EXHIBIT 10(xxiii)
MERRILL LYNCH & CO., INC.
2001 DEFERRED COMPENSATION PLAN
FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES
DATED AS OF OCTOBER 5, 2000
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
MERRILL LYNCH & CO., INC.
2001 DEFERRED COMPENSATION PLAN
FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES
Table of Contents
Page
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I. GENERAL ............................................................................... 1
1.1 Purpose and Intent ............................................................. 1
1.2 Definitions .................................................................... 1
II. ELIGIBILITY ........................................................................... 5
2.1 Eligible Employees ............................................................. 5
(a) General Rule ............................................................. 5
(b) Individuals First Employed During Election Year or Plan Year ............. 5
(c) Disqualifying Factors .................................................... 5
III. DEFERRAL ELECTIONS; ACCOUNTS .......................................................... 6
3.1 Deferral Elections ............................................................. 6
(a) Timing and Manner of Making of Elections ................................. 6
(b) Irrevocability of Deferral Election ...................................... 6
(c) Application of Election .................................................. 6
3.2 Crediting to Accounts .......................................................... 6
(a) Initial Deferrals ........................................................ 6
(b) ML Ventures and Other Private Return Options ............................. 6
3.3 Minimum Requirements for Deferral .............................................. 6
(a) Minimum Requirements ..................................................... 7
(b) Failure to Meet Requirements ............................................. 7
3.4 Return Options; Adjustment of Accounts ......................................... 7
(a) Selection of ML Ventures Return Option ................................... 7
(b) Selection of Mutual Fund Return Options .................................. 7
(c) Selection of the ML Ventures Leverage Percentage by Eligible
Participants ............................................................. 8
(d) Adjustments of ML Ventures ............................................... 8
(e) Adjustment of Debit Balance .............................................. 8
(f) Adjustment of Mutual Fund Return Balances ................................ 8
(g) Annual Charge ............................................................ 9
(h) Rollover Option .......................................................... 9
3.5 Rescission of Deferral Election ................................................ 10
(a) Prior to December 1, 2000 ................................................ 10
(b) Adverse Tax Determination ................................................ 10
(c) Rescission For Amounts Not Yet Earned .................................... 10
IV. STATUS OF DEFERRED AMOUNTS AND ACCOUNT ................................................ 11
4.1 No Trust or Fund Created; General Creditor Status .............................. 11
4.2 Non-Assignability .............................................................. 11
4.3 Effect of Deferral on Benefits Under Pension and Welfare Benefit Plans ......... 11
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V. PAYMENT OF ACCOUNT ........................................................................... 11
5.1 Manner of Payment ..................................................................... 11
(a) Regular Payment Elections ....................................................... 11
(b) Modified Installment Payments ................................................... 12
5.2 Termination of Employment ............................................................. 12
(a) Death or Retirement ............................................................. 12
(b) Other Termination of Employment - Forfeiture of Leverage ........................ 13
(c) Leave of Absence, Transfer or Disability ........................................ 13
(d) Discretion to Alter Payment Date ................................................ 13
5.3 Withholding of Taxes .................................................................. 13
5.4 Beneficiary ........................................................................... 14
(a) Designation of Beneficiary ...................................................... 14
(b) Change in Beneficiary ........................................................... 14
(c) Default Beneficiary ............................................................. 14
(d) If the Beneficiary Dies During Payment .......................................... 14
5.5 Hardship Distributions ................................................................ 14
5.6 Domestic Relations Orders ............................................................. 15
VI. ADMINISTRATION OF THE PLAN ................................................................... 15
6.1 Powers of the Administrator ........................................................... 15
6.2 Payments on Behalf of an Incompetent .................................................. 15
6.3 No Right of Set Off ................................................................... 16
6.4 Corporate Books and Records Controlling ............................................... 16
VII. MISCELLANEOUS PROVISIONS ..................................................................... 16
7.1 Litigation ............................................................................ 16
7.2 Headings Are Not Controlling .......................................................... 16
7.3 Governing Law ......................................................................... 16
7.4 Amendment and Termination ............................................................. 16
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MERRILL LYNCH & CO., INC.
2001 DEFERRED COMPENSATION PLAN
FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES
ARTICLE I
GENERAL
1.1 Purpose and Intent.
The purpose of the Plan is to encourage the employees who are integral
to the success of the business of the Company to continue their employment by
providing them with flexibility in meeting their future income needs. This Plan
is unfunded and maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
within the meaning of Title I of ERISA, and all decisions concerning who is to
be considered a member of that select group and how this Plan shall be
administered and interpreted shall be consistent with this intention.
1.2 Definitions.
For the purpose of the Plan, the following terms shall have the
meanings indicated.
"Account" means the notional account established on the books and
records of ML & Co. for each Participant to record the Participant's interest
under the Plan.
"Account Balance" means, as of any date, the Deferred Amounts credited
to a Participant's Account, adjusted in accordance with Section 3.4 to reflect
the performance of the Participant's Selected Benchmark Return Options, the
Annual Charge, the Debit Balance, (if any) any adjustments in the event of a
Capital Call Default, and any payments made from the Account under Article V to
the Participant prior to that date.
"Adjusted Compensation" means the financial consultant incentive
compensation, account executive incentive compensation or estate planning and
business insurance specialist incentive compensation, in each case exclusive of
base salary, earned by a Participant during the Fiscal Year ending in 2001, and
payable after January 1, 2001, as a result of the Participant's production
credit level, or such other similar items of compensation as the Administrator
shall designate as "Adjusted Compensation" for purposes of this Plan.
"Administrator" means the Head of Human Resources of ML & Co., or his
or her functional successor, or any other person or committee designated as
Administrator of the Plan by the Administrator or the MDCC.
"Affiliate" means any corporation, partnership, or other organization
of which ML & Co. owns or controls, directly or indirectly, not less than 50% of
the total combined voting power of all classes of stock or other equity
interests.
"Annual Charge" means the charge to a Participant's Account provided
for in Section 3.4(g).
"Applicable Federal Rate" means the applicable federal rate for
short-term (0-3 years) obligations of the United States Treasury as determined
initially in the month of closing of ML Ventures and thereafter in January of
each subsequent year.
