Registration No. 333-02275
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
Post-Effective Amendment No. 1
to
Registration Statement
under
THE SECURITIES ACT OF 1933
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MERRILL LYNCH & CO., INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2740599
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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)
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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)
Approximate date of commencement of the proposed sale to the public: From time
to time after the effective date of this Registration Statement, in connection
with the exercise of the stock options described herein.
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 426(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 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed maximum Proposed maximum Amount of
Title of securities Amount to offering price aggregate offering registration
to be registered be registered per share price fee(2)
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<S> <C> <C> <C> <C>
Common Stock, par
value $1.33-1/3 per
share, (including
Preferred Stock
Purchase Rights)(1)... 1,000,000 $61.875 $61,875,000 $21,337*
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*Previously paid.
(1) Prior to the occurrence of certain events, the Preferred Stock
Purchase Rights will not be evidenced separately from the Common Stock; value
attributable to such Rights, if any, is reflected in the market price of the
Common Stock.
(2) Calculated in accordance with Rule 457(c).
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</TABLE>
<PAGE>
PROSPECTUS
1,000,000 Shares
MERRILL LYNCH & CO., INC.
Common Stock
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This prospectus relates to up to 1,000,000 shares of Common Stock, par value
$1.33-1/3 per share, including preferred stock purchase rights ("Common Stock"),
of Merrill Lynch & Co., Inc. (the "Company"), which may be offered and sold to
immediate family members of certain Participants in the Merrill Lynch & Co.,
Inc. Long-Term Incentive Compensation Plan ("LTICP") or the Merrill Lynch & Co.,
Inc. Long-Term Incentive Compensation Plan for Managers and Producers ("LTICPMP"
and, together with LTICP, the "Plans"), pursuant to nonqualified stock options
("Stock Options") granted to such Participants under the Plans, some or all of
which may be transferred by Participants to immediate family members in
accordance with the Plans and the grant documents specifying the terms and
conditions of such Stock Options. This prospectus also relates to the offer and
sale of Common Stock pursuant to such Stock Options to the beneficiaries of such
immediate family members, or the executors, administrators or beneficiaries of
their estates, or other persons duly authorized by law to administer the estate
or assets of such persons.
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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 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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No person is authorized to give any information or to make any representations
other than those contained in this Prospectus, and if given or made such
information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of these securities in any jurisdiction to
any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction.
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THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
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The date of this Prospectus is January __, 1997.
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TABLE OF CONTENTS
Page
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Available Information.............................................2
Incorporation of Certain Documents by Reference...................2
Merrill Lynch & Co., Inc. ........................................3
Use of Proceeds...................................................3
Description of Common Stock.......................................3
Description of the Plans and the Stock Options....................4
Federal Income Tax Consequences...................................8
Experts...........................................................9
Legal Opinion.....................................................9
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy 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, as well as the following Regional Offices of the Commission: Midwest
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2551 and Northeast Regional Office, Seven World Trade Center, New York,
New York 10048. Copies of such material can also 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 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 Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 29,
1995, Quarterly Reports on Form 10-Q for the quarters ended March 29, 1996, June
28, 1996 and September 27, 1996, and Current Reports on Form 8-K dated January
17, 1996, January 22, 1996, February 7, 1996, February 29, 1996, March 1, 1996,
March 12, 1996, March 18, 1996, April 1, 1996, April 15, 1996, May 1, 1996, May
13, 1996, May 15, 1996, and May 28, 1996 (as amended by Form 8-K/A filed June 7,
1996), July 9, 1996, July 16, 1996, July 31, 1996, August 12, 1996, October 15,
1996, October 30, 1996 and January 13, 1997, filed pursuant to Section 13 of the
Exchange Act, are incorporated by reference herein.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the securities registered hereunder shall be
deemed to be incorporated by reference herein and to be 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 hereof 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 hereof.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person
(without exhibits other than exhibits specifically incorporated by reference) of
any or all of the documents incorporated by reference in this Prospectus.
Requests for such copies may 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).
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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 Asset Management, LP and Fund Asset
Management, LP together constitute one of the largest mutual fund managers in
the world and provide investment advisory services. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by the
U.S. Government and its agencies. Merrill Lynch Capital Services, Inc., Merrill
Lynch Derivative Products AG, 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. 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 trading 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.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Common
Stock offered hereby for general corporate purposes.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Company consists of 500,000,000 shares
of Common Stock, par value $1.33-1/3 per share, and 25,000,000 shares of
preferred stock, par value $1.00 per share, issuable in series ("Preferred
Stock"). The holders of shares of Common Stock are entitled to one vote for each
share held and each share of Common Stock is entitled to participate equally in
dividends out of funds legally available therefor, as and when declared by the
Board of Directors, and in the distribution of assets in the event of
liquidation. The shares of Common Stock have no preemptive or conversion rights,
redemption provisions or sinking fund provisions. The outstanding shares of
Common Stock are, and the shares offered hereby will be, duly and validly
issued, fully paid and nonassessable. Each share is eligible to participate
under the Rights Agreement referenced below and, to the extent specified
therein, to purchase certain securities upon the occurrence of certain events
specified in the Rights Agreement.
The Board of Directors of the Company, without further action by
stockholders, has the authority, to issue shares of Preferred Stock from time to
time in one or more series and to fix the powers (including voting power),
designations, preferences as to dividends and liquidation, and relative,
participating, optional, or other special rights and the qualifications,
limitations, or restrictions thereof. As of December 27, 1996, there were
17,000,000 Depositary Shares issued each representing a one-four hundredth
interest in a share of the Company's 9% Cumulative Preferred Stock, Series A
(the "9% Preferred Stock"). The 9% Preferred Stock is a single series consisting
of 42,500 shares with an aggregate liquidation preference of $425,000,000. As of
December 27, 1996, there were 42,500 shares of 9% Preferred Stock outstanding.
As of December 27, 1996, there were 3,000 shares of the Company's Remarketed
Preferred StockSM, Series C (the "RP(R) Stock") issued, of which 1,938 were
outstanding. On January 15, 1997, all the outstanding shares of RP stock were
called for redemption in accordance with their terms. From time to time, MLPF&S
may occasionally acquire a temporary position in the Depositary Shares and
shares of RP Stock. At December 27, 1996, the Depositary Shares and shares of RP
Stock held by MLPF&S for the purpose of resale
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was not material. The 9% Preferred Stock and RP Stock have dividend and
liquidation preference over the Common Stock and over the Series A Junior
Preferred Stock issuable pursuant to a Rights Agreement dated as of December 16,
1987 between ML & Co. and The Chase Manhattan Bank (successor by merger to
Manufacturers Hanover Trust Company).
DESCRIPTION OF THE PLANS AND THE STOCK OPTIONS
The Plans
Copies of the Plans are filed as exhibits to the Registration Statement of
which this Prospectus forms a part. The following summary of certain provisions
of the Plans does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all of the provisions of the Plans, including the
definitions therein of certain terms.
The purposes of the Plans are to enhance the growth and profitability of
the Company and its subsidiaries by providing the incentive of long-term rewards
to key employees, to attract and retain employees of outstanding competence and
ability, to encourage long-term stock ownership by employees, and to further
align the interests of such employees with those of stockholders by providing
them with the incentive of long-term rewards through an opportunity for capital
accumulation in the form of a proprietary interest in the Company. The Plans are
not pension, profit-sharing, or stock bonus plans designed to qualify under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or
employee benefit plans subject to any of the provisions of the Employee
Retirement Income Security Act of 1974 (other than a one-time reporting
requirement).
LTICP was adopted by the Board of Directors of the Company on February 27,
1989 and was approved by the stockholders of the Company on April 28, 1989. On
April 22, 1991, the stockholders of the Company approved an increase, to
40,000,000, in the number of shares authorized to be distributed under LTICP. On
January 27, 1992, the Board of Directors of the Company amended LTICP to limit
to 40,000,000 the total number of units payable in cash under LTICP. On October
11, 1993, the Board of Directors of the Company declared a two-for-one stock
split, effected in the form of a 100% stock dividend, payable on November 24,
1993 to the holders of record of shares of Common Stock at the close of business
on October 22, 1993. Therefore, total authorization pursuant to LTICP is
80,000,000 shares of Common Stock and 80,000,000 units payable in cash. As of
December 27, 1996, 10,945,605 shares were available for distribution under LTICP
(net of shares reserved for issuance upon the exercise of outstanding Stock
Options), and unexercised Stock Options to purchase 31,906,328 shares of Common
Stock were outstanding under LTICP.
LTICPMP was adopted by the Board of Directors of the Company on December
2, 1996. The total number of shares of Common Stock authorized pursuant to
LTICPMP is 20,000,000. Shares of Common Stock distributed under LTICPMP must be
treasury shares. As of December 27, 1996, 20,000,000 shares were available for
distribution under LTICPMP.
The Plans provide for grants of "Performance Shares," "Performance Units,"
"Restricted Shares," "Restricted Units," "Stock Options," "Stock Appreciation
Rights," and "Other ML & Co. Securities" to eligible employees as the Management
Development and Compensation Committee of the Board of Directors of the Company
(the "Committee") may determine. The Committee determines, after receiving the
recommendations of the management, the employees to whom grants will be made,
when such grants will be made, the size of such grants, and other terms of
grants.
The Plans are administered by the Committee, which is constituted to meet
the requirements of Rule 16b-3 promulgated under the Exchange Act. The Committee
members serve at the pleasure of the Company's Board of Directors. They
presently are Jill K. Conway, who chairs the Committee, Earle H. Harbison, Jr.,
Robert P. Luciano, John J. Phelan, Jr., and William L. Weiss, none of whom is
employed by the Company. The Committee's address is c/o Corporate Secretary,
Merrill Lynch & Co., Inc., 100 Church Street, 12th Floor, New York, New York
10080-6512. In addition to the powers mentioned above, the Committee has the
power to interpret the Plans and to prescribe rules and regulations relating
thereto. Copies of the Plans and additional information about the Plans and the
administrators
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may be obtained from Linda Teufel, Executive Compensation, Merrill Lynch & Co.,
Inc., North Tower, World Financial Center, New York, New York 10281-1331
(telephone no.: (212) 449-7031).
The Company's Board of Directors or the Committee may modify, amend, or
terminate the Plans at any time, except that, to the extent then required by
applicable law, rule, or regulation, approval of the holders of a majority of
the shares of Common Stock represented in person or by proxy at a meeting of
stockholders will be required to increase the maximum number of shares of Common
Stock available for distribution under LTICP (other than increases due to an
adjustment in accordance with LTICP). No amendment, modification or termination
shall adversely affect the rights of a Participant or Stock Option Transferee
(as defined below) under a grant previously made to him or her without his or
her consent.
The Stock Options
General
As stated above, the Plans provide for the grant of Nonqualified Stock
Options to purchase shares of Common Stock. At the time of grant, the Committee
establishes the exercise price (which may not be less than 50% of the Fair
Market Value of the underlying Common Stock on the date of grant), the
expiration date (which may not be more than 10 years from the date of grant),
and the times and installments in which the Stock Options may be exercised.
As of the date of this Prospectus, all Stock Options granted under the
Plans have had expiration dates ten years from the date of grant with an
exercise price equal to the Fair Market Value of the Common Stock on the date of
grant. All such grants have provided that the Stock Options become exercisable
in equal annual installments over the four- or five-year period following the
date of grant.
If any change shall occur in or affect shares of Common Stock or Stock
Options on account of a merger, reorganization, stock dividend, stock split or
similar changes, the Committee shall make adjustments in, among other things,
(i) the maximum number of shares of Common Stock available for distribution
under the Plans; (ii) the number of shares reserved for outstanding Stock Option
grants; and (iii) any other terms or provisions of outstanding grants, in order
to preserve the full benefits of such grants.
Transferability
The Plans provide that Stock Options are generally not transferable by a
Participant except by will or the laws of descent and distribution and are
exercisable during the Participant's lifetime only by the Participant.
Notwithstanding the foregoing, under certain circumstances, the Committee may
grant (or sanction by amending an existing grant) Stock Options that may be
transferred by the Participant during his or her lifetime to any member of his
or her immediate family or a trust established for the exclusive benefit of one
or more members of his or her immediate family in order to permit Participants
who receive transferable grants to make a gift of Stock Options to such persons
for estate planning purposes. The term "immediate family" is defined for such
purpose as children, stepchildren and grandchildren, including relationships
arising from legal adoption.
This Prospectus relates to up to 1,000,000 shares of Common Stock of the
Company which may be offered and sold to immediate family members of
Participants in the Plans pursuant to Stock Options that may be transferred to
such immediate family members as described in the immediately preceding
paragraph. This Prospectus also relates to the offer and sale of Common Stock
pursuant to such Stock Options to the beneficiaries of such immediate family
members, or the executors, administrators or beneficiaries of their estates, or
other persons duly authorized by law to administer the estate or assets of such
persons. As used herein, "Stock Option Transferee" refers to an immediate family
member of a Plan Participant (or such person's beneficiary, estate or other
legal representative), or a trust for the benefit of one or more immediate
family members, that has received Stock Options in a valid transfer, and
"Participant Transferor" refers to the Plan Participant who transferred Stock
Options held by a particular Stock Option Transferee.
