Exhibit 10.15

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, made effective as of February 1, 2004 by and between MELLON
FINANCIAL CORPORATION, a Pennsylvania corporation (the “Company”), and MARTIN G.
McGUINN (the “Executive”),

 

WITNESSETH THAT:

 

WHEREAS, the Executive is currently serving as Chairman and Chief Executive
Officer of the Company and as Chairman, President and Chief Executive Officer of
Mellon Bank, N.A. (the “Bank” and, together with the Company, the “Companies”),
and the Company desires to retain the Executive to continue to serve in such
capacities, and the Executive is willing to continue to serve in such
capacities, on the terms and conditions herein set forth;

 

NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties hereto, each intending to be legally bound, agree as
follows:

 

1. Employment. The Company agrees to continue to employ the Executive, and the
Executive agrees to continue to be employed by the Companies, for the Term
provided in Paragraph 3(a) below and upon the other terms and conditions
hereinafter provided. The Executive hereby represents and warrants that he has
the legal capacities to execute and perform this Agreement, that it is a valid
and binding agreement, enforceable against him according to its terms, and that
its execution and performance by him do not violate the terms of any existing
agreement or understanding to which the Executive is a party.

 

2. Position and Responsibilities. During the Term, the Executive agrees to serve
as the Chairman and Chief Executive Officer of the Company and as the Chairman,
President and Chief Executive Officer of the Bank. In his capacity as the
Chairman and Chief Executive Officer of the Company and in his capacity as
Chairman, President and Chief Executive Officer of the Bank, he shall be
responsible for the general management of the affairs of the Company and the
Bank, respectively, reporting directly to their respective boards of directors.
The Executive (a) shall serve as a member of such boards for the period for
which he is and shall from time to time be elected, (b) shall be given such
authority as is appropriate to carry out the duties described above, and (c)
agrees to serve, if elected, as an officer and director of any other subsidiary
or affiliate of the Companies.

 

3. Term and Duties.

 

(a) Term of Agreement. The term of the Executive’s employment under this
Agreement shall commence on February 1, 2004 and shall continue thereafter
through January 31, 2008 (the “Term”).

 

(b) Duties. During the Term, and except for illness or incapacity and reasonable
vacation periods of no more than 4 weeks in any calendar year (or such other
periods as shall be consistent with the Company’s policies for other key
executives), the Executive shall devote all of his business time, attention,
skill and efforts exclusively to the business and affairs of the Companies and
their subsidiaries and affiliates, shall not be engaged in any other business
activity, and shall perform and discharge well and faithfully the duties which
may be assigned to him from time to time by the board of directors of the
Company (the “Board”) or the Bank and that are consistent with his position and
status; provided, however, that nothing in this Agreement shall preclude the
Executive from devoting time during reasonable periods required for:

 

(i) serving, in accordance with the Company’s policies and with the prior
approval of the Board, which prior approval will not be unreasonably withheld,
as a director of any company or organization involving no actual or potential
conflict of interest with the Companies or any of their subsidiaries or
affiliates;

 

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(ii) delivering lectures and fulfilling speaking engagements;

 

(iii) engaging in charitable and community activities; and

 

(iv) investing his personal assets in businesses in which his participation is
solely that of an investor in such form or manner as will not violate Section 7
below or require any services on the part of the Executive in the operation or
the affairs of such business,

 

provided, however, that such activities do not materially affect or interfere
with the performance of the Executive’s duties and obligations to the Companies.
Not less frequently than annually, a listing of the Executive’s positions with
unaffiliated companies and organizations will be presented to the Corporate
Governance and Nominating Committee of the Board for its review and approval of
such service and granting of indemnification in connection therewith.

 

4. Compensation. For all services rendered by the Executive in any capacity
required hereunder during the Term, including, without limitation, services as
an executive, officer, director, or member of any committee of the Company, the
Bank or any subsidiary, affiliate or division thereof, the Executive shall be
compensated as set forth below. It is the intention of the Company and the
Executive that the Executive’s total compensation be competitive with that paid
by similar financial institutions. To assure this, the Company will conduct an
annual survey of compensation practices of a group of peer financial
institutions designated by the Human Resources Committee of the Board (“HRC”).

 

(a) Base Salary. The Executive shall be paid a fixed salary (“Base Salary”) of
$900,000 per annum as of the effective date of this Agreement. The Base Salary
amount is subject to periodic review by the Board or the HRC (which shall occur
at least annually, with the first such review to take place in May 2004). Base
Salary shall be payable in accordance with the customary payroll practices of
the Companies, but in no event less frequently than monthly.

 

(b) Bonus. The Executive shall be paid such amounts, if any, as may be due under
the terms of the Mellon Financial Corporation Profit Bonus Plan (or any
successor plan) (the “Bonus Plan”), with such payments of bonus to be made in
accordance with the terms of the Bonus Plan. It is understood that the Executive
may receive some portion of his Bonus Plan award in the form of restricted
stock, and such awards are to be made on the same terms as apply to other
members of the Executive Management Group.

 

(c) Equity-Based Compensation. The Company shall grant to the Executive during
calendar year 2004 and in subsequent years as the HRC shall decide, awards (the
“Awards”) permitted to be granted under the Company’s Long-Term Profit Incentive
Plan. (1996) or any successor plan (the “Long-Term Plan”), which Awards may
include stock options, SARs, performance units, restricted stock and deferred
share awards.

