Preliminary Copy
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[x] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Merrill Lynch & Co., Inc.
---------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Preliminary Copy
LOGO
2001
PROXY STATEMENT
Annual Meeting of Stockholders
April 27, 2001
Merrill Lynch & Co., Inc.
Conference and Training Center
Plainsboro, New Jersey
Preliminary Copy
March 16, 2001
Dear Stockholder:
We cordially invite you to attend Merrill Lynch's Annual Meeting of
Stockholders. The meeting will be held on Friday, April 27, 2001, at 10 a.m.,
at the Merrill Lynch Conference and Training Center, 800 Scudders Mill Road,
Plainsboro, New Jersey.
At the meeting, you will vote on a number of important matters
described in the attached proxy statement. There also will be an opportunity
for you to ask questions about our business and to comment on any aspect of
company affairs.
Your vote is very important, regardless of the number of shares you
own. Even if you plan to attend the meeting in person, please vote your proxy
by telephone (1-800-474-7492), by internet (at www.proxyvote.com), or by
completing and returning your proxy card, so that your shares are represented.
We look forward to receiving your vote and seeing you at the meeting.
If you need directions to the meeting, or have a disability that may require
special assistance, please contact our Corporate Secretary, Andrea L. Dulberg,
at 222 Broadway, 17th Floor, New York, New York 10038-2510; telephone: (212)
670-0432 or 0433; email address: corporatesecretary@exchange.ml.com.
Sincerely,
(Facsimile Signature)
DAVID H. KOMANSKY
Chairman of the Board and
Chief Executive Officer
Preliminary Copy
Notice of Annual Meeting of Stockholders
April 27, 2001
MERRILL LYNCH & CO., INC.'s Annual Meeting of Stockholders will be
held on Friday, April 27, 2001, at 10 a.m. The meeting will take place at the
Merrill Lynch Conference and Training Center, 800 Scudders Mill Road,
Plainsboro, New Jersey.
At the meeting, you will be asked to:
o elect three directors to the Board of Directors, each for a three-year
term,
o increase the authorized number of shares of our common stock,
o increase the number of shares of our common stock that may be issued
under our employee stock purchase plan,
o act on a stockholder proposal, and
o consider any other business properly brought before the meeting.
The accompanying proxy statement describes the matters being voted on
and contains other information that may be helpful to you.
The close of business on February 27, 2001 was the record date for
determining stockholders entitled to vote at the Annual Meeting. A list of
those stockholders will be available at the offices of Merrill Lynch
Investment Managers, L.P., located at 800 Scudders Mill Road, Plainsboro, New
Jersey, from April 17, 2001 until the meeting. This list also will be
available at the meeting.
By order of the Board of Directors
ANDREA L. DULBERG
Corporate Secretary
New York, New York
March 16, 2001
We included public notice of the date of the Annual Meeting in our
Mid-Year Report to Stockholders, which was mailed on August 22, 2000. We also
included notice of the meeting in our Quarterly Report on Form 10-Q for the
period ended September 29, 2000, which we filed with the Securities and
Exchange Commission on November 13, 2000.
Preliminary Copy
TABLE OF CONTENTS
Page
----
INFORMATION ABOUT OUR ANNUAL MEETING............................................................... 1
MATTERS REQUIRING STOCKHOLDER ACTION
Election of Directors.............................................................................. 4
Nominees for Election to the Board of Directors.................................. 4
Members of the Board of Directors Continuing in Office........................... 6
A Description of Our Committees.................................................................... 8
Audit Committee Report ............................................................................ 10
Our Proposal to Authorize Additional Shares of Common Stock........................................ 11
Our Proposal to Authorize Additional Shares for Our Employee Stock Purchase Plan................... 12
Stockholder Proposal............................................................................... 13
BENEFICIAL OWNERSHIP OF OUR COMMON STOCK
Ownership by Our Directors and Executive Officers.................................................. 14
Owners of More than 5% of Our Common Stock......................................................... 15
COMPENSATION
Management Development and Compensation Committee Report on Executive Compensation................. 16
Executive Compensation............................................................................. 18
Compensation of Directors.......................................................................... 22
Compensation Committee Interlocks and Insider Participation........................................ 23
OTHER MATTERS
Performance Graph.................................................................................. 24
Certain Transactions............................................................................... 25
Fees Paid to Our Independent Auditors.............................................................. 26
Stockholder Proposals for the 2002 Annual Meeting.................................................. 26
EXHIBIT
Audit Committee Charter.................................................................. Exhibit A
Preliminary Copy
INFORMATION ABOUT OUR ANNUAL MEETING
(share figures as of December 29, 2000 are used for this preliminary filing)
Who is soliciting my vote?
The Board of Directors of Merrill Lynch is soliciting your vote for our
2001 Annual Meeting of Stockholders.
What will I vote on?
You are being asked to vote on:
o The election of three directors to our Board of Directors.
o An increase in our authorized common stock.
o An increase in the number of shares of common stock that may be issued
under our employee stock purchase plan.
o A stockholder proposal.
How many votes do I have?
You have one vote for every share of common stock you owned on the record
date.
When was the record date for the Annual Meeting?
The close of business on February 27, 2001 was the record date for
determining those stockholders who are entitled to vote at the Annual Meeting
and at any adjournment.
How many votes can be cast by all stockholders?
A total of 812,608,931 votes may be cast, consisting of:
o One vote for each of the 807,954,553 shares of our common stock, par
value $1.33 1/3 per share, which were outstanding on the record date.
o One vote for each share of the 4,654,378 exchangeable securities issued
by one of our Canadian subsidiaries. Each share is exchangeable into, and
has voting rights equivalent to, one share of our common stock.
There is no cumulative voting.
How many votes must be present to hold the Annual Meeting?
A majority of the votes that can be cast, or 406,304,466 votes, is needed
to hold the Annual Meeting. We urge you to vote by proxy even if you plan to
attend the meeting. That will help us to know as soon as possible that enough
votes will be present to hold the meeting.
How do I vote?
You may vote at the Annual Meeting by proxy or in person.
To vote by proxy, you may use:
o the enclosed proxy card,
o your telephone, or
o the internet.
If you use the enclosed proxy card, you must sign and date it, and return
it to us in the enclosed postage-paid envelope. You will find instructions for
voting by telephone or the internet on the proxy card.
If you want to vote in person at the meeting, and you hold your stock
through a securities broker (that is, in street name), you must obtain a proxy
from your broker and bring that proxy to the meeting.
How many votes will be required to elect a director or to adopt a proposal?
o A plurality of the votes cast at the Annual Meeting will be required to
elect each director to the Board of Directors.
o A majority of the votes that can be cast, or 406,304,466 votes, as well
as a majority of the common stock, or 403,977,277 votes, will be required
to adopt the proposal to increase the number of shares of common stock
that we are authorized to issue.
o A majority of the shares represented at the meeting and entitled to vote
will be required to adopt the other proposals and other matters properly
raised at the meeting.
1
Can I change my vote?
Yes. Just cast a new vote by telephone or internet or send a new proxy
card with a later date. You may also send a written notice of revocation to
Andrea L. Dulberg, Corporate Secretary, Merrill Lynch & Co., Inc., 222
Broadway, 17th Floor, New York, New York 10038-2510. If you attend the Annual
Meeting and want to vote in person, you can request that your previously
submitted proxy not be used.
What if I do not indicate my vote for some of the matters on my proxy card?
If you return a signed proxy card without indicating your vote, your
shares will be voted:
o for the election of the three persons named under the caption "Election
of Directors - Nominees for Election to the Board of Directors",
o for our proposal to increase the number of shares of our common stock
that we are authorized to issue,
o for our proposal to increase the common stock that may be issued under
our employee stock purchase plan, and
o against the stockholder proposal.
What if I withhold my vote, or vote to "abstain"?
In the election of directors, you can vote for the three directors named
on the proxy card, or you can indicate that you are withholding your vote.
Withheld votes will not affect the election of directors.
In connection with any proposal, you may vote for or against the
proposal, or you may abstain from voting on the proposal. An abstention from
voting on a proposal will have the effect of a vote against that proposal.
What happens if I do not vote and do not attend the Annual Meeting?
If you do not vote shares held in your name, those shares will not be
voted.
If you do not vote and Merrill Lynch, Pierce, Fenner & Smith Incorporated
is your broker, it will vote your shares on matters other than the stockholder
proposal in proportion to the votes cast by other stockholders who hold their
shares in accounts at Merrill Lynch, Pierce, Fenner & Smith. If you do not
vote and your shares are held through any other broker, your broker can vote
your shares on matters other than the stockholder proposal. No broker may vote
on the stockholder proposal without your specific instructions.
If you do not vote your shares held through a broker and your broker does
not vote them, the votes will be "broker non-votes". Broker non-votes will:
o count as a vote against our proposal to increase the number of shares of
common stock that we may issue, and
o have no effect on any other matter that may be voted on at the meeting.
Will my votes be confidential?
Yes. Your votes will be tabulated by an independent agent and will not be
disclosed to our directors or employees, except for a very limited number of
employees involved in coordinating the voting tabulation process. Our
confidentiality policy does not apply to certain matters, such as contested
elections or disputed votes.
Could other matters be decided at the Annual Meeting?
Our by-laws require prior notification of a stockholder's intent to
request a vote on other matters at the meeting. The deadline for notification
is March 8, 2001. If any other matters arise at the meeting, your proxy,
together with the other proxies received, will be voted at the discretion of
the proxy holders.
Will Merrill Lynch's auditors participate in the Annual Meeting?
Yes. The Board of Directors, upon the recommendation of its Audit
Committee, has selected Deloitte & Touche LLP as our independent auditors for
the 2001 fiscal year. Representatives of Deloitte & Touche LLP are expected to
be present at the meeting, and will have an opportunity to make a statement
and to answer your questions.
