Exhibit 10(rr)

MERRILL LYNCH & CO., INC.

EMPLOYEE STOCK COMPENSATION PLAN

ARTICLE I — GENERAL.

Section 1.1 Purpose.

The purposes of the Merrill Lynch & Co., Inc. Employee Stock Compensation Plan
(the “Plan”) are: (a) to deliver a portion of annual year-end bonuses in stock,
in lieu of cash, to key employees of Merrill Lynch & Co., Inc., a Delaware
corporation (“ML & Co.”), its subsidiaries and affiliates; (b) to attract,
retain and motivate key employees of outstanding competence and ability who are
capable of having a significant impact on the performance of ML & Co.; (c) to
encourage long-term stock ownership by employees; and (d) to align the interests
of those employees with those of the stockholders of ML & Co.

Section 1.2 Definitions.

For the purpose of the Plan, the following terms shall have the meanings
indicated:

(a) “affiliate” shall mean a corporation or other entity controlled by,
controlling or under common control with ML & Co. and designated by the
Committee from time to time as such.

(b) “Board of Directors” or “Board” shall mean the Board of Directors of ML &
Co.

(c) “Code” shall mean the Internal Revenue Code of 1986, as amended, including
any successor law thereto.

(d) “Company” shall mean ML & Co. and any corporation, partnership, or other
entity 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. For purposes of the Plan, the terms “ML & Co.” and “Company” shall
include any successor thereto.

(e) “Committee” shall mean the Management Development and Compensation Committee
of the Board of Directors, or its functional successor or any other Board
committee that has been designated by the Board of Directors to administer the
Plan.

(f) “Common Stock” shall mean the Common Stock, par value $1.33  1/3 per share,
of ML & Co. and a “share of Common Stock” shall mean one share of Common Stock.

(g) “Disability,” unless otherwise provided herein, shall mean any physical or
mental condition that, in the opinion of the Head of Human Resources of Merrill
Lynch & Co., Inc. (or his or her functional successor), renders an employee
incapable of engaging in any employment or occupation for which he is suited by
reason of education or training.

(h) “Fair Market Value” of a share of Common Stock on any date means the closing
price of a share of Common Stock as reflected in the report of composite trading
of New York Stock Exchange listed securities for that day (or, if no Shares were
publicly traded on that day, the immediately preceding day that Shares were so
traded) published in The Wall Street Journal [Eastern Edition] or in any other
publication selected by the Committee; provided, however, that if the shares of
Common Stock are misquoted or omitted by the selected publication(s), the
Committee shall directly solicit the information from officials of the stock
exchanges or from other informed independent market sources.

(i) “Grant Document” shall mean a written document that sets forth the terms and
conditions of an award of Restricted Shares, Restricted Units, Stock Options or
Stock Appreciation Rights granted under the Plan.

 

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(j) “Key Employee” means any employee who has been designated by ML & Co. as one
of the 50 highest paid employees (based on W-2 income) as of the most recently
completed fiscal year.

(k) “Participant” shall mean any employee who has met the eligibility
requirements set forth in Section 1.5 hereof as of the time of grant and to whom
a grant has been made and is outstanding under the Plan.

(l) “Restricted Period” shall mean, in relation to Restricted Shares or
Restricted Units or shares received upon the exercise of Stock Options, the
period determined by the Committee, during which restrictions on the
transferability of such Restricted Shares or Restricted Units or shares received
upon the exercise of Stock Options are in effect.

(m) “Restricted Share” shall mean a share of Common Stock, granted to a
Participant pursuant to Article II that is subject to the restrictions set forth
in Section 2.2 hereof.

(n) “Restricted Unit” shall mean a right, granted to a Participant pursuant to
Section 2.3 of Article II, to receive either: (1) an amount in cash equal to the
Fair Market Value of one share of Common Stock, or (2) one share of Common
Stock, as provided by the Committee at the time of grant.

(o) “Stock Appreciation Right” shall mean a right, granted to a Participant
pursuant to Article IV hereof to receive upon exercise of such right before a
specified date, to receive, in cash or shares of Common Stock (or a combination
thereof) as determined by the Committee, an amount equal to the increase in Fair
Market Value, of a specified number of shares of Common Stock over a specified
exercise price per share.

(p) “Stock Option” shall mean a right, granted to a Participant pursuant to
Article III to purchase on exercise of the Stock Option, before a specified date
and at a specified exercise price per share, a specified number of shares of
Common Stock.

(q) “Termination of Employment” shall mean the termination of the participant’s
employment with the Company and any of its Subsidiaries or Affiliates other than
in connection with Retirement or Disability. Temporary absences from employment
because of illness, vacation or leave of absence and transfers among the Company
and its subsidiaries and affiliates shall not be considered Terminations of
Employment.

(r) “Vesting Period” shall mean, in relation to Restricted Shares, Restricted
Units, Stock Options, or Stock Appreciation Rights, any period determined by the
Committee during which such Restricted Shares, Restricted Units, Stock Options
or Stock Appreciation Rights may expire or be forfeited if the Participant
terminates employment or if other circumstances specified by the Committee
arise. The Vesting Period for Restricted Shares or Restricted Units granted as
part of a year-end stock bonus may not be less than three years from the date of
grant, provided that, the Committee may determine that year-end grants may vest
in substantially equal installments over three years, with the final installment
vesting no earlier than the third anniversary of the date of grant.

Section 1.3 Administration.

