Executive Annuity Agreement
Executive Annuity Agreement dated as of January 27, 1997, by and between
Merrill Lynch & Co., Inc. ("ML & Co.") and David H. Komansky (the "Executive").
WHEREAS, the Executive has worked for ML & Co. for an extended period and
is at present the Chief Executive Officer of ML & Co.; and
WHEREAS, ML & Co. desires to establish an incentive for the Executive,
based on the Executive's compensation and total period of qualifying service, to
continue to serve in the above-referenced position with ML & Co., or in such
other high senior executive position as the Board of Directors of ML & Co. may
hereafter specify, until such time as the Executive retires from ML & Co.;
WHEREAS, the Executive's substantial expertise and knowledge relating to
the operation of the activities of ML & Co. and its affiliates is such that ML &
Co.desires that the Executive not compete with ML & Co. and its affiliates in
certain respects following the Executive's retirement from ML & Co.; and
WHEREAS, in view of the foregoing ML & Co. has decided that an appropriate
benefit for the Executive, conditioned on continuing executive service until
retirement and non-competition after retirement, would be to provide the
Executive, and the Executive's surviving spouse, if any, with a retirement
annuity which supplements retirement benefits otherwise payable to the Executive
and the Executive's surviving spouse; and
WHEREAS, the Executive is willing to enter into this Agreement;
NOW THEREFORE, in consideration of the foregoing and the Executive's
further service with ML & Co., ML & Co. and the Executive agree as follows:
In addition to the defined terms indicated above, unless otherwise
required by the context for purposes of this Agreement, each of the following
terms shall have the meaning indicated for that term:
"Affiliate" means any subsidiary or other entity that is owned at least
50% by ML & Co. or by another such subsidiary or entity, or that is
designated by ML & Co. as an Affiliate for purposes of this Agreement.
"Agreement" means this Executive Annuity Agreement, as it may be amended
from time to time.
"Beneficiary" means the Executive's surviving spouse, if any.
"Board" means that Board of Directors of ML & Co.
"Committee" means the Management Development and Compensation Committee of
the Board, as constituted from time to time.
"Compensation" means the highest consecutive five calendar year average of
the Executive's Eligible Compensation, as defined in the Merrill Lynch &
Co., Inc. Retirement Accumulation Plan, as amended from time to time,
included in the Retirement Program, but without regard to the limit
prescribed under Internal Revenue Code Section 401(a)(17) and excluding
for all years any non-recurring cash compensation awards such as awards
under the Merrill Lynch & Co., Inc. ROE Incentive Compensation Plan.
"Disability" means a physical or mental impairment as a result of which
the Executive is eligible to receive, or is in receipt of, long term
disability benefits under the Merrill Lynch & Co., Inc. Basic Long Term
Disability Plan, as amended from time to time.
"Executive Annuity" means the annual amount determined under Section 3.
"401(k) Savings Plan" means the Merrill Lynch & Co., Inc. 401(k) Savings &
Investment Plan, as amended from time to time and any successor plans
"Index Value" means the "Personal Consumption Expenditures" index amount
published by the Economics and Statistics Administration of the
Department of Commerce for the period ending on the December 31 or June 30
immediately prior to the relevant date or, if such index amount is no
longer published on a regular basis, such successor index published by an
agency or instrumentality of the
government as the Committee United States
determines in its sole and absolute discretion to most closely replace
"Initial Index Value" means the Index Value as of January 1, 1997.
"Merrill Lynch" means ML & Co. and each Affiliate.
"Metropolitan Contract" means Group Annuity Contract No. 10438 issued as
of December 29, 1988 by Metropolitan Life Insurance Company to the
Trustees of the Pension Plan for Employees of Merrill Lynch & Co., Inc.
and Affiliates (terminated as of December 13, 1988) to provide for the
payment of Pension Plan Annuities as provided therein.
"Qualified Retirement Annuity" means an annual amount calculated as the
sum of the following, payable monthly for the life of the Executive
commencing as of the Retirement Date provided in Section 4:
(a) the single life annuity, if any, of the Executive under the
provisions of the Metropolitan Contract,
(b) the annuitized value of the aggregate of the Executive's account
balances under the Retirement Program and the 401(k) Savings Plan as
adjusted to reflect only the balance in the SIP account thereunder
allocable to employer contributions and investment experience
thereon (not including any amount allocable to elective 401(k)
deferrals or investment experience thereon), such value to be
calculated by dividing such aggregate by the applicable conversion
factor for immediate annuities payable at or after age 55 as set
forth in the table attached hereto as Appendix "A". Arithmetic
interpolation (in increments of one-twelfth for each month or any
part thereof, rounded up to the third decimal place) between the
conversion factors for two consecutive ages shall be used to
determine the conversion factor for Retirement Dates that are not
coincident with or next following the Executive's birthday, and
(c) 50% of the Executive's Social Security Primary Insurance amount
computed as of the Executive's Retirement Date.