Upon transfer to a Stock Option Transferee, a Stock Option continues to be
governed by and subject to the terms and limitations of the relevant Plan and
the relevant grant, and the Stock Option Transferee is entitled to the same
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rights as the Participant Transferor thereunder, as if no transfer had taken
place. Accordingly, the rights of the Stock Option Transferee are subject to the
terms and limitations of the original grant to the Participant Transferor,
including provisions relating to expiration date, exercisability, exercise price
and forfeiture. For information regarding the terms of a particular Stock Option
grant, Stock Option Transferees may contact Linda Teufel, Executive
Compensation, Merrill Lynch & Co., Inc., North Tower, World Financial Center,
New York, New York 10281-1331 (telephone no.: (212) 449-7031).
Once a Stock Option has been transferred to a Stock Option Transferee, it
may not be subsequently transferred by the Stock Option Transferee except by
will or the laws of descent and distribution. A Stock Option Transferee may
designate in writing to the Company before his or her death one or more
beneficiaries to receive, in the event of his or her death, any rights to which
the Stock Option Transferee would be entitled under the relevant Plan. A Stock
Option Transferee may also designate an alternate beneficiary to receive
payments if the primary beneficiary predeceases the Stock Option Transferee. A
beneficiary designation may be changed or revoked in writing by the Stock Option
Transferee at any time. Changes in beneficiary designation should be sent
(return receipt requested) to the attention of the Secretary, Merrill Lynch &
Co., Inc., 100 Church Street, 12th Floor, New York, New York 10080-6512.
Exercise of Stock Options by Stock Option Transferees
A Stock Option may be exercised by a Stock Option Transferee at any time
from the time first set by the Committee in the original grant to the
Participant Transferor until the close of business on the expiration date of the
Stock Option. Stock Options generally become exercisable in equal annual
installments over the four- or five-year period following the date of grant.
NOTWITHSTANDING THE FOREGOING, THE STOCK OPTION TRANSFEREE MAY NOT EXERCISE A
STOCK OPTION DURING THE 12-MONTH PERIOD FOLLOWING A HARDSHIP WITHDRAWAL BY THE
PARTICIPANT TRANSFEROR OF ELECTIVE 401(K) DEFERRALS AS DEFINED IN THE MERRILL
LYNCH & CO., INC. 401(K) SAVINGS & INVESTMENT PLAN.
The purchase price of the shares as to which Stock Options are exercised
shall be paid to the Company at the time of exercise (i) in cash, (ii) by
delivering freely transferable shares of Common Stock already owned by the Stock
Option Transferee having a total Fair Market Value on the day prior to the date
of exercise at least equal to the purchase price, (iii) a combination of cash
and shares of Common Stock equal in value to the purchase price, or (iv) by such
other means as the Committee may from time to time determine.
Upon exercise of a Stock Option by a Stock Option Transferee, any federal,
state or local withholding taxes arising from the exercise are the obligation of
the Participant Transferor. The exercise will not be given effect and the Stock
Option Transferee will not be able to sell the underlying shares until the
Company receives confirmation that the Participant Transferor's withholding
obligations, where applicable, have been satisfied. ACCORDINGLY, THE EXERCISE OF
A STOCK OPTION BY A STOCK OPTION TRANSFEREE IS NOT ENTIRELY WITHIN HIS OR HER
CONTROL.
A Stock Option will be deemed exercised on the date the Merrill Lynch
Corporate Secretary's office has received a copy of the Stock Option Exercise
Form (by mail or facsimile transmission), completed in all respects and signed
by the Stock Option Transferee (accompanied by a check and/or shares of Common
Stock, where applicable). The Stock Option shares will generally be transferred
to the Stock Option transferee as of the day following the date that (i) the
above conditions have been met, (ii) the funds and/or shares of Common Stock
paid by the Stock Option Transferee in satisfaction of the exercise price have
been received by the Company free and clear of all restrictions, and (iii) the
Company has received confirmation that the Participant Transferor's withholding
obligations have been satisfied.
Once the exercise is completed as described above, stock certificates for
the appropriate number of shares will be delivered to the Stock Option
Transferee or his or her estate or beneficiaries, or such shares shall be
credited to an MLPF&S brokerage account or otherwise delivered in such manner as
the person(s) entitled thereto may direct.
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Effect of Termination of Employment
Because Stock Options transferred to Stock Option Transferees continue to
be governed by the terms of the relevant Plan and the original grant, their
exercisability continues to be affected by the Participant Transferor's
employment status.
If a Participant Transferor terminates employment with the Company for any
reason other than death, all outstanding unexercised Stock Options granted to
such Participant Transferor, including those held by a Stock Option Transferee,
expire on the date of termination of employment, unless the Committee determines
that an extended exercise period is warranted.
Notwithstanding the foregoing, the Disability or Retirement (as such terms
are defined in the Plans) of a Participant Transferor shall not constitute
termination of employment for the purposes of the preceding paragraph, and
accordingly shall not result in the early expiration of outstanding Stock
Options, unless the Committee shall at any time determine that the Participant
Transferor is engaging in or assisting any business that the Committee
determines to be in competition with a business engaged in by the Company, in
which case the Participant Transferor shall be deemed to have terminated
employment.
If a Participant Transferor dies, all unexercised and unexpired Stock
Options granted to such Participant Transferor, including those held by a Stock
Option Transferee, shall become immediately exercisable at any time and from
time to time, but in no event after the expiration dates of such Stock Options.
Change in Control Provisions
The Plans provide that, in the event of a Change in Control of the Company
(as defined below) and a subsequent termination of the Participant Transferor's
employment without "Cause" or termination of employment by the Participant
Transferor for "Good Reason" as such terms are defined in the Plans, including a
change in responsibilities or a reduction in salary or benefits, payment will be
made for all unexpired Stock Options granted to that Participant Transferor,
including those held by a Stock Option Transferee, as if all conditions of
exercisability had been met. Payment will consist of a cash amount equal to, for
each underlying share of Common Stock, the excess of the Fair Market Value of
Common Stock on the day the Participant Transferor's employment is terminated,
or, if higher, the highest Fair Market Value during the 90-day period preceding
the Change in Control, over the exercise price for the relevant Stock Option.
A "Change in Control" of the Company means: (i) any change in control of a
nature required to be reported under the Commission's proxy rules; (ii) the
acquisition by any person of the beneficial ownership of securities representing
30 percent or more of the combined voting power of the Company's then
outstanding voting securities; (iii) a change in the composition of the Board of
Directors such that, within a period of 2 consecutive years, individuals who at
the beginning of such 2-year period constituted the Board of Directors and any
new directors elected or nominated by at least three-fourths of the directors
who were either directors at the beginning of the 2-year period or were so
elected or nominated, cease for any reason to constitute at least a majority of
the Board of Directors; or (iv) the liquidation of all or substantially all of
the assets of the Company. In addition, if the Company enters into an agreement,
the consummation of which would result in a Change in Control, then a Change in
Control shall be deemed to have occurred with respect to any Participant's
termination without "Cause" or for "Good Reason" occurring after the execution
of such agreement and, if such agreement expires or is terminated prior to
consummation of the Change in Control, before such expiration or termination.
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FEDERAL INCOME TAX CONSEQUENCES
Prior to making a transfer of a Nonqualified Stock Option ("NSO"), a
Participant should consult with his or her personal tax advisors concerning the
possible Federal and state gift, estate, inheritance, and generation skipping
tax consequences of such a transfer, as well as state and local income tax
consequences which are not addressed herein. The discussion of Federal income
tax consequences for the Participant and the Stock Option Transferee set forth
below assumes that the transfer of an NSO during a Participant's lifetime is
made by way of gift and no consideration is received therefor.
Income Tax Consequences for Participant Transferors
The Company has been advised by its tax counsel that a Participant who
transfers an NSO by way of gift to an immediate family member will not recognize
income at the time of the transfer. Instead, the Participant will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the shares purchased (which will not necessarily be equal to the price
at which such shares are sold, even if sold on the same day as exercise) over
the exercise price at the time the Stock Option Transferee exercises the NSO.
(Special rules may apply to Participants subject to potential liability under
Section 16(b) of the Exchange Act, which may defer the recognition of
compensation income.) Moreover, such income will be subject to payment and
withholding of income and FICA taxes. Normally, Participants will have all
withholding amounts deducted from a margin account maintained by the Participant
with the Company's affiliate, MLPF&S; alternatively, Participants may satisfy
the withholding obligation by writing a check to the Company or by another
method permitted by the Company. Subject to certain limitations, the Company
will generally be entitled to claim a Federal income tax deduction at such time
and in the same amount that the Participant realizes ordinary income. In the
event the Stock Option Transferee exercises the NSO after the death of the
Participant, any such ordinary income will be recognized by the Stock Option
Transferee.
Income Tax Consequences for Stock Option Transferee
Tax counsel has also advised that a Stock Option Transferee will not
recognize income at the time of the transfer of the NSO since a gift is
specifically excluded from gross income. As described in the preceding
paragraph, the Participant and not the Stock Option Transferee will recognize
ordinary compensation income at the time the Stock Option Transferee exercises
the NSO if the Participant is alive at the date the NSO is exercised. In the
event that the Stock Option Transferee exercises the NSO after the death of the
Participant, any such ordinary income will be recognized by the Stock Option
Transferee. Such income will not be subject to withholding of income tax but
will be subject to withholding of FICA tax unless such income is recognized
after the calendar year of the Participant's death. A Stock Option Transferee
who chooses to exercise an NSO in whole or in part by delivery of other Common
Stock already owned by the Stock Option Transferee should consult with tax
counsel concerning the tax consequences of such a transaction.
Income Tax Consequences on Subsequent Sale of Stock
If shares acquired upon exercise of an NSO are later sold or exchanged,
then the difference between the sales price and the Stock Option Transferee's
tax basis for the shares will generally be taxable as long-term or short-term
capital gain or loss (if the stock is a capital asset of the taxpayer) depending
upon whether the stock has been held for more than one year after the exercise
date. If the NSO is exercised by the Stock Option Transferee for cash while the
Participant is alive, the tax basis for the shares in the hands of the Stock
Option Transferee would be the exercise price for the NSO plus the amount of the
income recognized by the Participant Transferor at the time of exercise. If the
NSO is exercised for cash by the Stock Option Transferee after the Participant's
death, the tax basis for the Shares would be the exercise price for the NSO plus
the amount of income recognized upon exercise by the Stock Option Transferee.
Different basis rules will apply if the Stock Option Transferee delivered Common
Stock in payment of all or a portion of the exercise price of the NSO.
8
<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 1995 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 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 29, 1995 included in the 1995 Annual Report to
Stockholders of the Company, and incorporated by reference herein, have 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, and
such Selected Financial Data incorporated by reference in this Prospectus and
the Registration Statement of which this Prospectus is a part, have been
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 the Quarterly Reports on Form 10-Q which are 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 reports included in such Quarterly Reports 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 of
1933, as amended (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.
LEGAL OPINION
The legality of the shares of Common Stock offered hereby has been passed
upon by Brown & Wood LLP, One World Trade Center, New York, New York 10048,
counsel for the Company. In addition, Brown & Wood LLP has advised the Company
concerning certain Federal income tax consequences related to Stock Options
under the Plans and the transfer and exercise thereof.
9
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. Exhibits.
4(a) Restated Certificate of Incorporation of the Company, as amended
April 24, 1987 (incorporated by reference to Exhibit 3(i) to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1992 ("1992 10-K") (File No. 1-7182)).
4(b) Certificate of Amendment, dated April 29, 1993, of the Certificate
of Incorporation of the Company (incorporated by reference to
Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 26, 1993 ("First Quarter 1993 10-Q") (File No.
1-7182)).
4(c) By-Laws of the Company, effective as of July 22, 1996 (incorporated
by reference to Exhibit 3(i) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 28, 1996 (File No. 1-7182)).
4(d) Form of Rights Agreement, dated as of December 16, 1987, between the
Company and The Chase Manhattan Bank (successor by merger to
Manufacturers Hanover Trust Company) (incorporated by reference to
Exhibit 3(iv) to the 1992 10-K).
4(e) Certificate of Designation of the Company establishing the rights,
preferences, privileges, qualifications, restrictions and
limitations relating to the Company's 9% Cumulative Preferred Stock,
Series A (incorporated by reference to Exhibit 4(iii) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 (File No. 1-7182)).
4(f) Certificate of Designation of the Company establishing the rights,
preferences, privileges, qualifications, restrictions and
limitations relating to the Company's Remarketed Preferred Stock,
Series C (incorporated by reference to Exhibit 3(ii) to the First
Quarter 1993 10-Q).
4(g) Certificate of Designation of the Company establishing the rights,
preferences, privileges, qualifications, restrictions and
limitations relating to the Company's Series A Junior Preferred
Stock (incorporated by reference to Exhibit 3(f) to the Company's
Registration Statement on Form S-3 (File No. 33-19975)).