(a) The Plan shall be administered by the Committee. Subject to the provisions
of the Plan, the Committee shall have sole and complete authority to:
(i) subject to Section 1.5 hereof, select Participants after receiving the
recommendations of the management of the Company; (ii) determine the number of
shares of Common Stock subject to awards of Restricted Shares, Restricted Units,
Stock Options or Stock Appreciation Rights; (iii) determine the time or times

 

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when grants of awards under the Plan are to be made or are to be effective;
(iv) determine the terms and conditions subject to which grants of awards under
the Plan may be made; (v) extend the term of any Stock Option (but in no event
beyond ten years from the date of grant); (vi) determine that all or any portion
of any Stock Option shall be canceled upon the Participant’s exercise of a
tandem Stock Appreciation Rights; (vii) prescribe the form or forms of the Grant
Documents or other instruments evidencing any grants made hereunder, including
any provisions relating to a Change in Control; (viii) unless prohibited by a
Grant Document, amend any outstanding award in any respect, whether or not the
rights of the recipient of such award are adversely affected; (ix) adopt, amend,
and rescind such rules and regulations as, in its opinion, may be advisable for
the administration of the Plan; (x) construe and interpret the Plan and all
rules, regulations, and instruments utilized thereunder; (xi) make all
determinations deemed advisable or necessary for the administration of the Plan,
and (xii) the extent not prohibited by applicable laws or the rules of the New
York Stock Exchange applicable to ML & Co., to delegate any of its powers to the
Company’s Head of Human Resources, or his or her functional successor, or such
other officers as may be designated by the Committee. All determinations by the
Committee shall be final and binding.

(b) The Committee may cancel any grant under the Plan and issue a new grant in
substitution therefor upon such terms as the Committee may, in its sole
discretion determine, not inconsistent with the terms of the Plan.
Notwithstanding the foregoing, or any other provision of the Plan, in no event
shall a Stock Option or Stock Appreciation Right be granted in substitution for
a previously granted Stock Option or Stock Appreciation Right being canceled or
surrendered as a condition of receiving a new grant, if the new grant would have
a lower exercise price than the grant that it replaces nor shall the exercise
price of a Stock Option or Stock Appreciation Right be reduced once the Stock
Option or Stock Appreciation Right is granted. The foregoing is not intended to
prevent equitable adjustment of grants in accordance with Article VI.

(c) The Committee shall act in accordance with the procedures established under
ML & Co.’s Certificate of Incorporation and By-Laws, and the Committee’s Charter
and under any resolution of the Board.

Section 1.4 Shares Subject to the Plan.

(a) The total number of shares of Common Stock that may be issued under the Plan
shall be 75,000,000, subject to adjustment for changes in capitalization as
provided in Article VI hereof. Shares of Common Stock distributed under the Plan
may be authorized but unissued shares or shares that shall have been or may be
acquired by ML & Co. in the open market, in private transactions or otherwise.
No participant may be granted Stock Options and Stock Appreciation Rights
covering in excess of 1 million shares of Common Stock in any fiscal year of the
Company.

(b) In calculating the number of shares of Common Stock remaining available for
grants of awards under the Plan, the following rules shall apply:

 

  (i)

the number of shares of Common Stock remaining for issuance shall be reduced by
the number of outstanding Restricted Shares or shares reserved for issuance for
outstanding Restricted Units, Stock Options or Stock Appreciation Rights that
are payable in shares.

 

  (ii)

the number of shares of Common Stock remaining for issuance shall be increased
by the number of shares withheld or tendered (by actual delivery or attestation)
to pay the exercise price of a Stock Option and by the number of shares withheld
from any grant of Restricted Shares or Restricted Units, Stock Option or Stock
Appreciation Rights to satisfy tax withholding obligations.

 

  (iii)

the number of shares of Common Stock remaining for issuance shall be increased
by (A) the number of shares remaining available under the Merrill Lynch & Co.,
Inc. Long-Term

 

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Incentive Compensation Plan for Managers and Producers and/or (B) the number of
shares remaining available under the Merrill Lynch & Co., Inc. Equity Capital
Appreciation Plan, in each case on the date that the Committee shall determine
to make no further year-end awards in lieu of cash compensation under such
plans;

 

  (iv)

the number of shares of Common Stock remaining for issuance shall be increased
by the number of shares that have been granted as Restricted Shares or that have
been reserved for distribution in satisfaction of any Restricted Units, Stock
Options or Stock Appreciation Rights and are later forfeited, or that expire or
terminate or, for any other reason, are not payable or distributable under the
Plan or the Long-Term Incentive Compensation Plan for Managers and Producers;

 

  (v)

the number of shares of Common Stock remaining for issuance shall be increased
by the number of shares that have been granted in respect of Restricted Units or
Stock Appreciation Rights that are settled in cash under the Plan or the
Long-Term Incentive Compensation Plan for Managers and Producers; and

 

  (vi)

the number of shares of Common Stock remaining for issuance shall be increased
by the number of shares repurchased by the Company with cash option proceeds
from stock option exercises.

Section 1.5 Eligibility and Participation.

Participation in the Plan shall be limited to officers (other than executive
officers as such term is defined in the Securities Exchange Act of 1934) and
other salaried, key employees of the Company or an affiliate.

ARTICLE II — RESTRICTED SHARES AND RESTRICTED UNITS.

Section 2.1 Grants of Restricted Shares and Restricted Units.