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"Available Balance" means amounts in a Participant's Account that are
indexed to Benchmark Return Options with daily liquidity after the Account's
Debit Balance has been reduced to zero.
"Average Leveraged Principal Amount" means, for each Participant, for
any period, the sum of the Leveraged Principal Amounts outstanding at the end of
each day in the period divided by the number of days in such period.
"Benchmark Return Options" means such investment vehicles as the
Administrator may from time to time designate for the purpose of indexing
Accounts hereunder. In the event a Benchmark Return Option ceases to exist or is
no longer to be a Benchmark Return Option, the Administrator may designate a
substitute Benchmark Return Option for such discontinued option.
"Board of Directors" means the Board of Directors of ML & Co.
"Capital Call" means the periodic demands for funds from a
Participant's Account that will be equal to and occur simultaneously with
capital calls made by private equity funds (including ML Ventures) chosen as a
return option by the Participant.
"Capital Call Default" means that there is an insufficient Liquid
Balance in the Participant's Account to fund a Capital Call.
"Capital Demand Default Adjustment" means the negative adjustment
described in Section 3.4 in the number of "units" (including units acquired by
"Leverage") attributed to a Private Equity Fund Return Options that will be the
result of a Capital Call Default.
"Cash Compensation" means (1) (for VICP eligible employees) salary in
the reference year plus VICP earned in the reference year and paid in January or
February of the next calendar year or (2) (for Financial Consultants and other
employees receiving Adjusted Compensation) base salary plus Adjusted
Compensation paid in the reference year.
"Code" means the U.S. Internal Revenue Code of 1986, as amended from
time to time.
"Company" means ML & Co. and all of its Affiliates.
"Compensation" means, as relevant, a Participant's Adjusted
Compensation, Variable Incentive Compensation and/or Sign-On Bonus, or such
other items or items of compensation as the Administrator, in his or her sole
discretion, may specify in a particular instance.
"Debit Balance" means, as of any date, the dollar amount, if any,
representing each of: (1) the aggregate Annual Charge, accrued in accordance
with Section 3.4(g)(i); and (2) any Leveraged Principal Amount (together with
any pro rata Interest Amounts determined in accordance with Section 3.4(g)(ii),
if applicable), as reduced by any distributions recorded from ML Ventures Units
recorded in a Participant's Account in accordance with Section 3.4(e).
"Deferral Percentage" means the percentage (which, unless the
Administrator, in his or her sole discretion, determines otherwise, shall be in
whole percentage increments and not more than 90%) specified by the Participant
to be the percentage of each payment of Compensation he or she wishes to defer
under the Plan.
"Deferred Amounts" means, except as provided in Section 5.6, the
amounts of Compensation actually deferred by the Participant under this Plan.
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"Election Year" means the 2000 calendar year.
"Eligible Compensation" means (1) for persons eligible for the Variable
Incentive Compensation Program or other similar programs: (A) a Participant's
1999 base earnings plus (B) any cash bonus awarded in early 2000, and (2) for
persons ineligible for such bonus programs, a Participant's 1999 Adjusted
Compensation.
"Eligible Employee" means an employee eligible to defer amounts under
this Plan, as determined under Section 2.1 hereof.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Fiscal Month" means the monthly period used by ML & Co. for financial
accounting purposes.
"Fiscal Year" means the annual period used by ML & Co. for financial
accounting purposes.
"Full-Time Domestic Employee" means a full-time employee of the Company
paid from the Company's domestic based payroll (other than any U.S. citizen or
"green card" holder who is employed outside the United States).
"Full-Time Expatriate Employee" means a U.S. citizen or "green card"
holder employed by the Company outside the United States and selected by the
Administrator as eligible to participate in the Plan (subject to the other
eligibility criteria).
"Initial Leveraged Amount" means the initial dollar amount by which a
Participant's deferral into ML Ventures Units is leveraged as determined in
accordance with Section 3.4(c).
"Interest" means the hypothetical interest accruing on a Participant's
Average Leveraged Principal Amount at the Applicable Federal Rate.
"Interest Amounts" means, for any Participant, as of any date, the
amount of Interest that has accrued to such date on such Participant's Average
Leveraged Principal Amount, from the date on which a Participant's Leveraged
Principal Amount is established, or from the most recent date that Interest
Amounts were added to the Leveraged Principal Amount.
"Leveraged or Unleveraged Distributions" means the distributions to a
Participant's Account attributable to the leveraged or unleveraged portion (as
the case may be) of a Participant's ML Ventures Units.
"Leverage-Eligible Participants" means persons who (1) are accredited
investors within the meaning of the Securities Act of 1933, and (2) received
Cash Compensation of at least $250,000 in 1999, and (3) received Cash
Compensation of at least $200,000 in 1998 and otherwise qualify, in accordance
with standards determined by the Administrator, to select a ML Ventures Return
Option on a leverage basis.
"Leveraged Principal Amount" means a Participant's Initial Leveraged
Amount, if any, as adjusted to reflect the addition of Interest Amounts (or any
pro rata Interest Amounts).
"Leverage Percentage" means the percentage of leverage chosen by a
Leverage-Eligible Participant, which percentage shall not exceed 200%.
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"Liquid Balance" means, as of any date, the Deferred Amounts credited
to a Participant's Account, not including amounts that represent future
commitments to Private Equity Funds, including ML Ventures, adjusted (either up
or down) to reflect: (1) the performance of the Participant's Mutual Fund Return
Balances as provided in Section 3.4(f); (2) distributions with respect to ML
Ventures Units made in accordance with Section 3.4(d); (3) reduction of any
Debit Balance as provided in Section 3.4(e); and (4) any payments to the
Participant under Article V hereof.
"Maximum Deferral" means the whole dollar amount specified by the
Participant to be the amount of Compensation he or she elects to be deferred
under the Plan.
"MDCC" means the Management Development and Compensation Committee of
the Board of Directors.
"ML & Co." means Merrill Lynch & Co., Inc.
"ML Ventures Return Option" means the option of indexing returns
hereunder to the performance of a ML Ventures limited partnership, on a
leveraged or unleveraged basis.
