<PAGE> 1
As filed with the Securities and Exchange Commission on February 1, 1995
REGISTRATION NO. 33-57329
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO.1
TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------------
KEYCORP
(Exact name of Registrant as specified in its charter)
Ohio 6711 34-6542451
(State or other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification No.)
Organization) Code No.)
127 Public Square, Cleveland, Ohio 44114
(216) 689-6300
(Address of Registrant's principal executive offices, including telephone
number and area code)
-------------------
Carter B. Chase, Esq., Executive Vice President, General Counsel, and Secretary
KeyCorp
127 Public Square
Cleveland, Ohio 44114
(Name and address of agent for service)
Telephone number, including area code, of agent for service: (216) 689-0994
-------------------
Copies to:
Daniel R. Stolzer, Esq. Ashok W. Mukhey, Esq.
Carolyn E. Cheverine, Esq. Irell & Manella
KeyCorp 1800 Avenue of the Stars
127 Public Square Los Angeles, CA 90067
Cleveland, Ohio 44114 (310) 277-1010
(216) 689-0509
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
and all other conditions precedent to the merger of OMNIBANCORP with and into
the Registrant have been satisfied or waived as described in the
enclosed Prospectus/Proxy Statement.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission
(the "Commission"), acting pursuant to said Section 8(a), may determine.
<PAGE> 2
KEYCORP
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM CAPTION OR LOCATION
NO. FORM S-4 CAPTION IN PROSPECTUS/PROXY STATEMENT
- ---- ---------------- -----------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus. . . . . . . . . . . . . . . . . . . Facing page of registration statement;
Outside front cover page of Prospectus/Proxy
Statement
2. Inside Front and Outside Back Cover Pages of
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . Available Information; Incorporation of Certain
Documents by Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information . . . . . . . . . . . . . . . . . . . . . . . Summary; Selected Consolidated Financial
Data; Unaudited Comparative per Common
Share Data
4. Terms of the Transaction . . . . . . . . . . . . . . . . . . . . . . Summary; The Merger; Comparison of Certain
Rights of Holders of Capital Stock of
KeyCorp and OMNI
5. Pro Forma Financial Information. . . . . . . . . . . . . . . . . . . Not Applicable
6. Material Contacts with the Company being
Acquired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary; The Merger; Voting Agreements
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters. . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
8. Interests of Named Experts and Counsel . . . . . . . . . . . . . . . Certain Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities. . . . . . . . . . . Not Applicable
10. Information with Respect to S-3 Registrants. . . . . . . . . . . . . Available Information; Incorporation of
Certain Documents by Reference; The
Business of KeyCorp
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ITEM CAPTION OR LOCATION
NO. FORM S-4 CAPTION IN PROSPECTUS/PROXY STATEMENT
- ---- ---------------- -----------------------------
<S> <C> <C>
11. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . . . . . . . . . Incorporation of Certain Documents by
Reference
12. Information with Respect to S-2 or S-3
Registrants . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
13. Incorporation of Certain Information by
Reference . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
14. Information with Respect to Registrants Other
than S-2 or S-3 Registrants . . . . . . . . . . . . . . . . Not Applicable
15. Information with Respect to S-3 Companies . . . . . . . . . . Not Applicable
16. Information with Respect to S-2 or S-3 Companies . . . . . . Not Applicable
17. Information with Respect to Companies Other
than S-2 or S-3 Companies . . . . . . . . . . . . . . . . . Summary; OMNI Market Price and
Dividend Information; OMNI Management's
Discussion and Analysis of Financial
Condition and Results of Operations; The
Business of OMNI; OMNI Financial
Statements
18. Information if Proxies, Consents or
Authorizations are to be Solicited . . . . . . . . . . . . Outside front cover page of Prospectus/Proxy
Statement; Incorporation of Certain
Documents by Reference; Summary;
Introduction; Special Meeting of OMNI's
Shareholders; The Merger; Rights of
Dissenting Shareholders; The Business of
OMNI; Shareholder Proposals; Experts
19. Information if Proxies, Consents or
Authorizations are Not to be Solicited or in an
Exchange Offer . . . . . . . . . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 4
OMNIBANCORP
3600 S.Yosemite
Suite 210
Denver, Colorado 80237
February 7, 1995
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
of OMNIBANCORP ("OMNI") to be held in the basement conference room, OMNIBANK
Center, 3600 S. Yosemite, Denver, Colorado, on February 24, 1995, at 8:30 a.m.,
local time.
At the Special Meeting, OMNI shareholders will be asked to approve the
Plan of Merger, dated as of August 31, 1994, between KeyCorp and OMNI (as
amended or supplemented, the "Merger Agreement"), pursuant to which OMNI will
be merged with and into KeyCorp (the "Merger"). KeyCorp is an Ohio corporation
and a bank holding company with banking operations in 14 states, including
Colorado. KeyCorp conducts business in Colorado through its wholly owned
subsidiary, Key Bank of Colorado, with 15 banking offices in Colorado as of
September 30, 1994. KeyCorp, which will be the surviving corporation in the
Merger, has informed OMNI that following the consummation of the Merger,
KeyCorp intends to merge OMNI's banking subsidiaries with and into Key Bank of
Colorado. The term "Merger Agreement" for purposes of this letter shall
include the Letter Agreements dated as of August 31, 1994, January 4, 1995,
January 14, 1995 and January 27, 1995 between OMNI and KeyCorp relating to the
sale of Merchants Mortgage and Trust and the valuation period of KeyCorp common
stock.
If the Merger Agreement is approved and the transactions contemplated
thereby are consummated, each outstanding share of OMNI Common Stock will be
converted into the right to receive .2452 shares of common stock of KeyCorp
("KeyCorp Common Stock"), $1.00 par value per share, subject to certain
adjustments as set forth in the Merger Agreement and as described in the
accompanying Prospectus/Proxy Statement. The Merger is expected to qualify as
a tax-free exchange to holders of OMNI Common Stock.
Enclosed are a Notice of Special Meeting of Shareholders and a
Prospectus/Proxy Statement which describe the Merger, the background of the
transaction and the businesses of KeyCorp and OMNI. You are urged to read all
these materials carefully. The Board of Directors of OMNI has fixed the close
of business on January 20, 1995 as the record date for the Special Meeting.
Accordingly, only shareholders of record on that date will be entitled to
notice of, and to vote at, the Special Meeting or any adjournments or
postponements thereof. The affirmative vote of the holders of two-thirds of
the shares of OMNI Common Stock outstanding and entitled to vote is necessary
to approve the Merger Agreement. As a condition to KeyCorp's entering into the
Merger Agreement, OMNI's directors, executive officers and their affiliates
holding at least two-thirds of the outstanding shares of OMNI Common Stock were
required to execute and deliver to KeyCorp Voting Agreements pursuant to which
such persons have agreed to vote all of their shares of OMNI Common Stock in
favor of approval of the Merger Agreement. Such shareholders holding
11,273,588 shares of OMNI Common Stock representing 68.4% of the number of
shares of OMNI Common Stock entitled
<PAGE> 5
to vote at the Special Meeting have delivered executed Voting Agreements. Thus,
it is anticipated that the Merger Agreement will be approved at the Special
Meeting.
THE BOARD OF DIRECTORS OF OMNI HAS UNANIMOUSLY
ADOPTED THE MERGER AGREEMENT AND HAS APPROVED THE MERGER AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER AGREEMENT AT
THE SPECIAL MEETING.
Holders of shares of OMNI Common Stock who do not vote to approve the
Merger Agreement and who comply with the requirements of Article 113 of the
Colorado Business Corporation Act will be entitled, if the Merger is
consummated, to exercise dissenters' appraisal rights with respect to their
shares of OMNI Common Stock. See "Rights of Dissenting Shareholders" in the
accompanying Prospectus/Proxy Statement for a description of the procedures to
be followed to exercise such rights.
A form of proxy solicited by the Board of Directors of OMNI is
enclosed. Please indicate your voting instructions and sign, date and mail the
proxy card promptly in the return envelope provided. If no specification is
made, the properly executed proxies will be voted in favor of approval of the
Merger Agreement. Whether or not you plan to attend the Special Meeting in
person, it is important that you return the enclosed proxy card so that your
shares of OMNI Common Stock are voted. If you attend the Special Meeting, you
may vote in person if you wish, even if you have previously returned your proxy
card.
Promptly after the Merger, a letter of transmittal will be mailed to
all holders of record of shares of OMNI Common Stock to use in connection with
surrendering their stock certificates. PLEASE DO NOT SEND YOUR STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD OR TO THE EXCHANGE AGENT UNTIL YOU
RECEIVE THE LETTER OF TRANSMITTAL, WHICH WILL INCLUDE INSTRUCTIONS AS TO THE
PROCEDURE TO BE USED IN SENDING YOUR STOCK CERTIFICATES.
I support the Merger of OMNI with KeyCorp and join with the other
members of the Board of Directors of OMNI in recommending the Merger to you.
We urge you to vote in favor of approval of the Merger Agreement. If you
should have any questions about the Merger or need assistance in completing
your proxy card, please contact me at OMNI at (303) 773-6664.
Sincerely,
Robert W. Graf
President
<PAGE> 6
OMNIBANCORP
3600 S. Yosemite
Suite 210
Denver, Colorado 80237
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on February 24, 1995
NOTICE IS HEREBY GIVEN THAT pursuant to resolution of the Board of
Directors, a Special Meeting of Shareholders of OMNIBANCORP ("OMNI")
(including any adjournments or postponements thereof, the "Special Meeting")
will be held on February 24, 1995, at 8:30 a.m., local time, in the
basement conference room, OMNIBANK Center, 3600 S.Yosemite, Denver, Colorado,
for the following purposes:
(1) To consider and vote upon a proposal to approve a Plan of Merger,
dated as of August 31, 1994, between KeyCorp and OMNI (as amended
or supplemented by the Letter Agreements dated August 31, 1994,
January 4, 1995, January 14, 1995 and January 27, 1995, the
"Merger Agreement"), pursuant to which OMNI will be merged
with and into KeyCorp, with KeyCorp as the surviving corporation,
as described in the Merger Agreement and the accompanying
Prospectus/Proxy Statement. A copy of the Merger Agreement is
attached as Appendix A to the Prospectus/Proxy Statement.
(2) To transact such other business as may properly come before the
Special Meeting, or any adjournments or postponements thereof.
Only holders of record of OMNI Common Stock as of the close of
business on January 20, 1995 have the right to receive notice of and to vote
at the Special Meeting.
Shareholders of OMNI have the right to dissent from the Merger
Agreement by properly exercising their dissenters' rights in strict compliance
with the procedures set forth in Article 113 of the Colorado Business
Corporation Act (C.R.S. Section 7-113-101 et seq.), a copy of which is attached
as Appendix E to the Prospectus/Proxy Statement.
The accompanying document constitutes the Proxy Statement of OMNI with
respect to the Special Meeting. A copy of the Merger Agreement is attached as
Appendix A to the Prospectus/Proxy Statement and copies of the Letter
Agreements amending the Merger Agreement are attached as Appendices B, C, F and
G to the Prospectus/Proxy Statement.
You are cordially invited to attend the Special Meeting in person.
Whether or not you plan to attend the Special Meeting, you are urged to
complete, date, sign and return the enclosed proxy card in the envelope
provided as soon as possible. If no specification is made, the properly
executed and returned proxies will be voted in favor of approval of the Merger
<PAGE> 7
Agreement. If you attend the Special Meeting, you will be entitled to vote in
person if you choose.
HOLDERS OF OMNI COMMON STOCK SHOULD RETAIN THEIR STOCK CERTIFICATES UNTIL
TRANSMITTAL FORMS HAVE BEEN RECEIVED. STOCK CERTIFICATES SHOULD NOT BE RETURNED
WITH THE ENCLOSED PROXY CARD.
The Board of Directors of OMNI unanimously recommends that shareholders
vote FOR approval of the Merger Agreement.
By Order of the Board of Directors
Denver, Colorado
February 7, 1995 Gary Klearman, Secretary
IN ORDER THAT ALL STOCK IS REPRESENTED AT THIS
SPECIAL MEETING, WE URGE YOU TO SIGN AND
RETURN THE ENCLOSED PROXY, REGARDLESS
OF WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING IN PERSON. IF YOU DO NOT ATTEND
THE MEETING, YOUR PROXY WILL BE VOTED
AS INDICATED IN THE PROXY STATEMENT.
IF YOU DO ATTEND THE MEETING, YOU
WILL BE THEN ENTITLED TO
WITHDRAW YOUR PROXY
IF YOU SO CHOOSE.
<PAGE> 8
OMNIBANCORP
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 24, 1995
---------------------------
KEYCORP
PROSPECTUS
COMMON STOCK, $1.00 PAR VALUE PER SHARE (NOT TO EXCEED 4,313,198 SHARES),
AND THE ASSOCIATED RIGHTS
---------------------------
This Prospectus/Proxy Statement is being furnished to the holders of
common stock, no par value ("OMNI Common Stock"), of OMNIBANCORP, a Colorado
corporation ("OMNI"), in connection with the solicitation of proxies by the
Board of Directors of OMNI for use at the Special Meeting of Shareholders to be
held at 8:30 a.m., local time, on February 24, 1995, in the basement
conference room, at OMNIBANK Center, 3600 S. Yosemite, Denver, Colorado, and at
any adjournments or postponements thereof (the "Special Meeting"). At the
Special Meeting, the shareholders of record of OMNI Common Stock as of the
close of business on January 20, 1995 (the "Record Date"), will consider and
vote upon a proposal to approve a Plan of Merger, dated as of August 31, 1994,
by and between KeyCorp, an Ohio corporation, and OMNI (as amended or
supplemented by the Letter Agreements dated August 31, 1994, January 4, 1995,
January 14, 1995 and January 27, 1995 between OMNI and KeyCorp, the "Merger
Agreement"), pursuant to which OMNI will merge with and into KeyCorp (the
"Merger"). This Prospectus/Proxy Statement also constitutes a prospectus of
KeyCorp with respect to a maximum of 4,313,198 common shares of KeyCorp, $1.00
par value per share ("KeyCorp Common Stock"), including the associated rights
to purchase shares of KeyCorp Common Stock (the "Rights"), to be issued in
connection with the Merger. Upon consummation of the Merger, each outstanding
share of OMNI Common Stock will be converted into the right to receive .2452
shares of KeyCorp Common Stock (the "Exchange Ratio"), subject to certain
adjustments as set forth in the Merger Agreement. See "The Merger -- Conversion
of OMNI Capital Stock." Each share of KeyCorp Common Stock issued to OMNI
shareholders in the Merger will be accompanied by one Right to purchase one
share of KeyCorp Common Stock upon the terms and conditions set forth in the
Rights Agreement (as defined herein). See "Comparison of Certain Rights of
Holders of Capital Stock of KeyCorp and OMNI." Unless the context otherwise
requires, all references herein to the KeyCorp Common Stock also include the
Rights attached thereto. For a description of the Merger Agreement, which is
included in its entirety as Appendix A to this Prospectus/Proxy Statement and
incorporated
<PAGE> 9
herein, see "The Merger." The Letter Agreements amending and/or supplementing
the original Merger Agreement are attached hereto as Appendices B, C, F and G.
Upon consummation of the Merger, each outstanding share of KeyCorp Common Stock
and each Right outstanding prior to the Merger will remain issued and
outstanding.
The outstanding shares of KeyCorp Common Stock are listed on the
New York Stock Exchange ("NYSE"). The last reported sale price of KeyCorp
Common Stock on the NYSE composite transaction reporting system on January 26,
1995 was $27.00 per share.
This Prospectus/Proxy Statement does not cover any resales of
KeyCorp Common Stock received by shareholders of OMNI upon consummation of the
Merger, and no person is authorized to make use of the Prospectus/Proxy
Statement in connection with any such resale.
The Merger is a complex transaction and is discussed in detail in
this Prospectus/Proxy Statement. Shareholders are strongly encouraged to read
and consider carefully this Prospectus/Proxy Statement in its entirety.
This Prospectus/Proxy Statement and the accompanying proxy cards
are first being mailed to shareholders of OMNI on or about February 9, 1995.
THESE SECURITIES OF KEYCORP HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SHARES OF KEYCORP COMMON STOCK OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS, OR OTHER OBLIGATIONS OF
A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
The date of this Prospectus/Proxy Statement is February 3, 1995.
<PAGE> 10
AVAILABLE INFORMATION
KeyCorp is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). KeyCorp has filed with
the Commission a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), covering the shares of KeyCorp Common Stock to be issued by KeyCorp in
connection with the Merger. The Registration Statement and the exhibits
thereto, as well as the reports, proxy statements, and other information filed
by KeyCorp under the Exchange Act, can be inspected and copied at prescribed
rates at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at The Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center,
Thirteenth Floor, New York, New York 10048. Copies of such material can be
obtained by mail from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain securities
of KeyCorp, including the KeyCorp Common Stock, are listed on the NYSE, and
such reports and proxy statements concerning KeyCorp also may be inspected at
the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005.
This Prospectus/Proxy Statement does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted
from this Prospectus/Proxy Statement in accordance with the rules and
regulations of the Commission. Reference is made to the Registration Statement
and to the exhibits thereto for further information pertaining to KeyCorp and
the securities offered thereby.
Statements contained herein or in any document incorporated herein by
reference as to the contents of any contract or other document referred to
herein or therein are not necessarily complete and, in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement or such other document incorporated herein by
reference. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus/Proxy
Statement the following documents and information heretofore filed by KeyCorp
with the Commission pursuant to Sections 12, 13 or 15 of the Exchange Act:
1. KeyCorp's Annual Report on Form 10-K for the year ended December
31, 1993 (the Consolidated Financial Statements, the Notes to
Consolidated Financial Statements and the Supplemental
Consolidated Financial Statements included in KeyCorp's Form 10-K
for the year ended December 31, 1993 have been modified and
superseded by the Consolidated Financial Statements and Notes to
Consolidated Financial Statements included in KeyCorp's Current
Report on Form 8-K filed on April 20, 1994);
-2-
<PAGE> 11
2. KeyCorp's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1994, June 30, 1994 and September 30, 1994;
3. KeyCorp's Current Reports on Form 8-K, filed on (a) January 21,
1994, (b) March 16, 1994 (as amended by Amendment No. 1 to Form
8-K on Form 8-K/A filed on May 4, 1994), (c) April 12, 1994, (d)
April 20, 1994 (including as exhibits in the case of the Form 8-K
filed on April 20, 1994: (i) Management's Discussion and Analysis
of Financial Condition and Results of Operations; (ii) Report of
Ernst & Young LLP, Independent Auditors; (iii) Consolidated
Financial Statements for the fiscal year ended December 31, 1993;
(iv) Notes to Consolidated Financial Statements; and (v)
descriptions of KeyCorp's business (including a discussion of
regulatory and supervisory matters and properties), all of which
reflect the former KeyCorp, a New York corporation, and Society
Corporation, an Ohio corporation, on a combined basis giving
effect to their March 1, 1994 merger in which Society Corporation
was the surviving corporation, and immediately after which
Society Corporation changed its name to KeyCorp); (e) July 19,
1994, (f) July 26, 1994 (as amended by Amendment No. 1 to Form
8-K on Form 8-K/A filed on August 10, 1994), (g) August 12, 1994,
(h) October 21, 1994, (i) December 15, 1994 and (j) January 20,
1995; and
4. The description of KeyCorp's Common Shares and the Rights to
purchase Common Shares contained in KeyCorp's Registration
Statement on Form 8-A dated July 31, 1992, as amended by Form
8-A/A filed on February 25, 1994, under Section 12 of the
Exchange Act.
All reports subsequently filed by KeyCorp pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus/Proxy
Statement and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference into this Prospectus/Proxy Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus/Proxy
Statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as is modified or
superseded, to constitute a part of this Prospectus/Proxy Statement.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROSPECTUS/PROXY STATEMENT
IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO CARTER B. CHASE, EXECUTIVE VICE
PRESIDENT, GENERAL COUNSEL AND SECRETARY, KEYCORP, 127 PUBLIC SQUARE,
CLEVELAND, OHIO 44114-1306 (TELEPHONE (216) 689-6300). IN ORDER TO ENSURE
TIMELY DELIVERY OF SUCH DOCUMENTS, A REQUEST MUST BE RECEIVED NO LATER THAN
FEBRUARY 17, 1995.
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS/PROXY STATEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
-3-
<PAGE> 12
BEEN AUTHORIZED BY KEYCORP OR OMNI. THIS PROSPECTUS/PROXY STATEMENT DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH THEY RELATE AND DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS/PROXY STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF KEYCORP OR OMNI SINCE THE DATE HEREOF OR THEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO SUCH DATE.
-4-
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . 2
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Special Meeting of OMNI Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Record Date; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Voting, Solicitation and Revocation of Proxies . . . . . . . . . . . . . . . . . . . . . 20
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
OMNI's Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
KeyCorp's Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Recommendation of OMNI's Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 26
General Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Conversion of OMNI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Effects on KeyCorp Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Conversion of OMNI Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Conduct of Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 29
Adjustment to Increase Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Buy and Sell Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Sale of Merchants Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Waiver of Conditions, Amendment or Termination of the Merger Agreement . . . . . . . . . 37
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . 39
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . 40
Accounting Treatment of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Resales of KeyCorp Common Stock Received in the Merger . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<PAGE> 14
<TABLE>
<S> <C>
OMNI Market Price and Dividend Information . . . . . . . . . . . . . . . . . . . . . . . . . 46
OMNI Management's Discussion and Analysis Of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 48
The Business of OMNI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Regulation and Supervision of OMNI . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Principal Shareholders and Security Ownership of Management of OMNI . . . . . . . . . . . . . 67
The Business of KeyCorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Banking Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Other Financial Services Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Recently Completed Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Pending Acquisitions and Potential Divestiture . . . . . . . . . . . . . . . . . . . . . 73
Regulation and Supervision of KeyCorp . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Comparison of Certain Rights of Holders of Capital Stock of KeyCorp and OMNI . . . . . . . . 80
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
State Takeover Statutes and Takeover Provisions of Charter Documents . . . . . . . . . . 81
Shareholder Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Special Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Amendment of Charter Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Director Liability and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 90
Interested Director Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Shareholders' Rights to Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Shareholder Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Certain Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
OMNI Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Appendix A - Plan of Merger
Appendix B - Letter Agreement dated as of August 31, 1994
Appendix C - Letter Agreement dated January 4, 1995
Appendix D - Opinion of Financial Advisor
Appendix E - Article 113 of Colorado Business Corporation Act (Dissenters' Rights)
Appendix F - Letter Agreement dated January 14, 1995
Appendix G - Letter Agreement dated January 27, 1995
</TABLE>
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<PAGE> 15
SUMMARY
The following summary is intended to summarize certain information
contained elsewhere in this Prospectus/Proxy Statement. This summary is not
intended to be complete and is qualified in its entirety by reference to the
more detailed information contained elsewhere in this Prospectus/Proxy
Statement, the appendices hereto, and the documents referred to and
incorporated herein.
INTRODUCTION
The Board of Directors of KeyCorp has ratified and the Board of
Directors of OMNI has unanimously adopted the Merger Agreement pursuant to
which OMNI will be merged with and into KeyCorp if the shareholders of OMNI
approve the Merger Agreement by the requisite shareholder vote, regulatory
approvals are received, and certain other conditions are satisfied. KeyCorp
will be the surviving corporation in the Merger. A copy of the Merger
Agreement is incorporated herein by reference and attached hereto as Appendix
A. The terms of the Merger and information regarding the Special Meeting are
summarized below.
PARTIES TO THE MERGER
KEYCORP. On March 1, 1994, the former KeyCorp ("old Key"), a New York
corporation and a financial services holding company headquartered in Albany,
New York, with approximately $33 billion in assets at December 31, 1993, merged
with and into Society Corporation ("Society"), an Ohio corporation and a
financial services holding company headquartered in Cleveland, Ohio, with
approximately $27 billion in assets at December 31, 1993, pursuant to an
Agreement and Plan of Merger, and a related Supplemental Agreement to Agreement
and Plan of Merger, each dated as of October 1, 1993, and each as amended. In
the merger, Society was the surviving corporation, but changed its name to
KeyCorp. All financial data of KeyCorp set forth in this Prospectus/Proxy
Statement has been restated to give effect to the merger of old Key with and
into Society.
The merger of old Key with and into Society created a financial
services holding company which traces its roots back to 1825, when the first
predecessor of KeyCorp was organized. At September 30, 1994, KeyCorp was one
of the largest bank holding companies in the United States with consolidated
assets of approximately $64.5 billion.
KeyCorp provides banking and other financial services across much of
the country's northern tier and in Florida through a network of subsidiaries
operating 1,279 full-service banking offices in 13 states, giving KeyCorp the
nation's fifth largest domestic branch network as of September 30, 1994
(without giving effect to KeyCorp's recent acquisition of BANKVERMONT
Corporation described herein). KeyCorp's primary banking subsidiaries include
Society National Bank, headquartered in Cleveland, Ohio, the largest bank in
Ohio and one of the nation's major regional banks with $24.0 billion in total
assets and 296 full-service banking offices at September 30, 1994; Key Bank of
New York, headquartered in Albany, New York, with $14.8 billion in total assets
and 328 full-service banking offices at September 30, 1994; and Key Bank of
Washington, headquartered in Tacoma, Washington with $7.5 billion in total
assets and 190 full-service
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<PAGE> 16
banking offices at September 30, 1994. In addition, KeyCorp operates banking
subsidiaries in Alaska, Colorado, Florida, Idaho, Indiana, Maine, Michigan,
Oregon, Utah, Vermont (its Vermont subsidiary was acquired on January 27, 1995)
and Wyoming.
Key Bank of Colorado is a state-chartered commercial bank headquartered
in Fort Collins, Colorado, and a wholly owned subsidiary of KeyCorp. At
September 30, 1994, Key Bank of Colorado had approximately $600 million in
total assets and served customers through a network of 15 full-service banking
offices. Key Bank of Colorado was established in June 1993 with the
acquisition by KeyCorp of Home Federal Savings Bank and expanded in March of
1994 when KeyCorp acquired Commercial Bancorporation of Colorado. On December
30, 1994, Key Bank of Colorado acquired The Bank of Greeley, a single location
bank in Greeley, Colorado with $61 million in total assets as of September 30,
1994. See "The Business of KeyCorp -- Recently Completed Acquisitions." Key
Bank of Colorado is engaged in general banking business in the State of
Colorado providing commercial and retail banking services to consumers, small
businesses and corporate customers in the eastern region of Colorado. Retail
banking products offered by Key Bank of Colorado include, among others,
consumer loan products (including residential real estate mortgage lending,
direct and indirect installment, home equity, credit card and student lending),
and private banking services. Commercial banking products and services
include, among others, real estate, agribusiness, corporate and cash
management. Following consummation of the Merger, KeyCorp plans to effect
the merger of OMNIBANK Aurora, OMNIBANK Commerce City, OMNIBANK Iliff, OMNIBANK
Parker Road and OMNIBANK Southeast (collectively, the "OMNI Banks"), the
banking subsidiaries of OMNI, with and into Key Bank of Colorado.
KeyCorp's other banking subsidiaries also provide a wide range of
banking, fiduciary and other financial services to their corporate, individual
and institutional customers located throughout the country. In addition to the
customary banking services of accepting funds for deposit and making loans,
KeyCorp's banking subsidiaries provide specialized services tailored to
specific markets, including investment management services, personal and
corporate trust services, personal financial services, customer access to money
market and other mutual funds, cash management services, investment banking
services, and international banking services.
In addition to the services provided through its banking offices,
KeyCorp engages in a wide range of other financial services through
subsidiaries, including mortgage banking, investment management, mutual fund
advisory, and trust services.
Through its non-banking subsidiaries, KeyCorp provides additional
financial services both in and outside of its primary banking markets. These
include personal and corporate trust services, investment management,
reinsurance of credit life and accident and health insurance on loans made by
subsidiary banks, venture capital and small business investment financing
services, equipment lease financing, community development financing, stock
transfer agent, and other financial services.
The principal executive offices of KeyCorp are located at 127 Public
Square, Cleveland, Ohio 44114-1306, and its telephone number is (216) 689-6300.
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<PAGE> 17
OMNI. OMNI is a multi-bank holding company which, through its
subsidiaries, engages primarily in general commercial and retail banking in the
Denver, Colorado metropolitan area. At September 30, 1994, OMNI had total
deposits of approximately $400 million, total assets of approximately $506
million and 346 full-time employees in 18 banking offices. OMNI's five banking
subsidiaries are commercial banks organized and operated under the laws of the
State of Colorado. They offer a wide range of personal and business related
financial services to individuals, corporations, municipalities and other
public and governmental entities. These services include personal and business
checking accounts, a full range of time deposit accounts and personal and
commercial lending.
OMNI also owns 50% of the capital stock of Merchants Mortgage & Trust
Corporation ("Merchants Mortgage"), which is engaged primarily in the business
of purchasing, with recourse, consumer mortgage notes, secured by first deeds
of trust, originated by real estate development companies and selling such
notes to banks with recourse. In connection with the Merger, OMNI has agreed to
enter into a definitive agreement with a prospective purchaser on or before
January 31, 1995 to use its best efforts to dispose of its interest in Merchants
Mortgage by the Effective Time (defined below) and it has entered into such an
agreement. See "The Merger -- Sale of Merchants Mortgage."
The principal executive offices of OMNI are located at 3600 S.
Yosemite, Suite 210, Denver, Colorado 80237, and its telephone number is (303)
773-6664.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The OMNI Board of Directors has adopted a resolution approving the
Merger Agreement and, for the reasons set forth herein, has determined that the
Merger is fair to and in the best interests of OMNI and its shareholders. The
Board of OMNI, therefore, recommends that OMNI's shareholders vote FOR approval
of the Merger Agreement. See "The Merger -- Background of the Merger,"
"-- OMNI's Reasons for the Merger" and "-- Opinion of Financial Advisor."
THE BOARD OF DIRECTORS OF OMNI HAS UNANIMOUSLY
ADOPTED THE MERGER AGREEMENT AND APPROVED THE
MERGER AND RECOMMENDS APPROVAL OF THE MERGER
AGREEMENT BY THE SHAREHOLDERS OF OMNI
OPINION OF FINANCIAL ADVISOR
Hovde Financial, Inc. ("Hovde") has rendered a written opinion to
OMNI's Board of Directors to the effect that, as of the date of this
Prospectus/Proxy Statement, January 16, 1995 and August 27, 1994, the
consideration offered in the Merger is fair, from a financial point of view,
to the holders of OMNI Common Stock. The opinion of Hovde is attached as
Appendix D to this Prospectus/Proxy Statement. The opinion should be read in
its entirety for a description of the procedures followed by, assumptions and
qualifications made by, matters considered by, and limitations imposed on
Hovde. See also "The Merger -- Background of the Merger" and "-- Opinion of
Financial Advisor."
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<PAGE> 18
THE MERGER
GENERAL. Pursuant to the Merger Agreement, at the Effective Time
(defined below), OMNI will be merged with and into KeyCorp with KeyCorp as the
surviving corporation. See "The Merger -- General Terms." For information on
how OMNI shareholders will be able to exchange certificates representing shares
of OMNI Common Stock for new certificates representing shares of KeyCorp Common
Stock, see "The Merger -- Surrender of Certificates."
EFFECTIVE TIME. Subject to the receipt of regulatory approvals and the
satisfaction of other conditions, the Merger is expected to be consummated in
February 1995. The Merger will be consummated after (i) approval of the Merger
Agreement by the shareholders of OMNI; (ii) receipt of required regulatory
approvals and expiration of applicable statutory waiting periods; and (iii)
satisfaction or waiver of all other conditions to consummation of the Merger
pursuant to the Merger Agreement. The time and date at which the Merger will
be consummated is referred to herein as the "Effective Time." See "The Merger
- -- Effective Time," "-- Conditions to the Merger," and "-- Regulatory
Approvals."
CONVERSION OF OMNI COMMON STOCK. At the Effective Time, each share of
OMNI Common Stock (excluding any shares owned by KeyCorp, or its subsidiaries,
other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted, or shares held by shareholders who perfect their
dissenters' rights of appraisal) issued and outstanding at the Effective Time
will be converted into the right to receive .2452 shares of KeyCorp Common
Stock. Cash will be paid in lieu of issuing fractional shares of KeyCorp
Common Stock and to shareholders who properly exercise dissenters' rights. The
Exchange Ratio is subject to adjustment upon the occurrence of certain
circumstances as more fully described herein. See "The Merger -- Adjustment to
Increase Exchange Ratio," "-- Sale of Merchants Mortgage" and "-- Environmental
Matters." All references to the shares of KeyCorp Common Stock in this
Prospectus/Proxy Statement include the associated Rights to purchase KeyCorp
Common Stock pursuant to a Rights Agreement, dated as of August 25, 1989,
between KeyCorp and Society National Bank as rights agent, as amended (the
"Rights Agreement"); each share of KeyCorp Common Stock issued to shareholders
of OMNI in the Merger will be accompanied by one Right, which will be evidenced
by the certificates for the KeyCorp Common Stock. See "The Merger --
Conversion of OMNI Common Stock," "-- Certain Federal Income Tax Consequences,"
"Comparison of Certain Rights of Holders of Capital Stock of KeyCorp and OMNI"
and "Rights of Dissenting Shareholders."
CONVERSION OF OMNI OPTIONS. At the Effective Time, KeyCorp will issue
a new option to purchase KeyCorp Common Stock in substitution for each option
to purchase shares of OMNI Common Stock that is outstanding and exercisable
immediately prior to the Effective Time on substantially the same terms and
conditions as set forth in the KeyCorp Stock Option Agreement form that is
Exhibit B to the Merger Agreement, attached hereto as Appendix A. See "The
Merger -- Conversion of OMNI Options."
SALE OF MERCHANTS MORTGAGE. Consummation of the Merger is conditioned
upon, among other things, OMNI's sale of its interest in Merchants Mortgage
prior to the Effective Time. OMNI owns 50% of the stock of Merchants
Mortgage. If OMNI realizes an aggregate loss in
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<PAGE> 19
excess of certain thresholds on the sale of Merchants Mortgage (determined in
accordance with generally accepted accounting principles consistently applied),
the Exchange Ratio will be reduced. In late January, OMNI entered into a
definitive agreement to sell its interest in Merchants Mortgage prior to the
closing of the Merger. Although OMNI will incur an aggregate loss on the sale,
the loss will not result in a reduction to the Exchange Ratio. See "The Merger
- -- Conversion of OMNI Common Stock" and "-- Sale of Merchants Mortgage."
ENVIRONMENTAL MATTERS. Following execution of the Merger Agreement,
OMNI commissioned, at its own expense, Phase I environmental audits of
substantially all real property owned or leased by it for which it did not
already have such audits, including property relating to its branches and
property acquired through foreclosure and held as real estate owned. Upon
review of the Phase I environmental audit reports, KeyCorp commissioned several
Phase II environmental audits on certain properties, with the cost of such
audits to be shared equally by OMNI and KeyCorp. If, based on any reports
resulting from such audits, the estimated cost of remediation or repair exceeds
$1,000,000, the Exchange Ratio will be adjusted downward as described in the
Merger Agreement. If such estimated cost of remediation or repair exceeds
$5,000,000, then OMNI and KeyCorp each have the right to declare the Merger
Agreement null and void by giving written notice to the other party. See "The
Merger -- Conversion of OMNI Common Stock," "-- Environmental Matters" and "--
Waiver of Conditions, Amendment or Termination of the Merger Agreement."
DISSENTERS' RIGHTS. Holders of OMNI Common Stock may, by complying
with the provisions of Article 113 of the Colorado Business Corporation Act,
exercise dissenters' rights. Failure to comply precisely with the requirements
of the applicable statutes will result in the loss of dissenters' rights. See
"Rights of Dissenting Shareholders."
NYSE LISTING. KeyCorp has agreed to use its best efforts to cause the
listing on the NYSE of (a) the KeyCorp Common Stock issued in the Merger and
(b) the Rights which will accompany the KeyCorp Common Stock issued in the
Merger. See "The Merger -- NYSE Listing."
CONDITIONS; REGULATORY APPROVALS. Consummation of the Merger is
conditioned upon approval of the Merger Agreement by the affirmative vote of
holders of two-thirds of the issued and outstanding shares of OMNI Common Stock
as set forth herein; receipt of all necessary approvals of the Merger by
governmental regulatory agencies, including the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), and the Colorado State
Banking Board, applications for which have been filed and approval has been
granted, and expiration of all applicable statutory waiting periods; receipt
by each party of a favorable tax opinion from Irell & Manella, OMNI's legal
counsel; the continuing accuracy of the representations and warranties of each
party contained in the Merger Agreement; performance of specified obligations
by each party; notification from holders of no more than 10% of the issued and
outstanding shares of OMNI Common Stock that they intend to exercise
dissenters' rights; OMNI obtaining a definitive written agreement by January
31, 1995 to sell its interest in Merchants Mortgage and completing the sale by
the Effective Time; receipt of waivers of the OMNIBANCORP Buy and Sell
Agreement among OMNI and various shareholders of OMNI Common Stock (the "OMNI
Buy and Sell Agreement") from 80% of the OMNI shareholders and from OMNI
shareholders holding 90% of the OMNI Common Stock outstanding on August 31,
1994 (which waivers have been received); the listing on the NYSE of KeyCorp
Common Stock issued in the Merger and the accompanying Rights; receipt of a
fairness opinion by Hovde
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<PAGE> 20
dated the same date as this Prospectus/Proxy Statement that will not have been
withdrawn; and certain other conditions. See "The Merger -- Conditions to the
Merger" and" -- Regulatory Approvals."
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be
terminated, and the Merger abandoned, prior to the Effective Time, whether
before or after its adoption by the shareholders of OMNI (a) by the mutual
written consent of the Board of Directors of both KeyCorp and OMNI; (b) by
OMNI's Board of Directors in the event that the average per share closing price
of KeyCorp Common Stock as reported on the NYSE for the 10 consecutive trading
days ending on the third business day prior to the date of the Special Meeting
("Calculation Period") (such price being the "Average Closing Price") is less
than $26.10; (c) by KeyCorp's Board of Directors in the event that OMNI has not
entered into a definitive written agreement by January 31, 1995 to sell all of
its interest in Merchants Mortgage or has not completed the sale by the
Effective Time; or (d) by either Board of Directors under certain specified
circumstances, including if the Merger shall not have been consummated by June
30, 1995. See "The Merger -- Waiver of Conditions, Amendment or Termination of
the Merger Agreement."
TAX AND ACCOUNTING TREATMENT OF THE MERGER. Consummation of the Merger
is conditioned upon receipt by KeyCorp and OMNI of an opinion from OMNI's legal
counsel, which may be based on various facts and representations and subject to
various assumptions, dated as of the Effective Time, substantially to the
effect that the Merger will constitute a tax-free reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that the exchange of OMNI Common Stock for KeyCorp Common Stock
will not give rise to gain or loss to OMNI shareholders for federal income tax
purposes, except to the extent of any cash received in lieu of fractional
share interests or as a result of a shareholder's perfecting such holder's
dissenters' rights of appraisal. Due to the individual nature of the tax
consequences of the Merger, OMNI shareholders are urged to consult their own
tax advisors to determine the specific effect of the Merger on them under
federal, state, local and foreign tax laws. The Merger will be treated as a
purchase for financial reporting purposes. See "The Merger -- Certain Federal
Income Tax Consequences" and "-- Accounting Treatment of Merger" and "Rights of
Dissenting Shareholders."
INTERESTS OF CERTAIN PERSONS IN MERGER. As of January 27, 1995,
approximately 69.9% of the issued and outstanding shares of OMNI Common Stock
were beneficially owned by directors and executive officers of OMNI and their
respective affiliates; however, these amounts include certain shares of OMNI
Common Stock as to which such executive officers, directors and affiliates
disclaim beneficial ownership. See the notes to the tables appearing in
"Principal Shareholders and Security Ownership of OMNI Management." As of
January 27, 1995, the officers and directors of OMNI owned options to purchase
370,000 shares of OMNI Common Stock. As a condition to KeyCorp's entering into
the Merger Agreement, OMNI's directors, executive officers and their affiliates
holding at least two-thirds of the outstanding shares of OMNI Common Stock were
required to execute and deliver Voting Agreements to KeyCorp pursuant to which
such persons have agreed to vote all of their shares of OMNI Common Stock in
favor of approval of the Merger Agreement. See "The Merger -- Interests of
Certain Persons in the Merger."
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<PAGE> 21
OMNI has arrangements with its executive officers pursuant to which OMNI
will pay each such officer a severance payment equal to his prior year's total
compensation (including discretionary bonuses) in the event such officer is
terminated without cause within one year following a change of control.
Following the Effective Time, KeyCorp has agreed to honor these severance
contracts in accordance with their terms. KeyCorp has entered into an
employment agreement with Gary D. Levine, a director and Senior Credit Officer
of OMNI and President and Chief Executive Officer of OMNIBANK Southeast. In
addition, the OMNI Board of Directors awarded Mr. Graf a special bonus of
$150,000 in recognition of his efforts in connection with the sale of OMNI and
the future requirements of his time concerning assistance in the preparation of
all required documents and the anticipated closing of the Merger to be paid
whether or not the Merger is consummated. However, if the Merger is
consummated, Mr. Graf's bonus will be paid one-third upon the Effective Date
and the remaining two-thirds on the 90th day following the Effective Date.
See "The Merger -- Interests of Certain Persons in the Merger."
SHAREHOLDER MEETING
GENERAL. The Special Meeting of OMNI shareholders will be held on
February 24, 1995, at 8:30 a.m., local time, in the basement conference room,
OMNIBANK Center, 3600 S. Yosemite, Denver, Colorado. The purpose of the
Special Meeting is for shareholders of OMNI to consider and vote upon a
proposal to approve the Merger Agreement, pursuant to which OMNI will be merged
with and into KeyCorp, with KeyCorp as the surviving corporation. See "Special
Meeting of OMNI Shareholders -- General."
RECORD DATE; VOTE REQUIRED. Only holders of record of OMNI Common Stock
at the close of business on January 20, 1995, will be entitled to vote at the
Special Meeting. At such date there were 16,491,244 shares of OMNI Common
Stock outstanding. Each share of OMNI Common Stock is entitled to one vote.
For additional information relating to the Special Meeting, see "Special
Meeting of OMNI Shareholders -- Record Date; Vote Required."
Approval of the Merger Agreement requires the affirmative vote by
holders of two-thirds of the shares of OMNI Common Stock outstanding on the
Record Date. See "Special Meeting of OMNI Shareholders -- Record Date; Vote
Required." As a condition to KeyCorp's entering into the Merger Agreement,
OMNI's directors, executive officers and their affiliates beneficially owning
in excess of two-thirds of the outstanding shares of OMNI Common Stock were
required to execute and deliver Voting Agreements to KeyCorp pursuant to which
such persons have agreed to vote all of their shares of OMNI Common Stock in
favor of approval of the Merger Agreement. Such shareholders holding 11,273,588
shares of Common Stock representing 68.4% of the number of shares of OMNI
Common Stock entitled to vote at the Special Meeting have delivered executed
Voting Agreements. As a result, it is anticipated that the Merger Agreement
will be approved at the Special Meeting. See "Voting Agreements."
COMPARATIVE MARKET PRICES OF COMMON STOCK
KeyCorp Common Stock is traded on the NYSE. OMNI Common Stock is not
traded in any market and, to the best of OMNI's knowledge, sales of such stock
are isolated and infrequent and generally are effected in private transactions
between the buyer and seller. In addition, the sale of OMNI Common Stock by
most shareholders is restricted pursuant to the OMNI Buy and Sell Agreement.
See "The Merger -- Buy and Sell Agreement."
The following table sets forth the historical market value per share of
each of KeyCorp Common Stock and OMNI Common Stock and the equivalent market
value per share of OMNI
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<PAGE> 22
Common Stock, each as of August 31, 1994, the last business day preceding
public announcement of the Merger. The equivalent market value per share of
OMNI Common Stock is based on the Exchange Ratio of .2452 multiplied by the
last sales price of a share of KeyCorp Common Stock on August 31, 1994. The
historical market value per share of KeyCorp Common Stock set forth below is
the closing price per share of KeyCorp Common Stock on August 31, 1994, as
reported on the NYSE. Since, to the best of OMNI's knowledge, no shares of
OMNI Common Stock were offered for sale on August 31, 1994, the historical
market value per share of OMNI Common Stock set forth below is based on the
last known sale of OMNI Common Stock occurring prior to August 31, 1994, and
represents a single transaction involving 777 shares made pursuant to an
exercise of a right of first refusal under the Buy and Sell Agreement.
<TABLE>
<CAPTION>
OMNI
--------------------------------------
Equivalent
KeyCorp Market Value
Historical Historical Per Share
---------- ---------- ------------
<S> <C> <C> <C>
Closing Prices on
August 31, 1994 $32.875 $6.25 $8.06
</TABLE>
Shareholders are advised to obtain current market quotations for KeyCorp
Common Stock. There is no assurance as to the market prices of KeyCorp Common
Stock at or after the Effective Time.
UNAUDITED COMPARATIVE PER COMMON SHARE DATA
The following table sets forth unaudited comparative per common share
book value, cash dividends declared and net income: (a) on an historical basis
for KeyCorp and OMNI; (b) on a pro forma basis per share of KeyCorp Common Stock
adjusted to give effect to the Merger as if the Merger had occurred at September
30, 1994, with respect to the presentation of book value and as if the Merger
had occurred at January 1, 1993 with respect to the presentation of net income;
and (c) on an equivalent pro forma basis per share of OMNI Common Stock. The
pro forma information reflects the Exchange Ratio of .2452 shares of KeyCorp
Common Stock for each share of OMNI Common Stock outstanding immediately prior
to the Merger in a transaction to be accounted for as a purchase. The shares of
KeyCorp Common Stock to be issued will be provided through the repurchase of
shares prior to completion of the Merger.
The following information should be read in conjunction with the
historical financial statements of KeyCorp and OMNI incorporated by reference or
included elsewhere in this Prospectus/Proxy Statement. See "Incorporation of
Certain Documents by Reference," "Available Information" and "Index to Financial
Statements." The pro forma and equivalent pro forma data may not be indicative
of the results that actually would have occurred if the Merger had been in
effect during the periods presented or which may be attained in the future.
-14-
<PAGE> 23
UNAUDITED COMPARATIVE PER COMMON SHARE DATA
<TABLE>
<CAPTION>
KeyCorp OMNI
--------------------------- ----------------------------
Equivalent
Historical Pro Forma(1) Historical Pro Forma(2)
---------- --------- ---------- ------------
<S> <C> <C> <C> <C>
BOOK VALUE
September 30, 1994 $18.65 $18.65 $3.54 $4.57
December 31, 1993 17.53 17.53 3.50 4.30
CASH DIVIDENDS DECLARED
Fourth quarter 1994 $.320 $.320 $.110 $.078
Third quarter 1994 .320 .320 .025 .078
Second quarter 1994 .320 .320 .025 .078
First quarter 1994 .320 .320 .025 .078
Fourth quarter 1993 .280 .280 .120 .069
Third quarter 1993 .280 .280 .025 .069
Second quarter 1993 .280 .280 .025 .069
First quarter 1993 .280 .280 .020 .069
NET INCOME
Nine months ended September 30, 1994 $2.66 $2.65 $.43 $.66
Year ended December 31, 1993 2.89 2.88 .51 .71
</TABLE>
(1) Other than cash dividends declared, the KeyCorp pro forma data gives
effect to the Merger as if the Merger had occurred at the date presented
with respect to book value and as if the Merger had occurred at
January 1, 1993 with respect to the presentation of net income. The pro
forma book value and net income amounts include the results of both
companies' operations as well as acquisition-related adjustments. The
KeyCorp pro forma cash dividends represent KeyCorp's historical dividends.
The pro forma data may not be indicative of the results that actually would
have occurred if the Merger had been in effect during the periods presented
or which may be attained in the future.
(2) The equivalent pro forma per share amounts for OMNI Common Stock
represent, in the cases of book value and net income, the pro forma amounts
for shares of KeyCorp Common Stock multiplied by .2452 (the Exchange Ratio)
and, in the case of cash dividends declared, the historical data for shares
of KeyCorp Common Stock multiplied by .2452 (the Exchange Ratio).
-15-
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables set forth selected historical consolidated financial
data for KeyCorp and OMNI for each of the five years in the period ended
December 31, 1993, and for the nine-month periods ended September 30, 1994 and
1993. Such data have been derived from, and should be read in conjunction with,
the consolidated financial statements and unaudited consolidated interim
financial statements of KeyCorp and OMNI, including the notes thereto,
incorporated by reference or included elsewhere in this Prospectus/Proxy
Statement. See "Incorporation of Certain Documents by Reference" and "Index to
Financial Statements." Selected unaudited financial information for the
nine-month periods ended September 30, 1994 and 1993, for KeyCorp and OMNI, in
each case, includes all adjustments, consisting only of normal recurring
adjustments that, in the opinion of the management of KeyCorp and OMNI,
respectively, were considered necessary for a fair presentation of the
consolidated operating results and financial position for and at the end of such
interim periods. Results for the interim periods are not necessarily indicative
of results expected for the year as a whole. See "Available Information" and
"Index to Financial Statements."
On March 1, 1994, old Key, a New York corporation and financial services
holding company headquartered in Albany, New York, merged with and into Society,
an Ohio corporation and a financial services holding company headquartered in
Cleveland, Ohio, pursuant to an Agreement and Plan of Merger and a related
Supplemental Agreement to Agreement and Plan of Merger, each dated as of October
1, 1993, and each as amended. In the merger, Society was the surviving
corporation, but changed its name to KeyCorp. The merger was accounted for as a
pooling of interests and, accordingly, the financial data for KeyCorp is
presented as if old Key and Society had been combined for all periods presented.
Neither the Merger nor any other pending acquisitions under consideration
by KeyCorp is expected to have a material effect on KeyCorp's selected
consolidated financial data. Accordingly, no pro forma combined selected
consolidated financial data is included herein.
-16-
<PAGE> 25
KEYCORP AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Nine months ended
September 30,
--------------------------
(dollars in millions, except per share) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
FOR THE PERIOD
Interest income $3,298.3 $3,163.4
Interest expense 1,270.3 1,162.7
Net interest income 2,028.0 2,000.7
Provision for loan losses 99.0 165.3
Noninterest income 677.3 764.6
Noninterest expense 1,611.6 1,695.6
Income before income taxes 994.7 904.4
Net income 659.7 587.6
Net income applicable to Common Shares 647.7 573.4
- ---------------------------------------------------------------------------
PER COMMON SHARE
Net income $ 2.66 $ 2.40
Cash dividends .96 .84
Weighted average Common Shares (000) 243,635.2 239,437.1
- ---------------------------------------------------------------------------
AT PERIOD-END
Loans $44,608.8 $39,070.7
Earning assets 58,638.1 52,935.5
Total assets 64,500.3 58,169.2
Deposits 47,816.5 44,339.9
Long-term debt 2,177.8 1,908.4
Common shareholders' equity 4,541.9 4,150.1
Total shareholders' equity 4,701.9 4,310.1
- ---------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets 1.43% 1.39%
Return on average common equity 19.65 19.52
Efficiency(1) 58.81 60.21
Overhead(2) 45.53 46.42
Net interest margin 4.91 5.35
- ---------------------------------------------------------------------------
CAPITAL RATIOS AT PERIOD-END
Tangible equity to tangible assets 6.45% 6.52%
Tier 1 risk-adjusted capital 8.86 8.66
Total risk-adjusted capital 12.07 12.18
Leverage 6.79 6.74
- ---------------------------------------------------------------------------
ASSET QUALITY
Nonperforming loans $286.1 $379.7
Nonperforming assets 398.5 622.7
Allowance for loan losses 820.2 799.4
Nonperforming loans to period-end loans .64% .97%
Nonperforming assets to period-end loans
plus OREO and other nonperforming assets .89 1.58
Allowance for loan losses to nonperforming
loans 286.62 210.53
Allowance for loan losses to period-end loans 1.84 2.05
Net loan charge-offs to average loans .28 .59
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------------------------------
(dollars in millions, except per share) 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD
Interest income $4,213.9 $4,198.8 $4,652.4 $4,528.8 $4,410.2
Interest expense 1,534.9 1,750.1 2,519.4 2,667.7 2,615.8
Net interest income 2,679.0 2,448.7 2,133.0 1,861.1 1,794.4
Provision for loan losses 211.7 338.4 466.2 517.2 306.2
Noninterest income 1,001.7 925.2 849.3 744.2 635.1
Noninterest expense 2,385.1 2,170.4 2,065.7 1,819.5 1,705.8
Income before income taxes 1,083.9 865.1 450.4 268.6 417.5
Net income 709.9 592.1 313.7 256.1 286.7
Net income applicable to Common Shares 691.8 568.1 297.5 249.0 281.3
- ---------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income $ 2.89 $ 2.42 $ 1.31 $ 1.13 $ 1 .26
Cash dividends 1.12 .98 .92 .88 .80
Weighted average Common Shares (000) 239,775.2 235,004.8 227,116.2 220,078.6 223,901.3
- ---------------------------------------------------------------------------------------------------------------------------
AT PERIOD-END
Loans $40,071.3 $36,021.8 $35,534.3 $34,193.7 $31,570.4
Earning assets 54,352.7 49,380.8 48,207.9 44,668.2 41,871.4
Total assets 59,631.2 55,068.4 53,600.9 49,953.4 47,205.1
Deposits 46,499.1 43,433.1 42,835.0 40,935.3 37,375.4
Long-term debt 1,763.9 1,790.1 1,224.5 1,145.2 1,177.4
Common shareholders' equity 5,233.6 3,683.3 3,272.4 2,941.7 2,929.1
Total shareholders' equity 4,393.6 3,927.3 3,516.4 3,025.7 2,979.4
- ---------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets 1.24% 1.13% .60% .54% .64%
Return on average common equity 17.27 16.33 9.29 8.39 9.56
Efficiency(1) 60.50 60.96 65.27 66.92 67.09
Overhead(2) 46.85 47.21 52.63 54.58 56.50
Net interest margin 5.31 5.31 4.71 4.53 4.64
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT PERIOD-END
Tangible equity to tangible assets 6.51% 6.11% 5.45% 4.79% 5.39%
Tier 1 risk-adjusted capital 8.73 8.56 7.67 6.75 N/A
Total risk-adjusted capital 12.22 11.73 9.80 9.17 N/A
Leverage 6.72 6.56 5.97 5.23 N/A
- ---------------------------------------------------------------------------------------------------------------------------
ASSET QUALITY
Nonperforming loans $336.3 $552.9 $ 729.5 $ 798.9 $555.4
Nonperforming assets 500.1 900.2 1,071.9 1,013.2 683.1
Allowance for loan losses 802.7 782.6 793.5 677.3 452.7
Nonperforming loans to period-end loans .84% 1.53% 2.05% 2.34% 1.76%
Nonperforming assets to period-end loans
plus OREO and other nonperforming assets 1.24 2.47 2.99 2.94 2.16
Allowance for loan losses to nonperforming
loans 238.69 141.54 108.79 84.78 81.51
Allowance for loan losses to period-end loans 2.00 2.17 2.23 1.98 1.43
Net loan charge-offs to average loans .56 1.02 1.11 1.02 .89
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The comparability of the information presented above is affected by certain
acquistions and divestitures that KeyCorp has completed in the time periods
presented.
(1) Calculated as noninterest expense (excluding merger and integration charges
and other nonrecurring charges) divided by taxable-equivalent net interest
income plus noninterest income (excluding net securities transactions and
gains on certain asset sales).
(2) Calculated as noninterest expense (excluding merger and integration charges
and other nonrecurring charges) less noninterest income (excluding net
securities transactions and gains on certain assets sales) divided by
taxable-equivalent net interest income.
N/A = Not Applicable
-17-
<PAGE> 26
OMNIBANCORP
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
(Unaudited)
Nine months ended
September 30, Year ended December 31,
--------------------- ---------------------------------------------------------
(dollars in millions, except per share amounts) 1994 1993 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD
Interest income $25.7 $21.8 $29.7 $26.8 $26.0 $24.4 $20.8
Interest expense 6.2 5.4 7.3 8.1 11.7 12.9 10.3
Net interest income 19.5 16.4 22.4 18.7 14.3 11.5 10.5
Provision for loan losses - - 0.1 0.2 0.3 1.1 0.8
Noninterest income 5.8 6.4 7.7 7.5 7.3 3.6 1.2
Noninterest expense 14.9 13.1 17.7 15.7 14.8 11.9 10.1
Income before income taxes 10.4 9.7 12.3 10.3 6.5 2.1 0.8
Net income 7.2 6.7 8.4 7.3 5.1 1.7 0.6
- ---------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE
Net income $ 0 .43 $ 0.40 $ 0.51 $ 0.43 $ 0.30 $ 0.10 $ 0.04
Cash dividends 0.075 0.070 0.190 0.150 0.093 0.053 0.050
Weighted average common shares (000) 16,491.2 16,491.2 16,491.2 16,491.2 16,818.2 16,857.0 16,856.6
- ---------------------------------------------------------------------------------------------------------------------------------
AT PERIOD-END
Loans $217.1 $179.1 $191.7 $141.4 $116.2 $101.8 $ 90.6
Earning assets 459.5 399.8 436.0 349.0 311.5 291.1 226.9
Total assets 506.4 442.2 482.3 387.8 350.4 329.2 254.5
Deposits 400.4 376.9 418.4 325.7 298.0 280.2 207.7
Long-term debt - - - - 3.5 3.5 3.6
Shareholders' equity 58.3 55.6 57.7 50.1 46.3 42.9 42.1
- ---------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Return on average total assets 1.91% 2.09% 1.94% 2.00% 1.55% 0.56% 0.26%
Return on average equity 16.56 16.61 15.60 14.73 11.31 3.92 1.48
Efficiency (1) 58.23 56.63 58.27 59.35 66.83 73.39 78.34
Overhead (2) 46.09 39.70 44.21 43.53 50.42 65.69 76.21
Tax equivalent net interest margin 5.87 5.77 5.83 5.86 4.94 5.25 5.07
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL RATIOS AT PERIOD-END
Tangible equity to tangible assets 11.69% 12.14% 11.01% 12.66% 12.85% 12.56% 16.37%
Tier 1 risk-adjusted capital 23.11 24.95 22.96 28.47 34.81 34.31 N/A
Total risk-adjusted capital 24.09 26.04 24.03 29.66 36.30 36.40 N/A
Leverage 11.17 11.94 11.63 12.99 13.09 15.10 N/A
- ---------------------------------------------------------------------------------------------------------------------------------
ASSET QUALITY
Nonperforming loans $ 0.1 $ 0.6 $ 0.3 $ 1.1 $ 1.5 $ 5.0 $ 5.2
Nonperforming assets 0.5 1.6 1.1 1.8 3.0 6.6 6.4
Allowance for loan losses 2.4 2.2 2.3 2.0 1.9 2.5 1.1
Nonperforming loans to period-end loans 0.07% 0.33% 0.15% 0.77% 1.33% 4.92% 5.74%
Nonperforming assets to period-end loans
plus OREO and other nonperforming assets 0.22 0.88 0.57 1.28 2.56 6.42 6.98
Allowance for loan losses to nonperforming
loans 1,639.19 370.73 832.50 181.09 120.45 49.10 20.83
Allowance for loan losses to
period-end loans 1.09 1.24 1.22 1.39 1.60 2.42 1.19
Net loan charge-offs (recoveries) to
average loans (0.01) 0.01 0.01 0.05 0.83 0.51 1.18
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated as noninterest expense divided by taxable-equivalent net interest
income plus noninterest income excluding net securities transactions.
(2) Calculated as noninterest expense less noninterest income excluding net
securities transactions, divided by taxable-equivalent net interest income.
N/A = Not Applicable
-18-
<PAGE> 27
INTRODUCTION
This Prospectus/Proxy Statement is being furnished to the holders of OMNI
Common Stock in connection with the solicitation of proxies by the Board of
Directors of OMNI for use at a Special Meeting of OMNI's shareholders and at
any adjournments or postponements thereof. This Prospectus/Proxy Statement
also serves as a prospectus for the KeyCorp Common Stock (including the Rights)
which will be issued upon the effectiveness of the Merger.
All information contained in this Prospectus/Proxy Statement relating to
KeyCorp has been furnished by KeyCorp, and OMNI is relying upon the accuracy of
such information. All information contained in this Prospectus/Proxy Statement
relating to OMNI has been furnished by OMNI, and KeyCorp is relying on the
accuracy of such information.
SPECIAL MEETING OF OMNI SHAREHOLDERS
GENERAL
The Special Meeting will be held in the basement conference room,
OMNIBANK Center, 3600 S. Yosemite, Denver, Colorado, on February 24, 1995,
commencing at 8:30 a.m., local time. The purpose of the Special Meeting is
to consider and vote upon the approval of the Merger Agreement and to conduct
any other business that may properly come before the Special Meeting or any
adjournments or postponements thereof.
RECORD DATE; VOTE REQUIRED
The close of business on January 20, 1995 has been fixed by the Board
of Directors of OMNI for the determination of holders of shares of OMNI Common
Stock entitled to notice of and to vote at the Special Meeting. At the close
of business on the Record Date, there were 16,491,244 shares of OMNI Common
Stock issued and outstanding held by 223 holders of record, with each share
entitled to one vote. Only OMNI shareholders of record on the Record Date will
be entitled to vote at the Special Meeting and are entitled to exercise
dissenters' rights. See "Rights of Dissenting Shareholders." The affirmative
vote of two-thirds of the voting power of OMNI Common Stock issued, outstanding
and entitled to vote at the Special Meeting is required to approve the Merger
Agreement. As a condition to KeyCorp's entering into the Merger Agreement,
OMNI's directors, executive officers and their affiliates beneficially owning
at least two-thirds of the outstanding shares of OMNI Common Stock were
required to execute and deliver Voting Agreements to KeyCorp pursuant to which
such persons have agreed to vote all of their shares of OMNI Common Stock in
favor of approval of the Merger Agreement. Such shareholders holding 11,273,588
shares of Common Stock representing 68.4% of the number of shares of OMNI
Common Stock entitled to vote at the Special Meeting have delivered executed
Voting Agreements. Thus it is anticipated that the Merger Agreement will be
approved at the Special Meeting. See "Voting Agreements."
-19-
<PAGE> 28
At January 27, 1995, 16,491,244 shares of OMNI Common Stock were
outstanding and entitled to vote, of which 11,532,069 shares (not including
presently exercisable options to purchase 370,000 shares of OMNI Common Stock),
or approximately 69.9%, were beneficially owned by directors and executive
officers of OMNI and their respective affiliates; however, these amounts
include certain shares of OMNI Common Stock as to which such executive
officers, directors and affiliates disclaim beneficial ownership. See the
notes to the tables appearing in "Principal Shareholders and Security Ownership
of Management of OMNI."
VOTING, SOLICITATION AND REVOCATION OF PROXIES
Proxy cards for use at the Special Meeting accompany this Prospectus/
Proxy Statement delivered to record holders of OMNI Common Stock. A holder of
OMNI Common Stock may use the proxy if he or she does not attend the Special
Meeting in person or wishes to have his or her shares voted by proxy even if he
or she does attend the Special Meeting. The proxy may be revoked in writing by
the person giving it at any time before it is exercised by submitting notice of
such revocation to the Secretary of OMNI, or by submitting a proxy having a
later date, or by such person appearing at the Special Meeting and electing to
vote in person. All proxies validly submitted and not revoked will be voted in
the manner specified therein. If no specification is made, the proxies will be
voted in favor of approval of the Merger Agreement.
