Document:

EX-10.30

 

Exhibit 10.30

MERRILL LYNCH & CO., INC.

LONG-TERM INCENTIVE COMPENSATION PLAN

ARTICLE
I - GENERAL

     Section 1.1 Purpose.

     The
purposes of the Long-Term Incentive Compensation Plan (the “Plan”) are: (a) to enhance
the growth and profitability of Merrill Lynch & Co., Inc., a Delaware corporation
(“ML & Co.”), and
its subsidiaries by providing the incentive of long-term rewards to key employees who are capable
of having a significant impact on the performance of ML & Co. and its subsidiaries; (b) to attract
and retain employees of outstanding competence and ability; (c) to encourage long-term stock
ownership by employees; and (d) to further the identity of interests of such employees with those
of stockholders of ML & Co.

     Section 1.2 Definitions.

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

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

     (b) “Code” shall mean the Internal Revenue Code of l986, as amended, including any successor
law thereto.

     (c) “Company” shall mean ML & Co. and 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. For purposes of this Plan, the
terms “ML & Co.” and “Company” shall include any successor thereto.

     (d) “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, or the Board of Directors. The Committee shall be
constituted so that at all relevant times it meets the then applicable requirements of Rule 16b-3
(or its successor) promulgated under the Securities Exchange Act of 1934, as amended.

     (e) “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

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Common Stock together with, for so long as Rights are outstanding, one Right (whether trading with
the Common Stock or separately).

     (f) “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.

     (g) “Fair Market Value” of shares of Common Stock on any given date(s) shall be: (a) the mean
of the high and low sales prices on the New York Stock Exchange--Composite Tape of such shares on
the date(s) in question, or, if the shares of Common Stock shall not have been traded on any such
date(s), the mean of the high and low sales prices on the New York
Stock Exchange--Composite Tape
on the first day prior thereto on which the shares of Common Stock were so traded; or (b) if the
shares of Common Stock are not traded on the New York Stock Exchange, such other amount as may be
determined by the Committee by any fair and reasonable means.

          “Fair Market Value” of any Other ML & Co. Security on any given date(s) shall be: (a) the mean
of the high and low sales prices of such Other ML & Co. Security on the principal securities
exchange on which such Security is traded on the date(s) in question or, if such Other ML & Co.
Security shall not have been traded on any such exchange on such date(s), the mean of the high and
low sales prices on such exchange on the first day prior thereto on which such Other ML & Co.
Security was so traded; or (b) if the Other ML & Co. Security is not publicly traded on a
securities exchange, such other amount as may be determined by the Committee by any fair and
reasonable means.

     (h) “Junior Preferred Stock” shall mean ML & Co.’s Series A Junior Preferred Stock, par value
$1.00 per share.

     (i) “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.

     (j) “Other ML & Co. Security” shall mean a financial instrument issued pursuant to Article VI.

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

     (l) “Performance Period” shall mean, in relation to Performance Shares or Performance Units,
any period, for which performance objectives have been established, of not less than one nor more
than ten consecutive ML & Co. fiscal years,

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commencing with the first day of the fiscal year in which such Performance Shares or Performance
Units were granted.

     (m) “Performance Share” shall mean a right, granted to a Participant pursuant to Article II,
that will be paid out as a share of Common Stock.

     (n) “Performance Unit” shall mean a right, granted to a Participant pursuant to Article II, to
receive an amount equal to the Fair Market Value of one share of Common Stock in cash.

     (o) “Restricted Period” shall mean, (i) in relation to shares of Common Stock receivable in
payment for Performance Shares, the period beginning at the end of the applicable Performance
Period during which restrictions on the transferability of such shares of Common Stock are in
effect; and (ii) in relation to Restricted Shares or Restricted Units, the period beginning with
the first day of the month in which Restricted Shares or Restricted Units are granted, during which
restrictions on the transferability of such Restricted Shares or Restricted Units are in effect,
which shall not be of shorter duration than the Vesting Period applicable to the same Restricted
Shares or Restricted Units.

     (p) “Restricted Share” shall mean a share of Common Stock, granted to a Participant pursuant
to Article III, subject to the restrictions set forth in Section 3.3 hereof.

     (q) “Restricted Unit” shall mean the right, granted to a Participant pursuant to Article III,
as provided by the Committee at the time of grant 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.

     (r) “Retirement” shall mean the cessation of employment with the Company (1) on or after (A)
having completed at least five (5) years of service and (B) reaching any age, that, when added to
service with the Company (in each case, expressed as completed years and completed months), equals
at least 45; or (2) as the result of (A) becoming employed by an unconsolidated affiliate of the
Company (as specified by the Head of Human Resources) or (B) being a part of a divestiture or
spin-off designated by the Head of Human Resources as eligible, provided that, in each
case, termination of employment by the Company for cause, as defined in the Company’s grant
document, shall not qualify as Retirement.

     (s) “Rights” means the Rights to Purchase Units of Junior Preferred Stock issued pursuant to
the Rights Agreement.

     (t) “Rights Agreement” means the Rights Agreement dated as of December 16, 1987 between ML &
Co. and Manufacturers Hanover Trust Company, Rights Agent, as amended from time to time.

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     (w) “Stock Appreciation Right” shall mean a right, granted to a Participant pursuant to
Article V, to receive, in cash or shares of Common Stock, an amount equal to the increase in Fair
Market Value, over a specified period of time, of a specified number of shares of Common Stock.

     (x) “Stock Option” shall mean a right, granted to a Participant pursuant to Article IV, to
purchase, before a specified date and at a specified price, a specified number of shares of Common
Stock. Stock Options may be “Incentive Stock Options,” which meet the definition of such in
Section 422A of the Code, or “Nonqualified Stock Options,” which do not meet such definition.

     (y) “Vesting Period” shall mean, in relation to Restricted Shares or Restricted Units, any
period of not less than six (6) months beginning with the first day of the month in which the grant
of the applicable Restricted Shares or Restricted Units is effective, during which such Restricted
Shares or Restricted Units may be forfeited if the Participant terminates employment.

     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 Performance Shares, Performance Units, Restricted Shares, Restricted Units, Stock
Appreciation Rights, or Other ML & Co. Securities subject to each grant; (iii) determine the number
of shares of Common Stock subject to each Stock Option grant; (iv) determine the time or times when
grants are to be made or are to be effective; (v) determine the terms and conditions subject to
which grants may be made; (vi) extend the term of any Stock Option; (vii) provide at the time of
grant that all or any portion of any Stock Option shall be canceled upon the Participant’s exercise
of any Stock Appreciation Rights; (viii) prescribe the form or forms of the instruments evidencing
any grants made hereunder, provided that such forms are consistent with the Plan; (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; and (xi) make all determinations deemed advisable or necessary for
the administration of the Plan. All determinations by the Committee shall be final and binding.

