Merrill Lynch, Bank of America enter stock option agreement in connection with merger

By Lisa Kerner

Charlotte, N.C., Sept. 18 - Merrill Lynch & Co., Inc. granted Bank of America Corp. an option to purchase up to 304,421,097 fully paid and nonassessable shares of Merrill Lynch's common stock, par value $1.33 1/3 per share, at a price of $17.05 per share as a condition of the companies' recently announced merger agreement.

According to a form 8-K filed with the Securities and Exchange Commission, the option is exercisable for up to 19.9% of Merrill Lynch's issued and outstanding shares of common stock.

The option is exercisable in whole or in part only if an initial triggering event and subsequent triggering event, as defined in the filing, have occurred prior to the occurrence of an exercise termination event.

Initial triggering events include:

• Merrill Lynch or its subsidiaries, without Bank of America's prior written consent, agrees to an acquisition transaction with a party other than Bank of America;

• Any party other than Bank of America or its subsidiaries acquires beneficial ownership of 10% or more of the outstanding shares of common stock;

• Any party other than Bank of America or its subsidiaries makes a bona fide proposal to Merrill Lynch or its stockholders that is public or becomes the subject of public disclosure to engage in an acquisition transaction; and

• After receipt of a bona fide proposal, Merrill Lynch breaches any covenant or obligation in the merger agreement, entitling Bank of America to terminate the merger.

Subsequent triggering events include the acquisition by any person of beneficial ownership of 20% or more of the then-outstanding common stock.

Exercise termination events include the merger becoming effective, the termination of the merger agreement if that termination happens before an initial triggering event and 18 months after the termination of the merger agreement if that termination happens after an initial triggering event.

On Sept. 15, Bank of America announced it would buy New York-based investment firm Merrill Lynch in a $50 billion all-stock transaction.

Bank of America, based in Charlotte, N.C., said it will exchange 0.8595 shares of its common stock for each Merrill Lynch common share.

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