Document:

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                                                                   Exhibit 10(s)

            AGREEMENT made this 1st day of May 2002 by and between EDO
Corporation, a New York Corporation having its office and principal place of
business at 60 East 42nd Street, Suite 5010, New York, NY 10165 (the "Company")
and Lisa M. Palumbo, who resides at 10 Kenilworth Road, Rye, NY 10580
("Executive").

                                W I T N E S E T H:

            WHEREAS, the Company considers it essential to the best interests of
the Company and its stockholders that its management (including Executive) be
encouraged to remain with the Company and to continue to devote full attention
to the Company's business in the event of a "Change in Control" (paragraph 9.1)
or a "Potential Change in Control" (paragraph 9.2).

            WHEREAS, the Company recognizes that the possibility of a Change in
Control or a Potential Change in Control and the uncertainty and questions,
which either event may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders;

            WHEREAS, the Company's Board of Directors (the "Board") has
determined that appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the Company's management to
their assigned duties without distraction in the face of the potentially
disturbing circumstances arising from a Change in Control or a Potential Change
in Control;

            WHEREAS, the Company believes Executive has made valuable
contributions to the productivity and profitability of the Company;

            WHEREAS, should a Potential Change in Control occur, the Board
believes it imperative that the Company and the Board be able to rely upon the
Executive to continue in his position, and that the Company be able to receive
and rely upon his advice as to the best interests of the Company and its
stockholders without concern that he might be distracted by the personal
uncertainties and risks created by such event; and

            WHEREAS, should a Potential Change in Control occur, in addition to
the Executive's regular duties, he may be called upon to assist in the
assessment of any proposals of any person concerning the possible business
combination of the Company or acquisition of equity securities of the Company,
advise management and the Board as to whether such proposals would be in the
best interests of the Company and its stockholders, and to take such other
actions as the Board might determine to be appropriate;

            NOW, THEREFORE, to induce the Executive to remain in the employ of
the Company so that the Company will have the continued undivided attention and
services of the Executive and the availability of his advice and counsel during
the period of a Change in Control or a Potential Change in Control, and for
other good and valuable consideration, the Company and Executive agree as
follows:
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                                     GENERAL

            1. The purpose of this Agreement is to provide Executive with
"Special Severance Pay Benefits" in the event of, or following, a Change In
Control. The term Change in Control is defined in paragraph 9.1 of this
Agreement. The benefits available to Executive in the event of, or following, a
Change in Control are provided for in Articles 2 through 7 of this Agreement.

            2. This Agreement shall expire as of December 31, 2003; provided
however, in the event there is an intervening Change in Control, such expiration
shall become void and of no effect whatsoever. In the event there is an
intervening Potential Change in Control, this Agreement shall remain in full
force and effect following such Potential Change in Control; provided, however,
this Agreement shall then expire automatically as of the date which is eighteen
months following the commencement of such Potential Change in Control in the
event no Change in Control occurs within such eighteen month period.

            3. This Agreement may be renewed each year by mutual consent of the
Company and Executive by the issuance of a letter of notification and agreement
to that effect.

                                    ARTICLE 1
                              PRINCIPAL UNDERTAKING

            1.1 If (a) following a Potential Change in Control (provided a
Change in Control occurs within eighteen months thereafter) or (b) within a one
and one-half (1-1/2) year period after a Change in Control shall have occurred,
Executive's employment shall have been terminated by the Company without "Cause"
(paragraph 10.2) or by Executive in a "Termination for Good Reason" (Article
11), then Executive shall be paid by the Company subject to Article 6, the
following "Special Severance Pay Benefits":

                  -     Current Salary and Other Compensation Benefits (Article
                        2);

                  -     Other Salary and Incentive Compensation Benefits
                        (Article 3);

                  -     Pension Benefit Adjustment (Article 4)

                  -     Stock Option Adjustment (Article 5); and

                  -     Tax Adjustment (Article 6).

            1.2 The total of the amounts to be paid under Articles 3 through 6,
subject to any taxes required to be withheld, shall be paid to Executive as
follows: (A) in a lump sum, on or before the fifth day following "Date of
Employment Termination" (paragraph 13.2); or (B) at Executive's option, in
monthly installments not to exceed an 18 month period, commencing the fifth day
of the month following the Date of Employment Termination, if written
notification by the Executive is received by the Company within three days
following the Date of Employment Termination.

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            1.3 The amount of any loan or advance to Executive shall be due and
payable as of the Date of Employment Termination. The Company shall have no
right of setoff against any amount due Executive under this Agreement, except
that the Company may set off against such amount the balance of any loan or
advance which remains unpaid after the third day following the Date of
Employment Termination.

                                    ARTICLE 2
                 CURRENT SALARY AND OTHER COMPENSATION BENEFITS

            Payment of this portion of Special Severance Pay Benefits shall
consist of the following:

                  -     Executive's full base salary through the Date of
                        Employment Termination, at the rate in effect ten (10)
                        days prior to the Date of Employment Termination; plus

                  -     Executive's full base salary earned from the beginning
                        of the calendar year in which the Date of Employment
                        Termination occurs through the Date of Employment
                        Termination multiplied by the greater of (a) twenty
                        percent (20%) or (b) the percentage which is equal to
                        the highest percentage of base salary paid as a bonus to
                        Executive for any of the three calendar years preceding
                        the calendar year in which the Date of Employment
                        Termination occurs, in either case, reduced by any
                        installment of cash bonus previously paid by the Company
                        to Executive for the calendar year in which the Date of
                        Employment Termination occurs, plus

                  -     The full amount, if any, of any incentive or special
                        award, which Executive earned but which, has not yet
                        been paid.

                                    ARTICLE 3
                OTHER SALARY AND INCENTIVE COMPENSATION BENEFITS

            Payment of this portion of Special Severance Pay Benefits shall
consist of an amount equal to one and one-half (1-1/2) times the sum of (a)
Executive's annual base salary, at the highest rate in effect at any time up to
Date of Employment Termination (the "Highest Base Salary") and (b) and amount
equal to the Highest Base Salary multiplied by the greater of (i) twenty percent
(20%) or (ii) the percentage which is equal to the highest percentage of base
salary paid as a bonus to Executive for any of the three calendar years
preceding the calendar year in which the Date of Employment Termination occurs.

                                    ARTICLE 4
                           PENSION ADJUSTMENT PAYMENT

            Payment of this portion of Special Severance Pay Benefits shall
consist of the following:

            -     An amount which, as of the Date of Employment Termination, is
                  equal to the present value (calculated at the GATT discount
                  rate in effect as of the Date of Employment Termination) of
                  (x) the Lump Sum Value of the Retirement Pension (paragraph
                  13.1) to which Executive would have been entitled if the one
                  and one-half (1-1/2) years after

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                  the Date of Employment Termination were added to his Credited
                  Service under the EDO Corporation Employees Pension Plan,
                  reduced by (y) the Lump Sum Value of the Retirement Pension to
                  which Executive will be entitled under the terms of such plan
                  based upon termination of employment as of the Date of
                  Employment Termination and assuming commencement of payment of
                  Executive's pension benefits at age 65.

                                    ARTICLE 5
                             STOCK OPTION ADJUSTMENT

            The "Stock Option Adjustment" portion of Special Severance Pay
Benefits shall be payable if, after a Change in Control, Executive elects,
pursuant to options issued to him under the 1996 or 2002 Long-Term Incentive
Plan or any predecessor or successor plans, to elect stock appreciation rights
and shall consist of an amount equal to (a) the number of common shares as to
which Executive shall have made such election, multiplied by (b) the excess, if
any, of (x) the highest price per share actually paid in connection with any
Change in Control, over (y) the fair market value of a common share on the date
of such election.

                                    ARTICLE 6
                                      TAXES

            6.1 In the event that any amount or benefit paid or distributed to
Executive pursuant to this Agreement, taken together with any amounts or
benefits otherwise paid or distributed to Executive by the Company or any
affiliated company (collectively, the "Covered Payments"), would be an "excess
parachute payment" as defined in Section 280G of the Code and would thereby
subject Executive to the tax (the "Excise Tax") imposed under Section 4999 of
the Code (or any similar tax that may hereafter be imposed), the provisions of
this Article 6 shall apply to determine the amounts payable to Executive
pursuant to this Agreement.

            6.2 Immediately following Date of Employment Termination, the
Company shall notify Executive of the aggregate present value of all termination
benefits to which he would be entitled under this Agreement and any other plan,
program or arrangement as of the projected date of termination, together with
the projected maximum payments, determined as of such projected date of
termination that could be paid without Executive being subject to the Excise
Tax.

            6.3 If the aggregate value of all compensation payments or benefits
to be paid or provided to Executive under this Agreement and any other plan,
agreement or arrangement with the Company is less than 105% of the amount which
can be paid to Executive without Executive incurring an Excise Tax, then the
amounts payable to Executive under this Agreement may, in the discretion of the
Company, be reduced but not below zero, the maximum amount which may be paid
hereunder without Executive becoming subject to such an Excise Tax (such reduced
payments to be referred to as the "Payment Cap"). In the event that Executive
receives reduced payments and benefits hereunder, Executive shall have the right
to designate which of the payments and benefits otherwise provided for in this
Agreement that he will receive in connection with the application of the Payment
Cap.

            6.4 If the aggregate value of all compensation payments or benefits
to be paid or provided to Executive under this Agreement and any other plan,
agreement or arrangement with

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the Company is greater than 105% of the amount which can be paid to Executive
without Executive incurring an Excise Tax, the Company shall pay to Executive
immediately following Executive's termination of employment an additional amount
(the "Tax Adjustment") such that the net amount retained by Executive with
respect to such Covered Payments, after deduction of any Excise Tax on the
Covered Payments and any federal, state and local income tax and Excise Tax on
the Tax Adjustment provided for by this Article 6, but before deduction for any
federal, state or local income or employment tax withholding on such Covered
Payments, shall be equal to the amount of Covered Payments.