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

     Section 1.4 Shares Subject to the Plan.

     The total number of shares of Common Stock that may be distributed under the Plan shall be
320,000,000 (whether granted as Restricted Shares or reserved for

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distribution upon grant of Restricted Units, Performance Shares, Stock Options, Stock Appreciation
Rights (to the extent they may be paid out in Common Stock), or Other ML & Co. Securities), subject
to adjustment as provided in Article VII hereof. Shares of Common Stock distributed under the Plan
may be treasury shares or authorized but unissued shares. To the extent that awards of Other ML &
Co. Securities are convertible into Common Stock or are otherwise equity securities (or convertible
into equity securities) of ML & Co., they shall be subject to the limitation expressed above on the
number of shares of Common Stock that can be awarded under the Plan. Any shares of Common Stock
that have been granted as Restricted Shares or that have been reserved for distribution in payment
for Restricted Units or Performance Shares but are later forfeited or for any other reason are not
payable under the Plan may again be made the subject of grants under the Plan. If any Stock
Option, Stock Appreciation Right, or Other ML & Co. Security granted under the Plan expires or
terminates, or any Restricted Unit or Stock Appreciation Right is paid out in cash, the underlying
shares of Common Stock may again be made the subject of grants under the Plan. Units payable in
cash that are later forfeited or for any reason are not payable under the Plan may again be the
subject of grants under the Plan.

     Section 1.5 Eligibility and Participation.

     Participation in the Plan shall be limited to officers (who may also be members of the Board
of Directors) and other salaried, key employees of the Company or any affiliate of the Company
designated by the Committee.

ARTICLE
II - PROVISIONS APPLICABLE TO PERFORMANCE SHARES AND PERFORMANCE UNITS.

     Section 2.1 Performance Periods and Restricted Periods.

     The Committee shall establish Performance Periods applicable to Performance Shares and
Performance Units and may establish Restricted Periods applicable to Performance Shares, at its
discretion. Each such Performance Period shall commence with the beginning of a fiscal year in
which the Performance Shares and Performance Units are granted and have a duration of not less than
one nor more than ten consecutive fiscal years. Each such Restricted Period shall commence with
the end of the Performance Period established for such Performance Shares and shall end on such
date as may be determined by the Committee at the time of grant. There shall be no limitation on
the number of Performance Periods or Restricted Periods established by the Committee, and more than
one Performance Period may encompass the same fiscal year.

     Section 2.2 Performance Objectives.

     At any time before or during a Performance Period, the Committee shall establish one or more
performance objectives for such Performance Period, provided that such performance objectives shall
be established prior to the grant of any Performance

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Shares or Performance Units with respect to such Period. Performance objectives shall
be based on one or more measures such as return on stockholders’ equity, earnings, or any other
standard deemed relevant by the Committee, measured internally or relative to other organizations
and before or after extraordinary items, as may be determined by the Committee; provided,
however, that any such measure shall include all accruals for grants made under the Plan
and for all other employee benefit plans of the Company. The Committee may, in its discretion,
establish performance objectives for the Company as a whole or for only that part of the Company in
which a given Participant is involved, or a combination thereof. In establishing the performance
objective or objectives for a Performance Period, the Committee shall determine both a minimum
performance level, below which no Performance Shares or Performance Units shall be payable, and a
full performance level, at or above which 100% of the Performance Shares or Performance Units shall
be payable. In addition, the Committee may, in its discretion, establish intermediate levels at
which given proportions of the Performance Shares or Performance Units shall be payable. Such
performance objectives shall not thereafter be changed except as set forth in Sections 2.5 and 2.6
and Article VII hereof.

     Section 2.3 Grants of Performance Shares and Performance Units.

     The Committee may select employees to become Participants subject to the provisions of Section
1.5 hereof and grant Performance Shares or Performance Units to such Participants at any time prior
to or during the first fiscal year of a Performance Period. Grants shall be deemed to have been
made as of the beginning of the first fiscal year of the Performance Period. 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 Section 2.7 hereof, a grant of Performance Shares or
Performance Units shall be effective for the entire applicable Performance Period and may not be
revoked. Each grant to a Participant shall be evidenced by a written instrument stating the number
of Performance Shares or Performance Units granted, the Performance Period, the performance
objective or objectives, the proportion of payments for performance between the minimum and full
performance levels, if any, the Restricted Periods and restrictions applicable to shares of Common
Stock receivable in payment for Performance Shares, and any other terms, conditions, and rights
with respect to such grant. At the time of any grant of Performance Shares, there shall be
reserved out of the number of shares of Common Stock authorized for distribution under the Plan a
number of shares equal to the number of Performance Shares so granted.

     Section 2.4 Rights and Benefits During Performance Period.

     The Committee may provide that, during a Performance Period, a Participant shall be paid cash
amounts, with respect to each Performance Share or Performance Unit held by such Participant, in
the same manner, at the same time, and in the same amount paid, as a dividend on a share of Common
Stock.

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     Section 2.5 Adjustment with respect to Performance Shares and Performance Units.

     Any other provision of the Plan to the contrary notwithstanding, the Committee may at any time
adjust performance objectives (up or down) and minimum or full performance levels (and any
intermediate levels and proportion of payments related thereto), adjust the way performance
objectives are measured, or shorten any Performance Period or Restricted Period, 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, or the
occurrence of other unusual, unforeseen, or extraordinary events, so warrant.

     Section 2.6 Payment of Performance Shares and Performance Units.

     Within 90 days after the end of any Performance Period, the Company shall determine the extent
to which performance objectives established by the Committee pursuant to Section 2.2 hereof for
such Performance Period have been met during such Performance Period and the resultant extent to
which Performance Shares or Performance Units granted for such Performance Period are payable.
Payment for Performance Shares and Performance Units shall be as follows:

     (a) Performance Shares:

          (i) If a Restricted Period has been established in relation to the Performance Shares:

               (A) At the end of the applicable Performance Period, one or more certificates
representing the number of shares of Common Stock equal to the number of Performance Shares payable
shall be held by the Company for the employee until the end of the Restricted Period.

               (B) At the end of the applicable Restricted Period, all restrictions applicable to
the
shares of Common Stock, and other securities or property received with respect to such shares, held
by the Company for the accounts of recipients of Performance Shares granted in relation to such
Restricted Period shall lapse, and one or more stock certificates for such shares of Common Stock
and securities, free of the restrictions, shall be delivered in book-entry or certificated form to
the Participant, or such shares and securities shall be credited to a brokerage account if the
Participant so directs, as soon as practicable but in no event later than 45 days after the end of
the Restricted Period, provided that, in the event that the end of the Restricted Period is fewer
than 45 days prior to the end of the Company’s fiscal year, the payment of the shares shall be made
in the first 45 days of the next succeeding fiscal year.

