Exhibit 10.6
AMENDED EMPLOYMENT AGREEMENT
THIS AMENDED EMPLOYMENT AGREEMENT (this "Agreement") is made at
Cleveland, Ohio, as of July 18, 2002, between KEYCORP, an Ohio corporation
("Key"), and XXXXX X. XXXXX III ("Xxxxx"). The original version of this
Agreement was entered into by Key and Xxxxx as of May 15, 1997, and was amended
as of each of November 20, 1997, July 21, 1999, and February 1, 2001. Further
amendments are incorporated below in this Agreement which replaces and
supersedes both the original version and those prior amendments.
Xxxxx has been elected as Chairman of the Board of Directors,
President, and Chief Executive Officer of Key. Key is entering into this
Agreement in recognition of the importance of Xxxxx'x services to the continuity
of management of Key and based upon its determination that it will be in the
best interests of Key and its Subsidiaries to encourage Xxxxx'x continued
attention and dedication to his duties on behalf of Key on into the future. (As
used in this Agreement, the term "Subsidiaries" and certain other capitalized
terms have the meanings ascribed to them in Section 25, at the end of this
Agreement.)
Key and Xxxxx agree, effective as of the date first set forth above
(the "Effective Date"), as follows:
1. Employment, Term. Key engages and employs Xxxxx to render such
services in the administration and operation of its affairs as, from time to
time, may be specified by its Board of Directors in a manner consistent with his
status as Chairman of the Board of Directors, President, and Chief Executive
Officer, all in accordance with the terms and conditions of this Agreement, for
a constantly renewing three year term, commencing on the Effective Date, so that
the remaining term of employment under this Agreement shall always be three
years, unless: (a) either party gives written notice to the other that the term
shall no longer constantly renew (in which case, the term of employment under
this Agreement will expire on the third anniversary of the giving of such
notice) or (b) Xxxxx'x employment under this Agreement is earlier terminated in
accordance with the provisions of one of Sections 6.2 through 6.7 of this
Agreement. Thus, for example, on July 19, 2002, the term of employment under
this Agreement will be for three years until July 19, 2005; automatically,
without any action by either party, the term will renew and extend itself on
July 20, 2002 so as to be a three year term of employment until July 20, 2005;
and so on with the term automatically extending on a daily basis so as always to
be a three year term until either notice is given under clause (a) above or
Xxxxx'x employment is earlier terminated in accordance with the provisions of
one of Sections 6.2 through 6.7 of this Agreement.
2. Full-Time Services. Xxxxx will devote all his time and efforts to
the service of Key, except for (a) usual vacation periods and reasonable periods
of illness, (b) services as an officer and director of any Subsidiary of Key,
and (c) services as a director or trustee of other corporations or organizations
that are not in competition with Key or any Subsidiary, except that, Xxxxx shall
obtain the prior approval of the Chairman of the Compensation and Organization
Committee of Key's Board of Directors before accepting a position as director or
trustee of any
for profit entity, other than Lincoln Electric Holdings, Inc. (whether the
entity is in corporate or other form).
3. Executive Officer. Except as provided in the last sentence of this
Section 3, Xxxxx shall hold the offices of Chairman of the Board of Directors,
President, and Chief Executive Officer of Key throughout the period of his
employment under this Agreement. Xxxxx and Key may, at some point in time after
the Effective Date, mutually agree that a different executive officer of Key
should hold the title of President and report to Xxxxx while Xxxxx remains as
Chairman of the Board of Directors and Chief Executive Officer of Key.
4. Compensation. For all services to be rendered by Xxxxx to Key under
this Agreement, including services as an officer, director, Chairman of the
Board of Directors, or member of any committee of Key or of any Subsidiary, or
any other services specified by the Board of Directors, Key shall pay to Xxxxx,
in equal monthly or more frequent installments, Base Salary at a rate of not
less than $950,000 per annum. The rate of Xxxxx'x Base Salary shall be subject
to increase from time to time at the discretion of the Compensation and
Organization Committee of the Board of Directors and shall not be subject to
decrease except and then only to the extent that there is an across-the-board
salary reduction applicable to the executive officers of Key generally. In
addition to being paid such Base Salary, Xxxxx shall participate fully in any
incentive compensation, retirement, savings, stock option, restricted stock,
disability, and other employee benefit and welfare plan or arrangement allowed
or provided by Key in which he would otherwise be eligible for participation as
an executive officer and employee of Key, and, to the extent not provided, Key
shall pay or provide for the payment of benefits commensurate with Xxxxx'x
annual compensation.
5. Certain Compensation Guaranties During Two Years following a Change
of Control. For so long as Xxxxx remains in the employ of the Surviving Entity
or one of its Subsidiaries during the period beginning on the day after any
Change of Control and continuing through the second anniversary of that Change
of Control (the period of Xxxxx'x employment during that two year period being
the "Guaranteed Compensation Period"), Xxxxx shall be entitled to the Incentive
Compensation Guaranty set forth in Section 5.1 and to the Option/SAR Guaranty
set forth in Section 5.2. For purposes of determining Xxxxx'x entitlement to
benefits under the Supplemental Retirement Plan, amounts received by Xxxxx in
satisfaction of the Incentive Compensation Guaranty set forth in Section 5.1, to
the extent allocable to long term incentive compensation that was taken into
account in determining Average Annual Incentive Compensation, shall be deemed to
be long term incentive compensation received by Xxxxx during the Guaranteed
Compensation Period.
5.1 Guaranteed Level of Incentive Compensation. Except as
otherwise provided in Section 5.3, the Surviving Entity shall cause
Xxxxx to receive, during the Guaranteed Compensation Period, as
incentive compensation, an amount that, on an annualized basis, is at
least equal to Xxxxx'x Average Annual Incentive Compensation. The
guaranty set forth in the immediately preceding sentence (the
"Incentive Compensation Guaranty") establishes a minimum amount of
incentive compensation that must be paid to Xxxxx with respect to
Xxxxx'x employment during the Guaranteed
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Compensation Period. Except as and to the extent otherwise permitted by
any of the provisions of Section 5.3:
(a) The Surviving Entity shall make payments to Xxxxx in cash
that satisfy the Incentive Compensation Guaranty quarterly in
arrears, within 30 days after the end of each calendar quarter
for each quarter or portion thereof during the Guaranteed
Compensation Period;
(b) If Xxxxx'x employment is terminated for any reason other
than Cause, all unpaid guaranteed incentive compensation with
respect to the Guaranteed Compensation Period shall be paid to
Xxxxx by the Surviving Entity in a lump sum within 30 business
days following the Termination Date; and
(c) If Xxxxx'x employment is terminated by the Surviving
Entity for Cause, the Surviving Entity shall not be required
to pay to Xxxxx any amount of incentive compensation otherwise
payable at any time on or after the Termination Date.
5.2 Guaranteed Participation in Stock Option and SAR Plans.
During the Guaranteed Compensation Period, Xxxxx shall participate
fully (at a level that is at least comparable to the level at which he
participated in the last calendar year that ended before the date of
the Change of Control and is at least equal to the highest targeted
level at which other executive officers of the Surviving Entity
participate) in each and every stock option and stock appreciation
right plan in which executive officers of the Surviving Entity
generally participate. The guaranty of full participation set forth in
this Section 5.2 is hereinafter sometimes referred to as the
"Option/SAR Guaranty."
5.3 Exceptions to and Alternative Means of Satisfying the
Incentive Compensation Guaranty. For purposes of the exceptions and
alternative means of satisfying the Incentive Compensation Guaranty
that are set forth in this Section 5.3, the Incentive Compensation
Guaranty shall be deemed to be made up of two parts, the "Short Term
Part" and the "Long Term Part," each of which shall bear the same
proportion, respectively, to the entire Incentive Compensation Guaranty
as Average Short Term Incentive Compensation and Average Long Term
Incentive Compensation bear, respectively, to Average Annual Incentive
Compensation.
(a) Bona fide Short Term Incentive Compensation Plan
Exception. If (i) the Surviving Entity maintains a bona fide
short term incentive compensation plan that (x) would satisfy
the Short Term Part if Xxxxx received short term incentive
compensation under that plan at Xxxxx'x target level (as the
target level is specified under that plan) and (y) specifies a
target level for Xxxxx that is the highest target level for
any executive employed by the Surviving Entity; (ii) the
Surviving Entity, in administering that plan in good faith and
without discriminating against Xxxxx, utilizes a performance
factor that is intended to rate the corporation's overall
performance for the short term compensation cycle in question;
(iii) that performance factor is uniformly applied (either in
establishing an incentive compensation pool or against each
participant's target) to all
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participants in the plan; and (iv) the application of that
factor reduces the short term incentive compensation payable
under that plan to a level below Xxxxx'x target level; then
payment of the short term incentive compensation, if any, due
to Xxxxx at the reduced level under that plan shall satisfy
the Surviving Entity's obligation under the Short Term Part
for that particular short term compensation cycle.