"ML Ventures Units" means the record-keeping units credited to the
Accounts of Participants who have chosen the ML Ventures Return Option.
"Mutual Fund Return Options" means the mutual funds chosen as Benchmark
Return Options by the Administrator.
"Net Asset Value" means, with respect to each Benchmark Return Option
that is a mutual fund or other commingled investment vehicle for which such
values are determined in the normal course of business, the net asset value, on
the date in question, of the vehicle for which such value is being determined.
"Participant" means an Eligible Employee who has elected to defer
Compensation under the Plan.
"Plan" means this Merrill Lynch & Co., Inc. 2001 Deferred Compensation
Plan for a Select Group of Eligible Employees.
"Plan Year" means the Fiscal Year ending in 2001.
"Private Fund Return Option(s)" means one or more private funds that
are chosen by the Administrator to be offered - with such limitations as may be
required - to eligible Participants as Benchmark Return Options.
"Private Fund Unit(s)" means the record-keeping units credited to the
Accounts of Participants who have chosen one or more Private Fund Return
Options.
"Retirement" means a Participant's (i) termination of employment with
the Company for reasons other than for cause on or after the Participant's 65th
birthday, or (ii) resignation on or after the Participant's 55th birthday if the
Participant has at least 10 years of service, or (iii) resignation at any age
with the express approval of the Administrator, which will be granted only if
the termination is found by the Administrator to be in, or not contrary to, the
best interests of the Company.
4
"Remaining Deferred Amounts" means the product of a Participant's Deferred
Amounts times a fraction equal to the number of remaining installment payments
divided by the total number of installment payments.
"Selected Benchmark Return Option" means a Benchmark Return Option selected
by the Participant in accordance with Section 3.4.
"Sign-On Bonus" means a single-sum amount paid or payable to a new Eligible
Employee during the Plan Year upon commencement of employment, in addition to
base pay and other Compensation, to induce him or her to become an employee of
the Company, or any similar item of compensation as the Administrator shall
designate as "Sign-On Bonus" for purposes of this Plan.
"Undistributed Deferred Amounts" means, as of any date on which the Annual
Charge is determined, a Participant's Deferred Amounts (exclusive of any
appreciation or depreciation) minus, for each distribution to a Participant
prior to such date, an amount equal to the product of the Deferred Amounts and a
fraction the numerator of which is the amount of such distribution and the
denominator of which is the combined Net Asset Value (prior to distribution) of
the Participant's Account as of the date of the relevant distribution.
"Variable Incentive Compensation" means the variable incentive compensation
or office manager incentive compensation that is paid in cash to certain
employees of the Company generally in January or February of the Plan Year with
respect to the prior Fiscal Year, which for purposes of this Plan is considered
earned during the Plan Year regardless of when it is actually paid to the
Participant, or such other similar items of compensation as the Administrator
shall designate as "Variable Incentive Compensation" for purposes of this Plan.
"401(k) Plan" means the Merrill Lynch & Co., Inc. 401(k) Savings &
Investment Plan.
ARTICLE II
ELIGIBILITY
2.1 Eligible Employees.
(a) General Rule. An individual is an Eligible Employee if he or she (i) is
a Full-Time Domestic Employee or a Full-Time Expatriate Employee, (ii) has at
least $250,000 of Eligible Compensation for the year prior to the Election Year,
and (iii) has attained the title of Vice President or higher.
(b) Individuals First Employed During Election Year or Plan Year. Subject
to the approval of the Administrator in his or her sole discretion, an
individual who is first employed by the Company during the Election Year or the
Plan Year is an Eligible Employee if his or her Eligible Compensation, together,
if applicable, with the amount of any Variable Incentive Compensation that will
be payable to such individual in the next annual bonus cycle pursuant to a
written bonus guarantee, is greater than $250,000, and he or she is employed as
or is to be nominated for the title of Vice President or higher at the first
opportunity following his or her commencement of employment with the Company.
(c) Disqualifying Factors. An individual shall not be an Eligible Employee
if either (i) as of the deadline for submission of elections specified in
Section 3.1(a), the individual's wages have been attached or are being garnished
or are otherwise restrained pursuant to legal process, or (ii) within 13 months
prior to the deadline for submission of elections specified in Section 3.1(a),
the individual has made a hardship withdrawal of Elective 401(k) Deferrals as
defined under the 401(k) Plan.
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ARTICLE III
DEFERRAL ELECTIONS; ACCOUNTS
3.1 Deferral Elections.
(a) Timing and Manner of Making of Elections. An election to defer
Compensation for payment in accordance with Article V shall be made by
submitting to the Administrator such forms as the Administrator may prescribe in
whatever manner that the Administrator directs. Each election submitted must
specify a Maximum Deferral and a Deferral Percentage with respect to each
category of Compensation to be deferred. All elections by a Participant to defer
Compensation under the Plan must be received by the Administrator or such person
as he or she may designate for the purpose by no later than October 27 of the
Election Year (or such later date as the Administrator, in his or her sole
discretion, may specify in any particular instance) or, in the event such date
is not a business day, the immediately preceding business day; provided,
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however, that the Eligible Employee's election to defer a Sign-On Bonus must be
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part of such Eligible Employee's terms and conditions of employment agreed to
prior to the Eligible Employee's first day of employment with the Company.
(b) Irrevocability of Deferral Election. Except as provided in Sections 3.5
and 5.5, an election to defer the receipt of any Compensation made under Section
3.1(a) is irrevocable once submitted to the Administrator or his or her
designee. The Administrator's acceptance of an election to defer Compensation
shall not, however, affect the contingent nature of such Compensation under the
plan or program under which such Compensation is payable.
(c) Application of Election. The Participant's Deferral Percentage will be
applied to each payment of Compensation to which the Participant's deferral
election applies, provided that the aggregate of the Participant's Deferred
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Amounts shall not exceed the Participant's Maximum Deferral. If a Participant
has made deferral elections with respect to more than one category of
Compensation, this Section 3.1(c) shall be applied separately with respect to
each such category.