          (ii) If a Restricted Period has not been established in relation to the Performance
Shares, at the end of the applicable Performance Period, one or more

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stock certificates representing the number of shares of Common Stock equal to the number of
Performance Shares payable, free of restrictions, shall be registered in the name of the
Participant and delivered in book-entry or certificated form to the Participant, or such shares
shall be credited to a brokerage account if the Participant so directs , as soon as practicable but
in no event later than 45 days after the end of the Restricted Period, provided that, in the event
that the end of the Restricted Period is fewer than 45 days prior to the end of the Company’s
fiscal year, the payment of the shares shall be made in the first 45 days of the next succeeding
fiscal year.

     (b) Performance Units: At the end of the applicable Performance Period, a Participant shall
be paid a cash amount equal to the number of Performance Units payable, times the mean of the Fair
Market Value of Common Stock during the second calendar month following the end of the Performance
Period, as soon as practicable but in no event later than 45 days after the end of the Performance
Period, provided that, in the event that the end of the Performance Period is fewer than 45 days
prior to the end of the Company’s fiscal year, the payment shall be made in the first 45 days of
the next succeeding fiscal year, unless some other payment date or Restricted Period is established
by the Committee at the time of grant, in which case, payment to the Participant shall be made as
soon as practicable but in no event later than 45 days after the applicable date, provided that, in
the event that the applicable date is fewer than 45 days prior to the end of the Company’s fiscal
year, the payment shall be made in the first 45 days of next succeeding fiscal year.

     Section 2.7 Termination of Employment.

          Section 2.7 Termination of Employment.

          (a) Prior to the end of a Performance Period:

               (i) Death: If a Participant ceases to be an employee of the Company prior to the end
of a Performance Period by reason of death, any outstanding Performance Shares or Performance Units
with respect to such Participant shall become payable and be paid to such Participant’s beneficiary
or estate, as the case may be, as soon as practicable (subject to receipt of proper documentation)
in the manner set forth in Sections 2.6(a)(ii) and 2.6(b) hereof, respectively. In determining the
extent to which performance objectives established for such Performance Period have been met and
the resultant extent to which Performance Shares or Performance Units are payable, the Performance
Period shall be deemed to end as of the end of the fiscal year in which the Participant’s death
occurred, payment shall be made as soon as practicable (but in no event later than 45 days)
following the end of such fiscal year.

               (iii) Other Terminations: If a Participant ceases to be an employee prior to the end
of a Performance Period for any reason other than death, the Participant shall immediately forfeit
all Performance Shares and Performance Units previously granted under the Plan and all right to
receive any payment for such Performance Shares and Performance Units. The Committee may, however,
direct payment in accordance with

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the provisions of Section 2.6 hereof for a number of Performance Shares or Performance Units,
as it may determine, granted under the Plan to a Participant whose employment has so terminated
(but not exceeding the number of Performance Shares or Performance Units that could have been
payable had the Participant remained an employee) if it finds that the circumstances in the
particular case so warrant. For purposes of the preceding sentence, the Performance Period over
which performance objectives shall be measured shall be deemed to end as of the end of the fiscal
year in which termination occurred, and payment shall be made as soon as practicable (but in no
event later than 45 days) following the end of such fiscal year.

     (b) After the end of a Performance Period but prior to the end of a Restricted Period:

          (i) Death, Disability, or Retirement: If a Participant ceases to be an employee of the
Company by reason of death or in the case of the Disability or Retirement of a Participant, the
Restricted Period shall be deemed to have ended (subject, in the case of Retirement, to receipt of
appropriate documentation from the Participant regarding the Participant’s competitive status) and
shares held by the Company shall be paid as soon as practicable following the end of the Restricted
Period, in the manner set forth in Section 2.6(a)(i)(B).

          (ii) Other Terminations: Terminations of employment for any reason other than death
after the end of a Performance Period but prior to the end of a Restricted Period shall not have
any effect on the Restricted Period, unless the Committee, in its sole discretion, finds that the
circumstances so warrant and determines that the Restricted Period shall end on an earlier date as
determined by the Committee and that shares held by the Company shall be paid as soon as
practicable following such earlier date in the manner set forth in Section 2.6(a)(i)(B).

     (c) Except as otherwise provided in this Section 2.7, termination of employment after the end
of a Performance Period but before the payment of Performance Shares or Performance Units relating
to such Performance Period shall not affect the amount, if any, to be paid pursuant to Section 2.6
hereof. Approved leaves of absence of one year or less shall not be deemed to be terminations of
employment under this Section 2.7. Leaves of absence of more than one year will be deemed to be
terminations of employment under this Section 2.7, unless the Committee determines otherwise.

ARTICLE
III - PROVISIONS APPLICABLE TO RESTRICTED SHARES AND RESTRICTED UNITS.

     Section 3.1 Vesting Periods and Restricted Periods.

     The Committee shall establish one or more Vesting Periods applicable to Restricted Shares and
Restricted Units and one or more Restricted Periods applicable

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to Restricted Shares and Restricted Units, at its discretion. Each such Vesting Period shall have
a duration of not less than six (6) months, measured from the first day of the month in which the
grant of the applicable Restricted Shares or Restricted Units is effective. Each such Restricted
Period shall have a duration of six (6) or more consecutive months, measured from the first day of
the month in which the grant of the applicable Restricted Shares or Restricted Unit is effective,
but in no event shall any Restricted Period be of shorter duration than the Vesting Period
applicable to such Restricted Share or Restricted Unit.

     Section 3.2 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 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 Section 3.7 hereof, a grant of Restricted Shares or Restricted
Units shall be effective for the entire applicable Vesting and Restricted Periods and may not be
revoked. Each grant to a Participant shall be evidenced by a written instrument stating the number
of Restricted Shares or Restricted Units granted, the Vesting Period, the Restricted Period, the
restrictions applicable to such Restricted Shares or Restricted Units, the nature and terms of
payment of consideration, if any, and the consequences of forfeiture that will apply to such
Restricted Shares and Restricted Units, and any other terms, conditions, and rights with respect to
such grant.

     Section 3.3 Rights and Restrictions Governing 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 either in
his or her name or for his or her benefit either individually or collectively with others, 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, to
exercise Rights, and to vote such Common Stock and any securities issued upon exercise of Rights,
subject to the following restrictions: (a) the Participant shall not be entitled to delivery of
certificates representing such shares of Common Stock and any other such securities until the
expiration of the Restricted Period; (b) except as provided in Section 3.9, none of the Restricted
Shares may be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of during
the Restricted Period; and (c) all of the Restricted Shares shall be forfeited and all rights of
the Participant to such Restricted Shares shall terminate without further obligation on the part of
the Company unless the Participant remains in the continuous employment of the Company for the
entire Vesting Period in relation to which such Restricted Shares were granted, except as otherwise
provided in

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by Section 3.7 hereof. 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 3.4 Rights Governing Restricted Units.