+ 5 Opinion of Brown & Wood LLP as to legality and tax matters.
+15 Letter re: unaudited interim financial information.
+23(a) Consent of Brown & Wood LLP (included as part of Exhibit 5).
+23(b) Consent of Deloitte & Touche LLP.
*24 Power of Attorney.
99(a) Merrill Lynch & Co., Inc. Long-Term Incentive Compensation Plan, as
amended through October 21, 1996 (incorporated by reference to
Exhibit 10(i) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 27, 1996 (File No. 1-7182)).
+99(b) Merrill Lynch & Co., Inc. Long-Term Incentive Compensation Plan for
Managers and Producers.
+ Filed herewith.
* Previously filed.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
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 21st day
of January, 1997.
MERRILL LYNCH & CO., INC.
By /s/ Joseph T. Willett
----------------------------------
Joseph T. Willett
(Senior Vice President and
Chief Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed below by the following persons in
the capacities indicated on the 21st day of January, 1997.
Signature Title
--------- -----
* Chairman of the Board
- ------------------------------------ and Director
(Daniel P. Tully)
* Chief Executive Officer, President,
- ------------------------------------ Chief Operating Officer and Director
(David H. Komansky)
* Senior Vice President and Chief
- ------------------------------------ Financial Officer (Principal Financial
(Joseph T. Willett) Officer)
* Senior Vice President and Controller
- ------------------------------------ (Principal Accounting Officer)
(Michael J. Castellano)
* Director
- ------------------------------------
(William O. Bourke)
* Director
- ------------------------------------
(W. H. Clark)
II-2
<PAGE>
Signature Title
--------- -----
* Director
- ------------------------------------
(Jill K. Conway)
* Director
- ------------------------------------
(Stephen L. Hammerman)
* Director
- ------------------------------------
(Earle H. Harbison, Jr.)
* Director
- ------------------------------------
(George B. Harvey)
* Director
- ------------------------------------
(William R. Hoover)
* Director
- ------------------------------------
(Robert P. Luciano)
Director
- ------------------------------------
(David K. Newbigging)
* Director
- ------------------------------------
(Aulana L. Peters)
* Director
- ------------------------------------
(John J. Phelan, Jr.)
* Director
- ------------------------------------
(William L. Weiss)
*BY: /s/ Joseph T. Willett
-------------------------------
Joseph T. Willett
Attorney in Fact
II-3
<PAGE>
Exhibit Index
Exhibit No. Description Page
- ----------- ----------- ----
4(a) Restated Certificate of Incorporation of the Company,
as amended April 24, 1987 (incorporated by reference
to Exhibit 3(i) to the Company's Annual Report on Form
10-K for the fiscal year ended December 25, 1992
("1992 10-K") (File No. 1-7182)).
4(b) Certificate of Amendment, dated April 29, 1993, of the
Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3(i) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 26, 1993 ("First Quarter 1993
10-Q") (File No. 1-7182)).
4(c) By-Laws of the Company, effective as of July 22, 1996
(incorporated by reference to Exhibit 3(i) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 28, 1996 (File No. 1-7182)).
4(d) Form of Rights Agreement, dated as of December 16,
1987, between the Company and The Chase Manhattan Bank
(successor by merger to Manufacturers Hanover Trust
Company) (incorporated by reference to Exhibit 3(iv)
to the 1992 10-K).
4(e) Certificate of Designation of the Company establishing
the rights, preferences, privileges, qualifications,
restrictions and limitations relating to the Company's
9% Cumulative Preferred Stock, Series A (incorporated
by reference to Exhibit 4(iii) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 (File No. 1-7182)).
4(f) Certificate of Designation of the Company establishing
the rights, preferences, privileges, qualifications,
restrictions and limitations relating to the Company's
Remarketed Preferred Stock, Series C (incorporated by
reference to Exhibit 3(ii) to the First Quarter 1993
10-Q).
4(g) Certificate of Designation of the Company establishing
the rights, preferences, privileges, qualifications,
restrictions and limitations relating to the Company's
Series A Junior Preferred Stock (incorporated by
reference to Exhibit 3(f) to the Company's
Registration Statement on Form S-3 (File No.
33-19975)).
+ 5 Opinion of Brown & Wood LLP as to legality and tax
matters.
+15 Letter re: unaudited interim financial information.
+23(a) Consent of Brown & Wood LLP (included as part of
Exhibit 5).
+23(b) Consent of Deloitte & Touche LLP.
*24 Power of Attorney.
99(a) Merrill Lynch & Co., Inc. Long-Term Incentive
Compensation Plan, as amended through October 21, 1996
(incorporated by reference to Exhibit 10(i) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 27, 1996 (File No. 1-7182)).
+99(b) Merrill Lynch & Co., Inc. Long-Term Incentive
Compensation Plan for Managers and Producers.
+ Filed herewith.
* Previously filed.
EXHIBIT 5
[LETTERHEAD OF BROWN & WOOD LLP]
January 21, 1997
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
New York, New York 10281
Dear Sirs,
We have acted as counsel for Merrill Lynch & Co., Inc., a Delaware
corporation (the "Company"), in connection with the proposed filing with the
Securities and Exchange Commission expected to be made on or about January 21,
1997 under the Securities Act of 1933, as amended, of a Post-Effective Amendment
to a Registration Statement on Form S-3 (the "Registration Statement") for the
purpose of registering 1,000,000 shares of Common Stock, par value $1.33 1/3 per
share (including Preferred Stock Purchase Rights) (the "Common Stock") of the
Company that may be purchased in accordance with the terms of the Merrill Lynch
& Co., Inc. Long-Term Incentive Compensation Plan and the Merrill Lynch & Co.,
Inc. Long-Term Incentive Compensation Plan for Managers and Producers (the
"Plans"). In such capacity, we have examined the Restated Certificate of
Incorporation and By-Laws of the Company, the Plans, and such other documents of
the Company as we have deemed necessary or appropriate for the purposes of the
opinion expressed herein.
Based upon the foregoing, we advise you that, in our opinion, the shares
of Common Stock when issued in accordance with the provisions of the Plans will
be legally issued, fully paid and nonassessable.
It is also our opinion that, under current law, the discussion set forth
under the heading "Federal Income Tax Consequences" in the prospectus, although
general in nature, is an accurate summary of the material federal income tax
consequences related to stock options under the Plans and the transfer and
exercise thereof.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name wherever appearing in the Registration
Statement and any amendment thereto.
Very truly yours,
/s/ Brown & Wood LLP
Exhibit 15
January 21, 1997
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 for the
periods ended March 29, 1996 and March 31, 1995, June 28, 1996 and June 30, 1995
and September 27, 1996 and September 29, 1995, as indicated in our reports dated
May 10, 1996, August 9, 1996 and November 8, 1996, respectively; because we did
not perform an audit, we expressed no opinion on that information.
We are aware that such reports referred to above, which are included in your
Quarterly Reports on form 10-Q for the quarters ended March 29, 1996, June 28,
1996 and September 27, 1996, are incorporated by reference in this Registration
Statement.
We also are aware that the aforementioned reports, pursuant to Rule 436(c) under
the Securities Act of 1933, are 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.
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post Effective Amendment
No. 1 to the Registration Statement of Merrill Lynch & Co., Inc. (the "Company")
on Form S-3 of our reports dated February 26, 1996, appearing in and
incorporated by reference in the Annual Report on Form 10-K of the Company for
the year ended December 29, 1995 (the "Annual Report") 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 Post-Effective Amendment No. 1 to the Registration Statement of our report
dated February 26, 1996, appearing as Exhibit 99(ii) in the Company's Current
Report on Form 8-K dated March 12, 1996, 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 29, 1995 included
in the 1995 Annual Report to Stockholders of the Company.
January 21, 1997
Exhibit 99(b)
MERRILL LYNCH & CO., INC.
LONG-TERM INCENTIVE COMPENSATION PLAN
FOR MANAGERS AND PRODUCERS
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - GENERAL........................................................ 1
Section 1.1 Purpose.................................................. 1
Section 1.2 Definitions.............................................. 1
(a) "Board of Directors" or "Board"....................... 1
(b) "Code"................................................ 1
(c) "Company"............................................. 1
(d) "Committee"........................................... 1
(e) "Common Stock"........................................ 2
(f) "Disability".......................................... 2
(g) "Fair Market Value"................................... 2
(h) "Junior Preferred Stock".............................. 2
(i) "Other ML & Co. Security"............................. 2
(j) "Participant"......................................... 2
(k) "Performance Period".................................. 2
(l) "Performance Share"................................... 3
(m) "Performance Unit" ................................... 3
(n) "Restricted Period"................................... 3
(o) "Restricted Share".................................... 3
(p) "Restricted Unit"..................................... 3
(q) "Retirement".......................................... 3
(r) "Rights".............................................. 3
(s) "Rights Agreement".................................... 3
(t) "Stock Appreciation Right"............................ 3
(u) "Stock Option"........................................ 4
(v) "Vesting Period"...................................... 4
Section 1.3 Administration........................................... 4
Section 1.4 Shares and Units Subject to the Plan..................... 4
Section 1.5 Eligibility and Participation............................ 5
ARTICLE II - PROVISIONS APPLICABLE TO PERFORMANCE SHARES
AND PERFORMANCE UNITS.......................................... 5
Section 2.1 Performance Periods and Restricted Periods............... 5
Section 2.2 Performance Objectives................................... 5
Section 2.3 Grants of Performance Shares and Performance Units....... 6
i
<PAGE>
Section 2.4 Rights and Benefits During Performance Period............ 6
Section 2.5 Adjustment with respect to Performance Shares and
Performance Units........................................ 7
Section 2.6 Payment of Performance Shares and Performance
Units.................................................... 7
(a) Performance Shares.................................... 7
(i) If a Restricted Period has been established... 7
(ii) If a Restricted Period has not been
established................................... 8
(b) Performance Units..................................... 8
Section 2.7 Termination of Employment................................ 8
(a) Prior to the end of a Performance Period.............. 8
(i) Death......................................... 8
(ii) Disability or Retirement...................... 8
(iii) Other Terminations............................ 9
(b) After the end of a Performance Period but prior to
the end of a Restricted Period..................... 9
(i) Death, Disability, or Retirement.............. 9
(ii) Other Terminations............................ 9
Section 2.8 Deferral of Payment...................................... 10
ARTICLE III - PROVISIONS APPLICABLE TO RESTRICTED SHARES AND RESTRICTED
UNITS......................................................... 10
Section 3.1 Vesting Periods and Restricted Periods................... 10
Section 3.2 Grants of Restricted Shares and Restricted Units......... 10
Section 3.3 Rights and Restrictions Governing Restricted Shares...... 11
Section 3.4 Rights Governing Restricted Units........................ 11
Section 3.5 Adjustment with respect to Restricted Shares and
Restricted Units......................................... 11
Section 3.6 Payment of Restricted Shares and Restricted Units........ 12
ii
<PAGE>
(a) Restricted Shares..................................... 12
(b) Restricted Units...................................... 12
Section 3.7 Termination of Employment................................ 12
(a) Prior to the end of a Vesting Period.................. 12
(i) Death......................................... 12
(ii) Disability or Retirement...................... 12
(iii) Other Terminations............................ 12
(b) After the end of a Vesting Period but prior to
the end of a Restricted Period........................ 13
(i) Death, Disability, or Retirement.............. 13
(ii) Other Terminations............................ 13
Section 3.8 Extension of Vesting; Deferral of Payment................ 13
ARTICLE IV - PROVISIONS APPLICABLE TO STOCK OPTIONS......................... 14
Section 4.1 Grants of Stock Options.................................. 14
Section 4.2 Option Documentation..................................... 14
Section 4.3 Exercise Price........................................... 14
Section 4.4 Exercise of Stock Options................................ 14
(a) Exercisability........................................ 14
(b) Option Period......................................... 15
(c) Exercise in the Event of Termination of
Employment............................................ 15
(i) Death......................................... 15
(ii) Disability or Retirement...................... 15
(iii) Other Terminations............................ 15
(d) Limitations on Transferability........................ 16
Section 4.5 Payment of Purchase Price and Tax Liability Upon
Exercise; Delivery of Shares............................. 16
(a) Payment of Purchase Price............................. 16
(b) Payment of Taxes...................................... 16
(c) Delivery of Shares.................................... 17
iii
<PAGE>
Section 4.6 Limitation on Fair Market Value of Shares of Common
Stock Received upon Exercise of Incentive Stock
Options ................................................. 17
ARTICLE V - PROVISIONS APPLICABLE TO STOCK APPRECIATION
RIGHTS.......................................................... 17
Section 5.1 Grants of Stock Appreciation Rights...................... 17
Section 5.2 Stock Appreciation Rights Granted in Connection
with Incentive Stock Options............................. 18
Section 5.3 Payment Upon Exercise of Stock Appreciation
Rights................................................... 18
Section 5.4 Termination of Employment................................ 18
(a) Death................................................. 18
(b) Disability............................................ 18
(c) Retirement............................................ 19
(d) Other Terminations.................................... 19
ARTICLE VI - PROVISIONS APPLICABLE TO OTHER ML & CO.
