<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KEYCORP
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
KEYCORP
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
Not Applicable
(2) Form, schedule or registration statement no.:
Not Applicable
(3) Filing party:
Not Applicable
(4) Date filed:
Not Applicable
<PAGE> 2
[INSERT KEYCORP LOGO]
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
April 18, 1994
DEAR SHAREHOLDER:
You are cordially invited to attend the 1994 Annual Meeting of Shareholders
of KeyCorp which will be held at The Forum Conference Center, One Cleveland
Center, 1375 East Ninth Street, Cleveland, Ohio, on Thursday, May 19, 1994, at
10:30 a.m. KeyCorp was formed as a result of the merger of the former KeyCorp
("Old Key") with Society Corporation ("Society") on March 1, 1994. This will be
the first Annual Meeting of Shareholders following the merger of Old Key and
Society. The meeting is for the shareholders of the combined company.
All holders of record of KeyCorp Common Shares as of March 22, 1994, are
entitled to vote at the KeyCorp 1994 Annual Meeting, including holders of record
of KeyCorp Common Shares who have not tendered their Old Key common stock
certificates for exchange as of that date and holders of record who have Society
common share certificates as of that date. We encourage all holders of Old Key
common stock certificates to tender their certificates for exchange. Society
common share certificates do not need to be exchanged because, as a result of
the merger, those certificates are automatically treated as representing an
equal number of KeyCorp Common Shares.
As described in the accompanying Notice and Proxy Statement, you will be
asked to elect seven directors for three-year terms expiring in 1997, to amend
and restate the Corporation's 1991 Equity Compensation Plan, and to ratify the
appointment of Ernst & Young as independent auditors for 1994. The Annual Report
for the year ended December 31, 1993, is enclosed.
Your Proxy card is enclosed. Please indicate your voting instructions and
sign, date, and mail this Proxy promptly in the return envelope.
Sincerely,
[sig]
VICTOR J. RILEY, JR.
Chairman of the Board
and Chief Executive Officer
<PAGE> 3
[INSERT KEYCORP LOGO]
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1994
The 1994 Annual Meeting of Shareholders of KeyCorp will be held at The
Forum Conference Center, One Cleveland Center, 1375 East Ninth Street,
Cleveland, Ohio, on Thursday, May 19, 1994, at 10:30 a.m., for the following
purposes:
1. To elect seven directors to serve for terms expiring in 1997;
2. To consider and act upon an amendment and restatement of the 1991
Equity Compensation Plan;
3. To ratify the appointment by the Board of Directors of Ernst &
Young as independent auditors for KeyCorp for the fiscal year ending
December 31, 1994;
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of KeyCorp Common Shares of record as of the close of business
on March 22, 1994, have the right to receive notice of and to vote at the Annual
Meeting and any adjournment thereof. Holders of record of KeyCorp Common Shares
who have not tendered their Old Key common stock certificates for exchange as of
that date are entitled to vote at the meeting.
By Order of the Board of Directors
[sig]
CARTER B. CHASE
April 18, 1994 Secretary
------------------------
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN, AND MAIL THE ENCLOSED
PROXY CARD AT YOUR EARLIEST CONVENIENCE. PLEASE USE THE RETURN ENVELOPE ENCLOSED
WITH THE PROXY CARD FOR THAT PURPOSE.
<PAGE> 4
[INSERT KEYCORP LOGO]
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
PROXY STATEMENT
This Proxy Statement is furnished commencing on or about April 18, 1994, in
connection with the solicitation on behalf of the Board of Directors of KeyCorp
of proxies to be voted at the 1994 Annual Meeting of Shareholders on May 19,
1994, and at all adjournments thereof. KeyCorp was formed as a result of the
merger of the former KeyCorp ("Old Key") with Society Corporation ("Society") on
March 1, 1994 (the "Merger"). All holders of record of KeyCorp Common Shares at
the close of business on March 22, 1994, are entitled to vote, including holders
of record who have not tendered their Old Key common stock certificates for
exchange as of that date and holders of record who have Society common share
certificates as of that date. Holders of record of KeyCorp Common Shares who
have not tendered their Old Key common stock certificates for exchange as of
March 22, 1994, are entitled to vote a number of shares equal to the number of
whole KeyCorp Common Shares into which such holders' shares of Old Key common
stock are exchangeable pursuant to the Agreement and Plan of Merger and the
related Supplemental Agreement to Agreement and Plan of Merger between Old Key
and Society, each dated October 1, 1993, as amended (together, the "Merger
Agreement"). Holders of record of KeyCorp Common Shares who have Society Common
Share certificates do not need to exchange their shares because, under the
Merger Agreement, those certificates are automatically treated as representing
an equal number of KeyCorp Common Shares. On March 22, 1994, there were
241,820,458 KeyCorp Common Shares outstanding and entitled to vote at the
meeting, and each such share is entitled to one vote on each matter to be
considered. At the meeting, a majority of the outstanding shares shall
constitute a quorum.
This Proxy Statement presents information for various entities during
different time periods. For clarity, "Old Key" refers to the former KeyCorp
which merged into and with Society on March 1, 1994; "Society" refers to Society
Corporation prior to the Merger with Old Key on March 1, 1994; and "KeyCorp"
refers to Society as the surviving corporation in the Merger, which corporation
changed its name to KeyCorp on March 1, 1994.
1
<PAGE> 5
ELECTION OF DIRECTORS
In accordance with KeyCorp's Regulations, effective as of the 1994 Annual
Meeting of Shareholders, the Board of Directors of KeyCorp (the "Board") has
established the size of the Board at 22 members divided into two classes of
seven members each and one class of eight members. The terms of these classes,
as of the 1994 Annual Meeting, will expire in 1995, 1996, and 1997,
respectively. Seven nominees for directors for terms expiring in 1997 are listed
below. All properly executed and returned proxies will be voted for these
nominees unless contrary specifications are made on the proxy, in which case the
proxy will be voted in accordance with any proper specification thereon. The
nominees are all current members of the Board. Should any nominee become unable
to accept nomination or election, the proxies (unless a contrary specification
is made thereon) will be voted for the election of such person, if any, as shall
be recommended by the Board, or for holding a vacancy to be filled by the Board
at a later date. The Board has no reason to believe that the persons listed as
nominees will be unable to serve. At all elections of directors, the properly
nominated candidates receiving the greatest number of votes shall be elected.
The following table lists, as of February 22, 1994, as to nominees for
director and directors whose terms of office will continue after the Annual
Meeting, the principal occupation or employment, age, the year in which each
first became a director of KeyCorp (with the year in which the director first
became a director of Old Key shown in parentheses as applicable), and
directorships in registered investment companies or companies having securities
which are registered pursuant to, or which are subject to certain provisions of,
the Securities Exchange Act of 1934. Except as otherwise indicated, each nominee
or continuing director has had the same principal occupation or employment
during the past five years. The Merger Agreement provides that the seven
nominees listed below would be nominated by the Board for re-election as
directors of KeyCorp for terms expiring at the 1997 Annual Meeting of
Shareholders, and that KeyCorp would solicit proxies for, and use its best
efforts to cause, the election of all such nominees as directors.
<TABLE>
<CAPTION>
NAME,
PRINCIPAL OCCUPATION, DIRECTOR OTHER
AND AGE SINCE DIRECTORSHIPS
- - - -------------------------------------------- ------------ ----------------------------
<S> <C> <C>
NOMINEES FOR TERMS EXPIRING IN 1997:
WILLIAM G. BARES 1987 The Lubrizol Corporation;
President and Chief Operating Officer, The Bearings, Inc.; Oglebay
Lubrizol Corporation (chemicals for use in Norton Company
lubricants and fuels); 52
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
NAME,
PRINCIPAL OCCUPATION, DIRECTOR OTHER
AND AGE SINCE DIRECTORSHIPS
- - - -------------------------------------------- ------------ ----------------------------
<S> <C> <C>
LUCIE J. FJELDSTAD 1994 PPG Industries; Entergy
Private Consultant; 49 (1991) Corporation; Recognition
International
ROBERT W. GILLESPIE 1982
President and Chief Operating Officer,
KeyCorp; 49
HENRY S. HEMINGWAY 1994
President, Town & Country Life Insurance (1987)
Company (insurance); 40
STEVEN A. MINTER 1987 Consolidated Natural Gas
Executive Director and President, The Company; Goodyear Tire and
Cleveland Foundation (philanthropic Rubber Company;
foundation); 55 Rubbermaid, Inc.
VICTOR J. RILEY, JR. 1994 NYNEX
Chairman of the Board and Chief Executive (1973)
Officer, KeyCorp; 62
RONALD B. STAFFORD 1994
Partner, Stafford, Trombley, Purcell, (1983)
Lahtinen, Owens & Curtin (law firm);
member of the New York State Senate; 58
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1995:
H. DOUGLAS BARCLAY 1994 Syracuse Supply Company;
Partner, Hiscock & Barclay (law firm); 61 (1971) Eagle Media, Inc.
THOMAS A. COMMES 1987 The Sherwin-Williams
President and Chief Operating Officer, The Company; Centerior
Sherwin-Williams Company (paints and Energy Corporation
painting supplies); 51
STEPHEN R. HARDIS 1985 Eaton Corporation;
Vice Chairman and Chief Financial and First Union Real Estate
Administrative Officer, Eaton Corporation Investments;
(diversified manufacturing company); 58 Nordson Corporation;
Progressive Corporation
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME,
PRINCIPAL OCCUPATION, DIRECTOR OTHER
AND AGE SINCE DIRECTORSHIPS
- - - -------------------------------------------- ------------ ----------------------------
<S> <C> <C>
LAWRENCE A. LESER 1987 The E.W. Scripps Company;
President and Chief Executive Officer, The Scripps Howard Broadcasting
E.W. Scripps Company (newspaper Company
publishing, television stations, cable
television systems, and media services);
58
JOHN C. MORLEY 1992 Reliance Electric Company;
President and Chief Executive Officer, AMP Incorporated;
Reliance Electric Company Ferro Corporation
(electro-mechanical auto-
mation and telecommunications equipment);
62
PETER G. TEN EYCK, II 1994
President, Indian Ladder Farms (commercial (1979)
orchard); 55
NANCY B. VEEDER 1994
President, Veeder Realty, Inc.; partner, (1981)
V.R. Associates Ltd., doing business as
Residence Inn (hotel operation); 67
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1996:
ALBERT C. BERSTICKER 1991 Ferro Corporation; Brush
President since 1988, and Chief Executive Wellman Inc.; Centerior
Officer since 1991, Ferro Corporation Energy Corporation; Oglebay
(industrial specialty chemicals); 59 Norton Company
KENNETH M. CURTIS 1994 New England Telephone
President, Maine Maritime Academy (ocean- (1993) Company; Bowater
oriented college); 62 Incorporated
JOHN C. DIMMER 1994 Momentum Corporation
President, Firs Management Corporation (1993)
(real estate and investment company); 65
CHARLES R. HOGAN 1994
Co-Chairman of the Board, Puget Sound (1993)
Marketing Company, Inc. (supermarket chain
operation); 56
M. THOMAS MOORE 1992 Cleveland-Cliffs Inc;
Chairman, President and Chief Executive Capitol American
Officer, Cleveland-Cliffs Inc (iron ore Financial Corporation;
pellet producer); 59 The LTV Corporation
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
NAME,
PRINCIPAL OCCUPATION, DIRECTOR OTHER
AND AGE SINCE DIRECTORSHIPS
- - - -------------------------------------------- ------------ ----------------------------
<S> <C> <C>
RICHARD W. POGUE 1992 Continental Airlines, Inc.;
Partner, Jones, Day, Reavis & Pogue M.A. Hanna Company;
(law firm); 65 OHM Corporation;
TRW Inc.
ROBERT A. SCHUMACHER 1994
Private Consultant; 71 (1986)
DENNIS W. SULLIVAN 1993 Parker Hannifin Corporation;
Executive Vice President, Parker Hannifin Ferro Corporation
Corporation (industrial and aerospace
motion control components and systems); 55
</TABLE>
- - - ---------------
Messrs. Barclay, Pogue, and Stafford, directors of KeyCorp, are members of
law firms that KeyCorp utilizes for legal services.
Some of Society's and Old Key's executive officers and directors were
customers of one or more of Society's or Old Key's subsidiary banks during 1993
and had transactions with such banks in the ordinary course of business. In
addition, some directors are officers of, or have a relationship with,
corporations, or are members of partnerships, which were customers of such banks
during 1993 and had transactions with such banks in the ordinary course of
business. All loans included in such transactions were made on substantially the
same terms, including rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than normal
risks of collectibility or present other unfavorable features. Similar
transactions continue to be effected during 1994.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
BOARD OF DIRECTORS. During the year ended December 31, 1993, there were
five meetings of Society's Board of Directors. Each current member of KeyCorp's
Board who was a member of the Society Board prior to the Merger, other than Mr.
Commes, attended at least 75% of the aggregate of the meetings held by Society's
Board of Directors and the meetings held by the committees of the Board on which
such member served. Each current member of KeyCorp's Board who was a member of
the Old Key Board prior to the Merger, other than Mr. Schumacher, attended at
least 75% of the aggregate meetings held by Old Key's Board of Directors and the
meetings held by the committees of the Board on which such member served.
KeyCorp's Board of Directors currently exercises certain of its powers
through its Audit, Community Responsibility, Compensation and Organization,
Executive, Executive Equity Compensation, and Nominating Committees.
5
<PAGE> 9
EXECUTIVE COMMITTEE. Messrs. Barclay, Bares, Curtis, Gillespie, Hardis,
Pogue, Riley (Chair), and Ms. Veeder are the current members of KeyCorp's
Executive Committee. Through December 31, 1998, under KeyCorp's Regulations, it
is intended that Messrs. Riley and Gillespie will be members of KeyCorp's
Executive Committee as long as they are directors of KeyCorp.
The functions of the Committee are to exercise the authority of the Board
of Directors, to the extent permitted by law, on any matter requiring Board or
Board committee action between Board or Board committee meetings. Society's
Executive Committee met seven times in 1993.
AUDIT COMMITTEE. Messrs. Bares (Chair), Hemingway, Hogan, Moore, Pogue,
Stafford, Sullivan, and Ten Eyck are the current members of KeyCorp's Audit
Committee. The functions of the Committee include review of the adequacy of
internal administrative, operating, and accounting policies and controls, review
of the financial information provided to shareholders and the Securities and
Exchange Commission, recommendation of the appointment of KeyCorp's independent
auditors, review of the scope of the services and the estimated fees of the
independent auditors, review of the examinations of KeyCorp and its affiliates
conducted by federal and state regulatory authorities, review of the Audit
Committees of KeyCorp's subsidiaries, review of the audit plans of the internal
audit staff and of the independent auditors and the results and effectiveness of
their audits, and supervision and direction of any special projects or
investigations considered necessary. Society's Audit Committee met four times in
1993.
COMPENSATION AND ORGANIZATION COMMITTEE. Messrs. Barclay (Chair),
Bersticker, Commes, Ms. Fjeldstad, and Messrs. Hardis (Vice Chair) and
Schumacher are the current members of KeyCorp's Compensation and Organization
Committee. The functions of the Committee include review and approval of the
salary administration programs, determination of the compensation of senior
management, determination of participants and awards under executive
compensation plans and supplemental compensation plans except for equity
compensation plans, approval of amendments to employee and officer retirement,
compensation, and benefit plans, review and recommendation of director
compensation, review of organization structure and staffing, and review of
management structure, development, and succession planning. Society's
Compensation and Organization Committee met eight times in 1993.
EXECUTIVE EQUITY COMPENSATION COMMITTEE. Messrs. Bersticker, Commes, Ms.
Fjeldstad, and Messrs. Hardis (Chair) and Schumacher are the current members of
KeyCorp's Executive Equity Compensation Committee.
The functions of the Committee include determination of participants and
awards under KeyCorp's equity compensation plans, including the granting of
stock options. This Committee was established in 1994.
NOMINATING COMMITTEE. Messrs. Barclay, Gillespie, Hardis, and Riley are the
current members of KeyCorp's Nominating Committee. Through December 31, 1998,
under KeyCorp's
6
<PAGE> 10
Regulations, two of the four members of the Nominating Committee will be
individuals who were serving as directors of Old Key prior to the Merger (one of
whom will be Mr. Riley as long as he is a director of KeyCorp), and the other
members of the Nominating Committee will be individuals who were serving as
directors of Society prior to the Merger (one of whom will be Mr. Gillespie as
long as he is a director of KeyCorp).
The functions of the Committee include identifying and reviewing the
qualifications of prospective directors and recommending candidates for election
as directors. Through December 31, 1998, under KeyCorp's Regulations,
nominations for the election of directors by KeyCorp's Board of Directors may
only be made by the affirmative vote of three-quarters of the Board of Directors
and three-quarters of the Nominating Committee, except that there is an
alternative procedure in the event that the Nominating Committee is unable to
approve by the requisite vote a nomination for election of a particular director
or directors. The Committee will consider shareholder suggestions concerning
qualified candidates for election as directors that are forwarded to the
Nominating Committee. Any shareholder recommendation for a director nominee
should contain background information concerning the recommended nominee,
including, (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 KeyCorp 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, and (vi) a statement of whether such individual would be
willing to serve if nominated or elected. Any shareholder recommendation should
also include, as to the shareholder giving the written notice, (i) a
representation that the shareholder is a holder of record of shares of KeyCorp
entitled to vote at such meeting and (ii) a description of all arrangements or
understandings between the shareholder and such recommended person and any other
person or persons (naming such person or persons). The Committee was established
in 1994.
COMMUNITY RESPONSIBILITY COMMITTEE. Messrs. Curtis, Dimmer, Minter, Leser,
Morley, and Ms. Veeder (Chair) are the current members of KeyCorp's Community
Responsibility Committee.
The functions of the Committee include review of Community Reinvestment Act
programs of KeyCorp and its bank subsidiaries, KeyCorp's Compliance Program, and
KeyCorp's compliance with applicable law and regulation. This Committee was
established in 1994.
DIRECTOR COMPENSATION. Directors (other than directors who are officers of
KeyCorp or of any affiliate, which directors receive no director fees) receive
fees consisting of a $6,750 quarterly retainer and $1,500 for attendance at each
Board or committee meeting. Outside directors who serve as committee
chairpersons receive additional compensation of $2,500 per quarter. Under the
7
<PAGE> 11
KeyCorp Director Deferred Compensation Plan, directors are given an opportunity
to defer payment of director fees for future distribution.
Under the Directors' Stock Option Plan (the "Directors' Plan"), directors
are granted options to purchase 3,500 KeyCorp Common Shares annually at the
March meeting of the Board. Options for 3,500 KeyCorp Common Shares for 1994
were automatically granted at the meeting of the KeyCorp Board of Directors in
March 1994. All options granted under the Directors' Plan are non-qualified
stock options. Options generally expire ten years after grant. The purchase
price of the option shares is equal to their fair market value on the date of
grant and may be paid in cash or by the surrender of previously acquired KeyCorp
Common Shares. At December 31, 1993, 268,250 additional options could be granted
under the Directors' Plan. In the event that KeyCorp Common Shares are changed
into or exchanged for a different number or kind of securities, or in the event
of a stock split, then the number and exercise price of options and the limits
on the aggregate totals of shares available for grants under the Directors' Plan
will be proportionately amended.