What happens if the Annual Meeting is postponed or adjourned?
Your proxy will still be good and may be voted at the postponed or
adjourned meeting. You will still be able to change or revoke your proxy until
it is voted.
2
Who will pay the expenses incurred in connection with the solicitation of my
vote?
Merrill Lynch pays the cost of preparing proxy materials and soliciting
your vote. Georgeson and Co., Inc. has been retained (for a fee of $22,000,
plus expenses) to act as a proxy solicitor. Certain directors, officers or
employees of Merrill Lynch or its subsidiaries may also solicit your vote in
person, by telephone or by other means, but will not be paid. We reimburse
brokers, including our subsidiary Merrill Lynch, Pierce, Fenner & Smith
Incorporated, and other nominees for the cost of mailing materials to
beneficial owners of our common stock under the rules of the New York Stock
Exchange, Inc. We also pay all Annual Meeting expenses. You may incur
telephone or internet access charges if you vote by telephone or the internet.
Do any stockholders beneficially own more than 5% of our common stock?
Yes. State Street Bank and Trust Company, as trustee of various Merrill
Lynch employee benefit plans and as trustee or discretionary advisor to
non-Merrill Lynch related accounts, beneficially owns more than 5% of our
common stock. For details of this ownership, please see "Beneficial Ownership
of Our Common Stock".
3
MATTERS REQUIRING STOCKHOLDER ACTION
Election of Directors
Our Board of Directors has three classes. One class is elected each
year, and each class serves for a term of three years.
The Board of Directors has nominated each of the people named below
for a three-year term ending in 2004. Seven of our current directors will
continue to serve in accordance with previous elections. One director will
retire at the start of the Annual Meeting and our Board of Directors will be
reduced to ten members. The biographical information presented below for the
director nominees and for the directors continuing in office is based upon
information we received from the nominees and directors. Unless otherwise
indicated, the offices listed are offices of Merrill Lynch. While we do not
anticipate that any of the nominees will be unable to take office, if that is
the case your shares will be voted in favor of another person or other persons
nominated by the Board of Directors.
Nominees for Election to the Board of Directors
for a Three-Year Term Expiring in 2004*
Position, principal occupation, business
Name and age experience and directorships
- ------------------------ -------------------------------------------------------
David H. Komansky (61) Chairman of the Board and Chief Executive Officer
o Director since 1995
o Chairman of the Board since April 1997
o Chief Executive Officer since December 1996
o President and Chief Operating Officer from January 1995 to April 1997
o Other Directorship: Schering-Plough Corporation
Robert P. Luciano (67) Corporate Director and Chairman Emeritus of Schering-Plough Corporation
o Director since 1989
o Chairman Emeritus of Schering-Plough Corporation, a health and personal
care products company
o Chief Executive Officer of Schering-Plough Corporation from February 1982
to January 1996
o Chairman of the Board of Schering-Plough Corporation from January 1984 to
November 1998
o Other Directorships: Schering-Plough Corporation, Honeywell International
Inc. and C. R. Bard, Inc.
David K. Newbigging (67) Chairman of the Board of Friends' Provident Life Office
o Director since 1996
o Chairman of the Board of Friends' Provident Life Office, a United
Kingdom-based life assurance company
o Chairman of the Board of Equitas Holdings Limited, the parent company of
a group of reinsurance companies based in the United Kingdom, from
1995 to 1998
4
Position, principal occupation, business
Name and age experience and directorships
- ------------------------ -------------------------------------------------------
o Chairman of the Board of Rentokil Group PLC, an international support services
group based in the United Kingdom, from 1987 to 1994
o Chairman of the Board and Senior Managing Director of Jardine, Matheson &
Co. Limited, a Hong Kong-based international trading, industrial and financial
services group, from 1975 to 1983
o Other Directorships: Chairman of the Board of Faupel Trading Group PLC and
Thistle Hotels PLC, Deputy Chairman of Benchmark Group PLC and director of
Ocean Energy, Inc. and Paccar Inc.
* Mr. Komansky currently serves on the Board of Directors in the
class with terms expiring in 2002. To better balance the classes,
Mr. Komansky is nominated for election this year. Upon his election,
the class of 2002 will then be reduced to three members.
5
Members of the Board of Directors Continuing in Office
With Terms Expiring in 2002
Position, principal occupation, business
Name and age experience and directorships
- ------------------------ -------------------------------------------------------
Jill K. Conway (66) Visiting Scholar, Massachusetts Institute of Technology
o Director since 1978
o Visiting Scholar, Massachusetts Institute of Technology since 1985
o President of Smith College from July 1975 to June 1985
o Other Directorships: Colgate-Palmolive Company and NIKE, Inc.
George B. Harvey (69) Corporate Director and Chairman of the Board, Retired, of Pitney Bowes Inc.
o Director since 1993
o Chairman of the Board of Pitney Bowes Inc., a provider of mailing, office and
logistics systems and management and financial services, from 1983 to December
1996
o President and Chief Operating Officer of Pitney Bowes Inc. from 1981 to May
1996
o Other Directorships: Massachusetts Mutual Life Insurance Company, The
McGraw-Hill Companies, Inc. and Pfizer Inc.
John L. Steffens (59) Vice Chairman of the Board and Chairman of U.S. Private Client Group
o Director since 1997
o Vice Chairman of the Board since April 1997
o Chairman of U.S. Private Client Group since February 2000
o President of U.S. Private Client Group from April 1997 to February 2000
o Executive Vice President, Private Client Group from October 1990 to April 1997
6
Members of the Board of Directors Continuing in Office
With Terms Expiring in 2003
Position, principal occupation, business
Name and age experience and directorships
- ------------------------ -------------------------------------------------------
W.H. Clark (68) Corporate Director and Chairman of the Board, Retired, of Nalco Chemical Company
o Director since 1995
o Chairman of the Board of Nalco Chemical Company, a producer of
specialty chemicals, from 1984 to 1994
o Chief Executive Officer of Nalco Chemical Company from 1982 to 1994
o President of Nalco Chemical Company from 1984 to 1990
o Other Directorships: Bethlehem Steel Corporation, Georgia Pacific
Corporation, Millennium Chemicals Inc. and Ultramar Diamond Shamrock
Corporation
Stephen L. Hammerman (63) Vice Chairman of the Board
o Director since 1985
o Vice Chairman of the Board since April 1992
o General Counsel since October 1984
Aulana L. Peters (59) Corporate Director and Member, Public Oversight Board of AICPA
o Director since 1994
o Partner in the law firm of Gibson, Dunn & Crutcher LLP from 1980 to
1984 and from 1988 to 2000
o Commissioner of the U.S. Securities and Exchange Commission from 1984
to 1988
o Other Directorships: Callaway Golf Company, Minnesota Mining and
Manufacturing Company (3M) and Northrop Grumman Corporation
John J. Phelan, Jr. (69) Corporate Director and Senior Adviser to the Boston Consulting Group
o Director since 1991
o Senior Adviser to the Boston Consulting Group since October 1992
o Member of the Council on Foreign Relations since 1988
o President of the International Federation of Stock Exchanges from
January 1991 to January 1993
o Chairman and Chief Executive Officer of the New York Stock Exchange,
Inc. from May 1984 to December 1990
o Other Directorships: Eastman Kodak Company and Metropolitan Life
Insurance Company
William Hoover, age 71, has served as a director since 1995 and will
continue to serve until the start of the 2001 Annual Meeting. Mr. Hoover is
the Chairman of the Executive Committee of Computer Sciences Corporation, a
provider of information technology consulting, systems integration, and
outsourcing to industry and government. Mr. Hoover serves as a director of
Computer Sciences Corporation, Rofin-Sinar Technologies, Inc. and Storage
Technology Corporation.
7
A Description of Our Committees
In addition to the Executive Committee, the Board of Directors has
appointed other standing committees. These other committees, and certain of
their principal functions, are described below.
Our Audit Committee:
o reviews our annual consolidated financial statements with management
and our independent auditors.
o recommends the appointment and monitors the performance,
independence, and fees of our independent auditors, and monitors the
professional services they provide.
o monitors our system of internal accounting controls and oversees and
evaluates the internal audit function.
o monitors compliance with risk management and compliance policies and
procedures and oversees and evaluates management and compliance
functions.
o discharges other responsibilities including those described under the
caption "Audit Committee Report".
Our Finance Committee:
o reviews, makes recommendations about and approves our policies
regarding financial commitments and other expenditures.
o reviews and approves financial commitments, acquisitions,
divestitures and proprietary investments in excess of specified
dollar amounts.
o oversees our corporate funding policy, securities offerings,
financial commitments and related matters.
o reviews procedures for implementing and monitoring adherence to
corporate funding policies.
Our Management Development and Compensation Committee:
o reviews, recommends and oversees employee compensation programs,
policies and practices, including salary, incentive compensation,
stock related plans including stock option and stock bonus plans,
retirement, health and welfare programs.
o makes grants under the Merrill Lynch & Co., Inc. Long-Term Incentive
Compensation Plans and other stock-based compensation plans.
o reviews management development programs and executive succession
plans and certain senior management appointments.
o discharges other responsibilities described under the caption
"Management Development and Compensation Committee Report on
Executive Compensation".
Our Public Policy and Responsibility Committee:
o assists the Board of Directors and senior management in overseeing
Merrill Lynch's fulfillment internationally of its principles of
Respect for the Individual, Teamwork, Responsible Citizenship and
Integrity.
o reviews and, where appropriate, makes recommendations regarding our
political and charitable contribution policies, and our policies,
practices and actions as they relate to social and public policy
issues that affect our business around the world.
8
Our Nominating Committee:
o identifies and recommends potential candidates to serve on the Board
of Directors, with a view toward maintaining a desirable balance of
expertise among the directors.
o makes recommendations to the Board of Directors relating to the
membership of committees of the Board of Directors.
