
and will comply in all material respects with the requirements of the 1934
Act and the rules and regulations of the Commission thereunder (the "1934
Act Regulations"), and, when read together with the other information in
the ML&Co. Prospectus, at the time the ML&Co. Registration Statement and
any post-effective amendments thereto become effective, will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and any further documents
deemed to be incorporated by reference in the ML&Co. Prospectus will, when
they are filed with the Commission, comply in all material respects with
the requirements of the 1934 Act and the 1934 Act Regulations, and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the representations and warranties in
this subsection shall not apply to (A) statements in or omissions from the
ML&Co. Registration Statement or ML&Co. Prospectus made in reliance upon
and in conformity with information furnished to the Company in writing by
the Underwriter expressly for use in the ML&Co. Registration Statement or
ML&Co. Prospectus, (B) that part of the ML&Co. Registration Statement which
shall constitute the Statement of Eligibility under the 1939 Act (Form T-1)
of the Trustee and (C) information contained in or omitted from the MGIC
Prospectus.
(vi) Since the respective dates as of which information is given in the
ML&Co. Registration Statement and the ML&Co. Prospectus, except as
otherwise stated therein or contemplated thereby, (A) there has been no
material adverse change in the condition, financial or otherwise, of the
Company and its subsidiaries considered as one enterprise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, (B) there have been no transactions entered
into by the Company or any of its
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subsidiaries which are material with respect to the Company and its
subsidiaries considered as one enterprise, other than those in the ordinary
course of business, and (C) except for regular quarterly dividends on its
outstanding Common Stock and regular dividends on its preferred stock,
there has been no dividend or distribution of any kind declared, paid or
made by the Company on any class of its capital stock.
(vii) The Company 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 as described in the ML&Co.
Prospectus and to enter into and perform its obligations under this
Agreement, the Pricing Agreement, the Indenture and the Forward Purchase
Contract; the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which it
owns or leases substantial properties or in which the conduct of its
business requires such qualification and in which failure of the Company to
be so qualified and in good standing would have a material adverse effect
upon the Company and its subsidiaries considered as one enterprise.
(viii) Each subsidiary of the Company listed in Exhibit No. 21 to the
Form 10-K annual report of the Company filed with the Commission under
Section 13 of the 1934 Act for the fiscal year ended December 30, 1994
which is a "significant subsidiary" as defined in Rule 405 of Regulation C
of the 1933 Act Regulations (a "ML&Co. Significant Subsidiary") has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its properties and conduct
its business as now being conducted and as described in the ML&Co.
Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which it
owns or leases substantial properties or in which the conduct of its
business requires such qualification and in which failure of such ML&Co.
Significant Subsidiary to be so qualified and in good standing would have a
material adverse effect upon the Company and its subsidiaries considered as
one enterprise; all of the issued and outstanding shares of capital stock
of each ML&Co. Significant Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable; and all of the shares of
capital stock of each ML&Co. Significant Subsidiary (except for directors'
qualifying shares and except as set forth in the ML&Co. Prospectus) are
owned by the Company, directly or through subsidiaries, free and clear of
any mortgage, pledge, lien, encumbrance, claim or equity.
(ix) Neither the Company nor any of the ML&Co. Significant Subsidiaries
is in violation of its charter or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease
or other instrument to which it or any of them is a party or by which it or
any of them may be bound or to which any of the property or assets of the
Company or any of the ML&Co. Significant Subsidiaries is subject; the
execution, delivery and performance by the Company of this Agreement, the
Pricing Agreement, the Indenture and the Forward Purchase Contract and the
consummation by the Company of the transactions contemplated herein and
therein (including the issue and sale of the Securities, the delivery of
shares of MGIC Common Stock upon payment and discharge of the Securities
and the consummation of the Forward Purchase) have been duly authorized by
all necessary corporate action and will not conflict with or constitute a
breach of, or default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or
any of the ML&Co. Significant Subsidiaries pursuant to, any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which the Company or any of the ML&Co. Significant Subsidiaries is a party
or by which it or any of them may be bound or to which any of the property
or assets of the Company or any of the ML&Co. Significant Subsidiaries is
subject, nor will such action result in any violation of the provisions of
the charter or by-laws of the Company or, to the best of its knowledge, any
law, administrative regulation or administrative or court decree; and no
consent, approval, authorization or order of any court or governmental
authority or agency is required for the execution, delivery or performance
by the Company of this Agreement, the Pricing Agreement, the Indenture or
the Forward Purchase Contract or the consummation by the Company of the
transactions contemplated herein or therein (including the issue and sale
of the Securities, the delivery of shares of MGIC Common Stock upon payment
and discharge of the
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Securities and the consummation of the Forward Purchase), except such as
have been obtained under the 1933 Act or the 1933 Act Regulations or state
securities or Blue Sky laws.
(x) The Company and the ML&Co. Significant Subsidiaries possess
adequate certificates, authorities, permits, licenses, approvals, consents
and other authorizations issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the business now
operated by them, and neither the Company nor any of the ML&Co. Significant
Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority, permit,
license, approval, consent or other authorization which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially adversely affect the conduct of the business, operations,
financial condition or income of the Company and its subsidiaries
considered as one enterprise.
(xi) Except as set forth in the ML&Co. Prospectus, there is no action,
suit or proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries
which might, in the opinion of the Company, result in any material adverse
change in the condition, financial or otherwise, of the Company and its
subsidiaries considered as one enterprise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, or might materially and adversely affect the
properties or assets thereof or might materially and adversely affect the
consummation by the Company of the transactions contemplated by this
Agreement, the Pricing Agreement, the Indenture or the Forward Purchase
Contract (including the issue and sale of the Securities, the delivery of
shares of MGIC Common Stock upon payment and discharge of the Securities
and the consummation of the Forward Purchase); and there are no contracts
or documents of the Company or any of its subsidiaries which are required
to be filed as exhibits to the ML&Co. Registration Statement by the 1933
Act or by the 1933 Act Regulations which have not been so filed or
incorporated by reference.
(xii) This Agreement has been, and at the Representation Date, the
Pricing Agreement will have been, duly authorized, executed and delivered
by the Company.
(xiii) The Indenture has been duly authorized by the Company and, at
the Closing Time, will have been duly qualified under the 1939 Act and duly
executed and delivered by the Company and will constitute a valid and
legally binding agreement of the Company enforceable against the Company in
accordance with its terms, except as the enforcement thereof 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.
(xiv) The Securities have been duly authorized for issuance and sale
pursuant to this Agreement and, when issued, authenticated and delivered
pursuant to the provisions of this Agreement and the Indenture against
payment of the consideration therefor specified in the Pricing Agreement,
the Securities will be valid and legally binding obligations of the Company
enforceable against the Company in accordance with their terms, except as
enforcement thereof 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, and will be entitled to the benefits provided by the
Indenture; and the Securities, the Indenture and the Forward Purchase
Contract conform in all material respects to all statements relating
thereto contained in the ML&Co. Prospectus and will be in substantially the
forms filed or incorporated by reference, as the case may be, as exhibits
to the ML&Co. Registration Statement.
(xv) The Forward Purchase Contract has been duly authorized by the
Company and, at the Closing Time, will have been duly executed and
delivered by the Company and will constitute a valid and legally binding
agreement of the Company enforceable against the Company in accordance with
its terms, except as the enforcement thereof 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.
(xvi) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material with
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respect to the Company and its subsidiaries considered as one enterprise,
in each case free and clear of all liens, encumbrances and defects except
such as are described in the ML&Co. Prospectus or such as do not materially
affect the value of such property in the aggregate and do not materially
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as
are not material to the Company and its subsidiaries considered as one
enterprise and do not materially interfere with the use made and proposed
to be made of such property and buildings by the Company and its
subsidiaries.
(xvii) The Company and the ML&Co. Significant Subsidiaries own or
possess, or can acquire on reasonable terms, adequate trademarks, service
marks and trade names necessary to conduct the businesses now operated by
them, and neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of others with
respect to any trademarks, service marks or trade names which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would materially adversely affect the conduct of the business,
operations, financial condition or income of the Company and its
subsidiaries considered as one enterprise.
(xviii) No labor dispute by the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent which
might be expected to have a material adverse effect upon the conduct of the
business, or the earnings, operations or condition, financial or otherwise,
of the Company and its subsidiaries considered as one enterprise.
(b) NML represents and warrants to each of the Company and the Underwriter as
of the date hereof and as of the Representation Date as follows:
(i) NML 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 and the Forward Purchase Contract.
(ii) 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 NML
of this Agreement or the Forward Purchase Contract or the consummation by
NML of the transactions contemplated herein or therein, except such as may
be required under the 1933 Act or the 1933 Act Regulations or state
securities or Blue Sky laws; and NML has full right, power and authority to
enter into this Agreement and the Forward Purchase Contract and to sell,
assign, transfer and deliver shares of MGIC Common Stock pursuant to the
Forward Purchase Contract.
(iii) The execution, delivery and performance by NML of this Agreement
and the Forward Purchase Contract and the consummation by NML of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which NML is a party or by
which NML is bound, or to which any of the property or assets of NML is
subject if such conflict, breach, violation or default would impair the
ability of NML to perform its obligations under this Agreement or the
Forward Purchase Contract, nor will such action result in any violation of
the provisions of the Articles of Incorporation or By-laws of NML, 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 NML or the
property of NML if such violation would impair the ability of NML to
perform its obligations under this Agreement or the Forward Purchase
Contract.
(iv) (A) At the date hereof, NML 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
NML elects to deliver shares of MGIC Common Stock pursuant to the Forward
Purchase Contract, upon delivery of such shares of MGIC Common Stock and
payment therefor pursuant to the Forward Purchase Contract, good and
marketable title to such shares, free and clear of any mortgage, pledge,
lien, encumbrance, claim or equity, will pass to the Company.
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(v) This Agreement has been duly authorized, executed and delivered by
NML.
(vi) The Forward Purchase Contract has been duly authorized by NML and,
at the Closing Time, will have been duly executed and delivered by NML and
will constitute a valid and legally binding agreement of NML enforceable
against NML in accordance with its terms, except as the enforcement thereof
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.
(vii) To the extent that any statements in or omissions from the ML&Co.
Registration Statement or ML&Co. Prospectus are made in reliance upon and
in conformity with information furnished to the Company in writing by NML
expressly for use in the ML&Co. Registration Statement or ML&Co.
Prospectus, (A) at the time the ML&Co. Registration Statement and any post-
effective amendments thereto become effective and at the Representation
Date, the ML&Co. Registration Statement will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations
and will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading and (B) the ML&Co. Prospectus, at the
Representation Date (unless the term "ML&Co. Prospectus" refers to a
prospectus that has been provided to the Underwriter by ML&Co. for use in
connection with the offering of the Securities that differs from the ML&Co.
Prospectus on file at the Commission at the time the ML&Co. Registration
Statement first becomes effective, in which case at the time such
prospectus is first provided to the Underwriter for such use) and at
Closing Time and each Date of Delivery referred to in Section 2, will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(viii) To the extent that any statements in or omissions from the MGIC
Registration Statement or MGIC Prospectus are made in reliance upon and in
conformity with information furnished to MGIC Investment in writing by NML
expressly for use in the MGIC Registration Statement or MGIC Prospectus,
(A) at the time the MGIC Registration Statement and any post-effective
amendments thereto become effective and at the Representation Date, the
MGIC Registration Statement will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and (B) the MGIC Prospectus, at the
Representation Date (unless the term "MGIC Prospectus" refers to a
prospectus that has been prepared by MGIC Investment for use by the
Underwriter that differs from the MGIC Prospectus on file at the Commission
at the time the MGIC Registration Statement first becomes effective, in
which case at the time such prospectus is first provided to the Underwriter
for use) and at Closing Time and each Date of Delivery referred to in
Section 2, will not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(c) Any certificate signed by any officer of the Company or NML and delivered
to the Underwriter or counsel for the Underwriter in connection with the
offering of Securities shall be deemed a representation and warranty by the
Company or NML, as the case may be, as to the matters covered thereby, to the
Underwriter.
Section 2. Purchase and Sale. (a) On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby agrees to sell to the Underwriter, and the Underwriter
hereby agrees to purchase from the Company, at the purchase price per STRYPES
set forth in the Pricing Agreement, the Initial Securities.
(1) If the Company has elected not to rely upon Rule 430A of the 1933 Act
Regulations, the initial public offering price and the purchase price per
STRYPES to be paid by the Underwriter for the Securities have each been
determined and set forth in the Pricing Agreement, dated the date hereof, and an
amendment to the ML&Co. Registration Statement and the ML&Co. Prospectus
containing such information will be filed before the ML&Co. Registration
Statement becomes effective.