The Committee may select employees to become Participants (subject to the
provisions of Section 1.5 hereof) and grant Restricted Shares or Restricted
Units to such Participants at any time. Before making grants, the Committee may
receive recommendations of the management of the Company that take into account
such factors as level of responsibility, current and past performance, and
performance potential.

The grants of Restricted Shares and Restricted Units shall be in respect of such
number of shares of Common Stock for such amounts and subject to such terms and
conditions as the Committee may establish. Each grant to a Participant shall be
evidenced by a Grant Document stating the number of shares of Common Stock
subject to Restricted Shares or Restricted Units granted, the terms and
conditions of such grant, and the consequences of forfeiture that will apply to
such Restricted Shares or Restricted Units, and any other terms, conditions, or
rights with respect to such grant as the Committee may determine.

Section 2.2 Restricted Shares.

At the time of grant of Restricted Shares, subject to the receipt by the Company
of any applicable consideration for such Restricted Shares, one or more
certificates representing the appropriate number of shares of Common Stock
granted to a Participant shall be registered in his or her name, but shall be
held by the Company for the account of the Participant. The Participant shall
have all rights of a holder as to such shares of Common Stock, including the
right to receive dividends, and to vote such Common Stock, subject to the
following restrictions: (a) the Participant shall not be entitled to delivery of
shares of Common Stock until the expiration of the Vesting and Restricted
Periods; (b) except as otherwise provided in the Grant Document, none of the
Restricted Shares may be sold, transferred, assigned, pledged, or otherwise
encumbered or

 

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disposed of during the Restricted Period; and (c) except as otherwise provided
in the Grant Document, all rights of the Participant to such Restricted Shares
shall terminate without further obligation on the part of the Company and the
Restricted Shares shall be cancelled if the Participant incurs a Termination of
Employment prior to the end of the Vesting Period applicable to such Restricted
Shares or fails to comply with all other terms and requirements specified in the
Grant Document. Any shares of Common Stock or other securities or property
received with respect to such shares shall be subject to the same restrictions
as such Restricted Shares.

Section 2.3 Restricted Units.

During the Vesting Period (or, if longer, the Restricted Period) for Restricted
Units, upon the payment of a dividend on a share of Common Stock, a Participant
may be paid, with respect to each such Restricted Unit, a cash amount (or, if
the Committee so determines, may be granted additional Restricted Units having a
value equal to the amount of such dividend payment based on the Fair Market
Value of a share of Common Stock on the date of such additional grant), in the
same manner, at the same time and in the same amount paid, as such dividend.
Except as otherwise provided in the Grant Document or as may be determined by
the Committee, all rights of the Participant to such Restricted Units shall
terminate without further obligation on the part of the Company and the
Restricted Units shall be cancelled without further obligation on the part of
the Company if the Participant incurs a Termination of Employment prior to the
end of the Vesting Period applicable to such Restricted Units, or fails to
comply with all other terms and requirements specified in the Grant Document.

Section 2.4 Adjustment with respect to Restricted Shares and Restricted Units.

Any other provision of the Plan or a Grant Document to the contrary
notwithstanding, the Committee may at any time, change or amend the terms and
conditions of any outstanding grant of Restricted Shares or Restricted Units, if
it determines that conditions, including but not limited to, changes in the
economy, changes in competitive conditions, changes in laws or governmental
regulations, changes in generally accepted accounting principles, changes in the
Company’s accounting policies, acquisitions or dispositions by the Company, or
the occurrence of other unusual, unforeseen or extraordinary events, so warrant,
provided that, the Committee shall not be obligated to change all grants in the
same manner or treat all Participants the same.

Section 2.5 Payment of Restricted Shares and Restricted Units.

(a) Restricted Shares. At the end of the Vesting Period (or, if longer, the
Restricted Period) applicable to the Participant’s Restricted Shares, all
restrictions contained in the Grant Document or award of Restricted Shares and
in the Plan shall lapse, and the appropriate number of shares of Common Stock
(net of shares withheld at the end of the Vesting Period under Section 2.5(c)),
shall be delivered to the Participant free of restrictions, in book-entry or
certificated form or credited to a brokerage account as the Participant so
directs.

(b) Restricted Units. At the end of the Vesting Period (or, if longer, the
Restricted Period) applicable to a Participant’s Restricted Units, there shall
be paid to the Participant, either: (1) an amount in cash equal to the Fair
Market Value of one share of Common Stock for each vested Restricted Unit
measured on the last trading day of the Vesting Period (or, if longer, the
Restricted Period), or (2) one share of Common Stock for each vested Restricted
Unit, in each case, net of shares withheld by the Company pursuant to
Section 2.5(c) and free of restrictions.

For Restricted Units satisfied in shares of Common Stock, the appropriate number
of shares shall be delivered to the Participant in book-entry or certificated
form or credited to a brokerage account as the Participant so directs as soon as
practicable, but in no event later than 30 days after the end of the Vesting or
Restricted Period (whichever is later), provided that, in the event that the end
of such period is fewer than 30 days prior to end of the calendar year, the
payment of the shares shall be made in the first 30 days of the next succeeding
fiscal year.

 

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(c) Payment of Taxes. In the event that an individual is subject to any tax on
Restricted Shares or Restricted Units, the Company may permit the Participant to
satisfy any federal, state, local or social security tax withholding
requirements that occur by deducting from the number of whole shares of Common
Stock otherwise deliverable, such number of shares as shall have a Fair Market
Value, on the applicable date, equal to the tax required or permitted to be
withheld by the Company.