The Nominating Committee considers nominees recommended by our
stockholders. To submit recommendations for the 2002 Annual Meeting of
Stockholders, you may write to Andrea L. Dulberg, Corporate Secretary, Merrill
Lynch & Co., Inc., 222 Broadway, 17th Floor, New York, New York 10038-2510;
email address: corporatesecretary@exchange.ml.com.
-------------------
The following table shows the membership and the number of meetings
of each of our committees during the 2000 fiscal year, including, in the case
of the Nominating Committee, action taken by consent. The Board of Directors
held 11 meetings in 2000. Each director attended at least 75 percent of the
total number of meetings of the Board of Directors and board committees of
which he or she was a member in 2000.
Management Development and Public Policy and
Director Audit* Finance* Compensation Responsibility Nominating
- ----------------- ------- --------- -------------------------- ------------------ -----------
Mr. Clark** X
Mrs. Conway X Chair
Mr. Harvey X X X
Mr. Hoover X X
Mr. Luciano Chair X
Mr. Newbigging X X Chair
Mrs. Peters X X X
Mr. Phelan Chair Chair
2000 meetings 8 8 8 3 3
* On June 5, 2000 the Board of Directors approved the separation of the
Audit and Finance Committee into two committees, the Audit Committee
and the Finance Committee.
** Mr. Clark was a member of the Audit and Finance Committee through
June 5, 2000, at which time he became a member of the Management
Development and Compensation Committee.
9
Audit Committee Report
The Audit Committee (the "Committee") is comprised of four
independent directors and operates under a written charter, which is attached
as Exhibit A. The Committee recommends to the Board of Directors the selection
of Merrill Lynch's independent auditors.
In fulfilling its responsibilities, the Committee has reviewed and
discussed the audited consolidated financial statements for Merrill Lynch for
the fiscal year ended December 29, 2000 with Merrill Lynch's management and
Deloitte & Touche LLP ("Deloitte & Touche"), our independent auditors.
The Committee has discussed with Deloitte & Touche the matters
required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees." In addition, the Committee has received
the written disclosures and the letter from Deloitte & Touche required by
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees" and has discussed with Deloitte & Touche its independence
from Merrill Lynch and its management.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited consolidated
financial statements for Merrill Lynch for the fiscal year ended December 29,
2000 be included in our 2001 Annual Report to Stockholders which will be
incorporated by reference into our Annual Report on Form 10-K for the year
ended December 29, 2000 for filing with the Securities and Exchange
Commission.
Audit Committee
John J. Phelan, Jr., Chairman
William R. Hoover
David K. Newbigging
Aulana L. Peters
10
Our Proposal to Authorize Additional Shares of Common Stock
The Board of Directors recommends that the stockholders adopt an
amendment to Article IV of our restated certificate of incorporation to
increase the number of authorized shares of common stock to 3,000,000,000
shares.
The table below shows, as of December 29, 2000, Merrill Lynch's
current and proposed authorized and outstanding capital stock (after giving
effect to our most recent stock split). It shows stock of a subsidiary that is
exchangeable into common stock and stock currently available or subject to
awards under stockholder-approved plans (other than the 25,000,000 share
increase to the authorized shares for the Merrill Lynch & Co., Inc. Employee
Stock Purchase Plan that we are asking stockholders to approve at this
meeting).
Available or subject to
awards under
Outstanding on stockholder-approved
Security Authorized December 29, 2000 plans Proposal
- ----------------- ------------------- ----------------------- ------------------------- ----------
Common Stock 1,000,000,000 807,954,553 119,320,779 3,000,000,000
Preferred Stock 25,000,000 42,500 0 Unchanged
Exchangeable Stock 4,654,378 0 Unchanged
Total Capital Stock 1,025,000,000 3,025,000,000
The Board of Directors believes that the increase in our authorized
shares of common stock will maintain Merrill Lynch's financing and capital
raising flexibility and facilitate future stock splits, capital raising,
acquisitions and other corporate purposes and, therefore, is in the best
interests of Merrill Lynch. If our certificate of incorporation is amended,
the additional shares will be available for:
o issuance in connection with stock splits
o issuance to obtain funds for our present and future operations
o use in connection with acquisitions of businesses or properties
o any other proper corporate purpose
Merrill Lynch has no present agreements to issue the additional
shares to be authorized by this proposal. Merrill Lynch will issue additional
shares of common stock if the Board of Directors determines the issuance would
be in the best interests of Merrill Lynch and you, our stockholders.
Any newly authorized shares of common stock will have voting and
other rights identical to those of the currently authorized shares of common
stock. Under our certificate of incorporation, holders of common stock do not
have preemptive rights. As is true for shares presently authorized, any
issuance of additional shares of our common stock could dilute the equity of
the outstanding shares of common stock.
The Board of Directors recommends a vote FOR the adoption of our
proposal to authorize additional shares of common stock.
11
Our Proposal to Authorize Additional Shares for Our Employee
Stock Purchase Plan
The Board of Directors recommends that the stockholders adopt an
amendment to our 1986 Merrill Lynch & Co., Inc. Employee Stock Purchase Plan
to increase the number of shares of common stock available for our employees
under the plan by 25,000,000 shares.
This plan has assisted Merrill Lynch's efforts to attract and retain
highly talented employees, and has significantly increased the interest of
participating employees in the continuing success of Merrill Lynch. The plan
was approved by our stockholders in April 1987. Our stockholders voted to
increase the number of shares available for sale under the plan in 1989, and
again in 1991.
As of December 29, 2000, a total of 93,803,986 shares of our common
stock had been purchased by employees under plan since inception, and
6,796,014 shares of common stock were available for issuance under the plan.
In order to provide an adequate number of shares for future issuance and sale
to employees, the Board of Directors now seeks your approval to amend the
Employee Stock Purchase Plan:
o to increase the number of shares authorized under the Plan by
25,000,000 shares for a total of 125,600,000 authorized shares.
The plan is a broad-based plan and provides Merrill Lynch employees
with an opportunity to purchase shares of our common stock through regular
payroll deductions of up to 10% of their annual eligible compensation. These
amounts are applied to the purchase of our common stock under the plan on
designated investment dates. The shares used under the plan may be either
shares that you authorized but that have not yet been issued or shares that
have been repurchased and held in treasury.
Purchase price: 85% of the average of the high and low price of
Merrill Lynch common stock on each investment date.
Maximum annual payroll deduction per participant: $21,250 per employee.
Eligible employees: virtually all regular employees and certain
part-time employees of Merrill Lynch and our domestic subsidiaries employed at
least one year and employees of our foreign subsidiaries who are designated by
the Management Development and Compensation Committee.
Number of participating employees: 9,096 employees as of January 31,
2001.
Number of eligible employees: 58,941.
Tax treatment for U.S. employees: If shares are sold two years or
more after the purchase date, the 15% discount is ordinary income, any
further profit is a long-term capital gain and any loss is treated as a
long-term capital loss. If shares are sold before two years have elapsed since
the purchase date, the discount is taxed as ordinary income (even where there
is a loss). Any profit above the 15% discount is taxed as a short-term or
long-term capital gain, depending on how long the shares were held. Any loss,
after including the 15% discount as ordinary income, is treated as a capital
loss.
Tax treatment for Merrill Lynch: Merrill Lynch is entitled to a
deduction equal to the full 15% discount.
This is only a summary of the terms of the plan. A copy of the entire
plan, as we propose to amend it, may be obtained by writing to Andrea L.
Dulberg, Corporate Secretary, Merrill Lynch & Co., Inc., 222 Broadway, 17th
Floor, New York, New York 10038-2510 or by sending an email to
corporatesecretary@exchange.ml.com.
Three of our executive officers, including E. Stanley O'Neal,
currently participate in the plan. The maximum value received by these
executive officers in 2001 will not exceed the maximum value to any other plan
participant as described above.
The Board of Directors recommends a vote FOR the adoption of our
proposal to authorize additional shares for our Employee Stock Purchase Plan.
12
Stockholder Proposal
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600 Virginia Ave.,
N.W., Suite 215, Washington, D.C. 20037, who holds 800 shares of common stock,
has given notice of her intention to propose the following resolution at the
Annual Meeting:
RESOLVED: "That the stockholders of Merrill Lynch, assembled in
Annual Meeting in person and by proxy, hereby request the Board of
Directors to take the necessary steps to provide for cumulative
voting in the election of directors, which means each stockholder
shall be entitled to as many votes as shall equal the number of
shares he or she owns multiplied by the number of directors to be
elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit."
The following statement has been submitted by Mrs. Davis in support of the
resolution:
REASONS: "Many states have mandatory cumulative voting, so do National
Banks."
"In addition, many corporations have adopted cumulative voting."
"Last year the owners of 81,346,817 shares, representing approximately
32.6% of shares voting, voted FOR this proposal."
"If you AGREE, please mark your proxy FOR this resolution."
------------------
For the reasons stated below, the Board of Directors recommends
a vote AGAINST the adoption of this stockholder proposal.
A similar proposal has been rejected at our past annual meetings
fifteen times by you, our stockholders, each time by a substantial majority.
The important reasons for rejecting this proposal in the past remain important
reasons for rejecting the proposal now.
Cumulative voting may:
o allow for the election of directors by small groups with special
interests.
o result in directors being elected who feel an obligation to represent
the special interest groups that elected them, regardless of whether
the furtherance of those groups' interests would benefit all of our
stockholders generally.
o create factionalism among board members and undermine their ability
to work together effectively.
In order to minimize the risks of such divisiveness, and the
consequent risk of distracting our Board of Directors from management of
Merrill Lynch's affairs, Merrill Lynch, like most other major corporations,
elects directors by allowing each share of common stock to have one vote for
each nominee. By using this method, we:
o ensure that each director is elected by stockholders representing a
plurality of all of the shares of common stock voted at the meeting.
o encourage accountability of each director to all of our stockholders.
o reduce the risk of divisive factionalism.