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(2) If the Company has elected to rely upon Rule 430A of the 1933 Act
Regulations, the purchase price per STRYPES to be paid by the Underwriter for
the Securities shall be an amount equal to the initial public offering price,
less an amount per STRYPES to be determined by agreement between the Underwriter
and the Company. The initial public offering price per STRYPES shall be a fixed
price to be determined by agreement between the Underwriter and the Company.
The initial public offering price and the purchase price, when so determined,
shall be set forth in the Pricing Agreement. In the event that such prices have
not been agreed upon and the Pricing Agreement has not been executed and
delivered by all parties thereto by the close of business on the fourteenth
business day following the date of this Agreement, this Agreement shall
terminate forthwith, without liability of any party to any other party, unless
otherwise agreed to by the Underwriter and the Company. For purposes of this
Agreement, the term "business day" means a day on which the New York Stock
Exchange is open for business.
(b) In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants to the Underwriter an option to purchase all or any portion of the
Option Securities at the price per STRYPES set forth in the Pricing Agreement.
Such option shall expire 30 days after (i) the date the Registration Statements
become effective, if the Company has elected not to rely on Rule 430A of the
1933 Act Regulations, or (ii) the Representation Date, if the Company has
elected to rely upon Rule 430A of the 1933 Act Regulations, and may be exercised
in whole or in part from time to time only for the purpose of covering over-
allotments which may be made in connection with the offering and distribution of
the Initial Securities upon notice by the Underwriter to the Company setting
forth the number of Option Securities as to which the Underwriter is then
exercising the option and the time and date of payment for and delivery of such
Option Securities. Any such time and date of delivery (a "Date of Delivery")
shall be determined by the Underwriter, but shall not be later than seven full
business days and not earlier than two full business days after the exercise of
said option, nor in any event prior to the Closing Time, unless otherwise agreed
between the Underwriter and the Company.
(c) Payment of the purchase price for, and delivery of the certificates
representing, the Initial Securities to be purchased by the Underwriter 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 the Underwriter and the
Company, at 10:00 A.M., New York City time, on the third business day following
the date the Registration Statements become effective (or, if the Company has
elected to rely upon Rule 430A of the 1933 Act Regulations, the third business
day (or, if priced after 4:30 P.M., the fourth business day) after the
Representation Date), or such other time as shall be agreed between the
Underwriter and the Company (such time and date of payment and delivery being
referred to as the "Closing Time"). In addition, in the event that any or all
of the Option Securities are purchased by the Underwriter, payment of the
purchase price for, and delivery of the certificates representing, such Option
Securities shall be made at the above-mentioned offices of Brown & Wood, or at
such other place as may be agreed upon by the Underwriter and the Company, on
each Date of Delivery as specified in the notice from the Underwriter to the
Company. Payment shall be made to the Company by certified or official bank
check or checks in New York Clearing House or similar next day funds payable to
the order of the Company against delivery to the Underwriter of certificates for
such Initial Securities and Option Securities to be purchased by the Underwriter
(unless such Securities are issuable only in the form of one or more global
Shares registered in the name of a depository or a nominee of a depository, in
which event the Underwriter's interest in such global certificate shall be noted
in a manner satisfactory to the Underwriter and its counsel). Certificates for
the Initial Securities and the Option Securities, if any, shall be registered in
such names as the Underwriter may request in writing at least [one] business day
prior to the Closing Time or the relevant Date of Delivery, as the case may be.
Such certificates, which may be in temporary form, for the Initial Securities
and the Option Securities, if any, will be made available for examination and
packaging by the Underwriter not later than 10:00 A.M. on the business day prior
to the Closing Time or the relevant Date of Delivery, as the case may be.
Section 3. Covenants.
(a) The Company covenants with the Underwriter as follows:
(i) The Company will notify the Underwriter immediately, and confirm the
notice in writing, (A) of the effectiveness of the ML&Co. Registration
Statement and any amendment thereto (including any post-effective amendment),
(B) of the receipt of any comments from the Commission, (C) of any request
from the
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Commission for any amendment to the ML&Co. Registration Statement or any
amendment or supplement to the ML&Co. Prospectus or for additional
information, (D) of the issuance by the Commission of any stop order
suspending the effectiveness of the ML&Co. Registration Statement or any order
preventing or suspending the use of any preliminary prospectus, or the
initiation of any proceedings for that purpose, and (E) of the suspension of
the qualification of the Securities for offering or sale in any jurisdiction,
or the initiation or threatening of any proceedings for any such purpose. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible moment.
(ii) The Company will give the Underwriter notice of its intention to file
or prepare any amendment to the ML&Co. Registration Statement (including any
post-effective amendment) or any amendment or supplement to the ML&Co.
Prospectus (including any revised prospectus that the Company proposes for use
by the Underwriter in connection with the offering of the Securities which
differs from the prospectus on file at the Commission at the time the ML&Co.
Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the 1933 Act
Regulations), will furnish the Underwriter with copies of any such amendment
or supplement proposed to be filed a reasonable time in advance of such
proposed filing or use, and will not file any such amendment or supplement or
use any such prospectus in a form to which the Underwriter or counsel for the
Underwriter shall reasonably object.
(iii) The Company will deliver to the Underwriter one signed and as many
conformed copies of the ML&Co. Registration Statement (as originally filed)
and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated by reference in
the ML&Co. Prospectus) as the Underwriter may reasonably request.
(iv) The Company will furnish to the Underwriter, from time to time during
the period when the ML&Co. Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the ML&Co. Prospectus (as
amended or supplemented) as the Underwriter may reasonably request for the
purposes contemplated by the 1933 Act or the 1934 Act or the respective
applicable rules and regulations of the Commission thereunder.
(v) The Company, during the period when a prospectus relating to the
Securities is required to be delivered under the 1933 Act, will file promptly
all documents required to be filed with the Commission pursuant to Section 13
or 14 of the 1934 Act subsequent to the time the ML&Co. Registration Statement
becomes effective.
(vi) If any event shall occur or condition exist as a result of which it
is necessary, in the view of counsel for the Underwriter or counsel for the
Company, to amend or supplement the ML&Co. Prospectus in order that the ML&Co.
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser or if it shall be necessary, in the view of either
such counsel, at any such time to amend or supplement the ML&Co. Registration
Statement or the ML&Co. Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare
and file with the Commission such amendment or supplement (in form and
substance satisfactory to counsel for the Underwriter), whether by filing
documents pursuant to the 1934 Act or otherwise, as may be necessary to
correct such untrue statement or omission or to make the ML&Co. Registration
Statement or ML&Co. Prospectus comply with such requirements and the Company
will furnish to the Underwriter as many copies of such amendment or supplement
as the Underwriter may reasonably request.
(vii) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions
of Rule 158 under the 1933 Act) covering the twelve month period beginning not
later than the first day of the Company's fiscal quarter next following the
"effective date" (as defined in Rule 158) of the ML&Co. Registration
Statement.
(viii) The Company will endeavor, in cooperation with the Underwriter, to
qualify the Securities for offering and sale under the applicable securities
laws of such states and other jurisdictions of the United States
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as the Underwriter may designate, and will maintain such qualifications in
effect for as long as may be required for the distribution of the Securities;
provided, however, that no such qualification shall be required in any
jurisdiction in which, as a result thereof, the Company would be obligated to
file any general consent to service of process or to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified. The Company
will file such statements and reports as may be required by the laws of each
jurisdiction in which the Securities have been qualified as above provided.
(ix) The Company will use the net proceeds received by it from the sale of
the Securities in the manner specified in the ML&Co. Prospectus under the
caption "Use of Proceeds."
(x) If, at the time that the ML&Co. Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance upon
Rule 430A of the 1933 Act Regulations, then immediately following the
execution of the Pricing Agreement, the Company will prepare, and file or
transmit for filing with the Commission in accordance with such Rule 430A and
Rule 424(b) of the 1933 Act Regulations, copies of the amended ML&Co.
Prospectus, or, if required by such Rule 430A, a post-effective amendment to
the ML&Co. Registration Statement (including the amended ML&Co. Prospectus),
containing all information so omitted.
(xi) If the Company has elected to rely upon Rule 430A, it will take such
steps as it deems necessary to ascertain promptly whether the form of ML&Co.
Prospectus transmitted for filing under Rule 424(b) of the 1933 Act
Regulations was actually received for filing by the Commission and, in the
event that it was not, it will promptly file such prospectus.
(xii) The Company use its best efforts to effect the listing of the
Securities on the New York Stock Exchange.
(b) NML covenants with the Underwriter that, during the period beginning from
the date hereof and continuing to and including the date 90 days after the date
of the MGIC Prospectus, NML will not, without the prior written consent of the
Underwriter, (x) 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 MGIC Common Stock, or rights or warrants to
acquire MGIC Common Stock, or (y) cause to be filed any registration statement
under the 1933 Act with respect to any shares of MGIC Common Stock, securities
convertible into, exchangeable for or repayable with MGIC Common Stock, or
rights or warrants to acquire MGIC Common Stock.
Section 4. Conditions.
(a) The obligation of the Underwriter to purchase Securities pursuant hereto
at the Closing Time or on the relevant Date of Delivery, as the case may be, is
subject to the accuracy of the representations and warranties on the part of the
Company and NML herein contained, to the accuracy of the representations and
warranties on the part of MGIC Investment contained in the Registration
Agreement, dated the date hereof (the "Registration Agreement") among MGIC
Investment, the Company and the Underwriter, to the accuracy of the statements
of the officers of the Company, NML and MGIC Investment made in any certificate
furnished pursuant to the provisions hereof, to the performance by the Company
and NML of all of their respective covenants and other obligations hereunder, to
the performance by MGIC Investment of all of its covenants and other obligations
under the Registration Agreement and to the following further conditions:
(1) The Registration Statements shall have become effective not later than
5:30 P.M. on the date hereof, or with the consent of the Underwriter, at a
later time and date; and at Closing Time no stop order suspending the
effectiveness of either of the Registration Statements shall have been issued
under the 1933 Act or proceeding therefor initiated or threatened by the
Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
counsel to the Underwriter. If the Company has elected to rely upon Rule 430A
of the 1933 Act Regulations, the price of the Securities and any price-related
information previously omitted from the effective ML&Co. Registration
Statement pursuant to such Rule 430A shall have been transmitted to the
Commission for filing in accordance with Rule 424(b) of the 1933 Act
Regulations within the prescribed time period and prior to Closing Time the
Company shall have provided evidence satisfactory to the Underwriter of such
timely filing, or a post-effective
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amendment providing such information shall have been promptly filed and
declared effective in accordance with the requirements of Rule 430A of the
1933 Act Regulations.
(2) At the Closing Time the Underwriter shall have received:
(A) The favorable opinion, dated as of the Closing Time, of Brown &
Wood, counsel for the Company, in form and substance satisfactory to the
Underwriter, to the effect that:
(i) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
ML&Co. Registration Statement.
(iii) To the best of their knowledge and information, the Company is
duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is
required.
(iv) Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S")
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware, has corporate
power and authority to own, lease and operate its properties and conduct
its business as described in the ML&Co. Registration Statement, and is
duly qualified as a foreign corporation to transact business and is in
good standing in the State of New York; all of the issued and
outstanding capital stock of MLPF&S has been duly authorized and validly
issued and is fully paid and non-assessable, and all of such capital
stock owned by the Company, to the best of their knowledge and
information, is owned free and clear of any pledge, lien, encumbrance,
claim or equity.
(v) This Agreement and the Pricing Agreement have been duly
authorized, executed and delivered by the Company.
(vi) The Indenture has been duly authorized, executed and delivered
by the Company and (assuming the due authorization, execution and
delivery thereof by the Trustee) constitutes a valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms, except as enforcement thereof 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.
(vii) The Securities are in the form contemplated by the Indenture,
have been duly and validly authorized by the Company for issuance and
sale and, when executed by the Company and authenticated by the Trustee
in the manner provided in the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the Trustee) and delivered
against payment of the consideration therefor specified in the Pricing
Agreement, will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except
as enforcement thereof 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, and will be entitled to the benefits
provided by the Indenture.
(viii) The Forward Purchase Contract has been duly authorized,
executed and delivered by the Company and constitutes a valid and
legally binding agreement of the Company enforceable against the Company
in accordance with its terms, except as the enforcement thereof 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.
(ix) The Indenture has been qualified under the 1939 Act.
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<PAGE>
(x) The Securities, the Indenture and the Forward Purchase Contract
conform in all material respects to the descriptions thereof in the
ML&Co. Prospectus.