ARTICLE III — STOCK OPTIONS.

Section 3.1 Grants of Stock Options.

The Committee may select employees to become Participants (subject to
Section 1.5 hereof) and grant Stock Options to such Participants at any time;
provided, however, that Incentive Stock Options only shall be granted within 10
years of the earlier of the date the Plan is adopted by the Board or approved by
the stockholders of ML & Co. Before making grants, the Committee may receive the
recommendations of the management of the Company, which will take into account
such factors as level of responsibility, current and past performance, and
performance potential. Subject to the provisions of the Plan, the Committee
shall also determine the number of shares of Common Stock to be covered by each
Stock Option. The Committee may grant a Stock Appreciation Right in connection
with a Stock Option, as provided in Article IV.

Section 3.2 Option Documentation.

Each Stock Option granted under the Plan shall be evidenced by a Grant Document
stating the number of shares of Common Stock subject to the Stock Option, the
terms and conditions of such grant, any Vesting Period or Restricted Period, the
expiration date of such Stock Option and the events of and the consequences of
forfeiture that will apply to such Stock Option, and any other terms, conditions
or rights with respect to such grant as the Committee may deem appropriate and
are not inconsistent with the provisions of the Plan.

Section 3.3 Exercise Price.

The Committee shall establish the exercise price at the time any Stock Option is
granted, except that such exercise price shall not be less than 100% of the Fair
Market Value of the underlying shares of Common Stock on the day a Stock Option
is granted. The exercise price will be subject to adjustment in accordance with
the provisions of Article V of the Plan.

Section 3.4 Exercise of Stock Options.

(a) Exercisability and Vesting. Stock Options shall become exercisable at such
times and in such installments as the Committee may provide at the time of
grant. The Committee also may, but shall not be required to, set a Vesting
Period for grants of Stock Options. Once a Stock Option becomes exercisable, a
Stock Option may be exercised from the time first set by the Committee until the
close of business on the expiration date of the Stock Option, subject to (1) the
limitations imposed by ML & Co. policies with respect to employee trading and
(2) any limitations on exercise following termination of employment that are
contained in the Grant Document.

(b) Option Period. For each Stock Option granted, the Committee shall specify
the period during which the Stock Option may be exercised, provided that no
Stock Option shall be exercisable after the expiration of ten years from the
date of grant of such Stock Option.

Section 3.5 Payment of Exercise Price and Tax Liability Upon Exercise; Delivery
of Shares.

 

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(a) Payment of Purchase Price. The exercise price per share of the shares of
Common Stock as to which a Stock Option is exercised shall be paid to the
Company at the time of exercise (i) in cash, (ii) by actual delivery or
attestation to ownership of freely transferable shares of Common Stock already
owned by the person exercising the Stock Option (in accordance with rules
established by the Head of Human Resources from time to time) having a total
real-time market price, at the time of delivery or attestation and on the date
of exercise, equal to the exercise price, (iii) a combination of cash and shares
of Common Stock equal in value to the exercise price, or (iv) by such other
means as the Committee, in its sole discretion, may determine.

(b) Payment of Taxes. Upon exercise, a Participant may elect to satisfy any
federal, state, local, foreign, and social security taxes required or permitted
by law to be withheld that arise as a result of the exercise of a Stock Option
by directing the Company to withhold from the shares of Common Stock otherwise
deliverable upon the exercise of such Stock Option, such number of shares as
shall have a total real-time market price at the time and on the date of
exercise, at least equal to the amount of tax to be withheld.

(c) Delivery of Shares. Upon receipt by the Company of the exercise price and
satisfaction of all tax obligations, stock certificate(s) for the shares of
Common Stock as to which a Stock Option is exercised (net of any shares withheld
pursuant to Section 3.5(b) above) shall be delivered to the person in whose name
the Stock Option is outstanding or such person’s estate or beneficiaries, as the
case may be, or such shares shall be credited to a brokerage account or
otherwise delivered, in such manner as such person or such person’s estate or
beneficiaries, as the case may be, may direct.

(d) Cashless Exercises. If approved by the Committee, payment in full or in
part, upon exercise of a Stock Option, may also be made by delivering a properly
executed exercise notice to the Company, together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds necessary to pay the purchase price, and, if requested, the
amount of any federal, state, local, foreign or social security withholding
taxes. To facilitate the foregoing, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms.

ARTICLE IV — STOCK APPRECIATION RIGHTS.

Section 4.1 Grants of Stock Appreciation Rights.

The Committee may select employees to become Participants (subject to the
provisions of Section 1.5 hereof) and grant Stock Appreciation Rights to such
Participants at any time. Before making grants, the Committee must receive the
recommendations of the management of the Company, which will take into account
such factors as level of responsibility, current and past performance, and
performance potential. Subject to the provisions of the Plan, the Committee
shall have the authority to grant Stock Appreciation Rights, with or without
associated dividend equivalents, in connection with a Stock Option or
independently as a stand-alone award. The Committee may grant Stock Appreciation
Rights in connection with a Stock Option, either at the time of grant or by
amendment, in which case each such Stock Appreciation Right shall be subject to
the same terms and conditions as the related Stock Option and shall be
exercisable only at such times and to such extent as the related Stock Option is
exercisable. A Stock Appreciation Right granted in connection with a Stock
Option shall entitle the holder to surrender to the Company the related Stock
Option unexercised, or any portion thereof, and receive from the Company in
exchange therefore an amount equal to the excess of the Fair Market Value of one
share of the Common Stock on the day of the surrender of such Stock Option over
the Stock Option exercise price times the number of shares of Common Stock
underlying the Stock Option, or portion thereof, that is surrendered. A Stock
Appreciation Right granted independently of a Stock Option shall entitle the
holder to receive upon exercise an amount equal to the excess of the Fair Market
Value of one share of Common Stock on the day preceding the exercise of the
Stock Appreciation Right over the Fair Market Value of one share of Common Stock
on the date