Under Colorado law and the OMNI Bylaws, the presence, in person or by
proxy, of a majority of the outstanding shares of OMNI Common Stock is
necessary to constitute a quorum of shareholders to take action at the Special
Meeting. For these purposes, shares which are present, or represented by a
proxy, at the Special Meeting will be counted for quorum purposes regardless of
whether the holder of the shares or proxy abstains on the proposal relating to
the Merger Agreement ("abstentions") or whether a broker with discretionary
authority fails to exercise its discretionary authority to vote shares with
respect to the proposal relating to the Merger Agreement ("broker non-votes").
For voting purposes, only shares voted for the approval of the Merger Agreement
or shares represented by a proxy where the holder of the shares returns a
signed proxy card but fails to indicate voting instructions, and neither
abstentions nor broker non-votes, will be counted as voting in favor in
determining whether the Merger Agreement is approved by the holders of
two-thirds of the outstanding OMNI Common Stock. As a consequence, abstentions
and broker non-votes will have the same effect as votes against approval of the
Merger Agreement.
BECAUSE A PROPERLY EXECUTED PROXY CARD WHICH DOES NOT CONTAIN VOTING
INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED FOR APPROVAL OF THE MERGER
AGREEMENT, AN OMNI SHAREHOLDER WHO WISHES TO EXERCISE DISSENTERS' RIGHTS EITHER
MUST NOT SIGN AND RETURN HIS OR HER PROXY CARD OR, IF HE OR SHE DOES SIGN AND
RETURN THE PROXY CARD, MUST VOTE AGAINST OR ABSTAIN FROM VOTING ON THE APPROVAL
OF THE MERGER AGREEMENT.
-20-
<PAGE> 29
THE MERGER
This portion of the Prospectus/Proxy Statement describes various aspects
of the Merger. The following description does not purport to be complete and
is qualified in its entirety by this reference to the Merger Agreement attached
hereto as Appendix A, and incorporated herein by reference. ALL SHAREHOLDERS
OF OMNI ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
BACKGROUND OF THE MERGER
In December 1991, OMNI's senior management began to study the feasibility
of selling OMNI to, or merging OMNI with, a third party. OMNI retained Kidder
Peabody & Co. Incorporated, an investment banking firm ("Kidder"), to assist
it. OMNI's decision, after long and careful deliberation by its executive
management, was prompted by the current trend in Colorado concerning the
perceived market value for premier commercial banking organizations such as
OMNI and the desire to explore the feasibility of enhancing shareholders' value
and concomitantly providing better liquidity for OMNI's stock.
OMNI's management developed a list of potential suitors. In preparing
the list, management focused on large financial institutions with a potential
strategic interest in acquiring OMNI, the apparent ability to pay a substantial
price and publicly-traded, highly liquid stock. OMNI authorized Kidder to
contact the financial institutions on OMNI's list. In response, OMNI received
several preliminary expressions of interest during the spring of 1992, but none
were at a price, or on other terms, adequate in management's opinion to merit
further investigation.
From August 1992 to April 1994, OMNI's management periodically received
unsolicited expressions of interest from various parties interested in
exploring a business combination with OMNI or an acquisition of OMNI. However,
these expressions of interest were also on terms which management considered
inadequate and therefore they were not pursued.
OMNI's management perceived that a trend in commercial banking in
Colorado during the last several years apparently had been for locally owned
and managed institutions to become primary targets for out-of-state acquirers
in order for such acquirers to achieve a foothold in the Colorado banking
environment. OMNI's management believed that prices being paid by out-of-state
acquirers for premier banking organizations in Colorado had reached a point
that afforded an opportunity for a Colorado banking organization to maximize
its shareholders' value.
In July 1994, OMNI's management decided to actively solicit potential
acquirers, in part because it believed that the increased rate of consolidation
in the banking industry was producing a favorable market for the sale of local
banks such as OMNI. In order to facilitate due diligence by potential
acquirers, OMNI established an off-site data room in August of 1994. The data
room was organized with the goal of expediting due diligence by multiple
prospective acquirers without interfering with day-to-day operations at OMNI.
-21-
<PAGE> 30
In July and August 1994, management contacted executives affiliated with
four bank holding companies. These companies were considered the financial
institutions to have the greatest strategic interest in OMNI, thus potentially
warranting a premium price. OMNI's management held preliminary meetings and/or
conference calls with representatives from each of these companies. Following
these discussions and execution of appropriate confidentiality agreements, OMNI
invited all four bank holding companies to conduct a review of the due
diligence documents in the off-site data room. All four prospective acquirers
accepted the invitation and, from August 1 through August 19, 1994, visited
OMNI's data room in Denver, Colorado to review financial, operational and legal
documents.
In an effort to encourage an orderly and efficient bidding process, OMNI
distributed on August 15, 1994 a formal bid letter to all four companies
inviting them to submit binding proposals and setting forth the principal terms
to be addressed by the proposals. Also in August, 1994, OMNI engaged Hovde, an
investment banking firm and financial advisor based in Washington, D.C., to
assist OMNI in a potential transaction with KeyCorp, one of the prospective
acquirers, if such a transaction could be structured.
By August 22, 1994, OMNI had received either written or verbal
responses from all four financial institutions. KeyCorp submitted a written
offer at a specified price along with a draft merger agreement in substantially
a form that it was prepared to execute. One other financial institution
submitted a written offer at a specified price, and the other two prospective
bidders orally submitted expressions of interest. Based on the then current
stock prices of the bidders, KeyCorp had submitted the highest and most
definitive offer. Later that day, OMNI's Board of Directors reviewed the
status of these events. Based on the price, terms and credibility of the
KeyCorp offer, among other things, OMNI's Board concluded that negotiating
with KeyCorp was likely to result in the best possible offer for OMNI and its
shareholders and, accordingly, decided to focus its resources on negotiating
exclusively with KeyCorp as long as such negotiations continued to appear
promising.
Over the course of the next several days, OMNI and KeyCorp engaged in
lengthy and intensive negotiations regarding the specific terms for an
acceptable form of a definitive merger agreement.
The OMNI Board of Directors reconvened in a special meeting on August 27,
1994 to consider a substantially completed version of the merger agreement
negotiated with KeyCorp. At the meeting, management reviewed for the Board the
process used to solicit indications of interest from potential acquirers.
OMNI's management conducted a detailed review and analysis, based in part on
information compiled by Hovde, of, among other things, certain key financial
data on the four bidders (including their current stock prices, market values,
earnings per share, return on equity, price-earnings ratios, and dividends per
share). Management expressed the view that the KeyCorp offer represented a
premium over the other proposals as well as a substantial premium over OMNI's
book value per share and that, having gone through the bidding process, OMNI
was not likely to secure a higher price for its stock. Management also
informed the Board that, shortly before the board meeting, Hovde had orally
advised management that Hovde was prepared to render a fairness opinion in
connection with a potential merger with KeyCorp.
-22-
<PAGE> 31
The Board then reviewed in detail the material provisions of the merger
agreement negotiated with KeyCorp. The OMNI Board of Directors unanimously
voted to adopt the Merger Agreement and approve the Merger and determined to
recommend to the OMNI shareholders that they approve the Merger Agreement,
subject to the resolution to management's satisfaction of certain issues,
including, among other things, issues relating to the tax-free status of
the merger and the sale of Merchants Mortgage.
Over the next several days, OMNI and KeyCorp resolved these and other
issues during further lengthy and intensive negotiations. As a result, OMNI
and KeyCorp executed the Merger Agreement on August 31, 1994.
In reaching its conclusion to adopt the Merger Agreement, OMNI's Board of
Directors considered a number of factors without assigning any specific weight
to any particular single factor. The following factors were considered by
OMNI's Board of Directors to be significant reasons favoring approval of the
proposed Merger:
(i) the market value of the shares of KeyCorp Common Stock to be received in
the Merger as compared to the book value and historical sales prices of
the OMNI Common Stock to be exchanged in the Merger;
(ii) the financial condition, results of operations and prospects for KeyCorp;
(iii) the market liquidity of KeyCorp Common Stock compared to the relative
illiquidity of OMNI Common Stock;
(iv) the overall terms of the Merger Agreement, including the representations,
warranties, conditions and covenants contained therein;
(v) the expected tax-free nature of the Merger for the shareholders of OMNI;
and
(vi) the historical cash dividends paid on the OMNI Common Stock and KeyCorp
Common Stock, and the significant increase in dividends which would
probably result to OMNI shareholders from the Merger.
On January 16, 1994, prior to the initial filing of the Registration
Statement on Form S-4 with the Commission, the OMNI Board of Directors
reconvened for another special meeting to discuss KeyCorp's recent performance
and the approximately 21% decline in the market price of KeyCorp's Common Stock
since the execution of the Merger Agreement. At the meeting, Hovde delivered
its written opinion that, as of August 27, 1994 and as of the date of the
meeting, the Merger Consideration was fair to OMNI's shareholders from a
financial point of view. Hovde also gave a detailed presentation of the
analyses it performed in connection with the preparation of its opinion. See
"--Opinion of Financial Advisor." Robert W. Gillespie, KeyCorp's President and
Chief Operating Officer, and James W. Wert, a Senior Executive Vice President
of KeyCorp and its Chief Financial Officer, were present for part of the
meeting to report on Keycorp's recent financial performance and future
prospects and responded to questions from the OMNI directors. The Board of
Directors also compared the KeyCorp offer to the then current value of the
other proposals submitted in August 1994 taking into account the decline in
the market value of the stock of all bidders since execution of the Merger
Agreement, notwithstanding the preliminary nature of the other proposals and
the possibility that the other bidders may no longer have an interest in OMNI.
Based on the foregoing, the Board of Directors reaffirmed its recommendation
that the OMNI shareholders approve the Merger Agreement.
OMNI'S REASONS FOR THE MERGER
The Board of Directors of OMNI believes that the Merger is in the best
interests of OMNI and its shareholders. With respect to those shareholders who
desire to liquidate all or a portion of their investment in OMNI, the Board of
Directors believes that, based upon the exchange ratio of KeyCorp Common Stock
for OMNI Common Stock, such shareholders have the opportunity to realize a
premium over historical sales prices, the other offers received by OMNI and
OMNI's book value per share. They will also have the significant added
advantage of the market liquidity of the KeyCorp Common Stock.
With respect to those shareholders who desire to retain all or a portion
of their investment in the banking industry, the Merger is expected to qualify
as a tax-free reorganization and thus allow the
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conversion from an investment in OMNI to an investment in KeyCorp without
incurring current income tax liability. In addition, the Board of Directors of
OMNI believes that (i) current economic and market conditions favor
consolidation within the banking industry, particularly for local banks such as
OMNI; (ii) the business of the two companies complement each other because of
their limited geographic overlap in the Denver metropolitan market; (iii)
KeyCorp's national reputation will enhance OMNI's competitive position in the
Denver metropolitan market; (iv) based on the historical dividends paid on the
OMNI Common Stock and KeyCorp Common Stock, the merger will result in a
significant increase in cash dividends to the OMNI shareholders; and (v)
KeyCorp's significantly greater managerial, financial and other business
resources will substantially enhance OMNI's growth opportunities by (a)
enhancing OMNI's existing services with increased lending limits and additional
capital and (b) expanding OMNI's product line with new products such as home
mortgage lending, cash management services, investment and trust services,
credit card products and an ATM network.
Based upon a closing price of $32.875 per share of KeyCorp Common Stock
on August 31, 1994 (the date the Merger Agreement was executed), the value of
.2452 of a share of KeyCorp Common Stock to be received for each share of OMNI
Common Stock in the Merger would have been $8.06. This is equal to 2.28 times
the book value of each share of OMNI Common Stock as of September 30, 1994, and
is equal to 15.8 times the earnings per share of OMNI Common Stock for the year
ended December 31, 1993. Shareholders are advised to obtain current quotations
for the KeyCorp Common Stock.
KEYCORP'S REASONS FOR THE MERGER
In reaching its determination that the Merger and the Merger Agreement
are fair to, and in the best interest of, KeyCorp and its shareholders, KeyCorp
management considered a number of factors including the following:
(a) A variety of factors affecting and relating to the overall
strategic focus of KeyCorp, including KeyCorp's desire to
expand Key Bank of Colorado's presence in the greater Denver,
Colorado area;
(b) KeyCorp management's due diligence review of OMNI including the
business, operations, earnings, asset quality and financial
condition of OMNI on a historical, prospective and pro forma
basis, and the enhanced opportunities through Key Bank of
Colorado for both operating efficiencies and synergies that are
expected to result from the Merger, the enhanced opportunities
for growth that the Merger makes possible, and the respective
contributions the parties would bring to a combined
institution, recognizing that Key Bank of Colorado presently
conducts a banking business in the State of Colorado;
(c) The review by KeyCorp of the provisions of the Merger Agreement;
(d) The expectation that the Merger will be tax-free for federal
income tax purposes to KeyCorp (see "-- Certain Federal Income
Tax Considerations" and "-- Accounting Treatment"); and
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(e) The current and prospective economic environment facing
financial institutions, including KeyCorp.
KeyCorp management did not assign any specific or relative weights to the
factors in its consideration. The Board of KeyCorp concurred with management's
analysis and recommendation regarding the Merger and ratified KeyCorp's
adoption of the Merger Agreement.
OPINION OF FINANCIAL ADVISOR
OMNI retained Hovde to act as OMNI's financial advisor in connection
with the Merger and requested that Hovde render its opinion with respect to the
fairness, from a financial point of view, to the shareholders of OMNI of the
Exchange Ratio of .2452, as such Exchange Ratio may be adjusted pursuant to the
Merger Agreement (the "Merger Consideration") .
OMNI selected Hovde to serve as its financial advisor based upon,
among other things, Hovde's expertise in the valuation of businesses and their
securities in connection with mergers and acquisitions of financial
institutions, including commercial banks. As part of its services as financial
advisor in connection with the Merger, Hovde participated in direct discussions
with KeyCorp, provided comparative information regarding similar transactions,
as well as provided general advisory services, but was not asked to, and did
not, recommend the specific ratio of exchange between KeyCorp and OMNI common
stocks.
Hovde has delivered to the Board of Directors of OMNI its opinion that,
based upon and subject to the various considerations set forth in its written
opinion dated January 16, 1995, the Merger Consideration was fair from a
financial point of view to the shareholders of OMNI as of such date and as of
August 27, 1994. In addition, Hovde has delivered a written opinion to OMNI's
Board of Directors stating that, on and as of the date of this Prospectus/Proxy
Statement, the consideration offered in the Merger is fair, from a financial
point of view, to the holders of OMNI Common Stock. In requesting Hovde's
advice and opinion, no limitations were imposed by OMNI upon Hovde with respect
to the investigations made or procedures followed by it in rendering its
opinion.
The full text of the opinions of Hovde which describe the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken, are attached hereto as Appendix D. Shareholders of OMNI should read
the opinions in their entirety.
HOVDE'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL
POINT OF VIEW, OF THE MERGER CONSIDERATION, AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER OF OMNI AS TO HOW SUCH SHAREHOLDER SHOULD
VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF HOVDE SET FORTH IN
THIS PROSPECTUS/PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF SUCH OPINION.
The following is a brief summary of the analyses performed by Hovde in
connection with its fairness opinion:
During the course of its engagement, and as a basis for arriving at its
opinion, Hovde reviewed and analyzed material bearing upon the financial and
operating condition of KeyCorp and OMNI and material prepared in connection
with the Merger, including, among other things, the following: (i) the Merger
Agreement, as well as the Letter Agreements between KeyCorp and OMNI regarding
the sale of Merchants Mortgage; (ii) certain publicly available information
concerning KeyCorp and internal and other information regarding OMNI, including
the consolidated financial statements of KeyCorp and OMNI for each of the three
years ended December 31, 1993 and subsequent periods ended June 30, 1994 and
September 30, 1994, as well as any subsequent disclosure documents issued by
KeyCorp, such as press releases and documents filed with the Commission on Form
8-K; (iii) the nature and terms of recent acquisition and merger transactions
involving banking institutions and their holding companies that Hovde
considered reasonably similar to OMNI in size, financial character, operating
character, historical performance and geographic market; and (iv) historical
and current market data for the KeyCorp Common Stock, including the liquidity
thereof and historical dividend stream attendant thereto, and financial and
other information provided to Hovde by management of KeyCorp and OMNI. In
addition, Hovde discussed with members of senior management of OMNI the future
prospects of OMNI. Hovde also evaluated the pro forma earnings, book value,
tangible book value and historical dividend stream attributable to the KeyCorp
Common Stock to be exchanged for each share of OMNI Common Stock in the Merger.
Hovde also took into account its experience in other transactions, as well as
its knowledge of the commercial banking industry and its general experience in
securities valuations.
In rendering its opinion, Hovde assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations provided to it by KeyCorp and OMNI. Hovde did
not conduct a physical inspection of any of the properties or assets of KeyCorp
or OMNI, and has not made any independent evaluation or appraisals of any
properties, assets or liabilities of KeyCorp or OMNI. Hovde assumed and relied
upon the accuracy and completeness of the publicly available and other
financial and other information provided to it, relied upon the representations
and warranties of KeyCorp and OMNI made pursuant to the Merger Agreement, and
did not independently attempt to verify any of such information. In connection
with its opinion, Hovde performed various analyses with respect to KeyCorp and
OMNI. The following is a brief summary of such analyses.
ANALYSIS OF KEYCORP OFFER. Hovde reviewed the value of the
consideration to be received by OMNI shareholders based upon: the 20-day
average closing price for KeyCorp Common Stock for the 20 days preceding and
including August 26, 1994 (the last business day prior to the date of the OMNI
Board Meeting at which the Merger Agreement was approved), which was $32.656
(the "Initial Average Price") and the 20-day average closing price for KeyCorp
Common Stock over the 20 days preceding and including January 13, 1995, which
was $25.25 (the "Current Average Price"). Hovde calculated that KeyCorp's offer
equated to a multiple of 2.31 times OMNI's book value at June 30, 1994 based
upon the Initial Average Price, and 1.81 times OMNI's book value at September
30, 1994 based upon the Current Average Price. Hovde also calculated that
KeyCorp's offer equated to a multiple of 2.41 times OMNI's tangible book value
at June 30, 1994 based upon the Initial Average Price, and 1.88 times OMNI's
tangible book value at September 30, 1994 based upon the Current Average Price.
In addition, Hovde calculated that KeyCorp's offer equated to a
multiple of 15.1 times OMNI'S stated earnings for the 12 months ended June 30,
1994 based upon the Initial Average Price and 11.9 times OMNI's earnings for
the 12 months ended September 30, 1994 based upon the Current Average Price.
Further, Hovde calculated that the KeyCorp offer represented a premium to
OMNI's core deposits at June 30, 1994 (calculated by subtracting the tangible
book value for each company from the total consideration payable in the
transaction and dividing the result by the total core deposits of the selling
institution) of 20.1% based upon the Initial Average Price, and 13.4% of OMNI's
core deposits at September 30, 1994 based upon the Current Average Price.
ANALYSIS OF SELECTED MERGER/ACQUISITION TRANSACTIONS. Hovde reviewed
certain financial data relating to selected recently completed and pending bank
acquisition transactions (including those transactions announced or completed
since July 1, 1994) involving institutions throughout the United States and,
also, acquisition transactions involving selling institutions in certain
western states, including Colorado, New Mexico and Utah (the "Western States").
There were a total of 158 completed and 158 pending transactions nationally,
including 16 completed and 13 pending transactions in the Western States.
However, pricing information was only available with respect to 119 completed
and 105 pending transactions, including 5 recently completed and 11 pending
Western States transactions. In each transaction, Hovde reviewed the price as
a multiple of book value, tangible book value, earnings for the last 12
reported months, and as a premium to the core deposits of each company.
In regard to the 119 completed transactions nationwide, the median
price to book multiple was 1.59 times, the median price to tangible book
multiple was also 1.59 times, the median price to earnings multiple was 13.2
times, and the median premium to core deposits was 6.6%. The mean price to
book, price to tangible book, price to earnings and premium to core deposit
ratios were 1.63 times, 1.66 times, 14.0 times, and 7.8%, respectively. In
reviewing the five completed transactions with total consideration payable in
excess of $100 million, the following ratios were shown: median and mean price
to book value - 2.28 and 2.06 times; median and mean price to tangible book
value - 2.36 and 2.28 times; median and mean price to earnings - 14.8 and 16.1
times; and median and mean premium to core deposits - 12.1 and 11.1 %.
With respect to the 105 pending transactions nationwide for which
pricing information was available, the median price to book multiple was 1.79
times, the median price to tangible book multiple was 1.82 times, the median
price to earnings multiple was 14.8 times, and the median premium to core
deposits was 9.5%. The mean price to book, price to tangible book, price to
earnings and premium to core deposits ratios were 1.78 times, 1.84 times, 15.3
times and 9.3%, respectively. In reviewing the 10 pending transactions with
total consideration payable in excess of $100 million, the following ratios
were shown: median and mean price to book value - 1.94 and 1.83 times; median
and mean price to tangible book - 2.03 and 2.01 times; median and mean price to
earnings - 16.0 and 15.8 times; and mean and median premium to core deposits -
11.2 and 10.1 %.
In regard to the five recently completed Western States transactions
for which pricing data was available, the median price to book multiple was 1.68
times, the median price to tangible book multiple was also 1.68 times, the
median price to earnings multiple was 10.0 times, and the median premium to
core deposits was 5.8%. The mean price to book multiple was 1.80 times, the
mean price to tangible book multiple was also 1.81 times, the mean price to
earnings multiple was 9.7 times, and the mean premium to core deposits was
5.7%. With respect to the 11 pending Western States transactions, the median
price to book multiple was 2.15 times, the median price to tangible book
multiple was 2.16 times, the median price to earnings multiple was 14.9 times,
and the median premium to core deposits was 8.3%. Mean price to book, price to
tangible book, price to earnings and premium to core deposits ratios were 2.21
times, 2.28 times, 14.4 times and 9.2%, respectively. With the exception of
OMNI's pending transaction with KeyCorp, there were no Western States
transactions with aggregate consideration over $100 million.
It should be noted that price/earnings multiples lower than eight and
greater than 25, and premium to core deposits percentages less than one were
excluded in the calculation of the median and means.
No company or transaction used in the above analysis as a comparison
is identical to OMNI, KeyCorp or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading value of the companies to which they are being
compared.
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COMPARISON OF KEYCORP OFFER TO SELECTED MERGER/ACQUISITION
TRANSACTIONS. The KeyCorp offer equates to 1.81 times OMNI's book value at
September 30, 1994 based upon the Current Average Price of KeyCorp Common
Stock. This compares favorably to the medians and means of the comparative
groups discussed above with the following exceptions: it is below the 2.28
median and 2.06 mean book value multiples for completed bank acquisitions
nationwide with total consideration greater than $100 million; the median and
mean book value multiples for pending bank acquisitions involving total
consideration greater than $100 million; and the median and mean book value
multiples for pending Western States bank acquisitions. Based upon the Initial
Average Price, the KeyCorp offer equates to 2.31 times OMNI's book value at
June 30, 1994 and compares favorably to all of the median and mean price to
book multiples of the comparative groups, and is comparable to the 2.28 median
multiple for completed bank acquisitions nationwide involving consideration in
excess of $100 million. It should be noted that pricing multiples for pending
transactions are based upon the transaction value at announcement, and do not
reflect declines, or increases, in the value of the transaction since that
time. On a price to tangible book basis, the KeyCorp offer compares similarly
to the comparative groups as on a price to book basis.
Based upon the Current Average Price, the KeyCorp offer compares
favorably to the median and mean multiples to the last 12 months earnings
for recently completed Western States transactions of 10.0 times and 9.7
times, but is below the other comparative group median and mean multiples to
earnings, which ranged from 13.2 times to 16.1 times. Based upon the Initial
Average Price, the KeyCorp offer, which represents 15.1 times OMNI's 12
months earnings for the period ended June 30, 1994, was comparable to or in
excess of all of the median and mean ratios for the comparative groups with the
exception of: the median for completed bank acquisitions nationwide involving
consideration in excess of $100 million, which was 16.0 times; and the means
for all pending acquisitions nationwide, pending and completed acquisitions
nationwide involving consideration in excess of $100 million, which were 15.3
times, 15.8 times and 16.1 times, respectively.
The KeyCorp offer, which represented a premium to core deposits of
13.4% based upon the Current Average Price and 20.1% based upon the Initial
Average Price, compares favorably to all of the median and mean percentages
of premium to deposits, which ranged from 5.7% to 12.1%
ACCRETION/DILUTION AND CONTRIBUTION ANALYSIS. Hovde reviewed the
Exchange Ratio in the KeyCorp offer to analyze per share accretion or dilution
expected for each OMNI shareholder, assuming such ratio is not adjusted as
provided in the Merger Agreement. Based upon the median of analyst estimates,
Hovde estimated that earnings per share ("EPS") attributable to each share of
KeyCorp Common Stock in 1995 would be approximately $3.77. After consultation
with senior management of OMNI, $0.54 per share was considered a reasonable
estimation for OMNI's 1995 EPS. Based upon the Exchange Ratio of .2452 and the
$3.77 per share median analyst estimates for KeyCorp's 1995 earnings, each
share of OMNI Common Stock would be exchanged for shares of KeyCorp Common
Stock with expected earnings attributable to such shares of $0.92, or an
increase of approximately 70.0%. In addition, Hovde determined that the
KeyCorp offer would result in an increase in book value attributable to each
share of OMNI Common Stock from $3.54 to $4.57, or approximately 29.1 %, based
upon the book value OMNI and KeyCorp Common Stock at September 30, 1994, and
increase from $3.47 to $4.46, or approximately 28.5% based upon the book value
of OMNI and KeyCorp Common Stock at June 30, 1994. In addition, based upon the
.2452 Exchange Ratio, and KeyCorp's and OMNI's dividend payments of $1.28 and
$0.175 for the 12 months ended September 30, 1994, respectively, the KeyCorp
offer would result in dividend per share accretion of approximately 77.0% for
each OMNI Common Share. Also based upon the .2452 Exchange Ratio, and
KeyCorp's and OMNI's dividend payments of $1.28 and $0.195 for the 12
months ended June 30, 1994, the KeyCorp offer would result in dividend per
share accretion of approximately 61.0%.
Hovde also compared the KeyCorp offer to the values as of January 16,
1995 of the other proposals submitted in August 1994 taking into account the
decline in the market price of the stock of all of the bidders since the
execution of the Merger Agreement. Hovde considered the relatively preliminary
nature of the other proposals, as compared with the firm and definitive nature
of the KeyCorp offer, and concluded that, even with the decline in price of
KeyCorp Common Stock, the KeyCorp offer constituted the best offer.
For purposes of its analyses, Hovde assumed that the Exchange Ratio
would not be adjusted and remained fixed at .2452. However, the Exchange Ratio
is subject to adjustment under certain circumstances as described elsewhere
herein, including an increase in the event that the Average Closing Price of
the KeyCorp Common Stock is less than $26.10 but at least $24.47 and OMNI does
not exercise its right to terminate the Merger Agreement. See "--Adjustment to
Increase Exchange Ratio," "--Sale of Merchants Mortgage" and "--Environmental
Matters."
Based upon the foregoing analyses and other investigations and
assumptions set forth in the opinion, without giving specific weightings to any
one factor or comparison, Hovde determined that the KeyCorp offer was fair from
a financial point of view to the shareholders of OMNI.
THE SUMMARY SET FORTH ABOVE DOES NOT PURPORT TO BE A COMPLETE
DESCRIPTION OF THE ANALYSES PERFORMED OR FACTORS CONSIDERED BY HOVDE. THE
PREPARATION OF A FAIRNESS OPINION INVOLVES VARIOUS DETERMINATIONS AS TO THE
MOST APPROPRIATE AND RELEVANT METHODS OF FINANCIAL ANALYSES AND THE APPLICATION
OF THOSE METHODS TO THE PARTICULAR CIRCUMSTANCES, AND, THEREFORE, SUCH AN
OPINION IS NOT READILY SUSCEPTIBLE TO SUMMARY DESCRIPTION. FURTHERMORE, IN
ARRIVING AT ITS OPINION, HOVDE DID NOT ATTRIBUTE ANY PARTICULAR WEIGHT TO ANY
ANALYSIS OR FACTOR CONSIDERED BY IT, BUT RATHER MADE QUALITATIVE JUDGMENTS AS
TO THE SIGNIFICANCE AND RELEVANCE OF EACH ANALYSIS AND FACTOR. ACCORDINGLY,
HOVDE BELIEVES THAT ITS ANALYSES AND THE SUMMARY SET FORTH ABOVE MUST BE
CONSIDERED AS A WHOLE AND THAT SELECTING PORTIONS OF ITS ANALYSES, WITHOUT
CONSIDERING ALL FACTORS AND ANALYSES, COULD CREATE AN INCOMPLETE VIEW OF THE
PROCESS HOVDE UNDERTOOK IN RENDERING ITS FAIRNESS OPINION. IN PERFORMING ITS
ANALYSES, HOVDE MADE NUMEROUS ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE,
GENERAL BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS, MANY OF WHICH ARE
BEYOND THE CONTROL OF KEYCORP OR OMNI. THE ANALYSES PERFORMED BY HOVDE ARE NOT
NECESSARILY INDICATIVE OF ACTUAL VALUES OR ACTUAL FUTURE RESULTS, WHICH MAY BE
SIGNIFICANTLY MORE OR LESS FAVORABLE THAN SUGGESTED BY SUCH ANALYSES.
Pursuant to a Letter Agreement dated December 29, 1994 between OMNI
and Hovde, OMNI has paid Hovde $50,000 in connection with the Merger Agreement
and has agreed to pay Hovde an additional fee of $600,000 upon consummation of
the Merger. In addition, OMNI agreed to indemnify Hovde and its directors,
employees and agents against certain claims, damages, losses and liabilities,
including all reasonably incurred legal and other expenses, to which it may
become subject in connection with its engagement by OMNI.
RECOMMENDATION OF OMNI'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF OMNI HAS UNANIMOUSLY ADOPTED THE MERGER
AGREEMENT AND APPROVED THE MERGER AND RECOMMENDS APPROVAL OF THE MERGER
AGREEMENT BY THE SHAREHOLDERS OF OMNI.
GENERAL TERMS
The Merger Agreement provides that, subject to approval of the Merger
Agreement by the shareholders of OMNI, receipt of all necessary regulatory
approvals and expiration of all applicable statutory waiting periods, and
satisfaction, or in certain cases waiver, of certain other conditions, OMNI
will be merged with and into KeyCorp. The Merger will occur as promptly as
practicable after the date upon which all of the conditions to the Merger are
satisfied or waived or at such other time and date as OMNI and KeyCorp may
agree. OMNI and KeyCorp, however, currently anticipate that the Merger will be
completed during late February 1995, but, in any event prior to June 30, 1995.
Upon consummation of the Merger, the separate corporate existence of OMNI will
cease, KeyCorp will be the surviving corporation, and the shareholders of OMNI
will become shareholders of KeyCorp. See "-- Effective Time." Following the
consummation of the Merger, KeyCorp plans to effect the merger of the OMNI
Banks into Key Bank of Colorado.
The Board of Directors and executive officers of KeyCorp in office
immediately prior to the Effective Time will be the directors and officers,
respectively, of KeyCorp after consummation of the Merger.
CONVERSION OF OMNI COMMON STOCK
At the Effective Time, each share of OMNI Common Stock then issued and
outstanding (excluding shares held by KeyCorp, or its subsidiaries, other than
shares held in a fiduciary capacity
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or in satisfaction of a debt previously contracted or shares which have not
been voted in favor of the approval of the Merger Agreement and with respect to
which dissenters' rights have been properly perfected) will cease to be
outstanding and will be converted into .2452 shares of KeyCorp Common Stock;
provided, however, that such Exchange Ratio may be subject to adjustment in
certain circumstances as fully described elsewhere herein. See "-- Adjustment
to Increase Exchange Ratio," "-- Sale of Merchants Mortgage" and
"-- Environmental Matters." Each share of KeyCorp Common Stock issued to OMNI
shareholders in the Merger will be accompanied by one Right to be evidenced by
certificates for KeyCorp Common Stock under the Rights Agreement. Each Right
represents the right to purchase one share of KeyCorp Common Stock upon the
terms and conditions set forth in the Rights Agreement. See "Comparison of
Certain Rights of Holders of Capital Stock of KeyCorp and OMNI."
No fractional shares of KeyCorp Common Stock will be issued in the
Merger. In lieu of issuing fractional shares, each holder of OMNI Common Stock
who otherwise would have been entitled to a fraction of a share of KeyCorp
Common Stock, upon surrender of his or her certificates representing shares of
OMNI Common Stock, will be paid the cash value (without interest) of such
fraction, which will be equal to such fractional proportion of the average of
the high and low sales price of shares of KeyCorp Common Stock as reported on
the NYSE on the last trading day immediately preceding the Closing of the
Merger. See "-- Certain Federal Income Tax Consequences."
No conversion of OMNI Common Stock into KeyCorp Common Stock shall be
made with respect to any share of OMNI Common Stock as to which a shareholder
of OMNI has properly elected to exercise any rights to dissent and obtain
payment of the fair value of his or her shares under the Colorado Business
Corporation Act (the "Colorado Act"). See "Rights of Dissenting Shareholders."
EFFECTS ON KEYCORP SHAREHOLDERS
At the Effective Time, each share of KeyCorp Common Stock then issued
and outstanding will remain outstanding and will continue to be accompanied by
one Right under the Rights Agreement.
CONVERSION OF OMNI OPTIONS
At the Effective Time, KeyCorp will issue a new option to purchase
KeyCorp Common Stock in substitution for each option to purchase shares of OMNI
Common Stock ("OMNI Option") that is outstanding and exercisable immediately
prior to the Effective Time on substantially the same terms and conditions as
set forth in the KeyCorp Stock Option Agreement form which is Exhibit B to the
Merger Agreement attached hereto as Appendix A, except that such option will be
immediately exercisable upon grant. Each option to purchase KeyCorp Common
Stock issued in substitution for an OMNI Option will represent an option to
purchase the number of shares of KeyCorp Common Stock at such exercise price as
is calculated as follows: (a) the number of shares of KeyCorp Common Stock to
be subject to the new option will be equal to (i) the number of shares of OMNI
Common Stock subject to the original OMNI Option multiplied by (ii) the
Exchange Ratio, rounded up, if necessary, to the nearest share, and (b) the
exercise price per share of KeyCorp Common Stock
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under the new option will be equal to (i) the exercise price per share of OMNI
Common Stock under the original OMNI Option divided by (ii) the Exchange Ratio,
rounded if necessary, to the nearest cent.
SURRENDER OF CERTIFICATES
MANNER OF EXCHANGE -- CERTIFICATES. KeyCorp and OMNI have selected
Society National Bank as the exchange agent (the "Exchange Agent") to effect
the exchange of certificates representing shares of OMNI Common Stock in
connection with the Merger. Promptly after the Effective Time, the Exchange
Agent will mail to each holder of record of certificates that immediately prior
to the Effective Time represented outstanding shares of OMNI Common Stock
(other than holders of OMNI Common Stock who have properly demanded and
perfected dissenters' rights under the Colorado Act) a notice advising the
holder of the effectiveness of the Merger accompanied by a transmittal form
(the "Certificate Transmittal Form"). The Certificate Transmittal Form will
contain instructions with respect to the surrender of certificates representing
OMNI Common Stock to be exchanged for shares of KeyCorp Common Stock (together
with cash in lieu of any fractional share) and will specify that delivery will
be effected, and risk of loss and title to such certificates will pass, only
upon delivery of the certificates to the Exchange Agent. Upon surrender to the
Exchange Agent, in accordance with the instructions contained in the
Certificate Transmittal Form, of certificates representing shares of OMNI
Common Stock, the holder thereof will be entitled to receive in exchange
therefor a certificate(s) representing the appropriate number of shares of
KeyCorp Common Stock to which such holder is entitled and cash in lieu of any
fractional share of KeyCorp Common Stock.
OMNI STOCK CERTIFICATES SHOULD NOT BE FORWARDED TO THE EXCHANGE AGENT
UNTIL THE SHAREHOLDER HAS RECEIVED A CERTIFICATE TRANSMITTAL FORM AND SHOULD
NOT BE RETURNED WITH THE ENCLOSED PROXY.
RIGHTS OF HOLDERS OF OMNI STOCK CERTIFICATES PRIOR TO SURRENDER. After
the Effective Time, there will be no transfers of shares of OMNI Common Stock
on OMNI's stock transfer records. If certificates representing shares of OMNI
Common Stock are presented for transfer after the Effective Time, they will be
canceled and exchanged for the shares of KeyCorp Common Stock and a check for
the amount due in lieu of fractional shares, if any, deliverable in respect
thereof.
Prior to the time certificates representing shares of OMNI Common Stock
are surrendered, no dividend or other distribution payable to holders of record
of KeyCorp Common Stock on any date on or after the Effective Time will be paid
to any former shareholder of OMNI until such holder physically surrenders for
exchange his or her certificates representing shares of OMNI Common Stock and
such holder's other rights as a shareholder of KeyCorp, including his or her
right to vote, shall be suspended at the Effective Time until such holder
physically surrenders his or her certificates representing OMNI Common Stock
for exchange. Upon surrender by any such shareholder of his or her
certificates representing OMNI Common Stock to the Exchange Agent, the former
OMNI shareholder will receive certificates representing the shares of KeyCorp
Common Stock into which such shareholder's shares of OMNI Common Stock were
converted, will be paid the dividends or other distributions (without interest)
that have theretofore become payable with respect to such shares of KeyCorp
Common Stock since the Effective Time and, if suspended, such shareholder's
other rights as a shareholder will thereupon be restored.
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LOST CERTIFICATES. Any OMNI shareholder who has a lost, stolen or
destroyed certificate for any of his or her shares of OMNI Common Stock should
execute an affidavit to that effect, and, if required by KeyCorp, post a bond
as indemnity against any possible claims with respect to such certificate.
Upon receipt of the affidavit, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed certificate the appropriate shares of KeyCorp
Common Stock, a check in lieu of fractional shares, if any, and any unpaid
dividends and distributions on the KeyCorp Common Stock deliverable in respect
of each share of OMNI Common Stock represented by such certificate as
determined by the Merger Agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
The Merger Agreement contains certain restrictions on the conduct of the
business of OMNI pending the consummation of the Merger. In particular, unless
the prior written consent of KeyCorp is obtained, prior to the Effective Time,
the Merger Agreement requires OMNI and its subsidiaries to (a) conduct their
respective businesses in the ordinary course consistent with past practices,
and (b) preserve intact their respective business organizations and assets and
maintain their rights and franchises.
The Merger Agreement also prohibits OMNI and its subsidiaries from
engaging in certain activities prior to the Effective Time without the prior
written consent of KeyCorp (which consent will be deemed to have been given
after 10 business days or, in the case of certain loans, advances or other
extensions of credit, which consent will be deemed to have been given after 72
hours after delivery by facsimile of the appropriate documentation).
Specifically, without such consent, neither OMNI nor its subsidiaries, may:
(a) other than in the ordinary course of business consistent with past
practice, (i) incur any indebtedness, (ii) endorse or otherwise as an
accommodation become responsible for the obligations of any other
individual or entity, or (iii) make any loan, advance or other extension
of new or additional credit in excess of $500,000 (even if made in the
ordinary course of business);
(b) adjust, split, combine or reclassify any capital stock or other
securities;
(c) enter into any contract dealing with the issuance, purchase or voting of
shares of its capital stock or any other securities; redeem, purchase or
encumber any shares of its capital stock or other securities; grant any
rights to acquire any shares of its capital stock or other securities,
or issue any additional shares of its capital stock or other securities
(other than upon the exercise of any currently outstanding stock
options);
(d) make, declare or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) on any shares of its
capital stock except for regular quarterly dividends not to exceed
$0.025 per share, a special dividend to be paid in the fourth quarter of
1994 not to exceed in the aggregate 15% of OMNI's reasonably estimated
1994 consolidated net income, a special dividend to be paid in the first
quarter of 1995 not to exceed in the aggregate the amount by which 20%
of OMNI's audited consolidated net income exceeds the
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amount of a special dividend paid in the fourth quarter of 1994, and
dividends paid by any of the wholly owned subsidiaries of OMNI to OMNI
or any of its wholly owned subsidiaries; provided, however, that no
regular quarterly dividend will be declared or paid for the quarter in
which the Effective Time occurs if the shareholders of OMNI will be
holders of record of KeyCorp Common Stock on or before the record date
for the KeyCorp Common Stock dividend to its shareholders for that
quarter;
(e) sell, transfer, mortgage, encumber or otherwise dispose of any of its
material properties or assets to anyone other than a wholly owned
subsidiary of OMNI, or cancel, release or assign any indebtedness of any
such person or any claims held by any such person except in the ordinary
course of business consistent with past practice or pursuant to contract
in force as of August 31, 1994;
(f) other than in the ordinary course of business consistent with past
practice, make any material investment either by purchase of securities,
contributions to capital, property transfers or purchase of any property
or assets of any other individual or entity other than a wholly owned
subsidiary of OMNI, provided that OMNI will make no material acquisition
of equity securities or business operations of any such entity without
KeyCorp's prior consent;
(g) other than in the ordinary course of business consistent with past
practice, enter into or terminate any material contract or agreement or
make any change in any of its material leases or contracts, other than
renewals without material adverse changes of terms, provided, however,
that OMNI obtains the consent of KeyCorp as to the terms of any such
renewals;
(h) other than pursuant to the Merger Agreement, increase in any manner the
compensation or fringe benefits of or pay any pension or retirement
allowance not required by any existing plan or agreement to any of its
present or former directors, executive officers or other employees, or
grant any severance or termination pay (other than pursuant to written
agreements or policies of OMNI in effect on August 31, 1994), or, except
as required by applicable law or regulation or in accordance with
existing policies of OMNI become a party to, amend, renew, modify or
commit itself to any pension, retirement, profit-sharing, severance,
termination, welfare benefit, employment, deferred compensation,
non-competition, bonus, stock option, parachute, consulting or other
employee benefit agreements, trusts, plans, funds or other arrangements
with or for the benefit or welfare of any present or former director,
executive officer or other employee;
(i) make any payment or contribution with respect to any employee benefit
plan except for the 1994 contributions to the OMNI Employee Profit
Sharing Plan in an amount equal to approximately 5% of OMNI's reasonably
anticipated consolidated net income for 1994, or create or amend
any employee benefit plan except to the extent that an amendment is
required to maintain qualification under the Code, or to comply with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(j) settle any claim, action or proceeding for material money damages or
restrictions upon the operations of OMNI or any of its subsidiaries;
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(k) except as contemplated by the Merger Agreement, modify in any material
respect the manner in which it and its subsidiaries have conducted and
accounted for their business;
(l) amend its articles of incorporation or bylaws;
(m) except as contemplated by the Merger Agreement, make any capital
expenditures other than in the ordinary course of business or as
necessary to maintain existing assets in good repair, not to exceed
$50,000 for any single project;
(n) except as contemplated by the Merger Agreement, make application for the
opening or closing of, or open or close, any branches or automated
banking facilities;
(o) except as contemplated by the Merger Agreement, merge into, consolidate
with, affiliate with or be purchased or acquired by any other individual
or entity, or permit any other individual or entity to be merged,
consolidated or affiliated with it or be purchased or acquired by it,
or, except to realize upon collateral and except for purchases or sales
of loans or investment securities in the ordinary course of business,
acquire all or any substantial portion of the assets of any other
individual or entity, or sell all or any portion of its assets;
(p) except as contemplated by the Merger Agreement, purchase or otherwise
acquire from a third party branch offices, assets constituting any other
line of business or any other material properties or assets, including
mortgage or other loans and rights for the servicing of mortgage loans;
or
(q) amend, terminate, renew or exercise any option under the lease
originally dated April 1, 1975 and last amended pursuant to Amendment
XIX as of October 8, 1993, by and between M.D.C. Holdings, Inc.
and OMNIBANK Southeast, except for that portion of the premises located
on the first floor and constituting the branch premises as of August 31,
1994 as to which OMNI will exercise its renewal option on terms
satisfactory to KeyCorp.
ADJUSTMENT TO INCREASE EXCHANGE RATIO
OMNI can exercise its right to have KeyCorp increase the Exchange Ratio
prior to any other adjustments if the Average Closing Price is less than $26.10
but at least $24.47, assuming that OMNI does not exercise its right to
terminate the Merger Agreement. See "-- Waiver of Conditions, Amendment or
Termination of the Merger Agreement." The Exchange Ratio would be increased
prior to any other adjustments so that the per share value of the consideration
(valued at the Average Closing Price, which is defined above in "Summary -
Termination of the Merger Agreement") to be paid in respect of the OMNI Common
Stock outstanding as of the Effective Time of the Merger is equal to $6.40 per
share. If KeyCorp effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction between the date of the Merger Agreement and the end of the
Calculation Period, the closing prices for the calculation of the Average
Closing Price will be appropriately adjusted so as to be comparable to the
price on the day of execution of the Merger Agreement.
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BUY AND SELL AGREEMENT
All OMNI shareholders, other than Larry A. Mizel, and OMNI are parties
to the OMNI Buy and Sell Agreement which was first entered into several years
ago. As new shares of OMNI Common Stock are issued to new shareholders or
existing shares of OMNI Common Stock subject to the OMNI Buy and Sell Agreement
are transferred to new shareholders, such new shareholders are required to
become parties to the OMNI Buy and Sell Agreement. In the event of a proposed
sale or other conveyance for value of any stock subject to the OMNI Buy and
Sell Agreement, the OMNI Buy and Sell Agreement grants a right of first refusal
to OMNI and a right of second refusal to the other shareholder parties to the
OMNI Buy and Sell Agreement (the "Remaining Stockholders"). OMNI and/or the
Remaining Stockholders, as the case may be, have the option to purchase the
offered shares on the same terms and conditions as the proposed sale or
conveyance.
In any exercise of a right of second refusal, each Remaining Stockholder
has the right to purchase his or her proportionate share (relative to all the
other Remaining Stockholders then entitled to purchase shares) of the offered
shares, and, to the extent of any undersubscription by other Remaining
Stockholders, a Remaining Stockholder has the right to purchase the additional,
unsubscribed-for offered shares. In the case of any proposed sale or
conveyance for value under the OMNI Buy and Sell Agreement, the selling
shareholder is not obligated to sell any offered stock pursuant to an exercise
or exercises of rights of refusal unless OMNI and/or the Remaining
Stockholders elect to purchase all of the offered shares. In addition, the
OMNI Buy and Sell Agreement expressly provides that the rights of first refusal
do not apply to any sale or gift to (i) an existing shareholder who is a party
to the OMNI Buy and Sell Agreement, (ii) a shareholder's heirs, (iii)
partnerships, trusts or corporations controlled by a shareholder or his or her
heirs or (iv) Mr. Mizel.
OMNI does not believe that these rights of refusal were intended to
apply to a transaction such as the Merger, particularly as shareholder action
is separately required under Colorado law to approve the Merger. However, as
an abundance of caution, OMNI has also sought waivers of the OMNI Buy and Sell
Agreement from all parties thereto in order to facilitate the Merger and to
assure KeyCorp that it would be able to secure a sufficient controlling
interest in OMNI. Under the Merger Agreement, OMNI was required to deliver by
November 15, 1994 waivers of the OMNI Buy and Sell Agreement from at least 80%
of the OMNI shareholders in number representing at least 90% of the outstanding
shares of OMNI Common Stock. The Voting Agreements executed by the directors,
executive officers and their affiliates in connection with the execution of the
Merger Agreement, representing 68.4% of the outstanding shares of OMNI Common
Stock, contain powers of attorney authorizing the attorneys-in-fact to execute
waivers of the OMNI Buy and Sell Agreement to facilitate the transaction with
KeyCorp. It is expected that the attorneys-in-fact will execute such waivers
in connection with the closing of the Merger. OMNI has obtained waivers and/or
Voting Agreements (containing powers of attorney to execute such waivers) from
all but one shareholder, representing 99.55% of the OMNI shareholders and
99.99% of the outstanding shares of OMNI Common Stock, in satisfaction of the
condition in the Merger Agreement.
Until the consummation of the Merger, unless otherwise terminated, the
OMNI Buy and Sell Agreement will continue to be in effect.
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SALE OF MERCHANTS MORTGAGE
The Merger Agreement, as supplemented by the Letter Agreements dated
August 31, 1994, January 4, 1995 and January 14, 1995, which are attached
hereto as Appendices B, C and F, requires OMNI to use its best efforts to enter
into a definitive written agreement satisfactory to KeyCorp on or before
January 31, 1995 with a prospective buyer for all of its interest in Merchants
Mortgage with completion of the sale prior to the Effective Time. OMNI owns
50% of the capital stock of Merchants Mortgage. Upon disposition of Merchants
Mortgage, OMNI will be entitled to distribute as a dividend an amount equal to
the aggregate after-tax gain realized by OMNI on the sale, determined in
accordance with generally accepted accounting principles consistently applied.
In the event OMNI realizes an aggregate loss on the sale (determined in
accordance with generally accepted accounting principles consistently applied)
in excess of certain reimbursable losses, the Exchange Ratio will be reduced by
the amount of such excess aggregate after-tax loss divided by the product of
(i) 16,491,244 multiplied by (ii) $32.625. See "-- Conversion of OMNI Common
Stock."
In late January, OMNI entered into a definitive agreement with Merchants
Mortgage and its other principal shareholder to sell OMNI's interest in
Merchants Mortgage prior to the closing of the Merger for $3,479,900
($3,729,900 if certain conditions are not satisfied). The sale of OMNI's
interest in Merchants Mortgage is not conditioned upon consummation of the
Merger. Although OMNI will incur an aggregate loss on the sale, the loss will
not exceed the aforementioned reimbursable losses and thus will not result in a
reduction to the Exchange Ratio. In addition, OMNI will be entitled to a full
reimbursement from KeyCorp for the aggregate loss on the sale in the event the
Merger is not consummated. See "--Expenses." The disposition of OMNI's
interest in Merchants Mortgage is not expected to be conditioned upon the
closing of the Merger.
ENVIRONMENTAL MATTERS
Following execution of the Merger Agreement, OMNI commissioned at its
own expense Phase I environmental audits of substantially all real property
owned or leased by it for which it did not already have such audits, including
property relating to its banking center offices and property acquired through
foreclosure and held as real estate owned, and provided KeyCorp with the
results of such audits. Upon review of the Phase I environmental audit
reports, KeyCorp commissioned several Phase II environmental audits on certain
properties, with the cost being divided equally between OMNI and KeyCorp. If,
based upon the results of any environmental audit, the aggregate estimated cost
to repair, remediate or otherwise correct any situation or circumstance which
violates any local, state or federal environmental law, regulation or ordinance
to the extent necessary so that such condition or circumstance would no longer
be a violation (the "Remedial Cost Estimate") is less than or equal to
$1,000,000, the Merger will be consummated without adjustment to the Exchange
Ratio. If the Remedial Cost Estimate exceeds $1,000,000, then the Exchange
Ratio shall be adjusted downwards by an amount equal to the net after-tax
"Excess Remediation Cost" (defined below) divided by the product of (a)
16,491,244 multiplied by (b) $32.625. The amount of the reduction which is
calculated as follows is the "Excess Remediation Cost": (a) for the portion of
the Remedial Cost Estimate exceeding $1,000,000 up to and including $2,000,000,
such purchase price will be reduced by 100% of such portion and (b) for the
portion of the Remedial Cost Estimate exceeding $2,000,000 up to and including
$5,000,000, such purchase price will be reduced by 50% of such portion. In the
event that the Remedial Cost Estimate exceeds $5,000,000, OMNI and KeyCorp
shall each have the election to terminate the Merger Agreement. See "--
Conversion of OMNI Common Stock" and "-- Waiver of Conditions, Amendment or
Termination of the Merger Agreement."
EMPLOYEE BENEFITS
The Merger Agreement provides that KeyCorp will honor all employment,
severance and other compensation contracts between OMNI or any of its
subsidiaries and any director, officer or employee of OMNI or its subsidiaries.
Each employee of OMNI or any of its subsidiaries who is
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transferred to KeyCorp or any affiliate of KeyCorp will receive full credit for
the prior service with such company for purposes of determining eligibility for
participation and vesting, but not for purposes of benefit accrual, in
KeyCorp's employee benefit plans. After the Effective Time, the employee
benefits provided by KeyCorp to former employees of OMNI or its subsidiaries
retained or employed by KeyCorp will be substantially equivalent to the
benefits currently provided to such employees or will be otherwise comparable
to the benefits provided to employees of Key Bank of Colorado under the KeyCorp
benefits plans; provided, however, that officers that have an employment or
other contract providing for severance will be limited to the severance in such
contract.
CONDITIONS TO THE MERGER
The respective obligations of KeyCorp and OMNI to effect the Merger are
subject to the satisfaction or waiver prior to the Effective Time of certain
conditions, including but not limited to, the following significant conditions:
(a) in the case of each party, performance in all material respects
at or prior to the Effective Time of the agreements and
covenants required to be performed by the other party;
(b) in the case of each party, the truth and correctness in all
material respects as of the Effective Time and the date of
signing of the Merger Agreement of the representations and
warranties of the other party contained in the Merger
Agreement, except (i) as expressly contemplated by the Merger
Agreement, (ii) for any representation and warranty made as of
a specified date (which shall be true and correct as of such
date) and (iii) where the failure of such representations and
warranties would not have a material adverse effect on the
other party and its subsidiaries, taken as a whole;
(c) approval of the Merger Agreement by the requisite vote of
shareholders of OMNI (see "Special Meeting of OMNI
Shareholders");
(d) receipt of all approvals of, and all filings and registrations
with, governmental agencies or other third parties required to
consummate the transactions contemplated by the Merger
Agreement (see "-- Regulatory Approvals");
(e) absence of any temporary restraining order, injunction, decree
or other order by any federal or state court or agency which
enjoins or prohibits consummation of the Merger;
(f) absence of any statute, rule, regulation, order, injunction or
decree enacted, entered, promulgated or enforced by any
governmental authority which prohibits, restricts or makes
illegal consummation of the Merger;
(g) receipt by KeyCorp of a letter from OMNI's independent
accountants with respect to certain financial information
regarding OMNI;
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(h) OMNI will have entered into a definitive written agreement by
January 31, 1995 with a prospective purchaser to sell all of
its interest in Merchants Mortgage with the sale being
completed by the Effective Time;
(i) receipt of authorization for listing on NYSE of additional
shares of KeyCorp Common Stock to be issued to holders of OMNI
Common Stock upon consummation of the Merger and OMNI Options
upon exercise of the KeyCorp options substituted therefor;
(j) receipt by each of KeyCorp and OMNI of a written opinion from
OMNI's legal counsel as to certain federal income tax
consequences of the Merger (see "-- Certain Federal Income Tax
Consequences");
(k) holders of no more than 10% of the issued and outstanding
shares of OMNI Common Stock have notified OMNI that they intend
to exercise dissenters' rights;
(l) the Registration Statement of which this Prospectus/Proxy
Statement is a part shall have been declared effective by the
Commission and shall not be subject to a stop order suspending
the effectiveness of the Registration Statement and no
proceedings for the purpose of suspending the effectiveness of
the Registration Statement shall be pending before or
threatened by the Commission;
(m) receipt by OMNI of an opinion from Hovde dated as of the date
of this Prospectus/Proxy Statement (which opinion shall not
have been withdrawn) to the effect that the terms of the Merger
are fair to OMNI's shareholders from a financial point of view;
and
(n) receipt by KeyCorp of a written opinion of its Colorado counsel
that, among other things, all OMNI shareholders have waived any
rights they may have under the OMNI Buy and Sell Agreement, or
to the extent not waived, that it has been fully complied with.
See "-- Buy and Sell Agreement."
REGULATORY APPROVALS
Consummation of the Merger is subject to receipt by KeyCorp and OMNI of
all necessary regulatory approvals and expiration of all applicable statutory
waiting periods. The regulatory approvals required by the Merger are the
approvals of the Federal Reserve Board and the Colorado State Banking Board.
KEYCORP ANTICIPATES THAT THE REGULATORY APPROVALS DESCRIBED HEREIN WILL
BE OBTAINED IN TIME TO ALLOW FOR CONSUMMATION OF THE MERGER IN LATE FEBRUARY
1995, BUT THERE IS NO ASSURANCE THAT SUCH REGULATORY APPROVALS WILL BE OBTAINED
SO AS TO PERMIT CONSUMMATION OF THE MERGER OR THAT SUCH APPROVALS WILL NOT BE
CONDITIONED UPON MATTERS THAT WOULD CAUSE THE PARTIES TO ABANDON THE MERGER.
THERE LIKEWISE IS NO ASSURANCE THAT THE UNITED STATES DEPARTMENT OF JUSTICE OR
A STATE ATTORNEY GENERAL WILL NOT CHALLENGE THE MERGER, OR IF SUCH A CHALLENGE
IS MADE, AS TO THE RESULTS THEREOF.
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The Merger is subject to approval by the Federal Reserve Board under
Section 3 of the Bank Holding Company Act of 1956, as amended (the "BHCA").
Section 3 of the BHCA requires that the Federal Reserve Board take into
consideration the financial and managerial resources and future prospects of
the existing and proposed institutions and the convenience and needs of the
communities to be served. The Federal Reserve Board has indicated that it will
not approve a significant acquisition unless the resulting institution has
adequate capitalization, taking into account, among other things, asset
quality. The BHCA prohibits the Federal Reserve Board from approving the
Merger if (a) it would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize the business of banking in any part of
the United States or (b) its effect in any section of the country may be
substantially to lessen competition or to tend to create a monopoly or would be
in restraint of trade in any other manner, unless the Federal Reserve Board
finds that any anti-competitive effects of the Merger are clearly outweighed in
the public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. In addition, under the
Community Reinvestment Act, as amended (the "Community Reinvestment Act"), the
Federal Reserve Board must take into account the records of performance of the
bank subsidiaries of KeyCorp and OMNI in meeting the credit needs of each
community, including low and moderate income neighborhoods, served by such bank
subsidiaries. The Federal Reserve Board must also determine, under Section
3(d) of the BHCA, that the State of Colorado authorizes the acquisition of
OMNI's bank subsidiaries by a bank holding company principally located in Ohio;
this determination will require a finding that the interstate statute of
Colorado is reciprocal with the Ohio interstate statute, which reciprocity has
been determined to exist on prior occasions.
Under the BHCA, the Merger may not be consummated until the 30th day
following the date of Federal Reserve Board approval, during which time the
United States Department of Justice may challenge the Merger on antitrust
grounds. The commencement of an antitrust action by the Department of Justice
would stay the effectiveness of the Federal Reserve Board's approval unless a
court specifically orders otherwise. KeyCorp believes that antitrust concerns
will not interfere with the consummation of the Merger.
Applications seeking the foregoing approvals of the Federal Reserve
Board were submitted on November 22, 1994. The OMNI application was accepted
for filing on December 21, 1994 and was approved by the Federal Reserve Board
on January 4, 1995.
Consummation of the Merger is subject to receipt of a certificate from
the Colorado State Banking Board certifying that the Merger complies with the
provisions of Article 6.4 of the Colorado Banking Code. The issuance of the
certificate will be based on the following considerations: (1) whether the
Merger will provide positive benefits to Colorado citizens; (2) whether the
Merger affords protection to bank depositors in Colorado; and (3) whether the
Merger enhances the opportunity of the people of Colorado to receive services
provided by banks and bank holding companies. In addition, because the Merger
would result in a change in control of OMNI, consummation of the Merger will
also be subject to approval by the Colorado State Banking Board under the
change in control provisions of Article 2 of the Colorado Banking Code. This
approval will be based primarily upon the following considerations: (1) that
KeyCorp and Key Bank of Colorado are qualified by character, experience and
financial responsibility to control OMNI in a legal and proper manner; and (2)
that the interests of the public generally will not be jeopardized by the
proposed Merger.
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The application seeking the foregoing approval of the Colorado State
Banking Board was submitted on November 30, 1994 and was approved on January
19, 1995.
WAIVER OF CONDITIONS, AMENDMENT OR TERMINATION OF THE MERGER AGREEMENT
WAIVER. Prior to the Effective Time, by written notice to the other
party to the Merger Agreement, either KeyCorp or OMNI may extend the time for
performance or waive performance of the other party, waive any inaccuracies in
the representations or warranties of such other party, or waive compliance with
any of the conditions or covenants to be performed by such other party
contained in the Merger Agreement. The waiver by any party of a breach of any
provision of the Merger Agreement will not operate or be construed as a waiver
of a subsequent breach.
AMENDMENT. The Merger Agreement may be amended or supplemented, either
before or after its adoption by the shareholders of OMNI, upon approval of each
of KeyCorp's and OMNI's Boards of Directors. The parties have agreed to make
technical amendments, not inconsistent with the purpose of the Merger
Agreement, as may be required to facilitate regulatory approvals. However, any
such amendment made subsequent to the approval of the Merger Agreement by the
shareholders of OMNI, unless approved by the requisite vote of such
shareholders, may not alter the amount or change the form in which shares of
OMNI Common Stock will be exchanged for shares of KeyCorp Common Stock in the
Merger or alter or change any of the terms of the Merger Agreement if such
amendment would adversely affect the holders of OMNI Common Stock.
TERMINATION. The Merger Agreement may be terminated, and the Merger
abandoned, at any time prior to the Effective Time, whether before or after
approval of the Merger Agreement by the shareholders of OMNI:
(a) by mutual consent of KeyCorp and OMNI;
(b) by either KeyCorp or OMNI at any time after June 30, 1995 if
the Merger is not consummated by that date, unless the failure
to so consummate by such time is due to the breach of any
representation, warranty or covenant contained in the Merger
Agreement by the party seeking to terminate;
(c) by either KeyCorp or OMNI in the event of a material breach by
the other party of any warranty or representation contained in
the Merger Agreement if (i) the nonbreaching party determines
in good faith that it would not have entered into the Merger
Agreement, or that the consideration being offered in the
Merger might have been materially different, if it had known of
the breach prior to execution and such breach by its nature
cannot be cured by the closing date of the Merger, or (ii)
there occurs a material breach by the other party of any
agreement or covenant which is not cured or not curable within
20 days after written notice to the breaching party of such
breach;
(d) by either KeyCorp or OMNI if any of the conditions to such
party's obligations to consummate the Merger have not been
satisfied or waived at such time as such
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conditions are no longer capable of being satisfied
(see "-- Conditions to the Merger");
(e) by either KeyCorp or OMNI if (i) any approval, consent or
waiver of a governmental authority required to permit
consummation of the Merger has been denied or (ii) any
governmental authority of competent jurisdiction has issued a
final, unappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by the Merger
Agreement;
(f) by OMNI in the event that the per share Average Closing Price
is less than $26.10 and OMNI does not elect to increase the
Exchange Ratio (see "-- Adjustment to Increase Exchange
Ratio");
(g) by KeyCorp in the event that OMNI has not entered into a
definitive written agreement with a prospective purchaser on or
prior to January 31, 1995 to sell all of its interest in
Merchants Mortgage or OMNI has not completed the sale by the
Effective Time;
(h) by either KeyCorp or OMNI if remediation of any circumstance or
situation which violates any federal, state or local
environmental laws, regulations or ordinances is required and
the Remedial Cost Estimate exceeds $5,000,000; or
(i) by KeyCorp, if on or before November 15, 1994, OMNI has not
received from 80% of the OMNI shareholders and from OMNI
shareholders holding 90% of OMNI Common Stock outstanding on
August 31, 1994, a written waiver of each such OMNI
shareholder's rights under the OMNI Buy and Sell Agreement
among OMNI and the OMNI shareholders, provided that the
termination right is delivered to OMNI by November 23, 1994.