(xi) The Registration Statements have been declared effective under
the 1933 Act; any required filings of the Prospectuses pursuant to Rule
424(b) have been made in the manner and within the time period required
by Rule 424(b); and, to the best of their knowledge and information, no
stop order suspending the effectiveness of either of the Registration
Statements has been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission.
(xii) The Registration Statements and any amendments thereto, as of
their respective effective dates and as of the date hereof (other than
the financial statements and other financial data included or
incorporated by reference therein, as to which no opinion need be
rendered) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(xiii) Each document, if any, filed pursuant to the 1934 Act (other
than the financial statements and other financial data included therein,
as to which no opinion need be rendered) and incorporated by reference
in the ML&Co. Prospectus complied when so filed as to form in all
material respects with the 1934 Act and the 1934 Act Regulations.
(xiv) No consent, approval, authorization or order of any court or
governmental authority or agency is required in connection with the
consummation by the Company of the transactions contemplated by this
Agreement, the Pricing Agreement, the Indenture or the Forward Purchase
Contract (including the issue and sale of the Securities to the
Underwriter, the delivery of shares of MGIC Common Stock upon payment
and discharge of the Securities or the consummation of the Forward
Purchase), except such as have been obtained under the 1933 Act and the
1933 Act Regulations and state securities or Blue Sky laws; and to the
best of their knowledge and information, the execution, delivery and
performance by the Company of this Agreement, the Pricing Agreement, the
Indenture and the Forward Purchase Contract and the consummation of the
transactions contemplated herein and therein (including the issue and
sale of the Securities, the delivery of shares of MGIC Common Stock upon
payment and discharge of the Securities and the consummation of the
Forward Purchase) will not conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be
bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company, or
any law, administrative regulation or administrative or court decree.
In giving their opinion pursuant to this subsection (2)(A), Brown & Wood
shall additionally state that nothing has come to their attention that
would lead them to believe that either the ML&Co. Registration Statement or
the MGIC Registration Statement (in each case other than the financial
statements and other financial data included or incorporated by reference
therein, as to which no statement need be made), at the time it became
effective or at the Representation Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that
either the ML&Co. Prospectus or the MGIC Prospectus (in each case other
than the financial statements and other financial data included or
incorporated by reference therein, as to which no statement need be made),
at the Representation Date (unless the term "ML&Co. Prospectus" refers to a
prospectus which has been provided to the Underwriter by the Company for
use in connection with the offering of the Securities which differs from
the ML&Co. Prospectus on file at the Commission at the time the ML&Co.
Registration Statement became effective, in which case at the date of such
different prospectus, and unless the term "MGIC Prospectus" refers to a
prospectus which has been prepared by MGIC Investment for use by the
Underwriter which differs from the MGIC Prospectus on file at the
Commission at the time the MGIC Registration Statement became effective, in
which case at the date of such different prospectus) or at the Closing
Time, included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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<PAGE>
(B) favorable opinions of Foley & Lardner, outside counsel for MGIC
Investment (other than as to subparagraph (iii) and subparagraphs (x) and
(xi) insofar as such subparagraphs relate to insurance law matters), and
Russell E. Van Hooser, Senior Vice President Regulatory Relations and
counsel for MGIC Investment (as to subparagraph (iii) and subparagraphs (x)
and (xi) insofar as such subparagraphs relate to insurance law matters),
dated as of the Closing Time, in form and substance satisfactory to the
Underwriter, to the effect that:
(i) MGIC Investment has been duly incorporated and is validly
existing as a corporation under the laws of the State of Wisconsin, with
corporate power and authority to own its properties and conduct its
business as described in the MGIC Prospectus;
(ii) Mortgage Guaranty Insurance Corporation ("MGIC") has been duly
incorporated and is validly existing as a corporation under the laws of
the State of Wisconsin;
(iii) MGIC is duly licensed to conduct an insurance business under
the insurance laws of each jurisdiction in which the conduct of its
business requires such licensing and in which the failure to be so
licensed would have a material adverse effect on the financial position,
shareholders' equity or results of operations of MGIC Investment and its
subsidiaries considered as one enterprise;
(iv) MGIC Investment has authorized equity capitalization as set
forth in the MGIC Prospectus under the caption "Description of Capital
Stock," and all of the issued shares of capital stock of MGIC Investment
have been duly and validly authorized and issued and are fully paid and
non-assessable (except to the extent provided in Section 180.0622) of
the Wisconsin Business Corporation Law); and the MGIC Common Stock
conforms as to legal matters to the description of the MGIC Common Stock
contained in the MGIC Prospectus;
(v) MGIC Investment has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification, or is
subject to no liability or disability by reason of failure to be so
qualified in any such jurisdiction which is material to MGIC Investment
and its subsidiaries considered as one enterprise (such counsel being
entitled to rely in respect of the opinion in this clause upon opinions
of local counsel, provided that such counsel shall state that they
believe that both the Underwriter and they are justified in relying upon
such opinions);
(vi) Each MGIC Significant Subsidiary (other than MGIC) has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation; and all of
the issued shares of capital stock of each such subsidiary and MGIC have
been duly and validly authorized and issued, are fully paid and
nonassessable (except to the extent provided in Section 180.0622 of the
Wisconsin Business Corporation Law), and, to such counsel's knowledge,
(except for directors' qualifying shares and except as otherwise set
forth in the MGIC Prospectus) are owned directly or indirectly by MGIC
Investment, free and clear of all perfected liens, encumbrances or
adverse claims (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel, provided that
such counsel shall state that they believe that both the Underwriter and
they are justified in relying upon such opinions);
(vii) To such counsel's knowledge and other than as set forth in the
MGIC Prospectus, there are no legal or governmental proceedings pending
or threatened to which MGIC Investment or any of its subsidiaries is a
party or of which any property of MGIC Investment or any of its
subsidiaries is the subject which such counsel has reasonable cause to
believe would individually have a material adverse effect on the
consolidated financial position, shareholders' equity or results of
operations of MGIC Investment and its subsidiaries;
(viii) The Registration Agreement has been duly authorized, executed
and delivered by MGIC Investment;
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<PAGE>
(ix) The compliance by MGIC Investment with all of the provisions of
the Registration Agreement and the performance by MGIC Investment of its
obligations therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which MGIC
Investment or any of its subsidiaries is a party or by which MGIC
Investment or any of its subsidiaries is bound or to which any of the
property or assets of MGIC Investment or any of its subsidiaries is
subject, if such conflict, breach, violation or default would have a
material adverse effect on MGIC Investment and its subsidiaries taken as
a whole or would impair MGIC Investment's ability to perform its
obligations under the Registration Agreement nor will such compliance or
performance result in any violation of the provisions of the Articles of
Incorporation or By-laws of MGIC Investment;
(x) The compliance by MGIC Investment with all of the provisions of
the Registration Agreement and the performance by MGIC Investment of its
obligations therein contemplated will not result in any violation of any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over MGIC
Investment or any of its subsidiaries or any of their properties (it
being understood that such counsel need render no opinion with regard to
any state or foreign Blue Sky laws);
(xi) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required to be obtained by MGIC Investment in connection with the
consummation by MGIC Investment of the transactions contemplated by the
Registration Agreement, except the registration under the 1933 Act of
the shares of MGIC Common Stock deliverable upon payment and discharge
of the Securities, and such consents, approvals, authorizations,
registration or qualifications as may be required under state or foreign
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriter; and
(xii) The MGIC Registration Statement and the MGIC Prospectus and
any further amendments and supplements thereto made by MGIC Investment
prior to the Closing Time (other than the financial statements,
financial schedules and financial data contained therein, as to which
such counsel need express no opinion) appeared on their face to be
appropriately responsive in all material respects with the requirements
of the 1933 Act and the 1933 Act Regulations; no facts have come to
their attention that cause them to believe that the MGIC Registration
Statement (other than the financial statements, financial schedules and
financial data contained therein, as to which such counsel need not
comment), at the time it became effective or at the Representation Date,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the MGIC Prospectus (other
than the financial statements, financial schedules and financial data
contained therein, as to which such counsel need not comment), at the
Representation Date (unless the term "MGIC Prospectus" refers to a
prospectus which has been prepared by MGIC Investment for use by the
Underwriter which differs from the MGIC Prospectus on file at the
Commission at the time the MGIC Registration Statement became effective,
in which case at the date of such different prospectus) or at the
Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and they do not know of any
contracts or other documents of a character required to be filed as an
exhibit to the MGIC Registration Statement or required to be described
in the MGIC Registration Statement or the MGIC Prospectus which are not
filed or described as required, such counsel may state they do not
assume any responsibility for the accuracy, completeness or fairness of
statements contained in the MGIC Registration Statement or the MGIC
Prospectus except to the extent covered by their opinions expressed
pursuant to clause (iv) above.
In rendering such opinion, such counsel may state they express no
opinion as to the laws of any jurisdiction other than the federal laws of
the United States and the laws of the State of Wisconsin and such counsel
shall be entitled to rely in respect of matters of fact on certificates of
officers of MGIC
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<PAGE>
Investment and MGIC and upon certificates of government officials provided
such counsel shall state that they believe both the Underwriter and they
are justified in relying upon such certificates.
(C) The favorable opinion of Chapman and Cutler, counsel for NML, dated
as of the Closing Time, in form and substance satisfactory to the
Underwriter, to the effect that:
(i) NML 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 and the Forward Purchase Contract.
(ii) The execution, delivery and performance by NML of this
Agreement and the Forward Purchase Contract and the consummation by NML
of the transactions herein and therein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument known to
such counsel to which NML is a party or by which NML is bound, or to
which any of the property or assets of NML is subject if such conflict,
breach, violation or default would have a material adverse effect on NML
or impair the ability of NML to perform its obligations under this
Agreement or the Forward Purchase Contract, nor will such action result
in any violation of the provisions of the Articles of Incorporation or
By-laws of NML, or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over NML or the property of NML (it being understood that
such counsel need render no opinion with regard to any state statute,
rule or regulation with regard to state or foreign Blue Sky laws) (such
counsel being entitled to rely in respect of the opinion in this clause,
insofar as it relates to insurance law matters, upon the opinion of
other counsel, provided that such counsel shall state that they believe
both the Underwriter and they are justified in relying on such opinion).
(iii) 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 consummation by NML of the
transactions contemplated by this Agreement and the Forward Purchase
Contract, except such as may be required under the 1933 Act or the 1933
Act Regulations or state securities or Blue Sky laws (such counsel being
entitled to rely in respect of the opinion in this clause, insofar as it
relates to insurance law matters, upon the opinion of other counsel,
provided that such counsel shall state that they believe both the
Underwriter and they are justified in relying on such opinion).
(iv) NML has good and marketable title to at least 5,750,000 shares
of MGIC Common Stock, free and clear of all liens, encumbrances,
equities or claims.
(v) This Agreement has been duly authorized, executed and delivered
by NML.
(vi) The Forward Purchase Contract has been duly authorized,
executed and delivered by NML and constitutes a valid and legally
binding agreement of NML enforceable against NML in accordance with its
terms, except as the enforcement thereof 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.
(vii) With respect to information therein with respect to NML: the
MGIC Registration Statement and the MGIC Prospectus and any further
amendments and supplements thereto made by MGIC Investment prior to the
Closing Time comply as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and no facts
have come to their attention that cause them to believe that the MGIC
Registration Statement, at the time it became effective or at the
Representation Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the MGIC
Prospectus, at the Representation Date (unless the term "MGIC
Prospectus" refers to a prospectus which has been prepared by MGIC
Investment for use by the Underwriter which differs from the MGIC
Prospectus on file at the Commission at the time the MGIC Registration
Statement
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<PAGE>
became effective, in which case at the date of such different
prospectus) or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction other than the federal laws of
the United States and the laws of the State of Wisconsin and such counsel
shall be entitled to rely in respect of matters of fact on certificates of
officers of NML and upon certificates of government officials, provided
that such counsel shall state that they believe that both the Underwriter
and they are justified in relying upon such certificates.
(3) At the Closing Time, there shall not have been, since the date hereof
or since the respective dates as of which information is given in the ML&Co
Registration Statement and the ML&Co. Prospectus, except as otherwise stated
therein or contemplated thereby, any material adverse change in the condition,
financial or otherwise, of the Company and its subsidiaries considered as one
enterprise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the Underwriter shall have
received a certificate of the Chairman of the Board, the President, a Vice
President, the Treasurer or the Controller of the Company, dated as of the
Closing Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties of the Company contained in
Section 1(a) are true and correct with the same force and effect as though
made at and as of the Closing Time, and (iii) the Company has complied with
all agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time.