EXECUTIVE OFFICERS
Executive officers of KeyCorp are principally responsible for making policy
for KeyCorp. Mr. Riley is the Chief Executive Officer of KeyCorp for a term
expiring December 31, 1995, and Mr. Gillespie is the President of KeyCorp for a
term expiring December 31, 1998. All other executive officers hold their
respective office or offices for such term as may be prescribed by the Board
(generally, officers are elected annually) and until such persons' successors
have been chosen. Messrs. Riley, Gillespie, and Noall and certain other
executive officers have employment agreements with KeyCorp. All other executive
officers have severance or change of control agreements with KeyCorp.
There are no family relationships among executive officers. All have been
employed in officer capacities with KeyCorp, Old Key, or their acquired
subsidiaries, for at least the past five years, except for Messrs. Blakely,
Chase, and Carestio.
Set forth below are the names and ages of the executive officers of KeyCorp
as of March 1, 1994, positions held and the year from which held, and, in
parentheses, the year they first became executive officers of either KeyCorp or
Old Key.
GARY R. ALLEN (45)
Since 1994: Senior Executive Vice President and Chief Banking Officer,
KeyCorp; 1993-1994: Executive Vice President and Chief Banking Officer, Old Key;
1991-1993: President and Chief Executive Officer, Key Bank of New York;
1988-1993: Chief Executive Officer, Key Bank of Western New York. (1993)
8
<PAGE> 12
KEVIN M. BLAKELY (42)
Since 1994: Executive Vice President, KeyCorp; 1992-1994: Executive Vice
President, Credit Policy and Risk Management, Society National Bank; 1990-1992:
Senior Vice President, Loan Review, Ameritrust Company, N.A.; 1988-1990: Deputy
Comptroller, Office of the Comptroller of the Currency. (1994)
RALPH M. CARESTIO, JR. (50)
Since 1994: Executive Vice President, Financial Services Group, KeyCorp;
1991-1994: Executive Vice President, Financial Services Group, Old Key;
1984-1991: Executive Vice President, NCNB Corporation. (1991)
CARTER B. CHASE (58)
Since 1994: Executive Vice President, General Counsel and Secretary,
KeyCorp; 1990-1994: Senior Vice President and Assistant General Counsel, Old
Key; 1974-1990: Partner, Hiscock & Barclay. (1990)
ROBERT W. GILLESPIE (49)
Since 1994: President and Chief Operating Officer, KeyCorp; 1988-1994:
Chairman of the Board, Chief Executive Officer, and President, Society
Corporation. (1981)
ALLEN J. GULA (39)
Since 1994: Executive Vice President, Information Technology and
Operations, KeyCorp; 1992-1994: Executive Vice President and Group Executive,
Information Technology and Operations, Society Corporation; 1990-1992: Senior
Vice President, Society Corporation; 1989: Executive Vice President, Information
Technology Group, Society Management Company; 1987-1989: Senior Vice President
and Manager, Information Systems, Society Management Company. (1992)
LEROY G. IRVING (45)
Since 1994: Executive Vice President, Treasurer, and Chief Accounting
Officer, KeyCorp; 1986-1994: Senior Vice President and Treasurer, Old Key.
(1986)
HENRY L. MEYER III (44)
Since 1994: Senior Executive Vice President and Chief Banking Officer,
KeyCorp; 1991-1994: Vice Chairman of the Board and Chief Banking Officer,
Society Corporation; 1990-1991: Executive Vice President, Society Corporation;
Since 1993: President and Chief Executive Officer, Society National Bank;
1990-1991: President and Chief Operating Officer, Society National Bank; 1989:
Executive Vice President, Retail Banking Sector, Society National Bank. (1987)
9
<PAGE> 13
ROGER NOALL (58)
Since 1994: Senior Executive Vice President and Chief Administrative
Officer, KeyCorp; 1987-1994: Vice Chairman of the Board and Chief Administrative
Officer, Society Corporation. (1985)
VICTOR J. RILEY, JR. (62)
Since 1994: Chairman of the Board and Chief Executive Officer, KeyCorp;
1973-1994: Chairman of the Board, President, and Chief Executive Officer, Old
Key. (1973)
BRUCE E. TOFTE (50)
Since 1994: Executive Vice President, KeyCorp; 1987-1994: Executive Vice
President and Chief Control Officer, Old Key. (1987)
MARTIN J. WALKER (42)
Since 1994: Executive Vice President, KeyCorp; 1990-1994: Executive Vice
President and Treasurer, Society Corporation; 1988-1990: Senior Vice President,
Funds Management, Society National Bank. (1990)
JAMES W. WERT (46)
Since 1994: Senior Executive Vice President and Chief Financial Officer,
KeyCorp; 1990-1994: Vice Chairman of the Board and Chief Financial Officer,
Society Corporation; 1987-1990: Executive Vice President, Corporate Finance
Sector, Society Corporation. (1976)
10
<PAGE> 14
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY. The following table sets forth the compensation paid by Society
and its subsidiaries for each of the previous three years to the individual who
was Society's Chief Executive Officer during 1993, and each of the remaining
four highest paid executive officers of Society at December 31, 1993. The table
also sets forth the compensation paid by Old Key in 1993 to two of its executive
officers who would have been included in the table had the Merger taken place in
1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
AWARDS PAYOUTS
ANNUAL ------------- ----------
COMPENSATION(1) SECURITIES LONG-TERM
--------------------- UNDERLYING INCENTIVE ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS(#) PAYOUTS COMPENSATION
- - - ------------------------------------------- ---- -------- -------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Gillespie 1993 $599,000 $625,000(2) 40,000 $305,784(6) $211,011(8)
President and Chief Operating Officer, 1992 553,250 531,000(2) 160,000(4) 203,536(6) 41,494(8)
KeyCorp, formerly Chairman of the Board, 1991 500,000 450,000(2) 40,000(4) 177,847(6) 37,500(8)
Chief Executive Officer, and President,
Society Corporation.
Henry L. Meyer III 1993 363,000 300,000(2) 20,000 182,055(6) 111,915(8)
Senior Executive Vice President and 1992 337,500 255,000(2) 80,000(4) 109,700(6) 25,312(8)
Chief Banking Officer, KeyCorp, 1991 268,750 203,000(2) 20,000(4) 85,612(6) 20,156(8)
formerly Vice Chairman of the Board and
Chief Banking Officer, Society
Corporation.
Roger Noall 1993 363,000 300,000(2) 20,000 182,055(6) 117,379(8)
Senior Executive Vice President and 1992 337,500 255,000(2) 80,000(4) 119,669(6) 25,312(8)
Chief Administrative Officer, 1991 292,000 203,000(2) 20,000(4) 102,164(6) 20,680(8)
KeyCorp, formerly Vice
Chairman of the Board and Chief
Administrative Officer, Society
Corporation.
James W. Wert 1993 363,000 300,000(2) 20,000 182,055(6) 112,780(8)
Senior Executive Vice President and 1992 337,500 255,000(2) 80,000(4) 112,832(6) 25,312(8)
Chief Financial Officer, KeyCorp, 1991 275,750 203,000(2) 20,000(4) 91,390(6) 20,680(8)
formerly Vice Chairman of the Board and
Chief Financial Officer, Society
Corporation.
Stephen E. Wall 1993 231,500 200,000(2) 14,000 102,294(6) 71,781(8)
President, Society National Bank, 1992 217,000 165,000(2) 56,000(4) 64,291(6) 16,275(8)
formerly Executive Vice President, 1991 196,750 135,000(2) 12,000(4) 56,781(6) 14,756(8)
Society Corporation.
- - - ------------------------------------------------------------------------------------------------------
Victor J. Riley, Jr. 1993 $720,000 $720,000(3) 4,519(5) $2,259,000(7) $38,926(9)
Chairman of the Board and Chief Executive
Officer, KeyCorp, formerly Chairman of the
Board, President, and Chief Executive
Officer, Old Key.
William H. Dougherty 1993 $458,654 $450,000(3) 0 $1,129,500(7) $13,338(9)
Retired, formerly Group Executive Vice
President and Chief Financial Officer, Old
Key.
<FN>
- - - ---------------
(1) The above-named executive officers received other annual compensation in
1991, 1992, and 1993, in the form of perquisites, the amount of which did
not exceed reporting thresholds.
</TABLE>
11
<PAGE> 15
(2) Amounts awarded under Society's Management Incentive Compensation Plan for
the respective fiscal years, whether paid in cash or deferred.
(3) Amounts awarded under Old Key's Executive Incentive Compensation Plan for
fiscal year 1993, whether paid in cash or deferred.
(4) This information has been adjusted to reflect the two-for-one stock split
which was effected by a 100% stock dividend, effective March 22, 1993.
(5) This number has been adjusted to reflect the conversion of each share of Old
Key common stock into 1.205 KeyCorp Common Shares.
(6) Amounts awarded under Society's Long Term Incentive Compensation Plan for
the three year cycles ending in such respective fiscal years, whether paid
in cash or deferred.
(7) Amounts awarded under Old Key's Performance Compensation Plan; this includes
awards that were due for 1993 and 1994, and paid in 1993. This Plan has been
terminated and no further payments will be made under this Plan.
(8) Amounts of All Other Compensation are amounts contributed or accrued for the
executive officers under Society's Stock Purchase and Savings Plan ($67,455
in the aggregate) and the related supplemental savings plan ($532,708 in the
aggregate), and universal life insurance premiums ($24,703 in the
aggregate).
(9) Amounts of All Other Compensation include amounts contributed to a defined
contribution plan ($17,988 in the aggregate) and term life insurance
premiums ($34,276 in the aggregate).
OPTION GRANTS. The following table provides information regarding grants of
stock options made during the year ended December 31, 1993, to each of the
executive officers named in the Summary Compensation Table. Information
presented for Messrs. Gillespie, Meyer, Noall, Wert, and Wall is with respect to
Society for its fiscal year ended December 31, 1993. Information presented for
Messrs. Riley and Dougherty is with respect to Old Key for its fiscal year ended
December 31, 1993.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR TEN
UNDERLYING GRANTED TO OR BASE YEAR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- - - ------------------------ -------------- -------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Gillespie..... 40,000(1) 3.3% $33.9375(3) 4/5/03 $853,724 $2,163,505
Henry L. Meyer III...... 20,000(1) 1.6% 33.9375(3) 4/5/03 426,862 1,081,753
Roger Noall............. 20,000(1) 1.6% 33.9375(3) 4/5/03 426,862 1,081,753
James W. Wert........... 20,000(1) 1.6% 33.9375(3) 4/5/03 426,862 1,081,753
Stephen E. Wall......... 14,000(1) 1.1% 33.9375(3) 4/5/03 298,804 757,227
- - - ------------------------------------------------------------------------------------------------------
Victor J. Riley, Jr..... 4,519(2) .5% 38.1743(4) 3/18/03 $108,484 $ 274,921
William H. Dougherty.... 0 0 N/A N/A N/A N/A
<FN>
- - - ---------------
(1) Under the option agreements, these options became exercisable upon the
Merger of Old Key into Society; absent the Merger, these options would have
become exercisable April 5, 1994.
(2) This number has been adjusted to reflect the conversion of each share of Old
Key common stock into 1.205 KeyCorp Common Shares.
</TABLE>
12
<PAGE> 16
(3) The exercise price equals the market price of a Society Common Share on the
date of the option grant. All the grants were made under the 1991 Equity
Compensation Plan.
(4) The exercise price equals the market price of a share of Old Key common
stock on the date of grant, adjusted to reflect the conversion of Old Key
common stock into KeyCorp Common Shares.
The options reported for Messrs. Gillespie, Meyer, Noall, Wert, and Wall in
the preceding table were granted on April 5, 1993, at an exercise price equal to
the market price of Society's Common Shares on that date, which was $33.9375.
Based on this stock price, the market value of KeyCorp's Common Shares at the
end of the ten year option period using 5% and 10% compounded annual returns
would be $55.28 and $88.03, respectively.
OPTION EXERCISES AND VALUES. The following table provides information
regarding exercises of stock options during the year ended December 31, 1993, by
the executive officers named in the Summary Compensation Table, and the value of
such officers' unexercised stock options as of December 31, 1993.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/ OPTIONS/
SHARES SARS AT FY-END (#) SARS AT FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- - - ------------------------- --------------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Robert W. Gillespie...... 32,000 450,000 216,000/ 2,399,000/(2)
160,000 180,000(2)
Henry L. Meyer III....... no exercise 161,242/ 1,970,470/(2)
80,000 90,000/(2)
Roger Noall.............. 146,666 1,713,776 20,000/ 30,000/(2)
80,000 90,000(2)
James W. Wert............ 34,542 594,211 95,000/ 910,438/(2)
80,000 90,000(2)
Stephen E. Wall.......... no exercise 91,764/ 1,030,674/(2)
56,000 63,000(2)
- - - -----------------------------------------------------------------------------------------------------------
Victor J. Riley, Jr...... no exercise -- 485,676/(1) 4,659,200/(3)
0 0
William H. Dougherty..... no exercise -- 225,938/(1) 1,928,838/(3)
0 0
<FN>
- - - ---------------
(1) This number has been adjusted to reflect the conversion of each share of Old
Key common stock into 1.205 KeyCorp Common Shares.
(2) Based on a December 31, 1993 closing price for Society Common Shares which
equalled $29.75.
(3) Based on a December 31, 1993 closing price for Old Key common stock which
equalled $27.70, adjusted to reflect the conversion of each share of Old Key
common stock into 1.205 KeyCorp Common Shares.
</TABLE>
13
<PAGE> 17
LONG TERM INCENTIVE COMPENSATION. During 1993, Society's Compensation and
Organization Committee selected participants in what is now the KeyCorp Long
Term Incentive Compensation Plan for the 1993-1995 three-year compensation
period. Messrs. Gillespie, Meyer, Noall, Wert, and Wall were selected as
participants. The Committee has determined objective criteria by which KeyCorp's
financial performance should be judged and distributions under the Plan should
be made. These criteria were based on the Committee's judgment of a range of
return on common equity that would warrant satisfactory to excellent results for
KeyCorp for the compensation period. Based on Society's 1993 salary grade market
points (i.e., average salaries for such positions) upon which payments under the
Plan will be based (which may change by the time the awards are actually
determined), the officers in the Summary Compensation Table would be eligible to
receive the following payments for the 1993-1995 three-year compensation period:
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
PERFORMANCE ---------------------------------
NAME PERIOD THRESHOLD(1) TARGET MAXIMUM
- - - ---------------------------------------- ----------- --------- -------- --------
<S> <C> <C> <C> <C>
Robert W. Gillespie..................... 1993-1995 $68,356 $156,250 $390,625
Henry L. Meyer III...................... 1993-1995 41,016 93,750 234,375
Roger Noall............................. 1993-1995 41,016 93,750 234,375
James W. Wert........................... 1993-1995 41,016 93,750 234,375
Stephen E. Wall......................... 1993-1995 24,080 55,040 137,600
<FN>
- - - ---------------
(1) If the threshold is not met, no payouts will be made.
</TABLE>
These executives are also participants in the Long Term Incentive
Compensation Plan for the 1992-1994 compensation period, which has a similar
range of possible payouts.
Long term incentive compensation paid to Messrs. Riley and Dougherty is
disclosed in the Summary Compensation Table. No additional long term awards have
been made. Old Key's Performance Compensation Plan has been terminated and no
future long term payouts are due to these executive officers under that Plan.
RETIREMENT PLAN. Substantially all officers and employees of KeyCorp and
participating subsidiaries, who were officers and employees of Society prior to
the Merger, are participants in the Retirement Plan for Employees of Society and
Subsidiaries and related supplemental and excess retirement plans. There is a
similar plan that applies to officers and employees of Old Key. The Retirement
Plan provides a pension based upon years of participation in the Retirement Plan
and average annual compensation for the five highest consecutive years during
the last ten years of employment. The following table sets forth the estimated
annual benefits payable under the
14
<PAGE> 18
Retirement Plan to participants who attain the Social Security retirement age on
December 31, 1993, and who elect to receive a straight lifetime annuity:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
WITH INDICATED YEARS OF PARTICIPATION(1)
AVERAGE FINAL ------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- - - ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 450,000 $119,911 $159,881 $199,851 $239,821 $251,071
500,000 133,411 177,881 222,351 266,821 279,321
600,000 160,411 213,881 267,351 320,821 335,821
700,000 187,411 249,881 312,351 374,821 392,321
800,000 214,411 285,881 357,351 428,821 448,821
900,000 241,411 321,881 402,351 482,821 505,321
1,000,000 268,411 357,881 447,351 536,821 561,821
1,100,000 295,411 393,881 492,351 590,821 618,321
1,200,000 322,411 429,881 537,351 644,821 674,821
1,300,000 349,411 465,881 582,351 698,821 731,321
1,400,000 376,411 501,881 627,351 752,821 787,821
1,500,000 403,411 537,881 672,351 806,821 844,321
1,600,000 430,411 573,881 717,351 860,821 900,821
<FN>
- - - ---------------
(1) Former officers and employees of Old Key and its subsidiaries participating
in Old Key's Pension Plan and Supplemental Retirement Benefit Plan receive
similar benefits based on similar compensation. Compensation for purposes of
these Old Key plans does not include incentive compensation.
</TABLE>
All benefit amounts are subject to the annual pension limitations imposed
by the Internal Revenue Code for qualified plans; however, the extent of any
reduction will vary according to the limits existing at the time pension
payments commence. Any amounts under the Retirement Plan reduced by Internal
Revenue Code limitations will be paid under an excess benefit retirement plan.
The benefits are not subject to any deduction for social security or any other
offset.
Compensation for purposes of the Retirement Plan and the excess and
supplemental plans is total base pay and incentive compensation during a
calendar year, plus amounts deducted for the 401(k) and flexible benefits plans
during such year, but includes neither amounts attributable to stock options nor
appreciation rights nor receipt of non-cash remuneration that is included in the
participant's income for Federal income tax purposes. Compensation for purposes
of the Retirement Plan and excess and supplemental plans is substantially the
same as shown in the Summary Compensation Table after excluding stock options
and "all other compensation." Normal retirement age is 65. The Plan requires 5
years of service for vesting. Messrs. Gillespie, Meyer, Noall, Wert, and Wall
were credited under the Retirement Plan with 25, 21, 10, 18, and 23 years of
service, respectively, at year-end 1993. Messrs. Riley and Dougherty were
credited under Old Key's Pension Plan with 29 and 5 years of service,
respectively, at year-end 1993.
15
<PAGE> 19
EMPLOYMENT, SEVERANCE, AND CHANGE OF CONTROL AGREEMENTS. KeyCorp is a party
to employment agreements, severance agreements, and change of control agreements
with certain of its executive officers.
EMPLOYMENT AGREEMENT WITH MR. RILEY. KeyCorp and Mr. Riley are parties to
an employment agreement, which was amended, restated, and extended effective as
of the date of the Merger, pursuant to which Mr. Riley is to be employed by
KeyCorp as Chairman of the Board, Chairman of the Executive Committee of the
Board, and Chief Executive Officer through December 31, 1995, and as Chairman of
the Board and Chairman of the Executive Committee of the Board thereafter and
through December 31, 1998. Mr. Riley's compensation through December 31, 1995,
is to include annual base salary of not less than $775,000 for 1994 and $800,000
for 1995 plus annual and three-year incentive compensation awards no less
favorable than those that would be payable if Old Key's annual incentive bonus
plan and Performance Compensation Plan remained in effect. From 1996 through
1998, Mr. Riley's annual compensation is to be not less than $600,000. Under the
employment agreement, Mr. Riley is also entitled to a supplemental retirement
benefit determined under Old Key's Supplemental Executive Retirement Plan as in
effect immediately before the Merger but with no benefit reduction for
disability or postponed retirement and to a special supplemental death benefit.