            6.5 For purposes of determining whether any of the Covered Payments
will be subject to the Excise Tax, and the amount of such Excise Tax,

            (a) Such Covered Payments will be treated as "parachute payments"
within the meaning of Section 280G of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under Section 280G(b)(3) of the Code)
shall be treated as subject to the Excise Tax, unless and except to the extent
that, in the good faith judgment of the Company's independent certified public
accountants appointed prior to the Effective Date or tax counsel selected by
such Accountants (the "Accountants"), the Company has a reasonable basis to
conclude that such Covered Payments (in whole or in part) either do not
constitute "parachute payments" or represent reasonable compensation for person
services actually rendered (within the meaning of Section 280G(b)(4)(B) of the
Code) in excess of the "base amount," or such "parachute payments" are otherwise
not subject to such Excise Tax, and

            (b) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accountants in accordance with the principles
of Section 280G of the Code.

            6.6 For purposes of determining whether Executive would receive a
greater net after-tax benefit were the amounts payable under this Agreement
reduced in accordance with Paragraph 6.3, Executive shall be deemed to pay:

            (a) Federal income taxes at the highest applicable marginal rate of
federal income taxation for the calendar year in which the first amounts are to
be paid hereunder, and

            (b) Any applicable state and local income taxes at the highest
applicable marginal rate of taxation for such calendar year, net of the maximum
reduction in federal income taxes which could be obtained from the deduction of
such state or local taxes if paid in such year.

            6.7 If Executive receives reduced payments and benefits under this
Article 6, or this Article 6 is determined not to be applicable to Executive
because the Accountants conclude that Executive is not subject to any Excise
Tax, and in either case it is thereafter established pursuant to a final
determination of a court or an Internal Revenue Service proceeding (a "Final
Determination") that, notwithstanding the good faith or Executive and the
Company in applying the terms of this Agreement, the aggregate of the "parachute
payments" within the meaning of Section 280G of the Code paid to Executive or
for his benefit are in an amount that would result in Executive being subject to
an Excise Tax, then the amount equal to such excess parachute payments shall be
deemed for all purposes to be a loan to Executive made on the date of receipt of
such excess payments, which Executive shall have an obligation to repay to the
Company on demand, together with interest on such amount at the applicable
federal rate (as defined in

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Section 1274(d) of the Code) from the date of the payment hereunder to the date
of repayment by Executive. If this Article 6 is not applied to reduce
Executive's entitlements because the Accountants determine that Executive would
not receive a greater net-after-tax benefit by applying this Article 6 and it is
established pursuant to a Final Determination that, notwithstanding the good
faith of Executive and the Company in applying the terms of this Agreement,
Executive would have received a greater net-after-tax benefit by subjecting his
payments and benefits hereunder to the Payment Cap, then the aggregate
"parachute payments" paid to Executive or for his benefit in excess of the
Payment Cap shall be deemed for all purposes a loan to Executive made on the
date of receipt of such excess payments, which Executive shall have an
obligation to repay to the Company on demand, together with interest on such
amount at the applicable federal rate (as defined in Section 1274(d) of the
Code) from the date of the payment hereunder to the date of repayment by the
Executive. If Executive receives reduced payments and benefits by reason of this
Article 6 and it is established pursuant to a Final Determination that Executive
could have received a greater amount without exceeding the Payment Cap, then the
Company shall promptly thereafter pay Executive the aggregate additional amount
which could have been paid without exceeding the Payment Cap, together with
interest on such amount at the applicable federal rate (as defined in Section
1274(d) of the Code) from the original payment due date to the date of actual
payment by the Company.

            6.8 In the event that the Excise Tax is subsequently determined by
the Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to be less that the amount taken into account hereunder in
calculating the Tax Adjustment made, Executive shall repay to the Company, at
the time that the amount of such reduction in the Excise Tax is finally
determined, the portion of such prior Tax Adjustment that would not have been
paid if such Excise Tax had been applied in initially calculating such Tax
Adjustment, plus interest on the amount of such repayment at the rate provided
in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the
event any portion of the Tax Adjustment to be refunded to the Company has been
paid to any federal, state or local tax authority, repayment thereof shall not
be required until actual refund or credit of such portion has been made to
Executive, and interest payable to the Company shall not exceed interest
received or credited to Executive by such tax authority for the period it held
such portion. Executive and the Company shall mutually agree upon the course of
action to be pursued (and the method of allocating the expenses therof) if
Executive's good faith claim for refund or credit is denied.

            6.9 In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Tax Adjustment is made (including, but not limited to, by reason of any
payment the existence or amount of which cannot be determined at the time of the
Tax Adjustment), the Company shall make an additional Tax Adjustment in respect
of such excess (plus any interest or penalty payable with respect to such
excess) at the time that the amount of such excess is finally determined.

            6.10 Timing of Payment. Any Tax Adjustment (or portion thereof)
provided for in paragraph 6.4 above shall be paid to Executive not later than 10
business days following the payment of the Covered Payments; provided, however,
that if the amount of such Tax Adjustment (or portion thereof) cannot be finally
determined on or before the date on which payment is due, the Company shall pay
to Executive by such date an amount estimated in good faith by the Accountants
to be the minimum amount of such Tax Adjustment and shall pay the

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remainder of such Tax Adjustment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than 45 calendar days after payment of the
related Covered Payment. In the event that the amount of the estimated Tax
Adjustment exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to Executive, payable on the fifth
business day after written demand by the Company for payment (together with
interest at the arte provided in Section (1274(b)(2)(B) of the Code.)

                                    ARTICLE 7
                                  BENEFIT PLAN

            If (a) following a Potential Change in Control (provided a Change in
Control occurs within eighteen months thereafter) or (b) within a one and
one-half (1-1/2) year period after a Change In Control shall have occurred,
Executive's employment shall have terminated for any reason, including, but not
limited to, Termination for good Reason, except for death, voluntary retirement
or for cause, then, for one and one-half (1-1/2) years after the Date of
Employment Termination, the Company shall maintain in full force and effect and
Executive shall continue to participate in all group life, health and accident
and disability insurance, and other employee benefit plans, programs and
arrangements in which Executive was entitled to participate immediately prior to
the Date of Employment Termination, provided that continued participation is
possible under the general terms and provisions of such plans, programs and
arrangements. If participation is barred, or an applicable plan, program or
arrangement is discontinued or the benefits there under are materially reduced,
the Company shall arrange to provide Executive with benefits substantially
similar to those which he was entitled to receive immediately prior to the Date
of Employment Termination. At the end of the period of coverage above provided
for, Executive shall have the option to have assigned to him, at no cost and
with no apportionment of prepaid premiums, any assignable insurance owned by the
Company and relating specifically to him. The foregoing shall not be deemed to
apply to the EDO Corporation Employees Pension Plan, the EDO Corporation
Employee Stock ownership Plan nor the EDO Corporation Employee Investment Plan
(401(k)).

                                    ARTICLE 8
                             NO MITIGATION REQUIRED

            Executive shall not be required to mitigate the amount of any
payment or benefit provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment or benefit so provided for be
reduced by any compensation earned by him as the result of employment by another
employer after the Date of Employment Termination, or otherwise.

                                    ARTICLE 9
                        DEFINITION OF "CHANGE IN CONTROL"
                        AND "POTENTIAL CHANGE IN CONTROL"

            9.1  "Change in Control" shall mean an occurrence in which:

                  (i)   a "person" including a "group," other than the Company's
                        Employees Stock Ownership Trust (a "person"), becomes
                        the "beneficial owner"

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                        ("Beneficial Owner"), directly or indirectly, of
                        securities of the Company having 25% or more of the
                        total number of votes which may be cast for the election
                        of directors of the Company (as the term "persons",
                        "group" and "beneficial owner" are used in Sections
                        13(d)(3) and 14(d)(2) of the Securities Exchange Act of
                        1934), or

                  (ii)  during any period of two consecutive years, individuals
                        who at the beginning of such period constitute the Board
                        cease for any reason to constitute at least a majority
                        thereof unless the election, or the nomination for
                        election by the Company's shareholders, of each new
                        director was approved by a vote of at least two-thirds
                        of the directors then still in office who were directors
                        at the beginning of the period, or

                  (iii) the shareholders of the Company approve any merger or
                        other business combination, sale of assets or
                        combination of the foregoing transaction not involving
                        Executive in an interest other than in his capacity as
                        Executive.

            9.2 "Potential Change in Control" shall mean an occurrence in which:

                  (i)   a Person hereafter becomes the Beneficial Owner of
                        securities of the Company having at least 5% of the
                        total number of votes that may be cast for the election
                        of Directors of the Company, or

                  (ii)  any Person holds a 5% Beneficial ownership interest on
                        the date hereof and there occurs an increase in such
                        Person's Beneficial Ownership of such number of
                        securities of the Company as shall increase the
                        Beneficial ownership by such Person by an additional 1%
                        of the total number of votes that may be cast for the
                        election of directors of the Company, or

                  (iii) a Person commences a tender offer for at least 25% of
                        the outstanding shares of the Company's common stock, or

                  (iv)  approval of any corporate transaction is requested of
                        shareholders, which, if obtained, would result in a
                        Change in Control occurring, or

                  (v)   any Person solicits proxies for the election of
                        Directors of the Company, or

                  (vi)  the Board of Directors of the Company deems any other
                        event or occurrence to be a Potential Change in Control.

                                   ARTICLE 10
                              TERMINATION FOR CAUSE

            10.1 If the Executive's employment is terminated by the Company for
Cause, the Company shall pay the Executive his full base salary through the Date
of Termination (at the rate in effect as of the Date of Termination), and the
Company shall have no further obligations to the Executive under this Agreement.

            10.2 The following are the only reasons for which the Company may
terminate Executive's service for Cause without further obligations under this
Agreement:

                  -     for providing the Company with materially false reports
                        concerning Executive's business interests or
                        employment-related activities;

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                  -     for making materially false representations relied upon
                        by the Company in furnishing information to
                        shareholders, a stock exchange, or the Securities and
                        Exchange Commission;

                  -     for maintaining an undisclosed, unauthorized and
                        material conflict of interest in the discharge of duties
                        owed by Executive to the Company;

                  -     for misconduct causing a serious violation by the
                        Company of state or federal laws;

                  -     for theft of Company funds or corporate assets; or

                  -     for conviction of a crime (excluding traffic violations
                        or similar misdemeanors).