Because OMNI delivered to KeyCorp the necessary waivers to the
OMNI Buy and Sell Agreement by November 15, 1994, KeyCorp no
longer has this termination right under the Merger Agreement.
EFFECTIVE TIME
The Merger becomes effective when KeyCorp and OMNI file appropriate
certificates with, and such filings are accepted by, the Secretary of State of
the State of Colorado and the Secretary of State of the State of Ohio. Once the
Merger is effective, KeyCorp will be the surviving corporation and the separate
existence of OMNI will cease. For a description of circumstances under which
KeyCorp or OMNI may terminate the Merger Agreement, see "-- Waiver of
Conditions, Amendment or Termination of the Merger Agreement." If not so
terminated, the Effective Time will occur as promptly as practicable after the
date upon which all of the conditions to the Merger are satisfied or duly
waived or at such other time and date as KeyCorp and OMNI may agree. KeyCorp
and OMNI currently anticipate that the Merger will be completed during late
February 1995, but, in any event, prior to June 30, 1995. See "-- Regulatory
Approvals."
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
SHARES AND OPTIONS OWNED BY DIRECTORS AND EXECUTIVE OFFICERS OF OMNI.
As of January 27, 1995, approximately 69.9% of the issued and outstanding shares
of OMNI Common Stock were beneficially owned by directors and executive officers
of OMNI and their respective affiliates; however, this percentage includes
certain shares of OMNI Common Stock as to which such executive officers,
directors and affiliates disclaim beneficial ownership. See the notes to the
tables appearing in "Principal Shareholders and Security Ownership of OMNI
Management."
As described above under "-- Conversion of OMNI Options," the Merger
Agreement also provides that all options to purchase OMNI Common Stock that are
outstanding and exercisable immediately prior to the Effective Time will be
converted into options to purchase KeyCorp Common Stock. As of January 27,
1995, the officers and directors of OMNI owned options to purchase 370,000
shares of OMNI Common Stock.
VOTING AGREEMENTS. As a condition to KeyCorp's entering into the Merger
Agreement, all of the OMNI directors, executive officers and their affiliates
were required to execute and deliver Voting Agreements to KeyCorp pursuant to
which such persons have agreed to: (i) vote in favor of the approval of the
Merger Agreement and the approval of the Merger; (ii) vote against any proposal
relating to a competing merger or business combination involving the
acquisition of OMNI; (iii) not sell or otherwise voluntarily dispose of any
shares of OMNI Common Stock owned by such person (unless the transferee
executes an identical voting agreement) or take any voluntary action which
would have the effect of eliminating such person's ability to vote the OMNI
Common Stock owned by such person; and (iv) appoint Larry Mizel and Robert Graf
with powers of attorney to waive the OMNI Buy and Sell Agreement. Such
shareholders holding 11,273,588 shares of Common Stock representing 68.4% of
the number of shares of OMNI Common Stock entitled to vote at the Special
Meeting have delivered executed Voting Agreements. As a result, it is
anticipated that the Merger Agreement will be approved at the Special Meeting.
SEVERANCE ARRANGEMENTS WITH OMNI. OMNI has arrangements with its
executive officers (Larry A. Mizel, Robert W. Graf, Gary Klearman and Gary D.
Levine) pursuant to which OMNI will pay each such officer a severance payment
equal to his prior year's total compensation (including discretionary bonuses)
in the event such officer is terminated without cause within one year following
a change of control. Under those circumstances and based on 1994 salary
information, Messrs. Mizel, Graf, Klearman and Levine would be entitled to
severance payments totalling approximately $375,000, $280,000, $160,000 and
$240,000, respectively. Following the Effective Time, KeyCorp has agreed to
honor these severance arrangements. KeyCorp has indicated that it presently
expects to require the continuing services of Mr. Levine after the Merger.
EMPLOYMENT AGREEMENT WITH MR. LEVINE. KeyCorp and Gary D. Levine, a
director of OMNI, entered into an Employment Agreement dated August 27, 1994
(the "Employment Agreement"), pursuant to which Mr. Levine has agreed, subject
to consummation of the Merger, to be employed as a Senior Vice President of Key
Bank of Colorado or one of its affiliates under the terms and conditions of the
Employment Agreement from the Effective Date of the Merger until December 31,
1997. KeyCorp has agreed to pay an annual base salary of not less than
$102,138 and incentive compensation not to exceed an annual award of $138,000
to Mr. Levine. In addition, KeyCorp has
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agreed to grant to Mr. Levine on the first date on which he renders services
for KeyCorp under the Employment Agreement an option to buy 2,500 shares of
KeyCorp Common Stock at an exercise price equal to the fair market value of the
KeyCorp Common Stock on the date of grant. Upon termination of Mr. Levine by
KeyCorp without cause, he is entitled to receive all payments and benefits to
which he would have been entitled had he continued to perform services under
the Employment Agreement through the specified term. For these purposes,
"cause" includes a material breach of the Employment Agreement, misconduct as
an executive of Key Bank of Colorado or an affiliate, unreasonable neglect or
refusal to perform assigned duties, conviction of a crime involving moral
turpitude, failure to follow reasonable instructions of a superior executive
officer, or imposition by a bank regulatory agency of a final order of
suspension or removal for improper conduct.
SPECIAL BONUS. At the August 27, 1994 meeting, the OMNI board of
directors approved a special bonus to Mr. Graf in the amount of $150,000 to
compensate him for his additional responsibilities in conjunction with the
review, negotiation and completion of the Merger Agreement, and in recognition
of the future requirements of his time concerning assistance in the preparation
of all required documents and the anticipated closing of the Merger to be paid
whether or not the Merger is consummated. However, if the Merger is
consummated, one-third of this bonus will be paid upon the Effective Date and
the remaining two-thirds of the bonus will be paid on the 90th day following
the Effective Date as compensation for professional services to be provided by
Mr. Graf.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the Merger to OMNI and holders of OMNI Common Stock and relects
the opinion of tax counsel attached as Exhibit 8 to the Registration Statement
of which this Prospectus/Proxy Statement is a part. Such tax opinion is based
on certain assumptions noted in such opinion. The discussion is based on
current law. The discussion does not address aspects of federal taxation other
than income taxation, nor does it address all aspects of federal income
taxation, including without limitation, aspects of federal income taxation that
may be applicable to particular shareholders, such as shareholders who are
dealers in securities, foreign persons or those who acquired their OMNI Common
Stock in a compensation transaction. In addition, it does not address the
state, local or foreign tax consequences of the Merger, if any.
HOLDERS OF OMNI COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO EACH OF THEM,
INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS AND ANY PROPOSED CHANGES TO SUCH LAWS.
The principal federal income tax consequences of the Merger to OMNI and
holders of OMNI Common Stock will be as follows: (a) the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code; (b) no
gain or loss will be recognized by OMNI or KeyCorp as a result of the Merger;
(c) no gain or loss will be recognized by holders of OMNI Common Stock upon
their receipt of KeyCorp Common Stock in exchange for their OMNI Common Stock,
except that holders of OMNI Common Stock who receive cash proceeds in lieu of
fractional shares of KeyCorp Common Stock will recognize gain or loss equal to
the difference, if any, between such proceeds and the tax basis of OMNI
Common Stock allocated to their fractional share interests (see, however,
discussion of the treatment of dissenters in (h) below); (d) such gain or loss,
if any, will constitute capital gain or loss if the fractional share interests
exchanged are held as capital assets at the time of the Merger; (e) such
capital gain or loss will be long-term capital gain or loss if the holding
period for the fractional share interests (including the holding period of OMNI
Common Stock attributed thereto) exceeds one year; (f) the tax basis of KeyCorp
Common Stock received by holders of OMNI Common Stock will be the same as the
tax basis of the OMNI Common Stock exchanged therefor less the tax basis, if
any, allocated to fractional share interests; (g) the holding period of KeyCorp
Common Stock in the hands of holders of OMNI will include the holding period of
their OMNI Common Stock exchanged therefor, provided that such OMNI Common
Stock is held as a capital asset at the time of the Merger; (h) in general, a
dissenting holder of OMNI Common Stock receiving
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solely cash in exchange therefor will recognize gain or loss equal to the
difference, if any, between the cash received and the dissenting holder's tax
basis of the OMNI Common Stock; (i) such gain or loss, if any, will generally
constitute capital gain or loss if the OMNI Common Stock for which the
dissenting shareholder receives cash is held as a capital asset at the time of
the Merger; and (j) such capital gain or loss will be long-term capital gain or
loss if the dissenting holder has held the OMNI Common Stock for more than one
year.
It is a condition to KeyCorp's and OMNI's obligations to effect the
Merger that KeyCorp and OMNI receive an opinion (the "Tax Opinion") from Irell
& Manella to the effect that, on the basis of certain facts, including facts
derived from officers' certificates delivered by KeyCorp and OMNI, which
certificates are attached to the Tax Opinion, and certain assumptions stated in
the Tax Opinion, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code and that the foregoing tax consequences
are accordingly correct. It is possible that if enough shareholders exercise
dissenters' rights (an amount which is less than the 10% threshold otherwise
provided in the Merger Agreement), Irell & Manella will not be able to render
the Tax Opinion. Under the Merger Agreement, it is a condition to the Merger
that holders of more than 10% of the issued and outstanding shares of OMNI
Common Stock shall not have indicated that they intend to exercise dissenters'
rights in respect of the Merger.
No ruling has been or will be obtained from the Internal Revenue Service
(the "Service") with respect to the Merger. The Tax Opinion is not binding on
the Service or the courts, and no assurance can be given that the Tax Opinion
would be followed if challenged by the Service.
ACCOUNTING TREATMENT OF MERGER
The Merger, if consummated as proposed, is expected to be accounted for
as a purchase for financial reporting purposes. Accordingly, under generally
accepted accounting principles, the purchase price will be allocated to assets
acquired and liabilities assumed based on their estimated values on the date
the Merger becomes effective. Income of KeyCorp after the Effective Time will
not include income or loss of OMNI prior to such date.
NYSE LISTING
KeyCorp Common Stock is listed on the NYSE. KeyCorp has agreed to use
its best efforts to cause the listing on the NYSE of the shares of KeyCorp
Common Stock to be issued to holders of (a) OMNI Common Stock upon consummation
of the Merger and (b) OMNI Options upon exercise of the KeyCorp options
substituted therefor.
EXPENSES
The Merger Agreement provides, in general, that KeyCorp and OMNI will
each pay its own expenses in connection with the Merger Agreement and the
transactions contemplated thereby, including fees and expenses of its own
financial and other consultants, investment bankers, accountants and counsel;
except that KeyCorp will bear the costs of printing this Prospectus/Proxy
Statement and all listing, filing and registration fees paid by or incurred on
behalf of KeyCorp, including fees paid to the Commission and other regulatory
agencies.
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Notwithstanding the foregoing, in the event that either KeyCorp or OMNI
terminates the Merger Agreement due to a willful and material breach by the
other party of any of such other party's representations, warranties, covenants
or agreements contained in the Merger Agreement and the terminating party is
not also in material breach of the Merger Agreement, the costs and expenses
incurred by KeyCorp or OMNI, as the case may be, in connection with the Merger
Agreement and the transactions contemplated by the Merger Agreement shall be
paid by such breaching party. See "-- Waiver of Conditions, Amendment or
Termination of the Merger Agreement."
If either OMNI or KeyCorp terminates the Merger Agreement for any reason
(other than certain material breaches by OMNI) after OMNI sells or has entered
into a binding written agreement to sell its interest in Merchants Mortgage,
and OMNI realizes an aggregate pre-tax loss on such sale, KeyCorp will promptly
reimburse OMNI in an amount equal to the pre-tax loss but not to exceed
$750,000 ($500,000 in limited circumstances).
RIGHTS OF DISSENTING SHAREHOLDERS
Each OMNI shareholder who objects to the Merger shall be entitled to the
rights and remedies of dissenting shareholders as provided in Article 113 of
the Colorado Act (Sections 7-113-101 et seq.), a copy of which is included as
Appendix E to this Prospectus/Proxy Statement, if he or she strictly complies
with all of the provisions of Article 113 of the Colorado Act.
The following is a summary of the steps to be taken by an OMNI
shareholder who is interested in perfecting such holder's dissenters' rights,
and should be read in conjunction with the full text of Article 113 of the
Colorado Act. Each of the steps enumerated below must be taken in strict
compliance with the applicable provisions of the statute in order for holders
of OMNI Common Stock to perfect their dissenters' rights.
NOTICE OF INTENT TO DISSENT
Any holder of OMNI Common Stock who disapproves of or objects to the
proposed Merger and wishes to receive in cash the "fair value" of such shares
(determined immediately before the Effective Time of the Merger, excluding any
appreciation or depreciation in anticipation of the Merger) must:
(a) deliver to OMNI before the taking of the vote on the Merger
Agreement, a written notice of the shareholder's intention to
demand payment for the shareholder's share of OMNI Common Stock
if the Merger if effectuated, and
(b) not vote his or her shares in favor of approval of the Merger
Agreement.
Any written notice of intent to demand payment pursuant to clause (a)
above should be mailed or delivered to OMNIBANCORP, 3600 South Yosemite Street,
Suite 210, Denver, Colorado 80237, Attention: Secretary. Because the written
demand must be delivered before the shareholder vote on the Merger Agreement,
it is recommended, although not required, that a shareholder using the mails
should use certified or registered mail, return receipt requested, to confirm
that timely delivery has been made.
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A record holder may assert dissenters' rights as to fewer than all
shares of OMNI Common Stock registered in his or her name only if the record
holder dissents with respect to all shares beneficially owned by any one person
and delivers to OMNI a written notice that states the dissent and the name,
address and federal taxpayer identification number of each person on whose
behalf the record holder asserts dissenters' rights.
A beneficial shareholder of OMNI Common Stock who is not the record
holder may assert dissenters' rights as to shares held on his or her behalf
only if the record holder's written consent to the dissent is received by OMNI
not later than the beneficial shareholder asserts dissenters' rights and the
beneficial shareholder dissents with respect to all shares of OMNI Common Stock
beneficially owned by such shareholders.
At the Effective Time, dissenting shareholders who have perfected their
rights will cease to have any of the rights of a shareholder of OMNI Common
Stock except the right to be paid the "fair value" of their shares in
accordance with Article 113 of the Colorado Act.
DISSENTERS' NOTICE
If the Merger is approved at the Special Meeting, then no later than 10
days after the Effective Time of the Merger, OMNI or KeyCorp, as the case may
be, will send written notice of such approval to each of the shareholders who
has satisfied the conditions in (a) and (b) above (the "Dissenters' Notice").
Such notice shall also include the following:
(a) the date of the Effective Time or proposed Effective Time;
(b) an address to which shareholders must send demand for payment;
(c) instructions as to where and when certificates representing
OMNI Common Stock must be surrendered and deposited;
(d) a form for demanding payment which will require the shareholder
to state an address to which payment is to be made and to
certify whether he or she acquired beneficial ownership of his
or her OMNI Common Stock prior to September 1, 1994 which was
the date on which the Merger was announced.
(e) a date as to when the certificates and the payment demand must
be received by OMNI or KeyCorp, as the case may be, which date
cannot be less than 30 days from the mailing of the Dissenters'
Notice;
(f) a statement that when a record holder dissents with respect to
the shares of OMNI Common Stock held by any one or more
beneficial shareholder, each such beneficial shareholder must
certify to KeyCorp that the beneficial shareholder and the
record holder of all shares owned beneficially by such
beneficial shareholder have asserted, or will timely assert,
dissenters' rights as to all such shares as to which there is
no limitation on the ability to exercise dissenters' rights;
and
(g) a copy of Article 113 of the Colorado Act.
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PROCEDURE TO DEMAND PAYMENT
A shareholder who is given a Dissenters' Notice as described above who
wishes to assert dissenters' rights shall, in accordance with the terms of the
Dissenters' Notice:
(a) cause the corporation, which is described in the Dissenters'
Notice at the address set forth therein, to receive a payment
demand, which may be the payment demand form provided by OMNI
with the Dissenters' Notice, duly completed, or may be stated in
another writing; and
(b) deposit the shareholder's certificates for certificated shares as
set forth in the Dissenters' Notice.
A shareholder who demands payment in accordance with the foregoing
retains all rights of a shareholder, except the right to transfer the shares,
until the Effective Time of the Merger and has only the right to receive
payment for the shares after the Effective Time of the Merger.
A shareholder who does not demand payment and deposit the shareholder's
share certificates as required by the date or dates set in the Dissenters'
Notice will not be entitled to payment of the shares. Except as set forth in
Sections 7-113-207 and 7-113-209(1)(b) of the Colorado Act (see Appendix E),
the demand for payment and deposit of certificates are irrevocable.
PAYMENT
Upon the Effective Time or upon timely receipt of a properly completed
demand for payment, accompanied by all other required documents as set forth in
the Dissenters' Notice and the shareholder's certificates, whichever is later,
OMNI or KeyCorp, as the case may be, will pay to each dissenter the amount the
corporation estimates to be the fair value of the dissenter's shares plus
accrued interest. Such payment will be accompanied by recent financial
statements of OMNI, a statement of the estimated fair value of the shares of
OMNI Common Stock, a procedure to be followed if the dissenter is dissatisfied
with the settlement payment or offer, an explanation of how the interest was
calculated and a copy of Article 113 of the Colorado Act.
OMNI may elect to withhold payment from any dissenter who fails to
certify that the dissenter or the person on whose behalf the dissenter acts
acquired beneficial ownership of such shares prior to September 1, 1994, the
date on which the proposed Merger was first publicly announced. With respect
to such shares, OMNI may, in lieu of payment, offer to make such payment on
receiving the dissenter's agreement to accept such payment in full satisfaction
of the dissenter's demand for payment. Such offer will be accompanied by recent
financial statements of OMNI, a statement of the estimated fair value of the
shares, an explanation of how the interest was calculated, the procedure to be
followed if the dissenter is dissatisfied with the settlement offer, and a copy
of Article 113 of the Colorado Act.
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PROCEDURE IF DISSENTER IS DISSATISFIED
If a dissenter is dissatisfied with the settlement payment or offer, he
or she may notify KeyCorp or OMNI, as the case may be, in writing within 30
days of the corporation's mailing of the offer or payment of fair value, of the
dissenter's own estimate of fair value of his or her shares and of the amount
of interest due. A dissenter is entitled to so notify OMNI or KeyCorp if: (a)
the dissenter believes that the amount paid or offered in payment for his or
her shares is less than the fair value of those shares or that the interest due
was incorrectly calculated; (b) if OMNI or KeyCorp, as the case may be, fails
to pay dissenters the estimated fair value of the shares within 60 days after
the date set for receipt of dissenters' payment demands; or (c) OMNI or
KeyCorp does not return the deposited certificates of such shareholder if the
Effective Time of the Merger does not occur within 60 days after the date set
by OMNI or KeyCorp, as the case may be, by which date such corporation was to
have received the payment demand.
JUDICIAL APPRAISAL OF SHARES
If KeyCorp and any dissenter fail to agree upon the fair value of shares
of OMNI Common Stock, KeyCorp shall commence a court proceeding within 60 days
of KeyCorp's or OMNI's receipt of any demand for payment to fix the fair value
of the dissenters' shares. If KeyCorp does not commence the proceeding within
such 60-day period, KeyCorp will pay to each dissenter whose demand remains
unresolved the amount demanded. The proceeding shall be commenced in the
district court of the county in which OMNI's principal office is located. All
dissenters whose demands remain unsettled shall be made parties to the action
and shall be served with a copy of the petition by registered or certified
mail.
The court may appoint one or more appraisers to receive evidence and
make a recommendation to the court on the question of fair value. Each
dissenter made a party to the proceeding shall be entitled to judgment for the
amount, if any, by which the court finds the fair value of the dissenter's
shares, plus interest, exceeds the amount paid therefor by OMNI or KeyCorp, or
for the fair value, plus interest, of the dissenter's shares for which either
OMNI or KeyCorp elect to withhold payment because the dissenter acquired his or
her shares after the first public announcement of the proposed Merger. In
addition, the court shall determine all costs of the proceeding and may assess
such costs against some or all of the dissenters, in amounts the court finds
equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment other than that offered
by the corporation. The court also may assess the fees and expenses of counsel
and experts for the respective parties, in amounts the court finds equitable.
TERMINATION; TAX ISSUES
The rights of any dissenting shareholder will terminate if such
shareholder does not demand payment or deposit his or her share certificates
where required, each by the date set forth in the Dissenter's Notice. For a
discussion of certain federal income tax consequences to a shareholder
exercising dissenters' rights, see "The Merger -- Certain Federal Income Tax
Consequences."
BECAUSE A PROPERLY EXECUTED PROXY CARD THAT DOES NOT CONTAIN VOTING
INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED FOR APPROVAL OF THE MERGER
AGREEMENT, AN OMNI SHAREHOLDER
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WHO WISHES TO EXERCISE DISSENTERS' RIGHTS MUST EITHER NOT SIGN AND RETURN HIS
OR HER PROXY CARD OR, IF HE OR SHE DOES SIGN AND RETURN THE PROXY CARD, VOTE
AGAINST OR ABSTAIN FROM VOTING ON THE APPROVAL OF THE MERGER AGREEMENT.
VOTING AGREEMENTS
As a condition to KeyCorp's entering into the Merger Agreement, all of
the OMNI directors, executive officers and their affiliates were required to
execute and deliver to KeyCorp Voting Agreements pursuant to which such persons
have agreed to: (i) vote in favor of adoption of the Merger Agreement and
approval of the Merger; (ii) vote against any proposal relating to a competing
merger or business combination involving the acquisition of OMNI; (iii) not to
sell or otherwise voluntarily dispose of any shares of OMNI Common Stock owned
by such person (unless the transferee executes an identical voting agreement)
or take any voluntary action which would have the effect of eliminating such
person's ability to vote the OMNI Common Stock owned by such person; and (iv)
appoint attorneys-in-fact to waive the OMNI Buy and Sell Agreement. Such
shareholders holding 11,273,588 shares of Common Stock representing 68.4% of
the number of shares of OMNI Common Stock entitled to vote at the Special
Meeting have delivered executed Voting Agreements. As a result, it is
anticipated that the Merger and the Merger Agreement will be approved at the
Special Meeting. See "The Merger -- Interests of Certain Persons in the
Merger."
RESALES OF KEYCORP COMMON STOCK RECEIVED IN THE MERGER
The shares of KeyCorp Common Stock that will be issued if the Merger is
consummated will have been registered under the Securities Act, and will be
freely transferable, except for shares received by persons, including directors
and executive officers of OMNI, who may be deemed to be "affiliates" of OMNI at
the time the Merger is approved by the OMNI shareholders, as that term is used
in paragraphs (c) and (d) of Rule 145 under the Securities Act. Such
affiliates may not sell their shares of KeyCorp Common Stock acquired pursuant
to the Merger, except (a) pursuant to an effective registration statement under
the Securities Act covering those shares, (b) in compliance with Rule 145, or
(c) in the opinion of counsel reasonably satisfactory to KeyCorp pursuant to
another applicable exemption from the registration requirements of the
Securities Act. OMNI and KeyCorp will have obtained customary agreements with
all directors, officers and affiliates of OMNI under which those persons have
represented that they will not dispose of their shares of KeyCorp Common Stock
received in the Merger or the shares of OMNI Common Stock held by them prior to
the Merger, except in compliance with the Securities Act and the rules and
regulations promulgated thereunder. This Prospectus/Proxy Statement does not
cover any resales of KeyCorp Common Stock received by affiliates of OMNI.
Forms of the agreements of the affiliates of OMNI are set forth as Exhibit D to
the Merger Agreement, which is attached hereto as Appendix A.
OMNI MARKET PRICE AND DIVIDEND INFORMATION
There is no trading market for OMNI Common Stock and, to the best
knowledge of OMNI, sales of such stock are isolated and infrequent and
generally are effected in private transactions between buyer and seller. In
addition, the sale of OMNI Common Stock by most shareholders is
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restricted pursuant to the terms of the OMNI Buy and Sell Agreement. See "The
Merger -- Buy and Sell Agreement." As of January 27, 1995, OMNI had 223 holders
of record of OMNI Common Stock.
The following table sets forth the amount of cash dividends paid per
share of OMNI Common Stock in each of the periods indicated:
<TABLE>
<CAPTION>
Year 1992 1993 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
First Quarter $.015 $.020 $.025
Second Quarter .015 .025 .025
Third Quarter .020 .025 .025
Fourth Quarter .100 .120 .110
</TABLE>
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OMNI MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis addresses the significant factors
affecting OMNI's financial condition and results of operations during the
years 1993, 1992, and 1991, and during the nine months ended September 30, 1994
and 1993. It is intended to provide a more comprehensive review of OMNI's
financial condition and results of operations than could be obtained from a
review of the consolidated financial statements alone. Nonetheless, this
discussion and analysis should be read in conjunction with the consolidated
financial statements and related notes and the selected consolidated financial
data included elsewhere herein.
FINANCIAL CONDITION
At September 30, 1994, total earning assets for OMNI were $459.5
million, compared to $436.0 million at December 31, 1993. The increase is due
primarily to a $25.5 million increase in loans, consisting of a $17.8 million
increase in consumer-related loans, and a $7.7 million increase in commercial
loans. The majority of the increase in consumer loans has been an increase in
loans secured by first liens on single-family detached residential properties
with maturities generally between two and three years. This increase, as well
as the 5.5% increase in commercial loans outstanding, is due to improved
economic conditions in the Denver metropolitan area, particularly in the real
estate sector.
In 1993, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). SFAS 115 requires, in part, that OMNI report
investment securities classified as available for sale at fair value, with the
unrealized gains and losses reported, net of tax effects, as a separate
component of stockholders' equity. OMNI adopted SFAS 115 as of December 31,
1993, and as of that date, the net unrealized gains, net of tax effects,
related to investment securities available for sale was $2.3 million. During
1994, declining prices in the bond market and the required mark-to-market
adjustment under SFAS 115 resulted in a net unrealized loss of $3.0 million at
September 30, 1994, which resulted in a corresponding reduction in stockholders'
equity.
The overall increase in the total investment securities portfolio
(primarily direct obligations of the U.S. Treasury with maturities not greater
than five years) from December 31, 1993 to September 30, 1994 was $8.6 million,
which was due to normal growth experienced during this period. Prior to
January 1, 1994, OMNI classified substantially all of its investment securities
as "available for sale," which classification according to SFAS 115 requires a
mark-to-market adjustment, net of tax effects, that can either increase or
decrease the total amount of stockholders' equity on the date periodic
financial statements are prepared. During 1994, management adopted a new
philosophy in order to achieve a more balanced approach to its investment
objectives. This change in investment philosophy was due, in part, to
management's decision to reduce OMNI's exposure to periodic fluctuations in the
stockholders' equity section of its balance sheet, by decreasing the amount of
investment securities classified as "available for sale." Accordingly,
proceeds from the sales or maturities of investment securities previously
purchased without the intent to hold to maturity or actively trade were
reinvested into new investment securities with the intent to hold such
securities to maturity. As a result,
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investment securities classified as "held to maturity" at September 30, 1994
increased $41.3 million from December 31, 1993 and concomitantly, investment
securities classified as "available for sale" decreased $32.7 million.
In addition to capital, OMNI has two main sources of funding: deposits
and short-term borrowings. Total noninterest bearing demand deposits have
remained relatively stable during 1994. Interest-bearing deposits have
decreased 5.3% from December 31, 1993 to $286.4 million at September 30, 1994.
Short-term borrowings, which consist mainly of federal funds purchased and
securities sold under repurchase agreements, have increased from zero at
December 31, 1993 to $46.1 million at September 30, 1994. OMNI elected to
increase funding from short-term borrowings rather than interest-bearing
deposits during this period because of lower interest rates available for
federal funds purchased and repurchase agreements as compared to higher
interest rates for interest-bearing deposits. This decision resulted in the
loss of some depositors switching to alternative financial instruments that
afforded higher rates; however, the loss of such depositors is not expected to
have a significant impact.
NET INTEREST INCOME
Net interest income is the excess of interest income earned from earning
assets (i.e., loans and investment securities) over the interest expense
incurred from interest-bearing liabilities (i.e., deposits and borrowed funds).
It is the most significant component of OMNI's earnings. Net interest income
is determined by the relative volume and characteristics (such as rates,
repricing frequencies, and maturities) of interest-earning assets and
interest-bearing liabilities and the interest rate spread (i.e., the difference
between the yields earned on the interest-earning assets and the rates paid on
interest-bearing liabilities). The interest rate sensitivity of OMNI's
interest-earning assets and interest-bearing liabilities, as well as the
relative volume and mix of these assets and liabilities, can significantly
affect net interest income.
OMNI has historically maintained a liability sensitive balance sheet
that is referred to in the industry as a negative gap position. See
"-- Liquidity and Interest Rate Sensitivity." A negative gap position exists
when a company cannot adjust the rates on its interest-earning assets as
quickly as rate adjustments are normally experienced on its interest-bearing
liabilities. Accordingly, in a falling rate environment, this situation will
tend to increase net interest spreads because the company's cost of funds are
decreasing faster than the decreases in rates received on interest-earning
assets. Conversely, in a rising rate environment, this situation will tend to
reduce net interest spreads because the cost of interest bearing liabilities
will increase faster than interest rate adjustments on interest-earning assets.
OMNI's interest rate spread for the nine months ended September 30, 1994
was 5.06%, as compared to 4.94% for the nine months ended September 30, 1993.
Interest-earning assets yielded 7.61% and 7.56% for the nine months ended
September 30, 1994 and 1993, respectively, while the cost of interest-bearing
liabilities for the same periods was 2.55% and 2.62%, respectively. The net
interest rate spread was basically unchanged during the first nine months of
1994 as compared to the same period in 1993, as a result of a change in the
declining interest rate environment during 1993 to a slowly rising interest
rate environment during July, August and September of 1994.
-49-
<PAGE> 58
OMNI's interest rate spread was 4.99%, 4.84%, and 3.49% for the years
ended December 31, 1993, 1992, and 1991, respectively. Interest-earning assets
have yielded 7.60%, 8.23%, and 8.70% for these periods, while the cost of
interest-bearing liabilities has declined at a sharper rate, to 2.61%, 3.39%,
and 5.21% for the years ended December 31, 1993, 1992, and 1991, respectively.
The increases in the interest rate spread from year-to-year reflect OMNI's
asset/liability management in a declining interest rate environment. The
spread has increased as rates received on interest-earning assets declined less
than the decline of rates paid on interest-bearing liabilities. For additional
discussion of changes in interest rates and the impact such changes may have on
OMNI's financial performance, see "-- Liquidity and Interest Rate Sensitivity."
Net interest income for the nine months ended September 30, 1994 and
1993 was $19.5 million and $16.4 million, respectively. The major factors
contributing to the increase over the prior period were an 8.8% increase in
investment securities and a 21.4% increase in total loans outstanding. The
funding for the increase in interest-earning assets was provided from a 6.2%
increase in total deposits and additional short-term borrowings, consisting of
federal funds purchased and securities sold under repurchase agreements, which
increased from $8.4 million at September 30, 1993 to $46.1 million at September
30, 1994.
Net interest income for the years ended December 31, 1993, 1992 and
1991 was $22.4 million, $18.7 million and $14.3 million, respectively. The
increase in the volume of interest-earning assets contributed to most of the
increase in net interest income from 1992 to 1993. Average loans increased
$41.5 million from 1992 to 1993, $29.8 million due to normal growth in OMNI's
existing banking business and $11.7 million due to the 1993 acquisitions of two
metropolitan Denver banks. The increase in the volume of loans contributed
$4.4 million to the increase in net interest income during this period, but was
partially offset by $1.4 million of additional interest expense due to
increases in the volume of interest-bearing liabilities that were utilized to
fund the growth in total interest-earning assets. The decrease in the yield on
earning assets reduced net interest income by approximately $2.8 million, which
was partially offset by a similar reduction of $1.7 million of interest expense
due to the lower cost of interest-bearing liabilities. The increase in net
interest income from 1991 to 1992 was primarily a result of lower rates paid on
interest-bearing liabilities as OMNI experienced a significant increase in its
interest rate spread, along with an 8.8% increase in the volume of
interest-earning assets.
Net interest margin is determined by dividing net interest income by the
average earning assets (i.e., it is a function of the interest rate spread and
the relative volumes of earning assets to interest-bearing liabilities). The
net interest margin for the nine months ended September 30, 1994 and 1993 was
5.78% and 5.68%, respectively. The increase is attributable to a
proportionately larger increase in interest-earning assets in relation to the
growth in interest-bearing liabilities over the same period. The net interest
margin for the years ended December 31, 1993, 1992, and 1991 was 5.74%, 5.75%,
and 4.79%, respectively. The impact of lower rates paid for deposits and
short-term borrowings was primarily responsible for the increase in net
interest margin from 1991 to 1992 as the spread increased 38.8% and average
interest-earning assets increased 8.8%. The relative volume increases in 1993
in interest-earning assets were matched by a proportionate increase in net
interest income and resulted in almost no change in margins from 1992 to 1993.
The following tables present information about average assets and
liabilities, the related interest income and expense, and the resultant yields
and costs for the nine months ended September 30, 1994 and 1993, and for the
years ended December 31, 1993, 1992 and 1991.
-50-
<PAGE> 59
OMNIBANCORP AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------------------------------------------
1994 1993
--------------------------------------------------------------------------------
Average Average
ASSETS Balance Interest Rate Balance Interest Rate
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Interest earning deposits $ 1,850 $ 67 4.83% $ 2,184 $ 79 4.83%
Federal funds sold and securities purchased
under resale agreements 5,708 120 2.81% 14,677 123 1.12%
Investment securities:
Taxable 223,317 8,445 5.06% 193,677 8,342 5.76%
Tax-exempt 15,675 559 4.77% 11,324 459 5.42%
Loans (net of unearned income)(1) 204,020 16,460 10.79% 163,646 12,801 10.46%
Tax-exempt loans 122 8 8.94% 177 10 7.42%
-------- --------
Total interest earning assets 450,692 385,685
------- -------
Total interest income 25,659 7.61% 21,814 7.56%
------- -------
Non-earning assets:
Cash and due from banks 25,781 21,905
Land, bank premises, and equipment, net 10,323 8,014
Accrued interest receivable 4,045 3,881
Other assets 9,462 8,281
Allowance for loan losses (2,357) (2,186)
-------- --------
Total Assets $497,946 $425,580
======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Money market and NOW accounts $181,681 3,030 2.23% $154,185 2,721 2.36%
Savings 57,725 990 2.29% 48,356 914 2.53%
Time 62,200 1,489 3.20% 63,945 1,615 3.38%
Short-term borrowings 21,950 670 4.08% 9,629 170 2.36%
-------- --------
Total interest bearing liabilities 323,556 276,115
------- -------
Total interest expense 6,179 2.55% 5,420 2.62%
Non-interest bearing liabilities:
Demand deposits 113,250 93,576
Other liabilities 1,290 1,851
Shareholders' equity 59,850 54,038
-------- --------
Total liabilities and shareholders' equity $497,946 $425,580
======== ========
------- -------
Net interest income 19,480 16,394
Net interest spread 5.06% 4.94%
Net interest margin 5.78% 5.68%
Tax equivalent data:
Tax equivalent adjustment(2) 305 252
------- -------
Adjusted net interest income $19,785 $16,646
======= =======
Net interest spread 5.13% 5.00%
Net interest margin 5.87% 5.77%
</TABLE>
(1) Average total loans include non-accrual loans and loan income includes
loan fee income.
(2) Tax-equivalent adjustment is computed using a 35% statutory tax rate for
all periods presented.
-51-
<PAGE> 60
OMNIBANCORP AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1993 1992
------------------------------- --------------------------------
Average Average
ASSETS Balance Interest Rate Balance Interest Rate
------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Interest earning deposits $ 2,187 $106 4.83% $ 192 $9 4.83%
Federal funds sold and securities purchased
under resale agreements 8,041 172 2.14% 9,945 189 1.89%
Investment securities:
Taxable 200,800 11,133 5.54% 179,055 12,471 6.97%
Tax-exempt 11,570 612 5.29% 10,453 664 6.35%
Loans (net of unearned income)(1) 167,507 17,636 10.53% 126,197 13,488 10.69%
Tax-exempt loans 150 11 7.01% 0 0 N/A
-------- --------
Total interest earning assets 390,255 325,842
------- -------
Total interest income 29,670 7.60% 26,821 8.23%
------- -------
Non-earning assets:
Cash and due from banks 21,662 16,928
Land, bank premises, and equipment, net 8,499 9,590
Accrued interest receivable 3,978 3,601
Other assets 8,796 6,631
Allowance for loan losses (2,179) (1,945)
-------- --------
Total Assets $431,011 $360,647
======== ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Money market and NOW accounts $158,579 3,697 2.33% $126,984 3,795 2.99%
Savings 49,229 1,230 2.50% 35,332 1,131 3.20%
Time 63,274 2,133 3.37% 65,807 2,777 4.22%
Short-term borrowings 6,526 196 3.00% 10,356 378 3.65%
-------- --------
Total interest bearing liabilities 277,608 238,479
------- -------
Total interest expense 7,256 2.61% 8,081 3.39%
Non-interest bearing liabilities:
Demand deposits 97,870 70,492
Other liabilities 2,025 1,985
Shareholders' equity 53,508 49,691
-------- --------
Total liabilities and shareholders' equity $431,011 $360,647
======== ========
------- -------
Net interest income 22,414 18,740
Net interest spread 4.99% 4.84%
Net interest margin 5.74% 5.75%
Tax equivalent data:
Tax equivalent adjustment(2) 335 342
------- -------
Adjusted net interest income $22,749 $19,082
======= =======
Net interest spread 5.07% 4.95%
Net interest margin 5.83% 5.86%
<CAPTION>
Year Ended December 31,
-------------------------------
1991
-------------------------------
Average
ASSETS Balance Interest Rate
-------------------------------
<S> <C> <C> <C>
Interest earning assets:
Interest earning deposits $0 $0 N/A
Federal funds sold and securities purchased
under resale agreements 17,622 519 2.95%
Investment securities:
Taxable 163,836 12,643 7.72%
Tax-exempt 14,110 912 6.46%
Loans (net of unearned income)(1) 103,878 11,978 11.53%
Tax-exempt loans 0 0 N/A
--------
Total interest earning assets 299,446
-------
Total interest income 26,052 8.70%
-------
Non-earning assets:
Cash and due from banks 15,472
Land, bank premises, and equipment, net 9,103
Accrued interest receivable 3,898
Other assets 6,783
Allowance for loan losses (1,968)
--------
Total Assets $332,734
========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest bearing liabilities:
Money market and NOW accounts 110,138 5,272 4.79%
Savings 28,420 1,319 4.64%
Time 76,785 4,701 6.12%
Short-term borrowings 9,578 431 4.50%
-------
Total interest bearing liabilities 224,921
-------
Total interest expense 11,723 5.21%
Non-interest bearing liabilities:
Demand deposits 60,138
Other liabilities 1,660
Shareholders' equity 46,015
-------
Total liabilities and shareholders' equity 332,734
======= -------
Net interest income 14,329
Net interest spread 3.49%
Net interest margin 4.79%
Tax equivalent data:
Tax equivalent adjustment(2) 470
-------
Adjusted net interest income $14,799
=======
Net interest spread 3.64%
Net interest margin 4.94%
</TABLE>
(1) Average total loans include non-accrual loans and loan income includes
loan fee income.
(2) Tax-equivalent adjustment is computed using the 35% statutory tax rate for
1993, and 34% for 1992 and 1991.
N/A - Not Applicable
-52-
<PAGE> 61
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1993 1992
-------------------------------------------------
Average Average
ASSETS Balance Interest Balance Interest
-------------------------------------------------
<S> <C> <C> <C> <C>
Interest earning assets:
Interest earning deposits $ 2,187 $ 106 $ 192 $ 9
Federal funds sold and securities purchased
under resale agreements 8,041 172 9,945 189
Investment securities:
Taxable 200,800 11,133 179,055 12,471
Tax-exempt 11,570 612 10,453 664
Loans (net of unearned income) 167,507 17,636 126,197 13,488
Tax-exempt loans 150 11 0 0
-------- ------- -------- -------
Total earning assets/interest income $390,255 29,670 $325,842 26,821
======== ------- ======== -------
LIABILITIES
Interest bearing liabilities:
Money market and NOW accounts $158,579 3,697 $126,984 3,795
Savings 49,229 1,230 35,332 1,131
Time 63,274 2,133 65,807 2,777
Short-term borrowings 6,526 196 10,356 378
-------- ------- -------- -------
Total interest bearing liabilities/
interest expense $277,608 7,256 $238,479 8,081
-------- --------
Tax equivalent adjustment (1) 335 342
------- -------
Net interest income $22,749 $19,082
======= =======
</TABLE>
<TABLE>
<CAPTION>
Variance Analysis - Favorable (Unfavorable)
---------------------------------------------------
ASSETS Rate Volume Rate/Volume Total
---------------------------------------------------
<S> <C> <C> <C> <C>
Interest earning assets:
Interest earning deposits $ 0 $ 97 $ 0 $ 97
Federal funds sold and securities purchased
under resale agreements 24 (36) (5) (17)
Investment securities:
Taxable (2,544) 1,515 (309) (1,338)
Tax-exempt (111) 71 (12) (52)
Loans (net of unearned income) (201) 4,415 (66) 4,148
Tax-exempt loans - 11 - 11
------- ------- ----- -------
Total earning assets/interest income (2,832) 6,073 (392) 2,849
------- ------- ----- -------
LIABILITIES
Interest bearing liabilities:
Money market and NOW accounts 834 (944) 208 98
Savings 248 (445) 98 (99)
Time 559 107 (22) 644
Short-term borrowings 67 140 (25) 182
------- ------- ----- -------
Total interest bearing liabilities/
interest expense 1,708 (1,142) 259 825
Tax equivalent adjustment (1) -- -- (7) (7)
======= ======= ===== =======
Net interest income $(1,124) $ 4,931 $(140) $ 3,667
======= ======= ===== =======
</TABLE>
(1) Tax-equivalent adjustment is computed using the 35% statutory tax rate for
1993 and 34% for 1992.
-53-
<PAGE> 62
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1992 1991
--------------------------------------------------
Average Average
ASSETS Balance Interest Balance Interest
--------------------------------------------------
<S> <C> <C> <C> <C>
Interest earning assets:
Interest earning deposits $ 192 $ 9 $ 0 $ 0
Federal funds sold and securities purchased
under resale agreements 9,945 189 17,622 519
Investment securities:
Taxable 179,055 12,471 163,836 12,643
Tax-exempt 10,453 664 14,110 912
Loans (net of unearned income) 126,197 13,488 103,878 11,978
Tax-exempt loans - - - -
-------- ------- -------- -------
Total earning assets/interest income $325,842 26,821 $299,446 26,052
======== ------- ======== -------
LIABILITIES
Interest bearing liabilities:
Money market and NOW accounts $126,984 3,795 $110,138 5,272
Savings 35,332 1,131 28,420 1,319
Time 65,807 2,777 76,785 4,701
Short-term borrowings 10,356 378 9,578 431
-------- ------- -------- -------
Total interest bearing liabilities/
interest expense $238,479 8,081 $224,921 11,723
======== ========
Tax equivalent adjustment (1) 342 470
------- -------
Net interest income $19,082 $14,799
======= =======
</TABLE>
<TABLE>
<CAPTION>
Variance Variance Analysis
ASSETS Rate Volume Rate/Volume Total
---------------------------------------------------
<S> <C> <C> <C> <C>
Interest earning assets:
Interest earning deposits $ 0 $ 9 $ 0 $ 9
Federal funds sold and securities purchased
under resale agreements (186) (226) 82 (330)
Investment securities:
Taxable (1,233) 1,175 (114) (172)
Tax-exempt (16) (236) 4 (248)
Loans (net of unearned income) (875) 2,573 (188) 1,510
Tax-exempt loans - - - -
------- ------- ------ ------
Total earning assets/interest income (2,310) 3,295 (216) 769
------- ------- ------ ------
LIABILITIES
Interest bearing liabilities:
Money market and NOW accounts 1,981 (806) 302 1,477
Savings 410 (321) 99 188
Time 1,460 672 (208) 1,924
Short-term borrowings 82 (35) 7 54
------- ------- ------ ------
Total interest bearing liabilities/
interest expense 3,933 (490) 200 3,643
Tax equivalent adjustment (1) - - (128) (128)
------- ------- ------ ------
Net interest income $ 1,623 $ 2,805 $ (144) $4,284
======= ======= ====== ======
</TABLE>
(1) Tax-equivalent adjustment is computed using the 34% statutory tax rate
for 1992 and 1991.
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<PAGE> 63
NET INCOME
Net income for the nine months ended September 30, 1994 and 1993 was
$7.2 million and $6.7 million, respectively, or $0.43 and $0.40 per share,
respectively. The primary factor contributing to the 7.2% increase in
year-to-date earnings was the 18.8% increase in net interest income, as
discussed above, offset in part by a decrease in other income and an increase
in other expenses.
Net income for the years ended December 31, 1993, 1992 and 1991 was
$8.4 million, $7.3 million and $5.1 million, respectively. On a per share
basis, net income was $0.51, $0.43 and $0.30, respectively, for these periods.
The primary factor for the annual increases in net income has been the
increases in net interest income from each year to the next, as discussed
above. In addition, net gains on investment securities transactions have been
$2.6 million, $2.8 million and $2.2 million for the years ended December 31,
1993, 1992 and 1991, respectively. Other income, as discussed below, has also
increased in each of the last three years due to asset growth.
PROVISION FOR LOAN LOSSES AND ASSET QUALITY
The following tables present information about the composition of
OMNI's loan portfolio, non-performing loans and allowance for loan losses for
the past five years and for the nine months ended September 30, 1994.
-55-
<PAGE> 64
OMNIBANCORP
LOAN PORTFOLIO SUMMARY
(in thousands)
The following table sets forth loans, by category, at the dates indicated:
<TABLE>
<CAPTION>
(Unaudited)
September 30, ----------------------------------------------
1994 % 1993 % 1992 %
------------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 33,715 15.5 $ 44,190 23.0 $40,332 28.5
Real estate - construction 21,682 10.0 14,731 7.7 9,851 7.0
Real estate - mortgage 147,821 68.1 116,523 60.8 79,775 56.4
Installment 13,605 6.3 15,713 8.2 11,421 8.1
Lease financing 291 0.1 515 0.3 0 0.0
-------- ----- -------- ----- -------- -----
$217,114 100.0% $191,672 100.0% $141,379 100.0%
======== ======== ========
<CAPTION>
December 31, ---------------------------------------------------
1991 % 1990 % 1989 %
------------ ----- -------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 41,672 35.8 $ 39,540 38.8 $34,849 38.5
Real estate - construction 5,752 5.0 1,641 1.6 1,397 1.5
Real estate - mortgage 60,897 52.4 52,191 51.3 48,442 53.5
Installment 7,913 6.8 8,440 8.3 5,879 6.5
Lease financing 0 0.0 0 0 0.0
-------- ----- -------- ----- ------- -----
$116,234 100.0% $101,812 100.0% $90,567 100.0%
======== ======== =======
</TABLE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The Company does not allocate the allowance for loan losses by loan category.
However the adequacy of the allowance is determined from a number of factors
including management's review and analysis of the risk in the Company's loan
portfolio as well as an analysis of the Company's historical default ratio.
Included in the analysis is consideration of the levels of past due, nonaccural
and restructured loans; underlying collateral values; individual credit
reviews; current economic conditions and any recent trends in historical loan
default data. The Company has determined that the current allowance for loan
losses will adequately cover any charge-offs that may occur during the next
year.
-56-
<PAGE> 65
OMNIBANCORP
NON-PERFORMING LOANS
(IN THOUSANDS)
The following table sets forth the composition of non-performing loans at the
dates indicated:
<TABLE>
<CAPTION>
(Unaudited) Years Ended December 31,
September 30, -------------------------------------------------------------
1994 1993 1992 1991 1990 1989
------------- ---- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Non-accrual loans $ 80 $120 $948 $ 745 $3,872 $3,559
Troubled debt restructurings 64 160 136 800 1,142 1,636
---- ---- ---- ------ ------ ------
Total non-performing loans $144 $280 $1,084 $1,545 $5,014 $5,195
---- ---- ---- ------ ------ ------
Non-performing loans as a percent
of total loans 0.07% 0.15% 0.77% 1.33% 4.92% 5.74%
</TABLE>
ALLOWANCE FOR LOAN LOSSES
(IN THOUSANDS)
The following table presents activity in the allowance for loan losses for the
periods indicated:
<TABLE>
<CAPTION>
(Unaudited)
Nine Months
Ended Years Ended December 31,
September 30, --------------------------------------------------------------
1994 1993 1992 1991 1990 1989
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Beginning balance $2,331 $1,963 $1,861 $2,462 $1,082 $1,299
Loans charged off:
Commercial loans 1 12 64 730 365 224
Real estate loans - 7 19 195 85 784
Installment loans 23 47 35 66 78 119
------ ------ ------ ------ ------ ------
Total charge-offs 24 66 118 991 528 1,127
Recoveries on charged-off loans:
Commercial loans 39 28 40 72 39 15
Real estate loans 2 12 10 34 6 72
Installment loans 12 13 6 20 31 31
------ ------ ------ ------ ------ ------
Total recoveries 53 53 56 126 76 118
Net charge-offs (29) 13 62 865 452 1,009
Additions incident to mergers - 338 - - 740 -
Provision charged to operations - 43 164 264 1,092 792
------ ------ ------ ------ ------ ------
Ending balance $2,360 $2,331 $1,963 $1,861 $2,462 $1,082
====== ====== ====== ====== ====== ======
Allowance as a percent of
total loans 1.09% 1.22% 1.39% 1.60% 2.42% 1.19%
Allowance as a percent of
non-performing loans 1,639.19% 832.50% 181.09% 120.45% 49.10% 20.83%
</TABLE>
-57-
<PAGE> 66
The provision for loan losses provides a reserve (allowance for loan
losses) to which loan losses are charged as the net realizable value of loans
decrease, or when a loan becomes uncollectible. The provision to the reserve
is determined based upon management's monthly review and analysis of the risk
in OMNI's loan portfolio as well as an analysis of OMNI's historical actual
loan loss experience. The review and analysis of the loan portfolio is in
compliance with regulatory requirements for calculating the allowance for loan
losses. As part of this analysis, OMNI management considers the levels of
past due, nonaccrual, and restructured loans; other potential loan problems;
the prevailing economic environment in which OMNI operates; and any other
recent trends in historical loan loss data. This type of analysis takes into
consideration identified problem credits as well as unidentified losses which
may be inherent within the portfolio.
As part of its monthly review process, management maintains a
"Watch Loan Report" of loans that are of concern to management and regulatory
examiners due to past performance, negative financial trends, current economic
conditions or other reasons. At September 30, 1994, the Watch Loan Report
totalled $3.8 million in loans, of which $2.2 million were commercial loans and
$1.6 million were consumer loans. The total is down from the Watch Loan Report
as of December 31, 1993 that totalled $4.4 million in loans, of which $3.4
million were commercial loans, and $1.0 million were consumer loans.
In addition to management's monitoring of the loan portfolio,
OMNI's internal loan review program also independently reviews large loans as
well as samples of other types of loans. This review provides an ongoing,
independent assessment of the credit risk within the portfolio and adherence to
OMNI's credit standards. Based on management's knowledge of problem loans and
reports produced by the internal loan review program, monthly decisions are
made as to whether to specifically allocate a portion of the allowance for loan
losses to a particular problem loan. The balance of the allowance consists of
the expected loss on the remainder of the loan portfolio based on OMNI's
historical actual loan loss experience. As a result of continued improvements
in asset quality due to more favorable economic conditions in the Denver
metropolitan area, the unallocated portion of the allowance for loan losses
(i.e., the portion represented by unidentified losses which may be inherent in
the portfolio as opposed to the specific allocations discussed above) has
increased from 50.5% at December 31, 1993 to 79.6% at September 30, 1994.
Based upon all of the factors discussed above, loan loss
provisions are periodically recorded by OMNI in order to maintain the allowance
for loan losses at an adequate level. While reserve analysis is, by its
nature, a judgmental process, management believes that OMNI's allowance for
loan losses of $2.4 million at September 30, 1994 is adequate to provide for
risks within OMNI's loan portfolio.
Loans are charged off against the allowance when they have
been deemed uncollectible (i.e., the loan is chronically past due, there are no
reasonable expectations that the borrower will be able to pay the amount due,
and there are no other sources of recovery, such as liquidation of the
collateral). Total charge-offs have declined on an annual basis in recent
years. Total net charge-offs (recoveries) for the nine months ended September
30, 1994 were ($29,000), as compared to $13,000 for the nine months ended
September 30, 1993. Total net charge-offs for the years ended December 31,
1993, 1992, and 1991 were $13,000, $62,000 and $865,000, respectively. The
decline in net charge-offs over the past three years is attributable to the
improved economic environment in which OMNI operates. Recoveries of loans
previously charged off (which are included in the computation of total
-58-
<PAGE> 67
net charge-offs and recorded as a restoration of the allowance) totalled
$53,000 and $44,000 for the nine months ended September 30, 1994 and 1993,
respectively, and totalled $53,000, $56,000 and $126,000 for the years ended
December 31, 1993, 1992 and 1991, respectively.
Another measure of loan portfolio quality is the ratio of
nonperforming loans to total loans. Nonperforming loans include nonaccrual
loans and troubled debt restructurings. Loans are considered for nonaccrual
status when they become contractually delinquent more than 90 days, or the
potential collectibility is in doubt. At the time a loan is placed on
nonaccrual status, the existing accrued but uncollected interest is either
reversed from income or charged off, and the accrual of interest income is
suspended. The total amount of nonperforming loans was $144,000 at September
30, 1994, and $280,000, $1.1 million and $1.5 million at December 31, 1993, 1992
and 1991, respectively. The ratio of nonperforming loans to total loans was
0.07% at September 30, 1994, and 0.15%, 0.77% and 1.33% at December 31, 1993,
1992 and 1991, respectively.
There has been no provision charged to the allowance for loan
losses during the first nine months of 1994, as compared to a $43,000 provision
during the same period of the prior year. The primary factor contributing to
the absence of a provision in 1994 has been the improved loan quality.
Improved loan quality is evidenced by the downward trend of nonperforming loans
as a percentage of total loans. In addition, the quality of the loan
portfolios of the two most recent acquisitions, and the related allowance for
loan losses, has been sufficient to require no additional provision to the
consolidated allowance. The provision for loan losses was $43,000, $164,000,
and $264,000 for the years ended December 31, 1993, 1992, and 1991,
respectively. The decrease in the provision from each year to the next is a
direct result of the improved loan quality as well as the decline in nonaccrual
loans over the same period.
Loan charge-offs have steadily decreased annually since 1991,
and the ratio of net charge-offs (recoveries) to average total loans were
(0.01%) and 0.01% for the nine months ended September 30, 1994 and 1993,
respectively, and was 0.01% for the year ended December 31, 1993, down from
0.05% and 0.83 % for the years ended December 31, 1992 and 1991, respectively.
The ratio of allowance for loan losses to total loans at September 30, 1994 was
1.09%, compared to 1.22%, 1.39%, and 1.60% at December 31, 1993, 1992, and
1991, respectively.
OTHER INCOME
Other income consists primarily of non-interest related income
received through the normal course of business, such as service charges, net
gains on sales of assets (including securities), rental income of bank-owned
properties, and other fees for services. Other income for the nine months
ended September 30, 1994 and 1993 was $5.8 million and $6.5 million,
respectively. The most significant factor for the decline from the prior year
was a reduction in the amount of net gains on investment securities
transactions due to the reduction in potential available gains on such
securities resulting from a rising rate environment.
Other income for the years ended December 31, 1993, 1992 and
1991 was $7.7 million, $7.4 million and $7.3 million, respectively. The
increase from 1991 to 1992 was attributable to an increase in net gains on
investment securities transactions, and the increase from 1992 to 1993 was due
primarily to increases in service charges on deposit accounts.
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<PAGE> 68
OTHER OPERATING EXPENSES
Other operating expenses are all non-interest and non-income
tax-related charges that OMNI incurs through the normal course of business.
The expenditures relate primarily to the salaries and benefits of its
employees, the occupancy expense of its premises and equipment (including
depreciation and rent), data processing costs, and all other necessary
operating costs.
Other operating expenses for the nine months ended September
30, 1994 were $14.9 million, up from $13.1 million for the same period in
1993. The 13.5% increase is, in part, a result of the opening of two new
branches in 1994, as well as the recognition of a full nine months of operating
expenses in 1994 relative to the purchase of two banks in 1993, one in
February, and the other in December of that year.
Other operating expenses for the years ended December 31,
1993, 1992 and 1991 were $17.7 million, $15.7 million and $14.9 million,
respectively. Salaries and employee benefits, the largest segment of operating
expenses, were $9.5 million, $8.1 million and $7.3 million, for the years ended
December 31, 1993, 1992, and 1991, respectively. Increases in each of the
years is due to various acquisitions over the three-year period, normal salary
and wage increases, and the higher costs of employee benefits, such as health
insurance. Occupancy costs of bank premises were $1.2 million, $1.3 million
and $1.4 million, for the years ended December 31, 1993, 1992 and 1991,
respectively. The primary reason for the reduction in overall occupancy
expense over the last several years was the acquisition of bank premises
previously leased, and the outsourcing of operations and processing, which
reduced the need for office space.
Other expenses (which include losses on the sale of property
acquired in foreclosures ("OREO"), item and data processing, regulatory fees,
FDIC and other insurance costs, and legal, accounting and directors fees) were
$5.8 million and $5.5 million for the nine months ended September 30, 1994 and
1993, respectively. Other expenses for the years ended December 31, 1993, 1992
and 1991 were $6.5 million, $5.7 million and $5.7 million, respectively.
Nonrecurring losses on the sale of OREO contributed significantly to the higher
expenses in 1991 and 1993, and outsourcing of item processing also contributed
significantly to the higher expenses in 1993. Although outsourcing item
processing increased other expenses, OMNI realized offsetting savings in item
and data processing expenses due to increased efficiencies from this change.
INCOME TAXES
Income tax expense for the nine months ended September 30,
1994 was $3.2 million, a modest increase from $3.1 million during the same
period in 1993. Income tax expense for the years ended December 31, 1993, 1992
and 1991 was $3.9 million, $3.0 million, and $1.4 million, respectively. The
income tax expense has increased annually due to higher levels of taxable
income and lower amounts of tax exempt income during these periods. The
effective tax rate for the years ended December 31, 1993, 1992, and 1991 was
31.5%, 29.3% and 22.1%, respectively. The increase in the effective tax rate
is primarily a result of the partial utilization of a minimum tax credit in
1991, utilization of the balance of the carryover credit in 1992, and no
carryover in 1993.
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<PAGE> 69
Effective for fiscal year 1993, OMNI adopted Statement of
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Under the provisions of SFAS 109, OMNI determined that the cumulative effect of
this accounting change was not material to the financial statements, and prior
year financial statements were not restated.
Deferred taxes result from the difference between the tax
basis of assets and liabilities and their reported amounts in the financial
statements that will result in taxable or deductible amounts in future years.
OMNI's deferred taxes result primarily from deferred loan fees, provisions for
loan losses, and depreciation. The deferred tax liability (benefit) at
December 31, 1993, 1992 and 1991 was $1.1 million, ($221,000) and $96,000,
respectively. The increase from 1992 to 1993 was due primarily to the adoption
of SFAS 115, and depreciation and amortization. The variance from 1991 to 1992
was due to a provision for a potential fraud loss taken in 1992, a partial
insurance recovery of fraud losses realized in 1993, and the timing differences
of deferred loan fees and provision for loan losses.
CAPITAL
OMNI and each of its banking subsidiaries are required to
comply with capital requirements as prescribed by their primary regulators.
These requirements affect the ability of each of these entities to pay
dividends and can affect their operations. These capital regulations require
the maintenance of specified levels of Tier I capital (defined below) and total
capital to risk adjusted assets. These regulations also require the
maintenance of a leverage ratio (Tier I capital to average assets) of at least
3.0% for the most sound entities (other entities will be required to maintain
leverage ratios of 4.0% or 5.0%), and a total risk-based capital ratio of at
least 8.0%. Further, regulations promulgated by the FDIC define specified
levels of capitalization that can affect the amount that a financial
institution will be assessed for deposit insurance and can result in
operational limitations. Those financial institutions which have leverage
ratios in excess of 5.0% and total risk-based capital ratios in excess of 10.0%
are deemed to be "well capitalized," pay the lowest deposit insurance
assessment, and are not subject to operational restrictions.
At September 30, 1994, OMNI exceeded the levels required to be
deemed "well capitalized" by 6.17 percentage points ($30.7 million) in terms of
the leverage ratio, and 14.09 percentage points ($33.9 million) in terms of the
total risk-based capital ratio. The following table provides information
regarding OMNI's capital at the dates indicated:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(dollars in thousands)
<S> <C> <C>
Total Assets $506,437 $482,338
Risk-based Assets 246,384 223,566
Tier I Capital 55,617 50,115
Total Capital 57,977 52,446
Leverage Ratio 11.17% 11.63%
Tier I Risk-based Capital Ratio 23.11 22.96
Total Risk-based Capital Ratio 24.09 24.03
</TABLE>
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<PAGE> 70
LIQUIDITY AND INTEREST RATE SENSITIVITY
The management of a financial institution's net interest margin is known
as asset/liability management, and involves the determination of the effect
that changing interest rates will have on a company's net interest margin. See
"-- Net Interest Income." The process of estimating interest rate risk begins
with the determination of the institution's interest rate gap. The interest
rate gap is the difference in the amount of interest-earning assets and
interest-bearing liabilities that will reprice within a specified time period.
Assets and liabilities will reprice in two different ways: 1) the rate on a
particular asset or liability may be variable and subject to change to reflect
changes in market rates (these changes may occur at any time, or may only be
adjusted at specified points); and 2) fixed rate assets and liabilities are
deemed to reprice at their maturity date.
The interest rate gap during a selected time period provides a general
indication of the potential effect on net interest income of changes in market
interest rates. If rate sensitive assets exceed rate sensitive liabilities, an
institution is deemed to have a "positive" gap, whereas an institution that has
rate sensitive liabilities in excess of rate sensitive assets is deemed to have
a "negative" gap. If all assets and liabilities reacted equally to a change in
market interest rates, an institution with a positive gap would realize
increased net interest income when market rates rise, and decreased net
interest income when market rates fall. Conversely, an institution with a
negative gap would realize decreased net interest income when market rates
rise, and increased net interest income when market rates fall.
One of the principal functions of asset/liability management is to
provide for adequate liquidity. Liquidity is the ability to ensure that
sufficient funds are available to satisfy contractual liabilities, to meet
fluctuating loan demand and withdrawal requirements of depositors, and to meet
other operating needs. OMNI depends on its financial strength, asset quality
and mix, and the stability of its deposit base to ensure adequate liquidity.
In the ordinary course of business, cash flows needed to meet liquidity
requirements are generated from interest and fee income, repayments of loan
balances, increases in deposit accounts, and the sales and maturities of other
earning assets. In addition to the sources of asset liquidity as noted above,
OMNI is able to borrow overnight funds from correspondent banks, as well as
enter into repurchase agreements, whereby owned securities are sold, with
agreements made to repurchase them at a later date. With these financing
arrangements, management believes that OMNI has sufficient sources of liquidity
to meet its current anticipated needs.
