As filed with the Securities and Exchange Commission on
October 1, 2008
Registration
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
BANK OF AMERICA
CORPORATION
(Exact Name of Registrant as
Specified in its Charter)
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Delaware
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6021
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56-0906609
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(State or other
jurisdiction of incorporation)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification Number)
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Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina 28255
(704) 386-5681
(Address, including Zip Code,
and Telephone Number, including Area Code, of Registrants
Principal Executive Offices)
Timothy J. Mayopoulos, Esq.
Executive Vice President and General Counsel
Bank of America Corporation
Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina 28255
(704) 386-7484
(Name, Address, including Zip
Code, and Telephone Number, including Area Code, of Agent for
Service)
With copies to:
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Edward D. Herlihy, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
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Rosemary T. Berkery, Esq.
Vice Chairman and General Counsel
Merrill Lynch & Co., Inc.
4 World Financial Center
New York, New York 10080
(212) 449-1000
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John J. Madden, Esq.
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
(212) 848-4000
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Approximate date of commencement of the proposed sale of the
securities to the public: As soon as practicable
after this Registration Statement becomes effective and upon
completion of the merger described in the enclosed document.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act
of 1933, as amended, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount to
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Offering
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Aggregate
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Registration
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Securities to be Registered
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be Registered(1)
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Price per Unit
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Offering Price
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Fee(4)
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Common Stock, par value $0.01 per share
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1,709,883,000
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N/A
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$48,501,393,294.60
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$1,906,104.76
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Floating Rate Non-Cumulative Preferred Stock, Series 1, par
value $0.01 per share
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21,000
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N/A
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$630,000,000(3)
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$24,759.00
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Floating Rate Non-Cumulative Preferred Stock, Series 2, par
value $0.01 per share
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37,000
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N/A
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$1,110,000,000(3)
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$43,623.00
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6.375% Non-Cumulative Preferred Stock, Series 3, par value
$0.01 per share
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27,000
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N/A
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$810,000,000(3)
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$31,833.00
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Floating Rate Non-Cumulative Preferred Stock, Series 4, par
value $0.01 per share
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20,000
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N/A
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$600,000,000(3)
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$23,580.00
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Floating Rate Non-Cumulative Preferred Stock, Series 5, par
value $0.01 per share
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50,000
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N/A
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$1,500,000,000(3)
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$58,950.00
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6.70% Noncumulative Perpetual Preferred Stock, Series 6,
par value $0.01 per share
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65,000
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N/A
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$65,000,000(3)
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$2,554.50
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6.25% Noncumulative Perpetual Preferred Stock, Series 7,
par value $0.01 per share
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50,000
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N/A
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$50,000,000(3)
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$1,965.00
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8.625% Non-Cumulative Preferred Stock, Series 8, par value
$0.01 per share
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89,100
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N/A
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$2,673,000,000(3)
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$105,048.90
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(1) |
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Represents the estimated maximum number of shares of the
Registrants (i) common stock, (ii) Floating Rate
Non-Cumulative Preferred Stock, Series 1,
(iii) Floating Rate Non-Cumulative Preferred Stock,
Series 2, (iv) 6.375% Non-Cumulative Preferred Stock,
Series 3, (v) Floating Rate Non-Cumulative Preferred
Stock, Series 4, (vi) Floating Rate Non-Cumulative
Preferred Stock, Series 5, (vii) 6.70% Noncumulative
Perpetual Preferred Stock, Series 6, (viii) 6.25%
Noncumulative Perpetual Preferred Stock, Series 7, and
(ix) 8.625% Non-Cumulative Preferred Stock, Series 8,
to be issued in connection with the merger described herein. The
number of shares of common stock is based on the number of
shares of Merrill Lynch & Co, Inc. common stock
outstanding and reserved for issuance under various plans and in
connection with various exchangeable and convertible securities
as of September 26, 2008, and the exchange of each such
share of Merrill Lynch & Co., Inc. common stock for
shares of the Registrants common stock pursuant to the
formula set forth in the Agreement and Plan of Merger, dated as
of September 15, 2008, by and between
Merrill Lynch & Co., Inc. and the Registrant. The
number of shares of each series of Merrill Lynch preferred stock
is based on the number of shares of each series outstanding as
of September 26, 2008. |
(2) |
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Estimated solely for purposes of calculating the registration
fee required by Section 6(b) of the Securities Act, and
calculated pursuant to Rules 457(f)(1) and 457(c) under the
Securities Act, the proposed maximum aggregate offering price of
the Registrants common stock was calculated based upon the
market value of shares of Merrill Lynch & Co., Inc.
common stock (the securities to be cancelled in the merger) in
accordance with Rule 457(c) under the Securities Act as
follows: the product of (A) $24.38, the average of the high
and low prices per share of Merrill Lynch & Co., Inc.
common stock on September 26, 2008, as quoted on the New
York Stock Exchange, multiplied by (B) 1,989,392,670, the
estimated maximum number of shares of Merrill Lynch &
Co., Inc. common stock outstanding and reserved for issuance
under various plans and in connection with various exchangeable
and convertible securities as of September 29, 2008. |
(3) |
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Estimated solely for the purpose of calculating the registration
fee required by Section 6(b) of the Securities Act and
calculated in accordance with Rule 457(f)(2) under the
Securities Act. The proposed maximum aggregate offering price of
the registrants preferred stock was calculated based upon
book value per share of Merrill Lynch preferred stock as of
September 29, 2008. |
(4) |
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Determined in accordance with Section 6(b) of the
Securities Act at a rate equal to $39.30 per $1,000,000 of the
proposed maximum aggregate offering price. |
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such dates as
the SEC, acting pursuant to said Section 8(a), may
determine.
Information
contained herein is subject to completion or amendment. A
registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective.
This document shall not constitute an offer to sell or the
solicitation of any offer to buy nor shall there be any sale of
these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such
jurisdiction.
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PRELIMINARY
SUBJECT TO COMPLETION DATED OCTOBER 1,
2008
MERGER
PROPOSED YOUR VOTE IS VERY IMPORTANT
Dear Stockholder:
On September 15, 2008, Merrill Lynch & Co., Inc.
and Bank of America Corporation announced a strategic business
combination in which a subsidiary of Bank of America will merge
with and into Merrill Lynch. If the merger is completed, holders
of Merrill Lynch common stock will have a right to receive
0.8595 of a share of Bank of America common stock for each share
of Merrill Lynch common stock held immediately prior to the
merger.
The market value of the merger consideration will fluctuate with
the market price of Bank of America common stock. The following
table shows the closing sale prices of Bank of America common
stock and Merrill Lynch common stock as reported on the New York
Stock Exchange on September 12, 2008, the last trading day
before public announcement of the merger, and on
[ ], 2008, the last practicable trading day
before the distribution of this document. This table also shows
the implied value of the merger consideration proposed for each
share of Merrill Lynch common stock, which we calculated by
multiplying the closing price of Bank of America common stock on
those dates by 0.8595, the exchange ratio.
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Implied Value of One
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Bank of America
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Merrill Lynch
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Share of Merrill Lynch
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Common Stock
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Common Stock
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Common Stock
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At September 12, 2008
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$
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33.74
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$
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17.05
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$
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29.00
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At [ ] , 2008
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$
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[ ]
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$
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[ ]
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$
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[ ]
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The merger is intended to qualify as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended, and holders of Merrill Lynch common stock are not
expected to recognize any gain or loss for United States federal
income tax purposes on the exchange of shares of Merrill Lynch
common stock for shares of Bank of America common stock in the
merger, except with respect to any cash received instead of
fractional shares of Bank of America common stock.
The market prices of both Bank of America common stock and
Merrill Lynch common stock will fluctuate before the merger. You
should obtain current stock price quotations for Bank of America
common stock and Merrill Lynch common stock. Bank of America
common stock is quoted on the NYSE under the symbol
BAC. Merrill Lynch common stock is quoted on the
NYSE under the symbol MER.
At a special meeting of Bank of America stockholders, Bank of
America stockholders will be asked to vote on the issuance of
Bank of America common stock in the merger and certain other
matters. The stock issuance proposal requires the votes cast in
favor of such proposal to exceed the votes cast against such
proposal at the special meeting by holders of Bank of America
common stock and 7% Cumulative Redeemable Preferred Stock,
Series B, which we refer to as Series B Preferred
Stock, voting together without regard to class.
At a special meeting of Merrill Lynch stockholders, Merrill
Lynch stockholders will be asked to vote on the adoption of the
merger agreement and certain other matters. To adopt the merger
agreement and to approve the related certificate amendment
requires the affirmative vote of the holders of a majority of
the outstanding shares of Merrill Lynch common stock entitled to
vote.
Holders of Merrill Lynch preferred stock and holders of
depositary shares representing Merrill Lynch preferred stock are
not entitled to and are not being requested to vote at the
Merrill Lynch special meeting.
The Bank of America board of directors unanimously recommends
that Bank of America stockholders vote FOR the proposal to issue
shares of Bank of America common stock in the merger and FOR the
other related proposals.
The Merrill Lynch board of directors unanimously recommends
that Merrill Lynch stockholders vote FOR adoption of the merger
agreement and FOR the other related proposals.
This document describes the special meetings, the merger, the
documents related to the merger and other related matters.
Please carefully read this entire document, including Risk
Factors beginning on page [ ] for a
discussion of the risks relating to the proposed merger. You
also can obtain information about our companies from documents
that each of us has filed with the Securities and Exchange
Commission.
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KENNETH D. LEWIS
Chairman, Chief Executive Officer and President Bank of America
Corporation
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JOHN A. THAIN
Chairman and Chief Executive Officer
Merrill Lynch & Co., Inc.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved the Bank of
America common stock or preferred stock to be issued under this
document or determined if this document is accurate or adequate.
Any representation to the contrary is a criminal offense.
The date of this document is
[ ] 2008,
and it is first being mailed or otherwise delivered to Bank of
America and Merrill Lynch stockholders on or about
[ ] 2008.
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
Merrill Lynch & Co., Inc. (Merrill Lynch) will hold a
special meeting of stockholders at Merrill Lynch Headquarters, 4
World Financial Center, New York, NY at 8:00 a.m., local
time, on
[ ],
2008 to consider and vote upon the following matters:
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a proposal to adopt the Agreement and Plan of Merger, dated as
of September 15, 2008, by and between Merrill
Lynch & Co., Inc. and Bank of America Corporation, as
such agreement may be amended from time to time;
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a proposal to amend the restated certificate of incorporation of
Merrill Lynch, contingent upon the approval of the foregoing
proposal and satisfaction of all other conditions to the closing
of the merger set forth in the merger agreement, and effective
immediately prior to the effective time of the merger, to
provide that holders of 9.00% Non-Voting Mandatory Convertible
Non-Cumulative Preferred Stock, Series 2, and the 9.00%
Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock,
Series 3, shall be entitled to 600 votes per share, and to
vote together as a single class with, the holders of Merrill
Lynch common stock on matters submitted for a vote of such
holders; and
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a proposal to approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies, in the
event that there are not sufficient votes at the time of the
special meeting to adopt the foregoing proposals.
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The Merrill Lynch board of directors has fixed the close of
business on October 10, 2008 as the record date for the
special meeting. Only Merrill Lynch stockholders (including
holders of exchangeable securities issued by Merrill Lynch
& Co., Canada Ltd. (Merrill Lynch Canada)) of record at
that time are entitled to notice of, and to vote at, the special
meeting, or any adjournment or postponement of the special
meeting. In order for the merger and the certificate amendment
proposal to be approved, the holders of at least a majority of
the Merrill Lynch shares outstanding and entitled to vote
thereon must vote in favor of adoption of the merger agreement
and approval of the certificate amendment.
Regardless of whether you plan to attend the special meeting,
please submit your proxy with voting instructions. Please vote
as soon as possible by accessing the internet site listed on the
Merrill Lynch proxy card, by calling the toll-free number listed
on the Merrill Lynch proxy card or by submitting your proxy card
by mail. If you hold your stock in street name
through a bank or broker, you must direct your bank or broker to
vote in accordance with the instruction form included with these
materials and forwarded to you by your bank or broker. This
voting instruction form provides instructions on voting by mail,
telephone or the internet at www.proxyvote.com. This will not
prevent you from voting in person, but it will help to secure a
quorum and avoid added solicitation costs. Any holder of Merrill
Lynch common stock who is present at the special meeting may
vote in person instead of by proxy, thereby canceling any
previous proxy. In any event, a proxy may be revoked in writing
at any time before the special meeting in the manner described
in the accompanying document.
If you plan to attend, we ask that you notify our Corporate
Secretary by calling
(212) 670-0432
or sending an email to corporate_secretary@ml.com.
Holders of Merrill Lynch preferred stock and holders of
depositary shares representing Merrill Lynch preferred stock are
not entitled to and are not being requested to vote at the
special meeting.
The Merrill Lynch board of directors, by unanimous vote at a
meeting duly called, approved the merger and the merger
agreement and unanimously recommends that Merrill Lynch
stockholders vote FOR adoption of the merger
agreement and FOR approval of the related
certificate amendment proposal and FOR the
adjournment of the Merrill Lynch special meeting if necessary or
appropriate to permit further solicitation of proxies.
Please do not send any stock certificates at this time.
BY ORDER OF THE BOARD OF DIRECTORS,
Judith A. Witterschein
Corporate Secretary
[ ],
2008
YOUR VOTE IS IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY,
REGARDLESS
OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING.
100 N. Tryon Street
Charlotte, North Carolina 28255
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
Bank of America Corporation will hold a special meeting of
stockholders at
[ ] located
at
[ ] at
[ ],
local time, on
[ ],
2008, to consider and vote upon the following matters:
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a proposal to approve the issuance of shares of Bank of America
common stock as contemplated by the Agreement and Plan of
Merger, dated as of September 15, 2008, by and between
Merrill Lynch & Co., Inc. and Bank of America
Corporation, as such agreement may be amended from time to time;
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a proposal to approve an amendment to the 2003 Key Associate
Stock Plan, as amended and restated;
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a proposal to adopt an amendment to the Bank of America amended
and restated certificate of incorporation to increase the number
of authorized shares of Bank of America common stock from
7.5 billion to 10 billion; and
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a proposal to approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies, in the
event that there are not sufficient votes at the time of the
special meeting to approve the foregoing proposals.
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The Bank of America board of directors has fixed the close of
business on October 10, 2008, as the record date for the
special meeting. Only Bank of America stockholders of record at
that time are entitled to notice of, and to vote at, the special
meeting, or any adjournment or postponement of the special
meeting. Holders of the Bank of America common stock and
Series B Preferred Stock vote together without regard to
class and will be entitled to vote at the special meeting.
Approval of the issuance of Bank of America common stock and the
amendment to the 2003 Key Associate Stock Plan, as amended and
restated, which we refer to as the Stock Plan, each requires the
votes cast in favor of each such proposal to exceed the votes
cast against such proposal at the special meeting, assuming a
quorum. Approval of the proposal to increase the number of
authorized shares of Bank of America common stock requires the
affirmative vote of a majority of the votes represented by the
outstanding shares of Bank of America common stock and
Series B Preferred Stock entitled to vote at the special
meeting, voting together without regard to class. Under Delaware
law, the affirmative vote of a majority of the votes represented
by the outstanding shares of Bank of America common stock
entitled to vote at the special meeting, counted separately as a
class without the Series B Preferred Stock, is also
required to increase the number of authorized shares of Bank of
America common stock.
Whether or not you plan to attend the special meeting, please
submit your proxy with voting instructions. Please vote as soon
as possible by accessing the internet site listed on the Bank of
America proxy card, by calling the toll-free number listed on
the Bank of America proxy card, or by submitting your proxy card
by mail. To submit your proxy by mail, please complete, sign,
date and return the accompanying proxy card in the enclosed
self-addressed, stamped envelope. This will not prevent you
from voting in person, but it will help to secure a quorum and
avoid added solicitation costs. Any holder of Bank of America
common stock who is present at the special meeting may vote in
person instead of by proxy, thereby canceling any previous
proxy. In any event, a proxy may be revoked in writing at any
time before the special meeting in the manner described in the
accompanying document.
The Bank of America board of directors has unanimously
approved the merger and the merger agreement and unanimously
recommends that Bank of America stockholders vote
FOR approval of the issuance of common stock in the
merger, FOR the amendment to the Stock Plan,
FOR the increase in authorized shares of common
stock and FOR the adjournment of the Bank of America
special meeting if necessary or appropriate to permit further
solicitation of proxies.
BY ORDER OF THE BOARD OF DIRECTORS,
Alice A. Herald
Corporate Secretary
[ ],
2008
YOUR VOTE IS IMPORTANT. PLEASE VOTE YOUR SHARES PROMPTLY,
REGARDLESS
OF WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING.
REFERENCES
TO ADDITIONAL INFORMATION
This document incorporates by reference important business and
financial information about Bank of America and Merrill Lynch
from documents that are not included in or delivered with this
document. You can obtain documents incorporated by reference in
this document, other than certain exhibits to those documents,
by requesting them in writing or by telephone from the
appropriate company at the following addresses:
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Bank of America Corporation
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Merrill Lynch & Co., Inc.
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Bank of America Corporate Center
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222 Broadway
17th Floor
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100 N. Tryon Street
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New York, New York 10038
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Charlotte, North Carolina 28255
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Attention: Judith A. Witterschein
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Investor Relations
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Corporate Secretary
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Telephone:
(704) 386-5681
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Telephone: (212) 670-0432
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You will not be charged for any of these documents that you
request. Bank of America and Merrill Lynch stockholders
requesting documents should do so by
[ ],
2008, in order to receive them before their respective special
meetings.
You should rely only on the information contained or
incorporated by reference into this document. No one has been
authorized to provide you with information that is different
from that contained in, or incorporated by reference into, this
document. This document is dated
[ ], 2008, and you should assume
that the information in this document is accurate only as of
such date. You should assume that the information incorporated
by reference into this document is accurate as of the date of
such document. Neither the mailing of this document to Merrill
Lynch stockholders or Bank of America stockholders nor the
issuance by Bank of America of shares of
Bank of America common stock in connection with the
merger will create any implication to the contrary.
This document does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities, or the
solicitation of a proxy, in any jurisdiction to or from any
person to whom it is unlawful to make any such offer or
solicitation in such jurisdiction. Information contained in this
document regarding Merrill Lynch has been provided by Merrill
Lynch and information contained in this document regarding Bank
of America has been provided by Bank of America.
See Where You Can Find More Information on
page [ ].
TABLE OF
CONTENTS
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67
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APPENDICES
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APPENDIX A
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Agreement and Plan of Merger, dated as of September 15,
2008, by and between Merrill Lynch & Co., Inc. and
Bank of America Corporation
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A-1
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APPENDIX B
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Stock Option Agreement, dated as of September 15, 2008, by and
between Merrill Lynch & Co., Inc. and Bank of America
Corporation
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B-1
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APPENDIX C
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Opinion of J.C. Flowers & Co. LLC
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C-1
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APPENDIX D
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Opinion of Fox-Pitt Kelton Cochran Caronia Waller (USA) LLC
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D-1
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APPENDIX E
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Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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E-1
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APPENDIX F
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Amendment to Bank of Americas 2003 Key Associate Stock
Plan, as Amended and Restated
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F-1
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iii
QUESTIONS
AND ANSWERS ABOUT VOTING PROCEDURES FOR THE SPECIAL
MEETINGS
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What do Merrill Lynch stockholders need to do now? |
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After you have carefully read this document and have decided how
you wish to vote your shares, please vote your shares promptly.
Please vote as soon as possible by accessing the internet site
listed on the Merrill Lynch proxy card, by calling the toll-free
number listed on the Merrill Lynch proxy card or by submitting
your proxy card by mail. If you hold your stock in street
name through a bank or broker, you must direct your bank
or broker to vote in accordance with the instruction form
included with these materials and forwarded to you by your bank
or broker. This voting instruction form provides instructions on
voting by mail, telephone or the internet at www.proxyvote.com.
Submitting your proxy card or directing your bank or broker to
vote your shares will ensure that your shares are represented
and voted at the Merrill Lynch special meeting. If you
participate in the Merrill Lynch Retirement Accumulation Plan,
the Merrill Lynch Employee Stock Ownership Plan or the Merrill
Lynch 401(k) Savings & Retirement Plan, and your
account has investments in shares of Merrill Lynch common stock,
you must provide voting instructions to the plan trustee (either
via the proxy card or by internet or telephone) in order for
your shares to be voted as you instruct. If no voting
instructions are received, the trustees will vote these shares
in the same ratio as the shares for which voting instructions
have been provided. Your voting instructions will be held in
strict confidence. If you participate in the Merrill Lynch
Employee Stock Purchase Plan, your shares must be voted in order
to count. If you would like to attend the Merrill Lynch special
meeting, see Can I attend the Merrill Lynch special
meeting and vote my shares in person? |
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What do Bank of America stockholders need to do now? |
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After you have carefully read this document and have decided how
you wish to vote your shares, please vote promptly by accessing
the internet site listed on your proxy card, by calling the
toll-free number listed on your proxy card or by submitting your
proxy card by mail. If you hold your stock in street
name through a bank or broker, you must direct your bank
or broker to vote in accordance with the instructions you have
received from your bank or broker. Submitting your proxy card or
directing your bank or broker to vote your shares will ensure
that your shares are represented and voted at the Bank of
America special meeting; see Can I attend the Bank of
America special meeting and vote my shares in person?
If you participate in The Bank of America 401(k) Plan, The
Bank of America 401(k) Plan for Legacy Companies or the
Countrywide Financial Corporation 401(k) Savings and Investment
Plan and your account has investments in shares of Bank of
America common stock, you must provide voting instructions to
the plan trustees (either via the proxy card or by internet or
telephone) in order for your shares to be voted as you instruct.
If no voting instructions are received, your shares will not be
voted. Your voting instructions will be held in strict
confidence. |
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Why is my vote as a Merrill Lynch stockholder important? |
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If you do not vote by proxy, telephone or internet or vote in
person at the Merrill Lynch special meeting, it will be more
difficult for Merrill Lynch to obtain the necessary quorum to
hold its special meeting. In addition, your failure to vote, by
proxy, telephone, internet or in person, will have the same
effect as a vote against adoption of the merger agreement and
approval of the related certificate amendment. The merger
agreement must be adopted and the related certificate amendment
must be approved by the holders of a majority of the outstanding
shares of Merrill Lynch common stock entitled to vote at a
special meeting. The Merrill Lynch board of directors
unanimously recommends that you vote to adopt the merger
agreement and approve the related certificate amendment. |
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Why is my vote as a Bank of America stockholder important? |
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If you do not vote by proxy, telephone or internet or vote in
person at the Bank of America special meeting, it will be more
difficult for Bank of America to obtain the necessary quorum to
hold its special meeting. In addition, your failure to vote, by
proxy telephone, internet or in person, will have the same
effect as a vote against the proposal to increase the number of
authorized shares of Bank of America common stock. The proposal
to increase the number of authorized shares of Bank of America
common stock must be approved by the holders of a majority of
the votes represented by the outstanding shares of Bank of |
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America common stock and Series B Preferred Stock entitled
to vote at its special meeting, voting together without regard
to class. Under Delaware law, the affirmative vote of a majority
of the votes represented by the outstanding shares of Bank of
America common stock entitled to vote at the special meeting,
counted separately as a class without the Series B
Preferred Stock, is also required to increase the number of
authorized shares of Bank of America common stock. In addition,
the proposals to issue Bank of America common stock in the
merger and to amend the Stock Plan each require the votes cast
in favor of each such proposal to exceed the votes cast against
such proposal at the special meeting, assuming a quorum. The
Bank of America board of directors unanimously recommends that
you vote to approve the issuance of the common stock in the
merger, the increase the number of authorized shares of common
stock and the amendment to the Stock Plan. |
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If my shares are held in street name by my broker, will my
broker automatically vote my shares for me? |
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No. Your broker cannot vote your shares
without instructions from you. You should instruct your broker
as to how to vote your shares, following the directions your
broker provides to you. Please check the voting form used by
your broker. Without instructions, your shares will not be
voted, which will have the effect described below. |
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What if I abstain from voting or fail to instruct my
broker? |
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If you are a Merrill Lynch stockholder and you abstain from
voting or fail to instruct your broker to vote your shares and
the broker submits an unvoted proxy, a broker
non-vote, the abstention or broker non-vote will be
counted toward a quorum at the Merrill Lynch special meeting,
but it will have the same effect as a vote against adoption of
the merger agreement and against approval of the related
certificate amendment. |
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If you are a Bank of America stockholder, an abstention or
broker non-vote will be counted toward a quorum at the Bank of
America special meeting, but it will have the same effect as a
vote against the proposal to increase the number of authorized
shares of Bank of America common stock. Abstentions from voting,
as well as broker non-votes, are not treated as votes cast and,
therefore, will have no effect on the proposal to approve the
issuance of shares of Bank of America common stock in the merger
or the proposal to amend the Stock Plan, assuming a quorum. |
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Can I attend the Merrill Lynch special meeting and vote my
shares in person? |
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Yes. All holders of Merrill Lynch common stock
and exchangeable shares (issued by one of Merrill Lynchs
Canadian subsidiaries, each exchangeable into one share of
Merrill Lynch common stock), including stockholders of record
and stockholders who hold their shares through banks, brokers,
nominees or any other holder of record, are invited to attend
the Merrill Lynch special meeting. Holders of record of Merrill
Lynch common stock as of the record date can vote in person at
the Merrill Lynch special meeting. If you are not a stockholder
of record, you must obtain a proxy, executed in your favor, from
the record holder of your shares, such as a broker, bank or
other nominee, to be able to vote in person at the Merrill Lynch
special meeting. If you plan to attend the Merrill Lynch special
meeting, you must hold your shares in your own name or have a
letter from the record holder of your shares confirming your
ownership and you must bring a form of personal photo
identification with you in order to be admitted. Merrill Lynch
reserves the right to refuse admittance to anyone without proper
proof of share ownership or without proper photo identification. |
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Can I attend the Bank of America special meeting and vote my
shares in person? |
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Yes. All holders of Bank of America common
stock and Series B Preferred Stock, including stockholders
of record and stockholders who hold their shares through banks,
brokers, nominees or any other holder of record, are invited to
attend the Bank of America special meeting. Holders of Bank of
America common stock and Series B Preferred Stock can vote
in person at the Bank of America special meeting. If you are not
a stockholder of record, you must obtain a proxy, executed in
your favor, from the record holder of your shares, such as a
broker, bank or other nominee, to be able to vote in person at
the special meeting. If you plan to attend the Bank of America
special meeting, you must hold your shares in your own name |
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or have a letter from the record holder of your shares
confirming your ownership and you must bring a form of personal
photo identification with you in order to be admitted. Bank of
America reserves the right to refuse admittance to anyone
without proper proof of share ownership or without proper photo
identification. |
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Will Merrill Lynch be required to submit the merger agreement
to its stockholders even if the Merrill Lynch board of directors
has withdrawn, modified or qualified its recommendation? |
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Yes. Unless the merger agreement is terminated
before the Merrill Lynch special meeting, Merrill Lynch is
required to submit the merger agreement to its stockholders even
if the Merrill Lynch board of directors has withdrawn, modified
or qualified its recommendation, consistent with the terms of
the merger agreement. |
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Will Bank of America be required to submit the proposal to
issue shares of Bank of America common stock in the merger to
its stockholders even if the Bank of America board of directors
has withdrawn, modified or qualified its recommendation? |
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Yes. Unless the merger agreement is terminated
before the Bank of America special meeting, Bank of America is
required to submit the proposal to issue shares of Bank of
America common stock in the merger to its stockholders even if
the Bank of America board of directors has withdrawn, modified
or qualified its recommendation, consistent with the terms of
the merger agreement. |
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Is the merger expected to be taxable to Merrill Lynch
stockholders? |
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Generally, no. The merger is intended to qualify as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended, which we refer to as the Code, and holders of Merrill
Lynch common stock are not expected to recognize any gain or
loss for United States federal income tax purposes on the
exchange of shares of Merrill Lynch common stock for shares of
Bank of America common stock in the merger, except with respect
to cash received instead of fractional shares of Bank of America
common stock. You should read United States Federal
Income Tax Consequences of the Merger beginning on
page [ ] for a more complete discussion of the
United States federal income tax consequences of the merger. Tax
matters can be complicated and the tax consequences of the
merger to you will depend on your particular tax situation.
You should consult your tax advisor to determine the tax
consequences of the merger to you. |
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If I am a Merrill Lynch stockholder, can I change or revoke
my vote? |
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Yes. Regardless of the method you used to cast
your vote, if you are a holder of record, you may change your
vote by signing and returning a new proxy card with a later
date, by calling the toll-free number listed on the Merrill
Lynch proxy card or by accessing the internet site listed on the
Merrill Lynch proxy card [by 11:59 p.m. Eastern time
on
[ ]]
or by attending the Merrill Lynch special meeting and voting by
ballot at the special meeting. |
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If you are a Merrill Lynch stockholder of record and wish to
revoke rather than change your vote, you must send written,
signed revocation to Merrill Lynch & Co., Inc.,
c/o BroadRidge
Financial Services, Registered Issuer Client Services
Department, 51 Mercedes Way, Edgewood, NY 11717[, which must be
received by 11:59 p.m. Eastern time on
[ ]].
You must include your control number. |
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If you hold your shares in street name, and wish to change or
revoke your vote, please refer to the information on the voting
instruction form included with these materials and forwarded to
you by your bank, broker or other holder of record to see your
voting options. |
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Any holder of Merrill Lynch common stock entitled to vote in
person at the Merrill Lynch special meeting may vote in person
regardless of whether a proxy has been previously given, but the
mere presence of a stockholder at the special meeting will not
constitute revocation of a previously given proxy. |
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If I am a Bank of America stockholder, can I change my
vote? |
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Yes. You may revoke any proxy at any time
before it is voted by signing and returning a proxy card with a
later date, delivering a written revocation letter pursuant to
the instructions below, or by attending the |
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Bank of America special meeting in person, notifying the
Corporate Secretary and voting by ballot at the special meeting.
Bank of America stockholders may send their written revocation
letter to Bank of America Corporation, Attention: Corporate
Secretary, 101 South Tryon Street, NC1-002-29-01, Charlotte,
North Carolina 28255. If you have voted your shares by telephone
or through the internet, you may revoke your prior telephone or
internet vote by recording a different vote using telephone or
internet voting, or by signing and returning a proxy card dated
as of a date that is later than your last telephone or internet
vote. |
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Any stockholder entitled to vote in person at the Bank of
America special meeting may vote in person regardless of whether
a proxy has been previously given, but the mere presence
(without notifying the Secretary of Bank of America) of a
stockholder at the special meeting will not constitute
revocation of a previously given proxy. |
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If I am a Merrill Lynch stockholder with shares represented
by stock certificates, should I send in my Merrill Lynch stock
certificates now? |
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No. You should not send in your Merrill Lynch
stock certificates at this time. After the merger, Bank of
America will send you instructions for exchanging Merrill Lynch
stock certificates for the merger consideration. Unless Merrill
Lynch stockholders specifically request to receive Bank of
America stock certificates, the shares of Bank of America stock
they receive in the merger will be issued in book-entry form.
Please do not send in your stock certificates with your proxy
card. |
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When do you expect to complete the merger? |
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We currently expect to complete the merger on or after
December 31, 2008. However, we cannot assure you when or if
the merger will occur. We must first obtain the approvals of
Merrill Lynch and Bank of America stockholders at the special
meetings and the required regulatory approvals described below
in Regulatory Approvals Required for the
Merger. |
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Whom should I call with questions? |
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Merrill Lynch stockholders should call Georgeson Inc., Merrill
Lynchs proxy solicitor, toll-free at
(866) 873-6990
about the merger and related transactions. Bank of America
stockholders should call Laurel Hill Advisory Group, LLC, Bank
of Americas proxy solicitor, toll-free at
(866) 889-7083. |
4
SUMMARY
This summary highlights material information from this
document. It may not contain all of the information that is
important to you. We urge you to carefully read the entire
document and the other documents to which we refer in order to
fully understand the merger and the related transactions. See
Where You Can Find More Information on
page [ ]. Each item in this summary refers to
the page of this document on which that subject is discussed in
more detail. We have included page references parenthetically to
direct you to a more complete description of the topics
presented in this summary.
In the
Merger, Merrill Lynch Stockholders Will Have a Right to Receive
0.8595 of a Share of Bank of America Common Stock per Share of
Merrill Lynch Common Stock (page [ ])
We are proposing the merger of Merrill Lynch with MER Merger
Corporation, referred to as Merger Sub, which is a newly formed
wholly owned subsidiary of Bank of America. If the merger is
completed, Merrill Lynch will survive as a consolidated
subsidiary of Bank of America, and Merrill Lynch common stock
will no longer be publicly traded. Under the terms of the merger
agreement, holders of Merrill Lynch common stock will have the
right to receive 0.8595 of a share of Bank of America common
stock for each share of Merrill Lynch common stock held
immediately prior to the merger. Bank of America will not issue
any fractional shares of Bank of America common stock in the
merger. Holders of Merrill Lynch common stock who would
otherwise be entitled to a fractional share of Bank of America
common stock will instead receive an amount in cash based on the
net proceeds from the sale in the open market by the exchange
agent, on behalf of all such holders, of the aggregate
fractional shares of Bank of America common stock that would
otherwise have been issued.
Example: If you hold 100 shares of Merrill Lynch common
stock, you will have a right to receive 85 shares of Bank
of America common stock and a cash payment instead of the
0.95 shares of Bank of America common stock that you
otherwise would have received.
What
Holders of Merrill Lynch Stock Options and Other Equity-Based
Awards Will Receive (page [ ])
Upon completion of the merger, Merrill Lynch stock options,
restricted shares, restricted share units, capital accumulation
units, referred to as cap units, and deferred equity units that
are outstanding immediately before completion of the merger will
become stock options, restricted shares, restricted share units,
cap units and deferred equity units, respectively, of or on
shares of Bank of America common stock. The number of common
shares subject to these stock options, stock appreciation
rights, restricted share units, cap units, and deferred equity
units, and the exercise price of the Merrill Lynch stock
options, will be adjusted based on the exchange ratio of 0.8595.
Treatment
of Merrill Lynch Preferred Stock in the Merger
(page [ ])
Upon completion of the merger, (i) each share of Merrill
Lynch Floating Rate Non-Cumulative Preferred Stock,
Series 1, referred to as Merrill Lynch Preferred Stock
Series 1, issued and outstanding immediately prior to
completion of the merger will be exchanged for one share of Bank
of America Floating Rate Non-Cumulative Preferred Stock,
Series 1, referred to as Bank of America Preferred Stock
Series 1, (ii) each share of Merrill Lynch Floating
Rate Non-Cumulative Preferred Stock, Series 2, referred to
as Merrill Lynch Preferred Stock Series 2, issued and
outstanding immediately prior to completion of the merger will
be exchanged for one share of Bank of America Floating Rate
Non-Cumulative Preferred Stock, Series 2, referred to as
Bank of America Preferred Stock Series 2, (iii) each
share of Merrill Lynch 6.375% Non-Cumulative Preferred Stock,
Series 3, referred to as Merrill Lynch Preferred Stock
Series 3, issued and outstanding immediately prior to
completion of the merger will be exchanged for one share of Bank
of America 6.375% Non-Cumulative Preferred Stock, Series 3,
referred to as Bank of America Preferred Stock Series 3,
(iv) each share of Merrill Lynch Floating Rate
Non-Cumulative Preferred Stock, Series 4, referred to as
Merrill Lynch Preferred Stock Series 4, issued and
outstanding immediately prior to completion of the merger will
be exchanged for one share of Bank of America Floating Rate
Non-Cumulative Preferred Stock, Series 4, referred to as
Bank of America Preferred Stock Series 4, (v) each
share of Merrill Lynch Floating Rate Non-
5
Cumulative Preferred Stock, Series 5, referred to as
Merrill Lynch Preferred Stock Series 5, issued and
outstanding immediately prior to completion of the merger will
be exchanged for one share of Bank of America Floating Rate
Non-Cumulative Preferred Stock, Series 5, referred to as
Bank of America Preferred Stock Series 5, (vi) each
share of Merrill Lynch 6.70% Noncumulative Perpetual Preferred
Stock, Series 6, referred to as Merrill Lynch Preferred
Stock Series 6, issued and outstanding immediately prior to
completion of the merger will be exchanged for one share of Bank
of America 6.70% Noncumulative Perpetual Preferred Stock,
Series 6, referred to as Bank of America Preferred Stock
Series 6, (vii) each share of Merrill Lynch 6.25%
Noncumulative Perpetual Preferred Stock, Series 7, referred
to as Merrill Lynch Preferred Stock Series 7, issued and
outstanding immediately prior to completion of the merger will
be exchanged for one share of Bank of America 6.25%
Noncumulative Perpetual Preferred Stock, Series 7, referred
to as Bank of America Preferred Stock Series 7, and
(viii) each share of Merrill Lynch 8.625% Non-Cumulative
Preferred Stock, Series 8, referred to as Merrill Lynch
Preferred Stock Series 8, issued and outstanding
immediately prior to completion of the merger will be exchanged
for one share of Bank of America 8.625% Non-Cumulative Preferred
Stock, Series 8, referred to as Bank of America Preferred
Stock Series 8.
The terms of the Bank of America Preferred Stock Series 1,
Bank of America Preferred Stock Series 2, Bank of America
Preferred Stock Series 3, Bank of America Preferred Stock
Series 4, Bank of America Preferred Stock Series 5,
Bank of America Preferred Stock Series 6, Bank of America
Preferred Stock Series 7 and Bank of America Preferred
Stock Series 8 will be substantially identical to the terms
of the corresponding series of Merrill Lynch preferred stock,
except for the additional voting rights described in The
Merger Agreement Treatment of Preferred Stock,
starting on page [ ]. We sometimes refer to the
Bank of America Preferred Stock Series 1, Bank of America
Preferred Stock Series 2, Bank of America Preferred Stock
Series 3, Bank of America Preferred Stock Series 4,
Bank of America Preferred Stock Series 5, Bank of America
Preferred Stock Series 6, Bank of America Preferred Stock
Series 7 and Bank of America Preferred Stock Series 8
collectively as the New Bank of America Preferred
Stock.
Each outstanding share of Merrill Lynch non-convertible
preferred stock is presently represented by depositary shares,
or Merrill Lynch Depositary Shares, that are listed on the New
York Stock Exchange and represent (a) with respect to the
Merrill Lynch Preferred Stock Series 6 and Merrill Lynch
Preferred Stock Series 7, a one-fortieth interest in a
share of Merrill Lynch preferred stock and (b) with respect
to the Merrill Lynch Preferred Stock Series 1, Merrill
Lynch Preferred Stock Series 2, Merrill Lynch Preferred
Stock Series 3, Merrill Lynch Preferred Stock
Series 4, Merrill Lynch Preferred Stock Series 5 and
Merrill Lynch Preferred Stock Series 8, a one-twelve
hundredth interest in a share of Merrill Lynch preferred stock.
Each share of 9.00% Non-Voting Mandatory Convertible
Non-Cumulative Preferred Stock, Series 2, and the 9.00%
Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock,
Series 3, outstanding immediately prior to the completion
of the merger shall remain issued and outstanding and shall have
the rights, privileges, powers and preferences as set forth in
Merrill Lynchs certificate of incorporation, as amended by
the certificate amendment described herein.
Holders of Merrill Lynch preferred stock and Merrill Lynch
Depositary Shares are not entitled to vote on the merger or at
the special meeting.
Treatment
of Exchangeable Shares of Merrill Lynch & Co., Canada Ltd.
(page [ ])
In accordance with the terms of the merger agreement, Merrill
Lynch is obligated to redeem the exchangeable shares of Merrill
Lynch & Co., Canada Ltd., referred to as Merrill Lynch
Canada. The documents governing the exchangeable shares provide
that, as a result of the merger being proposed, Merrill Lynch
Canada has the right to cause the redemption (or repurchase by
an affiliate of Merrill Lynch Canada) of the exchangeable shares
in accordance with their terms. The redemption or repurchase
date for the exchangeable shares has not yet been set. Merrill
Lynch intends to cause the exchangeable shares to be repurchased
after the October 10, 2008, record date for the special
meeting and prior to the completion of the merger. Upon the
redemption by Merrill Lynch Canada, or repurchase by an
affiliate of Merrill Lynch Canada, of the exchangeable shares,
holders of such shares will be required to dispose of them in
exchange for Merrill Lynch common stock on a one-for-one basis.
The holders of exchangeable shares who receive such Merrill
Lynch
6
common stock, and continue to hold such Merrill Lynch common
stock at the time of the completion of the merger, will
subsequently receive the merger consideration in the same manner
as other holders of Merrill Lynch common stock. The redemption
or repurchase of the exchangeable shares will not, however, be
conditional upon the completion of the merger.
Holders of Merrill Lynch Canada exchangeable shares are entitled
to vote on the merger and at the Merrill Lynch special meeting.
Stock
Option Agreement (page [ ])
On September 15, 2008, in connection with the merger
agreement, Merrill Lynch granted to Bank of America an
irrevocable option to purchase, under certain circumstances, up
to 19.9% of its outstanding common shares at a price, subject to
certain adjustments, of $17.05 per share.
The
Merger Is Intended to Be Tax-Free to Merrill Lynch Stockholders
as to the Shares of Bank of America Common Stock They Receive
(page [ ])
The merger is intended to qualify as a
reorganization within the meaning of
Section 368(a) of the Code, and it is a condition to our
respective obligations to complete the merger that each of Bank
of America and Merrill Lynch receive a legal opinion to that
effect. Accordingly, the merger generally will be tax-free to
you for United States federal income tax purposes as to the
shares of Bank of America common stock you receive in the
merger, except for any gain or loss that may result from the
receipt of cash instead of fractional shares of Bank of America
common stock that you would otherwise be entitled to receive.
The United States federal income tax consequences described
above may not apply to all holders of Merrill Lynch common
stock. Your tax consequences will depend on your individual
situation. Accordingly, we strongly urge you to consult your tax
advisor for a full understanding of the particular tax
consequences of the merger to you.
Comparative
Market Prices and Share Information
(pages [ ]and [ ])
Bank of America common stock is quoted on the NYSE under the
symbol BAC. Merrill Lynch common stock is quoted on
the NYSE under the symbol MER. The following table
shows the closing sale prices of Bank of America common stock
and Merrill Lynch common stock as reported on the NYSE on
September 12, 2008, the last trading day before we
announced the merger, and on [ ],
2008, the last practicable trading day before the distribution
of this document. This table also shows the implied value of the
merger consideration proposed for each share of Merrill Lynch
common stock, which we calculated by multiplying the closing
price of Bank of America common stock on those dates by the
exchange ratio of 0.8595.
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Implied Value of
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One Share of
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Bank of America
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Merrill Lynch
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Merrill Lynch
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Common Stock
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Common Stock
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Common Stock
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At September 12, 2008
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$
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33.74
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$
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17.05
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$
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29.00
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At
[ ],
2008
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$
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[ ]
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$
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[ ]
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$
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[ ]
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The market price of Bank of America common stock and Merrill
Lynch common stock will fluctuate prior to the merger. Merrill
Lynch and Bank of America stockholders are urged to obtain
current market quotations for the shares prior to making any
decision with respect to the merger.
Merrill
Lynch, Pierce, Fenner & Smith Incorporated Has
Provided an Opinion to the Merrill Lynch Board of Directors
Regarding the Exchange Ratio
(page [ ])
Merrill Lynchs financial advisor, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, referred to as MLPFS,
delivered its opinion to the Merrill Lynch board of directors to
the effect that, as of September 14, 2008 and based upon
and subject to the various considerations described in its
written opinion, the exchange ratio in the merger was fair, from
a financial point of view, to the holders of Merrill Lynch
common stock.
7
The full text of the written opinion of MLPFS, dated
September 14, 2008, which sets forth the assumptions made,
procedures followed, assumptions made, matters considered, and
qualifications and limitations on the review undertaken by MLPFS
in rendering its opinion, is attached hereto as Appendix E.
Holders of Merrill Lynch common stock are urged to, and should,
read the opinion carefully and in its entirety. MLPFS has not
assumed any responsibility for updating or revising its opinion
based circumstances or events occurring after the date
thereof.
MLPFS provided its opinion for the use and benefit of the
Merrill Lynch board of directors in connection with its
consideration of the merger. The MLPFS opinion addresses only
the fairness, from a financial point of view, of the exchange
ratio in the merger as of September 14, 2008, the date of
the MLPFS opinion. The MLPFS opinion does not address the merits
of the underlying decision by Merrill Lynch to engage in the
merger and does not constitute a recommendation as to how any
holder of Merrill Lynch common stock should vote on the proposed
merger or any other matter.
J.C.
Flowers & Co. LLC and Fox-Pitt Kelton Cochran Caronia
Waller Have Each Provided an Opinion to the Bank of America
Board of Directors Regarding the Exchange Ratio (page [
])
Bank of Americas financial advisors, Fox-Pitt Kelton
Cochran Caronia Waller (USA) LLC, referred to as FPK, and J.C.
Flowers & Co. LLC, referred to as J.C. Flowers, each
delivered an opinion to the board of directors of Bank of
America to the effect that, as of September 14, 2008, and
based upon and subject to the various assumptions,
methodologies, limitations and considerations described in such
opinion, the exchange ratio to be paid by Bank of America in the
merger was fair, from a financial point of view, to Bank of
America.
The full text of FPKs written opinion, dated
September 14, 2008, is attached hereto as Appendix D.
The full text of J.C. Flowers written opinion, dated
September 14, 2008, is attached hereto as Appendix C.
Bank of America stockholders are urged to read each of these
opinions carefully and in its entirety for information regarding
the assumptions made, methodologies used, factors considered and
limitations upon the review undertaken by each of FPK and J.C.
Flowers in rendering its opinion. Neither FPK nor J.C. Flowers
has assumed any responsibility for updating or revising its
opinion based on circumstances or events occurring after the
date thereof.
Each of FPK and J.C. Flowers provided its opinion for the
information of and assistance to the board of directors of Bank
of America in connection with its consideration of the merger.
Each opinion addresses only the fairness to Bank of America,
from a financial point of view, of the exchange ratio to be paid
by Bank of America in the merger as of September 14, 2008,
the date of each opinion. Neither opinion addresses the
underlying business decision of Bank of America to proceed with
or effect the merger and related transactions or the relative
merits of the merger as compared to other transactions that may
have been available to Bank of America. Neither opinion
constitutes a recommendation to any stockholder of Bank of
America as to how such stockholder should vote with respect to
the issuance of Bank of America common stock or any other matter.
The
Merrill Lynch Board of Directors Unanimously Recommends that
Merrill Lynch Stockholders Vote FOR Adoption of the
Merger Agreement and Approval of the Related Certificate
Amendment (page [ ])
The Merrill Lynch board of directors believes that the merger is
in the best interests of Merrill Lynch and its stockholders and
has unanimously approved the merger and the merger agreement and
the related certificate amendment. The Merrill Lynch board of
directors unanimously recommends that Merrill Lynch stockholders
vote FOR adoption of the merger agreement and
FOR approval of the related certificate amendment.
To review the background of, and Merrill Lynchs reasons
for, the merger, as well as certain risks related to the merger,
see pages [ ] through [ ],
pages [ ] through [ ] and
[ ],
respectively.
8
The Bank
of America Board of Directors Unanimously Recommends that Bank
of America Stockholders Vote FOR the Approval of the
Issuance of Shares of Bank of America Common Stock in the
Merger, the Increase in the Number of Authorized Shares of
Common Stock and the Amendment to the Stock Plan
(page [ ])
The Bank of America board of directors believes that the merger
is in the best interests of Bank of America and its stockholders
and has unanimously approved the merger and the merger
agreement. The Bank of America board of directors unanimously
recommends that Bank of America stockholders vote
FOR the proposal to issue shares of Bank of America
common stock in the merger.
The Bank of America board of directors also has unanimously
approved the proposals to increase the authorized number of
shares of Bank of America common stock and amend the Stock Plan.
The Bank of America board of directors determined that the
proposals are advisable and in the best interests of Bank of
America and its stockholders. The Bank of America board of
directors unanimously recommends that you vote FOR
the proposals to increase the authorized number of shares of
Bank of America common stock and FOR the amendment
to the Stock Plan. The approvals of these proposals are not
conditions to the consummation of the merger.
To review the background of, and Bank of Americas reasons
for, the merger, as well as certain risks related to the merger,
see pages [ ] through
[ ],
pages [ ] through
[ ] and
[ ], respectively.
Merrill
Lynchs Executive Officers and Directors Have Financial
Interests in the Merger That Differ From Your Interests
(page [ ])
Merrill Lynchs executive officers and directors have
financial interests in the merger that are different from, or in
addition to, the interests of Merrill Lynch stockholders. The
Merrill Lynch board of directors was aware of and considered
these interests, among other matters, in evaluating and
negotiating the merger agreement and the merger, and in
recommending to Merrill Lynch stockholders that the merger
agreement be adopted.
The Merrill Lynch equity compensation plans and award agreements
generally provide for, with respect to employees, the vesting
and settlement of equity-based awards upon a termination of a
grantees employment without cause or for
good reason (as such terms are defined in the
applicable equity compensation plan or letter agreement) in
connection with the merger and, with respect to non-employee
directors, the settlement of equity-based awards upon completion
of the merger. Certain equity compensation awards granted to
Messrs. Thain and Chai vest automatically upon a change of
control.
Merrill Lynch executive officers and directors also have rights
to indemnification and directors and officers
liability insurance that will survive completion of the merger.
Please see The Merger Merrill Lynchs
Officers and Directors Have Financial Interests in the
Merger beginning on page [ ] for
information about these financial interests.
Holders
of Merrill Lynch Common Stock and Preferred Stock Do Not Have
Appraisal Rights (page [ ])
Appraisal rights are statutory rights that, if applicable under
law, enable stockholders to dissent from an extraordinary
transaction, such as a merger, and to demand that the
corporation pay the fair value for their shares as determined by
a court in a judicial proceeding instead of receiving the
consideration offered to stockholders in connection with the
extraordinary transaction. Appraisal rights are not available in
all circumstances, and exceptions to these rights are provided
under the Delaware General Corporation Law. As a result of one
of these exceptions, the holders of Merrill Lynch common stock
and preferred stock are not entitled to appraisal rights in the
merger.
Conditions
That Must Be Satisfied or Waived for the Merger to Occur
(page [ ])
Currently, we expect to complete the merger on or after
December 31, 2008. As more fully described in this document
and in the merger agreement, the completion of the merger
depends on a number of conditions being satisfied or, where
legally permissible, waived. These conditions include, among
others, receipt of the requisite approvals of each
companys stockholders, the receipt of all required
regulatory approvals (including
9
approval by the Board of Governors of the Federal Reserve
System), and the receipt of legal opinions by each company
regarding the United States federal income tax treatment of the
merger.
The merger is not conditioned upon the approval of the amendment
to the Stock Plan or the adoption of the amendment to the Bank
of America amended and restated certificate of incorporation to
increase the number of authorized shares of Bank of America
common stock.
We cannot be certain when, or if, the conditions to the merger
will be satisfied or waived, or that the merger will be
completed.
Termination
of the Merger Agreement (page [ ])
Merrill Lynch and Bank of America may mutually agree to
terminate the merger agreement before completing the merger,
even after stockholder approval, as long as the termination is
approved by each of the Merrill Lynch and Bank of America boards
of directors.
In addition, either Merrill Lynch or Bank of America may decide
to terminate the merger agreement, even after stockholder
approval,
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if a governmental entity issues a non-appealable final order
prohibiting the merger;
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if a governmental entity which must grant a regulatory approval
as a condition to the merger denies such approval of the merger
and such action has become final and non-appealable;
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if the other party breaches the merger agreement in a way that
would entitle the party seeking to terminate the agreement not
to consummate the merger, subject to the right of the breaching
party to cure the breach within 30 days following written
notice (unless it is not possible due to the nature or timing of
the breach for the breaching party to cure the breach);
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if the other party has committed a breach in any material
respect of its obligation to use reasonable best efforts to
obtain stockholder approval;
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if the merger has not been completed by September 15, 2009,
unless the reason the merger has not been completed by that date
is a breach of the merger agreement by the company seeking to
terminate the merger agreement; or
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if Merrill Lynch stockholders do not adopt the merger agreement
at the Merrill Lynch special meeting or if Bank of America
stockholders do not approve the issuance of Bank of America
common stock in the merger at the Bank of America special
meeting.
|
Bank of America may terminate the merger agreement if the
Merrill Lynch board of directors withdraws or adversely changes
its recommendation of the merger, recommends a competing
takeover proposal to acquire Merrill Lynch or fails to recommend
to Merrill Lynch stockholders that they reject any other
competing tender offer or exchange offer or if Merrill Lynch
breaches its agreement not to solicit other offers. The stock
option agreement remains in effect if the merger agreement is
terminated. For a description of the stock option agreement,
please refer to Stock Option Agreement, beginning on
page [ ].
Regulatory
Approvals Required for the Merger
(page [ ])
Both Merrill Lynch and Bank of America have agreed to use
reasonable best efforts to obtain all regulatory approvals
required to complete the transactions contemplated by the merger
agreement. These approvals include approval from or notices to
the Board of Governors of the Federal Reserve System, referred
to as the Federal Reserve Board, the Securities and Exchange
Commission, referred to as the SEC, the Financial Industry
Regulatory Authority, referred to as FINRA, the Federal Energy
Regulatory Commission, referred to as FERC, the Financial
Services Authority, referred to as FSA, the Financial Services
Agency of Japan, the Commodity Futures Trading Commission,
referred to as the CFTC, the Department of Justice, referred to
as the DOJ, the Federal Trade Commission, referred to as the
FTC, the Federal Deposit Insurance Corporation, referred to as
the FDIC, the Utah Department of Financial Institutions, the New
York Stock Exchange, referred to as the NYSE, the New York State
Banking Department, various state and foreign
10
securities, banking, consumer finance, mortgage banking and
insurance authorities, various self-regulatory organizations,
the filing of a joint proxy statement with the SEC, filing of a
certificate of Merger with the Secretary of State of Delaware,
any notices to or filings with the Small Business
Administration, referred to as the SBA, and various other
federal, state and foreign regulatory authorities or any courts,
administrative agencies or commissions or other governmental
authorities. Bank of America and Merrill Lynch have completed,
or will complete, the filing of applications and notifications
to obtain the required regulatory approvals. Although we do not
know of any reason why we cannot obtain these regulatory
approvals in a timely manner, we cannot be certain when or if we
will obtain them.
Board of
Directors and Management of Bank of America following Completion
of the Merger (page [ ])
Upon completion of the merger, the board of directors of Bank of
America will consist of those directors serving immediately
prior to the completion of the merger and three directors to be
mutually agreed upon by Bank of America and Merrill Lynch from
among the people serving as directors of Merrill Lynch
immediately prior to the completion of the merger.
The
Rights of Merrill Lynch Stockholders will Change as a Result of
the Merger (page [ ])
The rights of Merrill Lynch stockholders will change as a result
of the merger due to differences in Bank of Americas and
Merrill Lynchs governing documents. This document contains
descriptions of stockholder rights under each of the Bank of
America and Merrill Lynch governing documents, and describes the
material differences between them.
Bank of
America will Hold its Special Meeting on
[ ],
2008 (page [ ])
The Bank of America special meeting will be held on
[ ],
2008, at
[ ] a.m.,
local time, at
[ ] at
[ ].
At the special meeting, Bank of America stockholders will be
asked to:
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approve the issuance of Bank of America common stock in the
merger;
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approve the amendment to the Stock Plan;
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approve a proposal to adopt an amendment to the Bank of America
amended and restated certificate of incorporation, to increase
the number of authorized shares of Bank of America common stock
from 7.5 billion to 10 billion; and
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approve the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies, in the event that
there are not sufficient votes at the time of the special
meeting to approve the foregoing proposals.
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Record Date. Only holders of record at the
close of business October 10, 2008, will be entitled to
vote at the special meeting. Each share of Bank of America
common stock and Series B Preferred Stock is entitled to
one vote. Holders of common stock and Series B Preferred
Stock vote together without regard to class. As of the record
date of October 10, 2008, there were
[ ] shares
of Bank of America common stock and
[ ] shares
of Series B Preferred Stock entitled to vote at the special
meeting.
Required Vote. Approval of the issuance of
shares of Bank of America common stock in the merger and the
amendment to the Stock Plan each requires the votes cast in
favor of each such proposal to exceed the votes cast against
such proposal at the special meeting by the holders of the Bank
of America common stock and Series B Preferred Stock,
voting together without regard to class, assuming a quorum.
Because the required vote is based on the votes cast in favor of
such proposal exceeding the votes cast against such proposal,
your failure to vote, a broker non-vote or an abstention will
not be treated as a vote cast and, therefore, will have no
effect on these two proposals, assuming a quorum.
Approval of the proposal to increase the number of authorized
shares of Bank of America common stock requires the affirmative
vote of a majority of the votes represented by the outstanding
shares of Bank of America common stock and Series B
Preferred Stock entitled to vote at the special meeting, voting
together
11
without regard to class. Under Delaware law, the affirmative
vote of a majority of the votes represented by the outstanding
shares of Bank of America common stock entitled to vote at the
special meeting, counted separately as a class without the
Series B Preferred Stock, is also required to increase the
number of authorized shares of Bank of America common stock.
Because approval is based on the affirmative vote of a majority
of votes represented by shares outstanding, the failure to vote,
a broker non-vote or an abstention will have the same effect as
a vote against the proposal.
If there is a quorum, approval of any necessary or appropriate
adjournment of the special meeting requires the votes cast in
favor of such proposal to exceed the votes cast against such
proposal at the special meeting by the holders of the Bank of
America common stock and Series B Preferred Stock, voting
together without regard to class. In the absence of a quorum,
the special meeting may be adjourned by the approval of the
majority of the voting power of the outstanding shares present
and entitled to vote at the special meeting.
As of the record date, directors and executive officers of Bank
of America and their affiliates had the right to
vote [ ] shares
of Bank of America common stock and [no] shares of
Series B Preferred Stock, or
[ ]% of the outstanding Bank of
America shares entitled to be voted at the special meeting. We
currently expect that each of these individuals will vote their
shares of Bank of America common stock in favor of the proposals
to be presented at the special meeting.
Merrill
Lynch will Hold its Special Meeting on
[ ],
2008 (page [ ])
The Merrill Lynch special meeting will be held on
[ ], 2008, at [8:00] a.m.,
local time, at Merrill Lynch Headquarters at 4 World Financial
Center, New York, NY. At the special meeting, Merrill Lynch
stockholders will be asked to:
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adopt the merger agreement;
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approve the related certificate amendment; and
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approve the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies, in the event that
there are not sufficient votes at the time of the special
meeting to approve the foregoing proposals.
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Record Date. Only holders of record at the
close of business October 10, 2008 will be entitled to vote
at the special meeting. Each share of Merrill Lynch common stock
and each exchangeable share (issued by Merrill Lynch Canada and
exchangeable into one share of Merrill Lynch common stock) is
entitled to one vote. As of the record date of October 10,
2008, there were
[ ] shares
of Merrill Lynch common stock and
[ ] shares of exchangeable stock
entitled to vote at the special meeting.
Required Vote. Adoption of the merger
agreement and approval of the related certificate amendment each
require the affirmative vote of the holders of a majority of the
outstanding shares of Merrill Lynch common stock entitled to
vote. Because approval is based on the affirmative vote of a
majority of shares outstanding, a Merrill Lynch
stockholders failure to vote, a broker non-vote or an
abstention will have the same effect as a vote against adoption
of the merger agreement and approval of the related certificate
amendment.
Approval of any necessary adjournment of the special meeting may
be obtained by the affirmative vote of the holders of a majority
of the shares present in person or represented by proxy and
entitled to vote at the special meeting. Because approval of
such adjournment is based on the affirmative vote of a majority
of shares present or represented, abstentions will have the same
effect as a vote against this proposal.
As of the record date, directors and executive officers of
Merrill Lynch had the right to
vote [ ] shares of
Merrill Lynch common stock, or [ ]%
of the outstanding Merrill Lynch common stock entitled to be
voted at the special meeting. We currently expect that each of
these individuals will vote their shares of Merrill Lynch common
stock in favor of the proposals to be presented at the special
meeting.
12
Information
about the Companies (page [ ])
Bank
of America Corporation
Bank of America Corporation is a Delaware corporation, a bank
holding company and a financial holding company under
U.S. federal law. Bank of America is one of the
worlds largest financial institutions, serving individual
consumers, small and middle market businesses and large
corporations with a full range of banking, investing, asset
management and other financial and risk-management products and
services. The company provides unmatched convenience in the
United States, serving more than 59 million consumer and
small business relationships with more than 6,000 retail banking
offices, more than 18,000 ATMs and award-winning online banking
with nearly 24 million active users. The company serves
clients in 175 countries and has relationships with
99 percent of the U.S. Fortune 500 companies and
80 percent of the Fortune Global 500. As of June 30,
2008, Bank of America had total consolidated assets of
approximately $1.7 trillion, total consolidated deposits of
approximately $785 billion and total consolidated
stockholders equity of approximately $163 billion.
Bank of America is also the parent company of Countrywide
Financial Corporation, which Bank of America acquired on
July 1, 2008. The principal executive offices of Bank of
America are located in the Bank of America Corporate Center,
100 N. Tryon Street, Charlotte, North Carolina 28255,
and its telephone number is
(704) 386-5681.
Additional information about Bank of America and its
subsidiaries is included in documents incorporated by reference
in this document. See Where You Can Find More
Information on page [ ].
MER
Merger Corporation
Merger Sub is a Delaware corporation and a wholly owned
subsidiary of Bank of America and was formed solely for the
purpose of consummating the merger. Merger Sub has not carried
on any activities to date, except for activities incidental to
its formation and activities undertaken in connection with the
transactions contemplated by the merger agreement. The principal
executive offices of Merger Sub are located in the Bank of
America Corporate Center, 100 N. Tryon Street,
Charlotte, North Carolina, and its telephone number is
(704) 386-5681.
Merrill
Lynch & Co., Inc.
Merrill Lynch was formed in 1914 and became a publicly traded
company on June 23, 1971. In 1973, it created the holding
company, Merrill Lynch & Co., Inc., a Delaware
corporation that, through its subsidiaries, is one of the
worlds leading capital markets, advisory and wealth
management companies with offices in 40 countries and
territories and total client assets of approximately $1.6
trillion at June 27, 2008. As an investment bank, it is a
leading global trader and underwriter of securities and
derivatives across a broad range of asset classes, and it serves
as a strategic advisor to corporations, governments,
institutions and individuals worldwide. In addition, Merrill
Lynch owns a 45% voting interest and approximately half of the
economic interest of BlackRock, Inc., one of the worlds
largest publicly traded investment management companies with
approximately $1.4 trillion in assets under management at
June 30, 2008. The principal executive offices of Merrill
Lynch are located at 4 World Financial Center, New York, New
York 10080, and its telephone number is
(212) 449-1000.
Additional information about Merrill Lynch and its subsidiaries
is included in documents incorporated by reference in this
document. See Where You Can Find More Information on
page [ ].
13
SELECTED
CONSOLIDATED HISTORICAL FINANCIAL DATA OF BANK OF
AMERICA
Set forth below are highlights derived from Bank of
Americas audited consolidated financial statements as of
and for the years ended December 31, 2003 through 2007, and
Bank of Americas unaudited consolidated financial
statements as of and for the six months ended June 30, 2008
and 2007. The results of operations for the six months ended
June 30, 2008, are not necessarily indicative of the
results of operations for the full year or any other interim
period. Bank of America management prepared the unaudited
information on the same basis as it prepared Bank of
Americas audited consolidated financial statements. In the
opinion of Bank of America management, this information reflects
all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of this data for
those dates. You should read this information in conjunction
with Bank of Americas consolidated financial statements
and related notes included in Bank of Americas Annual
Report on
Form 10-K
for the year ended December 31, 2007, and Bank of
Americas Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2008, which are incorporated
by reference in this document and from which this information is
derived. See Where You Can Find More Information on
page [ ].
Bank of
America Summary of Consolidated Financial
Data
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Six Months Ended
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June 30,
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Years Ended December 31,
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2008
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2007
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2007
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2006
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2005
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2004
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2003
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(Dollars in millions, except per share information)
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Income statement
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Net interest income
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$
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20,612
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$
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16,659
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$
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34,433
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$
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34,591
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$
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30,737
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$
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27,960
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$
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20,505
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Noninterest income
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16,706
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21,181
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31,886
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37,989
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26,438
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22,729
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18,270
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Total revenue, net of interest expense
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37,318
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37,840
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66,319
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72,580
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57,175
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50,689
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38,775
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Provision for credit losses
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11,840
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3,045
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8,385
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5,010
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4,014
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2,769
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2,839
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Noninterest expense, before merger and restructuring charges
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18,377
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18,126
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36,600
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34,792
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28,269
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26,394
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20,155
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Merger and restructuring charges
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382
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186
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410
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805
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412
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618
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Income before income taxes
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6,719
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16,483
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20,924
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31,973
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24,480
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20,908
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15,781
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Income tax expense
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2,099
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5,467
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5,942
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10,840
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8,015
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6,961
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5,019
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Net income
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4,620
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11,016
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14,982
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21,133
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16,465
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13,947
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10,762
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Average common shares issued and outstanding (in thousands)
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4,431,870
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4,426,046
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4,423,579
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4,526,637
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4,008,688
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3,758,507
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2,973,407
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Average diluted common shares issued and outstanding (in
thousands)
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|
4,460,633
|
|
|
|
4,487,224
|
|
|
|
4,480,254
|
|
|
|
4,595,896
|
|
|
|
4,068,140
|
|
|
|
3,823,943
|
|
|
|
3,030,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
0.53
|
%
|
|
|
1.44
|
%
|
|
|
0.94
|
%
|
|
|
1.44
|
%
|
|
|
1.30
|
%
|
|
|
1.34
|
%
|
|
|
1.44
|
%
|
Return on average common stockholders equity
|
|
|
6.06
|
|
|
|
16.86
|
|
|
|
11.08
|
|
|
|
16.27
|
|
|
|
16.51
|
|
|
|
16.47
|
|
|
|
21.50
|
|
Total ending equity to total ending assets
|
|
|
9.48
|
|
|
|
8.85
|
|
|
|
8.56
|
|
|
|
9.27
|
|
|
|
7.86
|
|
|
|
9.03
|
|
|
|
6.76
|
|
Total average equity to total average assets
|
|
|
8.98
|
|
|
|
8.66
|
|
|
|
8.53
|
|
|
|
8.90
|
|
|
|
7.86
|
|
|
|
8.12
|
|
|
|
6.69
|
|
Dividend payout
|
|
|
134.71
|
|
|
|
45.71
|
|
|
|
72.26
|
|
|
|
45.66
|
|
|
|
46.61
|
|
|
|
46.31
|
|
|
|
39.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
$
|
0.96
|
|
|
$
|
2.47
|
|
|
$
|
3.35
|
|
|
$
|
4.66
|
|
|
$
|
4.10
|
|
|
$
|
3.71
|
|
|
$
|
3.62
|
|
Diluted earnings
|
|
|
0.95
|
|
|
|
2.44
|
|
|
|
3.30
|
|
|
|
4.59
|
|
|
|
4.04
|
|
|
|
3.64
|
|
|
|
3.55
|
|
Dividends paid
|
|
|
1.28
|
|
|
|
1.12
|
|
|
|
2.40
|
|
|
|
2.12
|
|
|
|
1.90
|
|
|
|
1.70
|
|
|
|
1.44
|
|
Book value
|
|
|
31.11
|
|
|
|
29.95
|
|
|
|
32.09
|
|
|
|
29.70
|
|
|
|
25.32
|
|
|
|
24.70
|
|
|
|
16.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market price per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing
|
|
$
|
23.87
|
|
|
$
|
48.89
|
|
|
$
|
41.26
|
|
|
$
|
53.39
|
|
|
$
|
46.15
|
|
|
$
|
46.99
|
|
|
$
|
40.22
|
|
High closing
|
|
|
45.03
|
|
|
|
54.05
|
|
|
|
54.05
|
|
|
|
54.90
|
|
|
|
47.08
|
|
|
|
47.44
|
|
|
|
41.77
|
|
Low closing
|
|
|
23.87
|
|
|
|
48.80
|
|
|
|
41.10
|
|
|
|
43.09
|
|
|
|
41.57
|
|
|
|
38.96
|
|
|
|
32.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market capitalization
|
|
$
|
106,292
|
|
|
$
|
216,922
|
|
|
$
|
183,107
|
|
|
$
|
238,021
|
|
|
$
|
184,586
|
|
|
$
|
190,147
|
|
|
$
|
115,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Years Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
(Dollars in millions, except per share information)
|
|
|
Average balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
$
|
877,150
|
|
|
$
|
727,193
|
|
|
$
|
776,154
|
|
|
$
|
652,417
|
|
|
$
|
537,218
|
|
|
$
|
472,617
|
|
|
$
|
356,220
|
|
Total assets
|
|
|
1,759,770
|
|
|
|
1,541,644
|
|
|
|
1,602,073
|
|
|
|
1,466,681
|
|
|
|
1,269,892
|
|
|
|
1,044,631
|
|
|
|
749,104
|
|
Total deposits
|
|
|
786,813
|
|
|
|
691,898
|
|
|
|
717,182
|
|
|
|
672,995
|
|
|
|
632,432
|
|
|
|
551,559
|
|
|
|
406,233
|
|
Long-term debt
|
|
|
201,828
|
|
|
|
153,591
|
|
|
|
169,855
|
|
|
|
130,124
|
|
|
|
97,709
|
|
|
|
92,303
|
|
|
|
67,077
|
|
Common stockholders equity
|
|
|
140,849
|
|
|
|
130,718
|
|
|
|
133,555
|
|
|
|
129,773
|
|
|
|
99,590
|
|
|
|
84,584
|
|
|
|
50,035
|
|
Total stockholders equity
|
|
|
158,078
|
|
|
|
133,569
|
|
|
|
136,662
|
|
|
|
130,463
|
|
|
|
99,861
|
|
|
|
84,815
|
|
|
|
50,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset quality
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses(1)
|
|
$
|
17,637
|
|
|
$
|
9,436
|
|
|
$
|
12,106
|
|
|
$
|
9,413
|
|
|
$
|
8,440
|
|
|
$
|
9,028
|
|
|
$
|
6,579
|
|
Nonperforming assets measured at historical cost(2)
|
|
|
9,749
|
|
|
|
2,392
|
|
|
|
5,948
|
|
|
|
1,856
|
|
|
|
1,603
|
|
|
|
2,455
|
|
|
|
3,021
|
|
Allowance for loan and lease losses as a percentage of total
loans and leases outstanding measured at historical cost(3)
|
|
|
1.98
|
%
|
|
|
1.20
|
%
|
|
|
1.33
|
%
|
|
|
1.28
|
%
|
|
|
1.40
|
%
|
|
|
1.65
|
%
|
|
|
1.66
|
%
|
Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases measured at historical cost
|
|
|
187
|
|
|
|
397
|
|
|
|
207
|
|
|
|
505
|
|
|
|
532
|
|
|
|
390
|
|
|
|
215
|
|
Net charge-offs
|
|
$
|
6,334
|
|
|
$
|
2,922
|
|
|
$
|
6,480
|
|
|
$
|
4,539
|
|
|
$
|
4,562
|
|
|
$
|
3,113
|
|
|
$
|
3,106
|
|
Net charge-offs as a percentage of average loans and leases
outstanding measured at historical cost (3,4)
|
|
|
1.46
|
%
|
|
|
0.81
|
%
|
|
|
0.84
|
%
|
|
|
0.70
|
%
|
|
|
0.85
|
%
|
|
|
0.66
|
%
|
|
|
0.87
|
%
|
Nonperforming loans and leases as a percentage of total loans
and leases outstanding measured at historical cost(3)
|
|
|
1.06
|
|
|
|
0.30
|
|
|
|
0.64
|
|
|
|
0.25
|
|
|
|
0.26
|
|
|
|
0.42
|
|
|
|
0.77
|
|
Nonperforming assets as a percentage of total loans, leases and
foreclosed properties(2,3)
|
|
|
1.13
|
|
|
|
0.32
|
|
|
|
0.68
|
|
|
|
0.26
|
|
|
|
0.28
|
|
|
|
0.47
|
|
|
|
0.81
|
|
Ratio of the allowance for loan and lease losses at period end
to net charge-offs(4)
|
|
|
1.34
|
|
|
|
1.54
|
|
|
|
1.79
|
|
|
|
1.99
|
|
|
|
1.76
|
|
|
|
2.77
|
|
|
|
1.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital ratios (period end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-based capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier 1
|
|
|
8.25
|
%
|
|
|
8.52
|
%
|
|
|
6.87
|
%
|
|
|
8.64
|
%
|
|
|
8.25
|
%
|
|
|
8.20
|
%
|
|
|
8.02
|
%
|
Total
|
|
|
12.60
|
|
|
|
12.11
|
|
|
|
11.02
|
|
|
|
11.88
|
|
|
|
11.08
|
|
|
|
11.73
|
|
|
|
12.05
|
|
Tier 1 Leverage
|
|
|
6.09
|
|
|
|
6.33
|
|
|
|
5.04
|
|
|
|
6.36
|
|
|
|
5.91
|
|
|
|
5.89
|
|
|
|
5.86
|
|
|
|
|
(1) |
|
Includes the allowance for loan and lease losses, and the
reserve for unfunded lending commitments. |
|
(2) |
|
Balances and ratios do not include nonperforming loans
held-for-sale included in other assets and nonperforming
available-for-sale debt securities. |
|
(3) |
|
Ratios do not include loans measured at fair value in accordance
with Statement of Financial Accounting Standards No. 159,
The Fair Value Option for Financial Assets and
Financial Liabilities, at and for the year ended
December 31, 2007 and at and for the periods ended
June 30, 2008 and 2007. |
|
(4) |
|
Net charge-off ratios for the six month periods are calculated
on an annualized basis. |
15
SELECTED
CONSOLIDATED HISTORICAL FINANCIAL DATA OF MERRILL
LYNCH
Set forth below are highlights derived from Merrill Lynchs
audited consolidated financial data as of and for the years
ended on the last Friday of 2003 through 2007 and Merrill
Lynchs unaudited consolidated financial data as of and for
the six months ended June 27, 2008, and June 29, 2007.
The results of operations for the six months ended June 27,
2008, are not necessarily indicative of the results of
operations for the full year or any other interim period. The
unaudited information was prepared on the same basis as Merrill
Lynchs audited consolidated financial statements. In the
opinion of Merrill Lynch management, this information reflects
all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of this data for
those dates. You should read this information in conjunction
with Merrill Lynchs consolidated financial statements and
related notes incorporated by reference within Merrill
Lynchs Annual Report on
Form 10-K
for the year ended December 28, 2007, and Merrill
Lynchs Quarterly Report on
Form 10-Q
for the quarter ended June 27, 2008, which are incorporated
by reference in this document and from which this information is
derived. See Where You Can Find More Information on
page [ ].
Merrill
Lynch & Co., Inc. Summary of Consolidated
Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Years Ended Last Friday in December
|
|
|
|
June 27,
|
|
|
June 29,
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
2008
|
|
|
2007
|
|
|
(52 weeks)
|
|
|
(52 weeks)
|
|
|
(52 weeks)
|
|
|
(53 weeks)
|
|
|
(52 weeks)
|
|
|
|
(Dollars in millions, except per share amounts)
|
|
|
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
18,742
|
|
|
$
|
44,541
|
|
|
$
|
62,675
|
|
|
$
|
69,352
|
|
|
$
|
46,848
|
|
|
$
|
31,916
|
|
|
$
|
27,392
|
|
Less interest expense
|
|
|
17,924
|
|
|
|
25,479
|
|
|
|
51,425
|
|
|
|
35,571
|
|
|
|
21,571
|
|
|
|
10,416
|
|
|
|
7,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues, net of interest expense
|
|
|
818
|
|
|
|
19,062
|
|
|
|
11,250
|
|
|
|
33,781
|
|
|
|
25,277
|
|
|
|
21,500
|
|
|
|
19,548
|
|
Noninterest expenses
|
|
|
12,230
|
|
|
|
13,335
|
|
|
|
24,081
|
|
|
|
23,971
|
|
|
|
18,516
|
|
|
|
15,992
|
|
|
|
14,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax (loss)/earnings from continuing operations
|
|
|
(11,412
|
)
|
|
|
5,727
|
|
|
|
(12,831
|
)
|
|
|
9,810
|
|
|
|
6,761
|
|
|
|
5,508
|
|
|
|
5,074
|
|
Income tax (benefit)/expense
|
|
|
(4,809
|
)
|
|
|
1,687
|
|
|
|
(4,194
|
)
|
|
|
2,713
|
|
|
|
1,946
|
|
|
|
1,244
|
|
|
|
1,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/earnings from continuing operations
|
|
$
|
(6,603
|
)
|
|
$
|
4,040
|
|
|
$
|
(8,637
|
)
|
|
$
|
7,097
|
|
|
$
|
4,815
|
|
|
$
|
4,264
|
|
|
$
|
3,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax earnings from discontinued operations
|
|
$
|
(57
|
)
|
|
$
|
391
|
|
|
$
|
1,397
|
|
|
$
|
616
|
|
|
$
|
470
|
|
|
$
|
327
|
|
|
$
|
146
|
|
Income tax expense (benefit)
|
|
|
(44
|
)
|
|
|
134
|
|
|
|
537
|
|
|
|
214
|
|
|
|
169
|
|
|
|
155
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/earnings from discontinued operations
|
|
$
|
(13
|
)
|
|
$
|
257
|
|
|
$
|
860
|
|
|
$
|
402
|
|
|
$
|
301
|
|
|
$
|
172
|
|
|
$
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)/earnings applicable to common stockholders(1)
|
|
$
|
(7,027
|
)
|
|
$
|
4,173
|
|
|
$
|
(8,047
|
)
|
|
$
|
7,311
|
|
|
$
|
5,046
|
|
|
$
|
4,395
|
|
|
$
|
3,797
|
|
Financial Position (period end)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
966,210
|
|
|
$
|
1,076,324
|
|
|
$
|
1,020,050
|
|
|
$
|
841,299
|
|
|
$
|
681,015
|
|
|
$
|
628,098
|
|
|
$
|
480,233
|
|
Short-term borrowings(2)
|
|
|
282,711
|
|
|
|
398,759
|
|
|
|
316,545
|
|
|
|
284,226
|
|
|
|
221,389
|
|
|
|
180,058
|
|
|
|
111,727
|
|
Deposits
|
|
|
100,458
|
|
|
|
82,801
|
|
|
|
103,987
|
|
|
|
84,124
|
|
|
|
80,016
|
|
|
|
79,746
|
|
|
|
79,457
|
|
Long-term borrowings
|
|
|
270,436
|
|
|
|
226,016
|
|
|
|
260,973
|
|
|
|
181,400
|
|
|
|
132,409
|
|
|
|
119,513
|
|
|
|
85,178
|
|
Junior subordinated notes (related to trust preferred securities)
|
|
|
5,193
|
|
|
|
4,403
|
|
|
|
5,154
|
|
|
|
3,813
|
|
|
|
3,092
|
|
|
|
3,092
|
|
|
|
3,203
|
|
Total stockholders equity
|
|
|
34,778
|
|
|
|
42,191
|
|
|
|
31,932
|
|
|
|
39,038
|
|
|
|
35,600
|
|
|
|
31,370
|
|
|
|
28,884
|
|
Common Share Data (in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss)/earnings per common share from continuing operations
|
|
$
|
(7.17
|
)
|
|
$
|
4.67
|
|
|
$
|
(10.73
|
)
|
|
$
|
7.96
|
|
|
$
|
5.32
|
|
|
$
|
4.62
|
|
|
$
|
4.10
|
|
Basic (loss)/earnings per common share from discontinued
operations
|
|
|
(0.01
|
)
|
|
|
0.31
|
|
|
|
1.04
|
|
|
|
0.46
|
|
|
|
0.34
|
|
|
|
0.19
|
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss)/earnings per common share
|
|
$
|
(7.18
|
)
|
|
$
|
4.98
|
|
|
$
|
(9.69
|
)
|
|
$
|
8.42
|
|
|
$
|
5.66
|
|
|
$
|
4.81
|
|
|
$
|
4.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Years Ended Last Friday in December
|
|
|
|
June 27,
|
|
|
June 29,
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
|
2008
|
|
|
2007
|
|
|
(52 weeks)
|
|
|
(52 weeks)
|
|
|
(52 weeks)
|
|
|
(53 weeks)
|
|
|
(52 weeks)
|
|
|
|
(Dollars in millions, except per share amounts)
|
|
|
Diluted (loss)/earnings per common share from continuing
operations
|
|
$
|
(7.17
|
)
|
|
$
|
4.22
|
|
|
$
|
(10.73
|
)
|
|
$
|
7.17
|
|
|
$
|
4.85
|
|
|
$
|
4.21
|
|
|
$
|
3.77
|
|
Diluted (loss)/earnings per common share from discontinued
operations
|
|
|
(0.01
|
)
|
|
|
0.28
|
|
|
|
1.04
|
|
|
|
0.42
|
|
|
|
0.31
|
|
|
|
0.17
|
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss)/earnings per common share
|
|
$
|
(7.18
|
)
|
|
$
|
4.50
|
|
|
$
|
(9.69
|
)
|
|
$
|
7.59
|
|
|
$
|
5.16
|
|
|
$
|
4.38
|
|
|
$
|
3.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
978,463
|
|
|
|
837,551
|
|
|
|
830,415
|
|
|
|
868,095
|
|
|
|
890,744
|
|
|
|
912,935
|
|
|
|
900,711
|
|
Diluted
|
|
|
978,463
|
|
|
|
926,778
|
|
|
|
830,415
|
|
|
|
962,962
|
|
|
|
977,736
|
|
|
|
1,003,779
|
|
|
|
980,947
|
|
Shares outstanding at period-end
|
|
|
985,376
|
|
|
|
862,559
|
|
|
|
939,112
|
|
|
|
867,972
|
|
|
|
919,201
|
|
|
|
931,826
|
|
|
|
949,907
|
|
Book value per share
|
|
$
|
21.43
|
|
|
$
|
43.55
|
|
|
$
|
29.34
|
|
|
$
|
41.35
|
|
|
$
|
35.82
|
|
|
$
|
32.99
|
|
|
$
|
29.96
|
|
Dividends paid per share
|
|
|
0.70
|
|
|
|
0.70
|
|
|
|
1.40
|
|
|
|
1.00
|
|
|
|
0.76
|
|
|
|
0.64
|
|
|
|
0.64
|
|
Financial Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax profit margin from continuing operations
|
|
|
N/M
|
|
|
|
30.0
|
%
|
|
|
N/M
|
|
|
|
29.0
|
%
|
|
|
26.7
|
%
|
|
|
25.6
|
%
|
|
|
26.0
|
%
|
Return on average assets
|
|
|
N/M
|
|
|
|
0.4
|
|
|
|
N/M
|
|
|
|
0.9
|
|
|
|
0.7
|
|
|
|
0.8
|
|
|
|
0.8
|
|
Return on average common stockholders equity from
continuing operations
|
|
|
N/M
|
|
|
|
21.4
|
|
|
|
N/M
|
|
|
|
20.1
|
|
|
|
15.0
|
|
|
|
13.8
|
|
|
|
14.4
|
|
Other Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full-time employees(3)
|
|
|
60,000
|
|
|
|
61,900
|
|
|
|
64,200
|
|
|
|
56,200
|
|
|
|
54,600
|
|
|
|
50,600
|
|
|
|
48,100
|
|
N/M = not meaningful
|
|
|
(1) |
|
Net(loss)/earnings less preferred stock dividends. |
|
(2) |
|
Consists of payables under repurchase agreements and securities
loaned transactions and short-term borrowings. |
|
(3) |
|
Excludes full-time employees on salary continuation severance of
2,800 and 300 at June 27, 2008 and June 29, 2007, and
700, 100, 200, 100 and 200 at the last Friday in December 2007,
2006, 2005, 2004, and 2003, respectively. |
17
UNAUDITED
SELECTED PRO FORMA COMBINED FINANCIAL INFORMATION
The following table shows unaudited pro forma combined financial
information about the financial condition and results of
operations, including per share data and financial ratios, after
giving effect to the merger. The unaudited pro forma financial
information assumes that the merger is accounted for under the
purchase method of accounting with Bank of America treated as
the acquirer. Under this method of accounting, the assets and
liabilities of Merrill Lynch will be recorded by Bank of America
at their estimated fair values as of the date the merger is
completed. The table sets forth the information as if the merger
had become effective on June 30, 2008, with respect to
financial condition data, and on January 1, 2007, with
respect to the results of operations data. The unaudited
selected pro forma combined financial information has been
derived from and should be read in conjunction with the
consolidated financial statements and the related notes of both
Bank of America and Merrill Lynch, which are incorporated in the
document by reference and the more detailed unaudited pro forma
condensed combined financial information, including the notes
thereto, appearing elsewhere in this document. See Where
You Can Find More Information on
page [ ] and Unaudited Pro Forma
Condensed Combined Financial Information on
page [ ].