                                   ARTICLE 11
                   DEFINITION OF "TERMINATION FOR GOOD REASON"

            "Termination for Good Reason" shall mean termination of Executive's
employment by Executive following or in connection with:

            (i)   without the express advance written consent of Executive, (a)
                  the assignment to Executive of any duties inconsistent in any
                  substantial respect with the position, authority or
                  responsibilities of Executive immediately prior to the earlier
                  to occur of a Potential Change in Control or a Change in
                  Control or (b) any other substantial change in such position,
                  including titles, authority or responsibilities, or

            (ii)  during the one and one-half (1-1/2) year period following a
                  Change in Control or during a period of Potential Change in
                  Control, any reduction in Executive's salary or any reduction
                  in bonus or incentive compensation targets (based upon the
                  highest dollar amount or other rate of salary, bonus and
                  incentive compensation in effect at any time up to Date of
                  Employment Termination), a termination, reduction or
                  alteration of disability policies or life or disability
                  insurance benefits maintained for Executive, any alteration or
                  reduction of expense allowances or reimbursement policies or a
                  significant reduction in scope or value of the aggregate other
                  benefits to which Executive was entitled immediately prior to
                  the earlier to occur of a Potential Change in Control or a
                  Change in Control, or

            (iii) the Company's requiring Executive to be based at any office or
                  location more than 50 miles from the one where he worked
                  immediately prior to the earlier to occur of a Potential
                  Change in Control or a Change in Control, except for travel
                  reasonably required in the performance of Executives
                  responsibilities, or

            (iv)  any purported termination by the Company of Executive's
                  employment otherwise than as permitted by this Agreement, it
                  being understood that any such purported termination shall not
                  be effective for any purpose of this Agreement, or

            (v)   any failure by the Company to obtain the assumption and
                  agreement to perform this Agreement by a successor as
                  contemplated by paragraph 12.1.

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                                   ARTICLE 12
                     SPECIAL CORPORATE RELOCATION PROVISION

            12.1 In event that the Company should relocate its principal
Corporate office to a location more than 100 miles outside of the current New
York City (Manhattan) location, and the Executive is either not offered
relocation to the location or elects of her own accord to not relocate to the
new location, Executive shall be entitled to elect "Termination for Good Reason"
and receive separation pay equal to 36 months of salary in effect at the time of
separation, as well as the other benefits as stated specifically in this
agreement. This relocation provision does not require a Change-in-Control, nor
potential Change-in-Control to have occurred. It remains in effect in the event
of a change-in-control, however, the 36-month benefit is in place of the
18-month provision, not in addition to. All other benefits would remain in place
as stated.

                                   ARTICLE 13
                          SUCCESSORS, BINDING AGREEMENT

            12.1 The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle
Executive to compensation from the Company in the same amount and on the same
terms as Executive would be entitled hereunder if the Company had terminated
Executive's employment other than for Cause after a Change in Control occurring
at the time of succession, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Employment Termination.

            12.2 As used in this Agreement, "Company" shall include any
successor to this business and/or assets as aforesaid which executes and
delivers the agreement provided for in paragraph 12.1 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law.

            12.3 This Agreement shall inure to the benefit of, and be
enforceable by, Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributes, devisees and legatees. If
Executive should die while any amounts would still be payable if he had
continues to live, all such amounts shall be paid in accordance with the terms
of this Agreement to Executive's devisee, legatee, or other designee or, if
there be no such designee, to his estate.

                                   ARTICLE 14
                            MISCELLANEOUS PROVISIONS

            13.1 The Lump Sum Value of the Retirement Pension shall be
determined as of Executive's retirement at age 65, using the same methods and
assumptions used at the Date of Employment Termination for purposes of the EDO
Corporation Employees Pension Plan.

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            13.2 Date of Employment Termination is the earlier of the date on
which Executive or the Company gives written notice of termination of
Executive's employment to the other party after the earlier to occur of a
Potential Change in Control or a Change in Control.

            13.3 Notice and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notices to the Company shall be
directed to the attention of the corporate counsel, or to such other address as
either party may have furnished to the other in writing in accordance herewith.
Notices of change of address shall be effective only upon receipt.

            13.4 No provisions of this Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in writing
signed by Executive and, on behalf of the Company, by such officer as may be
specifically designated by the Board.

            13.5 All benefits provided for in this Agreement are provided on an
unfunded basis and are not intended to meet the qualification requirements of
Section 401 of the Code. The Company shall not be deemed to be a trustee of any
amounts to be paid under this Agreement and shall not be required to segregate
any assets with respect to benefits under this Agreement. Such benefits shall be
payable solely from the general assets of the Company.

            13.6 Any failure at any time of either party to enforce any
provision of this Agreement shall not constitute a waiver of such provision, or
prejudice the right of either party to enforce such provision at any subsequent
time.

            13.7 No agreements or representations, oral or otherwise, expressed
or implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.

            13.8 The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New York.

            13.9 The invalidity or unenforceability of any one or more
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

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            13.10 In the event of any action or proceeding between the parties
arising out of this agreement, the Company will pay the costs of any such legal
proceedings including, but not limited to, the costs of Executive for all
expenses, including attorneys' fees, incurred in such action or proceeding. Such
costs and expenses shall be advanced to Executive currently as reasonably
required to continue such action or proceeding.

                                     EDO Corporation

                                 By: /s/ JAMES M. SMITH
                                    --------------------
                                        President

                                       Executive:

                                   /s/ LISA M. PALUMBO
                                   --------------------
                                     Lisa M. Palumbo

                                       12DEFERRED COMPENSATION PLAN FOR S/G OF ELIGIBLE EMP

 

 

Exhibit 10.26

MERRILL LYNCH & CO., INC.

2003 DEFERRED COMPENSATION PLAN

FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES

 

DATED AS OF SEPTEMBER 9, 2002

 

 

TABLE OF CONTENTS

									
	GENERAL
		1.1 Purpose and Intent.
		1.2 Definitions.
	 ELIGIBILITY
		2.1 Eligible Employees.
			(a) General Rule.
			(b) Individuals First Employed During Election Year or Plan Year.
			(c) Disqualifying Factors.
	 DEFERRAL ELECTIONS; ACCOUNTS
		3.1 Deferral Elections.
			(a) Timing and Manner of Making of Elections.
			(b) Irrevocability of Deferral Election.
			(c) Application of Election.
		3.2 Crediting to Accounts.
			(a) Initial Deferrals.
			(b) Private Fund Return Options.
		3.3 Minimum Requirements for Deferral.
			(a) Minimum Requirements.
			(b) Failure to Meet Requirements.
		3.4 Return Options; Adjustment of Accounts.
			(a) Selection of Private Fund Return Options.
			(b) Selection of Mutual Fund Return Options.
			(c) Selection of the ML Ventures Leverage Percentage by Eligible Participants.
			(d) Adjustments of ML Ventures and other Private Fund Return Options.
			(e) Adjustment of Debit Balance.
			(f) Adjustment of Mutual Fund Return Balances.
			(g) Annual Charge.
			(h) Rollover Option.
		3.5 Rescission of Deferral Election.
			(a) Prior to December 1, 2002.
			(b) Adverse Tax Determination.
			(c) Rescission For Amounts Not Yet Earned.
	 STATUS OF DEFERRED AMOUNTS AND ACCOUNT
		4.1 No Trust or Fund Created; General Creditor Status.
		4.2 Non-Assignability.
		4.3 Effect of Deferral on Benefits Under Pension and Welfare Benefit Plans.
	PAYMENT OF ACCOUNT
		5.1 Manner of Payment.
			(a) Regular Payment Elections.
			(b) Modified Installment Payments.
			(c) Merrill Lynch’s Right to Alter Payment Date.
		5.2 Termination of Employment.
			(a) Death, Retirement, Rule of 45.
			 (b) Other Termination of Employment — Forfeiture of Leverage.
			(c) Leave of Absence, Transfer or Disability.
			(d) Discretion to Alter Payment Date.
		5.3 Withholding of Taxes.
		5.4 Beneficiary.
			(a) Designation of Beneficiary.
			(b) Change in Beneficiary.
			(c) Default Beneficiary.
			(d) If the Beneficiary Dies During Payment.
		5.5 Hardship Distributions.
		5.6 Domestic Relations Orders.
		5.7 No Actions Permitted that Would Cause Constructive Receipt
	 ADMINISTRATION OF THE PLAN
		6.1 Powers of the Administrator.
		6.2 Grantor Trust
		6.3 Payments on Behalf of an Incompetent.
		6.4 No Right of Set-Off.
		6.5 Corporate Books and Records Controlling.
	 MISCELLANEOUS PROVISIONS
		7.1 Litigation.
		7.2 Headings Are Not Controlling.
		7.3 Governing Law.
		7.4 Amendment and Termination.

 

MERRILL LYNCH & CO., INC.

