Exhibit 10.3
MERRILL LYNCH & CO., INC.
2006 DEFERRED COMPENSATION PLAN
FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES
DATED AS OF MAY 23, 2005
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
MERRILL LYNCH & CO., INC.
2006 DEFERRED COMPENSATION PLAN
FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES
Table of Contents
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MERRILL LYNCH & CO., INC.
2006 DEFERRED COMPENSATION PLAN
FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES
ARTICLE I
GENERAL
1.1 Purpose and Intent.
The purpose of the Plan is to encourage the employees who are integral to the success of
the business of the Company to continue their employment by providing them with flexibility in
meeting their future income needs. This Plan is unfunded and maintained primarily for the
purpose of providing deferred compensation for a select group of management or highly
compensated employees within the meaning of Title I of ERISA, and all decisions concerning who
is to be considered a member of that select group and how this Plan shall be administered and
interpreted shall be consistent with this intention.
1.2 Definitions.
For the purpose of the Plan, the following terms shall have the meanings indicated.
“Account” means the notional account established on the books and records of ML & Co. for
each Participant to record the Participant’s interest under the Plan.
“Account Balance” means, as of any date, the Deferred Amounts credited to a Participant’s
Account, adjusted in accordance with Section 3.4 to reflect the performance of the
Participant’s Selected Benchmark Return Options, the Annual Charge, the Debit Balance, (if any)
any adjustments in the event of a Capital Call Default, and any payments made from the Account
under Article V to the Participant prior to that date.
“Adjusted Compensation” means the financial advisor incentive compensation, account
executive incentive compensation or estate planning and business insurance specialist incentive
compensation, in each case exclusive of base salary, earned by a Participant during the Fiscal
Year ending in 2006, and payable after January 1, 2006, as a result of the Participant’s
production credit level, or such other similar items of compensation as the Administrator shall
designate as “Adjusted Compensation” for purposes of this Plan.
“Administrator” means the Head of Rewards and Recognition Planning for ML & Co., or his or
her functional successor, or any other person or committee designated as Administrator of the
Plan by the Administrator or the MDCC.
“Affiliate” means any corporation, partnership, or other organization of which ML & Co.
owns or controls, directly or indirectly, not less than 50% of the total combined voting power
of all classes of stock or other equity interests.
“Annual Charge” means the charge to a Participant’s Account provided for in Section
3.4(g).
“Applicable Federal Rate” means the applicable federal rate for short-term (0-3 years)
obligations of the United States Treasury as determined initially in the month of closing of ML
Ventures and thereafter in January of each subsequent year.
“Available Balance” means amounts in a Participant’s Account that are indexed to Benchmark
Return Options with daily liquidity after the Account’s Debit Balance has been reduced to zero.
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“Average Leveraged Principal Amount” means, for each Participant, for any period, the sum
of the Leveraged Principal Amounts outstanding at the end of each day in the period divided by
the number of days in such period.
“Benchmark Return Options” means such investment vehicles as the Administrator may from
time to time designate for the purpose of indexing Accounts hereunder. In the event a Benchmark
Return Option ceases to exist or is no longer to be a Benchmark Return Option, the Administrator
may designate a substitute Benchmark Return Option for such discontinued option.
“Board of Directors” means the Board of Directors of ML & Co.
“Capital Call” means the periodic demands for funds from a Participant’s Account that will
be equal to and occur simultaneously with capital calls made by private equity funds (including
ML Ventures) chosen as a return option by the Participant.
“Capital Call Default” means that there is an insufficient Liquid Balance in the
Participant’s Account to fund a Capital Call.
“Capital Demand Default Adjustment” means the negative adjustment described in Section 3.4
in the number of “units” (including units acquired by “Leverage”) attributed to a Private Equity
Fund Return Options that will be the result of a Capital Call Default.
“Cash Compensation” means (1) (for VICP eligible employees) salary in the reference year
plus VICP earned in the reference year and paid in January or February of the next calendar year
or (2) (for Financial Advisors and other employees receiving Adjusted Compensation) base salary
plus Adjusted Compensation paid in the reference year.
“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time.
“Company” means ML & Co. and all of its Affiliates.
“Compensation” means, as relevant, a Participant’s Adjusted Compensation, Variable
Incentive Compensation and/or Sign-On Bonus, or such other items or items of compensation as the
Administrator, in his or her sole discretion, may specify in a particular instance.
“Debit Balance” means, as of any date, the dollar amount, if any, representing each of: (1)
the aggregate Annual Charge, accrued in accordance with Section 3.4(g)(i); and (2) any Leveraged
Principal Amount (together with any pro rata Interest Amounts determined in accordance with
Section 3.4(g)(ii), if applicable), as reduced by any distributions recorded from ML Ventures
Units recorded in a Participant’s Account in accordance with Section 3.4(e).
“Deferral Percentage” means the percentage (which, unless the Administrator, in his or her
sole discretion, determines otherwise, shall be in whole percentage increments and not more than
90%) specified by the Participant to be the percentage of each payment of Compensation he or she
wishes to defer under the Plan.