Cash and due from banks, federal funds sold and securities purchased
under resale agreements, which represent OMNI's daily liquidity position,
totalled $27.6 million at September 30, 1994, down $12.1 million from December
31, 1993. This liquidity position is affected by the day to day funding of
loans and purchases of investment securities and daily changes in the amount of
deposits outstanding. The decrease is attributable to increased loan demand
and a slight decrease in interest bearing deposits due to some depositors
switching to alternative financial instruments that afforded higher rates.
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<PAGE> 71
OMNIBANCORP
The following table illustrates the repricing opportunities, or rate
sensitivity, of interest-earning assets and interest-bearing liabilities as of
September 30, 1994. The difference, or "gap", is indicated as a percentage of
total assets. The information reflects the repricing opportunity for variable,
or floating, rate assets and liabilities and the maturities and/or estimated
cash flows for fixed rate assets and liabilities.
<TABLE>
<CAPTION>
At September 30, 1994
Maturing or Repricing Periods
(Unaudited)
--------------------------------------------------------------------------
3 Months
Within 3 to 1 to 5 After 5
Months 1 Year Years Years Total
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 84,899 $ 35,196 $ 94,658 $ 2,361 $217,114
Investment securities 7,205 29,816 192,525 8,606 238,152
Federal funds sold and securities purchased
under resale agreements 2,382 - - - 2,382
Interest-bearing balances with
financial institutions 950 - 900 - 1,850
--------- --------- -------- -------- --------
Total interest-earning assets 95,436 65,012 288,083 10,967 459,498
========= ========= ======== ======== ========
Interest-bearing liabilities:
MMDA, NOW and savings accounts 229,036 - - - 229,036
Time deposits 28,683 17,307 11,286 100 57,376
Short-term borrowings 46,081 - - - 46,081
--------- --------- -------- -------- --------
Total interest-bearing liabilities 303,800 17,307 11,286 100 332,493
========= ========= ======== ======== ========
Asset (liability) gap $(208,364) $ 47,705 $276,797 $ 10,867 $127,005
Cumulative asset (liability) gap $(208,364) $(160,659) $116,138 $127,005 ========
========= ========= ======== ========
Cumulative gap to total assets -41.14% -31.72% 22.93% 25.08%
</TABLE>
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<PAGE> 72
OMNI's policy is to manage the exposure to its interest rate gap by
achieving a reasonable balance of rate sensitive assets and liabilities while
maintaining a conservative credit risk level. The interest sensitivity of the
balance sheet is an indicator of OMNI's interest rate risk inherent in its
current position, as well as an indicator of longer horizon earnings trends.
While there is no single interest rate risk measurement system that can satisfy
all objectives, the relationship of interest earning assets and interest
bearing liabilities is reviewed on a monthly basis.
Net interest income is evaluated under various balance sheet
and interest rate scenarios for periods of from one to five years. The results
of this analysis provide the information needed to assess the net interest rate
gap exposure of the balance sheet structure. As market rates approach expected
turning points, management adjusts the interest rate sensitivity of OMNI.
At September 30, 1994, interest-bearing liabilities that are
subject to repricing during the next year exceed interest-earning assets that
are subject to similar repricing by $160.7 million (31.7% of total assets).
Although the assumption in the calculation of the net interest rate gap is that
liabilities such as interest-bearing demand deposits and savings accounts are
subject to immediate repricing, the rates paid on these accounts tend to adjust
more slowly than the changes in interest rates on those interest-earning
assets due to reprice in the same period. These liabilities are not tied to
specific indexes, and are influenced more by competitive market conditions and
other factors. Therefore, a general movement in market interest rates, either
up or down, may not have an immediate impact on the rates paid on these deposit
accounts.
OMNI has historically maintained a negative gap position which
is due, to a large extent, to the large amount of investment securities owned
which at September 30, 1994, December 31, 1991, 1992 and 1993, represented
51.8%, 60.4%, 59.0% and 52.7%, respectively, of total interest-earning assets.
Inasmuch as such investment securities earn interest at a fixed rate, OMNI's
net interest spread is adversely impacted during periods of rising rates.
Conversely, during periods of declining interest rates OMNI's net interest
spread will improve as its interest costs relative to its interest-bearing
liabilities decreases. OMNI manages this negative gap exposure by maintaining
a policy of purchasing investment securities with maturities not greater than
five years. The average maturity of OMNI's investment securities as of
September 30, 1994, December 31, 1991, 1992 and 1993 was 2.16 years, 2.44
years, 2.56 years and 2.09 years, respectively. Accordingly, even though the
current interest rate environment indicates a bias towards higher rates now and
in the immediate future, OMNI believes the average maturity of its investment
securities is currently short enough to enable it to reinvest those proceeds
into higher yielding securities and mitigate the severity of its negative gap.
The Company's fixed rate loans will have a similar impact on
net interest spreads as do fixed rate investment securities; however, the
amount of fixed rate loans outstanding as of September 30, 1994, December 31,
1991, 1992 and 1993 are not as significant as the Company's exposure to fixed
rate investment securities. Therefore, even though the Company has a negative
gap position, any detrimental effect on the Company's earnings potential is
somewhat mitigated by the short average maturity of its investment securities
portfolio.
At September 30, 1994, significant off-balance sheet items
that could impact OMNI's liquidity included unused loan commitments of $70.9
million and outstanding letters of credit of $2.6 million. At December 31,
1993, total unused loan commitments were $61.6 million, and outstanding letters
of credit totalled $1.8 million.
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<PAGE> 73
THE BUSINESS OF OMNI
GENERAL
OMNI is a multi-bank holding company which, through its subsidiaries,
engages primarily in general commercial and retail banking in the Denver,
Colorado metropolitan area. At September 30, 1994, OMNI had total deposits of
approximately $400 million, total assets of approximately $506 million and 346
full-time employees in 18 banking offices.
OMNI's five banking subsidiaries are commercial banks organized and
operated under the laws of the State of Colorado. They offer a wide range of
personal and business related financial services to individuals, corporations,
municipalities and other public and governmental entities. These services
include personal and business checking accounts, a full range of time deposit
accounts and personal and commercial lending.
OMNI also owns 50% of the capital stock of Merchants Mortgage which is
engaged primarily in the business of purchasing, with recourse, consumer
mortgage notes, secured by first deeds of trust, originated by real estate
development companies and selling such notes to banks with recourse. In
connection with the Merger, OMNI has agreed to use its best efforts to enter
into a definitive written agreement with a prospective purchaser prior to
January 31, 1995, and to dispose of its interest in Merchants Mortgage prior to
the Effective Time. See "The Merger -- Sale of Merchants Mortgage."
OMNI's executive offices are located at 3600 S. Yosemite, Suite 210,
Denver, Colorado 80237, and its telephone number is (303) 773-6664.
HISTORY
OMNI was incorporated under the laws of the State of Colorado in 1974 as
"Mountain Financial Services, Inc." and changed its name to its current form in
1981. OMNI commenced operations in 1976 by qualifying as a bank holding
company under the BHCA and acquiring all the stock of Northwest State Bank
(subsequently renamed OMNIBANK Arvada).
OMNI has significantly expanded its banking operations by organizing or
acquiring additional banking subsidiaries. Historically, OMNI's banking
subsidiaries were organized as "unit banks" operating a single banking office
because Colorado law prohibited branch banking. However, following a change in
Colorado law permitting branch banking, OMNI commenced a program in January
1994 to convert certain of its unit banks into branches of OMNIBANK Southeast
in order to capitalize on certain operating efficiencies. As a result, OMNI's
five current banking subsidiaries are OMNIBANK Southeast, OMNIBANK Aurora,
OMNIBANK Parker Road, OMNIBANK Commerce City and OMNIBANK Iliff.
COMPETITION
Commercial banking in the Denver market area is highly competitive, and OMNI
faces active competition for both deposits and loans. The Denver market area
consists of the Denver greater
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<PAGE> 74
metropolitan area, Boulder County and certain portions of Adams, Arapahoe and
Douglas counties. OMNI competes for deposits with commercial banks, savings
and loan associations, credit unions, and other financial institutions. OMNI
also competes for deposits with financial intermediaries and other investment
alternatives, including brokerage firms, "money market" funds, government
bonds, corporate bonds and other forms of fixed income investments. Changes
in state and federal banking laws over the last few years have resulted in
increased competition from both conventional banking institutions and other
businesses offering financial services and products. In making loans, OMNI
competes with savings and loan associations, credit unions, industrial banks,
insurance companies, real estate investment trusts, consumer finance agencies,
mortgage bankers and other consumer and commercial lenders.
REGULATION AND SUPERVISION OF OMNI
OMNI is a multi-bank holding company within the meaning of the BHCA and
is regulated and examined by the Federal Reserve Board. The OMNI Banks are
chartered by the State of Colorado and members of the FDIC and the Federal
Reserve System. The OMNI Banks are subject to supervision and periodic
examination by the Colorado Division of Banking and the Federal Reserve Bank of
Kansas City. Regulation and examination by banking regulatory authorities are
primarily directed toward the benefit of depositors, rather than shareholders.
The Federal Reserve Board has adopted regulations that specify the types
of activities in which bank holding companies may engage. Regulations
promulgated by the Federal Reserve Board and FDIC also subject bank holding
companies and their subsidiary banks to certain restrictions on the extension
of credit by subsidiary banks to the bank holding company or any of its
subsidiaries or affiliates. In addition, federal and state banking laws
include requirements as to the maintenance of reserves against deposits,
minimum requirements as to capital, restrictions on dividends and restrictions
on the nature and amount of loans.
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<PAGE> 75
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP
OF MANAGEMENT OF OMNI
The following table sets forth information as of January 6, 1995,
concerning the beneficial ownership of OMNI Common Stock by each person known
by OMNI to own beneficially more than 5% of the issued and outstanding shares
of OMNI Common Stock.
<TABLE>
<CAPTION>
Number of Shares Percentage of
of Common Stock Outstanding
Name and Address Beneficially Owned OMNI Common Stock
- ---------------- ------------------ -----------------
<S> <C> <C>
Larry A. Mizel 8,741,233(1) 53.01%(1)
3600 S. Yosemite
Suite 900
Denver, CO 80237
Michael A. Feiner 946,804(2) 5.74%(2)
3600 S. Yosemite
Suite 1000
Denver, CO 80237
</TABLE>
- ----------------
(1) Mr. Mizel is the Chairman of the Board of OMNI. The number of shares and
percentage shown in the table for Mr. Mizel consist of 7,701,281 shares
owned directly by Mr. Mizel plus: (i) 230,012 shares owned by LaM
Financial Holdings, Ltd., a limited partnership of whose corporate
general partner Mr. Mizel is president and of whose trust limited
partners Mr. Mizel is the beneficiary; (ii) 79,815 shares owned by Carol
Mizel, Mr. Mizel's wife; (iii) 326,671 shares owned by Steven M. Mizel,
Mr. Mizel's brother; (iv) 130,000 shares owned by Titan Trust, a trust
established for the benefit of Steven M. Mizel, of which Canadian
Imperial Bank of Commerce-Trust Company (Bahamas) Limited serves as
trustee; (v) 43,395 shares owned by Sonem Partners, Ltd., a limited
partnership of whose corporate general partner Steven M. Mizel is
president and of whose trust limited partners Steven M. Mizel is the
beneficiary; (vi) 50,673 shares owned by Mizel Resources, a trust in
which Morris Mizel, Mr. Mizel's father, is the beneficiary and trustee;
(vii) 79,167 shares owned by Bonnie Guzofsky, Carol Mizel's sister;
(viii) 79,166 shares owned by the Michael Guzofsky 1985 Trust, a trust
established for the benefit of Michael Guzofsky, Carol Mizel's brother;
(ix) 1,053 shares owned by a limited liability company controlled by
Harold Guzofsky, Carol Mizel's father; and (x) 20,000 shares owned by the
Vivian Guzofsky Grantor Income Trust, a trust established by Vivian
Guzofsky, Carol Mizel's mother, for the benefit of her children. The
persons and entities described in clauses (i) through (x) above, together
with Mr. Mizel, may be deemed to be a group; however, Mr. Mizel disclaims
beneficial ownership of all such shares except the 8,011,108 shares owned
directly by himself, Carol Mizel and LaM Financial Holdings, Ltd.,
representing 48.58% of the outstanding shares of OMNI Common Stock.
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<PAGE> 76
(2) Mr. Feiner is a Director of OMNI. The number of shares and percentage
shown in the table for Mr. Feiner consist of 537,610 shares owned
directly by Mr. Feiner plus: (i) 206,000 shares owned by Debra L.
Feiner, Mr. Feiner's wife; (ii) 61,250 shares owned collectively by Mr.
Feiner's three minor children, for whom he serves as custodian; (iii)
47,562 shares owned by Morton S. Frankel, Debra L. Feiner's father; (iv)
47,849 shares owned by Richard E. Frankel, Debra L. Feiner's brother; and
(v) 46,533 shares owned by Mitchell L. Frankel, Debra L. Feiner's
brother. The persons described in clauses (i) through (v) above,
together with Mr. Feiner, may be deemed to be a group; however, Mr.
Feiner disclaims beneficial ownership of all such shares except the
804,860 shares owned directly by himself, Debra L. Feiner and their
three minor children, representing 4.88% of the outstanding shares of
common stock.
The following table gives information concerning the beneficial ownership
of the OMNI Common Stock on January 6, 1995 by (i) each director of OMNI; (ii)
the chief executive officer of OMNI and the next four highest paid executive
officers (collectively, the "Named Executives"); and (iii) all directors and
executive officers of OMNI as a group.
<TABLE>
<CAPTION>
Number of Shares Percentage of Total
Name of Common Stock Outstanding Common Stock
---- --------------- ------------------------
<S> <C> <C>
Larry A. Mizel(1) 8,741,233(2) 53.01%(2)
Michael A. Feiner 946,804(3) 5.74%(3)
Calvin Eisenberg 617,023(4) 3.74%(4)
Robert W. Graf(1) 409,224(5) 2.46%(5)
Raymond T. Baker(6) 356,870 2.16%
Gary D. Levine(1) 293,237(7) 1.76%(7)
Gary Klearman(1) 263,037(8) 1.59%(8)
Harold Guzofsky 259,201(9) 1.57%(9)
Donald P. Shwayder 242,422(10) 1.47%(10)
William B. Kemper(6) 92,152 *
John A. Love(6) 89,178 *
Donald L. Kortz(6) 81,563 *
Kevin Ford(1)(11) 800 *
All Directors and Named Executive
Officers as a Group
(11 persons) 11,902,069(12) 70.59%(12)
</TABLE>
- -------------------
* Less than 1%
(1) Messrs. Graf, Mizel, Levine, Klearman and Ford are the Named Executives
of OMNI.
(2) See footnote (1) in the previous table.
(3) See footnote (2) in the previous table.
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<PAGE> 77
(4) Mr. Eisenberg is a Director of OMNI. The number of shares and
percentage shown in the table for Mr. Eisenberg consist of 400 shares
owned directly by Mr. Eisenberg plus: (i) 523,273 shares owned by JRA
Enterprises, an Illinois limited partnership of which trusts for the
benefit of Mr. Eisenberg and his family are, directly or indirectly, a
general and limited partners; and (ii) 93,350 shares owned by C.E.
Revocable Trust, a trust established for the benefit of Mr. Eisenberg.
The persons described in clauses (i) and (ii) above, together with Mr.
Eisenberg, may be deemed to be a group.
(5) Mr. Graf is a Director and the President and Chief Executive Officer of
OMNI. The number of shares and percentage shown in the table for Mr.
Graf consist of 15,000 shares owned directly by Mr. Graf plus: (i)
17,300 shares owned by Tricia Blair Graf, Mr. Graf's wife; (ii) 91,800
shares owned by Mr. Graf's two minor children, for whom Tricia Blair Graf
acts as custodian; (iii) 4,520 shares owned in joint tenancy by Nancy L.
Hall, Mr. Graf's daughter, and her husband, Robert L. Hall; (iv) 3,110
shares owned by Nancy L. Hall, individually; (v) 1,457 shares owned by
Nancy L. Hall's minor child, for whom Ms. Hall acts as custodian; (vi)
4,000 shares owned jointly by Barbara B. Eulenstein, Tricia Blair Graf's
sister, and Ms. Eulenstein's husband, Howard R. Eulenstein; (vii) 1,300
shares owned by Martha Blair, Tricia Blair Graf's sister; (viii) 155,000
shares which are covered by currently exercisable stock options; and (ix)
115,737 shares owned by the OMNIBANCORP Profit Sharing Plan, of which Mr.
Graf has shared voting and dispositive power in his capacity as a member
of the committee, along with Messrs. Levine, Klearman, and Richard
Jorgensen, which administers such Profit Sharing Plan. The persons and
Profit Sharing Plan described in clauses (i) through (ix) above, together
with Mr. Graf, may be deemed to be a group; however, Mr. Graf disclaims
beneficial ownership of all such shares except the 394,837 shares
(including the shares covered by exercisable options) owned directly by
himself, Tricia Blair Graf (individually and as custodian for their minor
children) and by the Profit Sharing Plan, representing 2.37% of the
outstanding shares of OMNI Common Stock.
(6) Messrs. Baker, Kemper, Love and Kortz are Directors of OMNI. The number
of shares and percentages shown in the table for these individuals
consist entirely of shares owned directly by such individuals.
(7) Mr. Levine is a Director and the Senior Credit Officer of OMNI and the
President and Chief Executive Officer of OMNIBANK Southeast. The number
of shares and percentage shown in the table for Mr. Levine consist of
38,750 shares owned directly by Mr. Levine plus: (i) 3,750 shares owned
jointly by Mr. Levine and his wife, Constance R. Levine; (ii) 135,000
shares which are covered by currently exercisable stock options; and
(iii) 115,737 shares owned by the OMNIBANCORP Profit Sharing Plan, of
which Mr. Levine has shared voting and dispositive power in his capacity
as a member of the committee, along with Messrs. Graf, Klearman, and
Richard Jorgensen, which administers such Profit Sharing Plan. The
persons and Profit Sharing Plan described in clauses (i) through (iii)
above, together with Mr. Levine, may be deemed to be a group.
(8) Mr. Klearman is a Director and the Executive Vice President and Secretary
of OMNI. The number of shares and percentage shown in the table for Mr.
Klearman consist of 57,500
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<PAGE> 78
shares owned directly by Mr. Klearman plus: (i) 9,800 shares owned by a
trust established for Mr. Klearman's children, of which Mr. Klearman
serves as trustee; (ii) 80,000 shares which are covered by currently
exercisable stock options; and (iii) 115,737 shares owned by the
OMNIBANCORP Profit Sharing Plan, of which Mr. Klearman has shared voting
and dispositive power in his capacity as a member of the committee, along
with Messrs. Graf, Levine, and Richard Jorgensen, which administers such
Profit Sharing Plan. The persons and Profit Sharing Plan described in
clauses (i) through (iii) above, together with Mr. Klearman, may be
deemed to be a group.
(9) Mr. Guzofsky is a Director of OMNI. The number of shares and percentage
shown in the table for Mr. Guzofsky consist of 1,053 shares owned by a
limited liability company controlled by Mr. Guzofsky plus: (i) 20,000
shares owned by the Vivian Guzofsky Grantor Income Trust, a trust
established by Vivian Guzofsky, Mr. Guzofsky's wife, for the benefit of
her children; (ii) 79,815 shares owned by Carol Mizel, Mr. Guzofsky's
daughter; (iii) 79,167 shares owned by Bonnie Guzofsky, Mr. Guzofsky's
daughter; and (iv) 79,166 shares owned by the Michael Guzofsky 1985
Trust, a trust established for the benefit of Michael Guzofsky, Mr.
Guzofsky's son. The persons and entities described in clauses (i) through
(iv) above and Mr. Mizel together with Mr. Guzofsky, may be deemed to be
a group; however, Mr. Guzofsky disclaims beneficial ownership of all
such shares except the 21,053 shares owned directly by himself and the
Vivian Guzofsky Grantor Income Trust, representing less than 1% of the
outstanding shares of OMNI Common Stock.
(10) Mr. Shwayder is a Director of OMNI. The number of shares and percentage
shown in the table consist of 106,414 shares owned directly by Mr.
Shwayder plus: (i) 101,413 shares owned by Arlene Shwayder, Mr.
Shwayder's wife; (ii) 20,515 shares owned in joint tenancy by Kerri S.
Greenberg and David Ethan, Mr. Shwayder's daughter and son-in-law; (iii)
4,000 shares owned by Kerri S. Greenberg, individually; (iv) 832 shares
owned by Kerri S. Greenberg's two minor children, for whom Ms. Greenberg
acts as custodian; (v) 4,000 shares owned by Bonnie S. Shwayder-Kassell,
Mr. Shwayder's daughter; (vi) 1,248 shares owned by Bonnie S.
Shwayder-Kassell's three minor children, for whom Ms. Shwayder-Kassell
acts as custodian; and (vii) 4,000 shares owned by Scott Shwayder, Mr.
Shwayder's son. The persons described in clauses (i) through (vii)
above, together with Mr. Shwayder, may be deemed to be a group; however,
Mr. Shwayder disclaims beneficial ownership of all such shares except the
207,827 shares owned directly by himself and Arlene Shwayder,
representing 1.26% of the outstanding shares of OMNI Common Stock.
(11) Mr. Ford is the Chief Financial Officer of OMNI.
(12) The number of shares and percentage shown in the table for all executive
officers and directors as a group include the shares as to which they
disclaim beneficial ownership in the above footnotes.
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THE BUSINESS OF KEYCORP
OVERVIEW
On March 1, 1994, old Key, a financial services holding company
headquartered in Albany, New York, with approximately $33 billion in assets at
December 31, 1993, merged into and with Society, a financial services holding
company headquartered in Cleveland, Ohio, with approximately $27 billion in
assets at December 31, 1993, pursuant to an Agreement and Plan of Merger, and a
related Supplemental Agreement to Agreement and Plan of Merger, each dated as
of October 1, 1993, and each as amended. In the merger, Society was the
surviving corporation, but changed its name to KeyCorp. All financial data of
KeyCorp set forth in this Prospectus/Proxy Statement has been restated to give
effect to the merger of old Key into and with Society.
The merger of old Key into and with Society created a financial services
holding company which traces its roots back to 1825, when the first predecessor
of KeyCorp was organized. At September 30, 1994, KeyCorp was one of the largest
bank holding companies in the United States with consolidated assets of
approximately $64.5 billion.
KeyCorp is a legal entity separate and distinct from its banking and
other subsidiaries. Accordingly, the right of KeyCorp, its security holders
and its creditors to participate in any distribution of the assets or earnings
of its banking and other subsidiaries is necessarily subject to the prior
claims of the respective creditors of such banking and other subsidiaries,
except to the extent that claims of KeyCorp in its capacity as a creditor of
such banking and other subsidiaries may be recognized.
BANKING SUBSIDIARIES
KeyCorp provides banking and other financial services across much of the
country's northern tier and in Florida through a network of subsidiaries
operating 1,279 full-service banking offices in 13 states, giving KeyCorp the
nation's fifth largest domestic branch network as of September 30, 1994
(without giving effect to KeyCorp's recent acquisition of BANKVERMONT
Corporation described herein). KeyCorp's primary banking subsidiaries include
Society National Bank, headquartered in Cleveland, Ohio, the largest bank in
Ohio and one of the nation's major regional banks with $24.0 billion in total
assets and 296 full-service banking offices at September 30, 1994; Key Bank of
New York, headquartered in Albany, New York, with $14.8 billion in total assets
and 328 full-service banking offices at September 30, 1994; and Key Bank of
Washington, headquartered in Tacoma, Washington, with $7.5 billion in total
assets and 190 full-service banking offices at September 30, 1994. In
addition, KeyCorp operates banking subsidiaries in Alaska, Colorado, Florida,
Idaho, Indiana, Maine, Michigan, Oregon, Utah, Vermont (its Vermont subsidiary
was acquired on January 27, 1995) and Wyoming.
Key Bank of Colorado is a state-chartered commercial bank headquartered
in Fort Collins, Colorado, and a wholly owned subsidiary of KeyCorp. At
September 30, 1994, Key Bank of Colorado had approximately $600 million in
total assets and served customers through a network of 15 full-service banking
offices. Key Bank of Colorado was established in June 1993 with the
acquisition by KeyCorp of Home Federal Savings Bank and expanded in March of
1994 when KeyCorp acquired Commercial Bancorporation of Colorado. On December
30, 1994, Key Bank of
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Colorado acquired The Bank of Greeley, a single location bank in Greeley,
Colorado with $61 million in total assets as of September 30, 1994. See
"-- Recently Completed Acquisitions." Key Bank of Colorado is engaged in
general banking business in the State of Colorado providing commercial and
retail banking services to consumers, small businesses and corporate customers
in the eastern region of Colorado. Retail banking products offered by Key
Bank of Colorado include, among others, consumer loan products (including
residential real estate mortgage lending, direct and indirect installment,
home equity, credit card and student lending), and private banking
services. Commercial banking products and services include, among others,
real estate, agribusiness, corporate and cash management. Following
consummation of the Merger, KeyCorp plans to effect the merger of the OMNI
Banks, with and into Key Bank of Colorado.
KeyCorp's other banking subsidiaries also provide a wide range of
banking, fiduciary and other financial services to their corporate, individual
and institutional customers located throughout the country. In addition to the
customary banking services of accepting funds for deposit and making loans,
KeyCorp's banking subsidiaries provide specialized services tailored to
specific markets, including investment management services, personal and
corporate trust services, personal financial services, customer access to money
market and other mutual funds, cash management services, investment banking
services and international banking services.
OTHER FINANCIAL SERVICES SUBSIDIARIES
In addition to the services provided through its banking offices,
KeyCorp engages in a wide range of other financial services through
subsidiaries, including mortgage banking, investment management, mutual fund
advisory and trust services. At September 30, 1994, through its banking and
other companies, KeyCorp serviced approximately $28 billion in mortgage loans,
managed approximately $33 billion in assets (excluding corporate trust assets)
in its investment management and trust operations, and managed approximately $5
billion in proprietary mutual funds.
KeyCorp currently engages in the mortgage banking business through
KeyCorp Mortgage Inc., a mortgage banking subsidiary of Key Bank of New York.
KeyCorp Mortgage Inc. originates, services, packages and sells residential
mortgage loans, and, to a lesser extent, services commercial and income
property loans. Its business activities are conducted throughout all of the
geographic areas in which the banking subsidiaries of KeyCorp are located,
except Florida (Alaska, Colorado, Idaho, Indiana, Maine, Michigan, New York,
Ohio, Oregon, Utah, Washington and Wyoming), and in Arizona, California and New
Jersey where KeyCorp's subsidiary banks do not maintain any branches. On
October 6, 1994, KeyCorp announced that it is exploring the possibility of
selling all or a substantial portion of the assets and business of KeyCorp
Mortgage Inc.
KeyCorp engages in the investment management business through its bank
and trust company subsidiaries as noted above and also through two registered
investment adviser subsidiaries owned by Society National Bank. Through these
entities, KeyCorp provides investment management services to institutional and
individual clients, including large corporate and public retirement plans,
Taft-Hartley plans, foundations and endowments, and high net worth individuals.
KeyCorp's bank and investment management subsidiaries also serve as investment
advisers to KeyCorp's proprietary mutual funds.
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Through its nonbanking subsidiaries, KeyCorp provides additional
financial services both in and outside of its primary banking markets. These
include personal and corporate trust services, investment management,
reinsurance of credit life and accident and health insurance on loans made by
subsidiary banks, venture capital and small business investment financing
services, equipment lease financing, community development financing, stock
transfer agent, and other financial services. KeyCorp is also a participant in
a joint venture with a number of other unaffiliated bank holding companies in
Electronic Payment Services, Inc., which through its subsidiary, Money Access
Service Inc., (more commonly known as the MAC network) provides automated
teller machine access for bank customers throughout much of the United States.
RECENTLY COMPLETED ACQUISITIONS
BANKVERMONT CORPORATION. On January 27, 1995, KeyCorp acquired
BANKVERMONT Corporation, headquartered in Burlington, Vermont. BANKVERMONT
Corporation's subsidiary, Bank of Vermont, with 12 branches and total assets of
$688 million at September 30, 1994, became an indirect wholly owned subsidiary
of KeyCorp on the same date and was renamed Key Bank of Vermont. The
transaction was accounted for as a purchase.
THE BANK OF GREELEY. On December 30, 1994, KeyCorp acquired The Bank of
Greeley, a single location bank in Greeley, Colorado ("Greeley Bank"), through
a merger of Greeley Bank with and into Key Bank of Colorado. In exchange for
all of the outstanding shares of common stock of Greeley Bank, 259,697 shares
of KeyCorp Common Stock were issued (based on an exchange ratio of 1.026 shares
of KeyCorp Common Stock for each share of Greeley Bank). The transaction was
accounted for as a pooling of interests. Greeley Bank had total assets of
$61 million at September 30, 1994.
FIRST CITIZENS BANCORP OF INDIANA. On December 13, 1994, KeyCorp
acquired First Citizens Bancorp of Indiana ("First Citizens"), based in
Anderson, Indiana, for total consideration of $50.8 million in a tax-free
exchange of stock. It is anticipated that by the end of the first quarter of
1995, First Citizens' subsidiary, Citizens Banking Company, an
Indiana-chartered commercial bank with nine branches in central Indiana, and
total assets of $351 million at September 30, 1994, will be merged with and
into Society National Bank, Indiana, a wholly owned subsidiary of KeyCorp. The
transaction was accounted for as a purchase.
STATE HOME SAVINGS BANK, FSB. On September 16, 1994, Society National
Bank, a wholly owned subsidiary of KeyCorp, acquired State Home Savings Bank,
FSB ("State Home Savings"), a closely held Federal stock savings bank based in
Bowling Green, Ohio, for cash consideration of $44.2 million. The transaction
was accounted for as a purchase. State Home Savings had 14 branches in five
Northwest Ohio counties and total assets of $335 million at June 30, 1994.
PENDING ACQUISITIONS AND POTENTIAL DIVESTITURE
CASCO NORTHERN BANK, NATIONAL ASSOCIATION. On June 23, 1994, KeyCorp
reached a definitive agreement to acquire Casco Northern Bank, National
Association ("Casco Northern"), headquartered in Portland, Maine. At September
30, 1994, Casco Northern had 34 branches in Maine and total assets of $1.2
billion. Pursuant to the terms of a letter dated December 16, 1994 from the
Department of Justice and agreed to by the Maine Attorney
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General, KeyCorp may acquire Casco Northern and Casco Northern may merge with
and into Key Bank of Maine, an indirect wholly owned subsidiary of KeyCorp,
following consummation of the acquisition, on the condition that KeyCorp
divest 11 of the 34 Casco Northern branches. This acquisition, which is
subject to certain regulatory approvals, is expected to close during the first
quarter of 1995 and will be accounted for as a purchase.
KEYCORP MORTGAGE INC. On October 6, 1994, KeyCorp announced that it is
exploring the possibility of selling all or a substantial portion of the assets
and business of KeyCorp Mortgage Inc. ("Key Mortgage"), KeyCorp's mortgage
banking subsidiary. Key Mortgage is a wholly owned subsidiary of Key Bank of
New York, an indirect subsidiary of KeyCorp. KeyCorp is currently accepting
bids for the sale of the capital stock of Key Mortgage, and such sale will
exclude the assets used in the origination of mortgages by Key Mortgage but
will include, among other things, the servicing portfolio, servicing
operations, secondary marketing functions and wholesale production functions of
Key Mortgage. See "-- Other Financial Services Subsidiaries."
SPEARS, BENZAK, SALOMON & FARRELL, INC. On November 28, 1994, KeyCorp
announced that it had entered into a letter of intent pursuant to which Society
National Bank, a wholly owned subsidiary of KeyCorp, through its subsidiary
KeyCorp Asset Management Holdings, Inc., will acquire Spears, Benzak, Salomon &
Farrell, Inc., a New York-based investment management firm ("Spears, Benzak").
The transaction, which is subject to certain regulatory approvals, is expected
to close during the first quarter of 1995 and will be accounted for as a
purchase. Spears, Benzak had aggregate assets under management of
approximately $3 billion as of September 30, 1994.
REGULATION AND SUPERVISION OF KEYCORP
GENERAL. As a bank holding company, KeyCorp is subject to the
regulation and supervision of the Federal Reserve Board under the BHCA. Under
the BHCA, bank holding companies may not, in general, directly or indirectly
acquire the ownership or control of more than 5% of the voting shares or
substantially all of the assets of any company, including a bank, without the
prior approval of the Federal Reserve Board. In addition, bank holding
companies are generally prohibited under the BHCA from engaging in nonbanking
(i.e. commercial or industrial) activities, subject to certain exceptions. As
a result of the 1993 acquisition of the institution that is now known as
Society First Federal Savings Bank ("Society First Federal"), KeyCorp is also
subject to the regulation and supervision of the Office of Thrift Supervision
(the "OTS") as a savings and loan holding company registered under the Home
Owners' Loan Act of 1933, as amended.
The banking and savings association subsidiaries (collectively, the
"banking subsidiaries" or "subsidiary banks") of KeyCorp are subject to
extensive supervision, examination and regulation by applicable Federal and
state banking agencies. Society National Bank, Society National Bank, Indiana,
and Key Bank USA, N.A. are national banking associations with full banking
powers, subject to regulation, supervision and examination by the Office of the
Comptroller of the Currency (the "OCC"). Two other national banking
subsidiaries of KeyCorp operate under charters that limit their banking powers
to trust-related activities. These entities are also subject to the
regulation, supervision and examination of the OCC, although they are not
regulated as banks for purposes of the BHCA. All of the other banking
subsidiaries of KeyCorp, other than Society First Federal, are state-chartered
banks that are subject to supervision, examination and regulation by the
applicable state banking authority in the state in which each such institution
is chartered. In addition,
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KeyCorp's state-chartered banks are not members of the Federal Reserve System
(and are therefore so-called "nonmember banks"), and, accordingly, are subject
to the regulation, supervision and examination of the FDIC. Because each of
KeyCorp's banking subsidiaries is insured by the FDIC, the FDIC also has
regulatory and supervisory authority over the banking subsidiaries in that
capacity. The OTS is charged with regulation of Federal savings associations
such as Society First Federal, presently KeyCorp's only such institution.
Depository institutions are affected significantly by the actions of the
Federal Reserve Board as it attempts to control the money supply and credit
availability in order to influence the economy. The regulatory regime
applicable to bank holding companies and their subsidiaries is not intended
generally for the protection of investors but is directed toward protecting the
interest of depositors, the FDIC deposit insurance funds and the U.S. banking
system as a whole.
KeyCorp also has nonbanking subsidiaries that are subject to
supervision, regulation and examination by the Federal Reserve Board, as well
as other applicable regulatory agencies. For example, KeyCorp's insurance
subsidiaries are subject to regulation by the insurance regulatory authorities
of the various states, and KeyCorp's state-chartered trust company subsidiaries
(which are considered nonbanking companies for purposes of the BHCA) are
subject to regulation by state banking authorities. Other nonbanking
subsidiaries are subject to other laws and regulations of both the Federal
government and the various states in which they are authorized to do business.
For example, KeyCorp's discount brokerage and investment adviser subsidiaries
are subject to supervision and regulation by the Commission, the National
Association of Securities Dealers, Inc. and state securities regulators.
The following references to certain statutes and regulations are brief
summaries thereof. The references are not intended to be complete and are
qualified in their entirety by reference to the statutes and regulations
themselves. In addition there are a number of other statutes and regulations
not summarized below that apply to and regulate the operation of KeyCorp and
its banking and nonbanking subsidiaries. A change in applicable law or
regulation may have an effect on the business of KeyCorp.
DIVIDEND RESTRICTIONS. KeyCorp is a legal entity separate and distinct
from its banking and other subsidiaries. The principal source of cash flow of
KeyCorp, including cash flow to pay dividends on KeyCorp's shares of common and
preferred stock and debt service on KeyCorp's debt, is dividends from its
banking and other subsidiaries. Various Federal and state statutory and
regulatory provisions limit the amount of dividends that may be paid to KeyCorp
by its banking subsidiaries without regulatory approval. No such statutory or
regulatory limits apply to the amount of dividends that may be paid to KeyCorp
by its other, nonbanking subsidiaries. The Federal Reserve Board, the OCC,
the FDIC and the OTS, however, have issued policy statements which provide that
insured depository institutions and their holding companies should generally
pay dividends only out of current earnings.
Under all of the laws, regulations and other restrictions applicable to
KeyCorp's banking subsidiaries, management estimates that, as of September 30,
1994, KeyCorp's banking subsidiaries could have declared dividends estimated to
be $639.1 million in the aggregate, without
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obtaining prior regulatory approval, not including dividends that may be
payable to KeyCorp by KeyCorp's trust company subsidiaries, Society First
Federal and certain other financial service subsidiaries.
HOLDING COMPANY STRUCTURE -- Transactions Involving Banking
Subsidiaries. Transactions involving KeyCorp's banking subsidiaries are
subject to Federal Reserve Act restrictions which limit the transfer of funds
from such subsidiaries to KeyCorp and (with certain exceptions) to KeyCorp's
nonbanking subsidiaries (together, "affiliates") in so-called "covered
transactions," such as loans and other extensions of credit, investments, or
asset purchases. Unless an exemption applies, each such transaction by a
banking subsidiary with one of its nonbanking affiliates is limited in amount
to 10% of that banking subsidiary's capital and surplus and, with respect to
all such transfers to affiliates in the aggregate, to 20% of that banking
subsidiary's capital and surplus. Furthermore, loans and extensions of credit
are required to be secured in specified amounts. In addition, a bank holding
company and its banking subsidiaries are prohibited from engaging in certain
tie-in arrangements in connection with any extension of credit, lease or sale
of property, or furnishing of services.
-- Source of Strength/Commonly Controlled Banking Subsidiaries. Under
Federal Reserve Board policy, a bank holding company is expected to serve as a
source of financial and managerial strength to each of its subsidiary banks
and, under appropriate circumstances, to commit resources to support each such
subsidiary bank. This support may be required by the Federal Reserve Board at
times when KeyCorp may not have the resources to provide it or, for other
reasons, would not otherwise be inclined to provide it. Certain loans by a
bank holding company to any of its subsidiary banks are subordinate in right of
payment to deposits in, and certain other indebtedness of, the subsidiary bank.
In addition, the Crime Control Act of 1990 provides that in the event of a bank
holding company's bankruptcy, any commitment by a bank holding company to a
Federal bank regulatory agency to maintain the capital of a subsidiary bank
will be assumed by the bankruptcy trustee and entitled to priority of payment.
Under Federal law, a depository institution, the deposits of which are
insured by the FDIC, can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC in connection with (i) the default of a
commonly controlled FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to a commonly controlled FDIC-insured depository
institution in danger of default (the so-called "cross guaranty" provision).
"Default" is defined under the FDIC's regulations generally as the appointment
of a conservator or receiver and "in danger of default" is defined generally as
the existence of certain conditions indicating that a "default" is likely to
occur in the absence of regulatory assistance.
CAPITAL REQUIREMENTS. The Federal Reserve Board, the FDIC and the OCC
have issued substantially similar risk-based and leverage capital guidelines
for United States banking organizations. The minimum ratio of total capital to
risk-adjusted assets (including certain off-balance sheet items, such as
standby letters of credit) required by the Federal Reserve Board for bank
holding companies is currently 8%. At least one-half of the total capital must
be comprised of common equity, retained earnings, qualifying non-cumulative,
perpetual preferred stock, a limited amount of qualifying cumulative, perpetual
preferred stock and
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minority interest in the equity accounts of consolidated subsidiaries, less
goodwill and certain other intangible assets ("Tier I capital"). The remainder
may consist of hybrid capital instruments, perpetual debt, mandatory convertible
debt securities, a limited amount of subordinated debt, other preferred stock
and a limited amount of loan and lease loss reserves ("Tier II capital"). As of
September 30, 1994, KeyCorp's Tier I and total capital to risk-adjusted assets
ratios were 8.86% and 12.07%, respectively.
In addition, KeyCorp is subject to guidelines relating to its minimum
leverage ratio (Tier I capital to total consolidated quarterly average assets
less goodwill and certain other intangible assets for the relevant period).
These guidelines provide for a minimum leverage ratio of 3% for bank holding
companies that meet certain specified criteria, such as having the highest
supervisory rating. All other bank holding companies are required to maintain
leverage ratios which are a least 100 to 200 basis points higher (i.e., a
leverage ratio of at least 4% to 5%). Neither KeyCorp nor any of its banking
subsidiaries have been advised by its appropriate Federal regulatory agency of
any specific leverage ratio applicable to it. As of September 30, 1994,
KeyCorp's Tier I leverage ratio was 6.79%. Federal Reserve Board policy
provides that banking organizations generally, and, in particular, those that
are experiencing internal growth or actively making acquisitions, will be
expected to maintain strong capital positions substantially above the minimum
supervisory levels, without significant reliance on intangible assets.
Furthermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "tangible Tier I leverage ratio" in evaluating proposals
for expansion or new activities. The tangible Tier I leverage ratio is the
ratio of a banking organization's Tier I capital less all intangible assets to
total consolidated quarterly average assets less all intangible assets. For
purposes of this calculation, purchased mortgage servicing rights are not
considered to be intangible assets. As of September 30, 1994, KeyCorp's
tangible Tier I leverage ratio was 6.71%.
Each of KeyCorp's banking subsidiaries is also subject to capital
requirements adopted by applicable Federal regulatory agencies which are
substantially similar to those imposed by the Federal Reserve Board on bank
holding companies. These requirements include minimum Tier I, total capital
and leverage ratios. As of September 30, 1994, each of KeyCorp's banking
subsidiaries had capital in excess of all minimum regulatory requirements.
SIGNIFICANT AMENDMENTS TO THE FEDERAL DEPOSIT INSURANCE ACT -- General.
The Federal Deposit Insurance Corporation Improvement Act of 1991, enacted
December 19, 1991, amended several Federal banking statutes, including the
Federal Deposit Insurance Act (the "FDIA"), and, among other things, increased
the FDIC's borrowing authority to resolve bank failures, mandated least-cost
resolutions and prompt regulatory action with regard to undercapitalized
institutions, expanded consumer protection, and mandated increased supervision
of domestic depository institutions and the U.S. operations of foreign
depository institutions. The 1991 amendments to the FDIA required the Federal
banking agencies to promulgate regulations and specify standards in a number of
areas of bank operations, including interest rate exposure, asset growth,
internal controls, credit underwriting, executive officer and director
compensation, real estate construction financing, additional review of capital
standards, interbank liabilities and other operational and managerial standards
as the
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agencies determine appropriate. In general, KeyCorp management believes that
these regulations have increased, and may continue to increase, the cost of and
the regulatory burden associated with the business of banking.
-- Prompt Corrective Action. Effective in December 1992, the OCC, the
Federal Reserve Board, the FDIC and the OTS adopted new regulations to
implement the so-called "prompt corrective action" provisions of the FDIA. The
regulations classify FDIC-insured depository institutions into five broad
categories based on their capital ratios. The five categories are "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized," as follows:
(a) An institution is "well capitalized" if it has a total risk-based
capital ratio (total capital to risk-adjusted assets) of 10% or greater,
a Tier I risk-based capital ratio (Tier I capital to risk-adjusted
assets) of 6% or greater, and a Tier I leverage capital ratio (Tier I
capital to average total assets) of 5% or greater, and it is not subject
to a regulatory order, agreement or directive to meet and maintain a
specific capital level for any capital measure.
(b) An institution is "adequately capitalized" if it has a total risk-based
capital ratio of 8% or greater, a Tier I risk-based capital ratio of 4%
or greater, and (generally) a Tier I leverage capital ratio of 4% or
greater, and the institution does not meet the definition of a "well
capitalized" institution.
(c) An institution is "undercapitalized" if the relevant capital ratios are
less than those specified in the definition of an "adequately
capitalized" institution.
(d) An institution is "significantly undercapitalized" if it has a total
risk-based capital ratio of less than 6%, a Tier I risk-based capital
ratio of less than 3% or a Tier I leverage capital ratio of less than
3%.
(e) An institution is "critically undercapitalized" if it has a ratio of
tangible equity (as defined in the regulations) to total assets of 2% or
less.
An institution may be downgraded to, or be deemed to be in, a capital
category that is lower than is indicated by its actual capital position if it
is determined to be in an unsafe or unsound condition or if it receives an
unsatisfactory examination rating with respect to certain matters.
The capital-based prompt corrective action provisions of the FDIA and
their implementing regulations apply to FDIC-insured depository institutions,
such as all of KeyCorp's banking subsidiaries, but they are not applicable to
holding companies, such as KeyCorp, which control such institutions. However,
both the Federal Reserve Board and the OTS have indicated that, in regulating
holding companies, they will take appropriate action at the holding company
level based on their assessment of the effectiveness of supervisory action
imposed upon subsidiary depository institutions pursuant to such provisions and
regulations.
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The FDIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the institution would thereafter be
undercapitalized. Undercapitalized depository institutions are also subject to
restrictions on borrowing from the Federal Reserve System, increased monitoring
by the appropriate Federal banking agency and limitations on growth, and are
required to submit a capital restoration plan to their primary Federal
regulatory agency. If a depository institution fails to submit an acceptable
plan, it is treated as if it were significantly undercapitalized. Significantly
undercapitalized depository institutions may be subject to a number of
additional requirements and restrictions including orders to sell sufficient
voting stock to become adequately capitalized and requirements to reduce total
assets, and are prohibited from receiving deposits from correspondent banks.
"Critically undercapitalized" institutions are subject to the appointment of a
receiver or conservator.
-- FDIC Insurance. Under the risk-related insurance assessment system
adopted in final form effective beginning with the January 1, 1994 assessment
period, a bank or savings association is required to pay an annual assessment
ranging from $.23 to $.31 per $100 of deposits based on the institution's risk
classification. The risk classification is based on an assignment of the
institution by the FDIC to one of three capital groups and to one of three
supervisory subgroups. The capital groups are "well capitalized," "adequately
capitalized" and "undercapitalized." The three supervisory subgroups are Group
"A" (for financially solid institutions with only a few minor weaknesses),
Group "B" (for those institutions with weaknesses which, if uncorrected, could
cause substantial deterioration of the institution and increase the risk to the
deposit insurance fund), and Group "C" (for those institutions with a
substantial probability of loss to the fund absent effective corrective
action). For the period commencing on July 1, 1994 through December 31, 1994,
insurance premiums on deposits of all of KeyCorp's banking subsidiaries were
paid at the rate of $.23 per $100 of deposits.
INTERSTATE BANKING LEGISLATION. On September 29, 1994, the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act")
was enacted into Federal Law. Under the Interstate Act, commencing on
September 29, 1995, bank holding companies will be permitted to acquire banks
located in any state regardless of the state law in effect at the time. The
Interstate Act also provides for the nationwide interstate branching of banks.
Under the Interstate Act, both national and state chartered banks will be
permitted to merge across state lines (and to thereby create interstate
branches) commencing June 1, 1997. States are permitted to "opt-out" of the
interstate branching authority by taking action prior to the commencement date.
States may also "opt-in" early (i.e., prior to June 1, 1997) to the interstate
branching provisions. KeyCorp will make a thorough review of consolidation
opportunities which may become available to it under the terms of the
Interstate Act.
CONTROL ACQUISITIONS. The Change in Bank Control Act (the "CBCA")
prohibits a "person" (as defined in the CBCA and the regulations thereunder) or
group of persons from acquiring "control" (as defined in the CBCA and the
regulations thereunder) of a bank holding company unless the Federal Reserve
Board has been given 60 days prior written notice of the proposed acquisition
and within that time period the Federal Reserve Board has not issued a notice
disapproving the proposed acquisition or extending for up to another 30 days
the period during which such a disapproval may be issued. An acquisition may
be made prior to the
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expiration of the disapproval period if the Federal Reserve Board issues written
notice of its intention not to disapprove the action. Under a rebuttable
presumption established by the Federal Reserve Board, the acquisition of 10% or
more of a class of voting stock of a bank holding company with a class of
securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended, such as KeyCorp, would, under the circumstances set forth in the
presumption, constitute the acquisition of control.
In addition, any "company" (as defined in the CBCA and the regulations
thereunder) is required to obtain the approval of the Federal Reserve Board
under the BHCA before acquiring 25% (5% in the case of an acquiror that is a
bank holding company) or more of the outstanding Common Shares of KeyCorp, or
otherwise obtaining control over KeyCorp.
COMPARISON OF CERTAIN RIGHTS OF HOLDERS OF
CAPITAL STOCK OF KEYCORP AND OMNI
If the Merger is consummated, all shareholders of OMNI (except
shareholders of OMNI who perfect their dissenters' rights) will become
shareholders of KeyCorp. KeyCorp is a corporation organized under and governed
by Ohio law, the KeyCorp Amended and Restated Articles of Incorporation (the
"KeyCorp Articles of Incorporation"), and the KeyCorp Regulations. OMNI is a
corporation organized under and governed by Colorado law, the OMNI Articles of
Incorporation, as amended (the "OMNI Articles of Incorporation"), and the OMNI
Bylaws, as amended (the "OMNI Bylaws"). If the Merger is consummated, KeyCorp
will remain a corporation organized under and governed by Ohio law, the KeyCorp
Articles of Incorporation and the KeyCorp Regulations. The rights of a holder
of KeyCorp Common Stock and OMNI Common Stock are each similar in some respects
and different in other respects. The following is a summary of the material
differences; however, this summary does not purport to be a complete
description of all differences.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COLORADO
ACT, THE OHIO GENERAL CORPORATION LAW, THE OHIO INTERESTED SHAREHOLDER
TRANSACTION LAW, THE KEYCORP ARTICLES OF INCORPORATION, THE KEYCORP
REGULATIONS, THE OMNI ARTICLES OF INCORPORATION AND THE OMNI BYLAWS.
VOTING RIGHTS
CUMULATIVE VOTING AND PRE-EMPTIVE RIGHTS. No holder of shares of any
class of capital stock of KeyCorp or OMNI is entitled to the right of
cumulative voting or to pre-emptive rights.
MERGERS, CONSOLIDATIONS, DISSOLUTIONS, COMBINATIONS AND OTHER
TRANSACTIONS. Under the Colorado Act for corporations that were in existence
on June 30, 1994, a merger, share exchange, dissolution or sale or disposition
of all or substantially all of a corporation's assets not in the usual course
of business generally must be approved by the affirmative vote of at least
two-thirds of all outstanding shares entitled to vote. The OMNI Articles of
Incorporation do not raise or lower the vote required by the Colorado Act.
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Subject to the provisions discussed in "State Takeover Statutes and
Takeover Provisions of Charter Documents" below, Ohio law requires adoption of
a merger, consolidation, dissolution, disposition of all or substantially all
of the corporation's assets and a "majority share acquisition" or combination
by the affirmative issuance or transfer of shares with one-sixth or more of the
voting power of the corporation by the affirmative vote of at least two-thirds
of the voting power of a corporation on such proposal, unless the articles of
incorporation specify a different proportion (not less than a majority).
Adoption by the affirmative vote of two-thirds of any class of shares, unless
otherwise provided in the articles, may also be required if the rights of
holders of that class are affected in certain respects by the merger or
consolidation. In lieu of the two-thirds shareholder vote required by law, the
KeyCorp Articles of Incorporation require adoption by the affirmative vote of
the holders of shares entitling them to exercise a majority of the voting power
of KeyCorp on any such proposal, and by the affirmative vote of the majority of
any class if a class vote is required.
FAIR PRICE AND SUPERMAJORITY VOTE PROVISIONS. Neither the OMNI Articles
of Incorporation nor the KeyCorp Articles of Incorporation include fair price
or supermajority vote provisions.
STATE TAKEOVER STATUTES AND TAKEOVER PROVISIONS OF CHARTER DOCUMENTS
Colorado law does not have any statutory provisions explicitly
concerning corporate takeovers (other than the two-thirds voting requirement
discussed above for mergers and share exchanges and for amendments to articles
of incorporation as discussed below) nor does the OMNI Articles of
Incorporation contain any anti-takeover provisions.
Under the Ohio Interested Shareholder Transaction Law, applicable to
KeyCorp, a corporation is prohibited from entering into a "Chapter 1704.
transaction" (as defined herein) with a direct or indirect beneficial owner of
10% or more of the shares of the corporation (a "10% shareholder") for at least
three years after the shareholder attains 10% ownership unless the board of
directors of the corporation approves, before the shareholder attains 10%
ownership, either the transaction or the purchase of shares resulting in such
person becoming a 10% shareholder. A "Chapter 1704. transaction" is broadly
defined to include, among other things, a merger or consolidation involving the
corporation and the 10% shareholder, a sale or purchase of substantial assets
between the corporation and the 10% shareholder, a reclassification,
recapitalization or other transaction proposed by the 10% shareholder that
results in an increase in the proportion of shares beneficially owned by the
10% shareholder, and the receipt by the 10% shareholder of a loan, guarantee,
other financial assistance or tax benefit not received proportionately by all
shareholders. Even after the three-year period, Ohio law restricts these
transactions between the corporation and the 10% shareholder. At that time,
such a transaction may proceed only if (a) the board of directors of the
corporation has approved the purchase of shares that gave the shareholder the
10% ownership, (b) the transaction is approved by the holders of shares of the
corporation with at least two-thirds of the voting power of the corporation (or
a different proportion set forth in the articles of
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incorporation), including at least a majority of the outstanding shares after
excluding shares held or controlled by the 10% shareholder, or (c) the business
combination results in shareholders, other than the 10% shareholder, receiving
a prescribed fair price plus interest for their shares.
In addition, under Ohio law, the acquisition by any person (as used in
this section, an "acquiring person") of shares of voting stock of KeyCorp
giving the acquiring person voting power of KeyCorp within any of the following
ranges would constitute a "control share acquisition": (a) one-fifth or more
but less then one-third of such voting power; (b) one-third or more but less
than a majority of such voting power; or (c) a majority or more of such voting
power. An acquiring person may make a control share acquisition only if (1)
the shareholders of KeyCorp who hold shares entitling them to vote in the
election of directors authorize such acquisition at a special meeting held for
that purpose at which a quorum is present by an affirmative vote of a majority
of the voting power of KeyCorp in the election of directors represented at such
meeting in person or by proxy, and of a majority of the portion of such voting
power excluding the voting power of "interested shares" (as defined below). A
quorum shall be deemed to be present at such special meeting if at least a
majority of the voting power of KeyCorp in the election of directors, and a
majority of the portion of such voting power excluding the voting power of
interested shares, are represented at such meeting in person or by proxy; and
(2) such acquisition is consummated, in accordance with the terms so
authorized, no later than 360 days following shareholder authorization of the
control share acquisition. "Interested shares" means the shares of KeyCorp in
respect of which any of the following persons may exercise or direct the
exercise of the voting power of KeyCorp in the election of directors: (a) the
acquiring person; (b) any officer of KeyCorp elected or appointed by a director
of KeyCorp; or (c) any employee of KeyCorp who is also a director of KeyCorp.
"Interested shares" also means any shares of KeyCorp acquired, directly or
indirectly, by any person from the holder or holders thereof for valuable
consideration during the period beginning with the date of the first public
disclosure of a proposed control share acquisition of KeyCorp or any proposed
merger, consolidation, or other transaction that would result in a change in
control of KeyCorp or all or substantially all of its assets and ending on the
date of any special meeting of KeyCorp's shareholders held thereafter for the
purpose of voting on a control share acquisition proposed by an acquiring
person if either of the following applies: (a) the aggregate consideration
paid or given by the person who acquired the shares, and any other person
acting in concert with such person, for all such shares exceeds $250,000; or
(b) the number of shares acquired by the person who acquired the shares, and
any other persons acting in concert with such person, exceeds one-half of one
percent of the outstanding shares entitled to vote in the election of
directors. The KeyCorp Articles of Incorporation contain an express opt-out
provision with regard to the Ohio control share acquisition law.
Ohio law further requires that any offer or making of a "control bid"
for any securities of a "subject company" pursuant to a tender offer must file
information specified in the Ohio Securities Act with the Ohio Division of
Securities when the bid commences. The Ohio Division of Securities must then
decide whether it will suspend the bid under the statute within three calendar
days. If it does so, it must initiate hearings on the suspension within 10
calendar days of the suspension date, and make a determination of whether to
maintain the suspension within 16 calendar days of the suspension date. For
this purpose, a "control bid"
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is the purchase of or an offer to purchase any equity security of a subject
company from a resident of Ohio that would, in general, result in the offeror
acquiring 10% or more of the outstanding shares of such company. A "subject
company" includes any company with both (a) its principal place of business
or principal executive office in Ohio or assets located in Ohio with a fair
market value of at least $1,000,000 and (b) more than 10% of its record or
beneficial equity security holders in Ohio, more than 10% of its equity
securities owned of record or beneficially by Ohio residents or more than 1,000
of its record or beneficial equity security holders in Ohio.
To avoid continued suspension of its bid in Ohio, an offer must comply
with three requirements: (a) the information required by the statute must be
provided to the Ohio Division of Securities, (b) all material information
regarding the control bid must be provided to the offerees, and (c) there may
be no material violation of any provision of the Ohio Securities Act.
SHAREHOLDER RIGHTS AGREEMENT
The following summarizes the principal terms of the Rights Agreement, as
amended to date.
Rights have been and will continue to be issued in respect of all shares
of KeyCorp Common Stock that are (a) issued after the Record Date but before
the earlier of the expiration or redemption of the Rights or the occurrence of
a Triggering Event (as defined herein), or (b) issued before the expiration or
redemption of the Rights upon the exercise of any employee stock option granted
prior to a Triggering Event.
Each of the Rights initially represents the right to purchase one share
of KeyCorp Common Stock for $65 (as used in this section, "Purchase Price").
The Rights will become exercisable 20 days after the earlier of (a) a public
announcement that a person or group has become an Acquiring Person (as
hereinafter defined) or (b) the commencement of a tender offer or exchange
offer that would result in a person or group becoming an Acquiring Person. As
used in this section, an "Acquiring Person" means a person or group that
beneficially owns more than 15% of the shares of KeyCorp Common Stock
outstanding, except that a person will not be deemed to be an Acquiring Person
if (i) the person becomes the beneficial owner of more than 15% of the shares
of KeyCorp Common Stock as a result of a reduction in the number of shares of
KeyCorp Common Stock outstanding unless, after the reduction, the person
acquires additional shares of KeyCorp Common Stock, and (ii) if the person
becomes the beneficial owner of more than 15% of the shares of KeyCorp Common
Stock inadvertently and, as soon as practicable after learning about such
beneficial ownership, divests enough KeyCorp Common Stock so that the person
ceases to be the beneficial owner of more than 15% of the KeyCorp Common Stock.
Until the Rights become exercisable, they will be represented by the
certificate which represents the associated shares of KeyCorp Common Stock, and
any transfer of KeyCorp Common Stock will also constitute a transfer of the
associated Rights. When the Rights become exercisable, they will begin to
trade separate and apart from the shares of KeyCorp
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Common Stock. At that time, separate certificates representing the Rights will
be mailed to holders of KeyCorp Common Stock.
Twenty days after certain events occur (as used in this section,
"Flip-in Events"), each of the Rights will become the right to purchase one
share of KeyCorp Common Stock for the then par value per share (now $1 per
share), and the Rights beneficially owned by the Acquiring Person will become
void. The Flip-in Events are (a) the beneficial ownership by a person or group
of more than 15% of the outstanding shares of KeyCorp Common Stock, unless the
shares of KeyCorp Common Stock are acquired in a tender or exchange offer for
all of the KeyCorp Common Stock at a price and on other terms approved in
advance by KeyCorp's Board of Directors, (b) certain self-dealing transactions
between KeyCorp and an Acquiring Person, and (c) a reclassification or
recapitalization of KeyCorp that has the effect of increasing by more than 1%
of the percentage of KeyCorp Common Stock owned by an Acquiring Person.
If, after a person or group becomes an Acquiring Person, KeyCorp is
acquired in a merger or other business combination or more than 50% of its
assets or earning power is sold, each of the Rights will "flip-over" and become
the right to purchase common shares of the acquiror (as used in this section,
"Flip-over Event"). The holder of each Right would, upon the occurrence of a
Flip-over Event, be entitled to purchase for the then par value of a share of
KeyCorp Common Stock (now $1) the number of common shares of the acquiror
having a market price equal to the market price of the KeyCorp Common Stock.
The Purchase Price and/or the number of shares of KeyCorp Common Stock
(or common shares of an acquiror) to be purchased upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution in the event
KeyCorp (a) declares a dividend on the KeyCorp Common Stock payable in KeyCorp
Common Stock, (b) subdivides or combines the KeyCorp Common Stock in a
reclassification of the KeyCorp Common Stock, or (c) makes a distribution to
all holders of KeyCorp Common Stock of debt securities, subscription rights,
warrants or other assets (except regular cash dividends). With certain
exceptions, no adjustment will be required until a cumulative adjustment of at
least 1% is required. KeyCorp is not required to issue fractional shares and,
instead, may make cash payments based on the market price of KeyCorp Common
Stock.
KeyCorp's Board of Directors may redeem the Rights for 1/2 cent each (as
used in this section, "Redemption Price") at any time before a "Triggering
Event" (which is defined as the occurrence of a Flip-over Event or the 20th day
after a Flip-in Event). However, the Rights may not be redeemed while there is
an Acquiring Person unless (a) Continuing Directors (as defined herein)
constitute a majority of the Board of Directors and (b) a majority of the
Continuing Directors approves the redemption. "Continuing Directors" are
defined as directors who were in office prior to a person or group becoming an
Acquiring Person or whose election to office was recommended by a majority of
Continuing Directors and who are not affiliated with the Acquiring Person. The
Rights will expire on September 12, 1999, unless they are redeemed before that
date. Until the KeyCorp Rights are exercised, the holders of the Rights, as
such, will have no rights as shareholders of KeyCorp, including the right to
vote or receive dividends.
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The provisions of the Rights Agreement may be amended by KeyCorp's Board
of Directors to cure any ambiguity or correct any defect or inconsistency or,
prior to the occurrence of a Triggering Event, to make other changes that the
Board of Directors deems to be desirable and not adverse to the interests of
KeyCorp and its shareholders.
The Rights will not prevent a takeover of KeyCorp. However, the Rights
may cause substantial dilution to a person or group that acquires 15% or more
of the KeyCorp Common Stock unless the Rights are first redeemed by the Board
of Directors of KeyCorp.
The Merger will not constitute a Triggering Event under the Rights
Agreement.
Copies of the Rights Agreement, dated as of August 25, 1989, between
KeyCorp and First Chicago Trust Company of New York, as rights agent, the First
Amendment to Rights Agreement, dated as of February 21, 1991, the Second
Amendment to Rights Agreement, dated as of September 12, 1991, and the Third
Amendment to Rights Agreement dated as of October 1, 1993 are included as
exhibits to a Registration Statement on Form 8-A filed by KeyCorp with the
Commission on August 29, 1989, a Registration Statement on Form 8-A filed by
KeyCorp with the Commission on February 28, 1991, a Schedule 13D filed by
KeyCorp on September 23, 1991, and a Schedule 13D filed by KeyCorp on October
12, 1993. The foregoing description of the KeyCorp Rights does not purport to
be complete and is qualified in its entirety by reference to the Rights
Agreement, as amended.