In short, we believe that our current system of electing directors
best serves the interests of you, our stockholders.
13
BENEFICIAL OWNERSHIP OF OUR COMMON STOCK
Ownership by our Directors and Executive Officers
We encourage our directors, officers and employees to become
stockholders of Merrill Lynch. We believe that this helps to align their
interests with your interests, as stockholders. We also believe that this
policy has been a significant factor in the returns that we have achieved for
our stockholders.
The following table contains information about the beneficial
ownership of common stock, common stock options and common stock-linked units
by each of our directors and certain executive officers. Information is also
provided as to ownership by all of our current directors and executive
officers as a group. This information is as of February 5, 2001.
Amount and Nature of Beneficial Ownership
Name Position Common Stock(1) Stock Options(2) Stock Units(3) Total(4)
- -------------------------- ---------------------- ----------------- ---------------- -------------- --------
W. H. Clark Director 10,308 0 4,770 15,078
Jill K. Conway Director 12,616 0 6,515 19,131
Thomas W. Davis Executive Vice President 485,933 1,465,567 115,777 2,067,277
Stephen L. Hammerman Director and Vice
Chairman 656,163 1,969,699 97,119 2,722,981
George B. Harvey Director 14,674 0 8,428 23,103
William R. Hoover Retiring Director 10,580 0 6,291 16,871
David H. Komansky Director, Chairman and
CEO 710,919 4,848,669 1,101,187 6,660,775
Robert P. Luciano Director 15,680 0 8,340 24,020
David K. Newbigging Director 9,000 0 10,146 19,146
E. Stanley O'Neal Executive Vice
President 73,161 1,354,387 67,367 1,494,915
Jeffrey M. Peek Executive Vice
President 369,681 1,272,673 109,684 1,752,038
Aulana L. Peters Director 2,956 0 18,689 21,645
John J. Phelan, Jr. Director 15,680 0 6,515 22,195
John L. Steffens Director and Vice
Chairman 1,399,176 1,264,707 568,088 3,231,972
Directors and executive
officers as a group 6,494,668 18,309,988 2,601,020 27,405,677
(1) Includes 72,000 shares held in trusts for which Mr. Hammerman has
shared voting and investment power, 29,580 shares held by a
charitable foundation for which Mr. Peek has shared voting and
investment power, 2,156 shares held in a trust for which Mrs. Peters
has shared voting and investment power, 9,084 shares held by
charitable foundations, and 10,464 shares held in custodial accounts
and trusts as to which, in each case, an executive officer has shared
voting and investment power. The directors and executive officers
have sole voting and investment power over all other shares of common
stock listed.
(2) This column includes all stock options for the directors and
executive officers as a group, including 11,260,070 stock options
that have or will become exercisable within 60 days of the record
date and 7,049,918 stock options that will become exercisable after
that date. The number of stock options exercisable within 60 days for
the named individuals are as follows: Mr. Davis 704,862, Mr.
Hammerman 1,369,868, Mr. Komansky 3,639,182, Mr. O'Neal 274,796, Mr.
Peek 605,100, and Mr. Steffens 589,706.
(3) Units in the table are linked to the value of our common stock and
are generally paid in shares of common stock at the end of the
restricted or deferral period.
(4) No individual director or executive officer owned more than 1% of our
outstanding common stock. The group of directors and executive
officers owned approximately 2.2% of the outstanding common stock
(excluding stock units and stock options that will not become
exercisable within 60 days after the record date).
14
Owners of More than 5% of Our Common Stock
Except as described below, we know of no person that beneficially
owns more than 5% of our outstanding common stock.
Beneficial Percent of
Name and Address of Beneficial Owner Ownership Class
------------------------------------ ---------- -----------
State Street Bank and Trust Company
(225 Franklin Street, Boston, Massachusetts 02110)
As trustee of the Merrill Lynch Employee Stock
Ownership Plan ("ESOP")..................................................... 44,844,423(1) 5.5%
As co-trustee of other Merrill Lynch employee benefit plans................. 39,943,791(2) 4.9%
As trustee or discretionary advisor for certain unaffiliated accounts and
collective investment funds................................................. 20,141,518(3) 2.5%
(1) As of February 27, 2001, 44,722,410 shares were allocated to ESOP
participants and 122,013 shares were beneficially owned by the ESOP
but were unallocated to participants (figures as of December 31, 2000
are used for this preliminary filing). Participants have the right to
direct the voting of allocated shares by State Street. State Street
is generally obligated to vote unallocated shares and allocated
shares for which it has not received instructions in the same
proportion as allocated shares that have directed a vote.
(2) Participants have the right to direct the voting of shares of common
stock by State Street. State Street is generally obligated to vote
shares for which it has not received instructions in the same
proportion as shares that have directed a vote.
(3) This information is as of December 31, 2000 and was derived from a
State Street SEC filing. State Street has sole voting power over
13,362,530 shares, sole dispositive power over 15,245,205 shares,
shared voting power over 5,034,742 shares, and shared dispositive
power over 4,896,313 shares.
15
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Executive Compensation Overview
Merrill Lynch's continuing status as a pre-eminent financial services company
owes much to its tradition of quality leadership. Our executive compensation
program is therefore designed to attract and retain highly talented
individuals and to recognize performance that maintains the firm's reputation
for superior results and continued success. The program supports creation of
stockholder value by providing compensation based on annual financial results
and long-term stock price appreciation.
Policies and Process
General
The Management Development and Compensation Committee (the "MDCC") is
responsible for administering all executive officer compensation programs and
plans, including the determination and approval of base salaries, cash bonuses
and stock bonuses. The MDCC consists of four directors who have never been
employees of Merrill Lynch and who are not eligible to participate in any of
the MDCC-administered compensation programs or plans.
The MDCC reviews Merrill Lynch's executive compensation programs to align them
with Merrill Lynch's annual and long-term goals. The MDCC has access to advice
and counsel from independent third parties.
Compensation Components
The three elements of total compensation for Merrill Lynch executives are base
salary, cash bonus and stock bonus. The MDCC has balanced these components of
pay to provide Merrill Lynch's top executives with a powerful incentive to
achieve annual and long-term goals that promote stockholder value.
Base Salary
Executive officer base salaries are reviewed periodically based on factors
determined by the MDCC at the time of review. The relationship of salaries to
total compensation enhances the motivational value of the incentive
compensation elements of the program.
Cash Bonus
The cash bonus program provides a strong incentive for executive officers to
deliver superior financial performance. The cash bonus is a major component of
total compensation and places significant emphasis on "at risk" compensation
that is dependent on organizational performance.
Stock Bonus
The stock bonus program is a critical component of the total compensation
awarded to executive management. The ultimate value of restricted unit and
stock option awards is dependent on future stock price performance. As such,
the stock bonus aligns executive and stockholder financial interests and
encourages a balance between short-term goals and long-term strategic
objectives.
Executive officers are also eligible to participate in broad-based plans
offered generally to Merrill Lynch employees, including retirement,
investment, health, and other employee benefit plans.
16
Incentive Compensation Rationale
Merrill Lynch's incentive awards for executive officers are determined in
accordance with a stockholder-approved performance formula that complies with
Internal Revenue Service regulations regarding the tax deductibility of
executive officer compensation in excess of $1 million. The MDCC assesses the
performance of the CEO and all other executive officers and recommends annual
cash bonus and stock bonus amounts for each individual to the Board of
Directors for approval. The MDCC retains the discretion to establish executive
officer incentive awards that are less than the formula amounts.
Performance factors taken into consideration for executive officer
compensation may include: strategic planning, quality of client service,
market share, corporate reputation, financial results, fixed expense control,
capital allocation, profit margins, compliance and risk control, management
development, workforce diversity, technology and innovation. The MDCC also
considers the extent to which individuals exemplify and foster Merrill Lynch's
principles of Client Focus, Respect for the Individual, Teamwork, Responsible
Citizenship, and Integrity. All factors are considered collectively by the
MDCC and are not weighted in any particular order of importance.
Compensation of the Chief Executive Officer for 2000 Performance
Based on a year-end assessment of Merrill Lynch's performance, the MDCC
recommended and the Board of Directors approved CEO total compensation of
$32,500,000 for performance year 2000.
The MDCC weighed a number of performance variables in determining the
compensation for the CEO:
o Merrill Lynch's year-over-year improvements in net earnings, return
on equity and diluted earnings per share.
o Various measures of financial performance relative to financial
industry peer companies.
o Measurable strategic initiatives that the MDCC identified as critical
to the long-term growth of the organization.
Further, the MDCC determined an appropriate mix of CEO compensation to be 50%
cash (base salary and cash bonus), 25% restricted units and 25% stock options.
The number of restricted units was calculated by dividing the dollar value to
be paid in restricted units by the fair market value (average of the high and
low prices) of a share of Merrill Lynch common stock on January 23, 2001, the
effective date of grant. The number of stock options was derived by dividing
the dollar value to be paid in stock options by the same price of common stock
used to determine the restricted unit grant, and multiplying the result by
three.
The methodology for determining stock awards for other executive officers is
the same as for the CEO except that the number of stock options was derived by
dividing the dollar value to be paid in stock options by the price of common
stock used to determine the restricted unit grant, and multiplying the result
by four, instead of three used for the CEO.