“Deferred Amounts” means, except as provided in Section 5.6, the amounts of Compensation
actually deferred by the Participant under this Plan.
“Election Year” means the 2005 calendar year.
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“Eligible Compensation” means (1) for persons eligible for the Variable Incentive
Compensation Program or other similar programs: (A) a Participant’s 2004 base earnings plus (B)
any cash bonus awarded in early 2005, and (2) for persons ineligible for such bonus programs, a
Participant’s 2004 Adjusted Compensation.
“Eligible Employee” means an employee eligible to defer amounts under this Plan, as
determined under Section 2.1 hereof.
“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended from
time to time.
“Fiscal Month” means the monthly period used by ML & Co. for financial accounting purposes.
“Fiscal Year” means the annual period used by ML & Co. for financial accounting purposes.
“Full-Time Domestic Employee” means a full-time employee of the Company paid from the
Company’s domestic based payroll (other than any U.S. citizen or “green card” holder who is
employed outside the United States).
“Full-Time Expatriate Employee” means a U.S. citizen or “green card” holder employed by the
Company outside the United States and selected by the Administrator as eligible to participate
in the Plan (subject to the other eligibility criteria).
“Initial Leveraged Amount” means the initial dollar amount by which a Participant’s
deferral into ML Ventures Units is leveraged as determined in accordance with Section 3.4(c).
“Interest” means the hypothetical interest accruing on a Participant’s Average Leveraged
Principal Amount at the Applicable Federal Rate.
“Interest Amounts” means, for any Participant, as of any date, the amount of Interest that
has accrued to such date on such Participant’s Average Leveraged Principal Amount, from the date
on which a Participant’s Leveraged Principal Amount is established, or from the most recent date
that Interest Amounts were added to the Leveraged Principal Amount.
“Leveraged or Unleveraged Distributions” means the distributions to a Participant’s Account
attributable to the leveraged or unleveraged portion (as the case may be) of a Participant’s ML
Ventures Units.
“Leverage-Eligible Participants” means persons who (1) are accredited investors within the
meaning of the Securities Act of 1933, and (2) received Cash Compensation of at least $300,000
in 2002, and (3) received Cash Compensation of at least $200,000 in 2001 and otherwise qualify,
in accordance with standards determined by the Administrator, to select a ML Ventures Return
Option on a leverage basis.
“Leveraged Principal Amount” means a Participant’s Initial Leveraged Amount, if any, as
adjusted to reflect the addition of Interest Amounts (or any pro rata Interest Amounts).
“Leverage Percentage” means the percentage of leverage chosen by a Leverage-Eligible
Participant, which percentage shall not exceed 200%.
“Liquid Balance” means, as of any date, the Deferred Amounts credited to a Participant’s
Account, not including amounts that represent future commitments to Private Equity Funds,
including
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ML Ventures, adjusted (either up or down) to reflect: (1) the performance of the Participant’s
Mutual Fund Return Balances as provided in Section 3.4(f); (2) distributions with respect to ML
Ventures Units made in accordance with Section 3.4(d); (3) reduction of any Debit Balance as
provided in Section 3.4(e); and (4) any payments to the Participant under Article V hereof.
“Maximum Deferral” means the whole dollar amount specified by the Participant to be the
amount of Compensation he or she elects to be deferred under the Plan.
“MDCC” means the Management Development and Compensation Committee of the Board of
Directors.
“ML & Co.” means Merrill Lynch & Co., Inc.
“ML Ventures Return Option” means the option of indexing returns hereunder to the
performance of a ML Ventures limited partnership, on a leveraged or unleveraged basis.
“ML Ventures Units” means the record-keeping units credited to the Accounts of Participants
who have chosen the ML Ventures Return Option.
“Mutual Fund Return Options” means the mutual funds chosen as Benchmark Return Options by
the Administrator.
“Net Asset Value” means, with respect to each Benchmark Return Option that is a mutual fund
or other commingled investment vehicle for which such values are determined in the normal course
of business, the net asset value, on the date in question, of the vehicle for which such value
is being determined.
“Participant” means an Eligible Employee who has elected to defer Compensation under the
Plan.
“Plan” means this Merrill Lynch & Co., Inc. 2006 Deferred Compensation Plan for a Select
Group of Eligible Employees.
“Plan Year” means the Fiscal Year ending in 2006.
“Private Fund Return Option(s)” means one or more private funds that are chosen by the
Administrator to be offered – with such limitations as may be
required – to eligible
Participants as Benchmark Return Options.
“Private Fund Unit(s)” means the record-keeping units credited to the Accounts of
Participants who have chosen one or more Private Fund Return Options.
“Retirement” means a Participant’s (i) termination of employment with the Company for
reasons other than for cause on or after the Participant’s 65th birthday, or (ii) termination of
employment on or after the Participant’s 55th birthday if the Participant has at least 10 years
of service.