3.2 Crediting to Accounts.
(a) Initial Deferrals. A Participant's Deferred Amounts will be credited to
the Participant's Account as soon as practicable (but in no event later than the
end of the following month) after the last day of the Fiscal Month during which
such Deferred Amounts would, but for deferral, have been paid and will be
accounted for in accordance with Section 3.4. No interest will accrue, nor will
any adjustment be made to an Account, for the period until the Deferred Amounts
are credited.
(b) ML Ventures and other Private Return Options. Upon the closing of any
ML Ventures or Private Return Option, a Participant's Account will be credited
with a number of units determined by dividing by $1,000 the sum of the
following: (1) the portion of the Account Balance that the Participant has
elected to allocate to the ML Ventures Return Option or such other Private
Return Option, as of the day prior to the closing date; and (in the case of ML
Ventures only) (2) the Participant's Initial Leveraged Amount (computed in
accordance with Section 3.4(c)).
3.3 Minimum Requirements for Deferral.
(a) Minimum Requirements. Notwithstanding any other provision of this Plan,
no deferral will be effected under this Plan with respect to a Participant if:
(i) the Participant is not an Eligible Employee as of December 31, 2000,
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(ii) the Participant's election as applied to the Participant's
Variable Incentive Compensation (determined by substituting the
Election Year for the Plan Year) or Adjusted Compensation
(determined by substituting the Fiscal Year immediately prior to
the Fiscal Year ending in the Election Year for the Fiscal Year
ending in the Plan Year) would have resulted in an annual
deferral of less than $15,000, or
(iii) the greater of (A) the sum of (1) the "Medicare wages" amount
listed on the Participant's W-2 form for the Plan Year, and (2)
any Compensation that is accelerated which the Participant may
receive in December of the Election Year which would have been
payable in the Plan Year in the absence of the action of the
Company to accelerate the payment, or (B) the Participant's
Eligible Compensation for the Plan Year, is less than $250,000;
provided, that any Participant who first becomes an employee of the Company
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during the Plan Year shall not be required to satisfy conditions (i) and (ii).
Condition (ii) does not require a Participant's elections to result in an actual
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deferral of at least $15,000.
(b) Failure to Meet Requirements. If the requirements of Section
3.3(a)(i) or (ii) are not met by a Participant to whom such requirements are
applicable, such Participant's Deferred Amounts, if any, will be paid to such
Participant, without adjustment to reflect the performance of any Selected
Benchmark Return Option, as soon as practicable after it has been determined
that the requirements have not been met. If the requirements of Section
3.3(a)(iii) are not met by a Participant, the greater of such Participant's
Deferred Amounts or Account Balance will be paid to such Participant as soon as
practicable after it has been determined that the requirements have not been
met.
3.4 Return Options; Adjustment of Accounts.
(a) Selection of ML Ventures Return Option or Private Fund Return
Options. In any year that a ML Ventures partnership or other Private Fund
partnership is offered as a return option, eligible Participants may select the
ML Ventures Return Option (and designate any Leverage Percentage) or select a
Private Fund Return Option. Participants should be aware that once the closing
of the relevant fund has occurred, Participants will not be able to change their
elections. Participants should also be aware that in the event of a Capital Call
Default, for certain Private Equity Funds, Including ML Ventures, they may be
penalized by having their Accounts adjusted downward in accordance with Section
3.4 (d).
(b) Selection of Mutual Fund Return Options. Coincident with the
Participant's election to defer Compensation, the Participant must select the
percentage of the Participant's Account to be adjusted to reflect the
performance of Mutual Fund Return Options, for use when a Participant's Account
has a Liquid Balance. All elections shall be in multiples of 1%. A Participant
may, by complying with such procedures as the Administrator may prescribe on a
uniform and nondiscriminatory basis, including procedures specifying the
frequency with respect to which such changes may be effected (but not more than
12 times in any calendar year), change the Selected Benchmark Return Options to
be applicable with respect to his or her Account.
(c) Selection of the ML Ventures Leverage Percentage by Eligible
Participants. Prior to the closing of the offering of an ML Ventures
partnership, Leverage-Eligible Participants who select the ML Ventures Return
Option on a leveraged basis must choose their Leverage Percentage, in accordance
with standards determined by the Administrator, by submitting such forms as the
Administrator shall prescribe. Prior to the closing of an ML Ventures
partnership, the Administrator will determine each Leverage-Eligible
Participant's Initial Leveraged Amount by applying such Participant's Leverage
Percentage to the dollar value of the portion of the Participant's Account
7
Balance allocated to the ML Ventures Return Option. The Initial Leveraged Amount
will be recorded as the Leveraged Principal Amount, to which amount Interest
Amounts will be added annually in accordance with Section 3.4(e).
(d) Adjustments of ML Ventures and other Private Fund Return Options.
(i) Whenever a distribution is paid on an actual unit of an ML
Ventures partnership or other Private Equity Fund Return Option,
an amount equal to such per unit distribution times the number of
units in the Participant's Account will first be applied against
any Debit Balance, as provided in Section 3.4(e), and then, if
any portion of such distribution remains after the Debit Balance
is reduced to zero, be credited to the Participant's Account to
be indexed to the Mutual Fund Return Option(s) chosen by the
Participant.
(ii) In the event of a Capital Call Default, a Participant's notional
investment in the relevant fund will be capped. If this occurs,
the number of units represented by the return option (including,
in the case of ML Ventures, any leveraged units) will be adjusted
downward to reflect a smaller investment and resulting lower
leverage.
(iii) The ML Ventures Units and the Debit Balance will also be adjusted
in accordance with Section 5.2 hereof in the event of a
Participant's termination.
(e) Adjustment of Debit Balance. Any Debit Balance shall be reduced
as soon as possible by any distributions relating to ML Ventures Units.
Reductions of the Debit Balance, as provided in the foregoing sentence, shall be
applied first to reduce the Debit Balance attributable to accrued Annual Charges
and then, after all such accrued Annual Charges have been satisfied, to reduce
any Leveraged Principal Amount. As of the last day of each Fiscal Year, Interest
Amounts computed by the Administrator shall be added to the Leveraged Principal
Amount. If on any date the Leveraged Principal Amount would be discharged
completely as a result of distributions or chargeoffs, Interest Amounts will be
computed through such date and added to the Leveraged Principal Amount as of
such date.
