Exhibit 10
MERRILL LYNCH & CO., INC.
1999 DEFERRED COMPENSATION PLAN
FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES
DATED AS OF OCTOBER 1, 1998
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
MERRILL LYNCH & CO., INC.
1999 DEFERRED COMPENSATION PLAN
FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES
Table of Contents
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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 .........................6
(c) Disqualifying Factors ................................................................6
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 ......................................................................7
(a) Initial Deferrals ....................................................................7
(b) KECALP ...............................................................................7
(c) Hedge Fund(s).........................................................................7
3.3 Minimum Requirements for Deferral ..........................................................7
(a) Minimum Requirements .................................................................7
(b) Failure to Meet Requirements .........................................................8
3.4 Return Options; Adjustment of Accounts .....................................................8
(a) Selection of KECALP 1999 or Hedge Fund Return Options ................................8
(b) Selection of Mutual Fund Return Options ..............................................8
(c) Selection of the KECALP Leverage Percentage
by Eligible Participants.......................................................8
(d) Adjustments of KECALP.................................................................8
(e) Adjustment of Debit Balance...........................................................9
(f) Adjustment of Mutual Fund Return Balances.............................................9
(g) Annual Charge.........................................................................10
(h) Rollover Option.......................................................................10
3.5 Rescission of Deferral Election ............................................................11
(a) Prior to December 1, 1998 ............................................................11
(b) Adverse Tax Determination ............................................................11
(c) Rescission For Amounts Not Yet Earned ................................................11
IV. STATUS OF DEFERRED AMOUNTS AND ACCOUNT ............................................................11
4.1 No Trust or Fund Created; General Creditor Status ..........................................11
4.2 Non-Assignability ..........................................................................12
4.3 Effect of Deferral on Benefits Under Pension and
Welfare Benefit Plans ...................................................................12
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V. PAYMENT OF ACCOUNT ................................................................................12
5.1 Manner of Payment ..........................................................................12
(a) Regular Payment Elections ............................................................12
(b) Modified Installment Payments ........................................................12
5.2 Termination of Employment ..................................................................13
(a) Death or Retirement ..................................................................13
(b) Other Termination of Employment - Forfeiture of Leverage .............................13
(c) Leave of Absence, Transfer or Disability .............................................14
(d) Discretion to Alter Payment Date .....................................................14
5.3 Withholding of Taxes .......................................................................14
5.4 Beneficiary ................................................................................14
(a) Designation of Beneficiary ...........................................................14
(b) Change in Beneficiary ................................................................15
(c) Default Beneficiary ..................................................................15
(d) If the Beneficiary Dies During Payment ...............................................15
5.5 Hardship Distributions .....................................................................15
5.6 Domestic Relations Orders ..................................................................16
VI. ADMINISTRATION OF THE PLAN ........................................................................16
6.1 Powers of the Administrator ................................................................16
6.2 Payments on Behalf of an Incompetent .......................................................16
6.3 Corporate Books and Records Controlling ....................................................16
VII. MISCELLANEOUS PROVISIONS ..........................................................................17
7.1 Litigation .................................................................................17
7.2 Headings Are Not Controlling ...............................................................17
7.3 Governing Law ..............................................................................17
7.4 Amendment and Termination ..................................................................17
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MERRILL LYNCH & CO., INC.
1999 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. It is
intended that this Plan be 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 reserve 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, and any payments made from the Account 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 1999, and
payable after January 1, 1999, 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 Director 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 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 established in
January of each year.
"Available Balance" means amounts in a Participant's Account after the
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.
"Career Retirement" means a Participant's termination of employment
with the Company for reasons other than for cause on or after: (i) the
Participant's 55th birthday, if the Participant has at least 5 years of service;
(ii) the Participant's 50th birthday, if the Participant has at least 10 years
of service; (iii) the Participant's 45th birthday, if the Participant has at
least 15 years of service, or (iv) at any age, if the Participant has at least
20 years of service, provided that, in each case, following such termination
such Participant does not engage in any activity that, in the sole judgment of
the Administrator, is in competition with the business of the Company.
"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 sole
discretion, may specify in a particular instance.
"Debit Balance" means, as of any date the negative 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 KECALP Units recorded in a Participant's Account or chargeoffs against the
Liquid Balance in such Account in accordance with Section 3.4(e).
