Document:

exv10w2

 

Exhibit 10.2

AN AWARD FOR PERFORMANCE SHARE UNITS, representing a number of shares of Common Stock
(hereinafter the “Units”) as noted in the 2008 Notice of Award of Performance Share Units (the
“Notice”), of Nordstrom, Inc., a Washington Corporation (the “Company”), is hereby granted to the
“Unit holder” on the date set forth in the Notice, subject to the terms of this Agreement. The
Units are also subject to the terms, definitions and provisions of the Nordstrom, Inc. 2004 Equity
Incentive Plan (the “Plan”) adopted by the Board of Directors of the Company and approved by the
Company’s shareholders, which is incorporated in this Agreement. Each vested Unit is equal in value
to one share of Nordstrom Common Stock. To the extent inconsistent with this Agreement, the terms
of the Plan shall govern. The Compensation Committee of the Board has the discretionary authority
to construe and interpret the Plan and this Agreement. The Units are subject to the following:

	1.	 	VESTING AND SETTLEMENT OF UNITS
	 
	 	 	At the end of three fiscal years following the date of the Award (“the Performance Cycle”), Units
shall vest and be settled in accordance with the provisions of the Plan as follows:

	 	(a)	 	Vesting
	 
	 	 	 	Except as set forth in Section 4, Units shall vest at the applicable percentage when the
Compensation Committee of the Board certifies that (1) the Company’s Total Shareholder Return
(TSR) is positive, and (2) its TSR performance relative to the TSR of other companies in the
peer group exceeds the following corresponding percentile rankings. For purposes of
determining the Company’s TSR relative to the TSR of other companies in the peer group, the
share price of our Common Stock, and the share prices of the companies in the peer group, are
based on the thirty (30) trading day closing price average immediately prior to the start of
the Performance Cycle and the thirty (30) trading day closing price average immediately prior
to the end of the Performance Cycle.

PSU Vesting % Based on Nordstrom Percentile Rank

	 	 	 
	If Nordstrom Percentile Is:	 	PSU Vesting Is:
	>85%
	 	125%
	 
	>75%
	 	100%
	 
	>65%
	 	85%
	 
	>50%
	 	75%
	 
	<50%
	 	0%

	 	 	 	While the relative percentile rankings may change during the Performance Cycle based upon
mergers, acquisitions, dissolutions and other industry consolidation involving the companies
in the peer group, the application of the percentile vesting above is applied consistently.
Generally, Units will be earned if the Nordstrom TSR for the Performance Cycle is in the top
half of performers relative to the other companies in the peer group.
	 
	 	(b)	 	Settlement
	 
	 	 	 	Units shall be settled upon vesting, unless the Unit holder has elected to defer the Units
into the Executive Deferred Compensation Plan (EDCP). Such deferral election must be in
writing, must be executed at least six months prior to the last day of the Performance Cycle
in which the Units vest, and must be irrevocable. Upon deferral,
the vested Units (and their subsequent settlement and payment) shall be governed by the terms
and conditions of the EDCP as that Plan may be amended from time to time by the Company.
	 
	 	 	 	Unless earlier deferred into the EDCP, the Unit holder shall elect (during a period prior to
settlement as prescribed by and in accordance with procedures established by the Company) to
settle the Units upon vesting in either one share of Common Stock for each vested Unit, receive
an equivalent amount of cash for each vested Unit, or receive a combination of cash and stock.
In the event the Unitholder does not or is unable to make such a settlement election, the Units
shall be settled in stock. In the event the Units are settled in cash, the amount of cash will
be determined on the basis of the closing price of the Company’s Common Stock on the New York
Stock Exchange on the last day of the Performance Cycle, determined at the time of vesting.
	 
	 	(c)	 	Withholding Taxes
	 
	 	 	 	No stock certificates or cash will be distributed to the Unit holder, or amounts deferred into
the EDCP, unless the Unit holder has made acceptable arrangements to pay any withholding taxes
that may be due as a result of the settlement of this Award. These arrangements may include
withholding shares of Common Stock that otherwise would be distributed when the Units are
settled. The fair market value of the shares required to cover withholding will be applied to
the withholding of taxes prior to the Unit holder receiving the remaining shares or the cash
value of those shares.
	 
