EX-10.1



 





EXECUTION COPY




EXHIBIT 10.1




[LETTERHEAD OF MERRILL LYNCH]




                    November 14, 2007




John A. Thain




c/o Dechert LLP

30 Rockefeller Plaza

New York, NY 10112




Dear John:




   The purpose of this letter agreement (this “Agreement”) is to set forth the terms and
conditions of our offer to you of employment with Merrill Lynch & Co., Inc. (the “Company”). This
Agreement and our offer of employment shall expire if you do not commence employment with the
Company on or before December 7, 2007.



          1. Start Date. You have informed us that you expect your first day of employment with
the Company to be December 1, 2007, but in no event shall such first day be later than December 7,
2007 (such first day, the “Start Date”).




          2. Term. The term of your employment with the Company shall commence on the Start Date
and continue until terminated by you or the Company (the term of your employment, the “Term”). You
agree that, subject to the terms of this Agreement and any other agreement you may enter into with
the Company, your employment may be terminated by you or the Company at any time, for any reason
and without notice.




          3. Position. On the Start Date, you shall be appointed, and you agree to serve as, (i) a
member of the Board of Directors of the Company (the “Board”) and the Chairman of the Board and
(ii) the Chief Executive Officer of the Company. During the Term, you agree to devote
substantially all your business time, attention and skill to the performance of your duties to the
Company, subject to reasonable allowances for illness and vacation. In addition, you shall be
permitted to engage in civic, charitable and trade association activities, as well as family and
personal business and investment activities, in each case, to the extent such activities do not
interfere, and are consistent, with your duties and obligations to the Company.




          4. Make-Whole Payments. To compensate you for your forfeiture of earned, but not yet
vested, amounts from your current employer (the “Current Employer”), the Company shall pay or grant
to you the following:





	 	•	 	With respect to the unvested Current Employer stock options forfeited by
you as a result of your commencing employment with











 



 






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	 	 	 	the Company (the “Forfeited Options”), you shall be granted Company stock
options (the “Replacement Options”) on the Start Date having (i) a strike
price per share of Company common stock equal to the mean of the high and
low sales prices per Company common share on the trading day immediately
preceding the Start Date (the “Start Date Price”), (ii) the same vesting
schedule and expiration date as the applicable Forfeited Options and (iii)
a number of underlying Company common shares determined so that, as of the
Start Date, the Black-Scholes value of the Replacement Options is equal to
the Black-Scholes value of the Forfeited Options. In the event the
Company terminates your employment without cause (as defined below), the
Replacement Options shall become fully vested and exercisable. Except as
described above, the Replacement Options shall be subject to the terms and
conditions set forth in the Company’s form of stock option award agreement
for executives previously provided to you, including with respect to
vesting and exercisability after termination of employment (including upon
death, disability and retirement) and upon a change in control. The
Company’s obligation to deliver the Replacement Options to you is
conditioned on your providing the Company with reasonably satisfactory
evidence of the Forfeited Options and your forfeiture thereof.
	 
	 	•	 	With respect to the unvested Current Employer restricted stock units
forfeited by you as a result of your commencing employment with the Company
(the “Forfeited RSUs”), you shall be granted Company restricted stock units
(the “Replacement RSUs”) on the Start Date having (i) a number of underlying
Company common shares determined so that, as of the trading day immediately
preceding the date hereof, the aggregate value of the Company common shares
underlying the Replacement RSUs is equal to the aggregate value of the Current
Employer common shares underlying the Forfeited RSUs (in each case, based on
the mean of the high and low sales prices per share of Company and Current
Employer common stock on their respective trading days immediately preceding
the date hereof) and (ii) the same vesting schedule as the applicable
Forfeited RSUs. In the event the Company terminates your employment without
cause, the Replacement RSUs shall become fully vested. Except as described
above, the Replacement RSUs shall be subject to the terms and conditions set
forth in the Company’s form of restricted stock unit award agreement for
executives previously provided to you, including with respect to vesting after
termination of employment (including upon death, disability and retirement)
and upon a change in control. The Company’s obligation to deliver the
Replacement RSUs to you is conditioned on your providing the










 



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	 	 	 	Company with reasonably satisfactory evidence of the Forfeited RSUs and
your forfeiture thereof. The Replacement Options and Replacement RSUs
shall be granted under, and subject to the terms and conditions of, the
Company’s Long-Term Incentive Compensation Plan for executives, as amended
April 27, 2001 (the “Company Stock Plan”), except as described above.
	 