If at any time before December 31, 1998, (a) KeyCorp terminates Mr. Riley's
employment other than for material breach or just cause, (b) Mr. Riley
terminates his employment following a breach of the employment agreement by
KeyCorp, including any failure of KeyCorp to cause Mr. Riley to hold the offices
contemplated in the employment agreement during the periods contemplated in the
employment agreement, (c) Mr. Riley dies or becomes disabled, or (d) a change of
control of KeyCorp occurs, then KeyCorp is to pay to Mr. Riley or to his estate
or designated beneficiary a lump sum equal to the sum of all base compensation
that would have been payable to Mr. Riley had he continued to perform services
through December 31, 1998, plus all bonuses he would have received for all
periods through December 31, 1995, if all maximum performance targets were met
during those periods. If this lump sum payment is payable, Mr. Riley is also
entitled to continuation, through December 31, 1998, of coverage under all
KeyCorp employee benefit plans (including retirement plans and medical,
disability, life, and accidental death or dismemberment insurance plans) and to
the special supplemental death benefit; to an additional "gross up" payment if
Mr. Riley is subject to the excise tax on receipt of "excess parachute
payments," as defined in Section 280G of the Internal Revenue Code, sufficient
to put Mr. Riley in the same position on an after-tax basis as if the excise tax
did not apply; to continuing indemnification to the fullest extent permitted by
Ohio law for actions against him by reason of his being or having been a
director or officer of KeyCorp or any related entity; and to payment of any
legal fees incurred in enforcing his rights under the employment agreement.
16
<PAGE> 20
EMPLOYMENT AGREEMENT WITH MR. GILLESPIE. KeyCorp and Mr. Gillespie are
parties to an employment agreement, which was amended, restated, and extended
effective as of the date of the Merger, pursuant to which Mr. Gillespie is to be
employed by KeyCorp, at a base salary of not less than $700,000 per year, as
President and Chief Operating Officer during a defined "Post-Merger Period" (to
expire not later than December 31, 1995) and as President and Chief Executive
Officer thereafter and through December 31, 1998. The employment agreement
provides for an additional two years of compensation and benefits to Mr.
Gillespie (through December 31, 2000) if, in 1998, the employment agreement is
not mutually extended or a new employment agreement is not entered into and Mr.
Gillespie elects to terminate his employment and receive those benefits.
Under the employment agreement, Mr. Gillespie may terminate his employment
for good reason (and receive post-termination agreement benefits) under certain
circumstances whether or not a change of control of KeyCorp occurs. Those
circumstances that will constitute good reason under the employment agreement
whether or not a change of control occurs include (a) demotion or removal of Mr.
Gillespie from his executive positions (i.e., President and Chief Operating
Officer during the Post-Merger Period and President and Chief Executive Officer
thereafter), (b) a reduction in Mr. Gillespie's base salary or participation in
benefit plans, (c) a good faith determination by Mr. Gillespie that his
responsibilities , duties, and authority have been materially reduced from those
contemplated by the employment agreement, or (d) relocation of Mr. Gillespie's
principal place of employment outside the Cleveland metropolitan area. Those
circumstances that will constitute good reason under the employment agreement
only after a change of control of KeyCorp occurs also include any reduction in
Mr. Gillespie's incentive compensation or a good faith determination by Mr.
Gillespie that his responsibilities or duties have been materially reduced from
their level before the change of control or that he is unable to carry out the
responsibilities of his positions as a result of the change of control.
Under the employment agreement, if Mr. Gillespie's employment with KeyCorp
is terminated before his 65th birthday for any reason other than (a) voluntary
resignation by Mr. Gillespie (without good reason) before December 31, 1998, or
(b) termination by KeyCorp for cause, and Mr. Gillespie (or someone claiming
through him) is entitled to receive retirement benefits under any KeyCorp
retirement plan after March 26, 1999 (Mr. Gillespie's 55th birthday), KeyCorp
will pay a supplemental retirement benefit in an amount sufficient to provide
Mr. Gillespie the same aggregate benefit that he would have received if he had
continued in the employ of KeyCorp through his 65th birthday (by eliminating any
reduction because he started receiving benefits before his 65th birthday and
giving him credit for additional years of service for the period after his
termination date and before his 65th birthday). Under the employment agreement,
KeyCorp will have "cause" to terminate Mr. Gillespie's employment before a
change of control only if he commits a felony, acts dishonestly in a way that is
materially inimical to the best interests of KeyCorp, competes with KeyCorp, or
totally abandons his duties and responsibilities and KeyCorp
17
<PAGE> 21
will have "cause" to terminate Mr. Gillespie's employment after a change of
control only if he is convicted of a felony, acts dishonestly and feloniously in
a way that is materially inimical to the best interests of KeyCorp, or competes
with KeyCorp.
REGULATIONS PROVISION REGARDING POSITIONS TO BE HELD BY MESSRS. RILEY AND
GILLESPIE. KeyCorp's Regulations, as amended effective as of March 1, 1994,
provide in part that neither Mr. Riley nor Mr. Gillespie may be removed by
action of the Board of Directors from any office held by either of them except
by the affirmative vote of three-quarters of the entire authorized Board of
Directors and that any such removal shall be without prejudice to the contract
rights of either of them.
EMPLOYMENT AGREEMENT WITH MR. NOALL. KeyCorp and Mr. Noall are parties to
an employment agreement, which was amended, restated, and extended effective as
of the date of the Merger, pursuant to which Mr. Noall is to be employed by
KeyCorp as its Chief Administrative Officer through the date of the 1996 Annual
Meeting of KeyCorp (the end of the "Scheduled Term") at a base salary of not
less than $369,000 per year. If Mr. Noall remains in the employ of KeyCorp
through the end of the Scheduled Term, his status as an employee of KeyCorp will
thereafter be continued for a three year "Supplemental Term" during which he
will have such duties and responsibilities as KeyCorp and he may mutually agree.
During the Supplemental Term KeyCorp will pay to Mr. Noall compensation at a
rate equal to the sum of his base salary (at the highest rate in effect during
the Scheduled Term) and his average annual incentive compensation (the average
of his two highest years of incentive compensation during the five year period
from 1991 through 1995). If Mr. Noall dies after the Supplemental Term has
begun, the compensation that would otherwise have been payable to him during the
Supplemental Term is to be paid to his estate or to a beneficiary designated by
him.
The employment agreement provides that following any termination of Mr.
Noall's employment (other than a termination by KeyCorp for cause during the
Scheduled Term), KeyCorp will provide a supplemental retirement benefit to Mr.
Noall so that he will receive, in the aggregate, the amounts of retirement
benefits to which he would have been entitled under all KeyCorp retirement plans
if his employment with KeyCorp and its predecessors had commenced on June 20,
1973. In addition, if Mr. Noall remains in the employ of KeyCorp through the end
of the Supplemental Term as contemplated by the employment agreement, he will be
entitled to begin receiving retirement benefits immediately after the end of the
Supplemental Term (and ten months before his normal retirement date) without any
discount for early commencement of retirement benefits.
Under the employment agreement, if Mr. Noall's employment is terminated
before the end of the Scheduled Term by KeyCorp without cause or by Mr. Noall
for good reason, Mr. Noall will be entitled to receive post-termination
compensation and benefits through the end of the Supplemental Term. The
post-termination compensation and benefits would include compensation
continuation payments at a rate equal to the sum of Mr. Noall's base salary (at
the highest rate in effect
18
<PAGE> 22
during the Scheduled Term) and his average annual incentive compensation (the
average of his two highest years of incentive compensation during his last five
years of employment), continued medical and life insurance benefits, continued
coverage under all retirement and savings plans (or the cash equivalent
thereof), and continuing treatment as an employee for purposes of outstanding
stock options.
Under the employment agreement, "good reason" will include, in all events,
any demotion, reduction in base salary, exclusion from full participation in
benefit plans maintained for senior executives of KeyCorp generally, or
relocation of Mr. Noall's principal place of employment outside of the Cleveland
metropolitan area. After a change of control, "good reason" will also include
any reduction of incentive compensation, any reduction in Mr. Noall's
responsibilities, duties, or authority from that in effect before the change of
control, or a good faith determination by Mr. Noall that he is unable to carry
out the responsibilities of his position as a result of the change of control.
Under the employment agreement, KeyCorp will have "cause" to terminate Mr.
Noall's employment before a change of control only if he commits a felony, acts
dishonestly in a way that is materially inimical to the best interests of
KeyCorp, competes with KeyCorp, or totally abandons his duties and
responsibilities and KeyCorp will have "cause" to terminate Mr. Noall's
employment after a change of control only if he is convicted of a felony, acts
dishonestly and feloniously in a way that is materially inimical to the best
interests of KeyCorp, or competes with KeyCorp.
AMENDED EMPLOYMENT AND SEVERANCE AGREEMENTS WITH OFFICERS WHO WERE OFFICERS
OF OLD KEY. KeyCorp and five of its executive officers (other than Mr. Riley)
who were officers of Old Key are parties to preexisting employment and severance
agreements (both of which contained change of control provisions) and amendments
to those agreements that were agreed to in anticipation of the Merger.
In general, as amended, each employment agreement provides for the
employment of the officer through a specified term of employment, the expiration
dates of which vary, depending upon the officer, from December 31, 1994 to June
30, 1998. If the officer's employment is terminated (a) by Keycorp without cause
at any time before the end of the specified term or (b) by the officer for good
reason within six months of the Merger (i.e., on or before September 1, 1994),
the officer will be entitled to receive all payments and benefits (including
retirement benefits) to which the officer would have been entitled had he
continued to perform services under the employment agreement through the end of
the specified term.
In general, as amended, each severance agreement provides that if the
officer's employment is terminated on or before March 1, 1996 (i.e., the second
anniversary of the Merger) by KeyCorp (other than for cause, disability, or
retirement) or by the officer for good reason, the officer is
19
<PAGE> 23
entitled to receive prorated payments of base salary and incentive compensation
through the date of termination plus a lump sum payment equal to 299% of the
officer's annual base salary.
In general, under the amendments to these employment and severance
agreements an officer may become entitled to post-termination benefits if the
officer's employment is terminated before March 1, 1997 (i.e., the third
anniversary of the Merger) by KeyCorp (other than for cause, disability, or
retirement) or by the officer for good reason. If an officer's employment is
terminated before March 1, 1997, under circumstances entitling the officer to
post-termination benefits under the terms of the amendment, the officer will be
entitled to elect to receive (a) the benefits, if any, called for under the
officer's amended employment agreement or (b) the benefits, if any, called for
under the officer's amended severance agreement or (c) a lump sum payment equal
to 1/12 of the sum of the employee's base salary at the time of termination and
the employee's average annual incentive compensation for the years 1991, 1992,
and 1993, multiplied by the greater of (i) 18 (i.e., 18 months of compensation)
or (ii) the number of months between the date of the termination and the third
anniversary of the Merger. If the officer elects to receive the lump sum
payment, KeyCorp will also continue medical and life insurance coverage to the
officer for up to 18 months (or, if longer, through the third anniversary of the
Merger), but not beyond the date the officer secures other employment.
For purposes of the amended employment and severance agreements and the
amendments thereto: "cause" includes a material breach of the amended employment
agreement by the officer, misconduct as an executive of KeyCorp, unreasonable
neglect or refusal to perform assigned duties, conviction of a crime involving
moral turpitude, adjudication as a bankrupt, failure to follow reasonable
instructions of superior executive officers, or imposition by a bank regulatory
agency of a final order of suspension or removal for improper conduct, and "good
reason" includes any reduction in the officer's base salary, any reduction in
the officer's job grade or failure to provide the officer the same opportunities
with respect to incentive compensation, stock option grants, and other benefits
as are provided to other employees with the same job grade, and any requirement
that the officer relocate as a condition of employment.
AMENDED CHANGE OF CONTROL AGREEMENTS WITH OFFICERS WHO WERE OFFICERS OF
SOCIETY. KeyCorp and five of its executive officers (other than Messrs.
Gillespie and Noall) who were officers of Society, including Messrs. Meyer and
Wert, are parties to preexisting change of control agreements that were both
activated by, and amended in anticipation of, the Merger. Under the amended
change of control agreements an officer will become entitled to receive payments
and benefits if the officer's employment with KeyCorp is terminated (a)
voluntarily by the officer during a three-month window period commencing on June
1, 1995 (i.e., 15 months after the date of the Merger) or (b) for any reason
before March 1, 1997 (i.e., the third anniversary of the Merger), other than
termination for cause, disability, or death or voluntary resignation by the
20
<PAGE> 24
officer (outside the three-month window period) unless the officer's base salary
has been reduced or the principal place of the officer's employment has been
relocated.
If an officer becomes entitled to benefits under an amended change of
control agreement by virtue of termination of employment on or before September
1, 1995 (i.e., during the first 18 months after the Merger), KeyCorp will
provide to the officer monthly compensation continuation payments (based on
salary at the highest rate in effect during the one year period ended on March
1, 1994 and average annual incentive compensation for the three highest of the
years 1989 through 1993, inclusive) for 24 months plus a lump-sum severance
payment equal to six of the monthly compensation continuation payments. In
addition, KeyCorp will continue to provide or arrange medical benefits,
long-term disability benefits, and group term life insurance benefits for 24
months and will continue the officer in all retirement and savings plans for the
24-month period unless impermissible under the plan or applicable law, in which
case KeyCorp will make an equivalent lump-sum cash payment. Certain of these
payments may be reduced if the officer accepts other full-time employment with
an unaffiliated employer during the 24-month period following termination of
employment. The payments would be payable after the death of the officer to his
surviving beneficiaries, to his estate, or to a trust.
If an officer becomes entitled to benefits under an amended change of
control agreement by virtue of termination of employment at any time during the
period from March 2, 1996 through March 1, 1997 (i.e., during the 25th through
36th months after the Merger), those benefits would include a lump sum severance
payment equal to 150% of the sum of the officer's annual base salary (at the
level in effect at the time of the Merger) plus the average of the incentive
compensation awards payable to the Executive for the years 1991, 1992, and 1993
and continued medical and life insurance coverage for up to 18 months after the
termination (but not beyond the date the officer became employed with another
employer).
If an officer becomes entitled to benefits under an amended change of
control agreement by virtue of termination of employment at any time during the
period from September 2, 1995 through February 28, 1996 (i.e., during the 19th
through 24th months after the Merger), the officer would have the right to elect
to receive either the benefits in effect for termination of employment during
the first 18 months after the Merger or those in effect for termination of
employment during the 25th through 36th months after the Merger.
NEW CHANGE OF CONTROL AGREEMENTS. KeyCorp has entered into a new change of
control agreement with each of Messrs. Meyer and Wert and eight other executive
officers of KeyCorp (other than Messrs. Riley, Gillespie, and Noall) which
provides that if, at any time within three years after the occurrence of a
change of control (as defined in the agreement), the officer's employment is
terminated by KeyCorp (except for cause) or the officer terminates employment
because the officer's base salary is reduced or relocation is made a condition
of the officer's employment, KeyCorp will pay to the officer a lump sum
severance benefit equal to two and one
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<PAGE> 25
half years' compensation (base salary and average annual incentive compensation)
and will pay the cost of continuing health benefits until the earlier of the
expiration of the continuation period required by Federal law or the date the
officer secures other employment. Each new change of control agreement also
provides a three-month window period, commencing 15 months after the date of a
change of control, during which the officer may voluntarily resign and receive a
lump sum severance benefit equal to one year's compensation (base salary and
average annual incentive compensation).
SECTION 280G LIMITATION ON PAYMENTS. Each of the employment, severance, and
change of control agreements described above to which KeyCorp is a party (other
than the employment agreement with Mr. Riley) provides, in effect, that if any
payments thereunder would otherwise be treated as excess parachute payments
under Section 280G of the Internal Revenue Code (and would therefore be
nondeductible by KeyCorp and subject to a 20% excise tax upon receipt by the
officer), the aggregate amount of those payments is to be reduced to the extent
necessary to avoid that treatment.
MANDATORY DEFERRAL OF CERTAIN AMOUNTS. Each of the employment, severance,
and change of control agreements described above to which KeyCorp is a party
provides, in effect, that if any amount of compensation otherwise payable to the
officer as earned would not be deductible by KeyCorp by reason of the
disallowance rules of Section 162(m) of the Internal Revenue Code (which rules
generally disallow deductions for certain compensation paid to any of certain
"covered employees" of a publicly held corporation in excess of $1,000,000 per
year), but would be deductible if it were deferred until a later year, that
amount of compensation will be so deferred until the earlier of the first date
on which the compensation can be paid without disallowance of the deduction to
KeyCorp or April 15 of the year immediately following the year in which the
officer ceases to be a covered employee of KeyCorp. Upon payment of any such
deferred amounts of compensation, KeyCorp will pay to the officer an additional
amount equivalent to the interest that would have accrued on the deferred
compensation if interest had accrued thereon at a rate equal to an interest rate
applicable to deferrals made under incentive compensation plans generally
applicable to KeyCorp executives.
GRANTOR TRUSTS. KeyCorp maintains grantor trusts to fund its commitments
under the survivor benefit, supplemental retirement, deferred compensation, and
severance plans for executive officers of Old Key that were in effect before the
Merger and under the death benefit, retirement benefit, and deferred
compensation plans for directors of Old Key that were in effect before the
Merger. The trust agreements provide that if KeyCorp fails to make payments
under any of those benefit plans when those payments are due, the trustee is to
make the payments from the assets of the trust. KeyCorp has partially funded the
trusts with life insurance policies. As of March 10, 1994, the value of all
assets in the grantor trust for executives was approximately $49,500,000 and the
value of all assets in the grantor trust for directors was approximately
$2,100,000.
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<PAGE> 26
COMPENSATION AND ORGANIZATION COMMITTEE AND
EXECUTIVE EQUITY COMPENSATION COMMITTEE
JOINT REPORT ON EXECUTIVE COMPENSATION
The following report is presented by the Compensation and Organization and
Executive Equity Compensation Committees of KeyCorp, which have responsibility
for executive compensation for KeyCorp, beginning with the consummation of the
Merger on March 1, 1994. In the year ending December 31, 1993, Old Key's
Compensation and Stock Option Program Committee and Society's Compensation and
Organization Committee had responsibility for executive compensation for the
respective corporations. The sections of this report describing compensation for
Old Key and Society executives are based on the decisions of those committees
and not on decisions made by KeyCorp's Compensation and Organization and
Executive Equity Compensation Committees.
SOCIETY CORPORATION
Society's Board of Directors delegated to its Compensation and Organization
("C&O") Committee responsibility for executive compensation. The C&O Committee
was composed of five independent, non-employee directors who had no interlocking
relationships with Society as defined by the Securities and Exchange Commission.