The unaudited pro forma condensed combined financial information
is presented for illustrative purposes only and does not
indicate the financial results of the combined companies had the
companies actually been combined at the beginning of each period
presented, nor the impact of possible business model changes.
The unaudited pro forma condensed combined financial information
also does not consider any potential impacts of current market
conditions on revenues, expense efficiencies, asset
dispositions, and share repurchases, among other factors. In
addition, as explained in more detail in the accompanying notes
to the unaudited pro forma condensed combined financial
information, the preliminary allocation of the pro forma
purchase price reflected in the unaudited pro forma condensed
combined financial information is subject to adjustment and may
vary significantly from the actual purchase price allocation
that will be recorded upon completion of the merger.
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Twelve Months Ended
|
|
|
|
June 30, 2008
|
|
|
December 31, 2007(1)
|
|
|
|
(Dollars in millions, except per share data)
|
|
|
Pro Forma Combined:
|
|
|
|
|
|
|
|
|
Income Statement
|
|
|
|
|
|
|
|
|
Net interest income
|
|
$
|
22,319
|
|
|
$
|
39,925
|
|
Noninterest income
|
|
|
16,052
|
|
|
|
37,587
|
|
Total revenue, net of interest expense
|
|
|
38,371
|
|
|
|
77,512
|
|
Provision for credit losses
|
|
|
12,175
|
|
|
|
8,528
|
|
Noninterest expense before merger and restructuring charges
|
|
|
30,335
|
|
|
|
60,889
|
|
Merger and restructuring charges
|
|
|
827
|
|
|
|
410
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(4,966
|
)
|
|
|
7,685
|
|
Income tax expense (benefit)
|
|
|
(2,799
|
)
|
|
|
1,615
|
|
Income (loss) from continuing operations
|
|
|
(2,167
|
)
|
|
|
6,070
|
|
Average common shares issued and outstanding
|
|
|
5,272,859
|
|
|
|
5,137,321
|
|
Average diluted common shares issued and outstanding
|
|
|
5,272,859
|
|
|
|
5,263,289
|
|
Performance ratios
|
|
|
|
|
|
|
|
|
Return on average assets
|
|
|
(0.15
|
)%
|
|
|
N/M
|
|
Return on average common stockholders equity
|
|
|
(3.38
|
)%
|
|
|
N/M
|
|
Total equity to total assets (period end)
|
|
|
7.71
|
%
|
|
|
N/M
|
|
Total average equity to total average assets
|
|
|
7.20
|
%
|
|
|
N/M
|
|
Dividend payout ratio(2)
|
|
|
|
|
|
|
212.39
|
|
18
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Twelve Months Ended
|
|
|
|
June 30, 2008
|
|
|
December 31, 2007(1)
|
|
|
|
(Dollars in millions, except per share data)
|
|
|
Per common share data
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
$
|
(0.56
|
)
|
|
$
|
1.09
|
|
Diluted earnings (loss) from continuing operations
|
|
|
(0.56
|
)
|
|
|
1.07
|
|
Cash dividends paid
|
|
|
1.28
|
|
|
|
2.40
|
|
Book value
|
|
|
31.96
|
|
|
|
N/M
|
|
Average balance sheet
|
|
|
|
|
|
|
|
|
Total loans and leases
|
|
|
955,174
|
|
|
|
N/M
|
|
Total assets
|
|
|
2,840,292
|
|
|
|
N/M
|
|
Total deposits
|
|
|
890,260
|
|
|
|
N/M
|
|
Long-term debt
|
|
|
444,153
|
|
|
|
N/M
|
|
Common stockholders equity
|
|
|
175,969
|
|
|
|
N/M
|
|
Total stockholders equity
|
|
|
204,392
|
|
|
|
N/M
|
|
Capital Ratios
|
|
|
|
|
|
|
|
|
Risk-based capital
|
|
|
[ ].[ ]
|
%
|
|
|
N/M
|
|
Tier 1
|
|
|
[ ].[ ]
|
|
|
|
N/M
|
|
Total
|
|
|
[ ].[ ]
|
%
|
|
|
N/M
|
|
Leverage
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Average balance sheet amounts and capital and other ratios as of
December 31, 2007 are not meaningful
(N/M) as
purchase accounting adjustments were calculated as of
June 30, 2008. |
|
(2) |
|
The pro forma dividend payout ratio is not presented for the six
months ended June 30, 2008 as pro forma income from
continuing operations for the period is a net loss. If
presented, the pro forma dividend payout ratio would be (218.06). |
|
(3) |
|
Bank of Americas historical per share data is as of or for
the year ended December 31, 2007, and the six months
ended June 30, 2008, and Merrill Lynchs comparable
information is as of or for the year ended December 28,
2007 and the six months ended June 27, 2008. |
19
COMPARATIVE
PER SHARE DATA
The following table sets forth for Bank of America common stock
and Merrill Lynch common stock certain historical, pro forma and
pro forma-equivalent per share financial information. In
accordance with requirements of the SEC, the pro forma and pro
forma-equivalent per share information gives effect to the
merger as if the merger had been effective on the dates
presented, in the case of the book value data, and as if the
merger had become effective on January 1, 2007, in the case
of the net income and dividends paid data. The unaudited pro
forma data in the tables assume that the merger is accounted for
using the purchase method of accounting and represents a current
preliminary estimate based on available information of the
combined companys results of operations. The pro forma
financial adjustments record the assets and liabilities of
Merrill Lynch at their preliminary estimated fair values
and are subject to adjustment as additional information becomes
available and as additional analyses are performed. See
Unaudited Pro Forma Condensed Combined Financial
Information on page [ ]. The information
in the following table is based on, and should be read together
with, the historical financial information that we have
presented in our prior filings with the SEC. See Where You
Can Find More Information on page [ ].
We anticipate that the merger will provide the combined company
with financial benefits that include reduced operating expenses
and revenue enhancement opportunities. The unaudited pro forma
information, while helpful in illustrating the financial
characteristics of the combined company under one set of
assumptions, does not reflect the impact of possible business
model changes as a result of current market conditions which may
impact revenues, expense efficiencies, asset dispositions, share
repurchases and other factors. It also does not necessarily
reflect what the historical results of the combined company
would have been had our companies been combined during these
periods nor is it indicative of the results of operations in
future periods or the future financial position of the combined
company. The Comparative Per Share Data Table for the six months
ended June 2008 and the year ended December 2007 combines
the historical income per share data of Bank of America and
subsidiaries and Merrill Lynch and subsidiaries giving effect to
the merger as if the merger had become effective on
January 1, 2007, using the purchase method of accounting.
The pro forma adjustments are based upon available information
and certain assumptions that the Bank of America management
believes are reasonable. Upon completion of the merger, the
operating results of Merrill Lynch will be reflected in the
consolidated financial statements of Bank of America on a
prospective basis.
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Comparative Per Share Data
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Per
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|
Bank of
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Pro Forma
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Equivalent
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America(1)
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Merrill Lynch(1)
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Combined(2)
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MER Share(3)
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Income (loss) from continuing operations for the year ended
December 2007:
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|
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|
|
|
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Basic
|
|
$
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3.35
|
|
|
$
|
(10.73
|
)
|
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$
|
1.09
|
|
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$
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0.94
|
|
Diluted
|
|
|
3.30
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|
|
|
(10.73
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)
|
|
|
1.07
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0.92
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|
Income (loss) from continuing operations for the six months
ended June 2008:
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|
|
|
|
|
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|
|
|
|
|
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Basic
|
|
|
0.96
|
|
|
|
(7.17
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)
|
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|
(0.56
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)
|
|
|
(0.48
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)
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Diluted
|
|
|
0.95
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|
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(7.17
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)
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(0.56
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)
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(0.48
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)
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Dividends Paid:
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For the year ended December 2007
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2.40
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1.40
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2.40
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2.06
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For the six months ended June 2008
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1.28
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0.70
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1.28
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1.10
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Book Value(4):
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As of year-end December 2007
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32.09
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29.34
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N/M
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N/M
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As of month-end June 2008
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31.11
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21.43
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31.96
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27.47
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(1) |
|
Bank of Americas historical per share data is as of or for
the year ended December 31, 2007, and the six months
ended June 30, 2008, and Merrill Lynchs comparable
information is as of or for the year ended December 28,
2007, and the six months ended June 27, 2008. |
|
(2) |
|
Does not reflect the impact of business model changes as a
result of current market conditions which may impact revenues,
expense efficiencies, asset dispositions and share repurchases,
among other factors, that may result as a consequence of the
merger and, accordingly, does not attempt to predict or suggest
future results. |
|
(3) |
|
Reflects Merrill Lynch shares at the exchange ratio of 0.8595. |
|
(4) |
|
Book value as of December 31, 2007, is not meaningful (N/M)
as purchase accounting adjustments were calculated as of
June 30, 2008. |
20
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document contains or incorporates by reference a number of
forward-looking statements, including statements about the
financial conditions, results of operations, earnings outlook
and prospects of Bank of America, Merrill Lynch and the
potential combined company and may include statements for the
period following the completion of the merger. You can find many
of these statements by looking for words such as
plan, believe, expect,
intend, anticipate,
estimate, project,
potential, possible or other similar
expressions.
The forward-looking statements involve certain risks and
uncertainties. The ability of either Bank of America or Merrill
Lynch to predict results or the actual effects of its plans and
strategies, or those of the combined company, is subject to
inherent uncertainty. Factors that may cause actual results or
earnings to differ materially from such forward-looking
statements include those set forth on
page [ ] under
Risk Factors, as well as, among others, the
following:
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those discussed and identified in public filings with the SEC
made by Bank of America or Merrill Lynch;
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completion of the merger is dependent on, among other things,
receipt of stockholder and regulatory approvals, the timing of
which cannot be predicted with precision and which may not be
received at all;
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the extent and duration of continued economic and market
disruptions and governmental regulatory proposals to address
these disruptions;
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the merger may be more expensive to complete than anticipated,
including as a result of unexpected factors or events;
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the integration of Merrill Lynchs business and operations
with those of Bank of America may take longer than anticipated,
may be more costly than anticipated and may have unanticipated
adverse results relating to Merrill Lynchs or Bank of
Americas existing businesses;
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the anticipated cost savings and other synergies of the merger
may take longer to be realized or may not be achieved in their
entirety, and attrition in key client, partner and other
relationships relating to the merger may be greater than
expected;
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decisions to restructure, divest or eliminate business units or
otherwise change the business mix of either company;
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the risk of new and changing regulation
and/or
regulatory actions in the U.S. and internationally; and
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the exposure to litigation, including the possibility that
litigation relating to the merger agreement and related
transactions could delay or impede the completion of the merger.
|
Because these forward-looking statements are subject to
assumptions and uncertainties, actual results may differ
materially from those expressed or implied by these
forward-looking statements. You are cautioned not to place undue
reliance on these statements, which speak only as of the date of
this document or the date of any document incorporated by
reference in this document.
All subsequent written and oral forward-looking statements
concerning the merger or other matters addressed in this
document and attributable to Bank of America or Merrill Lynch or
any person acting on their behalf are expressly qualified in
their entirety by the cautionary statements contained or
referred to in this document. Except to the extent required by
applicable law or regulation, Bank of America and Merrill Lynch
undertake no obligation to update these forward-looking
statements to reflect events or circumstances after the date of
this document or to reflect the occurrence of unanticipated
events.
21
RISK
FACTORS
In addition to the other information included and
incorporated by reference in this document, stockholders should
consider the matters described below in determining whether to
adopt the merger agreement and approve the related certificate
amendment in the case of Merrill Lynch stockholders, and approve
the issuance of Bank of America common stock in the merger, the
amendment to the Stock Plan and the increase in the number of
authorized shares of Bank of America common stock in the case of
Bank of America stockholders.
Because
the market price of Bank of America common stock will fluctuate,
Merrill Lynch stockholders cannot be sure of the market value of
the merger consideration they will receive.
Upon completion of the merger, each share of Merrill Lynch
common stock will be converted into merger consideration
consisting of 0.8595 of a share of Bank of America common stock.
The market value of the merger consideration may vary from the
closing price of Bank of America common stock on the date we
announced the merger, on the date that this document was mailed
to Merrill Lynch stockholders, on the date of the special
meeting of the Merrill Lynch stockholders and on the date we
complete the merger and thereafter. Any change in the market
price of Bank of America common stock prior to completion of the
merger will affect the market value of the merger consideration
that Merrill Lynch stockholders will receive upon completion of
the merger. Accordingly, at the time of the special meeting,
Merrill Lynch stockholders will not know or be able to calculate
the market value of the merger consideration they would receive
upon completion of the merger. Neither company is permitted to
terminate the merger agreement or resolicit the vote of Merrill
Lynch stockholders solely because of changes in the market
prices of either companys stock. There will be no
adjustment to the merger consideration for changes in the market
price of either shares of Bank of America common stock or shares
of Merrill Lynch common stock. Stock price changes may result
from a variety of factors, including general market and economic
conditions, changes in our respective businesses, operations and
prospects, and regulatory considerations. Many of these factors
are beyond our control. You should obtain current market
quotations for shares of Bank of America common stock and for
shares of Merrill Lynch common stock.
We may
fail to realize all of the anticipated benefits of the
merger.
The success of the merger will depend, in part, on our ability
to realize the anticipated benefits and cost savings from
combining the businesses of Bank of America and Merrill Lynch.
However, to realize these anticipated benefits and cost savings,
we must successfully combine the businesses of Bank of America
and Merrill Lynch. If we are not able to achieve these
objectives, the anticipated benefits and cost savings of the
merger may not be realized fully or at all or may take longer to
realize than expected.
Bank of America and Merrill Lynch have operated and, until the
completion of the merger, will continue to operate,
independently. It is possible that the integration process could
result in the loss of key employees, the disruption of each
companys ongoing businesses or inconsistencies in
standards, controls, procedures and policies that adversely
affect our ability to maintain relationships with clients,
customers, depositors and employees or to achieve the
anticipated benefits of the merger. Integration efforts between
the two companies will also divert management attention and
resources. These integration matters could have an adverse
effect on each of Merrill Lynch and Bank of America during such
pre-merger transition period and for an undetermined period
after consummation of the merger.
The
market price of Bank of America common stock after the merger
may be affected by factors different from those affecting the
shares of Merrill Lynch or Bank of America
currently.
The businesses of Bank of America and Merrill Lynch differ in
important respects and, accordingly, the results of operations
of the combined company and the market price of the combined
companys shares of common stock may be affected by factors
different from those currently affecting the independent results
of operations of Bank of America and Merrill Lynch. For a
discussion of the businesses of Bank of America and Merrill
Lynch and of certain factors to consider in connection with
those businesses, see the documents
22
incorporated by reference in this document and referred to under
Where You Can Find More Information beginning on
page [ ].
Merrill
Lynch stockholders will have a reduced ownership and voting
interest after the merger and will exercise less influence over
management.
Merrill Lynchs stockholders currently have the right to
vote in the election of the board of directors of Merrill Lynch
and on other matters affecting Merrill Lynch. When the merger
occurs, each Merrill Lynch stockholder that receives shares of
Bank of America common stock will become a stockholder of Bank
of America with a percentage ownership of the combined
organization that is much smaller than the stockholders
percentage ownership of Merrill Lynch. It is expected that the
former stockholders of Merrill Lynch as a group will own less
than 25% of the outstanding shares of Bank of America
immediately after the merger. Because of this, Merrill
Lynchs stockholders will have less influence on the
management and policies of Bank of America than they now have on
the management and policies of Merrill Lynch.
Termination
of the merger agreement could negatively impact Merrill
Lynch.
If the merger agreement is terminated, there may be various
consequences including:
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Merrill Lynchs businesses may have been adversely impacted
by the failure to pursue other beneficial opportunities due to
the focus of management on the merger, without realizing any of
the anticipated benefits of completing the merger; and
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|
the market price of Merrill Lynch common stock might decline to
the extent that the current market price reflects a market
assumption that the merger will be completed.
|
If the merger agreement is terminated and Merrill Lynchs
board of directors seeks another merger or business combination,
Merrill Lynch stockholders cannot be certain that Merrill Lynch
will be able to find a party willing to pay an equivalent or
more attractive price than the price Bank of America has agreed
to pay in the merger.
The
opinions obtained by Merrill Lynch and Bank of America from
their respective financial advisors will not reflect changes in
circumstances between signing the merger agreement and the
merger.
Neither Merrill Lynch nor Bank of America has obtained updated
opinions as of the date of this document from its financial
advisors. Changes in the operations and prospects of Bank of
America or Merrill Lynch, general market and economic conditions
and other factors that may be beyond the control of Bank of
America and Merrill Lynch, and on which each financial
advisors opinion was based, may significantly alter the
value of Bank of America or Merrill Lynch or the prices of
shares of Bank of America common stock or Merrill Lynch common
stock by the time the merger is completed. None of the opinions
speaks as of the time the merger will be completed or as of any
date other than the date of such opinions. Because neither
Merrill Lynch nor Bank of America currently anticipates
asking any of its financial advisors to update its respective
opinion, none of the opinions will address the fairness of the
exchange ratio from a financial point of view at the time the
merger is completed. Each of the Merrill Lynch board of
directors recommendation that Merrill Lynch stockholders
vote FOR adoption of the merger agreement and
FOR approval of the related certificate amendment,
and the Bank of America board of directors recommendation
that Bank of America stockholders vote FOR approval
of the issuance of shares of Bank of America common stock in the
merger, however, is as of the date of this document. For a
description of the opinions that Merrill Lynch and Bank of
America received from their respective financial advisors,
please refer to The Merger Opinion of Merrill
Lynchs Financial Advisor and The
Merger Opinions of Bank of Americas Financial
Advisors. For a description of the other factors
considered by Merrill Lynchs board of directors and Bank
of Americas board of directors in determining to approve
the merger, please refer to The Merger
Merrill Lynchs Reasons for the Merger; Recommendation
of the Merrill Lynch Board of Directors and The
Merger Bank of Americas Reasons for the
Merger; Recommendation of the Bank of America Board of
Directors.
23
The
merger agreement limits Merrill Lynchs ability to pursue
alternatives to the merger.
The merger agreement contains no shop provisions
that, subject to limited exceptions, limit Merrill Lynchs
ability to discuss, facilitate or commit to competing
third-party proposals to acquire all or a significant part of
the company. These provisions might discourage a potential
competing acquiror that might have an interest in acquiring all
or a significant part of Merrill Lynch from considering or
proposing that acquisition even if it were prepared to pay
consideration with a higher per share market price than that
proposed in the merger, or might result in a potential competing
acquirors proposing to pay a lower per share price to
acquire Merrill Lynch than it might otherwise have proposed to
pay. Merrill Lynch can consider and participate in discussions
and negotiations with respect to an alternative proposal so long
as the Merrill Lynch board of directors determines in good faith
(after consultation with legal counsel) that failure to do so
would cause it to violate its fiduciary duties to Merrill Lynch
stockholders under applicable law.
The
merger is subject to the receipt of consents and approvals from
government entities that may impose conditions that could have
an adverse effect on the combined company following the
merger.
Before the merger may be completed, various approvals or
consents must be obtained from the Federal Reserve Board and
various domestic and foreign bank regulatory, securities,
antitrust, insurance and other authorities. These governmental
entities, including the Federal Reserve Board, may impose
conditions on the completion of the merger or require changes to
the terms of the merger. Although Bank of America and Merrill
Lynch do not currently expect that any such conditions or
changes would be imposed, there can be no assurance that they
will not be, and such conditions or changes could have the
effect of delaying completion of the merger or imposing
additional costs on or limiting the revenues of Bank of America
following the merger, any of which might have a material adverse
effect on Bank of America following the merger.
The
merger is subject to closing conditions, including stockholder
approval, that, if not satisfied or waived, will result in the
merger not being completed, which may result in material adverse
consequences to Merrill Lynchs business and
operations.
The merger is subject to closing conditions, including the
approval of Merrill Lynch and Bank of America stockholders that,
if not satisfied, will prevent the merger from being completed.
The closing condition that Merrill Lynch stockholders adopt the
merger agreement, and the closing condition that Bank of America
stockholders approve the issuance of Bank of America common
stock in the merger, may not be waived under applicable law and
must be satisfied for the merger to be completed.
Merrill Lynch currently expects that all directors and
executive officers of Merrill Lynch will vote their shares
of Merrill Lynch common stock in favor of the proposals
presented at the special meeting. Bank of America currently
expects that all directors and officers of Bank of America will
vote their shares of Bank of America common stock in favor of
the proposals presented at the special meeting. If Merrill
Lynchs stockholders do not adopt the merger agreement or
if Bank of Americas stockholders do not approve the
issuance of Bank of America common stock in the merger and the
merger is not completed, the resulting failure of the merger
could have a material adverse impact on Merrill Lynchs
business and operations. In addition to the required approvals
and consents from governmental entities and the approval of
Merrill Lynch and Bank of America stockholders, the merger is
subject to a number of other conditions beyond Bank of
Americas and Merrill Lynchs control that may
prevent, delay or otherwise materially adversely affect its
completion. We cannot predict whether and when these other
conditions will be satisfied. See The Merger
Agreement Conditions to Complete the Merger
beginning on page [ ].
Merrill
Lynch officers and directors have financial interests in the
merger that differ from the interests of Merrill Lynch
stockholders.
Merrill Lynchs executive officers and directors have
financial interests in the merger that are different from, or in
addition to, the interests of Merrill Lynchs stockholders.
The members of the Merrill Lynch board of directors were aware
of and considered these interests, among other matters, in
evaluating and negotiating
24
the merger agreement and the merger, and in recommending to
Merrill Lynch stockholders that the merger agreement be adopted.
Please see The Merger Merrill Lynchs
Officers and Directors Have Financial Interests in the
Merger beginning on page [ ] for
information about these financial interests.
The
shares of Bank of America common stock to be received by Merrill
Lynch stockholders as a result of the merger will have different
rights from the shares of Merrill Lynch common
stock.
Upon completion of the merger, Merrill Lynch stockholders will
become Bank of America stockholders and their rights as
stockholders will be governed by the certificate of
incorporation and bylaws of Bank of America. The rights
associated with Merrill Lynch common stock are different from
the rights associated with Bank of America common stock. Please
see Comparison of Stockholders Rights
beginning on page [ ] for a discussion of
the different rights associated with Bank of America common
stock.
25
THE BANK
OF AMERICA SPECIAL MEETING
This section contains information about the special meeting of
Bank of America stockholders that has been called to consider
and approve the issuance of shares of Bank of America common
stock in the merger, the amendment to the Stock Plan and the
increase in the number of authorized shares of Bank of America
common stock.
Together with this document, Bank of America is also sending you
a notice of the special meeting and a form of proxy that is
solicited by the Bank of America board of directors. The special
meeting will be held on
[ ],
at
[ ] a.m.,
local time, at
[ ].
Matters
to Be Considered
The purpose of the special meeting is to vote on
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|
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|
|
a proposal for approval of the issuance of shares of Bank of
America common stock to the stockholders of Merrill Lynch in the
merger;
|
|
|
|
a proposal to approve an amendment to the Stock Plan;
|
|
|
|
a proposal to adopt an amendment to the Bank of America amended
and restated certificate of incorporation to increase the number
of authorized shares of Bank of America common stock from
7.5 billion to 10 billion; and
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|
a proposal to approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies, in the
event that there are not sufficient votes at the time of the
special meeting to approve the foregoing proposals.
|
Proxies
Each copy of this document mailed to holders of Bank of America
common stock and Series B Preferred Stock is accompanied by
a form of proxy with instructions for voting by mail, by
telephone or through the internet. If you hold stock in your
name as a stockholder of record and are voting by mail, you
should complete and return the proxy card accompanying this
document to ensure that your vote is counted at the special
meeting, or at any adjournment or postponement of the special
meeting, regardless of whether you plan to attend the special
meeting. You may also vote your shares by telephone or through
the internet. Information and applicable deadlines for voting by
telephone or through the internet are set forth in the enclosed
proxy card instructions.
If you hold your stock in street name through a bank
or broker, you must direct your bank or broker to vote in
accordance with the instructions you have received from your
bank or broker.
If you hold stock in your name as a stockholder of record, you
may revoke any proxy at any time before it is voted by signing
and returning a proxy card with a later date, delivering a
written revocation letter to Bank of Americas Secretary,
or by attending the special meeting in person, notifying the
Secretary, and voting by ballot at the special meeting. If you
have voted your shares by telephone or through the internet, you
may revoke your prior telephone or internet vote by recording a
different vote, or by signing and returning a proxy card dated
as of a date that is later than your last telephone or internet
vote.
Any stockholder entitled to vote in person at the special
meeting may vote in person regardless of whether a proxy has
been previously given, but the mere presence (without notifying
the Secretary) of a stockholder at the special meeting will not
constitute revocation of a previously given proxy.
Written notices of revocation and other communications about
revoking your proxy should be addressed to:
Bank of America Corporation
101 S. Tryon Street
NC1-002-29-01
Charlotte, North Carolina 28255
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Attention:
|
Alice A. Herald
|
Corporate Secretary
26
If your shares are held in street name by a bank or
broker, you should follow the instructions of your bank or
broker regarding the revocation of proxies.
All shares represented by valid proxies that we receive through
this solicitation, and that are not revoked, will be voted in
accordance with your instructions on the proxy card or as
instructed via internet or telephone. If you make no
specification on your proxy card as to how you want your shares
voted before signing and returning it, your proxy will be voted
FOR approval of the issuance of shares of Bank of
America common stock in the merger, FOR approval of
the amendment to the Stock Plan, FOR approval of the
charter amendment to increase the number of authorized shares of
Bank of America common stock and FOR approval of the
proposal to adjourn the special meeting, if necessary or
appropriate, to solicit additional proxies in the event that
there are not sufficient votes at the time of the special
meeting to approve the proposals. According to the Bank of
America restated bylaws, business to be conducted at a special
meeting of stockholders may only be brought before the meeting
by means of Bank of Americas notice of the meeting or
otherwise properly brought before the meeting by or at the
direction of the Bank of America board of directors. No matters
other than the matters described in this document are
anticipated to be presented for action at the special meeting or
at any adjournment or postponement of the special meeting.
Solicitation
of Proxies
Bank of America will bear the entire cost of soliciting proxies
from its stockholders. In addition to solicitation of proxies by
mail, Bank of America will request that banks, brokers, and
other record holders send proxies and proxy material to the
beneficial owners of Bank of America common stock and
Series B Preferred Stock and secure their voting
instructions. Bank of America will reimburse the record holders
for their reasonable expenses in taking those actions. Bank of
America has also made arrangements with Laurel Hill Advisory
Group, LLC to assist it in soliciting proxies and has agreed to
pay them $50,000, plus reasonable expenses for these services.
If necessary, Bank of America may use several of its regular
employees, who will not be specially compensated, to solicit
proxies from Bank of America stockholders, either personally or
by telephone, facsimile, letter or other electronic means.
Record
Date
The close of business on October 10, 2008, has been fixed
as the record date for determining the Bank of America
stockholders entitled to receive notice of and to vote at the
special meeting. At that time,
[ ] shares
of Bank of America common stock were outstanding, held by
approximately
[ ] holders
of record, and
[ ] shares
of Series B Preferred Stock, held by approximately
[ ] holders
of record.
Voting
Rights and Vote Required
The presence, in person or by proxy, of the holders of a
majority of the aggregate number of outstanding shares of Bank
of America common stock and Series B Preferred Stock
entitled to vote is necessary to constitute a quorum at the
special meeting. Abstentions and broker non-votes will be
counted for the purpose of determining whether a quorum is
present.
Approval of the issuance of shares of Bank of America common
stock in the merger and the amendment to the Stock Plan each
requires the votes cast in favor of each such proposal to exceed
the votes cast against such proposal at the special meeting by
the holders of the Bank of America common stock and
Series B Preferred Stock, voting together without regard to
class, assuming a quorum. Because the required vote is based on
the votes cast in favor of such proposal exceeding the votes
cast against such proposal, your failure to vote, a broker
non-vote or an abstention will not be treated as a vote cast
and, therefore, will have no effect on these proposals, assuming
a quorum.
Approval of the proposal to increase the number of authorized
shares of Bank of America common stock requires the affirmative
vote of a majority of the votes represented by the outstanding
shares of Bank of America common stock and Series B
Preferred Stock entitled to vote at the special meeting, voting
together without regard to class. Under Delaware law, the
affirmative vote of a majority of the votes represented by the
27
outstanding shares of Bank of America common stock entitled to
vote at the special meeting, counted separately as a class
without the Series B Preferred Stock, is also required to
increase the number of authorized shares of Bank of America
common stock. Because approval is based on the affirmative vote
of a majority of votes represented by shares outstanding, the
failure to vote, a broker non-vote or an abstention will have
the same effect as a vote against.
If there is a quorum, approval of any necessary or appropriate
adjournment of the special meeting requires the votes cast in
favor of such proposal to exceed the votes cast against such
proposal at the special meeting by the holders of the Bank of
America common stock and Series B Preferred Stock, voting
together without regard to class. In the absence of a quorum,
the special meeting may be adjourned by the approval of the
majority of the voting power of the outstanding shares present
and entitled to vote at the special meeting.
If you participate in The Bank of America 401(k) Plan, The Bank
of America 401(k) Plan for Legacy Companies or the Countrywide
Financial Corporation 401(k) Savings and Investment Plan and
your account has investments in shares of Bank of America common
stock, you must provide voting instructions to the plan trustees
(either via the proxy card or by internet or telephone) in order
for your shares to be voted as you instruct. If no voting
instructions are received, your shares will not be voted. Your
voting instructions will be held in strict confidence.
The Bank of America board of directors urges Bank of America
stockholders to promptly vote by: completing, dating, and
signing the accompanying proxy card and to return it promptly in
the enclosed postage-paid envelope; calling the toll-free number
listed in the proxy card instructions if voting by telephone; or
accessing the internet site listed in the proxy card
instructions if voting through the internet. If you hold your
stock in street name through a bank or broker,
please vote by following the voting instructions of your bank or
broker.
Stockholders will vote at the meeting by ballot. Votes cast at
the meeting, in person or by proxy, will be tallied by Bank of
Americas Inspector of Election.
As of the record date:
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Directors and executive officers of Bank of America had the
right to
vote [ ] shares
of Bank of America common stock and [no] shares of
Series B Preferred Stock, or
[ ]% of the outstanding Bank of
America shares entitled to vote at the special meeting. We
currently expect that each of these individuals will vote their
shares of Bank of America common stock in favor of the proposals
to be presented at the special meeting.
|
Recommendation
of the Bank of America Board of Directors
The Bank of America board of directors has unanimously approved
and adopted the merger agreement and the transactions it
contemplates, including the merger. The Bank of America board of
directors determined that the merger, merger agreement and the
transactions contemplated by the merger agreement are advisable
and in the best interests of Bank of America and its
stockholders and unanimously recommends that you vote
FOR approval of the issuance of shares of Bank of
America common stock in the merger. See The
Merger Bank of Americas Reasons for the
Merger; Recommendation of the Bank of America Board of
Directors on page [ ] for a more
detailed discussion of the Bank of America board of
directors recommendation.
The Bank of America board of directors also has unanimously
approved the proposals to increase the authorized number of
shares of Bank of America common stock and amend the Stock Plan.
The Bank of America board of directors determined that the
proposals are advisable and in the best interests of Bank of
America and its stockholders. The Bank of America board of
directors unanimously recommends that you vote FOR
the proposals to increase the authorized number of shares of
Bank of America common stock and to approve the amendment to the
Stock Plan.
28
Attending
the Meeting
All holders of Bank of America common stock and Series B
Preferred Stock, including stockholders of record and
stockholders who hold their shares through banks, brokers,
nominees or any other holder of record, are invited to attend
the special meeting. Stockholders of record can vote in person
at the special meeting. If you are not a stockholder of record,
you must obtain a proxy executed in your favor, from the record
holder of your shares, such as a broker, bank or other nominee,
to be able to vote in person at the special meeting. If you plan
to attend the special meeting, you must hold your shares in your
own name or have a letter from the record holder of your shares
confirming your ownership and you must bring a form of personal
photo identification with you in order to be admitted. We
reserve the right to refuse admittance to anyone without proper
proof of share ownership and without proper photo identification.
29
THE
MERRILL LYNCH SPECIAL MEETING
This section contains information about the special meeting of
Merrill Lynch stockholders that has been called to consider and
adopt the merger agreement and to approve the related
certificate amendment.
Together with this document, Merrill Lynch is also sending you a
notice of the special meeting and a form of proxy that is
solicited by the Merrill Lynch board of directors. The special
meeting will be held on [ ], at
8:00 a.m., local time, at Merrill Lynch headquarters,
4 World Financial Center, New York, NY, 10038.
Matters
to Be Considered
The purpose of the special meeting is to vote on:
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a proposal for adoption of the merger agreement;
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a proposal to amend the restated certificate of incorporation of
Merrill Lynch, contingent upon the approval of the foregoing
proposal and satisfaction of all other conditions to the closing
of the merger set forth in the merger agreement, and effective
immediately prior to the effective time of the merger, to
provide that holders of 9.00% Non-Voting Mandatory Convertible
Non-Cumulative Preferred Stock, Series 2 and 9.00%
Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock,
Series 3 will vote together as a single class with holders
of Merrill Lynch common stock on all matters presented for a
vote of such holders and will be entitled to 600 votes per
share; and
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a proposal to approve the adjournment of the special meeting, if
necessary or appropriate, to solicit additional proxies, in the
event that there are not sufficient votes at the time of the
special meeting to approve the foregoing proposals.
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The certificate amendment is a technical change necessitated by
the fact that the series of convertible preferred stock will
remain Merrill Lynch securities (though they will be convertible
into Bank of America common stock) immediately following the
completion of the merger, and will not impact the current voting
rights of the existing holders of Merrill Lynch common stock.
Proxies
Each copy of this document mailed to holders of Merrill Lynch
common stock is accompanied by a form of proxy with instructions
for voting. If you hold stock in your name as a stockholder of
record, you may complete, sign, date and mail your proxy card in
the enclosed postage paid return envelope as soon as possible,
vote by telephone by calling the toll-free number listed on the
Merrill Lynch proxy card, vote by accessing the internet site
listed on the Merrill Lynch proxy card or vote in person at the
Merrill Lynch special meeting. If you hold your stock in
street name through a bank or broker, you must
direct your bank or broker to vote in accordance with the
instruction form included with these materials and forwarded to
you by your bank or broker. This voting instruction form
provides instructions on voting by mail, telephone or the
internet at www.proxyvote.com. To vote using the proxy card you
must sign, date and return it in the enclosed postage-paid
envelope. Instructions on how to vote by telephone or by the
internet are included with your proxy card.
If you are a holder of record, to change your vote, you must:
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mail a new signed proxy card with a later date to Merrill
Lynch & Co., Inc.,
c/o BroadRidge
Financial Services, 51 Mercedes Way, Edgewood, NY 11717 which
must be received by 11:59 p.m. Eastern time on
[ ];
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Vote by calling the toll-free number listed on the Merrill Lynch
proxy card or accessing the internet site listed on the Merrill
Lynch proxy card by 11:59 p.m. Eastern time on
[ ]; or
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attend the special meeting and vote in person.
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30
If you wish to revoke rather than change your vote, you must
send written, signed revocation to
Merrill Lynch & Co., Inc.,
c/o BroadRidge
Financial Services, Registered Issuer Client Services
Department, 51 Mercedes Way, Edgewood, NY 11717 which must be
received by 11:59 p.m. Eastern time on
[ ]. You must include your control
number.
If you hold shares in street name, and wish to change or revoke
your vote, please refer to the information on the voting
instruction form included with these materials and forwarded to
you by your bank, broker or other holder of record to see your
voting options.
All shares represented by valid proxies that we receive through
this solicitation, and that are not revoked, will be voted in
accordance with your instructions on the proxy card. If you make
no specification on your proxy card as to how you want your
shares voted before signing and returning it, your proxy will be
voted FOR adoption of the merger agreement,
FOR approval of the related certificate amendment
and FOR approval of the proposal to adjourn the
special meeting, if necessary, to solicit additional proxies in
the event that there are not sufficient votes at the time of the
special meeting to adopt the merger agreement.
According to the Merrill Lynch restated bylaws, business to be
conducted at a special meeting of stockholders may only be
brought before the meeting by means of Merrill Lynchs
notice of the meeting or otherwise properly brought before the
meeting by or at the direction of the Merrill Lynch board of
directors. No matters other than the matters described in this
document are anticipated to be presented for action at the
special meeting or at any adjournment or postponement of the
special meeting.
Merrill Lynch stockholders with shares represented by stock
certificates should not send Merrill Lynch stock certificates
with their proxy cards. After the merger is completed, holders
of Merrill Lynch common stock will be mailed a transmittal form
with instructions on how to exchange their Merrill Lynch stock
certificates for the merger consideration. Unless Merrill Lynch
stockholders specifically request to receive Bank of America
stock certificates, the shares of Bank of America stock they
receive in the merger will be issued in book-entry form.
Solicitation
of Proxies
Merrill Lynch will bear the entire cost of soliciting proxies
from you. In addition to solicitation of proxies by mail,
Merrill Lynch will request that banks, brokers, and other record
holders send proxies and proxy material to the beneficial owners
of Merrill Lynch common stock and secure their voting
instructions. Merrill Lynch will reimburse the record
holders for their reasonable expenses in taking those actions.
Merrill Lynch has also made arrangements with Georgeson
Inc. to assist it in soliciting proxies and has agreed to pay
them approximately $50,000 plus reasonable expenses for these
services. If necessary, Merrill Lynch may use several of its
regular employees, who will not be specially compensated, to
solicit proxies from Merrill Lynch stockholders, either
personally or by telephone, facsimile, letter or other
electronic means.
Record
Date
The close of business on October 10, 2008 has been fixed as
the record date for determining the Merrill Lynch stockholders
entitled to receive notice of and to vote at the special
meeting. At that time,
[ ] shares
of Merrill Lynch common stock and
[ ] exchangeable
shares (issued by Merrill Lynch Canada each exchangeable into
one share of Merrill Lynch common stock) were outstanding, held
by approximately
[ ] holders
of record.
Voting
Rights and Vote Required
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Merrill Lynch common stock
entitled to vote is necessary to constitute a quorum at the
special meeting. Abstentions will be counted for the purpose of
determining whether a quorum is present.
Adoption of the merger agreement and approval of the related
certificate amendment require the affirmative vote of the
holders of a majority of the outstanding shares of Merrill Lynch
common stock entitled to vote at the special meeting. You are
entitled to one vote for each share of Merrill Lynch common
stock and
31
for each exchangeable share you held as of the record date.
Holders of shares of Merrill Lynch preferred stock and holders
of depositary shares representing Merrill Lynch preferred stock
are not entitled to vote on the merger or otherwise at the
special meeting.
Because the affirmative vote of the holders of a majority of the
outstanding shares of Merrill Lynch common stock entitled to
vote at the special meeting is needed for us to proceed with the
merger, the failure to vote by proxy or in person will have the
same effect as a vote against the merger. Abstentions also will
have the same effect as a vote against the merger.
Accordingly, the Merrill Lynch board of directors urges
Merrill Lynch stockholders to promptly vote by completing,
dating, and signing the accompanying proxy card and to return it
promptly in the enclosed postage-paid envelope, or, if you hold
your stock in street name through a bank or broker,
by following the voting instructions of your bank or broker.
If you hold stock in your name as a stockholder of record,
you may complete, sign, date and mail your proxy card in the
enclosed postage paid return envelope as soon as possible, vote
by calling the toll-free number listed on the Merrill Lynch
proxy card, vote by accessing the internet site listed on the
Merrill Lynch proxy card or vote in person at the Merrill Lynch
special meeting. If you hold your stock in street
name through a bank or broker, you must direct your bank
or broker to vote in accordance with the instruction form
included with these materials and forwarded to you by your bank
or broker. This voting instruction form provides instructions on
voting by mail, telephone or on the internet.
Approval of the proposal to adjourn or postpone the meeting, if
necessary or appropriate, for the purpose of soliciting
additional proxies requires the affirmative vote of the holders
of a majority of the shares present in person or represented by
proxy and entitled to vote at the special meeting. Because
approval of this proposal requires the affirmative vote of a
majority of shares present or represented, abstentions will have
the same effect as a vote against this proposal.
Stockholders will vote at the meeting by ballot. Votes cast at
the meeting, in person or by proxy, will be tallied by Merrill
Lynchs tabulator and certified by its inspector of
election.
As of the record date, directors and executive officers of
Merrill Lynch had the right to vote
[ ] shares
of Merrill Lynch common stock, or
[ ]% of the outstanding Merrill
Lynch common stock at that date. We currently expect that each
of these individuals will vote their shares of Merrill Lynch
common stock in favor of the proposals to be presented at the
special meeting.
Recommendation
of the Merrill Lynch Board of Directors
The Merrill Lynch board of directors has unanimously approved
the merger agreement and the transactions it contemplates,
including the merger. The Merrill Lynch board of directors
determined that the merger, merger agreement and the
transactions contemplated by the merger agreement are advisable
and in the best interests of Merrill Lynch and its stockholders
and unanimously recommends that you vote FOR
adoption of the merger agreement and FOR approval of
the related certificate amendment. See The
Merger Merrill Lynchs Reasons for the Merger;
Recommendation of the Merrill Lynch Board of Directors on
page [ ] for a more detailed discussion of
the Merrill Lynch board of directors recommendation.
Attending
the Meeting
All holders of Merrill Lynch common stock and holders of
exchangeable shares, including holders of record and
stockholders who hold their stock through banks, brokers,
nominees or any other holder of record, are invited to attend
the special meeting. Only stockholders of record on the record
date can vote in person at the special meeting. If you are not a
stockholder of record, you must obtain a proxy executed in your
favor, from the record holder of your shares, such as a broker,
bank or other nominee, to be able to vote in person at the
special meeting. If you plan to attend the special meeting, you
must hold your shares in your own name or have a letter from the
record holder of your shares confirming your ownership and you
must bring a form of personal photo identification with you in
order to be admitted. We reserve the right to refuse admittance
to anyone without proper proof of share ownership and without
proper photo identification.
32
INFORMATION
ABOUT THE COMPANIES
Bank of
America Corporation
Bank of America is a Delaware corporation, a bank holding
company and a financial holding company under U.S. federal
law. Bank of America is one of the worlds largest
financial institutions, serving individual consumers, small and
middle market businesses and large corporations with a full
range of banking, investing, asset management and other
financial and risk-management products and services. The company
provides unmatched convenience in the United States, serving
more than 59 million consumer and small business
relationships with more than 6,000 retail banking offices, more
than 18,000 ATMs and award-winning online banking with nearly
24 million active users. The company serves clients in 175
countries and has relationships with 99 percent of the
U.S. Fortune 500 companies and 80 percent of the
Fortune Global 500. As of June 30, 2008, Bank of America
had total consolidated assets of approximately $1.7 trillion,
total consolidated deposits of approximately $785 billion
and total consolidated stockholders equity of
approximately $163 billion. Bank of America is also the
parent company of Countrywide Financial Corporation, which Bank
of America acquired on July 1, 2008. The principal
executive offices of Bank of America are located in the Bank of
America Corporate Center, 100 N. Tryon Street,
Charlotte, North Carolina 28255, and its telephone number is
(704) 386-5681.
Additional information about Bank of America and its
subsidiaries is included in documents incorporated by reference
in this document. See Where You Can Find More
Information on page [ ].
MER
Merger Corporation
Merger Sub, a wholly owned subsidiary of Bank of America, was
formed solely for the purpose of consummating the merger. Merger
Sub has not carried on any activities to date, except for
activities incidental to its formation and activities undertaken
in connection with the transactions contemplated by the merger
agreement. The principal executive offices of Merger Sub are
located in the Bank of America Corporate Center,
100 N. Tryon Street, Charlotte, North Carolina, and
its telephone number is
(704) 386-5681.
Merrill
Lynch & Co., Inc.
Merrill Lynch was formed in 1914 and became a publicly traded
company on June 23, 1971. In 1973, it created the holding
company, Merrill Lynch & Co., Inc., a Delaware
corporation that, through its subsidiaries, is one of the
worlds leading capital markets, advisory and wealth
management companies with offices in 40 countries and
territories and total client assets of approximately $1.6
trillion at June 27, 2008. As an investment bank, it is a
leading global trader and underwriter of securities and
derivatives across a broad range of asset classes, and it serves
as a strategic advisor to corporations, governments,
institutions and individuals worldwide. In addition, Merrill
Lynch owns a 45% voting interest and approximately half of the
economic interest of BlackRock, Inc., one of the worlds
largest publicly traded investment management companies with
approximately $1.4 trillion in assets under management at
June 30, 2008. The principal executive offices of Merrill
Lynch are located at 4 World Financial Center, New York, New
York 10080, and its telephone number is
(212) 449-1000.
Additional information about Merrill Lynch and its subsidiaries
is included in documents incorporated by reference in this
document. See Where You Can Find More Information on
page [ ].
33
UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial
information and explanatory notes present the impact of the
merger of Bank of America and Merrill Lynch on the
companies respective historical financial positions and
results of operations under the purchase method of accounting
with Bank of America treated as the acquirer. Under this method
of accounting, the assets and liabilities of Merrill Lynch will
be recorded by Bank of America at their estimated fair values as
of the date the merger is completed. The unaudited pro forma
condensed combined financial information combines the historical
financial information of Bank of America and Merrill Lynch as of
and for the six months ended June 30, 2008, and
June 27, 2008, respectively, and for the year ended
December 31, 2007, and December 28, 2007,
respectively. The unaudited pro forma condensed combined balance
sheet as of June 30, 2008, assumes the merger was completed
on that date. The unaudited pro forma condensed combined
statements of income give effect to the merger as if the merger
had been completed on January 1, 2007.
The merger agreement was announced on September 15, 2008,
and provides for each outstanding share of Merrill Lynch common
stock other than shares beneficially owned by Merrill Lynch and
Bank of America to be converted into the right to receive 0.8595
of a share of Bank of America common stock. Shares of Merrill
Lynch preferred stock will be converted on a one-for-one basis
into Bank of America preferred stock having the same terms (to
the fullest extent possible) as the corresponding Merrill Lynch
preferred stock, except for the shares of Merrill Lynch
convertible preferred stock, which will remain issued and
outstanding and will have the rights, privileges, powers and
preferences as set forth in the surviving companys
certificate of incorporation, as amended. The unaudited pro
forma condensed combined financial information has been derived
from and should be read in conjunction with the historical
consolidated combined financial statements and the related notes
of both Bank of America and Merrill Lynch, which are
incorporated in the document by reference. See Where You
Can Find More Information on page [ ].
The unaudited pro forma condensed combined financial information
is presented for illustrative purposes only and does not
indicate the financial results of the combined companies had the
companies actually been combined at the beginning of each period
presented, nor the impact of possible business model changes.
The unaudited pro forma condensed combined financial information
also does not consider any potential impacts of current market
conditions on revenues, expense efficiencies, asset
dispositions, and share repurchases, among other factors. In
addition, as explained in more detail in the accompanying notes
to the unaudited pro forma condensed combined financial
information, the allocation of the pro forma purchase price
reflected in the unaudited pro forma condensed combined
financial information is subject to adjustment and may vary
significantly from the actual purchase price allocation that
will be recorded upon completion of the merger.
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2008
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|
|
|
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|
|
|
|
|
|
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|
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Purchase
|
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|
|
|
|
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|
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Accounting
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Bank of America
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Merrill Lynch
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Reporting
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and Other
|
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Pro Forma
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June 30, 2008
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June 27, 2008
|
|
|
Reclassifications
|
|
Adjustments
|
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|
|
|
June 30, 2008
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(Dollars in millions)
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|
Assets
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Cash
|
|
$
|
39,127
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|
|
$
|
31,211
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|
|
$
|
13,363
|
|
|
(1)
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|
|
|
|
|
|
$
|
83,701
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Cash and securities segregated for regulatory purposes or
deposited with clearing organizations
|
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|
|
|
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26,228
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(26,228
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)
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(1)
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|
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|
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|
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|
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Time deposits placed and other short-term investments
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7,649
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,649
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|
Federal funds sold and securities purchased under agreements to
resell
|
|
|
107,070
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|
|
|
224,958
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|
|
|
(56,938
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)
|
|
(2)
|
|
|
|
|
|
|
|
|
275,090
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|
Securities borrowed
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|
|
|
|
|
|
129,426
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|
|
|
56,938
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|
|
(2)
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|
|
|
|
|
|
|
186,364
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|
Trading account assets
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|
167,837
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|
|
|
217,639
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|
|
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(86,492
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)
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(3)
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|
|
|
|
|
|
|
298,984
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|
Derivative assets
|
|
|
42,039
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|
|
|
|
|
|
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86,492
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(3)
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$
|
(1,400
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)
|
|
(A)
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|
|
128,186
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|
|
|
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|
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|
|
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1,055
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(4)
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|
|
|
|
|
|
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|
Securities
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|
|
249,859
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|
|
|
71,286
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|
|
|
12,865
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|
(1)
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(B)
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|
334,010
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Securities received as collateral
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|
|
|
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51,505
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|
|
|
6,315
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(5)
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|
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|
|
|
|
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57,820
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Loans and leases
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|
870,464
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|
|
|
79,772
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|
|
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|
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(3,905
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)
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(C)
|
|
|
946,331
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|
Allowance for credit losses
|
|
|
(17,130
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)
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|
|
(602
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)
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|
|
|
|
|
|
|
|
100
|
|
|
(C)
|
|
|
(17,632
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases, net of allowance for credit losses
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|
853,334
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|
|
|
79,170
|
|
|
|
|
|
|
|
|
|
(3,805
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)
|
|
|
|
|
928,699
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|
Premises and equipment, net
|
|
|
11,627
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|
|
|
3,142
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,769
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|
Mortgage servicing rights
|
|
|
4,577
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|
|
|
|
|
|
|
273
|
|
|
(6)
|
|
|
|
|
|
|
|
|
4,850
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|
Goodwill
|
|
|
77,760
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|
|
|
|
|
|
|
4,616
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|
|
(7)
|
|
|
(4,616
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)
|
|
(D)
|
|
|
93,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,095
|
|
|
(D)
|
|
|
|
|
Intangible assets
|
|
|
9,603
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|
|
|
|
|
|
|
442
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|
|
(7)
|
|
|
(442
|
)
|
|
(E)
|
|
|
17,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
|
|
(E)
|
|
|
|
|
Goodwill and other intangible assets
|
|
|
|
|
|
|
5,058
|
|
|
|
(5,058
|
)
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
|
70,798
|
|
|
|
(70,798
|
)
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
Brokers and dealers
|
|
|
|
|
|
|
17,300
|
|
|
|
(17,300
|
)
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
Interest and other
|
|
|
|
|
|
|
32,684
|
|
|
|
(32,684
|
)
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other receivables
|
|
|
|
|
|
|
120,782
|
|
|
|
(120,782
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
120,782
|
|
|
(8)
|
|
|
|
|
|
|
|
|
140,276
|
|
|
|
|
|
|
|
|
|
|
|
|
19,494
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
146,393
|
|
|
|
5,805
|
|
|
|
(1,055
|
)
|
|
(4)
|
|
|
(3,130
|
)
|
|
(F)
|
|
|
115,014
|
|
|
|
|
|
|
|
|
|
|
|
|
(273
|
)
|
|
(6)
|
|
|
(2,917
|
)
|
|
(G)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,315
|
)
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,494
|
)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,000
|
)
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,716,875
|
|
|
$
|
966,210
|
|
|
$
|
(4,000
|
)
|
|
|
|
$
|
7,285
|
|
|
|
|
$
|
2,686,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits in domestic offices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
$
|
199,587
|
|
|
$
|
|
|
|
$
|
1,768
|
|
|
(11)
|
|
|
|
|
|
|
|
$
|
201,355
|
|
Interest-bearing
|
|
|
497,631
|
|
|
|
|
|
|
|
70,296
|
|
|
(11)
|
|
|
|
|
|
|
|
|
567,927
|
|
Deposits in foreign offices:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
|
|
3,432
|
|
|
|
|
|
|
|
814
|
|
|
(11)
|
|
|
|
|
|
|
|
|
4,246
|
|
Interest-bearing
|
|
|
84,114
|
|
|
|
|
|
|
|
27,580
|
|
|
(11)
|
|
|
|
|
|
|
|
|
111,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
784,764
|
|
|
|
|
|
|
|
100,458
|
|
|
|
|
|
|
|
|
|
|
|
885,222
|
|
Deposits
|
|
|
|
|
|
|
100,458
|
|
|
|
(100,458
|
)
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased and securities sold under agreements to
repurchase
|
|
|
238,123
|
|
|
|
197,881
|
|
|
|
(14,768
|
)
|
|
(12)
|
|
|
|
|
|
|
|
|
421,236
|
|
Securities loaned
|
|
|
|
|
|
|
65,691
|
|
|
|
14,768
|
|
|
(12)
|
|
|
|
|
|
|
|
|
80,459
|
|
Trading account liabilities
|
|
|
70,806
|
|
|
|
105,976
|
|
|
|
(65,908
|
)
|
|
(13)
|
|
|
|
|
|
|
|
|
110,874
|
|
Obligation to return securities received as collateral
|
|
|
|
|
|
|
51,505
|
|
|
|
6,315
|
|
|
(14)
|
|
|
|
|
|
|
|
|
57,820
|
|
Derivative liabilities
|
|
|
21,095
|
|
|
|
|
|
|
|
65,908
|
|
|
(13)
|
|
|
|
|
|
|
|
|
87,478
|
|
|
|
|
|
|
|
|
|
|
|
|
475
|
|
|
(15)
|
|
|
|
|
|
|
|
|
|
|
Commercial paper and other short-term borrowings
|
|
|
177,753
|
|
|
|
19,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,892
|
|
Accrued expenses and other liabilities
|
|
|
55,038
|
|
|
|
|
|
|
|
(475
|
)
|
|
(15)
|
|
$
|
4,050
|
|
|
(H)
|
|
|
8,537
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,315
|
)
|
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,000
|
)
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39,761
|
)
|
|
(16)
|
|
|
|
|
|
|
|
|
|
|
Other payables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
|
|
|
|
|
65,633
|
|
|
|
(65,633
|
)
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
Brokers and dealers
|
|
|
|
|
|
|
15,743
|
|
|
|
(15,743
|
)
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
Interest and other
|
|
|
|
|
|
|
33,777
|
|
|
|
(33,777
|
)
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other payables
|
|
|
|
|
|
|
115,153
|
|
|
|
(115,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other payables
|
|
|
|
|
|
|
|
|
|
|
115,153
|
|
|
(17)
|
|
|
|
|
|
|
|
|
154,914
|
|
|
|
|
|
|
|
|
|
|
|
|
39,761
|
|
|
(16)
|
|
|
|
|
|
|
|
|
|
|
Junior subordinated notes (related to trust preferred securities)
|
|
|
|
|
|
|
5,193
|
|
|
|
(5,193
|
)
|
|
(18)
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
206,605
|
|
|
|
270,436
|
|
|
|
5,193
|
|
|
(18)
|
|
|
(6,500
|
)
|
|
(I)
|
|
|
475,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,554,184
|
|
|
|
931,432
|
|
|
|
(4,000
|
)
|
|
|
|
|
(2,450
|
)
|
|
|
|
|
2,479,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
24,151
|
|
|
|
13,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,817
|
|
Shares exchangeable into common stock
|
|
|
|
|
|
|
39
|
|
|
|
(39
|
)
|
|
(19)
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
61,109
|
|
|
|
1,885
|
|
|
|
31,200
|
|
|
(19)
|
|
|
(33,124
|
)
|
|
(J)
|
|
|
91,956
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
(19)
|
|
|
55,152
|
|
|
(J)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,305
|
)
|
|
(19)
|
|
|
|
|
|
|
|
|
|
|
Paid-in
capital
|
|
|
|
|
|
|
31,200
|
|
|
|
(31,200
|
)
|
|
(19)
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
79,920
|
|
|
|
15,978
|
|
|
|
|
|
|
|
|
|
(15,978
|
)
|
|
(J)
|
|
|
79,920
|
|
Accumulated other comprehensive loss
|
|
|
(1,864
|
)
|
|
|
(3,685
|
)
|
|
|
|
|
|
|
|
|
3,685
|
|
|
(J)
|
|
|
(1,864
|
)
|
Treasury stock
|
|
|
|
|
|
|
(24,305
|
)
|
|
|
24,305
|
|
|
(19)
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
(625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
162,691
|
|
|
|
34,778
|
|
|
|
|
|
|
|
|
|
9,735
|
|
|
|
|
|
207,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
1,716,875
|
|
|
$
|
966,210
|
|
|
$
|
(4,000
|
)
|
|
|
|
$
|
7,285
|
|
|
|
|
$
|
2,686,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited pro forma condensed combined
financial statements.
35
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting
|
|
|
|
|
|
Bank of America
|
|
|
Merrill Lynch
|
|
|
Reporting
|
|
and Other
|
|
Pro Forma
|
|
|
|
June 30, 2008
|
|
|
June 27, 2008
|
|
|
Reclassifications
|
|
Adjustments
|
|
June 30, 2008
|
|
|
|
(Dollars in millions, except per share data)
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and fees on loans and leases
|
|
$
|
27,536
|
|
|
$
|
|
|
|
$
|
3,097
|
|
|
(20)
|
|
$
|
350
|
|
|
(C)
|
|
$
|
30,983
|
|
Interest on debt securities
|
|
|
5,674
|
|
|
|
|
|
|
|
1,940
|
|
|
(20)
|
|
|
|
|
|
|
|
|
7,614
|
|
Federal funds sold and securities purchased under agreements to
resell
|
|
|
2,008
|
|
|
|
|
|
|
|
10,587
|
|
|
(20)
|
|
|
|
|
|
|
|
|
12,595
|
|
Trading account assets
|
|
|
4,593
|
|
|
|
|
|
|
|
3,489
|
|
|
(20)
|
|
|
|
|
|
|
|
|
8,082
|
|
Other interest income
|
|
|
2,075
|
|
|
|
|
|
|
|
2,032
|
|
|
(20)
|
|
|
|
|
|
|
|
|
4,107
|
|
Interest and dividend revenues
|
|
|
|
|
|
|
19,396
|
|
|
|
(19,396
|
)
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
41,886
|
|
|
|
19,396
|
|
|
|
1,749
|
|
|
|
|
|
350
|
|
|
|
|
|
63,381
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
8,108
|
|
|
|
|
|
|
|
2,014
|
|
|
(21)
|
|
|
|
|
|
|
|
|
10,122
|
|
Short-term borrowings
|
|
|
7,229
|
|
|
|
|
|
|
|
10,011
|
|
|
(21)
|
|
|
|
|
|
|
|
|
17,240
|
|
Trading account liabilities
|
|
|
1,589
|
|
|
|
|
|
|
|
954
|
|
|
(21)
|
|
|
|
|
|
|
|
|
3,957
|
|
|
|
|
|
|
|
|
|
|
|
|
1,414
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
4,348
|
|
|
|
|
|
|
|
4,945
|
|
|
(21)
|
|
|
450
|
|
|
(I)
|
|
|
9,743
|
|
Interest expense
|
|
|
|
|
|
|
17,924
|
|
|
|
(17,924
|
)
|
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
21,274
|
|
|
|
17,924
|
|
|
|
1,414
|
|
|
|
|
|
450
|
|
|
|
|
|
41,062
|
|
Net interest income
|
|
|
20,612
|
|
|
|
1,472
|
|
|
|
335
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
22,319
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Card income
|
|
|
7,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,090
|
|
Service charges
|
|
|
5,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,035
|
|
Investment and brokerage services
|
|
|
2,662
|
|
|
|
|
|
|
|
3,700
|
|
|
(22)
|
|
|
|
|
|
|
|
|
9,216
|
|
|
|
|
|
|
|
|
|
|
|
|
2,854
|
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
Commissions
|
|
|
|
|
|
|
3,700
|
|
|
|
(3,700
|
)
|
|
(22)
|
|
|
|
|
|
|
|
|
|
|
Managed accounts and other fee-based revenues
|
|
|
|
|
|
|
2,854
|
|
|
|
(2,854
|
)
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
Investment banking income
|
|
|
1,171
|
|
|
|
2,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,246
|
|
Equity investment income
|
|
|
1,646
|
|
|
|
542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,188
|
|
Trading account profits (losses)
|
|
|
(1,426
|
)
|
|
|
|
|
|
|
(6,501
|
)
|
|
(24)
|
|
|
|
|
|
|
|
|
(7,927
|
)
|
Principal transactions
|
|
|
|
|
|
|
(6,501
|
)
|
|
|
6,501
|
|
|
(24)
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking income
|
|
|
890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
890
|
|
Gain on sales of debt securities
|
|
|
352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
352
|
|
Other income (loss)
|
|
|
(714
|
)
|
|
|
(3,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
16,706
|
|
|
|
(654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
37,318
|
|
|
|
818
|
|
|
|
335
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
38,371
|
|
Provision for credit losses
|
|
|
11,840
|
|
|
|
|
|
|
|
335
|
|
|
(20)
|
|
|
|
|
|
|
|
|
12,175
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
9,146
|
|
|
|
7,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,833
|
|
Occupancy
|
|
|
1,697
|
|
|
|
637
|
|
|
|
(14
|
)
|
|
(25)
|
|
|
|
|
|
|
|
|
2,320
|
|
Equipment
|
|
|
768
|
|
|
|
|
|
|
|
14
|
|
|
(25)
|
|
|
|
|
|
|
|
|
782
|
|
Marketing
|
|
|
1,208
|
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,550
|
|
Professional fees
|
|
|
647
|
|
|
|
505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,152
|
|
Amortization of intangibles
|
|
|
893
|
|
|
|
|
|
|
|
52
|
|
|
(26)
|
|
|
173
|
|
|
(E)
|
|
|
1,118
|
|
Data processing
|
|
|
1,150
|
|
|
|
|
|
|
|
683
|
|
|
(27)
|
|
|
|
|
|
|
|
|
1,833
|
|
Telecommunications
|
|
|
526
|
|
|
|
|
|
|
|
438
|
|
|
(27)
|
|
|
|
|
|
|
|
|
964
|
|
Communications and technology
|
|
|
|
|
|
|
1,121
|
|
|
|
(1,121
|
)
|
|
(27)
|
|
|
|
|
|
|
|
|
|
|
Brokerage, clearing and exchange fees
|
|
|
|
|
|
|
757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
757
|
|
Office supplies and postage
|
|
|
|
|
|
|
112
|
|
|
|
(112
|
)
|
|
(28)
|
|
|
|
|
|
|
|
|
|
|
Other general operating
|
|
|
2,342
|
|
|
|
624
|
|
|
|
112
|
|
|
(28)
|
|
|
|
|
|
|
|
|
3,026
|
|
|
|
|
|
|
|
|
|
|
|
|
(52
|
)
|
|
(26)
|
|
|
|
|
|
|
|
|
|
|
Merger and restructuring charges
|
|
|
382
|
|
|
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
18,759
|
|
|
|
12,230
|
|
|
|
|
|
|
|
|
|
173
|
|
|
|
|
|
31,162
|
|
Income (losses) from continuing operations before income
taxes
|
|
|
6,719
|
|
|
|
(11,412
|
)
|
|
|
|
|
|
|
|
|
(273
|
)
|
|
|
|
|
(4,966
|
)
|
Income tax expense (benefit)
|
|
|
2,099
|
|
|
|
(4,809
|
)
|
|
|
|
|
|
|
|
|
(89
|
)
|
|
(G)
|
|
|
(2,799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
4,620
|
|
|
$
|
(6,603
|
)
|
|
$
|
|
|
|
|
|
$
|
(184
|
)
|
|
|
|
|
(2,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations available to common
stockholders
|
|
$
|
4,244
|
|
|
$
|
(7,014
|
)
|
|
$
|
|
|
|
|
|
$
|
(184
|
)
|
|
|
|
$
|
(2,954
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) from continuing operations
|
|
$
|
0.96
|
|
|
$
|
(7.17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.56
|
)
|
Diluted earnings (losses) from continuing operations
|
|
$
|
0.95
|
|
|
$
|
(7.17
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.56
|
)
|
Dividends paid
|
|
$
|
1.28
|
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.28
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,431,870
|
|
|
|
978,463
|
|
|
|
|
|
|
|
|
|
(137,474
|
)
|
|
(K)
|
|
|
5,272,859
|
|
Diluted
|
|
|
4,460,633
|
|
|
|
978,463
|
|
|
|
|
|
|
|
|
|
(166,237
|
)
|
|
(K)
|
|
|
5,272,859
|
|
See accompanying notes to unaudited pro forma condensed combined
financial statements.
36
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting
|
|
|
|
|
|
Bank of America
|
|
|
Merrill Lynch
|
|
|
Reporting
|
|
and Other
|
|
Pro Forma
|
|
|
|
December 31, 2007
|
|
|
December 28, 2007
|
|
|
Reclassifications
|
|
Adjustments
|
|
December 31, 2007
|
|
|
|
(Dollars in millions, except per share data)
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and fees on loans and leases
|
|
$
|
55,681
|
|
|
$
|
|
|
|
$
|
6,181
|
|
|
(20)
|
|
$
|
700
|
|
|
(C)
|
|
$
|
62,562
|
|
Interest on debt securities
|
|
|
9,784
|
|
|
|
|
|
|
|
4,927
|
|
|
(20)
|
|
|
|
|
|
|
|
|
14,711
|
|
Federal funds sold and securities purchased under agreements to
resell
|
|
|
7,722
|
|
|
|
|
|
|
|
31,589
|
|
|
(20)
|
|
|
|
|
|
|
|
|
39,311
|
|
Trading account assets
|
|
|
9,417
|
|
|
|
|
|
|
|
9,290
|
|
|
(20)
|
|
|
|
|
|
|
|
|
18,707
|
|
Other interest income
|
|
|
4,700
|
|
|
|
|
|
|
|
5,298
|
|
|
(20)
|
|
|
|
|
|
|
|
|
9,998
|
|
Interest and dividend revenues
|
|
|
|
|
|
|
56,974
|
|
|
|
(56,974
|
)
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
87,304
|
|
|
|
56,974
|
|
|
|
311
|
|
|
|
|
|
700
|
|
|
|
|
|
145,289
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
18,093
|
|
|
|
|
|
|
|
5,864
|
|
|
(21)
|
|
|
|
|
|
|
|
|
23,957
|
|
Short-term borrowings
|
|
|
21,975
|
|
|
|
|
|
|
|
28,786
|
|
|
(21)
|
|
|
|
|
|
|
|
|
50,761
|
|
Trading account liabilities
|
|
|
3,444
|
|
|
|
|
|
|
|
5,023
|
|
|
(21)
|
|
|
|
|
|
|
|
|
8,635
|
|
|
|
|
|
|
|
|
|
|
|
|
168
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
9,359
|
|
|
|
|
|
|
|
11,752
|
|
|
(21)
|
|
|
900
|
|
|
(I)
|
|
|
22,011
|
|
Interest expense
|
|
|
|
|
|
|
51,425
|
|
|
|
(51,425
|
)
|
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
52,871
|
|
|
|
51,425
|
|
|
|
168
|
|
|
|
|
|
900
|
|
|
|
|
|
105,364
|
|
Net interest income
|
|
|
34,433
|
|
|
|
5,549
|
|
|
|
143
|
|
|
|
|
|
(200
|
)
|
|
|
|
|
39,925
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Card income
|
|
|
14,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,077
|
|
Service charges
|
|
|
8,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,908
|
|
Investment and brokerage services
|
|
|
5,147
|
|
|
|
|
|
|
|
7,284
|
|
|
(22)
|
|
|
|
|
|
|
|
|
17,896
|
|
|
|
|
|
|
|
|
|
|
|
|
5,465
|
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
Commissions
|
|
|
|
|
|
|
7,284
|
|
|
|
(7,284
|
)
|
|
(22)
|
|
|
|
|
|
|
|
|
|
|
Managed accounts and other fee-based revenues
|
|
|
|
|
|
|
5,465
|
|
|
|
(5,465
|
)
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
Investment banking income
|
|
|
2,345
|
|
|
|
5,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,927
|
|
Equity investment income
|
|
|
4,064
|
|
|
|
1,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,691
|
|
Trading account profits (losses)
|
|
|
(5,131
|
)
|
|
|
|
|
|
|
(12,067
|
)
|
|
(24)
|
|
|
|
|
|
|
|
|
(17,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal transactions
|
|
|
|
|
|
|
(12,067
|
)
|
|
|
12,067
|
|
|
(24)
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking income
|
|
|
902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
902
|
|
Gain on sales of debt securities
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180
|
|
Other income (loss)
|
|
|
1,394
|
|
|
|
(2,190
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(796
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
|
31,886
|
|
|
|
5,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, net of interest expense
|
|
|
66,319
|
|
|
|
11,250
|
|
|
|
143
|
|
|
|
|
|
(200
|
)
|
|
|
|
|
77,512
|
|
Provision for credit losses
|
|
|
8,385
|
|
|
|
|
|
|
|
143
|
|
|
(20)
|
|
|
|
|
|
|
|
|
8,528
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
18,753
|
|
|
|
15,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,656
|
|
Occupancy
|
|
|
3,038
|
|
|
|
1,139
|
|
|
|
(27
|
)
|
|
(25)
|
|
|
|
|
|
|
|
|
4,150
|
|
Equipment
|
|
|
1,391
|
|
|
|
|
|
|
|
27
|
|
|
(25)
|
|
|
|
|
|
|
|
|
1,418
|
|
Marketing
|
|
|
2,356
|
|
|
|
785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,141
|
|
Professional fees
|
|
|
1,174
|
|
|
|
1,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,201
|
|
Amortization of intangibles
|
|
|
1,676
|
|
|
|
|
|
|
|
242
|
|
|
(26)
|
|
|
208
|
|
|
(E)
|
|
|
2,126
|
|
Data processing
|
|
|
1,962
|
|
|
|
|
|
|
|
1,217
|
|
|
(27)
|
|
|
|
|
|
|
|
|
3,179
|
|
Telecommunications
|
|
|
1,013
|
|
|
|
|
|
|
|
840
|
|
|
(27)
|
|
|
|
|
|
|
|
|
1,853
|
|
Communications and technology
|
|
|
|
|
|
|
2,057
|
|
|
|
(2,057
|
)
|
|
(27)
|
|
|
|
|
|
|
|
|
|
|
Brokerage, clearing and exchange fees
|
|
|
|
|
|
|
1,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,415
|
|
Office supplies and postage
|
|
|
|
|
|
|
233
|
|
|
|
(233
|
)
|
|
(28)
|
|
|
|
|
|
|
|
|
|
|
Other general operating
|
|
|
5,237
|
|
|
|
1,522
|
|
|
|
233
|
|
|
(28)
|
|
|
|
|
|
|
|
|
6,750
|
|
|
|
|
|
|
|
|
|
|
|
|
(242
|
)
|
|
(26)
|
|
|
|
|
|
|
|
|
|
|
Merger and restructuring charges
|
|
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
|
37,010
|
|
|
|
24,081
|
|
|
|
|
|
|
|
|
|
208
|
|
|
|
|
|
61,299
|
|
Income (losses) from continuing operations before income
taxes
|
|
|
20,924
|
|
|
|
(12,831
|
)
|
|
|
|
|
|
|
|
|
(408
|
)
|
|
|
|
|
7,685
|
|
Income tax expense (benefit)
|
|
|
5,942
|
|
|
|
(4,194
|
)
|
|
|
|
|
|
|
|
|
(133
|
)
|
|
(G)
|
|
|
1,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
14,982
|
|
|
|
(8,637
|
)
|
|
|
|
|
|
|
|
|
(275
|
)
|
|
|
|
|
6,070
|
|
Income (loss) from continuing operations available to common
stockholders
|
|
$
|
14,800
|
|
|
$
|
(8,907
|
)
|
|
$
|
|
|
|
|
|
$
|
(275
|
)
|
|
|
|
$
|
5,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (losses) from continuing operations
|
|
$
|
3.35
|
|
|
$
|
(10.73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.09
|
|
Diluted earnings (losses) from continuing operations
|
|
$
|
3.30
|
|
|
$
|
(10.73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.07
|
|
Dividends paid
|
|
$
|
2.40
|
|
|
$
|
1.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.40
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,423,579
|
|
|
|
830,415
|
|
|
|
|
|
|
|
|
|
(116,673
|
)
|
|
(K)
|
|
|
5,137,321
|
|
Diluted
|
|
|
4,480,254
|
|
|
|
830,415
|
|
|
|
|
|
|
|
|
|
(47,380
|
)
|
|
(K)
|
|
|
5,263,289
|
|
See accompanying notes to unaudited pro forma condensed combined
financial statements.
37
|
|
Note 1
|
Basis of
Pro Forma Presentation
|
The unaudited pro forma condensed combined financial information
related to the merger is included for the year ended
December 31, 2007, and as of and for the six months ended
June 30, 2008. As indicated in Exhibit 99.1 to Bank of
Americas
Form 8-K
dated September 15, 2008, Bank of America agreed to acquire
Merrill Lynch for $50 billion. This purchase price was
calculated based upon the closing price of Bank of America
common stock of $33.74 on Friday, September 12, 2008.
However, for accounting purposes, generally accepted accounting
principles requires that the average closing price for the two
days before the announcement, the day of the announcement, and
the two days following the announcement be used to calculate the
purchase price, resulting in an average stock price of $30.02.
The pro forma adjustments included herein solely reflect, as of
June 27, 2008, the conversion of Merrill Lynch common stock
into Bank of America common stock using an exchange ratio of
0.8595 of a share of Bank of America common stock for each of
the approximately 1.2 billion shares of Merrill Lynch
common stock and share-based compensation awards. Also, Merrill
Lynch preferred stock of approximately $13.7 billion,
outstanding at June 27, 2008, has been converted into Bank
of America preferred stock on a one-for-one basis. The pro forma
purchase price included herein does not consider changes to
Merrill Lynchs common and preferred stock subsequent to
June 27, 2008. Additionally, the pro forma accounting,
including the determination of goodwill does not consider the
results of operations, including certain transactions that have
occurred subsequent to June 27, 2008. For additional
information on these subsequent events, see Note 18,
Subsequent Events to the condensed consolidated financial
statements in Merrill Lynchs quarterly report on
Form 10-Q
for the period ended June 27, 2008. The pro forma purchase
price, goodwill and earnings per share amounts will change based
upon these events and the results of operations between
June 27, 2008 and the actual merger date.
The merger will be accounted for using the purchase method of
accounting; accordingly, Bank of Americas cost to acquire
Merrill Lynch will be allocated to the assets (including
identifiable intangible assets) and liabilities (including
executory contracts and other commitments) of Merrill Lynch at
their respective fair values on the data the merger is complete.
The unaudited pro forma condensed combined financial information
includes preliminary estimated adjustments to record the assets
and liabilities of Merrill Lynch at their respective estimated
fair values and represents managements estimates based on
available information. The pro forma adjustments included herein
may be revised as additional information becomes available and
as additional analyses are performed. The final allocation of
the purchase price will be determined after the merger is
completed and after completion of a final analysis to determine
the estimated fair values of Merrill Lynchs tangible and
identifiable intangible assets, and liabilities. Accordingly,
the final purchase accounting adjustments and integration
charges may be materially different from the pro forma
adjustments presented in the document. Increases or decreases in
the estimated fair values of the net assets, commitments,
executory contracts, and other items of Merrill Lynch as
compared to the information shown in the document may change the
amount of the purchase price allocated to goodwill and other
assets and liabilities and may impact the statement of
operations due to adjustments in yield
and/or
amortization of the adjusted assets or liabilities.