	 	•	 	With respect to your forfeited annual bonus from the Current Employer for
2007, you shall be paid a lump sum cash amount of $15,000,000, which shall be
paid on or as soon as practicable after the Start Date, but in no event later
than December 15, 2007.
	 
	 	•	 	For purposes of this Agreement, the Replacement Options, the Replacement
RSUs, the Sign-on Options and the Sign-on RSUs, “Cause” shall mean the
occurrence of any of (i) your engagement in (A) willful misconduct resulting
in material harm to the Company or (B) gross negligence, (ii) your conviction
of, or pleading nolo contendere to, a felony or any other crime involving
fraud, financial misconduct or misappropriation of Company assets, or (iii)
your willful and continual failure, after written notice from the Board, to
(A) perform substantially your employment duties consistent with your position
and authority or (B) follow, consistent with your position, duties and
authorities, the lawful mandates of the Board.





          5. Sign-on Equity Awards. In consideration of your accepting employment with the
Company, the Company shall grant to you on the Start Date (i) options to acquire 1,800,000 shares
of Company common stock (the “Sign-on Options”) and (ii) 500,000 restricted stock units in respect
of Company common stock (the “Sign-on RSUs”), which, in each case, shall be granted under, and
subject to the terms and conditions of, the Company Stock Plan, except as described below.




   The Sign-on Options shall have a strike price per Company common share equal to the Start Date
Price and shall expire on the date that is the tenth anniversary of the Start Date, unless earlier
exercised or forfeited. The Sign-on Options shall become vested and exercisable, subject to your
continued employment with the Company, at the following times: (i) one-third of the Sign-on Options
(“Tranche 1”) shall vest and become exercisable in two equal annual installments on the first two
anniversaries of the Start Date, (ii) one-third of the Sign-on Options (“Tranche 2”) shall vest and
become exercisable if the average of the Company’s closing common stock prices over any period of
15 consecutive trading days is at least equal to the sum of the Start Date Price plus $20 (the
“First Price Target”) and (iii) one-third of the Sign-on Options (“Tranche 3”) shall vest and
become exercisable if the average of the Company’s closing common stock prices over any period of
15 consecutive trading days is at least equal to the sum of the Start Date Price plus $40 (the
“Second Price Target”). Notwithstanding the foregoing, the Sign-on Options shall not be
exercisable, whether or not vested, prior to the second anniversary of the Start Date, except that
such restriction shall









 



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not apply in the event your employment is terminated by the Company without Cause or your employment terminates
because of your death or disability.



   The Sign-on RSUs shall vest, subject to your continued employment with the Company, in five
equal annual installments on the first five anniversaries of the Start Date. The Sign-on RSUs
shall include the right to receive currently (without deferral or vesting limitations) in cash the
amount of any dividends paid on the underlying Company common shares.



   In addition, in the event of a Change in Control (as defined in the Company Stock Plan), (i)
(A) 100% of the Tranche 1 Sign-on Options shall automatically vest and become exercisable, (B) 100%
of the Tranche 2 Sign-on Options shall vest and become exercisable if the price per share of
Company common stock paid in the Change in Control is equal to or greater than the First Price
Target and (C) 100% of the Tranche 3 Sign-on Options shall vest and become exercisable if the price
per share of Company common stock paid in the Change in Control is equal to or greater than the
Second Price Target and (ii) (A) two-thirds of the then unvested Sign-on RSUs shall automatically
vest, (B) one-sixth of the then unvested Sign-on RSUs shall vest if the price per share of Company
common stock paid in the Change in Control is equal to or greater than the First Price Target and
(C) one-sixth of the then unvested Sign-on RSUs shall vest if the price per share of Company common
stock paid in the Change in Control is equal to or greater than the Second Price Target.