Annuitized values shall be determined based upon the quarterly (in
the case of the Retirement Program) or monthly (in the case of the
401(k) Savings Plan) valuation occurring coincident with or
immediately preceding the Executive's Retirement Date or death while
in Merrill Lynch employment, as applicable.
"Retirement" means termination of the Executive's employment with Merrill
Lynch after attaining age 60, except that Retirement shall not include
such termination by (a) affirmative vote of a majority of the whole Board,
either for or without cause, unless the Board specifically directs that
such termination shall be treated as Retirement, or (b) resignation of
the Executive without the approval of the Board, which shall not be
"Retirement Date" means the first day of any month coincident with or next
following the Executive's Retirement as of which payment of the Executive
Annuity to or in respect of the Executive is to commence as provided in
"Retirement Program" means the Merrill Lynch & Co., Inc. Retirement
Accumulation Plan, as amended from time to time, and the Merrill Lynch &
Co., Inc. Employee Stock Ownership Plan, as amended from time to time, and
any successor plans thereto.
"Service", shall have the same meaning as under the Retirement Program for
purposes of determining the Executive's "Basic Credits" thereunder, but
excluding any periods after the Executive's 65th birthday, Retirement, or
the date of termination of this Agreement. Service includes all periods of
An Executive Annuity shall be payable to or in respect of the Executive
only in the event of the Retirement or death of the Executive while in Merrill
Except as otherwise provided in Section 6, the amount of the Executive
Annuity to or in respect of the Executive shall be an annual sum equal to 1.25%
of the Executive's Compensation multiplied by the Executive's Service, reduced
by the Executive's Qualified Retirement Annuity. Notwithstanding the foregoing,
however, the sum of the amount payable annually to or in respect of the
Executive under this Agreement shall not exceed (i) $1,620,000, if the
Executive's Executive Annuity is payable as a Life Annuity, or a 10-year Certain
and Life Annuity as referred to in Section 4, or (ii) $1,370,000, if the
Executive's Executive Annuity is payable as a 50% or 100% Joint and Survivor
Life Annuity as referred to in Section 4, in either case less the amount of the
Executive's Qualified Retirement Annuity.
The $1,620,000 and $1,370,000 limits established under the preceding
paragraph shall be adjusted as of each December 31 and June 30 prior to the
earlier of the Executive's Retirement or death by multiplying the respective
amount by a fraction,
the numerator of which is the Index Value as of the relevant date and the
denominator of which is the Initial Index Value; provided that no adjustment
shall be made as of any December 31 or June 30 if such adjustment would result
in a decrease in the limit then in effect.
Following the Executive's Retirement or death, the amount of an Executive
Annuity as determined under this Section 3 will neither be increased by any cost
of living adjustments nor reduced by any such adjustments made to the Pension
Plan Annuity under the Metropolitan Contract.
Time and Forms of Payment
One-twelfth of the Executive Annuity shall be payable monthly commencing
as of the Executive's Retirement Date, which shall be at the same time and in
the same form (namely, as a Life Annuity, a 50% Joint and Survivor Life Annuity,
a 100% Joint and Survivor Life Annuity, or a 10-Year Certain and Life Annuity)
as the Pension Plan Annuity under the Metropolitan Contract that is actually so
payable to or in respect of the Executive. For purposes of computing an amount
payable under this Agreement, the computation shall be made in all cases by
applying the relevant reduction factors provided for in the Metropolitan
Contract with reference to the Beneficiary, whether or not the Beneficiary is
also the Executive's beneficiary, if any, under the Metropolitan Contract.
Notwithstanding the foregoing, in the event of the death of the Executive
while in Merrill Lynch employment and before Retirement, payments to the
Beneficiary, if any, shall be made as if the Executive's Retirement was on the
day before the Executive's death with the Executive having elected a 100% Joint
and Survivor Life Annuity, computed as stated in the foregoing paragraph.
The Committee is authorized in its sole and absolute discretion, without
limitation, to make all determinations which it deems necessary or advisable for
the operation of this Agreement, to construe and interpret the Agreement, to
establish such rules and to delegate such of its authority as it deems
appropriate, and to perform all other acts believed reasonable and proper in
connection with this Agreement.
Amendment and Termination
ML & Co. reserves the right to amend, modify, restate, or terminate this
Agreement in whole or in part, at any time for any reason; provided, however,
that no such action shall reduce the amount of the Executive Annuity determined
under Section 3, based on the Executive's Compensation and Service as of the
effective date of such action, but with the Qualified Retirement Annuity for
purposes of the offset under Section 3 to be determined as of the Executive's
Retirement Date, or otherwise deprive the Executive or Beneficiary of any
entitlement to such Executive Annuity determined as of the effective date of
7.1 Source of Payments
The obligation of ML & Co. to pay the Executive Annuity shall be unfunded
and is solely an unsecured Promise by ML & Co. All monthly payments shall be
made, as and when due, from the general assets of ML & Co. ML & Co. is not
obligated to, but may, in its sole and absolute discretion, make arrangements
with banks or insurance companies, and establish special reserve, accounts or
funds, including a "grantor trust", and may make such investments as deemed
desirable, to assist in meeting its obligations under this Agreement. Any such
arrangements with their underlying assets, reserves, accounts, or funds shall at
all times remain general assets of ML & Co., subject to the claims of its
general creditors, and neither the Executive nor the Beneficiary shall have any
right, title, or interest whatsoever therein.