The unaudited pro forma condensed combined balance sheet
includes a preliminary estimate of the exit and termination
costs which will be recorded in purchase accounting related to
the total estimated $2 billion after-tax ($3 billion
pre-tax) merger related costs that will be incurred to combine
the operations of Bank of America and Merrill Lynch. These
preliminary estimates of merger related charges will result from
action taken with respect to both Bank of America and Merrill
Lynch operations, facilities, and associates. The charges will
be recorded based on the nature and timing of these integration
actions. Accordingly, the unaudited pro forma condensed combined
statements of operations do not include the impact of these
charges. See Note 4 for a further discussion of these
charges.
Certain amounts in the historical consolidated financial
statements of Bank of America and Merrill Lynch have been
reclassified to conform to the combined companys
classification. Discontinued operations reported in Merrill
Lynchs historical consolidated statements of operations
have been excluded as this information is not required in the
unaudited pro forma condensed combined statements of operations.
The unaudited pro forma condensed combined financial information
is presented in this document for illustrative purposes only and
does not necessarily indicate the results of operations or the
combined financial position that would have
38
resulted had the merger been completed at the beginning of the
applicable period presented, nor the impact of possible business
model changes as a result of current market conditions which may
impact revenues, expense efficiencies, asset dispositions, share
repurchases and other factors. Additionally, the unaudited pro
forma condensed combined financial information is not indicative
of the results of operations in future periods or the future
financial position of the combined company.
The unaudited pro forma condensed combined financial information
as of and for the period ended June 30, 2008, and for the
year ended December 31, 2007, excludes the impact of Bank
of Americas acquisition of Countrywide Financial
Corporation on July 1, 2008, as the acquisition of
Countrywide Financial Corporation was not material to Bank of
Americas total assets and net income from continuing
operations. Additionally, the unaudited pro forma condensed
combined financial information has been prepared assuming the
merger with Merrill Lynch will occur prior to January 1,
2009 and accordingly, this information has been prepared under
Statement of Financial Accounting Standards (SFAS) No. 141,
Business Combinations. On January 1, 2009,
SFAS No. 141 (revised 2007), Business
Combinations (SFAS 141R) becomes effective. If the
merger closes on January 1, 2009, or later, the acquisition
will be accounted for under SFAS 141R. The primary changes
under SFAS 141R include the purchase price will be
determined based upon Bank of Americas closing stock price
on the date the merger closes, all exit and termination costs
will be expensed, the loan portfolio will be recorded at fair
value and contingent assets and liabilities will be recorded at
fair value.
|
|
Note 2
|
Reporting
Reclassifications
|
Balance
Sheet
|
|
|
|
1
|
Adjustment to reclassify Merrill Lynchs cash and
securities segregated for regulatory purposes or deposited with
clearing organizations into cash or securities to conform to
Bank of Americas classification.
|
|
|
2
|
Adjustment to reclassify Bank of Americas securities
borrowed included in federal funds sold and securities purchased
under agreements to resell into securities borrowed to conform
to the combined companys classification.
|
|
|
3
|
Adjustment to reclassify Merrill Lynchs derivative
contracts included in trading account assets into derivative
assets to conform to Bank of Americas classification.
|
|
|
4
|
Adjustment to reclassify Merrill Lynchs derivative
contracts included in other assets into derivative assets to
conform to Bank of Americas classification.
|
|
|
5
|
Adjustment to reclassify Bank of Americas securities
received as collateral included in other assets to securities
received as collateral to conform to the combined companys
classification.
|
|
|
6
|
Adjustment to reclassify Merrill Lynchs mortgage servicing
rights included in other assets to mortgage servicing rights to
conform to Bank of Americas classification.
|
|
|
7
|
Adjustment to reclassify Merrill Lynchs goodwill and
intangible assets to conform to Bank of Americas
classification.
|
|
|
8
|
Adjustment to reclassify Merrill Lynchs customers, brokers
and dealers and interest and other receivables into other
receivables to conform to the combined companys
classification.
|
|
|
9
|
Adjustment to reclassify Bank of Americas other
receivables included in other assets to other receivables to
conform to the combined companys classification.
|
|
|
10
|
Adjustment to reclassify Bank of Americas deferred tax
liabilities to deferred tax assets to conform to the combined
companys classification.
|
|
|
11
|
Adjustment to reclassify Merrill Lynchs deposits to
conform to Bank of Americas classification.
|
|
|
12
|
Adjustment to reclassify Bank of Americas securities
loaned included in federal funds purchased and securities sold
under agreements to repurchase into securities loaned to conform
to the combined companys classification.
|
|
|
13
|
Adjustment to reclassify Merrill Lynchs derivative
contracts included in trading account liabilities into
derivative liabilities to conform to Bank of Americas
classification.
|
39
|
|
|
|
14
|
Adjustment to reclassify Bank of Americas obligation to
return securities received as collateral included in other
liabilities to securities received as collateral to conform to
the combined companys classification.
|
|
|
15
|
Adjustment to reclassify Merrill Lynchs derivative
contracts included in other liabilities into derivative
liabilities to conform to Bank of Americas classification.
|
|
|
16
|
Adjustment to reclassify Bank of Americas other payables
included in accrued expenses and other liabilities to other
payables to conform to the combined companys
classification.
|
|
|
17
|
Adjustment to reclassify Merrill Lynchs customers, brokers
and dealers and interest and other payables into other payables
to conform to the combined companys classification.
|
|
|
18
|
Adjustment to reclassify Merrill Lynchs junior
subordinated notes (related to trust preferred securities) into
long-term debt to conform to Bank of Americas
classification.
|
|
|
19
|
Adjustment to reclassify Merrill Lynchs shares
exchangeable to common stock,
paid-in
capital and treasury stock to common stock to conform to Bank of
Americas classification.
|
Income
Statement
|
|
|
|
20
|
Adjustment to reclassify Merrill Lynchs interest and
dividend revenues to interest income: interest and fees on loans
and leases, interest on debt securities, fed funds sold and
securities purchased under agreements to resell, trading account
assets, other interest income, interest expense: trading account
liabilities or provision for credit losses to conform to Bank of
Americas classification.
|
|
|
21
|
Adjustment to reclassify Merrill Lynchs interest expense
to interest expense: deposits, short-term borrowings, trading
account liabilities or long-term debt to conform to Bank of
Americas classification.
|
|
|
22
|
Adjustment to reclassify Merrill Lynchs commissions income
to investment and brokerage services income to conform to Bank
of Americas classification.
|
|
|
23
|
Adjustment to reclassify Merrill Lynchs managed accounts
and other fee-based revenues to investment and brokerage
services income to conform to Bank of Americas
classification.
|
|
|
24
|
Adjustment to reclassify Merrill Lynchs principal
transactions to trading account profits (losses) to conform to
Bank of Americas classification.
|
|
|
25
|
Adjustment to reclassify Merrill Lynchs equipment expense
included in occupancy expense to equipment expense to conform to
Bank of Americas classification.
|
|
|
26
|
Adjustment to reclassify Merrill Lynchs amortization of
intangibles included in other general operating expense to
amortization of intangibles to conform to Bank of Americas
classification.
|
|
|
27
|
Adjustment to reclassify Merrill Lynchs data processing
and communications expense included in communication and
technology expense to data processing expense and
telecommunications expense to conform to Bank of Americas
classification.
|
|
|
28
|
Adjustment to reclassify Merrill Lynchs office supplies
and postage expense to other general operating expense to
conform to Bank of Americas classification.
|
|
|
Note 3
|
Preliminary
Purchase Accounting Allocation
|
The unaudited pro forma condensed combined financial information
for the merger includes the unaudited pro forma condensed
combined balance sheet as of June 30, 2008 assuming the
merger was completed on June 30, 2008. The unaudited pro
forma condensed combined income statements for the six months
ended June 30, 2008 and the year ended December 31,
2007 were prepared assuming the merger was completed on
January 1, 2007.
The unaudited pro forma condensed combined financial information
reflects the issuance of approximately 1.0 billion shares
of Bank of America common stock and share-based compensation
awards and preferred stock of approximately $13.7 billion.
The common stock, share-based compensation awards and preferred
stock issued in the exchange was valued using the methodology
discussed in Note 1 above.
40
The merger will be accounted for using the purchase method of
accounting; accordingly, Bank of Americas cost to acquire
Merrill Lynch will be allocated to the assets (including
identifiable intangible assets) and liabilities of Merrill Lynch
at their respective estimated fair values as of the acquisition
date. Accordingly, the pro forma purchase price was
preliminarily allocated to the assets acquired and the
liabilities assumed based on their estimated fair values as
summarized in the following table.
|
|
|
|
|
|
|
|
|
Preliminary Pro Forma Purchase Price Allocation
(unaudited)
|
|
|
|
|
|
|
(Dollars in billions, except per
share amounts)
|
|
|
|
|
|
|
|
Pro Forma Purchase price
|
|
|
|
|
|
|
|
|
Merrill Lynch common stock and share-based compensation awards
exchanged (in billions)
|
|
|
1.193
|
|
|
|
|
|
Exchange ratio
|
|
|
0.8595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares of Bank of Americas common stock exchanged
(in billions)
|
|
|
1.025
|
|
|
|
|
|
Purchase price per share of Bank of Americas common
stock(1)
|
|
$
|
30.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30.8
|
|
Merrill Lynch preferred stock converted to Bank of America
preferred stock
|
|
|
|
|
|
|
13.7
|
|
|
|
|
|
|
|
|
|
|
Total Pro Forma Purchase Price(2)
|
|
|
|
|
|
|
44.5
|
|
|
|
|
|
|
|
|
|
|
Preliminary allocation of the pro forma purchase price
|
|
|
|
|
|
|
|
|
Merrill Lynch stockholders equity
|
|
|
|
|
|
|
34.8
|
|
Merrill Lynch goodwill and intangible assets
|
|
|
|
|
|
|
(5.1
|
)
|
Adjustments to reflect assets acquired and liabilities assumed
at fair value:
|
|
|
|
|
|
|
|
|
Loans and leases, net
|
|
|
|
|
|
|
(3.8
|
)
|
Intangible assets
|
|
|
|
|
|
|
7.5
|
|
Other assets
|
|
|
|
|
|
|
(4.5
|
)
|
Accrued expenses and exit, termination and other liabilities
|
|
|
|
|
|
|
(4.1
|
)
|
Long-term debt
|
|
|
|
|
|
|
6.5
|
|
Deferred taxes
|
|
|
|
|
|
|
(2.9
|
)
|
|
|
|
|
|
|
|
|
|
Fair value of net assets acquired
|
|
|
|
|
|
|
28.4
|
|
|
|
|
|
|
|
|
|
|
Preliminary pro forma goodwill resulting from the
merger
|
|
|
|
|
|
$
|
16.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The value of the shares of common stock exchanged with Merrill
Lynch stockholders was based upon the average of the closing
prices of Bank of Americas common stock for the period
commencing two trading days before and ending two trading days
after September 15, 2008, the date of the merger agreement. |
|
(2) |
|
The pro forma purchase price included herein does not consider
changes to Merrill Lynchs common and preferred stock
subsequent to June 27, 2008. Additionally, the pro forma
accounting, including the determination of goodwill does not
consider the results of operations, including certain
transactions that have occurred subsequent to June 27,
2008. For additional information on these subsequent events, see
Note 18, Subsequent Events to the condensed
consolidated financial statements in Merrill Lynchs
quarterly report on
Form 10-Q
for the period ended June 27, 2008. The pro forma purchase
price, goodwill and earnings per share amounts will change based
upon these events and the results of operations between
June 27, 2008 and the actual merger date. |
The preliminary pro forma purchase accounting allocation
included in the unaudited pro forma condensed combined financial
information is as follows:
|
|
|
|
A
|
Preliminary adjustments, primarily to record estimated costs of
terminating certain Merrill Lynch credit derivatives. The entire
amount has been recorded as an adjustment to derivative assets
pending a detailed position by position review. The adjustments
reflected herein are based on current assumptions and valuations
which are subject to change.
|
41
|
|
|
|
B
|
Preliminary adjustments, primarily to record equity method and
other investments at their estimated fair values. Certain of
these adjustments were increases and certain of these
adjustments were decreases in fair value, resulting in an
immaterial net impact. The adjustments reflected herein are
based on current assumptions and valuations which are subject to
change.
|
|
|
C
|
Preliminary adjustments to record impaired loans at their
estimated fair values based upon credit
and/or
current interest rates, as well as non-impaired loans at their
estimated present value of amounts to be received at current
interest rates. For non-impaired loans, Merrill Lynchs
existing allowance for loan losses was retained. The effect of
these adjustments is to increase interest income and decrease
provision for loan losses for the impaired portfolio by
approximately $350 million and $700 million for the
six months ended June 30, 2008, and the twelve months ended
December 31, 2007, respectively. The entire amount has been
recorded as an adjustment to interest income pending a detailed
loan by loan review. The adjustments reflected herein are based
on current assumptions and valuations which are subject to
change.
|
|
|
D
|
Adjustments to write off historical Merrill Lynch goodwill and
record pro forma goodwill created as a result of the merger.
|
|
|
E
|
Adjustments to write off historical Merrill Lynch other
intangibles assets and record preliminary estimates of core
deposit, customer and trade name intangible assets of
approximately $7.5 billion resulting from the merger. The
impact of the intangible assets is to increase amortization of
intangibles by approximately $173 million and
$208 million for the six months ended June 30, 2008,
and the twelve months ended December 31, 2007, net of
amounts already included in Merrill Lynchs historical
statement of operations, respectively. The nature, amount and
amortization method of various possible identified intangibles
are being studied by management. The adjustments reflected
herein are based on current assumptions and valuations which are
subject to change. Material changes are possible when our
analysis is completed.
|
|
|
|
|
F
|
Preliminary adjustments, primarily to record other assets,
including prepaids, deferred costs, pension and other
postretirement benefits/liabilities and other miscellaneous
assets at their estimated fair values. The adjustments reflected
herein are based on current assumptions and valuations which are
subject to change.
|
|
|
|
|
G
|
Preliminary adjustments to record the tax effect of the pro
forma adjustments at an estimated 32.5% effective tax rate, as
well as estimated adjustments to Merrill Lynch deferred tax
assets. The adjustments reflected herein are based on current
assumptions and valuations which are subject to change.
|
|
|
H
|
Preliminary adjustments, primarily to record estimated exit and
termination costs, including costs for severance of personnel
and closure of vacant facilities, as well as certain contractual
change in control obligations for associates. The adjustments
reflected herein are based on current assumptions and valuations
which are subject to change.
|
|
|
|
|
I
|
Preliminary adjustments to record debt at its estimated fair
value based upon current credit and current interest rates. The
impact of the adjustments was to increase interest expense by
approximately $450 million and approximately
$900 million for the six months ended June 30, 2008,
and the twelve months ended December 31, 2007,
respectively. The adjustments reflected herein are based on
current assumptions and valuations which are subject to change.
|
|
|
|
|
J
|
Preliminary adjustments to eliminate Merrill Lynchs
historical stockholders equity and reflect Bank of
Americas capitalization of Merrill Lynch.
|
|
|
|
|
K
|
Weighted average shares were calculated using the historical
weighted average shares outstanding of Bank of America and
Merrill Lynch, adjusted using the exchange ratio, to the
equivalent shares of Bank of America common stock, for the year
ended December 31, 2007, and six months ended June 30,
2008. Earnings per share (EPS) data have been computed based on
the combined historical income of Bank of America, income from
continuing operations for Merrill Lynch and
|
42
|
|
|
|
|
the impact of purchase accounting adjustments. For periods in
which the pro forma combined company had a net loss from
continuing operations or net income from continuing operations
the impact of dilutive equity instruments have been excluded or
included, respectively, as part of the diluted EPS calculation.
|
|
|
Note 4
|
Merger
Related Charges
|
In connection with the merger, the plan to integrate Bank of
Americas and Merrill Lynchs operations is still
being developed. The total integration costs have been
preliminarily estimated to be approximately $2 billion
after-tax or approximately $3 billion pre-tax. The specific
details of these plans will continue to be refined over the next
several months. Currently, our merger integration team is
assessing the two companies operations, including
information systems, premises, equipment, benefit plans, supply
chain methodologies, service contracts and personnel to
determine optimum strategies to realize cost savings.
Our merger integration decisions will impact certain existing
Merrill Lynch facilities (both leased and owned), information
systems, supplier contracts and costs associated with the
involuntary termination of personnel. Additionally, as part of
our formulation of the merger integration plan, certain actions
regarding existing Bank of America information systems,
premises, equipment, benefit plans, supply chain methodologies,
supplier contracts and costs associated with the involuntary
termination of personnel may be impacted. To the extent there
are costs associated with these actions, the costs will be
recorded based on the nature and timing of these integration
actions. We expect that such decisions will be completed shortly
after the merger. Restructuring charges will be recorded based
on the nature and timing of these integration actions.
Included in the costs described above, during the combination of
the two companies we will incur additional integration costs
consisting of employee retention agreements, conversion costs
and incremental communication costs to customers and associates,
among other costs. It is expected that these costs will be
incurred over a three-year period after completion of the
merger. These costs will be expensed as incurred.
|
|
Note 5
|
Estimated
Annual Cost Savings
|
Estimated annual cost savings of approximately $4 billion
after-tax or approximately $7 billion pre-tax, when fully
phased in after the merger, represent our estimate only and may
not be indicative of the actual amount of the cost savings the
combined company actually achieves. These amounts do not include
the possible impacts of revenue opportunities. These amounts
consist of:
|
|
|
|
|
|
|
|
|
|
|
Annual Pre-Tax Cost Savings
|
|
|
|
Overlapping Businesses and Infrastructure
|
|
$
|
4,450
|
|
|
million
|
|
(A)
|
Corporate Staff Functions
|
|
|
1,500
|
|
|
million
|
|
(B)
|
Occupancy
|
|
|
500
|
|
|
million
|
|
(C)
|
Other
|
|
|
550
|
|
|
million
|
|
(D)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,000
|
|
|
million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
Overlapping business, including certain capital markets and
asset management activities, and related infrastructure,
including technology and operations functions, are projected to
result in cost savings due to the elimination of redundant
systems and software, the elimination of redundant operational
support and activities and reduced personnel costs for the
combined company. |
|
(B) |
|
Corporate staff function cost savings are projected to occur
from reduced personnel costs and elimination of duplicative
corporate and administrative functions. |
|
(C) |
|
Occupancy costs savings are projected to result from
consolidation of personnel into a reduced number of office
facilities and leased space. |
|
(D) |
|
Other cost savings result from miscellaneous items, including
vendor leverage purchasing efficiencies, not included in the
above categories. |
43
THE
MERGER
Background
of the Merger
Management and the boards of directors of both Bank of America
and Merrill Lynch regularly review and consider potential
strategic options for their companies in light of their
respective performance, business needs and the challenges and
opportunities presented by the economic and industry
environment. As part of this process, senior management of both
companies have met informally from time to time with senior
management of other financial institutions, including each
other, regarding industry trends and strategic considerations.
Among these considerations has been the possibility of a
combination of Bank of America and Merrill Lynch.
During the week of September 8, 2008, the prices of
publicly traded shares of many major financial services
companies declined significantly as speculation and reports
about financial difficulties at Lehman Brothers Holdings, Inc.
began to circulate. On September 10, 2008, Lehman Brothers
pre-announced a $3.9 billion net loss for its third quarter
of 2008, as well as a number of initiatives to bolster its
financial viability; however, the equity markets remained
volatile. Merrill Lynchs common stock price declined by
approximately 36 percent during that week. On the morning
of Friday, September 12, 2008, the Merrill Lynch board of
directors held an informational conference call. During the
conference call, senior management of Merrill Lynch updated the
directors on recent market conditions, developments relating to
Lehman Brothers financial viability, and the status of,
and certain considerations with respect to, Merrill Lynchs
capital, liquidity and business results, Merrill Lynchs
recent stock performance and potential rating agency actions.
The Merrill Lynch board of directors urged senior management to
continue to evaluate the potential impact of these market
developments on Merrill Lynch and the possible courses of action
Merrill Lynch might pursue in response to various possible
scenarios, and stressed the need for Merrill Lynch to be
prepared to act quickly as events unfolded.
On Saturday morning, September 13, 2008, John Thain,
Chairman and Chief Executive Officer of Merrill Lynch, contacted
Ken Lewis, Chairman, Chief Executive Officer and President of
Bank of America. Mr. Thain told Mr. Lewis that, in
light of the extremely distressed conditions in the financial
services industry generally and the investment banking industry
in particular, he believed that it might be beneficial to both
companies to explore one or more potential investment or other
transactions between Merrill Lynch and Bank of America.
Mr. Lewis agreed that such discussions could be in both
companies best interests and agreed to meet with
Mr. Thain later that day in New York City.
On Saturday afternoon, Messrs. Lewis and Thain met in New
York City. The two executives discussed the unprecedented market
environment that had triggered significant dislocations, the
near-bankruptcy of The Bear Stearns Companies Inc. and the
apparently imminent bankruptcy of Lehman Brothers.
Mr. Thain proposed to Mr. Lewis that Bank of America
consider acquiring a 9.9% equity stake in Merrill Lynch and
provide a credit facility to Merrill Lynch. Mr. Lewis
responded that Bank of America was not interested in acquiring a
minority stake in Merrill Lynch, but that Bank of America would
be interested in discussing a potential business combination
with Merrill Lynch. Mr. Lewis expressed his view of the
strategic fit between the two organizations and his belief that
the combination of the two companies would result in a leading
position in retail brokerage and wealth management,
significantly enhanced investment banking capabilities and
global scale in investment management. Messrs. Thain and
Lewis agreed to further discuss both alternatives.
Following that afternoon meeting, and in view of the need to
move expeditiously in light of the apparently imminent
bankruptcy of Lehman Brothers and deteriorating market
conditions, both companies began to arrange meetings among
members of management and their advisors to discuss the
challenges and benefits of a transaction and to undertake their
respective due diligence investigations. The discussions among
Bank of America, Merrill Lynch and their management teams and
advisors, as well as their due diligence investigations,
continued throughout the night and into the next day and night.
Also on Saturday, representatives of Merrill Lynch engaged in
exploratory discussions regarding a transaction with two other
large financial services companies, including with respect to
the potential for a
44
minority investment and credit facility with one company and for
a business combination with the other company. The discussions
regarding a potential minority investment did not result in the
development of a transaction that the senior management of
Merrill Lynch or its board of directors determined to be as
favorable to Merrill Lynch or its stockholders as the
combination proposed with Bank of America. After meeting with
the other company, Merrill Lynch did not pursue further
discussions regarding a potential combination because senior
management of Merrill Lynch concluded that such a transaction
was not readily achievable.
Early in the morning of Sunday, September 14, 2008,
Messrs. Thain and Lewis met in New York City. At this
meeting, Messrs. Thain and Lewis discussed the results of
the due diligence investigations conducted by their
companies respective representatives. Mr. Lewis and
Mr. Thain discussed the strategic rationale for a business
combination of Bank of America and Merrill Lynch and considered
how the businesses of Merrill Lynch and Bank of America would
complement each other. At the conclusion of the meeting,
Messrs. Thain and Lewis agreed to have representatives of
Merrill Lynch and Bank of America and their respective legal
advisors pursue the negotiation of the terms of the agreements
that would govern the proposed business combination transaction.
Later that day, the Merrill Lynch board of directors held an
informational conference call. In addition to the directors,
Shearman & Sterling LLP, counsel to Merrill Lynch, and
Cravath, Swaine & Moore LLP, counsel to the
non-employee directors, participated in the conference call. On
the conference call, Mr. Thain updated the directors on the
meetings held over the weekend between government officials and
senior executives at leading financial services companies to
provide financial assistance to Lehman Brothers, the exploratory
discussions with two other institutions regarding the potential
for a strategic transaction, the status of discussions with Bank
of America regarding the proposed business combination
transaction, and the status of, and certain considerations with
respect to, Merrill Lynchs capital, liquidity and business
results and the potential impact on Merrill Lynch of the
expected public announcements regarding the expected bankruptcy
filing by Lehman Brothers and the reported liquidity issues
facing American International Group. The Merrill Lynch board of
directors indicated their agreement that representatives of
Merrill Lynch and its legal advisors continue negotiating the
terms of the proposed merger with Bank of America and its legal
advisors with a view to reaching an agreement that could be
presented to the Merrill Lynch board of directors that evening,
particularly in light of the market uncertainties and related
risks Merrill Lynch would be expected to face when the markets
opened the next day. Mr. Thain proposed that the Merrill
Lynch board of directors plan to meet at 6:00 p.m. that
evening, and subsequently left the conference call together with
the other representatives of Merrill Lynch and their advisors.
The non-employee directors continued the conference call in
executive session with their independent counsel for purposes of
discussing the proposed business combination transaction with
Bank of America and the alternatives available to Merrill Lynch.
From September 13, 2008 through September 14, 2008,
representatives of Merrill Lynch met several times with
representatives of Bank of America to discuss valuation and
pricing for shares of Merrill Lynch common stock in any proposed
business combination transaction. During these discussions,
representatives of Merrill Lynch indicated that Merrill Lynch
would be seeking a significant premium to the closing price of
$17.05 for shares of Merrill Lynch common stock on the NYSE on
September 12, 2008, as well as an appropriate multiple of
book value. These discussions resulted in the parties
agreement to present to their respective boards a proposed
transaction having a price of $29.00 for each share of Merrill
Lynch common stock, which equated to an exchange ratio of 0.8595
based on the closing price for shares of Bank of America common
stock on the NYSE on September 12, 2008.
In the late afternoon on Sunday, the Bank of America board of
directors met with members of Bank of America senior management
and its outside advisors. Bank of America senior management
reviewed with the Bank of America board of directors information
regarding Bank of America, Merrill Lynch and the terms of the
proposed transaction. Bank of America senior management and the
companys financial advisors, J.C. Flowers and FPK,
presented the Bank of America board of directors with the
findings of their due diligence investigation of Merrill Lynch
and additional information, including financial information
regarding the two companies and the transaction as more fully
described below under the heading Opinion of
Bank of Americas Financial Advisors. Each of
J.C. Flowers and FPK orally advised the Bank of America
board of directors, and indicated that it was prepared to render
a written opinion to the same effect, that, as of such
45
date and based upon and subject to the assumptions made,
methodologies used, factors considered and limitations upon
their review as described in their respective opinions and other
matters as J.C. Flowers and FPK considered relevant, the
proposed exchange ratio to be paid by Bank of America in the
merger was fair, from a financial point of view, to Bank of
America. Bank of Americas general counsel and Wachtell,
Lipton, Rosen & Katz, counsel to Bank of America,
discussed with the Bank of America board of directors the legal
standards applicable to its decisions and actions with respect
to the proposed transaction and reviewed the legal terms of the
proposed merger. Following review and discussion among the
members of the Bank of America board of directors, including
consideration of the factors described under
Bank of Americas Reasons for the Merger;
Recommendation of the Bank of America Board of Directors,
the Bank of America board of directors unanimously determined
that the transaction was in the best interests of Bank of
America and its stockholders and voted unanimously to approve
the merger agreement, the stock option agreement and the
transactions contemplated by those agreements.
Shortly after the start of the Bank of America board meeting,
the Merrill Lynch board of directors met with members of Merrill
Lynchs senior management and Merrill Lynchs
financial advisors and outside legal advisors. Merrill Lynch
senior management reviewed with the Merrill Lynch board of
directors information regarding Bank of America, Merrill Lynch
and the terms of the proposed transaction and updated the
directors on developments in the discussions with
representatives of Bank of America since the adjournment of the
conference call earlier in the day. Merrill Lynch senior
management apprised the Merrill Lynch board of directors of its
due diligence investigations of Bank of America. MLPFS reviewed
its financial analyses regarding the proposed merger with the
Merrill Lynch board of directors as more fully described below
under the heading Opinion of Merrill
Lynchs Financial Advisor. MLPFS then rendered to the
Merrill Lynch board of directors its oral opinion, which opinion
was subsequently confirmed in writing, that as of
September 14, 2008, based upon the assumptions made,
matters considered and limits of such review, as set forth in
its opinion, the exchange ratio in the merger was fair from a
financial point of view to holders of Merrill Lynch common
stock. In addition, Shearman & Sterling LLP reviewed
with the Merrill Lynch board of directors the legal terms
of the proposed merger and the legal standards applicable to its
decisions and actions with respect to the proposed transaction.
Following review and discussion among the members of the
Merrill Lynch board of directors, including consideration
of the factors described under Merrill
Lynchs Reasons for the Merger; Recommendation of the
Merrill Lynch Board of Directors, the Merrill Lynch
board of directors determined that the merger was advisable and
in the best interests of Merrill Lynch and its stockholders, and
the Merrill Lynch board of directors voted unanimously to
approve the merger agreement, the stock option agreement and the
transactions contemplated by those agreements.
Following approval of each board of directors, the parties and
their counsel continued to work to finalize and document the
legal terms of the definitive agreements for the transaction,
and early in the morning on September 15, 2008, the parties
entered into the merger agreement and the stock option agreement
and the transaction was announced in a press release issued by
Bank of America.
Merrill
Lynchs Reasons for the Merger; Recommendation of the
Merrill Lynch Board of Directors
The Merrill Lynch board of directors consulted with Merrill
Lynchs management, as well as its legal and financial
advisors, in its evaluation of the merger. In reaching its
conclusion to adopt the merger agreement and in determining that
the merger is advisable and in the best interests of Merrill
Lynch and its stockholders, the Merrill Lynch board of directors
considered a number of factors, including the following factors:
|
|
|
|
|
Strategic and Other Business Advantages
|
|
|
|
|
|
that Bank of America is one of the largest financial
institutions in the world, with significant scale and strength
in the commercial and consumer banking arena that uniquely
compliments Merrill Lynchs global wealth management and
global markets and investment banking businesses;
|
|
|
|
the breadth and diversity of Bank of Americas businesses
and operations, as well as its strong capital position, funding
capabilities and liquidity positions Bank of America (and the
combined company) optimally within the current and evolving
financial services landscape;
|
46
|
|
|
|
|
the board of directors belief, based upon its
understanding of Bank of Americas business and operations,
that the combined company will provide strong support for
Merrill Lynchs existing operations, as well as new
opportunities to leverage the complementary nature of the
respective businesses, customers, products and skills of Merrill
Lynch and Bank of America;
|
|
|
|
the combined companys diverse business and geographic mix
will have leading global positions in commercial and consumer
banking, retail brokerage and wealth management, sales and
trading and investment management;
|
|
|
|
|
|
Business Condition and Prospects of Merrill Lynch
|
|
|
|
|
|
its understanding of Merrill Lynchs business, operations,
financial condition, liquidity and capital positions, earnings,
and prospects as discussed above under Background of the
Merger and below under Opinion of Merrill
Lynchs Financial Advisor;
|
|
|
|
its consideration of potential strategic alternatives based upon
periodic assessments undertaken by Merrill Lynch and its
advisors, including the contacts and discussions during the
period from September 12 through September 14, 2008,
between Merrill Lynch and other parties, including Bank of
America;
|
|
|
|
the significant decline in stock prices of financial services
firms generally in the weeks preceding the boards decision
to approve the merger and, in particular, of Merrill Lynch
common stock, which declined approximately 36% during the
one-week period prior to the decision of the Merrill Lynch board
of directors;
|
|
|
|
statements during the week of September 8, 2008, by credit
rating agencies suggesting the possibility of further credit
ratings downgrades for financial services companies that had
suffered severe declines in the trading price of their common
stock;
|
|
|
|
the risk of Merrill Lynchs credit ratings being further
downgraded and the potential effect such actions would have on
certain of Merrill Lynchs businesses and its liquidity
position and funding capabilities;
|
|
|
|
the current and prospective environment in which Merrill Lynch
operates, which reflects challenging and uncertain investment
banking industry conditions and risks that the Merrill Lynch
board of directors expected to persist, including:
|
|
|
|
|
|
the volatile valuations and illiquidity of certain financial
assets and exposures;
|
|
|
|
the circumstances under which Bear Stearns agreed to enter into
a business combination with JPMorgan Chase & Co. in
which Bear Stearns faced the prospect of a bankruptcy filing
that would have resulted in Bear Stearns stockholders receiving
no value for their common shares;
|
|
|
|
managements belief that the United States federal
government would not provide financial support to Lehman
Brothers or any potential acquiror of Lehman Brothers and the
anticipated bankruptcy filing of Lehman Brothers and its likely
effects on its stockholders and other companies within the
investment banking industry;
|
|
|
|
the reported liquidity issues facing AIG International Group,
Inc. and its reported need to secure significant financing in
the very near-term in order to avoid bankruptcy;
|
|
|
|
generally uncertain national and international economic
conditions;
|
as well as the competitive environment for financial
institutions generally, and the potential effects of these
factors on Merrill Lynch;
|
|
|
|
|
Form and Value of Per Share Merger Consideration
|
|
|
|
|
|
the all stock and fixed exchange ratio aspects of the merger
consideration, which would allow Merrill Lynch stockholders to
participate in a portion of any improvement in the Merrill Lynch
business and
|
47
|
|
|
|
|
synergies resulting from the merger, and the value to Merrill
Lynch stockholders represented by that consideration;
|
|
|
|
|
|
the fact that Merrill Lynch stockholders pro forma
ownership of the combined company would be approximately 25%;
|
|
|
|
the exchange ratio of 0.8595 of a share of Bank of America
common stock to be received in respect of each share of Merrill
Lynch common stock represented a 70.1% premium to the closing
price of Merrill Lynch common stock on September 12, 2008
(based on the closing price of Bank of America common stock on
that date);
|
|
|
|
|
|
Terms of the Merger Agreement and the Stock Option
Agreement
|
|
|
|
|
|
the provisions imposing restrictions on Merrill Lynch from
soliciting or pursuing alternative transactions;
|
|
|
|
the stock option agreement that allows Bank of America, upon the
occurrence of certain specified events, to exercise an option to
purchase from Merrill Lynch up to 19.9% of Merrill Lynchs
outstanding shares of common stock at a price of $17.05;
|
|
|
|
the aggregate total profit that Bank of America may realize
under the stock option agreement is capped at $2 billion,
representing approximately 4% of the total transaction value;
|
|
|
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that Bank of America has the right to match the terms of any
third party proposal to acquire Merrill Lynch;
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the Merrill Lynch board of directors may change its
recommendation in the event it receives a superior proposal;
provided, that Merrill Lynch must convene a special meeting of
Merrill Lynch stockholders to vote on the transaction with Bank
of America regardless of whether it changes its recommendation;
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that Merrill Lynch will have the right to have three mutually
agreed upon members of the board of directors of Merrill Lynch
serve on the combined companys board of directors;
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the merger is expected to be treated as a tax-free exchange for
Merrill Lynch stockholders;
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Opinion of Financial Advisor
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the financial presentation of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, including its opinion
dated September 14, 2008, to the Merrill Lynch board of
directors to the effect that, as of the date of the opinion, and
based upon and subject to the factors and assumptions set forth
in the opinion, the exchange ratio of 0.8595 of a share of Bank
of America common stock to be received in respect of each share
of Merrill Lynch common stock pursuant to the merger agreement
was fair from a financial point of view to Merrill Lynchs
stockholders. See - Opinion of Merrill Lynchs
Financial Advisor;
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the need to obtain stockholder and regulatory approvals to
complete the merger, and the likelihood that such approvals are
obtained by the first anniversary of the date of the merger
agreement, at which time either party could terminate the merger
agreement;
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the possibility that the merger might not be completed as a
result of failure to receive regulatory approvals or satisfy
other closing conditions, including securing approvals from
stockholders of Merrill Lynch and Bank of America;
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the possibility that the implied market value of the per share
merger consideration could decrease prior to the closing of the
merger if the per share trading price of Bank of America common
stock decreases;
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the potential impact of the transaction on Merrill Lynch
employees and other key constituencies;
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48
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Additional Considerations
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the historical and current market prices of Bank of America
common stock and Merrill Lynch common stock as well as
comparative valuation analyses for the two companies;
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the challenges of integrating Merrill Lynchs businesses,
operations and workforce with those of Bank of America, and the
risks associated with achieving anticipated cost savings and
other synergies;
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that there are no dissenters rights applicable to the
proposed merger; and
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that the Merrill Lynch directors and executive officers have
interests in the merger that are in addition to or different
from their financial interests as Merrill Lynch stockholders.
See - Merrill Lynchs Officers and Directors Have
Financial Interests in the Merger.
|
The foregoing discussion of the information and factors
considered by the Merrill Lynch board of directors is not
exhaustive, but includes the material factors that the Merrill
Lynch board of directors considered. In view of the wide variety
of factors considered in connection with its evaluation of the
merger and related transactions and the complexity of these
matters, the Merrill Lynch board of directors did not find it
useful, and did not attempt, to quantify, rank or otherwise
assign relative weights to these factors. In considering the
factors described above, individual members of the Merrill Lynch
board of directors may have given different weight to different
factors. The Merrill Lynch board of directors conducted an
overall analysis of the factors described above, including
discussions with, and questioning of, the management of Merrill
Lynch and Merrill Lynchs legal and financial advisors, and
reached the consensus that the merger, was advisable and in the
best interests of Merrill Lynch and Merrill Lynch stockholders.
Bank of
Americas Reasons for the Merger; Recommendation of the
Bank of America Board of Directors
The Bank of America board of directors consulted with Bank of
America management as well as financial and legal advisors and
determined that the merger is in the best interests of Bank of
America and Bank of America stockholders. In reaching its
conclusion to approve the merger agreement, the Bank of America
board considered a number of factors, including the following
material factors:
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its understanding of Bank of Americas business,
operations, financial condition, earnings and prospects and of
Merrill Lynchs business, operations, financial condition,
earnings and prospects;
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its understanding of the current and prospective environment in
which Bank of America and Merrill Lynch operate, including
economic and market conditions, the competitive environment and
the likely impact of these factors on Bank of America and
Merrill Lynch;
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the review by the Bank of America board of directors with its
legal advisors of the structure of the merger and the financial
and other terms of the merger and stock option agreement,
including the review by the Bank of America board of directors
with its financial advisors of the exchange ratio, and the
expectation of Bank of Americas legal advisors that the
merger will qualify as a transaction of a type that is generally
tax-free for U.S. federal income tax purposes;
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the fact that the complementary nature of the respective
customer bases, business products and skills of Bank of America
and Merrill Lynch is expected to result in substantial
opportunities to distribute products and services to a broader
customer base and across businesses and to enhance the
capabilities of both companies;
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the potential expense saving opportunities, currently estimated
by Bank of Americas management to be approximately
$7 billion per year on a pre-tax basis when fully realized,
as well as potential incremental revenue opportunities;
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the challenges of successfully integrating Merrill Lynchs
businesses, operations and workforce with those of Bank of
America and the costs of combining the two companies and
achieving the anticipated cost savings, including an anticipated
restructuring charge of $3 billion on a pre-tax basis and
assumed amortization expense of $450 million per-annum on a
pre-tax basis;
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49
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the fact that application of such potential expense savings and
other transaction-related assumptions and adjustments to the
combined net income forecasts for Bank of America and Merrill
Lynch made by various third-party brokerage firms and published
as consensus estimates by First Call would result in the
combination being 3.0% dilutive in 2009 and breakeven in 2010;
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the reports of Bank of America management and the financial
presentation by J.C. Flowers and FPK to Bank of Americas
board of directors concerning the operations, financial
condition and prospects of Merrill Lynch and the expected
financial impact of the merger on the combined company;
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the likelihood that the regulatory and stockholder approvals
needed to complete the transaction will be obtained in a timely
manner and that the regulatory approvals will be obtained
without the imposition of adverse conditions;
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the historical and current market prices of Bank of America
common stock and Merrill Lynch common stock, as well as the
financial analyses prepared by J.C. Flowers and FPK;
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the opinions delivered to the Bank of America board of directors
by each of J.C. Flowers and FPK to the effect that, as of the
date of the opinion and based upon and subject to the
assumptions made, methodologies used, factors considered and
limitations upon its review described in its opinion and such
other matters as J.C. Flowers and FPK considered relevant, the
exchange ratio to be paid by Bank of America was fair, from a
financial point of view, to Bank of America;
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the potential impact of the transaction on the capital levels
and credit rating of Bank of America; and
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the need and ability to retain key Merrill Lynch personnel.
|
The Bank of America board of directors considered all of these
factors as a whole and, on balance, concluded that they
supported a favorable determination to enter into the merger
agreement.
The foregoing discussion of the information and factors
considered by the Bank of America board of directors is not
exhaustive, but includes all material factors considered by the
Bank of America board of directors. In view of the wide variety
of factors considered by the Bank of America board of directors
in connection with its evaluation of the merger and the
complexity of these matters, the Bank of America board of
directors did not consider it practical to, nor did it attempt
to, quantify, rank or otherwise assign relative weights to the
specific factors that it considered in reaching its decision.
The Bank of America board of directors evaluated the factors
described above and reached a consensus that the merger was
advisable and in the best interests of Bank of America and its
stockholders. In considering the factors described above,
individual members of the Bank of America board of directors may
have given different weights to different factors.
The Bank of America board of directors determined that the
transaction was in the best interests of Bank of America and it
stockholders, and the board voted unanimously to approve the
merger agreement and recommends that Bank of America
stockholders vote FOR the issuance of Bank of
America common stock in the merger.
Opinion
of Merrill Lynchs Financial Advisor
Merrill Lynch retained MLPFS to act as its financial advisor
with respect to the merger. In connection with that engagement,
Merrill Lynch requested that MLPFS evaluate the fairness, from a
financial point of view, of the exchange ratio in the merger. At
the meeting of the Merrill Lynch board of directors on
September 14, 2008, MLPFS rendered its oral opinion to the
Merrill Lynch board of directors, which opinion was subsequently
confirmed in writing, that as of September 14, 2008, based
upon the assumptions made, matters considered and limits of such
review, as set forth in its opinion, the exchange ratio in the
merger was fair from a financial point of view to the holders of
such shares.
The full text of MLPFSs written opinion, which sets
forth material information relating to such opinion, including
the procedures followed, assumptions made, matters considered
and qualifications and limitations on the review undertaken by
MLPFS, is attached as Appendix E and is incorporated
50
into this document by reference in its entirety. This
description of MLPFSs opinion is qualified in its entirety
by reference to, and should be reviewed together with, the full
text of the opinion. Holders of Merrill Lynch common stock are
urged to read the opinion and consider it carefully. MLPFS has
consented to the inclusion in this document of its opinion and
of the summary of that opinion set forth below.
MLPFSs opinion is addressed to the Merrill Lynch board of
directors and addresses only the fairness, from a financial
point of view, of the exchange ratio in the merger as of the
date of the opinion. The opinion is for the use and benefit of
the Merrill Lynch board of directors, does not address the
merits of the underlying decision by Merrill Lynch to engage in
the merger and does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the merger
or any matter related thereto. In addition, Merrill Lynch has
not asked MLPFS to address, and the opinion does not address the
fairness to, or any other consideration of, the holders of any
class of securities, creditors or other constituencies of
Merrill Lynch, other than the holders of the shares of Merrill
Lynch common stock. In rendering the opinion, MLPFS expressed no
view or opinion with respect to the fairness (financial or
otherwise) of the amount or nature or any other aspect of any
compensation payable to or to be received by any officers,
directors, or employees of any parties to the merger, or any
class of such persons, relative to the consideration to be
received by the holders of the shares of Merrill Lynch common
stock pursuant to the merger agreement, which consideration was
determined through negotiations between Bank of America and
Merrill Lynch.
In arriving at its opinion, MLPFS, among other things:
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reviewed certain publicly available business and financial
information relating to Merrill Lynch and Bank of America that
MLPFS deemed to be relevant;
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reviewed certain information relating to the business, earnings,
cash flow, assets, liabilities, issuer ratings and overall
liquidity position and general prospects of Merrill Lynch and
Bank of America, as well as the amount and timing of the cost
savings and related expenses expected to result from the merger
(referred to as the Expected Cost Savings) furnished to MLPFS by
Merrill Lynch;
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conducted discussions with members of senior management and
representatives of Merrill Lynch and Bank of America concerning
the matters described in the bullet-points above, as well as
their respective businesses and prospects before and after
giving effect to the merger and the Expected Cost Savings;
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reviewed the market prices and valuation multiples for shares of
Merrill Lynch common stock and the shares of Bank of America
common stock and compared them with those of certain publicly
traded companies that MLPFS deemed to be relevant;
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reviewed the results of operations of Merrill Lynch and Bank of
America and compared them with those of certain publicly traded
companies that MLPFS deemed to be relevant;
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compared the proposed financial terms of the merger with the
financial terms of certain other transactions that MLPFS deemed
to be relevant;
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participated in certain discussions and negotiations among
representatives of Merrill Lynch and Bank of America and their
financial and legal advisors;
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reviewed the potential pro forma impact of the merger;
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reviewed drafts dated September 14, 2008, of the merger
agreement and the stock option agreement; and
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reviewed such other financial studies and analyses and took into
account such other matters as MLPFS deemed necessary, including
MLPFSs assessment of general economic, market and monetary
conditions.
|
In preparing its opinion, MLPFS assumed and relied on the
accuracy and completeness of all information supplied or
otherwise made available to it, discussed with or reviewed by or
for it, or that was publicly available, and MLPFS did not assume
any responsibility for independently verifying such information
or
51
undertaking an independent evaluation or appraisal of any of the
assets or liabilities of Merrill Lynch or Bank of America, nor
was MLPFS furnished with any such evaluation or appraisal. MLPFS
did not evaluate the solvency or fair value of Merrill Lynch or
Bank of America under any state or federal laws relating to
bankruptcy, insolvency or similar matters. In addition, MLPFS
did not assume any obligation to conduct any physical inspection
of the properties or facilities of Merrill Lynch or Bank of
America. With respect to any prospective information furnished
to or discussed with MLPFS by Merrill Lynch or Bank of America,
MLPFS assumed that such information was reasonably prepared and
reflected the best currently available estimates and judgment of
Merrill Lynchs or Bank of Americas management. With
respect to the Expected Cost Savings furnished to or discussed
with MLPFS by Merrill Lynch or Bank of America, MLPFS assumed
that they had been reasonably prepared and reflected the best
then currently available estimates and judgment of Merrill
Lynchs or Bank of Americas management as to the
expected future financial performance of Merrill Lynch or Bank
of America, as the case may be, and the Expected Cost Savings.
MLPFS further assumed that the merger will qualify as a tax-free
reorganization for U.S. federal income tax purposes. MLPFS
also assumed that the final forms of the merger agreement and
the stock option agreement would be substantially similar to the
last drafts MLPFS reviewed.
MLPFSs opinion was necessarily based upon market, economic
and other conditions as they existed and could be evaluated on
the date of the opinion, and upon the information made available
to MLPFS as of the date of the opinion. MLPFS has no obligation
to update its opinion to take into account events occurring
after the date that its opinion was delivered to Merrill Lynch.
MLPFS assumed that in the course of obtaining the necessary
regulatory or other consents or approvals (contractual or
otherwise) for the merger, no restrictions, including any
divestiture requirements or amendments or modifications, will be
imposed that will have a material adverse effect on the
contemplated benefits of the merger.
In connection with the preparation of the opinion, MLPFS was
neither authorized by Merrill Lynch or Merrill Lynchs
board of directors to solicit, nor did MLPFS solicit, third
party indications of interest for the acquisition of all or any
part of Merrill Lynch.
MLPFSs
Financial Analyses
At the meeting of the Merrill Lynch board of directors held on
September 14, 2008, MLPFS presented certain financial
analyses accompanied by delivery of its written materials in
connection with the delivery of its oral opinion at that meeting
and its subsequent written opinion. The following is a summary
of the material financial analyses performed by MLPFS in
arriving at its opinion. Some of the financial analyses
summarized below include information presented in tabular
format. In order to understand fully the financial analyses
performed by Merrill Lynch, the tables must be read together
with the accompanying text of each summary. The tables alone do
not constitute a complete description of the financial analyses,
and if viewed in isolation could create a misleading or
incomplete view of the financial analyses performed by Merrill
Lynch. To the extent the following quantitative information
reflects market data, except as otherwise indicated, Merrill
Lynch based this information on market data as they existed
prior to September 12, 2008. This information, therefore,
does not necessarily reflect current or future market conditions.
Transaction Multiples Analysis. Based on the
exchange ratio and the closing market price of Bank of America
common stock on September 12, 2008, MLPFS calculated that
each share of Merrill Lynch common stock would be converted into
Bank of America common stock with an implied market value of
$29.00, representing a premium of 70.1% to the closing price of
Merrill Lynch common stock on September 12, 2008, and a
premium of 29.3% and 13.76% to the average closing prices of
Merrill Lynch common stock for the five and thirty days ending
on September 12, respectively, and a discount of 21.9% and
39.6% to the average closing prices of Merrill Lynch common
stock for the six months and one year ending on
September 12, 2008. MLPFS also calculated that the $29
implied market value represented 11.1 times the mean publicly
available consensus analyst estimates (consensus
estimates) for Merrill Lynchs 2009 earnings per
share, 1.52 times Merrill Lynchs estimated book value at
September 30, 2008 and 1.81 times Merrill Lynchs
estimated tangible book value at such date.
52
Comparable Companies Analysis. MLPFS reviewed
and compared certain financial information and trading
statistics of Merrill Lynch to corresponding financial
information and trading statistics for the following publicly
traded corporations in the financial services industry,
consisting of the following broker-dealers:
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UBS AG
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Goldman Sachs Group, Inc.
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Credit Suisse Group
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Deutsche Bank AG
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Morgan Stanley
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In addition, MLPFS reviewed and compared certain financial
information and trading statistics of Bank of America to
corresponding financial information and trading statistics for
the following publicly traded corporations in the banking
industry, consisting of the following large capitalization money
centers and regional banks:
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JPMorgan Chase & Co.
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Wells Fargo & Company
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Citigroup Inc.
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U.S. Bancorp
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The following table compares selected financial information and
trading statistics of Merrill Lynch with corresponding mean data
for the above-listed companies, which data is based on financial
data at or for the period ending June 30, 2008, consensus
estimates for 2009 earnings per share and market prices as of
September 12, 2008.
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Market
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Value
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Price/
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Price/Tang.
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Price/
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Name
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($BN)
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Book
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Book
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09 EPS
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Broker-Dealers:
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UBS
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$
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60.9
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1.50
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x
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2.15
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x
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8.9
|
x
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Goldman Sachs
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60.7
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1.58
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1.81
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8.5
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Credit Suisse
|
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52.2
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1.46
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2.04
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8.7
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Deutsche Bank
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43.6
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0.92
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1.27
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6.6
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Morgan Stanley
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41.3
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1.24
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1.40
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6.7
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Mean
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1.34
|
x
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1.73
|
x
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7.9
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x
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Median
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1.46
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|
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1.81
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8.5
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Merrill Lynch(1)
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$
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24.6
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0.80
|
x
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0.95
|
x
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6.5
|
x
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Lehman Brothers
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$
|
2.5
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0.13
|
x
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|
0.17
|
x
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1.6
|
x
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|
(1) |
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Price to book value and price to tangible book value ratios as
estimated by Merrill Lynch as at September 30, 2008, are
0.89x and 1.07x, respectively. |
The following table compares selected financial information and
trading statistics of Bank of America with corresponding mean
data for the above-listed companies, which data is based on
financial data at or for
53
the period ending June 30, 2008, consensus estimates for
2009 earnings per share and market prices as of
September 12, 2008.
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Market
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|
|
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|
Value
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|
Price/
|
|
|
Price/Tang.
|
|
|
Price/
|
|
Name
|
|
($BN)
|
|
|
Book
|
|
|
Book
|
|
|
09 EPS
|
|
|
Money Center/Regional Banks:
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|
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|
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JPMorgan Chase
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$
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141.5
|
|
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1.11
|
x
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1.84
|
x
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12.5
|
x
|
Wells Fargo
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|
|
113.5
|
|
|
|
2.37
|
|
|
|
3.34
|
|
|
|
15.4
|
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Citigroup
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|
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97.8
|
|
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0.90
|
|
|
|
1.76
|
|
|
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8.1
|
|
U.S. Bancorp
|
|
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58.9
|
|
|
|
2.90
|
|
|
|
5.44
|
|
|
|
14.0
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|
Mean
|
|
|
|
|
|
|
1.82
|
x
|
|
|
3.09
|
x
|
|
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12.5
|
x
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Median
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|
|
|
|
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1.74
|
|
|
|
2.59
|
|
|
|
13.2
|
|
Bank of America
|
|
$
|
153.9
|
|
|
|
1.08
|
x
|
|
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2.67
|
x
|
|
|
10.3
|
x
|
The companies included were chosen because they are publicly
traded companies with operations that for purposes of analysis
may be considered similar to certain operations of Merrill Lynch
or Bank of America, as the case may be. However, no company used
in the comparable company analyses described above is identical
to Merrill Lynch or Bank of America. Accordingly, an analysis of
the results of the foregoing necessarily involves complex
considerations and judgments concerning financial and operating
characteristics and other factors that could affect the merger,
public trading or other values of the companies to which they
are being compared. Mathematical analyses, such as determining
the mean or median, are not of themselves meaningful methods of
using comparable company data.
Historical Market-for-Market Exchange Ratio
Analysis. MLPFS also analyzed the historical
exchange ratio that existed between Merrill Lynch common stock
and Bank of America common stock at selected intervals during
the past three years to illustrate the implied exchange ratio
between the companies common stock at such intervals. The
results of Merrill Lynchs analysis are set forth in the
following table:
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Historical Implied
|
|
Trading Period
|
|
Exchange Ratio
|
|
|
September 12, 2008 Market Price
|
|
|
0.505
|
|
5 Day Average Market Price
|
|
|
0.674
|
|
30 Day Average Market Price
|
|
|
0.812
|
|
6 Month Average Market Price
|
|
|
1.132
|
|
1 Year Average Market Price
|
|
|
1.247
|
|
3 Year Average Market Price
|
|
|
1.495
|
|
MLPFS also calculated the implied deal value per share at such
intervals. The results of its analysis are set forth in the
following table:
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|
|
|
|
Implied Deal
|
|
Trading Period
|
|
Value
|
|
|
September 12, 2008 Market Price
|
|
$
|
29.00
|
|
5 Day Average Market Price
|
|
$
|
28.61
|
|
30 Day Average Market Price
|
|
$
|
26.61
|
|
6 Month Average Market Price
|
|
$
|
28.15
|
|
1 Year Average Market Price
|
|
$
|
33.02
|
|
3 Year Average Market Price
|
|
$
|
39.20
|
|
Discounted Dividend Analysis. MLPFS performed
a discounted dividend analysis to estimate a range of present
values per share of Merrill Lynch common stock. The valuation
range was determined by adding (i) the present value of
Merrill Lynchs earnings available for dividends, net of
earnings necessary to maintain Merrill Lynchs tangible
common equity to tangible assets ratio at 3.0% (equivalent to an
11% Tier 1 Ratio) through December 31, 2013, and
(ii) the present value of the terminal value of
Merrill Lynch common stock.
54
In calculating the terminal value of Merrill Lynch common stock,
MLPFS applied multiples ranging from 7.0x to 11.0x to year 2014
forecasted earnings. The present value of the dividend stream
and terminal value were calculated using discount rates ranging
from 18.0% to 22.0%, which are rates MLPFS viewed as the
appropriate range for a company with Merrill Lynchs risk
characteristics.
In performing this analysis, MLPFS used the consensus earnings
per share estimate of $2.62 for Merrill Lynch for 2009. After
2009, earnings per share were assumed to increase annually at
6.25%, the consensus projected earnings growth rate for Merrill
Lynch. The analysis assumed an annual asset growth rate of 3%
for Merrill Lynch. The discounted dividend analysis also assumed
that Merrill Lynch is not required to record any additional
asset write-downs or other adverse mark-to-market adjustments
after the third quarter of 2009.
Using the foregoing criteria and assumptions, MLPFS calculated
the following range of implied equity values per share of
Merrill Lynch common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal EPS
|
|
|
Discount Rate
|
|
Multiple
|
|
|
18.0%
|
|
|
20.0%
|
|
|
22.0%
|
|
|
|
7.0x
|
|
|
$
|
23.90
|
|
|
$
|
22.87
|
|
|
$
|
21.93
|
|
|
8.0x
|
|
|
$
|
25.24
|
|
|
$
|
24.10
|
|
|
$
|
23.06
|
|
|
9.0x
|
|
|
$
|
26.57
|
|
|
$
|
25.33
|
|
|
$
|
24.19
|
|
|
10.0x
|
|
|
$
|
27.91
|
|
|
$
|
26.56
|
|
|
$
|
25.33
|
|
|
11.0x
|
|
|
$
|
29.25
|
|
|
$
|
27.79
|
|
|
$
|
26.46
|
|
MLPFS also performed a discounted dividend analysis to estimate
a range of present values per share of Bank of America common
stock. The valuation range was determined by adding (i) the
present value of Bank of Americas earnings available for
dividends, net of earnings necessary to maintain Bank of
Americas tangible common equity to tangible assets ratio
at 6.0% through December 31, 2013, and (ii) the
present value of the terminal value of Bank of
America common stock. In calculating the terminal value of Bank
of America common stock, MLPFS applied multiples ranging from
9.0x to 13.0x to year 2014 forecasted earnings. The present
value of the dividend stream and terminal value were calculated
using discount rates ranging from 11.0% to 15.0%, which are
rates MLPFS viewed as the appropriate range for a company with
Bank of Americas risk characteristics.
In performing this analysis, MLPFS used the consensus earnings
per share estimate of $3.26 for Bank of America for 2009. After
2009, earnings per share were assumed to increase annually at
6.6%, the consensus projected earnings growth rate for Bank of
America. The analysis assumed an annual asset growth rate of 3%
for Bank of America.
Using the foregoing criteria and assumptions, MLPFS calculated
the following range of implied equity values per share of Bank
of America common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminal EPS
|
|
|
Discount Rate
|
|
Multiple
|
|
|
11.0%
|
|
|
13.0%
|
|
|
15.0%
|
|
|
|
9.0x
|
|
|
$
|
32.97
|
|
|
$
|
30.22
|
|
|
$
|
27.73
|
|
|
10.0x
|
|
|
$
|
35.76
|
|
|
$
|
32.77
|
|
|
$
|
30.07
|
|
|
11.0x
|
|
|
$
|
38.55
|
|
|
$
|
35.32
|
|
|
$
|
32.40
|
|
|
12.0x
|
|
|
$
|
41.33
|
|
|
$
|
37.87
|
|
|
$
|
34.74
|
|
|
13.0x
|
|
|
$
|
44.12
|
|
|
$
|
40.42
|
|
|
$
|
37.08
|
|
Pro Forma Merger Analysis. MLPFS prepared
illustrative pro forma analyses of the potential financial
impact of the merger assuming the same 2009 earnings and long
term growth estimates used above and Bank of Americas
closing stock price on September 12, 2008. The pro forma
analysis also assumed that:
|
|
|
|
|
the combined entity will achieve $2.4 billion in pre-tax
synergies, 75% realized in 2009 and 100% realized in 2010;
|
|
|
|
amortizable intangibles will represent 20% of total goodwill,
amortized over 10 years on a straight line basis;
|
55
|
|
|
|
|
total restructuring charges will be equal to $2.4 billion
pre-tax;
|
|
|
|
a $5.0 billion pre-tax purchase accounting mark to market
adjustment, with one-half of that amount amortizable over
10 years; and
|
|
|
|
certain Tier 1 capital adjustments.
|
Based on these assumptions, MLPFS determined that the proposed
transaction would be 0.8% accretive to GAAP earnings per share
in 2009 and 2.8% accretive to GAAP earnings per share in 2010.
The summary set forth above does not purport to be a complete
description of the analyses performed by MLPFS in arriving at
its opinion. The fact that any specific analysis has been
referred to in the summary above or in this document is not
meant to indicate that such analysis was given more weight than
any other analysis. The preparation of a fairness opinion is a
complex process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances;
therefore, such an opinion is not readily susceptible to partial
analysis or summary description. In arriving at its opinion,
MLPFS did not attribute any particular weight to any analysis or
factor considered by it, but rather made qualitative judgments
as to the significance and relevance of each analysis and
factor. Accordingly, MLPFS believes that its analyses must be
considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without
considering all factors and analyses, would, in the view of
MLPFS, create an incomplete and misleading view of the analyses
underlying MLPFSs opinion. MLPFS made its determination as
to fairness on the basis of its experience and professional
judgment after considering the results of all such analyses.
The analyses performed by MLPFS include analyses based upon
forecasts of future results, which results may be significantly
more or less favorable than those upon which MLPFSs
analyses were based. The analyses do not purport to be
appraisals or to reflect the prices at which Merrill Lynch
shares may trade at any time after announcement of the merger.
Because the analyses are inherently subject to uncertainty,
being based upon numerous factors and events, including, without
limitation, factors relating to general economic and competitive
conditions beyond the control of the parties or their respective
advisors, neither MLPFS nor any other person assumes
responsibility if future results or actual values are materially
different from those contemplated above. In addition, as
described above, MLPFSs opinion was among several factors
taken into consideration by the Merrill Lynch board of directors
in making its determination to approve the merger and the merger
agreement and the transactions contemplated thereby.
Consequently, MLPFSs analyses should not be viewed as
determinative of the decision of the Merrill Lynch board of
directors and management with respect to the fairness of the
exchange ratio.
MLPFS is an internationally recognized investment banking firm
with substantial experience in transactions similar to the
merger. Merrill Lynch selected MLPFS as its financial advisor
because of MLPFSs qualifications, expertise and
reputation. MLPFS is a wholly owned subsidiary of Merrill Lynch.
Certain members of management of MLPFS are also members of
management of Merrill Lynch and have interests in the merger
that are different from, or in addition to, the interests of
stockholders of Merrill Lynch. See - Merrill Lynchs
Officers and Directors have Financial Interests in the
Merger. Merrill Lynch has agreed to pay a fee to MLPFS, a
substantial portion of which is contingent upon the merger being
consummated. Merrill Lynch has also agreed, among other things,
to reimburse MLPFS for certain expenses incurred in connection
with the services provided by MLPFS and to indemnify MLPFS and
certain related persons and entities for certain liabilities,
including liabilities under the U.S. federal securities
laws, related to or arising out of its engagement. MLPFS, as
part of its investment banking business, is regularly engaged in
the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
securities, private placements, financings and valuation for
estate, corporate and other purposes. In connection with its
trading and brokerage activities, MLPFS may, from time to time,
have a long or short position in, and buy and sell, securities
of Merrill Lynch or Bank of America.
The terms of the merger were determined through negotiations
between Merrill Lynch and Bank of America and were approved by
the Merrill Lynch board of directors. The opinion and financial
analyses of
56
MLPFS were only one of many factors considered by Merrill Lynch
in its evaluation of the merger and should not be viewed as
determinative of the views of Merrill Lynch with respect to the
merger or the exchange ratio. MLPFS did not recommend any
exchange ratio to Merrill Lynch or the Merrill Lynch board of
directors or that any specific exchange ratio constituted the
only appropriate consideration for the merger.
Opinions
of Bank of Americas Financial Advisors
On September 14, 2008, each of FPK and J.C. Flowers
delivered its oral opinion, which was subsequently confirmed in
writing as of such date, to the Bank of America board of
directors to the effect that, as of such date, and, based upon
and subject to various assumptions, methodologies, limitations
and considerations described at the meeting of the Bank of
America board of directors on September 14, 2008 and set
forth in such written opinion, the exchange ratio to be paid by
Bank of America in the merger was fair, from a financial point
of view, to Bank of America.
The full text of FPKs written opinion, dated
September 14, 2008, is attached hereto as Appendix D
and is incorporated into this document by reference in its
entirety. The full text of J.C. Flowers written opinion,
dated September 14, 2008, is attached hereto as
Appendix C and is incorporated into this document by
reference in its entirety. Bank of America stockholders are
urged to read each of these opinions carefully and in its
entirety for information regarding the assumptions made,
methodologies used, factors considered and limitations upon the
review undertaken by each of FPK and J.C. Flowers in rendering
its opinion. Neither FPK nor J.C. Flowers has assumed any
responsibility for updating or revising its opinion based on
circumstances or events occurring after the date thereof.
The following is a summary of the respective opinions of FPK and
J.C. Flowers and the methodologies used to render such opinions.
The summary of each opinion is qualified in its entirety by
reference to the full text of such opinion.
The advisory services and opinions provided by each of FPK and
J.C. Flowers were provided for the information and assistance of
the Bank of America board of directors in connection with its
consideration of the merger and related transactions. Neither
opinion is intended to be, and should not be deemed to
constitute, a recommendation to any stockholder of Bank of
America as to how such stockholder should vote with respect to
the issuance of Bank of America common stock or any other
matter. Neither FPK nor J.C. Flowers was requested to opine as
to, and neither opinion addresses, any of (i) Bank of
Americas underlying business decision to proceed with or
effect the merger, (ii) the relative merits of the merger
as compared to other transactions that may have been available
to Bank of America, (iii) the fairness to, or any other
consideration with respect to, the holders of any class of
securities, creditors or other constituencies of Bank of
America, (iv) the prices at which the shares of common
stock of either of Bank of America or Merrill Lynch will trade
at any time subsequent to the announcement of the merger or
(v) the fairness of the compensation to any officers,
directors, or employees of either of Bank of America or Merrill
Lynch, or any class of such persons, relative to the exchange
ratio or otherwise.
In connection with their respective opinions and subject to the
limitations described therein, each of FPK and J.C. Flowers
reviewed and analyzed:
|
|
|
|
|
the proposed financial terms of the merger as of
September 14, 2008;
|
|
|
|
publicly available information concerning Bank of America that
such firm believed to be relevant to its analysis;
|
|
|
|
publicly available information concerning Merrill Lynch that
such firm believed to be relevant to its analysis;
|
|
|
|
financial and operating information with respect to the
business, operations and prospects of Bank of America furnished
to FPK and J.C. Flowers by Bank of America;
|
|
|
|
financial and operating information with respect to the
business, operations and prospects of Merrill Lynch furnished to
FPK and J.C. Flowers by Bank of America;
|
57
|
|
|
|
|
a comparison of the historical financial results and then
current financial condition of Bank of America and Merrill Lynch
with each other and with those of other companies that such firm
believed to be relevant to its analysis;
|
|
|
|
a comparison of the financial terms of the merger with the
financial terms of certain other transactions that each firm
believed to be relevant to its analysis;
|
|
|
|
the trading histories of Bank of America common stock and
Merrill Lynch common stock from September 2003 to September 2008;
|
|
|
|
the potential pro forma impact of the merger on the future
financial condition and performance of Bank of America,
including certain information on the amount and timing of
estimated potential cost savings and related expenses and
synergies, including certain estimated restructuring charges and
revenue adjustments, and other strategic benefits that the
management of Bank of America anticipated would result from a
combination of the businesses of Bank of America and Merrill
Lynch, referred to as the estimated synergies, and the
anticipated impact of the merger on Bank of Americas pro
forma earnings per share (before and after taking into account
any goodwill created as a result of the merger) based on certain
pro forma financial information provided by Bank of
Americas management; and
|
|
|
|
in addition, J.C. Flowers participated in discussions with
members of senior management of Merrill Lynch with respect to
the businesses and prospects of Merrill Lynch.
|
In arriving at their respective opinions, each of FPK and J.C.
Flowers assumed and relied upon the accuracy and completeness of
the financial and other information provided to and used by it
in connection with the review and analysis described above
without assuming any responsibility for independent verification
of such information. With respect to prospective information
furnished to and reviewed by each of FPK and J.C. Flowers, with
the consent of Bank of America, each of FPK and J.C. Flowers
assumed that such information was reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the managements of Bank of America and Merrill Lynch as
applicable and did not assume any responsibility for or express
any view with respect to such information or the bases upon
which it was prepared. With the consent of Bank of America, each
of FPK and J.C. Flowers also assumed that the estimated
synergies furnished to and reviewed by each of them would be
realized substantially in accordance with Bank of Americas
estimates and determinations.
Each of the FPKs and J.C. Flowers opinions
necessarily was based upon market, economic, financial and other
conditions as they existed on, and other information disclosed
to such firms that could be evaluated as of, the date of such
opinions. Although each of FPK and J.C. Flowers evaluated the
fairness, from a financial point of view, to Bank of America of
the exchange ratio to be paid by Bank of America in the merger,
neither FPK nor J.C. Flowers was requested to, and neither did,
recommend a specific exchange ratio or the agreed exchange
ratio, which was determined through negotiations between Bank of
America and Merrill Lynch. The opinions and financial analyses
of FPK and J.C. Flowers were one of many factors considered by
Bank of America in its evaluation of the merger and should not
be viewed as determinative of the views of Bank of America with
respect to the merger or the exchange ratio.
In connection with rendering their respective opinions, each of
FPK and J.C. Flowers performed certain financial, comparative
and other analyses as summarized below. The preparation of a
fairness opinion is a complex process that involves various
determinations as to the most appropriate and relevant methods
of financial and comparative analysis and the application of
those methods to the particular circumstances. Therefore, such
an opinion is not readily susceptible to summary description.
Accordingly, each of FPK and J.C. Flowers believe that its
analyses must be considered as a whole and that considering any
portion of such analyses and factors, without considering all of
its analyses and factors as a whole, could create a misleading
or incomplete view of the process underlying its opinion.
In arriving at their respective opinions, neither FPK nor J.C.
Flowers ascribed a specific range of values to Bank of America
or Merrill Lynch, but rather each of FPK and J.C. Flowers made
its determination as to the fairness, from a financial point of
view, to Bank of America of the exchange ratio to be paid by
Bank of America in the merger on the basis of such financial,
comparative and other analyses as of the date of such
58
opinions. Further, in arriving at their respective opinions,
neither FPK nor J.C. Flowers attributed any particular weight to
any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of
each analysis and factor. In their respective analyses, each of
FPK and J.C. Flowers made numerous assumptions with respect to
industry performance, general business, financial and economic
conditions and other matters, many of which are beyond the
control of Bank of America and Merrill Lynch. Because these
assumptions are inherently subject to uncertainty, none of Bank
of America, FPK or J.C. Flowers assumes responsibility if future
results are materially different from those assumptions. Any
estimates contained in these analyses were not and are not
necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less
favorable than as set forth in these analyses. In addition, such
analyses relating to the valuation of a business do not purport
to be appraisals or to reflect the prices at which such business
would be sold.
In arriving at their respective opinions, FPK and J.C. Flowers
did not conduct a physical inspection of the properties and
facilities of Bank of America or Merrill Lynch and did not make
or obtain any independent valuations or appraisals of the
assets, liabilities (contingent, derivative, off-balance sheet
or otherwise) or solvency of Bank of America or Merrill Lynch,
including particularly any mark-to-market balance sheet
adjustments related to the merger, market conditions or
otherwise.
The following is a summary of the material financial analyses
used by each of FPK and J.C. Flowers in connection with
providing their respective opinions to the Bank of America board
of directors. Certain of the summaries of financial analyses
include information presented in tabular format. In order to
fully understand the financial analyses used by each of FPK and
J.C. Flowers, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete
description of the financial analyses of FPK or J.C. Flowers.
Accordingly, the analyses listed in the tables and described
below must be considered as a whole. Considering any portion of
such analyses and of the factors considered, without considering
all analyses and factors, could create a misleading or
incomplete view of the results of FPKs or J.C.
Flowers opinions.
Transaction Multiples Analysis. Based on the
exchange ratio and the closing trading price of Bank of America
common stock on the NYSE on September 12, 2008, each of FPK
and J.C. Flowers calculated that the implied value of each share
of Merrill Lynch common stock in the merger reflected a multiple
of 12.1 times consensus analyst estimated 2009 earnings per
share, referred to as EPS, 1.55 times estimated
September 30, 2008 book value per share, referred to as
BVPS, for Merrill Lynch and 1.84 times estimated
September 30, 2008, tangible BVPS for Merrill Lynch. Each
of FPK and J.C. Flowers also calculated that, based on the
exchange ratio and such market prices, the implied value of each
share of Merrill Lynch common stock in the merger reflected a
premium of 70% to Merrill Lynchs September 12, 2008,
closing price on the NYSE, a premium of 8% to Merrill
Lynchs one-week closing price on the NYSE, and a 62%
discount to Merrill Lynchs fifty-two week high trading
price on the NYSE.
Comparable Companies Analysis. Each of FPK and
J.C. Flowers reviewed and compared certain financial multiples
relating to Merrill Lynch to corresponding financial multiples
relating to publicly traded corporations in the financial
services industry, consisting of the following companies:
|
|
|
|
|
Goldman Sachs Group, Inc.
|
|
|
|
UBS AG
|
|
|
|
Credit Suisse Group AG
|
|
|
|
Deutsche Bank AG
|
|
|
|
Morgan Stanley
|
In addition, each of FPK and J.C. Flowers reviewed and compared
certain financial multiples relating to Bank of America to
corresponding financial multiples relating to publicly traded
corporations in the banking industry, consisting of the
following large capitalization banking companies:
|
|
|
|
|
Citigroup Inc.
|
|
|
|
JPMorgan Chase & Co.
|
|
|
|
Wachovia Corporation
|
59
|
|
|
|
|
Wells Fargo & Company
|
|
|
|
U.S. Bancorp
|
Although none of the above-mentioned companies is directly
comparable to Merrill Lynch or Bank of America, the companies
included were chosen because they are publicly traded companies
with operations that for purposes of analysis may be considered
similar to certain operations of Merrill Lynch or Bank of
America, as the case may be.
With respect to the selected companies for Merrill Lynch, each
of FPK and J.C. Flowers considered, among other things, the
following financial multiples for each of the selected
comparable companies:
|
|
|
|
|
market price per share of the comparable companys common
stock as of September 12, 2008, to the median consensus
analyst estimated EPS of such comparable company for 2008 and
2009;
|
|
|
|
market price per share of the comparable companys common
stock as of September 12, 2008 to the GAAP BVPS of
such comparable company as of the latest publicly available
report date; and
|
|
|
|
market price per share of the comparable companys common
stock as of September 12, 2008, to the GAAP tangible BVPS
of such comparable company as of the latest publicly available
report date;
|
|
|
|
the median and mean of such analysis including a 25% control
premium compared to the implied per share price of Merrill
Lynchs common stock reflected by the proposed exchange
ratio to be paid in the merger; and
|
|
|
|
the median and mean of such analysis including the net present
values of estimated synergies from the merger.
|
The following table summarizes the results of this analysis for
Merrill Lynch:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
|
|
Price/
|
|
|
Price/
|
|
|
Price/
|
|
|
Tang.
|
|
Name
|
|
08 EPS
|
|
|
09 EPS
|
|
|
BVPS
|
|
|
BVPS
|
|
|
Goldman Sachs
|
|
|
10.9
|
x
|
|
|
8.7
|
x
|
|
|
1.58
|
x
|
|
|
1.81
|
x
|
UBS
|
|
|
N/M
|
|
|
|
9.4
|
|
|
|
1.54
|
|
|
|
2.21
|
|
Credit Suisse Group AG
|
|
|
21.0
|
|
|
|
10.0
|
|
|
|
1.61
|
|
|
|
2.24
|
|
Deutsche Bank
|
|
|
27.1
|
|
|
|
8.2
|
|
|
|
0.95
|
|
|
|
1.31
|
|
Morgan Stanley
|
|
|
8.6
|
|
|
|
6.7
|
|
|
|
1.24
|
|
|
|
1.40
|
|
Median
|
|
|
16.0
|
|
|
|
8.7
|
|
|
|
1.54
|
|
|
|
1.81
|
|
Mean
|
|
|
16.9
|
|
|
|
8.6
|
|
|
|
1.38
|
|
|
|
1.80
|
|
Merrill Lynch*
|
|
|
N/M
|
|
|
|
7.1
|
|
|
|
0.91
|
|
|
|
1.08
|
|
Median with 25% control premium
|
|
|
N/M
|
|
|
|
10.8
|
|
|
|
1.93
|
|
|
|
2.26
|
|
Mean with 25% control premium
|
|
|
N/M
|
|
|
|
10.7
|
|
|
|
1.73
|
|
|
|
2.24
|
|
Implied per share value of Merrill Lynch common stock reflected
by exchange ratio
|
|
|
N/M
|
|
|
|
12.1
|
|
|
|
1.55
|
|
|
|
1.84
|
|
|
|
|
* |
|
Based on September 30, 2008 estimated BVPS/tangible BVPS |
60
The following table summarizes the results of this analysis for
Bank of America:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
|
|
Price/
|
|
|
Price/
|
|
|
Price/
|
|
|
Tang.
|
|
Name
|
|
08 EPS
|
|
|
09 EPS
|
|
|
BVPS
|
|
|
BVPS
|
|
|
Citigroup Inc.
|
|
|
N/M
|
|
|
|
8.2
|
x
|
|
|
0.90
|
x
|
|
|
1.77
|
x
|
JPMorgan Chase & Co.
|
|
|
17.9
|
x
|
|
|
12.6
|
|
|
|
1.11
|
|
|
|
1.82
|
|
Wachovia Corporation
|
|
|
N/M
|
|
|
|
10.2
|
|
|
|
0.47
|
|
|
|
1.17
|
|
Wells Fargo & Company
|
|
|
16.3
|
|
|
|
14.9
|
|
|
|
2.37
|
|
|
|
3.32
|
|
U.S. Bancorp
|
|
|
15.0
|
|
|
|
13.9
|
|
|
|
2.90
|
|
|
|
5.41
|
|
Median
|
|
|
16.3
|
|
|
|
12.6
|
|
|
|
1.11
|
|
|
|
1.82
|
|
Mean
|
|
|
15.9
|
|
|
|
12.9
|
|
|
|
1.71
|
|
|
|
2.93
|
|
Bank of America*
|
|
|
14.1
|
|
|
|
10.5
|
|
|
|
1.11
|
|
|
|
2.70
|
|
|
|
|
* |
|
Based on September 30, 2008 estimated BVPS/tangible BVPS |
Comparable Transaction Analysis. Each of FPK
and J.C. Flowers analyzed certain information relating to the
following selected transactions (acquiror/target):
|
|
|
|
|
JPMorgan Chase & Co./Bear Stearns
|
|
|
|
Wachovia Corp./AG Edwards Inc.
|
|
|
|
Royal Bank of Canada/Dain Rauscher Corp.
|
|
|
|
Credit Suisse Group AG/Donaldson Lufkin & Jenrette,
Inc.
|
|
|
|
UBS AG/PaineWebber Group Inc.
|
For each of the selected transactions, each of FPK and J.C.