SECURITIES..................................................... 19
Section 6.1 Grants of Other ML & Co. Securities...................... 19
Section 6.2 Terms and Conditions of Conversion or Exchange........... 20
ARTICLE VII - CHANGES IN CAPITALIZATION..................................... 20
ARTICLE VIII - PAYMENTS UPON TERMINATION OF EMPLOYMENT
AFTER A CHANGE IN CONTROL.................................... 21
Section 8.1 Value of Payments Upon Termination After a Change
in Control............................................... 21
(a) Performance Shares and Performance Units.............. 21
(b) Restricted Shares and Restricted Units................ 22
(c) Stock Options and Stock Appreciation Rights........... 22
(d) Other ML & Co. Securities............................. 23
Section 8.2 A Change in Control...................................... 23
Section 8.3 Effect of Agreement Resulting in Change in Control....... 24
Section 8.4 Termination for Cause.................................... 24
Section 8.5 Good Reason.............................................. 25
iv
<PAGE>
(a) Inconsistent Duties................................... 25
(b) Reduced Salary or Bonus Opportunity................... 25
(c) Relocation............................................ 25
(d) Compensation Plans.................................... 25
(e) Benefits and Perquisites.............................. 26
(f) No Assumption by Successor............................ 26
Section 8.6 Effect on Plan Provisions................................ 26
ARTICLE IX - MISCELLANEOUS.................................................. 27
Section 9.1 Designation of Beneficiary............................... 27
Section 9.2 Employment Rights........................................ 27
Section 9.3 Nontransferability....................................... 27
Section 9.4 Withholding.............................................. 27
Section 9.5 Relationship to Other Benefits........................... 28
Section 9.6 No Trust or Fund Created................................. 28
Section 9.7 Expenses................................................. 28
Section 9.8 Indemnification.......................................... 28
Section 9.9 Tax Litigation........................................... 28
ARTICLE X - AMENDMENT AND TERMINATION....................................... 28
ARTICLE XI - INTERPRETATION................................................. 29
Section 11.1 Governmental and Other Regulations...................... 29
Section 11.2 Governing Law........................................... 29
ARTICLE XII - EFFECTIVE DATE AND STOCKHOLDER APPROVAL....................... 29
v
<PAGE>
MERRILL LYNCH & CO., INC.
LONG-TERM INCENTIVE COMPENSATION PLAN
FOR MANAGERS AND PRODUCERS
ARTICLE I - GENERAL
Section 1.1 Purpose.
The purposes of the Long-Term Incentive Compensation Plan (the "Plan") for
Managers and Producers are: (a) to enhance the growth and profitability of
Merrill Lynch & Co., Inc., a Delaware corporation ("ML & Co."), and its
subsidiaries by providing the incentive of long-term rewards to key employees
who are capable of having a significant impact on the performance of ML & Co.
and its subsidiaries; (b) to attract and retain employees of outstanding
competence and ability; (c) to encourage long-term stock ownership by employees;
and (d) to further the identity of interests of such employees with those of
stockholders of ML & Co.
Section 1.2 Definitions.
For the purpose of the Plan, the following terms shall have the meanings
indicated:
(a) "Board of Directors" or "Board" shall mean the Board of Directors of
ML & Co.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended,
including any successor law thereto.
(c) "Company" shall mean ML & Co. and any corporation, partnership, or
other organization of which ML & Co. owns or controls, directly or indirectly,
not less than 50% of the total combined voting power of all classes of stock or
other equity interests. For purposes of this Plan, the terms "ML & Co." and
"Company" shall include any successor thereto.
(d) "Committee" shall mean the Management Development and Compensation
Committee of the Board of Directors, or its functional successor or any other
Board committee that has been designated by the Board of Directors to administer
the Plan, or the Board of Directors.
1
<PAGE>
(e) "Common Stock" shall mean the Common Stock, par value $1.33 1/3 per
share, of ML & Co. and a "share of Common Stock" shall mean one share of Common
Stock together with, for so long as Rights are outstanding, one Right (whether
trading with the Common Stock or separately).
(f) "Disability," unless otherwise provided herein, shall mean any
physical or mental condition that, in the opinion of the Director of Human
Resources of Merrill Lynch & Co., Inc. (or his or her functional successor),
renders an employee incapable of engaging in any employment or occupation for
which he is suited by reason of education or training.
(g) "Fair Market Value" of shares of Common Stock on any given date(s)
shall be: (a) the mean of the high and low sales prices on the New York Stock
Exchange--Composite Tape of such shares on the date(s) in question, or, if the
shares of Common Stock shall not have been traded on any such date(s), the mean
of the high and low sales prices on the New York Stock Exchange--Composite Tape
on the first day prior thereto on which the shares of Common Stock were so
traded; or (b) if the shares of Common Stock are not traded on the New York
Stock Exchange, such other amount as may be determined by the Committee by any
fair and reasonable means.
"Fair Market Value" of any Other ML & Co. Security on any given
date(s) shall be: (a) the mean of the high and low sales prices of such Other ML
& Co. Security on the principal securities exchange on which such Security is
traded on the date(s) in question or, if such Other ML & Co. Security shall not
have been traded on any such exchange on such date(s), the mean of the high and
low sales prices on such exchange on the first day prior thereto on which such
Other ML & Co. Security was so traded; or (b) if the Other ML & Co. Security is
not publicly traded on a securities exchange, such other amount as may be
determined by the Committee by any fair and reasonable means.
(h) "Junior Preferred Stock" shall mean ML & Co.'s Series A Junior
Preferred Stock, par value $1.00 per share.
(i) "Other ML & Co. Security" shall mean a financial instrument issued
pursuant to Article VI.
(j) "Participant" shall mean any employee who has met the eligibility
requirements set forth in Section 1.5 hereof and to whom a grant has been made
and is outstanding under the Plan.
(k) "Performance Period" shall mean, in relation to Performance Shares or
Performance Units, any period, for which performance objectives have been
established, of not less than one nor more than ten consecutive ML & Co. fiscal
years, commencing with the first day of the fiscal year in which such
Performance Shares or Performance Units were granted.
2
<PAGE>
(l) "Performance Share" shall mean a right, granted to a Participant
pursuant to Article II, that will be paid out as a share of Common Stock.
(m) "Performance Unit" shall mean a right, granted to a Participant
pursuant to Article II, to receive an amount equal to the Fair Market Value of
one share of Common Stock in cash.
(n) "Restricted Period" shall mean, (i) in relation to shares of Common
Stock receivable in payment for Performance Shares, the period beginning at the
end of the applicable Performance Period during which restrictions on the
transferability of such shares of Common Stock are in effect; and (ii) in
relation to Restricted Shares, the period, beginning with the first day of the
month in which Restricted Shares are granted, during which restrictions on the
transferability of such Restricted Shares are in effect and which shall not be
of shorter duration than the Vesting Period applicable to the same Restricted
Shares.
(o) "Restricted Share" shall mean a share of Common Stock, granted to a
Participant pursuant to Article III, subject to the restrictions set forth in
Section 3.3 hereof.
(p) "Restricted Unit" shall mean the right, granted to a Participant
pursuant to Article III, to receive an amount equal to the Fair Market Value of
one share of Common Stock in cash.
(q) "Retirement" shall mean the cessation of employment by the Company (1)
after reaching age 55 and having completed at least 5 years of service; (2)
after reaching age 50 and having completed at least 10 years of service; (3)
after reaching age 45 and having completed at least 15 years of service; or (4)
having completed at least 20 years of service (in each case including approved
leaves of absence of one year or less).
(r) "Rights" means the Rights to Purchase Units of Junior Preferred Stock
issued pursuant to the Rights Agreement.
(s) "Rights Agreement" means the Rights Agreement dated as of
December 16, 1987 between ML & Co. and Manufacturers Hanover Trust Company,
Rights Agent, as amended from time to time.
(t) "Stock Appreciation Right" shall mean a right, granted to a
Participant pursuant to Article V, to receive, in cash or shares of Common
Stock, an amount equal to the increase in Fair Market Value, over a specified
period of time, of a specified number of shares of Common Stock.
3
<PAGE>
(u) "Stock Option" shall mean a right, granted to a Participant pursuant
to Article IV, to purchase, before a specified date and at a specified price, a
specified number of shares of Common Stock. Stock Options may be "Incentive
Stock Options," which meet the definition of such in Section 422A of the Code,
or "Nonqualified Stock Options," which do not meet such definition.
(v) "Vesting Period" shall mean, in relation to Restricted Shares or
Restricted Units, any period of not less than 12 months beginning with the first
day of the month in which the grant of the applicable Restricted Shares or
Restricted Units is effective, during which such Restricted Shares or Restricted
Units may be forfeited if the Participant terminates employment.
Section 1.3 Administration.
(a) The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee shall have sole and complete authority to:
(i) subject to Section 1.5 hereof, select Participants after receiving the
recommendations of the management of the Company; (ii) determine the number of
Performance Shares, Performance Units, Restricted Shares, Restricted Units,
Stock Appreciation Rights, or Other ML & Co. Securities subject to each grant;
(iii) determine the number of shares of Common Stock subject to each Stock
Option grant; (iv) determine the time or times when grants are to be made or are
to be effective; (v) determine the terms and conditions subject to which grants
may be made; (vi) extend the term of any Stock Option; (vii) provide at the time
of grant that all or any portion of any Stock Option shall be canceled upon the
Participant's exercise of any Stock Appreciation Rights; (viii) prescribe the
form or forms of the instruments evidencing any grants made hereunder, provided
that such forms are consistent with the Plan; (ix) adopt, amend, and rescind
such rules and regulations as, in its opinion, may be advisable for the
administration of the Plan; (x) construe and interpret the Plan and all rules,
regulations, and instruments utilized thereunder; and (xi) make all
determinations deemed advisable or necessary for the administration of the Plan.
All determinations by the Committee shall be final and binding.
(b) The Committee shall act in accordance with the procedures established
for a Committee under ML & Co.'s Certificate of Incorporation and By-Laws or
under any resolution of the Board.
Section 1.4 Shares Subject to the Plan.
The total number of shares of Common Stock that may be distributed under
the Plan shall be 20,000,000 (whether granted as Restricted Shares or reserved
for distribution upon grant of Performance Shares, Stock Options, Stock
Appreciation Rights (to the extent they may be paid out in Common Stock), or
Other ML & Co. Securities), subject to adjustment as provided in Article VII
hereof. Shares of Common Stock distributed under the Plan may be treasury shares
or authorized but unissued
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shares. To the extent that awards of Other ML & Co. Securities are convertible
into Common Stock or are otherwise equity securities (or convertible into equity
securities) of ML & Co., they shall be subject to the limitation expressed above
on the number of shares of Common Stock that can be awarded under the Plan. Any
shares of Common Stock that have been granted as Restricted Shares or that have
been reserved for distribution in payment for Performance Shares but are later
forfeited or for any other reason are not payable under the Plan may again be
made the subject of grants under the Plan. If any Stock Option, Stock
Appreciation Right, or Other ML & Co. Security granted under the Plan expires or
terminates, or any Stock Appreciation Right is paid out in cash, the underlying
shares of Common Stock may again be made the subject of grants under the Plan.
Units payable in cash that are later forfeited or for any reason are not payable
under the Plan may again be the subject of grants under the Plan.
Section 1.5 Eligibility and Participation.
Participation in the Plan shall be limited to officers (who may also be
members of the Board of Directors) and other salaried, key employees of the
Company.
ARTICLE II - PROVISIONS APPLICABLE TO PERFORMANCE SHARES AND PERFORMANCE UNITS.
Section 2.1 Performance Periods and Restricted Periods.
The Committee shall establish Performance Periods applicable to
Performance Shares and Performance Units and may establish Restricted Periods
applicable to Performance Shares, at its discretion. Each such Performance
Period shall commence with the beginning of a fiscal year in which the
Performance Shares and Performance Units are granted and have a duration of not
less than one nor more than ten consecutive fiscal years. Each such Restricted
Period shall commence with the end of the Performance Period established for
such Performance Shares and shall end on such date as may be determined by the
Committee at the time of grant. There shall be no limitation on the number of
Performance Periods or Restricted Periods established by the Committee, and more
than one Performance Period may encompass the same fiscal year.
Section 2.2 Performance Objectives.