Society established, and the C&O Committee approved, a compensation program
whereby executive positions were compensated (on a total compensation basis) by
comparison to comparable positions in other bank holding companies. Adjustments
to an individual executive's salary were considered annually utilizing such
comparisons and considering the executive's contribution to the corporation's
success and accomplishment of individual, unit, and corporate objectives.
Incentive compensation amounts were determined as described in more detail
below.
The C&O Committee determined that Society would be better able to attract,
retain, and motivate Society's executives to achieve superior financial
performance if a relatively large portion of senior executive compensation was
"at risk", i.e., subject to incentive compensation plans. Society's compensation
for senior executives was designed with an objective of providing Society's
senior executives with less total compensation than that of senior executives of
peer companies in periods when Society's performance was poorer than the peer
group of companies and superior total compensation when performance was
superior.
In evaluating corporate performance for purposes of short term (i.e.,
annual) incentive compensation awards, the C&O Committee evaluated Society's
performance as compared with Society's profit plan for the year, and also
evaluated financial results (generally, return on common equity and return on
assets) as compared with peers for the current year. The C&O Committee also
evaluated the consistency of such financial performance over a number of years
(generally
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<PAGE> 27
three years) versus consistency of performance by peers. Although the C&O
Committee gave most weight to financial features, especially comparison of
Society's return on assets and return on common equity versus the return of its
peers, the C&O Committee also evaluated non-financial accomplishments of Society
and its senior executives. The C&O Committee then established a percentage of
target pool to be paid out as short term incentive compensation (a range of 0%
to 200% of target). The target pool was the sum of individual incentive targets,
which were based on "market point" (i.e., average salaries for such positions).
Individual targets ranged from 10% to 50% of market point. Individual payouts
ranged from 0% to the greater of (a) 200% or (b) 150% of the target pool
percentage, times the individuals' targets.
Each year the C&O Committee identified a number of financial services
companies as Society's peer group. For 1993, Society ranked in the top quartile
of the peer group in both return on assets and return on common equity and, in
the C&O Committee's judgment, ranked in the top quartile in consistency of
financial performance over a number of years. The C&O Committee was satisfied
with the overall financial and non-financial performance of Society and its
senior executives. The C&O Committee determined that the short term incentive
compensation pool for 1993 would be 200% of target, which was distributed among
participants in the short term plan based upon individual and group
contributions to the financial and other results of Society for the year.
The C&O Committee determined, prior to each three-year performance period
under Society's long term incentive compensation plan, objective criteria by
which Society's financial performance should be judged and distributions under
the long term plan should be made. The criteria were based on the C&O
Committee's judgment of a return on common equity that would warrant
satisfactory to excellent results for the three year period; for the three year
period ending December 31, 1993, the established criteria could result in a
payout that ranged from zero to 250% of target. The C&O Committee determined
that originally reported return on common equity would be utilized under the
plan, i.e., prior year results would not be restated to reflect poolings-of-
interest. The C&O Committee further determined that return on common equity
would be determined without reduction for restructuring charges relating to the
Merger. On this basis, for the three year period ending December 31, 1993,
return on common equity was 17.60%. Distributions to participants were 206% of
target. An individual executive's target was either 20% or 25% of the
executive's "market point."
The C&O Committee believed that senior executives would be motivated, and
their financial interests would be aligned with that of common shareholders, if
stock options were awarded to senior executives, and that the most senior level
executives should have the greatest percentage of their compensation subject to
stock options. The option price was always 100% of the market price of the stock
at the time the option was awarded. The aggregate number and vesting terms of
such
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<PAGE> 28
options varied from year to year depending on the C&O Committee's judgment of
the best form of long term motivation appropriate under the particular
circumstances. In determining the number of options awarded to individual
executives, the C&O Committee considered the value of the shares underlying the
options, the incentive compensation practices of Society's peers, and the
desirability of granting options covering a consistent number of shares from
year to year. In most years, options that vest one year from the date of the
grant were awarded to a broad group of middle and senior executives. The C&O
Committee believed these options provided a substantial motivation to executives
to improve the return to Society's common shareholders.
As of April 1, 1993, the C&O Committee established Mr. Gillespie's salary
at $610,000 per annum. It was the C&O Committee's judgment, based upon
comparison with peer companies and consultation with an outside consultant, that
such salary was within an appropriate range for such a position and below median
salary levels for such a position. In December of 1993, the C&O Committee
determined that $625,000 was the appropriate short term incentive compensation
for Mr. Gillespie for 1993. This was based on the analysis described above.
Salary adjustments for senior executives of Society other than Mr.
Gillespie and short term incentive compensation payments to such executives were
based upon the above methodology and the recommendation of Society's Chief
Executive Officer.
OLD KEY
Old Key's Board of Directors delegated to its Compensation and Stock Option
Program Committee ("Committee") the responsibility for executive compensation
for Old Key and its subsidiaries. Subject to the Board of Directors of Old Key
to whom it reported its actions, the Committee was responsible for reviewing pay
levels for senior executives, overseeing the operation of the Executive
Incentive Compensation, Stock Option, Career Equity, and Performance
Compensation Plans, and recommending to the full Board appropriate actions to
achieve a sound executive compensation policy in support of Old Key's short and
long term business objectives. The Committee's actions concerning compensation
were ultimately judgments based upon the Committee's ongoing assessment and
understanding of Old Key and its executive officers, the performance of the
executive officers, and whether or not cash payments or awards would provide an
appropriate award or incentive for the officers' contributions to Old Key's past
and future performance.
The most important principles that guided the Committee's decisions were
that the Old Key executive compensation program should:
- Operate as a primary motivator in driving executive decisions and activities
to enhance shareholder value.
- Pay total compensation that is commensurate with Old Key's performance as
compared to other financial institutions.
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<PAGE> 29
- Promote a strong pay for performance culture by ensuring that highly
competitive compensation is conditioned on the attainment of challenging
operating objectives.
- Be based on appropriate market practices so as to permit Old Key to attract
and retain the best available executive talent.
- Encourage substantial share ownership by executives, thereby linking
management's commitment to Old Key's long term success.
- Be at a cost level that is reasonable in relation to Old Key's resources and
these principles.
Pursuant to the foregoing principles Old Key's policy was to pay its
executives at levels that reflected Old Key's financial performance relative to
comparable organizations. Compensation plans and programs were adopted that
recognized the individual's contribution to Old Key's results, provided
motivation to achieve financial targets consistent with shareholder
expectations, and encouraged long term executive share ownership. As described
in more detail below, the elements of the executive compensation program were
base salary (which was set at levels found by the Committee to be comparable to
those paid by other financial institutions that were viewed as most likely to
compete with Old Key for the services of executive officers), an Executive
Incentive Compensation Plan (which makes payments only if Old Key achieves
specified performance goals), and a long term incentive compensation plan (which
makes payments to a limited number of executives for results achieved over more
than one fiscal period). Each executive participated in some, but not
necessarily all, of the plans and programs. Payments were conditioned on the
achievement of performance goals established by the Board of Directors annually.
The 1993 goals for the Executive Incentive Compensation Plan were established in
1992. The goals, each of which was assigned an equal weight, were an Earnings
per Common Share of $3.65 and a Return on Average Common Equity ("ROCE") of
17.72%. In 1992 and 1993, the compound growth rate of Old Key's Earnings per
Common Share, excluding merger and integration charges, was 23% annually, and
ROCE, excluding merger and integration charges, reached 18.70% in 1993. From the
beginning of 1992 to the end of 1993, the market price of Old Key common shares
grew at an annual compound rate of 9.3%. The Committee believed Old Key's
executive compensation program was influential in achieving these results.
It was a policy of Old Key to pay its executives base salaries that
reflected the value the executive added to Old Key's results over time. In
assessing the extent to which salary increases were warranted for the Chief
Executive Officer, the Committee weighed a number of factors, including his
performance during his tenure on the job, compensation practices of other
comparable banking institutions, the incremental value he added to Old Key, his
level of experience and expertise, and any applicable inflationary factors,
giving the greatest weight to Mr. Riley's performance in his nineteen year
tenure on the job and the incremental value he added to Old Key. These were the
same factors that were generally applied to the establishment of base salaries
for other Old Key executives, except that for other executives there was the
need to establish base pay
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<PAGE> 30
levels that reflected the responsibility and skills required of each job as
compared to other financial service industry jobs within and outside Old Key.
In late 1992 the Committee reviewed the salary level of Old Key's Chief
Executive Officer. The Committee noted that Mr. Riley had served as CEO of Old
Key since 1973, the longest tenure of any such officer of a major banking
company in the United States, and that during that time Old Key had grown from a
modest size bank holding company headquartered in Upstate New York to a
multi-regional bank holding company operating in eight states (including the
Northeast, Rocky Mountain, and Pacific Northwest regions) while dividends grew
at an average annual rate of 7.8% and the price of a single share of Old Key
common stock had appreciated at an average annual rate of 3.0%. After evaluating
these factors and Mr. Riley's contributions to Old Key's success, and after
reviewing chief executive officer compensation of other organizations, the
Committee recommended to the Board of Directors that Mr. Riley's salary for 1993
be $720,000. The Board of Directors approved the Committee's recommendation.
In addition to earning a fixed base salary, selected Old Key executives
could earn additional compensation each year through participation in the
Executive Incentive Compensation Plan (the "EICP"). Awards earned under the EICP
were intended to represent a substantial portion of an executive's total annual
compensation, though payments were dependent upon the achievement of aggressive
performance goals set prior to each EICP year relating to Old Key Earnings per
Common Share and ROCE. EICP contributed substantially to Old Key's pay for
performance orientation.
Mr. Riley's EICP opportunity in 1993 ranged from 60 percent of his base
salary (for performance equal to 95 percent goal achievement) to 100 percent of
salary (for performance equal to or exceeding 105 percent goal achievement). At
100 percent goal achievement, Mr. Riley was eligible to earn an EICP award equal
to 80 percent of his base salary. In fiscal 1993, Old Key's Earnings per Share
and ROCE results were in excess of 105% of the goals established for the year.
Consistent with the terms of the EICP award schedule, the Committee recommended
for Board approval an EICP payment to Mr. Riley an amount equal to 100 percent
of his base salary.
Since 1992, Old Key's Earnings per Share, excluding restructuring charges
in 1992 and 1993 respectively, grew from $3.13 to $3.84, while ROCE improved
from 17.02 percent to 18.70 percent. The Committee believed that the EICP was a
significant factor in Old Key's achievements in these two important performance
areas.
Old Key enhanced the performance orientation of its overall executive pay
program by supplementing its stock option programs with an additional long term
compensation plan which served as an incentive for performance to occur over a
period longer than one fiscal year.
The Performance Compensation Plan (the "Plan") offered participants
significant cash awards based on Old Key's three year performance in Return on
Average Assets ("ROA"),
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<PAGE> 31
ROCE, and Efficiency Ratio ("Efficiency"). Specific goals for each of these
measures of performance were set at the inception of the Plan cycle. However, no
awards under the Plan could be made if at any Plan measurement date the ratio of
Old Key's nonperforming assets to all of Old Key's assets fell below the
fiftieth (50th) percentile of Salomon Brothers' "Thirty-Five Bank Index" or
other comparable replacement index. Participation in the Plan was limited to
selected executives who were in positions where they performed critical
managerial functions that could directly and substantially influence Old Key's
performance results.
The Plan was designed to provide a long term incentive award for Mr. Riley
of a cumulative $2,000,000 if financial performance targets were met over the
Plan cycle, with additional incentive payments possible for certain performances
in excess of targets. At the inception of the Plan it was determined that Mr.
Riley would be granted the target cumulative payment contingent on Old Key
achieving 100 percent of each of its ROA, ROCE, and Efficiency goals in the Plan
cycle. The Plan also provided for an interim payment if related interim goals
were achieved. The ROA, ROCE, and Efficiency results for 1993 each exceeded the
goals for 1993. Furthermore, the ratio of Old Key's nonperforming assets to all
of Old Key's assets did not fall below the threshold level beneath which no Plan
awards could be paid. Accordingly, the Committee approved a cash payment to Mr.
Riley in the amount of $1,125,600, which, during the three year performance
period, exceeded the target performance payment level by $1,093,300. The
Committee believed that when the goals were met or exceeded, the payments over
the Plan cycle were consistent with the compensation practices among banking
organizations that were comparable to Old Key in terms of size and performance
and that the underlying Old Key financial results significantly benefited Old
Key shareholders.
The Committee concluded that Mr. Riley's compensation in 1993, as shown
below the Summary Compensation Table contained in this report, was comparable
with that of the Chief Executive Officers of the banking organizations included
in the Salomon Brothers Super Regional Composite.
1994 EXECUTIVE COMPENSATION
As stated above, KeyCorp's Board of Directors has delegated to its
Compensation and Organization ("New C&O") and its Executive Equity Compensation
("EEC") Committees responsibility for executive compensation. The EEC Committee
has responsibility for equity based compensation; the New C&O Committee has
responsibility for all other forms of executive compensation. In this section,
the New C&O Committee and the EEC Committee are jointly referred to as the
"Compensation Committees".
In designing KeyCorp's executive compensation program, KeyCorp and the
Compensation Committees concluded that the program should:
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<PAGE> 32
- Operate as a primary motivator in driving executive decisions and
activities to enhance shareholder value.
- Pay total compensation that is commensurate with KeyCorp's performance as
compared to other financial institutions.
- Promote a strong pay for performance culture by ensuring that highly
competitive compensation is conditioned on the attainment of challenging
objectives.
- Permit KeyCorp to attract, retain, and motivate the best available
executive talent.
- Encourage substantial share ownership by executives, thereby linking
management's commitment to KeyCorp's long term success.
KeyCorp and the Compensation Committees have adopted a compensation program
whereby executive positions are compensated (on a total compensation basis) by
comparison to comparable positions in peer bank holding companies. Adjustments
to an individual executive's salary will be considered annually using such
comparisons and considering the executive's contribution to the corporation's
success and accomplishment of individual, unit, and corporate objectives.
Incentive compensation amounts will be determined as described in more detail
below.
The Compensation Committees have determined that KeyCorp will be better
able to attract, retain, and motivate KeyCorp's executives to achieve superior
financial performance if a relatively large portion of senior executive
compensation was "at risk", i.e., subject to incentive compensation plans. Thus,
KeyCorp's compensation for senior executives is designed in a manner whereby
KeyCorp's senior executives will receive less total compensation than that of
senior executives of peer companies in periods when KeyCorp's performance is
poorer than peer group companies and receive superior total compensation when
performance is superior. The Compensation Committees will each year identify a
number of financial companies as KeyCorp's peer group.
In evaluating corporate performance for purposes of short term (i.e.,
annual) incentive compensation awards, the New C&O Committee will evaluate
KeyCorp's performance as compared with KeyCorp's profit plan for the year, and
also evaluate financial results (generally, return on common equity and return
on assets) as compared with peers for the year. The New C&O Committee will
evaluate the consistency of such financial performance over a number of years
(generally three years) versus consistency of performance by peers. In addition,
the New C&O Committee will evaluate non-financial accomplishments of KeyCorp and
its senior executives during the year. The New C&O Committee will establish a
percentage of target pool to be paid out as short term incentive compensation (a
range of 0% to 200% of target). In establishing the percentage of target pool to
be paid, the New C&O Committee will give most weight to financial features. The
target pool will be the sum of individual incentive targets, which are based on
"market point" (i.e., average salaries for such positions). Individual targets
range from 10% to
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<PAGE> 33
50% of market point. Individual payouts can range from zero to the greater of
(a) 200% or (b) 150% of the target pool percentage, times the individual's
incentive target.
The New C&O Committee has determined for the 1994-1996 performance period,
under the KeyCorp long term incentive compensation plan, objective criteria by
which KeyCorp's financial performance should be judged. The criteria were based
on the New C&O Committee's judgment of a return on common equity that would
warrant satisfactory to excellent results for the three year period. For the
three year period ending December 31, 1996, the established criteria could
result in a payout that ranges from zero to 231.25% of target. An individual
executive's target is either 20%, 25%, or 30% of the executive's "market point".
The EEC Committee believes that senior executives will be motivated, and
their financial interests would be aligned with that of common shareholders, if
stock options are awarded to senior executives, and that the most senior level
executives should have the greatest percentage of their compensation subject to
stock options. The option price has been 100% of the market price of the stock
at the time the option was awarded. The aggregate number and vesting terms of
such options may vary from year to year depending on the EEC Committee's
judgment of the best form of long term motivation appropriate under the
particular circumstances. In determining the number of options awarded to
individual executives, the EEC Committee will consider the value of the shares
underlying the options, and the desirability of granting options to an executive
covering a consistent number of shares from year to year, and the possibility of
special grants of options to selected executives to motivate such executives
under selected special circumstances. In most years, options that vest one year
from the date of the grant will be awarded to a broad group of middle and senior
executives. The EEC Committee believes options will provide a substantial
motivation to executives to improve the return to KeyCorp's common shareholders.
In 1994, consistent with prior practices, Society's C&O Committee awarded
1,246,800 options and Old Key's Compensation and Stock Option Program Committee
granted 1,362,513 options (adjusted to reflect the conversion of Old Key common
stock into 1.205 KeyCorp Common Shares). The EEC Committee has determined that,
in light of these options, no additional options will be granted in 1994 barring
unforeseen circumstances, except pursuant to KeyCorp's Career Equity Program.
As an incident to the Merger, KeyCorp entered into employment agreements
with Messrs. Riley and Gillespie. (See pages 16-18 of this Proxy Statement.)
Salary adjustments for senior executives of KeyCorp, other than KeyCorp's
Chief Executive Officer, and short term and long term incentive compensation
payments to such executives, are based upon the above methodology and the
recommendation of KeyCorp's Chief Executive Officer and Chief Operating Officer.
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<PAGE> 34
KeyCorp's short term and long term incentive compensation plans provide
that the New C&O Committee, in its sole discretion, shall have the authority to
require deferral of payment of all or a portion of awards under any plan if the
Committee determines that KeyCorp would be denied a deduction for federal income
tax purposes for such award or the portion thereof.
It is the judgment of the Compensation and Organization and Executive
Equity Compensation Committees, based on a review of the decisions made by
Society Corporation's Compensation and Organization Committee and Old Key's
Compensation and Stock Option Program Committee, that in 1993, and in the three
year period ending December 31, 1993, such entities had superior results and the
total compensation for senior executives was appropriate for such performance
and to retain and motivate such executives in the future.
This Joint Report on Executive Compensation is provided by the Compensation
and Organization Committee and Compensation and Stock Option Program Committee
of Society and Old Key respectively. The Joint Report has been reviewed by the
following committees of KeyCorp, which were organized in 1994 as an incident to
the Merger.
Compensation and Organization Committee
Board of Directors
KeyCorp
H. Douglas Barclay (Chair)
Albert C. Bersticker
Thomas A. Commes
Lucie J. Fjeldstad
Stephen R. Hardis (Vice Chair)
Robert A. Schumacher
Executive Equity Compensation Committee
Board of Directors
KeyCorp
Albert C. Bersticker
Thomas A. Commes
Lucie J. Fjeldstad
Stephen R. Hardis (Chair)
Robert A. Schumacher
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Hogan, Barclay, Bischoff, and Carlson and Ms. Fjeldstad were
members of the Old Key Compensation and Stock Option Program Committee during
1993. Mr. Barclay, who served as Old Key's Corporate Secretary from its
organization in 1971 until 1989, is a partner in the law firm of Hiscock &
Barclay. Hiscock & Barclay performed legal services during each of the last two
fiscal years (receiving over $6 million in legal fees for service to Old Key in
1993, in addition to fees collected by Old Key from its customers for work
performed by Hiscock & Barclay in connection with customer transactions such as
loans) and is performing services for KeyCorp in 1994. Mr. Carlson retired from
KeyCorp in 1988 as Executive Vice President and Chief Financial Officer. During
1994, Mr. Barclay has and will continue to serve as chair of KeyCorp's
Compensation and Organization Committee, but no other member of that Committee
or of the Executive Equity Compensation Committee has an interlocking
relationship with KeyCorp as defined by the Securities and Exchange Commission.