“Rule of 45” means a Participant’s termination of employment with the Company for reasons
other than cause (1) on or after (A) having completed at least five (5) years of service and (B)
reaching any age, that, when added to service with the Company (in each case, expressed as
completed years and completed months), equals at least 45; or (2) as the result of (A) becoming
employed by an unconsolidated affiliate of the Company (as specified by the Head of Human
Resources) or (B) being
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a part of a divestiture or spin-off designated by the Head of Human Resources as eligible,
provided that, a Participant shall not qualify for the Rule of 45 if he or she engages in a
business which the Administrator, in his or her sole discretion, determines to be in competition
with the business of the Company.
“Remaining Deferred Amounts” means the product of a Participant’s Deferred Amounts times a
fraction equal to the number of remaining installment payments divided by the total number of
installment payments.
“Selected Benchmark Return Option” means a Benchmark Return Option selected by the
Participant in accordance with Section 3.4.
“Sign-On Bonus” means a single-sum amount paid or payable to a new Eligible Employee during
the Plan Year upon commencement of employment, in addition to base pay and other Compensation,
to induce him or her to become an employee of the Company, or any similar item of compensation
as the Administrator shall designate as “Sign-On Bonus” for purposes of this Plan.
“Undistributed Deferred Amounts” means, as of any date on which the Annual Charge is
determined, a Participant’s Deferred Amounts (exclusive of any appreciation or depreciation)
minus, for each distribution to a Participant prior to such date, an amount equal to the product
of the Deferred Amounts and a fraction the numerator of which is the amount of such distribution
and the denominator of which is the combined Net Asset Value (prior to distribution) of the
Participant’s Account as of the date of the relevant distribution.
“Variable Incentive Compensation” means the variable incentive compensation or office
manager incentive compensation that is paid in cash to certain employees of the Company
generally in January or February of the Plan Year with respect to the prior Fiscal Year, which
for purposes of this Plan is considered earned during the Plan Year regardless of when it is
actually paid to the Participant, or such other similar items of compensation as the
Administrator shall designate as “Variable Incentive Compensation” for purposes of this Plan.
“401(k) Plan” means the Merrill Lynch & Co., Inc. 401(k) Savings & Investment Plan.
ARTICLE II
ELIGIBILITY
2.1 Eligible Employees.
(a) General Rule. An individual is an Eligible Employee if he or she (i) is a Full-Time
Domestic Employee or a Full-Time Expatriate Employee, (ii) has at least $300,000 of Eligible
Compensation for the year prior to the Election Year, and (iii) has attained the title of Vice
President or higher.
(b) Individuals First Employed During Election Year or Plan Year. Subject to the approval
of the Administrator in his or her sole discretion, an individual who is first employed by the
Company during the Election Year or the Plan Year is an Eligible Employee if his or her Eligible
Compensation, together, if applicable, with the amount of any Variable Incentive Compensation
that will be payable to such individual in the next annual bonus cycle pursuant to a written
bonus guarantee, is greater than $300,000, and he or she is employed as or is to be nominated
for the title of Vice President or higher at the first opportunity following his or her
commencement of employment with the Company.
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(c) Disqualifying Factors. An individual shall not be an Eligible Employee if either (i)
as of the deadline for submission of elections specified in Section 3.1(a), the individual’s
wages have been attached or are being garnished or are otherwise restrained pursuant to legal
process, or (ii) within 13 months prior to the deadline for submission of elections specified in
Section 3.1(a), the individual has made a hardship withdrawal of Elective 401(k) Deferrals as
defined under the 401(k) Plan.
ARTICLE III
DEFERRAL ELECTIONS; ACCOUNTS
3.1 Deferral Elections.
(a) Timing and Manner of Making of Elections. An election to defer Compensation for
payment in accordance with Article V shall be made by submitting to the Administrator such forms
as the Administrator may prescribe in whatever manner that the Administrator directs. Each
election submitted must specify a Maximum Deferral and a Deferral Percentage with respect to
each category of Compensation to be deferred. All elections by a Participant to defer
Compensation under the Plan must be received by the Administrator or such person as he or she
may designate for the purpose by no later than June 30 of the Election Year or, in the event
such date is not a business day, the immediately preceding business day; provided,
however, that (1) an Eligible Employee’s election to defer a Sign-On Bonus must be part
of such Eligible Employee’s terms and conditions of employment agreed to prior to the Eligible
Employee’s first day of employment with the Company and (2) an Eligible Employee’s election to
defer pursuant to Section 2.1(b) must occur no later than 30 days after his or her first day of
employment with the Company.
(b) Irrevocability of Deferral Election. Except as provided in Section 5.5, an election to
defer the receipt of any Compensation made under Section 3.1(a) is irrevocable once submitted to
the Administrator or his or her designee. The Administrator’s acceptance of an election to
defer Compensation shall not, however, affect the contingent nature of such Compensation under
the plan or program under which such Compensation is payable.
(c) Application of Election. The Participant’s Deferral Percentage will be applied to each
payment of Compensation to which the Participant’s deferral election applies, provided
that the aggregate of the Participant’s Deferred Amounts shall not exceed the Participant’s
Maximum Deferral. If a Participant has made deferral elections with respect to more than one
category of Compensation, this Section 3.1(c) shall be applied separately with respect to each
such category.