 

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such Stock Appreciation Right was granted, or such other price determined by the
Committee at the time of grant, which shall in no event be less than 100% of the
Fair Market Value of one share of Common Stock on the date such Stock
Appreciation Right was granted. In addition, the maximum term of Stock
Appreciation Rights shall not exceed ten years.

Section 4.2 Payment Upon Exercise of Stock Appreciation Rights.

The Company’s obligation to any Participant exercising a Stock Appreciation
Right may be paid in cash or shares of Common Stock, or partly in cash and
partly in shares of Common Stock, at the sole discretion of the Committee. The
number of shares of Common Stock deliverable upon the satisfaction of an
obligation in respect of a Stock Appreciation Right that is satisfied in shares
of Common Stock shall be determined based on the Fair Market Value of a share of
Common Stock on the date of exercise of such Stock Appreciation Right.

ARTICLE V — PAYMENTS UPON TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL.

Section 5.1 Value of Payments Upon Termination After a Change in Control.

Any other provision of the Plan to the contrary notwithstanding and
notwithstanding any election to the contrary previously made by the Participant,
in the event a Change in Control shall occur and thereafter the Company shall
terminate the Participant’s employment without Cause or the Participant shall
terminate his or her employment with the Company for Good Reason within six
months of the Change of Control, the Participant shall be paid the value of his
or her Restricted Shares, Restricted Units, Stock Options, and Stock
Appreciation Rights in a lump sum in cash, promptly after termination of his or
her employment but, without limiting the foregoing, in no event later than 30
days thereafter, provided that, in the event that, at the time of his or her
termination, a Participant is a Key Employee, the payment to such Participant
shall be delayed to a date that is six months from the date of such
Participant’s termination. Payments shall be calculated as set forth below:

(a) Restricted Shares and Restricted Units.

Any payment under this Section 5.1(a) shall be calculated as if all the relevant
Vesting and Restricted Periods had been fully completed immediately prior to the
date on which the Participant’s employment terminates. The amount of any payment
to a Participant pursuant to this Section 5.1(a) shall be reduced by the amount
of any payment previously made to the Participant with respect to the Restricted
Shares and Restricted Units, exclusive of ordinary dividend payments, resulting
by operation of law from the Change in Control, including, without limitation,
payments resulting from a merger pursuant to state law. The value of the
Participant’s Restricted Shares and Restricted Units payable pursuant to this
Section 5.1(a) shall be the amount equal to the number of the Restricted Shares
and Restricted Units outstanding in a Participant’s name multiplied by the Fair
Market Value of a share of Common Stock on the day the Participant’s employment
is terminated.

(b) Stock Options and Stock Appreciation Rights.

Any payment for Stock Options and Stock Appreciation Rights pursuant to this
Section 5.1(b) shall be calculated as if all such Stock Options and Stock
Appreciation Rights, regardless of whether or not then fully exercisable under
the terms of the grant, became exercisable immediately prior to the date on
which the Participant’s employment is terminated. The amount of any payment to a
Participant pursuant to this Section 5.1(b) shall be reduced by the amount of
any payment previously made to a Participant with respect to the Stock Options
and Stock Appreciation Rights, exclusive of any ordinary dividend payments,
resulting by operation of law from the Change in Control, including, without
limitation, payments resulting from a merger pursuant to state law. The value of
the Participant’s Stock Options and Stock Appreciation Rights payable pursuant
to this Section 5.1(b) shall be:

 

  (i)

in the case of a Stock Option, for each underlying share of Common Stock, the
excess of the Fair Market Value of a share of Common Stock on the day the
Participant’s employment is terminated over the per share exercise price for
such Stock Option; and

 

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  (ii)

in the case of a Stock Appreciation Right granted independently of a Stock
Option, the Fair Market Value of a share of Common Stock on the day the
Participant’s employment is terminated, over the Fair Market Value of one share
of Common Stock on the date such Stock Appreciation Right was granted, or such
other price determined by the Committee at the time of grant.

Section 5.2 A Change in Control.

(a) Definition of Change in Control. For purposes of the Plan, a “Change in
Control” shall mean the happening of any of the following events:

 

  (i)

An acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 30% or more of either (1) the then outstanding shares of common stock of the
Company (the “Outstanding Company Common Stock”) or (2) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”); excluding, however, the following: (1) Any acquisition directly
from the Company, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself acquired
directly from the Company, (2) Any acquisition by the Company, (3) Any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company, or (4) Any
acquisition pursuant to a transaction which complies with clauses (1), (2) and
(3) of subsection (iii) of this Section 5.2(a); or

 

  (ii)