(4) At the Closing Time, there shall not have been, since the date hereof
or since the respective dates as of which information is given in the MGIC
Registration Statement and the MGIC Prospectus, except as otherwise stated
therein or contemplated thereby, any material adverse change in the condition,
financial or otherwise, of MGIC Investment and its subsidiaries considered as
one enterprise, or in the earnings, business affairs or business prospects of
MGIC Investment and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business, and the Underwriter shall have
received a certificate of the Chairman of the Board, the President, a Vice
President, the Treasurer or the Controller of MGIC Investment, dated as of the
Closing Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties of the Company contained in
the Registration Agreement are true and correct with the same force and effect
as though made at and as of the Closing Time, and (iii) the Company has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time pursuant to the
Registration Agreement.
(5) At the Closing Time, the Underwriter shall have received a certificate
of the Chairman of the Board, the President, a Vice President, the Treasurer
or the Controller of NML, dated as of the Closing Time, to the effect that (i)
the representations and warranties of NML contained in Section 1(b) are true
and correct with the same force and effect as though made at and as of the
Closing Time, and (ii) NML has complied in all material respects with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to Closing Time.
(6) At the time of execution of this Agreement, the Underwriter shall have
received from Deloitte & Touche LLP a letter, dated such date, in the form and
substance satisfactory to the Underwriter, to the effect set forth in Annex I
hereto.
(7) At the Closing Time, the Underwriter shall have received from Deloitte
& Touche LLP a letter, dated as of Closing Time, to the effect that they
reaffirm the statements made in the letter furnished pursuant to Section
4(a)(6), except that any date specified in the letter furnished pursuant to
this Section 4(a)(7) as of which certain procedures had been performed shall
be a date not more than three days prior to Closing Time.
(8) At the time of execution of this Agreement, the Underwriter shall have
received from Price Waterhouse LLP a letter, dated such date, in the form and
substance satisfactory to the Underwriter, to the effect set forth in Annex II
hereto.
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<PAGE>
(9) At the Closing Time, the Underwriter shall have received from Price
Waterhouse LLP a letter, dated as of Closing Time, to the effect that they
reaffirm the statements made in the letter furnished pursuant to Section
4(a)(8), except that any date specified in the letter furnished pursuant to
this Section 4(a)(9) as of which certain procedures had been performed shall
be a date not more than three days prior to Closing Time.
(10) In the event that the Underwriter exercises the option granted in
Section 2(b) hereof to purchase all or any portion of the Option Securities,
the representations and warranties of the Company and NML contained herein,
the representations and warranties of MGIC Investment contained in the
Registration Agreement and the statements in any certificates furnished by the
Company, NML or MGIC Investment hereunder shall be true and correct as of each
Date of Delivery and, at each Date of Delivery, the Underwriter shall have
received:
(A) A certificate, dated such Date of Delivery, of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Controller of
the Company confirming that the certificate delivered at the Closing Time
pursuant to Section 4(a)(3) hereof remains true and correct as of such Date
of Delivery.
(B) A certificate, dated such Date of Delivery, of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Controller of
MGIC Investment confirming that the certificate delivered at the Closing
Time pursuant to Section 4(a)(4) hereof remains true and correct as of such
Date of Delivery.
(C) A certificate, dated such Date of Delivery, of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Controller of
NML confirming that the certificate delivered at the Closing Time pursuant
to Section 4(a)(5) hereof remains true and correct as of such Date of
Delivery.
(D) The favorable opinion of Brown & Wood, counsel for the Company, in
form and substance satisfactory to the Underwriter, dated such Date of
Delivery, relating to the Option Securities to be purchased on the Date of
Delivery and otherwise to the same effect as the opinion required by
Section 4(a)(2)(A) hereof.
(E) The favorable opinions of Foley & Lardner, outside counsel for MGIC
Investment, and Russell E. Van Hooser, Senior Vice President Regulatory
Relations and counsel for MGIC Investment, each in form and substance
satisfactory to the Underwriter, dated such Date of Delivery, to the same
effect as the opinions required by Section 4(a)(2)(B) hereof.
(F) The favorable opinion of Chapman and Cutler, counsel for NML, in
form and substance satisfactory to the Underwriter, dated such Date of
Delivery, to the same effect as the opinion required by Section 4(a)(2)(C)
hereof.
(G) A letter from Deloitte & Touche LLP, in form and substance
satisfactory to the Underwriter and dated such Date of Delivery,
substantially the same in scope and substance as the letter furnished to
the Underwriter pursuant to Section 4(a)(6) hereof except that any date
specified in the letter furnished pursuant to this Section 4(a)(10)(G) as
of which certain procedures had been performed shall be a date not more
than three days prior to such Date of Delivery.
(H) A letter from Price Waterhouse LLP, in form and substance
satisfactory to the Underwriter and dated such Date of Delivery,
substantially the same in scope and substance as the letter furnished to
the Underwriter pursuant to Section 4(a)(8) hereof except that any date
specified in the letter furnished pursuant to this Section 4(a)(10)(H) as
of which certain procedures had been performed shall be a date not more
than three days prior to such Date of Delivery.
(11) On or prior to the date hereof, each executive officer of MGIC
Investment shall have furnished to the Underwriter his written agreement, in
form and substance satisfactory to the Underwriter, that, during the period
beginning from the date hereof and continuing to and including the date 90
days after the date of the MGIC Prospectus, he will not, without the prior
written consent of the Underwriter, offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any shares of MGIC Common Stock,
securities
17
<PAGE>
convertible into, exchangeable for or repayable with MGIC Common Stock, or
rights or warrants to acquire MGIC Common Stock.
(12) At the Closing Time or Date of Delivery, as the case may be, counsel
for the Underwriter shall have been furnished with such documents and opinions
as they may reasonably require for the purpose of enabling them to pass upon
the issuance and sale of the Securities as herein contemplated and related
proceedings or in order to evidence the accuracy and completeness of any of
the representations and warranties, or the fulfillment of any of the
conditions, contained herein or in the Registration Agreement; and all
proceedings taken by the Company in connection with the issuance and sale of
the Securities as herein contemplated shall be satisfactory in form and
substance to the Underwriter.
(b) The obligation of the Company to sell Securities pursuant hereto at the
Closing Time or on the relevant Date of Delivery, as the case may be, is subject
to the accuracy of the representations and warranties on the part of NML herein
contained, to the accuracy of the representations and warranties on the part of
MGIC Investment contained in the Registration Agreement, to the accuracy of the
statements of the officers of NML and MGIC Investment made in any certificate
furnished pursuant to the provisions hereof, to the performance by NML of all of
its covenants and other obligations hereunder, to the performance by MGIC
Investment of all of its covenants and other obligations under the Registration
Agreement and to the following further conditions:
(1) The MGIC Registration Statement shall have become effective not later
than 5:30 P.M. on the date hereof, or with the consent of the Company and the
Underwriter, at a later time and date; and at Closing Time no stop order
suspending the effectiveness of the MGIC Registration Statements shall have
been issued under the 1933 Act or proceeding therefor initiated or threatened
by the Commission, and any request on the part of the Commission for
additional information shall have been complied with to the reasonable
satisfaction of counsel to the Company.
(2) At the Closing Time the Company shall have received:
(A) A certificate, dated such Closing Time, of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Controller of
MGIC Investment to the same effect as the certificate delivered to the
Underwriter pursuant to Section 4(a)(4) hereof.
(B) A certificate, dated such Closing Time, of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Controller of
NML to the same effect as the certificate delivered to the Underwriter
pursuant to Section 4(a)(5) hereof.
(C) The favorable opinion of Brown & Wood, counsel for the Company, in
form and substance satisfactory to the Company, dated as of the Closing
Time, to the same effect as the opinion required by Section 4(a)(2)(A)
hereof.
(D) The favorable opinions of Foley & Lardner, outside counsel for MGIC
Investment, and Russell E. Van Hooser, Senior Vice President Regulatory
Relations and counsel for MGIC Investment, each in form and substance
satisfactory to the Company, dated as of the Closing Time, to the same
effect as the opinions required by Section 4(a)(2)(B) hereof.
(E) The favorable opinion of Chapman and Cutler, counsel for NML, in
form and substance satisfactory to the Company, dated as of the Closing
Time, to the same effect as the opinion required by Section 4(a)(2)(C)
hereof.
(3) At the time of execution of this Agreement, the Company shall have
received from Price Waterhouse LLP a letter, dated such date, in form and
substance satisfactory to the Company, substantially the same in scope and
substance as the letter furnished to the Underwriter pursuant to Section
4(a)(8) hereof.
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<PAGE>
(4) At the Closing Time, the Company shall have received from Price
Waterhouse LLP a letter, dated as of the Closing Time, in form and substance
satisfactory to the Company, substantially the same in scope and substance as
the letter furnished to the Underwriter pursuant to Section 4(a)(9) hereof.
(5) In the event that the Underwriter exercises the option granted in
Section 2(b) hereof to purchase all or any portion of the Option Securities,
the representations and warranties of NML contained herein, the
representations and warranties of MGIC Investment contained in the
Registration Agreement and the statements in any certificates furnished by NML
or MGIC Investment hereunder shall be true and correct as of each Date of
Delivery and, at each Date of Delivery, the Company shall have received:
(A) A certificate, dated such Date of Delivery, of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Controller of
MGIC Investment confirming that the certificate delivered at the Closing
Time pursuant to Section 4(b)(2)(A) hereof remains true and correct as of
such Date of Delivery.
(B) A certificate, dated such Date of Delivery, of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Controller of
NML confirming that the certificate delivered at the Closing Time pursuant
to Section 4(b)(2)(B) hereof remains true and correct as of such Date of
Delivery.
(C) The favorable opinion of Brown & Wood, counsel for the Company, in
form and substance satisfactory to the Company, dated such Date of
Delivery, relating to the Option Securities to be purchased on the Date of
Delivery and otherwise to the same effect as the opinion required by
Section 4(b)(2)(C) hereof.
(D) The favorable opinions of Foley & Lardner, outside counsel for MGIC
Investment, and Russell E. Van Hooser, Senior Vice President Regulatory
Relations and counsel for MGIC Investment, each in form and substance
satisfactory to the Company, dated such Date of Delivery, to the same
effect as the opinions required by Section 4(b)(2)(D) hereof.
(E) The favorable opinion of Chapman and Cutler, counsel for NML, in
form and substance satisfactory to the Company, dated such Date of
Delivery, to the same effect as the opinion required by Section 4(b)(2)(E)
hereof.
(F) A letter from Price Waterhouse LLP, in form and substance
satisfactory to the Company and dated such Date of Delivery, substantially
the same in scope and substance as the letter furnished to the Underwriter
pursuant to Section 4(a)(10)(H) hereof.
(c) If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Underwriter or the Company, as the case may be, by notice to the other parties
hereto at any time at or prior to the Closing Time, and such termination shall
be without liability of any party to any other party except as provided in
Section 5.
Section 5. Payment of Expenses.
(a) The Company will pay all expenses incident to the performance of its
obligations under this Agreement, including (i) the printing and filing of the
ML&Co. Registration Statement as originally filed and all amendments thereto,
and the printing of this Agreement, the Pricing Agreement, the Indenture, the
Forward Purchase Contract and any certificates representing the Securities, (ii)
the preparation, issuance and delivery of the Securities to the Underwriter,
(iii) the fees and disbursements of the Company's counsel and accountants, (iv)
the qualification of the Securities under state securities laws in accordance
with the provisions of Section 3(a)(viii), including filing fees and the fees
and disbursements of the Company's counsel in connection therewith and in
connection with the preparation of any Blue Sky Survey, (v) the printing and
delivery to the Underwriter in quantities as hereinabove stated of copies of the
ML&Co. Registration Statement and any amendments thereto, and of the ML&Co.
Prospectus and any amendments or supplements thereto, (vi) the printing and
delivery to the Underwriter of copies of the Blue Sky Survey, (vii) the fees of
rating agencies, (viii) the fees and expenses, if any, incurred in connection
19
<PAGE>
with the listing of the Securities on the New York Stock Exchange or any other
national securities exchange, and (ix) the fees and expenses incurred with
respect to the filing with the National Association of Securities Dealers, Inc.
(b) NML will pay all expenses incident to the performance of its obligations
under this Agreement, including the fees and disbursements of NML's counsel.
(c) If this Agreement is terminated by the Underwriter in accordance with the
provisions of Section 4 or Section 9, the Company shall reimburse the
Underwriter for all of their out-of-pocket expenses, including the reasonable
fees and disbursements of counsel for the Underwriter.