2003 DEFERRED COMPENSATION PLAN

FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES

Table of Contents

	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 		 	 	 	 	Page
	 	 	 	 		 	 	 	 	

	 	I.	 	 	 	GENERAL
	 	 	1	 
	 	 	 	 	 	1.1	Purpose and Intent
	 	 	1	 
	 	 	 	 	 	1.2	Definitions
	 	 	1	 
	II.	 	 	ELIGIBILITY
	 	 	5	 
	 	 	 	 	 	2.1	Eligible Employees
	 	 	5	 
	 	 	 	 	 	 	(a) General Rule
	 	 	5	 
	 	 	 	 	 	 	(b) Individuals First Employed During Election Year or Plan Year
	 	 	6	 
	 	 	 	 	 	 	(c) Disqualifying Factors
	 	 	6	 
	III.	 	 	DEFERRAL ELECTIONS; ACCOUNTS
	 	 	6	 
	 	 	 	 	 	3.1	Deferral Elections
	 	 	6	 
	 	 	 	 	 	 	(a) Timing and Manner of Making of Elections
	 	 	6	 
	 	 	 	 	 	 	(b) Irrevocability of Deferral Election
	 	 	6	 
	 	 	 	 	 	 	(c) Application of Election
	 	 	6	 
	 	 	 	 	 	3.2	 Crediting to Accounts
	 	 	6	 
	 	 	 	 	 	 	(a) Initial Deferrals
	 	 	6	 
	 	 	 	 	 	 	(b) Private Fund Return Options
	 	 	7	 
	 	 	 	 	 	3.3	Minimum Requirements for Deferral
	 	 	7	 
	 	 	 	 	 	 	(a) Minimum Requirements
	 	 	7	 
	 	 	 	 	 	 	(b) Failure to Meet Requirements
	 	 	7	 
	 	 	 	 	 	3.4	Return Options; Adjustment of Accounts
	 	 	7	 
	 	 	 	 	 	 	(a) Selection of Private Fund Return Option
	 	 	7	 
	 	 	 	 	 	 	(b) Selection of Mutual Fund Return Options
	 	 	7	 
	 	 	 	 	 	 	(c) Selection of the ML Ventures Leverage Percentage
by Eligible Participants
	 	 	8	 
	 	 	 	 	 	 	(d) Adjustments of ML Ventures and Private Fund Return Options
	 	 	8	 
	 	 	 	 	 	 	(e) Adjustment of Debit Balance
	 	 	8	 
	 	 	 	 	 	 	(f) Adjustment of Mutual Fund Return Balances
	 	 	8	 
	 	 	 	 	 	 	(g) Annual Charge
	 	 	9	 
	 	 	 	 	 	 	(h) Rollover Option
	 	 	10	 
	 	 	 	 	 	3.5	Rescission of Deferral Election
	 	 	10	 
	 	 	 	 	 	 	(a) Prior to December 1, 2002
	 	 	10	 
	 	 	 	 	 	 	(b) Adverse Tax Determination
	 	 	10	 
	 	 	 	 	 	 	(c) Rescission For Amounts Not Yet Earned
	 	 	10	 
	IV.	 	 	STATUS OF DEFERRED AMOUNTS AND ACCOUNT
	 	 	11	 
	 	 	 	 	 	4.1	No Trust or Fund Created; General Creditor Status
	 	 	11	 
	 	 	 	 	 	4.2	Non-Assignability
	 	 	11	 
	 	 	 	 	 	4.3	Effect of Deferral on Benefits Under Pension and Welfare Benefit Plans
	 	 	11	 

-i-

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 	 	 	 	 	 	 	 	

	 	V.	 	 	PAYMENT OF ACCOUNT
	 	 	11	 
	 	 	 	 	5.1
	Manner of Payment	 	 	11	 
	 	 	 	 	 	(a)
	Regular Payment Elections	 	 	11	 
	 	 	 	 	 	(b)
	Modified Installment Payments	 	 	12	 
	 	 	 	 	 	(c)
	Merrill Lynch’s Right to Alter Payment Date	 	 	13	 
	 	 	 	 	5.2
	 Termination of Employment	 	 	13	 
	 	 	 	 	 	(a)
	Death, Retirement, Rule of 45	 	 	13	 
	 	 	 	 	 	(b)
	Other Termination of Employment — Forfeiture of Leverage	 	 	13	 
	 	 	 	 	 	(c)
	Leave of Absence, Transfer or Disability	 	 	14	 
	 	 	 	 	 	(d)
	Discretion to Alter Payment Date	 	 	14	 
	 	 	 	 	5.3
	Withholding of Taxes	 	 	14	 
	 	 	 	 	5.4
	Beneficiary	 	 	14	 
	 	 	 	 	 	(a)
	Designation of Beneficiary	 	 	14	 
	 	 	 	 	 	(b)
	Change in Beneficiary	 	 	14	 
	 	 	 	 	 	(c)
	Default Beneficiary	 	 	14	 
	 	 	 	 	 	(d)
	If the Beneficiary Dies During Payment	 	 	14	 
	 	 	 	 	5.5
	Hardship Distributions	 	 	15	 
	 	 	 	 	5.6
	Domestic Relations Orders	 	 	15	 
	 	 	 	 	5.7
	No Actions Permitted that Would Cause Constructive Receipt	 	 	15	 
	VI.	 	ADMINISTRATION OF THE PLAN
	 	 	15	 
	 	 	 	 	6.1
	 Powers of the Administrator	 	 	16	 
	 	 	 	 	6.2
	Grantor Trust	 	 	16	 
	 	 	 	 	6.3
	Payments on Behalf of an Incompetent	 	 	16	 
	 	 	 	 	6.4
	No Right of Set Off	 	 	16	 
	 	 	 	 	6.5
	 Corporate Books and Records Controlling	 	 	16	 
	VII.	 	MISCELLANEOUS PROVISIONS
	 	 	16	 
	 	 	 	 	7.1
	 Litigation	 	 	16	 
	 	 	 	 	7.2
	 Headings Are Not Controlling	 	 	17	 
	 	 	 	 	7.3
	 Governing Law	 	 	17	 
	 	 	 	 	7.4
	 Amendment and Termination	 	 	17	 

-ii-

 

MERRILL LYNCH & CO., INC.

2003 DEFERRED COMPENSATION PLAN

FOR A SELECT GROUP OF ELIGIBLE EMPLOYEES

ARTICLE I

GENERAL

1.1  Purpose and Intent.

        The purpose of the Plan is to encourage the employees who are integral
to the success of the business of the Company to continue their employment
by providing them with flexibility in meeting their future income needs.
This Plan is unfunded and maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees within the meaning of Title I of ERISA, and all
decisions concerning who is to be considered a member of that select group
and how this Plan shall be administered and interpreted shall be consistent
with this intention.

1.2  Definitions.

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

        “Account” means the notional account established on the books and
records of ML & Co. for each Participant to record the Participant’s
interest under the Plan.

        “Account Balance” means, as of any date, the Deferred Amounts credited
to a Participant’s Account, adjusted in accordance with Section 3.4 to
reflect the performance of the Participant’s Selected Benchmark Return
Options, the Annual Charge, the Debit Balance, (if any) any adjustments in
the event of a Capital Call Default, and any payments made from the Account
under Article V to the Participant prior to that date.

        “Adjusted Compensation” means the financial advisor incentive
compensation, account executive incentive compensation or estate planning
and business insurance specialist incentive compensation, in each case
exclusive of base salary, earned by a Participant during the Fiscal Year
ending in 2003, and payable after January 1, 2003, as a result of the
Participant’s production credit level, or such other similar items of
compensation as the Administrator shall designate as “Adjusted
Compensation” for purposes of this Plan.

        “Administrator” means the Head of Human Resources of ML & Co., or his
or her functional successor, or any other person or committee designated as
Administrator of the Plan by the Administrator or the MDCC.

        “Affiliate” means any corporation, partnership, or other organization
of which ML & Co. owns or controls, directly or indirectly, not less than
50% of the total combined voting power of all classes of stock or other
equity interests.

        “Annual Charge” means the charge to a Participant’s Account provided
for in Section 3.4(g).

        “Applicable Federal Rate” means the applicable federal rate for
short-term (0-3 years) obligations of the United States Treasury as
determined initially in the month of closing of ML Ventures and thereafter
in January of each subsequent year.

1

 

        “Available Balance” means amounts in a Participant’s Account that are
indexed to Benchmark Return Options with daily liquidity after the Account’s
Debit Balance has been reduced to zero.

        “Average Leveraged Principal Amount” means, for each Participant, for
any period, the sum of the Leveraged Principal Amounts outstanding at the
end of each day in the period divided by the number of days in such period.

        “Benchmark Return Options” means such investment vehicles as the
Administrator may from time to time designate for the purpose of indexing
Accounts hereunder. In the event a Benchmark Return Option ceases to exist
or is no longer to be a Benchmark Return Option, the Administrator may
designate a substitute Benchmark Return Option for such discontinued option.

        “Board of Directors” means the Board of Directors of ML & Co.

        “Capital Call” means the periodic demands for funds from a
Participant’s Account that will be equal to and occur simultaneously with
capital calls made by private equity funds (including ML Ventures) chosen as
a return option by the Participant.

        “Capital Call Default” means that there is an insufficient Liquid
Balance in the Participant’s Account to fund a Capital Call.

        “Capital Demand Default Adjustment” means the negative adjustment
described in Section 3.4 in the number of “units” (including units acquired
by “Leverage”) attributed to a Private Equity Fund Return Options that will
be the result of a Capital Call Default.

        “Cash Compensation” means (1) (for VICP eligible employees) salary in
the reference year plus VICP earned in the reference year and paid in
January or February of the next calendar year or (2) (for Financial Advisors
and other employees receiving Adjusted Compensation) base salary plus
Adjusted Compensation paid in the reference year.

        “Code” means the U.S. Internal Revenue Code of 1986, as amended from
time to time.

        “Company” means ML & Co. and all of its Affiliates.

        “Compensation” means, as relevant, a Participant’s Adjusted
Compensation, Variable Incentive Compensation and/or Sign-On Bonus, or such
other items or items of compensation as the Administrator, in his or her
sole discretion, may specify in a particular instance.

        “Debit Balance” means, as of any date, the dollar amount, if any,
representing each of: (1) the aggregate Annual Charge, accrued in accordance
with Section 3.4(g)(i); and (2) any Leveraged Principal Amount (together
with any pro rata Interest Amounts determined in accordance with Section
3.4(g)(ii), if applicable), as reduced by any distributions recorded from ML
Ventures Units recorded in a Participant’s Account in accordance with
Section 3.4(e).

        “Deferral Percentage” means the percentage (which, unless the
Administrator, in his or her sole discretion, determines otherwise, shall be
in whole percentage increments and not more than 90%) specified by the
Participant to be the percentage of each payment of Compensation he or she
wishes to defer under the Plan.

        “Deferred Amounts” means, except as provided in Section 5.6, the
amounts of Compensation actually deferred by the Participant under this
Plan.

2

 

        “Election Year” means the 2002 calendar year.

        “Eligible Compensation” means (1) for persons eligible for the Variable
Incentive Compensation Program or other similar programs: (A) a
Participant’s 2001 base earnings plus (B) any cash bonus awarded in early
2002, and (2) for persons ineligible for such bonus programs, a
Participant’s 2001 Adjusted Compensation.

        “Eligible Employee” means an employee eligible to defer amounts under
this Plan, as determined under Section 2.1 hereof.

        “ERISA” means the U.S. Employee Retirement Income Security Act of 1974,
as amended from time to time.

        “Fiscal Month” means the monthly period used by ML & Co. for financial
accounting purposes.

        “Fiscal Year” means the annual period used by ML & Co. for financial
accounting purposes.

        “Full-Time Domestic Employee” means a full-time employee of the Company
paid from the Company’s domestic based payroll (other than any U.S. citizen
or “green card” holder who is employed outside the United States).