     During the Vesting Period, or, if longer, the Restricted Period, for Restricted Units, a
Participant may be paid, with respect to each such Restricted Unit, cash amounts in the same
manner, at the same time, and in the same amount paid, as a dividend on a share of Common Stock.
Except as otherwise provided in Section 3.7 hereof, the Restricted Units shall be forfeited and all
rights of the Participant to the Restricted Units shall terminate without further obligation on the
part of the Company unless the Participant remains in the continuous employment of the Company for
the entire Vesting Period.

     Section 3.5 Adjustment with respect to Restricted Shares and Restricted Units.

     Any other provision of the Plan to the contrary notwithstanding, the Committee may at any time
shorten any Vesting Period or Restricted Period, 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, or the occurrence of other unusual,
unforeseen, or extraordinary events, so warrant.

     Section 3.6 Payment of Restricted Shares and Restricted Units.

     (a) Restricted Shares: At the end of the Vesting Period (or if longer, the Restricted
Period), all restrictions contained in the grant 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 3.6(c)), shall be delivered to the Participant or his or her
beneficiary or estate, as the case may be, free of restrictions, in book-entry or certificated
form or credited to a brokerage account as the Participant or his or her beneficiary or estate, as
the case may be, 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, or
his or her beneficiary or estate, as the case may be, either: (1) an amount in cash equal to the
Fair Market Value of one share of Common Stock on the last trading day of the Vesting Period (or,
if longer, the Restricted Period), or (2) one share of Common Stock for each Restricted Unit, net
of shares withheld by the Company pursuant to Section 3.6(c), free of restrictions. For Restricted
Units paid in Common Stock, the appropriate number of shares shall be delivered to the Participant
or his or her beneficiary or estate, as the case may be, in book-entry or certificated form or
credited to a brokerage account as the Participant or his or her beneficiary or

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estate, as the case may be, so directs, as soon as practicable but in no event later than 30 days
after the end of the Vesting or Restricted Period, provided that, in the event that the end of such
period is fewer than 10 days prior to the end of the Company’s fiscal year, the payment of the
shares shall be made in the first 10 days of the next succeeding fiscal year.

     Section 3.7 Termination of Employment.

     (a) Prior to the end of a Vesting Period:

          (i) Death: If a Participant ceases to be an employee of the Company prior to the end
of a Vesting Period by reason of death, all grants of Restricted Shares and Restricted Units
granted to such Participant are immediately payable in accordance with their terms (but in no event
later than 45 days after receipt of appropriate documentation).

          (ii) Disability or Retirement: The Disability or Retirement of a Participant shall not
constitute a termination of employment for purposes of this Article III and such Participant shall
not forfeit any Restricted Shares or Restricted Units held by him or her, provided that, during the
remainder of the applicable Vesting Period, such Participant does not engage in or assist any
business that the Committee, in its sole discretion, determines to be in competition with business
engaged in by the Company. A Participant who does engage in or assist any business that the
Committee, in its sole discretion, determines to be in competition with business engaged in by the
Company shall be deemed to have terminated employment subject to the receipt of appropriate
documentation from the Participant with respect to the Participant’s competitive status.

          (iii) Other Terminations: Except as otherwise provided herein, if a Participant ceases
to be an employee prior to the end of a Vesting Period for any reason other than death, the
Participant shall immediately forfeit all Restricted Shares and Restricted Units previously
granted, unless the Committee, in its sole discretion, finds that the circumstances in the
particular case so warrant and allows a Participant whose employment has so terminated to retain
any or all of the Restricted Shares or Restricted Units granted to such Participant.
Notwithstanding the foregoing, with respect to any Participant holding unvested Restricted Shares
and/or Restricted Units (x) whose employment is terminated because of a reduction in staff (coded
under termination code number 251 or such other code as may be equivalent to or substituted for
termination code number 251), and (y) who delivers to the Company and complies with a release of
claims he or she may have against the Company or any of its subsidiaries, which will include a
prohibition on solicitation of the Company’s employees and such other restrictions as the Company
may impose (a “Release”), then notwithstanding such termination, Restricted Shares and Restricted
Units granted to such Participant shall continue to vest during the Vesting Period and be
restricted during the Restricted Period for such grant; provided, however, that in
the event of the Employee’s death during the relevant Vesting or Restricted Periods the treatment of Restricted
Shares and

12

 

Restricted Units will be determined in accordance with the provisions of Section
3.7(a)(i);

     (b) After the end of a Vesting Period but prior to the end of a Restricted Period:

          (i) Death, Disability, or Retirement: If a Participant ceases to be an employee of the
Company by reason of death, or in the case of the Disability or Retirement of a Participant, prior
to the end of a Restricted Period, all Restricted Shares and Restricted Units granted to such
Participant are immediately payable in the manner set forth in Section 3.6.

          (ii) Other Terminations: Terminations of employment for any reason other than death
after the end of a Vesting Period but prior to the end of a Restricted Period shall not have any
effect on the Restricted Period, unless (A) the Restricted Period relates to Restricted Units that
have been further deferred in which case the Restricted Units shall be paid to the Participant, or
(B) the Committee, in its sole discretion, finds that the circumstances so warrant and determines
that the Restricted Period shall end on an earlier date as determined by the Committee and, in each
case, the applicable Restricted Shares or Restricted Units shall be paid as soon as practicable in
the manner set forth in Section 3.6.

Approved leaves of absence of one year or less shall not be deemed to be terminations of employment
under this Section 3.7. Leaves of absence of more than one year will be deemed to be terminations
of employment under this Section 3.7, unless the Committee determines otherwise.

     Section 3.8 Limitations on Transfer of Restricted Shares and Restricted Units.

     Restricted Shares and Restricted Units are not transferable by a Participant except by will or
the laws of descent and distribution or bequest; provided, however, that the Committee shall have
the authority, in its discretion, to grant (or to authorize) that Restricted Shares and Restricted
Units may be transferred by the Participant during his or her lifetime to any member of his or her
immediate family or to a trust, limited liability corporation, family limited partnership or other
equivalent vehicle, established for the exclusive benefit of one or more members of his or her
immediate family. A transfer of Restricted Shares or Restricted units will not be permitted unless
the Company has received evidence, to its satisfaction, that such transfer does not trigger income
or social security taxes or withholding requirements. A transfer of Restricted Shares or Restricted
Units may only be effected by the Company at the written request of a Participant and shall become
effective only when recorded in the Company’s record of outstanding Restricted Shares or Restricted
Units. In the event Restricted Shares or Restricted Units are transferred, such

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Restricted Shares
or Restricted Units may not be subsequently transferred by the transferee except by will or
the laws of descent and distribution. In the event Restricted Shares or Restricted Units are
transferred, such Restricted Shares or Restricted Units shall continue to be governed by and
subject to the terms and limitations of the Plan and the relevant grant and remain subject to
forfeiture in the event the Participant terminates his or her employment during the Vesting Period
as if no transfer had taken place. As used in this Section, “immediate family” shall mean, with
respect to any person, any child, stepchild or grandchild, and shall include relationships arising
from legal adoption.