Section 6. Indemnification. (a) The Company agrees to indemnify and hold
harmless the Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the ML&Co. Registration Statement
(or any amendment thereto), including the information deemed to be a part of
the ML&Co. Registration Statement pursuant to Rule 430A(b) of the 1933 Act
Regulations, if applicable, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or the ML&Co. Prospectus (or any amendment or supplement thereto)
or the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with the
written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by the Underwriter), reasonably
incurred in investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission (A) made in reliance upon and
in conformity with written information furnished to the Company by the
Underwriter expressly for use in the ML&Co. Registration Statement (or any
amendment thereto) or any preliminary prospectus or the ML&Co. Prospectus (or
any amendment or supplement thereto) or (B) made in any preliminary prospectus
or prospectus, including the MGIC Prospectus, constituting part of the MGIC
Registration Statement (or any amendment thereto).
Insofar as this indemnity may permit indemnification for liabilities under the
1933 Act of any person who controls the Underwriter within the meaning of
Section 15 of the 1933 Act and who, at the date of this Agreement, is a
director, officer or controlling person of the Company, such indemnity agreement
is subject to the undertaking of the Company in the ML&Co. Registration
Statement.
(b) NML agrees to indemnify and hold harmless (A) the Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act and (B) the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in the MGIC Registration Statement (or
any amendment thereto) or the omission or alleged omission therefrom of a
material fact required
20
<PAGE>
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus or the MGIC
Prospectus (or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with the
written consent of NML; and
(iii) against any and all expense whatsoever, as incurred (including the
fees and disbursements of counsel chosen by the Underwriter or the Company, as
the case may be), reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or (ii)
above;
provided, however, that this indemnity shall apply only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
MGIC Registration Statement (or any amendment thereto) or any preliminary
prospectus or the MGIC Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to MGIC
Investment by NML expressly for use in the MGIC Registration Statement (or any
amendment thereto) or any preliminary prospectus or the MGIC Prospectus (or any
amendment or supplement thereto).
(c) The Underwriter agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the ML&Co. Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the ML&Co. Registration Statement (or
any amendment thereto) or any preliminary prospectus or the ML&Co. Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by the Underwriter expressly for
use in the ML&Co. Registration Statement (or any amendment thereto) or any
preliminary prospectus or the ML&Co. Prospectus (or any amendment or supplement
thereto).
(d) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. In no event shall the indemnifying parties be liable for the fees and
expenses of more than one counsel separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances.
Section 7. Contribution.
(a) In order to provide for just and equitable contribution in circumstances
in which the indemnity agreements provided for in Sections 6(a) and 6(c) are for
any reason held to be unenforceable by the indemnified parties although
applicable in accordance with their respective terms, the Company and the
Underwriter shall contribute to the aggregate losses, liabilities, claims,
damages and expenses, as incurred, of the nature contemplated by said indemnity
agreement incurred by the Company and the Underwriter, as incurred, in such
proportions as will reflect the relative benefits from the offering of the
Securities received by the Company on the one hand and by the Underwriter on the
other hand, taking into account the portion of the proceeds of such offering
realized by each, provided that the relative benefits shall be deemed to be such
that the Underwriter shall be responsible for that portion of the aggregate
losses, liabilities, claims, damages and expenses represented by the percentage
that the
21
<PAGE>
underwriting discount appearing in the ML&Co. Prospectus bears to the initial
public offering price appearing therein and the Company shall be responsible for
the balance.
Notwithstanding the provisions of this Section 7(a), the Underwriter shall not
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by the Underwriter and distributed to
the public were offered to the public exceeds the amount of any damages which
the Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 7(a), each
person, if any, who controls the Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as the Underwriter, and
each director of the Company, each officer of the Company who signed the ML&Co.
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.
(b) In order to provide for just and equitable contribution in circumstances
in which the indemnity agreement provided for in Section 6(b) is for any reason
held to be unenforceable by the indemnified parties although applicable in
accordance with its terms, NML on the one hand and the Underwriter and the
Company on the other hand shall contribute to the aggregate losses, liabilities,
claims, damages and expenses, as incurred, of the nature contemplated by said
indemnity agreement incurred by NML, the Underwriter and the Company, as
incurred, in such proportions as will reflect the relative benefits from the
offering of the Securities received by NML on the one hand and by the
Underwriter and ML&Co. on the other hand, provided that the relative benefits
shall be deemed to be such that the Underwriter and the Company shall be
responsible for that portion of the aggregate losses, liabilities, claims,
damages and expenses represented by the percentage that the underwriting
discount appearing in the ML&Co. Prospectus bears to the initial public offering
price appearing therein and NML shall be responsible for the balance.
Notwithstanding the provisions of this Section 7(b), (i) the Underwriter and
the Company shall not be required to contribute any amount in excess of the
amount by which the total price at which the Securities underwritten by the
Underwriter and distributed to the public were offered to the public exceeds the
amount of any damages which the Underwriter and the Company have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission and (ii) NML shall not be required to contribute any amount
in excess of the amount which NML would otherwise have been required to pay if
the indemnity provided in Section 6(b) were enforceable against NML by an
indemnified party in respect of any loss, liability, claim, damage or expense
referred to therein. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 7(b), each person, if any, who controls the Underwriter
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Underwriter and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act shall have the same
rights to contribution as the Company.
Section 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement, or
contained in certificates of officers of the Company, NML or MGIC Investment
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Underwriter or
controlling person, or by or on behalf of the Company or NML, and shall survive
delivery of any Securities to the Underwriter.
Section 9. Termination. This Agreement may be terminated by the Underwriter,
immediately upon notice to the Company and NML, at any time at or prior to the
Closing Time (i) if there has been, since the date hereof or since the
respective dates as of which information is given in the ML&Co. Registration
Statement or the ML&Co. Prospectus, except as otherwise stated therein or
contemplated thereby, any material adverse change in the condition, financial or
otherwise, of the Company and its subsidiaries considered as one enterprise, or
in the earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has been, since the date hereof or
since the respective dates as of which information is given in the MGIC
Registration Statement or the MGIC Prospectus,
22
<PAGE>
except as otherwise stated therein or contemplated thereby, any material adverse
change in the condition, financial or otherwise, of MGIC Investment and its
subsidiaries considered as one enterprise, or in the earnings, business affairs
or business prospects of MGIC Investment and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (iii)
if there has occurred any material adverse change in the financial markets in
the United States or any outbreak or escalation of hostilities or other national
or international calamity or crisis, the effect of which is such as to make it,
in the judgment of the Underwriter, impracticable to market the Securities or
enforce contracts for the sale of the Securities, or (iv) if trading in the
common stock of the Company or the MGIC Common Stock has been suspended by the
Commission or a national securities exchange, or if trading generally on either
the American Stock Exchange or the New York Stock Exchange has been suspended,
or minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said exchanges or by
order of the Commission or any other governmental authority, if a banking
moratorium in the United States generally or in the City or State of New York
has been declared by either Federal or New York authorities, or (v) if the
rating assigned by any nationally recognized statistical rating agency to any
debt or other securities of the Company as of the date hereof shall have been
lowered since the date hereof or if any such rating agency shall have publicly
announced that it has placed any debt or other securities of the Company on what
is commonly termed a "watch list" for possible downgrading or (vi) if the rating
assigned by any nationally recognized statistical rating agency to MGIC
Investment's "claims paying ability" as of the date hereof shall have been
lowered since the date hereof or if any such rating agency shall have publicly
announced that it has placed its rating of MGIC Investment's "claims paying
ability" under surveillance or review, with possible negative implications. In
the event of any such termination, the covenant set forth in Sections 3(a)(vii),
the provisions of Section 5, the indemnity agreements set forth in Section 6,
the contribution provisions set forth in Section 7, and the provisions of
Sections 8, 11 and 13 shall remain in effect.
Section 10. 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 the Underwriter shall be
directed to it at World Financial Center, North Tower, New York, N.Y. 10281-
1201, attention of Douglas W. Squires, Managing Director; notices to the Company
shall be directed to it at 100 Church St., 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 NML shall be
directed to it at 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202,
attention of Securities Department c/o Gary A. Poliner.
Section 11. Parties. This Agreement shall inure to the benefit of and be
binding upon each of the Underwriter, the Company and NML and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
parties hereto and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the parties and their respective successors and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Securities from the Underwriter shall be deemed to be a
successor by reason merely of such purchase.
Section 12. Governing Law. 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 in such State.
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us three counterparts hereof, whereupon this
instrument along with all counterparts will become a binding agreement among the
Underwriter, the Company and NML in accordance with its terms.
Very truly yours,
Merrill Lynch & Co., Inc.
By _______________________
Name:
Title:
The Northwestern Mutual
Life Insurance Company
By ________________________
Name:
Title:
Confirmed and Accepted,
as of the date first above written:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By _______________________
Name:
Title:
24
<PAGE>
EXHIBIT A
5,000,000 STRYPES
MERRILL LYNCH & CO., INC.
(A DELAWARE CORPORATION)
STRUCTURED YIELD PRODUCT EXCHANGEABLE FOR STOCK/SM/
____% STRYPES/SM/ DUE , 1998
PRICING AGREEMENT
-----------------
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281-1201
Dear Sirs:
Reference is made to the Underwriting Agreement, dated _________, 1995 (the
"Underwriting Agreement"), relating to the purchase by the Underwriter, of the
above-referenced 5,000,000 Structured Yield Product Exchangeable for Stock, ___
% STRYPES Due _____, 1998 (the "Initial Securities"), of Merrill Lynch & Co.,
Inc. (the "Company").
Pursuant to Section 2 of the Underwriting Agreement, the Company agrees with
the Underwriter as follows:
1. The initial public offering price per STRYPES for the Initial Securities,
determined as provided in said Section 2, shall be $________.
2. The purchase price per STRYPES for the Initial Securities to be paid by
the Underwriter shall be $_______ (the "Purchase Price"), being an amount equal
to the initial public offering price set forth above less $_____ per STRYPES.
3. The Threshold Appreciation Price with respect to the STRYPES shall be
$_________.
_________________________
/SM/ Service Mark of Merrill Lynch & Co., Inc.
A-1
<PAGE>
If the foregoing is in accordance with our agreement, please sign and return
to the Company a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement between the Underwriter and the
Company in accordance with its terms.
Very truly yours,
Merrill Lynch & Co., Inc.
By ________________________
Name:
Title:
Confirmed and Accepted,
as of the date first above written:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By _________________________________
Name:
Title:
A-2
<PAGE>
ANNEX I
DESCRIPTION OF DELOITTE & TOUCHE LLP COMFORT LETTER
Pursuant to Section 4(a)(6) of the Underwriting Agreement, the accountants
shall furnish a letter to the Underwriter to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the 1933 Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the consolidated financial statements and
schedules examined by them and included or incorporated by reference in the
ML&Co. Registration Statement comply as to form in all material respects
with the applicable accounting requirements of the 1933 Act and 1934 Act and
related published rules and regulations thereunder;
(iii) The selected financial information with respect to the
consolidated results of operations and financial position of the Company and
its subsidiaries for the five most recent fiscal years included in the
ML&Co. Prospectus agrees with the corresponding amounts (after restatements
where applicable) in the audited financial statements for such five fiscal
years;
(iv) On the basis of limited procedures (they will not perform an
examination in accordance with generally accepted auditing standards),
consisting of a reading of the unaudited condensed consolidated financial
statements and other information referred to below, a reading of the latest
available interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries since the
date of the latest audited financial statements included or incorporated by
reference in the ML&Co. Prospectus, inquiries of officials of the Company
and its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such comfort
letter, nothing came to their attention that caused them to believe that:
(A) any material modification should be made to the unaudited
condensed consolidated financial statements included or incorporated by
reference in the ML&Co. Registration Statement for them to be in
conformity with generally accepted accounting principles;
(B) the unaudited condensed consolidated financial statements
included or incorporated by reference in the ML&Co. Registration
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the 1933 Act and 1934 Act and the
related published rules and regulations thereunder;
(C) any other unaudited income statement data and balance sheet
items included in the ML&Co. Prospectus do not agree with the
corresponding items in the unaudited consolidated financial statements
from which such data and items were derived, and any such unaudited data
and items were not determined on a basis substantially consistent with
the basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in the ML&Co.
Prospectus;
(D) the unaudited financial statements which were not included in
the ML&Co. Prospectus but from which were derived any unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included in the
ML&Co. Prospectus and referred to in Clause (C) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included or incorporated by reference
in the ML&Co. Prospectus;
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(E) as of a specified date not more than three days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options which were outstanding on the date of the latest financial
statements included or incorporated by reference in the ML&Co.
