McDONALD FINANCIAL GROUP
DEFERRAL PLAN
The McDonald
Financial Group Deferral Plan (“Plan”) as originally
established effective January 1, 2003, is hereby amended in
its entirety to be effective January 1, 2005. The Plan as
amended and restated, is structured to maintain on a bookkeeping
basis, those not vested discretionary bonus awards that have been
granted to Plan Participants under the various KeyCorp-sponsored
Incentive Compensation Plan(s) which mandate that such
discretionary bonus awards be subject to a three year vesting
period prior to distribution to the Plan Participant. The Plan,
provides a bookkeeping structure for such discretionary bonus
awards until such awards become vested and distributed to Plan
Participants. As structured, the Plan also provides Plan
Participants with a tax-favorable savings vehicle, while permitting
KeyCorp to retain such Participants’ continued employment. It
is the intention of KeyCorp, and it is the understanding of those
Participants covered under the Plan, that the Plan is unfunded for
tax purposes. It is also the understanding of Participants covered
under the Plan that the Plan will be administered in accordance
with the requirements of Section 409A of the Code.
2.1 Meaning
of Definitions . For the purposes of this Plan, the
following words and phrases shall have the meanings hereinafter set
forth, unless a different meaning is clearly required by the
context:
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(a)
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“ Beneficiary
” shall
mean the person, persons or entity entitled under Article VIII
to receive any Plan benefits that may become payable after a
Participant’s death.
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(b)
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“ Board
” shall
mean the Board of Directors of KeyCorp, the Board’s
Compensation and Organization Committee, or any other committee
designated by the Board or a subcommittee designated by the
Board’s Compensation and Organization Committee.
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(c)
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“ Change of Control
” shall
be deemed to have occurred if under a rabbi trust arrangement
established by KeyCorp (“Trust”), as such Trust may
from time to time be amended or substituted, the Corporation is
required to fund the Trust because of a “Change of
Control” as that term is defined in the Trust.
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(d)
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“ Code
” shall
mean the Internal Revenue Code of 1986, as amended from time to
time, together with all regulations promulgated thereunder.
Reference to a section of the Code shall include such section and
any comparable section or sections of any future legislation that
amends, supplements, or supersedes such section.
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(e)
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“ Common Stock Account
” shall
mean the investment account established under the Plan for
bookkeeping purposes, in which a Participant may elect to have his
or her Discretionary Bonus Awards credited. Discretionary Bonus
Awards invested in the Common Stock Account shall be credited based
on a bookkeeping allocation of KeyCorp Common Shares (both whole
and fractional rounded to the nearest one-hundredth of a share)
that shall be equal to the amount of Discretionary Bonus Awards and
Corporate
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Contributions
invested by the Participant and by the Corporation in the Common
Stock Account. The Common Stock Account shall also reflect on a
bookkeeping basis all dividends, gains, and losses attributable to
such Common Shares. All Corporate Contributions and all
Discretionary Bonus Awards credited to the Common Stock Account,
shall be based on the ten-day average of the New York Stock
Exchange’s closing price for such Common Shares immediately
preceding, up to, and including the day such Discretionary Bonus
Awards and Corporate Contributions are credited to the
Participants’ Plan Account.
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(f)
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“ Corporate
Contributions ” shall mean the dollar amount that an
Employer has agreed to contribute on a bookkeeping basis to the
Participant’s Plan Account in accordance with the provisions
of Article V of the Plan.
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(g)
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“ Corporation
” shall
mean KeyCorp, an Ohio corporation, its corporate successors, and
any corporation or corporations into or with which it may be merged
or consolidated.
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(h)
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“ Deferral Period
” shall
mean each applicable calendar year.
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(i)
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“ Determination Date
” shall
mean the last business day of each calendar quarter.
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(j)
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“ Disability
” shall
mean (1) the physical or mental disability of a permanent
nature which prevents a Participant from performing the duties such
Participant was employed to perform for his or her Employer when
such disability commenced, (2) qualifies for disability
benefits under the federal Social Security Act within
30 months following the Participant’s disability, and
(3) qualifies the Participant for disability coverage under
the KeyCorp Long Term Disability Plan.