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<PAGE> 35
KEYCORP STOCK PRICE PERFORMANCE
The following graph compares the stock price performance of KeyCorp's
Common Shares (assuming reinvestment of dividends) with that of the Standard and
Poor's 500 Index and the Keefe Bank Watch 50 Index. The Standard and Poor's 500
Index is an index of 500 stocks designed to measure the performance of the broad
domestic economy. The Keefe Bank Watch 50 Index is an index of the stock of
fifty banks of the United States, including all money-center and most major
regional banks. KeyCorp's stock is included in the Keefe Bank Watch 50 Index and
in the Standard & Poor's 500 Index.
<TABLE>
<CAPTION>
KEYCORP STOCK PRICE PERFORMANCE GRAPH*
TOTAL RETURN ANALYSIS
AVERAGE ANNUAL TOTAL RETURNS
<S> <C>
KEYCORP 17.2%
KBW 50 12.7%
S&P 500 14.6%
<FN>
* The stock price performance in the graph above is for Society
Corporation, which became KeyCorp on March 1, 1994. This stock price
performance is not necessarily indicative of future price performance.
</TABLE>
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<PAGE> 36
SHARE OWNERSHIP
The following table sets forth, as of February 22, 1994, certain
information with respect to KeyCorp Common Shares beneficially owned by current
directors of KeyCorp, the executive officers included in the Summary
Compensation Table, and all directors and executive officers of KeyCorp as a
group. To the best of KeyCorp's knowledge, no person beneficially owns more than
5% of the outstanding KeyCorp Common Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT OF
OWNERSHIP(1) COMMON
---------------------- SHARES
NAME SHARES OPTIONS(2) OUTSTANDING(3)
- - - ------------------------------------------- --------- --------- ------------
<S> <C> <C> <C>
William G. Bares........................... 2,400 -- (3)
H. Douglas Barclay(4)...................... 543,894 34,338 (3)
Albert C. Bersticker....................... 1,000 -- (3)
Thomas A. Commes........................... 8,400 -- (3)
Kenneth M. Curtis(4)....................... 1,205 -- (3)
John C. Dimmer(4).......................... 366,835 4,518 (3)
Lucie J. Fjeldstad(4)...................... 241 16,266 (3)
Robert W. Gillespie........................ 156,058 266,000 (3)
Stephen R. Hardis.......................... 10,000 -- (3)
Henry S. Hemingway(4)(5)................... 457,444 9,036 (3)
Charles R. Hogan(4)........................ 154,151 4,518 (3)
Lawrence A. Leser.......................... 3,000 -- (3)
Henry L. Meyer, III........................ 33,335 189,242 (3)
Steven A. Minter........................... 1,679 -- (3)
M. Thomas Moore............................ 2,000 -- (3)
John C. Morley............................. 3,640 -- (3)
Roger Noall................................ 220,164 60,000 (3)
Richard W. Pogue........................... 16,000 -- (3)
Victor J. Riley, Jr.(4).................... 26,720 473,625 (3)
Robert A. Schumacher(4).................... 13,176 34,338 (3)
Ronald B. Stafford(4)...................... 6,025 34,338 (3)
Dennis W. Sullivan......................... 1,200 -- (3)
Peter G. Ten Eyck, II(4)................... 7,093 29,820 (3)
Nancy B. Veeder(4)......................... 46,914 9,036 (3)
Stephen E. Wall............................ 30,065 119,764 (3)
James W. Wert.............................. 33,285 135,000 (3)
All directors and executive officers
as a group (34).......................... 2,260,288 1,838,094 1.7%
</TABLE>
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- - - ---------------
(1) With respect to KeyCorp Common Shares beneficially held by these individuals
or other executive officers under KeyCorp's Employee Stock Purchase and
Savings Plan, the shares included are as of December 31, 1993.
(2) Options vested as of April 22, 1994 are included herein.
(3) No director or executive officer beneficially owns more than 1% of the
outstanding KeyCorp Common Shares.
(4) Numbers of shares have been adjusted to reflect the conversion of each share
of Old Key common stock into 1.205 KeyCorp Common Shares.
(5) Includes 114,581 shares owned by Town & Country Life Insurance Company, of
which Mr. Hemingway is president and principal shareholder.
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<PAGE> 38
PROPOSED
AMENDMENT AND RESTATEMENT OF THE
1991 EQUITY COMPENSATION PLAN
On March 17, 1994, KeyCorp's Board of Directors adopted, subject to
shareholder approval, certain amendments to, and a restatement of, the Society
Corporation 1991 Equity Compensation Plan (the "Plan") in order to further
increase the flexibility available to KeyCorp in the grant of share-based
incentive compensation to selected employees following the Merger and to allow
options and stock appreciation rights granted under the Plan to qualify as
"performance-based compensation" for purposes of Section 162(m) of the Internal
Revenue Code. The amendments include a change in the manner of calculating the
number of Common Shares available for grants of awards under the Plan, an
increase in the number of Common Shares available for grant of incentive stock
options, a limit on the maximum number of Common Shares with respect to which
any one employee may be granted awards in any calendar year, and express
authority to grant options and stock appreciation rights that may first become
exercisable after an employee's retirement from KeyCorp. As amended and
restated, the Plan, which is being renamed the "KeyCorp Amended and Restated
1991 Equity Compensation Plan," will continue to authorize the grant of stock
options, stock appreciation rights, restricted stock, and performance shares
(collectively, "Awards") to employees of KeyCorp and its subsidiaries.
The Board of Directors is of the opinion that the ability to attract and
retain outstanding employees for key positions is critical to the success of
KeyCorp and that the enhanced flexibility with respect to share-based incentive
compensation afforded by the Plan will assist in the achievement of this
objective by offering KeyCorp's employees a stronger identity of interest with
KeyCorp and its shareholders.
KeyCorp intends to continue to grant stock options pursuant to Old Key's
Career Equity Program to those employees who, before the Merger, were
participants in that program and to continue to grant stock options to directors
under the Directors' Plan. If the shareholders approve the Plan as amended and
restated, KeyCorp will not thereafter make any equity compensation grants other
than (a) grants under the Plan as amended and restated, (b) grants (under Old
Key's 1988 Stock Option Plan) in connection with the Career Equity Program, and
(c) grants to directors under the Directors' Plan. No Awards will be made under
the Plan as amended and restated unless and until the shareholders have approved
the Plan as so amended and restated.
The following summary is a brief description of the material amendments to
the Plan and of the material provisions of the Plan as amended and restated.
This summary is subject to the express provisions of the Plan as amended and
restated, a copy of which is attached as Appendix A.
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<PAGE> 39
CHANGE IN MANNER OF CALCULATING COMMON SHARES AVAILABLE FOR AWARDS UNDER
THE PLAN. Prior to amendment, the Plan provided that the number of Common Shares
available for grant of Awards thereunder would be increased on each January 1 by
the number of Common Shares equal to one percent of the total number of Common
Shares of the Corporation outstanding on that date, subject to the proviso that
the number of Common Shares available for grant of Awards on any January 1 could
not exceed five percent of all Common Shares of the Corporation outstanding on
that date. As amended, the Plan provides (a) that the number of Common Shares
available for grant of Awards as of the date of the 1994 Annual Meeting of
Shareholders is equal to two percent of the number of Common Shares of the
Corporation outstanding on March 31, 1994 (241,856,031 Common Shares) and (b)
that on January 2, 1995, and on each January 2 thereafter during the life of the
Plan, the number of Common Shares available for grant of Awards under the Plan
will be reset at two percent of the total number of Common Shares of the
Corporation outstanding as of the immediately preceding December 31. The
amendment eliminates, because it is no longer relevant, the overall five percent
limitation on Common Shares available for grant of Awards under the Plan.
As before the amendment, the number of Common Shares remaining available
for grants of additional Awards under the Plan at any particular time in a
calendar year will be reduced, upon the granting of any Award, by the full
number of Common Shares subject to that Award (except in the case of Awards
granted in tandem, in which case the number of Common Shares remaining available
will be reduced by the maximum number of Common Shares that the holder may
receive under the tandem Award). If any Award for any reason expires or is
terminated, in whole or in part, without the receipt by an employee of Common
Shares (or the equivalent thereof in cash or other property), the Common Shares
subject to that part of the Award that has so expired or terminated will again
be available for the future grant of Awards under the Plan.
The amendment also provides that appropriate adjustments to the maximum
number of Common Shares available for grant of Awards will be adjusted
automatically in the event of a stock dividend, stock split, or share
combination. Prior to the amendment, the Plan stated that the Committee would
make such adjustments.
INCREASED LIMIT ON NUMBER OF INCENTIVE STOCK OPTIONS. The amendment
increases from 3,300,000 (adjusted to reflect the two-for-one stock split which
was effected by a 100% stock dividend effective March 22, 1993) to 4,800,000 the
number of Common Shares with respect to which incentive stock options may be
issued under the Plan (subject to adjustment in the case of changes in the
capital structure of KeyCorp including as a result of stock splits, stock
dividends, share combinations, reclassifications, and certain business
combinations) and resets the last date on which incentive stock options may be
issued under the Plan from the tenth anniversary of the
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<PAGE> 40
original adoption of the Plan in 1991 to the tenth anniversary of the adoption
of the amended and restated version of the Plan in 1994.
NEW LIMIT ON AWARDS TO ANY EMPLOYEE IN ANY CALENDAR YEAR. A new limit on
the number of Common Shares with respect to which an employee may receive grants
in any calendar year has been included in the Plan so that stock options and
stock appreciation rights granted under the Plan will qualify as
"performance-based" compensation for purposes of Section 162(m) of the Internal
Revenue Code. Under the new limit, the maximum number of Common Shares with
respect to which any employee may receive Awards under the Plan during any
calendar year is the lesser of 200,000 Common Shares or .2% of the outstanding
Common Shares of the Corporation on the date such Award was made (subject to
adjustment in the case of changes in the capital structure of KeyCorp including
as a result of stock splits, stock dividends, share combinations,
reclassifications, and certain business combinations).
AMENDMENT TO EXPRESSLY AUTHORIZE AWARDS THAT MAY BECOME EXERCISABLE AFTER
RETIREMENT. Prior to amendment, the Plan provided that, unless otherwise
provided in the relevant Award Instrument, an employee terminating employment
under circumstances entitling the employee to immediate payment of normal
retirement or early retirement benefits under any retirement plan of the
Corporation or of a subsidiary could exercise options and related stock
appreciation rights at any time within two years of the employee's employment
termination date to the same extent that those options and stock appreciation
rights were exercisable at the employment termination date. As amended, the Plan
expressly authorizes the Committee to grant options and related stock
appreciation rights that by their terms may first become exercisable at some
time or times after an employee's retirement, whether or not the Options or
stock appreciation rights were exercisable (or any conditions to exercise had
been met) as of the employee's retirement date.
TYPES OF AWARDS. The Plan provides for the grant of options (which may be
"incentive stock options", within the meaning of Section 422 of the Internal
Revenue Code, or nonqualified options), stock appreciation rights, limited stock
appreciation rights, restricted stock, and performance shares.
ADMINISTRATION. The Plan is administered by the Executive Equity
Compensation Committee of the Board of Directors. The Committee will be
empowered to grant Awards under the Plan and to construe, interpret, and
supervise the administration of the Plan. The members of the Committee will not
be eligible to participate in the Plan.
PARTICIPANTS. Grants of Awards will be made by the Committee. Awards may be
granted to employees of KeyCorp or a subsidiary selected by the Committee,
including officers named in the Summary Compensation Table.
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<PAGE> 41
EXERCISE PRICE OF OPTIONS. The exercise price under an option, whether an
incentive or a nonqualified stock option, will be not less than the fair market
value of the Common Shares on the date of grant. The market price of KeyCorp
Common Shares as reported on the New York Stock Exchange on March 31, 1994, was
$30.19 per share.
The exercise price may be paid in cash or such other form of consideration
as the Committee determines, including, without limitation, securities or other
property, or delivery of irrevocable instructions to a broker to promptly
deliver to KeyCorp the amount of sale or loan proceeds from the Common Shares
subject to the option to pay the exercise price. The Committee, in its sole
discretion, may permit "pyramiding", which involves the exercise of an option in
successive stages using as the payment at each stage shares which have been
acquired in preceding stages.
EXERCISE, TERM, AND TRANSFERABILITY OF OPTIONS. An option may not be
exercised until the optionee has completed six full months of employment after
the option is granted. Thereafter, the option is exercisable in one or more
installments at the time or times provided in the option agreement.
Notwithstanding any waiting period before exercise, an option will become
exercisable in full upon the occurrence of a change of control (as defined in
the Plan). An option will expire at the time set forth in the option agreement,
which will be not later than ten years after grant in the case of an incentive
stock option and ten years and one month after grant in the case of a
nonqualified stock option.
In general, an option may be exercised only while the optionee is an
employee and will not be transferable. An incentive stock option may be
exercised during the three months, and a nonqualified stock option may be
exercised during the six months, following termination of employment for any
reason other than retirement, disability, or death. If an optionee's employment
is terminated due to retirement or disability, an option, whether an incentive
stock option or a nonqualified option, may be exercised during the two years
following termination of employment, but any exercise of an incentive stock
option more than one year after termination of employment due to disability or
more than three months after retirement will cause the option to be treated as a
nonqualified stock option. If a holder of an incentive or nonqualified stock
option dies during employment or during the period following termination of
employment when that option may be exercised, the optionee's executor or
administrator or a permitted transferee of the option may exercise the option
during the two year period immediately following the optionee's death. If the
holder of a nonqualified option dies less than one year before the scheduled
expiration date of the option, the expiration date of the option will be
extended to the first anniversary of the holder's death. The Committee has the
authority to modify in the award instrument the periods specified above during
which options are exercisable following retirement, disability, or death. The
Committee also has the authority to grant options and related stock appreciation
rights that by their terms may first become exercisable at some time or times
after an employee's retirement,
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<PAGE> 42
whether or not the options or stock appreciation rights were exercisable (or any
conditions to exercise had been met) as of the employee's retirement date.
REGULAR AND LIMITED STOCK APPRECIATION RIGHTS. Regular and limited stock
appreciation rights ("Regular SARs" and "Limited SARs") may be granted under the
Plan to provide holders of options granted under the Plan (or under other option
plans maintained or assumed by KeyCorp) with an alternative method of realizing
the benefits of those options. Limited SARs may be granted in tandem with
Regular SARs, but only one type of SAR may be exercised with respect to any
particular optioned shares.
AMOUNTS PAYABLE UPON EXERCISE OF REGULAR SARS AND LIMITED SARS. Upon
exercise of a Regular SAR and surrender of the related stock option, KeyCorp
will pay to the holder of the Regular SAR an amount equal to 100%, or such
lesser percentage as the Committee may determine, of the excess of (a) the fair
market value of the Common Shares subject to the related option on the date the
Regular SAR is exercised over (b) the exercise price for those Common Shares
(the "spread"). Upon exercise of a Limited SAR granted with respect to an
incentive stock option and surrender of the related stock option, KeyCorp will
pay to the holder of the Limited SAR an amount equal to 100%, or such lesser
percentage as the Committee may determine, of the spread at the time of
exercise. Upon exercise of a Limited SAR granted with respect to a nonqualified
stock option and surrender of the related stock option, KeyCorp will pay the
holder of the Limited SAR an amount per share equal to 100%, or such lesser
percentage as the Committee may determine, of the highest of (a) the spread at
the time of exercise, (b) the excess of the highest price paid for a Common
Share of KeyCorp in connection with any change of control over the exercise
price per share of Common Shares subject to the related nonqualified stock
option, or (c) the excess of the highest fair market value of the Common Shares
on any day during the sixty days preceding the exercise of the Limited SAR over
the exercise price per share of the Common Shares subject to the related
nonqualified stock option. Amounts payable upon exercise of Regular or Limited
SARs are payable by KeyCorp at the time of exercise in cash, in Common Shares,
or in any combination of cash and Common Shares as determined by the Committee.
TIME OF EXERCISE OF REGULAR SARS AND LIMITED SARS. Regular SARs and Limited
SARs may be exercised only (a) after the expiration of six months from the date
of grant of the Regular SAR or Limited SAR, (b) on a date when the SAR or
Limited SAR is "in the money", (c) at a time and to the same extent as the
related option is exercisable, and (d) by surrender, unexercised, of the related
option or any applicable portion thereof. In the case of Regular and Limited
SARs held by an employee who is subject to the short-swing profit rules of
Section 16(b) of the Securities Exchange Act of 1934 (the "short-swing profit
rules"), the exercise of the SAR is
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<PAGE> 43
further limited to the extent necessary to qualify for the exemption from those
short-swing profit rules.
RESTRICTED STOCK. The Committee may grant to employees Awards consisting of
the right to purchase Common Shares as Restricted Stock for an acquisition price
determined by the Committee but not less than the par value of the Common
Shares. The maximum number of Common Shares that may be issued under the Plan as
Restricted Stock in any calendar year shall equal 5% of the total number of
Common Shares available for grant of Awards under the Plan as of January 2 of
such calendar year. Any Restricted Stock granted under the Plan will be subject
to (a) the restrictions that the grantee not sell, transfer, otherwise dispose
of, or pledge or otherwise encumber the Restricted Stock during a restriction
period specified by the Committee (the length of which will not be less than one
year), (b) the restrictions that (unless otherwise provided in the award
instrument with respect to the Restricted Stock) the grantee offer the
Restricted Stock to KeyCorp at the acquisition price paid by the grantee if the
grantee's employment terminates before the end of the applicable restriction
period, and (c) such other restrictions and conditions as the Committee may
impose. Upon payment of the acquisition price for Restricted Stock, an employee
will have full voting and dividend rights with respect to that Restricted Stock,
subject only to the restrictions noted above.
PERFORMANCE SHARES. The Committee may grant to employees Awards consisting
of Performance Shares with respect to which the employees' receipt of value will
be contingent upon attainment of one or more performance goals by KeyCorp or any
subsidiary or subunit of KeyCorp or of any subsidiary over one or more periods
selected by the Committee. The Committee will have full discretion to specify
the performance goals with respect to each grant of Performance Shares. These
performance goals may be, but need not be, goals of a type readily expressed in
financial terms and may be related to the performance by KeyCorp, by any
subsidiary, or by one or more employees or groups of employees in connection
with services performed for KeyCorp or a subsidiary. Unless otherwise provided
in the award instrument, an employee must be employed throughout a performance
period to be entitled to any payment with respect to Performance Shares that may
be earned during that period. The Committee may establish one or more formulas
to determine whether all, some portion but less than all, or none of the
Performance Shares granted with respect to any performance period will be
treated as earned during that performance period.