Prospectus) or any increase in the consolidated long-term debt of the
Company and its subsidiaries, or any decreases in consolidated net
current assets, total investment or net assets or other items specified
by the Underwriter, or any increases in loss reserve or any items
specified by the Underwriter, in each case as compared with amounts
shown in the latest balance sheet included or incorporated by reference
in the ML&Co. Prospectus, except in each case for changes, increases, or
decreases which the ML&Co. Prospectus discloses have occurred or may
occur or which are described in such comfort letter; and
(F) for the period from the date of the latest financial statements
included in the ML&Co. Prospectus to the specified date referred to in
Clause (E), to the extent such information is reasonably available from
the general accounting records of the Company and its subsidiaries,
there were any decreases in consolidated revenues, operating income, net
income or net income per share or other items specified by the
Underwriter, or any increases in losses incurred or any items specified
by the Underwriter, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding length
specified by the Underwriter, except in each case for decreases or
increases which the ML&Co. Prospectus discloses have occurred or may
occur or which are described in such comfort letter; and
(v) In addition to the examination referred to in their report(s)
included or incorporated by reference in the ML&Co. Prospectus and the
limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraph (iv) above, they have carried out
certain specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain amounts,
percentages and financial information specified by the Underwriter, which
are derived from the general accounting records of the Company and its
subsidiaries, which appear in the ML&Co. Prospectus, or in Part II of, or in
exhibits and schedules to, the ML&Co. Registration Statement specified by
the Underwriter, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
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<PAGE>
ANNEX II
DESCRIPTION OF PRICE WATERHOUSE LLP COMFORT LETTER
Pursuant to Section 4(a)(8) of the Underwriting Agreement, the accountants
shall furnish a letter to the Underwriter to the effect that:
(i) They are independent certified public accountants with respect to
MGIC Investment and its subsidiaries within the meaning of the 1933 Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the consolidated financial statements and
schedules examined by them and included or incorporated by reference in the
MGIC Registration Statement comply as to form in all material respects with
the applicable accounting requirements of the 1933 Act and 1934 Act and
related published rules and regulations thereunder;
(iii) The selected financial information with respect to the
consolidated results of operations and financial position of MGIC Investment
and its subsidiaries for the five most recent fiscal years included in the
MGIC Prospectus agrees with the corresponding amounts (after restatements
where applicable) in the audited financial statements for such five fiscal
years;
(iv) On the basis of limited procedures (they will not perform an
examination in accordance with generally accepted auditing standards),
consisting of a reading of the unaudited interim consolidated financial
statements and other information referred to below, a reading of the latest
available interim financial statements of MGIC Investment and its
subsidiaries, inspection of the minute books of MGIC Investment and its
subsidiaries since the date of the latest audited financial statements
included or incorporated by reference in the MGIC Prospectus, inquiries of
officials of MGIC Investment and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such comfort letter, nothing came to their attention that
caused them to believe that:
(A) any material modification should be made to the unaudited
interim consolidated financial statements included or incorporated by
reference in the MGIC Registration Statement for them to be in
conformity with generally accepted accounting principles;
(B) the unaudited interim consolidated financial statements
included or incorporated by reference in the MGIC Registration Statement
do not comply as to form in all material respects with the applicable
accounting requirements of the 1933 Act and 1934 Act and the related
published rules and regulations thereunder;
(C) any other unaudited income statement data and balance sheet
items included in the MGIC Prospectus do not agree with the
corresponding items in the unaudited consolidated financial statements
from which such data and items were derived, and any such unaudited data
and items were not determined on a basis substantially consistent with
the basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in the MGIC
Prospectus;
(D) the unaudited financial statements which were not included in
the MGIC Prospectus but from which were derived any unaudited interim
financial statements referred to in Clause (A) and any unaudited income
statement data and balance sheet items included in the MGIC Prospectus
and referred to in Clause (C) were not determined on a basis
substantially consistent with the basis for the audited consolidated
financial statements included or incorporated by reference in the MGIC
Prospectus;
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(E) as of a specified date not more than three days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options which were outstanding on the date of the latest financial
statements included or incorporated by reference in the MGIC Prospectus)
or any increase in the consolidated long-term debt of MGIC Investment
and its subsidiaries, or any decreases in consolidated total investments
or total assets or total shareholders' equity or other items specified
by the Underwriter, or any increases in loss reserves or any items
specified by the Underwriter, in each case as compared with amounts
shown in the latest balance sheet included or incorporated by reference
in the MGIC Prospectus, except in each case for changes, increases, or
decreases which the MGIC Prospectus discloses have occurred or may occur
or which are described in such comfort letter; and
(F) for the period from the date of the latest financial statements
included or incorporated by reference in the Prospectus to the specified
date referred to in Clause (E), to the extent such information is
reasonably available from the general accounting records of MGIC
Investment and its subsidiaries, there were any decreases in
consolidated net premiums written, net premiums earned, investment
income or the total or per share amounts of consolidated net income or
other items specified by the Underwriter, or any increases in losses
incurred or any items specified by the Underwriter, in each case as
compared with the comparable period of the preceding year and with any
other period of corresponding length specified by the Underwriter,
except in each case for decreases or increases which the MGIC Prospectus
discloses have occurred or may occur or which are described in such
comfort letter; and
(v) in addition to the examination referred to in their report(s)
included or incorporated by reference in the MGIC Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraph (iv) above, they have carried out certain specified
procedures, not constituting an examination in accordance with generally
accepted auditing standards, with respect to certain dollar amounts,
percentages and financial information specified by the Underwriter, which
are derived from the general accounting records of MGIC Investment and its
subsidiaries, which appear in the MGIC Prospectus, or in Part II of, or in
exhibits and schedules to, the MGIC Registration Statement specified by the
Underwriter, and have compared certain of such dollar amounts, percentages
and financial information with the accounting records of MGIC Investment and
its subsidiaries and have found them to be in agreement.
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<PAGE>
EXHIBIT 1(B)
DRAFT
REGISTRATION AGREEMENT
----------------------
_________, 1995
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281-1201
MERRILL LYNCH & CO., INC.
World Financial Center
North Tower
New York, New York 10281-1334
Dear Sirs:
MGIC Investment Corporation, a Wisconsin corporation (the "Company"),
confirms its agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated (the "Underwriter") and Merrill Lynch & Co., Inc.
("ML&Co.") in connection with the proposed issue and sale by ML&Co. to the
Underwriter, pursuant to an underwriting agreement, dated the date hereof
("Underwriting Agreement"), among ML&Co., The Northwestern Mutual Life Insurance
Company ("NML") and the Underwriter, of an aggregate of __________ of ML&Co.'s
Structured Yield Product Exchangeable for Stock/SM/, ____% STRYPES/SM/ Due
_________, 1998 (each, a "STRYPES"), payable at maturity by the delivery of
common stock, par value $1.00 per share (the "MGIC Common Stock"), of the
Company, and, at the option of the Underwriter, all or any part of ________
additional STRYPES to cover over-allotments. The aforesaid ____________ STRYPES
to be purchased by the Underwriter and all or any part of the ________
additional STRYPES subject to the over-allotment option described in Section
2(b) of the Underwriting Agreement (the "Option Securities") are hereinafter
collectively referred to as the "Securities". Capitalized terms used herein and
not otherwise defined shall have the meanings ascribed to them in the
Underwriting Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-_____) and related
preliminary prospectus for the registration of the MGIC Common Stock deliverable
upon payment and discharge of the Securities under the Securities Act of 1933,
as amended (the "1933 Act"), has filed such amendments thereto, if any, and such
amended preliminary prospectuses as may have been required to the date hereof,
and will file such additional amendments thereto and such amended prospectuses
as may hereafter be required. Such registration statement (as amended, if
applicable) at the time it becomes effective and the prospectus constituting a
part thereof (including the information, if any, incorporated by reference
therein), as from time to time amended or supplemented pursuant to the 1933 Act,
the Securities Exchange Act of 1934, as amended (the "1934 Act"), or otherwise,
are hereinafter referred to as the "MGIC Registration Statement" and the "MGIC
Prospectus", respectively, except that if any revised prospectus shall be
prepared by the Company for use by the Underwriter which differs from the MGIC
Prospectus on file at the Commission at the time the MGIC Registration Statement
becomes effective (whether or not such revised prospectus is required to be
filed by the Company pursuant to Rule 424(b) of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations")), the term "MGIC
Prospectus" shall refer to such revised prospectus from and after the time it
_______________________
/SM/ Service Mark of Merrill Lynch & Co., Inc.
<PAGE>
is first provided to the Underwriter for use and if the Company files any
documents pursuant to Section 13 or 14 of the 1934 Act after the MGIC
Registration Statement becomes effective and prior to the termination of the
offering of the Securities by the Underwriter, which documents are deemed to be
incorporated by reference into the MGIC Prospectus, the term "MGIC Prospectus"
shall refer to said prospectus as supplemented by the documents so filed from
and after the time said documents are filed with the Commission.
The Company understands that, prior to the purchase and public offering of
the Securities by the Underwriter, ML&Co. and the Underwriter shall enter into a
pricing agreement (the "Pricing Agreement") as provided by the Underwriting
Agreement. The Company further understands that the Underwriter proposes to make
a public offering of the Securities as soon as it deems advisable after the MGIC
Registration Statement and the registration statement on Form S-3 (No. 33-____)
of ML&Co. covering the STRYPES (as amended, if applicable, the "ML&Co.
Registration Statement") become effective and the Pricing Agreement has been
executed and delivered.
The Company acknowledges that the execution and delivery of this Agreement
is a condition to the execution and delivery of the Underwriting Agreement by
the Underwriter and that, in consideration of the execution and delivery of the
Underwriting Agreement by the Underwriter, the Company is willing to make the
representations, warranties and covenants herein contained.
Section 1. Representations and Warranties. (a) The Company represents and
warrants to each of the Underwriter and ML&Co. as of the date hereof and as of
the date of the Pricing Agreement (such later date being hereinafter referred to
as the "Representation Date") as follows:
(i) At the time the MGIC Registration Statement and any post-
effective amendments thereto become effective and at the Representation
Date, the MGIC Registration Statement will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. The MGIC Prospectus, at the
Representation Date (unless the term "MGIC Prospectus" refers to a
prospectus that has been prepared by MGIC for use by the Underwriter that
differs from the MGIC Prospectus on file at the Commission at the time the
MGIC Registration Statement first becomes effective, in which case at the
time such prospectus is first provided to the Underwriter for use) and at
Closing Time and each Date of Delivery, will not include an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
representations and warranties in this subsection shall not apply to (x)
statements in or omissions from the MGIC Registration Statement or MGIC
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by the Underwriter expressly for use in
the MGIC Registration Statement or MGIC Prospectus, (y) information
furnished in writing to the Company by ML&Co. expressly for use in the MGIC
Registration Statement or MGIC Prospectus and (z) information furnished in
writing to the Company by NML expressly for use in the MGIC Registration
Statement or MGIC Prospectus.
(ii) The Company meets the requirements for the use of Form S-3 under
the 1933 Act.
(iii) The accountants who certified the financial statements and
supporting schedules of the Company and its subsidiaries included or
incorporated by reference in the MGIC Registration Statement are
independent public accountants as required by the 1933 Act and the 1933 Act
Regulations.
(iv) The consolidated financial statements of the Company and its
consolidated subsidiaries included or incorporated by reference in the MGIC
Registration Statement and MGIC Prospectus present fairly the consolidated
financial position of the Company and its consolidated subsidiaries as at
the dates indicated and the results of their operations for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
during the periods involved, except as indicated therein; and the
supporting schedules included or incorporated by reference in the MGIC
Registration Statement present fairly the information required to be stated
therein.
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(v) The documents incorporated by reference in the MGIC Prospectus,
at the time they were or hereafter are filed with the Commission, complied
and will comply in all material respects with the requirements of the 1934
Act and the 1934 Act Regulations, and, when read together with the other
information in the MGIC Prospectus, at the time the MGIC Registration
Statement and any post-effective amendments thereto become effective, will
comply in all material respects with the requirements of the 1933 Act and
the 1933 Act Regulations and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and any
further documents deemed to be incorporated by reference in the MGIC
Prospectus will, when they are filed with the Commission, comply in all
material respects with the requirements of the 1934 Act and the 1934 Act
Regulations, and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the representations
and warranties in this subsection shall not apply to (x) statements in or
omissions from the MGIC Registration Statement or MGIC Prospectus made in
reliance upon and in conformity with information furnished to the Company
in writing by the Underwriter expressly for use in the MGIC Registration
Statement or MGIC Prospectus, (y) information furnished in writing to the
Company by ML&Co. expressly for use in the MGIC Registration Statement or
MGIC Prospectus and (z) information furnished in writing to the Company by
NML expressly for use in the MGIC Registration Statement or MGIC
Prospectus.