3.2 Crediting to Accounts.
(a) Initial Deferrals. A Participant’s Deferred Amounts will be credited to the
Participant’s Account as soon as practicable (but in no event later than the end of the
following month) after the last day of the Fiscal Month during which such Deferred Amounts
would, but for deferral, have been paid and will be accounted for in accordance with Section
3.4. No interest will accrue, nor will any adjustment be made to an Account, for the period
until the Deferred Amounts are credited.
(b) Private Fund Return Options. Upon the closing of any Private Return Option, a
Participant’s Account will be credited with a number of units determined by dividing by $1,000
the sum of the following: (1) the portion of the Account Balance that the Participant has
elected to allocate to the Private Return Option, as of the day prior to the closing date; and
(in the case of ML Ventures only) (2) the Participant’s Initial Leveraged Amount (computed in
accordance with Section 3.4(c)).
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3.3 Minimum Requirements for Deferral.
Notwithstanding any other provision of this Plan, no deferral will be effected under this
Plan with respect to a Participant if:
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(i) |
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the Participant is not an Eligible Employee as of December 31, 2005, or |
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(ii) |
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the Participant’s election as applied to the Participant’s Variable
Incentive Compensation (determined by substituting the Election Year for the Plan
Year) or Adjusted Compensation (determined by substituting the Fiscal Year
immediately prior to the Fiscal Year ending in the Election Year for the Fiscal
Year ending in the Plan Year) would have resulted in an annual deferral of less
than $15,000: |
provided, that any Participant who first becomes an employee of the Company during the
Plan Year shall not be required to satisfy conditions (i) and (ii). Condition (ii) does not
require a Participant’s elections to result in an actual deferral of at least $15,000.
3.4 Return Options; Adjustment of Accounts.
(a) Selection of Private Fund Return Options. In any year that a Private Fund partnership
is offered as a return option, an eligible Participant may select the Private Fund Return
Option, provided that the selection of such return option is consistent with the Participant’s
payment election under the terms of the Plan and applicable law. Upon the closing of a
selected Private Fund Return Option, the selecting Participant will not be able to change his
or her selection of such return option. In addition, upon a Capital Call Default with respect
to certain Private Fund Return Options, the defaulting Participant may be penalized by having
his or her Account adjusted downward in accordance with Section 3.4 (d).
(b) Selection
of Mutual Fund Return Options. Coincident with the Participant’s election
to defer Compensation, the Participant must select the percentage of the Participant’s Account
to be adjusted to reflect the performance of Mutual Fund Return Options, for use when a
Participant’s Account has a Liquid Balance. All elections shall be in multiples of 1%. A
Participant may, by complying with such procedures as the Administrator may prescribe on a
uniform and nondiscriminatory basis, including procedures specifying the frequency with respect
to which such changes may be effected (but not more than 12 times in any calendar year), change
the Selected Benchmark Return Options to be applicable with respect to his or her Account.
(c) Selection of the ML Ventures Leverage Percentage by Eligible Participants. In any
year that a ML Ventures Return Option is offered as a return option, an eligible Participant
may select the ML Ventures Return Option, provided that the selection of such return option is
consistent with the Participant’s payment election under the terms of the Plan and applicable
law. Prior to the closing of the offering of an ML Ventures partnership, Leverage-Eligible
Participants who select the ML Ventures Return Option on a leveraged basis must choose their
Leverage Percentage, in accordance with standards determined by the Administrator, by
submitting such forms as the Administrator shall prescribe. Prior to the closing of an ML
Ventures partnership, the Administrator will determine each Leverage-Eligible Participant’s
Initial Leveraged Amount by applying such Participant’s Leverage Percentage to the dollar value
of the portion of the Participant’s Account Balance allocated to the ML Ventures Return Option.
The Initial Leveraged Amount will be recorded as the Leveraged Principal Amount, to which
amount Interest Amounts will be added annually in accordance with Section 3.4(e).
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(d) Adjustments of ML Ventures and other Private Fund Return Options.
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(i) |
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Whenever a distribution is paid on an actual unit of an ML Ventures
partnership or other Private Fund Return Option, an amount equal to such per unit
distribution times the number of units in the Participant’s Account will first be
applied against any Debit Balance, as provided in Section 3.4(e), and then, if any
portion of such distribution remains after the Debit Balance is reduced to zero, be
credited to the Participant’s Account to be indexed initially to ML Retirement
Reserves and then to the Mutual Fund Return Option(s) chosen by the Participant. |
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(ii) |
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In the event of a Capital Call Default, a Participant’s notional investment
in the relevant fund will be capped. If this occurs, the number of units
represented by the return option (including, in the case of ML Ventures, any
leveraged units) will be adjusted downward to reflect a smaller investment and
resulting lower leverage. |
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(iii) |
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The ML Ventures Units and the Debit Balance will also be adjusted in
accordance with Section 5.2 hereof in the event of a Participant’s termination. |
(e) Adjustment of Debit Balance. Any Debit Balance shall be reduced as soon as possible by
any distributions relating to ML Ventures Units. Reductions of the Debit Balance, as provided
in the foregoing sentence, shall be applied first to reduce the Debit Balance attributable to
accrued Annual Charges and then, after all such accrued Annual Charges have been satisfied, to
reduce any Leveraged Principal Amount. As of the last day of each Fiscal Year, Interest Amounts
computed by the Administrator shall be added to the Leveraged Principal Amount. If on any date
the Leveraged Principal Amount would be discharged completely as a result of distributions or
chargeoffs, Interest Amounts will be computed through such date and added to the Leveraged
Principal Amount as of such date.