No payment or right under this Agreement is subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
such action, shall be void and of no effect; nor are any such payments subject
to seizure, attachment, execution, garnishment, or other legal or equitable
process, or for the payment of any debts, judgments, alimony, or separate
maintenance; nor are such payments transferable by operation of law in the event
of bankruptcy, insolvency, or similar occurrence of the Executive or
Beneficiary. In the event a person who is receiving or is entitled to receive
payments under this Agreement attempts to assign, transfer, or dispose of such
payment or right, or if an attempt is made to subject said payment or right to
such process, such assignment, transfer, or disposition shall be null and void.
The Executive and the Beneficiary, in the sole discretion of the
Committee, shall forfeit any right to payments under this Agreement not yet made
in the event that the Executive, following Retirement, enters into any
consulting, or other relationship with any person or entity which the Committee
determines, in its sole discretion, to be in competition with Merrill Lynch.
Competition, for purposes of this section, means any involvement in any business
in the financial services industry, including, but not limited to, investment
banking, securities brokerage, securities trading, asset management, insurance,
7.4 Merger, Consolidation, Sale, or Transfer of Assets
In the event ML & Co. is merged or consolidated with another entity, or
all or substantially all of the assets of ML & Co. are sold or otherwise
transferred to another entity, this Agreement shall be binding upon and inure to
the benefit of the successor or transferee resulting from or of such merger,
consolidation, sale or transfer.
7.5 Agreement Not a Condition of Employment
Nothing in this Agreement or any action taken hereunder shall be deemed or
construed as giving the Executive any right to continued employment or as
affecting the right of Merrill Lynch to discipline (including, without
limitation, the right to discharge) the Executive at any time.
7.6 No Trust or Fiduciary Relationship Created
Nothing contained in this Agreement and no action taken pursuant to the
provisions of this Agreement shall create or be construed to create a trust of
any kind or a fiduciary relationship between Merrill Lynch, the Executive, or
7.7 Application for Payments
An application for payments under this Agreement shall be in a form
acceptable to the Committee. The Committee may require any applicant to furnish
the Committee with such documented evidence or information as the Committee may
consider reasonably necessary or desirable.
7.8 Claims Procedure
(a) If an application for payments under this Agreement is denied, in
whole or in part, the Committee shall promptly give the applicant
written notice of the denial, setting forth the specific reasons
therefor. The notice shall include the following:
(i) The basis for the denial;
(ii) A reference to each Agreement provision on which the denial is
(iii) A description of any additional information required of the
(iv) An explanation of the procedure for having a denied
application reviewed under this Agreement.
(b) The applicant may, upon receipt of a notice of a denied application,
request a review of the application by the Committee. Such request
shall be delivered in writing to any member of the Committee. After
the Committee has reviewed the application, the final decision of
the Committee shall be communicated in writing to the applicant.
Such communication shall set forth the specific reasons for the
decision with reference to each appropriate Agreement provision.
7.9 Payments to Incompetents
If the Committee receives evidence satisfactory to it that the Executive
or Beneficiary entitled to receive any payment under this Agreement is, at the
time when such payment becomes payable, physically or mentally incompetent to
receive such payment and to give a valid release therefor and that another
person or institution is then maintaining or has custody of the Executive or
Beneficiary, and that no guardian, committee, or other representative of the
estate of the Executive or Beneficiary shall have been duly appointed, the
Committee may direct payment of such payment otherwise payable to the Executive
or Beneficiary to such other person or institution, and the release of such
other person or institution shall be a valid and complete discharge for the
7.10 Governing Law and Exclusive Venue
This Agreement shall be construed, performed and enforced under the laws
of the State of New York, without giving effect to its conflict of laws rules,
except to the extent such laws are pre-empted by Federal law. The venue with
respect to any litigation involving the Agreement and a claimant shall lie
exclusively in either (a) the Supreme Court of the State of New York, New York
County, or (b) the United States District Court for the Southern District of New
York. By continuing in employment with Merrill Lynch after executing this
Agreement, the Executive, on behalf of the Executive and the Executive's
Beneficiary, hereby waives any right to a trial by jury in connection with any
dispute relating to this Agreement.
IN WITNESS WHEREOF, the Executive and ML & Co. have duly executed this
Merrill Lynch & Co., Inc.
Name: Patrick J. Walsh
Title: Senior Vice President,
Director of Human Resources
David H. Komansky