   In the event the Company terminates your employment without Cause, the Sign-on Options and
Sign-on RSUs shall become fully vested and exercisable. Except as described above, the Sign-on
Options and Sign-on RSUs shall be subject to the terms and conditions set forth in the Company’s
form of stock option and restricted stock unit award agreement for executives previously provided
to you, including with respect to vesting and exercisability after termination of employment
(including upon death, disability and retirement).



          6. Salary. During the Term, you shall receive a salary at the annual rate of $750,000.




          7. Annual Bonus. After 2007 and during the Term, you shall be eligible to receive an
annual bonus. The amount of any annual bonus shall be determined by the Compensation Committee of
the Board, in its sole discretion, taking into account your individual performance, the performance
of the Company (including relative to peer companies) and the compensation of chief executive
officers of peer companies.




          8. Benefits; No Executive Pension or Severance. You shall be eligible to participate in
the Company’s tax-qualified retirement plans and broad-based health and welfare plans on the same
basis as other executive officers, provided that you shall not be eligible to receive, or
participate in, (i) any nonqualified, executive, supplemental or similar pension, retirement or
annuity plan or agreement or (ii) any severance plan, program or agreement. For the avoidance of
doubt, you shall not be offered a change in control severance agreement.










 



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          9.
Perquisites. During the Term, you shall be entitled to the use of (i) a car and
driver, and the Company will offer employment on commercially reasonable terms (and consistent with
Company policies) to the driver of your choice, and (ii) solely for business purposes, Company
aircraft, in each case in accordance with Company policies. In addition, the Company will offer
employment on commercially reasonable terms (and consistent with Company policies) to the executive
assistants of your choice. You shall not be entitled to any other perquisites or fringe benefits.




          10.
Certain Additional Payments. (i) In the event it shall be determined that any
payment, benefit or distribution by the Company (or any other payor described in Treas. Reg. Sec.
1.280G-1, Q&A 10) to you or for your benefit (a “Payment”) would be subject to the excise tax (the
“Excise Tax”) imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”), you shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount
such that, after payment by you of all taxes (and any interest or penalties imposed with respect to
such taxes), including any income and employment taxes and Excise Taxes imposed upon the Gross-Up
Payment, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon such
Payments. Notwithstanding the foregoing, (A) in the event that the aggregate amount of Payments is
no more than 105% of the maximum amount of Payments that may be made to you without incurring an
Excise Tax (the “Safe-Harbor Amount”), you shall not be entitled to a Gross-Up Payment and shall
instead reduce Payments in an amount sufficient to reduce the aggregate amount of Payments below
the Safe-Harbor Amount and (B) the Company shall have no obligation to pay you a Gross-Up Payment,
and you shall have no obligation to reduce Payments, under this paragraph 10(i), unless the “change
in ownership or effective control” or “change in ownership of a substantial portion of the assets”
of the Company (within the meaning of Section 280G of the Code; a “280G Transaction”) giving rise
to the Excise Tax is consummated on or before December 31, 2011.



   (ii) In the event a 280G Transaction is consummated after December 31, 2011, (A) you shall
not be entitled to any Gross-Up Payment and (B) you shall instead reduce Payments in an
amount sufficient to reduce the aggregate amount of Payments below the Safe-Harbor Amount,
but such reduction shall only be imposed if the aggregate after-tax value of the Payments
retained by you (after giving effect to such reduction) is equal to or greater than the
aggregate after-tax value (after giving effect to the Excise Tax) of the Payments to you
without any such reduction. For purposes of this paragraph 10, whenever there is to be a
reduction in Payments, cash payments shall be reduced first and then equity acceleration
Payments shall be reduced.


