THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK
OPTION AGREEMENT, dated September 15, 2008, between MERRILL
LYNCH & CO., INC., a Delaware corporation (“
Issuer ”), and BANK OF AMERICA CORPORATION, a Delaware
corporation (“ Grantee ”).
WHEREAS,
Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the “ Merger Agreement
”), which agreement has been executed by the parties hereto
in connection with this Stock Option Agreement (the “
Agreement ”); and
WHEREAS,
as a condition to Grantee’s entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant
Grantee the Option (as hereinafter defined);
NOW,
THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger
Agreement, the parties hereto agree as follows:
1.
(a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the “ Option ”) to purchase,
subject to the terms hereof, up to 304,421,097 fully paid and
nonassessable shares of Issuer’s Common Stock, par value
$1.33 1/3
per share (“ Common
Stock ”), at a price of $17.05 per share (the “
Option Price ”); provided , however ,
that in no event shall the number of shares of Common Stock for
which this Option is exercisable exceed 19.9% of the Issuer’s
issued and outstanding shares of Common Stock without giving effect
to any shares subject to or issued pursuant to the Option. The
number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In
the event that any additional shares of Common Stock are either
(i) issued or otherwise become outstanding after the date of
this Agreement (other than pursuant to this Agreement) or (ii)
redeemed, repurchased, retired or otherwise cease to be outstanding
after the date of this Agreement, the number of shares of Common
Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance, such number equals 19.9%
of the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to
the Option. Nothing contained in this Section 1(b) or elsewhere in
this Agreement shall be deemed to authorize Issuer or Grantee to
breach any provision of the Merger Agreement.
2.
(a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if,
both an Initial Triggering Event (as hereinafter defined) and a
Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as hereinafter defined), provided that the Holder shall
have sent the written notice of such exercise (as provided
in
1
subsection
(e) of this Section 2) within 180 days following
such Subsequent Triggering Event. Each of the following shall be an
“Exercise Termination Event”: (i) the Effective
Time (as defined in the Merger Agreement) of the Merger;
(ii) termination of the Merger Agreement in accordance with
the provisions thereof if such termination occurs prior to the
occurrence of an Initial Triggering Event except a termination by
Grantee pursuant to Section 8.1(d) (unless the breach by
Issuer giving rise to such right of termination is non-volitional)
or Section 8.1(e) of the Merger Agreement; or (iii) the
passage of 18 months after termination of the Merger Agreement
if such termination follows the occurrence of an Initial Triggering
Event or is a termination by Grantee pursuant to
Section 8.1(d) (unless the breach by Issuer giving rise to
such right of termination is non-volitional) or Section 8.1(e)
of the Merger Agreement. The term “Holder” shall mean
the holder or holders of the Option.
(b) The
term “ Initial Triggering Event ” shall mean any
of the following events or transactions occurring after the date
hereof:
(i)
Issuer or any of its Subsidiaries (each an “ Issuer
Subsidiary ”), without having received Grantee’s
prior written consent, shall have entered into an agreement to
engage in an Acquisition Transaction (as hereinafter defined) with
any person (the term “ person ” for purposes of
this Agreement having the meaning assigned thereto in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the “ 1934 Act ”), and the
rules and regulations thereunder) other than Grantee or any of its
Subsidiaries (each a “ Grantee Subsidiary ”) or
the Board of Directors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any Acquisition
Transaction with any person other than Grantee or a Subsidiary of
Grantee. For purposes of this Agreement, “ Acquisition
Transaction ” shall mean (w) a merger, consolidation
or share exchange, or any similar transaction, involving Issuer or
any Significant Subsidiary (as defined in Rule 1-02 of
Regulation S-X promulgated by the Securities and Exchange
Commission (the “ SEC ”)) of Issuer, (x) a
purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, (y) a purchase or other
acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of
the voting power of Issuer, (provided that this clause (y) shall
not be triggered as a result of Temasek Capital (Private) Limited
or its subsidiaries acquiring beneficial ownership of 10% or more
of the outstanding shares of Common Stock solely as a result of
their holdings of Common Stock as of the date hereof taken together
with their acquisition of additional shares of Common Stock under
their existing agreement to purchase Common Stock entered into with
Issuer on July 28, 2008), or (z) any substantially similar
transaction; provided , however , that in no event
shall any merger, consolidation, purchase or similar transaction
involving only the Issuer and one or more of its Subsidiaries or
involving only any two or more of such Subsidiaries, be deemed to
be an Acquisition Transaction, provided that any such
transaction is not entered into in violation of the terms of the
Merger Agreement;
(ii)
Any event set forth in Section 8.1(e) of the Merger Agreement
shall have occurred;
(iii)
Any person other than Grantee, any Grantee Subsidiary or any Issuer
Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term “ beneficial
ownership ” for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the 1934 Act, and the
rules and regulations thereunder); provided that this clause
(iii) shall
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not be