	 	(d)	 	Restrictions on Resale
	 
	 	 	 	The Unit holder agrees not to sell any shares of the Company’s stock at a time when applicable
laws or Company policies prohibit a sale. This restriction will apply as long as the Unit
holder is an employee, consultant or director of the Company or a subsidiary or affiliate of
the Company.

	2.	 	ACCEPTANCE OF UNITS
	 
	 	 	Although the Company does not require the Unit holder’s signature upon accepting the award, the
Unit holder remains subject to the terms and conditions of this Agreement.
	 
	3.	 	NONTRANSFERABILITY OF UNITS
	 
	 	 	The Units may not be sold, pledged, assigned or transferred in any manner otherwise than in the
event of the Unit holder’s death, either indicated on a valid Nordstrom Beneficiary Designation
form, by will or the laws of descent and distribution and, except as set forth in Section

1   |   Performance Share Unit Award Agreement

 

 

		 	4 below, may be settled during the lifetime of the Unit holder only by the Unit holder or by the
guardian or legal representative of the Unit holder. The terms of the award shall be binding upon
the executors, administrators, heirs and successors of the Unit holder.
	 
	4.	 	SEPARATION OF EMPLOYMENT
	 
	 	 	Except as set forth below, Units vest and may only be settled while the Unit holder is an
employee of the Company. If the Unit holder’s employment is terminated, the Units shall continue
to vest pursuant to the schedule set forth in subparagraph 1(a) above, and the Unit holder or his
or her legal representative shall have the right to settlement of the Units after such
termination only as follows:

	 	(a)	 	If the Unit holder dies while employed by the Company, the persons
named on the Unit holder’s Beneficiary Designation form shall
be entitled to settlement of the Units. If no valid Beneficiary Designation form is on file
with the Company, then the persons to whom the Unit holder’s rights have passed by will or the
laws of descent and distribution shall be entitled to settlement of the Units. If the Units
were granted at least six months prior to the death of the Unit holder while employed by the
Company, the Unit holder’s beneficiary(ies) shall be entitled to a prorated payment with
respect to Units earned during the Performance Cycle based on the period of service during the
term of this Agreement. If the Units were granted less than six months prior to death, the
Units shall be forfeited as of the date of death with no rights to a prorated payment at
settlement.
	 
	 	(b)	 	If the Unit holder is separated due to his or her disability, as defined
in Section 22(e)(3) of the Internal Revenue Code, and the Units were
granted at least six months prior to such separation, the Unit holder
(or his or her beneficiary) shall be entitled to a prorated payment
with respect to Units earned during the Performance Cycle based on
the period of service during the term of this Agreement. If the Units
were granted less than six months prior to separation due to the
Unit holder’s disability, the Units shall be forfeited as of the date of
separation with no rights to a prorated payment at settlement.
	 
	 	(c)	 	If the Unit holder is separated due to retirement between the ages
of 53 and 57 with 10 years of continuous service to the Company,
or upon attaining age 58, and the Units were granted at least six
months prior to such separation, the Unit holder (or his or her
beneficiary) shall be entitled to a prorated payment with respect to
Units earned during the Performance Cycle based on the period of
service during the term of this Agreement. If the Units were granted
less than six months prior to retirement, the Units shall be forfeited
as of the date of retirement with no rights to a prorated payment
at settlement.
	 
	 	(d)	 	If the Unit holder is separated for any reason other than those set
forth in subparagraphs (a), (b) and (c) above, Units, to the extent not
vested and settled as of the date of his or her separation, shall be
forfeited as of that date.

	 	 	Notwithstanding anything above to the contrary, if during the term of this Award, the Unit holder
directly or indirectly, either as an employee, employer, consultant, agent, principal, partner,
shareholder, corporate officer, director or in any other capacity, engages or assists any third
party in engaging in any business competitive with the Company; divulges any confidential or
proprietary information of the Company to a third party who is not authorized by the Company to
receive
the confidential or proprietary information; or improperly uses any confidential or proprietary
information of the Company, then the post-separation proration of Units and settlement rights set
forth above shall cease immediately, and all outstanding vested but not settled and unvested
portions of the Award shall be automatically forfeited.
	 