(f) Adjustment of Mutual Fund Return Balances. While the Participant’s Balances do not
represent the Participant’s ownership of, or any ownership interest in, any particular assets,
the Balances attributable to Mutual Fund Return Options shall be adjusted to reflect credits or
debits relating to distributions from any Private Fund Return Options or chargeoffs against the
Debit Balance and to reflect the investment experience of the Participant’s Mutual Fund Return
Options in the same manner as if investments or dispositions in accordance with the
Participant’s elections had actually been made through the ML Benefit Services Platform and ML
II Core Recordkeeping System, or any successor system used for keeping records of Participants’
Accounts (the “ML II System”). In adjusting Accounts, the Participant will give instructions
to the ML Benefit Services Platform which will be reflected as credits or debits as of the
weekly processing of such instructions through the ML II System. This processing shall control
the timing and pricing of the notional investments in the Participant’s Mutual Fund Return
Options in accordance with the rules of operation of the ML II System and its requirements for
placing corresponding investment orders, as if orders to make corresponding investments or
dispositions were actually to be made on the transaction processing date. In connection with
the crediting of Deferred Amounts or distributions to the Participant’s Account and
distributions from or debits to the Account, appropriate deferral allocation instructions shall
be treated as received from the Participant prior to the close of transactions through the ML
II System on the relevant transaction processing date. Each Mutual Fund Return Option shall be
valued using the Net Asset Value of the Mutual Fund Return Option as of the relevant
transaction processing date; provided, that, in valuing a Mutual Fund Return Option for
which a Net Asset Value is not computed, the value of the security involved for determining
Participants’ rights under the Plan shall be the price reported for actual transactions in that
security through the ML II System on the relevant transaction processing date, without giving
effect to any transaction charges or costs
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associated with such transactions; provided, further, that, if there are no
such transactions effected through the ML II System on the relevant day, the value of the
security shall be:
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(i) |
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if the security is listed for trading on one or more national securities
exchanges, the average of the high and low sale prices for that day on the
principal exchange for such security, or if such security is not traded on such
principal exchange on that day, the average of the high and low sales prices on
such exchange on the first day prior thereto on which such security was so traded; |
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(ii) |
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if the security is not listed for trading on a national securities exchange
but is traded in the over-the-counter market, the average of the highest and lowest
bid prices for such security on the relevant day; or |
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(iii) |
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if neither clause (i) nor (ii) applies, the value determined by the
Administrator by whatever means he considers appropriate in his or her sole
discretion. |
All debits and charges against the Account shall be applied as a pro rata reduction of
the portion of the Account Balance indexed to each of the Participant’s Mutual Fund Return
Options.
(g) Annual Charge. As of the last day of each Fiscal Year or such earlier day in December
as the Administrator shall determine, an Annual Charge of 2.0% of the Participant’s Original
Deferred Amounts (exclusive of any appreciation or depreciation determined under Section 3.4
(f)) shall be applied to reduce the Account Balance.
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(i) |
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In the event that all or any portion of the Account Balance is indexed to a
Benchmark Return Option with less than daily liquidity, the Annual Charge will
accrue as a Debit Balance and be paid out of future amounts credited to the Account
Balance. |
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(ii) |
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In the event that the Participant elects to have the Account Balance paid
in installments, the Annual Charge will be charged on the Remaining Deferred
Amounts after giving effect to the installment payments. |
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(iii) |
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In the event that the Account Balance is paid out completely during a
Fiscal Year prior to the date upon which the Annual Charge is assessed, a pro
rata Annual Charge will be deducted from amounts to be paid to the Participant
to cover that fraction of the Fiscal Year that Deferred Amounts (or Remaining
Deferred Amounts in the case of installment payments) were maintained hereunder.
The Annual Charge shall be applied as a pro rata reduction of the portion
of the Account Balance indexed to each of the Participant’s Selected Benchmark
Return Options. In applying the Annual Charge, the pricing principles set forth in
Section 3.4(f) will be followed. |
(h) Rollover Option. In the discretion of the Administrator or a designee, additional
Benchmark Return Options , including Return Options with less than daily liquidity, may be
offered to all Participants under the Plan or to a more limited group of Participants. In such
event, Participants will be allowed, in such manner as the Administrator shall determine, to
elect that all or a portion of Account Balances be indexed to such Benchmark Return Options.