Summary
The CEO's compensation for performance year 2000, based on the
methodology described above, consists of:
Restricted Stock
Base Salary Cash Bonus Units Options Total
- ----------------------- -------------------- ---------------- ------------- ---------
$700,000 $15,550,000 $8,125,000 $8,125,000 $32,500,000
Management Development and Compensation Committee
Robert P. Luciano, Chairman
W.H. Clark
Jill K. Conway
George B. Harvey
17
Executive Compensation
The following tables contain information with respect to the CEO and
the four other most highly compensated executive officers of Merrill Lynch.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards(1)
--------------------------------- ---------------------------
Restricted Securities
Securities Underlying All Other
Name and Principal Position Year Salary Bonus(1) (2)(3)(4) Options Compensation(5)
- ----------------------------------------- ------- ----------- ---------- ------------ ------------ ---------------
David H. Komansky......................... 2000 $700,000 $ 15,550,000 $8,380,400 314,263 $ 29,939
Chairman of the Board and 1999 700,000 8,234,000 2,100,704 656,320 8,518,478
Chief Executive Officer 1998 700,000 4,535,321 1,104,554 409,160 19,100
Thomas W. Davis............................ 2000 $350,000 $ 9,650,000 $5,157,200 257,857 $ 19,659
Executive Vice President 1999 300,000 5,765,000 1,470,270 381,580 3,855,533
1998 300,000 2,645,000 627,613 204,240 14,300
E. Stanley O'Neal.......................... 2000 $350,000 $ 9,650,000 $1,199,600 257,857 $ 3,847,066
Executive Vice President 1999 300,000 5,765,000 1,470,270 772,020 6,400
1998 300,000 2,830,000 666,700 216,950 6,400
Jeffrey M. Peek............................ 2000 $350,000 $ 8,650,000 $4,641,440 232,071 $ 15,405
Executive Vice President 1999 300,000 5,765,000 1,470,270 317,990 1,976,310
1998 210,000 2,800,000 640,666 208,470 11,100
Stephen L. Hammerman....................... 2000 $400,000 $ 7,100,000 $3,867,920 193,393 $ 22,885
Vice Chairman 1999 400,000 5,600,000 1,470,270 305,270 1,673,334
1998 400,000 2,105,000 533,876 173,730 11,450
(1) Awards were made in January 2001 for performance in 2000.
(2) Awards consisted of restricted units payable at the end of five
years. All awards have been valued for this table using the closing
prices of common stock on the Consolidated Transaction Reporting
System on the grant dates of the awards. The closing price on January
23, 2001, the effective date of the grants for performance in 2000,
was $80.00. All restricted units vest three years following grant and
may not be transferred for an additional two years after vesting.
Restricted units convey to the holder all the rights of a stockholder
except voting.
(3) During the applicable vesting and restricted periods, dividend
equivalents are paid on restricted units. The dividend equivalents
are equal in amount to the dividends paid on shares of common stock.
(4) The number and value of restricted shares and units held by the named
executive officers as of December 29, 2000 are as follows: Mr.
Komansky (87,692 shares and 103,050 units--$13,006,697); Mr. Davis
(66,644 shares and 66,944 units--$9,109,366); Mr. O'Neal (64,376
shares and 68,004 units--$9,026,992); Mr. Peek (46,502 shares and
66,936 units--$7,735,337); and Mr. Hammerman (45,556 shares and
58,950 units--$7,126,264). These amounts do not include restricted
units awarded in 2001 for performance in 2000.
(5) Amounts shown for 2000 consist of the following: (i) contributions
made in 2000 by Merrill Lynch under our 401(k) Savings & Investment
Plan (including, where applicable, cash payments made because of
limitations imposed by the Internal Revenue Code) -- Mr. Komansky
($2,000); Mr. Davis ($2,000); Mr. Peek ($2,000); and Mr. Hammerman
($2,000); (ii) allocations made in 2000 by Merrill Lynch under our
defined contribution retirement program -- Mr. Komansky ($20,400);
Mr. Davis ($13,600); Mr. O'Neal ($6,400); Mr. Peek ($11,900); and Mr.
Hammerman ($18,700); (iii) the dollar value of the premiums paid by
Merrill Lynch with respect to the term portion of split dollar life
insurance policies purchased on the lives of the named executives and
their spouses -- Mr. Komansky ($7,539); Mr. Davis ($4,059); Mr.O'Neal
18
($3,666); Mr. Peek ($1,505); and Mr. Hammerman ($2,185); and
(iv) the actuarial equivalent of the benefit to Mr. O'Neal of the
aggregate premiums paid on the split dollar life insurance policy by
Merrill Lynch over the life of the policy based on our assumptions
regarding interest rates and life expectancy ($3,837,000). Merrill
Lynch will recover the amount of the aggregate premiums paid by it.
Stock Option Grants Made in Last Fiscal Year(1)
Number of % of Total
Securities Options
Underlying Granted to Exercise Grant Date
Name Options Employees in Price Expiration Present
Granted Fiscal Year Per Share Date(2) Value(3)
- --------------------------------------------------------------------------------------------------------------------
David H. Komansky ............ 314,263 0.9% $77.5625 1/23/2011 $7,951,133
Thomas W. Davis............... 257,857 0.8 77.5625 1/23/2011 6,524,011
E. Stanley O'Neal............. 257,857 0.8 77.5625 1/23/2011 6,524,011
Jeffrey M. Peek............... 232,071 0.7 77.5625 1/23/2011 5,871,602
Stephen L. Hammerman.......... 193,393 0.6 77.5625 1/23/2011 4,893,015
(1) Includes awards made in January 2001 for performance in 2000. Awards
made in January 2000 for performance in 1999 are excluded.
(2) All stock options vest on August 1, 2001.
(3) Valued using a modified Black-Scholes option pricing model. The
exercise price of each stock option ($77.5625) is equal to the
average of the high and low prices on the Consolidated Transaction
Reporting System of a share of common stock on January 23, 2001, the
date of grant. The assumptions used for the variables in the model
were: 35.87% volatility (which is the volatility of the common stock
for the 120 months preceding grant); a 5.25% risk-free rate of return
(which is the yield as of the date of grant on a U.S. Treasury Strip
(zero-coupon bond) maturing in February 2008, as quoted in The Wall
Street Journal); a 0.83% dividend yield (which was the dividend yield
on the date of grant); and a 7-year option term (which is the
expected term until exercise). A discount of 25% was applied to the
option value yielded by the model to reflect the non-marketability of
employee stock options. The actual gain that executives will realize
on their stock options will depend on the future price of the common
stock and cannot be accurately forecast by application of an option
pricing model.
19
Aggregated Stock Option Exercises Made in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End at Fiscal Year-End(1)
-----------------------------------------------------------
Shares
Acquired on Value
Name Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------------------
David H. Komansky.......... 320,000(3) $14,469,992 2,965,784 1,568,622 $163,432,180 $55,769,232
Thomas W. Davis............ 226,800 14,103,181 508,280 699,430 26,388,830 21,335,432
E. Stanley O'Neal.......... 539,634 26,852,903 0 1,096,530 0 31,014,323
Jeffrey M. Peek............ 82,000 3,776,844 533,802 607,040 29,024,734 18,611,162
Stephen L. Hammerman....... 440,000 20,020,476 1,201,186 575,120 68,422,332 17,853,484
(1) These valuations represent the difference between $68.19, the
closing price of a share of common stock on December 29, 2000 on the
Consolidated Transaction Reporting System, and the exercise prices of
these stock options.
(2) These valuations represent the difference between the average of the
high and low prices of a share of common stock on the Consolidated
Transaction Reporting System on the date of exercise and the exercise
prices of the stock options exercised.
(3) Mr. Komansky elected to defer the gain received upon the exercise of
these stock options. He continues to hold 295,368 stock units as a
result of this deferral.
Pension Plan Annuity and Supplemental Annuity
In 1988, we terminated our defined benefits pension plan. To pay
pension plan benefits to the vested participants, we purchased a group annuity
contract from Metropolitan Life Insurance Company with a portion of the
terminated pension plan assets. The executive officers named in the Summary
Compensation Table are eligible to receive an annuity amount on retirement,
adjusted to reflect cost of living increases in accordance with IRS limits.
Merrill Lynch participates in the actuarial experience and investment
performance of the annuity assets.
Those retiring at age 65 with at least 10 years of pension plan
participation will receive up to the maximum amount permitted by law for the
year in which the annuity payments are made. In 2000, the maximum amount was
$126,000 for those born between 1938 and 1954. Those retiring at an earlier
retirement age will receive reduced annuity payments.
If annuity payments are payable as straight life annuities, they will
not exceed the following annual amounts: $103,655 for Mr. Komansky; $85,015
for Mr. Davis; $5,679 for Mr. O'Neal; $54,825 for Mr. Peek; and $100,466 for
Mr. Hammerman. These amounts reflect an offset for estimated social security
benefits, as required by the terms of the terminated pension plan.
In January of 1997, we entered into an annuity agreement with Mr.
Komansky that provides for supplemental annuity payments to Mr. Komansky and
his surviving spouse. Mr. Komansky is entitled to the annuity if he retires or
dies while employed by Merrill Lynch. The payment will be made monthly in the
form of a life annuity, or a 10-year certain and life annuity, or a 50% or
100% joint and survivor life annuity. The annual amount of his annuity will be
equal to either: (1) $1,620,000 if payable as a straight life annuity or a
10-year certain and life annuity, or (2) $1,370,000 if payable as a 50% or
100% joint and survivor life annuity. These amounts will be subject to the
following adjustments:
o Deduction of: (1) the dollar amount of the pension plan annuity described
above; (2) the combined annuity value at retirement of account balances
attributable to our contributions to the 401(k) Savings & Investment
Plan and the Retirement Accumulation Plan and to the allocations under the
Employee Stock Ownership Plan, and (3) 50% of the annual social security
retirement benefit amount receivable at retirement at age 65 (computed as of
his actual retirement date if earlier than age 65).
o Semi-annual adjustment for inflation until the commencement of payments.
20
Severance Agreements
We have severance agreements with certain members of our executive
and senior management. These agreements provide for payments and other
benefits if: (1) there is a "Change in Control" of Merrill Lynch, and (2)
employment terminates for a qualifying reason, such as being terminated
without "Cause" or leaving employment for "Good Reason" (as these terms are
described in the severance agreements).