 

(d) Additional Benefits. Except as modified by this Agreement, the Executive
shall be entitled to participate in all compensation or employee benefit plans
or programs, and to receive all benefits, perquisites and emoluments, for which
any member of senior management at the Company is eligible

 

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under any plan or program now or hereafter established and maintained by the
Company or the Bank for senior officers, to the extent permissible under the
general terms and provisions of such plans or programs and in accordance with
the provisions thereof, including group hospitalization, health, dental care,
senior executive life or other life insurance, travel or accident insurance,
disability plans, tax-qualified or non-qualified pension, savings, thrift and
profit-sharing plans, deferred compensation plans, sick-leave plans, auto
allowance or auto lease plans, and executive contingent compensation plans,
including, without limitation, capital accumulation programs and stock purchase
plans. Notwithstanding the foregoing, the Executive acknowledges and agrees that
the severance payments provided in certain circumstances under this Agreement
and the Prior Agreement (as defined in Section 6(g)) are in lieu of any rights
which the Executive might otherwise have under any and all other displacement,
separation or severance plans or programs of the Companies, including without
limitation the Mellon Financial Corporation Displacement Program, and the
Executive hereby waives all rights to participate in any of such plans or
programs in the event of the termination of his employment during the Term.

 

(e) Perquisites. The Company will also furnish the Executive, without cost to
him, with such perquisites as are commensurate with the Executive’s position and
status, including (i) membership in such country and business clubs as are
reasonably necessary to the conduct of the Companies’ business, (ii) an annual
physical examination of the Executive by a physician selected by the Executive,
(iii) participation in the Company’s matching gifts program, (iv) use of a car
and driver, and (v) personal financial, investment and tax advice, with any firm
selected by the Executive, not to exceed a reasonable sum per annum, to the
extent costs or expenses of the Executive to be reimbursed are properly
documented. To the extent the furnishing of the perquisites listed in this
section results in taxable income being imputed to the Executive, the Company
will reimburse the Executive for all tax costs incurred to restore him to the
same after tax position in which he would have been had income not been imputed.

 

5. Business Expenses. The Companies shall pay or reimburse the Executive for all
reasonable travel and other expenses incurred by the Executive (and his spouse
where there is a legitimate business reason for his spouse to accompany him) in
connection with the performance of his duties and obligations under this
Agreement, subject to the Executive’s presentation of appropriate vouchers in
accordance with such policies and procedures as the Companies from time to time
establish for senior officers.

 

6. Effect of Termination of Employment; Effect of Disability.

 

(a) Without Cause Termination or Constructive Discharge. Subject to the
provisions of Section 7 below, in the event the Executive’s employment hereunder
terminates due to either a Without Cause Termination or a Constructive
Discharge:

 

(i) Earned but unpaid Base Salary as of the Date of Termination (as defined in
Section 14(b)) and any earned but unpaid bonuses for prior years (collectively,
the “Accrued Obligations”), shall be payable in full, and the Company shall, as
liquidated damages or severance pay, or both:

 

(A) continue to pay the Executive’s Base Salary, as in effect at the Date of
Termination, from the Date of Termination until the end of the Term. Moreover,
if said termination occurs within 12 months from the end of the Term of this
Agreement, the Company shall continue to pay the Executive’s Base Salary for a
period of no less than

 

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the shorter period of (i) 12 months from the Date of Termination, or (ii) the
Date of Termination until the time when the Executive commences full-time
employment with another employer, and

 

(B) pay to the Executive for the year of termination and for each subsequent
calendar year or portion thereof during the remainder of the Term, an amount
(prorated in the case of any partial year) equal to the Cash Bonus Amount of the
highest bonus received by the Executive under the Bonus Plan for any year in the
three years preceding the Date of Termination, such payments to be made at the
normal times for payment of bonuses under the Bonus Plan.

 

With respect to the payments provided for in this Section 6(a)(i), the Executive
shall be entitled, to the extent permitted by law as determined by the Company
in good faith, to participate in any compensation deferral plans or arrangements
then provided by the Company to senior executives on the same basis as if he had
remained an employee through the end of the Term.

 

(ii) To the extent permitted by law, the Company shall continue to provide the
Executive through the remainder of the Term with (A) service credit under all
qualified and nonqualified retirement plans and excess benefit plans and the
Supplemental Retirement Benefit provided under this Agreement in which the
Executive participated as of his Date of Termination and (B) eligibility to
receive employer matching contributions on any pre-tax contributions made by the
Executive to the Retirement Savings Plan at the maximum rate which would have
been available to the Executive had his employment continued.

 

(iii) The Company shall continue to provide Executive (and Executive’s
dependents, if applicable) for the period of salary continuation set forth in
Section 6(a)(i)(A) above with medical, dental, accident, disability and life
insurance benefits upon substantially the same terms and conditions (including
contributions required by the Executive for such benefits) as those of the
applicable employee benefit plans in effect from time to time as applied to
employees; provided, however, that if the Executive cannot continue to
participate under the terms of the Company plans providing such benefits, the
Company shall otherwise provide such benefits on (as nearly as reasonably
practicable) the same after-tax basis as if continued participation had been
permitted. Notwithstanding the foregoing, in the event the Executive becomes
re-employed with another employer and becomes eligible to receive welfare
benefits from such employer, the welfare benefits described herein shall be
secondary to such benefits during the period of the Executive’s eligibility, but
only to the extent that the Company reimburses the Executive for any increased
cost and provides any additional benefits necessary to give the Executive the
benefits provided hereunder.