SPECIAL MEETINGS OF SHAREHOLDERS
Under the Colorado Act, a special meeting of shareholders may be called
by (a) the corporation's board of directors, (b) any other person authorized to
do so in the corporation's articles of incorporation or bylaws, or (c) holders
of shares representing at least 10% of all votes entitled to be cast on any
issue to be considered at a meeting if they deliver to the corporation a signed
and dated written demand for the meeting that state its purposes. The OMNI
Bylaws provide that a special meeting of shareholders may be called by (a) the
President, (b) the Chairman of the Board or (c) shareholders holding at least
25% of the shares entitled to vote at such meeting. Notice of a special
meeting must be given to all shareholders not less than 10 nor more than 60
days prior to the meeting; provided that if the authorized number of shares of
the corporation is proposed to be increased, at least 30 days' notice is
required. Notice of a special meeting must include a description of the
purpose(s) for which the meeting is called.
Under Ohio law, a special meeting of shareholders may be called by
holders of record of at least 25% of all shares outstanding and entitled to
vote at a special meeting unless the corporation's articles or regulations
specify a different percentage (not to exceed 50%). The KeyCorp Regulations
provide that a special meeting of shareholders may be called by (i) the
Chairman of the Board; (ii) the President, or in the case of the President's
absence, death, or disability, the vice president authorized to exercise the
authority of the President; (iii) the Board of Directors by action at a
meeting, or by a majority of the Board of Directors acting without a meeting;
or (iv) by persons who hold 50% of all shares outstanding and entitled to vote
at the special meeting. Written notice stating the time, place and purposes of
a
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shareholders' meeting must be given either by personal delivery or by mail
not less than seven nor more than 60 days before the date of the meeting unless
the articles or the regulations specify a longer period. The KeyCorp
Regulations provide that for special meetings, shareholders are entitled to
notice of a meeting to be held on a date not less than 10 nor more than 60 days
after the receipt of the request for a special meeting.
AMENDMENT OF CHARTER DOCUMENTS
ARTICLES OF INCORPORATION. Under the Colorado Act for corporations in
existence on June 30, 1994, the approval of two-thirds of the outstanding
voting shares of a corporation is required to amend its articles of
incorporation, except as otherwise provided therein, subject to a class vote in
certain instances. Such amendment may be proposed by either the board of
directors or by holders of shares representing at least 10% of the votes
entitled to be cast on the amendment. The OMNI Articles of Incorporation do
not raise or lower the vote required by the Colorado Act.
The Colorado Act provides that the holders of shares of each particular
class of stock are entitled to vote as a separate voting class on any amendment
that does any of the following: (a) increases or decreases the number of
authorized shares of the class; (b) effects an exchange or reclassification of
all or part of the shares of the class into shares of another class; (c)
effects an exchange, reclassification or creates the right of exchange of all
or part of the shares of another class into shares of the class; (d) changes
the express terms of the shares of the class; (e) changes the shares into a
different number of shares of the same class; (f) creates a new class of shares
having rights or preferences with respect to distributions or dissolution that
are prior, superior or substantially equal to the shares of the class; (g)
increases the rights, preferences or number of authorized shares of any class
that have rights or preferences with respect to distributions or dissolution
that are prior, superior or substantially equal to the shares of the class; (h)
limits or denies any pre-emptive right of the shares of the class; or (i)
cancels or otherwise affects rights to accumulated but not yet declared
dividends or distributions.
In addition, under the Colorado Act, a shareholder, whether or not
entitled to vote, is entitled to dissent and obtain payment of the fair value
of his or her shares in the event of (a) an amendment to the articles of
incorporation that materially and adversely affects rights in respect of the
shares because it (i) alters or abolishes a preferential right of the shares
or (ii) creates, alters, or abolishes a right in respect of redemption of the
shares, including a provision respecting a sinking fund for their redemption or
repurchase, or (b) an amendment to the articles of incorporation that affects
rights in respect of the shares because it (i) excludes or limits the right of
the shares to vote on any matter, or to cumulate votes, other than a limitation
by dilution through issuance of shares or other securities with similar voting
rights, or (ii) reduces the number of shares owned by the shareholder to a
fraction of a share or to scrip under certain circumstances.
Ohio law provides that generally at least two-thirds of the voting power
of a corporation, subject to a class vote in certain instances, is required to
approve any amendment to the articles of incorporation, unless otherwise
provided therein. The KeyCorp Articles of Incorporation require that a
majority of the voting power of KeyCorp approve any such
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amendment, subject to a class vote in those instances required by law and
subject to any greater vote required to approve a Chapter 1704 transaction.
Under Ohio law, the holders of shares of a particular class, and in the
circumstances outlined in sections (e), (f) and (g) below, the holders of
shares of every class, are entitled to vote as a class on the adoption of an
amendment to the articles of incorporation that does any of the following: (a)
increases or decreases the par value of the issued shares of the particular
class; (b) changes issued shares of the particular class, whether with or
without par value, into a lesser number of shares of the same class or into the
same or different number of shares of any other class, with or without par
value, theretofore or then authorized; (c) changes the express terms of issued
shares of any class senior to the particular class in any manner substantially
prejudicial to the holder of the particular class; (d) authorizes shares of
another class that are convertible into, or authorizes the conversion of shares
of another class into, shares of the particular class, or authorizes the
directors to fix or alter conversion rights of shares of another class that are
convertible into shares of the particular class; (e) provides, in the case of
any amendment described in sections (a) or (b) above, that the stated capital
of the corporation shall be reduced or eliminated as a result of the amendment,
or provides, in the case of an amendment described in section (d) above, that
the stated capital of the corporation shall be reduced or eliminated upon the
exercise of such conversion rights, provided that any such reduction or
elimination is consistent with certain provisions of Ohio General Corporation
Law regarding stated capital; (f) changes substantially the purposes of the
corporation, or provides that thereafter an amendment to the articles may be
adopted that changes substantially the purposes of the corporation; or (g)
changes the corporation into a nonprofit corporation. See "-- Voting Rights."
Ohio law provides that if an amendment to the articles of incorporation
does any of the following, then the dissenting shareholders will be entitled to
relief, subject to certain exceptions: (a) changes issued shares of a
particular class that have a preference in distributions or dividends or in
liquidation over shares of any other class, or changes any of the express terms
of issued shares of such particular class, and the holders of the shares of
such particular class are substantially prejudiced thereby; (b) changes the
express terms of issued shares of a particular class in such a manner as to
discharge without payment of, or to adjust or eliminate rights to, accrued
undeclared dividends or distributions on the shares of any such class; (c)
changes substantially the purpose of the corporation or provides that
thereafter an amendment to change substantially the purposes of the corporation
may be adopted; or (d) changes the corporation into a nonprofit corporation.
BYLAWS/REGULATIONS. The OMNI Bylaws provide that such Bylaws may be
altered or amended by a majority of the OMNI Board of Directors, provided that
no change of the time or place for the election of directors may be made within
30 days next before the day on which such election is held, and that in case of
any change of such time or place, notice thereof shall be given to each
shareholder at least 20 days before the election is held. Under the Colorado
Act, bylaws may also be amended by the shareholders.
Directors may not amend regulations of an Ohio corporation. The KeyCorp
Regulations provide for amendment by shareholders holding a majority of the
voting power at
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a meeting, but require that all amendments by written consent of the
shareholders without a meeting must be approved unanimously by the shareholders
entitled to vote thereon. In addition, any amendments regarding the calling of
special meetings of shareholders, nomination of directors, classification of
directors, removal of directors or amendment to the KeyCorp Regulations, which
are not recommended by at least two-thirds of the directors, must be approved
by shareholders holding at least 75% of the voting power of KeyCorp at a
meeting.
The KeyCorp Regulations provide that through December 31, 1998, the
provisions of the KeyCorp Regulations relating to (a) the number,
classification and term of office of directors; (b) Chairman of the Board,
Chairman of the Executive Committee and chairmen of other committees; (c)
nominations and removal of directors and filling vacancies in the Board of
Directors; (d) the Nominating Committee; (e) Chief Executive Officer and
President through December 31, 1998; (f) removal of officers; (g) the
headquarters of KeyCorp; and (h) amendments of the Regulations may only be
amended, repealed or altered (i) by the affirmative vote of the holders of
shares entitling them to exercise three-quarters of the voting power of KeyCorp
on such proposal; (ii) if such amendment, repeal or alteration is recommended
by three-quarters of the entire authorized Board of Directors of KeyCorp, by
the affirmative vote of the holders of shares entitling them to exercise a
majority of the voting power of KeyCorp on such proposal; or (iii) without a
meeting, by the written consent of the holders of shares entitling them to
exercise 100% of the voting power of KeyCorp on such proposal. The KeyCorp
Regulations also provide that until December 31, 1998, any KeyCorp Regulations,
other than those KeyCorp Regulations specifically listed in the immediately
preceding sentence, and, after December 31, 1998, any KeyCorp Regulations, may
be adopted, amended, repealed or altered (x) by the affirmative vote of the
holders of shares entitling them to exercise three-quarters of the voting power
of KeyCorp on such proposal; (y) if such adoption, amendment, repeal or
alteration is recommended by two-thirds of the entire authorized Board of
Directors of KeyCorp, by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of KeyCorp on such
proposal; or (z) without a meeting, by the written consent of the holders of
shares entitling them to exercise 100% of the voting power of KeyCorp on such
proposal.
DIRECTORS
NUMBER; CLASSIFICATION. The OMNI Bylaws provide that the number of
directors of OMNI shall be at least three but no more than 25, with the exact
number to be determined by resolution adopted by a majority of the then
existing members of the Board. The number of directors is currently fixed at
12. The Colorado Act provides that a corporation's articles of incorporation
may provide for a classified Board of Directors; however, the OMNI Articles of
Incorporation do not so provide.
The KeyCorp Regulations provide that the number of directors of KeyCorp
shall be between 20 and 24 directors. The number of directors is currently
fixed at 22. The Board of Directors is divided into three classes, each
serving three-year terms, so that approximately one-third of the directors of
KeyCorp are elected at each annual meeting of the shareholders of KeyCorp. The
Board of Directors of KeyCorp may change the size of the Board of Directors
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within the foregoing range, subject to certain limitations described therein,
by the affirmative vote of two-thirds of the entire authorized Board. The
shareholders of KeyCorp may change the size of the Board of Directors of
KeyCorp within the foregoing range, subject to certain limitations described
under "Nominations of Candidates for Election of Directors" below, at a meeting
of the shareholders of KeyCorp called for the purpose of election of directors
(i) by the affirmative vote of the holders of shares entitling them to exercise
three-quarters of the voting power of KeyCorp represented at the meeting and
entitled to elect directors or (ii) if the proposed change in the number of
directors is recommended by two-thirds of the entire authorized Board of
Directors of KeyCorp, by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of KeyCorp
represented at the meeting and entitled to elect directors. In addition, the
number of directors of KeyCorp is subject to automatic increase by two during
certain periods when dividends payable on any class or series of preferred
stock of KeyCorp are in arrears for six quarterly dividend payment periods, as
set forth in the KeyCorp Articles of Incorporation and/or the express terms of
the preferred stock of KeyCorp.
The effect of KeyCorp having a classified Board of Directors is that
only approximately one-third of the members of the Board will be elected each
year and, as a result, two annual meetings will be required for KeyCorp
shareholders to change a majority of the members constituting the Board of
Directors.
NOMINATIONS OF CANDIDATES FOR ELECTION AS DIRECTORS. Neither the OMNI
Articles of Incorporation nor the OMNI Bylaws provide a specific procedure for
nominating candidates for election as directors.
The KeyCorp Regulations establish a specific procedure for director
nominations made by the Board of Directors of KeyCorp. Through December 31,
1998, nominations for the election of directors of KeyCorp may be made by (a)
the affirmative vote of three-quarters of the entire Board of Directors of
KeyCorp and three-quarters of the members of the Nominating Committee of the
Board of Directors of KeyCorp, or (b) any shareholder of KeyCorp entitled to
vote for the election of directors at a meeting, but only if written notice of
such shareholder's intent to make such nomination is received by the Secretary
of KeyCorp not less than 60 nor more than 90 days prior to the meeting. After
December 31, 1998, nominations for the election of directors may be made by (a)
the affirmative vote of two-thirds of the entire authorized Board of Directors
of KeyCorp, or (b) any shareholder of KeyCorp in accordance with the procedures
summarized above.
REMOVAL OF DIRECTORS. Neither the OMNI Articles of Incorporation nor
the OMNI Bylaws provide for the removal of directors. The Colorado Act
provides that the shareholders may remove a director with or without cause
unless the articles of incorporation provide that directors may be removed only
for cause if the number of votes cast in favor of removal exceeds the number of
votes cast against the removal. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove. A director of a Colorado corporation also can be judicially
removed in a proceeding commenced in the district court in the county in which
the corporation's principal office is located if the court finds that the
director engaged in fraudulent or dishonest conduct or gross
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<PAGE> 98
abuse of authority or discretion with respect to the corporation and that such
removal is in the best interests of the corporation. Such proceeding may be
commenced either by the corporation or by shareholders holding at least 10% of
the outstanding shares of any class.
The KeyCorp Regulations provide that the Board of Directors may remove
any director upon judicial declaration of mental unsoundness, adjudicated
bankruptcy or failure to accept election as a director. KeyCorp's shareholders
may remove any or all directors, with or without cause, by an affirmative vote
of holders of at least 75% of the shares of KeyCorp Common Stock. Through
December 31, 1998, the Board of Directors may fill vacancies only by the
affirmative vote of two-thirds of the members of the Board of Directors and
two-thirds of the members of the Nominating Committee of the Board of
Directors.
DIRECTOR LIABILITY AND INDEMNIFICATION
Under the Colorado Act, no director or officer shall be personally
liable for any injury to person or property arising out of a tort committed by
an employee unless such director or officer was personally involved in the
situation giving rise to the litigation or unless such director or officer
committed a criminal offense in connection with such situation. Further, if so
provided in the corporation's articles of incorporation, a Colorado corporation
may eliminate or limit the personal liability of a director to the corporation
or to its shareholders for monetary damages for breach of fiduciary duty as a
director subject to certain limitations; however, the OMNI Articles of
Incorporation do not contain such a provision. A director who votes for or
assents to a dividend or other distribution to shareholders in violation of the
Colorado Act or the corporation's articles of incorporation is personally
liable, subject to contribution, to the corporation for the excess amount if it
is established that the director did not meet the applicable statutory standard
of conduct.
Under the Colorado Act, a corporation may indemnify officers and
directors against reasonable expenses, including attorneys' fees, (a) if the
officer or director acted in good faith; and, (b) if acting in his or her
official capacity, for a purpose he or she reasonably believed to be in the
best interests of the corporation or, in all other cases, for a purpose he or
she reasonably believed was not opposed to the best interests of the
corporation; and (c) if, in a criminal action, he or she had reasonable cause
to believe his or her conduct was lawful or no reasonable cause to believe that
his or her conduct was unlawful. A corporation may reimburse expenses incurred
by an officer or director prior to final disposition of a proceeding provided
the corporation obtains a written undertaking from such director or officer to
repay any reimbursed expenses if it is ultimately determined that he or she was
not entitled to indemnification; the officer or director furnishes a written
affirmation of such person's belief that he or she has met the necessary
standard of conduct; and makes a determination that the facts then known to the
persons making the determination on behalf of the corporation would not
preclude indemnification. The Colorado Act further provides that a corporation
may indemnify an officer, employee, fiduciary or agent who is not a director to
a greater extent than the foregoing if not inconsistent with public policy, if
so provided in the corporation's bylaws, by general or specific action of the
board of directors or the shareholders, or by contract. OMNI has entered into
indemnification agreements with certain of its officers and
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directors providing for indemnification of such persons under certain
circumstances to the fullest extent permitted by law.
Indemnification is mandatory if the officer or director is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which the person was a party because of his or her position with the
corporation. The foregoing statutory rights are not exclusive, and
indemnification may be provided under the corporation's articles of
incorporation or bylaws or, if such documents so provide, under a board or
shareholder resolution or an agreement to the extent the provision is
consistent with the Colorado Act.
The OMNI Bylaws provide that OMNI may indemnify and hold harmless from
all expenses, including but not limited to attorney's fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by any person
who is a director, officer, fiduciary or agent of OMNI or who served any other
corporation at the request of OMNI, and is a party or threatened to be made a
party to any threatened, pending or completed action or proceeding by reason of
such person's position with the corporation; provided, however, that such
person acted in good faith and in a manner which such person reasonably
believed to be in the best interests of the corporation and, with respect to
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The OMNI Bylaws provide that indemnification of any director,
officer, employee, fiduciary or agent shall be made only as authorized in the
specific case upon a determination that such indemnification is proper in the
circumstances because such person has met the applicable standard of conduct.
Such determination shall be made by the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to such action, suit
or proceeding, or, if such a quorum is not obtainable or even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or by the shareholders.
Under Ohio law, Ohio corporations are authorized to indemnify directors,
officers, employees, and agents within prescribed limits and must indemnify
them under certain circumstances. Ohio law does not provide statutory
authorization for a corporation to indemnify directors, officers, employees and
agents for settlements, fines or judgments in the context of derivative suits.
However, it provides that directors (but not officers, employees and agents)
are entitled to mandatory advancement of expenses, including attorneys' fees,
incurred in defending any action, including derivative actions, brought against
the director, provided the director agrees to cooperate with the corporation
concerning the matter and to repay the amount advanced if it is proved by clear
and convincing evidence that his or her action or failure to act was done with
deliberate intent to cause injury to the corporation or with reckless disregard
for the corporation's best interests.
Ohio law does not authorize payment of judgments to a director, officer,
employee or agent after a finding of negligence or misconduct in a derivative
suit absent a court order. Indemnification is required, however, to the extent
such person succeeds on the merits. In all other cases, if a director,
officer, employee or agent acted in good faith and in a matter he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, indemnification is discretionary except as otherwise provided by a
corporation's articles, code of regulations or by contract except with respect
to the advancement of expenses of directors.
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<PAGE> 100
Under Ohio law, a director is not liable for monetary damages unless it
is proved by clear and convincing evidence that his or her action or failure to
act was undertaken with deliberate intent to cause injury to the corporation or
with reckless disregard for the best interests of the corporation. There is,
however, no comparable provision limiting the liability of officers, employees
or agents of a corporation. The statutory right to indemnification is not
exclusive in Ohio, and Ohio corporations may, among other things, procure
insurance for such persons.
The KeyCorp Regulations provide that KeyCorp shall indemnify to the
fullest extent permitted by law any person made or threatened to be made a
party to any action, suit or proceeding by reason of the fact that he or she is
or was a director, officer or employee of KeyCorp or of any other bank,
corporation, partnership, trust or other enterprise for which he or she was
serving as a director, officer or employee at the request of KeyCorp.
Under the Merger Agreement, KeyCorp has agreed to indemnify all present
and former officers and directors of OMNI and its subsidiaries after the
Effective Time for any liabilities arising out of any act or omission prior to
the Effective Time in their capacity as officer or director to the fullest
extent provided by Colorado law and the OMNI Articles of Incorporation and the
OMNI Bylaws.
INTERESTED DIRECTOR TRANSACTIONS
Under the Colorado Act, no loan, guaranty, contract or other transaction
between a Colorado corporation and any of its directors or any entity in which
a director of the corporation is a director of officer or has a financial
interest shall be void or voidable or be enjoined, set aside or give rise to an
award of damages or other sanctions in a proceeding by a shareholder or by or
in the right of the corporation, solely because of the conflicting interest or
solely because the director is present at or participates in the meeting of the
corporation's board of directors or of the committee of the board of directors
which authorized, approved or ratified the conflicting interest transaction or
solely because the director's vote is counted for such purpose if: (1) the
material facts thereof are disclosed or are known to the board of directors or
the committee, or the shareholders, as the case may be, and the board of
directors, committee or the shareholders in good faith authorizes, approves or
ratifies the conflicting interest transaction; or (2) the conflicting interest
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified by the board of directors, a committee thereof or the
shareholders.
Notwithstanding the foregoing, under the Colorado Act, a board of
directors or a committee thereof may not authorize a loan or guaranty by the
corporation to a director of the corporation or an entity in which a director
of the corporation is a director of officer or has a financial interest unless
such loan or guaranty is fair as to the corporation as of the time it is
authorized or at least 10 days prior written notice of the proposed
authorization of the loan or guaranty has been given to the shareholders who
would be entitled to vote thereon if the issue of the loan or guaranty were
submitted to a vote of the shareholders.
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<PAGE> 101
Under Ohio law, unless otherwise provided for in the articles of
incorporation or regulations, no contract, action or transaction shall be void
or voidable with respect to a corporation for the reason that it is between or
affects the corporation and one or more of its directors or officers, or any
other person in which one or more of its directors or officers are directors,
trustees or officers, or have a financial or personal interest, or for the
reason that one or more interested directors or officers participate in or vote
at the meetings of the directors or a committee of the directors that
authorizes such contract, action or transaction, if any of the following apply:
(a) the material facts as to the relationship or interest are known to the
directors or the committee and the directors or committee, in good faith
reasonably justified by such facts, authorizes the contract, action or
transaction by the affirmative vote of a majority of the disinterested
directors, even though they constitute less than a quorum; (b) the material
facts as to the relationship or interest are known to the shareholders entitled
to vote hereon and the contract, action or transaction is specifically approved
at a meeting of the shareholders held for such purpose by the affirmative vote
of the holders of the shares entitling them to exercise a majority of the
voting power of the corporation held by persons not interested in the contract,
action or transaction; or (c) the contract, action or transaction is fair as to
the corporation as of the time it is authorized or approved by the directors, a
committee of the directors or the shareholders. There is nothing in the
KeyCorp Articles of Incorporation or the KeyCorp Regulations that provides
otherwise than set forth above.
For the purposes of this section of the Ohio law, a director is not an
interested director solely because the subject of the contract, action or
transaction may involve or affect a change in control of the corporation or his
or her continuation in office as a director of that corporation.
SHAREHOLDERS' RIGHTS TO INSPECTION
Under the Colorado Act, any shareholder (or the shareholder's agent or
attorney), upon five business days' notice to the corporation, is entitled to
inspect and copy, during regular business hours at the corporation's principal
office, the corporation's articles of incorporation and bylaws, minutes of all
shareholders' meetings of the past three years and all written communications
to shareholders as a group in the past three years, a list of names and
business addresses of the corporation's current officers and directors, a copy
of the corporation's most recent corporate reports filed with the Colorado
Secretary of State, and certain of the corporation's financial statements for
the past three years.
Any shareholder (or shareholders' agent or attorney) who has been a
shareholder of the corporation of at least three months or who owns at least 5%
of the outstanding stock of the corporation, upon written demand at least five
business days prior to the requested date of inspection, is entitled to inspect
and copy, during regular business hours at a reasonable location specified by
the corporation, (a) excerpts from minutes of any meeting or actions by written
consent of the board of directors, any committee thereof, or the shareholders;
(b) accounting records of the corporation; and (c) the record of shareholders'
names and addresses; provided that the demand is made in good faith and for a
proper purpose, which purpose is described in the demand with reasonable
particularity, and the records to be inspected and the records requested are
directly connected with such purpose.
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<PAGE> 102
Under Ohio law, any shareholder of the corporation, upon written demand
stating the specific purpose of the inspection, shall have the right to examine
in person or by agent or attorney at any reasonable time and for any reasonable
and proper purpose, the articles of the corporation, its regulations, its books
and records of account, minutes of the proceedings of this incorporators,
shareholders, directors and committees of the directors, and records of
shareholders showing their names and addresses and the number and class of
shares issued or transferred of record to or by them from time to time, and
voting trust agreements, if any, on file with the corporation, and to make
copies or extracts thereof. Any written demand by an acquiring person to
examine the record of shareholders for the purpose of communicating with
shareholders of the issuing public corporation in connection with a meeting of
shareholders called for a shareholder review of a proposed control share
acquisition shall be deemed to have been made by a shareholder of the issuing
public corporation for a reasonable and proper purpose.
DIVIDENDS
The OMNI Articles of Incorporation provide that dividends may be paid
out of the unreserved earned surplus of the corporation, or as otherwise
provided by the Colorado Corporation Code. Under the Colorado Act (which
supersedes the Colorado Corporation Code), dividends may be paid as authorized
by the Board of Directors; provided that no dividend may be paid if, after
giving effect to the payment of such dividend, the corporation would not be
able to pay its debts as they become due in the usual course of business, or if
the corporation's total assets would be less than its total liabilities, plus
any amount that would be needed if the corporation were to be dissolved at the
time of the dividend, to pay any preferential amounts on dissolution to
shareholders whose preferential rights are superior to those shareholders
receiving the dividend. The OMNI Bylaws provide that the Board of Directors may
declare a dividend at any regular or special meeting, provided, in the judgment
of such board, that it is advisable to declare such a dividend. In addition,
the payment of dividends is restricted by federal and state banking laws. See
"The Business Of OMNI -- Supervision and Regulation."
An Ohio corporation may pay dividends out of surplus, however created,
but must notify its shareholders if a dividend is paid out of capital surplus.
The Board of Directors of KeyCorp reviews the declaration and payment of
dividends by KeyCorp on a quarterly basis in light of cash needs, general
business conditions, availability of dividends from subsidiaries and regulatory
policies. There is no assurance as to declaration or the amount of future
dividends on KeyCorp's Common Stock.
Regulations restricting the ability of KeyCorp's subsidiary banks and
other subsidiaries to pay dividends to KeyCorp after the Effective Time are set
forth in "Certain Regulatory Considerations -- Dividend Restrictions."
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<PAGE> 103
SHAREHOLDER PROPOSALS
It is currently anticipated that KeyCorp will hold its 1995 annual
meeting of shareholders on or about May 18, 1995. The KeyCorp Regulations
require that notice of a nomination by shareholders of individuals for election
to the Board of Directors of KeyCorp, whether or not proposed to be included in
KeyCorp's proxy statement, be given to the Secretary of KeyCorp by March 17,
1995, assuming that the 1995 annual meeting is held on May 18, 1995, and that
the notice include certain information relating to the nominee and the
nominating shareholder.
CERTAIN LEGAL MATTERS
The validity of the KeyCorp Common Stock to be issued in connection with
the Merger will be passed upon for KeyCorp by Steven N. Bulloch, Senior Vice
President and Senior Managing Counsel of KeyCorp Management Company, an
affiliate of KeyCorp. On January 27, 1995, Mr. Bulloch owned approximately
2,780 shares of KeyCorp Common Stock and options to purchase 6,500 shares of
KeyCorp Common Stock which were exercisable within 60 days of such date.
Certain tax matters relating to the Merger will be passed upon for OMNI and
KeyCorp by OMNI's counsel Irell & Manella.
EXPERTS
The following consolidated financial statements of KeyCorp have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon, included therein and incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing:
(a) consolidated financial statements for the year ended December
31, 1993 of KeyCorp, as restated to give effect to the March 1,
1994 merger of old Key and Society, which was accounted for as
a pooling of interests; such financial statements are included
in and incorporated by reference into KeyCorp's Current Report
on Form 8-K filed with the Commission on April 20, 1994; and
(b) consolidated financial statements for the year ended December
31, 1993 of old Key (the combining company), which on March 1,
1994 merged with Society, subsequently renamed KeyCorp,
included in KeyCorp's Current Report on Form 8-K filed with the
Commission on March 16, 1994.
With respect to the unaudited consolidated interim financial information
for the three-month periods ended March 31, 1994 and March 31, 1993, for the
three- and six-month periods ended June 30, 1994 and June 30, 1993, and for the
three- and nine-month periods ended September 30, 1994 and September 30, 1993,
incorporated by reference in this Prospectus/Proxy Statement, Ernst & Young LLP
have reported that they have applied limited procedures in accordance with
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<PAGE> 104
professional standards for a review of such information. However, their
separate reports, included in KeyCorp's Quarterly Reports on Form 10-Q for
the periods ended March 31, 1994, June 30, 1994 and September 30, 1994, and
incorporated herein by reference, state that they did not audit and they do
not express an opinion on that interim financial information. Accordingly,
the degree of reliance on their reports on such information should be
restricted in light of the limited nature of the review procedures applied.
The independent auditors are not subject to the liability provisions of
Section 11 of the Securities Act, for their report on the unaudited interim
financial information because that report is not a "report" or a "part" of
the Registration Statement prepared or certified by the auditors within the
meaning of Sections 7 and 11 of the Securities Act.
The consolidated financial statements of OMNI and its subsidiaries at
December 31, 1993 and 1992 and for the two years then ended have been audited
by BDO Seidman, independent certified public accountants, as set forth in their
reports appearing elsewhere herein and are included in reliance upon such
reports given upon the authority of said firm as experts in auditing and
accounting. The consolidated financial statements of OMNI and its subsidiaries
for the year ended December 31, 1991 have been audited by Price Waterhouse
LLP, independent accountants, as set forth in their report appearing elsewhere
herein and are included in reliance upon such report given upon the authority
of said firm as experts in auditing and accounting.
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<PAGE> 105
<TABLE>
<CAPTION>
OMNIBANCORP
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<S> <C>
Consolidated Statements of Condition as of
September 30, 1994 and December 31, 1993 F-2
Consolidated Statements of Income
for the Three Months Ended and the Nine Months Ended
September 30, 1994 and 1993 F-3
Consolidated Statements of Changes in Stockholders' Equity
for the Nine Months Ended September 30, 1994 and 1993 F-4
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1994 F-5
Notes to Financial Statements F-6
Report of Independent Certified Public Accountants F-7
Report of Independent Certified Public Accountants F-8
Consolidated Statements of Condition as of
December 31, 1993 and 1992 F-9
Consolidated Statements of Income
for the Years Ended December 31,
1993, 1992 and 1991 F-11
Consolidated Statements of Changes in
Stockholders' Equity for the Years Ended
December 31, 1993, 1992 and 1991 F-12
Consolidated Statements of Cash Flows
for the Years Ended December 31,
1993, 1992 and 1991 F-13
Summary of Accounting Policies F-15
Notes to Consolidated Financial Statements F-18
</TABLE>
F-1
<PAGE> 106
OMNIBANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
(dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 25,255 $ 26,898
Federal funds sold and securities purchased
under resale agreements 2,382 12,855
Investment securities:
Held to maturity 63,352 22,082
Available for sale 174,800 207,499
---------- ----------
Total investment securities 238,152 229,581
Loans:
Commercial 146,707 139,006
Consumer 70,407 52,666
---------- ----------
217,114 191,672
Less: allowance for loan losses (2,360) (2,331)
---------- ----------
Net loans 214,754 189,341
Land, bank premises, and equipment, net 11,180 10,989
Accrued interest receivable 4,235 4,356
Other assets 10,479 8,318
---------- ----------
TOTAL ASSETS $ 506,437 $ 482,338
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 114,005 $ 116,112
Money market and NOW accounts 171,151 185,287
Savings 57,885 55,297
Time 57,376 61,726
---------- ----------
Total deposits 400,417 418,422
Short-term borrowings 46,081 -0-
Other liabilities 1,606 6,223
---------- ----------
Total liabilities 448,104 424,645
Stockholders' Equity:
Common stock 455 455
Additional paid-in-capital 19,135 19,135
Retained earnings 43,169 37,256
Net unrealized (loss) gain on securities
available for sale (3,008) 2,265
Less: treasury stock, at cost (1,418) (1,418)
---------- ----------
Total stockholders' equity 58,333 57,693
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 506,437 $ 482,338
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 107
OMNIBANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
--------------------- -------------------
1994 1993 1994 1993
-------- -------- ------- -------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 16,468 $ 12,811 $ 5,923 $ 4,585
Investment securities:
U.S. Treasury 7,981 7,764 2,777 2,550
U.S. Agencies 153 372 45 109
Obligations of states and
political subdivisions 559 459 212 161
Other 378 285 35 109
Federal funds sold and securities
purchased under resale agreements 120 123 76 7
-------- -------- ------- -------
Total interest income 25,659 21,814 9,068 7,521
-------- -------- ------- -------
INTEREST EXPENSE:
Deposits 5,509 5,250 1,944 1,814
Short-term borrowings 670 170 397 33
-------- -------- ------- -------
Total interest expense 6,179 5,420 2,341 1,847
-------- -------- ------- -------
Net interest income 19,480 16,394 6,727 5,674
Provision for loan losses -0- 43 -0- -0-
-------- -------- ------- -------
Net interest income after provision
for loan losses 19,480 16,351 6,727 5,674
OTHER INCOME:
Service charges 2,215 2,213 771 756
Realized gains on investment
securities transactions, net 2,348 2,726 -0- 89
Other 1,190 1,560 450 466
-------- -------- ------- -------
Total other income 5,753 6,499 1,221 1,311
-------- -------- ------- -------
OTHER EXPENSE:
Salaries and employee benefits 7,447 6,400 2,543 2,188
Occupancy 1,111 832 365 331
Furniture and equipment 552 385 189 130
Other 5,762 5,491 2,166 1,845
-------- -------- ------- -------
Total other expense 14,872 13,108 5,263 4,494
-------- -------- ------- -------
Income before income taxes 10,361 9,742 2,685 2,491
Income tax expense 3,210 3,072 840 850
-------- -------- ------- -------
NET INCOME $ 7,151 $ 6,670 $ 1,845 $ 1,641
======== ======== ======= =======
EARNINGS PER SHARE $0.43 $0.40 $0.11 $0.10
===== ===== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 108
OMNIBANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Additional Net unrealized Gain Total
Common Pain-in Retained (Loss) on Securities Treasury Shareholders'
Stock Capital Earnings Available for sale Stock Equity
------ ---------- -------- -------------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 $455 $19,135 $31,956 $ 0 $(1,418) $50,128
Net Income - - 6,672 - - 6,672
Dividends ($.070 per share) - - (1,155) - - (1,155)
Change in net unrealized
holding gain (loss) on
available for sale
securities - - - - - 0
---- ------- ------- ------- ------- -------
Balance, September 30, 1993 $455 $19,135 $37,473 $ 0 $(1,418) $55,645
==== ======= ======= ======= ======= =======
Balance, January 1, 1994 $455 $19,135 $37,256 $ 2,265 $(1,418) $57,693
Net Income - - 7,151 - - 7,151
Dividends ($.075 per share) - - (1,238) - - (1,238)
Change in net unrealized
holding gain (loss) on
available for sale
securities - - - (5,273) - (5,273)
---- ------- ------- ------- ------- -------
Balance, September 30, 1994 $455 $19,135 $43,169 $(3,008) $(1,418) $58,333
==== ======= ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 109
OMNIBANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
---------------------------
1994 1993
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,151 $ 6,672
Adjustments to reconcile net income to net cash
from operating activities 855 (140)
-------- ---------
Net cash provided by operating activities 8,006 6,532
-------- ---------
INVESTING ACTIVITIES
Proceeds from sale/maturities of
investment securities 3,762 115,847
Proceeds from sale/maturities of
available-for-sale securities 94,526 --
Proceeds from sale of trading securities 8,654 --
Purchase of investment securities (80,078) (111,181)
Purchase of available-for-sale securities (30,881) --
Purchase of trading securities (12,536) --
Net change in loans (25,703) (23,913)
Net change in federal funds purchased 42,185 (1,928)
Property and equipment expenditures (809) (1,065)
Net cash received from business
combination -- 2,060
-------- ---------
Net cash used in investing activities (880) (20,180)
-------- ---------
FINANCING ACTIVITIES
Net increase (decrease) in deposits (18,004) 16,343
Dividends paid (1,238) (1,155)
-------- ---------
Net cash (used in) provided by financing activities (19,242) 15,188
-------- ---------
Net change in cash and cash equivalents (12,116) 1,540
Cash and cash equivalents at
beginning of period 39,753 22,461
-------- ---------
Cash and cash equivalents at
end of period $ 27,637 $ 24,001
======== =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 110
OMNIBANCORP
NOTES TO FINANCIAL STATEMENTS
Note 1 - General
The financial statements of the Company include the accounts of OMNIBANCORP and
its wholly owned subsidiaries which are comprised primarily of six state-
chartered commercial banks. (In October 1994, one of the subsidiary banks was
merged into another subsidiary bank.) Significant intercompany accounts and
transactions have been eliminated. The Company owns a 50% interest in a
mortgage brokerage and servicing company which is accounted for using the equity
method. The September 30, 1994 and 1993 financial statements have been
prepared on a basis consistent with the Company's annual financial statements
and include, in the opinion of management, all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the
consolidated results of operations and financial position for and at the end of
such interim periods. The results of operations for the interim periods are not
necessarily indicative of a full year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. These
financial statements should be read in conjunction with the financial
statements and notes thereto included elsewhere in this Prospectus/Proxy
Statement for the fiscal year ended December 31, 1993.
Note 2 - Proposed sale of the Company
On August 31, 1994, the Company entered into a definitive agreement to merge
with KeyCorp. Pursuant to the agreement, each share of the Company's common
stock would be converted into .2452 shares of KeyCorp common stock, subject to
adjustments under certain circumstances as set forth in the agreement.
Consumation of the merger requires, among other things, the approval of
OMNIBANCORP's shareholders and various regulatory agencies.
F-6
<PAGE> 111
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of OMNIBANCORP
Denver, Colorado
We have audited the accompanying consolidated statements of condition of
OMNIBANCORP and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, stockholders' equity, and cash flows for
each of the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the consolidated financial position of OMNIBANCORP and
subsidiaries as of December 31, 1993 and 1992 and the results of their
operations and their cash flows for each of the years then ended in conformity
with generally accepted accounting principles.
As discussed in the notes to the consolidated financial statements, the Company
changed its method of accounting for investment securities in 1993 to adopt the
provisions of Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities.
/s/ BDO SEIDMAN
BDO SEIDMAN
January 12, 1994
Denver, Colorado
F-7
<PAGE> 112
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of OMNIBANCORP
In our opinion, the accompanying consolidated statements of income, of changes
in stockholders' equity and of cash flows for the year ended December 31, 1991,
present fairly, in all material respects, the results of operations and cash
flows of OMNIBANCORP and Subsidiaries for the year ended December 31, 1991, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above. We have not audited the consolidated financial
statements of OMNIBANCORP and Subsidiaries for any period subsequent to
December 31, 1991.
/s/ Price Waterhouse LLP
- -------------------------------
PRICE WATERHOUSE LLP
Denver, Colorado
January 15, 1992
F-8
<PAGE> 113
<TABLE>
OMNIBANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
================================================================================
<CAPTION>
December 31, 1993 1992
- ---------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 26,898,000 $ 22,461,000
Federal funds sold 12,855,000 -
Investment securities:
Held to maturity 22,082,000 205,820,000
Available for sale 207,499,000 -
Loans:
Commercial and real estate 139,006,000 113,541,000
Consumer 52,666,000 27,838,000
- ---------------------------------------------------------------------------------------
191,672,000 141,379,000
Less allowance for loan losses 2,331,000 1,963,000
- ---------------------------------------------------------------------------------------
Net loans 189,341,000 139,416,000
- ---------------------------------------------------------------------------------------
Other Assets:
Premises and equipment, net 10,989,000 9,453,000
Accrued interest receivable 4,356,000 4,613,000
Other assets 8,318,000 6,001,000
- ---------------------------------------------------------------------------------------
Total other assets 23,663,000 20,067,000
- ---------------------------------------------------------------------------------------
Total assets $ 482,338,000 $ 387,764,000
=======================================================================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-9
<PAGE> 114
<TABLE>
OMNIBANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
=============================================================================================================
<CAPTION>
December 31, 1993 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Noninterest bearing demand $ 116,112,000 $ 87,049,000
MMDA and NOW 185,287,000 141,571,000
Savings 55,297,000 38,519,000
Time 61,726,000 58,561,000
- -------------------------------------------------------------------------------------------------------------
Total deposits 418,422,000 325,700,000
Short-term borrowings 3,896,000 5,535,000
Other liabilities 2,327,000 6,401,000
- -------------------------------------------------------------------------------------------------------------
Total liabilities 424,645,000 337,636,000
- -------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock $.0267 stated value; 50,000,000
shares authorized; 17,057,591 shares issued;
16,491,244 shares outstanding 455,000 455,000
Additional paid-in capital 19,135,000 19,135,000
Retained earnings 37,256,000 31,956,000
Net unrealized gain on securities available for sale 2,265,000 -
- -------------------------------------------------------------------------------------------------------------
59,111,000 51,546,000
Treasury stock, at cost (1,418,000) (1,418,000)
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 57,693,000 50,128,000
- -------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 482,338,000 $ 387,764,000
=============================================================================================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-10
<PAGE> 115
<TABLE>
OMNIBANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
==============================================================================================================
<CAPTION>
Years Ended December 31, 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees $ 17,647,000 $ 13,488,000 $ 11,978,000
Investment securities:
Taxable interest income 10,847,000 12,161,000 12,337,000
Tax-exempt interest income 612,000 664,000 912,000
Other 392,000 320,000 306,000
Federal funds sold 172,000 188,000 519,000
- --------------------------------------------------------------------------------------------------------------
29,670,000 26,821,000 26,052,000
- --------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Deposits 7,060,000 7,703,000 11,292,000
Federal funds purchased 196,000 175,000 79,000
Notes payable - 203,000 352,000
- --------------------------------------------------------------------------------------------------------------
7,256,000 8,081,000 11,723,000
- --------------------------------------------------------------------------------------------------------------
Net interest income 22,414,000 18,740,000 14,329,000
Provision for loan losses 43,000 164,000 264,000
- --------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 22,371,000 18,576,000 14,065,000
- --------------------------------------------------------------------------------------------------------------
OTHER INCOME:
Service charges 3,100,000 2,682,000 2,809,000
Gains on investment securities
transactions 2,649,000 2,762,000 2,241,000
Other 1,920,000 1,982,000 2,271,000
- --------------------------------------------------------------------------------------------------------------
7,669,000 7,426,000 7,321,000
- --------------------------------------------------------------------------------------------------------------
OTHER EXPENSE:
Salaries and employee benefits 9,499,000 8,121,000 7,256,000
Occupancy of bank premises 1,192,000 1,342,000 1,379,000
Furniture and equipment 579,000 565,000 517,000
Other 6,456,000 5,705,000 5,730,000
- --------------------------------------------------------------------------------------------------------------
17,726,000 15,733,000 14,882,000
- --------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 12,314,000 10,269,000 6,504,000
INCOME TAX EXPENSE 3,881,000 3,012,000 1,439,000
- --------------------------------------------------------------------------------------------------------------
NET INCOME $ 8,433,000 $ 7,257,000 $ 5,065,000
==============================================================================================================
NET INCOME PER COMMON SHARE $ .51 $ .43 $ .30
==============================================================================================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-11
<PAGE> 116
<TABLE>
OMNIBANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
==============================================================================================================
<CAPTION>
Years Ended December 31, 1993, 1992 and 1991
Net Unrealized
Gain On
Additional Securities
Common Paid-in Retained Available Treasury
Stock Capital Earnings For Sale Stock Total
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1990 $ 455,000 $19,135,000 $ 23,680,000 $ - $ (403,000) $ 42,867,000
Treasury stock:
38,805 shares purchased
for $1.75 per share - - - - (68,000) (68,000)
Net income - - 5,065,000 - - 5,065,000
Dividends ($.0925 per
common share) - - (1,557,000) - - (1,557,000)
- --------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1991 455,000 19,135,000 27,188,000 - (471,000) 46,307,000
Treasury stock:
326,963 shares purchased
at prices of $2.79 and
$3.00 per share - - - - (947,000) (947,000)
Net income - - 7,257,000 - - 7,257,000
Dividends ($.15 per common
share) - - (2,489,000) - - (2,489,000)
- --------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1992 455,000 19,135,000 31,956,000 - (1,418,000) 50,128,000
Net income - - 8,433,000 - - 8,433,000
Dividends ($.19 per common
share) - - (3,133,000) - - (3,133,000)
Net unrealized gain on
securities available
for sale - - - 2,265,000 - 2,265,000
- --------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 $ 455,000 $19,135,000 $ 37,256,000 $ 2,265,000 $(1,418,000) $ 57,693,000
==============================================================================================================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-12
<PAGE> 117
<TABLE>
OMNIBANCORP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
==============================================================================================================
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Years Ended December 31, 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 8,433,000 $ 7,257,000 $ 5,065,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,951,000 1,452,000 895,000
Provision for loan losses and real estate
acquired by foreclosure 43,000 194,000 489,000
Provision for (benefit from)
deferred taxes 172,000 (222,000) 184,000
Undistributed earnings in
unconsolidated affiliate (440,000) (519,000) (253,000)
Deferred loan fees 518,000 422,000 262,000
Gains on investment securities
transactions (2,760,000) (2,762,000) (2,241,000)
Loss (gain) on sale of fixed assets (12,000) 11,000 (348,000)
Writedowns, net of gains and losses
from real estate acquired by
foreclosure (9,000) 292,000 96,000
Interest receivable 572,000 370,000 (521,000)
Other assets (216,000) (2,143,000) (3,243,000)
Other liabilities (5,725,000) 4,105,000 (239,000)
- --------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 3,527,000 8,457,000 146,000
- --------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Change in net federal funds purchased (1,639,000) 5,535,000 -
Proceeds from maturities of investment
securities 55,262,000 16,453,000 22,432,000
Proceeds from sales of investment
securities 84,340,000 98,201,000 106,074,000
Purchase of investment securities (138,350,000) (130,112,000) (141,379,000)
Net change in loans to customers (30,642,000) (25,629,000) (15,549,000)
Proceeds from sale of real estate
acquired by foreclosure 322,000 2,518,000 3,143,000
Expenditures for premises and equipment (1,385,000) (1,231,000) (1,913,000)
Net cash received from business
combinations 4,841,000 - -
Proceeds from sale of fixed assets - - 683,000
- --------------------------------------------------------------------------------------------------------------
Cash used in investing activities (27,251,000) (34,265,000) (26,509,000)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE> 118
<TABLE>
OMNIBANCORP
ANDSUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
===============================================================================================================
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Years Ended December 31, 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net change in deposits 44,149,000 27,666,000 17,821,000
Repayment of notes payable - (3,502,000) (27,000)
Purchase of treasury stock - (947,000) (68,000)
Dividends (3,133,000) (2,489,000) (1,557,000)
- ---------------------------------------------------------------------------------------------------------------
Cash provided by financing activities 41,016,000 20,728,000 16,169,000
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 17,292,000 (5,080,000) (10,194,000)
CASH AND CASH EQUIVALENTS, beginning
of year 22,461,000 27,541,000 37,735,000
- ---------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $ 39,753,000 $ 22,461,000 $ 27,541,000
===============================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 7,331,000 $ 8,701,000 $ 12,047,000
Income taxes 4,247,000 3,309,000 1,510,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Loan balances transferred to real estate
acquired by foreclosure - 1,059,000 3,362,000
Sales of real estate acquired by foreclosure
financed by the Bank 172,000 827,000 2,378,000
Net unrealized gain on securities available
for sale 2,265,000 - -
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-14
<PAGE> 119
OMNIBANCORP
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
================================================================================
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of OMNIBANCORP and
its wholly-owned subsidiaries which are comprised primarily of eleven state
chartered commercial banks. Significant intercompany accounts and transactions
have been eliminated. The Company owns a 50% interest in a mortgage brokerage
and servicing company which is accounted for using the equity method. The
Company's equity interest in earnings, which is included in other income was
$440,000, $519,000 and $253,000 for 1993, 1992 and 1991. During 1993, 1992 and
1991 the Company received $147,000, $272,000 and $72,000, in fees for services
provided to this entity.
INVESTMENT SECURITIES
Through December 31, 1992, the Company accounted for investment securities at
cost, adjusted for the amortization of premiums and accretion of discounts.
Gains and losses were recognized at the time of sale, using the specific
identification method or when management determined that a permanent decline in
value existed.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115 (SFAS 115), Accounting for Certain
Investments in Debt and Equity Securities. This Statement requires the Company
to classify investment securities as either held-to- maturity, available for
sale, or trading and also requires that adjustments be made to certain
classifications of the portfolio to reflect their fair market value. SFAS 115
was implemented as of December 31, 1993.
Investment securities classified as held-to-maturity are those securities that
the Company has the positive intent and ability to hold to maturity. They are
reported at cost, adjusted for the amortization of premiums and accretion of
discounts.
Investment securities classified as available for sale are those securities
that the Company does not have the positive intent to hold to maturity or does
not intend to trade actively. These securities are reported at fair value with
unrealized gains and losses reported as a net amount (net of applicable income
taxes) as a separate component of stockholders' equity. The effect of adopting
SFAS 115 resulted in a net increase to stockholders' equity of $2,265,000 as of
December 31, 1993.
F-15
<PAGE> 120
OMNIBANCORP
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
================================================================================
Trading securities are those investments that the Company purchases with the
intent to sell in the near future. They are reported at fair value.
Unrealized gains and losses for trading securities are included in current
earnings.
INTEREST AND FEES ON LOANS
Interest on loans is accrued based on the principal balance outstanding. The
accrual of interest on loans is discontinued when management believes that
interest or principal may not be collectible in the normal course of business.
Interest income on such loans is subsequently recognized only in the period in
which interest payments are received. The Company defers loan fees which are
amortized into interest income over the lives of the related loans as
adjustments of the yield. At December 31, 1993, 1992 and 1991, respectively,
the Company had deferred loan fees of $1,607,000, $1,089,000 and $670,000.
LOANS AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based primarily on historical loan loss and
collection experience, underlying collateral values, review of individual
credits, current economic conditions and such other factors which, in
management's judgment, deserve recognition in estimating loan losses.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation and
amortization calculated using the straight-line method over the shorter of the
estimated useful lives or lease periods of the respective assets.
REAL ESTATE ACQUIRED BY FORECLOSURE
Other real estate acquired by foreclosure (included in other assets) is stated
at the lesser of loan balance prior to foreclosure, adjusted for costs incurred
for improvements to the property ("cost"), or fair market value less estimated
selling costs of the property. In the event that the fair market value less
estimated selling costs is less than cost, a valuation allowance is established
to reflect this deficiency. Subsequent changes in the valuation allowance are
recognized through adjustments to current period operations. The balance of
real estate acquired by foreclosure net of any valuation allowance was $824,000
and $731,000 at December 31, 1993 and 1992.
CASH FLOWS
For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash on hand, amounts due from banks and federal funds
sold.
F-16
<PAGE> 121
OMNIBANCORP
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
================================================================================
INTANGIBLES
The net excess of $2,536,000 and $1,167,000 at December 31, 1993 and 1992,
(included in other assets) of the cost of subsidiary banks' assets acquired
over liabilities assumed (goodwill) is being amortized over a period ranging
from 10 to 29 years.
INCOME TAXES
Through December 31, 1992, the Company followed the provisions of Accounting
Principles Board Opinion 11, "Accounting for Income Taxes". Effective for
fiscal year 1993, the Company implemented Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). Under the
provisions of SFAS No. 109, the Company elected not to restate prior years and
determined that the cumulative effect of this accounting change is not material
to the financial statements.
Temporary differences are differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements that will
result in taxable or deductible amounts in future years. The Company's
temporary differences result primarily from depreciation, deferred loan fees,
and investment securities.
ACCOUNTING STANDARDS PRONOUNCEMENTS
In May 1993, Statement of Financial Accounting Standards No. 114, "Accounting
for Impairment of a Loan", was issued. This statement requires that impaired
loans, within the scope of the statement, be measured based on the present
value of expected future cash flows discounted at the loan's effective interest
rate or market price or the fair value of the collateral if the loan is
collateral dependent. This statement applies to fiscal years beginning after
December 15, 1994, and is not expected to have a material effect on the
accompanying financial statements.
NET INCOME PER SHARE
Net income per share is based upon the weighted average number of common shares
outstanding during the year. Common stock equivalents include shares issuable
upon exercise of stock options and are included as common stock equivalents
when dilutive. Common stock equivalents resulted in no material dilution
during the periods presented. Weighted average number of common shares
outstanding for the years ended December 31, 1993, 1992 and 1991 were
16,748,322, 16,747,620, and 16,844,962, respectively.
RECLASSIFICATIONS
Other expenses as reported in the previous financial statements were
reclassified to conform to the current year's presentation.
F-17
<PAGE> 122
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. INVESTMENT SECURITIES
The amortized cost and estimated market value of investment securities are
summarized as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1993 Cost Gains Losses Value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HELD TO MATURITY
U.S. Agencies $ 4,915,000 $ 181,000 $ (6,000) $ 5,090,000
Obligations of
states and
political
subdivisions 13,136,000 190,000 (31,000) 13,295,000
Other 4,031,000 - - 4,031,000
- ------------------------------------------------------------------------------
22,082,000 371,000 (37,000) 22,416,000
- ------------------------------------------------------------------------------
AVAILABLE FOR SALE
U.S. Treasury 204,014,000 3,591,000 (106,000) 207,499,000
- ------------------------------------------------------------------------------
Total $ 226,096,000 $ 3,962,000 $ (143,000) $ 229,915,000
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1993 Cost Gains Losses Value
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury $ 185,139,000 $ 4,514,000 $ (207,000) $ 189,446,000
U.S. Agencies 4,635,000 158,000 (16,000) 4,777,000
Obligations of
states and
political
subdivisions 9,839,000 184,000 (22,000) 10,001,000
Other 6,207,000 111,000 - 6,318,000
- ------------------------------------------------------------------------------
Total $ 205,820,000 $ 4,967,000 $ (245,000) $ 210,542,000
==============================================================================
</TABLE>
F-18
<PAGE> 123
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The amortized cost and estimated market value of investment securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
- ------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 55,647,000 $ 56,231,000
Due after one year through five years 159,236,000 162,371,000
Due after five years through ten years 8,498,000 8,509,000
Due after ten years 1,734,000 1,742,000
- ------------------------------------------------------------------------------
225,115,000 228,853,000
Mortgage backed securities 981,000 1,062,000
- ------------------------------------------------------------------------------
Total $ 226,096,000 $ 229,915,000
==============================================================================
</TABLE>
The Company realized gross gains of $2,828,000, $2,675,000 and $2,330,000 on
the sales of investment securities for the years ended December 31, 1993, 1992
and 1991.
The amortized cost and estimated market values of investment securities pledged
to secure public deposits and for other purposes required by law were
$45,256,000 and $46,441,000 at December 31, 1993 and $29,439,000 and
$30,298,000 at December 31, 1992.
F-19
<PAGE> 124
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
2. LOANS AND ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning
of year $ 1,963,000 $ 1,861,000 $ 2,462,000
Acquisitions 338,000 - -
Provision charged
to expense 43,000 164,000 264,000
Recoveries 53,000 56,000 126,000
Loans charged off (66,000) (118,000) (991,000)
- -------------------------------------------------------------------------------
Balance, end of year $ 2,331,000 $ 1,963,000 $ 1,861,000
===============================================================================
</TABLE>
The accrual of interest had been discontinued on loans having an outstanding
principal balance of $120,000 and $948,000 at December 31, 1993 and 1992.
Additional interest income of approximately $6,000 in 1993, $40,000 in 1992 and
$57,000 in 1991 would have been recognized if nonaccrual loans had been current
in accordance with their original terms.
3. TIME DEPOSITS
Individual time certificates of deposit in excess of $100,000 totaled
$22,610,000 and $23,354,000 at December 31, 1993 and 1992.
4. PREMISES AND EQUIPMENT
At December 31, premises and equipment, less accumulated depreciation and
amortization consisted of the following:
<TABLE>
<CAPTION>
1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
Land $ 4,675,000 $ 4,440,000
Buildings 5,148,000 4,806,000
Leasehold improvements 1,948,000 1,744,000
Furniture and equipment 4,028,000 3,496,000
- -------------------------------------------------------------------------------
15,799,000 14,486,000
Less accumulated depreciation
and amortization 4,810,000 5,033,000
- -------------------------------------------------------------------------------
$ 10,989,000 $ 9,453,000
===============================================================================
</TABLE>
F-20
<PAGE> 125
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
5. SHORT-TERM BORROWINGS
Short-term borrowings consist of repurchase agreements and federal funds
purchased and are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1993 1992 1991
(unaudited)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Ending balance $ 3,896,000 $ 5,535,000 $ -
Weighted average
interest rate 2.57% 5.00% -
Maximum amount out-
standing at any
month-end $21,235,000 $15,950,000 $ 8,050,000
Average amount out-
standing during the
period $ 6,526,000 $10,356,000 $ 9,578,000
Weighted average interest
rate during the period 3.00% 3.65% 4.50
</TABLE>
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimates of fair values of financial instruments are based on a variety of
factors at a specific point in time. Where possible, fair values represent
quoted market prices for identical or comparable instruments. In other cases,
fair values have been estimated based on assumptions concerning the amount and
timing of estimated future cash flows and assumed discount rates. Intangible
values assigned to customer relationships are not reflected in the reported
values. These estimates are subjective in nature and involve matters of
judgement. Accordingly, the fair values may not represent actual values of the
financial instruments that could have been realized as of year end or that will
be realized in the future.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
CASH AND SHORT-TERM INVESTMENTS
For those short-term instruments, the carrying amount is a reasonable estimate
of fair value.
INVESTMENT SECURITIES
The estimated fair values of securities are provided in Note 1. The fair
values are based on quoted market prices or dealer quotes, when available. If
a quoted market price is not available, fair value is estimated using quoted
market prices for similar securities.
F-21
<PAGE> 126
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
LOAN RECEIVABLES
The estimated fair values of loans outstanding net of the allowance for loan
losses at December 31, 1993 and 1992 are $190,049,000 and $139,696,000. The
fair value of loans is estimated by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers with similar
remaining maturities. This calculation ignores loan fees and certain factors
affecting the interest rates charged on various loans such as the borrower's
creditworthiness and compensating balances and dissimilar types of collateral.
DEPOSIT LIABILITIES
The estimated fair values of deposits outstanding at December 31, 1993 and 1992
are $418,615,000 and $325,924,000. The fair value of demand deposits, savings
accounts, and certain money market deposits is the amount payable on demand at
the reporting date. The fair value of fixed- rate deposits are estimated based
on discounted cash flows using the rates currently offered for deposits of
similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
The estimated fair values of commitments to extend credit and standby letters
of credit were $62,177,000 and $1,791,000, respectively, at December 31, 1993
and $44,222,000 and $2,067,000, respectively, at December 31, 1992. The fair
values of commitments to extend credit and letters of credit are determined by
combining the estimated fees currently charged to enter into similar agreements
with the committed amounts.
7. NOTES PAYABLE
During 1992, the Company prepaid, without penalty, 100% of its outstanding
mortgage indebtedness bearing interest at 10%.
F-22
<PAGE> 127
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
8. INCOME TAXES
The components of consolidated income tax expense are as follows:
<TABLE>
<CAPTION>
Years Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current liability $ 3,709,000 $ 3,234,000 $ 1,255,000
Deferred liability (benefit) 172,000 (222,000) 184,000
- ------------------------------------------------------------------------------
Total $ 3,881,000 $ 3,012,000 $ 1,439,000
==============================================================================
</TABLE>
The principal timing differences resulting in deferred income taxes and the tax
effect of each are as follows:
<TABLE>
<CAPTION>
Years Ended December 31, 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C>
Depreciation and amortization $ (25,000) $ (14,000)
Provision for loan losses (11,000) 210,000
Deferred loan fees (143,000) (89,000)
Provision for loss contingency (165,000) -
Other, net 122,000 77,000
- ------------------------------------------------------------------------------
Total $ (222,000) $ 184,000
==============================================================================
</TABLE>
The components of the net deferred tax assets and liabilities as of December
31, 1993 are as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
Net unrealized gain on investments available for sale $ 1,185,000
Depreciation and amortization 501,000
Provision for loan losses (152,000)
Deferred loan fees (546,000)
Provision for loss contingency (210,000)
Other, net 358,000
- ------------------------------------------------------------------------------
Net deferred liabilities (assets) $ 1,136,000
==============================================================================
</TABLE>
F-23
<PAGE> 128
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
The following table reconciles the federal statutory tax rate to the effective
tax rate:
<CAPTION>
Years Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0 % 34.0 % 34.0%
Adjustments to statutory tax rate
resulting from:
Tax-exempt interest income (1.8)% (2.2)% (4.8)%
Use of capital loss carryforward (0.9)% (1.7)% (1.6)%
Income of unconsolidated affiliate (1.3)% (0.6)% (1.3)%
Other, net 1.5 % (0.2)% (4.2)%
- ------------------------------------------------------------------------------
Effective tax rate 31.5 % 29.3 % 22.1%
==============================================================================
</TABLE>
During 1991, the Internal Revenue Service issued a Revenue Agent Report (RAR)
as a result of examining OMNIBANCORP's consolidated federal income tax returns
for the years 1985, 1986, and 1987. In March, 1992, the Company reached a
settlement with the Internal Revenue Service regarding the RAR which resulted
in a total additional tax liability to the Company of approximately $140,000.
The Company provided adequate accruals for this liability in prior years and,
as a result, the settlement had no impact on the Company's 1992 operations.
During 1993, the Internal Revenue Service completed an audit of OMNIBANCORP's
consolidated federal income tax returns for the years 1988 through 1990. This
examination resulted in a total additional tax liability to the Company of
approximately $22,000.
9. PROFIT SHARING PLAN
The Company has a profit-sharing plan in which employees of the Company and its
subsidiaries meeting eligibility requirements participate. Annual
contributions are at the discretion of the Board of Directors. Contributions
of $315,000, $280,000 and $200,000 were made to the plan in 1993, 1992 and
1991.
F-24
<PAGE> 129
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
10. STOCK OPTIONS
Options have been granted to certain key employees of the Company to purchase
shares of its common stock. As of December 31, 1992 options outstanding
represented 295,000 shares of common stock at prices of $2.56 and $2.57 per
share. During 1993, the Company granted additional options to these employees
to purchase another 75,000 shares of its common stock at a price of $3.15 per
share. All options are exercisable and expire seven years from the grant date.
The option price was the Company's book value (which approximates fair market
value) at the date of the grant. Three years from the exercise date, the
employee may elect to sell such stock to the Company at 1.25 times the option
price. No options have been exercised or cancelled during the three years
ended December 31, 1993.
11. DIVIDEND RESTRICTIONS
The Company is subject to federal and state laws and regulations which contain
restrictions on the receipt of dividends from the subsidiary banks. Approval
from these agencies is required for the subsidiary banks to pay dividends in
any calendar year which exceed the banks' net profits for that year combined
with its retained profits for the preceding two years. At December 31, 1993,
the banks' consolidated retained earnings of approximately $3,456,000 were
available for the payment of dividends without obtaining prior regulatory
approval.
12. OTHER EXPENSE
The components of other expense consisted of the following:
<TABLE>
<CAPTION>
Years Ended December 31, 1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Item and data processing $ 1,472,000 $ 863,000 $ 807,000
Regulatory fees, FDIC and
other insurance 1,160,000 994,000 881,000
Postage, printing and
supplies 811,000 642,000 648,000
Legal, accounting and
directors fees 591,000 517,000 427,000
Telephone and advertising 345,000 234,000 211,000
Correspondent bank charges 272,000 269,000 264,000
Other 1,805,000 2,186,000 2,492,000
- ------------------------------------------------------------------------------
Total other expense $ 6,456,000 $ 5,705,000 $ 5,730,000
==============================================================================
</TABLE>
F-25
<PAGE> 130
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
13. COMMITMENTS
The Company and its subsidiary banks lease certain premises under operating
leases. Minimum rental commitments remaining under the leases are as follows:
<CAPTION>
Years Ending
December 31,
- ------------------------------------------------------------------------------
<S> <C>
1994 $ 558,000
1995 448,000
1996 374,000
1997 325,000
1998 318,000
Later years 1,385,000
- ------------------------------------------------------------------------------
Total $ 3,408,000
==============================================================================
</TABLE>
Lease agreements contain various renewal options, and certain of the agreements
call for annual adjustments in the event of increases in the U.S. Bureau of
Labor Statistics Consumer Price Index. The Company and subsidiary banks are
also required to pay their prorata share of operating expenses above the base
minimum, as defined in the lease agreements. Rent expense approximated
$563,000, $654,000 and $490,000 for the years ended December 31, 1993, 1992 and
1991.
