As filed with the Securities and Exchange Commission on
, 1994
Registration No. 33-
==================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
__________________________________________________________________
KEYCORP
(Exact name of registrant as specified in its charter)
NEW YORK 6711 14-1538208
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
One KeyCorp Plaza
Post Office Box 88
Albany, New York 12201-0088
(518) 486-8000
(Address, including zip code, and telephone number, including area
code, or registrant's principal executive offices)
__________________________________________________________________
CARTER B. CHASE
Senior Vice President
KEYCORP
50 South Main Street
Salt Lake City, Utah 84144
(801) 535-1214
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Thomas H. Maxfield, Esq. Robert M. Donlon, Esq.
Baker & Hostetler Hiscock & Barclay
303 East 17th Avenue Financial Plaza
Suite 1100 Post Office Box 4878
Denver, Colorado 80203-1264 Syracuse, New York 13221
(303) 861-0600 (315) 422-2131
__________________________________________________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of Registration
Statement.
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box.
[ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Amount Proposed maximum Proposed
Title of each class of securities to be offering price maximum aggregate Amount of
to be registered Registered<F1> Per unit<F2> offering price registration fee<F3><F4>
<S> <C> <C> <C> <C>
Common Stock 3,000,000
($5 par value) Shares N/A N/A $27,841.23
<F1>
This Registration Statement covers the maximum number of shares of the Registrant's common stock that may be issued in
the transaction described herein.
<F2>
Not applicable.
<F3>
Pursuant to Rule 457(f)(1) and (c), the registration fee is calculated on the basis of 3,197,584 shares of Commercial
Bancorporation of Colorado Common Stock, the maximum number of such shares to be received in the Merger, and $25-1/4,
the average of high and low prices of Commercial Bancorporation of Colorado Class A Common Stock as reported on the
National Association of Securities Dealers Automated Quotation System, Inc., National Market System on January 10,
1994.
<F4>
In accordance with Rule 457(b), to total registration fee of $27,841.23 has been reduced by $15,669 which was
previously paid on December 9, 1993, at the time of filing under the Securities and Exchange Act of 1934, as amended,
of preliminary copies of the Commercial Bancorporation of Colorado's proxy material included herein. Therefore, the
registration fee payable upon filing of the Registration Statement is $12,172.23.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which specifically states that this Registration
Statement shall become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until
the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant
to said Section 8(1), may determine.
</TABLE>
=======================================================================
<PAGE>
CROSS-REFERENCE SHEET
(Showing Location of Information Required by Form S-4)
S-4 Item Proxy Statement-Prospectus
Heading
A. Information About the Transaction
1. Forepart of Registration Facing page of Registration
Statement and Outside Statement; this Cross-
Front Cover Page of Reference Sheet; outside front
Prospectus cover of Prospectus
2. Inside Front and Outside Available Information;
Back Cover Pages of Incorporation of Certain
Prospectus Documents by Reference; Table
of Contents
3. Risk Factors, Ratio of Summary of Proxy Statement-
Earnings to Fixed Charges, Prospectus; The Special
and Other Information Meeting; The Merger
4. Terms of the Transaction Summary of the Proxy
Statement-Prospectus; The
Merger; Certain Related
Transactions; Comparison of
Rights of Shareholders
5. Pro Forma Financial Summary of Proxy Statement-
Information Prospectus
6. Material Contacts with The Merger -- Background of
Company being Acquired and Reasons for the Merger
7. Additional Information Not Applicable
Required for Reoffering
by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts
Experts and Counsel
9. Disclosure of Commission Not Applicable
Position on Indemnification
for Securities Act
Liabilities
B. Information About the Registrant
10. Information with Respect Incorporation of Certain
to S-3 Registrants Documents by Reference;
Summary of Proxy Statement-
Prospectus;
11. Incorporation of Certain Incorporation of Certain
Information by Reference Documents by Reference
12. Information with Respect Not Applicable
to S-2 or S-3 Registrants
13. Incorporation of Certain Not Applicable
Information by Reference
14. Information with Respect Not Applicable
to Registrants Other Than
S-2 or S-3 Registrants
C. Information About Company Being Acquired
15. Information with Respect Not Applicable
to S-3 Companies
16. Information with Respect Certain Information
to S-2 or S-3 Companies Concerning CBC, Appendix E,
Appendix F, and Appendix G
17. Information with Respect Not Applicable
to Companies Other Than
S-2 or S-3 Companies
D. Voting and Management Information
18. Information if Proxies, Incorporation of Certain
Consents, or Documents by Reference;
Authorizations Are to Be Summary of Proxy Statement-
Solicited Prospectus; The Special
Meeting; Dissenters' Rights;
Experts
19. Information if Proxies, Not Applicable
Consents, or
Authorizations Are Not to
Be Solicited or in an
Exchange Offer
<PAGE>
[COMMERCIAL BANCORPORATION OF COLORADO LETTERHEAD]
January ___, 1994
Dear Commercial Bancorporation of Colorado Shareholder:
You are cordially invited to attend a Special Meeting of
Shareholders of Commercial Bancorporation of Colorado ("CBC"),
which will be held on Tuesday, February 22, 1994, at 2:00 p.m.,
Mountain Time, at the offices of CBC, Century Bank Plaza, 3300 East
First Avenue, Denver, Colorado. At this Special Meeting, you will
be asked to consider and vote upon a proposal to approve an
Agreement (the "CBC/KeyCorp Merger Agreement") pursuant to which
CBC will merge with and into Key Bancshares of Colorado, Inc. (the
"CBC/KeyCorp Merger"), a wholly-owned direct subsidiary of KeyCorp
to be formed for purposes of consummating the CBC/KeyCorp Merger,
and each share of CBC Class A Common Stock and each share of CBC
Class B Common Stock (except (i) shares held directly or indirectly
by KeyCorp other than in a fiduciary capacity or in satisfaction of
a debt previously contracted, (ii) shares held by any CBC
shareholder properly exercising dissenters' rights, or (iii) shares
held as treasury stock of CBC) will be converted in a tax-free
reorganization into .7460 of a share of KeyCorp Common Stock.
Since the execution of the CBC/KeyCorp Merger Agreement,
KeyCorp and Society Corporation, a financial services holding
company with principal offices in Cleveland, Ohio ("Society"),
entered into an Agreement and Plan of Merger and a related
Supplemental Agreement to Agreement and Plan of Merger, each dated
as of October 1, 1993, as amended (together, the "KeyCorp/Society
Merger Agreement") providing for the merger (the "KeyCorp/Society
Merger") of KeyCorp into and with Society, with Society as the
surviving corporation under the name "Key Bancshares Inc." or a
variant thereof ("New Key"). The KeyCorp/Society Merger Agreement
provides that, upon consummation of the KeyCorp/Society Merger,
each outstanding share of KeyCorp Common Stock will be converted
into 1.205 shares of Common Stock of New Key.
The result is that, (i) if the CBC/KeyCorp Merger is
consummated but the KeyCorp/Society Merger is not consummated, each
share of CBC Common Stock would be converted into and remain .7460
of a share of KeyCorp Common stock, (ii) if the CBC/KeyCorp Merger
is consummated and then the KeyCorp/Society Merger is consummated,
each share of CBC Common Stock ultimately would be converted to
.899 of a share of Common Stock of New Key, or (iii) if the
KeyCorp/Society Merger is consummated before the CBC/KeyCorp Merger
is consummated, each share of CBC Common Stock would be directly
converted into and remain .899 of a share of New Key Common Stock.
As a result, the enclosed Proxy Statement-Prospectus includes
certain information relating to the KeyCorp/Society Merger, Society
and New Key. The CBC/KeyCorp Merger Agreement and the
KeyCorp/Society Merger Agreement were independently negotiated and
the CBC/KeyCorp Merger and the KeyCorp/Society Merger are unrelated
transactions; neither of such transactions is conditioned on
consummation of the other.
The proposed CBC/KeyCorp Merger has been approved by the
Board of Directors of CBC and KeyCorp. Your Board of Directors has
considered the change in circumstances occasioned by the execution
of the KeyCorp/Society Merger Agreement, has reconfirmed its
approval of the CBC/KeyCorp Merger and has determined that the
CBC/KeyCorp Merger remains fair to, and in the best interests of,
CBC and its shareholders and recommends that you vote FOR approval
of the CBC/KeyCorp Merger Agreement.
Consummation of the CBC/KeyCorp Merger is subject to
certain conditions, including the approval of the CBC/KeyCorp
Merger Agreement by CBC's shareholders and by various regulatory
agencies. The KeyCorp/Society Merger is also subject to certain
conditions, including the requisite approval of the KeyCorp/Society
Merger Agreement by the shareholders of KeyCorp and Society and
certain regulatory approvals, including approval by the Board of
Governors of the Federal Reserve System. Subject to the foregoing
conditions, both the CBC/KeyCorp Merger and the KeyCorp/Society
Merger are currently expected to be consummated in the first
quarter of 1994. However, there can be no assurance that the
conditions to either closing will be met or, if met, as to the
timing of the closing of the CBC/KeyCorp Merger and/or the
KeyCorp/Society Merger.
It is expected that the KeyCorp/Society Merger, if it
closes, will close after the CBC shareholder vote on the
CBC/KeyCorp Merger Agreement at the Special Meeting, but before all
other conditions to consummation of the CBC/KeyCorp Merger have
been met. If this occurs, New Key would assume the rights and
obligations of KeyCorp under the CBC/KeyCorp Merger Agreement, and
if all conditions to consummation of the CBC/KeyCorp Merger are
subsequently met, CBC shareholders would become shareholders of
New Key rather than of KeyCorp without any further right on the
part of the CBC shareholders to vote on the direct merger with a
subsidiary of New Key or the KeyCorp/Society Merger or to exercise
dissenters' rights with respect to either of those transactions.
Should the KeyCorp/Society Merger close after consummation of the
CBC/KeyCorp Merger, CBC shareholders would become shareholders of
KeyCorp, and then, if the KeyCorp/Society Merger is subsequently
consummated, they would become New Key shareholders. In this
event, CBC shareholders would not be able to vote on the
KeyCorp/Society Merger, since they would not be shareholders of
KeyCorp on the record date for the KeyCorp shareholder vote on the
KeyCorp/Society Merger and would not be able to exercise
dissenters' rights with respect to that merger. Therefore, and in
either event, CBC shareholders, when voting on the CBC/KeyCorp
Merger Agreement and deciding whether to exercise dissenters'
rights with respect thereto, must consider the possibility that
they may become shareholders of New Key rather than KeyCorp. A
copy of the Prospectus/Joint Proxy Statement previously delivered
to KeyCorp shareholders relating to their vote on the
KeyCorp/Society Merger is enclosed for that purpose.
The enclosed Notice of Special Meeting of Shareholders
and Proxy Statement-Prospectus describe the CBC/KeyCorp Merger and
the KeyCorp/Society Merger and provide specific information
concerning the Special Meeting. Please read all of the enclosed
materials carefully and consider the information contained in them.
It is very important that your shares be represented at
the Special Meeting, regardless of whether you plan to attend in
person. The affirmative vote of two-thirds of all of the
outstanding shares of CBC Common Stock, voting by class, is
required to approve the CBC/KeyCorp Merger Agreement.
Consequently, a failure to vote will have the same effect as a vote
against the proposal. Therefore, I urge you to execute, date, and
return the enclosed proxy card in the enclosed postage-paid
envelope as soon as possible to ensure that your shares will be
voted at the Special Meeting. You should not send in certificates
for your CBC shares at this time.
ON BEHALF OF THE BOARD OF DIRECTORS, I RECOMMEND THAT YOU
VOTE FOR APPROVAL OF THE CBC/KEYCORP MERGER AGREEMENT.
Sincerely,
Jon P. Coates
President
<PAGE>
COMMERCIAL BANCORPORATION OF COLORADO
Century Bank Plaza
3300 East First Avenue
Denver, Colorado 80206
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 22, 1994
NOTICE IS HEREBY GIVEN that, pursuant to call of its
Directors, a Special Meeting of Shareholders of Commercial
Bancorporation of Colorado ("CBC") will be held at the offices of
CBC, Century Bank Plaza, 3300 East First Avenue, Denver, Colorado,
on Tuesday, February 22, 1994, at 2:00 p.m., Mountain Time, for the
purpose of considering and voting upon the following matters:
1. MERGER OF CBC WITH A SUBSIDIARY OF KEYCORP.
Considering and voting upon a proposal to approve an
Agreement dated as of the 11th day of September, 1993,
as amended and restated as of September 11, 1993, (as
so amended and restated, the "CBC/KeyCorp Merger
Agreement"), attached as Appendix A to the accompanying
Proxy Statement-Prospectus, providing for the merger of
CBC into a wholly-owned subsidiary of KeyCorp (the
"CBC/KeyCorp Merger"); and
2. WHATEVER OTHER BUSINESS may properly be brought before
the Special Meeting or any adjournment or postponement
thereof.
Only those shareholders of record at the close of
business on January 14, 1994, shall be entitled to notice of and to
vote at the Special Meeting or any adjournments or postponements
thereof.
CBC shareholders will not have an opportunity to vote
directly on (or exercise dissenters' rights directly with respect
to) the pending merger of KeyCorp with and into Society Corporation
(the "KeyCorp/Society Merger"). Accordingly if proposal 1 is
approved, all other conditions to consummation of the CBC/KeyCorp
Merger are otherwise met, and the KeyCorp/Society Merger is
consummated, CBC would become a subsidiary of the surviving entity
of the KeyCorp/Society Merger, and CBC shareholders would become
shareholders of Key Bancshares Inc., without any right on the part
of CBC shareholders to vote on that transaction or to exercise
dissenters' rights with respect thereto.
Any shareholder entitled to vote at the Special Meeting
shall have the right to dissent from the vote on the CBC/KeyCorp
Merger Agreement and to receive payment of the fair value of shares
of CBC Common Stock held of record or beneficially by such
shareholder upon compliance with Sections 7-4-123 and 7-4-124 of
the Colorado Corporation Code, the full text of which is included
as Appendix C to the Proxy Statement-Prospectus which is attached
to this Notice of Special Meeting. For a summary of the
dissenters' rights of CBC shareholders, see "DISSENTERS' RIGHTS OF
CBC SHAREHOLDERS" in the Proxy Statement-Prospectus.
By Order of the Board of Directors,
Paul G. West
Denver, Colorado Secretary
January ___, 1994
THE BOARD OF DIRECTORS OF CBC UNANIMOUSLY RECOMMENDS THAT
THE HOLDERS OF CBC COMMON STOCK VOTE TO APPROVE THE PROPOSAL.
SINCE THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS
(66-2/3%) OF THE OUTSTANDING SHARES OF CBC CLASS A COMMON STOCK AND
CBC CLASS B COMMON STOCK, VOTING BY CLASS, IS REQUIRED TO APPROVE
THE CBC/KEYCORP MERGER AGREEMENT, WE URGE YOU TO SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU
INTEND TO ATTEND THE MEETING IN PERSON. THE PROXY MAY BE REVOKED
AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER DESCRIBED IN THE
ATTACHED PROXY STATEMENT-PROSPECTUS. ANY SHAREHOLDER PRESENT AT
THE SPECIAL MEETING, INCLUDING ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF, MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY ON EACH
MATTER BROUGHT BEFORE THE SPECIAL MEETING.
<PAGE>
COMMERCIAL BANCORPORATION OF COLORADO
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 22, 1994
______________________
KEYCORP
PROSPECTUS
______________________
This Proxy Statement-Prospectus is being furnished to the
holders of Class A Common Stock, par value $1.00 per share ("CBC
Class A Common Stock"), and Class B Common Stock, par value $1.00
per share ("CBC Class B Common Stock" and collectively "CBC Common
Stock"), of Commercial Bancorporation of Colorado, a bank holding
company incorporated under the laws of Colorado ("CBC"), in
connection with the solicitation of proxies by the Board of
Directors of CBC for use at the Special Meeting of CBC shareholders
to be held at 2:00 p.m., Mountain Time, on Tuesday, February 22,
1994, at the offices of CBC, Century Bank Plaza, 3300 East First
Avenue, Denver, Colorado, and at any adjournments or postponements
thereof, (the "Special Meeting").
At the Special Meeting, the shareholders of record of CBC
Common Stock as of the close of business on January 14, 1994, will
consider and vote, separately by class, upon a proposal to approve
the Agreement dated as of the 11th day of September, 1993, as
amended and restated as of September 11, 1993, (as so amended and
restated, the "CBC/KeyCorp Merger Agreement"), by and between
KeyCorp, a bank holding company incorporated under the laws of
New York ("KeyCorp") and CBC, pursuant to which CBC will merge with
and into Key Bancshares of Colorado, Inc., a bank holding company
to be formed under the laws of Colorado as a wholly-owned direct
subsidiary of KeyCorp for purposes of consummating the CBC/KeyCorp
Merger, ("Key Bancshares"). Upon consummation of the CBC/KeyCorp
Merger, each outstanding share of CBC Common Stock (except
(i) shares held directly or indirectly by KeyCorp other than in a
fiduciary capacity or in satisfaction of a debt previously
contracted, (ii) shares held by any CBC shareholder properly
exercising dissenters' rights, or (iii) shares held as treasury
stock of CBC) will be converted into .7460 of a share of KeyCorp
Common Stock, par value $5.00 per share ("KeyCorp Common Stock").
Each share of KeyCorp Common Stock issued to CBC shareholders in
the CBC/KeyCorp Merger will be accompanied by one KeyCorp Right (as
defined herein) and, unless the context otherwise requires, all
references herein to the KeyCorp Common Stock also includes the
rights attached thereto. See "COMPARISON OF CERTAIN RIGHTS OF
HOLDERS OF CAPITAL STOCK OF KEYCORP, CBC AND NEW KEY." For a
description of the CBC/KeyCorp Merger Agreement, which is included
in its entirety as Appendix A to this Proxy Statement-Prospectus
and incorporated herein, see "THE CBC/KEYCORP MERGER."
Since the execution of the CBC/KeyCorp Merger Agreement,
KeyCorp and Society Corporation, a financial services holding
company with principal offices in Cleveland, Ohio ("Society"),
entered into an Agreement and Plan of Merger and a related
Supplemental Agreement to Agreement and Plan of Merger, each dated
as of October 1, 1993, as amended (together, the "KeyCorp/Society
Merger Agreement") providing for the merger (the "KeyCorp/Society
Merger") of KeyCorp into and with Society, with Society as the
surviving corporation under the name Key Bancshares Inc. or a
variant thereof ("New Key"). The KeyCorp/Society Merger Agreement
provides that, upon consummation of the KeyCorp/Society Merger,
each outstanding share of KeyCorp Common Stock will be converted
into 1.205 Common Shares, with a par value of $1 each, of New Key
("New Key Common Stock"). Each share of New Key Common Stock
issued in the KeyCorp/Society Merger will be accompanied by one
New Key Right (as defined herein) to purchase one share of New Key
Common Stock upon the terms and conditions set forth in the New Key
Rights Agreement (as defined herein), and unless the context
otherwise requires, all references herein to the New Key Common
Stock also includes the rights attached thereto. See "COMPARISON
OF CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF KEYCORP, CBC AND
NEW KEY -- Shareholder Rights Plans -- New Key Rights." The result
is that, (i) if the CBC/KeyCorp Merger is consummated but the
KeyCorp/Society Merger is not consummated, each share of CBC Common
Stock would be converted into and remain .7460 of a share of
KeyCorp Common Stock, (ii) if the CBC/KeyCorp Merger is consummated
and then the KeyCorp/Society Merger is consummated, each share of
CBC Common Stock ultimately would be converted to .899 of a share
of New Key Common Stock, or (iii) if the KeyCorp/Society Merger is
consummated before the CBC/KeyCorp Merger is consummated, each
share of CBC Common Stock would be directly converted into and
remain .899 of a share of New Key Common Stock. As a result, the
enclosed Proxy Statement-Prospectus includes certain information
relating to the KeyCorp/Society Merger, Society and New Key.
Further information is included in the Prospectus/Joint Proxy
Statement (the "KeyCorp/Society Joint Proxy Statement") previously
delivered to KeyCorp shareholders relating to their vote on the
KeyCorp/Society Merger, a copy of which is enclosed. CBC
shareholders will not be able to directly vote on, or exercise
dissenters' rights directly with respect to, the KeyCorp/Society
Merger or on, or with respect to, the direct merger of CBC with
New Key if, as expected, the KeyCorp/Society Merger closes before
all conditions to consummation of the CBC/KeyCorp Merger have been
met. The CBC/KeyCorp Merger Agreement and the KeyCorp/Society
Merger Agreement were independently negotiated and the CBC/KeyCorp
Merger and the KeyCorp/Society Merger are unrelated transactions;
neither of such transactions is conditioned on consummation of the
other. See "CERTAIN INFORMATION REGARDING THE PENDING MERGER OF
KEYCORP AND SOCIETY."
This Proxy Statement-Prospectus also constitutes a
prospectus of KeyCorp covering the maximum number of shares of
KeyCorp Common Stock which may be issued in connection with the
CBC/KeyCorp Merger Agreement ("Merger Shares").
The outstanding shares of KeyCorp Common Stock are listed
on the New York Stock Exchange ("NYSE"). The last reported sale
price of KeyCorp Common Stock on the NYSE composite transaction
reporting system on _______________, 1994, was $______ per share.
While it is anticipated that the shares of New Key Common Stock
will be listed on the NYSE, no assurances can be given that the
New Key Common Stock will be listed on the NYSE, and since the
KeyCorp/Society Merger has not yet been consummated, there are no
sales prices relating thereto.
This Proxy Statement-Prospectus and the accompanying
proxy cards are first being mailed to shareholders of CBC on or
about _____________________, 1994.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF KEYCORP COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS, OR OTHER OBLIGATIONS OF A BANK OR
SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Proxy Statement-Prospectus is
__________________, 1994.
<PAGE>
AVAILABLE INFORMATION
Each of KeyCorp, Society, and CBC is subject to the
information requirements of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"), and in accordance therewith file
reports, proxy statements, and other information with the
Securities and Exchange Commission (the "SEC"). KeyCorp has filed
with the SEC a Registration Statement on Form S-4 (together with
any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended, (the "Securities Act"),
covering the shares of KeyCorp Common Stock to be issued in the
CBC/KeyCorp Merger.
The Registration Statement and the exhibits thereto, as
well as the reports, proxy statements, and other information filed
with the SEC by KeyCorp, Society, and CBC under the Exchange Act,
may be inspected and copied at prescribed rates at the public
reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's Regional Offices of the SEC located at 7 World Trade Center,
Thirteenth Floor, New York, New York 10048, and The Citicorp
Center, 500 West Madison Street Suite 1400, Chicago, Illinois
60661. Copies of such material may also be obtained at prescribed
rates from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549. In addition, the KeyCorp
Common Stock and the Society Common Stock are listed on the NYSE,
and all materials filed by KeyCorp and Society with the SEC will be
available for inspection at the offices of the NYSE, 20 Broad
Street, New York, New York 10005. The CBC Class A Common Stock is
included for quotation in the National Association of Securities
Dealers Automated Quotation System, Inc., National Market System,
("NASDAQ National Market"), and such reports, proxy statements, and
other information concerning CBC should be available for inspection
and copying at the offices of the National Association of
Securities Dealers, 1735 K Street, N.W., Washington, D.C. 20006.
As permitted by the rules and regulations of the SEC, this Proxy
Statement-Prospectus omits certain information, exhibits, and
undertakings contained in the Registration Statement. Reference is
made to the Registration Statement and to the exhibits thereto for
further information.
Statements contained herein or in any document
incorporated herein or therein as to the contents of any contract
or other document referred to herein or therein are not necessarily
complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the
Registration Statement or such other document, each such statement
being qualified in all respects by such reference.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC under the
Exchange Act by KeyCorp are hereby incorporated by reference into
this Proxy Statement-Prospectus and made a part hereof:
(1) KeyCorp's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992; (2) KeyCorp's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1993, June 30, 1993, and September 30,
1993; (3) KeyCorp's Current Reports on Form 8-K dated January 14,
1993, January 27, 1993, March 18, 1993 (as amended by a Form 8
dated May 20, 1993) which contained the audited restated
consolidated financial statements of KeyCorp for the fiscal year
ended December 31, 1992 (giving effect to the merger of KeyCorp
with Puget Sound Bancorp on January 15, 1993), April 28, 1993,
May 19, 1993, two such Reports filed on July 8, 1993, September 21,
1993, two such Reports filed October 13, 1993 (one of which
includes financial statements of Society Corporation as of and for
the three years ended December 31, 1992), October 15, 1993,
January 7, 1994, and January 14, 1994; (4) the description of
KeyCorp Common Stock contained in KeyCorp's Registration Statement
on Form 8-A filed pursuant to Section 12 of the Exchange Act
(and any amendment or report filed for the purpose of updating
the description); (5) the description of KeyCorp Preferred Stock
and the Depositary Shares related thereto contained in KeyCorp's
Registration Statement on Form 8-A filed pursuant to Section 12
of the Exchange Act (and any amendment or report filed for the
purpose of updating the description; (6) the description of the
rights issued pursuant to the Shareholder Rights Protection Plan
of KeyCorp contained in KeyCorp's Registration Statement on
Form 8-A filed pursuant to Section 12 of the Exchange Act (and
any amendment or report filed for the purpose of updating the
description; and (7) KeyCorp's Report on Schedule 13D dated
October 12, 1993.
The following documents filed with the SEC under the
Exchange Act by CBC are hereby incorporated by reference into this
Proxy Statement-Prospectus and made a part hereof: (1) CBC's
Annual Report on Form 10-K for the fiscal year ended December 31,
1992; (2) CBC's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1993, June 30, 1993, and September 30, 1993; and
(3) CBC's Current Report on Form 8-K dated September 17, 1993. A
copy of CBC's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, Proxy Statement dated May 3, 1993, for the
Annual Meeting of Shareholders held on June 3, 1993 and Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993, are
contained in Appendices E, F and G, respectively, to this Proxy
Statement-Prospectus. Also incorporated by reference into this
Proxy Statement-Prospectus is Registration Statement No. 33-51717
filed on Form S-4 by Society Corporation, including the Prospectus/
Joint Proxy Statement contained therein, a copy of which is enclosed.
The information relating to KeyCorp and CBC contained in
this Proxy Statement-Prospectus should be read together with the
information in the documents incorporated by reference, some of
which, in the case of CBC, are attached as Appendixes E, F and G to
this Proxy Statement-Prospectus.
All documents filed by KeyCorp or CBC pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act after the
date of this Proxy Statement-Prospectus and prior to the Special
Meeting shall be deemed incorporated by reference in this Proxy
Statement-Prospectus and a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated
or deemed incorporated herein by reference will be deemed to be
modified or superseded for the purpose of this Proxy Statement-
Prospectus to the extent that a statement contained herein or in
the other subsequently filed document which also is, or is deemed
to be, incorporated herein by reference modifies or supersedes such
statement. Any such statement so modified or superseded will not
be deemed, except as so modified or superseded, to constitute a
part of this Proxy Statement-Prospectus.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
SUCH DOCUMENTS RELATING TO KEYCORP, OTHER THAN CERTAIN EXHIBITS TO
SUCH DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE UPON REQUEST MADE TO
KEYCORP, ONE KEYCORP PLAZA, ALBANY, NEW YORK 12207, TELEPHONE
(518) 486-8579, ATTENTION: MR. LEE IRVING, SENIOR VICE PRESIDENT.
SUCH DOCUMENTS RELATING TO CBC, OTHER THAN CERTAIN EXHIBITS TO SUCH
DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE UPON REQUEST MADE TO
COMMERCIAL BANCORPORATION OF COLORADO, CENTURY BANK PLAZA,
3300 EAST FIRST AVENUE, DENVER, COLORADO 80206, [TELEPHONE
(303) 321-1234], ATTENTION: GEORGE R. MATA, VICE PRESIDENT-FINANCE
AND TREASURER. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY FEBRUARY 14, 1994.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED HEREIN, IN
CONNECTION WITH THE SOLICITATION AND THE OFFERING OF SECURITIES
MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS DOCUMENT NOR ANY DISTRIBUTION OF SECURITIES
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF KEYCORP OR CBC
SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
<PAGE>
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 5
SUMMARY OF PROXY STATEMENT-PROSPECTUS 11
Introduction 11
Parties to the CBC/KeyCorp Merger 12
Effect of the CBC/KeyCorp Merger 13
CBC/KeyCorp Exchange Ratio 13
Pending Merger of KeyCorp and Society 14
Effect of KeyCorp/Society Merger on CBC
and CBC Shareholders 15
Special Meeting of CBC Shareholders 16
Vote Required; Record Date 16
Reasons for the CBC/KeyCorp Merger;
Recommendation of the CBC Board of Directors 18
Opinion of CBC Financial Advisor 18
Effective Date and Effective Time 18
Conditions; Regulatory Approvals 19
Termination of the CBC/KeyCorp Merger Agreement 19
Holding Company Merger; Bank Consolidation 20
Interests of Certain Persons in the
CBC/KeyCorp Merger 21
Certain Federal Income Tax Considerations 21
Accounting Treatment 21
CBC/KeyCorp Stock Option Agreements 22
Certain Differences in Shareholders' Rights 22
Dissenters' Rights of CBC Shareholders 23
Other Business 23
Comparative Stock Price Information 24
Summary Condensed Consolidated Financial
Information of KeyCorp and CBC 25
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF
KEYCORP AND SUBSIDIARIES AND SOCIETY CORPORATION
AND SUBSIDIARIES 28
KEYCORP AND SUBSIDIARIES AND SOCIETY
CORPORATION AND SUBSIDIARIES UNAUDITED
PRO FORMA COMBINED SELECTED FINANCIAL DATA 29
SELECTED HISTORICAL, PRO FORMA, AND EQUIVALENT
PRO FORMA PER SHARE DATA KEYCORP AND CBC 30
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS OF KEYCORP AND
SUBSIDIARIES AND SOCIETY AND SUBSIDIARIES 31
KEYCORP AND SUBSIDIARIES AND SOCIETY CORPORATION
AND SUBSIDIARIES UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET 32
INTRODUCTION 40
General 40
Parties to the CBC/KeyCorp Merger 41
Pending Merger of KeyCorp and Society 43
THE SPECIAL MEETING 44
General 44
Vote Required; Record Date 45
Recommendation of the Board of Directors 46
THE CBC/KEYCORP MERGER 46
Background of and Reasons for the CBC/KeyCorp
Merger 46
Opinion of CBC Financial Advisor 51
Effect of the CBC/KeyCorp Merger 56
Effect of KeyCorp/Society Merger on CBC
and CBC Shareholders 57
Effective Date and Effective Time 59
Surrender of Certificates 59
Conditions to Consummation of the
CBC/KeyCorp Merger 60
Price-Based Termination 64
Regulatory Approvals 66
Conduct of CBC's Business Pending the
CBC/KeyCorp Merger 68
No Solicitation 70
Waiver and Amendment; Termination 71
Holding Company Merger; Bank Consolidation 72
Interests of Certain Persons in the
CBC/KeyCorp Merger 72
Effect on CBC Employee Benefit Plans 73
Treatment of CBC Class A Stock Options 73
Certain Federal Income Tax Considerations 74
Accounting Treatment 76
NYSE Listing 77
Expenses 77
CERTAIN TRANSACTIONS RELATED TO THE CBC/KEYCORP
MERGER AGREEMENT 78
CBC/KeyCorp Stock Option Agreements 78
Resales of KeyCorp Common Stock 82
DISSENTERS' RIGHTS OF CBC SHAREHOLDERS 84
CERTAIN INFORMATION CONCERNING KEYCORP 87
General 87
Subsidiaries 87
Other KeyCorp Acquisitions 89
CERTAIN INFORMATION CONCERNING CBC 90
CERTAIN REGULATORY CONSIDERATIONS 91
General 91
Dividend Restrictions 92
Holding Company Structure 93
Capital Requirements 94
Recent Legislation 95
Depositor Preference Statute 98
Implications of Being a Savings and
Loan Holding Company 98
Control Acquisitions 99
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
CAPITAL STOCK OF KEYCORP, CBC AND NEW KEY 100
Voting Rights 100
State Takeover Statutes and Takeover
Provisions of Charter Documents 101
Shareholder Rights Plans 103
Special Meeting of Shareholders 110
Amendment of Charter Documents 111
Directors 113
Director Liability and Indemnification 115
Dividends 118
Repurchases 119
No Material Differences in Rights of
Holders of New Key Preferred Stock and
KeyCorp Preferred Stock 120
Preferred Stock 120
Inspection Rights 120
CERTAIN INFORMATION REGARDING THE PENDING MERGER
OF KEYCORP AND SOCIETY 122
General 122
Society 123
Integration of KeyCorp and Society into
New Key 124
The KeyCorp Shareholders' Rights Agreement 126
KeyCorp and Society Stock Options 127
Board of Directors and Chief Executive
Officers of New Key through December 31, 1998 127
Interests of Certain Persons in the
KeyCorp/Society Merger 133
DESCRIPTION OF NEW KEY CAPITAL STOCK 135
General 135
New Key Common Stock 135
New Key Preferred Stock and New Key
Depositary Shares 135
Additional Class of Authorized but Unissued
New Key Serial Preferred Stock 137
AMENDED AND RESTATED ARTICLES OF INCORPORATION
AND REGULATIONS OF NEW KEY 138
General 138
Amended and Restated Articles of
Incorporation of New Key 138
Regulations of New Key 140
VALIDITY OF KEYCORP COMMON STOCK 146
EXPERTS 146
OTHER MATTERS 146
CBC SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING 147
Appendix A Amended and Restated Merger Agreement
Appendix B Stock Option Agreements
Appendix C Sections 7-4-123 and 7-4-124 of the
Colorado Corporation Code
Dissenters' Rights
Appendix D Opinion of CBC Financial Advisor
Appendix E CBC 1992 Annual Report on Form 10-K
Appendix F CBC Proxy Statement and Notice of Annual
Meeting of Stockholders held June 3, 1993
Appendix G CBC Quarterly Report on Form 10-Q
For the Quarter Ending September 30, 1993
<PAGE>
COMMERCIAL BANCORPORATION OF COLORADO
Century Bank Plaza
3300 East First Avenue
Denver, Colorado 80206
SUMMARY OF PROXY STATEMENT-PROSPECTUS
DATED: JANUARY ___, 1994
The following summary is intended to summarize certain
information contained elsewhere in this Proxy Statement-Prospectus.
This summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information contained
elsewhere in this Proxy Statement-Prospectus, the Appendices
hereto, and the documents referred to and incorporated herein.
Introduction
The Boards of Directors of Commercial Bancorporation of
Colorado ("CBC") and KeyCorp have each approved and adopted the
CBC/KeyCorp Merger Agreement, pursuant to which CBC will merge with
and into a subsidiary of KeyCorp, if the shareholders of CBC adopt
the CBC/KeyCorp Merger Agreement by the requisite shareholder vote,
regulatory approvals are received, and certain other conditions are
satisfied. A copy of the CBC/KeyCorp Merger Agreement is attached
hereto as Appendix A, and is incorporated herein by reference. The
terms of the CBC/KeyCorp Merger and information regarding the
Special Meeting are summarized below.
Since the execution of the CBC/KeyCorp Merger Agreement,
KeyCorp and Society entered into the KeyCorp/Society Merger
Agreement, pursuant to which KeyCorp will merge with and into
Society, with Society as the surviving corporation under the name
Key Bancshares Inc. or a variant thereof ("New Key"), if the
shareholders of KeyCorp and Society adopt the KeyCorp/Society
Merger Agreement by the requisite shareholder votes, regulatory
approvals are received, and certain other conditions are satisfied.
If all conditions to consummation of the CBC/KeyCorp Merger are met
and the KeyCorp/Society Merger is consummated, CBC shareholders
ultimately would become shareholders of New Key with no further
action by the CBC shareholders other than the vote on the
CBC/KeyCorp Merger Agreement at the Special Meeting. As a result,
the terms of the KeyCorp/Society Merger are summarized below.
Unless the context otherwise requires, all references in
this Proxy Statement-Prospectus to CBC/KeyCorp Merger and
CBC/KeyCorp Merger Agreement and the discussion herein related
thereto shall include New Key in lieu of KeyCorp if the
KeyCorp/Society Merger is consummated before all conditions to the
CBC/KeyCorp Merger are met.
All historical financial information for KeyCorp
contained herein has been restated for the pooling-of-interests
acquisition of Puget Sound Bancorp on January 15, 1993.
Parties to the CBC/KeyCorp Merger
KeyCorp. KeyCorp is a multi-regional financial services
holding company headquartered in Albany, New York. Incorporated in
1970 under the laws of the State of New York, KeyCorp is registered
under the federal Bank Holding Company Act of 1956, as amended (the
"BHCA"). At September 30, 1993, based on data from the American
Banker publication, KeyCorp was the 25th largest bank holding
company in the United States in terms of total consolidated assets
of approximately $32.4 billion at that date. Through its eleven
banking subsidiaries in nine states along the country's Northeast,
Pacific Northwest and Rocky Mountain tiers, KeyCorp provides banking
services to individual customers, small- to medium-sized businesses,
and municipalities. The oldest bank subsidiary of KeyCorp was
organized in 1825. KeyCorp's banking subsidiaries all operate under
the Key Bank name and are located in Alaska, Colorado, Idaho, Maine,
New York, Oregon, Utah, Washington, and Wyoming. As of September 30,
1993, KeyCorp's banking subsidiaries served their respective markets
with over 800 full-service banking offices. In addition to its banking
services, KeyCorp offers a variety of personal and commercial
financial services through other subsidiaries. KeyCorp Mortgage
Inc., KeyCorp's primary mortgage banking subsidiary, serviced a
$22.0 billion portfolio of mortgage loans as of September 30, 1993,
making it one of the largest mortgage servicing companies in the
country. KeyCorp's other specialized financial service companies
provide such services as trust, credit life reinsurance, equipment
leasing, securities brokerage, annuity sales, asset management, and
data processing. At September 30, 1993, KeyCorp and its
subsidiaries employed approximately 17,800 full-time equivalent
employees. See "CERTAIN INFORMATION CONCERNING KEYCORP."
Key Bancshares of Colorado, Inc. Key Bancshares of
Colorado, Inc. ("Key Bancshares") is a bank holding company to be
incorporated under the laws of Colorado for purposes of
consummating the CBC/KeyCorp Merger and, when formed, will be a
wholly-owned direct subsidiary of KeyCorp (or New Key if the
KeyCorp/Society Merger is consummated before all conditions to
consummation of the CBC/KeyCorp Merger have been met).
CBC. CBC, headquartered in Denver, Colorado, is a
multi-bank holding company engaged in the commercial banking
business through five wholly-owned subsidiary banks with a total of
eleven banking offices located in the greater Denver, Fort Collins,
Fort Morgan, Sterling, and Colorado Springs areas of Colorado. CBC
has no significant nonbank subsidiaries. Incorporated in 1971
under the laws of the State of Colorado, CBC is registered under
the BHCA. CBC and its consolidated subsidiaries had total assets
of $373.9 million, total deposits of approximately $331.1 million
and shareholders' equity of approximately $35.0 million at
September 30, 1993. On September 30, 1993 CBC was the third
largest bank holding company headquartered in Colorado. Through
its subsidiary banks, CBC offers a variety of deposit services and
concentrates on secured lending to small and medium size
businesses. At September 30, 1993, CBC and its subsidiaries
employed 194 full-time equivalent employees.
Effect of the CBC/KeyCorp Merger
Pursuant to the CBC/KeyCorp Merger Agreement, at the
Effective Time (as defined below), CBC will merge into
Key Bancshares, with Key Bancshares being the surviving corporation
(the "CBC/KeyCorp Merger"). See "THE CBC/KEYCORP MERGER -- Effect
of the CBC/KeyCorp Merger." For information on how CBC
shareholders will be able to exchange certificates representing
shares of CBC Common Stock for new certificates representing the
shares of KeyCorp Common Stock, par value $5.00 per share, to be
issued to them in the CBC/KeyCorp Merger (the "CBC/KeyCorp Merger
Shares"), see "THE CBC/KEYCORP MERGER -- Surrender of
Certificates."
Assuming consummation of the CBC/KeyCorp Merger and other
pending KeyCorp acquisitions (but not the KeyCorp/Society Merger),
approximately 1.1% of KeyCorp's consolidated total assets,
approximately 1.2% of KeyCorp's consolidated total deposits,
approximately 1.5% of KeyCorp's consolidated shareholders' equity,
approximately 1.0% of KeyCorp's consolidated net income,
approximately 1.2% of KeyCorp's consolidated net interest income,
and approximately 2.0% of KeyCorp's voting power will be
represented by CBC.
Assuming consummation of the CBC/KeyCorp Merger, other
pending KeyCorp acquisitions and the KeyCorp/Society Merger,
approximately 0.6% of New Key's consolidated total assets,
approximately 0.7% of New Key's consolidated total deposits,
approximately 0.8% of New Key's consolidated shareholders' equity,
approximately 0.5% of New Key's consolidated net income,
approximately 0.7% of New Key's consolidated net interest income,
and approximately 1.1% of New Key's voting power will be
represented by CBC.
CBC/KeyCorp Exchange Ratio
The CBC/KeyCorp Merger Agreement provides that, in the
CBC/KeyCorp Merger, each outstanding share of CBC Common Stock
(except for shares with respect to which dissenters' rights shall
have been perfected in accordance with Colorado law, shares held
directly or indirectly by KeyCorp other than as a fiduciary or in
satisfaction of a debt previously contracted, and shares held as
treasury stock by CBC) will be converted into .7460 of a share of
KeyCorp Common Stock (the "CBC/KeyCorp Exchange Ratio") except that
if KeyCorp effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares, or
similar transaction prior to the Effective Time, an appropriate
adjustment to the CBC/KeyCorp Exchange Ratio will be made. In
addition, cash will be paid in lieu of fractional shares of KeyCorp
Common Stock. Unless the context otherwise requires, all
references to KeyCorp Common Stock in this Proxy Statement-
Prospectus include the associated rights ("KeyCorp Rights") to
purchase KeyCorp Common Stock pursuant to a Shareholders Protection
Rights Agreement, dated as of October 1, 1993, between KeyCorp and
Key Trust Company, as rights agent (the "KeyCorp Rights
Agreement"); each share of KeyCorp Common Stock issued to
shareholders of CBC in the CBC/KeyCorp Merger will be accompanied
by one KeyCorp Right which will be evidenced by the certificate for
the KeyCorp Common Stock. See "COMPARISON OF CERTAIN RIGHTS OF
HOLDERS OF CAPITAL STOCK OF KEYCORP, CBC AND NEW KEY -- Shareholder
Rights Plans." Any shares of CBC Common Stock held directly or
indirectly by KeyCorp (other than as a fiduciary or in satisfaction
of a debt previously contracted) will be cancelled and retired and
will cease to exist as of the Effective Time of the CBC/KeyCorp
Merger and no payment will be made with respect thereto. See "THE
CBC/KEYCORP MERGER -- Effect of the CBC/KeyCorp Merger." Each
outstanding share of KeyCorp Common Stock will remain outstanding
and unchanged as a result of the CBC/KeyCorp Merger.
The CBC/KeyCorp Exchange Ratio was arrived at through
arm's-length negotiations between KeyCorp and CBC. See "THE
CBC/KEYCORP MERGER -- Background of and Reasons for the CBC/KeyCorp
Merger" and "Opinion of CBC Financial Advisor." For certain
information concerning the premium over market price per share of
CBC Class A Common Stock represented by the CBC/KeyCorp Exchange
Ratio, see "Comparative Stock Price Information."
Pending Merger of KeyCorp and Society
On October 1, 1993, KeyCorp and Society entered into the
KeyCorp/Society Merger Agreement providing for the KeyCorp/Society
Merger. The KeyCorp/Society Merger Agreement provides that, upon
consummation of the KeyCorp/Society Merger, each share of KeyCorp
Common Stock will be converted into 1.205 shares of New Key Common
Stock (the "KeyCorp/Society Exchange Ratio"). Society, a financial
services holding company organized in 1958, is headquartered in
Cleveland, Ohio, is incorporated in Ohio, and is registered under
the BHCA. It is principally a regional banking organization and
provides a wide range of banking, fiduciary, and other financial
services to corporate, institutional, and individual customers. At
September 30, 1993, Society had total consolidated assets of
approximately $25.8 billion, making it the 29th largest bank
holding company in the United States in terms of total consolidated
assets based on data from the American Banker publication. The
first predecessor of a subsidiary of Society was organized in 1849.
Society's lead bank, Society National Bank, is the largest bank in
Ohio and one of the nation's major regional banks, with
headquarters in Cleveland. Society National Bank serves markets
throughout most of Ohio with 294 full-service banking offices as of
September 30, 1993. Society also has banking subsidiaries in
Indiana and Michigan and a savings bank subsidiary in Florida.
These subsidiaries operate a total of 146 full-service banking
offices in Indiana, Michigan, and Florida. In addition to
customary banking services of accepting funds for deposit and
making loans, Society's banking subsidiaries provide a wide range
of specialized services tailored to specific markets, including
investment management, personal and corporate trust services,
personal financial services, cash management services, investment
banking services and international banking services. Society had
one of the nation's largest trust departments with approximately
$25 billion in managed assets at September 30, 1993. Although
Society is principally a banking organization, its nonbanking
subsidiaries provide insurance sales services, reinsurance of
credit life and accident and health insurance on loans made by
subsidiary banks, securities brokerage services, investment
management, corporate and personal trust services, venture capital
and small business investment financing services, equipment lease
financing, registered investment advisory services, mortgage
banking services, community development services, and other
financial services. At September 30, 1993, Society and its
subsidiaries had approximately 12,700 full-time equivalent
employees. See "CERTAIN INFORMATION REGARDING THE PENDING MERGER
OF KEYCORP AND SOCIETY."
Effect of KeyCorp/Society Merger on CBC and CBC Shareholders
If both the CBC/KeyCorp Merger and the KeyCorp/Society
Merger are consummated, each share of CBC Common Stock ultimately
would be converted to .899 of a share of Common Stock of New Key
(the product of .7460 (CBC/KeyCorp Exchange Ratio) times 1.205
(KeyCorp/Society Exchange Ratio), except that cash will be paid in
lieu of fractional shares of New Key Common Stock. If the
KeyCorp/Society Merger is consummated before all conditions to
consummation of the CBC/KeyCorp Merger are met, New Key, by
operation of law, would assume the rights and obligations of
KeyCorp under the CBC/KeyCorp Merger Agreement and each share of
CBC Common Stock would be converted directly into .899 of a share
of New Key Common Stock. If the KeyCorp/Society Merger is
consummated after the CBC/KeyCorp Merger, the shares of CBC Common
Stock would first be converted into shares of KeyCorp Common Stock
at the CBC/KeyCorp Exchange Ratio and then into New Key Common
Stock at the KeyCorp/Society Exchange Ratio. If the
KeyCorp/Society Merger is not consummated after the CBC/KeyCorp
Merger, the shares of KeyCorp Common Stock received by CBC
shareholders in the CBC/KeyCorp Merger will remain as such. All
references to New Key Common Stock in this Proxy Statement-
Prospectus include the associated rights ("New Key Rights") to
purchase New Key Common Stock pursuant to a Rights Agreement dated
as of August 25, 1989, between Society and Society National Bank,
as rights agent, as amended (the "New Key Rights Agreement"); each
share of New Key Common Stock issued in the KeyCorp/Society Merger
will be accompanied by one New Key Right which will be evidenced by
the certificate for the New Key Common Stock. See "COMPARISON OF
CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF KEYCORP, CBC AND
NEW KEY -- Shareholder Rights Plans."
It is expected that the KeyCorp/Society Merger, if it
closes, will close after the CBC shareholder vote on the
CBC/KeyCorp Merger Agreement at the Special Meeting, but before all
other conditions to consummation of the CBC/KeyCorp Merger have
been met. If this occurs, New Key would assume the rights and
obligations of KeyCorp under the CBC/KeyCorp Merger Agreement, and
if all conditions to consummation of the CBC/KeyCorp Merger are
subsequently met, CBC shareholders would become shareholders of
New Key rather than of KeyCorp without any further right on the
part of the CBC shareholders to vote on the direct merger with a
subsidiary of New Key or the KeyCorp/Society Merger or to exercise
dissenters' rights with respect to either of those transactions.
Should the KeyCorp/Society Merger close after consummation of the
CBC/KeyCorp Merger, CBC shareholders would become shareholders of
KeyCorp, and then, if the KeyCorp/Society Merger is subsequently
consummated, they would become New Key shareholders. In this
event, CBC shareholders would not be able to vote on the
KeyCorp/Society Merger, since they would not be shareholders of
KeyCorp on the record date for the KeyCorp shareholder vote on the
KeyCorp/Society Merger and would not be able to exercise
dissenters' rights with respect to that merger. Therefore, and in
either event, CBC shareholders, when voting on the CBC/KeyCorp
Merger Agreement and deciding whether to exercise dissenters'
rights with respect thereto, must consider the possibility that
they may become shareholders of New Key rather than KeyCorp.
Consummation of the KeyCorp/Society Merger remains
subject to numerous conditions and there can be no assurance that
such conditions will be met or, if met, as to the timing of the
consummation of the KeyCorp/Society Merger. The CBC/KeyCorp Merger
Agreement and the KeyCorp/Society Merger Agreement were
independently negotiated and the CBC/KeyCorp Merger and the
KeyCorp/Society Merger are unrelated transactions; neither of such
transactions is conditioned on consummation of the other. See
"CERTAIN INFORMATION REGARDING THE PENDING MERGER OF KEYCORP AND
SOCIETY."
Special Meeting of CBC Shareholders
The Special Meeting of Shareholders of CBC will be held
at 2:00 p.m., Mountain Time, on Tuesday, February 22, 1994, at the
offices of CBC, Century Bank Plaza, 3300 East First Avenue, Denver,
Colorado. The purpose of the Special Meeting is to consider and
vote upon a proposal to approve the CBC/KeyCorp Merger Agreement.
Vote Required; Record Date
Only CBC shareholders of record at the close of business
on January 14, 1994, (the "Record Date"), will be entitled to vote
at the Special Meeting. As of the Record Date, there were
__________ shares of CBC Class A Common Stock and 431,950 shares of
CBC Class B Common Stock outstanding and entitled to be voted. The
CBC Class B Common Stock is convertible at any time at the election
of the holder thereof into CBC Class A Common Stock on a
one-for-one basis.
The directors and executive officers of CBC and their
affiliates owned, as of the Record Date, ____________ shares (or
approximately _____%) of CBC Class A Common Stock, excluding ______
shares of CBC Class A Common Stock (or approximately ___%) which
such individuals had the right to acquire upon the exercise of
options or the conversion of debentures. All of the CBC Class B
Common Stock is owned by a single affiliate of CBC. The directors
and executive officers of KeyCorp and their affiliates beneficially
owned, as of the Record Date, no shares of CBC Common Stock. As of
the Record Date, CBC subsidiaries held of record or in the name of
nominees no shares of CBC Common Stock in a fiduciary capacity.
See "THE SPECIAL MEETING -- Vote Required; Record Date."
The affirmative vote of the holders of two-thirds (or
66-2/3%) of the shares of CBC Class A Common Stock and CBC Class B
Common Stock outstanding on the Record Date, voting by class, is
required to approve the CBC/KeyCorp Merger Agreement. The approval
of any other matters that may properly come before the Special
Meeting must be approved by the affirmative vote of a majority of
the shares of CBC Common Stock, voting together as one class,
present in person or by proxy at the Special Meeting. Therefore,
a failure to return a properly-executed proxy card or to vote in
person at the Special Meeting will have the same effect as a vote
against the CBC/KeyCorp Merger Agreement or any other matters that
may properly come before the Special Meeting. In addition,
abstentions from voting with respect to the proposal to approve the
CBC/KeyCorp Merger Agreement or with respect to any other matter
will be treated as votes against, while broker nonvotes will not be
considered "shares present" for voting purposes.
CBC shareholders will not be able to vote directly on, or
exercise dissenters' rights directly with respect to, the
KeyCorp/Society Merger or on, or with respect to, the direct merger
of CBC with a subsidiary New Key if, as expected, the
KeyCorp/Society Merger closes before all conditions to consummation
of the CBC/KeyCorp Merger have been met. Accordingly if proposal 1
is approved, and all other conditions to consummation of the
CBC/KeyCorp Merger are met, and the KeyCorp/Society Merger is
consummated, CBC would become a subsidiary of the surviving entity
of the KeyCorp/Society Merger without further action by CBC
shareholders. For that reason, CBC shareholders, when voting on
the CBC/KeyCorp Merger Agreement and deciding whether to exercise
dissenters' rights with respect thereto, must consider the
possibility that they may become shareholders of New Key rather
than KeyCorp. A copy of the KeyCorp/Society Joint Proxy Statement
is enclosed for that purpose.
Reasons for the CBC/KeyCorp Merger; Recommendation of the CBC Board
of Directors
The CBC Board of Directors (the "Board of CBC") has
approved the CBC/KeyCorp Merger Agreement and has determined that
the CBC/KeyCorp Merger is fair to, and in the best interests of,
CBC and its shareholders. The Board of CBC has also considered the
change of circumstances occasioned by the execution of the
KeyCorp/Society Merger Agreement and has reconfirmed its approval
of the CBC/KeyCorp Merger in light of those circumstances. The
Board of CBC, therefore, recommends that CBC's shareholders vote
FOR approval of the CBC/KeyCorp Merger Agreement. See "THE
CBC/KEYCORP MERGER -- Background of and Reasons for the CBC/KeyCorp
Merger" and "Opinion of CBC Financial Advisor."
For information on the interests of certain officers and
directors of CBC in the CBC/KeyCorp Merger, see "THE CBC/KEYCORP
MERGER -- Interests of Certain Persons in the CBC/KeyCorp Merger,"
"Effect on CBC Employee Benefit Plans" and "Treatment of CBC
Class A Stock Options."
Opinion of CBC Financial Advisor
The Wallach Company, Inc., Denver, Colorado ("The Wallach
Company") has served as financial advisor to CBC in connection with
the CBC/KeyCorp Merger and has rendered an opinion to the Board of
CBC that the CBC/KeyCorp Exchange Ratio and, if the KeyCorp/Society
Merger is consummated, the KeyCorp/Society Exchange Ratio is fair
to CBC's shareholders from a financial point of view. For
additional information, see "THE CBC/KEYCORP MERGER -- Opinion of
CBC Financial Advisor." The opinion of The Wallach Company is
attached as Appendix D to this Proxy Statement-Prospectus.
Shareholders are urged to read such opinion in its entirety for
descriptions of the procedures followed, matters considered, and
limitations on the reviews undertaken in connection therewith.
Effective Date and Effective Time
The CBC/KeyCorp Merger will become effective on the date
the Articles of Merger are filed by the Secretary of State of the
State of Colorado (the "Effective Date"). The effective time of
the CBC/KeyCorp Merger will be the close of business in Colorado,
on the Effective Date, or such other time on the Effective Date as
may be agreed to by the parties, (the "Effective Time"). A period
of time will elapse between the Special Meeting and the Effective
Date in order to permit time for the approval of the CBC/KeyCorp
Merger by the Federal Reserve Board (or to waive the need for such
approval pursuant to a notice which has been filed by KeyCorp), the
Federal Deposit Insurance Corporation (the "FDIC"), and the
Colorado Banking Board.
If the CBC/KeyCorp Merger Agreement is approved by the
shareholders of CBC, subject to certain conditions described
herein, the Effective Date currently is expected to occur in the
first quarter of 1994.
Conditions; Regulatory Approvals
Consummation of the CBC/KeyCorp Merger, and issuance of
the CBC/KeyCorp Merger Shares, is subject to various conditions,
including receipt of the shareholder approval solicited hereby,
receipt of the necessary regulatory approvals, receipt of an
opinion of counsel regarding certain tax aspects of the CBC/KeyCorp
Merger, receipt of assurances that the CBC/KeyCorp Merger qualifies
for "pooling-of-interests" accounting treatment, the opinion of The
Wallach Company as to the fairness of the CBC/KeyCorp Exchange
Ratio to CBC's shareholders not having been withdrawn, and
satisfaction of other customary closing conditions.
The CBC/KeyCorp Merger Agreement requires CBC, under
certain circumstances and at the request of KeyCorp, to use its
best efforts to modify and change its loan, litigation, and real
estate valuation policies and practices (including loan
classifications and levels of reserves) prior to the Effective Time
so as to be consistent on a mutually satisfactory basis with those
of KeyCorp. Such modifications are not expected to have a material
adverse impact on CBC or on KeyCorp following the CBC/KeyCorp
Merger. See "THE CBC/KEYCORP MERGER -- Conduct of CBC's Business
Pending the CBC/KeyCorp Merger -- Modification of Certain Policies
of CBC."
The regulatory approvals and consents necessary to
consummate the CBC/KeyCorp Merger include the approval of the
Federal Reserve Board (or the waiving by the Federal Reserve Board
pursuant to a notice which has been filed by KeyCorp), the Colorado
Banking Board, and the FDIC. There can be no assurance that such
regulatory approvals will be obtained, and if the CBC/KeyCorp
Merger is approved, there can be no assurance as to the date of any
such approval. There can also be no assurance that any such
approvals will not contain a condition or requirement which causes
such approvals to fail to satisfy the conditions set forth in the
CBC/KeyCorp Merger Agreement and described under "THE CBC/KEYCORP
MERGER -- Conditions to Consummation of the CBC/KeyCorp Merger."
There can likewise be no assurance that the United States
Department of Justice or a state Attorney General will not
challenge the CBC/KeyCorp Merger or, if such a challenge is made,
as to the result thereof.
See "THE CBC/KEYCORP MERGER -- Conditions to Consummation
of the CBC/KeyCorp Merger," "Regulatory Approvals," "Conduct of
CBC's Business Pending the CBC/KeyCorp Merger," and "CERTAIN
REGULATORY CONSIDERATIONS."
Termination of the CBC/KeyCorp Merger Agreement
The CBC/KeyCorp Merger Agreement may be terminated, and
the CBC/KeyCorp Merger abandoned, prior to the Effective Date,
either before or after its approval by the shareholders of CBC,
(1) by the mutual consent of KeyCorp and CBC or (2) by either of
them individually under certain specified circumstances, including
if the CBC/KeyCorp Merger is not consummated by July 31, 1994,
unless the failure to consummate by such date is due to the breach
of any representation, warranty, or covenant contained in the
CBC/KeyCorp Merger Agreement by the party seeking to terminate.
See "THE CBC/KEYCORP MERGER -- Waiver and Amendment; Termination."
In addition, the CBC/KeyCorp Merger Agreement contains a
price-based termination provision. Under this provision, the
CBC/KeyCorp Merger Agreement may be terminated by CBC at any time
during the two-day period commencing with the fifth NYSE trading
day prior to the Effective Date if (1) the Average Closing Price of
KeyCorp Common Stock over the twenty consecutive NYSE trading days
ending five days prior to the Effective Time ("Pricing Period")
period is less than $35.00 per share, (2) the decline in the price
of the KeyCorp Common Stock since September 10, 1993, exceeds by
more than 10.0% the decline over such time period in an index
composed of a group of common stocks of other specified bank
holding companies, and (3) KeyCorp elects not to increase the
CBC/KeyCorp Exchange Ratio as specified in the CBC/KeyCorp Merger
Agreement. If the KeyCorp/Society Merger is consummated prior to
or during the Pricing Period, appropriate adjustments will be made
to such price-based termination computations to give effect to the
conversion of KeyCorp Common Stock into New Key Common Stock. See
"THE CBC/KEYCORP MERGER -- Price-Based Termination."
The Board of CBC would consider, prior to any decision
whether or not to terminate the CBC/KeyCorp Merger Agreement in
these circumstances, all financial and other information it deemed
relevant to its decision. If the price-based termination provision
becomes exercisable by CBC after its shareholders approve the
CBC/KeyCorp Merger Agreement, the decision whether or not to
terminate the CBC/KeyCorp Merger Agreement will not be resubmitted
to the shareholders.
Holding Company Merger; Bank Consolidation
As soon as administratively feasible after the Effective
Time, KeyCorp intends to cause Key Bancshares to merge into KeyCorp
(the "Holding Company Merger"), and to consolidate Key Bank of
Colorado, a Colorado banking corporation and a wholly-owned direct
subsidiary of KeyCorp ("Key Colorado"), and CBC's bank subsidiaries
other than Century Bank Sterling, into Century Bank Sterling (the
"Bank Consolidation") under the name "Key Bank of Colorado," in
each case subject to receipt of necessary regulatory approvals.
There can be no assurance that such approvals will be obtained or
that the Holding Company Merger and/or the Bank Consolidation will
be consummated. Consummation of the CBC/KeyCorp Merger is not
conditioned upon receipt of necessary regulatory approvals or of
consummation of the Holding Company Merger or the Bank
Consolidation.
Interests of Certain Persons in the CBC/KeyCorp Merger
Certain members of CBC's management and the Board of CBC
have interests in the CBC/KeyCorp Merger in addition to their
interests, if any, as shareholders of CBC generally. These
include, among other things, provisions in the CBC/KeyCorp Merger
Agreement relating to indemnification and continuation of severance
agreements and certain other employee benefits. In addition,
KeyCorp is considering offering employment agreements to selected
CBC executives, including Jon P. Coates who is President and a
director of CBC. See "THE CBC/KEYCORP MERGER -- Interests of
Certain Persons in the CBC/KeyCorp Merger" and "Effect on CBC
Employee Benefit Plans."
Certain Federal Income Tax Considerations
CBC and KeyCorp have received an opinion of Baker &
Hostetler that the CBC/KeyCorp Merger, if the KeyCorp/Society
Merger is consummated after the Effective Time, will be treated as
a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, (the "Code"), and
accordingly, for federal income tax purposes, (1) no income, gain,
or loss will be recognized by either CBC, Key Bancshares or KeyCorp
as a result of the CBC/KeyCorp Merger and (2) CBC's shareholders
will not recognize gain or loss upon the receipt of KeyCorp Common
Stock in exchange for CBC Common Stock in the CBC/KeyCorp Merger,
except that gain or loss will be recognized on receipt of any cash
in lieu of fractional shares or because of the exercise of
dissenters' rights. Consummation of the CBC/KeyCorp Merger is
conditioned upon receipt by each of KeyCorp and CBC of such
opinion, dated as of the Effective Date. In addition, if the
KeyCorp/Society Merger is consummated prior to the Effective Time,
consummation of a direct merger of CBC into a subsidiary of New Key
will be conditioned upon receipt of an opinion of Baker &
Hostetler, counsel for CBC, dated as of the Effective Date,
substantially to this effect. See "THE CBC/KEYCORP MERGER --
Certain Federal Income Tax Considerations."
Accounting Treatment
If consummated in accordance with the terms of the
CBC/KeyCorp Merger Agreement, it is anticipated that the
CBC/KeyCorp Merger will qualify as a "pooling of interests" of
KeyCorp and CBC under generally accepted accounting principles
("GAAP"). KeyCorp's obligation to consummate the CBC/KeyCorp
Merger is conditioned upon the receipt of a letter from KeyCorp's
independent auditors that the CBC/KeyCorp Merger may be accounted
for in such manner. See "THE CBC/KEYCORP MERGER -- Accounting
Treatment." It is KeyCorp's intention not to restate financial
statements and other financial information for periods prior to the
CBC/KeyCorp Merger to include the accounts and operations of CBC
because the transaction is not expected to be material to KeyCorp.
See "THE CBC/KEYCORP MERGER -- Accounting Treatment."
CBC/KeyCorp Stock Option Agreements
As an inducement and a condition to KeyCorp's entering
into the CBC/KeyCorp Merger Agreement, KeyCorp and CBC also entered
into Stock Option Agreements, dated as of the 12th day of
September, 1993, (the "CBC/KeyCorp Stock Option Agreements"),
pursuant to which KeyCorp has an option (the "Options"), upon the
occurrence of certain events (none of which has yet occurred to the
best of KeyCorp and CBC's knowledge), to purchase up to 479,013
shares of CBC Class A Common Stock (representing approximately
19.9% of the outstanding shares of CBC Class A Common Stock on
September 12, 1993) and 85,958 shares of CBC Class B Common Stock
(representing approximately 19.9%, the outstanding shares of CBC
Class B Common Stock on September 12, 1993), in each case at a
price of $30.12 per share (the closing price of KeyCorp Common
Stock on September 10, 1993 multiplied by the CBC/KeyCorp Exchange
Ratio of .7460), subject to adjustment in certain circumstances and
subject to termination within certain periods. The CBC/KeyCorp
Stock Option Agreements may discourage competing offers to the
CBC/KeyCorp Merger and is intended to increase the likelihood that
the CBC/KeyCorp Merger will be consummated in accordance with the
terms of the CBC/KeyCorp Merger Agreement.
In the event that CBC's shareholders fail to approve the
CBC/KeyCorp Merger Agreement, either CBC or KeyCorp may terminate
the CBC/KeyCorp Merger Agreement in accordance with its terms. See
"THE CBC/KEYCORP MERGER -- Waiver and Amendment; Termination." If
no Initial Triggering Event (as defined in the CBC/KeyCorp Stock
Option Agreements) has occurred prior to such termination or any
other Exercise Termination Event (as defined in the CBC/KeyCorp
Stock Option Agreements), the CBC/KeyCorp Stock Option Agreements
will automatically terminate at such time. If an Initial
Triggering Event and a Subsequent Triggering Event (as defined in
the CBC/KeyCorp Stock Option Agreements) occurs prior to an
Exercise Termination Event, then KeyCorp will be entitled to
exercise the Options in accordance with their terms.
Copies of the CBC/KeyCorp Stock Option Agreements are
attached to this Proxy Statement-Prospectus as Appendix B. See
"CERTAIN TRANSACTIONS RELATED TO THE CBC/KEYCORP MERGER AGREEMENT
- -- CBC/KeyCorp Stock Option Agreements."
Certain Differences in Shareholders' Rights
At the Effective Time, all shareholders of CBC (except
shareholders of CBC who perfect dissenters' rights) will become
shareholders of KeyCorp except that, if the KeyCorp/Society Merger
is consummated before the Effective Time, all shareholders of CBC
(except shareholders who perfect dissenters' rights with respect to
the CBC/KeyCorp Merger) would become shareholders of New Key. If
the KeyCorp/Society Merger is consummated after the CBC/KeyCorp
Merger, all shareholders of CBC who received KeyCorp Common Stock
in the CBC/KeyCorp Merger would become shareholders of New Key.
CBC is a corporation organized under, and governed by Colorado law,
the CBC Articles of Incorporation and CBC Bylaws, whereas KeyCorp
is a corporation organized under, and governed by New York law, the
KeyCorp Certificate of Incorporation and the KeyCorp By-Laws.
New Key will be a corporation organized under, and governed by Ohio
law, Articles of Incorporation of New Key ("New Key Articles of
Incorporation") and the Regulations of New Key (by-laws) ("New Key
Regulations"). The rights of shareholders of KeyCorp and New Key
differ from rights of the shareholders of CBC with respect to
certain important matters, including their rights to remove
directors, call special meetings, inspect corporate books and
records, amend By-Laws, and receive certain reports from the
corporation; the required shareholder votes as to certain matters;
and statutory and other restrictions on certain business
combinations. For a summary of these differences, see "COMPARISON
OF CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF KEYCORP, CBC AND
NEW KEY."
Dissenters' Rights of CBC Shareholders
Any CBC shareholders entitled to vote at the Special
Meeting will have the right to dissent from the vote on the
CBC/KeyCorp Merger Agreement and to receive payment of the fair
value of shares of CBC Common Stock held of record or beneficially
by such shareholder upon compliance with Sections 7-4-123 and
7-4-124 of the Colorado Corporation Code ("Colorado Corporation
Code"), the full text of which is included as Appendix C to this
Proxy Statement-Prospectus. Fair value for this purpose could be
higher or lower than the value of the KeyCorp Common Stock (or
New Key Common Stock) to be received in the CBC/KeyCorp Merger.
Failure to take any necessary step may result in a termination or
waiver of appraisal rights under Sections 7-4-123 and 7-4-124. See
"DISSENTERS' RIGHTS OF CBC SHAREHOLDERS." Any amount paid for
dissenters' shares and any appraisal costs, legal costs and any
other expenses incurred with respect to the dissenters' shares will
be paid out of funds deposited by CBC in an escrow account with an
independent escrow agent prior to the Effective Time.
CBC shareholders will have no right to vote on, or to
exercise dissenters' rights with respect to, (i) the merger of CBC
directly with New Key, if the KeyCorp/Society Merger is consummated
prior to the time that all conditions to consummation of the
CBC/KeyCorp Merger have been met or (ii) the KeyCorp/Society
Merger, if the CBC/KeyCorp Merger is consummated prior to the
consummation of the KeyCorp/Society Merger.
Other Business
The Board of CBC knows of no other matters that will come
before the Special Meeting. If any additional matters come before
the Special Meeting, the Proxies will be voted at the discretion of
the proxyholders.
Comparative Stock Price Information
CBC Class A Common Stock is included for quotation in the
NASDAQ National Market (symbol: CBOCA). KeyCorp Common Stock is
listed on the NYSE (symbol: KEY). The following table sets forth
the high and low sale prices of shares of CBC Class A Common Stock
as reported in the NASDAQ National Market and of shares of KeyCorp
Common Stock as reported on the NYSE on a quarterly basis for the
three calendar years ended December 31, 1993, 1992 and 1991, and
for 1994 through January ___, as well as dividends declared on such
shares during the same periods. The CBC Class B Common Stock is
owned by a single affiliate of CBC. Since there have been no
reported trades of CBC Class B Common Stock, there is no available
market price information on such stock and no information is
provided in the table below with respect to the CBC Class B Common
Stock. However, each share of CBC Class B Common Stock is
convertible, at anytime at the election of the holder thereof, into
one share of CBC Class A Common Stock and the dividends declared on
the CBC Class B Common Stock for the periods shown are identical to
those shown on the table below with respect to CBC Class A Common
Stock.
<TABLE>
<CAPTION>
1994 1993
__________ ___________________________________________
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
through
January __
__________ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
CBC Class A Common
High $ $ $28-1/4 $21-1/2 $21
Low $ $ $19-3/4 $18-3/8 $17
Dividends Declared $ $ .15 $ .15 $ .15 $ .10
KEYCORP Common
High $ $ $42-1/2 $45-1/4 $46
Low $ $ $37-3/8 $34-1/2 $37-1/8
Dividends Declared $ $ .31 $ .31 $ .31 $ .31
</TABLE>
<TABLE>
<CAPTION>
1992 1991
___________________________________________ ____________________________________________
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
_______ _______ _______ _______ _______ _______ _______ ________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CBC Class A Common
High $18-3/4 $15-3/4 $14-1/2 $12-7/8 $ 7-1/8 $ 7 $ 5-5/8 $ 3-7/8
Low $14 $11-5/8 $10-3/4 $ 7-1/4 $ 6-5/8 $ 5-1/2 $ 3-5/8 $ 2-5/8
Dividends Declared $ .10 $ .10 $ .10 $ .06 $ .06 $ -- $ -- $ --
KEYCORP Common
High $39-1/8 $34-3/4 $34-1/4 $34 $29-5/8 $27-7/8 $24-7/8 $20-5/8
Low $32-3/4 $30-1/8 $29-1/8 $27-1/8 $23-7/8 $22-5/8 $19-7/8 $13-7/8
Dividends Declared $ .26 $ .26 $ .26 $ .26 $ .24 $ .24 $ .24 $ .23
</TABLE>
The following table sets forth the closing price per
share of KeyCorp Common Stock and Society Common Stock, the last
reported sales price per share of CBC Class A Common Stock and the
equivalent per share price for CBC Class A Common Stock and CBC
Class B Common Stock giving effect to the CBC/KeyCorp Merger and
giving effect to both the CBC/KeyCorp Merger and the
KeyCorp/Society Merger on (1) September 10, 1993, the last business
day preceding public announcement of the signing of the CBC/KeyCorp
Merger Agreement and the CBC/KeyCorp Stock Option Agreements; and
(2) _______________, 1994, the last practicable date prior to the
mailing of this Proxy Statement-Prospectus. Shareholders are urged
to obtain current market quotations for KeyCorp Common Stock and
CBC Class A Common Stock.
<TABLE>
<CAPTION>
Equivalent Price Per
Share of CBC Common Stock
______________________________________________
Giving Effect to
KeyCorp Society CBC Class A Giving Effect to CBC/KeyCorp Merger and
Common Stock Common Stock Common Stock CBC/KeyCorp Merger1 KeyCorp/Society Merger2
<S> <C> <C> <C> <C> <C>
September 10, 1993 $40-3/8 $33-1/8 $22-1/2 $30.12 $29.78
_____________, 1993 $
1Equivalent Price Per Share of CBC Common Stock giving effect to the CBC/KeyCorp Merger has been calculated by
multiplying the closing price per share of KeyCorp Common Stock on the dates indicated by the CBC/KeyCorp Exchange
Ratio of .7460 of a share of KeyCorp Common Stock for each share of CBC Common Stock.
2Equivalent Price Per Share of CBC Common Stock giving effect to both the CBC/KeyCorp Merger and the KeyCorp/Society
Merger has been calculated by multiplying the closing price per share of Society Common Stock on the dates indicated
by the CBC/KeyCorp Exchange Ratio of .7460 of a share of KeyCorp Common Stock for each share of CBC Common Stock and
multiplying the result by the KeyCorp/Society Exchange Ratio of 1.205 of a share of New Key Common Stock for each
share of KeyCorp Common Stock.
</TABLE>
No assurance can be given as to the market prices of
KeyCorp or New Key Common Stock if and when the CBC/KeyCorp Merger
and KeyCorp/Society Merger are consummated or when the shares of
KeyCorp or New Key Common Stock are actually issued.
Summary Condensed Consolidated Financial Information of KeyCorp and
CBC
The following tables present summary consolidated
financial data for KeyCorp and CBC for each of the five years in
the period ended December 31, 1992 and the nine-month periods ended
September 30, 1993 and 1992. These tables should be read in
conjunction with the financial information appearing elsewhere in
this Proxy Statement-Prospectus or incorporated by reference
herein. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
KEYCORP
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
_______________________ ___________________________________________________________________
1993 1992 1992 1991 1990 1989 1988
____ ____ ____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
(Dollars in thousands)
Interest income $1,752,179 $1,714,337 $2,295,357 $2,388,478 $2,007,446 $1,846,098 $1,557,057
Interest expense 652,920 746,291 977,071 1,302,677 1,168,804 1,077,740 855,564
Net interest income 1,099,259 968,046 1,318,286 1,085,801 838,642 768,358 701,493
Provision for loan losses 106,226 144,841 190,971 186,116 97,302 94,123 57,055
Income before taxes 456,282 335,712 426,513 340,696 270,504 221,648 208,618
Income before accounting
change 297,418 227,028 284,275 237,218 194,633 164,842 160,261
PER COMMON SHARE DATA
Income before accounting
change $ 2.83 $ 2.19 $ 2.73 $ 2.45 $ 2.22 $ 1.87 $ 1.87
Cash dividends declared 0.93 0.78 1.04 0.95 0.89 0.84 0.80
Book value 21.23 18.92 19.19 17.50 15.87 14.45 13.40
AVERAGE BALANCE SHEET DATA
(Dollars in millions)
Loans $ 21,150 $ 18,842 $ 19,159 $ 17,724 $ 14,279 $ 12,755 $ 11,414
Earning assets 28,133 25,276 25,729 23,741 18,893 16,899 15,295
Total assets 31,194 27,951 28,486 26,595 21,030 18,839 17,078
Deposits 25,682 22,661 23,129 21,331 16,882 14,629 13,425
Long-term debt 878 834 853 752 687 812 794
Shareholders' equity 2,205 1,954 1,979 1,653 1,332 1,246 1,118
FINANCIAL RATIOS
Return on average total
assets 1.27% 1.12% 1.02% 0.89% 0.93% 0.87% 0.94%
Return on average
common equity 18.76 16.63 15.21 14.69 14.74 13.43 14.69
Return on average
shareholders' equity 18.04 15.98 14.70 14.35 14.61 13.23 14.34
Efficiency ratio1 60.45 61.20 63.22 64.07 65.36 69.05 69.06
Net yield on average
earning assets 5.37 5.29 5.30 4.76 4.65 4.78 4.86
Nonperforming loans to
period-end loans 0.82 0.97 1.02 1.28 1.31 1.43 1.45
Nonperforming assets to
period-end loans plus ORE 1.43 2.03 1.99 2.35 2.15 2.15 2.05
Allowance for loan losses
to period-end loans 1.42 1.47 1.40 1.43 1.34 1.28 1.23
Allowance for loan losses
to period-end nonperforming
loans 174.72 150.46 137.08 111.63 102.35 89.62 84.77
Net charge-offs to
average loans 0.57 0.91 0.99 1.00 0.65 0.67 0.46
Dividend payout ratio per
common share 32.86 34.51 37.14 38.78 40.09 44.92 42.78
1Computed by dividing noninterest expense by the sum of net interest income on a taxable equivalent basis plus fee income.
</TABLE>
The comparability of the information presented above is
affected by the acquisitions that KeyCorp has completed in the time
periods presented.
For information on regulatory capital ratios of KeyCorp,
see "CERTAIN REGULATORY CONSIDERATIONS."
COMMERCIAL BANCORPORATION OF COLORADO
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
____________________ _________________________________________________________
1993 1992 1992 1991 1990 1989 1988
________ ________ ________ ________ _________ ________ ________
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income $ 18,837 $ 18,701 $ 24,310 $ 24,794 $ 24,637 $ 25,049 $ 24,593
Interest expense 5,429 6,233 8,059 10,920 12,362 12,501 11,977
Net interest income 13,408 11,838 16,251 13,874 12,275 12,548 12,616
Provision for loan losses 840 1,506 1,869 2,748 4,434 3,441 3,405
Income (loss) before taxes
(benefit) and extraordinary item 5,439 3,298 4,947 2,683 (2,951) 3 446
Extraordinary item -- -- -- 250 -- -- --
Cumulative effect of accounting changes 363 -- -- -- -- -- 491
Net income (loss) 4,159 2,686 3,958 2,731 (2,251) 405 1,230
PER COMMON SHARE DATA
Primary net income (loss) before
extraordinary item and cumulative
effect of accounting changes $ 1.35 $ 1.05 $ 1.52 $ 0.99 $ (0.89) $ 0.17 $ 0.32
Extraordinary item -- -- -- 0.10 -- -- --
Cumulative effect of accounting changes 0.13 -- -- -- -- -- 0.21
Primary net income (loss) 1.48 1.05 1.52 1.09 (0.89) 0.17 0.53
Fully diluted net income (loss) before
extraordinary item and cumulative
effect of accounting changes 1.27 0.99 1.45 0.94 (0.89) 0.17 0.36
Extraordinary item -- -- -- 0.08 -- -- --
Cumulative effect of accounting changes 0.12 -- -- -- -- -- 0.15
Fully diluted net income (loss) 1.39 0.99 1.45 1.02 (0.89) 0.17 0.51
Cash dividends declared 0.40 0.26 0.36 0.06 0.12 0.24 0.24
Book value 12.29 10.77 11.18 9.94 8.92 9.90 10.71
AVERAGE BALANCE SHEET DATA
Loans $196,586 $185,038 $188,798 $172,258 $168,707 $180,788 $192,166
Earning assets 298,334 263,991 269,612 237,163 223,964 222,611 231,216
Total assets 342,908 301,297 309,009 276,048 266,612 262,520 272,811
Deposits 304,048 269,361 272,858 241,795 231,237 224,503 234,459
Long-term debt 3,891 5,912 5,346 6,912 7,661 8,697 9,257
Shareholders' equity 28,704 25,610 28,019 23,747 23,992 24,700 24,242
FINANCIAL RATIOS
Return on average total assets 1.62% 1.19% 1.28% 0.99% -0.84% 0.15% 0.45%
Return on average
shareholders' equity 19.32 13.98 14.12 11.50 -9.38 1.64 5.07
Efficiency ratio1 61.58 65.75 64.23 66.77 86.49 75.15 72.21
Net yield on average earning assets 6.15 6.19 6.25 6.15 5.81 5.94 5.78
Nonperforming loans to
period-end loans 1.09 2.48 1.76 2.46 5.78 7.27 8.73
Nonperforming assets to
period-end loans plus ORE 2.66 5.05 4.26 6.79 11.59 13.65 13.95
Allowance for loan losses to
period-end loans 2.63 2.77 2.99 3.21 3.33 2.19 1.95
Allowance for loan losses to
period-end nonperforming loans 242.76 111.46 169.36 130.31 57.56 30.09 22.29
Net charge-offs to average loans 0.51 0.95 0.99 1.57 1.60 1.83 1.80
Dividend payout ratio per common share 28.78 26.26 24.83 5.89 -13.48 141.18 47.06
1Computed by dividing noninterest expense by the sum of net interest income on a taxable equivalent basis plus fee income.
</TABLE>
For information on regulatory capital ratios of CBC, see
"CERTAIN REGULATORY CONSIDERATIONS."
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
OF KEYCORP AND SUBSIDIARIES AND
SOCIETY CORPORATION AND SUBSIDIARIES
The following table presents summary consolidated
financial data for KeyCorp and Society on an unaudited pro forma
combined basis giving effect to the KeyCorp/Society Merger. The
pro forma data in the table assumes that the KeyCorp/Society Merger
is accounted for as a pooling of interests. The pro forma
information does not reflect the KeyCorp/Society Merger expenses
and restructuring charges expected to be incurred by KeyCorp and
Society or the anticipated cost savings. As a result, the pro
forma combined financial information may not be indicative of the
results that actually would have occurred if the KeyCorp/Society
Merger had been in effect during the periods presented or which may
be attained in the future. The effect of the CBC/KeyCorp Merger
with CBC will not be material to the pro forma financial data and
is not presented. The comparability of the information presented
in the following table is affected by the acquisitions that KeyCorp
and Society has each completed in the time periods presented.
KEYCORP AND SUBSIDIARIES AND
SOCIETY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
_____________________________ _______________________________________________
1993 1992 1992 1991 1990
____ ____ ____ ____ ____
<S> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF
OPERATIONS
Interest income $ 3,163,372 $ 3,154,030 $ 4,198,791 $ 4,652,351 $ 4,528,845
Interest expense 1,162,718 1,346,481 1,750,118 2,519,390 2,667,757
___________ ___________ ___________ ___________ ___________
Net interest income 2,000,654 1,807,549 2,448,673 2,132,961 1,861,088
Provision for loan losses 165,306 261,098 338,337 466,163 517,216
Noninterest income 764,562 699,156 925,193 849,261 744,182
Noninterest expense 1,695,671 1,597,790 2,170,412 2,065,679 1,819,497
___________ ___________ ___________ ___________ ___________
Income before income taxes
and cumulative effect of
accounting change 904,239 647,817 865,117 450,380 268,557
Provision for income taxes 316,675 206,085 279,632 136,684 15,173
___________ ___________ ___________ ___________ ___________
Income before cumulative
effect of accounting change $ 587,564 $ 441,732 $ 585,485 $ 313,696 $ 253,384
=========== =========== =========== =========== ===========
Weighted average shares of
New Key Common Stock 239,437 234,559 235,005 227,116 220,079
CONSOLIDATED PER SHARE DATA
APPLICABLE TO NEW KEY
COMMON STOCK
Income before cumulative
effect of accounting change $ 2.40 $ 1.81 $ 2.39 $ 1.31 $ 1.12
Cash dividends declared 0.84 0.735 0.98 0.92 0.88
Book value at period-end 17.39 15.34 15.71 14.17 13.55
CONSOLIDATED BALANCE SHEET DATA
AT PERIOD-END
Investment securities $10,057,744 $ 9,868,814 $ 8,976,300 $10,288,270 $ 8,815,706
Loans, net of unearned income 39,094,659 35,802,329 36,045,833 35,558,257 34,217,667
Allowance for loan losses 799,394 806,817 782,649 793,519 677,294
Total assets 58,193,234 54,416,439 55,092,384 53,624,918 49,977,448
Deposits 44,339,871 41,687,372 43,433,065 42,835,006 40,935,288
Short-term borrowings 6,570,205 6,130,156 5,082,407 5,087,533 3,989,907
Long-term debt 1,908,419 1,605,150 1,790,078 1,224,470 1,145,288
Total shareholders' equity 4,325,712 3,842,177 3,942,893 3,532,033 3,041,261
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS OF KEYCORP AND SUBSIDIARIES AND SOCIETY AND
SUBSIDIARIES."
SELECTED HISTORICAL, PRO FORMA, AND EQUIVALENT PRO FORMA PER SHARE
DATA KEYCORP AND CBC
The following table, which shows comparative historical
per common share data for KeyCorp and CBC separately and pro forma
combined, and equivalent pro forma per share data for CBC,
reflecting the CBC/KeyCorp and KeyCorp/Society Mergers should be
read in conjunction with the financial information either appearing
elsewhere in this Proxy Statement-Prospectus or incorporated by
reference to other documents.
The pro forma and equivalent pro forma per share data in
the following table are presented for comparative purposes only and
are not necessarily indicative of the combined financial position
or results of operations in the future or what the combined
financial position or results of operations actually would have
been had the CBC/KeyCorp Merger, and in the case of KeyCorp/Society
pro forma data, the KeyCorp/Society Merger, been consummated during
the periods or as of the date for which such pro forma tables are
presented. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
KeyCorp
and CBC CBC Equivalent Pro Forma
Historical Pro Forma KeyCorp and KeyCorp/Society
KeyCorp CBC Combined CBC Pro Forma Pro Forma
________________ _______ ______ _________ _____________ ______________
<S> <C> <C> <C> <C> <C>
Net income (loss) before extraordinary
income and cumulative effect of
accounting change
For the nine months ended September 30,
1993 $ 2.83 $ 1.35 $ 2.81 $ 2.10 $ 2.16
1992 2.19 1.05 2.18 1.63 1.63
For the year ended December 31,
1992 2.73 1.52 2.72 2.03 2.15
1991 2.45 0.99 2.43 1.81 1.18
1990 2.22 (.89) 2.15 1.60 1.01
Cash Dividends
For the nine months ended September 30,
1993 $ 0.93 $ 0.40 $ 0.93 $ 0.69 $ 0.76
1992 0.78 0.26 0.78 0.58 0.67
For the year ended December 31,
1992 1.04 0.36 1.04 0.78 0.88
1991 0.95 0.06 0.95 0.71 0.83
1990 0.89 0.12 0.89 0.66 0.79
Book Value
As of September 30, 1993 $21.23 $12.29 $21.13 $15.76 $15.63
As of December 31, 1992 19.19 11.18 19.28 14.38 14.12
<F1>
1. CBC Equivalent Pro Forma amounts represent the equivalent net income, cash dividends, and book value per share CBC
Common Stock for the periods indicated based on the historical performance of KeyCorp and CBC, assuming that the
acquisition had occurred at the beginning of the periods presented. Pro forma equivalent amounts are computed by
multiplying the pro forma combined amounts by the assumed CBC/KeyCorp Exchange Ratio of .7460.
<F2>
2. The KeyCorp/Society Pro Forma assumes the KeyCorp/Society Merger is completed in accordance with its terms.
</TABLE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF
KEYCORP AND SUBSIDIARIES AND SOCIETY AND SUBSIDIARIES
The following unaudited pro forma condensed combined
balance sheet as of September 30, 1993, and the pro forma condensed
combined statements of income for the nine-month periods ended
September 30, 1993 and 1992, and for each of the three years in the
period ended December 31, 1992, give effect to the KeyCorp/Society
Merger, accounted for as a pooling of interests. The effects of
other pending or recently-completed KeyCorp or Society mergers and
acquisitions (including the CBC/KeyCorp Merger) are not expected to
be material to the unaudited pro forma condensed combined financial
statements and are not included therein. The pro forma information
is based on the historical consolidated financial statements of
KeyCorp and Society and their subsidiaries under the assumptions
and adjustments set forth in the accompanying notes to the pro
forma condensed combined financial statements.
The pro forma condensed combined financial statements
have been prepared by the managements of KeyCorp and Society based
upon their respective consolidated financial statements. Pro forma
per share amounts are based on the conversion rate of 1.205 shares
of New Key Common Stock for each share of KeyCorp Common Stock.
The pro forma condensed combined financial statements, which
include results of operations as if the KeyCorp/Society Merger had
been consummated on January 1, 1990, do not reflect the
KeyCorp/Society Merger expenses and restructuring charges expected
to be incurred by KeyCorp and Society or the cost savings
anticipated to result from the KeyCorp/Society Merger. As a
result, the pro forma condensed combined financial condition and
results of operations prior to the consummation of the
KeyCorp/Society Merger may not be indicative of the results that
actually would have occurred if the KeyCorp/Society Merger had been
in effect during the periods presented or which may be attained in
the future. The pro forma condensed combined financial statements
should be read in conjunction with the historical consolidated
financial statements and notes thereto of KeyCorp and Society
incorporated by reference herein.
KEYCORP AND SUBSIDIARIES AND
SOCIETY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 1993
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
KeyCorp Society Adjustments Combined
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,676,364 $ 979,703 $ 2,656,067
Short-term investments 88,051 791,579 879,630
Mortgage loans held for sale 840,817 280,878 1,121,695
Securities available for sale 1,068,723 737,053 1,805,776
Investment securities 5,150,950 4,906,794 10,057,744
Loans, net of unearned income 22,075,319 17,019,340 39,094,659
Less: Allowance for loan losses 314,402 484,992 799,394
___________ ___________ __________ ___________
Net loans 21,760,917 16,534,348 38,295,265
Premises and equipment 473,482 430,253 903,735
Other assets 1,373,297 1,100,025 2,473,322
___________ ___________ __________ ___________
Total Assets $32,432,601 $25,760,633 $ 0 $58,193,234
=========== =========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 4,969,892 $ 3,090,748 $ 8,060,640
Interest-bearing 21,604,991 14,674,240 36,279,231
___________ ___________ __________ ___________
Total deposits 26,574,883 17,764,988 44,339,871
Short-term borrowings 2,278,336 4,291,869 6,570,205
Other liabilities 431,079 617,948 1,049,027
Long-term debt 830,587 1,077,832 1,908,419
___________ ___________ __________ ___________
Total liabilities 30,114,885 23,752,637 53,867,522
Stockholders' equity:
Preferred stock 160,000 -- 160,000
Common stock 508,279 118,658 $ (385,784) 241,153
Capital surplus 390,764 634,087 385,784 1,410,635
Retained earnings 1,258,673 1,344,531 2,603,204
Loans to ESOP trustee -- (63,909) (63,909)
Common shares in treasury -- (25,371) (25,371)
___________ ___________ __________ ___________
Total stockholders' equity 2,317,716 2,007,996 0 4,325,712
___________ ___________ __________ ___________
Total liabilities and stockholders' equity $32,432,601 $25,760,633 $ 0 $58,193,234
=========== =========== ========== ===========
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS OF KEYCORP AND SUBSIDIARIES AND SOCIETY AND
SUBSIDIARIES."
KEYCORP AND SUBSIDIARIES AND
SOCIETY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Nine months ended September 30, 1993
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
KeyCorp Society Combined
___________ ___________ ___________
<S> <C> <C> <C>
Interest income $ 1,752,179 $ 1,411,193 $ 3,163,372
Interest expense 652,920 509,798 1,162,718
___________ ___________ ___________
Net interest income 1,099,259 901,395 2,000,654
Provision for loan losses 106,226 59,080 165,306
___________ ___________ ___________
Net interest income after provision for loan losses 993,033 842,315 1,835,348
Noninterest income 368,415 396,147 764,562
Noninterest expense 905,166 790,505 1,695,671
___________ ___________ ___________
Income before income taxes 456,282 447,957 904,239
Provision for income taxes 158,864 157,811 316,675
___________ ___________ ___________
Net income $ 297,418 $ 290,146 $ 587,564
=========== =========== ===========
Net income applicable to common shares $ 284,359 $ 289,108 $ 573,467
=========== =========== ===========
Weighted average common shares 100,466,064 118,375,534 239,437,141
Net income per common share $2.83 $2.44 $2.40
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS OF KEYCORP AND SUBSIDIARIES AND SOCIETY AND
SUBSIDIARIES."
KEYCORP AND SUBSIDIARIES AND
SOCIETY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Nine months ended September 30, 1992
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
KeyCorp Society Combined
__________ ___________ ___________
<S> <C> <C> <C>
Interest income $1,714,337 $ 1,439,693 $ 3,154,030
Interest expense 746,291 600,190 1,346,481
__________ ___________ ___________
Net interest income 968,046 839,503 1,807,549
Provision for loan losses 144,841 116,257 261,098
__________ ___________ ___________
Net interest income after provision for loan losses 823,205 723,246 1,546,451
Noninterest income 311,504 387,652 699,156
Noninterest expense 798,997 798,793 1,597,790
__________ ___________ ___________
Income before income taxes and cumulative
effect of accounting change 335,712 312,105 647,817
Provision for income taxes 108,684 97,401 206,085
__________ ___________ ___________
Income before cumulative effect of accounting
change $ 227,028 $ 214,704 $ 441,732
========== ============ ===========
Weighted average common shares 97,393,269 117,199,990 234,558,879
Income before cumulative effect of accounting
change per common share $2.19 $1.79 $1.81
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS OF KEYCORP AND SUBSIDIARIES AND SOCIETY AND
SUBSIDIARIES."
KEYCORP AND SUBSIDIARIES AND
SOCIETY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Year ended December 31, 1992
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
KeyCorp Society Combined
__________ ___________ ___________
<S> <C> <C> <C>
Interest income $2,295,357 $ 1,903,434 $ 4,198,791
Interest expense 977,071 773,047 1,750,118
__________ ___________ ___________
Net interest income 1,318,286 1,130,387 2,448,673
Provision for loan losses 190,971 147,366 338,337
__________ ___________ ___________
Net interest income after provision for loan losses 1,127,315 983,021 2,110,336
Noninterest income 423,659 501,534 925,193
Noninterest expense 1,124,461 1,045,951 2,170,412
__________ ___________ ___________
Income before income taxes and cumulative
effect of accounting change 426,513 438,604 865,117
Provision for income taxes 142,238 137,394 279,632
__________ ___________ ___________
Income before cumulative effect of accounting
change $ 284,275 $ 301,210 $ 585,485
========== ============ ===========
Weighted average common shares 97,639,971 117,348,656 235,004,821
Income before cumulative effect of accounting
change per common share $2.73 $2.51 $2.39
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS OF KEYCORP AND SUBSIDIARIES AND SOCIETY AND
SUBSIDIARIES."
