<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KEYCORP
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
KEYCORP
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
Not Applicable
(2) Form, schedule or registration statement no.:
Not Applicable
(3) Filing party:
Not Applicable
(4) Date filed:
Not Applicable
<PAGE> 2
[KEYCORP LOGO]
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
April 16, 1996
DEAR SHAREHOLDER:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
of KeyCorp which will be held at The Forum Conference Center, One Cleveland
Center, 1375 East Ninth Street, Cleveland, Ohio, on Thursday, May 23, 1996, at
10:30 a.m., local time.
All holders of record of KeyCorp Common Shares as of March 29, 1996, are
entitled to vote at the 1996 Annual Meeting.
As described in the accompanying Notice and Proxy Statement, you will be
asked to elect seven directors for three-year terms expiring in 1999, to
consider four separate proposals submitted by KeyCorp's shareholders, and to
ratify the appointment of Ernst & Young LLP as independent auditors for 1996.
The Annual Report for the year ended December 31, 1995, was mailed to all
shareholders of record as of March 29, 1996.
Your proxy card is enclosed. Please indicate your voting instructions and
sign, date, and mail this proxy card promptly in the return envelope.
Sincerely,
/s/ Robert W. Gillespie
ROBERT W. GILLESPIE
President and Chief Executive
Officer
<PAGE> 3
[KEYCORP LOGO]
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 23, 1996
The 1996 Annual Meeting of Shareholders of KeyCorp will be held at The
Forum Conference Center, One Cleveland Center, 1375 East Ninth Street,
Cleveland, Ohio, on Thursday, May 23, 1996, at 10:30 a.m., local time, for the
following purposes:
1. To elect seven directors to serve for terms expiring in 1999;
2. To consider and act upon a shareholder proposal regarding the form
of director compensation;
3. To consider and act upon a shareholder proposal regarding
classification of the Board of Directors;
4. To consider and act upon a shareholder proposal regarding
discretionary voting of proxies;
5. To consider and act upon a shareholder proposal regarding executive
compensation;
6. To ratify the appointment of Ernst & Young LLP by the Board of
Directors as independent auditors for KeyCorp for the fiscal year ending
December 31, 1996; and
7. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Only holders of KeyCorp Common Shares of record as of the close of business
on March 29, 1996, have the right to receive notice of and to vote at the Annual
Meeting and any postponement or adjournment thereof.
By Order of the Board of Directors
/s/ Roger Noall
ROGER NOALL
April 16, 1996 Secretary
------------------------
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN, AND MAIL THE ENCLOSED
PROXY CARD AT YOUR EARLIEST CONVENIENCE. PLEASE USE THE RETURN ENVELOPE ENCLOSED
WITH THE PROXY CARD FOR THAT PURPOSE.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
NOTICE OF ANNUAL MEETING
PROXY STATEMENT....................................................................... 1
Election of Directors................................................................. 1
Nominees for Terms Expiring in 1999................................................. 2
Continuing Directors................................................................ 4
The Board of Directors and Its Committees............................................. 8
Shareholder Proposals................................................................. 10
Independent Auditors.................................................................. 16
Executive Officers.................................................................... 17
Compensation of Executive Officers.................................................... 19
Employment, Severance, and
Change of Control Agreements........................................................ 25
Compensation and Organization Committee
Report on Executive Compensation.................................................... 32
KeyCorp Stock Price Performance....................................................... 36
Share Ownership and Phantom Stock Units............................................... 37
1997 Shareholder Proposals............................................................ 38
General............................................................................... 38
</TABLE>
<PAGE> 5
[KEYCORP LOGO]
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114
PROXY STATEMENT
This Proxy Statement is furnished commencing on or about April 16, 1996, in
connection with the solicitation on behalf of the Board of Directors of KeyCorp
of proxies to be voted at the 1996 Annual Meeting of Shareholders on May 23,
1996, and at all postponements and adjournments thereof. KeyCorp was formed as a
result of the merger of the former KeyCorp ("Old Key") with Society Corporation
("Society") on March 1, 1994 (the "Merger") pursuant to the Agreement and Plan
of Merger and related Supplemental Agreement to Agreement and Plan of Merger,
each dated October 1, 1993, as amended (the "Merger Agreement"). All holders of
record of KeyCorp Common Shares at the close of business on March 29, 1996, are
entitled to vote. On that date there were 231,707,124 KeyCorp Common Shares
outstanding and entitled to vote at the meeting, and each such share is entitled
to one vote on each matter to be considered. At the meeting, a majority of the
outstanding Common Shares shall constitute a quorum.
ELECTION OF DIRECTORS
In accordance with KeyCorp's Regulations, effective as of the 1996 Annual
Meeting the Board of Directors of KeyCorp (also sometimes referred to herein as
the "Board") has established the size of the Board at 20 members, divided into
two classes of seven members each and one class of six members. The terms of
these classes as of the 1996 Annual Meeting will expire in 1997, 1998 and 1999,
respectively. Seven nominees for directors for terms expiring in 1999 are listed
below. All properly executed and returned proxy cards will be voted for these
nominees unless contrary specifications are properly made in writing directly on
the proxy card in the space indicated for that purpose, in which case the proxy
will be voted in accordance with such specification. The nominees are all
current members of the Board. Should any nominee become unable to accept
nomination or election, the proxy cards (unless a contrary specification is
properly made on the proxy card) will be voted for the election of such person,
if any, as shall be recommended by the Board, or for holding a vacancy to be
filled by the Board at a later date. The Board has no reason to believe that the
persons listed as nominees will be unable to serve. At the election of
directors, the properly nominated candidates receiving the greatest number of
votes shall be elected.
Pursuant to rules promulgated under the Securities Exchange Act of 1934,
the following information lists, as of February 16, 1996, as to nominees for
director and directors whose terms of office will continue after the 1996 Annual
Meeting, the principal occupation or employment, age, the year in which each
first became a director of KeyCorp, and directorships in registered investment
companies or companies having securities which are registered pursuant to, or
which are subject to certain provisions of, the Securities Exchange Act of 1934.
Also included is information regarding officer positions, trusteeships, or
directorships with certain publicly traded foreign companies or charitable,
political, or educational organizations where applicable. Except as otherwise
indicated, each nominee or continuing director has had the same principal
occupation or employment during the past five years.
1
<PAGE> 6
NOMINEES FOR TERMS EXPIRING IN 1999
[PHOTO] ALBERT C. BERSTICKER
Since 1996, Chairman and Chief Executive Officer, Ferro
Corporation (industrial specialty chemicals);
previously, President since 1988, and Chief Executive
Officer since 1991, Ferro Corporation. Age 61. KeyCorp
director since 1991. Director, Ferro Corporation, Brush
Wellman Inc., Centerior Energy Corporation, and Oglebay
Norton Company.
[PHOTO] KENNETH M. CURTIS
Since 1994, Principal, Curtis, Thaxter, Stevens, Broder
& Micoleau Limited Liability Company, P.A. (law firm);
previously, President, Maine Maritime Academy
(ocean-oriented college). Age 64. KeyCorp director since
1994 (Old Key director since 1993). Director, Bowater
Incorporated; Trustee, Gulf of Maine Aquarium
Development Corporation and University of New England;
Member of Board of Directors, Foundation for Educational
Exchange between the United States and Canada and New
England Council.
[PHOTO] JOHN C. DIMMER
President, Firs Management Corporation (real estate and
investment company). Age 67. KeyCorp director since 1994
(Old Key director since 1993); Trustee, Multicare
Medical Center.
[PHOTO] CHARLES R. HOGAN
Co-Owner and Chief Executive Officer, C.R.H.
Investments, Inc. (shopping center and real estate
development); Chairman and Chief Executive Officer,
Citation Management Co. (commercial and multi-family
property management). Age 59. KeyCorp director since
1994 (Old Key director since 1993).
2
<PAGE> 7
[PHOTO] M. THOMAS MOORE
Chairman, President and Chief Executive Officer,
Cleveland-Cliffs Inc (iron ore producer). Age 61.
KeyCorp director since 1992. Director, Cleveland-Cliffs
Inc, Capitol American Financial Corporation, and The LTV
Corporation; Trustee, Fairview Health System.
[PHOTO] RICHARD W. POGUE
Since 1994, Senior Advisor, Dix & Eaton (public
relations); previously, Managing Partner, Jones, Day,
Reavis & Pogue (law firm). Age 67. KeyCorp director
since 1992. Director, Continental Airlines, Inc., Derlan
Industries Ltd., M.A. Hanna Company, OHM Corporation,
Redland PLC, and TRW Inc.; Chairman of the Board of
Trustees, University Hospitals of Cleveland; Member of
Board of Directors, Greater Cleveland Growth
Association; Trustee, Kulas Foundation, Case Western
Reserve University, University Circle Incorporated,
United Way; Co-Chair, Cleveland Bicentennial Commission.
[PHOTO] DENNIS W. SULLIVAN
Executive Vice President, Parker-Hannifin Corporation
(industrial and aerospace motion control components and
systems). Age 57. KeyCorp director since 1993. Director,
Parker-Hannifin Corporation and Ferro Corporation.
3
<PAGE> 8
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1997
[PHOTO] WILLIAM G. BARES
Since 1996, President and Chief Executive Officer, The
Lubrizol Corporation (chemicals for use in lubricants
and fuels); previously, President and Chief Operating
Officer, The Lubrizol Corporation. Age 54. KeyCorp
director since 1987. Director, The Lubrizol Corporation,
Bearings, Inc., and Oglebay Norton Company.
[PHOTO] LUCIE J. FJELDSTAD
Since 1995, President, Tektronix, Inc. (multi-media
company); previously, Private Consultant (1993-1994) and
Vice President, IBM (computer manufacturing)
(1989-1993). Age 52. KeyCorp director since 1994 (Old
Key director since 1991). Director, The Gap, Bolt,
Beranek and Newman, Inc., Entergy Corporation, and
Recognition International; Trustee, UCLA Foundation;
Board of Regents, Santa Clara University.
[PHOTO] ROBERT W. GILLESPIE
Since 1995, President and Chief Executive Officer,
KeyCorp; previously, President and Chief Operating
Officer (1994-1995), KeyCorp; previously President and
Chief Executive Officer, Society. Age 51. KeyCorp
director since 1982. Trustee, Case Western Reserve
University, Ohio Wesleyan University, United Way,
Cleveland Museum of Art, Cleveland Initiative on
Education, and Musical Arts Association; Member of Board
of Directors, Greater Cleveland Growth Association;
Co-Chair, Cleveland Bicentennial Commission.
[PHOTO] HENRY S. HEMINGWAY
President, Town & Country Life Insurance Company
(insurance). Age 42. KeyCorp director since 1994 (Old
Key director since 1987). Director, Key Bank of Utah;
Trustee, Utah Symphony.
4
<PAGE> 9
[PHOTO] STEVEN A. MINTER
Executive Director and President, The Cleveland
Foundation (philanthropic foundation). Age 57. KeyCorp
director since 1987. Director, Consolidated Natural Gas
Company, Goodyear Tire and Rubber Company, and
Rubbermaid, Inc.; Trustee, College of Wooster and
Cleveland Initiative on Education; Member of Board of
Directors, Greater Cleveland Roundtable.
[PHOTO] VICTOR J. RILEY, JR.
Chairman of the Board, KeyCorp. Age 64. KeyCorp director
since 1994 (Old Key director since 1973). Chairman, Pius
XII Foundation; Honorary Member, University at Albany
Foundation; 1996 National Banking Industry Chairman,
March of Dimes.
[PHOTO] RONALD B. STAFFORD
Partner, Stafford, Trombley, Purcell, Lahtinen, Owens &
Curtin, P. C. (law firm); member of the New York State
Senate. Age 60. KeyCorp director since 1994 (Old Key
director since 1983). Trustee, St. Lawrence University
and Paul Smith's College; Board of Visitors, Columbia
University School of Law.
5
<PAGE> 10
CONTINUING DIRECTORS WHOSE TERMS EXPIRE 1998
[PHOTO] CECIL D. ANDRUS
Since 1995, Chairman, Andrus Center for Public
Policy-Boise State University (non-profit center);
previously, Governor, State of Idaho. Age 64. KeyCorp
director since 1996. Director, Albertsons, Inc. and
Coeur d'Alene Mines, Inc.; Trustee, Albertson College of
Idaho.
[PHOTO] THOMAS A. COMMES
President and Chief Operating Officer, The
Sherwin-Williams Company (paints and painting supplies).
Age 53. KeyCorp director since 1987. Director, The
Sherwin-Williams Company and Centerior Energy
Corporation; Trustee, Cleveland Clinic Foundation.
[PHOTO] STEPHEN R. HARDIS
Since 1995, Chairman and Chief Executive Officer, Eaton
Corporation (diversified manufacturing company);
previously, Vice Chairman and Chief Financial and
Administrative Officer, Eaton Corporation. Age 60.
KeyCorp director since 1985. Director, Eaton
Corporation, First Union Real Estate Investments,
Nordson Corporation, and Progressive Corporation;
Trustee, University Circle, Inc., Musical Arts
Association, Playhouse Square Foundation, and Cleveland
Clinic Foundation; Member of Board of Directors, Greater
Cleveland Roundtable.
[PHOTO] DOUGLAS J. MCGREGOR
President and Chief Operating Officer, M.A. Hanna
Company (plastics and rubber manufacture and
distribution). Age 55. KeyCorp Director since 1995.
Director, M.A. Hanna Company and Vulcan Materials
Company; Chairman of the Board of Trustees, Cleveland
Institute of Music; Trustee, Playhouse Square Foundation
and Junior Achievement.
6
<PAGE> 11
[PHOTO] PETER G. TEN EYCK, II
President, Indian Ladder Farms (commercial orchard). Age
57. KeyCorp director since 1994 (Old Key director since
1979). Trustee, Cornell University.