Commitments to extend credit and standby letters of credit are issued by the
Company in the normal course of business to meet the financing needs of its
customers. These off-balance-sheet items approximated $61,561,000 and
$1,765,000, respectively, as of December 31, 1993.
The Company's exposure to credit losses, in the event of nonperformance by
these customers, is represented by the contractual amount of their obligations.
The Company uses the same credit policies in granting commitments and
conditional obligations as it does for on-balance-sheet instruments.
Management does not anticipate any material loss as a result of these
commitments, and believes there are no significant concentrations of credit
risk with any customer. The Company's lending is concentrated primarily in the
Denver Metropolitan area and consists of commercial, real estate and consumer
lending.
F-26
<PAGE> 131
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The Company is engaged in legal actions arising from the normal course of
business. In management's opinion, the Company has adequate legal defenses
with respect to these actions, and the resolution of these matters should have
no material adverse effects upon the results of operations or financial
condition of the Company.
14. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company and its subsidiary banks make
loans to directors, officers, and employees. All loans are made on
substantially equivalent terms, including interest rates and collateral, as
those prevailing at the time for comparable loans with other persons and do not
involve more than the normal risk of collectibility. Such loans totaled
$967,000 and $2,121,000 at December 31, 1993 and 1992.
15. ACQUISITIONS
On February 4, 1993, OMNIBANCORP acquired 100% of the outstanding shares of Met
State Corporation (the "Corporation"), a one-bank holding company, for $4.3
million. The Corporation, whose assets consisted primarily of 100% of the stock
of Metropolitan State Bank in Commerce City, Colorado ("the Bank"), was
subsequently liquidated. As a result of this transaction, the Bank became a
wholly-owned subsidiary of OMNIBANCORP and was subsequently renamed OMNIBANK
Commerce City.
On December 21, 1993, OMNIBANCORP acquired 100% of the outstanding shares of
Denver West Bank & Trust in Golden, Colorado ("Denver West") for $2.2 million.
Effective January 1, 1994 Denver West was merged into Omnibank Arvada and
operates as a branch of that institution.
These transactions have been accounted for as purchases. The Company's
consolidated financial statements include the assets, liabilities, and results
of operations of Omnibank Commerce City and Denver West since the dates of
acquisition. Portions of the purchase prices have been allocated to the assets
and liabilities of these entities based on their estimated fair values. The
operations of these acquired entities were not significant to the operations of
the Company prior to the acquisitions and therefore no proforma results are
presented.
F-27
<PAGE> 132
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
16. PARENT COMPANY STATEMENTS
Presented below are condensed balance sheets, statements of income and cash
flows for the parent company:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, 1993 1992
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash on deposit with subsidiaries $ 117,000 $ 17,000
Investment in subsidiaries 47,114,000 40,804,000
Investment securities 8,227,000 8,223,000
Other assets 3,205,000 2,111,000
- ------------------------------------------------------------------------------
Total assets $ 58,663,000 $ 51,155,000
==============================================================================
LIABILITIES
Other liabilities $ 970,000 $ 1,027,000
SHAREHOLDERS' EQUITY 57,693,000 50,128,000
- ------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 58,663,000 $ 51,155,000
==============================================================================
</TABLE>
F-28
<PAGE> 133
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
CONDENSED STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31, 1993 1992 1991
(unaudited)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING INCOME:
Dividends from bank sub-
sidiaries $ 7,895,000 $ 6,410,000 $ 4,200,000
Other income 1,285,000 2,308,000 2,300,000
- -------------------------------------------------------------------------------
Total 9,180,000 8,718,000 6,500,000
Operating expense 2,726,000 3,482,000 4,291,000
- -------------------------------------------------------------------------------
Income before income taxes
and equity in undistributed
earnings of consolidated
affiliates 6,454,000 5,236,000 2,209,000
Applicable income tax benefit 490,000 400,000 677,000
- -------------------------------------------------------------------------------
Income before equity in
undistributed earnings of
consolidated affiliates 6,944,000 5,636,000 2,886,000
Equity in undistributed earnings
of consolidated affiliates 1,489,000 1,621,000 2,179,000
- -------------------------------------------------------------------------------
Net income $ 8,433,000 $ 7,257,000 $ 5,065,000
===============================================================================
</TABLE>
F-29
<PAGE> 134
OMNIBANCORP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
<TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
Years Ended December 31, 1993 1992 1991
(unaudited)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 8,433,000 $ 7,257,000 $ 5,065,000
Adjustments to reconcile net
net income to cash from
operating activities:
Undistributed income of
subsidiaries (1,489,000) (1,621,000) (2,179,000)
(Gain) loss from sale of
securities (303,000) (186,000) -
Depreciation and amortization 136,000 60,000 34,000
Change in other assets (1,094,000) 414,000 1,615,000
Change in other liabilities (57,000) (509,000) 1,348,000
- -------------------------------------------------------------------------------
Total adjustments (2,807,000) (1,842,000) 818,000
- -------------------------------------------------------------------------------
Net cash from operating 5,626,000 5,415,000 5,883,000
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITIES:
Purchase of banks (6,500,000) - -
Purchases of investment
securities (22,164,000) (21,799,000) (7,255,000)
Sales and maturities of
investment securities 22,465,000 22,383,000 3,200,000
Sales of fixed assets 3,573,000 - -
Other, net 233,000 - -
- -------------------------------------------------------------------------------
Net cash used in investing
activities (2,393,000) 584,000 (4,055,000)
- -------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Purchase of treasury stock - (947,000) (68,000)
Retirement of mortgage - (3,502,000) -
Dividends paid (3,133,000) (2,489,000) (1,557,000)
- -------------------------------------------------------------------------------
Net cash used for financing
activities (3,133,000) (6,938,000) (1,625,000)
- -------------------------------------------------------------------------------
Net change in cash 100,000 (939,000) 203,000
CASH, beginning of year 17,000 956,000 753,000
- -------------------------------------------------------------------------------
CASH, end of year $ 117,000 $ 17,000 $ 956,000
===============================================================================
</TABLE>
F-30
<PAGE> 135
[EXECUTION COPY]
PLAN OF MERGER
DATED AS OF THE 31ST DAY OF AUGUST, 1994
BY AND BETWEEN
KEYCORP
AND
OMNIBANCORP
<PAGE> 136
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
RECITALS: 1
ARTICLE I THE MERGER 2
SECTION 1.1. Structure of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2. Effect on Outstanding Shares . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.4. Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 1.5. Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.6. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.7. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II CONDUCT OF OMNI PENDING THE MERGER 8
SECTION 2.1. Conduct of OMNI's Business Prior to the
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.2. Forbearance by OMNI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES 13
SECTION 3.1. Representations and Warranties of OMNI . . . . . . . . . . . . . . . . . . . 13
(a) Recitals True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(e) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(f) No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(g) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(h) Financial Statements; Undisclosed
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(i) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . 18
(j) Taxes and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(k) Absence of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(l) Absence of Regulatory Actions . . . . . . . . . . . . . . . . . . . . . . . . 21
(m) Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(n) Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(o) Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(p) Title to Properties and Other Assets . . . . . . . . . . . . . . . . . . . . 25
(q) Knowledge As to Conditions . . . . . . . . . . . . . . . . . . . . . . . . . 25
(r) Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(s) Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(t) Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(u) Allowance; Capital; OMNI Loans . . . . . . . . . . . . . . . . . . . . . . . 27
(v) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 28
(w) Antitakeover Provisions Inapplicable . . . . . . . . . . . . . . . . . . . . 28
(x) Material Interests of Certain Persons . . . . . . . . . . . . . . . . . . . 28
(y) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(z) Capital Spending and Commitments . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
A-i
<PAGE> 137
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(aa) Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(bb) Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(cc) Officer/Director Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.2. Representations and Warranties
of KeyCorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Recitals True . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Capital Stock of KeyCorp . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(c) Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(f) Certain Statements, Reports and
Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(g) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Compliance with Applicable Law . . . . . . . . . . . . . . . . . . . . . . . 33
(i) Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(j) Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(k) KeyCorp Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(l) Knowledge as to Conditions . . . . . . . . . . . . . . . . . . . . . . . . . 34
(m) Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV COVENANTS 34
SECTION 4.1. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.2. Certain Revaluations, Changes, and
Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.3. Employment and Benefit Matters . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.4. Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.5. Certain Filings, Consents and
Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.6. State Antitakeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.7. Indemnification; Directors' and
Officers' Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.8. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.9. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.10. Proxy; Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.11. Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.12. Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.13. Tax-Free Reorganization Treatment . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.14. Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.15. Documents and Information to be
Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.16. Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.17. Tax Representations of OMNI . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.18. Tax Representations of KeyCorp . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.19. KeyCorp Common and Other Merger
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.20. NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.21. Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
A-ii
<PAGE> 138
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 4.22. Termination of OMNI Profit Sharing Plan . . . . . . . . . . . . . . . . 43
ARTICLE V CONDITIONS TO CONSUMMATION 43
SECTION 5.1. Conditions to All Parties' Obligations . . . . . . . . . . . . . . . . 43
SECTION 5.2. Conditions to Obligations of KeyCorp . . . . . . . . . . . . . . . . . 45
SECTION 5.3. Conditions to the Obligations of OMNI . . . . . . . . . . . . . . . . . 47
ARTICLE VI TERMINATION 48
SECTION 6.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.2. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VII ENVIRONMENTAL MATTERS 50
SECTION 7.1. Environmental Representations and
Warranties of the OMNI . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.2. Phase I Environmental Audit . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 7.3. Phase II Environmental Audit and
Environmental Audit Response . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.4. Environmental Occurrence Notification . . . . . . . . . . . . . . . . . 53
SECTION 7.5. Remediation; Allocation of Remediation
Costs; Termination of Plan . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.6. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VIII OTHER MATTERS
SECTION 8.1. Certain Definitions; Interpretation . . . . . . . . . . . . . . . . . . 56
SECTION 8.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.3. Waiver and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.6. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.8. Entire Plan; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.9. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
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LIST OF EXHIBITS
Exhibit A -- Colorado Business Corporation Act Section 7-113-201
(shareholder dissenters' rights statute)
Exhibit B -- Form of Option Agreement
Exhibit C -- Loan Committee Review Sheet/KeyCorp Response
Exhibit D -- Form of Affiliate's Letter
Exhibit E -- Form of Voting Agreement
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INDEX TO DEFINITIONS
<TABLE>
<CAPTION>
Term Location of Definition
- ---- ----------------------
<S> <C>
20 Day Calculation Period 6.1(g)
Acquisition Proposal 4.1
Affiliates 4.12(a)
Appropriate Governmental Standard 7.6(e)
BHCA Recital A
Bank Merger 4.14
Call Reports 3.1(g)
CBCA 1.1
CERCLA 7.1
Certificate 1.3(a)
Closing 1.6
Closing Date 1.6
Code Recital C
Colorado Commissioner 3.1(g)
Costs 4.7(a)
Disclosure Memorandum 3.1(b)
Environmental Action Item 7.6(d)
Environmental Audit Report 7.6(f)
Environmental Audit Response 7.6(c)
Environmental Laws 7.1
Environmental Occurrence Notification 7.4
Environmental Permits 7.1
ERISA 3.1(o)
ERISA Affiliate 3.1(o)
ERISA Plan 3.1(o)
Effective Time 1.7
Employee Plans 3.1(o)
Excess Remediation Cost 7.5
Exchange Act 3.2(b)
Exchange Agent 1.3(c)
Exchange Fund 1.3(c)
Exchange Ratio 1.2(a)
FDIA 3.1(d)
FDIC 3.1(g)
Federal Reserve Board 3.1(g)
HOLA Recital A
IRS 3.1(j)
Indemnified Parties 4.7(a)
KeyCorp Preamble
KeyCorp Common Average Closing Price 6.1(g)
KeyCorp Common Stock 1.2(a)
KeyCorp Financial Statements 3.2(f)
KeyCorp Reports 3.2(f)
KeyCorp Right 1.2(d)
KeyCorp Rights Plan 1.2(d)
KeyCorp Subsidiary 3.2(c)
KeyCorp Subsidiaries 3.2(c)
</TABLE>
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<TABLE>
<CAPTION>
Term Location of Definition
- ---- ----------------------
<S> <C>
Loan Portfolio Properties 7.1
Material Adverse Effect 8.1
Maximum Amount 4.7(c)
Merger 1.1
Merger Consideration 1.3(a)
NYSE 1.2(b)
NYSE Tape 6.1(g)
OMNI Preamble
OMNI Bank 3.1(d)
OMNI Banks 3.1(d)
OMNI Buy and Sell Agreement 1.3(b)
OMNI Common Stock Recital B
OMNI Contracts 3.1(m)
OMNI Financial Statements 3.1(h)
OMNI Loan 3.1(u)
OMNI Loans 3.1(u)
OMNI Meeting 4.11
OMNI Preferred Stock Recital B
OMNI Reports 3.1(g)
OMNI Stockholder 1.3(b)
OMNI Subsidiary 3.1(d)
OMNI Subsidiaries 3.1(d)
Pension Plan 3.1(o)
Person 8.1
Phase I Environmental Audit 7.6(a)
Phase II Environmental Audit 7.6(b)
Plan Preamble
Properties Owned 7.1
Proxy Statement 3.1(t)
Proxy Statement/Prospectus 3.1(t)
Registration Statement 3.1(t)
Regulated Material 7.1
Regulators 3.1(l)
Remedial Cost Estimate 7.5
REO 7.1
SEC 3.1(t)
Securities Act 3.1(t)
Subsidiary Merger 1.1
Surviving Corporation 1.1
Voting Agreement 3.1(bb)
Voting Agreements 3.1(bb)
</TABLE>
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PLAN OF MERGER, dated as of the 31st day of August, 1994 (the "Plan"),
by and between KeyCorp ("KeyCorp") and OMNIBANCORP ("OMNI").
RECITALS:
A. KeyCorp. KeyCorp has been duly incorporated and is a corporation,
duly organized, validly existing, and in good standing under the laws of the
State of Ohio, with its principal executive offices located in Cleveland, Ohio.
KeyCorp is a registered bank holding company under the federal Bank Holding
Company Act of 1956, as amended ("BHCA"), and a savings and loan holding
company as defined in the federal Home Owners' Loan Act of 1933, as amended,
("HOLA").
B. OMNI. OMNI has been duly incorporated and is a corporation, duly
organized, validly existing, and in good standing under the laws of the State
of Colorado, with its principal executive offices located in Denver, Colorado.
OMNI is a registered bank holding company under the BHCA. As of the date
hereof, OMNI has 50,000,000 authorized common shares, stated value $.0267 per
share ("OMNI Common Stock"), of which 16,491,244 shares were issued and
outstanding as of August 31, 1994, exclusive of treasury shares, and 50,000,000
authorized preferred shares, ("OMNI Preferred Stock"), of which no shares are
issued and outstanding as of the date hereof (no other class of capital stock
being authorized).
C. Intention of the Parties. It is the intention of the parties to
this Plan that the Merger (as defined below) for federal income tax purposes
shall qualify as a "reorganization" within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
D. Board Approvals. By the vote of at least a majority of its
respective members, the Board of Directors of OMNI has adopted resolutions
approving this Plan and the consummation of the transactions contemplated
hereby and authorizing the execution and delivery of this Plan. In addition,
the Board of Directors of KeyCorp has adopted resolutions approving this Plan
and the consummation of the transactions contemplated hereby and authorizing
the execution and delivery of this Plan.
NOW, THEREFORE, in consideration of their mutual promises and
obligations hereunder, the parties hereto adopt and make this Plan and
prescribe the terms and conditions hereof and the manner and basis of carrying
it into effect, which shall be as follows:
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ARTICLE I
THE MERGER
SECTION 1.1. Structure of the Merger. Subject to the terms and
conditions hereof, at the Effective Time (as defined in Section 1.8), OMNI will
merge (the "Merger") with and into KeyCorp, pursuant to and in accordance with
Section 7-111-107 of the Colorado Business Corporation Act ("CBCA") and Section
1701.78 of the Ohio General Corporation Law ("OGCL"). KeyCorp, which will be
the surviving corporation, will sometimes be referred to herein as the
"Surviving Corporation" and shall continue to be incorporated under the laws of
the State of Ohio. The Merger shall have the effects specified in the CBCA and
the OGCL. At the Effective Time, the articles of incorporation and bylaws of
the Surviving Corporation shall be the Articles of Incorporation and Bylaws of
KeyCorp in effect immediately prior to the Effective Time, and the directors
and officers of the Surviving Corporation shall be the directors and officers
of KeyCorp immediately prior to the Effective Time. As soon after the
Effective Time as administratively feasible, KeyCorp intends to cause the
banking subsidiaries of OMNI referred to in Section 3.1(d)) to be merged into
Key Bank of Colorado (the "Subsidiary Merger").
SECTION 1.2. Effect on Outstanding Shares. (a) By virtue of the
Merger, automatically and without any action on the part of the holder thereof,
each share of OMNI Common Stock issued and outstanding at the Effective Time
(other than (i) shares which have not been voted in favor of the approval of
this Plan and with respect to which dissenters' rights shall have been
perfected in accordance with Article 113 of the CBCA, and (ii) shares held
directly or indirectly by KeyCorp, other than shares held in a fiduciary
capacity or in satisfaction of a debt previously contracted) shall become and
be converted into .2452 Common Shares, with a par value of $1 each, of KeyCorp
("KeyCorp Common Stock") (the "Exchange Ratio"); provided, that such Exchange
Ratio shall be reduced by an amount equal to (i) the sum of (a) the net after
tax Excess Remediation Cost pursuant to Section 7.5 plus (b) any aggregate
after tax loss pursuant to the terms of that certain Letter Agreement between
KeyCorp and OMNI dated as of the date hereof and delivered herewith, divided by
(ii) the product of (a) 16,491,244 multiplied by (b) 32.625; provided further,
that if KeyCorp effects a stock dividend, reclassification, recapitalization,
split-up, combination, exchange of shares or similar transaction, after the
date hereof and before the Effective Time, the Exchange Ratio shall be
appropriately adjusted. As of the Effective Time, each share of OMNI Common
Stock held directly or indirectly by KeyCorp, other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted, and
shares held as treasury stock of OMNI, shall be canceled, retired and cease to
exist, and no exchange or payment shall be made with respect thereof, and the
provisions of the OMNI Buy and Sell
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Agreement (as defined in Section 1.3(b) hereof) shall be of no further effect
and it shall thereby terminate.
(b) No fractional shares of KeyCorp Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of KeyCorp
Common Stock pursuant to Section 1.2(a), cash adjustments will be paid to
holders in respect of any fractional share of KeyCorp Common Stock that would
otherwise be issuable; the amount of such cash adjustment shall be equal to
such fractional proportion of the average of the high and low sales price of
shares of KeyCorp Common Stock as reported on the New York Stock Exchange
("NYSE") on the last trading day immediately preceding the Closing Date.
(c) Each share of KeyCorp Common Stock issued and outstanding
immediately prior to the Effective Time shall remain outstanding and unchanged
after the Merger.
(d) Pursuant to the Rights Agreement, dated August 25, 1989, by and
between KeyCorp and Society National Bank, as rights agent, as amended (the
"KeyCorp Rights Plan"), each share of KeyCorp Common Stock issued in the Merger
shall be accompanied by a right (a "KeyCorp Right") under the KeyCorp Rights
Plan. For purposes of this Plan, all references to a share of KeyCorp Common
Stock shall be deemed to include the accompanying KeyCorp Right.
(e) Notwithstanding anything to the contrary herein, KeyCorp may, with
the prior written consent of OMNI (not to be unreasonably withheld), modify the
structure of the Merger in order to achieve the intention of the parties as to
the federal income tax treatment described in Recital C or to qualify the
Merger for accounting purposes as a "pooling of interests," and OMNI shall
promptly enter into any amendment to this Plan pursuant to Section 8.3 of this
Plan necessary or desirable to accomplish any such structure modifications,
whether such amendment is after submission to or approval by the shareholders
of OMNI, provided that no such amendment shall reduce the amount or adversely
change the form or tax treatment of the consideration to be received by the
OMNI shareholders in the Merger.
SECTION 1.3. Exchange Procedures. (a) At and after the Effective
Time, each certificate (each a "Certificate") previously representing shares of
OMNI Common Stock shall represent (i) the number of whole shares of KeyCorp
Common Stock and (ii) the right to receive cash in lieu of fractional shares
into which such OMNI Common Stock has been converted pursuant to Section 1.2(a)
and (b) (the "Merger Consideration"). Certificates previously representing
shares of OMNI Common Stock shall be exchanged for certificates representing
whole shares of KeyCorp Common Stock and cash in lieu of fractional shares
issued in consideration therefor upon the surrender of such Certificates in
accordance with this Section 1.3, without any interest thereon.
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(b) Notwithstanding the legal effect of the provisions of Section 1.2
hereof, KeyCorp, as a condition to its obligation to issue KeyCorp Common Stock
in exchange for OMNI Common Stock, may require that each holder of OMNI Common
Stock who is a party to the OMNI Buy and Sell Agreement (as defined below)
("OMNI Stockholder") represent and warrant that such OMNI Stockholder owns the
OMNI Common Stock free and clear of any lien, encumbrance or rights of any
third party, that to the best of such OMNI Stockholder's knowledge, the
provisions of the OMNIBANCORP Buy and Sell Agreement between OMNI and certain
OMNI Stockholders (the "OMNI Buy and Sell Agreement") with respect to such OMNI
Stockholder's rights have been complied with, that no person has rights in or
to such tendering OMNI Stockholder's OMNI Common Stock and that KeyCorp is
receiving good and marketable title to such OMNI Common Stock free and clear of
any lien, encumbrance or rights of any third party.
(c) As of the Effective Time, KeyCorp shall deposit, or shall cause to
be deposited, with Society National Bank, or such other bank or trust company
acceptable to the parties (the "Exchange Agent"), for the benefit of the
holders of shares of OMNI Common Stock, for exchange in accordance with this
Section 1.3, certificates representing the shares of KeyCorp Common Stock and
the cash in lieu of fractional shares (such cash and certificates for shares of
KeyCorp Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Section 1.2 and paid pursuant to this Section 1.3 in exchange for
outstanding shares of OMNI Common Stock.
(d) Promptly after the Effective Time, KeyCorp shall cause the
Exchange Agent to mail to each holder of record of a Certificate or
Certificates the following: (i) a letter of transmittal specifying that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent, which
shall be in a form and contain any other provisions as KeyCorp and OMNI may
reasonably agree, including, without limitation, a notice of the effectiveness
of the Merger; and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon the proper
surrender of a Certificate to the Exchange Agent, together with a properly
completed and duly executed letter of transmittal, the holder of such
Certificate shall be entitled to receive in exchange therefor the appropriate
Merger Consideration which such holder has the right to receive in respect of
the Certificate surrendered pursuant to the provisions of Section 1.2(a) and
(b), and the Certificate so surrendered shall forthwith be canceled. No
interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of Certificates.
In the event of a transfer of ownership of any shares of OMNI Common Stock not
registered in the transfer records of OMNI, the Merger
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Consideration may be delivered to the transferee if the Certificate
representing such OMNI Common Stock is presented to the Exchange Agent,
accompanied by documents sufficient (i) to evidence and effect such transfer
and (ii) to evidence that all applicable stock transfer taxes have been paid.
(e) Whenever a dividend or other distribution is declared by KeyCorp
on the KeyCorp Common Stock, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all shares issuable pursuant to this Plan; provided that no dividend or
other distribution declared or made on the KeyCorp Common Stock shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
KeyCorp Common Stock represented thereby until the holder of such Certificate
shall duly surrender such Certificate in accordance with this Section 1.3; and
provided further that no holder of any unsurrendered Certificate shall have any
rights (including voting rights, if applicable) with respect to the KeyCorp
Common Stock represented thereby until the holder of such Certificate shall
duly surrender such Certificate in accordance with this Section 1.3. Following
such surrender of any such Certificate, there shall be paid to the holder of
the Certificates representing whole shares of KeyCorp Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions having a record date after the
Effective Time theretofore payable with respect to such whole shares of KeyCorp
Common Stock and not yet paid and (ii) at the appropriate payment date, the
amount of dividends or distributions having (x) a record date after the
Effective Time but prior to surrender and (y) a payment date subsequent to
surrender payable with respect to such whole shares of KeyCorp Common Stock.
Upon such surrender, any rights (including voting rights, if applicable)
suspended as a result of the operation of this Section shall be immediately
restored.
(f) From and after the Effective Time, there shall be no transfers on
the stock transfer records of OMNI of any shares of OMNI Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to KeyCorp or the Surviving Corporation, they
shall be canceled and exchanged for the Merger Consideration deliverable in
respect thereof pursuant to this Plan in accordance with the procedures set
forth in this Section 1.3.
(g) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any KeyCorp Common tock) that remains unclaimed by the
stockholders of OMNI for six months after the Effective Time shall be repaid to
KeyCorp. Any stockholders of OMNI who have not theretofore complied with
Section 1.3 shall thereafter look only to KeyCorp for payment of the Merger
Consideration, and any unpaid dividends and distributions on the KeyCorp Common
Stock deliverable in respect of
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each share of OMNI Common Stock such stockholder holds as determined pursuant
to this Plan, in each case, without any interest thereon. If outstanding
certificates for shares of OMNI Common Stock are not surrendered or the payment
for them not claimed prior to the date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by abandoned property and any
other applicable law, become the property of KeyCorp (and to the extent not in
its possession shall be paid over to it), free and clear of all claims or
interest of any person previously entitled to such claims. Notwithstanding the
foregoing, none of KeyCorp, the Exchange Agent or any other person shall be
liable to any former holder of OMNI Common Stock for any amount delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by KeyCorp,
the posting by such person of a bond in such amount as KeyCorp may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the appropriate Merger Consideration, and any unpaid
dividends and distributions on the KeyCorp Common Stock deliverable in respect
of each share of OMNI Common Stock represented by such Certificate as
determined pursuant to this Plan, in each case, without any interest thereon.
SECTION 1.4. Options. At the Effective Time, KeyCorp shall issue a
new option to purchase KeyCorp Common Stock in substitution for each option to
purchase shares of OMNI Common Stock which is outstanding and exercisable
immediately prior to such Effective Time, on substantially the same terms and
conditions as provided in the Option Agreement attached hereto as Exhibit B;
provided, that such option shall be immediately exercisable upon grant.
KeyCorp shall use its best efforts (such efforts not to include the
submission of any matter for KeyCorp shareholder approval) to grant each such
option under the terms of the KeyCorp Amended and Restated 1991 Equity
Compensation Plan, or to provide that the shares issuable upon exercise of such
option are not "restricted securities" under the Securities Act of 1933.
Each option to purchase KeyCorp Common Stock issued in substitution for
an option to purchase OMNI Common Stock shall represent an option to purchase
such number of shares of KeyCorp Common Stock at such exercise price as is
determined as follows:
(a) The number of shares of KeyCorp Common Stock to be subject to the
new option shall be equal to
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the product of (i) the number of shares of OMNI Common Stock subject to the
original option and (ii) the Exchange Ratio, rounded up, if necessary, to
the nearest whole share; and
(b) The exercise price per share of KeyCorp Common Stock under the new
option shall be equal to (i) the exercise price per share of OMNI Common
Stock under the original option divided by (ii) the Exchange Ratio,
rounded, if necessary, to the nearest cent.
SECTION 1.5. Dissenters' Rights. Notwithstanding any provision of
this Plan to the contrary, any shares of OMNI Common Stock outstanding
immediately prior to the Effective Time held by a holder who has demanded and
perfected dissenters' rights, if any, for those shares in accordance with
Article 113 of the CBCA and, as of the Effective Time, has not withdrawn or
lost such dissenters' rights shall not be converted into or represent a right
to receive the Merger Consideration to which such holder would be entitled
pursuant to Sections 1.2(a) and (b) of this Plan, but the holder of such shares
shall only be entitled to such rights as are granted by Article 113 of the CBCA
(attached hereto as Exhibit A). If a holder of shares of OMNI Common Stock who
demands dissenters' rights for those shares under Article 113 of the CBCA shall
effectively withdraw or lose (through failure to perfect or otherwise)
dissenters' rights, then, as of the Effective Time or the occurrence of such
event, whichever occurs last, those shares shall be converted into and
represent only the right to receive the Merger Consideration to which such
holder is entitled in accordance with Sections 1.2(a) and (b) of this Plan,
without interest, upon the surrender of the Certificate representing those
shares. OMNI shall forthwith give KeyCorp notice of any written demands for
dissenters' rights of any holder of shares of OMNI Common Stock, attempted
withdrawals of such demands, and any other instruments or notices served
pursuant to Article 113 of the CBCA received by OMNI relating to dissenters'
rights. OMNI shall not, except with the prior written consent of KeyCorp,
voluntarily make any payment with respect to any demands for dissenters' rights
of any holder of shares of OMNI Common Stock, offer to settle or settle any
such demands, or approve any withdrawal of any such demands.
SECTION 1.6. Closing. The closing (the "Closing") of the Merger shall
take place at the offices of KeyCorp in Cleveland, Ohio at 10:00 a.m., local
time, as promptly as practicable after the date on which the conditions
specified in Sections 5.1, 5.2, and 5.3 hereof are satisfied or at such other
time and place as OMNI, and KeyCorp shall agree in writing (the "Closing
Date"). The obligations of OMNI and KeyCorp shall be subject to satisfaction,
unless duly waived, of the applicable conditions set forth in this Plan.
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SECTION 1.7. Effective Time. The Merger shall become effective at the
time and date set forth in the articles of merger meeting the requirements of
Section 7-111-105 of the CBCA and the Certificate of Merger meeting the
requirements of Section 1701.81 of the OGCL, executed in accordance with all
appropriate legal requirements, and filed with the Secretary of State of the
State of Colorado and the Secretary of the State of Ohio, as the case may be
("Effective Time").
ARTICLE II
CONDUCT OF OMNI PENDING THE MERGER
SECTION 2.1. Conduct of OMNI's Business Prior to the Effective Time.
Except as expressly provided in this Plan, during the period from the date of
this Plan to the Effective Time, OMNI shall, and shall cause its subsidiaries
to (a) conduct its business in, and not take any action except in, the usual,
regular and ordinary course consistent with past practice, (b) use its best
efforts to maintain and preserve intact its business organization, employees
and business relationships and retain the services of its officers and key
employees, (c) maintain and keep its properties in as good repair and condition
as at present except for ordinary wear and tear, (d) use its best efforts to
keep in full force and effect insurance and bonds comparable in amount and
scope of coverage to that now maintained by it, (e) perform all material
obligations required to be performed by it and each of its subsidiaries under
all material contracts, leases, and other material documents relating to or
affecting its assets, properties, and business, (f) comply and perform in all
material respects all obligations and duties imposed upon it by all federal,
state, municipal, and local laws and rules, regulations, and orders by federal,
state, municipal, or local governmental agencies, and (g) take no action
knowingly which would adversely affect or delay the ability of OMNI or KeyCorp
to obtain any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated hereby or to perform its
covenants and agreements on a timely basis under this Plan.
SECTION 2.2. Forbearance by OMNI. During the period from the date of
this Plan to the Effective Time, except as otherwise permitted or required by
this Plan, OMNI shall not, and shall not permit any of its subsidiaries to,
without the prior written consent of KeyCorp, (which consent shall be deemed to
have been given upon the passage of ten business days (or, in the case of any
loan, advance or other extension of credit referred to in paragraph (a) below,
which consent shall be deemed to have been given upon the passage of 72 hours
after delivery by facsimile of a completed Loan Committee Review Sheet (in the
form attached hereto as Exhibit C) to Key Bank of Colorado's Senior Vice
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President of Commercial Lending [Gary Havens] at (303) 377-1062 any disapproval
of which shall be delivered within such 72-hour period by facsimile to OMNI's
President at (303) 220-7948, and which may, but need not be, in the form
attached to the Loan Committee Review Sheet, also as Exhibit C)).
(a) other than in the ordinary course of business consistent with past
practice, incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, or make
any loan, advance or other extension of new or additional credit, in excess
of $500,000 (even if made in the ordinary course of business);
(b) adjust, split, combine, or reclassify any capital stock or other
securities; enter into any arrangement, contract, or commitment with
respect to the issuance, purchase or voting of shares of its capital stock,
or any securities or obligations convertible into or exchangeable for any
shares of its capital stock or any other equity or long-term debt
securities, or directly or indirectly redeem, purchase, or otherwise
acquire, or hypothecate, pledge, or otherwise encumber, any shares of its
capital stock or other securities, grant any stock appreciation rights or
grant any individual, corporation, or other entity any right to acquire any
shares of its capital stock, or any securities convertible into or
exchangeable for shares of such capital stock or any other equity or
long-term debt securities, or issue any additional shares of its capital
stock, or any securities convertible into or exchangeable for any shares of
its capital stock or any other equity or long-term debt securities (in each
case other than upon the exercise of any stock options granted under the
OMNI Option Plan; make, declare, or pay any dividend or make any other
distribution on, (whether in cash, stock or property or any combination
thereof) any shares of its capital stock, except for (i) regular quarterly
cash dividends (to the extent legally permitted) at a rate per share of
OMNI Common Stock not in excess of $0.025 per share, (ii) a special
dividend to be paid in the fourth quarter of 1994 at a rate not to exceed
in the aggregate 15 percent of OMNI's reasonably estimated 1994
consolidated net income (determined in accordance with generally accepted
accounting principles consistently applied), (iii) a special dividend to
be paid in the first quarter of 1995 at a rate not to exceed in the
aggregate the amount by which 20 percent of OMNI's audited 1994
consolidated net income (determined in accordance with generally accepted
accounting principles
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consistently applied) exceeds the amount of the special dividend paid
pursuant to clause (ii) hereof, and (iv) dividends paid by any of the
wholly-owned subsidiaries of OMNI to OMNI or any of its wholly-owned
subsidiaries ( provided, however, that no regular quarterly dividend shall
be declared or paid for the quarter in which the Effective Date occurs if
the stockholders of OMNI will be holders of record of KeyCorp Common Stock
on or before the record date for the KeyCorp Common dividend to its
shareholders for that quarter, but this proviso shall not prohibit the
declaration or payment of the special dividends in clauses (ii) and (iii)
above);
(c) sell, transfer, mortgage, encumber or otherwise dispose of any of
its material properties or assets,including mortgage or other loans and
rights to the servicing of mortgage loans, to any individual, corporation
or other entity other than a direct or indirect wholly-owned subsidiary of
OMNI, or cancel, release or assign any indebtedness of any such person or
any claims held by any such person, except in the ordinary course of
business consistent with past practice or pursuant to contracts or
agreements in force at the date of this Plan;
(d) other than in the ordinary course of business consistent with past
practice, make any material investment either by purchase of stock or
securities, contributions to capital, property transfers, or purchase of
any property or assets of any other individual, corporation,bank, business,
trust, association, or other entity other than a wholly-owned subsidiary of
OMNI, provided that OMNI shall make no material acquisition of equity
securities or business operations of any such entity without KeyCorp's
prior consent;
(e) other than in the ordinary course of business consistent with past
practice, enter into or terminate any material contract or agreement,
including, without limitation, any loans or loan commitments to officers,
directors, or 5% or more stockholders (or any person or business entity
controlled by or affiliated with such officers, directors, or
stockholders), or make any change in any of its material leases or
contracts, other than renewals of contracts and leases without material
adverse changes of terms; provided, however , that OMNI obtains the consent
of KeyCorp as to the terms of any such renewals of contracts or leases;
(f) except as provided herein, increase in any manner the compensation
or fringe benefits, of any of its
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present or former directors, executive officers, or other employees or pay
any pension or retirement allowance not required by any existing plan or
agreement to any such directors, executive officers or other employees, or
grant any severance or termination pay (other than pursuant to written
agreements or policies of OMNI in effect on the date of this Plan, copies
of which are attached to the Disclosure Memorandum) or, except as required
by applicable law or regulation, become a party to, amend, renew, modify,
or commit itself to any pension, retirement, profit sharing, severance,
termination, welfare benefit, employment, deferred compensation, non-
competition, bonus, stock option, parachute, consulting, or other employee
benefit agreements, trusts, plans, funds, or other arrangements with or for
the benefit or welfare of any present or former director, executive officer
or other employee, in each case other than in accordance with the existing
policies of OMNI which policies are described in the Disclosure Memorandum;
(g) make any payment or contribution with respect to any ERISA Plan,
or any other arrangement, program, or plan listed in the Disclosure
Memorandum except for the 1994 contributions to the OMNI Employee Profit
Sharing Plan in an amount equal to approximately 5% of OMNI's reasonably
anticipated consolidated net income for 1994; create any new ERISA Plan, or
amend any ERISA Plan, or other arrangement, program or plan listed in the
Disclosure Memorandum except to the extent that such amendment is required
to maintain qualification under the Code or to comply with ERISA, in which
event, no such amendment shall increase the rate of benefit accruals for
non- highly compensated employees beyond the current rate of such benefit
accruals nor increase the number of non-highly compensated employees
covered under any such plans unless such increases are the sole method by
which such plan may achieve or maintain qualification or compliance and, in
such event, only with the prior written consent of KeyCorp;
(h) settle any claim, action or proceeding for material money damages
or restrictions upon the operations of OMNI or any of its subsidiaries;
(i) except as contemplated by Section 4.2 or as disclosed in the
Disclosure Memorandum, modify in any material respect the manner in which
it and its subsidiaries have heretofore conducted and accounted for their
business;
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(j) amend its articles of incorporation or its bylaws;
(k) except as set forth in the Disclosure Memorandum, make any capital
expenditures other than in the ordinary course of business or as necessary
to maintain existing assets in good repair, in either case, not to exceed
$50,000 for any single project;
(l) except as set forth in the Disclosure Memorandum, make application
for the opening or closing of, or open or close, any branches or automated
banking facilities;
(m) take any action that would result in the representations and
warranties of OMNI contained in this Plan not to be true and correct in all
material respects on the date of this Plan or at any future date on or
prior to the date of the Closing;
(n) except as set forth in the Disclosure Memorandum, merge into,
consolidate with, affiliate with, or be purchased or acquired by, any other
individual, corporation, or other entity, or permit any other individual,
corporation, or other entity, to be merged, consolidated or affiliated with
it or be purchased or acquired by it, or, except to realize upon collateral
and except for purchases or sales of loans or investment securities in the
ordinary course of its business, acquire all or any substantial portion of
the assets of any other individual, corporation, or other entity, or sell
all or any portion of its assets;
(o) except as set forth in the Disclosure Memorandum, purchase or
otherwise acquire from a third party, branch offices, assets constituting
any other line of business, or any other material properties or assets,
including mortgage or other loans and rights for the servicing of mortgage
loans;
(p) fail to notify KeyCorp promptly of its receipt of any letter,
notice, or other communication, whether written or oral, from any
governmental entity advising OMNI or any OMNI Subsidiary that it is
contemplating issuing, requiring, or requesting any agreement, memorandum
of understanding, or similar undertaking, or order, directive, or
supervisory letter; or
(q) agree to, or make any commitment to, take any of the actions
prohibited by the foregoing.
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(r) amend, terminate, renew or exercise any option under the lease
originally dated April 1, 1975 and last amended pursuant to Amendment XIX
as of October 8, 1993, by and between M.D.C. Holdings, Inc. and OMNI Bank
Southeast, of the property and premises located at OMNI Bank Building
Center One at 3600 South Yosemite Street, Denver, Colorado 80237 on or
after May 31, 1995, except for that portion of the premises located on the
first floor and constituting the branch premises as of the date hereof as
to which OMNI shall exercise its renewal option on terms satisfactory to
KeyCorp.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of OMNI. OMNI represents
and warrants to KeyCorp, that:
(a) Recitals True. The facts set forth in the Recitals of this Plan
with respect to OMNI are true and correct.
(b) Capital Stock. All outstanding shares of capital stock of OMNI
are duly authorized, validly issued and outstanding, fully paid and
non-assessable, and subject to no preemptive rights. Except as set forth
in this Section 3.1(b) and Recital C, there are no shares of capital stock
of OMNI authorized, issued or outstanding and there are no subscriptions,
options, warrants, scrip, rights, calls, convertible securities, or any
other similar agreements, arrangements, or commitments of any character
relating to the issued or unissued capital stock or other securities of
OMNI obligating, or which may obligate, OMNI to issue, deliver, or sell, or
cause to be issued, delivered, or sold, additional shares of its capital
stock or obligating or which may obligate, OMNI to grant, extend, or enter
into any such subscription, option, warrant, scrip, right, call,
convertible security, or other similar agreement, arrangement, or
commitment, except options covering 370,000 shares of OMNI Common Stock
granted to officers and employees, which options are not "incentive stock
options" (as defined in Section 422 of the Code). The names of all
optionees, the date of each option granted, the number of shares subject to
each such option, and the price at which each such option may be exercised
are set forth in the Option Agreements attached to a disclosure memorandum
delivered by OMNI to KeyCorp prior to execution of this Plan, such
memorandum having been accepted by KeyCorp by executing a copy thereof (the
"Disclosure Memorandum"). Except as set forth in the
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Disclosure Memorandum and except for the Voting Agreements referred to in
Section 3.1(bb) hereof there are no voting trusts or other similar
agreements, arrangements, or commitments to which OMNI is a party or of
which it has knowledge with respect to the voting of capital stock of OMNI.
The total number of shares of OMNI Common Stock outstanding immediately
prior to the Effective Time shall not exceed 16,861,244 shares, including
as outstanding for purposes of this sentence all shares of OMNI Common
Stock which would become outstanding upon exercise of all unexercised
employee stock options.
The Disclosure Memorandum sets forth a complete and correct
list of all holders of record of OMNI Common Stock, including the name of
each such record holder, the number of shares held and the percent
ownership of each as of the date indicated therein.
(c) Authority. OMNI and each OMNI Subsidiary (as defined in Section
3.1(d)) has the power and authority, and is duly qualified in all
jurisdictions where such qualification is required, to carry on its
business as it is now being conducted and to own, lease, or operate all of
its material properties and assets, and it has all federal, state, local,
and foreign governmental licenses, franchises, permits, and other
authorizations (except for such licenses, franchises, permits and other
authorizations the absence of which would not have a Material Adverse
Effect on OMNI and the OMNI Subsidiaries taken as a whole) necessary for it
to own or lease its properties and assets and to carry on its business as
it is now being conducted. Attached to the Disclosure Memorandum are true
and complete copies of the Articles of Incorporation and Bylaws of OMNI and
each OMNI Subsidiary.
(d) Subsidiaries. The Disclosure Memorandum sets forth a complete and
correct list of all of OMNI's subsidiaries, including the location of its
headquarters and the type of charter it operates under (individually, an "
OMNI Subsidiary" and collectively, the "OMNI Subsidiaries"), including
Omnibank Arapahoe, Omnibank Aurora, Omnibank Commerce City, Omnibank Iliff,
Omnibank Parker Road, and Omnibank Southeast (individually, an " OMNI Bank"
and collectively, the "OMNI Banks"). All of the OMNI Banks are commercial
banks, duly organized and validly existing under the laws of the State of
Colorado, and in good standing with the Colorado Commissioner (as defined
in Section 3.1(g)). The deposits of each of the OMNI Banks are insured by
the FDIC in accordance with the Federal Deposit Insurance Act (" FDIA"),
and each OMNI
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Bank has paid all assessments and filed all reports required by the FDIA.
Each of the OMNI Banks is a member of the Federal Reserve System and has
subscribed to and paid for the requisite number of shares of capital stock
of the Federal Reserve Bank of Kansas City. None of the OMNI Banks holds
trust powers under any federal or state law, and none of such banks engages
in any trust activities which require authorization of such trust powers.
Each of the other OMNI Subsidiaries is a corporation, in each case duly
organized, validly existing and in corporate good standing under the laws
of the jurisdiction of its organization. Except as set forth in the
Disclosure Memorandum, the shares of capital stock of each of the OMNI
Subsidiaries are owned by OMNI, directly or indirectly, and are validly
issued and outstanding, fully paid, and nonassessable, have not been issued
in violation of any preemptive rights, and are owned free and clear of all
liens, claims, charges, options, encumbrances, restrictions on transfer,
or agreements thereto. There are no subscriptions, options, warrants,
scrip, rights, calls, convertible securities, or any other similar
agreements, arrangements, or commitments of any character relating to the
issued or unissued capital stock or other securities of any OMNI Subsidiary
obligating, or which may obligate, any OMNI Subsidiary to issue, deliver,
or sell, or cause to be issued, delivered, or sold, additional shares of
its capital stock or obligating or which may obligate, any OMNI Subsidiary
to grant, extend, or enter into any such subscription, option, warrant,
scrip, right, call, convertible security, or other similar agreement,
arrangement, or commitment. Except as set forth in the Disclosure
Memorandum, neither OMNI nor any OMNI Subsidiary is a general partner in
any partnership or owns beneficially any equity securities (which includes
limited partnership interests and convertible securities) or any similar
interests of any corporation, bank, business, trust, partnership,
association, or similar organization.
(e) Authorization. (i) OMNI has the requisite corporate power and
authority to execute and deliver this Plan and, subject to the receipt of
required shareholder approval of this Plan, to carry out its obligations
hereunder. Subject only to the requisite shareholder vote, the execution,
delivery, and performance of this Plan by OMNI and the consummation of the
transactions contemplated hereby have been duly authorized and approved by
the Board of Directors of OMNI and no other corporate action is necessary
to authorize
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this Plan or to consummate the transactions so contemplated. This Plan is a
valid and binding agreement of it enforceable against it in accordance with
its terms, subject as to enforcement to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
application and to equity principles and except that the availability of
the equitable remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceedings may be
brought.
(ii) The affirmative vote of the holders of shares of OMNI Common
Stock having at least two- thirds (66 2/3%) of all the votes entitled to be
cast by holders of such shares is the only shareholder vote required for
approval of this Plan and consummation of the Merger and the other
transactions contemplated hereby.
(f) No Violations. Except as set forth in the Disclosure Memorandum,
the execution, delivery and performance of this Plan by it does not, and
the consummation of the transactions contemplated hereby will not,
constitute (i) assuming the approvals and consents referred to in Section
5.1 are obtained, a breach or violation of, or a default under (or an event
which, with notice or lapse of time or both, should constitute a default
under), or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration of, or
result in the creation of any lien, security interest, charge, or other
encumbrance upon any of the properties or assets of OMNI or any of the OMNI
Subsidiaries under, any law, rule or regulation,any applicable provision of
or any judgment, decree, order, governmental permit or license, or any
note, bond, mortgage, deed of trust, license, lease, agreement, indenture
or other instrument or obligation of OMNI or any OMNI Subsidiary or to
which OMNI or any OMNI Subsidiary (or any of their respective properties)
is subject, which breach, violation or default would have a Material
Adverse Effect on OMNI and the OMNI Subsidiaries, taken as a whole, or (ii)
a breach or violation of, or a default under, the certificate or articles
of incorporation or bylaws or regulations of OMNI or any OMNI Subsidiary;
and the consummation of the transactions contemplated hereby will not
require any approval, consent, authorization, waiver, permit of or from, or
filing with or notification to, any person, public body, or authority other
than (A) the required approvals, consents and waivers of governmental
authorities referred to in Section 5.1(b), (B) the approvals of the
stockholders of OMNI referred to in Section 3.1(e)(ii), (C) such approvals,
consents or
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waivers as are required under the federal and state securities or "Blue
Sky" laws in connection with the transactions contemplated by this Plan or
the Option Plan (D) the filing of articles of merger with the Secretary of
State of the State of Colorado pursuant to Section 7-111-105 of the CBCA,
and (E) any other approvals, consents or waivers the absence of which,
individually or in the aggregate, would not result in a Material Adverse
Effect on OMNI and the OMNI Subsidiaries, taken as a whole, or enable any
person to enjoin the Merger.
(g) Reports. Except as set forth in the Disclosure Memorandum, since
December 31, 1990, OMNI and each OMNI Subsidiary has filed all financial
and other reports (including without limitation, consolidated Reports of
Condition and Income (" Call Reports") and FRY-9C Reports), registrations,
and statements, together with all required amendments thereto, that it was
required to file with (a) the Board of Governors of the Federal Reserve
System or any Federal Reserve Bank (in either or both cases, the "Federal
Reserve Board"), the Federal Deposit Insurance Corporation (the "FDIC"),
the Colorado Division of Banking and the Colorado State Bank Commissioner
(in either or both cases, the "Colorado Commissioner"), and (b) any other
applicable federal or state securities or banking authorities
(collectively, the " OMNI Reports"). As of their respective dates, no OMNI
Report contained or will contain any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under
which they were made, not misleading. Attached to the Disclosure
Memorandum are all OMNI Reports filed since December 31, 1992.
(h) Financial Statements; Undisclosed Liabilities. Included in the
Disclosure Memorandum are audited consolidated financial statements of OMNI
and the OMNI Subsidiaries consisting of consolidated balance sheets for the
fiscal years ended December 31, 1991, 1992, and 1993 and consolidated
statements of income, stockholders' equity, and cash flows for the years
ended December 31, 1991, 1992, and 1993 with the report thereto of Price
Waterhouse for fiscal year 1991 and of BDO Seidman for fiscal years 1992
and 1993, both certified public accountants, and unaudited interim
consolidated financial statements of OMNI consisting of the consolidated
balance sheet of June 30, 1994 and consolidated statements of income and
stockholders' equity for the six month period ended on such date (all such
documents being referred to collectively herein as
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the "OMNI Financial Statements"). The OMNI Financial Statements fairly
presented the financial position and results of operations of OMNI and the
OMNI Subsidiaries in all material respects on a consolidated basis at the
dates shown and for the periods indicated (subject, in the case of
unaudited interim statements, to normal year-end audit adjustments that are
not material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the
periods presented, except as may be noted therein. Except as set forth in
the Disclosure Memorandum, there exist no obligations or liabilities,
whether absolute, accrued, contingent or otherwise (including, without
limiting the generality of the foregoing, liabilities as guarantor under
any guarantees or liabilities for taxes), which are material in amount
(individually or in the aggregate) to OMNI and the OMNI Subsidiaries, taken
as a whole, that are required to be disclosed, reflected, or reserved
against under generally accepted accounting principles, but are not so
disclosed, reflected or reserved against in the OMNI Financial Statements.
All reserves established by OMNI on or in connection with the OMNI
Financial Statements in respect of obligations or liabilities of OMNI or
any OMNI Subsidiary (whether absolute, accrued, contingent or otherwise
(including, without limiting the generality of the foregoing, liabilities
for taxes, for violations of laws or regulations, for discontinued
operations, if any, for severance, or for other matters)) are adequate in
all respects to cover and pay for the full amount of the matters for which
such reserves were established, and there are not material amounts of any
such obligations or liabilities in excess of such reserves for the matters
involved.
(i) Absence of Certain Changes or Events. Except as set forth in the
Disclosure Memorandum, from and after December 31, 1993 to the date of this
Plan: (a) OMNI and the OMNI Subsidiaries have carried on their respective
businesses in the ordinary and usual course consistent with their current
practices; (b) OMNI has not issued or sold any of its capital stock, or
any corporate debt securities which would be classified as long-term debt
on the balance sheets of OMNI; (c) OMNI has not granted any option for the
purchase of its capital stock, effected any stock split, or otherwise
changed its authorized capitalization; (d) except for its regular quarterly
dividends of $0.025 per share of OMNI Common Stock, OMNI has not declared,
set aside, or paid any dividend or other distribution in respect of its
capital stock, or, directly or indirectly, redeemed or otherwise acquired
any of its capital stock; (e) neither
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OMNI nor any OMNI Subsidiary has incurred any material obligation or
liability (absolute, accrued, contingent, or otherwise), except normal
trade or business obligations or liabilities incurred in the ordinary
course of business, or mortgaged, pledged, or subjected to lien, claim,
security interest, charge, encumbrance, or restriction any of its assets or
properties (except in connection with borrowings, if any, from the Federal
Reserve Bank); (f) neither OMNI nor any OMNI Subsidiary has discharged or
satisfied any lien, mortgage, pledge, claim, security interest, charge,
encumbrance, or restriction or paid any obligation or liability (absolute
or contingent), other than in the ordinary course of business; (g) neither
OMNI nor any OMNI Subsidiary has sold, assigned, transferred, leased,
exchanged, or otherwise disposed of any of its properties or assets other
than for a fair consideration in the ordinary course of business, the
disposition of which, individually or in the aggregate, would have a
Material Adverse Effect on OMNI and the OMNI Subsidiaries, taken as a
whole; (h) neither OMNI nor any OMNI Subsidiary has: increased the rate of
compensation of, or paid any bonus to, any of its directors, officers, or
employees, except merit increases in accordance with existing policies
(which policies are described in the Disclosure Memorandum); entered into
any new, or amended or supplemented any existing, or secured,
collateralized, or funded any, employment, management, consulting, deferred
compensation, severance, or insurance plan or arrangement or any other plan
or arrangement or similar benefits or other similar contract, plan or
arrangement; granted any new, or expanded any existing, perquisites to
directors or officers; entered into, terminated, or substantially modified
any OMNI Employee Plan in respect of any of its present or former
directors, officers, or other employees; or agreed to do any of the
foregoing; (i) OMNI and the OMNI Subsidiaries, taken as a whole, have not
suffered any material damage, destruction, or loss, whether as the result
of fire, explosion, earthquake, accident, casualty, labor trouble,
requisition, or taking of property by any government or any agency of any
government, flood, windstorm, embargo, riot, act of God or the enemy, or
other similar or dissimilar casualty or event or otherwise, and whether or
not covered by insurance; (j) neither OMNI nor any OMNI Subsidiary has
cancelled or compromised any debt exceeding $100,000 owed to OMNI or any
OMNI Subsidiary or claim exceeding $100,000 asserted by OMNI or any OMNI
Subsidiary or had any such debt or claim rejected or settled for less than
the face amount due by any bankruptcy court unless heretofore charged off
on OMNI's books; (k) neither OMNI nor any OMNI Subsidiary has entered
into any transaction,
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contract, or commitment, including, without limitation, any agreement for
the sale or acquisition of assets or any plan or transaction involving an
expenditure of more than $100,000, outside the ordinary course of its
business.
(j) Taxes and Tax Returns. All federal, state, local, and foreign tax
returns and tax reports required to be filed by or on behalf of OMNI or any
OMNI Subsidiaries have been timely filed or requests for extensions have
been timely filed and any such extension shall have been granted and not
have expired, and all such filed returns are complete and accurate in all
material respects. All taxes shown on returns and reports filed by OMNI
have been paid in full or adequate provision has been made for any such
taxes, including interest and penalties, on its balance sheet (in
accordance with generally accepted accounting principles). The Disclosure
Memorandum sets forth, as of the date of this Plan, the following
information with respect to OMNI and each OMNI Subsidiary: (a) the most
recent tax year through which the Internal Revenue Service (the "IRS") has
completed its examination of such corporation, (b) whether there is an
examination pending by the IRS with respect to such corporation and, if so,
the tax years involved, (c) whether such corporation has executed or filed
with the IRS any agreement which is still in effect extending the period
for assessment and collection of any federal tax and, if so, the tax years
covered by such agreement and the expiration date of such extension, and
(d) whether there are any existing disputes as to federal, state, or local
taxes. All taxes, interest, additions, and penalties due with respect to
completed and settled examinations or concluded litigation relating to it
have been paid in full or adequate provision has been made for any such
taxes on its balance sheet (in accordance with generally accepted
accounting principles). OMNI and each OMNI Subsidiary have made all
deposits which are required by law with respect to withholding taxes.
There are no liens for foreign, federal, state, or local taxes upon the
assets of OMNI or any OMNI Subsidiary, except for statutory liens for taxes
and assessments not yet delinquent or the validity of which is being
contested in good faith by appropriate proceedings and, in either case,
only if adequate reserves therefor have been established on OMNI's books.
Except as set forth in the Disclosure Memorandum, neither OMNI nor any OMNI
Subsidiary is a party to any action or proceeding by any governmental
authority for assessment and collection of taxes, and no claim for
assessment and collection of taxes has been asserted against any of them.
To the best
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of OMNI's knowledge, OMNI and the OMNI Subsidiaries have complied with all
information reporting requirements, including the TIN (taxpayer
identification number) reporting and backup and other withholding
requirements of the foreign, federal, state, local, and other tax laws.
(k) Absence of Claims. Set forth in the Disclosure Memorandum is a
complete list of all pending litigation and a brief description of each
matter. Except as set forth in the Disclosure Memorandum, (a) no claim,
litigation, proceeding or controversy before any court or governmental
agency is pending, and there is no pending claim, action, proceeding,
arbitration, investigation, or controversy affecting, nor any judgment,
injunction, decree, consent, order, or regulatory restriction imposed on,
OMNI or any of the OMNI Subsidiaries, or any officer or director of OMNI,
or the assets or business of OMNI or any OMNI Subsidiary, (b) to the best
of its knowledge no such litigation, proceeding, controversy, claim or
action has been threatened or is contemplated, and (c) there are no uncured
violations, or violations with respect to which refunds or restitutions may
be required, cited in any compliance report to OMNI or any OMNI Subsidiary
as a result of the examination by any bank regulatory authority the
violation of which would, individually or in the aggregate, have a Material
Adverse Effect on OMNI and the OMNI Subsidiaries, taken as a whole.
Without limiting the generality of the foregoing, except as set forth in
the Disclosure Memorandum, there are no actions, suits, or proceedings
pending or, to the best knowledge of OMNI, threatened against OMNI or any
OMNI Subsidiary by any stockholder of OMNI (or any former stockholder of
OMNI) or involving claims under state law involving fiduciary obligations
of directors and/or officers or involving claims under the Securities Act
(as defined below), the Exchange Act, the Community Reinvestment Act of
1977, the Bank Secrecy Act, the Americans with Disabilities Act, the Home
Mortgage Disclosure Act, or any applicable law restricting the issuance of
loans to directors or officers of OMNI or any OMNI Subsidiary.
(l) Absence of Regulatory Actions. Except as set forth in the
Disclosure Memorandum, neither OMNI nor any of the OMNI Subsidiaries (or
any of their officers, directors or controlling persons) is a party to any
cease and desist order, written agreement or memorandum of understanding
with, or a party to any commitment letter or similar undertaking to, or is
subject to any order or directive by, or is a recipient of any supervisory
letter from, or has adopted any board resolutions at the request
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of, federal or state, banking, securities, insurance or other governmental
authorities (the "Regulators") not generally applicable to entities engaged
in the same business, nor has it been advised by any Regulator, in writing
or, to OMNI's best knowledge, orally, that such Regulator is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, directive, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
(m) Agreements. Except as set forth in the Disclosure Memorandum,
neither OMNI nor any OMNI Subsidiary is a party to, or bound or affected
by, or received benefits under any material contract (other than loan
agreements with customers) involving the payment of more than $100,000 per
annum. Without limiting the generality of the foregoing, except as set
forth in the Disclosure Memorandum, as of the date of this Plan, neither
OMNI nor any of the OMNI Subsidiaries is a party to an oral or written (i)
agreement, indenture, or other instrument not reflected in the OMNI
Financial Statements relating to the borrowing of money by OMNI or the
guarantee by OMNI of any such obligation (other than trade payables and
instruments relating to transactions entered into in the ordinary course of
business, including, without limitation, borrowings from the Federal
Reserve Bank and reverse repurchase transactions), (ii) agreement relating
to the repurchase of securities, except in the ordinary course of business,
(iii) sale and leaseback or similar agreement, (iv) agreement, arrangement,
or commitment relating to the sale of mortgage loans, (v) agreement,
arrangement, or commitment relating to the sale of servicing rights, (vi)
consulting agreement (other than data processing, software programming and
licensing contracts entered into in the ordinary course of business) not
terminable on 30 days or less notice involving the payment of more than
$50,000 per annum, in the case of any such agreement with an individual, or
$100,000 per annum, in the case of any other such agreement, (vii)
agreement with any executive officer or other key employee of it or any of
its subsidiaries the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction
involving it or any of its subsidiaries of the nature contemplated by this
Plan and which provides for the payment of in
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excess of $100,000, (viii) agreement with respect to any executive officer
of it or any of its subsidiaries providing any term of employment or
compensation guarantee extending for a period longer than one year and for
the payment of in excess of $100,000 per annum or (ix) agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Plan or the
value of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Plan (the agreements and other
documents referred to in this Section, collectively, the " OMNI
Contracts").
Except as set forth in the Disclosure Memorandum, (i) each of the OMNI
Contracts is valid and subsisting and in full force and effect, (ii) OMNI
and each of the OMNI Subsidiaries have in all material respects performed
all obligations required to be performed by them to date under such OMNI
Contracts, and (iii) to the best knowledge of OMNI, no other party to any
of the OMNI Contracts is in default under any such OMNI Contract, and (iv)
to the best of OMNI's knowledge, no event or condition exists which
constitutes or, after notice or lapse of time or both, would constitute, a
material default on the part of OMNI or any of the OMNI Subsidiaries under
any such OMNI Contract.
(n) Labor Matters. Neither OMNI nor any of the OMNI Subsidiaries is a
party to, or is bound by, any collective bargaining agreement, contract, or
other agreement or understanding with a labor union or labor organization,
nor is it or any of its subsidiaries the subject of any proceeding
asserting that OMNI or any such OMNI Subsidiary has committed an unfair
labor practice or seeking to compel OMNI or any such OMNI Subsidiary to
bargain with any labor organization as to wages and conditions of
employment, nor is there any strike or other labor dispute involving OMNI
or any of the OMNI Subsidiaries pending or threatened.
(o) Employee Benefit Plans. Set forth in the Disclosure Memorandum is
a list of all employment agreements, severance agreements or arrangements,
parachute agreements, employee or director bonus, deferred compensation,
pension, retirement, profit sharing, stock option, stock purchase, employee
stock ownership, stock appreciation rights, savings, loan, consulting,
group insurance, fringe benefit, and other employee benefit, incentive, and
welfare plans, policies, contracts and arrangements, formal or informal,
written or oral, and all trust agreements related thereto, now in effect
and relating to any present or former directors, officers, or employees of
OMNI or any of the OMNI
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Subsidiaries, whether or not described in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (the "Employee
Plans"). All of the Employee Plans have been maintained, operated, and
administered in substantial compliance with their terms, and OMNI, all of
the OMNI Subsidiaries, and all of the Employee Plans currently comply, and
have at all relevant times complied, in all material respects with
applicable provisions of ERISA, the Code, securities laws, and other
applicable laws. With respect to each Employee Plan which is a pension
plan (as defined in Section 3(2) of ERISA) (a "Pension Plan"), each such
Pension Plan (and any trust relating thereto) intended to be a qualified
plan under Section 401(a) of the Code either has been determined by the IRS
to be so qualified or is the subject of a pending application for such
determination that was timely filed. Neither OMNI nor any OMNI Subsidiary
nor any ERISA Affiliate has in the past or now maintains, sponsors or
contributes to any plan subject to Title II of ERISA or Section 412 of the
Code (including any multi-employer pension plans defined in Section 3(37)
of ERISA), and none of them has ever incurred any liability to any person,
entity or agency by reason of the withdrawal from or termination of any
plan. "ERISA Affiliate" shall mean any entity that is a member of a
commonly controlled group of corporations or trades or businesses of which
OMNI or any OMNI Subsidiary is a member within the meaning of Section
414(b) and (c) of the Code. No "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) with respect to any
"employee benefit plan" (as defined under Section 3(3) of ERISA, each such
plan an "ERISA Plan") has occurred which is likely to result in any
material penalties or taxes under Section 502(i) of ERISA or Section 4975
of the Code. All reporting and disclosure requirements of ERISA and the
Code have been complied with in all material respects with respect to each
of the ERISA Plans and each other Employee Plan. OMNI and the OMNI
Subsidiaries have not contributed to any "multiemployer plan," as defined
in Section 3(37) of ERISA, nor any plan that is subject to Title IV of
ERISA, on or after September 26, 1980. Except as set forth in the
Disclosure Memorandum, OMNI and the OMNI Subsidiaries do not have any
obligations for retiree health and life benefits under any benefit plan,
contract or arrangement.