KEYCORP AND SUBSIDIARIES AND
SOCIETY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Year ended December 31, 1991
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
KeyCorp Society Combined
__________ ___________ ___________
<S> <C> <C> <C>
Interest income $2,388,478 $ 2,263,873 $ 4,652,351
Interest expense 1,302,677 1,216,713 2,519,390
__________ ___________ ___________
Net interest income 1,085,801 1,047,160 2,132,961
Provision for loan losses 186,116 280,047 466,163
__________ ___________ ___________
Net interest income after provision for loan losses 899,685 767,113 1,666,798
Noninterest income 394,197 455,064 849,261
Noninterest expense 953,186 1,112,493 2,065,679
__________ ___________ ___________
Income before income taxes 340,696 109,684 450,380
Provision for income taxes 103,478 33,206 136,684
__________ ___________ ___________
Net income $ 237,218 $ 76,478 $ 313,696
========== =========== ===========
Net income applicable to common shares $ 227,244 $ 70,229 $ 297,473
========== =========== ===========
Weighted average common shares 92,821,073 115,266,844 227,116,237
Net income per common share $2.45 $0.61 $1.31
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS OF KEYCORP AND SUBSIDIARIES AND SOCIETY AND
SUBSIDIARIES."
KEYCORP AND SUBSIDIARIES AND
SOCIETY CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Year ended December 31, 1990
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma
KeyCorp Society Combined
__________ ___________ ___________
<S> <C> <C> <C>
Interest income $2,007,446 $ 2,521,399 $ 4,528,845
Interest expense 1,168,804 1,498,953 2,667,757
__________ ___________ ___________
Net interest income 838,642 1,022,446 1,861,088
Provision for loan losses 97,302 419,914 517,216
__________ ___________ ___________
Net interest income after provision for loan losses 741,340 602,532 1,343,872
Noninterest income 283,574 460,608 744,182
Noninterest expense 754,410 1,065,087 1,819,497
__________ ___________ ___________
Income (loss) before income taxes and cumulative
effect of accounting change 270,504 (1,947) 268,557
Provision (credit) for income taxes 75,871 (60,698) 15,173
__________ ___________ ___________
Income before cumulative effect of accounting
change $ 194,633 $ 58,751 $ 253,384
========== =========== ===========
Weighted average common shares 86,816,123 115,465,132 220,078,560
Income before cumulative effect of accounting
change per common share $2.22 $0.47 $1.12
</TABLE>
See "NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS OF KEYCORP AND SUBSIDIARIES AND SOCIETY AND
SUBSIDIARIES."
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
OF KEYCORP AND SUBSIDIARIES AND
SOCIETY AND SUBSIDIARIES
(1) Pro forma adjustments to common shares and capital surplus,
at September 30, 1993, reflect the combination of KeyCorp
and Society, accounted for as a pooling of interests,
through: (a) the exchange of 122,495,270 shares of New Key
Common Stock for all outstanding shares of KeyCorp Common
Stock at an Exchange Ratio of 1.205 shares of New Key Common
Stock for each share of KeyCorp Common Stock, and (b) the
exchange of 1,280,000 shares of New Key Preferred Stock for
all outstanding shares of KeyCorp Preferred Stock on a
share-for-share basis. Under generally accepted accounting
principles ("GAAP"), the assets and liabilities of Society
will be combined with those of KeyCorp at book values. In
addition, the statements of income of Society will be
combined with the statements of income of KeyCorp on a
retroactive basis.
(2) Pro forma weighted average shares outstanding for the nine
months ended September 30, 1993 and 1992, and for each of
the three years in the period ended December 31, 1992,
reflect the issuance of 1.205 shares of New Key Common Stock
for each share of KeyCorp Common Stock.
(3) The pro forma condensed combined financial statements do not
reflect merger expenses and restructuring charges which
currently are estimated to be in the range of $90 to
$110 million. It is anticipated that these charges will be
incurred and recognized by Society and KeyCorp in the fourth
quarter of 1993 and substantially all paid in 1994. The
following table provides details of the estimated charges by
type of cost:
<TABLE>
<CAPTION>
Type of cost Expected range of cost
____________ ______________________
<S> <C>
Merger Expense $21 to $ 21 million
Restructuring charges:
Severance, relocation and other employee costs 35 to 42 million
Systems and facilities costs 30 to 38 million
Other restructuring costs 4 to 9 million
___ ____________
Total merger expenses and restructuring charges $90 to $110 million
</TABLE>
Although no assurance can be given, KeyCorp and Society also
expect that cost savings will be achieved by New Key at an
annual rate of $80 to $105 million by the end of the first
quarter of 1995 as a result of steps to be taken to integrate
their operations and to achieve efficiencies in certain
combined lines of business. These anticipated merger cost
savings were determined based upon preliminary estimates
provided by major business groups at both Society and KeyCorp.
Merger integration task forces, made up of representatives of
both companies, are in the process of validating these
preliminary estimates. However, it is presently expected
that approximately 50% of the anticipated annualized savings
will be achieved in 1994. The pro forma financial data do
not give effect to these expected cost savings.
(4) The pro forma financial data do not give effect to the
pending acquisitions by KeyCorp of Jackson County Federal
Bank, Commercial Bancorporation of Colorado, and The Bank of
Greeley due to immateriality. At September 30, 1993, those
entities had total assets of $351.3 million, $373.9 million,
and $60.9 million, respectively, and total stockholders'
equity of $24.1 million, $35.0 million, and $2.9 million,
respectively.
The pro forma financial data also do not give effect to the
recently completed acquisition by Society of Schaenen Wood
and Associates, Inc. of New York, New York, due to
immateriality. Schaenen Wood and Associates, Inc. is an
investment advisory firm and had approximately $0.8 million
in total assets and $0.2 million in total stockholders'
equity at September 30, 1993.
(5) SFAS No. 114, "Accounting by Creditors for Impairment of a
Loan," and SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," were issued in May 1993, and
are required to be adopted for fiscal years beginning after
December 15, 1994 and 1993, respectively, with earlier
application permitted. Neither KeyCorp nor Society has made
a final determination of when to adopt either standard, or
of the financial impact of the adoption of SFAS No. 114.
Based on the pro forma combined securities portfolio at
September 30, 1993, the estimated impact of adoption of SFAS
No. 115 would be an increase to stockholders' equity of
approximately $58 million, with no impact on the results of
operations.
INTRODUCTION
General
This Proxy Statement-Prospectus is being furnished to the
holders of Class A Common Stock, par value $1.00 per share (the
"CBC Class A Common Stock"), and Class B Common Stock, par value
$1.00 per share ("CBC Class B Common Stock" and, collectively, CBC
Common Stock"), of Commercial Bancorporation of Colorado, a bank
holding company incorporated under the laws of Colorado ("CBC"), in
connection with the solicitation of proxies by the Board of
Directors of CBC (the "Board of CBC") for use at the Special
Meeting of CBC shareholders to be held on Tuesday, February 22,
1994, at 2:00 p.m., Mountain Time, at the offices of CBC, Century
Bank Plaza, 3300 East First Avenue, Denver, Colorado, and at any
adjournments or postponements thereof, (the "Special Meeting").
At the Special Meeting, the shareholders of record of CBC
Common Stock as of the close of business on January 14, 1994, (the
Record Date"), will consider and vote upon a proposal to approve
the Agreement dated as of the 11th day of September, 1993, as
amended and restated as of September 11, 1993, (as so amended and
restated, the "CBC/KeyCorp Merger Agreement"), by and between
KeyCorp, a bank holding company incorporated under the laws of
New York ("KeyCorp"), pursuant to which CBC will merge (the
"CBC/KeyCorp Merger") with and into Key Bancshares of Colorado,
Inc., a bank holding company to be formed under the laws of
Colorado as a wholly-owned direct subsidiary of KeyCorp for
purposes of consummating the CBC/KeyCorp Merger ("Key Bancshares"),
with Key Bancshares surviving the CBC/KeyCorp Merger. Upon
consummation of the CBC/KeyCorp Merger, each outstanding share of
CBC Common Stock (except for (1) shares held directly or indirectly
by KeyCorp other than in a fiduciary capacity or in satisfaction of
a debt previously contracted, (2) shares held by any CBC
shareholder properly exercising dissenters' rights, or (3) shares
held as treasury stock of CBC) will be converted into .7460 of a
share of KeyCorp Common Stock. In addition, cash will be paid in
lieu of fractional shares of KeyCorp Common Stock.
Since the execution of the CBC/KeyCorp Merger Agreement,
KeyCorp and Society Corporation, a financial services holding
company with principal offices in Cleveland, Ohio ("Society"),
entered into an Agreement and Plan of Merger and a related
Supplemental Agreement to Agreement and Plan of Merger, each dated
as of October 1, 1993, as amended (together, the "KeyCorp/Society
Merger Agreement") providing for the merger (the "KeyCorp/Society
Merger") of KeyCorp into and with Society, with Society as the
surviving corporation under the name Key Bancshares Inc. or a
variant thereof ("New Key"). The KeyCorp/Society Merger Agreement
provides that, upon consummation of the KeyCorp/Society Merger,
each outstanding share of KeyCorp Common Stock will be converted
into 1.205 shares of Common Stock of New Key. The result is that,
(i) if the CBC/KeyCorp Merger is consummated but the
KeyCorp/Society Merger is not consummated, each share of CBC Common
Stock would be converted into and remain .7460 of a share of
KeyCorp Common stock, (ii) if the CBC/KeyCorp Merger is consummated
and then the KeyCorp/Society Merger is consummated, each share of
CBC Common Stock ultimately would be converted to .899 of a share
of Common Stock of New Key, or (iii) if the KeyCorp/Society Merger
is consummated before the CBC/KeyCorp Merger is consummated, each
share of CBC Common Stock would be directly converted into and
remain .899 of a share of New Key Common Stock. As a result, the
enclosed Proxy Statement-Prospectus includes certain information
relating to the KeyCorp/Society Merger, Society and New Key. The
CBC/KeyCorp Merger Agreement and the KeyCorp/Society Merger
Agreement were independently negotiated and the CBC/KeyCorp Merger
and the KeyCorp/Society Merger are unrelated transactions; neither
of such transactions is conditioned on consummation of the other.
See "CERTAIN INFORMATION REGARDING THE PENDING MERGER OF KEYCORP
AND SOCIETY." Additional information regarding the KeyCorp/Society
Merger is included in the KeyCorp/Society Joint Proxy Statement, a
copy of which is enclosed.
This Proxy Statement-Prospectus also constitutes a
prospectus of KeyCorp in respect of the shares of KeyCorp Common
Stock, par value $5.00 per share, ("KeyCorp Common Stock") to be
issued in the CBC/KeyCorp Merger (the "CBC/KeyCorp Merger Shares").
Unless the context otherwise requires, all references in
this Proxy Statement-Prospectus to CBC/KeyCorp Merger and
CBC/KeyCorp Merger Agreement and the discussion herein related
thereto shall include New Key in lieu of KeyCorp if the
KeyCorp/Society Merger is consummated before all conditions to the
CBC/KeyCorp Merger are met.
Parties to the CBC/KeyCorp Merger
KeyCorp. KeyCorp is a multi-regional financial services
holding company headquartered in Albany, New York. Incorporated in
1970 under the laws of the State of New York, KeyCorp is registered
under the federal Bank Holding Company Act of 1956, as amended (the
"BHCA"). At September 30, 1993, based on data from the American
Banker publication, KeyCorp was the 25th largest bank holding
company in the United States in terms of total consolidated assets
of approximately $32.4 billion at that date. Through its eleven
banking subsidiaries in nine states along the country's Northeast,
Pacific Northwest and Rocky Mountain tiers, KeyCorp provides banking
services to individual customers, small- to medium-sized businesses,
and municipalities. The oldest bank subsidiary of KeyCorp was
organized in 1825. KeyCorp's banking subsidiaries all operate under
the Key Bank name and are located in Alaska, Colorado, Idaho, Maine,
New York, Oregon, Utah, Washington, and Wyoming. As of September 30,
1993, KeyCorp's banking subsidiaries served their respective markets
with over 800 full-service banking offices. In addition to its banking
services, KeyCorp offers a variety of personal and commercial
financial services through other subsidiaries. KeyCorp Mortgage
Inc., KeyCorp's primary mortgage banking subsidiary, serviced a
$22.0 billion portfolio of mortgage loans as of September 30, 1993,
making it one of the largest mortgage servicing companies in the
country. KeyCorp's other specialized financial service companies
provide such services as trust, credit life reinsurance, equipment
leasing, securities brokerage, annuity sales, asset management, and
data processing. At September 30, 1993, KeyCorp and its
subsidiaries employed approximately 17,800 full-time equivalent
employees.
KeyCorp's principal assets and sources of income are its
investments in its operating subsidiaries, and it is a legal entity
separate and distinct from such subsidiaries. There are various
federal and state legal limitations on the extent to which a bank
subsidiary may finance or otherwise supply funds to KeyCorp or its
other subsidiaries. See "CERTAIN REGULATORY CONSIDERATIONS."
Additional information about KeyCorp and its subsidiaries
is included in documents incorporated by reference in this Proxy
Statement-Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE."
Key Bancshares of Colorado, Inc. Key Bancshares is a
bank holding company to be incorporated under the laws of the State
of Colorado for the purposes of consummating the CBC/KeyCorp Merger
and, when formed, will be a wholly-owned direct subsidiary of
KeyCorp (or New Key, if the KeyCorp/Society Merger is consummated
before all conditions to consummation of the CBC/KeyCorp Merger
have been met).
CBC. CBC, headquartered in Denver, Colorado, is a
multi-bank holding company engaged in the commercial banking
business through five wholly-owned subsidiary banks with a total of
eleven banking offices located in the greater Denver, Fort Collins,
Fort Morgan, Sterling, and Colorado Springs areas of Colorado. CBC
has no significant nonbank subsidiaries. Incorporated in 1971
under the laws of the State of Colorado, CBC is registered under
the BHCA. CBC and its consolidated subsidiaries had total assets
of $373.9 million, total deposits of approximately $331.1 million
and shareholders' equity of approximately $35.0 million at
September 30, 1993. On September 30, 1993 CBC was the third
largest bank holding company headquartered in Colorado. Through
its subsidiary banks, CBC offers a variety of deposit services and
concentrates on secured lending to small and medium size
businesses. At September 30, 1993, CBC and its subsidiaries
employed 194 full-time equivalent employees.
Additional information about CBC and its subsidiaries is
included in documents incorporated by reference in this Proxy
Statement-Prospectus, some of which are attached as Appendices E,
F and G to this Proxy Statement-Prospectus. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
Pending Merger of KeyCorp and Society
The KeyCorp/Society Merger Agreement provides that, upon
consummation of the KeyCorp/Society Merger, each outstanding share
of KeyCorp Common Stock will be converted into 1.205 Common Shares
("KeyCorp/Society Exchange Ratio"), with a par value of $1 each, of
New Key ("New Key Common Stock"). Society, a financial services
holding company organized in 1958, headquartered in Cleveland,
Ohio, is incorporated in Ohio, and is registered under the BHCA.
It is principally a regional banking organization and provides a
wide range of banking, fiduciary, and other financial services to
corporate, institutional, and individual customers. At
September 30, 1993, Society had total consolidated assets of
approximately $25.8 billion, making it the 29th largest bank
holding company in the United States in terms of total consolidated
assets based on data from the American Banker publication. The
first predecessor of a subsidiary of Society was organized in 1849.
Society's lead bank, Society National Bank, is the largest bank in
Ohio and one of the nation's major regional banks, with
headquarters in Cleveland. Society National Bank serves markets
throughout most of Ohio with 294 full-service banking offices as of
September 30, 1993. Society also has banking subsidiaries in
Indiana and Michigan and a savings bank subsidiary in Florida.
These subsidiaries operate a total of 146 full-service banking
offices in Indiana, Michigan, and Florida. In addition to
customary banking services of accepting funds for deposit and
making loans, Society's banking subsidiaries provide a wide range
of specialized services tailored to specific markets, including
investment management, personal and corporate trust services,
personal financial services, cash management services, investment
banking services and international banking services. Society has
one of the nation's largest trust departments with approximately
$25 billion in managed assets at September 30, 1993. Although
Society is principally a banking organization, its nonbanking
subsidiaries provide insurance sales services, reinsurance of
credit life and accident and health insurance on loans made by
subsidiary banks, securities brokerage services, investment
management, corporate and personal trust services, venture capital
and small business investment financing services, equipment lease
financing, registered investment advisory services, mortgage
banking services, community development services, and other
financial services. At September 30, 1993, Society and its
subsidiaries had approximately 12,700 full-time equivalent
employees. See "CERTAIN INFORMATION REGARDING THE PENDING MERGER
OF KEYCORP AND SOCIETY." Also see "THE CBC/KEYCORP MERGER --
Effect of KeyCorp/Society Merger on CBC and CBC Shareholders."
THE SPECIAL MEETING
General
Each copy of this Proxy Statement-Prospectus mailed to
holders of CBC Common Stock is accompanied by a proxy card
furnished in connection with the solicitation of proxies by the
Board of CBC for use at the Special Meeting. The Special Meeting
is scheduled to be held on Tuesday, February 22, 1994, at
2:00 p.m., Mountain Time, at the offices of CBC, Century Bank
Plaza, 3300 East First Avenue, Denver, Colorado. Only holders of
record of CBC Common Stock at the close of business on the Record
Date are entitled to receive notice of and to vote at the Special
Meeting. At the Special Meeting, shareholders will consider and
vote upon (1) a proposal to approve the CBC/KeyCorp Merger
Agreement and (2) such other matters as may properly be brought
before the Special Meeting. On each matter to be considered at the
Special Meeting, shareholders will have one vote for each share of
CBC Common Stock held of record on the Record Date.
HOLDERS OF CBC COMMON STOCK ARE REQUESTED PROMPTLY TO
SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY CARD TO CBC IN THE
ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE. FAILURE TO RETURN YOUR
PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE CBC/KEYCORP MERGER
AGREEMENT.
Any holder of CBC Common Stock who has delivered a proxy
may revoke it any time before it is voted by giving notice of
revocation in writing or submitting a signed proxy card bearing a
later date to CBC, provided that such notice or proxy card is
actually received by CBC before the vote of shareholders, or in
open meeting prior to the taking of the shareholder vote at the
Special Meeting. A proxy will not be revoked by death or
supervening incapacity of the shareholder executing the proxy
unless, before the vote, notice of such death or incapacity is
filed with the Corporate Secretary or other person responsible for
tabulating votes on behalf of CBC. The shares of CBC Common Stock
represented by properly-executed proxies received at or prior to
the Special Meeting and not subsequently revoked will be voted as
directed in such proxies. If instructions are not given, shares
represented by proxies received will be voted FOR approval of the
CBC/KeyCorp Merger Agreement. If any other matters are properly
presented at the Special Meeting for consideration, the persons
named in the CBC proxy card enclosed herewith will have
discretionary authority to vote on such matters in accordance with
their best judgment, provided, however, that such discretionary
authority will only be exercised to the extent permissible under
applicable federal and state securities and banking laws. As of
the date of this Proxy Statement-Prospectus, CBC is unaware of any
other matters to be presented at the Special Meeting.
The cost of soliciting proxies from holders of CBC Common
Stock will be borne by CBC. Such solicitation will be made by
mail, but also may be made by telephone or in person by the
directors, officers, and employees of CBC (who will receive no
additional compensation for doing so). CBC has retained Chemical
Bank, New York, New York, to assist in such solicitation. The fee
to be paid to such firm is not expected to exceed $4,000, plus
reasonable out-of-pocket costs and expenses authorized by CBC. In
addition, CBC will make arrangements with brokerage firms and other
custodians, nominees, and fiduciaries to send proxy materials to
their principals.
CBC SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK
CERTIFICATES WITH THEIR PROXY CARDS.
Vote Required; Record Date
Only CBC shareholders of record at the close of business
on January 14, 1994, (the "Record Date"), will be entitled to vote
at the Special Meeting. As of the Record Date, there were
__________ shares of CBC Class A Common Stock and 431,950 shares of
CBC Class B Common Stock outstanding and entitled to be voted. The
CBC Class B Common Stock is convertible at any time at the election
of the holder thereof into CBC Class A Common Stock on a
one-for-one basis.
The directors and executive officers of CBC and their
affiliates owned, as of the Record Date, ____________ shares (or
approximately _____%) of CBC Class A Common Stock, excluding ______
shares of CBC Class A Common Stock (or approximately ___%) which
such individuals had the right to acquire upon the exercise of
options or the conversion of debentures. All of the CBC Class B
Common Stock is owned by a single affiliate of CBC. The directors
and executive officers of KeyCorp and their affiliates beneficially
owned, as of the Record Date, no shares of CBC Common Stock. As of
the Record Date, CBC subsidiaries held of record or in the name of
nominees no shares of CBC Common Stock in a fiduciary capacity.
See "THE SPECIAL MEETING -- Vote Required; Record Date."
THE AFFIRMATIVE VOTE OF THE HOLDERS OF TWO-THIRDS (OR
66-2/3%) OF THE SHARES OF CBC CLASS A COMMON STOCK AND CBC CLASS B
COMMON STOCK OUTSTANDING ON THE RECORD DATE, VOTING BY CLASS, IS
REQUIRED TO APPROVE THE CBC/KEYCORP MERGER AGREEMENT. The approval
of any other matters that may properly come before the Special
Meeting must be approved by the affirmative vote of a majority of
the shares of CBC Common Stock, voting together as one class,
present in person or by proxy at the Special Meeting. Therefore,
a failure to return a properly-executed proxy card or to vote in
person at the Special Meeting will have the same effect as a vote
against the CBC/KeyCorp Merger Agreement or any other matters that
may properly come before the Special Meeting. In addition,
abstentions from voting with respect to the proposal to approve the
CBC/KeyCorp Merger Agreement or with respect to any other matter
will be treated as votes against, while broker nonvotes will not be
considered "shares present" for voting purposes.
CBC shareholders will not be able to vote directly on, or
exercise dissenters' rights directly with respect to, the
KeyCorp/Society Merger or on, or with respect to, the direct merger
of CBC with a subsidiary of New Key if, as expected, the
KeyCorp/Society Merger closes before all conditions to consummation
of the CBC/KeyCorp Merger have been met. Accordingly if proposal 1
is approved, and all other conditions to consummation of the
CBC/KeyCorp Merger are met, and the KeyCorp/Society Merger is
consummated, CBC would become a subsidiary of the surviving entity
of the KeyCorp/Society Merger without further action by CBC
shareholders. For that reason, CBC shareholders, when voting on
the CBC/KeyCorp Merger Agreement and deciding whether to exercise
dissenters' rights with respect thereto, must consider the
possibility that they may become shareholders of New Key rather
than KeyCorp.
Recommendation of the Board of Directors
The Board of CBC has unanimously approved the CBC/KeyCorp
Merger Agreement and has determined that the CBC/KeyCorp Merger is
fair to, and in the best interests of, CBC and its shareholders.
The Board of CBC has also considered the change of circumstances
occasioned by the execution of the KeyCorp/Society Merger Agreement
and has reconfirmed its approval of the CBC/KeyCorp Merger in light
of those circumstances. The Board of CBC, therefore, recommends
that CBC's shareholders vote FOR approval of the CBC/KeyCorp Merger
Agreement. See "THE CBC/KEYCORP MERGER -- Background of and
Reasons for the CBC/KeyCorp Merger" and "Opinion of CBC Financial
Advisor."
THE CBC/KEYCORP MERGER
The following information, insofar as it relates to
matters contained in the CBC/KeyCorp Merger Agreement or the
CBC/KeyCorp Stock Option Agreements, dated as of the 12th day of
September, 1993 (the "CBC/KeyCorp Stock Option Agreements"),
between KeyCorp and CBC, is qualified in its entirety by reference
to the CBC/KeyCorp Merger Agreement and the CBC/KeyCorp Stock
Option Agreements, which are incorporated herein by reference and
attached hereto as Appendix A and Appendix B, respectively.
KeyCorp and CBC shareholders are urged carefully to read the
CBC/KeyCorp Merger Agreement and the CBC/KeyCorp Stock Option
Agreements.
Background of and Reasons for the CBC/KeyCorp Merger
CBC's Strategy. CBC's consolidated assets grew from
$134.0 million at December 31, 1982 to $335.7 million at
December 31, 1992. In terms of assets at the time acquired,
acquisitions accounted for approximately $46.0 million of the
$201.7 million increase in consolidated total assets between
December 31, 1982 and December 31, 1992. Throughout its history,
CBC's strategy has been to focus its resources to becoming one of
the leading business lenders in Colorado in order to benefit from
the profitability associated with business lending. To this end,
there has been significant opportunity to serve business customers
because many other banks have focused primarily on servicing the
consumer markets.
In March 1988, Colorado adopted interstate banking
legislation that permitted, for the first time, the acquisition of
Colorado bank holding companies by out-of-state bank holding
companies. Since the adoption of that legislation, there have been
numerous acquisitions of Colorado banks by large out-of-state
banking organizations.
In late 1992, the Board of CBC determined that the
interests of CBC's shareholders may be best served by a sale of
CBC. The Board had noted the strong acquisition market involving
commercial banking companies in the Rocky Mountain states and
particularly in Colorado. Purchase prices for such companies in
Colorado had been higher relative to book value and operating
earnings than in recent years. Furthermore, the Board of CBC
believed, and continues to believe, that CBC's strong financial
performance, good asset quality, and desirable locations of its
banking operations positioned CBC as an attractive acquisition
candidate. Given the strong acquisition market and CBC's solid
performance, the Board of CBC believed it was an excellent time to
explore a sale of CBC.
KeyCorp's Strategy. KeyCorp conducts its banking and
financial services operations in multiple regions of the United
States. It historically has expanded its geographic franchise and
increased its customer base and market share by means of an
acquisition program, initially on an intrastate basis, later also
on an interstate basis. Its acquisition strategy over the years
was strongly influenced and shaped by the economic conditions in
its home State of New York and the banking legislation governing
activities in that State as well as in other states.
Under the BHCA, interstate banking acquisitions are
prohibited in the absence of enabling legislation at the state
level. New York in 1983 became one of the first states to adopt
legislation permitting acquisition of in-state banks by
out-of-state bank holding companies. The New York statute is not
geographically limited, but has a "reciprocity" requirement under
which the home state of the out-of-state company must enable
New York bank holding companies to acquire banks in that state.
Although a number of other states adopted interstate statutes,
almost all these statutes included geographic limitations (regions)
and a reciprocity requirement. Primarily because of the
possibility of incursions by the major New York City banks,
virtually no states in the mid-1980s included New York in the
defined region. Exceptions included Maine and Alaska, which had
national statutes.
KeyCorp had been a successful acquiror of upstate
New York banks for some years prior to 1983. In reviewing its
alternatives, KeyCorp determined that markets in New England and in
the Pacific Northwest had many of the same demographic and economic
characteristics as the markets it served in upstate New York. It
developed a strategy of expanding into such of those markets as
were in states that had permissive legislation which was reciprocal
with that of New York. KeyCorp then successfully expanded its
franchise from its upstate New York base and Albany headquarters,
first to Maine in 1984 and to Alaska in 1985, and subsequently to
Colorado, Idaho, Oregon, Utah, Washington and Wyoming as these
states adopted national statutes. It continued to make
acquisitions in New York, including acquisitions that resulted in
its becoming a major mortgage servicer.
In furtherance of its corporate plan to expand its
multi-regional network of banking offices, KeyCorp established a
presence in Colorado with its June 30, 1993 acquisition of Home
Federal Savings Bank (now, "Key Colorado"). The CBC/KeyCorp Merger
is designed to enhance KeyCorp's presence in the Rocky Mountain
region of the country, particularly in Colorado, and to allow entry
into the Denver, Colorado market.
Background of the CBC/KeyCorp Merger. At its meeting on
February 18, 1993, the Board of CBC reviewed the historical and
projected financial results for CBC, evaluated recent acquisitions
of other Rocky Mountain banking companies and received an analysis
of value of CBC. At that meeting, the Board approved the
engagement of The Wallach Company, Inc. ("The Wallach Company") to
act as a financial advisor to CBC with respect to the sale of CBC.
At that time the Board also initiated discussions with its legal
advisors concerning a potential sale.
During March, April, and May, 1993, The Wallach Company
identified potential acquirors for CBC and prepared informational
packages describing CBC. During June, The Wallach Company
contacted 16 potential acquirors to determine their interest in
CBC. Based on discussions with The Wallach Company, 12 parties
elected not to pursue the acquisition for various reasons including
internal corporate strategy, size, and timing. Between late June
and mid-August 1993, four potential acquirors received the
informational packages, visited CBC, met with management, and
received a presentation describing CBC. On August 19, 1993,
preliminary, non-binding indications of interest were received from
three of these four potential acquirors. These three parties,
which included KeyCorp, were then invited to conduct detailed due
diligence and submit a formal, written proposal for acquisition.
By September 9, 1993, each of these three parties had submitted a
formal proposal. An analysis of each of these proposals was
formally presented by The Wallach Company and CBC's legal counsel
to the Board on September 10, 1993. Based on an extensive
discussion of this analysis, the Board elected to accept the
KeyCorp proposal and the CBC/KeyCorp Merger Agreement and the
CBC/KeyCorp Stock Option Agreements were executed as of
September 11, 1993, and September 12, 1993, respectively.
CBC's Reasons for the CBC/KeyCorp Merger. The terms of
the CBC/KeyCorp Merger and the CBC/KeyCorp Merger Agreement,
including the CBC/KeyCorp Exchange Ratio, were the result of a
competitive marketing process among several potential acquirors and
an arm's length negotiation between CBC, KeyCorp, and their
respective representatives. In the course of reaching its decision
to approve the CBC/KeyCorp Merger, the CBC/KeyCorp Merger
Agreement, and the CBC/KeyCorp Stock Option Agreements (which were
a condition to KeyCorp's execution of the CBC/KeyCorp Merger
Agreement), the Board of CBC consulted with its legal and financial
advisors as well as with management of CBC, and, without assigning
any relative or specific weights, considered numerous factors,
including but not limited to the following:
(a) The current condition and growth prospects of CBC
and its subsidiary banks, including historical and
prospective results of operation, financial
conditions, and capital positions were it to remain
independent;
(b) The economic, banking, and competitive climate in
Colorado, with special consideration given to
recent transactions that have increased the
competitive environment in the financial services
and banking industry;
(c) The monetary value offered to CBC's shareholders
by KeyCorp (i) in absolute terms, (ii) as compared
to the two other offers received by CBC from
qualified and informed potential acquirors whose
offers were each less than KeyCorp's offer, and
(iii) as compared to recent merger and acquisition
transactions involving other institutions in the
Colorado and the Rocky Mountain region with assets
in excess of $50 million, equity to assets over 6%
and return on equity over 12%; in these
transactions, the average price to earnings ratio
paid was 71% of the KeyCorp offer and the average
price to book ratio was 90% of the KeyCorp offer.
(d) The price obtainable for CBC Common Stock at this
time compared with the risks involved and possible
price available at a later time;
(e) The prospect of trading value, liquidity, dividend
yield, and growth if CBC were to remain
independent;
(f) The benefits of a merger with KeyCorp, including
access to KeyCorp's financial and management
resources and customer products, which could
increase CBC's competitiveness and its ability to
serve its depositors, customers, and communities;
(g) The results of operations and financial condition
of KeyCorp;
(h) The future growth prospects of KeyCorp following
the CBC/KeyCorp Merger;
(i) KeyCorp's significant long-term experience and
success in integrating the operations of multiple
bank holding companies;
(j) The expectation that the CBC/KeyCorp Merger will
be a tax-free reorganization to CBC shareholders
for federal income tax purposes; and
(k) The presentation of CBC's financial advisor, The
Wallach Company, and their opinion rendered at the
time to the effect that the CBC/KeyCorp Exchange
Ratio was fair to the holders of CBC Common Stock
from a financial point of view.
KeyCorp's Reasons for the CBC/KeyCorp Merger. In
reaching its determination that the CBC/KeyCorp Merger and the
CBC/KeyCorp Merger Agreement are fair to, and in the best interests
of, KeyCorp and its shareholders, the KeyCorp Board of Directors
("Board of KeyCorp") consulted with KeyCorp management, and
considered a number of factors including the following:
(a) A variety of factors affecting and relating to the
overall strategic focus of KeyCorp, including
KeyCorp's desire to enter the Denver, Colorado
market;
(b) The Board of KeyCorp's review, based in part on a
presentation by KeyCorp management regarding its
due diligence review of CBC including the
business, operations, earnings, asset quality, and
financial condition of CBC on a historical,
prospective, and pro forma basis, and the enhanced
opportunities for both operating efficiencies and
synergies that are expected to result from the
CBC/KeyCorp Merger, the enhanced opportunities for
growth that the CBC/KeyCorp Merger makes possible,
and the respective contributions the parties would
bring to a combined institution, recognizing that
Key Colorado presently conducts a banking business
in the State of Colorado;
(c) The review by KeyCorp of the provisions of the
CBC/KeyCorp Merger Agreement and the CBC/KeyCorp
Stock Option Agreements;
(d) The expectation that the CBC/KeyCorp Merger will be
tax-free for federal income tax purposes to
KeyCorp and that the CBC/KeyCorp Merger will
qualify to be accounted for under the
"pooling-of-interests" method of accounting and
hence will not give rise to goodwill (see "THE
CBC/KEYCORP MERGER -- Certain Federal Income Tax
Considerations" and "Accounting Treatment"); and
(e) The current and prospective economic environment
facing financial institutions, including KeyCorp.
The Board of KeyCorp did not assign any specific or relative
weights to the factors in its consideration.
Opinion of CBC Financial Advisor
CBC received an opinion from The Wallach Company that, as
of September 11, 1993, the CBC/KeyCorp Exchange Ratio was fair to
CBC shareholders from a financial point of view. CBC also
received, as of the date of this Proxy Statement, an opinion from
The Wallach Company that the CBC/KeyCorp Exchange Ratio and the
KeyCorp/Society Exchange Ratio are fair to CBC shareholders from a
financial point of view. The full text of the opinion of The
Wallach Company dated as of the date of this Proxy Statement, which
sets forth matters considered undertaken in connection with such
opinion, is attached hereto as Appendix D, and should be read in
its entirety by CBC shareholders. This summary of the opinion is
qualified in its entirety by reference to the full text of the
opinion.
The Board of CBC retained The Wallach Company as its
financial advisor on the basis of the firm's experience and
expertise with the financial institution industry and with
transactions similar to the CBC/KeyCorp Merger. The Wallach
Company is familiar with CBC, having provided certain investment
banking services to CBC from time to time.
In connection with delivering its fairness opinion, The
Wallach Company, among other things, reviewed and considered the
following:
(a) reviewed certain publicly available financial
statements and other financial information not
publicly available of CBC;
(b) reviewed the current condition and growth
prospects for CBC and its subsidiary banks,
including financial projections prepared by CBC
management;
(c) discussed the past and current operations and
financial conditions and the prospects of CBC with
CBC management;
(d) reviewed CBC's historical stock trading activity
and considered the prospect for value, liquidity,
dividend yield and growth if CBC were to remain
independent;
(e) evaluated the economic, banking and competitive
climate in Colorado, with special consideration
given to recent transactions that may have
increased the competitive environment in the
financial services and banking industry;
(f) reviewed the process used in marketing CBC,
including a review of the potential acquirors
contacted and their responses relative to a
potential acquisition of CBC;
(g) compared the various offers received from
interested parties and determined the KeyCorp offer
represented the highest value in absolute terms;
(h) compared the KeyCorp offer to recent transactions
involving other institutions of similar size in
Colorado and the Rocky Mountain region;
(i) examined the price and trading activity for
KeyCorp;
(j) reviewed the CBC/KeyCorp Merger Agreement among
KeyCorp and CBC;
(k) analyzed the price obtainable for CBC Common Stock
at this time compared with the risks involved and
possible price available at a later time;
(l) reviewed the implications for CBC shareholders
receiving KeyCorp Common Stock with regards to
prospects for value, liquidity, dividend yield and
growth;
(m) met with KeyCorp and Society management and
reviewed certain publicly available financial
statements of KeyCorp and Society;
(n) reviewed certain publicly available information
regarding the proposed KeyCorp/Society Merger and
its implication for CBC shareholders receiving
New Key Common Stock, including the prospects for
value, liquidity, dividend yield and growth; and
(o) evaluated the future growth prospects of KeyCorp
and New Key following the CBC/KeyCorp Merger and
the KeyCorp/Society Merger.
The Wallach Company relied without independent
verification upon the accuracy and completeness of all the
financial and other information reviewed by it for purposes of the
fairness opinion. The fairness opinion is necessarily based on
information as of the date hereof. The fairness opinion is
directed only to the CBC/KeyCorp Exchange Ratio and the
KeyCorp/Society Exchange Ratio if the KeyCorp/Society Merger is
consummated and does not constitute a recommendation to any CBC
shareholder as to how such shareholder should vote at the Special
Meeting.
The following is a brief summary of the material analyses
utilized by The Wallach Company in arriving at its fairness
opinion. The summary does not purport to be a complete description
of the analyses performed by The Wallach Company.
Implied KeyCorp Offer Price. The closing stock price of
KeyCorp on September 10, 1993, the date the CBC/KeyCorp Merger was
publicly announced, was $40.375. The resulting exchange offer
price for each share of CBC Common Stock, based upon the offered
exchange ratio of .7460, was $30.12. The implied multiple of
trailing 12 month fully diluted earnings of CBC for the year ended
June 30, 1993 was 18.6. The implied multiple of fully diluted book
value per share at June 30, 1993 was 251.0%.
Comparison with the Two Other Offers. The Wallach
Company compared the KeyCorp offer to the other two offers received
from major bank holding companies. Both of those offers involved
a stock merger, pursuant to which CBC shareholders would receive
stock of the offeror having a value of less than KeyCorp's offer
based on the then stock prices of the offerors. The Wallach
Company's examination of the offers included, but was not limited
to, a comparison of pricing, the underlying security and the
implications for tax and liquidity.
Analysis of Selected Bank Mergers. The Wallach Company
reviewed publicly available information on the six bank merger and
acquisition transactions known by The Wallach Company to have
occurred in 1993 involving financial institutions in the Colorado
and the Rocky Mountain region with assets in excess of $50 million,
equity to assets over 6% and return on equity over 12%. The
Wallach Company compared certain percentages and multiples implied
by the KeyCorp proposal with comparable percentages and multiples
for these transactions. The average price offered in these six
transactions as a multiple of earnings was 13.2 as compared to 18.6
associated with the KeyCorp offer. The average percentage of book
value in these transactions was 225.2% compared to 251.0% in the
KeyCorp offer. The average price using the selected transactions'
multiples was 71% and 90% of the KeyCorp offer in terms of price to
earnings and book value, respectively.
No company or transaction used in the above analyses is
identical to CBC or the CBC/KeyCorp Merger. Accordingly, complex
considerations and judgments were involved and mathematical
analysis is not, by itself, a meaningful method of using comparable
company or transaction data.
Comparison with Selected Companies. The Wallach Company
also compared selected ratios of price to earnings and to book
value, profitability, asset quality and capitalization for CBC to
the corresponding statistics for a selected group of seven
publicly-traded financial institutions (Aspen Bancshares, Inc.,
Centennial Savings Bank, Community First Bankshares, First Federal
Savings Bank of Colorado, Goldenbanks of Colorado, United New
Mexico Financial Corporation and Zions Bancorporation) of which
Goldenbanks, Community First and United New Mexico were believed to
be the most comparable. While these banks are publicly traded,
they have not been acquired. For purposes of comparing theoretical
transactions involving these banks to the KeyCorp offer, The
Wallach Company therefore increased the price to earnings and book
value of the respective banks by 39.6% to reflect a control premium
paid for 100% conveyance of a bank's common stock. The control
premium is based on the average premium paid for acquisitions of
financial institutions during the period January 1, 1989 through
June 30, 1993. These adjustments resulted in a theoretical average
price to trailing earnings multiple of 14.4 as compared to a
multiple of 18.6 associated with the KeyCorp offer and a
theoretical average percentage of book value of 204.2% as compared
to a percentage of 251.0% associated with the KeyCorp offer. The
average price using the theoretical transactions' multiples was 77%
and 81% of the KeyCorp offer in terms of price to earnings and book
value, respectively.
Stock Trading History and Valuation. The Wallach Company
examined the history of trading prices and volume for KeyCorp and
Society Common Stock compared to the selected group of 16 large
regional bank holding companies used in the computations described
under the heading "Price-Based Termination" and referred to therein
as the "Index Group." The Index Group is comprised of: BancOne
Corp., Barnett Banks, Inc., Boatmen's Bancshares, Inc., CoreStates
Financial Corp, First Bank System, Inc., First Fidelity
Bancorporation, First Union Corporation, Fleet Financial Group,
Inc., Mellon Bank Corporation, National City Corporation, NBD
Bancorp, Inc., Norwest Corporation, PNC Financial Corp, SunTrust
Banks, Inc., U.S. Bancorp and Wachovia Corporation. The Wallach
Company also examined the valuation of KeyCorp and Society relative
to the Index Group in relation to earnings, book value, dividend
yield and other factors. In this analysis, The Wallach Company
placed greater emphasis on the more recent period and projected
data in evaluating market valuation. The analysis showed, among
other things, that for the trailing 12 month period and year
projected for 1993 and 1994, the price to earnings ratio for
KeyCorp was 12.5, 10.6 and 9.4, respectively; for Society, it was
11.0, 10.0 and 9.2, respectively; and for the Index Group, it was
14.5, 11.4 and 10.6, respectively. The price to book value ratios
were 190.0%, 193.1% and 193.2% for KeyCorp, Society and the Index
Group, respectively. The common dividend yield was 3.1%, 3.4% and
3.4% for KeyCorp, Society and the Index Group, respectively. The
return on average equity was 18.0%, 20.3% and 16.9% for KeyCorp,
Society and the Index Group, respectively. The ratio of equity to
assets was 7.15%, 7.79% and 7.97% for KeyCorp, Society and the
Index Group, respectively.
Recent Stock Price and Acquisition Activity. On
September 10, 1993, the day of the announcement, KeyCorp Common
Stock closed at $40.375. By November 5, 1993 KeyCorp Common Stock
had declined to $33.50 and has since increased to $35.00 on
January 6, 1994. From September 10, 1993 to January 6, 1994
KeyCorp Common Stock declined 13.3%. During the same period the
Index Price (as defined under the heading "Price-Based Termination)
declined by 9.1%.
Based upon the closing price as of January 6, 1994 for
KeyCorp of $35.00 and the exchange ratio of .7460, the resulting
exchange price for each share of CBC Common Stock is $26.11. The
implied ratio of price to trailing 12 month fully diluted earnings
of CBC for the year ended June 30, 1993 has declined from 18.6 at
the offer date to 16.12. The implied multiple of fully diluted
book value per share at June 30, 1993 has declined from 251.0% to
217.6%.
During this same period, the common stock price of the
two other banks which made offers for CBC declined on average by
9.0%. As a result, based on closing prices on January 6, 1994, the
theoretical value of the offers made by each bank to CBC remains
less than the value of KeyCorp's offer. This assumes the same
exchange ratios as offered by KeyCorp and the other two banks in
September 1993.
The Wallach Company is not aware of any merger and
acquisition transactions involving the sale of commercial banks in
Colorado or the Rocky Mountain region with assets in excess of $50
million, equity to assets in excess of 6% and return on equity over
12% which have been announced since September 10, 1993 and for
which information is publicly available.
Based on the closing price of Society Common Stock on
January 6, 1994 of $29.625, based on the CBC/KeyCorp Exchange Ratio
and the KeyCorp/Society Exchange Ratio and assuming the
KeyCorp/Society Merger closes, the resulting exchange offer price
for CBC based upon the offered exchange ratio of .899 was $26.63.
The implied multiple of trailing 12 month fully diluted earnings of
CBC for the period ended June 30, 1993 was 16.44. The implied
multiple of fully diluted book value per share at June 30, 1993 was
221.9%. The Wallach Company is of the opinion that the CBC/KeyCorp
Exchange Ratio and, if the KeyCorp/Society Merger is consummated,
the KeyCorp/Society Exchange Ratio is fair to CBC's shareholders
from a financial point of view, even after the recent price
declines in KeyCorp and Society Common Stock.
The Wallach Company believes that its analyses and the
summary set forth above must be considered as a whole and that
selecting portions of their analyses and the factors considered by
them could create an incomplete view of the process underlying the
preparation of its fairness opinion. No company or transaction
used in the company comparable transaction analysis is identical to
KeyCorp, CBC, Society, the CBC/KeyCorp Merger or the
KeyCorp/Society Merger. Accordingly, in its analysis, The Wallach
Company used complex considerations and judgments concerning
differences in financial and operating characteristics of the
companies and other factors that could affect the public trading
value or the acquisition values of the companies to which they are
being compared.
The terms of the engagement of The Wallach Company were
set forth in an engagement letter dated as of March 9, 1993.
Pursuant to that letter, if the CBC/KeyCorp Merger is consummated,
CBC will pay a transaction fee of 0.94% of the Purchase Price up to
$73,992,000 and 3.0% of the excess over that amount. As used in
this paragraph, "Purchase Price" means the total number of shares
of CBC Common Stock outstanding on the Effective Date times the
product of the average closing price of KeyCorp Common Stock over
the ten consecutive trading days prior to the Effective Date and
.7460. Since March 1993, The Wallach Company has received a
monthly retainer of $7,500 which amount shall be credited against
the transaction fee if the CBC/KeyCorp Merger is consummated. CBC
has also agreed to reimburse The Wallach Company for their
out-of-pocket expenses, and to indemnify The Wallach Company
against certain liabilities under the federal securities laws.
Effect of the CBC/KeyCorp Merger
At the Effective Time (as defined below), CBC will merge
with and into Key Bancshares, with Key Bancshares surviving as a
wholly-owned direct subsidiary of KeyCorp. In the CBC/KeyCorp
Merger, each share of CBC Common Stock outstanding immediately
prior to the Effective Time (other than shares with respect to
which dissenters' rights shall have been perfected in accordance
with applicable law (the "Dissenters' Shares"), shares held
directly or indirectly by KeyCorp other than in a fiduciary
capacity or in satisfaction of a debt previously contracted, and
shares held as treasury stock of CBC) will be converted into .7460
of a share of KeyCorp Common Stock (the "CBC/KeyCorp Exchange
Ratio"). Any shares of CBC Common Stock held directly or
indirectly by KeyCorp other than in a fiduciary capacity or in
satisfaction of a debt previously contracted and any shares held as
treasury stock of CBC will be cancelled and retired and no payment
will be made with respect thereto.
No fractional shares of KeyCorp Common Stock will be
issued in connection with the CBC/KeyCorp Merger. In lieu of
fractional shares, KeyCorp will make a cash payment equal to the
fractional interest which a CBC shareholder would otherwise receive
multiplied by the average of the closing prices of the KeyCorp
Common Stock (the "Average Closing Price") as reported on the NYSE
composite transaction reporting system over the 20 NYSE trading
days immediately preceding the fifth business day prior to the
Effective Date. If prior to the Effective Time the outstanding
shares of KeyCorp Common Stock are increased, decreased, changed
into, or exchanged for a different number or kind of shares or
securities through a change in KeyCorp's capitalization, then an
appropriate and proportionate adjustment in the CBC/KeyCorp
Exchange Ratio will be made. In addition, if the KeyCorp/Society
Merger is consummated prior to the Effective Date, CBC shareholders
will receive shares of New Key Common Stock as described under the
heading "Effect of KeyCorp/Society Merger on CBC and CBC
Shareholders" below.
For a discussion of the rights of dissenting shareholders
of CBC, see "DISSENTERS' RIGHTS OF CBC SHAREHOLDERS."
Effect of KeyCorp/Society Merger on CBC and CBC Shareholders
If both the CBC/KeyCorp Merger and the KeyCorp/Society
Merger are consummated, each share of CBC Common Stock ultimately
would be converted to .899 of a share of Common Stock of New Key
(the product of .7460 (CBC/KeyCorp Exchange Ratio) times 1.205
(KeyCorp/Society Exchange Ratio), except that cash will be paid in
lieu of fractional shares of New Key Common Stock. If the
KeyCorp/Society Merger is consummated before all conditions to
consummation of the CBC/KeyCorp Merger are met, New Key, by
operation of law, would assume the rights and obligations of
KeyCorp under the CBC/KeyCorp Merger Agreement and each share of
CBC Common Stock would be converted directly into .899 of a share
of New Key Common Stock. If the KeyCorp/Society Merger is
consummated after the CBC/KeyCorp Merger, the shares of CBC Common
Stock would first be converted into shares of KeyCorp Common Stock
at the CBC/KeyCorp Exchange Ratio and then into New Key Common
Stock at the KeyCorp/Society Exchange Ratio. If the
KeyCorp/Society Merger is not consummated after the CBC/KeyCorp
Merger, the shares of KeyCorp Common Stock received by CBC
shareholders in the CBC/KeyCorp Merger would remain as such. All
references to New Key Common Stock in this Proxy Statement-
Prospectus include the associated rights ("New Key Rights") to
purchase New Key Common Stock pursuant to a Rights Agreement dated
as of August 25, 1989, between Society and Society National Bank,
as rights agent, as amended (the "New Key Rights Agreement"); each
share of New Key Common Stock issued in the KeyCorp/Society Merger
will be accompanied by one New Key Right which will be evidenced by
the certificate for the New Key Common Stock. See "COMPARISON OF
CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF KEYCORP, CBC AND
NEW KEY."
It is expected that the KeyCorp/Society Merger, if it
closes, will close after the CBC shareholder vote on the
CBC/KeyCorp Merger Agreement at the Special Meeting, but before all
other conditions to consummation of the CBC/KeyCorp Merger have
been met. If this occurs, New Key would assume the rights and
obligations of KeyCorp under the CBC/KeyCorp Merger Agreement, and
if all conditions to consummation of the CBC/KeyCorp Merger are
subsequently met, CBC shareholders would become shareholders of
New Key rather than of KeyCorp without any further right on the
part of the CBC shareholders to vote on the direct merger with a
subsidiary of New Key or the KeyCorp/Society Merger or to exercise
dissenters' rights with respect to either of those transactions.
Should the KeyCorp/Society Merger close after consummation of the
CBC/KeyCorp Merger, CBC shareholders would become shareholders of
KeyCorp, and then, if the KeyCorp/Society Merger is subsequently
consummated, they would become New Key shareholders. In this
event, CBC shareholders would not be able to vote on the
KeyCorp/Society Merger, since they would not be shareholders of
KeyCorp on the record date for the KeyCorp shareholder vote on the
KeyCorp/Society Merger and would not be able to exercise
dissenters' rights with respect to that merger. Therefore, and in
either event, CBC shareholders, when voting on the CBC/KeyCorp
Merger Agreement and deciding whether to exercise dissenters'
rights with respect thereto, must consider the possibility that
they may become shareholders of New Key rather than KeyCorp.
Consummation of the KeyCorp/Society Merger remains
subject to numerous conditions and there can be no assurance that
such conditions will be met or, if met, as to the timing of the
consummation of the KeyCorp/Society Merger. The CBC/KeyCorp Merger
Agreement and the KeyCorp/Society Merger Agreement were
independently negotiated and the CBC/KeyCorp Merger and the
KeyCorp/Society Merger are unrelated transactions; neither of such
transactions is conditioned on consummation of the other. See
"CERTAIN INFORMATION REGARDING THE PENDING MERGER OF KEYCORP AND
SOCIETY."
Rights of Securityholders. Because New Key would be a
bank holding company organized under, and governed by, Ohio law,
the rights of a holder of its stock would be similar in some
respects and different in other respects from the rights of a
holder of common stock of a bank holding company organized under
the laws of the State of New York, such as KeyCorp, although the
rights of a holder of KeyCorp Common Stock and of New Key Common
Stock with respect to matters such as voting, participation in
dividends and upon liquidation will be substantially similar. For
a description of the differences between rights of holders of
KeyCorp Common Stock and rights of a holder of New Key Common Stock
see "COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF
KEYCORP, CBC AND NEW KEY."
Effective Date and Effective Time
The "Effective Date" of the CBC/KeyCorp Merger will be on
the date the Articles of Merger are filed by the Secretary of State
of the State of Colorado (the "Effective Date"). The "Effective
Time" of the CBC/KeyCorp Merger will be the close of business on
the Effective Date (or such other time on the Effective Date as may
be agreed to by the parties) (the "Effective Time"). A period of
time will elapse between the Special Meeting and the Effective Date
in order to permit time for the approval of the CBC/KeyCorp Merger
by the Board of Governors of the Federal Reserve Board (the
"Federal Reserve Board"), the Federal Deposit Insurance Corporation
(the "FDIC"), and the Colorado Banking Board.
If the CBC/KeyCorp Merger Agreement is approved by the
shareholders of CBC, subject to certain conditions described
herein, the Effective Date currently is expected to occur in the
first quarter of 1994.
Surrender of Certificates
Promptly after the Effective Time, KeyCorp will cause
Mellon Securities Trust Company (or its successor as KeyCorp's
Stock Transfer Agent), or such other bank or trust company
acceptable to the parties, acting in the capacity of exchange agent
for KeyCorp, (the "Exchange Agent") to mail to each former holder
of record of CBC Common Stock a form of letter of transmittal,
together with instructions for the exchange of such holder's
certificates representing shares of CBC Common Stock for
certificates representing shares of KeyCorp Common Stock.
HOLDERS OF CBC COMMON STOCK SHOULD NOT SEND IN ANY STOCK
CERTIFICATES UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND
INSTRUCTIONS FROM THE EXCHANGE AGENT.
Upon surrender to the Exchange Agent of one or more
certificates for CBC Common Stock, together with a properly
completed letter of transmittal, there will be issued and mailed to
the holder of CBC Common Stock surrendering such items a
certificate or certificates representing the number of shares of
KeyCorp Common Stock to which such holder is entitled, if any, and
where applicable, a check for the amount to be paid in lieu of any
fractional share interest determined in the manner described above
and unpaid dividends or distributions, if any, with respect to the
certificate or certificates so surrendered, in each case, without
interest.
No dividend or other distribution payable after the
Effective Time with respect to KeyCorp Common Stock will be paid to
the holder of any unsurrendered certificate until the holder duly
surrenders such certificate. Following such surrender of any such
certificate, there will be paid to the holder of the certificates
representing whole shares of KeyCorp Common Stock issued in
exchange therefor, without interest, (1) at the time of such
surrender, the amount of dividends or other distributions having a
record date after the Effective Time theretofore payable with
respect to such whole shares of KeyCorp Common Stock and not yet
paid; and (2) at the appropriate payment date, the amount of
dividends or other distributions having (a) a record date after the
Effective Time but prior to surrender and (b) a payment date
subsequent to surrender payable with respect to such whole shares
of KeyCorp Common Stock.
After the Effective Time, there will be no transfers on
CBC's stock transfer books of shares of CBC Common Stock issued and
outstanding immediately prior to the Effective Time. If
certificates representing shares of CBC Common Stock are presented
for transfer after the Effective Time, they will be cancelled and
exchanged for the shares of KeyCorp Common Stock and cash in lieu
of fractional shares, if any, and unpaid dividends or
distributions, if any, with respect to those certificates
deliverable in respect thereof.
None of KeyCorp, Key Bancshares, Key Colorado, the
Exchange Agent, or any other person will be liable to any former
holder of CBC Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat,
or similar laws.
If a certificate for CBC Common Stock has been lost,
stolen, or destroyed, the Exchange Agent will issue the
consideration properly payable in accordance with the CBC/KeyCorp
Merger Agreement upon receipt of appropriate evidence as to such
loss, theft, or destruction, appropriate evidence as to the
ownership of such certificate by the claimant, and appropriate and
customary indemnification.
Any Dissenters' Shares will be purchased in accordance
with the procedures described under "DISSENTERS' RIGHTS OF CBC
SHAREHOLDERS" and in Appendix C to this Proxy Statement-Prospectus.
Conditions to Consummation of the CBC/KeyCorp Merger
Conditions to Each Party's Obligations. The respective
obligations of KeyCorp and CBC to effect the CBC/KeyCorp Merger are
subject to the satisfaction or waiver prior to the Effective Time
of certain conditions, including the following:
(1) Receipt of the approval of the shareholders of CBC
solicited hereby;
(2) Receipt of the required approvals of (a) the
Federal Reserve Board (or a waiver of such
approval pursuant to a notice which has been filed
by KeyCorp), (b) the FDIC, and (c) the Colorado
Banking Board, and expiration of all applicable
statutory waiting periods, provided, however, that
no approval, consent, or waiver will be deemed to
have been received if it includes any condition or
requirement that would result in any condition,
event, change, or occurrence that is reasonably
likely to have a material adverse effect upon
(i) the condition, financial or otherwise,
properties, business, or results of operations or
prospects of KeyCorp (on a combined basis giving
effect to the CBC/KeyCorp Merger and the other
transactions contemplated by the CBC/KeyCorp Merger
Agreement) or (ii) the ability of KeyCorp to perform
its obligations under, and to consummate the
transactions contemplated by, the CBC/KeyCorp
Merger Agreement, except that the following
conditions or requirements will be deemed not to
result in such a material adverse effect: (x) a
requirement of divestitures in Fort Collins,
Colorado under the federal banking or antitrust
laws; (y) a condition or requirement imposed on
the basis of KeyCorp's (or any of its
subsidiaries') compliance with regulatory capital
requirements applicable to it; or (z) a condition
or requirement imposed on the basis of KeyCorp's
(or any of its subsidiaries') compliance with the
Community Reinvestment Act, as amended (12 U.S.C.
Section 2901-2906) (the "Community Reinvestment
Act");
(3) All other requirements prescribed by law which are
necessary to the consummation of the transactions
contemplated by the CBC/KeyCorp Merger Agreement
have been satisfied;
(4) The absence of any order, decree, or injunction of
a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the
CBC/KeyCorp Merger or any other transaction
contemplated by the CBC/KeyCorp Merger Agreement
and of any statute, rule, regulation, order,
injunction, or decree which prohibits, restricts,
or makes illegal consummation of the CBC/KeyCorp
Merger or any other transaction contemplated by
the CBC/KeyCorp Merger Agreement; and
(5) Receipt by each of KeyCorp and CBC of the opinion
of Baker & Hostetler, counsel for CBC, dated as of
the Effective Date, substantially to the effect
described under "Certain Federal Income Tax
Considerations."
For a discussion of the regulatory approvals required for
consummation of the CBC/KeyCorp Merger, see "THE CBC/KEYCORP MERGER
- -- Regulatory Approvals."
KeyCorp Conditions. The obligations of KeyCorp to effect
the CBC/KeyCorp Merger are subject to the satisfaction or waiver
prior to the Effective Time of certain additional conditions,
including the following:
(1) Receipt by KeyCorp and its directors and officers
who sign the Registration Statement of comfort
letters from CBC's independent auditors, dated
(a) the date of the mailing of this Proxy
Statement-Prospectus to CBC's shareholders and
(b) shortly prior to the Effective Date, with
respect to certain financial information regarding
CBC in the form customarily issued by such
accountants at such time in transactions of this
type;
(2) The truth of each of the representations and
warranties of CBC contained in the CBC/KeyCorp
Merger Agreement and the CBC/KeyCorp Stock Option
Agreements, in all material respects, on the
Effective Date as if made on such date; and
performance by CBC, in all material respects, of
each of its covenants and agreements, under
certain circumstances and at the request of
KeyCorp, contained in the CBC/KeyCorp Merger
Agreement and the CBC/KeyCorp Stock Option
Agreements, and KeyCorp shareholders received a
certificate signed by the Chief Executive Officer
and the Chief Financial Officer of CBC, dated the
Effective Date, to that effect;
(3) KeyCorp shall have received all state securities
laws and "Blue Sky" permits and other
authorizations necessary to consummate the
transactions contemplated by the CBC/KeyCorp
Merger Agreement;
(4) Receipt by KeyCorp of a letter, dated as of the
Effective Date, from its independent auditors to
the effect that the CBC/KeyCorp Merger will
qualify for pooling-of-interests accounting
treatment if closed and consummated in accordance
with the CBC/KeyCorp Merger Agreement;
(5) The absence of any litigation or proceeding
pending against KeyCorp or CBC or any of their
subsidiaries brought by any governmental agency
seeking to prevent consummation of the
transactions contemplated in the CBC/KeyCorp
Merger Agreement; and
(6) Receipt by KeyCorp of a favorable opinion of
Baker & Hostetler, as counsel to CBC, dated the
Effective Date, concerning the corporate standing
and capitalization of CBC, the due authorization
and enforceability of the CBC/KeyCorp Merger
Agreement, and the validity of the CBC Common
Stock to be exchanged in the CBC/KeyCorp Merger.
CBC's Conditions. The obligation of CBC to effect the
CBC/KeyCorp Merger shall be subject to the satisfaction or waiver
prior to the Effective Time of certain additional conditions,
including the following:
(1) Receipt by CBC of comfort letters from KeyCorp's
independent auditors, dated (a) the date of the
mailing of this Proxy Statement-Prospectus to
CBC's shareholders and (b) shortly prior to the
Effective Date, with respect to certain financial
information regarding KeyCorp in the form
customarily issued by such accountants at such
time in transactions of this type;
(2) The truth of each of the representations,
warranties, and covenants of KeyCorp contained in
the CBC/KeyCorp Merger Agreement, in all material
respects, on the Effective Date as if made on such
date, and the performance by KeyCorp in all
material respects, of its covenants and agreements
contained in the CBC/KeyCorp Merger Agreement and
receipt by CBC of certificates signed by the Chief
Executive Officer and the Chief Financial Officer
of KeyCorp, dated the Effective Date, to that
effect;
(3) The absence of any litigation or proceeding
pending against KeyCorp or CBC or any of their
subsidiaries brought by any governmental agency
seeking to prevent consummation of the
transactions contemplated in the CBC/KeyCorp
Merger Agreement;
(4) Receipt by CBC of the opinion from The Wallach
Company dated the same date as this Proxy
Statement-Prospectus (which opinion shall not have
been withdrawn) to the effect that the CBC/KeyCorp
Exchange Ratio or KeyCorp/Society Exchange Ratio
(if the KeyCorp/Society Merger is consummated
prior to the time that all conditions to
consummation of the CBC/KeyCorp Merger are met) is
fair to CBC's shareholders from a financial point
of view;
(5) The CBC/KeyCorp Merger Shares shall have been
approved for listing on the New York Stock
Exchange upon official notice of issuance; and
(6) Receipt by CBC of a favorable opinion, dated the
Closing Date, of KeyCorp's General Counsel or
Assistant General Counsel concerning the corporate
standing and capitalization of KeyCorp, the due
authorization and enforceability of the
CBC/KeyCorp Merger Agreement, and the validity of
the KeyCorp Common Stock to be issued in the
CBC/KeyCorp Merger.
Price-Based Termination
The CBC/KeyCorp Merger Agreement may be terminated by
CBC, if the Board of CBC so determines by a majority vote, at any
time during the two-day period commencing on the fifth NYSE trading
day prior to the Effective Date ("Determination Date") if both of
the following conditions are satisfied:
(a) the Average Closing Price on the Determination Date
of shares of KeyCorp Common Stock shall be less
than $35.00; and
(b) (1) the number obtained by dividing the Average
Closing Price on the Determination Date by $40.375
(the closing price per share of KeyCorp Common
Stock, as reported on the NYSE Composite
Transaction reporting system on September 10,
1993), shall be less than (2) the number obtained
by dividing the Index Price (as defined below) on
the Determination Date by the Index Price on
September 10, 1993, (the last NYSE trading day
immediately preceding the date of the first public
announcement of entry into the CBC/KeyCorp Merger
Agreement) and subtracting 0.10 from the quotient
in this clause (b)(2);
subject, however, to the following three sentences. If CBC elects
to exercise its termination right pursuant to the foregoing, it
must give prompt written notice to KeyCorp (provided that such
notice of election to terminate may be withdrawn at any time within
the aforementioned two-day period). During the two-day period
commencing with its receipt of such notice, KeyCorp will have the
option to increase the consideration to be received by the holders
of CBC Common Stock in the CBC/KeyCorp Merger, by adjusting the
CBC/KeyCorp Exchange Ratio to equal the number (calculated to the
nearest one one-thousandth) obtained by dividing (1) $29.00 by
(2) the actual Average Closing Price on the Determination Date
without regard to the $35.00 minimum average closing price
otherwise applicable. If KeyCorp so elects within such two-day
period, it must give prompt written notice to CBC of such election
and the revised CBC/KeyCorp Exchange Ratio, whereupon no
termination will be deemed to have occurred and the CBC/KeyCorp
Merger Agreement will remain in effect in accordance with its terms
(except as the CBC/KeyCorp Exchange Ratio shall have been so
modified).
The operation of the provisions of the preceding
paragraph can be illustrated by the following example. If the
Average Closing Price were $32.00 and the Index Price had not
fallen sufficiently between September 10, 1993 and the
Determination Date, causing the conditions of clause (b) above to
be met, CBC could elect not to consummate the CBC/KeyCorp Merger
unless KeyCorp elects to increase the CBC/KeyCorp Exchange Ratio to
.9063 (the CBC/KeyCorp Exchange Ratio obtained by dividing $29.00
by the assumed actual Average Closing Price of $32.00 without
regard to the minimum Average Closing Price of $35.00). In such
case, the market value of the KeyCorp Common Stock to be received
in the CBC/KeyCorp Merger would be approximately $29.00 per share
of CBC Common Stock. However, there can be no assurance that the
Board of Directors of KeyCorp would elect to increase the
CBC/KeyCorp Exchange Ratio as described above under such
circumstances. Moreover, there can be no assurance that the Board
of Directors of CBC would exercise its right not to consummate the
CBC/KeyCorp Merger if the conditions of clauses (a) and (b) above
were met and the Board of Directors of KeyCorp elected not to
increase the CBC/KeyCorp Exchange Ratio in the manner described
above.
For purposes of this provision of the CBC/KeyCorp Merger
Agreement, the following definitions apply:
"Average Closing Price" means the average of the
closing prices of the KeyCorp Common Stock as reported
on the NYSE composite transactions reporting system
over the 20 NYSE trading days ending on the fifth
business day prior to the Effective Date.
"Index Group" means the following 16 bank holding
companies (and the weighing factors assigned thereto):
BancOne Corp. (16.63%); Norwest Corporation (9.12%);
SunTrust Banks, Inc. (6.33%); First Union Corporation
(9.24%); Fleet Financial Group, Inc. (5.27%); NBD
Bancorp, Inc. (6.10%); PNC Financial Corp (8.45%); U.S.
Bancorp (3.00%); Wachovia Corporation (7.06%); First
Bank System, Inc. (4.12%); First Fidelity
Bancorporation (4.48%); Barnett Banks, Inc. (5.24%);
National City Corporation (4.91%); CoreStates Financial
Corp (3.91%); Mellon Bank Corporation (4.37%); and
Boatmen's Bancshares, Inc. (1.77%). In the event that
the common stock of any such company ceases to be
publicly traded or a proposal to acquire any such
company is announced before the CBC/KeyCorp Exchange
Ratio Determination Date, such company will be removed
from the Index Group, and the weights attributed to the
remaining companies will be adjusted proportionately
for purposes of determining the Index Price. The
weighing factors were determined based on the relative
market capitalizations of the companies in the Index
Group.
"Index Price," on a given date, means the weighted
average (weighted in accordance with the factors listed
above) of the closing prices on such date of the common
stocks of the companies comprising the Index Group.
If the KeyCorp/Society Merger is consummated prior to or
during the period covered by such twenty NYSE trading days the
closing price for any trading day within such period but after the
effective time of the KeyCorp/Society Merger shall be the closing
price of New Key Common Stock divided by 1.205.
If KeyCorp or any company belonging to the Index Group
declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or
similar transaction (other than the Stock Split already reflected)
between September 10, 1993, and the Determination Date, the prices
for the common stock of such company will be appropriately
adjusted.
Prior to making any decision to terminate the CBC/KeyCorp
Merger Agreement, the Board of CBC would consult with its financial
and other advisers and would consider all financial and other
information it deemed relevant to its decision. The matter would
not, however, be resubmitted to shareholders.
Regulatory Approvals
Consummation of the CBC/KeyCorp Merger is subject to
receipt by KeyCorp and CBC of all necessary regulatory approvals.
The principal regulatory approvals that must be obtained are from
the Federal Reserve Board, the Colorado Banking Board and the FDIC,
except that, in the case of the approval of the Federal Reserve
Board discussed in this section, KeyCorp has submitted a notice to
the Federal Reserve Board requesting a waiver of the approval
requirement. If such waiver is obtained, the approval of the
Federal Reserve Board discussed in this section will not apply to
the CBC/KeyCorp Merger.
The CBC/KeyCorp Merger is subject to prior approval by
the Federal Reserve Board under Section 3 of the Bank Holding
Company Act of 1956, as amended, (the "BHCA") and by the FDIC under
Section 18(c) of the Federal Deposit Insurance Act (the "FDIA").
Section 3 of the BHCA and Section 18(c) of the FDIA require that
the Federal Reserve Board and the FDIC, respectively, take into
consideration the financial and managerial resources and future
prospects of the institutions and the convenience and needs of the
communities to be served. The BHCA and the FDIA prohibit the
Federal Reserve Board and the FDIC, respectively, from approving
the CBC/KeyCorp Merger (1) if it would result in a monopoly or be
in furtherance of any combination or conspiracy to monopolize or to
attempt to monopolize the business of banking in any part of the
United States, or (2) if its effect in any section of the country
may be substantially to lessen competition or to tend to create a
monopoly, or if it would in any other manner be a restraint of
trade, unless the Federal Reserve Board or the FDIC, as the case
may be, finds that the anti-competitive effects of the CBC/KeyCorp
Merger are clearly outweighed by the public interest and the
probable effect of the transaction in meeting the convenience and
needs of the communities to be served. In addition, under the
Community Reinvestment Act, the Federal Reserve Board and the FDIC
must take into account the records of performance of the bank
subsidiaries of KeyCorp and CBC in meeting the credit needs of each
community, including low- and moderate-income neighborhoods, served
by such bank subsidiaries.
Under the BHCA, the CBC/KeyCorp Merger may not be
consummated until the 30th day following the date of Federal
Reserve Board approval, during which time the United States
Department of Justice may challenge the CBC/KeyCorp Merger on
antitrust grounds. The commencement of an antitrust action would
stay the effectiveness of the Federal Reserve Board's approval
unless a court specifically orders otherwise. KeyCorp and CBC
believe that antitrust concerns will not interfere with the
consummation of the CBC/KeyCorp Merger.
In addition, Section 4 of the BHCA requires that KeyCorp
obtain the prior approval of the Federal Reserve Board for the
indirect acquisition of CBC's non-banking subsidiary which is
engaged in activities that the Federal Reserve Board, by order or
regulation, has determined to be so closely related to banking or
to managing or controlling banks as to be a proper incident
thereto.
Consummation of the CBC/KeyCorp Merger is subject to
receipt of a certificate from the Colorado Banking Board certifying
that the CBC/KeyCorp Merger complies with the provisions of
Article 6.4 of the Colorado Banking Code. The issuance of the
certificate will be based on the following considerations: whether
the CBC/KeyCorp Merger will provide positive benefits to Colorado
citizens; whether the CBC/KeyCorp Merger affords protection to bank
depositors in Colorado; and whether the CBC/KeyCorp Merger enhances
the opportunity of the people of Colorado to receive services
provided by banks and bank holding companies. In addition, because
the CBC/KeyCorp Merger would result in a change in control of CBC's
subsidiary banks, consummation of the CBC/KeyCorp Merger will also
be subject to approval by the Colorado Banking Board under the
change in control provisions of Article 2 of the Colorado Banking
Code. This approval will be based primarily upon the following
considerations: that KeyCorp and Key Bancshares are qualified by
character, experience and financial responsibility to control the
subsidiary banks of CBC in a legal and proper manner; and that the
interests of the public generally will not be jeopardized by the
proposed CBC/KeyCorp Merger.
Applications have been submitted seeking the foregoing
approvals of the Federal Reserve Board, the FDIC, and the Colorado
Banking Board.
KeyCorp and CBC are not aware of any material
governmental approvals or actions that are required for
consummation of the CBC/KeyCorp Merger, except as described above.
Should any such approval or action be required, it is presently
contemplated that such approval or action would be sought.
The CBC/KeyCorp Merger cannot proceed in the absence of
the requisite regulatory approvals. See "Conditions to
Consummation of the Merger" and "Waiver and Amendment;
Termination." There can be no assurance that such regulatory
approvals will be obtained, and if the CBC/KeyCorp Merger is
approved, there can be no assurance as to the date of any such
approval. There can also be no assurance that any such approvals
will not contain a condition or requirement which causes such
approvals to fail to satisfy the conditions set forth in the
CBC/KeyCorp Merger Agreement and described above under "Conditions
to Consummation of the Merger." There can likewise be no assurance
that the United States Department of Justice or a State Attorney
General will not challenge the CBC/KeyCorp Merger or, if such a
challenge is made, as to the result thereof.
Conduct of CBC's Business Pending the CBC/KeyCorp Merger
The CBC/KeyCorp Merger Agreement contains certain
restrictions on the conduct of CBC's business pending consummation
of the CBC/KeyCorp Merger. In particular, prior to the Effective
Time, the CBC/KeyCorp Merger Agreement requires CBC (and its
subsidiaries) to (1) conduct its business in the usual, regular,
and ordinary course consistent with past practice; (2) use its best
efforts to maintain and preserve intact its business organization,
employees, and advantageous business relationships and retain the
services of its officers and key employees; and (3) take no action
which would adversely affect or delay the ability of the parties to
obtain any necessary approvals, consents, or waivers of any
governmental authority required for the transactions contemplated
in the CBC/KeyCorp Merger Agreement or to perform its covenants and
agreements on a timely basis under the CBC/KeyCorp Merger
Agreement. In addition, the CBC/KeyCorp Merger Agreement prohibits
CBC (and its subsidiaries) from engaging in certain transactions
(except as noted in a letter delivered by CBC to KeyCorp pursuant
to the CBC/KeyCorp Merger Agreement) without the prior written
consent of KeyCorp. Specifically, without such consent, CBC and
its subsidiaries may not (1) other than in the ordinary course of
business consistent with past practice, incur any indebtedness for
borrowed money, assume, guarantee, endorse, or otherwise as an
accommodation become responsible for the obligations of any other
individual, corporation, or other entity, or make any loan or
advance; (2) adjust, split, combine, or reclassify any capital
stock; (3) make, declare, or pay any dividend or make any other
distribution on, or directly or indirectly redeem, purchase (except
for the CBC Longevity Bonus Plan), or otherwise acquire, any shares
of its capital stock or any securities or obligations convertible
into or exchangeable for any shares of its capital stock, or grant
any stock appreciation rights, or grant any individual,
corporation, or other entity any right to acquire any shares of its
capital stock, except for regular quarterly cash dividends at a
rate per share of CBC Common Stock of $.15 per share on the
outstanding shares of CBC Common Stock and except for dividends
paid by any of the wholly-owned subsidiaries of CBC to CBC or any
of its wholly-owned subsidiaries; (4) issue any additional shares
of capital stock except pursuant to the conversion of CBC
Convertible Subordinated Debentures or the exercise of employee
stock options outstanding as of the date of the CBC/KeyCorp Merger
Agreement; (5) sell, transfer, mortgage, encumber, or otherwise
dispose of any of its material properties or assets to any
individual, corporation, or other entity other than a direct or
indirect wholly-owned subsidiary of CBC, or cancel, release, or
assign any indebtedness of any such person or any claims held by
any such person, except in the ordinary course of business
consistent with past practice or pursuant to contracts or
agreements in force at the date of the CBC/KeyCorp Merger
Agreement; (6) other than in the ordinary course of business
consistent with past practice in individual amounts not to exceed
$10,000, make any investment either by purchase of stock or
securities, contributions to capital, property transfers, or
purchase of any property or assets of any other individual,
corporation, or other entity other than a wholly-owned subsidiary
of CBC, provided that CBC may make no material acquisition of
equity securities or business operations of any such entity without
KeyCorp's prior consent; (7) enter into or terminate any material
contract or agreement, or make any change in any of its material
leases or contracts, other than with respect to those involving
aggregate payments of less than, or the provision of goods or
services with a market value of less than, $25,000 per annum;
(8) except as described under the caption "THE CBC/KEYCORP MERGER
- -- Effect on CBC Employee Benefit Plans," increase in any manner
the compensation or fringe benefits of any of its employees or pay
any pension or retirement allowance not required by any existing
plan or agreement to any such employees, or become a party to,
amend, or commit itself to any pension, retirement, profit-sharing,
or welfare benefit plan or agreement or employment agreement with
or for the benefit of any employee, in each case other than in the
ordinary course of business consistent with past practice, or
voluntarily accelerate the vesting of any stock options or other
stock-based compensation; (9) settle any claim, action, or
proceeding for material money damages or restrictions upon the
operations of CBC or any of its subsidiaries; (10) amend its
Articles of Incorporation or its By-Laws; or (11) agree to, or make
any commitment to, take any of the foregoing actions.
Modification of Certain Policies of CBC. The CBC/KeyCorp
Merger Agreement requires CBC, at the request of KeyCorp, to use
its best efforts to modify and change its loan, litigation, and
real estate valuation policies and practices (including loan
classifications and levels of reserves) prior to the Effective Time
so as to be consistent on a mutually satisfactory basis with those
of KeyCorp. CBC will not be required to modify or change any such
policies or practices, however, until the earlier of (1) such time
as KeyCorp acknowledges that all conditions to its obligation to
consummate the CBC/KeyCorp Merger have been waived or satisfied and
(2) immediately prior to the Effective Time. CBC's
representations, warranties, and covenants contained in the
CBC/KeyCorp Merger Agreement will not be deemed to be untrue or
breached in any respect for any purpose as a consequence of any
modifications or changes undertaken solely on account of the
foregoing. Based upon a preliminary review of CBC's loan portfolio
(a review which included an evaluation of the financial condition
and payment history of borrowers and underlying loan collateral
values), KeyCorp's policies would require a change in
classification of certain loans. Based upon the results of this
preliminary review, the modifications anticipated to be requested
by Keycorp under this provision would not have a material adverse
effect upon the results of operations, liquidity or financial
condition or reserves of CBC or of KeyCorp following the
CBC/KeyCorp Merger and are not the result of any specific
regulatory action.
No Solicitation
CBC has agreed in the CBC/KeyCorp Merger Agreement that
neither it nor any of its subsidiaries, nor any of the respective
officers and directors of CBC or its subsidiaries, will, and CBC
will direct and use its best efforts to cause its employees,
agents, and representatives (including, without limitation, any
investment banker, attorney, or accountant retained by it or any of
its subsidiaries) not to, initiate, solicit, or encourage, directly
or indirectly, any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to
shareholders of CBC) with respect to a merger, consolidation, or
similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, CBC
or any of its subsidiaries (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or, except to
the extent legally required for the discharge by the Board of CBC
of its fiduciary duties as advised in writing by the Board of CBC's
counsel, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with,
any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an
Acquisition Proposal.
Waiver and Amendment; Termination
Waiver and Amendment. Prior to the Effective Time, any
provision of the CBC/KeyCorp Merger Agreement may be (1) waived by
the party benefitted by the provision or by both parties or
(2) amended or modified (including the structure of the
transaction) by an agreement in writing between the parties
approved by their respective Boards of Directors (to the extent
allowed by law). After the vote by the shareholders of CBC,
however, the CBC/KeyCorp Merger Agreement may not be amended or
revised in any manner which would reduce the amount or adversely
change the form or tax treatment of the consideration to be
received by the CBC shareholders in the CBC/KeyCorp Merger. Only
an amendment which constitutes a fundamental change to the
CBC/KeyCorp Merger Agreement as described herein would require
subsequent solicitation by CBC of its shareholders.
Termination. The CBC/KeyCorp Merger Agreement may be
terminated, and the CBC/KeyCorp Merger abandoned, prior to the
Effective Date, either before or after its approval by the
shareholders of CBC (1) by the mutual consent of KeyCorp and CBC,
if the Board of Directors of each so determines by vote of a
majority of the members of its entire Board; (2) by KeyCorp or CBC,
if its Board of Directors so determines by vote of a majority of
the members of its entire Board, in the event of the failure of the
shareholders of CBC to approve the CBC/KeyCorp Merger Agreement, or
a material breach by the other party to the CBC/KeyCorp Merger
Agreement of any representation, warranty, covenant, or agreement
contained in the CBC/KeyCorp Merger Agreement (or, in the case of
CBC, in the CBC/KeyCorp Stock Option Agreements) which is not cured
or not curable in accordance with the terms of the CBC/KeyCorp
Merger Agreement; (3) by KeyCorp or CBC, by written notice to the
other party, if either (a) any approval, consent, or waiver of a
governmental authority required to permit consummation of the
transactions contemplated in the CBC/KeyCorp Merger Agreement is
finally denied or (b) any governmental authority of competent
jurisdiction issues a final, nonappealable order enjoining or
otherwise prohibiting consummation of the transactions contemplated
by the CBC/KeyCorp Merger Agreement; and (4) by KeyCorp or CBC, if
its Board of Directors so determines by vote for a majority of the
members of its entire Board, in the event that the CBC/KeyCorp
Merger is not consummated by July 31, 1994, unless the failure so
to consummate by such time is due to the breach of any
representation, warranty, or covenant contained in the CBC/KeyCorp
Merger Agreement by the party seeking to terminate.
The CBC/KeyCorp Merger Agreement also contains a
price-based termination provision under which the CBC/KeyCorp
Merger Agreement may be terminated by CBC in certain circumstances.
See "Price-Based Termination."
Holding Company Merger; Bank Consolidation
As soon as administratively possible after the Effective
Time, KeyCorp intends to cause Key Bancshares to merge into KeyCorp
(the "Holding Company Merger") and Key Colorado and CBC's bank
subsidiaries other than Century Bank Sterling to consolidate with
and into Century Bank Sterling, with Century Bank Sterling the
surviving bank under the name Key Bank of Colorado (the "Bank
Consolidation"). The Bank Consolidation is subject to the prior
approvals of (1) the FDIC under Section 18(c) of the FDIA and
(2) the Colorado Banking Board under Colorado law.
Applications for the requisite approvals of the Bank
Consolidation by the FDIC and the Colorado Banking Board have been
or will be submitted. No assurances can be given, however, that
such approvals will be received or that the Holding Company Merger
or the Bank Consolidation will be consummated.
Interests of Certain Persons in the CBC/KeyCorp Merger
Certain members of CBC's management and the Board of CBC
may be deemed to have interests in the CBC/KeyCorp Merger in
addition to their interests, if any, as shareholders of CBC
generally. The Board of CBC was aware of these factors and
considered them, among other matters, in approving the CBC/KeyCorp
Merger Agreement and the transactions contemplated thereby.
Indemnification. KeyCorp has agreed, among other things,
to (1) indemnify CBC's present and former directors and officers
against any costs or expenses (including reasonable attorney's
fees), judgments, fines, losses, claims, damages, or liabilities
incurred in connection with any claim, action, suit, proceeding, or
investigation arising out of matters existing or occurring at or
prior to the Effective Time, whether asserted or claimed prior to,
at, or after the Effective Time to the fullest extent that CBC
would have been obligated under the Colorado Corporation Code and
CBC's Articles of Incorporation or By-laws; and (2) use reasonable
efforts to maintain CBC's directors' and officers' liability
insurance policies (or policies containing terms which are
substantially no less advantageous) with respect to matters
occurring before the Effective Time for a period of two years
following the Effective Time.
Employment Agreements. KeyCorp is considering offering
employment agreements (the "Employment Agreements") to certain of
the existing officers of CBC or CBC subsidiaries
("Officers/Employees"), including Jon P. Coates who is President
and a director of CBC. The Employment Agreements were not
addressed in the negotiation of the CBC/KeyCorp Merger Agreement
and, if approved, will become effective only if the CBC/KeyCorp
Merger is completed.
See "Effect on CBC Employee Benefit Plans" for
information with respect to severance benefits available to members
of management of CBC, including Mr. Coates.
Effect on CBC Employee Benefit Plans
KeyCorp and CBC have agreed that, unless otherwise
mutually determined, the employee benefit plans maintained or
contributed to by CBC or any of its subsidiaries (the "Benefit
Plans") in effect at the date of the CBC/KeyCorp Merger Agreement
(except stock ownership or option plans) will remain in effect
temporarily after the Effective Time with respect to employees
(including retirees) covered by such plans at the Effective Time.
Thereafter, all employees of CBC and its subsidiaries who become
employees of KeyCorp or any of its subsidiaries will become
participants in KeyCorp's employee benefit plans. In addition,
retired employees of CBC and its subsidiaries will become
participants in KeyCorp's plans covering retired employees.
All employees of CBC and its subsidiaries continuing in
the employ of KeyCorp or any of its subsidiaries will be entitled
to participate in stock plans, bonus plans, and other such benefit
plans of KeyCorp and its subsidiaries on the same basis as other
similarly situated employees of such companies. All of these
employees will be credited for eligibility, vesting, and benefit
purposes, but not for (1) pension benefit computation purposes or
(2) eligibility for participation in post-employment plans for all
of their years of past service with CBC or any of its subsidiaries.
KeyCorp will pay severance benefits in accordance with
KeyCorp severance benefit programs to any employee of CBC who
terminates on or within one year after the Effective Date provided
that such employee remains employed by KeyCorp or Key Colorado or
any other KeyCorp subsidiary until the date fixed by KeyCorp for
the employee's termination. In addition, KeyCorp will honor CBC's
Amended and Restated 1988 Executive Severance Pay Plan following
the Effective Time.
Treatment of CBC Class A Stock Options
As of September 30, 1993, there were 62,700 unexercised
options outstanding under CBC's 1992 Employee Stock Option Plan
(the "CBC Option Plan") to purchase shares of CBC Class A Common
Stock at prices varying from $13.33 to $19.25 per share. All of
such options will be fully exercisable if the CBC/KeyCorp Merger is
consummated.
At the Effective Time, KeyCorp will assume each option
under the CBC Option Plan outstanding immediately prior to the
Effective Time, and each such option will become an option on
KeyCorp Common Stock and remain outstanding in accordance with its
terms, except that (a) each such option may be exercised only for
KeyCorp Common Stock, (b) each such option will become an option to
purchase the number of shares of KeyCorp Common Stock equal to
.7460 (.899, if the KeyCorp/Society Merger is consummated)
multiplied by the number of shares of CBC Common Stock subject to
such option immediately prior to the Effective Time (with the
product rounded to the next whole share), and (c) the exercise
price of KeyCorp Common Stock at which each such option is
exercisable will be an amount (rounded up to the next whole cent)
computed by dividing the exercise price per share of CBC Common
Stock at which such option is exercisable immediately prior to the
Effective Time by .7460 (.899, if the KeyCorp/Society Merger is
consummated).
Certain Federal Income Tax Considerations
The federal income tax discussion set forth below is
included for general information only. In certain situations, it
may not be applicable to certain classes of taxpayers, including
insurance companies, securities dealers, financial institutions,
foreign persons, and persons who acquired shares of CBC Common
Stock pursuant to the exercise of employee stock options or rights
or otherwise as compensation. BECAUSE EACH SHAREHOLDER'S TAX
CIRCUMSTANCES MAY DIFFER, EACH CBC SHAREHOLDER IS URGED TO CONSULT
HIS OWN TAX ADVISER AS TO THE SPECIFIC TAX CONSEQUENCES TO HIM OF
THE CBC/KEYCORP MERGER OR IF THE KEYCORP/SOCIETY MERGER IS
CONSUMMATED PRIOR TO THE EFFECTIVE TIME, A DIRECT MERGER OF CBC
INTO A SUBSIDIARY OF NEW KEY, INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL, AND OTHER TAX LAWS AND ANY PROPOSED CHANGES
IN SUCH LAWS.
General. CBC and KeyCorp have received an opinion of
Baker & Hostetler that the merger of CBC into a subsidiary of
KeyCorp (the "CBC/KeyCorp Merger") will be treated as a
reorganization within the meaning of Section 368(a) of the Code and
that, accordingly, for federal income tax purposes: (1) no gain or
loss will be recognized by any of KeyCorp, Key Bancshares, or CBC
as a result of the CBC/KeyCorp Merger; (2) no gain or loss will be
recognized by a holder of CBC Common Stock upon the receipt of
KeyCorp Common Stock in exchange for CBC Common Stock in the
CBC/KeyCorp Merger, except as discussed below with respect to cash
received in lieu of a fractional share interest in KeyCorp Common
Stock; (3) the aggregate adjusted tax basis of the shares of
KeyCorp Common Stock to be received by a holder of CBC Common Stock
in the CBC/KeyCorp Merger will be the same as the aggregate
adjusted tax basis in the shares of CBC Common Stock surrendered in
exchange therefor (reduced by any amount allocable to fractional
share interests for which cash is to be received); and (4) the
holding period of the shares of KeyCorp Common Stock to be received
by the holders of CBC Common Stock in the CBC/KeyCorp Merger will
include the holding period of the shares of CBC Common Stock
surrendered in exchange therefor, provided that such shares of CBC
Common Stock are held as capital assets at the Effective Time.
Consummation of the CBC/KeyCorp Merger is conditioned upon receipt
by each of KeyCorp and CBC of such opinion, dated the Effective
Date.
If the Effective Date occurs after the merger of KeyCorp
into Society, it is intended that the merger of CBC into a
subsidiary of New Key ("CBC/New Key Merger") will be treated as a
reorganization within the meaning of Section 368(a) of the Code and
that, accordingly, for federal income tax purposes: (1) no gain or
loss will be recognized by any of New Key, Key Bancshares, or CBC
as a result of the CBC/New Key Merger; (2) no gain or loss will be
recognized by a holder of CBC Common Stock upon the receipt of
New Key Common Stock in exchange for CBC Common Stock in the
CBC/New Key Merger, except as discussed below with respect to cash
received in lieu of a fractional share interest in New Key Common
Stock; (3) the aggregate adjusted tax basis of the shares of
New Key Common Stock to be received by a holder of CBC Common Stock
in the CBC/New Key Merger will be the same as the aggregate
adjusted tax basis in the shares of CBC Common Stock surrendered in
exchange therefor (reduced by any amount allocable to fractional
share interests for which cash is to be received); and (4) the
holding period of the shares of New Key Common Stock to be received
by the holders of CBC Common Stock in the CBC/New Key Merger will
include the holding period of the shares of CBC Common Stock
surrendered in exchange therefor, provided that such shares of CBC
Common Stock are held as capital assets at the Effective Time.
Consummation of the CBC/New Key Merger is conditioned upon receipt
of each of New Key and CBC of an opinion of Baker & Hostetler,
dated on the Effective Date, substantially to the foregoing effect.
The opinion of Baker & Hostetler received by CBC and
KeyCorp relating to the CBC/KeyCorp Merger is, and the opinion of
Baker & Hostetler to be delivered on the Effective Date relating to
either the CBC/KeyCorp Merger or the CBC/New Key Merger will be,
conditioned on certain representations and assumptions, including
an assumption that there is no plan or intention by the CBC
shareholders to sell or exchange or otherwise dispose of a number
of shares of KeyCorp Common Stock or New Key Common Stock received
that would reduce the CBC shareholders' ownership of KeyCorp Common
Stock or New Key Common Stock to a number of shares having a value,
as of the Effective Date, of less than fifty percent of the value
of all of the formerly outstanding shares of CBC Common Stock as of
the Effective Date.
Consequences of Receipt of Cash in Lieu of Fractional
Shares. A holder of shares of CBC Common Stock who receives cash
in the CBC/KeyCorp Merger or CBC/New Key Merger in lieu of a
fractional share interest in KeyCorp Common Stock or New Key Common
Stock will be treated for federal income tax purposes as having
received cash in redemption of such fractional share interest. The
receipt of such cash generally should result in capital gain or
loss in an amount equal to the difference between the amount of
cash received and the portion of such shareholder's adjusted tax
basis in the shares of CBC Common Stock allocable to the fractional
share interest. Such capital gain or loss will be long-term
capital gain or loss if the holder holds the shares as capital
assets and the holding period for the fractional shares of KeyCorp
Common Stock or New Key Common Stock deemed to be received and then
redeemed is more than one year.
Cash Received by Holders of CBC Common Stock Who Dissent.
A holder of shares of CBC Common Stock who perfects dissenters'
rights under the laws of the State of Colorado and who receives
cash payment of the fair value of his shares of CBC Common Stock
will be treated as having received such payment in redemption of
such shares. Such redemption will be subject to the conditions and
limitations of Section 302 of the Code, including the attribution
rules of Section 318. In general, if the shares of CBC Common
Stock are held by the holder as a capital asset at the Effective
Time, a dissenting holder will recognize capital gain or loss
measured by the difference between the amount of cash received by
such holder and the basis for such shares. If, however, such
holder owns, either actually or constructively, any CBC Common
Stock that is exchanged in the CBC/KeyCorp Merger for KeyCorp
Common Stock on in the CBC/New Key Merger for New Key Common Stock,
the payment made to such holder could be treated as dividend
income. In general, under the constructive ownership rules of the
Code, a holder may be considered to own stock that is owned, and in
some cases constructively owned, by certain related individuals or
entities, as well as stock that such holder (or related individuals
or entities) has the right to acquire by exercising an option or
converting a convertible security. Each holder of CBC Common Stock
who contemplates exercising his dissenters' rights should consult
his own tax adviser as to the possibility that any payment to him
will be treated as dividend income. See also "DISSENTERS' RIGHTS
OF CBC SHAREHOLDERS."
Accounting Treatment
If consummated in accordance with the terms of the
CBC/KeyCorp Merger Agreement, it is anticipated that the
CBC/KeyCorp Merger will qualify for "pooling-of-interests"
accounting treatment. KeyCorp's obligation to consummate the
CBC/KeyCorp Merger is conditioned upon the receipt of a letter from
KeyCorp's independent auditors that the CBC/KeyCorp Merger may be
accounted for in such manner. Under the pooling-of-interests
method of accounting, the recorded amounts of the assets and
liabilities of KeyCorp and CBC will be combined at the Effective
Date and carried forward at their previously recorded amounts and
the shareholders' equity accounts of CBC and KeyCorp will be
combined on KeyCorp's consolidated balance sheet. It is KeyCorp's
intention not to restate financial statements and other financial
information for periods prior to the CBC/KeyCorp Merger to include
the accounts and results of operations of CBC because the
transaction is not expected to be material to KeyCorp.
NYSE Listing
The KeyCorp Common Stock is listed on the NYSE. KeyCorp
has agreed to use its best efforts to cause the KeyCorp Common
Stock to be issued to the shareholders of CBC in the CBC/KeyCorp
Merger to be listed on the NYSE. Such listing is an express
condition of consummation of the CBC/KeyCorp Merger. It is
anticipated that the shares of New Key Common Stock will be listed
on the NYSE if the KeyCorp/Society Merger is consummated; however,
no assurances can be given that the New Key Common Stock will be
listed on the NYSE.
Expenses
The CBC/KeyCorp Merger Agreement provides, in general,
that KeyCorp and CBC will each pay its own expenses in connection
with the CBC/KeyCorp Merger Agreement and the transactions
contemplated thereby, including fees and expenses of its own
financial or other consultants, investment bankers, accountants,
and counsel, except that KeyCorp and CBC will divide equally the
costs of printing this Proxy Statement-Prospectus and any other
documents required in connection with the CBC/KeyCorp Merger.