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(i) |
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With respect to Benchmark Return Options that do not provide daily
liquidity: (A) except as otherwise provided under the Plan and applicable law,
payments under Article V will be made in accordance with a Participant’s election
at the time of the Participant’s original deferral; (B) Participants may be limited
in their ability to elect, change or continue their Benchmark Return Options in
accordance with such terms |
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and conditions as the Administrator or a designee may determine; and (C) the
Annual Charge shall be accrued and paid, when possible, upon liquidation of all
or any portion of the Benchmark Return Option, provided that no payment shall be
made to a Participant under Article V hereof until all accrued Annual Charges
have been paid. |
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(ii) |
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In the event that such limited liquidity options include future ML Ventures
Partnerships, the designated amounts shall be credited to such Participant,
accounted for, adjusted and paid out to such Participant in accordance with the
terms and conditions of this Plan and applicable law as they relate to the ML
Ventures Return Option. |
ARTICLE IV
STATUS OF DEFERRED AMOUNTS AND ACCOUNT
4.1 No Trust or Fund Created; General Creditor Status.
Nothing contained herein and no action taken pursuant hereto will be construed to create a
trust or separate fund of any kind or a fiduciary relationship between ML & Co. and any
Participant, the Participant’s beneficiary or estate, or any other person. Title to and
beneficial ownership of any funds represented by the Account Balance will at all times remain
in ML & Co.; such funds will continue for all purposes to be a part of the general funds of ML
& Co. and may be used for any corporate purpose. No person will, by virtue of the provisions
of this Plan, have any interest whatsoever in any specific assets of the Company. TO THE
EXTENT THAT ANY PERSON ACQUIRES A RIGHT TO RECEIVE PAYMENTS FROM ML & CO. UNDER THIS PLAN, SUCH
RIGHT WILL BE NO GREATER THAN THE RIGHT OF ANY UNSECURED GENERAL CREDITOR OF ML & CO.
4.2 Non-Assignability.
The Participant’s right or the right of any other person to the Account Balance or any
other benefits hereunder cannot be assigned, alienated, sold, garnished, transferred, pledged,
or encumbered except by a written designation of beneficiary under this Plan, by written will,
or by the laws of descent and distribution.
4.3 Effect of Deferral on Benefits Under Pension and Welfare Benefit Plans.
The effect of deferral on pension and welfare benefit plans in which the Participant may
participate will depend upon the provisions of each such plan, as amended from time to time.
ARTICLE V
PAYMENT OF ACCOUNT
5.1 Manner of Payment.
A Participant’s Account Balance will be paid by the Company, as elected by the Participant
at the time of his or her deferral election, either in a single payment to be made, or in the
number of annual installments (not to exceed 15) chosen by the Participant to commence, (i) in
the month following the month of the Participant’s Retirement or death, (ii) in any month and
year selected by the Participant after the end of 2006, or (iii) in any month in the calendar
year following the Participant’s Retirement; provided that, if a Participant’s election
would result in payment (in the case of a single payment) or commencement of payment (in the
case of installment payments) after the Participant’s 70th birthday, then, notwithstanding the
Participant’s elections, the Company will pay, or commence payment of, the Participant’s
Account Balance in the month following the Participant’s
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70th birthday unless the Participant continues to be an active full time employee at such time,
in which case the Company will pay, or commence payment of, the Participant’s Account Balance
in the month following the Participant’s cessation of active service (to the extent payment has
not already been made or commenced). The amount of each annual installment, if applicable,
shall be determined by multiplying the Account Balance as of the last day of the month
immediately preceding the month in which the payment is to be made by a fraction, the numerator
of which is one and the denominator of which is the number of remaining installment payments
(including the installment payment to be made).
5.2 Termination of Employment.
(a) Death, Retirement, Rule of 45. Subject to Section 5.2(b)(2), upon a Participant’s
death or Retirement (as defined in this Plan), or termination when the Participant complies
with the Rule of 45 (as defined in this Plan) prior to payment, the Account Balance will be
paid, in accordance with the Participant’s elections and as provided in Section 5.1, to the
Participant or to the Participant’s beneficiary (in the event of death); provided,
however, that (1) in the event that the Participant enters into competition with the
business of Merrill Lynch, he or she will not be eligible for Retirement or Rule of 45
treatment under this Section 5.2 (a), and (2) in the event that a beneficiary of the
Participant’s Account is the Participant’s estate or is otherwise not a natural person, the
applicable portion of the Account Balance will promptly be paid in a single payment to such
beneficiary notwithstanding any election of installment payments.
| |
(b) |
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Other Termination of Employment; Treatment of Key Employees; Forfeiture of
Leverage. |
(1) Subject to Section 5.2(b)(2), if a Participant’s employment terminates at any time for
any other reason than those described in Section 5.2(a), then, notwithstanding the
Participant’s elections hereunder, any Available Balance will be paid to the Participant in a
single payment in the month following the month of the Participant’s termination.