   (iii) All determinations required to be made under this paragraph 10, including whether a
Gross-Up Payment or reduction is required and the amount of any Gross-Up Payment or reductions of
Payments, shall be made by a nationally recognized certified public accounting firm that shall be
designated by the Company and reasonably acceptable to you (the “Accounting Firm”). The Accounting
Firm shall provide detailed supporting calculations both to the Company and you within 15 business
days of the receipt of notice from you that there has been a Payment or such









 



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earlier
time as is requested by the Company or you. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this paragraph 10, shall be
paid by the Company to you within 5 business days of the receipt of the Accounting Firm’s
determination and in any event not later than the last day of the calendar year after the calendar
year in which the applicable Excise Tax is paid. If the Accounting Firm determines that no Excise
Tax is payable by you or that a reduction is required, it shall so indicate to you in writing.



   (iv) Any determination by the Accounting Firm shall be binding upon the Company and you
(absent manifest error), provided that, in the event that your tax advisor delivers to the
Accounting Firm and the Company a written opinion that the actual Excise Tax payable by you is
greater than the Excise Tax amount initially determined by the Accounting Firm by reason of (A)
manifest error, (B) any Payment the existence or amount of which could not have been, or was not,
determined or known at the time the Excise Tax was initially determined or (C) any determination,
claim or assertion made by any tax authority that the actual Excise Tax is greater than the amount
initially determined by the Accounting Firm, then, in any such case, the Accounting Firm shall
recalculate the amount of the Excise Tax and any required (or additional) Gross-Up Payment or
reduction in Payments. Any such additional calculation or determination shall be performed
consistent with this paragraph 10, including your right to deliver the notice from your tax advisor
described above. Any disputes between the parties over such calculations and determinations shall
be resolved in accordance with paragraph 14(ii).



   (v) 
You shall notify the Company in writing of any written claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of a Gross-Up Payment.
You shall apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. You shall not pay such claim prior to the expiration of the 30-day
period following the date on which you give such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim is due). If
the Company notifies you in writing prior to the expiration of such period that the Company
desires to Contest such claim, you shall (i) give the Company any information reasonably
requested by the Company relating to such claim, (ii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from time to time,
including accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iii) cooperate with the Company in good faith in order
effectively to contest such claim and (iv) permit the Company to participate in any
proceedings relating to such claim; provided, however, that (A) the Company shall bear and
pay directly all costs and expenses (including additional income taxes, interest and
penalties) incurred in connection with such contest, and shall indemnify and hold you
harmless, on an after-tax basis, for any Excise Tax or income tax (including interest or
penalties) imposed as a result of such representation and payment of costs and expenses and
(B) your obligation to cooperate with the Company shall not require you to take any action,
or forego taking any action, that would have an adverse effect on your overall tax position.











 



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          11. Indemnification and Insurance. During and after the Term, the Company shall indemnify
you in your capacity as a director and officer of the Company to the fullest extent permitted by
applicable law and the Company’s charter and by-laws and shall provide you with director and
officer liability insurance coverage on the same basis as the Company’s other directors and senior
executive officers.




          12. Legal Fees. The Company shall reimburse you for the reasonable legal fees and
expenses incurred by you in connection with the review and negotiation of this Agreement and the
equity award agreements described herein. The Company shall also reimburse you for all reasonable
legal fees and expenses that you may incur during the Term or within ten years after the expiration
thereof in connection with any dispute between you and the Company involving this Agreement, your
employment with the Company or the termination thereof, but only in the event that you are the
prevailing party in such dispute. All reimbursements described in this paragraph shall be made
promptly after demand is made by you and your provision to the Company of reasonably satisfactory
evidence of such fees and expenses, but no later than the last day of the calendar year following
the calendar year in which you incur such fees and expenses. You right to reimbursement under
this paragraph in any calendar year shall not affect the amount eligible for reimbursement in any
other calendar year and shall not be subject to liquidation or exchange.