Under each agreement, if a member of executive or senior management
is entitled to severance compensation, that employee will receive:
o a lump sum payment equal to the lesser of: (A) 2.99 times the
employee's average annual W-2 compensation for the five years before
termination, and (B) 2.99 times the employee's average annual
salary, bonus, and the grant value of stock-based compensation for
the five years before termination,
o the value of various insurance benefits for 24 months after
termination, plus an amount covering income taxes on that payment,
and
o a payment of the retirement contribution, plus an amount covering
income taxes on that payment, that the employee would have been
eligible to receive from us under the terms of our retirement
program if the employee had been employed by us for an additional 24
months at his or her highest annual rate of compensation during the
12 months before termination.
Any payments under the severance agreements will be in addition to
amounts payable under certain stock-based plans, including our Long-Term
Incentive Compensation Plan (the "LTICP"), except as otherwise provided in the
severance agreements. The LTICP provides for early vesting and payment if an
employee is terminated under circumstances described in the LTICP.
21
Compensation of Directors
Fees and Expenses
In addition to reimbursement of the expense of attending meetings, we
paid non-employee directors in 2000:
o base compensation of $55,000.
o $15,000 for chairing the Management Development and Compensation
Committee.
o $15,000 for chairing both the Audit and the Finance Committees.
o $10,000 for chairing each of the Public Policy and Responsibility
and Nominating Committees.
We did not pay other committee members compensation for their service
as members.
Non-employee directors are entitled to defer all or a portion of
their base compensation and committee fees. Deferred payments are held in
accounts with values indexed either to (a) the performance of selected mutual
funds or certain sponsored employee partnerships, or (b) the performance of
our common stock, including reinvested dividends.
Stock Compensation
We also grant non-employee directors (a) deferred units (representing
our obligation to pay the value of one share of common stock) and deferred
stock units (representing our obligation to deliver one share of our common
stock) valued at $50,000 each when they join our Board of Directors, and (b)
in the month following the fifth Annual Meeting after their most recent grant,
additional deferred units and deferred stock units valued at $50,000. The
grant value of deferred units or deferred stock units is reduced
proportionately for directors retiring in less than five years. In addition,
each non-employee director is eligible for an annual $10,000 grant of deferred
units.
o Deferred units and deferred stock units are payable at the end of a
five-year deferral period, or earlier if the non-employee director's
service on the Board of Directors ends. The grants are pro-rated if
a director's service ends prior to scheduled retirement for any
reason other than death.
o While outstanding, the units receive dividend equivalents, but may
not vote.
o Payment of the units may be deferred.
Retirement
Each non-employee director who has served for five years (or has
reached age 65 with at least one year of service) and who then ceases to serve
on the board for any reason other than removal for cause is entitled to
receive a pension benefit. The beneficiary(ies) or estate of each non-employee
director is entitled to receive a death benefit if he or she dies during his
or her term. The annual base compensation of a non-employee director
(currently $55,000) at the end of his or her service on the board or death and
his or her age and length of service determines the amount of each of these
benefits. Although the amount and method of payment of each of these benefits
cannot be determined until the time of entitlement, it will not be more on an
annualized basis than the non-employee director's annual base compensation at
the time he or she ceases to serve on the board or dies.
Benefits
We offer medical insurance benefits to non-employee directors and
eligible family members. These benefits are generally comparable to those
offered to our employees, except that we provide these benefits on a
non-contributory basis and with differences in deductible, coinsurance and
lifetime benefits. We also offer life and business travel insurance
22
benefits to non-employee directors. In the 2000 fiscal year, the value of
medical insurance coverage that we provided was $666 for Mrs. Conway, $1,776
for Mr. Hoover, and $1,776 for Mr. Phelan. The value of life insurance
coverage which we provided for Mrs. Peters was $618.
Compensation Committee Interlocks And Insider Participation
The members of the MDCC are named in the table on page 9. None of
these individuals has ever been an officer or employee of Merrill Lynch or any
of its subsidiaries and no "compensation committee interlocks" existed during
the 2000 fiscal year.
23
Performance Graph
The following performance graph compares the performance of our
common stock for the last five years to that of the S&P 500
Index, the S&P Financial Index, and two indices based on the common stock of
the following two groups of peer companies:
Company Peer Group #1 Peer Group #2
A.G. Edwards, Inc. X X
The Bear Stearns Companies Inc. X X
The Charles Schwab Corporation X X
The Chase Manhattan Corporation X
Citigroup Inc. X X
The Goldman Sachs Group, Inc. X
J.P. Morgan & Co. Incorporated X X
Lehman Brothers Holdings Inc. X X
Morgan Stanley Dean Witter & Co. X X
Paine Webber Group Inc. X
Peer Group #1 consists of the companies included in the peer group in
Merrill Lynch's 2000 Proxy Statement. Peer Group #2 is a new group that
reflects the following changes to last year's peer group: The Goldman Sachs
Group, Inc. (which first issued publicly traded stock on May 4, 1999) and The
Chase Manhattan Corporation (which merged with J.P. Morgan & Co. Incorporated
on December 31, 2000) have been added, and Paine Webber Group Inc. (which
merged into UBS AG on November 3, 2000 and is no longer a U.S. publicly traded
company) has been removed.
The graph assumes that the value of the investment in our common
stock and each of the four named indices was $100 at December 29, 1995 and
that all dividends were reinvested. Points on the graph represent the
performance as of the last Friday in December of the specified year, the day
of Merrill Lynch's fiscal year-end. Stock price performance shown on the graph
is not necessarily indicative of future price performance.
[Performance Graph]
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Merrill Lynch 100 168 274 294 346 572
S&P 500 Index 100 125 155 201 242 220
S&P Financial Index 100 140 186 214 222 280
Peer Group #1 100 144 222 273 424 516
Peer Group #2 100 150 211 266 386 450
24
Certain Transactions
Some directors, executive officers and their associates may from time
to time borrow money from Merrill Lynch in the form of margin account loans,
mortgage loans, revolving lines of credit, and other extensions of credit.
These transactions are entered into in the ordinary course of business on
substantially the same terms, including interest rates and collateral
provisions, as those prevailing at the time for comparable transactions with
our other customers.
For some credit products, interest rates charged were the lowest
rates charged to other customers, or were at the rates charged to our
employees. These transactions did not involve more than the normal risk of
collectibility or other unfavorable features. Our directors, officers, and
employees are entitled to receive certain discounts, or waivers of fees or
commissions, for products and services offered by our subsidiaries.
State Street Bank and Trust Company is the beneficial owner of more
than 5% of the outstanding shares of our common stock. We and certain of our
subsidiaries have engaged in transactions in the ordinary course of business
with State Street and with certain of its affiliates. These transactions were
on substantially the same terms as comparable transactions with other customer
organizations.
We performed investment banking, financial advisory, and other
services in the ordinary course of our business, for certain corporations with
which some of our directors are affiliated.
The law firm of Gibson, Dunn & Crutcher LLP performed legal services
for Merrill Lynch and for mutual funds advised by Merrill Lynch. Aulana L.
Peters, one of our directors, retired as a partner of this law firm during
2000.
The current directors who were also directors between 1984 and 1988
are named defendants in a 1991 consolidated stockholder derivative action in
the Supreme Court of New York, New York County. Unspecified damages are sought
in connection with transactions between Merrill Lynch and Guarantee Security
Life Insurance Company.
25
Fees Paid to Our Independent Auditors
Audit Fees: The aggregate fees billed for professional services
rendered by Deloitte & Touche LLP, our independent auditors, in connection
with the audit and review of our 2000 financial statements was $20,115,000.
Financial Information Systems Design and Implementation Fees: The
aggregate fees billed for professional services rendered in connection with
financial information systems design and implementation by Deloitte & Touche
LLP was $6,746,028.
All Other Fees: The aggregate of all other fees billed for
professional services, including fees for audit-related activities, rendered
during 2000 by Deloitte & Touche LLP was $32,837,413.
The Audit Committee has considered whether the services rendered by
our independent auditors with respect to the foregoing fees are compatible
with maintaining their independence.
Stockholder Proposals for the 2002 Annual Meeting
If you intend to present a proposal at our 2002 Annual Meeting and
wish your proposal to be included in the proxy statement for that meeting you
must submit your proposal in writing to us at the following address: Merrill
Lynch & Co., Inc., 222 Broadway, 17th Floor, New York, New York 10038-2510,
Attention: Corporate Secretary. We must receive your proposal no later than
November 16, 2001.
The persons named as proxies for the 2002 Annual Meeting will
generally have discretionary authority to vote on any matter which a
stockholder presents for action at that meeting. If we receive notice from a
stockholder of:
o a nomination for the election of a director at least 50 days but not more
than 75 days before the Annual Meeting, or
o any other type of stockholder proposal at least 50 days before the Annual
Meeting,
then the people named as proxies may generally vote on those matters. In order
for the people named as proxies to exercise their discretionary authority to
vote on a matter presented by a stockholder for action at the meeting, we must
include in the proxy statement advice on the nature of the matter and how the
persons named as proxies intend to vote. The proxies' ability to exercise
discretionary authority may be limited by the SEC's rules governing
stockholder proposals.
26
Exhibit A
Adopted: June 5, 2000
Audit Committee Charter
Purpose
- -------
The Audit Committee (the "Committee") shall be appointed by the Board of
Directors (the "Board") of Merrill Lynch & Co., Inc. (together with its
affiliates, the "Company") to assist the Board in overseeing the preparation
of the Company's consolidated financial statements, the Company's system of
internal controls, including the Company's risk management and compliance
functions, and the independence and performance of the Company's internal and
independent auditors.