With respect to each Employee Plan, OMNI has attached to the Disclosure
Memorandum a true and correct copy of (i) the most recent annual report on
Form 5500 filed with the IRS, if such report is required, (ii) such
Employee Plan, (iii) each trust agreement and insurance contract relating
to such Employee Plan, (iv) the most
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recent summary plan description for such Employee Plan, if it is subject to
Title I of ERISA, and (v) the most recent determination letter issued by
the IRS, if such Employee Plan is intended to be qualified under Section
401(a) of the Code.
(p) Title to Properties and Other Assets. The Disclosure Memorandum
sets forth a complete and correct list of all real property owned, leased,
or operated by OMNI or any OMNI Subsidiary, including all of its branches
and all its properties acquired in foreclosure proceedings in the ordinary
course of business. Except as set forth in the Disclosure Memorandum, each
of OMNI and the OMNI Subsidiaries has good and marketable title to all
assets and properties, whether real or personal, tangible or intangible,
which they purport to own, including, without limitation, all properties
listed in the Disclosure Memorandum as being owned by them, and valid
leasehold interests in all properties listed in the Disclosure Memorandum
as being leased by them, in each case free and clear of any liens, claims,
charges, options, encumbrances, or similar restrictions except liens for
current taxes and assessments not yet due and payable and utility and other
easements that do not interfere with the use of the property for the
business being conducted thereon.
(q) Knowledge As to Conditions. OMNI knows of no reason why the
approvals, consents and waivers of governmental authorities referred to in
Section 5.1(b) should not be obtained without the imposition of any
condition of the type referred to in the proviso thereto.
(r) Compliance with Laws. Except as set forth in the Disclosure
Memorandum, (a) OMNI and each OMNI Subsidiary has complied in all material
respects with all laws, regulations, and orders (including, without
limitation, zoning ordinances, building codes, and environmental, civil
rights, and occupational health and safety laws and regulations and
including, without limitation, in the case of OMNI Subsidiaries that are
banks, all statutes, rules, and regulations pertaining to the conduct of
the banking business) and governing instruments applicable to it and to the
conduct of its business, and (b) neither OMNI nor any OMNI Subsidiary is
in default under, and no event has occurred which, with the lapse of time
or action by a third party, could result in the default under, the terms of
any judgment, order, writ, decree, permit, or license of any agency of any
government or court, whether federal, state, municipal, or local and
whether at law or in equity. Without limiting the generality of the
foregoing, except
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as set forth in the Disclosure Memorandum, to the best of OMNI's knowledge,
each OMNI Subsidiary has timely filed all currency transaction reports
required to be filed and taken all other actions required under the
Currency and Foreign Transactions Reporting Act, codified at 31 U.S.C.
Section 5301 et seq., and its implementing regulations. The deposits of
each are insured by the FDIC and each Bank has paid all assessments and
filed all reports required in connection with such insurance. Each Bank is
in substantial compliance with the applicable provisions of the Community
Reinvestment Act of 1977 and the regulations promulgated thereunder.
(s) Fees. Other than financial advisory services performed for OMNI
by Hovde Financial, Inc., which fees shall not exceed $1,000,000, neither
it nor any of its subsidiaries, nor any of their respective officers,
directors, employees or agents has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions, or finder's fees, and no broker or finder has acted directly
or indirectly for it or any of its subsidiaries, in connection with the
Plan or the transactions contemplated hereby.
(t) Registration Statement. The information to be supplied by OMNI in
writing expressly for inclusion in the Registration Statement on Form S-4
and/or such other form(s) as may be appropriate to be filed under the
Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission (the "SEC") by KeyCorp for the purpose
of, among other things, registering the KeyCorp Common Stock to be issued
to the stockholders of OMNI in the Merger (the "Registration Statement"),
and (ii) the proxy statement to be distributed in connection with OMNI's
meeting of its stockholders to vote upon this Plan (as amended or
supplemented from time to time, the "Proxy Statement," and together with
the prospectus included in the Registration Statement, as amended or
supplemented from time to time, the "Proxy Statement/Prospectus") will not,
at the time such Registration Statement becomes effective, and, in the case
of the Proxy Statement/Prospectus, at the time it is mailed and at the time
of the OMNI Meeting (as defined below), contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. All documents
which OMNI is responsible for filing, or which OMNI furnishes to KeyCorp
for filing, with the SEC and any regulatory authority in connection with
the
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Merger will comply as to form in all material respects with the provisions
of applicable law.
(u) Allowance; Capital; OMNI Loans. The allowance for possible loan
losses shown on the audited consolidated balance sheet as of December 31,
1993 and the allowance for possible loan losses shown on the consolidated
balance sheet as of June 30, 1994, was, and all such allowances for future
periods after the date of this Plan will be, adequate in all material
respects to provide for possible losses, net of recoveries relating to
loans and leases previously charged off, on loans outstanding, lease
receivables, and real estate (including accrued interest receivable) as of
the date thereof (i) under the standards applied by the applicable bank
regulatory authorities and (ii) under generally accepted accounting
principles. Except as set forth in the Disclosure Memorandum, since
December 31, 1993, OMNI has not incurred any unusual or extraordinary loan
losses in excess of $50,000 in the aggregate. For purposes of determining
adequacy, OMNI represents and warrants that it applies uniform standards to
all loans of OMNI and the OMNI Subsidiaries.
Each of OMNI and the OMNI Subsidiaries is in compliance with all
currently applicable capital requirements and guidelines prescribed by all
applicable federal and state bank regulatory agencies. For purposes of and
pursuant to Section 38 of the Federal Deposit Insurance Act, as amended,
(a) each Bank is deemed to be within a capital category not any lower than
"adequately capitalized," (b) no event has occurred that would cause any
of the Banks to be placed in a capital category any lower than "adequately
capitalized," and (c) no federal or state banking authority with
jurisdiction over the Banks has required or made any attempt to require any
of the Banks to comply with any mandatory or discretionary supervisory
actions as if such Bank were in a capital category any lower than
"adequately capitalized."
All currently outstanding loans of, or current extensions of credit by,
OMNI or any OMNI Subsidiary (individually, an "OMNI Loan", and,
collectively, the "OMNI Loans") were solicited, originated and currently
exist in compliance with all applicable requirements of federal and state
law and regulations promulgated thereunder except where the failure to so
comply would not individually or in the aggregate have a Material Adverse
Effect on OMNI and the OMNI Subsidiaries taken as a whole. Each note
evidencing an OMNI Loan or loan or credit agreement or security instrument
related to the OMNI Loans constitutes a valid, legal and binding
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obligation of the obligor thereunder, enforceable in accordance with the
terms thereof, except where the failure thereof, individually or in the
aggregate, would not have a Material Adverse Effect on OMNI and the OMNI
Subsidiaries taken as a whole. To the best of OMNI's knowledge, there are
no oral modifications or amendments or additional agreements related to the
OMNI Loans that are not reflected in the records of the OMNI Subsidiary
making such OMNI Loan, and, to the best knowledge of OMNI, no claims of
defense as to the enforcement of any OMNI Loan have been asserted, and, to
the best knowledge of OMNI, there are no acts or omissions or conditions
which exist which would give rise to any claim or right to rescission,
set-off, counterclaim or defense, except in each case where such
modifications, amendments, or agreements, claims or defenses, or acts or
omissions would not have, either individually or in the aggregate, a
Material Adverse Effect on OMNI and the OMNI Subsidiaries taken as a
whole.
(v) No Material Adverse Change. Since December 31, 1993, there has
been no material adverse change in the business, financial condition,
results of operations, or prospects of OMNI and the OMNI Subsidiaries,
taken as a whole.
(w) Antitakeover Provisions Inapplicable. No merger moratorium,
control share acquisition, or other similar Colorado State statute applies
nor will any such statute apply to this Plan, the Merger or the Voting
Agreements or the transactions contemplated hereby or thereby. In
addition, no moratorium on "significant business transactions" will arise
under Colorado law with respect to the Merger or any of the other
transactions contemplated by this Plan or the Voting Agreements.
(x) Material Interests of Certain Persons. Except as set forth in the
Disclosure Memorandum in response to this Section 3.1(x) or Sections
3.1(m)(vii) or (viii), to the best of OMNI's knowledge no officer or
director of OMNI, or any "associate" (as such term is defined in Rule 12b-2
under the Exchange Act) of any such officer or director, has any material
interest in any material contract or property (real or personal), tangible
or intangible, used in or pertaining to the business of OMNI or any of its
subsidiaries.
(y) Insurance. Set forth in the Disclosure Memorandum is a listing of
all insurance policies maintained by OMNI and the OMNI Subsidiaries (true
and correct copies of which have been previously delivered to KeyCorp),
including the name of the insurer, the risks
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insured against, current expiration dates and renewal options, the amount
of the coverage, and any applicable deductibles, retentions and co-pay
obligations.
(z) Capital Spending and Commitments. The Disclosure Memorandum lists
all current commitments and plans (including attachment of any agreements
related to thereto) of OMNI and each OMNI Subsidiary for expansion or
capital spending in excess of $50,000 per item, including, without
limitation, all plans or commitments regarding the purchase or sale of any
banking institution, or the branches or deposits of any such institution.
(aa) Accuracy of Information. The statements contained in this Plan,
the Disclosure Memorandum, and in any other written document executed and
delivered by or on behalf of OMNI pursuant to the terms of this Plan are
true and correct in all material respects, and such statements and
documents do not omit any material fact necessary to make the statements
contained therein not misleading.
(bb) Voting Agreement. OMNI has obtained voting agreements in the form
of Exhibit E hereto (individually, a "Voting Agreement" and collectively,
the "Voting Agreements") from holders of OMNI Common Stock whose
beneficial ownership represents, in the aggregate, at least two thirds (66
2/3%) of the outstanding shares of OMNI Common Stock on the date hereof.
Each of such Voting Agreements constitutes a valid and binding obligation
of each such holder, enforceable in accordance with its terms, except as
may be limited by bankruptcy, insolvency, or similar laws affecting
enforcement of creditors rights generally, and all such Voting Agreements
are in full force and effect.
(cc) Officer/Director Agreements. There are no written or oral
agreements providing for the indemnification of any of the officers or
directors of OMNI or any of the OMNI Subsidiaries.
SECTION 3.2. Representations and Warranties of KeyCorp.
KeyCorp represents and warrant to OMNI that:
(a) Recitals True. The facts set forth in the Recitals of this Plan
with respect to it are true and correct.
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(b) Capital Stock of KeyCorp. As of the date hereof, the authorized
capital stock of KeyCorp consists of (a) 900,000,000 shares of KeyCorp
Common Stock, of which 244,246,444 shares, as of June 30, 1994, are issued
and outstanding and 1,652,555 shares are held as treasury shares of
KeyCorp, (b) 1,400,000 shares of 10% Cumulative Preferred Stock, Class A,
of the par value of $5.00 per share, of which, as of June 30, 1994,
1,280,000 shares are issued and outstanding, and (c) 25,000,000 shares of
Preferred Stock, with a par value of $1 each, of which, as of June 30,
1994, no shares are issued and outstanding. All outstanding shares of
capital stock of KeyCorp are duly authorized, validly issued and
outstanding, fully paid and non-assessable, and subject to no preemptive
rights. Except for options to acquire 12,968,554 shares of KeyCorp Common
Stock pursuant to stock options outstanding under various stock option
plans of KeyCorp, there are no outstanding subscriptions, options,
warrants, scrip, rights (other than pursuant to the KeyCorp Rights Plan),
calls, convertible securities, or any other similar agreements,
arrangements, or commitments of any character relating to the issued or
unissued capital stock or other securities of KeyCorp obligating, or which
may obligate, KeyCorp to issue, deliver, or sell, or cause to be issued,
delivered, or sold, additional shares of its capital stock or obligating or
which may obligate, KeyCorp to grant, extend, or enter into any such
subscription, option, warrant, scrip, right, call, convertible security, or
other similar agreement, arrangement, or commitment. There are no voting
trusts or other similar agreements, arrangements, or commitments to which
KeyCorp is a party or of which it has knowledge with respect to the voting
of capital stock of KeyCorp. The shares of KeyCorp Common Stock are
registered pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act") and are listed on the NYSE.
(c) Organization and Authority. Each direct or indirect subsidiary of
KeyCorp that is a significant subsidiary as defined in Regulation S-X
promulgated by the SEC (individually, a "KeyCorp Subsidiary" and
collectively, the "KeyCorp Subsidiaries") is a corporation or a banking
institution in each case duly organized, validly existing and in good
standing under the laws of the state of its incorporation or the United
States. KeyCorp owns all of the outstanding stock of each KeyCorp
Subsidiary, free and clear of all liens, charges, encumbrances, and
security interests. Each of KeyCorp and the KeyCorp Subsidiaries has the
power and authority, and is duly qualified in all jurisdictions (except for
such qualifications the absence of which,
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individually or in the aggregate, would not have a Material Adverse
Effect (as defined in Section 8.1)) where such qualification is required,
to carry on its business as it is now being conducted and to own, lease, or
operate all its material properties and assets. KeyCorp has previously made
available to OMNI true and complete copies of the Amended and Restated
Articles of Incorporation and the Regulations of KeyCorp, as in effect on
the date of this Plan.
(d) Authorization. KeyCorp has the requisite corporate power and
authority to execute and deliver this Plan and to carry out its obligations
hereunder. The execution, delivery, and performance of this Plan by
KeyCorp and the consummation of the transactions contemplated hereby have
been duly authorized and approved by the Board of Directors of KeyCorp and
no other corporate action is necessary to authorize this Plan or to
consummate the transactions so contemplated. This Plan is a valid and
binding agreement of KeyCorp enforceable against KeyCorp in accordance with
its terms, subject as to enforcement to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
application and to equity principles and except that the availability of
the equitable remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceedings may be
brought.
(e) No Violations. The execution, delivery and performance of this
Plan by KeyCorp does not and the consummation of the transactions
contemplated hereby will not, constitute (a) assuming the approvals and
consents referred to in Section 5.1 are obtained, a breach or violation of,
or a default under (or an event which, with notice or lapse or time or
both, should constitute a default under), or result in the termination of,
or accelerate the performance required by, or result in a right of
termination or acceleration of, or result in the creation of any lien,
security interest, charge, or other encumbrance upon any of the properties
or assets of KeyCorp or any of the KeyCorp Subsidiaries under, any law,
rule or regulation,any applicable provision of or any judgment, decree,
order, governmental permit or license, or any note, bond, mortgage, deed of
trust, license, lease, agreement, indenture or other instrument or
obligation of KeyCorp or any KeyCorp Subsidiary or to which KeyCorp or any
KeyCorp Subsidiary (or any of their respective properties) is subject,
which breach, violation or default would have a Material Adverse Effect on
KeyCorp and the KeyCorp Subsidiaries, taken as a whole, or enable any
person to enjoin the Merger or
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(b) a breach or violation of, or a default under, the Amended and Restated
Articles or Incorporation or the Regulations of KeyCorp or the charter or
bylaws of any KeyCorp Subsidiary; and the consummation of the transactions
contemplated hereby will not require any approval, consent, authorization,
waiver, permit of or from, or filing with or notification to, any person,
public body, or authority other than (i) the required approvals, consents
and waivers of governmental authorities referred to in Section 5.1(b), (ii)
the approval of the stockholders of OMNI referred to in Section 3.1(e)(ii)
hereof, (iii) such approvals, consents or waivers as are required under the
federal and state securities or "Blue Sky" laws in connection with the
transactions contemplated by this Plan, (iv) the filing of a certificate of
merger with the Secretary of State of the State of Colorado pursuant to the
CBCA, and (v) any other approvals, consents or waivers the absence of
which, individually or in the aggregate, would not result in a Material
Adverse Effect on KeyCorp and the KeyCorp Subsidiaries, taken as a whole,
or enable any person to enjoin the Merger.
(f) Certain Statements, Reports and Documents. KeyCorp has previously
made available to OMNI true and complete copies of its (a) Annual Report to
Shareholders for the year ended 1993, (b) all Quarterly Reports on Form
10-Q and Current Reports on Form 8-K filed with the SEC since December 31,
1993, and (c) Proxy Statement for its 1994 Annual Meeting of Stockholders
(all such documents, as amended, being herein referred to collectively as
the "KeyCorp Reports" and the financial statements of KeyCorp contained in
the KeyCorp Reports are referred to herein as the "KeyCorp Financial
Statements"). The KeyCorp Financial Statements fairly presented the
financial position and results of operations of KeyCorp and its
subsidiaries on a consolidated basis at the dates shown and for the period
indicated (subject, in the case of unaudited interim statements, to normal
year-end audit adjustments that are not material in amount or effect), in
each case in accordance with generally accepted accounting principles
applicable to bank holding companies consistently applied during the
periods involved, except as may be noted therein. As of their respective
dates, the KeyCorp Reports did not contain any untrue statements of
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading. As of their
respective dates, all KeyCorp Reports complied as to form
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in all material respects with the published rules and regulations of the
SEC with respect thereto.
(g) No Material Adverse Change. Except as disclosed in any KeyCorp
Report, since December 31, 1993, there has been no material adverse change
in the business, financial condition, results of operations, or prospects
of KeyCorp and the KeyCorp Subsidiaries taken as a whole.
(h) Compliance with Applicable Law. KeyCorp and each KeyCorp
Subsidiary has all federal, state, local, and foreign governmental
licenses, franchises, permits, and other authorizations necessary for it to
own or lease its properties and assets and to carry on its business as it
is now being conducted, including, without limitation, any trust
activities, under and pursuant to, and to the knowledge of KeyCorp, has
complied with, and is not in default under, any applicable law, statute
(including, without limitation, ERISA, the Code, and 31 U.S.C. 5311, et
seq.), order, rule, regulation (including 31 C.F.R. Part 103), policy
and/or guideline of any federal, state, or local governmental authority
relating to KeyCorp or any KeyCorp Subsidiary, except for such powers and
authorizations the absence of which, or where the failure to so comply,
either individually or in the aggregate, would not have a Material Adverse
Effect on KeyCorp and the KeyCorp Subsidiaries taken as a whole.
(i) Fees. Neither KeyCorp nor any of the KeyCorp Subsidiaries, nor
any of their respective officers, directors, employees or agents has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker
or finder has acted directly or indirectly for it or any of its
subsidiaries, in connection with the Plan or the transactions contemplated
hereby.
(j) Registration Statement. The information to be supplied by KeyCorp
for inclusion in (i) the Registration Statement, or (ii) the Proxy
Statement/Prospectus, will not, at the time such Registration Statement
becomes effective, and, in the case of the Proxy Statement/Prospectus, at
the time it is mailed and at the time of the OMNI Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. All documents which KeyCorp is responsible for filing, or
which KeyCorp furnishes to OMNI for filing, with the SEC
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and any regulatory authority in connection with the Merger will comply as
to form in all material respects with the provisions of applicable law.
(k) KeyCorp Common Stock. The KeyCorp Common Stock to be issued in
the Merger is duly authorized and, when issued at the Effective Time, will
be validly issued, fully paid and non-assessable and not subject to
preemptive rights, with no personal liability attaching thereto.
(l) Knowledge as to Conditions. KeyCorp knows of no reason why the
approvals, consents and waivers of governmental authorities referred to in
Section 5.1(b) should not be obtained without the imposition of any
condition of the type referred to in the proviso thereto.
(m) Accuracy of Information. The statements contained in this Plan
and in any other written document executed and delivered by or on behalf of
KeyCorp pursuant to the terms of this Plan are true and correct in all
material respects, and such statements and documents do not omit any
material fact necessary to make the statements contained therein not
misleading.
ARTICLE IV
COVENANTS
SECTION 4.1. Acquisition Proposals. Unless and until this Plan shall
have been terminated by either party pursuant to Article VI hereof, OMNI agrees
that neither it nor any of its subsidiaries nor any of the respective officers
and directors of OMNI or any of its subsidiaries shall, and OMNI shall direct
and use its best efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney, or accountant
retained by it or any of its subsidiaries) not to, initiate or solicit,
directly or indirectly, any enquiries or the making of any proposal or offer,
or enter into any agreement or instrument evidencing any proposal or offer
(including, without limitation, any proposal or offer to stockholders) with
respect to a merger, consolidation or similar transaction involving, or any
purchase of, or right to purchase, all or any significant portion of the assets
or any equity securities of, or any securities convertible into or otherwise
evidencing any equity securities of, OMNI or any of its subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal")
or engage in any negotiations concerning, or assist or provide any information
or data to, or have any discussions with, any person, corporation, partnership,
or other entity or group (other than KeyCorp) relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt
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to make or implement an Acquisition Proposal. OMNI will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing. In
addition, OMNI will take the necessary steps to inform the appropriate
individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 4.1. OMNI will notify KeyCorp
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with OMNI, and OMNI will provide to KeyCorp
the identity of any person, corporation, partnership, or other entity or group
making such enquiries or proposals.
SECTION 4.2. Certain Revaluations, Changes, and Adjustments. From the
date of this Plan until the Effective Time, neither OMNI nor any OMNI
Subsidiary shall revalue any asset, adopt any change in accounting method,
(other than changes in accordance with generally accepted accounting principles
or regulatory accounting principles or as required by law), or adjust any
reserve, except in the ordinary course of business and after prior consultation
with KeyCorp. At the request of KeyCorp, OMNI shall promptly, after receipt of
all applicable regulatory consents, waivers and approvals, establish and take
such reserves and accruals as KeyCorp shall request to conform OMNI's loan,
accrual, reserve, litigation and real estate policies and practices to such
policies of KeyCorp, and OMNI shall, at KeyCorp's request, promptly recognize,
for financial accounting purposes, such expenses of the Merger and
restructuring charges relating to or to be incurred in connection with the
Merger as KeyCorp may specify, provided, however, that KeyCorp shall consult
with OMNI before making any such request and that KeyCorp shall not request
OMNI to take any such actions that are not in KeyCorp's good faith judgment
consistent with generally accepted accounting principles, regulatory accounting
principles and legal requirements, provided, further, that, in the event this
Plan is terminated for any reason other than as a result of a material breach
by OMNI pursuant to Section 6.1(b) hereof, and OMNI is unable to reverse the
actions taken pursuant to KeyCorp's request under this Section 4.2, KeyCorp
hereby agrees to indemnify and hold OMNI and the OMNI Subsidiaries harmless
from and against the full amount of any losses arising therefrom. OMNI's
representations, warranties, and covenants contained in this Plan shall not be
deemed to be untrue or breached in any respect for any purpose as a consequence
of any modifications or changes undertaken solely on account of this Section
4.2.
SECTION 4.3. Employment and Benefit Matters.
(a) Service Credit. In the event that any employee of OMNI or any
OMNI Subsidiary is transferred to KeyCorp or any affiliate of KeyCorp or
becomes a participant in an employee
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benefit plan, program or arrangement maintained by or contributed to by KeyCorp
or any of its affiliates, KeyCorp shall cause such plan, program, or
arrangement to treat the prior service of such employee with OMNI or any
affiliates as service rendered to KeyCorp or its affiliate, as the case may be,
for purposes of eligibility to participate, vesting and eligibility for special
benefits under such plan, program, or arrangement, but not for the purpose of
benefit accrual. Without limiting the foregoing, KeyCorp shall not treat any
employee of OMNI or any OMNI Subsidiary as a "new" employee for purposes of any
exclusion under any health or similar plan of KeyCorp or any of its affiliates
for a pre-existing medical condition.
(b) Employment, Severance, and Other Obligations. Following the
Effective Time, KeyCorp shall honor in accordance with their terms all
employment, severance, and other compensation contracts between OMNI or any
OMNI Subsidiary and any director, officer, or employee of OMNI or any OMNI
Subsidiary which are set forth in the Disclosure Memorandum and attached
thereto. After the Effective Time KeyCorp shall provide severance and other
benefits to employees of OMNI and OMNI Subsidiaries, to the officers and
employees of OMNI, that are substantially equivalent to the benefits currently
provided to such employees or that are otherwise comparable to the benefits
provided to employees of Key Bank of Colorado under the KeyCorp benefits plans,
provided, however, that officers that have an employment or other contract
providing for severance and which is set forth in the Disclosure Memorandum,
will be limited to the severance in such contract.
SECTION 4.4. Access and Information. Upon reasonable notice, OMNI
shall (and shall cause each of the OMNI Banks and the other OMNI Subsidiaries
to) permit KeyCorp and its representatives (including, without limitation,
directors, officers and employees of KeyCorp and its affiliates, and counsel,
accountants, and other professionals retained) full access during normal
business hours throughout the period prior to the Effective Time to the books,
papers, and records relating to the assets, stock ownership, operations,
obligations and liabilities, contracts and commitments, (including, without
limitation, minute books of director's and stockholders' meetings,
organizational documents, bylaws, filings with any regulatory authority,
litigation files, tax returns, examination reports of the IRS, and work papers
of independent auditors), properties, personnel, and to such other information
as any party may reasonably request. In accordance with the foregoing, OMNI
agrees that it will provide KeyCorp with reasonable access to its properties,
operations, and data systems and customer information in order to facilitate
any conversion of OMNI and the OMNI Banks' data processing systems to
effectuate the Merger. No investigation pursuant to this Section 4.4 shall
affect or be deemed to modify any representation or warranty made herein. Each
party will not, and will cause its representatives not to, use any information
obtained pursuant to this Section 4.4 for any
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purpose unrelated to the consummation of the transactions contemplated by this
Plan. Subject to the requirements of law, each party will keep confidential,
and will cause its representatives to keep confidential, all information and
documents obtained pursuant to this Section 4.4 unless such information (i) was
already known to such party, (ii) becomes available to such party from other
sources not known to such party to be bound by a confidentiality obligation,
(iii) is disclosed with the prior written approval of the party to which such
information pertains, or (iv) is or becomes readily ascertainable from
published information or trade sources. In the event that this Plan is
terminated or the transactions contemplated by this Plan shall otherwise fail
to be consummated, KeyCorp shall promptly cause all copies of documents or
extracts thereof containing information and data as to OMNI to be returned to
OMNI. KeyCorp agrees to continue to be bound by the terms of that certain
confidentiality agreement entered into with OMNI as of August 1, 1994.
SECTION 4.5. Certain Filings, Consents and Arrangements. KeyCorp and
OMNI shall (a) as soon as practicable, but in any event not later than November
28, 1994, make any filings and applications required to be filed in order to
obtain all approvals, consents and waivers of governmental authorities
necessary or appropriate for the consummation of the transactions contemplated
hereby or by the Voting Agreements, and, in connection therewith, make full and
accurate disclosure regarding the transactions contemplated hereby and by the
Voting Agreements to all such governmental authorities, (b) cooperate with one
another (i) in promptly determining what filings are required to be made or
approvals, consents or waivers are required to be obtained under any other
relevant federal, state or foreign law or regulation and (ii) in promptly
making any such filings, furnishing information required in connection
therewith and seeking timely to obtain any such approvals, consents, or
waivers, and (c) deliver to the other copies of the publicly available portions
of all such filings and applications promptly after they are filed. In
addition, prior to Closing, OMNI and the OMNI Subsidiaries will use their best
efforts to obtain, to the extent necessary, from the other party or parties to
all mortgages, deeds of trust, indentures, leases, contracts, and other
agreements to which any of them is a party, or by which any of their assets may
be bound, appropriate consents and waivers in writing to the transactions
contemplated by this Plan or and/or such amendments, assignments, or
modifications of such documents as may be required in order that the Merger
shall not conflict therewith, result in a breach or termination of any
provision thereof, or result in any default thereunder, or result in the
creation of any lien, pledge, claim, security interest, encumbrance, charge, or
restriction on any of the properties or assets of OMNI or any of the OMNI
Subsidiaries pursuant thereto, the failure of which to obtain would have a
Material Adverse Effect on OMNI and its Subsidiaries, taken as a whole.
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SECTION 4.6. State Antitakeover Statutes. OMNI shall take all
reasonable steps (a) to exempt OMNI and the Voting Agreements referenced herein
and the transactions contemplated hereby or thereby from the requirements of
any state antitakeover, control share, merger moratorium, or other similar law
by action of its Board of Directors or otherwise and (b) upon the request of
KeyCorp, to assist in any challenge by KeyCorp to the applicability to the
Voting Agreements referenced herein and the transactions contemplated hereby or
thereby to any such state law.
SECTION 4.7. Indemnification; Directors' and Officers' Insurance. (a)
From and after the Effective Time, KeyCorp agrees to indemnify and hold
harmless each present and former director and officer of OMNI or the OMNI
Subsidiaries as determined as of the Effective Time (the "Indemnified
Parties"), against expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages, liabilities, and amounts paid in settlement
actually and reasonably incurred (collectively, "Costs") in connection with any
claim, action, suit, proceeding, or investigation, whether civil, criminal,
administrative, or investigative, arising out of matters existing or occurring
at or prior to the Effective Time, whether asserted or claimed prior to, at, or
after the Effective Time, to the fullest extent provided under the Articles of
Incorporation and Bylaws of OMNI in effect on the date hereof and consistent
with Colorado law in existence at that time (and KeyCorp shall also advance
expenses as incurred to the fullest extent permitted under Colorado law
provided the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification); provided that any determination required to be
made with respect to whether an officer's or director's conduct complies with
the standards set forth under OMNI's Articles of Incorporation and Bylaws shall
be made by independent counsel selected by KeyCorp.
(b) Any Indemnified Party wishing to claim indemnification under
Section 4.7(a), upon learning of any such claim, action, suit, proceeding, or
investigation, shall promptly notify KeyCorp thereof, but the failure to so
notify shall not relieve KeyCorp of any liability it may have to such
Indemnified Party if such failure does not materially prejudice the
indemnifying party. In the event of any such claim, action, suit, proceeding,
or investigation (whether arising before or after the Effective Time), (i)
KeyCorp shall have the right to assume the defense thereof and KeyCorp shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if KeyCorp elects not to
assume such defense or counsel for the Indemnified Parties advises that there
are issues which raise conflicts of interest between KeyCorp and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory to
them, and KeyCorp shall
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pay the reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
KeyCorp shall be obligated pursuant to this paragraph to pay for only one firm
of counsel for all Indemnified Parties in any jurisdiction unless the use of
one counsel for such Indemnified Parties would present such counsel with a
conflict of interest (ii) the Indemnified Parties will cooperate in the defense
of any such matter, and (iii) KeyCorp shall not be liable for any settlement
effected without its prior written consent; and provided further that KeyCorp
shall not have any obligation hereunder to any Indemnified Party when and if a
court of competent jurisdiction shall ultimately determine that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) For a period of two years after the Effective Time, KeyCorp shall
use all reasonable efforts to cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by OMNI
(provided that KeyCorp may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are substantially no
less advantageous issued by another insurer with equal or better ratings from
A.M. Best) with respect to claims arising from facts or events which occurred
before the Effective Time; provided, however, that in no event shall KeyCorp be
obligated to expend, in order to maintain or provide insurance coverage
pursuant to this Subsection 4.7(c), any amount per annum in excess of $150,000
in the aggregate (the "Maximum Amount"). If the amount of the annual premiums
necessary to maintain or procure such insurance coverage exceeds the Maximum
Amount, KeyCorp shall use all reasonable efforts to maintain the most
advantageous policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Amount.
(d) The provisions of this Section 4.7 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs, assigns and representatives.
SECTION 4.8. Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper,
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Plan as promptly as
practicable, including using efforts to obtain all necessary actions or
non-actions, extensions, waivers, consents, and approvals from all applicable
governmental entities, effecting all necessary registrations, applications and
filings (including, without limitation, filings under any applicable state
securities
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laws) and obtaining any required contractual consents and regulatory approvals.
SECTION 4.9. Publicity. The initial press release announcing this
Plan shall be a joint press release and thereafter OMNI and KeyCorp shall
consult with each other in issuing any press releases or otherwise making
public statements with respect to the transactions contemplated hereby and in
making any filings with any governmental entity or with any national securities
exchange with respect thereto.
SECTION 4.10. Proxy; Registration Statement. As soon as practicable
after the date hereof, KeyCorp and OMNI shall prepare the Proxy Statement, and
promptly thereafter mail the Proxy Statement to all holders of record (as of
the applicable record date) of shares of OMNI Common Stock. KeyCorp and OMNI
shall cooperate with each other in the preparation of the Proxy Statement.
KeyCorp shall prepare and file the Registration Statement with the SEC as soon
as is reasonably practicable and shall use all reasonable efforts to have the
Registration Statement declared effective by the SEC as promptly as practicable
and to maintain the effectiveness of such Registration Statement. KeyCorp
shall also take any action required to be taken under state "Blue Sky" or
securities laws in connection with the issuance of the KeyCorp Common Stock
pursuant to the Merger, and OMNI shall furnish KeyCorp all information
concerning OMNI and the holders of its capital stock and shall take any action
as KeyCorp may reasonably request in connection with any such action.
SECTION 4.11. Stockholders' Meeting. OMNI shall take all action
necessary, in accordance with applicable law and its Articles of Incorporation
and Bylaws, to convene a meeting of the holders of OMNI Common Stock (the "OMNI
Meeting") as promptly as practicable for the purpose of considering and taking
action upon this Plan. The OMNI Meeting shall be held on a date mutually
agreed upon by KeyCorp and OMNI, but in all events as soon as reasonably
practicable after the Registration Statement is declared effective. OMNI shall
submit the Proxy Statement to its stockholders and use its best efforts to
obtain all votes and approvals of its stockholders necessary for the approval
and adoption of this Plan. OMNI shall submit no other matter for approval at
the OMNI Meeting without the consent of KeyCorp. OMNI will not distribute any
information to its stockholders with respect to the transactions contemplated
hereby without prior notice to, and opportunity to comment upon such
information by, KeyCorp. OMNI will, at the OMNI Meeting, present this Plan for
approval and adoption by its stockholders, in accordance with the applicable
requirements of law. Except to the extent legally required for the discharge
by the Board of Directors of its fiduciary duties, as determined by such Board
based upon the advice of counsel, the Board of Directors of OMNI shall
recommend that the
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holders of the OMNI Common Stock vote in favor of and approve the Merger and
adopt this Plan at the OMNI Meeting.
SECTION 4.12. Securities Act. (a) As soon as practicable after the
date of the OMNI Meeting, OMNI shall identify to KeyCorp all persons who were,
at the time of the OMNI Meeting, possible "Affiliates" of OMNI as that term is
used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Affiliates"). Thereafter and until the Effective Time, OMNI shall identify to
KeyCorp each additional person who thereafter becomes an "Affiliate."
(b) OMNI shall use its best efforts to obtain a written agreement in
the form of Exhibit D from each person who is identified as a possible
Affiliate pursuant to clause (a) above. OMNI shall deliver such written
agreement to KeyCorp as soon as practicable before the OMNI Meeting, but not
later than the date on which the Proxy Statement shall be mailed to the
stockholders of OMNI. OMNI shall provide its transfer agent for OMNI with stop
transfer instructions to effectuate the requirements of this Section 4.12.
SECTION 4.13. Tax-Free Reorganization Treatment. Neither OMNI nor any
of its affiliates, or KeyCorp or any of its affiliates shall take or cause to
be taken any action, whether before or after the Effective Time, which would
disqualify the Merger as a "reorganization" within the meaning of Section 368
of the Code.
SECTION 4.14. Bank Merger. At or after the Effective Time, KeyCorp
may cause one or more of the OMNI Banks to merge or consolidate with or into
Key Bank of Colorado (the "Bank Merger").
SECTION 4.15. Documents and Information to be Furnished. OMNI will
furnish to KeyCorp (a) as of the end of each calendar month commencing with
September 1994, within 25 days after the end of each such calendar month, (i)
the monthly financial statements of OMNI and all of its subsidiaries prepared
on a consolidated or consolidating basis (as prepared by OMNI in accordance
with its normal accounting procedures), and (ii) true and complete copies of
such information concerning the affairs of OMNI or any of its subsidiaries as
KeyCorp and its representatives may reasonably request, including, without
limitation, all internal control reports submitted to OMNI or any of the OMNI
Subsidiaries by independent accountants in connection with each annual,
interim, or special audit of the books made by such accountants and all
management reports prepared by OMNI or the OMNI Banks pertaining to credit
quality and the status of classified, non-accrual, restructured, overdue loans
and loan foreclosures, and (b) within 5 days of their filing, all filings or
reports (including, without limitation, all Call Reports and FRY-9C reports)
filed by OMNI and
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each of the OMNI Banks with federal, state, or other governmental agencies
having supervisory or regulatory authority over OMNI and the OMNI Banks,
including, without limitation, the Federal Reserve Board, the FDIC and the
Colorado Commissioner. Until the Closing Date, KeyCorp shall deliver to OMNI
copies of all reports filed by KeyCorp with the SEC within five business days
after the filing thereof with the SEC.
SECTION 4.16. Notification of Certain Matters. During the period from
the date of this Plan to the Effective Date, OMNI will promptly notify KeyCorp
of (a) any material change in the normal course of its business, (b) any
governmental complaints, audits, investigations, or hearings (or communications
indicating that the same may be contemplated), or receipt of any memorandum of
understanding or cease and desist order from a regulatory authority, or (c) the
institution or the threat of litigation involving OMNI or any of its
subsidiaries other than in the normal course of its business, and OMNI will
keep KeyCorp fully informed of such events. Notwithstanding Section 4.6, OMNI
shall provide KeyCorp within ten days prior to the Closing with an updated
Disclosure Memorandum to reflect any and all additions, deletions, or other
changes up through and including the date of such updated Disclosure
Memorandum, as applicable. Delivery of such updated Disclosure Memorandum
shall not alter the obligations of OMNI to satisfy the conditions provided in
Article V hereof.
SECTION 4.17. Tax Representations. OMNI and KeyCorp shall each make
all representations and warranties and each will use its best efforts to obtain
a certificate from its stockholders reasonably requested by counsel for OMNI
and KeyCorp in order for such counsel to issue the opinion referred to in
Section 5.1(h) hereof.
SECTION 4.18. KeyCorp Common and Other Merger Consideration. At the
Effective Time, KeyCorp shall make arrangements to timely provide the Exchange
Fund to the Exchange Agent to enable the Exchange Agent to deliver the Merger
Consideration in accordance with Article I of this Agreement.
SECTION 4.19. NYSE Listing. KeyCorp will use its best efforts to
maintain its listing on the NYSE. Prior to the Closing and in accordance with
applicable rules and regulations, KeyCorp shall file a Subsequent Listing
Application with the NYSE to list the additional shares of KeyCorp Common Stock
to be issued to holders of OMNI Common in connection with the Merger and to be
listed upon notice of issuance with respect to the exercise of KeyCorp options
into which OMNI Options are converted.
SECTION 4.20. Best Efforts. Each of KeyCorp and OMNI shall use their
best efforts to take or cause to be taken all actions necessary, proper, or
advisable to consummate the Merger on a prompt basis, including such actions as
any of the parties consider necessary, proper, or advisable on connection
therewith,
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including, without limitation, using all reasonable best efforts to lift or
rescind any injunction or restraining order or other order adversely affecting
the abilities of the parties to consummate the transactions contemplated
hereby.
SECTION 4.21. OMNI Buy and Sell Agreement. Each of OMNI and Larry A.
Mizel shall use all reasonable efforts to cause the rights of the OMNI
Stockholders under the OMNI Buy and Sell Agreement to be waived and/or to have
the OMNI Buy and Sell Agreement complied with in a prompt and expeditious
manner so that the OMNI Common Stock can be exchanged and converted in the
Merger free and clear of any restrictions created by the OMNI Buy and Sell
Agreement and otherwise in order to facilitate a timely closing of the Merger,
including seeking waivers from OMNI Stockholders and obtaining necessary
documentation.
SECTION 4.22. Termination of OMNI Profit Sharing Plan. Subject to the
closing of the Merger, OMNI intends to terminate the OMNI Employee Profit
Sharing Plan as of the Effective Time. In connection therewith, KeyCorp agrees
to cooperate with OMNI as appropriate to carry out such termination, including,
without limitation, taking such action as is necessary to obtain an approval of
such termination from the Internal Revenue Service and any other applicable
regulatory authorities. Thereafter, the trust fund maintained pursuant to such
plan shall be distributed to the persons entitled thereto.
ARTICLE V
CONDITIONS TO CONSUMMATION
SECTION 5.1. Conditions to All Parties' Obligations. The respective
obligations of KeyCorp and OMNI to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the following conditions:
(a) The Plan and the transactions contemplated hereby shall have been
approved by the requisite vote of the stockholders of OMNI to the extent
required under applicable law.
(b) All required approvals and authorizations of, filings and
registrations with, and notifications to, all regulatory authorities
required for the consummation of the transactions contemplated hereby shall
have been obtained or made, including, without limitation, all approvals by
the Federal Reserve Board, the FDIC and the Colorado Commissioner, as
applicable, and such approvals shall be in full force and effect and all
applicable statutory waiting periods shall have expired; and the parties
shall have procured all other regulatory approvals, consents or waivers of
governmental
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authorities that are necessary or appropriate to the consummation of the
transactions contemplated by the Plan; provided, however, that no approval,
consent or waiver in this Section 5.1(b) shall be deemed to have been
received if it shall contain or be subject to any restriction or condition
which, in the reasonable determination of KeyCorp, is materially
burdensome.
(c) All other requirements prescribed by law which are necessary to
the consummation of the transactions contemplated by this Plan shall have
been satisfied.
(d) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Merger or any other transaction
contemplated by this Plan.
(e) No statute, rule, regulation, order, injunction or decree shall
have been enacted, entered, promulgated or enforced by any governmental
authority which prohibits, restricts or makes illegal consummation of the
Merger of any other transaction contemplated by this Plan.
(f) The Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been initiated
or threatened by the SEC.
(g) No litigation or proceeding shall be pending against KeyCorp or
OMNI or any of their subsidiaries brought by any governmental agency
seeking to prevent consummation of the transactions contemplated hereby.
(h) OMNI and KeyCorp shall have received the opinion of Irell &
Manella, dated as of the Closing Date, substantially to the effect that, on
the basis of facts, representations and assumptions set forth in such
opinion, the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly: (i) no gain or loss will be recognized by KeyCorp or OMNI as
a result of the Merger; (ii) no gain or loss will be recognized by the
stockholders of OMNI who exchange their shares of OMNI Common Stock solely
for shares of KeyCorp Common Stock pursuant to the Merger (except with
respect to cash received in lieu of a fractional share interest in KeyCorp
Common Stock); (iii) the tax basis of the
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shares of KeyCorp Common Stock received by stockholders who exchange all of
their shares of OMNI Common Stock solely for shares of KeyCorp Common Stock
in the Merger will be the same as the tax basis of the shares of OMNI
Common Stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest for which cash is received); and
(iv) the holding period of the shares of KeyCorp Common Stock received in
the Merger will include the period during which the shares of OMNI Common
Stock surrendered in exchange therefor were held, provided such shares of
OMNI Common Stock were held as capital assets at the Effective Time. In
rendering such opinion, Irell & Manella may require and rely upon
representations contained in certificates of officers of KeyCorp, OMNI and
others.
(i) OMNI shall have received the opinion of Hovde Financial, Inc.
dated the same date as the Proxy Statement/Prospectus (which opinion shall
not have been withdrawn) to the effect that the terms of the Merger are
fair to OMNI's stockholders from a financial point of view.
SECTION 5.2. Conditions to Obligations of KeyCorp. The obligations of
KeyCorp to effect the Merger shall be subject to the satisfaction or waiver
prior to the Effective Time of the following additional conditions:
(a) KeyCorp and its directors and officers who sign the Registration
Statement shall have received from OMNI's independent certified public
accountants "cold comfort" letters, dated (i) the date of the mailing of
the Proxy Statement/Prospectus to OMNI's stockholders and (ii) shortly
prior to the Effective Time, with respect to certain financial information
regarding OMNI in the form customarily issued by such accountants at such
time in transactions of this type.
(b) OMNI shall have furnished KeyCorp with a favorable opinion of
Colorado counsel acceptable to KeyCorp, as OMNI counsel, dated the Closing
Date, concerning the corporate standing and capitalization of OMNI and the
OMNI Banks, the due authorization and enforceability of this Agreement, and
the validity of the OMNI Common Stock to be exchanged in the Merger, all
based on such investigation and OMNI officer representations as OMNI
counsel shall deem necessary in connection with such opinion.
(c) Except for changes contemplated by this Plan, each of the
representations and warranties of OMNI contained in this Plan shall, in all
material respects,
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be true on the Closing Date as if made on such date (or on the date when
made in the case of any representation or warranty which specifically
relates to an earlier date), provided, however, that notwithstanding
anything to the contrary contained in this Section 5.2, this Section 5.2
shall be deemed to have been satisfied even if such representations and
warranties are not true and correct unless the failure of the
representations and warranties, either singularly, or in the aggregate, to
be so true and correct would have a Material Adverse Effect on OMNI and the
OMNI Subsidiaries, taken as a whole; OMNI shall have performed, in all
material respects, each of its covenants and agreements contained in this
Plan; and KeyCorp shall have received a certificate signed by the Chief
Executive Officer and the Chief Financial Officer of OMNI, dated the
Closing Date, to the foregoing effect.
(d) KeyCorp shall have received all state securities laws and "Blue
Sky" permits and other authorizations necessary to consummate the
transactions contemplated thereby.
(e) OMNI and each OMNI Subsidiary shall have obtained any and all
consents or waivers from other parties to loan agreements or other
contracts required for the consummation of the Merger, except those for
which the failure to obtain such consents and waivers would not,
individually or in the aggregate, have a Material Adverse Effect on OMNI
and the OMNI Subsidiaries, taken as a whole.
(f) Holders of more than 10% of the issued and outstanding shares of
OMNI Common Stock shall not have indicated that they intend to exercise
dissenters' rights in respect of the Merger.
(g) Each person who may be deemed by KeyCorp to be an Affiliate of
OMNI shall have delivered not later than the date on which the Proxy
Statement/Prospectus shall be mailed to the stockholders of OMNI a written
agreement substantially in the form of Exhibit D hereto.
(h) OMNI and each OMNI Subsidiary shall have received the written
resignation of each member of its respective Board of Directors not
selected by KeyCorp to continue to serve in such capacity.
(i) OMNI shall have sold all of its interest in Merchants Mortgage &
Trust pursuant to the terms and conditions provided in that certain Letter
Agreement between KeyCorp and OMNI dated as of the date hereof and
delivered herewith.
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(j) OMNI shall not have paid cash or other dividends from June 30,
1994 to the Effective Date except as permitted under this Plan.
(k) OMNI shall have furnished KeyCorp with a favorable opinion of
Colorado counsel acceptable to KeyCorp, which opinion shall be dated the
Closing Date and shall be, in form and substance, acceptable to KeyCorp, to
the effect that: (i) OMNI has validly and irrevocably waived all of its
rights under the OMNI Buy and Sell Agreement (ii) all OMNI Stockholders
have validly and irrevocably waived all of their rights under the OMNI Buy
and Sell Agreement, or to the extent not waived, that the OMNI Buy and Sell
Agreement has been fully complied with so that no OMNI Stockholder has any
rights to purchase or otherwise acquire the OMNI Common Stock of any other
OMNI Stockholder at or following the Effective Time of the Merger and (iii)
at the Effective Time, KeyCorp's rights in and to the OMNI Common Stock
exchanged, or received in the Merger, will not be subject to the rights or
claims of any person arising out of or under or in connection with the OMNI
Buy and Sell Agreement and that no person will have any rights against
KeyCorp, OMNI or any OMNI Stockholder arising out of or under or in
connection with the OMNI Buy and Sell Agreement.
SECTION 5.3. Conditions to the Obligations of OMNI. The obligation of
OMNI to effect the Merger shall be subject to the satisfaction or waiver prior
to the Effective Time of the following additional conditions:
(a) OMNI shall have received from KeyCorp's independent certified
public accountants "cold comfort" letters, dated (i) the date of the
mailing of the Proxy Statement/Prospectus to OMNI's stockholders and (ii)
shortly prior to the Effective Time, with respect to certain financial
information regarding KeyCorp in the form customarily issued by such
accountants at such time in transactions of this type.
(b) KeyCorp shall have furnished OMNI with a favorable opinion, dated
the Closing Date, of KeyCorp's Senior Vice President and Senior Managing
Counsel (relying, at his option, as to matters of Colorado law, on the
opinion of Colorado counsel satisfactory to OMNI), concerning the corporate
standing and capitalization of KeyCorp, the due authorization and
enforceability of this Agreement, the validity of the KeyCorp Common Stock
to be issued in the Merger, and the effectiveness of the Registration
Statement.
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(c) Each of the representations, warranties and covenants of KeyCorp
contained in this Plan shall, in all material respects, be true on the
Closing Date as if made on such date (or on the date when made in the case
of any representation or warranty which specifically relates to an earlier
date); provided, however, that notwithstanding anything to the contrary
contained in this Section 5.3, this Section 5.3 shall be deemed to have
been satisfied even if such representations and warranties are not true and
correct unless the failure of any of the representations and warranties,
either singularly, or in the aggregate, to be so true and correct would
have a Material Adverse Effect on KeyCorp and its subsidiaries, taken as a
whole; KeyCorp shall have performed, in all material respects, its
covenants and agreements contained in this Plan; and OMNI shall have
received certificates signed by the Chief Financial Officer and the Senior
Vice President-Corporate Development of KeyCorp dated the Closing Date, to
the foregoing effect.
(d) The additional shares of KeyCorp Common Stock to be issued to
holders of (i) OMNI Common Stock upon consummation of the Merger and (ii)
OMNI Options upon exercise of the KeyCorp options substituted therefor
shall have been authorized for listing on the NYSE, in both cases, subject
only to official notice of issuance.
ARTICLE VI
TERMINATION
SECTION 6.1. Termination. This Plan may be terminated, and the Merger
abandoned, prior to the Effective Time, either before or after its approval by
the stockholders of OMNI:
(a) by the mutual consent of KeyCorp and OMNI, if the Board of
Directors (or, in the case of KeyCorp, the Executive Committee or the Board
of Directors) of each so determines;
(b) by KeyCorp or OMNI, if its Board of Directors (or, in the case of
KeyCorp, the Executive Committee or the Board of Directors) so determines,
in the event of
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a material breach by the other party hereto of any representation or
warranty contained herein if the nonbreaching party in good faith
determines that it would not have entered into this Plan, or that the
Merger Consideration might have been materially different, if the
nonbreaching party had known of the breach prior to execution of this Plan
and such breach by its nature cannot be cured prior to the Closing; or in
the event of a material breach by the other party hereto of any covenant or
agreement contained herein which is not cured or not curable within 20 days
after written notice of such breach is given to the party committing such
breach by the other party;
(c) by KeyCorp or OMNI by written notice to the other party if either
(i) any approval, consent or waiver of a governmental authority required to
permit consummation of the transactions contemplated hereby shall have been
denied or (ii) any governmental authority of competent jurisdiction shall
have issued a final, unappealable order enjoining or otherwise prohibiting
consummation of the transactions contemplated by this Plan;
(d) by KeyCorp or OMNI, if its Board of Directors (or, in the case of
KeyCorp, the Executive Committee or the Board of Directors) so determines,
in the event that the Merger is not consummated by June 30, 1995, unless
the failure to so consummate by such time is due to the breach of any
representation, warranty or covenant contained in this Plan by the party
seeking to terminate;
(e) by the Board of Directors of OMNI if any of the conditions
specified in Section 5.3 hereof have not been met or waived by OMNI at such
time as such condition is no longer capable of being satisfied;
(f) by the Executive Committee or the Board of Directors of KeyCorp if
any of the conditions specified in Section 5.2 hereof have not been met or
waived by KeyCorp at such time as such condition is no longer capable of
being satisfied;
(g) by OMNI, whether before or after any shareholder action, in the
event the KeyCorp Common Average Closing Price (as defined below) is less
than $26.10. For purposes of this Plan, " KeyCorp Common Average Closing
Price" shall mean the average of the last sale price of the day of one
share of KeyCorp Common Stock as reported on the New York Stock Exchange
Composite Transactions Tape (the " NYSE Tape") for the twenty consecutive
trading days ending on the fifth business day prior to the Closing Date
(the "20 Day Calculation Period").
The Exchange Ratio shall be increased (prior to any other adjustments
required under Section 1.2) such that the per share value of the
consideration (valued at the KeyCorp Common Average Closing Price) to be
paid in
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respect of shares of OMNI Common Stock outstanding as of the Effective Time
is equal to $6.40 per share in the event the KeyCorp Common Average Closing
Price is (a) less than $26.10, but at least $24.47, and (b) OMNI does not
elect to exercise its right under this Section 6.1(g) to terminate the
Plan.
If KeyCorp effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction between the date hereof and the end of the 20 Day Calculation
Period, the closing prices for the KeyCorp Common Average Closing Price
shall be appropriately adjusted for the purpose of this Section 6.1(h) so
as to be comparable to the price on the date of execution of this Plan.
(h) by KeyCorp, if OMNI has not sold, on or prior to January 31, 1995,
all of its interest in Merchants Mortgage & Trust pursuant to the terms and
conditions provided in that certain Letter Agreement between KeyCorp and
OMNI dated as of the date hereof and delivered herewith.
(i) by KeyCorp, if on or before November 15, 1994, OMNI has not received
from (i) 80 percent of the OMNI Stockholders, and (ii) from OMNI
Stockholders holding 90 percent of OMNI Common Stock outstanding on the
date hereof, a written waiver of each such OMNI Stockholder's rights under
the OMNI Buy and Sell Agreement, and delivered such waivers to KeyCorp,
provided that such termination right is delivered in writing to OMNI by
November 23, 1994.
SECTION 6.2. Effect of Termination. In the event of the termination
of this Plan by either KeyCorp or OMNI, as provided above, this Plan shall
thereafter become void and there shall be no liability on the part of any party
hereto or their respective officers, directors or shareholders; provided,
however, that in the event of a termination pursuant to Sections 6.1(b) because
of the willful breach of any representation, warranty, covenant, or agreement
set forth in this Plan, and if the terminating party is not also in material
breach of this Plan, then, notwithstanding Section 8.6 hereof, the breaching
party shall pay all costs and expenses of the terminating party within 20 days
of such termination, and such payment shall not constitute liquidated damages
or otherwise limit the rights of the nonbreaching party.
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ARTICLE VII
ENVIRONMENTAL MATTERS
SECTION 7.1. Environmental Representations and Warranties of the OMNI.
"Properties Owned" as used in this Article VII shall include (i) all
real property, whether owned or leased, in which OMNI or an OMNI Subsidiary
conducts banking business or any administrative activities related thereto
except the offices of Omnibank Denver, and (ii) all commercial Real Estate
Owned ("REO") by OMNI and each OMNI Subsidiary including those that are, or
should have been, listed in the Disclosure Memorandum as provided in
Section 3.1(p) of this Plan.
"Loan Portfolio Properties" means those properties collateralizing or
securing loan and/or lease obligations in favor of OMNI or any OMNI
Subsidiary. Whenever a representation or warranty is made in this Section
7.1 with respect to Loan Portfolio Properties, it shall be deemed to have
been made "to the best of OMNI's knowledge" as provided in Section 8.1
hereof.
Except as set forth in the Disclosure Memorandum, OMNI and each OMNI
Subsidiary have obtained all material permits, licenses and other
authorizations which are required with respect to the operation of their
respective businesses and all Properties Owned or Loan Portfolio Properties
under any Environmental Laws (as hereinafter defined) (such permits
licenses and authorizations being hereinafter referred to as "Environmental
Permits") including all federal, state and local laws relating to pollution
or protection of the environment such as the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), laws relating to
emissions, discharges, releases of threatened release of hazardous, toxic
or other pollutants, contaminants, chemicals or materials regulated by
Environmental Laws (" Regulated Material") including, but not limited to,
ambient air, surface water, ground water, land surface or subsurface
strata, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage disposal, transport or handling of Regulated
Material (which laws, together with all regulations, rules, codes, plans,
decrees, judgments, injunctions, notice and demand letters issued, entered,
promulgated or approved thereunder with respect to OMNI or any OMNI
Subsidiary being herein referred to as "Environmental Laws"). Except as
set forth in the Disclosure Memorandum, OMNI and each OMNI Subsidiary are
in compliance with all terms and conditions of all Environmental Permits
required under the Environmental Laws, and are also in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, orders, agreements,
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schedules and timetables contained in the Environmental Laws, except where
the failure to be in such compliance would not have a Material Adverse
Effect on OMNI and the OMNI Subsidiaries taken as a whole. Attached to the
Disclosure Memorandum are complete copies of all notices in the possession
of OMNI including notices received by any previous owner or lessee of any
Properties Owned or Loan Portfolio Properties or any business currently
owned or leased by OMNI or an OMNI Subsidiary within the five years
preceding the date of this Plan and alleging noncompliance with any
Environmental Law.
There is no civil, criminal or administrative action, demand, claim,
investigation or proceeding pending or, to the best knowledge of OMNI,
threatened against OMNI or any OMNI Subsidiary with regard to any
Properties Owned or Loan Portfolio Properties, including, without
limitation, any notices demand letters or requests for information from any
federal or state environmental agency, under or relating in any way to the
Environmental Laws, except as disclosed in Disclosure Memorandum.
With regard to any of the Properties Owned or Loan Portfolio
Properties, except as disclosed in the Disclosure Memorandum, there are no
past, present or to the best knowledge of OMNI, anticipated future events,
conditions, circumstances, or plans which may interfere with or prevent
compliance or continued compliance with the Environmental Laws in any
material respect, or which may give rise to any material common law or
other legal liability, or which otherwise may form the basis of any
material claim, action, demand, proceeding, notice of violation or
investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling or
the emission, discharge, release or threatened release into the
environment, of any Regulated Material. Without in any way limiting the
foregoing, except as set forth in the Disclosure Memorandum, to the best
knowledge of OMNI, no release, emission or discharge into the environment
of any Regulated Material which would give rise to material liability under
any Environmental Laws has occurred, is currently occurring at any
Properties Owned or Loan Portfolio Properties, and, except as disclosed in
the Disclosure Memorandum, to the best knowledge of OMNI, there is no
spill, deposit, or discharge of any such Regulated Material at, on, into,
under or having originated from any of the Properties Owned or Loan
Portfolio Properties which would give rise to material liability. Except
as set forth in the Disclosure Memorandum, to the best knowledge of OMNI,
none of the Properties Owned or Loan Portfolio Properties includes any
equipment, machinery, device, or other apparatus that contains
polychlorinated biphenyls that is now or ever has been leaking; any
asbestos that is or reasonably may be anticipated
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to become in a condition which reasonably may threaten the health and/or
safety of a person exposed to the asbestos; or any type of underground
storage tank.
SECTION 7.2. Phase I Environmental Audit. For all Properties Owned as
to which a Phase I Environmental Audit meeting the requirements of this Section
7.2 was not previously provided to KeyCorp, OMNI shall commission, at its sole
expense, a Phase I Environmental Audit (as defined in Section 7.6) by one or
more qualified independent environmental engineers or consultants acceptable to
KeyCorp. The Environmental Audit Reports (as defined in Section 7.6) relating
to the Phase I Environmental Audit shall be made available to KeyCorp as soon
as is practicable and, in any event, no later than 45 days following the date
of this Plan.
SECTION 7.3. Phase II Environmental Audit and Environmental Audit
Response. Within twenty (20) business days after either KeyCorp's receipt of
the Environmental Audit Report relating to any Environmental Audit or the date
of this Plan, whichever is later, and within twenty (20) business days after
KeyCorp's receipt of any Environmental Occurrence Notification (as defined
below), KeyCorp shall, with respect to each parcel of the Properties Owned,
provide OMNI with an Environmental Audit Response. If the Environmental Audit
Response requests an initial or additional Phase II Environmental Audit (as
defined in Section 7.6), KeyCorp shall commission a Phase II Environmental
Audit by the environmental engineer or consultant who performed the Phase I
Environmental Audit or by such other qualified environmental engineer or
consultant as KeyCorp may elect. The cost of each such Phase II Environmental
Audit shall be paid one-half by KeyCorp and one-half by OMNI. Such Phase II
Environmental Audit shall be completed as soon as is practicable and KeyCorp
shall, promptly after receipt of the Environmental Audit Report, deliver a copy
of such report to OMNI.
SECTION 7.4. Environmental Occurrence Notification. In the event that
OMNI either receives notice from any governmental entity, or OMNI has knowledge
(as defined in Section 8.1) at any time after the date of this Plan and prior
to the Closing Date that there are any Environmental Action Items (as defined
in Section 7.6) emanating from, occurring on, or in any way related to, the
Properties Owned, which Environmental Action Items are not fully disclosed in
the Phase I Environmental Audit Report or, if applicable, the Phase II
Environmental Audit Report, OMNI shall provide KeyCorp with notice setting
forth the details thereof (the "Environmental Occurrence Notification") as soon
as is reasonably practicable, but in no event later than the earlier of three
(3) days after becoming aware of such Environmental Action Item or at the
Closing Date.
SECTION 7.5. Remediation; Allocation of Remediation Costs; Termination
of Plan. KeyCorp, in its sole discretion, may
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prior to the Closing Date remediate or cause to be remediated any such
Environmental Action Item to the extent necessary so that, in the opinion of
KeyCorp in its sole discretion, such condition or circumstance would no longer
constitute an Environmental Action Item. The cost of any such remediation
undertaken or caused to be undertaken by KeyCorp shall be paid by Keycorp. If
the aggregate cost of remediation exceeds $1,000,000, then the purchase price
for the transaction contemplated by this Plan shall be reduced as set forth in
Section 1.2 in accordance with the following (the amount of such reduction
shall be referred to herein as the "Excess Remediation Costs"): (a) for the
first $1,000,000 of aggregate remediation costs, there shall be no adjustment
to such purchase price, (b) for the portion of aggregate remediation costs
exceeding $1,000,000 up to and including $2,000,000, such purchase price shall
be reduced by 100% of such portion, and (c) for the portion of aggregate
remediation costs exceeding $2,000,000 up to and including $5,000,000, such
purchase price shall be reduced by 50% of such portion. If the aggregate cost
of remediation shall exceed $5,000,000, OMNI and KeyCorp shall each have the
right to declare this Plan null and void with no obligations of one part to the
other thereafter by giving written notice to that effect to the other party.
For purposes of this Section 7.5, the aggregate cost of the remediation shall
be determined using the estimate of the environmental engineer/consultant who
performed the Phase II Environmental Audits ("Remedial Cost Estimate"), subject
to OMNI's right in its sole discretion to request a second estimate from an
environmental engineer/consultant selected by it. If the difference between
the estimates is 10% or less of the amount of the first estimate, then the
Remedial Cost Estimate shall be deemed conclusive and shall be binding. If the
difference between the two estimates is more than 10% of the amount of the
first estimate and the parties cannot reach agreement, then the two
environmental engineers/consultants shall select a third environmental
engineer/consultant to produce a third estimate, and the aggregate cost of the
remediation shall be the amount of the third estimate. In the event that the
first two environmental engineers/consultants are unable to agree upon a third,
then the third environmental engineer/consultant shall be selected from a list
of names prepared by the first two environmental engineers/consultants with the
parties striking names in order with the party striking first to be determined
by the flip of a coin. The cost of the second and third environmental
engineers/consultants shall be paid one-half by KeyCorp and one-half by OMNI.