"Deferral Percentage" means the percentage (which, unless the
Administrator, in his sole discretion, determines otherwise, shall be in whole
percentage increments and not more than 90%) specified by the Participant to be
the percentage of each payment of Compensation he or she wishes to defer under
the Plan.
"Deferred Amounts" means, except as provided in Section 5.6, the
amounts of Compensation actually deferred by the Participant under this Plan.
"Election Year" means the 1998 calendar year.
"Eligible Compensation" means (1) for persons eligible for the Variable
Incentive Compensation Program or other similar programs: (A) a Participant's
1997 base earnings (and/or 1997 Adjusted Compensation) plus (B) any cash bonus
awarded in early 1998, and (2) for persons ineligible for such bonus programs, a
Participant's 1997 Adjusted Compensation.
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"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).
"Hedge Fund Return Option(s)" means one or more multi-advisor hedge
funds structured and managed by Merrill Lynch Investment Partners Inc. that are
offered as Benchmark Return Options.
"Hedge Fund Unit(s)" means the record-keeping units credited to the
Accounts of Participants who have chosen one or more Hedge Fund Return Options.
"Initial Leveraged Amount" means the initial dollar amount by which a
Participant's deferral into KECALP 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.
"KECALP 1999 Return Option" means the option of indexing returns
hereunder to the performance of Merrill Lynch KECALP L.P. 1999, on a leveraged
or unleveraged basis.
"KECALP Units" means the record-keeping units credited to the Accounts
of Participants who have chosen the KECALP Return Option.
"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 KECALP Units.
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"Leverage-Eligible Participants" means persons who have at least
$400,000 of Total Compensation for the Election Year and otherwise qualify, in
accordance with standards determined by the Administrator, to select the KECALP
1999 Return Option on a leveraged basis.
"Leverage Percentage" means the percentage of leverage chosen by a
Leverage-Eligible Participant, which percentage will be subject to limits
determined by the Administrator.
"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).
"Liquid Balance" means, as of any date, the Deferred Amounts credited
to a Participant's Account, 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 KECALP 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.
"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. 1999 Deferred Compensation
Plan for a Select Group of Eligible Employees.
"Plan Year" means the Fiscal Year ending in 1999.
"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.
"Remaining Deferred Amounts" means a Participant's Deferred Amounts
times a fraction equal to the number of remaining installment payments divided
by the total number of installment payments.
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"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.
"Total Compensation" means Eligible Compensation plus the grant value,
as determined by ML & Co. at the time of grant, of stock-based awards that are
granted 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, are considered earned during the Plan Year regardless of when they are
actually granted or paid to the Participant.
"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 $225,000 of Eligible Compensation for the Election Year, (iii) has
attained at least the title of Vice President, Director or Managing Director, or
holds a National Sales Management position with the Company (a "National Sales
Manager"), and (A) is a financial consultant or an estate planning and business
insurance specialist, who was a member in 1998 of the Chairman's Club, the
Charles E. Merrill Circle, the Society of Eagles, the Falcons Club or the Win
Smith Fellows, (B) is a member of the International Private Banking Group, (C)
is employed as an Investment Manager for Merrill Lynch Asset Management, (D) is
an employee in the 2 Band or above, or (E) is a producing employee in grade 95
or above; provided, that employees in the 1 Band or above and producing
employees in grade 97 or above (or their executive equivalents) shall not be
required to meet condition (ii) hereof; and provided, further, that employees
who were 1998 Win Smith Fellows shall not be required to meet condition (iii)
hereof.
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(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 $225,000, and he or she is either
employed as a National Sales Manager or is to be nominated for at least the
title of Vice President, Director or Managing Director 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.
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.
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 may designate for the purpose by no
later than October 30 of the Election Year (or such later date as the
Administrator, in his 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, however, that the Eligible Employee's election to defer
a Sign-On Bonus must be part of such Eligible Employee's terms and conditions of
employment agreed to prior to the Eligible Employee's first day of employment
with the Company.
(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
designee. The Administrator's acceptance of an election to defer Compensation
shall not, however, affect the contingent nature of such Compensation under the
plan or program under which such Compensation is payable.
(c) Application of Election. The Participant's Deferral Percentage will
be applied to each payment of Compensation to which the Participant's deferral
election applies, provided that the aggregate of the Participant's Deferred
Amounts shall not exceed the Participant's Maximum Deferral. If a Participant
has made deferral elections with respect to more than one category of
Compensation, this Section 3.1(c) shall be applied separately with respect to
each such category.