[PHOTO] NANCY B. VEEDER
President, Veeder Realty, Inc.; Partner, Veedergate
Realty, L.P., doing business as Residence Inn by
Marriott (hotel operation). Age 69. KeyCorp director
since 1994 (Old Key director since 1981). Member of
Board of Overseers, R.P.I. School of Management; Member
of Board of Directors, Albany Tourist and Convention
Bureau and Capital District Health Care Coalition.
Messrs. Curtis and Stafford, directors of KeyCorp, are members of law firms
that KeyCorp utilizes for legal services.
Some of KeyCorp's executive officers and above directors were customers of
one or more of KeyCorp's subsidiary banks or other subsidiaries during 1995 and
had transactions with such banks in the ordinary course of business. In
addition, some of the above directors are officers of, or have a relationship
with, corporations or are members of partnerships which were customers of such
banks during 1995 and had transactions with such banks in the ordinary course of
business. All loans included in such transactions were made on substantially the
same terms, including rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than normal
risks of collectibility or present other unfavorable features. Similar
transactions continue to be effected during 1996.
Under the securities laws of the United States, KeyCorp's directors and
certain officers are required to report their ownership of KeyCorp's stock and
changes in that ownership to the Securities and Exchange Commission. The
Securities and Exchange Commission has established specific due dates for these
reports. A trust for which Henry S. Hemingway, a KeyCorp director, is a trustee
was late in filing a report of a gift of KeyCorp Common Shares occurring in
1994.
7
<PAGE> 12
THE BOARD OF DIRECTORS AND ITS COMMITTEES*
Board of Directors. During the year ended December 31, 1995, there were
seven meetings of KeyCorp's Board of Directors. Each current member of KeyCorp's
Board who served during 1995, other than Ms. Fjeldstad, attended at least 75% of
the aggregate of the meetings held by KeyCorp's Board of Directors and the
meetings held by the committees of the Board on which such member served during
1995.
KeyCorp's Board of Directors currently exercises certain of its powers
through its Audit, Community Responsibility, Compensation and Organization,
Executive, and Nominating Committees.
Audit Committee. Messrs. Bares (Chair), Hemingway, Hogan, Moore, Pogue,
Stafford, Sullivan, and Ten Eyck are the current members of KeyCorp's Audit
Committee. The functions of this Committee include review of the adequacy of
internal administrative, operating, and accounting policies and controls, review
of the financial information provided to shareholders and the Securities and
Exchange Commission, recommendation of the appointment of KeyCorp's independent
auditors, review of the scope of the services and the estimated fees of the
independent auditors, review of the examinations of KeyCorp and its affiliates
conducted by federal and state regulatory authorities, review of the activities
of the audit committees of KeyCorp's subsidiaries, review of the audit plans of
the internal audit staff and of the independent auditors and the results and
effectiveness of their audits, and supervision and direction of any special
projects or investigations considered necessary. KeyCorp's Audit Committee met
five times in 1995.
Community Responsibility Committee. Messrs. Andrus, Dimmer, McGregor,
Minter, Morley, and Ms. Veeder (Chair) are the current members of KeyCorp's
Community Responsibility Committee. The functions of this Committee include
review of the Community Reinvestment Act programs of KeyCorp and its bank
subsidiaries, KeyCorp's compliance program, and KeyCorp's compliance with
applicable law and regulation. KeyCorp's Community Responsibility Committee met
five times in 1995.
Compensation and Organization Committee. Messrs. Bersticker, Commes,
Curtis, Ms. Fjeldstad, and Messrs. Hardis (Chair) and Schumacher are the current
members of KeyCorp's Compensation and Organization Committee. The functions of
this Committee include review and approval of KeyCorp's salary administration
programs, determination of the compensation of senior management, determination
of participants and awards under executive compensation plans and supplemental
compensation plans including equity compensation plans, approval of (or
amendments to) employee and officer retirement, compensation, equity
compensation and benefit plans, granting of stock options, review and
recommendation of director compensation, review of organization structure and
staffing, and review of management structure, development, and succession
planning. KeyCorp's Compensation and Organization Committee met eight times in
1995. KeyCorp's Executive Equity Compensation Committee, the function of which
included all issues relating to KeyCorp's executive equity compensation plans,
was combined with the Compensation and Organization Committee in 1995.
Executive Committee. Messrs. Bares, Curtis, Gillespie, Hardis, Pogue, Riley
(Chair), and Ms. Veeder are the current members of KeyCorp's Executive
Committee. Through December 31, 1998, under the Merger Agreement and KeyCorp's
Regulations, it is intended that Messrs. Riley and Gillespie will be members of
- ---------------
* Messrs. John C. Morley and Robert A. Schumacher will not stand for re-election
at the Annual Meeting. They are, however, included in the description of
KeyCorp's current Board of Directors and its committees. Mr. Morley will
continue as a director of KeyCorp until April 30, 1996, and Mr. Schumacher
will continue as a director of KeyCorp until the Annual Meeting.
8
<PAGE> 13
KeyCorp's Executive Committee as long as they are directors of KeyCorp. The
functions of the Executive Committee are to exercise the authority of the Board
of Directors, to the extent permitted by law, on any matter requiring Board or
Board committee action between Board or Board committee meetings. KeyCorp's
Executive Committee met once in 1995.
Nominating Committee. Messrs. Curtis, Gillespie, Hardis, and Riley are the
current members of KeyCorp's Nominating Committee. Through December 31, 1998,
under the Merger Agreement and KeyCorp's Regulations, two of the four members of
the Nominating Committee will be individuals who were serving as directors of
Old Key prior to the Merger (one of whom will be Mr. Riley as long as he is a
director of KeyCorp), and the other members of the Nominating Committee will be
individuals who were serving as directors of Society prior to the Merger (one of
whom will be Mr. Gillespie as long as he is a director of KeyCorp).
The functions of the Nominating Committee include identifying and reviewing
the qualifications of prospective directors and recommending candidates for
election as directors. Through December 31, 1998, under KeyCorp's Regulations,
nominations for the election of directors by KeyCorp's Board of Directors may
only be made by the affirmative vote of three-quarters of the Board of Directors
and three-quarters of the Nominating Committee, except that there is an
alternative procedure in the event that the Nominating Committee is unable to
approve by the requisite vote a nomination for election of a particular director
or directors. The Nominating Committee will consider shareholder suggestions
concerning qualified candidates for election as directors that are forwarded to
such Committee. Any shareholder recommendation for a director nominee should
contain background information concerning the recommended nominee, including,
(a) the name, age, business, and residence address of such person; (b) the
principal occupation or employment of such person for the last five years; (c)
the class and number of shares of capital stock of KeyCorp that are beneficially
owned by such person; (d) all positions of such person as a director, officer,
partner, employee, or controlling shareholder of any corporation or other
business entity; (e) any prior position as a director, officer, or employee of a
depository institution or any company controlling a depository institution; and
(f) a statement of whether such individual would be willing to serve if
nominated or elected. Any shareholder recommendation should also include, as to
the shareholder giving the written notice, (a) a representation that the
shareholder is a holder of record of shares of KeyCorp entitled to vote at such
meeting and (b) a description of all arrangements or understandings between the
shareholder and such recommended person and any other person or persons (naming
such person or persons). KeyCorp's Nominating Committee met twice in 1995.
Director Compensation. Directors (other than Messrs. Gillespie and Riley
who receive no director fees) receive fees consisting of a $27,000 annual
retainer, payable in quarterly installments, and $1,500 for attendance at each
Board or committee meeting. Outside directors who serve as committee
chairpersons receive additional compensation of $2,500 per quarter. Under the
KeyCorp Director Deferred Compensation Plan, directors are given an opportunity
to defer payment of director fees for future distribution. All such deferred
payments are invested in either an interest bearing account (at an interest rate
equal to 1/2% higher than the effective annual yield of the Moody's Average
Corporate Bond Yield Index) or a KeyCorp Common Share account (which is a
phantom stock account in which the directors' deferred compensation earns a
yield based on the amount of dividends that would have been payable on an equal
number of KeyCorp Common Shares and the increase or decrease in the market price
of KeyCorp Common Shares, in both cases during the
9
<PAGE> 14
period that the deferred fees are invested in the Common Share account). All
payments to the directors under the Director Deferred Compensation Plan are in
the form of cash.
Under the Directors' Stock Option Plan (the "Directors' Plan"), each of the
non-employee directors is automatically granted options to purchase 3,500
KeyCorp Common Shares annually. Messrs. Gillespie and Riley were not eligible to
participate in the Directors' Plan during 1995 or prior thereto because they
were employees of KeyCorp, but Mr. Riley is eligible to participate in the
Directors' Plan as of January 1, 1996 due to his retirement as an employee of
KeyCorp. All options granted under the Directors' Plan are non-qualified stock
options. Options generally expire ten years after grant. The purchase price of
the option shares is equal to their fair market value on the date of grant and
may be paid in cash or by the surrender of previously acquired KeyCorp Common
Shares. At December 31, 1995, 100,404 additional options could be granted under
the Directors' Plan. In the event that KeyCorp Common Shares are changed into or
exchanged for a different number or kind of securities, or in the event of a
stock split, then the number and exercise price of options and the limits on the
aggregate totals of shares available for grants under the Directors' Plan will
be proportionately amended.
SHAREHOLDER PROPOSALS
PROPOSAL NO. 1
The following proposal ("Proposal No. 1") was submitted for inclusion in
this Proxy Statement by Mr. and Mrs. Clifford P. LaForme, 5486 Williamsburg
Lake, Wildwood, FL 34785. Mr. and Mrs. LaForme jointly own over 18,000 KeyCorp
Common Shares.
Shareholder Proposal and Supporting Statement. "We recommend that the
Board of Directors consider the following. Stop paying to the KeyCorp Board
of Directors their annual salaries in cash. That KeyCorp adopt a plan that
the KeyCorp Board of Directors be paid in KeyCorp Common Shares of equal
value to their salaries they now receive. Our reasoning for this move is we
feel that they will take more interest in KeyCorp to ensure its success."
Board of Directors Recommendation and Statement. The Board of Directors
recommends that shareholders vote AGAINST Proposal No. 1 for the following
reasons.
KeyCorp believes that the appropriate method of compensating directors is a
mix of cash compensation for current services and stock-based compensation to
align the interests of directors with those of shareholders. The existing
director compensation package of cash compensation and stock option grants
reflects this belief and allows KeyCorp to attract the best qualified
individuals to serve on its Board of Directors. Restricting director
compensation solely to payments in KeyCorp Common Shares would restrict board
membership to those with sufficient income or net worth levels to allow them to
serve as directors without receiving any cash remuneration. Directors who did
find themselves in need of cash would be forced to sell their KeyCorp Common
Shares, reducing their interest in KeyCorp and defeating the purpose of the
proponent's plan. In addition, the level and composition of KeyCorp's director
compensation is competitive with that being offered by other large,
well-established bank holding companies.
The value of attracting and retaining committed and qualified directors
demands a competitive, reasonable, and fair compensation program. A program such
as that proposed by the proponent would reduce the pool of qualified individuals
willing to serve on KeyCorp's board. Such a plan should not be supported.
10
<PAGE> 15
Vote Required. Approval of Proposal No. 1 will require the affirmative
vote of a majority of the KeyCorp Common Shares represented in person or by
proxy at the Annual Meeting.
PROPOSAL NO. 2
The following proposal ("Proposal No. 2") was submitted for inclusion in
this Proxy Statement by Mr. Gerald R. Armstrong, P.O. Box 18546, Capitol Hill
Station, Denver, Colorado 80218. Mr. Armstrong owns over 9,500 KeyCorp Common
Shares.
Shareholder Proposal. "Resolved: That the shareholders of KeyCorp,
assembled in person and by proxy in an annual meeting, now request that the
Board of Directors take those steps necessary to restore annual elections
for all directors by providing that at future elections in annual meetings,
all directors be elected annually and not by classes as is now provided and
that on the expiration of the present terms their subsequent election shall
also be on an annual basis."
Supporting Statement. "Recently, Lockheed-Martin Corp., Campbell
Soups, Atlantic Richfield Company, Pacific Enterprises, KATY Industries,
Hanover Direct, Westinghouse, and other corporations have replaced three
year terms for directors with the annual election of all directors.
"These actions have increased shareholder voting rights by
300% -- and, at no cost to the shareholders. In the merger of Chase
Manhattan and Chemical Bank, the shareholders of Chase shall have their
voting rights increased proportionately, too.
"At KeyCorp, this procedure will allow shareholders an opportunity to
register annually their reviews of the performance of the board
collectively and of each director, individually. Concern that annual
elections of all directors would leave KeyCorp without experienced
directors is unfounded.
"The proponent of this proposal is an investor who recognizes that
greater accountability -- one year terms for directors -- can be an
indication for greater profits and dividends -- not unsound investments in
derivatives.
"The 1994 Atlantic Richfield Company proxy statement, in support of
replacing three year terms with one year terms for its directors, states:
'The Board ... recognizes that many institutional stockholders now
believe that the annual election of all directors is appropriate. The
Board does not believe that the advantages of a classified board (one
with three year terms) are sufficient to offset the disadvantages.'
"In our 1994 annual meeting of shareholders, our chairman Victor J.
Riley, stated KeyCorp, because of its size, could not be vulnerable to a
take-over. Most staggered systems (three year terms for directors) are
created as an effort against take-overs.
"Moreover, no current Director opposed management's elimination of the
ratification by shareholders of the independent accountants leaving me to
challenge an attitude of "In management we trust, we have three year
terms". Have Ohio investors forgotten that Baldwin-United Corp. refused to
eliminate three year terms just a year before its collapse?
11
<PAGE> 16
"I believe that the current system produces only a facade of
continuity which should be displaced; and accountability and performance be
substituted as the basis for re-election to our board of directors.