ARTICLE
IV - PROVISIONS APPLICABLE TO STOCK OPTIONS.

     Section 4.1 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 shall be granted within 10 years of the earlier of the date the Plan is adopted by the
Board or approved by the stockholders. 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 also determine the number of shares of Common Stock to
be covered by each Stock Option. The Committee shall have the authority, in its discretion, to
grant “Incentive Stock Options” or “Nonqualified Stock Options,” or to grant both types of Stock
Options. Furthermore, the Committee may grant a Stock Appreciation Right in connection with a
Stock Option, as provided in Article V.

     Section 4.2 Option Documentation.

     Each Stock Option granted under the Plan shall be evidenced by written documentation
containing such terms and conditions as the Committee may deem appropriate and are not inconsistent
with the provisions of the Plan.

     Section 4.3 Exercise Price.

     The Committee shall establish the exercise price at the time any Stock Option is granted at
such amount as the Committee shall determine, except that such exercise price shall not be less
than 50% of the Fair Market Value of the underlying shares of Common Stock on the day a Stock
Option is granted and that, with respect to an Incentive Stock Option, such exercise price shall
not be less than 100% of the Fair Market Value of the underlying shares of Common Stock on the day
such Incentive Stock Option is granted. The exercise price will be subject to adjustment in
accordance with the provisions of Article VII of the Plan.

     Section 4.4 Exercise of Stock Options.

          (a) Vesting and Exercisability: Stock Options shall become exercisable at such times
and in such installments as the Committee may provide at the
time of grant. The Committee may also set a Vesting Period for grants of Stock Options. The

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Committee may also, in its sole discretion, accelerate the time at which a Stock Option or
installment may vest or become exercisable. A Stock Option may be exercised at any time from the
time first set by the Committee until the close of business on the expiration date of the Stock
Option.

          (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 10 years from the date of grant of such Stock Option.

          (c) Exercise in the Event of Termination of Employment:

     (i) Death: If a Participant ceases to be an employee of the Company by reason of
death prior to: (A) the end of a Vesting Period, (B) the exercise of or (C) or the expiration of
Stock Options granted to him or her that remain outstanding on the date of death, such Stock
Options may be exercised to the full extent not yet exercised, regardless of whether or not then
vested or fully exercisable under the terms of the grant or under the terms of Section 4.4(a)
hereof, by his or her estate, beneficiaries or transferees, as the case may be, at any time and
from time to time, but in no event after the expiration date of such Stock Option.

     (ii) Disability or Retirement: The Disability or Retirement of a Participant shall
not constitute a termination of employment for purposes of this Article IV, provided that following
Disability or Retirement such Participant does not engage in or assist any business that the
Committee, in its sole discretion, determines to be in competition with business engaged in by the
Company. A Participant who does engage in or assist any business that the Committee, in its sole
discretion, determines to be competition with business engaged in by the Company shall be deemed to
have terminated employment. In the case of Incentive Stock Options, Disability shall be as defined
in Code Section 22(e)(3).

     (iii) Other Terminations: Except as provided herein, if a Participant ceases to be an
employee for any reason other than death prior to: (a) the end of the Vesting Period, (b) the
exercise of, or (c) the expiration of a Stock Option, then all outstanding Stock Options granted to
such Participant, whether in his or her name or in the name of another person as a result of a
transfer in accordance with Section 4.4(d), shall expire and be forfeited on a date 30 days
following the date of such termination of employment. Notwithstanding the foregoing, with respect
to any Participant who holds unvested, unexercised non-qualified Stock Options (x) whose employment
is terminated because of a reduction in staff (coded under termination code number 251 or such
other code as may be equivalent to or substituted for termination code number 251), and (y) who
delivers to the Company and complies with a release of claims he or she may have against the
Company or any of its subsidiaries, which will include a prohibition on solicitation of the
Company’s employees and such other restrictions as the Company may impose (a “Release”), then,
notwithstanding such termination, all unvested, unexercised Stock Options shall continue to be and
become exercisable in
accordance with their terms until a date that is 30 days after the latest date on which any Stock

15

 

Options granted to such employee have become fully exercisable, but in no event later than the
original expiration date of such Stock Option, (the “Exercise End Date”), and may be exercised at
any time and from time to time during such period; provided however, that in the event of
the Employee’s death, during such period, the exercisability of Stock Options will be determined in
accordance with the provisions of Section 4.4(c)(i);

     In addition, if the Committee, in its sole discretion, finds that the circumstances in the
particular case so warrant, it may determine that the Participant, his or her transferee pursuant
to Section 4.4(d), or such transferee’s estate or beneficiaries, may exercise any such outstanding
Stock Option at any time and from time to time after such termination of employment, but in no
event after the expiration date of such Stock Option (the “Extended Period”).

     Approved leaves of absence of one year or less shall not be deemed to be terminations of
employment under this Section 4.4(c)(iii). Leaves of absence of more than one year shall be deemed
to be terminations of employment under this Section 4.4(c)(iii), unless the Committee determines
otherwise.

     (d) Limitations on Transferability: Stock Options are not transferable by a
Participant except by will or the laws of descent and distribution or bequest and are exercisable
during his or her lifetime only by him or her; provided, however, that the Committee shall have the
authority, in its discretion, to grant (or to authorize by amendment of an existing grant) Stock
Options that may be transferred by the Participant during his or her lifetime to any member of his
or her immediate family or to a trust, limited liability corporation, family limited partnership or
other equivalent vehicle, established for the exclusive benefit of one or more members of his or
her immediate family. A transfer of a Stock Option pursuant to this subparagraph may only be
effected by the Company at the written request of a Participant and shall become effective only
when recorded in the Company’s record of outstanding Stock Options. In the event a Stock Option is
transferred as contemplated in this subparagraph, such Stock Option may not be subsequently
transferred by the transferee except by will or the laws of descent and distribution. In the event
a Stock Option is transferred as contemplated in this subparagraph, such Stock Option shall
continue to be governed by and subject to the terms and limitations of the Plan and the relevant
grant, and the transferee shall be entitled to the same rights as the Participant under Articles
VII, VIII and X hereof, as if no transfer had taken place. As used in this subparagraph,
“immediate family” shall mean, with respect to any person, any child, stepchild or grandchild, and
shall include relationships arising from legal adoption.