CERTAIN TRANSACTIONS RELATED TO THE
CBC/KEYCORP MERGER AGREEMENT
CBC/KeyCorp Stock Option Agreements
The following summary of the material provisions of the
CBC/KeyCorp Stock Option Agreements is qualified in its entirety by
reference to the CBC/KeyCorp Stock Option Agreements, which are
attached as Appendix B to this Proxy Statement-Prospectus and are
incorporated herein by reference. As an inducement and a condition
to KeyCorp entering into the CBC/KeyCorp Merger Agreement, KeyCorp
and CBC entered into Stock Option Agreements, dated as of
September 12, 1993, (the "CBC/KeyCorp Stock Option Agreements"),
pursuant to which CBC granted KeyCorp options (the "Options") to
purchase, upon the occurrence of certain events (none of which has
yet occurred to the best of KeyCorp's and CBC's knowledge), up to
479,013 shares of CBC Class A Common Stock (representing
approximately 19.9% of the shares of CBC Class A Common Stock
outstanding on September 12, 1993), and up to 85,958 shares of CBC
Class B Common Stock (representing approximately 19.9% of the
shares of CBC Class B Common Stock outstanding on September 12,
1993) at a cash price (the "Option Price") equal to $30.12 per
share (the closing price of KeyCorp Common Stock on September 10,
1993 multiplied by the CBC/KeyCorp Exchange Ratio of .7460),
subject to adjustment in certain circumstances and subject to
termination within certain periods.
The CBC/KeyCorp Stock Option Agreements may discourage
competing offers to the CBC/KeyCorp Merger and are intended to
increase the likelihood that the CBC/KeyCorp Merger will be
consummated in accordance with the terms of the CBC/KeyCorp Merger
Agreement. KeyCorp and CBC believe that the exercise of the
Options would likely prohibit any acquiror from accounting for an
acquisition of, or merger with, CBC using the pooling-of-interests
accounting method for a period of up to two years.
Subject to applicable law and regulatory restrictions,
KeyCorp may exercise the Option(s), in whole or in part, if, but
only if, both an Initial Triggering Event (as defined below) and a
Subsequent Triggering Event (as defined below) shall have occurred
prior to the occurrence of an Exercise Termination Event (as
defined below), provided that KeyCorp shall have sent written
notice to CBC of such exercise within 30 days following such
Subsequent Triggering Event or such later period as provided in the
CBC/KeyCorp Stock Option Agreements.
As defined in the CBC/KeyCorp Stock Option Agreements:
"Initial Triggering Event" means any of (1) the entry by
CBC or any subsidiary of CBC, without having received KeyCorp's
prior written consent, into an agreement to engage in an
Acquisition Transaction (as defined below) with any person (the
term "person" for purposes of the Stock Option Agreements having
the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of
the Exchange Act and the rules and regulations thereunder) other
than KeyCorp or any subsidiary of KeyCorp, or the recommendation by
the Board of CBC that the shareholders of CBC approve or accept any
Acquisition Transaction other than as contemplated by the
CBC/KeyCorp Merger Agreement. For purposes of the Stock Option
Agreements, "Acquisition Transaction" means (a) a merger or
consolidation, or any similar transaction, involving CBC or any
banking subsidiary of CBC, other than a requirement of divestiture
in Fort Collins, Colorado under the federal banking or antitrust
laws, (b) a purchase, lease, or other acquisition of all or
substantially all of the assets of CBC or any banking subsidiary of
CBC, or (c) a purchase or other acquisition (including by way of
merger, consolidation, share exchange, or otherwise) of securities
representing 10% or more of the voting power of CBC or a banking
subsidiary of CBC (the term "Acquisition Transaction" specifically
does not include any merger or consolidation among CBC and/or
subsidiaries of CBC); (2) the Board of Directors of CBC does not
recommend that the shareholders of CBC approve the CBC/KeyCorp
Merger Agreement in any proxy statement seeking approval thereof;
(3) any person other than any existing limited partner of
Commercial Bank Investment Company, KeyCorp, any shareholder of
KeyCorp who currently owns 10% or more of the outstanding shares of
CBC Common Stock, or any subsidiary of KeyCorp or any subsidiary of
CBC acting in a fiduciary capacity acquires beneficial ownership or
the right to acquire beneficial ownership of 10% or more of the
then outstanding shares of the class of CBC Common Stock subject to
the Option (the term "beneficial ownership" for purposes of the
Stock Option Agreements having the meaning assigned thereto in
Section 13(d) of the Exchange Act and the rules and regulations
thereunder); (4) any person other than KeyCorp or any subsidiary of
KeyCorp shall make a bona fide proposal to CBC or its shareholders
by public announcement or written communication that is or becomes
the subject of public disclosure to engage in an Acquisition
Transaction; (5) after a proposal is made by a third party to CBC
or its shareholders to engage in an Acquisition Transaction, CBC
shall have breached any covenant or obligation contained in the
CBC/KeyCorp Merger Agreement and such breach (a) would entitle
KeyCorp to terminate the CBC/KeyCorp Merger Agreement and (b) shall
not have been cured prior to the date of KeyCorp's written notice
to exercise this Option ("Notice Date"); or (6) any person other
than KeyCorp or any subsidiary of KeyCorp, other than in connection
with a transaction to which KeyCorp has given its prior written
consent, shall have filed an application or notice with the Federal
Reserve Board or other governmental authority or regulatory or
administrative agency or commission, domestic or foreign, for
approval to engage in an Acquisition Transaction.
"Subsequent Triggering Event" means either: (1) the
acquisition by any person of beneficial ownership of 20% or more of
the then outstanding shares of the class of CBC Common Stock
subject to the Option (other than by a person that currently
beneficially owns more than 20% of the outstanding shares of the
class of CBC Common Stock subject to the Option); or (2) the
occurrence of the Initial Triggering Event described in clause (1)
of the definition above, except that the percentage referred to in
clause (1)(c) shall be 20%.
"Exercise Termination Event" means any of: (1) the time
immediately preceding the Effective Time; (2) termination by CBC of
the CBC/KeyCorp Merger Agreement in accordance with its provisions
as a result of a material breach by KeyCorp of any representation,
warranty, covenant, or agreement contained in the CBC/KeyCorp
Merger Agreement, which breach is not cured or not curable within
20 days after CBC gives written notice of such breach to KeyCorp;
(3) termination of the CBC/KeyCorp Merger Agreement in accordance
with its provisions, if such termination occurs prior to the
occurrence of an Initial Triggering Event; or (4) the passage of 9
months after termination of the CBC/KeyCorp Merger Agreement if
such termination follows the occurrence of an Initial Triggering
Event (provided that if an Initial Triggering Event continues or
another Initial Triggering Event occurs beyond such termination,
the Exercise Termination Event shall be 9 months from the
expiration of the last Initial Triggering Event to occur, but in no
event more than 18 months after such termination).
Under the BHCA, KeyCorp may not acquire 5% or more of the
outstanding shares of CBC Common Stock without the prior approval
of the Federal Reserve Board under Sections 3 and 4 of the BHCA.
In considering whether to approve the acquisition by KeyCorp of
shares pursuant to exercise of the Options, the Federal Reserve
Board generally will apply the same standards as in considering
whether to approve the CBC/KeyCorp Merger. See "THE CBC/KEYCORP
MERGER -- Regulatory Approvals." Certain other regulatory
approvals may also be required before such an acquisition could be
completed.
The Option may not be assigned, in whole or in part, by
CBC or KeyCorp without the express written consent of the other
party, except that if a Subsequent Triggering Event shall have
occurred prior to an Exercise Termination Event, KeyCorp may
assign, in whole or in part, its rights and obligations under the
Stock Option Agreements within 30 days following such Subsequent
Triggering Event (or such later period as provided in the Stock
Option Agreements), provided, however, that until 30 days following
the date on which the Federal Reserve Board approves an application
by KeyCorp under the BHCA to acquire the shares of CBC Common Stock
subject to the Options, KeyCorp may not assign its rights under the
Stock Option Agreements except in (1) a widely-dispersed public
distribution, (2) a private placement in which no party acquires
the right to purchase in excess of 2% of the voting shares of CBC,
(3) an assignment to a single party (e.g., a broker or investment
banker) for the purpose of conducting a widely-dispersed public
distribution on KeyCorp's behalf, or (4) any other manner approved
by the Federal Reserve Board.
In the event of any change in CBC Common Stock by reason
of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares, or
the like, the type and number of shares of CBC Common Stock
purchasable upon exercise of the Options shall be adjusted
appropriately. Whenever the number of shares of CBC Common Stock
purchasable upon exercise of the Options is so adjusted, the Option
Price shall be adjusted by multiplying the Option Price by a
fraction, the numerator of which shall be equal to the number of
shares of CBC Common Stock purchasable prior to the adjustment and
the denominator of which shall be equal to the number of shares of
CBC Common Stock purchasable after the adjustment.
If a Subsequent Triggering Event occurs prior to an
Exercise Termination Event, (1) at the request of KeyCorp,
delivered within 30 days of the Subsequent Triggering Event (or
such later period as provided in the Stock Option Agreements), CBC
will repurchase the Options from KeyCorp at a price (the "Option
Repurchase Price") equal to (a) the amount by which (i) the
market/offer price (as defined below) exceeds (ii) the Option
Price, multiplied by the number of shares for which the Options may
then be exercised, plus (b) KeyCorp's Out-of-Pocket Expenses (as
defined below) to the extent not previously reimbursed and (2) at
the request of the owner of Option shares, delivered within 30 days
of the Subsequent Triggering Event (or such later period as
provided in the Stock Option Agreements), CBC will repurchase such
number of the Option shares from such owner as such owner shall
designate at a price equal to (a) the market/offer price multiplied
by the number of Option shares designated plus (b) KeyCorp's
Out-of-Pocket Expenses (to the extent not previously reimbursed).
As defined in the Stock Option Agreements, the term "Out-of-Pocket
Expenses" means KeyCorp's reasonable out-of-pocket expenses
incurred in connection with the transactions contemplated by the
CBC/KeyCorp Merger Agreement, including, without limitation, legal,
accounting, and investment banking fees. As defined in the Stock
Option Agreements, the term "market/offer price" means the highest
of (1) the price per share of CBC Common Stock at which a tender
offer or exchange offer therefor has been made after the date of
the Stock Option Agreements, (2) the price per share of CBC Common
Stock paid or to be paid by any third party pursuant to an
agreement with CBC, (3) the highest closing price for shares of CBC
Common Stock within the 30-day period immediately preceding the
date KeyCorp gives notice of the required repurchase of the
Options, or the owner gives notice of the required repurchase of
the Option shares, as the case may be, or (4) in the event of a
sale of all or substantially all of CBC's assets, the sum of the
price paid in such sale for such assets and the current market
value of the remaining assets of CBC as determined by a nationally
recognized investment banking firm selected by KeyCorp or the
owner, as the case may be, divided by the number of shares of CBC
Common Stock outstanding at the time of such sale. In determining
the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking
firm selected by KeyCorp or the owner, as the case may be, whose
determination shall be conclusive and binding on all parties.
In the event that prior to an Exercise Termination Event,
CBC enters into an agreement (1) to consolidate or merge with any
person, other than KeyCorp or a subsidiary of KeyCorp, and shall
not be the continuing or surviving corporation of such
consolidation or merger; (2) to permit any person, other than
KeyCorp or a subsidiary of KeyCorp, to merge into CBC and CBC shall
be the continuing or surviving corporation, but in connection with
such merger, the then-outstanding shares of the class of CBC Common
Stock subject to the Option shall be changed into or exchanged for
stock or other securities of any other person or cash or any other
property or the then-outstanding shares of the class of CBC Common
Stock subject to the Option shall after such merger represent less
than 50% of the outstanding shares and share equivalents of the
merged company; or (3) to sell or otherwise transfer all or
substantially all of its assets to any person, other than KeyCorp
or a subsidiary of KeyCorp, then, and in each such case, the
agreement governing such transaction shall make proper provision so
that the Options shall, upon the consummation of such transaction
and upon the terms and conditions set forth in the Stock Option
Agreements, be converted into, or exchanged for, options (the
"Substitute Options"), at the election of KeyCorp, of either
(a) the acquiring corporation or (b) any person that controls the
acquiring corporation. As more fully described in the Stock Option
Agreements, the Substitute Options shall have substantially the
same terms as the Options. In no event will the Substitute Options
be exercisable for more than 19.9% of the shares of common stock of
the issuer of the Substitute Options (the "Substitute Option
Issuer") outstanding prior to exercise of the Substitute Options.
In the event that the Substitute Options would be exercisable for
more than 19.9% of the shares of common stock of the Substitute
Option Issuer outstanding prior to exercise but for the preceding
sentence, the Substitute Option Issuer will make a cash payment to
KeyCorp equal to the excess of (1) the value of the Substitute
Options without giving effect to the limitation in the preceding
sentence over (2) the value of the Substitute Options after giving
effect to such limitation. This difference in value will be
determined by a nationally-recognized independent investment
banking firm selected by KeyCorp. CBC will not enter into any
transaction described in the first sentence of this paragraph
unless the acquiring corporation and any person that controls the
acquiring corporation shall assume in writing all the obligations
of CBC under the Stock Option Agreements.
Resales of KeyCorp Common Stock
The shares of KeyCorp Common Stock issued pursuant to the
CBC/KeyCorp Merger Agreement will be freely transferable under the
Securities Act except for shares issued to any shareholder who may
be deemed to be an "affiliate" of CBC for purposes of Rule 145
under the Securities Act as of the date of the Special Meeting.
Affiliates may not sell their shares of KeyCorp Common Stock
acquired in connection with the CBC/KeyCorp Merger except pursuant
to an effective registration statement under the Securities Act
covering such shares or in compliance with Rule 145 under the
Securities Act or another applicable exemption from the
registration requirements of the Securities Act. Persons who may
be deemed to be affiliates of CBC generally include individuals or
entities that control are controlled by or are under common control
with CBC and may include certain officers and directors of CBC as
well as principal shareholders of CBC.
CBC has agreed in the CBC/KeyCorp Merger Agreement to use
its best efforts to cause each director, executive officer, and
other person who is an affiliate of CBC to enter into an agreement
with KeyCorp providing that such person will not sell, pledge,
transfer, or otherwise dispose of shares of CBC Common Stock owned
by such person or KeyCorp Common Stock to be received by such
person in the CBC/KeyCorp Merger (1) in the case of shares of
KeyCorp Common Stock only, except in compliance with the applicable
provisions of the Securities Act and the rules and regulations
thereunder, and (2) during the period commencing 30 days prior to
the Effective Time and ending at the time results covering at least
30 days of combined operations of KeyCorp and CBC have been
published.
DISSENTERS' RIGHTS OF CBC SHAREHOLDERS
The following discussion sets forth information
concerning the dissenters' rights of CBC shareholders relating to
the CBC/KeyCorp Merger. CBC shareholders will not be able to vote
directly on, or exercise dissenters' rights directly with respect
to, the KeyCorp/Society Merger or on, or with respect to, the
direct merger of CBC with New Key if, as expected, the
KeyCorp/Society Merger closes before all conditions to consummation
of the CBC/KeyCorp Merger have been met. For that reason, CBC
shareholders, when voting on the CBC/KeyCorp Merger Agreement and
deciding whether to exercise dissenters' rights with respect
thereto, must consider the possibility that they may become
shareholders of New Key rather than KeyCorp.
If the CBC/KeyCorp Merger Agreement is approved, a holder
of record of CBC Common Stock on the Record Date, who follows the
procedures set forth under Sections 7-4-123 and 7-4-124 of the
Colorado Code ("Sections 7-4-123 and 7-4-124"), will receive cash
equal to the fair value of his shares, in lieu of KeyCorp Common
Stock. The following is a summary of certain of the provisions of
Sections 7-4-123 and 7-4-124, copies of which are attached to this
Proxy Statement-Prospectus as Appendix C and are incorporated
herein by reference. Except where the corporate action is illegal
or fraudulent, Sections 7-4-123 and 7-4-124 represent the exclusive
statutory remedy available to holders of CBC Common Stock who elect
to seek appraisal of the fair value of their shares. Failure to
take any necessary step may result in a termination or waiver of
appraisal rights under Sections 7-4-123 and 7-4-124.
Prior to the vote at the Special Meeting, the CBC
shareholder of record electing to exercise dissenters' rights under
Sections 7-4-123 and 7-4-124 must (1) deliver a written notice of
intention to demand that he be paid fair compensation for his
shares if the CBC/KeyCorp Merger Agreement is approved and adopted
and the CBC/KeyCorp Merger is effected, which CBC must receive
prior to the vote at the Special Meeting, and (2) refrain from
voting his shares in approval of the CBC/KeyCorp Merger Agreement.
Such written notice is in addition to and separate from any proxy
or vote against the CBC/KeyCorp Merger Agreement. Because a proxy
signed and left blank will, unless revoked, be voted FOR approval
and adoption of the CBC/KeyCorp Merger Agreement, in order to be
assured that his shares of CBC Common Stock are not voted for
approval and adoption of the CBC/KeyCorp Merger Agreement, a CBC
shareholder electing to exercise dissenters' rights who votes by
proxy must not leave his proxy blank, but must vote AGAINST
approval and adoption of the CBC/KeyCorp Merger Agreement or
ABSTAIN from voting.
A beneficial owner of shares who is not the record holder
may assert dissenters' rights under the terms of Sections 7-4-123
and 7-4-124 if and only if he submits a written consent of the
shareholder of record to CBC at the time of or before the assertion
of those rights. A shareholder may dissent as to less than all of
the shares registered in his name only if he dissents with respect
to all the shares beneficially owned by any one person and
discloses the name and address of the person or persons on whose
behalf he dissents.
If the CBC/KeyCorp Merger Agreement is approved by the
required vote at the Special Meeting, CBC is required to mail a
notice to all shareholders who gave due notice of their intention
to demand payment for their shares and who refrained from voting in
favor of the CBC/KeyCorp Merger Agreement. The notice will state
where and when a dissenting shareholder must send his demand for
payment and deposit his share certificates in order to obtain
payment for his shares. CBC will supply a form for demanding
payment which will include a request for certification of the date
on which the shareholder or the person on whose behalf the
shareholder dissents acquired beneficial ownership of the shares,
and shall be accompanied by a copy of Sections 7-4-123 and 7-4-124.
The time set for the demand and deposit will be not less than
thirty days from the day CBC mails the notice.
A shareholder who fails to demand payment or fails to
deposit his share certificates as required by the foregoing notice
mailed to such shareholder by CBC will have no right under Sections
7-4-123 and 7-4-124 to receive payment for his shares. If the
CBC/KeyCorp Merger Agreement is not effected and CBC does not remit
payment for the shares within sixty days after the date set for
demanding payment and depositing the share certificates, CBC will
return to the dissenting shareholder any share certificates that
have been deposited.
On the Effective Date of the CBC/KeyCorp Merger or upon
receipt of demand for payment, if the CBC/KeyCorp Merger has
already been effected, CBC will remit to a dissenter who has
properly made demand and who has deposited his certificates the
amount which CBC estimates to be the fair value of the shares, with
interest if any has accrued. The remittance will be accompanied
by:
(i) CBC's closing balance sheet and statement of
income for a fiscal year ending not more than
sixteen months before the date of the remittance,
together with the latest available interim
financial statements; and
(ii) A statement of CBC's estimate of the fair value of
the shares; and
(iii)A notice of the dissenters' right to demand
supplemental payment, accompanied by a copy of
Sections 7-4-123 and 7-4-124.
If CBC fails to remit payment for a shareholder's shares
as required by Sections 7-4-123 and 7-4-124 or if the dissenting
shareholder believes that the amount remitted is less than the fair
value of his shares or that the interest is not correctly
determined, he may, within thirty days after the date of mailing of
CBC's remittance, mail to CBC his own estimate of the value of the
shares or of the interest and demand payment of the deficiency. If
the dissenting shareholder fails to follow this procedure within
the thirty-day time limitation, he will be entitled to no more than
the amount remitted.
Within sixty days after receiving a demand for payment of
a deficiency, if any such demand for payment remains unsettled, CBC
will file in an appropriate court a petition requesting that the
fair value of the shares and interest thereon be determined by the
court. All dissenters whose demands have not been settled will be
made parties to the proceeding.
Notwithstanding any other provisions of Sections 7-4-123
and 7-4-124, CBC may elect to withhold the remittance from any
dissenter for shares of which the dissenter or the person on whose
behalf the dissenter acts was not the beneficial owner on the date
of the first announcement to news media or to shareholders of the
terms of the CBC/KeyCorp Merger Agreement. With respect to such
shares, CBC will, upon the Effective Date of CBC/KeyCorp Merger,
state to each dissenter its estimate of the fair market value of
the shares and the rate of interest to be used (explaining the
basis thereof), and offer to pay the resulting amounts on receiving
the dissenters' agreement to accept them in full satisfaction of
his shares. If the dissenter believes that the amount offered by
CBC is less than the fair value of the shares and interest, he may,
within thirty days after the date of mailing of CBC's offer, mail
to CBC his own estimate of fair value and interest and demand
payment of that amount. If the dissenting shareholder fails to
follow this procedure, he will be entitled to no more than CBC's
offer.
The costs and expenses of any of the proceedings
described above, including the reasonable compensation and expenses
payable to the appraisers appointed by the court, will be assessed
against CBC; provided however, that, to the extent the court deems
equitable, any part of the costs and expenses of the proceedings
may be assessed against all or some of the dissenting shareholders
whose demands for supplemental payment the court finds to be
arbitrary, vexatious, or not in good faith.
Fees and expenses of counsel and of experts may be
assessed against CBC to the extent the court deems equitable if CBC
fails to comply substantially with the requirements of
Sections 7-4-123 and 7-4-124 and may be assessed against either CBC
or a dissenter, in favor of any other party, if the party against
whom the fees and expenses are assessed is found to have acted
arbitrarily, vexatiously, or not in good faith.
In view of the complexity of these provisions of Colorado
law, shareholders of CBC who intend to exercise their dissenters'
rights should consult their legal advisors.
CERTAIN INFORMATION CONCERNING KEYCORP
General
KeyCorp, a multi-regional financial services holding
company, was incorporated in New York State in 1970. KeyCorp
is registered under the BHCA. Headquartered in Albany, New York,
KeyCorp is comprised of full-service commercial banks and related
financial service companies. KeyCorp provides banking services
to individual consumers, small- to medium-sized businesses, and
municipalities. In addition, through its specialized financial
service subsidiaries, KeyCorp offers mortgage banking, insurance,
brokerage, and trust services. At September 30, 1993, KeyCorp's
subsidiary banks operate over 800 banking offices in the States of
Alaska, Colorado, Idaho, Maine, New York, Oregon, Utah, Washington,
and Wyoming. KeyCorp ranked as one of the 25 largest bank holding
companies in the United States based on total consolidated assets
of approximately $32.4 billion at September 30, 1993. In addition,
at September 30, 1993, KeyCorp and its subsidiaries had
approximately 17,800 full-time equivalent employees.
Since the execution of the CBC/KeyCorp Merger Agreement,
KeyCorp and Society entered into the KeyCorp/Society Merger
Agreement, pursuant to which KeyCorp would merge with and into
Society, with Society as the surviving corporation under the name
Key Bancshares Inc. or a variant thereof (referred to herein as
"New Key"). If the CBC/KeyCorp Merger Agreement is approved by CBC
shareholders at the Special Meeting and if all other conditions to
consummation of the CBC/KeyCorp Merger have been met, and the
KeyCorp/Society Merger is consummated, CBC shareholders would
become shareholders of New Key with no further action by the CBC
shareholders other than the vote on the CBC/KeyCorp Merger
Agreement at the Special Meeting. For information regarding
Society, the KeyCorp/Society Merger, and the effect of the
KeyCorp/Society Merger on CBC shareholders see "CERTAIN INFORMATION
REGARDING THE PENDING MERGER OF KEYCORP AND SOCIETY."
Subsidiaries
KeyCorp's commercial banks, all operating under the
Key Bank name, serve markets throughout the country's northern
tier.
In the East, banking operations are conducted through
Key Bank of New York and Key Bank of Maine. Key Bank of New York
had total assets of $14.0 billion at September 30, 1993, and
operated 339 banking offices. Key Bank of Maine had total assets
of $2.5 billion at September 30, 1993, and operated 96 banking
offices.
In the Rocky Mountain states, banking operations are
conducted through the Key Banks of Colorado, Idaho, Utah, and
Wyoming. Key Bank of Idaho had total assets of $1.2 billion at
September 30, 1993, and operated 44 banking offices. As of
September 30, 1993, Key Bank of Colorado had total assets of $0.2
billion and operated 4 banking offices. Key Bank of Utah had total
assets of $1.2 billion at September 30, 1993, and operated 36
banking offices. At September 30, 1993, Key Bank of Wyoming had
total assets of $1.3 billion and operated 27 banking offices.
The Key Banks of Alaska, Oregon, and Washington conduct
KeyCorp's banking operations in the Pacific Northwest. Key Bank of
Alaska had total assets of $0.9 billion at September 30, 1993, and
operated 20 banking offices. At September 30, 1993, Key Bank of
Oregon had total assets of $1.9 billion and operated 72 banking
offices. Key Bank of Washington had total assets of $6.8 billion
at September 30, 1993, and operated 191 banking offices. In
addition, banking operations in Washington are also conducted
through Key Savings Bank, a state chartered savings bank with its
primary regulator being the Federal Deposit Insurance Corporation.
At September 30, 1993, Key Savings Bank had total assets of $1.4
billion and operated 191 banking offices under dual Charter with
Key Bank of Washington.
A unique banking subsidiary based in Albany, New York,
Key Bank U.S.A. N.A. ("Key Bank U.S.A."), is KeyCorp's national
bank subsidiary. With total assets of $0.6 billion at
September 30, 1993, Key Bank U.S.A. provides banking services by
mail to customers nationwide -- primarily gathering deposits from
areas not served by any other Key Bank.
Through its bank and nonbank subsidiaries, KeyCorp offers
a variety of traditional banking services as well as personal and
commercial financial services. Such services include checking,
savings, and money market deposit accounts; NOW accounts; fixed and
variable rates certificates of deposit; demand, time, and
installment loans; credit cards; equipment leasing; first and
second mortgage loans, including home equity loans; cash management
services, corporate, and personal fiduciary services; discount
brokerage services; and credit life reinsurance.
KeyCorp Mortgage Inc., KeyCorp's primary mortgage banking
subsidiary, serviced a $22.0 billion portfolio of mortgage loans as
of September 30, 1993, making it one of the largest mortgage
servicing companies in the country. KeyCorp's other specialized
financial service companies provide such service as trust, credit
life reinsurance, equipment leasing, securities brokerage, annuity
sales, asset management, and data processing.
As with other New York domiciled bank holding companies,
KeyCorp is subject to regulation by the New York State Banking
Department and the Federal Reserve Board. Each of KeyCorp's
subsidiary banks is a member of the Federal Deposit Insurance
Corporation and is also subject to regulation by the banking
authorities of the state in which it is located.
Investments in its operating subsidiaries are KeyCorp's
principal asset sources of income. Dividends from bank
subsidiaries constitute KeyCorp's principal source of funds.
Various Federal and state laws limit the extent to which KeyCorp's
bank subsidiaries may pay dividends. Similarly, the Federal
Reserve Act imposes limitations on a subsidiary bank's ability to
extend credit to, invest in, and certain other transactions with
KeyCorp and its other subsidiaries. See "CERTAIN REGULATORY
CONSIDERATIONS."
Other KeyCorp Acquisitions
Neither of the other acquisitions of KeyCorp described
below will, either individually or in the aggregate, have a
material impact on the consolidated financial condition or result
of operations of KeyCorp and its subsidiaries. The effects of the
following acquisitions are not included in information presented in
the tables under the heading "UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS" in this Proxy Statement-Prospectus
but certain information about Jackson Bank and Greeley Bank (each
as defined below) is set forth in footnote (4) under the heading
"NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS OF KEYCORP AND SUBSIDIARIES AND SOCIETY AND
SUBSIDIARIES" herein.
Jackson County Federal Bank, F.S.B. On December 31,
1993, Jackson County Federal Bank, F.S.B., a federal stock savings
bank headquartered in Medford, Oregon ("Jackson Bank") merged into
Key Bank of Oregon. Under the terms of the merger agreement,
Jackson Bank shareholders are entitled to receive an aggregate of
approximately 1.6 million shares of KeyCorp Common Stock. At
December 31, 1993, Jackson Bank, which had eight branch offices in
Oregon, had approximately $_____ million in assets.
The Bank of Greeley. On October 5, 1993, KeyCorp entered
into an agreement to acquire The Bank of Greeley, a single-branch
Colorado state-chartered bank, headquartered in Greeley, Colorado
("Greeley Bank"). Under the terms of the agreement, all shares of
Greeley Bank common stock will be exchanged for approximately
200,000 shares of KeyCorp Common Stock. At December ___, 1993,
Greeley Bank had approximately $60.9 million in assets.
Consummation of the Greeley Bank acquisition is subject to
regulatory and Greeley Bank shareholder approval. The acquisition
is expected to be completed during the first six months of 1994.
CERTAIN INFORMATION CONCERNING CBC
CBC. CBC, a bank holding company headquartered in
Denver, Colorado, was incorporated in Colorado and registered under
the BHCA in 1971. CBC is engaged in the commercial banking
business through its five wholly-owned subsidiary banks with a
total of eleven banking offices located in Colorado. CBC's
principal assets and sources of income are its investments in its
banking subsidiaries. CBC has no significant nonbank subsidiaries.
CBC's banking offices are located in various communities along the
front range of the Rocky Mountains and in northeastern Colorado.
Five banking offices are located in the greater Denver Metropolitan
area, three are located in Colorado Springs, and one each are
located in the communities of Sterling, Fort Collins, and
Fort Morgan. CBC is the third largest bank holding company
headquartered in the State of Colorado with total consolidated
assets of $373.9 million, total deposits of $331.1 million, and
shareholders' equity of $35.0 million at September 30, 1993.
Through its subsidiary banks, CBC offers a variety of
loan, deposit, and other banking services to its customers.
Throughout CBC's history, its strategy has been to focus its
resources to create one of the leading business banks in Colorado.
CBC believes that business lending done in compliance with strict
quality is highly profitable and also believes there is significant
opportunity to serve business customers because many other banks
have focused primarily on serving consumer markets and have placed
a lower priority on serving business customers. Accordingly, CBC
concentrates on secured lending to small and medium size business.
Each subsidiary bank is managed by its own officers and
a common set of directors, however CBC provides certain advisory
services and establishes all general policies. More specifically,
CBC renders advice and service to its subsidiary banks relating to
training, lending structure and techniques, securities investments,
public relations, marketing, accounting and internal auditing
services, and compliance with government regulations. CBC also
provides capital planning and financial assistance to its
subsidiary banks through bank premises acquisition and construction
and infusion of capital when necessary.
Additional information concerning CBC including its
business, financial affairs and directors and executive officers is
variously contained in CBC's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, Proxy Statement dated May 3,
1993 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, copies of which are included in Appendices E,
F and G to this Proxy Statement-Prospectus.
CERTAIN REGULATORY CONSIDERATIONS
General
As bank holding companies, CBC and KeyCorp are, and
New Key will be, subject to supervision by the Federal Reserve
Board. The banking and savings association subsidiaries of KeyCorp
and the banking subsidiaries of CBC (collectively "banking
subsidiaries") are subject to extensive supervision, examination,
and regulation by applicable federal and state banking agencies,
including in the case of KeyCorp, KeyCorp's national bank
subsidiaries (Key Bank U.S.A. N.A. and Key Trust Company of
Florida), the Office of the Comptroller of the Currency (the
"OCC"). Since all of CBC's banking subsidiaries are Colorado
chartered state banks, none of CBC's banking subsidiaries are
subject to the supervision of the OCC. Each of the banking
subsidiaries is insured by, and therefore also subject to the
regulations of, the FDIC. Depository institutions such as the
banking subsidiaries are affected significantly by the actions of
the Federal Reserve Board as it attempts to control the money
supply and credit availability in order to influence the economy.
The discussion in this section of regulatory considerations
affecting KeyCorp and subsidiaries, will be generally applicable to
CBC prior to the Effective Time of the CBC/KeyCorp Merger and to
New Key should the KeyCorp/Society Merger be consummated. All
references to regulation of New Key in this section are conditioned
on the consummation of the KeyCorp/Society Merger. The regulatory
regime applicable to bank holding companies and their subsidiaries
generally is not intended for the protection of investors and is
directed toward protecting the interests of depositors, the FDIC
deposit insurance funds, and the U.S. banking system as a whole.
KeyCorp's nonbanking subsidiaries are and New Key's
nonbanking subsidiaries will be subject to supervision and
examination by the Federal Reserve Board, as well as other
applicable regulatory agencies. For example, discount brokerage
subsidiaries are subject to supervision and regulation by the SEC,
the National Association of Securities Dealers, Inc. and state
securities regulators. KeyCorp's and CBC's insurance subsidiaries
are subject to regulation by the insurance regulatory authorities
of various states. Other nonbanking subsidiaries are subject to
other laws and regulations of both the federal government and the
various states in which they are authorized to do business.
The following references to certain statutes and
regulations are brief summaries thereof. The references are not
intended to be complete and are qualified in their entirety by
reference to the statutes and regulations. In addition, there are
other statutes and regulations that apply to and regulate the
operation of banking institutions. A change in applicable law or
regulation may have a material effect on the business of KeyCorp
and/or New Key.
Dividend Restrictions
Various federal and state statutory provisions, which
currently limit the amount of dividends paid to CBC and KeyCorp by
their respective banking subsidiaries, will also limit the amount
of dividends the banking subsidiaries are permitted to pay to
New Key without regulatory approval. The approval of the OCC is
required for any dividend by a national bank if the total of all
dividends declared by the bank in any calendar year would exceed
the total of its net profits (as defined by the OCC) for that year
combined with its retained net profits for the preceding two years
less any required transfers to surplus or a fund for the retirement
of any preferred stock. In addition, a national bank is not
permitted to pay a dividend in an amount greater than its net
profits then on hand (as defined by the OCC) after deducting its
losses and bad debts. For this purpose, bad debts are defined to
include, generally, loans which have matured as to which interest
is overdue by six months or more, other than such loans which are
well secured and in the process of collection.
Office of Thrift Supervision ("OTS") regulations (which
will apply to New Key as a result of its owning a savings
association subsidiary, but which do not apply to KeyCorp) impose
limitations upon capital distributions by savings associations.
State nonmember banks are subject to varying restrictions on the
payment of dividends under state laws. All of KeyCorp's banking
subsidiaries other than Key Bank U.S.A. N.A. and Key Trust Company
of Florida, N.A., are state nonmember banks and each of CBC's bank
subsidiaries is a state nonmember bank.
The approval of the Colorado Banking Board is required
for any dividend by a Colorado state bank if the total of all
dividends declared by such state bank in any calendar year will
exceed the total of its net profits for that year combined with its
retained net profits of the preceding two years, less any required
transfers to a fund for the retirement of any preferred stock.
Under these restrictions, as of September 30, 1993, CBC's
banking subsidiaries could have declared dividends of approximately
$6.8 million in the aggregate, without obtaining prior regulatory
approval, and KeyCorp's banking subsidiaries could have declared
dividends of approximately $540 million in the aggregate, without
obtaining prior regulatory approval. The payment of dividends by
any banking subsidiary may also be affected by other factors, such
as the requirement that each such subsidiary maintain adequate
capital.
If, in the opinion of the applicable federal banking
agency, a depository institution under its jurisdiction is engaged
in or is about to engage in an unsafe or unsound practice (which,
depending on the financial condition of the institution, could
include the payment of dividends), such authority may require,
after notice and hearing, that such institution cease and desist
from such practice. In addition, the Federal Reserve Board, the
OCC, and the FDIC have issued policy statements which provide that
insured banks and bank holding companies should generally only pay
dividends out of current operating earnings.
Holding Company Structure
Transactions Involving Banking Subsidiaries.
Transactions involving KeyCorp's (and New Key's) banking
subsidiaries will be subject to restrictions under federal law
which limit the transfer of funds from such subsidiaries to KeyCorp
and (with certain exceptions) its nonbanking subsidiaries in
"covered transactions" such as loans, extensions of credit,
investments, or asset purchases. Each such transfer by a banking
subsidiary to either KeyCorp or any nonbanking subsidiary is
limited in amount to 10% of that banking subsidiary's capital and
surplus and, with respect to all such transfers to KeyCorp and all
KeyCorp's nonbanking subsidiaries in the aggregate, to 20% of that
banking subsidiary's capital and surplus. Furthermore, loans and
extensions of credit are required to be secured in specified
amounts. "Covered transactions" also include the acceptance of
securities issued by the banking subsidiary as collateral for a
loan and the issuance of a guarantee, acceptance or letter of
credit for the benefit of KeyCorp or its nonbanking subsidiaries.
In addition, a bank holding company and its banking subsidiaries
are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property
or furnishing of services.
Bank Holding Company Support of Banking Subsidiaries.
Under Federal Reserve Board policy, a bank holding company is
expected to act as a source of financial and managerial strength to
each of its subsidiary banks and to commit resources to support
each such subsidiary bank. This support may be required by the
Federal Reserve Board at times when KeyCorp may not have the
resources to provide it or, for other reasons, would not otherwise
be inclined to provide it. Any capital loans by KeyCorp to any of
the subsidiary banks are subordinate in right of payment to
deposits and to certain other indebtedness of a subsidiary bank.
In addition, the Crime Control Act of 1990, provides that in the
event of a bank holding company's bankruptcy, any commitment by the
bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the
bankruptcy trustee and entitled to a priority of payment.
A depository institution, the deposits of which are
insured by the FDIC can be held liable (the so-called "cross
guaranty" provision) for any loss incurred by, or reasonably
expected to be incurred by, the FDIC in connection with (i) the
default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to a
commonly controlled FDIC-insured depository institution in danger
of default. "Default" is defined under the FDIC's regulations
generally as the appointment of a conservator or receiver and "in
danger of default" is defined generally as the existence of certain
conditions indicating that a "default" is likely to occur in the
absence of regulatory assistance.
Capital Requirements
The minimum ratio of total capital to risk-adjusted
assets (including certain off-balance sheet items, such as stand-by
letters of credit) required by Federal Reserve Board for bank
holding companies is 8%. At least one-half of the total capital
must be comprised of common equity, retained earnings, qualifying
noncumulative perpetual preferred stock, a limited amount of
qualifying cumulative perpetual preferred stock, and minority
interests in the equity accounts of consolidated subsidiaries, less
goodwill and certain other intangible assets ("Tier 1 capital").
The remainder may consist of hybrid capital instruments, perpetual
debt, mandatorily convertible debt securities, a limited amount of
subordinated debt, other preferred stock, and a limited amount of
loan and lease loss reserves ("Tier 2 capital"). The Federal
Reserve Board has stated that banking organizations generally, and
particularly those that actively make acquisitions, are expected to
operate well above the minimum risk-based capital ratios. As of
September 30, 1993, CBC's Tier 1 and total capital to risk-adjusted
assets ratios were 13.22% and 15.89%, respectively, KeyCorp's
Tier 1 and total capital to risk-adjusted assets ratios were 8.68%
and 11.49%, and, on a pro forma basis (taking into account the
KeyCorp/Society Merger but not other pending or recently completed
KeyCorp or Society mergers or acquisitions such as the CBC/KeyCorp
Merger contemplated hereby), New Key's Tier 1 and total capital to
risk-adjusted assets ratios would have been 8.69% and 12.21%.
In addition, KeyCorp is and New Key will be subject to
minimum leverage ratio (Tier 1 capital to average total assets)
guidelines. These guidelines provide for a minimum leverage ratio
of 3% for bank holding companies that meet certain specified
criteria, including that they have the highest supervisory rating.
All other banking holding companies are required to maintain a
leverage ratio which is at least 100 to 200 basis points higher
(i.e., a leverage ratio of at least 4% to 5%). Neither CBC,
KeyCorp, nor any banking subsidiary of either of them has been
advised by its appropriate federal regulatory agency of any
specific leverage ratio applicable to it. At September 30, 1993
CBC's Tier 1 leverage ratio was 8.89%, KeyCorp's Tier 1 leverage
ratio was 6.32%, and, on a pro forma basis, New Key's Tier 1
leverage ratio would have been 6.79%. The guidelines also provide
that banking organizations experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels, without
significant reliance on intangible assets. Furthermore, the
guidelines Indicate that the Federal Reserve Board will continue to
consider a "tangible Tier 1 leverage ratio" in evaluating proposals
for expansion or new activities. The tangible Tier 1 leverage
ratio is the ratio of a banking organization's Tier 1 capital less
all intangibles, to total assets less all intangibles. Each of
KeyCorp's banking subsidiaries are and each of New Key's banking
subsidiary will also be subject to capital requirements adopted by
applicable federal regulatory agencies which are substantially
similar to those imposed by the Federal Reserve Board on bank
holding companies.
All the federal banking agencies have proposed
regulations that would add an additional capital requirement based
upon the amount of an institution's exposure to interest rate risk.
The OTS recently adopted its final rule adding an interest rate
component to its risk-based capital rule. Under the final OTS
rule, savings associations with a greater than "normal" level of
interest rate risk exposure will be subject to a deduction from
total capital for purposes of calculating the risk-based capital
ratio. The new OTS rule is effective January 1, 1994. The OTS
will apply to New Key, but does not apply to CBC or KeyCorp. The
other federal banking agencies have yet to adopt their final rules
on the interest rate risk component of risk-based capital.
Recent Legislation
In 1991, Congress enacted the Federal Deposit Insurance
Corporation Improvement Act of 1991 which, among other things,
amended the Federal Deposit Insurance Act (the "FDIA"), increased
the FDIC's borrowing authority to resolve bank failures, mandated
least-cost resolutions and prompt regulatory action with regard to
undercapitalized institutions, expanded consumer protection, and
mandated increased supervision of domestic depository institutions
and the U.S. operations of foreign depository institutions. The
FDIA requires federal banking agencies to promulgate regulations
and specify standards in numerous areas of bank operations,
including interest rate exposure, asset growth, internal controls,
credit underwriting, executive officer and director compensation,
real estate construction financing, additional review of capital
standards, interbank liabilities, and other operational and
managerial standards as the agencies determine appropriate. These
regulations have increased and may continue to increase the cost of
and the regulatory burden associated with the banking business.
Prompt Corrective Action. Effective in December 1992,
the FDIC, the Federal Reserve Board, the OCC and the OTS adopted
new regulations to implement the prompt corrective action
provisions of the FDIA. The regulations group FDIC-insured
depository institutions into five broad categories based on
specified capital ratios. The first categories are "well
capitalized," "adequately capitalized." undercapitalized,"
"significantly undercapitalized," and "critically
undercapitalized." An institution is "well capitalized" if it has
a total risk-based capital ratio of 10% or greater, a Tier 1
risk-based capital ratio of 6% or greater and a Tier 1 leverage
capital ratio of 5% or greater, and is not subject to a regulatory
order, agreement, or directive to meet and maintain a specific
capital level for any capital measure. An institution is
"adequately capitalized" if it has a total risk-based capital ratio
of 8% or greater, a Tier 1 risk-based capital ratio of 4% or
greater and (generally) a Tier 1 leverage capital ratio of 4% or
greater, and the institution does not meet the definition of a
"well capitalized" institution. An institution is
"undercapitalized" if the relevant capital ratios are less than
those specified in the definition of an "adequately capitalized"
institution. An institution is "significantly undercapitalized" if
it has a total risk-based capital ratio of less than 6%, a Tier 1
risk-based capital ratio of less than 3%, or a Tier 1 leverage
capital ratio of less than 3%. An institution is "critically
undercapitalized" if it has a ratio of tangible equity (as defined
in the regulations) to total assets of 2% or less. An institution
may be downgraded to, or be deemed to be in a capital category that
is lower than is indicated by its actual capital position if it is
determined to be in an unsafe or unsound condition or if it
receives an unsatisfactory examination rating with respect to
certain matters.
The capital-based prompt corrective action provisions of
the FDIA and their implementing regulations apply to FDIC insured
depository institutions and are not applicable to holding companies
which control such institutions. However, both the Federal Reserve
Board and the OTS have indicated that, in regulating holding
companies, they will take appropriate action at the holding company
level based on their assessment of the effectiveness of supervisory
actions imposed upon subsidiary depository institutions pursuant to
such provisions and regulations. Although the capital categories
defined under the prompt corrective action regulations are not
directly applicable to CBC, KeyCorp, or New Key under existing law
and regulations, if either KeyCorp or CBC were placed in a capital
category it would qualify as "well-capitalized" as of September 30,
1993, as would New Key on a pro forma basis. As of September 30,
1993 no banking subsidiary of either KeyCorp or CBC was subject to
any regulatory order, agreement, or directive to meet and maintain
a specific capital level for any capital measure, except for
Key Bank of Maine, which is required pursuant to an agreement with
the Superintendent of the Maine Bureau of Banking to maintain a 6%
tangible equity ratio through December 1994. As of the date
hereof, Key Bank of Maine is in compliance with such agreement.
The FDIA generally prohibits a depository institution
from making any capital distribution (including payment of a
dividend) or paying any management fee to its holding company if
the institution would thereafter be "undercapitalized."
Undercapitalized depository institutions also will be subject to
restrictions on borrowing from the Federal Reserve System,
effective December 19, 1993. "Undercapitalized" depository
institutions are subject to increased monitoring by the appropriate
federal banking agency, limitations on growth, and are required to
submit a capital restoration plan. The federal banking agencies
may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is
likely to succeed in restoring the institution's capital. In
addition, for a capital restoration plan to be acceptable, the
depository institution's parent holding company must guarantee that
the institution will comply with such capital restoration plan The
aggregate liability of the parent holding company with respect to
such a guarantee is limited to the lesser of: (a) an amount equal
to 5% of the depository institution's total assets at the time it
became undercapitalized, or (b) the amount which is necessary (or
would have been necessary) to bring the institution into compliance
with all capital standards applicable with respect to such
institution as of the time it fails to comply with the plan. If a
depository institution fails to submit an acceptable plan, it is
treated as if it were "significantly undercapitalized."
"Significantly undercapitalized" depository institutions may be
subject to a number of requirements and restrictions, including
orders to sell sufficient voting stock to become adequately
capitalized and requirements to reduce total assets, and are
prohibited from receiving deposits from correspondent banks.
"Critically undercapitalized" institutions are subject to the
appointment of a receiver or conservator.
Brokered Deposits. The FDIC has also adopted final
regulations governing the receipt of brokered deposits. Under
these regulations, an FDIC-insured bank or savings association
cannot accept brokered deposits unless: (a) it is "well
capitalized" or (b) it is "adequately capitalized" and receives a
waiver from the FDIC.
A bank or savings association that cannot receive
brokered deposits also cannot offer "pass-through" insurance on
certain employee benefit accounts, unless it provides certain
notice to affected depositors. In addition, a bank or savings
association that is not "well capitalized" may not pay an interest
rate on any deposits in excess of 75 basis points over certain
prevailing market rates. At September 30, 1993, KeyCorp's banking
subsidiaries had brokered deposits of $341 million. At
September 30, 1993, CBC's banking subsidiaries had no brokered
deposits. At September 30, 1993, on a pro forma basis New Key's
banking subsidiaries would have had brokered deposits of $546
million.
FDIC Insurance. On September 15, 1992, the FDIC adopted
regulations implementing a transitional risk-related insurance
assessment system. The transitional system was adopted to provide
a transition between the previous flat-rate system and the
risk-related system that is required by statute to be implemented
by January 1, 1994. On June 17, 1993, the FDIC adopted certain
amendments to the transitional system and thereby created the final
risk-based assessment system which will be effective beginning with
the January 1, 1994 assessment period. Under the risk-related
insurance assessment system, a bank or savings association is
required to pay an assessment ranging from $.23 to $.31 per $100 of
deposits based on the institution's risk classification.
The risk classification is based on an assignment of the
institution by the FDIC to one of three capital groups and to one
of three supervisory subgroups. The capital groups are "well
capitalized," "adequately capitalized," and "undercapitalized."
The three supervisory subgroups are Group "A" (for financially
sound institutions with only a few minor weaknesses), Group "B"
(for those institutions with weaknesses which, if uncorrected,
could cause substantial deterioration of the institution and
increase risk to the insurance fund), and Group "C" (for those
institutions with a substantial probability of loss to the fund
absent effective corrective action). For the period commencing on
July 1, 1993 through December 31, 1993, insurance assessments on
all deposits of KeyCorp's banking subsidiaries were paid at the
$.23 per $100 of deposits rate. For the same period, 82% of all
deposits of CBC's banking subsidiaries were paid at the $.23 per
$100 of deposits rate, and the remaining 18% of deposits were paid
at a $.26 per $100 of deposits rate.
Depositor Preference Statute
Federal legislation has been enacted providing that
deposits and certain claims for administrative expenses and
employee compensation against an insured depository institution
would be afforded a priority over other general unsecured claims
against such an institution, including federal funds and letters of
credit, in the "liquidation or other resolution" of such an
institution by any receiver.
Implications of Being a Savings and Loan Holding Company
If the KeyCorp/Society Merger is consummated, New Key
will continue Society's registration as a savings and loan holding
company within the meaning of HOLA. With certain exceptions, a
savings and loan holding company must obtain prior written approval
of the OTS (as well as the Federal Reserve Board, or other federal
agencies whose approval may be required, depending upon the
structure of the acquisition transaction) before acquiring control
of a savings association or savings and loan holding company
through the acquisition of stock or through a merger or some other
business combination. HOLA prohibits the OTS from approving an
acquisition by a savings and loan holding company which would
result in the holding company's controlling savings associations in
more than one state unless (a) the holding company is authorized to
do so by the FDIC as an emergency acquisition, (b) the holding
company controls a savings association which operated an office in
the additional state or states on March 5, 1987 or (c) the statutes
of the state in which the savings association to be acquired is
located specifically permit a savings association chartered by such
state to be acquired by an out-of-state savings association or
savings and loan holding company.
Control Acquisitions
The Change in Bank Control Act of 1978, as amended,
prohibits a person or group of persons from acquiring "control" of
a bank holding company unless the Federal Reserve Board has been
given 60 days' prior written notice of such proposed acquisition
and within that time period the Federal Reserve Board has not
issued a notice disapproving the proposed acquisition or extending
for up to another 30 days the period during which such a
disapproval may be issued. An acquisition may be made prior to the
expiration of the disapproval period if the Federal Reserve Board
issues written notice of its intent not to disapprove the action.
Under a rebuttable presumption established by the Federal Reserve
Board, the acquisition of more than 10% of a class of voting stock
of a bank holding company with a class of securities registered
under Section 12 of the Exchange Act, such as KeyCorp and New Key,
would, under the circumstances set forth in the presumption,
constitute the acquisition of control.
In addition, any "company" would be required to obtain
the approval of the Federal Reserve Board under the BHCA before
acquiring 25% (5% in the case of an acquiror that is a bank holding
company) or more of the outstanding shares of KeyCorp Common Stock
or New Key Common Stock, or otherwise obtaining control over
KeyCorp or New Key. See "THE CBC/KEYCORP MERGER -- Regulatory
Approvals" for a description of the standards applicable under the
BHCA.
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
CAPITAL STOCK OF KEYCORP, CBC AND NEW KEY
At the Effective Time, shareholders of CBC (except for
any CBC shareholder properly exercising dissenters' rights)
automatically will become shareholders of KeyCorp (unless the
KeyCorp/Society Merger is consummated first), and their rights as
shareholders will be determined by New York law and KeyCorp's
Certificate of Incorporation and By-Laws. If both the CBC/KeyCorp
Merger and the KeyCorp/Society Merger are consummated shareholders
of CBC ultimately will become shareholders of New Key and their
rights as shareholders will be determined by Ohio law and New Key's
Articles of Incorporation and Regulations. KeyCorp is a
corporation organized under, and governed by, New York law, the
KeyCorp Certificate of Incorporation, and the KeyCorp By-Laws,
whereas, if the KeyCorp/Society Merger is consummated, New Key will
be a corporation organized under, and governed by, Ohio law, the
New Key Articles of Incorporation, and the New Key Regulations.
The rights of a holder of CBC Common Stock are similar in some
respects and different in other respects from the rights of a
holder of KeyCorp Common Stock or New Key Common Stock. Certain of
these similarities and differences are summarized below. The
information related to New Key will be applicable to CBC
shareholders only if the KeyCorp/Society Merger is consummated.
This summary is qualified in its entirety by reference to the
Colorado Corporation Code, the New York Business Corporation Law,
the Ohio General Corporation Law, the Ohio Interested Shareholder
Transaction Law, the CBC Articles of Incorporation and the CBC
Bylaws, the KeyCorp Certificate of Incorporation and the KeyCorp
By-Laws, and the New Key Articles of Incorporation and the New Key
Regulations.
Voting Rights
Cumulative Voting and Pre-Emptive Rights. A holder of
shares of CBC Class A Common Stock is entitled to cumulate his
votes, at each election for directors, by giving one candidate as
many votes as equals the number of directors to be elected
multiplied by the number of his shares or by distributing such
votes on the same principle among any number of such candidates.
No holder of shares of CBC Class B Common Stock is entitled to the
right of cumulative voting. In addition, no holders of shares of
any class of CBC Common Stock is entitled to pre-emptive rights.
No holders of shares of any class of capital stock of
KeyCorp or New Key is entitled to the right of cumulative voting or
to pre-emptive rights.
Mergers, Consolidations, Dissolutions, Combinations, and
Other Transactions. The Colorado Corporation Code requires that a
merger, consolidation, or share exchange, or a sale of all or
substantially all of the assets of the corporation other than in
the usual and regular course of its business be approved by the
holders of two-thirds of the outstanding voting shares of the
corporation, unless the corporation's articles of incorporation
provide otherwise. The Colorado Corporation Code will be replaced
by the Colorado Business Corporation Act, effective July 1, 1994.
Under the Colorado Business Corporation Act, the foregoing action
may be approved by a majority of the votes entitled to be cast on
the action, unless the articles of incorporation, bylaws adopted by
the shareholders, or the board of directors require a greater vote.
Under New York law, a merger, consolidation, dissolution, and
disposition of all or substantially all of a corporation's assets
must be adopted by the affirmative vote of the holders of
two-thirds of all outstanding shares entitled to vote.
Except for "Business Combinations" (see "State Takeover
Statutes and Takeover Provisions of Charter Documents" below),
New York law does not require shareholder approval in the case of
"combinations" and "majority share acquisitions," as is required in
Ohio. KeyCorp's Certificate of Incorporation does not raise or
lower the percentage vote required by New York law.
Subject to the provisions discussed in "State Takeover
Statutes and Takeover Provisions of Charter Documents" below, Ohio
law requires adoption of a merger, consolidation, dissolution,
disposition of all or substantially all of the corporation's
assets, and a "majority share acquisition" or "combination"
involving issuance or transfer of shares with one-sixth or more of
the voting power of the corporation by the affirmative vote of the
holders of shares entitled to exercise at least two-thirds of the
voting power of the corporation on such proposal, unless the
articles of incorporation specify a different proportion (not less
than a majority). Adoption by the affirmative vote of the holders
of two-thirds of any class of shares, unless otherwise provided in
the articles, may also be required if the rights of holders of that
class are affected in certain respects by the merger or
consolidation. Except for the "Fair Price and Supermajority
Provisions" discussed below, in lieu of the two-thirds shareholder
vote required by law, the New Key Articles of Incorporation will
require adoption by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of
New Key on any such proposal, and by the affirmative vote of the
majority of any class if a class vote is required.
State Takeover Statutes and Takeover Provisions of Charter
Documents
Under New York law, a corporation cannot enter into
certain business combinations involving persons beneficially owning
20% or more of its outstanding voting stock unless its Board has
approved the business combination or the stock acquisition by which
the person's interest reached 20% ("Stock Acquisition") prior to
the date of the Stock Acquisition. This restriction applies for
five years after the date of the Stock Acquisition, and thereafter,
the corporation may enter into a business combination with the
interested person (1) if the combination is approved by a majority
of its outstanding voting stock beneficially owned by disinterested
shareholders or (2) if the disinterested shareholders receive a
price for their shares equal to or greater than the price
determined in accordance with certain statutory formulas. New York
law also prevents a New York corporation from purchasing more than
10% of its common shares from a shareholder for more than the
market value thereof unless the purchase is approved by its Board
and by a majority vote of all of its outstanding shares entitled to
vote unless the offer to purchase is extended to all of its
shareholders, or unless the offer is for shares of which the holder
has been the beneficial owner for more than two years.
Under the Ohio Interested Shareholder Transaction Law,
applicable to New Key, an "issuing public corporation" is
prohibited from entering into a "Chapter 1704. transaction" (as
defined below) with the direct or indirect beneficial owner of 10%
or more of the shares of the corporation (a "10% shareholder") for
at least three years after the shareholder attains his 10%
ownership unless the board of directors of the corporation
approves, before the shareholder attains his 10% ownership, either
the transaction or the purchase of shares resulting in his 10%
ownership. For this purpose, an "issuing public corporation" is
defined as an Ohio corporation with 50 or more shareholders that
has its principal place of business, principal executive offices,
or substantial assets within the State of Ohio, and as to which no
close corporation agreement exists. A "Chapter 1704. Transaction"
is broadly defined to include, among other things, a merger or
consolidation involving the issuing public corporation and the 10%
shareholder, a sale or purchase of substantial assets between the
issuing public corporation and the 10% shareholder, a
reclassification, recapitalization, or other transaction proposed
by the 10% shareholder that results in an increase in the
proportion of shares beneficially owned by the 10% shareholder, and
the receipt by the 10% shareholder of a loan, guarantee, other
financial assistance, or tax benefit not received proportionately
by all shareholders. Even after the three-year period, Ohio law
restricts these transactions between the corporation and the 10%
shareholder. At that time, such a transaction may proceed only if
(a) the board of directors of the issuing public corporation had
approved the purchase of shares that gave the shareholder his 10%
ownership, (b) the transaction is approved by the holders of shares
of the corporation with at least two-thirds of the voting power of
the corporation (or a different proportion set forth in the
articles of incorporation), including at least a majority of the
outstanding shares after excluding shares held or controlled by the
10% shareholder, or (c) the business combination results in
shareholders, other than the 10% shareholder, receiving a
prescribed fair price plus interest for their shares.
In addition, Ohio law includes a "control share
acquisition" law which imposes limitations on the acquisition of
one-fifth or more of the voting stock of an Ohio corporation such
as New Key, unless the Ohio Corporation Law "opted out" of coverage
by the statute. New Key has opted-out of the Ohio control share
acquisition statute and such limitations will not apply to
acquisitions of New Key Capital Stock.
Ohio law further requires that any offeror making a
"control bid" for any securities of a "subject company" pursuant to
a tender offer must file information specified in the Ohio
Securities Act with the Ohio Division of Securities when the bid
commences. The Ohio Division of Securities must then decide
whether it will suspend the bid under the statute within three
calendar days. If it does so, it must initiate hearings on the
suspension within 10 calendar days of the suspension date, and make
a determination of whether to maintain the suspension, within 16
calendar days of the suspension date. For this purpose, a "control
bid" is the purchase of or an offer to purchase any equity security
of a subject company from a resident of Ohio that would, in
general, result in the offeror acquiring 10% or more of the
outstanding shares of such company. A "subject company" includes
any company with both (a) its principal place of business or
principal executive office in Ohio or assets located in Ohio with
a fair market value of at least $1,000,000 and (b) more than 10% of
its record or beneficial equity security holders in Ohio, more than
10% of its equity securities owned of record or beneficially by
Ohio residents, or more than 1,000 of its record or beneficial
equity security holders in Ohio.
To avoid continued suspension of its bid in Ohio, an
offeror must comply with three requirements: (a) the information
required by the statute must be provided to the Ohio Division of
Securities, (b) all material information regarding the control bid
must be provided to the offerees, and (c) there may be no material
violation of any provision of the Ohio Securities Act.
Colorado law contains no similar takeover statute.
Shareholder Rights Plans
KeyCorp Rights. On October 1, 1993 the Board of
Directors of KeyCorp declared a dividend payable November 1, 1993
of one KeyCorp Right for each outstanding share of KeyCorp Common
Stock held of record at the close of business on October 15, 1993
(the "Record Time"), or issued thereafter and prior to the
Separation Time (as hereinafter defined) and thereafter pursuant to
options and convertible securities outstanding at the Separation
Time. The KeyCorp Rights are issued pursuant to the KeyCorp Rights
Agreement, between KeyCorp and the KeyCorp Rights Agent. Each
KeyCorp Right entitles its registered holder to purchase from
KeyCorp, after the Separation Time, one-hundredth of a share of
Participating Preferred Stock, par value $5.00 per share
("Participating Preferred Stock"), for $115 (the "Exercise Price")
subject to adjustment. Each share of KeyCorp Common Stock issued
in the CBC/KeyCorp Merger will include one KeyCorp Right.
The KeyCorp Rights will be evidenced by the KeyCorp
Common Stock certificates until the close of business on the
earlier of (either, the "Separation Time") (a) the tenth business
day (or such later date as the Board of Directors of KeyCorp may
from time to time fix by resolution adopted prior to the Separation
Time that would otherwise have occurred) after the date on which
any Person (as defined in the KeyCorp Rights Agreement) commences
a tender or exchange offer which, if consummated, would result in
such Person's becoming an Acquiring Person, as defined below, and
(b) the tenth day after the first date (the "Flip-in Date") of
public announcement by KeyCorp that such Person has become an
Acquiring Person, other than as a result of a Flip-over Transaction
or Event (as defined below); provided that if the foregoing results
in the Separation Time being prior to the Record Time, the
Separation Time shall be the Record Time; and provided further that
if a tender or exchange offer referred to in clause (a) is
cancelled, terminated, or otherwise withdrawn prior to the
Separation Time without the purchase of any shares of stock
pursuant thereto, such offer shall be deemed never to have been
made. An "Acquiring Person" is any Person having Beneficial
Ownership (as defined in the Rights Agreement) of 20% or more of
the outstanding shares of KeyCorp Common Stock, which term shall
not include (i) KeyCorp, any wholly-owned subsidiary of KeyCorp or
any employee stock ownership or other employee benefit plan of
KeyCorp, (ii) any Person who shall become the Beneficial Owner (as
defined in the Rights Agreement) of 20% or more of the outstanding
KeyCorp Common Stock solely as a result of an acquisition of
KeyCorp Common Stock by KeyCorp, until such time as such Person
acquires additional KeyCorp Common Stock, other than through a
dividend or stock split, (iii) any Person who becomes an Acquiring
Person without any plan or intent to seek or affect control of
KeyCorp if such Person, upon notice by KeyCorp, promptly divests
sufficient securities such that such 20% or greater Beneficial
Ownership ceases, or (iv) Society, provided that Society only
Beneficially Owns shares of KeyCorp Common Stock consisting solely
of one or more of (A) shares of KeyCorp Common Stock Beneficially
Owned pursuant to the grant or exercise of the KeyCorp Stock Option
pursuant to the KeyCorp Stock Option Agreements, (B) shares of
KeyCorp Common Stock (or securities convertible into, exchangeable
into, or exercisable for KeyCorp Common Stock), Beneficially Owned
by Society or its Affiliates or Associates on October 1, 1993,
(C) shares of KeyCorp Common Stock (or securities convertible into,
exchangeable into, or exercisable for KeyCorp Common Stock)
acquired by Affiliates or Associates of Society after the time of
such grant which, in the aggregate, amount to less than 1% of the
outstanding shares of KeyCorp Common Stock, or (D) shares of
KeyCorp Common Stock (or securities convertible into, exchangeable
into, or exercisable for KeyCorp Common Stock) which are held by
Society or any of its subsidiaries in trust accounts, managed
accounts, and the like or otherwise held in a fiduciary capacity or
in respect of a debt previously contracted, in all cases in the
ordinary course of its banking or trust business. The KeyCorp
Rights Agreement provides that, until the Separation Time, the
KeyCorp Rights will be transferred with and only with the KeyCorp
Common Stock. KeyCorp Common Stock certificates issued after the
Record Time but prior to the Separation Time shall evidence one
KeyCorp Right for each share of KeyCorp Common Stock represented
thereby and shall contain a legend incorporating by reference the
terms of the KeyCorp Rights Agreement (as such may be amended from
time to time). Notwithstanding the absence of the aforementioned
legend, certificates evidencing shares of KeyCorp Common Stock
outstanding at the Record Time shall also evidence one KeyCorp
Right for each share of KeyCorp Common Stock evidenced thereby.
Promptly following the Separation Time, separate certificates
evidencing the KeyCorp Rights ("Rights Certificates") will be
mailed to holders of record of KeyCorp Common Stock at the
Separation Time.
The KeyCorp Rights will not be exercisable until the
Business Day (as defined in the KeyCorp Rights Agreement) following
the Separation Time. The KeyCorp Rights will expire on the
earliest of (a) the Exchange Time (as defined below), (b) the close
of business on October 15, 2003, (c) the date on which the KeyCorp
Rights are redeemed as described below, and (d) upon the merger of
KeyCorp into Society Corporation (in any such case, the "Expiration
Time").
The Exercise Price and the number of KeyCorp Rights
outstanding, or in certain circumstances the securities purchasable
upon exercise of the KeyCorp Rights, are subject to adjustment from
time to time to prevent dilution in the event of a KeyCorp Common
Stock dividend on, or a subdivision or a combination into a smaller
number of shares of, KeyCorp Common Stock, or the issuance or
distribution of any securities or assets in respect of, in lieu of,
or in exchange for KeyCorp Common Stock.
In the event that prior to the Expiration Time a Flip-in
Date occurs, KeyCorp shall take such action as shall be necessary
to ensure and provide that each KeyCorp Right (other than KeyCorp
Rights Beneficially Owned by the Acquiring Person or any affiliate
or associate thereof, which KeyCorp Rights shall become void) shall
constitute the right to purchase, upon the exercise thereof in
accordance with the terms of the Rights Agreement, that number of
shares of KeyCorp Common Stock or Participating Preferred Stock of
KeyCorp having an aggregate Market Price (as defined in the KeyCorp
Rights Agreement), on the date of the public announcement of an
Acquiring Person's becoming such (the "Stock Acquisition Date")
that gave rise to the Flip-in Date, equal to twice the Exercise
Price for an amount in cash equal to the then current Exercise
Price. In addition, the Board of Directors of KeyCorp may, at its
option, at any time after a Flip-in Date and prior to the time that
an Acquiring Person becomes the Beneficial Owner of more than 50%
of the outstanding shares of KeyCorp Common Stock at an exchange
ratio of one or more shares of KeyCorp Common Stock per KeyCorp
Right, appropriately adjusted to reflect any stock split, stock
dividend, or similar transaction occurring after the date of the
Separation Time (the "KeyCorp Rights Exchange Ratio"). Immediately
upon such action by the Board of Directors (the "Exchange Time"),
the right to exercise the KeyCorp Rights will terminate and each
KeyCorp Right will thereafter represent only the right to receive
a number of shares of KeyCorp Common Stock equal to the KeyCorp
Rights Exchange Ratio.
Whenever KeyCorp shall become obligated under the
preceding paragraph to issue shares of KeyCorp Common Stock upon
exercise of or in exchange for KeyCorp Rights, KeyCorp, at its
option, may substitute therefor shares of Participating Preferred
Stock, at a ratio of one-hundredth of a share of Participating
Preferred Stock for each share of KeyCorp Common Stock so issuable.
In the event that prior to the Expiration Time KeyCorp
enters into, consummates or permits to occur a transaction or
series of transactions after the time an Acquiring Person has
become such in which, directly or indirectly, (a) KeyCorp shall
consolidate or merge or participate in a binding share exchange
with any other Person if, at the time of the consolidation, merger,
or share exchange or at the time KeyCorp enters into an agreement
with respect to such consolidation, merger, or share exchange, the
Acquiring Person controls the Board of Directors of KeyCorp and any
term of or arrangement concerning the treatment of shares of
capital stock in such merger, consolidation, or share exchange
relating to the Acquiring Person is not identical to the terms and
arrangements relating to other holders of KeyCorp Common Stock or
(b) KeyCorp shall sell or otherwise transfer (or one or more of its
subsidiaries shall sell or otherwise transfer) assets
(i) aggregating more than 50% of the assets (measured by either
book value or fair market value) or (ii) generating more than 50%
of the operating income or cash flow, of KeyCorp and its
subsidiaries (taken as a whole) to any other Person (other than
KeyCorp or one or more of its wholly owned subsidiaries) or two or
more such Persons which are affiliated or otherwise acting in
concert, if, at the time of such sale or transfer of assets or at
the time KeyCorp (or any such subsidiary) enters into an agreement
with respect to such sale or transfer, the Acquiring Person
controls the Board of Directors of KeyCorp (a "Flip-over
Transaction or Event"), KeyCorp shall take such action as shall be
necessary to ensure that, and shall not enter into, consummate, or
permit to occur such Flip-over Transaction or Event unless, the
Acquiring Person or the parent corporation thereof (the "Flip-over
Entity"), shall have entered into a supplemental agreement for the
benefit of the holders of the KeyCorp Rights, providing that, upon
consummation or occurrence of the Flip-over Transaction or Event
(A) each Right shall thereafter constitute the right to purchase
from the Flip-over Entity, upon exercise thereof in accordance with
the terms of the KeyCorp Rights Agreement, that number of shares of
common stock of the Flip-over Entity having an aggregate Market
Price on the date of consummation or occurrence of such Flip-over
Transaction or Event equal to twice the Exercise Price for an
amount in cash equal to the then current Exercise Price and (B) the
Flip-over Entity shall thereafter be liable for, and shall assume,
by virtue of such Flip-over Transaction or Event and such
supplemental agreement, all the obligations and duties of KeyCorp
pursuant to the KeyCorp Rights Agreement. For purposes of the
foregoing description, the term "Acquiring Person" shall include
any Acquiring Person and its Affiliates counted together as a
single Person.
The Board of Directors of KeyCorp may, at its option, at
any time prior to the close of business on the Flip-in Date, redeem
all (but not less than all) the then outstanding KeyCorp Rights at
a price of $.01 per Right (the "Redemption Price") as provided in
the KeyCorp Rights Agreement. Immediately upon the action of the
Board of Directors of KeyCorp, electing to redeem the KeyCorp
Rights, without any further action and without any notice, the
right to exercise the KeyCorp Rights will terminate and each Right
will thereafter represent only the right to receive the Redemption
Price in cash of each Right so held.
The holders of KeyCorp Rights will not, solely by reason
of their ownership of KeyCorp Rights, have any rights as
shareholders of KeyCorp, including, without limitation, the right
to vote or to receive dividends.
The KeyCorp Rights will not prevent a takeover of
KeyCorp. However, the KeyCorp Rights may cause substantial
dilution to a person or group that acquires 20% or more of the
KeyCorp Common Stock unless the KeyCorp Rights are first redeemed
by the Board of Directors of KeyCorp.
As of October 15, 1993 there were 101,696,499 shares of
KeyCorp Common Stock issued and outstanding, 4,526,411 shares
reserved for issuance pursuant to employee benefit plans, and
509,122 shares reserved for issuance under employee stock purchase
and dividend reinvestment plans. As long as the KeyCorp Rights are
attached to the KeyCorp Common Stock, KeyCorp will issue one
KeyCorp Right with each new share of KeyCorp Common Stock so that
all such shares will have KeyCorp Rights attached.
New Key Rights. The following summarizes the principal
terms of the Society Rights Agreement, as amended to date,
including the Society Rights Agreement Amendment, which was entered
into in connection with the Merger Agreement and the Society Option
Agreement. If the KeyCorp/Society Merger is consummated, the
Society Rights Agreement will become the New Key Rights Agreement
and each share of New Key Common Stock issued to CBC shareholders
will be accompanied by one New Key Right. As appropriate, all
references in this section to Society, Society's Board of
Directors, Society Rights and Society Common Stock shall be deemed
to refer to New Key, New Key's Board of Directors, New Key Rights
and New Key Common Stock as of and after the effective time of the
KeyCorp/Society Merger.
Society Rights have been and will continue to be issued
in respect of all shares of Society Common Stock that are
(a) issued after the Society Record Date but before the earlier of
the expiration or redemption of the Society Rights or the
occurrence of a Triggering Event (as defined below), (b) issued
before the expiration or redemption of the Society Rights in
exchange for KeyCorp Common Stock upon consummation of the
KeyCorp/Society Merger or issued pursuant to the Society Option
Agreement, or (c) issued before the expiration or redemption of the
Society Rights upon the exercise of any employee stock option
granted prior to a Triggering Event.
Each of the Society Rights initially represents the right
to purchase one Society Common Share for $65 (as used in this
section, "Purchase Price"). The Society Rights will become
exercisable 20 days after the earlier of (a) a public announcement
that a person or group has become an Acquiring Person (as
hereinafter defined) or (b) the commencement of a tender offer or
exchange offer that would result in a person or group becoming an
Acquiring Person. As used in this section, an "Acquiring Person"
means a person or group that beneficially owns more than 15% of the
Society Common Stock outstanding, except that (a) a person will not
be deemed to be an Acquiring Person if the person becomes the
beneficial owner of more than 15% of the Society Common Stock as a
result of a reduction in the number of Society Common Stock
outstanding unless, after the reduction, the person acquires
additional Society Common Stock, (b) a person will not be deemed to
be an Acquiring Person if the person becomes the beneficial owner
of more than 15% of the Society Common Stock inadvertently and, as
soon as practicable after learning about such beneficial ownership,
divests enough Society Common Stock so that the person ceases to be
the beneficial owner of more than 15% of the Society Common Stock,
and (c) neither KeyCorp nor any of its affiliates or associates
will be deemed to be the beneficial owner of Society Common Stock
by reason of the execution or performance of the KeyCorp/Society
Merger Agreement or the Society Option Agreement so long as neither
KeyCorp nor any of its subsidiaries becomes the beneficial owner of
any Society Common Stock other than (i) pursuant to the
KeyCorp/Society Merger Agreement or the Society Option Agreement,
(ii) Society Common Stock beneficially owned by KeyCorp or any of
its subsidiaries on October 1, 1993 or Society Common Stock
acquired after October 1, 1993 by any affiliate or associate of
KeyCorp (other than a subsidiary of KeyCorp), (iii) Society Common
Stock of which KeyCorp or any of its subsidiaries inadvertently
becomes the beneficial owner after October 1, 1993, provided the
number of such shares does not exceed 1/2% of the Society Common
Stock then outstanding and that KeyCorp or its subsidiary divests
such shares as soon as practicable after learning about such
beneficial ownership, or (iv) Society Common Stock beneficially
owned or otherwise held by KeyCorp or any of its subsidiaries in
trust accounts or otherwise acquired in the ordinary course of
their banking and trust business (collectively, "Permitted Society
Stock").
Until the Society Rights become exercisable, they will be
represented by the certificate which represents the associated
Society Common Stock, and any transfer of Society Common Stock will
also constitute a transfer of the associated Society Rights. When
the Society Rights become exercisable, they will begin to trade
separate and apart from the Society Common Stock. At that time,
separate certificates representing the Society Rights will be
mailed to holders.
Twenty days after certain events occur (as used in this
section, "Flip-in Events"), each of the Society Rights will become
the right to purchase one share of Society Common Stock for the
then par value per share (now $1.00 per share), and the Society
Rights beneficially owned by the Acquiring Person will become void.
The Flip-in Events are (a) the beneficial ownership by a person or
group of more than 15% of the outstanding Society Common Stock,
unless the shares of Society Common Stock are acquired in a tender
or exchange offer for all of the Society Common Stock at a price
and on other terms approved in advance by Society's Board of
Directors, (b) certain self-dealing transactions between Society
and an Acquiring Person, and (c) a reclassification or
recapitalization of Society that has the effect of increasing by
more than 1% of the percentage of Society Common Stock owned by an
Acquiring Person; provided that, neither KeyCorp nor any of its
affiliates or associates will be deemed to be the beneficial owner
of Society Common Stock by reason of the execution or performance
of the KeyCorp/Society Merger Agreement or the Society Option
Agreement so long as neither KeyCorp nor any of its subsidiaries
becomes the beneficial owner of any Society Common Stock, other
than Permitted Society Stock.
If, after a person or group becomes an Acquiring Person,
Society is acquired in a merger or other business combination or
more than 50% of its assets or earning power is sold, each of the
Society Rights will "flip-over" and become the right to purchase
common shares of the acquiror (as used in this section, "Flip-over
Event"). The holder of each Society Right would, upon the
occurrence of a Flip-over Event, be entitled to purchase for the
then par value of a share of Society Common Stock (now $1.00) the
number of common shares of the acquiror having a market price equal
to the market price of the Society Common Stock.
The Purchase Price and/or the number of shares of Society
Common Stock (or common shares of an acquiror) to be purchased upon
exercise of the Society Rights are subject to adjustment from time
to time to prevent dilution in the event Society (a) declares a
dividend on the Society Common Stock payable in Society Common
Stock, (b) subdivides or combines the Society Common Stock in a
reclassification of the Society Common Stock, or (c) makes a
distribution to all holders of Society Common Stock of debt
securities, subscription rights, warrants, or other assets (except
regular cash dividends). With certain exceptions, no adjustment
will be required until a cumulative adjustment of at least 1% is
required. Society is not required to issue fractional shares and,
instead, may make cash payment based on the market price of Society
Common Stock.
Society's Board of Directors may redeem the New Key
Rights for a one-half cent each (as used in this section,
"Redemption Price") at any time before a "Triggering Event" (which
is defined as the occurrence of a Flip-over Event or the 20th day
after a Flip-in Event). However, the rights may not be redeemed
while there is an Acquiring Person unless (a) Continuing Directors
(as defined below) constitute a majority of the Board of Directors
and (b) a majority of the Continuing Directors approves the
redemption. "Continuing Directors" are defined as directors who
were in office prior to a person or group becoming an Acquiring
Person or whose election to office was recommended by a majority of
the Continuing Directors and who are not affiliated with the
Acquiring Person. The Society Rights will expire on September 12,
1999, unless they are redeemed before that date.
Until the Society Rights are exercised, the holders of
the Society Rights, as such, will have no rights as shareholders of
Society, including the right to vote or receive dividends.
The provisions of the Society Rights Agreement may be
amended by Society's Board of Directors to cure any ambiguity or
correct any defect or inconsistency or, prior to a Triggering
Event, to make other changes that the Board of Directors deems to
be desirable and not adverse to the interests of Society and its
shareholders.
Copies of the Rights Agreement, dated as of August 25,
1989, between Society and First Chicago Trust Company of New York,
as rights agent, the First Amendment to Rights Agreement, dated as
of February 21, 1991, the Second Amendment to Rights Agreement,
dated as of September 12, 1991, and the Society Rights Agreement
Amendment, are included as exhibits to a Registration Statement on
Form 8-A filed by Society with the SEC on July 31, 1992, and on
amendment to Form 8-A on Form 8-A/A filed by Society with the SEC
on October 13, 1993. The foregoing description of the Society
Rights does not purport to be complete and is qualified in its
entirety by reference to the Society Rights Agreement.
CBC has no shareholder rights plan.
Special Meeting of Shareholders
A special meeting of CBC's shareholders may be called by
the President or by the Board of Directors and must be called by
the President or the Secretary upon the request of a majority of
the Board of Directors or of the holders of not less than 10% of
the outstanding stock entitled to vote at the meeting.
A special meeting of KeyCorp's shareholders may be called
by a majority of the KeyCorp Board or by the Chairman of the Board
or the President, and must be called by the Secretary or an
Assistant Secretary at the written request of the holders of record
of at least 75% of the outstanding shares entitled to vote.
Ohio law provides that persons who hold 25% of all shares
outstanding and entitled to vote at a special meeting may call a
special meeting of shareholders unless the corporation's articles
or regulations specify a smaller or larger proportion (but not in
excess of 50%). The New Key Regulations will provide that a
special meeting of New Key's shareholders may be called by (i) the
Chairman of the Board, (ii) the President, or in the case of the
President's absence, death, or disability, the Vice President
authorized to exercise the authority of the President, (iii) the
Board of Directors by action at a meeting, or by a majority of the
Board of Directors acting without a meeting, or, (iv) by persons
who hold 50% of all shares outstanding and entitled to vote at
special meetings.
Amendment of Charter Documents
Certificate of Incorporation/Articles of Incorporation.
The Colorado Corporation Code requires that an amendment to the
corporation's articles of incorporation be approved by the holders
of two-thirds of the outstanding voting shares of the corporation,
subject to a class vote in certain instances, unless the
corporation's articles of incorporation provide otherwise. Under
the Colorado Business Corporation Act (effective July 1, 1994), an
amendment to the corporation's articles of incorporation may be
approved by a majority of the votes entitled to be cast on the
action, subject to a class vote in certain instances, unless the
articles of incorporation, bylaws adopted by the shareholders, the
proposing shareholders, or the proposing board of directors require
a greater vote. The CBC Articles of Incorporation permit amendment
of the Articles of Incorporation by a majority vote of each class
of the shares entitled to vote on the amendment and in any other
manner now or hereafter prescribed or permitted by the Colorado
Corporation Code.
Under New York law, the approval of a majority of the
outstanding voting shares of a corporation is required to amend its
certificate of incorporation (which amendment may only be voted on
by the shareholders after approval by the Board of Directors),
subject to a class vote in certain instances. The KeyCorp
Certificate of Incorporation provides that the provisions therein
concerning the number of directors that shall constitute the entire
board and the classification and removal of directors may be
amended only by the affirmative vote of the holders of 80% or more
of the then outstanding capital stock of KeyCorp entitled to vote
generally in the election of directors.
Ohio law provides that generally at least two-thirds of
the voting power of a corporation, subject to a class vote in
certain instances, is required to approve any amendment to the
articles of incorporation, except as otherwise provided therein.
The New Key Articles of Incorporation will require that a majority
of the voting power of New Key approve any such amendment, subject
to a class vote in those instances required by law and subject to
the fair price and supermajority vote provisions contained therein.
Under Ohio law, the holders of shares of a particular class, and in
the circumstances outlined in sections (e), (f), and (g) below, the
holders of shares of every class, are entitled to vote as a class
on the adoption of an amendment to the articles of incorporation
that does any of the following: (a) increases or decreases the par
value of the issued shares of the particular class, (b) changes
issued shares of the particular class, whether with or without par
value, into a lesser number of shares of the same class or into the
same or different number of shares of any other class, with or
without par value, theretofore or then authorized, (c) changes the
express terms of issued shares of any class senior to the
particular class in any manner substantially prejudicial to the
holders of the particular class; (d) authorizes shares of another
class that are convertible into, or authorizes the conversion of
shares of another class into, shares of the particular class, or
authorizes the directors to fix or alter conversion rights of
shares of another class that are convertible into shares of the
particular class; (e) provides, in the case of any amendment
described in sections (a) or (b) above, that the stated capital of
the corporation shall be reduced or eliminated as a result of the
amendment, or provides, in the case of an amendment described in
section (d) above, that the stated capital of the corporation shall
be reduced or eliminated upon the exercise of such conversion
rights, provided that any such reduction or elimination is
consistent with certain provisions of Ohio General Corporation Law
regarding stated capital; (f) changes substantially the purposes of
the corporation, or provides that thereafter an amendment to the
articles may be adopted that changes substantially the purposes of
the corporation; or (g) changes the corporation into a nonprofit
corporation.
By-Laws/Regulations. The CBC Bylaws provide that the CBC
Bylaws are subject to alteration, amendment, or repeal, and new
bylaws may be added, by the affirmative vote of a majority of a
quorum of the members of the Board of Directors of CBC. Under the
Colorado Corporation Code or (effective July 1, 1994) the Colorado
Business Corporation Act, the shareholders may amend or repeal the
Bylaws even though the Bylaws also may be amended or repealed by
the corporation's Board of Directors. In addition, the
shareholders may expressly prohibit the Board of Directors from
amending or repealing a particular bylaw.
The KeyCorp By-Laws provide that the KeyCorp By-Laws may
be adopted, amended, or repealed at any meeting of shareholders,
notice of which shall have referred to the proposed action, by a
majority of the votes cast by the shareholders of KeyCorp at the
time entitled to vote in the election of any directors, or at any
meeting of the KeyCorp Board of Directors, ten days' notice of
which shall have referred to the proposed action, by the vote of
three-fourths of the entire KeyCorp Board of Directors; provided,
however, that if any bylaw regulating an impending election of
directors is adopted, amended, or repealed by the KeyCorp Board of
Directors, there shall be set forth in the notice of the next
meeting of shareholders for the election of directors the bylaw so
adopted, amended, or repealed, together with a concise statement of
the changes made.
Directors may not amend regulations of an Ohio
corporation. Because New Key will be an Ohio corporation, the
directors of New Key will not be able to amend the New Key
Regulations. The New Key Regulations will provide that through
December 31, 1998, the provisions of the New Key Regulations
relating to (i) the number, classification, and term of office of
directors, (ii) Chairman of the Board, Chairman of the Executive
Committee, and chairmen of other committees, (iii) nominations and
removal of directors and filling vacancies in the Board of
Directors, (iv) the Nominating Committee, (v) Chief Executive
Officer and President through December 31, 1998, (vi) removal of
officers, (vii) the headquarters of New Key, and (viii) amendments
of the New Key Regulations may only be amended, repealed, or
altered (i) by the affirmative vote of the holders of shares
entitling them to exercise three-quarters of the voting power of
New Key on such proposal, (ii) if such amendment, repeal, or
alteration is recommended by three-quarters of the entire
authorized Board of Directors of New Key, by the affirmative vote
of the holders of shares entitling them to exercise a majority of
the voting power of New Key on such proposal, or (iii) without a
meeting, by the written consent of the holders of shares entitling
them to exercise 100% of the voting power of New Key on such
proposal. The New Key Regulations will also provide that until
December 31, 1998, any New Key Regulations, other than those
New Key Regulations specifically listed in the immediately
preceding sentence, and, after December 31, 1998, any New Key
Regulations, may be adopted, amended, repealed or altered (i) by
the affirmative vote of the holders of shares entitling them to
exercise three-quarters of the voting power of New Key on such
proposal, (ii) if such adoption, amendment, repeal, or alteration
is recommended by two-thirds of the entire authorized Board of
Directors of New Key, by the affirmative vote of the holders of
shares entitling them to exercise a majority of the voting power of
New Key on such proposal, or (iii) without a meeting, by the
written consent of the holders of shares entitling them to exercise
100% of the voting power of New Key on such proposal.
Certain of the provisions of the New Key Articles of
Incorporation and the New Key Regulations may impede or prevent a
change of control of New Key, even in circumstances where a
majority of the shareholders may believe that such a change of
control would be in the best interests of New Key.
Directors
Number; Classification. The CBC Bylaws provide that the
Board of Directors of CBC shall consist of nine members. The
holders of CBC Class A Common Stock, voting separately, are
entitled to elect a majority of the directors. The holders of CBC
Class B Common Stock, voting separately, are entitled to elect that
number of directors being one less than the number of directors
elected by the holders of CBC Class A Common Stock. The Board of
Directors of CBC is not divided into classes. Both the KeyCorp
Certificate of Incorporation and the KeyCorp By-Laws provide that
the number of directors of KeyCorp shall be between 12 and 24
directors, as fixed, from time to time, by majority vote of the
entire board. The Board of Directors is divided into three
classes, each serving three-year terms, so that approximately
one-third of the directors of KeyCorp are elected at each annual
meeting of the shareholders of KeyCorp.
The New Key Regulations will provide that the number of
directors shall be between 20 and 24, divided into three classes.
The Board of Directors of New Key may change the size of the Board
of Directors within the foregoing range, subject to certain
limitations described under "CERTAIN INFORMATION REGARDING THE
PENDING MERGER OF KEYCORP AND SOCIETY -- Board of Directors and
Chief Executive Officers of New Key through December 31, 1998." by
the affirmative vote of two-thirds of the entire authorized Board.
The shareholders of New Key may change the size of the Board of
Directors of New Key within the foregoing range, subject to certain
limitations described under "CERTAIN INFORMATION REGARDING THE
PENDING MERGER OF KEYCORP AND SOCIETY -- Board of Directors and
Chief Executive Officers of New Key through December 31, 1998," at
a meeting of the shareholders of New Key called for the purpose of
electing directors (i) by the affirmative vote of the holders of
shares entitling them to exercise three-quarters of the voting
power of New Key represented at the meeting and entitled to elect
directors or (ii) if the proposed change in the number of directors
is recommended by two-thirds of the entire authorized Board of
Directors of New Key, by the affirmative vote of the holders of
shares entitling them to exercise a majority of the voting power of
New Key represented at the meeting and entitled to elect directors.
In addition, the number of directors of New Key is subject to
automatic increase by two during certain periods when dividends
payable on any class or series of preferred stock of New Key are in
arrears for six quarterly dividend payment periods, as set forth in
the New Key Articles of Incorporation and/or the express terms of
the preferred stock of New Key. For a discussion regarding the
initial composition of the New Key Board of Directors, see "CERTAIN
INFORMATION REGARDING THE PENDING MERGER OF KEYCORP AND SOCIETY --
Board of Directors and Chief Executive Officers of New Key through
December 31, 1998."
The effect of New Key having a classified Board of
Directors is that only approximately one-third of the members of
the Board will be elected each year and, as a result, two annual
meetings will be required for New Key's shareholders to change a
majority of the members constituting the Board of Directors.
Nominations of Candidates for Election as Directors.
Neither the CBC Articles of Incorporation or the CBC Bylaws nor the
KeyCorp Certificate of Incorporation or the KeyCorp By-Laws provide
a specific procedure for nominating candidates for election as
directors.
The New Key Regulations will establish a specific
procedure for director nominations made by the Board of Directors
of New Key. Through December 31, 1998, the Board of Directors of
New Key may make director nominations in accordance with the
procedure described in "CERTAIN INFORMATION REGARDING THE PENDING
MERGER OF KEYCORP AND SOCIETY -- Board of Directors and Chief
Executive Officers of New Key through December 31, 1998." After
December 31, 1998, nominations for the election of directors may be
made by the affirmative vote of two-thirds of the entire authorized
Board of Directors of New Key. For a discussion of the
requirements applicable to shareholders nominations see "AMENDED
AND RESTATED ARTICLES OF INCORPORATION AND REGULATION OF NEW KEY."
Removal of Directors. Any director of CBC may be
removed, with or without cause, by the affirmative vote of a
majority of the issued and outstanding voting shares of the class
of shares that elected such director.
The KeyCorp Certificate of Incorporation provides that
directors of KeyCorp may be removed from office, but only for cause
and by the affirmative vote of a majority of the outstanding voting
shares or 75% of the entire Board of Directors of KeyCorp.
For a discussion of the procedure for removing directors
of New Key, see "AMENDED AND RESTATED ARTICLES OF INCORPORATION AND
REGULATIONS OF NEW KEY." Through December 31, 1998, however, the
Board of Directors of New Key may only fill vacancies (however
caused) in accordance with the description in "CERTAIN INFORMATION
REGARDING THE PENDING MERGER OF KEYCORP AND SOCIETY -- Board of
Directors and Chief Executive Officers of New Key through
December 31, 1998."
Director Liability and Indemnification
Under the New York Business Corporation Law, a
corporation may indemnify officers and directors against judgments,
fines, settlements, and reasonable expenses if the officer or
director acted in good faith for a purpose he reasonably believed
to be in the best interests of the corporation and if, in criminal
actions, he had no reasonable cause to believe that his conduct was
unlawful, except that with respect to actions by or in the right of
the corporation, no indemnification for settlements or matters as
to which the officer or director has been adjudged liable may be
made without court approval.
Indemnification is mandatory if the officer or director
is successful, on the merits or otherwise, in the proceeding. The
foregoing statutory rights are not exclusive, and indemnification
may be provided under the certificate or by-laws or, if such
documents so provide, under a board or shareholder resolution or an
agreement, but no indemnification may be made if a final
adjudication adverse to the officer or director establishes that
his acts were committed in bad faith or were the result of active
and deliberate dishonesty and were material to the cause of action
so adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled.
The KeyCorp By-Laws provide that each director and
officer of KeyCorp, whether or not then in office, and any person
whose testator or intestate was such a director or officer, shall
be indemnified by KeyCorp for the defense of, or in connection
with, civil or criminal actions in accordance with and to the
fullest extent permitted by applicable law.
The New York Business Corporation Law also permits the
certificate of incorporation to eliminate or limit the personal
liability of directors to the corporation or its shareholders for
any breach of duty in such capacity, provided that no such
provision shall eliminate or limit the liability of any director if
a final adjudication adverse to him establishes that his actions
were in bad faith or involved intentional misconduct or a knowing
violation of law or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled or
that his acts violated the statutory provisions imposing liability
on directors in certain instances for the declaration of dividends,
repurchase of shares, distribution of assets to shareholders or
making of loans to directors.
The KeyCorp Certificate of Incorporation provides that no
director shall be liable to KeyCorp or any of its shareholders for
any breach of duty in such capacity except to the extent the effect
of such provision is limited by law.
The Colorado Corporation Code permits corporations to
indemnify officers and directors against a judgment, settlement,
penalty, fine, and reasonable expense (including attorney fees)
incurred with respect to a proceeding under circumstances similar
to those permitted under the New York Business Corporation Law.
However, unlike the New York Business Corporation Law, the
statutory rights of indemnification under the Colorado Corporation
Code are exclusive. Colorado law allows a corporation to indemnify
a director who acts in good faith if, in the case of conduct in his
official capacity with the corporation, he reasonably believed that
his conduct was in the corporation's best interests or in all other
cases, he reasonably believed that his conduct was at least not
opposed to the corporation's best interests and if, in criminal
proceedings, he had no reasonable cause to believe his conduct was
unlawful. In addition to the prohibition on indemnification with
respect to actions by or in the right of the corporation in which
the director was adjudged liable to the corporation, the Colorado
Corporation Code prohibits a corporation from indemnifying a
director with respect to any proceeding charging improper personal
benefit to the director in which he was adjudged liable on the
basis that he received improper personal benefit. Under the
Colorado Corporation Code, indemnification with respect to a
proceeding by or in the right of the corporation is limited to
reasonable expenses (including attorney fees) incurred in
connection with the proceeding.
Under the Colorado Corporation Code, any indemnification
of or advance of expenses to a director arising out of a proceeding
by or on behalf of the corporation must be reported in writing to
the shareholders with or before the notice of the next
shareholder's meeting.
The Colorado Corporation Code also permits the Articles
of Incorporation to eliminate or limit the personal liability of
directors to the corporation or its shareholders for monetary
damages for breach of fiduciary duty in such capacity with
restrictions on such elimination or limitation of personal
liability similar to those provided under the New York Business
Corporation Law. The CBC Articles of Incorporation provide that no
director shall have any personal liability to CBC or its
shareholders for monetary damages for breach of fiduciary duty in
such capacity, except for the liability of a director to CBC or its
shareholders for monetary damages for any breach of the director's
duty of loyalty to the corporation or its shareholders, acts or
omissions not in good faith or involving intentional misconduct or
a knowing violation of law, transactions from which the director
derived an improper personal benefit, acts violating statutory
provisions imposing liability on directors in certain instances for
declaration of dividends, repurchase of shares, distribution of
assets to shareholders, or making or guaranteeing loans to
directors.