"If you agree, please vote FOR this proposal. If you do not agree,
vote against it. If your proxy card is unmarked on this issue, your shares
will be automatically voted "AGAINST" this proposal."
Board of Directors Recommendation and Statement. The Board of Directors
recommends that shareholders vote AGAINST Proposal No. 2 for the following
reasons.
KeyCorp's Board of Directors is divided into three classes of directors,
each of which serve for staggered three year terms. These staggered terms are an
effort to balance two very important concerns, those being the need for
shareholders to express their opinion about the Board's performance each year
and the need for KeyCorp's directors to focus on KeyCorp's long-term success.
The Board believes that KeyCorp's success in producing long-term
shareholder value, as reflected in dividend growth and stock price appreciation,
requires long-term strategic planning, capital commitments and careful and
consistent application of financial and other resources.
In the opinion of KeyCorp's Board, a classified board of directors
facilitates continuity and stability of leadership and policy by assuring that
experienced personnel familiar with the corporation and its business will be on
the board of directors at all times. A classified board of directors is also
intended to prevent precipitous changes in the composition of the board and,
thereby, serves to moderate corresponding precipitous changes in the
corporation's policies, business strategies and operations. As current newspaper
headlines demonstrate, no company, regardless of its size, is immune to a
take-over attempt. Board classification is intended to encourage any person
seeking to acquire control of KeyCorp to initiate such an action through
arm's-length negotiations with the Board of Directors.
Election of directors by classes is a common practice that has been adopted
by many companies and currently exists at over half of the 500 companies
comprising the 1995 Standard & Poor's Stock Price Index.
Proposal No. 2 requests the Board to take all steps necessary to restore
annual elections of all directors. One of those steps would be to amend
KeyCorp's Regulations. Under KeyCorp's Regulations, the provisions providing for
a classified Board may only be amended, repealed or altered by the affirmative
vote of the holders of shares entitling them to exercise three-quarters of the
voting power of KeyCorp on such proposal unless such amendment, repeal, or
alteration is recommended by three-quarters of the entire authorized Board of
Directors (two-thirds of the Board after December 31, 1998), in which case the
amendment, repeal or alteration would require the affirmative vote of the
holders of shares entitling them to exercise a majority of the voting power of
KeyCorp on such proposal. Because the Board of Directors is recommending a vote
"AGAINST" Proposal No. 2 and has not recommended a repeal or amendment of the
provisions in KeyCorp's Regulations providing for a classified Board, to
implement Proposal No. 2 would require the submission at a future shareholders'
meeting of an appropriate amendment to KeyCorp's Regulations and such amendment
would require the affirmative vote of three-quarters of KeyCorp's Common Shares.
A vote in favor of Proposal No. 2 is only an advisory recommendation to the
Board of Directors.
Vote Required. Approval of Proposal No. 2 will require the affirmative
vote of a majority of the KeyCorp Common Shares represented in person or by
proxy at the Annual Meeting.
12
<PAGE> 17
PROPOSAL NO. 3
The following proposal ("Proposal No. 3") was submitted for inclusion in
this Proxy Statement by Dr. Allen Wolff, 1553 So. Carpenter Road, Brunswick,
Ohio 44212. Dr. Wolff owns approximately 500 KeyCorp Common Shares.
Shareholder Proposal and Statement. "There are apparently very few
stockholders who have the inclination to try to read the annual report and
among those who try, many are unable to. For those who do wade through the
entire report, they will find many inequities and there remain others to be
revealed. It seems that many Boards feel that the annual meeting is an
intrusion into their realm and that stockholders should have little input,
save for some glad-handing and a few questions by the few who attend. If
more stockholders took the time and effort to read, I am sure fewer would
vote with management on many of the self-serving issues that are proposed
by them. On the other hand, if more shareholders realized how the voting is
weighted against them, they would (should) be up-in arms.
"For instance, did you know that if your shares are held in street
name (by a broker) and you don't return the proxy (or don't even receive
it), the broker can vote your shares (in favor of management's slate)?
"Did you know that if you return the signed proxy card but do not mark
one or more of the issues (because you don't understand it or have no
opinion), your number of shares will be voted with management?
"Do you realize that management has nominated exactly the number of
directors as there are directorships to be filled and that no matter how
few votes a director-candidate receives, he/she will still be elected. To
nominate someone from the floor of the annual meeting is an exercise in
futility -- due to the lack of numbers in attendance and the fact that
management already controls (almost) all of the proxies returned by mail.
Any proposal brought up at the annual meeting NOT favored by management, if
not deemed to be improper, will be defeated for the same reason.
"Last year, some KeyCorp (apparently) employee-shareholders received
their proxy statement on May 16th, which was exactly the last day "ballots"
were to be in. These 401(k) shareholders were apparently disenfranchised
because their proxies could be (would be) voted for them (in favor of
management) even though they didn't have the opportunity. Their only
recourse would be to travel to the annual meeting and vote in
person -- although the company might not be able to verify their holdings
in a street name. My questioning of the CEO and the Wachovia Bank on this
issue did not receive a reply, until very late. Management regretted this
error but felt, had these shareholders voted it would not have changed the
outcome.
"My proposal is very simple. In future proxies of this corporation,
there will be no discretionary voting. The proxies signed will be
considered represented and help to make up a quorum; the proxies counted
will be on those issues actually marked by the shareholder. Contrary to
management's opinion, any future unmarked proxies would NOT be votes
AGAINST an issue. They would be simply non-votes; therefore, those tallying
the proxies need only compare the votes FOR versus the number AGAINST or
WITHHELD. I don't see how any shareholder, in his right mind, could be
against this proposal.
"If you agree, please mark FOR; if you disagree, mark AGAINST. Please
note: Proxies unmarked on this issue will be counted as voting AGAINST."
13
<PAGE> 18
Board of Directors Recommendation and Statement. The Board of Directors
recommends that shareholders vote AGAINST Proposal No. 3 for the following
reasons.
If adopted, Proposal No. 3 would mean that any proxy cards which are
returned without specific voting instructions would not be voted at meetings of
shareholders and, since many shareholders do not mark their proxy cards, would
become in effect votes against the proposal whether or not the shareholders
objected to the proposal. Authorizing management to vote unmarked proxy cards
provides KeyCorp shareholders with a convenient way to participate in
shareholders' meetings. KeyCorp understands that many institutional shareholders
who sign a great many proxy cards for numerous companies in which they have
investments appreciate the convenience of voting as management recommends
without the necessity of marking each proposal box, a process which is of little
inconvenience for one proxy card but a burden when dealing with many proxy
cards.
In addition, Proposal No. 3 assumes that many shareholders who sign and
return their proxy cards do not intend to cast any vote -- an assumption KeyCorp
cannot make. Rather, KeyCorp believes that every shareholder that returns a
properly signed proxy card does intend either to cast a vote or to select a
proxy to represent that shareholder's interests at a meeting he or she chooses
not to attend. The Board of Directors is obligated to give effect to the
opinions of all shareholders who wish to participate, whether those shareholders
choose to do so by marking the proxy card with a specific vote or simply by
returning the proxy card without specific voting instructions and thereby
conferring authority in a proxy to vote on the shareholder's behalf.
The proponent also states that unmarked proxies should not be voted by
management because shareholders who return unmarked cards may not understand the
issues. KeyCorp is confident that its shareholders do understand the issues on
which they are asked to vote.
Since the Proxy Statement and proxy card clearly state in several places
that any unmarked proxies will be voted in accordance with the recommendations
of the Board of Directors and since a shareholder who is willing to take the
time to sign their proxy card will probably observe that statement, it seems
unlikely that many shareholders would be confused or surprised by the procedure.
With approximately 47% of KeyCorp's shares held by institutional shareholders,
it is important for KeyCorp to make voting by those shareholders as convenient
as possible in order to have sufficient shares represented at its shareholder
meetings to have a quorum.
KeyCorp feels it is important for shareholders to understand exactly what
Proposal No. 3 will address. It is true, as the proponent states, that if
shareholders adopt Proposal No. 3, unmarked proxies will no longer be voted by
management in its discretion.
Shareholders must understand, however, that Proposal No. 3 will not affect
the way brokers vote shares held in street name or the way shares held by
KeyCorp's employees in KeyCorp's 401(k) plan will be voted by the plan trustee.
For example, if a shareholder holding shares in street name fails to return a
proxy card to their broker, brokers do have the ability to vote such
shareholder's shares with respect to certain types of issues as the broker sees
fit. Sometimes brokers vote with management and sometimes they do not. Proposal
No. 3 will not change the ability of brokers to vote shares at their discretion.
Second, if a shareholder holds shares in KeyCorp's 401(k) plan and does not
return a voting instruction card with respect to those shares, the shares will
be voted by the plan trustee. The trustee is obligated by the plan documents to
vote unvoted shares in the same proportion as voted shares. For example, suppose
14
<PAGE> 19
participants holding 50% of the plan's shares return their voting instruction
cards, with 60% of the voted shares voted for a certain issue and 40% of the
voted shares voted against. The plan trustee must vote the unvoted portion of
the plan's shares in the same proportion: 60% for and 40% against. Proposal No.
3 will not change the way the plan trustee is required to vote shares.
Vote Required. Approval of Proposal No. 3 will require the affirmative
vote of a majority of the KeyCorp Common Shares represented in person or by
proxy at the Annual Meeting.
PROPOSAL NO. 4
The following proposal ("Proposal No. 4") was submitted for inclusion in
this Proxy Statement by Dr. Edward S. George, 89 Corning Hill, Glenmont, New
York 12077. Dr. George owns approximately 1,800 KeyCorp Common Shares.
Shareholder Proposal and Statement. "Whereas the dividend is the
first casualty in any economic downturn and the stockholder is the first
casualty and the last to benefit from an upturn, be it
"Resolved: That when a dividend is cut, it is recommended that no
salaries will be increased or any stock options for executive officers
allowed until the dividend is restored to its original amount before the
cut.
"The bullet must be large enough to enable the executives and
employees as well as the stockholders to get their teeth on it."
Board of Directors Recommendation and Statement. The Board of Directors
recommends that shareholders vote AGAINST Proposal No. 4 for the following
reasons.
Proposal No. 4 seeks to limit KeyCorp's ability to increase salaries and
grant stock options to its executive officers in circumstances where dividends
are reduced. KeyCorp believes this limitation is inappropriate for several
reasons. First, KeyCorp believes that it is in the best interests of KeyCorp and
its shareholders to link executive compensation to individual performance as
well as corporate performance. Adopting a compensation program which is tied
solely to dividend rates would fail to recognize significant individual
performance by KeyCorp's executive officers. Second, under KeyCorp's current
executive compensation program, a relatively large portion of senior executive
compensation is "at risk," i.e. subject to incentive compensation plans.
KeyCorp's compensation program for senior executives was designed with the
objective that KeyCorp's senior executives would receive less total compensation
than that of comparable executives at peer companies in periods where KeyCorp's
performance is poorer than performance of peer companies and receive superior
total compensation when performance is superior to the performance of such
companies. Thus, major aspects of the proposal are built into KeyCorp's current
compensation programs. Finally, the proposal could cause executives, who may
have the ability directly to impact KeyCorp's earnings and dividends, to focus
on short-term results which could be detrimental to KeyCorp's continued
long-term success. The proposal could discourage management from adopting
programs that would strengthen KeyCorp's financial position in the long term if
those programs might reduce dividends for the short term.
It is important to note that KeyCorp has never decreased its dividend since
it went public. This fact demonstrates that KeyCorp's compensation structure has
consistently produced positive results for its shareholders for more than 30
years.
15
<PAGE> 20
Vote Required. Approval of Proposal No. 4 will require the affirmative
vote of a majority of the KeyCorp Common Shares represented in person or by
proxy at the Annual Meeting.
INDEPENDENT AUDITORS
The Board of Directors of KeyCorp, acting upon the recommendation of its
Audit Committee, has appointed Ernst & Young LLP as its independent auditors to
examine the financial statements of KeyCorp and its subsidiaries for the year
1996. Ernst & Young LLP has conducted the annual audit of KeyCorp's financial
statements since 1959. The Board of Directors recommends ratification of the
appointment of Ernst & Young LLP. The favorable vote of the holders of a
majority of the KeyCorp Common Shares represented in person or by proxy at the
Annual Meeting will be required for such ratification.
A representative of Ernst & Young LLP will be present at the meeting with
an opportunity to make a statement if such representative desires to do so and
to respond to appropriate questions.
Although shareholder approval of this appointment is not required by law or
binding on the Board, the Board believes that shareholders should be given the
opportunity to express their views. If the shareholders do not ratify the
appointment of Ernst & Young LLP as KeyCorp's independent auditors, the Board
will consider this vote in determining whether or not to continue the engagement
of Ernst & Young LLP.
16
<PAGE> 21
EXECUTIVE OFFICERS
Executive officers of KeyCorp are principally responsible for making policy
for KeyCorp, subject to the supervision and direction of KeyCorp's Board of
Directors. Mr. Gillespie is President and Chief Executive Officer of KeyCorp for
a term expiring December 31, 1998. All other executive officers hold their
respective office or offices for such term as may be prescribed by the Board
(generally, officers are elected annually) and until such persons' successors
have been chosen. Messrs. Gillespie, Allen, and Noall and certain other
executive officers have employment agreements with KeyCorp. All other executive
officers have severance or change of control agreements with KeyCorp.
There are no family relationships among executive officers. Other than
Messrs. Cone, Helfrich, Simonson and Somers, all have been employed in officer
capacities with KeyCorp, Old Key, or their subsidiaries for at least the past
five years.
Set forth below are the names and ages of the executive officers of KeyCorp
as of February 16, 1996, positions held during the past five years and the year
from which held, and, in parentheses, the year they first became executive
officers of either KeyCorp or Old Key.