Membership
- ----------
The Committee's membership is determined by the Board and consists of at least
three (3) Board members in accordance with the Company's By-Laws. The
Committee shall meet all applicable requirements of the Audit Committee Policy
of the New York Stock Exchange with respect to independence, financial
literacy, and accounting or related financial management expertise, and any
other matters required by the New York Stock Exchange or the Securities and
Exchange Commission.
Authority
- ---------
The Committee shall have full, free and unrestricted authority to, and the
ability to communicate with, the Company's senior management and employees,
and internal and independent auditors and shall have the authority to retain
outside third parties, as it determines appropriate, to fulfill its
responsibilities.
The Committee's responsibility is one of oversight. It is the responsibility
of the Company's management to prepare consolidated financial statements in
accordance with generally accepted accounting principles and of the Company's
independent auditor to audit those financial statements. The Committee does
not provide any expert or other special assurance as to such financial
statements concerning compliance with laws, regulations, or generally accepted
accounting principles.
The Committee shall have authority to take any and all acts that it deems
necessary to carry out its oversight function, including but not limited to:
1. Financial Statements
--------------------
A. Reviewing with Company management and the independent auditor,
the Company's audited consolidated financial statements,
including the matters set forth in Statement of Auditing
Standards No. 61, as well as related significant financial
reporting issues, judgments, estimates made in preparing such
financial statements and other matters required by professional
auditing literature. After review, recommending to the Board
whether the audited consolidated financial statements be
included in the Company's Annual Report on Form 10-K.
2. Independent Auditor
-------------------
A. Selecting, evaluating, and recommending to the Board the
nomination of and, where appropriate, the replacement of, the
independent auditor. The independent auditor shall be ultimately
accountable to the Committee and the Board.
B. Evaluating and satisfying itself as to the independence of the
independent auditor by, among other things, (i) ensuring that
the independent auditor periodically submits to the Committee a
formal written statement delineating all relationships between
such auditor and the Company;(ii) actively engaging in a dialogue
with the independent auditor with respect to any disclosed
relationships or services that may impact its objectivity and
independence; and (iii) if appropriate, recommending that the
Board take action to satisfy itself of the independence of the
auditor.
C. Reviewing the annual plan and scope of work of the independent
auditor and monitoring any and all related fees for these and
all other services.
D. Discussing the adequacy of the Company's internal controls with
the independent auditor.
3. Internal Audit
--------------
A. Reviewing the annual plan and scope of work of Internal Audit.
B. Reviewing, as appropriate, the results of internal audits and
discussing related significant internal control matters with
Internal Audit and with Company management.
C. Discussing the adequacy of the Company's internal controls with
Internal Audit.
D. Reviewing the appointment and performance of the Company's
Director of Internal Audit and the adequacy of resources to
support Internal Audit.
4. Risk Management and Compliance
------------------------------
A. Overseeing the Company's risk management function.
B. Overseeing the Company's compliance function.
5. Meetings, Reports and Charter Review
------------------------------------
A. Holding regular meetings of the Committee, reporting significant
matters arising from such meetings to the Board and, at least
once per year, meeting separately with the independent and
internal auditors without Company management present.
B. Providing the report of the Committee in the Company's annual
proxy statement, as required by the rules of the Securities and
Exchange Commission.
C. Annually reviewing and assessing the adequacy of this charter
and, if appropriate, recommending changes to the Board.
LOGO
Merrill Lynch & Co., Inc.
4 World Financial Center
New York, NY 10080
www.ml.com
Preliminary Copy
MERRILL LYNCH & CO., INC. PROXY Annual Meeting - April 27, 2001
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I appoint Stephen L. Hammerman and Thomas H. Patrick individually as proxies to
vote as indicated on the back of this card all of my Merrill Lynch & Co., Inc.
Common Stock at the Annual Meeting of Stockholders to be held on April 27,
2001, or at any
adjournment of that meeting and, in their discretion, upon
other matters that arise at the meeting. I also give each
of them the ability to substitute someone else as proxy. I
revoke any proxy previously given for the same shares of
stock.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH INSTRUCTIONS GIVEN ON THE BACK OF THIS
CARD. IF THIS PROXY IS SIGNED AND RETURNED WITHOUT
SPECIFIC INSTRUCTIONS AS TO ANY ITEM OR ALL ITEMS, IT WILL
BE VOTED FOR THE ELECTION OF 3 DIRECTORS, FOR PROPOSALS
(2) AND (3), AND AGAINST STOCKHOLDER PROPOSAL (4).
- -------------------------------------------- -----------------------------
(Signature of Stockholder) (Date)
- -------------------------------------------- -----------------------------
(Signature of Stockholder) (Date)
Please vote on the reverse of this card. Sign, date and return this card
promptly using the enclosed envelope. Sign exactly as name appears above. Each
joint tenant should sign. When signing as attorney, trustee, etc., give full
title.
- ---------------------------------------------------------- -----------------------------------------------------------------
The Board of Directors The Board The Board of Directors The Board
recommends a vote FOR Recommends recommends a vote AGAINST Recommends
proposals (1), (2) and (3) ---------- stockholder proposal (4) ----------
X X
---------------------------------------------------------- -----------------------------------------------------------------
(1) The election to the FOR WITHHOLD (4) Institute cumulative voting FOR AGAINST ABSTAIN
Board of Directors all nominees authority to
of the 3 nominees named listed (except vote for all
below for a term of as indicated nominees [ ] [ ] [ ]
3 years: to the listed
contrary below)
David H. Komansky
Robert P. Luciano [ ] [ ]
David K. Newbigging
(2) Amend the Certificate of FOR AGAINST ABSTAIN
Incorporation to
increase the authorized [ ] [ ] [ ]
shares of common stock
(3) Amend the Employee Stock FOR AGAINST ABSTAIN
Purchase Plan to
increase the authorized [ ] [ ] [ ]
shares
Instruction: To withhold authority to vote for one or more
individual nominees, write the name(s) of such person(s) here: _____________________________________________________________
(To be signed on the other side)
MERRILL LYNCH & CO., INC.
1986 EMPLOYEE STOCK PURCHASE PLAN
1. Definitions.
"Account" means an Employee Stock Purchase Plan (BlueprintSM) account
maintained by Merrill Lynch, Pierce, Fenner & Smith Incorporated, a subsidiary
of ML & Co.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Management Development and Compensation Committee of the
Board of Directors of ML & Co.
"Common Stock" means ML & Co. Common Stock, par value $1.331/3 per share.
"Current Eligible Compensation" for any pay period means the gross amount of
Eligible Compensation with respect to which net amounts are actually paid in
such pay period, provided that, for all Eligible Employees (other than
officers of ML & Co., as defined in Rule 16a-1 under the Securities Exchange
Act of 1934), the gross amount of any portion of incentive compensation, under
ML & Co.'s Variable Incentive Compensation Program or Office Management
Incentive Compensation Plan (or any equivalents, or successors thereto) or
incentive compensation for Financial Consultants with pay frequencies other
than monthly, with respect to which net amounts are paid on an accelerated
basis in the last two months of the fourth calendar quarter of any Plan Year,
shall be included in Current Eligible Compensation for the pay period
beginning January 1 of the next following Plan Year only, and provided further
that for officers of ML & Co., as defined in Rule 16a-1 under the Securities
Exchange Act of 1934, any such accelerated gross amounts shall not be included
as Current Eligible Compensation in either the Plan Year in which they were
paid or the next following Plan Year.
"Default Dollar Amount" means the lesser of (i) the dollar amount payroll
deduction, if any, as in effect for a Participating Employee as of the end of
the previous Plan Year for this Plan or the Employee Stock Purchase Plan for
Employees of Merrill Lynch Partnerships or (ii) the maximum dollar amount
payroll deduction, if any, allowable for such Participating Employee for such
Plan Year.
"Dollar Amount Eligible Compensation" for any Plan Year means the gross amount
of Eligible Compensation paid during the calendar year two years prior to such
Plan Year provided that, for all Eligible Employees (other than officers of ML
& Co., as defined in Rule 16a-1 under the Securities Exchange Act of 1934) for
the purpose of determining Dollar Amount Eligible Compensation for any Plan
Year after 1992, the gross amount of any incentive compensation paid pursuant
to ML & Co.'s Variable Incentive Compensation Program or Office Management
Incentive Compensation Plan (or any equivalents, or successors thereto) or
incentive compensation for Financial Consultants with pay frequencies other
than monthly, with respect to which net amounts are paid on an accelerated
basis in the last two months of the fourth calendar quarter of any year, shall
be included as Dollar Amount Eligible Compensation in the next following
calendar year only, and provided further that for officers of ML & Co., as
defined in Rule 16a-1 under the Securities Exchange Act of 1934, any such
accelerated gross amounts shall not be included as Dollar Amount Eligible
Compensation in either the calendar year in which they were paid or the next
following calendar year.
"Eligible Compensation" means base salary, asset gathering compensation,
adjusted compensation, incentive compensation, overtime, bonuses and/or other
regular payments, with such additions or deletions as may be determined by the
Director of Human Resources to be necessary to provide consistency with other
plans of ML & Co., subject to any applicable requirements or limitations under
Section 423 of the Code.
"Eligible Employee" means employees eligible to participate in the Plan
pursuant to the provisions of Section 5.
"Fair Market Value" means the mean of the high and low sales prices of a share
of Common Stock on the New York Stock Exchange on the date in question or, if
the Common Stock shall not have been traded on such exchange on such date, the
mean of the high and low sales prices on such exchange on the first day prior
thereto on which the Common Stock was so traded or such other amount as may be
determined by the Committee by any fair and reasonable means.
"Investment Date" means the Friday immediately preceding the 15th day of the
month following the end of each calendar quarter, or such other date as may be
determined by the Committee or its delegate, subject to any applicable
requirements or limitations under Section 423 of the Code.
"ML & Co." means Merrill Lynch & Co., Inc., a Delaware corporation.