Flowers calculated and compared certain multiples, including the
value of the per share merger consideration as of announcement
of the transaction relative to consensus analyst estimates of
EPS for the second year thereafter, and the value of the per
share merger consideration relative to tangible BVPS. Each of
FPK and J.C. Flowers also calculated the premium reflected by
the value of the per share merger consideration compared to the
market price per share of the targets common stock both
one day and one month prior to the announcement of the
transaction. The following table presents the results of this
analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price/
|
|
|
Price/
|
|
|
|
|
|
|
|
|
|
Second
|
|
|
Tang.
|
|
|
One-Day
|
|
|
One-Month
|
|
Transaction (Date)
|
|
Year EPS
|
|
|
BVPS
|
|
|
Premium
|
|
|
Premium
|
|
|
J.P. Morgan Chase/Bear Stearns
(March 16, 2008)
|
|
|
1.1
|
x
|
|
|
0.10
|
x
|
|
|
(66.7
|
)%
|
|
|
(87.9
|
)%
|
Wachovia Corp./A.G. Edwards Inc. (May 31, 2007)
|
|
|
17.5
|
|
|
|
3.19
|
|
|
|
16.0
|
|
|
|
20.0
|
|
Royal Bank of Canada/Dain Rauscher Corp. (September 28,
2000)
|
|
|
N/A
|
|
|
|
3.79
|
|
|
|
18.9
|
|
|
|
18.1
|
|
Credit Suisse/Donaldson, Lufkin & Jenrette
(August 30, 2000)
|
|
|
19.0
|
|
|
|
3.43
|
|
|
|
9.9
|
|
|
|
70.4
|
|
UBS AG/PaineWebber Group (July 12, 2000)
|
|
|
17.2
|
|
|
|
3.84
|
|
|
|
47.2
|
|
|
|
53.5
|
|
Median
|
|
|
17.4
|
|
|
|
3.43
|
|
|
|
16.0
|
|
|
|
20.0
|
|
Mean
|
|
|
13.7
|
|
|
|
2.87
|
|
|
|
5.1
|
|
|
|
14.8
|
|
Bank of America/Merrill Lynch
|
|
|
12.1
|
|
|
|
1.84
|
|
|
|
70.1
|
|
|
|
16.6
|
|
Discounted Cash Flow Analysis. Each of FPK and
J.C. Flowers performed discounted cash flow analyses of Merrill
Lynch to estimate a range of present values per share of Merrill
Lynch common stock. Each of FPK and J.C. Flowers performed an
analysis based upon the sum of the discounted net present value
of Merrill Lynchs stand-alone cash flows through
December 31, 2013, plus the discounted net present value of
the terminal value of cash flows based on a perpetuity growth
rate of 2% to 4% and discount rates of 12%-
61
14%. Each of FPK and J.C. Flowers also performed an analysis
based upon the sum of the discounted net present value of
Merrill Lynchs cash flows with estimated synergies through
December 31, 2013, plus the discounted net present value of
the terminal value of Merrill Lynchs cash flows on a
stand-alone basis based on a perpetuity growth rate of 2% to 4%
and discount rates of 12%-14%, plus the discounted net present
value of the terminal value of estimated synergies based on a
perpetuity growth rate of 0% and discount rates of 12%-14%. The
results of the analyses as such for Merrill Lynch on a stand
alone basis lead to a value of Merrill Lynchs common stock
price on a per share basis from $20.96 to $31.77 with a midpoint
of $25.30. Similarly, the results of the analyses as such for
Merrill Lynch with estimated synergies lead to a value of
Merrill Lynchs common stock price on a per share basis
from $32.70 to $45.96 with a midpoint of $38.16.
Historical Exchange Ratio Analysis. Each of
FPK and J.C. Flowers compared the historical share prices of
Bank of America and Merrill Lynch common stock during different
periods between September 2003 and September 2008 in order to
determine the implied average exchange ratios that existed for
various periods during that period. The following table sets
forth the exchange ratio of shares of Bank of America common
stock for each share of Merrill Lynch common stock for the
periods indicated:
Historical
Exchange Ratio Summary
|
|
|
|
|
|
|
|
|
|
|
5-Year
Average Ratio
|
|
|
1.41
|
x
|
|
Merger Ratio
|
|
|
0.86
|
x
|
3-Year
Average Ratio
|
|
|
1.47
|
x
|
|
Current Ratio
|
|
|
0.51
|
x
|
1-Year
Average Ratio
|
|
|
1.23
|
x
|
|
5-Year High
|
|
|
1.84
|
x
|
1-Month
Average Ratio
|
|
|
0.81
|
x
|
|
5-Year Low
|
|
|
0.51
|
x
|
Year to Date Average Ratio
|
|
|
1.18
|
x
|
|
|
|
|
|
|
Pro Forma Merger Analysis. Each of FPK and
J.C. Flowers prepared illustrative pro forma analyses of the
potential financial impact of the merger under certain
assumptions, including:
|
|
|
|
|
consensus analyst EPS and long-term growth estimates for Bank of
America;
|
|
|
|
a negative balance sheet (mark-to-market) adjustment of
$8.785 billion pre-tax ($6.275 billion after tax), as
estimated by Bank of America management;
|
|
|
|
the impact of certain revenue synergies and the assumed loss of
overlapping revenues, as estimated by Bank of America
management; and
|
|
|
|
pre-tax cost savings of $7.0 billion, with 25% realized in
2009, 60% realized in 2010, 80% in 2011 and 100% in 2012 and
beyond, as estimated by Bank of America management.
|
Based on these assumptions, each of FPK and J.C. Flowers
determined that the merger would be 2.5% dilutive to Bank of
Americas consensus analyst estimated EPS in 2009, 0.3%
accretive to Bank of Americas consensus analyst estimated
EPS in 2010, and increasingly accretive to Bank of
Americas consensus analyst estimated EPS in subsequent
years.
Miscellaneous
FPK is an internationally recognized investment banking firm.
FPK regularly engages in evaluation of bank, thrift and bank
holding company securities in connection with acquisitions,
negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for
various other purposes. In the ordinary course of its business,
FPK may effect transactions for its own account or for the
accounts of customers, and at any time may hold a position in
securities of Bank of America or Merrill Lynch. FPK issues
independent equity research covering Bank of America and Merrill
Lynch and from time to time, FPK participates with affiliates of
Bank of America
and/or
Merrill Lynch in various underwriting syndicates (including as a
lead or co-lead managing underwriter) of various public
securities offerings, and for which services it receives
customary fees. For the period between September 13, 2006
and September 14, 2008, FPK did not have any material
financial advisory relationship with Bank of America or Merrill
Lynch.
62
J.C. Flowers is an investment firm that serves as advisor to a
number of private equity funds focused solely on the financial
services sector. Affiliates of J.C. Flowers hold a significant
equity stake in FPK.
Bank of Americas board of directors selected FPK and J.C.
Flowers because of their respective expertise, reputation and
familiarity with Bank of America and Merrill Lynch, and because
their senior professionals have substantial experience in
transactions comparable to the merger. As compensation for their
services in connection with the merger, Bank of America has
agreed to pay FPK and J.C. Flowers customary fees, a portion of
which was due upon delivery of their respective opinions and the
remainder of which is contingent upon the consummation of the
merger and related transactions. In addition, Bank of America
has agreed to reimburse each of FPK and J.C. Flowers for
reasonable out-of-pocket expenses incurred in connection with
the merger and related transactions and to indemnify each of FPK
and J.C. Flowers for certain liabilities that may arise out of
its engagement by Bank of America and the rendering of its
opinion. The opinion of FPK was approved by its fairness
committee.
Board of
Directors and Management of Bank of America Following Completion
of the Merger
Upon completion of the merger, the board of directors of Bank of
America will consist of those directors serving immediately
prior to the completion of the merger and three directors to be
mutually agreed upon by Bank of America and Merrill Lynch from
among the people serving as directors of Merrill Lynch
immediately prior to the completion of the merger. Information
about the current Bank of America directors and executive
officers can be found in the documents listed under the heading
Bank of America SEC Filings in the section entitled
Where You Can Find More Information on
page [ ].
Public
Trading Markets
Bank of America common stock trades on the NYSE under the symbol
BAC. Bank of America common stock is also listed on
the London Stock Exchange, and certain shares are listed on the
Tokyo Stock Exchange. Merrill Lynch common stock trades on the
NYSE under the symbol MER. Merrill Lynch common
stock is also listed on the Chicago Stock Exchange, the London
Stock Exchange and the Tokyo Stock Exchange. Upon completion of
the merger, Merrill Lynch common stock will be delisted from the
above-mentioned
exchanges and deregistered under the Securities Exchange Act of
1934, as amended. The newly issued Bank of America common stock
issuable pursuant to the merger agreement will be listed on the
NYSE.
Each outstanding share of Merrill Lynch non-convertible
preferred stock is represented by Merrill Lynch Depositary
Shares that are listed on the NYSE and represent either a
one-fortieth interest in a share of Merrill Lynch preferred
stock or a one-twelve hundredth interest in a share of Merrill
Lynch preferred stock. Following the exchange of New Bank of
America Preferred Stock for Merrill Lynch preferred stock in the
merger under the applicable Deposit Agreement, these depositary
shares will continue to be listed on the NYSE upon completion of
the merger under a new name and will be traded under a new
symbol.
Convertible preferred stock of Merrill Lynch will remain
outstanding after the merger and will thereafter be convertible
in accordance with its terms into shares of Bank of America
common stock based on the exchange ratio of 0.8595.
Bank of
Americas Dividend Policy
Bank of America currently pays a quarterly dividend of $0.64 per
share. The Bank of America board of directors may change this
dividend policy at any time, and the payment of dividends by
financial holding companies is generally subject to legal and
regulatory limitations.
Merrill
Lynch Stockholders Do Not Have Dissenters Appraisal Rights
in the Merger
Appraisal rights are statutory rights that, if applicable under
law, enable stockholders to dissent from an extraordinary
transaction, such as a merger, and to demand that the
corporation pay the fair value for their shares as determined by
a court in a judicial proceeding instead of receiving the
consideration offered to
63
stockholders in connection with the extraordinary transaction.
Appraisal rights are not available in all circumstances, and
exceptions to these rights are provided under the Delaware
General Corporation Law.
Section 262 of the Delaware General Corporation Law
provides that stockholders have the right, in some
circumstances, to dissent from certain corporate action and to
instead demand payment of the fair value of their shares.
Stockholders do not have appraisal rights with respect to shares
of any class or series of stock if such shares of stock, or
depositary receipts in respect thereof, are either
(i) listed on a national securities exchange or
(ii) held of record by more than 2,000 holders, unless the
stockholders receive in exchange for their shares anything other
than shares of stock of the surviving or resulting corporation
(or depositary receipts in respect thereof), or of any other
corporation that is publicly listed or held by more than 2,000
holders of record, cash in lieu of fractional shares or
fractional depositary receipts described above or any
combination of the foregoing.
Therefore, because Merrill Lynchs common stock is listed
on the NYSE, holders of Merrill Lynch common stock will not be
entitled to dissenters appraisal rights in the merger with
respect to their shares of Merrill Lynch common stock.
Furthermore, because the Merrill Lynch Depositary Receipts for
the shares of Merrill Lynch preferred stock that are being
converted in the merger are listed on the NYSE and the New Bank
of America Preferred Stock into which Merrill Lynch preferred
stock will be converted pursuant to the merger will also be
listed on the NYSE, Merrill Lynchs preferred stockholders
do not have dissenters appraisal rights in the merger with
respect to their shares of Merrill Lynch preferred stock.
Finally, because shares of convertible preferred stock of
Merrill Lynch will remain outstanding after the merger, Merrill
Lynchs convertible preferred stockholders do not have
dissenters appraisal rights in the merger with respect to
shares of Merrill Lynch convertible preferred stock.
Regulatory
Approvals Required for the Merger
Bank of America and Merrill Lynch have each agreed to use
reasonable best efforts to obtain all regulatory approvals
required to complete the transactions contemplated by the merger
agreement. These approvals include approval from or notices to
the Board of Governors of the Federal Reserve Board, the SEC,
NYSE, FINRA, FERC, the FSA, the Financial Services Agency of
Japan, the CFTC, the DOJ, the FTC, the FDIC, the Utah Department
of Financial Institutions, the New York State Banking
Department, various state and foreign securities, mortgage
banking and insurance authorities, and various other federal,
state and foreign regulatory authorities. Bank of America and
Merrill Lynch have completed, or will complete, the filing of
applications and notifications to obtain the required regulatory
approvals.
Federal Reserve Board. In order to approve the
merger, the Federal Reserve Board must determine that the merger
can reasonably be expected to produce benefits to the public
that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition,
conflicts of interest, or unsound banking practices. As part of
its evaluation of a proposal under these public interest
factors, the Federal Reserve Board reviews the financial and
managerial resources of Bank of America and Merrill Lynch, the
effect of the proposal on competition in the relevant markets,
the record of the insured depository institution subsidiaries of
Bank of America and Merrill Lynch under the Community
Reinvestment Act and other public interest factors. Each of the
depository institution subsidiaries of Bank of America has
received an outstanding rating in its most recent Community
Reinvestment Act performance evaluation from its federal
regulator. Merrill Lynch Bank USA received an outstanding rating
at its most recent Community Reinvestment Act performance
evaluation from its federal regulator and Merrill Lynch
Bank & Trust Co., FSB is scheduled for such
performance evaluation during the first quarter of 2009. The
Federal Reserve Boards review of these factors affects
both its decision on the merger and the timing of that decision,
as well as any conditions that might be imposed.
The Federal Reserve Board will furnish a copy of the
notification for approval of the merger to the Office of Thrift
Supervision, which has 30 days to submit its views and
recommendations to the Federal Reserve Board. A copy of the
notice will also be provided to the DOJ and the FTC, which will
review the merger for adverse effects on competition.
Furthermore, the Bank Holding Company Act and Federal Reserve
Board regulations require published notice of, and the
opportunity for public comment on, the notification submitted by
Bank of America for approval of the merger, and authorize the
Federal Reserve Board to hold a public hearing or meeting if the
Federal Reserve Board determines that a hearing or meeting would
be appropriate.
64
Any hearing, meeting or comments provided by third parties could
prolong the period during which the notification is under review
by the Federal Reserve Board.
Department of Justice, Federal Trade Commission and
U.S. Antitrust Authorities. Because the
merger involves activities that are not subject to review by the
Federal Reserve Board under Section 4 of the Bank Holding
Company Act, it is partially subject to the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, or the HSR Act. The HSR Act
and related rules prohibit the completion of transactions such
as the merger unless the parties notify the FTC and the DOJ in
advance. Bank of America and Merrill Lynch filed the requisite
HSR Act notification forms on September 26, 2008. The HSR
Act further provides that a transaction or portion of a
transaction that is notifiable under the HSR Act, such as the
merger, may not be consummated until the expiration of a 30
calendar-day
waiting period, or the early termination of that waiting period,
following the parties filing of their respective HSR Act
notification forms. If the DOJ or the FTC issues a Request for
Additional Information and Documentary Material prior to the
expiration of the waiting period, the parties must observe a
second
30-day
waiting period, which would begin to run only after both parties
have substantially complied with the request for information,
unless the waiting period is terminated earlier or extended with
the consent of the parties. If either
30-day
waiting period ends on a weekend or holiday, the waiting period
is extended until the next business day.
At any time before or after the acquisition is completed, either
the DOJ or FTC could take action under the antitrust laws in
opposition to the merger, including seeking to enjoin the
acquisition or seeking divestiture of substantial assets of Bank
of America or Merrill Lynch or their subsidiaries. Private
parties
and/or state
attorney generals also may seek to take legal action under the
antitrust laws under some circumstances. Based upon an
examination of information available relating to the businesses
in which the companies are engaged, Bank of America and Merrill
Lynch believe that the completion of the merger will not violate
U.S. antitrust laws. However, Bank of America and Merrill
Lynch can give no assurance that a challenge to the merger on
antitrust grounds will not be made, or, if such a challenge is
made, that Bank of America and Merrill Lynch will prevail.
Other Requisite U.S. Approvals, Notices and
Consents. Notifications
and/or
applications requesting approval must be submitted to various
state regulatory authorities and self-regulatory organizations
in connection with the change in control of certain businesses
that are controlled by Merrill Lynch. Notifications
and/or
applications requesting approval must be submitted to certain
state mortgage banking and insurance authorities in connection
with the change in control of Merrill Lynchs licensed
mortgage and insurance businesses. In addition, the change in
control of Merrill Lynchs registered broker-dealer
subsidiaries is subject to review by FINRA. Bank of America and
Merrill Lynch have filed and submitted, or will shortly file and
submit, all applications and notices required to be submitted to
obtain these approvals and provide these notices.
Certain Foreign Approvals. Approvals also will
be required from, and notices must be submitted to, certain
foreign regulatory authorities in connection with the merger and
the change in ownership of certain businesses that are
controlled by Merrill Lynch abroad including, the FSA and the
Financial Services Authority of Japan, among others. Bank of
America and Merrill Lynch have filed, or will shortly file, all
applications and notices required to be submitted to obtain
these approvals and any other approvals that may be required to
complete the merger.
Timing. We cannot assure you that all of the
regulatory approvals described above will be obtained and, if
obtained, we cannot assure you as to the timing of any
approvals, our ability to obtain the approvals on satisfactory
terms or the absence of any litigation challenging such
approvals. We also cannot assure you that the DOJ, the FTC, a
foreign regulatory regime, or any state attorney general will
not attempt to challenge the merger on antitrust grounds, and,
if such a challenge is made, we cannot assure you as to its
result.
Bank of America and Merrill Lynch believe that the merger does
not raise substantial antitrust or other significant regulatory
concerns and that they will be able to obtain all requisite
regulatory approvals on a timely basis without the imposition of
any condition that would have a material adverse effect on Bank
of America or Merrill Lynch. The parties obligation to
complete the merger is conditioned upon the receipt of all
required regulatory approvals.
65
It is presently contemplated that if any governmental approvals
or actions are required beyond those listed above, such
approvals or actions will be sought. There can be no assurance,
however, that any additional approvals or actions will be
obtained. The parties are required to use their reasonable best
efforts to file all the necessary documentation and obtain all
consents of third parties that are necessary to consummate the
merger and to comply with the terms and conditions of all
consents, approvals and authorizations of any third party or
governmental entity.
Litigation
Relating to the Merger
Four purported class actions have been filed on behalf of
Merrill Lynch stockholders in the Supreme Court of the State of
New York, County of New York and one has been filed in Court of
Chancery of the State of Delaware. The actions allege that the
members of the Merrill Lynch board of directors breached their
fiduciary duties of care, loyalty, good faith and candor in
agreeing to the merger, with three of the actions containing
additional allegations that Bank of America aided and abetted
the Merrill Lynch directors breaches of fiduciary duty.
The lawsuits seek, among other things, to enjoin the completion
of the merger, the imposition of a constructive trust upon any
benefits improperly received by the defendants, and an award of
attorneys and experts fees and expenses. Laura
Diamond v. John A. Thain, et al., No. 650341/2008
(Sup. Ct. N.Y. Co.); Peter Miller v. Merrill Lynch,
& Co., Inc., et al, No. 602669/2008 (Sup. Ct. N.Y.
Co.); Milton Pfeiffer v. John A. Thain, et al.,
No. 650342/2008 (Sup. Ct. N.Y. Co.); Ulisse v.
Merrill Lynch & Co., Inc., et al,
No. 602810/2008 (Sup. Ct. N.Y. Co.); County of New York
Employees Retirement Plan v. Merrill Lynch & Co. Inc., et
al, (Del. Ch.).
On September 23, 2008, Merrill Lynch shareholder plaintiffs
in an existing derivative action brought against current and
former Merrill Lynch directors and officers in the
U.S. District Court for the Southern District of New York
filed a second amended derivative and class action complaint .
The lawsuit asserts derivative claims brought on behalf of
Merrill Lynch against current and former Merrill Lynch directors
and officers for alleged breaches of fiduciary duties, corporate
waste, abuse of control, gross mismanagement, contribution and
indemnification, aiding and abetting breaches of fiduciary duty,
insider selling, and unjust enrichment in connection with
Merrill Lynchs underwriting of collateralized debt
obligations and the officer and director defendants sales
of Merrill Lynch common stock. With respect to these derivative
claims, the plaintiffs seek, among other things, to recover
damages from the current and former directors and officers on
behalf of Merrill Lynch and an award of attorneys and
experts fees and expenses. The lawsuit also asserts claims
on behalf of a putative class of all current holders of Merrill
Lynch common stock to the effect that the Merrill Lynch board of
directors breached their fiduciary duties of care and loyalty in
agreeing to the merger and that Bank of America aided and
abetted the Merrill Lynch directors breaches of fiduciary
duty. The lawsuit also asserts claims on behalf of a putative
class of all holders of Merrill Lynch common stock on
January 18, 2008, who continued to hold all or some of
those shares on September 15, 2008 against Merrill
Lynchs Chief Executive Officer for alleged false
statements regarding the possibility of write-downs and the need
for additional capital. With respect to the class claims, the
lawsuit seeks, among other things, to enjoin the completion of
the merger and an award of compensatory and punitive damages.
In re Merrill Lynch & Co., Inc. Securities,
Derivative and ERISA Litigation,
No. 07-CV-9633
(S.D.N.Y.), referred to as the New York Federal Court Action.
On September 18, 2008, Merrill Lynch shareholder plaintiffs
in an existing consolidated derivative action brought against
current and former Merrill Lynch directors and officers in the
Supreme Court of the State of New York, County of New York moved
to lift a stay that was imposed in the action on March 14,
2008 in favor of the New York Federal Action. These shareholder
plaintiffs seek to file an amended complaint that, in addition
to asserting derivative claims on behalf of Merrill Lynch
against current and former Merrill Lynch directors and officers
for breaches of fiduciary duties, corporate waste, abuse of
control, and gross mismanagement in connection with Merrill
Lynchs underwriting of collateralized debt obligations,
asserts claims on behalf of a putative Merrill Lynch shareholder
class challenging the merger. The proposed amended complaint
alleges that the Merrill Lynch board of directors breached their
fiduciary duties in agreeing to the merger and that Bank of
America aided and abetted the Merrill Lynch directors
breaches of fiduciary duty. With respect to the derivative
claims, the lawsuit seeks, among other things, to recover
damages allegedly sustained by
66
Merrill Lynch, and with respect to the class claims, the lawsuit
seeks, among other things, to enjoin the completion of the
merger. Plaintiffs also seek to an award of attorneys and
experts fees and expenses. Merrill Lynch has opposed the
motion to vacate the stay and has moved to consolidate this
derivative action with the three purported class actions pending
in the Supreme Court of the State of New York and to stay each
of these each actions in favor of the derivative and class
actions pending in the U.S. District Court for the Southern
District of New York. Levin v. ONeal, et al.,
No. 603662/07 (Sup. Ct. N.Y. Co.).
On September 26, 2008, a Merrill Lynch shareholder filed a
purported class action in the Delaware Court of Chancery
alleging that Merrill Lynch directors breached their fiduciary
duties of loyalty, good faith, due care and disclosure in
agreeing to the merger, and that Bank of America aided and
abetted the Merrill Lynch directors breaches of fiduciary
duty. The lawsuit seeks, among other things, to enjoin the
completion of the merger, the imposition of a construction trust
upon any benefits improperly received by the defendants, and an
award of attorneys and experts fees. County of
York Employees Retirement Plan v. Merrill Lynch, et al.,
No. 4066 (Del. Ch.).
Merrill Lynch and Bank of America believe that the class claims
asserted by Merrill Lynch stockholders relating to the merger
are without merit and intend to contest them vigorously. Upon
consummation of the merger, the plaintiffs who have asserted
derivative claims on behalf of Merrill Lynch may lose standing
to assert such claims on behalf of Merrill Lynch because they
will no longer be Merrill Lynch stockholders.
Interests
Of Certain Persons in the Merger
Merrill
Lynchs Officers and Directors Have Financial Interests in
the Merger
In considering the recommendation of the Merrill Lynch board of
directors that you vote to adopt the merger agreement, you
should be aware that Merrill Lynch executive officers and
directors have financial interests in the merger that are
different from, or in addition to, those of Merrill Lynch
stockholders generally. The independent members of the Merrill
Lynch board of directors were aware of and considered these
interests, among other matters, in evaluating and negotiating
the merger agreement and the merger, and in recommending to the
stockholders that the merger agreement be adopted. For purposes
of all of the Merrill Lynch agreements and plans described
below, the completion of the transactions contemplated by the
merger agreement will constitute a change in control.
Equity Compensation Awards and Deferred Equity
Units. The merger agreement provides that, upon
completion of the merger, stock options, restricted shares,
restricted share units, cap units and deferred equity units that
are outstanding immediately before completion of the merger will
become stock options, restricted shares, restricted share units,
cap units and deferred equity units with respect to shares of
Bank of America common stock. Please see The
Merger Treatment of Merrill Lynch Stock Options and
Other Equity-Based Awards on page [ ]. The
Merrill Lynch equity compensation plans and award agreements
generally provide for, with respect to employees, the vesting
and settlement of equity-based awards upon a termination of a
grantees employment without cause or for
good reason (as such terms are defined in the
applicable equity compensation plan or, in the case of
Messrs. Sanzone and Montag, in the applicable letter
agreement) in connection with the merger and, with respect to
non-employee directors, the settlement of equity-based awards
upon completion of the merger.
Based on Merrill Lynch equity compensation holdings as of
September 25, 2008: (1) the number of unvested stock
options to acquire shares of Merrill Lynch common stock (at
exercise prices ranging from
$[ ]
to
$[ ])
held by each of Messrs. Thain, Chai, Fleming and McCann and
the three other executive officers (as a group) that would vest
upon completion of the merger is
[ ],
[ ],
[ ],
[ ],
and
[ ],
respectively, and the number that would not vest upon completion
of the merger, but would vest upon a subsequent qualifying
termination of employment, held by each of Messrs. Thain,
Chai, Fleming and McCann, and the three other executive officers
(as a group) is
[ ],
[ ],
[ ],
[ ],
and
[ ],
respectively; (2) the number of unvested restricted shares
of Merrill Lynch common stock held by each of
Messrs. Thain, Chai, Fleming and McCann, the three other
executive officers (as a group), and the nine non-employee
directors (as a group), that would vest upon completion of the
merger is
[ ],
[ ],
[ ],
[ ],
[ ] and
[ ],
67
respectively, and the number that would not vest upon completion
of the merger, but would vest upon a subsequent qualifying
termination of employment, held by each of Messrs. Thain,
Chai, Fleming and McCann and the three other executive officers
(as a group) is
[ ],
[ ],
[ ],
[ ] and
[ ],
respectively; (3) the number of unvested restricted stock
units in respect of shares of Merrill Lynch common stock held by
each of Messrs. Thain, Chai, Fleming and McCann, the three
other executive officers (as a group) and the nine non-employee
directors (as a group), that would vest upon completion of the
merger is
[ ],
[ ],
[ ],
[ ],
[ ] and
[ ],
respectively, and the number that would not vest upon completion
of the merger, but would vest upon a subsequent qualifying
termination of employment held by each of Messrs. Thain,
Chai, Fleming and McCann and the three other executive officers
(as a group), is
[ ],
[ ],
[ ],
[ ] and
[ ],
respectively; and (4) the number of shares of deferred
equity units held by each of Messrs. Thain, Chai, Fleming
and McCann, the three other executive officers (as a group) and
the nine non-employee directors (as a group), that would settle
upon completion of the merger is
[ ],
[ ],
[ ],
[ ],
[ ] and
[ ],
respectively. Immediately prior to consummation of the change in
control, performance-based participation units granted under
Merrill Lynchs Long-Term Incentive Compensation Program as
part of Merrill Lynchs Managing Partners Incentive Program
will be converted into restricted shares, with one-third of the
original award converted at a special ratio of 2.5 to 1. The
amounts set forth above for restricted share holdings reflect
this conversion. All options held by the nine non-employee
directors are already fully vested. None of Merrill Lynchs
executive officers or non-employee directors hold any cap units
in respect of shares of Merrill Lynch common stock.
Equity awards that vest upon a qualifying termination of
employment generally are settled promptly following the
termination of employment. With respect to many of the executive
officers equity awards, the Merrill Lynch equity
compensation plans provide that the value of the payout, if the
executive officer is terminated without cause or
resigns for good reason in connection with a change
in control, will be determined based on the fair market value of
a share of Merrill Lynch common stock on the date of
termination, or, if higher, the highest fair market value of a
share of Merrill Lynch common stock during the
90-day
period ending on the date of the change in control.
Thain and Chai Letter Agreements. Pursuant to
letter agreements entered into with Merrill Lynch upon their
commencement of employment in December 2007, Mr. Thain and
Mr. Chai were awarded replacement restricted
stock unit awards and stock options to replace stock awards
forfeited when they left their former employer, and
sign-on restricted stock unit awards and stock
options. Upon a change in control, the replacement
restricted stock units and stock options vest only upon a
qualifying termination in accordance with the terms of Merrill
Lynchs standard form of equity awards for executive
officers. However, the sign-on restricted stock
units and stock options provide that upon a change in control:
(1) two-thirds of any then-unvested sign-on
restricted stock units and the first tranche of the
sign-on stock options (which consists of one-third
of the sign-on stock options) granted to each of
Messrs. Thain and Chai will vest in full;
(2) one-sixth of any then-unvested sign-on
restricted stock units and the second tranche of the
sign-on stock options (which consists of one-third
of the sign-on stock options) granted to each of
Messrs. Thain and Chai will vest in full if the price paid
per share of Merrill Lynch stock is at least equal to
$80.43 or $82.32, respectively; and (3) one-sixth of any
then-unvested sign-on restricted stock units and the
third tranche of the sign-on stock options (which
consists of one-third of the sign-on stock options)
granted to each of Messrs. Thain and Chai will vest in full
if the price paid per share of Merrill Lynch stock is at least
equal to $100.43 or $102.32, respectively.
Based on the grant price of the sign-on awards and
the price per share of Merrill Lynch common stock, the
sign-on restricted stock units and
sign-on stock options subject to the transaction
price test described in the immediately preceding paragraph will
not vest in connection with consummation of the merger, but may
vest upon a subsequent termination without cause of
Mr. Thains or Mr. Chais employment.
In the event that Mr. Thain becomes subject to the change
of control excise tax under the Code, his letter agreement
generally provides for an additional payment to him such that he
will be placed in the same after-tax position as if no such
excise tax had been imposed, unless the payments and benefits
due to him exceed the limit on change in control payments under
the Code by less than 5%, in which case Mr. Thains
payments
68
and benefits will be reduced to the minimum extent necessary so
that no portion of the payments are subject to the excise tax.
Montag Letter Agreement. In connection with
its hiring earlier this year of Thomas J. Montag,
Merrill Lynch entered into a letter agreement with
Mr. Montag which provides that, upon a termination of his
employment without cause or for good
reason (as such terms are defined in his letter agreement)
following a change in control, notwithstanding the provisions of
any Merrill Lynch equity plan, stock options granted to
Mr. Montag will vest and remain exercisable for their full
original term, restricted stock units will vest, and in each
case such awards will not be subject to any forfeiture
provisions or covenants. Mr. Montags letter agreement
also provides for a guaranteed bonus for fiscal year 2008, part
of which is payable as equity-based compensation. Upon a
qualifying termination of Mr. Montags employment,
this equity-based compensation will vest and any options will be
exercisable for the remainder of their term.
Sanzone Letter Agreement. In connection with
its hiring earlier this year of Thomas S. Sanzone,
Merrill Lynch entered into a letter agreement with
Mr. Sanzone which provides a guaranteed bonus for fiscal
year 2008, part of which is payable as equity-based
compensation. Upon a qualifying termination of
Mr. Sanzones employment, this equity-based
compensation will vest.
Arrangements with Bank of America. The merger
agreement provides that three directors from among the
individuals serving as directors of Merrill Lynch immediately
prior to the effective time of the merger will be appointed to
the board of directors of Bank of America. The identity of the
three directors will be mutually agreed upon by Bank of America
and Merrill Lynch.
Protection of Merrill Lynch Directors and Officers Against
Claims. Bank of America has agreed that it will
or will cause the surviving corporation in the merger to
indemnify and hold harmless, and provide advancement of expenses
to, each past and present officer and director of Merrill Lynch
and its subsidiaries against all losses or liabilities incurred
in their capacity as officer or director of Merrill Lynch to the
fullest extent permitted by applicable laws. Bank of America has
also agreed that it will maintain in place existing
indemnification and exculpation rights in favor of Merrill Lynch
and its officers for six years after the merger and it will
maintain Merrill Lynchs current directors and officers
liability insurance coverage, or an equivalent replacement
policy for the benefit of Merrill Lynch directors and officers,
for six years following the completion of the merger, except
that Bank of America is not required to incur an annual premium
expense greater than 250% of Merrill Lynchs current annual
directors and officers liability insurance premium.
69
THE
MERGER AGREEMENT
The following describes certain aspects of the merger,
including material provisions of the merger agreement. The
following description of the merger agreement is subject to, and
qualified in its entirety by reference to, the merger agreement,
which is attached to this document as Appendix A and is
incorporated by reference in this document. We urge you to read
the merger agreement carefully and in its entirety, as it is the
legal document governing the merger.
Terms of
the Merger
Each of the Merrill Lynch board of directors and the Bank of
America board of directors has approved the merger agreement,
which provides for the merger of Merger Sub with and into
Merrill Lynch. Merrill Lynch will be the surviving corporation
in the merger and will remain a subsidiary of Bank of America.
Each share of Merrill Lynch common stock, par value
$1.331/3
per share, issued and outstanding immediately prior to the
completion of the merger, except for specified shares of Merrill
Lynch common stock held by Merrill Lynch and Bank of America,
will be converted into the right to receive 0.8595 of a share of
Bank of America common stock. If the number of shares of Bank of
America common stock changes before the merger is completed
because of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other
similar change in capitalization, then an appropriate and
proportionate adjustment will be made to the number of shares of
Bank of America common stock into which each share of Merrill
Lynch common stock will be converted.
Bank of America will not issue any fractional shares of Bank of
America common stock in the merger. Instead, a Merrill Lynch
stockholder who otherwise would have received a fraction of a
share of Bank of America common stock will receive an amount in
cash rounded to the nearest cent. This cash amount will be equal
to such stockholders proportionate interest in the net
proceeds from the sale in the open market by the exchange agent,
on behalf of all such holders, of the aggregate fractional
shares of Bank of America common stock that would otherwise have
been issued. The sale described in the previous sentence will
occur as soon as practicable following the merger.
Non-convertible preferred stock of Merrill Lynch will be
exchanged for preferred stock issued by Bank of America having
substantially identical terms except for the additional voting
rights described in The Merger Agreement
Treatment of Preferred Stock, starting on
page [ ]. Convertible preferred stock of Merrill
Lynch will remain outstanding after the merger and will
thereafter be convertible in accordance with its terms into
shares of Bank of America common stock based on the exchange
ratio of 0.8595.
Prior to the effective time of the merger, the certificate of
incorporation of Merrill Lynch will be amended to reflect
changes in the terms of convertible preferred stock of Merrill
Lynch described below. The merger agreement provides that Bank
of America may change the structure of the merger. No such
change will alter the amount or kind of merger consideration to
be provided under the merger agreement, adversely affect the tax
treatment of Merrill Lynchs stockholders as a result of
receiving the merger consideration or the tax treatment of the
parties to the merger agreement, or impede or delay completion
of the merger.
Treatment
of Merrill Lynch Stock Options and Other Equity-Based
Awards
Each outstanding option to acquire Merrill Lynch common stock
granted under Merrill Lynchs stock incentive plans will be
converted automatically at the effective time of the merger into
an option to purchase Bank of America common stock and will
continue to be governed by the terms of the Merrill Lynch stock
plan and related grant agreements under which it was granted,
except that:
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the number of shares of Bank of America common stock subject to
each converted Bank of America stock option will be equal to the
product of the number of shares of Merrill Lynch common stock
previously subject to the Merrill Lynch stock option and 0.8595,
rounded down to the nearest whole share; and
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the exercise price per share of Bank of America common stock
subject to each converted Bank of America stock option will be
equal to the exercise price for each share of Merrill Lynch
common stock
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previously subject to the Merrill Lynch stock option immediately
prior to completion of the merger divided by 0.8595, rounded up
to the nearest cent.
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Restricted shares of Merrill Lynch common stock outstanding
immediately prior to the effective time of the merger will be
converted automatically at the effective time of the merger into
restricted shares of Bank of America common stock. The number of
restricted shares of Bank of America common stock will be equal
to the product of the number of shares of Merrill Lynch common
stock previously subject to the Merrill Lynch restricted share
award and 0.8595, rounded to the nearest whole share.
Restricted share units in respect of Merrill Lynch common stock
outstanding immediately prior to completion of the merger will
be converted automatically at the effective time of the merger
into restricted share units in respect of shares of Bank of
America common stock. The number of shares of Bank of America
common stock subject to each converted restricted share unit
will be equal to the product of the number of shares of Merrill
Lynch common stock previously subject to the Merrill Lynch
restricted share unit and 0.8595, rounded to the nearest whole
share. The Bank of America restricted share units will be
payable or distributable in accordance with the terms of the
Merrill Lynch agreement, plan or arrangement relating to the
restricted share units.
Cap units in respect of Merrill Lynch common stock outstanding
immediately prior to completion of the merger will be converted
automatically at the effective time of the merger into cap units
in respect of shares of Bank of America common stock. The number
of shares of Bank of America common stock subject to each
converted cap unit will be equal to the product of the number of
shares of Merrill Lynch common stock previously subject to the
Merrill Lynch cap unit and 0.8595, rounded to the nearest whole
share. The Bank of America cap units will be payable or
distributable in accordance with the terms of the agreement,
plan or arrangement relating to the Merrill Lynch restricted
share units.
Merrill Lynch deferred equity units, which are amounts
denominated in Merrill Lynch common stock and held in
participant accounts pursuant to certain of Merrill Lynchs
deferred compensation plans, will be converted automatically at
the effective time of the merger into deferred equity units in
respect of shares of Bank of America common stock. The number of
shares of Bank of America common stock subject to each converted
deferred equity unit will be equal to the product of the number
of shares of Merrill Lynch common stock in which the Merrill
Lynch deferred equity unit was previously denominated and
0.8595, rounded to the nearest whole share. The deferred equity
units will be payable or distributable in accordance with the
terms of the Merrill Lynch deferred compensation plans
applicable to the deferred equity units.
The Merrill Lynch 1986 Employee Stock Purchase Plan and
outstanding rights under the plan will be terminated as of the
effective time of the merger. The offering period under the plan
in effect immediately prior to the completion of the merger will
end and each participant in the plan will be credited with the
number of shares of Merrill Lynch common stock purchased for his
or her account under the plan in respect of this offering period
in accordance with the terms of the Merrill Lynch plan.
Treatment
of Merrill Lynch Preferred Stock
Upon completion of the merger, (i) each share of Merrill
Lynch Preferred Stock Series 1 issued and outstanding
immediately prior to completion of the merger will be exchanged
for one share of Bank of America Preferred Stock
Series 1, (ii) each share of Merrill Lynch Preferred
Stock Series 2 issued and outstanding immediately prior to
completion of the merger will be exchanged for one share of Bank
of America Preferred Stock Series 2, (iii) each share
of Merrill Lynch Preferred Stock Series 3 issued and
outstanding immediately prior to completion of the merger will
be exchanged for one share of Bank of America Preferred Stock
Series 3, (iv) each share of Merrill Lynch Preferred
Stock Series 4 issued and outstanding immediately prior to
completion of the merger will be exchanged for one share of Bank
of America Preferred Stock Series 4, (v) each share of
Merrill Lynch Preferred Stock Series 5 issued and
outstanding immediately prior to completion of the merger will
be exchanged for one share of Bank of America Preferred Stock
Series 5, (vi) each share of Merrill Lynch Preferred
Stock Series 6 issued and outstanding immediately prior to
completion of the merger will be exchanged for one share of Bank
of America Preferred Stock Series 6, (vii) each share
of Merrill Lynch Preferred Stock Series 7 issued and
outstanding immediately prior to
71
completion of the merger will be exchanged for one share of Bank
of America Preferred Stock Series 7 and (viii) each
share of Merrill Lynch Preferred Stock Series 8 issued and
outstanding immediately prior to completion of the merger will
be exchanged for one share of Bank of America Preferred Stock
Series 8.
The terms of the Bank of America Preferred Stock Series 1,
Bank of America Preferred Stock Series 2, Bank of America
Preferred Stock Series 3, Bank of America Preferred Stock
Series 4, Bank of America Preferred Stock Series 5,
Bank of America Preferred Stock Series 6, Bank of America
Preferred Stock Series 7, and Bank of America Preferred
Stock Series 8 will be substantially identical to the terms
of the corresponding series of Merrill Lynch preferred stock,
except for the additional voting rights described below. We
sometimes refer to the Bank of America Preferred Stock
Series 1, Bank of America Preferred Stock Series 2,
Bank of America Preferred Stock Series 3, Bank of America
Preferred Stock Series 4, Bank of America Preferred Stock
Series 5, Bank of America Preferred Stock Series 6,
Bank of America Preferred Stock Series 7 and Bank of
America Preferred Stock Series 8 collectively as the New
Bank of America Preferred Stock. As of August 29, 2008
(i) 50,000 shares were authorized as Merrill Lynch
Preferred Stock Series 1, 21,000 of which were outstanding,
(ii) 50,000 shares were authorized as Merrill Lynch
Preferred Stock Series 2, 37,000 of which were outstanding,
(iii) 43,333 shares were authorized as Merrill Lynch
Preferred Stock Series 3, 27,000 of which were outstanding,
(iv) 23,333 shares were authorized as Merrill Lynch
Preferred Stock Series 4, 20,000 of which were outstanding;
(v) 50,000 shares were authorized as Merrill Lynch
Preferred Stock Series 5, 50,000 of which were outstanding,
(vi) 65,000 shares were authorized as Merrill Lynch
Preferred Stock Series 6, 65,000 of which were outstanding,
(vii) 50,000 shares were authorized as Merrill Lynch
Preferred Stock Series 7, 50,000 of which were outstanding,
(viii) 97,750 shares were authorized as Merrill Lynch
Preferred Stock Series 8, 89,100 of which were outstanding.
The holders of Bank of America Preferred Stock Series 1,
Bank of America Preferred Stock Series 2, Bank of America
Preferred Stock Series 3, Bank of America Preferred Stock
Series 4, Bank of America Preferred Stock Series 5 and
Bank of America Preferred Stock Series 8 shall be entitled
to vote on all matters submitted to a vote of the holders of
Bank of America common stock, voting together with the holders
of common stock as one class. Each share shall be entitled to
150 votes. The holders of Bank of America Preferred Stock
Series 6 and Bank of America Preferred Stock Series 7
shall be entitled to vote on all matters submitted to a vote of
the holders of Bank of America common stock, voting together
with the holders of common stock as one class. Each share shall
be entitled to 5 votes.
Each outstanding share of Merrill Lynch non-convertible
preferred stock is presently represented by depositary shares,
or Merrill Lynch Depositary Shares, that are listed on the NYSE
and represent (a) with respect to the Merrill Lynch
Preferred Stock Series 6 and Merrill Lynch Preferred Stock
Series 7, a one-fortieth interest in a share of Merrill
Lynch preferred stock and (b) with respect to the Merrill
Lynch Preferred Stock Series 1, Merrill Lynch Preferred
Stock Series 2, Merrill Lynch Preferred Stock
Series 3, Merrill Lynch Preferred Stock Series 4,
Merrill Lynch Preferred Stock Series 5 and Merrill Lynch
Preferred Stock Series 8, a one-twelve hundredth interest
in a share of Merrill Lynch preferred stock. Upon completion of
the merger, Bank of America will assume the obligations of
Merrill Lynch under the (i) Deposit Agreement, dated as of
November 1, 2004, between Merrill Lynch, The Bank of New
York Mellon (as successor to JPMorgan Chase Bank, N.A.), as
depositary, and the Holders from Time to Time of Depositary
Receipts (relating to the Merrill Lynch Floating Rate
Non-Cumulative Preferred Stock, Series 1),
(ii) Deposit Agreement, dated as of March 14, 2005,
between Merrill Lynch, The Bank of New York Mellon (as successor
to JPMorgan Chase Bank, N.A.), as depositary, and the Holders
from Time to Time of Depositary Receipts (relating to the
Merrill Lynch Floating Rate Non-Cumulative Preferred Stock,
Series 2), (iii) Deposit Agreement, dated as of
November 17, 2005 (referred to as the November 2005 Deposit
Agreement), between Merrill Lynch, The Bank of New York Mellon
(as successor to JPMorgan Chase Bank, N.A.) and the Holders from
Time to Time of Depositary Receipts (relating to the Merrill
Lynch 6.375% Non-Cumulative Preferred Stock, Series 3),
(iv) the November 2005 Deposit Agreement between Merrill
Lynch, The Bank of New York Mellon (as successor to JPMorgan
Chase Bank, N.A.), and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch Floating Rate
Non-Cumulative Preferred Stock, Series 4), (v) the
November 2005 Deposit Agreement between Merrill Lynch, The Bank
of New York Mellon (as successor to JPMorgan Chase Bank, N.A.)
and the Holders from Time to Time of Depositary Receipts
(relating to the Merrill Lynch Floating Rate Non-Cumulative
72
Preferred Stock, Series 5), (vi) Deposit Agreement,
dated as of January 28, 2004, between Merrill Lynch (as
successor to First Republic Bank), Mellon Investor Services LLC,
as depositary, and the Holders from Time to Time of Depositary
Receipts (relating to the Merrill Lynch 6.70% Noncumulative
Perpetual Preferred Stock, Series 6), (vii) Deposit
Agreement, dated as of March 18, 2005, between Merrill
Lynch (as successor to First Republic Bank), Mellon Investor
Services LLC, as depositary, and the Holders from Time to Time
of Depositary Receipts (relating to the Merrill Lynch 6.25%
Noncumulative Perpetual Preferred Stock, Series 7) and
(viii) the November 2005 Deposit Agreement between Merrill
Lynch, The Bank of New York Mellon (as successor to JPMorgan
Chase Bank, N.A.) and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch 8.625%
Non-Cumulative Preferred Stock, Series 8). Bank of America
will instruct the depositaries, each referred to as a
Depositary, as depositary under each of the deposit agreements,
or Deposit Agreements, to treat the shares of New Bank of
America Preferred Stock received by it in exchange for shares of
Merrill Lynch preferred stock as newly deposited securities
under the applicable Deposit Agreement. In accordance with the
terms of the relevant Deposit Agreement, the Merrill Lynch
Depositary Shares will thereafter represent the shares of the
relevant series of New Bank of America Preferred Stock. Such
depositary shares will continue to be listed on the New York
Stock Exchange upon completion of the merger under a new name
and traded under a new symbol.
Shares of preferred securities issued by Merrill Lynchs
subsidiaries will remain issued and outstanding following
completion of the merger, and the terms of those preferred
shares will generally be unaffected by the merger. Each share of
9.00% Non-Voting Mandatory Convertible Non-Cumulative Preferred
Stock, Series 2, and the 9.00% Non-Voting Mandatory
Convertible Non-Cumulative Preferred Stock, Series 3,
outstanding immediately prior to completion of the merger shall
remain issued and outstanding and shall have the rights,
privileges, powers and preferences as set forth in Merrill
Lynchs certificate of incorporation, as amended by the
certificate amendment described herein. Holders of Merrill Lynch
preferred stock, Merrill Lynch Depositary Shares or preferred
securities issued by Merrill Lynchs subsidiaries are not
entitled to vote on the merger or at the special meeting.
EACH DEPOSITARY IS THE ONLY HOLDER OF RECORD OF SHARES OF
MERRILL LYNCH PREFERRED STOCK THAT ARE REPRESENTED BY DEPOSITARY
SHARES. ALL HOLDERS OF MERRILL LYNCH DEPOSITARY SHARES SHOULD
FOLLOW THE INSTRUCTIONS GIVEN TO THEM BY THEIR BROKER.
Treatment
of Exchangeable Shares of Merrill Lynch & Co., Canada
Ltd.
In accordance with the terms of the merger agreement, Merrill
Lynch is obligated to redeem the exchangeable shares in
accordance with their terms. The documents governing the
exchangeable shares provide that, as a result of the merger
being proposed, Merrill Lynch Canada has the right to cause the
redemption (or repurchase by an affiliate of Merrill Lynch
Canada) of the exchangeable shares in accordance with their
terms. The redemption or repurchase date for the exchangeable
shares has not yet been set. Merrill Lynch intends to cause the
exchangeable shares to be repurchased after the October 10,
2008, record date for the special meeting and prior to the
completion of the merger. Registered holders of exchangeable
shares on the record date will be entitled to vote at the
meeting in accordance with the terms of the documents governing
the Merrill Lynch Canada exchangeable shares.
Upon the redemption by Merrill Lynch Canada, or repurchase by an
affiliate of Merrill Lynch Canada, of the exchangeable shares,
holders of such shares will be required to dispose of them in
exchange for Merrill Lynch common stock on a one-for-one basis.
The holders of exchangeable shares who receive such Merrill
Lynch common stock, and continue to hold such Merrill Lynch
common stock at the time of the completion of the merger, will
subsequently receive the merger consideration in the same manner
as other holders of Merrill Lynch common stock. The redemption
or repurchase of the exchangeable shares will not, however, be
conditional upon the completion of the merger.
Generally, a Canadian resident who holds Merrill Lynch Canada
exchangeable shares as capital property and who disposes of them
in exchange for Merrill Lynch common stock will realize a
capital gain (or capital loss) under the Income Tax Act
(Canada) equal to the amount by which the fair market value
of the
73
Merrill Lynch common stock received by the holder, less any
reasonable costs of disposition, exceeds (or is less than) the
adjusted cost base of the Merrill Lynch Canada exchangeable
shares disposed of by the holder.
This summary is of a general nature and is not comprehensive.
It is not intended to be, nor should it be construed to be,
legal or tax advice to any particular holder of Merrill Lynch
Canada exchangeable shares. Accordingly, holders of Merrill
Lynch Canada exchangeable shares will need to consult with their
own tax advisors for advice regarding the Canadian income tax
consequences to them of the disposition of such shares in
exchange for Merrill Lynch common stock and the subsequent
receipt of Bank of America common stock upon the merger.
Closing
and Effective Time of the Merger
The merger will be completed only if all of the following occur:
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the merger agreement is adopted by Merrill Lynch stockholders;
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the issuance of shares of Bank of America common stock is
approved by the Bank of America stockholders;
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we obtain all required governmental and regulatory consents and
approvals; and
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all other conditions to the merger discussed in this document
and the merger agreement are either satisfied or waived.
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The merger will become effective when a certificate of merger is
filed with the Secretary of State of the State of Delaware.
However, we may agree to a later time for completion of the
merger and specify that time in the certificate of merger in
accordance with Delaware law. In the merger agreement, we have
agreed to cause the completion of the merger to occur no later
than the fifth business day following the satisfaction or waiver
of the last of the conditions specified in the merger agreement,
or on another mutually agreed date. If these conditions are
satisfied or waived during the two weeks immediately prior to
the end of a fiscal quarter of Bank of America, then Bank of
America may postpone the closing until the first full week after
the end of that quarter. It currently is anticipated that the
effective time of the merger will occur on or after
December 31, 2008, but we cannot guarantee when or if the
merger will be completed.
Conversion
of Shares; Exchange of Certificates; Book-Entry Shares
The conversion of Merrill Lynch common stock into the right to
receive the merger consideration will occur automatically upon
completion of the merger. As soon as reasonably practicable
after completion of the merger, the exchange agent will exchange
certificates representing shares of Merrill Lynch common stock
for merger consideration to be received pursuant to the terms of
the merger agreement. Prior to the completion of the merger,
Bank of America will select a bank or trust company subsidiary
of Bank of America or another bank or trust company reasonably
acceptable to Merrill Lynch to be the exchange agent, who will
exchange certificates representing shares of Merrill Lynch
common stock for the merger consideration and perform other
duties as explained in the merger agreement.
Shares of Merrill Lynch common stock held in the Direct
Registration System (DRS) are being automatically converted into
whole shares of Bank of America common stock in DRS form. An
account statement will be mailed to you confirming this
automatic conversion.
Shares of Merrill Lynch common stock held in the book-entry form
will be automatically converted into whole shares of Bank of
America common stock in book-entry form. An account statement
will be mailed to you confirming this automatic conversion.
Letter
of Transmittal
As soon as reasonably practicable after completion of the
merger, the exchange agent will mail a letter of transmittal to
each holder of a Merrill Lynch common stock certificate at the
effective time of the merger. This mailing will contain
instructions on how to surrender Merrill Lynch common stock
certificates in
74
exchange for statements indicating book-entry ownership of Bank
of America common stock and a check in the amount of cash to be
paid instead of fractional shares. If a holder of a Merrill
Lynch common stock certificate makes a special request, however,
Bank of America will issue to the requesting holder a Bank of
America stock certificate in lieu of book-entry shares. When you
deliver your Merrill Lynch stock certificates to the exchange
agent along with a properly executed letter of transmittal and
any other required documents, your Merrill Lynch stock
certificates will be cancelled and you will receive statements
indicating book-entry ownership of Bank of America common stock,
or, if requested, stock certificates representing the number of
full shares of Bank of America common stock to which you are
entitled under the merger agreement. You also will receive a
cash payment for any fractional shares of Bank of America common
stock that would have been otherwise issuable to you as a result
of the merger.
Holders of Merrill Lynch common stock should not submit their
Merrill Lynch stock certificates for exchange until they receive
the transmittal instructions and a form of letter of transmittal
from the exchange agent.
If a certificate for Merrill Lynch common stock has been lost,
stolen or destroyed, the exchange agent will issue the
consideration properly payable under the merger agreement upon
receipt of appropriate evidence as to that loss, theft or
destruction and appropriate and customary indemnification.
After completion of the merger, there will be no further
transfers on the stock transfer books of Merrill Lynch, except
as required to settle trades executed prior to completion of the
merger.
Withholding
The exchange agent will be entitled to deduct and withhold from
the cash in lieu of fractional shares payable to any Merrill
Lynch stockholder the amounts it is required to deduct and
withhold under any federal, state, local or foreign tax law. If
the exchange agent withholds any amounts, these amounts will be
treated for all purposes of the merger as having been paid to
the stockholders from whom they were withheld.
Dividends
and Distributions
Until Merrill Lynch common stock certificates are surrendered
for exchange, any dividends or other distributions declared
after the completion of the merger with respect to Bank of
America common stock into which shares of Merrill Lynch common
stock may have been converted will accrue, without interest, but
will not be paid. Bank of America will pay to former Merrill
Lynch stockholders any unpaid dividends or other distributions,
without interest, only after they have duly surrendered their
Merrill Lynch stock certificates.
Prior to the effective time of the merger, Merrill Lynch and its
subsidiaries may not make, declare or pay any dividend or
distribution on its capital stock or repurchase any shares of
its capital stock, other than:
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regular quarterly cash dividends on Merrill Lynch common stock
at a rate not to exceed $0.35 per share of Merrill Lynch common
stock with record dates and payment dates consistent with the
prior year;
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dividends on Merrill Lynchs preferred stock;
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dividends paid by any subsidiary of Merrill Lynch to Merrill
Lynch or to any of its wholly owned subsidiaries; or
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the acceptance of shares of Merrill Lynch common stock in
payment of the exercise of a stock option or stock appreciation
rights or the vesting of restricted shares of (or settlement of
other equity-based awards in respect of) Merrill Lynch common
stock granted under a Merrill Lynch stock plan, financial
advisor capital accumulation award plan or deferred equity unit
plan, in each case in accordance with past practice and the
terms of the applicable plan.
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Merrill Lynch and Bank of America have agreed to coordinate
declaration of dividends so that holders of Merrill Lynch common
stock will not receive two dividends, or fail to receive one
dividend, for any quarter with respect to their Merrill Lynch
common stock and any Bank of America common stock any holder
receives in the merger.
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Representations
and Warranties
The merger agreement contains customary representations and
warranties of Merrill Lynch and Bank of America relating to
their respective businesses. With the exception of certain
representations that must be true and correct in all material
respects (or, in the case of specific representations and
warranties regarding the capitalization of Merrill Lynch, true
and correct except to a de minimis extent), no representation or
warranty will be deemed untrue, inaccurate or incorrect as a
consequence of the existence or absence of any fact,
circumstance or event unless that fact, circumstance or event,
individually or when taken together with all other facts,
circumstances or events, has had or would reasonably be expected
to have a material adverse effect on the company making the
representation. In determining whether a material adverse effect
has occurred or would reasonably be expected to occur, the
parties will disregard any effects resulting from
(1) changes in generally accepted accounting principles or
regulatory accounting requirements applicable generally to
companies in the industries in which the relevant party and its
subsidiaries operate (except to the extent that the effects of
such a change are disproportionately adverse to such party as
compared to other companies in such industries),
(2) changes in laws, rules or regulations or the
interpretation of laws, rules or regulations by governmental
authorities of general applicability to companies in the
industries in which the relevant party and its subsidiaries
operate (except to the extent that the effects of such a change
are disproportionately adverse to such party as compared to
other companies in such industries), (3) actions or
omissions taken with the prior written consent of the other
party or expressly required by the merger agreement,
(4) changes in global, national or regional political
conditions (including acts of terrorism or war) or in general
business, economic or market conditions, including changes
generally in prevailing interest rates, currency exchange rates,
credit markets and price levels or trading volumes in the United
States or foreign securities markets, in each case, generally
affecting the industries in which the relevant party or its
subsidiaries operate and including changes to any previously
correctly applied asset marks resulting therefrom (except to the
extent that the effects of such a change are disproportionately
adverse to such party as compared to other companies in such
industries), (5) the execution of the merger agreement or
public disclosure of the merger or the transactions contemplated
by the merger agreement, including acts of competitors or losses
of employees to the extent resulting therefrom, (6) failure
to meet earning projections in and of itself, but not including
any underlying causes thereof, or (7) changes in the
trading price of either partys common stock in and of
itself, but not including any underlying causes thereof. The
representations and warranties in the merger agreement do not
survive the completion of the merger.
Each of Bank of America and Merrill Lynch has made
representations and warranties to the other regarding, among
other things:
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corporate matters, including due organization and qualification;
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capitalization;
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authority relative to execution and delivery of the merger
agreement and the stock option agreement and the absence of
conflicts with, or violations of, organizational documents or
other obligations as a result of the merger;
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required governmental filings and consents;
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the timely filing of reports with governmental entities, and the
absence of investigations and enforcement actions by regulatory
agencies;
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financial statements, internal controls and accounting or
auditing practices;
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brokers fees payable in connection with the merger;
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the absence of material adverse changes;
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conduct of business in the ordinary course of business since
June 27, 2008;
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legal proceedings;
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taxes and tax returns;
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material contracts;
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risk management instruments and derivatives;
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compliance with applicable laws;
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tax treatment of the merger;
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the receipt of financial advisors opinions;
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intellectual property; and
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the accuracy of information supplied for inclusion in this
document and other similar documents.
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In addition, Merrill Lynch has made other representations and
warranties about itself to Bank of America as to:
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employee matters, including employee benefit plans;
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investment securities and commodities;
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owned and leased real property;
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environmental liabilities;
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broker dealer, fund and investment advisory matters;
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securitizations;
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the inapplicability of state takeover laws; and
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interested party transactions.
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The representations and warranties described above and included
in the merger agreement were made by each of Bank of America and
Merrill Lynch to the other. These representations and warranties
were made as of specific dates, may be subject to important
qualifications and limitations agreed to by Bank of America and
Merrill Lynch in connection with negotiating the terms of the
merger agreement, and may have been included in the merger
agreement for the purpose of allocating risk between Bank of
America and Merrill Lynch rather than to establish matters as
facts. The merger agreement is described in, and included as an
appendix to, this document only to provide you with information
regarding its terms and conditions, and not to provide any other
factual information regarding Merrill Lynch, Bank of America or
their respective businesses. Accordingly, the representations
and warranties and other provisions of the merger agreement
should not be read alone, but instead should be read only in
conjunction with the information provided elsewhere in this
document and in the documents incorporated by reference into
this document. See Where You Can Find More
Information on page [ ].
Covenants
and Agreements
Each of Merrill Lynch and Bank of America has undertaken
customary covenants that place restrictions on it and its
subsidiaries until completion of the merger. In general, each of
Bank of America and Merrill Lynch agreed to (1) conduct its
business in the ordinary course in all material respects,
(2) use reasonable best efforts to maintain and preserve
intact its business organization and advantageous business
relationships, including retaining the services of key officers
and employees, and (3) take no action that would reasonably
be expected to adversely affect or materially delay its ability
to obtain any necessary regulatory and governmental approvals,
perform its covenants or complete the merger. Merrill Lynch
further agreed that, with certain exceptions or except with Bank
of Americas prior written consent (which consent will not
be unreasonably withheld or delayed with respect to certain of
the actions described below), Merrill Lynch will not, and will
not permit any of its subsidiaries to, among other things,
undertake the following extraordinary actions:
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incur indebtedness or in any way assume the indebtedness of
another person, except in the ordinary course of business
consistent with past practice;
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adjust, split, combine or reclassify any of its capital stock;
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make, declare or pay any dividends or other distributions on any
shares of its capital stock, or redeem, purchase or otherwise
acquire any shares of its capital stock, except as set forth
above in Conversion of Shares; Exchange of
Certificates Dividends and Distributions (Bank
of America has agreed to allow Merrill Lynch to repurchase
shares of Merrill Lynch common stock in connection with the
issuance of shares under Merrill Lynchs stock incentive,
financial advisor capital accumulation award plan, and deferred
equity unit plans);
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issue or grant shares, stock options, stock appreciation rights,
restricted shares, restricted stock units, deferred equity
units, awards based on the value of Merrill Lynchs capital
stock or other equity-based awards outside the parameters set
forth in the merger agreement;
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except as required under applicable law or the terms of any
Merrill Lynch benefit plan, (i) increase the compensation
or benefits of any current or former directors, officers or
employees; (ii) pay any current or former directors,
officers or employees any amounts not required by existing plans
or agreements; (iii) become a party to, establish, adjust,
or terminate any employee benefit or compensation plan or
agreement; (iv) accelerate the vesting of any stock-based
compensation or other long-term incentive compensation under any
of Merrill Lynchs employee benefit plans; (v) hire
employees in the position of vice president or above or
terminate (other than for cause) the employment of employees in
the position of vice president or above; or (vi) take any
action which could reasonably be expected to give rise to a
good reason claim;
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other than in the ordinary course of business, consistent with
past practice or pursuant to contracts in force as of
September 15, 2008, sell, transfer, pledge, lease, license,
mortgage, encumber or otherwise dispose of any material assets
or properties or cancel, release or assign any material
indebtedness;
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enter into any new line of business or change in any material
respect its lending, investment, underwriting, risk and asset
liability management and other banking, operating,
securitization and servicing policies other than as required by
applicable law, regulation or policies imposed by any
governmental entity;
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transfer ownership or grant rights to its material intellectual
property, except for certain grants of licenses in the ordinary
course of business consistent with past practice;
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make any material investment either by purchase of securities,
capital contributions, property transfers or purchase of
property or assets other than in the ordinary course of business
consistent with past practice;
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take any action or knowingly fail to take any action, which
action or failure to act is reasonably likely to prevent the
merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code;
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amend its charter and bylaws or otherwise take any action to
exempt another person from any applicable takeover law or
defensive charter or terminate, amend or waive any provisions of
any confidentiality or standstill agreements in place with any
third parties;
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amend or knowingly violate certain material contracts or enter
into any obligation that would impose material restrictions on
the business of Merrill Lynch, its subsidiaries or its
affiliates;
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commence or settle any material claim, action or proceeding;
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take or fail to take any action that is intended, or may
reasonably be expected to, result in any of the conditions to
the merger to fail to be satisfied;
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implement or adopt any material change in its tax accounting or
financial accounting principles, practices or methods, except as
required by applicable law, generally accepted accounting
principles or regulatory guidelines;
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file or amend any material tax return, make or change any
material tax election or settle or compromise any material tax
liability, in each case, other than in the ordinary course of
business or as required by law; or
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agree to take or adopt any resolutions by the board of directors
in support of any of the actions prohibited by the preceding
bullets.
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Bank of America agrees that, except as permitted by the merger
agreement or with Merrill Lynchs prior written consent,
Bank of America will not, among other things, undertake the
following extraordinary actions:
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amend any governing documents in a manner that would adversely
affect Merrill Lynch or its stockholders or the transactions
contemplated by the merger agreement;
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take any action or knowingly fail to take any action reasonably
likely to prevent the merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code;
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take any action or willfully fail to take any action that is
intended, or may be reasonably expected, to result in any of the
conditions to the merger failing to be satisfied;
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take any action that would reasonably be expected to prevent,
materially impede or materially delay completion of the
merger; or
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agree to take or adopt any resolutions by the board of directors
in support of any of the actions prohibited by the preceding
bullets.
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The merger agreement also contains covenants relating to the
preparation of this document and the holding of the special
meetings of Merrill Lynch and Bank of America stockholders,
access to information of the other company and public
announcements with respect to the transactions contemplated by
the merger agreement. Merrill Lynch has agreed to consult with
Bank of America regarding certain tax planning matters. Bank of
America has also agreed to cause the shares of Bank of America
common stock issued in the merger to be approved for listing on
the NYSE.
In addition, the merger agreement contains a covenant that
Merrill Lynch shall take all action necessary to redeem the
exchangeable shares which were issued by Merrill Lynch Canada in
connection with the merger with Midland Walwyn Inc., prior to
completion of the merger.
Reasonable
Best Efforts of Merrill Lynch and Bank of America to Obtain the
Required Stockholder Vote
Merrill Lynch has agreed to use its reasonable best efforts to
hold a meeting of its stockholders as soon as is reasonably
practicable for the purpose of Merrill Lynch stockholders voting
on the adoption of the merger agreement. Merrill Lynch will use
its reasonable best efforts to obtain such stockholder approval.
The merger agreement requires Merrill Lynch to submit the merger
agreement to a stockholder vote even if its board of directors
no longer recommends adoption of the merger agreement. The board
of directors of Merrill Lynch has unanimously approved the
merger and adopted resolutions directing that the merger be
submitted to the Merrill Lynch stockholders for their
consideration.
Bank of America has also agreed to use its reasonable best
efforts to hold a meeting of its stockholders as soon as is
reasonably practicable and to use its reasonable best efforts to
obtain stockholder approval of the issuance of shares of Bank of
America common stock to Merrill Lynch stockholders in the
merger. The merger agreement requires Bank of America to submit
the proposal to issue shares of common stock to a stockholder
vote even if its board of directors no longer recommends such
proposal. The board of directors of Bank of America has
unanimously approved the merger and has adopted resolutions
directing that the issuance of the common stock be submitted to
Bank of America stockholders for their consideration.
79
Agreement
Not to Solicit Other Offers
Merrill Lynch also has agreed that it, its subsidiaries and
their officers, directors, employees, agents and representatives
will not, directly or indirectly:
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initiate, solicit, encourage or facilitate (including by way of
furnishing information) any inquiries or proposals for any
Alternative Proposal (as defined below); or
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participate in any discussions or negotiations, or enter into
any agreement, regarding any Alternative Transaction
(as defined below).
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However, prior to the special meeting of Merrill Lynch
stockholders, Merrill Lynch may consider and participate in
discussions and negotiations with respect to a bona fide
Alternative Proposal, and furnish information in connection
therewith, if it has first entered into a confidentiality
agreement with a party proposing the Alternative Proposal on
terms substantially similar to, and no less favorable to Merrill
Lynch than, Merrill Lynchs confidentiality agreement with
Bank of America and the Merrill Lynch board of directors
determines in good faith (after consultation with outside legal
counsel) that failure to take these actions would cause the
board to violate its fiduciary duties to Merrill Lynch
stockholders under applicable law.
Merrill Lynch has agreed in the merger agreement:
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to cease any existing discussions or negotiations with respect
to any Alternative Proposal conducted prior to execution of the
merger agreement, and to use reasonable best efforts to cause
all persons other than Bank of America who have been furnished
with confidential information in connection with an Alternative
Proposal within the 12 months prior to the date of the
merger agreement to return or destroy such information;
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to notify Bank of America promptly (but no later than
24 hours) after it receives any Alternative Proposal, or
any material change to any Alternative Proposal, or any request
for nonpublic information relating to Merrill Lynch or any of
its subsidiaries or access to Merrill Lynchs properties,
books or records, and to provide Bank of America with relevant
information regarding the Alternative Proposal or such
request; and
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to use its best efforts to keep Bank of America fully informed,
on a current basis, of any material changes in the status and
any material changes in the terms of any such Alternative
Proposal.
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As used in the merger agreement, an Alternative
Proposal means any inquiry or proposal, including any
indication of an intention to make a proposal, regarding any
merger, share exchange, consolidation, sale of assets, sale of
shares of capital stock (including by way of a tender offer) or
similar transactions involving Merrill Lynch or any of its
subsidiaries that, if completed, would constitute an Alternative
Transaction.
As used in the merger agreement, Alternative
Transaction means any of the following:
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a transaction in which any person or group (other than Bank of
America or its affiliates), directly or indirectly, acquires or
would acquire more than 15% of the outstanding shares of Merrill
Lynch or any of its subsidiaries or outstanding voting power or
of any new series or new class of Merrill Lynch preferred stock
that would be entitled to a class or series vote with respect to
a merger with Merrill Lynch or any of its subsidiaries, whether
from Merrill Lynch or pursuant to a tender offer or exchange
offer or otherwise;
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a merger, share exchange, consolidation or other business
combination involving Merrill Lynch or any of its subsidiaries
(other than the merger being described here);
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any transaction in which any person or group (other than Bank of
America or its affiliates) acquires or would acquire control of
assets (including, for this purpose, the outstanding equity
securities of subsidiaries of Merrill Lynch and securities of
the entity surviving any merger or business combination
including any of Merrill Lynchs subsidiaries) of Merrill
Lynch or any of its subsidiaries representing more than 15% of
the fair market value of all the assets, net revenues or net
income of Merrill Lynch and its subsidiaries, taken as a whole,
immediately prior to such transaction; or
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any other consolidation, business combination, recapitalization
or similar transaction involving Merrill Lynch or any of its
subsidiaries, other than the transactions contemplated by the
merger agreement.
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The Merrill Lynch board of directors has unanimously adopted a
resolution recommending that the Merrill Lynch stockholders
adopt the merger agreement. Under the merger agreement, except
as provided in the paragraph below, the Merrill Lynch board of
directors may not withdraw, modify or qualify, or propose
publicly to withdraw, modify or qualify, its recommendation,
take any public action or make any public statement in
connection with the meeting of Merrill Lynch stockholders that
is substantively inconsistent with its recommendation, or
approve or recommend, or publicly propose to approve or
recommend, or fail to recommend against, any Alternative
Proposal. Any of these actions is referred to as a Change
of Recommendation.
The Merrill Lynch board of directors may make a Change of
Recommendation if the board receives an unsolicited Alternative
Proposal that constitutes a Superior Proposal (as defined below)
and that Superior Proposal has not been withdrawn, the board
determines in good faith (after consultation with outside legal
counsel) that, in light of such Superior Proposal, the failure
to effect such Change of Recommendation would cause it to
violate its fiduciary duties to Merrill Lynch stockholders under
applicable law and Merrill Lynch complies with certain notice
and negotiation requirements.
As used in the merger agreement, Superior Proposal
means any third party proposal to acquire all of Merrill
Lynchs equity or assets, net revenues or net income of
Merrill Lynch and its subsidiaries, that Merrill Lynchs
board of directors determines in reasonable good faith judgment,
after consultation with its financial advisor and outside
counsel, would be more favorable, from a financial point of
view, to the Merrill Lynch stockholders than the transactions
contemplated by the merger agreement and is reasonably capable
of being completed.
Employee
Matters
Bank of America has agreed, from completion of the merger
through December 31, 2009, to maintain employee benefit
plans and compensation opportunities for the benefit of
individuals who are, on the closing date of the merger, actively
employed by Merrill Lynch and its subsidiaries that are
substantially comparable, in the aggregate, to those made
available to those employees immediately prior to completion of
the merger.
In addition, Bank of America has agreed, to the extent any
Merrill Lynch employee becomes eligible to participate in Bank
of America benefit plans following the merger:
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to recognize each employees service with Merrill Lynch
prior to completion of the merger for purposes of eligibility,
participation, vesting and, except under defined benefit pension
plans, benefit accrual, in each case under the Bank of America
plans to the same extent such service was recognized under
comparable Merrill Lynch plans prior to completion of the
merger; and
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to use reasonable best efforts to waive any exclusion for
pre-existing conditions or eligibility waiting periods under any
Bank of America health, dental, vision or other welfare plans,
to the extent such limitation would have been waived or
satisfied under a corresponding Merrill Lynch plan in which such
employee participated immediately prior to completion of the
merger, and recognize any health, dental or vision expenses
incurred in the year in which the merger closes (or, if later,
the year in which such employee is first eligible to
participate) for purposes of applicable deductible and annual
out-of-pocket expense requirements under any health, dental or
vision plan of Bank of America.
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Indemnification
and Insurance
The merger agreement requires the current rights of the
directors and officers of Merrill Lynch and its subsidiaries to
indemnification under these entities organizational
documents and other disclosed agreements to continue in effect
for six years after completion of the merger. The merger
agreement also provides that, upon completion of the merger,
Bank of America will cause the surviving corporation to
indemnify, defend and hold harmless, and provide advancement of
expenses to, all past and present officers and directors of
81
Merrill Lynch and its subsidiaries against all losses or
liabilities incurred in their capacities as such to the fullest
extent permitted by applicable laws.
The merger agreement requires Bank of America to maintain for a
period of six years after completion of the merger Merrill
Lynchs current directors and officers
liability insurance policy, or policies of at least the same
coverage and amount and containing terms and conditions that are
not less advantageous than the current policy, with respect to
acts or omissions occurring prior to completion of the merger,
except that Bank of America is not required to incur an annual
premium expense greater than 250% of Merrill Lynchs
current annual directors and officers liability
insurance premium. If Bank of America is unable to maintain such
a policy because the annual premium expense is greater than 250%
of Merrill Lynchs current annual directors and
officers liability insurance premium, Bank of America is
obligated to obtain as much comparable insurance as is available
for the amount that is 250% of Merrill Lynchs current
premium.
Conditions
to Complete the Merger
Our respective obligations to complete the merger are subject to
the fulfillment or waiver of certain conditions, including:
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the adoption of the merger agreement by Merrill Lynch
stockholders;
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the approval of the issuance of shares of common stock of Bank
of America by Bank of America stockholders;
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the approval of the listing of the Bank of America common stock
to be issued in the merger on the NYSE, subject to official
notice of issuance;
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the effectiveness of the registration statement of which this
document is a part with respect to the Bank of America common
stock and preferred stock to be issued in connection with the
merger under the Securities Act and the absence of any stop
order or proceedings initiated or threatened by the SEC for that
purpose; and
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the absence of any order, decree or injunction by any court or
other governmental entity or other law that prohibits or makes
illegal completion of the transactions contemplated by the
merger agreement.
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Each of Bank of Americas and Merrill Lynchs
obligations to complete the merger is also separately subject to
the satisfaction or waiver of a number of conditions including:
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the receipt by each of Bank of America and Merrill Lynch of a
legal opinion with respect to certain United States federal
income tax consequences of the merger;
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the receipt and effectiveness of all governmental and other
approvals, registrations and consents, and the expiration of all
related waiting periods required to complete the merger; and
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the truth and correctness of the representations and warranties
of the other party in the merger agreement, subject to the
materiality standard provided in the merger agreement, and the
performance by the other party in all material respects of its
obligations under the merger agreement and the receipt of
certificates from the other party to that effect.
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We cannot provide assurance as to when or if all of the
conditions to the merger can or will be satisfied or waived by
the appropriate party. As of the date of this document, we have
no reason to believe that any of these conditions will not be
satisfied.
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Termination
of the Merger Agreement
The merger agreement can be terminated at any time prior to
completion of the merger by mutual consent of Bank of America
and Merrill Lynch if authorized in a written instrument by each
of our boards of directors, or by either party in the following
circumstances:
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if any of the required regulatory approvals are denied or
completion of the merger has been enjoined, prohibited or made
illegal by a court or other governmental entity (and the denial
or prohibition is final and nonappealable);
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if the merger has not been completed by September 15, 2009,
unless the failure to complete the merger by that date is due to
the terminating partys failure to abide by the merger
agreement;
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if there is a breach by the other party that would cause the
failure of the closing conditions described above, unless the
breach is capable of being, and is, cured within 30 days
following written notice of the breach to the party committing
the breach;
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if the other party has committed a breach in any material
respect of its obligation to use reasonable best efforts to
obtain stockholder approval;
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if the Merrill Lynch stockholders fail to adopt the merger
agreement at the special meeting convened for purposes of
adopting the merger agreement; or
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if the Bank of America stockholders fail to approve the issuance
of shares of Bank of America common stock to Merrill Lynch
stockholders at the special meeting convened for the purpose of
approving the issuance of shares of Bank of America common stock
in the merger.
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In addition, Bank of America may terminate the merger agreement
if:
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Merrill Lynchs board of directors (1) fails to
recommend the adoption of the merger agreement by the Merrill
Lynch stockholders, (2) makes any Change of Recommendation,
(3) approves or recommends any Alternative Proposal or
publicly proposes to do so, or (4) fails to recommend that
the Merrill Lynch stockholders reject any tender offer or
exchange offer that constitutes an Alternative Transaction
within the statutorily provided time for making such a
recommendation; or
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Merrill Lynch materially breaches its agreement to use
reasonable best efforts to obtain stockholder approval.
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Effect of
Termination
If the merger agreement is terminated, it will become void and
have no effect, and there will be no liability on the part of
Bank of America, Merrill Lynch or any of their respective
subsidiaries, except that (1) both Bank of America and
Merrill Lynch will remain liable for any knowing breach of the
merger agreement and (2) designated provisions of the
merger agreement will survive the termination, including, but
not limited to, the confidential treatment of information and
publicity restrictions. In the event of any termination of the
merger agreement, the stock option agreement will remain in full
force and effect in accordance with its terms. Please see the
section entitled Stock Option Agreement starting on
page [ ] for a
description of the stock option agreement.
Expenses
and Fees
In general, each of Bank of America and Merrill Lynch will be
responsible for all expenses incurred by it in connection with
the negotiation and completion of the transactions contemplated
by the merger agreement, whether or not the merger is completed.
However, the costs and expenses of printing and mailing this
document, and all filing and other fees paid to the SEC in
connection with the merger, will be borne equally by Merrill
Lynch and Bank of America.
83
Amendment,
Waiver and Extension of the Merger Agreement
Subject to applicable law, the parties may amend the merger
agreement by action taken or authorized by their respective
boards of directors at any time before or after approval of
matters presented in connection with the merger by the
stockholders of each of the parties. However, after any adoption
of the merger agreement by the Merrill Lynch stockholders or the
approval of the issuance of shares of Bank of America common
stock by the Bank of America stockholders, there may not be,
without further approval of those stockholders, any amendment of
the merger agreement that requires further approval under
applicable law.
At any time prior to the completion of the merger, each of us,
by action taken or authorized by our respective boards of
directors, to the extent legally allowed, may:
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extend the time for the performance of any of the obligations or
other acts of the other party;
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waive any inaccuracies in the representations and warranties of
the other party; or
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waive compliance by the other party with any of the other
agreements or conditions contained in the merger agreement.
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84
STOCK
OPTION AGREEMENT
The following description of the stock option agreement is
subject to, and qualified in its entirety by reference to, the
stock option agreement, which is attached to this document as
Appendix B and is incorporated by reference in this
document..
On September 15, 2008, in connection with the merger
agreement, Merrill Lynch granted to Bank of America an
irrevocable option to purchase, under certain circumstances, up
to 19.9% of its outstanding common shares at a price, subject to
certain adjustments, at $17.05 per share. The holder of the
option may exercise the option, in whole or part, and from time
to time if, but only if, both an Initial Triggering Event (as
defined below) and a Subsequent Trigger Event (as defined below)
occur prior to an Exercise Termination Event (as defined below).
In no event will Bank of Americas total profit exceed
$2 billion pursuant to the stock option agreement.
An Exercise Termination Event means any of the
following:
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the effective time of the merger;
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termination of the merger agreement in accordance with its terms
if such termination occurs prior to the occurrence of an Initial
Triggering Event, except a termination by Bank of America as a
result of:
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a breach (other than a non-volitional breach) by Merrill Lynch
that would cause the failure of the closing conditions, unless
the breach is capable of being, and is, cured within
30 days of notice to Merrill Lynch of the breach; or
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Merrill Lynchs board of directors (1) failing to
recommend the adoption of the merger agreement by Merrill Lynch
stockholders, (2) making any change of its recommendation
regarding adoption of the merger agreement, (3) approving
or recommending an Alternative Proposal or publicly proposing to
do so, or (4) failing to recommend that the Merrill Lynch
stockholders reject any tender offer or exchange offer that
constitutes an Alternative Transaction within the statutorily
provided time for making such a recommendation; or
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Merrill Lynch materially breaches its agreement to use
reasonable best efforts to obtain stockholder approval; or
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the passage of 18 months after the termination of the
merger agreement if such termination occurs after the occurrence
of an Initial Triggering Event or is a termination by Bank of
America as a result of:
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a breach (other than a non-volitional breach) by Merrill Lynch
that would cause the failure of the closing conditions, unless
the breach is capable of being, and is, cured within
30 days of notice to Merrill Lynch of the breach; or
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Merrill Lynchs board of directors (1) failing to
recommend the adoption of the merger agreement by Merrill Lynch
stockholders, (2) making any change of its recommendation
regarding adoption of the merger agreement, (3) approving
or recommending an Alternative Proposal or publicly proposing to
do so, or (4) failing to recommend that the Merrill Lynch
stockholders reject any tender offer or exchange offer that
constitutes an Alternative Transaction within the statutorily
provided time for making such a recommendation; or
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Merrill Lynch materially breaches its agreement to use
reasonable best efforts to obtain stockholder approval.