At any time before or during a Performance Period, the Committee shall
establish one or more performance objectives for such Performance Period,
provided that such performance objectives shall be established prior to the
grant of any Performance Shares or Performance Units with respect to such
Period. Performance objectives shall be based on one or more measures such as
return on stockholders' equity, earnings, or any other standard deemed relevant
by the Committee, measured internally or relative to other organizations and
before or after extraordinary items, as may be determined by the Committee;
provided, however, that any such measure shall
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include all accruals for grants made under the Plan and for all other employee
benefit plans of the Company. The Committee may, in its discretion, establish
performance objectives for the Company as a whole or for only that part of the
Company in which a given Participant is involved, or a combination thereof. In
establishing the performance objective or objectives for a Performance Period,
the Committee shall determine both a minimum performance level, below which no
Performance Shares or Performance Units shall be payable, and a full performance
level, at or above which 100% of the Performance Shares or Performance Units
shall be payable. In addition, the Committee may, in its discretion, establish
intermediate levels at which given proportions of the Performance Shares or
Performance Units shall be payable. Such performance objectives shall not
thereafter be changed except as set forth in Sections 2.5 and 2.6 and Article
VII hereof.
Section 2.3 Grants of Performance Shares and Performance Units.
The Committee may select employees to become Participants subject to the
provisions of Section 1.5 hereof and grant Performance Shares or Performance
Units to such Participants at any time prior to or during the first fiscal year
of a Performance Period. Grants shall be deemed to have been made as of the
beginning of the first fiscal year of the Performance Period. Before making
grants, the Committee must receive the recommendations of the management of the
Company, which will take into account such factors as level of responsibility,
current and past performance, and performance potential. Subject to the
provisions of Section 2.7 hereof, a grant of Performance Shares or Performance
Units shall be effective for the entire applicable Performance Period and may
not be revoked. Each grant to a Participant shall be evidenced by a written
instrument stating the number of Performance Shares or Performance Units
granted, the Performance Period, the performance objective or objectives, the
proportion of payments for performance between the minimum and full performance
levels, if any, the Restricted Periods and restrictions applicable to shares of
Common Stock receivable in payment for Performance Shares, and any other terms,
conditions, and rights with respect to such grant. At the time of any grant of
Performance Shares, there shall be reserved out of the number of shares of
Common Stock authorized for distribution under the Plan a number of shares equal
to the number of Performance Shares so granted.
Section 2.4 Rights and Benefits During Performance Period.
The Committee may provide that, during a Performance Period, a Participant
shall be paid cash amounts, with respect to each Performance Share or
Performance Unit held by such Participant, in the same manner, at the same time,
and in the same amount paid, as a dividend on a share of Common Stock.
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Section 2.5 Adjustment with respect to Performance Shares and Performance
Units.
Any other provision of the Plan to the contrary notwithstanding, the
Committee may at any time adjust performance objectives (up or down) and minimum
or full performance levels (and any intermediate levels and proportion of
payments related thereto), adjust the way performance objectives are measured,
or shorten any Performance Period or Restricted Period, if it determines that
conditions, including but not limited to, changes in the economy, changes in
competitive conditions, changes in laws or governmental regulations, changes in
generally accepted accounting principles, changes in the Company's accounting
policies, acquisitions or dispositions, or the occurrence of other unusual,
unforeseen, or extraordinary events, so warrant.
Section 2.6 Payment of Performance Shares and Performance Units.
Within 90 days after the end of any Performance Period, the Company shall
determine the extent to which performance objectives established by the
Committee pursuant to Section 2.2 hereof for such Performance Period have been
met during such Performance Period and the resultant extent to which Performance
Shares or Performance Units granted for such Performance Period are payable.
Payment for Performance Shares and Performance Units shall be as follows:
(a) Performance Shares:
(i) If a Restricted Period has been established in relation to the
Performance Shares:
(A) At the end of the applicable Performance Period, one or
more certificates representing the number of shares of Common Stock equal to the
number of Performance Shares payable shall be registered in the name of the
Participant but shall be held by the Company for the account of the employee.
Such shares will be nonforfeitable but restricted as to transferability during
the applicable Restricted Period. During the Restricted Period, the Participant
shall have all rights of a holder as to such shares of Common Stock, including
the right to receive dividends, to exercise Rights, and to vote such Common
Stock and any securities issued upon exercise of Rights, subject to the
following restrictions: (1) the Participant shall not be entitled to delivery of
certificates representing such shares of Common Stock and any other such
securities until the expiration of the Restricted Period; and (2) none of such
shares of Common Stock or Rights may be sold, transferred, assigned, pledged, or
otherwise encumbered or disposed of during the Restricted Period. Any shares of
Common Stock or other securities or property received with respect to such
shares shall be subject to the same restrictions as such shares; provided,
however, that the Company shall not be required to register any fractional
shares of Common Stock payable to any Participant, but will pay the value of
such fractional shares, measured as set forth in Section 2.6(b) below, to the
Participant.
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(B) At the end of the applicable Restricted Period, all
restrictions applicable to the shares of Common Stock, and other securities or
property received with respect to such shares, held by the Company for the
accounts of recipients of Performance Shares granted in relation to such
Restricted Period shall lapse, and one or more stock certificates for such
shares of Common Stock and securities, free of the restrictions, shall be
delivered to the Participant, or such shares and securities shall be credited to
a brokerage account if the Participant so directs.
(ii) If a Restricted Period has not been established in relation to
the Performance Shares, at the end of the applicable Performance Period, one or
more stock certificates representing the number of shares of Common Stock equal
to the number of Performance Shares payable, free of restrictions, shall be
registered in the name of the Participant and delivered to the Participant, or
such shares shall be credited to a brokerage account if the Participant so
directs.
(b) Performance Units: At the end of the applicable Performance Period, a
Participant shall be paid a cash amount equal to the number of Performance Units
payable, times the mean of the Fair Market Value of Common Stock during the
second calendar month following the end of the Performance Period, unless some
other date or period is established by the Committee at the time of grant.
Section 2.7 Termination of Employment.
(a) Prior to the end of a Performance Period:
(i) Death: If a Participant ceases to be an employee of the Company
prior to the end of a Performance Period by reason of death, any outstanding
Performance Shares or Performance Units with respect to such Participant shall
become payable and be paid to such Participant's beneficiary or estate, as the
case may be, as soon as practicable in the manner set forth in Sections
2.6(a)(ii) and 2.6(b) hereof, respectively. In determining the extent to which
performance objectives established for such Performance Period have been met and
the resultant extent to which Performance Shares or Performance Units are
payable, the Performance Period shall be deemed to end as of the end of the
fiscal year in which the Participant's death occurred.
(ii) Disability or Retirement: The Disability or Retirement of a
Participant shall not constitute a termination of employment for purposes of
this Article II, and such Participant shall not forfeit any Performance Shares
or Performance Units held by him, provided that following Disability or
Retirement such Participant does not engage in or assist any business that the
Committee, in its sole discretion, determines to be in competition with business
engaged in by the Company during the remainder of the applicable Performance
Period. A Participant who does engage in or assist any business that the
Committee, in its sole discretion, determines to be in competition with
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business engaged in by the Company shall be deemed to have terminated
employment.
(iii) Other Terminations: If a Participant ceases to be an employee
prior to the end of a Performance Period for any reason other than death, the
Participant shall immediately forfeit all Performance Shares and Performance
Units previously granted under the Plan and all right to receive any payment for
such Performance Shares and Performance Units. The Committee may, however,
direct payment in accordance with the provisions of Section 2.6 hereof for a
number of Performance Shares or Performance Units, as it may determine, granted
under the Plan to a Participant whose employment has so terminated (but not
exceeding the number of Performance Shares or Performance Units that could have
been payable had the Participant remained an employee) if it finds that the
circumstances in the particular case so warrant. For purposes of the preceding
sentence, the Performance Period over which performance objectives shall be
measured shall be deemed to end as of the end of the fiscal year in which
termination occurred.
(b) After the end of a Performance Period but prior to the end of a
Restricted Period:
(i) Death, Disability, or Retirement: If a Participant ceases to be
an employee of the Company by reason of death or in the case of the Disability
or Retirement of a Participant, the Restricted Period shall be deemed to have
ended and shares held by the Company shall be paid as soon as practicable in the
manner set forth in Section 2.6(a)(i)(B).
(ii) Other Terminations: Terminations of employment for any reason
other than death after the end of a Performance Period but prior to the end of a
Restricted Period shall not have any effect on the Restricted Period, unless the
Committee, in its sole discretion, finds that the circumstances so warrant and
determines that the Restricted Period shall end on an earlier date as determined
by the Committee and that shares held by the Company shall be paid as soon as
practicable following such earlier date in the manner set forth in Section
2.6(a)(i)(B).
(c) Except as otherwise provided in this Section 2.7, termination of
employment after the end of a Performance Period but before the payment of
Performance Shares or Performance Units relating to such Performance Period
shall not affect the amount, if any, to be paid pursuant to Section 2.6 hereof.
Approved leaves of absence of one year or less shall not be deemed to be
terminations of employment under this Section 2.7. Leaves of absence of more
than one year will be deemed to be terminations of employment under this Section
2.7, unless the Committee determines otherwise.
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Section 2.8 Deferral of Payment.
The Committee may, in its sole discretion, offer a Participant the right,
by execution of a written agreement, to defer the receipt of all or any portion
of the payment, if any, for Performance Shares or Performance Units. If such an
election to defer is made, the Common Stock receivable in payment for
Performance Shares shall be deferred as stock units equal in number to and
exchangeable, at the end of the deferral period, for the number of shares of
Common Stock that would have been paid to the Participant. Such stock units
shall represent only a contractual right and shall not give the Participant any
interest, right, or title to any Common Stock during the deferral period. The
cash receivable in payment for Performance Units or fractional shares receivable
for Performance Shares shall be deferred as cash units. Deferred stock units and
cash units may be credited annually with the appreciation factor contained in
the deferred compensation agreement, which may include dividend equivalents. All
other terms and conditions of deferred payments shall be as contained in the
written agreement.
ARTICLE III - PROVISIONS APPLICABLE TO RESTRICTED SHARES AND RESTRICTED UNITS.
Section 3.1 Vesting Periods and Restricted Periods.
The Committee shall establish one or more Vesting Periods applicable to
Restricted Shares and Restricted Units and one or more Restricted Periods
applicable to Restricted Shares, at its discretion. Each such Vesting Period
shall have a duration of not less than 12 months, measured from the first day of
the month in which the grant of the applicable Restricted Shares or Restricted
Units is effective. Each such Restricted Period shall have a duration of 12 or
more consecutive months, measured from the first day of the month in which the
grant of the applicable Restricted Shares is effective, but in no event shall
any Restricted Period applicable to a Restricted Share be of shorter duration
than the Vesting Period applicable to such Restricted Share.
Section 3.2 Grants of Restricted Shares and Restricted Units.
The Committee may select employees to become Participants (subject to the
provisions of Section 1.5 hereof) and grant Restricted Shares or Restricted
Units to such Participants at any time. Before making grants, the Committee must
receive the recommendations of the management of the Company, which will take
into account such factors as level of responsibility, current and past
performance, and performance potential.
Subject to the provisions of Section 3.7 hereof, a grant of Restricted
Shares or Restricted Units shall be effective for the entire applicable Vesting
and Restricted Periods and may not be revoked. Each grant to a Participant shall
be evidenced by a written instrument stating the number of Restricted Shares
granted, the Vesting Period,
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the Restricted Period, the restrictions applicable to such Restricted Shares,
the nature and terms of payment of consideration, if any, and the consequences
of forfeiture that will apply to such Restricted Shares, and any other terms,
conditions, and rights with respect to such grant. Each grant to a Participant
of Restricted Units shall be evidenced by a written instrument stating the
number of Restricted Units granted, the Vesting Period, and all other terms,
conditions and rights with respect to such grant.
Section 3.3 Rights and Restrictions Governing Restricted Shares.
At the time of grant of Restricted Shares, subject to the receipt by the
Company of any applicable consideration for such Restricted Shares, one or more
certificates representing the appropriate number of shares of Common Stock
granted to a Participant shall be registered either in his name or for his
benefit either individually or collectively with others, but shall be held by
the Company for the account of the Participant. The Participant shall have all
rights of a holder as to such shares of Common Stock, including the right to
receive dividends, to exercise Rights, and to vote such Common Stock and any
securities issued upon exercise of Rights, subject to the following
restrictions: (a) the Participant shall not be entitled to delivery of
certificates representing such shares of Common Stock and any other such
securities until the expiration of the Restricted Period; (b) none of the
Restricted Shares may be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restricted Period; and (c) all of the
Restricted Shares shall be forfeited and all rights of the Participant to such
Restricted Shares shall terminate without further obligation on the part of the
Company unless the Participant remains in the continuous employment of the
Company for the entire Vesting Period in relation to which such Restricted
Shares were granted, except as otherwise allowed by Section 3.7 hereof. Any
shares of Common Stock or other securities or property received with respect to
such shares shall be subject to the same restrictions as such Restricted Shares.
Section 3.4 Rights Governing Restricted Units.
During the Vesting Period for Restricted Units, a Participant shall be
paid, with respect to each Restricted Unit to which such Vesting Period is
applicable, cash amounts in the same manner, at the same time, and in the same
amount paid, as a dividend on a share of Common Stock.
Section 3.5 Adjustment with respect to Restricted Shares and Restricted
Units.