        “Full-Time Expatriate Employee” means a U.S. citizen or “green card”
holder employed by the Company outside the United States and selected by the
Administrator as eligible to participate in the Plan (subject to the other
eligibility criteria).

        “Initial Leveraged Amount” means the initial dollar amount by which a
Participant’s deferral into ML Ventures Units is leveraged as determined in
accordance with Section 3.4(c).

        “Interest” means the hypothetical interest accruing on a Participant’s
Average Leveraged Principal Amount at the Applicable Federal Rate.

        “Interest Amounts” means, for any Participant, as of any date, the
amount of Interest that has accrued to such date on such Participant’s
Average Leveraged Principal Amount, from the date on which a Participant’s
Leveraged Principal Amount is established, or from the most recent date that
Interest Amounts were added to the Leveraged Principal Amount.

        “Leveraged or Unleveraged Distributions” means the distributions to a
Participant’s Account attributable to the leveraged or unleveraged portion
(as the case may be) of a Participant’s ML Ventures Units.

        “Leverage-Eligible Participants” means persons who (1) are accredited
investors within the meaning of the Securities Act of 1933, and (2) received
Cash Compensation of at least $300,000 in 2001, and (3) received Cash
Compensation of at least $200,000 in 2000 and otherwise qualify, in
accordance with standards determined by the Administrator, to select a ML
Ventures Return Option on a leverage basis.

        “Leveraged Principal Amount” means a Participant’s Initial Leveraged
Amount, if any, as adjusted to reflect the addition of Interest Amounts (or
any pro rata Interest Amounts).

        “Leverage Percentage” means the percentage of leverage chosen by a
Leverage-Eligible Participant, which percentage shall not exceed 200%.

3

 

        “Liquid Balance” means, as of any date, the Deferred Amounts credited
to a Participant’s Account, not including amounts that represent future
commitments to Private Equity Funds, including ML Ventures, adjusted (either
up or down) to reflect: (1) the performance of the Participant’s Mutual Fund
Return Balances as provided in Section 3.4(f); (2) distributions with
respect to ML Ventures Units made in accordance with Section 3.4(d); (3)
reduction of any Debit Balance as provided in Section 3.4(e); and (4) any
payments to the Participant under Article V hereof.

        “Maximum Deferral” means the whole dollar amount specified by the
Participant to be the amount of Compensation he or she elects to be deferred
under the Plan.

        “MDCC” means the Management Development and Compensation Committee of
the Board of Directors.

        “ML & Co.” means Merrill Lynch & Co., Inc.

        “ML Ventures Return Option” means the option of indexing returns
hereunder to the performance of a ML Ventures limited partnership, on a
leveraged or unleveraged basis.

        “ML Ventures Units” means the record-keeping units credited to the
Accounts of Participants who have chosen the ML Ventures Return Option.

        “Mutual Fund Return Options” means the mutual funds chosen as Benchmark
Return Options by the Administrator.

        “Net Asset Value” means, with respect to each Benchmark Return Option
that is a mutual fund or other commingled investment vehicle for which such
values are determined in the normal course of business, the net asset value,
on the date in question, of the vehicle for which such value is being
determined.

        “Participant” means an Eligible Employee who has elected to defer
Compensation under the Plan.

        “Plan” means this Merrill Lynch & Co., Inc. 2003 Deferred Compensation
Plan for a Select Group of Eligible Employees.

        “Plan Year” means the Fiscal Year ending in 2003.

        “Private Fund Return Option(s)” means one or more private funds that
are chosen by the Administrator to be offered – with such limitations as may
be required – to eligible Participants as Benchmark Return Options.

        “Private Fund Unit(s)” means the record-keeping units credited to the
Accounts of Participants who have chosen one or more Private Fund Return
Options.

        “Retirement” means a Participant’s (i) termination of employment with
the Company for reasons other than for cause on or after the Participant’s
65th birthday, or (ii) resignation on or after the Participant’s 55th
birthday if the Participant has at least 10 years of service, or (iii)
resignation at any age with the express approval of the Administrator, which
will be granted only if the termination is found by the Administrator to be
in, or not contrary to, the best interests of the Company.

4

 

        “Rule of 45” means a Participant’s termination of employment with the
Company for reasons other than cause (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, a
Participant shall not qualify for the Rule of 45 if he or she engages in a
business which the Administrator, in his or her sole discretion, determines
to be in competition with the business of the Company.

        “Remaining Deferred Amounts” means the product of a Participant’s
Deferred Amounts times a fraction equal to the number of remaining
installment payments divided by the total number of installment payments.

        “Selected Benchmark Return Option” means a Benchmark Return Option
selected by the Participant in accordance with Section 3.4.

        “Sign-On Bonus” means a single-sum amount paid or payable to a new
Eligible Employee during the Plan Year upon commencement of employment, in
addition to base pay and other Compensation, to induce him or her to become
an employee of the Company, or any similar item of compensation as the
Administrator shall designate as “Sign-On Bonus” for purposes of this Plan.

        “Undistributed Deferred Amounts” means, as of any date on which the
Annual Charge is determined, a Participant’s Deferred Amounts (exclusive of
any appreciation or depreciation) minus, for each distribution to a
Participant prior to such date, an amount equal to the product of the
Deferred Amounts and a fraction the numerator of which is the amount of such
distribution and the denominator of which is the combined Net Asset Value
(prior to distribution) of the Participant’s Account as of the date of the
relevant distribution.

        “Variable Incentive Compensation” means the variable incentive
compensation or office manager incentive compensation that is paid in cash
to certain employees of the Company generally in January or February of the
Plan Year with respect to the prior Fiscal Year, which for purposes of this
Plan is considered earned during the Plan Year regardless of when it is
actually paid to the Participant, or such other similar items of
compensation as the Administrator shall designate as “Variable Incentive
Compensation” for purposes of this Plan.

        “401(k) Plan” means the Merrill Lynch & Co., Inc. 401(k) Savings &
Investment Plan.

ARTICLE II

ELIGIBILITY

2.1  Eligible Employees.

        (a)        General
Rule.  An individual is an Eligible Employee if he or she
(i) is a Full-Time Domestic Employee or a Full-Time Expatriate Employee,
(ii) has at least $300,000 of Eligible Compensation for the year prior to
the Election Year, and (iii) has attained the title of Vice President or
higher.

5

 

        (b)        Individuals
First Employed During Election Year or Plan Year.  
Subject to the approval of the Administrator in his or her sole discretion,
an individual who is first employed by the Company during the Election Year
or the Plan Year is an Eligible Employee if his or her Eligible
Compensation, together, if applicable, with the amount of any Variable
Incentive Compensation that will be payable to such individual in the next
annual bonus cycle pursuant to a written bonus guarantee, is greater than
$300,000, and he or she is employed as or is to be nominated for the title
of Vice President or higher at the first opportunity following his or her
commencement of employment with the Company.

        (c)        Disqualifying
Factors.  An individual shall not be an Eligible
Employee if either (i) as of the deadline for submission of elections
specified in Section 3.1(a), the individual’s wages have been attached or
are being garnished or are otherwise restrained pursuant to legal process,
or (ii) within 13 months prior to the deadline for submission of elections
specified in Section 3.1(a), the individual has made a hardship withdrawal
of Elective 401(k) Deferrals as defined under the
401(k) Plan.

ARTICLE III

DEFERRAL ELECTIONS; ACCOUNTS

3.1  Deferral Elections.

         (a)        Timing
and Manner of Making of Elections.  An election to defer
Compensation for payment in accordance with Article V shall be made by
submitting to the Administrator such forms as the Administrator may
prescribe in whatever manner that the Administrator directs. Each election
submitted must specify a Maximum Deferral and a Deferral Percentage with
respect to each category of Compensation to be deferred. All elections by a
Participant to defer Compensation under the Plan must be received by the
Administrator or such person as he or she may designate for the purpose by
no later than September 30 of the Election Year (or such later date as the
Administrator, in his or her sole discretion, may specify in any particular
instance) or, in the event such date is not a business day, the immediately
preceding business day; provided, however, that the Eligible Employee’s
election to defer a Sign-On Bonus must be part of such Eligible Employee’s
terms and conditions of employment agreed to prior to the Eligible
Employee’s first day of employment with the Company.

        (b)        Irrevocability
of Deferral Election.  Except as provided in
Sections 3.5 and 5.5, an election to defer the receipt of any Compensation
made under Section 3.1(a) is irrevocable once submitted to the Administrator
or his or her designee. The Administrator’s acceptance of an election to
defer Compensation shall not, however, affect the contingent nature of such
Compensation under the plan or program under which such Compensation is
payable.

        (c)        Application
of Election.  The Participant’s Deferral Percentage
will be applied to each payment of Compensation to which the Participant’s
deferral election applies, provided that the aggregate of the Participant’s
Deferred Amounts shall not exceed the Participant’s Maximum Deferral. If a
Participant has made deferral elections with respect to more than one
category of Compensation, this Section 3.1(c) shall be applied separately
with respect to each such category.

3.2  Crediting to Accounts.

        (a)        Initial
Deferrals.  A Participant’s Deferred Amounts will be
credited to the Participant’s Account as soon as practicable (but in no
event later than the end of the following month) after the last day of the
Fiscal Month during which such Deferred Amounts would, but for deferral,
have been paid and will be accounted for in accordance with Section 3.4. No
interest will accrue, nor will any adjustment be made to an Account, for the
period until the Deferred Amounts are credited.

6

 

        (b)        Private Fund Return Options. Upon the closing of any Private Return
Option, a Participant’s Account will be credited with a number of units
determined by dividing by $1,000 the sum of the following: (1) the portion
of the Account Balance that the Participant has elected to allocate to the
Private Return Option, as of the day prior to the closing date; and (in the case of ML Ventures only) (2) the
Participant’s Initial Leveraged Amount (computed in accordance with Section
3.4(c)).