     Section 4.5 Payment of Purchase Price and Tax Liability Upon Exercise; Delivery of
Shares. 

     (a) Payment of Purchase Price: The purchase price of the shares as to which a Stock
Option is exercised shall be paid to the Company at the time of exercise (i) in
cash, (ii) by delivering freely transferable shares of Common Stock already owned by

16

 

the person
exercising the Stock Option having a total real-time market price, at the time and on the date of
exercise, equal to the purchase 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, or social security taxes required 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 purchase price, 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 4.5(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.

     Section 4.6 Limitations on Shares of Common Stock Received upon Exercise of Stock
Options.

     The aggregate Fair Market Value (determined at the time an Incentive Stock Option is granted)
of the shares of Common Stock with respect to which an Incentive Stock Option is exercisable for
the first time by a Participant during any calendar year (under all plans of the Company) shall not
exceed $100,000 or such other limit as may be established from time to time under the Code.

     The maximum aggregate number of shares of Common Stock underlying stock options to be granted
in any one fiscal year to any individual executive officer, as such term is defined in the
regulations promulgated under Section 162(m) of the Internal Revenue Code, shall be 4,000,000 (four
million), which number shall be adjusted automatically to give effect to mergers, consolidations,
reorganizations, stock dividends, stock splits or combinations, reclassifications,
recapitalizations, or distributions to holders of Common Stock (other than cash dividends)
including, without limitation, a merger or other reorganization event in which the Common Stock
ceases to exist.

ARTICLE
V - PROVISIONS APPLICABLE TO STOCK APPRECIATION RIGHTS.

     Section 5.1 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

17

 

such factors as
level of responsibility, current and past performance, and performance potential. The Committee
shall have the authority to grant Stock Appreciation Rights in connection with a Stock Option or
independently. 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 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 therefor
an amount equal to the excess of the Fair Market Value of one share of the Common Stock on the day
preceding the surrender of such Stock Option over the Stock Option exercise price times the number
of shares 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 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 50% of the
Fair Market Value of one share of Common Stock on the date such Stock Appreciation Right was
granted. Stock Appreciation Rights are not transferable by a Participant except by will or the
laws of descent and distribution and are exercisable during his or her lifetime only by him or her.

Section 5.2 Stock Appreciation Rights Granted in Connection with Incentive Stock Options.

     (a) Stock Appreciation Rights granted in connection with Incentive Stock Options must expire
no later than the last date the underlying Incentive Stock Option can be exercised.

     (b) Such Stock Appreciation Rights may be granted for no more than 100% of the difference
between the exercise price of the underlying Incentive Stock Option and the Fair Market Value of
the Common Stock subject to the underlying Incentive Stock Option at the time the Stock
Appreciation Right is exercised.

     (c) Such Stock Appreciation Rights are transferable only to the extent and at the same time
and under the same conditions as the underlying Incentive Stock Options.

     (d) Such Stock Appreciation Rights may be exercised only when the underlying Incentive Stock
Options may be exercised.

     (e) Such Stock Appreciation Rights may be exercised only when the Fair Market Value of the
shares of Common Stock subject to the Incentive Stock Options exceeds the exercise price of the
Incentive Stock Options.

18

 

     Section 5.3 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, at the sole discretion
of the Committee.

     Section 5.4 Termination of Employment.

     (a) Death: If a Participant ceases to be an employee of the Company prior to the
exercise or expiration of a Stock Appreciation Right outstanding in his or her name on the date of
death, such Stock Appreciation Right may be exercised to the full extent not yet exercised,
regardless of whether or not then fully exercisable under the terms of the grant, by his or her
estate or beneficiaries, as the case may be, at any time and from time to time within l2 months
after the date of death but in no event after the expiration date of such Stock Appreciation Right.

     (b) Disability: The Disability of a Participant shall not constitute a termination of
employment for purposes of this Article IV, provided that following the Disability such Participant
does not engage in or assist any business that the Committee, in its sole discretion, determines to
be in competition with business engaged in by the Company. A Participant who does engage in or
assist any business that the Committee, in its sole discretion, determines to be in competition
with business engaged in by the Company shall be deemed to have terminated employment.

     (c) Retirement: The Retirement of a Participant shall not constitute a termination of
employment for purposes of this Article IV, provided that following Retirement such Participant
does not engage in or assist any business that the Committee, in its sole discretion, determines to
be in competition with business engaged in by the Company, and such Participant may exercise any
Stock Appreciation Right outstanding in his or her name at any time and from time to time within 5
years after the date his or her Retirement commenced but in no event after the expiration date of
such Stock Appreciation Right. A Participant who does engage in or assist any business that the
Committee, in its sole discretion, determines to be in competition with business engaged in by the
Company shall be deemed to have terminated employment.

     (d) Other Terminations: If a Participant ceases to be an employee prior to the
exercise or expiration of a Stock Appreciation Right for any reason other than death, all
outstanding Stock Appreciation Rights granted to such Participant shall expire on the date of such
termination of employment, unless the Committee, in its sole discretion, determines that he may
exercise any such outstanding Stock Appreciation Right (to the
extent that he was entitled to do so at the date of such termination of such employment) at any
time and from time to time within up to 5 years after such termination of employment but in no
event after the expiration date of such Stock Appreciation Right.

19

 

ARTICLE
VI - PROVISIONS APPLICABLE TO OTHER ML & CO. SECURITIES.

     Section 6.1 Grants of Other ML & Co. Securities.

     Subject to the provisions of the Plan and any necessary action by the Board of Directors, the
Committee may select employees to become Participants (subject to the provisions of Section 1.5
hereof) and grant to Participants Other ML & Co. Securities or the right or option to purchase
Other ML & Co. Securities on such terms and conditions as the Committee shall determine, including,
without limitation, the period such rights or options may be exercised, the nature and terms of
payment of consideration for such Other ML & Co. Securities, whether such Other ML & Co. Securities
shall be subject to any or all of the provisions of Article III of the Plan applicable to
Restricted Shares and/or Restricted Units, the consequences of termination of employment, and the
terms and conditions, if any, upon which such Other ML & Co. Securities may or must be repurchased
by the Company. 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. Each such Other ML & Co. Security shall
be issued at a price that will not exceed the Fair Market Value thereof on the date the
corresponding right or option is granted. Other ML & Co. Securities may bear interest or pay
dividends from such date and at a rate or rates or pursuant to a formula or formulas fixed by the
Committee or any necessary action of the Board. Any applicable conversion or exchange rate with
respect to Other ML & Co. Securities shall be fixed by, or pursuant to a formula determined by, the
Committee or any necessary action of the Board at each date of grant and may be predicated upon the
attainment of financial or other performance goals.