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(k)
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“ Discharge for Cause
” shall
mean the termination (whether by the Participant or the Employer)
of a Participant’s employment from his or her Employer and
any other Employer that is the result of (1) serious
misconduct as an Employee, including, but not limited to, a
continued failure after notice to perform a substantial portion of
his or her duties and responsibilities unrelated to illness or
incapacity, unethical behavior such as acts of self-dealing or
self-interest, harassment, violence in the workplace, or theft;
(2) the commission of a crime involving a controlled
substance, moral turpitude, dishonesty, or breach of trust; or
(3) the Employer being directed by a regulatory agency or
self-regulatory agency to terminate or suspend the Participant or
to prohibit the Participant from performing services for the
Employer. The Corporation in its sole and absolute discretion shall
determine whether a Participant has been Discharged for Cause, as
provided for in this Section 2.1(k), provided, however, that
for a period of two years following a Change of Control, any
determination by the Corporation that an Employee has been
Discharged for Cause shall be set forth in writing with the factual
basis for such Discharge for Cause clearly specified and documented
by the Corporation.
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(l)
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“ Discretionary Bonus
Awards ” shall mean those not-vested
discretionary bonus award(s) granted to an Employee under the terms
of an Incentive Compensation Plan during the applicable Deferral
Period, which shall be subject to the automatic deferral and
vesting provisions of Article III and Article VI of the
Plan. For purposes of this Section 2.1(l), the term
“Discretionary Bonus Awards” shall not include any
compensation paid to the Employee during the applicable Deferral
Period which constitutes any form of a hiring bonus,
sales
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commissions,
referral awards, recognition awards, and /or corporate long-term
incentive compensation plan awards.
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(m)
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“ Employee
” shall
mean a common law employee who is employed by an
Employer.
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(n)
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“ Employer
” shall
mean the Corporation and any of its subsidiaries or affiliates,
unless specifically excluded as an Employer for Plan purposes by
written action by an officer of the Corporation. An
Employer’s Plan participation shall be subject to all
conditions and requirements made by the Corporation, and each
Employer shall be deemed to have appointed the Plan Administrator
as its exclusive agent under the Plan as long as it continues as an
Employer.
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(o)
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“ Harmful Activity
” shall
have occurred if the Participant shall do any one or more of the
following. This provision shall survive the Participant’s
termination of employment from KeyCorp.
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(i)
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Use, publish, sell, trade or
otherwise disclose Non-Public Information of KeyCorp unless such
prohibited activity was inadvertent, done in good faith and did not
cause significant harm to KeyCorp.
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(ii)
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After notice from KeyCorp, fail to
return to KeyCorp any document, data, or thing in his or her
possession or to which the Participant has access that may involve
Non-Public Information of KeyCorp.
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(iii)
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After notice from KeyCorp, fail to
assign to KeyCorp all right, title, and interest in and to any
confidential or non-confidential Intellectual Property which the
Participant created, in whole or in part, during employment with
KeyCorp, including, without limitation, copyrights, trademarks,
service marks, and patents in or to (or associated with) such
Intellectual Property.
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(iv)
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After notice from KeyCorp, fail to
agree to do any acts and sign any document reasonably requested by
KeyCorp to assign and convey all right, title, and interest in and
to any confidential or non-confidential Intellectual Property which
the Participant created, in whole or in part, during employment
with KeyCorp, including, without limitation, the signing of patent
applications and assignments thereof.
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(v)
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Upon the Participant’s own
behalf or upon behalf of any other person or entity that competes
or plans to compete with KeyCorp, solicit or entice for employment
or hire any KeyCorp employee.
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(vi)
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Upon the Participant’s own
behalf or upon behalf of any other person or entity that competes
or plans to compete with KeyCorp, call upon, solicit, or do
business with (other than business which does not compete with any
business conducted by KeyCorp) any KeyCorp customer the Participant
called upon, solicited, interacted with, or became acquainted with,
or learned of through access to information (whether or not such
information is or was non-public) while the Participant was
employed at KeyCorp unless such prohibited activity was
inadvertent, done in good faith, and did not involve a customer
whom the Participant should have reasonably known was a customer of
KeyCorp.
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(vii)
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Upon the Participant’s own
behalf or upon behalf of any other person or entity that competes
or plans to compete with KeyCorp, after notice from KeyCorp,
continue to engage in any business activity in competition with
KeyCorp in the same or a closely related activity that the
Participant was engaged in for KeyCorp during the one year period
prior to the termination of the Participant’s
employment.
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For
purposes of this Section 2.1(o) the term:
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“Intellectual
Property” shall mean any invention, idea,
product, method of doing business, market or business plan,
process, program, software, formula, method, work of authorship, or
other information, or thing relating to KeyCorp or any of its
businesses.