(f) Adjustment of Mutual Fund Return Balances. While the
Participant's Balances do not represent the Participant's ownership of, or any
ownership interest in, any particular assets, the Balances attributable to
Mutual Fund Return Options shall be adjusted to reflect credits or debits
relating to distributions with respect to the ML Ventures Units or chargeoffs
against the Debit Balance and to reflect the investment experience of the
Participant's Mutual Fund Return Options in the same manner as if investments or
dispositions in accordance with the Participant's elections had actually been
made through the ML Benefit Services Platform and ML II Core Recordkeeping
System, or any successor system used for keeping records of Participants'
Accounts (the "ML II System"). In adjusting Accounts, the timing of receipt of
Participant instructions or credits or debits by the ML II System shall control
the timing and pricing of the notional investments in the Participant's Mutual
Fund Return Options in accordance with the rules of operation of the ML II
System and its requirements for placing corresponding investment orders, as if
orders to make corresponding investments or dispositions were actually to be
made, except that in connection with the crediting of Deferred Amounts or
distributions to the Participant's Account and distributions from or debits to
the Account, appropriate deferral allocation instructions shall be treated as
received from the Participant prior to the close of transactions through the ML
II System on the relevant day. Each Mutual Fund Return Option shall be valued
using the Net Asset Value of the Mutual Fund Return Option as of the relevant
day; provided, that, in valuing a Mutual Fund Return Option for which a Net
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Asset Value is not computed, the value of the security involved for determining
Participants' rights under the Plan shall be the price reported for actual
transactions in that security through the ML II System on the
8
relevant day, without giving effect to any transaction charges or costs
associated with such transactions; provided, further, that, if there are no such
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transactions effected through the ML II System on the relevant day, the value of
the security shall be:
(i) if the security is listed for trading on one or more national
securities exchanges, the average of the high and low sale prices
for that day on the principal exchange for such security, or if
such security is not traded on such principal exchange on that
day, the average of the high and low sales prices on such
exchange on the first day prior thereto on which such security
was so traded;
(ii) if the security is not listed for trading on a national
securities exchange but is traded in the over-the-counter market,
the average of the highest and lowest bid prices for such
security on the relevant day; or
(iii) if neither clause (i) nor (ii) applies, the value determined by
the Administrator by whatever means he considers appropriate in
his or her sole discretion.
All debits and charges against the Account shall be applied as a pro rata
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reduction of the portion of the Account Balance indexed to each of the
Participant's Mutual Fund Return Options.
(g) Annual Charge. As of the last day of each Fiscal Year or such
earlier day in December as the Administrator shall determine, an Annual Charge
of 2.0% of the Participant's Deferred Amounts (exclusive of any appreciation or
depreciation determined under Section 3.4 (f)) shall be applied to reduce the
Account Balance.
(i) In the event that all or any portion of the Account Balance is
indexed to a Benchmark Return Option with less than daily
liquidity, the Annual Charge will accrue as a Debit Balance and
be paid out of future amounts credited to the Account Balance.
(ii) In the event that the Participant elects to have the Account
Balance paid in installments, the Annual Charge will be charged
on the Remaining Deferred Amounts after giving effect to the
installment payments.
(iii) In the event that the Account Balance is paid out completely
during a Fiscal Year prior to the date upon which the Annual
Charge is assessed, a pro rata Annual Charge will be deducted
--------
from amounts to be paid to the Participant to cover that fraction
of the Fiscal Year that Deferred Amounts (or Remaining Deferred
Amounts in the case of installment payments) were maintained
hereunder. The Annual Charge shall be applied as a pro rata
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reduction of the portion of the Account Balance indexed to each
of the Participant's Selected Benchmark Return Options. In
applying the Annual Charge, the pricing principles set forth in
Section 3.4(f) will be followed.
(h) Rollover Option. In the discretion of the Administrator or a
designee, additional Benchmark Return Options, including Return Options with
less than daily liquidity, may be offered to all Participants under the Plan or
to a more limited group of Participants. In such event, Participants will be
allowed, in such manner as the Administrator shall determine, to elect that all
or a portion of Account Balances be indexed to such Benchmark Return Options.
(i) With respect to Benchmark Return Options that do not provide
daily liquidity: (A) payments under Article V will be made in
accordance with a Participant's election at the time of the
Participant's original deferral, with any adjustments required
for the more limited liquidity of such Return Option; (B)
Participants may be limited in their
9
ability to elect, change or continue their Benchmark Return
Options in accordance with such terms and conditions as the
Administrator or a designee may determine; and (C) the Annual
Charge shall be accrued and paid, when possible, upon liquidation
of all or any portion of the Benchmark Return Option, provided
that no payment shall be made to a Participant under Article V
hereof until all accrued Annual Charges have been paid.
(ii) In the event that such limited liquidity options include future
ML Ventures Partnerships, the designated amounts shall be
credited to such Participant, accounted for, adjusted and paid
out to such Participant in accordance with the terms and
conditions of this Plan as they related to the ML Ventures Return
Option.
3.5 Rescission of Deferral Election.
(a) Prior to December 1, 2000. A deferral election hereunder may be
rescinded at the request of a Participant only (i) on or before December 1,
2000, and (ii) if the Administrator, in his or her sole discretion and upon
evidence of such basis that he or she finds persuasive (including a material
applicable change in the Participant's U.S. Federal and/or foreign income tax
rate during the period between October 27, 2000 and November 30, 2000), agrees
to the rescission of the election. In the event that the Administrator agrees to
the rescission, the Deferred Amounts, if any, credited to the Participant's
Account will be paid to the Participant as soon as practicable thereafter,
subject to reduction for any applicable withholding taxes.