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Initial Triggering Event means any of the following:
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Merrill Lynch or any of its subsidiaries, without the prior
written consent of Bank of America, enters into an agreement
with a third party to engage in (1) a merger,
consolidation, share exchange or any similar transaction,
(2) a purchase, lease or other acquisition of all or a
substantial portion of the assets or deposits of Merrill Lynch
or any of its significant subsidiaries, (3) a purchase or
other acquisition (including by way of merger, consolidation,
share exchange or otherwise) of securities representing 10% or
more of the voting power of Merrill Lynch or (4) any
substantially similar transaction; or
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Merrill Lynchs board of directors (1) fails to
recommend the adoption of the merger agreement by Merrill Lynch
stockholders, (2) makes any change of its recommendation
regarding adoption of the merger agreement, (3) approves or
recommends an Alternative Proposal or publicly proposes to do
so, or (4) fails to recommend that the Merrill Lynch
stockholders reject any tender offer or exchange offer that
constitutes an Alternative Transaction within the statutorily
provided time for making such a recommendation;
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Merrill Lynch materially breaches its agreement to use
reasonable best efforts to obtain stockholder approval; or
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a third party acquires beneficial ownership or the right to
acquire beneficial ownership of 10% or more the outstanding
shares of common stock of Merrill Lynch; or
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a third party makes a bona fide acquisition proposal to Merrill
Lynch or its stockholders that is or becomes public; or
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following any bona fide inquiry or proposal from a third party
to engage in an acquisition transaction with Merrill Lynch,
Merrill Lynch breaches any covenant or obligation contained in
the merger agreement and such breach entitles Bank of America to
terminate the merger agreement and has not been cured prior to
the date on which the holder of the option sends written notice
of its intent to exercise the option; or
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any third party (other than in connection with a transaction to
which Bank of America has given its prior written consent) files
an application or notice with the Federal Reserve Board, or
other federal or state bank regulatory authority, and such
application or notice is accepted for processing, for approval
to engage in an acquisition transaction.
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Subsequent Triggering Event means either of the
following:
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the acquisition by any person of beneficial ownership of 20% or
more of the then outstanding shares of common stock of Merrill
Lynch; or
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Merrill Lynch or any of its subsidiaries, without the prior
written consent of Bank of America, enters into an agreement
with a third party to engage in (1) a merger,
consolidation, share exchange or any similar transaction,
(2) a purchase, lease or other acquisition (including by
way of merger, consolidation, share exchange or otherwise) of
all or a substantial portion of the assets or deposits of
Merrill Lynch or any of its significant subsidiaries, (3) a
purchase or other acquisition of securities representing 20% or
more of the voting power of Merrill Lynch or (4) any
substantially similar transaction.
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Furthermore, the holder of the option may require that Merrill
Lynch repurchase the option or any shares of common stock issued
upon exercise of the option if either of the following events
occur prior to an Exercise Termination Event:
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Merrill Lynch or any of its subsidiaries, without the prior
consent of Bank of America, consummates a transaction with a
third party regarding a (1) a merger, consolidation, share
exchange or any similar transaction, (2) a purchase, lease
or other acquisition of all or a substantial portion of the
assets or deposits of Merrill Lynch or any of its significant
subsidiaries, (3) a purchase or other acquisition
(including by way of merger, consolidation or exchange or
otherwise) of securities representing 50% or more of the voting
power of Merrill Lynch or (4) any substantially similar
transaction; or
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a third party acquires beneficial ownership of 50% or more of
then outstanding shares of common stock of Merrill Lynch.
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86
DESCRIPTION
OF NEW BANK OF AMERICA PREFERRED STOCK
New Bank
of America Preferred Stock to be Issued in the Merger
Bank of America is authorized to issue 100,000,000 shares
of undesignated preferred stock, $0.01 par value per share.
All shares of currently outstanding preferred stock constitute
one and the same class that rank junior to all of Bank of
Americas indebtedness and have equal rank and priority
over common stockholders as to dividends and in the event of
liquidation. As of
[ ],
2008, [ ] shares of Bank of
America preferred stock were issued and outstanding and had been
issued in thirteen series. Bank of America will issue eight new
series of preferred stock to holders of Merrill Lynch preferred
stock in connection with the merger.
The following summary of the terms and provisions of the New
Bank of America Preferred Stock is not complete and is qualified
in its entirety by reference to the pertinent sections of the
certificates of designation of each series of New Bank of
America Preferred Stock.
Ranking. New Bank of America Preferred Stock
will rank senior to Bank of Americas common stock and
equally with Bank of Americas existing and future series
of preferred stock with respect to payment of distributions or
amounts upon Bank of Americas liquidation, dissolution or
winding up. New Bank of America Preferred Stock will rank
equally with Bank of Americas authorized but unissued
shares of preferred stock.
Distributions. Holders of New Bank of America
Preferred Stock will be entitled to receive, if, when and as
authorized and declared by the Bank of America board of
directors (or a duly authorized committee thereof), out of funds
legally available for the payment of distributions,
non-cumulative cash distributions, payable quarterly, at
(A) a fixed rate of, (i) with respect to the Bank of
America Preferred Stock Series 3, 6.375% of the $30,000
liquidation preference per annum (equivalent to $1,912.50 per
annum per share or $ $1.594 per annum per depositary share),
(ii) with respect to the Bank of America Preferred Stock
Series 6, 6.70% of the $1,000 liquidation preference per
annum (equivalent to $67.00 per annum per share or $1.675 per
annum per depositary share), (iii) with respect to the Bank
of America Preferred Stock Series 7, 6.25% of the $1,000
liquidation preference per annum (equivalent to $62.50 per annum
per share or $1.5625 per annum per depositary share) and
(iv) with respect to the Bank of America Preferred Stock
Series 8, 8.625% of the $30,000 liquidation preference per
annum (equivalent to $2,587.50 per annum per share or $ $2.156
per annum per depositary share) and (B) a floating rate
based on, (i) with respect to the Bank of America Preferred
Stock Series 1,
3-month
London Interbank Offering Rate, or LIBOR, plus 0.75% (subject to
a 3.00% minimum rate per annum) of the liquidation preference
per share of $30,000, (ii) with respect to the Bank of
America Preferred Stock Series 2,
3-month
LIBOR plus 0.65% (subject to a 3.00% minimum rate per annum) of
the liquidation preference per share of $30,000, (iii) with
respect to the Bank of America Preferred Stock Series 4,
3-month
LIBOR plus 0.75% (subject to a 4.00% minimum rate per annum) of
the liquidation preference per share of $30,000 and
(iv) with respect to the Bank of America Preferred Stock
Series 5,
3-month
LIBOR plus 0.50% (subject to a 4.00% minimum rate per annum) of
the liquidation preference per share of $30,000.
Distributions are non-cumulative. If the Bank
of America board of directors does not authorize or declare a
dividend for a dividend period, then the holders of a series of
New Bank of America Preferred Stock will have no right to
receive a dividend related to that dividend period, and Bank of
America will have no obligation to pay a dividend for the
related dividend period or to pay any interest, whether or not
dividends on such series of New Bank of America Preferred Stock
are authorized or declared for any prior or future dividend
period.
If full dividends on a series of New Bank of America Preferred
Stock have not been declared and paid with respect to any
dividend period, or declared and a sum sufficient for the
payment for a dividend has not been set apart with respect to
any dividend period, the following restrictions will be
applicable:
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for the next subsequent dividend period, no dividend or
distribution, other than the pro rata payment described in the
paragraph following this sentence, may be declared, set aside or
paid on any preferred stock ranking on parity with such series
of New Bank of America Preferred Stock as to dividends or
amounts upon liquidation, dissolution or winding up of the
affairs of Bank of America, or Parity Shares, or on any common
stock or other capital shares that rank junior to such series of
New Bank of
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America Preferred Stock as to dividends or amounts upon
liquidation, dissolution or winding up of the affairs of Bank of
America, or Junior Shares; and
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unless dividends on all outstanding New Bank of America
Preferred Stock of such series have been paid in full for at
least four consecutive dividend periods, no junior shares or
parity shares may be redeemed, purchased or otherwise acquired
for any consideration, and no monies may be paid to or made
available for a sinking fund for the redemption of any junior
shares or parity shares, except by conversion into or exchange
for other junior shares.
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Liquidation Rights. In the event of any
liquidation, dissolution or winding up of Bank of Americas
affairs, the holders of New Bank of America Preferred Stock will
be entitled to be paid out of Bank of Americas assets
legally available for distribution to Bank of Americas
stockholders liquidating distributions in the amount of, with
respect to the Bank of America Preferred Stock Series 1,
Bank of America Preferred Stock Series 2, Bank of America
Preferred Stock Series 3, Bank of America Preferred Stock
Series 4, Bank of America Preferred Stock Series 5 and
Bank of America Preferred Stock Series 8, $30,000 per share
(equivalent to $25 per depositary share), and with respect to
the Bank of America Preferred Stock Series 6 and Bank of
America Preferred Stock Series 7, $1,000 per share
(equivalent to $25 per depositary share), plus any dividends
declared on New Bank of America Preferred Stock and not yet
paid, before any distribution of assets is made to holders of
common stock or any other Junior Shares. After payment of the
full amount of the liquidating distributions to which they are
entitled, the holders of New Bank of America Preferred Stock
will have no right or claim to any of Bank of Americas
remaining assets.
Conversion Rights. New Bank of America
Preferred Stock is not convertible into or exchangeable for any
other series of stock or securities of, or any other interests
in, Bank of America.
Redemption at Bank of Americas
Option. Bank of America Preferred Stock
Series 1 is not redeemable prior to November 28, 2009,
Bank of America Preferred Stock Series 2 is not redeemable
prior to November 28, 2009, Bank of America Preferred Stock
Series 3 is not redeemable prior to November 28, 2010,
Bank of America Preferred Stock Series 4 is not redeemable
prior to November 28, 2010, Bank of America Preferred Stock
Series 5 is not redeemable prior to May 21, 2012, Bank
of America Preferred Stock Series 6 is not redeemable prior
to February 3, 2009, Bank of America Preferred Stock
Series 7 is not redeemable prior to March 18, 2010 and
Bank of America Preferred Stock Series 8 is not redeemable
prior to May 28, 2013. On or after the relevant redemption
date, at Bank of Americas option, Bank of America may
redeem a series of New Bank of America Preferred Stock and thus
the depositary shares, in whole or in part, at any time or from
time to time, at a redemption price equal to the liquidation
value per share ($1,000 per share (equivalent to $25 per
depositary share) or $30,000 per share (equivalent to $25 per
depositary share), as applicable), plus the amount of any
declared dividends. If notice of redemption of a series of New
Bank of America Preferred Stock has been given and if the funds
necessary for such redemption have been irrevocably deposited
with the paying agent identified in such notice, then from and
after the date such deposit has been made, such New Bank of
America Preferred Stock will no longer be deemed outstanding and
all rights of the holders of such shares will terminate, except
the right to receive the redemption price, without interest.
Unless full dividends on a series of New Bank of America
Preferred Stock in respect of the most recently completed
dividend period have been or contemporaneously are declared and
paid or full dividends have been declared and a sum sufficient
for the payment thereof has been set apart for payment in
respect of the most recently completed dividend period, no share
of New Bank of America Preferred Stock of such series will be
redeemed unless all outstanding shares of such series of New
Bank of America Preferred Stock are redeemed, and Bank of
America shall not purchase or otherwise acquire any New Bank of
America Preferred Stock of such series; provided, however, that
Bank of America may purchase or acquire New Bank of America
Preferred Stock pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding New Bank of America
Preferred Stock of such series.
Voting Rights. Registered owners of New Bank
of America Preferred Stock will not have any voting rights,
except as set forth below or as otherwise required by law.
88
The holders of Bank of America Preferred Stock Series 1,
Bank of America Preferred Stock Series 2, Bank of America
Preferred Stock Series 3, Bank of America Preferred Stock
Series 4, Bank of America Preferred Stock Series 5 and
Bank of America Preferred Stock Series 8, shall be entitled
to vote on all matters submitted to a vote of the holders of
Bank of America common stock, voting together with the holders
of common stock as one class. Each such share shall be entitled
to 150 votes. The holders of Bank of America Preferred Stock
Series 6 and Bank of America Preferred Stock Series 7,
shall be entitled to vote on all matters submitted to a vote of
the holders of Bank of America common stock, voting together
with the holders of common stock as one class. Each such share
shall be entitled to 5 votes.
In any matter in which New Bank of America Preferred Stock is
entitled to vote as a separate series (as described herein or as
may be required by law), including any action by written
consent, each share of Bank of America Preferred Stock
Series 1, Bank of America Preferred Stock Series 2,
Bank of America Preferred Stock Series 3, Bank of America
Preferred Stock Series 4, Bank of America Preferred Stock
Series 5 and Bank of America Preferred Stock Series 8
will be entitled to three votes.
In any matter in which New Bank of America Preferred Stock is
entitled to vote as a separate series (as described herein or as
may be required by law), including any action by written
consent, each share of Bank of America Preferred Stock
Series 6 and Bank of America Preferred Stock Series 7,
will be entitled to 40 votes, each of which may be directed
separately by the holder thereof (or by any proxy or proxies of
such holder). The holder of each of such series Stock may
designate up to 40 proxies, with each such proxy having the
right to vote a whole number of votes (totaling 40 votes per
share of New Bank of America Preferred Stock).
As more fully described in the section entitled
Description of New Bank of America Preferred
Stock Depositary Shares Representing New Bank of
America Preferred Stock, the Depositary, as holder of all
shares of a series of New Bank of America Preferred Stock, will
grant a proportionate number of proxies per depositary share to
the registered owner of each depositary share so that each
depositary share will be entitled to exercise its proportionate
voting rights.
If, at the time of any annual meeting of stockholders for the
election of directors, distributions on a series of New Bank of
America Preferred Stock have not been paid, or declared and set
aside for payment, for any six dividend periods (whether or not
consecutive), holders of such series of New Bank of America
Preferred Stock (voting separately as a class with holders of
any other shares, including shares of another series of New Bank
of America Preferred Stock, upon which like voting rights have
been conferred and are exercisable), will be entitled to vote at
such annual meeting for the election of two additional directors
(unless Bank of America already has two additional directors as
a result of prior failures to declare, pay or set aside
dividends on other series of preferred stock) to serve on Bank
of Americas board of directors until all dividends on such
series of New Bank of America Preferred Stock are paid in full
for at least four Bank of Americas consecutive dividend
periods.
Bank of America cannot take any of the following actions without
the affirmative vote of holders of at least two-thirds of the
outstanding shares of a series of New Bank of America Preferred
Stock:
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create any class or series of shares that ranks, as to dividends
or distribution of assets, senior to such series of New Bank of
America Preferred Stock; or
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alter or change the provisions of Bank of Americas
restated certificate of incorporation so as to adversely affect
the voting powers, preferences or special rights of the holders
of such series of New Bank of America Preferred Stock.
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Depositary
Shares Representing New Bank of America Preferred
Stock
Each outstanding share of Merrill Lynch preferred stock is
presently represented by Merrill Lynch Depositary Shares that
are listed on the NYSE and represent a one-fortieth interest in
a share of Merrill Lynch preferred stock. Upon completion of the
merger, Bank of America will assume the obligations of Merrill
Lynch under the relevant Deposit Agreement pursuant to which
Merrill Lynch preferred stock has been deposited. Bank of
America will instruct the Depositary to treat the shares of New
Bank of America Preferred Stock received by it in exchange for
shares of Merrill Lynch preferred stock as newly deposited
securities under the applicable
89
Deposit Agreement. In accordance with the terms of the relevant
Deposit Agreement, the Merrill Lynch Depositary Shares will
thereafter represent the shares of the relevant series of New
Bank of America Preferred Stock. We sometimes refer to these
depositary shares after completion of the merger as Bank of
America Depositary Shares. Such depositary shares will continue
to be listed on the NYSE upon completion of the merger under a
new name and will be traded under a new symbol.
Listing. Bank of America Depositary Shares
will be listed on the NYSE. New Bank of America Preferred Stock
will not be listed, and Bank of America does not expect that
there will be any trading market for New Bank of America
Preferred Stock except as represented by depositary shares.
Distributions. The Depositary will distribute
all cash dividends paid on New Bank of America Preferred Stock
to the record holders of Bank of America Depositary Shares. If a
distribution is other than in cash and it is feasible for the
Depositary to distribute the property it receives, the
Depositary, upon written instructions from Bank of America, will
distribute the property to the record holders of Bank of America
Depositary Shares. If such a distribution is not feasible and
Bank of America so directs, the Depositary will sell on behalf
of the holders of Bank of America Depositary Shares the property
and distribute the net proceeds from the sale to the holders
thereof.
Liquidation Preference. In the event of any
liquidation, dissolution or winding up of Bank of Americas
affairs, the holder of a Bank of America Depositary Share will
be entitled to one-fortieth or one-twelve hundredth, as
applicable, of the liquidation preference accorded each share of
New Bank of America Preferred Stock represented thereby.
Redemption. Whenever Bank of America redeems
any shares of New Bank of America Preferred Stock held by the
Depositary, the Depositary will redeem as of the same date, Bank
of America Depositary Shares representing the redeemed New Bank
of America Preferred Stock. A notice of the redemption furnished
by Bank of America will be mailed by the Depositary, postage
prepaid, not less than 30 nor more than 60 days prior to
the redemption date, addressed to the respective holders of
record of the depositary shares to be redeemed at their
respective addresses as they appear on the share transfer
records of the Depositary.
Voting. The respective Depositary, as the
holder of all shares of the relevant series of New Bank of
America Preferred Stock, will grant a proportionate number of
proxies per Bank of America Depositary Share to the record owner
of such Bank of America Depositary Share so that each can
exercise its proportionate voting rights. Promptly upon receipt
of notice of any meeting at which the holders of a series of New
Bank of America Preferred Stock is entitled to vote, the
Depositary will mail the information contained in such notice to
the record holders of Bank of America Depositary Shares as of
the record date for such meeting. Each such holder will be
entitled to instruct the Depositary as to the exercise of the
voting rights pertaining to the number of shares of New Bank of
America Preferred Stock represented by such holders
depositary shares. The Depositary will vote such New Bank of
America Preferred Stock represented by such Bank of America
Depositary Shares in accordance with such instructions (and as
nearly as possible in the event the holders depositary
shares represent a fractional share of New Bank of America
Preferred Stock), and Bank of America will take all action which
may be deemed necessary by the Depositary in order to enable the
Depositary to do so. The Depositary will abstain from voting any
shares of New Bank of America Preferred Stock to the extent that
it does not receive specific instructions from the holders of
Bank of America Depositary Shares. The Depositary will not be
responsible for any failure to carry out any instruction to
vote, or for the manner or effect of any vote, as long as any
action or nonaction does not result from the gross negligence or
willful misconduct of the depositary.
Withdrawal of New Bank of America Preferred
Stock. Upon surrender of Bank of America
Depositary Shares at the principal office of the Depositary and
payment of any unpaid amount due the Depositary, and subject to
the terms of the relevant Deposit Agreement, the owner of Bank
of America Depositary Shares evidenced thereby is entitled to
delivery of the number of whole
and/or
fractional New Bank of America Preferred Stock and all money and
other property, if any, represented by such depositary shares.
Holders of New Bank of America Preferred Stock thus withdrawn
will not thereafter be entitled to deposit such shares under the
relevant Deposit Agreement or to receive depositary shares
therefor.
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ACCOUNTING
TREATMENT
The merger will be accounted for as a purchase, as
that term is used under generally accepted accounting
principles, for accounting and financial reporting purposes.
Under purchase accounting, the assets (including identifiable
intangible assets) and liabilities (including executory
contracts and other commitments) of Merrill Lynch as of the
effective time of the merger will be recorded at their
respective fair values and added to those of Bank of America.
Any excess of purchase price over the fair values is recorded as
goodwill. Financial statements of Bank of America issued after
the merger would reflect these fair values and would not be
restated retroactively to reflect the historical financial
position or results of operations of Merrill Lynch.
UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following general discussion sets forth the anticipated
material United States federal income tax consequences of the
merger to U.S. holders (as defined below) of Merrill Lynch
common stock that exchange their shares of Merrill Lynch common
stock for shares of Bank of America common stock in the merger.
This discussion does not address any tax consequences arising
under the laws of any state, local or foreign jurisdiction, or
under any United States federal laws other than those pertaining
to income tax. This discussion is based upon the Internal
Revenue Code of 1986, as amended, or the Code, the
regulations promulgated under the Code and court and
administrative rulings and decisions, all as in effect on the
date of this document. These laws may change, possibly
retroactively, and any change could affect the accuracy of the
statements and conclusions set forth in this discussion.
This discussion addresses only those Merrill Lynch stockholders
that hold their shares of Merrill Lynch common stock as a
capital asset within the meaning of Section 1221 of the
Code. Further, this discussion does not address all aspects of
United States federal income taxation that may be relevant to
you in light of your particular circumstances or that may be
applicable to you if you are subject to special treatment under
the United States federal income tax laws, including if you are:
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a financial institution;
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a tax-exempt organization;
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an S corporation or other pass-through entity (or an
investor in an S corporation or other pass-through entity);
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an insurance company;
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a mutual fund;
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a dealer or broker in stocks and securities, or currencies;
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a trader in securities that elects mark-to-market treatment;
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a holder of Merrill Lynch common stock subject to the
alternative minimum tax provisions of the Code;
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a holder of Merrill Lynch common stock that received Merrill
Lynch common stock through the exercise of an employee stock
option, through a tax qualified retirement plan or otherwise as
compensation;
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a person that is not a U.S. holder (as defined below);
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a person that has a functional currency other than the
U.S. dollar;
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a holder of Merrill Lynch common stock that holds Merrill Lynch
common stock as part of a hedge, straddle, constructive sale,
conversion or other integrated transaction; or
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a United States expatriate.
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Determining the actual tax consequences of the merger to you may
be complex. They will depend on your specific situation and on
factors that are not within our control. You should consult with
your own tax
91
advisor as to the tax consequences of the merger in your
particular circumstances, including the applicability and effect
of the alternative minimum tax and any state, local, foreign or
other tax laws and of changes in those laws.
For purposes of this discussion, the term
U.S. holder means a beneficial owner of Merrill
Lynch common stock that is for United States federal income tax
purposes (i) an individual citizen or resident of the
United States, (ii) a corporation organized in or under the
laws of the United States or any state thereof or the District
of Columbia or (iii) otherwise subject to United States
federal income taxation on a net income basis in respect of the
Merrill Lynch common stock.
The United States federal income tax consequences to a partner
in an entity or arrangement treated as a partnership, for United
States federal income tax purposes, that holds Merrill Lynch
common stock generally will depend on the status of the partner
and the activities of the partnership. Partners in a partnership
holding Merrill Lynch common stock should consult their own tax
advisors.
Tax
Consequences of the Merger Generally
The parties intend for the merger to qualify as a reorganization
for United States federal income tax purposes. It is a condition
to Bank of Americas obligation to complete the merger that
Bank of America receive an opinion from Wachtell, Lipton,
Rosen & Katz, dated the closing date of the merger,
substantially to the effect that the merger will qualify as a
reorganization within the meaning of
Section 368(a) of the Code. It is a condition to Merrill
Lynchs obligation to complete the merger that Merrill
Lynch receive an opinion from Shearman & Sterling LLP,
dated the closing date of the merger, substantially to the
effect that the merger will qualify as a
reorganization within the meaning of
Section 368(a) of the Code. These opinions will be based on
representation letters provided by Bank of America and Merrill
Lynch and on customary factual assumptions. Neither of the
opinions described above will be binding on the Internal Revenue
Service. Bank of America and Merrill Lynch have not sought and
will not seek any ruling from the Internal Revenue Service
regarding any matters relating to the merger, and as a result,
there can be no assurance that the Internal Revenue Service will
not assert, or that a court would not sustain, a position
contrary to any of the conclusions set forth below.
Provided the merger qualifies as a reorganization
within the meaning of Section 368(a) of the Code, upon
exchanging your Merrill Lynch common stock for Bank of America
common stock, you generally will not recognize gain or loss,
except with respect to cash received instead of fractional
shares of Bank of America common stock (as discussed below). The
aggregate tax basis in the shares of Bank of America common
stock that you receive in the merger, including any fractional
share interests deemed received and redeemed as described below,
will equal your aggregate adjusted tax basis in the Merrill
Lynch common stock you surrender. Your holding period for the
shares of Bank of America common stock that you receive in the
merger (including a fractional share interest deemed received
and sold as described below) will include your holding period
for the shares of Merrill Lynch common stock that you surrender
in the exchange.
Cash
Instead of a Fractional Share
If you receive cash instead of a fractional share of Bank of
America common stock, you will be treated as having received the
fractional share of Bank of America common stock pursuant to the
merger and then as having sold that fractional share of Bank of
America common stock for cash. As a result, you generally will
recognize gain or loss equal to the difference between the
amount of cash received and the basis in your fractional share
of Bank of America common stock as set forth above. This gain or
loss generally will be capital gain or loss, and will be
long-term capital gain or loss if, as of the effective date of
the merger, the holding period for the shares (including the
holding period of Merrill Lynch common stock surrendered
therefor) is greater than one year. The deductibility of capital
losses is subject to limitations.
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Backup
Withholding
If you are a non-corporate holder of Merrill Lynch common stock
you may be subject to information reporting and backup
withholding (currently at a rate of 28%) on any cash payments
you receive. You generally will not be subject to backup
withholding, however, if you:
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furnish a correct taxpayer identification number, certify that
you are not subject to backup withholding on the substitute
Form W-9
or successor form included in the election form/letter of
transmittal you will receive and otherwise comply with all the
applicable requirements of the backup withholding rules; or
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provide proof that you are otherwise exempt from backup
withholding.
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Any amounts withheld under the backup withholding rules will
generally be allowed as a refund or credit against your United
States federal income tax liability, provided you timely furnish
the required information to the Internal Revenue Service.
93
COMPARISON
OF STOCKHOLDERS RIGHTS
Bank of America and Merrill Lynch are both incorporated under
Delaware law. Any differences, therefore, between the rights of
Bank of America stockholders and the rights of Merrill Lynch
stockholders result solely from differences in the
companies respective certificates of incorporation and
bylaws. Upon completion of the merger, Merrill Lynch
stockholders will exchange their shares of Merrill Lynch common
stock for shares of Bank of America common stock, and as a Bank
of America stockholder their rights will be governed by the Bank
of America certificate of incorporation and the Bank of America
bylaws.
The following is a summary of the material differences between
the rights of holders of Bank of America common stock and the
rights of holders of Merrill Lynch common stock, but does not
purport to be a complete description of those differences. The
Bank of America certificate of incorporation, the Merrill Lynch
restated certificate of incorporation, the Bank of America
bylaws and the Merrill Lynch bylaws are subject to amendment in
accordance with their terms. Copies of these governing corporate
instruments are available, without charge, to any person,
including any beneficial owner to whom this document is
delivered, by following the instructions listed under
Where You Can Find More Information on
page [ ].
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Merrill Lynch
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Bank of America
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AUTHORIZED CAPITAL STOCK
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Authorized Shares
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Merrill Lynch is authorized under its restated certificate of
incorporation to issue 3,025,000,000 shares, consisting of
3,000,000,000 shares of common stock, par value $1.33 and
1/3 per share, and 25,000,000 shares of preferred stock,
par value $1.00 per share.
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Bank of America is authorized under its certificate of
incorporation to issue 7,600,000,000 shares, consisting of
7,500,000,000 shares of common stock, par value $0.01 per
share, and 100,000,000 shares of preferred stock, par value
$0.01 per share.
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Preferred Stock
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Merrill Lynchs restated certificate of incorporation
provides that shares of preferred stock may be issued from time
to time in one or more series by the board of directors. The
board can fix, by resolution or resolutions adopted by the
affirmative vote of a majority of the whole board, the voting
powers, designations, preferences and relative, participating,
optional or other special rights and the qualifications,
limitations or restrictions of each series of preferred stock.
The rights of preferred stockholders may supersede the rights of
common stockholders. Currently, (1) 50,000 shares are
authorized as Merrill Lynch Preferred Stock Series 1,
(2) 50,000 shares are authorized as Merrill Lynch
Preferred Stock Series 2, (3) 43,333 shares are
authorized as Merrill Lynch Preferred Stock Series 3,
(4) 23,333 shares are authorized as Merrill Lynch
Preferred Stock Series 4, (5) 50,000 shares of
Preferred Stock are authorized as Merrill Lynch Preferred Stock
Series 5, (6) 65,000 shares are authorized as
Merrill Lynch Preferred Stock Series 6,
(7) 50,000 shares are authorized as Merrill Lynch
Preferred Stock Series 7, (8) 97,750 shares are
authorized as Merrill Lynch Preferred Stock Series 8,
(9) 12,000 shares are authorized as Merrill Lynch
9.00% Non-Voting Mandatory Convertible Non-Cumulative Preferred
Stock, Series 2 and (10) 5,000 shares are
authorized as Merrill Lynch 9.00% Non-Voting Mandatory
Convertible Non-Cumulative Preferred Stock, Series 3.
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Bank of Americas certificate of incorporation provides
that shares of preferred stock may be issued from time to time
in one or more series by the board of directors. The board can
fix the preferences, limitations and relative rights of each
series of preferred stock. The rights of preferred stockholders
may supersede the rights of common stockholders. Currently, (1)
3,000,000 shares are authorized as Bank of America ESOP
Convertible Preferred Stock, Series C, (2) 35,045 shares
are authorized as Bank of America Cumulative Redeemable
Preferred Stock, Series B, (3) 20,000,000 shares are
authorized as Bank of America $2.50 Cumulative Convertible
Preferred Stock, Series BB, (4) 85,100 shares are
authorized as Bank of America Floating Rate Non-Cumulative
Preferred Stock, Series E, (5) 34,500 shares are authorized
as Bank of America 6.204% Non-Cumulative Series D Preferred
Stock, (6) 7,001 shares are authorized as Bank of America
Floating Rate Non-Cumulative Preferred Stock, Series F, (7)
8,501 shares are authorized as Bank of America Adjustable
Rate Non-Cumulative Preferred Stock, Series G, (8)
25,300 shares are authorized as Bank of America 6.625%
Non-Cumulative Preferred Stock, Series I, (9)
41,400 shares are authorized as Bank of America 7.25%
Non-Cumulative Preferred Stock, Series J, (10)
6,900,000 shares are authorized as Bank of America 7.25%
Non-Cumulative Perpetual Convertible Preferred Stock, Series L,
(11) 240,000 shares are authorized as Bank of America
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series K,
(12) 160,000 shares are authorized as Bank of America
Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series
M, and (13) 124,200 shares are authorized as Bank of
America 8.20% Non-Cumulative Preferred Stock, Series H.
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Merrill Lynch
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Bank of America
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AMENDMENT TO THE CERTIFICATE OF INCORPORATION
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Under the Delaware General Corporation Law, an amendment to the
certificate of incorporation requires (1) the approval of
the board of directors, (2) the approval of the holders of
a majority of the outstanding stock entitled to vote upon the
proposed amendment, and (3) the approval of the holders of
a majority of the outstanding stock of each class entitled to
vote thereon as a class.
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Merrill Lynchs restated certificate of incorporation
provides that an amendment of certain designated provisions
(regarding, among other things, the preferred stock; the board
of directors; meetings of stockholders and directors, elections
of directors, and corporation books; limitations of director
liability, indemnification and insurance; and amendments to the
certificate of incorporation) requires the affirmative vote of
the holders of outstanding shares representing at least
80 percent of the voting power of all of the shares of
capital stock of the corporation then entitled to vote generally
in the election of directors, unless such amendment is declared
advisable by an affirmative vote of at least 75 percent of
the whole board of directors.
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The Bank of America certificate of incorporation does not
contain any provisions altering the standards for amendment.
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AMENDMENT TO THE BYLAWS
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Under the Delaware General Corporation Law, bylaws may be
adopted, amended or repealed by the stockholders entitled to
vote, and by the board of directors if the corporations
certificate of incorporation confers the power to adopt, amend
or repeal the corporations bylaws upon the directors.
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Merrill Lynchs restated bylaws may be amended by a
majority vote of the holders of the capital stock of the
corporation entitled to vote at any annual or special meeting of
stockholders called for that purpose, or by affirmative vote of
a majority of the board of directors at any valid meeting.
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The Bank of America certificate of incorporation confers the
power to adopt, amend or repeal the Bank of America bylaws upon
the Bank of America board of directors, subject to the power of
the Bank of America stockholders to alter or repeal any bylaws
adopted by the Bank of America board of directors.
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SPECIAL MEETINGS OF STOCKHOLDERS
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Special meetings of Merrill Lynch stockholders may be called
only by the board of directors pursuant to a resolution adopted
by the affirmative vote of a majority of the whole board of
directors.
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The Bank of America bylaws provide that a special meeting of
stockholders may be called for any purpose by the board of
directors, the chairman of the board of directors, the chief
executive officer or the president, or the secretary acting
under instructions of any of the foregoing or upon the written
request of the record holders and at least 25% of Bank of
Americas outstanding common stock.
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STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
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Merrill Lynchs restated certificate of incorporation and
restated bylaws do not permit action to be taken by written
consent without a meeting.
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The Bank of America certificate of incorporation permits
stockholders to act by written consent only if consents are
signed by all stockholders entitled to vote on such action.
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Merrill Lynch
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Bank of America
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STOCKHOLDER PROPOSALS AND NOMINATIONS
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Merrill Lynchs restated certificate of incorporation
provides that any stockholder of record entitled to vote
generally in the election of directors may nominate one or more
persons for election as directors at an annual meeting only if
written notice has been provided to the secretary of the
corporation not less than 50 days nor more than
75 days prior to such meeting.
In order to properly bring business before an annual meeting, a
stockholder of record has to give written notice to the
secretary not less than 50 days nor more than 75 days
prior to such meeting, setting forth as to each matter such
stockholder proposes a brief description of the business desired
to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, the name and
record address of such stockholder, the class or series and
number of shares of capital stock of the corporation which are
owned beneficially or of record by such stockholder, a
description of all arrangements or understandings between such
stockholder and any other person or persons (including their
names) in connection with the proposal of such business by such
stockholder and any material interest of such stockholder in
such business and a representation that such stockholder intends
to appear in person or by proxy at the annual meeting to bring
such business before the meeting.
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The Bank of America bylaws specify that nominations of
individuals for election as directors and stockholder proposals
may be made pursuant to Bank of Americas notice of
meeting, by or at the direction of the Bank of America board of
directors or by any holder of Bank of America stock entitled to
vote on the election of directors who complies with the
requisite notice procedure. The notice procedure requires that a
stockholders proposal or nomination of an individual for
election as a director must be received by the secretary of Bank
of America not later than the close of business on the
75th day nor earlier than the close of business on the
120th day prior to the first anniversary of the date Bank
of America commenced mailing its proxy materials for the
preceding years annual meeting except that where the date
of the current annual meeting differs significantly from the
preceding years meeting, notice must be delivered not
earlier than the 120th day prior to the meeting and not
later than the 75th day before the meeting or the
10th day following public announcement of the meeting. In
the event of a special meeting of Bank of America stockholders
at which directors are to be elected, any Bank of America
stockholder entitled to vote may nominate an individual for
election as director if the stockholders notice is
received by the secretary of Bank of America not later than the
close of business on the 15th day following the day on
which notice of the meeting is first mailed to Bank of America
stockholders. The notice must include certain information
concerning the stockholder, the matter the stockholder proposes
to bring before the meeting and, in the case of a nomination for
director, the nominee.
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BOARD OF DIRECTORS
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Number of Directors
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Merrill Lynchs restated bylaws provide that the number of
directors may be fixed from time to time by resolution of the
board of directors, but must not be less than three or more than
30.
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The Bank of America bylaws provide that the Bank of America
board of directors is to consist of not less than five nor more
than 30 members, which number may be changed from time to time
within such range by the Bank of America board of directors.
Currently, the number of members of the Bank of America board of
directors is 16.
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Classification
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Merrill Lynchs restated certificate of incorporation
divides the board of directors into three separate classes, as
nearly equal in number as possible, with staggered three-year
terms. At each annual meeting of stockholders, directors elected
to succeed those directors whose terms expire are elected for a
three-year term.
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The Bank of America certificate of incorporation and the Bank of
America bylaws do not provide for classification of the Bank of
America board of directors.
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Merrill Lynch
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Bank of America
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Removal
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Merrill Lynchs restated bylaws provide that, subject to
the rights of the holders of any series of preferred stock or
any other class of capital stock (other than common stock) of
Merrill Lynch then outstanding, any director may be removed from
office at any time, but only for cause, by the affirmative vote
of the holders of record of outstanding shares representing at
least 80 percent of all the shares of capital stock of
Merrill Lynch then entitled to vote generally in the election of
directors, voting together as a single class.
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Bank of America stockholders may remove one or all of the Bank
of America directors with or without cause upon an affirmative
vote of the holders of a majority of the Bank of America voting
stock.
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Special Meetings of the Board
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Special meetings of the Merrill Lynch board of directors may be
called by the secretary upon the request of the chairman, the
president or a vice chairman of the board of directors, the
chief executive officer, or upon the request in writing or by
electronic transmission of any three other directors stating the
purpose or purposes of such meeting.
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Special meetings of the Bank of America board of directors may
be called by the chairman of the board, the chief executive
officer, the president, or the secretary acting under
instructions from any of the foregoing persons, or upon the
request of any three directors.
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STOCKHOLDER RIGHTS PLAN
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Merrill Lynch currently does not have a stockholder rights plan
in effect, but under Delaware law the Merrill Lynch board of
directors could adopt such a plan without stockholder approval.
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Bank of America currently does not have a stockholder rights
plan in effect, but under Delaware law the Bank of America board
of directors could adopt such a plan without stockholder
approval.
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The Bank of America board of directors has adopted a policy of
requiring stockholder approval prior to the adoption of any
stockholder rights plan.
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PURCHASES OF STOCK FROM CERTAIN PERSONS
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Merrill Lynchs restated certificate of incorporation and
Merrill Lynchs restated bylaws do not limit Merrill
Lynchs power to purchase shares of Merrill Lynch stock
from any person.
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The Bank of America certificate of incorporation and the Bank of
America bylaws do not limit Bank of Americas power to
purchase shares of Bank of America stock from any person.
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The terms, designations, preferences, limitations, privileges,
and relative rights of shares of Merrill Lynch preferred stock
and the shares of New Bank of America Preferred Stock for which
they will be exchanged are identical except for the additional
voting rights described below and for certain non-material
technical or format changes to the provisions included in the
terms of the New Bank of America Preferred Stock.
The holders of Bank of America Preferred Stock Series 1,
Bank of America Preferred Stock Series 2, Bank of America
Preferred Stock Series 3, Bank of America Preferred Stock
Series 4, Bank of America Preferred Stock Series 5 and
Bank of America Preferred Stock Series 8, shall be entitled
to vote on all matters submitted to a vote of the holders of
Bank of America common stock, voting together with the holders
of common stock as one class. Each such share shall be entitled
to 150 votes. The holders of Bank of America Preferred Stock
Series 6 and Bank of America Preferred Stock Series 7,
shall be entitled to vote on all matters submitted to a vote of
the holders of Bank of America common stock, voting together
with the holders of common stock as one class. Each such share
shall be entitled to five votes.
Please see the section entitled Description of New Bank of
America Preferred Stock beginning on
page [ ].
AMENDMENT
TO BANK OF AMERICAS STOCK PLAN
Bank of America currently maintains the Bank of America
Corporation 2003 Key Associate Stock Plan, as amended and
restated effective April 1, 2004, and as subsequently
amended effective April 26, 2006, which
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Bank of America refers to as the Stock Plan. Under this plan,
Bank of America has reserved a number of shares of its common
stock for issuance to key associates in the form of stock
options, stock appreciation rights (SARs), restricted stock
shares and restricted stock units. The Stock Plans term is
currently scheduled to expire on December 31, 2011.
Prior to the merger with Countrywide Financial Corporation and
the proposed merger with Merrill Lynch, Bank of America
estimated that the remaining shares available under the Stock
Plan would have been sufficient to fund equity awards through at
least the annual grant for performance year [2009] to be made in
[February 2010]. However, both the Countrywide merger and the
Merrill Lynch merger, if approved, will increase the number of
key associates eligible for awards under the Stock Plan,
resulting in a pool of shares that will likely be insufficient
to fund equity awards for performance year [2009] to be made in
[February 2010].
In order to provide a sufficient pool of equity for Bank of
America to attract and retain talent over the next several
years, Bank of America intends to adopt, subject to stockholder
approval, an amendment to the Stock Plan to add
[ ] million
shares of Bank of America common stock to the pool of shares
available for awards. Bank of America refers to the Stock Plan
as modified by this amendment as the Amended Stock Plan. The
Amended Stock Plan is substantially identical in design to the
current Stock Plan, other than the proposed increase to the
share pool. The Amended Stock Plan extends the Stock Plans
term by two years, from December 31, 2011 to
December 31, 2013.
If the Amended Stock Plan is approved by Bank of Americas
stockholders, the shares remaining available under the Merrill
Lynch plans, including without limitation any shares that could
have been used again under the Merrill Lynch plans as a
result of shares withheld to cover taxes, option exercise
prices, or otherwise, will be canceled and no longer available
for new grants from and after the closing of the merger.
However, all outstanding awards will continue to be subject to
the terms and conditions of these programs. Effective upon
closing of the Countrywide transaction (July 1, 2008), all
of the then available shares under the Countrywide equity plans
were also canceled and are no longer available for future grants.
Plan
Features and Grant Practices That Protect Stockholder
Interests
The Amended Stock Plan and Bank of Americas grant
practices include a number of features intended to protect the
interests of stockholders:
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The number of additional shares requested,
[ ] million,
represents approximately [ ]% of
the combined common shares outstanding, which we refer to as
CSO, upon consummation of the merger.
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The Amended Stock Plan includes a limit on the number of the new
shares that can be granted as full value awards of
restricted stock shares or units. Under the Amended Stock Plan,
any additional grants of full value awards beyond this limit
would be counted at a [ ]:1 premium
factor against the remaining available share pool.
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A significant portion (approximately 75%) of the full value
shares are expected to be used for grants of restricted stock
shares or units as a portion of annual incentive awards to
certain key associates.
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The Compensation and Benefits Committee continues to control the
dilutive effect of equity issued under the plan by controlling
the number of shares issued on an annual basis (run-rate). [In
recent years, the annual share usage has been less than
[ ]% of CSO.]
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The Amended Stock Plan includes a minimum three-year pro rata
vesting schedule for awards. In practice, grants of stock
options and restricted stock shares and units to executive
officers and other members of senior management have
incorporated a three-year cliff-vesting schedule. Grants of
stock options to executive officers and other members of senior
management have also included a requirement to hold net
profit shares for up to three years after exercise.
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For awards made to senior management for performance in 2007 and
later years, dividends/dividend equivalents on restricted stock
shares/units are accrued with interest from the grant date and
paid only if and when the underlying award becomes vested.
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The Amended Stock Plan incorporates specific limitations on the
ability of the Compensation and Benefits Committee to accelerate
vesting or waive restrictions on awards.
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Bank of America has a recoupment policy under which Bank of
Americas board can cancel unvested restricted stock or
outstanding stock option awards previously granted to an
executive officer whose fraud or intentional misconduct caused
the company to restate its financial statements.
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The Amended Stock Plan does not include provisions frequently
labeled as liberal share counting provisions by
institutional investors (e.g., the ability to re-use shares
tendered or surrendered to pay the exercise cost or tax
obligation of grants or the net counting of shares
for stock option or SAR exercises). The only add backs are for
awards that are canceled or forfeited or for awards payable in
cash.
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The Amended Stock Plan does not permit the use of discounted
stock options or SARs, the use of dividend equivalents on stock
options or SARs, or the use of reload options.
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The Amended Stock Plan does not provide for option or equity
transferability to third parties for consideration.
The transfer of awards, if at all, is limited to immediate
family members without consideration and by the laws of descent
and distribution.
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The Amended Stock Plan broadly prohibits the re-pricing of stock
options or SARs without stockholder approval, including the
repurchase of underwater options or SARs for cash.
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All of Bank of Americas current equity compensation
programs are funded by grants under a stockholder approved
program. The current Stock Plan was last approved by
stockholders in 2006 with a more than 80% approval rating.
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The Amended Stock Plan is intended to serve a critical function
in Bank of Americas overall compensation program. Bank of
America believes that the compensation of its key associates
should be significantly linked to Bank of Americas
business performance in order to enhance Bank of Americas
long-term success and value. The Amended Stock Plan will serve
this compensation philosophy by providing a source of
stock-based awards for key associates. Bank of America believes
that stock-based awards best align the interests of the key
associates with those of Bank of Americas stockholders.
Awards generally include vesting and other terms and conditions
that encourage a long-term stock ownership by key associates and
provide incentive for key associates to remain employed with
Bank of America and its subsidiaries. The Amended Stock Plan
will also provide Bank of America with a competitive program to
better attract, recruit and retain key associates of outstanding
ability who have the ability to further enhance the long-term
success and value of Bank of America through their services.
The following is a summary of the material terms of the Amended
Stock Plan, with significant differences from the current Stock
Plan identified where applicable. It is qualified in its
entirety by reference to the terms of the Stock Plan, as
amended. A copy of the proposed amendment to the Stock Plan is
attached to this proxy statement as Appendix F. The
amendment will become effective upon the closing of the Merrill
Lynch merger only if it is approved by Bank of Americas
stockholders.
Number of
Shares
Under the Stock Plan as currently in effect, there are reserved
for issuance an aggregate of 200 million shares of Bank of
America common stock, plus (a) any remaining shares that
were available for awards as of December 31, 2002 under the
Bank of America Corporation Key Employee Stock Plan (the
predecessor to the Stock Plan) (33,711,872 shares), plus
(b) any shares covered by awards granted under the Bank of
America Corporation Key Employee Stock Plan before
January 1, 2003 that again become available because of
cancellation or forfeiture of an award, plus
(c) 102 million shares approved by the stockholders
effective as of April 1, 2004 (upon completion of the
FleetBoston merger), plus (d) 180 million shares
approved by the
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stockholders effective as of April 26, 2006. As of
August 31, 2008, there were
[ ] shares
of Bank of America common stock available for future awards
under the Stock Plan. Of this total, no more than approximately
[ ] million
shares may be issued as restricted stock shares or restricted
stock units (on a
one-for-one
share basis).
Under the Amended Stock Plan, there would be added an additional
[ ] million
shares of Bank of America common stock available for awards. Of
these new shares, no more than
[ ] million
shares could be awarded as restricted stock shares or restricted
stock units on a
one-for-one
share basis. Under the current Stock Plan, any full value award
issued in excess of this limit would count as six shares
against the pool of available shares. The Amended Stock Plan
would instead provide any full value award issued in excess of
this limit would count as
[ ] shares
against the pool of available shares.
As under the Stock Plan, shares covered by awards under the
Amended Stock Plan will again be available for awards if and to
the extent (a) the award is canceled or forfeited or
(b) the award is settled in cash. Shares used to cover the
exercise price of stock options or to cover any tax withholding
obligations in connection with awards will not again be
available for awards under the Amended Stock Plan. In addition,
the total number of shares covering stock-settled SARs or
net-settled options will be counted against the pool of
available shares, not just the net shares issued upon exercise.
Administration
As under the Stock Plan, the Amended Stock Plan is designed to
be administered by the Compensation and Benefits Committee. To
the extent permitted by law, the Compensation and Benefits
Committee may designate an individual or committee (which need
not consist of directors) to act as the appropriate committee
under the Amended Stock Plan for awards to key associates who
are not officers under Section 16 of the
Exchange Act or covered employees under
Section 162(m) of the Code. Under the Amended Stock Plan,
the Compensation and Benefits Committee has authority with
respect to the following:
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the selection of the key associates to receive awards from time
to time;
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the granting of awards in amounts as it determines;
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the imposition of limitations, restrictions and conditions upon
awards as it deems appropriate;
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the establishment of performance targets and allocation formulas
for awards of restricted stock shares or restricted stock units
intended to be qualified performance-based
compensation under Code Section 162(m);
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the certification of the attainment of performance goals, if
applicable, as required by Code Section 162(m);
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the interpretation of the Amended Stock Plan and the adoption,
amendment and rescission of administrative guidelines and other
rules and regulations relating to the Amended Stock Plan;
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the correction of any defect or omission or reconciliation of
any inconsistency in the Amended Stock Plan or any award granted
under the Amended Stock Plan; and
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the making of all other determinations and taking of all other
actions necessary or advisable for the implementation and
administration of the Amended Stock Plan.
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The Compensation and Benefits Committee also has limited
authority to accelerate the vesting
and/or waive
any restrictions on any outstanding awards. Such authority to
accelerate vesting or waive restrictions may not be applied to:
(i) any current or former executive officer of Bank of
America; or (ii) more than an aggregate of 9 million
shares. No awards may be made under the Amended Stock Plan after
December 31, 2013.
Eligibility
Only key associates of Bank of America and its
subsidiaries may participate in the Amended Stock Plan. Key
associates are those associates of Bank of America and its
subsidiaries who occupy managerial or other important positions
and who have made, or are expected to make, important
contributions to the business of Bank of America, as determined
by the Compensation and Benefits Committee, including persons
employed outside the United States. It is expected that after
both the Merrill Lynch and Countrywide transactions,
approximately
100
[ ] associates
will be eligible to participate. As mentioned above, the
Compensation and Benefits Committee in its discretion selects
which key associates would in fact receive any awards from time
to time.
Types of
Awards
The Amended Stock Plan, like the Stock Plan, permits awards of
stock options, SARs, restricted stock shares and restricted
stock units, all of which are described in more detail below.
Awards of Stock Options and SARs. The Amended
Stock Plan provides for the grant of options to purchase shares
of Bank of America common stock at option prices which are not
less than the fair market value of a share of Bank of America
common stock at the close of business on the date of grant. (The
fair market value of a share of Bank of America common stock as
of October [ ], 2008, was
$[ ].) The Amended Stock Plan also
provides for the grant of SARs to key associates. SARs entitle
the holder upon exercise to receive either cash or shares of
Bank of America common stock or a combination of the two, as the
Compensation and Benefits Committee in its discretion may
determine, with a value equal to the difference between:
(i) the fair market value on the exercise date of the
shares with respect to which a SAR is exercised; and
(ii) the fair market value of the shares on the date of
grant.
Awards of options under the Amended Stock Plan, which may be
either incentive stock options (which qualify for special tax
treatment) or nonqualified stock options, are determined by the
Compensation and Benefits Committee. No more than an aggregate
of 40 million shares may be awarded as incentive stock
options under the Amended Stock Plan. The terms and conditions
of each option and SAR are to be determined by the Compensation
and Benefits Committee (or its designees) at the time of grant.
Options and SARs granted under the Amended Stock Plan will
expire not more than 10 years from the date of grant, and
the award agreements entered into with each participant will
specify the extent to which options and SARs may be exercised
during their respective terms, including in the event of the
participants death, disability or termination of
employment.
It has been Bank of Americas practice over the last
several years to require participants in senior management who
receive stock options to hold any gains realized upon exercise
of their stock options (net of taxes and transaction costs) in
the form of shares of Bank of America common stock for a period
of one or three years following exercise (depending on the
participants level within senior management), or until
termination of employment, if earlier.
The Amended Stock Plan includes two additional limitations on
stock option and SAR grants:
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The Amended Stock Plan expressly prohibits dividend equivalents
with respect to stock options and SARs.
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The Amended Stock Plan permits nonqualified stock options and
SARs to be transferable if and to the extent permitted under the
applicable award agreement, but prohibits any such transfer to
be made for consideration.
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Awards of Restricted Stock Shares and Restricted Stock
Units. Under the Amended Stock Plan, the
Compensation and Benefits Committee may award key associates
restricted shares of Bank of America common stock or restricted
stock units which represent the right to receive shares of Bank
of America common stock (or cash equal to the fair market value
of those shares). The award agreement with the participant will
contain the terms of the award, including any applicable
conditions, which may include the continued service of the
participant with Bank of America, the attainment of specified
performance goals or any other conditions deemed appropriate by
the Compensation and Benefits Committee.
Bank of Americas practice has been to link the award of
restricted stock shares and units to an annual review of key
associate performance. The annual performance review follows a
principled, structured framework for analysis. This analysis
focuses on financial performance measures that the Compensation
and Benefits Committee believes collectively best indicate
successful management of our business. The analysis takes into
account both performance against internal business goals and
relative performance against our competitors over one-year and
multi-year periods.
Restricted stock shares will be held in the custody of Bank of
America until the applicable restrictions have been satisfied.
The participant cannot sell, transfer, pledge, assign or
otherwise alienate or hypothecate
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restricted stock shares until the applicable restrictions are
satisfied. Once the restrictions are satisfied, the shares will
be delivered to the participants account, free of
restrictions. During the period of restriction, the participant
may exercise full voting rights with respect to the restricted
stock shares. The participant will also be credited with
dividends with respect to the shares. Dividends may be payable
currently or subject to additional restrictions as determined by
the Compensation and Benefits Committee and reflected in the
award agreement. For awards made to senior management for
performance in 2007 and later years, dividends are accrued with
interest from the grant date and paid only if and when the
underlying award becomes vested.
The award agreement for any restricted stock units will specify
whether units that become earned and payable will be settled in
shares of Bank of America common stock (with one share of Bank
of America common stock to be delivered for each earned and
payable restricted stock unit), in cash (equal to the aggregate
fair market value of the restricted stock units that are earned
and payable), or in a combination of shares and cash. Shares of
Bank of America common stock used to pay earned restricted stock
units may have additional restrictions, as determined by the
Compensation and Benefits Committee. Unpaid restricted stock
units may have dividend equivalent rights, as determined by the
Compensation and Benefits Committee and evidenced in the award
agreement. As with restricted stock shares, awards of restricted
stock units made to senior management for performance in 2007
and later years include dividend equivalents that accrue with
interest from the grant date and are paid only if and when the
underlying award becomes vested. Unpaid restricted stock units
have no voting rights.
The Amended Stock Plan, like the Stock Plan, places limits on
the use of restricted stock shares and restricted stock units:
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From and after the merger closing date, no more than
[ ] million
shares of Bank of America common stock may be awarded under the
Amended Stock Plan as restricted stock shares or restricted
stock units, except for awards of restricted stock shares or
restricted stock units that become vested and earned solely on
the basis of achievement of performance goals. This
[ ] million
shares is comprised of the approximately
[ ] million
shares that were available for awards of restricted stock shares
or units as of August 31, 2008, under the current Stock
Plan plus
[ ] million
of the
[ ] million
additional shares to be added to the plan if the Amended Stock
Plan is approved by the stockholders.
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In addition, if this restricted stock pool is exhausted, the
Amended Stock Plan permits the use of any remaining shares
otherwise available for awards of stock options or SARs to be
used for awards of restricted stock shares or restricted stock
units. However, each such additional award of restricted stock
shares or restricted stock units will count as
[ ] shares
against the remaining available pool for stock options or SARs.
This is a change from the current Stock Plan, under which
additional awards of restricted stock shares or restricted stock
units will count as six shares against the remaining available
pool for stock options or SARs.
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Minimum
Vesting Conditions
For awards intended to vest solely on the basis of the passage
of time, the awards will not vest more quickly than ratably over
a three-year period beginning on the first anniversary of the
award. Awards may vest more quickly in the event of
(a) death, disability or retirement, (b) job loss due
to workforce reduction, job elimination or divestiture or
(c) under the change in control provisions of
the Stock Plan. Awards of restricted stock shares or units made
in lieu of annual incentive compensation will not be subject to
a minimum time-based vesting requirement (because these awards
are already based on an annual review of performance). Also,
awards necessary in the recruitment of new key associates or for
the retention of key associates acquired in a business
combination will not be subject to a minimum time-based vesting
requirement.
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Stock
Plan Benefits Table
Because awards under the Amended Stock Plan are discretionary,
awards are generally not determinable at this time. The
following table presents information on Bank of Americas
equity compensation plans at December 31, 2007:
[TABLE]
The following information provides an update to the Bank of
America information as of August 31, 2008:
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There were approximately
[ ] million stock options
outstanding with a weighted average exercise price of
$[ ] per share and a weighted
average remaining term of
[ ] years.
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There were approximately
[ ] million unvested shares of
restricted stock and restricted stock units outstanding,
including shares of restricted stock and restricted stock units
previously granted as part of annual incentive awards under Bank
of Americas Equity Incentive Plan, Executive Incentive
Compensation or other annual incentive programs.
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There will be approximately
[ ] million shares that remain
available for awards of future grants, of which approximately
[ ] million shares are
available for awards under the Stock Plan and approximately
[ ] thousand shares are
available for awards under the Directors Stock Plan. Of
the shares under the Stock Plan, no more than approximately
[ ] million shares may be
granted as awards of restricted stock shares or restricted stock
units (on a
one-for-one
share basis).
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Bank of America will assume the grants outstanding under
Merrill Lynchs equity programs and convert them to
Bank of America awards. The following presents information on
Merrill Lynchs equity compensation plans at
August 31, 2008, as adjusted for the 0.8595 merger exchange
ratio:
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There are approximately
[ ] million stock options
outstanding with a weighted average exercise price of
$[ ] per
share and a weighted average remaining term of
[ ] years. Of this total,
approximately [ ] million
options are expected to expire unexercised within a month of the
merger closing and the underlying shares will not become
available for future grant.
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There are approximately
[ ] million unvested shares of
restricted stock and restricted stock units outstanding,
including shares of restricted stock and restricted stock units
previously granted as part of annual incentive awards. Of this
total, approximately
[ ] million shares are
scheduled to vest within a month of the merger closing.
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There are approximately
[ ] million shares available
for awards of future grants under the Merrill Lynch plans
excluding shares available under the Employee Stock Purchase
Plan. If the amendment to the Stock Plan is approved, all
remaining shares available under the Merrill Lynch plans,
including without limitation any shares that could have been
used again under the Merrill Lynch plans as a result of
shares withheld to cover taxes, option exercise prices, or
otherwise, will be canceled and no longer available for new
grants upon closing.
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As of August 31, 2008, taking into account the Merrill
Lynch equity compensation plans (after application of the merger
exchange ratio) but excluding the
[ ] million shares under the
Merrill Lynch plans that have not yet been awarded, Bank of
America will have the following number of outstanding equity
awards and shares available for future awards under all plans
(without regard to the proposed amendment to the Stock Plan):
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There will be approximately
[ ] million
stock options outstanding with a weighted average exercise price
of $[ ] per share and a weighted
average remaining term of
[ ] years. As noted above,
approximately [ ] million
Merrill Lynch options, as adjusted for the exchange ratio,
are expected to expire unexercised within one month of the
closing.
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There will be approximately
[ ] million
unvested shares of restricted stock and restricted stock units
outstanding, including shares of restricted stock and restricted
stock units previously granted as part of annual incentive
awards under Bank of Americas Equity Incentive Plan,
Executive Incentive Compensation Plan or other annual incentive
programs. It expected that
[ ] million Merrill Lynch
shares, as adjusted for the exchange ratio, will vest within one
month of the closing date.
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There will be approximately
[ ] million
shares that remain available for awards of future grants, of
which approximately
[ ] million
shares are available for awards under the Stock Plan and
approximately
[ ] shares
are available for awards under the Directors Stock Plan.
Of the approximately
[ ] million
shares available for awards under the Stock Plan, no more than
approximately
[ ] million
shares may be granted as awards of restricted stock shares or
restricted stock units.
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If the additional
[ ] million
shares are approved, the number of shares available for
restricted stock awards will initially be increased by
[ ] million
shares.
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Bank of America does not anticipate material changes in this
data as a result of stock option exercises or restricted stock
vesting between August 31, 2008, and the closing of the
merger.
Overhang
The Compensation and Benefits Committee regularly reviews the
dilutive effect of the Stock Plan on Bank of Americas
stockholders (sometimes called overhang), and
compares this level of overhang against the level of overhang at
its primary competitor group, made up of the five other largest
United States bank holding companies, as further described in
the Compensation Discussion and Analysis portion of Bank of
Americas most recent Annual Proxy Statement (filed
March 19, 2008). For the past several years, Bank of
Americas overhang has been below the median for this
competitor group.
As of August 31, 2008, assuming approval of the Amended
Stock Plan, the additional
[ ] million
shares proposed to be added to the Amended Stock Plan represent
an additional [ ]% of overhang, and
Bank of Americas total overhang would be
[ ]%. [This level of overhang would
still be below the median level of overhang for the companies in
Bank of Americas primary competitor group based on the
most recently available public information for the members of
the competitor group.]
For the purpose of calculating the overhang in the previous
paragraph, Bank of America is using fully diluted
overhang, which equals Amount A divided by Amount B, where
Amount A equals the sum of all outstanding stock options,
unvested restricted stock units and unvested restricted stock
shares plus shares available for future grants under all plans,
and Amount B equals the sum of total shares of Bank of America
common stock outstanding plus Amount A less unvested restricted
stock shares. As of August 31, 2008: (i) the number of
outstanding stock options, unvested restricted stock units and
unvested restricted stock shares equals approximately
[ ] million;
(ii) the number of shares available for future grants under
all plans assuming approval of the Amended Stock Plan equals
approximately
[ ] million;
(iii) the number of shares of Bank of America common stock
outstanding, including Merrill Lynch shares converted based on
the exchange ratio, equals approximately
[ ] million;
and (iv) the number of unvested restricted stock shares is
approximately
[ ] million
(which are already included in Bank of America common stock
outstanding).
Run
Rate
The Compensation and Benefits Committee reviews throughout the
year the rate at which Bank of America is granting equity awards
relative to its shares of Bank of America common stock
outstanding (sometimes referred to as Bank of Americas
run rate), and compares this run rate to the run
rates at Bank of Americas primary competitor group. For
2007, Bank of Americas run rate was slightly below the
median for this competitor group. In determining Bank of
Americas run rate, Bank of America includes all of the
restricted stock granted in lieu of a portion of annual
incentive compensation under Bank of Americas Equity
Incentive Plan, Executive Incentive Compensation Plan or other
annual incentive programs, which for 2007 accounted for
approximately 75% of all restricted stock awards by Bank of
America. In recent years, the annual run rate has been less than
[ ]% of CSO.
Internal
Revenue Code Section 162(m)
Section 162(m) of the Code generally places a
$1 million annual limit on a companys tax deduction
for compensation paid to the principal executive officer or any
of the three most highly compensated officers other than the
principal executive officer or principal financial officer,
referred to as the covered individuals. This
limitation does not apply, however, to qualified
performance-based compensation. Because stock options or
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SARs granted under the Amended Stock Plan must have an exercise
price equal at least to fair market value at the date of grant,
are granted to covered individuals by a Compensation and
Benefits Committee consisting of at least two outside directors,
and the Amended Stock Plan limits the number of shares that may
be the subject of awards granted to any key associate during any
calendar year, compensation from the exercise of stock options
or SARs should be treated as qualified performance-based
compensation for purposes of Section 162(m).
In addition, the Amended Stock Plan authorizes the Compensation
and Benefits Committee to make awards of restricted stock shares
or restricted stock units that are conditioned on the
satisfaction of performance criteria. For those awards intended
to meet the requirements of the qualified
performance-based compensation exception to
Section 162(m), the Compensation and Benefits Committee
must establish the applicable performance conditions prior to or
within a specified period after the start of the applicable
performance period. The Compensation and Benefits Committee may
select from the following performance measures for this purpose:
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total revenue (defined as the sum of net interest income on a
taxable-equivalent basis and noninterest income);
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net income;
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shareholder value added (which equals the cash basis operating
earnings for a year less a charge for the use of capital for the
year);
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return on average common stockholders equity;
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return on average assets;
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earnings per common share (using either diluted earnings or not);
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operating earnings per common share (using either diluted
earnings or not);
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total stockholder return;
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customer satisfaction (determined based on objective criteria
approved by the Compensation and Benefits Committee);
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expense management;
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operating margin;
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operating leverage; or
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cash flow.
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The performance conditions will be stated in the form of an
objective, nondiscretionary formula, and the Compensation and
Benefits Committee will certify in writing the attainment of
those performance conditions prior to any payment or
distributions with respect to awards. The Compensation and
Benefits Committee in its discretion may adjust downward any
award.
As under the Stock Plan, in no event may an individual receive
awards under the Amended Stock Plan for a given calendar year
covering in excess of four million shares of Bank of America
common stock.
So that options and SARs granted under the Amended Stock Plan
qualify for the exclusion for performance-based compensation,
and to permit the Compensation and Benefits Committee to grant
other awards under the Amended Stock Plan that are intended to
qualify for the exclusion, the Amended Stock Plan is being
submitted to Bank of Americas stockholders for approval. A
vote in favor of approving the Amended Stock Plan will be a vote
approving all the material terms and conditions of the plan for
purposes of the performance-based exemption under
Section 162(m), including the performance measures,
eligibility requirements and limits on various stock awards, in
each case as described above.
Withholding
for Payment of Taxes
As with the Stock Plan, the Amended Stock Plan provides for the
withholding and payment by a participant of any payroll or
withholding taxes required by applicable law. The Amended Stock
Plan permits a participant to satisfy this requirement, with the
approval of the Compensation and Benefits Committee and
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subject to the terms of the Amended Stock Plan, by having Bank
of America withhold from the participant a number of shares of
Bank of America common stock otherwise issuable under the award
having a fair market value equal to the amount of applicable
payroll and withholding taxes.
Changes
in Capitalization and Similar Changes
As with the Stock Plan, in the event of any change in the number
of outstanding shares of Bank of America common stock by reason
of any stock dividend, split, spin-off, recapitalization,
merger, consolidation, combination, exchange of shares or
otherwise, the aggregate number of shares of Bank of America
common stock with respect to which awards may be made under the
Amended Stock Plan, the annual limit on individual awards, the
limits on incentive stock options, restricted stock and
restricted stock units and the terms, types of shares and number
of shares of any outstanding awards under the Amended Stock Plan
will be equitably adjusted by the Compensation and Benefits
Committee in its discretion to preserve the benefit of the award
for Bank of America and the participant.
Changes
in Control
The Amended Stock Plan, like the Stock Plan, provides that in
the event of a change in control of Bank of America, all options
and SARs will be fully exercisable as of the date of the change
in control and will remain exercisable through their full term.
Outstanding awards of restricted stock shares and restricted
stock units will become immediately vested on the date of the
change in control, and any applicable performance conditions
will be deemed fully satisfied (at the target performance
condition, if applicable) as of the date of the change in
control.
Amendment
and Termination of the Plan
The Bank of America board of directors has the power to amend,
modify or terminate the Amended Stock Plan on a prospective
basis. Stockholder approval will be obtained for any change to
the material terms of the Amended Stock Plan to the extent
required by NYSE listing requirements, Code Section 162(m),
or other applicable law.
Option
Repricing Prohibited
The Amended Stock Plan specifically prohibits the re-pricing of
stock options or SARs without stockholder approval. For this
purpose, a repricing means any of the following (or
any other action that has the same effect as any of the
following): (A) changing the terms of a stock option or SAR
to lower its exercise price; (B) any other action that is
treated as a repricing under generally accepted
accounting principles; and (C) repurchasing for cash or
canceling a stock option or SAR at a time when its exercise
price is greater than the fair market value of the underlying
stock in exchange for another award, unless the cancellation and
exchange occurs in connection with change in capitalization or
similar change. Such cancellation and exchange would be
considered a repricing regardless of whether it is
treated as a repricing under generally accepted
accounting principles and regardless of whether it is voluntary
on the part of the key associate.
Federal
Income Tax Treatment
The following discussion summarizes certain U.S. federal
income tax consequences of awards under the Amended Stock Plan
based on the law as in effect on the date of this document. The
following discussion does not purport to cover federal
employment taxes or other federal tax consequences that may be
associated with awards, nor does it cover state, local or
non-U.S. taxes.
Incentive Stock Options. Options granted under
the Amended Stock Plan and intended to qualify as incentive
stock options will be subject to the applicable provisions of
the Code, including Section 422. If shares of Bank of
Americas common stock are issued to an optionee upon the
exercise of an incentive stock option, if no disqualifying
disposition of the shares is made by the optionee within
one year after the exercise of the incentive stock option or
within two years after the date the incentive stock option was
granted, and if the options otherwise satisfy all applicable
requirements under the Code to qualify as incentive stock
options, then (a) no income will be recognized by the
optionee at the time of the grant of the incentive stock option,
(b) no income, for regular income tax purposes, will be
realized by the optionee at the date of exercise, (c) upon
sale of the shares of Bank of Americas common stock
acquired by exercise of the incentive stock
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option, any amount realized in excess of the option price will
be taxed to the optionee, for regular income tax purposes, as a
capital gain (at varying rates depending upon the
optionees holding period in the shares and income level)
and any loss sustained will be a capital loss, and (d) no
deduction will be allowed to Bank of America for federal income
tax purposes. If a disqualifying disposition of the
shares is made, the optionee will realize taxable ordinary
income in an amount equal to the excess of the fair market value
of the shares purchased at the time of exercise over the option
price (the bargain purchase element) and Bank of America will be
entitled to a federal income tax deduction equal to that amount.
The amount of any gain in excess of the bargain purchase element
realized upon a disqualifying disposition will be
taxable as capital gain at that time to the holder (at varying
rates depending upon the holders holding period in the
shares and income level), for which Bank of America will not be
entitled to a federal tax deduction. Upon exercise of an
incentive stock option, the optionee may be subject to
alternative minimum tax.
Nonqualified Stock Options. With respect to
nonqualified stock options granted to optionees under the
Amended Stock Plan, in general (a) the optionee will
realize no income at the time the nonqualified stock option is
granted, (b) at exercise, the optionee will realize
ordinary income in an amount equal to the difference between the
option price and the fair market value of the shares on the date
of exercise, and Bank of America will receive a tax deduction
for the same amount, and (c) on disposition, the holder
will treat appreciation or depreciation after the date of
exercise as capital gain or loss and taxed at varying rates
depending upon the holders holding period in the shares
and income level.
Restricted Stock Shares. Upon becoming
entitled to receive shares at the end of the applicable
restricted period without a forfeiture, the recipient will have
ordinary income in an amount equal to the fair market value of
the shares at that time. However, a recipient who so elects
under Code Section 83(b) within 30 days after the date
of the grant will have ordinary income on the date of the grant
equal to the fair market value of the restricted stock shares as
if the shares were unrestricted and could be sold immediately.
If the shares subject to the election are subsequently
forfeited, the recipient will not be entitled to any deduction,
refund or loss for tax purposes. Upon the sale of the shares
after the forfeiture period has expired, the holding period to
determine whether the recipient has long-term or short-term
capital gain or loss will begin when the restricted period
expires, and the tax basis will be equal to the fair market
value of the shares when the restricted period expires. However,
if the recipient timely elects under Section 83(b) to be
taxed as of the date of grant, the holding period will commence
on the date of the grant and the tax basis will be equal to the
fair market value of the shares on the date of the grant as if
the shares were then unrestricted and could be sold immediately.
Bank of America generally will be entitled to a deduction equal
to the amount that is taxable as ordinary compensation income to
the recipient.
Restricted Stock Units. A participant who is
awarded restricted stock units will not recognize income and
Bank of America will not be allowed a deduction at the time the
award is made. When a participant receives payment for
restricted stock units in shares of Bank of Americas
common stock or cash, the fair market value of the shares or the
amount of the cash received will be ordinary income to the
participant and will be allowed as a deduction for federal
income tax purposes to Bank of America. However, if there is a
substantial risk that any shares of Bank of Americas
common stock used to pay out earned restricted stock units will
be forfeited (for example, because the Compensation and Benefits
Committee conditions those shares on the performance of future
services), the taxable event will be deferred until the risk of
forfeiture lapses. In this case, the participant can elect to
make an election under Section 83(b) of the Code as
previously described. Bank of America can take the deduction at
the time the ordinary income is recognized by the participant.
The Bank
of America board of directors recommends a vote FOR
approval of the Amended Stock Plan.
107
AMENDMENT
TO THE BANK OF AMERICA
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
The Bank of America board of directors has adopted, subject to
stockholder approval, an amendment to Bank of Americas
amended and restated certificate of incorporation to provide for
an increase in the number of shares of Bank of America common
stock authorized for issuance from 7.5 billion to
10 billion. In the event this proposal is adopted by Bank
of America stockholders, but the merger agreement is terminated
(without the merger being completed) prior to the filing of a
certificate of amendment with the Secretary of State of the
State of Delaware giving effect to the amendment, Bank of
America may still file the certificate of amendment, but has not
yet decided whether it will do so.
As of
[ ],
Bank of America had approximately
[ ] shares
of Bank of America common stock issued and outstanding. As of
[ ],
there were
[ ] shares
of Bank of America common stock reserved for issuance. Based on
the number of shares of Merrill Lynch common stock outstanding
as of
[ ],
if the merger is completed, Bank of America will issue
approximately
[ ] additional
shares of Bank of America common stock to the Merrill Lynch
stockholders. Based on the options, other equity-based awards
and arrangements to purchase or issue Merrill Lynch common
stock, if the merger is completed, Bank of America will reserve
for issuance approximately
[ ] million
additional shares of Bank of America common stock.
Although Bank of Americas management currently has no
definitive plans for the issuance of any additional authorized
shares, the authorization of additional shares would permit the
issuance of shares for future stock dividends, stock splits,
possible acquisitions, stock option plans, and other appropriate
corporate purposes. The additional shares of Bank of America
common stock will not be entitled to preemptive rights nor will
existing stockholders have any preemptive right to acquire any
of those shares when issued. Adoption of the amendment requires
the affirmative vote of a majority of the votes represented by
the aggregate of all of the outstanding shares of Bank of
America common stock and Series B Preferred Stock entitled
to vote at the Bank of America special meeting. Under Delaware
law, the affirmative vote of a majority of the votes represented
by the outstanding shares of Bank of America common stock
entitled to vote at the special meeting, counted separately as a
class without the Series B Preferred Stock, is also
required to increase the number of authorized shares of Bank of
America common stock. You are entitled to one vote for each
share of Bank of America common stock and Series B
Preferred Stock you held as of the record date. Abstentions and
broker non-votes will have the same effect as a vote against the
amendment.
The Bank of America board of directors recommends a vote
FOR the proposal to amend Bank of Americas
amended and restated certificate of incorporation to increase
the number of authorized shares of Bank of America common stock
from 7.5 billion to 10 billion.
108
AMENDMENT
TO THE MERRILL LYNCH
RESTATED CERTIFICATE OF INCORPORATION
It is the intent of Bank of America and Merrill Lynch that the
merger of Merger Sub with and into Merrill Lynch qualify as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended. As currently structured, in order for the merger to so
qualify, the issued and outstanding shares of Merrill Lynch 9%
Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock,
Series 2, referred to as Series 2 Preferred, and 9%
Non-Voting Mandatory Convertible Non-Cumulative Preferred Stock,
Series 3, referred to as Series 3 Preferred, must
constitute voting stock.
Accordingly, the Merrill Lynch board of directors has adopted,
subject to stockholder approval, an amendment to Merrill
Lynchs restated certificate of incorporation to provide
the holders of the Series 2 Preferred and the Series 3
Preferred with the right to vote on all matters presented to the
holders of Merrill Lynch common stock. In the event this
proposal is adopted by Merrill Lynch stockholders, the amendment
to Merrill Lynchs restated certificate of incorporation
will not be effective until the filing of a certificate of
amendment with the Secretary of State of the State of Delaware.
The amendment to Merrill Lynchs restated certificate of
incorporation will only become effective immediately prior to
the effective time of the merger. Accordingly, in the event this
proposal is adopted by Merrill Lynch stockholders, but the
merger agreement is terminated (without the merger being
completed), Merrill Lynch will not file the certificate of
amendment with the Secretary of State of the State of Delaware
and the amendment to Merrill Lynchs restated certificate
of incorporation will not become effective and will be abandoned.
As of
[ ],
Merrill Lynch had approximately
[ ] shares
of Series 2 Preferred outstanding. Section Five of the
Certificate of Designation for the Series 2 Preferred will
be amended to provide that each share of the Series 2
Preferred will vote together as a single class with the shares
of Merrill Lynch common stock on all matters presented for a
vote of the holders of Merrill Lynch common stock and each such
share will be entitled to 600 votes.
As of
[ ],
Merrill Lynch had approximately
[ ] shares
of Series 3 Preferred outstanding. Section Five of the
Certificate of Designation for the Series 3 Preferred will
be amended to provide that each share of the Series 3
Preferred will vote together as a single class with the shares
of Merrill Lynch common stock on all matters presented for a
vote of the holders of Merrill Lynch common stock and each such
share will be entitled to 600 votes.
Adoption of the amendment requires the affirmative vote of a
majority of the votes represented by the aggregate of all of the
outstanding shares of Merrill Lynch common stock entitled to
vote at the Merrill Lynch special meeting. You are entitled to
one vote for each share of Merrill Lynch common stock and each
share of exchangeable securities (issued by Merrill Lynch Canada
and exchangeable into one share of Merrill Lynch common stock)
you hold as of the record date. Abstentions and broker non-votes
will have the same effect as a vote against the amendment.
The Merrill Lynch board of directors recommends a vote
FOR the proposal to amend Merrill Lynchs
restated certificate of incorporation to permit holders of the
Series 2 Preferred and Series 3 Preferred the right to
vote with the shares of Merrill Lynch common stock.
109
COMPARATIVE
MARKET PRICES AND DIVIDENDS
Each of Bank of America common stock and Merrill Lynch common
stock is listed on the NYSE, among other stock exchanges. Bank
of America common stock is listed for trading on the NYSE under
the trading symbol BAC and Merrill Lynch common
stock is listed for trading on the NYSE under the trading symbol
MER. The following table sets forth, for the periods
indicated, the high and low sales prices of shares of Bank of
America common stock and Merrill Lynch common stock as reported
on the NYSE, and the quarterly cash dividends declared per share.
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Bank of America Common Stock
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Merrill Lynch Common Stock
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High
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Low
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Dividend
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High
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Low
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Dividend
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2006
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First Quarter
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47.24
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42.92
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0.50
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79.32
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67.04
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0.25
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Second Quarter
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50.50
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45.26
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0.50
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81.25
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64.58
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0.25
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Third Quarter
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54.00
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47.59
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0.56
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79.26
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66.69
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0.25
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Fourth Quarter
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55.08
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51.32
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0.56
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93.93
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77.90
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0.25
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2007
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First Quarter
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54.21
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48.36
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0.56
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98.68
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76.85
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0.35
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Second Quarter
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52.20
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48.55
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0.56
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95.00
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80.61
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0.35
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Third Quarter
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52.78
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46.52
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0.64
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89.23
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66.94
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0.35
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Fourth Quarter
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52.96
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40.61
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0.64
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77.89
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50.50
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0.35
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2008
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First Quarter
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45.08
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33.12
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0.64
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59.60
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37.25
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0.35
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Second Quarter
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41.50
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22.44
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0.64
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54.00
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32.94
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0.35
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Third Quarter
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39.50
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18.44
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0.64
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36.97
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16.25
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0.35
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Fourth Quarter (through
[ ],
2008)
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On September 12, 2008, the last full trading day before the
announcement of the merger agreement, the high and low sales
prices of shares of Bank of America common stock as reported on
the NYSE were $34.40 and $32.10, respectively. On
[ ],
2008, the last full trading day before the date of this
document, the high and low sale prices of shares of Bank of
America common stock as reported on the NYSE were
$[ ] and
$[ ], respectively.
On September 12, 2008, the last full trading day before the
announcement of the merger agreement, the high and low sales
prices of shares of Merrill Lynch common stock as reported on
the NYSE were $19.49 and $16.60, respectively. On
[ ],
2008, the last full trading day before the date of this
document, the high and low sale prices of shares of Merrill
Lynch common stock as reported on the NYSE were
$[ ] and
$[ ], respectively.