PAYMENT FOR PERFORMANCE SHARES. KeyCorp may pay an employee for Performance
Shares earned during any performance period in cash, Common Shares, Restricted
Stock, or any combination of cash, Common Shares, and Restricted Stock as the
Committee may determine.
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EFFECT OF CHANGE OF CONTROL. Unless otherwise specified in the award
instrument and subject to such restrictions as may be applicable to employees
subject to the short-swing profit rules, Awards outstanding on the date of a
change of control will be accelerated so that all outstanding options, Regular
SARs, and Limited SARs will become immediately exercisable in full, the
restriction period for all outstanding Restricted Stock will immediately
terminate, and any restrictions, conditions, or contingencies on any Performance
Shares will be modified in such manner as the Committee may specify to give the
employees entitled to those Performance Shares the benefit of those Performance
Shares through the date of the change of control.
ASSIGNABILITY. No option, Regular SAR, Limited SAR, Restricted Stock during
the Restriction Period, or Performance Share may be transferred other than by
will or by the laws of descent and distribution. During an employee's lifetime,
only the employee (or in the case of incapacity of an employee, the employee's
attorney in fact or legal guardian) may exercise any Award requiring or
permitting exercise.
AMENDMENT AND TERM OF THE PLAN. The Board of Directors or a duly authorized
committee thereof may amend the Plan, but no amendment may be made without
shareholder approval if shareholder approval (a) is required under Rule 16b-3
under the Securities Exchange Act of 1934 to qualify for the exemption from
Section 16(b) of that Act, (b) is required by any applicable securities law or
tax law, or (c) is required by the rules of any exchange on which the Common
Shares of KeyCorp are traded or, if the Common Shares are not listed on an
exchange, by the rules of the registered national securities association through
whose inter-dealer quotation system the Common Shares are quoted.
The Plan, as amended and restated, will become effective on the date on
which it is approved by the shareholders of KeyCorp and will remain in effect
thereafter until terminated by action of the Board of Directors.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS. The following is a brief general
discussion of the anticipated income tax treatment of the grant and exercise of
Awards to employees and to KeyCorp under current provisions of the Internal
Revenue Code.
INCENTIVE STOCK OPTIONS. The grant of an incentive stock option will have
no immediate tax consequences to KeyCorp or the optionee. If the optionee has
remained an employee of KeyCorp or a subsidiary from the date of grant until at
least the day three months before the date of exercise (one year before the date
of exercise in the case of an employee who is disabled), the optionee will
recognize no taxable income and KeyCorp will not be entitled to any tax
deduction at the time of exercise of an incentive stock option. However, the
amount by which the fair market value of the acquired shares at the time of
exercise exceeds the exercise price will be an adjustment to
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alternative minimum taxable income for purposes of the alternative minimum tax.
If an optionee exercises an incentive stock option more than three months after
terminating employment (one year in the case of an employee who is disabled),
the exercise of the option will be treated in the same manner as the exercise of
a nonqualified stock option.
If an optionee holds the shares received upon exercise of an incentive
stock option for at least two years after the date of grant and for at least one
year from the date of exercise, gain or loss on a subsequent sale of the shares
will be a long-term capital gain or loss. If an optionee disposes of shares
acquired upon exercise of an incentive stock option before these holding periods
are satisfied, the optionee generally will recognize compensation income equal
to the lesser of (a) the excess of the fair market value of the stock on the
exercise date over the exercise price or (b) the excess of the amount realized
on disposition over the exercise price. The amount received in excess of the
fair market value on the exercise date will be taxable as a short-term capital
gain, and any loss will be treated as short-term capital loss. Upon any such
premature disposition by an employee, KeyCorp will be entitled to a deduction in
the amount of compensation income realized by the employee. For purposes of
calculating the alternative minimum tax for the year of the disposition of a
share acquired upon exercise of an incentive stock option, any adjustment to
alternative minimum taxable income reported upon exercise of the incentive stock
option will be included in the basis of the share.
NONQUALIFIED STOCK OPTIONS. The grant of a nonqualified stock option will
have no immediate tax consequences to KeyCorp or the optionee. An optionee will
recognize compensation income at the time of exercise of a nonqualified option
in an amount equal to the difference between the exercise price and the fair
market value on the exercise date of the acquired shares. KeyCorp will be
entitled to a deduction in the same taxable year and in the same amount as an
optionee recognizes compensation income as a result of the exercise of a
nonqualified option, provided that KeyCorp satisfies applicable withholding
requirements.
REGULAR SARS AND LIMITED SARS. Grants of Regular SARs or Limited SARs will
have no immediate tax consequences to KeyCorp or the employee receiving the
grant. The amount received by an employee upon the exercise of a Regular SAR or
Limited SAR will constitute compensation income to the employee at the time of
exercise. KeyCorp will be entitled to a deduction for compensation paid in that
amount at that time.
RESTRICTED STOCK. Unless an employee makes an election under Section 83(b)
of the Internal Revenue Code, an employee will recognize no income and KeyCorp
will be entitled to no deduction at the time Restricted Stock is awarded to an
employee. As and when the restrictions on Restricted Stock lapse or are
otherwise removed, the employee will recognize compensation income equal to the
excess of the fair market value of the Restricted Stock on the date the
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restrictions lapse or are otherwise removed over the amount paid by the employee
for the Restricted Stock and KeyCorp will be entitled to a corresponding
deduction for compensation paid, provided that KeyCorp satisfies applicable
withholding requirements. Dividends paid on Restricted Stock during the
restriction period will constitute compensation income to the employee receiving
the dividend and will give rise to a deduction for KeyCorp. Upon disposition of
Common Shares after the restrictions lapse or are otherwise removed, any gain or
loss realized by an employee will be treated as short-term or long-term capital
gain or loss depending upon the period of time between the disposition and the
earlier lapse or removal of the restrictions on those Common Shares. If an
employee files an election under Section 83(b) with the Internal Revenue Service
within 30 days after the grant of Restricted Stock, the employee will recognize
compensation income on the date of the grant, equal to the excess of the fair
market value of the Common Shares on that date over the price paid for those
Common Shares and KeyCorp will be entitled to a corresponding deduction,
provided KeyCorp satisfies applicable withholding requirements.
PERFORMANCE SHARES. The grant of Performance Shares will not have any
immediate tax consequences to an employee receiving the Performance Shares or to
KeyCorp. In general, at the time KeyCorp pays any amount to an employee with
respect to Performance Shares, the employee will recognize compensation income
equal to the amount of that payment and KeyCorp will be entitled to a
corresponding deduction.
A copy of the KeyCorp Amended and Restated 1991 Equity Compensation Plan is
attached as Appendix A.
The Board of Directors recommends approval of the Plan as amended and
restated.
The favorable vote of the holders of a majority of the KeyCorp Common
Shares present in person or by proxy at the meeting will be required for such
approval.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors of KeyCorp, acting upon the recommendation of its
Audit Committee, has appointed Ernst & Young, independent auditors, to examine
the financial statements of KeyCorp and its subsidiaries for the year 1994.
Ernst & Young has conducted the annual audit of KeyCorp's financial statements
since 1959. Although shareholder approval of this appointment is not required by
law or binding on the Board, the Board believes that shareholders should be
given this opportunity to express their views. If the shareholders do not ratify
the appointment of Ernst & Young as KeyCorp's independent auditors, the Board
will consider this vote in determining whether or not to continue the engagement
of Ernst & Young.
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A representative of Ernst & Young is expected to be present at the meeting
with an opportunity to make a statement if such representative desires to do so
and to respond to appropriate questions.
The Board of Directors recommends ratification of the appointment of Ernst
& Young.
The favorable vote of the holders of a majority of the KeyCorp Common
Shares present in person or by proxy at the meeting will be required for such
ratification.
1994 SHAREHOLDERS' PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the Proxy Statement for next year's Annual Meeting of Shareholders
is December 19, 1994.
GENERAL
The Board of Directors knows of no other matters which will be presented at
the meeting. However, if other matters properly come before the meeting or any
adjournment, the person or persons voting the proxies will vote them in
accordance with their best judgment on such matters.
Shareholders may only nominate a person for election as a director of
KeyCorp at a meeting of shareholders if the nominating shareholder has strictly
complied with the applicable notice and procedural requirements set forth in
KeyCorp's Regulations, including, without limitation, timely providing to the
Secretary of KeyCorp the requisite notice of the proposed nominee(s) containing
all the information specified by the Regulations. KeyCorp will provide to any
shareholder, without charge, a copy of the applicable procedures governing
nomination of directors set forth in KeyCorp's Regulations upon request to the
Secretary of KeyCorp.
KeyCorp will bear the expense of preparing, printing, and mailing this
Proxy Statement. In addition to solicitation by mail, officers and regular
employees of KeyCorp and its subsidiaries may solicit the return of proxies.
KeyCorp has engaged the services of Morrow & Co., Inc. to assist in the
solicitation of proxies at an anticipated cost of $17,000 plus expenses. KeyCorp
will request brokers, banks, and other custodians, nominees, and fiduciaries to
send proxy material to beneficial owners and will, upon request, reimburse them
for their expense in so doing.
You are urged to complete, date, sign, and return your proxy promptly in
order to make certain your shares are voted at the meeting. KeyCorp Common
Shares represented by properly executed proxies will be voted in accordance with
any specification made thereon and, if no specification is made, will be voted
for the election as directors of the nominees named herein, in favor of the
proposed amendments to the 1991 Equity Compensation Plan, and in favor of
ratifying
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the appointment of Ernst & Young as independent auditors for the fiscal year
ending December 31, 1994. Unless a broker's authority to vote on a particular
matter is limited, abstentions and broker non-votes are counted in determining
the votes present at a meeting. Consequently, an abstention or a broker non-vote
has the same effect as a vote against a proposal, as each abstention or broker
non-vote would be one less vote in favor of a proposal. You may revoke your
proxy by a later proxy received by, or by giving notice to, KeyCorp, or in open
meeting, without affecting any vote previously taken. However, your mere
presence at the meeting will not operate to revoke your proxy.
By Order of the Board of Directors
[sig]
CARTER B. CHASE
Secretary
April 18, 1994
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APPENDIX A
KEYCORP
AMENDED AND RESTATED
1991 EQUITY COMPENSATION PLAN
1. PURPOSE. The KeyCorp Amended and Restated 1991 Equity Compensation
Plan is intended to promote the interests of KeyCorp and its shareholders by
providing equity-based incentives for effective service and high levels of
performance to selected Employees who are in a position to make a substantial
contribution to the continued progress and success of the Corporation and its
Subsidiaries and thereby to enable the Corporation and its Subsidiaries to
attract and retain qualified individuals to serve as Employees in those
positions. To achieve these purposes, the Corporation may grant Awards of
Options, Stock Appreciation Rights, Limited Stock Appreciation Rights,
Restricted Stock, and Performance Shares to selected Employees, all in
accordance with the terms and conditions hereinafter set forth.
2. DEFINITIONS.
2.1 1934 ACT. The term "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
2.2 ACQUISITION PRICE. The term "Acquisition Price" with respect to
Restricted Stock shall mean such amount, not less than the par value per Common
Share, as may be specified by the Committee in the Award Instrument with respect
to that Restricted Stock as the consideration to be paid by the Employee for
that Restricted Stock.
2.3 AWARD. The term "Award" shall mean an award granted under the Plan of
an Option, of Stock Appreciation Rights, of Limited Stock Appreciation Rights,
of Restricted Stock, or of Performance Shares.
2.4 AWARD INSTRUMENT. The term "Award Instrument" shall mean a written
instrument evidencing an Award in such form and with such provisions as the
Committee may prescribe, including, without limitation, an agreement to be
executed by the Employee and the Corporation, a certificate issued by the
Corporation, or a letter executed by the Committee or its designee. Acceptance
of the Award Instrument by an Employee constitutes agreement to the terms of the
Award evidenced thereby.
2.5 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if at any time or from time to time after the date of the grant of the
relevant Award:
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(a) there is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form, or report), each as adopted under the 1934 Act,
disclosing the acquisition of 25% or more of the voting stock of the
Corporation in a transaction or series of transactions by any person (as
the term "person" is used in Section 13(d) and Section 14(d)(2) of the 1934
Act),
(b) during any period of 24 consecutive calendar months, individuals
who at the beginning of such period constitute the directors of the
Corporation cease for any reason to constitute at least a majority thereof
unless the election of each new director of the Corporation was approved or
recommended by the vote of at least two-thirds of the directors of the
Corporation then still in office who were directors of the Corporation at
the beginning of any such period; provided, however, in the case of Awards
granted on or after March 1, 1994 (the date of the merger of the former
KeyCorp, a New York corporation, into Society Corporation, an Ohio
corporation, whereupon the surviving corporation changed its name to
KeyCorp), the measuring period under this clause (b), in lieu of being
defined as "during any period of 24 consecutive calendar months," shall be
defined as "during any period of 24 consecutive calendar months commencing
after March 1, 1994, and if, at the relevant time, 24 consecutive calendar
months have not elapsed since March 1, 1994, then during the period since
March 1, 1994",
(c) the Corporation merges with or into or consolidates with another
corporation following approval of the shareholders of the Corporation of
such merger or consolidation and, after giving effect to such merger or
consolidation, less than sixty percent (60%) of the then outstanding voting
securities of the surviving or resulting corporation represent or were
issued in exchange for voting securities of the Corporation outstanding
immediately prior to such merger or consolidation,
(d) there is a sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of the Corporation following approval of the shareholders
of the Corporation of such transaction or series of transactions, or
(e) the shareholders of the Corporation shall approve any plan or
proposal for the liquidation or dissolution of the Corporation.
2.6 COMMITTEE. The term "Committee" shall mean a committee appointed by
the Board of Directors of the Corporation to administer the Plan. The Committee
shall be composed of not less than three directors of the Corporation. The Board
of Directors may also appoint one or more directors as alternate members of the
Committee. No officer or Employee of the Corporation or of any Subsidiary shall
be a member or alternate member of the Committee. The Committee shall at all
times be so comprised (a) as to satisfy the disinterested administration
standard contained in
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Rule 16b-3, if required to qualify for the Rule 16b-3 Exemption and (b) as to
satisfy the outside director standard under Section 162(m) of the Internal
Revenue Code of 1986, as amended, if required to qualify compensation paid under
one or more of the provisions of the Plan as performance-based compensation
within the meaning of that section.
2.7 COMMON SHARES. The term "Common Shares" shall mean common shares of
the Corporation, with a par value of $1 each.
2.8 CORPORATION. The term "Corporation" shall mean KeyCorp and its
successors, including the surviving or resulting corporation of any merger of
KeyCorp with or into, or any consolidation of KeyCorp with, any other
corporation or corporations.
2.9 DISABILITY. The term "Disability" with respect to an Employee shall
mean physical or mental impairment which entitles the Employee to receive
disability payments under any long term disability plan maintained by the
Corporation.
2.10 EMPLOYEE. The term "Employee" shall mean any individual employed by
the Corporation or by any Subsidiary and shall include officers as well as all
other employees of the Corporation or of any Subsidiary (including employees who
are members of the Board of Directors of the Corporation or any Subsidiary).
2.11 EMPLOYMENT TERMINATION DATE. The term "Employment Termination Date"
with respect to an Employee shall mean the first date on which the Employee is
no longer employed by the Corporation or any Subsidiary.
2.12 EXERCISE PRICE. The term "Exercise Price" with respect to an Option
shall mean the price specified in the Option at which the Common Shares subject
to the Option may be purchased by the holder of the Option.
2.13 FAIR MARKET VALUE. Except as otherwise determined by the Committee
at the time of the grant of an Award, the term "Fair Market Value" with respect
to Common Shares shall mean: (a) if the Common Shares are traded on a national
exchange, the mean between the high and low sales price per Common Share on that
national exchange on the date for which the determination of fair market value
is made or, if there are no sales of Common Shares on that date, then on the
next preceding date on which there were any sales of Common Shares, or (b) if
the Common Shares are not traded on a national exchange, the mean between the
high and low sales price per Common Share in the over-the-counter market,
National Market System, as reported by the National Quotations Bureau, Inc. and
NASDAQ on the date for which the determination of fair market value is made or,
if there are no sales of Common Shares on that date, then on the next preceding
date on which there were any sales of Common Shares.
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2.14 INCENTIVE STOCK OPTION. The term "Incentive Stock Option" shall mean
an Option intended by the Committee to qualify as an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
2.15 LIMITED STOCK APPRECIATION RIGHT. The term "Limited Stock
Appreciation Right" or "Limited SAR" shall mean an Award granted to an Employee
with respect to all or any part of any Option, that entitles the holder thereof
to receive from the Corporation, upon exercise of the Limited SAR and surrender
of the related Option, or any portion of the Limited SAR and the related Option,
an amount equal to (unless the Committee specifies a lesser amount at the time
of the grant of the Award):
(a) in the case of a Limited SAR granted with respect to an Incentive
Stock Option, 100% of the excess, if any, measured at the time of the
exercise of the Limited SAR, of (i) the Fair Market Value of the Common
Shares subject to the Incentive Stock Option with respect to which the
Limited SAR is exercised over (ii) the Exercise Price of those Common
Shares under the Incentive Stock Option, or
(b) in the case of a Limited SAR granted with respect to a
Nonqualified Option, 100% of the highest of:
(i) the excess, measured at the time of the exercise of the Limited
SAR, of (A) the Fair Market Value of the Common Shares subject to the
Nonqualified Option with respect to which the Limited SAR is exercised
over (B) the Exercise Price of those Common Shares under the
Nonqualified Option,
(ii) the excess of (A) the highest gross price (before brokerage
commissions and soliciting dealers' fees) paid or to be paid for a
Common Share (whether in cash or in property and whether by way of
exchange, conversion, distribution upon liquidation, or otherwise) in
connection with any Change of Control multiplied by the number of Common
Shares subject to the Nonqualified Option with respect to which the
Limited SAR is exercised over (B) the Exercise Price of those Common
Shares under the Nonqualified Option, or
(iii) the excess of (A) the highest Fair Market Value of the Common
Shares subject to the Nonqualified Option with respect to which the
Limited SAR is exercised on any one day during the period beginning on
the sixtieth day prior to the date on which the Limited SAR is exercised
multiplied by the number of Common Shares subject to the Nonqualified
Option with respect to which the Limited SAR is exercised over (B) the
Exercise Price of those Common Shares under the Nonqualified Option.
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2.16 NONQUALIFIED OPTION. The term "Nonqualified Option" shall mean an
Option intended by the Committee not to qualify as an "incentive stock option"
under Section 422 of the Internal Revenue Code of 1986, as amended.
2.17 OPTION. The term "Option," (a) when used otherwise than in
connection with the term Stock Appreciation Right or Limited Stock Appreciation
Right, shall mean an Award entitling the holder thereof to purchase a specified
number of Common Shares at a specified price during a specified period of time,
and (b) when used in connection with the term Stock Appreciation Right or
Limited Stock Appreciation Right, shall mean (i) any such Award or (ii) any
award under any other plan maintained or assumed by the Corporation entitling
the holder thereof to purchase a specified number of Common Shares at a
specified price during a specified period of time.
2.18 OPTION EXPIRATION DATE. The term "Option Expiration Date" with
respect to any Option shall mean the date selected by the Committee after which,
except as provided in Section 10.4 in the case of the death of the Employee to
whom the option was granted, the Option may not be exercised.