3.3  Minimum Requirements for Deferral.

        (a)        Minimum Requirements. Notwithstanding any other provision of this
Plan, no deferral will be effected under this Plan with respect to a
Participant if:

	        (i)	 	the Participant is not an Eligible Employee as of
December 31, 2002,
	 
	        (ii)	 	the Participant’s election as applied to the
Participant’s Variable Incentive Compensation (determined by
substituting the Election Year for the Plan Year) or Adjusted
Compensation (determined by substituting the Fiscal Year
immediately prior to the Fiscal Year ending in the Election
Year for the Fiscal Year ending in the Plan Year) would have
resulted in an annual deferral of less than $15,000, or
	 
	        (iii)	 	the greater of (A) the sum of (1) the “Medicare
wages” amount listed on the Participant’s W-2 form for the
Plan Year, and (2) any Compensation that is accelerated which
the Participant may receive in December of the Election Year
which would have been payable in the Plan Year in the absence
of the action of the Company to accelerate the payment, or (B)
the Participant’s Eligible Compensation for the Plan Year, is
less than $250,000;

provided, that any Participant who first becomes an employee of the Company
during the Plan Year shall not be required to satisfy conditions (i) and
(ii). Condition (ii) does not require a Participant’s elections to result
in an actual deferral of at least $15,000.

        (b)        Failure to Meet Requirements. If the requirements of Section
3.3(a)(i) or (ii) are not met by a Participant to whom such requirements
are applicable, such Participant’s Deferred Amounts, if any, will be paid
to such Participant, without adjustment to reflect the performance of any
Selected Benchmark Return Option, as soon as practicable after it has been
determined that the requirements have not been met. If the requirements of
Section 3.3(a)(iii) are not met by a Participant, the greater of such
Participant’s Deferred Amounts or Account Balance will be paid to such
Participant as soon as practicable after it has been determined that the
requirements have not been met.

3.4  Return Options; Adjustment of Accounts.

        (a)        Selection of Private Fund Return Options. In any year that a
Private Fund partnership is offered as a return option, eligible
Participants may select the Private Fund Return Option, provided that the
selection that Merrill Lynch will have the discretion to alter the
Participant’s payout elections if this option is chosen. Participants
should be aware that once the closing of the relevant fund has occurred,
Participants will not be able to change their elections. Participants
should also be aware that in the event of a Capital Call Default, for
certain Private Equity Funds, they may be penalized by having their Accounts
adjusted downward in accordance with Section 3.4 (d).

        (b)        Selection of Mutual Fund Return Options. Coincident with the
Participant’s election to defer Compensation, the Participant must select
the percentage of the Participant’s Account to be adjusted to reflect the
performance of Mutual Fund Return Options, for use when a Participant’s

7

 

Account has a Liquid Balance. All elections shall be in multiples of 1%. A
Participant may, by complying with such procedures as the Administrator may
prescribe on a uniform and nondiscriminatory basis, including procedures
specifying the frequency with respect to which such changes may be effected
(but not more than 12 times in any calendar year), change the Selected
Benchmark Return Options to be applicable with respect to his or her
Account.

        (c)        Selection of the ML Ventures Leverage Percentage by Eligible
Participants. Prior to the closing of the offering of an ML Ventures
partnership, Leverage-Eligible Participants who select the ML Ventures
Return Option on a leveraged basis must choose their Leverage Percentage,
in accordance with standards determined by the Administrator, by submitting
such forms as the Administrator shall prescribe. Prior to the closing of
an ML Ventures partnership, the Administrator will determine each
Leverage-Eligible Participant’s Initial Leveraged Amount by applying such
Participant’s Leverage Percentage to the dollar value of the portion of the
Participant’s Account Balance allocated to the ML Ventures Return Option.
The Initial Leveraged Amount will be recorded as the Leveraged Principal
Amount, to which amount Interest Amounts will be added annually in
accordance with Section 3.4(e).

        (d)     Adjustments of ML Ventures and other Private Fund Return Options.

	        (i)	 	Whenever a distribution is paid on an actual unit of an
ML Ventures partnership or other Private Fund Return Option, an
amount equal to such per unit distribution times the number of
units in the Participant’s Account will first be applied against
any Debit Balance, as provided in Section 3.4(e), and then, if
any portion of such distribution remains after the Debit Balance
is reduced to zero, be credited to the Participant’s Account to
be indexed initially to ML Retirement Reserves and then to the
Mutual Fund Return Option(s) chosen by the Participant.
	 
	        (ii)	 	In the event of a Capital Call Default, a Participant’s
notional investment in the relevant fund will be capped. If this
occurs, the number of units represented by the return option
(including, in the case of ML Ventures, any leveraged units) will
be adjusted downward to reflect a smaller investment and
resulting lower leverage.
	 
	        (iii)	 	The ML Ventures Units and the Debit Balance will also be
adjusted in accordance with Section 5.2 hereof in the event of a
Participant’s termination.

        (e)        Adjustment of Debit Balance. Any Debit Balance shall be reduced as
soon as possible by any distributions relating to ML Ventures Units.
Reductions of the Debit Balance, as provided in the foregoing sentence,
shall be applied first to reduce the Debit Balance attributable to accrued
Annual Charges and then, after all such accrued Annual Charges have been
satisfied, to reduce any Leveraged Principal Amount. As of the last day of
each Fiscal Year, Interest Amounts computed by the Administrator shall be
added to the Leveraged Principal Amount. If on any date the Leveraged
Principal Amount would be discharged completely as a result of distributions
or chargeoffs, Interest Amounts will be computed though such date and added
to the Leveraged Principal Amount as of such date.

        (f)        Adjustment of Mutual Fund Return Balances. While the
Participant’s Balances do not represent the Participant’s ownership of, or
any ownership interest in, any particular assets, the Balances attributable
to Mutual Fund Return Options shall be adjusted to reflect credits or
debits relating to distributions from any Private Fund Return Options or
chargeoffs against the Debit Balance and to reflect the investment
experience of the Participant’s Mutual Fund Return Options in the same
manner as if investments or dispositions in accordance with the
Participant’s elections had actually been made through the ML Benefit
Services Platform and ML II Core Recordkeeping System, or any

8

 

successor system used for keeping records of Participants’ Accounts (the “ML II
System”). In adjusting Accounts, the Participant will give instructions to
the ML Benefit Services Platform which will be reflected as credits or
debits as of the weekly processing of such instructions through the ML II
System. This processing shall control the timing and pricing of the
notional investments in the Participant’s Mutual Fund Return Options in
accordance with the rules of operation of the ML II System and its
requirements for placing corresponding investment orders, as if orders to
make corresponding investments or dispositions were actually to be made on
the transaction processing date. In connection with the crediting of
Deferred Amounts or distributions to the Participant’s Account and
distributions from or debits to the Account, appropriate deferral
allocation instructions shall be treated as received from the Participant
prior to the close of transactions through the ML II System on the relevant
transaction processing date. Each Mutual Fund Return Option shall be
valued using the Net Asset Value of the Mutual Fund Return Option as of the
relevant transaction processing date; provided, that, in valuing a Mutual
Fund Return Option for which a Net Asset Value is not computed, the value
of the security involved for determining Participants’ rights under the
Plan shall be the price reported for actual transactions in that security
through the ML II System on the relevant transaction processing date,
without giving effect to any transaction charges or costs associated with
such transactions; provided, further, that, if there are no such
transactions effected through the ML II System on the relevant day, the
value of the security shall be:

	 	 (i)	 	if the security is listed for trading on one or more
national securities exchanges, the average of the high and low
sale prices for that day on the principal exchange for such
security, or if such security is not traded on such principal
exchange on that day, the average of the high and low sales
prices on such exchange on the first day prior thereto on which
such security was so traded;
	 
	 	 (ii)	 	if the security is not listed for trading on a national
securities exchange but is traded in the over-the-counter
market, the average of the highest and lowest bid prices for
such security on the relevant day; or
	 
	 	 (iii)	 	if neither clause (i) nor (ii) applies, the value
determined by the Administrator by whatever means he or she considers
appropriate in his or her sole discretion.

All debits and charges against the
Account shall be applied as a pro rata
reduction of the portion of the Account Balance indexed to each of the
Participant’s Mutual Fund Return Options.

      (g)        Annual Charge. As of the last day of each Fiscal Year or such
earlier day in December as the Administrator shall determine, an Annual
Charge of 2.0% of the Participant’s Deferred Amounts (exclusive of any
appreciation or depreciation determined under Section 3.4 (f)) shall be
applied to reduce the Account Balance.

	 	 (i)	 	In the event that all or any portion of the Account
Balance is indexed to a Benchmark Return Option with less than
daily liquidity, the Annual Charge will accrue as a Debit
Balance and be paid out of future amounts credited to the
Account Balance.
	 
	 	 (ii)	 	In the event that the Participant elects to have the
Account Balance paid in installments, the Annual Charge will be
charged on the Remaining Deferred Amounts after giving effect to
the installment payments.
	 
	 	 (iii)	 	In the event that the Account Balance is paid out
completely during a Fiscal Year prior to the date upon which the
Annual Charge is assessed, a pro rata Annual Charge will be
deducted from amounts to be paid to the Participant to cover
that fraction of the Fiscal Year that Deferred Amounts (or
Remaining Deferred Amounts in the case of installment

9

 

		
	 	payments) were maintained hereunder. The Annual Charge shall be applied
as a pro rata reduction of the portion of the Account Balance
indexed to each of the Participant’s Selected Benchmark Return
Options. In applying the Annual Charge, the pricing principles
set forth in Section 3.4(f) will be followed.

      (h)      Rollover Option. In the discretion of the Administrator or a
designee, additional Benchmark Return Options, including Return Options
with less than daily liquidity, may be offered to all Participants under
the Plan or to a more limited group of Participants. In such event,
Participants will be allowed, in such manner as the Administrator shall
determine, to elect that all or a portion of Account Balances be indexed to
such Benchmark Return Options.

	 	(i)	 	With respect to Benchmark Return Options that do not
provide daily liquidity: (A) payments under Article V will be
made in accordance with a Participant’s election at the time of
the Participant’s original deferral, with any adjustments
required for the more limited liquidity of such Return Option;
(B) Participants may be limited in their ability to elect,
change or continue their Benchmark Return Options in accordance
with such terms and conditions as the Administrator or a
designee may determine; and (C) the Annual Charge shall be accrued and
paid, when possible, upon liquidation of all or any portion of
the Benchmark Return Option, provided that no payment shall be
made to a Participant under Article V hereof until all accrued
Annual Charges have been paid.
	 