Under Ohio law, Ohio corporations are authorized to
indemnify directors, officers, employees, and agents within
prescribed limits and must indemnify them under certain
circumstances. Ohio law does not provide statutory authorization
for a corporation to indemnify directors, officers, employees, and
agents for settlements, fines, or judgments in the context of
derivative suits. However, it provides that directors (but not
officers, employees, and agents) are entitled to mandatory
advancement of expenses, including attorneys' fees, incurred in
defending any action, including derivative actions, brought against
the director, provided the director agrees to cooperate with the
corporation concerning the matter and to repay the amount advanced
if it is proved by clear and convincing evidence that his act or
failure to act was done with deliberate intent to cause injury to
the corporation or with reckless disregard for the corporation's
best interests.
Ohio law does not authorize payment of judgments to a
director, officer, employee, or agent after a finding of negligence
or misconduct in a derivative suit absent a court order.
Indemnification is required, however, to the extent such person
succeeds on the merits. In all other cases, if a director,
officer, employee, or agent acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation, indemnification is discretionary except as
otherwise provided by a corporation's articles, code of
regulations, or by contract except with respect to the advancement
of expenses of directors.
Under Ohio law, a director is not liable for monetary
damages unless it is proved by clear and convincing evidence that
his action or failure to act was undertaken with deliberate intent
to cause injury to the corporation or with reckless disregard for
the best interests of the corporation. There is, however, no
comparable provision limiting the liability of officers, employees,
or agents of a corporation. The statutory right to indemnification
is not exclusive in Ohio, and Ohio corporations may, among other
things, procure insurance for such persons.
The New Key Regulations will provide that New Key shall
indemnify to the fullest extent permitted by law any person made or
threatened to be made a party to any action, suit, or proceeding by
reason of the fact that he is or was a director, officer, or
employee of New Key or of any other bank, corporation, partnership,
trust, or other enterprise for which he was serving as a director,
officer, or employee at the request of New Key.
Dividends
Under the Colorado Corporation Code, a corporation may
pay dividends out of the corporation's net assets in excess of its
stated capital, except when the corporation is insolvent or when
the dividend payment would render the corporation insolvent and
except that no dividends may be paid if the payment would reduce
the corporation's remaining net assets below the total of stated
capital, plus additional amounts not forming part of stated capital
payable in the event of voluntary liquidation to the holders of
shares having rights to the assets of the corporation in
liquidation preferential to those of the class on which the
dividend is made. When the dividend is paid from sources other
than unreserved and unrestricted earned surplus, the dividend must
be identified as such and the source and amount per share paid from
each source must be disclosed to the shareholder receiving the
dividend at the time of the distribution and to all other
shareholders not later than six months after the end of the
corporation's fiscal year during which the dividend was paid.
Under the Colorado Business Corporation Act (effective July 1,
1994), the corporation may pay a dividend unless, after giving
effect to the dividend, the corporation would not be able to pay
its debts as they become due in the usual course of business, or
the corporation's total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of the dividend, to
satisfy the preferential rights upon dissolution of shareholders
having preferential rights superior to those receiving the
dividend. Furthermore, under the Colorado Business Corporation
Act, a statement of par value for shares does not impose any
limitation on dividends and does not require any separate
designation, restriction, reservation, or other segregation of any
capital account of the corporation.
An Ohio corporation may pay dividends out of surplus,
however created, but must notify its shareholders if a dividend is
paid out of capital surplus. A New York corporation may pay
dividends out of surplus only, so that the net assets of the
corporation remaining after such payment will be at least equal to
the amount of the corporation's stated capital. Under New York
law, if a dividend is paid from sources other than earned surplus,
the corporation must give written notice to its shareholders.
The terms of certain of Society's long-term debt
agreements provide for restrictions on the payment of cash
dividends but have not affected Society's ability to declare and
pay dividends on outstanding shares of Society Common Stock.
Specifically, Society's 8.33% Series A ESOP Notes, due 1996, and
8.48% Series B ESOP Notes, due 2001, prohibit Society from having
a consolidated funded debt ratio greater than 50%, a consolidated
senior funded debt ratio greater than 40%, or a priority debt ratio
greater than 30%. Under the most restrictive term, $516 million
were unrestricted as to the payment of cash dividends at
September 30, 1993. These dividend restrictions will remain in
effect after the KeyCorp/Society Merger.
The dividend policy of New Key will be established by its
Board of Directors. While the New Key Board of Directors may
consider the dividend policy of Society and KeyCorp prior to the
Merger, no assurance can be given as to the declaration or amount
of future dividends of New Key.
Regulations restricting the ability of KeyCorp's
subsidiary banks and other subsidiaries to pay dividends to New Key
after the effective time of the KeyCorp/Society Merger are set
forth in "CERTAIN REGULATORY CONSIDERATIONS -- Dividend
Restrictions."
Repurchases
Under New York law, a corporation may repurchase or
redeem its shares except when the corporation is insolvent or would
thereby be made insolvent.
Under the Colorado Corporation Code, a corporation may
repurchase or redeem its shares only to the extent of unreserved
and unrestricted surplus and only if it is not insolvent or would
not be rendered insolvent by such purchase or redemption.
Under Ohio law, a corporation may by action of its board
of directors purchase or redeem its own shares if authorized to do
so by its articles of incorporation or under certain other
circumstances, but may not do so if immediately thereafter its
assets would be less than its liabilities plus its stated capital,
if any, or if the corporation is insolvent or would be rendered
insolvent by such a purchase or redemption. The New Key Articles
of Incorporation will permit the New Key Board of Directors to
authorize the repurchase or redemption of shares to the extent
permitted by law.
No Material Differences in Rights of Holders of New Key Preferred
Stock and KeyCorp Preferred Stock
The terms, designations, preferences, limitations,
privileges, and relative rights of New Key Preferred Stock and
KeyCorp Preferred Stock are identical except for certain
non-material technical or format changes to the provisions included
in the terms of the New Key Preferred Stock. See "DESCRIPTION OF
NEW KEY CAPITAL STOCK -- New Key Preferred Stock and New Key
Depositary Shares."
Preferred Stock
CBC is authorized to issue 180,000 shares of Preferred
Stock, $1 par value. In addition to the Class A Common Stock and
Class B Common Stock, the Preferred Stock may be issued in series
as determined by the Board of CBC. The Board of CBC is also
empowered to determine, as to each series, voting powers (other
than for the election of directors), if any, dividend rates,
whether dividends are cumulative, the amount payable in the event
of liquidation, conversion privileges, terms of any redemption and
certain other aspects of such preferences and rights. No shares of
Preferred Stock have been issued.
The Key Corp Certificate authorizes the issuance of
10,000,000 shares of KeyCorp Preferred Stock. The KeyCorp
Preferred Stock may be issued in series, with the Board of KeyCorp
fixing the designation, relative rights, preferences, and
limitations of the shares of each series, including dividend rate,
whether dividends shall be cumulative, the voting rights, the
conversion rights, the redemption rights, and the liquidation or
dissolution rights.
For a description of the preferred stock of New Key, see
"DESCRIPTION OF NEW KEY CAPITAL STOCK -- New Key Preferred Stock
and New Key Depositary Shares."
Inspection Rights
Both New York law and Ohio law grant certain shareholders
the right to inspect certain records of the corporation. New York
law limits the right of a shareholder to inspect certain books and
records of the corporation to persons who (i) have been
shareholders in the corporation for at least six months immediately
preceding the demand to inspect the corporation's records or
(ii) hold at least 5% of the corporation's outstanding shares of
any class. Under Ohio law, any shareholder is entitled to inspect
the books and records of the corporation upon written demand
provided such inspection is conducted at a reasonable time and made
for any reasonable and proper purpose.
The Colorado Corporation Code contains provisions
granting certain shareholders the right to inspect certain records
of the Corporation. The Colorado Corporation Code limits the right
of inspection to persons who (1) have been shareholders in the
Colorado corporation for at least three months immediately
preceding the demand to inspect the corporation's records or
(2) hold at least 5% of the corporation's outstanding shares.
Under the Colorado Business Corporation Act (effective July 1,
1994), any shareholder is entitled to inspect and copy the
corporation's most recent annual financial statements, if any, and
its most recently published financial statements, if any. In
addition, the Colorado Business Corporation Act contains provisions
granting certain shareholders the right to inspect certain other
records of the corporation. The Colorado Business Corporation Act
limits the right of inspection of such other records to persons who
(1) have been shareholders in the Colorado Corporation for at least
three months immediately preceding the demand to inspect the
corporation's records or (2) hold at least 5% of the corporation's
outstanding shares of any class.
CERTAIN INFORMATION REGARDING
THE PENDING MERGER OF KEYCORP AND SOCIETY
The following summary of the pending KeyCorp/Society
Merger is included to provide certain information regarding that
transaction should it occur. The enclosed copy of the
KeyCorp/Society Joint Proxy Statement includes additional
information relating to the KeyCorp/Society Merger. Information
provided with respect to Society, New Key, and the Keycorp/Society
Merger will be applicable to CBC shareholders only if the
KeyCorp/Society Merger is consummated. See "CBC/KEYCORP MERGER --
Effect of KeyCorp/Society Merger on CBC and CBC Shareholders."
This summary is necessarily incomplete and qualified in its
entirety by the more detailed information contained in KeyCorp's
Current Report on Form 8-K dated October 13, 1993, and KeyCorp's
Report on Schedule 13D dated October 12, 1993, (both of which are
incorporated by reference herein) and the KeyCorp/Society Merger
Agreement included in such Schedule 13D.
General
On October 1, 1993, KeyCorp and Society entered into
KeyCorp/Society Merger Agreement which provides for the
KeyCorp/Society Merger. Upon completion of the KeyCorp/Society
Merger, (i) each outstanding share of KeyCorp Common Stock (other
than KeyCorp Common Stock held in KeyCorp's treasury or owned by
Society for its own account and any shares as to which the right to
dissent and obtain the fair value thereof have been properly
elected and exercised, and not withdrawn, under the New York
Business Corporation Law) will be converted into the right to
receive 1.205 Common Shares, with a par value of $1 each, of
New Key ("New Key Common Stock"); (ii) each outstanding share of
KeyCorp 10% Cumulative Preferred Stock, Series B (the "KeyCorp
Preferred Stock") (other than KeyCorp Preferred Stock held in
KeyCorp's treasury or owned by Society for its own account) will be
converted into the right to receive one share of 10% Cumulative
Preferred Stock, Class A, par value $5 per share, of New Key (the
"New Key Preferred Stock"); (iii) outstanding shares of KeyCorp
Common Stock and of KeyCorp Preferred Stock owned by Society for
its own account will be cancelled; and (iv) shares of KeyCorp
Common Stock and of KeyCorp Preferred Stock held in KeyCorp's
treasury will be cancelled.
Completion of the KeyCorp/Society Merger is subject to
certain conditions, including (a) approvals by the shareholders of
KeyCorp and of Society; (b) approvals by the Board of Governors of
the Federal Reserve System and other regulatory authorities, and
receipt of material consents; (c) the effectiveness under the
Securities Act of a registration statement for New Key Common Stock
and New Key Preferred Stock to be issued in the KeyCorp/Society
Merger; (d) receipt by each of KeyCorp and Society of letters from
Ernst & Young to the effect that the KeyCorp/Society Merger
qualifies as a pooling of interests for accounting purposes;
(e) receipt by KeyCorp and Society of opinions of their respective
counsel that the KeyCorp/Society Merger constitutes a tax-free
reorganization for federal income tax purposes and that, among
other matters, no gain or loss will be recognized by KeyCorp's
shareholders upon conversion of the KeyCorp Common Stock into the
right to receive New Key Common Stock pursuant to the
KeyCorp/Society Merger (except for cash received in lieu of
fractional shares); (f) the absence of certain material adverse
changes in the financial condition, results of operations, or
business of KeyCorp and of Society; and (g) certain other
conditions to closing customary in a transaction of this type. In
the KeyCorp/Society Merger Agreement, KeyCorp and Society have made
various representations, warranties, covenants, and agreements to
each other and, in certain instances, to the directors and officers
of the other party.
Subject to the approval of the KeyCorp/Society Merger by
the shareholders of KeyCorp and Society and the satisfaction or
waiver of the other conditions to closing referenced above, the
KeyCorp/Society Merger currently is expected to be consummated in
the first quarter of 1994. However, there can be no assurance that
such conditions will be met or, if met, as to the timing of the
closing of the KeyCorp/Society Merger.
Society
Society, a financial services holding company organized
in 1958, is headquartered in Cleveland, Ohio, is incorporated in
Ohio, and is registered under the BHCA and the Home Owners Loan Act
of 1933, as amended ("HOLA"). It is principally a regional banking
organization and provides a wide range of banking, fiduciary, and
other financial services to institutional, and individual
customers. At September 30, 1993, Society had total consolidated
assets of approximately $25.8 billion, making it the 29th largest
bank holding company in the United States, in terms of total
consolidated assets, based on data from the American Banker
publication. The first predecessor of a subsidiary of Society was
organized in 1849. At September 30, 1993, Society's subsidiary
banks operated 440 full-service banking offices in the States of
Ohio, Indiana, Michigan, and Florida. At September 30, 1993,
Society and its subsidiaries had approximately 12,700 full-time
employees.
Banking operations in Ohio are conducted through Society
National Bank, a federally-chartered bank headquartered in
Cleveland, Ohio, the largest bank in Ohio and one of the nation's
major regional banks. At September 30, 1993, Society National Bank
had total assets of $20.7 billion and operated 294 full-service
banking offices.
Banking operations in Indiana are conducted through
Society National Bank, Indiana, a federally-chartered bank
headquartered in South Bend, Indiana. At September 30, 1993,
Society National Bank, Indiana had total assets of $3.0 billion and
operated 86 full-service banking offices.
Banking operations in Michigan are conducted through
Society Bank, Michigan, a state-chartered bank headquartered in Ann
Arbor, Michigan. At September 30, 1993, Society Bank, Michigan had
assets of $1.0 billion and operated 36 full-service banking
offices.
Banking operations in Florida are conducted through
Society First Federal Savings Association of Fort Myers, a federal
savings bank association headquartered in Fort Myers, Florida
("Society First Federal"). At September 30, 1993, Society First
Federal had assets of $1.2 billion and operated 24 full-service
banking offices.
In addition to the customary banking services of
accepting funds for deposit and making loans, Society's subsidiary
banks provide a wide range of specialized services tailored to
specific markets, including investment management, personal and
corporate trust services, personal financial services, cash
management services, investment banking services, and international
banking services. At September 30, 1993, Society had one of the
nation's largest trust departments with approximately $25 billion
in managed assets.
Society's nonbanking subsidiaries provide insurance sales
services, reinsurance of credit life and accident and health
insurance on loans made by subsidiary banks, securities brokerage
services, investment management, corporate and personal trust
services, venture capital and small business investment financing
services, equipment lease financing, registered investment advisory
services, mortgage banking services, community development
services, and other financial services.
Society is a legal entity separate and distinct from its
subsidiaries. The principal source of Society's income is the
earnings of subsidiary banks, and the principal source of its cash
flow is dividends from its subsidiary banks. Applicable state and
Federal laws impose limitations on the ability of Society's banking
subsidiaries to pay dividends. In addition, the subsidiary banks
are subject to the limitations contained in the Federal Reserve Act
regarding extensions of credit to, investments in, and certain
other transactions with Society and its other subsidiaries. See
"CERTAIN REGULATORY CONSIDERATIONS."
Integration of KeyCorp and Society into New Key
Integration Management Team. In connection with the
KeyCorp/Society Merger, KeyCorp and Society have formed a joint
Integration Management Team under the chairmanship of Stephen E.
Wall, an Executive Vice President of Society, and consisting of an
equal number of senior management representatives from each
company. One of the objectives of the Integration Management Team
is to review and analyze the historical operations of KeyCorp and
Society and, in light of this analysis, to begin to develop plans
for the combined strategies and operations of New Key.
The Integration Management Team has assigned
representatives of the senior level management of each of KeyCorp
and Society to integration groups (general administration, credit
policy, finance, investment management and services, information
technology and operations, and banking) and has organized a series
of task forces to assist each group. These task forces are in the
process of reviewing the methods by which KeyCorp and Society
currently perform certain business and operational functions,
determining the strategy pursuant to which New Key will best
perform those functions after the KeyCorp/Society Merger, and
identifying the appropriate individuals to manage those activities.
Included among the business and operational functions being
reviewed by the task forces are information services, customer
support, asset management, commercial lending, consumer credit,
retail banking, and credit policy.
Certain Business Strategies Under Consideration. The
following information summarizes the considerations given to date
to certain business strategies by the Integration Management Team;
because, however, the Integration Management Team is at a
relatively early stage of carrying out its assignment, no assurance
can be given that any of the operating strategies as described
below will not be significantly revised prior to or after the
effective time of the KeyCorp/Society Merger by the Integration
Management Team, the senior management, or the Board of Directors
of KeyCorp and Society or (after the effective time) of New Key to
reflect changing business, regulatory, or other conditions.
Product Development. KeyCorp and Society currently
anticipate that financial services products presently offered by
each company will be made more widely available to consumers
throughout the New Key combined branch network and banking system.
Though the specific KeyCorp and Society products which will be
introduced into markets serviced by the combined distribution
network have not been determined, KeyCorp and Society have
undertaken a review of their respective product lines and have
identified certain financial products and services for which each
has significant market position or particular expertise. KeyCorp,
for example, has a strong mortgage banking business and specializes
in the delivery of services to small- and medium-sized businesses
in local communities. Society has a strong trust and asset
management services business and specializes in developing and
delivering products to the large corporate and various specialized
industry markets. KeyCorp and Society currently anticipate that
KeyCorp's large banking distribution network with over 800 banking
offices throughout nine states and 459 communities and the Society
distribution network of over 400 banking offices in four states
will provide significant new distribution networks for these
product lines and services.
Investment Strategy. Material changes in the major
operating policies relating to the investment strategy of New Key,
as compared to the policies of KeyCorp and Society in this area,
are not presently anticipated. The management of financial market
risk by New Key will continue the practice of both KeyCorp and
Society to focus on interest rate risk, liquidity, and capital
leverage. The management and analysis of these components of
financial risk will be centrally controlled, as is the current
practice with both companies, but each affiliate bank subsidiary of
New Key will be responsible for its own loan and deposit pricing
decisions. As a much larger and more geographically dispersed
organization than either KeyCorp or Society, New Key may make
changes in policies and procedures to take into account the size
and scope of a combined entity that has subsidiary banks operating
in several different geographic regions.
Loan Portfolio Diversification. As a result of the
KeyCorp/Society Merger, New Key will have a more geographically
diversified loan portfolio located in KeyCorp's lending markets,
including the Rocky Mountain region, the Pacific Northwest, and the
Northeast, in addition to loans in Society's lending markets,
including the Midwest and Florida. KeyCorp and Society anticipate
that New Key will continue to market diversified credit products
through the combined geographically diverse branch network and
banking system, with efforts to introduce certain unique credit
products of each institution into markets previously served by the
other institution's banking distribution network.
As described under the heading "CERTAIN INFORMATION
REGARDING THE PENDING MERGER OF KEYCORP AND SOCIETY -- Interests of
Certain Persons in the KeyCorp/Society Merger -- Management After
the KeyCorp/Society Merger," KeyCorp and Society have designated
the individuals listed under that heading who will have the
respective executive and senior management responsibilities at
New Key, including the responsibility for executing such plans as
are finally developed for integrating KeyCorp and Society into
New Key and carrying out New Key's combined business strategies and
operations.
The KeyCorp Shareholders' Rights Agreement
Concurrently with the execution of the KeyCorp/Society
Merger Agreement, KeyCorp entered into a Shareholder Protection
Rights Agreement dated as of October 1, 1993, (the "KeyCorp Rights
Agreement"), with Key Trust Company, as rights agent ("KeyCorp
Rights Agent"), pursuant to which holders of KeyCorp Common Stock
were issued a dividend of certain Rights (the "KeyCorp Rights")
which shall be, upon the occurrence of certain events, exercisable
for or convertible into other securities of KeyCorp or of other
corporations or entities. See "COMPARISON OF CERTAIN RIGHTS OF
HOLDERS OF CAPITAL STOCK OF KEYCORP, CBC AND NEW KEY -- State
Takeover Statutes and Takeover Provisions of Charter Documents" and
"Shareholder Rights Plans."
KeyCorp and Society Stock Options
Following the execution and delivery of the
KeyCorp/Society Merger Agreement, KeyCorp and Society granted to
each other an option, in each case pursuant to a stock option
agreement, dated as of October 2, 1993, to purchase up to 19.9% of
the outstanding KeyCorp Common Stock (the "KeyCorp Option"), in the
case of Society, and of the outstanding Common Shares, with a par
value of $1 each, of Society (the "Society Option"), in the case of
KeyCorp. KeyCorp and Society each approved and granted these
options to induce each other to enter into the KeyCorp/Society
Merger Agreement. One effect of these options is to increase the
likelihood that the Keycorp/Society Merger will be consummated by
making it more difficult and more expensive for another party to
obtain control of or acquire either KeyCorp or Society. KeyCorp
and Society believe that the exercise of the KeyCorp Option would
likely bar any acquiror of KeyCorp from accounting for an
acquisition of, or merger with, KeyCorp using the pooling of
interests accounting method for a period of up to two years and
that the exercise of the Society Option would likely bar any
acquiror of Society from accounting for an acquisition of, or
merger with Society using the pooling of interests accounting
method for a period of up to two years. The options will become
exercisable upon the occurrence of certain events as set forth in
the respective stock option agreements and will be exercisable at
a per share rice of $38.50, in the case of KeyCorp Common Stock,
and $32.50, in the case of the Society Common Shares. The number
of shares subject to such options and the purchase price per share
provided for therein are subject to adjustment as provided in the
respective stock option agreements.
Board of Directors and Chief Executive Officers of New Key through
December 31, 1998
Board of Directors of New Key Through December 31, 1998.
The KeyCorp/Society Merger Agreement and the Regulations of New Key
(the "New Key Regulations") provide that, at the effective time of
the KeyCorp/Society Merger, New Key will have 22 directors, divided
into three classes as follows: one class of seven directors whose
term will expire at the next annual meeting of shareholders
occurring after the effective time of the KeyCorp/Society Merger,
one class of seven directors whose term will expire at the second
annual meeting of shareholders occurring after the effective time
of the KeyCorp/Society Merger, and one class of eight directors
whose term will expire at the third annual meeting of shareholders
occurring after the effective time of the KeyCorp/Society Merger.
Through December 31, 1998, not more than two directors of New Key
may be "Insider Directors." "Insider Director" means any person
who, as of immediately prior to the effective time of the
KeyCorp/Society Merger, was a current or former officer of Society
or KeyCorp or any of their subsidiaries or any predecessor or
constituent (by merger, consolidation, or otherwise) of New Key
(including KeyCorp and Society) or any of its subsidiaries, but
does not include Mr. H. Douglas Barclay (who previously served as
Secretary and General Counsel of KeyCorp, but who has never been an
employee of KeyCorp or any subsidiary) and Mr. Henry S. Hemingway
(who previously served as a director of a liquidated intermediate
holding company subsidiary of KeyCorp). The KeyCorp/Society Merger
Agreement and the New Key Regulations further provide that, through
December 31, 1998, if the Board of Directors or shareholders of
New Key change the size of the Board of Directors of New Key in
accordance with the New Key Regulations, no more than two directors
of the total number of directors on the Board may be Insider
Directors, and that any increase or decrease in the size of the
Board must be by a multiple of two.
The KeyCorp/Society Merger Agreement provides that
Victor J. Riley, Jr. and Robert W. Gillespie will be directors of
New Key immediately following the effective time of the
KeyCorp/Society Merger. The CBC/KeyCorp Merger Agreement further
provides that Messrs. Riley and Gillespie will consult with each
other as to the determination of the remaining 20 directors of
New Key, and that after such consultation and prior to the
effective time of the KeyCorp/Society Merger, they will each
designate ten persons to be members of the Board of Directors of
New Key (subject to the approval of the respective Boards of
Directors of KeyCorp and Society). None of the persons designated
by Messrs. Riley and Gillespie may be an "Insider Director."
Messrs. Riley and Gillespie have consulted with each
other and, with the approval of the Boards of Directors of KeyCorp
and Society, respectively, have designated the following
individuals to be Directors of New Key from and after the effective
time of the KeyCorp/Society Merger:
<TABLE>
<CAPTION>
PRESENT BOARD
NAME AGE AFFILIATION OCCUPATION
______________________ ____ _________________ _____________
<S> <C> <C> <C>
TERM EXPIRING IN 1994
William G. Bares 52 Society President and Chief Operating Officer
of The Lubrizol Corporation, a
producer of chemicals for use in
lubricants and fuels
Lucie J. Fjeldstad 49 KeyCorp Private Consultant
Robert W. Gillespie 49 Society Chairman of the Board, President, and
Chief Executive Officer of Society
Henry S. Hemingway 40 KeyCorp President of Town & Country Life
Insurance Company
Steven A. Minter 55 Society Executive Director and President of
The Cleveland Foundation, a
philanthropic foundation
Victor J. Riley, Jr. 62 KeyCorp Chairman of the Board, President, and
Chief Executive Officer of KeyCorp
Ronald B. Stafford 58 KeyCorp Partner of the law firm of Stafford,
Trombley, Purcell, Lahtinen, Owens &
Curtin; member of the New York State
Senate
Dennis W. Sullivan 55 Society Executive Vice President -- Industrial
and Automotive of Parker-Hannifin
Corporation, an aeronautic and
automotive parts manufacturer
TERM EXPIRING IN 1995
H. Douglas Barclay 61 KeyCorp Partner in the law firm of Hiscock &
Barclay
Thomas A. Commes 51 Society President and Chief Operating Officer
of The Sherwin-Williams Company, a
paints and painting supplies
manufacturer
Stephen R. Hardis 58 Society Vice Chairman and Chief Financial and
Administrative Officer of Eaton
Corporation, a diversified
manufacturing company
Lawrence A. Leser 58 Society President and Chief Executive Officer
of the E.W. Scripps Company, a
communications and multi-media
services company
John C. Morley 62 Society President and Chief Executive Officer
of Reliance Electric Company, an
electro-mechanical automation and
telecommunications equipment
manufacturer
Peter G. Ten Eyck, II 55 KeyCorp President of Indian Ladder Farms, a
commercial orchard
Nancy B. Veeder 67 KeyCorp President of Veeder Realty, Inc. and
partner in V.R. Associates Ltd, doing
business as Residence Inn
TERM EXPIRING IN 1996
Robert A. Schumacher 70 KeyCorp Consultant for Georgia Pacific
Corporation
Albert C. Bersticker 59 Society President and Chief Executive Officer
of Ferro Corporation, a manufacturer
of industrial specialty materials
Kenneth M. Curtis 62 KeyCorp President, Maine Maritime Academy, an
ocean-oriented college offering
degree programs including a program
a program to train officers for the
Merchant Marine and Uniformed
Services
John C. Dimmer 65 KeyCorp President of Firs Management
Corporation, a real estate and
investment company
Charles R. Hogan 56 KeyCorp Co-Chairman of the Board, Puget Sound
marketing Co., Inc., an operator of a
supermarket chain
M. Thomas Moore 59 Society Chairman, President, and Chief
Executive Officer of Cleveland-Cliffs
Inc., a producer of iron ore pellets
Richard W. Pogue 65 Society Senior Partner -- Jones, Day, Reavis &
Pogue, Attorneys at Law
</TABLE>
After the effective time of the KeyCorp/Society Merger,
and for as long as Mr. Riley is Chairman of the Board of New Key,
Messrs. Riley and Gillespie will further consult with each other
with respect to any vacancies on the Board of Directors of New Key.
Through December 31, 1998, nominations for the election of
directors of New Key may only be made by (a) the shareholders of
New Key in compliance with the procedure described in "AMENDED AND
RESTATED ARTICLES OF INCORPORATION AND REGULATIONS OF NEW KEY" or
(b) the affirmative vote of three-quarters of the entire authorized
Board of Directors of New Key and three-quarters of the members of
the Nominating Committee of New Key, if any, then in office;
provided, however, that if the Nominating Committee is unable, for
any reason, to approve by the requisite vote a nomination for
election of a particular director or directors, such nomination
will be made instead by the affirmative vote of two-thirds of the
entire authorized Board of Directors of New Key and three-quarters
of the members of a committee to be comprised, depending on whether
the director position to be filled was originally held at the
effective time of the KeyCorp/Society Merger by an individual who
had been a director of KeyCorp or of Society, of all of the
directors then in office who immediately prior to the effective
time of the KeyCorp/Society Merger had been directors of KeyCorp
(or of Society as the case may be) or who have been elected to fill
a director position originally held by an individual who at the
effective time of the KeyCorp/Society Merger had been a director of
KeyCorp (or of Society, as the case may be); provided, further,
that, in the case of a nomination for election to fill a director
position which resulted from an increase in the size of the Board
after the effective time of the KeyCorp/Society Merger, such
nomination shall be made by the affirmative vote of three-quarters
of the entire authorized Board of Directors of New Key acting alone
if the Nominating Committee is unable, for any reason, to approve
by the requisite vote a nomination to fill such director position.
Committees of the Board of Directors of New Key. New Key
will have an Executive Committee of the Board of Directors
comprised of at least four members of the Board of Directors
designated annually by two-thirds of the entire authorized Board of
Directors. Through December 31, 1998, Messrs. Riley and Gillespie
will each be members of the Executive Committee as long as they are
also members of the Board of Directors of New Key. Through
December 31, 1998, New Key will also have a Nominating Committee of
the Board of Directors comprised of four members of the Board of
Directors designated annually by two-thirds of the entire
authorized Board of Directors. Through December 31, 1998, two of
the members of the Nominating Committee will be individuals who
were serving as directors of KeyCorp at the effective time of the
KeyCorp/Society Merger (one of whom will be Mr. Riley, as long as
he is a director of New Key), and the other two members of the
Nominating Committee will be individuals who were serving as
directors of Society at the effective time of the KeyCorp/Society
Merger (one of whom will be Mr. Gillespie, as long as he is a
director of New Key).
The KeyCorp/Society Merger Agreement provides that, prior
to the effective time of the KeyCorp/Society Merger, Messrs. Riley
and Gillespie will mutually agree as to the number of members of
the Executive Committee, the Compensation and Organization
Committee, the Audit Committee, and the Community Responsibility
Committee, and will consult with each other as to the formation of
any other committees of the Board of Directors of New Key and as to
the appointment of members to the Executive Committee, the
Compensation and Organization Committee, the Audit Committee, the
Nominating Committee, the Community Responsibility Committee, and
any other committee of the Board of Directors of New Key. After
such consultation Messrs. Riley and Gillespie will each designate
an equal number of members to the Executive Committee, the
Compensation and Organization Committee, the Audit Committee, the
Nominating Committee, the Community Responsibility Committee, and
any other committee of the Board of Directors of New Key, subject,
prior to the effective time of the KeyCorp/Society Merger, to the
approval of the respective Boards of Directors of KeyCorp and
Society and, after the effective time of the KeyCorp/Society
Merger, to the approval of the Board of Directors of New Key.
After the effective time of the KeyCorp/Society Merger, and for as
long as Mr. Riley is Chairman of the Board of New Key,
Messrs. Riley and Gillespie will further consult with each other
with respect to any vacancies on the Board of Directors, the
Executive Committee, the Compensation and Organization Committee,
the Audit Committee, the Nominating Committee, the Community
Responsibility Committee, or any other committee of the Board of
Directors of New Key, as to the formation of any other committee of
the Board of Directors of New Key, and as to any adjustment to the
number of members of any committee of the Board of Directors of
New Key other than the Nominating Committee.
Chairman of the Board and Chairman of the Executive
Committee of New Key. The KeyCorp/Society Merger Agreement and the
New Key Regulations provide that Mr. Riley will be Chairman of the
Board and Chairman of the Executive Committee of the Board of
Directors of New Key through December 31, 1998 or his earlier
failure to continue to be a director of New Key (whether as a
result of his death, resignation, removal, or failure to be
re-elected at the expiration of his term as director). On
December 31, 1998, Mr. Riley will cease to be Chairman of the Board
and Chairman of the Executive Committee, unless he has earlier
ceased to hold those positions. Mr. Gillespie will become Chairman
of the Board and Chairman of the Executive Committee of New Key on
the date (which in no event will be later than December 31, 1998)
on which Mr. Riley ceases to be Chairman of the Board and Chairman
of the Executive Committee, subject, in all cases, to
Mr. Gillespie's earlier failure to continue to be a director of
New Key (whether as a result of his death, resignation, removal, or
failure to be re-elected at the expiration of his term as
director). If Mr. Riley ceases, at any time prior to December 31,
1998, to hold for any reason one or both of his positions as
Chairman of the Board and Chairman of the Executive Committee,
Mr. Gillespie will immediately assume any such position, provided
that he is then a director of New Key. Prior to Mr. Gillespie's
becoming Chairman of the Board and Chairman of the Executive
Committee, no individual (other than Mr. Gillespie or any other
person designated by Mr. Gillespie) will be designated vice
chairman or deputy chairman, or with any position or title of
similar import, of either the Board of Directors or the Executive
Committee of New Key. The position of Chairman of the Board of
New Key will be an officer position through December 31, 1995, or
any earlier date on which Mr. Riley ceases for any reason
(including death, retirement, resignation, or removal) to be Chief
Executive Officer of New Key, and thereafter will be solely a
director position and not an officer position.
Chief Executive Officers of New Key Through December 31,
1998. The most senior officer of New Key will be the President,
who also will be the Chief Executive Officer of New Key (and may
use the term "Chief Executive Officer" as part of his title) except
during periods when there is a separate office of Chief Executive
Officer, in which case the officer holding the separate office of
Chief Executive Officer will be the most senior officer of New Key
and the President will be the second most senior officer. At the
effective time of the KeyCorp/Society Merger, Mr. Riley will be the
Chief Executive Officer of New Key for a term expiring on
December 31, 1995, or upon his earlier death, retirement,
resignation, or removal. There will be a separate office of Chief
Executive Officer of New Key during the period from the effective
time of the KeyCorp/Society Merger through December 31, 1995 or any
earlier date on which Mr. Riley ceases for any reason (including
death, retirement, resignation, or removal) to be Chief Executive
Officer. There will be no separate office of Chief Executive
Officer after December 31, 1995 or any earlier date on which
Mr. Riley ceases for any reason (including death, retirement,
resignation, or removal) to be Chief Executive Officer of New Key.
At the effective time of the KeyCorp/Society Merger,
Mr. Gillespie will be the President of New Key for a term expiring
on December 31, 1998, or upon his earlier death, retirement,
resignation, or removal. Accordingly, at such time (which in no
event will be later than December 31, 1995) as Mr. Riley ceases for
any reason to hold the separate office of Chief Executive Officer,
Mr. Gillespie will, by virtue of being President, also be the Chief
Executive Officer through the expiration of his term on
December 31, 1998, or until his earlier death, retirement,
resignation, or removal. In addition, at the effective time of the
KeyCorp/Society Merger, Mr. Gillespie will be the Chief Operating
Officer of New Key for a term expiring on the date on which
Mr. Riley ceases to be the Chief Executive Officer of New Key
(which in no event will be later than December 31, 1995). On
December 31, 1995, Mr. Riley will retire from all positions he then
holds as an officer of New Key or an officer, employee, or director
of any of its subsidiaries. The elections of Mr. Riley and
Mr. Gillespie to, and the retirement of Mr. Riley from, the various
offices and positions referred to under this caption "Board of
Directors and Chief Executive Officers of New Key Through
December 31, 1998" will be automatically self-executing without any
further action required by the Board of Directors of New Key or
otherwise.
Through December 31, 1998, neither Mr. Riley nor
Mr. Gillespie may be removed by action of the Board of Directors of
New Key from any officer position held by either of them except by
the affirmative vote of three-quarters of the entire authorized
Board, and in any case without prejudice to the contract rights of
either. Notwithstanding anything to the contrary in the
KeyCorp/Society Merger Agreement, any of the provisions relating to
the foregoing that are contained in the KeyCorp/Society Merger
Agreement and that, pursuant to the KeyCorp/Society Merger
Agreement, survive the effective time of the KeyCorp/Society
Merger, shall be deemed to be automatically amended to the extent
necessary to conform to the provisions of the Articles of
Incorporation of New Key ("New Key Articles of Incorporation")
and/or the New Key Regulations as either of them may be amended
after the effective time of the KeyCorp/Society Merger in
accordance with its respective terms or applicable law. See
"AMENDED AND RESTATED ARTICLES OF INCORPORATION AND REGULATIONS OF
NEW KEY."
Interests of Certain Persons in the KeyCorp/Society Merger
Management After the KeyCorp/Society Merger. In addition
to the senior officer positions of New Key to be held by
Messrs. Riley and Gillespie as discussed above in "Board of
Directors and Chief Executive Officers of New Key through
December 31, 1998," at the effective time of the KeyCorp/Society
Merger, the following persons will have the responsibilities set
forth below at New Key:
<TABLE>
<CAPTION>
NAME PRESENT COMPANY AFFILIATION RESPONSIBILITY
___________________ ____________________________ _______________
<S> <C> <C>
Gary R. Allen <F2> KeyCorp Group Executive-Banking <F1>
Kevin M. Blakely Society Credit Policy
Michael A. Butler KeyCorp Loan Review
Ralph M. Carestio, Jr. KeyCorp Financial Services
Carter B. Chase' KeyCorp Legal Matters
Allen J. Gula, Jr. Society Information Technology and Operations
Francis X. Hamilton KeyCorp Quality Control/Improvement
Lee G. Irving KeyCorp Treasury Functions
Henry L. Meyer, III <F2> Society Group Executive-Banking <F1>
A. Jay Meyerson Society Marketing
Roger Noall <F2> Society Chief Administrative Officer
Bruce E. Tofte KeyCorp Audit and Corporate Security
Martin J. Walker Society Balance Sheet Management
Stephen E. Wall Society Integration Management
F. Jay Ward KeyCorp Operations-Information Management
James W. Wert <F2> Society Chief Financial Officer
<F1>
The respective roles of each of the officers of New Key with Group Executive-Banking responsibility will be
determined based on geographic and other factors.
<F2>
Members of New Key Management Committee, together with Messrs. Riley and Gillespie. The Management
Committee is a group of senior executives who will guide the overall strategic direction of New Key
following the merger.
</TABLE>
Indemnification. For a period of six years from the
effective time of the KeyCorp/Society Merger, New Key will maintain
the indemnification rights currently provided by KeyCorp and
Society with respect to matters occurring before the effective time
of the KeyCorp/Society Merger in favor of their respective current
and former employees, directors, and officers and, if applicable,
in favor of the employees, directors, and officers of their
respective subsidiaries, on terms no less favorable than those
provided in the charter or by-laws or regulations of KeyCorp or
Society or as otherwise in effect on the date of the
KeyCorp/Society Merger Agreement.
Directors' and Officers' Liability Insurance. For a
period of six years from the effective time of the KeyCorp/Society
Merger, New Key will use its best efforts to maintain the
directors' and officers' liability insurance policies maintained at
the date of the KeyCorp/Society Merger Agreement by KeyCorp and
Society, provided that New Key may provide substantially similar
insurance policies with the same coverage and amounts in
substitution for such policies of KeyCorp and Society.
Notwithstanding the foregoing, New Key will not be obligated, in
connection with maintaining any such KeyCorp insurance policies, to
expend any amount per year in excess of 200% of the amount of the
annual premiums paid as of the date of the KeyCorp/Society Merger
Agreement by KeyCorp (the "KeyCorp Maximum Amount") and will not be
obligated, in connection with maintaining any such Society
insurance polices, to expend any amount in excess of 200% of the
annual premiums paid as of the date of the KeyCorp/Society Merger
Agreement by Society (the "Society Maximum Amount"). In the
alternative, New Key will provide and maintain the most
advantageous directors' and officers' liability insurance coverage
obtainable for an annual premium equal to the KeyCorp Maximum
Amount or the Society Maximum Amount, as the case may be.
DESCRIPTION OF NEW KEY CAPITAL STOCK
General
The New Key Articles of Incorporation authorize
900,000,000 shares of New Key Common Stock, 25,000,000 shares of
New Key Serial Preferred Stock, and 1,400,000 shares of 10%
Cumulative Preferred Stock, Class A, par value $5.00 per share
("New Key Preferred Stock") to be issued in the KeyCorp/Society
Merger upon conversion of the outstanding KeyCorp Preferred Stock.
If the CBC/KeyCorp Merger and the KeyCorp/Society Merger
are consummated, shares of CBC Common Stock ultimately will be
converted to New Key Common Stock with no New Key Preferred Stock
issued in exchange therefor.
The information provided herein will be applicable to CBC
shareholders only if the KeyCorp/Society Merger is consummated.
New Key Common Stock
The New Key Articles of Incorporation authorize 900,000,000
shares of New Key Common Stock. The shares of New Key Common Stock
will be entitled (a) subject to any rights of the New Key Preferred
Stock and of any additional preferred stock of New Key that may be
issued on or after the effective time of the KeyCorp/Society
Merger, to dividends when and as declared by the directors, (b) to
one vote per share on each matter properly submitted to
shareholders for their vote, and (c) to participate ratably in the
net assets of New Key in the event of liquidation, subject to any
prior rights of the New Key Preferred Stock and of any additional
preferred stock of New Key that may hereafter be issued. The
holders of shares of New Key Common Stock will have no preemptive
comparison rights to acquire any additional shares of New Key. For
a further discussion of the rights of holders of New Key Common
Stock, see "COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF CAPITAL
STOCK OF KEYCORP, CBC AND NEW KEY."
New Key Preferred Stock and New Key Depositary Shares
New Key Preferred Stock. The New Key Preferred Stock
will be a class of capital stock of New Key into which shares of
KeyCorp Preferred Stock will be converted pursuant to the
KeyCorp/Society Merger. 1,400,000 shares of New Key Preferred
Stock will be authorized upon consummation of the KeyCorp/Society
Merger. There are no material differences between the rights of a
holder of New Key Preferred Stock and the rights of a holder of
KeyCorp Preferred Stock of the New Key Preferred Stock. The
following is a summary of the terms of the New Key Preferred Stock
and does not purport to be complete.
Dividends. Dividends, which are cumulative, are payable
on the New Key Preferred Stock quarterly on March 31, June 30,
September 30, and December 31 of each year at the rate per annum
equal to 10% of the liquidation preference, or $12.50 per share.
The New Key Preferred Stock ranks prior to the New Key Common Stock
as to payment of dividends.
Voting Rights. Except as expressly required by
applicable law, the holders of shares of New Key Preferred Stock
will not be entitled to vote on matters presented to shareholders
except under certain circumstances, including (a) if New Key fails
to pay full cumulative dividends on the New Key Preferred Stock or
any other series of New Key Serial Preferred Stock (as defined
herein) for six quarterly dividend periods, whether or not
consecutive, in which case the number of directors of New Key will
be increased by two and the holders of shares of New Key Preferred
Stock, together with the holders of all other series of New Key
Serial Preferred Stock, will be entitled to vote separately as a
class to elect such additional two Directors, and (b) the adoption
of any amendment to the New Key Articles of Incorporation that
would adversely affect the rights of the New Key Preferred Stock,
subject to certain exceptions.
Preemptive Rights. The holders of shares of New Key
Preferred Stock will have no preemptive rights to acquire any
additional shares of New Key.
Redemption. The New Key Preferred Stock will not be
redeemable prior to June 30, 1996. On and after such date, the
New Key Preferred Stock will be redeemable in cash at the option of
New Key, in whole or in part, from time to time upon not less than
30 nor more than 60 days' notice, with the prior approval of the
Federal Reserve Board (if such approval is required), at $125 per
share plus all accrued and unpaid dividends to the date fixed for
redemption. Shares of the New Key Preferred Stock that are
redeemed will be deemed retired.
Conversion. The New Key Preferred Stock will not be
convertible into shares of any other class or series of capital
stock of New Key.
Liquidation Rights. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of New Key, the
holders of shares of New Key Preferred Stock will be entitled to
receive out of the assets of New Key available for distribution to
shareholders, before any distribution of assets is made to the
holders of New Key Common Stock or any other class of stock of
New Key ranking junior to the New Key Preferred Stock upon
liquidation. Liquidating distributions on the New Key Preferred
Stock will be payable in the amount of $125 per share plus accrued
and unpaid dividends.
New Key Depositary Shares. Each New Key Depositary Share
represents a one-fifth interest in a share of New Key Preferred
Stock. The New Key Preferred Stock issued in the KeyCorp/Society
Merger will be deposited under a Deposit Agreement, dated July 27,
1991 (the "Deposit Agreement"), between New Key (as successor to
KeyCorp), Chase Manhattan Bank, or any successor, as depositary
(the "Depositary"), and the holders from time to time of the
New Key Depositary Receipts issued by the Depositary thereunder.
The New Key Depositary Receipts so issued will evidence the New Key
Depositary Shares. Subject to the terms of the Deposit Agreement,
each owner of a New Key Depositary Share will be entitled through
the Depositary, in proportion to the one-fifth interest in a share
of New Key Preferred Stock underlying such New Key Depositary
Share, to all rights and preferences of a share of New Key
Preferred Stock (including dividend, voting, redemption and
liquidation rights). Because each share of New Key Preferred Stock
entitles the holder thereof to one vote on matters on which the
New Key Preferred Stock is entitled to vote, each New Key
Depositary Share will, in effect, entitle the holder thereof to
one-fifth of a vote thereon, rather than one full vote. There are
no material differences between the rights of a holder of New Key
Depositary Shares and the rights of a holder of KeyCorp Depositary
Shares.
Additional Class of Authorized but Unissued New Key Serial
Preferred Stock
If the KeyCorp/Society Merger is consummated, New Key
will have 25,000,000 authorized shares of preferred stock (the
"New Key Serial Preferred Stock"), of which no shares will be
issued or outstanding. New Key may issue New Key Serial Preferred
Stock from time to time in one or more series. Except as expressly
required by applicable law, the holders of New Key Serial Preferred
Stock will not be entitled to vote on matters presented to
shareholders, except under certain circumstances, including (a) if
New Key fails to pay full cumulative dividends on the New Key
Serial Preferred Stock or the New Key Preferred Stock for six
quarterly dividend periods, whether or not consecutive, in which
case the number of directors of New Key will be increased by two
and the holders of shares of New Key Serial Preferred Stock,
together with the holders of New Key Preferred Stock, will be
entitled to vote separately as a class to elect such additional two
directors, and (b) the adoption of any amendment to the New Key
Articles of Incorporation or the New Key Regulations which would be
substantially prejudicial to the rights of the holders of New Key
Serial Preferred Stock. The holders of shares of New Key Serial
Preferred Stock will have no preemptive rights to acquire any
additional shares of New Key. Certain terms of the New Key Serial
Preferred Stock may be fixed by New Key's Board of Directors,
including dividend rate, whether dividends shall be cumulative,
liquidation price, redemption price, sinking fund provisions,
conversion rights, and restrictions on issuance of shares of the
same series or any other class or series as may be determined by
the directors.
AMENDED AND RESTATED ARTICLES OF
INCORPORATION AND REGULATIONS OF NEW KEY
General
If the CBC shareholders approve the CBC/Keycorp Merger
Agreement at the Special Meeting and all other conditions to
consummation of the CBC/KeyCorp Merger have been met, and the
KeyCorp/Society Merger is consummated, CBC shareholders would
become shareholders of New Key (see "INTRODUCTION -- Pending Merger
of KeyCorp and Society" and "THE CBC/KEYCORP MERGER -- Effect of
KeyCorp/Society Merger on CBC and CBC Shareholders") an
organization controlled, in part, by the Amended and Restated
Articles of Incorporation and Regulations of New Key. Information
provided with respect to the New Key Amended and Restated Articles
of Incorporation and Regulations of New Key will be applicable to
CBC shareholders only if the KeyCorp/Society Merger is consummated.
Amended and Restated Articles of Incorporation of New Key
The following summary is intended to highlight certain
important provisions of the New Key Articles of Incorporation.
This summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information contained in
the New Key Articles of Incorporation which are included in
KeyCorp's Current Report on Form 8-K dated October 13, 1993, which
is incorporated by reference herein.
Number of Shares of Authorized Stock. The New Key
Articles of Incorporation authorize 900,000,000 shares of New Key
Common Stock, 25,000,000 shares of New Key Serial Preferred Stock,
and 1,400,000 shares of New Key Preferred Stock.
Of the 900,000,000 authorized shares of New Key Common
Stock, approximately 118,658,008 shares are currently issued as
Society Common Stock, approximately 122,495,270 shares will be
issued in connection with the KeyCorp/Society Merger in respect of
the KeyCorp Common Stock, approximately 5,428,299 shares will be
reserved for issuance for outstanding options under option plans
maintained by KeyCorp which will be assumed by New Key in the
KeyCorp/Society Merger, approximately 7,160,264 shares are reserved
for issuance under option plans maintained by Society,
approximately 661,370 will be reserved for issuance under KeyCorp's
employee stock purchase and dividend reinvestment plans, and
approximately 254,403,211 shares are reserved for issuance pursuant
to the Society Rights Agreement (assuming the consummation of the
KeyCorp/Society Merger, the exercise of all outstanding Society and
KeyCorp employee and director stock options, and issuance of all
shares reserved for issuance under KeyCorp's employee stock
purchase and dividend reinvestment plans). None of the 25,000,000
shares of New Key Serial Preferred Stock will be issued in
connection with the CBC/KeyCorp Merger or the KeyCorp/Society
Merger. Up to 1,280,000 shares of the 1,400,000 shares of New Key
Preferred Stock authorized will be issued in the CBC/KeyCorp Merger
upon conversion of the outstanding KeyCorp Preferred Stock; as of
the Record Date, there were 1,280,000 shares of KeyCorp Preferred
Stock outstanding.
Therefore, upon consummation of the KeyCorp/Society
Merger, New Key will have not more than approximately 391,193,578
shares of Common Stock, 25,000,000 shares of New Key Serial
Preferred Stock, and not more than 120,000 shares of New Key
Preferred Stock available for issuance from time to time as may be
necessary in connection with future financings, acquisitions of
other companies, stock dividends, stock splits, other
distributions, or other corporate purposes.
The issuance in future acquisitions or other transactions
of the additional shares that would be authorized under the New Key
Articles of Incorporation may dilute the equity ownership position
of then holders of KeyCorp Common Stock, and could have a dilutive
effect on the book value and earnings per share of New Key Common
Stock, and could affect the relative voting rights of New Key
shareholders. Further, additional shares could be issued by
New Key in a private placement to a holder that would, among other
things, vote against a business combination. The effect of issuing
shares to a holder that would vote against a business combination
could be to dilute the ownership of a person attempting to gain
control of New Key. Accordingly, a possible effect of the New Key
Articles of Incorporation may be to deter potential acquirors from
attempts to take control of New Key.
Express Terms of New Key Common Stock, New Key Preferred
Stock and New Key Serial Preferred Stock. The express terms of the
New Key Common Stock, the New Key Preferred Stock, and the New Key
Serial Preferred Stock are discussed under the heading "DESCRIPTION
OF NEW KEY CAPITAL STOCK."
Voting. If a shareholder vote is required under
applicable law, the New Key Articles of Incorporation reduce the
shareholder vote required under applicable law from a two-thirds
vote to a majority of the voting power of New Key to approve any
merger, consolidation, dissolution, disposition of all or
substantially all of the corporation's assets, and any "majority
share acquisition" or "combination," except that the New Key
Articles of Incorporation do not reduce the vote of shareholders
required to approve a transaction which requires shareholder
approval under the Ohio Interested Shareholder Transaction Law.
See "COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF
KEYCORP, CBC AND NEW KEY -- Voting Rights -- Mergers,
Consolidations, Dissolutions, Combinations, and Other
Transactions." No holders of shares of any class of New Key
Capital Stock will be entitled to cumulate their voting power.
Opt-Out of Control Share Acquisition Statute. The
New Key Articles of Incorporation contain an election that New Key
will not be covered by Section 1701.831 of the Ohio General
Corporation Law, which would otherwise apply to control share
acquisitions of shares of New Key. For a more detailed discussion,
see "COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF CAPITAL STOCK OF
KEYCORP AND NEW KEY -- State Takeover Statutes and Takeover
Provisions of Charter Documents."
Regulations of New Key
The following summary is intended to highlight selected
provisions of the New Key Regulations. This summary is not
intended to be complete and is qualified in its entirety by
reference to the more detailed information contained in the New Key
Regulations which are included in KeyCorp's Current Report on
Form 8-K dated October 13, 1993, which is incorporated by reference
herein. In particular, this summary does not describe certain
provisions of the New Key Regulations which are, or the effects of
which are, described under the heading "CERTAIN INFORMATION
REGARDING THE PENDING MERGER OF KEYCORP AND SOCIETY -- Board of
Directors and Chief Executive Officers of New Key through
December 31, 1998," and reference is made to that section of this
Proxy Statement-Prospectus for a description of such provisions
under Ohio law, regulations are similar to by-laws under New York
or Colorado law.
Advance Notice of Shareholder Proposals and Nominations.
The New Key Regulations will provide that at any meeting of
shareholders, proposals by shareholders (including director
nominations) will be considered if advance notice of such proposal
has been timely given as described below. Written notice of any
shareholder proposal must be received by the Secretary of New Key
at New Key's principal executive offices not less than 60 nor more
than 90 days prior to the shareholders' meeting, unless New Key
gives less than 75 days' prior public disclosure of the date of the
meeting or prior notice of the meeting to its shareholders, in
which case written notice of such shareholder proposal must be
given to New Key's Secretary within 15 days of the date on which
New Key gives prior public disclosure of the date of the meeting or
prior notice of the meeting to its shareholders. The written
notice of any such proposal must set forth the text of the proposal
to be presented and a brief written statement of the reasons why
such shareholder favors the proposal, such shareholder's name and
record address, the number and class of all shares of each class of
stock of New Key beneficially owned by such shareholder, and any
material interest of such shareholder in the proposal (other than
as a shareholder). In addition, if the shareholder proposal
constitutes a nomination of an individual for director, the written
notice of such proposal must also set forth: (a) as to each person
who is not an incumbent director when the shareholder proposes to
nominate such person for election as a director, (i) the name, age,
business, and residence address of such person, (ii) the principal
occupation or employment of such person for the last five years,
(iii) the class and number of shares of capital stock of New Key
that are beneficially owned by such person, (iv) all positions of
such person as a director, officer, partner, employee, or
controlling shareholder of any corporation or other business
entity, (v) any prior position as a director, officer, or employee
of a depository institution or any company controlling a depository
institution, (vi) any other information regarding such person that
would be required to be included in a proxy statement filed
pursuant to the proxy rules of the SEC had such person been
nominated by the Board of Directors of New Key, and (vii) the
written consent of each nominee to serve as a director of New Key
if so elected, and, (b) as to the shareholder giving the written
notice, (i) a representation that the shareholder is a holder of
record of shares of New Key entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice, and (ii) a
description of all arrangements or understandings between the
shareholder and such nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination is
to be made by the shareholder.
Classified Board of Directors. The New Key Regulations
provide that the Board of Directors of New Key will be divided into
three classes having as equal a number of directors as possible.
The respective terms of the three classes are staggered so that at
any time the term of one class will expire at the next annual
meeting of shareholders thereafter occurring, the term of a second
class will expire at the second annual meeting of shareholders
thereafter occurring, and the term of a third class will expire at
the third annual meeting of shareholders thereafter occurring. At
each annual meeting of shareholders of New Key, the successors to
the directors of the class whose term will expire in that year will
be elected to hold office for a term expiring at the annual meeting
of shareholders occurring in the third year after the date of their
election.
The New Key Regulations provide that the Board of
Directors or the shareholders of New Key may change the number of
directors to a total number of no fewer than 20 directors and no
more than 24 directors. The Board of Directors of New Key may
change the total number of directors by the affirmative vote of
two-thirds of the entire authorized Board. The shareholders of
New Key may change the total number of directors at a meeting of
the shareholders called for the purpose of electing directors
(a) by the affirmative vote of the holders of shares entitling them
to exercise three-quarters of the voting power of New Key
represented at the meeting and entitled to elect directors or
(b) if the proposed change in the number of directors is
recommended by two-thirds of the entire authorized Board of
Directors, by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of
New Key represented at the meeting and entitled to elect directors.
The ability of the Board of Directors or shareholders to change the
total number of directors is subject to the limitation regarding
the number of directors referred to above and to the limitations
described in "CERTAIN INFORMATION REGARDING THE PENDING MERGER OF
KEYCORP AND SOCIETY -- Board of Directors and Chief Executive
Officers of New Key through December 31, 1998," regarding the
number of Insider Directors and the requirement that any increase
or decrease in the number of directors be effected by a multiple of
two.
The New Key Regulations provide that the number of
authorized directors of New Key will be automatically increased by
two and that the holders of any class or series of preferred stock
of New Key will have the right to elect two directors of New Key
during any time when dividends payable on such shares are in
arrears, as set forth in the New Key Articles of Incorporation
and/or the express terms of the preferred stock of New Key. See
"DESCRIPTION OF NEW KEY CAPITAL STOCK -- New Key Preferred Stock
and New Key Depositary Shares" and "Additional Class of Authorized
but Unissued New Key Serial Preferred Stock."
Nominations for Directors. For a discussion of the
process of director nominations through December 31, 1998, see
"CERTAIN INFORMATION REGARDING THE PENDING MERGER OF KEYCORP AND
SOCIETY -- Board of Directors and Chief Executive Officers of
New Key through December 31, 1998." The New Key Regulations
provide that after December 31, 1998, nominations for the election
of directors may be made by the affirmative vote of two-thirds of
the entire authorized Board of Directors.
Nominations for the election of directors may also be
made, before and after December 31, 1998, by any shareholder of
New Key entitled to vote for the election of directors at a
meeting, but only if written notice of such shareholder's intent to
make such nomination is received by the Secretary of New Key, at
New Key's principal executive offices, not less than 60 nor more
than 90 days prior to the meeting; provided, however, that in the
event that less than 75 days' notice to the shareholders or prior
public disclosure of the date of the meeting is given or made, the
written notice of such shareholder's intent to make such nomination
must be given to the Secretary of New Key not later than the close
of business on the fifteenth day following the earlier of the day
on which such notice of the date of the meeting was mailed or such
public disclosure was made. Each such notice of a shareholder's
intent to make a nomination must set forth specific information
about the nominee and the shareholder giving the notice. See
"AMENDED AND RESTATED ARTICLES OF INCORPORATION AND REGULATIONS OF
NEW KEY -- Regulations of New Key -- Advance Notice of Shareholder
Proposals and Nominations."
Vote Required for Director Action. The New Key
Regulations provide, in the absence of a different or greater vote
as specified for specific matters in the New Key Regulations, that
a majority of the entire authorized Board of Directors constitutes
a quorum for the transaction of any business at any meeting at the
Board and that the affirmative vote of a majority of directors
present at any meeting at which a quorum is present will be the act
of the Board.
The New Key Regulations provide that the affirmative vote
of at least two-thirds of the entire authorized Board of Directors
is required for approval of any of the following transactions:
(a) any merger or consolidation of New Key (i) with any interested
shareholder, as such term is defined in Chapter 1704 of the Ohio
General Corporation Law, or (ii) with any other corporation if the
merger or consolidation is caused by any interested shareholder,
(b) any recommendation or approval of any transaction as a result
of which any person will become an interested shareholder, (c) any
merger or consolidation involving New Key and any other corporation
with assets having an aggregate book value equal to 50% or more of
the aggregate book value of all the assets of New Key determined on
a consolidated basis, (d) any liquidation or dissolution of
New Key, (e) any sale, lease, exchange, mortgage, pledge, transfer,
or other disposition (in one transaction or a series of
transactions) to or with an interested shareholder of assets of
New Key which assets have an aggregate book value equal to 10% or
more of the aggregate book value of all the assets of New Key
determined on a consolidated basis, (f) any sale, lease, exchange,
mortgage, pledge, transfer, or other disposition (in one
transaction or a series of transactions) to or with any person of
assets of New Key which assets have an aggregate book value equal
to 25% or more of the aggregate book value of all the assets of
New Key determined on a consolidated basis, (g) any transaction
which results in the issuance or transfer by New Key of more than
15% of the voting stock of New Key to any person, (h) any
transaction involving New Key which has the effect, directly or
indirectly, of increasing the proportionate share of the stock or
securities of any class or series of New Key which is owned by an
interested shareholder, (i) any transaction requiring the amendment
of any provision of the New Key Articles of Incorporation if to
amend such provision otherwise would require an affirmative vote of
at least two-thirds of the entire authorized Board of Directors or
any transaction requiring the amendment of any provision of the
New Key Regulations if to amend such provision otherwise would
require an affirmative vote of at least two-thirds of the entire
authorized Board of Directors of New Key (provided, however, if the
amendment of any provision of the New Key Regulations requires an
affirmative vote of more than two-thirds of the entire authorized
Board of Directors, any transactions having the same effect may
only be authorized by the vote required to amend such provision of
the New Key Regulations), and (j) any receipt by an interested
shareholder, other than proportionately as a shareholder of
New Key, of the benefit, directly or indirectly, of any financial
benefits provided through New Key.
Removal of Directors and Filling Vacancies. The New Key
Regulations provide that the Board of Directors may remove any
director and thereby create a vacancy on the Board: (a) if by order
of court he has been found to be of unsound mind or if he is
adjudicated a bankrupt or (b) if within 60 days from the date of
his election he does not qualify by accepting in writing his
election to such office or by acting at a meeting of directors.
All the directors, or all of the directors of a
particular class, or any individual director, may be removed from
office, without assigning any cause, by the affirmative vote of the
holders of shares entitling them to exercise three-quarters of the
voting power of New Key entitled to elect directors in place of
those to be removed. In case of any such removal, a new director
nominated in accordance with the New Key Regulations may be elected
at the same meeting for the unexpired term of each director
removed. Failure to elect a director to fill the unexpired term of
any director removed is deemed to create a vacancy on the Board.
The New Key Regulations will provide that any vacancies
on the Board of Directors resulting from death, resignation,
removal, or other cause may only be filled by the affirmative vote
of two-thirds of the remaining directors then in office, even
though less than a quorum of the Board of Directors, or by a sole
remaining director. Newly created directorships resulting from any
increase in the number of directors by action of the Board of
Directors shall be filled by the affirmative vote of two-thirds of
the directors then in office, or if not so filled, by the
shareholders at the next annual meeting thereof or at a special
meeting called for that purpose in accordance with the New Key
Regulations. In the event that the shareholders increase the
authorized number of directors in accordance with the New Key
Regulations but fail at the meeting at which such increase is
authorized, or an adjournment of that meeting, to elect the
additional directors provided for, or if the shareholders fail at
any meeting to elect the whole authorized number of directors, such
vacancies may be filled by the affirmative vote of two-thirds of
the directors then in office. Any director elected in accordance
with the three preceding sentences shall hold office for the
remainder of the full term of the class of directors in which the
new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified.
Notwithstanding the foregoing, through December 31, 1998, the Board
of Directors of New Key may only fill vacancies (however caused) in
accordance with the provisions of the New Key Regulations described
under "CERTAIN INFORMATION REGARDING THE PENDING MERGER OF KEYCORP
AND SOCIETY -- Board of Directors and Chief Executive Officers of
New Key through December 31, 1998" and "AMENDED AND RESTATED
ARTICLES OF INCORPORATION AND REGULATIONS OF NEW KEY -- Regulations
of New Key -- Nominations for Directors."
Membership of Board Committees. The New Key Regulations
provide that the Board of Directors may, by resolution adopted by
the affirmative vote of at least two-thirds of the entire
authorized Board, designate annually (a) four or more of its
members to constitute members of the Executive Committee and
(b) one or more of its members to be alternate members of the
Executive Committee to take the place of any absent member or
members at any meeting of the Executive Committee. For a
discussion regarding the membership of the Executive Committee
through December 31, 1998, see "CERTAIN INFORMATION REGARDING THE
PENDING MERGER OF KEYCORP AND SOCIETY -- Board of Directors and
Chief Executive Officers of New Key through December 31, 1998."
The New Key Regulations also provide for the designation
of a Nominating Committee, to remain in effect until December 31,
1998. For a detailed discussion regarding the Nominating
Committee, see "CERTAIN INFORMATION REGARDING THE PENDING MERGER OF
KEYCORP AND SOCIETY -- Board of Directors and Chief Executive
Officers of New Key through December 31, 1998."
The New Key Regulations further provide that the Board of
Directors may, by resolution adopted by the affirmative vote of at
least two-thirds of the entire authorized Board, designate from
among its members one or more other committees, each of which must
(a) consist of not fewer than three directors, together with such
alternates as the Board of Directors may appoint to take the place
of any absent member or members at any meeting of such committee,
and (b) except as otherwise prescribed by law, have such authority
of the Board as may be specified in the resolution of the Board
designating such committee.
Indemnification. The New Key Regulations provide that
New Key will indemnify to the fullest extent permitted by law any
person made or threatened to be made a party to any action, suit,
or proceeding by reason of the fact that he is or was a director,
officer, or employee of New Key or is or was serving at the request
of New Key as a director, trustee, officer, or employee of a bank,
other corporation, partnership, joint venture, trust, or
enterprise. New Key will indemnify any person who served as a
director, officer, or employee of any constituent corporation that
is merged into New Key, or who served at the request of such
constituent corporation as a director, officer, trustee, or
employee of a bank, other corporation, partnership, joint venture,
trust, or other enterprise for acts, omissions, or other events or
occurrences prior to the merger to the same extent as the
constituent corporation, if its separate existence had continued,
would have been required to indemnify such persons. The
indemnification provided in the New Key Regulations is not
exclusive of any other rights to indemnification which any persons
may have.
Headquarters Location. The New Key Regulations provide
that the headquarters and principal executive offices of New Key
will be located in Cleveland, Ohio.
Amendment of New Key Regulations. For a discussion of
the limitations on the amendment, repeal, or alteration of the
New Key Regulations, see "COMPARISON OF CERTAIN RIGHTS OF HOLDERS
OF CAPITAL STOCK OF KEYCORP, CBC AND NEW KEY -- Amendment of
Charter Documents -- By-Laws/Regulations."
VALIDITY OF KEYCORP COMMON STOCK
The validity of the CBC/KeyCorp Merger Shares has been
passed upon by Walter V. Ferris, Executive Vice President and
General Counsel of KeyCorp.
EXPERTS
The consolidated statements of condition of Commercial
Bancorporation of Colorado, and subsidiaries as of December 31,
1992 and 1991, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1992, included in
Appendix E to this Proxy Statement-Prospectus have been audited by
Deloitte & Touche, independent auditors, as stated in their report
appearing therein, and have been so included in reliance upon the
report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of KeyCorp included
in KeyCorp's Report on Form 8-K dated March 18, 1993; as amended by
Form 8 dated May 20, 1993, have been audited by Ernst & Young,
independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
Representatives of Deloitte & Touche are expected to be
present at the Special Meeting, will be given an opportunity to
make a statement if they so desire, and are expected to be
available to respond to appropriate questions.
OTHER MATTERS
Management of CBC knows of no other business to come
before the Special Meeting other than the proposal to consider and
vote upon the CBC/KeyCorp Merger Agreement provided for in the
Notice of Special Meeting and discussed in this Proxy Statement-
Prospectus. If any other matters should properly come before the
Special Meeting, the persons designated as proxies in the
accompanying proxy card will vote the shares represented by all
properly-executed proxies on such matters in such manner as shall
be determined by the Board of CBC.
CBC SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any proposal which a CBC shareholder wishes to have
included in CBC's proxy materials for CBC's Annual Meeting of
Shareholders to be held in 1994 must be received at the executive
offices of CBC at Century Bank Plaza, 3300 East First Avenue,
Denver, Colorado 80206, no later than February 1, 1994. Please
note that, if the CBC/KeyCorp Merger is completed as contemplated
by the CBC/KeyCorp Merger Agreement, CBC will not hold an Annual
Meeting of Shareholders in 1994. If CBC does hold an Annual
Meeting of Shareholders in 1994, the Board of Directors will review
each proposal timely received from shareholders to determine if it
satisfies the criteria established by applicable law for inclusion
in CBC's 1994 proxy materials.
<PAGE>
APPENDIX A
AMENDED AND RESTATED
AGREEMENT
DATED AS OF THE 11th DAY OF SEPTEMBER, 1993
BY AND BETWEEN
KEYCORP
AND
COMMERCIAL BANCORPORATION OF COLORADO
<PAGE>
TABLE OF CONTENTS
Page
____
RECITALS 1
ARTICLE I. THE MERGER
SECTION 1.1. Key Bancshares of Colorado, Inc. 4
SECTION 1.2. Structure of the Merger 4
SECTION 1.3. Effect on Outstanding Shares 5
SECTION 1.4. Exchange Procedures 7
SECTION 1.5. Options 12
ARTICLE II. CONDUCT PENDING THE MERGER
SECTION 2.1. Conduct of CBC's Business Prior to the
Effective Time 14
SECTION 2.2. Forbearance by CBC 14
SECTION 2.3. Forbearance by KeyCorp 17
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties 18
ARTICLE IV. COVENANTS
SECTION 4.1. Merger Proposals 36
SECTION 4.2. Certain Policies of CBC 37
SECTION 4.3. Employee Benefits 38
SECTION 4.4. Access and Information 39
SECTION 4.5. Certain Filings, Consents and Arrangements 41
SECTION 4.6. Indemnification; Directors' and Officers'
Insurance 41
SECTION 4.7. Additional Agreements 44
SECTION 4.8. Publicity 45
SECTION 4.9. Proxy; Registration Statement 45
SECTION 4.10. Shareholders' Meeting 46
SECTION 4.11. Securities Act; Pooling-of-Interests 46
SECTION 4.12. Pooling-of-Interests and Tax-Free
Reorganization Treatment 47
SECTION 4.13. Stock Exchange Listing 47
SECTION 4.14. Notification of Certain Matters 47
SECTION 4.15. Antitakeover Statutes 48
ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1. Conditions to All Parties' Obligations 48
SECTION 5.2. Conditions to Obligations of KeyCorp 51
SECTION 5.3. Conditions to the Obligations of CBC 53
ARTICLE VI. TERMINATION
SECTION 6.1. Termination 55
SECTION 6.2. Effect of Termination 60
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.1. Effective Date and Effective Time 60
ARTICLE VIII. OTHER MATTERS
SECTION 8.1. Certain Definitions; Interpretation 61
SECTION 8.2. Survival 62
SECTION 8.3. Waiver 62
SECTION 8.4. Counterparts 63
SECTION 8.5. Governing Law 63
SECTION 8.6. Expenses 63
SECTION 8.7. Notices 63
SECTION 8.8. Entire Agreement; Etc. 64
SECTION 8.9. Assignment 64
SECTION 8.10. Directors' Qualifying Shares 64
<PAGE>
LIST OF ANNEXES
Annex 1 -- Form of Option Agreements (Recital D)
Annex 2 -- Significant Subsidiaries of KeyCorp (Section 3.1(d))
Annex 3 -- Significant Subsidiaries of CBC (Section 3.1(d))
Annex 4 -- CBC Benefit Plans (Section 3.1(n))
Annex 5 -- Form of Affiliate's Letter (Section 4.11(b))
<PAGE>
INDEX TO DEFINITIONS
Term Location of Definition
____ ______________________
Affiliates 4.11(a)
Average Closing Price 1.3(b)
BHC Act Recital C
Bank Regulators 3.1(k)
Benefit Plans 3.1(n)
CBC Preamble
CBC Class A Common Stock Recital C
CBC Class B Common Stock Recital C
CBC Common Stock Recital C
CBC Convertible Subordinated Debentures Recital C
CBC Meeting 4.10
CBC Preferred Stock Recital C
CCC 1.2
Certificate 1.4(a)
Code Recital E
Control 8.1
Conversion Number 1.3(a)
Costs 4.6(a)
Determination Date 6.1(e)
Disclosure Letter 3.1
Dissenters' Shares 1.3
EPA 3.1(u)
ERISA 3.1(n)
Effective Date 7.1
Effective Time 7.1
Exchange Agent 1.4(b)
Exchange Fund 1.4(b)
Executive Agreements 4.3(c)
FDIC 5.1(b)
Federal Reserve Board 5.1(b)
Hazardous Material 3.1(u)(vi)(z)
IRS 3.1(n)
Index Group 6.1(e)
Index Price 6.1(e)
KeyCorp Preamble
KeyCorp Common Stock Recital A
Key Bancshares 1.1
Key Colorado Recital B
Loan Property 3.1(u)(vi)(x)
Material Adverse Effect 8.1
Merger 1.2
Merger Proposal 4.1
NYSE 1.3(b)
OREO 3.1(v)
Option Agreements Recital D
Participation Facility 3.1(u)(vi)(y)
Pension Plan 3.1(n)
Person 8.1
Plan Preamble
Proxy Statement 3.1(t)
Proxy Statement/Prospectus 3.1(t)
Registration Statement 3.1(t)
Reports 3.1(g)
Rights Recital C
SEC 3.1(g)
Securities Act 3.1(t)
Securities Exchange Act 3.1(g)
Significant Subsidiary 3.1(b)
Starting Date 6.1(e)
Starting Price 6.1(e)
Subsidiary 8.1
Surviving Corporation 1.2
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF ACQUISITION,
REORGANIZATION AND MERGER, dated as of the 11th day of September,
1993 (the "Plan"), by and between KeyCorp ("KeyCorp") and
Commercial Bancorporation of Colorado ("CBC").
INTRODUCTION
KeyCorp and CBC entered into an Agreement and Plan of
Acquisition, Reorganization and Merger dated as of the 11th day
of September, 1993 (the "September 11, 1993 Agreement"). The
parties now wish to amend and restate the September 11, 1993
Agreement to clarify certain provisions. Accordingly, the
parties have executed this Amended and Restated Plan of
Acquisition, Reorganization and Merger on or about the 8th day of
December, 1993, to be effective as of the execution of the
September 11, 1993 Agreement.
RECITALS:
A. KeyCorp. KeyCorp has been duly incorporated and is an
existing corporation in good standing under the laws of the State
of New York, with its principal executive offices located in
Albany, New York. As of the date hereof, KeyCorp has 350,000,000
authorized shares of common stock, par value $5.00 per share
("KeyCorp Common Stock"), of which 101,211,313 shares were
outstanding as of June 30, 1993, and 5,000,000 authorized shares
of preferred stock, par value $5.00 per share, of which 479,394
shares of its Adjustable Rate Cumulative Preferred Stock Series A
(redeemed August 2, 1993) and 1,280,000 shares of its Cumulative
Preferred Stock Series B were outstanding as of June 30, 1993 (no
other class of capital stock being authorized).
B. Key Colorado. Key Bank of Colorado ("Key Colorado") is
a Colorado chartered commercial bank with all of its capital
stock owned by KeyCorp.
C. CBC. CBC has been duly incorporated and is an existing
corporation in good standing under the laws of the State of
Colorado, with its principal executive offices located in Denver,
Colorado. CBC is a bank holding company duly registered with the
Federal Reserve Board (as defined below) under the Bank Holding
Company Act of 1956, as amended (the "BHC Act"). As of
August 19, 1993, CBC has (i) 5,600,000 authorized shares of
common stock, par value $1.00 per share ("CBC Common Stock"), of
which 2,636,579 shares of Class A Common Stock ("CBC Class A
Common Stock") were issued and 2,407,101 were outstanding (with
229,478 shares held in CBC's treasury) while 431,950 shares of
Class B Common Stock ("CBC Class B Common Stock") were issued and
outstanding, and (ii) 180,000 authorized shares of preferred
stock, par value $1.00 per share ("CBC Preferred Stock"), of
which no shares were outstanding as of August 19, 1993. Pursuant
to the terms of its Adjustable Rate Convertible Subordinated
Debentures Due 2004 ("CBC Convertible Subordinated Debentures"),
as of August 19, 1993, CBC is obligated to issue up to 296,838
additional shares of its CBC Class A Common Stock. CBC is also
obligated to issue up to 62,700 additional shares of its CBC
Class A Common Stock pursuant to its Employee Stock Option Plan.
CBC does not have any shares of its capital stock reserved for
issuance, any outstanding option, call or commitment relating to
shares of its capital stock or any outstanding securities,
obligations or agreements convertible into or exchangeable for,
or giving any person any right (including, without limitation,
pre-emptive rights) to subscribe for or acquire from it, any
shares of its capital stock (collectively, "Rights"), except
(i) pursuant to the Option Agreements (as defined below) which
will be entered into immediately after the execution and delivery
of this Plan, (ii) pursuant to the terms of the CBC Convertible
Subordinated Debentures and (iii) pursuant to the terms of the
CBC Employee Stock Option Plan.
D. The Option Agreements. As a condition to, and
immediately following, the execution and delivery of this Plan,
and as a condition to and inducement of the willingness of
KeyCorp to enter into this Plan, KeyCorp and CBC will enter into
two Stock Option Agreements in the form set forth in Annex 1-A
and Annex 1-B, respectively, (the "Option Agreements"), pursuant
to which CBC will grant to KeyCorp (i) an option to purchase
newly issued shares of CBC Class A Common Stock, up to 19.9% of
the currently outstanding CBC Class A Common Stock plus certain
subsequent issuances of CBC Class A Common Stock, and (ii) an
option to purchase up to 19.9% of the currently outstanding CBC
Class B Common Stock plus certain subsequent issuances of CBC
Class B Common Stock, both subject to regulatory restrictions and
upon the terms and conditions therein contained.
E. Intention of the Parties. It is the intention of the
parties to this Plan that the Merger (as defined below) (i) for
federal income tax purposes shall qualify as a "reorganization"
within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code") and (ii) for accounting purposes
shall qualify for treatment as a "pooling of interests."
F. Board Approvals. The respective Boards of Directors of
KeyCorp and CBC have duly approved the Plan and have duly
authorized its execution and delivery.
NOW, THEREFORE, in consideration of their mutual promises
and obligations hereunder, the parties hereto adopt and make this
Plan and prescribe the terms and conditions hereof and the manner
and basis of carrying it into effect, which shall be as follows:
ARTICLE I. THE MERGER
SECTION 1.1. Key Bancshares of Colorado, Inc. Promptly
following the execution of this Agreement, KeyCorp shall take the
steps necessary and desirable to organize a Colorado corporation
as a direct "first tier" subsidiary of KeyCorp with the name "Key
Bancshares of Colorado, Inc." ("Key Bancshares").
SECTION 1.2. Structure of the Merger. On the Effective
Date (as defined in Section 7.1) CBC will merge (the "Merger")
with and into Key Bancshares, with Key Bancshares being the
surviving corporation (the "Surviving Corporation"), pursuant to
the provisions of, and with the effect provided in, the Colorado
Corporation Code (the "CCC"). At the Effective Time the articles
of incorporation and bylaws of the Surviving Corporation shall be
the articles of incorporation and the bylaws of Key Bancshares in
effect immediately prior to the Effective Time. At the Effective
Time, the directors and officers of the Surviving Corporation
shall be the directors and officers of Key Bancshares immediately
prior to the Effective Time. As soon after the Effective Time as
administratively feasible, KeyCorp intends to cause
Key Bancshares to merge into KeyCorp and to then cause the bank
subsidiaries of Key Bancshares immediately prior to such Merger
of Key Bancshares into KeyCorp (which by operation of the Merger
will be the bank subsidiaries of CBC) and Key Colorado to be
consolidated into Century Bank Sterling (the "Subsidiary
Consolidation") under the name of Key Bank of Colorado.
SECTION 1.3. Effect on Outstanding Shares. (a) By virtue
of the Merger, automatically and without any action on the part
of the holder thereof, each share of CBC Class A Common Stock and
CBC Class B Common Stock issued and outstanding at the Effective
Time (other than (i) shares which have not been voted in favor of
the approval of this Plan with respect to which appraisal rights
have been perfected in accordance with Section 7-4-124 of the CCC
(the "Dissenters' Shares"), (ii) shares held directly or
indirectly by KeyCorp, other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted, and
(iii) shares held as treasury stock of CBC) shall become and be
converted into 0.7460 of a share of KeyCorp Common Stock (the
"Conversion Number"); provided that if KeyCorp effects a stock
dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction after the
date hereof and before the Effective Time (as defined in
Section 7.1), the Conversion Number shall be appropriately
adjusted. As of the Effective Time, each share of CBC Common
Stock held directly or indirectly by KeyCorp, other than shares
held in a fiduciary capacity or in satisfaction of a debt
previously contracted, and shares held as treasury stock of CBC,
shall be canceled, retired and cease to exist, and no exchange or
payment shall be made with respect thereof.
(b) No fractional shares of KeyCorp Common Stock shall be
issued pursuant hereto. In lieu of the issuance of any
fractional share of KeyCorp Common Stock pursuant to
Section 1.3(a), cash adjustments will be paid to holders in
respect of any fractional shares of KeyCorp Common Stock that
would otherwise be issuable; the amount of such cash adjustment
shall be equal to the Average Closing Price of a share of KeyCorp
Common Stock multiplied by the fraction of a share of KeyCorp
Common Stock to which the holder would be entitled. The "Average
Closing Price" means the average closing price per share of
KeyCorp Common Stock, as reported on the New York Stock Exchange
("NYSE") Composite Transactions reporting system (as reported by
The Wall Street Journal or, if not reported thereby, another
authoritative source), for the twenty NYSE trading days ending on
the fifth NYSE trading day prior to the Effective Date.
(c) The shares of the Surviving Corporation issued and
outstanding immediately prior to the Effective Time shall remain
outstanding and unchanged after the Merger and shall thereafter
constitute all of the issued and outstanding shares of the
capital stock of the Surviving Corporation.
(d) Dissenters' Shares shall be purchased and paid for in
accordance with Sections 7-4-123 and 7-4-124 of the CCC. Any
amount paid for Dissenters' Shares and any appraisal costs, legal
costs, and any other expenses incurred with respect to the
Dissenters' Shares will be paid out of funds deposited by CBC in
an escrow account with an independent escrow agent prior to the
Effective Time.
(e) Notwithstanding anything to the contrary herein,
KeyCorp may, upon notice to CBC, modify the structure of the
Merger in order to achieve the intention of the parties as to the
federal income tax treatment described in Recital E, and CBC
shall promptly enter into any amendment to this Agreement
pursuant to Section 8.3 of this Agreement necessary or desirable
to accomplish such structure modification, whether such amendment
is after submission to or approval by the shareholders of CBC,
provided that no such amendment shall reduce the amount or
adversely change the form or tax treatment of the consideration
to be received by the CBC shareholders in the Merger.
SECTION 1.4. Exchange Procedures. (a) At and after the
Effective Time, each certificate (each a "Certificate")
previously representing shares of CBC Common Stock shall
represent (i) the number of whole shares of KeyCorp Common Stock
and (ii) the right to receive cash in lieu of fractional shares
into which such CBC Common Stock has been converted pursuant to
Section 1.3(a) and (b). Certificates previously representing
shares of CBC Common Stock shall be exchanged for certificates
representing whole shares of KeyCorp Common Stock and cash in
lieu of fractional shares issued in consideration therefor upon
the surrender of such Certificates in accordance with this
Section 1.4, without any interest thereon.
(b) As of the Effective Time, KeyCorp shall deposit, or
shall cause to be deposited, with Mellon Securities Trust Company
(or its successor as KeyCorp's Stock Transfer Agent), or such
other bank or trust company acceptable to the parties (the
"Exchange Agent"), for the benefit of the holders of shares of
CBC Common Stock, for exchange in accordance with this
Section 1.4, certificates representing the shares of KeyCorp
Common Stock and the cash in lieu of fractional shares (such cash
and certificates for shares of KeyCorp Common Stock, together
with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Section 1.3 and paid pursuant to this Section 1.4 in
exchange for outstanding shares of CBC Common Stock. Prior to
the Effective Time, CBC shall deposit or cause to be deposited,
in an escrow account the amount, if any, determined by CBC to be
necessary to redeem CBC Convertible Subordinated Debentures as an
incident to this transaction.
(c) Promptly after the Effective Time, KeyCorp shall cause
the Exchange Agent to mail to each holder of record of a
Certificate or Certificates the following: (i) a letter of
transmittal specifying that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent, which shall
be in a form and contain any other provisions as KeyCorp and CBC
may reasonably agree; and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates
representing shares of KeyCorp Common Stock and cash in lieu of
fractional shares. Upon the proper surrender of a Certificate to
the Exchange Agent, together with a properly completed and duly
executed letter of transmittal, the holder of such Certificate
shall be entitled to receive in exchange therefor (x) a
certificate representing that number of whole shares of KeyCorp
Common Stock and (y) a check representing the amount of cash in
lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive
in respect of the Certificate surrendered pursuant to the
provisions of Section 1.3(a), and the Certificate so surrendered
shall forthwith be canceled. No interest will be paid or accrued
on the cash in lieu of fractional shares and unpaid dividends and
distributions, if any, payable to holders of Certificates. In
the event of a transfer of ownership of any shares of CBC Common
Stock not registered in the transfer records of CBC, a
certificate representing the proper number of shares of KeyCorp
Common Stock, together with a check for the cash to be paid in
lieu of fractional shares, may be issued to the transferee if the
Certificate representing such CBC Common Stock is presented to
the Exchange Agent, accompanied by documents sufficient (i) to
evidence and effect such transfer and (ii) to evidence that all
applicable stock transfer taxes have been paid.
(d) Whenever a dividend or other distribution is declared
by KeyCorp on the KeyCorp Common Stock, the record date for which
is at or after the Effective Time, the declaration shall include
dividends or other distributions on all shares issuable pursuant
to this Plan; provided that no dividend or other distribution
declared or made on the KeyCorp Common Stock shall be paid to the
holder of any unsurrendered Certificate with respect to the
shares of KeyCorp Common Stock represented thereby until the
holder of such Certificate shall duly surrender such Certificate
in accordance with this Section 1.4. Following such surrender of
any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of KeyCorp Common Stock
issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions
having a record date after the Effective Time theretofore payable
with respect to such whole shares of KeyCorp Common Stock and not
yet paid, and (ii) at the appropriate payment date, the amount of
dividends or distributions having (x) a record date after the
Effective Time but prior to surrender and (y) a payment date
subsequent to surrender payable with respect to such whole shares
of KeyCorp Common Stock.
(e) From and after the Effective Time, there shall be no
transfers on the stock transfer records of CBC of any shares of
CBC Common Stock that were outstanding immediately prior to the
Effective Time. If after the Effective Time Certificates are
presented to KeyCorp or the Surviving Corporation, they shall be
canceled and exchanged for the shares of KeyCorp Common Stock and
cash in lieu of fractional shares, if any, deliverable in respect
thereof pursuant to this Plan in accordance with the procedures
set forth in this Section 1.4.
(f) Any portion of the Exchange Fund (including the
proceeds of any investments thereof and any KeyCorp Common Stock)
that remains unclaimed by the shareholders of CBC for six months
after the Effective Time shall be repaid to KeyCorp. Any
shareholders of CBC who have not theretofore complied with
Section 1.4 shall thereafter look only to KeyCorp for payment of
their shares of KeyCorp Common Stock, cash in lieu of fractional
shares, and any unpaid dividends and distributions on the KeyCorp
Common Stock deliverable in respect of each share of CBC Common
Stock such stockholder holds as determined pursuant to this Plan,
in each case, without any interest thereon. If outstanding
certificates for shares of CBC Common Stock are not surrendered
or the payment for them not claimed prior to the date on which
such payments would otherwise escheat to or become the property
of any governmental unit or agency, the unclaimed items shall, to
the extent permitted by abandoned property and any other
applicable law, become the property of KeyCorp (and to the extent
not in its possession shall be paid over to it), free and clear
of all claims or interest of any person previously entitled to
such claims. Notwithstanding the foregoing, none of KeyCorp, Key
Bancshares, Key Colorado, the Exchange Agent or any other person
shall be liable to any former holder of CBC Common Stock for any
amount delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(g) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact
by the person claiming such Certificate to be lost, stolen or
destroyed and, if required by KeyCorp, the posting by such person
of a bond in such amount as KeyCorp may direct as indemnity
against any claim that may be made against it with respect to
such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of KeyCorp
Common Stock and cash in lieu of fractional shares deliverable
(and unpaid dividends and distributions) in respect thereof
pursuant to this Plan.
SECTION 1.5. Options. At the Effective Time, each option
granted by CBC to purchase shares of CBC Common Stock, which is
outstanding and unexercised immediately prior thereto, shall be
converted, by agreement of the holder, into an option to purchase
shares of KeyCorp Common Stock. Each such option that is
converted shall be converted into an option to purchase such
number of shares of KeyCorp Common Stock at such exercise price
as is determined as provided below (and otherwise having the same
duration and other terms as the original option, except that a
terminated optionee who has executed a letter in the form of
Annex 5 shall be entitled to exercise any such vested option up
to and including the later of (i) the date ninety days after the
Effective Date; or (ii) the date thirty days following the date
of such Optionee's termination of employment; provided that in no
event shall the original five-year term of any such option be
extended by this subsection (ii)):
(a) the number of shares of KeyCorp Common Stock to be
subject to the new option shall be equal to the product of
(i) the number of shares of CBC Common Stock subject to the
original option and (ii) the Conversion Number, rounded, if
necessary, to the nearest whole share; and
(b) the exercise price per share of KeyCorp Common
Stock under the new option shall be equal to (i) the
exercise price per share of CBC Common Stock under the
original option divided by (ii) the Conversion Number,
rounded, if necessary, to the nearest cent.
The adjustment provided herein with respect to any options which
are "incentive stock options" (as defined in Section 422 of the
Code) shall be effected in a manner consistent with
Section 424(a) of the Code.
ARTICLE II. CONDUCT PENDING THE MERGER
SECTION 2.1. Conduct of CBC's Business Prior to the
Effective Time. Except as expressly provided in this Plan,
during the period from the date of this Plan to the Effective
Time, CBC shall, and shall cause its subsidiaries to (i) conduct
its business in the usual, regular and ordinary course consistent
with past practice, (ii) use its best efforts (subject to
Section 2.2 below) to maintain and preserve intact its business
organization, employees and advantageous business relationships
and retain the services of its officers and key employees and
(iii) take no action which would adversely affect or delay the
ability of CBC, KeyCorp, Key Bancshares or Key Colorado to obtain
any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated hereby or to
perform its covenants and agreements on a timely basis under this
Plan.
SECTION 2.2. Forbearance by CBC. During the period from
the date of this Plan to the Effective Time, except as noted in
the letter delivered by CBC to KeyCorp pursuant to Section 3.1,
CBC shall not, and shall not permit any of its subsidiaries to,
without the prior written consent of KeyCorp:
(a) other than in the ordinary course of business
consistent with past practice, incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as
an accommodation become responsible for the obligations of
any other individual, corporation or other entity, or make
any loan or advance;
(b) adjust, split, combine or reclassify any capital
stock; make, declare or pay any dividend or make any other
distribution on, or directly or indirectly redeem, purchase
(except for the CBC Longevity Bonus Plan) or otherwise
acquire, any shares of its capital stock or any securities
or obligations convertible into or exchangeable for any
shares of its capital stock, or grant any stock appreciation
rights or grant any individual, corporation or other entity
any right to acquire any shares of its capital stock, except
for quarterly dividends of $0.15 per share on the
outstanding shares of Class A and Class B Common Stock and
except for dividends paid by any of the wholly-owned
subsidiaries of CBC to CBC or any of its wholly-owned
subsidiaries; or issue any additional shares of capital
stock except pursuant to the conversion of CBC Convertible
Subordinated Debentures or the exercise of employee stock
options outstanding as of the date hereof;
(c) sell, transfer, mortgage, encumber or otherwise
dispose of any of its material properties or assets to any
individual, corporation or other entity other than a direct
or indirect wholly-owned subsidiary of CBC, or cancel,
release or assign any indebtedness of any such person or any
claims held by any such person, except in the ordinary
course of business consistent with past practice or pursuant
to contracts or agreements in force at the date of this
Plan;
(d) other than in the ordinary course of business
consistent with past practice in individual amounts not to
exceed $10,000, make any investment either by purchase of
stock or securities, contributions to capital, property
transfers, or purchase of any property or assets of any
other individual, corporation or other entity other than a
wholly-owned subsidiary of CBC; provided that CBC shall make
no material acquisition of equity securities or business
operations of any such entity without KeyCorp's prior
consent;
(e) enter into or terminate any material contract or
agreement, or make any change in any of its material leases
or contracts, other than with respect to those involving
aggregate payments of less than, or the provision of goods
or services with a market value of less than, $25,000 per
annum;
(f) except as provided in Section 4.3, increase in any
manner the compensation or fringe benefits of any of its
employees or pay any pension or retirement allowance not
required by any existing plan or agreement to any such
employees, or become a party to, amend or commit itself to
any pension, retirement, profit-sharing or welfare benefit
plan or agreement or employment agreement with or for the
benefit of any employee, in each case other than in the
ordinary course of business consistent with past practice,
or voluntarily accelerate the vesting of any stock options
or other stock-based compensation; provided, however, that
the foregoing shall not apply to prohibit any increase or
acceleration disclosed in writing by CBC to KeyCorp prior to
the execution hereof which results from the execution of
this Plan or the consummation of any transaction
contemplated hereby;
(g) settle any claim, action or proceeding for
material money damages or restrictions upon the operations
of CBC or any of its subsidiaries;
(h) except as contemplated by Section 4.2., modify in
any material respect the manner in which it or its
subsidiaries have heretofore conducted and accounted for
their business;
(i) amend its articles of incorporation or its
by-laws; or
(j) agree to, or make any commitment to, take any of
the actions prohibited by this Section 2.2.
SECTION 2.3. Forbearance by KeyCorp. During the period
from the date of this Plan to the Effective Time, without the
prior written consent of CBC, KeyCorp will not take any action
that would substantially (a) delay or adversely affect the
ability of CBC, KeyCorp, Key Bancshares or Key Colorado to obtain
any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated hereby or
(b) adversely affect its ability to perform its covenants and
agreements on a timely basis under this Plan.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties. KeyCorp
represents and warrants to CBC, and CBC represents and warrants
to KeyCorp, that, except as previously disclosed in a Disclosure
Letter of KeyCorp or CBC, respectively, of even date herewith
delivered to the other party (and making specific reference to
the Section of this Plan for which exception is taken):
(a) Recitals True. The facts set forth in the
Recitals of this Plan with respect to it are true and
correct.
(b) Capital Stock. All outstanding shares of capital
stock of it and its Significant Subsidiaries (as defined in
Rule 1-02 of Regulation S-X, provided that, in the case of
CBC, such term shall include all subsidiaries and, in the
case of KeyCorp, such term shall also include Key Bancshares
and Key Colorado) are duly authorized, validly issued and
outstanding, fully paid and (subject to 12 U.S.C. Section 55
in the case of a national bank subsidiary and any similar
state statute in the case of a state-chartered bank, savings
bank or trust company) non-assessable, and subject to no
preemptive rights.