 

(iv) All stock options and restricted stock awards granted after February 1,
1998 under the Long-Term Plan and outstanding as of the Date of Termination
(other than those under which vesting is performance-based or is dependent upon
the satisfaction of conditions other than continued employment) shall become
immediately and fully vested. The Executive shall have up to three (3) years to
exercise all such outstanding stock options following the Date of Termination,
but in no event beyond their specified term. All Type II stock options and
related deferred cash incentive awards granted after February 1, 1998 under the
Long-Term Plan shall not terminate or be forfeited, as the case may be, but
shall remain outstanding and exercisable or payable, as the case may be, as if
Executive remained employed by the Company. The Chairman and Chief Executive
Officer of the Company shall recommend to the HRC, with respect to any period
for which Performance Goals (as defined in the Long-Term Plan) relating to such
Type 11

 

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stock options and deferred cash incentive awards are achieved, that the right to
exercise the maximum possible number of Type II stock options be accelerated and
that the maximum possible deferred cash incentive award be earned and payable to
the Executive upon such exercise. The vesting of other Awards under which
vesting is performance-based or is dependent upon the satisfaction of conditions
other than continued employment shall be governed by the terms of the applicable
award agreement. The award agreement for any Award of performance accelerated
restricted stock granted during the Term shall provide that if the Executive’s
employment terminates due to a Without Cause Termination or a Constructive
Discharge, the restricted stock shall not be forfeited, and the restrictions
thereon shall lapse at the same times as if employment had continued.

 

(v) The perquisites set forth in Paragraphs 4(e)(i), (iv) and (v) shall continue
through the first anniversary of the Executive’s Date of Termination. In
addition, the Company shall furnish the Executive with office space and
secretarial support during the remainder of the Term or, if a shorter period of
time, until the time the Executive commences full-time employment with another
employer.

 

(b) Disability. In the event of the Executive’s Disability, the Company may, by
giving a Notice of Disability as provided in Section 14(c), remove the Executive
from active employment and in that event shall provide the Executive for the
remainder of the Term with the same payments and benefits as those provided in
Section 6(a), except that:

 

(i) in lieu of the bonus payments provided in Section 6(a)(i)(B), the Executive
shall receive, at the same time as bonus payments for the year of Disability
would otherwise be made under the Bonus Plan, a prorated bonus for the year of
Disability only equal to the Cash Bonus Amount of the bonus award the Executive
would have received if he had been employed throughout the bonus year and had
received the same performance rating as he received for the preceding year,
prorated on a daily basis as of the Date of Disability;

 

(ii) except for Accrued Obligations, Base Salary payments shall be offset by any
amounts otherwise payable to the Executive under the Company’s disability
program generally available to other employees; and

 

(iii) all stock options and restricted stock awards granted after February 1,
1998 under the Long-Term Plan and outstanding as of the Date of Disability
(other than those under which vesting is performance-based or is dependent upon
the satisfaction of conditions other than continued employment but including
Type II stock options and related deferred cash incentive awards) shall become
immediately and fully vested. The Executive shall have up to three (3) years to
exercise all such outstanding stock options following the Date of Disability,
but in no event beyond their specified term. The vesting of other Awards under
which vesting is performance-based or is dependent upon the satisfaction of
conditions other than continued employment shall be governed by the terms of the
applicable award agreement.

 

(c) Retirement. In the event the Executive’s employment hereunder terminates due
to Retirement:

 

(i) Accrued Obligations as of the Date of Retirement shall be payable in full;

 

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(ii) the Company shall pay to the Executive, at the same time as bonus payments
for the year of Retirement would otherwise be made under the Bonus Plan, a
prorated bonus for the year of Retirement only equal to the Cash Bonus Amount of
the bonus award the Executive would have received if he had been employed
throughout the bonus year and had received the same performance rating as he
received for the preceding year, prorated on a daily basis as of the Date of
Retirement;

 

(iii) stock options, restricted stock and other Awards under the Long-Term Plan
shall vest and be exercisable as provided in the Long-Term Plan and the
applicable award agreement. The award agreement for any Award of performance
accelerated restricted stock granted during the Term shall provide that,
notwithstanding any other provision therein, (A) if the Executive’s employment
terminates due to Retirement prior to age 65, then to the extent such shares
have not previously been earned, the restrictions shall lapse as to 14% of the
original number of shares granted for each completed year of service subsequent
to the date of grant and (B) if the Executive’s employment terminates for any
reason at or after attainment of age 65, the restrictions shall lapse as to 100%
of the shares granted which have not previously been earned;

 

(iv) the Executive shall receive such retirement and other benefits as he is
entitled to receive under the terms of the Companies’ retirement and other
benefit plans, including Section 8 hereof; and

 

(v) the Executive shall receive post-Retirement perquisites which are not less
than those which as of the time of Retirement are customarily provided to
similarly situated retired executives.

 

(d) Death. In the event the Executive’s employment hereunder terminates due to
death, Accrued Obligations as of the date of death shall be payable in full, and
the Company shall pay to the Executive’s estate, at the same time as bonus
payments for the year of death would otherwise be made under the Bonus Plan, a
prorated bonus for the year of death only equal to the Cash Bonus Amount of the
bonus award the Executive would have received if he had been employed throughout
the bonus year and had received the same performance rating as he received for
the preceding year, prorated on a daily basis as of the date of death.

 

All stock options and restricted stock awards granted after February 1, 1998
under the Long-Term Plan and outstanding as of the date of death (other than
those under which vesting is performance based or is dependent upon the
satisfaction of conditions other than continued employment but including Type II
stock options and related deferred cash incentive awards) shall become
immediately and fully vested. The Executive’s personal representative,
beneficiary or person who may exercise stock options under the rules of descent
and distribution or under the Executive’s will shall have up to three (3) years
to exercise all such outstanding stock options following the date of death, but
in no event beyond their specified term. The vesting of other Awards under which
vesting is performance-based or is dependent upon the satisfaction of conditions
other than continued employment shall be governed by the terms of the applicable
award agreement.