	5.	 	TERM OF UNITS
	 
	 	 	Units not certified by the Compensation Committee of the Board as having vested as of the end
of the Performance Cycle for which the Units were awarded, shall be forfeited.
	 
	6.	 	ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
	 
	 	 	The number and kind of shares of Company stock subject to this Award shall be appropriately
adjusted pursuant to the Plan to reflect any stock dividend, stock split, split-up,
extraordinary dividend distribution, or any combination or exchange of shares, however
accomplished.
	 
	7.	 	ADDITIONAL UNITS
	 
	 	 	The Compensation Committee may or may not grant the Unit holder additional Units in the future.
Nothing in this Award or any future Award should be construed as suggesting that additional Unit
awards to the Unit holder will be forthcoming.
	 
	8.	 	LEAVES OF ABSENCE
	 
	 	 	For purposes of this Award, the Unit holder’s service does not terminate due to a military leave,
a sick leave or another bona fide leave of absence if the leave was approved by the Company in
writing and if continued crediting of service is required by the terms of the leave or by
applicable law. But, service terminates when the approved leave ends unless the Unit holder
immediately returns to active work.
	 
	9.	 	TAX WITHHOLDING
	 
	 	 	In the event that the Company determines that it is required to withhold any tax as a result of
the settlement of Units, the Unit holder shall make arrangements satisfactory to the Company to
enable it to satisfy all withholding requirements.
	 
	10.	 	RIGHTS AS A SHAREHOLDER
	 
	 	 	Neither the Unit holder nor the Unit holder’s beneficiary or representative shall have any rights
as a shareholder with respect to any Common Shares subject to these Units, unless and until the
Units vest and are settled in shares of Common Stock of the Company.
	 
	11.	 	NO RETENTION RIGHTS
	 
	 	 	Nothing in this Agreement or in the Plan shall give the Unit holder the right to be retained by
the Company (or a subsidiary of the Company) as an employee or in any capacity. The Company and
its subsidiaries reserve the right to terminate the Unit holder’s service at any time, with or
without cause.
	 
	12.	 	CLAWBACK POLICY
	 
	 	 	The Units are subject to the Clawback Policy adopted by the Company’s Board of Directors, which
provides as follows:
	 
	 	 	To the extent permitted by law, if the Board of Directors, with the recommendation of the
Compensation Committee, determines that any bonus, equity award, equity equivalent award or other
incentive compensation has been awarded or received by a Section 16 executive officer of the
Company, and that:

2   |   Performance Share Unit Award Agreement

 

 

	 	(a)	 	such compensation was based on the achievement of certain financial
results that were subsequently the subject of a material restatement of
the Company’s financial statements filed with the Securities and Exchange
Commission,
	 
	 	(b)	 	the Section 16 executive officer engaged in grossly negligent or
intentional misconduct that caused or substantially caused the need for
the material restatement, and
	 
	 	(c)	 	the amount or vesting of the bonus, equity award, equity equivalent or
statements been correct,

	 	 	then the Board shall recover from the Section 16 executive officer such
compensation (in whole or in part) as it deems appropriate under the
circumstances.
	 
	 	 	In the event the Clawback Policy is deemed unenforceable with respect to the
Units, then the award of Units subject to this Agreement shall be deemed
unenforceable due to lack of adequate consideration.
	 
	13.	 	ENTIRE AGREEMENT
	 
	 	 	The 2008 Notice of Award of Performance Share Units, this Agreement and the Plan
constitute the entire contract between the parties hereto with regard to the
subject matter hereof. They supersede any other agreements, representations or
understandings (whether oral or written and whether express or implied) that
relate to the subject matter hereof.
	 
	14.	 	CHOICE OF LAW
	 
	 	 	This Agreement shall be governed by, and construed in accordance with, other
incentive compensation would have been less had the financial the laws of the
State of Washington, as such laws are applied to contracts entered into and
performed in such State.