GARY R. ALLEN (47)
1994 to present: Senior Executive Vice President and Chief Banking Officer,
KeyCorp; 1993-1994: Executive Vice President and Chief Banking Officer, Old Key;
1991-1993: President and Chief Executive Officer, Key Bank of New York;
1988-1993: Chief Executive Officer, Key Bank of Western New York. (1993)
KEVIN M. BLAKELY (44)
1994 to present: Executive Vice President, KeyCorp; 1992-1994: Executive
Vice President, Credit Policy and Risk Management, Society National Bank;
1990-1992: Senior Vice President, Loan Review, Ameritrust Company, N.A. (1994)
MICHAEL A. BUTLER (37)
1994 to present: Executive Vice President, KeyCorp; 1993-1994: Executive
Vice President, Old Key; 1991-1993: Senior Vice President, Loan Review, Old Key;
1987-1991: Vice President, Old Key. (1993)
STEPHEN A. CONE (45)
1994 to present: Executive Vice President, KeyCorp; 1993-1994: Executive
Vice President, Citicorp; 1987-1993: Senior Vice President, American Express
Corporation. (1996)
ROBERT W. GILLESPIE (51)
1995 to present: Chief Executive Officer and President, KeyCorp; 1994-1995:
President and Chief Operating Officer, KeyCorp; 1988-1994: Chairman of the
Board, Chief Executive Officer, and President, Society Corporation. (1981)
ALLEN J. GULA, JR. (41)
1994 to present: Executive Vice President, KeyCorp; 1992-1994: Executive
Vice President and Group Executive, Information Technology and Operations,
Society Corporation; 1990-1992: Senior Vice President, Society Corporation.
(1992)
17
<PAGE> 22
THOMAS E. HELFRICH (45)
1995 to present: Executive Vice President, KeyCorp; 1986-1995: Senior Vice
President-Human Resources, The Travelers Inc. (1995)
LEE IRVING (47)
1995 to present: Executive Vice President and Chief Accounting Officer,
KeyCorp; 1994-1995: Executive Vice President, Treasurer, and Chief Accounting
Officer, KeyCorp; 1986-1994: Senior Vice President and Treasurer, Old Key.
(1986)
HENRY L. MEYER III (46)
1995 to present: Senior Executive Vice President and Chief Operating
Officer, KeyCorp; 1994-1995: Senior Executive Vice President and Chief Banking
Officer, KeyCorp; 1991-1994: Vice Chairman of the Board and Chief Banking
Officer, Society Corporation; 1990-1991: Executive Vice President, Society
Corporation; 1994 to present: Chairman of the Board and Chief Executive Officer,
Society National Bank; 1993-1994: President and Chief Executive Officer, Society
National Bank; 1990-1993: President and Chief Operating Officer, Society
National Bank. (1987)
ROGER NOALL (60)
1995 to present: Senior Executive Vice President, Chief Administrative
Officer, General Counsel and Secretary, KeyCorp; 1994-1995: Senior Executive
Vice President and Chief Administrative Officer, KeyCorp; 1987-1994: Vice
Chairman of the Board and Chief Administrative Officer, Society Corporation.
(1985)
JOHN A. SIMONSON (50)
1995 to present: Executive Vice President and Treasurer, KeyCorp;
1992-1995: Executive Vice President, Society National Bank; 1991 to present:
Owner, Maple Grove Tree Farm (sole proprietorship); 1985-1991: Executive Vice
President and Chief Financial Officer, Comerica, Inc. (1995)
K. BRENT SOMERS (47)
1996 to present: Senior Executive Vice President and Chief Financial
Officer, KeyCorp; 1994-1995: Executive Vice President and Chief Financial
Officer, The United States Shoe Corporation; 1990-1994: Vice President and Chief
Financial Officer, The United States Shoe Corporation. (1996)
BRUCE E. TOFTE (52)
1994 to present: Executive Vice President, KeyCorp; 1987-1994: Executive
Vice President and Chief Control Officer, Old Key. (1987)
JAMES W. WERT (49)
1995 to present: Senior Executive Vice President and Chief Investment
Officer, KeyCorp; 1994-1995: Senior Executive Vice President and Chief Financial
Officer, KeyCorp; 1990-1994: Vice Chairman of the Board and Chief Financial
Officer, Society Corporation. (1976)
18
<PAGE> 23
COMPENSATION OF EXECUTIVE OFFICERS
Summary. The following table sets forth the compensation paid by KeyCorp
and its subsidiaries for each of the previous three years to the individuals who
served as KeyCorp's Chief Executive Officer during 1995 and each of the
remaining four highest paid executive officers of KeyCorp at December 31, 1995.
Amounts set forth in this table for Messrs. Riley and Allen for periods prior to
the Merger were paid by Old Key.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ---------------- ----------
-------------------------------------- SECURITIES LONG-TERM
OTHER ANNUAL UNDERLYING INCENTIVE
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS(#) PAYOUTS
- ------------------------------- ---- -------- -------- ------------ ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Gillespie 1995 $754,167 $404,000(1) -- (4) 40,000 $ 407,451(7)
President and Chief Executive 1994 685,000 465,000(1) --(4) 120,000 390,757(7)
Officer 1993 599,000 625,000(2) -- (4) 40,000 305,784(7)
Gary R. Allen 1995 435,750 187,000(1) -- (4) 35,868 0
Senior Executive Vice 1994 425,927 230,000(1) $350,043(5) 70,585 0
President and Chief 1993 348,333 178,125(3) -- (4) 17,387(6) 0
Banking Officer
Henry L. Meyer III 1995 435,750 187,000(1) -- (4) 20,000 244,112(7)
Senior Executive Vice 1994 407,250 230,000(1) -- (4) 60,000 237,281(7)
President and Chief 1993 363,000 300,000(2) -- (4) 20,000 182,055(7)
Operating Officer
Roger Noall 1995 435,750 187,000(1) -- (4) 20,000 244,112(7)
Senior Executive Vice 1994 407,250 230,000(1) -- (4) 60,000 237,281(7)
President, Chief 1993 363,000 300,000(2) -- (4) 20,000 182,055(7)
Administrative Officer,
General Counsel and Secretary
James W. Wert 1995 435,750 187,000(1) -- (4) 20,000 244,112(7)
Senior Executive Vice 1994 407,250 230,000(1) -- (4) 60,000 237,281(7)
President and Chief 1993 363,000 300,000(2) -- (4) 20,000 182,055(7)
Investment Officer
Victor J. Riley, Jr. 1995 825,000 459,000(1) 254,020(5) 40,000 777,800(8)
Chairman of the Board 1994 784,936 565,000(1) 320,920(5) 80,000 0
1993 720,000 720,000(3) -- (4) 4,519(6) 2,259,000(9)
<CAPTION>
NAME AND PRINCIPAL POSITION ALL OTHER
- ------------------------------- COMPENSATION
----------------
<S> <C><C>
Robert W. Gillespie $109,974(10)
President and Chief Executive 108,094(11)
Officer 211,011(12)
Gary R. Allen 44,310(13)
Senior Executive Vice 27,575(14)
President and Chief 16,217(15)
Banking Officer
Henry L. Meyer III 58,793(16)
Senior Executive Vice 59,115(17)
President and Chief 111,915(18)
Operating Officer
Roger Noall 67,304(19)
Senior Executive Vice 69,010(20)
President, Chief 117,379(21)
Administrative Officer,
General Counsel and Secretary
James W. Wert 60,101(22)
Senior Executive Vice 60,708(23)
President and Chief 112,780(24)
Investment Officer
Victor J. Riley, Jr. 164,556(25)
Chairman of the Board 82,306(26)
38,926(27)
</TABLE>
- ---------------
(1) Amounts awarded under KeyCorp's Short Term Incentive Compensation Plan for
the respective fiscal years, whether paid in cash or deferred.
(2) Amounts awarded under Society's Management Incentive Compensation Plan for
the fiscal year 1993, whether paid in cash or deferred.
(3) Amounts awarded under Old Key's Executive Incentive Compensation Plan for
the fiscal year 1993, whether paid in cash or deferred.
(4) Other annual compensation received in the respective fiscal years was in
the form of perquisites, the amount of which did not exceed reporting
thresholds.
(5) Each perquisite or other personal benefit which exceeds 25% of the total
perquisites and other personal benefits received by Messrs. Riley and Allen
is as follows: Mr. Riley (1994) -- $116,250 (moving allowance), $106,950
(tax gross-up on moving allowance); Mr. Riley (1995) -- $96,611 (use of
corporate aircraft), $82,822 (tax gross-up on use of corporate aircraft);
Mr. Allen (1994) -- $175,056 (moving allowance), $161,052 (tax gross-up on
moving allowance).
(6) This number has been adjusted to reflect the conversion of each share of
Old Key common stock into 1.205 KeyCorp Common Shares.
(7) Amounts awarded under the Society Corporation Long Term Incentive
Compensation Plan for the three year cycles ending in such respective
fiscal years, whether paid in cash or deferred.
(8) Amount awarded under the KeyCorp 1994-1995 Performance Unit Plan for Mr.
Riley for the two year cycle ending in fiscal year 1995, whether paid in
cash or deferred.
19
<PAGE> 24
(9) Amount awarded under Old Key's Performance Compensation Plan for the three
year cycles ending in fiscal year 1993, whether paid in cash or deferred.
The amount shown is made up of $1,126,000 attributable to 1993 and
$1,133,000 attributable to 1994, both of which amounts were paid in 1993.
(10) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $84,937
(amounts contributed under KeyCorp Excess 401(k) Savings Plan); $16,037
(universal life insurance premiums).
(11) $9,240 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $83,205 (amounts contributed under KeyCorp Excess 401(k)
Savings Plan); $15,649 (universal life insurance premiums).
(12) $13,491 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $190,298 (amounts contributed under the Society Supplemental
Savings Plan); $7,222 (universal life insurance premiums).
(13) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $28,365
(amounts contributed under KeyCorp Excess 401(k) Savings Plan); $6,945
(split-dollar life insurance premiums).
(14) $6,750 (amounts contributed under the Old Key Profit Sharing Plus Plan);
$13,800 (amounts contributed under KeyCorp Excess 401(k) Savings Plan);
$7,025 (split-dollar life insurance premiums).
(15) $8,994 (amounts contributed to the Old Key Profit Sharing Plus Plan);
$7,223 (split-dollar life insurance premiums).
(16) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $43,012
(amounts contributed under KeyCorp Excess 401(k) Savings Plan); $6,781
(universal life insurance premiums).
(17) $9,240 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $43,232 (amounts contributed under KeyCorp Excess 401(k)
Savings Plan); $6,643 (universal life insurance premiums).
(18) $13,491 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $95,358 (amounts contributed under Society's Supplemental
Savings Plan); $3,066 (universal life insurance premiums).
(19) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $43,012
(amounts contributed under KeyCorp Excess 401(k) Savings Plan); $15,292
(universal life insurance premiums).
(20) $9,240 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $43,232 (amounts contributed under KeyCorp Excess 401(k)
Savings Plan); $16,538 (universal life insurance premiums).
(21) $13,491 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $96,255 (amounts contributed under Society's Supplemental
Savings Plan); $7,633 (universal life insurance premiums).
(22) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan); $43,012
(amounts contributed under KeyCorp Excess 401(k) Savings Plan); $8,089
(universal life insurance premiums).
(23) $9,240 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $43,232 (amounts contributed to KeyCorp Excess 401(k)
Savings Plan); $8,236 (universal life insurance premiums).
(24) $13,491 (amounts contributed under the Society Employee Stock Purchase and
Savings Plan); $95,640 (amounts contributed under Society's Supplemental
Savings Plan); $3,649 (universal life insurance premiums).
(25) $9,000 (amounts contributed under the KeyCorp 401(k) Savings Plan);
$114,708 (amounts contributed under KeyCorp Excess 401(k) Savings Plan);
$3,800 (universal life insurance premiums); $37,048 (split-dollar life
insurance premiums).
(26) $6,750 (amounts contributed under the Old Key Profit Sharing Plus Plan);
$33,900 (amounts contributed under KeyCorp Excess 401(k) Savings Plan);
$3,800 (universal life insurance premiums); $37,856 (split-dollar life
insurance premiums).
(27) $8,994 (amounts contributed under the Old Key Profit Sharing Plus Plan);
$29,932 (split-dollar life insurance premiums).
20
<PAGE> 25
Option Grants. The following table provides information regarding grants of
stock options made during the year ended December 31, 1995, to each of the
executive officers named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR TEN
UNDERLYING GRANTED TO OR BASE YEAR OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ------------------------------------ -------------- -------------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Gillespie 40,000(1) 1.7% $26.125 (3) 1/18/05 657,195 1,665,461
Gary R. Allen 15,623(2) 0.7% 31.875 (3) 12/31/96 -- --
-- --
20,245(2) 0.9% 36.250 (3) 12/31/96
Henry L. Meyer III 20,000(1) 0.9% 26.125 (3) 1/18/05 328,597 832,730
Roger Noall 20,000(1) 0.9% 26.125 (3) 1/18/05 328,597 832,730
James W. Wert 20,000(1) 0.9% 26.125 (3) 1/18/05 328,597 832,730
Victor J. Riley, Jr. 40,000(1) 1.7% 26.125 (3) 1/18/05 657,195 1,665,461
</TABLE>
- ---------------
(1) These options were granted under the Amended and Restated 1991 Equity
Compensation Plan and became exercisable on January 18, 1996 for all
officers with the exception of Mr. Riley. Mr. Riley's options became
exercisable on December 31, 1995.