 

(e) Other Termination of Employment. In the event the Executive’s employment
hereunder terminates due to a Termination for Cause or the Executive terminates
employment with the Company for reasons other than due to a Constructive
Discharge, Disability, Retirement or death, vested benefits and Accrued
Obligations as of the Date of Termination shall be payable in full, and vested
Awards may be exercised according to the terms of the Long-Term Plan. No other
payments shall be made, or benefits provided, by the Company except for benefits
which have already become vested under the

 

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terms or employee benefit programs maintained by the Company or its affiliates
for its employees generally as provided in Section 10.

 

(f) Definitions. For purposes of this Agreement, the following terms, when
capitalized, shall have the following meanings unless the context otherwise
requires:

 

(i) “Termination for Cause” means, to the maximum extent permitted by applicable
law, a termination of the Executive’s employment by the Company by a vote of the
majority of the Board members then in office, because the Executive (a) has been
convicted of a criminal offense covered by Section 19 of the Federal Deposit
Insurance Act, 12 U.S.C. § 1829, or any successor provision, or (b) has entered
a plea of nolo contendere thereto, or (c) has breached or failed to perform his
duties hereunder, and such breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness (within the meaning of Section
1713(a) of the Pennsylvania Business Corporation Law, as amended, or any
successor provision), or (d) has violated a material provision of the Company’s
Code of Conduct (as the same may be modified from time to time), or (e) a final
determination has been reached that the Executive has violated the
representations made in Section 1 above, or the provisions of Section 7 below;
provided, however, that the Board has given the Executive advance notice of such
Termination for Cause including the reasons therefor, together with a reasonable
opportunity for the Executive to appear with counsel before the Board and to
reply to such notice.

 

(ii) “Constructive Discharge” means a termination of the Executive’s employment
by the Executive due to a failure of the Companies or their successors to
fulfill their obligations under this Agreement in any material respect,
including (a) any failure to elect or reelect or to appoint or reappoint the
Executive to the offices of Chairman and Chief Executive Officer of the Company
and Chairman, President and Chief Executive Officer of the Bank or as a member
of each of their boards of directors, or (b) any other material change by the
Companies in the functions, duties or responsibilities of the Executive’s
respective positions with the Companies which would reduce the ranking or level,
dignity, responsibility, importance or scope of such positions, or (c) any
imposition on the Executive of a requirement to be permanently based at a
location more than fifty miles from the principal office of the Company as of
the date of this Agreement without the consent of the Executive, or (d) any
reduction without the consent of the Executive in the Executive’s salary below
the amount then provided for under Paragraph 4(a) hereof.

 

(iii) “Without Cause Termination” means a termination of the Executive’s
employment by the Company other than due to Disability, death or expiration of
the Term and other than a Termination for Cause.

 

(iv) “Disability” for purposes of this Agreement means the Executive shall be
disabled so as to be unable to perform for 180 days in any 365-day period, with
or without reasonable accommodation, the essential functions of his positions
under this Agreement, as determined by the person or entity responsible for
making determinations under the Company’s long-term disability plan or, if any
such person or entity is not able for any reason to make this determination, by
another independent person or entity experienced in this field selected by the
Company and acceptable to the Executive or his representative.

 

(v) “Retirement” means a voluntary termination of his employment by the
Executive (1) on or after attainment of age 55, (2) on or after completion of at
least five years of credited service under the Company’s qualified pension plan
with the Companies, (3) on not less than 6 months’ Notice of Retirement as
provided in Section 14 and (4) under circumstances not constituting a
Termination for Cause, Without Cause Termination, Constructive Discharge,
Disability or death.

 

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(vi) The “Cash Bonus Amount” of a Bonus Plan award for any period means the sum
of (1) the amount of such award paid or payable in cash (whether or not
deferred) plus (2) with respect to any portion of the award paid or payable in
restricted stock, phantom stock or other interests in Company securities, the
amount of cash which would otherwise have been paid, excluding any premium in
value given to compensate for risk of forfeiture or otherwise.

 

(vii) The “Date of Termination,” “Date of Disability” and “Date of Retirement”
shall have the meanings ascribed to them in Section 14. To the fullest extent
permitted by applicable law, to the extent this Agreement requires the payment
of Base Salary and/or the provision of coverages and benefits subsequent to the
Date of Termination or Date of Disability, the Executive’s Date of Termination
or Date of Disability, as applicable, shall not be treated as a termination of
employment (a “Benefit Plan Termination Date”) from the Companies for purposes
of determining the Executive’s rights, responsibilities and tax treatment under
any and all employee pension, welfare and fringe benefit plans maintained by the
Companies. Rather, the Benefit Plan Termination Date shall be the day following
the last day for which any Base Salary and/or coverages and benefits are
required to be provided by this Agreement.

 

(g) Change in Control. Notwithstanding anything else contained herein, if any
termination of the Executive’s employment hereunder constitutes a “Qualifying
Termination” during the “Termination Period,” each as defined in the Agreement
between the Executive and the Company dated as of February, 1997, as amended
(the “Prior Agreement”), then the provisions of the Prior Agreement shall apply
to such termination in lieu of the provisions of this Section 6. Section 5 of
the Prior Agreement shall apply to any Payment (as therein defined) under this
Agreement to the extent provided therein.