triggered as a result of Temasek Capital (Private) Limited or its
subsidiaries acquiring beneficial ownership of 10% or more of the
outstanding shares of Common Stock solely as a result of their
holdings of Common Stock as of the date hereof taken together with
their acquisition of additional shares of Common Stock under their
existing agreement to purchase Common Stock entered into with
Issuer on July 28, 2008;
(iv)
Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its stockholders that
is public or becomes the subject of public disclosure to engage in
an Acquisition Transaction;
(v)
After the receipt by Issuer or its stockholders of any bona
fide inquiry or proposal (or the bona fide indication of
any intention to propose) from a third party to engage in an
Acquisition Transaction, Issuer shall have breached any covenant or
obligation contained in the Merger Agreement and such breach
(x) would entitle Grantee to terminate the Merger Agreement
and (y) shall not have been cured prior to the Notice Date (as
defined below); or
(vi)
Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice
with the Federal Reserve Board, or other federal or state bank
regulatory authority, which application or notice has been accepted
for processing, for approval to engage in an Acquisition
Transaction.
(c) The
term “ Subsequent Triggering Event ” shall mean
either of the following events or transactions occurring after the
date hereof:
(i)
The acquisition by any person of beneficial ownership of 20% or
more of the then outstanding Common Stock; or
(ii)
The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2,
except that the percentage referred to in clause (y) shall be
20%.
(d) Issuer
shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event of which it
has knowledge, it being understood that the giving of such notice
by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In
the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which
being herein referred to as the “ Notice Date ”)
specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not
earlier than three business days nor later than 60 business days
from the Notice Date for the closing of such purchase (the “
Closing Date ”); provided that if prior
notification to or approval of the Federal Reserve Board or any
other regulatory agency is required in connection with such
purchase, the Holder shall as soon as reasonably practicable file
the required notice or application for approval and shall
expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run instead
from the date on which any required notification periods have
expired or been terminated or such approvals
3
have been
obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
(f) At
the closing referred to in subsection (e) of this
Section 2, the Holder shall pay to Issuer the aggregate
purchase price for the shares of Common Stock purchased pursuant to
the exercise of the Option in immediately available funds by wire
transfer to a bank account designated by Issuer, provided
that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the
Option.
(g) At
such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise
dispose of such shares in violation of applicable law or the
provisions of this Agreement.
(h) Certificates
for Common Stock delivered at a closing hereunder may be endorsed
with a restrictive legend that shall read substantially as
follows:
“The
transfer of the shares represented by this certificate is subject
to certain provisions of an agreement between the registered holder
hereof and Issuer and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on
file at the principal office of Issuer and will be provided to the
holder hereof without charge upon receipt by Issuer of a written
request therefor.”
It
is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the “
1933 Act ”), in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the
Holder shall have delivered to Issuer a copy of a letter from the
staff of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend
is not required for purposes of the 1933 Act; (ii) the
reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without
such reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference;
and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other
legend as may be required by law.
(i) Upon
the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of
this Section 2 and the tender of the applicable purchase price
in immediately available funds, the Holder shall be deemed to be
the holder of record of the shares of Common Stock issuable upon
such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such
shares of Common Stock shall not then be actually delivered to the
Holder. Issuer shall pay all expenses, and any and all United
States federal, state and local taxes and other charges that may be
payable
4
in connection
with the preparation, issuance and delivery of stock certificates
under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3.
Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued shares
of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all
other options, warrants, convertible securities and other rights to
purchase Common Stock; (ii) that it will not, by charter
amendment or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid
or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from
time to time be required (including (x) complying with all
premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. § 18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the “ BHCA ”),
or the Change in Bank Control Act of 1978, as amended, or any state
banking law, prior approval of or notice to the Federal Reserve
Board or to any state or other regulatory authority is necessary
before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing such
information to the Federal Reserve Board or such other regulatory
authori
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