(2) Options granted under KeyCorp's Career Equity Program ( the "Program")
established prior to the Merger by Old Key. Participants are former senior
officers of Old Key who were selected for participation in the Program on
the basis of their responsibilities and potential for contribution to
enhance shareholder value, recognizing the number of years remaining to
expected retirement (at least five years). After the participant makes a
personal investment, the Program generates semi-annual share acquisitions
through automatic stock option exercises that can lead to increased share
ownership on the part of the executives in the Program. The executives must
retain the shares for the five-year duration of the Program so that the
amounts ultimately realized by the executives are contingent on the
long-term market price of KeyCorp stock.
(3) The exercise price equals the market price of a KeyCorp Common Share on the
date of the option grant.
- ---------------
The options reported in the preceding table for Messrs. Gillespie, Meyer,
Noall, Wert and Riley were granted on January 18, 1995, at an exercise price
equal to the market price of KeyCorp Common Shares on that date, which was
$26.125. Based on this stock price, the market value of KeyCorp Common Shares at
the end of the ten year option period using 5% and 10% compounded annual returns
would be $42.55 and $67.76, respectively.
21
<PAGE> 26
Option Exercises and Values. The following table provides information
regarding exercises of stock options during the year ended December 31, 1995, by
the executive officers named in the Summary Compensation Table, and the value of
such officers' unexercised stock options as of December 31, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/ OPTIONS/
SHARES SARS AT FY-END (#) SARS AT FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
- ------------------------------- --------------- ------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Robert W. Gillespie 30,000(2) 571,250 276,000/ 2,996,748/
200,000 1,555,000
Gary R. Allen 47,071 345,164 67,497/ 460,138/
40,000 284,000
Henry L. Meyer III 12,000 217,500 197,242/ 2,762,792/
100,000 777,500
Roger Noall 0 0 80,000/ 493,750/
100,000 777,500
James W. Wert 20,000 366,250 135,000/ 1,460,438/
100,000 777,500
Victor J. Riley, Jr. 0 0 553,620/ 9,315,520/
40,000 284,000
</TABLE>
- ---------------
(1) Based on a December 31, 1995 closing price for KeyCorp Common Shares which
equalled $36.25.
(2) Represents an exercise of stock appreciation rights only.
22
<PAGE> 27
Long Term Incentive Compensation. During 1995, KeyCorp's Compensation and
Organization Committee selected participants in the KeyCorp Long Term Cash
Incentive Compensation Plan for the 1995-1997 three-year compensation period.
Messrs. Riley, Gillespie, Allen, Meyer, Noall, and Wert were included as
participants. The Committee has determined objective criteria by which KeyCorp's
financial performance should be judged and distributions under the Plan should
be made. These criteria were based on the Committee's judgment of a range of
return on common equity that would warrant satisfactory to excellent results for
KeyCorp for the compensation period. Based on KeyCorp's 1995 salary grade market
points (i.e., average salaries for executives in the marketplace in similar
positions) upon which payments under the Plan will be based (which may change by
the time the awards are actually determined), the officers in the Summary
Compensation Table would be eligible to receive the following payments for the
compensation periods indicated.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
PERFORMANCE -----------------------------------------
NAME PERIOD THRESHOLD(1) TARGET MAXIMUM
- ---------------------------------------------------------- ----------- --------- -------- ----------
<S> <C> <C> <C> <C>
Robert W. Gillespie 1995-1997 $ 60,067 $240,267 $ 555,617
Gary R. Allen 1995-1997 26,563 106,250 245,703
Henry L. Meyer III 1995-1997 26,563 106,250 245,703
Roger Noall 1995-1997 26,563 106,250 245,703
James W. Wert 1995-1997 26,563 106,250 245,703
Victor J. Riley, Jr. 1995(2) 20,850 83,400 192,863
</TABLE>
- ---------------
(1) If the threshold is not met, no payouts will be made.
(2) Mr. Riley retired as an employee of KeyCorp on December 31, 1995. As a
result, his award under the KeyCorp Long Term Cash Incentive Compensation
Plan for the 1995-1997 compensation period will be on a pro rata basis for
the portion of the compensation period that he was an employee. The amounts
included in the table represent one-third of the amount that would be
applicable if Mr. Riley were a participant in the plan for the full
1995-1997 compensation period.
These executives are also participants in the KeyCorp Long Term Cash
Incentive Compensation Plan for the 1994-1996 compensation period, which has a
similar range of possible payouts except in Mr. Gillespie's case, the threshold,
target, and maximum for the 1994-1996 compensation period are $51,375, $205,500,
and $475,219, respectively. Mr. Riley's compensation for the 1994-1996
compensation period will be based on the pro rata portion of the compensation
period that he was an employee of KeyCorp. In addition, these executives, with
the exception of Messrs. Riley and Allen, were also participants in the Society
Corporation Long Term Incentive Compensation Plan for the 1993-1995 compensation
period, payouts under which are reflected in the Summary Compensation Table on
page 19 of this Proxy Statement under the heading "Long-Term Incentive Payouts."
23
<PAGE> 28
Pension Plan. KeyCorp's pension plan was revised effective January 1, 1995.
Substantially all officers and employees of KeyCorp and participating
subsidiaries are participants in the KeyCorp Cash Balance Pension Plan (the
"Pension Plan"). Certain officers, including all executives named in the Summary
Compensation Table on page 19 of this Proxy Statement, also participate in
related supplemental and excess retirement plans. The Pension Plan is a cash
balance plan that provides a pension based upon a hypothetical account balance
maintained for the participant to which accruals are made equal to a percentage
of the participant's compensation and to which interest is credited.
Certain officers have the option of electing grandfathered benefits under
the Pension Plan, which benefits are based upon years of participation in the
Pension Plan and average annual compensation for either the five highest
consecutive years during the last ten years of employment for former Society
employees or the three highest consecutive years during the last five years of
employment for former Old Key employees. All executives named in the Summary
Compensation Table have elected to receive grandfathered benefits. The following
table sets forth the estimated maximum annual benefits payable under the Pension
Plan to participants who (1) have elected grandfathered benefits under the
Pension Plan and are participants in a supplemental retirement plan, (2) attain
the Social Security retirement age on December 31, 1995, and (3) elect to
receive a straight lifetime annuity.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
AVERAGE WITH INDICATED YEARS OF PARTICIPATION
FINAL ----------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 400,000 $ 220,000 $ 260,000 $ 300,000 $ 300,000 $ 300,000
500,000 275,000 325,000 375,000 375,000 375,000
600,000 330,000 390,000 450,000 450,000 450,000
700,000 385,000 455,000 525,000 525,000 525,000
800,000 440,000 520,000 600,000 600,000 600,000
900,000 495,000 585,000 675,000 675,000 675,000
1,000,000 550,000 650,000 750,000 750,000 750,000
1,200,000 660,000 780,000 900,000 900,000 900,000
1,400,000 770,000 910,000 1,050,000 1,050,000 1,050,000
1,600,000 880,000 1,040,000 1,200,000 1,200,000 1,200,000
1,800,000 990,000 1,170,000 1,350,000 1,350,000 1,350,000
2,000,000 1,100,000 1,300,000 1,500,000 1,500,000 1,500,000
2,400,000 1,320,000 1,560,000 1,800,000 1,800,000 1,800,000
2,600,000 1,430,000 1,690,000 1,950,000 1,950,000 1,950,000
</TABLE>
All benefit amounts are subject to the annual pension limitations imposed
by the Internal Revenue Code for qualified plans; however, the extent of any
reduction will vary according to the limits existing at the time pension
payments commence. Amounts under the Pension Plan reduced by Internal Revenue
Code limitation may be paid under an excess benefit retirement plan. The
benefits are not subject to any deduction for social security or any other
offset.
Compensation for purposes of computing benefits under the Pension Plan and
excess and supplemental plans is total base pay and incentive compensation paid
during a calendar year, plus amounts deducted for the 401(k) and flexible
benefits plans during such year, but does not include amounts attributable to
stock options or receipt of non-cash remuneration that is included in the
participant's income for Federal income tax purposes. Compensation for purposes
of the Pension Plan and excess and supplemental plans is substantially
24
<PAGE> 29
the same as shown in the Summary Compensation Table after excluding stock
options, "all other compensation," and "other annual compensation." Normal
retirement age is 65. The Pension Plan requires 5 years of service for vesting.
The excess and supplemental plans require 5 years of service for vesting for the
former Old Key employees, including Mr. Allen, and 10 years of service and the
attainment of age 55 for former Society employees, including Messrs. Gillespie,
Meyer, Noall, and Wert. Messrs. Gillespie, Allen, Meyer, Noall, Wert and Riley
were credited under the excess and supplemental plans with 27, 23, 23, 12, 20,
and 31 years of service, respectively, at year-end 1995.
EMPLOYMENT, SEVERANCE, AND CHANGE OF CONTROL AGREEMENTS
KeyCorp is a party to employment agreements, severance agreements, and
change of control agreements with Mr. Riley and certain of its executive
officers.
Employment and Consulting Agreement With Mr. Riley. KeyCorp and Mr. Riley
are parties to an employment and consulting agreement pursuant to which Mr.
Riley was employed by KeyCorp through December 31, 1995 (the "Employment
Period") and thereafter is to be retained by KeyCorp as an independent
contractor to serve as Chairman of the Board and Chairman of the Executive
Committee of the Board from January 1, 1996 through December 31, 1998 (the
"Independent Contractor Period").
During the Employment Period, Mr. Riley's compensation included an annual
base salary of $825,000 and Mr. Riley was a participant, along with other senior
executives of KeyCorp, in KeyCorp's Short Term Incentive Compensation Plan and,
on a pro rata basis, KeyCorp's Long Term Cash Incentive Compensation Plan. In
addition, Mr. Riley was the only participant in the "KeyCorp 1994-1995
Performance Unit Plan for Mr. Riley" under the terms of which he earned
$777,800, based on achieving the maximum goals specified by the plan for return
on average common equity and return on average total assets.
Upon his retirement from KeyCorp on December 31, 1995, Mr. Riley became
entitled to a retirement benefit determined under a Supplemental Retirement
Benefit Plan for executives of Old Key.
During the Independent Contractor Period, Mr. Riley's duties will be to
preside at meetings of the Board and of the Executive Committee and at
shareholder meetings of KeyCorp and to perform such other duties as he may be
specifically requested to perform by the Board or by KeyCorp's Chief Executive
Officer that he, in his sole discretion, agrees to perform. During the
Independent Contractor Period, KeyCorp is to pay Mr. Riley base annual
compensation of $600,000 and such additional amount, if any, as the Compensation
and Organization Committee may, in its sole discretion, authorize for payment to
Mr. Riley as incentive compensation.
If Mr. Riley's status as an independent contractor is terminated prior to
the end of the Independent Contractor Period for any reason (except by KeyCorp
for cause), KeyCorp is to pay to Mr. Riley or his estate or designated
beneficiary a lump sum equal to the sum of all base compensation that would have
been payable to Mr. Riley had he continued to perform services through December
31, 1998. Under the agreement, KeyCorp would have cause to terminate Mr. Riley's
independent contractor status if Mr. Riley were convicted of a felony, if he
continued to engage in activities presenting material conflicts of interest
after notice in writing from the Board, or if a federal or state regulatory
agency barred Mr. Riley from service with KeyCorp.
Mr. Riley is entitled to continuing indemnification to the fullest extent
permitted by Ohio law for actions against him by reason of his being or having
been a director or officer of KeyCorp or any related entity; to
25
<PAGE> 30
payment of any legal fees incurred in enforcing his rights under his employment
and consulting agreement; and to ancillary benefits incident to the performance
of his duties under that agreement.
Employment Agreement With Mr. Gillespie. KeyCorp and Mr. Gillespie are
parties to an employment agreement, pursuant to which Mr. Gillespie was employed
by KeyCorp as President and Chief Operating Officer through September 1, 1995
and is thereafter to be employed by KeyCorp as President and Chief Executive
Officer through December 31, 1998. Under the employment agreement, Mr. Gillespie
is to be paid a base salary of not less than $700,000 per year and is entitled
to participate in all KeyCorp executive incentive compensation plans including
KeyCorp's short and long term incentive compensation plans. The employment
agreement provides for an additional two years of compensation and benefits to
Mr. Gillespie (through December 31, 2000) if, in 1998, the employment agreement
is not mutually extended or a new employment agreement is not entered into and
Mr. Gillespie elects to terminate his employment and receive those benefits.
Under the employment agreement, Mr. Gillespie may terminate his employment
for good reason (and receive post-termination benefits) under certain
circumstances whether or not a change of control of KeyCorp occurs. Those
circumstances that will constitute good reason under the employment agreement
whether or not a change of control occurs include (a) demotion or removal of Mr.
Gillespie from his executive positions (i.e., President and Chief Executive
Officer); (b) a reduction in Mr. Gillespie's base salary or participation in
benefit plans; (c) a good faith determination by Mr. Gillespie that his
responsibilities, duties, and authority have been materially reduced from those
contemplated by the employment agreement; or (d) relocation of Mr. Gillespie's
principal place of employment outside the Cleveland metropolitan area. Those
circumstances that will constitute good reason under the employment agreement
after a change of control of KeyCorp occurs also include any reduction in Mr.
Gillespie's incentive compensation or a good faith determination by Mr.
Gillespie that his responsibilities or duties have been materially reduced from
their level before the change of control or that he is unable to carry out the
responsibilities of his positions as a result of the change of control. Under
the employment agreement, a change of control will be deemed to have occurred
(a) if any person acquires 25% or more of the voting stock of KeyCorp; (b) if
the composition of the Board of Directors changes during any period of 24
consecutive calendar months so that a majority of the individuals at the end of
the period were neither on the Board nor approved by a majority of the
individuals who were on the Board at the beginning of the period; (c) if KeyCorp
merges with another corporation and KeyCorp shareholders receive or retain in
the merger less than 60 percent of the outstanding voting securities of the
surviving corporation; (d) if all or substantially all of the assets of KeyCorp
are sold or otherwise transferred; or (e) if a plan of liquidation or
dissolution of KeyCorp is adopted by its shareholders.