3   |   Performance Share Unit Award Agreement

 

 

Nordstrom, Inc.

2008 Notice of Award of Performance Share Units

			
	 
	 	 	 
	Name
	 	Employee No: xxxxx
	 
	 	Award No: xxxxx
	 

On February 19, 2008, you were awarded x,xxx Performance Share Units (PSUs) under
the Nordstrom, Inc. 2004 Equity Incentive Plan (the “Plan”).

Your PSUs are governed by the terms of your 2008 PSU Award Agreement and the terms of
the Plan. Your PSUs are earned based on the Nordstrom Total Shareholder Return (TSR)
relative to the performance of our retail peer group over the three-year period ending
on January 29, 2011 (“Performance Cycle”).

At the end of the Performance Cycle, if Nordstrom TSR is a positive number, your PSUs
will be earned as shown below:

	 	 	 	 	 
	If Nordstrom Percentile Ranking	 	PSU Vesting
	                  > 85%
	 	 	125	%
	                  > 75%
	 	 	100	%
	                  > 65%
	 	 	85	%
	                  > 50%
	 	 	75	%
	                  < 50%
	 	 	0	%

The relative percentile rankings may change during the Performance Cycle based upon
mergers, acquisitions, dissolutions and other industry consolidation involving the
companies in the peer group. If that occurs, the application of the percentile vesting
above will still be applied consistently, relative to the remaining or resulting members
of the peer group at the end of the Performance Cycle.

TSR results are provided to you via e-mail on a quarterly basis during the fiscal year.
The periodic TSR communication shows you how Nordstrom stock is performing in relation
to our retail peer group for each PSU grant, and the progress that has been made toward
earning your PSUs. Final vesting of PSUs will be determined by the Compensation
Committee of the Board of Directors and based on the actual TSR measured at the end of
the Performance Cycle.

 

Please keep this Notice for your records.

If you have any questions about your grant, please contact Nordstrom Leadership Benefits
at (206) 303-5855, tie line 8-805-5855, or leadership.benefits@nordstrom.com.Exhibit 4(a)

                         INVESTMENT MANAGEMENT AGREEMENT
                         -------------------------------

      AGREEMENT, dated September 29, 2006, between Merrill Lynch Retirement
Series Trust, a Massachusetts business trust (the "Trust"), on behalf of Merrill
Lynch Retirement Reserves Money Fund (the "Fund"), a series of the Trust, and
BlackRock Advisors, LLC (the "Advisor"), a Delaware limited liability company.

      WHEREAS, the Board of Trustees of the Trust have established and
designated the Fund as a series of the Trust, an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and

      WHEREAS, the Advisor has agreed to furnish investment advisory services to
the Fund; and

      WHEREAS, this Agreement has been approved in accordance with the
provisions of the 1940 Act, and the Advisor is willing to furnish such services
upon the terms and conditions herein set forth;

      NOW, THEREFORE, in consideration of the mutual premises and covenants
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is agreed by and between the parties hereto as
follows:

      1. In General. The Advisor agrees, all as more fully set forth herein, to
act as investment advisor to the Fund with respect to the investment of the
Fund's assets and to supervise and arrange for the day to day operations of the
Fund and the purchase of securities for and the sale of securities held in the
investment portfolio of the Fund.

      2. Duties and Obligations of the Advisor with Respect to Investment of
Assets of the Fund. Subject to the succeeding provisions of this section and
subject to the direction and control of the Trust's Board of Trustees, the
Advisor shall (i) act as investment advisor for and supervise and manage the
investment and reinvestment of the Fund's assets and in connection therewith
have complete discretion in purchasing and selling securities and other assets
for the Fund and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of the Fund; (ii)
supervise continuously the investment program of the Fund and the composition of
its investment portfolio; (iii) arrange, subject to the provisions of paragraph
4 hereof, for the purchase and sale of securities and other assets held in the
investment portfolio of the Fund; and (iv) provide investment research to the
Fund.