2.19 PERFORMANCE GOAL. The term "Performance Goal" shall mean a
performance goal specified by the Committee in connection with the potential
grant of Performance Shares and may include, without limitation, goals based
upon cumulative earnings per Common Share, return on investment, return on
shareholders' equity, or achievement of any other goals, whether or not readily
expressed in financial terms, that are related to the performance by the
Corporation, by any Subsidiary, or by any Employee or group of Employees in
connection with services performed by that Employee or those Employees for the
Corporation, a Subsidiary, or any one or more subunits of the Corporation or of
any Subsidiary.
2.20 PERFORMANCE PERIOD. The term "Performance Period" shall mean such
one or more periods of time, which may be of varying and overlapping durations,
as the Committee may select, over which the attainment of one or more
Performance Goals will be relevant in connection with one or more Awards of
Performance Shares.
2.21 PERFORMANCE SHARES. The term "Performance Shares" shall mean an
Award denominated in Common Shares and contingent upon attainment of one or more
Performance Goals by the Corporation or a Subsidiary or any subunit of the
Corporation or of any Subsidiary over a Performance Period.
2.22 PLAN. The term "Plan" shall mean this KeyCorp Amended and Restated
1991 Equity Compensation Plan as from time to time hereafter amended in
accordance with Section 20.
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2.23 RESTRICTED STOCK. The term "Restricted Stock" shall mean Common
Shares of the Corporation delivered to an Employee pursuant to an Award subject
to such restrictions, conditions, and contingencies as the Committee may provide
in the relevant Award Instrument, including (a) the restriction that the
Employee not sell, transfer, otherwise dispose of, or pledge or otherwise
hypothecate the Restricted Stock during the applicable Restriction Period, (b)
the requirement that, subject to the provisions of Section 10, if the Employee's
employment terminates so that the Employee is no longer employed by the
Corporation or any Subsidiary before the end of the applicable Restriction
Period, the Employee will offer to sell to the Corporation at the Acquisition
Price each Common Share of Restricted Stock held by the Employee at the
Employment Termination Date with respect to which, as of that date, any
restrictions, conditions, or contingencies have not lapsed, and (c) such other
restrictions, conditions, and contingencies, if any, as the Committee may
provide in the Award Instrument with respect to that Restricted Stock.
2.24 RESTRICTION PERIOD. The term "Restriction Period" with respect to an
Award of Restricted Stock shall mean the period selected by the Committee and
specified in the Award Instrument with respect to that Restricted Stock during
which the Employee may not sell, transfer, otherwise dispose of, or pledge or
otherwise hypothecate that Restricted Stock.
2.25 RULE 16B-3. The term "Rule 16b-3" shall mean Rule 16b-3 or any rule
promulgated in replacement thereof or in substitution therefor under the 1934
Act.
2.26 RULE 16B-3 EXEMPTION. The term "Rule 16b-3 Exemption" shall mean the
exemption from Section 16(b) of the 1934 Act that is available under Rule 16b-3.
2.27 SECTION 16(B) EMPLOYEE. The term "Section 16(b) Employee" shall mean
an individual who is, or at any time within the preceding six months was, a
director, officer, or 10% shareholder of the Corporation within the meaning of
Section 16(b) of the 1934 Act.
2.28 STOCK APPRECIATION RIGHT. The term "Stock Appreciation Right" or
"SAR" shall mean an Award granted to an Employee with respect to all or any part
of any Option that entitles the holder thereof to receive from the Corporation,
upon exercise of the SAR and surrender of the related Option, or any portion of
the SAR and the related Option, an amount equal to 100%, or such lesser
percentage as the Committee may determine at the time of the grant of the Award,
of the excess, if any, measured at the time of the exercise of the SAR, of (a)
the Fair Market Value of the Common Shares subject to the Option with respect to
which the SAR is exercised over (b) the Exercise Price of those Common Shares
under the Option.
2.29 SUBSIDIARY. The term "Subsidiary" shall mean any corporation,
partnership, joint venture, or other business entity in which the Corporation
owns, directly or indirectly, 50 percent
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or more of the total combined voting power of all classes of stock (in the case
of a corporation) or other ownership interests (in the case of any entity other
than a corporation).
2.30 TANDEM AWARD. The term "Tandem Award" shall mean any two or more
Awards that are linked by the terms of any such Awards so that the exercise of
one such Award, in whole or in part, requires or will automatically result in
the surrender or cancellation, in whole or in proportionate part, of the other
such Awards.
3. ADMINISTRATION. The Plan shall be administered by the Committee. No
Award may be made under the Plan to any member or alternate member of the
Committee. The Committee shall have authority, subject to the terms of the Plan,
(a) to determine the Employees who are eligible to participate in the Plan, the
type, size, and terms of Awards to be granted to any Employee, the time or times
at which Awards shall be exercisable or at which restrictions, conditions, and
contingencies shall lapse, and the terms and provisions of the instruments by
which Awards shall be evidenced, (b) to establish any other restrictions,
conditions, and contingencies on Awards in addition to those prescribed by the
Plan, (c) to interpret the Plan, and (d) to make all determinations necessary
for the administration of the Plan.
The construction and interpretation by the Committee of any provision of
the Plan or any Award Instrument delivered pursuant to the Plan and any
determination by the Committee pursuant to any provision of the Plan or any
Award Instrument shall be final and conclusive. No member or alternate member of
the Committee shall be liable for any such action or determination made in good
faith.
The Committee may act only by a majority of its members. Any determination
of the Committee may be made, without a meeting, by a writing or writings signed
by all of the members of the Committee. In addition, the Committee may authorize
any one or more of their number or any officer of the Corporation to execute and
deliver documents on behalf of the Committee and the Committee may delegate to
one or more employees, agents, or officers of the Corporation, or to one or more
third party consultants, accountants, lawyers, or other advisors, such
ministerial duties related to the operation of the Plan as it may deem
appropriate.
4. ELIGIBILITY. Awards may be granted to Employees of the Corporation or
any Subsidiary selected by the Committee in its sole discretion. The granting of
any Award to an Employee shall not entitle that Employee to, nor disqualify that
Employee from, participation in any other grant of an Award. The maximum number
of Common Shares with respect to which any Employee may receive Awards during
any calendar year shall be the lesser of 200,000 Common Shares or .2% of the
outstanding Common Shares of the Corporation on the date such Award was made,
which maximum number shall be subject to adjustment as provided in Section 13 of
the Plan.
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5. STOCK SUBJECT TO THE PLAN. The stock that may be issued and
distributed to Employees in connection with Awards granted under the Plan shall
be Common Shares and may be authorized and unissued Common Shares, treasury
Common Shares, or Common Shares acquired on the open market specifically for
distribution under the Plan, as the Board of Directors may from time to time
determine.
Subject to adjustment as provided in Section 13, the number of Common
Shares available for grant of Awards under the Plan shall be determined from
time to time as follows: (a) on the date of the 1994 Annual Meeting of
Shareholders of the Corporation (at which meeting an amendment and restatement
of the Plan was submitted for approval of the shareholders of the Corporation),
the number of Common Shares available for grants of Awards under the Plan shall
equal two percent of the total number of Common Shares outstanding on March 31,
1994, and (b) on January 2, 1995 and on each January 2 occurring thereafter
during the life of the Plan, the number of Common Shares available for grant of
Awards under the Plan shall be increased by adding to the number of Common
Shares then available for grant of Awards under the Plan, the number of Common
Shares of the Corporation that, when added to the number of Common Shares that
otherwise remain available for grant of additional Awards under the Plan on that
January 2, equals two percent of the total number of Common Shares of the
Corporation outstanding on December 31st of the next preceding year.
The number of Common Shares remaining available for grants of additional
Awards under the Plan at any particular time during a calendar year shall be
reduced, upon the granting thereafter of any Award under the Plan, by the full
number of Common Shares subject to that Award except that, in the case of any
particular Tandem Award, the number of Common Shares counted as being subject to
such Tandem Award shall be the maximum number of Common Shares with respect to
which the Employee may receive value under such Tandem Award. If any Award for
any reason expires or is terminated, in whole or in part, without the receipt by
an Employee of Common Shares (or the equivalent thereof in cash or other
property), the Common Shares subject to that part of the Award that has so
expired or terminated shall again be available for the future grant of Awards
under the Plan.
Notwithstanding any other provision of the Plan, but subject to adjustment
under Section 13, (a) the maximum number of Common Shares that may be issued
under the Plan pursuant to Incentive Stock Options shall be 4,800,000 Common
Shares, and (b) the maximum number of Common Shares that may be issued under the
Plan as Restricted Stock during any calendar year shall be that number of Common
Shares that is equal to five percent of the total number of Common Shares
available for grant of Awards under the Plan as of January 2 of that calendar
year.
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6. STOCK OPTIONS.
6.1 TYPE AND DATE OF GRANT OF OPTIONS.
(a) The Award Instrument pursuant to which any Incentive Stock Option
is granted shall specify that the Option granted thereby shall be treated
as an Incentive Stock Option. The Award Instrument pursuant to which any
Nonqualified Option is granted shall specify that the Option granted
thereby shall not be treated as an Incentive Stock Option.
(b) The day on which the Committee authorizes the grant of an
Incentive Stock Option shall be the date on which that Option is granted.
No Incentive Stock Option may be granted on any date after the tenth
anniversary of the date of adoption, on March 17, 1994, by the Board of
Directors of the Corporation, of the Plan as amended and restated.
(c) The day on which the Committee authorizes the grant of a
Nonqualified Option shall be considered the date on which that Option is
granted, unless the Committee specifies a later date.
6.2 EXERCISE PRICE. The Exercise Price under any Option shall be not less
than the Fair Market Value of the Common Shares subject to the Option on the
date the Option is granted.
6.3 OPTION EXPIRATION DATE. The Option Expiration Date under any
Incentive Stock Option shall be not later than ten years from the date on which
the Option is granted. The Option Expiration Date under any Nonqualified Option
shall not be later than ten years and one month from the date on which the
Option is granted.
6.4 EXERCISE OF OPTIONS.
(a) Except as otherwise provided in Section 10, an Option may be
exercised only (i) while the Employee to whom the Option was granted is in
the employ of the Corporation or of a Subsidiary, and (ii) after the
Employee to whom the Option was granted has been in the continuous employ
of the Corporation or of a Subsidiary for at least six months from the date
on which the Option was granted. Subject to these requirements, each Option
shall become exercisable in one or more installments at the time or times
provided in the Award Instrument evidencing the Option. Once any portion of
an Option becomes exercisable, that portion shall remain exercisable until
expiration or termination of the Option. An Employee to whom an Option is
granted may exercise the Option from time to time, in whole or in part, up
to the total number of Common Shares with respect to which the Option is
then exercisable, except that no fraction of a Common Share may be
purchased upon the exercise of any Option.
(b) An Employee electing to exercise an Option shall deliver to the
Corporation (i) the Exercise Price payable in accordance with Section 6.5
and (ii) written notice of the election
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that states the number of whole Common Shares with respect to which the
Employee is exercising the Option.
6.5 PAYMENT FOR COMMON SHARES. Upon exercise of an Option by an Employee,
the Exercise Price shall be payable by the Employee in cash or in such other
form of consideration as the Committee determines may be accepted, including,
without limitation, securities or other property, or any combination of cash,
securities or other property, or by delivery by the Employee (with the written
notice of election to exercise) of irrevocable instructions to a broker
registered under the 1934 Act to promptly deliver to the Corporation the amount
of sale or loan proceeds to pay the Exercise Price. The Committee, in its sole
discretion, may grant to an Employee the right to transfer Common Shares
acquired upon the exercise of a part of an Option in payment of the Exercise
Price payable upon immediate exercise of a further part of the Option.
6.6 CONVERSION OF INCENTIVE STOCK OPTIONS. The Committee may at any time
in its sole discretion take such actions as may be necessary to convert any
outstanding Incentive Stock Option (or any installments or portions of
installments thereof) into a Nonqualified Option with or without the consent of
the Employee to whom that Incentive Stock Option was granted and whether or not
that Employee is an Employee at the time of the conversion.
7. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS.
7.1 GRANT OF SARS AND LIMITED SARS. An SAR may be granted only in
connection with an Option. An SAR granted in connection with an Incentive Stock
Option may be granted only when the Incentive Stock Option is granted. An SAR
granted in connection with a Nonqualified Option may be granted either when the
related Nonqualified Option is granted or at any time thereafter including, in
the case of any Nonqualified Option resulting from the conversion of an
Incentive Stock Option, simultaneously with or after the conversion. Similarly,
a Limited SAR may be granted only in connection with an Option. A Limited SAR
granted in connection with an Incentive Stock Option may be granted only when
the Incentive Stock Option is granted. A Limited SAR granted in connection with
a Nonqualified Option may be granted either when the related Nonqualified Option
is granted or at any time thereafter including, in the case of any Nonqualified
Option resulting from the conversion of an Incentive Stock Option,
simultaneously with or after the conversion.
7.2 EXERCISE OF SARS AND LIMITED SARS.
(a) An Employee electing to exercise an SAR or a Limited SAR shall
deliver written notice to the Corporation of the election identifying the
SAR or Limited SAR and the related Option with respect to which the SAR or
Limited SAR was granted to the Employee and specifying the number of whole
Common Shares with respect to which the Employee is
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exercising the SAR or Limited SAR. Upon exercise of the SAR or Limited SAR,
the related Option shall be deemed to be surrendered to the extent that the
SAR or Limited SAR is exercised.
(b) SARs and Limited SARs may be exercised only (i) after the
expiration of six months from the date of grant of the SAR or Limited SAR,
(ii) on a date when the SAR or Limited SAR is "in the money" (i.e., when
there would be positive consideration received upon exercise of the SAR or
Limited SAR), (iii) at a time and to the same extent as the related Option
is exercisable, (iv) unless otherwise provided in the relevant Award
Instrument, by surrender to the Corporation, unexercised, of the related
Option or any applicable portion thereof, and (v) in compliance with all
restrictions set forth in or specified by the Committee pursuant to Section
7.2(c).
(c) The Committee may specify in the Award Instrument pursuant to
which any SAR or Limited SAR is granted waiting periods and restrictions on
permissible exercise periods in addition to the restrictions on exercise
set forth in Section 7.2(b), including, without limitation, any restriction
necessary to make applicable the Rule 16b-3 Exemption.
7.3 PAYMENT FOR SARS AND LIMITED SARS. The amount payable upon exercise
of an SAR or Limited SAR may be paid by the Corporation in cash, or, if the
Committee shall determine in its sole discretion, in whole Common Shares (taken
at their Fair Market Value at the time of exercise of the SAR or Limited SAR) or
in a combination of cash and whole Common Shares; provided, however, that in no
event shall the total number of Common Shares that may be paid to an Employee
pursuant to the exercise of an SAR or Limited SAR exceed the total number of
Common Shares subject to the related Option.
7.4 TERMINATION, AMENDMENT, OR SUSPENSION OF SARS AND LIMITED SARS. SARs
and Limited SARs shall terminate and may no longer be exercised upon the first
to occur of (a) exercise or termination of the related Option, or (b) any
termination date specified by the Committee at the time of grant of the SAR or
Limited SAR. In addition, the Committee may in its sole discretion at any time
before the occurrence of a Change of Control amend, suspend, or terminate any
SAR or Limited SAR theretofore granted under the Plan without the holder's
consent; provided that, in the case of amendment, no provision of the SAR or
Limited SAR, as amended, shall be in conflict with any provision of the Plan.
8. RESTRICTED STOCK.
8.1 ADDITIONAL CONDITIONS ON RESTRICTED STOCK. In addition to the
restrictions on disposition of Restricted Stock during the Restriction Period
and the requirement to offer Restricted
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Stock to the Corporation if the Employee's employment terminates during the
Restriction Period, the Committee may provide in the Award Instrument with
respect to any Award of Restricted Stock other restrictions, conditions, and
contingencies, which other restrictions, conditions, and contingencies, if any,
may relate to, in addition to such other matters as the Committee may deem
appropriate, the Employee's personal performance, corporate performance, or the
performance of any subunit of the Corporation or any Subsidiary, in each case
measured in such manner as may be specified by the Committee. The Committee may
impose different restrictions, conditions, and contingencies on separate Awards
of Restricted Stock granted to different Employees, whether at the same or
different times, and on separate Awards of Restricted Stock granted to the same
Employee, whether at the same or different times. The Committee may specify a
single Restriction Period for all of the Restricted Stock subject to any
particular Award Instrument or may specify multiple Restriction Periods so that
the restrictions with respect to the Restricted Stock subject to the Award will
expire in stages according to a schedule specified by the Committee and set
forth in the Award Instrument; provided, however, that no Restriction Period
with respect to any Restricted Stock shall end earlier than one year after the
date on which that Restricted Stock is granted.
8.2 PAYMENT FOR RESTRICTED STOCK. Each Employee to whom an Award of
Restricted Stock is made shall pay the Acquisition Price with respect to that
Restricted Stock to the Corporation not later than 30 days after the delivery to
the Employee of the Award Instrument with respect to that Restricted Stock. If
any Employee fails to pay the Acquisition Price with respect to any Award of
Restricted Stock within that 30 day period, the Employee's rights under that
Award shall be forfeited.
8.3 RIGHTS AS A SHAREHOLDER. Upon payment by an Employee in full of the
Acquisition Price for Restricted Stock under an Award, the Employee shall have
all of the rights of a shareholder with respect to the Restricted Stock,
including voting and dividend rights, subject only to such restrictions and
requirements referred to in Section 8.1 as may be incorporated in the Award
Instrument with respect to that Restricted Stock.
9. PERFORMANCE SHARES.
9.1 DISCRETION OF COMMITTEE WITH RESPECT TO PERFORMANCE SHARES. The
Committee shall have full discretion to select the Employees to whom Awards of
Performance Shares are made, the number of Performance Shares to be granted to
any Employee so selected, the kind and level of the Performance Goals and
whether those Performance Goals are to apply to the Corporation, a Subsidiary,
or any one or more subunits of the Corporation or of any Subsidiary, and the
dates on which each Performance Period shall begin and end, and to determine the
form and provisions of the Award Instrument to be used in connection with any
Award of Performance Shares.
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9.2 CONDITIONS TO PAYMENT FOR PERFORMANCE SHARES.
(a) Unless otherwise provided in the relevant Award Instrument, an
Employee must be employed by the Corporation or a Subsidiary on the last
day of a Performance Period to be entitled to payment for any Performance
Shares.
(b) The Committee may establish, from time to time, one or more
formulas to be applied against the Performance Goals to determine whether
all, some portion but less than all, or none of the Performance Shares
granted with respect to a Performance Period are treated as earned pursuant
to any Award. An Employee will be entitled to receive payments with respect
to any Performance Shares only to the extent that those Performance Shares
are treated as earned under one or more such formulas.
9.3 PAYMENT FOR PERFORMANCE SHARES. The Corporation shall pay each
Employee who is entitled to payment for Performance Shares earned with respect
to any Performance Period an amount for those Performance Shares (a) in cash
(based upon the per share Fair Market Value of Common Shares on the last day of
the Performance Period), (b) in Common Shares (one Common Share for each
Performance Share earned), (c) in Restricted Stock (one Common Share of
Restricted Stock for each Performance Share earned), or (d) any combination of
the foregoing, in such proportions as the Committee may determine. Restricted
Stock issued by the Corporation in payment of Performance Shares shall be
subject to all the provisions of Section 8.