Under the employment agreement, if Mr. Gillespie's employment with KeyCorp
is terminated before his 65th birthday for any reason other than voluntary
resignation by Mr. Gillespie (without good reason) before December 31, 1998 or
termination by KeyCorp for cause, and Mr. Gillespie (or his estate or designated
beneficiary) is entitled to receive retirement benefits under any KeyCorp
retirement plan after March 26, 1999 (Mr. Gillespie's 55th birthday), KeyCorp
will pay a supplemental retirement benefit in an amount sufficient to provide
Mr. Gillespie the same aggregate benefit that he would have received if he had
continued in the employ of KeyCorp through his 65th birthday (by eliminating any
reduction because he started receiving benefits before his 65th birthday and
giving him credit for additional years of service for the period after his
termination date and before his 65th birthday). Under the employment agreement,
KeyCorp will have "cause" to terminate Mr. Gillespie's employment before a
change of control if he commits a felony, acts
26
<PAGE> 31
dishonestly in a way that is materially inimical to the best interests of
KeyCorp, competes with KeyCorp, or totally abandons his duties and
responsibilities. KeyCorp will have "cause" to terminate Mr. Gillespie's
employment after a change of control if he is convicted of a felony, acts
dishonestly and feloniously in a way that is materially inimical to the best
interests of KeyCorp, or competes with KeyCorp.
If a change of control occurs while Mr. Gillespie is employed under the
employment agreement and an exercise by him of the right referred to in this
paragraph would not conflict with the treatment for accounting purposes of any
transaction entered into in connection with the change of control as a pooling
of interests, Mr. Gillespie will be entitled to surrender his rights in any
outstanding KeyCorp stock options (whether or not then exercisable) that have
been outstanding for at least six months, in return for a payment equal to the
spread on those options.
Under the employment agreement, Mr. Gillespie is entitled to continuing
indemnification to the fullest extent permitted by Ohio law for actions against
him by reason of his being or having been a director or officer of KeyCorp or
any related entity; to payment of certain legal fees incurred in enforcing his
rights under his employment agreement; to ancillary benefits incident to the
performance of his duties under that agreement; and to a special supplemental
death benefit if he dies while employed by KeyCorp and he is survived by his
wife. The special supplemental death benefit, if payable, would consist of
monthly installments to Mr. Gillespie's wife (or to her estate), through the
15th anniversary of Mr. Gillespie's death. Each monthly payment would be in an
amount that, when added to the monthly survivor benefits, if any, payable to Mr.
Gillespie's wife under all KeyCorp retirement plans, equals one third of the
monthly compensation (base salary and incentive compensation) that Mr. Gillespie
would have received during that month if he had been terminated by KeyCorp
without cause.
Regulations Provision Regarding Positions To Be Held by Mr. Gillespie.
KeyCorp's Regulations, as amended effective as of March 1, 1994, provide in part
that Mr. Gillespie may not be removed by action of the Board of Directors from
any office held by him except by the affirmative vote of three-quarters of the
entire authorized Board of Directors and that any such removal shall be without
prejudice to his contract rights.
Employment Agreement With Mr. Noall. KeyCorp and Mr. Noall are parties to
an employment agreement pursuant to which Mr. Noall is to be employed by KeyCorp
as its Chief Administrative Officer through February 28, 1997 (the end of the
"Scheduled Term") at a base salary of not less than $441,000 per year. If Mr.
Noall remains in the employ of KeyCorp through the end of the Scheduled Term,
his status as an employee of KeyCorp will thereafter be continued for a three
year "Supplemental Term" during which he will have such duties and
responsibilities as KeyCorp and he may mutually agree. During the Supplemental
Term KeyCorp will pay to Mr. Noall compensation at a rate equal to the sum of
his base salary (at the highest rate in effect during the Scheduled Term) and
his average annual incentive compensation (the average of his two highest years
of short-term incentive compensation and the average of his two highest years of
long-term incentive compensation, in both cases during the five calendar year
period preceding his termination date). If Mr. Noall dies after the Supplemental
Term has begun, the compensation that would otherwise have been payable to him
during the Supplemental Term is to be paid to his estate or to a beneficiary
designated by him.
The employment agreement provides that following any termination of Mr.
Noall's employment (other than a termination by KeyCorp for cause during the
Scheduled Term), KeyCorp will provide a supplemental retirement benefit to Mr.
Noall so that he will receive, in the aggregate, the amounts of retirement
benefits to which he would have been entitled under all KeyCorp retirement plans
if his employment with Society had
27
<PAGE> 32
commenced on June 20, 1973. In addition, if Mr. Noall remains in the employ of
KeyCorp through the end of the Supplemental Term as contemplated by the
employment agreement, he will be entitled to begin receiving retirement benefits
immediately after the end of the Supplemental Term (and one month before his
normal retirement date) without any discount for early commencement of
retirement benefits.
Under the employment agreement, if Mr. Noall's employment is terminated
before the end of the Scheduled Term by KeyCorp without cause or by Mr. Noall
for good reason, Mr. Noall will be entitled to receive post-termination
compensation and benefits through the end of the Supplemental Term. The post-
termination compensation and benefits would include compensation continuation
payments at a rate equal to the sum of Mr. Noall's base salary and his average
annual incentive compensation, continued medical and life insurance benefits,
continued coverage under all retirement and savings plans (or the cash
equivalent thereof), and continuing treatment as an employee for purposes of
outstanding stock options.
Under the employment agreement, "good reason" will include, in all events,
any demotion, reduction in base salary, exclusion from full participation in
benefit plans maintained for senior executives of KeyCorp generally, or
relocation of Mr. Noall's principal place of employment outside of the Cleveland
metropolitan area.
Under the employment agreement, KeyCorp will have "cause" to terminate Mr.
Noall's employment during the Scheduled Term if he commits a felony, acts
dishonestly in a way that is materially inimical to the best interests of
KeyCorp, competes with KeyCorp, or totally abandons his duties and
responsibilities.
If a change of control occurs while Mr. Noall is employed under the
employment agreement and an exercise by him of the right referred to in this
paragraph would not conflict with the treatment for accounting purposes of any
transaction entered into in connection with the change of control as a pooling
of interests, Mr. Noall will be entitled to surrender his rights in any
outstanding KeyCorp stock options (whether or not then exercisable) that have
been outstanding for at least six months, in return for a payment equal to the
spread on those options. The definition of "change of control" in Mr. Noall's
employment agreement is the same as the definition of that term in Mr.
Gillespie's employment agreement.
Amended Employment and Severance Agreements With Officers Who Were Officers
of Old Key. KeyCorp and three of its executive officers (other than Mr. Riley)
who were officers of Old Key, including Mr. Allen, are parties to preexisting
employment and severance agreements (each of which contained change of control
provisions) and amendments to those agreements that were agreed to in
anticipation of the Merger.
In general, as amended, each employment agreement provides for the
employment of the officer through a specified term of employment, the expiration
dates of which vary, depending upon the officer, from December 31, 1994 to June
30, 1998. The expiration date of Mr. Allen's employment agreement is June 30,
1998. If the officer's employment is terminated by Keycorp without cause at any
time before the end of the specified term, the officer will be entitled to
receive all payments and benefits (including retirement benefits) to which the
officer would have been entitled had he continued to perform services under the
employment agreement through the end of the specified term.
In general, under the amendments to these employment and severance
agreements an officer may become entitled to post-termination benefits if the
officer's employment is terminated before March 1, 1997 (i.e., the third
anniversary of the Merger) by KeyCorp (other than for cause, disability, or
retirement) or by the officer for good reason. If an officer's employment is
terminated before March 1, 1997, under
28
<PAGE> 33
circumstances entitling the officer to post-termination benefits under the terms
of the amendment, the officer will be entitled to elect to receive (a) the
benefits, if any, called for under the officer's amended employment agreement or
(b) the benefits, if any, called for under the officer's amended severance
agreement or (c) a lump sum payment equal to 1/12 of the sum of the officer's
base salary at the time of termination and the officer's average annual
incentive compensation for the years 1991, 1992, and 1993, multiplied by 18
(i.e., 18 months of compensation). If the officer elects to receive the lump sum
payment, KeyCorp will also continue medical and life insurance coverage to the
officer for up to 18 months but not beyond the date the officer secures other
employment.
For purposes of the amended employment and severance agreements and the
amendments thereto, "cause" includes a material breach of the amended employment
agreement by the officer, misconduct as an executive of KeyCorp, unreasonable
neglect or refusal to perform assigned duties, conviction of a crime involving
moral turpitude, adjudication as a bankrupt, failure to follow reasonable
instructions of superior executive officers, or imposition by a bank regulatory
agency of a final order of suspension or removal for improper conduct, and "good
reason" includes any reduction in the officer's base salary, any reduction in
the officer's job grade or failure to provide the officer the same opportunities
with respect to incentive compensation, stock option grants, and other benefits
as are provided to other employees with the same job grade, and any requirement
that the officer relocate as a condition of employment.
Amended Change of Control Agreements With Officers Who Were Officers of
Society. KeyCorp and four of its executive officers (other than Messrs.
Gillespie and Noall) who were officers of Society, including Messrs. Meyer and
Wert, are parties to preexisting change of control agreements that were both
activated by, and amended in anticipation of, the Merger. Under the amended
change of control agreements an officer will become entitled to receive payments
and benefits if the officer's employment with KeyCorp is terminated for any
reason before March 1, 1997 (i.e., the third anniversary of the Merger), other
than termination for cause, disability, or death or voluntary resignation by the
officer except that the officer will be entitled to such payments and benefits
if the officer resigns voluntarily after the officer's base salary has been
reduced or the principal place of the officer's employment has been relocated.
For purposes of the amended change of control agreements, "cause" includes
conviction of a felony, dishonesty in the course of employment that constitutes
a felony and is materially inimical to the best interests of KeyCorp or a
subsidiary, and competing with KeyCorp.
If an officer becomes entitled to benefits under an amended change of
control agreement by virtue of termination of employment during the first 18
months after the Merger, KeyCorp will provide to the officer monthly
compensation continuation payments (based on salary at the highest rate in
effect during the one year period ended on March 1, 1994 and average annual
incentive compensation for the three highest of the years 1989 through 1993,
inclusive) for 24 months plus a lump-sum severance payment equal to six of the
monthly compensation continuation payments. In addition, KeyCorp will continue
to provide or arrange medical benefits, long-term disability benefits, and group
term life insurance benefits for 24 months and will continue the officer in all
retirement and savings plans for the 24-month period unless impermissible under
the plan or applicable law, in which case KeyCorp will make an equivalent
lump-sum cash payment. Certain of these payments may be reduced if the officer
accepts other full-time employment with an unaffiliated employer during the
24-month period following termination of employment. The payments would be
payable after the death of the officer to his surviving beneficiaries, to his
estate, or to a trust.
29
<PAGE> 34
If an officer becomes entitled to benefits under an amended change of
control agreement by virtue of termination of employment at any time during the
period from March 2, 1996 (July 1, 1996 in Mr. Wert's case) through March 1,
1997 (i.e., during the 25th through 36th months after the Merger), those
benefits would include a lump sum severance payment equal to 150% of the sum of
the officer's annual base salary (at the level in effect at the time of the
Merger) plus the average of the incentive compensation awards payable to the
officer for the years 1991, 1992, and 1993 and continued medical and life
insurance coverage for up to 18 months after the termination (but not beyond the
date the officer became employed with another employer).
If an officer other than Mr. Wert becomes entitled to benefits under an
amended change of control agreement by virtue of termination of employment at
any time during the period from September 2, 1995 through March 1, 1996 (i.e.,
during the 19th through 24th months after the Merger), the officer would have
the right to elect to receive either the benefits in effect for termination of
employment during the first 18 months after the Merger or those in effect for
termination of employment during the 25th through 36th months after the Merger.
In Mr. Wert's case, if he voluntarily resigns on or before June 30, 1996
without a reduction in base salary or the requirement that he relocate outside
of Cleveland, he will be entitled to the benefits generally provided during the
first 18 months after the Merger. If KeyCorp terminates Mr. Wert's employment on
or before June 30, 1996 or he resigns on or prior to that date following a
reduction in base salary or the requirement that he relocate outside of
Cleveland, Mr. Wert would have the right to elect to receive either the benefits
in effect during the first 18 months after the Merger or those in effect during
the 25th through 36th month after the Merger.