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“Non-Public
Information” shall mean, but is not limited to,
trade secrets, confidential processes, programs, software,
formulas, methods, business information or plans, financial
information, and listings of names (e.g., employees, customers, and
suppliers) that are developed, owned, utilized, or maintained by an
employer such as KeyCorp, and that of its customers or suppliers,
and that are not generally known by the public.
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“KeyCorp”
shall include KeyCorp,
its subsidiaries, and its affiliates.
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(p)
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“ Incentive Compensation
Plan ” shall mean a line of business or
management incentive compensation plan that is sponsored by KeyCorp
or an affiliate of KeyCorp that mandates the deferral of unvested
Discretionary Bonus Awards granted under the applicable Incentive
Compensation Plan and which the Corporation in its sole discretion
has determined constitutes an Incentive Compensation Plan for
purposes of the Plan.
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(q)
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“ Interest Bearing
Account ” shall mean the investment account
established under the Plan for bookkeeping purposes in which a
Participant may elect to have his or her Discretionary Bonus Awards
credited. Discretionary Bonus Awards invested for bookkeeping
purposes in the Interest Bearing Account shall be credited with
earnings as of each Determination Date which shall be based on the
effective annual yield of the average of Moody’s Average
Corporate Bond Yield Index for the previous calendar month
increased by 50 basis points. In the event that Moody’s
Investor Services, Inc. ceases to publish such Index (or any
successor publisher thereto) the Board, in its sole and absolute
discretion, shall select a substantially similar index to be used
in crediting earnings under the Interest Bearing
Account.
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(r)
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“ Investment Accounts
” shall
collectively mean those investment accounts established under the
Plan for bookkeeping purposes in which a Participant may elect to
have his or her Discretionary Bonus Awards credited. Investment
Accounts shall include the Plan’s (1) Interest Bearing
Account, (2) Common Stock Account, and (3) Investment
Funds.
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(s)
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“ Investment Funds
” shall
mean those investment accounts established under the Plan for
bookkeeping purposes in which a Participant may elect to have his
or her Discretionary Bonus awards credited and which mirror the
investment funds established under Article VIII of the KeyCorp
401(k) Savings Plan (“Savings Plan”) as may be amended
from time to time, provided, however, that the Savings Plan’s
Corporation
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Stock Fund, for Plan purposes, shall
be excluded from the definition of Investment Funds. Discretionary
Bonus Awards invested for bookkeeping purposes in the Investment
Funds shall be credited on a bookkeeping basis with those earnings,
gains, and losses experienced by the Savings Plan’s
investment funds.
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(t)
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“ Involuntary
Termination ” shall mean the termination (by the
Employer) of a Participant’s employment from his or her
Employer and from any other Employer, other than a Discharge for
Cause or a Termination Under Limited Circumstances.
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(u)
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“ Participant
” shall
mean an Employee who meets the eligibility and participation
requirements set forth in Section 3.1 of the Plan.
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(v)
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“ Plan
” shall
mean the McDonald Financial Group Deferral Plan with all
amendments, modifications and revisions as hereafter
made.
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(w)
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“ Plan Account
” shall
mean those bookkeeping accounts established by the Corporation for
each Plan Participant, which shall reflect all Discretionary Bonus
Awards and Corporate Contributions invested for bookkeeping
purposes in the Plan’s Investment Accounts, with all
earnings, dividends, gains, and losses thereon. Plan Accounts shall
not constitute separate Plan funds or separate Plan assets. Neither
the maintenance of, nor the crediting of amounts to such Plan
Accounts shall be treated (i) as the allocation of any Corporation
assets to, or a segregation of any Corporation assets in any such
Plan Accounts, or (ii) as otherwise creating a right in any
person or Participant to receive specific assets of the
Corporation.
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(x)
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“ Plan Year
” shall
mean the calendar year.
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(y)
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“ Retirement
” shall
mean the termination of a Participant’s employment any time
after the Participant’s attainment of age 55 and completion
of 5 years of Vesting Service but shall not include the
Participant’s (i) Discharge for Cause, (ii) Involuntary
Termination, (iii) Termination Under Limited Circumstances,
(iv) Disability, or (v) death.