(2) If a Participant’s employment terminates at any time while the Participant constitutes
a specified employee within the meaning of section 409A of the Code, then, notwithstanding the
Participant’s elections hereunder, any Available Balance will be paid to the Participant (or to
the Participant’s beneficiary, in the event of death) in a single payment in the month
following the earlier of (i) the six-month anniversary of the Participant’s termination or (ii)
the month of the Participant’s death.
(3) In the event that a Participant’s employment terminates at any time for any reason
other than death, disability or the Participant’s qualification for Retirement under this Plan,
such Participant will forfeit all rights to the unvested leveraged portion of such
Participant’s ML Ventures Units, including any future Leveraged Distributions, unless the
Administrator, in his or her sole discretion, determines that such forfeiture would be
detrimental to Merrill Lynch; provided, however, that such forfeiture will not occur if (a) the
Participant is terminated by ML & Co. as the result of a reduction in staff, (b) the
Participant delivers to ML & Co. a release of claims (in a form approved by the Administrator
and counsel) he or she may have against the corporation or any of its subsidiaries, and (3)
such Participant complies with the terms of such release. In the event of such forfeiture, the
Participant’s Account Balance and Debit Balance will be restated, as of the date of
termination, to reflect what such balances would have been had the Participant selected no
leverage under Section 3.4(c). To the extent necessary, the Participant’s Account Balance will
also be adjusted, as of the date of the termination, to credit the Participant with the amount
of any Unleveraged Distributions that were previously applied to the repayment of the Leveraged
Principal Amount and any Interest Amounts and, to the extent necessary, any Leveraged
Distributions paid out to the Participant will be
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restated as a Debit Balance. Leveraged and Unleveraged Distributions shall be deemed to
have been applied and distributed proportionately. All calculations hereunder shall be made by
the Administrator and shall be final and conclusive.
(c) Leave of Absence, Transfer or Disability. The Participant’s employment will not be
considered as terminated if the Participant (1) is on an approved leave of absence; (2)
transfers or is transferred but remains in the employ of the Company or an unconsolidated
affiliate; or (3) is eligible to receive disability payments under the ML & Co. Basic Long-Term
Disability Plan.
5.3 Withholding of Taxes.
ML & Co. will deduct or withhold from any payment to be made or deferred hereunder any
U.S. Federal, state or local or foreign income or employment taxes required by law to be
withheld or require the Participant or the Participant’s beneficiary to pay any amount, or the
balance of any amount, required to be withheld.
5.4 Beneficiary.
(a) Designation of Beneficiary. The Participant may designate, in a writing delivered to
the Administrator or his or her designee before the Participant’s death, a beneficiary to
receive payments in the event of the Participant’s death. The Participant may also designate a
contingent beneficiary to receive payments in accordance with this Plan if the primary
beneficiary does not survive the Participant. The Participant may designate more than one
person as the Participant’s beneficiary or contingent beneficiary, in which case (i) no
contingent beneficiary would receive any payment unless all of the primary beneficiaries
predeceased the Participant, and (ii) the surviving beneficiaries in any class shall share in
any payments in proportion to the percentages of interest assigned to them by the Participant.
(b) Change in Beneficiary. The Participant may change his or her beneficiary or
contingent beneficiary (without the consent of any prior beneficiary) in a writing delivered to
the Administrator or his or her designee before the Participant’s death. Unless the
Participant states otherwise in writing, any change in beneficiary or contingent beneficiary
will automatically revoke prior such designations of the Participant’s beneficiary or of the
Participant’s contingent beneficiary, as the case may be, under this Plan only; and any
designations under other deferral agreements or plans of the Company will remain unaffected.
(c) Default Beneficiary. In the event that a Participant does not designate a
beneficiary, or no designated beneficiary survives the Participant, the Participant’s
beneficiary shall be the Participant’s surviving spouse, if the Participant is married at the
time of his or her death and not subject to a court-approved agreement or court decree of
separation, or otherwise the person or persons designated to receive benefits on account of the
Participant’s death under the ML & Co. Basic Group Life Insurance Plan (the “Life Insurance
Plan”). However, if an unmarried Participant does not have coverage in effect under the Life
Insurance Plan, or the Participant has assigned his or her death benefit under the Life
Insurance Plan, any amounts payable to the Participant’s beneficiary under the Plan will be
paid to the Participant’s estate.
(d) If the Beneficiary Dies During Payment. If a beneficiary who is receiving or is
entitled to receive payments hereunder dies after the Participant dies, but before all the
payments have been made, the portion of the Account Balance to which that beneficiary was
entitled will be paid as soon as practicable in one lump sum to such beneficiary’s estate and
not to any contingent beneficiary the Participant may have designated.
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5.5 Distributions Upon Unforeseeable Emergency.