New Change of Control Agreements. KeyCorp has entered into new change of
control agreements with each of Messrs. Allen, Meyer, and Wert and six other
executive officers of KeyCorp (other than Messrs. Riley, Gillespie, and Noall)
which provide that if, at any time within three years after the occurrence of a
change of control, the officer's employment is terminated by KeyCorp (except for
cause) or the officer terminates employment because the officer's base salary is
reduced or relocation is made a condition of the officer's employment, KeyCorp
will pay to the officer a lump sum severance benefit equal to two and one half
years' compensation (base salary and average annual incentive compensation) and
will pay the cost of continuing health benefits until the earlier of the
expiration of the continuation period required by Federal law or the date the
officer secures other employment. Each new change of control agreement also
provides a three-month window period, commencing 15 months after the date of a
change of control, during which the officer may voluntarily resign and receive a
lump sum severance benefit equal to one year's compensation (base salary and
average annual incentive compensation). For purposes of these agreements, a
change in control will be deemed to have occurred (a) if KeyCorp is merged with
or into another corporation and, within 24 months after that transaction, fewer
than 40% of the members of the board of directors of the surviving corporation
are individuals who were members of KeyCorp's Board of Directors before the
transaction; (b) if KeyCorp is merged with or into another corporation and
KeyCorp shareholders receive or retain in the merger less than 40 percent of the
outstanding voting securities of the surviving corporation and, at any time
within 24 months after that transaction, individuals who were members of
KeyCorp's Board of Directors before the transaction constitute less than 51% of
the members of the board of directors of the surviving corporation; (c) if any
person announces an intention to engage in an election contest relating to the
election of directors of KeyCorp and, within 24 months thereafter, a majority of
the members of KeyCorp's Board of Directors are individuals
30
<PAGE> 35
who became members of the Board of Directors after the last meeting of
shareholders of KeyCorp held before that intention was announced; and (d) if, in
a transaction that either was not approved by the Board of Directors of KeyCorp
or was only so approved after an unsolicited effort to take control of KeyCorp
had been publicly announced, (i) any person acquires 25% or more of the voting
stock of KeyCorp; (ii) KeyCorp merges with another corporation and KeyCorp
shareholders receive or retain in the merger less than 50 percent of the
outstanding voting securities of the surviving corporation; (iii) all or
substantially all of the assets of KeyCorp are sold or otherwise transferred; or
(iv) a plan of liquidation or dissolution of KeyCorp is adopted by its
shareholders. For purposes of the new change in control agreements, "cause"
includes conviction of a felony, dishonesty in the course of employment that
constitutes a felony and is inimical to the best interest of KeyCorp or a
subsidiary, imposition by a bank regulatory agency of a final order of
suspension or removal, or competing with KeyCorp.
Section 280G Limitation on Payments. Each of the employment, severance, and
change of control agreements described above to which KeyCorp is a party (other
than the employment agreement with Mr. Riley) provides, in effect, that if any
payments thereunder would otherwise be treated as "excess parachute payments"
under Section 280G of the Internal Revenue Code (and would therefore be
nondeductible by KeyCorp and subject to a 20% excise tax upon receipt by the
officer), the aggregate amount of those payments is to be reduced to the extent
necessary to avoid that treatment.
Mandatory Deferral of Certain Amounts. Each of the employment, severance,
and change of control agreements described above to which KeyCorp is a party
provides, in effect, that if any amount of compensation otherwise payable to the
officer as earned would not be deductible by KeyCorp by reason of the
disallowance rules of Section 162(m) of the Internal Revenue Code (which rules
generally disallow deductions for certain compensation paid to any of certain
"covered employees" of a publicly held corporation in excess of $1,000,000 per
year), but would be deductible if it were deferred until a later year, that
amount of compensation will be so deferred until the earlier of the first date
on which the compensation can be paid without disallowance of the deduction to
KeyCorp or April 15 of the year immediately following the year in which the
officer ceases to be a covered employee of KeyCorp. Upon payment of any such
deferred amounts of compensation, KeyCorp will pay to the officer an additional
amount equivalent to the interest that would have accrued on the deferred
compensation if interest had accrued thereon at a rate equal to the interest
rate applicable to deferrals made under incentive compensation plans generally
applicable to KeyCorp executives.
Grantor Trusts. KeyCorp maintains grantor trusts to fund its commitments to
executive officers or directors who were executive officers or directors of Old
Key prior to the Merger. These commitments were made under the survivor benefit,
supplemental retirement, deferred compensation, and severance plans or the
successor plans maintained by KeyCorp for executive officers of Old Key and
under the death benefit, retirement benefit, and deferred compensation plans or
the successor plans maintained by KeyCorp for directors of Old Key. The trust
agreements provide that if KeyCorp fails to make payments under any of those
benefit plans when those payments are due, the trustee is to make the payments
from the assets of the trust. KeyCorp has partially funded the trusts with life
insurance policies. As of December 31, 1995, the value of all assets in the
grantor trust for executives was approximately $75,891,897 and the value of all
assets in the grantor trust for directors was approximately $2,812,304.
31
<PAGE> 36
COMPENSATION AND ORGANIZATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
KeyCorp's Board of Directors has delegated to its Compensation and
Organization Committee ("Committee") responsibility for executive compensation.
In designing KeyCorp's executive compensation program, KeyCorp and the
Committee concluded that the program should:
- Operate as a primary motivator in driving executive decisions and
activities to enhance shareholder value.
- Pay total compensation that is commensurate with KeyCorp's performance as
compared with other comparable financial institutions.
- Promote a strong pay for performance culture by ensuring that highly
competitive compensation is conditioned on the attainment of challenging
objectives.
- Permit KeyCorp to attract, retain, and motivate the best available
executive talent.
- Encourage substantial share ownership by executives, thereby linking
management's commitment to KeyCorp's long term success.
The executive compensation program -- including the establishment of job
grades, salary ranges, and market points (the approximate average salary for
executives in similar jobs in the marketplace), and the assignment of senior
executives to job grades based upon their executive responsibilities -- was
designed and implemented with the aid of an independent outside executive
compensation consultant.
Under the compensation program adopted by KeyCorp and the Committee,
executive positions are compensated (on a total compensation basis) by
comparison with comparable positions in peer bank holding companies. The
Committee each year identifies the companies to be included in the peer group of
companies. The peer group includes bank holding companies that, in the
Committee's judgment, have similar characteristics to KeyCorp. The 1995 peer
group included bank holding companies with assets ranging from approximately $30
to $170 billion as of the beginning of 1995. All of the companies in the peer
group were included in the KBW 50 Index (which is used in the stock price
performance graph on page 36 of this Proxy Statement).
Adjustments to an individual executive's salary are considered annually
using such competitive market comparisons and considering the executive's
contribution to KeyCorp's success and accomplishment of individual and unit
goals. Incentive compensation amounts are determined as described in more detail
below.
The Committee has determined that KeyCorp will be better able to attract,
retain and motivate KeyCorp's executives to achieve superior financial
performance if a relatively large portion of senior executive compensation is
"at risk," i.e., subject to incentive compensation plans. Thus, KeyCorp's
compensation for senior executives is designed in a manner whereby KeyCorp's
senior executives will receive less total compensation than that of senior
executives of peer companies in periods when KeyCorp's performance is poorer
than performance of peer companies and receive superior total compensation when
performance is superior to the performance of such companies.
Under KeyCorp's short term incentive compensation plan, after the close of
the year the Committee establishes a percentage of target pool to be paid out as
short term incentive compensation (a range of 0% to 200% of target). The target
pool is the sum of individual incentive targets. Individual targets range from
10% to 50% of the individual's market point. Individual payouts can range from
zero to the greater of (a) 200% of
32
<PAGE> 37
the individual's incentive target or (b) 150% of the target pool percentage
times the individual's incentive target. In evaluating corporate performance for
purposes of setting the percentage of target to be paid out, the Committee
evaluates KeyCorp's performance as compared with KeyCorp's profit plan for the
year, and evaluates financial results (generally, return on average common
equity and return on average assets) as compared with companies in the peer
group. The Committee also considers such financial performance over a number of
years (generally three years) versus performance by the companies in the peer
group. In establishing the percentage of target pool to be paid, the Committee
gives most weight to financial results, but the Committee also evaluates
non-financial accomplishments of KeyCorp and its senior executives during the
year.
Earnings per share for 1995 were less than KeyCorp's profit plan for the
year essentially due to unplanned expenses incurred during the year in
connection with strategic initiatives (initiatives that are expected to add
significantly to net income in later years). For 1995, KeyCorp ranked in the
second and third quartile of the peer group in return on average common equity
and return on average assets, respectively. In the Committee's judgment, KeyCorp
has achieved consistency of satisfactory financial performance over a number of
years. The Committee was satisfied with the overall performance of the senior
executives during 1995. The Committee determined that the short term incentive
compensation pool for 1995 would be 110% of target. Individual awards were paid
or credited in the first quarter of 1996 among participants in the short term
plan based upon individual and group contributions to the financial and other
results of KeyCorp for the year.
Under KeyCorp's long term incentive compensation plan, the Committee
establishes objective criteria by which KeyCorp's financial performance should
be judged for each three year cycle. The criteria is based on the Committee's
judgment of a return on average common equity that will warrant satisfactory to
excellent results for the three year period. For the three year period ending
December 31, 1998, the established criteria could result in a payout that ranges
from zero to 250% of target. The maximum amount for the 1996-1998 performance
period will be earned if return on average common equity for such three year
period, after adjustments which the Committee deems to be appropriate, equals or
exceeds 20%. An individual executive's target is either 20%, 25%, or 30% of the
executive's market point.
Under the criteria established for the three year period 1993-1995, the
payout could range from zero to 250% of target. The average return on common
equity for this three year period was 18.71% (after adjusting for one-time
restructuring charges in connection with the KeyCorp/Society merger, which
adjustment the Committee determined was appropriate). This resulted in a payout
of 239.13% of target. The awards were paid or credited to participating
executives in the first quarter of 1996.
The Committee believes that senior executives will be motivated, and their
financial interests will be aligned with those of common shareholders, if stock
options are awarded to senior executives. The Committee determines the stock
option policies and makes the actual grant of options. In general, the number of
options granted to an executive is based on the executive's job grade. During
1995, with limited exceptions, the same number of options were granted to all
executives in the same job grade. Except in the case of the Chief Executive
Officer and senior executives reporting directly to the Chief Executive Officer
(for these executives the Committee determined that a set number of options
should be granted to motivate and reward these executives as a group), the
approach to determining the number of options granted was changed for 1996 and
thereafter. For options granted in 1996 the Committee continued to use job
grades as a basis for the number of options to be granted, but established a
threshold, targeted, and maximum number of options for each job
33
<PAGE> 38
grade. The Committee felt that this change in the number of options that may be
granted provides valuable flexibility, as, within the confines of the threshold
and maximum number of options for the job grade, the actual grants are based on
the executive's contribution and/or anticipated contribution to the long-term
financial and other results of KeyCorp. The aggregate number and vesting terms
of options may vary depending on the Committee's judgment of the best form of
long term motivation appropriate under the particular circumstances. In most
instances prior to 1996 options vested one year from the date of the grant. The
Committee determined that for options granted in 1996 and thereafter the general
policy would be to grant options that vest one-third each year from the date of
the grant, resulting in full vesting after three years. Management felt, and the
Committee concurred, that this change would aid in retaining executives, would
result in options being held for a longer period of time, and would be more cost
effective. In determining stock option grants, the Committee does not feel it
relevant and does not take into account options previously awarded to the
executive (whether or not the options remain outstanding).
During 1995, 580 executives of KeyCorp were awarded options covering
2,277,379 KeyCorp Common Shares. In January of 1996, 600 executives of KeyCorp
were awarded options covering 1,962,800 KeyCorp Common Shares. In addition,
beginning in 1996 KeyCorp adopted a program whereby stock options could be
granted to employees in lower positions identified as exceptional high
performers and/or the future leaders of the organization. In January of 1996,
250 of these employees received a total of 125,000 options under this program.
In all instances the option price was 100% of the market price of the stock at
the time the option was granted.
Salary adjustments for senior executives of KeyCorp, and short term and
long term incentive compensation payments to such executives, are based upon the
above methodology. In the case of executives with employment contracts, the same
methodology is applied subject to complying with salary minimums specified in
such contracts. In the case of executives other than Messrs. Riley and
Gillespie, the Committee also solicited from Mr. Riley (during the portion of
1995 for which he served as Chief Executive Officer) and Mr. Gillespie (for all
of 1995) an evaluation of such executive's performance and a compensation
recommendation, which evaluation and recommendation are additional factors
considered by the Committee, in its sole discretion, in applying the above
methodology.
Internal Revenue Code Section 162(m), enacted in 1993, precludes a public
corporation from taking a deduction for compensation in excess of $1 million for
its chief executive officer or any of its four other highest paid executive
officers. Certain performance-based compensation, however, is specifically
exempt from the deduction limit. Any compensation derived from the exercise of
stock options under employee stock option plans of KeyCorp is exempt from the
limit on the corporate tax deduction. KeyCorp's short term and long term
incentive compensation plans provide that the Committee, in its sole discretion,
shall have the authority to require deferral of payment of all or a portion of
awards under any such plan if the Committee determines that KeyCorp would be
denied a deduction for federal income tax purposes for such award or the portion
thereof.
Pursuant to an employment agreement, as amended, (the "Riley employment
agreement") with Mr. Riley (see pages 25 - 26 of this Proxy Statement), he was
paid a salary of $825,000 for 1995. Under the Riley employment agreement Mr.
Riley, in addition to being a participant in KeyCorp's other incentive
compensation plans for senior executives, was covered by a special incentive
compensation arrangement for the period January 1, 1994 through December 31,
1995. This plan sets criteria for return on average common equity,
34
<PAGE> 39
return on average total assets, and efficiency ratio. Under the terms of the
special incentive compensation arrangement no payment was to be made unless a
minimum asset quality test was met. The Committee determined that the
appropriate asset quality tests are whether, as ranked by Keefe, Bruyette &
Woods, Inc., KeyCorp was for 1995 in the top half of the 50 largest bank holding
companies in net charge-offs as a percent of average loans and in non-performing
assets as a percent of loans and other real estate owned; these tests were met.
The maximum amount that could be paid under this plan was $1,133,400, $388,900
for achieving the maximum goal with respect to return on average common equity,
$388,900 for achieving the maximum goal with respect to return on average total
assets, and $355,600 for achieving the maximum goal with respect to the
efficiency ratio. The Committee determined that the formulas resulted in an
award of $777,800 under the special incentive compensation plan (maximum goals
for return on average common equity and return on average total assets having
been met and the minimum goal with respect to efficiency ratio having not been
met); this amount was paid to Mr. Riley in the first quarter of 1996.