 

7. Other Duties of Executive During and After Term.

 

(a) Confidential Information. The Executive recognizes and acknowledges that
certain information pertaining to the affairs, business, clients, or customers
of the Companies or any of their subsidiaries or affiliates (any or all of such
entities hereinafter referred to as the “Business”), as such information may
exist from time to time, is confidential information and is a unique and
valuable asset of the Business, access to and knowledge of which are essential
to the performance of his duties under this Agreement. The Executive shall not,
through the end of the Term or at any time thereafter, except to the extent
reasonably necessary in the performance of his duties under this Agreement,
divulge to any person, firm, association, corporation or governmental agency,
any information concerning the affairs, business, clients, or customers of the
Business (except such information as is required by law to be divulged to a
government agency or pursuant to lawful process or such information which is or
shall become part of the public realm through no fault of the Executive), or
make use of any such information for his own purposes or for the benefit of any
person, firm, association or corporation (except the Business) and shall use his
reasonable best efforts to prevent the disclosure of any such information by
others. All records and documents relating to the Business, whether made by the
Executive or otherwise coming into his possession are, shall be, and shall
remain the property of the Business. No copies thereof shall be made which are
not retained by the Business, and the Executive agrees, on any termination of
his employment, or on demand of the Company, to deliver the same to the Company.

 

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(b) Non-Competition. Through the end of the Term, whether during the Executive’s
employment or following the termination of his employment for any reason except
for a Without Cause Termination, Constructive Discharge or Qualifying
Termination as defined by the Prior Agreement, the Executive shall not without
express prior written approval by order of the HRC, directly or indirectly:

 

(i) solicit for the account of any Financial Services Company (other than the
Company or its affiliates) the sale of any products or services of a type then
provided by the Company or its affiliates (A) during the Executive’s employment,
to any entity or individual or (B) following termination of the Executive’s
employment (1) to any entity or individual that was a customer or client of the
Company or its affiliates at any time during the 12-month period immediately
preceding the Executive’s Date of Termination, Date of Disability or Date of
Retirement, (2) to any individual who is a resident of a Restricted State or (3)
to any entity where the customary office of the individual solicited or of the
individual responsible for the entity’s purchasing decision is located in a
Restricted State.

 

(ii) solicit any employee of the Company or its affiliates to terminate such
employment relationship.

 

For purposes of this Section 7(b), the following definitions shall apply:

 

(1) “Financial Services Company” shall mean any corporation, partnership, sole
proprietorship or other entity engaged in the provision to unaffiliated
customers of financial services, including, without limitation, commercial
banking, lending, trade financing or other extension of credit, rate risk
management products, securities lending, loan servicing, investment banking,
brokerage services, investment management or advisory services, sponsorship,
administration or management of mutual funds or other collective investment
vehicles, cash management, foreign exchange, fiduciary or custodial services,
employee benefit plan administration, retirement and employee benefits
consulting services, human resources and benefit plan outsourcing services,
shareholder services or underwriting or sale of insurance.

 

(2) “Restricted State” shall mean any State of the United States all or part of
which is located east of the Mississippi River and the District of Columbia.

 

In addition to the foregoing, it is understood that during his employment the
Executive is subject to all policies and procedures of the Companies regarding
investment in securities of competitors.

 

(c) Remedies. The Company’s obligation to make payments or provide for or
increase any benefits under this Agreement (except to the extent previously
vested) shall cease upon any violation of the provisions of this Section 7;
provided, however, that the Executive shall first have the right to appear
before the Board with counsel and that such cessation of payments or benefits
shall require a vote of a majority of the Board members then in office. In
addition, in the event of a violation by the Executive of the provisions of this
Section 7, the Company shall be entitled, if it shall so elect, to institute
legal proceedings to obtain damages for any such breach, or to enforce the
specific performance by the Executive of this Section 7 and to enjoin the
Executive from any further violation, and may exercise such remedies
cumulatively or in conjunction with such other remedies as may be available to
the Company at law or in equity. The Executive acknowledges, however, that the
remedies at law for any breach by him of the provisions of this Section 7 would
be inadequate and agrees that the Company shall be entitled to injunctive relief
against him in the event of any such breach.

 

(d) Survival Authorization to Modify Restrictions. The covenants of the
Executive contained in this Section 7 shall survive any termination of the
Executive’s employment for the periods stated herein, except that the covenants
contained in Section 7(b) shall not survive any termination of employment (i)
for which a Notice of Termination is given during the Termination Period
following a Change in Control, each as defined in the Prior Agreement or (ii)
which is a termination of employment described in the second sentence of Section
1(j) of the Prior Agreement. The Executive represents that his experience and
capabilities are such that the enforcement of the provisions of this Section 7
will not prevent him

 

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from earning his livelihood, and acknowledges that it would cause the Company
serious and irreparable injury and cost if Executive were to use his ability and
knowledge in competition with the Company or to otherwise breach the obligations
contained in this Section 7. Accordingly, it is the intention of the parties
that the provisions of this Section 7 shall be enforceable to the fullest extent
permissible under applicable law, but that the unenforceability (or modification
to conform to such law) of any provision or provisions hereof shall not render
unenforceable, or impair, the remainder thereof. If any provision or provisions
hereof shall be deemed invalid or unenforceable, either in whole or in part,
this Agreement shall be deemed amended to delete or modify, as necessary, the
offending provision or provisions and to alter the bounds thereof to the extent
required in order to render it valid and enforceable.