10. TERMINATION OF EMPLOYMENT. After an Employee's Employment Termination
Date, the rules set forth in this Section 10 shall apply. All factual
determinations with respect to the termination of an Employee's employment that
may be relevant under this Section 10 shall be made by the Committee in its sole
discretion.
10.1 TERMINATION OTHER THAN UPON DEATH, DISABILITY, OR CERTAIN
RETIREMENTS. Upon any termination of an Employee's employment for any reason
other than the Employee's retirement (under any retirement plan of the
Corporation or of a Subsidiary) as provided in Section 10.2, disability as
provided in Section 10.3, or death as provided in Section 10.4:
(a) Unless otherwise provided in the relevant Award Instrument, the
Employee shall have the right (i) during the period ending six months after
the Employment Termination Date, but not later than the Option Expiration
Date, to exercise any Nonqualified Options and related SARs that were
outstanding on the Employment Termination Date, if and to the same extent
as those Options and SARs were exercisable by the Employee on the
Employment Termination Date, and (ii) during the period ending three months
after the Employment Termination Date, but not later than the Option
Expiration Date, to exercise any Incentive Stock Options and related SARs
that were outstanding on the Employment Termination
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Date, if and to the same extent as those Options and SARs were exercisable
by the Employee on the Employment Termination Date,
(b) Unless otherwise provided in the relevant Award Instrument, the
Employee shall offer for resale at the Acquisition Price to the Corporation
each Common Share of Restricted Stock held by the Employee at the
Employment Termination Date with respect to which, as of that date, any
restrictions, conditions, or contingencies have not lapsed, and
(c) Unless otherwise provided in the relevant Award Instrument, the
Employee shall forfeit each Performance Share with respect to which, as of
that date, any restrictions, conditions, or contingencies have not lapsed.
10.2 TERMINATION DUE TO CERTAIN RETIREMENTS. Upon any termination of an
Employee's employment with the Corporation or any Subsidiary under circumstances
entitling the Employee to immediate payment of normal retirement or early
retirement benefits under any retirement plan of the Corporation or of a
Subsidiary (whether the Employee elects to commence or defer receipt of such
payment):
(a) Unless otherwise provided in the relevant Award Instrument, the
Employee shall have the right (i) to exercise, from time to time during the
period ending two years after the Employment Termination Date, but not
later than the Option Expiration Date, any Nonqualified Options and related
SARs that were outstanding on the Employment Termination Date, if and to
the same extent as those Options and SARs were exercisable by the Employee
on the Employment Termination Date, and (ii) to exercise, from time to time
during the period ending two years after the Employment Termination Date,
but no later than the Option Expiration Date, any Incentive Stock Options
and related SARs that were outstanding on the Employment Termination Date,
if and to the same extent as those Options and SARs were exercisable by the
Employee on the Employment Termination Date (even though exercise of the
Incentive Stock Option more than three months after the Employment
Termination Date may cause the Option to fail to qualify for Incentive
Stock Option treatment under the Internal Revenue Code of 1986, as
amended),
(b) The relevant Award Instrument may provide that the Employee will
have the right to exercise, from time to time until not later than the
Option Expiration Date, Nonqualified Stock Options and SARs and Incentive
Stock Options and SARs to the extent such Options and SARs become
exercisable by their terms prior to the Option Expiration Date (or such
earlier date as specified in the relevant Award Instrument),
notwithstanding the fact that such Options and SARs were not exercisable in
whole or in part (whether because a condition to exercise had not yet
occurred or a specified time period had not yet elapsed or otherwise) on
the Employment Termination Date,
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(c) Unless otherwise provided in the relevant Award Instrument, the
Employee shall offer for resale at the Acquisition Price to the Corporation
each Common Share of Restricted Stock held by the Employee at the
Employment Termination Date with respect to which, as of that date, any
restrictions, conditions, or contingencies have not lapsed, and
(d) Unless otherwise provided in the relevant Award Instrument, the
Employee shall forfeit each Performance Share with respect to which, as of
that date, any restrictions, conditions, or contingencies have not lapsed.
10.3 TERMINATION DUE TO DISABILITY. Upon any termination of an Employee's
employment due to disability:
(a) Unless otherwise provided in the relevant Award Instrument, the
Employee, or the Employee's attorney in fact or legal guardian, shall have
the right (i) to exercise, from time to time during the period ending two
years after the Employment Termination Date, but not later than the Option
Expiration Date, any Nonqualified Options and related SARs that were
outstanding on the Employment Termination Date, if and to the same extent
those Options and SARs were exercisable by the Employee on the Employment
Termination Date, and (ii) to exercise, from time to time during the period
ending two years after the Employment Termination Date, but no later than
the Option Expiration Date, any Incentive Stock Options and related SARs
that were outstanding on the Employment Termination Date, if and to the
same extent as those Options and SARs were exercisable by the Employee on
the Employment Termination Date (even though exercise of the Incentive
Stock Option more than one year after the Employment Termination Date may
cause the Option to fail to qualify for Incentive Stock Option treatment
under the Internal Revenue Code of 1986, as amended),
(b) Unless otherwise provided in the relevant Award Instrument, the
Employee shall offer for resale at the Acquisition Price to the Corporation
each Common Share of Restricted Stock held by the Employee at the
Employment Termination Date with respect to which, as of that date, any
restrictions, conditions, or contingencies have not lapsed, and
(c) Unless otherwise provided in the relevant Award Instrument, the
Employee shall forfeit each Performance Share with respect to which, as of
that date, any restrictions, conditions, or contingencies have not lapsed.
10.4 DEATH OF AN EMPLOYEE. Upon the death of an Employee while employed
by the Corporation or any Subsidiary or within any of the periods referred to in
any Section 10.1, 10.2, or 10.3 during which any particular Option or SAR
remains potentially exercisable:
(a) Unless otherwise provided in the relevant Award Instrument, if the
Option Expiration Date of any Nonqualified Option that had not expired
before the Employee's death would
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<PAGE> 64
otherwise expire before the first anniversary of the Employee's death, that
Option Expiration Date shall automatically be extended to the first
anniversary of the Employee's death or such other date as provided in the
relevant Award Instrument,
(b) Unless otherwise provided in the relevant Award Instrument, the
Employee's executor or administrator or the person or persons to whom the
Employee's rights under any Option or SAR are transferred by will or the
laws of descent and distribution shall have the right to exercise, from
time to time during the period ending two years after the date of the
Employee's death, but not later than the Option Expiration Date, any
Options and related SARs that were outstanding on the date of the
Employee's death, if and to the same extent as those Options and SARs were
exercisable by the Employee on the date of the Employee's death,
(c) Unless otherwise provided in the relevant Award Instrument, the
Employee shall offer for resale at the Acquisition Price to the Corporation
each Common Share of Restricted Stock held by the Employee at the
Employment Termination Date with respect to which, as of that date, any
restrictions, conditions, or contingencies have not lapsed, and
(d) Unless otherwise provided in the relevant Award Instrument, the
Employee shall forfeit each Performance Share with respect to which, as of
that date, any restrictions, conditions, or contingencies have not lapsed.
11. ACCELERATION UPON CHANGE OF CONTROL. Unless otherwise specified in the
relevant Award Instrument, upon the occurrence of a Change of Control of the
Corporation, each Award theretofore granted to any Employee that then remains
outstanding shall, subject to Section 17, be automatically treated as follows:
(a) any outstanding Option shall become immediately exercisable in full, (b)
SARs and Limited SARs related to any such Options shall also become immediately
exercisable in full, (c) the Restriction Period with respect to all outstanding
Awards of Restricted Stock shall immediately terminate, and (d) the
restrictions, conditions, or contingencies on any Performance Shares shall be
modified in such manner as the Committee may specify to give the Employee the
benefit of those Performance Shares through the date of Change of Control.
12. ASSIGNABILITY. No Option, SAR, Limited SAR, Restricted Stock during
the Restriction Period, or Performance Share may be transferred other than by
will or by the laws of descent and distribution. During an Employee's lifetime,
only the Employee (or in the case of incapacity of an Employee, the Employee's
attorney in fact or legal guardian) may exercise any Award requiring or
permitting exercise. Notwithstanding any contrary provision of the Plan or any
relevant Award Instrument, with respect to Section 16(b) Employees, no
"derivative security" (as defined for purposes of Rule 16b-3) shall be
transferable by such Employee other than (a) by will or the laws
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<PAGE> 65
of descent and distribution, or (b) as otherwise hereafter permitted in
accordance with Rule 16b-3 without jeopardizing or impairing any Rule 16b-3
Exemption. Any restriction on transferability of derivative securities required
by Rule 16b-3 in order to qualify for a Rule 16b-3 Exemption is hereby
incorporated in the Plan to the extent necessary to obtain the Rule 16b-3
Exemption.
13. ADJUSTMENT UPON CHANGES IN COMMON SHARES. Automatically and without
Committee action, in the event of any stock dividend, stock split, or share
combination of the Common Shares, or by appropriate Committee action in the
event of any reclassification, recapitalization, merger, consolidation, other
form of business combination, liquidation, or dissolution involving the
Corporation or any spin-off or other distribution to shareholders of the
Corporation (other than normal cash dividends), appropriate adjustments to (a)
the maximum number of Common Shares that may be issued under the Plan pursuant
to Section 5, the maximum number of Common Shares that may be issued under the
Plan pursuant to Incentive Stock Options as provided in Section 5, and the
maximum number of Common Shares with respect to which any Employee may receive
Awards during any calendar year as provided in Section 4, and (b) the number and
kind of shares subject to, the price per share under, and the terms and
conditions of each then outstanding Award shall be made to the extent necessary
and in such manner that the benefits of Employees under all then outstanding
Awards shall be maintained substantially as before the occurrence of such event.
Any adjustment shall be conclusive and binding for all purposes of the Plan and
shall be effective, in the event of any stock dividend, stock split, or share
combination, as of the date of such stock dividend, stock split, or share
combination, and in all other cases, as of such date as the Committee may
determine.
14. PURCHASE FOR INVESTMENT. Each person acquiring Common Shares pursuant
to any Award may be required by the Corporation to furnish a representation that
he or she is acquiring the Common Shares so acquired as an investment and not
with a view to distribution thereof if the Corporation, in its sole discretion,
determines that such representation is required to insure that a resale or other
disposition of the Common Shares would not involve a violation of the Securities
Act of 1933, as amended, or of applicable blue sky laws. Any investment
representation so furnished shall no longer be applicable at any time such
representation is no longer necessary for such purposes.
15. WITHHOLDING OF TAXES. The Corporation will withhold from any payments
of cash made pursuant to the Plan such amount as is necessary to satisfy all
applicable federal, state, and local withholding tax obligations. The Committee
may, in its discretion and subject to such rules as the Committee may adopt from
time to time, permit or require an Employee to satisfy, in whole or in part, any
withholding tax obligation that may arise in connection with the grant of an
Award, the lapse of any restrictions with respect to an Award, the acquisition
of Common Shares pursuant to any Award, or the disposition of any Common Shares
received pursuant to any Award by having
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<PAGE> 66
the Corporation hold back some portion of the Common Shares that would otherwise
be delivered pursuant to the Award or by delivering to the Corporation an amount
equal to the withholding tax obligation arising with respect to such grant,
lapse, acquisition, or disposition in (a) cash, (b) Common Shares, or (c) such
combination of cash and Common Shares as the Committee may determine. The Fair
Market Value of the Common Shares to be so held back by the Company or delivered
by the Employee shall be determined as of the date on which the obligation to
withhold first arose. The Corporation may apply the provisions of this Section
15 based upon generally applicable withholding rates and without regard to any
statutory minimum rate applicable to special payments. With respect to Section
16(b) Employees, any applicable conditions with respect to tax withholding
required under Rule 16b-3 in order to obtain or be eligible for the Rule 16b-3
Exemption in respect thereof shall be deemed to be incorporated into the Plan.
16. AWARDS IN SUBSTITUTION FOR AWARDS GRANTED BY OTHER COMPANIES. Awards,
whether Incentive Stock Options, Nonqualified Options, SARs, Limited SARs,
Restricted Stock, or Performance Shares, may be granted under the Plan in
substitution for awards held by employees of a company who become Employees of
the Corporation or a Subsidiary as a result of the merger or consolidation of
the employer company with the Corporation or a Subsidiary, or the acquisition by
the Corporation or a Subsidiary of the assets of the employer company, or the
acquisition by the Corporation or a Subsidiary of stock of the employer company
as a result of which it becomes a Subsidiary. The terms, provisions, and
benefits of the substitute Awards so granted may vary from the terms,
provisions, and benefits set forth in or authorized by the Plan to such extent
as the Committee at the time of the grant may deem appropriate to conform, in
whole or in part, to the terms, provisions, and benefits of the awards in
substitution for which they are granted.
17. HOLDING PERIODS. No Section 16(b) Employee shall sell or exercise, as
the case may be, any equity security or derivative security (which includes,
without limitation, Options, SARs, and Limited SARs), in each case as defined in
the 1934 Act or the rules and regulations promulgated thereunder, acquired
pursuant to an Award under the Plan, before the earliest date on which the sale
or exercise is eligible for the Rule 16b-3 Exemption. If any provision of this
Section 17 must be modified or becomes unnecessary to comply with the
requirements of Rule 16b-3, the Committee may waive such provision and/or amend
the Plan to add to or modify the provisions hereof accordingly.
18. LEGAL REQUIREMENTS. No Awards shall be granted and the Corporation
shall have no obligation to make any payment under the Plan, whether in Common
Shares, cash, or any combination thereof, unless such payment is, without
further action by the Committee, in compliance with all applicable Federal and
state laws and regulations, including, without limitation, the United States
Internal Revenue Code and Federal and state securities laws.
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<PAGE> 67
19. DURATION AND TERMINATION OF THE PLAN. The Plan shall become effective
and shall be deemed to have been adopted on the date on which it is approved by
the shareholders of the Corporation and shall remain in effect thereafter until
terminated by action of the Board of Directors. No termination of the Plan shall
adversely affect the rights of any Employee with respect to any Award granted
before the effective date of the termination.
20. AMENDMENTS. The Board of Directors, or a duly authorized committee
thereof, may alter or amend the Plan from time to time prior to its termination
in any manner the Board of Directors, or such duly authorized committee, may
deem to be in the best interests of the Corporation and its shareholders, except
that no amendment may be made without shareholder approval if shareholder
approval is required under Rule 16b-3 to qualify for the Rule 16b-3 Exemption,
is required by any applicable securities law or tax law, or is required by the
rules of any exchange on which the Common Shares of the Corporation are traded
or, if the Common Shares are not listed on an exchange, by the rules of the
registered national securities association through whose inter-dealer quotation
system the Common Shares are quoted. The Committee shall have the authority to
amend the terms and conditions applicable to outstanding Awards (a) in any case
where expressly permitted by the terms of the Plan or of the relevant Award
Instrument or (b) in any other case with the consent of the Employee to whom the
Award was granted. Except as expressly provided in the Plan or in the Award
Instrument evidencing the Award, the Committee may not, without the consent of
the holder of an Award granted under the Plan, amend the terms and conditions
applicable to that Award in a manner adverse to the interests of the Employee.
21. PLAN NONCONTRACTUAL. Nothing herein contained shall be construed as a
commitment to or agreement with any person employed by the Corporation or a
Subsidiary to continue such person's employment with the Corporation or the
Subsidiary, and nothing herein contained shall be construed as a commitment or
agreement on the part of the Corporation or any Subsidiary to continue the
employment or the annual rate of compensation of any such person for any period.
All Employees shall remain subject to discharge to the same extent as if the
Plan had never been put into effect.
22. INTEREST OF EMPLOYEES. Any obligation of the Corporation under the
Plan to make any payment at any future date merely constitutes the unsecured
promise of the Corporation to make such payment from its general assets in
accordance with the Plan, and no Employee shall have any interest in, or lien or
prior claim upon, any property of the Corporation or any Subsidiary by reason of
that obligation.
23. CLAIMS OF OTHER PERSONS. The provisions of the Plan shall in no event
be construed as giving any person, firm, or corporation any legal or equitable
right against the Corporation or any Subsidiary, their officers, employees,
agents, or directors, except any such rights as are specifically
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<PAGE> 68
provided for in the Plan or are hereafter created in accordance with the terms
and provisions of the Plan.
24. ABSENCE OF LIABILITY. No member of the Board of Directors of the
Corporation or a Subsidiary, of the Committee, of any other committee of the
Board of Directors, or any officer or Employee of the Corporation or a
Subsidiary shall be liable for any act or action under the Plan, whether of
commission or omission, taken by any other member, or by any officer, agent, or
Employee, or, except in circumstances involving his bad faith or willful
misconduct, for anything done or omitted to be done by himself.
25. SEVERABILITY. The invalidity or unenforceability of any particular
provision of the Plan shall not affect any other provision hereof, and the Plan
shall be construed in all respects as if such invalid or unenforceable provision
were omitted herefrom.
26. GOVERNING LAW. The provisions of the Plan shall be governed and
construed in accordance with the laws of the State of Ohio.
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<PAGE> 69
[KEYCORP LOGO]
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
P THE COMPANY FOR THE ANNUAL MEETING ON MAY 19, 1994.
R
O The undersigned hereby constitutes and appoints Victor J. Riley,
X Jr., Robert W. Gillespie, and Carter B. Chase,
Y and each of them, his/her true and lawful agents and proxies with
full power of substitution in each to represent the undersigned at
the Annual Meeting of Shareholders of KeyCorp to be held on May 19,
1994, and at any adjournments thereof, on all matters properly
coming before said meeting.
1. Election of Directors: The nominees of the Board of Directors
to the class whose term of office will expire in 1997 are:
William G. Bares, Lucie J. Fjeldstad, Robert W. Gillespie,
Henry S. Hemingway, Steven A. Minter,
Victor J. Riley, Jr., and Ronald B. Stafford.
2. Approval of Amended and Restated 1991 Equity Compensation
Plan.
3. Proposal to ratify the appointment of Ernst & Young as
independent auditors for the fiscal year ending December 31,
1994.
(Change of Address/Comments)
_________________________________
_________________________________
_________________________________
_________________________________
(If you have written in the above
space, please mark the corresponding
box on the reverse side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
<PAGE> 70
<TABLE>
<S> <C>
/ X / PLEASE MARK YOUR SHARES IN YOUR NAME REINVESTMENT SHARES
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD
1. Election of / / / /
Directors
(see reverse)
For, except vote withheld from the following nominee(s):
________________________________________________________
FOR AGAINST ABSTAIN
2. Approval of
Amended and / / / / / /
Restated 1991
Equity Compensation
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
FOR AGAINST ABSTAIN
3. Ratification of
appointment of / / / / / /
independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES
LISTED ON THE REVERSE, FOR PROPOSAL 2, AND FOR PROPOSAL 3.
/ / Change of Address/Comments
on Reverse Side.
SIGNATURE(S) _______________________________________________________ DATE _________________
SIGNATURE(S) _______________________________________________________ DATE _________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
In accordance with their
judgment, the proxies are
authorized to vote upon any
other matters that may
properly come before the
meeting. The signer hereby
revokes all proxies
heretofore given by the
signer to vote at said
meeting or any adjournments
thereof.
</TABLE>