	 	(ii)	 	In the event that such limited liquidity options include
future ML Ventures Partnerships, the designated amounts shall be
credited to such Participant, accounted for, adjusted and paid
out to such Participant in accordance with the terms and
conditions of this Plan as they related to the ML Ventures
Return Option.

3.5   Rescission of Deferral Election.

      (a)        Prior to December 1, 2002. A deferral election hereunder may be
rescinded at the request of a Participant only (i) on or before December 1,
2002, and (ii) if the Administrator, in his or her sole discretion and upon
evidence of such basis that he or she finds persuasive (including a
material applicable change in the Participant’s U.S. Federal and/or foreign
income tax rate during the period between October 31, 2002 and November 30,
2002), agrees to the rescission of the election. In the event that the
Administrator agrees to the rescission, the Deferred Amounts, if any,
credited to the Participant’s Account will be paid to the Participant as
soon as practicable thereafter, subject to reduction for any applicable
withholding taxes.

      (b)        Adverse Tax Determination. Notwithstanding the provisions of
Section 3.5(a), a deferral election may be rescinded at any time if (i) a
final determination is made by a court or other governmental body of
competent jurisdiction that the election was ineffective to defer income
for purposes of U.S. Federal, state, local or foreign income taxation and
the time for appeal from this determination has expired, and (ii) the
Administrator, in his or her sole discretion, decides, upon the
Participant’s request and upon evidence of the occurrence of the events
described in (i) hereof that he or she finds persuasive, to rescind the
election. Upon such rescission, the Account Balance, including any
adjustment for performance of the Selected Benchmark Return Options, will
be paid to the Participant as soon as practicable, and no additional
amounts will be deferred pursuant to this Plan.

      (c)        Rescission For Amounts Not Yet Earned. Upon the Participant’s
written request, the Administrator may in his or her sole discretion
terminate any deferral elections made hereunder with respect to
Compensation not yet earned and no further amounts will be deferred. In
addition, in

10

 

the event a Participant receives a hardship withdrawal under
the 401(k) Plan, the Administrator shall, as of the date the Participant’s
Elective 401(k) Deferrals (as defined in the 401(k) Plan) are suspended
under the 401(k) Plan as a result of such hardship withdrawal, terminate
the Participant’s deferrals under this Plan in accordance with the
preceding sentence, as if the Participant had requested rescission in
writing. In each case, amounts previously deferred will continue to be
governed by the terms of this Plan.

ARTICLE IV

STATUS OF DEFERRED AMOUNTS AND ACCOUNT

4.1  No Trust or Fund Created; General Creditor Status.

      Nothing contained herein and no action taken pursuant hereto will be
construed to create a trust or separate fund of any kind or a fiduciary
relationship between ML & Co. and any Participant, the Participant’s
beneficiary or estate, or any other person. Title to and beneficial
ownership of any funds represented by the Account Balance will at all times
remain in ML & Co.; such funds will continue for all purposes to be a part
of the general funds of ML & Co. and may be used for any corporate purpose.
No person will, by virtue of the provisions of this Plan, have any
interest whatsoever in any specific assets of the Company. TO THE EXTENT
THAT ANY PERSON ACQUIRES A RIGHT TO RECEIVE PAYMENTS FROM ML & CO. UNDER
THIS PLAN, SUCH RIGHT WILL BE NO GREATER THAN THE RIGHT OF ANY UNSECURED
GENERAL CREDITOR OF ML & CO.

4.2  Non-Assignability.

      The Participant’s right or the right of any other person to the
Account Balance or any other benefits hereunder cannot be assigned,
alienated, sold, garnished, transferred, pledged, or encumbered except by a
written designation of beneficiary under this Plan, by written will, or by
the laws of descent and distribution.

4.3  Effect of Deferral on Benefits Under Pension and Welfare Benefit Plans.

      The effect of deferral on pension and welfare benefit plans in which
the Participant may participate will depend upon the provisions of each
such plan, as amended from time to time.

ARTICLE V

PAYMENT OF ACCOUNT

5.1  Manner of Payment.

      (a)        Regular Payment Elections. A Participant’s Account Balance will
be paid by the Company, as elected by the Participant at the time of his or
her deferral election, either in a single payment to be made, or in the
number of annual installments (not to exceed 15) chosen by the

11

 

Participant to commence, (i) in the month following the month of the Participant’s
Retirement or death, (ii) in any month and year selected by the Participant
after the end of 2003, or (iii) in any month in the calendar year following
the Participant’s Retirement; provided that, if a Participant’s election
would result in payment (in the case of a single payment) or commencement
of payment (in the case of installment payments) after the Participant’s
70th birthday, then, notwithstanding the Participant’s elections, the
Company will pay, or commence payment of, the Participant’s Account Balance in the month
following the Participant’s 70th birthday unless the Participant continues
to be an active full time employee at such time, in which case the Company
will pay, or commence payment of, the Participant’s Account Balance in the
month following the Participant’s cessation of active service (to the
extent payment has not already been made or commenced). The amount of each
annual installment, if applicable, shall be determined by multiplying the
Account Balance as of the last day of the month immediately preceding the
month in which the payment is to be made by a fraction, the numerator of
which is one and the denominator of which is the number of remaining
installment payments (including the installment payment to be made). In the
event that immediately prior to the lump sum payment or the initial
installment payment, all or any portion of a Participant’s Account Balance
remains indexed to a Benchmark Return Option with less than daily
liquidity, such payment shall be adjusted, if necessary, for the liquidity
restraints of the Benchmark Return Option and, in the case of an election
of 11 or more installment payments commencing upon Retirement or a date
certain coincident with Retirement, shall be delayed until such Account
Balance is fully liquid.

      (b)       Modified Installment Payments. In lieu of one of the regular
payment elections provided for in Section 5.1(a), a Participant may elect
to receive the Account Balance in at least 11 but no more than 15 annual
installment payments (“modified installment payments”), such modified
installment payments to commence on the last business day in March in the
year following the Participant’s Retirement or death (the “Initial Payment
Date”), provided that, in the event that immediately prior to the initial
payment of such installment payments, all or any portion of a Participant’s
Account Balance remains indexed to a Benchmark Return Option with less than
daily liquidity, such initial payment shall be delayed until such Account
Balance is fully liquid. The modified installment payments shall be
computed in accordance with the last sentence of Section 5.1(a) and will in all
other respects be treated like regular installment payments under the Plan.
By electing modified installment payments, the Participant agrees that at
any time prior to the last day of February immediately preceding a
Participant’s Initial Payment Date (the “Determination Date”), ML & Co.
shall have the right, without the consent of the Participant or any
beneficiary, to change the Participant’s method of payment to 11 annuitized
payments (“annuitized payments”), in the event that, in the sole discretion
of the Administrator, it is determined that such a change is necessary or
appropriate in order to preserve the intended state tax benefits of the
modified installment payments to the Participant or any beneficiary. In
the event that the Administrator determines that annuitized payments shall
be made, the amount of the annuitized payments will be determined by
applying the Discount Rate, as defined below, to the Account Balance as of
the Determination Date to create a stream of 11 equal annual payments. If
annuitized payments are to be made, then the Account Balance shall cease to
be adjusted pursuant to Section 3.4 as of the Determination Date (except
that a pro rata Annual Charge will be deducted from the Account Balance
prior to calculation of the annuitized payments to cover the fraction of
the Fiscal Year preceding the Determination Date) and the Company’s only
obligation to the Participant shall be to make the annuitized payments when
due. As used herein, Discount Rate shall mean ML & Co.’s then-applicable
after-tax cost of borrowing and is defined as (A) x (B), where (A) is equal
to 1 minus ML & Co.’s then-effective tax rate, expressed as a decimal, and
(B) is equal to the sum of: (i) the annual yield on the then-current 5-year U.S. Treasury Note, and (ii) a spread (which will
not be less than 0.10%) indicative of ML & Co.’s borrowing cost for
transactions of similar structure and average maturity to the annuity, as
determined by ML & Co.

12

 

      (c)       Merrill Lynch’s Right to Alter Payment Date. Notwithstanding the
provisions of Sections 5.1(a) and (b), if the Participant chooses an
illiquid private equity benchmark, the Administrator may, in his or her
sole discretion, direct that the Account Balance be paid as amounts are
distributed by the underlying private equity fund rather than in accordance
with the Participant’s original elections.

5.2  Termination of Employment.

      (a)       Death, Retirement, Rule of 45. Upon a Participant’s death or
Retirement (as defined in this Plan), or termination when the Participant
complies with the Rule of 45 (as defined in this Plan) prior to payment,
the Account Balance will be paid, in accordance with the Participant’s
elections and as provided in Section 5.1(a) or (b), as applicable, to the
Participant or to the Participant’s beneficiary (in the event of death);
provided, however, that (1) in the event that the Participant enters into
competition with the business of Merrill Lynch, he or she will not be
eligible for Retirement treatment under this Section 5.2 (a) and (2) in the
event that a beneficiary of the Participant’s Account is the Participant’s
estate or is otherwise not a natural person, then (i) if the Participant
has elected a regular payment election pursuant to Section 5.1(a), the
applicable portion of the Account Balance will be paid in a single payment
to such beneficiary notwithstanding any election of installment payments,
and (ii) if the Participant has elected modified installment payments
pursuant to Section 5.1(b), the applicable portion of the Account Balance
will continue to be payable as modified installment payments or annuitized
payments, as the case may be, in accordance with Section 5.1(b), but only
to a single person consisting of the administrator or executor of the
Participant’s estate or another person lawfully designated by the
administrator or executor (and in the event no such person is designated
within a reasonable time, payment will be made in a lump sum).

      (b)       Other
Termination of Employment - Forfeiture of Leverage.

      (1)       If the Participant’s employment terminates at any time for any
other reason than those described in Section 5.2 (a), then, notwithstanding
the Participant’s elections hereunder, any Available Balance will be paid
to the Participant, as soon as practicable, in a single payment if the
Account Balance is fully liquid, or as available, as soon thereafter as is
practicable, notwithstanding the Participant’s elections hereunder.