Any other provision of the Plan to the contrary notwithstanding, the
Committee may at any time shorten any Vesting Period or Restricted Period, if it
determines that conditions, including but not limited to, changes in the
economy, changes in competitive conditions, changes in laws or governmental
regulations, changes in generally accepted accounting principles, changes in the
Company's accounting
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policies, acquisitions or dispositions, or the occurrence of other unusual,
unforeseen, or extraordinary events, so warrant.
Section 3.6 Payment of Restricted Shares and Restricted Units.
(a) Restricted Shares: At the end of the Restricted Period, all
restrictions contained in the Restricted Share Agreement and in the Plan shall
lapse as to Restricted Shares granted in relation to such Restricted Period, and
one or more stock certificates for the appropriate number of shares of Common
Stock, free of restrictions, shall be delivered to the Participant or such
shares shall be credited to a brokerage account if the Participant so directs.
(b) Restricted Units: At the end of the Vesting Period applicable to
Restricted Units granted to a Participant, a cash amount equivalent in value to
the Fair Market Value of one share of Common Stock on the last day of the
Vesting Period, or during such period as is established by the Committee at the
time of grant, shall be paid, with respect to each such Restricted Unit, to the
Participant, or his beneficiary or estate, as the case may be.
Section 3.7 Termination of Employment.
(a) Prior to the end of a Vesting Period:
(i) Death: If a Participant ceases to be an employee of the Company
prior to the end of a Vesting Period by reason of death, all Restricted Shares
and Restricted Units granted to such Participant are immediately payable as set
forth in Section 3.6.
(ii) Disability or Retirement: The Disability or Retirement of a
Participant shall not constitute a termination of employment for purposes of
this Article III and such Participant shall not forfeit any Restricted Shares or
Restricted Units held by him, provided that, during the remainder of the
applicable Vesting Period, such Participant does not engage in or assist any
business that the Committee, in its sole discretion, determines to be in
competition with business engaged in by the Company. A Participant who does
engage in or assist any business that the Committee in its sole discretion,
determines to be in competition with business engaged in by the Company shall be
deemed to have terminated employment.
(iii) Other Terminations: If a Participant ceases to be an employee
prior to the end of a Vesting Period for any reason other than death, the
Participant shall immediately forfeit all Restricted Shares and Restricted Units
previously granted with respect to such Vesting Period in accordance with the
provisions of Section 3.2 hereof, unless the Committee, in its sole discretion,
finds that the circumstances in the particular case so warrant and allows a
Participant whose employment has so
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terminated to retain any or all of the Restricted Shares or Restricted Units
granted to such Participant.
(b) After the end of a Vesting Period but prior to the end of a Restricted
Period:
(i) Death, Disability, or Retirement: If a Participant ceases to be
an employee of the Company by reason of death, or in the case of the Disability
or Retirement of a Participant, prior to the end of a Restricted Period, all
Restricted Shares granted to such Participant are immediately payable in the
manner set forth in Section 3.6.
(ii) Other Terminations: Terminations of employment for any reason
other than death after the end of a Vesting Period but prior to the end of a
Restricted Period shall not have any effect on the Restricted Period, unless the
Committee, in its sole discretion, finds that the circumstances so warrant and
determines that the Restricted Period shall end on an earlier date as determined
by the Committee and that shares held by the Company shall be paid as soon as
practicable following such earlier date in the manner set forth in Section 3.6.
(c) Approved leaves of absence of one year or less shall not be deemed to
be terminations of employment under this Section 3.7. Leaves of absence of more
than one year will be deemed to be terminations of employment under this Section
3.7, unless the Committee determines otherwise.
Section 3.8 Extension of Vesting; Deferral of Payment.
The Committee may, in its sole discretion, offer any Participant the
right, by execution of a written agreement with ML & Co. containing such terms
and conditions as the Committee shall in its sole discretion provide for, to
extend the Vesting Period applicable to all or any portion of such Participant's
Restricted Shares or Restricted Units, to convert all or any portion of such
Participant's Restricted Shares into Restricted Units or to defer the receipt of
all or any portion of the payment, if any, for such Participant's Restricted
Units (including any Restricted Shares converted into Restricted Units). In the
event that any Vesting Period with respect to Restricted Shares is extended
pursuant to this Section 3.8, the Restricted Period with respect to such
Restricted Shares shall be extended to the same date. The provisions of any
written agreement with a Participant pursuant to this Section 3.8 may provide
for the payment or crediting of interest, an appreciation factor or index or
dividend equivalents, as appropriate.
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ARTICLE IV - PROVISIONS APPLICABLE TO STOCK OPTIONS.
Section 4.1 Grants of Stock Options.
The Committee may select employees to become Participants (subject to
Section 1.5 hereof) and grant Stock Options to such Participants at any time;
provided, however, that Incentive Stock Options shall be granted within 10 years
of the earlier of the date the Plan is adopted by the Board or approved by the
stockholders. Before making grants, the Committee must receive the
recommendations of the management of the Company, which will take into account
such factors as level of responsibility, current and past performance, and
performance potential. Subject to the provisions of the Plan, the Committee
shall also determine the number of shares of Common Stock to be covered by each
Stock Option. The Committee shall have the authority, in its discretion, to
grant "Incentive Stock Options" or "Nonqualified Stock Options," or to grant
both types of Stock Options. Furthermore, the Committee may grant a Stock
Appreciation Right in connection with a Stock Option, as provided in Article V.
Section 4.2 Option Documentation.
Each Stock Option granted under the Plan shall be evidenced by written
documentation containing such terms and conditions as the Committee may deem
appropriate and are not inconsistent with the provisions of the Plan.
Section 4.3 Exercise Price.
The Committee shall establish the exercise price at the time any Stock
Option is granted at such amount as the Committee shall determine, except that
such exercise price shall not be less than 50% of the Fair Market Value of the
underlying shares of Common Stock on the day a Stock Option is granted and that,
with respect to an Incentive Stock Option, such exercise price shall not be less
than 100% of the Fair Market Value of the underlying shares of Common Stock on
the day such Incentive Stock Option is granted. The exercise price will be
subject to adjustment in accordance with the provisions of Article VII of the
Plan.
Section 4.4 Exercise of Stock Options.
(a) Exercisability: Stock Options shall become exercisable at such
times and in such installments as the Committee may provide at the time of
grant. The Committee may, however, in its sole discretion accelerate the time at
which a Stock Option or installment may be exercised. A Stock Option may be
exercised at any time from the time first set by the Committee until the close
of business on the expiration date of the Stock Option. Notwithstanding the
foregoing, in no event may a Participant, or a Participant's transferee pursuant
to Section 4.4(d), exercise a Stock Option during the 12-month period following
a hardship withdrawal by the Participant of Elective
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401(k) Deferrals as defined under the Merrill Lynch & Co., Inc. 401(k) Savings &
Investment Plan.
(b) Option Period: For each Stock Option granted, the Committee
shall specify the period during which the Stock Option may be exercised,
provided that no Stock Option shall be exercisable after the expiration of 10
years from the date of grant of such Stock Option.
(c) Exercise in the Event of Termination of Employment:
(i) Death: If a Participant ceases to be an employee of the Company by
reason of death prior to the exercise or expiration of Stock Options granted to
him and outstanding on the date of death, such Stock Options may be exercised to
the full extent not yet exercised, regardless of whether or not then fully
exercisable under the terms of the grant or under the terms of Section 4.4(a)
hereof, by his estate or beneficiaries, as the case may be, if such Stock
Options are outstanding in his name, or by his transferee pursuant to Section
4.4(d) or such transferee's estate or beneficiaries, if such Stock Options are
outstanding in the name of such transferee, at any time and from time to time,
but in no event after the expiration date of such Stock Option.
(ii) Disability or Retirement: The Disability or Retirement of a
Participant shall not constitute a termination of employment for purposes of
this Article IV, provided that following Disability or Retirement such
Participant does not engage in or assist any business that the Committee in its
sole discretion, determines to be in competition with business engaged in by the
Company. A Participant who does engage in or assist any business that the
Committee in its sole discretion, determines to be competition with business
engaged in by the Company shall be deemed to have terminated employment. In the
case of Incentive Stock Options, Disability shall be as defined in Code Section
22(e)(3).
(iii) Other Terminations: If a Participant ceases to be an employee prior
to the exercise or expiration of a Stock Option for any reason other than death,
all outstanding Stock Options granted to such Participant, whether outstanding
in his name or in the name of another person as a result of a transfer in
accordance with Section 4.4(d), shall expire on the date of such termination of
employment, unless the Committee, in its sole discretion, finds that the
circumstances in the particular case so warrant and determines that the
Participant, his transferee pursuant to Section 4.4(d) or such transferee's
estate or beneficiaries, may exercise any such outstanding Stock Option (to the
extent that any such outstanding Stock Option could have been exercised at the
date of such termination of employment) at any time and from time to time within
up to 5 years after such termination of employment but in no event after the
expiration date of such Stock Option (the "Extended Period"). If a Participant
dies during the Extended Period and prior to the exercise or expiration of a
Stock Option, his estate or beneficiaries, as the case may be, if such Stock
Option is outstanding in his
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name, or his transferee pursuant to Section 4.4(d) or such transferee's estate
or beneficiaries, if such Stock Option is outstanding in the name of such
transferee, may exercise such Stock Option (to the extent such Stock Option
could have been exercised at the date of termination of employment) at any time
and from time to time, but in no event after the end of the Extended Period.
(d) Limitations on Transferability: Stock Options are not transferable by
a Participant except by will or the laws of descent and distribution and are
exercisable during his lifetime only by him; provided, however, that the
Committee shall have the authority, in its discretion, to grant (or to sanction
by way of amendment of an existing grant) Stock Options which may be transferred
by the Participant during his lifetime to any member of his immediate family or
to a trust, limited liability corporation, family limited partnership or other
equivalent vehicle, established for the exclusive benefit of one or more members
of his immediate family, in which case the written documentation containing the
terms and conditions of such Stock Options shall so state. A transfer of a Stock
Option pursuant to this subparagraph may only be effected by the Corporation at
the written request of a Participant and shall become effective only when
recorded in the Corporation's record of outstanding Stock Options. In the event
a Stock Option is transferred as contemplated in this subparagraph, such Stock
Option may not be subsequently transferred by the transferee except by will or
the laws of descent and distribution. In the event a Stock Option is transferred
as contemplated in this subparagraph, such Stock Option shall continue to be
governed by and subject to the terms and limitations of the Plan and the
relevant grant, and the transferee shall be entitled to the same rights as the
Participant under Articles VII, VIII and X hereof, as if no transfer had taken
place. As used in this subparagraph, "immediate family" shall mean, with respect
to any person, any child, stepchild or grandchild, and shall include
relationships arising from legal adoption.
Section 4.5 Payment of Purchase Price and Tax Liability Upon Exercise;
Delivery of Shares.
(a) Payment of Purchase Price: The purchase price of the shares as to
which a Stock Option is exercised shall be paid to the Company at the time of
exercise (i) in cash, (ii) by delivering freely transferable shares of Common
Stock already owned by the person exercising the Stock Option having a total
Fair Market Value on the date of exercise equal to the purchase price, (iii) a
combination of cash and shares of Common Stock equal in value to the exercise
price, or (iv) by such other means as the Committee, in its sole discretion, may
determine.
(b) Payment of Taxes: Upon exercise, a Participant may elect to satisfy
any federal, state or local taxes required by law to be withheld that arise as a
result of the exercise of a Stock Option by directing the Company to withhold
from the shares of Common Stock otherwise deliverable upon the exercise of such
Stock Option, such number of shares as shall have a total Fair Market Value, on
the date of exercise, at least equal to the amount of tax to be withheld.
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(c) Delivery of Shares: Upon receipt by the Company of the purchase price,
stock certificate(s) for the shares of Common Stock as to which a Stock Option
is exercised (net of any shares withheld pursuant to Section 4.5(b) above) shall
be delivered to the person in whose name the Stock Option is outstanding or such
person's estate or beneficiaries, as the case may be, or such shares shall be
credited to a brokerage account or otherwise delivered, in such manner as such
person or such person's estate or beneficiaries, as the case may be, may direct.
Section 4.6 Limitation on Fair Market Value of Shares of Common Stock
Received upon Exercise of Incentive Stock Options.
The aggregate Fair Market Value (determined at the time an Incentive Stock
Option is granted) of the shares of Common Stock with respect to which an
Incentive Stock Option is exercisable for the first time by a Participant during
any calendar year (under all plans of the Company) shall not exceed $100,000 or
such other limit as may be established from time to time under the Code.
ARTICLE V - PROVISIONS APPLICABLE TO STOCK APPRECIATION RIGHTS.
Section 5.1 Grants of Stock Appreciation Rights.