(b) Annual Payment Exception. If the Surviving Entity
maintains a bona fide short term incentive compensation plan
that would satisfy the Short Term Part if Xxxxx received short
term incentive compensation under that plan at Xxxxx'x target
level and that plan provides for payment of all amounts earned
at regularly scheduled times not less frequently than once a
year, the Surviving Entity may satisfy the Short Term Part by
paying incentive compensation to Xxxxx under that plan (at not
less than Xxxxx'x target level or as reduced if permitted by
5.3(a) above) at those regularly scheduled times, except that
if Xxxxx'x employment terminates for any reason other than
Cause, the Surviving Entity shall make payments under that
plan, pro rated to include all periods within the Compensation
Guaranty Period as to which Xxxxx has not yet received
incentive compensation under that plan, within 30 business
days after the Termination Date.
(c) Issuance of Restricted Stock Alternative. As an
alternative to paying Xxxxx cash to satisfy the Long Term
Part, the Surviving Entity may continue to make LTIC
Restricted Stock Grants to Xxxxx each year during the
Guaranteed Compensation Period that:
(i) are made during the same calendar quarter of the
year as the calendar quarter during which Key made
such a grant to Xxxxx in the last calendar year that
ended before the beginning of the Guaranteed
Compensation Period;
(ii) have a Fair Market Value that on an annual basis
is at least equal to Xxxxx'x Average Long Term
Incentive Compensation;
(iii) provide for time lapsed vesting of the
restricted stock subject to the grant so that the
entire grant will be fully vested not later than the
third anniversary of the date of grant if Xxxxx
continues to be employed through that date; and
(iv) have the further provision that, upon any
termination of Xxxxx'x employment other than a
termination for Cause (including, without limitation,
any termination by reason of death, disability,
voluntary or involuntary retirement, or resignation),
if, as of the Termination Date, less than a
proportionate part of the Common Shares subject to
the LTIC Restricted Stock Grant granted to Xxxxx
during the Guaranteed Compensation Period has vested,
then an additional portion of those Common Shares
shall vest immediately on the Termination Date so
that, in the aggregate, a proportionate part has
vested as of the Termination
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Date. For these purposes, "a proportionate part"
means the full number of Common Shares in the LTIC
Restricted Stock Grant multiplied by a fraction, the
numerator of which is the number of days between (x)
January 1 of the calendar year in which the LTIC
Restricted Stock Grant was made and (y) the last day
of the Guaranteed Compensation Period, inclusive, and
the denominator of which is 1095 (i.e., 365 times
three).
If the Surviving Entity makes LTIC Restricted Stock Grants as
provided in this 5.3(c), the Surviving Entity will have
satisfied the Long Term Part.
6. Termination.
6.1 Three Years following Notice of Non-Renewal. If either party gives
written notice to the other of his or its intention to discontinue the otherwise
automatic renewal of the term of Xxxxx'x employment hereunder (a "Non-Renewal
Notice"), that term will terminate on the third anniversary of the giving of the
Non-Renewal Notice, except that if a Change of Control occurs before that third
anniversary date and while Xxxxx remains employed by Key pursuant to this
Agreement, the Non-Renewal Notice shall be automatically abrogated and
thereafter treated as though it had never been given unless Xxxxx gives written
notice, not later than 30 days after the occurrence of the Change of Control,
that he desires to have the Non-Renewal Notice (whether it was given by Key or
by Xxxxx) continue in effect. If either party gives the other a Non-Renewal
Notice as provided in the immediately preceding sentence, that Non-Renewal
Notice remains in effect through the third anniversary of the giving of that
notice, and Xxxxx'x employment continues through that third anniversary, Xxxxx'x
employment under this Agreement shall terminate at 12:00 Midnight on that third
anniversary.
6.2 Death or Disability. Xxxxx'x employment hereunder will terminate
immediately upon Xxxxx'x death. Key may terminate Xxxxx'x employment hereunder
immediately upon giving notice of termination if Xxxxx is disabled, by reason of
physical or mental impairment, to such an extent that he is unable to
substantially perform his duties under this Agreement for 180 consecutive days.
6.3 For "Cause" Absent a Change of Control. At any time that is either
before the occurrence of any Change of Control or after the second anniversary
of the then most recent Change of Control, Key may terminate Xxxxx'x employment
hereunder for "Cause" if :
(a) Xxxxx commits a felony (other than felonious operation of a motor
vehicle);
(b) Xxxxx commits an act or series of acts of dishonesty in the course
of his employment that are materially inimical to the best interests of
Key or a Subsidiary as determined by Majority Action of the Board of
Directors and, if the act or acts are capable of being cured, Xxxxx
fails to cure or take all reasonable steps to cure within 30 days of
notice from the Board of Directors to Xxxxx;
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(c) Key or any Subsidiary has been ordered or directed by any federal
or state regulatory agency with jurisdiction to terminate or suspend
Xxxxx'x employment and such order or directive has not been vacated or
reversed upon appeal;
(d) Xxxxx continues to violate his obligation under Section 10.1 not to
engage in Competitive Activities for more than ten days after the Board
of Directors has by Majority Action advised him in writing to cease
those activities; or
(e) Other than for disability, Xxxxx abandons and consistently fails to
attempt to perform his duties and responsibilities as specified from
time to time by the Board of Directors for 90 consecutive days after
the Board of Directors has by Majority Action advised him in writing of
that failure.
6.4 For "Cause" Within Two Years After a Change of Control. From the
date on which occurs any Change of Control and thereafter through the second
anniversary of that Change of Control, the Surviving Entity and its Subsidiaries
may terminate Xxxxx'x employment under this Agreement for "Cause" only if :
(a) Xxxxx is convicted of a felony (other than felonious operation of a
motor vehicle);
(b) Xxxxx commits an act or series of acts of dishonesty in the course
of his employment that are materially inimical to the best interests of
the Surviving Entity or any of its Subsidiaries and that constitutes
the commission of a felony (other than felonious operation of a motor
vehicle), all as determined in good faith by the vote of three quarters
of the entire number of members of the Board of Directors, which
determination is confirmed by a panel of three arbitrators appointed
and acting in accordance with the rules of the American Arbitration
Association for the purpose of reviewing that determination;
(c) The Surviving Entity or any of its Subsidiaries has been ordered or
directed by any federal or state regulatory agency with jurisdiction to
terminate or suspend Xxxxx'x employment and, notwithstanding the best
efforts of the Surviving Entity and/or its relevant Subsidiary or
Subsidiaries to oppose, initially, and to appeal, thereafter, the order
or directive, that order or directive has not been vacated or reversed
upon appeal; or
(d) Xxxxx continues to violate his obligation under Section 10.1 not to
engage in Competitive Activities for more than ten days after the Board
of Directors has by Majority Action advised him in writing to cease
those activities, that violation is material, and the fact that the
violation both was material and so continued beyond that ten day period
is confirmed by a panel of three arbitrators appointed and acting in
accordance with the rules of the American Arbitration Association for
the purpose of determining whether the violation both was material and
so continued beyond that ten day period.
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If (x) the Surviving Entity or any of its Subsidiaries terminates the employment
of Xxxxx during the two year period beginning on the date of a Change of Control
and at a time when it has "Cause" therefor under clause (c) above, (y) the order
or directive is subsequently vacated or reversed on appeal and the vacation or
reversal becomes final and no longer subject to further appeal, and (z) the
Surviving Entity or any of its Subsidiaries fails to offer to reinstate Xxxxx to
employment under this Agreement within ten days of the date on which the
vacation or reversal becomes final and no longer subject to further appeal, the
Surviving Entity and its Subsidiaries will be deemed to have terminated Xxxxx
without Cause during the two year period beginning on the date of the Change of
Control.
6.5 By Key Without Cause. Key may terminate Xxxxx'x employment
hereunder without Cause at any time by Majority Action of the Board of
Directors.
6.6 By Xxxxx Following Constructive Termination at Any Time. Xxxxx may
terminate his employment hereunder "on grounds of Constructive Termination"
(and, if Xxxxx elects to terminate his employment in such circumstances, he will
be deemed to have been "Constructively Terminated" and not to have "Voluntarily
Resigned" or "Voluntarily Retired") if, at any time:
(a) Xxxxx'x Base Salary is reduced other than in connection with, and
then only to the extent of, a general across-the-board salary reduction
applicable to the executive officers of Key generally;
(b) Xxxxx is excluded from full participation in any incentive, option,
restricted stock, or other compensatory plan applicable to executive
officers of Key generally;
(c) Xxxxx is subject to Demotion or Removal;
(d) Key requests Xxxxx'x resignation or retirement at a time when Key
does not have grounds to terminate Xxxxx'x employment for Cause; or
(e) Xxxxx'x principal place of employment for Key is relocated outside
of the Cleveland metropolitan area or Xxxxx is otherwise required by
Key to relocate outside the Cleveland metropolitan area.