(c) Authority. It and each of its Significant
Subsidiaries have the power and authority, and are duly
qualified in all jurisdictions (except for such
qualifications the absence of which, individually or in the
aggregate, would not have a Material Adverse Effect (as
defined in Section 8.1)) where such qualification is
required, to carry on their business as it is now being
conducted and to own all their material properties and
assets, and they have all federal, state, local, and foreign
governmental authorizations necessary for them to own or
lease their properties and assets and to carry on their
business as it is now being conducted, except for such
powers and authorizations the absence of which, either
individually or in the aggregate, would not have a Material
Adverse Effect.
(d) Subsidiaries. In the case of KeyCorp, a list of
its Significant Subsidiaries is contained in Annex 2; and in
the case of CBC, a list of its Significant Subsidiaries is
contained in Annex 3. The shares of capital stock of each
of its Significant Subsidiaries are owned by it (except for
director's qualifying shares) free and clear of all liens,
claims, encumbrances and restrictions on transfer and there
are no Rights with respect to such capital stock.
(e) Shareholder Approvals. (i) Subject, in the case
of CBC, to the receipt of required shareholder approval of
this Plan, each of this Plan and the respective Option
Agreements has been authorized by all necessary corporate
action of it. Subject to receipt of (A) such shareholder
approval and (B) the required approvals, consents or waivers
of governmental authorities referred to in Section 5.1(b),
this Plan is, and upon their execution and delivery the
Option Agreements will be, a valid and binding agreements of
it enforceable against it in accordance with their terms,
subject as to enforcement to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar
laws affecting creditors' rights generally and to general
equity principles.
(ii) In the case of CBC, the affirmative votes of the
holders of shares of CBC Preferred Stock (if any), CBC
Class A Common Stock and CBC Class B Common Stock, voting by
class, having in each case two-thirds of all the votes
entitled to be cast by holders of such shares within each of
such classes are the only shareholder votes required for
approval of this Plan and consummation of the Merger and the
other transactions contemplated hereby.
(f) No Violations. The execution, delivery and
performance of this Plan by it do not, and the consummation
of the transactions contemplated hereby or thereby will not,
constitute (i) a breach or violation of, or a default under,
any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or
instrument of it or its subsidiaries or to which it or its
subsidiaries (or any of their respective properties) is
subject, which breach, violation or default would have a
Material Adverse Effect on it, or enable any person to
enjoin the Merger or (ii) a breach or violation of, or a
default under, the certificate or articles of incorporation
or by-laws of it or any of its Significant Subsidiaries; and
the consummation of the transactions contemplated hereby or,
upon its execution and delivery, by the Option Agreements,
will not require any approval, consent or waiver under any
such law, rule, regulation, judgment, decree, order,
governmental permit or license or the approval, consent or
waiver of any other party to any such agreement, indenture
or instrument, other than (i) the required approvals,
consents and waivers of governmental authorities referred to
in Section 5.1(b), (ii) the approvals of the shareholders of
CBC referred to in Section 3.1(e), (iii) such approvals,
consents or waivers as are required under the federal and
state securities or "Blue Sky" laws in connection with the
transactions contemplated by this Plan and (iv) any other
approvals, consents or waivers the absence of which,
individually or in the aggregate, would not result in a
Material Adverse Effect or enable any person to materially
delay the Merger.
(g) Securities Reports. As of their respective dates,
neither of its Annual Report on Form 10-K for the year ended
December 31, 1992, nor any other document (excluding
exhibits) filed with the Securities and Exchange Commission
(the "SEC") subsequent to December 31, 1992 pursuant to the
Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act") (collectively, its "Reports"), contained or
will contain any untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not
misleading. Each of the balance sheets or statements of
condition contained or incorporated by reference in its
Reports (including any related notes and schedules) fairly
presented the financial position of the entity or entities
to which it relates as of its date and each of the
statements of operations and retained earnings and of cash
flows or equivalent statements contained or incorporated by
reference in its Reports (including any related notes and
schedules) fairly presented the results of operations,
retained earnings and cash flows, as the case may be, of the
entity or entities to which it relates for the periods set
forth therein (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments), in each
case in accordance with generally accepted accounting
principles applicable to it consistently applied during the
periods involved, except as may be noted therein. There
exist no material liabilities of it and its subsidiaries,
contingent or otherwise, that are required to be disclosed
under generally accepted accounting principles, or would be
required to be disclosed in the financial statements to be
contained in its Annual Report for the recently completed
fiscal year, but are not so disclosed in its Reports.
(h) Absence of Certain Changes or Events. Except as
disclosed in its Reports filed prior to the date of this
Plan, since December 31, 1992, it and its subsidiaries have
not incurred any material liability, except in the ordinary
course of their business consistent with past practice, nor
has there been any change, or any event involving a
prospective change, in the condition, financial or
otherwise, properties, business or results of operations of
it or any of its subsidiaries which, individually or in the
aggregate, has had, or is reasonably likely to have, a
Material Adverse Effect on it (other than as a result of
changes in banking laws or regulations of general
applicability or interpretations thereof).
(i) Taxes. All material federal, state, local, and
foreign tax returns required to be filed by or on behalf of
it or any of its subsidiaries have been timely filed or
requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and
all such filed returns are complete and accurate in all
material respects. All taxes shown on returns filed by it
have been paid in full or adequate provision has been made
for any such taxes on its balance sheet (in accordance with
generally accepted accounting principles). As of the date
of this Plan, there is no audit examination, deficiency, or
refund litigation with respect to any taxes of it that could
result in a determination that would have a Material Adverse
Effect on it. All taxes, interest, additions, and penalties
due with respect to completed and settled examinations or
concluded litigation relating to it have been paid in full
or adequate provision has been made for any such taxes on
its balance sheet (in accordance with generally accepted
accounting principles). It has not executed an extension or
waiver of any statute of limitations on the assessment or
collection of any material tax due that is currently in
effect.
(j) Absence of Claims. No material litigation,
proceeding or controversy before any court or governmental
agency is pending, and there is no pending claim, action or
proceeding against it or any of its subsidiaries, which is
reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect or to materially hinder or delay
consummation of the transactions contemplated hereby, and,
to the best of its knowledge after reasonable inquiry, no
such litigation, proceeding, controversy, claim or action
has been threatened or is contemplated.
(k) Absence of Regulatory Actions. Neither it nor any
of its subsidiaries is a party to any cease and desist
order, written agreement or memorandum of understanding
with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by,
or is a recipient of any extraordinary supervisory letter
from, or has adopted any board resolutions at the request
of, federal or state governmental authorities charged with
the supervision or regulation of banks or bank holding
companies or engaged in the insurance of bank deposits
("Bank Regulators"), nor has it been advised by any Bank
Regulator that it is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting)
any such order, directive, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment
letter, board resolutions or similar undertaking.
(l) Agreements. Except for the Option Agreements and
arrangements made in the ordinary course of business, it and
its subsidiaries are not bound by any material contract (as
defined in Item 601(b)(10) of SEC Regulation S-K) to be
performed after the date hereof that has not been filed with
or incorporated by reference in its Reports. Specifically,
in the case of CBC, except as disclosed in its Reports filed
prior to the date of this Plan, as of the date of this Plan,
neither it nor any of its subsidiaries is a party to an oral
or written (i) consulting agreement (other than data
processing, software programming and licensing contracts
entered into in the ordinary course of business) not
terminable on 30 days or less notice involving the payment
of more than $50,000 per annum, in the case of any such
agreement with an individual, or $500,000 per annum, in the
case of any other such agreement, (ii) agreement with any
executive officer or other key employee of it or any of its
subsidiaries the benefits of which are contingent, or the
terms of which are materially altered, upon the occurrence
of a transaction involving it or any of its subsidiaries of
the nature contemplated by this Plan or the Option
Agreements and which provides for the payment of in excess
of $50,000 per employee, (iii) agreement with respect to any
executive officer of it or any of its subsidiaries providing
any term of employment or compensation guarantee extending
for a period longer than one year and for the payment of in
excess of $50,000 per employee per annum, or (iv) agreement
or plan, including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this
Plan or the Option Agreements or the value of any of the
benefits of which will be calculated on the basis of any of
the transactions contemplated by this Plan.
(m) Labor Matters. Neither it nor any of its
subsidiaries is a party to, or is bound by, any collective
bargaining agreement, contract, or other agreement or
understanding with a labor union or labor organization, nor
is it or any of its subsidiaries the subject of any
proceeding asserting that it or any such subsidiary has
committed an unfair labor practice or seeking to compel it
or such subsidiary to bargain with any labor organization as
to wages and conditions of employment, nor is there any
strike or other labor dispute involving it or any of its
subsidiaries pending or threatened.
(n) Employee Benefit Plans. All benefit plans,
contracts, agreements, arrangements, including, but not
limited to "employee benefit plans," as defined in
Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), that cover any of its or its
subsidiaries' employees, comply in all material respects
with all applicable requirements of ERISA, the Code and
other applicable laws; neither it nor any of its
subsidiaries has engaged in a "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Employee Plan which is likely to result
in any material penalties or taxes under Section 502(i) of
ERISA or Section 4975 of the Code; no material liability to
the Pension Benefit Guaranty Corporation has been or is
expected by it or them to be incurred with respect to any
Employee Plan which is subject to Title IV of ERISA
("Pension Plan"), or with respect to any "single-employer
plan" (as defined in Section 4001(a)(15) of ERISA) currently
or formerly maintained by it, them or any entity which is
considered one employer with it under Section 4001 of ERISA
or Section 414 of the Code; no Pension Plan had an
"accumulated funding deficiency" (as defined in Section 302
of ERISA (whether or not waived)) as of the last day of the
end of the most recent plan year ending prior to the date
hereof; the fair market value of the assets of each Pension
Plan exceeds the present value of the "benefit liabilities"
(as defined in Section 4001(a)(16) of ERISA) under such
Pension Plan as of the end of the most recent plan year with
respect to the respective Pension Plan ending prior to the
date hereof, calculated on the basis of the actuarial
assumptions used in the most recent actuarial valuation for
such Pension Plan as of the date hereof; no notice of a
"reportable event" (as defined in Section 4043 of ERISA) for
which the 30-day reporting requirement has not been waived
has been required to be filed for any Pension Plan within
the 12-month period ending on the date hereof; neither it
nor any of its subsidiaries has provided, or is required to
provide, security to any Pension Plan pursuant to
Section 401(a)(29) of the Code; it and its subsidiaries have
not contributed to any "multiemployer plan," as defined in
Section 3(37) of ERISA, on or after September 26, 1980; and
it and its subsidiaries do not have any obligations for
retiree health and life benefits under any benefit plan,
contract or arrangement that cannot be amended or terminated
without incurring any liability thereunder.
In the case of CBC, with respect to each benefit plan,
("Benefit Plan") it has made available to KeyCorp a true and
correct copy of (i) the most recent annual report on
Form 5500 filed with the Internal Revenue Service (the
"IRS"), (ii) such Benefit Plan, (iii) each trust agreement
and insurance contract relating to such Benefit Plan,
(iv) the most recent summary plan description for such
Benefit Plan, (v) the most recent actuarial report or
valuation if such Benefit Plan is subject to Title IV of
ERISA and (vi) the most recent determination letter issued
by the IRS if such Benefit Plan is intended to be qualified
under Section 401(a) of the Code. Annex 4 contains a
complete list of the Benefit Plans.
(o) Title to Assets. Each of it and its subsidiaries
has good and marketable title to its properties and assets
(other than (i) property as to which it is lessee and
(ii) real estate owned as a result of foreclosure, transfer
in lieu of foreclosure or other transfer in satisfaction of
a debtor's obligation previously contracted), except for
such defects in title which would not, individually or in
the aggregate, result in any material impairment of such
title.
(p) Knowledge As to Conditions. It knows of no reason
why the approvals, consents and waivers of governmental
authorities referred to in Section 5.1(b) should not be
obtained without the imposition of any condition of the type
referred to in the proviso thereto or why the accountants'
letter referred to in Section 5.2(d) cannot be obtained.
(q) Compliance with Laws. It and each of its
subsidiaries has all permits, licenses, certificates of
authority, orders, and approvals of, and has made all
filings, applications, and registrations with, federal,
state, local, and foreign governmental or regulatory bodies
that are required in order to permit it to carry on its
business in all material respects as it is presently
conducted and the absence of which could, individually or in
the aggregate, have a Material Adverse Effect; all such
permits, licenses, certificates of authority, orders, and
approvals are in full force and effect, and, to the best
knowledge of it, no suspension or cancellation of any of
them is threatened.
(r) KeyCorp Common Stock. In the case of KeyCorp, the
shares of KeyCorp Common Stock to be issued pursuant to this
Plan, when issued in accordance with the terms of this Plan,
will be duly authorized, validly issued, fully paid and
non-assessable and subject to no preemptive rights.
(s) Fees. Other than financial advisory services
(including an opinion that the consideration to be received
by CBC shareholders pursuant to the Agreement is fair from a
financial point of view) performed for CBC by The Wallach
Company, neither it nor any of its subsidiaries, nor any of
their respective officers, directors, employees or agents
has employed any broker or finder or incurred any liability
for any financial advisory fees, brokerage fees,
commissions, or finder's fees, and no broker or finder has
acted directly or indirectly for it or any of its
subsidiaries, in connection with the Plan or the
transactions contemplated hereby.
(t) Registration Statement. The information to be
supplied by it for inclusion in (i) the Registration
Statement on Form S-4 and/or such other form(s) as may be
appropriate to be filed under the Securities Act of 1933, as
amended (the "Securities Act"), with the SEC by KeyCorp for
the purpose of, among other things, registering the KeyCorp
Common Stock to be issued to the shareholders of CBC in the
Merger (the "Registration Statement"), or (ii) the proxy
statement to be filed with the SEC by CBC under the
Securities Exchange Act and distributed in connection with
CBC's meeting of its shareholders to vote upon this Plan (as
amended or supplemented from time to time, the "Proxy
Statement," and together with the prospectus included in the
Registration Statement, as amended or supplemented from time
to time, the "Proxy Statement/Prospectus") will not, at the
time such Registration Statement becomes effective, and, in
the case of the Proxy Statement/Prospectus, at the time it
is mailed and at the time of the CBC Meeting, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(u) Environmental Matters. (i) It and each of its
subsidiaries, the Participation Facilities, and the Loan
Properties (each as defined below) are, and have been, in
compliance with all applicable laws, rules, regulations,
standards and requirements of the United States
Environmental Protection Agency ("EPA") and of state and
local agencies with jurisdiction over pollution or
protection of health or the environment, except for
violations which, individually or in the aggregate, do not
or would not result in a Material Adverse Effect on KeyCorp
or CBC as the case may be.
(ii) To its knowledge, there is no suit, claim, action
or proceeding pending or threatened, before any court,
governmental agency or board or other forum in which it or
any of its subsidiaries or any Participation Facility has
been or, with respect to threatened proceedings, may be,
named as a defendant (x) for alleged noncompliance
(including by any predecessor), with any environmental law
or (y) relating to the release into the environment of any
Hazardous Material (as defined below) or oil, whether or not
occurring at or on a site owned, leased or operated by it or
any of its subsidiaries or any Participation Facility,
except as would not, individually or in the aggregate,
result in a Material Adverse Effect on KeyCorp or CBC, as
the case may be.
(iii) To its knowledge, there is no suit, claim,
action or proceeding pending or threatened, before any
court, governmental agency or board or other forum in which
any Loan Property (or in respect of such Loan Property) has
been or, with respect to threatened proceedings, may be
named as a defendant (x) for alleged noncompliance
(including by any predecessor) with any environmental law,
rule or regulation or (y) relating to the release into the
environment of any Hazardous Material or oil whether or not
occurring at or on a site owned, leased or operated by a
Loan Property, except where such noncompliance or release
does not or would not result, individually or in the
aggregate, in a Material Adverse Effect on CBC or KeyCorp,
as the case may be.
(iv) To its knowledge, there is no reasonable basis
for any suit, claim, action or proceeding of a type
described in Section 3.1(u)(ii) or (iii), except as would
not, individually or in the aggregate, have a Material
Adverse Effect on CBC or KeyCorp, as the case may be.
(v) During the period of (x) its or any of its
subsidiaries' ownership or operation of any of their
respective current properties, (y) its or any of its
subsidiaries' participation in the management of any
Participation Facility, or (z) its or any of its
subsidiaries' holding of a security interest in a Loan
Property, to its knowledge, there has been no release of
Hazardous Material or oil in, on, under or affecting such
properties, except where such release does not or would not
result, individually or in the aggregate, in a Material
Adverse Effect on it. Prior to the period of (x) its or any
of its subsidiaries' ownership or operation of any of their
respective current properties, (y) its or any of its
subsidiaries' participation in the management of any
Participation Facility, or (z) its or any of its
subsidiaries' holding of a security interest in a Loan
Property, to its knowledge, there was no release of
Hazardous Material or oil in, on, under or affecting any
such property, Participation Facility or Loan Property,
except where such release does not or would not result,
individually or in the aggregate, in a Material Adverse
Effect on CBC or KeyCorp, as the case may be.
(vi) The following definitions apply for purposes of
this Section 3.1(u): (x) "Loan Property" means any property
in which the applicable party (or a subsidiary of it) holds
a security interest for an amount greater than $150,000,
and, where required by the context, includes the owner or
operator of such property, but only with respect to such
property; (y) "Participation Facility" means any facility in
which the applicable party (or a subsidiary of it)
participates in the management and, where required by the
context, includes the owner or operator of such property,
but only with respect to such property; and (z) "Hazardous
Material" means any pollutant, contaminant, or hazardous
substances within the meaning of the Comprehensive
Environmental Response, Compensation, and Liability Act,
42 U.S.C. Section 9601 et seq., or any similar federal,
state or local law.
(v) Allowance. The allowance for possible loan losses
shown on the most recent balance sheet contained in its
Reports was, and the allowance for possible loan losses
shown on the balance sheets in its Reports for periods
ending after the date of this Plan will be, adequate in all
material respects to provide for possible losses, net of
recoveries relating to loans previously charged off, and
loans outstanding (including accrued interest receivable) as
of the date thereof (i) under the standards applied by the
applicable regulatory authorities and (ii) under generally
accepted accounting principles. In the case of CBC, for
purposes of determining adequacy, CBC represents and
warrants that it applies uniform standards to all loans of
its subsidiaries.
(w) Material Interests of Certain Persons. In the
case of CBC, except as disclosed in CBC's Proxy Statement
for its 1993 Annual Meeting of Stockholders, no officer or
director of CBC, or any "associate" (as such term is defined
in Rule 12b-2 under the Securities Exchange Act) of any such
officer or director, has any material interest in any
material contract or property (real or personal), tangible
or intangible, used in or pertaining to the business of CBC
or any of its subsidiaries.
ARTICLE IV. COVENANTS
SECTION 4.1. Merger Proposals. CBC agrees that after the
date hereof neither it nor any of its subsidiaries nor any of the
respective officers and directors of CBC or its subsidiaries
shall, and CBC shall immediately direct and use its best efforts
to cause its employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant
retained by it or any of its subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any enquiries or
the making of any proposal or offer (including, without
limitation, any proposal or offer to stockholders of CBC) with
respect to a merger, consolidation or similar transaction
involving, or any purchase of all or any significant portion of
the assets or any equity securities of, CBC or any of its
subsidiaries (any such proposal or offer being hereinafter
referred to as an "Merger Proposal") or, except to the extent
legally required for the discharge by the board of directors of
its fiduciary duties as advised in writing by such board's
counsel, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions
with, any person relating to an Merger Proposal, or otherwise
facilitate any effort or attempt to make or implement an Merger
Proposal. CBC will immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any
parties conducted heretofore with resect to any of the foregoing.
CBC will take the necessary steps to inform the appropriate
individuals or entities referred to in the first sentence hereof
of the obligations undertaken in this Section 4.1. CBC will
notify KeyCorp immediately if any such inquiries or proposals are
received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or
continued with CBC.
SECTION 4.2. Certain Policies of CBC. At the request of
KeyCorp, CBC shall use its best efforts to modify and change its
loan, litigation and real estate valuation policies and practices
(including loan classifications and levels of reserves) prior to
the Effective Time so as to be consistent on a mutually
satisfactory basis with those of KeyCorp. However,
notwithstanding the preceding sentence, CBC shall not be required
to modify or change any such policies or practices until the
earlier of (i) such time as KeyCorp acknowledges that all
conditions to its obligation to consummate the Merger set forth
in Sections 5.1 and 5.2 have been waived or satisfied and
(ii) immediately prior to the Effective Time. CBC's
representations, warranties and covenants contained in this Plan
shall not be deemed to be untrue or breached in any respect for
any purpose as a consequence of any modifications or changes
undertaken solely on account of this Section 4.2.
SECTION 4.3. Employee Benefits. (a) KeyCorp and CBC agree
that, unless otherwise mutually determined, the Benefit Plans in
effect at the date of this Plan (except stock plans) will remain
in effect temporarily after the Effective Time with respect to
employees (including retirees) covered by such plans at the
Effective Time. KeyCorp will take such steps as are required so
that (i) all employees of CBC and its subsidiaries who become or
remain as employees of KeyCorp or any of its subsidiaries become
participants in KeyCorp's employee benefit plans and (ii) retired
employees of CBC and its subsidiaries become participants in
KeyCorp's plans covering retired employees.
(b) All employees of CBC and its subsidiaries continuing in
the employ of the Surviving Corporation or any of its
subsidiaries shall be entitled to participate in stock plans,
bonus plans and other such benefit plans of the Surviving
Corporation and its subsidiaries on the same basis as other
similarly situated employees of such companies. All of these
employees will be credited for eligibility, vesting and benefit
purposes, but not for (i) pension benefit computation purposes or
(ii) eligibility for participation in the post-employment medical
plan, with all of their years of past service with CBC or any of
its subsidiaries (or any of their predecessors to the extent CBC
is obligated to credit past service under acquisition
agreements).
(c) KeyCorp shall pay severance benefits in accordance with
KeyCorp severance benefit programs to any employee of CBC who
terminates on or within one year after the Effective Date
provided that such employee remains employed by KeyCorp or Key
Colorado or any other KeyCorp subsidiary until the date fixed by
KeyCorp for the employee's termination. KeyCorp will honor CBC's
Amended and Restated 1988 Executive Severance Pay Plan following
the Effective Time.
(d) This Section 4.3 shall not be construed to create a
contractual right of employees of CBC to continued employment or
severance benefits.
SECTION 4.4. Access and Information. Upon reasonable
notice, each of the parties shall (and shall cause each of the
parties' subsidiaries to) afford to the other parties and their
representatives (including, without limitation, directors,
officers and employees of the parties and their affiliates, and
counsel, accountants and other professionals retained) such
access during normal business hours throughout the period prior
to the Effective Time to the books, records (including, without
limitation, tax returns and work papers of independent auditors),
properties, personnel and to such other information as any party
may reasonably request; provided, however, that no investigation
pursuant to this Section 4.4 shall affect or be deemed to modify
any representation or warranty made herein. Each party will not,
and will cause its representatives not to, use any information
obtained pursuant to this Section 4.4 for any purpose unrelated
to the consummation of the transactions contemplated by this
Plan. Subject to the requirements of law, each party will keep
confidential, and will cause its representatives to keep
confidential, all information and documents obtained pursuant to
this Section 4.4 unless such information (i) was already known to
such party, (ii) becomes available to such party from other
sources not known by such party to be bound by a confidentiality
obligation, (iii) is disclosed with the prior written approval of
the party to which such information pertains, (iv) is or becomes
readily ascertainable from published information or trade sources
or (v) is required to be disclosed pursuant to subpoena or court
order. In the event that this Plan is terminated or the
transactions contemplated by this Plan shall otherwise fail to be
consummated, each party shall promptly cause all copies of
documents or extracts thereof containing information and data as
to another party hereto to be returned to the party which
furnished the same. Notwithstanding anything in this Agreement
to the contrary, KeyCorp agrees that with respect to asset
quality, it will rely on certifications described in Sections
5.2(b) and any information that is not now but may in the future
become public to satisfy its concerns regarding the accuracy of
the representations and warranties set forth at Section 3.1(v)
applicable to CBC's allowance for possible loan losses.
SECTION 4.5. Certain Filings, Consents and Arrangements.
KeyCorp and CBC shall (a) as soon as practicable make any filings
and applications required to be filed in order to obtain all
approvals, consents and waivers of governmental authorities
necessary or appropriate for the consummation of the transactions
contemplated hereby or by the Option Agreement, (b) cooperate
with one another (i) in promptly determining what filings are
required to be made or approvals, consents or waivers are
required to be obtained under any other relevant federal, state
or foreign law or regulation and (ii) in promptly making any such
filings, furnishing information required in connection therewith
and seeking timely to obtain any such approvals, consents or
waivers and (c) deliver to the other copies of the publicly
available portions of all such filings and applications promptly
after they are filed.
SECTION 4.6. Indemnification; Directors' and Officers'
Insurance. (a) From and after the Effective Time until the sixth
anniversary thereof, KeyCorp agrees to cause the Surviving
Corporation to indemnify and hold harmless each present and
former director and officer of CBC or its subsidiaries and each
officer or employee of CBC or its subsidiaries that is serving or
has served as a director or trustee of another entity expressly
at CBC's request or direction, determined as of the Effective
Time (the "Indemnified Parties"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or
prior to the Effective Time, whether asserted or claimed prior
to, at or after the Effective Time, to the fullest extent that
CBC would have been obligated under the CCC, and its Articles of
Incorporation or By-Laws in effect on the date hereof to
indemnify such person (and the Surviving Corporation shall also
advance expenses as incurred to the fullest extent permitted
under applicable law provided the person to whom expenses are
advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to
indemnification).
(b) Any Indemnified Party wishing to claim indemnification
under Section 4.6(a), upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify the
Surviving Corporation thereof, but the failure to so notify shall
not relieve KeyCorp or the Surviving Corporation of any liability
it may have to such Indemnified Party if such failure does not
materially prejudice the indemnifying party. In the event of any
such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) KeyCorp or the
Surviving Corporation shall have the right to assume the defense
thereof and neither KeyCorp nor the Surviving Corporation shall
be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof,
except that if KeyCorp or the Surviving Corporation elects not to
assume such defense or counsel for the Indemnified Parties and
advises that there are issues which raise conflicts of interest
between KeyCorp or the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory
to them, and KeyCorp or the Surviving Corporation shall pay the
reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided,
however, that KeyCorp and the Surviving Corporation shall be
obligated pursuant to this paragraph (b) to pay for only one firm
of counsel for all Indemnified Parties in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present
such counsel with a conflict of interest, (ii) the Indemnified
Parties will cooperate in the defense of any such matter and
(iii) neither KeyCorp nor the Surviving Corporation shall be
liable for any settlement effected without its prior written
consent; and provided further that neither KeyCorp nor the
Surviving Corporation shall have any obligation hereunder to any
Indemnified party when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have
become final and nonappealable, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited
by applicable law.
(c) For a period of two years after the Effective Time,
KeyCorp shall use all reasonable efforts to cause to be
maintained in effect the current policies of directors' and
officers' liability insurance maintained by CBC (provided that
KeyCorp may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are
substantially no less advantageous) with respect to claims
arising from facts or events which occurred before the Effective
Time; provided, however, that in no event shall KeyCorp be
obligated to expend, in order to maintain or provide insurance
coverage pursuant to this Subsection 4.6(c), any amount per annum
in excess of the amount of the annual premiums paid as of the
date hereof by CBC for such insurance (the "Maximum Amount"). If
the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount,
KeyCorp shall use all reasonable efforts to maintain the most
advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Amount.
SECTION 4.7. Additional Agreements. Subject to the terms
and conditions herein provided, each of the parties hereto agrees
to use all reasonable efforts to take promptly, or cause to be
taken promptly, all actions and to do promptly, or cause to be
done promptly, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Plan as promptly as
practicable, including using efforts to obtain all necessary
actions or non-actions, extensions, waivers, consents and
approvals from all applicable governmental entities, effecting
all necessary registrations, applications and filings (including,
without limitation, filings under any applicable state securities
laws) and obtaining any required contractual consents and
regulatory approvals.
SECTION 4.8. Publicity. The initial press release
announcing this Plan shall be a joint press release and
thereafter CBC and KeyCorp shall consult with each other in
issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and in
making any filings with any governmental entity or with any
national securities exchange with respect thereto.
SECTION 4.9. Proxy; Registration Statement. As soon as
practicable after the date hereof, KeyCorp and CBC shall prepare
the Proxy Statement, file it with the SEC, respond to comments of
the staff of the SEC, clear the Proxy Statement with the staff of
the SEC and promptly thereafter mail the Proxy Statement to
holders of record as of the applicable record date of all shares
of CBC common stock entitled to vote upon the Merger. KeyCorp
and CBC shall cooperate with each other in the preparation of the
Proxy Statement. KeyCorp shall prepare and file a Registration
Statement with the SEC as soon as is reasonably practicable and
shall use all reasonable efforts to have the Registration
Statement declared effective by the SEC as promptly as
practicable and to maintain the effectiveness of such
Registration Statement. KeyCorp shall also take any action
required to be taken under state "Blue Sky" or securities laws in
connection with the issuance of the KeyCorp Common Stock pursuant
to the Merger, and CBC shall furnish KeyCorp all information
concerning CBC and the holders of its capital stock and shall
take any action as KeyCorp may reasonably request in connection
with any such action.
SECTION 4.10. Shareholders' Meeting. CBC shall take all
action necessary, in accordance with applicable law and its
Articles of Incorporation and By-laws, to convene a meeting of
the holders of CBC Common Stock (the "CBC Meeting") as promptly
as practicable for the purpose of considering and taking action
upon this Plan. Except to the extent legally required for the
discharge by the board of directors of its fiduciary duties as
advised in writing by such board's counsel, the board of
directors of CBC shall recommend that the holders of the CBC
Common Stock vote in favor of and approve the Merger and adopt
this Plan at the CBC Meeting.
SECTION 4.11. Securities Act; Pooling-of-Interests. (a) As
soon as practicable after the date of the CBC Meeting, CBC shall
identify to KeyCorp all persons who were, at the time of the CBC
Meeting, possible "affiliates" of CBC as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act and
for purposes of qualifying for "pooling-of-interests" accounting
treatment (the "Affiliates").
(b) CBC shall use its best efforts to obtain a written
agreement in the form of Annex 5 from each person who is
identified as a possible Affiliate pursuant to clause (a) above.
CBC shall deliver such written agreements to KeyCorp as soon as
practicable after the CBC Meeting.
SECTION 4.12. Pooling-of-Interests and Tax-Free
Reorganization Treatment. Neither KeyCorp nor CBC shall take or
cause to be taken any action, whether before or after the
Effective Time, which would disqualify the Merger as a
"pooling-of-interests" for accounting purposes or as a
"reorganization" within the meaning of Section 368 of the Code.
SECTION 4.13. Stock Exchange Listing. KeyCorp shall use
its best efforts to list on the NYSE, upon official notice of
issuance, the KeyCorp Common Stock to be issued in the Merger.
SECTION 4.14. Notification of Certain Matters. Each party
shall give prompt notice to the others of: (a) any notice of, or
other communication relating to, a default or event that, with
the notice or lapse of time or both, would become a default,
received by it or any of its subsidiaries subsequent to the date
of this Plan and prior to the Effective Time, under any contract
material to the financial condition, properties, businesses or
results of operations of CBC and its subsidiaries taken as a
whole to which CBC or any of its subsidiaries is a party or is
subject; and (b) any material adverse change in the financial
condition, properties, business or results of operations of it
and its subsidiaries taken as a whole or the occurrence of any
event which, so far as reasonably can be foreseen at the time of
its occurrence, is reasonably likely to result in any such
change. Each of CBC and KeyCorp shall give prompt notice to the
other party of any notice or other communication from any third
party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this
Agreement.
SECTION 4.15. Antitakeover Statutes. CBC shall take all
reasonable steps (i) to exempt CBC and the Plan from the
requirements of any state antitakeover law by action of its board
of directors or otherwise and (ii), upon the request of KeyCorp,
to assist in any challenge by KeyCorp to the applicability of the
Merger to any state antitakeover law.
ARTICLE V. CONDITIONS TO CONSUMMATION
SECTION 5.1. Conditions to All Parties' Obligations. The
respective obligations of KeyCorp, Key Colorado and CBC to effect
the Merger shall be subject to the satisfaction or waiver prior
to the Effective Time of the following conditions:
(a) The Plan and the transactions contemplated hereby
shall have been approved by the requisite vote of the
shareholders of CBC in accordance with applicable law.
(b) KeyCorp and Key Colorado shall have procured the
required approval, consent or waiver with respect to the
Plan, the Merger, the Subsidiary Merger and the transactions
contemplated hereby by (i) the Board of Governors of the
Federal Reserve Board ("Federal Reserve Board"), (ii) the
Federal Deposit Insurance Corporation ("FDIC") and (iii) the
Banking Board of the State of Colorado pursuant to Colorado
State law, and all applicable statutory waiting periods
shall have expired; and the parties shall have procured all
other regulatory approvals, consents or waivers of
governmental authorities or other persons that are necessary
or appropriate to the consummation of the transactions
contemplated by the Plan; provided, however, that no
approval, consent or waiver in this Section 5.1(b) shall be
deemed to have been received if it shall include any
condition or requirement that would result in a Material
Adverse Effect on KeyCorp (on a combined basis giving effect
to the Merger and the other transactions contemplated by
this Plan) and provided further that the following
conditions or requirements shall be deemed not to result in
such a Material Adverse Effect: (i) a requirement of
divestitures in Fort Collins, Colorado under the federal
banking or antitrust laws; (ii) a condition or requirement
imposed on the basis of KeyCorp's (or any of its
subsidiaries') compliance with regulatory capital
requirements applicable to it: or (iii) a condition or
requirement imposed on the basis of KeyCorp's (or any of its
subsidiaries') compliance with the Community Reinvestment
Act.
(c) All other requirements prescribed by law which are
necessary to the consummation of the transactions
contemplated by this Plan shall have been satisfied.
(d) No party hereto shall be subject to any order,
decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of
the Merger or any other transaction contemplated by this
Plan or be a party to a proceeding seeking such an order,
decree or injunction.
(e) No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or
enforced by any governmental authority which prohibits,
restricts or makes illegal consummation of the Merger or any
other transaction contemplated by this Plan.
(f) The Registration Statement shall have become
effective and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or
threatened by the SEC.
(g) KeyCorp and CBC shall have each received the
opinion of Baker & Hostetler, dated as of the Effective
Date, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in such
opinion which are consistent with the statement of facts
existing at the Effective Time, the Merger will be treated
for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code and that,
accordingly: (i) no gain or loss will be recognized by
KeyCorp or CBC as a result of the Merger; (ii) no gain or
loss will be recognized by the shareholders of CBC who
exchange their shares of CBC Common Stock solely for shares
of KeyCorp Common Stock pursuant to the Merger (except with
respect to cash received in lieu of a fractional share
interest in KeyCorp Common Stock); (iii) the tax basis of
the shares of KeyCorp Common Stock received by shareholders
who exchange all of their shares of CBC Common Stock solely
for shares of KeyCorp Common Stock in the Merger will be the
same as the tax basis of the shares of CBC Common Stock
surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest for which cash is
received); and (iv) the holding period of the shares of
KeyCorp Common Stock received in the Merger will include the
period during which the shares of CBC Common Stock
surrendered in exchange therefor were held, provided such
shares of CBC Common Stock were held as capital assets at
the Effective Time. In rendering such opinion, Baker &
Hostetler may require and rely upon representations
contained in certificates of officers of KeyCorp, Key
Colorado, CBC and others.
SECTION 5.2. Conditions to Obligations of KeyCorp. The
obligations of KeyCorp and Key Colorado to effect the Merger
shall be subject to the satisfaction or waiver prior to the
Effective Time of the following additional conditions:
(a) KeyCorp and its directors and officers who sign
the Registration Statement shall have received from CBC's
independent certified public accountants "cold comfort"
letters, dated (i) the date of the mailing of the Proxy
Statement/Prospectus to CBC's shareholders and (ii) shortly
prior to the Effective Date, with respect to certain
financial information regarding CBC in the form customarily
issued by such accountants at such time in transactions of
this type.
(b) Each of the representations and warranties of CBC
contained in this Plan shall be true on the Effective Date
as if made on such date (or on the date when made in the
case of any representation or warranty which specifically
relates to an earlier date); CBC shall have performed, in
all material respects, each of its covenants and agreements
contained in this Plan; and KeyCorp shall have received a
certificate signed by the Chief Executive Officer and the
Chief Financial Officer of CBC, dated the Effective Date, to
the foregoing effect.
(c) KeyCorp shall have received all state securities
laws and "Blue Sky" permits and other authorizations
necessary to consummate the transactions contemplated
hereby.
(d) KeyCorp shall have received a letter, dated as of
the Effective Date, from its independent certified public
accountants to the effect that the Merger will qualify for
pooling-of-interests accounting treatment if closed and
consummated in accordance with this Plan.
(e) No litigation or proceeding shall be pending
against KeyCorp or CBC or any of their subsidiaries brought
by any governmental agency seeking to prevent consummation
or the transactions contemplated hereby.
(f) CBC shall have furnished KeyCorp with a favorable
opinion of Baker & Hostetler, as CBC counsel, dated the
Closing Date, concerning the corporate standing and
capitalization of CBC, the due authorization and
enforceability of this Agreement, and the validity of the
CBC Common Stock to be exchanged in the Merger, all based on
such investigation and CBC officer representations as CBC
counsel shall deem necessary in connection with such
opinion, it being understood that CBC counsel shall not be
required to conduct a general "due diligence" investigation
of the affairs of CBC.
SECTION 5.3. Conditions to the Obligations of CBC. The
obligation of CBC to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the
following additional conditions:
(a) CBC shall have received from KeyCorp's independent
certified public accountants "cold comfort" letters, dated
(i) the date of the mailing of the Proxy Statement/
Prospectus to CBC's shareholders and (ii) shortly prior to
the Effective Date, with respect to certain financial
information regarding KeyCorp in the form customarily issued
by such accountants at such time in transactions of this
type.
(b) Each of the representations, warranties and
covenants of KeyCorp and Key Colorado contained in this Plan
shall be true on the Effective Date as if made on such date
(or on the date when made in the case of any representation
or warranty which specifically relates to an earlier date);
KeyCorp and Key Colorado each shall have performed, in all
material respects, each of its covenants and agreements
contained in this Plan; and CBC shall have received
certificates signed by the Chief Executive Officer and the
Chief Financial Officer of KeyCorp, respectively, dated the
Effective Date, to the foregoing effect.
(c) No litigation or proceeding shall be pending
against KeyCorp or CBC or any of their subsidiaries brought
be any governmental agency seeking to prevent consummation
of the transactions contemplated hereby.
(d) CBC shall have received the opinion from The
Wallach Company dated the same date as the Proxy Statement
(which opinion shall not have been withdrawn) to the effect
that the terms of the Merger are fair to CBC's stockholders
from a financial point of view.
(e) The shares of the KeyCorp Common Stock to be
issued to CBC stockholders pursuant to this Agreement shall
have been approved for listing on the New York Stock
Exchange upon official notice of issuance.
(f) KeyCorp shall have furnished CBC with a favorable
opinion, dated the Closing Date, of Hiscock & Barclay, as
KeyCorp Counsel, or KeyCorp's General Counsel or Assistant
General Counsel (relying, at their or his option, as to
matters of Colorado law, on the opinion of Colorado counsel
satisfactory to CBC) concerning the corporate standing and
capitalization of KeyCorp, the due authorization and
enforceability of this Agreement, and the validity of the
KeyCorp Common Stock to be issued in the Merger.
ARTICLE VI. TERMINATION
SECTION 6.1. Termination. This Plan may be terminated, and
the Merger abandoned, prior to the Effective Date, either before
or after its approval by the shareholders of CBC:
(a) by the mutual consent of KeyCorp and CBC, if the
board of directors of each so determines by vote of a
majority of the members of its entire board;
(b) by KeyCorp or CBC, if its board of directors so
determines by vote of a majority of the members of its
entire board, in the event of the failure of the
shareholders of CBC to approve the Plan at its meeting
called to consider such approval, or a material breach by
the other party hereto of any representation, warranty,
covenant or agreement contained herein (or in the case of
CBC, the Option Agreements) which is not cured or not
curable within 20 days after written notice of such breach
is given to the party committing such breach by the other
party;
(c) by KeyCorp or CBC by written notice to the other
party if either (i) any approval, consent or waiver of a
governmental authority required to permit consummation of
the transactions contemplated hereby shall have been finally
denied or (ii) any governmental authority of competent
jurisdiction shall have issued a final, nonappealable order
enjoining or otherwise prohibiting consummation of the
transactions contemplated by this Plan; or
(d) by KeyCorp or CBC, if its board of directors so
determines by vote of a majority of the members of its
entire board, in the event that the Merger is not
consummated by July 31, 1994, unless the failure to so
consummate by such time is due to the breach of any
representation, warranty or covenant contained in this Plan
by the party seeking to terminate; or
(e) by CBC, if its board of directors so determines by
a majority vote of the members of its entire board, at any
time during the two-day period commencing with the
Determination Date if both of the following conditions are
satisfied:
(i) The Average Closing Price on the Determination Date of
shares of KeyCorp Common Stock shall be less than
$35.00 (adjusted as indicated below in this
Section 6.1(e)); and
(ii) (A) the number obtained by dividing the Average Closing
Price on the Determination Date by the Starting Price
shall be less than (B) the number obtained by dividing
the Index Price on the Determination Date by the Index
Price on the Starting Date and subtracting 0.10 from
the quotient in this clause (ii)(B);
subject, however, to the following three sentences. If CBC
elects to exercise its termination right pursuant to this
Section 6.1(e), it shall give prompt written notice to
KeyCorp (provided that such notice of election to terminate
may be withdrawn at any time within the aforementioned
two-day period). During the two-day period commencing with
its receipt of such notice, KeyCorp shall have the option to
increase the consideration to be received by the holders of
CBC Common Stock hereunder, by adjusting the Conversion
Number such that it shall be determined by dividing $29.00
by the actual Average Closing Price without regard to the
Minimum Average Closing Price. If KeyCorp so elects within
such two-day period, it shall give prompt written notice to
CBC of such election and the revised Conversion Number,
whereupon no termination shall have occurred pursuant to
this Section 6.1(e) and this Plan shall remain in effect in
accordance with its terms (except as the Conversion Number
shall have been so modified).
For purposes of this Section 6.1(e), the following terms
shall have the meanings indicated:
"Average Closing Price" shall have the meaning
specified in Section 1.3(b).
"Determination Date" means the fifth NYSE trading day
prior to the Effective Date.
"Index Group" means the 16 bank holding companies
listed below, the common stock of all of which shall be
publicly traded and to which there shall not have been a
publicly announced proposal since the Starting Date and
before the Determination Date for any such company to be
acquired. In the event that the common stock of any such
company ceases to be publicly traded or a proposal to
acquire any such company is announced after the Starting
Date and before the Determination Date, such company will be
removed from the Index Group, and the weights (which have
been determined are based on the number of outstanding
shares of common stock) attributed to the remaining
companies will be adjusted proportionately for purposes of
determining the Index Price. The 16 bank holding companies
and the weights attributed to them are as follows:
<TABLE>
<CAPTION>
Bank Holding Company Weighting
____________________ _________
<S> <C>
BancOne Corp. (ONE) 16.63%
Norwest Corporation (NOB) 9.12
Sun Trust Banks, Inc. (STI) 6.33
First Union Corporation (FTU) 9.24
Fleet Financial Group, Inc. (FLT) 5.27
NBD Bancorp., Inc. (NBD) 6.10
PNC Financial Corp (PNC) 8.45
U.S. Bancorp (USBC) 3.00
Wachovia Corporation (WB) 7.06
First Bank System, Inc. (FBS) 4.12
First Fidelity Bancorporation (FFB) 4.48
Barnett Banks, Inc. (BBI) 5.24
National City Corporation (NCC) 4.91
CoreStates Financial Corp (CSFN) 3.91
Mellon Bank Corporation (MEL) 4.37
Boatmen's Bancshares, Inc. (BOAT) 1.77
______
100.00%
</TABLE>
"Index Price," on a given date, means the weighted
average (weighted in accordance with the factors listed
above) of the closing prices on such date of the common
stocks of the companies comprising the Index Group.
"Starting Date" means the last NYSE trading day
immediately preceding the date of the first public
announcement of entry into this Plan.
"Starting Price" means the closing price per share of
KeyCorp Common Stock, as reported on the NYSE Composite
Transaction reporting system (as reported by The Wall Street
Journal or, if not reported thereby, another authoritative
source) for the Starting Date.
If KeyCorp or any company belonging to the Index Group declares
or effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction
between the Starting Date and the Determination Date, the prices
for the common stock of such company shall be appropriately
adjusted for the purposes of applying this Section 6.1(e).
SECTION 6.2. Effect of Termination. In the event of the
termination of this Plan by either KeyCorp or CBC, as provided
above, this Plan shall thereafter become void and there shall be
no liability on the part of any party hereto or their respective
officers or directors, except that any such termination shall be
without prejudice to the rights of any party hereto arising out
of the willful breach by any other party of any covenant or
willful misrepresentation contained in this Plan.
ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME
SECTION 7.1. Effective Date and Effective Time. On the
later of January 3, 1994, or the last business day of the month
during which the expiration of all applicable waiting periods in
connection with approvals of governmental authorities occurs and
all conditions to the consummation of this Plan are satisfied or
waived, or on such earlier or later date as may be agreed by the
parties, articles of merger shall be executed in accordance with
all appropriate legal requirements and shall be filed as required
by law, and the Merger provided for herein shall become effective
upon such filing or on such date as may be specified in such
certificate of merger. The date of such filing or such later
effect date is herein called the "Effective Date." The
"Effective Time" of the Merger shall be the close of business in
the State of Colorado on the Effective Date (or such other time
of the Effective Date as may be agreed by the parties).
ARTICLE VIII. OTHER MATTERS
SECTION 8.1. Certain Definitions; Interpretation. As used
in this Plan, the following terms shall have the meanings
indicated:
"Control" shall have the meaning ascribed thereto in
the Bank Holding Company Act of 1956, as amended.
"Material Adverse Effect," with respect to a person,
means any condition, event, change or occurrence that is
reasonably likely to have a material adverse effect upon
(A) the condition, financial or otherwise, properties,
business or results of operations or prospects of such
person and its subsidiaries, taken as a whole, or (B) the
ability of such person to perform its obligations under, and
to consummate the transactions contemplated by, this Plan.
"person" includes an individual, corporation,
partnership, association, trust or unincorporated
organization.
"Subsidiary," with respect to a person, means any other
person controlled by such person.
When a reference is made in this Plan to Sections, Annexes or
Schedules, such reference shall be to a Section of, or Annex or
Schedule to, this Plan unless otherwise indicated. The table of
contents, tie sheet and headings contained in this Plan are for
ease of reference only and shall not affect the meaning or
interpretation of this Plan. Whenever the words "include,"
"includes," or "including" are used in this Plan, they shall be
deemed followed by the words "without limitation." Any singular
term in this Plan shall be deemed to include the plural, and any
plural term the singular.
SECTION 8.2. Survival. Only those agreements and covenants
of the parties which are expressly made applicable in whole or in
part after the Effective Time, such as Sections 4.3 and 4.6,
shall survive the Effective Time. All other representations,
warranties, agreements and covenants shall be deemed to be
conditions of the Plan and shall not survive the Effective Time.
If the Plan shall be terminated, the agreements of the parties in
Sections 4.4 (except the first sentence), 6.2 and 8.6 shall
survive such termination.
SECTION 8.3. Waiver. Prior to the Effective Time, any
provision of the Plan may be (i) waived by the party benefitted
by the provision or by both parties or (ii) amended or modified
at any time (including the structure of the transaction) by an
agreement in writing between the parties hereto approved by their
respective boards of directors (to the extent allowed by law)
except that, after the vote by the shareholders of CBC,
Section 1.3 shall not be amended or revised in any manner, which
would reduce the amount or adversely change the form or tax
treatment of the consideration to be received by the CBC
shareholders in the Merger.
SECTION 8.4. Counterparts. This Plan may be executed in
counterparts each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the
same instrument.
SECTION 8.5. Governing Law. This Agreement and the legal
relations among the parties shall be governed by and construed in
accordance with the internal laws of the State of Colorado
without taking into account provisions regarding choice of law.
SECTION 8.6. Expenses. Each party hereto will bear all
expenses incurred by it in connection with this Plan and the
transactions contemplated hereby, except printing expenses which
shall be shared equally.
SECTION 8.7. Notices. All notices, requests,
acknowledgements and other communications hereunder to a party
shall be in writing and shall be deemed to have been duly given
when delivered by hand, telecopy, telegram or telex (confirmed in
writing) to such party at its address set forth below or such
other address as such party may specify by notice to the other
party hereto.
If to CBC, to: If to KeyCorp or Key Colorado, to:
Commercial Bancorporation KeyCorp
of Colorado One KeyCorp Plaza
3300 East First Avenue Albany, New York 12207
Denver, Colorado 80206 Telecopy: (518) 487-4287
Telecopy: Attention: Gary R. Allen
Attention: Jon P. Coates Executive Vice President
President and Chief Banking Officer
With copies to: With copies to:
Baker & Hostetler KeyCorp
303 East 17th Avenue Key Bank Tower, Suite 2011
Suite 1100 50 South Main Street
Denver, Colorado 80203 Salt Lake City, Utah 84144
Telecopy: Telecopy: (801) 535-1146
Attn: Thomas H. Maxfield, Esq. Attention: Carter B. Chase
Senior Vice President
SECTION 8.8. Entire Agreement; Etc. This Plan, including
the Disclosure Letter and its annexes and the Option Agreements
when executed, represents the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and
supersedes any and all other prior oral or written negotiations,
discussions or agreements. All terms and provisions of the Plan
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
Except as to Section 4.6, nothing in this Plan is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Plan.
SECTION 8.9. Assignment. This Plan may not be assigned by
any party hereto without the written consent of the other
parties.
SECTION 8.10. Directors' Qualifying Shares. To the extent
that directors' qualifying shares shall exist with respect to any
bank subsidiary, CBC shall take such action with respect to such
shares as KeyCorp shall reasonably request consistent with its
indirect acquisition of any such bank subsidiary pursuant to this
Plan.
IN WITNESS WHEREOF, the parties hereto have caused this Plan
to be executed by their duly authorized officers as of the day
and year first above written.
KEYCORP
By: /s/ Carter B. Chase
______________________________
Carter B. Chase
Senior Vice President
COMMERCIAL BANCORPORATION OF COLORADO
By: /s/ John P. Coates
________________________________
Jon P. Coates
President
<PAGE>
APPENDIX B
STOCK OPTION AGREEMENT, dated as of September 12, 1993 (this
"Agreement"), between KeyCorp, a New York corporation
("Grantee"), and Commercial Bancorporation of Colorado
("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger (the "Plan") which has been executed by the
parties hereto prior to this Agreement; and
WHEREAS, as a condition and inducement to Grantee's
willingness to enter into the Plan and in consideration thereof,
Issuer has agreed to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and to be
contained in the Plan, the parties hereto agree as follows:
SECTION 1. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable Option (the "Option") to purchase,
subject to the terms hereof, up to 479,013 fully paid and
nonassessable shares of Class A Common Stock, par value $1.00 per
share ("Class A Common Stock"), of Issuer at a price of $30.12
per share; provided, however, that in the event Issuer issues or
agrees to issue any shares of Class A Common Stock or Class B
Common Stock, par value $1.00 per share, of the Issuer ("Class B
Common Stock") at a price less than $30.12 per share (as adjusted
pursuant to subsection 5(b)) (other than pursuant to conversion
of Issuer's Adjustable Rate Convertible Subordinated Indentures
Due 2004 or existing employee stock option plans), such price
shall be adjusted down by an amount equal to the product of (a)
$30.12 minus the issue price of the newly issued shares times (b)
the number of newly issued shares divided by the number of shares
of Class A Common Stock then outstanding on a proforma basis
(such price, as adjusted if applicable, the "Option Price");
provided further that in no event shall the number of shares for
which this Option is exercisable exceed 19.9% of the Issuer's
issued and outstanding Class A Common Stock without giving effect
to any shares subject or issued pursuant to the Option. The
number of shares of Common Stock that may be received upon the
exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
(b) In the Event that any additional shares of Class A
Common Stock are issued or otherwise become outstanding after the
date of this Agreement other than pursuant to this Agreement, or
pursuant to existing employee stock option plans or pursuant to
the conversion of the Issuer's Adjustable Rate Convertible
Subordinated Debentures Due 2004 outstanding as of the date
hereof, the number of shares of Class A Common Stock subject to
the Option shall be increased so that, after such issuance, it
equals 19.9% of the number of shares of Class A Common Stock then
issued and outstanding without giving effect to any shares
subject to or issued pursuant to the Option, existing employee
stock option plans or the Issuer's Adjustable Rate Convertible
Subordinated Debentures Due 2004. Nothing contained in this
Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Plan.
SECTION 2. (a) The holder or holders of the Option (the
"Holder") may exercise the Option, in whole or part, if, but only
if, both an Initial Triggering Event (as defined below) and a
Subsequent Triggering Event (as defined below) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as defined below); provided that the Holder shall have sent the
written notice of such exercise (as provided in Section 2(e))
within 30 days following such Subsequent Triggering Event (or
such later date as provided in Section 9). Each of the following
shall be an Exercise Termination Event: (i) the time immediately
preceding the Effective Time of the Merger, as defined in the
Plan; (ii) termination of the Plan by Issuer in accordance with
the provisions thereof as a result of a material breach by
KeyCorp of any representation, warranty, covenant or agreement
contained in the Plan, which breach is not cured or not curable
within 20 days after written notice of such breach is given to
KeyCorp by Issuer; (iii) termination of the Plan in accordance
with the provisions thereof if such termination occurs prior to
the occurrence of an Initial Triggering Event; or (iv) the
passage of nine months after termination of the Plan if such
termination follows the occurrence of an Initial Triggering Event
(provided that if an Initial Triggering Event continues or
another Initial Triggering Event occurs beyond such termination,
the Exercise Termination Event shall be nine months from the
expiration of the Last Triggering Event but in no event more than
18 months after such termination). The "Last Triggering Event"
shall mean the last Initial Triggering Event to occur.
(b) The term "Initial Triggering Event" shall mean any of
the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to
engage in an Merger Transaction (as defined below) with any
person (the term "Person " for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934 (the
"Securities Exchange Act"), and the rules and regulations
thereunder) other than Grantee or any of its subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of
Issuer shall have recommended that the shareholders of
Issuer approve or accept any Merger Transaction other than
as contemplated by the Plan. For purposes of this
Agreement, "Merger Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer,
or any of Issuer's banking subsidiaries ("Bank
Subsidiaries") other than a requirement of divestiture in
Fort Collins, Colorado under the federal banking or
antitrust laws, (y) a purchase, lease or other acquisition
of all or substantially all of the assets of Issuer, or any
Bank Subsidiary or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange
or otherwise) of securities representing 10% or more of the
voting power of Issuer or a Bank Subsidiary. (The term
Merger Transaction specifically does not include any merger
or consolidation among Issuer and/or Issuer Subsidiaries.)
(ii) The Board of Directors of Issuer at any time does
not recommend that the shareholders of Issuer approve the
Plan;
(iii) Any person other than any existing limited
partner of Commercial Bank Investment Company, the Grantee,
or any shareholder of Grantee who currently beneficially
owns 10% or more of Grantee's outstanding shares of Class A
Common Stock and Class B Common Stock (Class A Common Stock
and Class B Common Stock collectively, the "Common Stock"),
any Grantee Subsidiary or any Issuer Subsidiary acting in a
fiduciary capacity shall have acquired beneficial ownership
or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Common Stock (the term
"beneficial ownership" for purposes of this Stock Option
Agreement having the meaning assigned thereto in Section
13(d) of the Securities Exchange Act, and the rules,
regulations and interpretations thereunder);
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or
its shareholders by public announcement or written
communication that is or becomes the subject of public
disclosure to engage in an Merger Transaction;
(v) After a proposal is made by a third party to
Issuer or its shareholders to engage in an Merger
Transaction, Issuer shall have breached any covenant or
obligation contained in the Plan and such breach (x) would
entitle Grantee to terminate the Plan and (y) shall not have
been cured prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall
have filed an application or notice with The Board of
Governors of the Federal Reserve System (the "Federal
Reserve Board") or other governmental authority or
regulatory or administrative agency or commission, domestic
or foreign (each, a "Government Entity"), for approval to
engage in an Merger Transaction.
(c) The term "Subsequent Triggering Event" shall mean
either of the following events or transactions occurring after
the date hereof:
(i) The acquisition by any person of beneficial
ownership of 20% or more of the then outstanding Class A
Common Stock other than by a person that currently
beneficially owns more than 20% of the outstanding Class A
Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in Section 2(b)(i), except that the percentage
referred to in clause (z) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a "Triggering Event"); provided,
however, that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In the event that the Holder is entitled to and wishes
to exercise the Option, it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing
Date"); provided that if prior notification to or approval of the
Federal Reserve Board or any other Governmental Entity is
required in connection with such purchase, the Holder shall
promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run from the
later of (x) the date on which any required notification periods
have expired or been terminated and (y) the date on which such
approvals have been obtained and any requisite waiting period or
periods shall have expired. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in Section 2(e), the Holder
shall pay to Issuer the aggregate purchase price for the shares
of Class A Common Stock purchased pursuant to the exercise of the
Option in immediately available funds by wire transfer to a bank
account designated by Issuer; provided, however, that failure or
refusal of Issuer to designate such a bank account shall not
preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(f), Issuer
shall deliver to the Holder a certificate or certificates
representing the number of shares of Class A Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the holder
thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer this Agreement
and a letter agreeing that the Holder will not offer to sell or
otherwise dispose of such shares in violation of applicable law
or the provisions of this Agreement.
(h) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for in Section 2(e) and
the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of
record of the shares of Class A Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such
shares of Class A Common Stock shall not then actually be
delivered to the Holder. Issuer shall pay all expenses, and any
and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation,
issuance and delivery of stock certificates under this Section 2
in the name of the Holder or its assignee, transferee or
designee.
(i) Certificates for Common Stock delivered at a closing
hereunder shall be endorsed with any restrictive legend as may be
required by law.
SECTION 3. (a) Issuer agrees: (i) that it shall at all
times maintain, free from preemptive rights, sufficient
authorized but unissued or treasury shares of Class A Common
Stock so that the Option may be exercised without additional
authorization of Class A Common Stock after giving effect to all
other options, warrants, convertible securities and other rights
to purchase Class A Common Stock; (ii) that it will not, by
amendment of its organization certificate or through
reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations
or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be
required (including in the event, under the Bank Holding Company
Act of 1978, as amended, or the Change in Bank Control Act of
1956, as amended, or any state banking law, prior approval of or
notice to the Federal Reserve Board or to any other Governmental
Entity is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications
or notices and providing such information to each such
Governmental Entity as they may require) in order to permit the
Holder to exercise the Option and Issuer duly and effectively to
issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the
Holder against dilution.
(b) Grantee agrees, and each Holder by becoming such
agrees, that it will not convert any shares of Class B Common
Stock beneficially owned by it into shares of Class A Common
Stock except to maintain its proportionate share of the
outstanding shares of Class A Common Stock.
SECTION 4. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of the Holder,
upon presentation and surrender of this Agreement at the
principal office of Issuer, for other agreements providing for
Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions
as are set forth herein, in the aggregate the same number of
shares of Class A Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any agreements
and related options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of
loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new
Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
SECTION 5. The number of shares of Class A Common Stock
purchasable upon the exercise of the Option shall be subject to
adjustment from time to time as follows:
(a) In the event of any change in the Class A Common Stock
by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions,
exchanges of shares or the like, the type and number of shares of
Class A Common Stock purchasable upon exercise hereof shall be
appropriately adjusted.
(b) Whenever the number of shares of Class A Common Stock
purchasable upon exercise hereof is adjusted as provided in this
Section 5, the Option Price shall be adjusted by multiplying the
Option Price by a fraction, the numerator of which shall be equal
to the number of shares of Class A Common Stock purchasable prior
to the adjustment and the denominator of which shall be equal to
the number of shares of Class A Common Stock purchasable after
the adjustment.
SECTION 6. (a) Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination
Event, (i) at the request of the Holder, delivered within 30 days
of the Subsequent Triggering Event (or such later period as may
be provided pursuant to Section 9), Issuer shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price")
equal to (x) the amount by which (a) the market/offer price (as
defined below) exceeds (b) the Option Price, multiplied by the
number of shares for which the Option may then be exercised plus
(y) Grantee's Out-of-Pocket Expenses (as defined below) (to the
extent not previously reimbursed) and (ii) at the request of the
owner of Option shares from time to time (the "Owner"), delivered
within 30 days of a Subsequent Triggering Event (or such later
period as may be provided pursuant to Section 9), Issuer shall
repurchase such number of the Option Shares from the Owner as the
Owner shall designate at a price (the "Option Share Repurchase
Price") equal to (x) the market/offer price multiplied by the
number of Option Shares so designated plus (y) Grantee's
Out-of-Pocket Expenses (to the extent not previously reimbursed).
The term "Out-of-Pocket Expenses" shall mean Grantee's reasonable
out-of-pocket expenses incurred in connection with the
transactions contemplated by the Plan, including, without
limitation, legal, accounting and investment banking fees. The
term "market/offer price" shall mean the highest of (i) the price
per share of Common Stock at which a tender offer or exchange
offer therefor has been made after the date hereof, (ii) the
price per share of Common Stock to be paid by any third party
pursuant to an agreement with Issuer, (iii) the highest closing
price for shares of common Stock within the 30-day period
immediately preceding the date the Holder gives notice of the
required repurchase of this Option or the Owner gives notice of
the required repurchase of Option Shares, as the case may be, or
(iv) in the event of a sale of all or substantially all of
Issuer's assets, the sum of the price paid in such sale for such
assets and the current market value of the remaining assets of
Issuer as determined by a nationally recognized investment
banking firm selected by the Holder or the Owner, as the case may
be, divided by the number of shares of Common Stock of Issuer
outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking
firm selected by the Holder or Owner, as the case may be, whose
determination shall be conclusive and binding on all parties.
(b) The Holder or the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and
any Option Shares pursuant to this Section 6 by surrendering for
such purpose to Issuer, at its principal office, this Agreement
or certificates for Option shares, as applicable, accompanied by
a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase the
Option and/or the Option Shares in accordance with the provisions
of this Section 6. As promptly as practicable, and in any event
within five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or
the portion thereof that Issuer is not then prohibited from so
delivering under applicable law and regulation or as a
consequence of administrative policy.
(c) Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal consents and to file any
required notices in order to accomplish any repurchase
contemplated by this Section 6. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately
so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or
the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within five business
days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to Section 6(b) is prohibited under
applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices
as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or
to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder and/or the Owner,
as appropriate, that portion of the Option Purchase Price or the
Option Share Repurchase Price that Issuer is not prohibited from
delivering and (ii) deliver, as appropriate, either (A) to the
Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by
multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of
the notice of repurchase by a fraction, the numerator of which is
the Option Repurchase Price less the sum of (x) the portion
thereof theretofore delivered to the Holder and (y) Out-of-Pocket
Expenses and the denominator of which is the Option Repurchase
Price less Out-of-Pocket Expenses, or (B) to the Owner, a
certificate for the Option Shares it is then so prohibited from
repurchasing, assuming that the portion of the Option Share
Repurchase Price theretofore delivered is first applied to the
payment of Out-of-Pocket Expenses and then to the repurchase of
Option Shares.
SECTION 7. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to
consolidate or merge with any person, other than Grantee or one
of its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Class A Common Stock shall be changed into
or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Class A Common Stock shall after such merger represent less than
50% of the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or a Grantee Subsidiary, then, and in each such case, the
agreement governing such transaction shall make proper provision
so that the Option shall, upon the consummation of such
transaction and upon the terms and conditions set forth herein,
be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as defined below) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (y) Issuer in a
merger in which Issuer is the continuing or surviving
person, and (z) the transferee of all or substantially all
of Issuer's assets.
(ii) "Substitute Class A Common Stock" shall mean the
common stock to be issued by the issuer of the Substitute
Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer
price, as defined in Section 6.
(iv) "Average Price" shall mean the average closing
price of a share of the Substitute Class A Common Stock for
the one year immediately preceding the consolidation, merger
or sale in question, but in no event higher than the closing
price of the shares of Substitute Class A Common Stock on
the date preceding such consolidation, merger or sale;
provided, that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to
a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by
such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option; provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Class A Common Stock as is equal
to the Assigned Value multiplied by the number of shares of Class
A Common Stock for which the Option is then exercisable, divided
by the Average Price. The exercise price of the Substitute
Option per share of Substitute Class A Common Stock shall then be
equal to the Option Price multiplied by a fraction, the numerator
of which shall be the number of shares of Common Stock for which
the Option is then exercisable and the denominator of which shall
be the number of shares of Substitute Class A Common Stock for
which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Class A Common Stock
outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more
than 19.9% of the shares of Substitute Class A Common Stock
outstanding prior to exercise but for this Section 7(e), the
issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to the Holder equal to the excess of
(i) the value of the Substitute Option without giving the effect
to the limitation in this Section 7(e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this
Section 7(e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the
Holder.
(f) Issuer shall not enter into any transaction described
in Section 7(a) unless the Acquiring Corporation and any person
that controls the Acquiring Corporation shall assume in writing
all the obligations of Issuer hereunder.
SECTION 8. (a) At the request of the holder of the
Substitute Option (the "Substitute Option Holder"), the issuer of
the Substitute Option (the "Substitute Option Issuer") shall
repurchase the Substitute Option from the Substitute Option
Holder at a price (the "Substitute Option Repurchase Price")
equal to (i) the amount by which (x) the Highest Closing Price
(as hereinafter defined) exceeds (y) the exercise price of the
Substitute Option, multiplied by the number of shares of
Substitute Common Stock for which the Substitute Option may then
be exercised plus (ii) Grantee's Out-of-Pocket Expenses (to the
extent not previously reimbursed), and at the request of the
owner (the "Substitute Share Owner") of shares of Substitute
Class A Common Stock (the "Substitute Shares"), the Substitute
Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to (i) the
Highest Closing Price (as defined below) multiplied by the number
of Substitute Shares so designated plus (ii) Grantee's
Out-of-Pocket Expenses (to the extent not previously reimbursed).
The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the 30-day
period immediately preceding the date the Substitute Option
Holder gives notice of the required repurchase of the Substitute
Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder or the Substitute Share
Owner, as the case may be, may exercise its respective right to
require the Substitute Option Issuer to repurchase the Substitute
Option and the Substitute Shares pursuant to this Section 8 by
surrendering for such purpose to the Substitute Option Issuer, at
its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, this Agreement) and
certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or
the Substitute Share Owner, as the case may be, elects to require
the Substitute Option Issuer to repurchase the Substitute Option
and/or the Substitute Shares in accordance with the provisions of
this Section 8. As promptly as practicable, and in any event
within five business days after the surrender of the Substitute
Option and/or certificates representing Substitute Shares and the
receipt of such notice or notices relating thereto, the
Substitute Option Issuer shall deliver or cause to be delivered
to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the
Substitute Option Issuer is not then prohibited from so
delivering under applicable law and regulation or as a
consequence of administrative policy.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a
consequence of administrative policy, from repurchasing the
Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited
from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any
time after delivery of a notice of repurchase pursuant to Section
8(b) prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to receive
all required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke its
notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or
Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substituting Option Holder to
purchase that number of shares of the Substitute Class A Common
Stock obtained by multiplying the number of shares of the
Substitute Class A Common Stock for which the surrendered
Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the
Substitute Option Repurchase Price less the sum of (x) the
portion thereof theretofore delivered to the Substitute Option
Holder and (y) Out-of-Pocket Expenses and the denominator of
which is the Substitute Option Repurchase Price less
Out-of-Pocket Expenses, or (B) to the Substitute Share Owner, a
certificate for the Substitute Option Shares it is then so
prohibited from repurchasing, assuming that the portion of the
Substitute Share Repurchase Price theretofore delivered is first
applied to the payment of Out-of-Pocket Expenses and then to the
repurchase of Substitute Shares.
SECTION 9. The 30-day period for exercise of certain rights
under Section 2, and 11 shall be extended: (a) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, and for the expiration of all statutory waiting
periods; and (b) to the extent necessary to avoid liability under
Section 16(b) of the Securities Exchange Act by reason of such
exercise.
SECTION 10. Issuer hereby represents and warrants to
Grantee as follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer. This Agreement is the valid and legally binding
obligation of Issuer subject as to enforcement to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws and general equity principles.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon
the exercise of the Option, that number of shares of Class A
Common Stock equal to the maximum number of shares of Class A
Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto,
will be duly authorized, validly issued, fully paid, except as
provided under New York Banking Law non-assessable, and will be
delivered free and clear of all claims, liens, encumbrances and
security interests and not subject to any preemptive rights.
SECTION 11. Neither of the parties hereto may assign any of
its rights and obligations under this Agreement or the Option
created hereunder to any other person, without the express
written consent of the other party, except that in the event a
Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 30 days following such Subsequent
Triggering Event (or such later period as may be provided
pursuant to Section 9); provided, however, that until the date 30
days following the date at which the Federal Reserve Board
approves an application by Grantee under the Bank Holding Company
Act to acquire the shares of Class A Common Stock subject to the
Option, Grantee may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the
Federal Reserve Board.
SECTION 12. Each of Grantee and Issuer will use its best
efforts to make all filings with, and to obtain consents of, all
third parties and Governmental Entities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation applying to the Federal Reserve
Board under the Bank Holding Company Act for approval to acquire
the shares issuable hereunder, but Grantee shall not be obligated
to apply to any other Governmental Entities for approval to
acquire the shares of Class A Common Stock issuable hereunder
until such time, if ever, as it deems appropriate to do so.
SECTION 13. Notwithstanding anything to the contrary
herein, in the event that the Holder or Owner or any affiliate
(as defined in Rule 12b-2 of the rules and regulations under the
Securities Exchange Act) thereof is a person making an offer or
proposal to engage in an Merger Transaction (other than the
Merger), then (i) in the case of a Holder or any affiliate
thereof, the Option held by it shall immediately terminate and be
of no further force or effect, and (ii) in the case of an Owner
or any affiliate thereof, the Option Shares held by it shall be
immediately repurchasable by Issuer at the Option Price.
SECTION 14. (a) Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination
Event, Issuer shall, at the request of Grantee or the Holder
delivered in the written notice of exercise of the option
provided for in Section 2(e), as promptly as practicable prepare,
file and use its best efforts to keep current a shelf
registration statement under the Securities Act covering any
shares issued an issuable pursuant to the Option and shall use
its best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of any shares of Class A Common Stock issued upon
total or partial exercise of the Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee or
such Holder; provided, however, that Issuer may postpone filing a
registration statement relating to a registration request by
Grantee under this Section 6 for a period of time (not in excess
of 180 days) if in its judgment such filing would require the
disclosure of material information that Issuer has a bona fide
business purpose for preserving as confidential. Issuer will use
its best efforts to cause such registration statement first to
become effective and then to remain effective for such period not
in excess of 180 days from the day such registration statement
first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee
and all Holders shall have the right to demand two such
registrations. The foregoing notwithstanding, if, at the time of
any request by Grantee or a Holder or registration of Option
Shares as provided above, Issuer is in the process of
registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith judgment of the
managing underwriter or managing underwriters, or, if one, the
sole underwriter or underwriters, of such offering the offering
or inclusion of the Option Shares would interfere materially with
the successful marketing of the shares of Common Stock offered by
Issuer, the number of Option Shares otherwise to be covered in
the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the
account of Grantee or a Holder shall constitute at least 25% of
the total number of shares of Grantee or such Holder and Issuer
covered in such registration statement ; provided further,
however, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable
thereafter as to which no reduction shall thereafter occur.
Grantee or such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement
to be filed hereunder. In connection with any such registration,
Issuer and Grantee or a Holder shall provide each other with
representations, warranties, indemnities and other agreements
customarily given in connection with such registrations. If
requested by Grantee or a Holder in connection with such
registration, Issuer and Grantee and such Holder shall become a
party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating themselves in
respect of representations, warranties, indemnities and other
agreements customarily included in such underwriting agreements.
(b) In the event that Grantee or a Holder requests Issuer
to file a registration statement following the failure to obtain
any approval required to exercise the Option as described in
Section 9, the closing of the sale or other disposition of the
Class A Common Stock or other securities pursuant to such
registration statement shall occur substantially simultaneously
with the exercise of the Option.
SECTION 15. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by
either party hereto and that the obligations of the parties shall
hereto be enforceable by either party hereto through injunctive
or other equitable relief.
SECTION 16. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to
Section 6, the full number of shares of Class A Common Stock
provided in Section 1(a) (as adjusted pursuant to Section 5), it
is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares
as may be permissible, without any amendment or modification
hereof.
SECTION 17. All notices, requests, claims, demands and
other communications hereunder shall be deemed to have been duly
given when delivered in person, by cable, telegram, telecopy or
telex, or by registered or certified mail (postage prepaid,
return receipt requested) at the following addresses.
If to Issuer, to: If to Grantee, to:
Commercial Bancorporation of KeyCorp
Colorado One KeyCorp Plaza
3300 East First Avenue Albany, New York 12207
Denver, Colorado 80206 Telecopy: (518) 487-4287
Telecopy:
Attention: Jon P. Coates Attention: Gary R. Allen
President Executive Vice President and
Chief Banking Officer
With copies to: With copies to:
Baker & Hostetler KeyCorp
303 East 17th Avenue Key Bank Tower, Suite 2011
Suite 1100 50 South Main Street
Denver, Colorado 80203 Salt Lake City, Utah 84144
Telecopy: (303) 861-2307 Telecopy: (801) 535-1146
Attention: Thomas H. Maxfield, Esq. Attention: Carter B. Chase
Senior Vice President
SECTION 18. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
SECTION 19. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
SECTION 20. Except as otherwise expressly provided herein,
each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel.
SECTION 21. Except as otherwise expressly provided herein
or in the Plan, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided
herein.
IN WITNESS WHEREOF, each of the parties has caused this
Stock Option Agreement to be executed on its behalf by their
officers thereunto duly authorized, all as of the date first
above
written.
KEYCORP
By: ________________________________
Title:
COMMERCIAL BANCORPORATION OF COLORADO
By: ________________________________
Title:
<PAGE>
STOCK OPTION AGREEMENT, dated as of September 12, 1993 (this
"Agreement"), between KeyCorp, a New York corporation
("Grantee"), and Commercial Bancorporation of Colorado
("Issuer").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement
and Plan of Merger (the "Plan") which has been executed by the
parties hereto prior to this Agreement; and
WHEREAS, as a condition and inducement to Grantee's
willingness to enter into the Plan and in consideration thereof,
Issuer has agreed to grant Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and to be
contained in the Plan, the parties hereto agree as follows:
SECTION 1. (a) Issuer hereby grants to Grantee an
unconditional, irrevocable Option (the "Option") to purchase,
subject to the terms hereof, up to 85,958 fully paid and
nonassessable shares of Class B Common Stock, par value $1.00 per
share ("Class B Common Stock"), of Issuer at a price of $30.12
per share; provided, however, that in the event Issuer issues or
agrees to issue any shares of Class B Common Stock or Class A
Common Stock, par value $1.00 per share, of the Issuer ("Class A
Common Stock") at a price less than $30.12 per share (as adjusted
pursuant to subsection 5(b)) (other than pursuant to conversion
of Issuer's Adjustable Rate Convertible Subordinated Indentures
Due 2004 or existing employee stock option plans), such price
shall be adjusted down by an amount equal to the product of (a)
$30.12 minus the issue price of the newly issued shares times (b)
the number of newly issued shares divided by the number of shares
of Class B Common Stock then outstanding on a proforma basis
(such price, as adjusted if applicable, the "Option Price");
provided further that in no event shall the number of shares for
which this Option is exercisable exceed 19.9% of the Issuer's
issued and outstanding Class B Common Stock without giving effect
to any shares subject or issued pursuant to the Option. The
number of shares of Class B Common Stock that may be received
upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the Event that any additional shares of Class B
Common Stock are issued or otherwise become outstanding after the
date of this Agreement other than pursuant to this Agreement,
pursuant to existing employee stock option plans or pursuant to
the conversion of the Issuer's Adjustable Rate Convertible
Subordinated Debentures Due 2004 outstanding as of the date
hereof, the number of shares of Class B Common Stock subject to
the Option shall be increased so that, after such issuance, it
equals 19.9% of the number of shares of Class B Common Stock then
issued and outstanding without giving effect to any shares
subject to or issued pursuant to the Option, existing employee
stock option plans or the Issuer's Adjustable Rate Convertible
Subordinated Debentures Due 2004. Nothing contained in this
Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Plan.
SECTION 2. (a) The holder or holders of the Option (the
"Holder") may exercise the Option, in whole or part, if, but only
if, both an Initial Triggering Event (as defined below) and a
Subsequent Triggering Event (as defined below) shall have
occurred prior to the occurrence of an Exercise Termination Event
(as defined below); provided that the Holder shall have sent the
written notice of such exercise (as provided in Section 2(e))
within 30 days following such Subsequent Triggering Event (or
such later date as provided in Section 9). Each of the following
shall be an Exercise Termination Event: (i) the time immediately
preceding the Effective Time of the Merger, as defined in the
Plan; (ii) termination of the Plan by Issuer in accordance with
the provisions thereof as a result of a material breach by
KeyCorp of any representation, warranty, covenant or agreement
contained in the Plan, which breach is not cured or not curable
within 20 days after written notice of such breach is given to
KeyCorp by Issuer; (iii) termination of the Plan in accordance
with the provisions thereof if such termination occurs prior to
the occurrence of an Initial Triggering Event; or (iv) the
passage of nine months after termination of the Plan if such
termination follows the occurrence of an Initial Triggering Event
(provided that if an Initial Triggering Event continues or
another Initial Triggering Event occurs beyond such termination,
the Exercise Termination Event shall be nine months from the
expiration of the Last Triggering Event but in no event more than
18 months after such termination). The "Last Triggering Event"
shall mean the last Initial Triggering Event to occur.
(b) The term "Initial Triggering Event" shall mean any of
the following events or transactions occurring after the date
hereof:
(i) Issuer or any of its subsidiaries (each an "Issuer
Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to
engage in an Merger Transaction (as defined below) with any
person (the term "Person " for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934 (the
"Securities Exchange Act"), and the rules and regulations
thereunder) other than Grantee or any of its subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of
Issuer shall have recommended that the shareholders of
Issuer approve or accept any Merger Transaction other than
as contemplated by the Plan. For purposes of this
Agreement, "Merger Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer,
or any of Issuer's banking subsidiaries ("Bank
Subsidiaries") other than a requirement of divestiture in
Fort Collins, Colorado under the federal banking or
antitrust laws, (y) a purchase, lease or other acquisition
of all or substantially all of the assets of Issuer, or any
Bank Subsidiary or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange
or otherwise) of securities representing 10% or more of the
voting power of Issuer or a Bank Subsidiary. (The term
Merger Transaction specifically does not include any merger
or consolidation among Issuer and/or Issuer Subsidiaries.)
(ii) The Board of Directors of Issuer at any time does
not recommend that the shareholders of Issuer approve the
Plan;
(iii) Any person other than any existing limited
partner of Commercial Bank Investment Company, the Grantee,
or any shareholder of Grantee who currently beneficially
owns 10% or more of Grantee's outstanding shares of Class A
Common Stock and Class B Common Stock (Class A Common Stock
and Class B Common Stock, collectively, the "Common Stock"),
any Grantee Subsidiary or any Issuer Subsidiary acting in a
fiduciary capacity shall have acquired beneficial ownership
or the right to acquire beneficial ownership of 10% or more
of the outstanding shares of Class B Common Stock (the term
"beneficial ownership" for purposes of this Stock Option
Agreement having the meaning assigned thereto in Section
13(d) of the Securities Exchange Act, and the rules,
regulations and interpretations thereunder);
(iv) Any person other than Grantee or any Grantee
Subsidiary shall have made a bona fide proposal to Issuer or
its shareholders by public announcement or written
communication that is or becomes the subject of public
disclosure to engage in an Merger Transaction;
(v) After a proposal is made by a third party to
Issuer or its shareholders to engage in an Merger
Transaction, Issuer shall have breached any covenant or
obligation contained in the Plan and such breach (x) would
entitle Grantee to terminate the Plan and (y) shall not have
been cured prior to the Notice Date (as defined below); or
(vi) Any person other than Grantee or any Grantee
Subsidiary, other than in connection with a transaction to
which Grantee has given its prior written consent, shall
have filed an application or notice with The Board of
Governors of the Federal Reserve System (the "Federal
Reserve Board") or other governmental authority or
regulatory or administrative agency or commission, domestic
or foreign (each, a "Government Entity"), for approval to
engage in an Merger Transaction.
(c) The term "Subsequent Triggering Event" shall mean
either of the following events or transactions occurring after
the date hereof:
(i) The acquisition by any person of beneficial
ownership of 20% or more of the then outstanding Class B
Common Stock other than by a person that currently
beneficially owns more than 20% of the outstanding Class B
Common Stock; or
(ii) The occurrence of the Initial Triggering Event
described in Section 2(b)(i), except that the percentage
referred to in clause (z) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Initial Triggering Event or Subsequent
Triggering Event (together, a "Triggering Event"); provided,
however, that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In the event that the Holder is entitled to and wishes
to exercise the Option, it shall send to Issuer a written notice
(the date of which being herein referred to as the "Notice Date")
specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing
Date"); provided that if prior notification to or approval of the
Federal Reserve Board or any other Governmental Entity is
required in connection with such purchase, the Holder shall
promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that
otherwise would run pursuant to this sentence shall run from the
later of (x) the date on which any required notification periods
have expired or been terminated and (y) the date on which such
approvals have been obtained and any requisite waiting period or
periods shall have expired. Any exercise of the Option shall be
deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in Section 2(e), the Holder
shall pay to Issuer the aggregate purchase price for the shares
of Class B Common Stock purchased pursuant to the exercise of the
Option in immediately available funds by wire transfer to a bank
account designated by Issuer; provided, however, that failure or
refusal of Issuer to designate such a bank account shall not
preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(f), Issuer
shall deliver to the Holder a certificate or certificates
representing the number of shares of Class B Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the holder
thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer this Agreement
and a letter agreeing that the Holder will not offer to sell or
otherwise dispose of such shares in violation of applicable law
or the provisions of this Agreement.
(h) Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for in Section 2(e) and
the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of
record of the shares of Class B Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such
shares of Class B Common Stock shall not then actually be
delivered to the Holder. Issuer shall pay all expenses, and any
and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation,
issuance and delivery of stock certificates under this Section 2
in the name of the Holder or its assignee, transferee or
designee.
(i) Certificates for Class B Common Stock delivered at a
closing hereunder shall be endorsed with any restrictive legend
as may be required by law.
SECTION 3. (a) Issuer agrees: (i) that it shall at all
times maintain, free from preemptive rights, sufficient
authorized but unissued or treasury shares of Class B Common
Stock so that the Option may be exercised without additional
authorization of Class B Common Stock after giving effect to all
other options, warrants, convertible securities and other rights
to purchase Class B Common Stock; (ii) that it will not, by
amendment of its organization certificate or through
reorganization, consolidation, merger, dissolution or sale of
assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations
or conditions to be observed or performed hereunder by Issuer;
(iii) promptly to take all action as may from time to time be
required (including in the event, under the Bank Holding Company
Act of 1978, as amended, or the Change in Bank Control Act of
1956, as amended, or any state banking law, prior approval of or
notice to the Federal Reserve Board or to any other Governmental
Entity is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications
or notices and providing such information to each such
Governmental Entity as they may require) in order to permit the
Holder to exercise the Option and Issuer duly and effectively to
issue shares of Class B Common Stock pursuant hereto; and (iv)
promptly to take all action provided herein to protect the rights
of the Holder against dilution.
(b) Grantee agrees, and each Holder by becoming such
agrees, that it will not convert any shares of Class B Common
Stock beneficially owned by it into shares of Class B Common
Stock except to maintain its proportionate share of the
outstanding shares of Class B Common Stock.
SECTION 4. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of the Holder,
upon presentation and surrender of this Agreement at the
principal office of Issuer, for other agreements providing for
Options of different denominations entitling the holder thereof
to purchase, on the same terms and subject to the same conditions
as are set forth herein, in the aggregate the same number of
shares of Class B Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any agreements
and related options for which this Agreement (and the Option
granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of
loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new
Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
SECTION 5. The number of shares of Class B Common Stock
purchasable upon the exercise of the Option shall be subject to
adjustment from time to time as follows:
(a) In the event of any change in the Class B Common Stock
by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions,
exchanges of shares or the like, the type and number of shares of
Class B Common Stock purchasable upon exercise hereof shall be
appropriately adjusted.
(b) Whenever the number of shares of Class B Common Stock
purchasable upon exercise hereof is adjusted as provided in this
Section 5, the Option Price shall be adjusted by multiplying the
Option Price by a fraction, the numerator of which shall be equal
to the number of shares of Class B Common Stock purchasable prior
to the adjustment and the denominator of which shall be equal to
the number of shares of Class B Common Stock purchasable after
the adjustment.
SECTION 6. (a) Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination
Event, (i) at the request of the Holder, delivered within 30 days
of the Subsequent Triggering Event (or such later period as may
be provided pursuant to Section 9), Issuer shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price")
equal to (x) the amount by which (a) the market/offer price (as
defined below) exceeds (b) the Option Price, multiplied by the
number of shares for which the Option may then be exercised plus
(y) Grantee's Out-of-Pocket Expenses (as defined below) (to the
extent not previously reimbursed) and (ii) at the request of the
owner of Option shares from time to time (the "Owner"), delivered
within 30 days of a Subsequent Triggering Event (or such later
period as may be provided pursuant to Section 9), Issuer shall
repurchase such number of the Option Shares from the Owner as the
Owner shall designate at a price (the "Option Share Repurchase
Price") equal to (x) the market/offer price multiplied by the
number of Option Shares so designated plus (y) Grantee's
Out-of-Pocket Expenses (to the extent not previously reimbursed).
The term "Out-of-Pocket Expenses" shall mean Grantee's reasonable
out-of-pocket expenses incurred in connection with the
transactions contemplated by the Plan, including, without
limitation, legal, accounting and investment banking fees. The
term "market/offer price" shall mean the highest of (i) the price
per share of Class B Common Stock at which a tender offer or
exchange offer therefor has been made after the date hereof, (ii)
the price per share of Class B Common Stock to be paid by any
third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of common Stock within the
30-day period immediately preceding the date the Holder gives
notice of the required repurchase of this Option or the Owner
gives notice of the required repurchase of Option Shares, as the
case may be, or (iv) in the event of a sale of all or
substantially all of Issuer's assets, the sum of the price paid
in such sale for such assets and the current market value of the
remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by the Holder or the
Owner, as the case may be, divided by the number of shares of
Class B Common Stock of Issuer outstanding at the time of such
sale. In determining the market/offer price, the value of
consideration other than cash shall be determined by a nationally
recognized investment banking firm selected by the Holder or
Owner, as the case may be, whose determination shall be
conclusive and binding on all parties.
(b) The Holder or the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and
any Option Shares pursuant to this Section 6 by surrendering for
such purpose to Issuer, at its principal office, this Agreement
or certificates for Option shares, as applicable, accompanied by
a written notice or notices stating that the Holder or the Owner,
as the case may be, elects to require Issuer to repurchase the
Option and/or the Option Shares in accordance with the provisions
of this Section 6. As promptly as practicable, and in any event
within five business days after the surrender of the Option
and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or
the portion thereof that Issuer is not then prohibited from so
delivering under applicable law and regulation or as a
consequence of administrative policy.
(c) Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal consents and to file any
required notices in order to accomplish any repurchase
contemplated by this Section 6. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation, or as a
consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately
so notify the Holder and/or the Owner and thereafter deliver or
cause to be delivered, from time to time, to the Holder and/or
the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that
it is no longer prohibited from delivering, within five business
days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a
notice of repurchase pursuant to Section 6(b) is prohibited under
applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required
regulatory and legal approvals and to file any required notices
as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or
to the extent of the prohibition, whereupon, in the latter case,
Issuer shall promptly (i) deliver to the Holder and/or the Owner,
as appropriate, that portion of the Option Purchase Price or the
Option Share Repurchase Price that Issuer is not prohibited from
delivering and (ii) deliver, as appropriate, either (A) to the
Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Class B Common Stock obtained
by multiplying the number of shares of Class B Common Stock for
which the surrendered Agreement was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the sum of (x) the
portion thereof theretofore delivered to the Holder and (y)
Out-of-Pocket Expenses and the denominator of which is the Option
Repurchase Price less Out-of-Pocket Expenses, or (B) to the
Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing, assuming that the portion of the
Option Share Repurchase Price theretofore delivered is first
applied to the payment of Out-of-Pocket Expenses and then to the
repurchase of Option Shares.
SECTION 7. (a) In the event that prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to
consolidate or merge with any person, other than Grantee or one
of its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Class B Common Stock shall be changed into
or exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Class B Common Stock shall after such merger represent less than
50% of the outstanding shares and share equivalents of the merged
company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or a Grantee Subsidiary, then, and in each such case, the
agreement governing such transaction shall make proper provision
so that the Option shall, upon the consummation of such
transaction and upon the terms and conditions set forth herein,
be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as defined below) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (y) Issuer in a
merger in which Issuer is the continuing or surviving
person, and (z) the transferee of all or substantially all
of Issuer's assets.
(ii) "Substitute Class B Common Stock" shall mean the
common stock to be issued by the issuer of the Substitute
Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the market/offer
price, as defined in Section 6.
(iv) "Average Price" shall mean the average closing
price of a share of the Substitute Class B Common Stock for
the one year immediately preceding the consolidation, merger
or sale in question, but in no event higher than the closing
price of the shares of Substitute Class B Common Stock on
the date preceding such consolidation, merger or sale;
provided, that if Issuer is the issuer of the Substitute
Option, the Average Price shall be computed with respect to
a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by
such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option; provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Class B Common Stock as is equal
to the Assigned Value multiplied by the number of shares of Class
B Common Stock for which the Option is then exercisable, divided
by the Average Price. The exercise price of the Substitute
Option per share of Substitute Class B Common Stock shall then be
equal to the Option Price multiplied by a fraction, the numerator
of which shall be the number of shares of Class B Common Stock
for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Class B Common
Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more
than 19.9% of the shares of Substitute Class B Common Stock
outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more
than 19.9% of the shares of Substitute Class B Common Stock
outstanding prior to exercise but for this Section 7(e), the
issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to the Holder equal to the excess of
(i) the value of the Substitute Option without giving the effect
to the limitation in this Section 7(e) over (ii) the value of the
Substitute Option after giving effect to the limitation in this
Section 7(e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the
Holder.
(f) Issuer shall not enter into any transaction described
in Section 7(a) unless the Acquiring Corporation and any person
that controls the Acquiring Corporation shall assume in writing
all the obligations of Issuer hereunder.
SECTION 8. (a) At the request of the holder of the
Substitute Option (the "Substitute Option Holder"), the issuer of
the Substitute Option (the "Substitute Option Issuer") shall
repurchase the Substitute Option from the Substitute Option
Holder at a price (the "Substitute Option Repurchase Price")
equal to (i) the amount by which (x) the Highest Closing Price
(as hereinafter defined) exceeds (y) the exercise price of the
Substitute Option, multiplied by the number of shares of
Substitute Class B Common Stock for which the Substitute Option
may then be exercised plus (ii) Grantee's Out-of-Pocket Expenses
(to the extent not previously reimbursed), and at the request of
the owner (the "Substitute Share Owner") of shares of Substitute
Class B Common Stock (the "Substitute Shares"), the Substitute
Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to (i) the
Highest Closing Price (as defined below) multiplied by the number
of Substitute Shares so designated plus (ii) Grantee's
Out-of-Pocket Expenses (to the extent not previously reimbursed).
The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Class B Common Stock within the
30-day period immediately preceding the date the Substitute
Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of
the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder or the Substitute Share
Owner, as the case may be, may exercise its respective right to
require the Substitute Option Issuer to repurchase the Substitute
Option and the Substitute Shares pursuant to this Section 8 by
surrendering for such purpose to the Substitute Option Issuer, at
its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, this Agreement) and
certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or
the Substitute Share Owner, as the case may be, elects to require
the Substitute Option Issuer to repurchase the Substitute Option
and/or the Substitute Shares in accordance with the provisions of
this Section 8. As promptly as practicable, and in any event
within five business days after the surrender of the Substitute
Option and/or certificates representing Substitute Shares and the
receipt of such notice or notices relating thereto, the
Substitute Option Issuer shall deliver or cause to be delivered
to the Substitute Option Holder the Substitute Option Repurchase
Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or the portion thereof which the
Substitute Option Issuer is not then prohibited from so
delivering under applicable law and regulation or as a
consequence of administrative policy.
(c) To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation, or as a
consequence of administrative policy, from repurchasing the
Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner
and thereafter deliver or cause to be delivered, from time to
time, to the Substitute Option Holder and/or the Substitute Share
Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited
from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any
time after delivery of a notice of repurchase pursuant to Section
8(b) prohibited under applicable law or regulation, or as a
consequence of administrative policy, from delivering to the
Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its best efforts to receive
all required regulatory and legal approvals as promptly as
practicable in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke its
notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or
Substitute Share Owner, as appropriate, that portion of the
Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering and (ii) deliver, as appropriate,
either (A) to the Substitute Option Holder, a new Substitute
Option evidencing the right of the Substituting Option Holder to
purchase that number of shares of the Substitute Class B Common
Stock obtained by multiplying the number of shares of the
Substitute Class B Common Stock for which the surrendered
Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the
Substitute Option Repurchase Price less the sum of (x) the
portion thereof theretofore delivered to the Substitute Option
Holder and (y) Out-of-Pocket Expenses and the denominator of
which is the Substitute Option Repurchase Price less
Out-of-Pocket Expenses, or (B) to the Substitute Share Owner, a
certificate for the Substitute Option Shares it is then so
prohibited from repurchasing, assuming that the portion of the
Substitute Share Repurchase Price theretofore delivered is first
applied to the payment of Out-of-Pocket Expenses and then to the
repurchase of Substitute Shares.
SECTION 9. The 30-day period for exercise of certain rights
under Section 2, and 11 shall be extended: (a) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, and for the expiration of all statutory waiting
periods; and (b) to the extent necessary to avoid liability under
Section 16(b) of the Securities Exchange Act by reason of such
exercise.
SECTION 10. Issuer hereby represents and warrants to
Grantee as follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings
on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by
Issuer. This Agreement is the valid and legally binding
obligation of Issuer subject as to enforcement to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws and general equity principles.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times
from the date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon
the exercise of the Option, that number of shares of Class B
Common Stock equal to the maximum number of shares of Class B
Common Stock at any time and from time to time issuable
hereunder, and all such shares, upon issuance pursuant hereto,
will be duly authorized, validly issued, fully paid, except as
provided under New York Banking Law non-assessable, and will be
delivered free and clear of all claims, liens, encumbrances and
security interests and not subject to any preemptive rights.