      3. Duties and Obligations of Advisor with Respect to the Administration of
the Fund. The Advisor also agrees to furnish office facilities and equipment and
clerical, bookkeeping and administrative services (other than such services, if
any, provided by the Fund's Custodian, Transfer Agent and Dividend Disbursing
Agent and other service providers) for the Fund. To the extent requested by the
Fund, the Advisor agrees to provide the following administrative services:
<PAGE>

            (a) Oversee the determination and publication of the Fund's net
asset value in accordance with the Fund's policy as adopted from time to time by
the Board of Trustees;

            (b) Oversee the maintenance by the Fund's Custodian and Transfer
Agent and Dividend Disbursing Agent of certain books and records of the Fund as
required under Rule 31a1(b)(4) of the 1940 Act and maintain (or oversee
maintenance by such other persons as approved by the Board of Trustees) such
other books and records required by law or for the proper operation of the Fund;

            (c) Oversee the preparation and filing of the Fund's federal, state
and local income tax returns and any other required tax returns;

            (d) Review the appropriateness of and arrange for payment of the
Fund's expenses;

            (e) Prepare for review and approval by officers of the Trust
financial information for the Fund's semiannual and annual reports, proxy
statements and other communications with shareholders required or otherwise to
be sent to Fund shareholders, and arrange for the printing and dissemination of
such reports and communications to shareholders;

            (f) Prepare for review by an officer of the Trust the Fund's
periodic financial reports required to be filed with the Securities and Exchange
Commission ("SEC") on Form N-SAR, Form N-CSR, Form N-PX, Form N-Q, and such
other reports, forms and filings, as may be mutually agreed upon;

            (g) Prepare such reports relating to the business and affairs of the
Fund as may be mutually agreed upon and not otherwise appropriately prepared by
the Fund's custodian, counsel or auditors;

            (h) Make such reports and recommendations to the Board of Trustees
concerning the performance of the independent accountants as the Board of
Trustees may reasonably request or deems appropriate;

            (i) Make such reports and recommendations to the Board of Trustees
concerning the performance and fees of the Fund's Custodian and Transfer and
Dividend Disbursing Agent as the Board of Trustees may reasonably request or
deems appropriate;

            (j) Oversee and review calculations of fees paid to the Fund's
service providers;

            (k) Oversee the Fund's portfolio and perform necessary calculations
as required under Section 18 of the 1940 Act;

                                       2
<PAGE>

            (l) Consult with the Trust's officers, independent accountants,
legal counsel, custodian, accounting agent and transfer and dividend disbursing
agent in establishing the accounting policies of the Fund and monitor financial
and shareholder accounting services;

            (m) Determine the amounts available for distribution as dividends
and distributions to be paid by the Fund to its shareholders; prepare and
arrange for the printing of dividend notices to shareholders; and provide the
Fund's dividend disbursing agent and custodian with such information as is
required for such parties to effect the payment of dividends and distributions
and to implement the Fund's dividend reinvestment plan;

            (n) Prepare such information and reports as may be required by any
banks from which the Fund borrows funds;

            (o) Provide such assistance to the Custodian and the Fund's counsel
and auditors as generally may be required to properly carry on the business and
operations of the Fund;

            (p) Respond to or refer to the Trust's officers or transfer agent,
shareholder (including any potential shareholder) inquiries relating to the
Fund;

            (q) Supervise any other aspects of the Fund's administration as may
be agreed to by the Fund and the Advisor; and

      All services are to be furnished through the medium of any directors,
officers or employees of the Advisor or its affiliates as the Advisor deems
appropriate in order to fulfill its obligations hereunder.

      The Fund will reimburse the Advisor or its affiliates for all out of
pocket expenses incurred by them in connection with the performance of the
administrative services described in this paragraph 3. The Fund will reimburse
the Advisor and its affiliates for their costs in providing accounting services
to the Fund.