6.7 By Xxxxx Following Constructive Termination Within Two Years After
a Change of Control. At any time during the period beginning on the date on
which occurs any Change of Control and thereafter through the second anniversary
of that Change of Control, Xxxxx may terminate his employment hereunder "on
grounds of Constructive Termination" (and, if Xxxxx elects to terminate his
employment in such circumstances, he will be deemed to have been "Constructively
Terminated" and not to have "Voluntarily Resigned" or "Voluntarily Retired") if
he could then terminate his employment on any of the grounds of Constructive
Termination listed under Section 6.6 or if:
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(a) Xxxxx'x Base Salary is reduced from the highest level in effect at
any time during the one year period ending on the date of the Change of
Control;
(b) Xxxxx is excluded from full participation in any incentive, option,
restricted stock, or other compensatory plan that was available to him
and in effect at any time during the one year period ending on the date
of the Change of Control (the "Pre-Change of Control Compensatory
Plans") unless Xxxxx is provided with substitute incentive, option,
restricted stock, and other compensatory plans that provide to Xxxxx,
in the aggregate, at least substantially equivalent compensatory
opportunities as would have been provided had the Pre- Change of
Control Compensatory Plans remained in effect with Xxxxx as a full
participant therein;
(c) Following notice by Xxxxx to the Surviving Entity and an
opportunity by the Surviving Entity to cure, the Surviving Entity fails
to satisfy the Incentive Compensation Guaranty or the Option/SAR
Guaranty or Xxxxx is otherwise excluded from full participation in any
incentive, option, restricted stock, or other compensation plan that is
generally applicable to executive officers of the Surviving Entity
after the Change of Control;
(d) The headquarters of the Surviving Entity is located outside of the
Cleveland metropolitan area;
(e) Xxxxx determines in good faith that his responsibilities, duties,
or authorities with the Surviving Entity are materially reduced from
those in effect before the Change of Control and the reduction has not
been cured within thirty days after Xxxxx gives notice to the Board of
Directors of the Surviving Entity of his election to terminate his
employment based upon that reduction; or
(f) Xxxxx determines in good faith that as a result of the Change of
Control he is unable to carry out the authorities, powers, functions,
responsibilities, or duties as Chairman of the Board of Directors and
Chief Executive Officer as those authorities, powers, functions,
responsibilities, or duties attached to those positions were in effect
before the Change of Control and the Board of Directors of the
Surviving Entity fails to fully address those issues (as determined by
Xxxxx in good faith) within thirty days after Xxxxx gives notice to the
Board of Directors of his determination under this clause (f) and the
basis of such determination.
For purposes of clause (c), the Surviving Entity will be deemed to have had an
opportunity to cure and to have failed to effect a cure if the failure to
satisfy the Incentive Compensation Guaranty or the Option/SAR Guaranty, as the
case may be, persists (as determined in good faith by Xxxxx) for more than
thirty calendar days after Xxxxx has given notice to the Surviving Entity of the
existence of that failure.
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7. Severance Payments and Benefits upon Termination.
7.1 Termination by Key Without Cause, etc., or by Xxxxx Following
Constructive Termination. If Xxxxx'x employment is terminated by Key (or, if
applicable, the Surviving Entity) for any reason other than Cause, disability,
or death, or if Xxxxx is Constructively Terminated:
(a) Base Salary through Termination Date. Key shall pay to Xxxxx, at
the same time or times as would have been the case absent the
termination, any unpaid Base Salary due or to become due to Xxxxx with
respect to any period ending on or before the Termination Date.
(b) Short Term Incentive Compensation through Termination Date. Key
shall pay to Xxxxx, within 30 days after the Termination Date, as short
term incentive compensation with respect to each short term incentive
compensation plan in which Xxxxx is a participant, an amount equal to a
pro rata portion of Xxxxx'x targeted short term incentive compensation
under that plan for the calendar year in which the Termination Date
falls. For these purposes, a "pro rata portion" means the percentage
figure determined by dividing the number of days between January 1 of
the calendar year in question through the Termination Date, inclusive,
by 365. Any amount paid by Key to Xxxxx pursuant to this Section 7.1(b)
with respect to a particular short term incentive compensation plan in
which Xxxxx is a participant shall reduce, but not below zero, the
amount that Key is required to pay to Xxxxx under that plan as short
term incentive compensation for the calendar year in which the
Termination Date falls, but that short term incentive compensation plan
shall in all other respects be governed by its terms.
(c) Lump Sum Payment. Key shall pay to Xxxxx, within 30 days after the
Termination Date, a lump sum severance benefit equal to three times the
sum of (i) one year's Base Salary (at the highest rate in effect at any
time before the Termination Date) plus (ii) his Average Annual
Incentive Compensation;
(d) Retirement and Savings Plan Participation. For the period beginning
on the day after the Termination Date and ending on the third
anniversary of the Termination Date (the "Continuing Benefit Period"),
Key shall cause Xxxxx to continue to be covered by and to participate
in all Retirement Plans and Savings Plans that he was entitled to be
covered by and participating in as an officer of Key immediately before
the Termination Date in the same manner and to the same extent as if
Xxxxx continued in the full-time employ of Key throughout the
Continuing Benefit Period, except where such coverage or participation
is Impermissible. For these purposes: (i) the entire Continuing Benefit
Period shall be included in determining Xxxxx'x years of service, (ii)
amounts received by Xxxxx under clause (c)(i) above shall be deemed to
be base salary received by Xxxxx ratably during the Continuing Benefit
Period, and (iii) amounts received by Xxxxx under clause (c)(ii) above
shall be deemed to be incentive compensation
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received by Xxxxx ratably during the Continuing Benefit Period and
shall, if relevant, be allocated between short term incentive
compensation and long term incentive compensation based on the degree
to which awards of each type of incentive compensation were taken into
account in determining Average Annual Incentive Compensation. If, at
any time during the Continuing Benefit Period, Key determines in good
faith that continuing Xxxxx'x coverage by and participation in any of
the Retirement Plans or any of the Savings Plans during the Continuing
Benefit Period is Impermissible, Xxxxx shall not be covered by and
participate in such affected plan or plans during the Continuing
Benefit Period, but Key shall provide to Xxxxx under this Agreement, as
a supplemental retirement benefit, payments and benefits that put Xxxxx
in the same position that he would have been in had he continued to be
covered by and participated in all such affected plan or plans
throughout the Continuing Benefit Period to the same extent as he was a
participant immediately before the Termination Date, with the
supplemental payments and benefits under this sentence being payable to
Xxxxx (or, if applicable, to his wife, estate, or designated
beneficiary) at the same time and with the same payment options as
would be applicable under the affected plan or plans in question.
(e) Medical, Disability, and Group Term Life Coverage. Through the
third anniversary of the Termination Date, Key shall continue to
maintain in effect medical (including dental) coverage, disability
coverage, and group term life insurance for the benefit of Xxxxx and
his dependents at the same levels and subject to the same (by dollar
amount) employee contribution requirement, if any, as had been in
effect for the benefit of Xxxxx and his dependents before the
Termination Date. After the third anniversary of the Termination Date,
Xxxxx and his dependents shall be provided retiree medical benefits
that are at least equal to those that Xxxxx and his dependents would
have been entitled to under the Retiree Medical Benefits Plan if Xxxxx
had retired from Key on the Termination Date after satisfying all
eligibility requirements for retiree medical benefits under that plan.
The retiree medical benefits shall be provided under the Retiree
Medical Benefit Plan, with the cost thereof borne as between Key and
Xxxxx and his dependents as provided in that plan, if and so long as
that plan remains in effect and Xxxxx and his dependents are in fact
eligible for the intended benefits thereunder. In all other
circumstances, the retiree medical benefits shall be provided directly
by Key, with the cost thereof borne as between Key and Xxxxx and his
dependents in the same manner as would have been the case if the
benefits had been provided under the Retiree Medical Benefits Plan
rather than directly by Key.
7.2 Effect of Death While in Employ of Key. If Xxxxx dies while
employed by Key:
(a) Key shall pay to Xxxxx'x estate any unpaid Base Salary due or to
become due to Xxxxx with respect to any period ending before his death
and Key shall
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have no further obligations to Xxxxx for Base Salary for any period
after Xxxxx'x death.
(b) Key shall continue to maintain medical (including dental) coverage
in effect (i) for the benefit of Xxxxx'x wife, for her lifetime, and
(ii) for the benefit of each of Xxxxx'x children, through the earlier
of the date on which he or she attains age 23 or has ceased for more
than 120 consecutive days to be a full time student, in each case at
Key's sole cost and at the highest levels as had been in effect for the
benefit of Xxxxx'x wife and each of his children, as the case may be,
at any time before the Termination Date.
(c) Upon his death, Xxxxx'x rights under any other plan or benefit of
Key shall be governed by the respective terms thereof.
7.3 Effect of Disability While in Employ of Key. If, while Xxxxx is
employed by Key, he becomes disabled, by reason of physical or mental
impairment, to such an extent that he is unable to perform his duties under this
Agreement:
(a) Key may relieve Xxxxx of his duties under this Agreement for as
long as Xxxxx is so disabled.