A change in the composition of the Board such that the individuals who, as of
the effective date of the Plan, constitute the Board (such Board shall be
hereinafter referred to as the “Incumbent Board”) cease for any reason to
constitute at least a majority of the Board; provided, however, for purposes of
this Section 5.2(a), that any individual who becomes a member of the Board
subsequent to the effective date of the Plan, whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this proviso)
shall be considered as though such individual were a member of the Incumbent
Board; but, provided further, that any such individual whose initial assumption
of office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so considered as a
member of the Incumbent Board; or

 

  (iii)

Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (“Corporate
Transaction”); excluding, however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 50% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Corporate Transaction (including, without limitation, a corporation which
as a result of such

 

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transaction owns the Company or all or substantially all of the Company’s assets
either directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Corporate Transaction,
of the Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (2) no Person (other than the Company, any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Corporate Transaction) will beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of common stock
of the corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding voting securities of such corporation entitled
to vote generally in the election of directors except to the extent that such
ownership existed prior to the Corporate Transaction, and (3) individuals who
were members of the Incumbent Board will constitute at least a majority of the
members of the board of directors of the corporation resulting from such
Corporate Transaction; or

 

  (iv)

The approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.

Section 5.3 Effect of Agreement Resulting in Change in Control.

If ML & Co. executes an agreement, the consummation of which would result in the
occurrence of a Change in Control as described in Section 5.2 and such Change in
Control actually occurs, then, with respect to a termination of employment
without Cause or for Good Reason occurring after the execution of such agreement
(and, if such agreement expires or is terminated prior to consummation, prior to
such expiration or termination of such agreement), a Change in Control shall be
deemed to have occurred as of the date of the execution of such agreement.

Section 5.4 Termination for Cause.

Termination of the Participant’s employment by the Company for “Cause” shall
mean termination upon:

(a) the willful and continued failure by the Participant substantially to
perform his or her duties with the Company (other than any such failure
resulting from the Participant’s incapacity due to physical or mental illness or
from the Participant’s Retirement or any such actual or anticipated failure
resulting from termination by the Participant for Good Reason) after a written
demand for substantial performance is delivered to him or her by the Board of
Directors, which demand specifically identifies the manner in which the Board of
Directors believes that he or she has not substantially performed his or her
duties;

(b) the willful engaging by the Participant in conduct that is demonstrably and
materially injurious to the Company, monetarily or otherwise; and

(c) any violation of the Corporation’s Code of Business Conduct.

No act or failure to act by the Participant shall be deemed “willful” unless
done, or omitted to be done, by the Participant not in good faith and without
reasonable belief that his or her action or omission was in the best interest of
the Company.

Section 5.5 Good Reason.

“Good Reason” shall mean the Participant’s termination of his or her employment
with the Company if, without the Participant’s consent, after he or she has
notified the Company and the Company has failed to take action within 60 days,
any of the following circumstances shall occur within two years following the
Change in Control:

(a) Inconsistent Duties. A meaningful and detrimental alteration in the
Participant’s responsibilities from those in effect immediately prior to the
Change in Control;

 

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(b) Relocation. The relocation of the office of the Company where the
Participant is employed at the time of the Change in Control (the “CIC
Location”) to a location that in his or her good faith assessment is an area not
generally considered conducive to maintaining the executive offices of a company
such as ML & Co. because of hazardous or undesirable conditions including
without limitation a high crime rate or inadequate facilities, or to a location
that is more than twenty-five (25) miles away from the CIC Location or the
Company’s requiring the Participant to be based more than twenty-five (25) miles
away from the CIC Location (except for required travel on the Company’s business
to an extent substantially consistent with his or her customary business travel
obligations in the ordinary course of business prior to the Change in Control);

(c) Compensation Plans. The failure by the Company to continue in effect any
compensation plan in which the Participant participates, including but not
limited to this Plan, the Company’s retirement program, Employee Stock Purchase
Plan, 1978 Incentive Equity Purchase Plan, Equity Capital Accumulation Plan,
Canadian Capital Accumulation Plan, Management Capital Accumulation Plan,
limited partnership offerings, cash incentive compensation or any other plans
adopted prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan in connection with the Change in Control, or the failure by
the Company to continue the Participant’s participation therein on at least as
favorable a basis, both in terms of the amount of benefits provided and the
level of his or her participation relative to other Participants, as existed
immediately prior to the Change in Control;

(d) Benefits and Perquisites. The failure of the Company to continue to provide
the Participant with benefits at least as favorable, in the aggregate, as those
enjoyed by the Participant under any of the Company’s retirement, life
insurance, medical, health and accident, disability, deferred compensation or
savings plans in which the Participant was participating immediately prior to
the Change in Control; the taking of any action by the Company that would
directly or indirectly materially reduce any of such benefits or deprive the
Participant of any material fringe benefit enjoyed by him or her immediately
prior to the Change in Control, including, without limitation, the use of a car,
secretary, office space, telephones, expense reimbursement, and club dues; or
the failure by the Company to provide the Participant with the number of paid
vacation days to which the Participant is entitled on the basis of years of
service with the Company in accordance with the Company’s normal vacation policy
in effect immediately prior to the Change in Control. The determination of
comparability shall be made by an independent benefits consultant;

(e) No Assumption by Successor. The failure of ML & Co. to obtain a satisfactory
agreement from any successor to assume and agree to perform a Participant’s
employment agreement as contemplated thereunder or, if the business of the
Company for which his or her services are principally performed is sold at any
time after a Change in Control, the purchaser of such business shall fail to
agree to provide the Participant with the same or a comparable position, duties,
compensation, and benefits as provided to him or her by the Company immediately
prior to the Change in Control.