(b) Adverse Tax Determination. Notwithstanding the provisions of
Section 3.5(a), a deferral election may be rescinded at any time if (i) a final
determination is made by a court or other governmental body of competent
jurisdiction that the election was ineffective to defer income for purposes of
U.S. Federal, state, local or foreign income taxation and the time for appeal
from this determination has expired, and (ii) the Administrator, in his or her
sole discretion, decides, upon the Participant's request and upon evidence of
the occurrence of the events described in (i) hereof that he or she finds
persuasive, to rescind the election. Upon such rescission, the Account Balance,
including any adjustment for performance of the Selected Benchmark Return
Options, will be paid to the Participant as soon as practicable, and no
additional amounts will be deferred pursuant to this Plan.
(c) Rescission For Amounts Not Yet Earned. Upon the Participant's
written request, the Administrator may in his or her sole discretion terminate
any deferral elections made hereunder with respect to Compensation not yet
earned and no further amounts will be deferred. In addition, in the event a
Participant receives a hardship withdrawal under the 401(k) Plan, the
Administrator shall, as of the date the Participant's Elective 401(k) Deferrals
(as defined in the 401(k) Plan) are suspended under the 401(k) Plan as a result
of such hardship withdrawal, terminate the Participant's deferrals under this
Plan in accordance with the preceding sentence, as if the Participant had
requested rescission in writing. In each case, amounts previously deferred will
continue to be governed by the terms of this Plan.
ARTICLE IV
STATUS OF DEFERRED AMOUNTS AND ACCOUNT
4.1 No Trust or Fund Created; General Creditor Status.
Nothing contained herein and no action taken pursuant hereto will be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between ML & Co. and any Participant,
10
the Participant's beneficiary or estate, or any other person. Title to and
beneficial ownership of any funds represented by the Account Balance will at all
times remain in ML & Co.; such funds will continue for all purposes to be a part
of the general funds of ML & Co. and may be used for any corporate purpose. No
person will, by virtue of the provisions of this Plan, have any interest
whatsoever in any specific assets of the Company. TO THE EXTENT THAT ANY PERSON
ACQUIRES A RIGHT TO RECEIVE PAYMENTS FROM ML & CO. UNDER THIS PLAN, SUCH RIGHT
WILL BE NO GREATER THAN THE RIGHT OF ANY UNSECURED GENERAL CREDITOR OF ML & CO.
4.2 Non-Assignability.
The Participant's right or the right of any other person to the Account
Balance or any other benefits hereunder cannot be assigned, alienated, sold,
garnished, transferred, pledged, or encumbered except by a written designation
of beneficiary under this Plan, by written will, or by the laws of descent and
distribution.
4.3 Effect of Deferral on Benefits Under Pension and Welfare Benefit Plans.
The effect of deferral on pension and welfare benefit plans in which
the Participant may participate will depend upon the provisions of each such
plan, as amended from time to time.
ARTICLE V
PAYMENT OF ACCOUNT
5.1 Manner of Payment.
(a) Regular Payment Elections. A Participant's Account Balance will be
paid by the Company, as elected by the Participant at the time of his or her
deferral election, either in a single payment to be made, or in the number of
annual installments (not to exceed 15) chosen by the Participant to commence,
(i) in the month following the month of the Participant's Retirement or death,
(ii) in any month and year selected by the Participant after the end of 2001, or
(iii) in any month in the calendar year following the Participant's Retirement;
provided that, if a Participant's election would result in payment (in the case
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of a single payment) or commencement of payment (in the case of installment
payments) after the Participant's 70th birthday, then, notwithstanding the
Participant's elections, the Company will pay, or commence payment of, the
Participant's Account Balance in the month following the Participant's 70th
birthday unless the Participant continues to be an active full time employee at
such time, in which case the Company will pay, or commence payment of, the
Participant's Account Balance in the month following the Participant's cessation
of active service (to the extent payment has not already been made or
commenced). The amount of each annual installment, if applicable, shall be
determined by multiplying the Account Balance as of the last day of the month
immediately preceding the month in which the payment is to be made by a
fraction, the numerator of which is one and the denominator of which is the
number of remaining installment payments (including the installment payment to
be made). In the event that immediately prior to the lump sum payment or the
initial installment payment, all or any portion of a Participant's Account
Balance remains indexed to a Benchmark Return Option with less than daily
liquidity, such payment shall be adjusted, if necessary, for the liquidity
restraints of the Benchmark Return Option and, in the case of an election of 11
or more installment payments commencing upon Retirement or a date certain
coincident with Retirement, shall be delayed until such Account Balance is fully
liquid.
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(b) Modified Installment Payments. In lieu of one of the regular
payment elections provided for in Section 5.1(a), a Participant may elect to
receive the Account Balance in at least 11 but no more than 15 annual
installment payments ("modified installment payments"), such modified
installment payments to commence on the last business day in March in the year
following the Participant's Retirement or death (the "Initial Payment Date"),
provided that, in the event that immediately prior to the initial payment of
such installment payments, all or any portion of a Participant's Account Balance
remains indexed to a Benchmark Return Option with less than daily liquidity,
such initial payment shall be delayed until such Account Balance is fully
liquid. The modified installment payments shall be computed in accordance with
last sentence of Section 5.1(a) and will in all other respects be treated like
regular installment payments under the Plan. By electing modified installment
payments, the Participant agrees that at any time prior to the last day of
February immediately preceding a Participant's Initial Payment Date (the
"Determination Date"), ML & Co. shall have the right, without the consent of the
Participant or any beneficiary, to change the Participant's method of payment to
11 annuitized payments ("annuitized payments"), in the event that, in the sole
discretion of the Administrator, it is determined that such a change is
necessary or appropriate in order to preserve the intended state tax benefits of
the modified installment payments to the Participant or any beneficiary. In the
event that the Administrator determines that annuitized payments shall be made,
the amount of the annuitized payments will be determined by applying the
Discount Rate, as defined below, to the Account Balance as of the Determination
Date to create a stream of 11 equal annual payments. If annuitized payments are
to be made, then the Account Balance shall cease to be adjusted pursuant to
Section 3.4 as of the Determination Date (except that a pro rata Annual Charge
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will be deducted from the Account Balance prior to calculation of the annuitized
payments to cover the fraction of the Fiscal Year preceding the Determination
Date) and the Company's only obligation to the Participant shall be to make the
annuitized payments when due. As used herein, Discount Rate shall mean ML &
Co.'s then-applicable after-tax cost of borrowing and is defined as (A) x (B),
where (A) is equal to 1 minus ML & Co.'s then-effective tax rate, expressed as a
decimal, and (B) is equal to the sum of: (i) the annual yield on the
then-current 5-year U.S. Treasury Note, and (ii) a spread (which will not be
less than 0.10%) indicative of ML & Co.'s borrowing cost for transactions of
similar structure and average maturity to the annuity, as determined by ML & Co.