SECTION 7.6. Definitions. Except as otherwise defined in this Article
or in this Plan:
(a) "Phase I Environmental Audit" means an inspection, investigation,
and audit of the Properties Owned with respect to all applicable
Environmental Laws and Environmental Action Items which shall include a
view of the Properties Owned, inquiry into present and past
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uses of the Properties Owned to the extent reasonably necessary to enable
KeyCorp to review whether it may avail itself of the so-called "Innocent
Purchaser" defense contained in Section 101(35) of CERCLA, review of
records of the United States Environmental Protection Agency and applicable
state or local environmental protection agencies, field observations,
review of applicable air and water discharge permits, solid and hazardous
waste disposal permits, if any, the status thereof and all requirements
associated therewith, and such additional investigations (without physical
sampling or analysis) as KeyCorp and the applicable environmental engineer
or consultant shall determine are appropriate; provided, however, that at a
minimum, the Phase I Environmental Audit shall be conducted in accordance
with the 1993 ASTM standard promulgated therefor, to the extent applicable.
(b) "Phase II Environmental Audit" means such additional investigation
and analysis, including physical sampling and analysis, as KeyCorp and the
applicable environmental engineer or consultant shall determine are
appropriate.
(c) "Environmental Audit Response" means the written notification to
be provided to OMNI by KeyCorp based upon the results of the applicable
Environmental Audit, such notification to either (i) state that there are
no events or conditions which require further investigation or constitute
Environmental Action Items; or (ii) specifically identify and describe,
referring to relevant portions from the applicable Environmental Audit
Report, any events or conditions identified in the Environmental Audit
Report which, in the reasonable judgment of KeyCorp, require further
investigation or constitute an Environmental Action Item.
(d) "Environmental Action Item" means any material or substantial
condition or circumstance which violates, is not in compliance with, or is
not consistent with any Appropriate Governmental Standard without regard to
whether any such condition or circumstance otherwise would or would not be
required to be reported pursuant to any applicable Environmental Laws and
without regard to whether any such condition or circumstance would or would
not be a violation of, or a condition required to be addressed remediated,
by, any applicable Environmental Law.
(e) "Appropriate Governmental Standard" means the following, in each
case as in effect at the time the relevant task pursuant to this Plan is
being performed:
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(i) with respect to the presence of any Regulated Material in any
environmental medium or media, the relevant clean-up or remediation
standards that would be applied by the [name of state environmental
agency]; and, (ii) with respect to all other conditions or circumstances,
any applicable Environmental Law.
(f) " Environmental Audit Report" means the written report of the
applicable environmental engineer or consultant with respect to the Phase I
Environmental Audit or the Phase II Environmental Audit, as the case may
be. Any Phase II Environmental Audit Report shall either state the
applicable environmental engineer or consultant's opinion as to the actions
to be taken in order to remediate any Environmental Action Item to the
extent necessary so that such conditions or circumstances would no longer
constitute Environmental Action Items, or specify the additional work
necessary to render such opinion. Any Phase II Environmental Audit Report
shall, on the basis of actual bids or otherwise, estimate the cost of
remediate Environmental Action Items as specified above.
ARTICLE VIII
OTHER MATTERS
SECTION 8.1. Certain Definitions; Interpretation. As used in this
Plan, the following terms shall have the meanings indicated:
"Material Adverse Effect," shall mean, when used with respect to any
person, a material adverse effect on the consolidated business, operations,
results of operations or financial condition of such person, other than any
such effect attributable to or resulting directly or indirectly from
changes in the general level of interest rates, general economic conditions
or economic conditions in the banking industry; provided, further, that
Environmental Action Items, whether individually or in the aggregate, shall
not constitute a Material Adverse Effect with respect to OMNI or any of the
OMNI Subsidiaries.
"Person" includes an individual, corporation, partnership, association,
trust or unincorporated organization or government or any agency or
political subdivision thereof.
Whenever the phrase "to OMNI's knowledge," "to the best of OMNI's knowledge" or
a similar phrase is used in connection with any matter, such phrase means
the actual knowledge of Larry A. Mizel,
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Robert W. Graf and Gary D. Levine, and, with respect to Article VII hereof,
also the actual knowledge of Gary Klearman, and with respect to Sections 3.1(h)
and (i) also the actual knowledge of Kevin Ford. When a reference is made in
this Plan to Sections or Annexes, such reference shall be to a Section of, or
Annex to, this Plan unless otherwise indicated. The table of contents and
headings contained in this Plan are for ease of reference only and shall not
affect the meaning or interpretation of this Plan. Whenever the words
"include," "includes," or "including" are used in this Plan, they shall be
deemed followed by the words "without limitation." Any singular term in this
Plan shall be deemed to include the plural, and any plural term the singular.
SECTION 8.2. Survival. All representations, warranties, agreements
and covenants shall be deemed to be conditions of the Plan and shall not
survive the Effective Time. If the Plan shall be terminated, the agreements of
the parties in Sections 4.2, 8.6 and the confidentiality obligations contained
in Section 4.4 and the confidentiality agreement referenced therein shall
survive such termination.
SECTION 8.3. Waiver and Amendment. (a) Prior to the Effective Time,
by written notice to any other party hereto, any party hereto may (i) extend
the time for the performance of any of the obligations or other actions of such
other party under this Plan; (ii) waive any inaccuracies in the representations
or warranties of such other party contained in this Plan or in any document
delivered pursuant to this Plan; (iii) waive compliance with any of the
conditions or covenants to be performed by such other party contained in this
Plan; or (iv) waive performance of any of the obligations of such other party
under this Plan. Except as provided in the preceding sentence, no action taken
pursuant to this Plan, including, without limitation, any investigation by or
on behalf of either party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any of the representations, warranties,
covenants, conditions or agreements contained in this Plan. The waiver by any
party hereto of a breach of any provision of this Plan shall not operate or be
construed as a waiver of any subsequent breach.
(b) This Plan may be amended or supplemented by the parties hereto, by
action taken by or on behalf of their respective Boards of Directors at any
time before or after approval and adoption of this Plan by the stockholders of
OMNI; provided, however, that any such amendment or supplement to this Plan
made subsequent to the approval and adoption of this Plan by the stockholders
of OMNI shall not (i) alter the amount or change the form of the Merger
Consideration, or (ii) alter or change any of the terms of this Plan if such
alteration or change would adversely affect the holders of OMNI Common Stock.
The parties hereto shall make such technical changes to this Plan, not
inconsistent with the purpose hereof, as may be required to effect or
facilitate any
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governmental approval or acceptance of the Merger or of this Plan or to effect
or facilitate any filing or recording required for the consummation of any of
the transactions contemplated hereby. This Plan may not be amended except by
an instrument in writing signed on behalf of each of the parties hereto.
SECTION 8.4. Counterparts. This Plan may be executed in counterparts
each of which shall be deemed to constitute an original, but all of which
together shall constitute one and the same instrument.
SECTION 8.5. Governing Law. This Plan shall be governed by, and
interpreted in accordance with, the laws of the State of Colorado.
SECTION 8.6. Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Plan and the transactions contemplated
hereby.
SECTION 8.7. Notices. All notices, requests, acknowledgements and
other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, telecopy, telegram or
telex (confirmed in writing ) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.
If to OMNI, to: If to KeyCorp, to:
Robert W. Graf, President Andrew R. Tyson
OMNIBANCORP Senior Vice President
3600 South Yosemite St. KeyCorp
Suite 210 127 Public Square
Denver, Colorado 80237 Cleveland, Ohio 44114
Telecopy: (303) 220-7948 Telecopy: (216) 689-3610
With copies to: With copies to:
Ashok W. Mukhey, Esq. Daniel R. Stolzer, Esq.
Irell & Manella Senior Vice President and
1800 Ave. of the Stars Senior Managing Counsel
Suite 900 KeyCorp Management Company
Los Angeles, CA 90067 127 Public Square, 2nd Floor
Cleveland, Ohio 44114
Telecopy: (310) 203-7199
Telecopy: (216) 689-4121
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and
Robert W. Pappenheim
Chairman and Chief Executive Officer
Key Bank of Colorado
300 West Oak Street
Fort Collins, Colorado 80521
Telecopy: (307) 638-7801
SECTION 8.8. Entire Plan; Etc. This Plan, together with the Voting
Agreements and the Letter Agreement between OMNI and KeyCorp dated as of the
date hereof and delivered herewith represent the entire understanding of the
parties hereto with reference to the transactions contemplated hereby and
supersede any and all other oral or written agreements heretofore made. All
terms and provisions of the Plan shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Except as to Sections 4.3, and 4.7, nothing in this Plan is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Plan.
SECTION 8.9. Assignment. This Plan may not be assigned by any party
hereto without the written consent of the other parties.
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IN WITNESS WHEREOF, the parties hereto have caused this Plan to be
executed by their duly authorized officers as of the day and year first above
written.
KEYCORP
By:/s/ Daniel R. Stolzer
--------------------------------
Title: Authorized Officer
OMNIBANCORP
By:/s/ Larry A. Mizel
--------------------------------
Title: Chairman of the Board
ACCEPTED AND AGREED TO WITH RESPECT
TO SECTION 4.21 HEREOF AS OF THE
31st DAY OF August, 1994:
/s/ Larry A. Mizel
- ----------------------------------
Larry A. Mizel
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EXHIBIT A
COLORADO BUSINESS CORPORATION ACT SECTION 7-113-201
(shareholder dissenters' rights statute)
See Appendix E attached hereto.
<PAGE> 203
Exhibit D
[Form of Affiliate's Letter]
______________ , 199 __
KeyCorp
127 Public Square
Cleveland, Ohio 44114
Gentlemen:
I have been advised that as of the date hereof I may be deemed to be an
"affiliate" of OMNIBANCORP, a Colorado corporation ("OMNI"), as the term
"affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule 145
of the Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act; of 1933,
as amended (the "Act"), and/or (ii) used in and for purposes of Accounting
Series Releases 130 and 135, as amended, of the Commission. Pursuant to the
terms of the Plan of Merger, dated as of the 31st day of August, 1994 (the
"Plan"), by and between KeyCorp, an Ohio corporation ("KeyCorp") and OMNI, OMNI
will be merged with and into KeyCorp (the "Merger").
As a result of the Merger, I may receive Common Shares, with a par
value of $1 each, of KeyCorp ("KeyCorp Common Stock"). I would receive such
shares in exchange for shares owned by me of Common Stock, stated value $.0267
per share, of OMNI.
I hereby represent, warrant to, and covenant with, KeyCorp that in the
event I receive any KeyCorp Common Stock as a result of the Merger:
(A) I shall not make any sale, transfer or other disposition
of the KeyCorp Common Stock in violation of the Act of the Rules
and Regulations.
(B) I have carefully read this letter and discussed its
requirements and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of KeyCorp Common Stock, to the extent I
felt necessary, with my counsel or counsel for OMNI.
(C) I have been advised that the issuance of shares of
KeyCorp Common Stock to me in the Merger has been registered under
the Act by a Registration Statement of Form S-4. However, I have
also been advised that because (i) at the time of the Merger's
submission for a vote of the shareholders of Company X I may be deemed
an affiliate of OMNI and (ii) the distribution by me of the KeyCorp
Common Stock has not been registered under the Act, that I may not
sell, transfer or otherwise dispose of KeyCorp Common Stock issued
to me in the Merger unless (a) such sale, transfer or other
disposition has been registered under the Act, (b) such sale,
transfer or other disposition is made in conformity with the volume
and other limitations imposed by Rule 145 under the Act, or (c) in
the opinion of counsel reasonably acceptable to KeyCorp, such sale,
transfer or other disposition is otherwise exempt from registration
under the Act.
(D) I understand that KeyCorp is under no obligation to
register the sale, transfer or other disposition of shares of KeyCorp
Common Stock by me or on my behalf under the Act or to take any
other action necessary in order to make compliance with an exemption
from such registration available.
(E) I also understand that stop transfer instructions will
be given to KeyCorp's transfer agents with respect to KeyCorp Common
Stock owned by me and that there will be placed on the certificates
for the KeyCorp Common Stock issued to me, or any substitutions
therefor, a legend stating in substance:
"The shares represented by this certificate were
issued in a transaction to which Rule 145 under
the Securities Act of 1933 applies. The shares
represented by this certificate may only be trans-
ferred in accordance with the terms of an agreement
dated ______________ , 199 __ between the
registered holder hereof and KeyCorp, a copy of
which agreement is on file at the principal offices
of KeyCorp."
(F) I also understand that unless the transfer by me of my
KeyCorp Common Stock has been registered under the Act or is a sale
made in conformity with the provisions of Rules 145 under the Act,
KeyCorp reserves the right, in its sole discretion, to place the
following legend on the certificates issued to any transferee of
shares from me:
"The shares represented by this certificate have
not been registered under the Securities Act of 1933
and were acquired from a person who received such
shares in a transaction to which
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Rule 145 under the Securities Act of 1933 applies.
The shares have been acquired by the holder not with
a view to, or for resale in connection with, any
distribution thereof within the meaning of Securities
Act of 1933 and may not be sold, pledged or otherwise
transferred except in accordance with an exemption
from the registration requirements of the Securities
Act of 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above shall be removed by delivery of substitute certificates without
such legend if I shall have delivered to KeyCorp (i) a copy of a letter from
the staff of the Commission, or an opinion of counsel in form and substance
reasonably satisfactory to KeyCorp, to the effect that such legend is not
required for purposes of the Act or (ii) reasonably satisfactory evidence or
representations that the shares represented by such certificates are being or
have been transferred in a transaction made in conformity with the provisions
of Rule 145.
Very truly yours,
_________________________________
Name:
Acknowledged this _____ day of
____________ , 199__ , by
KEYCORP
By: ___________________________
Name:
Title:
2
<PAGE> 205
Exhibit E
VOTING AGREEMENT
WITH
POWER OF ATTORNEY
This Voting Agreement with Power of Attorney is entered into as of the
_________ day of ___________, 1994, between KeyCorp, an Ohio corporation
("KeyCorp"), and the shareholder ("Shareholder") of OMNIBANCORP ("OMNI")
executing this Agreement and identified on the last page hereof.
RECITALS
A. The Shareholder owns or has the power to vote the number of shares
of Common Stock, $.0267 per share stated value ("Common Stock"), of OMNI
(together with all shares of OMNI Common Stock which the Shareholder
subsequently acquires or obtains the power to vote, the "OMNI Shares") set
forth opposite the Shareholder's signature on the last page of this Agreement.
B. Keycorp and OMNI intend to enter into a Plan of Merger (the "Plan")
on the date hereof, providing for the merger (the "Merger") of OMNI with and
into KeyCorp. Pursuant to the Plan, each outstanding share of OMNI Common Stock
will be converted into the right to receive shares of KeyCorp Common Stock in
accordance with and as set forth in the Plan. The Plan contains, among other
things, representations and warranties of the parties with resect to the Merger
and conditions precedent to the obligations of the parties to consummate the
Merger.
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<PAGE> 206
C. As an inducement to KeyCorp to enter into the Plan, the Shareholder
has agreed to commit to vote the OMNI Shares in favor of the Merger, and to
appoint Larry A. Mizel and Robert W. Graf, and each of them, as his or her
attorneys to agree to terminate, and to the extent not terminated by all
parties thereto, to waive all rights and privleges and exercise and carry out
any obligations or duties under the Buy and Sell Agreement between the
undersigned and OMNI (the "Buy/Sell Agreement"), as provided herein.
AGREEMENTS
Accordingly, the parties hereto agree as follows:
1. OMNI STOCKHOLDER VOTE. The Shareholder agrees to vote the OMNI
Shares as follows:
(i) in favor of the adoption of the Plan and the approval of the
Merger at the Special Meeting of Shareholders of OMNI;
(ii) against the approval of any proposal relating to a competing
merger or business combination involving an acquisition of
OMNI or the purchase of all or a substantial portion of the
OMNI Common Stock or of the assets of OMNI by any person or
entity other than KeyCorp or an affiliate of KeyCorp; and
(iii) against any other transaction which is inconsistent with the
obligation of OMNI to consummate the Merger in accordance with
the Plan.
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2. LIMITATION ON VOTING POWER. If the Shareholder is also a director of
OMNI, it is expressly understood and acknowledged by the parties hereto that
nothing contained herein is intended to restrict the Shareholder from voting on
any matter, or otherwise from acting, in the Shareholder's capacity as a
director of OMNI with respect to any matter, including but not limited to, an
Acquisition Proposal (as defined in the Plan) the general management or
over-all operation of OMNI.
3. TERMINATION. This Agreement shall terminate on the earlier of (a)
the date on which the Plan is terminated in accordance with the terms thereof
or (b) the date on which the Merger is consummated.
4. REPRESENTATIONS, WARRANTIES, AND ADDITIONAL COVENANTS OF THE
SHAREHOLDER. The Shareholder hereby represents, warrants and covenants to
KeyCorp that:
(a) the Shareholder has the capacity and all necessary power and
authority to vote and to dispose or direct the disposition of the OMNI shares;
(b) this Agreement constitutes a legal, valid, and binding
obligation of the Shareholder enforceable in accordance with its terms except
as may be limited by bankruptcy, insolvency, or similar laws affecting
enforcement of creditors rights generally; and
(c) during the term of this Agreement, the Shareholder will not sell
or otherwise voluntarily dispose of any of the OMNI Shares which are owned by
the Shareholder, unless the transferee
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<PAGE> 208
executes a voting agreement identical to this Voting Agreement (and the
Shareholder provides notice to KeyCorp of such transfer and a copy of the
signed Voting Agreement, immediately following execution thereof) or take any
voluntary action which would have the effect of removing the Shareholder's
power to vote the OMNI Shares or which would be inconsistent with this
Agreement.
5. BENEFIT. This Agreement shall be binding upon and insure to the
benefit of the parties hereto and their respective heirs, successors, and
assigns.
6. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original for all purposes, but such counterparts
taken together shall constitute one and the same instrument.
7. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the Shareholder shall be
specifically enforceable and KeyCorp shall be entitled to injunctive and other
equitable relief. The Shareholder further agrees to waive any bond in
connection with the obtaining of any such injunctive or equitable relief. This
provision is without prejudice to any other rights that KeyCorp may have
against the Shareholder for any failure to perform his obligations under this
Agreement.
8. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Colorado, without regard to its
conflict of laws principles.
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<PAGE> 209
POWER OF ATTORNEY
The undersigned, a party to that certain Buy and Sell Agreement
between OMNIBANCORP and certain Stockholders of OMNIBANCORP (the "Buy and Sell
Agreement") hereby constitutes and appoints Larry A. Mizel and Robert W. Graf,
and each of them, as his or her attorney or attorneys, with full power of
substitution and resubstitution, for and in his or her name, place and stead, to
agree to terminate, and to the extent not terminated by all parties thereto, to
waive all rights and privileges afforded the undersigned under the Buy and Sell
Agreement and to exercise and carry out any obligations or duties imposed on
the undersigned pursuant to the Buy and Sell Agreement, with full power and
authority to do and perform any and all acts and things whatsoever requisite
and necessary to be done in the premises hereby ratifying and approving the
acts of such attorney or any such substitute.
This Power of Attorney shall be effective from the date hereof through
and including the earlier of (a) the consummation of the Merger or (b) the
earlier termination of the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Voting
Agreement with the POwer of Attorney as of the day and year first above
written.
KEYCORP SHAREHOLDER
By:
------------------------- ----------------------
Title:
---------------------- ----------------------
Print Name
No. of OMNI Shares over which the
Shareholder executing this Agreement
has sole voting power and sole power to
dispose or direct the disposition:
--------------------------------------
STATE OF COLORADO )
) SS.
COUNTY OF _____________)
NOW COMES __________________________________known to me to be the
___________________of _____________________________, who swears that the above
Voting Agreement with Power of Attorney was duly executed by him on this ____
day of ___________, 1994
-----------------------------------
Notary Public
My Commission Expires:
-------------
(SEAL)
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<PAGE> 210
APPENDIX B
Letter Agreement
----------------
OMNIBANCORP
3600 South Yosemite Street
Suite 210
Denver, Colorado 80237
As of August 31, 1994
KeyCorp
127 Public Square
Cleveland, Ohio 44114
Gentlemen:
This Letter Agreement is in reference to that
certain Plan of Merger (the "Plan") as dated of even date
herewith by and among, OMNIBANCORP, a Colorado corporation
("Omni") and KeyCorp. It is the intention of the parties hereto
that this Letter Agreement be incorporated into and integrated
with the Plan of Merger and made a part thereof for all purposes
and interpretations thereunder. Pursuant to the terms of the
Plan, Omni will merger with and into KeyCorp (the "Merger").
(Capitalized terms not otherwise defined herein have the meanings
ascribed to them in the Plan.)
In consideration of the execution and delivery of
the Plan by KeyCorp, Omni hereby agrees to use its best efforts
to sell all of its interest in Merchants Mortgage & Trust
("MM&T") to a third party on or before January 31, 1995. In
connection with such sale, neither Omni nor any Omni Subsidiary
shall retain any liabilities or obligations (whether absolute,
accrued, contingent or otherwise) of MM&T or incur any such
liabilities or obligations which survive the Effective Time
(including, but not limited to, obligations to indemnify the
purchaser or purchasers thereof), without the prior written
consent of KeyCorp.
Notwithstanding Section 2.2(b) or any other
provision of the Plan, in the event Omni realizes an aggregate
gain on the sale (determined in accordance with generally
accepted accounting principles consistently applied), Omni may
declare and distribute to its shareholders a cash dividend in an
amount equal to such aggregate after tax gain.
In the event Omni realizes an aggregate loss on
the sale of MM&T (determined in accordance with generally
accepted accounting principles consistently applied), the
Exchange Ratio shall be reduced by an amount equal to (i) the
aggregate after tax loss on the sale of MM&T (determined in
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<PAGE> 211
Page 2
KeyCorp
As of August 31, 1994
accordance with generally accepted accounting principles
consistently applied), if any, less the Reimbursable MM&T Loss
(as defined below except that it shall be calculated on an after
tax basis) divided by (ii) the product of (a) 16,491,244
multiplied by (b) $32,625.
In the event either Omni or KeyCorp terminates the
Plan for any reason (other than as a result of a material breach
by Omni pursuant to Section 6.1(b) of the Plan) after Omni sells
or has entered into a binding written agreement to sell its
interest in MM&T, and Omni realizes an aggregate pre-tax loss on
such sale (determined in accordance with generally accepted
accounting principles consistently applied), KeyCorp shall
promptly upon such termination reimburse Omni in an amount (the
"Reimbursable MM&T Loss") equal to such pre-tax loss but not to
exceed (a) $500,000 if the purchaser is Lester Gold or an
affiliate of Lester Gold or (b) $750,000 in all other cases.
Notwithstanding anything to the contrary in the
Plan, KeyCorp's obligations under this letter shall survive the
termination of the Plan by either party for any reason (other
than as a result of a material breach by Omni pursuant to
Section 6.1(b) of the Plan).
If the foregoing correctly reflects our
understanding and agreement, please sign and return to me the
enclosed copy of this letter.
Very truly yours,
OMNIBANCORP
/s/ Robert W. Graf
----------------------------
Robert W. Graf, President
ACKNOWLEDGED AND AGREED TO BY:
KEYCORP
By: /s/ Daniel R. Stolzer
------------------------------
Name: Daniel R. Stolzer
----------------------------
Title: Authorized Officer
----------------------------
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<PAGE> 212
APPENDIX C
[OMNIBANCORP]
ROBERT W. GRAF
PRESIDENT
January 4, 1995
VIA TELECOPY AND U.S. MAIL
Mr. Dan Stolzer
Senior Vice President - Senior Managing Counsel
KeyCorp
127 Public Square
Cleveland, OH 44114
Re: Sale of Merchants Mortgage & Trust
----------------------------------
Dear Dan:
This letter is in reference to the Plan of Merger dated as of
August 31, 1994 between OMNIBANCORP ("OMNI") and KeyCorp (the
"Plan") and the Letter Agreement between OMNI and KeyCorp dated as
of the same date (the "MM&T Letter") regarding the sale of
Merchants Mortgage & Trust ("MM&T"). (Capitalized terms not
otherwise defined herein have the meanings ascribed to them in the
Plan or the MM&T Letter, as applicable).
Specifically, I would like to confirm OMNI's understanding that, if
on or before January 31, 1995, OMNI and a prospective buyer enter
into a bona fide definitive written agreement (the "MM&T Definitive
Agreement"), satisfactory in form and substance to KeyCorp and
consistent with the terms of the MM&T sale contemplated by the Plan
and the MM&T Letter, to sell all of its interest in MM&T at any
time prior to the Effective Time, (i) OMNI will have complied with
its obligations under the Plan and the MM&T Letter to use its best
efforts to sell all of its interest in MM&T to a third party on or
before January 31, 1995, and (ii) KeyCorp agrees not to exercise
its right of termination under Section 6.1(h) of the Plan
notwithstanding the fact that OMNI will not have consummated the
sale of its interest in MM&T on or prior to January 31, 1995.
3600 SOUTH YOSEMITE STREET, SUITE 210
DENVER, COLORADO 80237
(303) 773-6664
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<PAGE> 213
Mr. Dan Stolzer
January 4, 1995
Page two
This letter is merely intended to clarify the timing of the sale of
OMNI's interest in MM&T. This letter is not intended to alter any
other aspect of the Plan or the MM&T Letter, in particular the
provisions dealing with loss reimbursement in a sale of MM&T or the
condition precedent under Section 5.2(i) of the Plan that OMNI sell
all of its interest in MM&T before the Effective Time.
If the foregoing correctly reflects KeyCorp's understanding, please
sign and return to me the enclosed copy of this letter.
Sincerely,
/s/ Robert W. Graf
- ----------------------------
Robert W. Graf
President
ACKNOWLEDGED AND AGREED TO BY:
KEYCORP
By: /s/ Dan Stolzer
------------------------
Dan Stolzer
Title: AUTHORIZED OFFICER
---------------------
cc: Kent Allen
Ashok Mukhey
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<PAGE> 214
APPENDIX D
HOVDE FINANCIAL, INC.
INVESTMENT BANKERS & FINANCIAL ADVISORS
January 16, 1995
Board of Directors
OMNIBANCORP
3600 South Yosemite
Denver, CO 80237
Gentlemen:
OMNIBANCORP ("OMNI") has entered into a Merger Agreement dated as of
August 31, 1994 (the "Merger Agreement") by and between KeyCorp ("KeyCorp") and
OMNI, pursuant to which OMNI will be merged into KeyCorp. As is set forth in
the Merger Agreement, all outstanding shares of OMNI's common stock will be
converted into the right to receive .2452 shares of KeyCorp Common Stock,
subject to possible adjustment as provided in the Merger Agreement (the "Merger
Consideration"). In connection therewith, you have requested our opinion as to
the fairness of the proposed transaction, from a financial point of view, to
the shareholders of OMNI.
Hovde Financial, Inc. ("Hovde") specializes in providing investment
banking and financial advisory services to commercial bank and thrift
institutions. Our principals are experienced in the independent valuation of
securities in connection with negotiated underwritings, subscription and
community offerings, private placements, merger and acquisition transactions
and recapitalizations. We are familiar with OMNI, having acted as its financial
advisor in connection with, and having participated in the negotiations leading
to, the Merger Agreement.
During the course of our engagement, we reviewed and analyzed material
bearing upon the financial and operating condition of KeyCorp and OMNI and
material prepared in connection with the Merger, including, among other things,
the following: (i) the Merger Agreement, including the Letter Agreements
between KeyCorp and OMNI regarding the sale of Merchants Mortgage & Trust; (ii)
certain publicly available information concerning KeyCorp and internal and
other information regarding OMNI, including the consolidated financial
statements of KeyCorp and OMNI for each of the three years ended December 31,
1993 and subsequent periods ended June 30, 1994 and September 30, 1994, as well
as any subsequent disclosure documents issued by KeyCorp, such as press
releases and documents filed with the Securities and Exchange Commission on
form 8-K; (iii) the nature and terms of recent acquisition and merger
transactions involving banking institutions and their holding companies that we
considered reasonably similar to OMNI in size, financial character, operating
character, historical performance and geographic market; (iv) historical and
current market data for KeyCorp Common Stock, including the liquidity thereof
and the historical dividend stream attendant thereto; and (v) financial and
other information provided to Hovde by management of KeyCorp and OMNI.
We have discussed with members of senior management of OMNI the future
prospects of OMNI. In addition, we have evaluated the pro forma earnings, book
value, tangible book value and historical dividend stream attributable to the
KeyCorp Common Stock to be exchanged for each share of OMNI Common Stock in the
Merger. We have also taken into account our assessment of general economic,
market and financial conditions and our experience in other transactions, as
well as our knowledge of the banking industry and our general experience in
securities valuations.
In rendering this opinion, we have assumed, without independent
verification, the accuracy and completeness of the financial and other
information and representations contained in the materials provided to us by
KeyCorp and OMNI, as well as information relayed in the discussions with OMNI's
management. We have not conducted a physical inspection of any of the
properties or assets of KeyCorp or OMNI, nor have we made an independent
evaluation or appraisal of any of the properties, assets or liabilities of
KeyCorp or OMNI.
Based on the foregoing and our experience as investment bankers, we
are of the opinion that, as of August 27, 1994 and the date hereof, the Merger
Consideration to be received by the shareholders of OMNI as described in the
Merger Agreement was and is fair to such shareholders from a financial point of
view.
Sincerely,
/s/ Hovde Financial, Inc.
-------------------------
HOVDE FINANCIAL, INC.
cc: KeyCorp
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<PAGE> 215
February __, 1995
Board of Directors
OMNIBANCORP
3600 South Yosemite
Denver, CO 80237
Gentlemen:
This letter serves as a confirmation of our opinion dated January 16,
1995, to the effect that the consideration proposed by KeyCorp ("KeyCorp") for
all of the outstanding shares of common stock of OMNIBANCORP ("OMNI") is fair
to the shareholders of OMNI from a financial point of view (the "Fairness
Opinion"). As discussed in more detail in the Fairness Opinion, we understand
that pursuant to the Plan of Merger dated as of August 31, 1994 and amended or
supplemented by Letter Agreements dated August 31, 1994, January 4, 1995,
January 14, 1995 and January 27, 1995, OMNI will be merged with and into
KeyCorp, and each outstanding share of common stock of OMNI will be converted,
subject to certain possible adjustments, into the right to receive 0.2452
shares of common stock of KeyCorp (the "Merger Consideration").
Based upon our updated review of current market conditions, Keycorp's
news relases and SEC filings (if any) since the date of our Fairness Opinion,
the recent amendment to the Plan of Merger and the recent financial performance
of both KeyCorp and OMNI, we continue to believe that, as of February __, 1995,
the Merger Consideration to be received by to the shareholders of OMNI is fair
from a financial point of view.
Sincerely,
HOVDE FINANCIAL, INC.
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<PAGE> 216
APPENDIX E
ARTICLE 113
OF THE
COLORADO BUSINESS CORPORATION ACT
DISSENTERS' RIGHTS
PART 1
RIGHT OF DISSENT--PAYMENT FOR SHARES
7-113-101 DEFINITIONS.--For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares
held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring domestic
or foreign corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under section 7-113-102 and who exercises that right at
the time and in the manner required by Part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action except to the extent that
exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at the legal rate
as specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a
beneficial shareholder.
7-113-102 RIGHT OF DISSENT.--(1) A shareholder, whether or
not entitled to vote, is entitled to dissent and obtain payment of the fair
value of his or her shares in the event of any of the following corporate
actions:
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(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation, or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition
of all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition
of all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote upon
the consent of the corporation to the disposition pursuant to section
7-112-102(2).
(2) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of:
(a) An amendment to the articles of incorporation that materially
and adversely affects rights in respect of the shares because it:
(I) Alters or abolishes a preferential right of the shares; or
(II) Creates, alters, or abolishes a right in respect of redemption
of the shares, including a provision respecting a sinking fund for their
redemption or repurchase; or
(b) An amendment to the articles of incorporation that affects
rights in respect of the shares because it:
(I) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(II) Reduces the number of shares owned by the shareholder to a
fraction of a share or to scrip if the fractional share or scrip so created is
to be acquired for cash or the scrip is to be voided under section 7-106-104.
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(3) A shareholder is entitled to dissent and obtain payment of the
fair value of the shareholder's shares in the event of any corporate action to
the extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(1) A
record shareholder may assert dissenters' rights as to fewer than all the
shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and the
other shares of the record shareholder were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
the shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive
the record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each such beneficial shareholder must certify to the corporation
that the beneficial shareholder and the record shareholder or record
shareholders of all shares owned beneficially by the beneficial shareholder
have asserted, or will timely assert, dissenters' rights as to all such shares
as to which there is no limitation on the ability to exercise dissenters'
rights. Any such requirement shall be stated in the dissenters' notice given
pursuant to section 7-113-203.
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PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
7-113-201 NOTICE OF DISSENTERS' RIGHTS.--(1) If a proposed
corporate action creating dissenters' rights under section 7-113-102 is
submitted to a vote at a shareholders' meeting, the notice of the meeting shall
be given to all shareholders, whether or not entitled to vote. The notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under this article and shall be accompanied by a copy of this article
and the materials, if any, that, under articles 101 to 117 of this title, are
required to be given to shareholders entitled to vote on the proposed action at
the meeting. Failure to give notice as provided by this subsection (1) to
shareholders not entitled to vote shall not affect any action taken at the
shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights
under section 7-113-102 is authorized without a meeting of shareholders
pursuant to section 7-107-104, any written or oral solicitation of a
shareholder to execute a writing consenting to such action contemplated in
section 7-107-104 shall be accompanied or preceded by a written notice stating
that shareholders are or may be entitled to assert dissenters' rights under
this article, by a copy of this article, and by the materials, if any, that,
under articles 101 to 117 of this title, would have been required to be given
to shareholders entitled to vote on the proposed action if the proposed action
were submitted to a vote at a shareholders' meeting. Failure to give notice as
provided by this subsection (2) to shareholders not entitled to vote shall not
affect any action taken pursuant to section 7-107-104 for which the notice was
to have been given.
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT.--(1) If a
proposed corporate action creating dissenters' rights under section 7-113-102
is submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights
under section 7-113-102 is authorized without a meeting of shareholders
pursuant to section 7-107-104, a shareholder who wishes to assert dissenters'
rights shall not execute a writing consenting to the proposed corporate action.
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(3) A shareholder who does not satisfy the requirements of
subsection (1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203 DISSENTERS' NOTICE.--(1) If a proposed corporate
action creating dissenters' rights under section 7-113-102 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this article.
(2) The dissenters' notice required by subsection (1) of this
section shall be given no later than ten days after the effective date of the
corporate action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated shares
must be deposited;
(c) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request
a dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be less
than thirty days after the date the notice required by subsection (1) of this
section is given;
(f) State the requirement contemplated in section 7-113-103(3), if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 PROCEDURE TO DEMAND PAYMENT.--(1) A shareholder who
is given a dissenters' notice pursuant to section 7-113-203 and who wishes to
assert dissenters' rights shall, in accordance with the terms of the
dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may
be the payment demand form contemplated in section 7-113-203(2)(d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
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(2) A shareholder who demands payment in accordance with
subsection (1) of this section retains all rights of a shareholder, except the
right to transfer the shares, until the effective date of the proposed
corporate action giving rise to the shareholder's exercise of dissenters'
rights and has only the right to receive payment for the shares after the
effective date of such corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b),
the demand for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this
article.
7-113-205 UNCERTIFICATED SHARES.--(1) Upon receipt of a demand
for payment under section 7-113-204 from a shareholder holding uncertificated
shares, and in lieu of the deposit of certificates representing the shares, the
corporation may restrict the transfer thereof.
(2) In all other respects, the provisions of section 7-113-204
shall be applicable to shareholders who own uncertificated shares.
7-113-206 PAYMENT.--(1) Except as provided in section
7-113-208, upon the effective date of the corporate action creating dissenters'
rights under section 7-113-102 or upon receipt of a payment demand pursuant to
section 7-113-204, whichever is later, the corporation shall pay each dissenter
who complied with section 7-113-204, at the address stated in the payment
demand, or if no such address is stated in the payment demand, at the address
shown on the corporation's current record of shareholders for the record
shareholder holding the dissenter's shares, the amount the corporation
estimates to be the fair value of the dissenter's shares, plus accrued
interest.
(2) The payment made pursuant to subsection (1) of this section
shall be accompanied by:
(a) The corporation's balance sheet as of the end of its most
recent fiscal year or, if that is not available, the corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, and, if the corporation
customarily provides such statements to shareholders, a statement of changes in
shareholder's equity for that year and a statement of cash flow for that year,
which balance sheet and statements shall have been audited if the corporation
customarily provides audited financial statements to shareholders, as well as
the latest available financial statements, if any, for the interim or full-year
period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of
the shares;
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<PAGE> 222
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207 FAILURE TO TAKE ACTION.--(1) If the effective date of
the corporate action creating dissenters' rights under section 7-113-102 does
not occur within sixty days after the date set by the corporation by which the
corporation must receive the payment demand as provided in section 7-113-203,
the corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(2) If the effective date of the corporate action creating
dissenters' rights under section 7-113-102 occurs more than sixty days after
the date set by the corporation by which the corporation must receive the
payment demand as provided in section 7-113-203, then the corporation shall
send a new dissenters' notice, as provided in section 7-113-203, and the
provisions of sections 7-113-204 to 7-113-209 shall again be applicable.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.--(1) The corporation may, in or with
the dissenters' notice given pursuant to section 7-113-203, state the date of
the first announcement to news media or to shareholders of the terms of the
proposed corporate action creating dissenters' rights under section 7-113-102
and state that the dissenter shall certify in writing, in or with the
dissenters' payment demand under section 7-113-204, whether or not the
dissenter (or the person on whose behalf dissenters' rights are asserted)
acquired beneficial ownership of the shares before that date. With respect to
any dissenter who does not so certify in writing, in or with the payment
demand, that the dissenter or the person on whose behalf the dissenter asserts
dissenters' rights acquired beneficial ownership of the shares before such
date, the corporation may, in lieu of making the payment provided in section
7-113-206, offer to make such payment if the dissenter agrees to accept it in
full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section
shall include or be accompanied by the information required by section
7-113-206(2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT
OR OFFER.--(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any
payment made under section 7-113-206, or reject the corporation's offer under
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<PAGE> 223
section 7-113-208 and demand payment of the fair value of the shares and
interest due, if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of the
shares or that the interest due was incorrectly calculated:
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as required
by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this
section unless the dissenter causes the corporation to receive the notice
required by subsection (1) of this section within thirty days after the
corporation made or offered payment for the dissenter's shares.
7-113-301 COURT ACTION.--(1) If a demand for payment under
section 7-113-209 remains unresolved, the corporation may, within sixty days
after receiving the payment demand, commence a proceeding and petition the
court to determine the fair value of the shares and accrued interest. If the
corporation does not commence the proceeding within the sixty-day period, it
shall pay to each dissenter whose demand remains unresolved the amount
demanded.
(2) The corporation shall commence the proceeding described in
subsection (1) of this section in the district court of the county in this
state where the corporation's principal office is located or, if it has no
principal office in this state, in the district court of the county in which
its registered office is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic
corporation merged into, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unresolved parties to the
proceeding commenced under subsection (2) of this section as in an action
against their shares, and all parties shall be served with a copy of the
petition. Service on each dissenter shall be by registered or certified mail,
to the address stated in such dissenter's payment demand, or if no such address
is stated in the payment demand, at the address shown on the corporation's
current record of shareholders for the record shareholder holding the
dissenter's shares, or as provided by law.
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<PAGE> 224
(4) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers have the
powers described in the order appointing them, or in any amendment to such
order. The parties to the proceeding are entitled to the same discovery rights
as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302 COURT COSTS AND COUNSEL FEES.--(1) The court in an
appraisal proceeding commenced under section 7-113-301 shall determine all
costs of the proceeding, including the reasonable compensation and expenses of
appraisers appointed by the court. The court shall assess the costs against
the corporation; except that the court may assess costs against all or some of
the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the requirements
of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in
favor of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to said counsel reasonable fees to be paid out
of the amounts awarded to the dissenters who were benefitted.
E-9
<PAGE> 225
APPENDIX F
OMNIBANCORP
ROBERT W. GRAF
PRESIDENT
January 14, 1995
VIA FACSIMILE AND U.S. MAIL
- ---------------------------
Daniel R. Stolzer, Esq.
Senior Vice President
and Managing Counsel
Law Group, 2nd Floor
KeyCorp
127 Public Square
Cleveland, OH 44114
Re: Sale of Merchants Mortgage & Trust
----------------------------------
Dear Dan:
This letter is in reference to the Plan of Merger dated as of
August 31, 1994 between OMNIBANCORP ("OMNI") and KeyCorp (the
"Plan") and the Letter Agreements between OMNI and KeyCorp dated as
of August 31, 1994 and January 4, 1995 (the "MM&T" Letters")
regarding the sale of Merchants Mortgage & Trust ("MM&T").
Specifically, I would like to confirm OMNI's understanding that a
third party (and not Lester Gold or an affiliate of Mr. Gold) will
be deemed the purchaser of OMNI's interest in MM&T for purposes of
the MM&T Letters if such interest is repurchased by MM&T in
connection with a transaction substantially as described in the
attached letter from Mr. Gold dated January 12, 1995, which letter
has also been signed by Mr. Chotin, one of the proposed buyers.
This letter is merely intended to clarify the application of the
MM&T Letters to the proposed structure for the sale of MM&T
described in Mr. Gold's letter. This letter is not intended to
alter any other aspect of the Plan or the MM&T Letters, in
particular (i) the provisions dealing with loss reimbursement in a
sale of MM&T, (ii) the conditions precedent to the merger
contemplated by the Plan or (iii) the requirement that the final
agreement for the sale of OMNI's interest in MM&T be satisfactory
in form and substance to KeyCorp.
F-1
3600 SOUTH YOSEMITE STREET, SUITE 210
DENVER, COLORADO 80237
(303) 773-6664
<PAGE> 226
Daniel R. Stolzer, Esq.
January 14, 1995
page two
If the foregoing correctly reflects KeyCorp's understanding, please
sign and return to me the enclosed copy of this letter.
Sincerely,
/s/ Robert W. Graf
Robert W. Graf
President
Enclosure (letter from Lester Gold dated January 12, 1995)
ACKNOWLEDGED AND AGREED TO BY:
KeyCorp
By: /s/ Daniel R. Stolzer
--------------------------------
Daniel R. Stolzer
Authorized Signatory for KeyCorp
cc: Ashok Mukhey, Esquire
F-2
<PAGE> 227
APPENDIX G
[KEYCORP LETTERHEAD]
January 27, 1995
VIA TELECOPY
- ------------
Mr. Robert W. Graf
President
OMNIBANCORP
3600 S. Yosemite Street
Suite 210
Denver, CO 89237
RE: Revisions to Valuation Period and Closing Date in Plan of Merger
-----------------------------------------------------------------
Dear Bob:
This Letter amends and supplements the Plan of Merger dated as of
August 31, 1994 between OMNIBANCORP ("OMNI") and KeyCorp (as amended and
supplemented by Letter Agreements dated August 31, 1994, January 4, 1995
and January 14, 1995, the "Plan") with respect to the valuation period
discussed in the Plan. Capitalized terms not otherwise defined herein have
the meanings ascribed to them in the Plan.
Specifically, the following amendments to the Plan shall be and hereby
are made:
1. The current definition of "KEYCORP COMMON AVERAGE CLOSING PRICE" set
forth in Section 6.1(g) of the Plan is deleted in its entirety and is
amended to read as follows:
For purposes of this Plan, "KEYCORP COMMON AVERAGE CLOSING PRICE"
shall mean the average of the last sale price of the day of one share of
KeyCorp Common Stock as reported on the New York Stock Exchange
Composite Transactions Tape (the "NYSE TAPE") for the 10 consecutive
trading days ending on the third business day prior to the date of the
OMNI Meeting (the "CALCULATION PERIOD").
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<PAGE> 228
2. The term "Calculation Period" is hereby inserted in all places where
"20 Day Calculation Period" is used in the Plan.
3. The first sentence of Section 1.6 of the Plan is hereby deleted in its
entirety and is amended to read as follows:
The closing (the "CLOSING") of the Merger shall take place at the
offices of KeyCorp in Cleveland, Ohio at 2:00 p.m., local time, and
KeyCorp and OMNI shall make all best efforts for the Closing of the
Merger to take place on the same date as the OMNI Meeting, but in no
event before all conditions specified in Sections 5.1, 5.2, and 5.3
hereof are satisfied or waived, or at such other time and place as
OMNI and KeyCorp shall agree in writing (the "CLOSING DATE").
If the foregoing correctly reflects OMNI's understanding of the
revisions to the Plan, please sign the enclosed originals and return one of the
executed letters to me.
Very truly yours,
/s/ Daniel R. Stolzer
Daniel R. Stolzer
Authorized Officer
ACKNOWLEDGED AND AGREED TO BY:
OMNIBANCORP
By: /s/ Robert W. Graf
------------------------------
Title: President
---------------------------
cc: Kent Allen
Ashok Mukhey
G-2
<PAGE> 229
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Ohio law, Ohio corporations are authorized to indemnify directors,
officers, employees and agents within prescribed limits and must indemnify them
under certain circumstances. Ohio law does not provide statutory authorization
for a corporation to indemnify directors, officers, employees and agents for
settlements, fines or judgments in the context of derivative suits. However,
it provides that directors (but not officers, employees and agents) are
entitled to mandatory advancement of expenses, including attorneys' fees,
incurred in defending any action, including derivative actions, brought against
the director, provided the director agrees to cooperate with the corporation
concerning the matter and to repay the amount advanced if it is proved by clear
and convincing evidence that his or her act or failure to act was done with
deliberate intent to cause injury to the corporation or with reckless disregard
for the corporation's best interest.
Ohio law does not authorize payment of judgments to a director, officer,
employee or agent after a finding of negligence or misconduct in a derivative
suit absent a court order. Indemnification is required, however, to the extent
such person succeeds on the merits. In all other cases, if a director,
officer, employee or agent acted in good faith and in a matter he or she
reasonably believed to be in or not opposed to the best interest of the
corporation, indemnification is discretionary except as otherwise provided by a
corporation's articles, code of regulations or by contract, except with respect
to the advancement of expenses of directors.
Under Ohio law, a director is not liable for monetary damages unless it
is proved by clear and convincing evidence that his or her action or failure to
act was undertaken with deliberate intent to cause injury to the corporation or
with reckless disregard for the best interest of the corporation. There is,
however, no comparable provision limiting the liability of officers, employees
or agents of a corporation. The statutory right to indemnification is not
exclusive in Ohio, and an Ohio corporation may, among other things, procure
insurance for such persons.
The KeyCorp Regulations provide that KeyCorp shall indemnify to the
fullest extent permitted by law any person made or threatened to be made a
party to any action, suit or proceeding by reason of the fact that he or she is
or was a director, officer or employee of KeyCorp or of any other bank,
corporation, partnership, trust or other enterprise for which he or she was
serving a director, officer or employee at the request of KeyCorp.
Except as stated above, neither the Articles of Incorporation of KeyCorp
nor any other contract or arrangement to which KeyCorp is a party provides for
such indemnification. Under the terms of KeyCorp's directors' and officers'
liability and company reimbursement insurance policy, directors and officers of
KeyCorp are insured against certain liabilities, including liabilities arising
under the Securities Act.
II-1
<PAGE> 230
KeyCorp is a party to Employment Agreements with, respectively, Victor
J. Riley, Jr., Robert W. Gillespie and Roger Noall, and KeyCorp is party to
Change of Control Agreements with certain other executive officers (the
provisions of which became effective as a result of the merger of old Key with
and into Society), pursuant to which KeyCorp has agreed to indemnify the
officer, to the fullest extent permitted or authorized by Ohio law, if the
officer is made or threatened to be made a party to any action, suit or
proceeding by reason of the officer's serving as an employee, officer or
director of KeyCorp and/or any of its subsidiaries or any other company at the
request of KeyCorp or any of the subsidiaries, and KeyCorp has agreed to
advance expenses incurred by the officer in defending any such action, suit or
proceeding.
Under the Merger Agreement, KeyCorp has agreed to indemnify all present
and former officers and directors of OMNI and its subsidiaries after the
Effective Time for any liabilities arising out of any act or omission prior to
the Effective Time in their capacity as officer or director to the fullest
extent provided by Colorado law. For a period of two years after the Effective
Time, KeyCorp has agreed to use reasonable efforts to cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by OMNI with respect to claims arising from facts or events which
occurred before the Effective Time.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
FORM
S-4
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(2) (a) Plan of Merger, dated as of August 31,
1994, by and between KeyCorp and
OMNIBANCORP (included as Appendix A to
the Prospectus/Proxy Statement)
(b) Letter Agreement dated as of August 31,
1994 between KeyCorp and OMNIBANCORP
(included as Appendix B to the
Prospectus/Proxy Statement)
II-2
<PAGE> 231
<TABLE>
<CAPTION>
<S> <C> <C>
(c) Letter Agreement dated as of
January 4,1995 between
KeyCorp and
OMNIBANCORP (included
as Appendix C to the
Prospectus/Proxy Statement)
(d) Letter Agreement dated as of
January 14, 1995 between
KeyCorp and OMNIBANCORP
(included as Appendix F to the
Prospectus/Proxy Statement)
(e) Letter Agreement dated as of
January 27, 1995 between
KeyCorp and OMNIBANCORP
(included as Appendix G to the
Prospectus/Proxy Statement)
(3) (a) Amended and Restated Incorporated herein by reference to Exhibit 7
Articles of Incorporation of to Form 8-A/A filed on February 25, 1994
KeyCorp
(b) Regulations of KeyCorp Incorporated herein by reference to Exhibit
to Form 8-A/A filed on February 25, 1994
(4) (a) Amended and Restated Articles of See Exhibit 3(a)
Incorporation of
KeyCorp
(b) Regulations of KeyCorp See Exhibit 3(b)
(c) Rights Agreement, dated as of August 25, Incorporated herein by reference to Exhibit 1
1989, between Society Corporation to Form 8-A filed on August 29, 1989
(renamed KeyCorp on March 1, 1994) and
First Chicago Trust Company of New York
as Rights Agent, including as Exhibit A
thereto the form of Rights Certificate
(d) Amendment No. 1 to Rights Agreement, Incorporated herein by reference to Exhibit 1
dated February 21, 1991, between Society to Form 8-A filed on February 28, 1991
Corporation (renamed KeyCorp on March 1,
1994) and First Chicago Trust Company of
New York, as Rights Agent
</TABLE>
II-3
<PAGE> 232
<TABLE>
<CAPTION>
<S> <C> <C>
(e) Amendment No. 2 to Rights Incorporated herein by reference to
Agreement, dated September Exhibit 4 to Schedule 13D filed on
12, 1991, between Society September 23, 1991
Corporation (renamed
KeyCorp on March 1, 1994)
and First Chicago Trust
Company of New York, as
Rights Agent)
(f) Amendment No. 3 to Rights Incorporated herein by reference to
Agreement, dated October 1, Exhibit 4 to Schedule 13D filed on
Corporation (renamed October 12, 1993
1993, between Society
KeyCorp on March 1,1994)
and Society National Bank, as
Rights Agent
(5) Opinion of KeyCorp as to the
legality of the securities to be
registered*
(8) Opinion of Irell & Manella as
to certain federal income tax
matters*
(15) Letter re unaudited interim
financial information
(21) List of KeyCorp subsidiaries*
(23) (a) Consent of Ernst & Young
LLP, Independent Auditors
(b) Consent of BDO Seidman,
Independent Certified Public
Accountants
(c) Consent of Price Waterhouse
LLP, Independent Accountants
</TABLE>
II-4
<PAGE> 233
(d) Consent of Irell & Manella (included as
part of Exhibit 8(a))
(24) (a) Powers of Attorney*
(b) Certified Resolution of Board of
Directors of KeyCorp*
(99) (a) Form of OMNIBANCORP Voting Agreement
(included as Exhibit E to Plan of
Merger, see Exhibit 2(a))
(b) Opinions of Hovde Financial, Inc.
dated January 16, 1995 and the date of
the Prospectus/Proxy Statement
(included as Appendix D to the
Prospectus/Proxy Statement)
(c) Form of Option Agreement
(included as Exhibit B to Plan of
Merger, see Exhibit 2(a))
(d) Form of Proxy to be used by
OMNIBANCORP
- ---------------------------------
*Filed as an exhibit to KeyCorp's Registration Statement on Form S-4 (Reg. No
33-57329, filed January 17, 1995).
(b) Financial Statement Schedules
-----------------------------
All financial statement schedules have been omitted because they
are not applicable or the required information is shown in the
financial statements or related notes thereto incorporated by
reference in the Prospectus/Proxy Statement.
(c) Information Provided Pursuant to Item 4(b) of Form S-4 Opinion of Financial
Advisor is furnished as Appendix D to the Prospectus/Proxy
Statement.
ITEM 22. UNDERTAKINGS.
(a) KeyCorp, the undersigned Registrant, hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii)
II-5
<PAGE> 234
to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information in the
Registration Statement; and (iii) to include any material information
with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information
in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements
of Section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will
not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, as
amended, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating
to the securities offered
II-6
<PAGE> 235
therein, and the offering of such securities at the time shall
be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to provisions
described in Item 20 above, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act
of 1933 and will be governed by the final adjudication of such
issue.
(b) KeyCorp, the undersigned Registrant, hereby undertakes to respond
to requests for information that is incorporated by reference into
the Prospectus/Proxy Statement pursuant to Items 4, 10(b), 11 or
13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of
the Registration Statement through the date of responding to the
request.
(c) KeyCorp, the undersigned Registrant, hereby undertakes to supply
by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein,
that was not the subject of or included in the Registration
Statement when it became effective.
II-7
<PAGE> 236
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cleveland, State of
Ohio, on this 1st day of February, 1995.
KEYCORP
By: /s/ Daniel R. Stolzer
-------------------------
Daniel R. Stolzer
Senior Vice President and
Senior Managing Counsel
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacity indicated.
Title and Description
Victor J. Riley, Jr., Chairman of the Board, Chief Executive Officer, and
Director (Principal Executive Officer); James W. Wert (Principal Financial
Officer); Lee G. Irving (Principal Accounting Officer); H. Douglas Barclay,
Director; William G. Bares, Director; Albert C. Bersticker, Director; Kenneth
M. Curtis, Director; John C. Dimmer, Director; Robert W. Gillespie, Director;
Stephen R. Hardis, Director; Henry S. Hemingway, Director; Charles R. Hogan,
Director; Lawrence A. Leser, Director; Steven A. Minter, Director; M. Thomas
Moore, Director; John C. Morley, Director; Richard W. Pogue, Director; Robert
A. Schumacher, Director; Ronald B. Stafford, Director; Dennis W. Sullivan,
Director; Peter G. Ten Eyck II, Director; and Nancy B. Veeder, Director.
By: /s/ Daniel R. Stolzer
-------------------------
Daniel R. Stolzer
Attorney-in-Fact
II-8
<PAGE> 237
FORM S-4
REGISTRATION STATEMENT
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
FORM
S-4
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C> <C>
(2) (a) Plan of Merger, dated as of August 31, 1994, by
and between KeyCorp and OMNIBANCORP (included as
Appendix A to the Prospectus/Proxy Statement)
(b) Letter Agreement dated as of August 31, 1994 between
KeyCorp and OMNIBANCORP (included as Appendix B to
the Prospectus/Proxy Statement)
(c) Letter Agreement dated as of January 4, 1995 between
KeyCorp and OMNIBANCORP (included as Appendix C to
the Prospectus/Proxy Statement)
(d) Letter Agreement dated as of January 14, 1995 between
KeyCorp and OMNIBANCORP (included as Appendix F to the
Prospectus/Proxy Statement)
(e) Letter Agreement dated as of January 27, 1995 between
KeyCorp and OMNIBANCORP (included as Appendix G to the
Prospectus/Proxy Statement)
(3) (a) Amended and Restated Articles of Incorporation of Incorporated herein by reference to Exhibit 7 to
KeyCorp Form 8-A/A filed on February 25, 1994
(b) Regulations of KeyCorp Incorporated herein by reference to Exhibit to
Form 8-A/A filed on February 25, 1994
(4) (a) Amended and Restated Articles of Incorporation of See Exhibit 3(a)
KeyCorp
(b) Regulations of KeyCorp See Exhibit 3(b)
</TABLE>
E-1
<PAGE> 238
<TABLE>
<CAPTION>
<S> <C>
(c) Rights Agreement, dated as of August 25, 1989, Incorporated herein by reference to Exhibit 1 to
between Society Corporation (renamed KeyCorp on Form 8-A filed on August 29, 1989
March 1, 1994) and First Chicago Trust Company of
New York, as Rights Agent, including as Exhibit A
thereto the form of Rights Certificate
(d) Amendment No. 1 to Rights Agreement, dated February 21, Incorporated herein by reference to Exhibit 1 to
1991, between Society Corporation (renamed KeyCorp on Form 8-A filed on February 28, 1991
March 1, 1994) and First Chicago Trust Company of
New York, as Rights Agent
(e) Amendment No. 2 to Rights Agreement, dated September Incorporated herein by reference to Exhibit 4 to
12, 1991, between Society Corporation (renamed Schedule 13D filed on September 23, 1991
KeyCorp on March 1, 1994) and First Chicago Trust
Company of New York, as Rights Agent
(f) Amendment No. 3 to Rights Agreement, dated October Incorporated herein by reference to Exhibit 4 to
1, 1993, between Society Corporation (renamed Schedule 13D filed on October 12, 1993
KeyCorp on March 1, 1994) and Society National Bank,
as Rights Agent.
(5) Opinion of KeyCorp as to the legality of the
securities to be registered*
(8) Opinion of Irell & Manella as to certain federal
income tax matters*
(15) Letter re unaudited interim financial information
(21) List of KeyCorp subsidiaries*
(23) (a) Consent of Ernst & Young LLP, Independent Auditors
</TABLE>
E-2
<PAGE> 239
(b) Consent of BDO Seidman, Independent Certified Public Accountants
(c) Consent of Price Waterhouse LLP, Independent Accountants
(d) Consent of Irell & Manella (included as part of
Exhibit 8(a))
(24) (a) Powers of Attorney*
(b) Certified Resolutions of Board of Directors of
KeyCorp*
(99) (a) Form of OMNIBANCORP Voting
Agreement (included as Exhibit E
to Merger Agreement, see Exhibit 2(a))
(b) Opinions of Hovde Financial, Inc.
dated January 16, 1995 and the date
of the Prospectus/Proxy Statement
(included as Appendix D to the
Prospectus/Proxy Statement)
(c) Form of Option Agreement
(included as Exhibit B to Merger
Agreement, see Exhibit 2(a))
(d) Form of Proxy to be used by
OMNIBANCORP
- -------------------------------
*Filed as an exhibit to KeyCorp's Registration Statement on Form S-4 (Reg. No.
33-57329, filed January 17, 1995).
E-3
<PAGE> 1
Exhibit 15
ACKNOWLEDGMENT LETTER OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
KeyCorp
We are aware of the incorporation by reference in KeyCorp's Amendment No. 1 to
the Registration Statement on Form S-4 pertaining to the merger of OMNIBANCORP
with and into KeyCorp, of our reports dated April 19, 1994, July 18, 1994 and
October 17, 1994 relating to the unaudited consolidated interim financial
statements of KeyCorp, included in its Forms 10-Q for the quarters ended March
31, 1994, June 30, 1994 and September 30, 1994.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part
of the Amendment No. 1 to the Registration Statement prepared or certified by
accountants within the meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
January 31, 1995
<PAGE> 1
Exhibit 23 (a)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Amendment No. 1 to the Registration Statement (Form S-4) and related Prospectus
pertaining to the merger of OMNIBANCORP with and into KeyCorp and to the
incorporation by reference therein of our reports:
(a) dated March 1, 1994, with respect to the consolidated financial
statements for the year ended December 31, 1993, of KeyCorp as restated
to give effect to the March 1, 1994 merger of KeyCorp and Society
Corporation, accounted for as a pooling of interests, such financial
statements are included in and incorporated by reference into the
Corporation's Current Report on Form 8-K filed with the Commission on
April 20, 1994;
(b) dated January 20, 1994, except for Note 2 as to which the date is March
1, 1994, with respect to the consolidated financial statements for the
year ended December 31, 1993, of KeyCorp (the combining company), which
on March 1, 1994 merged with Society Corporation, subsequently renamed
KeyCorp, included in the Corporation's Current Report on Form 8-K filed
with the Commission on March 16, 1994.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
January 31, 1995
<PAGE> 1
Exhibit 23(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
OMNIBANCORP
Denver, Colorado
We hereby consent to the use in the Proxy Statement/Prospectus constituting part
of this Amendment Number 1 to the Registration Statement on Form S-4 of our
report dated January 12, 1994 relating to the consolidated financial statements
of OMNIBANCORP, which are contained in that Proxy Statement/Prospectus. We also
consent to the reference to us under the caption "Experts" in the Proxy
Statement/Prospectus.
/s/ BDO Seidman
BDO Seidman
Denver, Colorado
January 31, 1995
<PAGE> 1
Exhibit 23(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in Amendment No. 1 to the Proxy Statement/
Prospectus constituting part of this Registration Statement on Form S-4 of
KeyCorp of our report dated January 15, 1992 relating to the consolidated
financial statements of OMNIBANCORP and Subsidiaries, which appears in such
Amendment No. 1 to the Proxy Statement/Prospectus. We also consent to the
references to us under the heading "Experts" in such Amendment No. 1 to the
Proxy Statement/Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
January 31, 1995
<PAGE> 1
EXHIBIT 99(d)
PROXY
OMNIBANCORP
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
OMNIBANCORP FOR THE SPECIAL MEETING OF SHAREHOLDERS ON FEBRUARY 24, 1995
The undersigned shareholder(s) of OMNIBANCORP ("OMNI"), hereby constitutes and
appoints Robert W. Graf and Larry Mizel and each of them, his or her true and
lawful agents and proxies with full power of substitution in each, to represent
the undersigned shareholder(s) at the Special Meeting of Shareholders of OMNI
to be held in the basement conference room at OMNIBANK Center, 3600 S.
Yosemite, Denver, Colorado 80237, on February 24, 1995, at 8:30 a.m., local
time, and at any adjournments thereof, and to vote the undersigned
shareholder's shares as follows:
For Against Abstain
1. Approval of Plan of Merger by and / / / / / /
between OMNI and KeyCorp, dated as
of August 31, 1994, as amended,
pursuant to which OMNI will be
merged with and into KeyCorp
("Merger Agreement").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX.
IF NO DIRECTION IS MADE, YOUR SHARES WILL BE VOTED IN ACCORDANCE WITH THE
BOARD OF DIRECTORS' RECOMMENDATION. YOUR SHARES CANNOT BE VOTED IN THE
MANNER DIRECTED HEREIN UNLESS YOU SIGN AND PROMPTLY RETURN THIS CARD.
Please check if you plan to attend the Special Meeting in
person.
Attend
/ /
Meeting
2. The shareholder further authorizes proxies to vote in
accordance with their judgment upon any other matters as
may properly come before the Special Meeting
which relate to the Plan of Merger and the
transactions contemplated thereby.
The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting
or any adjournments thereof.
SIGNATURE(S) DATE
-------------------------------- ----------------
SIGNATURE(S) DATE
-------------------------------- ----------------
NOTE: Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney-in-fact, officer,
executor, administrator, trustee or guardian, please give full
title as such.
(change of address)
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