Section 5.6 Effect on Plan Provisions.

In the event of a Change in Control, no changes in the Plan, or in any documents
evidencing grants of Restricted Shares, Restricted Units, Stock Options, or
Stock Appreciation Rights and no adjustments, determinations or other exercises
of discretion by the Committee or the Board of Directors, that were made
subsequent to the Change in Control and that would have the effect of
diminishing a Participant’s rights or his or her payments under the Plan or this
Article shall be effective, including, but not limited to, any changes,
determinations or other exercises of discretion made to or pursuant to the Plan.
Once a Participant has received a payment pursuant

 

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to this Article V, shares of Common Stock that were reserved for issuance in
connection with any Restricted Shares or Stock Options for which payment is made
shall no longer be reserved and shares of Common Stock that are Restricted
Shares or that are restricted and held by the Company, for which payment has
been made, shall no longer be registered in the name of the Participant and
shall again be available for grants under the Plan.

ARTICLE VI — CHANGES IN CAPITALIZATION.

Any other provision of the Plan to the contrary notwithstanding, if any change
shall occur in or affect shares of Common Stock, or awards of Restricted Units,
Stock Options or Stock Appreciation Rights on account of a merger,
consolidation, reorganization, stock dividend, stock split or combination,
reclassification, recapitalization, or special distribution or spinoff to
holders of shares of Common Stock (other than regular cash dividends) including,
without limitation, a merger or other reorganization event in which the shares
of Common Stock cease to exist, then, without any action by the Committee,
appropriate adjustments shall be made to (1) the maximum number of shares of
Common Stock available for distribution under the Plan including the limitations
on the grant of Restricted Stock or Restricted Units; (2) the number and kind of
shares subject to or reserved for issuance and payable under outstanding awards
of Restricted Units, Restricted Shares, Stock Options or Stock Appreciation
Rights; and (3) the exercise price of outstanding Stock Options and Stock
Appreciation Rights; provided however, that the number of shares Common Stock
subject to an award shall always be a whole number. In addition, if in the
opinion of the Committee, after consultation with the Company’s independent
public accountants, changes in the Company’s accounting policies, acquisitions,
divestitures by the Company, distributions, or other unusual or extraordinary
items have disproportionately and materially affected the value of shares of
Common Stock, Restricted Units, Stock Options, or Stock Appreciation Rights; and
any other terms or provisions of any outstanding grants of Restricted Shares,
Restricted Units, Stock Options, or Stock Appreciation Rights, the Committee, in
its sole discretion may (but shall not have an obligation to) adjust any other
terms or provisions of any outstanding awards of Restricted Shares, Restricted
Units, Stock Options or Stock Appreciation Rights, in order to preserve the
benefits of such awards for the Participants. In the event of a change in the
presently authorized shares of Common Stock that is limited to a change in the
designation thereof or a change of authorized shares with par value into the
same number of shares with a different par value or into the same number of
shares without par value, the shares resulting from any such change shall be
deemed to be shares of Common Stock within the meaning of the Plan. In the event
of any other change affecting the shares of Common Stock, Restricted Units,
Stock Options, or Stock Appreciation Rights, such adjustment shall be made as
may be deemed equitable by the Committee to give proper effect to such event.

ARTICLE VII — MISCELLANEOUS.

Section 7.1 Documents Evidencing Grants.

Each award under the Plan shall be evidenced by a written Grant Document, which
shall contain such terms and conditions as the Committee deems appropriate.
Subject to Section 1.3(b), the Committee may make grants in tandem with or in
substitution for any other grant or grants under this Plan or any other plan of
the Company. By accepting a grant under the Plan, the recipient thereby agrees
that the grant shall be subject to all of the terms and conditions of the Plan
and any applicable Grant Document.

Section 7.2 Waiver of Claims.

Each eligible employee recognizes and agrees that prior to receiving a grant he
or she has no right to any benefits hereunder. Accordingly, in consideration of
a Participant’s receipt of a grant hereunder, he or she expressly waives the
right to contest the number of shares of Common Stock subject to any grant, the
terms contained in any Grant Document evidencing a grant, any determination,
action, omission hereunder, or under Grant Document by the Committee, the
Company or the Board, or any amendment to the Plan or any particular grant.

 

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Section 7.3 Designation of Beneficiary.

A Participant, or the transferee of a Restricted Share, Restricted Unit or Stock
Option, may designate, in a writing delivered to ML & Co. before his or her
death, a person or persons or entity or entities to receive, in the event of his
or her death, any rights in respect of awards which he or she has been granted
and are entitled to under the Plan and the Grant Document. A Participant or
Restricted Share, Restricted Unit or Stock Option transferee, may also designate
an alternate beneficiary to receive payments if the primary beneficiary does not
survive the Participant or the transferee. A Participant or transferee may
designate more than one person or entity as his or her beneficiary or alternate
beneficiary, in which case such beneficiaries would receive payments as joint
tenants with a right of survivorship. A beneficiary designation under the Plan
will apply to future grants unless changed or revoked by a Participant or the
transferee by filing a written or electronic notification of such change or
revocation with the Company. If a Participant or transferee fails to designate a
beneficiary, then his or her estate shall be deemed to be his or her
beneficiary.

Section 7.4 Employment Rights.

Neither the Plan nor any action taken hereunder shall be construed as giving any
employee of the Company the right to become a Participant, and a grant under the
Plan shall not be construed as giving any Participant any right to be retained
in the employ of the Company or its affiliates or receive further awards under
the Plan.