(b) Key shall pay to Xxxxx all Base Salary and incentive compensation
to which he would have been entitled under this Agreement and under
applicable incentive compensation plans had he continued to be actively
employed by Key to the earliest of (i) the date on which he becomes
eligible for payment of long term disability benefits under the Long
Term Disability Benefit Plan, (ii) the date of his death, or (iii) the
third anniversary of the first date on which his employment hereunder
could have been terminated by Key pursuant to the second sentence of
Section 6.2, except that if, after Xxxxx has become so disabled and
before he is terminated by Key pursuant to the second sentence of
Section 6.2, Xxxxx recovers so that he is no longer so disabled to such
an extent that he is unable to perform his duties under this Agreement,
Xxxxx shall be restored to his duties under this Agreement and entitled
to the benefits of and subject to this Agreement as if no period of
disability had occurred.
(c) The amounts payable to Xxxxx for any month under this Section 7.3
shall be reduced, but not below zero, by the full amount of the
payments, if any, received by Xxxxx for that month (i) from all
Retirement Plans, (ii) from the Long Term Disability Plan, and (iii)
from any other disability plan the entire cost of which is borne by
Key.
(d) For purposes of all incentive compensation, retirement, savings,
stock option, restricted stock, disability, and other employee benefit
and welfare plans or arrangements allowed or provided by Key to
executive officers, Xxxxx shall be treated in the same manner that Key
treats other executive officers who become disabled.
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(e) Except as provided in this Section 7.3, Key shall have no further
obligations to Xxxxx for Base Salary or incentive compensation for any
period during which Xxxxx is so disabled to such an extent that he is
unable to perform his duties under this Agreement.
(f) The payments provided for under this Section 7.3 shall be made as
provided for in this Section notwithstanding any termination of Xxxxx'x
employment under the second sentence of Section 6.2.
7.4 Effect of Termination for Cause. If Xxxxx'x employment is
terminated for Cause, Key may, by giving written notice to Xxxxx, terminate all
its obligations remaining to be performed or observed by it under this Agreement
(other than the obligation to pay Base Salary to Xxxxx through the Termination
Date and the obligations of Key under Sections 11, 12.3, and 14 and, to the
extent then applicable by its terms, Section 15), except no termination of Key's
obligations under this Agreement shall affect Xxxxx'x rights under any plan or
benefit of Key, all of which shall be governed by their respective terms.
7.5 Effect of Termination Upon Xxxxx'x Voluntary Resignation or
Voluntary Retirement. If Xxxxx'x employment is terminated by Xxxxx'x Voluntary
Resignation or Voluntary Retirement, Key may, by giving written notice to Xxxxx,
terminate all its obligations remaining to be performed or observed by it under
this Agreement (other than the obligation to pay Base Salary to Xxxxx through
the Termination Date, the obligations of Key under Sections 11, 12, and 14 and,
to the extent then applicable by their respective terms, the obligations of Key
under Sections 15, 16, and 17), except no termination of Key's obligations under
this Agreement shall affect Xxxxx'x rights under any plan or benefit of Key, all
of which shall be governed by their respective terms.
8. No Set-Off; No Obligation to Seek Other Employment or to Otherwise
Mitigate Damages; No Effect Upon Other Plans. Key's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim whatsoever that Key or any of its Subsidiaries may have
against Xxxxx, except that the prohibition on set-off, counterclaim, recoupment,
defense, or other claim contained in this sentence shall not apply if Xxxxx'x
employment is terminated by Key for Cause at any time that is either before the
occurrence of any Change of Control or after the second anniversary of the then
most recent Change of Control. Xxxxx shall not be required to mitigate damages
or the amount of any payment provided for under this Agreement by seeking other
employment or otherwise. The amount of any payment provided for under this
Agreement shall not be reduced by any compensation or benefits earned by Xxxxx
as the result of employment by another employer or otherwise after the
termination of Xxxxx'x employment. Neither the provisions of this Agreement nor
the making of any payment provided for hereunder, nor the termination of Key's
obligations under this Agreement, shall reduce any amounts otherwise payable, or
in any way diminish Xxxxx'x rights, under any incentive compensation plan, stock
option or stock appreciation rights plan, restricted stock plan or agreement,
deferred compensation, retirement, or supplemental retirement plan,
12
stock purchase and savings plan, disability or insurance plan, or other similar
contract, plan, or arrangement of Key or any Subsidiary, all of which shall be
governed by their respective terms.
9. Payments Are in Lieu of Severance Payments. If Xxxxx becomes entitled
to receive payments under this Agreement as a result of termination of his
employment, those payments shall be in lieu of any and all other claims or
rights that Xxxxx may have against Key for severance, separation, and/or salary
continuation pay upon that termination of his employment.
10. Limitations on Competition.
10.1 During Employment. Xxxxx shall not engage in any
Competitive Activity during the period of his employment with Key.
10.2 Two Years in Certain Circumstances. If Xxxxx'x employment
is terminated within two years after the occurrence of a Change of
Control either by Key without Cause or by Xxxxx after he has been
Constructively Terminated, Xxxxx shall not engage in any Competitive
Activity during the two year period ending on the second anniversary of
the Termination Date.
10.3 Three Years Following Any Other Termination. If Xxxxx'x
employment is terminated (whether by him, by Key, or otherwise) in any
circumstances other than those expressly covered by Section 10.2 above,
Xxxxx shall not engage in any Competitive Activity at any time during
the three year period ending on the third anniversary of the
Termination Date.
10.4 No Further Obligation to Make Payments or Provide Benefits
Following Continuing Breach. If Xxxxx continues to violate the
restriction set forth in Section 10.2 or 10.3, as may be applicable,
after the Board of Directors has advised him by Majority Action in
writing to cease those activities and that violation is material, Key
shall thereupon be relieved of all further obligations to make payments
and provide benefits to Xxxxx under any of the provisions contained in
Section 7.1. Xxxxx shall not be required to repay to Key any payment
received by him before he began to engage in any such Competitive
Activity.
10.5 Other Remedies. In addition to other remedies provided by
law or equity, upon a breach by Xxxxx of any prohibition on Competitive
Activity contained in this Section 10, Key shall be entitled to have a
court of competent jurisdiction enter an injunction against Xxxxx
restraining him from any further breach of any such prohibition.
11. Indemnification. Key shall indemnify Xxxxx, to the full extent
permitted or authorized by the Ohio General Corporation Law as it may from time
to time be amended, if Xxxxx is made or threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that Xxxxx is
or was a director, officer, or employee of Key or any Subsidiary, or is or was
serving at the request of Key or any Subsidiary as a director, trustee, officer,
or employee of a bank, corporation, partnership, joint venture, trust, or other
enterprise. The indemnification
13
provided by this Section 11 shall not be deemed exclusive of any other rights to
which Xxxxx may be entitled under the articles of incorporation or the
regulations of Key or of any Subsidiary, or any agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in Xxxxx'x official
capacity and as to action in another capacity while holding such office, and
shall continue as to Xxxxx after Xxxxx has ceased to be a director, trustee,
officer, or employee and shall inure to the benefit of the heirs, executors, and
administrators of Xxxxx.
12. Reimbursement of Certain Expenses.
12.1 Key shall pay, as incurred, all expenses, including the
reasonable fees of counsel engaged by Xxxxx, of defending any action
brought to have this Agreement declared invalid or unenforceable.
12.2 Key shall pay, as incurred, all expenses, including the
reasonable fees of counsel engaged by Xxxxx, of prosecuting any action
to compel Key to comply with the terms of this Agreement upon receipt
from Xxxxx of an undertaking to repay Key for such expenses if, and
only if, it is ultimately determined by a court of competent
jurisdiction that Xxxxx had no reasonable grounds for bringing that
action (which determination need not be made simply because Xxxxx fails
to succeed in the action).
12.3 Expenses (including attorney's fees) incurred by Xxxxx in
defending any action, suit, or proceeding commenced or threatened
against Xxxxx for any action or failure to act as an employee, officer,
or director of Key or any Subsidiary shall be paid by Key, as they are
incurred, in advance of final disposition of the action, suit, or
proceeding upon receipt of an undertaking by or on behalf of Xxxxx in
which he agrees to reasonably cooperate with Key or the Subsidiary, as
the case may be, concerning the action, suit, or proceeding, and (a) if
the action, suit, or proceeding is commenced or threatened against
Xxxxx for any action or failure to act as a director, to repay the
amount if it is proved by clear and convincing evidence in a court of
competent jurisdiction that his action or failure to act involved an
act or omission undertaken with deliberate intent to cause injury to
Key or a Subsidiary or with reckless disregard for the best interests
of Key or a Subsidiary or (b) if the action, suit, or proceeding is
commenced or threatened against Xxxxx for any action or failure to act
as an officer or employee, to repay the amount if it is ultimately
determined that he is not entitled to be indemnified. The obligation of
Key to advance expenses provided for in this Section 12.3 shall not be
deemed exclusive of any other rights to which Xxxxx may be entitled
under the articles of incorporation or the regulations of Key or of any
Subsidiary, or any agreement, vote of shareholders or disinterested
directors, or otherwise.