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(z)
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“ Termination Under Limited
Circumstances ” shall mean the termination (whether
by the Participant or the Employer) of a Participant’s
employment from his or her Employer, and from any other Employer
(i) under circumstances in which the Participant is entitled
to receive severance benefits or salary continuation benefits under
the KeyCorp Separation Pay Plan, (ii) under circumstances in
which the Participant is entitled to severance benefits or salary
continuation or similar benefits under a change of control
agreement or employment agreement within two years after a change
of control (as defined by such agreement) has occurred, or
(iii) as otherwise expressly approved by an officer of the
Corporation.
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(aa)
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“ Vesting Service
” for
purposes of Section 2.1(y) shall be calculated by measuring
the period of service commencing on the Employee’s employment
commencement date and ending on the Employee’s termination
date and shall be computed based on each full calendar month that
the Employee is employed by an Employer.
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(bb)
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“ Voluntary Termination
” shall
mean a voluntary termination of the Participant’s employment
from his or her Employer and from any other Employer, whether by
resignation or otherwise, but shall not include the
Participant’s Discharge for Cause,
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Involuntary Termination, Retirement,
Termination Under Limited Circumstances, or termination as a result
of Disability or death.
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(cc)
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" Termination
” shall
mean the voluntary or involuntary and permanent termination of a
Participant’s employment from his or her Employer and any
other Employer, whether by resignation or otherwise, but shall not
include the Participant’s Retirement
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2.2
Pronouns . The masculine pronoun wherever used herein
includes the feminine in any case so requiring, and the singular
may include the plural.
ELIGIBILITY AND
PARTICIPATION
3.1
Eligibility and Participation . An Employee shall
automatically become a Plan Participant upon (i) the
Employee’s meeting the applicable Incentive Compensation
Plan’s annual production criteria established by the
Corporation for the applicable Deferral Period, and (ii) the
Employee being awarded a not vested, Discretionary Bonus Award
under his or her applicable Incentive Compensation Plan.
3.2
Automatic Deferral Requirements . An Employee meeting
the eligibility and automatic participation requirements of
Section 3.1 hereof, shall automatically have his or her not
vested Discretionary Bonus Awards deferred to the Plan. Such
Discretionary Bonus Awards shall be maintained in the Plan until
vested or forfeited.
3.3
Deferral Limited by Termination Under Limited Circumstances,
Involuntary Termination, Retirement, Disability, or Death .
As of a Participant’s Termination Under Limited
Circumstances, Involuntary Termination, Retirement, Disability or
death, the Participant shall be relieved from and, further, shall
not be permitted to have any further bonus awards deferred to the
Plan, and any Discretionary Bonus Awards that thereafter would have
been subject to the Automatic Deferral Requirements of
Section 3.2 hereof, if and to the extent payable, shall be
paid directly to the Participant in accordance with the terms of
the applicable Incentive Compensation Plan.
3.4 Effect
of a Participant’s Discharge for Cause or Voluntary
Termination on Participant’s Discretionary Bonus Award
. In the event of a Participant’s Discharge for Cause or
Voluntary Termination, the Participant shall forfeit his or her
Discretionary Bonus Award to the extent that it would otherwise
become subject to the Automatic Deferral Requirements of
Section 3.2 of the Plan when paid but for the termination of
the Participant’s employment.
3.5 Change
in Participation Status . During those Deferral Periods in
which the Participant does not automatically defer Discretionary
Bonus Awards to the Plan, Discretionary Bonus Awards and Corporate
Contributions previously credited to the Participant’s Plan
Account shall remain in the Plan and shall continue to vest under
the terms of Section 6.1 hereof; such Discretionary Bonus
Awards and Corporate Contributions with all earnings, gains, or
losses thereon when vested shall be distributed to the Participant
in accordance with the provisions of Article VII of the
Plan.
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DISCRETIONARY BONUS
AWARDS
4.1 Plan
Account/Investment of Discretionary Bonus Awards.
Discretionary Bonus Awards and Corporate Contributions shall be
credited on a bookkeeping basis to a Plan Account established in
the Participant’s name. Each Participant shall direct the
manner in which his or her Discretionary Bonus Awards are to be
invested for bookkeeping purposes under the Plan. All Discretionary
Bonus Awards may be invested for bookkeeping purposes in any one or
more of the Plan’s Investment Accounts, in such amounts as
the Participant shall select, provided that such election amounts
are expressed in five percent increments. Participants may modify
their investment elections at such times and in such manner as
permitted by the Corporation.
4.2
Crediting of Discretionary Bonus Awards . Discretionary
Bonus Awards shall be credited to the Participant’s Plan
Account as of the date that the Participant’s Discretionary
Bonus Awards would have been payable to the Part
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