Under the short term incentive compensation plan, Mr. Riley's target for
1995 was $417,000 and his award could range from zero to $1,251,000 (if the
Committee established a pool of 200% of target). The Committee determined that
$459,000 was the appropriate short term incentive compensation for Mr. Riley for
1995 which was 110% of his target. Mr. Riley is not a participant in the short
term incentive compensation plan for 1996 or thereafter. He is a participant (on
a pro rata basis for the period of time that he was an employee, i.e., until
December 31, 1995) in KeyCorp's long term incentive compensation plan for the
three year periods 1994-1996 and 1995-1997.
Mr. Gillespie, who is subject to an employment agreement with KeyCorp (see
pages 26 - 27 of this Proxy Statement) became the Chief Executive Officer of
KeyCorp on September 1, 1995, succeeding Mr. Riley in this position. As of
September 1, 1995, the Committee established Mr. Gillespie's salary at $800,000
per annum. It was the Committee's judgment, based upon comparison with peer
companies, that such salary was reasonable and appropriate.
Under the short term incentive compensation plan, Mr. Gillespie's target
for 1995 was $367,000 and his award could range from zero to $1,101,000 (if the
Committee established a pool of 200% of target). The Committee determined that
$404,000 was the appropriate short term incentive for Mr. Gillespie for 1995,
which was 110% of his target.
As is the case of other senior executives, Mr. Gillespie is a participant
in KeyCorp's long term incentive compensation plan for the three year periods
1994-1996 and 1995-1997. For the three year period 1993-1995 his award under the
plan was $407,451 (see page 19 of this Proxy Statement).
Compensation and Organization Committee
Board of Directors
KeyCorp
Albert C. Bersticker
Thomas A. Commes
Lucie J. Fjeldstad
Stephen R. Hardis (Chair)
Robert A. Schumacher
35
<PAGE> 40
KEYCORP STOCK PRICE PERFORMANCE
The following graph compares the stock price performance of KeyCorp's
Common Shares (assuming reinvestment of dividends) with that of the Standard &
Poor's 500 Index and the KBW 50 Index. The Standard & Poor's 500 Index is an
index of 500 stocks designed to measure the performance of the broad domestic
economy. The KBW 50 Index is an index of the stock of fifty banks of the United
States, including all money-center and most major regional banks. KeyCorp's
stock is included in the KBW 50 Index and in the Standard & Poor's 500 Index.
KEYCORP STOCK
PERFORMANCE GRAPH*
(1990-1995)
KeyCorp KBW 50 S&P 500
12/31/90 100 100 100
6/30/91 135 136 113
12/31/91 162 161 130
6/30/92 190 178 131
12/31/92 213 201 139
6/30/93 238 215 149
12/31/93 206 212 155
6/30/94 227 224 149
12/31/94 181 201 157
6/30/95 235 262 188
12/31/95 275 325 213
* This stock price performance is not necessarily indicative of future
price performance. The stock price performance in the graph above for the
period prior to March 1, 1994 is for Society.
36
<PAGE> 41
SHARE OWNERSHIP AND PHANTOM STOCK UNITS
Five Percent Beneficial Ownership. To the best of KeyCorp's knowledge, no
person beneficially owns more than 5% of the outstanding KeyCorp Common Shares.
Beneficial Ownership of Common Shares and Investment in Phantom Stock
Units. The following table lists current directors of and nominees for director
of KeyCorp, the executive officers included in the Summary Compensation Table,
and all directors, nominees, and executive officers of KeyCorp as a group. The
table sets forth, as of February 16, 1996, certain information with respect to
(1) the amount and nature of beneficial ownership of KeyCorp Common Shares, (2)
the number of phantom stock units, if any, and (3) total phantom stock units and
beneficial ownership of KeyCorp Common Shares for such current directors,
nominees for director, and executive officers.
<TABLE>
<CAPTION>
TOTAL PHANTOM
AMOUNT AND NATURE OF STOCK UNITS AND
BENEFICIAL OWNERSHIP PERCENT OF PHANTOM BENEFICIAL
----------------------- COMMON SHARES STOCK OWNERSHIP
NAME SHARES(1) OPTIONS(2) OUTSTANDING(3) UNITS(4) OF COMMON SHARES
- ------------------------------------ --------- --------- ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Gary R. Allen....................... 29,716 44,628 1,028 75,372
Cecil D. Andrus..................... 1,000 0 0 1,000
William G. Bares.................... 2,000 7,000 3,951 12,951
Albert C. Bersticker................ 2,000 7,000 1,586 10,586
Thomas A. Commes.................... 10,000 7,000 0 17,000
Kenneth M. Curtis................... 1,205 7,000 0 8,205
John C. Dimmer...................... 431,835 11,518 0 443,353
Lucie J. Fjeldstad.................. 241 23,266 0 23,507
Robert W. Gillespie................. 160,960 316,000 18,607 495,567
Stephen R. Hardis................... 10,000 7,000 35,016 52,016
Henry S. Hemingway.................. 251,085 16,036 0 267,121
Charles R. Hogan.................... 151,053 11,518 0 162,571
Douglas J. McGregor................. 794 0 1,568 2,362
Henry L. Meyer III.................. 50,159 217,242 7,410 274,811
Steven A. Minter.................... 1,679 7,000 6,985 15,664
M. Thomas Moore..................... 2,000 7,000 3,768 12,768
John C. Morley...................... 3,640 7,000 4,263 14,903
Roger Noall......................... 187,207 100,000 8,566 295,773
Richard W. Pogue.................... 17,000 7,000 0 24,000
Victor J. Riley, Jr................. 19,343 553,620 2,516 575,479
Robert A. Schumacher................ 41,378 12,476 2,275 56,129
Ronald B. Stafford.................. 6,021 38,820 0 44,841
Dennis W. Sullivan.................. 1,200 7,000 17,674 25,874
Peter G. Ten Eyck, II............... 7,093 36,820 0 43,913
Nancy B. Veeder..................... 34,074 8,018 0 42,092
James W. Wert....................... 35,655 120,000 7,931 163,586
All directors and executive officers
as a group (34)................... 1,510,373 1,822,540 1.4% 129,441 3,462,354
</TABLE>
- ---------------
(1) With respect to KeyCorp Common Shares beneficially held by these individuals
or other executive officers under the KeyCorp 401(k) Savings Plan, the
shares included are as of December 31, 1995.
(2) Options vested as of April 16, 1996 are included herein.
(3) No director or executive officer beneficially owns more than 1% of the total
of outstanding KeyCorp Common Shares plus options vested as of April 16,
1996.
(4) Investments in phantom stock units by directors are made pursuant to the
KeyCorp Director Deferred Compensation Plan, whereby directors may defer
payment of all or a portion of their directors fees into a Common Share
Account consisting of "phantom stock units." On a quarterly basis, the
Common Share Account is credited with an additional number of phantom stock
units equal to the number of Common Shares that could be purchased at market
value with the sum of the director's deferred fees for the quarter, plus the
amount of quarterly dividends on the phantom stock units in the Common Share
Account during the quarter as if such phantom stock units were Common
Shares. The Common Share Account is distributed only in cash (and never in
Common Shares) and, at the time of distribution, each phantom stock unit is
paid based on the market value of a Common Shares at the end of the
preceding calendar quarter. Investments in phantom stock units by executive
officers are made pursuant to KeyCorp's Excess 401(k) Savings Plan (the
"Supplemental Plan"), an excess benefit plan established by KeyCorp. Under
the Supplemental Plan, a "phantom stock" account is established for each
participant and credited with the amount of matching employer and profit
sharing contributions that cannot be credited to the participant's account
in the KeyCorp 401(k) Savings Plan (the "401(k) Plan") because of Internal
Revenue Code limitations. In addition, each participant's phantom stock
account is credited with dividends and other earnings as if it
37
<PAGE> 42
were invested in the Corporation Stock Fund of the 401(k) Plan. Though
contributions to a participant's phantom stock account are treated as if
they were invested in KeyCorp's Common Shares, a participant's account
balance may only be paid in cash (and never in Common Shares). Because no
Common Shares are actually issued in connection with the Director Deferred
Compensation Plan or the Supplemental Plan (i.e. they are "phantom stock"
plans), directors and executive officer's participating in these plans do
not have any voting rights or investment power with respect to or on account
of the phantom stock units, and the phantom stock units do not result in the
directors or executive officer's having beneficial ownership of the Common
Shares.
1997 SHAREHOLDER PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the Proxy Statement for next year's Annual Meeting of Shareholders
is December 11, 1996.
GENERAL
The Board of Directors knows of no other matters which will be presented at
the meeting. However, if other matters properly come before the meeting or any
adjournment, the person or persons voting the proxy cards will vote them in
accordance with their best judgment on such matters.
Shareholders may only nominate a person for election as a director of
KeyCorp at a meeting of shareholders if the nominating shareholder has strictly
complied with the applicable notice and procedural requirements set forth in
KeyCorp's Regulations, including, without limitation, timely providing to the
Secretary of KeyCorp the requisite notice of the proposed nominee(s) containing
all the information specified by the Regulations. KeyCorp will provide to any
shareholder, without charge, a copy of the applicable procedures governing
nomination of directors set forth in KeyCorp's Regulations upon request to the
Secretary of KeyCorp.
KeyCorp will bear the expense of preparing, printing, and mailing this
Proxy Statement. In addition to solicitation by mail, officers and regular
employees of KeyCorp and its subsidiaries may solicit the return of proxies.
KeyCorp has engaged the services of Morrow & Co., Inc. to assist in the
solicitation of proxies at an anticipated cost of $12,500 plus expenses. KeyCorp
will request brokers, banks, and other custodians, nominees, and fiduciaries to
send proxy material to beneficial owners and will, upon request, reimburse them
for their expense in so doing.
You are urged to complete, date, sign, and return your proxy card promptly
in order to make certain your shares are voted at the meeting. KeyCorp Common
Shares represented by properly executed proxy cards will be voted in accordance
with any specification made thereon and, if no specification is made, will be
voted for the election as directors of the nominees named herein, against all
shareholder proposals, and in favor of ratifying the appointment of Ernst &
Young LLP as independent auditors for the fiscal year ending December 31, 1996.
Unless a broker's authority to vote on a particular matter is limited,
abstentions and broker non-votes are counted in determining the votes present at
a meeting. Consequently, an abstention or a broker non-vote has the same effect
as a vote against a proposal, as each abstention or broker non-vote would be one
less vote in favor of a proposal. You may revoke your proxy by a later proxy
received by, or by giving notice to, KeyCorp, or in open meeting, without
affecting any vote previously taken. However, your mere presence at the meeting
will not operate to revoke your proxy.
38
<PAGE> 43
<TABLE>
<S> <C>
[KEYCORP LOGO] PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF KEYCORP FOR THE ANNUAL MEETING ON MAY 23, 1996.
P The undersigned hereby constitutes and appoints Victor J.
Riley, Jr., Robert W. Gillespie, and Roger Noall, and each of
them, his/her true and lawful agents and proxies with full power of
R substitution in each to represent the undersigned at the Annual
Meeting of Shareholders of KeyCorp to be held on May 23, 1996, and at
any adjournments or postponements thereof, on all matters properly
O coming before said meeting.
1. Election of Directors: The nominees of the Board of Directors (Change of Address/Comments)
X to the class whose term of office will expire in 1999 are: _____________________________________________________
Albert C. Bersticker, Kenneth M. Curtis, John C. Dimmer, _____________________________________________________
Charles R. Hogan, M. Thomas Moore, Richard W. Pogue, and _____________________________________________________
Y Dennis W. Sullivan. _____________________________________________________
(If you have written in the above space, please
2. Proposal requiring the payment of all diector compensation mark the corresponding box on the reverse side of
to be made in KeyCorp Common Shares. this card.)
3. Proposal requiring the election of all directors at each
annual meeting.
4. Proposal withdrawing management's authority to vote
unmarked proxy cards.
5. Proposal prohibiting any increase in salaries or grant
of stock options to executives in the event or a
reduction in the dividend paid on KeyCorp Common Shares.
6. Proposal to ratify the appointment of Ernst & Young LLP
as independent auditors for the fiscal year ending
December 31, 1996.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO
VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. YOUR
SHARES CANNOT BE VOTED UNLESS YOU SIGN AND RETURN THIS CARD.
-------------
| SEE REVERSE |
| SIDE |
------------
</TABLE>
<PAGE> 44
<TABLE>
<S> <C> <C>
X PLEASE MARK YOUR SHARES IN YOUR NAME REINVESTMENT SHARES
VOTES AS IN THIS
EXAMPLE.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Proposal requiring / / / / / /
Directors the payment of all
(see reverse) director compensation
to be made in KeyCorp
For, except vote withheld from the Common Shares.
following nominee(s):
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 2
______________________________________________ <C> <C> <C>
FOR AGAINST ABSTAIN
3. Proposal requiring / / / / / /
the election of
directors at each
annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
<C> <C> <C>
FOR AGAINST ABSTAIN
4. Proposal withdrawing / / / / / /
management's authority
to vote unmarked
proxy cards.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 4.
<C> <C> <C>
FOR AGAINST ABSTAIN
5. Proposal prohibiting / / / / / /
executive salary
increases upon a
reduction in dividends.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 5.
<C> <C> <C>
FOR AGAINST ABSTAIN
6. Ratification of / / / / / /
------ Change of appointment of
| | Address/Comments independent auditors.
------ on Reverse Side.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 6.
<S> <C> <C>
This proxy when properly executed will be
voted in the manner directed herein by
the undersigned shareholder. If no
direction is made, this proxy will be
voted FOR the election of the nominees
listed on the reverse, AGAINST proposals
2, 3, 4, and 5, and FOR proposal 6.
In accordance with their judgment, the
proxies are authorized to vote upon any
other matters that may properly come
SIGNATURE(S)_________________________________________________ DATE ___________ before the meeting. The signer hereby
revokes all proxies heretofore given by
SIGNATURE(S) ________________________________________________ DATE ____________ the signer to vote at said meeting or any
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. adjournments thereof.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
</TABLE>