Section 7.5 Nontransferability.

Except as otherwise provided in the Grant Document, a Participant’s rights under
the Plan, including the right to any amounts or shares of Common Stock payable
or distributable in respect of an award under the Plan, may not be assigned,
pledged, or otherwise transferred except, in the event of a Participant’s death,
to his or her designated beneficiary or, in the absence of such a designation,
by will or the laws of descent and distribution. All Stock Options and Stock
Appreciation Rights shall be exercisable, subject to the terms of this Plan,
only by the Participant, or, in the event of the Participant’s disability, his
or her guardian or legal representative.

Section 7.6 Withholding.

The Company shall have the right, before any payment is made or a certificate
for any shares of Common Stock is delivered or any shares of Common Stock are
credited to any brokerage account, to deduct or withhold from any payment or
distribution of shares of Common Stock under the Plan any federal, state, local
or social security or other taxes, including transfer taxes, required or
permitted by law to be withheld or to require the Participant or his or her
beneficiary or estate, as the case may be, to pay any amount, or the balance of
any amount, required or permitted to be withheld.

Section 7.7 Relationship to Other Benefits.

No payment under the Plan shall be taken into account in determining any
benefits under any retirement, group insurance, or other employee benefit plan
of the Company. The Plan shall not preclude the stockholders of ML & Co., the
Board of Directors or any committee thereof, or the Company from authorizing or
approving other employee benefit plans or forms of incentive compensation, nor
shall it limit or prevent the continued operation of other incentive
compensation plans or other employee benefit plans of the Company or the
participation in any such plans by Participants in the Plan. The Committee shall
establish procedures to permit Participants to satisfy their tax obligations by
tendering or withholding shares of Common Stock in a manner that avoids adverse
accounting consequences to the Company.

 

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Section 7.8 No Trust or Fund Created.

Neither the Plan nor any grant made hereunder shall create or be construed to
create a trust or separate fund of any kind or a fiduciary relationship between
the Company and a Participant or any other person. To the extent that any person
acquires a right to receive payments from the Company pursuant to a grant under
the Plan, such right shall be no greater than the right of any unsecured general
creditor of the Company.

Section 7.9 Expenses.

The expenses of administering the Plan shall be borne by the Company.

Section 7.10 Indemnification.

Service on the Committee shall constitute service as a member of the Board of
Directors so that members of the Committee shall be entitled to indemnification
and reimbursement as directors of ML & Co. pursuant to its Certificate of
Incorporation, By-Laws, or resolutions of its Board of Directors or
stockholders.

Section 7.11 Tax Litigation.

The Company shall have the right to contest, at its expense, any tax ruling or
decision, administrative or judicial, on any issue that is related to the Plan
and that the Company believes to be important to the Company or the Participants
in the Plan and to conduct any such contest or any litigation arising therefrom
to a final decision.

Section 7.12 Subsidiary Employees.

In the case of a grant of an award to any employee of a subsidiary of ML & Co.,
ML & Co. may, if the Committee so directs, issue or transfer the shares of
Common Stock, if any, covered by the award to the employee of the subsidiary,
for such lawful consideration as the Committee may specify, upon the condition
or understanding that the subsidiary will transfer the shares of Common Stock to
the employee in accordance with the terms of the award specified by the
Committee pursuant to the provisions of the Plan. All shares of Common Stock
underlying awards that are forfeited or canceled shall revert to ML & Co.

Section 7.13 Foreign Employees and Foreign Law Considerations.

The Committee may grant awards to eligible employees who are foreign nationals,
who are located outside the United States or who are not compensated from a
payroll maintained in the United States, or who are otherwise subject to (or
could cause the Company to be subject to) legal or regulatory provisions of
countries or jurisdictions outside the United States, on such terms and
conditions different from those specified in the Plan as may, in the judgment of
the Senior Vice President of Human Resources, be necessary or desirable to
foster and promote achievement of the purposes of the Plan, and, in furtherance
of such purposes, the Committee or the Senior Vice President of Human Resources
may make such modifications, amendments, procedures, or sub-plans as may be
necessary or advisable to comply with such legal or regulatory provisions.

ARTICLE VIII — AMENDMENT AND TERMINATION.

The Board of Directors or the Committee may modify, amend or terminate the Plan
at any time, provided that, to the extent required by applicable law or the
rules of the New York Stock Exchange that apply to ML & Co., material amendments
shall be subject to approval by the stockholders of ML & Co.

 

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ARTICLE IX — INTERPRETATION.

Section 9.1 Governmental and Other Regulations.

The Plan and any grant hereunder shall be subject to all applicable federal,
state and local laws, rules, and regulations and to such approvals by any
regulatory or governmental agency that may, in the opinion of the counsel for
ML & Co., be required.

Section 9.2 Governing Law.

THE PLAN SHALL BE CONSTRUED AND ITS PROVISIONS ENFORCED AND ADMINISTERED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
ENTERED INTO AND PERFORMED ENTIRELY IN SUCH STATE.

ARTICLE X — EFFECTIVE DATE AND TERM.

The Plan shall become effective upon its adoption by the Board of Directors,
subject to its approval by the stockholders of ML & Co. Subject to earlier
termination in accordance with Article VIII, the Plan shall terminate on the
tenth anniversary of its adoption by the Board of Directors, unless stockholders
approve an extension of such term.

 

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