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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. For Participants who have chosen the KECALP
Return Option, Deferred Amounts will be indexed automatically to a special
benchmark titled "KECALP Reserves" until the closing of Merrill Lynch KECALP
L.P. 1999. For Participants who have chosen a Hedge Fund Return Option, Deferred
Amounts will be indexed automatically to a special benchmark titled "Hedge
Reserves".
(b) KECALP. Upon the closing of Merrill Lynch KECALP L.P. 1999, 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 KECALP Return
Option, as of the day prior to the closing date; and (2) the Participant's
Initial Leveraged Amount (computed in accordance with Section 3.4(c)). Any
amounts not applied to the KECALP Unit Account will remain in a Participant's
Account (or be applied to reduce a Participant's Debit Balance). No fractional
units will be credited.
(c) Hedge Fund(s). Upon the closing of any Hedge Fund Return Option
chosen by a Participant, a Participant's Account will be credited with a number
of Hedge Fund Units determined by dividing $100 by the portion of the
Participant's Account Balance that the Participant has elected to be indexed to
the applicable Hedge Fund Return Option as of the day prior to the closing date.
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,
1998,
(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 $225,000;
provided, that any Participant who first becomes an employee of the Company
during the Plan Year shall not be required to satisfy conditions (i) and (ii).
Condition (ii) shall not be construed to require a Participant's elections to
result in an actual deferral of at least $15,000.
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(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 KECALP 1999 or Hedge Fund Return Options. Coincident
with the Participant's election to defer Compensation, eligible Participants may
select the KECALP 1999 Option (and designate any Leverage Percentage) or may
instead elect to have their Deferred Amounts benchmarked to the other available
Benchmark Return Options, including a Hedge Fund Return Option, provided that
such benchmarking shall be on an unleveraged basis. Participants should be aware
that once the closing of Merrill Lynch KECALP L.P. 1999 and/or the applicable
Hedge Fund Return Option has occurred, Participants will not be able to change
their elections of such options.
(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 KECALP Leverage Percentage by Eligible
Participants. Prior to the closing of the offering of Merrill Lynch KECALP L.P.
1999, Leverage-Eligible Participants who select the KECALP 1999 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 Merrill Lynch KECALP L.P.
1999, the Administrator will determine each Leverage-Eligible Participant's
Initial Leveraged Amount by applying such Participant's Leverage Percentage to
the dollar value of the portion of the Participant's Account Balance allocated
to the KECALP 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 KECALP. Whenever a distribution is paid on an actual
unit of Merrill Lynch KECALP L.P. 1999, 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. Because the KECALP Return
Option is illiquid, payouts to Participants under Article V hereof will be made
only from amounts credited to a Participant's Account after the Debit Balance is
reduced to zero. The KECALP Units and the Debit Balance will also be adjusted in
accordance with Section 5.2 hereof in the event of a Participant's termination.
8
(e) Adjustment of Debit Balance. Any Debit Balance shall be reduced as
soon as possible against either (i) any Liquid Balance, or (ii) any
distributions relating to KECALP 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 though 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 KECALP 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 Asset Value is not
computed, the value of the security involved for determining Participants'
rights under the Plan shall be the price reported for actual transactions in
that security through the ML II System on the relevant day, without giving
effect to any transaction charges or costs associated with such transactions;
provided, further, that, if there are no such transactions effected through the
ML II System on the relevant day, the value of the security shall be:
(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 sole discretion.
All debits and charges against the Account shall be applied as a pro rata
reduction of the portion of the Account Balance indexed to each of the
Participant's Mutual Fund Return Options.
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(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
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, if appropriate because of regulatory
requirements. In such event, Participants will be entitled, 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 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 KECALP 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 KECALP 1999
Return Option.
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3.5 Rescission of Deferral Election.
(a) Prior to December 1, 1998. A deferral election hereunder may be
rescinded at the request of a Participant only (i) on or before December 1,
1998, and (ii) if the Administrator, in his sole discretion and upon evidence of
such basis that he 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 30, 1998 and November 30, 1998), 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 sole
discretion, decides, upon the Participant's request and upon evidence of the
occurrence of the events described in (i) hereof that he 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 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, 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.