ML & Co. has the sole discretion, but shall not be required, to pay to the Participant, on
such terms and conditions as the Administrator may establish, such part or all of the
Participant’s Account Balance as the Administrator determines, based upon substantial evidence
submitted by the Participant, is necessary to alleviate an unforeseeable emergency of the
Participant. An unforeseeable emergency is defined as a severe financial hardship to the
Participant (i) resulting from an illness or accident of the Participant, the Participant’s
spouse, or a dependent (as defined in section 152(a) of the Code, (ii) loss of the
Participant’s property due to casualty, or (iii) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Participant. The amount
of the distribution shall not exceed the amount needed to satisfy the emergency plus taxes
reasonably anticipated as a result of the distribution. A distribution shall not be allowed to
the extent that the hardship may be relieved through reimbursement or compensation by insurance
or otherwise, or by liquidation of the Participant’s assets (to the extent such liquidation
would not itself cause a severe financial hardship). Such payment will be made only at the
Participant’s written request and with the express approval of the Administrator and will be
made on the date selected by the Administrator in his or her sole discretion. The balance of
the Account, if any, will continue to be governed by the terms of this Plan.
5.6 Domestic Relations Orders.
Notwithstanding the Participant’s elections hereunder, ML & Co. will pay to, or to the
Participant for the benefit of, the Participant’s spouse or former spouse the portion of the
Participant’s Account Balance specified in a valid court order entered in a domestic relations
proceeding involving the Participant’s divorce or legal separation. Such payment will be made
in a lump sum and net of any amounts the Company may be required to withhold under applicable
federal, state or local law. After such payment, references herein to the Participant’s
“Deferred Amounts” (including, without limitation, for purposes of determining the Annual
Charge applicable to any remaining Account Balance) shall mean the Participant’s original
Deferred Amounts times an amount equal to one minus a fraction, the numerator of which is the
gross amount (prior to withholding) paid pursuant to the order, and the denominator of which is
the Participant’s Account Balance immediately prior to payment.
| 5.7 |
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No Actions Permitted that Would Cause Constructive Receipt or Violate Section 409A of the
Code. |
Notwithstanding any provision of the Plan to the contrary, no deferral election, payment
election, modification of any election under the Plan or other action with respect to the Plan
shall be permitted to the extent that such election, modification or other action would violate
any requirement of Section 409A of the Code or would cause any Participant or Beneficiary to be
in constructive receipt of any amount hereunder.
ARTICLE VI
ADMINISTRATION OF THE PLAN
6.1 Powers of the Administrator.
The Administrator has full power and authority to interpret, construe and administer this
Plan so as to ensure that it provides deferred compensation for the Participants as members of
a select group of management or highly compensated employees within the meaning of Title I of
ERISA. The Administrator’s interpretations and construction hereof, and actions hereunder,
including any determinations regarding the amount or recipient of any payments, will be binding
and conclusive on all persons for all purposes. The Administrator will not be liable to any
person for any action taken or
13
omitted in connection with the interpretation and administration of this Plan unless
attributable to his or her willful misconduct or lack of good faith. The Administrator may
designate persons to carry out the specified responsibilities of the Administrator and shall
not be liable for any act or omission of a person as designated.
6.2 Payments on Behalf of an Incompetent.
If the Administrator finds that any person who is entitled to any payment hereunder is a
minor or is unable to care for his or her affairs because of disability or incompetency,
payment of the Account Balance may be made to anyone found by the Administrator to be the
committee or other authorized representative of such person, or to be otherwise entitled to
such payment, in the manner and under the conditions that the Administrator determines. Such
payment will be a complete discharge of the liabilities of ML & Co. hereunder with respect to
the amounts so paid.
6.3 No Right of Set-Off.
Unless specifically authorized by a Participant, the Company shall have no right of
set-off with respect to any Participant’s Account Balances or Account under the Plan and unless
so authorized, the Company shall not withhold any sums owed to a Participant under the Plan.
6.4 Corporate Books and Records Controlling.
The books and records of the Company will be controlling in the event that a question
arises hereunder concerning the amount of Adjusted Compensation, Incentive Compensation,
Sign-On Bonus, Eligible Compensation, the Deferred Amounts, the Account Balance, the
designation of a beneficiary, or any other matters.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Litigation.
The Company shall have the right to contest, at its expense, any ruling or decision,
administrative or judicial, on an issue that is related to the Plan and that the Administrator
believes to be important to Participants, and to conduct any such contest or any litigation
arising therefrom to a final decision.
7.2 Headings Are Not Controlling.
The headings contained in this Plan are for convenience only and will not control or
affect the meaning or construction of any of the terms or provisions of this Plan.
7.3 Governing Law.
To the extent not preempted by applicable U.S. Federal law, this Plan will be construed in
accordance with and governed by the laws of the State of New York as to all matters, including,
but not limited to, matters of validity, construction, and performance.
7.4 Amendment and Termination.
ML & Co., through the Administrator, reserves the right to amend or terminate this Plan at
any time, except that no such amendment or termination shall adversely affect the right of a
Participant to his or her Account Balance (as reduced by the Annual Charge, the Debit Balance or the Leveraged
Principal Amount and Interest thereon, as set forth in Section 3.4) as of the date of such
amendment or termination.
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