As of
[ ],
2008, the last date prior to printing this document for which it
was practicable to obtain this information, there were
approximately
[ ] registered
holders of Bank of America common stock and approximately
[ ]
registered holders of Merrill Lynch common stock.
Bank of America stockholders and Merrill Lynch stockholders are
advised to obtain current market quotations for Bank of America
common stock and Merrill Lynch common stock. The market price of
Bank of America common stock and Merrill Lynch common stock will
fluctuate between the date of this document and the effective
date of the merger. No assurance can be given concerning the
market price of Bank of America common stock or Merrill Lynch
common stock before or after the effective date of the merger.
110
LEGAL
MATTERS
The validity of the Bank of America common stock to be issued in
connection with the merger will be passed upon for Bank of
America by Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America. Wachtell, Lipton,
Rosen & Katz on behalf of Bank of America, and
Shearman & Sterling LLP on behalf of Merrill Lynch,
will pass upon certain legal matters to the effect that the
merger will constitute a tax-free reorganization
within the meaning of Section 368(a) of the Internal
Revenue Code.
EXPERTS
The financial statements and managements assessment of the
effectiveness of internal control over financial reporting
(which is included in Managements Report on Internal
Control over Financial Reporting) incorporated in this document
by reference to the Annual Report on
Form 10-K
of Bank of America Corporation for the year ended
December 31, 2007, have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements and the related financial
statement schedule incorporated by reference in this
registration statement from Merrill Lynch & Co.,
Inc.s Annual Report on
Form 10-K
for the year ended December 28, 2007, and the effectiveness
of Merrill Lynch & Co., Inc. and subsidiaries
internal control over financial reporting have been audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their reports, incorporated
herein by reference (which report on the consolidated financial
statements expresses an unqualified opinion and includes
explanatory paragraphs regarding (a) the adoption in 2007
of Statement of Financial Accounting Standards No. 157,
Fair Value Measurements, Statement of Financial
Accounting Standards No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities
Including an amendment of FASB Statement No. 115, and
FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement
No. 109, and a change in the method of accounting in
2006 for share-based payments to conform to Statement of
Financial Accounting Standards No. 123 (revised 2004),
Share-Based Payment, and (b) the restatement
discussed in Note 20 to the consolidated financial
statements). Such consolidated financial statements have been so
incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim
financial information for the three-month periods ended
March 28, 2008, and March 30, 2007, and the three- and
six-month periods ended June 27, 2008, and June 29,
2007, which is incorporated herein by reference,
Deloitte & Touche LLP, an independent registered
public accounting firm, have applied limited procedures in
accordance with the standards of the Public Company Accounting
Oversight Board (United States) for a review of such
information. However, as stated in their reports included in
Merrill Lynch & Co., Inc.s Quarterly Reports on
Form 10-Q
for the quarters ended March 28, 2008 (which report
includes an explanatory paragraph relating to the restatement
discussed in Note 16 to the unaudited condensed
consolidated interim financial statements), and June 27,
2008 (which report includes explanatory paragraphs related to
the restatement discussed in Note 16 and the transactions
subsequent to the balance sheet date discussed in Note 18
to the unaudited condensed consolidated interim financial
statements), and incorporated by reference herein, they did not
audit and they do not express an opinion on that interim
financial information. Accordingly, the degree of reliance on
their reports on such information should be restricted in light
of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for
their reports on the unaudited interim financial information
because those reports are not reports or a
part of the Registration Statement prepared or
certified by an accountant within the meaning of Sections 7
and 11 of the Act.
OTHER
MATTERS
Merrill
Lynch
According to the Merrill Lynch restated bylaws, business to be
conducted at a special meeting of stockholders may only be
brought before the meeting pursuant to a notice of meeting or
otherwise properly
111
brought before the meeting by or at the direction of the Merrill
Lynch board of directors. No matters other than the matters
described in this document are anticipated to be presented for
action at the special meeting or at any adjournment or
postponement of the special meeting.
Merrill Lynch will hold a 2009 annual meeting of stockholders
only if the merger is not completed. If it is determined that
the merger will not be completed as contemplated by the merger
agreement, Merrill Lynch will provide notice of the date fixed
for the annual meeting, as well as the deadline for submitting
stockholder proposals for such meeting and for having such
stockholder proposals included in Merrill Lynchs proxy
statement.
Bank of
America
According to the Bank of America bylaws, business to be
conducted at a special meeting of stockholders may only be
brought before the meeting pursuant to a notice of meeting or
otherwise properly brought before the meeting by or at the
direction of the Bank of America board of directors. No matters
other than the matters described in this document are
anticipated to be presented for action at the special meeting or
at any adjournment or postponement of the special meeting.
STOCKHOLDERS
SHARING AN ADDRESS
Only one copy of this document is being delivered to multiple
stockholders of Bank of America or Merrill Lynch sharing an
address unless Bank of America or Merrill Lynch has previously
received contrary instructions from one or more of such
stockholders. Each stockholder who holds shares in street
name will continue to receive a voting instruction form.
Stockholders who hold shares in street name can
request further information on householding through their banks,
brokers or other holders of record. On written or oral request
to the Secretary of Bank of America at 101 S. Tryon
Street, NC1-002-29-01, Charlotte, North Carolina 28255,
(704) 386-5681,
Bank of America will deliver promptly a separate copy of this
document to a stockholder at a shared address to which a single
copy of the document was delivered. On written or oral request
to the Secretary of Merrill Lynch at 222 Broadway
17th Floor, New York, New York 10038,
(212) 670-0432,
Merrill Lynch will deliver promptly a separate copy of this
document to a stockholder at a shared address to which a single
copy of the document was delivered. Stockholders sharing an
address who wish, in the future, to receive separate copies or a
single copy of Bank or Americas or Merrill Lynchs
proxy statements and annual reports should provide written or
oral notice to the Secretary of Bank of America or Merrill
Lynch, as applicable, at the address and telephone number set
forth above. Holders in street name who wish, in the
future, to receive separate copies or a single copy of Bank of
Americas or Merrill Lynchs proxy statements and
annual reports, must contact their banks and brokers.
WHERE YOU
CAN FIND MORE INFORMATION
Bank of America has filed with the SEC a registration statement
under the Securities Act that registers the distribution to
Merrill Lynch stockholders of the shares of Bank of America
common stock to be issued in connection with the merger. The
registration statement, including the attached exhibits and
schedules, contains additional relevant information about Bank
of America and Bank of America stock. The rules and regulations
of the SEC allow us to omit certain information included in the
registration statement from this document.
You may read and copy this information at the Public Reference
Room of the SEC at 100 F Street, NE, Room 1580,
Washington, D.C. 20549. You may obtain information on the
operation of the SECs Public Reference Room by calling the
SEC at
1-800-SEC-0330.
The SEC also maintains an internet website that contains
reports, proxy statements and other information about issuers,
like Bank of America and Merrill Lynch, who file electronically
with the SEC. The address of the site is
http://www.sec.gov.
The reports and other information filed by Bank of America with
the SEC are also available at Bank of Americas website at
http://www.bankofamerica.com.
The reports and other information filed by Merrill Lynch with
the SEC are also available at Merrill Lynchs investor
relations website at
http://www.ir.ml.com.
We have included the web addresses of the SEC, Bank of America,
and Merrill Lynch as inactive textual references only. Except as
specifically incorporated by reference into this document,
information on those web sites is not part of this document.
112
The SEC allows Bank of America and Merrill Lynch to incorporate
by reference information in this document. This means that Bank
of America and Merrill Lynch can disclose important information
to you by referring you to another document filed separately
with the SEC. The information incorporated by reference is
considered to be a part of this document, except for any
information that is superseded by information that is included
directly in this document.
This document incorporates by reference the documents listed
below that Bank of America and Merrill Lynch previously filed
with the SEC. They contain important information about the
companies and their financial condition.
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Bank of America SEC Filings
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(SEC File No. 001-06523; CIK No. 0000070858)
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Period or Date Filed
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Annual Report on
Form 10-K
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Year ended December 31, 2007
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Proxy Statement
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Dated March 19, 2008
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Quarterly Reports on
Form 10-Q
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Quarters ended March 30, 2008 and June 30, 2008
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Current Reports on
Form 8-K
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Current Reports for events that occurred on July 1, 2008, July
21, 2008, July 23, 2008, July 25, 2008, and September 15, 2008
(two filings) (other than the portions of those documents not
deemed to be filed)
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The description of Bank of America common stock set forth in a
registration statement filed pursuant to Section 12 of the
Exchange Act and any amendment or report filed for the purpose
of updating those descriptions
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Merrill Lynch SEC Filings
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(SEC File No. 001-07182; CIK No. 0000065100)
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Period or Date Filed
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Annual Report on
Form 10-K
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Year ended December 28, 2007
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Proxy Statement
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Dated March 14, 2008
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Quarterly Reports on
Form 10-Q
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Quarters ended March 28, 2008 and June 27, 2008
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Current Reports on
Form 8-K
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Current Reports for events that occurred on June 27, 2008 (two
filings), June 30, 2008 (four filings), July 3, 2008,
July 7, 2008 (six filings), July 11, 2008,
July 14, 2008, July 17, 2008, July 25, 2008,
July 28, 2008 (two filings), July 29, 2008 (two
filings), July 30, 2008 (two filings), July 31, 2008
(two filings), August 1, 2008, August 7, 2008 (two
filings), August 8, 2008(six filings), August 12,
2008, August 21, 2008, August 26, 2008 (two filings),
August 28, 2008, September 3, 2008, September 4,
2008, September 8, 2008, September 9, 2008 (four
filings), September 14, 2008, September 15, 2008,
September 18, 2008 and September 29, 2008 (other than
the portions of those documents not deemed to be filed)
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In addition, Bank of America and Merrill Lynch also incorporate
by reference additional documents that either company files with
the SEC under Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended, between the date of
this document and the date of the Merrill Lynch special meeting.
These documents include periodic reports, such as Annual Reports
on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
as well as proxy statements.
Bank of America has supplied all information contained or
incorporated by reference in this document relating to Bank of
America, as well as all pro forma financial information, and
Merrill Lynch has supplied all information relating to Merrill
Lynch.
Documents incorporated by reference are available from Bank of
America and Merrill Lynch without charge, excluding any exhibits
to those documents unless the exhibit is specifically
incorporated by reference
113
as an exhibit in this document. You can obtain documents
incorporated by reference in this document by requesting them in
writing or by telephone from the appropriate company at the
following addresses:
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Bank of America Corporation
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Merrill Lynch & Co., Inc
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Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina 28255
Investor Relations
Telephone:
(704) 386-5681
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222 Broadway 17th Floor
New York, New York 10038
Attention: Judith A. Witterschein
Corporate Secretary
Telephone: (212) 670-0432
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Bank of America stockholders and Merrill Lynch
stockholders requesting documents should do so by
[ ],
2008, to receive them before their special meeting. You will
not be charged for any of these documents that you request. If
you request any incorporated documents from Bank of America or
Merrill Lynch, Bank of America or Merrill Lynch will mail them
to you by first class mail, or another equally prompt means, as
soon as practicable after it receives your request.
You should rely only on the information contained or
incorporated by reference in this document. Neither Bank of
America nor Merrill Lynch has authorized anyone to give any
information or make any representation about the merger or our
companies that is different from, or in addition to, that
contained in this document or in any of the materials that have
been incorporated in this document. Therefore, if anyone does
give you information of this sort, you should not rely on it.
You should assume that the information in this document is
accurate only as of
[ ],
2008. You should also assume that the information contained in
any document incorporated by reference herein is accurate only
as of the date of such document. Neither the mailing of this
document to stockholders nor the issuance of Bank of America
common stock creates any implication to the contrary.
If you are in a jurisdiction where offers to exchange or
sell, or solicitations of offers to exchange or purchase, the
securities offered by this document or the solicitation of
proxies is unlawful, or if you are a person to whom it is
unlawful to direct these types of activities, then the offer
presented in this document does not extend to you. The
information contained in this document speaks only as of the
date of this document unless the information specifically
indicates that another date applies.
This document contains a description of the representations
and warranties that each of Bank of America and Merrill Lynch
made to the other in the merger agreement. Representations and
warranties made by Bank of America, Merrill Lynch and other
applicable parties are also set forth in contracts and other
documents (including the merger agreement) that are attached or
filed as exhibits to this document or are incorporated by
reference into this document. These representations and
warranties were made as of specific dates, may be subject to
important qualifications and limitations agreed to between the
parties in connection with negotiating the terms of the merger
agreement, and may have been included in the agreement for the
purpose of allocating risk between the parties rather than to
establish matters as facts. These materials are included or
incorporated by reference only to provide you with information
regarding the terms and conditions of the agreements, and not to
provide any other factual information regarding Merrill Lynch,
Bank of America or their respective businesses. Accordingly, the
representations and warranties and other provisions of the
merger agreement should not be read alone, but instead should be
read only in conjunction with the other information provided
elsewhere in this document or incorporated by reference into
this document.
114
APPENDIX A
AGREEMENT
AND PLAN OF MERGER
by and between
MERRILL LYNCH & CO., INC.
and
BANK OF AMERICA CORPORATION
DATED AS OF
SEPTEMBER 15, 2008
TABLE OF
CONTENTS
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Page
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Article I
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THE MERGER
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A-1
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1.1
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The Merger
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A-1
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1.2
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Effective Time
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A-1
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1.3
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Effects of the Merger
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A-1
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1.4
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Conversion of Stock
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A-2
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1.5
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Stock Options and Other Stock-Based Awards; ESPP
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A-2
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1.6
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Certificate of Incorporation and Bylaws of the Surviving Company
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A-4
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1.7
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Directors and Officers
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A-5
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1.8
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Tax Consequences
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A-5
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Article II
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DELIVERY OF MERGER CONSIDERATION
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A-5
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2.1
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Exchange Agent
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A-5
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2.2
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Deposit of Merger Consideration
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A-5
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2.3
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Delivery of Merger Consideration
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A-5
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Article III
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REPRESENTATIONS AND WARRANTIES OF COMPANY
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A-7
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3.1
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Corporate Organization
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A-8
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3.2
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Capitalization
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A-8
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3.3
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Authority; No Violation
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A-10
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3.4
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Consents and Approvals
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A-10
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3.5
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Reports; Regulatory Matters
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A-11
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3.6
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Financial Statements
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A-12
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3.7
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Brokers Fees
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A-13
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3.8
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Absence of Certain Changes or Events
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A-13
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3.9
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Legal Proceedings
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A-14
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3.10
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Taxes and Tax Returns
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A-14
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3.11
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Employee Matters
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A-15
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3.12
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Compliance with Applicable Law
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A-17
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3.13
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Certain Contracts
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A-17
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3.14
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Risk Management Instruments
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A-18
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3.15
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Investment Securities and Commodities
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A-18
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3.16
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Property
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A-18
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3.17
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Intellectual Property
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A-19
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3.18
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Environmental Liability
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A-20
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3.19
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Broker-Dealer and Investment Advisory Matters
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A-20
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3.20
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Securitization Matters
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A-22
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3.21
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State Takeover Laws
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A-24
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3.22
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Interested Party Transactions
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A-24
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3.23
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Reorganization
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A-24
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3.24
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Opinion
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A-24
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3.25
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Company Information
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A-24
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A-i
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Page
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Article IV
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REPRESENTATIONS AND WARRANTIES OF PARENT
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A-24
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4.1
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Corporate Organization
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A-25
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4.2
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Capitalization
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A-25
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4.3
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Authority; No Violation
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A-26
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4.4
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Consents and Approvals
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A-26
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4.5
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Reports; Regulatory Matters
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A-27
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4.6
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Financial Statements
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A-28
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4.7
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Brokers Fees
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A-29
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4.8
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Absence of Certain Changes or Events
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A-29
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4.9
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Legal Proceedings
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A-29
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4.10
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Taxes and Tax Returns
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A-29
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4.11
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Compliance with Applicable Law
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A-29
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4.12
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Reorganization; Approvals
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A-29
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4.13
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Opinion
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A-29
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4.14
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Certain Contracts
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A-29
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4.15
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Risk Management Instruments
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A-30
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4.16
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Intellectual Property
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A-30
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4.17
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Parent Information
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A-31
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Article V
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COVENANTS RELATING TO CONDUCT OF BUSINESS
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A-31
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5.1
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Conduct of Businesses Prior to the Effective Time
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A-31
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5.2
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Company Forbearances
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A-31
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5.3
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Parent Forbearances
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A-33
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Article VI
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ADDITIONAL AGREEMENTS
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A-33
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6.1
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Regulatory Matters
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A-33
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6.2
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Access to Information
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A-34
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6.3
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Stockholder Approval
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A-34
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6.4
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NYSE Listing
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A-35
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6.5
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Employee Matters
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A-35
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6.6
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Indemnification; Directors and Officers Insurance
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A-36
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6.7
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Additional Agreements
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A-37
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6.8
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Advice of Changes
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A-37
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6.9
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Exemption from Liability Under Section 16(b)
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A-37
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6.10
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No Solicitation
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A-37
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6.11
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Dividends
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A-39
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6.12
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Redemption of Exchangeable Shares
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A-39
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6.13
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Tax Matters
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A-39
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Article VII
|
|
CONDITIONS PRECEDENT
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A-40
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7.1
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Conditions to Each Partys Obligation to Effect the Merger
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A-40
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7.2
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Conditions to Obligations of Parent
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A-40
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7.3
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Conditions to Obligations of Company
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A-41
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A-ii
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Page
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Article VIII
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TERMINATION AND AMENDMENT
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A-41
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8.1
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Termination
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A-41
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8.2
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Effect of Termination
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A-42
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8.3
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Fees and Expenses
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A-42
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8.4
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Amendment
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A-42
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8.5
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Extension; Waiver
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A-42
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Article IX
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GENERAL PROVISIONS
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A-43
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9.1
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Closing
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A-43
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9.2
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Standard
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A-43
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9.3
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Nonsurvival of Representations, Warranties and Agreements
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A-43
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9.4
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Notices
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A-43
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9.5
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Interpretation
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A-44
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9.6
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Counterparts
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A-44
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9.7
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Entire Agreement
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A-44
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9.8
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Governing Law; Jurisdiction
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A-44
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9.9
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Publicity
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A-45
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9.10
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Assignment; Third Party Beneficiaries
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A-45
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|
Exhibit A
Stock Option Agreement
Exhibit B
Amendment to Surviving Company Certificate of Incorporation
A-iii
INDEX OF
DEFINED TERMS
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|
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Section
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1940 Act
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3.19(h)(i)
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Adjusted Option
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1.5(a)
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Adverse Development
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3.20(h)
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Advisers Act
|
|
3.19(h)(ii)
|
Agreement
|
|
Preamble
|
Alternative Proposal
|
|
6.10(a)
|
Alternative Transaction
|
|
6.10(a)
|
Bankruptcy and Equity Exception
|
|
3.3(a)
|
BHC Act
|
|
3.4
|
BHCA Application
|
|
3.4
|
Certificate
|
|
1.4(d)
|
Certificate Amendment
|
|
1.6
|
Certificate of Merger
|
|
1.2
|
CFTC
|
|
3.4
|
Change of Recommendation
|
|
6.10(d)
|
Change of Recommendation Notice
|
|
6.10(d)(iv)
|
Claim
|
|
6.6(a)
|
Client
|
|
3.19(h)(iii)
|
Closing
|
|
9.1
|
Closing Date
|
|
9.1
|
Code
|
|
Recitals
|
Company
|
|
Preamble
|
Company Benefit Plans
|
|
3.11(a)
|
Company Bylaws
|
|
3.1(b)
|
Company Cap Plan
|
|
1.5(d)
|
Company Cap Units
|
|
1.5(d)
|
Company Capitalization Date
|
|
3.2(a)
|
Company Certificate
|
|
3.1(b)
|
Company Common Stock
|
|
1.4(b)
|
Company Contract
|
|
3.13(a)
|
Company Deferred Equity Units
|
|
1.5(e)
|
Company Deferred Equity Unit Plans
|
|
1.5(e)
|
Company Disclosure Schedule
|
|
Art. III
|
Company ESPP
|
|
1.5(g)
|
Company IP
|
|
3.17(a)
|
Company Options
|
|
1.5(a)
|
Company Preferred Stock
|
|
3.2(a)
|
Company Regulatory Agreement
|
|
3.5(b)
|
Company Requisite Regulatory Approvals
|
|
7.3(d)
|
Company Restricted Shares
|
|
1.5(b)
|
Company RSUs
|
|
1.5(c)
|
Company SEC Reports
|
|
3.5(c)
|
Company Securitization Documents
|
|
3.20(h)
|
A-iv
|
|
|
|
|
Section
|
|
Company Securitization Interests
|
|
3.20(h)
|
Company Securitization Trust
|
|
3.20(h)
|
Company Sponsored Asset Securitization Transaction
|
|
3.20(f)
|
Company Stock Plans
|
|
1.5(a)
|
Confidentiality Agreement
|
|
6.2(b)
|
Convertible Note Agreement
|
|
4.2
|
Convertible Series
|
|
3.2(a)
|
Controlled Group Liability
|
|
3.11(g)
|
Copyrights
|
|
3.17(a)
|
Covered Employees
|
|
6.5(a)
|
Derivative Transactions
|
|
3.14(a)
|
DGCL
|
|
1.1(a)
|
DPC Common Shares
|
|
1.4(b)
|
Effective Time
|
|
1.2
|
Employees
|
|
5.2(c)
|
Environmental Laws
|
|
3.18
|
ERISA
|
|
3.11(a)
|
ERISA Affiliate
|
|
3.11(h)
|
Excess Shares
|
|
2.3(f)
|
Exchange Act
|
|
3.5(c)
|
Exchange Agent
|
|
2.1
|
Exchange Agent Agreement
|
|
2.1
|
Exchange Fund
|
|
2.2
|
Exchange Ratio
|
|
1.4(c)
|
FDIC
|
|
3.4
|
Federal Reserve Board
|
|
3.4
|
FERC
|
|
3.4
|
FINRA
|
|
3.4
|
Form S-4
|
|
3.4
|
FSA
|
|
3.4
|
Fund
|
|
3.19(h)(iv)
|
GAAP
|
|
3.1(c)
|
Governmental Entity
|
|
3.4
|
HSR Act
|
|
3.4
|
Indemnified Parties
|
|
6.6(a)
|
Insurance Amount
|
|
6.6(c)
|
Intellectual Property
|
|
3.17(a)
|
Investment Advisory Agreement
|
|
3.19(h)(v)
|
IRS
|
|
3.10(a)
|
Joint Proxy Statement
|
|
3.4
|
Leased Properties
|
|
3.16
|
Letter of Transmittal
|
|
2.3(a)
|
License Agreement
|
|
3.17(a)
|
Licensed Company IP
|
|
3.17(a)
|
v
|
|
|
|
|
Section
|
|
Licensed Parent IP
|
|
4.16(a)
|
Liens
|
|
3.2(b)
|
Loans
|
|
3.20(d)
|
Material Adverse Effect
|
|
3.8(a)
|
Merger
|
|
Recitals
|
Merger Consideration
|
|
1.4(c)
|
Merger Sub
|
|
Recitals
|
Nonqualified Deferred Compensation Plan
|
|
3.11(c)
|
Non-Sponsored Fund
|
|
3.19(e)
|
NYSE
|
|
2.3(f)
|
Owned Company IP
|
|
3.17(a)
|
OTS
|
|
3.5(a)
|
Owned Parent IP
|
|
4.16(a)
|
Owned Properties
|
|
3.16
|
Permitted Encumbrances
|
|
3.16
|
Parent
|
|
Preamble
|
Parent Bylaws
|
|
4.1(a)
|
Parent Cap Unit
|
|
1.5(d)
|
Parent Capitalization Date
|
|
4.2
|
Parent Certificate
|
|
4.1(a)
|
Parent Common Stock
|
|
1.4(c)
|
Parent Contract
|
|
4.14(a)
|
Parent Deferred Equity Unit
|
|
1.5(e)
|
Parent Disclosure Schedule
|
|
Art. IV
|
Parent IP
|
|
4.16(a)
|
Parent Preferred Stock
|
|
4.2
|
Parent Regulatory Agreement
|
|
4.5(b)
|
Parent Requisite Regulatory Approvals
|
|
7.2(d)
|
Parent Restricted Share
|
|
1.5(b)
|
Parent RSU
|
|
1.5(c)
|
Parent SEC Reports
|
|
4.5(c)
|
Parent Stock Plans
|
|
4.2
|
Patents
|
|
3.17(a)
|
Real Property
|
|
3.16
|
Regulatory Agencies
|
|
3.5(a)
|
Regulatory Approvals
|
|
3.4
|
Retained Interest
|
|
3.20(h)
|
Sarbanes-Oxley Act
|
|
3.5(c)
|
SBA
|
|
3.4
|
SEC
|
|
3.4
|
Securities Act
|
|
3.2(a)
|
Servicer Default
|
|
3.20(h)
|
Servicer Default or Termination
|
|
3.20(g)
|
Software
|
|
3.17(a)
|
vi
|
|
|
|
|
Section
|
|
Specified Series
|
|
3.2(a)
|
SRO
|
|
3.4
|
Stock Option Agreement
|
|
Recitals
|
Subsidiary
|
|
3.1(c)
|
Superior Proposal
|
|
6.10(d)
|
Surviving Company
|
|
Recitals
|
Takeover Statutes
|
|
3.21
|
Tax(es)
|
|
3.10(b)
|
Tax Return
|
|
3.10(c)
|
Trademarks
|
|
3.17(a)
|
Trade Secrets
|
|
3.17(a)
|
Trust Account Common Shares
|
|
1.4(b)
|
Voting Debt
|
|
3.2(a)
|
vii
AGREEMENT
AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 15,
2008 (this Agreement), by and between Merrill
Lynch & Co., Inc., a Delaware corporation
(Company), and Bank of America Corporation, a
Delaware corporation (Parent).
WITNESSETH:
WHEREAS, promptly following the execution of this Agreement,
Parent shall form a new wholly owned subsidiary (Merger
Sub) as a Delaware corporation, and Parent shall cause
Merger Sub to, and Merger Sub shall, sign a joinder agreement to
this Agreement and be bound hereunder;
WHEREAS, the Boards of Directors of Company, Parent and Merger
Sub have determined that it is in the best interests of their
respective companies and their stockholders to consummate the
strategic business combination transaction provided for in this
Agreement in which Merger Sub will, on the terms and subject to
the conditions set forth in this Agreement, merge with and into
Company (the Merger), with Company as the
surviving company in the Merger (sometimes referred to in such
capacity as the Surviving Company);
WHEREAS, for federal income Tax purposes, it is the intent of
the parties hereto that the Merger shall qualify as a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended (the Code), and this Agreement is
intended to be and is adopted as a plan of
reorganization for purposes of Sections 354 and 361
of the Code;
WHEREAS, as an inducement and condition to the entrance of Bank
of America into this Agreement, Company is granting to Bank of
America an option pursuant to a stock option agreement in the
form set forth in Exhibit A (the Stock Option
Agreement); and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also
to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained in this
Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. (a) Subject to
the terms and conditions of this Agreement, in accordance with
the Delaware General Corporation Law (the
DGCL), at the Effective Time, Merger Sub
shall merge with and into Company. Company shall be the
Surviving Company in the Merger and shall continue its existence
as a corporation under the laws of the State of Delaware. As of
the Effective Time, the separate corporate existence of Merger
Sub shall cease.
(b) Parent may at any time change the method of effecting
the combination (including by providing for the merger of
Company and a wholly-owned subsidiary of Parent other than
Merger Sub) if and to the extent requested by Parent;
provided, however, that no such change shall
(i) alter or change the amount or kind of the Merger
Consideration provided for in this Agreement,
(ii) adversely affect the Tax treatment of Companys
stockholders as a result of receiving the Merger Consideration
or the Tax treatment of either party pursuant to this Agreement
or (iii) impede or delay consummation of the transactions
contemplated by this Agreement.
1.2 Effective Time. The Merger
shall become effective as set forth in the certificate of merger
(the Certificate of Merger) that shall be
filed with the Secretary of State of the State of Delaware on
the Closing Date. The term Effective Time
shall be the date and time when the Merger becomes effective as
set forth in the Certificate of Merger.
1.3 Effects of the Merger. At and
after the Effective Time, the Merger shall have the effects set
forth in the DGCL.
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1.4 Conversion of Stock. At the
Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub, Company or the holder of any
of the following securities:
(a) Each share of common stock, par value $1.00 per share,
of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly
issued, fully paid and nonassessable share of common stock, par
value
$1.331/3
per share, of the Surviving Company. From and after the
Effective Time, all certificates representing the common stock
of Merger Sub shall be deemed for all purposes to represent the
number of shares of common stock of the Surviving Company into
which they were converted in accordance with the immediately
preceding sentence.
(b) All shares of common stock, par value
$1.331/3
per share, of Company issued and outstanding immediately prior
to the Effective Time (the Company Common
Stock) that are owned by Company or Parent (other than
shares of Company Common Stock held in trust accounts, managed
accounts, mutual funds and the like, or otherwise held in a
fiduciary or agency capacity, that are beneficially owned by
third parties (any such shares, Trust Account
Common Shares) and other than shares of Company Common
Stock held, directly or indirectly, by Company or Parent in
respect of a debt previously contracted (any such shares,
DPC Common Shares)) shall be cancelled and
shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor. All
shares of Company Common Stock held by any wholly-owned
subsidiary of Company or Parent shall be converted into such
number of shares of stock of the Surviving Company such that
each such subsidiary owns the same percentage of the outstanding
common stock of the Surviving Company immediately following the
Effective Time as such subsidiary owned in Company immediately
prior to the Effective Time.
(c) Subject to Section 1.4(f), each share of Company
Common Stock, except for shares of Company Common Stock owned by
Company or Parent (other than Trust Account Common Shares
and DPC Common Shares), shall be converted, in accordance with
the procedures set forth in Article II, into the right to
receive 0.8595 (the Exchange Ratio) of a
share of common stock, par value $0.01 per share, of Parent
(Parent Common Stock) (the Merger
Consideration).
(d) All of the shares of Company Common Stock converted
into the right to receive the Merger Consideration pursuant to
this Article I shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist as of the
Effective Time, and each certificate previously representing any
such shares of Company Common Stock (each, a
Certificate) shall thereafter represent only
the right to receive the Merger Consideration
and/or cash
in lieu of fractional shares into which the shares of Company
Common Stock represented by such Certificate have been converted
pursuant to this Section 1.4 and Section 2.3(f), as
well as any dividends to which holders of Company Common Stock
become entitled in accordance with Section 2.3(c).
(e) (i) Each share of the Specified Series (as
hereinafter defined) of Company Preferred Stock outstanding
immediately prior to the Effective Time shall automatically be
converted into a share of preferred stock of Parent having
rights, privileges, powers and preferences substantially
identical to those of the relevant Specified Series.
(ii) Each share of the Convertible Series (as hereinafter
defined) of Company Preferred Stock outstanding immediately
prior to the Effective Time shall remain issued and outstanding
and shall have the rights, privileges, powers and preferences as
set forth in the Surviving Companys certificate of
incorporation, as amended as provided in Section 1.6.
(f) If, between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock
shall have been increased, decreased, changed into or exchanged
for a different number or kind of shares or securities as a
result of a reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other
similar change in capitalization, an appropriate and
proportionate adjustment shall be made to the Merger
Consideration.
1.5 Stock Options and Other Stock-Based Awards;
ESPP.
(a) As of the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, each
option to purchase shares of Company Common Stock granted under
the Long-Term Incentive Compensation Plan for Managers and
Producers, as amended through October 22, 2007, the
Long-Term
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Incentive Compensation Plan, as amended through October 22,
2007, the Employee Stock Compensation Plan, as amended through
October 22, 2007, the Equity Capital Accumulation Plan, the
Deferred Restricted Unit Plan for Executive Officers, the First
Republic Employee Stock Option Plan, as amended and restated,
the First Republic 1998 Stock Option Plan, as amended and
restated, and the Deferred Stock Unit Plan for Non-Employee
Directors (collectively, the Company Stock
Plans) that is outstanding immediately prior to the
Effective Time (collectively, the Company
Options) shall be converted into an option (an
Adjusted Option) to purchase, the number of
whole shares of Parent Common Stock that is equal to the number
of shares of Company Common Stock subject to such Company Option
immediately prior to the Effective Time multiplied by the
Exchange Ratio (rounded down to the nearest whole share), at an
exercise price per share of Parent Common Stock (rounded up to
the nearest whole penny) equal to the exercise price for each
such share of Company Common Stock subject to such Company
Option immediately prior to the Effective Time divided by the
Exchange Ratio, and otherwise on the same terms and conditions
(including applicable vesting requirements and any accelerated
vesting thereof) as applied to each such Company Option
immediately prior to the Effective Time provided, that,
in the case of any Company Option to which Section 421 of
the Code applies as of the Effective Time by reason of its
qualification under Section 422 of the Code, the exercise
price, the number of shares of Parent Common Stock subject to
such option and the terms and conditions of exercise of such
option shall be determined in a manner consistent with the
requirements of Section 424(a) of the Code.
(b) As of the Effective Time, each restricted share of
Company Common Stock granted under a Company Stock Plan that is
outstanding immediately prior to the Effective Time
(collectively, the Company Restricted Shares)
shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into a restricted share
with respect to the number of shares of Parent Common Stock that
is equal to the number of shares of Company Common Stock subject
to the Company Restricted Share immediately prior to the
Effective Time multiplied by the Exchange Ratio (rounded to the
nearest whole share) (a Parent Restricted
Share), and otherwise on the same terms and conditions
(including applicable vesting requirements and any accelerated
vesting thereof) as applied to each such Company Restricted
Share immediately prior to the Effective Time.
(c) As of the Effective Time, each restricted share unit
with respect to shares of Company Common Stock granted under a
Company Stock Plan that is outstanding immediately prior to the
Effective Time (collectively, the Company
RSUs) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into a
restricted share unit with respect to the number of shares of
Parent Common Stock that is equal to the number of shares of
Company Common Stock subject to the Company RSU immediately
prior to the Effective Time multiplied by the Exchange Ratio
(rounded to the nearest whole share) (a Parent
RSU), and otherwise on the same terms and conditions
(including applicable vesting requirements, any accelerated
vesting thereof and deferral provisions) as applied to each such
Company RSU immediately prior to the Effective Time. The
obligations in respect of the Parent RSUs shall be payable or
distributable in accordance with the terms of the agreement,
plan or arrangement relating to such Parent RSUs.
(d) As of the Effective Time, each share unit with respect
to shares of Company Common Stock granted under the Financial
Advisor Capital Accumulation Award Plan, as amended through
October 22, 2007 (the Company Cap Plan)
that is outstanding immediately prior to the Effective Time
(collectively, the Company Cap Units) shall,
by virtue of the Merger and without any action on the part of
the holder thereof, be converted into a share unit with respect
to the number of shares of Parent Common Stock that is equal to
the number of shares of Company Common Stock subject to the
Company Cap Unit immediately prior to the Effective Time
multiplied by the Exchange Ratio (rounded to the nearest whole
share) (a Parent Cap Unit), and otherwise on
the same terms and conditions (including applicable vesting
requirements, accelerated vesting thereof and deferral
provisions) as applied to such Company Cap Units immediately
prior to the Effective Time. The obligations in respect of the
Parent Cap Units shall be payable or distributable in accordance
with the terms of the agreement, plan or arrangement relating to
such Parent Cap Units.
(e) As of the Effective Time, all amounts denominated in
Company Common Stock and held in participant accounts (other
than Company RSUs and Company Cap Units) (collectively, the
Company Deferred Equity Units) either
pursuant to (i) the Company Stock Plans or (ii) any
nonqualified deferred compensation program or any individual
deferred compensation agreements (the Company Deferred
Equity
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Unit
Plans
) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be
converted into deferred equity units with respect to the number
of shares of Parent Common Stock that is equal to the number of
shares of Company Common Stock in which such Company Deferred
Equity Units are denominated immediately prior to the Effective
Time multiplied by the Exchange Ratio (rounded to the nearest
whole share) (a
Parent Deferred Equity Unit),
and otherwise on the same terms and conditions (including
applicable vesting requirements, accelerated vesting thereof and
deferral provisions) as applied to such Company Deferred Equity
Units immediately prior to the Effective Time. The obligations
in respect of the Parent Deferred Equity Units shall be payable
or distributable in accordance with the terms of the Company
Stock Plan or Company Deferred Equity Unit Plan relating to such
Parent Deferred Equity Units.
(f) As of the Effective Time, Parent shall assume the
obligations and succeed to the rights of Company under the
Company Stock Plans, the Company Cap Plan and the Company
Deferred Equity Unit Plans with respect to the Company Options
(as converted into Adjusted Options), the Company Restricted
Shares (as converted into Parent Restricted Shares), the Company
RSUs (as converted into Parent RSUs), the Company Deferred
Equity Units (as converted into Parent Deferred Equity Units)
and the Company Cap Units (as converted into Parent Cap Units).
Company and Parent agree that prior to the Effective Time each
of the Company Stock Plans, the Company Cap Plan and the Company
Deferred Equity Unit Plans shall be amended (i) to reflect
the transactions contemplated by this Agreement, including the
conversion of the Company Options, Company Restricted Shares,
Company RSUs, Company Cap Units and Company Deferred Equity
Units pursuant to paragraphs (a), (b), (c), (d) and
(e) above and the substitution of Parent for Company
thereunder to the extent appropriate to effectuate the
assumption of such Company Stock Plans, the Company Cap Plan and
the Company Deferred Equity Unit Plans by Parent, (ii) to
preclude any automatic or formulaic grant of options, restricted
shares or other awards thereunder on or after the Effective
Time, and (iii) to the extent requested by Parent and
subject to compliance with applicable law and the terms of the
plan, to terminate any or all Company Stock Plans, the Company
Cap Plan and the Company Deferred Equity Unit Plans effective
immediately prior to the Effective Time (other than with respect
to outstanding awards thereunder). From and after the Effective
Time, all references to Company (other than any references
relating to a Change in Control of Company) in each
Company Stock Plan, the Company Cap Plan and each Company
Deferred Equity Unit Plan and in each agreement evidencing any
award of Company Options, Company Restricted Shares, Company
RSUs, Company Cap Units or Company Deferred Equity Units shall
be deemed to refer to Parent, unless Parent in good faith
determines otherwise.
(g) Company shall, prior to the Effective Time, take all
actions necessary to terminate the 1986 Employee Stock Purchase
Plan (the Company ESPP) effective as of the
Effective Time and all outstanding rights thereunder at the
Effective Time. The offering period in effect as of immediately
prior to the Effective Time shall end and each participant in
the Company ESPP will be credited with the number of share(s) of
Company Common Stock purchased for his or her account(s) under
the Company ESPP in respect of the applicable offering period in
accordance with the terms of the Company ESPP.
(h) Prior to the Effective Time, the Company, the Board of
Directors of the Company and the Compensation Committee of the
Board of Directors of the Company, as applicable, shall adopt
resolutions and take all other actions necessary to effectuate
the provisions of this Section 1.5 and to ensure that,
notwithstanding anything to the contrary, following the
Effective Time, no service provider of the Company and its
Subsidiaries shall have any right to acquire any securities of
the Company, the Surviving Company or any Subsidiary thereof or
to receive any payment, right or benefit with respect to any
award previously granted under the Company Stock Plans (whether
hereunder, under any Company Stock Plan or individual award
agreement or otherwise) except the right to receive an Adjusted
Option, Parent RSU, Parent Restricted Share, Parent Cap Unit or
Parent Deferred Equity Unit or a payment, right or benefit with
respect thereto as provided in this Section 1.5.
1.6 Certificate of Incorporation and Bylaws of the
Surviving Company. At the Effective Time, the
certificate of incorporation of the Company in effect
immediately prior to the Effective Time (as amended effective
immediately prior to the Effective Time to give effect to the
modifications set forth on Exhibit B hereto (such
modifications the Certificate Amendment))
shall be the certificate of incorporation of the Surviving
Company until thereafter amended in accordance with applicable
law. The bylaws of Merger Sub, as
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in effect immediately prior to the Effective Time, shall be the
bylaws of the Surviving Company until thereafter amended in
accordance with applicable law and the terms of such bylaws.
1.7 Directors and Officers. The
directors of Company and its Subsidiaries immediately prior to
the Effective Time shall submit their resignations to be
effective as of the Effective Time. The directors, if any, and
officers of Merger Sub shall, from and after the Effective Time,
become the directors and officers, respectively, of the
Surviving Company until their successors shall have been duly
elected, appointed or qualified or until their earlier death,
resignation or removal in accordance with the certificate of
incorporation of the Surviving Company. At the Effective Time,
the number of directors constituting the whole board of
directors of Parent shall be increased by three (3) and the
board of directors of Parent shall consist of (a) those
directors of Parent who are serving thereon immediately prior to
the Effective Time, and (b) three (3) directors as
mutually agreed to by Parent and Company from among those
individuals serving as directors of Company immediately prior to
the Effective Time.
1.8 Tax Consequences. It is
intended that the Merger shall constitute a
reorganization within the meaning of
Section 368(a) of the Code, and that this Agreement shall
constitute, and is adopted as, a plan of
reorganization for purposes of Sections 354 and 361
of the Code.
ARTICLE II
DELIVERY OF
MERGER CONSIDERATION
2.1 Exchange Agent. Prior to the
Effective Time, Parent shall appoint a bank or trust company
Subsidiary of Parent or another bank or trust company reasonably
acceptable to Company, or Parents transfer agent, pursuant
to an agreement (the Exchange Agent
Agreement) to act as exchange agent (the
Exchange Agent) hereunder.
2.2 Deposit of Merger
Consideration. At or prior to the Effective Time,
Parent shall (i) authorize the Exchange Agent to issue an
aggregate number of shares of Parent Common Stock equal to the
aggregate Merger Consideration, and (ii) deposit, or cause
to be deposited with, the Exchange Agent, to the extent then
determinable, any cash payable in lieu of fractional shares
pursuant to Section 2.3(f) (the Exchange
Fund).
2.3 Delivery of Merger Consideration.
(a) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of
Certificate(s) which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive the Merger
Consideration pursuant to Section 1.4 and any cash in lieu
of fractional shares of Parent Common Stock to be issued or paid
in consideration therefor (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk
of loss and title to Certificate(s) shall pass, only upon
delivery of Certificate(s) (or affidavits of loss in lieu of
such Certificates) to the Exchange Agent and shall be
substantially in such form and have such other provisions as
shall be prescribed by the Exchange Agent Agreement (the
Letter of Transmittal)) and
(ii) instructions for use in surrendering Certificate(s) in
exchange for the Merger Consideration, any cash in lieu of
fractional shares of Parent Common Stock to be issued or paid in
consideration therefor and any dividends or distributions to
which such holder is entitled pursuant to Section 2.3(c).
(b) Upon surrender to the Exchange Agent of its Certificate
or Certificates, accompanied by a properly completed Letter of
Transmittal, a holder of Company Common Stock will be entitled
to receive promptly after the Effective Time the Merger
Consideration and any cash in lieu of fractional shares of
Parent Common Stock to be issued or paid in consideration
therefor in respect of the shares of Company Common Stock
represented by its Certificate or Certificates. Until so
surrendered, each such Certificate shall represent after the
Effective Time, for all purposes, only the right to receive,
without interest, the Merger Consideration and any cash in lieu
of fractional shares of Parent Common Stock to be issued or paid
in consideration therefor upon surrender of such Certificate in
accordance with, and any dividends or distributions to which
such holder is entitled pursuant to, this Article II.
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(c) No dividends or other distributions with respect to
Parent Common Stock shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby, in each case unless and until
the surrender of such Certificate in accordance with this
Article II. Subject to the effect of applicable abandoned
property, escheat or similar laws, following surrender of any
such Certificate in accordance with this Article II, the
record holder thereof shall be entitled to receive, without
interest, (i) the amount of dividends or other
distributions with a record date after the Effective Time
theretofore payable with respect to the whole shares of Parent
Common Stock represented by such Certificate and not paid
and/or
(ii) at the appropriate payment date, the amount of
dividends or other distributions payable with respect to shares
of Parent Common Stock represented by such Certificate with a
record date after the Effective Time (but before such surrender
date) and with a payment date subsequent to the issuance of the
Parent Common Stock issuable with respect to such Certificate.
(d) In the event of a transfer of ownership of a
Certificate representing Company Common Stock that is not
registered in the stock transfer records of Company, the
fractional shares of Parent Common Stock and cash in lieu of
fractional shares of Parent Common Stock comprising the Merger
Consideration shall be issued or paid in exchange therefor to a
person other than the person in whose name the Certificate so
surrendered is registered if the Certificate formerly
representing such Company Common Stock shall be properly
endorsed or otherwise be in proper form for transfer and the
person requesting such payment or issuance shall pay any
transfer or other similar Taxes required by reason of the
payment or issuance to a person other than the registered holder
of the Certificate or establish to the satisfaction of Parent
that the Tax has been paid or is not applicable. The Exchange
Agent (or, subsequent to the earlier of (x) the one-year
anniversary of the Effective Time and (y) the expiration or
termination of the Exchange Agent Agreement, Parent) shall be
entitled to deduct and withhold from any cash in lieu of
fractional shares of Parent Common Stock otherwise payable
pursuant to this Agreement to any holder of Company Common Stock
such amounts as the Exchange Agent or Parent, as the case may
be, is required to deduct and withhold under the Code, or any
provision of state, local or foreign Tax law, with respect to
the making of such payment. To the extent the amounts are so
withheld by the Exchange Agent or Parent, as the case may be,
and timely paid over to the appropriate Governmental Entity,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of shares of Company
Common Stock in respect of whom such deduction and withholding
was made by the Exchange Agent or Parent, as the case may be.
(e) After the Effective Time, there shall be no transfers
on the stock transfer books of Company of the shares of Company
Common Stock that were issued and outstanding immediately prior
to the Effective Time other than to settle transfers of Company
Common Stock that occurred prior to the Effective Time. If,
after the Effective Time, Certificates representing such shares
are presented for transfer to the Exchange Agent, they shall be
cancelled and exchanged for the Merger Consideration and any
cash in lieu of fractional shares of Parent Common Stock to be
issued or paid in consideration therefor in accordance with the
procedures set forth in this Article II.
(f) Notwithstanding anything to the contrary contained in
this Agreement, no fractional shares of Parent Common Stock
shall be issued upon the surrender of Certificates for exchange,
no dividend or distribution with respect to Parent Common Stock
shall be payable on or with respect to any fractional share, and
such fractional share interests shall not entitle the owner
thereof to vote or to any other rights of a stockholder of
Parent. In lieu of the issuance of any such fractional share,
each former stockholder of Company who otherwise would be
entitled to receive such fractional share shall be paid an
amount in cash (rounded to the nearest cent) equal to such
holders proportionate interest in the net proceeds from
the sale or sales in the open market by the Exchange Agent, on
behalf of all such holders, of the aggregate fractional shares
of Parent Common Stock that would otherwise have been issued
pursuant to this Article II. As soon as practicable
following the Closing Date, the Exchange Agent shall determine
the excess of (i) the number of full shares of Parent
Common Stock delivered to the Exchange Agent by Parent over
(ii) the aggregate number of full shares of Parent Common
Stock to be distributed to holders of shares of Company Common
Stock (such excess, the Excess Shares), and
the Exchange Agent, as agent for the former holders of Company
Common Stock, shall sell the Excess Shares at the prevailing
prices on the New York Stock Exchange (the
NYSE). The sale of the Excess Shares by the
Exchange Agent shall be executed on the NYSE through one or more
member firms
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of the NYSE and shall be executed in round lots to the extent
practicable. All commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent, incurred in connection with
such sale of Excess Shares shall reduce, but not below zero, the
amount of cash paid to former stockholders of Company in respect
of fractional shares. The Exchange Agent shall determine the
portion of the proceeds of such sale to which each former holder
of Company Common Stock shall be entitled, if any, by
multiplying the amount of the proceeds of such sale by a
fraction the numerator of which is the amount of fractional
share interests to which such holder of Company Common Stock is
entitled (after taking into account all shares of Company Common
Stock held at the Effective Time by such holder) and the
denominator of which is the aggregate amount of fractional share
interests to which all holders of Company Common Stock are
entitled. Until the proceeds of such sale have been distributed
to the former holders of shares of Company Common Stock, the
Exchange Agent will hold such proceeds in trust for such former
holders. As soon as practicable after the determination of the
amount of cash to be paid to such former holders of shares of
Company Common Stock in lieu of any fractional interests, the
Exchange Agent shall make available in accordance with this
Agreement such amounts to such former holders of shares of
Company Common Stock.
(g) Any portion of the Exchange Fund that remains unclaimed
by the stockholders of Company as of the first anniversary of
the Effective Time may be paid to Parent. In such event, any
former stockholders of Company who have not theretofore complied
with this Article II shall thereafter look only to Parent
with respect to the Merger Consideration, any cash in lieu of
any fractional shares and any unpaid dividends and distributions
on the Parent Common Stock deliverable in respect of each share
of Company Common Stock such stockholder holds as determined
pursuant to this Agreement, in each case, without any interest
thereon. Notwithstanding the foregoing, none of Parent, the
Surviving Company, the Exchange Agent or any other person shall
be liable to any former holder of shares of Company Common Stock
for any amount delivered in good faith to a public official
pursuant to applicable abandoned property, escheat or similar
laws.
(h) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Certificate to be lost, stolen
or destroyed and, if reasonably required by Parent or the
Exchange Agent, the posting by such person of a bond in such
amount as Parent may determine is reasonably necessary as
indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof pursuant to
this Agreement.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF COMPANY
Except (i) as disclosed in any report, schedule, form or
other document filed with, or furnished to, the SEC by Company
and publicly available prior to the date of this Agreement
(excluding, in each case, any disclosures set forth in any risk
factor section and in any section relating to forward-looking
statements to the extent that they are cautionary, predictive or
forward-looking in nature), or (ii) as disclosed in the
disclosure schedule (the Company Disclosure
Schedule) delivered by Company to Parent prior to the
execution of this Agreement (which schedule sets forth, among
other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception
to one or more representations or warranties contained in this
Article III, or to one or more of Companys covenants
contained herein, provided, however, that
disclosure in any section of such schedule shall apply only to
the indicated Section of this Agreement except to the extent
that it is reasonably apparent on the face of such disclosure
that such disclosure is relevant to another Section of this
Agreement, provided, further, that notwithstanding
anything in this Agreement to the contrary, (i) no such
item is required to be set forth in such schedule as an
exception to a representation or warranty if its absence would
not result in the related representation or warranty being
deemed untrue or incorrect under the standard established by
Section 9.2 and (ii) the mere inclusion of an item in
such schedule as an exception to a representation or warranty
shall not be deemed an admission that such item represents a
material exception or material fact,
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event or circumstance or that such item has had or would be
reasonably likely to have a Material Adverse Effect (as defined
in Section 3.8) on Company), Company hereby represents and
warrants to Parent as follows:
3.1 Corporate Organization.
(a) Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware. Company has the requisite corporate power and
authority to own or lease all of its properties and assets and
to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the
character or location of the properties and assets owned or
leased by it makes such licensing or qualification necessary.
(b) True, complete and correct copies of the Restated
Certificate of Incorporation of Company (the Company
Certificate), and the Amended and Restated Bylaws of
Company (the Company Bylaws), as in effect as
of the date of this Agreement, have previously been made
available to Parent.
(c) Each Subsidiary of Company (i) is duly
incorporated or duly formed, as applicable to each such
Subsidiary, and validly existing and in good standing under the
laws of its jurisdiction of organization, (ii) has the
requisite corporate power and authority or other power and
authority to own or lease all of its properties and assets and
to carry on its business as it is now being conducted and
(iii) is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it
or the character or location of the properties and assets owned
or leased by it makes such licensing or qualification necessary.
As used in this Agreement, the word
Subsidiary, when used with respect to either
party, means any bank, corporation, partnership, limited
liability company or other organization, whether incorporated or
unincorporated, with respect to which such party owns, directly
or indirectly, 50 percent or more of the equity interests
or such party has the power to elect 50 percent or more of
the directors or equivalent governing persons.
(d) The minute books of Company previously made available
to Parent contain true, complete and correct records of all
meetings and other corporate actions held or taken since
January 1, 2007 of its stockholders and Board of Directors
and the audit committee of its Board of Directors.
3.2 Capitalization. (a) The
authorized capital stock of Company consists of
3,000,000,000 shares of common stock, par value
$1.331/3
per share, of which, as of August 29, 2008 (the
Company Capitalization Date),
1,529,754,261 shares were issued and outstanding, and
25,000,000 shares of preferred stock, par value $1.00 per
share (the Company Preferred Stock), of
which, as of the Company Capitalization Date,
(i) 50,000 shares are designated as Floating
Rate Non-Cumulative Preferred Stock, Series 1, 21,000
of which were outstanding, (ii) 50,000 shares are
designated as Floating Rate Non-Cumulative Preferred
Stock, Series 2, 37,000 of which were outstanding,
(iii) 43,333 shares are designated as 6.375%
Non-Cumulative Preferred Stock, Series 3, 27,000 of
which were outstanding, (iv) 23,333 shares are
designated as Floating Rate Non-Cumulative Preferred
Stock, Series 4, 20,000 of which were outstanding;
(v) 50,000 shares of Preferred Stock are designated as
Floating Rate Non-Cumulative Preferred Stock,
Series 5, 50,000 of which were outstanding,
(vi) 65,000 shares are designated as 6.70%
Non-Cumulative Perpetual Preferred Stock, Series 6,
65,000 of which were outstanding, (vii) 50,000 shares
are designated as 6.25% Non-Cumulative Perpetual Preferred
Stock, Series 7, 50,000 of which were outstanding,
(viii) 97,750 shares are designated as 8.625%
Non-Cumulative Preferred Stock, Series 8, 89,100 of
which were outstanding (clauses (i) through
(viii) collectively, the Specified
Series), (ix) 66,000 shares are designated
as 9.00% Non-Voting Mandatory Convertible Non-Cumulative
Preferred Stock, Series 1, none of which were
outstanding, (x) 12,000 shares are designated as
9.00% Non-Voting Mandatory Convertible Non-Cumulative
Preferred Stock, Series 2, 12,000 of which were
outstanding and (xi) 5,000 shares are designated as
9.00% Non-Voting Mandatory Convertible Non-Cumulative
Preferred Stock, Series 3, 5,000 of which were
outstanding (clauses (x) and (xi) collectively, the
Convertible Series). As of the Company
Capitalization Date, the Company held 432,087,182 shares of
Company Common Stock in its treasury. As of the Company
Capitalization Date, no shares of Company Common Stock or
Company Preferred Stock were reserved for issuance except for
(i) 214,909,111 shares of Company Common Stock
reserved for issuance in connection with existing awards under
employee benefit, stock option and dividend reinvestment and
stock purchase plans and 83,849,895 shares of Company
Common Stock reserved for issuance in connection with future
awards that have not yet been made under employee
A-8
benefit, stock option and dividend reinvestment and stock
purchase plans, (ii) 1,778,120 shares of Company
Common Stock reserved for issuance in connection with
Exchangeable Shares issued by Merrill Lynch & Co.
Canada Ltd, (iii) 31,788,990 shares of Company Common
Stock reserved for issuance upon the conversion of the
Companys zero-coupon contingent convertible debt (Liquid
Yield Option Notes), and (iv) an aggregate of
58,585,859 shares of Company Common Stock reserved for
issuance upon conversion of the series of Company Preferred
Stock listed in clauses (ix), (x) and (xi) of the
first sentence of this paragraph. As of the date of this
Agreement, 304,421,097 shares of Company Common Stock were
reserved for issuance pursuant to the Stock Option Agreement.
All of the issued and outstanding shares of Company Common Stock
have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. As of the date of
this Agreement, no bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which
shareholders of Company may vote (Voting
Debt) are issued or outstanding. As of the date of
this Agreement, except pursuant to this Agreement, and other
than as set forth in Section 3.2(a) of the Company
Disclosure Schedule, the Company does not have and is not bound
by any outstanding subscriptions, options, warrants, calls,
rights, commitments or agreements of any character calling for
the purchase or issuance of, or the payment of any amount based
on, any shares of Company Common Stock, Company Preferred Stock,
Voting Debt or any other equity securities of Company or any
securities representing the right to purchase or otherwise
receive any shares of Company Common Stock, Company Preferred
Stock, Voting Debt or other equity securities of Company. As of
the date of this Agreement, except pursuant to this Agreement,
and other than as set forth in Section 3.2(a) of the
Company Disclosure Schedule, there are no contractual
obligations of Company or any of its Subsidiaries (I) to
repurchase, redeem or otherwise acquire any shares of capital
stock of Company or any equity security of Company or its
Subsidiaries or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any
other equity security of Company or its Subsidiaries or
(II) pursuant to which Company or any of its Subsidiaries
is or could be required to register shares of Company capital
stock or other securities under the Securities Act of 1933, as
amended (the Securities Act).
(b) Within five business days following the date hereof,
Company shall have provided Parent with a true, complete and
correct list of the aggregate number of shares of Company Common
Stock issuable upon the exercise of each Company Option and
settlement of each Company RSU, Company Cap Unit and Company
Deferred Equity Unit granted under the Company Stock Plans,
Company Cap Plan or Company Deferred Equity Unit Plans that were
outstanding as of the Company Capitalization Date and the
weighted average exercise price for the Company Options. Other
than the Company Options, Company Restricted Shares, Company
RSUs, Company Cap Units and Company Deferred Equity Units that
are outstanding as of the Company Capitalization Date, no other
equity-based awards are outstanding as of the Company
Capitalization Date. Since the Company Capitalization Date
through the date hereof, the Company has not (i) issued or
repurchased any shares of Company Common Stock, Company
Preferred Stock, Voting Debt or other equity securities of
Company, other than the issuance of shares of Company Common
Stock in connection with the exercise of Company Options or
settlement of the Company RSUs, Company Cap Units or Company
Deferred Equity Units granted under the Company Stock Plans,
Company Cap Plan or Company Deferred Equity Unit Plans that were
outstanding on the Company Capitalization Date or
(ii) issued or awarded any options, stock appreciation
rights, restricted shares, restricted stock units, deferred
equity units, awards based on the value of Company capital stock
or any other equity-based awards under any of the Company Stock
Plans.
(c) Except for any director qualifying shares, all of the
issued and outstanding shares of capital stock or other equity
ownership interests of each Subsidiary of Company are owned by
Company, directly or indirectly, free and clear of any liens,
pledges, charges, claims and security interests and similar
encumbrances (Liens), and all of such shares
or equity ownership interests are duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive
rights. No Subsidiary of Company has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or
issuance of any shares of capital stock or any other equity
security of such Subsidiary or any securities representing the
right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Subsidiary.
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3.3 Authority; No
Violation. (a) Company has full corporate
power and authority to execute and deliver this Agreement and
the Stock Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
this Agreement and the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby
(including the Certificate Amendment) have been duly, validly
and unanimously approved by the Board of Directors of Company.
Such unanimous approval by the Board of Directors is sufficient
to render inapplicable the provisions of Section 3 of
Article VII of the Company Certificate. The Board of
Directors of Company has determined unanimously that this
Agreement is advisable and in the best interests of Company and
its stockholders and has directed that this Agreement be
submitted to Companys stockholders for approval and
adoption at a duly held meeting of such stockholders and has
adopted a resolution to the foregoing effect. Except for the
approval and adoption of this Agreement by the affirmative vote
of the holders of a majority of the outstanding shares of
Company Common Stock entitled to vote at such meeting, no other
corporate proceedings on the part of Company are necessary to
approve this Agreement or the Stock Option Agreement or to
consummate the transactions contemplated hereby or thereby. This
Agreement and the Stock Option Agreement have been duly and
validly executed and delivered by Company and (assuming due
authorization, execution and delivery by Parent and Merger Sub)
constitute the valid and binding obligations of Company,
enforceable against Company in accordance with their terms
(except as may be limited by bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization or similar laws of general
applicability relating to or affecting the rights of creditors
generally and subject to general principles of equity (the
Bankruptcy and Equity Exception)).
(b) Neither the execution and delivery of this Agreement or
the Stock Option Agreement by Company nor the consummation by
Company of the transactions contemplated hereby or thereby, nor
compliance by Company with any of the terms or provisions of
this Agreement or the Stock Option Agreement, will
(i) violate any provision of the Company Certificate or
Company Bylaws or (ii) assuming that the consents,
approvals and filings referred to in Section 3.4 are duly
obtained
and/or made,
(A) violate any law, judgment, order, injunction or decree
applicable to Company, any of its Subsidiaries or any of their
respective properties or assets or (B) violate, conflict
with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective
properties or assets of Company or any of its Subsidiaries
under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease,
franchise, permit, Company Securitization Document, agreement,
bylaw or other instrument or obligation to which Company or any
of its Subsidiaries is a party or by which any of them or any of
their respective properties or assets is bound.
3.4 Consents and Approvals. Except
for (i) filings of applications and notices with, and
receipt of consents, authorizations, approvals, exemptions or
nonobjections from, the Securities and Exchange Commission (the
SEC), NYSE,
non-U.S. and
state securities authorities, the Financial Industry Regulatory
Authority (FINRA), the Commodities and
Futures Trading Commission (CFTC), the
Federal Energy Regulatory Commission (FERC),
applicable securities, commodities and futures exchanges, the
United Kingdom Financial Services Authority
(FSA), and other industry self-regulatory
organizations (SRO), (ii) the filing of
an application (the BHCA Application) with
the Board of Governors of the Federal Reserve System (the
Federal Reserve Board) under Section 4
of the Bank Holding Company Act of 1956, as amended (the
BHC Act) and approval of such application,
(iii) the filing of any required applications with the
Federal Deposit Insurance Corporation (the
FDIC), the Utah Department of Financial
Institutions, the New York State Banking Division and any other
non-U.S.,
federal or state banking, consumer finance, mortgage banking,
insurance or other regulatory, self-regulatory or enforcement
authorities or any courts, administrative agencies or
commissions or other governmental authorities or
instrumentalities (each a Governmental
Entity) and approval of or non-objection to such
applications, filings and notices (taken together with the items
listed in clauses (i) and (ii), the Regulatory
Approvals), (iv) the filing with the SEC of a
Proxy Statement in definitive form relating to the respective
meetings of Companys and Parents stockholders to be
held in connection with this Agreement and the transactions
contemplated by this Agreement (the Joint Proxy
Statement) and of a registration statement on
Form S-4
(the
Form S-4)
in which the Joint Proxy Statement will be included as a
prospectus, and declaration of effectiveness of the
Form S-4,
(v) the filing of the
A-10
Certificate of Merger with the Secretary of State of the State
of Delaware pursuant to the DGCL, (vi) any notices to or
filings with the Small Business Administration (the
SBA), (vii) any notices or filings
required under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act) and the antitrust laws and regulations of any
non-U.S. jurisdiction
and (viii) such filings and approvals as are required to be
made or obtained under the securities or Blue Sky
laws of various states in connection with the issuance of the
shares of Parent Common Stock pursuant to this Agreement and
approval of listing of such Parent Common Stock on the NYSE, no
consents or approvals of or filings or registrations with any
Governmental Entity are necessary in connection with the
consummation by Company of the Merger and the other transactions
contemplated by this Agreement or the Stock Option Agreement. No
consents or approvals of or filings or registrations with any
Governmental Entity are necessary in connection with the
execution and delivery by Company of this Agreement or the Stock
Option Agreement.
3.5 Reports; Regulatory Matters.
(a) Company and each of its Subsidiaries have timely filed
all reports, registrations, statements and certifications,
together with any amendments required to be made with respect
thereto, that they were required to file since January 1,
2006 with (i) FINRA, (ii) the SEC, (iii) the
Office of Thrift Supervision (the OTS),
(iv) the FDIC, (v) the NYSE, (vi) any state
consumer finance, mortgage banking or insurance regulatory
authority or agency, (vii) any
non-U.S. regulatory
authority and (viii) any SRO (collectively,
Regulatory Agencies) and with each other
applicable Governmental Entity, and all other reports and
statements required to be filed by them since January 1,
2006, including any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States,
any state, any
non-U.S. entity,
or any Regulatory Agency or other Governmental Entity, and have
paid all fees and assessments due and payable in connection
therewith. Except for normal examinations conducted by a
Regulatory Agency or other Governmental Entity in the ordinary
course of the business of Company and its Subsidiaries, no
Regulatory Agency or other Governmental Entity has initiated
since January 1, 2006 or has pending any proceeding,
enforcement action or, to the knowledge of Company,
investigation into the business, disclosures or operations of
Company or any of its Subsidiaries. Since January 1, 2006,
no Regulatory Agency or other Governmental Entity has resolved
any proceeding, enforcement action or, to the knowledge of
Company, investigation into the business, disclosures or
operations of Company or any of its Subsidiaries. There is no
unresolved, or, to Companys knowledge, threatened
criticism, comment, exception or stop order by any Regulatory
Agency or other Governmental Entity with respect to any report
or statement relating to any examinations or inspections of
Company or any of its Subsidiaries. Since January 1, 2006,
there have been no formal or informal inquiries by, or
disagreements or disputes with, any Regulatory Agency or other
Governmental Entity with respect to the business, operations,
policies or procedures of Company or any of its Subsidiaries
(other than normal examinations conducted by a Regulatory Agency
or other Governmental Entity in Companys ordinary course
of business).
(b) Neither Company nor any of its Subsidiaries is subject
to any
cease-and-desist
or other order or formal or informal enforcement action issued
by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to
any order or directive by, or has been ordered to pay any civil
money penalty by, or has been since January 1, 2006 a
recipient of any supervisory letter from, or since
January 1, 2006 has adopted any policies, procedures or
board resolutions at the request or suggestion of, any
Regulatory Agency or other Governmental Entity that currently
restricts or affects in any material respect the conduct of its
business (or to Companys knowledge that, upon consummation
of the Merger, would restrict in any material respect the
conduct of the business of Parent or any of its Subsidiaries),
or that in any material manner relates to its capital adequacy,
its ability to pay dividends, its credit, risk management or
compliance policies, its internal controls, its management or
its business, other than those of general application that apply
to similarly situated companies or their Subsidiaries (each item
in this sentence, a Company Regulatory
Agreement), nor has Company or any of its Subsidiaries
been advised since January 1, 2006 by any Regulatory Agency
or other Governmental Entity that it is considering issuing,
initiating, ordering, or requesting any such Company Regulatory
Agreement. The Company and each of its subsidiaries are
currently in compliance with all applicable laws and regulations
relating to capital adequacy and, to the knowledge of Company,
there has not been any event or
A-11
occurrence since January 1, 2006 that would result in a
determination that Merrill Lynch Bank &
Trust Co., FSB or Merrill Lynch Bank USA is not well
capitalized as a matter of applicable banking law.
(c) Company has previously made available to Parent an
accurate and complete copy of each (i) final registration
statement, prospectus, report, schedule and definitive proxy
statement filed with or furnished to the SEC by Company or any
of its Subsidiaries pursuant to the Securities Act or the
Securities Exchange Act of 1934, as amended (the
Exchange Act) since January 1, 2006 (the
Company SEC Reports) and prior to the date of
this Agreement and (ii) communication mailed by Company to
its stockholders since January 1, 2006 and prior to the
date of this Agreement. No such Company SEC Report or
communication, at the time filed, furnished or communicated
(and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of the
relevant meetings, respectively), contained any untrue statement
of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances in which
they were made, not misleading, except that information as of a
later date (but before the date of this Agreement) shall be
deemed to modify information as of an earlier date. As of their
respective dates, all Company SEC Reports complied as to form in
all material respects with the published rules and regulations
of the SEC with respect thereto. Each current Subsidiary of
Company that has filed since January 1, 2006 a
Form S-3
registration statement with the SEC meets the requirements for
the use of
Form S-3,
and no event has occurred that would reasonably be expected to
result in
Form S-3
eligibility requirements no longer being satisfied by any such
Subsidiary. No executive officer of Company has failed in any
respect to make the certifications required of him or her under
Section 302 or 906 of the Sarbanes-Oxley Act of 2002 (the
Sarbanes-Oxley Act).
3.6 Financial Statements.
(a) The financial statements of Company and its
Subsidiaries included (or incorporated by reference) in the
Company SEC Reports (including the related notes, where
applicable) (i) have been prepared from, and are in
accordance with, the books and records of Company and its
Subsidiaries, (ii) fairly present in all material respects
the consolidated results of operations, cash flows, changes in
stockholders equity and consolidated financial position of
Company and its Subsidiaries for the respective fiscal periods
or as of the respective dates therein set forth (subject in the
case of unaudited statements to recurring year-end audit
adjustments normal in nature and amount), (iii) complied as
to form, as of their respective dates of filing with the SEC, in
all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with
respect thereto, and (iv) have been prepared in accordance
with U.S. generally accepted accounting principles
(GAAP) consistently applied during the
periods involved, except, in each case, as indicated in such
statements or in the notes thereto. The books and records of
Company and its Subsidiaries have been, and are being,
maintained in all material respects in accordance with GAAP and
any other applicable legal and accounting requirements.
Deloitte & Touche LLP has not resigned or been
dismissed as independent public accountants of Company as a
result of or in connection with any disagreements with Company
on a matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
(b) Neither Company nor any of its Subsidiaries has any
material liability or obligation of any nature whatsoever
(whether absolute, accrued, contingent, determined, determinable
or otherwise and whether due or to become due), except for
(i) those liabilities that are reflected or reserved
against on the consolidated balance sheet of Company included in
its Quarterly Report on
Form 10-Q
for the fiscal quarter ended June 27, 2008 (including any
notes thereto) and (ii) liabilities incurred in the
ordinary course of business consistent with past practice since
June 27, 2008 or in connection with this Agreement and the
transactions contemplated hereby.
(c) The records, systems, controls, data and information of
Company and its Subsidiaries are recorded, stored, maintained
and operated under means (including any electronic, mechanical
or photographic process, whether computerized or not) that are
under the exclusive ownership and direct control of Company or
its Subsidiaries or accountants (including all means of access
thereto and therefrom), except for any non-exclusive ownership
and non-direct control that would not reasonably be expected to
have a material adverse effect on the system of internal
accounting controls described below in this Section 3.6(c).
Company (x) has implemented and maintains disclosure
controls and procedures (as defined in
Rule 13a-15(e)
of the Exchange
A-12
Act) to ensure that material information relating to Company,
including its consolidated Subsidiaries, is made known to the
chief executive officer and the chief financial officer of
Company by others within those entities, and (y) has
disclosed, based on its most recent evaluation prior to the date
hereof, to Companys outside auditors and the audit
committee of Companys Board of Directors (i) any
significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting (as
defined in
Rule 13a-15(f)
of the Exchange Act) which are reasonably likely to adversely
affect Companys ability to record, process, summarize and
report financial information and (ii) any fraud, whether or
not material, that involves management or other employees who
have a significant role in Companys internal controls over
financial reporting. These disclosures were made in writing by
management to Companys auditors and audit committee, a
copy of which has previously been made available to Parent. As
of the date hereof, there is no reason to believe that
Companys outside auditors, chief executive officer and
chief financial officer will not be able to give the
certifications and attestations required pursuant to the rules
and regulations adopted pursuant to Section 404 of the
Sarbanes-Oxley Act, without qualification, when next due.
(d) Since December 28, 2007, (i) neither Company
nor any of its Subsidiaries nor, to the knowledge of Company,
any director, officer, employee, auditor, accountant or
representative of Company or any of its Subsidiaries has
received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or
oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of Company or any of its
Subsidiaries or their respective internal accounting controls,
including any material complaint, allegation, assertion or claim
that Company or any of its Subsidiaries has engaged in
questionable accounting or auditing practices, and (ii) no
attorney representing Company or any of its Subsidiaries,
whether or not employed by Company or any of its Subsidiaries,
has reported evidence of a material violation of securities
laws, breach of fiduciary duty or similar violation by Company
or any of its officers, directors, employees or agents to the
Board of Directors of Company or any committee thereof or to any
director or officer of Company.
3.7 Brokers Fees. Neither
Company nor any of its Subsidiaries nor any of their respective
officers, directors, employees or agents has utilized any
broker, finder or financial advisor or incurred any liability
for any brokers fees, commissions or finders fees in
connection with the Merger or any other transactions
contemplated by this Agreement, other than as set forth in
Section 3.7 of the Company Disclosure Schedule and pursuant
to letter agreements, true, complete and correct copies of which
have been previously delivered to Parent.
3.8 Absence of Certain Changes or
Events. (a) Since June 27, 2008, no
event or events have occurred that have had or would reasonably
be expected to have, either individually or in the aggregate, a
Material Adverse Effect on Company. As used in this Agreement,
the term Material Adverse Effect means, with
respect to Parent or Company, as the case may be, a material
adverse effect on (i) the financial condition, results of
operations or business of such party and its Subsidiaries taken
as a whole (provided, however, that, with respect
to clause (i), a Material Adverse Effect shall not
be deemed to include effects to the extent resulting from
(A) changes, after the date hereof, in GAAP or regulatory
accounting requirements applicable generally to companies in the
industries in which such party and its Subsidiaries operate,
(B) changes, after the date hereof, in laws, rules,
regulations or the interpretation of laws, rules or regulations
by Governmental Authorities of general applicability to
companies in the industries in which such party and its
Subsidiaries operate, (C) actions or omissions taken with
the prior written consent of the other party or expressly
required by this Agreement, (D) changes in global, national
or regional political conditions (including acts of terrorism or
war) or general business, economic or market conditions,
including changes generally in prevailing interest rates,
currency exchange rates, credit markets and price levels or
trading volumes in the United States or foreign securities
markets, in each case generally affecting the industries in
which such party or its Subsidiaries operate and including
changes to any previously correctly applied asset marks
resulting therefrom, (E) the execution of this Agreement or
the public disclosure of this Agreement or the transactions
contemplated hereby, including acts of competitors or losses of
employees to the extent resulting therefrom, (F) failure,
in and of itself, to meet earnings projections, but not
including any underlying causes thereof or (G) changes in
the trading price of a partys common stock, in and of
itself, but not including any underlying causes, except, with
respect to clauses (A), (B) and (D), to the extent that the
effects of such change are
A-13
disproportionately adverse to the financial condition, results
of operations or business of such party and its Subsidiaries,
taken as a whole, as compared to other companies in the industry
in which such party and its Subsidiaries operate) or
(ii) the ability of such party to timely consummate the
transactions contemplated by this Agreement.
(b) Since June 27, 2008 through and including the date
of this Agreement, Company and its Subsidiaries have carried on
their respective businesses in all material respects in the
ordinary course of business consistent with their past practice.
(c) Since June 27, 2008 through and including the date
of this Agreement, neither Company nor any of its Subsidiaries
has (i) except for (A) normal increases for or
payments to employees (other than officers subject to the
reporting requirements of Section 16(a) of the Exchange Act
(the Executive Officers)) made in the
ordinary course of business consistent with past practice or
(B) as required by applicable law or contractual
obligations existing as of the date hereof, increased the wages,
salaries, compensation, pension, or other fringe benefits or
perquisites payable to any Executive Officer or other employee
or director from the amount thereof in effect as of
June 27, 2008, granted any severance or termination pay,
entered into any contract to make or grant any severance or
termination pay (in each case, except as required under the
terms of agreements or severance plans listed on
Section 3.11 of the Company Disclosure Schedule, as in
effect as of the date hereof ), or paid any cash bonus in excess
of $1,000,000 other than the customary year-end bonuses in
amounts consistent with past practice and other than the monthly
incentive payments made to financial advisors under current
Company programs, (ii) granted any options to purchase
shares of Company Common Stock, any restricted shares of Company
Common Stock or any right to acquire any shares of its capital
stock, or any right to payment based on the value of
Companys capital stock, to any Executive Officer or other
employee or director other than grants to employees (other than
Executive Officers) made in the ordinary course of business
consistent with past practice under the Company Stock Plans or
grants relating to shares of Company Common Stock with an
aggregate value for all such grants of less than $1 million
for any individual, (iii) changed any financial accounting
methods, principles or practices of Company or its Subsidiaries
affecting its assets, liabilities or businesses, including any
reserving, renewal or residual method, practice or policy,
(iv) suffered any strike, work stoppage, slow-down, or
other labor disturbance, or (v) except for publicly
disclosed ordinary dividends on the Company Common Stock or
Company Preferred Stock and except for distributions by
wholly-owned Subsidiaries of Company to Company or another
wholly-owned Subsidiary of Company, made or declared any
distribution in cash or kind to its stockholder or repurchased
any shares of its capital stock or other equity interests.
3.9 Legal
Proceedings. (a) Neither Company nor any of
its Subsidiaries is a party to any, and there are no pending or,
to Companys knowledge, threatened, legal, administrative,
arbitral or other proceedings, claims, actions, suits or
governmental or regulatory investigations of any nature against
Company or any of its Subsidiaries or to which any of their
assets are subject.
(b) There is no judgment, settlement agreement, order,
injunction, decree or regulatory restriction (other than those
of general application that apply to similarly situated savings
and loan holding companies or their Subsidiaries) imposed upon
Company, any of its Subsidiaries or the assets of Company or any
of its Subsidiaries (or that, upon consummation of the Merger,
would apply to Parent or any of its Subsidiaries).
3.10 Taxes and Tax Returns.
(a) Each of Company and its Subsidiaries has duly and
timely filed (including all applicable extensions) all material
Tax Returns required to be filed by it on or prior to the date
of this Agreement (all such Tax Returns being accurate and
complete in all material respects), has paid all Taxes shown
thereon as arising and has duly paid or made provision for the
payment of all material Taxes that have been incurred or are due
or claimed to be due from it by federal, state, foreign or local
taxing authorities other than Taxes that are not yet delinquent
or are being contested in good faith, have not been finally
determined and have been adequately reserved against under GAAP.
The federal, state and local income Tax Returns of Company and
its Subsidiaries have been examined by the Internal Revenue
Service (the IRS) or other relevant taxing
authority for all years to and including 2001, and any liability
with respect thereto has been satisfied or any liability with
respect to deficiencies asserted as a result of such examination
is covered by reserves that are
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adequate under GAAP. There are no material disputes pending, or
written claims asserted, for Taxes or assessments upon Company
or any of its Subsidiaries for which Company does not have
reserves that are adequate under GAAP. Neither Company nor any
of its Subsidiaries is a party to or is bound by any Tax sharing
agreement or arrangement (other than such an agreement or
arrangement exclusively between or among Company and its
Subsidiaries). Within the past five years (or otherwise as part
of a plan (or series of related transactions) within
the meaning of Section 355(e) of the Code of which the
Merger is also a part), neither Company nor any of its
Subsidiaries has been a distributing corporation or
a controlled corporation in a distribution intended
to qualify under Section 355(a) of the Code. Neither
Company nor any of its Subsidiaries is required to include in
income any adjustment pursuant to Section 481(a) of the
Code, no such adjustment has been proposed by the IRS and no
pending request for permission to change any accounting method
has been submitted by Company or any of its Subsidiaries.
Neither Company nor any of its Subsidiaries has participated in
a listed transaction within the meaning of Treasury
Regulation Section 1.6011-4(b)(2)
subsequent to such transaction becoming listed.
(b) As used in this Agreement, the term
Tax or Taxes means
(i) all federal, state, local, and foreign income, excise,
gross receipts, gross income, ad valorem, profits,
gains, property, capital, sales, transfer, use, payroll,
employment, severance, withholding, duties, intangibles,
franchise, backup withholding, value added and other taxes,
charges, levies or like assessments together with all penalties
and additions to tax and interest thereon and (ii) any
liability for Taxes described in clause (i) above under
Treasury
Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), as a
transferee or successor or by contract.
(c) As used in this Agreement, the term Tax
Return means a report, return or other information
(including any amendments) required to be supplied to a
governmental entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any
group of entities that includes Company or any of its
Subsidiaries.
(d) Without regard to this Agreement or the Stock Option
Agreement, Company has not undergone any ownership
change within the meaning of Section 382 of the Code
and, other than as a result of an acquisition by Company or any
of its Subsidiaries, the availability of any net operating loss
and other carryovers available to Company or its Subsidiaries
has not been affected by Sections 382, 383 or 384 of the
Code or by the SRLY limitations of Treasury
Regulation Sections 1.1502-21,
1.1502-21T or 1.1502-22.