      4. Covenants. (a) In the performance of its duties under this Agreement,
the Advisor shall at all times conform to, and act in accordance with, any
requirements imposed by: (i) the provisions of the 1940 Act and the Investment
Advisers Act of 1940, as amended, and all applicable Rules and Regulations of
the SEC; (ii) any other applicable provision of law; (iii) the provisions of the
Declaration of Trust and By Laws of the Trust, as such documents are amended
from time to time; (iv) the investment objectives and policies of the Fund as
set forth in its Registration Statement on Form N-1A and/or the resolutions of
the Board of Trustees; and (v) any policies and determinations of the Board of
Trustees of the Trust and

            (b) In addition, the Advisor will:

                  (i) place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this paragraph, in placing
orders with brokers and

                                       3
<PAGE>

dealers, the Advisor will attempt to obtain the best price and the most
favorable execution of its orders. In placing orders, the Advisor will consider
the experience and skill of the firm's securities traders as well as the firm's
financial responsibility and administrative efficiency. Consistent with this
obligation, the Advisor may select brokers on the basis of the research,
statistical and pricing services they provide to the Fund and other clients of
the Advisor. Information and research received from such brokers will be in
addition to, and not in lieu of, the services required to be performed by the
Advisor hereunder. A commission paid to such brokers may be higher than that
which another qualified broker would have charged for effecting the same
transaction, provided that the Advisor determines in good faith that such
commission is reasonable in terms either of the transaction or the overall
responsibility of the Advisor to the Fund and its other clients and that the
total commissions paid by the Fund will be reasonable in relation to the
benefits to the Fund over the long term. Subject to the foregoing and the
provisions of the 1940 Act, the Securities Exchange Act of 1934, as amended, and
other applicable provisions of law, the Advisor may select brokers and dealers
with which it or the Fund is affiliated;

                  (ii) maintain a policy and practice of conducting its
investment advisory services hereunder independently of the commercial banking
operations of its affiliates. When the Advisor makes investment recommendations
for the Fund, its investment advisory personnel will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale for
the Fund's account are customers of the commercial department of its affiliates;
and

                  (iii) treat confidentially and as proprietary information of
the Fund all records and other information relative to the Fund, and the Fund's
prior, current or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities and
duties hereunder, except after prior notification to and approval in writing by
the Fund, which approval shall not be unreasonably withheld and may not be
withheld where the Advisor may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, or when so requested by the Fund.

      5. Services Not Exclusive. Nothing in this Agreement shall prevent the
Advisor or any officer, employee or other affiliate thereof from acting as
investment advisor for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Advisor or any of its officers, employees or agents from buying, selling or
trading any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting; provided, however, that the Advisor
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations under this Agreement.

      6. Sub-Advisors. The Advisor may from time to time, in its sole discretion
to the extent permitted by applicable law, appoint one or more sub-advisors,
including, without limitation, affiliates of the Advisor, to perform investment
advisory services with respect to the

                                       4
<PAGE>

Fund. The Advisor may terminate any or all sub-advisors in its sole discretion
at any time to the extent permitted by applicable law.

      7. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Advisor hereby agrees that all records which it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund any such records upon the Fund's request. The
Advisor further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.

      8. Expenses. During the term of this Agreement, the Advisor will bear all
costs and expenses of its employees and any overhead incurred in connection with
its duties hereunder and shall bear the costs of any salaries or trustees' fees
of any officers or trustees of the Trust who are affiliated persons (as defined
in the 1940 Act) of the Advisor; provided that the Board of Trustees of the
Trust may approve reimbursement to the Advisor of the pro rata portion of the
salaries, bonuses, health insurance, retirement benefits and all similar
employment costs for the time spent on Fund operations, (including, without
limitation, compliance matters) (other than the provision of investment advice
and administrative services required to be provided hereunder) of all personnel
employed by the Advisor who devote substantial time to Fund operations or the
operations of other investment companies advised by the Advisor.

      9. Compensation of the Advisor. (a) The Fund agrees to pay to the Advisor
and the Advisor agrees to accept as full compensation for all services rendered
by the Advisor as such, a monthly fee (the "Investment Advisory Fee") in arrears
at an annual rate equal to the amount set forth in Schedule A hereto of the
average daily value of the Fund's Net Assets. "Net Assets" means the total
assets of the Fund minus the sum of the accrued liabilities. For any period less
than a month during which this Agreement is in effect, the fee shall be prorated
according to the proportion which such period bears to a full month of 28, 29,
30 or 31 days, as the case may be.