SECTION 11. Neither of the parties hereto may assign any of
its rights and obligations under this Agreement or the Option
created hereunder to any other person, without the express
written consent of the other party, except that in the event a
Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder within 30 days following such Subsequent
Triggering Event (or such later period as may be provided
pursuant to Section 9); provided, however, that until the date 30
days following the date at which the Federal Reserve Board
approves an application by Grantee under the Bank Holding Company
Act to acquire the shares of Class B Common Stock subject to the
Option, Grantee may not assign its rights under the Option except
in (i) a widely dispersed public distribution, (ii) a private
placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the
Federal Reserve Board.
SECTION 12. Each of Grantee and Issuer will use its best
efforts to make all filings with, and to obtain consents of, all
third parties and Governmental Entities necessary to the
consummation of the transactions contemplated by this Agreement,
including without limitation applying to the Federal Reserve
Board under the Bank Holding Company Act for approval to acquire
the shares issuable hereunder, but Grantee shall not be obligated
to apply to any other Governmental Entities for approval to
acquire the shares of Class B Common Stock issuable hereunder
until such time, if ever, as it deems appropriate to do so.
SECTION 13. Notwithstanding anything to the contrary
herein, in the event that the Holder or Owner or any affiliate
(as defined in Rule 12b-2 of the rules and regulations under the
Securities Exchange Act) thereof is a person making an offer or
proposal to engage in an Merger Transaction (other than the
Merger), then (i) in the case of a Holder or any affiliate
thereof, the Option held by it shall immediately terminate and be
of no further force or effect, and (ii) in the case of an Owner
or any affiliate thereof, the Option Shares held by it shall be
immediately repurchasable by Issuer at the Option Price.
SECTION 14. (a) Upon the occurrence of a Subsequent
Triggering Event that occurs prior to an Exercise Termination
Event, Issuer shall, at the request of Grantee or the Holder
delivered in the written notice of exercise of the option
provided for in Section 2(e), as promptly as practicable prepare,
file and use its best efforts to keep current a shelf
registration statement under the Securities Act covering any
shares issued an issuable pursuant to the Option and shall use
its best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other
disposition of any shares of Class A Common Stock issued upon
conversion of Class B Common Stock issued upon total or partial
exercise of the Option ("Option Shares") in accordance with any
plan of disposition requested by Grantee or such Holder;
provided, however, that Issuer may postpone filing a registration
statement relating to a registration request by Grantee under
this Section 6 for a period of time (not in excess of 180 days)
if in its judgment such filing would require the disclosure of
material information that Issuer has a bona fide business purpose
for preserving as confidential. Issuer will use its best efforts
to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 180
days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary to
effect such sales or other dispositions. Grantee and all Holders
shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by
Grantee or a Holder or registration of Option Shares as provided
above, Issuer is in the process of registration with respect to
an underwritten public offering of shares of Common Stock, and if
in the good faith judgment of the managing underwriter or
managing underwriters, or, if one, the sole underwriter or
underwriters, of such offering the offering or inclusion of the
Option Shares would interfere materially with the successful
marketing of the shares of Common Stock offered by Issuer, the
number of Option Shares otherwise to be covered in the
registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the
number of Option Shares to be included in such offering for the
account of Grantee or a Holder shall constitute at least 25% of
the total number of shares of Grantee or such Holder and Issuer
covered in such registration statement ; provided further,
however, that if such reduction occurs, then Issuer shall file a
registration statement for the balance as promptly as practicable
thereafter as to which no reduction shall thereafter occur.
Grantee or such Holder shall provide all information reasonably
requested by Issuer for inclusion in any registration statement
to be filed hereunder. In connection with any such registration,
Issuer and Grantee or a Holder shall provide each other with
representations, warranties, indemnities and other agreements
customarily given in connection with such registrations. If
requested by Grantee or a Holder in connection with such
registration, Issuer and Grantee and such Holder shall become a
party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating themselves in
respect of representations, warranties, indemnities and other
agreements customarily included in such underwriting agreements.
(b) In the event that Grantee or a Holder requests Issuer
to file a registration statement following the failure to obtain
any approval required to exercise the Option as described in
Section 9, the closing of the sale or other disposition of the
Class B Common Stock or other securities pursuant to such
registration statement shall occur substantially simultaneously
with the exercise of the Option.
SECTION 15. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by
either party hereto and that the obligations of the parties shall
hereto be enforceable by either party hereto through injunctive
or other equitable relief.
SECTION 16. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to
Section 6, the full number of shares of Class B Common Stock
provided in Section 1(a) (as adjusted pursuant to Section 5), it
is the express intention of Issuer to allow the Holder to acquire
or to require Issuer to repurchase such lesser number of shares
as may be permissible, without any amendment or modification
hereof.
SECTION 17. All notices, requests, claims, demands and
other communications hereunder shall be deemed to have been duly
given when delivered in person, by cable, telegram, telecopy or
telex, or by registered or certified mail (postage prepaid,
return receipt requested) at the following addresses.
If to Issuer, to: If to Grantee, to:
Commercial Bancorporation of KeyCorp
Colorado One KeyCorp Plaza
3300 East First Avenue Albany, New York 12207
Denver, Colorado 80206 Telecopy: (518) 487-4287
Telecopy:
Attn: Jon P. Coates Attn: Gary R. Allen
President Executive Vice President
and Chief Banking Officer
With copies to: With copies to:
Baker & Hostetler KeyCorp
303 East 17th Avenue Key Bank Tower, Suite 2011
Suite 1100 50 South Main Street
Denver, Colorado 80203 Salt Lake City, Utah 84144
Telecopy: (303) 861-2307 Telecopy: (801) 535-1146
Attn: Thomas H. Maxfield, Esq. Attn: Carter B. Chase
Senior Vice President
SECTION 18. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
SECTION 19. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
SECTION 20. Except as otherwise expressly provided herein,
each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses
of its own financial consultants, investment bankers, accountants
and counsel.
SECTION 21. Except as otherwise expressly provided herein
or in the Plan, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided
herein.
IN WITNESS WHEREOF, each of the parties has caused this
Stock Option Agreement to be executed on its behalf by their
officers thereunto duly authorized, all as of the date first
above written.
KEYCORP
By: _______________________________
Title:
COMMERCIAL BANCORPORATION OF COLORADO
By: _______________________________
Title:
Exchange Offer
<PAGE>
APPENDIX C
SECTIONS 7-4-123 and 7-4-124 OF THE COLORADO CORPORATION CODE
DISSENTERS' RIGHTS
7-4-123. Right of shareholders to dissent and obtain
payment for shares
(1) Any shareholder of a corporation shall have the
right to dissent from, and to obtain payment for his shares in
the event of, any of the following corporate actions:
(a) Except as provided in subsection (3) of this
section, any plan of merger or consolidation to which the
corporation is a party or any plan of exchange pursuant to
section 7-7-102.5 as to which the corporation is a party
other than the acquiring corporation; or
(b) Any sale, lease, exchange, or other disposition of
all or substantially all of the property and assets of the
corporation not made in the usual or regular course of its
business, including a sale in dissolution but not including
a sale pursuant to an order of a court having jurisdiction
in the premises or a sale for cash on terms requiring that
all or substantially all of the net proceeds of sale be
distributed to the shareholders in accordance with their
respective interests within one year after the date of sale.
(2) (a) A shareholder may assert dissenters' rights as
to less than all of the shares registered in his name only if he
dissents with respect to all the shares beneficially owned by any
one person and discloses the name and address of the person or
persons on whose behalf he dissents. In that event, his rights
shall be determined as if the shares as to which he has dissented
and his other shares were registered in the names of different
shareholders.
(b) A beneficial owner of shares who is not the record
holder may assert dissenters' rights with respect to shares held
on his behalf and shall be treated as a dissenting shareholder
under the terms of this section and section 7-4-124 if he submits
a written consent of the shareholder to the corporation at the
time of or before the assertion of those rights.
(3) The right to obtain payment under this section
shall not apply to the shareholders of the surviving corporation
in a merger if a vote of the shareholders of such corporation is
not necessary to authorize such merger; except that this
subsection (3) shall not apply if the merger is pursuant to
section 7-7-106, all of the stock of the subsidiary corporation
was not owned by the parent corporation immediately prior to the
merger, and the subsidiary corporation is the surviving
corporation.
(4) A shareholder who has a right under this code to
obtain payment for his shares shall have no right at law or in
equity to attack the validity of the corporate action which gives
rise to his right to obtain payment nor to have the action set
aside or rescinded, except when the corporate action is illegal
or fraudulent with regard to the complaining shareholder or the
corporation.
7-4-124. Procedures for protection of dissenters'
rights
(1) As used in this section:
(a) "Corporation" means the issuer of the shares held
by the dissenter before the corporate action or the
successor by merger or consolidation of that issuer.
(b) "Dissenter" means a shareholder or beneficial
owner who is entitled to and does assert dissenters' rights
under section 7-4-123 and who has performed every act
required up to the time involved for the assertion of such
rights.
(c) "Fair value" means the value of shares immediately
before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or
depreciation in anticipation of such corporate action,
unless such exclusion would be inequitable.
(d) "Interest" means interest from the effective date
of the corporate action until the date of payment calculated
at the average rate currently paid by the corporation on its
principal bank loans or, if none, at such rate as is fair
and equitable under all the circumstances.
(2) If a proposed corporate action which would give
rise to dissenters' rights under section 7-4-123 is submitted to
a vote at a meeting of shareholders, the notice of meeting shall
notify all shareholders that they have or may have a right to
dissent and obtain payment for their shares by complying with the
terms of this section, and the notice shall be accompanied by a
copy of section 7-4-123 and this section.
(3) If the proposed corporate action is submitted to a
vote at a meeting of shareholders, any shareholder who wishes to
dissent and obtain payment for his shares shall file with the
corporation, prior to the vote, a written notice of intention to
demand that he be paid fair compensation for his shares if the
proposed action is effectuated and shall refrain from voting his
shares in approval of such action. A shareholder who fails in
either respect shall not acquire a right to payment for his
shares under this section or section 7-4-123.
(4) If the proposed corporate action is approved by
the required vote at a meeting of shareholders, the corporation
shall mail a notice to all shareholders who gave due notice of
intention to demand payment and who refrained from voting in
favor of the proposed action. If the proposed corporate action
is to be taken without a vote of shareholders, the corporation
shall send to all shareholders who are entitled to dissent and
demand payment for their shares a notice of the adoption of the
plan of corporate action. The notice shall state where and when
a demand for payment shall be sent and certificates shall be
deposited in order to obtain payment, shall supply a form for
demanding payment which includes a request for certification of
the date on which the shareholder or the person on whose behalf
the shareholder dissents acquired beneficial ownership of the
shares, and shall be accompanied by a copy of section 7-4-123 and
this section. The time set for the demand and deposit shall be
not less than thirty days from the mailing of the notice.
(5) A shareholder who fails to demand payment or fails
to deposit certificates, as required by a notice mailed to such
shareholder pursuant to subsection (4) of this section, shall
have no right under this section or section 7-4-123 to receive
payment for his shares. The dissenter shall retain all other
rights of a shareholder until those rights are modified by
effectuation of the proposed corporate action.
(6) (a) If the corporation has not effectuated the
proposed corporate action and remitted payment for shares
pursuant to paragraph (c) of this subsection (6) within sixty
days after the date set for demanding payment and depositing
certificates, it shall return any certificates that have been
deposited.
(b) If deposited certificates have been returned, the
corporation may, at any later time, send a new notice conforming
to the requirements of subsection (4) of this section.
(c) Immediately upon effectuation of the proposed
corporate action or upon receipt of demand for payment, if the
corporate action has already been effectuated, the corporation
shall remit to a dissenter who has made demand and who has
deposited his certificates the amount which the corporation
estimates to be the fair value of the shares, with interest if
any has accrued. The remittance shall be accompanied by:
(I) The corporation's closing balance sheet and
statement of income for a fiscal year ending not more than
sixteen months before the date of remittance, together with
the latest available interim financial statements;
(II) A statement of the corporation's estimate
of fair value of the shares; and
(III) A notice of the dissenter's right to
demand supplemental payment, accompanied by a copy of
section 7-4-123 and this section.
(7) If the corporation fails to remit payment for his
shares as required by subsection (6) of this section or if the
dissenter believes that the amount remitted is less than the fair
value of his shares or that the interest is not correctly
determined, he may, within thirty days after the date of mailing
of the corporation's remittance, mail to the corporation his own
estimate of the value of the shares or of the interest to the
corporation and demand payment of the deficiency. If he fails to
do so, he shall be entitled to no more than the amount remitted.
(8) (a) Within sixty days after receiving a demand for
payment pursuant to subsection (7) of this section, if any such
demand for payment remains unsettled, the corporation shall file
in an appropriate court a petition requesting that the fair value
of the shares and interest thereon be determined by the court.
(b) An appropriate court is a court of competent
jurisdiction in the county of this state where the registered
office of the corporation is located. If the corporation is a
foreign corporation without a registered office in this state,
the petition shall be filed in the county where the registered
office of the foreign corporation was last located.
(c) All dissenters, wherever residing, whose demands
have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the petition shall
be served on each such dissenter; except that, if a dissenter is
a nonresident, the copy may be served on him by registered or
certified mail or by publication as provided by law.
(d) The jurisdiction of the court shall be plenary and
exclusive. The court may appoint one or more persons as
appraisers to receive evidence and to recommend a decision on the
question of fair value. The appraisers shall have the power and
authority specified in the order of their appointment or in any
amendment thereof. The dissenters are entitled to discovery in
the same manner as parties in other civil suits.
(e) All dissenters who are made parties are entitled
to judgment for the amount by which the fair value of their
shares is found to exceed the amount previously remitted, with
interest.
(f) If the corporation fails to file a petition as
provided in paragraph (a) of this subsection (8), each dissenter
who has made a demand and who has not already settled his claim
against the corporation shall be paid by the corporation the
amount demanded by him with interest and may sue therefor in an
appropriate court.
(9) (a) The costs and expenses of any proceeding under
subsection (8) of this section, including the reasonable
compensation and expenses of appraisers appointed by the court,
shall be determined by the court and assessed against the
corporation; except that any part of the costs and expenses may
be apportioned and assessed as the court may deem equitable
against all or some of the dissenters who are parties and whose
action in demanding supplemental payment the court finds to be
arbitrary, vexatious, or not in good faith.
(b) Fees and expenses of counsel and of experts for
the respective parties may be assessed as the court deems
equitable against the corporation and in favor of any or all
dissenters if the corporation fails to comply substantially with
the requirements of this section and may be assessed against
either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not
in good faith in respect to the rights provided by this section
and section 7-4-123.
(c) If the court finds that the services of counsel
for any dissenter were of substantial benefit to other dissenters
similarly situated and should not be assessed against the
corporation, it may award to the counsel reasonable fees to be
paid out of the amounts awarded to the dissenters who were
benefited.
(10) (a) Notwithstanding any other provisions of this
section, the corporation may elect to withhold the remittance
required by subsection (6) of this section from any dissenter
with respect to shares of which the dissenter or the person on
whose behalf the dissenter acts was not the beneficial owner on
the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action. With
respect to such shares, the corporation shall, upon effectuating
the corporate action, state to each dissenter its estimate of the
fair market value of the shares, state the rate of interest to be
used (explaining the basis thereof), and offer to pay the
resulting amounts on receiving the dissenter's agreement to
accept them in full satisfaction.
(b) If the dissenter believes that the amount offered
under paragraph (a) of this subsection (10) is less than the fair
value of the shares and interest determined according to this
section, he may, within thirty days after the date of mailing of
the corporation's offer, mail to the corporation his own estimate
of fair value and interest and demand payment of that amount. If
he fails to do so, he shall be entitled to no more than the
corporation's offer.
(c) If the dissenter makes a demand as provided in
paragraph (b) of this subsection (10), the provisions of
subsections (8) and (9) of this section shall apply to further
proceedings on the dissenter's demand.
<PAGE>
APPENDIX D
January 14, 1994
The Board of Directors
Commercial Bancorporation of Colorado
Century Bank Plaza
3300 East First Avenue
Denver, CO 80206
Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to the common stockholders of Commercial
Bancorporation of Colorado, Inc. ("CBC") of the exchange ratio in
the proposed merger (the "Merger") of CBC with and into
Key Bancshares of Colorado, Inc. ("Key Colorado"), a subsidiary
of KeyCorp, pursuant to the Merger Agreement dated September 11,
1993, as Amended and Restated as of September 11, 1993 (as so
amended and restated the "Agreement"). Under the terms of the
Agreement, each outstanding share of CBC common stock, $1.00 par
value, will be converted into 0.746 shares of KeyCorp common
stock, $5.00 par value (the "CBC/KeyCorp Exchange Ratio"). In
completing this analysis, we have also considered the
implications of the proposed merger (the "KeyCorp/Society
Merger") of KeyCorp into and with Society Corporation
("Society"), with Society as the surviving corporation under the
new name Key Bancshares Inc. or a variant thereof ("New Key").
Under that proposed merger, each outstanding share of KeyCorp
common stock will be converted into 1.205 common shares of
New Key (the "KeyCorp/Society Exchange Ratio"). The result is
that, if both the Merger and the KeyCorp/Society merger are
consummated, each share of CBC common stock would be converted
into .899 of a share of common stock of New Key.
In arriving at our opinion, we have, among other things:
i. reviewed certain publicly available financial
statements and other financial information not
publicly available of CBC;
ii. reviewed the current condition and growth
prospects for CBC and its subsidiary banks,
including financial projections prepared by CBC
management;
iii. discussed the past and current operations and
financial conditions and the prospects of CBC with
CBC management;
iv. reviewed CBC's historical stock trading activity
and considered the prospect for value, liquidity,
dividend yield and growth if CBC were to remain
independent;
v. evaluated the economic, banking and competitive
climate in Colorado, with special consideration
given to recent transactions that may have
increased the competitive environment in the
financial services and banking industry;
vi. reviewed the process used in marketing CBC,
including a review of the potential acquirors
contacted and their responses relative to a
potential acquisition of CBC;
vii. compared the various offers received from
interested parties and determined that the KeyCorp
offer represented the highest value in absolute
terms;
viii.compared the KeyCorp offer to recent transactions
involving other institutions of similar size in
Colorado and the Rocky Mountain region;
xi. examined the price and trading activity for
KeyCorp;
x. reviewed the Merger Agreement among KeyCorp and
CBC;
xi. analyzed the price obtainable for CBC's shares at
this time compared with the risks involved and
possible price available at a later time;
xii. reviewed the implications for CBC shareholders
receiving KeyCorp stock with regards to prospects
for value, liquidity, dividend yield and growth;
xiii.met with KeyCorp and Society Corporation
management and reviewed certain publicly available
financial statements of KeyCorp and Society;
xiv. reviewed certain publicly available information
regarding the proposed merger of KeyCorp and
Society Corporation and its implication for CBC
shareholders including the prospects for value,
liquidity, dividend yield and growth; and
xv. evaluated the future growth prospects of KeyCorp
following the Merger.
We have assumed without independent verification the
accuracy and completeness of the financial and other information
regarding CBC that was provided to us or obtained from publicly
available sources. We have not prepared or acquired an
independent valuation or appraisal of any of the assets of CBC
and we have assumed without independent verification that the
aggregate allowances for loan losses of CBC and KeyCorp are
adequate to cover such losses. With respect to business plans
and forecasts, we have assumed that they have been reasonably
prepared on a basis reflecting the best currently available
estimates and judgments of the management of CBC as to the future
performance of CBC, its subsidiaries and business units.
Furthermore, we have assumed that the Merger will be consummated
on a timely basis in accordance with its terms and pursuant to
the Merger Agreement. We have also taken into account our
assessment of general economic, market and financial conditions
as they exist, as well as our experience in connection with
similar transactions and securities valuations generally. Our
opinion necessarily is based upon conditions as they exist and
can be evaluated as of the date of this opinion.
The Wallach Company is an investment banking firm engaged in
the valuation of businesses and their securities in connection
with mergers and acquisitions, private placements, and valuations
for corporate and other purposes. The Wallach Company, as the
Company's financial adviser, assisted with the marketing and
negotiations leading to the Merger Agreement for which it has and
will receive compensation.
It is understood that this letter is for the information of
CBC Board only and may not be used for any other purposes without
our prior written consent, provided, however, that we hereby
consent to the inclusion of this opinion in any registration
statement or proxy statement used in connection with the Merger
so long as the opinion is included in its entirety in such
registration statement or proxy statement.
Based on our analysis of the foregoing, the assumptions
described above and upon such other factors we deem relevant, it
is our opinion that, as of the date hereof, the CBC/KeyCorp
Exchange Ratio, and if the KeyCorp/Society Merger is consummated,
the KeyCorp/Society Exchange Ratio, are fair to CBC shareholders
from a financial point of view.
<PAGE>
APPENDIX E
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the
fiscal year ended December 31, 1992.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the
transition period from to .
Commission file number 0-7149
Commercial Bancorporation of Colorado
_________________________________________________________________
(Exact name of registrant as specified in its charter)
Colorado 84-0616683
(State of incorporation) (IRS Employer Identification Number)
3300 East First Avenue, Denver, Colorado 80206
(Address of principal executive offices)
Registrant's telephone number, including area code (303) 321-1234
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, Par Value $1.00 Per Share
(Title of Class)
Adjustable Rate Convertible Subordinated Debentures Due 2004
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past
90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendments to this
form 10-K. [X]
The aggregate market value of the Class A Common Stock held by
nonaffiliates of the registrant as of February 26, 1993, was
$28,496,000. All of Class B Common Stock is held by an
affiliate.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable
date:
Outstanding at
Class February 26, 1993
_____________________________________ __________________
Class A Common Stock, $1.00 par value 2,365,954
Class B Common Stock, $1.00 par value 431,950
DOCUMENTS INCORPORATED BY REFERENCE:
Proxy Statement for year ended December 31, 1992, incorporated in
Part III.
<PAGE> PART I
Item 1 Business
________
General
Commercial Bancorporation of Colorado (the "Company") was
incorporated in Colorado and became a registered bank holding
company in 1971. The Company is engaged in the commercial
banking business through five wholly-owned subsidiary banks
("Subsidiary Banks") with a total of nine banking offices located
in Colorado. The Company has no significant nonbank
subsidiaries. The Company had total consolidated assets of
$335,741,000 as of December 31, 1992.
The Subsidiary Banks are located in various communities
along the front range of the Rocky Mountains and in northeastern
Colorado. Century Bank, with five banking offices, is located in
the greater Denver Metropolitan area, Century Bank
Broadmoor/Skyway and Century Bank Academy at Hancock are located
in Colorado Springs, Century Bank Sterling is located in Sterling
and Century Bank Fort Collins is located in Fort Collins. At
December 31, 1992, the Subsidiary Banks had total assets of
$331,436,000, total loans of $187,733,000, total deposits of
$299,564,000 and total equity of $27,001,000.
Colorado banking laws do not allow for unlimited statewide
branch banking until January 1, 1995. Until then, the law allows
a limited number of de novo branches and the conversion of failed
bank acquisitions into branches. As a multibank holding company,
the Company may own or control more than one bank in Colorado.
Also as a multibank holding company, the Company provides the
individual Subsidiary Banks the ability to make larger loans than
would otherwise be permitted through participation in such loans
by the other Subsidiary Banks.
During the fourth quarter of 1992, Century Bank Academy at
Hancock and Century Bank Sterling received authorization to open
de novo branches in north Colorado Springs and Fort Morgan,
Colorado, respectively. The branch in north Colorado Springs was
opened in mid-March 1993 and the branch in Fort Morgan is
scheduled to open in the third quarter of 1993.
Each Subsidiary Bank is managed by its own officers and a
common set of directors, however, the Company provides certain
advisory services and establishes all general policies. More
specifically, the Company renders advice and service to the
Subsidiary Banks relating to training, lending structure and
techniques, securities investments, public relations, marketing,
accounting and internal auditing services, and compliance with
government regulations. The Company also provides capital
planning and financial assistance to the Subsidiary Banks through
bank premises acquisition and construction and infusion of
capital when necessary.
Each Subsidiary Bank is chartered under the laws of the
State of Colorado and each bank is a member of the Federal
Deposit Insurance Corporation (FDIC) and two banks, Century Bank
Sterling and Century Bank Academy at Hancock are members of the
Federal Reserve Bank. The Subsidiary Banks are each subject to
examination according to schedules established by their
respective regulatory agencies: Century Bank Sterling and
Century Bank Academy at Hancock by the Colorado Division of
Banking and the Board of Governors of the Federal Reserve System;
Century Bank Fort Collins, Century Bank Broadmoor/Skyway, and
Century Bank by the Colorado Division of Banking and the FDIC.
Additionally, the Company, as a registered bank holding company,
is also subject to examination by the Federal Reserve Bank of
Kansas City.
One of the Subsidiary Banks is operating under a written
agreement with its regulatory agency. This agreement restricts
dividend payments and requires the Subsidiary Bank to strengthen
its loan underwriting and review procedures. The Subsidiary Bank
is in compliance with the agreement in all material respects.
Subsidiary Banks
The Subsidiary Banks offer general commercial banking
services to their customers. They accept both checking and
savings deposits and make commercial, agricultural, consumer,
real estate and construction mortgage loans. The Subsidiary
Banks also provide direct deposit and safe deposit services and
offer national credit card services, including VISA and Master
Card. The Subsidiary Banks concentrate on secured lending to
small and medium size businesses.
The following table sets forth certain information
concerning the Subsidiary Banks as of December 31, 1992. Each of
the banks is a state bank organized under the laws of Colorado.
Intercompany accounts have not been eliminated.
<TABLE>
<CAPTION>
Name, Location & Year of Organization Acquired Assets Loans Deposits Equity
______________________________________ ________ ________ ________ ________ _______
(In Thousands)
<S> <C> <C> <C> <C> <C>
Century Bank Sterling - 1918<F1> 1971 $ 53,173 $ 36,955 $ 46,698 $ 6,096
Sterling, Logan County
Century Bank - 1961<F2> 1974 196,603 106,249 177,137 15,517
City and County of Denver
Century Bank Broadmoor/Skyway - 1969<F3> 1974 32,367 16,595 30,012 2,182
Colorado Springs, El Paso County
Century Bank Academy at Hancock - 1982<F4> 1985 23,805 13,089 22,344 1,353
Colorado Springs, El Paso County
Century Bank Fort Collins - 1962<F5> 1986 25,488 14,845 23,373 1,853
Fort Collins, Larimer County
<F1>
Century Bank Sterling owns all of the outstanding capital stock of Commercial Agency, Inc. Commercial Agency, Inc., is
a general purpose insurance agency with minimal operations. None of the other Subsidiary Banks have subsidiaries.
Century Bank Sterling has received authorization to establish a de novo branch bank in Fort Morgan, Colorado. This
branch is scheduled to open in the third quarter of 1993.
<F2>
Century Bank operates five banking offices in the greater Denver Metropolitan area.
<F3>
Bank of Colorado conducts business under this name.
<F4>
Century Bank Academy at Hancock established a de novo branch bank in north Colorado Springs which opened in
mid-March 1993.
<F5>
Rocky Mountain Bank and Trust Company conducts business under this name.
</TABLE>
Distribution of Assets, Liabilities and Shareholders' Equity.
The following table sets forth balance sheet items on a daily
average basis during 1992, 1991 and 1990 and shows the daily
average interest rates earned on assets and the daily average
interest rate paid on liabilities for such periods:
<TABLE>
<CAPTION>
Year Ended December 31,
________________________________________________________________________________________________
1992 1991 1990
_____________________________ _____________________________ _____________________________
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
_____________________________ _____________________________ _____________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
ASSETS
Loans<F1> $188,798 $19,683 10.43% $172,258 $20,145 11.69% $168,707 $20,333 12.05%
Investment securities
Taxable 42,983 2,940 6.84% 28,871 2,519 8.73% 21,791 1,847 8.48%
Non-taxable<F2> 15,061 1,576 10.46% 18,055 1,882 10.42% 17,081 1,883 11.02%
Federal funds sold 22,770 722 3.17% 17,979 969 5.39% 16,385 1,302 7.95%
________ _______ ________ _______ ________ _______
Total earning assets 269,612 24,921 9.24% 237,163 25,515 10.76% 223,964 25,365 11.33%
_______ _______ _______
Cash and due from banks 24,342 20,280 18,696
Premises and equipment
(net) 8,498 8,402 8,386
Other assets 6,557 10,203 15,566
________ ________ ________
Total Assets $309,009 $276,048 $266,612
======== ======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing deposits:
Demand $118,959 $ 3,820 3.21% $ 95,318 $ 4,538 4.76% $ 83,690 $ 4,489 5.36%
Savings 28,744 985 3.43% 21,940 1,031 4.70% 22,113 1,307 5.91%
Certificates of Deposit 53,735 2,848 5.30% 70,700 4,799 6.79% 75,998 5,940 7.82%
Short-term borrowings 874 26 2.98% 1,181 61 5.17% 1,003 66 6.58%
Long-term debt 5,346 380 7.11% 6,912 491 7.10% 7,661 560 7.31%
________ _______ ________ _______ ________ _______
Total interest-bearing
liabilities 207,658 8,059 3.88% 196,051 10,920 5.57% 190,465 12,362 6.49%
_______ _______ _______
Non-interest bearing
deposits 71,420 53,837 49,436
Other liabilities 1,912 2,413 2,719
Shareholders' equity 28,019 23,747 23,992
________ ________ ________
Total Liabilities and
Shareholders' Equity $309,009 $276,048 $266,612
======== ======== ========
Net Interest Income $16,862 $14,595 $13,003
======= ======= =======
Net Interest Spread 5.36% 5.19% 4.84%
==== ==== ====
Net Yield on Average
Earning Assets 6.25% 6.15% 5.81%
==== ==== ====
<F1>
Includes interest earned on municipal loans and leases (on a tax equivalent basis) of approximately $224,000 for 1992,
$237,000 for 1991 and $261,000 for 1990. Daily average loan balances include nonaccrual and renegotiated loans.
<F2>
The taxable equivalent yields were computed by adjusting non-taxable securities interest for the effect of the federal
income tax rate of 34%.
</TABLE>
Changes in Interest Income and Interest Expense. The following
table represents a summary analysis of changes in interest income
and interest expense for the periods presented each as compared
with the preceding period. Total average earning assets have
increased $45,648,000 and total average interest bearing
liabilities have increased $17,193,000 in the three year period.
The increase in net interest income resulted from (a) an overall
decline in the rates paid on interest bearing liabilities along
with slightly lower yields on interest earning assets reflecting
a general decline in interest rates over the three year period
and (b) a reduction in the volume of certificates of deposit.
<TABLE>
<CAPTION>
Effect of Changes In
____________________________________________________________
Rate
Volume<F1> Rate<F2> Volume<F3> Total
__________ ________ __________ ________
(In Thousands)
Year 1992 Over Year 1991
____________________________________________________________
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans<F4> $1,934 $(2,186) $(210) $ (462)
Investment securities<F5>
Taxable 1,231 (544) (266) 421
Non-taxable (312) 7 (1) (306)
Federal funds sold 258 (399) (106) (247)
______ _______ _____ _______
$3,111 $(3,122) $(583) $ (594)
====== ======= ===== =======
INTEREST EXPENSE
Interest-bearing deposits
Demand $1,125 $(1,477) $(366) $ (718)
Savings 320 (279) (87) (46)
Certificates of deposit (1,151) (1,052) 252 (1,951)
Short-term borrowings<F6> (16) (26) 7 (35)
Long-term debt (111) 0 0 (111)
______ _______ _____ _______
$ 167 $(2,834) $(194) $(2,861)
Year 1991 Over Year 1990
____________________________________________________________
INTEREST INCOME
Loans<F4> $ 428 $ (603) $ (13) $ (188)
Investment securities<F5>
Taxable 600 54 18 672
Non-taxable 107 (103) (5) (1)
Federal funds sold 127 (419) (41) (333)
______ _______ _____ _______
$1,262 $(1,071) $ (41) $ 150
INTEREST EXPENSE
Interest-bearing deposits:
Demand $ 624 $ (505) $ (70) $ 49
Savings (10) (268) 2 (276)
Certificates of deposit (414) (781) 54 (1,141)
Short-term borrowings<F6> 12 (14) (3) (5)
Long-term debt (55) (16) 2 (69)
______ _______ _____ _______
$ 157 $(1,584) $ (15) $(1,442)
<F1>
Change in average balance times prior year's average rate.
<F2>
Change in average rate times prior year's average balance.
<F3>
Change in average rate times change in average balances.
<F4>
The loan categories include interest on municipal loans and leases (on a tax equivalent basis) of $224,000 and $237,000
for December 31, 1992 and 1991 respectively. The taxable equivalent yields were computed by adjusting the municipal
loan and lease interest for the effect of the federal income tax rate of 34%.
<F5>
The taxable equivalent yields were computed by adjusting non-taxable securities interest for the effect of the federal
income tax rate of 34%.
<F6>
Includes federal funds purchased and securities sold under repurchase agreements.
</TABLE>
Investment Securities. The following table summarizes the
carrying amount of investment securities by class of security.
<TABLE>
<CAPTION>
December 31,
___________________________________
1992 1991 1990
_______ ________ ________
(In Thousands)
<S> <C> <C> <C>
Book Value:
U.S. Treasury $11,827 $ 9,160 $11,921
U.S. agencies and corporations 36,777 28,623 13,060
States and political subdivisions 13,931 16,647 17,482
Other securities 697 493 238
_______ _______ _______
Total Book Value $63,232 $54,923 $42,701
======= ======= =======
Total Market Value $64,435 $56,362 $43,096
======= ======= =======
</TABLE>
Approximately $48,604,000 (76.9%) of the entire investment
portfolio is comprised of obligations of the U.S. Treasury and
other U.S. agencies and corporations and are backed by the full
faith and credit of the United States. Approximately $13,931,000
(22.0%) of the portfolio is comprised of bonds of states and
political subdivisions of which approximately 64.1% (based on
their total par value) are rated by either Moody's or Standard
and Poors. Of the $5,000,000 par value of bonds of states and
politicial subdivisions that are not rated, $3,355,000 are
general obligation bonds. Substantially all of the bonds of
states and political subdivisions are considered "investment
grade" and are readily tradable through broker/dealers with which
the Company does business.
The following table sets forth the maturity of investment
securities at December 31, 1992 and the weighted average yields
to maturity of such securities on a tax equivalent adjusted
basis:
<TABLE>
<CAPTION>
December 31, 1992
________________________________________________________________________________________________
Under 1 Year 1 to 5 Years 5 to 10 Years Over 10 Years Total
________________ ________________ ________________ ________________ ________________
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
______ _____ ______ _____ ______ _____ ______ _____ ______ _____
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $4,761 6.94% $ 6,805 6.58% $ 251 8.48% $ 10 8.25% $11,827 6.76%
U.S. agencies and
corporations 450 8.64% 4,929 8.34% 1,033 8.12% 30,365 5.61% 36,777 6.08%
State and political
subdivisions<F1> 1,021 7.09% 10,463 6.65% 2,084 6.15% 363 6.62% 13,931 6.61%
Other securities 15 5.50% -- -- 10 5.50% 672 8.15% 697 8.05%
______ _______ ______ _______ _______
Total investment
securities $6,247 7.08% $22,197 7.00% $3,378 6.92% $31,410 5.68% $63,232 6.35%
====== ======= ====== ======= =======
<F1>
The taxable equivalent yields were computed by adjusting municipal securities interest for the effect of the federal income
tax rate of 34%.
</TABLE>
Loan Portfolio. The following table sets forth the
classification of the loans by major category:
<TABLE>
<CAPTION>
December 31,
_______________________________________________________________________
1992 1991 1990 1989 1988
__________ _________ _________ _________ __________
(In Thousands)
<S> <C> <C> <C> <C> <C>
Commercial and financial $107,630 $ 99,411 $ 90,732 $ 99,079 $110,739
Agriculture 18,005 17,091 18,843 20,180 19,191
Real estate
Construction 6,150 4,937 5,798 4,757 7,138
Mortgage 33,501 31,397 28,893 28,161 29,018
Consumer 22,447 21,903 22,778 22,299 22,869
________ ________ ________ ________ ________
Total Loans 187,733 174,739 167,044 174,476 188,955
Less:
Allowance for loan losses 5,606 5,601 5,558 3,819 3,678
________ ________ ________ ________ ________
Net Loans $182,127 $169,138 $161,486 $170,657 $185,277
======== ======== ======== ======== ========
</TABLE>
The following table summarizes the loan portfolio by maturities
and sensitivity to changes in interest rates of such loans
maturing in more than one year.
<TABLE>
<CAPTION>
December 31, 1992
________________________________________________
Under 1 1 to 5 Over 5
Year Years Years Total
________ _______ ________ _________
(In Thousands)
<S> <C> <C> <C> <C>
Commercial and financial $43,231 $52,220 $12,179 $107,630
Agriculture 11,313 6,001 691 18,005
Real estate
Construction 3,271 2,862 17 6,150
Mortgage 10,609 17,840 5,052 33,501
Consumer 8,975 13,068 404 22,447
_______ _______ _______ ________
Total Loans $77,399 $91,991 $18,343 $187,733
======= ======= ======= =========
Loans due in more than 1 year:
Subject to fixed interest rates $43,274
=======
Subject to adjustable interest rates $67,060
=======
</TABLE>
Risk Elements. The following table sets forth certain
information concerning nonperforming loans:
<TABLE>
<CAPTION>
December 31,
_______________________________________________________________________
1992 1991 1990 1989 1988
__________ _________ _________ _________ __________
(In Thousands)
<S> <C> <C> <C> <C> <C>
Delinquent loans but accruing interest:
Commercial and financial $ -- $ -- $ 4 $ 48 $ --
Agricultural -- -- -- -- --
Real estate
Construction -- -- -- -- --
Mortgage -- 445 470 136 --
Consumer 5 110 11 3 --
________ ________ _________ ________ _________
Total Delinquent Loans 5 555 485 187 --
________ ________ _________ ________ _________
Nonaccruing loans:
Commercial and financial 1,043 1,261 3,863 2,423 4,180
Agricultural -- -- -- 375 580
Real estate
Construction -- -- -- -- 222
Mortgage 321 373 475 1,098 1,744
Consumer 30 104 139 121 417
________ ________ _________ ________ _________
Total Nonaccrual Loans 1,394 1,738 4,477 4,017 7,143
________ ________ _________ ________ _________
Renegotiated loans 1,916 2,560 5,179 8,674 9,359
________ ________ _________ ________ _________
Total Nonperforming Loans $3,315 $ 4,853 $ 10,141 $ 12,878 $ 16,502
======== ======== ========= ======== =========
Ratio of Nonperforming Loans to
Total Loans 1.77% 2.78% 6.07% 7.38% 8.66%
======== ======== ========= ======== =========
</TABLE>
Potential problem loans at December 31, 1992, where
management has serious doubts about the ability of the customer
to comply with the present repayment terms and where management
suspects that these loans could become delinquent within a 90-day
period, have been included in the table above.
Delinquent loan amounts consist of loans with principal or
interest payments past due 90 days or more. The Company has a
general policy of placing loans in excess of 90 days past due on
nonaccrual status unless such loan is guaranteed as to principal
and interest by a U.S. government agency or the loan is in the
process of collection and the realizable value of collateral is
sufficient to cover the principal balance and accrued interest.
This policy applies to all loan categories. When a loan is
placed on nonaccrual status, the Company stops crediting accrued
interest to income and at that time, any accrued interest that is
not yet collected is charged against current income.
Renegotiated loans are loans that have been renegotiated to
provide a reduction or deferral of interest or principal because
of a deterioration in the financial position of the borrower.
If nonaccrual and renegotiated loans had been current in
accordance with their original terms, additional interest revenue
of $130,000 would have been recognized in 1992. Interest income
of $213,000 was collected on nonaccrual and renegotiated loans
and was included in 1992 earnings.
Except at Century Bank Sterling, where a large portion of
the loans are agriculture related, none of the Subsidiary Banks
are significantly affected by an annual or seasonal cycle. An
annual cycle related to the raising and selling of crops and
cattle affects the composition of deposits and loans at Century
Bank Sterling.
The Company had other real estate owned net of reserves of
$4,899,000 as of December 31, 1992 as compared to $8,122,000 at
year end 1991. Other real estate owned is carried at the lower
of cost or fair value. Included in other real estate owned are
loans accounted for as in-substance foreclosures and loans
accounted for as covered transactions. For additional
information, see Note 6 - Notes to Consolidated Financial
Statements.
Allowance for Loan Losses Policy. The historical relationship
between the Company's loan charge offs and recoveries and
allowance for loan losses is set forth below:
<TABLE>
<CAPTION>
December 31,
_______________________________________________________________________
1992 1991 1990 1989 1988
__________ _________ _________ _________ __________
(In Thousands)
<S> <C> <C> <C> <C> <C>
Average loans outstanding $188,798 $172,258 $168,707 $180,798 $192,166
======== ======== ======== ======== ========
Allowance for loan losses at
beginning of period $ 5,601 $ 5,558 $ 3,819 $ 3,678 $ 3,725
Loans charged off:
Commercial and financial 577 2,022 1,413 1,423 2,324
Agricultural 887 227 261 357 184
Real estate
Construction 18 -- -- 64 296
Mortgage 732 748 1,301 1,393 561
Consumer 146 206 127 297 512
________ ________ ________ ________ ________
Total Loans Charged Off 2,360 3,203 3,102 3,534 3,877
________ ________ ________ ________ ________
Recoveries of loans previously
charged off:
Commercial and financial 323 343 276 146 324
Agricultural 85 80 41 6 25
Real estate
Construction -- -- -- -- --
Mortgage 33 46 45 33 7
Consumer 55 29 46 49 69
________ ________ ________ ________ ________
Total Amounts Recovered 496 498 408 234 425
________ ________ ________ ________ ________
Net loans charged off 1,864 2,705 2,694 3,300 3,452
Provision for loan losses 1,869 2,748 4,433 3,441 3,405
________ ________ ________ ________ ________
Allowance for loan losses at end
of period $ 5,606 $ 5,601 $ 5,558 $ 3,819 $ 3,678
======== ======== ======== ======== ========
Ratio: Net charge offs to average
loans outstanding .99% 1.57% 1.60% 1.83% 1.80%
======== ======== ======== ======== ========
Ratio: Allowance for loan losses to
loans outstanding, end of period 2.99% 3.21% 3.33% 2.19% 1.95%
======== ======== ======== ======== ========
</TABLE>
The allowance for loan losses is established through charges
to earnings in the form of provisions for loan losses. Losses or
recoveries are charged or credited directly to the allowance. In
general, the amount charged to earnings each year by the
Subsidiary Banks is based on management's judgment, which takes
into consideration a number of factors, including: (a) the
Subsidiary Banks' loss experience in relation to outstanding
loans and the existing level of the allowance; (b) a continuing
review of problem loans, related uncollected interest and overall
portfolio quality; (c) regular examinations and appraisals of
loan portfolios conducted by the Company's internal and external
auditors and state and federal supervisory authorities; and (d)
current economic conditions.
Loans collateralized by real estate may represent a higher
than normal degree of risk because of the uncertainty associated
with the real estate market. Colorado's residential real estate
market has shown considerable improvement and the commercial real
estate market is beginning to show signs of improvement.
Management believes that at December 31, 1992, the allowance for
loan losses was adequate to protect against such exposure.
The following table sets forth an allocation of the reserve
for loan losses among categories as of the dates indicated.
Management believes that any allocation of the reserve for loan
losses into categories lends an appearance of precision which
does not exist. The allowance is utilized as a single
unallocated allowance available for all loans. The following
allocation table should not be interpreted as an indication of
the specific amounts or the relative proportion of the future
changes to the allowance. Such a table is merely a convenient
device for assessing the adequacy of the allowance as a whole.
The following allocation table has been derived by applying
historical loan loss ratios to both internally classified loans
and the portfolio as a whole in determining the allocation of the
allowance for loan losses attributable to each category of loans.
<TABLE>
<CAPTION>
% of % of % of % of % of
Loans Loans Loans Loans Loans
to to to to to
Total Total Total Total Total
1992 Loans 1991 Loans 1990 Loans 1989 Loans 1988 Loans
______ _______ ______ ________ ______ _______ ______ _______ ______ _______
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and
financial $2,500 57.33% $2,300 56.89% $2,075 54.32% $1,225 56.78% $2,258 58.60%
Agricultural 1,000 9.59 800 9.78 1,200 11.28 600 11.57 400 10.16
Real estate
Construction 400 3.27 200 2.83 300 3.47 200 2.73 200 3.78
Mortgage 900 17.85 1,200 17.97 1,400 17.30 1,400 16.14 420 15.36
Consumer 300 11.96 300 12.53 300 13.63 300 12.78 250 12.10
Unallocated 506 N/A 801 N/A 283 N/A 94 N/A 150 N/A
______ ______ ______ ______ ______ ______ ______ ______ ______ ______
$5,606 100.00% $5,601 100.00% $5,558 100.00% $3,819 100.00% $3,678 100.00%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Deposits. The following table sets forth the average deposit
balances and interest rates paid:
<TABLE>
<CAPTION>
Year Ended December 31,
___________________________________________________________________________
1992 1991 1990
______________________ _____________________ _____________________
Balance Rate Balance Rate Balance Rate
________ _______ _______ ______ _______ ______
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Demand
Interest-bearing $118,959 3.21% $ 95,318 4.76% $ 83,690 5.36%
Noninterest-bearing 71,420 53,837 49,436
Savings 28,744 3.43% 21,940 4.70% 22,113 5.91%<F1>
Certificates of deposit 53,735 5.30% 70,700 6.79% 75,998 7.82%
________ ________ ________
Total Average Deposits $272,858 $241,795 $231,237
======== ======== ========
<F1>
Includes higher rates of interest paid on Individual Retirement Accounts that are included in the savings deposit
classification.
</TABLE>
The following table sets forth, by time remaining to maturity,
certificates of deposit in the amount of $100,000 or more at
December 31:
<TABLE>
<CAPTION>
Time Remaining to Maturity 1992 1991 1990
____________________________ ________ _________ _________
(In Thousands)
<S> <C> <C> <C>
Three months or less $ 7,481 $13,625 $15,493
Over three thru six months 2,635 3,770 5,618
Over six thru twelve months 2,132 3,574 4,345
Over twelve months 480 100 400
_______ _______ _______
Total $12,728 $21,069 $25,856
======= ======= =======
</TABLE>
Return on Equity and Assets
<TABLE>
<CAPTION>
Year Ended December 31,
___________________________________________
1992 1991 1990
________ _________ _________
(In Thousands)
<S> <C> <C> <C>
Return on assets <F1> 1.28% .99% (.84%)
Return on equity <F2> 14.12% 11.50% (9.38%)
Equity to assets ratio <F3> 9.07% 8.60% 9.00%
Dividend payout ratio <F4> 23.68% 5.50% (13.48%)
<F1>
Consolidated net income divided by average total assets.
<F2>
Consolidated net income divided by average equity.
<F3>
Average equity divided by average total assets.
<F4>
Dividends declared per share divided by net income per share.
</TABLE>
Commitments and Lines of Credit.
The Subsidiary Banks make contractual commitments to extend
credit through loan commitments and lines of credit. These
commitments are generally made in the real estate, commercial and
agricultural loan areas and normally do not exceed a term of one
year. At December 31, 1992, credit commitments consisted of
$3,089,000 in standby letters of credit and $30,427,000 in
unfunded loan commitments to customers. For additional
information, see Note 11 - Notes to Consolidated Financial
Statements.
Competition
The Subsidiary Banks face active competition both in seeking
deposits and in making loans. In addition to competition from
the commercial banks located in their market areas, they also
face competition from savings and loan associations, money market
funds, large retailers entering financial markets, out-of-state
financial institutions, thrift companies, credit unions, mortgage
bankers and other consumer and commercial lenders. By virtue of
their larger capital bases or affiliation with larger multibank
holding companies, some of the banks with which the Subsidiary
Banks compete, have substantially greater lending limits and
perform other functions for their customers which the Subsidiary
Banks can offer only through correspondents, if at all. To the
knowledge of the Company, there were 343 commercial banks in
Colorado at December 31, 1992. Of those banks, 103 were owned by
the ten largest bank holding companies in the state. The largest
of these holding companies had deposits of $4.5 billion. The
Company, based on deposits, was the eighth largest with deposits
of $296 million.
Colorado banking laws do not allow for unlimited statewide
branch banking until January 1, 1995. Until then, the law allows
a limited number of de novo branches and the conversion of failed
bank acquisitions into branches. Legislation passed in the
Colorado State Legislature during 1988 authorized regional
interstate banking (reciprocal with adjoining states) effective
July 1, 1988, with full nationwide interstate banking effective
January 1, 1991. Interstate and branch banking has further
increased competition in attracting deposits and making loans.
Markets
The Subsidiary Banks are variously located in five counties
along the Front Range (east side) of the Colorado Rockies. A
significant portion of the economic activity of the State of
Colorado is concentrated in the Front Range. The Front Range,
particularly the Denver metropolitan area, acts as a regional
service center for areas of Colorado and the surrounding states,
including western Kansas, southwestern Nebraska, southern and
eastern Wyoming and some portions of northern New Mexico.
Regulation
The Company, as a registered bank holding company under the
Bank Holding Company Act of 1956 (the "BHC Act"), is required to
obtain the approval of the Board of Governors of the Federal
Reserve System before it may acquire all or substantially all of
the assets of any bank, or ownership or control of the voting
shares of any bank if, after giving effect to such acquisition of
shares, the Company would own or control more than 5 percent of
the voting shares of such bank. The BHC Act also provides that
no application for approval by the Company to acquire any voting
share or interest in, or all or substantially all of the assets
of, a bank located outside the State of Colorado will be approved
unless such acquisition is specifically authorized by the laws of
the state in which such bank is located.
The Company is prohibited from engaging in, or acquiring
direct or indirect ownership or control of more than 5 percent of
the voting shares of any company engaged in, non-banking
activities, unless the Federal Reserve Bank by order or
regulation has found such activities to be closely related to
banking or managing or controlling banks as to be a proper
incident thereto.
The Company, the Subsidiary Banks, or any other subsidiaries
it may acquire or organize, are deemed to be affiliates within
the meaning of the Federal Reserve Act. Therefore, the Company
is subject to certain restrictions which limit the extend to
which the Subsidiary Banks can supply it funds. The Company is
also subject to restrictions on the underwriting and the public
sale and distribution of securities. It is prohibited from
engaging in certain tie-in arrangements in connection with any
extension of credit, sale or lease of property, or furnishing of
services.
The BHC Act requires the Company to file reports with the
Federal Reserve Bank and provide additional information requested
by the Federal Reserve Bank.
Under Colorado law, cash dividends by the Company are
subject to declaration by the Board of Directors at its
discretion out of net assets in excess of stated capital.
Dividends cannot be declared and paid when such payment would
make the Company insolvent.
Each Subsidiary Bank is chartered under the laws of the
State of Colorado and their deposits are insured by the FDIC.
The Subsidiary Banks are each subject to regulation, supervision,
and regular examination according to schedules established by
their respective regulatory agencies: Century Bank Sterling and
Century Bank Academy at Hancock by the Colorado Division of
Banking and the Board of Governors of the Federal Reserve System;
Century Bank Fort Collins, Century Bank Broadmoor/Skyway and
Century Bank by the Colorado Division of Banking and the FDIC.
The ability of the Subsidiary Banks to pay dividends is subject
to the banking laws of the State of Colorado and to the powers of
the Colorado Division of Banking. Under Colorado law, such
dividends can only be paid from the last three years retained
earnings unless specifically approved by the Colorado Banking
Board.
Under federal and state law, the Company, as the sole
shareholder of the Subsidiary Banks, may be subject to assessment
to restore capital of the Subsidiary Banks should it become
impaired.
Employees
Substantially, all of the Company's employees work for and
are paid by the Subsidiary Banks. At December 31, 1992, the
Company directly employed 9 persons. The Company believes its
relationship with employees is good. At December 31, 1992, the
Subsidiary Banks and the Company together had approximately 187
employees.
Item 2 Properties
__________
Century Bank Sterling, Century Bank Broadmoor/Skyway and
Century Bank Fort Collins own the premises and buildings in which
their facilities are located. Century Bank owns the
drive-through bank facilities at its principal location. Century
Bank's main facility and three of its branch facilities are
leased from nonaffiliated parties under long-term leases.
Century Bank Academy at Hancock and the fourth branch facility of
Century Bank lease their main banking facilities from the
Company. For information concerning mortgages and long-term
leases affecting these properties, see Notes 8 and 11 - Notes to
Consolidated Financial Statements.
Item 3 Legal Proceedings
_________________
Century Bank, a subsidiary of the Company, was named as a
co-defendant in two related class action lawsuits (Maierhofer v.
Crown Realty Co.). The lawsuits are between the same parties and
were both filed on January 23, 1989. One was filed in Arapahoe
County District Court (Civil Action No. 89-CV-289, Division 3)
and the other in the United States District Court for the
District of Colorado (Civil Action 89-123). Other defendants in
the lawsuits include Crown Realty Co. and Meridith Corporation.
In both cases, the plaintiffs allege in their complaints
that Imperial Mortgage Corporation, a subsidiary of Crown Realty
Co., solicited investments from Colorado residents to be used to
fund equity advance and trade-in programs for clients of Crown
Realty. Plaintiffs claim that Century Bank, as principal lender
for Crown Realty and Imperial Mortgage, was an insider and
controlling person and knew of or acquiesced to Imperial
Mortgage's alleged false statements and misrepresentations made
while soliciting investors. Plaintiffs also alleged that Century
Bank knew of and acquiesced to alleged illegal transfers between
Imperial Mortgage and Crown Realty. Plaintiffs claimed that
Century Bank is liable for aiding and abetting, for recklessly,
knowingly or intentionally giving substantial assistance to a
person violating Colorado and federal securities laws pursuant to
C.R.S. Section 11-51-125 (i) and 15 U.S.C. Section 78t (a), 15
U.S.C. Section 77o and 15 U.S.C. Section 78j (b). Plaintiffs
seek $4,030,000 in damages for the proposed class, plus interest,
costs and attorney fees.
On October 4, 1991, the Court in the federal case entered
oral findings of fact and conclusions of law, granting Century
Bank's Motion for Summary Judgement. On October 16, 1991, the
Court entered its written judgement incorporating its previous
order and dismissing all claims in the federal case against
Century Bank. Plaintiffs have filed a motion to alter or amend
this judgement, which is presently pending before the court.
Based upon discussion with counsel, management of the Company
believes this motion will be denied. Century Bank has also filed
a motion to alter or amend the judgement to recover its costs as
a prevailing party pursuant to F.R.Civ.P., Rule 59(d).
The Arapahoe County District Court action has been stayed
pending a resolution of the federal case.
There are no other material pending legal proceedings, other
than ordinary routine litigation incidental to the business, to
which either the Company or any of its Subsidiary Banks is a
party or of which any of their property is the subject. The
Company is not aware of any proceedings contemplated by
governmental authorities.
Item 4 Submission of Matters to a Vote of Security Holders
___________________________________________________
None.
PART II
Item 5 Market For Registrant's Common Equity and Related
Stockholder Matters
__________________________________________________________
Market Information.
The Company's Class A common stock trades on the NASDAQ
Stock Market under the symbol CBOCA. There is no established
trading market for the Company's Class B common stock. The
Company's currently outstanding Adjustable Rate Convertible
Subordinated Debentures due 2004 are traded in the
over-the-counter market on a limited basis.
The following table lists the high and low trade prices of
the Class A common stock for each quarterly period indicated
through December 31, 1992, as reported by the National
Association of Securities Dealers, Inc., Automated Quotation
System. The quotations represent prices in the over-the-counter
market between dealers in securities, do not include retail
markup, markdown or commission and do not necessarily represent
actual transactions.
<TABLE>
<CAPTION>
1992 1991
_____________ _____________
HIGH LOW HIGH LOW
____ ______ _____ ______
<S> <C> <C> <C> <C>
First Quarter 12-7/8 7-1/4 3-7/8 2-5/8
Second Quarter 14-1/2 10-3/4 5-5/8 3-5/8
Third Quarter 15-3/4 11-5/8 7 5-1/2
Fourth Quarter 18-3/4 14 7-1/8 6-5/8
</TABLE>
Approximate Number of Holders of Class A and Class B Common
Stock. As of December 31, 1992, there were approximately 647
shareholders of record of Class A common stock and one
shareholder of record of Class B common stock (Commercial Bank
Investment Company, an affiliated Colorado limited partnership).
Dividend History and Restrictions
The Company paid quarterly cash dividends in varying amounts
from 1983 to the second quarter of 1990. From 1985 through the
second quarter of 1990, the quarterly cash dividend was $.06 per
share. In the third quarter of 1990, the Board of Directors
suspended the cash dividend temporarily. During the fourth
quarter of 1991, the Board of Directors declared and paid a cash
dividend of $.06 per share. A dividend in the same amount was
also declared and paid in the first quarter of 1992. In the
second quarter of 1992, the Board of Directors approved a 3 for 2
stock split to shareholders of record April 27, 1992. On the
same date, the Board of Directors also voted to increase the cash
dividend to $.10 per share on the post split shares. A dividend
of $.10 per share has been declared and paid in each quarter
since the second quarter of 1992 including the first quarter of
1993.
Continued payment of cash dividends, and the amount thereof,
is within the discretion of the Board of Directors. The Board of
Directors will consider the payment of dividends after
considering, among other factors, earnings, capital requirements
and the operating and financial condition of the Company and
Subsidiary Banks. In addition, the ability of the Company to pay
dividends will be largely dependent upon the Company's receipt of
dividends paid by the Subsidiary Banks, the payment and amount of
which are limited by federal and state law and in the case of one
bank restricted by written agreement with a regulatory agency.
In addition, the Company is restricted by covenants in the
Indenture dated December 1, 1984, covering the Adjustable Rate
Convertible Subordinated Debentures due 2004. See Notes 8 and 9
- - Notes to Consolidated Financial Statements.
Item 6 Selected Financial Data
________________________
The following selected consolidated financial data of the
Company for, and as of the end of, each of the five years in the
period ended December 31, 1992, have been derived from the
Company's consolidated financial statements for such periods,
which have been audited by Deloitte & Touche, independent
certified public accountants. Such selected consolidated
financial data as of December 31, 1992 and 1991, and for each of
the three years in the period ended December 31, 1992, should be
read in conjunction with the Company's consolidated financial
statements and related notes included elsewhere in this document.
<TABLE>
<CAPTION>
December 31,
_______________________________________________________________________
1992 1991 1990 1989 1988
__________ _________ _________ _________ __________
(Dollars in Thousands Except Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Interest Income $ 24,310 $ 24,794 $ 24,637 $ 25,049 $ 24,593
Interest Expense 8,059 10,919 12,362 12,501 11,977
________ ________ ________ ________ ________
Net Interest Income 16,251 13,875 12,275 12,548 12,616
Provision for Loan Losses 1,869 2,748 4,434 3,441 3,405
Net Income (Loss) 3,958 2,731<F1> (2,251) 405 1,230<F2>
PER COMMON SHARE DATA:<F3>
Net Income (Loss)
Primary $ 1.52 $ 1.09 $ (89) $ .17 $ .53
Assuming Full Dilution 1.45 1.02 (.89)<F4> .17<F4> .51
Shareholders' Equity 11.18 9.94 8.92 9.90 10.71
Dividends .36 .06 .12 .24 .24
BALANCE SHEET DATA:
Total Assets $335,741 $302,298 $280,308 $270,913 $274,833
Investment Securities 63,232 54,923 42,701 29,660 26,250
Total Loans and Leases 187,733 174,739 167,044 174,476 188,955
Allowance for Loan Losses 5,606 5,601 5,558 3,819 3,678
Nonaccrual Loans 1,394 1,738 4,477 4,017 7,143
Renegotiated Loans 1,916 2,560 5,179 8,674 9,359
Other Real Estate Owned 4,899 8,122 10,978 12,891 11,455
Deposits 296,329 267,620 247,114 233,270 237,651
Long-term Debt 4,523 6,464 7,552 7,732 9,133
RATIOS:
Return on Average Assets 1.28% .99% (.84%) .15% .45%
Return on Average Equity 14.12% 11.50% (9.38%) 1.64% 5.07%
Allowance for Loan Losses at
End-of-Period as a Percent of
Loans 2.99% 3.21% 3.33% 2.19% 1.95%
Net Charge Offs as a Percent of
Average Loans .99% 1.57% 1.60% 1.83% 1.80%
Average Shareholders' Equity as
a Percent of Average Assets 9.07% 8.60% 9.00% 9.41% 8.89%
Average Net Loans as a Percent
of Average Deposits 66.98% 68.94% 70.99% 78.86% 80.38%
<F1>
Includes $250,000 extraordinary item-gain on extinguishment of debt, net of taxes.
<F2>
Includes $491,000 benefit representing the cumulative effect of a change in the method of accounting for income taxes.
<F3>
Per share information has been restated to give effect to the 3 for 2 stock split effective April 27, 1992.
<F4>
Earnings per share are antidilutive.
</TABLE>
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations
_________________________________________________________________
Summary
The principal business of the Company has been banking since
inception in 1971 with the Subsidiary Banks providing
substantially all of the revenues and earnings. The following
commentary presents the major factors affecting the performance
of the Company.
Since 1988, the relatively high level of nonperforming loans
and other real estate owned have been the primary factors that
have impacted earnings and growth of the Company. At December
31, 1988, the ratio of nonperforming loans plus other real estate
owned to total loans plus other real estate owned was 13.9%. At
December 31, 1992, this same ratio has been reduced to 4.3%. The
weak Colorado economy and depressed real estate values also
contributed to the performance of the Company in prior years.
The Colorado economy will continue to be a factor in the
performance of the Company.
Results of Operations
Over the three year period ended December 31, 1992, net
interest income increased by $3,977,000 (32.2%). During the same
period, total average earning assets increased by $45,648,000
(20.3%) and total average interest bearing liabilities have
increased by $17,193,000 (9.0%). The increase in net interest
income resulted primarily from a decrease in interest expense.
This decrease in interest expense is the result of an overall
decline in rates paid on interest bearing liabilities over the
three year period. Interest income remained relatively constant
over this period with the decline in yields on earning assets
being offset by increased volume. Reductions in the volume of
certificates of deposit also contributed to the increased net
interest income. For additional information, see "Changes in
Interest Income and Interest Expense" included in Item 1 of this
report.
The provision for loan losses was $1,868,900, $2,747,900 and
$4,433,500 for the years ended December 31, 1992, 1991 and 1990,
respectively. The provision for loan losses in 1990 was the
result of high levels of problem assets and weakness in the real
estate market. Since that time, there have been significant
improvements in the level of nonperforming assets and a decline
in net charge-offs in 1992 to $1,864,000 from $2,694,000 in 1990.
An improving Colorado economy and a reduction in nonperforming
assets allowed the Company to reduce its provision for loan
losses in 1992 and 1991. Management of the Company believes this
trend will continue through 1993. At December 31, 1992, the
allowance for loan losses as a percentage of total loans
outstanding was 2.99% as compared to 3.21% in 1991 and 3.33% in
1990. Based upon an analysis of loan portfolio, management of
the Company believes the provision and allowance for loan losses
was adequate at December 31, 1992. For additional information,
see "Risk Elements" and "Allowance for Loan Losses Policy"
included in Item 1 of this report.
Total other income increased $540,000 to $3,901,000 in 1992
as compared to $3,361,000 in 1990. For the three year period
ended December 31, 1992, service function income increased
$737,000 which reflected an increased pricing structure on
amounts charged to customers for deposit account services and an
increase of approximately $57,253,000 in average demand deposits.
Income from real estate acquired through foreclosures, a
component of other income, was lower for the year ending December
31, 1992, as compared to 1990 due to lower levels of real estate
acquired through foreclosures.
Other expense was $13,336,000, $12,319,000 and $14,154,000
for the years ended December 31, 1992, 1991 and 1990,
respectively. In the three year period, salaries and employee
benefits increased $721,000 (13.46%), occupancy expense increased
$115,000 (10.0%), furniture and equipment expense increased
$73,000 (11.15%) and other expenses increased $942,000 (27.66%)
due to inflation and growth of the Subsidiary Banks. Expenses on
real estate acquired through foreclosure were $916,000, $815,000
and $3,586,000 in 1992, 1991 and 1990, respectively. Expenses on
real estate acquired through foreclosure in 1990 of $3,586,000
were primarily the result of prolonged weakness in the real
estate market. Reductions in the levels of real estate acquired
through foreclosure and an improving Colorado economy allowed the
Company to decrease this expense by $2,670,000 in the year ended
December 31, 1992.
An analysis of the Company's provision for income taxes is
included in Note 7 - Notes to Consolidated Financial Statements
included elsewhere in this report. The Company's provision for
income taxes does not bear the customary relationship to income
before taxes because of tax exempt income, investment tax
credits, direct lease financing, nondeductible interest and
amortization and a reduction in deferred income taxes.
On May 30, 1991, the Company began its offer to purchase for
cash up to $2,040,000 principal amount of its Adjustable Rate
Convertible Subordinated Debentures at a price of $740 per $1,000
principal amount of debentures. The offer to purchase expired
August 1, 1991. As of the expiration date, a total of $692,000
principal amount of debentures had been tendered and accepted for
payment. As a result, the Company realized an extraordinary
item-gain on extinguishment of debt of approximately $180,000
before amortization of debt issue costs, the cost of the offer
and income taxes. In addition, the Company also acquired, on the
open market, approximately $278,000 of debentures at an average
cost of approximately $684 per $1,000 principal amount of
debentures. As a result of these acquisitions, the Company
realized an additional gain on extinguishment of debt of
approximately $87,800 before income taxes and amortization of
debt issue costs.
Asset Quality
Nonaccrual loans and renegotiated loans in recent years have
been at high levels with a high at December 31, 1988 of
$16,502,000 (8.73% of total loans). Since that time, the volume
of loans in this category has trended downward. At December 31,
1992, nonaccrual and renegotiated loans had been reduced to
$3,310,000 (1.76% of total loans) a decrease of $13,192,000
(79.94%) from the December 31, 1988 level. In addition, the
Company had other real estate owned net of reserves of $4,899,000
in 1992 as compared to $8,122,000 in 1991, and $10,978,000 in
1990. These problem assets were primarily the result of
weaknesses in the real estate market. Colorado's residential
real estate market has shown considerable improvement and the
commercial real estate market is beginning to show signs of
improvement. The Colorado economy will continue to be a major
factor in determining the levels of problem assets. For
additional information, see "Risk Elements" and "Allowance for
Loan Losses Policy" included in Item 1 of this report.
Liquidity
Liquidity in banking terms means being able to meet
financial commitments. Assuring the continuous availability of
funds to meet the needs of both deposit and credit customers is a
very important management objective. Liquidity management
involves both sides of the balance sheet. Asset liquidity is
provided through assets that either mature or are saleable in a
short period of time. Liquid assets include short-term
investment securities, federal funds sold and short-term loans.
At December 31, 1992, the Company had $6,247,000 in investment
securities with maturities of one year or less, $40,472,000 in
federal funds sold and $77,399,000 in loans which mature in one
year or less. On the liability side, a portion of the funding
needs of the Company is accomplished through the acquisition of
liabilities such as certificates of deposit over $100,000,
federal funds purchased and other short-term borrowings. At
December 31, 1992, the Company had $12,248,000 in certificates of
deposit over $100,000 with a maturity of one year or less.
An additional component is the Company's ability to meet its
cash obligation to employees, creditors and shareholders. The
Company obtains its funds primarily from its Subsidiary Banks in
the form of management fees to cover operating expenses and
dividends to cover debt service requirements and dividends paid
to the Company's stockholders. The payment of dividends to the
Company by the Subsidiary Banks are limited by federal and state
law and in the case of one Subsidiary Bank, restricted by a
written agreement with its regulatory agency.
Capital Resources
Assuring that adequate capital is available to provide
needed funds for future growth and a measure of protection
against unanticipated adverse operating results and to support
the volume and character of the Company's business is another
important management objective. The internal generation of
equity capital through retained earnings is expected to be a
primary source of capital to meet the Company's needs. While it
is the intention of management that new capital resources be
generated primarily through retained earnings from year to year,
it may become desirable at some future date for the Company to
seek additional capital funds from other sources.
The Company and Subsidiary Banks must comply with risk-based
capital guidelines established by the Federal Reserve Board,
State of Colorado Division of Banking and the FDIC. These
risk-based capital ratios went into effect in 1990 with a
phase-in period ended December 31, 1992. The Company's total
required capital is to equal at least 8% of risk weighted assets.
As a result of the Company's high level of capital and the risk
in its current asset mix, the Company's risk-based capital ratio
was 13.70% at December 31, 1992 and exceeded the minimum
requirement. At December 31, 1992, the Company's total
qualifying capital to risk weighted assets was 14.95%. There
have been no capital ratio requirements established for the
Company or any of the Subsidiary Banks by regulatory authorities.
As of December 31, 1992, all of the Subsidiary Banks exceeded the
1992 regulatory minimums and it is expected the Subsidiary Banks
will continue to do so.
In addition, the Federal Reserve Board, State of Colorado
Division of Banking and the FDIC have established leverage ratio
requirements which measures capital, net of intangibles, against
total assets. A leverage ratio of 3% is the minimum requirement
for the most highly rated financial institution, and most
financial institutions would be expected to maintain a leverage
ratio between 4% and 5%. At December 31, 1992, the Company's
leverage ratio was 8.3%.
The Company had no material commitments for capital
expenditures at December 31, 1992.
Asset Liability Management
The objective of asset liability management is to manage
interest sensitive assets and liabilities to maintain positive
net interest margins, regardless of changes in market interest
rates. Interest sensitive assets and liabilities, including both
variable or adjustable rate instruments approaching maturity, are
subject to repricing immediately or in the near term. An
interest rate sensitivity gap arises when interest rates on
assets change in a different time period from that of interest
rates on liabilities. The interest rate sensitivity gap is the
difference between total interest sensitive assets and total
interest sensitive liabilities. If the interest rate sensitivity
gap is positive during a period of rising interest rates or
negative during a period of declining interest rates, net
interest income will tend to increase. Conversely, if the
interest rate sensitivity gap is negative during a period of
rising interest rates or positive during a period of declining
interest rates, net interest income will tend to decrease. The
greater the gap, the greater the effect declining or rising
interest rates will have on net interest income. If the gap is
closed or matched, the effect on net interest income due to
interest rate movements is reduced.
The following table shows the Company's gap profile as of
December 31, 1992.
<TABLE>
<CAPTION>
Within 3 3 Months 1 Year After 5
Months to 1 Year to 5 Years Years Total
_________ __________ ___________ ________ ________
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Loans $129,702 $14,782 $38,508 $ 4,741 $187,733
Investment Securities:
Taxable 139 882 10,463 2,447 13,931
Non-taxable 30,880 4,711 11,734 1,976 49,301
Federal funds sold 40,472 -- -- -- 40,472
________ ________ _______ _______ ________
Total 201,193 20,375 60,705 9,164 291,437
________ ________ _______ _______ ________
Interest-Bearing liabilities:
Demand Deposits 130,603 -- -- -- 130,603
Savings 30,523 -- -- -- 30,523
Certificates of Deposit 19,270 20,596 9,390 -- 49,256
Short-term borrowings 2,835 -- -- -- 2,835
Long-term debt -- 4,205 228 90 4,523
________ ________ _______ _______ ________
183,231 24,801 9,618 90 217,740
________ ________ _______ _______ ________
Interest sensitivity gap $ 17,962 $ (4,426) $51,087 $ 9,074 $ 73,697
======== ======== ======= ======= ========
Cumulative sensitivity gap $ 17,962 $ 13,536) $64,623 $73,697 $ 73,697
======== ======== ======= ======= ========
Percent of total earning assets 6.2% (1.5%) 17.5% 3.1% 25.3%
</TABLE>
The preceding table does not necessarily indicate the impact
of general interest rate movements on the Company's net interest
income because the repricing of various assets and liabilities is
discretionary and is subject to competitive and other pressures.
As a result, assets and liabilities indicated as repricing within
the same period may, in fact, reprice at different times and
different rate levels.
Effects of Inflation
The effects of inflation on banks is significantly different
from industrial companies since banks are not heavily involved in
capital expenditures and substantially all of their assets and
liabilities are monetary in nature and move in concert with
inflation. The Company's monetary assets are generally earning
assets and in times of rising inflation, any net monetary assets
can produce an adequate return to compensate for any loss in
purchasing power. Other data, included elsewhere in this report,
provides information on the Company's assets and liability
structure.
Item 8 Financial Statements and Supplementary Data
____________________________________________
The financial statements and supplementary data required by
this item are included in Part IV of this report and are
incorporated therein by reference.
Item 9 Disagreements on Accounting and Financial Disclosure
____________________________________________________
None.
PART III
The information set forth in the Registrant's definitive
proxy statement to be used at the Company's 1992 annual
shareholders' meeting is incorporated herein by reference.
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K
_________________________________________________________________
(A) 1. Financial Statements
_____________________
Included in Part IV of this report:
Independent Auditors' Report
Consolidated Statements of Condition as of December 31, 1992 and
1991
Consolidated Statements of Operations for each of the three years
in the period ended December 31, 1992
Consolidated Statements of Shareholders' Equity as of the end of
each of the three years ended December 31, 1992
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1992
Notes to Consolidated Financial Statements
(A) 2. Financial Statement Schedules
_____________________________
All schedules are omitted because of the absence of
conditions under which they are required or because the required
information is given in the financial statements or notes
thereto.
(A) 3. Exhibits
_________
The following exhibits are filed herewith or have been
filed pursuant to Section 601 of Regulation S-K and are
incorporated by reference to previous filings:
Item 601
<TABLE>
<CAPTION>
Cross Reference Document Exhibit Number
_______________ ___________________________________________________________ ______________
<S> <C> <C>
(3) Articles of Incorporation and Bylaws.<F1> 3.1
Amendment to Articles of Incorporation 3.1.1
(4) Conformed Indenture, dated as of December 1, 1984, between 4.1.1
registrant and Bank of America National Trust and Savings
Association (includes form of Adjustable Rate Convertible
Subordinated Debenture due 2004).<F2>
Article V of the registrant's Articles of Incorporation, 4.2
as amended re: capital stock
10 Lease Agreement dated February 29, 1980, between John Madden 10.3
Company and Century Bank Southeast, N.A., and Lease Amendment
No. 1 dated May 12, 1983, between those parties.<F2>
Lease Agreement dated March 30, 1978, between First Avenue and 10.4
Century Bank and Trust and Amendment to Lease dated October 26,
1982, between San Francisco Real Estate Investors and Century
Bank and Trust.<F2>
Commercial Bancorporation of Colorado and Subsidiaries Employee 10.10
Discount Stock Purchase Plan.<F3>
Stock Purchase Agreement dated September 23, 1987, between 10.12
Commercial Bancorporation of Colorado and AMBANK Financial
Corporation regarding the purchase of 100% of the outstanding
common stock of AMBANK at Orchard Valley and at Broadway.<F4>
Office building lease dated October 13, 1987, between AMBANK 10.13
Building Venture I and Century Bank Orchard Road<F5>
Building lease dated October 13, 1987, between AMBANK Financial 10.14
Corporation and Century Bank Broadway<F5>
Ground Lease Agreement dated October 13, 1987, between Koelbel 10.15
and Company and Century Bank Broadway<F5>
11 Statement re: computation of per share earnings 11.1
22 Exhibit re: Listing of subsidiaries owned by the Company 22.1
(included in Item 1 of this report).
24 Consent of accountants 24.1
<F1>
Documents were filed as exhibits to the registrant's Annual Report on Form 10-K for the year ended December 31, 1980,
and are incorporated herein by reference.
<F2>
Documents were filed as exhibits to the registrant's Registration Statement on Form S-2 (File No. 2-93977).
<F3>
Documents were filed as exhibits to the registrant's Annual Report on Form 10-K for the year ended December 31, 1985,
and are incorporated herein by reference.
<F4>
Documents were filed as exhibits to the registrant's current report on Form 8-K filed on March 28, 1989, and is
incorporated herein by reference.
<F5>
Documents were filed as exhibits to the registrants annual report on Form 10-K for the year ended December 31, 1987,
and are incorporated herein by reference.
</TABLE>
Other exhibits are omitted because of the absence of conditions
under which they are required.
(B) 1. Reports on Form 8-K
___________________
None
<PAGE>
INDEPENDENT AUDITORS' REPORT
____________________________
To the Board of Directors and Shareholders
of Commercial Bancorporation of Colorado
Denver, Colorado
We have audited the accompanying consolidated statements of
condition of Commercial Bancorporation of Colorado and
subsidiaries as of December 31, 1992 and 1991, and the related
consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended
December 31, 1992. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Commercial Bancorporation of Colorado and subsidiaries at
December 31, 1992 and 1991, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1992, in conformity with generally accepted
accounting principles.
February 5, 1993
<PAGE>
COMMERCIAL BANCORPORATION OF COLORADO
AND SUBSIDIARIES
____________________________________
CONSOLIDATED STATEMENTS OF CONDITION
DECEMBER 31, 1992 AND 1991
<TABLE>
<CAPTION>
__________________________________________________________________________________
ASSETS 1992 1991
______ ____________ ____________
<S> <C> <C>
Cash and due from banks $ 30,079,059 $ 37,988,536
Investment securities, approximate
market value of $64,435,000 and
$56,362,000 (Note 2 and 12) 63,232,237 54,923,170
Federal funds sold (Note 12) 40,472,000 16,960,000
Loans (Notes 3, 4, 6 and 12):
Commercial and financial 107,629,973 99,411,204
Agricultural 18,004,987 17,090,853
Real estate:
Construction 6,149,461 4,936,972
Mortgage 33,501,048 31,396,399
Consumer 22,447,097 21,903,179
____________ ____________
187,732,566 174,738,607
Less allowance for loan losses 5,605,813 5,600,645
____________ ____________
Net loans 182,126,753 169,137,962
Bank premises and equipment, net
(Notes 5 and 8) 8,522,694 8,302,172
Excess of investment in subsidiaries
over equity in net assets acquired (Note 13) 2,231,107 2,320,411
Accrued interest receivable 2,725,876 3,028,800
Other real estate owned, net (Note 6) 4,899,195 8,122,132
Other assets (Note 7) 1,451,837 1,515,295
____________ ____________
TOTAL ASSETS $335,740,758 $302,298,478
============ ============
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1992 1991
______________________________________ ____________ ____________
<S> <C> <C>
LIABILITIES:
Deposits (Note 2 and 12):
Demand:
Regular $ 85,946,548 $ 70,111,004
N.O.W. 58,513,453 47,957,260
Other interest-bearing 72,089,251 58,961,714
Savings 30,523,417 21,812,670
Certificates of Deposit:
$100,000 or over 12,728,439 21,068,696
Under $100,000 36,527,699 47,708,748
____________ ____________
296,328,807 267,620,092
Securities sold under repurchase
agreements and other short-
term borrowings (Note 2 and 12) 2,835,000 1,072,432
Accrued taxes and other liabilities (Note 7) 1,870,768 2,118,436
Mortgages and other long-term debt
(Note 8 and 12) 4,523,087 6,464,409
____________ ____________
TOTAL LIABILITIES 305,557,662 277,275,369
COMMITMENTS, CONTINGENCIES AND OTHER
MATTERS (Note 11)
SHAREHOLDERS' EQUITY (Notes 8, 9 and 13):
Preferred stock, par value $1;
180,000 shares authorized and unissued -- --
Common stock, par value $1;
Class A, authorized, 5,000,000 shares;
2,513,151 and 2,344,114 shares issued 2,513,151 2,344,114
Class B, authorized, 600,000 shares;
431,950 issued and outstanding 431,950 431,950
Additional paid-in capital 15,940,191 14,044,437
Retained earnings 12,438,077 9,412,823
____________ ____________
31,323,369 26,233,324
____________ ____________
Less Class A common stock held in treasury,
at cost (244,290 and 259,098 shares) 1,140,273 1,210,215
____________ ____________
30,183,096 25,023,109
____________ ____________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $335,740,758 $302,298,478
============ ============
</TABLE>
<TABLE>
<CAPTION>
COMMERCIAL BANCORPORATION OF COLORADO
AND SUBSIDIARIES
______________________________________
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER, 31, 1992, 1991 AND 1990
__________________________________________________________________________________________________________
1992 1991 1990
________ ________ __________
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $19,607,271 $20,064,551 $20,244,549
Interest on investment securities:
Taxable 2,940,451 2,518,860 1,847,450
Exempt from federal taxes 1,040,298 1,242,231 1,242,819
Interest on federal funds sold 722,196 968,738 1,302,380
___________ ___________ ___________
Total interest income 24,310,216 24,794,380 24,637,198
INTEREST EXPENSE:
Deposits:
Demand 3,819,643 4,537,588 4,488,804
Savings 984,979 1,031,478 1,307,246
Certificates of Deposit:
$100,000 or over 708,385 1,484,161 2,212,424
Under $100,000 2,139,504 3,315,080 3,728,014
___________ ___________ ___________
7,652,511 10,368,307 11,736,488
Securities sold under repurchase agree-
ments and other short-term borrowings 26,370 60,656 66,195
Mortgages and other long-term debt 380,139 490,937 559,909
___________ ___________ ___________
Total interest expense 8,059,020 10,919,900 12,362,592
___________ ___________ ___________
Net interest income before provision
for loan losses 16,251,196 13,874,480 12,274,606
Provision for loan losses (Note 4) 1,868,900 2,747,900 4,433,500
___________ ___________ ___________
Net interest income after provision
for loan losses 14,382,296 11,126,580 7,841,106
OTHER INCOME:
Service function 3,360,535 3,271,053 2,623,977
Other 540,374 584,193 737,242
___________ ___________ ___________
3,900,909 3,855,246 3,361,219
___________ ___________ ___________
18,283,205 14,981,826 11,202,325
OTHER EXPENSE:
Salaries and employee benefits 6,077,509 5,771,808 5,356,166
Occupancy expense, net 1,265,861 1,178,290 1,150,949
Furniture and equipment expense 728,456 736,452 654,746
Other real estate owned expense (Note 6) 915,586 814,558 3,585,668
Other (Note 10) 4,348,371 3,818,166 3,406,130
___________ ___________ ___________
13,335,783 12,319,274 14,153,659
___________ ___________ ___________
Income (loss) before income tax expense
(benefit) and extraordinary item 4,947,422 2,662,552 (2,951,334)
Income tax expense (benefit) (Note 7) 989,900 181,400 (700,800)
___________ ___________ ___________
Income (loss) before extraordinary item 3,957,522 2,481,152 (2,250,534)
Extraordinary item - gain on extinguishment
of debt, net of taxes of $18,200 (Note 8) -- 249,514 --
___________ ___________ ___________
NET INCOME (LOSS) $ 3,957,522 $ 2,730,666 $(2,250,534)
=========== =========== ===========
PRIMARY NET INCOME (LOSS)
PER COMMON SHARE (Note 1):
Before extraordinary item $ 1.52 $ .99 $ (.89)
Extraordinary item - gain on extinguishment
of debt -- .10 --
___________ ___________ ___________
$ 1.52 $ 1.09 $ (.89)
=========== =========== ===========
Weighted average shares of common
stock outstanding assuming no
dilution 2,611,101 2,515,077 2,519,233
=========== =========== ===========
FULLY DILUTED NET INCOME (LOSS)
PER COMMON SHARE (Note 1):
Before extraordinary item $ 1.45 $ .94 $ (.89)
Extraordinary item - gain on extinguishment
of debt -- .08 --
___________ ___________ ___________
$ 1.45 $ 1.02 $ (.89)
=========== =========== ===========
Weighted average shares of common
stock outstanding assuming full
dilution 2,960,935 3,042,198 3,127,054
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
COMMERCIAL BANCORPORATION OF COLORADO
AND SUBSIDIARIES
______________________________________
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1992, 1991 and 1990
_______________________________________________________
<TABLE>
<CAPTION>
1992 1991 1990
________ ________ __________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,957,522 $ 2,730,666 $(2,250,534)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Amortization, net of accretion, investment securities 351,303 89,755 (41,713)
Provision for loan losses 1,868,900 2,747,900 4,433,500
Provision for losses on other real estate owned 526,408 377,007 2,903,452
Accretion of net deferred loan fees and costs (897,886) (587,293) (380,366)
Origination of loans held for sale (32,334,525) (14,253,415) (10,922,300)
Proceeds from sale of loans 31,088,435 13,793,432 11,291,287
Extraordinary gain on extinguishment of debt -- (267,714) --
Losses recognized on other real estate owned, net 101,016 624,631 339,415
Depreciation and amortization 752,464 735,618 606,692
Amortization of goodwill 89,304 89,304 89,304
Change in accrued interest receivable 302,924 22,520 (36,548)
Change in other assets 63,458 375,877 (455,810)
Change in accrued taxes on income (109,086) 388,158 (1,183,750)
Change in other liabilities (138,582) 112,089 (176,674)
___________ ___________ ___________
Net cash provided by operating activities 5,621,655 6,978,535 4,215,955
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 13,828,077 12,551,601 14,252,030
Purchase of investment securities (22,488,447) (24,863,588) (27,251,245)
Net increase in loans (13,540,568) (10,923,923) (1,816,879)
Loan origination fees received, net of origination
costs 1,031,562 481,441 307,661
Proceeds from sale of other real estate owned 2,390,804 2,943,372 4,928,693
Purchase of bank premises and equipment (996,083) (479,088) (965,530)
Proceeds from sale of bank premises and equipment 23,097 4,298 13,000
Net (increase) decrease in federal funds sold (23,512,000) 7,158,000 (4,353,000)
___________ ___________ ___________
Net cash used in investing activities (43,263,558) (13,127,887) (14,885,270)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 28,708,715 20,506,116 13,844,381
Net increase (decrease) in securities sold under
repurchase agreements and other borrowings 1,762,568 (522,568) (275,000)
Proceeds from long term debt 228,000 -- --
Repayment of mortgages and other long term debt (137,497) (819,956) (180,285)
Dividends paid (932,268) (150,890) (302,257)
Sales of treasury stock, net of purchases 102,908 14,500 (80,359)
___________ ___________ ___________
Net cash provided by financing activities 29,732,426 19,027,202 13,006,480
___________ ___________ ___________
NET (DECREASE) INCREASE IN CASH AND
DUE FROM BANKS (7,909,477) 12,877,850 2,337,165
CASH AND DUE FROM BANKS, BEGINNING
OF YEAR 37,988,536 25,110,686 22,773,521
___________ ___________ ___________
CASH AND DUE FROM BANKS, END OF YEAR $30,079,059 $37,988,536 $25,110,686
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 8,197,602 $10,807,811 $13,723,016
=========== =========== ===========
Income taxes $ 1,099,630 $ 318,036 $ 440,122
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES:
The Company had the following noncash
transactions:
Net Transfer of other real estate owned to loans $ 204,709 $ 1,089,436 $ 6,258,650
=========== =========== ===========
Conversion of debentures $ 2,031,825 -- $ --
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
COMMERCIAL BANCORPORATION OF COLORADO AND SUBSIDIARIES
______________________________________________________
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
______________________________________________________
YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
______________________________________________________
<TABLE>
<CAPTION>
COMMON STOCK
____________________________________________
CLASS A CLASS B
____________________________________________
CLASS A
SHARES ADDITIONAL TREASURY STOCK
SHARES ISSUED AND PAID-IN RETAINED ______________________
ISSUED AMOUNT OUTSTANDING AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
_________ __________ ___________ ________ ____________ ____________ ________ ____________ ____________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
January 1, 1990 2,344,114 $2,344,114 431,950 $431,950 $14,060,609 $ 9,385,838 244,567 $(1,160,528) $25,061,983
Sale of treasury
stock -- -- -- -- (20,522) -- (8,794) 41,041 20,519
Purchase of
treasury stock -- -- -- -- -- -- 25,500 (100,878) (100,878)
Cash dividends -- -- -- -- -- (302,257) -- -- (302,257)
Net loss -- -- -- -- -- (2,250,534) -- -- (2,250,534)
_________ __________ ___________ ________ ___________ ___________ _______ ___________ ___________
BALANCE
December 31, 1990 2,344,114 2,344,114 431,950 431,950 14,040,087 6,833,047 261,273 (1,220,365) 22,428,833
Sale of treasury
stock -- -- -- -- 4,350 -- (2,175) 10,150 14,500
Cash dividends -- -- -- -- -- (150,890) -- -- (150,890)
Net income -- -- -- -- -- 2,730,666 -- -- 2,730,666
_________ __________ ___________ ________ ___________ ___________ _______ ___________ ___________
BALANCE
December 31, 1991 2,344,114 2,344,114 431,950 431,950 14,044,437 9,412,823 259,098 (1,210,215) 25,023,109
Sale of treasury
stock -- -- -- -- 32,966 -- (14,808) 69,942 102,908
Conversion of
debentures 169,037 169,037 -- -- 1,862,788 -- -- -- 2,031,825
Cash dividends -- -- -- -- -- (932,268) -- -- (932,268)
Net income -- -- -- -- -- 3,957,522 -- -- 3,957,522
_________ __________ ___________ ________ ___________ ___________ _______ ___________ ___________
BALANCE
December 31, 1992 2,513,151 $2,513,151 431,950 $431,950 $15,940,191 $12,438,077 244,290 $(1,140,273) $30,183,096
========= ========== ======= ======== =========== =========== ======= =========== ===========
</TABLE>
See notes to consolidated financial statements.
COMMERCIAL BANCORPORATION OF COLORADO AND SUBSIDIARIES
______________________________________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
________________________________________________________________
1. Summary of Significant Accounting Policies:
___________________________________________
The accounting and reporting practices of Commercial
Bancorporation of Colorado (the Company) and its wholly-
owned subsidiaries conform to generally accepted accounting
principles and practices within the banking industry. A
summary of the more significant accounting and reporting
practices follows.
a. The consolidated financial statements include the
accounts of the Company (a majority-owned subsidiary of
Commercial Bank Investment Company, a limited
partnership, which is 59% owned by the Estate of Gerson
Epstein) and its wholly-owned subsidiaries: Century
Bank Cherry Creek, Century Bank Academy at Hancock,
Century Bank Broadmoor/Skyway, Century Bank Fort
Collins and Century Bank Sterling and its subsidiary.
All significant intercompany accounts and transactions
have been eliminated.
b. Investment securities are stated at cost adjusted for
amortization of premiums and accretion of discounts,
computed by the interest method. Because these
securities are purchased for investment purposes and
the quoted market values fluctuate during the
investment period, gains and losses are recognized upon
disposal or at such time as management determines that
a permanent decline in value exists. Cost of
securities sold is determined by the identified
certificate method. The Company has the ability to
hold these investments to maturity and intends to hold
these investments on a long term basis or until
maturity.
c. Interest on loans is credited to income as earned on
the principal amount outstanding. Interest income is
generally not accrued on loans past due 90 days or
more. Management may elect to continue the accrual of
interest when the loan is in the process of collection
and the realizable value of collateral is sufficient to
cover the principal balance and accrued interest. When
a loan is designated as nonaccrual, any accrued
interest receivable is generally charged against
current earnings. Payments received on nonaccrual
loans are generally applied to the principal balance of
the loan. The placement of a loan on nonaccrual status
for revenue recognition does not necessarily imply a
potential charge off of principal.
d. Loan origination and commitment fees and certain direct
loan origination costs, which represent an adjustment
to interest yield, are deferred and the net amount is
amortized by the interest method over the contractual
life of the related loans. Commitment fees on
customers' unused lines of credit are recognized over
the commitment period.
e. The allowance for loan losses is established through
charges to operations in the form of provisions for
loan losses. Loans deemed uncollectible and recoveries
are charged or credited directly to the allowance. In
general, the amount charged to earnings each year by
the banks is based on management's judgment, which
takes into consideration a number of factors,
including: (a) the subsidiary bank's loss experience in
relation to outstanding loans and the existing level of
the allowance, (b) a continuing review of problem
loans, related uncollected interest and overall
portfolio quality, (c) regular examinations and
appraisals of loan portfolios by the Company's internal
and external auditors and state and federal supervisory
authorities and (d) current economic conditions. The
Company computes its allowance for loan losses on the
basis of an analysis of its entire loan portfolio. No
assurances can be given, however, that adverse economic
conditions or other circumstances will not result in
increased losses in the portfolio.
f. Bank premises and equipment are stated at cost, less
accumulated depreciation and amortization, computed
principally by the straight-line method over the
estimated useful lives of the assets.
g. The excess of investments in subsidiaries over equity
in net assets acquired is amortized using a straight-
line method over periods of 20 to 40 years except for
the excess applicable to investments acquired prior to
October 31, 1970, which is not being amortized because,
in the opinion of management, the excess has continuing
value.
h. Other real estate owned is held for resale and is
stated at the lower of cost or estimated fair value
less costs to sell. Losses arising from the
acquisition of property through foreclosure are charged
to the allowance for loan losses. The allowance for
losses on other real estate owned is established
through charges to operating expense to provide for
probable declines in the estimated fair value of real
estate acquired through foreclosure or in settlement of
debt.
i. Deferred income taxes are provided on temporary
differences which exist in the recognition of certain
income and expense items for financial statement and
tax purposes.
The Company presently accounts for income taxes under
the provisions of Statement of Financial Accounting
Standards (SFAS) No. 96, "Accounting for Income Taxes"
(see Note 7). New rules for accounting for income
taxes have been issued in SFAS No. 109 "Accounting for
Income Taxes." These rules, which must be adopted in
fiscal 1993, are different from the current standards.
However, had the Company elected to adopt SFAS No. 109
as of December 31, 1992, management believes its impact
would have been insignificant to the Company's
consolidated financial statements.
j. Primary earnings per common share is computed by
dividing net income or loss available to common
shareholders by the weighted average number of shares
outstanding during the period. Fully diluted earnings
per common share are computed assuming conversion of
the subordinated debentures. In 1990, the computation
of fully diluted earnings per share was antidilutive.
k. In accordance with requirements of the Federal Reserve,
average reserves of $3,108,000 and $2,087,000 were
maintained at the Federal Reserve for 1992 and 1991,
respectively.
l. The Company has defined cash and cash equivalents as
those amounts included in the consolidated statements
of condition caption "Cash and due from banks."
m. All common stock share information has been adjusted to
give retroactive effect to the Company's 3 for 2 stock
split in 1992.
n. Certain reclassifications have been made in the 1991
and 1990 financial statements to conform to
classifications used in 1992.