5.2 Termination of Employment.
(a) Death or Retirement. Upon a Participant's death, Career Retirement
(as defined in the ML & Co. Long-Term Incentive Compensation Plans) or
Retirement prior to payment, the Account Balance will be paid, in accordance
with the Participant's elections and as provided in Section 5.1(a) or (b), as
applicable, to the Participant or to the Participant's beneficiary (in the event
of death); provided, however, that (1) in the event that the Participant enters
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into competition with the business of Merrill Lynch, he or she will not be
eligible for Retirement treatment under this Section 5.2 (a) and (2) in the
event that a beneficiary of the Participant's Account is the Participant's
estate or is otherwise not a natural person, then (i) if the Participant has
elected a regular payment election pursuant to Section 5.1(a), the applicable
portion of the Account Balance will be paid in a single payment to such
beneficiary notwithstanding any election of installment payments, and (ii) if
the Participant has elected modified installment payments pursuant to Section
5.1(b), the applicable portion of the Account Balance will continue to be
payable as modified installment payments or annuitized payments, as the case may
be, in accordance with Section 5.1(b), but only to a single person consisting of
the administrator or executor of the Participant's estate or another person
lawfully designated by the administrator or executor (and in the event no such
person is designated within a reasonable time, payment will be made in a lump
sum).
(b) Other Termination of Employment - Forfeiture of Leverage.
12
(1) If the Participant's employment terminates at any time for any
other reason than those described in Section 5.2 (a), then, notwithstanding the
Participant's elections hereunder, any Available Balance will be paid to the
Participant, as soon as practicable, in a single payment if the Account Balance
is fully liquid, or as available, as soon thereafter as is practicable,
notwithstanding the Participant's elections hereunder.
(2) In the event that a Participant's employment terminates at any time for
any reason other than death, disability or Retirement, such Participant
will forfeit all rights to the unvested leveraged portion of such
Participant's ML Ventures Units, including any future Leveraged
Distributions, unless the Administrator, in his or her sole discretion,
determines that such forfeiture would be detrimental to Merrill Lynch;
provided, however, that such forfeiture will not occur: if (a) the
Participant is terminated by ML & Co. as the result of a reduction in
staff, (b) the Participant delivers to ML & Co. a release of claims (in
a form approved by the Administrator and counsel) he or she may have
against the corporation or any of its subsidiaries, and (3) such
Participant complies with the terms of such release. In the event of
such forfeiture, the Participant's Account Balance and Debit Balance
will be restated, as of the date of termination, to reflect what such
balances would have been had the Participant selected no leverage under
Section 3.4(c). To the extent necessary, the Participant's Account
Balance will also be adjusted, as of the date of the termination, to
credit the Participant with the amount of any Unleveraged Distributions
that were previously applied to the repayment of the Leveraged
Principal Amount and any Interest Amounts and, to the extent necessary,
any Leveraged Distributions paid out to the Participant will be
restated as a Debit Balance. Leveraged and Unleveraged Distributions
shall be deemed to have been applied and distributed proportionately.
All calculations hereunder shall be made by the Administrator and shall
be final and conclusive.
(c) Leave of Absence, Transfer or Disability. The Participant's
employment will not be considered as terminated if the Participant (1) is on an
approved leave of absence; (2) transfers or is transferred but remains in the
employ of the Company or an unconsolidated affiliate; or (3) is eligible to
receive disability payments under the ML & Co. Basic Long-Term Disability Plan.
(d) Discretion to Alter Payment Date. Notwithstanding the provisions of
Sections 5.2(a) and (b), if the Participant's employment terminates for any
reason, the Administrator may, in his or her sole discretion, direct that the
Account Balance be paid at some other time or that it be paid in installments;
provided that no such direction that adversely affects the rights of the
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Participant or his or her beneficiary under this Plan shall be implemented
without the consent of the affected Participant or beneficiary.
5.3 Withholding of Taxes.
ML & Co. will deduct or withhold from any payment to be made or
deferred hereunder any U.S. Federal, state or local or foreign income or
employment taxes required by law to be withheld or require the Participant or
the Participant's beneficiary to pay any amount, or the balance of any amount,
required to be withheld.
5.4 Beneficiary.
(a) Designation of Beneficiary. The Participant may designate, in a
writing delivered to the Administrator or his or her designee before the
Participant's death, a beneficiary to receive payments in the event of the
Participant's death. The Participant may also designate a contingent beneficiary
to receive payments in accordance with this Plan if the primary beneficiary does
not survive the Participant. The Participant may designate more than one person
as the Participant's
13
beneficiary or contingent beneficiary, in which case (i) no contingent
beneficiary would receive any payment unless all of the primary beneficiaries
predeceased the Participant, and (ii) the surviving beneficiaries in any class
shall share in any payments in proportion to the percentages of interest
assigned to them by the Participant.
(b) Change in Beneficiary. The Participant may change his or her
beneficiary or contingent beneficiary (without the consent of any prior
beneficiary) in a writing delivered to the Administrator or his or her designee
before the Participant's death. Unless the Participant states otherwise in
writing, any change in beneficiary or contingent beneficiary will automatically
revoke prior such designations of the Participant's beneficiary or of the
Participant's contingent beneficiary, as the case may be, under this Plan only;
and any designations under other deferral agreements or plans of the Company
will remain unaffected.
(c) Default Beneficiary. In the event that a Participant does not
designate a beneficiary, or no designated beneficiary survives the Participant,
the Participant's beneficiary shall be the Participant's surviving spouse, if
the Participant is married at the time of his or her death and not subject to a
court-approved agreement or court decree of separation, or otherwise the person
or persons designated to receive benefits on account of the Participant's death
under the ML & Co. Basic Group Life Insurance Plan (the "Life Insurance Plan").
