[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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