2. Investment Securities:
______________________
The carrying amount and approximate market value of
investment securities at December 31, 1992 and 1991 are as
follows:
<TABLE>
<CAPTION>
1992
________________________________________________________
Gross Gross Approximate
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
_________ __________ __________ ____________
<S> <C> <C> <C> <C>
Obligations of U.S. Treasury
and other U.S. government
agencies and corporations $48,603,843 $ 660,000 $ (200) $49,264,000
Obligations of states and
political subdivisions 13,931,444 620,000 (77,000) 14,474,000
Other 696,950 -- -- 697,000
___________ __________ _________ ___________
$63,232,237 $1,280,000 $ (77,200) $64,435,000
=========== ========== ========== ===========
1991
________________________________________________________
Gross Gross Approximate
Carrying Unrealized Unrealized Market
Amount Gains Losses Value
_________ __________ __________ ____________
Obligations of U.S. Treasury
and other U. S. government
agencies and corporations $37,782,636 $ 950,000 $ (33,000) $38,700,000
Obligations of states and
political subdivisions 16,647,384 557,000 (35,000) 17,169,000
Other 493,150 -- -- 493,000
___________ __________ _________ ___________
$54,923,170 $1,507,000 $ (68,000) $56,362,000
=========== ========== ========== ===========
</TABLE>
The carrying amount and approximate market value of
investment securities at December 31, 1992, by contractual
maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the
right to call or prepay obligations.
<TABLE>
<CAPTION>
Approximate
Carrying Market
Amount Value
________ ____________
<S> <C> <C>
Due in 1 year or less $ 6,247,268 $ 6,369,000
Due after 1 year through 5 years 22,197,007 23,177,000
Due after 5 years through 10 years 3,377,799 3,426,000
Due after 10 years 31,410,163 31,463,000
___________ ___________
$63,232,237 $64,435,000
=========== ===========
</TABLE>
Investment securities with an approximate market value of
$6,049,000 and $7,172,000 were pledged as collateral to
secure deposits of public funds of $2,592,000 and $2,931,000
at December 31, 1992 and 1991, respectively. Other
investment securities with an approximate market value of
$5,461,000 and $3,028,000 were pledged as collateral for
securities sold under repurchase agreements and other
purposes permitted or required by law.
Obligations of states and political subdivisions at December
31, 1992, do not include any single issuer for which the
aggregate carrying amount exceeds 10% of shareholders'
equity. However, approximately 91% of the par value of
these securities consists of obligations of the State of
Colorado or its political subdivisions.
3. Loans:
______
The majority of the subsidiary banks' lending activity is
with customers located within the state of Colorado.
Management believes the subsidiary banks had no significant
concentrations of credit risk in their loan portfolio. The
subsidiary banks, as collateralized lenders, hold various
types of collateral which may include accounts receivable,
inventory, property, plant and equipment and residential and
commercial real estate. As of December 31, 1992,
approximately 65.4% of the subsidiary banks' loans are
collateralized by real estate in Colorado. The subsidiary
banks have no significant exposure to highly leveraged
transactions and have no foreign credits in their portfolio.
At December 31, 1992 and 1991, loans aggregating
approximately $3,310,000 and $4,298,000 respectively, were
on nonaccrual status or had been restructured because of
their delinquency. If interest on these loans had been
accrued in accordance with their original terms, such
additional income would have been approximately $130,000,
$369,000 and $619,000 for 1992, 1991 and 1990, respectively.
4. Allowance for Loan Losses:
__________________________
An analysis of the allowance for loan losses for the years
ended December 31, 1992, 1991 and 1990 is as follows:
<TABLE>
<CAPTION>
1992 1991 1990
________ ________ ________
<S> <C> <C> <C>
Balance, beginning of year $ 5,600,645 $ 5,558,117 $ 3,818,873
Provision for loan losses 1,868,900 2,747,900 4,433,500
Loan recoveries 496,165 497,750 408,135
Loans charged off (2,359,897) (3,203,122) (3,102,391)
___________ ___________ ___________
Balance, end of year $ 5,605,813 $ 5,600,645 $ 5,558,117
=========== =========== ===========
</TABLE>
5. Bank Premises and Equipment:
____________________________
Bank premises and equipment at December 31, 1992 and 1991
consists of the following:
<TABLE>
<CAPTION>
1992 1991
________ ________
<S> <C> <C>
Land $ 2,816,854 $ 2,957,222
Buildings and improvements 7,296,321 6,634,820
Furniture, fixtures and equipment 5,335,209 5,088,085
___________ ___________
15,448,384 14,680,127
Less accumulated depreciation and
amortization 6,925,690 6,377,955
___________ ___________
$ 8,522,694 $ 8,302,172
=========== ===========
</TABLE>
6. Other Real Estate Owned:
________________________
Other real estate owned at December 31, 1992 and 1991
consists of the following:
<TABLE>
<CAPTION>
1992 1991
________ ________
<S> <C> <C>
Other real estate owned acquired through
foreclosure or in settlement of debt $4,370,686 $5,922,577
In-substance foreclosures 746,188 1,304,300
Other real estate owned sold as a
covered transaction 858,717 2,274,799
__________ __________
5,975,591 9,501,676
Less allowance for losses 1,076,396 1,379,544
__________ __________
$4,899,195 $8,122,132
========== ==========
</TABLE>
In-substance foreclosure is an accounting classification of
certain loans where the subsidiary banks have not foreclosed
on the loan but whereby the primary risks and rewards of
collateral ownership have passed from the debtor to the
bank. In these instances, the borrower has little or no
equity in the collateral when considering the current fair
value of the collateral and the proceeds for the repayment
of the loan can be expected to come only from the operation
or sale of the collateral. In addition, the borrower has
either formally or effectively abandoned control of the
property or retained control but has little or no
opportunity to rebuild equity in the collateral in the
foreseeable future.
Other real estate owned sold as a covered transaction
includes the sale of previously foreclosed real estate which
has been financed by a subsidiary bank. In addition, these
transactions may not have transferred the usual risks of
ownership from the subsidiary bank to the purchaser or the
purchaser has not made a significant enough initial
investment. Accordingly, for accounting purposes, these
transactions continue to be classified as other real estate
owned.
An analysis of the allowance for losses on other real estate
owned for the years ended December 31, 1992, 1991 and 1990
is as follows:
<TABLE>
<CAPTION>
1992 1991 1990
___________ __________ __________
<S> <C> <C> <C>
Balance, beginning of year $1,379,544 $2,254,347 $ 482,000
Provision for losses 526,408 377,007 2,903,452
Write-downs (829,556) (1,251,810) (1,131,105)
__________ __________ __________
Balance, end of year $1,076,396 $1,379,544 $2,254,347
========== ========== ==========
</TABLE>
7. Income Taxes:
_____________
The components of consolidated income tax expense (benefit)
for the years ended December 31, 1992, 1991 and 1990 are as
follows:
<TABLE>
<CAPTION>
1992 1991 1990
___________ __________ __________
<S> <C> <C> <C>
Currently payable $1,018,800 $ 519,600 $ 290,300
Deferred (28,900) (320,000) (991,100)
__________ _________ _________
$ 989,900 $ 199,600 $(700,800)
========== ========= =========
</TABLE>
The principal items resulting in prepaid income taxes and
the tax effect of each for the years ended December 31,
1992, 1991 and 1990 are as follow:
<TABLE>
<CAPTION>
1992 1991 1990
___________ __________ __________
<S> <C> <C> <C>
Deferred tax asset limitation $(85,000) $(288,200) $ 488,000
Lease financing -- (182,100) (184,200)
Provision for loan losses 20,000 11,400 (381,900)
Other real estate owned 88,000 154,400 (784,200)
Investment tax credits on leveraged
leases -- -- (29,700)
Amortization of adjustment for
reporting under cash method of
accounting for tax purposes -- -- (50,500)
Depreciation 11,400 22,300 33,200
Other, net (63,300) (37,800) (81,800)
________ _________ _________
$(28,900) $(320,000) $(991,100)
======== ========= =========
</TABLE>
Deferred tax charges of approximately $649,000 are included
in other assets at December 31, 1992.
The following table reconciles the effective tax amount to
the federal statutory amount for the years ended December
31, 1992, 1991 and 1990:
<TABLE>
<CAPTION>
1992 1991 1990
___________ __________ __________
<S> <C> <C> <C>
Income (loss) before income tax expense
(benefit) $4,947,422 $2,930,266 $(2,951,334)
========== ========== ===========
Computed "expected" expense (benefit) $1,682,100 $ 996,300 $(1,003,500)
Tax-exempt interest (407,100) (478,600) (482,300)
Alternative minimum tax (247,000) (105,400) 161,000
Deferred tax asset limitation (85,000) (288,200) 488,000
Nondeductible interest 20,700 33,100 42,200
Tax credits -- -- (29,700)
Amortization of goodwill 32,600 32,600 32,600
Other, net (6,400) 9,800 90,900
__________ __________ ___________
$ 989,900 $ 199,600 $ (700,800)
</TABLE>
8. Mortgages and Other Long-Term Debt:
___________________________________
Mortgages and other long-term debt at December 31, 1992 and
1991 consist of the following:
<TABLE>
<CAPTION>
1992 1991
____________ ____________
<S> <C> <C>
Federal Home Loan Bank advance bearing interest at 6.35%
due October 1997 $ 228,000 $ --
Mortgage notes payable, bearing interest at 8-1/4% due in
quarterly installments of approximately $7,300 including
interest, final payments due on various dates through
May, 1998 90,087 128,409
Adjustable rate convertible subordinated
debentures maturing in 2004 4,205,000 6,336,000
__________ __________
$4,523,087 $6,464,409
========== ==========
</TABLE>
The mortgage notes payable are collateralized by land and
buildings having a net carrying amount of $543,000 at
December 31, 1992.
The aggregate annual maturities of the mortgage notes and
Federal Home Loan Bank advance for the five years subsequent
to December 31, 1992, are: $22,000 - 1993, $24,000 - 1994,
$23,000 - 1995, $10,000 - 1996 and $239,000 - 1997.
The adjustable rate convertible subordinated debentures
(Debentures) currently bear interest at the rate of 7.00%
per annum. The annual rate will be adjusted semiannually as
of each interest payment date to the rate that is 1.5% below
the average of the rate payable on five-year U.S. Treasury
constant maturities for the four-week period preceding each
May 15 or November 15 prior to the applicable interest
payment date, but not less than 7% nor more than 13%. The
Debentures may be converted into Class A common stock of the
Company at a conversion price of $12.02 which has been
adjusted for common stock dividends and stock splits. At
December 31, 1992, 349,833 shares of common stock are
reserved for issuance upon conversion of these Debentures.
The adjustable rate trust indenture gives the Company the
option to redeem the Debentures and requires the Company to
make mandatory sinking fund payments on December 1 of each
year from 1994 to 2003 in an amount equal to 7.5% of the
aggregate principal amount of the originally outstanding
Debentures and on or before December 1, 2004, an amount
equal to 25% of the aggregate principal amount of the
originally outstanding Debentures. The Company may, at its
option, receive credit against required sinking fund
payments for the principal amount of (a) Debentures acquired
(other than by redemption) by the Company and delivered to
the trustee; (b) Debentures redeemed or called for
redemption (other than through the use of required payments
into the sinking fund) and (c) Debentures converted into
Class A common stock.
The adjustable rate trust indenture imposes certain
restrictions on pledges, other than a pledge of the capital
stock of Century Bank Cherry Creek, or sales of capital
stock of the subsidiaries and limitations on the payment of
dividends, other than stock dividends, and the purchase or
redemption of any capital stock of the Company. Retained
earnings, free of such divided restrictions at December 31,
1992, amount to approximately $4,009,000. The Debentures
are redeemable at any time, in whole or in part, at the
Company's option, at declining redemption prices.
The payment of principal and interest on the adjustable rate
convertible debentures is subordinated in right of payment
to all superior indebtedness (as defined in the indenture)
of the Company and to its debts to general creditors and
depositors.
During 1991, the Company acquired, through open market
purchases and a tender offer, $970,000 of the adjustable
rate convertible subordinated debentures at a cost of
$702,286, resulting in a gain of $267,714. Accordingly,
this gain is presented as an extraordinary gain on
extinguishment of debt in the accompanying consolidated
statements of operations.
9. Common Stock:
_____________
Both classes of the Company's common stock are identical in
all respects except that the holders of Class A common stock
are entitled to the cumulative system of voting for the
election of directors. Holders of Class B common stock are
entitled to elect one fewer than the majority of directors
and may freely convert, at their option, any of their shares
into an equal number of fully paid and nonassessable shares
of Class A common stock.
On October 13, 1987, the Company acquired 100% of the
outstanding common stock of AMBANK at Broadway (Century Bank
Littleton) and AMBANK at Orchard Valley (Century Bank
Orchard Road) in exchange for 110,009 unregistered shares of
the Company's Class A common stock. Of such amount, 70,537
shares were placed in an escrow account for a period of five
years ending October 13, 1992, to provide the Company
certain guarantees regarding the performance of the acquired
banks' loan portfolios and other matters. The escrow period
has been extended to April 13, 1993. AMBANK has the right
to trade cash for shares held in the escrow account at the
rate of $10.13 per share at the end of any quarter prior to
expiration of the escrow period. The shares placed in
escrow have not been reflected as issued in the consolidated
financial statements as of December 31, 1992, as the number
of shares to ultimately be issued is not determinable.
The Company has an Officer and Employee Discount Stock
Purchase Plan (the "Plan"). Under the Plan, the Board of
Directors is authorized to grant to officers and eligible
employees the nonassignable right to subscribe to purchase
shares of Class A common stock of the Company at a 25%
discount from market price at the date the subscription
rights are granted. The total number of shares of Class A
common stock which may be offered under the Plan is 90,000
and each will be subject to the antidilution provisions of
the Plan. These shares were registered with the Securities
and Exchange Commission in December 1991. In January 1992,
the Board of Directors granted to officers and eligible
employees subscription rights to purchase 16,416 shares at a
purchase price of $4.81 per share. Subscription rights
totalling 14,035 shares were exercised and were paid through
payroll deductions in 1992. In January 1993, the Board of
Directors granted to officers and eligible employees
subscription rights to purchase 15,579 shares at a purchase
price of $12.66 per share. Subscription rights totalling
9,667 shares were exercised and will be paid through payroll
deductions in 1993.
During 1992, the Board of Directors and Shareholders of the
Company adopted the Commercial Bancorporation of Colorado
1992 Stock Option Plan. The stock option plan, which covers
a maximum of 75,000 shares of the Company's Class A common
stock, provides for granting of stock options at any time
prior to March 31, 2002 to key management employees of the
Company or any subsidiary thereof and nonemployee members of
the Board of Directors of the Company as designated by the
stock option committee. The options are granted at exercise
prices not less than the fair market value of the Company's
Class A common stock on the date of grant. The options,
once granted, may not be exercised more than five years
after the grant. Each option provides that immediately
after grant of the option, it may be exercised for up to 20%
of the total shares included in the option and immediately
after each of the four succeeding anniversary dates of the
date of the grant, it may be exercised for up to an
additional 20% of the total shares included in the option.
An option will automatically become exercisable as to all
shares covered by that option beginning on the occurance of
a change in control of the Company (as defined in the Plan)
and continuing during the remainder of the five year
exercise period. In addition, the stock option committee
may accelerate the schedule of the times when an option may
be exercised. The following table presents share data
related to the stock option plan.
<TABLE>
<CAPTION>
Option Price
Per Share Shares
__________________ __________
<S> <C> <C>
Balance, January 1, 1992 --
Options Granted $13.333-$16.875 70,500
Options Exercised --
Terminated --
______
Balance, December 31, 1992 70,500
======
</TABLE>
At December 31, 1992, options for 17,700 shares of Class A
common stock were exercisable.
The Company provides a profit sharing plan for its
employees. Contributions to the plan are made annually at
the discretion of the board of directors. Contributions to
the Plan were $148,400 and $102,400 in 1992 and 1991,
respectively. There were no contributions made to the Plan
in 1990.
10. Supplementary Statement of Operations Information:
__________________________________________________
Supplementary information concerning charges to other
expense for the years ended December 31, 1992, 1991 and 1990
included in the accompanying consolidated statements of
operations is as follows:
<TABLE>
<CAPTION>
1992 1991 1990
___________ ___________ ___________
<S> <C> <C> <C>
Legal Fees $ 341,755 $ 518,539 $ 496,015
FDIC Insurance 527,854 494,932 270,991
Supplies 270,025 308,500 277,277
Bookkeeping Services 683,956 -- --
Other 2,524,781 2,496,195 2,361,847
__________ __________ __________
$4,348,371 $3,818,166 $3,406,130
========== ========== ==========
</TABLE>
11. Commitments, Contingencies and Other Matters:
_____________________________________________
Legal - In the normal course of business, there are various
legal proceedings against the Company and its subsidiary
banks. In the opinion of management, following consultation
with legal counsel, liabilities arising from these
proceedings, if any, will not have a material effect on the
consolidated financial statements.
In addition to lawsuits in the normal course of business, a
subsidiary bank of the Company is a co-defendant in two
putative class action lawsuits claiming violations of state
and federal securities laws. These lawsuits arise out of
the operation of Imperial Mortgage Corporation ("Imperial"),
a subsidiary of Crown Realty Co. ("Crown"). The subsidiary
bank was a principal lender for both Imperial and Crown.
Plaintiffs contend the subsidiary bank is liable for aiding
and abetting the alleged violations of state and federal
securities laws and as an alleged "control person" of
Imperial and Crown.
The federal court entered summary judgment on October 16,
1991 in favor of the subsidiary bank and against plaintiffs,
dismissing all claims against the subsidiary bank.
Plaintiffs have filed a motion to alter or amend this
judgment. The state court action was previously stayed,
pending the outcome of the case in federal court.
Based upon discussions with counsel, management of the
Company believes the subsidiary bank's position in these
cases has substantial merit, intends to continue to
vigorously defend these lawsuits and does not believe the
liabilities arising from these cases, if any, will have a
material effect on the consolidated financial statements.
Leases - Certain of the Company's subsidiary banks have
entered into operating leases for their bank premises.
These leases have varying terms, renewal options and
expiration dates through the year end 2004. Rental payments
will increase annually on the basis of increases in
operating costs. The minimum future rental payments
required under the subsidiary banks operating leases are as
follows:
YEAR ENDING
DECEMBER 31
___________
1993 $ 603,000
1994 639,000
1995 640,000
1996 640,000
1997 582,000
Later Years 2,343,000
__________
$5,447,000
==========
Rental expense, net of rental income, was $614,000, $577,000
and $565,000 in 1992, 1991 and 1990, respectively.
Financial instruments with off-balance-sheet risk - The
subsidiary banks are parties to financial instruments with
off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers. These financial
instruments include commitments to extend credit and stand-
by letters of credit. Those instruments involve, to varying
degrees, elements of credit risk in excess of the amount
recognized in the consolidated financial statements. The
contract amounts of those instruments reflect the extent of
involvement the subsidiary banks have in particular classes
of financial instruments.
The subsidiary banks' exposure to credit loss in the event
of non-performance by the counter party to the financial
instrument for commitments to extend credit and stand-by
letters of credit is represented by the contractual amount
of those instruments. The subsidiary banks use, the same
credit policies in making commitments and conditional
obligations as they do for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition
established in the contract. Commitments generally have
fixed expiration dates or other termination clauses and may
require the payment of a fee. Since some of the commitments
are expected to expire without being fully drawn upon, the
total unfunded commitment amounts do not necessarily
represent future cash requirements. At December 31, 1992,
the subsidiary banks had unfunded loan commitments to
customers of $30,427,000. The subsidiary banks evaluate
each customers' creditworthiness on a case-by-case basis.
The amount of collateral obtained if deemed necessary upon
extension of credit is based upon management's credit
evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant
and equipment, residential real estate and income-producing
commercial properties. Additional risks associated with
these commitments are incurred when they are drawn upon,
such as the demands on liquidity that the Company would
experience if a significant portion were drawn at once.
However, this is considered unlikely, as many commitments
expire without having been drawn upon.
Stand-by letters of credit are conditional commitments
issued by the subsidiary banks to guarantee the performance
of a customer to a third party and total $3,089,000 at
December 31, 1992. The credit risk involved in issuing
letters of credit is essentially the same as that involved
in extending loan facilities to customers. Collateral held
varies but may include accounts receivable, inventory,
property, equipment, and marketable securities. Since most
of the letters of credit are expected to expire without
being drawn upon, they do not necessarily represent future
cash requirements.
12. Fair Value Disclosures
______________________
The following disclosure of the estimated fair value of the
Company and its subsidiary banks financial instruments is
made in accordance with the requirements of SFAS No. 107,
"Disclosures about Fair Value of Financial Instruments."
The estimated fair value amounts have been determined by the
Company using available market information and appropriate
valuation methodologies. However, considerable judgment is
required to interpret market data in order to develop the
estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the
amounts the Company could realize in a current market
exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the
estimated fair value amounts.
<TABLE>
<CAPTION>
December 31, 1992
____________________________
Estimated
Carrying Fair
Amount Value
____________ ____________
<S> <C> <C>
Assets:
Cash and due from banks $ 30,079,059 $ 30,079,000
Investment securities 63,232,237 64,435,000
Federal funds sold 40,472,000 40,472,000
Loans (net) 182,126,753 182,901,000
Liabilities:
Deposits:
Non-interest bearing transaction
accounts 85,946,548 85,947,000
Interest bearing transaction
accounts 130,602,704 130,603,000
Savings and time 79,779,555 80,214,000
Securities sold under repurchase
agreements and other short term
borrowings 2,835,000 2,835,000
Mortgages and other long term debt 4,523,087 4,523,000
</TABLE>
The estimation methodologies utilized by the Company are
summarized as follows:
Cash and due from banks/federal funds purchased and sold -
For both cash and due from banks and federal funds sold, the
carrying amount is a reasonable estimate of fair value.
Investment Securities - The fair value of investment
securities is based on quoted market prices or dealer
quotes.
Loans - The fair value for all loans has been estimated by
discounting the projected cash flows of the performing loans
at December 31, 1992, using the current rate at which
similar loans would be made to borrowers with similar credit
ratings and for the same maturities. In computing the
estimated fair value for all loans, estimated future cash
flows have been reduced by specific and general reserves for
loan losses. For real estate loans, prepayments were not
taken into consideration.
Deposits - The fair value of both interest and noninterest-
bearing transaction accounts, and certain savings deposits,
is the amount payable on demand at December 31, 1992. The
fair value of fixed-maturity certificates of deposit is
estimated using the rates currently offered for deposits of
similar remaining maturities.
Securities Sold Under Repurchase Agreements and Other Short
Term Borrowings - Rates currently available to the Company
for debt with similar terms and remaining maturities are
used to estimate fair value of existing debt obligations.
Commitments to extend credit and letters of credit - The
fair value of commitments is estimated to be the same as the
commitment amount, as these instruments are booked at
floating rates.
The fair value estimates presented herein are based on
pertinent information available to management as of December
31, 1992. Although management is not aware of any factors
that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued
for purposes of these financial statements since that date
and, therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
13. Financial Statements of the Parent Company:
Financial statements of the parent company, Commercial
Bancorporation of Colorado, are shown below and should be
read in conjunction with the consolidated financial
statements.
STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
_______________________________
1992 1991
___________ ____________
<S> <C> <C>
ASSETS
Cash on deposit<F1> $ 1,109,047 $ 722,437
Investment in subsidiaries on the basis of
equity in net assets<F1> 26,782,164 24,296,409
Excess of investment in subsidiaries over
equity in net assets acquired, less
accumulated amortization of $1,090,329 and
$1,001,025 2,231,107 2,320,411
Bank premises and equipment, less accumulated
depreciation of $412,036 and $431,584 3,213,136 3,227,735
Other assets 1,205,668 1,107,584
___________ ___________
$34,541,122 $31,674,576
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Short-term borrowings $ -- $ 150,000
Accrued taxes and other liabilities 153,026 165,467
Long-term debt<F2> 4,205,000 6,336,000
___________ ___________
TOTAL LIABILITIES 4,358,026 6,651,467
SHAREHOLDERS' EQUITY<F3> 30,183,096 25,023,109
___________ ___________
$34,541,122 $31,674,576
=========== ===========
<F1>
Wholly or partially eliminated in consolidation.
<F2>
Long-term debt consists of adjustable rate convertible subordinated debentures maturing in 2004 with a current rate
of 7%. For discussion of long-term debt, see Note 8, Consolidated Financial Statements.
<F3>
For an analysis of activity, see the Consolidated Statements of Shareholders' Equity.
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
_______________________________________________
1992 1991 1990
___________ ___________ ___________
<S> <C> <C> <C>
OPERATING INCOME:
Dividends received from
subsidiaries $1,740,000 $1,525,300 $ 1,056,400
Interest and fees on loans 12,378 7,322 7,675
Rent<F1> 236,931 236,931 236,931
Other<F1> 905,283 781,815 874,984
__________ __________ ___________
2,894,592 2,551,368 2,175,990
OPERATING EXPENSE:
Salaries and employee benefits 675,662 589,614 521,512
Interest expense 368,518 481,176 546,272
Occupancy expense 120,471 120,333 120,088
Furniture and equipment expense 36,212 36,484 84,861
Other 460,996 540,069 539,764
__________ __________ ___________
1,661,859 1,767,676 1,812,497
__________ __________ ___________
Earnings before equity in
undistributed earnings
(losses) of subsidiaries 1,232,733 783,692 363,493
Equity in undistributed net earnings
(losses) of subsidiaries<F1> 2,385,754 1,522,077 (3,268,638)
__________ __________ ___________
Income (loss) before income tax
benefit and extraordinary item 3,618,487 2,305,769 (2,905,145)
Income tax benefit 339,035 175,383 654,611
__________ __________ ___________
Income (loss) before extraordinary
item 3,957,522 2,481,152 (2,250,534)
Extraordinary item - gain on extinguishment
of debt, net of taxes of $18,200 -- 249,514 --
__________ __________ ___________
NET INCOME (LOSS) $3,957,522 $2,730,666 $(2,250,534)
========== ========== ===========
<F1>
Wholly or partially eliminated in consolidation.
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
_______________________________________________
1992 1991 1990
___________ ___________ ___________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,957,522 $ 2,730,666 $(2,250,534)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Equity in undistributed (earnings) losses of
subsidiaries (2,485,754) (1,422,622) 3,268,638
Gain on extinguishment of debt -- (267,714) --
Depreciation and amortization 59,773 71,577 176,766
Amortization of goodwill 89,304 89,304 89,304
Change in other assets 153,635 7,873 (523,788)
Change in accrued taxes on income (251,719) 11,129 (107,443)
Change in other liabilities (12,441) 17,013 (408,898)
___________ ___________ ___________
Net cash provided by operating activities 1,510,320 1,237,226 244,045
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash invested in subsidiaries -- (450,000) (250,000)
Purchase of bank premises and equipment (45,174) (7,983) (26,838)
Proceeds from sale of bank
premises and equipment -- 2,418 253,809
___________ ___________ ___________
Net cash used in investing activities (45,174) (455,565) (23,029)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in short-term borrowings (150,000) 150,000 --
Repayments of long-term debt (99,176) (802,286) (164,000)
Dividends paid (932,268) (150,890) (302,257)
Sales of treasury stock, net of purchases 102,908 14,500 (80,359)
___________ ___________ ___________
Net cash used in financing activities (1,078,536) (788,676) (546,616)
___________ ___________ ___________
NET INCREASE (DECREASE) IN CASH ON DEPOSIT 386,610 (7,015) (325,600)
CASH ON DEPOSIT, BEGINNING OF YEAR 722,437 729,452 1,055,052
___________ ___________ ___________
CASH ON DEPOSIT, END OF YEAR $ 1,109,047 $ 722,437 $ 729,452
=========== =========== ===========
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
COMMERCIAL BANCORPORATION OF COLORADO
/s/ Jon P. Coates
_________________________
Jon P. Coates, President
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
President and
/s/ Jon P. Coates Director March 29, 1993
___________________
Jon P. Coates
/s/ Aileen Epstein Whitman Director March 29, 1993
___________________________
Aileen Epstein Whitman
Secretary and
/s/ Paul G. West Director March 29, 1993
___________________
Paul G. West
Vice President-
Finance and
Treasurer
(Principal
Accounting
/s/ George Mata Officer) March 29, 1993
___________________
George Mata
<PAGE>
APPENDIX F
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1993
__________________
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-7149
______
COMMERCIAL BANCORPORATION OF COLORADO
_________________________________________________________________
Exact name of registrant as specified in its charter
Colorado 84-0616683
______________________________ __________________________________
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization
3300 East First Avenue, Denver, Colorado 80206
________________________________________ ________
Address of principal executive offices Zip Code
(303) 321-1234
__________________________________________________
Registrant's telephone number, including area code
Not Applicable
_________________________________________________________________
Former name, former address, former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
___ ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
___ ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at September 30,
1993
_____________________________________________________
Class A, Common Stock, $1 par value 2,413,502 shares
Class B, Common Stock, $1 par value 431,950 shares
<PAGE>
PART I. FINANCIAL INFORMATION
______________________________
ITEM 1. FINANCIAL STATEMENTS
_____________________________
COMMERCIAL BANCORPORATION OF COLORADO
_____________________________________
CONSOLIDATED CONDENSED BALANCE SHEETS
_____________________________________
<TABLE>
<CAPTION>
September 30, December 31,
1993 1992
_____________ ____________
<S> <C> <C>
ASSETS (Unaudited) <F1>
Cash and due from banks $ 31,989,842 $ 30,079,059
Investment securities, approximate market
value of $77,213,000 and $64,435,000 76,241,790 63,232,237
Federal funds sold 44,947,000 40,472,000
Loans 206,554,977 187,732,566
Less allowance for loan losses 5,442,677 5,605,813
____________ ____________
Net loans 201,112,300 182,126,753
Bank premises and equipment, net 8,961,515 8,522,694
Excess cost of investment in subsidiaries
over equity in net assets acquired 2,164,129 2,231,107
Accrued interest receivable 3,362,079 2,725,876
Other real estate owned, net 3,336,111 4,899,195
Other assets 1,808,766 1,451,837
____________ ____________
$373,923,532 $335,740,758
============ ============
LIABILITIES
Deposits $331,111,752 $296,328,807
Securities sold under repurchase agreements 470,000 2,835,000
Accrued taxes and other liabilities 2,092,255 1,870,768
Mortgages and other long-term debt 5,277,018 4,523,087
____________ ____________
338,951,025 305,557,662
SHAREHOLDERS' EQUITY
Preferred stock, par value $1 per share; authorized
and unissued 180,000 shares -- --
Common stock, par value $1 per share;
Class A, authorized 5,000,000 shares;
issued 2,642,980 and 2,513,151 2,642,980 2,513,151
Class B, authorized 600,000 shares;
431,950 issued and outstanding 431,950 431,950
Additional paid-in capital 17,503,817 15,940,191
Retained earnings (restricted to the extent of the
cost of treasury stock) 15,467,684 12,438,077
____________ ____________
36,046,431 31,323,369
Less treasury stock, at cost (1,073,924) (1,140,273)
34,972,507 30,183,096
____________ ____________
$373,923,532 $335,740,758
============ ============
<F1>
The balance sheet at December 31, 1992, has been taken from the audited financial statements at that date and condensed.
</TABLE>
See accompanying notes to consolidated condensed financial
statements.
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
___________________________________________
COMMERCIAL BANCORPORATION OF COLORADO
_____________________________________
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
___________________________________________
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
___________________________ ___________________________
1993 1992 1993 1992
___________ ___________ ___________ ___________
<S> <C> <C> <C> <C>
Interest income $ 6,595,562 $ 5,972,894 $18,836,840 $18,070,602
Interest expense 1,804,618 1,897,452 5,428,550 6,233,040
___________ ___________ ___________ ___________
Net interest income 4,790,944 4,075,442 13,408,290 11,837,562
Provision for loan losses 208,900 569,000 839,900 1,505,600
___________ ___________ ___________ ___________
Net interest income after provision
for loan losses 4,582,044 3,506,442 12,568,390 10,331,962
Other income:
Service function 864,773 830,602 2,554,383 2,505,109
Other 453,358 242,447 938,852 478,698
___________ ___________ ___________ ___________
1,318,131 1,073,049 3,493,235 2,983,807
___________ ___________ ___________ ___________
Net interest and other income 5,900,175 4,579,491 16,061,625 13,315,769
Other expenses:
Personnel expense 1,734,650 1,509,423 5,077,800 4,515,034
Occupancy expense, net 343,548 322,743 1,006,353 933,816
Furniture & Equipment 243,270 180,894 646,345 537,288
Other real estate owned 157,366 285,835 485,418 708,852
Other 1,182,426 1,099,385 3,406,611 3,322,715
___________ ___________ ___________ ___________
3,661,260 3,398,280 10,622,527 10,017,705
___________ ___________ ___________ ___________
Income before income taxes and cumulative
effect of accounting change 2,238,915 1,181,211 5,439,098 3,298,064
Income tax expense 769,300 201,400 1,642,600 612,100
___________ ___________ ___________ ___________
Income before cumulative effect of
accounting 1,469,615 979,811 3,796,498 2,685,964
Cumulative effect of accounting change -- -- 363,000 --
___________ ___________ ___________ ___________
Net income $ 1,469,615 $ 979,811 $ 4,159,498 $ 2,685,964
=========== =========== =========== ===========
Weighted average shares outstanding:
Primary 2,859,463 2,618,554 2,810,409 2,562,910
=========== =========== =========== ===========
Assuming full dilution 3,149,896 3,036,607 3,100,842 2,980,963
=========== =========== =========== ===========
Primary net income per common share:
Before cumulative effect of accounting change $.51 $.38 $1.35 $1.05
Cumulative effect of accounting change -- -- .13 --
___________ ___________ ___________ ___________
$.51 $.38 $1.48 $1.05
=========== =========== =========== ===========
Fully diluted net income per common share:
Before cumulative effect of accounting change $.48 $.35 $1.27 $ .99
Cumulative effect of accounting change -- -- .12 --
___________ ___________ ___________ ___________
$.48 $.35 $1.39 $ .99
=========== =========== =========== ===========
Cash dividends per share $.15 $.10 $ .40 $ .26
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial
statements.
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
___________________________________________
COMMERCIAL BANCORPORATION OF COLORADO
_____________________________________
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
_______________________________________________
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
______________________________
1993 1992
_________ ___________
<S> <C> <C>
Net cash provided by operating activities $ 6,391,829 $ 5,323,451
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 9,983,119 4,034,735
Purchase of investment securities (23,528,889) (5,261,627)
Net increase in loans (19,777,544) (21,464,952)
Proceeds from sale of other real estate owned 673,742 3,462,065
Purchase of bank premises and equipment (1,275,266) (945,850)
Proceeds from sale of bank premises and equipment 190,017 --
Net increase in federal funds sold (4,475,000) (7,151,000)
___________ ___________
Net cash used in investing activities (38,209,821) (27,326,629)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 34,782,945 9,885,493
Net decrease in repurchase agreements (2,365,000) (572,432)
Repayments of mortgages and other long-term debt (32,069) (122,864)
Other borrowings 1,500,000 --
Dividends paid (1,130,347) (687,258)
Sale of treasury stock 163,623 72,055
Issuance of common stock 809,623 --
___________ ___________
Net cash provided by (used in) financing activities 33,728,775 8,574,994
___________ ___________
NET INCREASE (DECREASE) IN CASH AND
DUE FROM BANKS 1,910,783 (13,428,184)
CASH AND DUE FROM BANKS, beginning of
period 30,079,059 37,988,536
___________ ___________
CASH AND DUE FROM BANKS, end of period $31,989,842 $24,560,352
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial
statements.
<PAGE>
PART I. FINANCIAL INFORMATION (continued)
__________________________________________
COMMERCIAL BANCORPORATION OF COLORADO
_____________________________________
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
____________________________________________________
(Unaudited)
1. Reference is made to Note 1 of the Consolidated Financial
Statements included in the Annual Report on Form 10-K for
the year ended December 31, 1992, which describes the
accounting policies of the Company for annual reporting
purposes. In the opinion of the Company, the accompanying
unaudited consolidated condensed financial statements
contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position
as of September 30, 1993, and the results of operations for
the three and nine months ended September 30, 1993 and 1992,
and statements of cash flows for the nine months ended
September 30, 1993 and 1992.
2. The results of operations for the three and nine months
ended September 30, 1993, are not necessarily indicative of
the results to be expected for the full year.
3. The provision for taxes on income has been based on an
estimated annual effective tax rate. The provision does not
bear the customary relationship to income before taxes due
to tax-exempt interest income on obligations of states and
political subdivisions and nondeductible amortization.
4. On September 11, 1993, the Company entered into a definitive
agreement with KeyCorp, a New York corporation, pursuant to
which the Company has agreed to merge into a wholly owned
subsidiary of KeyCorp in consideration for KeyCorp common
stock. Consummation of the merger is subject to, among
other matters, regulatory approval and approval of the
Company's shareholders.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
_________________________________________________________________
Liquidity in banking terms means being able to meet
financial commitments. A portion of the Company's funding needs
is accomplished through acquisition of liabilities such as
negotiable certificates of deposit, federal funds purchased and
other short-term borrowings. Liquid assets include short-term
investment securities, federal funds sold and short-term loans.
The composition of assets and liquidity has not changed
materially since year-end 1992 as discussed in the Company's
annual report on Form 10-K. Nonperforming assets continued to
show improvement at September 30, 1993 as compared to December
31, 1992. Total loans on nonaccrual statues were $1,435,000 at
September 30, 1993, as compared to $1,395,000 at December 31,
1992, a slight increase of $40,000 (2.9%). Loans that are
currently on nonaccrual status represent a higher than normal
degree of risk due to the past due status of these loans.
Restructured loans were $797,000 at September 30, 1993 as
compared to $1,915,000 at December 31, 1992, a decrease of
$1,118,000 (58.4%). Real estate acquired through foreclosure,
net of reserves, was $3,336,000 at September 30, 1993 as compared
to $4,899,000 at December 31, 1992, a decrease of $1,563,000
(31.9%). At September 30, 1993, the allowance for loan losses
was $5,443,000 (2.64% of total loans) as compared to $5,606,000
(2.99% of total loans) at December 31, 1992. Management
currently believes that at September 30, 1993, the allowance for
loan losses was adequate.
Assuring that adequate capital is available to provide
needed funds for future growth and a measure of protection
against unanticipated adverse operating results is a very
important management objective. The internal generation of
equity capital through retained earnings is expected to be a
primary source of
capital to meet the Company's needs. The Company's Tier I
leverage capital ratio was 8.8% at September 30, 1993 and in
excess of minimum capital requirements. At September 30, 1993,
long-term debt as a percent of equity capital was 15.1%.
At September 30, 1993, there were no material commitments
for capital expenditures.
Results of Operations
_____________________
Nine Months Ended September 30, 1993 Compared to September
30, 1992
______________________________________________________________
The Company reported net income of $4,159,000 ($1.48 per
share) for the nine months ended September 30, 1993 as compared
to net income of $2,686,000 ($1.05 per share) in the same period
in 1992, an increase of 54.8%. Factors which contributed to
improved net income included an increase in net interest income,
lower provisions for loan losses and higher noninterest income.
Net interest income increased $1,571,000 (13.3%) in the nine
months ended September 30, 1993 as compared to the corresponding
period in the prior year. The increase in net interest income
resulted from growth in the earning asset base and lower rates
paid on interest bearing liabilities over the period as compared
to the prior year.
Another significant factor in the improved performance of
the Company is the lower provision for loan losses. The lower
provision for loan losses is primarily the result of lower levels
of nonperforming assets as compared to the nine months ended
September 30, 1992 and an improved Colorado economy. The
provision for loan losses decreased by approximately $666,000
during the nine months ended September 30, 1993 as compared to
the same period in 1992. Management of the Company believes the
provision and allowance for loan losses were adequate as of
September 30, 1993.
Noninterest income increased by approximately $509,000
(17.1%) in the nine months ended September 30, 1993 as compared
to the same period in 1992. Included in noninterest income in
1993 are $570,000 in gains on sales of loans and a $120,000
increase in other income due to interest on income tax refunds
received. It should also be noted, gains on sales of real estate
acquired through foreclosure decreased by approximately $158,000
in the nine months ended September 30, 1993 as compared to the
same period in 1992.
Noninterest expenses increased by approximately $605,000
(6.0%) in the nine months ended September 30, 1993 as compared to
the nine months ended September 30, 1992. Most of the increase
in noninterest expenses can be attributed to growth of the banks,
inflation and the opening of a new branch in Colorado Springs in
mid-March 1993. It should also be noted, expenses related to
real estate acquired through foreclosure decreased by
approximately $224,000 (31.5%) in the nine months ended September
30, 1993 as compared to the similar period in 1992.
Income tax expense was $1,643,000 for the nine months ended
September 30, 1993. The provision for taxes on income has been
based on an estimated annual effective tax rate. Income tax
expense does not bear the customary relationship to income before
taxes due to tax-exempt interest income on obligations of states
and political subdivisions and nondeductible amortization.
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." The cumulative effect of adopting SFAS No. 109 on
the Company's financial statements was to increase income by
$363,000 ($.13 per share). As part of the cumulative effect of
adopting SFAS No. 109, $363,000 of previously unrecorded deferred
tax benefits from alternative minimum tax credit carry forwards
were recognized at January 1, 1993.
Three Months Ended September 30, 1993
_____________________________________
Compared to Three Months Ended September 30, 1992
_________________________________________________
The Company reported net income of $1,470,000 ($.51 per
share) in the three months ended September 30, 1993, as compared
to $980,000 ($.38 per share) in the same period in 1992, an
increase of 50.0%. As explained above, the increase is primarily
the result of growth in the earning assets base and lower rates
paid on interest bearing liabilities, a reduction in the
provision for loan losses and an increase in other income.
Included in other income in the quarter ended September 30, 1993
is $281,000 in gains on sales of loans and $120,000 due to
interest on income tax refunds received. Other components of
income and expense showed moderate levels of increase due to
growth of the banks and inflation.
The provision for income taxes has been based on an
estimated annual effective tax rate. Income tax expense does not
bear the customary relationship to income before income taxes due
to tax-exempt interest income on obligations of states and
political subdivisions and nondeductible amortizations.
PART II. OTHER INFORMATION
____________________________
Item 1. Legal Proceedings
_________________
On July 1, 1993, the Arapahoe County District Court ("State
Court") lifted the stay in the case of Maierhofer v. Crown Realty
Co. (Civil Action No. 89-CV-289, Division 3), in which Century
Bank, a wholly owned subsidiary of the Company, is a co-
defendant. The stay was entered by the Arapahoe County District
Court in Januray 1989 pending a resolution of a related case
(Civil Action No. 89-123) filed at that time in the United States
District Court for the District of Colorado ("Federal Court").
The State Court matter is set for trial commencing on February
28, 1994. During September 1993, Century Bank filed a Motion for
Summary Judgement, which is currently pending before the State
Court, seeking dismissal of all claims asserted against it. For
additional information concerning the Federal Court case and the
State Court case, see Item 3 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992, and Note
11 of the Consolidated Financial Statements included as a part
thereof.
Item 6. Exhibits and reports on Form 8-K
________________________________
a. Exhibits:
Item 601
Cross Exhibit
Reference Document Number
_________ ________________________________________________ ______
11 Statement Re: Computation of Per Share Earnings 11
b. Reports on Form 8-K
Current report on Form 8-K dated September 11, 1993 reported
the Company had entered into a definitive agreement with
KeyCorp, a New York corporation, pursuant to which the
Company has agreed to merge into a wholly owned subsidiary
of KeyCorp in consideration for KeyCorp common stock.
Consummation of the merger is subject to, among other
matters, regulatory approval and approval of the Company's
shareholders.
<PAGE>
COMMERCIAL BANCORPORATION OF COLORADO
SIGNATURES
__________
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
COMMERCIAL BANCORPORATION OF COLORADO
(Registrant)
October 22, 1993 /s/ Jon P. Coates
__________________ _________________________________
Date Jon P. Coates, President
October 22, 1993 /s/ George Mata
__________________ _________________________________
Date George Mata, Vice President-
Finance and Treasurer
(Principal Accounting Officer)
<PAGE>
APPENDIX G
COMMERCIAL BANCORPORATION OF COLORADO
3300 East First Avenue
Denver, Colorado 80206
__________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1993
__________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of COMMERCIAL BANCORPORATION OF COLORADO, a Colorado
corporation (the "Company), will be held at the offices of the
Company, 3300 East First Avenue, Denver, Colorado 80206,
Thursday, June 3, 1993, at 9:00 a.m. Mountain Daylight Time, for
the purposes of considering and acting upon the following:
1. Election of five Directors (four by Class A
stockholders and one by Class B stockholders) to serve
until the next Annual Meeting of Stockholders and until
their successors shall have been duly elected and
qualified.
2. Approval of the engagement of Deloitte & Touche as the
Company's independent certified public accountants for
the 1993 fiscal year.
3. Such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on
April 26, 1993 are entitled to notice of the meeting and to vote
at the meeting or any adjournment thereof.
IF YOU WILL NOT BE ABLE TO ATTEND THE MEETING IN PERSON,
PLEASE FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHICH DOES NOT REQUIRE
ANY POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ARE ABLE TO
ATTEND THE MEETING AND TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO
SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
By Order of the Board of Directors
PAUL G. WEST
Secretary
Denver, Colorado
May 3, 1993
<PAGE>
COMMERCIAL BANCORPORATION OF COLORADO
3300 East First Avenue
Denver, Colorado 80206
THE PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
June 3, 1993
The undersigned holder of Class A common stock of COMMERCIAL
BANCORPORATION OF COLORADO, a Colorado corporation (the
"Company"), acknowledges receipt of the Proxy Statement of the
Company and hereby appoints Jon P. Coates and Paul G. West, and
each of them, as attorney and proxy, with full power of
substitution, to appear and vote all shares of stock standing in
the name of the undersigned which the undersigned would be
entitled to vote if personally present and acting at the Annual
Meeting of Stockholders of the Company to be held at the offices
of the Company, 3300 East First Avenue, Denver, Colorado 80206,
on June 3, 1993, at 9:00 a.m., Mountain Daylight Time, and at any
and all adjournments thereof as follows:
1. Authority is granted__________ withheld__________ to
vote for the election of the following nominees to the
Board of Directors:
Number of Votes (Applicable only if a stockholder,
under his or her cumulative voting rights, elects
to distribute his or her votes on a basis other
than one vote per share per nominee)
__________________________________________________
Name of Director
________________
Aileen Epstein Whitman __________
Albert Soffa __________
Charles L. Epstein __________
Paul G. West __________
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY PARTICULAR
PERSON, DRAW A LINE THROUGH THAT PERSON'S NAME. FOR A MORE
COMPLETE DISCUSSION OF STOCKHOLDER'S RIGHTS UNDER CUMULATIVE
VOTING PROCEDURES, SEE ACCOMPANYING PROXY STATEMENT AT
"SECURITIES ENTITLED TO VOTE."
Please turn over,
Signatures required on reverse side.
2. Retention of Deloitte & Touche as the Company's
independent certified public accountants for the 1993
fiscal year:
FOR _______ AGAINST _______ ABSTAIN _______
3. In their discretion, on any other matters which may
properly come before the Meeting:
FOR _______ AGAINST _______ ABSTAIN _______
Please date, sign and complete the information requested below.
The undersigned hereby revokes any proxy or proxies
heretofore given to vote such stock.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ACCORDING
TO THE INSTRUCTION GIVEN BY THE UNDERSIGNED. IF INSTRUCTIONS ARE
NOT GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
DIRECTORS WHOSE NAMES ARE SET FORTH IN ITEM 1 ABOVE, AND FOR THE
RETENTION OF DELOITTE & TOUCHE AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1993 AND IN THE
DISCRETION OF THE PROXY ON ANY OTHER MATTERS WHICH MAY PROPERLY
COME BEFORE THE MEETING.
Date: _____________________, 1993
__________________________ ________________________
Signature of Stockholder Signature of Stockholder
Please sign exactly as the Stockholder name appears on this
Proxy. For joint accounts, each joint owner should sign. When
signing in a fiduciary or representative capacity, please give
your full title as such.
If the above address is incorrect, please print your correct
address below:
______________________________________________
______________________________________________
PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE
ENCLOSED, POSTAGE-PAID ENVELOPE
<PAGE>
COMMERCIAL BANCORPORATION OF COLORADO
3300 East First Avenue
Denver, Colorado 80206
____________________
Proxy Statement
____________________
Annual Meeting of Stockholders
______________________________
June 3, 1993
The following information, first mailed to stockholders on
or about May 3, 1993, is submitted with respect to the enclosed
proxy and the matters to be acted upon at the Annual Meeting of
Stockholders (the "Meeting") of Commercial Bancorporation of
Colorado, a Colorado corporation (the "Company"), to be held on
June 3, 1993, or any adjournment or adjournments thereof pursuant
to the foregoing Notice of Meeting. This proxy statement was
sent to stockholders on or about May 3, 1993.
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited by the Board of Directors of
the Company with respect to the Company's Class A common stock.
The solicitation is being made primarily by mail, although
proxies may also be solicited personally by regular employees of
the Company directly, by mail and by telephone. The expenses of
printing and mailing proxy material will be borne by the Company.
The Company will also forward to banks, brokers, and other
custodian nominees and fiduciaries a sufficient number of copies
as will enable them to furnish proxy material to the beneficial
owners of Class A common stock held of record by them and will,
upon request, reimburse them for their reasonable expenses in so
doing.
A stockholder giving a proxy for the Meeting may revoke it
prior to the voting thereof on any matter (without affecting,
however, any vote taken prior to such revocation), by written
notice to the secretary of the Company, by submission of a proxy
bearing a later date or by attending the meeting and voting in
person. Shares of Class A common stock represented by valid
proxies will be voted in accordance with stockholder's
instructions; if no instructions are given, proxies will be voted
FOR the nominees to the Board of Directors set forth herein, FOR
the retention of Deloitte & Touche as the Company's independent
certified public accountants and in the discretion of the proxy
on any other matters which may properly come before the Meeting.
SECURITIES ENTITLED TO VOTE
Only the holders of Class A and Class B common stock of
record at the close of business on April 26, 1993, will be
entitled to vote at the Meeting or any adjournment thereof. At
the close of business on April 26, 1993, 2,377,990 shares of
Class A common stock and 431,950 shares of Class B common stock
were issued and outstanding and entitled to vote at the Meeting.
The Class B common stock is held of record by one stockholder.
The holders of a majority of the shares issued and
outstanding and entitled to vote, present in person or
represented by proxy, will constitute a quorum for the
transaction of business at the Meeting. Pursuant to the
Company's Articles of Incorporation, holders of Class A and Class
B common stock are entitled to one vote per share on each matter
presented at the Meeting. Pursuant to the Company's Articles of
Incorporation, holders of Class A common stock are entitled to
elect a majority of the Company's directors and, in this
election, may cumulate their votes; while the holder of Class B
common stock is entitled to elect such number of directors as is
one less than the majority of the directors and is not entitled
to cumulate its votes.
Each holder of Class A common stock has the right to give
one candidate a number of votes equal to the number of directors
to be elected by the Class A stockholders multiplied by the
number of such stockholder's shares of Class A common stock, or
to distribute the votes on the same principle among as many
candidates as such stockholder may see fit. Subject to
instructions to the contrary in returned proxies, the persons
named as proxies reserve the right to cumulate votes represented
by proxies which they receive and to distribute such votes among
one or more of the Class A nominees at their discretion.
If a quorum is present at the Meeting, each nominee for
election to the Board by the Class A stockholders (see "Election
of Directors") receiving the affirmative vote of a majority of
the Class A common stock present in person or by proxy and
entitled to vote on the nominee will be elected. Any shares of
Class A common stock not voted with respect to a nominee (whether
by withholding authority or broker nonvote) will not be
considered "shares present" for voting purposes. The nominee for
election to the Board by the Class B stockholder (see "Election
of Directors") will be elected by the Class B stockholder.
The approval of independent certified public accountants and
any other matters that may properly come before the Meeting must
be approved by the affirmative vote of a majority of the shares
of Class A and Class B common stock (voting together as one
class) present in person or by proxy at the Meeting. Abstentions
from voting on any such matter will be treated as votes against,
while broker nonvotes will not be considered "shares present" for
voting purposes.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of April 26, 1993, the
beneficial ownership of the Company's Class A and Class B common
stock by each person known to the Company to beneficially own
more than 5% of its voting securities and by the directors and
officers of the Company as a group:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent
Beneficial Owners Ownership A<F1> Of Class B<F2>
_________________________ __________________ _____________
<S> <C> <C>
CLASS A SHARES
David J. Steinberg C<F3> 1,146,855 D<F4> 40.62
601 Conshohocken State Road
Narberth, PA 19072
Charles L. Epstein C<F3> 1,012,160 E<F4> 36.02
Road #1, Box 130
Charlestown Road
Malvern, PA 19355
Stanley Edeiken C<F3> 1,003,237 F<F6> 35.70
10 Hathaway Avenue
Deal, NJ 07723
Commercial Bank Investment Company<FC> 1,003,237 F<F6> 35.70
("CBIC")
3300 East First Avenue
Denver, CO 80206
Jon P. Coates 188,286 G<F7> 7.88
P. O. Box 6324
Denver, CO 80206
FMR Corporation 139,250 5.86
82 Devonshire Street
Boston, MA 02109
All Officers and Directors 1,268,850 H<F8> 52.97
of the Company as a group
CLASS B SHARES
Commercial Bank Investment Company C<F3> 431,950 I<F9> 100.00
3300 East First Avenue
Denver, CO 80206
<F1>
A. Except as stated in the following notes, each person has sole voting and investment powers associated with the shares
stated as beneficially owned by him.
<F2>
B. Although only 2,377,990 Class A shares were outstanding as of April 26, 1993, the "Percent of Class" ownership was
calculated as though the Class B shares were converted into Class A shares (see Note I below) and the adjustable
rate convertible subordinated debentures beneficially owned by those listed were also converted into Class A shares.
<F3>
C. CBIC, a Colorado limited partnership, has three general partners, Charles L. Epstein (the beneficial owner of an
approximate 0.0% partnership interest), David J. Steinberg (owner, together with Chaile B. Steinberg, his wife, as
tenants by the entireties of an approximate 4.2% partnership interest) and Stanley Edeiken, uncle of Charles L. Epstein
(owner of an approximate .8% partnership interest); and 40 limited partners, including Jon P. Coates (owner of an
approximate 2.2% partnership interest), the Estate of Gerson Epstein (owner directly or indirectly of an approximate
59.3% partnership interest) of which Aileen Epstein is the sole beneficiary and Albert Soffa (owner of an approximate
3.5% partnership interest). Pursuant to the terms of the limited partnership agreement, any two of the three general
partners control CBIC.
<F4>
D. Consists of:
1. 571,287 Class A shares owned directly by CBIC.
2. 431,950 Class A shares into which 431,950 Class B shares owned by CBIC may, at CBIC's option, be converted (pursuant
to the Company's Articles of Incorporation).
3. 83,565 Class A shares owned by David J. Steinberg and Chaile B. Steinberg, his wife, as Trustees of David J. Steinberg
Profit Sharing and Retirement Plan with Mr. Steinberg having shared voting and investment power over the shares.
4. 46,825 Class A shares owned directly by David J. Steinberg and Chaile B. Steinberg, his wife, as tenants by the
entireties.
5. 13,228 Class A shares into which $159,000 par value of adjustable rate convertible subordinated debentures owned
by David J. Steinberg and Chaile B. Steinberg, his wife, as Trustees of the David J. Steinberg Profit Sharing and
Retirement Plan can be converted with Mr. Steinberg having shared voting and investment powers over the shares.
<F5>
E. Consists of:
1. 571,287 Class A shares owned directly by CBIC.
2. 431,950 Class A shares into which 431,950 Class B shares owned by CBIC may, at CBIC's option, be converted (pursuant
to the Company's Articles of Incorporation).
3. 8,923 Class A shares owned directly by Mr. Epstein.
<F6>
F. Consists of:
1. 571,287 Class A shares owned directly by CBIC.
2. 431,950 Class A shares into which 431,950 Class B shares owned by CBIC may, at CBIC's option, be converted (pursuant
to the Company's Articles of Incorporation).
<F7>
G. Consists of:
1. 175,818 Class A shares owned directly by Jon P. Coates
2. Exercisable options on 3,150 shares of Class A shares pursuant to the Company's 1992 Stock Option Plan.
3. 9,318 Class A shares into which $112,000 par value of adjustable rate convertible subordinated debentures owned by
Jon P. Coates and Sheila R. Johnson, his wife, as joint tenants, can be converted.
4. Does not include 12,610 Class A shares owned directly by CBIC or 9,534 Class A shares into which 9,534 Class B shares
owned by CBIC may, at its option, be converted, which shares are attributable to Mr. Coates' approximate 2.2% limited
partnership interest in CBIC.
<F8>
H. The directors and officers as a group beneficially owned $132,000 principal amount of the Company's adjustable rate
convertible subordinated debentures.
<F9>
I. Pursuant to the Company's Articles of Incorporation, these shares may be converted at any time at CBIC's option into an
equal number of fully paid and nonassessable shares of Class A common stock.
</TABLE>
ELECTION OF DIRECTORS
Each of the five nominees set forth below has been nominated
by the Board of Directors for election as a director of the
Company to serve until the 1994 Annual Meeting of Stockholders,
or until his or her successor has been duly elected and
qualified. Each nominee is currently a director. Four of the
nominees are to be elected by the holders of Class A common stock
and one is to be elected by the holder of Class B common stock.
The holder of Class B common stock is entitled to elect three
directors but is reserving the right to elect one or two more
directors at a later date. See "Securities Entitled to Vote."
The Board of Directors does not know of any nominee who will
be unable to stand for election or otherwise serve as a director.
If for any reason, any one or more nominees become unavailable
for election, the Board of Directors may designate a substitute
nominee or nominees, in which event, in the case of a Class A
nominee, the shares of Class A common stock represented on the
proxy cards returned to the Company will be voted for the
remaining Class A nominees and for any substitute Class A
nominees, unless an instruction to the contrary is indicated on
the proxy card.
The following table sets forth the directors and Board
nominees of the Company, together with certain information
concerning such persons including beneficial ownership of equity
securities of the Company as of April 26, 1993. There are no
family relationships between or among any directors or officers
of the Company other than Charles L. Epstein who is the son of
Mrs. Aileen Epstein Whitman.
<TABLE>
<CAPTION>
Adjustable
Rate
Convertible
Class A Subordinated
Common Stock Debentures
Amount and Amount and
Nature of Nature of
Name and Age of Beneficial Percent of Beneficial Percent of
Director/Nominee Ownership Class Ownership Class
_______________________ ____________ ___________ ____________ ___________
<S> <C> <C> <C> <C>
Jon P. Coates, A<F1> 58 188,286 B<F2> 7.88 $112,000 B<F2> 2.86
Aileen Epstein Whitman, C<F3> 61 19,197 D<F4> .81 --
Albert Soffa, C<F3> 72 3,591 E<F5> .15 --
Charles L. Epstein, C<F3> 38 1,012,160 F<F6> 36.02 --
Paul G. West, C<F3> 68 30,433 G<F7> 1.28 --
<F1>
A. Nominee for election to the Board by the Class B stockholder.
<F2>
B. Consists of:
1. Amounts listed under Note G to the table under subcaption "Principal Stockholders."
2. Does not include 9,762 Class A shares owned by Sheila R. Johnson, wife of Jon P. Coates and President of Century Bank
Cherry Creek, as to which Mr. Coates disclaims beneficial ownership.
<F3>
C. Nominee for election to the Board by Class A stockholders.
<F4>
D. Consists of:
1. 19,197 Class A shares owned directly by Aileen Epstein Whitman.
2. Does not include 338,835 Class A shares owned directly by CBIC or 256,193 Class A shares into which 256,193 Class B
shares owned by CBIC may, at its option, be converted, which shares are attributable to Mrs. Whitman's approximate 59.3%
limited partnership interest in CBIC.
<F5>
E. Does not include 20,178 Class A shares owned directly by CBIC or 15,256 Class A shares into which 15,256 Class B
shares owned by CBIC may, at its option, be converted, which shares are attributable to Mr. Soffa's approximate 3.5%
limited partnership interest in CBIC.
<F6>
F. Consists of amounts listed under Note E to the table under subcaption "Principal Stockholders."
<F7>
G. Consists of:
1. 19,633 Class A shares owned directly by Paul G. West.
2. 9,000 Class A shares owned by Paul G. West, as trustee of the Paul G. West Profit Sharing Trust.
3. Exercisable options on 1,800 of Class A shares pursuant to the Company's 1992 Stock Option Plan.
4. Does not include 5,250 Class A shares owned by Adair West, wife of Paul G. West, as to which Paul G. West disclaims
beneficial ownership.
</TABLE>
Class A Board Nominees
______________________
Mrs. Whitman has been a director of the Company since 1976.
She has been active in and has chaired numerous community
activities and has been active in management of certain family
business ventures. She is the widow of Gerson Epstein, founder
of the Company and former Chairman of the Board of Directors.
Mr. Soffa has been a director of the Company since 1971 and
until 1987 also served as Treasurer of the Company. He was the
co-founder and Chairman of the Board of Directors of Kulicke &
Soffa Industries, Inc., a publicly owned machinery manufacturer
headquartered in Fort Washington, Pennsylvania, from 1961 to
October 1984 and was Vice Chairman of the Board of Directors
until 1986. Mr. Soffa has since retired as Vice Chairman but
remains on the Board of Directors as a director. Mr. Soffa has
been a director of Checkpoint Systems, Inc., a publicly owned
manufacturer of security devices headquartered in Thorofare, New
Jersey, since January 1984.
Mr. Epstein was appointed to the Board of Directors on
December 10, 1992 to fill the vacancy created upon the
resignation of David J. Steinberg from the Board. Since 1986,
Mr. Epstein has been the president of GAC, Inc., a family owned
company which operates two tennis and racquet ball clubs in the
Cherry Hill, New Jersey area and has also been active in the
management of certain other family business ventures. He is the
son of Gerson Epstein, deceased, the founder of the Company and
former Chairman of the Board of Directors.
Mr. West has been a director and Assistant Secretary of the
Company from 1974 to December 10, 1992 and Secretary since
December 10, 1992. Mr. West has practiced law in Denver,
Colorado since 1951 and is of counsel to the law firm of West and
Weaver, PC. This firm was general counsel to Century Bank Cherry
Creek and has served as counsel to the Company from time to time.
Class B Board Nominee
_____________________
Mr. Coates has been a director of the Company since 1971.
He was Executive Vice President of the Company from 1971 to April
15, 1985 and has been President since April 15, 1985. He was
also President of Century Bank Cherry Creek from 1973 to April
15, 1985, and from April 1986 to March 1987 and is a director of
each of the subsidiary banks.
Executive Officers of the Company
__________________________________
The executive officers of the Company are Jon P. Coates,
President; Paul G. West, Secretary and George Mata, Vice
President-Finance and Treasurer. See "Class A Board Nominees"
and "Class B Board Nominee" for background information on Messrs.
Coates and West. Mr. Mata, age 48, has been employed by the
Company since 1976 and served as Vice President-Finance from
February 1982 to May 1988 and as Vice President-Finance and
Treasurer from May 1988. He is a certified public accountant and
was employed by Touche Ross & Co. from 1973 to 1976.
Executive, Audit and Compensation Committees
_____________________________________________
The Company maintains a Compensation Committee consisting of
Directors Jon P. Coates, Aileen Epstein Whitman and Albert Soffa.
The committee reviews and approves the recommendations of the
presidents of the various subsidiary banks and the
recommendations of the president pertaining to the salaries of
all Company employees whose salary is higher than $40,000 per
year. During 1992, the committee met informally and by telephone
and these matters were also considered by the full Board of
Directors.
The Company maintains an Audit Committee consisting of
Directors Jon P. Coates, Charles L. Epstein and Paul G. West.
The Audit committee reviews questions which might arise during
the course of the Company's audit and reviews the engagement of
Deloitte & Touche. During 1992, the committee met formally two
times and by telephone, and these matters were also considered by
the full Board of Directors. All members of the audit committee
attended the formal meetings.
The Company maintains an executive committee consisting of
Directors Jon P. Coates and Paul G. West. This committee reviews
all material matters pertaining to the operation of the Company
and the subsidiary banks. The committee meets at least once
between each meeting of the Board of Directors and informally by
telephone as often as necessary. During 1992, the committee met
formally two times and each meeting was attended by all members
of the committee and informally by telephone.
At the March 12, 1992 meeting of the Board of Directors of
the Company, directors Aileen Epstein Whitman and Albert Soffa
were appointed to the Stock Option Committee. This committee was
appointed to administer the Commercial Bancorporation of Colorado
1992 Stock Option Plan ("1992 Stock Option Plan").
Meetings of the Board of Directors
___________________________________
The small size of the Company's Board of Directors lends
itself to frequent and informal discussion of the Company matters
among its members. Four formal meetings of the Board were held
during the year ended December 31, 1992 and each was attended by
all of the Directors except in the case of Mr. Epstein who
attended one meeting. As noted above, Mr. Epstein became a
Director in December 1992. In addition to these meetings,
certain business was conducted by unanimous written consent of
the Board.
COMPENSATION OF DIRECTORS
During 1992, the nonsalaried directors were paid an annual
fee of $5,000 in quarterly installments in addition to $1,000 per
formal board meeting attended. Four formal meetings were held
and attended by the directors during 1992 except for Mr. Epstein
who attended one meeting. The Company also reimburses the
directors for the expenses incurred in attending board meetings.
The Company maintains an Executive Committee comprised of
Directors Coates and West. During 1992, the nonsalaried members
of the Executive Committee were paid an annual fee of $2,500 in
quarterly installments in addition to $500 per Executive
Committee meeting attended. Two Executive Committee meetings
were held during 1992. The Company also reimburses the directors
for expenses incurred in attending such meetings.
Non-employee members of the Company's Board of Directors are
eligible to receive options under the Company's 1992 Stock Option
Plan. During 1992, Paul G. West (a director and the Secretary of
the Company) and David J. Steinberg (a former director and the
former Secretary of the Company) were granted options to acquire
6,000 and 4,500 shares of the Company's Class A common stock,
respectively. Mr. West's options consisted of 3,000 options
granted on April 27, 1992 with an exercise price of $13.333 per
share and 3,000 options granted on December 10, 1992 with an
exercise price of $16.875 per share. Mr. Steinberg's options
consisted of 4,500 options granted on April 27, 1992 with an
exercise price of $13.333 per share. See Note 1 to the table
entitled "1992 Option Grants" for information concerning certain
of the terms relating to options granted under the 1992 Stock
Option Plan. Mr. Steinberg resigned as a director and as the
Secretary of the Company for personal reasons effective December
1, 1992. Following his resignation, the Stock Option Committee
accelerated the vesting schedule of Mr. Steinberg's options to
the date of his resignation. Mr. Steinberg fully exercised his
options on March 12, 1993.
During 1992, Mr. West and Mr. Steinberg, as officers of the
Company, acquired a total of 510 shares each under the Company's
Officer and Employee Discount Stock Purchase Plan ("Discount
Stock Purchase Plan"). The purchase price for these shares was
$4.81 per share, a 25% discount from the $6.42 per share market
price on the date of subscription.
COMPENSATION COMMITTEE REPORT
Under, the supervision of the Compensation Committee of the
Board of Directors, the Company has developed and implemented
compensation programs which seek to enhance the profitability of
the Company and, thus, stockholder value, by aligning closely the
financial interest of the Company's executives and executives of
its subsidiaries with those of its stockholders. The Company's
Compensation Committee has the responsibility for reviewing all
aspects of the compensation program for key executive officers of
the Company and its subsidiary banks. The Compensation Committee
is comprised of three directors, Aileen Epstein Whitman, Albert
Soffa and Jon P. Coates. The committee establishes, subject to
the Board of Directors' approval, the base salary of Mr. Coates
based upon the Committee's assessment of his past performance and
contribution to the performance of the Company. Mr. Coates is
not present at the time his compensation is approved by the Board
of Directors nor is he present when the Committee evaluates his
performance and contribution to the performance of the Company.
The Committee's primary objective in the area of
compensation is to provide a means of attracting, retaining and
motivating executives. These executives are entrusted with the
responsibility of providing leadership to the Company's employees
and providing excellent returns to the stockholders.
Each year the Compensation Committee conducts a review of
its various compensation programs. This review includes an
analysis of compensation paid by other banks in the state of
Colorado provided by the Mountain States Employers Council. This
review is performed by component of pay and in the aggregate to
ensure its competitiveness against other banks in Colorado. In
addition, the Compensation Committee reviews relevant financial
results including growth in earning and assets, the rate of
return on assets, levels of nonperforming assets and various
other measures of productivity and efficiency. Each component of
compensation is discussed below.
Base Salaries
_____________
Base salaries for executive officers are determined by
evaluating the responsibilities of the position and the
experience of the individual. Reference is made to the
compensation practices of other banks in Colorado by using the
Mountain States Employers Council salary survey. Annual salary
adjustments are determined by evaluating the performance of the
Company or subsidiary bank, if appropriate, and of each executive
officer and takes into account all of their responsibilities.
With respect to the base salary granted to Mr. Coates in
1992, the Compensation Committee took into account the Company's
success in meeting its financial and nonfinancial performance and
an overall assessment of Mr. Coates contribution to the Company's
outstanding performance. Mr. Coates earned a base salary of
$157,500 in 1992.
Annual Incentive Bonus
_______________________
The Company's executive officers and officers of the
subsidiary banks participate in the Company's Incentive Bonus
Plan. Performance objectives are established for the Company and
its subsidiary banks through the annual budgeting and planning
process. Each participant may earn a portion of incentive bonus
based upon a discretionary evaluation of the individuals
contribution to the goals during the year.
With respect to the bonus granted to Mr. Coates in 1992, the
Compensation Committee evaluated Mr. Coates' contribution to the
Company's success in meeting its financial and nonfinancial goals
and overall excellent performance of the Company. Mr. Coates was
granted a bonus of $46,002 in 1992.
Equity Based Compensation
__________________________
During 1992, the Company included stock options under the
1992 Stock Option Plan as an element of its total compensation
package. The Compensation Committee believes that stock options
provide a long term incentive for improved shareholder return as
well as the rewards it provides to the recipient. The 1992 Stock
Option Plan was approved by the stockholders in 1992. The stock
options are granted at market price and, therefore, the value of
the stock options is wholly dependent upon an increase in the
Company's stock price. It is not anticipated the option exercise
prices will be reset once they have been established.
The Company also maintains the Discount Stock Purchase Plan
whereby officers of the Company and its subsidiaries and
employees who have met certain service requirements are eligible
to participate. The discount stock purchase plan was approved by
the stockholders in 1985. Under the plan, participants may
purchase stock through payroll deductions at a price that is a
25% discount from the market price on the date of grant.
Based upon his individual performance and contribution to
the Company's outstanding performance in 1992, Mr. Coates
received options under the 1992 Stock Option Plan to purchase
5,250 shares of Class A common stock with an exercise price of
$13.333 and 5,250 shares of Class A common stock with an exercise
price of $16.875. In addition, Mr. Coates purchased 1,125 shares
of Class A common stock through the Company's Discount Stock
Purchase Plan at a price of $4.81 per share. The market price of
the Class A common stock on date of grant was $6.42.
Conclusion
___________
Through the programs described above, a portion of the
Company's executive compensation is linked to the Company's
performance, growth in stockholder value and each executives'
contribution to those results. The Compensation Committee will
continue to review annually the structure, goals and levels of
compensation to ensure that compensation incentives remain
consistent with stockholder interest and stockholder value.
Submitted by the Compensation Committee,
Aileen Epstein Whitman
Albert Soffa
Jon P. Coates
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Aileen Epstein Whitman, Albert Soffa and Jon P. Coates were
members of the Compensation Committee of the Board of Directors
during 1992. Jon P. Coates was and is also the President of the
Company.
COMPANY PERFORMANCE
The following graph reflects a comparison of the cumulative
total returns (change in stock price plus reinvested dividends)
to holders of the Company's Class A common stock from December
31, 1987 through December 31, 1992 with the NASDAQ Stock Market
Index and the NASDAQ Banks Index. The NASDAQ Stock Market Index
is a broad market equity index comprising all U. S. companies,
including the Company, which trade on the NASDAQ stock market.
The NASDAQ Banks Index is made up of all banking organizations
which trade on the NASDAQ stock market. The comparison in the
graph is required by the SEC and, therefore, is not intended to
forecast or be indicative of possible future performance of the
Company's Class A common stock.
EXECUTIVE COMPENSATION
Summary Compensation Tables
____________________________
The following tables set forth compensation data for the
President (chief executive officer of the Company). No other
executive officer of the Company was paid a salary and bonus in
excess of $100,000 during the year ended December 31, 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
______________________________________________ __________________________
Other
Name Annual All Other
and Compen- Stock Compen-
Principal sation Options sation
Position Year Salary ($) Bonus ($) ($) <F1> (#) ($)<F1>
___________________________ ____ __________ _________ ________ ________ __________
<S> <C> <C> <C> <C> <C> <C>
Jon P. Coates, President
and Director of
Company 1992 $157,500 $46,002 $1,807<F2> 10,500 $428,925<F3>
Director of all 1991 $147,500 $22,409 -- -- --
Subsidiary Banks 1990 $136,500 $17,000 -- -- --
<F1>
In order to facilitate the adoption of new SEC disclosure rules regarding executive compensation, the SEC does not
require that this column include information for years ended before December 31, 1992.
<F2>
Represents the discount on shares purchased through the Company's Discount Stock Purchase Plan, see "Compensation
Committee Report-Equity Based Compensation."
<F3>
Consists of (a) employer contributions to the Company's profit sharing plan of $6,018 and (b) $422,907 which represents
the maximum amount payable under the Company's Executive Severance Pay Plan in the event of a change in control of the
Company (as defined in the plan) and the occurrence of certain other specified events. See "Change in Control
Arrangements".
</TABLE>
1992 OPTION GRANTS
<TABLE>
<CAPTION>
Potential
Realizable Value At
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants <F1> For Option Term<F2>
________________________________________________________ ___________________
% of
Total
Number of Options Exercise Expira-
Options Granted Price tion
Name Granted in 1992 Per Share Date 5% 10%
_______________ ________ _______ _________ ________ _______ _______
<S> <C> <C> <C> <C> <C> <C>
Jon P. Coates 5,250 14.0 $13.333 4/27/97 $19,341 $42,735
5,250 15.9 16.875 12/10/97 $24,475 $54,085
<F1>
Options were granted under the Company's 1992 Stock Option Plan, Options under the Plan are awarded at fair market value
on the date of grant and vest in 20% increments annually beginning on date of grant provided that (a) the options will
fully vest upon occurrence of a "change in control" as defined in the plan and (b) the Stock Option Committee may,
subject to approval of the optionee, accelerate the vesting schedule.
<F2>
The dollar amounts in the table are net of the option exercise price and are the result of calculations at stock price
appreciation rates specified by the SEC. The amounts are not intended to forecast actual future appreciation rates of
the Company's Class A common stock price.
</TABLE>
1992 AGGREGATED OPTION EXERCISES AND
FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
Value of
Shares Number of Unexercised In-The-Money
Acquired Unexercised Options Options at
at December 31, 1992 December 31, 1992<F1>
_____________________________ _____________________________
On Value
Name Exercise (#) Realized ($) Unexercisable Exercisable Unexercisable Exercisable
_____________ ____________ ____________ _____________ ___________ _____________ ____________
<S> <C> <C> <C> <C> <C> <C>
Jon P. Coates -- -- 7,350 3,150 $19,426 $10,982
<F1>
Represents the difference between the closing sales price of the Company's Class A common stock on December 31, 1992
($18.00 per share) and the exercise price of the stock options.
</TABLE>
CHANGE IN CONTROL ARRANGEMENT
On November 17, 1988, the Board of Directors adopted the
1988 Executive Severance Pay Plan of Commercial Bancorporation of
Colorado (the "Plan"). The Plan provides certain officers of the
Company and its subsidiary banks with severance pay in the event
of termination of employment following a "Change in Control" of
the Company, as hereinafter defined. Plan participants are
selected and approved by the Board of Directors. Participants
must have at least two years of service with the Company or one
of its subsidiaries immediately preceding the effective date of a
Change in Control in order to receive payments under the Plan.
The Plan provides severance pay to participants who are
discharged from employment (other than for cause) in the first or
second year following a Change in Control in an amount equal to
six-month's salary for the first year of service to the Company
and one month's salary for each additional year. Payments are
reduced from the preceding amounts if the discharge from service
occurs in the third or fourth year following a Change of Control.
There are eleven participants in the Plan, one of which is Mr.
Coates. Change of Control means the acquisition of more than 50%
of the outstanding shares of Class A or Class B common stock of
the Company by any persons other than (i) a director or officer
of the Company or (ii) CBIC.
CERTAIN TRANSACTIONS
During 1992, the Company paid Mr. Coates $7,220 as
reimbursements for Company use of a condominium owned by Mr.
Coates. The amounts paid to Mr. Coates for use of his
condominium were at rates which are lower than the rates being
charged by owners of similar size condominiums located in the
same general area.
Directors of the Company and the subsidiary banks and
certain business organizations and individuals associated with
them have been customers of and have had normal banking
transactions with the banks. In the opinion of the Company, all
such transactions were made in the ordinary course of business,
were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the same time for
comparable transactions with other persons, and did not involve
more than normal risk of collectibility or present other
unfavorable features. The Company and banks intend to continue
these relationships. All such relationships have been and will
continue to be subject to examination by the appropriate
regulatory authorities as often as such agencies consider it
advisable to review accounting, proprietary and safety of
investments and loans and internal and external security.
COMPLIANCE WITH REPORTING REQUIREMENTS
The Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who are beneficial
owners of more than 10% of the Class A common stock or adjustable
rate convertible subordinated debentures to file reports of
ownership and changes in ownership in those equity securities
with the SEC and to furnish the Company with copies of such
reports. Based on a review of the copies it has received and
upon written representations from the officers and directors that
no Form 5's were required to be filed, the Company believes that
in 1992 all Section 16 (a) filing requirements applicable to its
officers and directors were met on a timely basis.
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent certified public accountants for
the fiscal year ended December 31, 1992, were, as in 1991,
Deloitte & Touche. Based upon a recommendation from the
Company's Audit Committee, the Board of Directors has appointed,
subject to ratification by stockholders at the Meeting, Deloitte
& Touche as independent certified public accountants of the
Company for the year 1993. If the selection of such auditors is
not ratified by the stockholders, the Board of Directors will
consider the selection of other auditors.
It is anticipated representatives of Deloitte and Touche
will be present at the Meeting with an opportunity to make a
statement, if desired, and will be available to respond to
questions.
ANNUAL REPORT
Copies of the Company's Annual Report to stockholders for
the year ended December 31, 1992, containing financial statements
of the Company is enclosed with this Notice and Proxy Statement.
OTHER MATTERS
In addition to the business described herein, there will be
remarks by the President of the Company and a general discussion
period during which stockholders will have an opportunity to ask
questions about the Company.
The Board of Directors knows of no other matters to be
brought before the Meeting. However, if any other matters are
properly brought before the Meeting, the persons named in the
Proxy enclosed herewith, or their substitutes, will vote on such
matters according to their best judgement.
SUBMISSION OF STOCKHOLDER PROPOSALS TO NEXT ANNUAL MEETING
If a stockholder desires to present a proposal to the 1994
Annual Meeting of Stockholders, and have that proposal included
in the Proxy Statement relating to such meeting, the proposal
must be received by the Company's management at the Company's
principal executive offices (3300 East First Avenue, Denver,
Colorado 80206) no later than February 1, 1994. It is
anticipated that such a meeting will be held in June 1994.
Management may omit any proposal under circumstances specified in
Rule 14a-8 under the Securities Exchange Act of 1934, as amended.
<PAGE>
II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Reference is made to Sections 721-726 of Article 7 of the
New York Business Corporation Law ("NYBCL") which provide
for indemnification of directors and officers of a
New York corporation under certain circumstances and
Sections 402 and 721 of the NYBCL which allow New York
corporations to provide indemnification to their
directors and officers under certain circumstances.
The following is an extract from the Certificate of
Incorporation, as amended, of the Registrant with respect
to the indemnification of directors and officers:
SEVENTH: No Director of the Corporation
shall be personally liable to the Corporation or
any of its Shareholders for damages for any breach
of duty in such capacity, except that this Article
SEVENTH shall not apply to the extent its effect is
limited by law. Any repeal or modification of this
Article SEVENTH of the Corporation's Certificate of
Incorporation shall not adversely affect any right
or protection of a Director of the Corporation
existing at the time of such repeal or
modification.
The following is an extract from Article VI of the
By-Laws of the Registrant with respect to the
indemnification of directors and officers:
Section 1. Right of Indemnification: Each
director and officer of the Corporation, whether or
not then in office, and any person whose testator
or intestate was such a director or officer, shall
be indemnified by the Corporation for the defense
of, or in connection with, civil or criminal
actions or proceedings, or appeals therein, in
accordance with and to the fullest extent permitted
by law.
Section 2. Other Rights of Indemnification: The
right of indemnification herein provided shall not
be deemed exclusive of any other rights to which
any such director, officer, or other person may now
or hereafter be otherwise entitled and specifically
without limiting the generality of the foregoing,
shall not be deemed exclusive of any rights,
pursuant to statute or otherwise, of any such
director, officer, or other person in any such
action or proceeding to have assessed or allowed in
his favor, against the Corporation or otherwise,
his costs and expenses incurred therein or in
connection therewith or any part thereof.
Registrant has provided directors' and officers'
liability insurance coverage for all directors and
officers of the Registrant and its subsidiaries through
Continental Casualty Company, a CNA affiliate, and
National Union Fire Insurance Company, an AIG affiliate,
for a one-year policy term ending August 16, 1994.
In addition, each KeyCorp director has entered into a
Director's Indemnity Agreement with KeyCorp which
provides for indemnification and advance payment of
defense costs. The form of such Agreement appears as
Appendix A to the KeyCorp Proxy Statement dated March 31,
1988, for the Special Meeting of Shareholders held on
April 28, 1988, filed pursuant to Section 14 of the
Securities Exchange Act of 1934.
Item 21. Exhibits and Financial Statement Schedules.
(a) The following are filed as exhibits to the
Registration Statement.
Page
2 Agreement dated the 11th day of September, 1993, as
Amended and Restated as of the 11th day of
September, 1993, by and between KeyCorp and
Commercial Bancorporation of Colorado, a bank
holding company, included as Appendix A to the
Proxy Statement-Prospectus.
3 (a) The registrant's Restated Certificate of
Incorporation, incorporated by reference to
registrant's current report on Form 8-K, dated
June 25, 1991.
3 (b) Certificate of Amendment to the registrant's
Restated Certificate of Incorporation, filed
with the Department of State of the State of
New York on April 27, 1992, incorporated by
reference to registrant's current Registration
Statement on Form S-4 Registration
Number 33-51676, filed September 4, 1992.
3 (c) Certificate of Amendment to the Registrant's
Restated Certificate of Incorporation, filed
with the New York Department of State on
April 26, 1993, incorporated by reference to
the registrant's current report on Form 8-K
dated May 19, 1993.
3 (d) The registrant's By-Laws, incorporated by
reference to registrant's current report on
Form 8-K, dated September 28, 1989.
5 Opinion of Hiscock & Barclay as to the legality of
the securities to be registered.
8 (a) Opinion of Baker & Hostetler as to certain
federal income tax matters.
(b) Opinion of Baker & Hostetler as to certain
federal income tax matters.
15 Letter of Ernst & Young re: Unaudited Interim
Financial Information.
23 (a) Consent of Ernst & Young.
23 (b) Consent of Deloitte & Touche.
23 (c) Consent of Hiscock & Barclay (included in
Exhibit 5).
23 (d) Consent of Baker & Hostetler (included in
Exhibit 8).
24 (a)(b) Powers of Attorney.
99 (a)(b) Stock Option Agreements dated as of
September 12, 1993, between KeyCorp and
Commercial Bancorporation of Colorado,
included as Appendix B to the Proxy
Statement-Prospectus.
(c) Shareholder Protection Rights Agreement,
dated October 1, 1993, by and between
KeyCorp and Key Trust Company as Rights
Agent, incorporated by reference to
Exhibit 3 to Schedule 13D filed on
October 12, 1993.
(d) Society Corporation Registration Statement
on Form S-4 incorporated by reference to
Registration No. 33-51717 filed December 28,
1993.
(e)(f) Form of Proxies for Commercial
Bancorporation of Colorado.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective
amendment to this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date
of the registration statement (or the
most recent post-effective amendment)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement; and
(iii) To include any material information
with respect to the plan of
distribution not previously
disclosed in the registration
statement or any material change to
such information in the registration
statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933,
each such post-effective amendment shall be
deemed to be a new registration statement
relating to the securities offered therein,
and the offering of such securities at that
time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities
being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the
Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to
Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be
deemed to be a new registration statement relating
to the securities offered therein, and the offering
of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as
follows: that prior to any public offering of the
securities registered hereunder through use of a
prospectus which is a part of this registration
statement, by any person or party who is deemed to
be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information
called for by the applicable registration form with
respect to reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other Items of the applicable form.
(d) The registrant undertakes that every prospectus
(i) that is filed pursuant to the paragraph (c)
immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the
Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a
part of an amendment to the registration statement
and will not be used until such amendment is
effective, and that, for purposes of determining
any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed
to be a new registration statement relating to the
securities offered therein, and the offering of
such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted
to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and
Exchange Commission such indemnification is against
public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a
claim for indemnification against such liabilities
(other than the payment by the Registrant of
expenses incurred or paid by a director, officer,
or controlling person of the registrant in the
successful defense of any action, suit, or
proceeding) is asserted by such director, officer,
or controlling person in connection with the
securities being registered, the registrant will,
unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question
whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to
respond to requests for information that is
incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of this Form,
within one business day of receipt of such request,
and to send the incorporated documents by first
class mail or other equally prompt means. This
includes information contained in documents filed
subsequent to the effective date of the
registration statement through the date of
responding to the request.
(g) The undersigned registrant hereby undertakes to
supply by means of a post-effective amendment all
information concerning a transaction, and the
company being acquired involved therein, that was
not the subject of and included in the registration
statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the registrant has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Albany, State of New York, on
January 17, 1994.
KEYCORP
By: * Victor J. Riley, Jr.
___________________________
Victor J. Riley, Jr.
Chairman, President, and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the following
persons in the capacities indicated on January 17, 1994.
SIGNATURE TITLE
*Victor J. Riley, Jr. Chairman, President,
____________________________
Victor J. Riley, Jr. Chief Executive Officer,
and Director
*William H. Dougherty Group Executive Vice
____________________________
William H. Dougherty President and Chief
Financial Officer
*William J. Agee Director
____________________________
William J. Agee
*Frank A. Augsbury Jr. Director
____________________________
Frank A. Augsbury Jr.
*H. Douglas Barclay Director
____________________________
H. Douglas Barclay
*Robert H. Bischoff Director
____________________________
Robert H. Bischoff
*Curtis M. Carlson Director
____________________________
Curtis M. Carlson
*Kenneth M. Curtis Director
____________________________
Kenneth M. Curtis
*John C. Dimmer Director
____________________________
John C. Dimmer
*Lucie J. Fjeldstad Director
____________________________
Lucie J. Fjeldstad
*Henry S. Hemingway Director
____________________________
Henry S. Hemingway
*Charles R. Hogan Director
____________________________
Charles R. Hogan
*Raymond E. LaVoie Jr. Director
____________________________
Raymond E. LaVoie Jr.
*Robert A. Schumacher Director
____________________________
Robert A. Schumacher
*Ronald B. Stafford Director
____________________________
Ronald B. Stafford
*Peter G. TenEyck II Director
____________________________
Peter G. TenEyck II
*Nancy Veeder Director
____________________________
Nancy Veeder
By: /s/ David J. DeLuca
________________________
Attorney-in-Fact
Exhibit 5
The following is a true and correct copy of
a letter to KeyCorp from Hiscock & Barclay.
January 17, 1994
KeyCorp
One KeyCorp Plaza
30 South Pearl Street
Post Office Box 88
Albany, New York 12201-0088
Attention: Victor J. Riley, Jr.
Chairman of the Board, President, and
Chief Executive Officer
Gentlemen:
We have represented KeyCorp in connection with the issue by
KeyCorp of up to 3,000,000 shares of its Common Stock at the Effective
Time of the Amended and Restated Agreement and Plan of Acquisition,
Reorganization and Merger, dated as of the 11th day of September, 1993,
(the "Plan"), by and between KeyCorp and Commercial Bancorporation of
Colorado ("CBC"). We are submitting this opinion at your request for
use as an Exhibit to KeyCorp's Registration Statement on Form S-4 under
the Securities Act of 1933 (the "Act"), which is being filed with the
Securities and Exchange Commission on or about January ___, 1994, (the
"Registration Statement"). You recognize that H. Douglas Barclay, who
serves as a Director of KeyCorp is a member of our firm.
In preparing this opinion, we have examined such corporate
records, certificates, and other documents, and such questions of law as
we have considered necessary or appropriate in the circumstances. As to
various matters of fact, we have relied on certificates of governmental
authorities and on certificates or representations of officers of
KeyCorp or its subsidiaries. We have assumed without investigation that
the shares of capital stock of CBC outstanding on the date of the
effectiveness of the Merger under the Plan are validly authorized,
validly, issued, fully paid, and nonassessable.
Based on the foregoing, it is our opinion that, under current
interpretations of the law, when the pertinent provisions of the
Securities Act of 1933 and state securities laws have been complied
with, the issuance of up to 3,000,000 shares of KeyCorp Common Stock at
the Effective Time of the Plan has been duly authorized, and when those
securities are issued under the circumstances contemplated by the Plan
and the Registration Statement, such Common Stock of KeyCorp will be
validly issued, fully paid, and non-assessable (except that if at some
future time the Common Stock of KeyCorp is not regularly quoted on an
over-the-counter market or listed on a national securities exchange, the
ten largest shareholders would be liable under certain conditions for
debts, wages, or salaries due and not paid by KeyCorp to any employee,
other than contractors, for services performed by them for KeyCorp).
The foregoing opinion is limited to the federal laws of the
United States and the laws of the State of New York, and we are
expressing no opinion as to the effect of the laws of any other
jurisdiction.
We consent to the use of this opinion as an Exhibit to the
Registration Statement and the reference to us under the heading "Legal
Matters" in the Prospectus. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required
under Section 7 of the Act or the Rules and Regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
HISCOCK & BARCLAY
Exhibit 8(a)
The following is a true and correct copy
of a letter to the Board of Directors of
KeyCorp and Board of Directors of
Commercial Bancorporation of Colorado
from Baker & Hostetler
BAKER & HOSTETLER LETTERHEAD
January 18, 1994
Board of Directors
KeyCorp
One KeyCorp Plaza
Albany, New York 12207
Board of Directors
Commercial Bancorporation of Colorado
3300 East First Avenue
Denver, Colorado 86286
Members of the Boards:
This is in response to your request for our tax opinion
on the proposed merger (the "Merger") of Commercial
Bancorporation of Colorado ("CBC") into Key Bancshares of
Colorado, Inc. ("KBC"), a wholly-owned subsidiary of KeyCorp
("KeyCorp"). The conclusions presented herein are based on the
facts and representations in the Amended and Restated Agreement
and Plan of Acquisition, Reorganization and Merger by and between
KeyCorp and CBC dated as of September 11, 1993 (the "Agreement"),
the Proxy Statement-Prospectus included as a part of the
Registration Statement on Form S-4 filed by KeyCorp with the
Securities and Exchange Commission ("SEC") on January 18, 1994,
the representations of facts as set forth in letters dated
January 10 and 12, 1994 from KeyCorp and CBC, and the applicable
tax law as it exists today. We have assumed with your consent
that the representations in such letters are true and there will
be no change in any of the facts material to this opinion between
the date of this opinion and the Merger Effective Date.
FACTS
KeyCorp is a corporation duly incorporated and existing
in good standing under the laws of the State of New York and is a
multi-regional financial services holding company registered
under the Bank Holding Company Act of 1956, as amended.
The authorized capital stock of KeyCorp consists of
(i) 350,000,000 shares of common stock, par value $5.00 per share
("KeyCorp Common Stock"), of which 101,211,313 shares were
outstanding as of June 30, 1993 and (ii) 10,000,000 shares of
preferred stock, par value $5.00 per share, of which 479,394
shares of Adjustable Rate Cumulative Preferred Stock Series A
(redeemed August 2, 1993) and 1,280,000 shares of Cumulative
Preferred Stock Series B were outstanding as of June 30, 1993.
The common stock of KeyCorp is listed on the New York Stock
Exchange ("NYSE"). KeyCorp and its subsidiaries file a
consolidated federal income tax return.
On October 1, 1993 KeyCorp entered into a Shareholders
Protection Rights Agreement with Key Trust Company, as rights
agent (the "KeyCorp Rights Agreement") pursuant to which holders
of KeyCorp Common Stock received a dividend of rights ("KeyCorp
Rights") to purchase participating preferred stock. Until the
occurrence of certain events ("triggering events"), KeyCorp
Rights are evidenced by KeyCorp Common Stock certificates, are
transferable with and only with KeyCorp Common Stock, and may be
redeemed, at the option of KeyCorp, for $.01 per KeyCorp Right.
The KeyCorp Rights are not exercisable except upon the occurrence
of a triggering event.
KeyCorp through its eleven banking subsidiaries in New
York, Alaska, Colorado, Idaho, Maine, Oregon, Utah, Washington
and Wyoming provides banking services to individual customers,
small and medium sized businesses and municipalities. In
addition, KeyCorp offers a variety of personal and commercial
financial services through other subsidiaries, including mortgage
servicing, trust, credit life reinsurance, equipment leasing,
securities brokerage, annuity sales, asset management, and data
processing.
KBC, a wholly-owned subsidiary of KeyCorp, is a
corporation organized under the laws of the State of Colorado for
purposes of this transaction.
CBC is a corporation duly incorporated and existing in
good standing under the laws of the State of Colorado and is a
bank holding company duly registered under the Bank Holding
Company Act of 1956, as amended.
As of September 30, 1993, the authorized capital stock
of CBC consisted of (i) 5,600,000 shares of voting common stock,
par value $1.00 per share, of which 2,642,980 shares of Class A
Common Stock were issued and 2,413,502 shares were outstanding
and 431,950 shares of Class B Common Stock were issued and
outstanding, and (ii) 180,000 shares of preferred stock, par
value of $1.00 per share, of which no shares were outstanding.
As of September 30, 1993, CBC was obligated under certain
circumstances to issue up to (i) 290,432 additional shares of
Class A Common Stock pursuant to the terms of its Adjustable Rate
Convertible Subordinated Debentures Due 2004 and (ii) 62,700
additional shares of Class A Common Stock pursuant to its
Employee Stock Option Plan. On September 12, 1993, in connection
with the Agreement, CBC also granted to KeyCorp options to
purchase newly issued shares of Class A Common Stock and Class B
Common Stock, up to 19.9% of the shares outstanding, upon the
occurrence of certain events. CBC has four shareholders who
directly or beneficially own 5 percent or more of its stock. The
CBC Class A Common Stock is traded over the counter on the NASDAQ
National Market System. CBC and its subsidiaries file a
consolidated federal income tax return.
CBC is a multi-bank holding company engaged in the
commercial banking business through five wholly-owned
subsidiaries with eleven banking offices in Colorado. CBC offers
a variety of deposit services and concentrates on secured lending
to small and medium sized businesses.