      (2)       In the event that a Participant’s employment terminates at any
time for any reason other than death or disability or in the event that the
Participant qualifies for Retirement under this Plan, such Participant will
forfeit all rights to the unvested leveraged portion of such Participant’s
ML Ventures Units, including any future Leveraged Distributions, unless the
Administrator, in his or her sole discretion, determines that such
forfeiture would be detrimental to Merrill Lynch; provided, however, that
such forfeiture will not occur: if (a) the Participant is terminated by ML
& Co. as the result of a reduction in staff, (b) the Participant delivers
to ML & Co. a release of claims (in a form approved by the Administrator
and counsel) he or she may have against the corporation or any of its
subsidiaries, and (3) such Participant complies with the terms of such release. In the event of such
forfeiture, the Participant’s Account Balance and Debit Balance will be
restated, as of the date of termination, to reflect what such balances
would have been had the Participant selected no leverage under Section
3.4(c). To the extent necessary, the Participant’s Account Balance will
also be adjusted, as of the date of the termination, to credit the
Participant with the amount of any Unleveraged Distributions that were
previously applied to the repayment of the Leveraged Principal Amount and
any Interest Amounts and, to the extent necessary, any Leveraged
Distributions paid out to the Participant will be restated as a Debit
Balance. Leveraged and Unleveraged Distributions shall be deemed to have
been applied and distributed proportionately. All calculations hereunder
shall be made by the Administrator and shall be final and conclusive.

13

 

      (c)       Leave of Absence, Transfer or Disability. The Participant’s
employment will not be considered as terminated if the Participant (1) is
on an approved leave of absence; (2) transfers or is transferred but
remains in the employ of the Company or an unconsolidated affiliate; or (3)
is eligible to receive disability payments under the ML & Co. Basic
Long-Term Disability Plan.

      (d)       Discretion to Alter Payment Date. Notwithstanding the provisions
of Sections 5.2(a) and (b), if the Participant’s employment terminates for
any reason, the Administrator may, in his or her sole discretion, direct
that the Account Balance be paid at some other time or that it be paid in
installments; provided that no such direction that adversely affects the
rights of the Participant or his or her beneficiary under this Plan shall
be implemented without the consent of the affected Participant or
beneficiary.

5.3  Withholding of Taxes.

      ML & Co. will deduct or withhold from any payment to be made or
deferred hereunder any U.S. Federal, state or local or foreign income or
employment taxes required by law to be withheld or require the Participant
or the Participant’s beneficiary to pay any amount, or the balance of any
amount, required to be withheld.

5.4  Beneficiary.

      (a)       Designation of Beneficiary. The Participant may designate, in a
writing delivered to the Administrator or his or her designee before the
Participant’s death, a beneficiary to receive payments in the event of the
Participant’s death. The Participant may also designate a contingent
beneficiary to receive payments in accordance with this Plan if the primary
beneficiary does not survive the Participant. The Participant may
designate more than one person as the Participant’s beneficiary or
contingent beneficiary, in which case (i) no contingent beneficiary would
receive any payment unless all of the primary beneficiaries predeceased the
Participant, and (ii) the surviving beneficiaries in any class shall share
in any payments in proportion to the percentages of interest assigned to
them by the Participant.

      (b)       Change in Beneficiary. The Participant may change his or her
beneficiary or contingent beneficiary (without the consent of any prior
beneficiary) in a writing delivered to the Administrator or his or her
designee before the Participant’s death. Unless the Participant states otherwise in writing, any change in
beneficiary or contingent beneficiary will automatically revoke prior such
designations of the Participant’s beneficiary or of the Participant’s
contingent beneficiary, as the case may be, under this Plan only; and any
designations under other deferral agreements or plans of the Company will
remain unaffected.

      (c)       Default Beneficiary. In the event that a Participant does not
designate a beneficiary, or no designated beneficiary survives the
Participant, the Participant’s beneficiary shall be the Participant’s
surviving spouse, if the Participant is married at the time of his or her
death and not subject to a court-approved agreement or court decree of
separation, or otherwise the person or persons designated to receive
benefits on account of the Participant’s death under the ML & Co. Basic
Group Life Insurance Plan (the “Life Insurance Plan”). However, if an
unmarried Participant does not have coverage in effect under the Life
Insurance Plan, or the Participant has assigned his or her death benefit
under the Life Insurance Plan, any amounts payable to the Participant’s
beneficiary under the Plan will be paid to the Participant’s estate.

      (d)       If the Beneficiary Dies During Payment. If a beneficiary who is
receiving or is entitled to receive payments hereunder dies after the
Participant dies, but before all the payments have been made, the portion
of the Account Balance to which that beneficiary was entitled will be

14

 

paid as soon as practicable in one lump sum to such beneficiary’s estate and not
to any contingent beneficiary the Participant may have designated;
provided, however, that if the beneficiary was receiving modified
installment payments or annuitized payments pursuant to Section 5.1(b), the
applicable portion of the Account Balance will continue to be paid as
modified installment payments or annuitized payments, as the case may be,
in accordance with Section 5.1(b), but only to a single person consisting
of the administrator or executor of the beneficiary’s estate or another
person lawfully designated by the administrator or executor (and in the
event no such person is designated within a reasonable time, payment will
be made in a lump sum).

 5.5  Hardship Distributions.

        ML & Co. has the sole discretion, but shall not be required to, pay to
the Participant, on such terms and conditions as the Administrator may
establish, such part or all of the Account Balance as he or she may, in his
or her sole discretion based upon substantial evidence submitted by the
Participant, determine necessary to alleviate hardship caused by an
unanticipated emergency or necessity outside of the Participant’s control
affecting the Participant’s personal or family affairs. Such payment will
be made only at the Participant’s written request and with the express
approval of the Administrator and will be made on the date selected by the
Administrator in his or her sole discretion. The balance of the Account,
if any, will continue to be governed by the terms of this Plan. Hardship
shall be deemed to exist only on account of expenses for medical care
(described in Code Section 213(d)) of the Participant, the Participant’s
spouse or the Participant’s dependents (described in Code Section 152);
payment of unreimbursed tuition and related educational fees for the
Participant, the Participant’s spouse or the Participant’s dependents; the
need to prevent the Participant’s eviction from or, foreclosure on, the
Participant’s principal residence; unreimbursed damages resulting from a
natural disaster; or such other financial need deemed by the Administrator in his or her sole discretion to
be immediate and substantial.

5.6  Domestic Relations Orders.

        Notwithstanding the Participant’s elections hereunder, ML & Co. will
pay to, or to the Participant for the benefit of, the Participant’s spouse
or former spouse the portion of the Participant’s Account Balance specified
in a valid court order entered in a domestic relations proceeding involving
the Participant’s divorce or legal separation. Such payment will be made
net of any amounts the Company may be required to withhold under applicable
federal, state or local law. After such payment, references herein to the
Participant’s “Deferred Amounts” (including, without limitation, for
purposes of determining the Annual Charge applicable to any remaining
Account Balance) shall mean the Participant’s original Deferred Amounts
times an amount equal to one minus a fraction, the numerator of which is
the gross amount (prior to withholding) paid pursuant to the order, and the
denominator of which is the Participant’s Account Balance immediately prior
to payment.

5.7  No Actions
Permitted that Would Cause Constructive Receipt.

        Notwithstanding any provision of the Plan to the contrary, no acceleration
or other modification of the time or form of payment of any amount under the
Plan shall be permitted to the extent that such acceleration or modification
would cause any Participant or Beneficiary to be in constructive receipt of
any amount hereunder.

ARTICLE VI

ADMINISTRATION OF THE PLAN
 
15

 

6.1  Powers of the Administrator.

        The Administrator has full power and authority to interpret, construe
and administer this Plan so as to ensure that it provides deferred
compensation for the Participants as members of a select group of
management or highly compensated employees within the meaning of Title I of
ERISA. The Administrator’s interpretations and construction hereof, and
actions hereunder, including any determinations regarding the amount or
recipient of any payments, will be binding and conclusive on all persons
for all purposes. The Administrator will not be liable to any person for
any action taken or omitted in connection with the interpretation and
administration of this Plan unless attributable to his or her willful
misconduct or lack of good faith. The Administrator may designate persons
to carry out the specified responsibilities of the Administrator and shall
not be liable for any act or omission of a person as designated.

6.2  Grantor Trust.

        Creation of Trust. The Administrator shall be empowered to create a
grantor trust to hold assets representing the amounts deferred under this
Plan on such terms and conditions as the Administrator shall approve. The trustee of the
grantor trust shall be a party unaffiliated with the Company.

6.3  Payments on Behalf of an Incompetent.

        If the Administrator finds that any person who is entitled to any
payment hereunder is a minor or is unable to care for his or her affairs
because of disability or incompetency, payment of the Account Balance may
be made to anyone found by the Administrator to be the committee or other
authorized representative of such person, or to be otherwise entitled to
such payment, in the manner and under the conditions that the Administrator
determines. Such payment will be a complete discharge of the liabilities
of ML & Co. hereunder with respect to the amounts so paid.

6.4  No Right of Set-Off.

        Unless specifically authorized by a Participant, the Company shall
have no right of set-off with respect to any Participant’s Account Balances
or Account under the Plan and unless so authorized, the Company shall not
withhold any sums owed to a Participant under the Plan.

6.5  Corporate Books and Records Controlling.

        The books and records of the Company will be controlling in the event
that a question arises hereunder concerning the amount of Adjusted
Compensation, Incentive Compensation, Sign-On Bonus, Eligible Compensation,
the Deferred Amounts, the Account Balance, the designation of a
beneficiary, or any other matters.

ARTICLE VII

MISCELLANEOUS PROVISIONS

7.1  Litigation.

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

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7.2  Headings Are Not Controlling.

        The headings contained in this Plan are for convenience only and will
not control or affect the meaning or construction of any of the terms or
provisions of this Plan.

7.3  Governing Law.

        To the extent not preempted by applicable U.S. Federal law, this Plan
will be construed in accordance with and governed by the laws of the State
of New York as to all matters, including, but not limited to, matters of validity,
construction, and performance.

7.4  Amendment and Termination.

        ML & Co., through the Administrator, reserves the right to amend or
terminate this Plan at any time, except that no such amendment or
termination shall adversely affect the right of a Participant to his or her
Account Balance (as reduced by the Annual Charge, the Debit Balance or the
Leveraged Principal Amount and Interest thereon, as set forth in Section
3.4) as of the date of such amendment or termination.

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