 

8. Supplemental Retirement Benefit. The Executive will be entitled to receive a
monthly Supplemental Retirement Benefit (the “Supplemental Retirement Benefit”)
commencing on the first day of the month coincident with or following the later
of the Executive’s termination of employment or attainment of age 60 and
continuing for the remainder of his life. Unless otherwise elected by the
Executive, the Supplemental Retirement Benefit shall be payable in the form of a
50% joint and survivor annuity which shall be unreduced for the actuarial value
of the survivor’s benefit. If the Executive’s spouse at the time of his death is
not more than four years younger than the Executive, the survivor benefit shall
be equal to 50% of the Executive’s benefit and shall be payable to his spouse
for the remainder of the spouse’s life. If the Executive’s spouse at the time of
his death is more than four years younger than the Executive, the benefit
payable to the spouse shall be reduced to a benefit having the same actuarial
value as the benefit that would have been payable had the spouse been four years
younger than the Executive. The Executive shall also have the right to elect a
100% joint and survivor annuity, on an actuarially-reduced basis or a lump-sum
payment, on an actuarially-reduced basis (if the Executive makes a timely
lump-sum election which avoids constructive receipt), or any other form of
payment available or provided under the “Supplemental Plans” defined in this
Section 8. Actuarial reductions shall be based on the actual ages of the
Executive and his spouse at the time of retirement. If the Executive is not
married at the time of his retirement, actuarial adjustments shall be made as if
the Executive had a spouse with the same date of birth as the Executive. In the
event that the Executive elects a form of payment other than the automatic 50%
joint and survivor annuity or other than a lump sum payment, and remarries
subsequent to retirement, the benefits payable under this Section shall be
actuarially adjusted at the time of the Executive’s death to reflect the age of
the subsequent spouse. If the Executive elects a lump sum payment at retirement,
no further benefits will be payable under this Section.

 

The amount of the monthly retirement benefit as an unreduced 50% joint and
survivor annuity shall be equal to the product of (A) the “Service Percentage”
multiplied by (B) the Executive’s “Final Average Compensation,” with such
product reduced by (C) the total monthly amount of benefits (measured for
purposes of this offset as if the Executive elected a 50% joint and survivor
annuity payable as of the date benefits commence under this Agreement) provided
to or in respect of the Executive under all tax-qualified retirement plans and
related excess benefit and other benefit restoration plans maintained by the
Company or the Bank for the Executive, including the Mellon Bank Benefit
Restoration Plan and the Mellon Bank IRC Section 401(ax17) Plan (the
“Supplemental Plans”) and benefits paid pursuant to Section 4.7 of the Mellon
Financial Corporation Elective Deferred Compensation Plan for Senior Officers,
but not including payments of any compensation previously deferred under any
deferred compensation plan of the Company or the Bank, or interest thereon, or
payments from the Mellon Financial Corporation Retirement Savings Plan, a 401
(k) plan.

 

The Executive owns interests in life insurance policies (the “Policies”) as a
participant in the Mellon Bank Senior Executive Life Insurance Plan. The
Supplemental Retirement Benefit payable to the Executive hereunder shall be
further reduced by the Executive’s interest in the cash value of the Policies.

 

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This reduction shall be calculated in the same manner as under the Supplemental
Plans. In the event the United States federal income tax laws change or are
interpreted so as to cause Executive’s ownership interests in Policies to be
subject to taxation, the Executive and the Company will negotiate in good faith
to mitigate the effects of such change.

 

The Executive shall be vested in the Supplemental Retirement Benefit provided
under this Paragraph as of February 1, 1998.

 

The Executive shall elect the form of payment of his Supplemental Retirement
Benefit at the same time and subject to the same provisions (including timing
requirements and all reductions and/or penalties for late elections) as provided
under the Supplemental Plans. After retirement, the Executive (or beneficiary
who is receiving payments) may elect to receive his remaining Supplemental
Retirement Benefits which are payable hereunder in a lump sum payment,
calculated in the same manner and subject to the same reductions as under the
Supplemental Plans. In the event that the Executive elects a form of payment of
his Supplemental Retirement Benefits which provides for payments to continue
after his death and the Executive dies without having received all payments of
Supplemental Retirement Benefits that may be payable hereunder, then the unpaid
balance of such benefits shall be paid in accordance with the form of payment
elected by the Executive. Any such remaining payments shall be made to the
Executive’s beneficiary provided under the Supplemental Plans, subject to any
contrary written instructions from the Executive designating a different
beneficiary for such payments.

 

The Executive may also elect, upon not less than 12 months’ advance written
notice, to have the payment of the Supplemental Retirement Benefit commence on
the first day of any month coincident with or after the later of his termination
of employment or attainment of age 55. In this event, the Supplemental
Retirement Benefit will be subject to an early payment reduction amount equal to
0.5% per month (6% per annum) for each month that payments commence before
attainment of age 60. In the event of such retirement, the Term and the
Company’s obligations to make payments under Section 4 above shall cease as of
the retirement date.

 

The Executive may also elect, upon not less than 12 months’ advance written
notice prior to the commencement of Supplemental Retirement Benefit payments, to
have the lump sum value of the Supplemental Retirement Benefit to which the
Executive would otherwise be entitled applied to the purchase of a single
premium annuity in a form and from an issuer selected or concurred in by the
Executive. In the event of such an election by the Executive, the sole
responsibilities of the Company shall be to apply the amount of the lump sum
value of the Supplemental Retirement Benefit to the purchase of the annuity
selected or concurred in by the Executive and the distribution of such annuity
to the Executive. Thereafter, the Executive shall look solely to the issuer of
the annuity for payment on account of or in connection with the Supplemental
Retirement Benefit and agrees that the Company and its affiliates, and each of
their officers, directors and employees, shall have no further liability in
respect of the Supplemental Retirement Benefit or by reason of the application
of the lump sum value as elected by the Executive or the selection of the form
or issuer of the annuity.

 

Notwithstanding the foregoing, in no event shall the Executive receive any
payments under this Section 8 or be deemed to be retired from the Company while
the Executive is entitled to payments under Paragraph 6(a) or Paragraph 6(b) or
during any period for which the Executive receives additional service credit in
respect of a “Qualifying Termination” as provided in clause (B) of the
definition of “Service Percentage” below.