However, if an unmarried Participant does not have coverage in effect under the
Life Insurance Plan, or the Participant has assigned his or her death benefit
under the Life Insurance Plan, any amounts payable to the Participant's
beneficiary under the Plan will be paid to the Participant's estate.
(d) If the Beneficiary Dies During Payment. If a beneficiary who is
receiving or is entitled to receive payments hereunder dies after the
Participant dies, but before all the payments have been made, the portion of the
Account Balance to which that beneficiary was entitled will be paid as soon as
practicable in one lump sum to such beneficiary's estate and not to any
contingent beneficiary the Participant may have designated; provided, however,
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that if the beneficiary was receiving modified installment payments or
annuitized payments pursuant to Section 5.1(b), the applicable portion of the
Account Balance will continue to be paid as modified installment payments or
annuitized payments, as the case may be, in accordance with Section 5.1(b), but
only to a single person consisting of the administrator or executor of the
beneficiary's estate or another person lawfully designated by the administrator
or executor (and in the event no such person is designated within a reasonable
time, payment will be made in a lump sum).
5.5 Hardship Distributions.
ML & Co. may pay to the Participant, on such terms and conditions as
the Administrator may establish, such part or all of the Account Balance as he
or she may, in his or her sole discretion based upon substantial evidence
submitted by the Participant, determine necessary to alleviate hardship caused
by an unanticipated emergency or necessity outside of the Participant's control
affecting the Participant's personal or family affairs. Such payment will be
made only at the Participant's written request and with the express approval of
the Administrator and will be made on the date selected by the Administrator in
his or her sole discretion. The balance of the Account, if any, will continue to
be governed by the terms of this Plan. Hardship shall be deemed to exist only on
account of expenses for medical care (described in Code Section 213(d)) of the
Participant, the Participant's spouse or the Participant's dependents (described
in Code Section 152); payment of unreimbursed tuition and related educational
fees for the Participant, the Participant's spouse or the Participant's
dependents; the need to prevent the Participant's eviction from or, foreclosure
on, the Participant's principal residence; unreimbursed damages resulting from a
natural disaster; or such other financial need deemed by the Administrator in
his or her sole discretion to be immediate and substantial.
14
5.6 Domestic Relations Orders.
Notwithstanding the Participant's elections hereunder, ML & Co. will
pay to, or to the Participant for the benefit of, the Participant's spouse or
former spouse the portion of the Participant's Account Balance specified in a
valid court order entered in a domestic relations proceeding involving the
Participant's divorce or legal separation. Such payment will be made net of any
amounts the Company may be required to withhold under applicable federal, state
or local law. After such payment, references herein to the Participant's
"Deferred Amounts" (including, without limitation, for purposes of determining
the Annual Charge applicable to any remaining Account Balance) shall mean the
Participant's original Deferred Amounts times an amount equal to one minus a
fraction, the numerator of which is the gross amount (prior to withholding) paid
pursuant to the order, and the denominator of which is the Participant's Account
Balance immediately prior to payment.
ARTICLE VI
ADMINISTRATION OF THE PLAN
6.1 Powers of the Administrator.
The Administrator has full power and authority to interpret, construe
and administer this Plan so as to ensure that it provides deferred compensation
for the Participants as members of a select group of management or highly
compensated employees within the meaning of Title I of ERISA. The
Administrator's interpretations and construction hereof, and actions hereunder,
including any determinations regarding the amount or recipient of any payments,
will be binding and conclusive on all persons for all purposes. The
Administrator will not be liable to any person for any action taken or omitted
in connection with the interpretation and administration of this Plan unless
attributable to his or her willful misconduct or lack of good faith. The
Administrator may designate persons to carry out the specified responsibilities
of the Administrator and shall not be liable for any act or omission of a person
as designated.
6.2 Rabbi Trust
Creation of Trust. The Administrator shall create a Grantor Trust to
hold assets representing the amounts deferred under this Plan on such terms and
conditions as the Administrator shall approve. The trustee of the Rabbi Trust
shall be a party unaffiliated with the Company.
6.3 Payments on Behalf of an Incompetent.
If the Administrator finds that any person who is entitled to any
payment hereunder is a minor or is unable to care for his or her affairs because
of disability or incompetency, payment of the Account Balance may be made to
anyone found by the Administrator to be the committee or other authorized
representative of such person, or to be otherwise entitled to such payment, in
the manner and under the conditions that the Administrator determines. Such
payment will be a complete discharge of the liabilities of ML & Co. hereunder
with respect to the amounts so paid.
6.4 No Right of Set-Off.
Unless specifically authorized by a Participant, the Company shall have
no right of set-off with respect to any Participant's Account Balances or
Account under the Plan and unless so authorized, the Company shall not withhold
any sums owed to a Participant under the Plan.
6.5 Corporate Books and Records Controlling.
15
The books and records of the Company will be controlling in the event
that a question arises hereunder concerning the amount of Adjusted Compensation,
Incentive Compensation, Sign-On Bonus, Eligible Compensation, the Deferred
Amounts, the Account Balance, the designation of a beneficiary, or any other
matters.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Litigation.
The Company shall have the right to contest, at its expense, any ruling
or decision, administrative or judicial, on an issue that is related to the Plan
and that the Administrator believes to be important to Participants, and to
conduct any such contest or any litigation arising therefrom to a final
decision.
7.2 Headings Are Not Controlling.
The headings contained in this Plan are for convenience only and will
not control or affect the meaning or construction of any of the terms or
provisions of this Plan.
7.3 Governing Law.
To the extent not preempted by applicable U.S. Federal law, this Plan
will be construed in accordance with and governed by the laws of the State of
New York as to all matters, including, but not limited to, matters of validity,
construction, and performance.
7.4 Amendment and Termination.
ML & Co., through the Administrator, reserves the right to amend or
terminate this Plan at any time, except that no such amendment or termination
shall adversely affect the right of a Participant to his or her Account Balance
(as reduced by the Annual Charge, the Debit Balance or the Leveraged Principal
Amount and Interest thereon, as set forth in Section 3.4) as of the date of such
amendment or termination.
16