          13. Other Agreements. Promptly after the date hereof and prior to the Start Date, you
agree to enter into (i) equity award agreements, having the terms and conditions described herein,
to document the Replacement Options, Replacement RSUs, Sign-on Options and Sign-on RSUs and (ii)
the Company’s standard covenant agreement for executive officers.




          14. Miscellaneous. (i) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (other than its choice of laws rules).




   (ii) All controversies, claims or disputes arising out of or related to this Agreement shall
be settled under the rules of the American Arbitration Association then in effect in the
State of New York, as the sole and exclusive remedy of either party, and judgment upon such
award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction in
the State of New York.



   (iii) This Agreement constitutes the entire understanding and agreement between the parties
with respect to the subject matter hereof, and supersedes any prior discussions, negotiations or
other written materials in respect of the subject matter hereof. This Agreement may not be
amended, unless such amendment is in writing and signed by both of the parties hereto.



   (iv) All amounts payable to you hereunder shall be subject to any required deductions or
withholdings from, and the Executive shall be responsible for, any applicable taxes (including any
taxes under Section 409A of the Code).



   (v) To the extent that you are a “specified employee” (within the meaning of the final
regulations promulgated under Section 409A of the Code) as of
the date of your “separation from service” (within the meaning of








 



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	 	 	 	Section 409A of the Code) from the
Company, no amount that constitutes a deferral of compensation that is payable upon such
separation from service and is subject to the six-month delay rule of Section
409A(a)(2)(B)(i) of the Code shall be paid to you before the date (the “Delayed Payment
Date”) that is the first day of the seventh month after the date of your separation from
service or, if earlier, the date of your death following such separation from service.
All such amounts that would, but for this paragraph 14(v), become payable prior to the
Delayed Payment Date will be accumulated and paid on the Delayed Payment Date. The
Company intends that income provided to you pursuant to this Agreement will not be
subject to taxation under Section 409A of the Code. The provisions of this Agreement
shall be interpreted and construed in favor of satisfying any applicable requirements of
Section 409A of the Code and the final regulations promulgated thereunder. The Company
Stock Plan, as applicable to equity awards thereunder granted to you, and such equity
awards granted to you, will, to the extent not exempt from the requirements of Section
409A of the Code, comply with the documentary requirements of Section 409A of the Code by
the documentary compliance effective date thereof and operationally comply at all times
from and after the date of grant of such equity awards, and you agree to accept any
amendments of such equity awards reasonably required to effect such compliance, which
amendments will not adversely impact the value of such awards to you.





   (vi) The Company represents and warrants that it is fully authorized and empowered to enter
into this Agreement and to perform its obligations hereunder, including the grants of the
Replacement Options, the Replacement RSUs, the Sign-on Options and the Sign-on RSUs.



   (vii) The respective rights and obligations of the parties hereunder shall survive any
termination of this Agreement and your employment with the Company to the extent necessary
to preserve the intended rights and obligations of the parties.



   (viii) The invalidity or unenforceability of any provision of this Agreement, or any
provisions of any agreement referred to herein, shall not affect the validity or enforceability of
any other provision herein or therein.



   (ix) For purposes of this Agreement, the term “including” shall mean “including, without
limitation”.




	 	(x)	 	This Agreement may be executed in one or more counterparts,











 



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	 	 	 	including by fax or PDF, each of which shall be deemed to be an original but all of which together
shall constitute one and the same instrument.





	 	 	 	 	 
	 	 	Sincerely,
	 
	 	 	 	 
	 	 	MERRILL LYNCH & CO., INC.,
	 
	 	 	 	 
	 

	 	by:
	 	  /s/  Peter R. Stingi
	 

	 	 	 	 
	 

	 	 	 	  Peter R. Stingi

  Senior Vice President








	 	 	 	 	 
	Acknowledged and Agreed:	 	 
	 
	 	 	 	 

	 

	by:
	/s/  John A. Thain
	 

	 	 
	 

	 	John A. Thain