 

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As used in this Section 8:

 

(i) “Service Percentage” means 2% for each full or partial year of the
Executive’s employment with the Company (plus service with a prior employer if
treated as credited service with the Company) commencing January 2, 1981 and
ending as of the date his active employment with the Company terminates, plus 2%
for (A) each full year, if any, that the Executive receives payments under
Paragraph 6(a) or 6(b) hereof (with such percentage pro-rated for the partial
contract year in which such final termination of the Executive’s employment
occurs or in which such final payments under Paragraph 6(a) or 6(b) hereof are
made, whichever shall be applicable) or (B) for each of the three years
following any “Qualifying Termination” of the Executive’s Employment during the
“Termination Period,” each as defined in the Prior Agreement.

 

(ii) “Final Average Compensation” means one-twelfth (1/ 12th) of the sum of the
Executive’s Base Salary paid and the Cash Bonus Amount of any bonus award earned
for the calendar year within the final three (3) full calendar years of the
Executive’s employment by the Company which produces the highest amount. For
purposes of determining Final Average Compensation (A) Bonus Plan awards shall
be attributed to the calendar year in which earned, whether paid in that
calendar year or the year following or deferred and (B) any portion of the
Executive’s Base Salary and bonus award which is deferred by the Executive under
agreements with the Company or under any Company employee benefit plan shall be
included for purposes of determining Final Average Compensation.

 

Notwithstanding the foregoing, in the event of a “Qualifying Termination” of the
Executive’s employment during the “Termination Period,” each as defined in the
Prior Agreement, “Final Average Compensation” for purposes of computing the
Supplemental Retirement Benefit shall mean one-twelfth (1/12th) of the sum of
(i) the Executive’s highest annual rate of base salary during the 12-month
period immediately prior to the Executive’s Date of Termination and (ii) the
Executive’s Bonus Amount, as defined in the Prior Agreement. In addition, the
Supplemental Retirement Benefit shall be payable without any reduction for early
payment in the event the Executive is less than age 60 at the time that payment
is made. In the event of such a “Qualifying Termination,” the present value of
the Supplemental Retirement Benefit shall be payable to the Executive in a lump
sum at the same time payments are due to the Executive under Section 4(a) of the
Prior Agreement (i.e., within 20 days following the Executive’s Date of
Termination). The present value shall be calculated in the same manner and using
the actuarial factors set forth in the Supplemental Plans as of the effective
date of this Agreement.

 

In the event the Executive’s termination of employment is due to death prior to
the commencement of the payment of Supplemental Retirement Benefits under this
Section 8, and he shall be survived by a spouse, entitlement to Supplemental
Retirement Benefits will become fully vested and such spouse shall be entitled
to receive a pre-retirement death benefit, payable in the form of a lifetime
annuity, equal to the benefit that would have been payable had he retired
immediately prior to death and elected a 50% joint and survivor annuity, but
without any early payment reductions applicable for payments prior to age 60. If
the Executive’s spouse at the time of his death is more than four years younger
than the Executive, the benefit payable to the survivor shall be reduced to a
benefit having the same actuarial value as the benefit that would have been
payable had the spouse been four years younger than the Executive.

 

The Executive’s entitlement to Supplemental Retirement Benefits under this
Section 8 shall survive the expiration of the Term and any other termination of
this Agreement.

 

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9. Resolution of Disputes. Except as otherwise provided in Section 7(c) hereof,
any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Pittsburgh, Pennsylvania, by
three arbitrators in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrators’ award in
any court having jurisdiction. In the event of any arbitration, litigation or
other proceeding between the Company and the Executive with respect to the
subject matter of this Agreement and the enforcement of rights hereunder, the
Company shall reimburse the Executive for his reasonable costs and expenses
relating to such arbitration, litigation or other proceeding, including
attorneys’ fees and expenses, provided that such arbitration, litigation or
other proceeding results in any: (i) settlement requiring the Company to make a
payment, continue to make payments or provide any other benefit to the
Executive; or (ii) judgment, order or award against the Company in favor of the
Executive or his spouse, legal representative or heirs, unless such judgment,
order or award is subsequently reversed on appeal or in a collateral proceeding.
At the request of the Executive, costs and expenses (including attorneys’ fees)
incurred in connection with any arbitration, litigation or other proceeding
referred to in this Section shall be paid by the Company in advance of the final
disposition of the arbitration, litigation or other proceeding upon receipt of
an undertaking by or on behalf of the Executive to repay the amounts advanced if
it is ultimately determined that he is not entitled to reimbursement of such
costs and expenses by the Company as set forth in this Section.

 

10. Full Settlement; No Mitigation; Non-Exclusivity of Benefits. Except as
provided in Section 6(g), the Company’s obligation to make any payment provided
for in this Agreement and otherwise to perform its obligations hereunder shall
be in lieu and in full settlement of all other severance payments to the
Executive under any other severance plan, arrangement or agreement of the
Company and its affiliates, including but not limited to the Mellon Financial
Corporation Displacement Program, and in full settlement of any and all claims
or rights of the Executive for severance, separation and/or salary continuation
payments resulting from the termination of his employment. In no event shall the
Executive be obligated to seek other employment or to take other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and except as specifically provided herein, such
amounts shall not be reduced whether or not the Executive obtains other
employment. Except as provided above in this Section 10, nothing in this
Agreement shall prevent or limit the Executive’s continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliates for which the Executive may qualify, nor, except as
otherwise specifically provided in this Agreement, shall anything herein limit
or otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliates, including without
limitation any stock option or restricted stock agreement. Amounts or benefits
which are vested benefits or which the Executive is otherwise entitled to
receive under any such plan, program, policy, practice, contract or agreement
prior to, at or subsequent to any Date of Termination, Date of Disability or
Date of Retirement shall be paid or provided in accordance with the terms of
such plan, program, policy, practice, contract or agreement except as explicitly
modified by this Agreement.

