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Executive Compensation

Compensation Discussion and Analysis

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In reaching this agreement, the Board retained and was advised by an independent compensation consultant and independent legal counsel.

The following table summarizes the amounts to which Mr. O'Neal was entitled as of the date of his termination (valued as of the close of business on October 29, 2007 and as of 2007 year-end). All of the following represent awards and benefits that had been previously earned for prior service and disclosed in our Proxy Statements for prior years. Mr. O'Neal did not receive any incentive compensation for 2007 or any severance benefit.

Unvested Equity
and Unexercised
Stock Options(1)

Retirement
Benefits(2)
 

Deferred
Compensation
Balances(3)

Total

Value at Termination

            $131.4 million

$  24.7 million

$    5.4 million

$   161.5 million

Value at 2007 Year-end

    89.2 million

    23.6 million

    5.2 million

    117.9 million










(1)  This column represents the values (as of termination and fiscal year-end) of unvested 
      restricted shares/units and the in-the-money value of unexercised stock options that 
      Mr. O'Neal received as compensation for years prior to 2007. The fiscal year-end value 
      at December 28, 2007 is based on the closing stock price ($52.97) on that date.

(2)  This column shows the actuarial present values (as of termination and fiscal year-end) 
      of future payments under the executive annuity agreement and his balances under 
      the Company's broad-based 401(k) Savings and Investment Plan (401(k) Plan), Employee 
      Stock Ownership Plan and Retirement Accumulation Plan. Amounts shown as at fiscal 
      year-end represent the amounts calculated using the assumptions disclosed in footnote 
      1 to the "Pension Benefits" table in this Proxy Statement and those used in footnote 
      12 to the Consolidated Financial Statements included in our 2007 Annual Report. 
      Retirement benefits at year end do not include 401(k) or retirement accumulation plan 
      balances that were paid upon Mr. O'Neal's retirement in accordance with terms of his 
      previous elections under these plans.

(3)  This column shows the values (as of termination and fiscal year-end) of compensation 
      previously deferred by Mr. O'Neal under voluntary deferred compensation plans. 
      Mr. O'Neal elected to defer these amounts from cash bonus awards in past years, as 
      discussed further in the "Non-Qualified Deferred Compensation" table and related notes 
      in this Proxy Statement.

Departures of Mr. Kim and Mr. Fakahany. Mr. Kim served as Executive Vice President and Co-Head of Global Markets and Investment Banking until May 2007 and left the Company on November 16, 2007. In January 2008, Mr. Fakahany informed the Company of his decision to retire from the Company and resigned as Co-President and Co-Chief Operating Officer of Merrill Lynch effective February 1, 2008. Mr. Fakahany received no cash or stock bonus for performance in 2007. He will remain a salaried employee of the Company through the end of the six-month notice period provided for in his covenant agreement. The Company has entered into severance discussions with each of Mr. Kim and Mr. Fakahany, but no agreements have been reached. Any agreement with Mr. Kim or Mr. Fakahany will be subject to review and approval by the MDCC.

II. Hiring of Mr. Thain and Mr. Chai

Following Mr. O'Neal's departure, the Board of Directors formed a search committee consisting of independent directors and chaired by Mr. Cribiore, to identify and evaluate chief executive officer candidates from within and outside of the Company. After a comprehensive search, the Board decided to make an offer of employment to Mr. Thain who, prior to his joining Merrill Lynch, was CEO of NYSE Euronext, Inc. (NYSE Euronext). On November 14, 2007, the Company announced that Mr. Thain had been elected as a Director and appointed Chairman and CEO of Merrill Lynch effective December 1, 2007. In connection with the announcement, Merrill Lynch entered into an agreement with Mr. Thain that covered the terms on which he would join Merrill Lynch. The agreement was approved by the Board after considering advice from its independent compensation consultant and independent counsel. The terms of the agreement cover: (i) base salary; (ii) a cash bonus for fiscal year 2007, in recognition that Mr. Thain would not receive a bonus from NYSE Euronext for 2007 and as an incentive to join Merrill Lynch; (iii) Merrill Lynch stock options and restricted units to replace forfeited NYSE Euronext equity awards with the same value and the same vesting, exercise and other terms as the forfeited awards; and (iv) sign-on restricted units and stock options. In structuring the compensation proposal, the Board believed it was important to provide a compensation package that was sufficient to attract Mr. Thain while simultaneously providing strong incentives for future performance. It therefore structured his sign-on stock options to include performance-based vesting requirements for two-thirds of the options. See the "Grants of Plan-Based Awards" table in this Proxy Statement for a complete description of the performance features of Mr. Thain's stock options. Mr. Thain's agreement specifies that he will not be entitled to any severance or pension benefits (other than under broad-
  
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