(e) Company and its Subsidiaries have complied in all
material respects with all applicable laws relating to the
payment and withholding of Taxes (including withholding of Taxes
pursuant to Sections 1441, 1442 and 3402 of the Code or any
comparable provision of any state, local or foreign laws) and
have, within the time and in the manner prescribed by applicable
law, withheld from and paid over all amounts required to be so
withheld and paid over under applicable laws.
3.11 Employee Matters.
(a) Section 3.11 of the Company Disclosure Schedule
(which shall be delivered by Company to Parent within five
business days following the date hereof), sets forth a true,
complete and correct list of each material employee
benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
(ERISA), whether or not subject to ERISA, and
each material employment, consulting, bonus, incentive or
deferred compensation, vacation, stock option or other
equity-based, severance, termination, retention, change of
control, profit-sharing, fringe benefit or other similar plan,
program, agreement or commitment, whether written or unwritten,
for the benefit of any employee, former employee, director or
former director of Company or any of its Subsidiaries entered
into, maintained or contributed to by Company or any of its
Subsidiaries or to which Company or any of its Subsidiaries is
obligated to contribute, or with respect to which Company or any
of its Subsidiaries has any liability, direct or indirect,
contingent or otherwise (including any liability arising out of
an indemnification, guarantee, hold harmless or similar
agreement) or otherwise providing benefits to any current,
former or future employee, officer or director of Company or any
of its Subsidiaries or to any beneficiary or dependent thereof
(such plans, programs, agreements and commitments, herein
referred to as the Company Benefit Plans).
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(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect,
(i) each of the Company Benefit Plans has been operated and
administered in all material respects with applicable law,
including, but not limited to, ERISA, the Code and in each case
the regulations thereunder; (ii) each Company Benefit Plan
intended to be qualified within the meaning of
Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service, or has
pending an application for such determination from the Internal
Revenue Service with respect to those provisions for which the
remedial amendment period under Section 401(b) of the Code
has not expired, and, to the knowledge of the Company, there is
not any reason why any such determination letter should be
revoked; (iii) with respect to each Company Benefit Plan
that is subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Code, as of the last day of the
most recent plan year ended prior to the date hereof, the
actuarially determined present value of all benefit
liabilities within the meaning of Section 4001(a)(16)
of ERISA did not exceed the then current value of assets of such
Company Benefit Plan or, if such liabilities did exceed such
assets, the amount thereof was properly reflected on the
financial statements of Company or its applicable Subsidiary
previously filed with the SEC; (iv) no Company Benefit Plan
provides benefits, including, without limitation, death or
medical benefits (whether or not insured), with respect to
current or former employees or directors of the Company or any
Company Subsidiary beyond their retirement or other termination
of service, other than (1) coverage mandated by applicable
law or (2) death benefits or retirement benefits under any
employee pension plan (as such term is defined in
Section 3(2) of ERISA); (v) no Controlled Group
Liability has been incurred by the Company, a Company Subsidiary
or any of their respective ERISA Affiliates that has not been
satisfied in full, and no condition exists that presents a risk
to the Company, a Company Subsidiary or any of their respective
ERISA Affiliates of incurring any such liability;
(vi) neither the Company nor any Company Subsidiary
contributes on behalf of employees of the Company or any Company
Subsidiary to a multiemployer pension plan (as such
term is defined in Section 3(37) of ERISA) or a plan that
has two or more contributing sponsors at least two of whom are
not under common control, within the meaning of
Section 4063 of ERISA; (vii) all contributions or
other amounts payable by the Company or a Company Subsidiary
with respect to each Company Benefit Plan in respect of current
or prior plan years have been paid or accrued in accordance with
generally accepted accounting principles; (viii) neither
the Company nor a Company Subsidiary has engaged in a
transaction in connection with which the Company or a Company
Subsidiary reasonably could be subject to either a civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a
material tax imposed pursuant to Section 4975 or 4976 of
the Code; and (ix) there are no pending, threatened or
anticipated claims (other than routine claims for benefits) by,
on behalf of or against any of the Company Benefit Plans or any
trusts related thereto which could reasonably be expected to
result in any liability of the Company or any Company Subsidiary.
(c) Each Company Benefit Plan that is a nonqualified
deferred compensation plan within the meaning of
Section 409A(d)(1) of the Code (a Nonqualified
Deferred Compensation Plan) and any award thereunder,
in each case that is subject to Section 409A of the Code
has been operated in compliance in all material respects with
Section 409A of the Code since January 1, 2006, based
upon a good faith, reasonable interpretation of
(A) Section 409A of the Code and (B)(1) the proposed
and final Treasury Regulations issued thereunder and
(2) Internal Revenue Service Notice
2005-1, all
subsequent Internal Revenue Service Notices and other interim
guidance on Section 409A of the Code.
(d) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, all
Company Options have been granted in compliance with the terms
of the applicable Company Benefit Plans, with applicable law,
and with the applicable provisions of the Company Certificate
and Company Bylaws as in effect at the applicable time, and all
such Company Options are accurately disclosed as required under
applicable law in the Company SEC Reports, including the
financial statements contained therein or attached thereto (if
amended or superseded by a filing with the SEC made prior to the
date of this Agreement, as so amended or superseded).
(e) Neither the execution or delivery of this Agreement nor
the consummation of the transactions contemplated by this
Agreement will, either alone or in conjunction with any other
event, (i) result in any material payment or benefit
becoming due or payable, or required to be provided, to any
director, employee or independent contractor of Company or any
of its Subsidiaries or to such individuals in the aggregate,
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(ii) materially increase the amount or value of any benefit
or compensation otherwise payable or required to be provided to
any such director, employee or independent contractor,
(iii) result in the acceleration of the time of payment,
vesting or funding of any such benefit or compensation or
(iv) result in any material limitation on the right of
Company or any of its Subsidiaries to amend, merge or, terminate
any Company Benefit Plan or related trust. No Company Benefit
Plan provides for the reimbursement of excise Taxes under
Section 4999 of the Code or any income Taxes under the Code.
(f) No labor organization or group of employees of the
Company or any of its subsidiaries has made a pending demand for
recognition or certification, and there are no representation or
certification proceedings or petitions seeking a representation
proceeding presently pending or threatened to be brought or
filed, with the National Labor Relations Board or any other
labor relations tribunal or authority. There are no organizing
activities, strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances, or other material
labor disputes pending or threatened against or involving the
Company or any of its subsidiaries. Except as would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, each of the Company and its
Subsidiaries is in compliance in all material respects with all
applicable laws and collective bargaining agreements respecting
employment and employment practices, terms and conditions of
employment, wages and hours and occupational safety and health.
(g) Controlled Group Liability
means any and all liabilities (i) under Title IV
of ERISA, (ii) under Section 302 of ERISA,
(iii) under Sections 412 and 4971 of the Code, and
(iv) as a result of a failure to comply with the
continuation coverage requirements of Section 601 et seq.
of ERISA and section 4980B of the Code.
(h) ERISA Affiliate means any
entity if it would have ever been considered a single employer
with the Company under ERISA Section 4001(b) or part of the
same controlled group as the Company for purposes of
ERISA Section 302(d)(8)(C) or Code Sections 414(b) or
(c) or a Member of an affiliated service group for purposes
of Code Section 414(m).
3.12 Compliance with Applicable
Law. (a) Company and each of its
Subsidiaries hold all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to each, and have
complied in all respects with and are not in default in any
respect under any, law, rule, regulation or legal requirement
applicable to Company or any of its Subsidiaries.
(b) Company and each of its Subsidiaries has properly
administered all accounts for which it acts as a fiduciary,
including accounts for which it serves as a trustee, agent,
custodian, personal representative, guardian, conservator or
investment advisor, in accordance with the terms of the
governing documents and applicable law. None of Company, any of
its Subsidiaries, or any director, officer or employee of
Company or of any of its Subsidiaries has committed any breach
of trust or fiduciary duty with respect to any such fiduciary
account and the accountings for each such fiduciary account are
true and correct and accurately reflect the assets of such
fiduciary account.
3.13 Certain
Contracts. (a) Neither Company nor any of
its Subsidiaries is a party to or bound by any contract,
arrangement, commitment or understanding (whether written or
oral) (i) that is a material contract (as such
term is defined in Item 601(b)(10) of
Regulation S-K
of the SEC) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the
Company SEC Reports filed prior to the date hereof,
(ii) that contains a non-compete or client or customer
non-solicit requirement or other provision that materially
restricts the conduct of, or the manner of conducting, any line
of business material to the Company and its Subsidiaries, taken
as a whole, or, to the knowledge of Company, upon consummation
of the Merger could materially restrict the ability of Parent,
the Surviving Company or any of their respective Subsidiaries to
engage in any material line of business, (iii) that
obligates Company or any of its Subsidiaries to conduct business
on an exclusive or preferential basis with any third party or
upon consummation of the Merger will obligate Parent, the
Surviving Company or any of their respective Subsidiaries to
conduct business with any third party on an exclusive or
preferential basis, in any case of the preceding which is
material, (iv) with or to a labor union or guild (including
any collective bargaining agreement). Each contract,
A-17
arrangement, commitment or understanding of the type described
in this Section 3.13(a), whether or not set forth in the
Company Disclosure Schedule, is referred to as an
Company Contract.
(b) (i) Each Company Contract is valid and binding on
Company or its applicable Subsidiary, enforceable against it in
accordance with its terms (subject to the Bankruptcy and Equity
Exception), and is in full force and effect, (ii) Company
and each of its Subsidiaries and, to Companys knowledge,
each other party thereto has duly performed all obligations
required to be performed by it to date under each Company
Contract and (iii) no event or condition exists that
constitutes or, after notice or lapse of time or both, will
constitute, a breach, violation or default on the part of
Company or any of its Subsidiaries or, to Companys
knowledge, any other party thereto under any such Company
Contract. There are no disputes pending or, to Companys
knowledge, threatened with respect to any Company Contract.
3.14 Risk Management
Instruments. (a) Derivative
Transactions means any swap transaction, option,
warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or collar
transaction relating to one or more currencies, commodities,
bonds, equity securities, loans, servicing rights, interest
rates, prices, values, or other financial or non-financial
assets, credit-related events or conditions or any indexes, or
any other similar transaction or combination of any of these
transactions, including collateralized mortgage obligations or
other similar instruments or any debt or equity instruments
evidencing or embedding any such types of transactions, and any
related credit support, collateral or other similar arrangements
related to such transactions; provided that, for the
avoidance of doubt, the term Derivative Transactions
shall not include any Company Option.
(b) All Derivative Transactions, whether entered into for
the account of Company or any of its Subsidiaries or for the
account of a customer of Company or any of its Subsidiaries,
were entered into in the ordinary course of business consistent
with past practice and in accordance with prudent banking
practice and applicable laws, rules, regulations and policies of
any Regulatory Authority and in accordance with the investment,
securities, commodities, risk management and other policies,
practices and procedures employed by Company and its
Subsidiaries, and with counterparties believed at the time to be
financially responsible and able to understand (either alone or
in consultation with their advisers) and to bear the risks of
such Derivative Transactions. All of such Derivative
Transactions are valid and binding obligations of Company or one
of its Subsidiaries enforceable against it in accordance with
their terms (subject to the Bankruptcy and Equity Exception),
and are in full force and effect. Company and its Subsidiaries
and, to Companys knowledge, all other parties thereto have
duly performed their obligations under the Derivative
Transactions to the extent that such obligations to perform have
accrued and, to Companys knowledge, there are no breaches,
violations or defaults or allegations or assertions of such by
any party thereunder.
3.15 Investment Securities and
Commodities. (a) Except as would not
reasonably be expected to have a Material Adverse Effect on
Company, each of Company and its Subsidiaries has good title to
all securities and commodities owned by it (except those sold
under repurchase agreements or held in any fiduciary or agency
capacity), free and clear of any Liens, except to the extent
such securities or commodities are pledged in the ordinary
course of business to secure obligations of Company or its
Subsidiaries. Such securities and commodities are valued on the
books of Company in accordance with GAAP in all material
respects.
(b) Company and its Subsidiaries and their respective
businesses employ investment, securities, commodities, risk
management and other policies, practices and procedures which
Company believes are prudent and reasonable in the context of
such businesses.
3.16 Property. Company or one of
its Subsidiaries (a) has good and marketable title to all
the properties and assets reflected in the latest audited
balance sheet included in such Company SEC Reports as being
owned by Company or one of its Subsidiaries or acquired after
the date thereof (except properties sold or otherwise disposed
of since the date thereof in the ordinary course of business)
(the Owned Properties), free and clear of all
Liens of any nature whatsoever, except (i) statutory Liens
securing payments not yet due, (ii) Liens for real property
Taxes not yet due and payable, (iii) easements, rights of
way, and other similar encumbrances that do not materially
affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business
operations at such properties and (iv) such imperfections
or irregularities of title or Liens as do not materially affect
the use of the properties or assets subject thereto or
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affected thereby or otherwise materially impair business
operations at such properties (collectively, Permitted
Encumbrances), and (b) is the lessee of all
leasehold estates reflected in the latest audited financial
statements included in such Company SEC Reports or acquired
after the date thereof (except for leases that have expired by
their terms since the date thereof) (the Leased
Properties and, collectively with the Owned
Properties, the Real Property), free and
clear of all Liens of any nature whatsoever, except for
Permitted Encumbrances, and is in possession of the properties
purported to be leased thereunder, and each such lease is valid
without default thereunder by the lessee or, to Companys
knowledge, the lessor. The Real Property is in material
compliance with all applicable zoning laws and building codes,
and the buildings and improvements located on the Real Property
are in good operating condition and in a state of good working
order, ordinary wear and tear excepted. There are no pending or,
to the knowledge of Company, threatened condemnation proceedings
against the Real Property. Company and its Subsidiaries are in
compliance with all applicable health and safety related
requirements for the Real Property, including those under the
Americans with Disabilities Act of 1990 and the Occupational
Health and Safety Act of 1970. Company and its Subsidiaries own
and have good and valid title to, or have valid rights to use,
all material tangible personal property used by them in
connection with the conduct of their businesses, in each case,
free and clear of all Liens, other than Permitted Encumbrances.
3.17 Intellectual Property.
(a) Definitions. For purposes of this
Agreement, the following terms shall have the meanings assigned
below:
Company IP means all Intellectual Property
owned, used, held for use or exploited by Company or any of its
Subsidiaries.
Intellectual Property means collectively, all
intellectual property and other similar proprietary rights in
any jurisdiction throughout the world, whether owned, used or
held for use under license, whether registered or unregistered,
including such rights in and to: (i) trademarks, service
marks, brand names, certification marks, trade dress, logos,
trade names and corporate names and other indications of origin,
and the goodwill associated with any of the foregoing
(collectively, Trademarks); (ii) patents
and patent applications, and any and all divisions,
continuations,
continuations-in-part,
reissues, continuing patent applications, provisional patent
applications, re-examinations, and extensions thereof, any
counterparts claiming priority therefrom, utility models,
patents of importation/confirmation, certificates of invention,
certificates of registration and like rights (collectively,
Patents), and inventions, invention
disclosures, discoveries and improvements, whether or not
patentable; (iii) trade secrets (including, those trade
secrets defined in the Uniform Trade Secrets Act and under
corresponding foreign statutory law and common law), business,
technical and know-how information, non-public information, and
confidential information and rights to limit the use or
disclosure thereof by any person (collectively, Trade
Secrets); (iv) all works of authorship (whether
copyrightable or not), copyrights and proprietary rights in
copyrighted works including writings, other works of authorship,
and databases (or other collections of information, data, works
or other materials) (collectively,
Copyrights); (v) software, including
data files, source code, object code, firmware, mask works,
application programming interfaces, computerized databases and
other software-related specifications and documentation
(collectively, Software); (vi) designs
and industrial designs; (vii) Internet domain names;
(viii) rights of publicity and other rights to use the
names and likeness of individuals; (ix) moral rights; and
(x) claims, causes of action and defenses relating to the
past, present and future enforcement of any of the foregoing; in
each case of (i) to (ix) above, including any
registrations of, applications to register, and renewals and
extensions of, any of the foregoing with or by any Governmental
Entity in any jurisdiction.
License Agreement means any legally binding
contract, whether written or oral, and any amendments thereto
(including license agreements, sub-license agreements, research
agreements, development agreements, distribution agreements,
consent to use agreements, customer or client contracts,
coexistence, non assertion or settlement agreements), pursuant
to which any interest in, or any right to use or exploit any
Intellectual Property has been granted.
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Licensed Company IP means the Intellectual
Property owned by a third party that Company or any of its
Subsidiaries has a right to use or exploit by virtue of a
License Agreement.
Owned Company IP means the Intellectual
Property that is owned by Company or any of its Subsidiaries.
(b) Company and its Subsidiaries collectively own all
right, title and interest in, or have the valid right to use,
all of the Company IP, free and clear of any Liens, and there
are no obligations to, covenants to or restrictions from third
parties affecting Companys or its applicable
Subsidiarys use, enforcement, transfer or licensing of the
Owned Company IP.
(c) The Owned Company IP and Licensed Company IP constitute
all the Intellectual Property necessary and sufficient to
conduct the businesses of Company and its Subsidiaries as they
are currently conducted, as they have been conducted since
December 28, 2007.
(d) The Owned Company IP and, to the knowledge of Company,
Licensed Company IP, are valid, subsisting and enforceable.
(e) Neither Company nor any of its Subsidiaries has
infringed, misappropriated or otherwise violated any
Intellectual Property of any third party.
(f) No Owned Company IP or Licensed Company IP is being
used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of such
Intellectual Property. To the knowledge of Company, no third
party has infringed, misappropriated or otherwise violated any
Owned Company IP.
3.18 Environmental Liability. There
are no legal, administrative, arbitral or other proceedings,
claims, actions, causes of action or notices with respect to any
environmental, health or safety matters or any private or
governmental environmental, health or safety investigations or
remediation activities of any nature, whether relating to the
Real Property or otherwise, seeking to impose, or that are
reasonably likely to result in, any liability or obligation of
Company or any of its Subsidiaries arising under common law or
under any local, state or federal environmental, health or
safety statute, regulation, ordinance, or other requirement of
any Governmental Entity, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended, and any similar state laws (Environmental
Laws), pending or threatened against Company or any of
its Subsidiaries. To the knowledge of Company, there is no
reasonable basis for, or circumstances that are reasonably
likely to give rise to, any such proceeding, claim, action,
cause of action, notice, investigation, or remediation
activities that would result in any such liability or obligation
of Company or any of its Subsidiaries. Neither Company nor any
of its Subsidiaries is subject to any agreement, order,
judgment, decree, letter or memorandum by or with any
Governmental Entity or third party imposing any liability or
obligation with respect to any of the foregoing. Company, its
Subsidiaries, and the activities, operations and conditions on
the Real Property have complied with all applicable
Environmental Laws.
3.19 Broker-Dealer, Fund and Investment Advisory
Matters.
(a) Each of Company and its Subsidiaries and each of their
respective officers and employees who are required to be
registered, licensed or qualified as (i) a broker-dealer,
investment adviser, futures commission merchant, commodity
trading advisor or commodity pool operator or (ii) a
registered principal, registered representative, investment
adviser representative, insurance agent, salesperson, or in any
other capacity, with the SEC or any securities or insurance
commission or other Governmental Entity are duly registered as
such and such registrations are in full force and effect, or are
in the process of being registered as such within the time
periods required by applicable law. Each of Company and its
Subsidiaries and each of their respective officers and employees
are in compliance with all applicable federal, state and foreign
laws requiring any such registration, licensing or
qualification, and are not subject to any liability or
disability by reason of the failure to be so registered,
licensed or qualified. There is no action, suit, proceeding or
investigation pending or, to the knowledge of Company,
threatened which would reasonably be expected to lead to the
revocation, amendment, failure to renew, limitation, suspension
or restriction of any such registration, license or
qualification.
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(b) With respect to Company and each Subsidiary that serves
in a capacity described in Section 9(a) or 9(b) of the 1940
Act with respect to a Fund, (i) such person is not (taking
into account any applicable exemption) ineligible under such
Section 9(a) or 9(b) to serve in such capacity,
(ii) no affiliated person (as defined in
Section 2(a)(3) of the 1940 Act) of such person is (taking
into account any applicable exemption) ineligible under such
Section 9(b) to serve as an affiliated person
of such person and (iii) there is no proceeding or
investigation pending and served on Company or any Company
Subsidiary or, to Companys knowledge, pending and not so
served or threatened by any Governmental Entity, which would
result in (A) the ineligibility of such person to serve in
such capacity under such Section 9(a) or 9(b) or
(B) the ineligibility under such Section 9(b) of such
affiliated person to serve as an affiliated
person of such person.
(c) With respect to Company and each Subsidiary that acts
as an investment adviser within the meaning of the Advisers Act,
(i) such person is not (taking into account any applicable
exemption) ineligible pursuant to Section 203(e) of the
Advisers Act to act as an investment adviser, (ii) no
person associated (as defined in
Section 202(a)(17) of the Advisers Act) with such person is
(taking into account any applicable exemption) ineligible under
Section 203(f) of the Advisers Act to serve as a
person associated with an investment adviser and
(iii) there is no proceeding or investigation pending and
served on Company or any Company Subsidiary or, to
Companys knowledge, pending and not so served or
threatened by any Governmental Entity, which would result in
(A) the ineligibility under such Section 203(e) of
such person to act as an investment adviser or (B) the
ineligibility under such Section 203(f) of such
person associated with such person to serve as a
person associated with an investment adviser.
(d) With respect to Company and each Subsidiary that acts
as a broker or dealer within the meaning of the Exchange Act,
(i) such person is not (taking into account any applicable
exemption) ineligible pursuant to Section 15(b)(4) of the
Exchange Act to act as a broker or dealer, (ii) no
person associated (as defined in
Section 3(a)(18) of the Exchange Act) with such person is
(taking into account any applicable exemption) ineligible under
Section 15(b)(6) of the Exchange Act to serve as a
person associated with a broker or dealer and
(iii) there is no proceeding or investigation pending and
served on Company or any Subsidiary or, to Companys
knowledge, pending and not so served or threatened by any
Governmental Entity, which would result in (A) the
ineligibility under such Section 15(b)(4) of such person to
act as a broker or dealer or (B) the ineligibility under
such Section 15(b)(6) of such person associated
with such person to serve as a person associated
with a broker or dealer.
(e) Each Fund sponsored by Company or any Subsidiary and,
to Companys knowledge, each other Fund
(Non-Sponsored Fund) has filed all
registrations, reports, prospectuses, proxy statements,
statements of additional information, financial statements,
sales literature, statements, notices and other filings required
to be filed by it with any Governmental Entity (other than Tax
Returns), including all amendments or supplements to any of the
above for the past two years, in each case to the extent related
to its business. Each Fund sponsored by Company or any
Subsidiary and, to Companys knowledge, each Non-Sponsored
Fund, holds all legally required licenses, registrations,
franchises, permits and authorizations and are in compliance
with, and are not in violation of, under any applicable law,
statute, order, rule, regulation, policy
and/or
guideline of any Governmental Entity of competent jurisdiction,
and neither Company nor any of its Subsidiaries knows of, or has
received notice of, any violations of any of the above.
(f) Each of Company and its Subsidiaries, and, to
Companys knowledge, its solicitors, third party
administrators, managers, brokers and distributors, have
marketed, sold and issued investment products and securities in
compliance with all applicable laws governing sales processes
and practices and in compliance with all advisory or other
agreements under which such products and securities are sold or
under which such investment management, investment advisory and
sub-advisory services are provided. Company and each Subsidiary
has at all times since January 1, 2003 rendered investment
advisory services to Clients and Funds sponsored by Company or
any Subsidiary and, to Companys knowledge, Non-Sponsored
Funds, with whom they are or were a party to an Investment
Advisory Agreement, in compliance with all requirements, if any,
as to investment objectives, portfolio composition and portfolio
management, the terms of the applicable Investment Advisory
Agreement, written instructions from such Clients and Funds,
prospectuses, registration
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statements, offering memorandums, board of director or trustee
directives, applicable law and, to Companys knowledge, the
organizational documents of such Clients and Funds.
(g) Each Fund sponsored by Company or its Subsidiaries that
is a juridical entity is duly organized, validly existing and,
with respect to jurisdictions that recognize the concept of
good standing, in good standing under the laws of
the jurisdiction of its organization and has the requisite
corporate, trust, company or partnership power and authority to
own its properties and to carry on its business conducted as of
the date of this Agreement, and is qualified to do business in
each jurisdiction where it is required to be so qualified under
applicable law. The shares or units of each Fund sponsored by
Company or its Subsidiaries (i) have been issued and sold
by such Fund in compliance with applicable law, (ii) are,
in the case of such public Funds only, qualified for public
offering and sale by such Funds in each jurisdiction where
offers are made to the extent required under applicable law and
(iii) to the extent applicable, have been duly authorized
and validly issued and are fully paid and non-assessable.
(h) For purposes of this Agreement, the following terms
shall have the meanings assigned below:
(i) 1940 Act shall mean the
Investment Company Act of 1940, as amended.
(ii) Advisers Act shall mean the
Investment Advisers Act of 1940, as amended.
(iii) Client means any person to
which Company or any of its Subsidiaries provides investment
management or investment advisory services, including any
sub-advisory services, pursuant to an Investment Advisory
Agreement.
(iv) Fund means any pooled
investment vehicle (including each portfolio or series thereof,
if any) for which Company or any of its Subsidiaries acts as
investment adviser, investment sub-adviser, manager, general
partner or sponsor, whether or not registered or qualified for
offer and sale to members of the public generally with any
Governmental Entity.
(v) Investment Advisory Agreement
means an agreement under which Company or any of its
Subsidiaries acts as an investment adviser or sub-adviser to, or
manages any investment or trading account of, any Client.
3.20 Securitization Matters. In
each case except as would not reasonably be expected to have a
Material Adverse Effect on Company:
(a) Each of Company and its applicable Subsidiaries and, to
the knowledge of Company, each other party thereto has performed
in all material respects the obligations to be performed by it
under each of the Company Securitization Documents, including
any required filing of any financing statements, continuation
statements or amendments under the Uniform Commercial Code of
each applicable jurisdiction with the appropriate filing offices.
(b) Each of the Company Securitization Interests, each
series of certificates or other securities issued by any Company
Securitization Trust and each of the Company Securitization
Documents to which Company, any of its Subsidiaries, or any
Company Securitization Trust, as the case may be, is a party, is
in full force and effect and is a valid, binding and enforceable
obligation of Company, such Subsidiary or any Company
Securitization Trust, as the case may be, and, to the knowledge
of Company, of the other parties thereto, subject to the
Bankruptcy and Equity Exception. Each Company Securitization
Interest (including, without limitation, each Retained Interest)
is fully paid and subject to no further assessment or
obligation, other than required servicing or master servicing
advances in transactions for which Company or any of its
Subsidiaries serves as servicer or master servicer.
(c) All Company Securitization Documents required to be
qualified under the Trust Indenture Act of 1939, as
amended, have been so qualified and no Company Securitization
Trust is required to be registered under the 1940 Act. The sale
of all securities issued by any Company Securitization Trust was
either duly registered under, or exempt from the registration
requirements of, the Securities Act.
(d) Since January 1, 2006, on a consolidated basis,
Company has properly accounted for the sale of all loan
agreements, notes or borrowing arrangements (including leases,
credit enhancements,
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commitments, guarantees and interest-bearing assets) payable to
the Company or its Subsidiaries (collectively,
Loans) under GAAP, including Statement of
Financial Accounting Standards No. 140, and including in
respect of the reporting of income arising from the sale of such
Loans.
(e) On a consolidated basis, Company consolidates any
variable interest entity as required under GAAP, including
FIN 46 and FIN 46R, as in effect as of the date hereof
in connection with any transaction related to a Company
Securitization Trust.
(f) All reports required to be filed since January 1,
2006 with the SEC or any other Governmental Entity in connection
with any offering of securities in any loan or other asset
securitization transaction in which Company or any of its
Subsidiaries was an issuer, sponsor or depositor (a
Company Sponsored Asset Securitization
Transaction) complied as to form in all material
respects with the published rules and regulations of the SEC or
such other Governmental Entity with respect thereto. No person
has failed in any respect to make the certifications required of
him or her under Section 302 of the Sarbanes-Oxley Act with
respect to such reports. All assessments and attestations
regarding servicing compliance required to be delivered or filed
by Company or any of its Subsidiaries have been timely and
accurately filed, and no material instances of noncompliance
have been identified in such assessments or attestations. Since
December 28, 2007, neither Company nor any of its
Subsidiaries nor, to the knowledge of Company, any director,
officer, employee, auditor, accountant or representative of
Company or any of its Subsidiaries has received or otherwise had
or obtained knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or
methods of any Company Securitization Trust or their respective
internal accounting controls.
(g) No event or condition exists which does now or with
either notice or the passage of time would constitute a default,
event of default, early redemption event, payout event, early
amortization event or other similar event under any Company
Securitization Document. No Adverse Development has occurred and
is continuing in connection with any Company Sponsored Asset
Securitization Transaction. No event or condition exists which
constitutes a Servicer Default or other similar event permitting
the termination of the servicer under any of the Company
Securitization Documents (a Servicer Default or
Termination). The consummation of the transactions
contemplated hereby (including the Merger) shall not cause the
occurrence of any Adverse Development or Servicer Default or
Termination.
(h) For purposes of this Agreement, the following terms
shall have the meanings assigned below:
Adverse Development means any event or
condition which is or with either notice or the passage of time
would (i) constitute a breach, default, event of default,
early redemption event, payout event, early amortization event
or other similar event under any Company Securitization Document
or (ii) trigger any requirement under any Company
Securitization Document to (x) fund an increase in any form
of internal credit enhancement, external credit enhancement,
spread account or similar account (other than with respect to
spread accounts that have already been funded), (y) draw on
any such internal or external credit enhancement or account
under the terms of any Company Securitization Document or
(z) otherwise increase any otherwise required credit
enhancement required under the Company Securitization Documents.
Company Securitization Documents
includes each security issued by any Company Securitization
Trust, and each loan sale agreement, pooling and servicing
agreement, indenture, bond insurance agreement (and related
policy), pool insurance agreement (and related policy),
guarantee, swap or derivative contract, prospectus, offering
circular, underwriting agreement, purchase agreement and each
other material agreement related to any such security and each
supplement, terms or pricing agreement or other agreement
relating to the foregoing and each document required to be
delivered in connection therewith.
Company Securitization Interests means
any securities, any Retained Interest, any reserve account, cash
collateral account, other residual or servicing interest or
other ongoing obligations (in each case whether or not
certificated) owned by Company or any of its Subsidiaries
created pursuant to or associated with any Company
Securitization Document.
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Company Securitization Trust means any
trust or other special purpose vehicle created by Company.
Retained Interest means any interest
retained by Company or any of its Subsidiaries pursuant to the
Company Securitization Documents.
Servicer Default means a servicer or
master servicer default or similar event, as specified in the
relevant pooling and servicing agreement, indenture or other
Company Securitization Document, as the case may be.
(i) For purposes of this Section 3.20 and
Section 3.5(c), Subsidiary shall include any
Subsidiary of Company and, if and to the extent not otherwise
included, also include each issuer, sponsor
and/or
depositor in each Company Sponsored Asset Securitization
Transaction.
3.21 State Takeover Laws. The Board
of Directors of Company has unanimously approved this Agreement
and the transactions contemplated hereby as required to render
inapplicable to this Agreement and such transactions the
restrictions on business combinations set forth in
Section 203 of the DGCL or any other
moratorium, control share, fair
price, takeover or interested
stockholder law (any such laws, Takeover
Statutes).
3.22 Interested Party
Transactions. Except as set forth in the Company
SEC Documents or Section 3.22 of the Company Disclosure
Schedule, no event has occurred since December 28, 2007
that would be required to be reported by Company pursuant to
Item 404(a) of
Regulation S-K
promulgated by the SEC.
3.23 Reorganization. As of the date
of this Agreement, Company is not aware of any fact or
circumstance that could reasonably be expected to prevent the
Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
3.24 Opinion. The Board of
Directors of Company has received the opinion of Merrill Lynch,
Pierce, Fenner & Smith, Incorporated, to the effect
that, as of the date hereof, and based upon and subject to the
factors and assumptions set forth therein, the Exchange Ratio is
fair from a financial point of view to the holders of Company
Common Stock. Such opinion has not been amended or rescinded as
of the date of this Agreement.
3.25 Company Information. The
information relating to Company and its Subsidiaries that is
provided by Company or its representatives for inclusion in the
Proxy Statement and
Form S-4,
or in any application, notification or other document filed with
any other Regulatory Agency or other Governmental Entity in
connection with the transactions contemplated by this Agreement,
will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
therein, in light of the circumstances in which they are made,
not misleading. The portions of the Proxy Statement relating to
Company and its Subsidiaries and other portions within the
reasonable control of Company and its Subsidiaries will comply
in all material respects with the provisions of the Exchange Act
and the rules and regulations thereunder.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF PARENT
Except (i) as disclosed in any report, schedule, form or
other document filed with, or furnished to, the SEC by Parent
and publicly available prior to the date of this Agreement
(excluding, in each case, any disclosures set forth in any risk
factor section and in any section relating to forward-looking
statements to the extent that they are cautionary, predictive or
forward-looking in nature), or (ii) as disclosed in the
disclosure schedule (the Parent Disclosure
Schedule) delivered by Parent to Company prior to the
execution of this Agreement (which schedule sets forth, among
other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure
requirement contained in a provision hereof or as an exception
to one or more representations or warranties contained in this
Article IV, or to one or more of Parents covenants
contained herein, provided, however, that
disclosure in any section of such schedule shall
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apply only to the indicated Section of this Agreement except to
the extent that it is reasonably apparent on the face of such
disclosure that such disclosure is relevant to another Section
of this Agreement, provided, further, that
notwithstanding anything in this Agreement to the contrary,
(i) no such item is required to be set forth in such
schedule as an exception to a representation or warranty if its
absence would not result in the related representation or
warranty being deemed untrue or incorrect under the standard
established by Section 9.2, and (ii) the mere
inclusion of an item in such schedule as an exception to a
representation or warranty shall not be deemed an admission that
such item represents a material exception or material fact,
event or circumstance or that such item has had or would be
reasonably likely to have a Material Adverse Effect on Parent),
Parent hereby represents and warrants to Company as follows:
4.1 Corporate
Organization. (a) Parent is, and Merger Sub
will be, a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. Parent
has and Merger Sub will have the requisite corporate power and
authority to own or lease all of its properties and assets and
to carry on its business as it is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the
character or location of the properties and assets owned or
leased by it makes such licensing or qualification necessary.
Parent is duly registered as a bank holding company under the
BHC Act and is a financial holding company pursuant to
Section 4(1) of the BHC Act and meets the applicable
requirements for qualification as such. True, complete and
correct copies of the Amended and Restated Certificate of
Incorporation, as amended (the Parent
Certificate), and Bylaws of Parent (the
Parent Bylaws), as in effect as of the date
of this Agreement, have previously been made available to
Company.
(b) Each Subsidiary of Parent (i) is duly
incorporated or duly formed, as applicable to each such
Subsidiary, and validly existing and in good standing under the
laws of its jurisdiction of organization, (ii) has the
requisite corporate power and authority or other power and
authority to own or lease all of its properties and assets and
to carry on its business as it is now being conducted and
(iii) is duly qualified to do business in each jurisdiction
in which the nature of the business conducted by it or the
character or location of the properties and assets owned or
leased by it makes such licensing or qualification necessary.
4.2 Capitalization. The authorized
capital stock of Parent consists of 7,500,000,000 shares of
Parent Common Stock, of which, as of July 31, 2008 (the
Parent Capitalization Date),
4,560,112,687 shares were issued and outstanding, and
100,000,000 shares of preferred stock, $0.01 par value
(the Parent Preferred Stock), of which, as of
the Parent Capitalization Date, (i) 3,000,000 shares
were authorized as ESOP Convertible Preferred Stock,
Series C, none of which were issued and outstanding,
(ii) 35,045 shares were authorized as Cumulative
Redeemable Preferred Stock, Series B, 7,667 of which were
issued and outstanding, (iii) 20,000,000 shares were
authorized as $2.50 Cumulative Convertible Preferred Stock,
Series BB, none of which were issued and outstanding,
(iv) 85,100 shares were authorized as Floating Rate
Non-Cumulative Preferred Stock, Series E, of which and
issued 81,000 shares were issued and outstanding,
(v) 34,500 shares were authorized as 6.204%
Non-Cumulative Series D Preferred Stock, of which 33,000
were issued and outstanding, (vi) 7,001 were authorized as
Floating Rate Non-Cumulative Preferred Stock, Series F,
none of which were issued and outstanding, (vii) 8,501 were
authorized as Adjustable Rate Non-Cumulative Preferred Stock,
Series G, none of which were issued and outstanding,
(viii) 25,300 were authorized as 6.625% Non-Cumulative
Preferred Stock, Series I, 22,000 of which were issued and
outstanding, (ix) 41,400 were authorized as 7.25%
Non-Cumulative Preferred Stock, Series J, 41,400 of which
were issued and outstanding, (x) 6,900,000 were authorized
as 7.25% Non-Cumulative Perpetual Convertible Preferred Stock,
Series L, 6,900,000 of which were issued and outstanding,
(xi) 240,000 were authorized as Fixed-to-Floating Rate
Non-Cumulative Preferred Stock, Series K, 240,000 of which
were issued and outstanding, (xii) 160,000 were authorized
as Fixed-to-Floating Rate Non-Cumulative Preferred Stock,
Series M, 160,000 of which were issued and outstanding, and
(xiii) 124,200 were authorized as 8.20% Non-Cumulative
Preferred Stock, Series H, 117,000 of which were issued and
outstanding. As of the Parent Capitalization Date, no shares of
Parent Common Stock were held in Parents treasury. As of
the Parent Capitalization Date, no shares of Parent Common Stock
or Parent Preferred Stock were reserved for issuance, except for
(i) 373,427,609 shares of Parent Common Stock reserved
for issuance upon exercise of options issued pursuant to
employee and director stock plans of Parent or a Subsidiary of
Parent in effect as of the date of this Agreement (the
Parent Stock
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Plans), (ii) 159,954 shares of Parent
Common Stock reserved for issuance pursuant to a convertible
note agreement (the Convertible Note
Agreement) and (iii) 138,000,000 shares of
Parent Common Stock reserved for issuance upon conversion of the
7.25% Non-Cumulative Perpetual Convertible Preferred Stock,
Series L and (iv) 13,181,696 shares of Parent
Common Stock reserved for the conversion of Countrywide
Financial Corporation Series A and Series B
Convertible Debentures Due 2037. All of the issued and
outstanding shares of Parent Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this
Agreement, no Voting Debt of Parent is issued or outstanding. As
of the Parent Capitalization Date, except pursuant to this
Agreement, the Parent Stock Plans, the Convertible Note
Agreement, Parents dividend reinvestment plan and stock
repurchase plans entered into by Parent from time to time,
Parent does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, rights, commitments or
agreements of any character calling for the purchase or issuance
of any shares of Parent Common Stock, Parent Preferred Stock,
Voting Debt of Parent or any other equity securities of Parent
or any securities representing the right to purchase or
otherwise receive any shares of Parent Common Stock, Parent
Preferred Stock, Voting Debt of Parent or other equity
securities of Parent. The shares of Parent Common Stock to be
issued pursuant to the Merger will be duly authorized and
validly issued and, at the Effective Time, all such shares will
be fully paid, nonassessable and free of preemptive rights, with
no personal liability attaching to the ownership thereof.
4.3 Authority; No Violation.
(a) Parent has and Merger Sub will have full corporate
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
approved by the Board of Directors of Parent, and will be so
approved in the case of Merger Sub. The Board of Directors of
Parent has determined that this Agreement and the transactions
contemplated hereby are in the best interests of Parent and its
stockholders and has directed that the issuance of Parent Common
Stock in connection with the Merger be submitted to
Parents stockholders for approval and adoption at a duly
held meeting of such stockholders and has adopted a resolution
to the foregoing effect. Except for the approval and adoption of
this Agreement by the affirmative vote of the holders of a
majority of the outstanding shares of Parent Common Stock
present or represented and entitled to vote at such meeting, no
other corporate proceedings on the part of Parent are necessary
to approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and (assuming due
authorization, execution and delivery by Company) constitutes
the valid and binding obligation of Parent, enforceable against
each of Parent in accordance with its terms (subject to the
Bankruptcy and Equity Exception).
(b) Neither the execution and delivery of this Agreement by
Parent or Merger Sub, nor the consummation by Parent or Merger
Sub of the transactions contemplated hereby, nor compliance by
Parent or Merger Sub with any of the terms or provisions of this
Agreement, will (i) violate any provision of the Parent
Certificate or the Parent Bylaws or the certificate of
incorporation or bylaws of Merger Sub, or (ii) assuming
that the consents, approvals and filings referred to in
Section 4.4 are duly obtained
and/or made,
(A) violate any law, judgment, order, injunction or decree
applicable to Parent, any of its Subsidiaries or any of their
respective properties or assets or (B) violate, conflict
with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or
cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective
properties or assets of Parent or any of its Subsidiaries under,
any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their
respective properties or assets is bound.
4.4 Consents and Approvals.
Except for (i) the Regulatory Approvals, (ii) the
filing with the SEC of the Joint Proxy Statement and the filing
and declaration of effectiveness of the
Form S-4,
(iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware pursuant to the
DGCL, (iv) any notices to or filings with the SBA,
(v) any notices or filings required under the HSR Act and
the antitrust laws and regulations of any foreign jurisdiction,
and (vi) such filings and approvals as are required to be
made or
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obtained under the securities or Blue Sky laws of
various states in connection with the issuance of the shares of
Parent Common Stock pursuant to this Agreement and approval of
listing of such Parent Common Stock on the NYSE, no consents or
approvals of or filings or registrations with any Governmental
Entity are necessary in connection with the consummation by
Parent or Merger Sub of the Merger and the other transactions
contemplated by this Agreement. No consents or approvals of or
filings or registrations with any Governmental Entity are
necessary in connection with the execution and delivery by
Parent or Merger Sub of this Agreement.
4.5 Reports; Regulatory Matters.
(a) Parent and each of its Subsidiaries have timely filed
all reports, registration statements, proxy statements and other
materials, together with any amendments required to be made with
respect thereto, that they were required to file since
January 1, 2006 with the Regulatory Agencies and each other
applicable Governmental Entity, and all other reports and
statements required to be filed by them since January 1,
2006, including any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States,
any state, any foreign entity, or any Regulatory Agency or other
Governmental Entity, and have paid all fees and assessments due
and payable in connection therewith. Except for normal
examinations conducted by a Regulatory Agency or other
Governmental Entity in the ordinary course of the business of
Parent and its Subsidiaries, no Regulatory Agency or other
Governmental Entity has initiated since January 1, 2006 or
has pending any proceeding, enforcement action or, to the
knowledge of Parent, investigation into the business,
disclosures or operations of Parent or any of its Subsidiaries.
Since January 1, 2006, no Regulatory Agency or other
Governmental Entity has resolved any proceeding, enforcement
action or, to the knowledge of Parent, investigation into the
business, disclosures or operations of Parent or any of its
Subsidiaries. There is no unresolved violation, criticism,
comment or exception by any Regulatory Agency or other
Governmental Entity with respect to any report or statement
relating to any examinations or inspections of Parent or any of
its Subsidiaries. Since January 1, 2006 there has been no
formal or informal inquiries by, or disagreements or disputes
with, any Regulatory Agency or other Governmental Entity with
respect to the business, operations, policies or procedures of
Parent or any of its Subsidiaries (other than normal
examinations conducted by a Regulatory Agency or other
Governmental Entity in Parents ordinary course of
business).
(b) Neither Parent nor any of its Subsidiaries is subject
to any
cease-and-desist
or other order or formal or informal enforcement action issued
by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any
commitment letter or similar undertaking to, or is subject to
any order or directive by, or has been since January 1,
2006 a recipient of any supervisory letter from, or has been
ordered to pay any civil money penalty by, or since
January 1, 2006 has adopted any policies, procedures or
board resolutions at the request or suggestion of, any
Regulatory Agency or other Governmental Entity that currently
restricts or affects in any material respect the conduct of its
business or that in any material manner relates to its capital
adequacy, its ability to pay dividends, its credit, risk
management or compliance policies, its internal controls, its
management or its business, other than those of general
application that apply to bank holding companies or their
Subsidiaries (each, a Parent Regulatory
Agreement), nor has Parent or any of its Subsidiaries
been advised since January 1, 2006 by any Regulatory Agency
or other Governmental Entity that it is considering issuing,
initiating, ordering or requesting any such Parent Regulatory
Agreement.
(c) Parent has previously made available to Company an
accurate and complete copy of each (i) final registration
statement, prospectus, report, schedule and definitive proxy
statement filed with or furnished to the SEC by Parent pursuant
to the Securities Act or the Exchange Act since January 1,
2006 (the Parent SEC Reports) and prior to
the date of this Agreement and (ii) communication mailed by
Parent to its stockholders since January 1, 2006 and prior
to the date of this Agreement. No such Parent SEC Report or
communication, at the time filed, furnished or communicated
(and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of the
relevant meetings, respectively), contained any untrue statement
of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances in which
they were made, not misleading, except that information as of a
later date (but before the date of this Agreement) shall be
deemed to modify information as of an earlier date. As of their
respective dates, all Parent SEC Reports complied as
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to form in all material respects with the published rules and
regulations of the SEC with respect thereto. No executive
officer of Parent has failed in any respect to make the
certifications required of him or her under Section 302 or
906 of the Sarbanes-Oxley Act.
4.6 Financial Statements.
(a) The financial statements of Parent and its Subsidiaries
included (or incorporated by reference) in the Parent SEC
Reports (including the related notes, where applicable)
(i) have been prepared from, and are in accordance with,
the books and records of Parent and its Subsidiaries;
(ii) fairly present in all material respects the
consolidated results of operations, cash flows, changes in
stockholders equity and consolidated financial position of
Parent and its Subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth (subject in the
case of unaudited statements to recurring year-end audit
adjustments normal in nature and amount); (iii) complied as
to form, as of their respective dates of filing with the SEC, in
all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with
respect thereto; and (iv) have been prepared in accordance
with GAAP consistently applied during the periods involved,
except, in each case, as indicated in such statements or in the
notes thereto. The books and records of Parent and its
Subsidiaries have been, and are being, maintained in all
material respects in accordance with GAAP and any other
applicable legal and accounting requirements.
PricewaterhouseCoopers LLP has not resigned or been dismissed as
independent public accountants of Parent as a result of or in
connection with any disagreements with Parent on a matter of
accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
(b) Neither Parent nor any of its Subsidiaries has any
material liability or obligation of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether
due or to become due), except for those liabilities that are
reflected or reserved against on the consolidated balance sheet
of Parent included in its Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2008 (including any
notes thereto) and for liabilities incurred in the ordinary
course of business consistent with past practice since
June 30, 2008 or in connection with this Agreement and the
transactions contemplated hereby.
(c) The records, systems, controls, data and information of
Parent and its Subsidiaries are recorded, stored, maintained and
operated under means (including any electronic, mechanical or
photographic process, whether computerized or not) that are
under the exclusive ownership and direct control of Parent or
its Subsidiaries or accountants (including all means of access
thereto and therefrom), except for any non-exclusive ownership
and non-direct control that would not reasonably be expected to
have a material adverse effect on the system of internal
accounting controls described below in this Section 4.6(c).
Parent (x) has implemented and maintains disclosure
controls and procedures (as defined in
Rule 13a-15(e)
of the Exchange Act) to ensure that material information
relating to Parent, including its consolidated Subsidiaries, is
made known to the chief executive officer and the chief
financial officer of Parent by others within those entities, and
(y) has disclosed, based on its most recent evaluation
prior to the date hereof, to Parents outside auditors and
the audit committee of Parents Board of Directors
(i) any significant deficiencies and material weaknesses in
the design or operation of internal controls over financial
reporting (as defined in
Rule 13a-15(f)
of the Exchange Act) which are reasonably likely to adversely
affect Parents ability to record, process, summarize and
report financial information and (ii) any fraud, whether or
not material, that involves management or other employees who
have a significant role in Parents internal controls over
financial reporting. These disclosures were made in writing by
management to Parents auditors and audit committee, a copy
of which has previously been made available to Company. As of
the date hereof, there is no reason to believe that
Parents outside auditors, chief executive officer and
chief financial officer will not be able to give the
certifications and attestations required pursuant to the rules
and regulations adopted pursuant to Section 404 of the
Sarbanes-Oxley Act, without qualification, when next due.
(d) Since December 31, 2007, (x) neither Parent
nor any of its Subsidiaries nor, to the knowledge of the
officers of Parent, any director, officer, employee, auditor,
accountant or representative of Parent or any of its
Subsidiaries has received or otherwise had or obtained knowledge
of any material complaint, allegation, assertion or claim,
whether written or oral, regarding the accounting or auditing
practices, procedures, methodologies or methods of Parent or any
of its Subsidiaries or their respective internal accounting
controls,
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including any material complaint, allegation, assertion or claim
that Parent or any of its Subsidiaries has engaged in
questionable accounting or auditing practices, and (y) no
attorney representing Parent or any of its Subsidiaries, whether
or not employed by Parent or any of its Subsidiaries, has
reported evidence of a material violation of securities laws,
breach of fiduciary duty or similar violation by Parent or any
of its officers, directors, employees or agents to the Board of
Directors of Parent or any committee thereof or to any director
or officer of Parent.
4.7 Brokers Fees. Neither
Parent nor any of its Subsidiaries nor any of their respective
officers or directors has employed any broker or finder or
incurred any liability for any brokers fees, commissions
or finders fees in connection with the Merger or related
transactions contemplated by this Agreement, other than as set
forth on Section 4.7 of the Parent Disclosure Schedule.
4.8 Absence of Certain Changes or
Events.
(a) Since June 30, 2008, no event or events have
occurred that have had or would reasonably be expected to have a
Material Adverse Effect on Parent.
(b) Since June 30, 2008 through and including the date
of this Agreement, Parent and its Subsidiaries have carried on
their respective businesses in all material respects in the
ordinary course of business consistent with their past practice.
4.9 Legal Proceedings.
(a) Neither Parent nor any of its Subsidiaries is a party
to any, and there are no pending or, to Parents knowledge,
threatened, legal, administrative, arbitral or other
proceedings, claims, actions or governmental or regulatory
investigations of any nature against Parent or any of its
Subsidiaries or to which any of their assets are subject.
(b) There is no judgment, order, injunction, decree or
regulatory restriction (other than those of general application
that apply to similarly situated bank holding companies or their
Subsidiaries) imposed upon Parent, any of its Subsidiaries or
the assets of Parent or any of its Subsidiaries.
4.10 Taxes and Tax Returns. Each
of Parent and its Subsidiaries has duly and timely filed
(including all applicable extensions) all material Tax Returns
required to be filed by it on or prior to the date of this
Agreement (all such returns being accurate and complete in all
material respects), has paid all Taxes shown thereon as arising
and has duly paid or made provision for the payment of all
material Taxes that have been incurred or are due or claimed to
be due from it by federal, state, foreign or local taxing
authorities other than Taxes that are not yet delinquent or are
being contested in good faith, have not been finally determined
and have been adequately reserved against. There are no material
disputes pending, or claims asserted, for Taxes or assessments
upon Parent or any of its Subsidiaries for which Parent does not
have reserves that are adequate under GAAP.
4.11 Compliance with Applicable
Law. Parent and each of its Subsidiaries hold
all licenses, franchises, permits and authorizations necessary
for the lawful conduct of their respective businesses under and
pursuant to each, and have complied in all respects with and are
not in default in any respect under any, law applicable to
Parent or any of its Subsidiaries.
4.12 Reorganization; Approvals. As
of the date of this Agreement, Parent is not aware of any fact
or circumstance that could reasonably be expected to prevent the
Merger from qualifying as a reorganization within
the meaning of Section 368(a) of the Code.
4.13 Opinion. The Board of
Directors of Parent has received the opinions of Fox-Pitt
Kelton, Cochran Caronia Waller (USA) LLC and J.C.
Flowers & Co. LLC , to the effect that, as of the date
hereof, and based upon and subject to the factors and
assumptions set forth therein, the Merger Consideration is fair
from a financial point of view to Parent. Such opinions have not
been amended or rescinded as of the date of this Agreement.
4.14 Certain Contracts.
(a) Neither Parent nor any of its Subsidiaries is a party
to or bound by any contract, arrangement, commitment or
understanding (whether written or oral) that is a material
contract (as such term is defined in Item 601(b)(10)
of
Regulation S-K
of the SEC) to be performed after the date of this
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Agreement that has not been filed or incorporated by reference
in the Parent SEC Reports filed prior to the date hereof (any
such contract, arrangement, commitment or understanding, whether
or not set forth in the Parent Disclosure Schedule, is referred
to as a Parent Contract).
(b) (i) Each Parent Contract is valid and binding on
Parent or its applicable Subsidiary, enforceable against it in
accordance with its terms (subject to the Bankruptcy and Equity
Exception), and is in full force and effect, (ii) Parent
and each of its Subsidiaries and, to Parents knowledge,
each other party thereto has duly performed all obligations
required to be performed by it to date under each Parent
Contract and (iii) no event or condition exists that
constitutes or, after notice or lapse of time or both, will
constitute, a breach, violation or default on the part of Parent
or any of its Subsidiaries or, to Parents knowledge, any
other party thereto under any such Parent Contract. There are no
disputes pending or, to Parents knowledge, threatened with
respect to any Parent Contract.
4.15 Risk Management
Instruments. All Derivative Transactions, whether
entered into for the account of Parent or any of its
Subsidiaries or for the account of a customer of Parent or any
of its Subsidiaries, were entered into in the ordinary course of
business consistent with past practice and in accordance with
prudent banking practice and applicable laws, rules, regulations
and policies of any Regulatory Authority and in accordance with
the investment, securities, commodities, risk management and
other policies, practices and procedures employed by Parent and
its Subsidiaries, and with counterparties believed at the time
to be financially responsible and able to understand (either
alone or in consultation with their advisers) and to bear the
risks of such Derivative Transactions. All of such Derivative
Transactions are valid and binding obligations of Parent or one
of its Subsidiaries enforceable against it in accordance with
their terms (subject to the Bankruptcy and Equity Exception),
and are in full force and effect. Parent and its Subsidiaries
and, to Parents knowledge, all other parties thereto have
duly performed their obligations under the Derivative
Transactions to the extent that such obligations to perform have
accrued and, to Parents knowledge, there are no breaches,
violations or defaults or allegations or assertions of such by
any party thereunder
4.16 Intellectual Property.
(a) Definitions. For purposes of this
Agreement, the following terms shall have the meanings assigned
below:
Parent IP means all Intellectual Property
owned, used, held for use or exploited by Parent or any of its
Subsidiaries.
Licensed Parent IP means the Intellectual
Property owned by a third party that Parent or any of its
Subsidiaries has a right to use or exploit by virtue of a
License Agreement.
Owned Parent IP means the Intellectual
Property that is owned by Parent or any of its Subsidiaries.
(b) Parent and its Subsidiaries collectively own all right,
title and interest in, or have the valid right to use, all of
the Parent IP, free and clear of any Liens, and there are no
obligations to, covenants to or restrictions from third parties
affecting Parents or its applicable Subsidiarys use,
enforcement, transfer or licensing of the Owned Parent IP.
(c) The Owned Parent IP and Licensed Parent IP constitute
all the Intellectual Property necessary and sufficient to
conduct the businesses of Parent and its Subsidiaries as they
are currently conducted, as they have been conducted since
December 31, 2007.
(d) The Owned Parent IP and, to the knowledge of Parent,
Licensed Parent IP, are valid, subsisting and enforceable.
(e) Neither Parent nor any of its Subsidiaries has
infringed, misappropriated or otherwise violated any
Intellectual Property of any third party.
(f) No Owned Parent IP or Licensed Parent IP is being used
or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of such Intellectual Property.
To the knowledge of Parent, no third party has infringed,
misappropriated or otherwise violated any Owned Parent IP.
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4.17 Parent Information. The information
relating to Parent and its Subsidiaries that is provided by
Parent or its representatives for inclusion in the Joint Proxy
Statement and the
Form S-4,
or in any application, notification or other document filed with
any other Regulatory Agency or other Governmental Entity in
connection with the transactions contemplated by this Agreement,
will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
therein, in light of the circumstances in which they are made,
not misleading. The portions of the Joint Proxy Statement
relating to Parent and its Subsidiaries and other portions
within the reasonable control of Parent and its Subsidiaries
will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder. The
Form S-4
will comply in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
ARTICLE V
COVENANTS
RELATING TO CONDUCT OF BUSINESS
5.1 Conduct of Businesses Prior to the Effective
Time. Except as expressly contemplated by or
permitted by this Agreement or with the prior written consent of
the other party, during the period from the date of this
Agreement to the Effective Time, each of Company and Parent
shall, and shall cause each of its respective Subsidiaries to,
(a) conduct its business in the ordinary course in all
material respects, (b) use reasonable best efforts to
maintain and preserve intact its business organization and
advantageous business relationships and retain the services of
its key officers and key employees and (c) take no action
that would reasonably be expected to adversely affect or
materially delay the ability of Company, Parent or Merger Sub to
obtain any necessary approvals of any Regulatory Agency or other
Governmental Entity required for the transactions contemplated
hereby or to perform its covenants and agreements under this
Agreement or to consummate the transactions contemplated hereby
or thereby.
5.2 Company Forbearances. During
the period from the date of this Agreement to the Effective
Time, except as set forth in this Section 5.2 of the
Company Disclosure Schedule or except as expressly contemplated
or permitted by this Agreement, Company shall not, and shall not
permit any of its Subsidiaries to, without the prior written
consent of Parent:
(a) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for
borrowed money, or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any
other individual, corporation or other entity (it being
understood and agreed that incurrence of indebtedness in the
ordinary course of business consistent with past practice shall
include the creation of deposit liabilities, securitizations,
sales of certificates of deposit and entering into repurchase
agreements, participation in structured note programs and the
rollover of indebtedness for borrowed money outstanding as of
the date hereof from time to time as such indebtedness becomes
due and payable, in each case in the ordinary course of business
consistent with past practice);
(b) (i) adjust, split, combine or reclassify any of
its capital stock;
(ii) make, declare or pay any dividend, or make any other
distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any shares of its capital stock or any
securities or obligations convertible (whether currently
convertible or convertible only after the passage of time or the
occurrence of certain events) into or exchangeable for any
shares of its capital stock (except (A) for regular
quarterly cash dividends on the Company Common Stock at a rate
not in excess of $0.35 per share with record dates and payment
dates consistent with the prior year, (B) dividends on the
Company Preferred Stock, (C) dividends paid by any of the
Subsidiaries of Company to Company or to any of its wholly-owned
Subsidiaries, and (D) the acceptance of shares of Company
Common Stock in payment of the exercise price or withholding
Taxes incurred by any employee or director in connection with
the exercise of stock options or stock appreciation rights or
the vesting of restricted shares of (or settlement of other
equity-based awards in respect of) Company Common Stock granted
under a Company Stock Plan, the Company Cap Plan or a Company
Deferred Equity Unit Plan, in each case in accordance with past
practice and the
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terms of the applicable the Company Stock Plan, Company Cap Plan
and related award agreements or a Company Deferred Equity Unit
Plan);
(iii) grant any stock options, stock appreciation rights,
restricted shares, restricted stock units, deferred equity
units, awards based on the value of Companys capital stock
or other equity-based award with respect to shares of Company
Common Stock under any of the Company Stock Plans, the Company
Cap Plan or any of the Company Deferred Equity Unit Plans or
otherwise, or grant any individual, corporation or other entity
any right to acquire any shares of its capital stock; or
(iv) issue any additional shares of capital stock or other
securities, except pursuant to the exercise of stock options or
stock appreciation rights or the settlement of other
equity-based awards granted under a Company Stock Plan, the
Company Cap Plan or a Company Deferred Equity Unit Plan that are
outstanding as of the date of this Agreement;
(c) except as required under applicable law or the terms of
any Company Benefit Plan existing as of the date hereof,
(i) increase in any manner the compensation or benefits of
any of the current or former directors, officers or employees of
Company or its Subsidiaries (collectively,
Employees), (ii) pay any amounts to
Employees not required by any current plan or agreement (other
than base salary in the ordinary course of business),
(iii) become a party to, establish, amend, commence
participation in, make any adjustment, terminate or commit
itself to the adoption of any stock option plan or other
stock-based compensation plan, compensation (including any
employee co-investment fund), severance, pension, retirement,
profit-sharing, welfare benefit, or other employee benefit plan
or agreement or employment agreement with or for the benefit of
any Employee (or newly hired employees), (iv) accelerate
the vesting of any stock-based compensation or other long-term
incentive compensation under any Company Benefit Plans, (v)
(x) hire employees in the position of Vice President or
above or (y) terminate the employment of any employee in
the position of Vice President or above (other than due to
terminations for cause) or (vi) take any action which could
reasonably be expected to give rise to a good reason
(or any term of similar import) claim;
(d) sell, transfer, pledge, lease, license, mortgage,
encumber or otherwise dispose of any material amount of its
properties or assets (including pursuant to securitizations) to
any individual, corporation or other entity other than a
Subsidiary or cancel, release or assign any material amount of
indebtedness to any such person or any material claims held by
any such person, in each case other than in the ordinary course
of business consistent with past practice or pursuant to
contracts in force at the date of this Agreement;
(e) enter into any new line of business or change in any
material respect its lending, investment, underwriting, risk and
asset liability management and other banking, operating,
securitization and servicing policies, except as required by
applicable law, regulation or policies imposed by any
Governmental Entity;
(f) transfer ownership, or grant any license or other
rights, to any person or entity of or in respect of any material
Company IP, other than grants of non-exclusive licenses pursuant
to License Agreements entered into in the ordinary course of
business consistent with past practice;
(g) other than in the ordinary course of business
consistent with past practice, make any material investment
either by purchase of stock or securities, contributions to
capital, property transfers, or purchase of any property or
assets of any other individual, corporation or other entity;
(h) take any action, or knowingly fail to take any action,
which action or failure to act is reasonably likely to prevent
the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code;
(i) amend its charter or bylaws, or otherwise take any
action to exempt any person or entity (other than Parent or its
Subsidiaries) or any action taken by any person or entity from
any Takeover Statute or similarly restrictive provisions of its
organizational documents or terminate, amend or waive any
provisions of any confidentiality or standstill agreements in
place with any third parties;
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(j) (i) amend or otherwise modify, except in the
ordinary course of business, or knowingly violate, in each case
in any material respect, the terms of, any Company Contract, or
(ii) create, renew or amend any agreement or contract or,
except as may be required by applicable law, other binding
obligation of Company or its Subsidiaries containing
(A) any material restriction on the ability of Company or
its Subsidiaries to conduct its business as it is presently
being conducted or (B) any material restriction on the
ability of Company or its affiliates to engage in any type of
activity or business;
(k) commence or settle any material claim, action or
proceeding;
(l) take any action or fail to take any action that is
intended or may reasonably be expected to result in any of the
conditions to the Merger set forth in Article VII not being
satisfied;
(m) implement or adopt any material change in its Tax
accounting or financial accounting principles, practices or
methods, other than as may be required by applicable law, GAAP
or regulatory guidelines;
(n) file or amend any material Tax Return, make or change
any material Tax election, or settle or compromise any material
Tax liability, in each case, other than in the ordinary course
of business or as required by law; or
(o) agree to take, make any commitment to take, or adopt
any resolutions of its board of directors in support of, any of
the actions prohibited by this Section 5.2.
5.3 Parent Forbearances. Except as
expressly permitted by this Agreement or with the prior written
consent of Company, during the period from the date of this
Agreement to the Effective Time, Parent shall not, and shall not
permit any of its Subsidiaries to, (a) amend, repeal or
otherwise modify any provision of the Parent Certificate or the
Parent Bylaws in a manner that would adversely affect Company,
the stockholders of Company or the transactions contemplated by
this Agreement; (b) take any action, or knowingly fail to
take any action, which action or failure to act is reasonably
likely to prevent the Merger from qualifying as a
reorganization within the meaning of
Section 368(a) of the Code; (c) take any action or
willfully fail to take any action that is intended or may
reasonably be expected to result in any of the conditions to the
Merger set forth in Article VII not being satisfied;
(d) take any action that would be reasonably expected to
prevent, materially impede or materially delay the consummation
of the transactions contemplated by this Agreement; or
(e) agree to take, make any commitment to take, or adopt
any resolutions of its board of directors in support of, any of
the actions prohibited by this Section 5.3.
ARTICLE VI
ADDITIONAL
AGREEMENTS
6.1 Regulatory
Matters. (a) Parent and Company shall
promptly prepare and file with the SEC the
Form S-4,
in which the Joint Proxy Statement will be included as a
prospectus. Each of Parent and Company shall use its reasonable
best efforts to have the
Form S-4
declared effective under the Securities Act as promptly as
practicable after such filing, and Company shall thereafter mail
or deliver the Joint Proxy Statement to its stockholders. Parent
shall also use its reasonable best efforts to obtain all
necessary state securities law or Blue Sky permits
and approvals required to carry out the transactions
contemplated by this Agreement, and Company shall furnish all
information concerning Company and the holders of Company Common
Stock as may be reasonably requested in connection with any such
action.
(b) The parties shall cooperate with each other and use
their respective reasonable best efforts to promptly prepare and
file all necessary documentation, to effect all applications,
notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations
of all third parties (including any unions, works councils or
other labor organizations) and Governmental Entities that are
necessary or advisable to consummate the transactions
contemplated by this Agreement (including the Merger), and to
comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such third parties
or Governmental Entities. Company and Parent shall have the
right to review in advance, and, to the extent practicable, each
will consult the other on, in each case subject to applicable
laws relating to the confidentiality of information, all the
information relating to Company or
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Parent, as the case may be, and any of their respective
Subsidiaries, that appear in any filing made with, or written
materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the
parties shall act reasonably and as promptly as practicable. The
parties shall consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations
of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other apprised of the
status of matters relating to completion of the transactions
contemplated by this Agreement.
(c) Each of Parent and Company shall, upon request, furnish
to the other all information concerning itself, its
Subsidiaries, directors, officers and stockholders and such
other matters as may be reasonably necessary or advisable in
connection with the Joint Proxy Statement, the
Form S-4
or any other statement, filing, notice or application made by or
on behalf of Parent, Company or any of their respective
Subsidiaries to any Governmental Entity in connection with the
Merger and the other transactions contemplated by this Agreement.
(d) Each of Parent and Company shall promptly advise the
other upon receiving any communication from any Governmental
Entity the consent or approval of which is required for
consummation of the transactions contemplated by this Agreement
that causes such party to believe that there is a reasonable
likelihood that any Parent Requisite Regulatory Approval or
Company Requisite Regulatory Approval, respectively, will not be
obtained or that the receipt of any such approval may be
materially delayed.
6.2 Access to
Information. (a) Upon reasonable notice and
subject to applicable laws relating to the confidentiality of
information, each of Company and Parent shall, and shall cause
each of its Subsidiaries to, afford to the officers, employees,
accountants, counsel, advisors, agents and other representatives
of the other party, reasonable access, during normal business
hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records, and,
during such period, such party shall, and shall cause its
Subsidiaries to, make available to the other party (i) a
copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to
the requirements of federal securities laws or federal or state
banking or insurance laws (other than reports or documents that
such party is not permitted to disclose under applicable law)
and (ii) all other information concerning its business,
properties and personnel as the other party may reasonably
request (in the case of access or a request by Company, the
foregoing rights provided by this Section 6.2(a) shall be
limited to information concerning Parent that is reasonably
related to the prospective value of Parent Common Stock or to
Parents ability to consummate the transactions
contemplated hereby). Neither Company nor Parent, nor any of
their Subsidiaries, shall be required to provide access to or to
disclose information where such access or disclosure would
jeopardize the attorney-client privilege of such party or its
Subsidiaries or contravene any law, rule, regulation, order,
judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties shall make
appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding
sentence apply.
(b) All information and materials provided pursuant to this
Agreement shall be subject to the provisions of the
Confidentiality Agreement entered into between the parties as of
September 14, 2008 (the Confidentiality
Agreement).
(c) No investigation by a party hereto or its
representatives shall affect the representations and warranties
of the other party set forth in this Agreement.
6.3 Stockholder Approval. Each of
Company and Parent shall call a meeting of its stockholders to
be held as soon as reasonably practicable for the purpose of
obtaining the requisite stockholder approval required in
connection with the Merger, on substantially the terms and
conditions set forth in this Agreement, and shall use its
reasonable best efforts to cause such meeting to occur as soon
as reasonably practicable. The Board of Directors of Company
shall use its reasonable best efforts to obtain from its
stockholders the stockholder vote approving the Merger, on
substantially the terms and conditions set forth in this
Agreement, required to consummate the transactions contemplated
by this Agreement, and shall recommend such approval except to
the extent expressly permitted under Section 6.10(d).
Company shall submit this Agreement to its stockholders at the
stockholder meeting even if its Board of Directors shall have
withdrawn, modified or qualified its
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recommendation. The Board of Directors of Company has adopted
resolutions approving the Merger, on substantially the terms and
conditions set forth in this Agreement, and directing that the
Merger, on such terms and conditions, be submitted to
Companys stockholders for their consideration. The Board
of Directors of Parent shall use its reasonable best efforts to
obtain from its stockholders the stockholder vote approving the
issuance of Parent Common Stock in the Merger, on substantially
the terms and conditions set forth in this Agreement, required
to consummate the issuance of Parent Common Stock contemplated
by this Agreement, and shall recommend such approval except to
the extent making such recommendation would cause the Board of
Directors of Parent to violate its fiduciary duties to Parent
stockholders under applicable law. Parent shall submit the stock
issuance proposal to its stockholders at the stockholder meeting
even if its Board of Directors shall have withdrawn, modified or
qualified its recommendation. The Board of Directors of Parent
has adopted resolutions approving the Merger, on substantially
the terms and conditions set forth in this Agreement, and
directing that the issuance of Parent Common Stock in the
Merger, on such terms and conditions, be submitted to
Parents stockholders for their consideration.
6.4 NYSE Listing. Parent shall
cause the shares of Parent Common Stock to be issued in the
Merger to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Effective Time.
6.5 Employee Matters. (a) For
the period from the Effective Time through December 31,
2009, Parent shall maintain or cause to be maintained employee
benefit plans and compensation opportunities for the benefit of
employees (as a group) who are actively employed by Company and
its Subsidiaries on the Closing Date (Covered
Employees) that provide employee benefits and
compensation opportunities which, in the aggregate, are
substantially comparable to the employee benefits and
compensation opportunities that were provided to such Covered
Employees immediately prior to the Effective Time.
(b) To the extent that a Covered Employee becomes eligible
to participate in an employee benefit plan maintained by Parent
or any of its Subsidiaries, Parent shall (i) cause such
employee benefit plan to recognize the service of such Covered
Employee with Company or its Subsidiaries (or their predecessor
entities) for purposes of eligibility, participation, vesting,
and, except under defined benefit pension plans, benefit accrual
under such employee benefit plan of Parent or any of its
Subsidiaries (including, without limitation, for purposes of the
Company Stock Plans, the Company Cap Plan and the Company
Deferred Equity Unit Plans as assumed by Parent pursuant to
Section 1.5), to the same extent such service was
recognized immediately prior to the Effective Time under a
comparable Company Benefit Plan in which such Covered Employee
was eligible to participate immediately prior to the Effective
Time; provided that such recognition of service shall not
operate to duplicate any benefits of a Covered Employee with
respect to the same period of service, and (ii) with
respect to any health, dental, vision or other welfare plan of
Parent or any of its Subsidiaries (other than Company and its
Subsidiaries) in which any Covered Employee is eligible to
participate for the plan year in which such Covered Employee is
first eligible to participate, use its reasonable best efforts
to (x) cause any pre-existing condition limitations or
eligibility waiting periods under such Parent or Subsidiary plan
to be waived with respect to such Covered Employee, to the
extent such limitation would have been waived or satisfied under
the Company Benefit Plan in which such Covered Employee
participated immediately prior to the Effective Time, and
(y) recognize any health, dental or vision expenses
incurred by such Covered Employee in the year that includes the
Closing Date (or, if later, the year in which such Covered
Employee is first eligible to participate) for purposes of any
applicable deductible and annual out-of-pocket expense
requirements under any such health, dental or vision plan of
Parent or any of its Subsidiaries.
(c) From and after the Effective Time, Parent shall, or
shall cause its Subsidiaries to, honor, in accordance with the
terms thereof as in effect as of the date hereof or as may be
amended after the date hereof (i) with the prior written
consent of Parent or (ii) as permitted pursuant to
Section 5.2(c) of this Agreement, each Company Benefit Plan.
(d) Nothing in this Section 6.5 shall be construed to
limit the right of Parent or any of its Subsidiaries (including,
following the Closing Date, Company and its Subsidiaries) to
amend or terminate any Company Benefit Plan or other employee
benefit plan, to the extent such amendment or termination is
permitted by the terms of the applicable plan, nor shall
anything in this Section 6.5 be construed to prohibit the
Parent or any
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of its Subsidiaries (including, following the Closing Date,
Company and its Subsidiaries) from terminating the employment of
any particular Covered Employee following the Closing Date.
(e) Without limiting the generality of Section 9.10,
the provisions of this Section 6.5 are solely for the
benefit of the parties to this Agreement, and no current or
former employee, director or independent contractor or any other
individual associated therewith shall be regarded for any
purpose as a third-party beneficiary of the Agreement, and
nothing herein shall be construed as an amendment to any Company
Benefit Plan or other employee benefit plan for any purpose.
6.6 Indemnification; Directors and
Officers Insurance.
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or
administrative (a Claim), including any such
Claim in which any individual who is now, or has been at any
time prior to the date of this Agreement, or who becomes prior
to the Effective Time, a director or officer of Company or any
of its Subsidiaries or who is or was serving at the request of
Company or any of its Subsidiaries as a director or officer of
another person (the Indemnified Parties), is,
or is threatened to be, made a party based in whole or in part
on, or arising in whole or in part out of, or pertaining to
(i) the fact that he or she is or was a director or officer
of Company or any of its Subsidiaries prior to the Effective
Time or (ii) this Agreement or any of the transactions
contemplated by this Agreement, whether asserted or arising
before or after the Effective Time, the parties shall cooperate
and use their reasonable best efforts to defend against and
respond thereto. All rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to
the Effective Time now existing in favor of any Indemnified
Party as provided in their respective certificates or articles
of incorporation or bylaws (or comparable organizational
documents), and any indemnification agreements which are
existing as of the date hereof, shall survive the Merger and
shall continue in full force and effect in accordance with their
terms, and shall not be amended, repealed or otherwise modified
for a period of six years after the Effective Time in any manner
that would adversely affect the rights thereunder of such
individuals for acts or omissions occurring at or prior to the
Effective Time or taken at the request of Parent pursuant to
Section 6.7, it being understood that nothing in this
sentence shall require any amendment to the certificate of
incorporation or bylaws of the Surviving Company.
(b) From and after the Effective Time, Parent shall or
shall cause the Surviving Company to, to the fullest extent
permitted by applicable law, indemnify, defend and hold
harmless, and provide advancement of expenses to, each
Indemnified Party against all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in
settlement of or in connection with any Claim based in whole or
in part on or arising in whole or in part out of the fact that
such person is or was a director or officer of Company or any of
its Subsidiaries, and pertaining to any matter existing or
occurring, or any acts or omissions occurring, at or prior to
the Effective Time, whether asserted or claimed prior to, or at
or after, the Effective Time (including matters, acts or
omissions occurring in connection with the approval of this
Agreement and the consummation of the transactions contemplated
hereby) or taken at the request of Parent pursuant to
Section 6.7.
(c) Parent shall cause the individuals serving as officers
and directors of Company or any of its Subsidiaries immediately
prior to the Effective Time to be covered for a period of six
years from the Effective Time by the directors and
officers liability insurance policy maintained by Company
(provided that Parent may substitute therefor policies of at
least the same coverage and amounts containing terms and
conditions that are not less advantageous than such policy) with
respect to acts or omissions occurring prior to the Effective
Time that were committed by such officers and directors in their
capacity as such; provided that in no event shall Parent be
required to expend annually in the aggregate an amount in excess
of 250% of the annual premiums currently paid by Company (which
current amount is set forth in Section 6.6 of the Company
Disclosure Schedule) for such insurance (the Insurance
Amount), and provided further that if Parent is unable
to maintain such policy (or such substitute policy) as a result
of the preceding proviso, Parent shall obtain as much comparable
insurance as is available for the Insurance Amount.
(d) The provisions of this Section 6.6 shall survive
the Effective Time and are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
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6.7 Additional Agreements. In case
at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this
Agreement (including any merger between a Subsidiary of Parent,
on the one hand, and a Subsidiary of Company, on the other) or
to vest the Surviving Company with full title to all properties,
assets, rights, approvals, immunities and franchises of either
party to the Merger, the proper officers and directors of each
party and their respective Subsidiaries shall, at Parents
sole expense, take all such necessary action as may be
reasonably requested by Parent.
6.8 Advice of Changes. Each of
Parent and Company shall promptly advise the other of any change
or event (i) having or reasonably likely to have a Material
Adverse Effect on it or (ii) that it believes would or
would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants
contained in this Agreement; provided, however,
that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of
the parties under this Agreement; and provided
further that a failure to comply with this
Section 6.8 shall not constitute a breach of this Agreement
or the failure of any condition set forth in Article VII to
be satisfied unless the underlying Material Adverse Effect or
material breach would independently result in the failure of a
condition set forth in Article VII to be satisfied.
6.9 Exemption from Liability Under
Section 16(b). Prior to the Effective Time,
Parent and Company shall each take all such steps as may be
reasonably necessary or appropriate, and the parties shall
cooperate with each other as necessary, to cause any deemed
disposition of shares of Company Common Stock or conversion of
any derivative securities in respect of such shares of Company
Common Stock or any deemed acquisition of shares of Parent
Common Stock by an individual who after the Merger is expected
to be subject to Section 16(b) of the Exchange Act with
respect to Parent, in each case in connection with the
consummation of the transactions contemplated by this Agreement
to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
6.10 No Solicitation.
(a) None of Company, its Subsidiaries or any officer,
director, employee, agent or representative (including any
investment banker, financial advisor, attorney, accountant or
other representative) of Company or any of its Subsidiaries
shall directly or indirectly (i) solicit, initiate,
encourage, facilitate (including by way of furnishing
information) or take any other action designed to facilitate any
inquiries or proposals regarding any merger, share exchange,
consolidation, sale of assets, sale of shares of capital stock
(including by way of a tender offer) or similar transactions
involving Company or any of its Subsidiaries that, if
consummated, would constitute an Alternative Transaction (any of
the foregoing inquiries or proposals, including the indication
of any intention to propose any of the foregoing, being referred
to herein as an Alternative Proposal),
(ii) participate in any discussions or negotiations
regarding an Alternative Transaction or (iii) enter into
any agreement regarding any Alternative Transaction.
Notwithstanding the foregoing, the Board of Directors of Company
shall be permitted, prior to the meeting of Company stockholders
to be held pursuant to Section 6.3, and subject to
compliance with the other terms of this Section 6.10 and to
first entering into a confidentiality agreement with the person
proposing such Alternative Proposal on terms substantially
similar to, and no less favorable to Company than, those
contained in the Confidentiality Agreement, to consider and
participate in discussions and negotiations with respect to a
bona fide Alternative Proposal received by Company, and furnish
information in connection therewith (provided that the Company
shall simultaneously provide to Parent any such information that
was not previously provided to Parent) if and only to the extent
that and so long as the Board of Directors of Company determines
in good faith (after consultation with outside legal counsel)
that failure to do so would cause it to violate its fiduciary
duties to Company stockholders under applicable law.