THE TRANSACTION
KeyCorp and CBC desire to combine their respective
businesses through a tax-free reorganization (the "Transaction")
so that the respective depositors and borrowers can obtain the
benefit of a more efficient and larger enterprise with an
expanded market area. Among the factors considered by the Boards
of Directors of KeyCorp and CBC were the historical operating
results, current financial condition, business and management and
future financial and other prospects of the companies,
respectively and combined, and the advice of their respective
financial advisors as to the fairness to KeyCorp and CBC
stockholders, from a financial point of view, of the
consideration to be paid by KeyCorp and received by the
shareholders of CBC in the Merger. Also considered were the
operating philosophies, relative size, competitive position and
geographic market areas of KeyCorp and CBC.
The Agreement provides for the acquisition of CBC by
KeyCorp through the merger of CBC with and into KBC, with KBC
being the surviving corporation (the "Merger"). As a result of
the Merger, the separate existence of CBC shall cease, and all of
its assets, properties, obligations and liabilities shall become
the assets, properties, obligations and liabilities of KBC as the
surviving corporation in the Merger. The affirmative vote of the
holders of at least 66 2/3% of the outstanding CBC Class A and
Class B Common Stock, voting separately by class, is required for
approval of the Agreement.
At the Merger Effective Date, by virtue of the Merger
automatically and without any action on the part of the holders
thereof, each share of CBC Class A Common Stock and Class B
Common Stock issued and outstanding at the Merger Effective Date
shall become and be converted into .7460 of a share of KeyCorp
Common Stock, which is voting stock, and the associated KeyCorp
Right subject to the following exceptions:
(i) shares which have not been voted in favor of the
approval of the Agreement with respect to which
appraisal rights have been perfected in accordance with
Section 7-4-124 of the Colorado Corporation Code (the
"Dissenters' Shares"),
(ii) shares held directly or indirectly by KeyCorp, other
than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted, and
(iii) shares held as treasury stock of CBC.
The holders of certificates representing shares of CBC
Common Stock, including holders of Dissenting Shares, shall cease
to have any rights as stockholders of CBC.
No fractional shares of KeyCorp Common Stock will be
issued in exchange for any shares of CBC Common Stock. In lieu
of such fractional share interest, any holder of CBC Common Stock
who would otherwise be entitled to a fractional share of KeyCorp
Common Stock will, upon surrender of his, her or its certificate
or certificates representing CBC Common Stock, be paid the
applicable cash value of such fractional share interest, which
shall be equal to the product of the fraction multiplied by the
average closing price of KeyCorp Common Stock reported on the
NYSE Composite Transactions reporting system for the twenty NYSE
trading days ending on the fifth NYSE trading day prior to the
Merger Effective Date.
Prior to the Merger Effective Date, CBC will deposit
funds with Colorado National Bank, as escrow agent, (the "Escrow
Fund") out of which all amounts due holders of Dissenting Shares
and all expenses in connection with such Dissenting Shares will
be paid.
As soon after the Merger Effective Date as
administratively feasible, KeyCorp intends to cause KBC to merge
into KeyCorp and then to cause the bank subsidiaries of KBC
(consisting of those subsidiaries which were formerly the bank
subsidiaries of CBC) and Key Bank of Colorado, wholly-owned
subsidiary of KeyCorp, to be consolidated into Century Bank
Sterling, one of the bank subsidiaries of CBC.
On October 1, 1993, KeyCorp entered into a merger
agreement with Society Corporation, a bank holding company
incorporated under the laws of Ohio ("Society"), pursuant to
which KeyCorp will merge with and into Society with Society as
the surviving corporation (the "KeyCorp/Society Merger") under
the name Key Bancshares Inc. ("Key Bancs"). Key Bancs is
expected to become the 10th largest bank holding company in the
United States ranked by assets as a result of KeyCorp/Society
Merger. Holders of KeyCorp Common Stock (other than holders who
perfect dissenters' rights) will receive 1.205 shares of Key
Bancs voting common stock (the "Key Bancs Common Stock") (except
for cash in lieu of fractional shares) and associated Key Bancs
Rights and holders of KeyCorp Preferred Stock will receive shares
of Key Bancs preferred stock in the KeyCorp/Society Merger. The
KeyCorp/Society Merger is subject to various regulatory and
shareholder approvals and will occur after the Transaction.
Thus, holders of CBC Common Stock will receive shares of KeyCorp
Common Stock in the Transaction and if they hold such shares at
the effective time of the KeyCorp/Society Merger will receive
shares of Key Bancs Common Stock (or cash in lieu of fractional
shares) in the KeyCorp/Society Merger. Since the CBC/KeyCorp
Merger was not consummated prior to the record date for the
KeyCorp shareholder vote on the KeyCorp/Society Merger, CBC
shareholders will not have an opportunity to vote on the
KeyCorp/Society Merger or to exercise dissenters' rights with
respect to that transaction.
REPRESENTATIONS
In order to determine the consequences of the
Transaction for federal income tax purposes, you have directed us
to rely on the following representations:
(1) The fair market value of the KeyCorp Common Stock
received by each CBC shareholder will be approximately
equal to the fair market value of the CBC Common Stock
surrendered in the Transaction.
(2) There is no plan or intention by the shareholders of
CBC who own 5 percent or more of the CBC Common Stock,
and to the best of the knowledge of the management of
CBC, there is no plan or intention on the part of the
remaining shareholders of CBC to sell, exchange or
otherwise dispose of a number of shares of KeyCorp
Common Stock received in the Transaction (or such
shares of Key Bancs Common Stock exchanged for such
shares of KeyCorp Common Stock pursuant to the
KeyCorp/Society Merger) that would reduce the CBC
shareholders' ownership of KeyCorp Common Stock or Key
Bancs Common Stock to a number of shares having a
value, as of the Merger Effective Date, of less than
50 percent of the value of all of the formerly
outstanding CBC Common Stock as of the same date. For
purposes of this representation, shares of CBC Common
Stock surrendered by dissenters or exchanged for cash
in lieu of fractional shares of KeyCorp Common Stock
are treated as outstanding CBC Common Stock at the
Merger Effective Date. Moreover, shares of CBC Common
Stock and KeyCorp Common Stock or Key Bancs Common
Stock held by CBC shareholders and otherwise sold,
redeemed, or disposed of prior or subsequent to the
Transaction are considered in making this
representation.
(3) KBC (and pursuant to the merger of KBC into KeyCorp,
KeyCorp) will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent
of the fair market value of the gross assets held by
CBC immediately prior to the Transaction. For purposes
of this representation, amounts transferred by CBC to
the Escrow Fund to pay holders of Dissenting Shares,
amounts used by CBC to pay its reorganization expenses,
and all redemptions and distributions (except for
regular, normal dividends) made by CBC immediately
preceding the Transaction will be included as assets of
CBC held immediately prior to the Transaction.
(4) Prior to the Transaction, KeyCorp will be in control of
KBC within the meaning of Section 368(c) of the
Internal Revenue Code of 1986, as amended (the "Code").
(5) Following the Transaction, KBC will not issue
additional shares of its stock that would result in
KeyCorp losing control of KBC within the meaning of
Section 368(c) of the Code.
(6) KeyCorp and KBC have no plan or intention to reacquire
any of KeyCorp Common Stock issued in the Transaction.
(7) KeyCorp or Key Bancs has no plan or intention to sell
or otherwise dispose of the stock of KBC, and KeyCorp,
Key Bancs and KBC have no plan or intention to sell or
otherwise dispose of any of the assets of CBC acquired
in the transaction, except for the merger of KBC into
KeyCorp and dispositions made in the ordinary course of
business or transfers described in Section 368(a)(2)(C)
of the Code.
(8) Pursuant to the Transaction, the KeyCorp Common Stock
will be distributed to the shareholders of CBC.
(9) The liabilities of CBC assumed by KBC (and pursuant to
the merger of KBC and KeyCorp, KeyCorp) and the
liabilities to which the transferred assets of CBC are
subject were incurred by CBC in the ordinary course of
its business.
(10) Following the merger of CBC into KBC, KBC, (and after
the merger of KBC into KeyCorp, KeyCorp) will continue
the historic business of CBC or use a significant
portion of CBC's business assets in a business.
(11) KeyCorp, KBC, CBC and the shareholders of CBC will pay
their respective expenses, if any, incurred in
connection with the Transaction.
(12) There is no intercorporate indebtedness existing
between KeyCorp and CBC or between KBC and CBC that was
issued, acquired, or will be settled at a discount.
(13) No two parties to the Transaction are "investment
companies" as defined in Sections 368(a)(2)(F)(iii) and
(iv) of the Code.
(14) CBC is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(15) The fair market value of the assets of CBC transferred
to KBC (and pursuant to the merger of KBC into KeyCorp,
KeyCorp) will equal or exceed the sum of the
liabilities assumed by KBC (and pursuant to the merger
of KBC into KeyCorp, KeyCorp), plus the amount of
liabilities, if any, to which the transferred assets
are subject.
(16) Neither KeyCorp nor KBC owns, directly or indirectly,
nor has either owned during the past five years,
directly or indirectly, any stock of CBC.
(17) No stock of KBC will be issued in the Transaction.
(18) The payment of cash in lieu of fractional shares of
KeyCorp Common Stock is solely for the purpose of
avoiding the expense and inconvenience to KeyCorp of
issuing fractional shares and does not represent
separately bargained-for consideration. The total cash
consideration that will be paid in the Transaction to
shareholders of CBC instead of issuing fractional
shares of KeyCorp Common Stock will not exceed 1
percent of the total consideration that will be issued
in the Transaction to the shareholders of CBC in
exchange for their shares of CBC Common Stock. The
fractional share interests of each shareholder of CBC
will be aggregated, and no shareholder of CBC will
receive cash in an amount equal to or greater than the
value of one full share of KeyCorp Common Stock.
(19) None of the compensation to be received by any
shareholder-employees of CBC will be separate
consideration for, or allocable to, any of their shares
of CBC Common Stock; none of the shares of KeyCorp
Common Stock received by any shareholder-employees will
be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any
shareholder-employees will be for services actually
rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar
services.
(20) Any shareholders of CBC who do not vote in favor of the
Transaction and perfect their appraisal rights under
applicable law shall receive cash only from the Escrow
Fund established by CBC prior to the Transaction in
exchange for the surrender of their shares of CBC
Common Stock.
(21) The merger of CBC into KBC will qualify as a statutory
merger under the laws of Colorado. Additionally, if
CBC had merged into KeyCorp, it would have met the
general requirements of a merger under applicable law.
(22) The KeyCorp Rights Agreement was adopted for the
principal purpose of providing a mechanism by which
KeyCorp can provide shareholders rights to purchase
stock at substantially less than fair market value as
a means of responding to unsolicited offers to acquire
KeyCorp and no "triggering event" has occurred with
respect thereto.
(23) The KeyCorp/Society Merger will qualify as a
reorganization under Section 368(a)(1)(A) of the Code.
APPLICABLE LAW
Section 368(a)(1)(A) of the Code provides that the term
"reorganization" means a statutory merger or consolidation.
Under Section 1.368-2(b)(1) of the Treasury Regulations
("Regulations"), in order to qualify as a reorganization under
Section 368(a)(1)(A) of the Code, the transaction must be a
merger or consolidation effected pursuant to the corporation laws
of the United States or a State or Territory or the District of
Columbia. It has been represented that the Merger will qualify
as a statutory merger under the laws of Colorado. Accordingly,
the Merger should qualify as a reorganization within the meaning
of Section 368(a)(1)(A) of the Code.
Section 368(a)(2)(D) of the Code provides that the
acquisition by one corporation, in exchange for stock of a
corporation (referred to as the "controlling corporation") which
is in control of the acquiring corporation, of substantially all
of the properties of another corporation shall not disqualify a
transaction under Section 368(a)(1)(A) if (i) no stock of the
acquiring corporation is used in the transaction, and (ii) in the
case of a transaction under Section 368(a)(1)(A), such
transaction would have qualified under Section 368(a)(1)(A) had
the merger been into the controlling corporation.
Section 368(c) of the Code provides that the term
"control" means the ownership of stock possessing at least 80
percent of the total combined voting power of all classes of
stock entitled to vote and at least 80 percent of the total
number of shares of all other classes of stock of the
corporation.
At the time of the Transaction, KeyCorp will directly
own 100% of the issued and outstanding stock of KBC; therefore,
KeyCorp will be in control of KBC within the meaning of Section
368(c) of the Code. Rev. Proc. 77-37, 1977-2 C.B. 568, provides
that the "substantially all" requirement of Sections 368(a)(2)(D)
and 368(a)(1)(C) is satisfied if there is a transfer of assets
representing at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of
the gross assets held by the corporation immediately prior to the
transfer. All payments to dissenters and all redemptions and
distributions (except for regular, normal distributions) made by
the corporation immediately preceding the transfer and which are
part of the plan of reorganization will be considered as assets
held by the corporation immediately prior to the transfer. It
has been represented that KBC will acquire at least 90 percent of
the fair market value of the net assets and at least 70 percent
of the fair market value of the gross assets held by CBC
immediately prior to the Merger. No stock of KBC will be issued
in the Merger.
It has been represented that the Merger will qualify as
a statutory merger under the laws of Colorado and that, if CBC
had merged into KeyCorp, it would have met the general
requirements of a merger under applicable law.
Section 1.368-2(b)(2) of the Regulations, in discussing
the requirement of Section 368(a)(2)(D)(ii) of the Code that the
merger of the target corporation into the acquiring corporation
would have qualified as a statutory merger under Section
368(a)(1)(A) of the Code had the merger been into the controlling
corporation, states:
"The foregoing test of whether the transaction would
have qualified under Section 368(a)(1)(A) if the merger
had been into the controlling corporation means that
the general requirements of a reorganization under
Section 368(a)(1)(A) (such as a business purpose,
continuity of business enterprise, and continuity of
interest) must be met in addition to the special
requirements of Section 368(a)(2)(D). Under this test,
it is not relevant whether the merger into the
controlling corporation could have been effected
pursuant to State or Federal corporation law."
Rev. Rul. 74-297, 1974-1 C.B. 84, held that the merger
of an unrelated domestic corporation into the wholly-owned
domestic subsidiary of a foreign corporation through an exchange
of the parent corporation's stock, which met the business purpose
and continuity requirements of Section 368(a)(1)(A) of the Code,
qualified as a reorganization by reason of the application of
Section 368(a)(2)(D) (subject to meeting certain requirements
under Section 367 that are not relevant to this discussion).
Although not citing Section 1.368-2(b)(2) of the Regulations,
Rev. Rul. 74-297 rested its holding on a rationale that is almost
word-for-word identical with that portion of the regulations
quoted above. Based upon the representation that CBC could merge
into KeyCorp if the Agreement had provided, the requirements of
Section 368(a)(2)(D)(ii) should be met.
Because KBC will be merged into KeyCorp as soon after
the Merger Effective Date as administratively feasible, it is
likely that the Transaction will be considered an acquisition by
KeyCorp of substantially all of the assets, properties,
liabilities and obligations of CBC in exchange for KeyCorp Common
Stock. In Rev. Rul. 72-405, 1972-2 C.B. 217, the Internal
Revenue Service, citing Rev. Rul. 67-274, 1967-2 C.B. 141, held
that where a target corporation was merged into a subsidiary of a
parent corporation in exchange for the parent corporation stock
and as part of the overall plan the subsidiary was immediately
liquidated into parent corporation, the merger of target into
subsidiary followed by the liquidation of the subsidiary into the
parent corporation would not constitute a reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code, but would be considered an acquisition by parent
corporation of the assets of target corporation in a
reorganization described in Section 368(a)(1)(C) of the Code.
Section 368(a)(1)(C) of the Code provides the
acquisition by one corporation, in exchange solely for all or
part of its voting stock, of substantially all of the properties
of another corporation constitutes a "reorganization" and in
determining whether the exchange is solely for stock, the
assumption by the acquiring corporation of a liability of the
other, or the fact that property acquired is subject to a
liability, shall be disregarded. Section 368(a)(2)(B) of the
Code provides that if an acquisition of substantially all the
assets would qualify under Section 368(a)(1)(C) of the Code but
for the fact that the acquiring corporation exchanges money or
other property in addition to voting stock and the acquiring
corporation acquires, solely for voting stock, property having a
fair market valve which is at least 80% of the fair market value
of all the property of the other corporation, then such
acquisition shall be treated as qualifying as a "reorganization"
under Section 368(a)(1)(C) of the Code. For this purpose,
liabilities assumed by the acquiring corporation or to which
property acquired is subject are treated as money paid for the
property.
As discussed above, it has been represented that KBC
will acquire at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of
the gross assets held by CBC immediately prior to the
Transaction. Further, KeyCorp will acquire 100% of the fair
market value of the net and gross assets of KBC in the merger of
KBC into KeyCorp. Therefore, KeyCorp will acquire substantially
all the assets of CBC within the meaning of Rev. Proc. 77-37
(supra) and Section 368(a)(1)(C) of the Code.
Pursuant to the Transaction, solely KeyCorp Common
Stock, which is voting stock, and associated KeyCorp Rights will
be exchanged for the assets of CBC, except that cash will be
issued in lieu of fractional shares of KeyCorp Common Stock. In
Rev. Rul. 90-11, 1990-1 C.B. 10, the Internal Revenue Service
held that rights similar to the associated KeyCorp Rights do not
constitute "property," at least until a "triggering event"
occurs. It has been represented that the payment of cash in lieu
of fractional shares of KeyCorp Common Stock is solely for the
purpose of avoiding the expense and inconvenience to KeyCorp of
issuing fractional shares and does not represent separately
bargained for consideration. In Rev. Rul. 66-365, 1966-2
C.B. 116, the Internal Revenue Service held that the receipt of
cash in lieu of fractional shares under such circumstances will
not violate the "solely for voting stock" requirement of Section
368(a)(1)(C) of the Code.
Payments of cash to shareholders of CBC who perfect
dissenters rights will not violate the "solely for voting stock"
requirement because such payments will be made from an escrow
fund established and funded by CBC prior to the Transaction. In
Rev. Rul. 68-285, 1968-1 C.B. 147, the Internal Revenue Service
held that because dissenting shareholders cease to have rights as
shareholders and receive payments from an escrow fund established
by the target corporation prior to the Transaction, the "solely
for voting stock" requirement is not violated.
In addition to the definitional requirements set forth
in the statute, in order for a transaction to be a tax-free
reorganization, certain requirements set forth under Section
1.368-1(b) of the Regulations must be satisfied. The Regulations
provide that the purpose of the reorganization provisions of the
Code is to except from the general rule of taxability certain
specifically described exchanges incident to such readjustments
of corporate structures made in one of the particular ways
specified in the Code, as are required by business exigencies and
which effect only a readjustment of continuing interest in
property under the modified corporate forms. Requisite to a
reorganization under the Code are a continuity of the business
enterprise under the modified corporate form and a continuity of
interest therein on the part of those persons who, directly or
indirectly, were the owners of the enterprise prior to the
reorganization.
To be treated as a reorganization, the transaction must
be planned and carried out for a genuine business purpose.
KeyCorp believes the Transaction will permit it to expand its
business operations in Colorado while benefiting from the
addition of CBC's personnel, deposit-taking and loan-origination
market shares and loan portfolio. KeyCorp and CBC believe that
they will be in an enhanced competitive position with respect to
other financial institutions in Colorado after the Transaction
and that economies of scale are likely to be achieved as a result
of the Transaction. CBC believes the Transaction will offer
enhanced opportunities for CBC to meet the needs of its banking
customers and other members of the communities served by CBC.
CBC also believes the Transaction will afford the shareholders of
CBC the benefit of KeyCorp's stronger relative capital position
and a more liquid market for KeyCorp Common Stock. This should
satisfy the genuine business purpose requirement for the
Transaction.
Section 1.368-1(d) of the Regulations provides that
continuity of business enterprise requires that the acquiring
corporation either (i) continue the acquired corporation's
historic business or (ii) use a significant portion of the
acquired corporation's historic business assets in a business.
It has been represented that after the Transaction, KBC (and
after the merger of KBC into KeyCorp, KeyCorp) will continue the
historic business of CBC or use a significant portion of such
historic business assets in its business. Accordingly, the
Transaction should meet the continuity of business enterprise
requirement.
The consolidation of the various subsidiary banks of
CBC and Key Bank of Colorado into Century Bank of Sterling, an
existing subsidiary bank of CBC, will not adversely affect the
continuity of business enterprise requirement.
Under Section 1.368-1(b) of the Regulations, the
continuity of interest doctrine requires that in a reorganization
there must be a continuing interest through stock ownership on
the part of those persons who, directly or indirectly, were the
owners of the stock of the acquired corporation prior to the
reorganization. Rev. Proc. 77-37 (supra) provides that the
continuity of interest requirement of Section 1.368-1(b) of the
Regulations is satisfied if there is continuing interest through
the stock ownership in the acquiring or transferee corporation on
the part of the former shareholders of the acquired or transferor
corporation which is equal in value, as of the effective date of
the reorganization, to at least 50 percent of the value of all of
the formerly outstanding stock of the acquired or transferor
corporation as of the same date.
It is not necessary that each shareholder of the
acquired or transferor corporation receive in the exchange stock
of the acquiring or transferee corporation, or a corporation in
"control" thereof, which is equal in value to at least 50 percent
of the value of his former stock interest in the acquired or
transferor corporation, so long as one or more shareholders of
the acquired or transferor corporation have a continuing interest
through stock ownership in the acquiring or transferee
corporation (or a corporation in "control" thereof) which is, in
the aggregate, equal in value to at least 50 percent of the value
of all of the formerly outstanding stock of the acquired or
transferor corporation. Sales, redemptions, and other
dispositions of stock occurring prior or, if planned or intended
by the shareholder at the time of the Transaction, subsequent to
the exchange will be considered in determining whether there is a
50 percent continuing interest through stock ownership as of the
effective date of the reorganization.
It has been represented that there is no plan or
intention by the shareholders of CBC who own 5 percent or more of
CBC Common Stock and, to the best of the knowledge of the
management CBC, there is no plan or intention on the part of
remaining shareholders of CBC Common Stock to sell, exchange, or
otherwise dispose of a number of shares of KeyCorp or Key Bancs
Common Stock that will reduce CBC shareholders' ownership of such
stock to a number of shares having, as of the date of the
Transaction, a value of less than 50 percent of the total value
of all the formerly outstanding shares of CBC Common Stock as of
the same date. Accordingly, the Transaction should meet the
continuity of interest requirement.
The 50 percent continuity of interest standard set
forth in Rev. Proc. 77-37 is a guideline utilized by the Internal
Revenue Service in determining whether to issue an advance
ruling, and does not represent how much continuity of interest is
needed in a reorganization as a matter of law. In fact, in
Nelson v. Helvering, 296 U.S. 374 (1936), the Supreme Court held
that there was a valid reorganization when the continuity of
interest was equal to 38 percent.
The merger of KeyCorp into Society after the Transac-
tion will not adversely affect the CBC shareholders' continuing
interest through stock ownership in the transferred business of
CBC and thus the continuity of interest requirement will be
satisfied, provided that CBC shareholders owning the relevant
percentage of CBC stock set forth above continue to own Key Bancs
Common Stock. In Rev. Rul. 79-250, 1979-2 C.B. 156, the Service
held that two successive transactions would be treated as two
separate and independent transactions qualifying as
reorganizations because each transaction had sufficiently
meaningful economic motivation supporting it and each transaction
was not dependent on the other for its substantiation. The
Transaction and the KeyCorp/Society Merger should be viewed as
two separate and independent transactions, because the
Transaction was entered into prior to and without knowledge of
the KeyCorp/Society Merger. Also the Transaction may occur and
will have economic significance even if the KeyCorp/Society
Merger does not occur; and the KeyCorp/Society Merger may occur
and will have economic significance even if the Transaction does
not occur.
Based upon the analysis set forth above, the
Transaction should qualify as a reorganization as described under
Sections 368(a) the Code.
Section 368(b)(2) of the Code provides that the term "a
party to a reorganization" includes both corporations, in the
case of a reorganization resulting from the acquisition by one
corporation of stock or properties of another corporation. In
the case of a reorganization qualifying under Section
368(a)(1)(A) by reason of Section 368(a)(2)(D), the term "a party
to a reorganization" also includes the controlling corporation
referred to in Section 368(a)(2)(D). Accordingly, KeyCorp, KBC
and CBC will each be "a party to a reorganization."
Section 361(a) of the Code provides that no gain or
loss shall be recognized to a corporation if such corporation is
"a party to a reorganization" and exchanges property, in
pursuance of the plan or reorganization, solely for stock or
securities in another corporation, "a party to the
reorganization."
Section 361(b) of the Code provides that if Section
361(a) would apply to an exchange but for the fact that the
property received in exchange consists not only of stock or
securities permitted by Section 361(a) to be received without the
recognition of gain, but also of other property or money, then
(A) Property distributed - If the corporation receiving
such other property or money distributes it in
pursuance of the plan of reorganization, no gain to the
corporation shall be recognized from the exchange, but
(B) Property not distributed - If the corporation receiving
such other property or money does not distribute it in
pursuance of the plan or reorganization, the gain, if
any, to the corporation shall be recognized.
The amount of gain recognized under subparagraph (B)
shall not exceed the sum of the money and the fair market value
of the property so received which is not so distributed.
Section 357(a) of the Code provides that if the
taxpayer receives property which would be permitted to be
received under Section 361 without the recognition of gain if it
were the sole consideration, and as a part of the consideration,
another party to the exchange assumes a liability of the
taxpayer, or acquires from the taxpayer property subject to a
liability, then such assumption or acquisition shall not be
treated as money or other property, and shall not prevent the
exchange from being within the provisions of Section 361.
Since the Transaction is a reorganization under Section
368(a) of the Code and CBC is exchanging its property solely for
KeyCorp Common Stock, associated KeyCorp Rights and KeyCorp's
assumption of its liabilities, no gain or loss will be recognized
by CBC by reason of the Transaction and Sections 361(a) and
357(a) of the Code.
Section 1032(a) of the Code provides that no gain or
loss shall be recognized to a corporation on the receipt of money
or other property in exchange for stock of such corporation. In
a transaction to which Section 1032(a) applies, the corporation
receiving property exchanges its own stock for such property
rather than the stock of its parent corporation. Rev. Rul. 57-
278, 1957-1 C.B. 124, involves a transaction in which a
corporation acquired substantially all of the properties of
another corporation in exchange solely for the voting stock of a
corporation which was in control of the acquiring corporation in
a transaction which was held to qualify as a reorganization
described in Section 368(a)(1)(C). The ruling further holds that
no gain or loss is recognized to the parent or the subsidiary
corporation as a result of the exchanges made pursuant to the
plan of reorganization. In the case at hand, CBC will merge with
and into KBC in exchange for KeyCorp Common Stock, associated
KeyCorp Rights and cash in lieu of fractional shares. The
holding in Rev. Rul. 57-278 should apply equally here and
accordingly, no gain or loss should result to KeyCorp or KBC as a
result of the Transaction.
Section 362(b) of the Code provides that if property
was acquired by a corporation in connection with a
reorganization, then the basis of such property shall be the same
as it would be in the hands of the transferor, increased by the
amount of gain recognized to the transferor on such transfer.
Since KBC (and pursuant to the merger of KBC into KeyCorp,
KeyCorp) will receive property (i.e., the assets) from CBC in
connection with a reorganization within the meaning of Section
368(a) of the Code, the basis of the assets to be received by KBC
and KeyCorp will be the same as the basis of those assets in the
hands of CBC immediately prior to the transfer.
Section 1223(2) of the Code provides that, in
determining the period for which the taxpayer has held property,
however acquired, there shall be included the period for which
such property was held by any other person, if such property has,
for purposes of determining gain or loss from a sale or exchange,
the same basis (in whole or in part) in his hands as it would
have in the hands of such other person. Because the basis of the
assets to be received by KBC (and pursuant to the merger of KBC
into KeyCorp, KeyCorp) will be the same as the basis of those
assets in the hands of CBC immediately prior to the transfer, the
holding period for the assets of CBC to be received by KBC and
KeyCorp will include the period during which such assets were
held by CBC.
Section 354(a) provides that no gain or loss will be
recognized if stock in a corporation a party to a reorganization
is, in pursuance of the plan of reorganization, exchanged solely
for stock in another corporation a party to the reorganization.
Therefore, since the shareholders of CBC, a party to the
reorganization, will receive solely KeyCorp Common Stock, another
party to the reorganization, no gain or loss will be recognized
by the shareholders of CBC, except with respect to fractional
share interests.
Section 358(a)(1) of the Code provides that, in the
case of an exchange to which Section 354 applies, the basis of
the property permitted to be received under Section 354 without
the recognition of gain or loss shall be the same as that of the
property exchanged, decreased by (i) the fair market value of any
other property (except money) received by the taxpayer, (ii) the
amount of any money received by the taxpayer, and (iii) the
amount of loss to the taxpayer which was recognized on such
exchange, and increased by (i) the amount which was treated as a
dividend, and (ii) the amount of gain to the taxpayer which was
recognized on such exchange (not including any portion of such
gain which was treated as a dividend).
Since the Transaction constitutes an exchange to which
Section 354 of the Code applies, the basis of the KeyCorp Common
Stock (including the fractional share interests that they would
otherwise be entitled to receive) in the hands of the CBC
shareholders will be the same as the basis of the CBC Common
Stock surrendered in the exchange.
Section 1223(1) of the Code provides that, in
determining the period for which the taxpayer has held property
received in an exchange, there shall be included the period for
which the taxpayer held the property exchanged if the property
has, for the purpose of determining gain or loss from a sale or
exchange, the same basis (in whole or in part) in his hands as
the property exchanged, provided the property exchanged at the
time of such exchange is a capital asset as defined in Section
1221 or property described in Section 1231. Since the basis of
the KeyCorp Common Stock held by the CBC shareholders will have
the same basis (in whole or in part) as the stock exchanged, the
holding period of the KeyCorp Common Stock (including the
fractional share interests that they would otherwise be entitled
to receive) will include the period for which the CBC Common
Stock was held, provided that such stock was held as a capital
asset on the date of the exchange.
Section 302(b)(3) of the Code provides that if a
distribution to a dissenting shareholder is in complete
redemption of all of the stock of a corporation owned by such
shareholder actually or constructively, such redemption shall be
treated as a distribution in part or full payment in exchange for
such stock. Under Rev. Rul. 73-102, 1973-1 C.B. 186, because of
the operation of Section 302 of the Code, where cash is received
by a Dissenting Shareholder who will not receive actually or
constructively any KeyCorp Common Stock in the Transaction, such
cash will be treated as received by the Dissenting Shareholder as
a distribution in redemption of his, her or its stock, subject to
the provisions and limitations of Section 302 of the Code.
OPINION
Based on the facts set forth above, in the Agreement
and in the Proxy Statement-Prospectus filed by KeyCorp with the
SEC on January 18, 1994, the representations of facts as set
forth in letters dated January 10 and 12, 1994 from KeyCorp and
CBC, and the applicable tax law as it exists today, our opinion
as to the federal income tax consequences of the Transaction is
as follows:
o The Transaction will qualify as a reorganization under
Section 368(a) of the Code. KeyCorp, KBC and CBC will each
be "a party to a reorganization" within the meaning of
Section 368(b) of the Code.
o No gain or loss will be recognized to CBC upon the transfer
of its assets to KBC (and after the merger of KBC into
KeyCorp, KeyCorp) in exchange for KeyCorp Common Stock,
associated KeyCorp Rights, the assumption by KBC (and after
the merger of KBC into KeyCorp, KeyCorp) of the liabilities
of CBC, and the cash to be paid in lieu of fractional
shares, each of which will be distributed pursuant to the
plan of reorganization. Sections 361(a) and 357(a) of the
Code.
o No gain or loss will be recognized to KeyCorp or KBC on the
receipt of CBC's assets by KBC (and after the merger of KBC
into KeyCorp, KeyCorp) and the assumption by KBC (and after
the merger of KBC into KeyCorp, KeyCorp) of CBC's
liabilities. Rev. Rul. 57-278, 1957-1 C.B. 124.
o The basis of the assets of CBC in the hands of KBC (and
after the merger of KBC into KeyCorp, KeyCorp) will be the
same as the basis of such assets in the hands of CBC
immediately prior to the Transaction. Section 362(b) of the
Code.
o The holding period of the property acquired by KBC (and
after the merger of KBC into KeyCorp, KeyCorp) from CBC will
include the holding period of such property in the hands of
CBC immediately prior to the Transaction. Section 1223(2)
of the Code.
o No gain or loss will be recognized by a CBC shareholder on
the receipt of KeyCorp Common Stock and associated KeyCorp
Rights (including any fractional share interest to which
such holder may be entitled) solely in exchange for his
shares of CBC Common Stock. Sections 356(a) and 356(c) of
the Code.
o The basis of KeyCorp Common Stock (including fractional
share interest to which such holder may be entitled)
received by a CBC shareholder who exchanges CBC Common Stock
for KeyCorp Common Stock will be the same as the basis of
the CBC Common Stock surrendered in the exchange therefor.
Section 358(a)(1) of the Code.
o The holding period of the KeyCorp Common Stock (including
fractional share interest to which such holder may be
entitled) received by a CBC shareholder will include the
holding period of the CBC Common Stock surrendered in
exchange therefor, provided that such CBC Common Stock was
held as a capital asset at the Merger Effective Date.
Section 1223(1) of the Code.
o Cash received by a CBC shareholder in lieu of a fractional
share interest of KeyCorp Common Stock will be treated as
having been received as a distribution in full payment in
exchange for the fractional share interest of KeyCorp Common
Stock which such shareholder would otherwise be entitled to
receive. This receipt of cash will result in gain or loss
measured by the difference between the basis of such
fractional share interest and the cash received. Such gain
or loss will be capital gain or loss to the CBC shareholder,
provided the CBC Common Stock was a capital asset in such
shareholder's hands and, as such, will be subject to the
provisions and limitations of Subchapter P of Chapter 1 of
the Code. Rev. Rul. 66-365, 1966-2 C.B. 116, and Rev. Proc.
77-41, 1977-2 C.B. 574.
o Where cash is received by a Dissenting Shareholder, such
cash payment will be treated as received by that shareholder
as a distribution in redemption of his, her or its CBC
Common Stock, subject to the provisions and limitations of
Section 302 of the Code. Rev. Rul. 73-102, 1973-1 C.B. 186.
Our opinion is not the equivalent of a ruling from the
Internal Revenue Service and may upon audit be challenged by the
Internal Revenue Service. Our opinion is based on the
understanding that the relevant facts are, and will be at the
Merger Effective Date, as set forth in this letter. It is also
based on the Code, Regulations, case law and Internal Revenue
Service rulings as they now exist. These authorities are all
subject to change and such change may be made with retroactive
effect. Were there to be such changes, or should the relevant
facts prove to be other than as we have reviewed, our opinion
could be affected.
We hereby consent to the reference to us under the
heading "The CBC/KeyCorp Merger -- Certain Federal Income Tax
Considerations" in the Proxy Statement -- Prospectus and to the
filing of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not hereby admit that
we are within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
Baker & Hostetler
Exhibit 8(b)
The following is a true and correct copy
of a letter to the Board of Directors of
KeyCorp and Board of Directors of
Commercial Bancorporation of Colorado
from Baker & Hostetler
BAKER & HOSTETLER LETTERHEAD
January 18, 1994
Board of Directors
KeyCorp
One KeyCorp Plaza
Albany, New York 12207
Board of Directors
Commercial Bancorporation of Colorado
3300 East First Avenue
Denver, Colorado 86286
Members of the Boards:
This is in response to your request for our tax opinion
on the proposed merger (the "Merger") of Commercial
Bancorporation of Colorado ("CBC") into Key Bancshares of
Colorado, Inc. ("KBC"), a wholly-owned subsidiary of Key
Bancshares Inc. ("Key Bancs"). It is contemplated that prior to
the date of the Merger (the "Merger Effective Date") KeyCorp will
have merged into and with Society Corporation, with Society
Corporation as the surviving corporation under the name Key
Bancshares Inc. The conclusions presented herein are based on
the facts and representations in the Amended and Restated
Agreement and Plan of Acquisition, Reorganization and Merger by
and between KeyCorp and CBC dated as of September 11, 1993 (the
"Agreement") and the Proxy Statement-Prospectus included as a
part of the Registration Statement on Form S-4 filed by KeyCorp
with the Securities and Exchange Commission ("SEC") on
January 18, 1994 (collectively, the "Documents"). The opinions
expressed herein are conditioned on and subject to the following:
1. the receipt by us of letters in the forms of
Exhibits A and B dated the Merger Effective Date
(the "Representation Letters");
2. the facts and representations set forth in the
Documents and the Representation Letters are true
and correct;
3. the merger of KeyCorp into and with Society
Corporation has occurred prior to the Merger
Effective Date; and
4. there is no change in facts or applicable law
between the date hereof and the Merger Effective
Date.
FACTS
Key Bancs will be a corporation duly incorporated and
existing in good standing under the laws of the State of Ohio and
will be a multi-regional financial services holding company
registered under the Bank Holding Company Act of 1956, as
amended.
The authorized capital stock of Key Bancs will consist
of (i) 900,000,000 shares of common stock, par value $1.00 per
share ("Key Bancs Common Stock"), of which approximately
220,078,560 shares will be outstanding as of the Merger Effective
Date, (ii) 25,000,000 shares of Serial Preferred Stock, none of
which will be issued or outstanding as of the Merger Effective
Date, and (iii) 1,400,000 shares of 10% Cumulative Preferred
Stock, Class A, par value $5.00 per share, of which approximately
1,280,000 shares will be outstanding as of the Merger Effective
Date. The common stock of Key Bancs will be listed on the New
York Stock Exchange ("NYSE"). Key Bancs and its subsidiaries
will file a consolidated federal income tax return.
On August 25, 1989 Society Corporation entered into a
Rights Agreement with First Chicago Trust Company of New York, as
rights agent which was amended on February 21, 1991, September
12, 1991 and October 1, 1993, (as amended the "Society Rights
Agreement") pursuant to which holders of Society Corporation
Common Stock received a dividend of rights ("Society Rights") to
purchase Society Common Stock. Until the occurrence of certain
events ("triggering events"), Society Rights are represented by
Society Common Stock certificates and any transfer of Society
Common Stock constitutes a transfer of the associated Society
Rights. Prior to the occurrence of a triggering event, Society
Rights are not exercisable and are redeemable, at the option of
Society, at $.005 per Right. Prior to the Merger Effective Date
and pursuant to the merger of KeyCorp into and with Society
Corporation, the Society Rights associated with the Society
Common Stock will have become rights ("Key Bancs Rights") to
purchase Key Bancs Common Stock.
Key Bancs through its banking subsidiaries in New York,
Alaska, Colorado, Florida, Idaho, Indiana, Maine, Michigan, Ohio,
Oregon, Utah, Washington and Wyoming will provide banking
services to corporate, institutional, municipal and individual
customers. In addition, Key Bancs will offer a variety of
personal and commercial financial services through other
subsidiaries, including mortgage servicing, trust, credit life
reinsurance, equipment leasing, securities brokerage, annuity
sales, asset management, and data processing.
KBC, a wholly-owned subsidiary of Key Bancs, will be a
corporation organized under the laws of the State of Colorado for
purposes of this transaction.
CBC is a corporation duly incorporated and existing in
good standing under the laws of the State of Colorado and is a
bank holding company duly registered under the Bank Holding
Company Act of 1956, as amended.
As of September 30, 1993, the authorized capital stock
of CBC consisted of (i) 5,600,000 shares of voting common stock,
par value $1.00 per share, of which 2,642,980 shares of Class A
Common Stock were issued and 2,413,502 shares were outstanding
and 431,950 shares of Class B Common Stock were issued and
outstanding, and (ii) 180,000 shares of preferred stock, par
value of $1.00 per share, of which no shares were outstanding.
As of September 30, 1993, CBC was obligated under certain
circumstances to issue up to (i) 290,543 additional shares of
Class A Common Stock pursuant to the terms of its Adjustable Rate
Convertible Subordinated Debentures Due 2004 and (ii) 62,700
additional shares of Class A Common Stock pursuant to its
Employee Stock Option Plan. On September 12, 1993, in connection
with the Agreement, CBC also granted to KeyCorp options to
purchase newly issued shares of Class A Common Stock and Class B
Common Stock, up to 19.9% of the shares outstanding, upon the
occurrence of certain events. CBC has four shareholders who
directly or beneficially own 5 percent or more of its stock. The
CBC Class A Common Stock is traded over the counter on the NASDAQ
National Market System. CBC and its subsidiaries file a
consolidated federal income tax return.
CBC is a multi-bank holding company engaged in the
commercial banking business through five wholly-owned
subsidiaries with eleven banking offices in Colorado. CBC offers
a variety of deposit services and concentrates on secured lending
to small and medium sized businesses.
THE TRANSACTION
It is contemplated that Key Bancs, with and into which
KeyCorp will have merged prior to the Merger Effective Date, and
CBC will combine their respective businesses through a
transaction (the "Transaction") intended to be a tax-free
reorganization so that the respective depositors and borrowers
will obtain the benefit of a more efficient and larger enterprise
with an expanded market area. Among the factors considered by
the Boards of Directors of KeyCorp and CBC were the historical
operating results, current financial condition, business and
management and future financial and other prospects of the
companies, respectively and combined, and the advice of their
respective financial advisors as to the fairness to KeyCorp and
CBC shareholders, from a financial point of view, of the
consideration to be paid by KeyCorp and received by the
shareholders of CBC in the Merger. Also considered were the
operating philosophies, relative size, competitive position and
geographic market areas of KeyCorp and CBC.
The Agreement provides for the acquisition of CBC by
KeyCorp, (which will have merged into and with Key Bancs, prior
to the merger of CBC into KBC) through the merger of CBC with and
into KBC, with KBC being the surviving corporation (the
"Merger"). As a result of the Merger, the separate existence of
CBC shall cease, and all of its assets, properties, obligations
and liabilities shall become the assets, properties, obligations
and liabilities of KBC as the surviving corporation in the
Merger. The affirmative vote of the holders of at least 66 2/3%
of the outstanding CBC Class A and Class B Common Stock, voting
separately by class, is required for approval of the Agreement.
At the Merger Effective Date, by virtue of the Merger
automatically and without any action on the part of the holders
thereof, each share of CBC Class A Common Stock and Class B
Common Stock issued and outstanding at the Merger Effective Date
shall become and be converted into .899 of a share of Key Bancs
Common Stock, which is voting stock, and the associated Key Bancs
Right subject to the following exceptions:
(i) shares which have not been voted in favor of the
approval of this Agreement with respect to which
appraisal rights have been perfected in accordance
with Section 7-4-124 of the Colorado Corporation Code
(the "Dissenting Shares"),
(ii) shares held directly or indirectly by Key Bancs, other
than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted, and
(iii) shares held as treasury stock of CBC.
The holders of certificates representing shares of CBC
Common Stock, including holders of Dissenting Shares, shall cease
to have any rights as stockholders of CBC.
No fractional shares of Key Bancs Common Stock will be
issued in exchange for any shares of CBC Common Stock. In lieu
of such fractional share interest, any holder of CBC Common Stock
who would otherwise be entitled to a fractional share of Key
Bancs Common Stock will, upon surrender of his, her or its
certificate or certificates representing CBC Common Stock, be
paid the applicable cash value of such fractional share interest,
which shall be equal to the product of the fraction multiplied by
the average closing price of Key Bancs Common Stock reported on
the NYSE Composite Transactions reporting system for the twenty
NYSE trading days ending on the fifth NYSE trading day prior to
the Merger Effective Date.
Prior to the Merger Effective Date, CBC will deposit
funds with Colorado National Bank, as escrow agent, (the "Escrow
Fund") out of which all amounts due holders of Dissenting Shares
and all expenses in connection with such Dissenting Shares will
be paid.
As soon after the Merger Effective Date as
administratively feasible, Key Bancs will cause KBC to merge into
Key Bancs and then cause the bank subsidiaries of KBC (consisting
of those subsidiaries which were formerly the bank subsidiaries
of CBC) and Key Bank of Colorado, then a wholly-owned subsidiary
of Key Bancs, to be consolidated into Century Bank Sterling, one
of the bank subsidiaries of CBC.
REPRESENTATIONS
In order to determine the consequences of the
Transaction for federal income tax purposes, you will have
directed us to rely on the following assumptions and
representations:
(1) The fair market value of the Key Bancs Common Stock
received by each CBC shareholder will be approximately
equal to the fair market value of the CBC Common Stock
surrendered in the Transaction.
(2) There is no plan or intention by the shareholders of
CBC who own 5 percent or more of the CBC Common Stock,
and to the best of the knowledge of the management of
CBC, there is no plan or intention on the part of the
remaining shareholders of CBC to sell, exchange or
otherwise dispose of a number of shares of Key Bancs
Common Stock received in the Transaction that would
reduce the CBC shareholders' ownership of Key Bancs
Common Stock to a number of shares having a value, as
of the Merger Effective Date, of less than 50 percent
of the value of all of the formerly outstanding CBC
Common Stock as of the same date. For purposes of this
representation, shares of CBC Common Stock surrendered
by dissenters or exchanged for cash in lieu of
fractional shares of Key Bancs Common Stock are treated
as outstanding CBC Common Stock at the Merger Effective
Date. Moreover, shares of CBC Common Stock and Key
Bancs Common Stock held by CBC shareholders and
otherwise sold, redeemed, or disposed of prior or
subsequent to the Transaction are considered in making
this representation.
(3) KBC and (pursuant to the merger of KBC into Key Bancs)
Key Bancs will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent
of the fair market value of the gross assets held by
CBC immediately prior to the Transaction. For purposes
of this representation, amounts transferred by CBC to
the Escrow Fund to pay holders of Dissenting Shares,
amounts used by CBC to pay its reorganization expenses,
and all redemptions and distributions (except for
regular, normal dividends) made by CBC immediately
preceding the Transaction will be included as assets of
CBC held immediately prior to the Transaction.
(4) Prior to the Transaction, Key Bancs will be in control
of KBC within the meaning of Section 368(c) of the
Internal Revenue Code of 1986, as amended (the "Code").
(5) Following the Transaction, KBC will not issue
additional shares of its stock that would result in Key
Bancs losing control of KBC within the meaning of
Section 368(c) of the Code.
(6) Key Bancs and KBC have no plan or intention to
reacquire any of Key Bancs Common Stock issued in the
Transaction.
(7) Key Bancs has no plan or intention to sell or otherwise
dispose of the stock of KBC, and Key Bancs and KBC have
no plan or intention to sell or otherwise dispose of
any of the assets of CBC acquired in the transaction,
except for the merger of KBC into Key Bancs and
dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(C) of the
Code.
(8) Pursuant to the Transaction, the Key Bancs Common Stock
will be distributed to the shareholders of CBC.
(9) The liabilities of CBC assumed by KBC (and pursuant to
the merger of KBC into Key Bancs, Key Bancs) and the
liabilities to which the transferred assets of CBC are
subject were incurred by CBC in the ordinary course of
its business.
(10) Following the merger of CBC into KBC, KBC, (and after
the merger of KBC into Key Bancs, Key Bancs) will
continue the historic business of CBC or use a
significant portion of CBC's business assets in a
business.
(11) Key Bancs, KBC, CBC and the shareholders of CBC will
pay their respective expenses, if any, incurred in
connection with the Transaction.
(12) There is no intercorporate indebtedness existing
between Key Bancs and CBC or between KBC and CBC that
was issued, acquired, or will be settled at a discount.
(13) No two parties to the Transaction are "investment
companies" as defined in Sections 368(a)(2)(F)(iii) and
(iv) of the Code.
(14) CBC is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(15) The fair market value of the assets of CBC transferred
to KBC (and pursuant to the merger of KBC into Key
Bancs, Key Bancs) will equal or exceed the sum of the
liabilities assumed by KBC (and pursuant to the merger
of KBC into Key Bancs, Key Bancs) plus the amount of
liabilities, if any, to which the transferred assets
are subject.
(16) Neither Key Bancs nor KBC owns, directly or indirectly,
nor has either owned during the past five years,
directly or indirectly, any stock of CBC.
(17) No stock of KBC will be issued in the Transaction.
(18) The payment of cash in lieu of fractional shares of Key
Bancs Common Stock is solely for the purpose of
avoiding the expense and inconvenience to Key Bancs of
issuing fractional shares and does not represent
separately bargained-for consideration. The total cash
consideration that will be paid in the Transaction to
shareholders of CBC instead of issuing fractional
shares of Key Bancs Common Stock will not exceed 1
percent of the total consideration that will be issued
in the Transaction to the shareholders of CBC in
exchange for their shares of CBC Common Stock. The
fractional share interests of each shareholder of CBC
will be aggregated, and no shareholder of CBC will
receive cash in an amount equal to or greater than the
value of one full share of Key Bancs Common Stock.
(19) None of the compensation to be received by any
shareholder-employees of CBC will be separate
consideration for, or allocable to, any of their shares
of CBC Common Stock; none of the shares of Key Bancs
Common Stock received by any shareholder-employees will
be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any
shareholder-employees will be for services actually
rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar
services.
(20) Any shareholders of CBC who do not vote in favor of the
Transaction and perfect their appraisal rights under
applicable law shall receive cash only from the Escrow
Fund established by CBC prior to the Transaction in
exchange for the surrender of their shares of CBC
Common Stock.
(21) The merger of CBC into KBC will qualify as a statutory
merger under the laws of Colorado. Additionally, if
CBC had merged into Key Bancs, it would have met the
general requirements of a merger under applicable law.
(22) The Society Rights Agreement was adopted for the
principal purpose of providing a mechanism by which
Society (after the merger of KeyCorp into and with
Society, Key Bancs) can provide shareholders rights to
purchase stock at substantially less than fair market
value as a means of responding to unsolicited offers to
acquire Key Bancs and no "triggering event" has
occurred with respect to Key Bancs Rights.
APPLICABLE LAW
Section 368(a)(1)(A) of the Code provides that the term
"reorganization" means a statutory merger or consolidation.
Under Section 1.368-2(b)(1) of the Treasury Regulations
("Regulations"), in order to qualify as a reorganization under
Section 368(a)(1)(A) of the Code, the transaction must be a
merger or consolidation effected pursuant to the corporation laws
of the United States or a State or Territory or the District of
Columbia. It will be represented that the Merger will qualify as
a statutory merger under the laws of Colorado. Accordingly, the
Merger should qualify as a reorganization within the meaning of
Section 368(a)(1)(A) of the Code.
Section 368(a)(2)(D) of the Code provides that the
acquisition by one corporation, in exchange for stock of a
corporation (referred to as the "controlling corporation") which
is in control of the acquiring corporation, of substantially all
of the properties of another corporation shall not disqualify a
transaction under Section 368(a)(1)(A) if (i) no stock of the
acquiring corporation is used in the transaction, and (ii) in the
case of a transaction under Section 368(a)(1)(A), such
transaction would have qualified under Section 368(a)(1)(A) had
the merger been into the controlling corporation.
Section 368(c) of the Code provides that the term
"control" means the ownership of stock possessing at least 80
percent of the total combined voting power of all classes of
stock entitled to vote and at least 80 percent of the total
number of shares of all other classes of stock of the
corporation.
At the time of the Transaction, Key Bancs will directly
own 100% of the issued and outstanding stock of KBC; therefore,
Key Bancs will be in control of KBC within the meaning of Section
368(c) of the Code. Rev. Proc. 77-37, 1977-2 C.B. 568, provides
that the "substantially all" requirement of Sections 368(a)(2)(D)
and 368(a)(1)(C) is satisfied if there is a transfer of assets
representing at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of
the gross assets held by the corporation immediately prior to the
transfer. All payments to dissenters and all redemptions and
distributions (except for regular, normal distributions) made by
the corporation immediately preceding the transfer and which are
part of the plan of reorganization will be considered as assets
held by the corporation immediately prior to the transfer. It
will be represented that KBC will acquire at least 90 percent of
the fair market value of the net assets and at least 70 percent
of the fair market value of the gross assets held by CBC
immediately prior to the Merger and that no stock of KBC will be
issued in the Merger.
It will be represented that the Merger will qualify as
a statutory merger under the laws of Colorado and that, if CBC
had merged into Key Bancs, it would have met the general
requirements of a merger under applicable law.
Section 1.368-2(b)(2) of the Regulations, in discussing
the requirement of Section 368(a)(2)(D)(ii) of the Code that the
merger of the target corporation into the acquiring corporation
would have qualified as a statutory merger under Section
368(a)(1)(A) of the Code had the merger been into the controlling
corporation, states:
"The foregoing test of whether the transaction would
have qualified under Section 368(a)(1)(A) if the merger
had been into the controlling corporation means that
the general requirements of a reorganization under
Section 368(a)(1)(A) (such as a business purpose,
continuity of business enterprise and continuity of
interest) must be met in addition to the special
requirements of Section 368(a)(2)(D). Under this test,
it is not relevant whether the merger into the
controlling corporation could have been effected
pursuant to State or Federal corporation law."
Rev. Rul. 74-297, 1974-1 C.B. 84, held that the merger
of an unrelated domestic corporation into the wholly owned
domestic subsidiary of a foreign corporation through an exchange
of the parent corporation's stock, which met the business purpose
and continuity requirements of Section 368(a)(1)(A) of the Code,
qualified as a reorganization by reason of the application of
Section 368(a)(2)(D) (subject to meeting certain requirements
under Section 367 that are not relevant to this discussion).
Although not citing Section 1.368-2(b)(2) of the Regulations,
Rev. Rul. 74-297 rested its holding on a rationale that is almost
word-for-word identical with that portion of the regulations
quoted above. Based upon the representation that CBC could merge
into Key Bancs if the Agreement had provided, the requirements of
Section 368(a)(2)(D)(ii) should be met.
Because KBC will be merged into Key Bancs as soon after
the Merger Effective Date as administratively feasible, it is
likely that the Transaction will be considered an acquisition by
Key Bancs of substantially all of the assets, properties,
liabilities and obligations of CBC in exchange for Key Bancs
Common Stock. In Rev. Rul. 72-405, 1972-2 C.B. 217, the Internal
Revenue Service, citing Rev. Rul. 67-274, 1967-2 C.B. 141, held
that where a target corporation was merged into a subsidiary of a
parent corporation in exchange for the parent corporation stock
and as part of the overall plan the subsidiary was immediately
liquidated into parent corporation, the merger of target into
subsidiary followed by the liquidation of the subsidiary into the
parent corporation would not constitute a reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code, but would be considered an acquisition by parent
corporation of the assets of target corporation in a
reorganization described in Section 368(a)(1)(C) of the Code.
Section 368(a)(1)(C) of the Code provides the
acquisition by one corporation, in exchange solely for all or
part of its voting stock, of substantially all of the properties
of another corporation constitutes a "reorganization" and in
determining whether the exchange is solely for stock, the
assumption by the acquiring corporation of a liability of the
other, or the fact that property acquired is subject to a
liability, shall be disregarded. Section 368(a)(2)(B) of the
Code provides that if an acquisition of substantially all the
assets would qualify under Section 368(a)(1)(C) of the Code but
for the fact that the acquiring corporation exchanges money or
other property in addition to voting stock and the acquiring
corporation acquires, solely for voting stock, property having a
fair market valve which is at least 80% of the fair market value
of all the property of the other corporation, then such
acquisition shall be treated as qualifying as a "reorganization"
under Section 368(a)(1)(C) of the Code. For this purpose,
liabilities assumed by the acquiring corporation or to which
property acquired is subject are treated as money paid for the
property.
As discussed above, it will be represented that KBC
will acquire at least 90 percent of the fair market value of the
net assets and at least 70 percent of the fair market value of
the gross assets held by CBC immediately prior to the
Transaction. Further, Key Bancs will acquire 100% of the fair
market value of the net and gross assets of KBC in the merger of
KBC into Key Bancs. Therefore, Key Bancs will acquire substan-
tially all the assets of CBC within the meaning of Rev. Proc. 77-
37 (supra) and Section 368(a)(1)(C) of the Code.
Pursuant to the Transaction, solely Key Bancs Common
Stock, which is voting stock, and associated Key Bancs Rights
will be exchanged for the assets of CBC, except that cash will be
issued in lieu of fractional shares of Key Bancs Common Stock.
In Rev. Rul. 90-11, 1990-1 C.B. 10, the Internal Revenue Service
held that rights similar to the Key Bancs Rights do not
constitute "property," at least until a "triggering event"
occurs. It will be represented that the payment of cash in lieu
of fractional shares of Key Bancs Common Stock is solely for the
purpose of avoiding the expense and inconvenience to Key Bancs of
issuing fractional shares and does not represent separately
bargained for consideration. In Rev. Rul. 66-365, 1966-2 C.B.
116, the Internal Revenue Service held that the receipt of cash
in lieu of fractional shares under such circumstances will not
violate the "solely for voting stock" requirement of Section
368(a)(1)(C) of the Code.
Payments of cash to shareholders of CBC who perfect
dissenters rights will not violate the "solely for voting stock"
requirement because such payments will be made from an escrow
fund established and funded by CBC prior to the Transaction. In
Rev. Rul. 68-285, 1968-1 C.B. 147, the Internal Revenue Service
held that because dissenting shareholders cease to have rights as
shareholders and receive payments from an escrow fund established
by the target corporation prior to the Transaction, the "solely
for voting stock" requirement is not violated.
In addition to the definitional requirements set forth
in the statute, in order for a transaction to be a tax-free
reorganization, certain requirements set forth under Section
1.368-1(b) of the Regulations must be satisfied. The Regulations
provide that the purpose of the reorganization provisions of the
Code is to except from the general rule of taxability certain
specifically described exchanges incident to such readjustments
of corporate structures made in one of the particular ways
specified in the Code, as are required by business exigencies and
which effect only a readjustment of continuing interest in
property under the modified corporate forms. Requisite to a
reorganization under the Code are a continuity of the business
enterprise under the modified corporate form and a continuity of
interest therein on the part of those persons who, directly or
indirectly, were the owners of the enterprise prior to the
reorganization.
To be treated as a reorganization, the transaction must
be planned and carried out for a genuine business purpose.
KeyCorp believes the Transaction will permit it to expand its
business operations in Colorado while benefiting from the
addition of CBC's personnel, deposit-taking and loan-origination
market shares and loan portfolio. KeyCorp and CBC believe that
they will be in an enhanced competitive position with respect to
other financial institutions in Colorado after the Transaction
and that economies of scale are likely to be achieved as a result
of the Transaction. CBC believes the Transaction will offer
enhanced opportunities for CBC to meet the needs of its banking
customers and other members of the communities served by CBC.
CBC also believes the Transaction will afford the shareholders of
CBC the benefit of KeyCorp's or Key Bancs' stronger relative
capital position and a more liquid market for KeyCorp or Key
Bancs Common Stock. This should satisfy the genuine business
purpose requirement for the Transaction.
Section 1.368-1(d) of the Regulations provides that
continuity of business enterprise requires that the acquiring
corporation either (i) continue the acquired corporation's
historic business or (ii) use a significant portion of the
acquired corporation's historic business assets in a business.
It will be represented that after the Transaction, KBC (and after
the merger of KBC into Key Bancs, Key Bancs) will continue the
historic business of CBC or use a significant portion of such
historic business assets in its business. Accordingly, the
Transaction should meet the continuity of business enterprise
requirement.
The consolidation of the various subsidiary banks of
CBC and Key Bank of Colorado into Century Bank of Sterling, an
existing subsidiary bank of CBC, will not adversely affect the
continuity of business enterprise requirement.
Under Section 1.368-1(b) of the Regulations, the
continuity of interest doctrine requires that in a reorganization
there must be a continuing interest through stock ownership on
the part of those persons who, directly or indirectly, were the
owners of the stock of the acquired corporation prior to the
reorganization. Rev. Proc. 77-37 (supra) provides that the
continuity of interest requirement of Section 1.368-1(b) of the
Regulations is satisfied if there is continuing interest through
the stock ownership in the acquiring or transferee corporation on
the part of the former shareholders of the acquired or transferor
corporation which is equal in value, as of the effective date of
the reorganization, to at least 50 percent of the value of all of
the formerly outstanding stock of the acquired or transferor
corporation as of the same date.
It is not necessary that each shareholder of the
acquired or transferor corporation receive in the exchange stock
of the acquiring or transferee corporation, or a corporation in
"control" thereof, which is equal in value to at least 50 percent
of the value of his former stock interest in the acquired or
transferor corporation, so long as one or more shareholders of
the acquired or transferor corporation have a continuing interest
through stock ownership in the acquiring or transferee
corporation (or a corporation in "control" thereof) which is, in
the aggregate, equal in value to at least 50 percent of the value
of all of the formerly outstanding stock of the acquired or
transferor corporation. Sales, redemptions, and other
dispositions of stock occurring prior or, if planned or intended
by the shareholder at the time of the transaction, subsequent to
the exchange which are part of the plan of reorganization will be
considered in determining whether there is a 50 percent
continuing interest through stock ownership as of the effective
date of the reorganization.
It will be represented that there is no plan or
intention by the shareholders of CBC who own 5 percent or more of
CBC Common Stock and, to the best of the knowledge of the
management CBC, there is no plan or intention on the part of
remaining shareholders of CBC Common Stock to sell, exchange, or
otherwise dispose of a number of shares of Key Bancs Common Stock
that will reduce CBC shareholders' ownership of such stock to a
number of shares having, as of the date of the Transaction, a
value of less than 50 percent of the total value of all the
formerly outstanding shares of CBC Common Stock as of the same
date. Accordingly, the Transaction should meet the continuity of
interest requirement.
The 50 percent continuity of interest standard set
forth in Rev. Proc. 77-37 is a guideline utilized by the Internal
Revenue Service in determining whether to issue an advance
ruling, and does not represent how much continuity of interest is
needed in a reorganization as a matter of law. In fact, in
Nelson v. Helvering, 296 U.S. 374 (1936), the Supreme Court held
that there was a valid reorganization when the continuity of
interest was equal to 38 percent.
Based upon the analysis set forth above, the
Transaction should qualify as a reorganization as described under
Sections 368(a) the Code.
Section 368(b)(2) of the Code provides that the term "a
party to a reorganization" includes both corporations, in the
case of a reorganization resulting from the acquisition by one
corporation of stock or properties of another corporation. In
the case of a reorganization qualifying under Section
368(a)(1)(A) by reason of Section 368(a)(2)(D), the term "a party
to a reorganization" also includes the controlling corporation
referred to in Section 368(a)(2)(D). Accordingly, Key Bancs, KBC
and CBC will each be "a party to a reorganization."
Section 361(a) of the Code provides that no gain or
loss shall be recognized to a corporation if such corporation is
"a party to a reorganization" and exchanges property, in
pursuance of the plan or reorganization, solely for stock or
securities in another corporation, "a party to the
reorganization."
Section 361(b) of the Code provides that if Section
361(a) would apply to an exchange but for the fact that the
property received in exchange consists not only of stock or
securities permitted by Section 361(a) to be received without the
recognition of gain, but also of other property or money, then
(A) Property distributed - If the corporation receiving
such other property or money distributes it in
pursuance of the plan of reorganization, no gain to the
corporation shall be recognized from the exchange, but
(B) Property not distributed - If the corporation receiving
such other property or money does not distribute it in
pursuance of the plan or reorganization, the gain, if
any, to the corporation shall be recognized.
The amount of gain recognized under subparagraph (B)
shall not exceed the sum of the money and the fair market value
of the property so received which is not so distributed.
Section 357(a) of the Code provides that if the
taxpayer receives property which would be permitted to be
received under Section 361 without the recognition of gain if it
were the sole consideration, and as a part of the consideration,
another party to the exchange assumes a liability of the
taxpayer, or acquires from the taxpayer property subject to a
liability , then such assumption or acquisition shall not be
treated as money or other property, and shall not prevent the
exchange from being within the provisions of Section 361.
Since the Transaction is a reorganization under Section
368(a) of the Code and CBC is exchanging its property solely for
Key Bancs Common Stock, associated Key Bancs Rights and Key
Bancs' assumption of its liabilities, no gain or loss will be
recognized by CBC by reason of the Transaction and Sections
361(a) and 357(a) of the Code.
Section 1032(a) of the Code provides that no gain or
loss shall be recognized to a corporation on the receipt of money
or other property in exchange for stock of such corporation. In
a transaction to which Section 1032(a) applies, the corporation
receiving property exchanges its own stock for such property
rather than the stock of its parent corporation. Rev. Rul. 57-
278, 1957-1 C.B. 124, involves a transaction in which a
corporation acquired substantially all of the properties of
another corporation in exchange solely for the voting stock of a
corporation which was in control of the acquiring corporation in
a transaction which was held to qualify as a reorganization
described in Section 368(a)(1)(C). The ruling further holds that
no gain or loss is recognized to the parent or the subsidiary
corporation as a result of the exchanges made pursuant to the
plan of reorganization. In the case at hand, CBC will merge with
and into KBC in exchange for Key Bancs Common Stock, associated
Key Bancs Rights and cash in lieu of fractional shares. The
holding in Rev. Rul. 57-278 should apply equally here and
according, no gain or loss should result to Key Bancs as a result
of the Transaction.
Section 362(b) of the Code provides that if property
was acquired by a corporation in connection with a
reorganization, then the basis of such property shall be the same
as it would be in the hands of the transferor, increased by the
amount of gain recognized to the transferor on such transfer.
Since KBC (and pursuant to the merger of KBC into Key Bancs, Key
Bancs) will receive property (i.e., the assets) from CBC in
connection with a reorganization within the meaning of Section
368(a) of the Code, the basis of the assets to be received by KBC
and Key Bancs will be the same as the basis of those assets in
the hands of CBC immediately prior to the transfer.
Section 1223(2) of the Code provides that, in
determining the period for which the taxpayer has held property,
however acquired, there shall be included the period for which
such property was held by any other person, if such property has,
for purposes of determining gain or loss from a sale or exchange,
the same basis (in whole or in part) in his hands as it would
have in the hands of such other person. Because the basis of the
assets to be received by KBC (and pursuant to the merger of KBC
into Key Bancs, Key Bancs) will be the same as the basis of those
assets in the hands of CBC immediately prior to the transfer, the
holding period for the assets of CBC to be received by KBC and
Key Bancs will include the period during which such assets were
held by CBC.
Section 354(a) provides that no gain or loss will be
recognized if stock in a corporation a party to a reorganization
is, in pursuance of the plan of reorganization, exchanged solely
for stock in another corporation a party to the reorganization.
Therefore, since the shareholders of CBC, a party to the
reorganization, will receive solely Key Bancs Common Stock,
another party to the reorganization, no gain or loss will be
recognized by the shareholders of CBC, except with respect to
fractional share interests.
Section 358(a)(1) of the Code provides that, in the
case of an exchange to which Section 354 applies, the basis of
the property permitted to be received under Section 354 without
the recognition of gain or loss shall be the same as that of the
property exchanged, decreased by (i) the fair market value of any
other property (except money) received by the taxpayer, (ii) the
amount of any money received by the taxpayer, and (iii) the
amount of loss to the taxpayer which was recognized on such
exchange, and increased by (i) the amount which was treated as a
dividend, and (ii) the amount of gain to the taxpayer which was
recognized on such exchange (not including any portion of such
gain which was treated as a dividend).
Since the Transaction constitutes an exchange to which
Section 354 of the Code applies, the basis of the Key Bancs
Common Stock (including the fractional share interests that they
would otherwise be entitled to receive) in the hands of the CBC
shareholders will be the same as the basis of the CBC Common
Stock surrendered in the exchange.
Section 1223(1) of the Code provides that, in
determining the period for which the taxpayer has held property
received in an exchange, there shall be included the period for
which the taxpayer held the property exchanged if the property
has, for the purpose of determining gain or loss from a sale or
exchange, the same basis (in whole or in part) in his hands as
the property exchanged, provided the property exchanged at the
time of such exchange is a capital asset as defined in Section
1221 or property described in Section 1231. Since the basis of
the Key Bancs Common Stock held by the CBC shareholders will have
the same basis (in whole or in part) as the stock exchanged, the
holding period of the Key Bancs Common Stock (including the
fractional share interests that they would otherwise be entitled
to receive) will include the period for which the CBC Common
Stock was held, provided that such stock was held as a capital
asset on the date of the exchange.
Section 302(b)(3) of the Code provides that if a
distribution to a dissenting shareholder is in complete
redemption of all of the stock of a corporation owned by such
shareholder actually or constructively, such redemption shall be
treated as a distribution in part or full payment in exchange for
such stock. Under Rev. Rul. 73-102, 1973-1 C.B. 186, because of
the operation of Section 302 of the Code, where cash is received
by a Dissenting Shareholder who will not receive actually or
constructively any Key Bancs Common Stock in the Transaction,
such cash will be treated as received by the Dissenting
Shareholder as a distribution in redemption of his, her or its
stock, subject to the provisions and limitations of Section 302
of the Code.
OPINION
Based upon and subject to the foregoing, our opinion as
to the federal income tax consequences of the Transaction is as
follows:
o The Transaction will qualify as a reorganization under
Section 368(a) of the Code. Key Bancs, KBC and CBC will
each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code.
o No gain or loss will be recognized to CBC upon the transfer
of its assets to KBC (and after the merger of KBC into Key
Bancs, Key Bancs) in exchange for Key Bancs Common Stock,
associated Key Bancs Rights, the assumption by KBC (and
after the merger of KBC into Key Bancs, Key Bancs) of the
liabilities of CBC, and the cash to be paid in lieu of
fractional shares, each of which will be distributed
pursuant to the plan of reorganization. Sections 361(a) and
357(a) of the Code.
o No gain or loss will be recognized to Key Bancs or KBC on
the receipt of CBC's assets by KBC (and after the merger of
KBC into Key Bancs, Key Bancs) and the assumption by KBC
(and after the merger of KBC into Key Bancs, Key Bancs) of
CBC's liabilities. Rev. Rul. 57-278, 1957-1 C.B. 124.
o The basis of the assets of CBC in the hands of KBC (and
after the merger of KBC into Key Bancs, Key Bancs) will be
the same as the basis of such assets in the hands of CBC
immediately prior to the Transaction. Section 362(b) of the
Code.
o The holding period of the property acquired by KBC (and
after the merger of KBC into Key Bancs, Key Bancs) from CBC
will include the holding period of such property in the
hands of CBC immediately prior to the Transaction. Section
1223(2) of the Code.
o No gain or loss will be recognized by a CBC shareholder on
the receipt of Key Bancs Common Stock and associated Key
Bancs Rights (including any fractional share interest to
which such holder may be entitled) solely in exchange for
his shares of CBC Common Stock. Sections 356(a) and 356(c)
of the Code.
o The basis of Key Bancs Common Stock (including fractional
share interest to which such holder may be entitled)
received by a CBC shareholder who exchanges CBC Common Stock
for Key Bancs Common Stock will be the same as the basis of
the CBC Common Stock surrendered in the exchange therefor.
Section 358(a)(1) of the Code.
o The holding period of the Key Bancs Common Stock (including
fractional share interest to which such holder may be
entitled) received by a CBC shareholder will include the
holding period of the CBC Common Stock surrendered in
exchange therefor, provided that such CBC Common Stock was
held as a capital asset at the Merger Effective Date.
Section 1223(1) of the Code.
o Cash received by a CBC shareholder in lieu of a fractional
share interest of Key Bancs Common Stock will be treated as
having been received as a distribution in full payment in
exchange for the fractional share interest of Key Bancs
Common Stock which such shareholder would otherwise be
entitled to receive. This receipt of cash will result in
gain or loss measured by the difference between the basis of
such fractional share interest and the cash received. Such
gain or loss will be capital gain or loss to the CBC
shareholder, provided the CBC Common Stock was a capital
asset in such shareholder's hands and, as such, will be
subject to the provisions and limitations of Subchapter P of
Chapter 1 of the Code. Rev. Rul. 66-365, 1966-2 C.B. 116,
and Rev. Proc. 77-41, 1977-2 C.B. 574.
o Where cash is received by a Dissenting Shareholder, such
cash payment will be treated as received by that shareholder
as a distribution in redemption of his, her or its CBC
Common Stock, subject to the provisions and limitations of
Section 302 of the Code. Rev. Rul. 73-102, 1973-1 C.B. 186.
Our opinion is not the equivalent of a ruling from the
Internal Revenue Service and may upon audit be challenged by the
Internal Revenue Service. Our opinion is based on the
understanding that the relevant facts are, and will be at the
Merger Effective Date, as set forth in this letter. It is also
based on the Code, Regulations, case law and Internal Revenue
Service rulings as they now exist. These authorities are all
subject to change and such change may be made with retroactive
effect. Were there to be such changes either before or after the
Merger Effective Date, or should the relevant facts prove to be
other than as we have reviewed, our opinion could be affected.
We hereby consent to the reference to us under the
heading "The CBC/KeyCorp Merger -- Certain Federal Income Tax
Considerations" in the Proxy Statement-Prospectus and to the
filing of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not hereby admit that
we are within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
Baker & Hostetler
<PAGE>
Exhibit A
Baker & Hostetler
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Dear Sirs:
KeyCorp ("KeyCorp"), and Commercial Bancorporation of
Colorado ("CBC") have entered into an Amended and Restated
Agreement and Plan of Acquisition Reorganization and Merger dated
as of September 11, 1993 (the "Agreement"). On _______________,
1994 KeyCorp merged into and with Society Corporation, with
Society Corporation as the surviving corporation under the name
Key Bancshares Inc. ("Key Bancs"). Pursuant to the Agreement,
CBC will merge with and into Key Bancshares of Colorado, Inc.
("KBC"), a wholly-owned subsidiary of Key Bancs (the "Merger").
In accordance with the Agreement, we are requesting your opinion
(the "Opinion") dated the Merger Effective Date (as defined in
the Agreement) on certain federal income tax consequences of the
Agreement as described in Section 5.1(g) of the Agreement with
respect to the overall plan of reorganization contemplated by
such Agreement (the "Transaction").
In preparing the Opinion, you may rely on the following
representations and/or assumptions relating to the Transaction:
(1) The fair market value of the Key Bancs Common Stock
received by each CBC shareholder will be approximately
equal to the fair market value of the CBC Common Stock
surrendered in the Transaction.
(2) There is no plan or intention by the shareholders of
CBC who own 5 percent or more of the CBC Common Stock,
and to the best of the knowledge of the management of
CBC, there is no plan or intention on the part of the
remaining shareholders of CBC to sell, exchange or
otherwise dispose of a number of shares of Key Bancs
Common Stock received in the Transaction that would
reduce the CBC shareholders' ownership of Key Bancs
Common Stock to a number of shares having a value, as
of the Merger Effective Date, of less than 50 percent
of the value of all of the formerly outstanding CBC
Common Stock as of the same date. For purposes of this
representation, shares of CBC Common Stock surrendered
by dissenters or exchanged for cash in lieu of
fractional shares of Key Banks Common Stock are treated
as outstanding CBC Common Stock at the Merger Effective
Date. Moreover, shares of CBC Common Stock and Key
Bancs Common Stock held by CBC shareholders and
otherwise sold, redeemed, or disposed of prior or
subsequent to the Transaction are considered in making
this representation.
(3) KBC and (pursuant to the merger of KBC into Key Bancs),
Key Bancs will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent
of the fair market value of the gross assets held by
CBC immediately prior to the Transaction. For purposes
of this representation, amounts transferred by CBC to
the Escrow Fund to pay holders of Dissenting Shares,
amounts used by CBC to pay its reorganization expenses,
and all redemptions and distributions (except for
regular, normal dividends) made by CBC immediately
preceding the Transaction will be included as assets of
CBC held immediately prior to the Transaction.
(4) Pursuant to the Transaction, the Key Bancs Common Stock
will be distributed to the shareholders of CBC.
(5) The liabilities of CBC assumed by KBC (and pursuant to
the merger of KBC and Key Bancs, Key Bancs) and the
liabilities to which the transferred assets of CBC are
subject were incurred by CBC in the ordinary course of
its business.
(6) Key Bancs, KBC, CBC and the shareholders of CBC will
pay their respective expenses, if any, incurred in
connection with the Transaction.
(7) There is no intercorporate indebtedness existing
between Key Bancs and CBC or between KBC and CBC that
was issued, acquired, or will be settled at a discount.
(8) No two parties to the Transaction are "investment
companies" as defined in Sections 368(a)(2)(F)(iii) and
(iv) of the Code.
(9) CBC is not under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(10) The fair market value of the assets of CBC transferred
to KBC (and pursuant to the merger of KBC into
Key Bancs, Key Bancs) will equal or exceed the sum of
the liabilities assumed by KBC (and pursuant to the
merger of KBC into Key Bancs, Key Bancs), plus the
amount of liabilities, if any, to which the transferred
assets are subject.
(11) None of the compensation to be received by any
shareholder-employees of CBC will be separate
consideration for, or allocable to, any of their shares
of CBC Common Stock; none of the shares of Key Bancs
Common Stock received by any shareholder-employees will
be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any
shareholder-employees will be for services actually
rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar
services.
(12) Any shareholders of CBC who do not vote in favor of the
Transaction and perfect their appraisal rights under
applicable law shall receive cash only from the Escrow
Fund established by CBC prior to the Transaction in
exchange for the surrender of their shares of CBC
Common Stock.
(13) The facts set forth in the Opinion are correct and
there will be no change in any of the facts material to
the Opinion between today and the Merger Effective
Date.
The above representations of fact were made for the
purposes of allowing Baker & Hostetler to form and issue the
Opinion.
Commercial Bancorporation
of Colorado
By: _________________________
<PAGE>
Exhibit B
Baker & Hostetler
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Dear Sirs:
KeyCorp ("KeyCorp"), and Commercial Bancorporation of
Colorado ("CBC") have entered into an Amended and Restated
Agreement and Plan of Acquisition Reorganization and Merger dated
as of September 11, 1993 (the "Agreement"). On ________________,
1994 KeyCorp merged into and with Society Corporation, with
Society Corporation as the surviving corporation under the name
Key Bancshares Inc. ("Key Bancs"). Pursuant to the Agreement,
CBC will merge with and into Key Bancshares of Colorado, Inc.
("KBC"), a wholly-owned subsidiary of Key Bancs (the "Merger").
In accordance with the Agreement, we are requesting your opinion
(the "Opinion") dated the Merger Effective Date (as defined in
the Agreement) on certain federal income tax consequences of the
Agreement as described in Section 5.1(g) of the Agreement with
respect to the overall plan of reorganization contemplated by
such Agreement (the "Transaction").
In preparing the Opinion, you may rely on the following
representations and/or assumptions relating to the Transaction:
(1) The fair market value of the Key Bancs Common Stock
received by each CBC shareholder will be approximately
equal to the fair market value of the CBC Common Stock
surrendered in the Transaction.
(2) KBC and (pursuant to the merger of KBC into Key Bancs),
Key Bancs will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent
of the fair market value of the gross assets held by
CBC immediately prior to the Transaction. For purposes
of this representation, amounts transferred by CBC to
the Escrow Fund to pay holders of Dissenting Shares,
amounts used by CBC to pay its reorganization expenses,
and all redemptions and distributions (except for
regular, normal dividends) made by CBC immediately
preceding the Transaction will be included as assets of
CBC held immediately prior to the Transaction.
(3) Prior to the Transaction, Key Bancs will be in control
of KBC within the meaning of Section 368(c) of the
Internal Revenue Code of 1986, as amended (the "Code").
(4) Following the Transaction, KBC will not issue
additional shares of its stock that would result in Key
Bancs losing control of KBC within the meaning of
Section 368(c) of the Code.
(5) Key Bancs and KBC have no plan or intention to
reacquire any of Key Bancs Common Stock issued in the
Transaction.
(6) Key Bancs has no plan or intention to sell or otherwise
dispose of the stock of KBC, and Key Bancs and KBC have
no plan or intention to sell or otherwise dispose of
any of the assets of CBC acquired in the transaction,
except for the merger of KBC into Key Bancs and
dispositions made in the ordinary course of business or
transfers described in Section 368(a)(2)(C) of the
Code.
(7) Pursuant to the Transaction, the Key Bancs Common Stock
will be distributed to the shareholders of CBC.
(8) Following the merger of CBC into KBC, KBC, (and after
the merger of KBC into Key Bancs, Key Bancs) will
continue the historic business of CBC or use of a
significant portion of CBC's business assets in a
business.
(9) Key Bancs, KBC, CBC and the shareholders of CBC will
pay their respective expenses, if any, incurred in
connection with the Transaction.
(10) There is no intercorporate indebtedness existing
between Key Bancs and CBC or between KBC and CBC that
was issued, acquired, or will be settled at a discount.
(11) No two parties to the Transaction are "investment
companies" as defined in Sections 368(a)(2)(F)(iii) and
(iv) of the Code.
(12) The fair market value of the assets of CBC transferred
to KBC (and pursuant to the merger of KBC into Key
Bancs, Key Bancs) will equal or exceed the sum of the
liabilities assumed by KBC (and pursuant to the merger
of KBC into Key Bancs, Key Bancs), plus the amount of
liabilities, if any, to which the transferred assets
are subject.
(13) Neither Key Bancs nor KBC owns, directly or indirectly,
nor has either owned during the past five years,
directly or indirectly, any stock of CBC.
(14) No stock of KBC will be issued in the Transaction.
(15) The payment of cash in lieu of fractional shares of Key
Bancs Common Stock is solely for the purpose of
avoiding the expense and inconvenience to Key Bancs of
issuing fractional shares and does not represent
separately bargained-for consideration. The total cash
consideration that will be paid in the Transaction to
shareholders of CBC instead of issuing fractional
shares of Key Bancs Common stock will not exceed 1
percent of the total consideration that will be issued
in the Transaction to the shareholders of CBC in
exchange for their shares of CBC Common Stock. The
fractional share interests of each shareholder of CBC
will be aggregated, and no shareholder of CBC will
receive cash in an amount equal to or greater than the
value of one full share of Key Bancs Common Stock.
(16) None of the compensation to be received by any
shareholder-employees of CBC will be separate
consideration for, or allocable to, any of their shares
of CBC Common Stock; none of the shares of Key Bancs
Common Stock received by any shareholder-employees will
be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any
shareholder-employees will be for services actually
rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar
services.
(17) Any shareholders of CBC who do not vote in favor of the
transaction and perfect their appraisal rights under
applicable law shall receive cash only from the Escrow
Fund established by CBC prior to the Transaction in
exchange for the surrender of their shares of CBC
Common Stock.
(18) The merger of CBC into KBC will qualify as a statutory
merger under the laws of Colorado. Additionally, if
CBC had merged into Key Bancs, it would have met the
general requirements of a merger under applicable law.
(19) The Society Rights Agreement was adopted for the
principal purpose of providing a mechanism by which
Society (now Key Bancs) can provide shareholders rights
to purchase stock at substantially less than fair
market value as a means of responding to unsolicited
offers to acquire Key Bancs and no "triggering event"
has occurred with respect thereto.
(20) The KeyCorp/Society Merger qualified as a
reorganization under Section 368(a)(1)(A) of the Code.
(21) The facts set forth in the Opinion are correct and
there will be no change in any of the facts material to
the Opinion between today and the Merger Effective
Date.
The above assumptions and representations of fact were
made for the purpose of allowing Baker & Hostetler to form and
issue the Opinion.
Key Bancshares Inc.
By: ________________________
Exhibit 15
The following is a true and correct copy of a
letter to the Securities and Exchange
Commission from Ernst & Young.
January 11, 1994
Securities and Exchange Commission
Washington, DC 20549
We are aware of the incorporation by reference in the Registration
Statement (Form S-4) of KeyCorp for the registration of shares of
its common stock of our reports dated April 15, 1993 and July 15,
1993 and October 14, 1993 relating to the unaudited consolidated
interim financial statements of KeyCorp which are included in its
Forms 10-Q for the quarters ended March 31, 1993 and June 30, 1993
and September 30, 1993.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports
are not a part of the registration statement prepared or certified
by accountants within the meaning of Section 7 or 11 of the
Securities Act of 1933.
Exhibit 23(a)
The following is a true and correct copy of
the Consent of Independent Auditors from
Ernst & Young
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts"
in the Registration Statement on Form S-4 and related Prospectus of
KeyCorp for the registration of KeyCorp common shares and to the
incorporation by reference therein of our report dated January 15,
1993 with respect to the KeyCorp 1992 Supplemental Financial
Statements (which now are considered to be the primary financial
statements, giving effect to the merger of Puget Sound Bancorp with
KeyCorp on January 15, 1993) included in the KeyCorp current report
on Form 8-K dated March 18, 1993, (as amended by a Form 8 dated
May 20, 1993) filed with the Securities and Exchange Commission.
Albany, New York
January 11, 1994
Exhibit 23(b)
The following is a true and correct copy of the
Consent of Independent Auditors from
Deloitte & Touche
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement, relating to
the merger of KeyCorp and Commercial Bancorporation of Colorado on
Form S-4, of our report dated February 5, 1993, appearing in the
Form 10-K which is included in Appendix E to the Proxy Statement -
Prospectus, which is part of such Registration Statement.
We also consent to the reference to us under the heading "Experts"
in such Proxy Statement - Prospectus.
DELOITTE & TOUCHE
Denver, Colorado
January 12, 1994
Exhibit 24
The following are true and correct copies
of the Powers of Attorney signed by the
officers and directors of KeyCorp.
KEYCORP
SPECIAL POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the undersigned,
being respectively the Chairman, President and Chief Executive
Officer and the Group Executive Vice President and Chief
Financial Officer of KEYCORP, a New York corporation ("KeyCorp"),
hereby constitute and appoint Robert W. Bouchard, Walter V.
Ferris, David J. DeLuca, Lee Irving, and Carter B. Chase, as the
undersigned's agents and attorneys-in fact, with full power to
each of them to execute, file and deliver any and all instruments
and to do any and all acts and things which said agents and
attorneys-in-fact, or any of them, deem necessary or advisable to
enable KeyCorp to comply with the Securities Act of 1933, the
Securities Exchange Act of 1934, and any requirements of the
Securities and Exchange Commission, the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve
System, state securities law regulators, the Secretary of State
of the State of Colorado, or the Colorado Banking Board, relating
to the acquisition by KeyCorp of Commercial Bancorporation of
Colorado, and the issuance of common stock of KeyCorp in
furtherance thereof including specifically, but without
limitation of the general authority hereby granted, the power and
authority to sign the names of the undersigned on behalf of
KeyCorp as a director or officer, as the case may be, of KeyCorp
to a registration statement on Form S-4, or any amendment
(including post-effective amendments) or papers supplemental
thereto; and the undersigned hereby fully ratify and confirm all
that said agents and attorneys-in-fact, or any of them, shall do
or cause to be done by virtue hereof.
Dated: December 16, 1993
Signature Capacity
_________ ________
/s/ Victor J. Riley, Jr. Chairman, President and
______________________________ Chief Executive Officer,
Victor J. Riley, Jr. and Director
/s/ William H. Dougherty Group Executive Vice President
______________________________ and Chief Financial Officer
William H. Dougherty
<PAGE>
KEYCORP
SPECIAL POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each of the
undersigned directors of KEYCORP, a New York corporation
("KeyCorp"), hereby constitutes and appoints Victor J. Riley,
Jr., Robert W. Bouchard, William H. Dougherty, Walter V. Ferris,
David J. DeLuca, Lee Irving, and Carter B. Chase, as the
undersigned's agents and attorneys-in fact, with full power to
each of them to execute, file and deliver any and all instruments
and to do any and all acts and things which said agents and
attorneys-in-fact, or any of them, deem necessary or advisable to
enable KeyCorp to comply with the Securities Act of 1933, the
Securities Exchange Act of 1934, and any requirements of the
Securities and Exchange Commission, the Federal Deposit Insurance
Corporation, the Board of Governors of the Federal Reserve
System, state securities law regulators, the Secretary of State
of the State of Colorado, or the Colorado Banking Board, relating
to the acquisition by KeyCorp of Commercial Bancorporation of
Colorado, and the issuance of common stock of KeyCorp in
furtherance thereof including specifically, but without
limitation of the general authority hereby granted, the power and
authority to sign the name of each of the undersigned on behalf
of KeyCorp as a director of KeyCorp to a registration statement
on Form S-4, or any amendment (including post-effective
amendments) or papers supplemental thereto; and the undersigned
hereby fully ratifies and confirms all that said agents and
attorneys-in-fact, or any of them, shall do or cause to be done
by virtue hereof.
Dated: December 16, 1993
Signature Capacity
_________ ________
/s/ William J. Agee Director
________________________________
William J. Agee
/s/ Frank A. Augsbury, Jr. Director
______________________________
Frank A. Augsbury, Jr.
/s/ H. Douglas Barclay Director
______________________________
H. Douglas Barclay
/s/ Robert H. Bischoff Director
______________________________
Robert H. Bischoff
/s/ Curtis M. Carlson Director
______________________________
Curtis M. Carlson
/s/ Kenneth M. Curtis Director
______________________________
Kenneth M. Curtis
/s/ John C. Dimmer Director
______________________________
John C. Dimmer
/s/ Lucie J. Fjeldstad Director
______________________________
Lucie J. Fjeldstad
/s/ Henry S. Hemingway Director
______________________________
Henry S. Hemingway
/s/ Charles R. Hogan Director
______________________________
Charles R. Hogan
/s/ Raymond E. Lavoie, Jr. Director
______________________________
Raymond E. Lavoie, Jr.
/s/ Robert A. Schumacher Director
______________________________
Robert A. Schumacher
/s/ Ronald B. Stafford Director
______________________________
Ronald B. Stafford
/s/ Peter G. TenEyck II Director
______________________________
Peter G. TenEyck II
/s/ Nancy B. Veeder Director
______________________________
Nancy B. Veeder
Exhibit 99
COMMERCIAL BANCORPORATION OF COLORADO
Century Bank Plaza
3300 East First Avenue
Denver, Colorado 80206
THIS PROXY IS SOLICITED
BY THE BOARD OF DIRECTORS
FOR THE
SPECIAL MEETING OF SHAREHOLDERS
TUESDAY, FEBRUARY 22, 1994
The undersigned shareholder of COMMERCIAL BANCORPORATION
OF COLORADO, a Colorado corporation ("CBC"), acknowledges receipt
of the Notice of Special Meeting of Shareholders ("Special
Meeting') to be held at the offices of CBC, Century Bank Plaza,
3300 East First Avenue, Denver, Colorado, on Tuesday, February 22,
1994, at 2:00 p.m. Mountain Time, and the Proxy Statement ("Proxy
Statement") that accompanied the Notice of Special Meeting and
hereby appoints Jon P. Coates and Paul G. West, or either of them,
each with the power of substitution, as Attorneys and Proxies, to
vote all of the shares of Class A Common Stock held by the
undersigned at the Special Meeting and at all adjournments thereof,
hereby ratifying and confirming all that said Attorneys and Proxies
may do or cause to be done by virtue thereof. The above-named
Attorneys and Proxies are instructed to vote all of the
undersigned's shares as follows:
1. Approval of the Merger Agreement pursuant to which CBC will
merge with and into a wholly owned direct subsidiary of
KeyCorp, as further described in the Proxy Statement:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the Special
Meeting or any adjournment or adjournments thereof.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Proxy continued on reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN THE DISCRETION
OF THE PROXIES ON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE
THE SPECIAL MEETING.
Please sign your name exactly as it appears on your stock
certificate.
Date: ______________________, 1994.
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY _______________________________
IMMEDIATELY. IF SHARES ARE Signature
HELD JOINTLY, EACH HOLDER
SHOULD SIGN. EXECUTORS,
TRUSTEES, AND OTHER
FIDUCIARIES SHOULD SO INDICATE _______________________________
WHEN SIGNING. FOR A Signature
CORPORATION OR A PARTNERSHIP,
PLEASE SIGN IN THE FULL
CORPORATE NAME BY THE
PRESIDENT OR OTHER _______________________________
AUTHORIZED OFFICER OR THE (Print or Type Name of Person(s)
FULL PARTNERSHIP NAME BY AN Executing Proxy)
AUTHORIZED PERSON, AS THE
CASE MAY BE. IN ALL CASES,
PLEASE PRINT OR TYPE THE NAME
OF THE PERSON(S) EXECUTING _______________________________
THE PROXY AND THE TITLE (IF (Print or Type Title of Person
APPLICABLE) OF SUCH PERSON IN Executing Proxy, if Applicable)
THE SPACES PROVIDED.
PLEASE PROVIDE THE INFORMATION REQUESTED ABOVE AND SIGN,
DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
COMMERCIAL BANCORPORATION OF COLORADO
Century Bank Plaza
3300 East First Avenue
Denver, Colorado 80206
THIS PROXY IS SOLICITED
BY THE BOARD OF DIRECTORS
FOR THE
SPECIAL MEETING OF SHAREHOLDERS
TUESDAY, FEBRUARY 22, 1994
The undersigned shareholder of COMMERCIAL BANCORPORATION
OF COLORADO, a Colorado corporation ("CBC"), acknowledges receipt
of the Notice of Special Meeting of Shareholders ("Special
Meeting') to be held at the offices of CBC, Century Bank Plaza,
3300 East First Avenue, Denver, Colorado, on Tuesday, February 22,
1994, at 2:00 p.m. Mountain Time, and the Proxy Statement ("Proxy
Statement") that accompanied the Notice of Special Meeting and
hereby appoints Jon P. Coates and Paul G. West, or either of them,
each with the power of substitution, as Attorneys and Proxies, to
vote all of the shares of Class B Common Stock held by the
undersigned at the Special Meeting and at all adjournments thereof,
hereby ratifying and confirming all that said Attorneys and Proxies
may do or cause to be done by virtue thereof. The above-named
Attorneys and Proxies are instructed to vote all of the
undersigned's shares as follows:
1. Approval of the Merger Agreement pursuant to which CBC will
merge with and into a wholly owned direct subsidiary of
KeyCorp, as further described in the Proxy Statement:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the Special
Meeting or any adjournment or adjournments thereof.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Proxy continued on reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND IN THE DISCRETION
OF THE PROXIES ON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE
THE SPECIAL MEETING.
Please sign your name exactly as it appears on your stock
certificate.
Date: ______________________, 1994.
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY _______________________________
IMMEDIATELY. IF SHARES ARE Signature
HELD JOINTLY, EACH HOLDER
SHOULD SIGN. EXECUTORS,
TRUSTEES, AND OTHER
FIDUCIARIES SHOULD SO INDICATE _______________________________
WHEN SIGNING. FOR A Signature
CORPORATION OR A PARTNERSHIP,
PLEASE SIGN IN THE FULL
CORPORATE NAME BY THE
PRESIDENT OR OTHER _______________________________
AUTHORIZED OFFICER OR THE (Print or Type Name of Person(s)
FULL PARTNERSHIP NAME BY AN Executing Proxy)
AUTHORIZED PERSON, AS THE
CASE MAY BE. IN ALL CASES,
PLEASE PRINT OR TYPE THE NAME
OF THE PERSON(S) EXECUTING _______________________________
THE PROXY AND THE TITLE (IF (Print or Type Title of Person
APPLICABLE) OF SUCH PERSON IN Executing Proxy, if Applicable)
THE SPACES PROVIDED.
PLEASE PROVIDE THE INFORMATION REQUESTED ABOVE AND SIGN,
DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