13. Gross-Up of Payments Deemed to be Excess Parachute Payments.
13.1 Key and Xxxxx acknowledge that, following a Change of
Control, one or more payments or distributions to be made by Key to or
for the benefit of Xxxxx (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, under some other
plan, agreement, or arrangement, or otherwise) (a "Payment") may be
determined to be an "excess parachute payment" that is not deductible
by Key for Federal income tax purposes and with respect to which Xxxxx
will
14
be subject to an excise tax because of Sections 280G and 4999,
respectively, of the Internal Revenue Code (hereinafter referred to
respectively as "Section 280G" and "Section 4999"). If Xxxxx'x
employment is terminated after a Change of Control occurs, the
Accounting Firm, which, subject to any inconsistent position asserted
by the Internal Revenue Service, shall make all determinations required
to be made under this Section 13, shall determine whether any Payment
would be an excess parachute payment and shall communicate its
determination, together with detailed supporting calculations, to Key
and to Xxxxx within 30 days after the Termination Date or such earlier
time as is requested by Key. Key and Xxxxx shall cooperate with each
other and the Accounting Firm and shall provide necessary information
so that the Accounting Firm may make all such determinations. Key shall
pay all of the fees of the Accounting Firm for services performed by
the Accounting Firm as contemplated in this Section 13.
13.2 If the Accounting Firm determines that any Payment gives
rise, directly or indirectly, to liability on the part of Xxxxx for
excise tax under Section 4999 (and/or any penalties and/or interest
with respect to any such excise tax), Key shall make additional cash
payments to Xxxxx, from time to time and at the same time as any
Payment constituting an excess parachute payment is paid or provided to
Xxxxx, in such amounts as are necessary to put Xxxxx in the same
position, after payment of all federal, state, and local taxes (whether
income taxes, excise taxes under Section 4999 or otherwise, or other
taxes) and any and all penalties and interest with respect to any such
excise tax, as Xxxxx would have been in after payment of all federal,
state, and local income taxes if the Payments had not given rise to an
excise tax under Section 4999 and no such penalties or interest had
been imposed.
13.3 If the Internal Revenue Service determines that any
Payment gives rise, directly or indirectly, to liability on the part of
Xxxxx for excise tax under Section 4999 (and/or any penalties and/or
interest with respect to any such excise tax) in excess of the amount,
if any, previously determined by the Accounting Firm, Key shall make
further additional cash payments to Xxxxx not later than the due date
of any payment indicated by the Internal Revenue Service with respect
to these matters, in such amounts as are necessary to put Xxxxx in the
same position, after payment of all federal, state, and local taxes
(whether income taxes, excise taxes under Section 4999 or otherwise, or
other taxes) and any and all penalties and interest with respect to any
such excise tax, as Xxxxx would have been in after payment of all
federal, state, and local income taxes if the Payments had not given
rise to an excise tax under Section 4999 and no such penalties or
interest had been imposed.
13.4 If Key desires to contest any determination by the
Internal Revenue Service with respect to the amount of excise tax under
Section 4999, Xxxxx shall, upon receipt from Key of an unconditional
written undertaking to indemnify and hold Xxxxx harmless (on an after
tax basis) from any and all adverse consequences that might arise from
the contesting of that determination, cooperate with Key in that
contest at Key's sole expense. Nothing in this Section 13.4 shall
require Xxxxx to incur any expense other than expenses with respect to
which Key has paid to Xxxxx sufficient sums so that after the payment
of the expense by Xxxxx and taking into account the payment by Key with
15
respect to that expense and any and all taxes that may be imposed upon
Xxxxx as a result of his receipt of that payment, the net effect is no
cost to Xxxxx. Nothing in this Section 13.4 shall require Xxxxx to
extend the statute of limitations with respect to any item or issue in
his tax returns other than, exclusively, the excise tax under Section
4999. If, as the result of the contest of any assertion by the Internal
Revenue Service with respect to excise tax under Section 4999, Xxxxx
receives a refund of a Section 4999 excise tax previously paid and/or
any interest with respect thereto, Xxxxx shall promptly pay to Key such
amount as will leave Xxxxx, net of the repayment and all tax effects,
in the same position, after all taxes and interest, that he would have
been in if the refunded excise tax had never been paid.
14. Deferral of Payment of Compensation under Certain Circumstances.
14.1 Section Will Not Apply if a Change of Control Occurs.
This Section 14 shall not apply to any compensation that, but for the
application of this Section 14, would be payable by Key to Xxxxx in
respect of the first calendar year in which a Change of Control occurs
(the "Change Year") or in respect of any later calendar year. For
example, if the Committee has given notice to Xxxxx, as contemplated by
Section 14.2, that this Section 14 shall apply to compensation
otherwise payable in respect of a particular calendar year and a Change
of Control thereafter occurs during that calendar year, this Section 14
shall not apply to that compensation, notwithstanding the notice given
by the Committee.
14.2 Section to Apply on an Annual Basis and Only If Timely
Notice to that Effect Given by Committee. This Section 14 shall apply
to any compensation that, but for this Section 14, is payable to Xxxxx
in respect of any particular calendar year before the Change Year if,
and only if, on or before March 31 of that particular calendar year,
the Committee notifies Xxxxx in writing of the Committee's
determination that this Section 14 shall so apply. If the Committee so
determines and so provides Xxxxx with such a timely notice as to any
such particular calendar year, this Section 14 shall apply according to
its terms to all compensation that, but for this Section 14, becomes
payable to Xxxxx in respect of that particular calendar year.
Conversely, if the Committee does not so notify Xxxxx in writing on or
before March 31 of any particular calendar year, this Section 14 will
not apply to any compensation that, but for this Section 14, becomes
payable to Xxxxx in respect of that particular calendar year. For
purposes of this Section 14, compensation payable by Key to Xxxxx is
"in respect of" a particular calendar year if it is compensation that,
ignoring both (x) the effect, if any, of Section 162(m) and (y) the
application of this Section 14, the compensation would be paid by Key
to Xxxxx either during or shortly after that calendar year and would be
deductible by Key in that calendar year (assuming, for these purposes,
that Key has sufficient taxable income so that it can make use of all
possible deductions during that calendar year).
14.3 Section 162(m). For purposes of this Section 14, the term
"Section 162(m)" shall mean Section 162(m) of the Internal Revenue Code
(which, as amended by the Revenue Reconciliation Act of 1993,
prescribes rules disallowing deductions for certain "applicable
employee remuneration" to any of five specified
16
"covered employees" of a publicly held corporation in excess of
$1,000,000 per year), as from time to time amended, and the
corresponding provisions of any similar law subsequently enacted, and
to all regulations issued under that section and any such provisions.
14.4 Deferral. Except as otherwise provided in either of
Section 14.5 or Section 14.6, below, if this Section 14 applies with
respect to any particular calendar year by reason of timely notice
having been given by the Committee to Xxxxx with respect to that
calendar year as contemplated by Section 14.2 and Key determines that,
after giving effect to all applicable elective deferrals of
compensation, any amount of compensation (including any Base Salary and
any incentive compensation payable under any incentive compensation
plan in which Xxxxx is a participant) otherwise payable to Xxxxx under
this Agreement at any particular time in respect of that particular
calendar year (the "Scheduled Time"),
(a) would not be deductible by Key if paid at the Scheduled
Time by reason of the disallowance rules of Section 162(m),
and
(b) would be deductible by Key if deferred until and paid
during a later year, that amount of compensation shall be
deferred until, and paid during, the year that is determined
by Key to be the first year following the year of deferral
during which the compensation can be paid without disallowance
of the deduction for payment of the compensation by reason of
Section 162(m). If Key determines that in any year following
the year of deferral a portion of, but not all of, the amounts
deferred (together with interest thereon as provided in
Section 14.7, below) can be paid without disallowance of the
deduction, that portion that can be so paid shall be paid by
Key during that year and the remainder, except as otherwise
provided in Section 14.5 or Section 14.6, below, shall
continue to be deferred until a later year.
14.5 Early Payout of Deferred Amount if Deferral is Determined
to be Ineffective. If any amount of compensation is deferred under
Section 14.4 with the expectation that it will be deductible by Key if
paid in a later year and Key later determines that the compensation
will not be deductible by Key even if payment thereof is deferred until
a later year, then, within 30 days of the date on which that
determination is made, the deferral with respect to that compensation
shall terminate and Key shall pay that compensation to Xxxxx.
14.6 Payout Following Termination of Employment in All Events.
On April 15 of the year immediately following the year in which Xxxxx
ceases to be employed by Key, Key shall pay to Xxxxx, in a single lump
sum, all amounts of compensation that have been deferred pursuant to
this Section 14 and have not previously been paid so that, as of the
close of business on that date, no amount of compensation will remain
deferred under this Section 14 whether or not Key is entitled to a
deduction with respect to the payment of that compensation.
17
14.7 Interest on Deferred Amounts. Upon payment of any amounts
of compensation deferred for any period of time pursuant to this
Section 14, Key shall pay to Xxxxx an additional amount equivalent to
the interest that would have accrued on such deferred compensation if
interest accrued thereon on a daily basis from the date on which that
compensation would have been paid but for this Section 14 through the
date on which that compensation is paid at a rate varying from month to
month and equal to 50 basis points higher than the effective annual
yield of the average of the Moody's Average Corporate Bond Yield Index
for the previous month, as published by Xxxxx'x Investor Services, Inc.
(or any successor published thereto), or, if such index is no longer
published, a substantially similar index selected by the Accounting
Firm, with interest compounded as of the end of each month.