As used in this Agreement, Alternative
Transaction means any of (i) a transaction
pursuant to which any person (or group of persons) (other than
Parent or its affiliates), directly or indirectly, acquires or
would acquire more than 15% of the outstanding shares of Company
or any of its Subsidiaries or outstanding voting power or of any
new series or new class of preferred stock that would be
entitled to a class or series vote with respect to a merger with
Company or any of its Subsidiaries, whether from Company or
pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger, share exchange, consolidation or other
business
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combination involving Company or any of its Subsidiaries (other
than the Merger), (iii) any transaction pursuant to which
any person (or group of persons) (other than Parent or its
affiliates) acquires or would acquire control of assets
(including for this purpose the outstanding equity securities of
subsidiaries of Company and securities of the entity surviving
any merger or business combination including any of
Companys Subsidiaries) of Company or any of its
Subsidiaries representing more than 15% of the fair market value
of all the assets, net revenues or net income of Company and its
Subsidiaries, taken as a whole, immediately prior to such
transaction, or (iv) any other consolidation, business
combination, recapitalization or similar transaction involving
Company or any of its Subsidiaries other than the transactions
contemplated by this Agreement.
(b) Company shall notify Parent promptly (but in no event
later than 24 hours) after receipt of any Alternative
Proposal, or any material modification of or material amendment
to any Alternative Proposal, or any request for nonpublic
information relating to Company or any of its Subsidiaries or
for access to the properties, books or records of Company or any
of its Subsidiaries, other than any such request that does not
relate to and would not reasonably be expected to lead to, an
Alternative Proposal. Such notice to Parent shall be made orally
and in writing, and shall indicate the identity of the person
making the Alternative Proposal or intending to make or
considering making an Alternative Proposal or requesting
non-public information or access to the books and records of
Company or any of its Subsidiaries, and a copy (if in writing)
and summary of the material terms of any such Alternative
Proposal or modification or amendment to an Alternative
Proposal. Company shall use its best efforts to keep Parent
fully informed, on a current basis, of any material changes in
the status and any material changes or modifications in the
terms of any such Alternative Proposal, indication or request.
Company shall also provide Parent 24 hours written notice
before it enters into any discussions or negotiations concerning
any Alternative Proposal in accordance with
Section 6.10(a). The Company shall not enter into any
confidentiality or other agreement that would impede its ability
to comply with its obligations under this Section 6.10(b).
(c) Company and its Subsidiaries shall immediately cease
and cause to be terminated any existing discussions or
negotiations with any persons (other than Parent) conducted
heretofore with respect to any of the foregoing, and shall use
reasonable best efforts to cause all persons other than Parent
who have been furnished confidential information regarding
Company in connection with the solicitation of or discussions
regarding an Alternative Proposal within the 12 months
prior to the date hereof promptly to return or destroy such
information. Company agrees not to, and to cause its
Subsidiaries not to, release any third party from the
confidentiality and standstill provisions of any agreement to
which Company or its Subsidiaries is or may become a party, and
shall immediately take all steps necessary to terminate any
approval that may have been heretofore given under any such
provisions authorizing any person to make an Alternative
Proposal. Neither Company nor the Board of Directors of Company
shall approve or take any action to render inapplicable to any
Alternative Proposal or Alternative Transaction Section 203
of the DGCL or any similar Takeover Statutes.
(d) Except as expressly permitted by this
Section 6.10(d), neither the Board of Directors of Company
nor any committee thereof shall (i) withdraw, modify or
qualify, or propose publicly to withdraw, modify or qualify, the
recommendation by the Board of Directors of Company of this
Agreement
and/or the
Merger to Companys stockholders, (ii) take any public
action or make any public statement in connection with the
meeting of Company stockholder to be held pursuant to
Section 6.3 substantively inconsistent with such
recommendation or (iii) approve or recommend, or publicly
propose to approve or recommend, or fail to recommend against,
any Alternative Proposal (any of the actions described in
clauses (i), (ii) or (iii), a Change of
Recommendation). Notwithstanding the foregoing, the
Board of Directors of Company may make a Change of
Recommendation, if, and only if, each of the following
conditions is satisfied:
(i) it receives an Alternative Proposal not solicited in
breach of this Section 6.10 that constitutes a Superior
Proposal and such Superior Proposal has not been withdrawn;
(ii) it determines in good faith (after consultation with
outside legal counsel), that in light of a Superior Proposal the
failure to effect such Change of Recommendation would cause it
to violate its fiduciary duties to Company stockholders under
applicable law;
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(iii) Parent has received written notice from Company (a
Change of Recommendation Notice) at least
three business days prior to such Change of Recommendation,
which notice shall (1) state expressly that Company has
received an Alternative Proposal which the Board of Directors of
Company has determined is a Superior Proposal and that Company
intends to effect a Change of Recommendation and the manner in
which it intends or may intend to do so and (2) include the
identity of the person making such Alternative Proposal and a
copy (if in writing) and summary of material terms of such
Alternative Proposal; provided that any material
amendment to the terms of such Alternative Proposal shall
require a new Change of Recommendation Notice and at least two
business days prior to such Change of Recommendation; and
(iv) during any such notice period, Company and its
advisors have negotiated in good faith with Parent (provided
that Parent desires to negotiate) to make adjustments in the
terms and conditions of this Agreement such that such
Alternative Proposal would no longer constitute a Superior
Proposal.
As used in this Agreement, Superior Proposal
means any proposal made by a third party (A) to acquire,
directly or indirectly, for consideration consisting of cash
and/or
securities, 100% of the outstanding shares of Company Common
Stock or 100% of the assets, net revenues or net income of
Company and its Subsidiaries, taken as a whole and
(B) which is otherwise on terms which the Board of
Directors of Company determines in its reasonable good faith
judgment (after consultation with its financial advisor and
outside legal counsel), taking into account, among other things,
all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal, that the proposal,
(i) if consummated would result in a transaction that is
more favorable, from a financial point of view, to
Companys stockholders than the Merger and the other
transactions contemplated hereby and (ii) is reasonably
capable of being completed, including to the extent required,
financing which is then committed or which, in the good faith
judgment of the Board of Directors of Company, is reasonably
capable of being obtained by such third party.
(e) Company shall ensure that the officers, directors and
all employees, agents and representatives (including any
investment bankers, financial advisors, attorneys, accountants
or other representatives) of Company or its Subsidiaries are
aware of the restrictions described in this Section 6.10 as
reasonably necessary to avoid violations thereof. It is
understood that any violation of the restrictions set forth in
this Section 6.10 by any officer, director, employee, agent
or representative (including any investment banker, financial
advisor, attorney, accountant or other representative) of
Company or its Subsidiaries shall be deemed to be a breach of
this Section 6.10 by Company.
(f) Nothing contained in this Section 6.10 shall
prohibit Company or its Subsidiaries from taking and disclosing
to its stockholders a position required by
Rule 14e-2(a)
or
Rule 14d-9
promulgated under the Exchange Act.
6.11 Dividends. After the date of
this Agreement, each of Parent and Company shall coordinate with
the other regarding the declaration of any dividends in respect
of Parent Common Stock and Company Common Stock and the record
dates and payment dates relating thereto, it being the intention
of the parties that holders of Company Common Stock shall not
receive two dividends, or fail to receive one dividend, for any
quarter with respect to their shares of Company Common Stock and
any shares of Parent Common Stock any such holder receives in
exchange therefor in the Merger.
6.12 Redemption of Exchangeable
Shares. Prior to the Effective Time, the Company
shall take all actions necessary to redeem, and shall redeem,
the Exchangeable Shares of Merrill Lynch & Co. Canada
Ltd. in accordance with the terms of such securities.
6.13 Tax Matters. Company shall
consult with Parent regarding any significant transactions or
Tax Return positions reasonably expected to materially increase
or affect the Companys net operating losses or capital
losses for any taxable year or period and shall, in
Companys reasonable discretion, take account of
Parents views on such matters to the extent reasonably
feasible.
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ARTICLE VII
CONDITIONS
PRECEDENT
7.1 Conditions to Each Partys Obligation to
Effect the Merger. The respective obligations of
the parties to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approvals. (i) This
Agreement, on substantially the terms and conditions set forth
in this Agreement, shall have been adopted by the requisite
affirmative vote of the holders of Company Common Stock entitled
to vote thereon, and (ii) the issuance of Parent Common
Stock in the Merger, on substantially the terms and conditions
set forth in this Agreement, shall have been approved by the
requisite affirmative vote of the holders of Parent Common Stock
entitled to vote thereon.
(b) NYSE Listing. The shares of Parent
Common Stock to be issued to the holders of Company Common Stock
upon consummation of the Merger shall have been authorized for
listing on the NYSE, subject to official notice of issuance.
(c) Form S-4. The
Form S-4
shall have become effective under the Securities Act and no stop
order suspending the effectiveness of the
Form S-4
shall have been issued and no proceedings for that purpose shall
have been initiated or threatened by the SEC.
(d) No Injunctions or Restraints;
Illegality. No order, injunction or decree issued
by any court or agency of competent jurisdiction or other law
preventing or making illegal the consummation of the Merger or
any of the other transactions contemplated by this Agreement
shall be in effect.
7.2 Conditions to Obligations of
Parent. The obligation of Parent and Merger Sub
to effect the Merger is also subject to the satisfaction, or
waiver by Parent, at or prior to the Effective Time, of the
following conditions:
(a) Representations and
Warranties. Subject to the standard set forth in
Section 9.2, the representations and warranties of Company
set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Effective Time as though
made on and as of the Effective Time (except that
representations and warranties that by their terms speak
specifically as of the date of this Agreement or another date
shall be true and correct as of such date); and Parent shall
have received a certificate signed on behalf of Company by the
Chief Executive Officer or the Chief Financial Officer of
Company to the foregoing effect.
(b) Performance of Obligations of
Company. Company shall have performed in all
material respects all obligations required to be performed by it
under this Agreement at or prior to the Effective Time; and
Parent shall have received a certificate signed on behalf of
Company by the Chief Executive Officer or the Chief Financial
Officer of Company to such effect.
(c) Federal Tax Opinion. Parent shall
have received the opinion of its counsel, Wachtell, Lipton,
Rosen & Katz, in form and substance reasonably
satisfactory to Parent, dated the Closing Date, substantially to
the effect that, on the basis of facts, representations and
assumptions set forth in such opinion that are consistent with
the state of facts existing at the Effective Time, the Merger
will qualify as a reorganization within the meaning
of Section 368(a) of the Code. In rendering such opinion,
counsel may require and rely upon customary representations
contained in certificates of officers of Company and Parent.
(d) Regulatory Approvals. All approvals
set forth in Section 4.4 required to consummate the
transactions contemplated by this Agreement, including the
Merger, shall have been obtained and shall remain in full force
and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all
such waiting periods being referred as the Parent
Requisite Regulatory Approvals).
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7.3 Conditions to Obligations of
Company. The obligation of Company to effect the
Merger is also subject to the satisfaction or waiver by Company
at or prior to the Effective Time of the following conditions:
(a) Representations and
Warranties. Subject to the standard set forth
in Section 9.2, the representations and warranties of
Parent set forth in this Agreement shall be true and correct as
of the date of this Agreement and as of the Effective Time as
though made on and as of the Effective Time (except that
representations and warranties that by their terms speak
specifically as of the date of this Agreement or another date
shall be true and correct as of such date); and Company shall
have received a certificate signed on behalf of Parent by the
Chief Executive Officer or the Chief Financial Officer of Parent
to the foregoing effect.
(b) Performance of Obligations of
Parent. Parent shall have performed in all
material respects all obligations required to be performed by it
under this Agreement at or prior to the Effective Time, and
Company shall have received a certificate signed on behalf of
Parent by the Chief Executive Officer or the Chief Financial
Officer of Parent to such effect.
(c) Federal Tax Opinion. Company
shall have received the opinion of its counsel,
Shearman & Sterling LLP, in form and substance
reasonably satisfactory to Company, dated the Closing Date,
substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion that
are consistent with the state of facts existing at the Effective
Time, the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. In
rendering such opinion, counsel may require and rely upon
customary representations contained in certificates of officers
of Company and Parent.
(d) Regulatory Approvals. All
approvals set forth in Section 3.4 required to consummate
the transactions contemplated by this Agreement, including the
Merger, shall have been obtained and shall remain in full force
and effect and all statutory waiting periods in respect thereof
shall have expired (all such approvals and the expiration of all
such waiting periods being referred as the Company
Requisite Regulatory Approvals).
ARTICLE VIII
TERMINATION
AND AMENDMENT
8.1 Termination. This Agreement may
be terminated at any time prior to the Effective Time, whether
before or after approval of the matters presented in connection
with the Merger by the stockholders of Company:
(a) by mutual consent of Company and Parent in a written
instrument authorized by the Boards of Directors of Company and
Parent;
(b) by either Company or Parent, if any Governmental Entity
that must grant a Parent Requisite Regulatory Approval or a
Company Requisite Regulatory Approval has denied approval of the
Merger and such denial has become final and nonappealable or any
Governmental Entity of competent jurisdiction shall have issued
a final and nonappealable order, injunction or decree
permanently enjoining or otherwise prohibiting or making illegal
the consummation of the transactions contemplated by this
Agreement;
(c) by either Company or Parent, if the Merger shall not
have been consummated on or before the first anniversary of the
date of this Agreement unless the failure of the Closing to
occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the
covenants and agreements of such party set forth in this
Agreement;
(d) by either Company or Parent (provided that the
terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained
herein), if there shall have been a breach of any of the
covenants or agreements or any of the representations or
warranties set forth in this Agreement on the part of Company,
in the case of a termination by Parent, or Parent or Merger Sub,
in
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the case of a termination by Company, which breach, either
individually or in the aggregate, would result in, if occurring
or continuing on the Closing Date, the failure of the conditions
set forth in Section 7.2 or 7.3, as the case may be, and
which is not cured within 30 days following written notice
to the party committing such breach or by its nature or timing
cannot be cured within such time period;
(e) by Parent, if (i) the Board of Directors of
Company shall have (A) failed to recommend in the Joint
Proxy Statement the approval and adoption of this Agreement,
(B) made any Change of Recommendation, (C) approved or
recommended, or publicly proposed to approve or recommend, any
Alternative Proposal, whether or not permitted by the terms
hereof or (D) failed to recommend to Companys
stockholders that they reject any tender offer or exchange offer
that constitutes an Alternative Transaction within the ten
business day period specified in
Rule 14e-2(a)
of the Exchange Act, or (ii) Company shall have breached
its obligations under Section 6.3 in any material respect;
(f) by Company, if Parent shall have breached its
obligations under Section 6.3 in any material respect;
(g) by either Company or Parent, if the approval of Company
stockholders required by Section 7.1(a) shall not have been
obtained at a meeting of Company stockholders convened for
purposes of approving and adopting this Agreement; or
(h) by either Company or Parent, if the approval of Parent
stockholders required by Section 7.1(a) shall not have been
obtained at a meeting of Parent stockholders convened for
purposes of approving the issuance of Parent Common Stock in the
Merger.
The party desiring to terminate this Agreement pursuant to
clause (b), (c), (d), (e), (f), (g) or (h) of this
Section 8.1 shall give written notice of such termination
to the other party in accordance with Section 9.4,
specifying the provision or provisions hereof pursuant to which
such termination is effected.
8.2 Effect of Termination. In the
event of termination of this Agreement by either Company or
Parent as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, and none of Company,
Parent, any of their respective Subsidiaries or any of the
officers or directors of any of them shall have any liability of
any nature whatsoever under this Agreement, or in connection
with the transactions contemplated by this Agreement, except
that (i) Sections 6.2(b), 8.2, 8.3, 9.3, 9.4, 9.5,
9.6, 9.7, 9.8 and 9.10 shall survive any termination of this
Agreement, and (ii) neither Company nor Parent shall be
relieved or released from any liabilities or damages arising out
of its knowing breach of any provision of this Agreement.
Notwithstanding the foregoing, in the event of any termination
of this Agreement, the Stock Option Agreement shall remain in
full force and affect in accordance with its terms.
8.3 Fees and Expenses. Except with
respect to costs and expenses of printing and mailing the Joint
Proxy Statement and all filing and other fees paid to the SEC in
connection with the Merger, which shall be borne equally by
Company and Parent, all fees and expenses incurred in connection
with the Merger, this Agreement, and the transactions
contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Merger is
consummated.
8.4 Amendment. This Agreement may
be amended by the parties, by action taken or authorized by
their respective Boards of Directors, at any time before or
after approval of the matters presented in connection with
Merger by the respective stockholders of Company and Parent;
provided, however, that after any approval of the
transactions contemplated by this Agreement by the stockholders
of Company or Parent, there may not be, without further approval
of such stockholders, any amendment of this Agreement that
requires further approval under applicable law. This Agreement
may not be amended except by an instrument in writing signed on
behalf of each of the parties.
8.5 Extension; Waiver. At any time
prior to the Effective Time, the parties, by action taken or
authorized by their respective Board of Directors, may, to the
extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations
and warranties contained in this Agreement or (c) waive
compliance with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a party to any such
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extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance
with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
GENERAL
PROVISIONS
9.1 Closing. On the terms and
subject to the conditions set forth in this Agreement, the
closing of the Merger (the Closing) shall
take place at 10:00 a.m. on a date and at a place to be
specified by the parties, which date shall be no later than five
business days after the satisfaction or waiver (subject to
applicable law) of the latest to occur of the conditions set
forth in Article VII (other than those conditions that by
their nature are to be satisfied or waived at the Closing),
unless extended by mutual agreement of the parties (the
Closing Date). If the conditions set forth in
Article VII are satisfied or waived during the two weeks
immediately prior to the end of a fiscal quarter of Parent, then
Parent may postpone the Closing until the first full week after
the end of that fiscal quarter.
9.2 Standard. No representation or
warranty of Company contained in Article III or of Parent
contained in Article IV shall be deemed untrue, inaccurate
or incorrect for any purpose under this Agreement, and no party
hereto shall be deemed to have breached a representation or
warranty for any purpose under this Agreement, in any case as a
consequence of the existence or absence of any fact,
circumstance or event unless such fact, circumstance or event,
individually or when taken together with all other facts,
circumstances or events inconsistent with any representations or
warranties contained in Article III, in the case of
Company, or Article IV, in the case of Parent, has had or
would reasonably be expected to have a Material Adverse Effect
with respect to Company or Parent, respectively (disregarding
for purposes of this Section 9.2 all qualifications or
limitations set forth in any representations or warranties as to
materiality, Material Adverse Effect and
words of similar import). Notwithstanding the immediately
preceding sentence, the representations and warranties contained
in (x) Section 3.2(a) shall be deemed untrue and
incorrect if not true and correct except to a de minimis extent,
(y) Sections 3.2(b), 3.3(a), 3.3(b)(i), 3.7 and 3.25,
in the case of Company, and Sections 4.2, 4.3(a), 4.3(b)(i)
and 4.7, in the case of Parent, shall be deemed untrue and
incorrect if not true and correct in all material respects and
(z) Section 3.8(a), in the case of Company, and
Section 4.8(a), in the case of Parent, shall be deemed
untrue and incorrect if not true and correct in all respects.
9.3 Nonsurvival of Representations, Warranties and
Agreements. None of the representations,
warranties, covenants and agreements set forth in this Agreement
or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for Section 6.7 and for
those other covenants and agreements contained in this Agreement
that by their terms apply or are to be performed in whole or in
part after the Effective Time.
9.4 Notices. All notices and other
communications in connection with this Agreement shall be in
writing and shall be deemed given if delivered personally, sent
via facsimile (with confirmation), mailed by registered or
certified mail (return receipt requested) or delivered by an
express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Company, to:
Merrill Lynch & Co., Inc.
4 World Financial Center
250 Vesey Street
New York, NY 10080
Attention: Rosemary T. Berkery
Vice
Chairman and General Counsel
Facsimile:
(212) 449-9336
A-43
with a copy to:
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022
Attention: John J. Madden
John
A. Marzulli, Jr.
Scott
D. Petepiece
Fax:
(212) 848-7179
(b) if to Parent, to:
Bank of America Corporation
Bank of America Corporate Center
100 North Tryon Street
Charlotte, NC 28255
Attention: Timothy J. Mayopoulos,
Executive
Vice President and General Counsel
Facsimile:
(704) 370-3515
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Edward D. Herlihy
Lawrence
S. Makow
Nicholas
G. Demmo
Fax:
(212) 403-2000
9.5 Interpretation. When a
reference is made in this Agreement to Articles, Sections,
Exhibits or Schedules, such reference shall be to an Article or
Section of or Exhibit or Schedule to this Agreement unless
otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words include,
includes or including are used in this
Agreement, they shall be deemed to be followed by the words
without limitation. The Company Disclosure Schedule
and the Parent Disclosure Schedule, as well as all other
schedules and all exhibits hereto, shall be deemed part of this
Agreement and included in any reference to this Agreement. This
Agreement shall not be interpreted or construed to require any
person to take any action, or fail to take any action, if to do
so would violate any applicable law.
9.6 Counterparts. This Agreement
may be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the
parties and delivered to the other party, it being understood
that each party need not sign the same counterpart.
9.7 Entire Agreement. This
Agreement (including the documents and the instruments referred
to in this Agreement), together with the Confidentiality
Agreement and the Stock Option Agreement, constitutes the entire
agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement, other than the
Confidentiality Agreement and the Stock Option Agreement.
9.8 Governing Law;
Jurisdiction. This Agreement shall be governed
and construed in accordance with the internal laws of the State
of Delaware applicable to contracts made and wholly-performed
within such state, without regard to any applicable conflicts of
law principles. The parties hereto agree that any suit, action
or proceeding brought by either party to enforce any provision
of, or based on any matter arising out of or in connection with,
this Agreement or the transactions contemplated hereby shall be
brought in any federal or
A-44
state court located in the State of Delaware. Each of the
parties hereto submits to the jurisdiction of any such court in
any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of, or in connection
with, this Agreement or the transactions contemplated hereby and
hereby irrevocably waives the benefit of jurisdiction derived
from present or future domicile or otherwise in such action or
proceeding. Each party hereto irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or
hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit,
action or proceeding brought in any such court has been brought
in an inconvenient forum.
9.9 Publicity. Neither Company nor
Parent shall, and neither Company nor Parent shall permit any of
its Subsidiaries to, issue or cause the publication of any press
release or other public announcement with respect to, or
otherwise make any public statement concerning, the transactions
contemplated by this Agreement without the prior consent (which
consent shall not be unreasonably withheld) of Parent, in the
case of a proposed announcement or statement by Company, or
Company, in the case of a proposed announcement or statement by
Parent; provided, however, that either party may,
without the prior consent of the other party (but after prior
consultation with the other party to the extent practicable
under the circumstances) issue or cause the publication of any
press release or other public announcement to the extent
required by law or by the rules and regulations of the NYSE.
9.10 Assignment; Third Party
Beneficiaries. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall
be assigned by either of the parties (whether by operation of
law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of and be enforceable by
each of the parties and their respective successors and assigns.
Except as otherwise specifically provided in Section 6.6,
this Agreement (including the documents and instruments referred
to in this Agreement) is not intended to and does not confer
upon any person other than the parties hereto any rights or
remedies under this Agreement.
Remainder of Page Intentionally Left Blank
A-45
IN WITNESS WHEREOF, Company and Parent have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.
MERRILL LYNCH & CO., INC.
Name: John A. Thain
|
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Title:
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Chairman and Chief Executive Officer
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BANK OF AMERICA CORPORATION
Name: Kenneth D. Lewis
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Title:
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Chairman, Chief Executive Officer and President
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Signature Page to Agreement and Plan of Merger
A-46
Exhibit A
[Stock
Option Agreement, dated September 15, 2008, between Merrill
Lynch & Co., Inc.
as Issuer and Bank of America Corporation as Grantee, attached
as Appendix B]
AA-1
Exhibit B
Immediately prior to the Effective Time, the Company Certificate
shall be amended as follows:
(1) Section 5 of the Certificate of Designations of
the 9.00% Non-Voting Mandatory Convertible Non-Cumulative
Preferred Stock, Series 2 and Section 5 of the
Certificate of Designations of the 9.00% Non-Voting Mandatory
Convertible Non-Cumulative Preferred Stock, Series 3 shall
each be amended to provide that (a) each share of such
series of Company Preferred Stock shall vote together as a
single class with the shares of Company Common Stock on all
matters presented for a vote of the holders of Company Common
Stock, and (b) each such share shall be entitled to 600
votes.
At the Effective Time, the Company Certificate shall be amended
as follows:
(1) Section 2B.(b) of Article IV of the Company
Certificate shall be amended to provide that, effective as of
the Effective Time, each holder of Company Common Stock shall be
entitled to 250,000 votes for each share thereof held by such
holder.
(2) Section 1 of Article XI of the Company
Certificate shall be amended to provide that, effective as of
the Effective Time, holders of Company Common Stock may take
action without a meeting by written consent of the holders of
80% of the shares of Company Common Stock outstanding and
entitled to vote.
AB-1
APPENDIX B
THE
TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated September 15, 2008, between
MERRILL LYNCH & CO., INC., a Delaware corporation
(Issuer), and BANK OF AMERICA CORPORATION, a
Delaware corporation (Grantee).
W I T
N E S S E T
H:
WHEREAS, Grantee and Issuer have entered into an Agreement and
Plan of Merger of even date herewith (the Merger
Agreement), which agreement has been executed by the
parties hereto in connection with this Stock Option Agreement
(the Agreement); and
WHEREAS, as a condition to Grantees entering into the
Merger Agreement and in consideration therefor, Issuer has
agreed to grant Grantee the Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger
Agreement, the parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable option (the
Option) to purchase, subject to the terms
hereof, up to 304,421,097 fully paid and nonassessable shares of
Issuers Common Stock, par value
$1.331/3
per share (Common Stock), at a price of
$17.05 per share (the Option Price);
provided, however, that in no event shall the
number of shares of Common Stock for which this Option is
exercisable exceed 19.9% of the Issuers issued and
outstanding shares of Common Stock without giving effect to any
shares subject to or issued pursuant to the Option. The number
of shares of Common Stock that may be received upon the exercise
of the Option and the Option Price are subject to adjustment as
herein set forth.
(b) In the event that any additional shares of Common Stock
are either (i) issued or otherwise become outstanding after
the date of this Agreement (other than pursuant to this
Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of this
Agreement, the number of shares of Common Stock subject to the
Option shall be increased or decreased, as appropriate, so that,
after such issuance, such number equals 19.9% of the number of
shares of Common Stock then issued and outstanding without
giving effect to any shares subject or issued pursuant to the
Option. Nothing contained in this Section 1(b) or elsewhere
in this Agreement shall be deemed to authorize Issuer or Grantee
to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may
exercise the Option, in whole or part, and from time to time,
if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence
of an Exercise Termination Event (as hereinafter defined),
provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of
this Section 2) within 180 days following such
Subsequent Triggering Event. Each of the following shall be an
Exercise Termination Event: (i) the Effective
Time (as defined in the Merger Agreement) of the Merger;
(ii) termination of the Merger Agreement in accordance with
the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event except a termination
by Grantee pursuant to Section 8.1(d) (unless the breach by
Issuer giving rise to such right of termination is
non-volitional) or Section 8.1(e) of the Merger Agreement;
or (iii) the passage of 18 months after termination of
the Merger Agreement if such termination follows the occurrence
of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 8.1(d) (unless the breach by Issuer
giving rise to such right of
B-1
termination is non-volitional) or Section 8.1(e) of the
Merger Agreement. The term Holder shall mean the
holder or holders of the Option.
(b) The term Initial Triggering Event
shall mean any of the following events or transactions occurring
after the date hereof:
(i) Issuer or any of its Subsidiaries (each an
Issuer Subsidiary), without having received
Grantees prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as
hereinafter defined) with any person (the term
person for purposes of this Agreement having
the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the
1934 Act), and the rules and regulations
thereunder) other than Grantee or any of its Subsidiaries (each
a Grantee Subsidiary) or the Board of
Directors of Issuer shall have recommended that the stockholders
of Issuer approve or accept any Acquisition Transaction with any
person other than Grantee or a Subsidiary of Grantee. For
purposes of this Agreement, Acquisition
Transaction shall mean (w) a merger,
consolidation or share exchange, or any similar transaction,
involving Issuer or any Significant Subsidiary (as defined in
Rule 1-02
of
Regulation S-X
promulgated by the Securities and Exchange Commission (the
SEC)) of Issuer, (x) a purchase, lease
or other acquisition or assumption of all or a substantial
portion of the assets or deposits of Issuer or any Significant
Subsidiary of Issuer, (y) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or
otherwise) of securities representing 10% or more of the voting
power of Issuer (provided that this clause (y) shall
not be triggered as a result of Temasek Capital (Private)
Limited or its subsidiaries acquiring beneficial ownership of
10% or more of the outstanding shares of Common Stock solely as
a result of their holdings of Common Stock as of the date hereof
taken together with their acquisition of additional shares of
Common Stock under their existing agreement to purchase Common
Stock entered into with Issuer on July 28, 2008), or
(z) any substantially similar transaction; provided,
however, that in no event shall any merger,
consolidation, purchase or similar transaction involving only
the Issuer and one or more of its Subsidiaries or involving only
any two or more of such Subsidiaries, be deemed to be an
Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the
Merger Agreement;
(ii) Any event set forth in Section 8.1(e) of the
Merger Agreement shall have occurred;
(iii) Any person other than Grantee, any Grantee Subsidiary
or any Issuer Subsidiary acting in a fiduciary capacity in the
ordinary course of its business shall have acquired beneficial
ownership or the right to acquire beneficial ownership of 10% or
more of the outstanding shares of Common Stock (the term
beneficial ownership for purposes of this
Agreement having the meaning assigned thereto in
Section 13(d) of the 1934 Act, and the rules and
regulations thereunder); provided that this
clause (iii) shall not be triggered as a result of Temasek
Capital (Private) Limited or its subsidiaries acquiring
beneficial ownership of 10% or more of the outstanding shares of
Common Stock solely as a result of their holdings of Common
Stock as of the date hereof taken together with their
acquisition of additional shares of Common Stock under their
existing agreement to purchase Common Stock entered into with
Issuer on July 28, 2008;
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer
or its stockholders that is public or becomes the subject of
public disclosure to engage in an Acquisition Transaction;
(v) After the receipt by Issuer or its stockholders of any
bona fide inquiry or proposal (or the bona fide
indication of any intention to propose) from a third party
to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger
Agreement and such breach (x) would entitle Grantee to
terminate the Merger Agreement and (y) shall not have been
cured prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to which
Grantee has given its prior written consent, shall have filed an
application or notice
B-2
with the Federal Reserve Board, or other federal or state bank
regulatory authority, which application or notice has been
accepted for processing, for approval to engage in an
Acquisition Transaction.
(c) The term Subsequent Triggering Event
shall mean either of the following events or transactions
occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership
of 20% or more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in paragraph (i) of subsection (b) of this
Section 2, except that the percentage referred to in
clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent
Triggering Event of which it has knowledge, it being understood
that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice
(the date of which being herein referred to as the
Notice Date) specifying (i) the total
number of shares it will purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days
nor later than 60 business days from the Notice Date for the
closing of such purchase (the Closing Date);
provided that if prior notification to or approval of the
Federal Reserve Board or any other regulatory agency is required
in connection with such purchase, the Holder shall as soon as
reasonably practicable file the required notice or application
for approval and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which any required
notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or
periods shall have passed. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of
this Section 2, the Holder shall pay to Issuer the
aggregate purchase price for the shares of Common Stock
purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by
Issuer, provided that failure or refusal of Issuer to
designate such a bank account shall not preclude the Holder from
exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f)
of this Section 2, Issuer shall deliver to the Holder a
certificate or certificates representing the number of shares of
Common Stock purchased by the Holder and, if the Option should
be exercised in part only, a new Option evidencing the rights of
the Holder thereof to purchase the balance of the shares
purchasable hereunder, and the Holder shall deliver to Issuer
this Agreement and a letter agreeing that the Holder will not
offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy of
such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor.
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended
(the 1933 Act), in the above legend
shall be removed by delivery of substitute certificate(s)
without such reference if the Holder shall have delivered to
Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not
required for purposes of the 1933 Act; (ii) the
reference to the provisions of this Agreement in the above
legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement
and under circumstances that do not require the retention of
such reference; and (iii) the legend shall be removed in
its entirety if the conditions in the preceding clauses (i)
and (ii) are both satisfied. In addition, such certificates
shall bear any other legend as may be required by law.
B-3
(i) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under
subsection (e) of this Section 2 and the tender of the
applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares
of Common Stock issuable upon such exercise, notwithstanding
that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Common Stock shall
not then be actually delivered to the Holder. Issuer shall pay
all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection
with the preparation, issuance and delivery of stock
certificates under this Section 2 in the name of the Holder
or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but
unissued shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock;
(ii) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid
the observance or performance of any of the covenants,
stipulations or conditions to be observed or performed hereunder
by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all
premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. § 18a and
regulations promulgated thereunder and (y) in the event,
under the Bank Holding Company Act of 1956, as amended (the
BHCA), or the Change in Bank Control Act of
1978, as amended, or any state banking law, prior approval of or
notice to the Federal Reserve Board or to any state or other
regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the
Federal Reserve Board or such other regulatory authority as they
may require) in order to permit the Holder to exercise the
Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to
purchase, on the same terms and subject to the same conditions
as are set forth herein, in the aggregate the same number of
shares of Common Stock purchasable hereunder. The terms
Agreement and Option as
used herein include any Stock Option Agreements and related
Options for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated,
Issuer will execute and deliver a new Agreement of like tenor
and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of
shares of Common Stock purchasable upon the exercise of the
Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of
any change in, or distributions in respect of, the Common Stock
by reason of stock dividends,
split-ups,
mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect
of the Common Stock that would be prohibited under the terms of
the Merger Agreement, or the like, the type and number of shares
of Common Stock purchasable upon exercise hereof and the Option
Price shall be appropriately adjusted in such manner as shall
fully preserve the economic benefits provided hereunder and
proper provision shall be made in any agreement governing any
such transaction to provide for such proper adjustment and the
full satisfaction of the Issuers obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer
shall, at the request of Grantee delivered within 180 days
of such Subsequent Triggering Event (whether on its own behalf
or on behalf of any subsequent holder of this Option (or part
thereof) or any of the shares of Common Stock issued pursuant
hereto), promptly prepare, file and keep current a shelf
registration
B-4
statement under the 1933 Act covering this Option and any
shares issued and issuable pursuant to this Option and shall use
its reasonable best efforts to cause such registration statement
to become effective and remain current in order to permit the
sale or other disposition of this Option and any shares of
Common Stock issued upon total or partial exercise of this
Option (Option Shares) in accordance with any
plan of disposition requested by Grantee. Issuer will use its
reasonable best efforts to cause such registration statement
first to become effective and then to remain effective for such
period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter
time as may be reasonably necessary to effect such sales or
other dispositions. Grantee shall have the right to demand two
such registrations. The foregoing notwithstanding, if, at the
time of any request by Grantee for registration of the Option or
Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering of shares of Common
Stock, and if in the good faith judgment of the managing
underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of
the Holders Option or Option Shares would interfere with
the successful marketing of the shares of Common Stock offered
by Issuer, the number of Option Shares otherwise to be covered
in the registration statement contemplated hereby may be
reduced; provided, however, that after any such
required reduction the number of Option Shares to be included in
such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further,
however, that if such reduction occurs, then the Issuer
shall file a registration statement for the balance as promptly
as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested
by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any
underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of
representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting
agreements for the Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by
promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies.
Notwithstanding anything to the contrary contained herein, in no
event shall Issuer be obligated to effect more than two
registrations pursuant to this Section 6 by reason of the
fact that there shall be more than one Grantee as a result of
any assignment or division of this Agreement.
7. (a) Immediately prior to, or after, the occurrence
of a Repurchase Event (as defined below), (i) following a
request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall
repurchase the Option from the Holder immediately prior to the
Repurchase Event (or, as requested by the Holder, after the
Repurchase Event) at a price (the Option Repurchase
Price) equal to the product of the number of shares
for which this Option may then be exercised multiplied by the
amount by which (A) the Market/Offer Price (as defined
below) exceeds (B) the Option Price, and (ii) at the
request of the owner of Option Shares from time to time (the
Owner), delivered prior to an Exercise
Termination Event and within 90 days of the occurrence of a
Repurchase Event (or such later period as provided in
Section 10), Issuer shall repurchase such number of the
Option Shares from the Owner as the Owner shall designate at a
price (the Option Share Repurchase Price)
equal to the Market/Offer Price multiplied by the number of
Option Shares so designated. The term Market/Offer
Price shall mean the highest of (i) the price per
share of Common Stock at which a tender offer or exchange offer
therefor has been made, (ii) the price per share of Common
Stock to be paid by any third party pursuant to an agreement
with Issuer, (iii) the highest closing price for shares of
Common Stock within the six-month period immediately preceding
the date the Holder gives notice of the required repurchase of
this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be, or (iv) in the event
of a sale of all or a substantial portion of Issuers
assets, the sum of the price paid in such sale for such assets
and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Issuer, divided by the number of
shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a
nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable
to the Issuer.
(b) The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option
and any Option Shares pursuant to this Section 7 by
surrendering for such purpose to Issuer, at its
B-5
principal office, this Agreement or certificates for Option
Shares, as applicable, accompanied by a written notice or
notices stating that the Holder or the Owner, as the case may
be, elects to require Issuer to repurchase this Option
and/or the
Option Shares in accordance with the provisions of this
Section 7. Within the latter to occur of (x) five
business days after the surrender of the Option
and/or
certificates representing Option Shares and the receipt of such
notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event,
Issuer shall deliver or cause to be delivered to the Holder the
Option Repurchase Price
and/or to
the Owner the Option Share Repurchase Price therefor or the
portion thereof, if any, that Issuer is not then prohibited
under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option
and/or the
Option Shares in full, Issuer shall immediately so notify the
Holder
and/or the
Owner and thereafter deliver or cause to be delivered, from time
to time, to the Holder
and/or the
Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within five business
days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time
after delivery of a notice of repurchase pursuant to paragraph
(b) of this Section 7 is prohibited under applicable
law or regulation from delivering to the Holder
and/or the
Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer
hereby undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices,
in each case as promptly as practicable in order to accomplish
such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or
to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder
and/or the
Owner, as appropriate, that portion of the Option Repurchase
Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as
appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the
Option Repurchase Price, or (B) to the Owner, a certificate
for the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a
Repurchase Event shall be deemed to have
occurred (i) upon the consummation of an Acquisition
Transaction with respect to Issuer (and not solely involving one
or more subsidiaries of Issuer) (except that the percentage
referred to in clause (y) of the definition thereof shall
be 50%) or (ii) upon the acquisition by any person of
beneficial ownership of 50% or more of the then outstanding
shares of Common Stock.
8. [Intentionally Omitted]
9. [Intentionally Omitted]
10. The
90-day or
180-day
periods for exercise of certain rights under Sections 2, 6,
7 and 13 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights
and for the expiration of all statutory waiting periods; and
(ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such
exercise.
11. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all
times from the date hereof through the termination of this
Agreement in accordance with its terms will have reserved for
issuance upon the exercise of the Option, that number of shares
of Common
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Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant hereto, will be duly authorized,
validly issued, fully paid, nonassessable, and will be delivered
free and clear of all claims, liens, encumbrance and security
interests and not subject to any preemptive rights.
(c) The Board of Directors of Issuer has unanimously
approved this Agreement and the transactions contemplated hereby
(including by reserving shares for issuance of shares of Common
Stock on exercise of the Option) and taken any other action as
required to render inapplicable to such agreement and
transactions Section 203 of the Delaware General
Corporation Law and, to the knowledge of Issuer, any similar
Takeover Statutes.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority
to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of Grantee. This Agreement has been duly
executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock
or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public
distribution thereof and will not be transferred or otherwise
disposed of except in a transaction registered or exempt from
registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created
hereunder to any other person, without the express written
consent of the other party, except that in the event a
Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 180 days following such
Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until
the date 15 days following the date on which the Federal
Reserve Board approves an application by Grantee under the BHCA
to acquire the shares of Common Stock subject to the Option,
Grantee may not assign its rights under the Option except in
(i) a widely dispersed public distribution, (ii) a
private placement in which no one party acquires the right to
purchase in excess of 2% of the voting shares of Issuer,
(iii) an assignment to a single party (e.g., a
broker or investment banker) for the purpose of conducting a
widely dispersed public distribution on Grantees behalf,
or (iv) any other manner approved by the Federal Reserve
Board.
14. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock
Exchange upon official notice of issuance and applying to the
Federal Reserve Board under the BHCA for approval to acquire the
shares issuable hereunder, but Grantee shall not be obligated to
apply to state banking authorities for approval to acquire the
shares of Common Stock issuable hereunder until such time, if
ever, as it deems appropriate to do so.
15. [Intentionally Omitted]
16. (a) Notwithstanding any other provision of this
Agreement, in no event shall the Grantees Total Profit (as
hereinafter defined) exceed $2 billion and, if it otherwise
would exceed such amount, the Grantee, at its sole election,
shall either (i) reduce the number of shares of Common
Stock subject to this Option, (ii) deliver to Issuer for
cancellation Option Shares previously purchased by Grantee,
(iii) pay cash to Issuer, or (iv) any combination
thereof, so that Grantees actually realized Total Profit
shall not exceed $2 billion after taking into account the
foregoing actions.
(b) Notwithstanding any other provision of this Agreement,
this Option may not be exercised for a number of shares as would
result in a Notional Total Profit (as defined below) of more
than $2 billion.
(c) As used herein, the term Total
Profit shall mean the aggregate amount (before taxes)
of the following: (i) the amount received by Grantee
pursuant to Issuers repurchase of the Option (or any
portion thereof)
B-7
pursuant to Section 7, (ii) (x) the amount received by
Grantee pursuant to Issuers repurchase of Option Shares
pursuant to Section 7, less (y) the Grantees
purchase price for such Option Shares, (iii) (x) the net
cash amounts received by Grantee pursuant to the sale of Option
Shares (or any other securities into which such Option Shares
are converted or exchanged) to any unaffiliated party, less
(y) the Grantees purchase price of such Option
Shares, (iv) any amounts received by Grantee on the
transfer of the Option (or any portion thereof) to any
unaffiliated party, and (v) any amount equivalent to the
foregoing with respect to the Substitute Option.
(d) As used herein, the term Notional Total
Profit with respect to any number of shares as to
which Grantee may propose to exercise this Option shall be the
Total Profit determined as of the date of such proposed exercise
assuming that this Option were exercised on such date for such
number of shares and assuming that such shares, together with
all other Option Shares held by Grantee and its affiliates as of
such date, were sold for cash at the closing market price for
the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
17. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
18. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions
and covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court
or regulatory agency determines that the Holder is not permitted
to acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or 5 hereof), it is the express intention of
Issuer to allow the Holder to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible,
without any amendment or modification hereof.
19. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram, telecopy or telex,
or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
20. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles
of conflicts of laws thereof (except to the extent that
mandatory provisions of federal or state law apply).
21. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
22. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses
incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers,
accountants and counsel.
23. Except as otherwise expressly provided herein or in the
Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions
contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party,
other than the parties hereto, and their respective successors
and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as
expressly provided herein.
24. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the
Merger Agreement.
B-8
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all as of the date first above written.
MERRILL LYNCH & CO., INC.
(Issuer)
Name: John A. Thain
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Title:
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Chairman and Chief Executive Officer
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BANK OF AMERICA CORPORATION
(Grantee)
Name: Kenneth D. Lewis
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Title:
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Chairman and Chief Executive Officer
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Signature
Page to Stock Option Agreement
APPENDIX C
September 14,
2008
The Board of Directors
Bank of America Corporation
100 N. Tryon St.
Charlotte, NC 28255
Members of the Board of Directors:
We understand that Bank of America Corporation
(Acquiror) and Merrill Lynch & Co. (the
Company) propose to enter into an Agreement and Plan
of Merger, to be dated as of September 15, 2008 (the
Agreement), pursuant to which Acquiror will acquire
the Company by means of a merger of a wholly-owned subsidiary of
Acquiror with and into the Company (the Merger).
Pursuant to the Merger, each outstanding share of common stock
of the Company (Company Common Stock) will be
converted into the right to receive 0.8595 shares (the
Exchange Ratio) of common stock of Acquiror
(Acquiror Common Stock). The terms and conditions of
the Merger are more fully set forth in the Agreement.
You have requested our opinion as of the date hereof as to the
fairness, from a financial point of view, to Acquiror of the
Exchange Ratio. In connection with this opinion, we have:
(i) reviewed the financial terms and conditions of the
Merger; (ii) analyzed certain historical and prospective
business and financial information relating to the Company and
Acquiror; (iii) held discussions with members of the senior
managements of the Company and Acquiror with respect to the
businesses and prospects of the Company; (iv) reviewed
public information with respect to certain other companies we
believed to be relevant; (v) reviewed the financial terms
of certain business combinations involving companies we believed
to be relevant; (vi) reviewed historical stock prices and
trading volumes of the Company common stock and Acquiror common
stock; and (vii) conducted such other financial studies,
analyses and investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of
the information we reviewed in connection with the activities
described in the foregoing paragraph and upon which our opinion
is based, including public information and information provided
by each of the Company and the Acquiror. We did not
independently verify the accuracy or completeness of any such
information, nor will we do so in the future, and we did not and
do not assume any responsibility for doing so. With respect to
all cost savings assumptions and other forward-looking data, we
have assumed, with your permission, that they have been
reasonably prepared on bases reflecting the best currently
available estimates and judgments as to the future financial
performance of the Company. We assume no responsibility for and
express no view as to such forecasts or the assumptions on which
they are based. We have relied as to all legal matters on advice
of counsel to the Company, and have assumed that both the
Company and the Acquiror will continue as going concerns for all
periods relative to our analysis and that the Merger will be
consummated on the financial terms and conditions of the Merger
as they are proposed as of the date hereof, without any waiver
of any material terms or conditions by the Company. We also have
assumed that all governmental, regulatory and other consents and
approvals necessary for the consummation of the Merger will be
obtained without any adverse effect on Acquiror or the Company
or on the potential benefits of the Merger in any way meaningful
to our analysis. Our opinion does not address any legal,
regulatory, tax or accounting matters.
Our opinion is necessarily based on economic, monetary, market
and other conditions as in effect on, and the information made
available to us as of, the date hereof. We assume no
responsibility for updating or revising our opinion based on
circumstances or events occurring after the date hereof. We do
not express any opinion as to the prices at which shares of
Acquiror Common Stock or Company Common Stock may trade at any
time subsequent to the announcement of the Merger.
We have acted as financial advisor to Acquiror in connection
with, and have participated in certain of the negotiations
leading to, the Merger. Acquiror has agreed to pay us a fee for
our services in connection with the Merger and to reimburse our
expenses and indemnify us against certain liabilities arising
out of our engagement.
C-1
Our opinion does not address the underlying business decision of
Acquiror to engage in the Merger or the relative merits of the
Merger as compared to other alternatives that may be available
to Acquiror. This opinion addresses only the fairness to
Acquiror, from a financial point of view, of the Exchange Ratio
as of the date hereof. We do not express any view on, and our
opinion does not address, any other term or aspect of the Merger
or the Agreement. Our advisory services and the opinion
expressed herein are provided for the information and assistance
of the Board of Directors of Acquiror in connection with its
consideration of the Merger and such opinion does not constitute
a recommendation as how any stockholder of either the Acquiror
or the Company should vote with respect to the Merger or any
other matter.
Based on and subject to the foregoing, we are of the opinion
that as of the date hereof the Exchange Ratio is fair, from a
financial point of view, to Acquiror.
Very truly yours,
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By
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/s/ J. Christopher Flowers
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Name: J. Christopher Flowers
C-2
APPENDIX D
September 14,
2008
Board of Directors of Bank of America Corporation
100 North Tryon Street
Bank of America Corporate Center
Charlotte, NC 28255
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a
financial point of view, to Bank of America Corporation (the
Company) of the Exchange Ratio (as defined below) to
be paid by the Company pursuant to the terms of, and subject to
the conditions set forth in, the Agreement and Plan of Merger to
be dated as of September 15, 2008 (the Merger
Agreement) by and between the Company and Merrill
Lynch & Co., Inc. (Merrill Lynch).
Pursuant to the terms of, and subject to the conditions set
forth in, the Merger Agreement, a newly-formed wholly-owned
subsidiary of the Company (the Merger Sub) will be
merged (the Merger) with and into Merrill Lynch and
each issued and outstanding share of common stock of Merrill
Lynch,
$1.331/3
par value per share, except for certain shares as specified in
the Merger Agreement, will be converted into the right to
receive 0.8595 of a share (the Exchange Ratio) of
the common stock, $0.01 par value per share, of the
Company. You have not asked us to express, and we are not
expressing, any opinion with respect to any of the other terms,
conditions, determinations or actions with respect to the Merger.
In connection with our review of the proposed Merger and the
preparation of our opinion herein, we have examined:
(a) the financial terms and conditions of a preliminary
draft of the Merger Agreement; (b) certain audited
historical financial statements of the Company and of Merrill
Lynch for the five years ended December 31, 2007;
(c) information regarding the strategic, financial and
operational benefits anticipated from the Merger and the
prospects of the Company (with and without the Merger);
(d) the pro forma impact of the Merger on the earnings per
share of the Company (before and after taking into consideration
any goodwill created as a result of the Merger) based on certain
pro forma financial information prepared by the senior
management of the Company; (e) information regarding the
amount and timing of potential cost savings and related expenses
and synergies which senior management of the Company expects
will result from the Merger, as well as certain estimated
restructuring charges and negative revenue adjustments which
senior management of the Company expects to result from the
Merger (the Expected Synergies);
(f) information regarding publicly available financial
terms of certain recently-completed transactions in the
investment banking industry; (g) current and historical
market prices and trading volumes of the common stock of the
Company and Merrill Lynch; and (h) certain other publicly
available information on the Company and Merrill Lynch. We have
also considered certain other matters which we have deemed
relevant to our inquiry and have taken into account certain
traditionally accepted financial and investment banking
procedures and considerations as we have deemed relevant.
In rendering our opinion, we have assumed and relied, without
independent verification, upon the accuracy and completeness of
all the information examined by, or otherwise reviewed or
discussed with, us for purposes of this opinion. We have not
made or obtained an independent valuation or appraisal of the
assets, liabilities (contingent, derivative, off-balance sheet
or otherwise) or solvency of the Company or Merrill Lynch,
including particularly any mark-to-market balance sheet
adjustments resulting from the Merger, market conditions or
otherwise. We relied solely upon information provided to us by
the Company and other publicly available information with
respect to Merrill Lynchs financial condition, results of
operations and prospects.
We have been advised by the senior management of the Company
that the assumptions utilized in our analyses or otherwise
examined by us, including the Expected Synergies prepared by the
Company, have been reasonably prepared by, and reflect the best
currently available estimates, assumptions and judgments of, the
senior management of the Company. In that regard, we have
assumed, with your consent, that the Expected Synergies and
consensus earnings estimates used in our analyses will be
realized in the amounts and at the
D-1
times contemplated thereby. We express no opinion with respect
to the Expected Synergies or any such assumptions or related
information or data, or the estimates, assumptions and judgments
on which they are based. We were not requested to, and did not,
participate in the negotiation or structuring of the Merger nor
were we asked to consider, and our opinion does not address, the
relative merits of the Merger as compared to any alternative
business strategies that might exist for the Company or the
effect of any other transaction in which the Company might
engage.
Our opinion herein is based upon economic, market, financial and
other conditions existing on, and other information disclosed to
us as of, the date of this letter. It should be understood that,
although subsequent developments may affect this opinion, we do
not have any obligation to update, revise or reaffirm this
opinion. We have relied as to all legal matters on advice of
counsel to the Company, and have assumed that both the Company
and Merrill Lynch will continue as going concerns for all
periods relative to our analysis and that the Merger will be
consummated on the terms described in the Merger Agreement,
without any waiver of any material terms or conditions by the
Company.
We expect to receive a fee for rendering this opinion. We also
expect to receive substantial additional compensation contingent
upon the successful completion of the Merger for our role as a
financial advisor to the Company in connection with the Merger.
The Company has also agreed to reimburse our expenses and
indemnify us against certain liabilities arising out of our
engagement.
Other than as described below, during the period from
September 13, 2006 to September 14, 2008, we have not
had any material financial advisory relationship with the
Company or Merrill Lynch. Our firm issues independent equity
research covering the Company and Merrill Lynch. Also, from time
to time, our firm participates with affiliates of the Company
and/or
Merrill Lynch in various underwriting syndicates (including as a
lead or co-lead managing underwriter) of various public
securities offerings, and for which services we receive
customary fees.
In the ordinary course of business, we or our affiliates may
actively trade the equity securities of the Company and Merrill
Lynch for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in
such securities. Furthermore, we are affiliated with J.C.
Flowers I L.P. and J.C. Flowers II L.P., investment
funds managed by J. Christopher Flowers and entities controlled
by him. An affiliate of such entities also served as a financial
advisor to the Company in connection with the Merger, for which
it expects to receive substantial compensation contingent in
part upon the successful completion of the Merger. We were
formerly an affiliate of the Swiss Re group of companies, which
still holds a minority voting interest in our firm. Swiss Re and
its subsidiaries, divisions, branches and affiliates are
involved in a range of investment and financial business, both
for their own accounts and for the account of their clients.
We are expressing no opinion herein as to the price at which the
common stock of the Company or Merrill Lynch will trade at any
future time or as to the effect of the Merger on the trading
price of the common stock of the Company or Merrill Lynch. Such
trading price may be affected by a number of factors, including
but not limited to (i) dispositions of the common stock of
the Company by stockholders within a short period of time after
the effective date of the Merger, (ii) changes in
prevailing interest rates and other factors which generally
influence the price of securities, (iii) adverse changes in
the current capital markets, (iv) the occurrence of adverse
changes in the financial condition, business, assets, results of
operations or prospects of the Company or Merrill Lynch or in
the financial institution
and/or
investment banking industries, (v) any necessary actions by
or restrictions of federal, state or other governmental agencies
or regulatory authorities, and (vi) timely completion of
the Merger on terms and conditions that are acceptable to all
parties at interest.
Our investment banking services and our opinion were provided
solely for the internal and confidential use and benefit of the
Board of Directors and senior management of the Company in
connection with their consideration of the Merger. Our opinion
is limited to the fairness to the Company, from a financial
point of view, of the Exchange Ratio to be paid by the Company
in connection with the Merger, and we do not address the merits
of the underlying decision by the Company to engage in the
Merger and this opinion does not constitute a recommendation to
any stockholder of either the Company or Merrill Lynch as to how
such
D-2
stockholder should vote on the proposed Merger. We express no
opinion herein about the fairness of the compensation to any
officers, directors or employees of the Company or Merrill
Lynch, or any class of such persons, relative to the
Companys public stockholders. It is understood that this
letter may not be summarized, described, reproduced,
disseminated, quoted from, referred to or otherwise disclosed
without our prior written consent, except that this opinion may
be included in its entirety in a submission to regulatory
authorities or in a registration statement, prospectus
and/or proxy
statement mailed to the Companys stockholders with respect
to the Merger, provided that we will have the right to review
and approve in advance all such disclosures, including any
description or reference to us or this opinion prior to any
filing thereof with the Securities and Exchange Commission, any
regulatory authority and prior to any dissemination to the
Companys stockholders.
Based upon and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Exchange Ratio to be paid by
the Company in the Merger is fair, from a financial point of
view, to the Company. This opinion has been approved by our
fairness committee.
Very truly yours,
/s/ Fox-Pitt
Kelton Cochran Caronia Waller (USA) LLC
FOX-PITT KELTON
COCHRAN CARONIA WALLER (USA) LLC
D-3
APPENDIX E
September 14,
2008
Board of Directors
Merrill Lynch & Co., Inc.
4 World Financial Center
New York, NY 10080
Members of the Board of Directors:
Bank of America Corporation (Bank of America) and
Merrill, Lynch & Co., Inc. (Merrill Lynch)
propose to enter into an Agreement and Plan of Merger (the
Agreement) pursuant to which a wholly owned
subsidiary of Bank of America will be merged with and into
Merrill Lynch in a transaction (the Merger) in which
each issued and outstanding share of Merrill Lynchs common
stock, par value
$1.331/3
per share (the Merrill Lynch Shares), other than
(i) Merrill Lynch Shares that are owned by Merrill Lynch or
Bank of America (other than Merrill Lynch Shares held in trust
accounts, managed accounts, mutual funds and the like, or
otherwise held in a fiduciary or agency capacity, that are
beneficially owned by third parties) and (ii) Merrill Lynch
Shares held, directly or indirectly, by Merrill Lynch or Bank of
America in respect of a debt previously contracted, will be
converted into the right to receive 0.8595 of a share (the
Exchange Ratio) of the common stock of Bank of
America, par value $.01 per share (the Bank of America
Shares). In connection with the entry into the Agreement,
Merrill Lynch and Bank of America propose to enter into a Stock
Option Agreement (the Option Agreement) pursuant to
which Merrill Lynch would grant to Bank of America an option to
buy up to 304,421,097 Merrill Lynch Shares, subject to the terms
and condition thereof.
You have asked us whether, in our opinion, the Exchange Ratio is
fair from a financial point of view to holders of Merrill Lynch
Shares.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed certain publicly available business and
financial information relating to Merrill Lynch and Bank of
America that we deemed to be relevant;
(2) Reviewed certain information relating to the business,
earnings, cash flow, assets, liabilities, issuer ratings and
overall liquidity position and prospects of Merrill Lynch and
Bank of America, as well as the amount and timing of the cost
savings and related expenses expected to result from the Merger
(the Expected Cost Savings) furnished to us by
Merrill Lynch;
(3) Conducted discussions with members of senior management
and representatives of Merrill Lynch and Bank of America
concerning the matters described in clauses 1 and 2 above,
as well as their respective businesses and prospects before and
after giving effect to the Merger and the Expected Cost Savings;
(4) Reviewed the market prices and valuation multiples for
the Merrill Lynch Shares and the Bank of America Shares and
compared them with those of certain publicly traded companies
that we deemed to be relevant;
(5) Reviewed the results of operations of Merrill Lynch and
Bank of America and compared them with those of certain publicly
traded companies that we deemed to be relevant;
(6) Compared the proposed financial terms of the Merger
with the financial terms of certain other transactions that we
deemed to be relevant;
(7) Participated in certain discussions and negotiations
among representatives of Merrill Lynch and Bank of America and
their financial and legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed drafts dated September 14, 2008 of the
Agreement and the Option Agreement; and
E-1
(10) Reviewed such other financial studies and analyses and
took into account such other matters as we deemed necessary,
including our assessment of general economic, market and
monetary conditions.
In preparing our opinion, we have assumed and relied on the
accuracy and completeness of all information supplied or
otherwise made available to us, discussed with or reviewed by or
for us, or publicly available, and we have not assumed any
responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the
assets or liabilities of Merrill Lynch or Bank of America or
been furnished with any such evaluation or appraisal, nor have
we evaluated the solvency or fair value of Merrill Lynch or Bank
of America under any state or federal laws relating to
bankruptcy, insolvency or similar matters. In addition, we have
not assumed any obligation to conduct any physical inspection of
the properties or facilities of Merrill Lynch or Bank of
America. With respect to the Expected Cost Savings furnished to
or discussed with us by Merrill Lynch or Bank of America, we
have assumed that they have been reasonably prepared and reflect
the best currently available estimates and judgment of Merrill
Lynchs or Bank of Americas management as to the
expected future financial performance of Merrill Lynch or Bank
of America, as the case may be, and the Expected Cost Savings.
We have further assumed that the Merger will qualify as a
tax-free reorganization for U.S. federal income tax
purposes. We have also assumed that the final forms of the
Agreement and the Option Agreement will be substantially similar
to the last drafts reviewed by us.
Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on, and on the
information made available to us as of, the date hereof. We have
assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for
the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed
that will have a material adverse effect on the contemplated
benefits of the Merger.
In connection with the preparation of this opinion, we have not
been authorized by Merrill Lynch or the Board of Directors to
solicit, nor have we solicited, third party indications of
interest for the acquisition of all or any part of Merrill Lynch.
We are a wholly-owned subsidiary of Merrill Lynch and are acting
as financial advisor to Merrill Lynch in connection with the
Merger and will receive a fee from Merrill Lynch for our
services, a significant portion of which is contingent upon the
consummation of the Merger. We have, in the past, provided
financial advisory and financing services to Bank of America and
Merrill Lynch and may continue to do so and have received, and
may receive, fees for the rendering of such services. In
addition, in the ordinary course of our business, we may
actively trade the Merrill Lynch Shares and other securities of
Merrill Lynch, as well as the Bank of America Shares and other
securities of Bank of America, for our own account and for the
accounts of customers and, accordingly, may at any time hold a
long or short position in such securities.
This opinion is for the use and benefit of the Board of
Directors of Merrill Lynch. Our opinion does not address the
merits of the underlying decision by Merrill Lynch to engage in
the Merger and does not constitute a recommendation to any
shareholder of Merrill Lynch as to how such shareholder should
vote on the proposed Merger or any matter related thereto. In
addition, you have not asked us to address, and this opinion
does not address, the fairness to, or any other consideration
of, the holders of any class of securities, creditors or other
constituencies of Merrill Lynch, other than the holders of the
Merrill Lynch Shares. In rendering this opinion, we express no
view or opinion with respect to the fairness (financial or
otherwise) of the amount or nature or any other aspect of any
compensation payable to or to be received by any officers,
directors, or employees of any parties to the Merger, or any
class of such persons, relative to the Exchange Ratio. Our
opinion has been authorized for issuance by the Americas
Fairness Opinion (and Valuation Letter) Committee of Merrill
Lynch.
On the basis of and subject to the foregoing, we are of the
opinion that, as of the date hereof, the Exchange Ratio is fair
from a financial point of view to holders of Merrill Lynch
Shares.
Very truly yours,
/s/ Merrill Lynch, Pierce, Fenner & Smith Incorporated
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
E-2
APPENDIX F
[Amendment
to Bank of Americas 2003 Key Associate Stock Plan, as
Amended and Restated]
F-1
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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|
Item 20.
|
Indemnification
of Directors and Officers.
|
Section 145 (a) of the General Corporation Law of the
State of Delaware (Delaware Corporation Law)
provides, in general, that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation), because the person is or was a director, officer,
employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or
agent of any other enterprise. Such indemnity may be against
expenses (including attorneys fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
the person in connection with such action, suit or proceeding,
if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best
interests of the corporation and if, with respect to any
criminal action or proceeding, the person did not have
reasonable cause to believe the persons conduct was
unlawful.
Section 145 (b) of the Delaware Corporation Law
provides, in general, that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a
judgment in its favor because the person is or was a director,
officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director,
officer, employee or agent of any other enterprise, against any
expenses (including attorneys fees) actually and
reasonably incurred by the person in connection with the defense
or settlement of such action or suit if the person acted in good
faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation, except
that no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 145(g) of the Delaware Corporation Law provides, in
general, that a corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director,
officer, employee or agent of any other enterprise, against any
liability asserted against the person in any such capacity, or
arising out of the persons status as such, regardless of
whether the corporation would have the power to indemnify the
person against such liability under the provisions of the law.
Article VIII of the Registrants bylaws provides for
indemnification to the fullest extent authorized by Delaware law
for any person who is or was a director or officer of the
Registrant who is or was involved or threatened to be made
involved in any proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person is or was serving as a director, officer, manager or
employee of the Registrant or was serving at the request of the
Registrant as a director, officer, manager or employee of any
other enterprise. Such indemnification is provided only if the
director, officer, manager or employee acted in good faith and
in a manner that the director, officer, manager or employee
reasonably believed to be in, or not opposed to, the best
interests of the Registrant, and with respect to any criminal
proceeding, had no reasonable cause to believe that the conduct
was unlawful.
The foregoing is only a general summary of certain aspects of
Delaware law and the Registrants bylaws dealing with
indemnification of directors and officers, and does not purport
to be complete. It is qualified in its entirety by reference to
the detailed provisions of Section 145 of the Delaware
Corporation Law and Article VIII of the bylaws of the
Registrant.
Pursuant to the Registrants bylaws, the Registrant also
maintains a directors and officers insurance policy
which insures the directors and officers of the Registrant
against liability asserted against such persons
II-1
in such capacity whether or not such directors or officers have
the right to indemnification pursuant to the bylaws or otherwise.
|
|
Item 21.
|
Exhibits
and Financial Statement Schedules.
|
(a) Exhibits. The following is a list of
Exhibits to this Registration Statement:
|
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|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
2(a)
|
|
|
Agreement and Plan of Merger, dated as of September 15,
2008, by and among Merrill Lynch & Co., Inc. and Bank
of America Corporation (included in Part I as
Appendix A to the document included in this Registration
Statement)
|
|
3(a)
|
|
|
Amended and restated certificate of incorporation of Registrant,
as in effect on the date hereof, incorporated by reference to
Exhibit 3(a) of Registrants Annual Report on
Form 10-K
filed February 28, 2008
|
|
3(b)
|
|
|
Amended and Restated Bylaws of Registrant, as in effect on the
date hereof, incorporated by reference to Exhibit 3.1 of
Registrants Current Report on
Form 8-K
filed January 24, 2007
|
|
4(a)
|
|
|
Form of Certificate of Designations of Registrants
Floating Rate Non-Cumulative Preferred Stock, Series 1*
|
|
4(b)
|
|
|
Form of Certificate of Designations of Bank of America Floating
Rate Non-Cumulative Preferred Stock, Series 2*
|
|
4(c)
|
|
|
Form of Certificate of Designations of Bank of America 6.375%
Non-Cumulative Preferred Stock, Series 3*
|
|
4(d)
|
|
|
Form of Certificate of Designations of Bank of America Floating
Rate Non-Cumulative Preferred Stock, Series 4*
|
|
4(e)
|
|
|
Form of Certificate of Designations of Bank of America Floating
Rate Non-Cumulative Preferred Stock, Series 5*
|
|
4(f)
|
|
|
Form of Certificate of Designations of Bank of America 6.70%
Noncumulative Perpetual Preferred Stock, Series 6*
|
|
4(g)
|
|
|
Form of Certificate of Designations of Bank of America 6.25%
Noncumulative Perpetual Preferred Stock, Series 7*
|
|
4(h)
|
|
|
Form of Certificate of Designations of Bank of America 8.625%
Non-Cumulative Preferred Stock, Series 8*
|
|
4(i)
|
|
|
Deposit Agreement, dated as of November 1, 2004, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.), as depositary, and the Holders from
Time to Time of Depositary Receipts (relating to the Merrill
Lynch Floating Rate Non-Cumulative Preferred Stock,
Series 1)*
|
|
4(j)
|
|
|
Deposit Agreement, dated as of March 14, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.), as depositary, and the Holders from
Time to Time of Depositary Receipts (relating to the Merrill
Lynch Floating Rate Non-Cumulative Preferred Stock,
Series 2)*
|
|
4(k)
|
|
|
Deposit Agreement, dated as of November 17, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.) and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch 6.375%
Non-Cumulative Preferred Stock, Series 3)*
|
|
4(l)
|
|
|
Deposit Agreement, dated as of November 17, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.) and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch Floating Rate
Non-Cumulative Preferred Stock, Series 4)*
|
|
4(m)
|
|
|
Deposit Agreement, dated as of November 17, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.) and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch Floating Rate
Non-Cumulative Preferred Stock, Series 5)*
|
|
4(n)
|
|
|
Deposit Agreement, dated as of January 28, 2004, between
Merrill Lynch (as successor to First Republic Bank), Mellon
Investor Services LLC, as depositary, and the Holders from Time
to Time of Depositary Receipts (relating to the Merrill Lynch
6.70% Noncumulative Perpetual Preferred Stock, Series 6)*
|
II-2
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
4(o)
|
|
|
Deposit Agreement, dated as of March 18, 2005, between
Merrill Lynch (as successor to First Republic Bank), Mellon
Investor Services LLC, as depositary, and the Holders from Time
to Time of Depositary Receipts (relating to the Merrill Lynch
6.25% Noncumulative Perpetual Preferred Stock, Series 7)*
|
|
4(p)
|
|
|
Deposit Agreement, dated as of November 17, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase, N.A.) and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch 8.625%
Non-Cumulative Preferred Stock, Series 8)*
|
|
5(a)
|
|
|
Opinion of Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America Corporation, as to the
validity of the shares of common stock and preferred stock of
Bank of America Corporation.*
|
|
8(a)
|
|
|
Opinion of Wachtell, Lipton, Rosen & Katz as to tax
matters*
|
|
8(b)
|
|
|
Opinion of Shearman & Sterling LLP as to tax matters*
|
|
10(a)
|
|
|
Amendment to Bank of Americas 2003 Key Associate Stock
Plan, as Amended and Restated (included in Part I as
Appendix F to the document included in this Registration
Statement)*
|
|
15(a)
|
|
|
Letter of Deloitte & Touche LLP regarding Unaudited
Interim Financial Information
|
|
23(a)
|
|
|
Consent of Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America Corporation (included in
Exhibit 5(a) to this Registration Statement)*
|
|
23(b)
|
|
|
Consent of Independent Registered Public Accounting Firm of Bank
of America Corporation, PricewaterhouseCoopers LLP
|
|
23(c)
|
|
|
Consent of Independent Registered Public Accounting Firm of
Merrill Lynch & Co., Inc., Deloitte & Touche
LLP
|
|
23(d)
|
|
|
Consent of Independent Registered Public Accounting Firm of
BlackRock, Inc., Deloitte & Touche LLP
|
|
23(e)
|
|
|
Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8(a) to this Registration Statement)*
|
|
23(f)
|
|
|
Consent of Shearman & Sterling LLP (included in
Exhibit 8(b) to this Registration Statement)*
|
|
24(a)
|
|
|
Power of Attorney
|
|
99(a)
|
|
|
Stock Option Agreement, dated as of September 15, 2008, by
and between Merrill Lynch & Co., Inc. (issuer) and
Bank of America Corporation (grantee) (included in Part I
as Appendix B to the document included in this Registration
Statement)
|
|
99(b)
|
|
|
Opinion of J.C. Flowers & Co. LLC (included in
Part I as Appendix C to the document included in this
Registration Statement)
|
|
99(c)
|
|
|
Opinion of Fox-Pitt Kelton Cochran Caronia Waller (included in
Part I as Appendix D to the document included in this
Registration Statement)
|
|
99(d)
|
|
|
Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (included in Part I as Appendix E to the
document included in this Registration Statement)
|
|
99(e)
|
|
|
Notice of Special Meeting of Stockholders of Bank of America
Corporation (included in the document included in this
Registration Statement)
|
|
99(f)
|
|
|
Notice of Special Meeting of Stockholders of Merrill
Lynch & Co., Inc. (included in the document included
in this Registration Statement)
|
|
99(g)
|
|
|
Form of Proxy Card for Special Meeting of Stockholders of Bank
of America Corporation*
|
|
99(h)
|
|
|
Form of Proxy Card for Special Meeting of Stockholders of
Merrill Lynch & Co., Inc.*
|
|
99(i)
|
|
|
Consent of J.C. Flowers & Co. LLC
|
|
99(j)
|
|
|
Consent of Fox-Pitt Kelton Cochran Caronia Waller
|
|
99(k)
|
|
|
Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
|
|
|
|
* |
|
To be filed by Amendment |
II-3
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement: (i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933, as amended
(the Securities Act); (ii) to reflect in the
prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in
the registration statement (notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration
statement); and (iii) to include any material information
with respect to the plan of distribution not previously
disclosed in the registration statement or any material change
to such information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for purposes of determining any liability under
the Securities Act, each filing of the Registrants annual
report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (and, where applicable, each
filing of an employee benefit plans annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934, as
amended) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(6) That every prospectus (i) that is filed pursuant
to paragraph (5) above, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act
and is used in connection with an offering of securities subject
to Rule 415, will be filed as a part of an amendment to
this registration statement and will not be used until such
amendment has become effective, and that for the purpose of
determining liabilities under the Securities Act, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(7) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
II-4
(8) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in this registration statement when it became effective.
(9) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this
Form S-4
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of
Charlotte, state of North Carolina, on October 1, 2008.
BANK OF AMERICA CORPORATION
|
|
|
|
By:
|
/s/ Kenneth
D. Lewis*
|
Name: Kenneth D. Lewis
|
|
|
|
Title:
|
Chairman, Chief Executive Officer and President
|
Pursuant to the requirements of the Securities Act of 1933, as
amended, this
Form S-4
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
|
|
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|
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|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Kenneth
D. Lewis*
Kenneth
D. Lewis
|
|
Chairman, Chief Executive Officer,
President and Director
(Principal Executive Officer)
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Joe
L. Price*
Joe
L. Price
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Neil
A. Cotty*
Neil
A. Cotty
|
|
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
|
|
October 1, 2008
|
|
|
|
|
|
/s/ William
Barnet, III*
William
Barnet, III
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Frank
P. Bramble, Sr.*
Frank
P. Bramble, Sr.
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ John
T. Collins*
John
T. Collins
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Gary
L. Countryman*
Gary
L. Countryman
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Tommy
R. Franks*
Tommy
R. Franks
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Charles
K. Gifford*
Charles
K. Gifford
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Monica
C. Lozano*
Monica
C. Lozano
|
|
Director
|
|
October 1, 2008
|
II-6
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|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Walter
E. Massey*
Walter
E. Massey
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Thomas
J. May*
Thomas
J. May
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Patricia
E. Mitchell*
Patricia
E. Mitchell
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Thomas
M. Ryan*
Thomas
M. Ryan
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ O.
Temple Sloan, Jr.*
O.
Temple Sloan, Jr.
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Meredith
R. Spangler*
Meredith
R. Spangler
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
|
/s/ Robert
L. Tillman*
Robert
L. Tillman
|
|
Director
|
|
October 1, 2008
|
|
|
|
|
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/s/ Jackie
M. Ward*
Jackie
M. Ward
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Director
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October 1, 2008
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*By: /s/ Teresa
M. Brenner
Teresa
M. Brenner
Attorney-in-Fact
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October 1, 2008
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II-7
EXHIBIT INDEX
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Exhibit
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No.
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Description
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2(a)
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Agreement and Plan of Merger, dated as of September 15,
2008, by and among Merrill Lynch & Co., Inc. and Bank
of America Corporation (included in Part I as
Appendix A to the document included in this Registration
Statement)
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3(a)
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Amended and restated certificate of incorporation of Registrant,
as in effect on the date hereof, incorporated by reference to
Exhibit 3(a) of Registrants Annual Report on
Form 10-K
filed February 28, 2008
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3(b)
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Amended and Restated Bylaws of Registrant, as in effect on the
date hereof, incorporated by reference to Exhibit 3.1 of
Registrants Current Report on
Form 8-K
filed January 24, 2007
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4(a)
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Form of Certificate of Designations of Registrants
Floating Rate Non-Cumulative Preferred Stock, Series 1*
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4(b)
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Form of Certificate of Designations of Bank of America Floating
Rate Non-Cumulative Preferred Stock, Series 2*
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4(c)
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Form of Certificate of Designations of Bank of America 6.375%
Non-Cumulative Preferred Stock, Series 3*
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4(d)
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Form of Certificate of Designations of Bank of America Floating
Rate Non-Cumulative Preferred Stock, Series 4*
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4(e)
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Form of Certificate of Designations of Bank of America Floating
Rate Non-Cumulative Preferred Stock, Series 5*
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4(f)
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Form of Certificate of Designations of Bank of America 6.70%
Noncumulative Perpetual Preferred Stock, Series 6*
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4(g)
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Form of Certificate of Designations of Bank of America 6.25%
Noncumulative Perpetual Preferred Stock, Series 7*
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4(h)
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Form of Certificate of Designations of Bank of America 8.625%
Non-Cumulative Preferred Stock, Series 8*
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4(i)
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Deposit Agreement, dated as of November 1, 2004, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.), as depositary, and the Holders from
Time to Time of Depositary Receipts (relating to the Merrill
Lynch Floating Rate Non-Cumulative Preferred Stock,
Series 1)*
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4(j)
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Deposit Agreement, dated as of March 14, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.), as depositary, and the Holders from
Time to Time of Depositary Receipts (relating to the Merrill
Lynch Floating Rate Non-Cumulative Preferred Stock,
Series 2)*
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4(k)
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Deposit Agreement, dated as of November 17, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.) and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch 6.375%
Non-Cumulative Preferred Stock, Series 3)*
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4(l)
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Deposit Agreement, dated as of November 17, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.) and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch Floating Rate
Non-Cumulative Preferred Stock, Series 4)*
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4(m)
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Deposit Agreement, dated as of November 17, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase Bank, N.A.) and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch Floating Rate
Non-Cumulative Preferred Stock, Series 5)*
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4(n)
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Deposit Agreement, dated as of January 28, 2004, between
Merrill Lynch (as successor to First Republic Bank), Mellon
Investor Services LLC, as depositary, and the Holders from Time
to Time of Depositary Receipts (relating to the Merrill Lynch
6.70% Noncumulative Perpetual Preferred Stock, Series 6)*
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4(o)
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Deposit Agreement, dated as of March 18, 2005, between
Merrill Lynch (as successor to First Republic Bank), Mellon
Investor Services LLC, as depositary, and the Holders from Time
to Time of Depositary Receipts (relating to the Merrill Lynch
6.25% Noncumulative Perpetual Preferred Stock, Series 7)*
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4(p)
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Deposit Agreement, dated as of November 17, 2005, between
Merrill Lynch, The Bank of New York Mellon (as successor to
JPMorgan Chase, N.A.) and the Holders from Time to Time of
Depositary Receipts (relating to the Merrill Lynch 8.625%
Non-Cumulative Preferred Stock, Series 8)*
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Exhibit
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No.
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Description
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5(a)
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Opinion of Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America Corporation, as to the
validity of the shares of common stock and preferred stock of
Bank of America Corporation.*
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8(a)
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Opinion of Wachtell, Lipton, Rosen & Katz as to tax
matters*
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8(b)
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Opinion of Shearman & Sterling LLP as to tax matters*
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10(a)
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Amendment to Bank of Americas 2003 Key Associate Stock
Plan, as Amended and Restated (included in Part I as
Appendix F to the document included in this Registration
Statement)*
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15(a)
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Letter of Deloitte & Touche LLP regarding Unaudited
Interim Financial Information
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23(a)
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Consent of Timothy J. Mayopoulos, Executive Vice President and
General Counsel of Bank of America Corporation (included in
Exhibit 5(a) to this Registration Statement)*
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23(b)
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Consent of Independent Registered Public Accounting Firm of Bank
of America Corporation, PricewaterhouseCoopers LLP
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23(c)
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Consent of Independent Registered Public Accounting Firm of
Merrill Lynch & Co., Inc., Deloitte & Touche
LLP
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23(d)
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Consent of Independent Registered Public Accounting Firm of
BlackRock, Inc., Deloitte & Touche LLP
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23(e)
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Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 8(a) to this Registration Statement)*
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23(f)
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Consent of Shearman & Sterling LLP (included in
Exhibit 8(b) to this Registration Statement)*
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24(a)
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Power of Attorney
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99(a)
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Stock Option Agreement, dated as of September 15, 2008, by
and between Merrill Lynch & Co., Inc. (issuer) and
Bank of America Corporation (grantee) (included in Part I
as Appendix B to the document included in this Registration
Statement)
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99(b)
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Opinion of J.C. Flowers & Co. LLC (included in
Part I as Appendix C to the document included in this
Registration Statement)
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99(c)
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Opinion of Fox-Pitt Kelton Cochran Caronia Waller (included in
Part I as Appendix D to the document included in this
Registration Statement)
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99(d)
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Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (included in Part I as Appendix E to the
document included in this Registration Statement)
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99(e)
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Notice of Special Meeting of Stockholders of Bank of America
Corporation (included in the document included in this
Registration Statement)
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99(f)
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Notice of Special Meeting of Stockholders of Merrill
Lynch & Co., Inc. (included in the document included
in this Registration Statement)
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99(g)
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Form of Proxy Card for Special Meeting of Stockholders of Bank
of America Corporation*
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99(h)
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Form of Proxy Card for Special Meeting of Stockholders of
Merrill Lynch & Co., Inc.*
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99(i)
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Consent of J.C. Flowers & Co. LLC
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99(j)
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Consent of Fox-Pitt Kelton Cochran Caronia Waller
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99(k)
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Consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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* |
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To be filed by Amendment |