(vi) Since the respective dates as of which information is given in
the MGIC Registration Statement and the MGIC Prospectus, except as
otherwise stated therein or contemplated thereby, (x) there has been no
material adverse change in the condition, financial or otherwise, of the
Company and its subsidiaries considered as one enterprise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, (y) there have been no transactions entered
into by the Company or any of its subsidiaries which are material with
respect to the Company and its subsidiaries considered as one enterprise,
other than those in the ordinary course of business, and (z) except for
regular quarterly dividends on the outstanding MGIC Common Stock, there has
been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(vii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of Wisconsin with
corporate power and authority to own, lease and operate its properties and
conduct its business as now being conducted and as described in the MGIC
Prospectus and to enter into and perform its obligations under this
Agreement; the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which it
owns or leases substantial properties or in which the conduct of its
business requires such qualification and in which failure of the Company to
be so qualified and in good standing would have a material adverse effect
upon the Company and its subsidiaries considered as one enterprise.
(viii) Each subsidiary of the Company listed in Exhibit No. 21 to the
Form 10-K annual report of the Company filed with the Commission under
Section 13 of the 1934 Act for the fiscal year ended December 31, 1994
which is a "significant subsidiary" as defined in Rule 405 of Regulation C
of the 1933 Act Regulations (a "MGIC Significant Subsidiary") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has corporate
power and authority to own, lease and operate its properties and conduct
its business as now being conducted and as described in the MGIC Prospectus
and is duly qualified as a foreign corporation to transact business and is
in good standing in each other jurisdiction in which it owns or leases
substantial properties or in which the conduct of its business requires
such qualification and in which failure of such MGIC Significant Subsidiary
to be so qualified and in good standing would have a material adverse
effect upon the Company and its subsidiaries considered as one enterprise;
all of the issued and outstanding shares of capital stock of each MGIC
Significant Subsidiary have been duly authorized and validly issued and are
fully paid and non-assessable (except to the extent provided in Section
180.0622 of the Wisconsin Business Corporation Law); and all of the shares
of capital stock of each MGIC Significant Subsidiary (except for directors'
qualifying shares and except as set forth in the MGIC Prospectus) are owned
by the Company, directly or through subsidiaries, free and clear of any
mortgage, pledge, lien, encumbrance, claim or equity.
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(ix) The Company has an authorized equity capitalization as set forth
in the MGIC Prospectus under the caption "Description of Capital Stock,"
and all of the issued shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and non-assessable
(except to the extent provided in Section 180.0622 of the Wisconsin
Business Corporation Law) and conform to the description of the MGIC Common
Stock contained in the MGIC Prospectus; and all of the MGIC Common Stock
currently outstanding is duly listed on the New York Stock Exchange.
(x) Neither the Company nor any of the MGIC Significant Subsidiaries
is in violation of its charter or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease
or other instrument to which it or any of them is a party or by which it or
any of them may be bound or to which any of the property or assets of the
Company or any of the MGIC Significant Subsidiaries is subject; and the
execution, delivery and performance of this Agreement by the Company and
the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action and will not conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company or any of the MGIC Significant Subsidiaries pursuant to, any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Company or any of the MGIC Significant Subsidiaries
is a party or by which it or any of them may be bound or to which any of
the property or assets of the Company or any of the MGIC Significant
Subsidiaries is subject, nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or, to the best of
its knowledge, any law, administrative regulation or administrative or
court decree; and 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 consummation by the Company of
the transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act or the 1933 Act Regulations or state securities
or Blue Sky laws.
(xi) The Company and the MGIC Significant Subsidiaries possess
adequate certificates, authorities, permits, licenses, approvals, consents
and other authorizations issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies (including all state insurance
officials and bodies) necessary to conduct the business now operated by
them, and neither the Company nor any of the MGIC Significant Subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authority, permit, license, approval,
consent or other authorization which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would materially
adversely affect the conduct of the business, operations, financial
condition or income of the Company and its subsidiaries considered as one
enterprise.
(xii) Except as set forth in the MGIC Prospectus, there is no action,
suit or proceeding before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries
which might, in the opinion of the Company, result in any material adverse
change in the condition, financial or otherwise, of the Company and its
subsidiaries considered as one enterprise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, or might materially and adversely affect the
properties or assets thereof or might materially and adversely affect the
issue and sale of the Securities, the delivery of shares of MGIC Common
Stock upon payment and discharge of the Securities or the consummation by
the Company of the transactions contemplated by this Agreement; and there
are no contracts or documents of the Company or any of its subsidiaries
which are required to be filed as exhibits to the MGIC Registration
Statement by the 1933 Act or by the 1933 Act Regulations which have not
been so filed or incorporated by reference.
(xiii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xiv) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material with respect to the
Company and its subsidiaries considered as one enterprise, in each case
free and clear of all liens, encumbrances and defects except such as are
described in the MGIC Prospectus or such as do not materially affect the
value of such property in the aggregate and do not materially interfere
with the use
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<PAGE>
made and proposed to be made of such property and buildings by the Company
and its subsidiaries; and any real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material
to the Company and its subsidiaries considered as one enterprise and do not
materially interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
(b) Any certificate signed by any officer of the Company and delivered to
the Underwriter or counsel for the Underwriter or ML&Co. or counsel for ML&Co.
in connection with the offering of Securities shall be deemed a representation
and warranty by the Company, as to the matters covered thereby, to the
Underwriter and ML&Co.
Section 2. Covenants. The Company covenants with each of the Underwriter
and ML&Co. as follows:
(a) The Company will notify the Underwriter and ML&Co. immediately, and
confirm the notice in writing, (i) of the effectiveness of the MGIC Registration
Statement and any amendment thereto (including any post-effective amendment),
(ii) of the receipt of any comments from the Commission, (iii) of any request
from the Commission for any amendment to the MGIC Registration Statement or any
amendment or supplement to the MGIC Prospectus or for additional information,
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the MGIC Registration Statement or any order preventing or
suspending the use of any preliminary prospectus, or the initiation of any
proceedings for that purpose, and (v) of the suspension of the qualification of
the shares of MGIC Common Stock deliverable upon payment and discharge of the
Securities for offering or sale in any jurisdiction, or the initiation or
threatening of any proceedings for any such purpose. The Company will make
every reasonable effort to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) The Company will give the Underwriter and ML&Co. notice of its
intention to file or prepare any amendment to the MGIC Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
MGIC Prospectus (including any revised prospectus that the Company proposes for
use by the Underwriter which differs from the prospectus on file at the
Commission at the time the MGIC Registration Statement becomes effective,
whether or not such revised prospectus is required to be filed pursuant to Rule
424(b) of the 1933 Act Regulations), will furnish ML&Co. and the Underwriter
with copies of any such amendment or supplement proposed to be filed a
reasonable time in advance of such proposed filing or use, and will not file any
such amendment or supplement or use any such prospectus in a form to which the
Underwriter or counsel for the Underwriter or ML&Co. or counsel for ML&Co. shall
reasonably object.
(c) The Company will deliver to the Underwriter and ML&Co. one signed and
as many conformed copies of the MGIC Registration Statement (as originally
filed) and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein and documents incorporated by reference in the
MGIC Prospectus) as the Underwriter and ML&Co. may reasonably request.
(d) The Company will furnish to the Underwriter, from time to time during
the period when the MGIC Prospectus is required to be delivered under the 1933
Act or the 1934 Act, such number of copies of the MGIC Prospectus (as amended or
supplemented) as the Underwriter may reasonably request for the purposes
contemplated by the 1933 Act or the 1934 Act or the respective applicable rules
and regulations of the Commission thereunder.
(e) The Company, during the period when a prospectus relating to shares of
MGIC Common Stock deliverable upon payment and discharge of the Securities is
required to be delivered under the 1933 Act, will file promptly all documents
required to be filed with the Commission pursuant to Section 13 or 14 of the
1934 Act subsequent to the time the MGIC Registration Statement becomes
effective.
(f) If any event shall occur or condition exist as a result of which it is
necessary, in the view of counsel for the Underwriter or counsel for ML&Co. or
counsel for the Company, to amend or supplement the MGIC Prospectus in order
that the MGIC Prospectus will not include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser or if it shall be necessary, in the view of any such
counsel, at any such time to amend or supplement the MGIC Registration Statement
or the MGIC Prospectus in order to comply with the requirements of the 1933 Act
or the 1933 Act Regulations, the Company will promptly prepare and file with the
5
<PAGE>
Commission such amendment or supplement (in form and substance satisfactory to
counsel for the Underwriter and counsel for ML&Co.), whether by filing documents
pursuant to the 1934 Act or otherwise, as may be necessary to correct such
untrue statement or omission or to make the MGIC Registration Statement or MGIC
Prospectus comply with such requirements and the Company will furnish to the
Underwriter as many copies of such amendment or supplement as the Underwriter
may reasonably request.
(g) The Company will make generally available to its security holders as
soon as practicable, but not later than 90 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering the twelve month period beginning not
later than the first day of the Company's fiscal quarter next following the
"effective date" (as defined in Rule 158) of the MGIC Registration Statement.
(h) The Company will endeavor, in cooperation with the Underwriter, to
qualify the shares of MGIC Common Stock deliverable upon payment and discharge
of the Securities for offering and sale under the applicable securities laws of
such states and other jurisdictions of the United States as the Underwriter may
designate, and will maintain such qualifications in effect for as long as may be
required for the distribution of the Securities; provided, however, that no such
qualification shall be required in any jurisdiction in which, as a result
thereof, the Company would be obligated to file any general consent to service
of process or to qualify as a foreign corporation in any jurisdiction in which
it is not so qualified. The Company will file such statements and reports as
may be required by the laws of each jurisdiction in which shares of MGIC Common
Stock deliverable upon payment and discharge of the Securities have been
qualified as above provided.
(i) During the period beginning from the date hereof and continuing to and
including the date 90 days after the date of the MGIC Prospectus, the Company
will not, without the prior written consent of the Underwriter, 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 MGIC Common Stock, or rights or warrants to acquire MGIC Common Stock;
provided, however, that the foregoing shall not apply to MGIC Common Stock
offered to the Company's employees under its existing employee benefit plans nor
shall it apply to rights to acquire MGIC Common Stock under a shareholder rights
plan.
(j) The Company shall use its best efforts to cause each executive officer
of the Company to furnish to the Underwriter, on or prior to the date hereof,
his written agreement, in form and substance satisfactory to the Underwriter,
that, during the period beginning from the date hereof and continuing to and
including the date 90 days after the date of the MGIC Prospectus, he will not,
without the prior written consent of the Underwriter, 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 MGIC
Common Stock, or rights or warrants to acquire MGIC Common Stock.
(k) At the Closing Time or Date of Delivery, as the case may be, the
Company shall furnish or cause to be furnished to counsel for the Underwriter
and counsel for ML&Co. such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of
the Securities and related proceedings or in order to evidence the accuracy and
completeness of any of the representations and warranties herein contained.
Section 3. Payment of Expenses. The Company will pay all expenses incident
to the performance of its obligations under this Agreement, including (i) the
printing and filing of the MGIC Registration Statement as originally filed and
all amendments thereto, (ii) the fees and disbursements of the Company's counsel
and accountants, (iii) the printing and delivery to the Underwriter in
quantities as hereinabove stated of copies of the MGIC Registration Statement
and any amendments thereto, and of the MGIC Prospectus and any amendments or
supplements thereto, (iv) the qualification of the shares of MGIC Common Stock
deliverable upon payment and discharge of the Securities under state securities
laws in accordance with the provisions of Section 2(h), including filing fees
and the fees and disbursements of ML&Co.'s counsel in connection therewith and
in connection with the preparation of any Blue Sky Survey and (v) the fees and
expenses, if any, incurred with respect to the filing with the National
Association of Securities Dealers, Inc.