 

11. Employment and Payments by Affiliates. Except as herein otherwise
specifically provided, references in this Agreement to employment by the Company
shall include employment by affiliates of the Company, and the obligation of the
Company to make any payment or provide any benefit to the Executive hereunder
shall be deemed satisfied to the extent that such payment is made or such
benefit is provided by any affiliate of the Company.

 

12. Withholding Taxes. The Company may directly or indirectly withhold from any
payments made under this Agreement all Federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.

 

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13. Consolidation, Merger, or Sale of Assets. Nothing in this Agreement shall
preclude the Company from consolidating or merging into or with, or transferring
all or substantially all of its assets to, another corporation or entity which
assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger or transfer of assets and
assumption, the term, “Company” as used herein shall mean such other corporation
or entity, and this Agreement shall continue in full force and effect.

 

14. Notices.

 

(a) General. All notices, requests, demands and other communications required or
permitted hereunder shall be given in writing and shall be deemed to have been
duly given when delivered or 5 days after being deposited in the United States
mail, certified and return receipt requested, postage prepaid, addressed as
follows:

 

  (i) To the Company:

 

Director-Human Resources Department

Mellon Bank, N.A.

One Mellon Center

Pittsburgh, Pennsylvania 15258

 

  (ii) To the Executive:

 

Martin G. McGuinn

714 Amberson Avenue Pittsburgh, PA 15232-1446

 

with a copy to:

 

Mark Bookman, Esq.

Lovett Bookman Harmon Marks

LLP Fifth Avenue Place

120 Fifth Avenue, Suite 2900 Pittsburgh, Pennsylvania 15222

 

or to such other address as the addressee party shall have previously specified
in writing to the other.

 

(b) Notice of Termination. Except in the case of death of the Executive, any
termination of the Executive’s employment hereunder, whether by the Executive or
the Company, shall be effected only by a written notice given to the other party
in accordance with this Section 14 (a “Notice of Termination.” Any Notice of
Termination shall (i) indicate the specific termination provision in Section 6
relied upon, (ii) in the case of a termination for Cause or a Constructive
Discharge, set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination and (iii) specify the effective date of
such termination of employment (the “Date of Termination”), which shall not be
less than 15 days nor more than 60 days after such notice is given. The failure
of the Executive or the Company to set forth in any Notice of Termination any
fact or circumstance which contributes to a showing of Cause or Constructive
Discharge shall not waive any right of the Executive or the Company hereunder or
preclude the Executive or the Company from asserting such fact or circumstance
in enforcing the Executive’s or the Company’s rights hereunder.

 

(c) Notice of Disability. Any finding of Disability by the Company shall be
effected only by a written notice given to the Executive in accordance with this
Section 14 (a “Notice of Disability”). Any Notice of Disability shall (i) set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for such finding of Disability and (ii) specify an effective date (the
“Date of Disability”), which shall not be less than 10 days after such notice is
given. The failure of the Company to set forth in any

 

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Notice of Disability any fact or circumstance which contributes to a showing of
Disability shall not waive any right of the Company hereunder or preclude the
Company from asserting such fact or circumstance in enforcing the Company’s
rights hereunder.

 

(d) Notice of Retirement. Retirement shall be effected only by a written notice
given by the Executive in accordance with this Section 14 (a ‘Notice of
Retirement”). Any Notice of Retirement shall (i) indicate that it is a Notice of
Retirement and (ii) specify an effective date (the “Date of Retirement) which
shall not be less than six months after such notice is given.

 

15. No Attachment. Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect; provided, however, that nothing in this Section 15 shall
preclude the assumption of such rights by executors, administrators, or other
legal representatives of the Executive or his estate or their assigning any
rights hereunder to the person or persons entitled thereto.

 

16. Source of Payments. Subject to Section 11 hereof, all payments provided for
under this Agreement shall be paid in cash from the general funds of the
Company. The Company shall not be required to establish a special or separate
fund or other segregation of assets to assure such payments, and, if the Company
shall make any investments to aid it in meeting its obligations hereunder, the
Executive shall have no right, title or interest whatever in or to any such
investments except as may otherwise be expressly provided in a separate written
instrument relating to such investments. Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the Company and
the Executive or any other person. To the extent that any person acquires a
right to receive payments from the Company hereunder, such right shall be no
greater than the right of an unsecured creditor.

 

17. Binding Agreement. This Agreement shall be binding upon, and shall inure to
the benefit of, the Executive and the Company and, as permitted by this
Agreement, their respective successors, assigns, heirs, beneficiaries and
representatives.

 

18. Governing Law. The validity, interpretation, performance and enforcement of
this Agreement shall be governed exclusively by the laws of the Commonwealth of
Pennsylvania, without regard to principles of conflicts of laws thereof.

 

19. Counterparts; Headings. This Agreement may be executed in counterparts, each
of which, when executed, shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument. The underlined
Section headings contained in this Agreement are for convenience of reference
only and shall not affect the interpretation or construction of any provision
hereof.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed and its
seal to be affixed hereunto by its officers thereunto duly authorized, and the
Executive has signed this Agreement, all as of the first date above written.

 

ATTEST:

     

MELLON FINANCIAL CORPORATION

/s/    CARL KRASIK      

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      By:  

/s/    WESLEY W. VON SCHACK      

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Carl Krasik      

Name:

  Wesley W. von Schack Secretary      

Title:

  Chairman of the Human Resources Committee

 

/s/    MARTIN G. MCGUINN      

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Martin G. McGuinn

 

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