     Section 6.2 Terms and Conditions of Conversion or Exchange.

     Each Other ML & Co. Security may be convertible or exchangeable on such date and within such
period of time as the Committee, or the Board if necessary, determines at the time of grant. Other
ML & Co. Securities may be convertible into or exchangeable for (i) shares of Preferred Stock of ML
& Co. or (ii) other securities of ML & Co. or any present or future subsidiary of ML & Co., whether
or not convertible into shares of Common Stock, as the Committee, or the Board if necessary,
determines at the time of grant (or at any time prior to the conversion or exchange date).

ARTICLE
VII - 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 Performance Units, Restricted Units, Stock Options, Stock
Appreciation Rights, or Other ML & Co. Securities on
account of a merger, consolidation, reorganization, stock dividend, stock split or combination,
reclassification, recapitalization, or distribution to holders of shares of Common Stock (other
than cash dividends) including, without limitation, a merger or other reorganization event in which
the shares of Common Stock cease to exist, , then,

20

 

without any action by the Committee, appropriate
adjustments shall be made (1) the maximum number of shares of Common Stock available for
distribution under the Plan; (2) the number of shares subject to or reserved for issuance and
payable under outstanding Performance Share, Restricted Unit, Restricted Share, and Stock Option
grants. 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, distributions, or other unusual or extraordinary items have disproportionately and
materially affected the value of shares of Common Stock or Performance Units, Restricted Units,
Stock Options, Stock Appreciation Rights, or Other ML & Co. Securities, the Committee shall make
such adjustments, if any, that it may deem necessary or equitable in the performance objectives for
the Performance Periods not yet completed, including the minimum, intermediate, and full
performance levels and portion of payments related thereto; and any other terms or provisions of
any outstanding grants of Performance Shares, Performance Units, Restricted Shares, Restricted
Units, Stock Options, Stock Appreciation Rights, or Other ML & Co. Securities, in order to preserve
the full benefits of such grants for the Participants, taking into account inflation, interest
rates, and any other factors that the Committee, in its sole discretion, considers relevant. 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,
Performance Units, Restricted Units, Stock Options, Stock Appreciation Rights, or Other ML & Co.
Securities, such adjustment shall be made as may be deemed equitable by the Committee to give
proper effect to such event.

ARTICLE
VIII -  PAYMENTS UPON TERMINATION OF EMPLOYMENT AFTER A CHANGE IN CONTROL.

     Section 8.1 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, the Participant
shall be paid the value of his or her Performance Shares, Performance Units, Restricted Shares,
Restricted Units, Stock Options, Stock Appreciation Rights, and Other ML & Co. Securities in a lump
sum in cash, promptly after termination of his or her employment but, without limiting the
foregoing, in no event later than 45 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 until a date that is six months after the date of such
Participant’s termination. Payments shall be calculated as set forth below:

21

 

     (a) Performance Shares and Performance Units.

     Any payment for Performance Shares and Performance Units pursuant to this Section 8.1(a) shall
be calculated by applying performance objectives for any outstanding Performance Shares and
Performance Units as if the applicable Performance Period and any applicable Restricted Period had
ended on the first day of the month in which the Participant’s employment is terminated. The
amount of any payment to a Participant pursuant to this Section 8.1(a) shall be reduced by the
amount of any payment previously made to the Participant with respect to the Performance Shares and
Performance 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 Performance Shares and Performance Units payable pursuant to this
Section 8.1(a) shall be the amount equal to the number of Performance Shares and Performance Units
payable in accordance with the preceding sentence multiplied by the Fair Market Value of a share of
Common Stock on the day the Participant’s employment is terminated or, if higher, the highest Fair
Market Value of a share of the Common Stock on any day during the 90-day period ending on the date
of the Change in Control (the “Pre-CIC Value”).

     (b) Restricted Shares and Restricted Units.

     Any payment under this Section 8.1(b) 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 is terminated. The amount of any payment to a Participant pursuant to
this Section 8.1(b) 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 8.1(b) 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 or, if higher, the Pre-CIC Value.

     (c) Stock Options and Stock Appreciation Rights.

     Any payment for Stock Options and Stock Appreciation Rights pursuant to this Section 8.1(c)
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 8.1(c) 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

22

 

law. The value of the
Participant’s Stock Options and Stock Appreciation Rights payable pursuant to this Section 8.1(c)
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, or, if higher, the Pre-CIC Value, over the
per share exercise price for such Stock Option;

               (ii) in the case of a Stock Appreciation Right granted in tandem with a Stock
Option, the Fair Market Value of a share of Common Stock on the day the
Participant’s employment is terminated, or, if higher, the Pre-CIC Value, over the
Stock Option exercise price; and

               (iii) 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, or, if higher, the Pre-CIC Value, 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.

     (d) Other ML & Co. Securities.

     Any payment for Other ML & Co. Securities under this Section 8.1(d) shall be calculated as if
any relevant Vesting or Restricted Periods or other applicable conditions dependent on the passage
of time and relating to the exercisability of any right or option to purchase Other ML & Co.
Securities, or relating to the full and unconditional ownership of such Other ML & Co. Securities
themselves, had been met on the first day of the month in which the Participant’s employment is
terminated. The amount of any payment to a Participant pursuant to this Section 8.1(d) shall be
reduced by the amount of any payment previously made to the Participant with respect to the Other
ML & Co. Securities, 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 Other ML & Co. Securities payable pursuant to this
Section 8.1(d) shall be

               (i) in the case of an option or right to purchase such Other ML & Co.
Security,
for each underlying Other ML & Co. Security, the excess of the Fair Market Value of
such Other ML & Co. Security on the day the Participant’s employment is terminated,
or, if higher, the Pre-CIC Value, over the exercise price of such option or right;
and

               (ii) in the case of the Other ML & Co. Security itself (where there is no
outstanding option or right relating to such Other ML & Co. Security), the Fair
Market Value of the Other ML & Co. Security on the day the Participant’s employment
is terminated, or, if higher, the Pre-CIC Value.

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     Section 8.2 A Change in Control.