14.8 Miscellaneous. Xxxxx'x rights with respect to payment
during his lifetime of any compensation deferred under this Section 14
shall not be subject to assignment. If Xxxxx dies before all
compensation deferred under this Section 14 has been paid to him, any
such unpaid compensation shall be paid, at the same time it would have
been paid if Xxxxx had not died but had merely ceased to be an employee
of Key on the date of his death (or, if earlier, on the last date he
actually was an employee of Key), to his estate or, if Xxxxx shall so
direct to Key in writing, to his wife or to a trust created by Xxxxx.
The obligation of Key to make payments of compensation deferred
pursuant to this Section 14 constitutes the unsecured promise of Key to
make payments from its general assets as and when due and neither Xxxxx
nor any person claiming through him shall have, as a result of this
Section 14, any lien or claim on any assets of Key that is superior to
the claims of the general creditors of Key.
15. Vesting of Supplemental Retirement Benefit. Upon any termination of
Xxxxx'x employment with Key other than (a) a termination by Key for Cause before
Xxxxx attains age 55 or (b) by Xxxxx'x Voluntary Resignation before he attains
age 55, Xxxxx will be treated as having satisfied all of the requirements for
eligibility for and as being fully vested in a supplemental retirement benefit
under the Supplemental Retirement Plan. Nothing in this Section 15 shall be
deemed to create an inference that Xxxxx is not otherwise eligible for or fully
vested in a supplemental retirement benefit under the Supplemental Retirement
Plan and whether or not he is so otherwise eligible for or fully vested in such
a benefit will be determined pursuant to the terms of the Supplemental
Retirement Plan without reference to this Section 15.
16. Vesting of, and Extension of Exercise Period for, Stock Options.
All stock options (other than so-called "performance options," which are options
that vest or become exercisable only if certain stock price and/or financial
performance tests are achieved) granted to Xxxxx by Key after February 1, 2001
that remain outstanding on the Termination Date shall be deemed to have vested
(to the extent not already vested) as of immediately prior to the termination of
his employment unless Xxxxx'x employment is terminated by Key for Cause, by
Xxxxx'x Voluntary Resignation before the fifth anniversary of the date of grant
of the particular stock option, or as a result of death or disability. Each
stock option (other than any performance option) granted to Xxxxx by Key after
February 1, 2001 that remains outstanding and is vested on the Termination Date
(whether pursuant to the immediately preceding sentence or otherwise) shall be
exercisable after the Termination Date until that particular option's expiration
date (which is the last date
18
that the option would be exercisable in accordance with its terms if Xxxxx had
continued in Key's employment indefinitely) unless Xxxxx'x employment is
terminated by Key for Cause or by Xxxxx'x Voluntary Resignation before the fifth
anniversary of the date of grant of the particular stock option. In the case of
incentive stock options granted to Xxxxx by Key after February 1, 2001, this
Section 16 shall apply, recognizing however that failure to exercise the
incentive stock option within the time periods after the Termination Date
prescribed by the Internal Revenue Code may cause the option to fail to qualify
for incentive stock option treatment under the Internal Revenue Code. If, in
accordance with its terms and without regard to this Section 16, an option would
vest earlier than is provided in this Section 16 or would be exercisable for a
longer period than is provided in this Section 16, the terms of the option
providing for earlier vesting and/or a longer period of exercisability, as the
case may be, shall govern. Each stock option (other than performance options)
granted to Xxxxx by Key after February 1, 2001 shall be deemed to contain the
provisions of this Section 16 as a part of the award instrument evidencing such
option.
17. Post-Termination Benefits. Following termination of his employment
with Key for any reason other than Cause, Voluntary Resignation, or death, Key
shall continue to provide to Xxxxx the following benefits:
(a) Payment of monthly membership dues at one country club, one
luncheon club, and one professional or cultural group or association
located in the Greater Cleveland metropolitan area.
(b) Payment of the cost of tax preparation assistance but only to the
extent and as long as Key provides this benefit to its executive
officers.
(c) Payment of the cost of an executive physical examination but only
to the extent and as long as Key provides this benefit to its executive
officers.
(d) Payment of an amount equal to the meeting fee and payment of
reasonable expenses for a meeting of the Board of Directors if Xxxxx
attends Key's annual meeting of shareholders.
(e) Use of office space and secretarial support in Key facilities in
Cleveland for a period of two years following the Termination Date.
18. Savings Clause. If any payments otherwise payable to Xxxxx under
this Agreement are prohibited by any applicable statute or regulation in effect
at the time the payments would otherwise be payable, including, without
limitation, any regulation issued by the Federal Deposit Insurance Corporation
(the "FDIC") that limits so called "golden parachute payments" that can be made
by an FDIC insured institution or its holding company if the institution is
financially troubled and certain so-called "indemnification payments" (any such
statute or regulation being a "Limiting Rule"):
(a) Key will use its best efforts to obtain the consent of the
appropriate governmental agency (whether the FDIC or any other agency,
and including using its best efforts to appeal any refusal by any such
agency to grant its consent) to the
19
payment by Key to Xxxxx of the maximum amount that is permitted (up to
the amounts that would be due to Xxxxx under this Agreement or
otherwise absent the Limiting Rule); and
(b) Xxxxx will be entitled to elect to have apply, and therefore to
receive benefits directly under, either (i) this Agreement (as limited
by the Limiting Rule) or (ii) any generally applicable Key plan or
policy (including any severance, separation pay, and/or salary
continuation plan that may be in effect at the time of Xxxxx'x
termination), up to the amounts that would be due to Xxxxx under this
Agreement or otherwise absent the Limiting Rule.
19. Survival of Obligations. Except as is otherwise expressly provided
in this Agreement, the respective obligations of Key and Xxxxx hereunder shall
survive any termination of Xxxxx'x employment under this Agreement.
20. Merger or Transfer of Assets of Key. Key will not consolidate with
or merge into any other corporation, or transfer all or substantially all of its
assets to another corporation, unless such other corporation shall assume this
Agreement in a signed writing and deliver a copy thereof to Xxxxx. Upon such
assumption the successor corporation shall become obligated to perform the
obligations of Key under this Agreement, and the term "Key" as used in this
Agreement shall be deemed to refer to such successor corporation.
21. Notices. Notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
delivered in person (to the Secretary of Key in the case of notices to Key and
to Xxxxx in the case of notices to Xxxxx) or mailed by United States registered
mail, return receipt requested, postage prepaid, as follows:
If to Key:
KeyCorp
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Attention: Secretary
If to Xxxxx:
Xx. Xxxxx X. Xxxxx III
0000 Xxxxxxxxx Xxxx
Xxxxxxx Xxxxxx, Xxxx 00000
or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
22. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement which shall remain in full force and effect.
23. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is agreed
to in a writing signed by
20
Xxxxx and Key. No waiver by either party hereto at any time of any breach by the
other party of, or compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or at any prior or
subsequent time. No agreement or representation, oral or otherwise, express or
implied, with respect to the subject matter hereof has been made by either party
which is not set forth expressly in this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of Ohio.
24. Prior Agreement. This Agreement supersedes the agreement entered
into between Xxxxx and Key as of October 15, 1996 that provided Xxxxx certain
protection in the event of a Change of Control of Key.
25. Definitions.
25.1 Accounting Firm. The term "Accounting Firm" means the
independent auditors of Key for the fiscal year preceding the earlier
of (i) the year in which the Termination Date occurred, or (ii) the
year, if any, in which occurred the first Change of Control occurring
after the Effective Date, and such firm's successor or successors;
provided, however, if such firm is unable or unwilling to serve and
perform in the capacity contemplated by this Agreement, Key shall
select another national accounting firm of recognized standing to serve
and perform in that capacity under this Agreement, except that such
other accounting firm shall not be the then independent auditors for
Key or any of its affiliates (as defined in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended (the "1934
Act")).
25.2 Average Annual Incentive Compensation. The term "Average
Annual Incentive Compensation" means the sum of Average Short Term
Incentive Compensation, as defined in Section 25.4 below, and Average
Long Term Incentive Compensation, as defined in Section 25.3 below. For
purposes of this Agreement:
(a) incentive compensation means any cash based incentive
compensation, including bonuses and is calculated before any
reduction on account of deferrals;
(b) notwithstanding the fact that they are made in restricted
stock rather than in cash, any LTIC Restricted Stock Grant
shall be deemed to be long term incentive compensation;
(c) short term incentive compensation means incentive
compensation for periods of time of one year or less;
(d) targeted short term incentive compensation means:
(i) if the short term incentive compensation plan,
program, or arrangement in question designates a
targeted amount or a targeted level of achievement
applicable to Xxxxx, it means that targeted amount or
level;
21
(ii) if the short term incentive compensation plan,
program, or arrangement in question has only one
level of payout applicable to Xxxxx (other than
zero), it means that level (i.e.: the level other
than zero);
(iii) if the short term incentive compensation plan,
program, or arrangement in question does not
designate a targeted amount or level of achievement
applicable to Xxxxx but does have multiple
anticipated levels of possible payout or achievement
applicable to Xxxxx, it means (in each case excluding
from consideration any level that results in zero
payout) the middle level of payout or achievement
applicable to Xxxxx (or if there are an even number
of levels, the average of the two levels if there are
only two levels or the average of the middle two
levels if there are four or more levels); and
(iv) in all other cases, the amount anticipated or
projected to be paid under the plan, program, or
arrangement in question at the time the performance
period in question commenced.