"Participating Employee" means an employee (i) for whom payroll deductions are
currently being made or (ii) for whom payroll deductions are not currently
being made because he or she has reached the limitation set forth in Section
7.
"Plan" means this Merrill Lynch & Co., Inc. 1986 Employee Stock Purchase Plan.
"Plan Year" means a calendar year.
"SIP" means the Merrill Lynch & Co., Inc. 401(k) Savings & Investment Plan.
"Subsidiary" means any corporation not excluded by the Committee or its
delegate, in its sole discretion, 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.
2. Purpose of the Plan.
The purpose of the Plan is to secure for ML & Co. and its stockholders the
benefits of the incentive inherent in the ownership of ML & Co.'s capital
stock by present and future employees of ML & Co. and its Subsidiaries. The
Plan is intended to comply with the provisions of Sections 421, 423 and 425
[since the date of adoption of the Plan, Section 425 has been renumbered to
Section 424] of the Code and the Plan shall be administered, interpreted and
construed in accordance with such provisions.
3. Shares Reserved for the Plan.
There shall be reserved for issuance and purchase by employees under the Plan
an aggregate of 100,600,000 shares of Common Stock, subject to adjustment as
provided in Section 13. Shares subject to the Plan may be shares now or
hereafter authorized but unissued, or shares that were once issued and
subsequently re-acquired by ML & Co. If and to the extent that any right to
purchase reserved shares shall not be exercised by any employee for any reason
or if such right to purchase shall terminate as provided herein, shares that
have not been so purchased hereunder shall again become available for the
purposes of the Plan unless the Plan shall have been terminated, but such
unpurchased shares shall not be deemed to increase the aggregate number of
shares specified above to be reserved for purposes of the Plan (subject to
adjustment as provided in Section 13).
4. Administration of the Plan.
The Plan shall be administered, at the expense of ML & Co., by the Committee.
The Committee consists of not less than 3 members of the Board of Directors
who are not officers or in the employ of ML & Co., who are not eligible, and
for a period of one year prior to the commencement of their service on the
Committee have not been eligible, to participate in the Plan, who are
non-employee directors within the terms of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, and who shall serve at the pleasure of the
Board of Directors. The Committee may request advice or assistance or employ
such other persons as are necessary for proper administration of the Plan.
Subject to the express provisions of the Plan, the Committee shall have
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to delegate duties and responsibilities under Plan
in accordance with the terms of such Plan, and to make all other
determinations necessary or advisable in administering the Plan, all of which
determinations shall be final and binding upon all persons.
5. Eligible Employees.
All employees of ML & Co. and each Subsidiary shall be eligible to participate
in the Plan, provided that each of such employees
(a) is not in a group of key employees that, pursuant to Section
423(b)(4)(D) of the Code, the Committee or its delegate determines
to be ineligible to participate in the Plan; and
(b) has been employed by ML & Co. and/or any Subsidiary (or any
predecessor thereof) for a period of one year, or for such shorter
period (continuous or otherwise) as may be determined by the
Committee or its delegate, subject to any applicable requirements or
limitations under Section 423 of the Code, and is employed by ML &
Co. or any Subsidiary during the enrollment period for the Plan Year
for which participation is to commence; and
(c) does not own, immediately after the right is granted, stock
possessing five percent (5%) or more of the total combined voting
power or value of all classes of capital stock of ML & Co. or of a
Subsidiary.
In determining stock ownership under this Section 5, the rules of Section
425(d) [since date of adoption of the Plan, Section 425(d) has been renumbered
to Section 424(d)] of the Code shall apply and stock that the employee may
purchase under outstanding options shall be treated as stock owned by the
employee. Eligible Employees who have been or will be laid off or retired on
the first day of a Plan Year cannot participate in such Plan Year.
6. Election to Participate and Payroll Deductions.
Each Eligible Employee may elect to participate in the Plan during an
applicable enrollment period.
Each Eligible Employee may elect to make payroll deduction contributions to
the Plan (in the form of a percentage and/or a stated dollar amount) from
Eligible Compensation or Current Eligible Compensation in accordance with such
rules and limitations as may be determined by the Committee or its delegate,
subject to any applicable requirements or limitations under Section 423 of the
Code.
Elections under this Section 6 are subject to the limits set forth in Section
7. All payroll deductions shall be credited, as promptly as practicable, to an
account in the name of the Participating Employee and may be used by ML & Co.
for any corporate purpose.
Unless he or she elects otherwise during an enrollment period, an Eligible
Employee who is a Participating Employee in either this Plan or the Employee
Stock Purchase Plan for Employees of Merrill Lynch Partnerships on the day
before a Plan Year (or such other period as may be determined by the Committee
or its delegate) commences will be deemed (i) to have elected to participate
in the applicable period and (ii) to have authorized the same type of payroll
deduction (i.e., percentage or dollar amount) for such period as in effect for
such employee on the day before such period commences. That payroll deduction
will be either the same percentage deduction or deductions in effect for such
employee on the day before such period commences or the Default Dollar Amount,
as applicable.
A Participating Employee may at any time cease participation in the Plan by
filing the required election with ML & Co. The cessation will be effective as
soon as practicable, whereupon no further payroll deductions shall be made,
and payroll deductions not theretofore invested shall be invested as provided
in Section 9. Any Participating Employee who ceases to participate may elect
to participate in a subsequent applicable period, if then eligible. A
Participating Employee may at any time during an applicable period, (but not
more than such number of times as may be determined by the Committee or its
delegate) change his or her payroll deductions by filing the required election
with ML & Co., which change shall become effective with the first pay period
of the first succeeding applicable period to which it may be practicably
applied.
7. Limitation of Number of Shares That an Employee May Purchase.
No right to purchase shares under this Plan shall permit an employee to
purchase stock under all employee stock purchase plans of ML & Co. and its
subsidiaries (as defined in Section 423 of the Code) at a rate which in the
aggregate exceeds $25,000 of Fair Market Value of such stock (determined at
the time the right is granted, which, in the case of this Plan, is the
Investment Date) for each calendar year in which the right is outstanding at
any time.
8. Purchase Price.
The purchase price for each share of Common Stock shall be eighty-five percent
(85%) of the Fair Market Value of such share on the Investment Date, or such
greater percentage as may be determined by the Committee or its delegate,
subject to any applicable requirements or limitations under Section 423 of the
Code.
9. Method of Purchase and Investment Accounts.
As of each Investment Date, each Participating Employee shall be offered the
right to purchase, and shall be deemed, without any further action, to have
purchased, the number of whole and fractional shares of Common Stock
determined by dividing the amount of his or her payroll deductions not
theretofore invested by the purchase price as determined in Section 8. All
such shares shall be maintained in separate Accounts for the Participating
Employees. All dividends paid with respect to such shares shall be credited to
each Participating Employee's Account, and will be automatically reinvested in
whole and fractional shares of Common Stock, unless the Participating Employee
elects not to have such dividends reinvested.
10. Title of Accounts.
Each Account may be in the name of the Participating Employee or, if he or she
so indicates in the appropriate election, in his or her name jointly with
another person, with right of survivorship. A Participating Employee who is a
resident of a jurisdiction that does not recognize such a joint tenancy may
have an Account in his or her name as tenant in common with another person,
without right of survivorship.
11. Rights as a Stockholder.
At the time funds from a Participating Employee's payroll deductions account
are used to purchase the Common Stock, he or she shall have all of the rights
and privileges of a stockholder of ML & Co. with respect to whole shares
purchased under the Plan whether or not certificates representing full shares
have been issued.
12. Rights Not Transferable.
Rights granted under the Plan are not transferable by a Participating Employee
other than by will or the laws of descent and distribution and are
excercisable during his or her lifetime only by him or her.
13. Adjustment in Case of Changes Affecting ML & Co.'s Common Stock.
In the event of a subdivision of outstanding shares of Common Stock, or the
payment of a stock dividend thereon, the number of shares reserved or
authorized to be reserved under this Plan shall be increased proportionately,
and such other adjustment shall be made as may be deemed necessary or
equitable by the Board of Directors. In the event of any other change
affecting the Common Stock, such adjustment shall be made as may be deemed
equitable by the Board of Directors to give proper effect to such event,
subject to the limitations of Section 425 [since date of adoption of the Plan,
Section 425 has been renumbered to Section 424] of the Code.
14. Retirement, Termination and Death.
In the event of a Participating Employee's retirement or termination of
employment during a Plan Year or other applicable period, the amount of his or
her payroll deductions not theretofore invested shall be refunded to him or
her, and in the event of his or her death shall be paid to his or her estate,
any such refund or payment to be made as soon as practicable after the next
Investment Date.
15. Amendment of the Plan.
The Board of Directors may at any time, or from time to time, amend the Plan
in any respect; provided, however, that the Plan may not be amended in any way
that will cause rights issued under it to fail to meet the requirements for
employee stock purchase plans as defined in Section 423 of the Code, including
stockholder approval if required.
16. Termination of the Plan.
The Plan and all rights of employees hereunder shall terminate:
(a) on the Investment Date that Participating Employees become entitled
to purchase a number of shares greater than the number of reserved
shares remaining available for purchase; or
(b) at any time, at the discretion of the Board of Directors.
In the event that the Plan terminates under circumstances described in (a)
above, reserved shares remaining as of the termination date shall be sold to
Participating Employees on a pro rata basis.
17. Effective Date of the Plan.
The Plan shall be effective as of October 23, 1986.
18. Governmental and Other Regulations.
The Plan, and the grant and exercise of the rights to purchase shares
hereunder, and ML & Co.'s obligation to sell and deliver shares upon the
exercise of rights to purchase shares, shall be subject to all applicable
Federal, state and foreign laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may, in the opinion of counsel for
ML & Co., be required.
19. Indemnification of Committee.
Service on the Committee shall constitute service as a Director of ML & Co. 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.