     A “Change in Control” shall mean a change in control of ML & Co. of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the
Company is then subject to such reporting requirement; provided, however, that,
without limitation, a Change in Control shall be deemed to have occurred if:

     (a) any individual, partnership, firm, corporation, association, trust, unincorporated
organization or other entity, or any syndicate or group deemed to be a person under Section
14(d)(2) of the Exchange Act, other than the Company’s employee stock ownership plan, is or becomes
the “beneficial owner” (as defined in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), directly or indirectly, of securities of ML & Co. representing 30% or more of the
combined voting power of ML & Co.’s then outstanding securities entitled to vote in the election of
directors of ML & Co.;

     (b) during any period of two consecutive years (not including any period prior to the
Effective Date of this Plan) individuals who at the beginning of such period constituted the Board
of Directors and any new directors, whose election by the Board of Directors or nomination for
election by the stockholders of ML & Co. was approved by a vote of at least three quarters of the
directors then still in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any reason to constitute
at least a majority thereof; or

     (c) all or substantially all of the assets of ML & Co. are liquidated or distributed.

     Section 8.3 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 8.2, 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 8.4 Termination for Cause.

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

24

 

     (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 has not
substantially performed his or her duties; or

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

     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.

     Notwithstanding the foregoing, the Participant shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to him or her a copy of a resolution duly
adopted by the affirmative vote of not less than three quarters of the entire membership of the
Board of Directors at a meeting of the Board called and held for such purpose (after reasonable
notice to the Participant and an opportunity for him or her, together with counsel, to be heard
before the Board of Directors), finding that, in the good faith opinion of the Board of Directors,
the Participant was guilty of conduct set forth above in clause (a) or (b) of the first sentence of
this Section 8.4 and specifying the particulars thereof in detail.

     Section 8.5 Good Reason.

     “Good Reason” shall mean the Participant’s termination of his or her employment with the
Company if, without the Participant’s written consent, any of the following circumstances shall
occur:

     (a) Inconsistent Duties. A meaningful and detrimental alteration in the Participant’s
position or in the nature or status of his or her responsibilities (including those as a director
of ML & Co., if any) from those in effect immediately prior to the Change in Control;

     (b) Reduced Salary or Bonus Opportunity. A reduction by the Company in the
Participant’s annual base salary as in effect immediately prior to the Change in Control; a failure
by the Company to increase the Participant’s salary at a rate commensurate with that of other key
executives of the Company; or a reduction in the Participant’s annual cash bonus below the greater
of (i) the annual cash bonus that he
received, or to which he was entitled, immediately prior to the Change in Control, or (ii) the
average annual cash bonus paid to the Participant by the Company for the three years preceding the
year in which the Change in Control occurs;

25

 

     (c) 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);

     (d) 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;

     (e) Benefits and Perquisites. The failure of the Company to continue to provide the
Participant with benefits at least as favorable 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;

     (f) 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

26

 

benefits as provided to him or
her by the Company immediately prior to the Change in Control.

     Section 8.6 Effect on Plan Provisions.

     In the event of a Change in Control, no changes in the Plan, or in any documents evidencing
grants of Performance Shares, Performance Units, Restricted Shares, Restricted Units, Stock
Options, Stock Appreciation Rights, or Other ML & Co. Securities 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 to this Article VIII, shares of Common
Stock that were reserved for issuance in connection with any Performance Shares, Restricted Shares,
Stock Options, or Other ML & Co. Securities 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 pursuant to Section 2.6(a)(i), 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.
If the Participant’s employment is terminated without Cause or for Good Reason after a Change in
Control, any election to defer payment for Performance Shares or Performance Units pursuant to
Section 2.8 hereof or Restricted Shares or Restricted Units pursuant to Section 3.8 hereof shall be
null and void.

ARTICLE
IX - MISCELLANEOUS.

     Section 9.1 Designation of Beneficiary.

          A Participant, or the transferee of a Restricted Share, Restricted Unit or Stock Option
pursuant to Sections 3.9 or 4.4(d), 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 to which he would be entitled under the Plan. 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 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 made under the Plan will apply to future grants unless
be changed or revoked by a Participant or transferee by filing a written or electronic notification
of such change or revocation with the Company. If a Participant or Stock Option transferee fails
to designate a beneficiary, then his or her estate shall be deemed to be his or her beneficiary.

27

 

     Section 9.2 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.

     Section 9.3 Nontransferability.

          Except as provided in Sections 3.9 and 4.4(d), a Participant’s rights under the Plan,
including the right to any amounts or shares payable, 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.

     Section 9.4 Withholding.

     The Company shall have the right, before any payment is made or a certificate for any shares
is delivered or any shares are credited to any brokerage account, to deduct or withhold from any
payment under the Plan any federal, state, local, social security or other taxes, including
transfer taxes, required 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 to be withheld.

     Section 9.5 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.

     Section 9.6 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.

28

 

     Section 9.7 Expenses.

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

     Section 9.8 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 9.9 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 Participants in the Plan and to conduct any such contest or any litigation
arising therefrom to a final decision.

ARTICLE
X - AMENDMENT AND TERMINATION.

     The Board of Directors or the Committee (but no other committee of the Board of Directors) may
modify, amend or terminate the Plan at any time, except that, to the extent then required by
applicable law, rule or regulation, approval of the holders of a majority of shares of Common Stock
represented in person or by proxy at a meeting of the stockholders will be required to increase the
maximum number of shares of Common Stock available for distribution under the Plan (other than
increases due to an adjustment in accordance with the Plan). No modification, amendment or
termination of the Plan shall have a material adverse effect on the rights of a Participant under a
grant previously made to him or her without the consent of such Participant.

ARTICLE
XI - INTERPRETATION.

     Section 11.1 Governmental and Other Regulations.

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

     Section 11.2 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.

29

 

ARTICLE
XII - EFFECTIVE DATE AND STOCKHOLDER APPROVAL.

     The Plan shall not be effective unless or until approved by a majority of the votes cast at a
duly held stockholders’ meeting at which a quorum representing a majority of all outstanding voting
stock is, either in person or by proxy present and voting on the Plan.

30EX-10.32

 

Exhibit 10.32

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.

1

 

     (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” shall mean, for any given date, except as otherwise provided by the
Committee, as of any given date, the average of the highest and lowest per-share sales prices for
the Shares during normal business hours on the New York Stock Exchange or if the Shares were not
traded on the New York Stock Exchange on such date, then on the next preceding date on which the
Shares were traded, all as reported by such source as the Committee may select.

     (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.

     (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

2

 

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 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

3

 

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

4

 

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
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

5

 

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 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

6

 

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 15 days prior to end of the calendar year, the
payment

7

 

of the shares shall be made within the first 30 days of the next succeeding fiscal year.

     (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.

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     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.

     (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.

9

 

     (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 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.

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     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.

11

 

     (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
	 
	 	(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

12

 

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
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)

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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

14

 

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;

     (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

15

 

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 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

16

 

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.

     Section 7.3 Designation of Beneficiary.

     A Participant, or the transferee of a Restricted Share, Restricted Unit or Stock

17

 

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.

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     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.

     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 &

19

 

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.

     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.

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     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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