25.3 Average Long Term Incentive Compensation. The term
"Average Long Term Incentive Compensation" means:
(a) if the Relevant Year is 2002, the dollar value of the 2002
LTIC Restricted Stock Grant;
(b) if the Relevant Year is 2003, the higher of:
(i) the dollar value of the 2002 LTIC Restricted
Stock Grant, and
(ii) the dollar value of the 2003 LTIC Restricted
Stock Grant; and
(c) if the Relevant Year is 2004 or any later year, the higher
of
(i) the average of the dollar value of the LTIC
Restricted Stock Grants made to Xxxxx in each of the
two years immediately preceding the Relevant Year
(e.g., the average of the 2003 LTIC Restricted Stock
Grant and the 2004 LTIC Restricted Stock Grant if the
Relevant Year is 2005), or, if for any reason an LTIC
Restricted Stock Grant was made to Xxxxx in only one
of those two immediately preceding years, the dollar
value of the LTIC Restricted Stock Grant for that
single year, and
(ii) the dollar value of the LTIC Restricted Stock
Grant for the Relevant Year.
For purposes of this Section 25.3, the dollar value of any LTIC
Restricted Stock Grant means the aggregate Fair Market Value of the
restricted Common Shares subject to that grant as of the date the grant
is made, without regard to changes in Key's stock price after the date
of grant or to any restrictions on those Common Shares.
22
25.4 Average Short Term Incentive Compensation. The term
"Average Short Term Incentive Compensation" means the higher of:
(a) the average of the short term incentive compensation
payable to Xxxxx for each of the last two years immediately
preceding the Relevant Year or, if for any reason short term
incentive compensation was payable to Xxxxx for only one of
those two years, the amount of short term incentive
compensation payable to Xxxxx for that year, and
(b) Xxxxx'x targeted short term incentive compensation for the
Relevant Year or for the year immediately preceding the
Relevant Year, whichever is higher.
25.5 Base Salary. The term "Base Salary" means the salary
payable to Xxxxx from time to time before any reduction for voluntary
contributions to the KeyCorp 401(k) Plan or any other deferral under
any other plan. Base Salary does not include imputed income from
payment by Key of country club membership fees or other noncash
benefits.
25.6 Board of Directors. The term "Board of Directors," when
used other than with specific reference to another entity, means the
Board of Directors of Key.
25.7 Change of Control. A "Change of Control" shall be deemed
to have occurred if, at any time after the date of this Agreement and
while Xxxxx remains in the employ of Key, there is a Change of Control
under any of clauses (a), (b), (c), or (d) below. For these purposes,
Key will be deemed to have become a subsidiary of another corporation
if any other corporation (which term shall, for all purposes of this
Section 25.7, include, in addition to a corporation, a limited
liability company, partnership, trust, or other organization) owns,
directly or indirectly, 50 percent or more of the total combined
outstanding voting power of all classes of stock of Key or any
successor to Key.
(a) A Change of Control will have occurred under this clause
(a) if Key is a party to a transaction pursuant to which Key
is merged with or into, or is consolidated with, or becomes
the subsidiary of another corporation and either
(i) immediately after giving effect to that
transaction, less than 65% of the then outstanding
voting securities of the surviving or resulting
corporation or (if Key becomes a subsidiary in the
transaction) of the ultimate parent of Key represent
or were issued in exchange for voting securities of
Key outstanding immediately prior to the transaction,
or
(ii) immediately after giving effect to that
transaction, individuals who were directors of Key on
the day before the first public announcement of (x)
the pendency of the transaction or (y) the intention
of any person or entity to cause the transaction to
occur, cease for any reason to constitute at least
51% of the directors of the surviving or resulting
corporation or (if Key becomes a subsidiary in the
transaction) of the ultimate parent of Key.
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(b) A Change of Control will have occurred under this clause
(b) if a tender or exchange offer shall be made and
consummated for 35% or more of the outstanding voting stock of
Key or any person (as the term "person" is used in Section
13(d) and Section 14(d)(2) of the 0000 Xxx) is or becomes the
beneficial owner of 35% or more of the outstanding voting
stock of Key or there is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report),
each as adopted under the 1934 Act, disclosing the acquisition
of 35% or more of the outstanding voting stock of Key in a
transaction or series of transactions by any person (as
defined earlier in this clause (b));
(c) A Change of Control will have occurred under this clause
(c) if either
(i) without the prior approval, solicitation,
invitation, or recommendation of the Board of
Directors any person or entity makes a public
announcement of a bona fide intention (A) to engage
in a transaction with Key that, if consummated, would
result in a Change Event (as defined below in this
clause (c)), or (B) to "solicit" (as defined in Rule
14a-1 under the 0000 Xxx) proxies in connection with
a proposal that is not approved or recommended by the
Board of Directors, or
(ii) any person or entity publicly announces a bona
fide intention to engage in an election contest
relating to the election of directors of Key
(pursuant to Regulation 14A, including Rule 14a-11,
under the 1934 Act),
and, at any time within the 24 month period immediately
following the date of the announcement of that intention,
individuals who, on the day before that announcement,
constituted the directors of Key (the "Incumbent Directors")
cease for any reason to constitute at least a majority thereof
unless both (A) the election, or the nomination for election
by Key's shareholders, of each new director was approved by a
vote of at least two-thirds of the Incumbent Directors in
office at the time of the election or nomination for election
of such new director, and (B) prior to the time that the
Incumbent Directors no longer constitute a majority of the
Board of Directors, the Incumbent Directors then in office, by
a vote of at least 75% of their number, reasonably determine
in good faith that the change in Board membership that has
occurred before the date of that determination and that is
anticipated to thereafter occur within the balance of the 24
month period to cause the Incumbent Directors to no longer be
a majority of the Board of Directors was not caused by or
attributable to, in whole or in any significant part, directly
or indirectly, proximately or remotely, any event under
subclause (i) or (ii) of this clause (c).
For purposes of this clause (c), the term "Change Event" shall
mean any of the events described in the following subclauses
(x), (y), or (z) of this clause (c):
(x) A tender or exchange offer shall be made for 25%
or more of the outstanding voting stock of Key or any
person (as the term "person" is used in Section 13(d)
and Section 14(d)(2) of the 0000 Xxx) is or becomes
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the beneficial owner of 25% or more of the
outstanding voting stock of Key or there is a report
filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form, or report), each as adopted
under the 1934 Act, disclosing the acquisition of 25%
or more of the outstanding voting stock of Key in a
transaction or series of transactions by any person
(as defined earlier in this subclause (x)).
(y) Key is a party to a transaction pursuant to which
Key is merged with or into, or is consolidated with,
or becomes the subsidiary of another corporation and,
after giving effect to such transaction, less than
50% of the then outstanding voting securities of the
surviving or resulting corporation or (if Key becomes
a subsidiary in the transaction) of the ultimate
parent of Key represent or were issued in exchange
for voting securities of Key outstanding immediately
prior to such transaction or less than 51% of the
directors of the surviving or resulting corporation
or (if Key becomes a subsidiary in the transaction)
of the ultimate parent of Key were directors of Key
immediately prior to such transaction.
(z) There is a sale, lease, exchange, or other
transfer (in one transaction or a series of related
transactions) of all or substantially all the assets
of Key.
(d) A Change of Control will have occurred under this clause
(d) if there is a sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all or
substantially all of the assets of Key.
25.8 Committee. The term "Committee" means the Compensation
and Organization Committee of the Board of Directors of Key or any
successor to that committee.
25.9 Common Shares. The term "Common Shares" means common
shares of Key.
25.10 Competitive Activity. Xxxxx shall be deemed to have
engaged in "Competitive Activity" if he engages, without Key's prior
written consent, in any business or business activity in which Key or
any of its Subsidiaries engages, including, without limitation,
engaging in any business activity in the banking or financial services
industry (other than as a director, officer, or employee of Key or any
of its Subsidiaries) or has an ownership interest in, or serves as a
director, officer, agent, or employee of, or in any other capacity
with, any Financial Services Company or renders services of a
consultative, advisory, or other nature to any Financial Services
Company. Notwithstanding the foregoing, Xxxxx will not be deemed to
have engaged in Competitive Activity solely because of any one or more
investments he may make in any one or more for profit entity or
entities, none of which is a Financial Services Company, or solely
because he owns stock in a publicly held Financial Services Company
that constitutes not more than 1% of the outstanding stock of that
Financial Services Company.
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25.11 Day. A "day" as used in this Agreement means a calendar
day unless business day is specifically referred to.