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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 1999, or
(iii) in any month in the calendar year following the Participant's Retirement;
provided that, if a Participant's election would result in payment (in the case
of a single payment) or commencement of payment (in the case of installment
payments) after the Participant's 70th birthday, then, notwithstanding the
Participant's elections, the Company will pay, or commence payment of, the
Participant's Account Balance in the month following the Participant's 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.
(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
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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 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,
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 (in the event of Career Retirement or Retirement)
or to the Participant's beneficiary (in the event of death); provided, however,
that 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. If the
Participant's employment terminates at any time for any reason other than death,
Career Retirement or Retirement, then, notwithstanding the Participant's
elections hereunder, any Available Benchmark Return Account 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. In the event that a
Participant's employment
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terminates at any time for any reason other than death, disability, Career
Retirement or Retirement, such Participant will forfeit all rights to the
leveraged portion of such Participant's KECALP Unit Account, including any
future Leveraged Distributions, unless the Administrator, in his sole
discretion, determines that such forfeiture would be detrimental to Merrill
Lynch based on the Net Asset Value of the KECALP Units; provided, however, that
such forfeiture will not occur: if (1) the Participant is terminated by ML & Co.
as the result of a reduction in staff, (2) the Participant delivers to ML & Co.
a release of claims (in a form approved by the Director of Human Resources of ML
& Co. 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 by the Administrator, 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 determinative.
(c) Leave of Absence, Transfer or Disability. The Participant's
employment will not be considered as terminated if the Participant is on an
approved leave of absence or if the Participant transfers or is transferred but
remains in the employ of the Company or if the Participant 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 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 Participant or
his or her beneficiary under this Plan shall be implemented without the consent
of the affected Participant or beneficiary. This direction may be revoked by the
Administrator at any time in his sole discretion.
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 designee before the Participant's
death, a beneficiary to receive payments in the event of the Participant's
death. The Participant may also designate a contingent beneficiary to receive
payments in accordance with this Plan if the primary beneficiary does not
survive the Participant. The Participant may designate more than one person as
the Participant's beneficiary or contingent beneficiary, in which case (i) no
contingent beneficiary would receive any payment unless all of the primary
beneficiaries predeceased the Participant, and (ii) the surviving beneficiaries
in any class shall share in any payments in proportion to the percentages of
interest assigned to them by the Participant.
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(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 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,
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
may, in his 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 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 sole discretion to be immediate and substantial.
15
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 willful misconduct or lack of good faith. The Administrator
may designate persons to carry out the specified responsibilities of the
Administrator and shall not be liable for any act or omission of a person as
designated.
6.2 Payments on Behalf of an Incompetent.
If the Administrator finds that any person who is entitled to any
payment hereunder is a minor or is unable to care for his or her affairs because
of disability or incompetency, payment of the Account Balance may be made to
anyone found by the Administrator to be the committee or other authorized
representative of such person, or to be otherwise entitled to such payment, in
the manner and under the conditions that the Administrator determines. Such
payment will be a complete discharge of the liabilities of ML & Co. hereunder
with respect to the amounts so paid.
6.3 Corporate Books and Records Controlling.
The books and records of the Company will be controlling in the event
that a question arises hereunder concerning the amount of Adjusted Compensation,
Incentive Compensation, Sign-On Bonus, Eligible Compensation, the Deferred
Amounts, the Account Balance, the designation of a beneficiary, or any other
matters.
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ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Litigation.
The Company shall have the right to contest, at its expense, any ruling
or decision, administrative or judicial, on an issue that is related to the Plan
and that the Administrator believes to be important to Participants, and to
conduct any such contest or any litigation arising therefrom to a final
decision.
7.2 Headings Are Not Controlling.
The headings contained in this Plan are for convenience only and will
not control or affect the meaning or construction of any of the terms or
provisions of this Plan.
7.3 Governing Law.
To the extent not preempted by applicable U.S. Federal law, this Plan
will be construed in accordance with and governed by the laws of the State of
New York as to all matters, including, but not limited to, matters of validity,
construction, and performance.
7.4 Amendment and Termination.
ML & Co., through the Administrator, reserves the right to amend or
terminate this Plan at any time, except that no such amendment or termination
shall adversely affect the right of a Participant to his or her Account Balance
(as reduced by the Annual Charge, the Debit Balance or the Leveraged Principal
Amount and Interest thereon, as set forth in Section 3.4) as of the date of such
amendment or termination.
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