The Committee may select employees to become Participants (subject to the
provisions of Section 1.5 hereof) and grant Stock Appreciation Rights to such
Participants at any time. Before making grants, the Committee must receive the
recommendations of the management of the Company, which will take into account
such factors as level of responsibility, current and past performance, and
performance potential. The Committee shall have the authority to grant Stock
Appreciation Rights in connection with a Stock Option or independently. The
Committee may grant Stock Appreciation Rights in connection with a Stock Option,
either at the time of grant or by amendment, in which case each such right shall
be subject to the same terms and conditions as the related Stock Option and
shall be exercisable only at such times and to such extent as the related Stock
Option is exercisable. A Stock Appreciation Right granted in connection with a
Stock Option shall entitle the holder to surrender to the Company the related
Stock Option unexercised, or any portion thereof, and receive from the Company
in exchange therefor an amount equal to the excess of the Fair Market Value of
one share of the Common Stock on the day preceding the surrender of such Stock
Option over the Stock Option exercise price times the number of shares
underlying the Stock Option, or portion thereof, that is surrendered. A Stock
Appreciation Right granted independently of a Stock Option shall entitle the
holder to receive upon exercise an amount equal to the excess of the Fair Market
Value of one share of Common Stock on the day preceding the exercise of the
Stock Appreciation Right over the Fair Market Value of one share of Common Stock
on the date such Stock Appreciation Right was granted, or such other price
determined by the Committee at the time of grant, which shall in no event be
less than 50% of the Fair Market Value of one share of Common Stock on the date
such Stock Appreciation
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Right was granted. Stock Appreciation Rights are not transferable by a
Participant except by will or the laws of descent and distribution and are
exercisable during his lifetime only by him.
Section 5.2 Stock Appreciation Rights Granted in Connection with
Incentive Stock Options.
(a) Stock Appreciation Rights granted in connection with Incentive Stock
Options must expire no later than the last date the underlying Incentive Stock
Option can be exercised.
(b) Such Stock Appreciation Rights may be granted for no more than 100% of
the difference between the exercise price of the underlying Incentive Stock
Option and the Fair Market Value of the Common Stock subject to the underlying
Incentive Stock Option at the time the Stock Appreciation Right is exercised.
(c) Such Stock Appreciation Rights are transferable only to the extent and
at the same time and under the same conditions as the underlying Incentive Stock
Options.
(d) Such Stock Appreciation Rights may be exercised only when the
underlying Incentive Stock Options may be exercised.
(e) Such Stock Appreciation Rights may be exercised only when the Fair
Market Value of the shares of Common Stock subject to the Incentive Stock
Options exceeds the exercise price of the Incentive Stock Options.
Section 5.3 Payment Upon Exercise of Stock Appreciation Rights.
The Company's obligation to any Participant exercising a Stock
Appreciation Right may be paid in cash or shares of Common Stock, or partly in
cash and partly in shares, at the sole discretion of the Committee.
Section 5.4 Termination of Employment.
(a) Death: If a Participant ceases to be an employee of the Company prior
to the exercise or expiration of a Stock Appreciation Right outstanding in his
name on the date of death, such Stock Appreciation Right may be exercised to the
full extent not yet exercised, regardless of whether or not then fully
exercisable under the terms of the grant, by his estate or beneficiaries, as the
case may be, at any time and from time to time within l2 months after the date
of death but in no event after the expiration date of such Stock Appreciation
Right.
(b) Disability: The Disability of a Participant shall not constitute a
termination of employment for purposes of this Article IV, provided that
following the Disability such
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Participant does not engage in or assist any business that the Committee, in its
sole discretion, determines to be in competition with business engaged in by the
Company. A Participant who does engage in or assist any business that the
Committee, in its sole discretion, determines to be in competition with business
engaged in by the Company shall be deemed to have terminated employment.
(c) Retirement: The Retirement of a Participant shall not constitute a
termination of employment for purposes of this Article IV, provided that
following Retirement such Participant does not engage in or assist any business
that the Committee, in its sole discretion, determines to be in competition with
business engaged in by the Company, and such Participant may exercise any Stock
Appreciation Right outstanding in his name at any time and from time to time
within 5 years after the date his Retirement commenced but in no event after the
expiration date of such Stock Appreciation Right. A Participant who does engage
in or assist any business that the Committee, in its sole discretion, determines
to be in competition with business engaged in by the Company shall be deemed to
have terminated employment.
(d) Other Terminations: If a Participant ceases to be an employee prior to
the exercise or expiration of a Stock Appreciation Right for any reason other
than death, all outstanding Stock Appreciation Rights granted to such
Participant shall expire on the date of such termination of employment, unless
the Committee, in its sole discretion, determines that he may exercise any such
outstanding Stock Appreciation Right (to the extent that he was entitled to do
so at the date of such termination of such employment) at any time and from time
to time within up to 5 years after such termination of employment but in no
event after the expiration date of such Stock Appreciation Right.
ARTICLE VI - PROVISIONS APPLICABLE TO OTHER ML & CO. SECURITIES.
Section 6.1 Grants of Other ML & Co. Securities.
Subject to the provisions of the Plan and any necessary action by the
Board of Directors, the Committee may select employees to become Participants
(subject to the provisions of Section 1.5 hereof) and grant to Participants
Other ML & Co. Securities or the right or option to purchase Other ML & Co.
Securities on such terms and conditions as the Committee shall determine,
including, without limitation, the period such rights or options may be
exercised, the nature and terms of payment of consideration for such Other ML &
Co. Securities, whether such Other ML & Co. Securities shall be subject to any
or all of the provisions of Article III of the Plan applicable to Restricted
Shares and/or Restricted Units, the consequences of termination of employment,
and the terms and conditions, if any, upon which such Other ML & Co. Securities
may or must be repurchased by the Company. Before making grants, the Committee
must receive the recommendations of the management of the Company, which will
take into account such factors as level of responsibility, current and past
performance, and performance potential. Each such Other ML & Co. Security shall
be issued at a price that will not
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exceed the Fair Market Value thereof on the date the corresponding right or
option is granted. Other ML & Co. Securities may bear interest or pay dividends
from such date and at a rate or rates or pursuant to a formula or formulas fixed
by the Committee or any necessary action of the Board. Any applicable conversion
or exchange rate with respect to Other ML & Co. Securities shall be fixed by, or
pursuant to a formula determined by, the Committee or any necessary action of
the Board at each date of grant and may be predicated upon the attainment of
financial or other performance goals.
Section 6.2 Terms and Conditions of Conversion or Exchange.
Each Other ML & Co. Security may be convertible or exchangeable on such
date and within such period of time as the Committee, or the Board if necessary,
determines at the time of grant. Other ML & Co. Securities may be convertible
into or exchangeable for (i) shares of Preferred Stock of ML & Co. or (ii) other
securities of ML & Co. or any present or future subsidiary of ML & Co., whether
or not convertible into shares of Common Stock, as the Committee, or the Board
if necessary, determines at the time of grant (or at any time prior to the
conversion or exchange date).
ARTICLE VII - CHANGES IN CAPITALIZATION.
Any other provision of the Plan to the contrary notwithstanding, if any
change shall occur in or affect shares of Common Stock or Performance Units,
Restricted Units, Stock Options, Stock Appreciation Rights, or Other ML & Co.
Securities on account of a merger, consolidation, reorganization, stock
dividend, stock split or combination, reclassification, recapitalization, or
distribution to holders of shares of Common Stock (other than cash dividends)
including, without limitation, a merger or other reorganization event in which
the shares of Common Stock cease to exist, or, if in the opinion of the
Committee, after consultation with the Company's independent public accountants,
changes in the Company's accounting policies, acquisitions, divestitures,
distributions, or other unusual or extraordinary items have disproportionately
and materially affected the value of shares of Common Stock or Performance
Units, Restricted Units, Stock Options, Stock Appreciation Rights, or Other ML &
Co. Securities, the Committee shall make such adjustments, if any, that it may
deem necessary or equitable in (a) the maximum number of shares of Common Stock
available for distribution under the Plan; (b) the number of shares subject to
or reserved for issuance under outstanding Performance Share, Restricted Share,
and Stock Option grants; (c) the performance objectives for the Performance
Periods not yet completed, including the minimum, intermediate, and full
performance levels and portion of payments related thereto; and (d) any other
terms or provisions of any outstanding grants of Performance Shares, Performance
Units, Restricted Shares, Restricted Units, Stock Options, Stock Appreciation
Rights, or Other ML & Co. Securities, in order to preserve the full benefits of
such grants for the Participants, taking into account inflation, interest rates,
and any other factors that the Committee, in its sole discretion, considers
relevant. In the event of a change in the presently
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authorized shares of Common Stock that is limited to a change in the designation
thereof or a change of authorized shares with par value into the same number of
shares with a different par value or into the same number of shares without par
value, the shares resulting from any such change shall be deemed to be shares of
Common Stock within the meaning of the Plan. In the event of any other change
affecting the shares of Common Stock, Performance Units, Restricted Units, Stock
Options, Stock Appreciation Rights, or Other ML & Co. Securities, such
adjustment shall be made as may be deemed equitable by the Committee to give
proper effect to such event.
ARTICLE VIII - PAYMENTS UPON TERMINATION OF EMPLOYMENT AFTER A CHANGE IN
CONTROL.
Section 8.1 Value of Payments Upon Termination After a Change in
Control.
Any other provision of the Plan to the contrary notwithstanding and
notwithstanding any election to the contrary previously made by the Participant,
in the event a Change in Control shall occur and thereafter the Company shall
terminate the Participant's employment without Cause or the Participant shall
terminate his employment with the Company for Good Reason, the Participant shall
be paid the value of his Performance Shares, Performance Units, Restricted
Shares, Restricted Units, Stock Options, Stock Appreciation Rights, and Other ML
& Co. Securities in a lump sum in cash, promptly after termination of his
employment but, without limiting the foregoing, in no event later than 30 days
thereafter. Payments shall be calculated as set forth below:
(a) Performance Shares and Performance Units.
Any payment for Performance Shares and Performance Units pursuant to this
Section 8.1(a) shall be calculated by applying performance objectives for any
outstanding Performance Shares and Performance Units as if the applicable
Performance Period and any applicable Restricted Period had ended on the first
day of the month in which the Participant's employment is terminated. The amount
of any payment to a Participant pursuant to this Section 8.1(a) shall be reduced
by the amount of any payment previously made to the Participant with respect to
the Performance Shares and Performance Units, exclusive of ordinary dividend
payments, resulting by operation of law from the Change in Control, including,
without limitation, payments resulting from a merger pursuant to state law. The
value of the Performance Shares and Performance Units payable pursuant to this
Section 8.1(a) shall be the amount equal to the number of Performance Shares and
Performance Units payable in accordance with the preceding sentence multiplied
by the Fair Market Value of a share of Common Stock on the day the Participant's
employment is terminated or, if higher, the highest Fair Market Value of a share
of the Common Stock on any day during the 90-day period ending on the date of
the Change in Control (the "Pre-CIC Value").
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(b) Restricted Shares and Restricted Units.
Any payment under this Section 8.1(b) shall be calculated as if all the
relevant Vesting and Restricted Periods had been fully completed immediately
prior to the date on which the Participant's employment is terminated. The
amount of any payment to a Participant pursuant to this Section 8.1(b) shall be
reduced by the amount of any payment previously made to the Participant with
respect to the Restricted Shares and Restricted Units, exclusive of ordinary
dividend payments, resulting by operation of law from the Change in Control,
including, without limitation, payments resulting from a merger pursuant to
state law. The value of the Participant's Restricted Shares and Restricted Units
payable pursuant to this Section 8.1(b) shall be the amount equal to the number
of the Restricted Shares and Restricted Units outstanding in a Participant's
name multiplied by the Fair Market Value of a share of Common Stock on the day
the Participant's employment is terminated or, if higher, the Pre-CIC Value.
(c) Stock Options and Stock Appreciation Rights.
Any payment for Stock Options and Stock Appreciation Rights pursuant to
this Section 8.1(c) shall be calculated as if all such Stock Options and Stock
Appreciation Rights, regardless of whether or not then fully exercisable under
the terms of the grant, became exercisable immediately prior to the date on
which the Participant's employment is terminated. The amount of any payment to a
Participant pursuant to this Section 8.1(c) shall be reduced by the amount of
any payment previously made to a Participant with respect to the Stock Options
and Stock Appreciation Rights, exclusive of any ordinary dividend payments,
resulting by operation of law from the Change in Control, including, without
limitation, payments resulting from a merger pursuant to state law. The value of
the Participant's Stock Options and Stock Appreciation Rights payable pursuant
to this Section 8.1(c) shall be
(i) in the case of a Stock Option, for each underlying share
of Common Stock, the excess of the Fair Market Value of a share of
Common Stock on the day the Participant's employment is terminated,
or, if higher, the Pre-CIC Value, over the per share exercise price
for such Stock Option;
(ii) in the case of a Stock Appreciation Right granted in
tandem with a Stock Option, the Fair Market Value of a share of
Common Stock on the day the Participant's employment is terminated,
or, if higher, the Pre-CIC Value, over the Stock Option exercise
price; and
(iii) in the case of a Stock Appreciation Right granted
independently of a Stock Option, the Fair Market Value of a share of
Common Stock on the day the Participant's employment is terminated,
or, if higher, the Pre-CIC Value, over the Fair Market Value of one
share of
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Common Stock on the date such Stock Appreciation Right was granted,
or such other price determined by the Committee at the time of
grant.