            (b) For purposes of this Agreement, the net assets of the Fund shall
be calculated pursuant to the procedures adopted by resolutions of the Trustees
of the Trust for calculating the value of the Fund's assets or delegating such
calculations to third parties.

      10. Indemnity. (a) The Fund may, in the discretion of the Board of
Trustees of the Trust, indemnify the Advisor, and each of the Advisor's
directors, officers, employees, agents, associates and controlling persons and
the directors, partners, members, officers, employees and agents thereof
(including any individual who serves at the Advisor's request as director,
officer, partner, member, trustee or the like of another entity) (each such
person being an "Indemnitee") against any liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees (all as provided in accordance with applicable state
law) reasonably incurred by such Indemnitee in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or investigative body in which such
Indemnitee may be or may have been involved as a party or otherwise or with
which such Indemnitee may be or may have been threatened, while acting in any
capacity set forth herein or thereafter by reason of such

                                       5
<PAGE>

Indemnitee having acted in any such capacity, except with respect to any matter
as to which such Indemnitee shall have been adjudicated not to have acted in
good faith in the reasonable belief that such Indemnitee's action was in the
best interest of the Fund and furthermore, in the case of any criminal
proceeding, so long as such Indemnitee had no reasonable cause to believe that
the conduct was unlawful; provided, however, that (1) no Indemnitee shall be
indemnified hereunder against any liability to the Fund or its shareholders or
any expense of such Indemnitee arising by reason of (i) willful misfeasance,
(ii) bad faith, (iii) gross negligence or (iv) reckless disregard of the duties
involved in the conduct of such Indemnitee's position (the conduct referred to
in such clauses (i) through (iv) being sometimes referred to herein as
"disabling conduct"), (2) as to any matter disposed of by settlement or a
compromise payment by such Indemnitee, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other expenses
shall be provided unless there has been a determination that such settlement or
compromise is in the best interests of the Fund and that such Indemnitee appears
to have acted in good faith in the reasonable belief that such Indemnitee's
action was in the best interest of the Fund and did not involve disabling
conduct by such Indemnitee and (3) with respect to any action, suit or other
proceeding voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Indemnitee was authorized by a majority of the full
Board of Trustees of the Trust.

            (b) The Fund may make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Fund receives a written affirmation of the Indemnitee's
good faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to reimburse the Fund unless it is
subsequently determined that such Indemnitee is entitled to such indemnification
and if the Trustees of the Trust determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the Indemnitee shall provide security for such
Indemnitee's undertaking, (B) the Trust shall be insured against losses arising
by reason of any unlawful advance, or (C) a majority of a quorum consisting of
Trustees of the Trust who are neither "interested persons" of the Trust (as
defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding
("Disinterested Non Party Trustees") or an independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial type inquiry), that there is reason to believe that
the Indemnitee ultimately will be found entitled to indemnification.

            (c) All determinations with respect to the standards for
indemnification hereunder shall be made (1) by a final decision on the merits by
a court or other body before whom the proceeding was brought that such
Indemnitee is not liable or is not liable by reason of disabling conduct, or (2)
in the absence of such a decision, by (i) a majority vote of a quorum of the
Disinterested Non Party Trustees of the Trust, or (ii) if such a quorum is not
obtainable or, even if obtainable, if a majority vote of such quorum so directs,
independent legal counsel in a written opinion. All determinations that advance
payments in connection with the expense of defending any proceeding shall be
authorized and shall be made in accordance with the immediately preceding clause
(2) above.

                                       6
<PAGE>

      The rights accruing to any Indemnitee under these provisions shall not
exclude any other right to which such Indemnitee may be lawfully entitled.

      11. Limitation on Liability.

            (a) The Advisor will not be liable for any error of judgment or
mistake of law or for any loss suffered by Advisor or by the Fund in connection
with the performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
duties under this Agreement. As used in this Section 11(a), the term "Advisor"
shall include any affiliates of the Advisor performing services for the Fund
contemplated hereby and partners, directors, officers and employees of the
Advisor and of such affiliates.