25.12 Demotion or Removal. Xxxxx shall be deemed to have been
subjected to "Demotion or Removal:"
(a) if Xxxxx ceases to be Chairman of the Board of Key (or,
after a Change of Control, of the Surviving Entity) at any
time before the expiration of the term of his employment
pursuant to Section 6.1, other than as a result of the
termination of his employment by Key for Cause or of his
Voluntary Resignation or Voluntary Retirement, death, or
disability,
(b) if Xxxxx ceases to be or have the responsibilities,
duties, or authorities of Chief Executive Officer of Key (or,
after a Change of Control, of the Surviving Entity) at any
time before the expiration of the term of his employment
pursuant to Section 6.1, other than as a result of the
termination of his employment by Key for Cause or of his
Voluntary Resignation or Voluntary Retirement, death, or
disability, or
(c) if Xxxxx ceases to be a director of Key (or, after a
Change of Control, of the Surviving Entity) at any time before
the expiration of the term of his employment pursuant to
Section 6.1, other than as a result of the termination of his
employment by Key for Cause or of his Voluntary Resignation or
Voluntary Retirement, death, or disability.
25.13 Fair Market Value. The term "Fair Market Value" with
respect to Common Shares means:
(a) if the Common Shares are traded on a national exchange,
the mean between the high and low sales price per Common Share
on the national exchange on the date for which the
determination of fair market value is made or, if there are no
sales of Common Shares on that date, then on the next
preceding date on which there were any sales of Common Shares,
or
(b) if the Common Shares are not traded on a national
exchange, the mean between the high and low sales price per
Common Share in the over-the-counter market, National Market
System, as report by the National Quotations Bureau, Inc. and
NASDAQ on the date for which the determination of fair market
value is made or, if there are no sales of Common Shares on
that date, then on the next preceding date on which there were
any sales of Common Shares.
25.14 Financial Services Company. The term "Financial Services
Company" means a bank, bank holding company, savings and loan
association, building and loan association, savings and loan holding
company, insurance company, investment banking, or securities company,
or other financial services company, other than Key or any of its
Subsidiaries.
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25.15 Impermissible. The term "Impermissible," when used in
the context of Xxxxx'x continued coverage by and participation in any
of the Retirement Plans or Savings Plans shall mean that such a
continuation would violate the provisions of any such plan, would cause
any such plan that is or is intended to be qualified under Section
401(a) of the Internal Revenue Code to fail to be so qualified, would
require shareholder approval, or would be unlawful.
25.16 Long Term Disability Plan. The term "Long Term
Disability Plan" means and includes the KeyCorp Long Term Disability
Plan as from time to time amended, restated, or otherwise modified,
including any long term disability plan or program that, after the
Effective Date, succeeds, replaces, or is substituted for that plan and
includes long term disability benefits or rights provided pursuant to
or under insurance contracts maintained by Key applicable to executive
officers of Key.
25.17 LTIC Restricted Stock Grant. The term "LTIC Restricted
Stock Grant" means the grant, if any, of restricted stock made by the
Committee to Xxxxx during any particular year as part of Key's ongoing
compensation program. For greater clarity, for purposes of this
Agreement:
(a) The grant of 42,025 shares of restricted stock made by the
Committee to Xxxxx pursuant to the KeyCorp Chief Executive
Officer Restricted Stock Plan by resolution adopted January
17, 2002, which provided for vesting of one-half of the
restricted stock subject to the grant (the "Time Lapse
Restricted Shares") on December 31, 2004 (or earlier in
certain circumstances involving Xxxxx'x termination following
a Change of Control) and for vesting of the remaining one-
half of the restricted stock subject to the grant (the
"Performance Accelerated Restricted Shares") on December 31,
2008 (or earlier if a stock price performance test specified
in the resolution is met or if a Change of Control occurs on
or before December 31, 2004) does constitute an LTIC
Restricted Stock Grant.
(b) By a further resolution adopted January 17, 2002, the
Committee also granted to Xxxxx an additional 21,015 shares of
restricted stock, also pursuant to the KeyCorp Chief Executive
Officer Restricted Stock Plan. This smaller grant (i) includes
Time Lapse Restricted Shares that vest on December 31, 2003
(or earlier), rather than on December 31, 2004 (or earlier),
(ii) is not, for purposes of this Agreement, considered to be
an LTIC Restricted Stock Grant, and (iii) is to be ignored
when calculating Xxxxx'x Average Long Term Incentive
Compensation.
(c) The 42,025 share LTIC Restricted Stock Grant made to Xxxxx
in 2002 is referred to in this Agreement as the "2002 LTIC
Restricted Stock Grant." The terms "2003 LTIC Restricted Stock
Grant," "2004 LTIC Restricted Stock Grant," etc. similarly
refer to LTIC Restricted Stock Grants, if any, made to Xxxxx
by resolution adopted by the Committee in the specified year.
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25.18 Majority Action. The term "Majority Action," when used
in reference to the Board of Directors, means an action taken by the
affirmative vote of a majority of the entire number of members of the
Board of Directors.
25.19 Relevant Year. The term "Relevant Year" means the year
in which the Termination Date occurs unless, during the two year period
ending on the Termination Date, there has occurred one or more Changes
of Control, in which case the term "Relevant Year" means the year in
which occurred the first Change of Control that occurred during that
two year period.
25.20 Retiree Medical Benefits Plan. The term "Retiree Medical
Benefits Plan" means and includes the KeyCorp Medical Benefits Plan For
Retirees as from time to time amended, restated, or otherwise modified,
including any plan that, after the Effective Date, succeeds, replaces,
or is substituted for that plan.
25.21 Retirement Plans. The term "Retirement Plans" means and
includes the KeyCorp Cash Balance Pension Plan, which succeeded by
merger the Retirement Plan for Employees of Society Corporation and
Subsidiaries, and the Supplemental Retirement Plan, in all cases, as
from time to time amended, restated, or otherwise modified, including
any plan that, after the Effective Date, succeeds, replaces, or is
substituted for any such plan, and all retirement plans of any nature
maintained by Key or any of its Subsidiaries in which Xxxxx was
participating prior to the Termination Date. Reference to a "Retirement
Plan," in the singular, means any of the Retirement Plans.
25.22 Savings Plan. The term "Savings Plans" means and
includes the KeyCorp 401(k) Savings Plan and the KeyCorp Excess 401(k)
Savings Plan, in both cases, as from time to time amended, restated, or
otherwise modified, including any plan that, after the Effective Date,
succeeds, replaces, or is substituted for either such plan, and all
salary reduction, savings, profit-sharing, or stock bonus plans
(including, without limitation, all plans involving employer matching
contributions, whether or not constituting a qualified cash or deferred
arrangement under Section 401(k) of the Internal Revenue Code),
maintained by Key or any of its Subsidiaries in which Xxxxx was
participating prior to the Termination Date. Reference to a "Savings
Plan," in the singular, shall mean any of the Savings Plans.
25.23 Subsidiary. The term "Subsidiary," as of any time, means
any corporation, bank, partnership, or other entity a majority of the
voting control of which is directly or indirectly owned or controlled
at that time by Key or, after a Change of Control, by the Surviving
Entity.
25.24 Surviving Entity. The term "Surviving Entity" means the
entity surviving or resulting from any Change of Control involving Key
or (if Key becomes a subsidiary in the transaction) the ultimate parent
of Key.
25.25 Supplemental Retirement Plan. The term "Supplemental
Retirement Plan" means the KeyCorp Supplemental Retirement Plan, which
succeeded by merger the Amended and Restated Society Corporation
Supplemental Retirement Plan, in all cases,
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as from time to time amended, restated, or otherwise modified,
including any plan that, after the Effective Date, succeeds, replaces,
or is substituted for the KeyCorp Supplemental Retirement Plan.
25.26 Termination Date. The term "Termination Date" means the
date on which Xxxxx'x employment with Key and its Subsidiaries
terminates.
25.27 Voluntary Resignation. The term "Voluntary Resignation"
means a termination by Xxxxx of his employment with Key and its
Subsidiaries before the expiration of the term of his employment pursuant
to Section 6.1 by voluntarily resigning at his own instance without
having been requested to so resign by Key, provided, however:
(a) A resignation by Xxxxx will not be deemed to be a
Voluntary Resignation if it occurs at a time when Xxxxx is
entitled to terminate his employment on grounds of
Constructive Termination;
(b) Xxxxx will not be considered to have Voluntarily Resigned
if he retires at any time on or after February 1, 2011; and
(c) Xxxxx will not be considered to have Voluntarily Resigned
if he retires at any time before February 1, 2011 with the
approval of the Board of Directors or the Committee.
25.28 Voluntary Retirement. The term "Voluntary Retirement"
means a termination by Xxxxx of his employment with Key and its
Subsidiaries by voluntarily retiring at his own instance without having
been requested to so retire by Key, except that any retirement by Xxxxx
will not be deemed to be a Voluntary Retirement if it occurs at a time
when Xxxxx is entitled to terminate his employment on grounds of
Constructive Termination.
IN WITNESS WHEREOF, Key and Xxxxx have executed this Agreement, Key by
its duly authorized Vice Chairman of the Board, as of the date first written
above.
KEYCORP
By: _____________________________
Xxxxxx X. Xxxxxxx
Vice Chairman of the Board
_____________________________
XXXXX X. XXXXX III
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