(d) Other ML & Co. Securities.
Any payment for Other ML & Co. Securities under this Section 8.1(d) shall
be calculated as if any relevant Vesting or Restricted Periods or other
applicable conditions dependent on the passage of time and relating to the
exercisability of any right or option to purchase Other ML & Co. Securities, or
relating to the full and unconditional ownership of such Other ML & Co.
Securities themselves, had been met on the first day of the month in which the
Participant's employment is terminated. The amount of any payment to a
Participant pursuant to this Section 8.1(d) shall be reduced by the amount of
any payment previously made to the Participant with respect to the Other ML &
Co. Securities, exclusive of ordinary dividend payments, resulting by operation
of law from the Change in Control, including, without limitation, payments
resulting from a merger pursuant to state law. The value of the Participant's
Other ML & Co. Securities payable pursuant to this Section 8.1(d) shall be
(i) in the case of an option or right to purchase such Other
ML & Co. Security, for each underlying Other ML & Co. Security, the
excess of the Fair Market Value of such Other ML & Co. Security on
the day the Participant's employment is terminated, or, if higher,
the Pre-CIC Value, over the exercise price of such option or right;
and
(ii) in the case of the Other ML & Co. Security itself (where
there is no outstanding option or right relating to such Other ML &
Co. Security), the Fair Market Value of the Other ML & Co. Security
on the day the Participant's employment is terminated, or, if
higher, the Pre-CIC Value.
Section 8.2 A Change in Control.
A "Change in Control" shall mean a change in control of ML & Co. of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, a Change in Control shall be deemed to have occurred if:
(a) any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity, or any syndicate or group deemed to
be a person under Section 14(d)(2) of the Exchange Act, other than the Company's
employee stock ownership plan, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 of the General Rules and Regulations under the Exchange Act),
directly or indirectly, of securities of ML & Co. representing 30% or more of
the combined voting
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power of ML & Co.'s then outstanding securities entitled to vote in the election
of directors of ML & Co.;
(b) during any period of two consecutive years (not including any period
prior to the Effective Date of this Plan) individuals who at the beginning of
such period constituted the Board of Directors and any new directors, whose
election by the Board of Directors or nomination for election by the
stockholders of ML & Co. was approved by a vote of at least three quarters of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof; or
(c) all or substantially all of the assets of ML & Co. are liquidated or
distributed.
Section 8.3 Effect of Agreement Resulting in Change in Control.
If ML & Co. executes an agreement, the consummation of which would result
in the occurrence of a Change in Control as described in Section 8.2, then, with
respect to a termination of employment without Cause or for Good Reason
occurring after the execution of such agreement (and, if such agreement expires
or is terminated prior to consummation, prior to such expiration or termination
of such agreement), a Change in Control shall be deemed to have occurred as of
the date of the execution of such agreement.
Section 8.4 Termination for Cause.
Termination of the Participant's employment by the Company for "Cause"
shall mean termination upon:
(a) the willful and continued failure by the Participant substantially to
perform his duties with the Company (other than any such failure resulting from
the Participant's incapacity due to physical or mental illness or from the
Participant's Retirement or any such actual or anticipated failure resulting
from termination by the Participant for Good Reason) after a written demand for
substantial performance is delivered to him by the Board of Directors, which
demand specifically identifies the manner in which the Board of Directors
believes that he has not substantially performed his duties; or
(b) the willful engaging by the Participant in conduct that is
demonstrably and materially injurious to the Company, monetarily or otherwise.
No act or failure to act by the Participant shall be deemed "willful"
unless done, or omitted to be done, by the Participant not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company.
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Notwithstanding the foregoing, the Participant shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to
him a copy of a resolution duly adopted by the affirmative vote of not less than
three quarters of the entire membership of the Board of Directors at a meeting
of the Board called and held for such purpose (after reasonable notice to the
Participant and an opportunity for him, together with counsel, to be heard
before the Board of Directors), finding that, in the good faith opinion of the
Board of Directors, the Participant was guilty of conduct set forth above in
clause (a) or (b) of the first sentence of this Section 8.4 and specifying the
particulars thereof in detail.
Section 8.5 Good Reason.
"Good Reason" shall mean the Participant's termination of his employment
with the Company if, without the Participant's written consent, any of the
following circumstances shall occur:
(a) Inconsistent Duties. A meaningful and detrimental alteration in the
Participant's position or in the nature or status of his responsibilities
(including those as a director of ML & Co., if any) from those in effect
immediately prior to the Change in Control;
(b) Reduced Salary or Bonus Opportunity. A reduction by the Company in the
Participant's annual base salary as in effect immediately prior to the Change in
Control; a failure by the Company to increase the Participant's salary at a rate
commensurate with that of other key executives of the Company; or a reduction in
the Participant's annual cash bonus below the greater of (i) the annual cash
bonus that he received, or to which he was entitled, immediately prior to the
Change in Control, or (ii) the average annual cash bonus paid to the Participant
by the Company for the three years preceding the year in which the Change in
Control occurs;
(c) Relocation. The relocation of the office of the Company where the
Participant is employed at the time of the Change in Control (the "CIC
Location") to a location that in his good faith assessment is an area not
generally considered conducive to maintaining the executive offices of a company
such as ML & Co. because of hazardous or undesirable conditions including
without limitation a high crime rate or inadequate facilities, or to a location
that is more than twenty-five (25) miles away from the CIC Location or the
Company's requiring the Participant to be based more than twenty-five (25) miles
away from the CIC Location (except for required travel on the Company's business
to an extent substantially consistent with his customary business travel
obligations in the ordinary course of business prior to the Change in Control);
(d) Compensation Plans. The failure by the Company to continue in effect
any compensation plan in which the Participant participates, including but not
limited to this Plan, the Company's retirement program, Employee Stock Purchase
Plan, 1978
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Incentive Equity Purchase Plan, Equity Capital Accumulation Plan, Canadian
Capital Accumulation Plan, Management Capital Accumulation Plan, limited
partnership offerings, cash incentive compensation or any other plans adopted
prior to the Change in Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such plan
in connection with the Change in Control, or the failure by the Company to
continue the Participant's participation therein on at least as favorable a
basis, both in terms of the amount of benefits provided and the level of his
participation relative to other Participants, as existed immediately prior to
the Change in Control;
(e) Benefits and Perquisites. The failure of the Company to continue to
provide the Participant with benefits at least as favorable as those enjoyed by
the Participant under any of the Company's retirement, life insurance, medical,
health and accident, disability, deferred compensation or savings plans in which
the Participant was participating immediately prior to the Change in Control;
the taking of any action by the Company that would directly or indirectly
materially reduce any of such benefits or deprive the Participant of any
material fringe benefit enjoyed by him immediately prior to the Change in
Control, including, without limitation, the use of a car, secretary, office
space, telephones, expense reimbursement, and club dues; or the failure by the
Company to provide the Participant with the number of paid vacation days to
which the Participant is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation policy in effect
immediately prior to the Change in Control;
(f) No Assumption by Successor. The failure of ML & Co. to obtain a
satisfactory agreement from any successor to assume and agree to perform a
Participant's employment agreement as contemplated thereunder or, if the
business of the Company for which his services are principally performed is sold
at any time after a Change in Control, the purchaser of such business shall fail
to agree to provide the Participant with the same or a comparable position,
duties, compensation, and benefits as provided to him by the Company immediately
prior to the Change in Control.
Section 8.6 Effect on Plan Provisions.
In the event of a Change in Control, no changes in the Plan, or in any
documents evidencing grants of Performance Shares, Performance Units, Restricted
Shares, Restricted Units, Stock Options, Stock Appreciation Rights, or Other ML
& Co. Securities and no adjustments, determinations or other exercises of
discretion by the Committee or the Board of Directors, that were made subsequent
to the Change in Control and that would have the effect of diminishing a
Participant's rights or his payments under the Plan or this Article shall be
effective, including, but not limited to, any changes, determinations or other
exercises of discretion made to or pursuant to the Plan. Once a Participant has
received a payment pursuant to this Article VIII, shares of Common Stock that
were reserved for issuance in connection with any Performance Shares, Restricted
Shares, Stock Options, or Other ML & Co. Securities for which
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payment is made shall no longer be reserved and shares of Common Stock that are
Restricted Shares or that are restricted and held by the Company pursuant to
Section 2.6(a)(i), for which payment has been made, shall no longer be
registered in the name of the Participant and shall again be available for
grants under the Plan. If the Participant's employment is terminated without
Cause or for Good Reason after a Change in Control, any election to defer
payment for Performance Shares or Performance Units pursuant to Section 2.8
hereof or Restricted Shares or Restricted Units pursuant to Section 3.8 hereof
shall be null and void.
ARTICLE IX - MISCELLANEOUS.
Section 9.1 Designation of Beneficiary.
A Participant, or the transferee of a Stock Option pursuant to
Section 4.4(d), may designate, in a writing delivered to ML & Co. before his
death, a person or persons to receive, in the event of his death, any rights to
which he would be entitled under the Plan. A Participant or Stock Option
transferee, may also designate an alternate beneficiary to receive payments if
the primary beneficiary does not survive the Participant or Stock Option
transferee. A Participant or Stock Option transferee may designate more than one
person as his beneficiary or alternate beneficiary, in which case such persons
would receive payments as joint tenants with a right of survivorship. A
beneficiary designation may be changed or revoked by a Participant or Stock
Option transferee at any time by filing a written statement of such change or
revocation with the Company. If a Participant or Stock Option transferee fails
to designate a beneficiary, then his estate shall be deemed to be his
beneficiary.
Section 9.2 Employment Rights.
Neither the Plan nor any action taken hereunder shall be construed as
giving any employee of the Company the right to become a Participant, and a
grant under the Plan shall not be construed as giving any Participant any right
to be retained in the employ of the Company.
Section 9.3 Nontransferability.
Except as provided in Section 4.4(d), a Participant's rights under
the Plan, including the right to any amounts or shares payable, may not be
assigned, pledged, or otherwise transferred except, in the event of a
Participant's death, to his designated beneficiary or, in the absence of such a
designation, by will or the laws of descent and distribution.
Section 9.4 Withholding.
The Company shall have the right, before any payment is made or a
certificate for any shares is delivered or any shares are credited to any
brokerage account, to
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deduct or withhold from any payment under the Plan any Federal, state, local or
other taxes, including transfer taxes, required by law to be withheld or to
require the Participant or his beneficiary or estate, as the case may be, to pay
any amount, or the balance of any amount, required to be withheld.
Section 9.5 Relationship to Other Benefits.
No payment under the Plan shall be taken into account in determining any
benefits under any retirement, group insurance, or other employee benefit plan
of the Company. The Plan shall not preclude the stockholders of ML & Co., the
Board of Directors or any committee thereof, or the Company from authorizing or
approving other employee benefit plans or forms of incentive compensation, nor
shall it limit or prevent the continued operation of other incentive
compensation plans or other employee benefit plans of the Company or the
participation in any such plans by Participants in the Plan.
Section 9.6 No Trust or Fund Created.
Neither the Plan nor any grant made hereunder shall create or be construed
to create a trust or separate fund of any kind or a fiduciary relationship
between the Company and a Participant or any other person. To the extent that
any person acquires a right to receive payments from the Company pursuant to a
grant under the Plan, such right shall be no greater than the right of any
unsecured general creditor of the Company.
Section 9.7 Expenses.
The expenses of administering the Plan shall be borne by the Company.
Section 9.8 Indemnification.
Service on the Committee shall constitute service as a member of the Board
of Directors so that members of the Committee shall be entitled to
indemnification and reimbursement as directors of ML & Co. pursuant to its
Certificate of Incorporation, By-Laws, or resolutions of its Board of Directors
or stockholders.
Section 9.9 Tax Litigation.
The Company shall have the right to contest, at its expense, any tax
ruling or decision, administrative or judicial, on any issue that is related to
the Plan and that the Company believes to be important to Participants in the
Plan and to conduct any such contest or any litigation arising therefrom to a
final decision.
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ARTICLE X - AMENDMENT AND TERMINATION.
The Board of Directors or the Committee (but no other committee of the
Board of Directors) may modify, amend or terminate the Plan at any time. No
modification, amendment or termination of the Plan shall adversely affect the
rights of a Participant under a grant previously made to him without the consent
of such Participant.
ARTICLE XI - INTERPRETATION.
Section 11.1 Governmental and Other Regulations.
The Plan and any grant hereunder shall be subject to all applicable
Federal and state laws, rules, and regulations and to such approvals by any
regulatory or governmental agency that may, in the opinion of the counsel for
the Company, be required.
Section 11.2 Governing Law.
The Plan shall be construed and its provisions enforced and administered
in accordance with the laws of the State of New York applicable to contracts
entered into and performed entirely in such State.
ARTICLE XII - EFFECTIVE DATE.
The Plan shall not be effective unless it is approved by the Board of
Directors of the Corporation.
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