            (b) Notwithstanding anything to the contrary contained in this
Agreement, the parties hereto acknowledge and agree that, as provided in Section
5.1 of Article V of the Declaration of Trust, this Agreement is executed by the
Trustees and/or officers of the Trust, not individually but as such Trustees
and/or officers of the Trust, and the obligations hereunder are not binding upon
any of the Trustees or shareholders individually but bind only the estate of the
Fund.

      12. Duration and Termination. This Agreement shall become effective as of
the date hereof and, unless sooner terminated with respect to the Fund as
provided herein, shall continue in effect for a period of two years. Thereafter,
if not terminated, this Agreement shall continue in effect with respect to the
Fund for successive periods of 12 months, provided such continuance is
specifically approved at least annually by both (a) the vote of a majority of
the Trust's Board of Trustees or the vote of a majority of the outstanding
voting securities of the Fund at the time outstanding and entitled to vote, and
(b) by the vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval. Notwithstanding
the foregoing, this Agreement may be terminated by the Fund at any time, without
the payment of any penalty, upon giving the Advisor 60 days' notice (which
notice may be waived by the Advisor), provided that such termination by the Fund
shall be directed or approved by the vote of a majority of the Trustees of the
Trust in office at the time or by the vote of the holders of a majority of the
outstanding voting securities of the Fund entitled to vote, or by the Advisor on
60 days' written notice (which notice may be waived by the Fund). This Agreement
will also immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings of such terms
in the 1940 Act.)

      13. Notices. Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.

                                       7
<PAGE>

      14. Amendment of this Agreement. This Agreement may be amended by the
parties only if such amendment is specifically approved by the vote of the Board
of Trustees of the Trust, including a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval and, where
required by the 1940 Act, by a vote of a majority of the outstanding voting
securities of the Fund.

      15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York for contracts to be performed
entirely therein without reference to choice of law principles thereof and in
accordance with the applicable provisions of the 1940 Act. To the extent that
the applicable laws of the State of New York, or any of the provisions, conflict
with the applicable provisions of the 1940 Act, the latter shall control.

      16. Use of the Name BlackRock. The Advisor has consented to the use by the
Trust of the name or identifying word "BlackRock" in the name of the Trust and
the Fund. Such consent is conditioned upon the employment of the Advisor as the
investment advisor to the Fund. The name or identifying word "BlackRock" may be
used from time to time in other connections and for other purposes by the
Advisor and any of its affiliates. The Advisor may require the Trust and the
Fund to cease using "BlackRock" in the name of the Trust and the Fund if the
Trust ceases to employ, for any reason, the Advisor, any successor thereto or
any affiliate thereof as investment advisor of the Fund.

      17. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.

      18. Counterparts. This Agreement may be executed in counterparts by the
parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.

                                       8
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.

                                           MERRILL LYNCH RETIREMENT SERIES TRUST

                                           By:
                                               ---------------------------------
                                           Name:  Donald C. Burke
                                           Title: Vice President

                                           BLACKROCK ADVISORS, LLC

                                           By:
                                               ---------------------------------
                                           Name:  Donald C. Burke
                                           Title: Managing Director

                                       9
<PAGE>

                                   Schedule A
                                   ----------

                             Investment Advisory Fee
                             -----------------------

Portion of average daily value of Net Assets of the Fund:           Advisory fee
--------------------------------------------------------------------------------
Not exceeding $1 billion ...........................................   0.50%

In excess of $1 billion but not exceeding $2 billion ...............   0.45%

In excess of $2 billion but not exceeding $3 billion ...............   0.40%

In excess of $3 billion but not exceeding $4 billion ...............   0.375%

In excess of $4 billion but not exceeding $7 billion ...............   0.35%

In excess of $7 billion but not exceeding $10 billion ..............   0.325%

In excess of $10 billion but not exceeding $15 billion .............   0.30%

In excess of $15 billion ...........................................   0.29%

                                       10

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