6
<PAGE>
Section 4. Indemnification. (a) The Company agrees to indemnify and hold
harmless (1) the Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act and (2) ML&Co. and
each person, if any, who controls ML&Co. within the meaning of Section 15 of the
1933 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the MGIC Registration
Statement (or any amendment thereto), including the information deemed to
be a part of the MGIC Registration Statement pursuant to Rule 430A(b) of
the 1933 Act Regulations, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the MGIC Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by the Underwriter or ML&Co.,
as the case may be), reasonably incurred in investigating, preparing or
defending against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under (i) or (ii) above;
provided, however, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with (x) written information furnished to the Company by the
Underwriter expressly for use in the MGIC Registration Statement (or any
amendment thereto) or any preliminary prospectus or the MGIC Prospectus (or any
amendment or supplement thereto) or (y) written information furnished to the
Company by ML&Co. expressly for use in the MGIC Registration Statement (or any
amendment thereto) or any preliminary prospectus or the MGIC Prospectus (or any
amendment or supplement thereto); and provided, further, that the foregoing
indemnity is subject to the condition that, insofar as it relates to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus of the Company but eliminated in the MGIC Prospectus (or
any amendment or supplement thereto), such indemnity shall not inure to the
benefit of the Underwriter if a copy of such MGIC Prospectus (or such amendment
or supplement thereto), excluding documents incorporated therein by reference,
was not delivered to the person asserting the claim and the delivery thereof
would have constituted a complete defense to the claim of such person.
(b) The Underwriter agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the MGIC Registration Statement and
each person, if any, who controls the Company within the meaning of Section 15
of the 1933 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the MGIC Registration Statement (or any
amendment thereto) or any preliminary prospectus or the MGIC Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by the Underwriter expressly for use in the
MGIC Registration Statement (or any amendment thereto) or any preliminary
prospectus or the MGIC Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the
7
<PAGE>
defense of such action. In no event shall the indemnifying parties be liable for
the fees and expenses of more than one counsel separate from their own counsel
for all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
Section 5. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreements provided for in
Section 4 are for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with their terms, the Company on the one hand
and the Underwriter and ML&Co. on the other hand shall contribute to the
aggregate losses, liabilities, claims, damages and expenses, as incurred, of the
nature contemplated by said indemnity agreements incurred by the Company, the
Underwriter and ML&Co., as incurred, in such proportions as will reflect the
relative benefits from the offering of the Securities received by the Company on
the one hand and by the Underwriter and ML&Co. on the other hand. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law, then the Company on the one hand and the Underwriter and
ML&Co. on the other hand shall contribute to such aggregate losses, liabilities,
claims, damages and expenses in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Underwriter and ML&Co. on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages and expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriter and ML&Co. on the other hand shall
be deemed to be such that the Underwriter and ML&Co. shall be responsible for
that portion of the aggregate losses, liabilities, claims, damages and expenses
represented by the percentage that the underwriting discount appearing in the
prospectus of ML&Co. constituting part of the ML&Co. Registration Statement, as
from time to time amended or supplemented, bears to the initial public offering
price appearing therein and the Company shall be responsible for the balance.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or NML on the one hand or the Underwriter or ML&Co. on
the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Underwriter and ML&Co. agree that it would not be just and
equitable if contributions pursuant to this Section 5 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 5.
Notwithstanding the provisions of this Section 5, the Underwriter and
ML&Co. shall not be required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by the Underwriter
and distributed to the public were offered to the public exceeds the amount of
any damages which the Underwriter and ML&Co. have otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
The obligations of the Company, the Underwriter and ML&Co. under this
Section 5 shall be in addition to any liability which the Company, the
Underwriter or ML&Co., as the case may be, may have otherwise than on account of
this Section 5. For purposes of this Section 5, each person, if any, who
controls the Underwriter within the meaning of Section 15 of the 1933 Act shall
have the same rights to contribution as the Underwriter; each person, if any,
who controls ML&Co. within the meaning of Section 15 of the 1933 Act shall have
the same rights to contribution as ML&Co.; and each director of the Company,
each officer of the Company who signed the MGIC Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act shall have the same rights to contribution as the Company.
Section 6. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement, or
contained in certificates of officers of the Company submitted pursuant to the
Underwriting Agreement, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Underwriter or any
controlling person thereof, or by or on behalf of ML&Co. or any controlling
person thereof or by or on behalf of the Company and shall survive delivery of
any Securities to the Underwriter pursuant to the Underwriting Agreement.
Section 7. Termination. In the event that the Underwriter terminates the
Underwriting Agreement as provided in Section 9 thereof, this Agreement shall
simultaneously terminate, except that the provisions of Section
8
<PAGE>
3, the indemnity agreements set forth in Section 4, the contribution provisions
set forth in Section 5, and the provisions of Sections 6, 9 and 10 shall remain
in effect.
Section 8. 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 the
Underwriter shall be directed to it at World Financial Center, North Tower, New
York, New York 10281-1201, attention of Douglas W. Squires, Managing Director;
notices to ML&Co. shall be directed to it at 100 Church St., 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
the Company shall be directed to it at 250 East Kilbourn Avenue, Milwaukee,
Wisconsin 53202, attention of Chief Financial Officer.
Section 9. Parties. This Agreement shall inure to the benefit of and be
binding upon each of the Underwriter, ML&Co. and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the parties hereto and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the parties and their respective successors and
said controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Securities from the Underwriter shall be deemed to be a
successor by reason merely of such purchase.
Section 10. Governing Law. 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 in such State.
9
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us three counterparts hereof, whereupon this
instrument along with all counterparts will become a binding agreement among the
Underwriter, ML&Co. and the Company in accordance with its terms.
Very truly yours,
MGIC INVESTMENT CORPORATION
By _______________________
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By _______________________
Name:
Title:
MERRILL LYNCH & CO., INC.
By _______________________
Name:
Title:
10
<PAGE>
EXHIBIT 12
MERRILL LYNCH & CO., INC. AND SUBSIDIARIES
------------------------------------------
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
----------------------------------------------------------- ----------------------
APRIL 1, MARCH 31,
1990 1991 1992 1993 1994 1994 1995
---------- ---------- ---------- ---------- ----------- ---------- ----------
(52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS) (52 WEEKS)
<S> <C> <C> <C> <C> <C> <C> <C>
Pretax earnings (loss)
from continuing
operations............. $ 282,328 $1,017,418 $1,621,389 $2,424,808 $ 1,729,604 $ 652,208 $ 378,792
Deduct equity in
undistributed net
earnings of
unconsolidated
subsidiaries........... (9,429) (10,677) (12,913) (13,029) (18,817) (3,048) --
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total pretax earnings
(loss) from continuing
operations............. 272,899 1,006,741 1,608,476 2,411,779 1,710,787 649,160 378,792
---------- ---------- ---------- ---------- ----------- ---------- ----------
Add: Fixed charges:
Interest............... 5,343,107 5,073,824 4,822,711 6,008,511 8,585,832 1,899,427 2,781,009
Amortization of debt
expense............... 3,890 4,366 4,232 3,921 2,738 797 709
Capitalized interest... 555 929 -- -- -- -- --
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total interest......... 5,347,552 5,079,119 4,826,943 6,012,432 8,588,570 1,900,224 2,781,718
Interest factor in
rents................. 135,038 141,438 141,546 141,654 128,744 33,564 32,355
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total fixed charges..... 5,482,590 5,220,557 4,968,489 6,154,086 8,717,314 1,933,788 2,814,073
---------- ---------- ---------- ---------- ----------- ---------- ----------
Pretax earnings before
fixed charges
(excluding capitalized
interest).............. $5,754,934 $6,226,369 $6,576,965 $8,565,865 $10,428,101 $2,582,948 $3,192,865
========== ========== ========== ========== =========== ========== ==========
Ratio of earnings to
fixed charges.......... 1.05 1.19 1.32 1.39 1.20 1.34 1.13
========== ========== ========== ========== =========== ========== ==========
</TABLE>
<PAGE>
EXHIBIT 15
June 20, 1995
Merrill Lynch & Co., Inc.
World Financial Center
North Tower, 31st Floor
New York, NY 10281
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim
consolidated financial information of Merrill Lynch & Co., Inc. and
subsidiaries as of March 31, 1995 and for the three-month periods ended March
31, 1995 and April 1, 1994 as indicated in our report dated May 12, 1995;
because we did not perform an audit, we expressed no opinion on that
information.
We are aware that such report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, is
incorporated by reference in this Registration Statement.
We are also aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
New York, New York
<PAGE>
EXHIBIT 23(A)
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in this Registration Statement of
Merrill Lynch & Co., Inc. (the "Company") on Form S-3 of our reports dated
February 27, 1995, appearing in or incorporated by reference in the Annual
Report on Form 10-K of the Company for the year ended December 30, 1994 and to
the reference to us under the heading "Experts" in the Prospectus, which is a
part of this Registration Statement. We also consent to the incorporation by
reference in this Registration Statement of our report dated February 27, 1995,
appearing as Exhibit 99(a) in the Company's Current Report on Form 8-K dated
March 9, 1995 relating to 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. We also consent to the inclusion
as Exhibit 99 to this Registration Statement of our report dated February 27,
1995 relating to information under the caption "Summary Financial Information,"
for each of the five years in the period ended December 30, 1994, appearing in
the Prospectus, which is a part of this Registration Statement.
/s/ Deloitte & Touche LLP
New York, New York
June 20, 1995
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 9th day of June, 1995.
/s/ William O. Bourke
--------------------------------
William O. Bourke
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 8th day of June, 1995.
/s/ Jill K. Conway
--------------------------------
Jill K. Conway
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 9th day of June, 1995.
/s/ Stephen L. Hammerman
--------------------------------
Stephen L. Hammerman
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 9th day of June, 1995.
/s/ Earle H. Harbison, Jr.
--------------------------------
Earle H. Harbison, Jr.
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 12th day of June, 1995.
/s/ George B. Harvey
--------------------------------
George B. Harvey
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 9th day of June, 1995.
/s/ William R. Hoover
--------------------------------
William R. Hoover
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 8th day of June, 1995.
/s/ Robert P. Luciano
---------------------------------
Robert P. Luciano
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 9th day of June, 1995.
/s/ Aulana L. Peters
--------------------------------
Aulana L. Peters
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 9th day of June, 1995.
/s/ John J. Phelan, Jr.
--------------------------------
John J. Phelan, Jr.
<PAGE>
POWER OF ATTORNEY
-----------------
WHEREAS, Merrill Lynch & Co., Inc., a Delaware corporation (the
"Corporation"), intends to file with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act"), a
Registration Statement on Form S-3 (the "Registration Statement"), including a
prospectus and exhibits thereto, with any amendment or amendments (including
post-effective amendments) and any supplement or supplements thereto, as
prescribed by the Commission pursuant to the 1933 Act and the rules and
regulations of the Commission promulgated thereunder, in connection with the
registration of certain senior, fixed-rate debt securities of the Corporation,
which by their terms will be paid and discharged by delivery of a specified
number of shares of common stock of MGIC Investment Corporation, a Wisconsin
corporation, or an equivalent value in cash.
NOW, THEREFORE, the undersigned hereby constitutes and appoints Daniel P.
Tully, David H. Komansky, Joseph T. Willett and Stephen L. Hammerman, and each
of them, his true and lawful attorneys-in-fact and agents, with full power to
act with or without the others and with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including without limitation in any capacity on behalf of the
Corporation), to execute the Registration Statement, including a prospectus and
exhibits thereto, and any and all amendments (including post-effective
amendments) thereto and any supplement or supplements thereto, as said
attorneys-in-fact or any of them shall deem necessary or appropriate, together
with all documents necessary or incidental in connection therewith, to file the
same or cause the same to be filed with the Commission and to appear before the
Commission in connection with any matter relating thereto. Each of said
attorneys-in-fact shall have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and confirming the acts that said attorneys-in-fact
and each of them, or their or his substitutes or substitute, may lawfully do or
cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 9th day of June, 1995.
/s/ William L. Weiss
--------------------------------
William L. Weiss
<PAGE>
EXHIBIT 99
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders of
Merrill Lynch & Co., Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of Merrill Lynch & Co., Inc. and subsidiaries
as of December 30, 1994 and December 31, 1993 and for each of the three years
in the period ended December 30, 1994 and have issued our report thereon dated
February 27, 1995. Such financial statements and our report thereon are
incorporated herein by reference.
We have also previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Merrill Lynch & Co., Inc. and
subsidiaries as of December 25, 1992, December 27, 1991 and December 28, 1990
and the related statements of consolidated earnings, changes in consolidated
stockholders' equity and consolidated cash flows for the years ended December
27, 1991 and December 28, 1990 (none of which are presented or incorporated by
reference herein); and we expressed unqualified opinions on those consolidated
financial statements. In our opinion, the information set forth in the table
under the caption Summary Financial Information for each of the five years in
the period ended December 30, 1994, appearing on page 9 on the Prospectus,
which is a part of this Registration Statement of Merrill Lynch & Co., Inc. on
Form S-3, is fairly stated in all material respects in relation to the
consolidated financial statements from which it has been derived.
/s/ Deloitte & Touche LLP
New York, New York
February 27, 1995
